UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB/A
(Mark One)
[root] QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
- ---------
OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly
period ended October 31, 1996
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From.................... to.....................
Commission File Number 1-8287
RIO GRANDE, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 74-1973357
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
10101 Reunion Place, Suite 210, San Antonio, Texas 78216-4156
(Address of Principal Executive Office) (Zip Code)
Issuer's Telephone Number Including Area Code: 210-308-8000
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes
[root] No .
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date:
At December 13, 1996 there were 5,552,760 shares of the registrant's
common stock outstanding.
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PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
The accompanying Index to Exhibits on page E-1 and E-2 are amended to
reflect the inclusion of Exhibit 27 Financial Data Schedule on the Index to
Exhibits.
The actual Exhibit 27 was included in the original filing of Form
10-QSB for the quarterly period ended October 31, 1996.
The page numbers on Exhibit 10(i) and Exhibit 10(j) have been
corrected and the Exhibits are included herein.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
RIO GRANDE, INC.
Date: December 13, 1996 By: /s/ Guy R. Buschman
----------------------
Guy R. Buschman, President
Date: December 13, 1996 By: /s/ Gary Scheele
-------------------
Gary Scheele, Secretary and Treasurer
(principal financial officer)
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INDEX TO EXHIBITS
The following exhibits are numbered in accordance with Item 601 of Regulation
S-B:
3(a) Certificate of Incorporation of the Company (incorporated by reference to
Exhibit 3(a) to Form 8-K dated December 29, 1986 (File No. 1-8287).
3(b) Bylaws of the Company (incorporated by reference to Exhibit 3(b) to Form
8-K dated December 29, 1986 (File No. 1-8287).
3(c) Certificate of Amendment of Certificate of Incorporation of the Company
(E-3).
4(a) Specimen stock certificate (incorporated by reference to Exhibit 4(a) to
Form 8-K dated December 29, 1986 (File No. 1-8287).
4(b) Specimen Stock Purchase Warrant (incorporated by reference to Exhibit 4(b)
to form 8-K dated December 29, 1986 (File No. 1- 8287).
4(c) Note Purchase Agreement, dated September 27, 1995, by and among the
Company, Rio Grande Drilling Company, and the various purchasers of 11.50%
Subordinated Notes due September 30, 2000 (incorporated herein by reference
from October 31, 1995 Form 10-QSB).
4(d) Form of Common Stock Purchase Warrant issued in connection with the
Offering described in this report (incorporated herein by reference from
October 31, 1995 Form 10-QSB).
4(e) Amendments to Note Purchase Agreement, by and among the Company, Drilling
and the Holders (incorporated herein by reference from March 26, 1996 Form
8-K).
4(f) Amendments to Notes, by and among the Company and the Holders (incorporated
herein by reference from March 26, 1996 Form 8-K).
4(g) Consents to Proposed Transactions by the Holders to the Company
(incorporated herein by reference from March 26, 1996 Form 8-K).
4(h) Amendment to Warrant Agreement among the Company and the Holders
(incorporated herein by reference from March 26, 1996 Form 8-K).
10(a)Asset Purchase Agreement dated June 26, 1992 by and between SHV Oil and Gas
Company and Rio Grande Drilling Company (incorporated herein by reference
from July 31, 1992 Form 10-Q).
10(b)Agreement of Limited Partnership dated June 25, 1992 for Rio Grande
Offshore, Ltd. between Rio Grande Drilling Company, Robert A. Buschman, H.
Wayne Hightower and H. W. Hightower, Jr. (incorporated herein by reference
from July 31, 1992 Form 10-Q).
10(c)Loan Agreement by and between International Bank of Commerce and Rio Grande
Drilling Company dated June 26, 1992 (incorporated herein by reference from
July 31, 1992 Form 10-Q)
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10(d)Purchase and Sale Agreement dated May 24, 1995, between Newfield
Exploration Company and Rio Grande Offshore, Ltd. for the sale of Ewing
Bank Blocks 947/903 and Ship Shoal Block 356 at a sales price of $1,200,000
(incorporated by reference from July 31, 1995 Form 10-QSB).
10(e)Consulting Agreement dated August 10, 1995, between Hobby A. Abshier and
Rio Grande, Inc. (incorporated by reference from July 31, 1995 Form
10-QSB).
10(f)Closing Agreement between Fortune Petroleum Corporation, Pendragon
Resources, L.L.C. and Rio Grande Offshore, Ltd. dated March 6, 1996 for the
acquisition of South Timbalier Block 76 (incorporated by reference from
March 26, 1996 Form 8-K).
10(g)Loan Agreement between Comerica Bank-Texas, Rio Grande, Inc. and Rio Grande
Drilling Company dated March 8, 1996 for a senior credit facility of
$10,000,000 (incorporated herein by reference from March 26, 1996 Form
8-K).
10(h)Purchase and Sale Agreement between Belle Oil, Inc., Belle Exploration,
Inc., Louisiana Well Service Co., Alton J. Ogden, Jr., Alton J. Ogden, Sr.,
Jeff L. Burkhalter and Rio Grande Offshore, Ltd. (incorporated herein by
reference from April 29, 1996 Form 8-K).
10(i)Engagement letter between Reid Investment Corporation and Rio Grande, Inc.
dated August 28, 1996, as exclusive agent to sell equity in Rio Grande,
Inc. (E-3)
10(j)Purchase and Sale Agreement between Brechtel Energy Corporation, et al and
Rio Grande Offshore, Ltd. dated November 20, 1996 for the acquisition of
oil and gas properties located in the Righthand Creek Field, Allen Parish,
Louisiana. (E-7)
27. Financial Data Schedule (E-85).
99(a)Private Offering Memorandum of the Company dated August 27, 1995
(incorporated herein by reference from October 31, 1995 Form 10-QSB)
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R E I D
S E C U R I T I E S
August 28, 1996
RIO GRANDE, INC.
10101 Reunion Place, Suite 210
San Antonio, TX 78216-4156
Attention: Guy Bob Buschman President
Gentlemen:
In connection with the proposed issue and sale (by means of a private
placement to institutional investors) by Rio Grande, Inc. (the "Company") of
approximately $10 to $15 million of subordinated debt, preferred stock or any
other security issued by the Company (the "Securities"), the Company and Reid
Securities Corporation ("Reid") agree:
1. (a) Prior to the sale of the Securities to any prospective purchaser
("Offeree"), the authorized employees of the Company shall: (i) furnish or make
available to each Offeree and any person advising such Offeree all relevant
information pertaining to the Company and the Securities and the terms and
conditions of the offering, and (ii) give each Offeree and any person advising
such Offeree the opportunity to ask questions and receive answers concerning the
Company and the Securities and the terms and conditions of the offering.
(b) To the best of the Company's knowledge all written
information or oral information provided to Offerees or to Reid by authorized
employees of the Company will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make such information not
misleading.
(c) The Company covenants that it shall promptly advise Reid
if, because of the occurrence of any event or condition, the passing of time or
otherwise, written information or oral communications of the Company and its
employees to Offerees which relate to the offer and sale of the Securities
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements, in light of the circumstances under which they
were made, not misleading, and the written information (and attendant oral
communications) shall be amended in form and substance satisfactory to Reid so
that after giving effect to such amendment, the written information (and
attendant oral communications) will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements,
in the light of the circumstances under which they were made, not misleading.
Reid Securities Corporation
5956 Sherry Lane*Suite 190l*Dallas, Texas 75225*214/739-8900*Fax 214/739-5420
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Rio Grande, Inc.
August 28, 1996
Page 2
2. The Company hereby appoints Reid as its exclusive agent to effect
sales of the Securities on a best efforts basis during the period commencing on
the date of this engagement letter and ending December 31, 1996 (the 'Offering
Period"), which may be mutually extended by written agreement of the parties
hereto. Subject to the terms and conditions herein set forth, Reid accepts such
appointment and shall use its best efforts to find purchasers for all of the
Securities. Reid's agency hereunder is coupled with an interest and is not
terminable by the Company without Reid's permission; such agency shall continue
until the termination of the Offering Period, except that if subscriptions for
all of the Securities are received prior to the termination of the Offering
Period, Reid's agency shall terminate at the date of the last sale of the
Securities. In the event the offering of the Securities is commenced and
subscriptions for the Securities are not received by the end of the Offering
Period, Reid's agency and this Agreement shall terminate without further
obligation of either Reid or the Company to the other except as provided in this
paragraph 2 and in paragraphs 4, 6 and 7. The Company shall have the right to
reject any and all proposed purchasers of the Securities for any reason the
Company deems reasonable. Notwithstanding the foregoing, in the event that Reid
contacts an Offeree and introduces the Offeree to the Company and its employees
and the Offeree purchases the Securities from the Company within 1 year after
the expiration of the Offering Period, Reid shall be entitled to the same sales
commission provided for in paragraph 5 hereof with respect to such purchase
which would have been due had the purchase occurred during the Offering Period.
3. (a) The Company shall not, directly or indirectly (except through
Reid), offer or sell, or attempt to offer or sell, or solicit any offer to buy
the Securities. As used in this Agreement the terms "offer" and "sale" shall
have the meanings specified in Section 2(3) of the Securities Act of 1933.
(b) The Company and Reid shall approve in advance, and if requested
by the Company, shall have its counsel review in advance: (i) every form of
letter, memorandum, circular, notice or other written information provided to
the Offerees; and (ii) each person to whom each written information is to be
addressed or delivered. Neither Reid nor the Company shall offer any Securities
for sale to, or solicit any offer to purchase any Securities from, any person
that has not previously been approved for such purpose by both Reid and the
Company. The Company and Reid shall promptly review all written information
submitted by the other for approval, and they shall use their respective best
efforts promptly to prepare all written information reasonably required in
connection with the offer and sale of the Securities.
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Rio Grande, Inc.
August 28, 1996
Page 3
4. The Company will reimburse Reid on a monthly basis as incurred by
Reid and billed to the Company for all costs and other expenses relating to
Reid's offering of the Securities, including without limitation all direct
expenses for travel and all other reasonable and necessary costs and expenses
associated with the offering and sale of the Securities. In the event the
Securities are not sold, the Company shall reimburse Reid for the costs and
expenses incurred by it as described in the foregoing sentence.
5. As compensation for its services the Company shall pay to Reid a
cash fee equal to 2 1/2% of the aggregate proceeds received by the Company from
the sale of the Securities. Such fee shall be contingent upon the consummation
of a sale(s) and payable to Reid promptly following the closing thereof. In the
event that the transactions contemplated by this agreement are not consummated
by the end of the Offering Period, the Company shall pay Reid a cash fee of
$25,000.
6. In addition to the amounts which the Company has herein agreed to
pay to Reid, the Company shall indemnify and hold Reid (and its directors,
officers and employees) harmless against any losses, claims, damages or
liabilities to which Reid may become subject in connection with the transactions
contemplated hereby and shall reimburse Reid or such person for any legal or
other expenses reasonably incurred in connection with investigating, settling or
defending any action or claim in connection therewith; provided however, that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage or liability is found in a final judgment of a court of
competent jurisdiction to have resulted from a breach of Reid's obligations to
the Company in connection with the performance by Reid of the services pursuant
hereto or from Reid's gross negligence or willful misfeasance in performing such
services.
7. The indemnity agreement contained in paragraph 6 shall remain
operative and in full force and effect regardless of any termination of this
Agreement or of any investigation made by or on behalf of the Company or Reid,
and shall survive the delivery of and payment for the Securities for a period of
one year.
8. This Agreement is made solely for the benefit of Reid, the Company
and their respective successors and permitted assigns, and no other person shall
acquire or have any right by virtue of this Agreement, and the term 'successors
and permitted assigns" as used herein shall not include any purchasers of the
Securities.
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Rio Grande, Inc.
August 28, 1996
Page 4
If the foregoing is in accordance with your understanding,
kindly confirm your acceptance and agreement by signing and returning the
enclosed duplicate of this letter, and it will thereupon constitute a binding
agreement between us.
Very truly yours,
REID SECURITIES CORPORATION
James P. Benson
Managing Director
ACCEPTED AND AGREED TO
AS OF AUGUST 28, 1996:
RIO GRANDE, INC.
By:
Guy Bob Buschman
President
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PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
BRECHTEL ENERGY CORPORATION
AGENT AND ATTORNEY-IN-FACT
SELLER
AND
RIO GRANDE OFFSHORE, LTD.
BUYER
DATED NOVEMBER , 1996
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EXHIBITS
EXHIBIT "A" List of Principals represented by Brechtel Energy Corporation
EXHIBIT "B" Description of Leases, Wells and Agreements I. Oil and Gas Leases
II. Assignments III. Wells, Working Interest, Net Revenue
Interest IV. Facilities V. Agreements Contracts and Rights of Way
VI. Gas Purchase Contract VII. Crude Oil Purchase Contract
EXHIBIT "B-1" Buyer's Allocation of Closing Purchase Price
EXHIBIT "C" Assignment, Bill of Sale and Conveyance (Developed Assets)
EXHIBIT "C-1" Assignment, Bill of Sale and Conveyance (Undeveloped Assets)
EXHIBIT "D" Escrow Agreement
EXHIBIT "E" Liquid Hydrocarbon Inventory
EXHIBIT "F" Plat of Existing Pipeline
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PURCHASE AND SALE AGREEMENT
THIS AGREEMENT, dated November , 1996 by and between BRECHTEL ENERGY
CORPORATION, a Louisiana corporation, 19331 North 12th Street, Covington,
Louisiana 70433, herein acting for itself and as Agent and Attorney-in-Fact (by
authority of that certain Irrevocable Power of Attorney dated November , 1996)
for, and on behalf of, those working-interest owners identified on Exhibit "A,"
attached hereto and made part hereof for all purposes, hereinafter collectively
referred to as "Seller" and RIO GRANDE OFFSHORE, LTD., a Texas limited
partnership, 10101 Reunion Place, Suite 210, San Antonio, Texas 78216,
hereinafter referred to as "Buyer."
WITNESSETH:
That Seller desires to sell to Buyer and Buyer desires to purchase from
Seller, on the terms set forth in this Purchase and Sale Agreement (the
"Agreement"), all of Seller's right, title and interest in and to those certain
oil and gas working interests and associated assets identified in the exhibits
attached hereto and made part hereof and sometimes referred to herein as the
"Developed Assets" and the "Undeveloped Assets," as hereinafter defined, or,
collectively, the "Assets." The term "Seller" shall collectively mean all of the
owners listed on Exhibit "A" and represented by Brechtel Energy Corporation, and
the term "each Seller" shall refer to each of such owners, individually.
Therefore, in consideration of the mutual promises contained herein, the
benefits to be derived by each party hereunder as well as other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Buyer and Seller agree as follows:
ARTICLE I.
PURCHASE AND SALE
1.01 Purchase and Sale of Assets. Subject to the terms and conditions
of this Agreement, Seller offers and agrees to sell, and Buyer
offers and agrees to purchase, as of the Effective Date
hereinbelow defined, save and except the "Assets Excluded" as set
forth in Article 1.02, supra, all of Seller's right, title and
interest in the following assets, to-wit:
A. the Developed Assets, being those assets of the nature and
character hereinbelow described (excluding those overriding
royalty interests listed in Exhibit "B") in Paragraph C(a)
through (g), inclusive,
(a) insofar as such leasehold working interests, existing
wells and associated equipment are situated within the
surface boundaries of that certain oil and gas unit
designated as the U WX RD SU created by Louisiana
Office of Conservation Order No. 1041-C-6 and
represented by that certain unit survey dated April 4,
1996 prepared by C. L. Jack Stelly & Associates, Inc.,
inclusive of all depths and formations in and under
such lands (except where leasehold depth limitations
are indicated in Exhibit "B"),
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LESS AND EXCEPT the "Exception Tract," being that
certain tract of land comprised of the following unit
tracts or portions thereof, as depicted on said unit
survey plat:
Unit Tract 1: insofar as said tract is
situated west of a projection, due North,
of the East boundary line of Unit Tract 2,
until such projected line meets the
northern surface boundary line of said U
WX RD SU;
Unit Tract 2: the N 1/2
Unit Tract 4: all
(b) and further including, as a Developed Asset, that
certain Brechtel Energy Corporation (formerly, Ballard
Exploration Company, Inc.) No. 1 Ragley Well (Serial
No. 188683) located in Section 29, T5S,R7W, Allen
Parish, Louisiana along with all downhole and surface
equipment associated therewith but limited to the
currently existing wellbore and any well that may be
completed, deepened or sidetracked from said existing
wellbore (the "Ballard Well"); and
B. the Undeveloped Assets, being those assets of the nature and
character hereinbelow described (excluding any overriding
royalty interest listed in Exhibit "B") in Paragraph C(a)
through (g), inclusive,
(a) insofar as such leasehold working interests cover lands
situated outside the surface boundaries of said U WX RD
SU plus
(b) the Exception Tract, above described, and
(c) all wells and equipment located on lands within the
surface boundaries of that certain oil and gas unit
designated as the U WX RD SU created by Louisiana
Office of Conservation Order No.1041-C, less and except
the said Ballard Well, described above as a Developed
Asset;
C. considered together the Developed Assets and Undeveloped
Assets are herein referred to as the "Assets," which,
subject to the above limitations and exceptions, shall
include:
(a) the "Leases," as hereinbelow defined, including the
working interests and net revenue interests described
in Exhibit "B" and, with respect to said leases, the
oil and/or gas wells located thereon described in said
Exhibit "B" (the "Wells") along with all other right,
title and interest of Seller in and to said Wells and
in and to the associated leasehold;
(b) Except to the extent as may be limited by the leasehold
rights set forth above, all of Seller's rights,
privileges, benefits and powers conferred upon Seller,
as the holder of any Lease, with respect to the use and
occupation of the surface of, as well as the subsurface
depths under the lands covered by such Lease that may
be necessary or useful to the possession and enjoyment
of such Lease; except to the extent as may be limited
by the leasehold rights set forth above, all of
Seller's rights in any pools or units which include all
or any part of any Lease or any Well (the "Units"),
including Seller's right, title and interest in
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production from any Unit, regardless of whether such
Unit production is derived from wells located on or off
a Lease and Seller's right, title and interest in any
wells within any such unit;
(c) To the extent assignable, all of Seller's right, title and
interest in and to surface use agreements, authorizations,
permits and similar rights and interests applicable to, or
used or useful in connection with, any or all of the
Wells, Leases, Lands and Units;
(d) To the extent assignable, all of Seller's right, title and
interest in and to permits, servitudes, easements,
rights-of-way, orders, lease agreements, royalty
agreements, assignments, gas purchase and sale contracts,
oil purchase and sale agreements, farmin and farmout
agreements, transportation and marketing agreements,
operating agreements, unit agreements, processing
agreements, options, facilities or equipment leases and
other contracts, agreements and rights used, or held for
use, in connection with the ownership or operation of the
Assets, or with the production or treatment of
hydrocarbons from the Assets, including, without
limitation, the easements and other contracts described in
Exhibit "B," attached hereto, or the sale or disposal of
water, hydrocarbons or associated substances from the
Assets but excluding any such contracts, agreements and
rights where transfer of same is limited by third party
agreement or operation of law;
(e) All of Seller's right, title and interest in and to all
equipment, machinery, fixtures and other real, personal
and mixed property situated on the Leases and used in the
operation of the Assets including, without limitation,
wells, salt water disposal wells, well equipment, casing,
rods, tanks, boilers, buildings, tubing, pumps, motors,
fixtures, machinery, inventory, separators, dehydrators,
compressors, treaters, power lines, field processing
facilities, flowlines, gathering lines, transmission lines
and all other pipelines ("Equipment");
(f) All of Seller's right, title and interest (excluding such
interest attributable to any overriding royalty interest)
in and to oil, condensate, natural gas in whatever form
and natural gas liquids produced after the Effective Date,
including "line fill" and inventory below the pipeline
connection in tanks, attributable to the Wells, the
Leases, Lands and Units; and
(g) Originals, or clean and legible copies of, all of the
files, records, information and data respecting the Assets
in Seller's possession including, without limitation,
title records, abstracts, title opinions, title
certificates, computer records, production records,
severance tax records, geological and geophysical data and
all other information relating directly to the ownership
or operation of the Assets but exclusive of (i) any such
records, data or information where transfer of same is
prohibited by third party agreements or applicable law,
(ii) the work product of Seller's legal counsel and (iii)
records relating to the Sale and Closing under this
Agreement.
1.02 Assets Excluded. The Assets do not include the following:
(a) Accounts receivable and payable associated with the Assets
and relating to operations conducted or occurring prior to
the Effective Date.
(b) Liquid hydrocarbon inventory in storage tanks above the
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pipeline connection as of 7:00 a.m. on the Effective Date,
as set forth in Exhibit "E."
ARTICLE II.
PURCHASE PRICE
2.01 Purchase Price.
(a) As cash consideration for the sale of the interest in the
Developed Assets, subject to adjustments as provided for in
Article 2.06, supra, Buyer shall pay to Seller at Closing, as
hereinafter defined in Article IX, the total sum of Fifteen
Million and No/100 ($15,000,000.00) Dollars (U.S.) (the
"Closing Purchase Price");
(b) As consideration for the sale of the Undeveloped Assets, Buyer
shall drill the wells and, as applicable, distribute such
proceeds as are attributable to the reversionary working
interest in favor of Seller as hereinbelow defined in
Paragraph 2.03, such wells to be drilled in the manner and in
accordance with the prescribed schedule set forth therein.
All cash payments required under (a), above, shall be made by wire
transfer at Closing pursuant to Seller's instructions.
2.02 Performance Deposit
(a) Upon execution of this Purchase and Sale Agreement (the
"Agreement"):
Buyer will pay to Seller, by wire transfer, into an Escrow
Account established by Buyer and Seller in the Gulf South
Bank and Trust, Gretna, Louisiana, the amount of (i) Two
Hundred Fifty Thousand and No/100 ($250,000.00) Dollars; and
(ii) two (2%) percent of such amount, or $5,000.00,
representing the required escrow portion of the broker's
commission due Burks Oil and Gas Properties, Inc.
representing, collectively, a Performance Deposit which
shall be, subject only to the specific exceptions set out in
subparagraph (b), below, non-refundable and shall be paid to
Seller by the Escrow Agent, as hereinafter provided, in the
event that Closing (as defined in Article 9.01, supra) does
not occur.
(b) Exceptions to Non-Refundability of Performance Deposit. The
Performance Deposit shall not be refunded to Buyer in the
event that Closing fails to occur, unless the failure to
Close is as a result of one or more of the following
occurrences:
(1) As a result of the failure of Seller to Close the
transaction contemplated hereunder.
(2) As a result of termination of this Agreement under
Article X.
In effecting the refund of the Performance Deposit
pursuant to this Article 2.01(b), Seller shall advise the
Escrow Agent, in writing, to refund the deposit to Buyer.
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2.03 Undeveloped Assets.
(a) Prescribed Wells and Reversionary Interest. In consideration
for the purchase of the Undeveloped Assets and in addition
to its payment of the Closing Purchase Price, described
above, for the Developed Assets, Buyer shall conduct certain
drilling operations and make certain elections available to
Seller contingent upon payout of such operations as
hereinafter specified. It is understood and agreed that
Buyer's obligation to commence actual drilling operations
(i.e., "spudding-in") of the following "Prescribed Wells"
and prosecute the drilling thereof with all reasonable care
and diligence are, together, material and moving
consideration in favor of Seller without which consideration
Seller would not have entered into this Agreement to sell
the Undeveloped Assets.
(b) Schedule and Manner of Drilling of Prescribed Wells. Within
the twelve (12) month period following Closing, Seller shall
commence the drilling ("spudding-in") of two (2) wells and
drill such wells with all due care and diligence to a depth
sufficient to test the Wilcox "B" Sand, as such sand is
found in other wells producing within the said U WX RD SU.
In the event that Buyer experiences mechanical or equipment
failures or unforseen downhole conditions or encounters
heaving shale or other impenetrable formation which preclude
or make further operations unjustified, Seller may cease
such operations and still satisfy the requirement of this
provision by commencing the drilling ("spudding-in") on a
substitute well within ninety (90) days and continuing the
drilling thereof in same manner required of the original
well or wells, and, in like manner, continue the prosecution
of such wells or substitutes therefor until the prescribed
drilling obligation has been satisfied.
In lieu of the requirement to drill one of the two wells,
as specified above, Buyer shall have the option to
re-enter and attempt the testing of the Wilcox "B" Sand,
as found between the depths of 11,032 feet and 11,102 feet
on the electric log in the existing Magnolia-Ragley No. 1
Well located in Section 29, T5S,R7W, Allen Parish,
Louisiana. If attempted, such operation shall be commenced
within said twelve (12) month period and conducted by
Buyer with all due care and diligence to test the Wilcox
"B" Sand as found in the said well or a sidetrack thereof.
In the event that due to mechanical or equipment failures
or adverse downhole conditions which make the re-entry
operation or a sidetrack operation unjustified and the
objective of testing the Wilcox "B" Sand is not met, Buyer
may cease such operation and still satisfy the drilling
requirement of this provision by commencing drilling
operations ("spudding-in") on another well within ninety
(90) days of such cessation of operations and continuing
such operations in the same manner required hereinabove.
For purposes of this provision, commencement of re-entry
operations shall mean that point in time when a rig
capable of conducting such re-entry operation is moved on
the location of said Magnolia-Ragley No. 1 Well and such
re-entry operation is prosecuted with all due care and
diligence.
(c) In the event Buyer fails to drill the two prescribed
wells, as set forth in subparagraph (b) above, then as its
sole and exclusive remedy for such failure, each Seller
shall have the right to obtain reassignment of its
proportionate working interest in the "Unearned Acreage,"
being all of the Undeveloped Assets assigned to Buyer,
save and except the acreage assigned to any drilling or
proration unit for a well drilled or recompleted by Buyer.
If at the end of such 12 month period for drilling the
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prescribed wells, the Buyer has not spudded-in such two
wells or if Buyer fails to drill either of such wells or
substitute wells to the required depth, then each Seller
shall have the option to provide written notice to Buyer
to reconvey to such Seller its proportionate undivided
interest in all of the Unearned Acreage. Such written
notice must be received by Buyer within 545 days after the
date of this Agreement or within 100 days after Buyer
ceases the continuous drilling operations set forth in
subparagraph (b), above, whichever is later, or such right
to a reassignment shall be waived and be of no further
force and effect. Within 30 days of receiving notice,
Buyer shall deliver to each Seller who properly and timely
requests a reassignment, an executed, recordable
Assignment reassigning such Seller's proportionate working
interest in the Unearned Acreage.
(d) In the event any lease within the Undeveloped Assets is due
to expire due to the failure of Buyer to drill wells and
extend the primary term thereof and if Buyer does not choose
to pay delay rentals or to extend or renew such leases or
obtain new leases on such acreage, then Buyer shall notify
Seller accordingly at least sixty (60) days prior to the
date such delay rental is due or such lease is scheduled to
expire. If Seller requests in writing that Buyer reassign
such lease, Buyer shall promptly reassign to Seller all of
Buyer's right, title and interest in such lease. In the
event Buyer elects to extend or renew any expiring lease
within the Undeveloped Assets or obtains a new lease
covering the same lands within twelve (12) months after the
date such lease expires, the rights of Seller under this
Paragraph 2.03 shall continue in effect for such extension,
renewal or new lease.
(e) Seller's Option to Assume Interest. Each Seller, as
identified on Exhibit "A," attached hereto, shall have the
same separate and independent option to assume each such
Seller's proportionate share of an undivided
(i) twenty (20%) working interest in all wells
drilled or recompleted on the Undeveloped Assets
exclusive of the Ballard Well, included above as
a Developed Asset, and further exclusive of that
portion of the Undeveloped Assets located within
the surface boundaries of the U WX RB SUA created
by Louisiana Office of Conservation Order No.
1041-C; and,
(ii) ten (10%) percent working interest in all wells
drilled or recompleted on the Undeveloped Assets
situated within the surface boundaries of said U
WX RB SUA, excluding said Ballard Well; provided,
however, in the event that said U WX RB SUA is
revised or, if terminated, replaced by a new unit
of a configuration that, by unit survey, would
include within its surface boundaries additional
acreage which is not subject to the terms of any
farmout described in Exhibit "B," such additional
included acreage shall, for the purposes of this
Agreement, be deemed Undeveloped Assets and,
accordingly, Seller's working interest as to such
included acreage shall be twenty (20%) percent.
such option to become effective upon "Project Payout" and
to continue in effect until each such electing Seller has
received such Seller's proportionate share of the 7MM
Payout, defined below, attributable to such working
interest as set forth below. The "Project Payout" shall
occur when Buyer has received from the proceeds of
production from the wells on the Undeveloped Acreage, a
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sum equal to all of Buyer's Recoverable Costs and Expenses
incurred prior to date Project Payout first occurs. Buyer
shall provide each Seller with quarterly statements
showing the status of Project Payout, and upon attaining
Project Payout, Buyer shall promptly provide each Seller
with written notification thereof, via certified mail, and
each Seller shall have thirty (30) days after receipt of
such written notification within which to notify Buyer of
such Seller's election to assume such proportionate share
of an undivided twenty (20%) working interest in such
wells. Failure of a Seller to notify Buyer of such
election shall constitute an election not be assume such
Seller's proportionate share of said working interest.
Recoverable Costs and Expenses shall include all actual
costs of drilling, completing, re-completing, equipping,
maintaining, connecting, producing and operating the wells
located on the Undeveloped Assets, specifically including
the actual costs to Buyer of conducting and interpreting a
3-D seismic reasonably necessary to evaluate the Assets,
should Buyer conduct such seismic survey, as well as all
ad valorem taxes burdening the working interests and all
severance taxes, production taxes, royalties and
overriding royalties, in existence on the date of Closing
and described on said Exhibit "B" which burden or are
chargeable to such interests or the production of proceeds
therefrom. Operating costs shall be determined as set
forth in that certain currently applicable Joint Operating
Agreement ("JOA"), dated January 20, 1993 by and between
Brechtel Energy Corporation, Operator, and Team America,
et al, Non- Operator; provided, however, that at Closing
Rio Grande Drilling Company shall become Operator under
such JOA, and Buyer shall be included as an additional
party. However, with respect to this Article 2.03(e), no
non-consent penalties shall be included in the Recoverable
Costs and Expenses. After the occurrence of Project
Payout, the each party's proportionate undivided working
interest shall be subject to such JOA, including the non-
consent penalties on a well by well basis. Each electing
Seller's proportionate share of such 20% working interest
shall automatically revert to Buyer on the date when such
electing Seller has recovered from the proceeds of
production sales derived from the subject wells (net of
revocable costs and expenses paid by such Seller after
Project Payout) of such Seller's proportionate share of
the sum of Seven Million Dollars ($7,000,000.00) (the "7MM
Payout"). If any electing Seller should make a non-consent
election for any operation under the JOA, neither the
proceeds nor the costs and expenses associated with the
applicable non-consent penalty shall be applied toward the
7MM Payout for such Seller's interest.
f. Prescribed Wells - Additional Covenants. With respect to
any well drilled pursuant to the provisions of this
Paragraph 2.03, the Buyer and Seller further agree that:
(a) Should Buyer sell any or all of its interest in
the Assets prior to the occurrence of the 7MM
Payout, the provisions of this Paragraph 2.03
shall become an obligation running with the land
and shall remain an obligation of, and
encumbrance upon, the interests of each
subsequent Assignee. Until such 7MM Payout
occurs, Rio Grande Drilling Company, or an
affiliate thereof, shall remain as Operator of
the Undeveloped Assets; provided, however, that
another company may be substituted as Operator,
with Seller's written consent, which shall not
be unreasonably withheld. Should Buyer sell any
or all of its interest in the Assets after the
occurrence of Project Payout, Buyer agrees to
use its best efforts to gain for Seller the
option of Seller to sell its interest in the
Assets in conjunction with Buyer's sale.
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(b) With respect to any well drilled pursuant to the
provisions of this Article 2.03 prior to Project
Payout, as to which Buyer elects not to set
production casing, the Operator shall provide
each Seller with notice of such election, as
provided in the JOA, and each Seller shall have
a period of forty-eight (48) hours after receipt
of such written notification within which to
elect to make a completion attempt on such well
at those electing Sellers' sole cost, risk and
expense pursuant to the provisions of Article
VI.6 of the JOA, as modified by this
subparagraph. Likewise, if Seller's completion
attempt is unsuccessful, Seller shall also plug
and abandon such well at Seller's sole cost,
risk and expense. If Seller's completion attempt
results in a well capable of producing in
commercial quantities, Seller shall be entitled
to receive all proceeds derived from the sale of
all production from said well until Seller has
recovered, out of such proceeds, three hundred
(300%) percent of all of Seller's costs and
expenses of drilling, completing, equipping and
operating said well to point of "payout." At
payout, Buyer shall have the right to assume a
fifty (50%) percent working interest in such
well and thereafter all costs and benefits
attributable to the working interest in such
well shall be shared: Seller, fifty (50%)
percent and Buyer fifty (50%) percent, and all
subsequent operations on such well shall be
governed by the JOA. Any proceeds received from
the sale of production derived from any well
operated by Seller under this article shall not
act to reduce the additional consideration due
Seller after Project Payout; provided however,
(i) each Seller's right of election following
Project Payout shall be applicable to the
Buyer's fifty (50%) percent reversionary
interest in any well completed by Seller
pursuant to this article; (ii) Buyer's actual
costs paid in connection with Buyer's working
interest in such well shall be included in the
calculation of Project Payout; and (iii) the
proceeds derived from the sale of production
attributable to that portion of Buyer's working
interest in such well which is acquired by
Seller after Project Payout occurs (up to 10% of
8/8ths thereof) shall be included in the
calculation of the 7MM Payout.
2.04 Escrow Account. In order to establish the escrow account referred
to in Article 2.02 above, concurrently with the execution of this
Agreement, Buyer and Seller shall enter into an Escrow Agreement
in substantially the form attached hereto as Exhibit "D" but
including, among its other terms and conditions, the following
procedures for instructing the Escrow Agent to distribute the
escrow funds:
(a) In the event Closing does occur, the Escrow Agent shall be
authorized to immediately transfer all Escrow Funds, less
escrow expenses but plus all interest accruing thereon,
from the Escrow Account into an account designated, in
writing, by Seller. The Escrow Agent's authority shall be
represented by written instructions conveyed to Escrow
Agent by facsimile transmission from Buyer on Closing
date.
(b) In the event Closing does not occur and such failure to
Close is not as a result of any of the exceptions to
non-refundability set out in 2.01(b), infra, Buyer shall
instruct Escrow Agent, in writing by facsimile
transmission, to immediately pay to an account designated
by Brechtel Energy Corporation, as Agent, the Performance
Deposit provided in Article 2.01(a) plus all interest
accrued thereon.
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(c) In the event that Closing does not occur and such failure
to close is a result of the occurrence of any one or more
of the exceptions to non- refundability set forth in
subparagraph (b), Seller shall promptly instruct the
Escrow Agent to immediately pay the Escrow Fund to Buyer,
plus all interest accruing thereto.
(d) In the event of the occurrence of either of the
circumstances described in subparagraphs (b) and (c) and
the party required to provide notice to the Escrow Agent
fails to do so, the party entitled to the distribution of
funds from the Escrow Account may provide the Escrow Agent
with a sworn affidavit attesting to the particular
circumstances whereupon the Escrow Agent, after the
expiration of five (5) days written notice given to the
other party, shall promptly release the escrow funds to
the attesting party.
2.05 Allocation of Closing Purchase Price. Prior to execution of this
Agreement, Buyer shall provide to Seller, for Seller's approval,
an allocation of the Closing Purchase Price among individual or
separate Wells and/or Units described in Exhibit "B." The
"Allocated Value" for any singular Developed Asset shall be that
portion of the Purchase Price allocated to such singular Developed
Asset identified on Exhibit "B-1", increased or decreased in the
manner described herein. Any adjustments to the Closing Purchase
Price, other than those adjustments provided for in Article V,
Title Matters, shall be applied on a pro rata basis to the
Allocated Value for all Developed Assets. After such adjustments
are made, any adjustments to the Closing Purchase Price made
pursuant to Article V shall be applied to the Allocated Value for
the particular Developed Asset(s) affected.
2.06 Closing Purchase Price Adjustments. The Closing Purchase Price
shall be adjusted in the following manner:
(a) The Closing Purchase Price shall be adjusted upward as
follows:
(1) the value of all oil in storage above the
pipeline connection as of the Effective Date and
not previously sold by Seller, as set forth in
Exhibit "E," which is attributable to the
interest conveyed to Buyer in the Assets;
(2) with respect to the interest in the Assets
conveyed to Buyer, the amount of all expenditures
(capital or other), rentals and other charges,
pro-rata ad valorem, property, production,
excise, severance and similar taxes (but not
including income taxes, federal or state) based
upon, or measured by, the ownership of the Assets
or the production of hydrocarbons or the receipt
of proceeds therefrom, paid by, or on behalf of,
Seller in connection with the operation of the
Assets, in accordance with generally accepted
accounting principles and the JOA and
attributable to the period after the Effective
Date until Closing, expressly including, without
limitation, all of the lease operating expenses
relating to the Assets;
(3) with respect to the interest in the Assets
conveyed to Buyer, an amount equal to all prepaid
expenses attributable to the Assets that are paid
by, or on behalf of, Seller that are, in
accordance with generally accepted accounting
principles and the JOA, attributable to the
period after the Effective Date, including,
without limitation, prepaid utility charges and
prepaid ad valorem, property, production,
severance and similar taxes based upon, or
measured by, the ownership of the Assets or the
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<PAGE>
production of hydrocarbons or the receipt of
proceeds therefrom; and
(4) with respect to the interest in the Assets
conveyed to Buyer, by the value of each
one-percent (or fraction thereof) of increase in
net revenue interest ("NRI") above that set forth
in Exhibit "B," attached hereto, such value to be
calculated by dividing the applicable Allocated
Value by the NRI set forth in said Exhibit "B"
and multiplying the result thereof by the
increase in NRI.
(b) With respect to the interest in the Assets conveyed to Buyer, the
Closing Purchase Price shall be adjusted downward as follows:
(1) the aggregate amount of proceeds received by
Seller from the sale of oil, gas and other
minerals produced from the Leases, Units and
Wells or otherwise in any way attributable to the
Assets between the Effective Date and Closing
(using actual sales, not Seller's entitlement,
where such sales are greater than or less than
Seller's entitlement);
(2) the aggregate amount of royalty payments payable
to third parties but held in suspense by Seller
as of Closing;
(3) the amount of all payments made as provided for
in Article 2.02(a)(i), infra; and
(4) by the value of each one-percent (or fraction
thereof) of decrease in net revenue interest
("NRI") above that set forth in Exhibit "B,"
attached hereto, such value to be calculated by
dividing the applicable Allocated Value of a well
by the NRI set forth in said Exhibit "B" for such
well and multiplying the result thereof by the
decrease in NRI.
The adjustment described in Article 2.06(a)(2)and (3) shall serve
to satisfy up to the amount of the adjustment, Buyer's obligation
to pay operating expenses of the Assets for the period between the
Effective Date and Closing, and Buyer shall not be separately
obligated to pay the various payees for such expenses. Similarly,
the adjustments described in Article 2.06(a)(1) shall serve to
provide Buyer, up to the amount of the adjustment, with the value
of the oil, gas and other minerals and the proceeds and products
from the Assets to which Buyer is entitled between the Effective
Date and Closing, and Buyer shall not have any separate rights to
receive the production, proceeds and products affected.
Buyer and Seller shall execute and deliver a settlement statement,
prepared in accordance with this Agreement and generally accepted
accounting principles and JOA (the "Preliminary Settlement
Statement"), prepared by Seller that shall set forth the
Preliminary Purchase Price and each adjustment and the calculation
of such adjustment used to determine such amount. Seller shall
provide Buyer with the Preliminary Settlement Statement not less
than three (3) days prior to Closing for Buyer's review and
approval. The term "Preliminary Purchase Price" shall mean the
Purchase Price, adjusted as approved by the parties and as
provided in Article 2.06, using for such adjustments actual costs,
except where unavailable, whereupon Seller will use estimates of
such costs. The Preliminary Settlement Statement shall also
contain wire transfer instructions concerning the delivery of the
Preliminary Purchase Price at Closing.
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2.07 Revenues. To the extent, and only to the extent, or in the proportion
of the percentage interest in the Assets conveyed to Buyer, all
proceeds from production, accounts receivable, income and other
revenues with respect to the Assets which are attributable, under
generally accepted accounting principles and JOA, to the period prior
to the Effective Date shall belong to Seller, and those which are
attributable, under generally accepted accounting principles and JOA,
to the period commencing with the Effective Date shall belong to the
Buyer.
2.08 Effective Date. The Effective Date of the Sale of the Assets described
in Article 1.01 shall be November 1, 1996 as of 7:00 a.m., local time.
ARTICLE III.
TAXES
3.01 Payment of Taxes. Any taxes or fees (other than Seller's federal, state
or local income taxes) associated with this sale will be borne by
Buyer. Seller shall be liable and responsible for any and all taxes of
whatsoever kind or nature arising or accruing prior to the Effective
Date. Buyer shall be responsible for the payment of any and all taxes
relating to the Assets from and after the Effective Date.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
4.01 Seller's Representations and Warranties. Seller represents and warrants
(references to Seller in this Article IV shall include each Seller
whether as corporation, limited liability company or as an individual
to the full extent that a Representation and Warranty is applicable) in
accordance with the legal status of each such Seller identified in
Exhibit "A":
(a) Legal Status and Authority:
(1) Each Seller which is not an individual is a
corporation or limited liability company duly
organized and validly existing, in good standing,
under the laws of Seller's state of incorporation
or organization. Seller has the power and
authority to own its property and to carry on its
business as now conducted and to enter into and
to carry out the terms of this Agreement.
(2) The execution and delivery of this Agreement and
the consummation of the transactions contemplated
hereby have been duly authorized by all necessary
corporate or, as the case may be, membership
action on behalf of sellers, and no seller is
subject to any Charter, by-law, lien or
encumbrance of any kind, agreement, instrument,
order or decree of any court or governmental body
(other than any governmental approval required)
which would prevent consummation of the
transactions contemplated by this Agreement.
(3) Seller shall warrant title to and forever defend
all and singular the Assets conveyed to Buyer,
its successors and assigns, against every person
whomsoever lawfully claiming the Assets or any
part thereof, by, through or under Seller, but
not otherwise.
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<PAGE>
(4) Seller is not a party to, or in any way obligated
under, nor does Seller have any knowledge of, any
contract or outstanding claim for the payment of
any broker's or finder's fee which Seller is
obligated to pay in connection with the origin,
negotiation, execution, or performance of this
Agreement for which Buyer could be held
responsible.
(5) The consummation of this transaction will not
violate or cause a default under (i) any bylaw or
other provision of any Seller's corporate or
limited liability company governing documents;
(ii) any material provision of any material
contract or agreement or of any bank loan,
indenture or credit agreement to which any Seller
is a party; (iii) any law, ordinance, rule or
regulation of any governmental authority; or (iv)
any applicable order, writ, judgment or decree of
any court or other competent authority and will
not result in the creation of any lien, charge or
encumbrance on any of the Assets.
(6) Except for routine change of operator filings, no
authorization, consent or approval of, or filing
with, any governmental authority is required to
be obtained or made by Seller for the execution
and delivery by Seller of this Agreement and the
consummation by Seller of the transaction
contemplated hereunder. No authorization, consent
or approval of any non-governmental third party
is required to be obtained by Seller for the
execution and delivery of this Agreement or the
consummation by Seller of the transaction
contemplated hereunder, except such prior written
consents as are required from the Lessors under
the Oil and Gas Leases described in Exhibit "B,"
attached hereto. The transaction contemplated is
not subject to any prior preferential right or
option to purchase in favor of any third party.
(7) This Agreement has been duly executed and
delivered by Seller, and all documents and
instruments required hereunder to be executed and
delivered by Seller at Closing will be duly
executed and delivered by Seller. This Agreement
and all such documents and instruments constitute
legal, valid and binding obligations of Seller
enforceable in accordance with their terms,
subject, however, to the effects of bankruptcy,
insolvency, reorganization and other similar laws
affecting creditors' rights generally.
(8) Brechtel Energy Corporation is authorized to act
for all Sellers for which it will be delivering
title and executing this binding agreement.
(b) Information and Data Regarding Assets.
(1) Seller is not obligated by virtue of a prepayment
arrangement, make-up right under a production
sales contract containing a "take or pay" or
similar provision, production payment or any
other arrangement, to deliver hydrocarbons, or
proceeds from the sale thereof, attributable to
the Assets at some future time without then or
thereafter receiving the full contract price
therefor.
(2) No person or entity has any call upon, option to
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purchase or similar right to obtain production
from the Assets other than pursuant to renewal
rights or automatic renewal provisions contained
in existing production sales contracts.
(3) There are no agreements or arrangements relating
to the Assets with Seller or any affiliate or
subsidiary of Seller that will be binding on
Buyer or the Assets after Closing.
(4) All taxes imposed or assessed with respect to or
measured by or charged against or attributable to
the Assets or the hydrocarbons produced therefrom
have been, or will be, duly and timely paid.
(5) To the best of Seller's knowledge, the Assets
have been operated by Seller in accordance with
all rules and regulations of all governmental
authorities having or asserting jurisdiction
relating to the ownership and operation of the
Assets, including the production of hydrocarbons
attributable thereto, and are not presently
subject to reduced allowables or other penalties
due to overproduction or otherwise.
(6) No fire, explosion, accident, earthquake, act of
public enemy or other casualty (regardless of
whether covered by insurance) adversely affecting
any material portion of the Assets, or the
operation thereof, or adversely affecting the
ability of Seller to perform its obligations
under this Agreement, or the Exhibits hereto has
occurred during Seller's use and ownership of the
Assets.
(7) To the best of Seller's knowledge, Seller has
obtained all permits, licenses and other
authorizations which are presently required under
federal, state and local laws with respect to
pollution or protection of the environment
relating to the Assets, including laws relating
to actual or threatened emissions, discharges or
releases of pollutants, raw materials, products,
contaminants or hazardous or toxic materials,
surface water, ground water or land or otherwise
relating to the manufacture, processing,
distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants
or hazardous or toxic materials or wastes, except
to the extent the failure to obtain or file such
permits, licenses and other authorizations would
not result in, or reasonably be expected to
result in, any material liability or loss to
Buyer or the Assets.
(8) To the best of Seller's knowledge, all leases and
leaseholds to be transferred to Buyer hereunder
and which are listed in Exhibit "B" are in full
force and effect, according to their respective
terms.
(9) To the best of Seller's knowledge, there exist no
contracts or agreements regarding, or orders
directed to, the Assets or forming a part
thereof, other than those described and listed on
Exhibit "B," hereto.
(10) Seller has not created nor to the best of
Seller's knowledge does there presently exist,
under any contract or by operation of law, any
liens, mortgages, encumbrances or other burdens
in or on the Assets, except that certain Mortgage
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Collateral Assignment, Security Agreement and
Financing Statement dated January 29, 1996 by and
between Seller, RHC Associates, L.L.C., as
Mortgagor, and First National Bank of Commerce,
Mortgagee, which encumbrance will be canceled in
full at Closing.
(11) Since the Effective Date, Seller has received no
notice of any proposed or contemplated
modifications of any existing drilling or
production unit or units or the establishment of
new drilling or production units affecting the
Assets or amendments to or modifications or
revisions of the unit order or orders
establishing same which would have an adverse
impact upon the Assets to be conveyed pursuant to
this Agreement.
(12) To the best of Seller's knowledge, Seller is not
in material breach as to the Assets and any wells
thereon or any laws, regulations, rules, decrees
or orders.
(13) Seller has paid, or will pay, all bills, debts,
expenses or charges relating to the Assets as of
the Closing in the normal course of its business
operations.
(14) For the purposes of the by, through and under
warranty, Seller represents that it has not
created any overriding royalty interest,
production payments or carved out other mineral
interests affecting the interest in the Leases
nor has it alienated, conveyed or transferred an
interest in the Leases, except those certain
assignments of overriding royalty described in
Exhibit "B."
(15) All proceeds of production attributable to the
Assets are currently being paid directly to
Seller or its authorized agents without the
furnishing of indemnity, other than the customary
warranty contained in the division orders,
transfer orders or gas sale contracts that have
been furnished to Buyer and no portion of such
proceeds are being held in suspense.
(16) To the best of Seller's knowledge, Seller has
made available for examination all applicable
written agreements, correspondence, reports,
required safety plans, compliance statements or
other documents of which Seller is aware that
materially affect the Assets, including, but not
limited to, applicable operating agreements,
joint venture agreements, tax partnership
agreements, product purchase and sale agreements,
farmout agreements and "area of mutual interest"
agreements, and all such agreements are (i)
listed on Exhibit "B," hereto and (ii) legal,
valid, binding, subsisting and in full force and
effect.
(17) To the best of Seller's knowledge, none of the
operations of Seller relating to the Assets are
now subject to federal or state investigation
directed toward evaluating whether any remedial
action involving a material expenditure is needed
to respond to a release or discharge of any toxic
or hazardous waste or substance into the
environment, and Seller has no material
contingent liability in connection with any
release or discharge of any toxic or hazardous
waste or substance into the environment from
Seller's Assets.
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(18) For the purposes of the by, through and under
warranty, Seller represents that Seller's working
interest and net revenue interest in each of the
Leases are as reflected on Exhibit "B" hereto.
Seller has received no notice of any claim
adverse to Seller's title.
(19) All material environmental, health and OSHA
files, reports and audits in Seller's possession,
or available to Seller, have been made available
to Buyer for review.
(20) There are no outstanding unpaid AFE's respecting
work conducted upon the Assets for which Buyer
could be held responsible.
(c) Litigation. There is no action, administrative proceeding,
lawsuit or governmental inquiry relating to the Assets
pending or, to the Seller's knowledge, threatened.
(d) Equipment and Personal Property. All equipment and personal
property currently used on the Assets have been maintained
in an operable state of repair consistent with the customary
standards in the industry, except for such failures to
maintain as would not, individually or in the aggregate,
have a Material Adverse Effect. SELLER HEREBY EXPRESSLY
DISCLAIMS ANY WARRANTY, WHETHER EXPRESS OR IMPLIED, AND
WHETHER BY COMMON LAW, STATUTE OR OTHERWISE AS TO OPERATING
CONDITION, MERCHANTABILITY, FITNESS FOR ANY PURPOSES,
CONDITION OR OTHERWISE, CONCERNING ANY OF THE ASSETS, EXCEPT
AS TO THE SPECIAL AND LIMITED WARRANTY TITLE RESPECTING THE
REAL PROPERTY. ALL WELLS, PERSONAL PROPERTY, MACHINERY,
EQUIPMENT AND FACILITIES THEREIN, THEREON AND APPURTENANT
THERETO SHALL BE CONVEYED BY SELLER AND ACCEPTED BY BUYER
PRECISELY AND ONLY "AS IS, WHERE IS, AND WITH ALL FAULTS AND
WITHOUT WARRANTY." SELLER DOES NOT WARRANT THE ASSETS TO BE
FREE FROM REDHIBITORY DEFECTS, LATENT OR APPARENT, AND BUYER
SPECIFICALLY WAIVES ANY CLAIM FOR A REDUCTION OR ADJUSTMENT
IN THE PURCHASE PRICE BASED UPON REDHIBITION OR QUANTI
MENORIS OR ACTION OF EVICTION ON ACCOUNT OF CONDITION OR
MERCHANTABILITY OF THE ASSETS.
4.02 Buyer's Representations and Warranties. Buyer represents and warrants:
(a) Legal Status and Authority:
(1) Buyer is a Texas limited partnership and Rio
Grande Drilling Company, the General Partner, is
a Texas corporation duly organized and validly
existing, in good standing, under the laws of the
State of Texas and has the power and authority to
own its property and to carry on its business, as
now conducted, and to enter into and to carry out
the terms of this Agreement.
(2) Except for a bank waiver required by Buyer's
lender, the execution and delivery of this
Agreement and the consummation of the
transactions contemplated hereby have been duly
authorized by all necessary action on behalf of
Buyer, and Buyer is not subject to any charter,
bylaw, lien or encumbrance of any kind,
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agreement, instrument, order or decree of any
court or governmental body which would prevent
consummation of the actions contemplated by this
Agreement.
(3) Buyer is not a party to, or in any way obligated
under, nor does Buyer have any knowledge of any
contract or outstanding claim for the payment of
any broker's or finder's fee in connection with
the origin, negotiation, execution or performance
of this Agreement for which Seller could be held
responsible.
(4) Buyer shall comply with all applicable laws,
ordinances, rules and regulations and shall
promptly obtain and maintain all permits required
by public authorities in connection with the
Assets purchased, except when such failure to
comply or obtain shall not have a material
adverse effect.
(b) Condition of the Assets:
(1) Buyer has made, or arranged for others to make, an
inspection of the Assets. Buyer is solely responsible
for conducting its own due diligence and inspection of
the Assets. Buyer has also had the full right and
opportunity to ask questions of Seller, its employees,
agents and representatives, and Buyer has assumed full
responsibility for any conclusions or analyses relating
to the Assets and Buyer's decision to purchase same.
Buyer accepts all personal or tangible property
described in Article 1.01(f) in "as is, where is and
with all faults" condition, with an express acceptance
and understanding of the representations and
disclaimers contained herein, subject to Article 4.01.
(2) Buyer acknowledges that the Assets have been used for
oil and gas drilling and producing operations, related
oil field operation and possibly the storage and
disposal of waste materials incidental to, or occurring
in connection with, such operations and that physical
changes in the land and/or water bottoms may have
occurred as a result of such uses and that, with
respect to the physical condition of the Assets, Buyer
has entered into this Agreement on the basis of Buyer's
own investigation and due diligence of the physical
condition of the Assets, including environmental
conditions and accepts the Assets inclusive of any
adverse environmental condition presently existing,
whether known or unknown.
(3) Buyer represents that it is not otherwise prevented
from having the Assets transferred to Buyer, and its
General Partner is properly authorized to operate said
Assets and duly qualified to do business in the state
where the Assets are located.
(4) Buyer represents that it has inspected the Assets, the
public records and Seller's files for all purposes,
including, without limitation, for the purpose of
detecting the presence and concentration of
naturally-occurring radioactive materials ("NORM") and
asbestos and has satisfied itself as to the physical
condition and potential environmental condition of the
Assets, both surface and sub-surface. Buyer
acknowledges that no representations have been made by
Seller regarding environmental conditions or physical
conditions of the Assets, past or present.
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(5) Buyer is engaged in the business of exploring for or
producing oil and gas or other valuable minerals as an
ongoing business, and Buyer is a sophisticated buyer,
knowledgeable in the evaluation and acquisition of oil
and gas properties. Furthermore, Buyer has been
informed that the solicitations of offers and the sale
of the Assets by Seller have not been registered with
any securities commission, state or federal, and Buyer
hereby specifically agrees that neither Buyer nor its
directors, shareholders, employees, representatives or
agents shall initiate any proceeding based upon the
assertion or claim that the sale contemplated hereunder
is the sale of a security.
(6) Buyer is acquiring the Assets for its own benefit and
account and not with the intent of selling such Assets
in a manner that would be subject to regulation under
federal or state securities laws.
ARTICLE V
TITLE MATTERS
5.01 After the date of this Agreement and until Closing, Seller shall make
all records and documents in Seller's possession affecting Seller's
title to the Assets available to Buyer and/or its representatives at
Seller's office, or such other place as deemed appropriate by Seller,
during normal business hours for examination by Buyer. Seller shall not
be obligated to perform any additional title work, and any additional
abstracts and title opinions will not be made current by Seller.
NO WARRANTY OF ANY KIND IS MADE BY SELLER AS TO THE INFORMATION SO
SUPPLIED, EXCEPT THAT ANY SUCH DOCUMENTS PROVIDED BY SELLER ARE
TRUE AND CORRECT COPIES OF MATERIALS PROVIDED OR MADE AVAILABLE.
BUYER AGREES THAT ANY CONCLUSIONS DRAWN THEREFROM SHALL BE THE
RESULT OF ITS OWN INDEPENDENT REVIEW AND JUDGMENT.
5.02 Title Defect Defined. The term "Title Defect", as used herein, shall
mean any encumbrance, defect in or objection to Seller's title to the
Assets which, alone or in combination with other defects, would
unreasonably interfere with Buyer's enjoyment of the Assets to the
extent that Buyer would not have the same degree of enjoyment of the
Assets as did Seller immediately prior to Closing or which impairs
Seller's special and limited warranty of title or which results in a
reduction of the NRI or WI decimals set forth on Exhibit "B."
5.03 Notice of and Remedies for Title Defect.
(a) Upon discovery of a Title Defect, Buyer shall promptly
notify Seller in writing of the nature of the Title Defect,
shall furnish Seller with Buyer's basis for the assertion of
such Title Defect and data in support thereof and shall
furnish Seller with the proposed reduction in the Purchase
Price attributable to such Title Defect, and, in the event
that the Buyer's estimate of the effects of such Title
Defect(s) would cause a reduction in the Purchase Price in
an amount in excess of twenty (20%) percent, advise Seller,
subject to Seller's right to cure such defect(s) prior to
Closing, of Buyer's decision to terminate this Agreement in
accordance with the provisions of Article 10.01(b) of this
Agreement.
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(b) Upon receipt of such notice, Seller, at its discretion,
shall have the right to choose one of the following options:
(1) to cure the Title Defect at Seller's expense prior to
Closing thereby eliminating the need for a reduction in
Purchase Price; or
(2) to reduce the Purchase Price by an amount mutually
agreed upon; or
(3) exclude the affected Asset(s) from the sale and reduce
the Purchase Price by an amount equal to the value of
the excluded Asset(s) as set forth on Exhibit "B."
(c) Any Title Defect which is not disclosed to Seller by
Buyer on or before December 31, 1996 shall conclusively
be deemed waived by Buyer for all purposes.
5.04 If a Title Defect is based upon Buyer's notice that Seller owns a
lesser interest or the notice is from Seller to the effect that Seller
owns a greater interest than that shown on Exhibit "B," then the
Purchase Price shall be reduced or increased, as appropriate, based
upon the amount allocated to the affected Asset on Exhibit "B" attached
hereto. In the event of a Title Defect which Seller, after notification
as hereinbelow provided, elects not to cure prior to Closing, or cannot
cure prior to Closing, and which would cause the reduction of the
Purchase Price by more than twenty (20%) percent, then either Seller or
Buyer may terminate this Agreement without any liability whatsoever to
the other, and the Performance Deposit, as provided for in Article 2.02
shall be refunded to Buyer in accordance with the Escrow Agreement.
VI.
ENVIRONMENTAL CONDITIONS
6.01 Buyer's Access to Assets. Buyer and its employees and representatives
shall, subject to any necessary third party approvals, and at Buyer's
sole risk and expense, be given access to all facilities, properties,
personnel, books, records and other pertinent information within the
possession of Seller relating to the operation of the Assets. Buyer's
investigation shall be conducted in a manner that minimizes any
interference with the normal operation of the Assets. Buyer may
photocopy information that it reviews at Buyer's expense. Buyer further
and specifically waives any cause of action against Seller, its
directors, shareholders, employees, representatives and agents based
upon a claim for damages, losses, costs, expenses (including,
attorneys' fees and court costs) arising out of, resulting from or on
account of, Buyer's investigation of the environmental condition of the
Assets prior to Closing. Neither Buyer nor agents, representatives or
consultants of Buyer shall conduct any environmental testing or
sampling on, or with respect to, the Assets prior to Closing, without
the prior written consent of Seller. Any information obtained by Buyer
under this Article 6.01 shall remain confidential and shall not be
disclosed, except to Seller and Buyer's agents, partners and
consultants, without Seller's prior written consent, unless required
pursuant to order of a court or governmental agency exercising proper
jurisdiction over the Assets and the environmental matters relating
thereto.
6.02 Notice of and Remedies for Material Adverse Environmental Condition(s).
Upon discovery of a Material Adverse Environmental Condition(s) (being
a condition which (1) is required to be remediated under applicable
environmental laws in effect on the Effective Date and (2) the cost to
remediate said condition to lawfully acceptable levels together with
the cost to remediate all such conditions will cost in total in excess
of ten (10%) percent of the Purchase Price for the Buyer's share of
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such remediation costs and (3) said condition, or the severity
thereof, was not previously known, or made known, to the Buyer prior
to execution of this Agreement), Buyer shall immediately notify Seller
in writing of the nature of such condition and shall furnish Seller
with Buyer's basis for the assertion of same along with data in
support thereof. In the event the Buyer has properly notified Seller
of one or more environmental conditions which, alone or together,
constitute a Material Adverse Environmental Condition, Seller shall
select one of the following options at its sole discretion:
(i) agree to remedy the Material Adverse Environmental
Condition(s) at its own expense prior to Closing or as
soon as thereafter practicable; or
(ii) reduce the Purchase Price by an amount mutually agreed
upon; or
(iii)exclude the affected Assets from the sale and reduce
the Purchase Price by an amount equal to the value of
the Assets as shown on Exhibit "B-1"; or
(iv) Seller may indemnify Buyer for the Material Adverse
Environmental Condition, and the Purchase Price shall
not be reduced; or
(v) Seller may terminate this Agreement; provided that
notwithstanding the foregoing, in the event that
Buyer's share of the cost of remediating a Material
Adverse Environmental Condition will exceed twenty
(20%) percent of the Purchase Price, Buyer shall have
the option to terminate this Agreement without further
liability, and the Performance Deposit shall be
refunded.
Any Material Adverse Environmental Condition which is not
disclosed by Buyer to Seller on or before December 31, 1996 shall
conclusively be deemed waived by Buyer for all purposes.
Notification to Seller by Buyer of the presence in the wellbore of
naturally occurring radioactive material ("NORM") or asbestos
shall not be cause to invoke any of the remedies set forth in this
Article 6.02.
6.03 BUYER'S RELEASE AND INDEMNITY. BUYER HEREBY RELEASES SELLER, ITS
OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES, REPRESENTATIVES AND
AGENTS FROM ANY AND ALL LIABILITY AND RESPONSIBILITY AND AGREES TO
INDEMNIFY, DEFEND AND HOLD SELLER, ITS OFFICERS, DIRECTORS,
SHAREHOLDERS, EMPLOYEES, REPRESENTATIVES AND AGENTS HARMLESS FROM ANY
AND ALL CLAIMS, CAUSES OF ACTION, FINES, EXPENSES, COSTS, LOSSES AND
LIABILITIES WHATSOEVER IN CONNECTION WITH THE ENVIRONMENTAL CONDITION
OF THE ASSETS, KNOWN OR UNKNOWN, INCLUDING, SUCH AS MAY ARISE UNDER
APPLICABLE FEDERAL, STATE AND LOCAL LAW, INCLUDING, WITHOUT LIMITATION,
THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY
ACT OF 1980, 42 U.S.C., SECTION 9601, ET SEQ., AS AMENDED, ("CERCLA"),
THE RESOURCE CONSERVATION AND RECOVERY ACT OF 1976, AS AMENDED, THE
CLEAN AIR ACT, 42 U.S.C., SECTION 7401, ET SEQ., AS AMENDED, THE
FEDERAL WATER POLLUTION ACT OF 1990, 33 U.S.C., SECTION 1251, ET. SEQ.,
AS AMENDED, AND THE OIL POLLUTION ACT OF 1990, 33 U.S.C., SECTION 2701,
ET SEQ., AS AMENDED, (COLLECTIVELY THE "LAWS") WHEN SUCH CONDITION IS
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CAUSED BY EVENTS OR OPERATIONS OR ACTIVITIES OCCURRING AFTER THE
EFFECTIVE DATE AND, FURTHER, FOLLOWING THE EXPIRATION OF A PERIOD OF
TWO (2) YEARS AFTER THE EFFECTIVE DATE, BUYER'S INDEMNIFICATION AND
RELEASE OF SELLER SHALL EXTEND TO ALL CLAIMS, CAUSES OF ACTION, FINES,
EXPENSES, COSTS, LOSSES AND LIABILITIES WITHOUT REGARD AS TO WHETHER
SUCH CONDITION IS CAUSED BY EVENTS OR OPERATIONS OCCURRING PRIOR TO OR
AFTER THE EFFECTIVE DATE. FOR A PERIOD OF TWO (2) YEARS AFTER THE
EFFECTIVE DATE, SELLER AGREES TO INDEMNIFY, DEFEND AND HOLD BUYER, ITS
OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES, REPRESENTATIVES AND
AGENTS HARMLESS FROM ANY AND ALL CLAIMS, CAUSES OF ACTION, FINES,
EXPENSES, COSTS, LOSSES AND LIABILITIES WHATSOEVER IN CONNECTION WITH
THE ENVIRONMENTAL CONDITION OF THE ASSETS, INCLUDING SUCH AS MAY ARISE
UNDER THE LAWS WHEN SUCH CONDITION WAS CAUSED OR CREATED BY EVENTS OR
OPERATIONS OR ACTIVITIES OCCURRING PRIOR TO THE EFFECTIVE DATE.
ARTICLE VII.
ADDITIONAL AGREEMENTS
7.01 Seller's Disclaimer. Except as otherwise set forth in this Agreement,
Seller disclaims all liability or responsibility for any statement,
information or data made or communicated (orally or in writing) to
Buyer, its affiliates, or any stockholder, officer, director, employee,
agent, advisor or representative of either (including, but not limited
to, any opinion, information or advice which may have been provided to
any such party by any representative of Seller or any other party),
wherever or however made. Seller makes no representation or warranty as
to (i) the amounts, value, quality, or deliverability of hydrocarbons
from the Assets, (ii) any geological, geophysical or other
interpretations with respect to the Assets and (iii) any economic
forecasts, in each case whether contained in any material furnished to
Buyer by Seller, its officers, directors, employees, agents, advisors,
representatives or otherwise. Buyer expressly acknowledges and accepts
Seller's disclaimer.
7.02 Operations Prior to Closing. After the date of this Agreement and prior
to Closing, Seller shall use and maintain the Assets (including the
continuance of insurance coverage) in substantially the same manner in
which they have been used and maintained prior to this Agreement.
Unless Seller and Buyer otherwise agree, Seller shall not enter into
any agreement or transaction in relation to the Assets, excepting those
with unaffiliated third parties which (i) individually involve a fair
market value of less than Fifteen Thousand ($15,000) Dollars and (ii)
are entered into in the ordinary course of business in a manner
consistent with prudent oil field practices and JOA; provided, however,
if in the sole judgment of the Seller such conditions occur with
respect to the Assets which would constitute an imminent hazard to
property or person or jeopardize the productive status of the Assets,
Seller shall act as a reasonable operator and take such action as is
reasonably necessary and make such expenditures as are required without
the necessity of securing Buyer's prior consent. Buyer shall bear the
cost of all expenditures permitted under the preceding sentence in
connection with the operation of the field between the date of this
Agreement and Closing. In the event that an expenditure for purposes
other than that incurred in normal day-to-day operations is proposed or
contemplated, Seller shall submit such proposal to Buyer for written
concurrence, absent which Seller shall not make such expenditures.
Buyer will assume the risk of, and release Seller from, any
consequences which arise as a result of Buyer's failure or refusal to
approve and pay such expenditure. Unless Buyer and Seller otherwise
agree, Seller shall not sell, encumber, dispose of or materially alter
the Assets (other than the use of supplies and consumables) or remove
any improvements, equipment or property which comprise the Assets
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(other than the use of supplies and consumables), with the exception
of individual assets (i) involving a fair market value of less than
Two Thousand ($2,000.00) Dollars and (ii) sold or transferred to
unaffiliated third parties or consumed in the ordinary course of
business, except the sale of oil and/or gas production in the ordinary
course of business.
7.03 Assumption of Liabilities and Indemnification. Buyer expressly assumes
all costs, expenses, obligations and liabilities associated with the
Assets after the Effective Date, including, but by no means limited to,
the proper and lawful plug and abandonment and reabandonment of all
wells and facilities on lands covered by the Leases or pooled
therewith, closure of all pits, removal of all flowlines, pipelines,
shell pads and pilings, whether now or hereafter, located on the lands
to be transferred hereunder in accordance with all requirements under
law, including, but not limited to, the rules, regulations and
requirements of any governmental authority having jurisdiction thereof,
specifically including the Department of Conservation, State of
Louisiana and in accordance with all obligations, express or implied,
in any agreement (including the applicable leases) which Buyer is
required to assume hereunder or hereby, whether or not any such
obligations arise prior to or after the Effective Date. BUYER SHALL
INDEMNIFY AND DEFEND SELLER, ITS OFFICERS, DIRECTORS, SHAREHOLDERS,
AGENTS, REPRESENTATIVES AND EMPLOYEES AGAINST ANY AND ALL SUCH LOSSES,
CLAIMS, SUITS, CONTROVERSIES, LIABILITIES AND EXPENSES, ARISING OUT OF,
OR IN CONNECTION WITH, OBLIGATIONS ASSUMED UNDER THIS PARAGRAPH,
INCLUDING, WITHOUT LIMITATION, THE PLUGGING AND ABANDONING AND
REABANDONING OF ANY WELLS, REMOVAL OR MODIFICATION OF FACILITIES,
INCLUDING, BUT NOT LIMITED TO, FLOWLINES AND PIPELINES, CLOSURE OF PITS
AND RESTORATION OF SURFACE, REGARDLESS OF WHETHER THE OBLIGATION TO
PLUG AND ABANDON AND REABANDON, REMOVE, MODIFY, CLOSE OR RESTORE AROSE
PRIOR TO, OR SUBSEQUENT TO, THE EFFECTIVE DATE, AND SUCH
INDEMNIFICATION SHALL EXTEND TO AND INCLUDE CLAIMS OR CAUSES OF ACTION
BASED UPON THE NEGLIGENCE OR STRICT LIABILITY OF SELLER, ITS DIRECTORS,
SHAREHOLDERS, EMPLOYEES, REPRESENTATIVES OR AGENTS. THE SALE WILL BE
MADE EXPRESSLY SUBJECT TO THE TERMS OF ALL EXISTING OPERATING
AGREEMENTS, UNIT AGREEMENTS, FARMOUT AGREEMENTS, LEASES, SUBLEASES AND
ASSIGNMENTS AS WELL AS ANY AND ALL OTHER AGREEMENTS, WHETHER RECORDED
OR UNRECORDED, AFFECTING THE ASSETS.
Buyer further agrees to release and to defend and hold Seller, its
officers, directors, shareholders, representatives, employees and
agents harmless from and against any and all damages, losses, expenses
(including, but not limited to, court costs, attorneys' fees,
consultant fees and investigative costs and fees), and other costs and
liabilities arising as a result of claims, demands and all other
causes of action (excluding such claims, demands or causes of action
made by Seller's employees, agents, contractors or representatives)
whether arising out of an event or omission occurring subsequent to
the Effective Date and without regard as to whether such claims arise
out of the operation of the Assets by Seller or a third party and
without regard as to whether such claims are asserted by a third party
(including a governmental agency) for death, injury, damage to
property or, further, without regard as to whether such claim is based
upon the negligence or the strict liability of Seller, its officers,
directors, representatives, employees or agents.
7.04 Use of and Access to Certain Facilities. Certain production, gathering
and storage facilities presently existing which serve that portion of
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the Assets described as Righthand Creek Field in Exhibit "B," attached
hereto, may be necessary or useful in performing similar services for
production derived from East Righthand Creek Prospect. Therefore,
Seller shall reserve the right to use such facilities as capacity may
permit and/or erect new facilities and/or construct an additional
pipeline traversing the Leases to the extent Seller shall have, or
shall obtain, the third party easements, surface leases or rights of
way entitling Seller to use the surface of such lands for these
purposes. The Seller shall expressly reserve the right of access and
use of that certain gas pipeline situated in Sections 30 and 31,
T5S,R7W and in Sections 6 and 7, T6S,R7W, Allen Parish, Louisiana to
the extent necessary and to the extent capacity is available, to
service production derived from East Righthand Creek Prospect. The
location of said gas pipeline is depicted on Exhibit "H" attached
hereto. In connection with Seller's use of the facilities as herein
provided, Buyer and Seller agree to enter into a mutually agreeable
facilities use agreement containing, among other customary terms and
conditions, provisions which call for Seller to bear its proportionate
share of the actual costs of operation and the actual costs of
adapting the facilities for Seller's usage, if necessary.
7.05 Requested Data. Seller hereby agrees to provide true and accurate
copies of any data or information in Seller's possession which is
requested by Buyer.
ARTICLE VIII.
CONDITIONS PRECEDENT TO CLOSING
8.01 Seller's Conditions Precedent. The obligations of Seller to consummate
the transaction contemplated by this Agreement are subject to each of
the following conditions:
(a) Buyer shall have performed and complied with all
terms of this Agreement required to be performed by
or complied with by Buyer prior to Closing.
(b) No action or proceeding by any third party or by or
before any governmental authority shall have been
instituted or threatened (and not subsequently
dismissed, settled or otherwise terminated) which
might restrain, prohibit or invalidate any of the
transactions contemplated by this agreement, other
than an action or proceeding instituted or threatened
by Seller or any of its affiliates.
(c) Buyer's Representations and Warranties set forth
herein are true and correct in all material respects
at the time of Closing as though made on Closing
Date.
(d) The Purchase Price has not been reduced in an amount
in excess of twenty (20%) as a result of a portion of
Seller's title having been found to suffer from Title
Defects or Material Adverse Environment Condition(s),
as hereinabove defined, unless Seller otherwise
elects.
8.02 Buyer's Conditions Precedent. The obligation of Buyer to consummate
the transactions contemplated by this Agreement is subject to each of
the following conditions precedent:
(a) Seller shall have performed and complied with all termsof
this Agreement required to be performed by, or complied
with, by Seller prior to Closing.
(b) Seller's Representations and Warranties set forth herein are
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true and correct in all material respects at the time of
Closing, as though made on the Closing date.
(c) No action or proceeding by any third party or by or before
any governmental authority shall have been instituted or
threatened (and not subsequently dismissed, settled or
otherwise terminated) which might restrain, prohibit or
invalidate any of the transactions contemplated by this
agreement, other than an action or proceeding instituted or
threatened by Buyer or any of its affiliates.
(d) Seller shall have performed and complied with all terms of
this Agreement required to be performed by, or complied
with, by Buyer prior to Closing.
(e) The Purchase Price has not been reduced in an amount in
excess of twenty (20%) as a result of a portion of Seller's
title having been found to suffer from Title Defects or
Material Adverse Environment Condition(s), as hereinabove
defined, unless Buyer otherwise elects.
ARTICLE IX.
CLOSING
9.01 Time and Place of Closing. The sale and purchase of the Assets pursuant
to this Agreement (the "Closing") shall be consummated and completed in
New Orleans, Louisiana at a site selected by Seller on or before
January 16, 1997.
9.02 Closing Obligations. At the Closing, the following events shall occur,
each being a condition precedent to the others and each being deemed to
have occurred simultaneously with the others:
(a) Seller shall execute, acknowledge and deliver to Buyer:
(1) for Buyer's execution, the Assignment, Bill of
Sale and Conveyance in substantially the form of
Exhibit "C" and "C-1," attached hereto, conveying
to Buyer the Developed Assets and the Undeveloped
Assets, respectively; and
(2) title, curative documents and other materials
Seller may have elected to deliver pursuant to
Article 5.03.
(b) Buyer shall deliver to Seller the Closing Purchase Price,
minus the Performance Deposit, by direct bank or wire
transfer in immediately available federal funds as
provided in the Preliminary Settlement Statement. Buyer
shall also deliver to the Escrow Agent written
notification to pay the Performance Deposit to Seller and
to Burks Oil & Gas Properties, Inc., as provided for in
the Escrow Agreement.
(c) Seller shall deliver to Buyer exclusive possession of the
Assets, including all monies held in suspense and for
account of third parties.
(d) Seller and Buyer shall execute, acknowledge and deliver
transfer orders or letters-in-lieu thereof directing all
purchasers of production to make payment to Buyer of
proceeds attributable to production from the Assets conveyed
to Buyer along with written notification of changes of
operator as required by the State Office of Conservation.
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(e) Seller shall deliver to Buyer a fully executed, recordable
release of the lien encumbering Seller's interests held by
the First National Bank of Commerce, New Orleans,
Louisiana and any other material liens encumbering any of
Seller's interests.
(f) Seller and Buyer shall deliver copies of all such
documents deemed reasonably necessary by the other to
evidence each party's authority to enter into and execute
all agreements required hereunder to satisfy the Closing
Obligations, including, without limitation, powers of
attorney, limited partnership authorizations, corporate
resolutions, by-laws and such similar documents evidencing
the parties authority such as the other party may
reasonably request.
(g) Buyer and Seller shall execute and deliver such other
documents as may be necessary to consummate the
transactions contemplated hereby, including, forms
transferring all permits related to the Assets.
(h) Seller and Buyer shall deliver, upon request by the other,
a certificate dated as of the Closing Date, signed by an
authorized representative of the requested party,
certifying that the representations and warranties were
true and complete when made, and shall be true and
complete on, and as of, Closing as though such
representations and warranties were made at, and as of,
such date.
(h) Buyer shall pay all brokerage fees and commissions owed to
Burks Oil & Gas Properties, Inc.
9.03 Final Settlement. As soon as practicable after the Closing but no
later than June 1, 1997, Seller shall prepare and deliver to Buyer in
accordance with this Agreement and generally accepted accounting
principles, a statement (the "Final Settlement Statement") setting
forth each adjustment or payment that was not finally determined as of
Closing and showing the calculation of such adjustments. Within
fifteen (15) days after receipt of the Final Settlement Statement,
Buyer shall deliver to Seller a written report containing any changes
that Buyer proposes be made to the Final Settlement Statement. The
parties shall undertake to agree with respect to the amounts due
pursuant to such post-closing adjustment no later than fifteen (15)
days after Seller has received Buyer's proposed changes. The date upon
which such agreement is reached or upon which the Final Purchase Price
is established, shall be called the "Final Settlement Date". If the
parties cannot agree to the adjustment of the Final Purchase Price,
then either Buyer or Seller may submit such disputed adjustments to
the New Orleans office of the accounting firm of KPMG Peat Marwick,
L.L.P., and the determination made as to such disputed adjustments by
such accounting firm shall be final and binding upon Buyer and Seller.
The fees charged by such accounting firm shall be paid by the
non-prevailing party. If (i) the Final Purchase Price is more than the
Preliminary Purchase Price, Buyer shall pay by wire transfer the
amount of such difference to Seller or to Seller's account (as
designated by Seller) or (ii) the Final Purchase Price is less than
the Preliminary Purchase Price, Seller shall pay in immediately
available funds the amount of such difference to Buyer or to Buyer's
account (as designated by Buyer). Payment by Buyer or Seller shall be
made within five (5) days after the Final Settlement Date.
Within one (1) year of Closing, either party may, at its own expense,
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audit the other party's books, accounts and records relating to
production, sales proceeds, operating expenses and taxes paid which
may have been adjusted due to this transaction. Such audit shall be
conducted following reasonable advance written notice to the party to
be audited and shall be conducted during regular business hours and at
minimum inconvenience to the audited party.
In addition, with respect to consideration to be paid to Seller,
post-Closing, Seller may, at its own expense audit Buyer's books
relating to production, sales proceeds, operating expenses and
taxes paid which impact such post-Closing consideration, such
right to audit shall continue until all contingent monies have
been paid.
ARTICLE X.
TERMINATION
10.01Termination. This Agreement and the transaction contemplated hereby
may be terminated in the following instances:
(a) By Seller, under Article V, Article VI, or if any of the
conditions set forth in Article 8.01 (Seller's Conditions
Precedent to Closing) are not satisfied in all material
respects or waived at the time of Closing.
(b) By Buyer, under Article V or VI or if any of the conditions
set forth in Article 8.02 (Buyer's Conditions Precedent to
Closing) are not satisfied in all material respects or
waived at the time of Closing.
(c) At any time by the mutual written agreement of Seller and
Buyer.
10.02Effect of Termination. In the event that the Closing does not occur as
a result of automatic termination or any party hereto exercising its
rights to terminate pursuant to Article 10.01, then this Agreement
shall be null and void and, except as expressly provided herein, no
party shall have any rights or obligations under this Agreement,
except for the payment of the Performance Deposit to Buyer out of the
Escrow Account. Nothing herein shall relieve any party from liability
for any willful or negligent failure to perform or observe in any
material respect any agreement or covenant herein. In the event the
termination of this Agreement results from the willful or negligent
failure of any party to perform in any material respect any agreement
or covenant herein, then the other party shall be entitled to all
remedies available in law or in equity and shall be entitled to
recover court costs and reasonable attorneys' fees in addition to any
other relief to which such party may be entitled.
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<PAGE>
ARTICLE XI
MISCELLANEOUS
11.01Exhibits. The Exhibits referred to in this Agreement are hereby
incorporated in this Agreement by reference and constitute a part of
this Agreement. Each party to this Agreement has received a complete
set of Exhibits as of the execution of this Agreement.
11.02Expenses. Except as otherwise specifically provided, all fees, costs
and expenses incurred by Buyer or Seller in negotiating this Agreement
shall be paid by the party incurring the same, including, without
limitation, legal and accounting fees, costs and expenses.
11.03Notices. All notices and communications required or permitted under
this Agreement shall be in writing, and any communication or delivery
hereunder shall be deemed to have been duly made when personally
delivered to the individual indicated below, or if mailed or by
facsimile transmission, when received by the party charged with such
notice and addressed as follows:
If to Buyer:
Rio Grande Drilling Company
10101 Reunion Place, Suite 210,
San Antonio, Texas 78216
Attention: Guy Bob Buschman, President
Telephone: (210) 308-8000
Fax: (210) 308-8111
With a copy to:
Barron W. Dowling
Cox & Smith, Incorporated
112 East Pecan Street, Suite 1800
San Antonio, Texas 78205-1521
Telephone: (210) 554-5309
Fax: (210) 226-8395
If to Seller:
Brechtel Energy Corporation
19331 North 12th Street
Covington, Louisiana, 70433
Telephone: (504) 892-9779
Fax: (504) 892-0266
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<PAGE>
With a copy to
Michael C. McKeogh, Esq.
601 Poydras Street, Suite 2421
New Orleans, Louisiana 70130
Telephone: (504) 524-3996
Fax: (504) 524-3019
Any party may, by written notice so delivered to the other
parties, change the address or individual to which delivery shall
thereafter be made.
11.04Amendments. This Agreement may not be amended nor any rights hereunder
waived, except by an instrument in writing signed by the party to be
charged with such amendment or waiver and delivered by such party to
the party claiming the benefit of such amendment or waiver.
11.05Assignment. Neither party may assign all or any portion of its rights
or delegate all or any portion of its duties hereunder, unless it
continues to remain liable for the performance of the obligations
hereunder and obtains the prior written consent of the other party,
which consent shall not be unreasonably withheld.
11.06Announcements. Seller and Buyer shall consult with each other with
regard to all press releases and other announcements issued after the
date of this Agreement and prior to the Closing concerning this
Agreement or the transactions contemplated hereby and, except as may
be required by applicable laws or the applicable rules and regulations
of any governmental agency or stock exchange, neither Buyer nor Seller
shall issue any such press release or other publicity without the
prior written consent of the other party.
11.07Conditions. The inclusion in this Agreement of conditions to Seller's
and Buyer's obligations at the Closing shall not, in and of itself,
constitute a covenant of either Seller or Buyer to satisfy the
conditions of the other party's obligations at Closing.
11.08Headings. The headings of the articles and sections of this Agreement
are for guidance and convenience of reference only and shall not limit
or otherwise affect any of the terms or provisions of this Agreement.
11.09Counterparts. This Agreement may be executed by Buyer and Seller in
any number of counterparts, each of which shall be deemed an original
instrument, but all of which, together, shall constitute but one and
the same instrument.
11.10References. References made in this Agreement, including use of a
pronoun, shall be deemed to include where applicable, masculine,
feminine, singular or plural, individuals, partnerships or
corporations. As used in this Agreement, "person" shall mean any
natural person, corporation, partnership, trust, estate or other
entity.
11.11Governing Law. This Agreement and the transactions contemplated hereby
shall be construed in accordance with, and governed by, the laws of
the State of Louisiana.
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<PAGE>
11.12Entire Agreement. This Agreement (including the Exhibits attached
hereto) constitutes the entire understanding among the parties with
respect to the subject matter hereof, superseding all negotiations,
prior discussions and prior agreements and understandings relating to
such subject matter.
11.13Parties in Interest. This Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto (including Buyer and each
Seller), and their respective successors and permitted assigns, and
nothing contained in this Agreement, expressed or implied, is intended
to confer upon any other person or entity any benefits, rights or
remedies, expressly excluding any benefits recognized and acknowledged
in favor of Burks Oil and Gas Properties, Inc. in the provisions of
Article 11.18.
11.14Survival. The liability of Buyer and Seller under each of their
respective representations, warranties, covenants and indemnities
shall survive Closing and execution and delivery of the Assignment
contemplated hereby. After Closing, any claim that Seller is liable
for any breach of any representation, warranty or covenant hereunder,
by either Buyer or a third party, must be made in writing and
delivered to Seller within one year after Closing.
11.15Arbitration. All disputes arising out of, or in connection with, this
Agreement or any determination required to be made by Buyer and Seller
as to which the parties cannot reach an agreement shall be settled by
arbitration in New Orleans, Louisiana. Any matter to be submitted to
arbitration shall be determined by a panel of three (3) arbitrators,
unless otherwise agreed by the parties. Each arbitrator shall be a
person experienced in the oil and gas industry and shall be appointed
(a) by mutual agreement of Buyer and Seller, or
(b) failing such agreement, within sixty (60) days of the
request for arbitration, each party shall appoint one
arbitrator, and the third arbitrator shall be appointed by
the other two arbitrators, or, if they cannot agree, by a
judge serving of the United States District Court, Eastern
District of Louisiana, Fifth Circuit.
In the event of the failure or refusal of the parties to appoint
the arbitrator(s) within 120 days of the request for arbitration,
the arbitrator shall be selected in accordance with reasonable
rules established by the arbitrators. The arbitration shall be
conducted in accordance with reasonable rules established by the
arbitrators. Any award by the arbitrators shall be final, binding
and non-appealable, and judgment may be entered thereon in any
court of competent jurisdiction.
11.16NORM. It is expressly recognized that the water bottoms and land
masses comprising the Assets, along with surface facilities and
production equipment located thereon, having been used in connection
with oil and gas production activities, may contain naturally
occurring radioactive materials (NORM) as a result of these
operations. Accordingly, lands, water bottoms, surface facilities and
production equipment transferred herein are transferred with the
restriction that they will be used only in connection with oil and gas
producing activities associated with these leases and will not be
subsequently transferred for unrestricted use, unless the
concentrations of NORM associated therewith are below the levels
specified as allowable for unrestricted transfer by the applicable
regulations or laws of the state and/or federal agencies having
regulatory jurisdiction there over. Buyer further agrees to include
the provisions of this clause in any subsequent sale or assignment of
any interest in the Assets herein transferred.
11.17Seller's Option to Make "Like-Kind" Exchange. At any time prior to
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<PAGE>
Closing, Seller, or any one or more of them, may elect by written
notice to Buyer to receive all or a portion of the Purchase Price
through an escrow agent designated by Seller pursuant to an escrow
agreement to be established for purposes of effecting a tax free,
like-kind exchange under Section 1031 of the Internal Revenue Code of
1986, as amended. Buyer agrees to cooperate with all reasonable
requests of Seller in order to establish and create sufficient
documentation to support such federal tax treatment by Seller,
provided that Buyer shall have no obligation to incur or pay any cost
or expense in such connection, and provided, further, that Buyer shall
have no obligation to acquire any properties (other than the Assets)
in connection, with such exchange or to execute any agreements or
other documents or to undertake any other action whereby Buyer might
incur or assume any indebtedness or other liability in connection with
such exchange.
If Seller appoints an Intermediary pursuant to this paragraph, it may
transfer the Assets to the Intermediary, and at Closing, the
Intermediary shall transfer the Assets to the Buyer and receive
consideration payable at Closing from Buyer, all pursuant to this
Agreement. The payment by Buyer of such consideration to the
Intermediary shall be treated as satisfaction of Buyer's obligations
under the Agreement to the same extent as if such payment had been
made directly to Seller. Seller agrees that the transfer of the Assets
to the Intermediary shall expressly be subject to this Agreement and
that Seller shall remain liable for performance under this Agreement
and all documents to be delivered at Closing to the same extent as if
it had not appointed an Intermediary. If Seller appoints an
Intermediary, Buyer shall not be obligated to pay any additional
costs, or incur any additional obligations, in the acquisition of the
Assets, and Seller shall indemnify and hold Buyer and its affiliates
harmless from and against all claims, expenses, losses and liabilities
resulting from the Intermediary's participating in the purchase.
11.18Broker's Commission. Buyer shall pay in full by wire transfer, in
immediately available funds, all commissions due at Closing to Burks
Oil and Gas Properties, Inc. or to its designees, such payment to be
made in the same manner as, and concurrently with, any and all
payments made to Seller.
11.19Further Assurances. After Closing, each party hereto, at the request
of the other, shall from time to time without additional consideration
execute and deliver such further agreements and instruments of
conveyance and take such other action as the other party hereto may
reasonably request in order to convey and deliver the Assets to Buyer
and to otherwise accomplish the transactions contemplated by the
Agreement.
11.20No Punitive Damages. Under no circumstances shall either Party be
liable to the other for any indirect, consequential, unforseen,
exemplary or punitive damages of any nature.
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<PAGE>
EXECUTED on the day, month and year first above mentioned.
SELLER: BUYER:
BRECHTEL ENERGY CORPORATION RIO GRANDE OFFSHORE,
INDIVIDUALLY AND AS AGENT LTD.
AND ATTORNEY-IN-FACT
BY: RIO GRANDE DRILLING
COMPANY, GENERAL PARTNER
By: By:
PETER P. BRECHTEL, JR. GUY BOB BUSCHMAN
PRESIDENT PRESIDENT
Signature Page to that certain Purchase and Sale Agreement dated , 1996 by and
between Brechtel Energy Corporation and Rio Grande Offshore, Ltd.
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<PAGE>
EXHIBIT "A" (Page 1 of 2)
RIGHTHAND CREEK FIELD
Attached to and made a part of that certain Purchase
and Sale Agreement dated the ____ day of
________, 1996 by and
between Rio Grande, Inc., as Buyer, and Brechtel Energy
Corporation, as Seller
PARTIES TO THIS AGREEMENT
BRECHTEL ENERGY CORPORATION Office: 504/892-9779
19331 North 12th Street Fax: 504/892-0266
Covington, Louisiana 70433
RHC ASSOCIATES, L.L.C. Office: 504/892-9779
19331 North 12th Street Fax: 504-892-0266
Covington, Louisiana 70433
AFP EXPLORATION, INC. Office: 504/892-9779
19331 North 12th Street Fax: 504/892-0266
Covington, Louisiana 70433
ATC PROPERTIES, L.L.C. Office: 504/892-9779
19331 North 12th Street Fax: 504/892-0266
Covington, Louisiana 70433
COASTAL ENERGY CORPORATION Office: 504/362-5340
Post Office Box 1670 Fax: 504/368-7879
Gretna, Louisiana 70053
MUD MOTORS, INC. Office: 504/362-5340
Post Office Box 1670 Fax: 504/368-7879
Gretna, Louisiana 70053
MILLER, PATRICK & ROWE, INC. Office: 504/362-5340
2439 Manhattan Boulevard, Suite 205 Fax: 504/368-7879
Harvey, Louisiana 70053
SUSAN BRAGG BRECHTEL Office: 504/892-9779
130 East Ruelle Fax: 504/892-0266
Mandeville, Louisiana 70448
RICHARD J. THIBODEAUX Office: 504/831-7800
Post Office Box 6738 Fax: 504/832-3660
Metairie, Louisiana 70009
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<PAGE>
EXHIBIT "A" (Page 2 of 2)
DONALD H. BURKS Office: 713/580-4590
14300 Cornerstone Village Drive, Suite 515 Fax: 713/537-2121
Houston, Texas 77014-1251
MARY CHASSAIGNAC BURKS Office: 713/580-4590
15318 Poplar Grove Drive Fax: 713/537-2121
Houston, Texas 77006
REVEILLE RESOURCES, INC. Office: 504/525-3611
601 Poydras Street, Suite 2421 Fax: 504/524-3019
New Orleans, Louisiana 70130
CIG EXPLORATION, INC. Office: 504/892-9779
5321 Janice Avenue Fax: 504/892-0266
Kenner, Louisiana 70065
DOUBLE H ENTERPRISES, INC. Office: 504/362-5340
Post Office Box 1670 Fax: 504/368-7879
Gretna, Louisiana 70053
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<PAGE>
EXHIBIT "B" (Page 1 of 2)
Attached to and made a part of that certain Purchase and Sale
Agreement dated the _____ day of, 1996 by and
between Rio Grande, Inc., as Buyer, and Brechtel Energy
Corporation, as Seller
Brechtel Energy Corporation - Cavenham Well No. 1
Current
Producing
Serial No. Interval WI NRI ORRI
215326 U WX RD SU 1.00 .729122769 .036081846
[11,044-11,064']
Brechtel Energy Corporation - Cavenham Well No. 2
Current
Producing
Serial No. Interval WI NRI ORRI
216728 U WX RD SU 1.00 .729122769 .036081846
[11,032-11,052']
Brechtel Energy Corporation - Cavenham Well No. 3
Current
Producing
Serial No. Interval WI NRI ORRI
217938 U WX RD SU 1.00 .729122769 .036081846
[11,179-11,190']
Brechtel Energy Corporation - W. G. Ragley Lumber Company Well No. 1
Current
Producing
Serial No. Interval WI NRI ORRI
217828 U WX RD SU 1.00 .729122769 .036081846
[11,140-11,160']
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<PAGE>
Brechtel Energy Corporation - Powell Lumber Company Well No. 1
Current
Producing
Serial No. Interval WI NRI ORRI
218645 U WX RD SU 1.00 .729122769 .036081846
[11,055-11,081']
Brechtel Energy Corporation - Crosby Land & Resources Well No. 1
Current
Producing
Serial No. Interval WI NRI ORRI
218713 U WX RD SU 1.00 .729122769 .036081846
[11,091-11,106']
Brechtel Energy Corporation - Crosby Land and Resources Well No. 1D
Current
Producing
Serial No. Interval WI NRI ORRI
219086 U WX RD SU 1.00 .729122769 .036081846
[11,021-11,037']
Brechtel Energy Corporation - W. G. Ragley Lumber Company Well No. 2
Current
Producing
Serial No. Interval WI NRI ORRI
188683 U WX RD SU 1.00 .692700926 .01 BPO
[11,140-11,150'] .954348457 .613160451 .03 APO-I
[11,104-11,110'] .876146180 .590014942 .03 APO-II
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<PAGE>
EXHIBIT "B" (Page 2 of 2)
APO-I
Tracts 3 & 5: Mobile has an option to convert its 5% of 99% ORRI to a
12.5% of 99% ORRI. IP retains 25% of 1% ORRI BPO with no
conversion rights.
Tract 6: Kenai reserved an ORRI equal to the difference between
26.5% and the total burdens affecting this tract with an
option to convert the ORRI to a 35% WI-APO, proportionate to
its ownership in the tract equity.
Kaiser (Sceptre) reserved an ORRI equal to the difference
between 26.5% and the total burdens affecting this tract
with an option to convert the ORRI to a 25% WI- APO
proportionate to its ownership in the tract equity.
APO-II
Tracts 3 & 5: Mobil has an option to convert its 5% of 99% ORRI to
a 30% WI-APO. IP retains its 25% of 1% ORRI with no
conversion rights.
Tract 6: Same assumptions made as shown in APO-I above, with all
parties converting their ORRI to their proportionate working
interest position.
FACILITIES:
1. Brechtel-Righthand Creek Facility No. 1 -Cavenham Well No. 1
2. Brechtel-Righthand Creek Facility No. 2 -Cavenham Well No. 2
-Crosby Well No. 1 & 1D
3. Brechtel-Righthand Creek Facility No. 3 -Cavenham Well No. 3
-Ragley Well No. 1
4. Brechtel-Righthand Creek Facility No. 4 -Powell Well No. 1
5. Brechtel-Righthand Creek Facility No. 5 -Ragley Well No. 2
6. Brechtel-Righthand Creek Gas Compressor Station No. 1
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<PAGE>
EXHIBIT "B-1"
Attached to, and made part of, that certain
Purchase and Sale Agreement dated November ,
1996 by and
between Brechtel Energy Corporation, Seller, and Rio
Grande Offshore, Ltd., Buyer.
PURCHASE
WORKING NET REVENUE ALLOCATION
LEASE NAME INTEREST INTEREST PRICE
Cavenham No. 1 100% 72.912 1,917,137
Cavenham No. 2 100% 72.912 2,152,041
Cavenham No. 3 100% 72.912 375,457
Ragley Lumber Co. No.1 100% 72.912 1,212,894
Powell Lumber Co. No.1 100% 72.912 4,622,756
Crosby Land & Resources No. 1 100% 72.912 375,257
Crosby Land & Resources No. 1-D 100% 72.912 4,347,458
----------
15,000,000
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<PAGE>
DEVELOPED ASSETS
EXHIBIT "C"
Attached to, and made part of, that certain
Purchase and Sale Agreement dated November ,
1996 by and
between Brechtel Energy Corporation, Seller, and Rio
Grande Offshore, Ltd., Buyer.
ASSIGNMENT, BILL OF SALE AND CONVEYANCE
STATE OF LOUISIANA
PARISHES OF ALLEN AND BEAUREGARD
This Assignment, Bill of Sale and Conveyance ("Assignment"), effective
as of November 1, 1996 at 7:00 a.m. C.S.T. (the "Effective Date") from BRECHTEL
ENERGY CORPORATION, 19331 North 12th Street, Covington, Louisiana, 70433, as
Agent and Attorney-In-Fact for, and on behalf of, those parties to that certain
Irrevocable Power of Attorney, attached hereto as Exhibit "A" and made part
hereof for all purposes, ("Assignor") to RIO GRANDE OFFSHORE, LTD. a Texas
limited partnership, herein represented by its General Partner, Rio Grande
Drilling Company, 10101 Reunion Place, Union Square, Suite 210, San Antonio,
Texas 78216-4156 ("Assignee").
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<PAGE>
1. Conveyance of Assets
For, and in consideration of, the sum of One Thousand and No/100
Dollars ($1,000.00) and other valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Assignor, does hereby ASSIGN,
BARGAIN, SELL, TRANSFER, SET-OVER, GRANT, CONVEY AND DELIVER unto Assignee,
effective as of the Effective Date, saving and excepting the "Assets Excluded,"
as defined in the Purchase and Sale Agreement hereinafter described, as well as
any and all overriding royalty interests listed in Exhibit "B", all Assignor's
right, title and interest, subject to the limitations and restrictions
hereinbelow set forth, in the following, to-wit (the "Assets"):
(a) the "Leases," as hereinbelow defined, including the working
interests and net revenue interests described in Exhibit "B" and,
with respect to said leases, the oil and/or gas wells located
thereon described in Exhibit "B" (the "Wells") along with all
other right, title and interest of Seller in and to said Wells
and in and to the associated leasehold;
(b) Except to the extent as may be limited by the leasehold rights
set forth above, all of Seller's rights, privileges, benefits and
powers conferred upon Seller, as the holder of any Lease, with
respect to the use and occupation of the surface of, as well as
the subsurface depths under the lands covered by such Lease that
may be necessary or useful to the possession and enjoyment of
such Lease; except to the extent as may be limited by the
leasehold rights set forth above, all of Seller's rights in any
pools or units which include all or any part of any Lease or any
Well (the "Units"), including Seller's right, title and interest
in production from any Unit, regardless of whether such Unit
production is derived from wells located on or off a Lease and
Seller's right, title and interest in any wells within any such
unit;
(c) To the extent assignable, all of Seller's right, title and
interest in and to surface use agreements, authorizations,
permits and similar rights and interests applicable to, or used
or useful in connection with, any or all of the Wells, Leases,
Lands and Units;
(d) To the extent assignable, all of Seller's right, title and
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<PAGE>
interest in and to permits, servitudes, easements, rights-of-way,
orders, lease agreements, royalty agreements, assignments, gas
purchase and sale contracts, oil purchase and sale agreements,
farmin and farmout agreements, transportation and marketing
agreements, operating agreements, unit agreements, processing
agreements, options, facilities or equipment leases and other
contracts, agreements and rights used, or held for use, in
connection with the ownership or operation of the Assets, or with
the production or treatment of hydrocarbons from the Assets,
including, without limitation, the easements and other contracts
described in Exhibit "B," attached hereto, or the sale or
disposal of water, hydrocarbons or associated substances from the
Assets but excluding any such contracts, agreements and rights
where transfer of same is limited by third party agreement or
operation of law;
(e) All of Seller's right, title and interest in and to all
equipment, machinery, fixtures and other real, personal and mixed
property situated on the Leases and used in the operation of the
Assets including, without limitation, wells, salt water disposal
wells, well equipment, casing, rods, tanks, boilers, buildings,
tubing, pumps, motors, fixtures, machinery, inventory,
separators, dehydrators, compressors, treaters, power lines,
field processing facilities, flowlines, gathering lines,
transmission lines and all other pipelines ("Equipment");
(f) All of Seller's right, title and interest (excluding such
interest attributable to any overriding royalty interest) in and
to oil, condensate, natural gas in whatever form and natural gas
liquids produced after the Effective Date, including "line fill"
and inventory below the pipeline connection in tanks,
attributable to the Wells, the Leases, Lands and Units; and
(g) Originals, or clean and legible copies of, all of the files,
records, information and data respecting the Assets in Seller's
possession including, without limitation, title records,
abstracts, title opinions, title certificates, computer records,
production records, severance tax records, geological and
geophysical data and all other information relating directly to
the ownership or operation of the Assets but exclusive of (i) any
such records, data or information where transfer of same is
prohibited by third party agreements
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<PAGE>
or applicable law, (ii) the work product of Seller's legal
counsel and (iii) records relating to the Sale and Closing under
this Agreement.
but INSOFAR AND ONLY INSOFAR as such Assets are situated within the surface
boundaries of that certain oil and/or gas unit designated as the U WX RD SU,
created by Louisiana Office of Conservation Order No. 1041- C-6, dated effective
July 9, 1996, as represented by that certain unit survey plat attached to said
Order recorded July 25, 1996 in Conveyance Book 361, at pages 69 through 74,
under File No. 382663 of the Public Records of Allen Parish, Louisiana, LESS AND
EXCEPT that certain tract of land, as more particularly described on Exhibit
"B," attached hereto and made part hereof for all purposes, comprised of the
following three (3) unit tracts, or portions thereof:
Unit Tract 1: but only insofar as such tract is situated
West of a projection, due North, of the East boundary
line of Unit Tract 2, until such projected line meets
the northern surface boundary line of said U WX RD SU.
Unit Tract 2: the North one-half (N 1/2)
Unit Tract 4: All
AND SUCH ASSETS FURTHER INCLUDING that certain Brechtel Energy Corporation
(formerly, Ballard Exploration Company, Inc.) No. 1 Ragley Well located in
Section 29, T5S,R7W, Allen Parish, Louisiana (Serial No. 188683) along with all
downhole and surface equipment associated therewith, TO HAVE AND TO HOLD the
Assets unto Assignee, its successors and assigns forever; provided, however,
this Assignment is made expressly subject to the following terms and conditions:
2.
Purchase and Sale Agreement
This Assignment is made and delivered pursuant to the provisions of that
certain Purchase and Sale Agreement (the "Purchase Agreement") dated November ,
1996 by and between Assignor and Assignee, a copy of which is available at the
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<PAGE>
offices of Assignor at the address set forth above. The warranties,
representations and covenants contained in the Purchase Agreement shall survive
the execution and delivery of this Assignment for the applicable time periods
set forth in, and in accordance with, the provisions of the Purchase Agreement.
3.
Limitations and Warranties
3.1 Assignor warrants title and shall forever defend all and singular the
Assets conveyed to Assignee, its successors and assigns, against every
person whomsoever lawfully claiming the Assets or any part thereof,
by, through or under Assignor but not otherwise.
3.2 The equipment and personal property (both surface and downhole) is
assigned to Assignee "AS IS, WHERE IS AND WITH ALL FAULTS", and
Assignor expressly disclaims any warranty or representation of any
kind or character, whether express or implied, and whether by common
law, statute or otherwise as to operating condition, merchantability,
fitness for any purpose or purposes, condition or otherwise. Assignor
does not warrant the equipment or personal property to be free from
redhibitory vices or defects.
3.3 To the extent transferable, Assignee shall be and is hereby subrogated
to all warranties of title (other than that of Assignor) heretofore
given or made to Assignor or its predecessors in title with respect to
the Assets.
4.
Assumed Liabilities
By Assignee's acceptance of this Assignment, Assignee assumes the following
liabilities, responsibilities and obligations respecting the Assets as of the
Effective Date:
4.1 All obligations and liabilities arising from, or in connection with,
the ownership and operation of the Assets as of, and subsequent to,
the Effective Date, including but by no means limited to:
a. the proper and lawful reclamation and plugging and
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<PAGE>
abandoning of all wells and facilities presently existing,
or in the future drilled, on acreage covered by the Leases
or pooled therewith, removal of all flowlines, pipelines,
shell pads and pilings, whether now or hereafter located on
acreage covered by the Leases, or pooled therewith; and
b. the payment and performance of all liabilities and
obligations arising from, or in connection with, any
federal, state or local law, rule, order, regulation or
permit applicable to any waste material or hazardous
substance on, in or included within the Assets or the
presence, disposal, release or threatened release of such
waste material or hazardous substances from the Assets and,
in connection with such assumed liability, Assignee hereby
expressly accepts the Assets in their present condition as
of the Effective Date and assumes any and all liabilities
and obligations with respect to any matter that may arise
out of such condition, including, but not limited to,
environmental claims for losses or damages (including,
without limitation, the presence of naturally occurring
radioactive material).
4.2 As of, and subsequent to, the Effective Date, all liabilities,
responsibilities and obligations arising from, under and in connection
with, all agreements and contracts whether recorded or unrecorded and
whether specified herein or in Exhibit "B," attached hereto,
including, without limitation, all Leases, Subleases, Operating
Agreements, Unit Agreements, Farmout Agreements and Assignments.
5.
Indemnification
5.1 Effective from and after the Effective Date, Assignee shall indemnify,
defend and hold harmless Assignor, its officers, directors, agents,
representatives and employees from and against any and all losses,
claims, suits, controversies, liabilities and expenses arising
directly or indirectly out of Assignee's ownership and use of the
Assets and, further, after the expiration of two (2) years from the
date hereof, Assignee shall indemnify, defend and hold harmless
Assignor, its officers, directors, agents, representatives and
employees from and against any and all losses, claims, suits,
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<PAGE>
controversies, liabilities and expenses without regard to whether such
arise from an incident or condition occurring prior to, or after, the
Effective Date.
5.2 For a period of two (2) years only from the date hereof, Assignor
shall indemnify, defend and hold harmless Assignee, its officers,
directors, agents, representatives and employees from and against any
and all losses, claims, suits, controversies, liabilities, and
expenses arising directly or indirectly out of Assignor's ownership
and use of the Assets prior to the Effective Date.
6.
Additional Provisions
6.1 Successors and Assigns All of the provisions hereof shall inure to the
benefit of, and be binding upon, the parties hereto and their
respective heirs, successors and assigns. 6.2 No Third-Party
Beneficiaries Subject to the provisions of Article 4.2 hereof, nothing
contained in this Agreement is intended or shall be construed to
confer any right or benefit upon any third party.
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IN WITNESS WHEREOF, the parties hereto have executed this Assignment this
day of January, 1997 but is effective as of the Effective Date.
WITNESSES: ASSIGNOR:
BRECHTEL ENERGY CORPORATION, AGENT AND
ATTORNEY-IN-FACT
By:
PETER P. BRECHTEL, JR., PRESIDENT
WITNESSES: ASSIGNEE:
RIO GRANDE OFFSHORE, LTD.
BY: RIO GRANDE DRILLING
COMPANY, GENERAL PARTNER
By:
GUY BOB BUSCHMAN, PRESIDENT
Signature page to that certain Assignment, Bill of Sale and Conveyance dated
January , 1997 by and between Brechtel Energy Corporation, Assignor, and Rio
Grande Offshore, Ltd., Assignee, conveying Assignor's interests in East
Righthand Creek Field, Allen and Beauregard Parishes, Louisiana.
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UNDEVELOPED ASSETS
EXHIBIT "C-1"
Attached to, and made part of, that certain
Purchase and Sale Agreement dated November ,
1996 by and
between Brechtel Energy Corporation, Seller, and Rio
Grande Offshore, Ltd., Buyer.
ASSIGNMENT, BILL OF SALE AND CONVEYANCE
STATE OF LOUISIANA
PARISHES OF ALLEN AND BEAUREGARD
This Assignment, Bill of Sale and Conveyance ("Assignment"), effective
as of November 1, 1996 at 7:00 a.m. C.S.T. (the "Effective Date") from BRECHTEL
ENERGY CORPORATION, 19331 North 12th Street, Covington, Louisiana, 70433, as
Agent and Attorney-In-Fact for, and on behalf of, those parties to that certain
Irrevocable Power of Attorney, attached hereto as Exhibit "A" and made part
hereof for all purposes, ("Assignor") to RIO GRANDE OFFSHORE, LTD., a Texas
limited partnership, herein represented by its General Partner, Rio Grande
Drilling Company, 10101 Reunion Place, Union Square, Suite 210, San Antonio,
Texas 78216-4156 ("Assignee").
1.
Conveyance of Assets
For, and in consideration of, the sum of One Thousand and No/100
Dollars ($1,000.00) and other valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Assignor, does hereby ASSIGN,
BARGAIN, SELL, TRANSFER, SET-OVER, GRANT, CONVEY AND DELIVER unto Assignee,
effective as of the Effective Date, saving and excepting the "Assets Excluded,"
as defined in the Purchase and Sale Agreement hereinafter described, as well as
any and all overriding royalty interests listed on Exhibit "B," all Assignor's
right, title and interest, subject to the limitations and restrictions
hereinbelow set forth, in the following, to-wit (the "Assets"):
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(a) the "Leases," as hereinbelow defined, including the working interests
and net revenue interests described in Exhibit "B" and, with respect
to said leases, the oil and/or gas wells located thereon described in
Exhibit "B" (the "Wells") along with all other right, title and
interest of Seller in and to said Wells and in and to the associated
leasehold;
(b) Except to the extent as may be limited by the leasehold rights set
forth above, all of Seller's rights, privileges, benefits and powers
conferred upon Seller, as the holder of any Lease, with respect to the
use and occupation of the surface of, as well as the subsurface depths
under the lands covered by such Lease that may be necessary or useful
to the possession and enjoyment of such Lease; except to the extent as
may be limited by the leasehold rights set forth above, all of
Seller's rights in any pools or units which include all or any part of
any Lease or any Well (the "Units"), including Seller's right, title
and interest in production from any Unit, regardless of whether such
Unit production is derived from wells located on or off a Lease and
Seller's right, title and interest in any wells within any such unit;
(c) To the extent assignable, all of Seller's right, title and
interest in and to surface use agreements, authorizations, permits and
similar rights and interests applicable to, or used or useful in
connection with, any or all of the Wells, Leases, Lands and Units; (d)
To the extent assignable, all of Seller's right, title and interest in
and to permits, servitudes, easements, rights-of-way, orders, lease
agreements, royalty agreements, assignments, gas purchase and sale
contracts, oil purchase and sale agreements, farmin and farmout
agreements, transportation and marketing agreements, operating
agreements, unit agreements, processing agreements, options,
facilities or equipment leases and other contracts, agreements and
rights used, or held for use, in connection with the ownership or
operation of the Assets, or with the production or treatment of
hydrocarbons from the Assets, including, without limitation, the
easements and other contracts described in Exhibit "B," attached
hereto, or the sale or disposal of water, hydrocarbons or associated
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substances from the Assets but excluding any such contracts,
agreements and rights where transfer of same is limited by third party
agreement or operation of law;
(e) All of Seller's right, title and interest in and to all equipment,
machinery, fixtures and other real, personal and mixed property
situated on the Leases and used in the operation of the Assets
including, without limitation, wells, salt water disposal wells, well
equipment, casing, rods, tanks, boilers, buildings, tubing, pumps,
motors, fixtures, machinery, inventory, separators, dehydrators,
compressors, treaters, power lines, field processing facilities,
flowlines, gathering lines, transmission lines and all other pipelines
("Equipment");
(f) All of Seller's right, title and interest (excluding such interest
attributable to any overriding royalty interest) in and to oil,
condensate, natural gas in whatever form and natural gas liquids
produced after the Effective Date, including "line fill" and inventory
below the pipeline connection in tanks, attributable to the Wells, the
Leases, Lands and Units; and
(g) Originals, or clean and legible copies of, all of the files, records,
information and data respecting the Assets in Seller's possession
including, without limitation, title records, abstracts, title
opinions, title certificates, computer records, production records,
severance tax records, geological and geophysical data and all other
information relating directly to the ownership or operation of the
Assets but exclusive of (i) any such records, data or information
where transfer of same is prohibited by third party agreements or
applicable law, (ii) the work product of Seller's legal counsel and
(iii) records relating to the Sale and Closing under this Agreement.
but INSOFAR AND ONLY INSOFAR as such Assets are situated outside the
surface boundaries of that certain oil and/or gas unit designated as the U
WX RD SU, created by Louisiana Office of Conservation Order No. 1041- C-6,
dated effective July 9, 1996, as represented by that certain unit survey
plat attached to said Order recorded July 25, 1996 in Conveyance Book 361,
at pages 69 through 74, under File No. 382663 of the Public Records of
Allen Parish, Louisiana, LESS AND EXCEPT that certain Brechtel Energy
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<PAGE>
Corporation (formerly, Ballard Exploration Company, Inc.) No. I Ragley Well
located in Section 29, T5S,R7W, Allen Parish, Louisiana (Serial No. 188683)
along with all downhole and surface equipment associated therewith,
BUT SUCH ASSETS FURTHER INCLUDING, that certain tract of land, as more
particularly described on Exhibit "B," attached hereto and made part hereof
for all purposes, comprised of the following three (3) unit tracts, or
portions thereof:
Unit Tract 1: but only insofar as such tract is situated West of a
projection, due North, of the East boundary line of Unit
Tract 2, until such projected line meets the northern
surface boundary line of said U WX RD SU. Unit
Tract 2: the North one-half (N 1/2)
Unit Tract 4: All
TO HAVE AND TO HOLD the Assets unto Assignee, its successors and assigns
forever; provided, however, this Assignment is made expressly subject to the
following terms and conditions:
2.
Purchase and Sale Agreement
This Assignment is made and delivered pursuant to the provisions
(including, without limitation, those certain provisions respecting Seller's
option to assume a working interest in the Assets upon the occurrence of Project
Payout as therein defined) of that certain Purchase and Sale Agreement (the
"Purchase Agreement") dated November , 1996 by and between Assignor and
Assignee, a copy of which is available at the offices of Assignor at the address
set forth above. The warranties, representations and covenants contained in the
Purchase Agreement shall survive the execution and delivery of this Assignment
for the applicable time periods set forth in, and in accordance with, the
provisions of the Purchase Agreement.
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<PAGE>
3.
Limitations and Warranties
3.1 Assignor warrants title and shall forever defend all and singular the
Assets conveyed to Assignee, its successors and assigns, against every
person whomsoever lawfully claiming the Assets or any part thereof, by,
through or under Assignor but not otherwise.
3.2 The equipment and personal property (both surface and downhole) is
assigned to Assignee "AS IS, WHERE IS AND WITH ALL FAULTS", and
Assignor expressly disclaims any warranty or representation of any kind
or character, whether express or implied, and whether by common law,
statute or otherwise as to operating condition, merchantability,
fitness for any purpose or purposes, condition or otherwise. Assignor
does not warrant the equipment or personal property to be free from
redhibitory vices or defects.
3.3 To the extent transferable, Assignee shall be and is hereby subrogated
to all warranties of title (other than that of Assignor) heretofore
given or made to Assignor or its predecessors in title with respect to
the Assets.
4.
Assumed Liabilities
By Assignee's acceptance of this Assignment, Assignee assumes the
following liabilities, responsibilities and obligations respecting the Assets as
of the Effective Date:
4.1 All obligations and liabilities arising from, or in connection with, the
ownership and operation of the Assets as of, and subsequent to, the
Effective Date, including but by no means limited to:
a. the proper and lawful reclamation and plugging and abandoning of all
wells and facilities presently existing, or in the future drilled, on
acreage covered by the Leases or pooled therewith, removal of all
flowlines, pipelines, shell pads and pilings, whether now or hereafter
located on acreage covered by the Leases, or pooled therewith; and
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<PAGE>
b. the payment and performance of all liabilities and obligations arising
from, or in connection with, any federal, state or local law, rule,
order, regulation or permit applicable to any waste material or
hazardous substance on, in or included within the Assets or the
presence, disposal, release or threatened release of such waste
material or hazardous substances from the Assets and, in connection
with such assumed liability, Assignee hereby expressly accepts the
Assets in their present condition as of the Effective Date and assumes
any and all liabilities and obligations with respect to any matter
that may arise out of such condition, including, but not limited to,
environmental claims for losses or damages (including, without
limitation, the presence of naturally occurring radioactive material).
4.2 As of, and subsequent to, the Effective Date, all liabilities,
responsibilities and obligations arising from, under and in connection
with, all agreements and contracts whether recorded or unrecorded and
whether specified herein or in Exhibit "B," attached hereto, including,
without limitation, all Leases, Subleases, Operating Agreements, Unit
Agreements, Farmout Agreements and Assignments.
5.
Indemnification
5.1 Effective from and after the Effective Date, Assignee shall indemnify,
defend and hold harmless Assignor, its officers, directors, agents,
representatives and employees from and against any and all losses, claims,
suits, controversies, liabilities and expenses arising directly or
indirectly out of Assignee's ownership and use of the Assets and, further,
after the expiration of two (2) years from the date hereof, Assignee shall
indemnify, defend and hold harmless Assignor, its officers, directors,
agents, representatives and employees from and against any and all losses,
claims, suits, controversies, liabilities and expenses without regard to
whether such arise from an incident or condition occurring prior to, or
after, the Effective Date.
5.2 For a period of two (2) years only from the date hereof, Assignor shall
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<PAGE>
indemnify, defend and hold harmless Assignee, its officers, directors,
agents, representatives and employees from and against any and all losses,
claims, suits, controversies, liabilities, and expenses arising directly or
indirectly out of Assignor's ownership and use of the Assets prior to the
Effective Date.
6.
Additional Provisions
6.1 Successors and Assigns All of the provisions hereof shall inure to the
benefit of, and be binding upon, the parties hereto and their respective
heirs, successors and assigns.
6.2 No Third-Party Beneficiaries Subject to the provisions of Article 4.2
hereof, nothing contained in this Agreement is intended or shall be
construed to confer any right or benefit upon any third party.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
this day of January, 1997 but is effective as of the Effective Date.
WITNESSES: ASSIGNOR:
BRECHTEL ENERGY CORPORATION, AGENT AND
ATTORNEY-IN-FACT
By:
PETER P. BRECHTEL, JR., PRESIDENT
WITNESSES: ASSIGNEE:
RIO GRANDE OFFSHORE, LTD.
BY: RIO GRANDE DRILLING
COMPANY, GENERAL PARTNER
By:
GUY BOB BUSCHMAN, PRESIDENT
Signature page to that certain Assignment, Bill of Sale and Conveyance dated
January , 1997 by and between Brechtel Energy Corporation, Assignor, and Rio
Grande Offshore, Ltd., Assignee, conveying Assignor's interests in East
Righthand Creek Field, Allen and Beauregard Parishes, Louisiana.
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<PAGE>
EXHIBIT "D"
Attached to, and made part of, that certain
Purchase and Sale Agreement dated November ,
1996 by and
between Brechtel Energy Corporation, Seller, and Rio
Grande Offshore, Ltd., Buyer.
ESCROW AGREEMENT
This Escrow Agreement is made and entered into this day of November,
1996 by and between BRECHTEL ENERGY CORPORATION, a Louisiana corporation, 19331
North 12th Street, Covington, Louisiana 70433 ("BEC"), BURKS OIL AND GAS
PROPERTIES, INC., a Texas corporation, 14300 Cornerstone Village Drive, Suite
515, Houston, Texas 77014-1251 ("Burks"), RIO GRANDE OFFSHORE, LTD., a Texas
limited partnership, 10101 Reunion Place, Union Square, Suite 210, San Antonio,
Texas 78216-4156 ("Principal") and the GULF SOUTH BANK AND TRUST COMPANY, 313
Westbank Expressway, Gretna, Louisiana 70053 (the "Escrow Agent").
WITNESSETH:
WHEREAS, the Principal has agreed to establish an escrow account with
Escrow Agent on the terms and conditions set forth herein, and Escrow Agent has
agreed to the terms hereof:
NOW, THEREFORE, in consideration of the premises herein, the parties
hereto agree as follows:
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<PAGE>
1. ESTABLISHMENT OF ESCROW FUND. The Principal shall deliver to sum of
Two Hundred Fifty-Five Thousand and No/100 ($255,000.00) Dollars
allocated as between BEC and Burks as follows: BEC $250,000.00, Burks
$5,000.00 (hereinafter referred to collectively as the "Escrow Fund").
The Escrow Agent shall administer the Escrow Fund under these special
terms and conditions: See Exhibit "A," attached hereto and made part
hereof for all purposes.
2. INVESTMENT OF ESCROW FUND. Unless otherwise directed in writing by the
Principal, Escrow Agent shall deposit or invest for the benefit of BEC
and Burks all or any portion of the cash in the Escrow Fund in one or
more, money market funds selected by Escrow Agent. Administrative fees
may be accepted by Gulf South Bank and Trust Company, in its capacity
as Escrow Agent, from such mutual funds companies as a result of
investing trust assets with such companies.
3. TERM OF AGREEMENT. For a period commencing on the date hereof and
terminating no later than March 1, 1997, the Escrow Agent agrees to
hold the Escrow Fund and to disburse the Escrow Fund in accordance
with the terms hereof. If Escrow Agent has not been instructed to
distribute the Escrow Fund on or before March 1, 1997 and no Notice
has been received by Escrow Agent of a dispute concerning distribution
of the Escrow Fund, the Escrow Agent shall turn over the Escrow Fund
to BEC and Burks in accordance with the instructions contained in
Paragraph 1 of said Exhibit "A."
4. DISTRIBUTION OF ESCROW FUND. Escrow Agent shall make distributions
from Escrow Fund only upon single/joint detailed written instructions
in accordance with Exhibit "A," attached hereto.
Distributions shall be made within a reasonable time after Escrow
Agent's receipt of such instructions, taking into account the time
required to liquidate the invested Escrow Fund or a portion thereof.
Specifically, no distribution will be made on the same day notice is
given to Escrow Agent, if said instructions for disbursement are
received after 9:00 A.M.
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<PAGE>
5. AMENDMENTS. This Agreement may be amended, or modified at any time in
any or all respects but only by an instrument in writing executed by
all of the parties hereto.
6. NOTICES. Any notice, delivery, communication, request, reply or advice
(herein collectively, "Notice") in this Agreement provided or
permitted to be given or made by any party to another must be in
writing and may be given or served by depositing the same in the
United States Mail, postage prepaid and registered or certified with
return receipt requested, or by delivering the same to the address of
the person or entity to receive such Notice. Notice deposited in the
mail in the manner hereinabove described shall be effective at the
time of receipt. For purposes of Notice, the addresses of the parties
shall, until changed as hereinafter provided, be as follows:
If to Escrow Agent:
Gulf South Bank and Trust Company
313 Westbank Expressway
Gretna, Louisiana 70053
Attention: Mr. Dean F. Gruder
or at such other address as the Escrow Agent may have advised each of
the parties hereto by Notice in writing:
If to BEC:
Brechtel Energy Corporation
19331 North 12th Street
Covington, Louisiana 70433
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<PAGE>
or at such other address as BEC may have advised each of the parties
hereto by Notice in writing in the manner provided herein:
If to Burks:
Burks Oil and Gas Properties, Inc.
14300 Cornerstone Village Drive, Suite 515
Houston, Texas 77014-1251
or at such other address as Burks may have advised each of the parties
hereto by Notice in writing;
If to Principal:
Rio Grande Offshore, Ltd.
10101 Reunion Place
Union Square, Suite 210
San Antonio, Texas 78216-4156
or at such other address as Principal may have advised each of the
parties hereto by Notice in writing.
7. ESCROW AGENT. Escrow Agent acts hereunder solely as a depository, and
the responsibility of the Escrow Agent extends only to the duties
affirmatively stated in this Agreement and to the exercise of ordinary
diligence. No implied duties or obligations of Escrow Agent shall be
read into this Escrow Agreement, and Escrow Agent shall not in any
event be required to construe or determine the rights of any party
under this Agreement.
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<PAGE>
Escrow Agent shall in no way be responsible for, nor shall it have any
duty to notify, any party hereto or any other party interested in this
Escrow Agreement of any payment required or maturity occurring under
this Escrow Agreement or under the terms of any instrument deposited
hereunder.
Escrow Agent may consult with its attorneys as to any matters
incidental to duties hereunder and shall be fully protected and incur
no liability when acting thereon in accordance with the advice of its
attorneys. Escrow Agent shall not be responsible for any act or
omission, except for actual fraud, dishonesty or bad faith. Escrow
Agent may rely upon any such instructions and deliver the Escrow Fund
as directed without further investigation. Escrow Agent shall be
protected in acting upon any written notice, request, waiver, consent,
certificate, receipt, authorization, power of attorney or other paper
or document that Escrow Agent, in good faith, believes to be genuine
and what it purports to be, including, but not limited to, items
directing investment or non-investment of funds, items requesting or
authorizing release, disbursement or retainage of the subject matter
of Escrow Agreement and items amending the terms of this Escrow
Agreement.
In the event of dispute arising between and/or among any two or more
of the parties hereto, or if a claim is asserted with respect to the
Escrow Fund, the Escrow Agent may withhold any requested action until
the dispute is amicably resolved. In any event, Escrow Agent reserves
the right to deposit all property in its possession in connection with
this Agreement into the registry of a court of competent jurisdiction
in a concursus or other proceeding, upon directing Notice to the
parties as provided hereinabove, and thereby shall be relieved of any
further responsibility under this Agreement. The Escrow Agent shall be
entitled to reimbursement for all legal fees and costs incurred by it
in connection with any concursus, interpleader or other action filed
by Escrow Agent hereunder and in connection with any dispute or claim
involving the distribution of the Escrow Fund.
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<PAGE>
Each person comprising Principal hereby jointly, severally and
solidarily agrees to indemnify and hold harmless the Escrow Agent from
and against all losses, costs, claims, demands, expenses and damages
and attorneys fees suffered or incurred by Escrow Agent as a result of
any litigation or cause of action arising from, or in conjunction
with, this Agreement or involving the subject matter hereof.
If any party to this Agreement is a legal entity other than a natural
person, the Escrow Agent may conclusively presume that the undersigned
representative of such party has full power and authority to instruct
Escrow Agent on behalf of such party, unless written notice to the
contrary is delivered to Escrow Agent.
8. *COMPENSATION, FEES, ETC. Escrow Agent shall be entitled to reasonable
compensation for its services hereunder and to reimbursement for its
costs and expenses in connection with its performance of services
under this Agreement (including amounts representing reasonable fees
and expenses of Escrow Agent's counsel and accountants). Such
compensation, fees, costs and expenses shall be paid from the income
earned on the Escrow Fund, but if such amounts are unpaid, in whole or
in part, the Escrow Agent shall be entitled to deduct such amounts
from the Escrow Fund.
9. ASSIGNMENT. No assignment of the rights of any party to this Agreement
shall be valid and enforceable without the prior written consent of
all of the parties hereto.
10. SUCCESSOR ESCROW AGENT. Escrow Agent may resign at any time by giving
written notice to the other parties hereto, whereupon such parties
agree to immediately appoint a successor escrow agent. Until a
successor escrow agent has been named and accepts its appointment or
until another disposition of the Escrow Fund has been agreed upon by
all parties hereto, Escrow Agent shall be discharged of all of its
duties hereunder save to keep the Escrow Fund whole.
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* Such compensation not to exceed the sum of $1,000.00.
* Such fees not to exceed the sum of $500.00.
12. CONTROLLING LAW. The validity of this Agreement, the construction of
its terms and the determination of the rights and duties of the
parties hereto shall be governed by, and construed in accordance with,
the laws of the State of Louisiana.
WITNESSES: BRECHTEL ENERGY CORPORATION
BY:
BURKS OIL & GAS PROPERTIES, INC.
BY:
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<PAGE>
RIO GRANDE OFFSHORE, LTD.
BY ITS GENERAL PARTNER,
RIO GRANDE DRILLING COMPANY
BY:
GULF SOUTH BANK AND TRUST COMPANY
BY:
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<PAGE>
EXHIBIT "A"
Attached to, and made part of, that certain
Escrow Agreement dated November , 1996 by and
between
Gulf South Bank and Trust Company, Escrow Agent, and
Brechtel Energy Corporation, etal.
DISTRIBUTION OF ESCROW FUNDS
Prior to or on March 1, 1997
1. Escrow Agent shall disburse the Escrow Fund plus all interest accrued
thereto, less the Escrow Agent's fee and reasonable expenses, to the
following parties, if and only if, so directed by Rio Grande
Offshore, Ltd. as represented by its General Partner, Rio Grande
Drilling Company:
Brechtel Energy Corporation $250,000.00 plus interest
attributable thereto.
Burks Oil & Gas Properties, Inc. $5,000.00 plus interest
attributable thereto.
2. Escrow Agent shall disburse the Escrow Fund plus all interest accrued
thereto, less the Escrow Agent's fee and reasonable expenses, to Rio
Grande Offshore, Ltd., if and only if, so directed by Brechtel Energy
Corporation and Burks Oil & Gas Properties, Inc.
3. If the party necessary to give directions to the Escrow Agent fails
to do so, the party claiming the distribution of the Escrow Fund may
provide Escrow Agent with an affidavit claiming such party's right to
such distribution including in such affidavit a statement to the
effect that the claiming party had given the other party five (5)
days prior written notice that the claiming party was preparing to
file such affidavit. In the absence of a written objection delivered
to Escrow Agent by the other party
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<PAGE>
within such five (5) day notice period, Escrow Agent shall distribute
the Escrow Fund to the attesting party in the manner described in
Paragraphs 1 and 2, above, as the case may be.
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IRREVOCABLE POWER OF ATTORNEY
STATE OF LOUISIANA
PARISH OF ORLEANS
KNOW ALL MEN BY THESE PRESENTS, THAT, the following undersigned
parties:
RHC ASSOCIATES, L.L.C., a Louisiana limited liability company,
represented by Peter P. Brechtel, Jr., whose mailing address is 19331 North 12th
Street, Covington, Louisiana 70433;
TEAM AMERICA, represented by John C. Wilshusen, President, whose
mailing address is 5005 Laurel Street, Suite 112, Tampa, Florida 35607;
DOUBLE H ENTERPRISES, INC., a Louisiana corporation, represented by
Hank W. Helmer, President, whose mailing address is Post Office Box 1670,
Gretna, Louisiana 70053;
CIG EXPLORATION, INC., a Louisiana corporation, represented by Arthur
T. Cerniglia, President, whose mailing address is 5321 Janice Avenue, Kenner,
Louisiana 70065;
REVEILLE RESOURCES, INC., a Louisiana corporation, represented by
Michael C. McKeogh, President, whose mailing address is 601 Poydras Street,
Suite 2421, New Orleans, Louisiana 70130;
DONALD H. BURKS, whose mailing address is 15318 Poplar Grove Drive,
Houston, Texas 77068; and
MARY CHASSAIGNAC BURKS, whose mailing address is 15318 Poplar Grove
Drive, Houston, Texas 77068,
collectively, hereinafter referred to as "Principal" or "Principals," do hereby
declare, make, constitute and appoint BRECHTEL ENERGY CORPORATION ("Agent") to
be their true and lawful agent and attorney-in-fact, to act for them and in
their name, place and stead, to execute a Purchase and Sale Agreement and to
appear before any Notary Public and execute an Assignment, Bill of Sale and
Conveyance assigning, conveying, granting and delivering unto RIO GRANDE
OFFSHORE, LTD., with special and limited warranty, all of each Principal's
undivided right, title and interest in and to the Assets as described in that
certain Letter of Intent (the Agreement") dated November 6, 1996 by and between
Brechtel Energy Corporation and Rio Grande Offshore, Ltd., attached hereto as
Exhibit "A," such conveyance to be for a price and on terms substantially the
same as contained in said Agreement.
The Principals further declare that they do hereby authorize the said
Agent to incorporate in said instrument such terms, conditions and agreements as
said Agent shall deem meet and proper in his own sole and uncontrolled
direction, to sign all papers, documents and acts necessary in order to convey
their interest in the above described property, to receive and receipt for the
proceeds thereof and to do any and all things the said Agent, in his sole
discretion, deems necessary or proper in connection therewith to carry out the
intent and purpose of the Agreement.
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The Principals do further declare that they do hereby give and grant
unto Agent, as their agent and attorney-in-fact, full and complete power to
perform any and all acts necessary and proper in the premises as fully and with
the same force and effect as the Principals were they personally present and
acting for themselves, hereby ratifying and confirming all that such Agent shall
lawfully do, or shall have lawfully done, in carrying out the purposes for which
the powers herein described are hereby granted.
Principals acknowledge and understand that Agent is undertaking this
office for purposes of accommodation and convenience, only, in completing the
transaction contemplated by the Agreement and, therefore, Agent shall have no
liability or responsibility whatsoever respecting the transaction, its
consummation, the results emanating therefrom or any financial consequences to
any principal individually, including, without limitation, any federal, state or
local tax consequences arising out of treatment of the contemplated transaction
for tax purposes. Principals, furthermore, hereby indemnify and hold Agent
harmless from any claim for loss, cause of action (even if brought by a member
or members of the group of principals herein appearing) or damages occurring,
directly or indirectly, as a result of the consummation or non-consummation of
the contemplated transaction, including, without limitation, attorney fees,
costs of court and expenses of expert witnesses incurred by Agent in defending
such claims for loss or damage or other causes of action; provided, however,
Principal's indemnification shall not be available to Agent where Agent has
acted with gross negligence or wilful misconduct.
This Irrevocable Power of Attorney may be executed in any number of
counterpart instruments and shall be binding upon each party so executing. The
signature and acknowledgment pages of such instruments may be combined into a
single instrument for purposes of filing same in the public records.
THIS DONE AND PASSED on the day of execution by each principal in the
presence of the undersigned competent witnesses, but effective as of November 1,
1996.
WITNESSES: RHC ASSOCIATES, L.L.C.
BY:
NAME:
TITLE:
DATE:
TEAM AMERICA
BY:
NAME: John C. Wilshusen
TITLE: President
DATE:
E-72
<PAGE>
ENTERPRISES, INC.
BY:
Hank W. Helmer
TITLE: President
DATE:
CIG EXPLORATION, INC.
BY:
NAME: Arthur T. Cerniglia
TITLE: President
DATE:
REVEILLE RESOURCES, INC.
BY:
NAME: Michael C. McKeogh
TITLE: President
DATE:
DONALD H. BURKS
BY:
NAME: Donald H. Burks
DATE:
MARY CHASSAIGNAC BURKS
BY:
NAME: Mary Chassaignac Burks
DATE:
E-73
<PAGE>
STATE OF LOUISIANA
PARISH OF ____________
On this day of November, 1996, before me personally appeared PETER P.
BRECHTEL, JR. to me personally known, who, being by me duly sworn, did say that
he is the representative of RHC ASSOCIATES, L.L.C. and that said instrument was
signed of said corporation by authority of its Board of Directors and said Peter
P. Brechtel, Jr. acknowledged said instrument to be the free act and deed of
said corporation.
NOTARY PUBLIC
STATE OF LOUISIANA
PARISH OF _________________
On this day of November, 1996, before me personally appeared HANK W. HELMER
to me personally known, who, being by me duly sworn, did say that he is the
President of DOUBLE H ENTERPRISES, INC. and that said instrument was signed of
said corporation by authority of its Board of Directors and said Hank W. Helmer
acknowledged said instrument to be the free act and deed of said corporation.
NOTARY PUBLIC
E-74
<PAGE>
STATE OF LOUISIANA
PARISH OF __________________
On this day of November, 1996, before me personally appeared ARTHUR T.
CERNIGLIA to me personally known, who, being by me duly sworn, did say that he
is the President of CIG EXPLORATION, INC. and that said instrument was signed of
said corporation by authority of its Board of Directors and said Arthur T.
Cerniglia acknowledged said instrument to be the free act and deed of said
corporation.
NOTARY PUBLIC
STATE OF LOUISIANA
PARISH OF _________________
On this day of November, 1996, before me personally appeared MICHAEL C.
MCKEOGH to me personally known, who, being by me duly sworn, did say that he is
the President of REVEILLE RESOURCES, INC. and that said instrument was signed of
said corporation by authority of its Board of Directors and said Michael C.
McKeogh acknowledged said instrument to be the free act and deed of said
corporation.
NOTARY PUBLIC
E-75
<PAGE>
STATE OF ___________
COUNTY OF ___________
On this day of November, 1996, before me personally appeared JOHN C.
WILSHUSEN to me personally known, who, being by me duly sworn, did say that he
is the President of TEAM AMERICA and that this instrument was signed in behalf
of said corporation by authority of its Board of Directors and said John C.
Wilshusen acknowledged said instrument to be the free act and deed of said
corporation.
NOTARY PUBLIC
STATE OF TEXAS
COUNTY OF
On this day of November, 1996, before me, the undersigned authority,
personally came and appeared DONALD H. BURKS, to me known to be the person
described in and who executed the foregoing instrument, and acknowledged that he
executed the same as his free act and deed.
NOTARY PUBLIC
STATE OF TEXAS
COUNTY OF
On this day of November, 1996, before me, the undersigned authority,
personally came and appeared MARY CHASSAIGNAC BURKS, to me known to be the
person described in and who executed the foregoing instrument, and acknowledged
that he executed the same as his free act and deed.
NOTARY PUBLIC
E-76
<PAGE>
EXHIBIT "E"
Attached to, and made part of, that certain
Purchase and Sale Agreement dated November ,
1996 by and
between Brechtel Energy Corporation, Seller, and Rio
Grande Offshore, Ltd., Buyer.
The following is stock on hand on a well-by-well basis at 7:00 A.M.,
November 1, 1996:
BARRELS OF OIL
Cavenham Energy Resources #1 517.70
Cavenham Energy Resources #2 711.42
Cavenham Energy Resources #3 544.42
Ragley Lumber Company #1 646.29
Powell Lumber Company #1 275.55
Crosby Land & Resources #1 (Long-String) 647.96
Crosby Land & Resources #1-D (Short-String) 401.64
Ragley Lumber Company #2
(Formerly Ballard-Ragley #1) 120.24
Tank Battery 20.00
TOTAL STOCK ON HAND AT 7:00 A.M.,
NOVEMBER 1, 1996 3,885.22
AVERAGE PRICE OF OIL SOLD FOR OCTOBER 25.038
DOLLAR VALUE OF STOCK ON HAND 97,278.14
LESS SEVERANCE TAX AT 12.42% (12,081.94)
NET VALUE OF STOCK ON HAND 85,196.20
NET REVENUE WORKING INTEREST .729122769
DOLLAR VALUE OF STOCK ON HAND
ATTRIBUTABLE TO W.I. $62,118.49
E-77
<PAGE>
LLC AUTHORITY TO SELL
1. The undersigned hereby certify to RIO GRANDE OFFSHORE, LTD. ("Buyer") and
to its successors and assigns, that:
a. The undersigned are all the members of, and all the parties owning any
interest in, RHC ASSOCIATES, L.L.C. ("L.L.C."), a limited liability
company formed under the laws of the State of Louisiana.
b. The principal office of the LLC is located at 19331 North 12th Street,
Covington, Louisiana 70433.
c. The Articles of Organization (the "Articles" ) of the LLC, dated
January 24, 1996, and the Operating Agreement of the LLC, dated
January 31, 1996, are in full force and effect and have not been
amended or modified as of the date hereof.
d. The LLC's federal employer identification number is 72-1314351.
e. The LLC is composed of the following members:
BRECHTEL ENERGY CORPORATION 34.5284%
19331 North 12th Street
Covington, Louisiana 70433
COASTAL ENERGY CORPORATION 31.1233%
Post Office Box 1670
Gretna, Louisiana 70056
MUD MOTORS, INC. 10.0000%
Post Office Box 1670
Gretna, Louisiana 70056
ATC PROPERTIES, INC. 8.6321%
19331 North 12th Street
Covington, Louisiana 70433
E-78
<PAGE>
MILLER, PATRICK & ROWE, INC. 7.1979%
2439 Manhattan Boulevard, Suite 205
Harvey, Louisiana 70058
AFP EXPLORATION, INC. 2.8794%
3752 Lake Charles Drive
Gretna, Louisiana 70056
SUSAN BRECHTEL 2.8363%
19331 North 12th Street
Covington, Louisiana 70433
RICHARD J. THIBODEAUX 2.8026%
3121 Plymouth Place
New Orleans, Louisiana 70131
2. The undersigned hereby authorize PETER P. BRECHTEL, JR. (the Managing
Partner) for, and on behalf of, the LLC to sell, transfer and convey unto
RIO GRANDE OFFSHORE, LTD., a Texas Limited Partnership, 10101 Reunion
Place, Union Square, Suite 210, San Antonio, Texas 78216, in accordance
with the terms and conditions of that certain Letter of Intent, dated
November 6, 1996, as amended, and a mutually agreeable Purchase and Sale
Agreement, all of the LLC's right, title and interest to the Assets as
defined in said Letter of Intent; which authorization is permitted by, and
effective under, applicable law, the Articles and Operating Agreement.
3. In connection with the authority granted in Article 2, above, the Managing
Partner may make, execute and deliver all acts and execute and deliver all
instruments and other agreements deemed necessary or appropriate by the
Managing Partner, from time to time, in order to carry out the purposes of
this LLC Authority to Sell, including, without limitation, an Irrevocable
Power of Attorney authorizing Brechtel Energy Corporation to act for, and
on behalf of, the LLC in execution of a Purchase and Sale Agreement and a
Conveyance, Assignment and Bill of Sale.
4. The undersigned agree that this LLC Authority to Sell shall remain in full
force and effect until the actual receipt by Buyer of a written notice of
revocation or of a change signed by all of the members of the LLC. IN
WITNESS WHEREOF, we have cause this agreement to be duly executed this day
of November, 1996.
WITNESSES: BRECHTEL ENERGY CORPORATION
By:
PETER P. BRECHTEL, JR., PRESIDENT
E-79
<PAGE>
COASTAL ENERGY CORPORATION
By:
MUD MOTORS, INC.
By:
ATC PROPERTIES, INC.
By:
E-80
<PAGE>
MILLER, PATRICK & ROWE, INC.
By:
AFP EXPLORATION, INC.
By:
SUSAN BRECHTEL
RICHARD J. THIBODEAUX
E-81
<PAGE>
STATE OF LOUISIANA
PARISH OF
On this day of November, 1996, before me personally appeared PETER P.
BRECHTEL, JR. to me personally known, who, being by me duly sworn, did say that
he is the President of BRECHTEL ENERGY CORPORATION and that said instrument was
signed on behalf of said corporation by authority of its Board of Directors and
said Peter P. Brechtel, Jr. acknowledged said instrument to be the free act and
deed of said corporation.
NOTARY PUBLIC
STATE OF LOUISIANA
PARISH OF
On this day of November, 1996, before me personally appeared to me
personally known, who, being by me duly sworn, did say that he is the of COASTAL
ENERGY CORPORATION and that said instrument was signed on behalf of said
corporation by authority of its Board of Directors and said acknowledged said
instrument to be the free act and deed of said corporation.
NOTARY PUBLIC
STATE OF LOUISIANA
PARISH OF
On this day of November, 1996, before me personally appeared to me
personally known, who, being by me duly sworn, did say that he is the of MUD
MOTORS, INC. and that said instrument was signed on behalf of said corporation
by authority of its Board of Directors and said acknowledged said instrument to
be the free act and deed of said corporation.
NOTARY PUBLIC
E-82
<PAGE>
STATE OF LOUISIANA
PARISH OF
On this day of November, 1996, before me personally appeared to me
personally known, who, being by me duly sworn, did say that he is the of ATC
PROPERTIES, INC. and that said instrument was signed on behalf of said
corporation by authority of its Board of Directors and said acknowledged said
instrument to be the free act and deed of said corporation.
NOTARY PUBLIC
STATE OF LOUISIANA
PARISH OF
On this day of November, 1996, before me personally appeared to me
personally known, who, being by me duly sworn, did say that he is the of MILLER,
PATRICK & ROWE, INC. and that said instrument was signed on behalf of said
corporation by authority of its Board of Directors and said acknowledged said
instrument to be the free act and deed of said corporation.
NOTARY PUBLIC
STATE OF LOUISIANA
PARISH OF
On this day of November, 1996, before me personally appeared to me
personally known, who, being by me duly sworn, did say that he is the of AFP
EXPLORATION, INC. and that said instrument was signed on behalf of said
corporation by authority of its Board of Directors and said acknowledged said
instrument to be the free act and deed of said corporation.
NOTARY PUBLIC
E-83
<PAGE>
STATE OF LOUISIANA
PARISH OF
On this day of November, 1996, before me, the undersigned authority,
personally came and appeared SUSAN BRECHTEL, to me known to be the person
described in and who executed the foregoing instrument, and acknowledged that he
executed the same as his free act and deed.
NOTARY PUBLIC
STATE OF LOUISIANA
PARISH OF
On this day of November, 1996, before me, the undersigned authority,
personally came and appeared RICHARD J. THIBODEAUX, to me known to be the person
described in and who executed the foregoing instrument, and acknowledged that he
executed the same as his free act and deed.
NOTARY PUBLIC
E-84
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(This schedule contains summary financial information extracted from
this October 31, 1996 Form 10-QSB)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Jan-31-1997
<PERIOD-END> Oct-31-1996
<CASH> 501399
<SECURITIES> 0
<RECEIVABLES> 848907
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1361997
<PP&E> 11502212
<DEPRECIATION> 3471026
<TOTAL-ASSETS> 10696024
<CURRENT-LIABILITIES> 2443537
<BONDS> 5589769
0
0
<COMMON> 55528
<OTHER-SE> 1520277
<TOTAL-LIABILITY-AND-EQUITY> 10696024
<SALES> 3732930
<TOTAL-REVENUES> 3732930
<CGS> 2937145
<TOTAL-COSTS> 3872045
<OTHER-EXPENSES> 934900
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 488624
<INCOME-PRETAX> (274975)
<INCOME-TAX> 5648
<INCOME-CONTINUING> (280623)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (280623)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
