UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report February 26, 1996
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MAYNARD OIL COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 0-5704 75-1362284
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
8080 N. Central Expressway, Suite 660, Dallas, Texas 75206
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Registrant's telephone number, including area code: (214) 891-8880
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INFORMATION TO BE INCLUDED
IN THE REPORT
Item 2. Acquisition or Disposition of Assets.
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Pursuant to Instruction 6 (ii) of this item, financial
statements for the properties acquired and pro forma financial
information has been attached hereto as set forth in newly added Item
7 below.
Item 7. Financial Statements and Exhibits.
---------------------------------
(a) Financial Statements of business acquired
(1) Report of Independent Accountants
(2) Historical Financial Summaries of The Interests in
the Oil and Gas Revenues and Direct Operating
Expenses of the Properties Acquired by Maynard Oil
Company from Energy Development Corporation for<PAGE>
the year ended December 31, 1994 and the nine
months ended September 30, 1995.
(3) Notes to Historical Financial Summaries of The
Interests in the Oil and Gas Revenues and Direct
Operating Expenses of the Properties Acquired by
Maynard Oil Company from Energy Development
Corporation for the year ended December 31, 1994
and the nine months ended September 30, 1995.
(4) Supplementary Oil and Gas Information (Unaudited)
(b) Pro Forma Financial Information.
-------------------------------
(1) Pro Forma Condensed Consolidated Statement of
Operations (Unaudited) Nine Months Ended September
30, 1995.
(2) Pro Forma Condensed Consolidated Balance Sheet
(Unaudited) September 30, 1995
(3) Pro Forma Condensed Consolidated Statement of
Operations (Unaudited) Year Ended December 31,
1994.
(4) Notes to Pro Forma Condensed Consolidated
Financial Statements (Unaudited)
(5) Supplementary Oil and Gas Information (Unaudited)
Exhibits
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99.1 Purchase and Sale Agreement with Energy
Development Corporation dated November 16, 1995
(together with certain Exhibits and a list briefly
identifying the contents of all omitted exhibits,
schedules and appendices thereto). The Registrant
agrees to provide copies of such omitted exhibits,
schedules and appendices to the Commission upon
request.
Item 7(a), Financial Statements of Business Acquired.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants
Historical Financial Summaries of The Interests
in the Oil and Gas Revenues and Direct Operating
Expenses of the Properties Acquired by Maynard Oil
Company from Energy Development Corporation for the
year ended December 31, 1994 and the nine months
ended September 30, 1995.
Notes to Historical Financial Summaries of The
Interests in the Oil and Gas Revenues and Direct
Operating Expenses of the Properties Acquired by <PAGE>
Maynard Oil Company from Energy Development
Corporation for the year ended December 31, 1994
and the nine months ended September 30, 1995.
Supplementary Oil and Gas Information (Unaudited)
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors
and Shareholders of
Energy Development Corporation
and Maynard Oil Company
We have audited the accompanying historical financial summaries of the
interests in the oil and gas revenues and direct operating expenses of
the properties acquired by Maynard Oil Company from Energy Development
Corporation for the year ended December 31, 1994 and the nine months
ended September 30, 1995. These historical financial summaries are
the responsibility of the Company's management. Our responsibility is
to express an opinion on these historical summaries based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the historical financial
summaries are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the historical financial summaries. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
historical financial summary presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the historical financial summaries of the interests in
the oil and gas revenues and direct operating expenses of the
properties acquired by Maynard Oil Company from Energy Development
Corporation audited by us presents fairly, in all material respects,
the oil and gas revenues and direct operating expenses for those
interests for the year ended December 31, 1994 and the nine months
ended September 30, 1995, in conformity with generally accepted
accounting principles.
PRICE WATERHOUSE LLP
Dallas, Texas
February 8, 1996<PAGE>
HISTORICAL FINANCIAL SUMMARIES OF THE INTERESTS IN THE
OIL AND GAS REVENUES AND DIRECT OPERATING EXPENSES OF THE PROPERTIES
ACQUIRED BY MAYNARD OIL COMPANY FROM ENERGY DEVELOPMENT CORPORATION
(Dollars in Thousands)
Year ended Nine Months ended
December 31, September 30,
1994 1994 1995
(Audited) (Audited) (Unaudited)
Oil and gas revenues $ 4,350 $ 3,808 $ 3,142
Direct operating expenses 1,770 1,161 1,252
Revenues in excess of
direct operating expenses $ 2,580 $ 2,647 $ 1,890
NOTES TO THE HISTORICAL FINANCIAL SUMMARIES OF THE INTERESTS
IN THE OIL AND GAS REVENUES AND DIRECT OPERATING EXPENSES OF THE
PROPERTIES ACQUIRED BY MAYNARD OIL COMPANY FROM
ENERGY DEVELOPMENT CORPORATION
1. Basis of Presentation
The accompanying Historical Financial Summaries represent the
interests in the oil and gas revenues and direct operating expenses of
the oil and gas producing properties acquired by Maynard Oil Company
(Maynard) from Energy Development Corporation (EDC) effective October
1, 1995 for cash consideration of $18.75 million (closing occurred on
December 21, 1995). The producing properties acquired were not
operated by EDC nor will they be operated by Maynard and are located
in the Garza Field of Garza County Texas.
The oil and gas properties acquired were never operated as a
separate division by EDC and, accordingly, full separate, historical
financial statements prepared in accordance with generally accepted
accounting principles (GAAP) do not exist. A practicable
determination of the historical general and administrative expenses
and other indirect expenses which were attributable to the properties
acquired would not be possible or indicative of the level of such
expenses to be incurred by Maynard. The depreciation charges of EDC
associated with the acquired properties would be based upon EDC's
historical costs and are not relevant to the ongoing financial
reporting of Maynard, or related investor decisions, since the
properties will be depreciated over future periods based upon
Maynard's acquisition costs. The presentation herein of historical
financial statements reflecting financial position, results of
operations and cash flows required by GAAP was not practicable in
these circumstances. Accordingly, the Historical Financial Summaries
are presented in lieu of the financial statements required under Rule
3-05 of Securities and Exchange Commission Regulation S-X.
The oil and gas revenues and direct operating expenses shown in
the Historical Financial Summaries may not be representative of future
operations.
2. Oil and Gas Revenues
Oil and gas revenues have been based on realizations at the point
of sale using historical oil and gas prices and the revenue and<PAGE>
working interests purchased by the Company. There were no sales to
affiliated parties.
3. Direct Operating Expenses
Direct operating expenses include those costs incurred by EDC in
respect to production up to the point of sale, including electricity,
fuel, transportation costs, chemicals, other materials and supplies,
and the labor and associated costs of employees working directly on
these properties. These expenses exclude depreciation and
amortization of production facilities and the estimated cost of
abandonment of these facilities. General and administrative expenses
not incurred by the operator are also excluded.
SUPPLEMENTARY OIL AND GAS INFORMATION (Unaudited)
Estimated Net Quantities of Proved Developed and Undeveloped Oil and
Gas Reserves
Proved reserves are estimated quantities of crude oil and natural
gas which geological and engineering data demonstrate with reasonable
certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions. Proved developed
reserves are proved reserves that can be expected to be recovered
through existing wells with existing equipment and operating methods.
The following table presents the estimated net proved developed
oil and gas reserves, estimated by Maynard, attributable to the
properties at October 1, 1995.
Proved Developed Reserves
-------------------------
Crude Oil, Condensate and
Natural Gas Liquids
(Barrels) 2,463,668
Natural Gas
(Thousands of Cubic Feet) (MCF) 357,880
Production volumes for prior periods were added back to the above
referenced reserve amounts to arrive at reserve totals at December 31,
1994, and 1993, respectively. There were no "new discovery"
quantities considered for the referenced disclosure.
Oil Gas
(Barrels) (MCF)
Total as of October 1, 1995 2,463,668 357,880
1995 Production (9 months) 216,195 20,336
Totals as of December 31, 1994 2,679,863 378,216
1994 Production 264,404 18,388
Totals as of December 31, 1993 2,944,267 396,604
SUPPLEMENTARY OIL AND GAS INFORMATION (Unaudited)
(continued)
Standardized Measure of Discounted Future Net Cash Flows Relating to
Proved Reserves
The following table sets forth the computation of the
standardized measure of discounted future net cash flows relating to
proved reserves attributable to the acquired properties, estimated by
Maynard as of October 1, 1995. Future cash inflows represent expected
revenues from production of proved reserves based on October 1, 1995
prices and any fixed and determinable price adjustments provided by
contractual arrangements in existence at that date. Escalation based
on inflation and supply and demand are not considered. Estimated
future production and development costs related to future production
of proved reserves are based on October 1, 1995 costs. Future income
tax estimates are included based on tax rates currently in effect. A
discount rate of 10% is applied to the annual future net cash flows.
The methodology and assumptions used in calculating the
standardized measure are those required by Statement of Financial
Accounting Standards No. 69. This data is not intended to be
representative of the fair market value of the properties' proved
reserves. The valuation of revenues and costs do not necessarily
reflect the amounts to be received or expended. In addition to the
valuations used, numerous other factors are considered in evaluating
known and prospective oil and gas reserves.
As of
October 31
1995
(000's)
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Future cash inflows $ 40,513
Future production costs (17,161)
Future development costs --
Future income tax benefit 535
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Future net cash flows 23,887
Discount at 10 percent (8,428)
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Standardized measure of
discounted future net cash
flows from estimated
production of proved oil
and gas reserves after
income taxes $ 15,459
========
OTHER SUPPLEMENTAL INFORMATION
Maynard utilized almost 47% of its cash at September 30, 1995 to
fund the acquisition of the EDC properties and increased its long term
debt from $13,844,000 to $26,844,000. However, the remaining cash,
almost $6.7 million, is sufficient to cover Maynard's anticipated capital
expenditures and working capital requirements. Also, the anticipated
cash flow from the properties should generate a surplus after debt
service (principal and interest payments) on an annual basis.
MAYNARD OIL COMPANY
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
Effective October 1, 1995, the Company purchased an interest in
approximately 250 producing wells located in Garza County, Texas from<PAGE>
Energy Development Corporation (EDC) for cash consideration of $18.75
million.
The unaudited pro forma condensed consolidated balance sheet of
Maynard Oil Company and Subsidiaries has been prepared as if the
acquisition of these assets occurred on September 30, 1995. The
unaudited pro forma condensed consolidated statements of operations
for the nine months ended September 30, 1995 and for the year ended
December 31, 1994 have been prepared as if the acquisition occurred at
the beginning of the respective periods. The condensed consolidated
pro forma information should be read in conjunction with the notes
thereto. Such pro forma information is not necessarily indicative of
the results which would have actually occurred had the transactions
been in effect on the dates or for the periods indicated or which may
occur in the future.
Item 7(b), Pro Forma Financial Information
INDEX TO PRO FORMA FINANCIAL INFORMATION
Pro Forma Condensed Consolidated Balance Sheet (Unaudited)
September 30, 1995
Pro Forma Condensed Consolidated Statement of Operations
(Unaudited) for the Nine Months Ended September 30, 1995
Pro Forma Condensed Consolidated Statement of Operations
(Unaudited) for the Year Ended December 31, 1994
Notes to Pro Forma Condensed Consolidated
Financial Statements (Unaudited)
Supplementary Pro Forma Oil and Gas Information
(Unaudited)<PAGE>
<TABLE>
MAYNARD OIL COMPANY
Pro Forma Condensed Consolidated Balance Sheet
September 30, 1995
(Unaudited)
<CAPTION>
Historical Pro Forma Pro Forma
Amounts Adjustments(a) Amounts
---------- -------------- -------
(Thousands of
Dollars)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash $12,487 $(5,850) $6,637
Accounts receivable and other
current assets 2,985 -- 2,985
Total current assets 15,472 (5,850) 9,622
Property and equipment, at cost
Oil and gas properties 92,666 18,850 111,516
Other property 823 -- 823
93,489 18,850 112,339
Less accumulated depreciation
and depletion (48,084) -- (48,084)
Net property and equipment 45,405 18,850 64,255
$60,877 $13,000 $73,877
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion, long-term $3,125 1,688 4,813
debt accounts payable, accrued
expenses and other current
liabilities 6,156 -- 6,156
9,281 1,688 10,969
Deferred income taxes 1,883 -- 1,883
Long-term debt 10,719 11,312 22,031
Shareholders' equity
Common stock 489 -- 489
Additional paid-in capital 18,831 -- 18,831
Retained earnings 19,674 -- 19,674
Total shareholders' equity 38,994 -- 38,994
$60,877 $13,000 $73,877
See Notes to Pro Forma Condensed Consolidated Financial Statements.
</TABLE>
<TABLE> MAYNARD OIL COMPANY
Pro Forma Condensed Consolidated Statements of Operations (Unaudited)
For the Nine Months Ended September 30, 1995
<CAPTION>
EDC
Property
Maynard Acquisition
Historical Historical Pro Forma Pro Forma
Amounts* Amounts Adjustments Amounts
(Thousands of Dollars, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales and
royalties $16,398 $ 3,808 $ -- $ 20,206
Costs and expenses:
Operating expenses 6,615 1,161 -- 7,776
Dry holes and abandonments 95 -- -- 95
Lease rentals and seismic 35 -- -- 35
General and administrative 636 -- -- 636
Depreciation and amortization 5,335 -- 1,509 (b) 6,844
12,716 1,161 1,509 15,386
Operating profit (loss) 3,682 2,647 (1,509) 4,820
Other income (deductions) 468 -- (1,030)(c) (562)
Income (loss) before
income taxes 4,150 2,647 (2,539) 4,258
Income tax expense (benefit) 988 -- (157)(d) 831
Net income $ 3,162 $ 2,647 $(2,382) $ 3,427
Weighted average number of
common shares
outstanding 4,890,801 4,890,801
Income per common share:
Income before accounting
change $0.65 $0.70
* Maynard's Historical Statement of Operations for the nine months ended September 30, 1995 has been
adjusted from those amounts disclosed in the Third Quarter 1995 Form 10-Q to include the pro forma
adjustments resulting from properties acquired during March 1995 as reflected on Form 8K dated
June 12, 1995.
See Notes to Pro Forma Condensed Consolidated Financial Statements.
</TABLE>
<TABLE> MAYNARD OIL COMPANY
Pro Forma Condensed Consolidated Statements of Operations (Unaudited)
For the Twelve Months Ended December 31, 1994
<CAPTION>
EDC
Property
Maynard Acquisition
Historical Historical Pro Forma Pro Forma
Amounts * Amounts Adjustments Amounts
(Thousands of Dollars, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales and
royalties $ 22,507 $ 4,350 $ -- $ 26,857
Costs and expenses:
Operating expenses 9,246 1,770 -- 11,016
Dry holes and abandonments 837 -- -- 837
Lease rentals and seismic 332 -- -- 332
General and administrative 921 -- -- 921
Depreciation and amortization 7,842 -- 1,675(b) 9,517
19,178 1,770 1,675 22,623
Operating profit (loss) 3,329 2,580 (1,675) 4,234
Other income (deductions) (695) -- (1,313)(e) 2,008)
Income (loss) before
income taxes 2,634 2,580 (2,988) 2,226
Income tax expense (benefit) 358 -- (361)(d) (3)
Net income $ 2,276 $ 2,580 $ (2,627) $ 2,229
Weighted average number of
common shares outstanding 4,891,592 4,891,592
Income per common share:
Income before accounting
change $0.46 $0.46
* Maynard's Historical Statement of Operations for the twelve months ended December 31, 1994 has
been adjusted from those amounts disclosed in the 1994 Form 10-K to include the pro forma
adjustments of properties acquired during December 1994 and March 1995, as reflected on Form
8K's filed December 22, 1994 and June 12, 1995.
See Notes to Pro Forma Condensed Consolidated Financial Statements.
</TABLE>
MAYNARD OIL COMPANY
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(a) Record the adjusted purchase price as an increase of $18,850,000 to
Oil and Gas Properties consisting of $18,750,000 cash for the
properties and $100,000 of additional expenses incurred to close the
purchase. The $18,750,000 was funded with $5,750,000 of the Company's
cash resources and $13,000,000 in bank financing which was
added to the Company's existing debt. The revised loan agreement
provides for repayment of the loan over a five year period.
(b) Depreciation, depletion and amortization of the Energy Development
Corporation (EDC) Properties determined by using the unit-of-
production method based upon the purchase price.
(c) Recognize interest expense associated with the borrowings incurred to
fund the acquisition at an annual rate of 8.306 percent and the loss
of interest income associated with the cash utilized to fund the
acquisition at an annual rate of 5 percent, which would have been
incurred, if the EDC acquisition had occurred on January 1, 1995.
(d) Record the tax effect, at 34 percent for U.S. Federal income taxes,
of the pro forma adjustments, net income from the EDC properties and
percentage depletion deductions for the respective periods.
(e) Recognize interest expense associated with the borrowings incurred to
fund the acquisition at an annual rate of 7.94 percent, and the loss
of interest income associated with the cash utilized to fund the
acquisition at an annual rate of 4.8 percent, which would have been
incurred, if the EDC acquisition had occurred on January 1, 1994.
PRO FORMA SUPPLEMENTARY OIL AND GAS INFORMATION (Unaudited)
Estimated Net Quantities of Proved Reserves
Proved reserves are estimated quantities of crude oil and natural gas
which geological and engineering data demonstrate with reasonable certainty
to be recoverable in future years from known reservoirs under existing economic
and operating conditions.
The following pro forma historical data as of December 31, 1994 gives
effect to the acquisition of the EDC Properties.
EDC
Properties
Company* (Historical) Pro Forma
PROVED RESERVES
Crude Oil, Condensate and
Natural Gas Liquids
(Barrels) 7,147,465 2,679,863 9,827,328
Natural Gas
(Thousands of Cubic
Feet) (MCF) 21,440,629 378,216 21,818,845
* The Company's proved reserves at December 31, 1994 have been adjusted from
those amounts disclosed in the 1994 Form 10-K to include those proven
reserves acquired during March 1995 as reflected on Form 8K dated
June 12, 1995.
SUPPLEMENTARY OIL AND GAS INFORMATION (Unaudited)
(continued)
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
RELATING TO PROVED RESERVES
The following table sets forth the computation of the standardized
measure of discounted future net cash flows relating to proved reserves,
estimated by the Company as of December 31, 1994. Future cash inflows
represent expected revenues from production of proved reserves based on
December 31, 1994 prices and any fixed and determinable future
escalation provided by contractual arrangements in existence at that date.
Escalation based on inflation and supply and demand are not considered.
Estimated future production and development costs related to future
production of proved reserves are based on December 31, 1994 costs. Future
income tax estimates are included based on tax rates currently in
effect. A discount rate of 10% is applied to the annual future net cash flows.
The methodology and assumptions used in calculating the standardized
measure are those required by Statement of Financial Accounting Standards
No. 69. This data is not intended to be representative of the fair market
value of the properties' proved reserves. The valuation of revenues and
costs do not necessarily reflect the amounts to be received or expended.
In addition to the valuations used, numerous other factors are considered
in evaluating known and prospective oil and gas reserves.
Standardized measure (in thousands of dollars):
EDC
Properties
Company* (Historical) Pro Forma
Future cash inflows $146,865 $45,152 $192,017
Future production costs (72,280) (18,747) (91,027)
Future development costs (2,166) -- (2,166)
Future net cash flows 72,419 26,405 98,824
Future income tax expense (8,117) (266) (8,383)
64,302 26,139 90,441
Discount at 10 percent (20,233) (9,222) (29,455)
Standardized measure of
discounted future net
cash flows from estimated
production of proved oil
and gas reserves after
income taxes $44,069 $16,917 $ 60,986
* The standardized measure presented for the Company has been adjusted
from those amounts disclosed in the 1994 Form 10-K to include the
amounts associated with the reserves acquired in March 1995 as
reflected on Form 8K dated June 12, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
MAYNARD OIL COMPANY
By: /s/ Kenneth W. Hatcher
-------------------------
Kenneth W. Hatcher
Vice President of Finance
Dated: February 28, 1996
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (this "Agreement") dated as
of the 16th day of November, 1995, is between ENERGY DEVELOPMENT
CORPORATION (herein referred to as "Seller") a New Jersey
corporation, and Maynard Oil Company, a Delaware corporation
(herein referred to as "Buyer").
In consideration of the mutual promises and conditions
contained herein, the benefits to be derived by each party
hereunder and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Seller and
Buyer agree as follows:
ARTICLE I
PURCHASE AND SALE
1.01 PURCHASE AND SALE. Subject to the terms and conditions
of this Agreement, Buyer agrees to purchase from Seller and
Seller agrees to sell, transfer, assign and convey to Buyer the
Properties as defined below.
1.02 PROPERTIES. The "Properties" hereunder shall consist
of the following and shall hereafter collectively be referred to
as the "Properties" or individually as the "Property."
(a) All of Seller's undivided right, title and
interest in, to and under the oil and gas leases, and other
agreements, if any, described in Exhibit "A" hereto, together
with all other interests of Seller in and to the lands subject
thereto including, without limitation, fee interests, working
interests, overriding royalty interests, net revenue interests,
carried interests, net profits interests, and any other interests
of a similar nature.
(b) All of Seller's undivided right, title and
interest in and to all Hydrocarbons produced from or allocated to
the Properties after the Effective Time. "Hydrocarbons" shall
mean and include oil, gas well gas, casinghead gas, condensate,
and all components of any of them.
(c) All of Seller's undivided interest in and to all
documents and agreements relating to the Properties, including,
without limitation: leases, operating agreements, processing,
gathering, compression and transportation agreements; joint
venture agreements, farmout agreements, farmin agreements, dry
hole agreements, bottom hole agreements, acreage contribution
agreements, area of mutual interest agreements, salt water
disposal agreements, servicing contracts, easements, surface use
and/or right-of-way agreements, permits, licenses, unitization or
pooling agreements, product purchase and sale agreements and
transportation agreements and all other executory contracts and
agreements relating to the Properties, to the extent that any of
the foregoing relate to periods on and after the Effective Time.
(d) All of Seller's undivided interest in and to all
wells, fixtures, equipment, personal property, gas gathering or
processing systems, gas plants, pipelines and any and all other
fixtures and improvements appurtenant to the Properties or used
in connection therewith.
1.03 EFFECTIVE TIME. The purchase and sale of the
Properties shall be effective as of October 1, 1995, at 7:00
A.M., Central Time (herein called the "Effective Time"). Prior
to the Effective Time, Seller shall have the right to all
revenues resulting from operations performed in connection with
and production from the Properties and shall be obligated for all
liabilities attributable to such operations.
ARTICLE II
PURCHASE PRICE
2.01 PURCHASE PRICE. The purchase price for the Properties
shall be $18,750,000.00 (herein called the "Purchase Price"),
which shall be subject to adjustment as set forth in Section 2.02
below. Contemporaneous with execution of this Agreement, Buyer
shall pay and deliver to Seller by either cashier's check or wire
transfer of cash ten percent (10%) of the above-stated unadjusted
Purchase Price. For purposes of payment of the Purchase Price,
title defects, preferential rights to purchase, and any
adjustments to the Purchase Price as herein provided, and solely
for such purposes, the Purchase Price shall be allocated among
the Properties in those proportions ascribed to such Properties
on Exhibit "C" hereto.
2.02 ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price
shall be adjusted as follows and the resulting amount shall be
herein called the Adjusted Purchase Price :
(a) The Purchase Price shall be adjusted upwards by
the following:
(1) An amount equal to the value of all merchantable oil or
condensate in storage as of the Effective Time that is credited
to the Properties, such value to be the actual price received for
such oil or condensate upon the sale thereof or absent a sale,
then such value shall be based upon the average market price
posted in the area for oil or condensate of similar quality and
grade in effect as of the Effective Time less applicable taxes;
and
(2) An amount equal to the amount of all operating and
capital expenditures (including, without limitation, royalties,
rentals and other charges, ad valorem, property, production,
excise, severance, and any other taxes based upon or measured by
the ownership of property or the production of hydrocarbons or
the receipt of proceeds therefrom and expenses billed under
applicable operating agreements or in the absence of an operating
agreement, those customarily billed under such agreement) paid by
or on behalf of Seller in connection with the operation of the
Properties which are, in accordance with generally accepted
accounting principles, attributable to the period of time after
the Effective Time; and including general and administrative
expenses normally charged in connection with the Properties or
such expenses paid to unaffiliated third parties pursuant to the
terms of applicable joint operating agreements.
(b) The Purchase Price shall be adjusted downwards by
the following:
(1) An amount equal to the amount of proceeds derived from
the sale of Hydrocarbons received by Seller attributable to the
Properties which are, in accordance with generally accepted
accounting principles, attributable to the period of time after
the Effective Time;
(2) An amount equal to all unpaid ad valorem, property,
production, severance and similar taxes and assessments (but not
including income taxes) based upon or measured by the ownership
of property or the production of Hydrocarbons or the receipt of
proceeds therefrom, which taxes or assessments become due and
payable or accrue (but have not yet become due and payable) to
the Properties prior to the Effective Time, which amount shall
where possible be computed based upon the tax rate and values
applicable to the tax period in question; otherwise, the amount
of the adjustment under this paragraph shall be computed based
upon such taxes assessed against the applicable portion of the
Properties for the immediately preceding tax period just ended;
(3) An amount equal to the sum of the Downward Defect
Adjustments provided for in Section 6.05(b); and
(4) An amount equal to the proceeds payable to Seller
allocated to such Properties as herein provided in connection
with the exercise of preferential rights to purchase or similar
rights as provided in Section 6.05(a).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01 REPRESENTATIONS AND WARRANTIES OF SELLER. Seller makes
the following representations and warranties, which shall be true
and correct as of the execution of this Agreement and as of
Closing:
(a) Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the State of New
Jersey and is duly qualified to carry on business in the State of
Texas.
(b) Seller has all requisite power and authority to
carry on its business as presently conducted, to enter into this
Agreement, and to perform its obligations under this Agreement.
Consummation of the transaction contemplated hereby will not
violate any articles of incorporation, bylaws, partnership
agreement or other governing documents of Seller.
(c) The execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly
and validly authorized by all necessary action, corporate or
otherwise, if any, on the part of Seller.
(d) This Agreement has been duly executed and
delivered on behalf of Seller and constitutes a legal, valid and
binding obligation of Seller enforceable in accordance with its
terms.
(e) The consummation of the transactions contemplated
by this Agreement has been duly and validly authorized and will
not violate or be in conflict with, nor trigger default under the
provisions of any agreement or instrument to which Seller is a
party or by which it or the Properties is bound (except any
preferential rights to purchase all or any portion of the
Properties or required consents to transfer described in the
following paragraph), or to the best knowledge of Seller, will
not violate or be in conflict with any material provision of any
judgment, decree, order, statute, rule or regulation applicable
to Seller.
(f) Seller will have obtained by Closing (i) all
prerequisite waivers of preferential rights of purchase or
evidence of proper delivery and receipt of notices of such
preferential rights, evidencing the expiration of the appropriate
election period, and (ii) all necessary consents (in a form
acceptable to Buyer) for transfer of the interests or Buyer and
Seller shall have waived same or adjusted the Sale Price in
accordance with the provisions of Section 6.05.
(g) To the best of Seller's knowledge, no suit, action
or other proceeding is pending before any court, governmental
agency or arbitrator that might result in impairment of Seller's
ownership interest in any of the Properties or that might hinder
or impede the operation of the Properties or that seeks to
restrain or prohibit or to obtain damages from Seller, in respect
of, or which is related to or arises out of, this Agreement or
the consummation of all or part of the transactions contemplated
herein.
(h) To the best of Seller's knowledge, Seller is not
in default of any material provision under any of the contracts,
agreements, leases, documents, or other commitments to which it
is a party or is otherwise bound concerning the Properties.
(i) Except as disclosed on Exhibit "D" hereto, (i)
there are no material outstanding calls for payments which are
due or to which Seller has committed which have not been made;
(ii) there are no material operations under the operating
agreements to which Seller has become a non-consenting party; and
(iii) there are no outstanding proposals involving material
expenditures. For purposes of this subparagraph (l) the term
"material" should mean any call, payment, operation or authority
for expenditures under which Seller's share thereof would be in
excess of $10,000.00 for any single project or related group of
projects.
(j) During the period of time from the Effective Time
to Closing, Seller (i) has not incurred any obligation or
liability with respect to the Properties other than in the
ordinary course of Seller's business; (ii) has not sold,
transferred, mortgaged or otherwise disposed or encumbered any of
the Properties or entered into any transaction, the effect of
which would be to cause Seller's interest therein to be less than
that shown on Exhibit "B" hereto, except as disclosed to Buyer in
writing, if any.
(k) To the best knowledge of Seller, neither this
Agreement, nor any exhibit attached hereto, contains any untrue
statement of fact.
(l) No obligations are pending which relate to the
Properties requiring makeup of gas that is overproduced under
applicable gas balancing agreements or which may entitle
purchasers under production sales contracts in existence as of
the date of this Agreement to recoup or otherwise receive
deliveries of gas after the Effective Time without payment
therefor.
(m) The Properties are conveyed "As Is", "With All
Faults", without any express or implied warranty, including the
Warranty of Merchantability or Fitness for a Particular Purpose,
or any other sort of warranty; except that Seller warrants and
agrees to defend title to the Properties against the lawful
claims of all persons claiming by, through or under Seller, but
not otherwise. However, Buyer shall have the right of full
substitution and subrogation in and to any and all rights and
actions of warranty which Seller may have against any and all
preceding owners or vendors of the Properties. The working
interest and net revenue of Seller in the Properties is set forth
on Exhibit "B" hereto.
(n) To the best of Seller's knowledge and belief,
during the period of Seller's ownership, the Properties have been
operated in compliance with applicable environmental protection
laws and regulations.
(o) Seller is not a foreign person, foreign corporation,
foreign partnership, foreign trust, or foreign estate (as those
terms are defined in the Internal Revenue Code of 1986 as amended
and Income Tax regulations).
Seller shall use all reasonable efforts to assure that
the warranties and representations herein contained are true and
correct as of Closing and will give prompt written notice to
Buyer after execution of this Agreement and prior to Closing of
any matter which affects any warranty or representation herein
contained or which renders such warranty or representation
untrue.
3.02 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer
represents and warrants the following to Seller, which
representations and warranties shall be true and correct as of
the execution of this Agreement and as of Closing:
(a) Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware and is duly qualified to carry on its business in the
State of Texas.
(b) Buyer has all requisite power and authority, to
carry on its business as presently conducted, to enter into this
agreement, to purchase the Properties on the terms described in
this Agreement, and to perform its other obligations under this
Agreement.
(c) The execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly
and validly authorized by all necessary action, on the part of
Buyer.
(d) This Agreement has been duly executed and
delivered on behalf of Buyer and constitutes a legal, valid and
binding obligation of Buyer, enforceable in accordance with its
terms.
(e) The consummation of the transactions contemplated
by this Agreement will not violate, or be in conflict with, the
Articles of Incorporation, bylaws or governing documents of Buyer
or any material provision in any agreement or instrument to which
Buyer is a party or by which it is bound, or, to the best of
Buyer's knowledge, will not violate or be in conflict with any
judgment, decree, order, statute, rule or regulation applicable
to Buyer.
(f) Buyer has incurred no liability, contingent or
otherwise, for brokers' or finders' fees relating to the
transactions contemplated by this Agreement for which Seller
shall have any responsibility whatsoever.
(g) After Closing, Seller will make available and
transfer certain information as provided in Section 9.01 hereof.
Buyer acknowledges that Seller has made no representations or
warranties as to the accuracy of such information, and in
entering into this Agreement, and consummating the transactions
contemplated herein, Buyer will rely solely upon its independent
investigation of, and judgment with respect to, the Properties
and the geologic and geophysical characteristics related thereto.
ARTICLE IV
COVENANTS
4.01 COVENANTS OF SELLER. Seller covenants and agrees with
Buyer that:
(a) After the execution of this Agreement until
Closing, and to the extent within Seller's control, Seller shall
use its reasonable best efforts to cause the Properties to be
maintained and operated in a good and workmanlike manner.
(b) To the extent Seller has actual knowledge thereof,
Seller shall promptly notify Buyer of any suit, action or other
proceeding before any court, arbitrator or governmental agency
and any cause of action which relates to the Properties or which
might result in impairment or loss of Seller's interest in any
portion of the Properties or the value thereof or which might
hinder or impede their operation.
(c) Prior to the Closing Date, Seller shall submit to
Buyer for review and approval, the documents described in Section
8.02 (a) and (b) below.
(d) When Closing occurs, Seller shall duly execute and
deliver all documents and instruments required hereunder which
may be reasonably necessary to convey the Properties to Buyer in
accordance with the provisions hereof.
4.02 COVENANTS OF BUYER. Buyer covenants and agrees with
Seller that:
(a) Buyer shall keep confidential all aspects and
terms of the transactions contemplated by this Agreement and all
information and data concerning the Properties obtained through
Seller in connection with this Agreement and, without the prior
written consent of Seller, shall not disclose such information to
anyone other than its lending institution, gas transmission
companies, officers, employees, agents and representatives, who
shall first agree in writing to be bound by this confidentiality
requirement, except as otherwise required by applicable law. The
aforesaid obligation shall terminate upon Closing.
(b) Buyer shall protect, indemnify and hold Seller
harmless from and against any and all liability arising as a
result of injury or damages (other than as a result of sole
negligence or willful misconduct by Seller) to Buyer, their
employees, agents and affiliates, in connection with the access
of Buyer, its employees, agents and affiliates to the Properties
and records related thereto under this agreement.
(c) To the extent necessary to facilitate the
consummation of the transactions contemplated herein, in addition
to the general assumption by Buyer of the obligations of Seller
attributable to the Properties after the Effective Time contained
in Section 9.08, Buyer agrees to enter into any specific
agreements of assumption with respect to the obligations of
Seller which may be required by third parties or governmental
authorities to the extent such obligations are attributable to
the Properties after the Effective Time.
(d) Promptly after Closing Buyer shall (a) record the
assignments of the Properties executed at the Closing in all
applicable real property records, (b) send notices to vendors
supplying goods and services for the Properties of the assignment
of the Properties to Buyer, and (c) actively pursue all other
consents and approvals that may be required in connection with
the assignment of the Properties to Buyer and the assumption of
the liabilities assumed by Buyer hereunder, and that shall not
have been obtained prior to Closing.
ARTICLE V
ENVIRONMENTAL INSPECTION
5.01 After the execution of this Agreement, Buyer and
its authorized representatives shall have physical access to the
Properties at Buyer's sole cost, risk and expense for the purpose
of inspecting the Properties, conducting such tests, examination,
investigations and assessments as may be reasonable and necessary
or appropriate to evaluate the environmental and physical
conditions of the Properties. Buyer shall obtain permission from
the operators to conduct such inspections. Buyer shall defend
and indemnify Seller from any and all liability, claims, causes
of action, injury to agents or contractors or to Buyer's
property, and/or injury to Seller's property, employees, agents
or contractors which may arise out of Buyer's inspections, but
only to the extent of Buyer's negligence. Buyer agrees to
provide to Seller, upon request, a copy of any environmental
assessments, including any reports, data, and conclusions. Buyer
shall notify Seller in writing at least five (5) working days
prior to the initiation of an environmental assessment in order
that Seller may have a representative present during such
assessment(s). Buyer and Seller shall keep any and all data or
information acquired by all such examinations and results of all
analysis of such data and information strictly confidential and
not disclose same to any person or agency without the prior
written approval of both Buyer and Seller. The foregoing
obligation of confidentiality shall survive Closing or
termination of this Agreement without Closing.
5.02 Not later than twenty (20) days prior to Closing, Buyer
shall notify Seller in writing of any Environmental Conditions of
the Properties that Buyer finds unacceptable. For the purposes
of this Section, such conditions shall be material only if they
will cost in excess of $100,000.00 net to Seller's interest to
cure or remedy. ( Material Adverse Environmental Condition ).
If on the date which is five (5) days prior to Closing
there remain Material Adverse Environmental Conditions which are
unacceptable to Buyer and which will cost an amount in excess of
$500,000.00 to cure or remedy, Buyer shall have the right and
option to elect to:
(a) waive the existence of such conditions and close the
purchase and sale herein provided, or
(b) terminate this agreement.
5.03 If on the date which is five (5) days prior to Closing
there remain Environmental Conditions which are unacceptable to
Buyer and which will cost an amount in excess of $100,000.00, but
not in excess of $500,OOO.00 to cure or remedy, the sale and
purchase herein proviced will be effected and closed in its
entirety and the Sale Price will be reduced by the amount
required to be expended to cure or remedy such conditions.
5.04 If the sale and purchase herein provided is closed,
Buyer expressly agrees to fully and promptly pay, perform and
discharge, defend, indemnify and hold harmless Seller, its parent
corporation, their subsidiaries and affiliates, and their
respective directors, officers, agents and employees from and
against any claim, demand, action or suit, loss, cost, damage,
fine, penalty or expense (including reasonable attorney's fees)
resulting from any Environmental Claim arising out of any
operations conducted, commitment made or any action taken or
omitted by Seller at any time with respect to the Properties
(including but not limited to business operations, transactions
or conduct of the business directly or indirectly related
thereto). For purposes of this paragraph, "Environmental Claim"
shall mean any claim, demand, cause of action asserted by any
governmental agency or any person, corporation or other entity
for personal injury (including sickness, disease or death),
property damage or damage to the environment resulting from the
discharge or release of any chemical, material or emission into
one or more of the environmental media at or in the vicinity of
the Properties.
In the event Buyer and Seller must resolve disputes
regarding the cost to cure or remedy a Material Adverse
Environmental Condition under ARTICLE V hereof, the parties shall
jointly select a mutually acceptable environmental consulting
firm to act as the sole arbitrator. The decision of the third
party arbitrator shall be binding upon Buyer and SEller, and may
be enforced in any court of competent jurisdiction. Seller and
Buyer, respectively, shall bear their own legal fees and other
costs incurred in presenting their respective cases. The charges
and expenses of the third party arbitrator shall be shared
equally by Seller and Buyer. In the event Seller and Buyer
cannot agree upon an environmental consulting firm, then either
Seller or Buyer, or both parties may in writing request the
American Arbitration Association to appoint a qualified
arbitrator.
ARTICLE VI
TITLE MATTERS
6.01 GOOD AND DEFENSIBLE TITLE.
(a) As used herein, the term Good and Defensible
Title shall mean as to each of the Properties, such title, held
by Seller, or by a third party for the benefit of Seller which,
subject to and except for the Permitted Encumbrances (as
hereinafter defined): (i) entitles Seller to receive, and after
Closing shall entitle Buyer to receive, not less than the Net
Revenue Interest set forth in Exhibit "B" for the Properties or
in any unit to which such Properties are contributed; (ii) is
free and clear (except for Permitted Encumbrances) of liens,
encumbrances, obligations or defects which arise as a result of
actions taken (or effective) at or prior to the Effective Time;
and (iii) obligates Seller to bear a percentage of the costs and
expenses relating to the maintenance, development and operation
of each Property and wells associated therewith in an amount not
greater than the "Working Interest" set forth in Exhibit "B".
(b) As used herein, the term "Permitted Encumbrances",
shall mean:
(1) lessor's royalties, overriding royalties, net profits
interests, and division orders covering Hydrocarbons,
reversionary interests and similar burdens if the net cumulative
effect of such burdens does not operate to reduce the interest of
Seller in any Property to less than that set forth in Exhibit
"B";
(2) preferential rights to purchase and required third
party consents to assignments and similar agreements with respect
to which (i) waivers or consents are obtained from the
appropriate parties; (ii) the appropriate time period for
asserting such rights has expired without an exercise of such
rights; or (iii) Buyer has agreed to treat such rights as
"Permitted Encumbrances";
(3) materialman's, mechanic's, repairman's, employee's,
contractor's, operator's, tax and other similar liens or charges
arising in the ordinary course of business (i) if they have not
been filed pursuant to law; (ii) if filed, they have not yet
become due and payable or payment is being withheld as provided
by law; (iii) if they are against a Property in which Seller owns
only an undivided interest, then in such a proportion as is owned
other than by Seller; (iv) if their validity is being contested
in good faith by appropriate action; provided, however, that
nothing contained in this subparagraph (3) shall be construed to
abrogate or limit Seller's obligations, as set forth in Section
9.04, to pay all valid operating and capital expenditures
incurred in connection with the Properties which are, in
accordance with generally accepted accounting principles,
attributable to the period of time prior to the Effective Time;
(4) all rights to consent by, required notices to, filings
with, or other actions by governmental entities in connection
with the sale or conveyance of oil and gas leases or interests
therein, if the same are customarily obtained subsequent to such
sale or conveyance;
(5) conventional rights of reassignment arising upon a
decision or election by the owner of the Properties to surrender
or abandon all or any portion of the Properties either by an
express election or as a result of any other election where such
a result arises under the applicable contract;
(6) easements, rights-of-way, servitudes, permits, surface
leases and other rights in respect of surface operations;
(7) such Title Defects or other defects as Buyer has waived
or released or is deemed to have waived or released pursuant to
the terms of this Agreement including, without limitation,
Section 6.03 hereof;
(8) liens and mortgages to be released at Closing, if any;
(9) the terms and conditions of all leases, agreements,
orders, instruments, documents and other matters described or
referred to in this Agreement or Exhibits hereto;
(10) rights reserved to or vested in any municipality or
governmental, statutory or public authority to control or
regulate any of the Properties in any manner, and all applicable
laws, rules and orders of governmental authority.
6.02 CASUALTY LOSS. If, prior to the Closing, all or any
portion of the Properties are destroyed by fire or other casualty
or shall be taken by condemnation or under the right of eminent
domain (all of which are herein called "Casualty Loss"), Buyer
may elect: (i) to treat the Casualty Loss as a Title Defect in
accordance with Sections 6.04 and 6.05; or (ii) to purchase such
Property notwithstanding any such destruction or taking (without
reduction of the Purchase Price) in which case Seller shall, at
the Closing, pay to Buyer all sums paid to Seller by third
parties by reason of the destruction or taking of such Property
and shall assign, transfer and set over unto Buyer all of the
right, title and interest of Seller in and to any unpaid proceeds
or other payments from third parties arising out of such
destruction or taking. Prior to Closing, Seller shall not
voluntarily compromise, settle or adjust any amounts payable by
reason of any Casualty Loss without first obtaining the written
consent of Buyer.
6.03 NOTICE OF TITLE DEFECT. The term "Title Defect" as
used herein shall mean any encumbrance, encroachment,
irregularity, defect in or objection to Seller's title to the
Properties (expressly excluding Permitted Encumbrances) that
alone or in combination with other defects renders Seller's title
to such Properties less than Good and Defensible Title (and shall
include any Casualty Loss treated as a Title Defect pursuant to
Section 6.02 above), provided that as to the particular Property
affected, the alleged Title Defect has a negative economic impact
of at least Ten Thousand Dollars ($10,000) Buyer shall notify
Seller in writing of any Title Defect on or before December 6,
1995. Such notice of Title Defect shall include (i) a
description of the Properties affected by the Title Defect, (ii)
the basis for determining a Title Defect exists, (iii) the amount
by which Buyer believes the value of each such Property has been
reduced as a result of the Title Defect. Buyer shall have the
right to waive any Title Defect of which it has previously
provided timely notice to Seller hereunder.
6.04 REMEDIES FOR TITLE DEFECT. If Buyer timely notifies
Seller of a Title Defect, Seller shall have the right, but not
the obligation, for a period of five (5) working days following
expiration of the notice period provided for by Section 6.03
above to elect to cure the Title Defect; or in the alternative,
and at its option, to elect to reduce the Purchase Price in the
manner provided in Section 6.05. Seller shall notify Buyer
prior to the expiration of said five (5) day period of Seller's
election to attempt to cure the Title Defect or to reduce the
Purchase Price in the manner provided in Section 6.05. Such
notice shall be in writing and shall state whether Seller agrees
with the value attributed to the Title Defect as set forth in
Buyer's notice or, if not, the value which Seller attributes to
such Title Defect.
6.05 VALUE OF TITLE DEFECTS. If Seller is unable or elects
not to cure a Title Defect, and such Title Defect has not been
waived by Buyer or deemed to have been waived by Buyer pursuant
to Section 6.04, then the Purchase Price shall be adjusted by the
amount attributable thereto as set forth below:
(a) If the Title Defect is a preferential right to
purchase or similar right ( preferential right ) which has been
exercised, or where the holder thereof has notified Seller prior
to Closing of its intent to exercise such right, the affected
Property shall be excluded from the Properties and the Purchase
Price shall be reduced by the amount of proceeds payable to
Seller by such holder in connection with the exercise of such
preferential rights. If such amount is not known with certainty
at the time of Closing, Seller shall in good faith estimate such
amount. Thereafter, any necessary adjustment based upon the
proceeds actually received by Seller upon consummation of the
transaction shall be accounted for in the Post-Closing
Adjustments pursuant to Section 9.02. If the holder of such
right fails to consummate the purchase of the Property, then
Seller shall convey such Property to Buyer and Buyer shall pay to
Seller the amount by which the Purchase Price was reduced, which
payment shall be accounted for in the Post-Closing Adjustments
pursuant to Section 9.02.
(b) With respect to all other Title Defects (Downward
Defect Adjustments), the affected Property shall be sold to Buyer
hereunder with the Purchase Price reduced by the value of the
Title Defects. The amount of each such Downward Defect
Adjustment shall be determined as follows:
(i) Where Seller agrees with the value of the Title Defect
as set forth in Buyer's notice, that value shall be the amount of
the Downward Defect Adjustment.
(ii) If the Title Defect is a lien, encumbrance or other
charge upon a Property which is undisputed and liquidated in
amount, then the Downward Defect Adjustment shall be the amount
necessary to be paid to the obligee to remove the Title Defect
from the affected Property reduced proportionately to the
interest of Seller in the affected Property.
(iii) If the Title Defect represents an obligation,
encumbrance, burden or charge upon the affected Property for
which the economic detriment to Buyer is not undisputed and
liquidated, the parties shall enter into good faith negotiations
and shall attempt to agree upon the amount of the Downward Defect
Adjustment. Where the parties do not reach agreement within five
days after Buyer's receipt of Seller's notice provided for above,
the affected Property shall be excluded from the Properties, and
the Purchase Price shall be reduced by the Allocated Value of the
excluded Property.
(iv) In the event the net amount of downward adjustments
so made because of Title Defects to the Purchase Price exceeds
twenty percent (20%) of the Purchase Price, then Seller or Buyer
may, upon written notice to the other, cancel this Agreement and
the same shall be of no further force and effect and in such
event Seller shall promptly refund to Buyer the ten percent (10%)
of the Purchase Price paid under 2.01 without interest.
ARTICLE VII
CONDITIONS TO CLOSING
7.01 SELLER'S CONDITIONS. The obligations of Seller at
Closing are at its option subject to the satisfaction at or prior
to Closing of the following conditions:
(a) All representations and warranties of Buyer
contained in this Agreement shall be true in all respects at and
as of Closing, and Buyer shall have performed in all respects the
agreements and covenants required by this Agreement to be
performed and satisfied by Buyer at or prior to Closing.
(b) The execution, delivery and performance of this
Agreement and the transactions contemplated hereby shall have
been duly and validly authorized by all necessary action,
partnership or otherwise.
(c) No action or proceeding shall have been
instituted before any court, governmental agency, or arbitrator
to restrain or prohibit the consummation in whole or in part of
the transactions contemplated herein, or to obtain damages from
Seller in respect of, or which is related to or arises out of
this Agreement.
(d) Seller shall have received a certificate dated as
of Closing, executed by a duly qualified officer of Buyer to the
effect that the statements made under Section 3.02 hereof are
true at and as of Closing, along with a certificate of incumbency
for such officer.
7.02 BUYER'S CONDITIONS. The obligations of Buyer at
Closing are subject, at the option of Buyer, to the satisfaction
at or prior to Closing of the following conditions:
(a) All representations and warranties of Seller
contained in this Agreement shall be true in all material
respects at and as of the Closing, and Seller shall have
performed in all material respects the agreements and covenants
required by this Agreement to be performed and satisfied by
Seller at or prior to Closing.
(b) The execution, delivery and performance of this
Agreement and the transactions contemplated thereby have been
duly and validly authorized by all necessary action, corporate or
otherwise, on the part of Seller.
(c) No action or proceeding shall have been instituted
before any court, governmental agency or arbitrator to restrain
or prohibit the consummation in whole or in part of the
transactions contemplated herein, or to obtain damages from Buyer
in respect of, or which is related to, or arises out of this
Agreement.
(d) Buyer shall have had reasonable access during
regular business hours to all data and records obligated to be
provided Buyer in Section 9.01 hereof.
(e) Buyer shall have received a certificate dated as
of Closing, executed by a duly qualified officer of Seller to the
effect that the statements made under Section 3.01 hereof are
true at and as of Closing, along with a certificate of incumbency
for such officer.
(f) Seller shall have obtained and delivered to Buyer
(i) all requisite waivers of preferential rights of purchase and
(ii) all necessary consents for transfer of the Properties,
except those which by their nature cannot be requested or
obtained until after Closing, or the Purchase Price shall have
been adjusted as provided for herein, or as waived by Buyer in
writing.
ARTICLE VIII
CLOSING
8.01 DATE OF CLOSING. The purchase by Buyer and the sale by
Seller of the Properties as contemplated by this Agreement
(herein called the "Closing") shall take place on or before the
20th day of December, 1995 at the offices of Seller or such other
time or place as the parties may agree upon.
8.02 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 an individual assignment, bill of sale and conveyance of
all of Seller's right, title and interest in each of the
Properties in sufficient counterparts to facilitate recording.
The form and substance of said instrument is set forth in Exhibit
"E" hereof.
(b) With respect to matters that can be determined as
of Closing, Seller and Buyer shall execute and deliver a
settlement statement (herein called the "Preliminary Settlement
Statement") that shall set forth the Closing Amount (as
hereinafter defined) and each adjustment and the calculation of
such adjustments used to determine such amount. The term
"Closing Amount" shall mean the Purchase Price adjusted as
provided in Section 2.02, using for such adjustments the best
information then available. All other adjustments to the
Purchase Price shall be taken into account in the Final
Settlement Statement provided for by Section 9.02.
(c) Buyer shall deliver to Seller in accordance with
Seller's written instructions, which are to be provided Buyer at
least three (3) days prior to Closing, an amount equal to the
Closing Amount. Seller's instructions shall provide the manner
of payment, which shall at Seller's option be either by certified
check, cashier's check, direct bank or wire transfer, and shall
specify depository requirements.
(d) Seller shall execute Letters in Lieu of Transfer
or Division Orders on forms prepared by Buyer and reasonably
satisfactory to Seller directing all purchasers of production to
make payment to Buyer of proceeds attributable to production from
the Properties on and after the Effective Time.
(e) Seller shall execute and deliver to Buyer non-foreign
affidavits in compliance with Section 1445 of the Internal
Revenue Code of 1986.
ARTICLE IX
POST-CLOSING RIGHTS AND OBLIGATIONS
9.01 Within five (5) working days after Closing, Seller
shall permit Buyer to take possession, at Buyer's cost and
expense, of all original files, records and data relating to the
Properties in Seller's possession and control (except accounting
records for transactions prior to the Closing Date), wherever
located, including, without limitation, title records (including
abstracts of title and title curative documents) contracts,
correspondence, production records, electric logs, core data,
pressure data and decline curves and graphical production curves,
and all related records and data. As regards such retained
accounting records, Seller shall make available to Buyer such
records for inspection and copying during normal business hours.
From time to time as requested by Seller, Buyer shall make such
files, records and data available to Seller for inspection and
copying during normal business hours, together with such
additional files, data and records of Buyer as may be required by
Seller in order to pursue any claims, obligations and disputes
relating to the Properties.
9.02 POST-CLOSING ADJUSTMENTS. Within ninety (90) days
after Closing, Buyer and/or Seller shall prepare and deliver a
statement (herein called the Final Settlement Statement )
setting forth each adjustment to the Purchase Price that was not
finally determined as of the Closing and showing the calculation
of such adjustments. As soon as practicable after receipt of the
Final Settlement Statement, each party shall deliver to the other
a written report containing any changes that Buyer or Seller
proposes be made to the Final Settlement Statement. The parties
shall negotiate in good faith and undertake to agree with respect
to the amounts due pursuant to such post-Closing adjustment no
later than ten days after Buyer's submission of its written
report hereunder to Seller. The date upon which such agreement
is reached or upon which the Adjusted Purchase Price is
established, shall be herein called the Final Settlement Date.
In the event that (1) the Adjusted Purchase Price is more than
the Closing Amount, Buyer shall pay to Seller in immediately
available funds the amount of such difference, or (2) the
Adjusted Purchase Price is less than the Closing Amount, Seller
shall pay to Buyer in immediately available funds the amount of
such difference to Buyer.
9.03 SUBSEQUENT ADJUSTMENTS. As set forth in Section 1.03,
Buyer is entitled to all proceeds attributable to the Properties
from and after the Effective Time and Seller is entitled to all
proceeds attributable to the Properties prior to the Effective
Time. Similarly, all operating and capital expenditures incurred
in connection with the Properties which are in accordance with
generally accepted accounting procedures attributable to the time
prior to the Effective Time (with the exception of those
obligations expressly assumed by Buyer pursuant to Section 9.07)
are the obligations of Seller and all such operating and capital
expenditures attributable to the time after the Effective Time,
together with those obligations expressly assumed by Buyer
pursuant to Section 9.07, are the obligations of Buyer. Buyer
and Seller recognize that subsequent to the Final Settlement Date
provided for in Section 9.02, either Buyer or Seller may from
time to time receive monies which belong to the other or pay
monies due which belong to the other. In such event, the
receiving party shall promptly pay over such monies to the party
entitled to the same. If payment is made of expenses which are
the obligation of the other, the paying party shall invoice the
other for the expenses paid and the invoiced party shall pay the
amount due within 30 days of receipt of said invoice.
9.04 RESERVATION OF CLAIMS. Seller shall be entitled to all
amounts payable with respect to reimbursement of prepaid
expenses, and settlements or judgments of claims, obligations or
disputes related to the Properties which arise, accrue or relate
to events occurring prior to the Effective Time, regardless of
when such amount is finally paid, and Seller hereby expressly
reserves all rights with respect thereto. Buyer shall be
entitled to all amounts payable with respect to claims,
obligations or disputes which arise, accrue or relate to events
occurring after the Effective Time. Where any settlement or
resolution of a claim reserved hereunder by Seller results in
Sellers' acquisition of title to properties which acquisition
arises out of or is related to Seller's ownership of the
Properties covered by this Agreement, Seller shall convey such
title to Buyer without warranty of title express or implied,
effective as of the Effective Time or the effective date of the
acquisition, whichever is later. Buyer and Seller agree to
cooperate fully with each other to protect and preserve all such
claims reserved hereunder.
9.05 SALES AND USE TAXES AND RECORDING FEES. The parties
believe that this sale is exempt from sales tax. If, however, a
determination is ever made that a sales tax or other transfer tax
applies, Buyer shall be liable for such tax. Buyer shall be
liable for any applicable conveyance, transfer and recording
fees, and real estate transfer stamps or taxes imposed on any
transfer of Property pursuant to this Agreement. Buyer shall
defend and hold Seller harmless with respect to the payment of
all sales or other transfer tax, if any, in connection with the
transactions contemplated by this Agreement, including, without
limitation, any interest or penalties assessed thereon. Buyer
shall defend and hold Seller harmless with respect to the payment
of all conveyance, transfer and recording fees and real estate
transfer stamps or taxes, if any, imposed on any transfer of
property pursuant to this Agreement, including any interest or
penalties assessed thereon.
9.06 FURTHER ASSURANCES. After Closing, Seller and Buyer
shall execute, acknowledge and deliver or cause to be executed,
acknowledged and delivered such instruments and take such other
action as may be necessary or advisable to carry out their
obligations under this Agreement and under any document,
certificate or other instrument delivered pursuant hereto.
9.07 ASSUMPTION OF OBLIGATIONS. At Closing, Buyer shall
assume (a) the obligation to (i) plug and abandon or remove and
dispose of all wells, structures, flow lines, pipelines, and the
other equipment now or hereafter located on the Properties, (ii)
cap and bury all flow lines and other pipelines now or hereafter
located on the Properties and (iii) dispose of naturally
occurring radioactive material and all other pollutants, wastes,
contaminants, or hazardous, extremely hazardous, or toxic
materials, substances, chemicals or wastes now or hereafter
located on the Properties; (b) all obligations and liabilities
arising from or in connection with any gas production pipeline,
storage, processing or other imbalance attributable to substances
produced from the Properties, whether before, on or after the
Effective Time; and (c) all other costs, obligations and
liabilities that arise under the Properties or otherwise relate
to the Properties and, in each case, arise from or relate to
events occurring or conditions existing on or after the Effective
Time or accrue after the Effective Time. All such plugging,
replugging, abandonment, removal, disposal, and restoration
operations shall be in compliance with applicable laws and
regulations and contracts, and shall be conducted in a good and
workmanlike manner.
9.08 INDEMNIFICATION. Except with respect to Title Defects
and the obligations assumed by Buyer pursuant to Section 9.07 or
obligations which are expressly excluded from Seller's
indemnification hereunder, and as to which Buyer hereby releases
Seller, Seller shall indemnify and hold harmless Buyer with
respect to all claims, obligations, liabilities, losses or
damages, costs or expenses (including, without limitation, all
attorney fees, including trial and appeal) arising out of the
ownership or operation of the Properties by Seller prior to the
Effective Time hereof. Buyer shall indemnify and hold harmless
Seller with respect to all duties, liabilities and obligations
expressly assumed by Buyer and with respect to all claims,
obligations, liabilities, losses, damages, costs or expenses
(including, without limitation, all attorney fees, including
trial and appeal) arising out of the ownership or operation of
the Properties after the Effective Time.
To the extent of the working interest herein conveyed,
Seller shall be responsible for any and all liabilities, claims,
causes of action and damages arising out of the production or
sale of production from the Properties or the leases and the
proper accounting or payment of proceeds of production to royalty
owners and working interest owners therein, insofar as such
liabilities, claims, causes of action and damages relate to or
arise out of actions of Seller or Seller's agents prior to the
Effective Date and shall defend, indemnify and hold Buyer
harmless from and against all such claims. Buyer shall be
responsible for all of said types of claims insofar as they
relate to periods of time from and after the Effective Time and
shall defend, indemnify, and hold Seller harmless therefrom.
Buyer shall not be entitled to assert the right to
indemnification hereunder or to otherwise seek any damages or
other remedies for or in connection with (a) the inaccuracy of
any representations of Seller contained in this Agreement or in
any other agreement, instrument, document or certificate executed
or delivered in connection with this Agreement; (b) the breach
of, or failure to perform or satisfy any of the covenants of
Buyer set forth in this Agreement or in any other agreement,
instrument, document or certificate executed or delivered in
connection with this Agreement; or (c) any liabilities otherwise
arising in connection with or with respect to the transactions
contemplated in this Agreement until the aggregate amount of the
Liabilities for such misrepresentations and breaches actually
suffered by Buyer exceed three percent of the Purchase Price, and
then only to the extent of such excess. In no event, however,
shall Seller be required to indemnify Buyer or pay any other
amount in connection with or respect to the transactions
contemplated in this Agreement in any amount exceeding in the
aggregate twenty-five percent (25%) of the Adjusted Purchase
Price.
ARTICLE X
TERMINATION OF AGREEMENT
10.01 TERMINATION. This Agreement and the transactions
contemplated hereby may be terminated in the following instances:
(a) By Seller if the conditions set forth in Section
6.01 are not satisfied in all material respects or waived as of
the Closing.
(b) By Buyer if the conditions set forth in Sections
6.02 are not satisfied in all material respects or waived as of
the Closing.
(c) At any time by the mutual written agreement of
Buyer and Seller.
10.02 DEFAULT. Should Buyer default in a material way,
including but not limited to Buyer's absence at the designated
time for Closing, Seller shall have the right to retain the ten
percent payment under Section 2.01 hereof as minimum liquidated
damages in addition to all of its other rights at law or in
equity, including, without limitation, the right to specific
performance and/or to any actual damages which Seller may suffer
in excess of the amount of the ten percent payment. Further,
Seller shall be free immediately to sell the Properties to any
third party without any restriction under or by reason of this
Agreement.
ARTICLE XI
MISCELLANEOUS
11.01 NOTICES. All notices and communications required
or permitted under this Agreement shall be sufficiently given,
effective upon receipt, if personally delivered in writing or if
mailed by registered or certified mail, postage prepaid, or if
communicated by telegram or telecopy, if directed to the parties
addressed as follows:
Seller: Energy Development Corporation
1000 Louisiana, Suite 2900
Houston, Texas 77002
Attn: Ershel C. Redd, Jr.
Vice President, Commercial Operations
Telephone: (713)750-7531
Telecopy: (713)750-7583
Buyer: Maynard Oil Company
8080 N. Central Expressway
Suite 660
Dallas, Texas 75206
Attn: Glenn R. Moore, President
Telephone: (214) 891-8880
Telecopy: (214) 891-8827
Provided, however, that any notice required or permitted under
this Agreement will be effective if given verbally within the
time period provided, so long as such verbal notice is followed
by written notice thereof in the manner herein provided within
twenty-four hours following the end of such time period. Any
party may, by written notice so delivered to the others, change
the address or individual to which delivery shall thereafter be
made.
11.02 AMENDMENTS. Except as otherwise provided herein,
this Agreement may be amended or modified at any time and in all
respects, or any provision may be waived, only by an instrument
in writing executed by Buyer and Seller in the case of amendment
or modification, or, in the case of a waiver, by a written
instrument executed by the party to whom the obligation was owed.
11.03 ASSIGNMENT. Neither Buyer nor Seller may assign
all or any portion of its rights or delegate all or any portion
of its duties hereunder without the prior written consent of the
other party.
11.04 TABLE OF CONTENTS/HEADINGS. 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.
11.05 GOVERNING LAW. THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY SHALL BE CONSTRUED IN ACCORDANCE
WITH, AND GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF TEXAS.
11.06 ANNOUNCEMENTS. Seller and Buyer shall consult
with each other with regard to all press releases and other
announcements issued at or prior to the Closing concerning this
agreement or the transaction contemplated hereby and except as
may be required by applicable laws or the applicable rules or
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.
11.07. ENTIRE AGREEMENT. This Agreement 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, whether oral or written.
11.08. PARTIES IN INTEREST. This Agreement shall be
binding upon, and shall inure to the benefit of, the parties
hereto and, except as otherwise prohibited, their respective
successors and assigns; and nothing contained in this Agreement,
express or implied, is intended to confer upon any other person
or entity any benefits, rights or remedies.
11.09 WAIVER. The failure of a party hereto to insist
on the strict performance of any provision of this Agreement or
to exercise any right, power or remedy upon a breach thereof
shall not constitute a waiver of any provisions of this Agreement
or limit the party's right thereafter to enforce any provision or
exercise any right.
11.10 SURVIVAL. After Closing, any assertion by Buyer
that Seller is liable (a) for the inaccuracy of any
representation or warranty, (b) for the breach of any covenant,
(c) for indemnity under the terms of this Agreement or (d)
otherwise in connection with the transaction contemplated in this
Agreement, must be made by Buyer in writing and must be given to
Seller on or prior to eighteen (18) months from the date of
Closing.
11.11 EXHIBITS AND SCHEDULES. All Exhibits and
Schedules attached to or referred to in this Agreement are
incorporated into and made a part of this Agreement.
IN WITNESS WHEREOF, Buyer and Seller have executed this
Agreement the date and year written above.
SELLER:
ENERGY DEVELOPMENT CORPORATION
By:_____________________________
Malcolm Butler
President and Chief Operating Officer
BUYER:
MAYNARD OIL COMPANY
By:___________________________
Glenn R. Moore
President
EXHIBIT A
OIL AND GAS LEASES
Intentionally Omitted
Buyer will provide a copy of Exhibit A upon request.
EXHIBIT B
SELLER'S INTERESTS IN CERTAIN PROPERTIES
Intentionally Omitted
Buyer will provide a copy of Exhibit B upon request.
EXHIBIT C
Attached to and made a part of that certain Purchase and
Sale Agreement dated November 16, 1995 between Energy Development
Corporation and Maynard Oil Company.
Property Description Allocated Value
-------------------- ---------------
City of Post SA A WF Unit 1 $ 780,000
Garza Glorieta South Deep Unit 917,000
Garza San Andres Deep Unit 4,929,000
Hair Jack 1, 2, 3, 4, 7 1,000
Kennedy 1 (RRC #63754) 1,000
Kennedy #2 1,000
Montgomery - Davies H 1,000
Post Estate (RRC #01873) 1,731,000
Post Estate D (RRC #01899) 156,000
Post- Montgomery Unit 1 5,383,000
Stoker K (RRC #01876) 697,000
West City of Post SA Unit A 4,153,000
-----------
Total Value $18,750,000
EXHIBIT D
Attached To and Made Part Of That Certain
Purchase and Sale Agreement Dated
November 16, 1995, Between Energy Development
Corporation and Maynard Oil Company
EDC's Share of
EDC AFE No. Property Type of Work Estimated Cost
----------- -------- ------------ --------------
95210051 Property Estate Facilities $19,216
Lease
95220045 #201-204 Workover $14,339
W. City of Post<PAGE>
