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 (or Date of Earliest Event Reported): July 2, 1998
SWIFT ENERGY COMPANY
(Exact name of Registrant as specified in its charter)
TEXAS 1-8754 74-2073055
(State of incorporation or (Commission File Number) (IRS Employer
organization) Identification No.)
16825 Northchase Drive, Suite 400
Houston, Texas 77060
(Address of principal executive offices)
(281) 874-2700
(Registrant's telephone number)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 2, 1998, Swift Energy Company (the "Company" or "Swift") signed an
agreement dated as of June 1, 1998 with Sonat Exploration Company, a subsidiary
of Sonat Inc. ("Sonat"), to purchase for approximately $87.6 million producing
oil and gas properties that will increase Swift's existing proved oil and gas
reserves by approximately 25%. At the effective date of April 1, 1998, these
properties were estimated to have proved reserves of 91.1 billion cubic feet of
natural gas equivalent (Bcfe), of which 56% was natural gas. Included in the
purchase are extensive production facilities, interests in two gas processing
plants and more than 200,000 undeveloped net acres.
The properties to be purchased include all of Sonat's interests in 156
producing natural gas and oil wells in the Brookeland Field in southeast Texas
and the Masters Creek Field area in western Louisiana. Swift will assume
operations of 113 of such wells. As part of the transaction, Swift is to acquire
Sonat's 20% interest in both the Brookeland and the Masters Creek natural gas
liquids plants, which together have a combined capacity of up to 250 million
cubic feet of gas per day.
The Brookeland Field covers parts of Jasper, Newton and Sabine counties in
southeast Texas. In this field, Swift will acquire interests in 83 wells that at
April 1, 1998 were producing approximately 10.8 million cubic feet of natural
gas and 1,000 barrels of condensate and oil per day. In the Masters Creek Field
area, which includes the Burr Ferry, Masters Creek, and Hurricane Branch fields
located in Rapidies, Sabine, Vernon and Avoyelles parishes in western Louisiana,
Swift will acquire interests in 73 wells that at April 1, 1998 were producing
approximately 22.8 million cubic feet of natural gas and 6,700 barrels of
condensate and oil per day. The Master Creek properties represents Swift's first
entry into the Louisiana portion of the Austin Chalk trend. All but one of the
156 wells produce from the Austin Chalk formation at depths of 10,000 to 15,000
feet, and most of the wells are dual lateral horizontal completions.
Acquisition of the Sonat properties will extend one of the Company's core
areas through acquisition of producing reserves that will significantly increase
the Company's production on a short-term basis. Furthermore, due to the sizeable
acreage position, Swift believes these properties have substantial drilling
potential. The interests in plants, equipment and other physical property being
acquired have been used by Sonat for the production of oil and gas, and the
Company intends to continue to use such assets in the same nature of business as
used by Sonat.
Swift anticipates funding this acquisition with bank financing and is
exploring alternatives to replace this with other more permanent forms of
capital. The transaction is expected to close in August 1998. It is subject to
purchase price adjustments and closing conditions typical in the oil and gas
industry.
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Recent drilling in these fields has been focused in Louisiana on properties
(wells) which typically are characterized by short-lived reserves with high
initial production and rapid decline rates.
The Sonat property purchase signifies a redirection of the Company's plans
for 1998 capital expenditures. The Company's original 1998 budget was focused
primarily on drilling. With current lower crude oil prices, opportunities have
arisen to purchase producing properties, including these from Sonat, that were
not available in the recent past. Consequently, the Company has deferred a
substantial portion of its 1998 drilling activity in favor of acquisitions.
This Form 8-K includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The opinions, forecasts,
projections or other statements, other than statements of historical fact, are
forward-looking statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable; it can give no
assurance that such expectations will prove to have been correct. Certain risks
and uncertainties inherent in the Company's business are set forth in the
filings of the Company with the Securities and Exchange Commission.
ITEM 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
An audited statement of revenues and direct operating expenses
attributable to the Sonat properties for the years ended December 31, 1997, 1996
and 1995 and the three months ended March 31, 1998 is not presently available.
It will be filed by amendment as soon as practicable, but not later than 60 days
after the due date for the filing of this report on Form 8-K.
(b) Pro forma financial information.
Pro forma results of operations of Swift Energy Company for
the year ended December 31, 1997 and three months ended March 31, 1998 to give
effect to the acquisition as if it had occurred as of January 1, 1997 and a pro
forma balance sheet as of March 31, 1998 as if the acquisition had occurred as
of March 31, 1998, are not presently available. They will be filed by amendment
as soon as practicable, but not later than 60 days after the due date for the
filing of this report on Form 8-K.
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(c) Exhibits.
Exhibit No. Exhibit Description
- ----------- -------------------
2 Purchase and Sale Agreement between the Company and Sonat
Inc. dated as of June 1, 1998.
23* Consent of Ernst & Young LLP
- ------------
* To be filed by amendment
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SIGNATURE
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.
Dated: July 9, 1998
Swift Energy Company
By: /s/ John R. Alden
-----------------------------
Name: John R. Alden
Title: Senior Vice President
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EXHIBIT INDEX
Exhibit No. Exhibit Description
2 Purchase and Sale Agreement between the Company and Sonat
Inc. dated as of June 1, 1998.
23* Consent of Ernst & Young LLP
- ------------
* To be filed by amendment
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EXHIBIT 2
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement is executed as of the 1st day of June,
1998, by and between Sonat Exploration Company, a Delaware corporation
("Seller"), and Swift Energy Company, a Texas corporation ("Buyer").
1. Sale and Purchase of the Properties. Subject to the terms and conditions
herein set forth, Seller agrees to sell, assign, convey and deliver to Buyer,
and Buyer agrees to purchase and acquire from Seller, at the Closing (defined in
Article 15 below) but effective as of 7:00 a.m., Central Time, on April 1, 1998
(Effective Date), all of Seller's right, title and interest in each property set
forth on Exhibit A (Units and Wells), Exhibit B (Leases, Rights-of-Way and
Easements), Exhibit C (Gas Plants), and (a) all other interest, if any, owned by
Seller, in, to and under the above referenced items and all contracts relating
thereto; (b) as of the Closing Date, all of Seller's right, title and interest
in the equipment located on or appurtenant to a Lease and used exclusively in
connection with the operation of a Well; and (c) all of the real, personal and
mixed property used in the operation of the Wells or other Properties (whether
located on or off the Properties), including, but not limited to all wells
plugged or unplugged, including, but not limited to the Wells, all wellhead
equipment, fixtures (including, but not limited to, field separators and liquid
extractors), pipe, casing, and tubing, all production, gathering, treating,
processing, compression, dehydration, salt water disposal, and injection
equipment and facilities, all tanks, machines, equipment, vessels and other
facilities all rights, privileges, benefits, powers conferred upon the holder of
the Leases with respect to the use and occupation of the surface of the lands
covered thereby (Lands) that may be necessary, convenient, or incidental to the
possession and enjoyment of the Leases, all rights in respect to any pooled or
unitized acreage located in whole or in part within the Lands by virtue of the
Leases, including rights to production from the pool or unit allocated to any
Lease being a part thereof, regardless of whether such production is from the
Lands, all rights, options, titles, and interests of Seller granting Seller the
right to obtain, or otherwise earn interests within the Lands, no matter how
earned, all tenements, hereditaments, and appurtenances belonging to any of the
foregoing, all permits, licenses, servitudes, rights-of-way, division orders,
gas purchase and sale agreements (wherein Seller is a selling party), crude oil
purchase and sale agreements (wherein Seller is a selling party), surface
leases, farmin agreements, farmout agreements, bottom hole agreements, acreage
contribution agreements, operating agreements, unit agreements, processing
agreements, options, leases of equipment or facilities, and all other contracts
and agreements that are appurtenant to the Properties or used or held for use in
connection with the ownership or operation of the Properties; and any and all
geological data and reports, subject to all applicable licensing and other
agreements and all restrictions on transfer, including but not limited to all
well logs, core reports, paleo reports and surveys, vertical surveys, seismic
data, interpreted maps, contour maps, isopach maps, etc., and all of the files,
records, documents, correspondence and data now in the possession or control of
Seller that related to the items described above, including, without limitation,
all computer-generated disks, diskettes and access codes and tapes; provided,
however, Seller shall have no obligation to provide Buyer access to any
information or interpretative or proprietary data which Seller considers
privileged, confidential or proprietary to it or which Seller cannot lawfully
provide due to third party restrictions (collectively, "Properties").
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2. Purchase Price. The purchase price for the Properties shall be
Eighty-Seven Million Six Hundred Twenty-Five Thousand and No/100 Dollars
($87,625,000.00) (Purchase Price), subject to any applicable adjustments as are
hereinafter provided.
3. Adjustments to Purchase Price; Final Purchase Price. The Purchase Price
shall be adjusted as follows and the resulting amount shall be referred to
herein as the Final Purchase Price:
3.1 Increases in Purchase Price: The Purchase Price shall be increased
by an amount equal to the sum of the following amounts:
3.1.1 The amount of all reasonable costs and expenses, including,
without limitation, such capital expenditures as are permitted by
Section 8.1.1. below incurred after the Effective Date by Seller in
the ordinary course of Seller's business and reasonable customary
overhead charges related to the Properties from the Effective Date to
the Closing Date.
3.1.2 The amount of all prepaid expenses, including, without
limitation, ad valorem, property and similar taxes and assessments
based upon or measured by ownership of the Properties and attributable
to periods of time after the Effective Date.
3.1.3 Any amounts due to Seller from other parties as of the
Effective Date with respect to any Imbalance existing at the Effective
Date, such amounts to be determined:
(a) for production Imbalances by multiplying the Imbalance
volume by $1.75 per MCF and then reducing such amount by
royalties and severance taxes to be paid on such amount,
for pipeline or transportation Imbalances by
multiplying the Imbalance volume by the price actually in
effect for make-up gas if made-up prior to Closing or by
$1.75 per MCF if not made-up, and then reducing such amount
by the sum of the total of royalties and severance and
similar taxes, if any, actually paid on such amount plus all
penalties and other charges on the Imbalance, and
for natural gas liquids Imbalances by multiplying the
Imbalance volume by the price actually received by the
overproduced/overdelivered party, and then reducing such
amount by the sum of the total of royalties and severance
and similar taxes, if any, actually paid on such amount plus
all penalties and other charges on the Imbalance.
The term "Imbalance" means any gas or other hydrocarbon production,
pipeline, transportation or processing Imbalance existing as of the
Effective Date with respect to any of the Properties, together with
any related rights or obligations as to future cash and/or gas or
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product balancing, as a result of, in the case of production
Imbalances, Seller having taken and sold for Seller's account
cumulative production which is greater or less than Seller's Working
Interest share in cumulative production, or, in the case of a
pipeline, transportation or processing Imbalances, Seller having
delivered production which is greater or less than the production
volume Seller contracted to deliver.
3.1.4 As to Wells in which Seller's Net Revenue Interest (as
defined in Article 12 below) is determined to be greater than the
decimal interest noted in Exhibit A, without a corresponding increase
in the associated Working Interest (as defined in Article 12 below),
an amount determined by multiplying the Allocated Value (as
hereinafter defined) for Seller's interest in the Well in question by
a fraction, the numerator of which shall be the decimal increase in
Seller's Net Revenue Interest in such Well from the percentage shown
for such Well in Exhibit A and the denominator of which shall be the
Net Revenue Interest shown for such Well on such Exhibit A.
3.1.5 The value of all merchantable, clean oil and other products
in tanks above the pipeline sales connection at the Effective Date
that is credited to the Properties, and attributable to Seller's Net
Revenue Interest in the Properties, such value to be the market or, if
applicable, the contract price in effect as of the Effective Date,
less any applicable severance taxes and royalties.
3.2 Decreases in Purchase Price: The Purchase Price shall be decreased
by an amount equal to the sum of the following amounts:
3.2.1 The amount of all proceeds received by Seller, net of all
applicable taxes and royalties attributable to production from the
Properties for periods of time after the Effective Date, including,
without limitation, proceeds from Gas Plant operations, salt water
disposal operations and natural gas liquids, but excluding all such
proceeds prior to the Effective Date, which proceeds shall be for the
account of Seller. Buyer acknowledges that in making this adjustment,
(a) oil proceeds shall be based on the price per barrel on which
Seller calculates payments to its royalty owners, and (b) gas proceeds
shall be net of the $.02 marketing fee Seller has incurred in
connection with the marketing of its gas.
3.2.2 Any amounts due from Seller to other parties as of the
Effective Date with respect to any Imbalances existing at the
Effective Date, such amounts to be determined:
(a) for production Imbalances by multiplying the Imbalance
volume by $1.75 per MCF and then reducing such amount by
royalties and severance taxes to be paid on such amount,
(b) for pipeline or transportation Imbalances by multiplying
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the Imbalance volume by the price actually in effect for make-up
gas if made-up prior to Closing or by $1.75 per MCF if not
made-up and then reducing such amount by the sum of the total
royalties and severance and similar taxes, if any, actually paid
on such amount plus the amount of all penalties and other charges
on the Imbalance, and
(c) for natural gas liquids Imbalances by multiplying the
Imbalance volume by the price actually received by Seller during
the time in which the Imbalance accrued, including, without
limitation, a decrease in the Purchase Price of $1,115,452.00 as
reflected in Exhibit D attached hereto and made a part hereof,
and then reducing such amount by the sum of the total royalties
and severance and similar taxes, if any, actually paid on such
amount plus the amount of all penalties and other charges on the
Imbalance.
3.2.3 An amount equal to all ad valorem, property, and similar
taxes and assessments based upon or measured by Seller's ownership of
the Properties that are unpaid as of the Closing Date and attributable
to periods of time prior to the Effective Date, which amounts shall be
computed based upon such taxes and assessments for the calendar year
1998, if available and if not available such assessments for the
calendar year 1997; provided that if such taxes or assessments are
assessed on other than a calendar year basis, for the tax related year
last ended.
3.2.4 Any amount determined in connection with uncured Title
Defects as provided for in Article 12 below.
3.2.5 Any amount determined in connection with Adverse
Environmental Conditions as provided for in Article 22 below.
3.2.6 An amount equal to $1,720,364.00 as Seller's share of all
pipeline reimbursement obligations due to the plan owners of the
Brookeland Gas Facilities and the Masters Creek Gas Facilities.
4. Miscellaneous Obligations.
4.1 Equipment Inventory. Buyer shall receive and be solely responsible
for the costs associated with (a) the equipment described in Exhibit E
attached hereto and made a part hereof, and (b) the vehicles described on
Exhibit F attached hereto and made a part hereof, the costs of which
vehicles, as reflected on Exhibit F to be handled as an increase in the
Purchase Price under Section 3.1 above. Seller shall retain and be solely
responsible for the costs associated with the equipment described in
Exhibit G attached hereto and made a part hereof.
4.2 Dominion Carried Interest. Seller shall be solely responsible for
that certain carried working interest obligation under Article IV(b) of
that certain Exxon Masters Creek Exploration Agreement effective as of
September 3, 1997, by and between Sonat Exploration Company and Dominion
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Reserves, Inc., and there shall be no increase in the Purchase Price by
reason thereof.
4.3 Undrilled Locations. Seller shall be solely responsible for the
costs already incurred by Seller in connection with the construction of the
drillsite locations for the Temple A6#1, Labokay 11#1, Ashworth 10#1, Exxon
Minerals 18#2 and Temple 18#1 wells, and there shall be no increase in the
Purchase Price by reason thereof.
5. Audited Financial and Reserve Information. In accordance with the
Securities and Exchange Commission's rules and regulations, specifically
Regulation S-X rule 3-05, Buyer may be required to disclose certain audited
financial and reserve information as it relates to the Properties being
acquired. Prior to the Closing Date, Seller agrees to assist Buyer, at Buyer's
sole expense, in the compilation and audit of such information. Buyer is aware
of and acknowledges the fact that the Properties have never undergone a separate
financial audit, whereby a separate and distinct audit report was issued. Seller
agrees to assist in accommodating Arthur Andersen, Ernst and Young, or another
nationally recognized CPA firm in the audit of these Properties for this
specific purpose.
6. Representations and Warranties of Seller. Seller represents and warrants
to Buyer that:
6.1 Organization. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
is qualified to do business in and in good standing under the laws of the
state(s) where the Properties are located.
6.2 Authority. Seller has full power and authority and has taken all
requisite action, corporate or otherwise, to authorize it to carry on its
business as currently conducted, to enter into this Agreement and to
perform its obligations under this Agreement.
6.3 Enforceability. This Agreement has been duly executed and
delivered on behalf of Seller and constitutes the legal, valid and binding
obligation of Seller enforceable in accordance with its terms. At the
Closing, all documents required hereunder to be executed and delivered by
Seller shall be duly authorized, executed and delivered and shall
constitute legal, valid and binding obligations of Seller enforceable in
accordance with their respective terms.
6.4 Material Information. At Closing, Seller will represent that all
material information known or available to Seller, regardless of whether or
not specifically requested by Buyer, has been disclosed to or made
available to Buyer and that Seller has provided Buyer with access to all of
the information that a prudent and knowledgeable buyer would deem necessary
or appropriate in order to evaluate the Properties and satisfy itself as to
the correctness of all such information prior to Closing. "Material
Information" is defined as any information, other than information
discovered by Buyer during its title examination under Article 12 or its
environmental assessment under Article 22, concerning (a) the Properties
which could reasonably materially reduce the value of the Properties to
Buyer or impair Buyer's ability to own or operate the Properties in an
amount in excess of $100,000.00 in any single instance; or (b) an
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obligation (other than rentals, bonus payments, options to acquire
additional acreage, preferential rights or nonoperated well proposals that
may become due in the future but which Buyer has the option not to
undertake or exercise) relating to any of the Properties which obligates
Seller to expend monies in any single event in excess of $100,000.00. The
information Buyer deems material includes, but is not limited, to:
6.4.1 Litigation and Claims. Except as set forth on Exhibit H,
there are no claims, demands, pending suits, actions, arbitrations,
mediations or proceedings as to which Seller has been served process
or received notice before any court or governmental body which would
adversely affect the Properties, or hinder, impede or prevent Seller
from consummating the transactions contemplated by the Agreement. To
the best of Seller's knowledge and information, there are no claims,
demands, pending suits, actions, arbitrations, mediations or
proceedings as to which Seller has not been served process or received
notice, or that are threatened before any court or governmental body
which would adversely affect the Properties, or hinder, impede or
prevent Seller from consummating the transactions contemplated by this
Agreement.
6.4.2 Compliance with Applicable Laws. Except as set forth on
Exhibit H, Seller, in the operation of those Properties that Seller
operates and, to Seller's knowledge, the operator, in the case of
those Properties Seller does not operate, is in compliance with any
applicable laws, orders, rules, regulations, judgments or decrees of
any governmental bodies, including the common or civil law, including
but not limited to those relating to occupational safety and health,
consumer product safety, employee benefits, environmental laws, zoning
laws or regulations or other applicable laws or regulations.
6.4.3 Contracts. The Properties are not subject to (a) any
instrument or agreement evidencing or related to indebtedness for
borrowed money, whether directly or indirectly; or (b) any agreements
not entered into in the ordinary course of business in which the
amount involved is in excess of $100,000.00. With respect to the
Properties, (i) all material contracts are to the best of Seller's
knowledge and information in full force and effect and are the valid
and legally binding obligations of the parties thereto and are
enforceable in accordance with their respective terms; (ii) Seller is
not in material breach or default with respect to any of its
obligations pursuant to any such material contract; (iii) all payments
(including, without limitation, calls for advance payment under unit
or operating agreements) due by Seller thereunder have been made by
Seller; (iv) to Seller's knowledge, and except to the extent a breach
or default is alleged in any of the actions as set forth in Exhibit H,
no other party to any material contract relating to any Property is in
breach or default with respect to any of its obligations thereunder to
the extent such breach or default would have a material adverse impact
on Seller or any of the Properties; and (v) neither Seller, nor to
Seller's knowledge, any other party to any material contract has given
notice of any action to terminate, cancel, rescind, or procure a
judicial reformation of a material contract or any provision thereof.
6.4.4 Affiliate Contracts. There are no contracts solely between
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Seller and any of its affiliates affecting or providing services or
support to any of the Properties or operations on the Properties which
will survive Closing.
6.4.5 Preferential Rights/Consents. Except as set forth on
Exhibit I and consents required from governmental bodies as part of an
ordinary course transfer, no preferential purchase rights, consents,
approvals or other action by, or filing with any person or
governmental body is required in connection with the assignment of the
Properties to Buyer.
6.4.6 Wells. To Seller's knowledge, no well included in the
Properties is subject to material penalties on allowables because of
an overproduction or any other violation of applicable Laws, which
would have a material adverse effect on any of the wells included in
the Properties. There are no wells located on the Leases that Seller
or operator is currently obligated by order of any governmental body
to plug and abandon within a certain time. Except as provided for in
Section 3.2.2(c) above, Seller has not received any payments by virtue
of a prepayment arrangement under any contract (or entered into a
prepayment arrangement) for the sale of hydrocarbons, or a production
payment or of any other arrangement (other than gas balancing
arrangements), which would obligate Seller to deliver hydrocarbons
produced from the Properties at some future time without receiving
full payment therefor.
6.4.7 Equipment. All equipment and machinery used by Seller to
operate the Properties has been maintained in accordance with past
practices in the field and to Seller's knowledge all other equipment
and machinery used by third persons to operate the Properties has been
so maintained.
6.5 Buyer's Notice. Should Buyer, through its due diligence
examination of the Properties, discover any Material Information which has
not been previously disclosed by Seller, Buyer will provide written notice
thereof to Seller with sufficient particulars for Seller to identify the
claimed Material Information. Thereafter, Seller and Buyer will meet to
discuss a mutually acceptable remedy therefor.
7. Representations and Warranties of Buyer. Buyer represents and warrants
to Seller that:
7.1 Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the state of Buyer's
incorporation and is qualified to do business in and in good standing under
the laws of the state(s) where the Properties are located.
7.2 Authority. Buyer has full power and authority and has taken all
requisite action, corporate or otherwise, to authorize it to carry on its
business as currently conducted, to enter into this Agreement, to purchase
the Properties on the terms described in this Agreement and to perform its
other obligations under this Agreement.
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7.3 Enforceability. This Agreement has been duly executed and
delivered on behalf of Buyer, and constitutes the legal, valid and binding
obligation of Buyer enforceable in accordance with its terms. At the
Closing, all documents required hereunder to be executed and delivered by
Buyer shall be duly authorized, executed and delivered and shall constitute
legal, valid and binding obligations of Buyer enforceable in accordance
with their respective terms.
7.4 Due Diligence. Buyer represents that it has performed, or will
perform before Closing, sufficient review and due diligence with respect to
the Properties, including, without limitation, reviewing well data and
other files and performing all on-site and other necessary evaluations,
assessments and other tasks relating to the Properties, so as to enable
Buyer to acquire the Properties under the terms of this Agreement.
7.5 Basis of Buyer's Decision. Buyer represents that by reason of its
knowledge and experience in the evaluation, acquisition, and operation of
oil and gas properties, Buyer has evaluated the merits and risks of
purchasing the Properties from Seller and has formed an opinion based
solely on Buyer's knowledge and experience and not on any representations
or warranties by Seller. THERE ARE NO WARRANTIES, REPRESENTATIONS OR
IMPLIED COVENANTS BETWEEN THE PARTIES EXCEPT THE MATTERS EXPRESSLY PROVIDED
FOR IN THIS AGREEMENT AND THE EXHIBITS ATTACHED HERETO AND THE DOCUMENTS,
CONVEYANCES AND INSTRUMENTS TO BE DELIVERED BY THE PARTIES AT AND AFTER
CLOSING. THE PARTIES DISCLAIM ANY OTHER WARRANTIES, REPRESENTATIONS OR
COVENANTS, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES, REPRESENTATIONS
AND COVENANTS IMPLIED UNDER ANY STATUTE OR LAW.
8. Covenants of Seller.
8.1 Conduct of Business Pending Closing. Seller covenants that from
the date hereof to the Closing Date, except (a) as provided herein, (b) as
required by any obligation, agreement, lease, contract, or instrument
referred to in any exhibit hereto, or (c) as otherwise consented to in
writing by Buyer, Seller will:
8.1.1 Not (a) act in any manner with respect to the Properties
other than in the normal, usual and customary manner, consistent with
prior practice; (b) offer to sell, dispose of, encumber or relinquish
any of the Properties (other than relinquishments resulting from the
expiration of leases that Seller has no right or option to renew); (c)
enter into any new material agreement, AFE supplement or commitment,
or terminate or modify, waive, compromise or settle any material right
or claim with respect to any of the Properties; (d) participate in any
single field operation with respect to the Properties in excess of the
dollar limit allowed the Operator of the applicable Property in the
applicable Operating Agreement or, for a Property where no Operating
Agreement exists, $35,000.00, except when required by an emergency
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when there shall have been insufficient time to obtain advance consent
from Buyer; or (e) initiate or conduct or consent to participate in
any capital or workover project that is not either in progress or
already approved as of the execution date of this Agreement. Seller
agrees to promptly notify Buyer of any AFE or other well or Gas Plant
proposal received by Seller between the Effective Date and the Closing
Date.
8.1.2 From the date hereof until Closing, Seller will use its
best efforts to (a) cause the Properties to be maintained and operated
in a good and workmanlike manner; (b) maintain insurance now in force
with respect to the Properties; (c) pay or cause to be paid all costs
incurred in connection with the Properties; (d) keep the Leases and
other agreements in full force and effect; (e) perform and comply with
all of the covenants and conditions contained in the Leases and other
agreements relating to the Properties; and (f) use its best efforts to
preserve relationships with all third parties having business dealings
with respect to the Properties.
8.1.3 Cooperate with Buyer in the notification of all applicable
governmental regulatory authorities of the transactions contemplated
hereby and cooperate with Buyer in obtaining the issuance by each such
authority of such permits, licenses and authorizations as may be
necessary for Buyer to own and operate the Properties following the
consummation of the transactions contemplated by this Agreement.
8.1.4 Notify Buyer of the discovery by Seller that any
representation or warranty of Seller contained in this Agreement is or
becomes materially untrue or will be materially untrue on the Closing
Date.
8.2 Access.
8.2.1 Seller shall afford to Buyer and its authorized
representatives reasonable access, at Buyer's sole risk and expense
and during normal business hours, from the date hereof until the
Closing Date, to (a) the Properties operated by Seller; PROVIDED,
HOWEVER, THAT BUYER SHALL RELEASE, DEFEND, INDEMNIFY AND HOLD HARMLESS
SELLER FROM AND AGAINST ANY AND ALL LOSSES, COSTS, DAMAGES,
OBLIGATIONS, CLAIMS, LIABILITIES, EXPENSES AND CAUSES OF ACTION
ARISING FROM BUYER'S INSPECTION OF THE PROPERTIES, INCLUDING, WITHOUT
LIMITATION, CLAIMS FOR PERSONAL INJURIES OR DEATH, PROPERTY DAMAGE,
COURT COSTS AND REASONABLE ATTORNEYS' FEES, and (b) Seller's
operating, accounting, contract, corporate, land, lease, geophysical,
facility, marketing and legal files, records, materials, data and
information regarding the Properties ("Data"); provided, however, that
Data shall not include (a) any legal materials the disclosure of which
Seller determines would jeopardize the assertion of a privilege in
ongoing or anticipated litigation with third parties, (b) information
not included in files specifically identified to the Properties in
accordance with Seller's existing filing and data management system,
or (c) information, the disclosure of which would violate any
confidentiality agreement to which Seller is bound.
<PAGE>
8.2.2 From and after the Closing Date, Buyer shall afford Seller
reasonable access, at Seller's sole risk and expense and during normal
business hours, to any Property which is the subject of any matter
described and listed on Exhibit H; PROVIDED, HOWEVER, THAT SELLER
SHALL RELEASE, DEFEND, INDEMNIFY AND HOLD HARMLESS BUYER FROM AND
AGAINST ANY AND ALL LOSSES, COSTS, DAMAGES, OBLIGATIONS, CLAIMS,
LIABILITIES, EXPENSES AND CAUSES OF ACTION ARISING FROM SELLER'S
ACCESS TO THE PROPERTIES FOR SUCH PURPOSE, INCLUDING, WITHOUT
LIMITATION, CLAIMS FOR PERSONAL INJURIES OR DEATH, PROPERTY DAMAGE,
COURT COSTS AND REASONABLE ATTORNEYS' FEES.
8.3 Release of Geologic and Geophysical Information. Prior to Closing,
Buyer shall be allowed to review and copy any geologic or geophysical
information, maps, and data in Seller's files attributable to the
Properties to the extent Seller may disclose to Buyer such materials
without violating any confidentiality agreements or licenses. Buyer agrees
that it will obtain and use such materials at its own risk and expense, and
further, Buyer releases Seller from any and all liability and agrees to
release, defend, indemnify and hold harmless Seller from all claims,
demands, judgments, costs, and expenses (including courts costs and
reasonable attorneys' fees) brought by Buyer and/or all other parties
arising from Buyer's use, possession or transfer of such information
without limit as to time.
8.4 Closing Conditions. Seller shall cause all the representations and
warranties of Seller contained in this Agreement to be true and correct in
all material respects on and as of the Closing Date. To the extent the
conditions precedent to the obligations of Buyer are within the control of
Seller, Seller shall cause such conditions to be satisfied on or prior to
the Closing Date and, to the extent the conditions precedent to the
obligations of Buyer are not within the control of Seller, Seller shall use
commercially reasonable efforts to cause such conditions to be satisfied on
or prior to the Closing Date.
9. Covenants of Buyer.
9.1 Closing Conditions. Buyer shall cause all the representations and
warranties of Buyer contained in this Agreement to be true and correct on
and as of the Closing Date. To the extent the conditions precedent to the
obligations of Seller are within the control of Buyer, Buyer shall cause
such conditions to be satisfied on or prior to the Closing Date and, to the
extent the conditions precedent to the obligations of Seller are not within
the control of Buyer, Buyer shall use commercially reasonable efforts to
cause such conditions to be satisfied on or prior to the Closing Date.
10. Conditions Precedent to the Obligations of Seller. The obligations of
Seller to be performed at Closing are subject to the fulfillment (or waiver by
Seller in its sole discretion) before or at Closing, of each of the following
conditions:
<PAGE>
10.1 Representations and Warranties. The representations and
warranties by Buyer set forth in this Agreement shall be true and correct
in all material respects at and as of the Closing as though made at and as
of the Closing; and Buyer shall have performed and complied with, in all
material respects, all covenants and agreements required to be performed
and satisfied by Buyer at or prior to the Closing. If, at Closing, Seller
has knowledge that Buyer is in breach of any part of this Section 10.1, it
shall disclose such to Buyer in order to afford Buyer an opportunity to
correct same.
10.2 No Litigation. There shall be no suits, actions or other
proceedings pending or threatened to enjoin the consummation of the
transactions contemplated by this Agreement or seeking substantial damages
against Seller in connection therewith.
10.3 Approvals. All known approvals required to be obtained for the
assignment of the Properties to Buyer shall have been obtained or waived or
shall have expired without being exercised, except for those approvals
which are customarily obtained after closing.
10.4 Closing Obligations. Buyer shall contemporaneously perform its
closing obligations under Section 15.2.
11. Conditions Precedent to the Obligations of Buyer. The obligations of
Buyer to be performed at Closing are subject to the fulfillment (or waiver by
Buyer in its sole discretion) before or at Closing, of each of the following
conditions:
11.1 Representations and Warranties. The representations and
warranties by Seller set forth in this Agreement shall be true and correct
in all material respects at and as of the Closing as though made at and as
of the Closing; and Seller shall have performed and complied with, in all
material respects, all covenants and agreements required to be performed
and satisfied by Seller at or prior to the Closing. If, at Closing, Buyer
has knowledge that Seller is in breach of any part of this Section 11.1, it
shall disclose such to Seller in order to afford Seller an opportunity to
correct same.
11.2 No Litigation. There shall be no suits, actions or other
proceedings pending or threatened to enjoin the consummation of the
transactions contemplated by this Agreement or seeking substantial damages
against Buyer in connection therewith.
11.3 Consents. All known approvals required to be obtained for the
assignment of the Properties to Buyer shall have been obtained or waived or
shall have expired without being exercised, except for those approvals
which are customarily obtained after closing.
11.4 Closing Obligations. Seller shall contemporaneously perform its
closing obligations under Section 15.2.
12. Title Matters.
12.1 Title Adjustment. There shall not exist at Closing any uncured
<PAGE>
Title Defects unless adjustments therefor have been made pursuant to the
further terms of this Agreement or Buyer has elected to waive any such
Title Defects. Buyer shall notify Seller in writing of any claimed Title
Defects not less than ten (10) business days prior to Closing (Title
Defects Notice). The Title Defects Notice shall (a) set forth in reasonable
detail the Well and/or Lease with respect to which a claimed Title Defect
is made, (b) the nature of such claimed Title Defect, and (c) Buyer's
proposed calculation of the Defect Value of each claimed Title Defect. Any
Title Defect that is not identified in the Title Defects Notice shall
thereafter be deemed a Permitted Encumbrance and be forever waived and
expressly assumed by Buyer, except for any Title Defect that constitutes a
breach of Seller's special warranty contained in the form of Assignment
attached hereto as Exhibit J. As used in this Agreement, the term:
12.1.1 "Title Defect" shall mean, with respect to Seller's
interest in each Property, any lien, mortgage, pledge, claim, charge,
option, defect, requirement for consent to assignment or other
encumbrance or matter which would apply to the transaction
contemplated hereby, other than Permitted Encumbrances, and which
could reasonably result in Buyer receiving a percentage of all
proceeds of production therefrom less than the Net Revenue Interest of
Seller set forth on Exhibit A for such Property or bearing a greater
Working Interest share of costs than that set forth in Exhibit A
(without a corresponding increase in the associated Net Revenue
Interest). For purposes of this Agreement, in evaluating the
significance of a fact, circumstance or condition to determine whether
the same constitutes a Title Defect, due consideration shall be given
to the length of time that the particular Property has been producing
hydrocarbon substances and whether such fact, circumstance or
condition is of the type expected to be encountered in the area
involved and is usual and customarily acceptable to reasonable and
prudent operators, interest owners, and purchasers engaged in the
business of the ownership, development and operation of oil and gas
properties.
12.1.2 "Net Revenue Interest" shall mean Seller's interest in and
to all production of oil, gas and other minerals saved, produced and
sold from any Well after giving effect to all valid lessor's
royalties, overriding royalties, production payments, carried
interests, liens and other encumbrances or charges against production
therefrom.
12.1.3 "Working Interest" shall mean, with respect to the Wells,
Seller's interest in and to the full and entire leasehold estate
created under and by virtue of the Leases and all rights and
obligations of every kind and character appurtenant thereto or arising
therefrom, without regard to any valid lessor's royalty, overriding
royalties, production payments, carried interests, liens, or other
encumbrances or charges against production therefrom insofar as such
interest in said leasehold estate is burdened with the obligation to
bear and pay costs of operations.
12.1.4 "Permitted Encumbrances" shall mean:
(a) Lessors' royalties, overriding royalties, reversionary
<PAGE>
interests and similar burdens if the net cumulative effect of the
burdens does not operate to reduce the interest of Seller with
respect to all oil and gas produced from any Well below the Net
Revenue Interest, or increase the Working Interest for such Well
set forth in Exhibit A;
(b) Division orders and production sales contracts
terminable without penalty upon no more than 90 days notice to
the purchaser;
(c) Preferential rights to purchase and required third party
consents to assignment and similar agreements with respect to
which waivers or consents are obtained from the appropriate
parties, or the appropriate time period for asserting any such
right has expired without an exercise of the right;
(d) Materialman's, mechanic's, repairman's, employee's,
contractor's, operator's, tax, and other similar liens or charges
arising in the ordinary course of business for obligations that
are not delinquent or that will be paid by Seller and discharged
in the ordinary course of business or if delinquent, that are
being contested in good faith by appropriate action of which
Buyer is notified in writing before Closing;
(e) All rights to consent by, required notices to, filings
with, or other actions by governmental entities in connection
with the sale or conveyance of oil and gas leases or interests
therein if they are routinely obtained subsequent to the sale or
conveyance;
(f) Easements, rights-of-way, servitudes, permits, surface
leases and other rights in respect of surface operations that do
not materially interfere with the oil and gas operations to be
conducted on any Well or Lease;
(g) All operating agreements, unit agreements, unit
operating agreements, pooling agreements and pooling designations
affecting the Properties that are either of record in Seller's
chain of title or reflected or referenced in Seller's files;
(h) Conventional rights of reassignment prior to release or
surrender requiring notice to the holders of the rights;
(i) All rights reserved to or vested in any governmental,
statutory or public authority to control or regulate any of the
Properties in any manner, and all applicable laws, rules and
orders of governmental authority;
(j) The terms and conditions of the Leases, and of all
agreements that are of record in Seller's chain of title or
reflected or referenced in Seller's files.
<PAGE>
(k) All other liens, charges, encumbrances, contracts,
agreements, instruments, obligations, defects, irregularities,
and other matters affecting the Properties which individually or
in the aggregate are not such as to interfere materially with the
operation, value or use of any of the Properties, do not prevent
Buyer from receiving the proceeds of production from any of the
Wells, do not reduce the interest of Seller with respect to all
oil and gas produced from any Well below the Net Revenue Interest
set forth in Exhibit A for such Well, and/or do not increase the
portion of the costs and expenses relating to any Well that
Seller is obligated to pay above the Working Interest set forth
in Exhibit A for such Well;
(l) Any Title Defect Buyer may have expressly waived in
writing or which are deemed to have become Permitted Encumbrances
under Section 12.1.
(m) Any potential Title Defect arising out of the matters
described in Items (1), (2), (8) and (9) of Exhibit H.
12.1.5 "Defect Value" shall mean the amount by which the
Allocated Value of any Well is reduced as a result of each Title
Defect which is accepted by Seller or determined to be a Title Defect
pursuant to Section 12.2.
12.1.6 "Allocated Value" shall mean, with respect to any Well,
the value specified therefor on Exhibit A attached hereto.
12.2 Determination of Title Defects and Defect Values. Within five (5)
business days after Seller's receipt of the Title Defects Notice, Seller
shall notify Buyer whether Seller agrees with Buyer's claimed Title Defects
and/or the proposed Defect Values therefor (Seller's Response). If Seller
does not agree with any claimed Title Defect and/or the proposed Defect
Value therefor, then the parties shall enter into good faith negotiations
and shall attempt to agree on such matters. If the parties cannot reach
agreement concerning either the existence of a Title Defect or a Defect
Value by the Closing Date, upon either party's request, the parties shall
mutually agree on and employ an attorney experienced in title examination
in the state where the Properties are located ("Title Consultant") to
resolve all points of disagreement relating to Title Defects and Defect
Values; provided, however, that if at any time the Title Consultant so
chosen fails or refuses to perform hereunder, a new Title Consultant shall
be chosen by the parties. The cost of any such Title Consultant shall be
borne 50% by Seller and 50% by Buyer. Each party shall present a written
statement of its position on the Title Defect and/or Defect Value in
question to the Title Consultant within five (5) business days after the
Title Consultant is selected, and the Title Consultant shall make a
determination of all points of disagreement in accordance with the terms
and conditions of this Agreement within ten (10) business days of receipt
of such position statements. The determination by the Title Consultant
<PAGE>
shall be conclusive and binding on the parties, and shall be enforceable
against any party in any court of competent jurisdiction. If necessary, the
Closing Date shall be deferred only as to those Properties affected by any
unresolved disputes regarding the existence of a Title Defect and/or the
Defect Value until the consultant has made a determination of the disputed
issues with respect thereto and all subsequent dates and required
activities with respect to any such Properties having reference to the
Closing Date shall be correspondingly deferred; provided, however, that,
unless Seller and Buyer mutually agree to the contrary, the Closing Date
shall not be deferred in any event for more than sixty (60) days beyond the
original Closing Date. All Properties as to which no such dispute(s) exist
shall be conveyed to Buyer subject to the terms of this Agreement at
Closing. Once the Title Consultant's determination has been expressed to
both parties, Seller shall have five (5) business days in which to advise
Buyer in writing which of the options available to Seller under Section
12.3 below Seller elects regarding each of the Properties as to which the
Title Consultant has made a determination.
12.3 Remedies for Title Defect. Seller shall have the right, but not
the obligation, to cure any Title Defect accepted by Seller or determined
to be a Title Defect pursuant to Section 12.2 above. With respect to any
Title Defect that Seller elects not to cure or that Seller fails to cure to
Buyer's reasonable satisfaction at or prior to the Closing (including any
deferral thereof pursuant to Section 12.2 above), Seller shall have the
option to:
12.3.1 exclude the Property including pipelines and other
personal property necessary to operate the particular well(s) subject
to the Title Defect from this Agreement, in which event the Purchase
Price shall be reduced by the Allocated Value of such Property, or
12.3.2 sell the Property subject to such Title Defect to Buyer
and the Purchase Price shall be reduced by the Defect Value for such
Title Defect.
12.4. Title Defect Hurdle. No downward adjustment of the Purchase
Price on account of Title Defects shall occur unless the Defect Value
determined in accordance with this Article 12 of an individual Title Defect
exceeds $10,000.00. Once the $10,000 threshold is reached, the amount of
any such downward adjustment shall be the total amount of such Defect
Value. Should the aggregate Defect Values and/or the Allocated Values of
excluded Properties exceed ten percent (10%) of the Purchase Price, then
either Buyer or Seller shall have the option to terminate this Agreement,
in which case neither party shall have any further liability or obligation
to the other hereunder except as regards obligations imposed by any
confidentiality agreement, which shall survive such termination and be
enforceable in accordance with the terms thereof.
12.5 Preferential Purchase Rights and Consents to Assign. Seller shall
make a good faith effort to insure that all preferential purchase rights
and consents to assign arising in connection with the assignment of the
Properties to Buyer shall have been waived or obtained or shall have
expired before or by the time of Closing; except those which are
customarily obtained or received after Closing; provided, however, that if
notice of the transaction contemplated herein has been given to a party or
<PAGE>
parties entitled to a preferential purchase right with respect thereto, but
the time during which any such party or parties has to exercise such right
has not expired, Closing as to such Property shall be deferred, and Buyer
shall remain obligated to purchase the Property at such time as the consent
or waiver is obtained or the time has expired, but in no event more than
ninety (90) days following Closing.
13. Suspense Funds Held by Seller.
13.1 Seller agrees to convey and Buyer agrees to receive all suspense
funds held by Seller as of the Effective Date for the benefit of royalty,
overriding royalty interest and working interest owners attributable to the
Properties, the amount of such funds to be adjusted with respect to
suspense funds received and disbursed by Seller from and after the
Effective Date, and Buyer shall assume all past, present and future
liability associated with such funds, but only as to the suspense funds
actually transferred, and not to any liability resulting from Seller's
failure to pay or retain any amounts prior to the Effective Date in
addition to the suspense funds so transferred. All past, present and future
liability associated with such funds shall be assumed by Buyer and Buyer
agrees to protect, defend, indemnify and hold Seller and its employees
harmless from and against any and all costs, expenses, claims, demands, and
causes of action of every kind and character (including attorneys' fees and
court costs) arising out of, incident to, or in connection therewith. Prior
to Closing, Seller shall furnish Buyer with a schedule of suspense funds by
Property by owner.
13.2 Notwithstanding the preceding paragraph, Seller shall retain the
obligation for interest due on suspended royalty funds which are
transferred to Buyer following Closing. Seller's share of interest due on
any such suspended royalty funds shall not accrue past the date the
suspense funds are actually transferred to Buyer. Prior to paying any
interest on suspended funds, Buyer shall provide for Seller's approval,
which shall not be unreasonably withheld, Buyer's calculation of interest
due. Buyer will invoice Seller following payment of interest to the royalty
owners on any such suspended funds.
13.3 No negative (receivable) balances from prior royalty overpayments
will be transferred to Buyer. However, to the extent such receivables are
due Seller from active payees, Buyer will attempt to recover such balances
from future royalty payments for up to twenty-four (24) months past
Closing. Buyer will provide an annual accounting to Seller of any such
funds recovered.
14. Royalty Audit Responsibility. Seller shall retain the obligation, for
audit purposes, to maintain accounting records for all royalties paid or due
through the date of transfer of operations, including, but not limited to,
royalties paid or due any Federal or State Governmental agencies. Except as
otherwise provided in this Agreement, Seller shall also retain full liability
for all royalty obligations, including any underpayment penalties, for
production periods prior to the Effective Date. For royalty adjustments paid by
Seller covering periods after the Effective Date but prior to the time Buyer
commences to pay royalties, such adjustments shall be handled as an increase in
Purchase Price item under Section 3.1 above, provided the adjustments are not
based on any price differential between the price received by Seller and the
price paid to Buyer in the closing adjustment calculations.
<PAGE>
15. Closing.
15.1 The Closing. The sale and purchase of the Properties pursuant to
this Agreement shall be consummated (Closing) in Houston, Texas at the
offices of Sonat Exploration Company on or before August 19, 1998 (Closing
Date).
15.2 Closing Obligations. At the Closing, the following events shall
occur, each event under the control of one party hereto being a condition
precedent to the events under the control of the other party, and each
event being deemed to have occurred simultaneously with the other events:
15.2.1 Seller shall execute and deliver to Buyer one or more
instruments of assignment, in substantially the form of the
Assignment, Bill of Sale and Conveyance set forth as Exhibit J hereto.
Buyer shall record the Assignment as soon as reasonably practicable
after the Closing and furnish Seller with a copy of the recorded
Assignment within thirty (30) days of such recordation.
15.2.2 Seller shall deliver, or cause to be delivered, to Buyer
one or more executed originals of the instruments described in Article
29 below. Buyer shall record such instruments as soon as reasonably
practicable after the Closing and furnish Seller with a copy of the
recorded instruments within thirty (30) days of such recordation.
15.2.3 Buyer shall deliver to Seller in immediately available
funds (wire transfer), the Preliminary Amount. The "Preliminary
Amount" shall be that amount to be determined by Seller and Buyer
prior to the Closing Date as an estimate of the final computation of
the Final Purchase Price. Seller shall provide Buyer a closing
statement reflecting the Preliminary Amount at least five (5) business
days prior to the Closing, accompanied by information sufficient to
allow Buyer to determine how the Preliminary Amount was computed.
15.2.4 Seller and Buyer shall execute, acknowledge and deliver
division orders, transfer orders or letters in lieu thereof directing
all purchasers of production from the Properties to make payment of
proceeds attributable to such production occurring on or after the
Effective Date to Buyer.
15.2.5 As to those Properties operated by Seller, Seller shall
prepare, and Seller and Buyer shall execute all appropriate state or
local forms required to be executed to effect the administrative
change of operator of such Properties from Seller to Buyer, and Buyer
shall file such forms within five (5) business days after Closing.
Also with respect to any Wells for which Seller is designated as the
operator under the applicable operating or other similar agreement,
Seller shall send letters to all working interest owners advising of
<PAGE>
Seller's resignation as operator and advising that Buyer is assuming
operations.
15.2.6 Seller shall deliver to the Buyer possession of the
Properties at the Closing.
16. Post-Closing Adjustments.
16.1 Final Settlement Statement. After the Closing Date, Seller shall
prepare, in accordance with this Agreement and with generally accepted
accounting principles consistently applied, a statement (Final Settlement
Statement), a copy of which shall be delivered by Seller to Buyer no later
than ninety (90) days after the Closing Date, setting forth each adjustment
to the Purchase Price necessary to determine the Final Purchase Price and
showing the calculation of such adjustments in accordance with Article 3.
Buyer shall have forty-five (45) days after receipt of the Final Settlement
Statement to review such statement and to provide written notice to Seller
of Buyer's objection to any item on the statement. Buyer's notice shall
clearly identify the item(s) objected to and the reasons and support for
the objection(s). If Buyer does not provide written objection(s) within the
45-day period, the Final Settlement Statement shall be deemed correct and
shall not be subject to further adjustment. If Buyer provides written
objection(s) within the 45-day period, the Final Settlement Statement shall
be deemed correct with respect to the items not objected to. Buyer and
Seller shall meet to negotiate and resolve the objections within fifteen
(15) days of Seller's receipt of Buyer's objections. If Buyer and Seller
agree on all objections, the adjusted Final Settlement Statement shall be
deemed correct and shall not be subject to further adjustment. Any items
not agreed to at the end of the 15-day period may, at either party's
request, be resolved by arbitration in accordance with Section 16.2 below.
16.2 Arbitration. If Seller and Buyer cannot agree upon the Final
Settlement Statement, the firm of Ernst and Young, L.L.P., shall act as an
arbitrator and decide all points of disagreement with respect to the Final
Settlement Statement. The decision of Ernst & Young on all such points
shall be binding upon the parties. The costs and expenses of Ernst and
Young shall be borne fifty percent (50%) by Seller and fifty percent (50%)
by Buyer.
16.3 Payment of Final Purchase Price. If the Final Purchase Price is
more than the Preliminary Amount, Buyer shall pay such difference to Seller
in immediately available funds within five (5) business days after the
parties have agreed upon the Final Settlement Statement. If the Final
Purchase Price is less than the Preliminary Amount, Seller shall pay such
difference to Buyer in immediately available funds within five (5) business
days after the parties have agreed upon the Final Settlement Statement.
16.4 Revenues and Expenses during Post-Closing Period. At least once
every thirty (30) days during the post-Closing period, Seller agrees to
promptly forward to Buyer a statement showing revenues and expenses
received by Seller and attributable to the Properties after the Effective
Date together with payment of any excess of such revenues over such
expenses. Similarly, at least once every thirty (30) days during the
post-Closing period, Buyer agrees to promptly forward to Seller a statement
showing revenues and expenses
<PAGE>
received by Buyer and attributable to the Properties prior to the Effective
Date together with payment of any excess of such revenues over such
expenses.
17. Assumption of Certain Obligations. Except as provided for in Section
22.7.1(a), and as otherwise provided for in Article 4 above, at Closing, Buyer
shall assume all costs and liabilities and discharge all obligations of Seller
(a) under all leases, operating agreements, production sales contracts, farmout
agreements and other contracts or agreements respecting the Properties or
relating the ownership or operation of the Properties from and after the
Effective Date, (b) with respect to all Imbalances associated with the
Properties, regardless of their nature or of the time at which they accrued, (c)
all pipeline reimbursement obligations under Items (A)(2) and (B)(2) of Exhibit
C attached hereto, and (d) in connection with that certain matter described in
Items (1), (2), (8) and (9) of Exhibit H. Seller shall retain responsibility for
all matters described on Exhibit H other than Items (1), (2), (8) and (9).
18. Limitation of Warranties. Anything in this Agreement to the contrary
notwithstanding, the Properties are being sold by Seller to Buyer without
recourse, covenant, or warranty of any kind, express, implied, or statutory,
with the sole exception that Seller will warrant title to the Properties,
subject to the Permitted Encumbrances, against every person whomsoever lawfully
claiming or to claim the same or any part thereof by, through, or under Seller,
but not otherwise. WITHOUT LIMITATION OF THE GENERALITY OF THE IMMEDIATELY
PRECEDING SENTENCE, SELLER CONVEYS THE PROPERTIES AS-IS, WHERE-IS AND WITH ALL
FAULTS AND EXPRESSLY DISCLAIMS AND NEGATES:
(a) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY,
(b) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE,
AND
(c) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF
MATERIALS.
SELLER ALSO EXPRESSLY DISCLAIMS AND NEGATES ANY IMPLIED OR EXPRESS WARRANTY
AT COMMON LAW, BY STATUTE OR OTHERWISE RELATING TO THE ACCURACY OF ANY OF THE
INFORMATION FURNISHED WITH RESPECT TO THE EXISTENCE OR EXTENT OF RESERVES OR THE
VALUE OF THE PROPERTIES BASED THEREON OR THE CONDITION OR STATE OF REPAIR OF ANY
OF THE PROPERTIES.
THIS DISCLAIMER AND DENIAL OF WARRANTY ALSO EXTENDS TO ANY EXPRESS OR
IMPLIED REPRESENTATION OR WARRANTY AS TO THE VOLUMES AND PRICES BUYER AND SELLER
ARE OR WILL BE ENTITLED TO RECEIVE FROM PRODUCTION OF OIL, GAS OR OTHER
SUBSTANCES FROM THE PROPERTIES, IT BEING UNDERSTOOD THAT ALL RESERVE, PRICE AND
VALUE ESTIMATES UPON WHICH BUYER HAS RELIED OR IS RELYING HAVE BEEN DERIVED BY
THE INDIVIDUAL EVALUATION OF BUYER.
<PAGE>
THE REPRESENTATIONS AND WARRANTIES MADE BY SELLER AND BUYER IN ARTICLES 6
AND 7 SHALL SURVIVE CLOSING FOR A PERIOD OF SIX (6) MONTHS. AFTER SUCH TIME,
NEITHER PARTY SHALL HAVE ANY RIGHTS OR CLAIMS AGAINST THE OTHER PARTY BASED UPON
THE BREACH OF ANY SUCH REPRESENTATIONS OR WARRANTIES. THE PROVISIONS OF SECTIONS
4.1, 4.2 AND 14 SHALL SURVIVE CLOSING.
19. Cross-Indemnification. Except as expressly limited elsewhere in this
Agreement:
19.1 Buyer agrees to indemnify and hold Seller harmless from and
against any and all liability, loss, cost and expense (including, without
limitation, court costs and reasonable attorneys' fees) that are
attributable to the Properties conveyed to Buyer and are attributable to
periods of time on or after the Effective Date including, but not limited
to any liability resulting from the condition of the Properties arising
after the Effective Date under any federal, state or local statute,
regulation, rule, ordinance, etc., relating to health, safety or the
environment, or that are attributable to a breach by Buyer of any of its
surviving representations, warranties or covenants hereunder, and
19.2 Seller agrees to indemnify and hold Buyer harmless from and
against any and all liability, loss, cost and expense (including, without
limitation, court costs and reasonable attorneys' fees) that are
attributable to the Properties conveyed to Buyer and are attributable to
periods of time before the Effective Date including, but not limited to any
liability resulting from the condition of the Properties arising after the
Effective Date under any federal, state or local statute, regulation, rule,
ordinance, etc., relating to health, safety or the environment, or that are
attributable to a breach by Seller of any of its surviving representations,
warranties or covenants hereunder.
20. Casualty Loss. Prior to Closing, Seller shall promptly notify Buyer of
any Casualty Loss of which Seller becomes aware. "Casualty Loss" shall mean,
with respect to all or any material portion of a Property, any destruction by
fire, blowout or other casualty (above or below the ground) or any taking, or
pending or threatened taking, in condemnation or under the right to eminent
domain of any Property or portion thereof occurring between the time this
Agreement is executed and the Closing Date. If any Casualty Loss occurs, Seller
shall transfer to Buyer such Property notwithstanding such Casualty Loss and
transfer to Buyer such Property insurance proceeds, claims, awards and other
payments arising out of such Casualty Loss. Seller shall not voluntarily
compromise, settle or adjust any amounts payable by reason of any Casualty Loss
without first obtaining the written consent of Buyer.
21. Termination and Remedies.
21.1 Termination. If the Closing has not occurred on or prior to
September 15, 1998, for any reason not attributable to the fault of either
Party, either Party may terminate this Agreement, in which case it shall
give written notice of the termination to the other Party.
21.2 Sole Remedy of Buyer Prior to Closing. If at any time prior to
<PAGE>
Closing, a material representation or warranty made herein by Seller is
incorrect or if Seller fails to fully and timely comply with any of
Seller's obligations as set forth herein or as required by applicable law,
Buyer's sole and exclusive remedy against Seller shall be to terminate this
Agreement (unless an alternative remedy shall be mutually agreed upon
between Buyer and Seller); provided, however, if such a breach consists of
Seller intentionally refusing to perform any of its obligations referred to
in Section 15.2, Buyer may seek injunctive relief requiring Seller to
execute and deliver such documents in accordance with the terms of this
Agreement.
21.3 Sole Remedy of Seller Prior to Closing. If at any time prior to
Closing, a material representation or warranty made herein by Buyer is
incorrect or if Buyer fails to fully and timely comply with any of Buyer's
obligations as set forth herein or as required by applicable law, Seller's
sole and exclusive remedy against Buyer shall be to terminate this
Agreement (unless an alternative remedy shall be mutually agreed upon
between Seller and Buyer); provided, however, if such a breach consists of
Buyer intentionally refusing to perform any of its obligations referred to
in Section 15.2, Seller may seek injunctive relief requiring Buyer to
perform such obligations in accordance with the terms of this Agreement.
22. Environmental Matters.
22.1 Presence of NORM. Buyer acknowledges that the Properties have
been used to explore for, develop and produce oil and gas, and that the
Properties, including production equipment, may contain Naturally Occurring
Radioactive Material ("NORM"). NORM may affix or attach itself to the
inside of wells, materials, and equipment as scale or in other forms.
Special procedures may be required for remediating, removing, transporting,
and disposing of such NORM-contaminated equipment from the Property, and
Buyer assumes all liability for the assessment, remediation, removal,
transportation, and disposal of such equipment in accordance with the
applicable rules, regulations, and requirements of governmental agencies.
22.2 Adverse Environmental Condition. As used in the following
Sections, "Adverse Environmental Condition" means:
(a) any contamination (exclusive of NORM-contaminated equipment)
or condition exceeding currently-allowed regulatory limits and not
otherwise permanently authorized by permit or law, resulting from any
discharge, release, disposal, production, storage, treatment, or any
other activities on, in or from any Property, or the migration or
transportation from other lands to any Property, prior to the
Effective Date, of any wastes, pollutants, contaminants, hazardous
materials or other materials or substances subject to regulation
relating to the protection of the environment, including, but not
limited to, the Clean Air Act, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (CERCLA), the Federal
Water Pollution Control Act, the Safe Drinking Water Act, the Toxic
Substance Control Act, the Hazardous and Solid Waste Amendments Act of
1984, the Superfund Amendments and Reauthorization Act of 1986, the
Hazardous Materials Transportation Act, the Clean Water Act, the
National Environmental Policy Act, the Endangered Species Act, the
<PAGE>
Fish and Wildlife Coordination Act, the National Historic Preservation
Act, and the Oil Pollution Act of 1990, as well as any state and local
regulation or law governing the same, similar or related matters, and
(b) any such contamination or condition temporarily authorized by
permit, fee agreement or other arrangement.
22.3 Environmental Assessment. After the execution of this Agreement,
Buyer shall have the opportunity to conduct at its sole risk and expense an
environmental assessment of the Properties. Seller will provide reasonable
access for this purpose to Properties operated by Seller; for any Property
not operated by Seller, however, Buyer must contact the operator of any
such non-operated Property directly. Seller will use its best reasonable
efforts to assist Buyer in obtaining any such consent. Buyer or any of its
representatives and agents must comply with Seller's environmental and
safety rules and policies while on Seller's Properties. Buyer agrees it
will not disclose any information obtained in its environmental assessment
to third parties unless agreed to in writing by Seller or unless such
disclosure is expressly required by applicable law or regulation or is
compelled pursuant to legal process of any court or governmental authority.
Subject to the foregoing, Buyer will notify Seller in advance of any such
disclosure and will furnish Seller copies of all materials to be disclosed
prior to any disclosure thereof to third parties. As soon as possible after
Buyer's receipt thereof, Buyer shall forward to Seller copies of all
reports, data, analysis, test results, remediation cost estimates, and
recommended remediation procedures or other information concerning or
derived from Buyer's environmental assessment.
22.4 Field Inspection. After the execution of this Agreement, Buyer
shall have the opportunity to inspect the Wells and equipment related to
the Properties and, not less than ten (10) business days prior to Closing,
to request in writing an adjustment to the Purchase Price based on the
condition of such Wells and/or equipment. Such request shall be based upon
reasonable grounds as would be applied under good oil field practices.
Seller shall have five (5) business days after receipt of any such notice
from Buyer to correct, at its option, any such condition to Buyer's
reasonable satisfaction or to mutually agree with Buyer on an appropriate
reduction in the Purchase Price. In the event that Seller elects not to
correct any such condition, and thereafter Seller and Buyer cannot mutually
agree on an appropriate reduction to the Purchase Price, the Property
affected by the condition shall be excluded from this transaction and the
Purchase Price shall be reduced by the Allocated Value therefor.
22.5 Notice of Adverse Environmental Conditions. Buyer shall notify
Seller in writing every ten (10) days following commencement of Buyer's
environmental assessment of any claimed Adverse Environmental Condition(s)
for the preceding 10-day period, with Buyer's final such notice of claimed
Adverse Environmental Condition(s) due not more than one (1) year after
Closing (each notice an Environmental Defects Notice). The Environmental
Defects Notice shall (a) set forth in reasonable detail the Property with
respect to which a claimed Adverse Environmental Condition is made, (b) the
nature of such claimed Adverse Environmental Condition, and (c) Buyer's
proposed calculation of the cost to remediate each claimed Adverse
Environmental Condition (Remediation Value). Buyer shall absolutely and
forever waive its right to assert any claim or liability against Seller
<PAGE>
arising out of or in any way related to any Adverse Environmental Condition
not set forth in an Environmental Defects Notice.
22.6 Determination of Adverse Environmental Conditions and Remediation
Values. Within five (5) business days after Seller's receipt of the
Environmental Defects Notice, Seller shall notify Buyer whether Seller
agrees with Buyer's claimed Adverse Environmental Conditions and/or the
Remediation Value (Seller's Environmental Response). If Seller does not
agree with any claimed Adverse Environmental Condition and/or the
Remediation Value, then the parties shall enter into good faith
negotiations and shall attempt to agree on such matters. If the parties
cannot reach agreement concerning either the existence of an Adverse
Environmental Condition or the Remediation Value therefor up to a maximum
claimed amount of $500,000.00 within ten (10) business days after Buyer's
receipt of Seller's Environmental Response, upon either party's request,
the parties shall mutually agree on a consultant experienced in
environmental matters in the state where the Properties are located
(Environmental Consultant) to resolve all points of disagreement with
respect to such matters. If at any time any Environmental Consultant so
chosen fails or refuses to perform hereunder, a new Environmental
Consultant shall be chosen by the parties. The cost of any such consultant
shall be borne 50% by Seller and 50% by Buyer. Each party shall present a
written statement of its position on the Adverse Environmental Condition
and/or the Remediation Value in question to the consultant within five (5)
business days after the Environmental Consultant is selected, and the
Environmental Consultant shall make a determination of all points of
disagreement in accordance with the terms and conditions of this Agreement
within ten (10) business days of receipt of such position statements. The
determination by the Environmental Consultant shall be conclusive and
binding on the parties, and shall be enforceable against any party in any
court of competent jurisdiction. With respect to claimed Adverse
Environmental Conditions with claimed Remediation Values in excess of
$500,000.00, Seller and Buyer shall mutually agree on the manner in which
such dispute shall be resolved, and failing such mutual agreement, the
matter shall be submitted to binding arbitration in accordance with the
arbitration rules promulgated by the American Arbitration Association. If
necessary, the Closing Date shall be deferred only as to those Properties
affected by any unresolved disputes regarding the existence of a Adverse
Environmental Condition and/or the Remediation Value until the
Environmental Consultant has made a determination of the disputed issues
with respect thereto and all subsequent dates and required activities with
respect to any such Properties having reference to the Closing Date shall
be correspondingly deferred; provided, however, that, unless Seller and
Buyer mutually agree to the contrary, the Closing Date shall not be
deferred in any event for more than sixty (60) days beyond the original
Closing Date. All Properties as to which no such dispute(s) exist shall be
conveyed to Buyer subject to the terms of this Agreement at Closing. Once
the Environmental Consultant's determination has been expressed to both
parties, Seller shall have five (5) business days in which to advise Buyer
in writing which of the options available to Seller under Section 22.6
below Seller elects regarding each of the Properties as to which the
consultant has made a determination.
22.7 Remedies for Adverse Environmental Conditions.
<PAGE>
22.7.1 As to any Adverse Environmental Condition accepted by
Seller or determined to be an Adverse Environmental Condition, Seller
shall have the election to:
(a) remediate such Adverse Environmental Condition at
Seller's sole cost in accordance with applicable environmental
laws, and to Buyer's reasonable satisfaction, and there shall be
no adjustment to the Purchase Price in respect of such Adverse
Environmental Condition and the provisions of Section 22.8 shall
thereafter apply in all respects;
(b) reduce the Purchase Price by the applicable Remediation
Value, which in no event shall exceed the Allocated Value of the
Unit and/or Well affected by such Adverse Environmental
Condition, in which event Seller shall have no other or further
obligation or liability in respect of such Adverse Environmental
Condition and the provisions of Section 22.8 shall thereafter
apply in all respects; or
(c) delete from this Agreement the Property which contains
the Adverse Environmental Condition and adjust the Purchase Price
by the Allocated Value of such Property.
Prior to exercising option (b) above, Seller shall advise Buyer of its
election and Buyer shall have a period of ten (10) business days
within which to notify Seller whether it concurs with Seller's
election. If Buyer does not concur with Seller's election and Seller
and Buyer cannot mutually agree on another option, Buyer shall have
the right to designate that option (c) above shall apply.
22.7.2 No downward adjustment of the Purchase Price on account of
Adverse Environmental Conditions shall occur unless the Remediation
Value determined in accordance with this Article 22 of an individual
Adverse Environmental Condition exceeds $10,000.00. Once the $10,000
threshold is reached, however, the amount of the downward adjustment
shall be the total amount of such Remediation Value. Should the
aggregate sum of the Remediation Values exceed ten percent (10%) of
the Purchase Price, then either Party shall have the option to
terminate this Agreement, in which case neither party shall have any
further liability or obligation to the other hereunder except as
regards obligations imposed by any confidentiality agreement, which
shall survive such termination and be enforceable in accordance with
the terms thereof.
22.7.3 If Seller elects 22.7.1(a) above, Seller will exercise all
reasonable efforts and diligence to complete the remediation work
within six (6) months of the Closing Date, but any failure by Seller
to complete such remediation efforts by such time shall not relieve
Seller of its duty to satisfy its obligation hereunder. Buyer shall
allow Seller and its agents and representatives such access to the
Properties as is reasonably necessary for performance of remediation
<PAGE>
work. Seller will conduct such work so as not to unreasonably
interfere with Buyer's operations.
22.8 Buyer's Indemnification of Adverse Environmental Conditions.
Notwithstanding anything contained in Article 19 above, except for the
costs associated with (a) Seller's remediation of any Adverse Environmental
Conditions pursuant to Section 22.7.1(a) above, and (b) Items (5) and (7)
described on Exhibit H, Buyer shall release, defend, indemnify, and hold
harmless Seller from and against any and all claims, demands,
fines/penalties, causes of action, liabilities and obligations, and all
costs and expenses (including, without limitation, reasonable attorneys'
fees and court costs) associated with all Adverse Environmental Conditions
not included in an Environmental Defects Notice pursuant to Section 22.4
above, including, without limitation, any such conditions arising out of or
relating to any discharge, release, disposal, production, storage,
treatment or any activities on, in or from the Properties, or the migration
or transportation from any other lands to the Properties, whether before or
after the Effective Date, of materials or substances that are at present,
or become in the future, subject to regulation under federal, state or
local laws or regulations, whether such laws or regulations now exist or
are hereafter enacted, INCLUDING, WITHOUT LIMITATION, ANY CLAIMS, DEMANDS,
CAUSES OF ACTION, LIABILITIES, OR OBLIGATIONS ARISING IN WHOLE OR IN PART
FROM THE SOLE OR CONCURRENT NEGLIGENCE OR STRICT LIABILITY OF SELLER. BUYER
HEREBY RELEASES SELLER FROM AND AGAINST ANY AND ALL CLAIMS FOR CONTRIBUTION
UNDER CERCLA AND/OR ANY OTHER ENVIRONMENTAL LAW OR REGULATION.
23. Seller's Election to Effect IRC Section 1031 Exchange. In the event
Seller so elects, Buyer agrees to accommodate Seller in effecting a tax-deferred
exchange under Internal Revenue Code Section 1031, as amended. Seller shall have
the right to elect this tax-deferred exchange at any time prior to the date of
Closing. If Seller elects to effect a tax deferred exchange, Buyer agrees to
execute additional escrow instructions, documents, agreements, or instruments as
may reasonably be required to effect the exchange, provided that Buyer shall
incur no additional costs, expenses, fees or liabilities as a result of or
connected with the exchange.
24. Further Assurances. After the Closing, Seller and Buyer shall execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
such instruments and take such other action as may be reasonably necessary or
advisable to carry out their obligations under this Agreement and under any
exhibit, document, certificate or other instrument delivered pursuant hereto.
Seller shall use its best efforts to obtain all approvals and consents required
by or necessary for the transactions contemplated by this Agreement that are
customarily obtained after Closing, provided that Seller shall not be required
to expend any funds to obtain such approvals and consents.
25. Access to Records. As soon as practicable after Closing, Seller shall
deliver to Buyer, at Seller's address, or at such other place as any of same may
be kept, the originals of all Data, except that Seller may retain the originals
of all accounting Data, subject to the right of Buyer to copy selected portions
of such accounting Data at Seller's expense and with minimal disruption of
Seller's ongoing business. For the shorter of the period during which Buyer
continues to own the Properties or six (6) years after the date of Closing,
<PAGE>
Buyer will retain the Data relating to each Property delivered to it pursuant
hereto and will make such Data available to Seller upon reasonable notice at
Buyer's headquarters at reasonable times and during office hours. Buyer shall
notify Seller in writing within sixty (60) days of the sale to a third party of
all or any part of the Properties which involves the transfer of any of the Data
of the name and address of the buyer(s) in any such sale. Buyer shall require as
part of any such sales transaction that such third party assume the obligations
imposed on Buyer in this Article 25.
26. Use of Sonat Name. Buyer agrees that, as soon as practicable after the
Closing, it will remove or cause to be removed the names and marks "Sonat",
"Sonat Exploration Company", and all variations and derivatives thereof and
logos relating thereto from the Properties of which it has assumed operations
and will not thereafter make any use whatsoever of such names, marks, and logos.
27. Contact with Sonat Employees. Buyer agrees that it will not contact,
either directly or indirectly, any Sonat field employee for possible future
employment without Seller's prior consent.
28. Notices. All notices required or permitted under this Agreement shall
be in writing and shall be delivered personally or by telecopier as follows:
Seller: Sonat Exploration Company
P. O. Box 1513
Houston, Texas 77251-1513
Telephone: (713) 940-4032
Fax/Telecopier: (713) 940-6903
Attention: Vice President Legal-Land
and
6101 South Broadway, Suite 200
Tyler, Texas 75703
Telephone: (903) 534-7457
Fax/Telecopier: (903) 509-5385
Attn: David Hamilton, Land Manager
Buyer: Swift Energy Company
16825 Northchase Drive, Suite 400
Houston, Texas 77060
Telephone: (281) 874-2797
Fax/Telecopier: (281) 874-2726
Attn: Vice President - Land
or to such other place within the United States of America as either Seller or
Buyer may designate as to themselves by written notice to the other. All notices
given by personal delivery or mail shall be deemed received upon the date of
actual receipt at the appropriate address. Notice given by fax shall be
effective upon actual receipt if received prior to 5 p.m. during normal business
<PAGE>
days or at the beginning of the next business day after receipt if received
after 5 p.m. All notices by fax shall be confirmed promptly after transmission,
by certified mail or personal delivery.
29. Sonat Minerals Acreage. AND NOW TO THESE PRESENTS, come Sonat Minerals,
Inc. ("SMI") and Sonat Minerals Leasing, Inc. ("SMLI") who appear herein for the
sole and only purpose of agreeing that for and in consideration of Ten Dollars
and other valuable considerations, the receipt and sufficiency of which are
hereby acknowledged, SMI shall assign, execute and deliver to Buyer, or Buyer's
designee, at Closing the instrument attached hereto and made a part hereof as
Exhibit K, and that SMLI shall assign, execute and deliver to Buyer, or Buyer's
designee, at Closing the instruments attached hereto and made a part hereof as
Exhibits L and M. For purposes of this section, the term "Sonat Minerals
Acreage" shall mean all of SMI's and SMLI's right, title and interest in and to
the properties described on Exhibit N attached hereto and made a part hereof.
30. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
31. Assignment. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto; it shall not, however, be assignable by Buyer
without Seller's prior written consent.
32. Entire Agreement; Amendments; Waivers. This Agreement constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof, superseding all prior negotiations, discussions, agreements and
understandings, whether oral or written, relating to such subject matter. This
Agreement may not be amended and no rights hereunder may be waived except by a
written document signed by the party to be charged with such amendment or
waiver. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions hereto (whether or not
similar) nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided.
33. Headings. The headings of the articles and sections of this Agreement
and any listing of its contents are for guidance and convenience of reference
only and shall not limit or otherwise affect any of the terms or provisions of
this Agreement. Where the context so admits, words importing the singular number
only shall include the plural, and likewise words importing a gender shall
include any other gender.
34. Expenses, Fees and Taxes. Each of the parties hereto shall pay its own
fees and expenses incident to the negotiation and preparation of this Agreement
and consummation of the transactions contemplated hereby, including broker fees.
Buyer shall be responsible for the cost of all fees for the recording of
transfer documents. All other costs shall be borne by the party incurring them.
Notwithstanding anything to the contrary herein, it is acknowledged and agreed
by and between Seller and Buyer that the Purchase Price excludes any sales taxes
or other similar taxes in connection with the sale of property pursuant to this
Agreement. If a determination is ever made that a sales tax or other transfer
tax applies, Buyer shall be liable for such tax as well as any applicable
conveyance, transfer and recording fees, and real estate transfer stamps or
taxes imposed on any transfer of property pursuant to this Agreement. Buyer
<PAGE>
shall release, defend, indemnify and hold harmless Seller with respect to the
payment of any of such taxes, including any interest or penalties assessed
thereon.
35. Laws and Regulations. From and after the Closing:
35.1 Buyer shall comply with all applicable laws, ordinances, rules
and regulations and shall properly obtain and maintain all permits required
by public authorities with regard to the Properties, and shall provide and
maintain with all applicable regulatory agencies all required bonds, and
35.2 Subject to the mutual indemnities of the Parties and the
provisions of Article 22 above, Buyer shall assume all of Seller's
obligations with regard to abandonment of all existing unplugged wells,
whether producing or nonproducing, and abandonment of the leasehold
property including, where applicable, the plugging of wells and the
restoration of the surface as completely as practicable and/or in
compliance with all applicable laws, rules, regulations and in compliance
with all leases and other agreements affecting the Properties, and shall
release, defend, indemnify and hold harmless Seller with respect to any and
all of those obligations.
The obligations set forth hereinabove shall survive the Closing and Buyer shall
remain liable therefor as regards Seller even if Buyer shall assign, sell or
transfer the Properties to a third party.
36. Exhibits. The following Exhibits are incorporated herein and are a part
hereof.
Exhibit A - Units and Wells (and allocation of purchase price)
Exhibit B - Leases, Rights-of-Way and Easements
Exhibit C - Gas Plants
Exhibit D - Natural Gas Liquids Imbalance Schedule
Exhibit E - Buyer's Equipment Inventory
Exhibit F - Vehicle Schedule
Exhibit G - Seller's Equipment Inventory
Exhibit H - Litigation and Claims
Exhibit I - Preferential Purchase Rights/Consents
Exhibit J - Form of Assignment, Bill of Sale and Conveyance
Exhibit K - Form of Partial Conveyance of Louisiana Oil and
Gas Rights
<PAGE>
Exhibit L - Form of Partial Sublease of Oil, Gas and
Mineral Lease
Exhibit M - Form of Assignment of Overriding Royalty Interest
Exhibit N - Sonat Minerals Acreage Descriptions
Executed as of the date set forth above.
SELLER
SONAT EXPLORATION COMPANY
By: /s/ John B. Holmes, Jr.
-------------------------------------
Its: President
-------------------------------------
BUYER
SWIFT ENERGY COMPANY
By: /s/ Terry E. Swift (Initialed by
James P. Mitchell)
-------------------------------------
Its: President
-------------------------------------
SONAT MINERALS LEASING, INC.
By: /s/ Robert A. Lane
-------------------------------------
Its: Executive Vice President
-------------------------------------
SONAT MINERALS, INC.
By: /s/ John B. Holmes, Jr.
-------------------------------------
Its: President
-------------------------------------
