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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A-1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-20125
BASIN EXPLORATION, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 84-1143307
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
370 SEVENTEENTH STREET, SUITE 3400, DENVER, COLORADO 80202
(Address of principal executive offices) (Zip Code)
(303) 685-8000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
<PAGE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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. [X] Yes [ ] No
As of March 7, 1997, the aggregate market value of the approximate
7,550,000 shares of voting stock held by non-affiliates of the registrant was
approximately $51,900,000 based upon the closing sale price of the Common sTock
on the Nasdaq Stock Market on March 7, 1997 of $6.88 per share.
As of March 7, 1997, the registrant ahs 10,779,000 shares of Common Stock
outstanding.
Documents Incorporated by Reference: None.
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<PAGE>
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) (3) Exhibits
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
2.1 -- Agreement and Plan of Merger between Sterling
Energy Corporation, Basin Energy, Inc. and Basin
Exploration, Inc. dated October 13, 1994/7/
2.2 -- Plan of Merger between Basin Sterling, Inc. and
Basin Exploration, Inc. dated November 22, 1994/8/
2.3 -- Plan of Merger between Basin Operating Company and
Basin Exploration, Inc. dated December 14, 1994/8/
3.1 -- Restated Certificate of Incorporation of Basin./2/
3.2 -- Restated Bylaws of Basin./2/
4.1 -- Common Stock Certificate of Basin./2/
10.1 -- Equity Incentive Plan, as amended June 6, 1996./1/
10.2 -- Directors' Stock Option Plan, as amended June 6,
1996./1/
10.3 -- Key Employee Participation Plan./2/
10.4 -- Employment Agreement dated March 31, 1992 by and
between Basin and Michael S. Smith./3/
10.5 -- Gulf Coast Geoscientist Overriding Royalty Interest
Plan dated November 30, 1995./10/
10.6 -- Form of Rights Agreement dated as of February 24,
1996, between Basin Exploration, Inc. and Corporate
Stock Transfer, Inc. as Rights Agent./9/
10.7 -- Performance Shares Plan approved February 4,
1997./1/
10.8 -- Change of Control Employment Agreement dated
October 13, 1995 between Basin Exploration, Inc.
and Howard L. Boigon./10/
10.9 -- Employment Agreement dated August 28, 1995 between
Basin Exploration, Inc. and Samuel D. Winegrad./10/
10.10 -- Employment Agreement dated June 28, 1995 between
Basin Exploration, Inc. and Neil L. Stenbuck./10/
10.11 -- Employment Agreement dated November 10, 1995
between Basin Exploration, Inc. and David A.
Pustka./10/
10.12 -- Employment Agreement dated February 23, 1996
between Basin Exploration, Inc. and Thomas J.
Corley./1/
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10.13 -- Assignment and Assumption of Lease dated December
18, 1995 by and between Team, Inc., as original
Tenant, Basin Exploration, Inc., as New Tenant, and
FC Tower Property Partners, L.P., as Landlord./9/
10.14 -- First Supplement to Amended Mortgage, Security
Agreement, Assignment, Financing Statement and
Fixture Filing dated May 8, 1995 by and between
Basin Exploration, Inc. and Basin Gas Ltd. to
NationsBank of Texas, N.A., as successor collateral
agent for the benefit of Colorado National Bank,
Union Bank and NationsBank of Texas, N.A./8/
10.15 -- Second Supplement to Amended Mortgage, Security
Agreement, Assignment, Financing Statement and
Fixture Filing dated May 8, 1995 by and between
Basin Exploration, Inc., and Basin Gas Ltd. to
NationsBank of Texas, N.A. in its capacity as the
successor collateral agent for the benefit of
Colorado National Bank, Union Bank and NationsBank
of Texas, N.A./10/
10.16 -- Agreement for Purchase and Sale of Assets
(Monetization) dated February 24, 1996 by and
between Basin Exploration, Inc., HS Resources, Inc.
and Orion Acquisition, Inc./7/
10.17 -- Agreement for Purchase and Sale of Assets
(Wattenberg), dated February 24, 1996 by and
between Basin Exploration, Inc., HS Resources, Inc.
and Orion Acquisition, Inc./7/
10.18 -- Lease of Office Space dated September 25, 1992,
between Brookfield Republic Inc. and Basin
Operating Company, as amended/4/+/
10.19 -- First Lease of Additional Office Space dated as of
December 1, 1994, between Brookfield Republic, Inc.
and Basin Operating Company./6/+/
10.20 -- Amended and Restated Credit Agreement dated August
6, 1996 between the Company and Colorado National
Bank, Union Bank of California, N.A. and
NationsBank of Texas, N.A./11/
10.21 -- Purchase and Sale Agreement dated February 13,
1997, between Hall-Houston Oil Company et al as
Sellers and Basin Exploration, Inc. as Buyer./12/++/
21 -- Subsidiaries./1/
23.1 -- Consent of Arthur Andersen LLP./1/
23.2 -- Consent of Netherland, Sewell & Associates, Inc./1/
23.3 -- Consent of Rider Scott Company./1/
27 -- Financial Data Schedule./1/
- --------------
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1 Filed as an Exhibit to Form 10-K filed on March 31, 1997, and
incorporated herein by reference.
2 Filed as an Exhibit to Basin's Registration Statement on
Form S-1 as filed on March 17, 1992, Registration No.
33-46486, and incorporated herein by reference.
3 Filed as an Exhibit to Amendment No. 1 to Basin's
Registration Statement on Form S-1 as filed on April 21,
1992, Registration No. 33-46486, and incorporated herein
by reference.
4 Filed as an Exhibit to Basin's Registration Statement on
Form S-1 as filed on October 25, 1993, Registration No.
33-70802, and incorporated herein by reference.
5 Filed as an Exhibit to Form 8-K filed on December 10, 1994,
and incorporated herein by reference.
6 Filed as an Exhibit to Form 10-K/A-1 filed on June 26, 1995
and incorporated herein by reference.
7 Filed as an Exhibit to Form 8-K filed on March 6, 1996, and
incorporated herein by reference.
8 Filed as an Exhibit to Form 10-K filed on March 28, 1995, and
incorporated herein by reference.
9 Filed as an Exhibit to Form 8-K filed on February 26, 1996,
and incorporated herein by reference.
10 Filed as an Exhibit to Form 10-K filed on March 28, 1996, and
incorporated herein by reference.
11 Filed as an Exhibit to Form 10-Q filed on August 14, 1996, and
incorporated herein by reference.
12 Filed herewith.
+ Confidential treatment has been granted for portions of
these Exhibits.
++ Confidential treatment has been requested for portions of
this Exhibit.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BASIN EXPLORATION, INC.
Date: June 5, 1997 By: /s/ Howard L. Boigon
-----------------------------------
Howard L. Boigon
Vice President - General Counsel,
Secretary
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS PAGE NO.
10.21 -- Purchase and Sale Agreement dated
February 13, 1997, between Hall-Houston
Oil Company et al as Sellers and Basin
Exploration, Inc. as Buyer. 10
CONFIDENTIAL TREATMENT
PURCHASE AND SALE AGREEMENT
by and between
Hall-Houston Oil Company
Hall-Houston Oil Company
Employee Royalty Trust
Hall-Houston
1996 Exploration and
Development Facility
Overriding Royalty Trust
Hall Family Trust
Gulf Royalty
Interests, Inc.
("Sellers")
and
Basin Exploration, Inc.
("Buyer")
Eugene Island Blocks 64 and 65 and East Cameron Block 378
Offshore Louisiana
February 13, 1997
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TABLE OF CONTENTS
-----------------
ARTICLE I DEFINITIONS........................................... 1
1.1 "Agreement"........................................... 1
1.2 "Assets".............................................. 1
1.3 "Assumed Obligations"................................. 2
1.4 "Closing"............................................. 2
1.5 "Closing Date"........................................ 2
1.6 "Effective Time"...................................... 2
1.7 "Excluded Assets"..................................... 2
1.8 "Exploration Rights".................................. 3
1.9 "First Closing"....................................... 3
1.10 "Hydrocarbons"........................................ 3
1.11 "Interests"........................................... 3
1.12 "Leases".............................................. 3
1.13 "Personal Property and Incidental Rights"............. 3
1.14 "Purchase Price"...................................... 4
1.15 "Reserve Report"...................................... 4
1.16 "Second Closing"...................................... 4
1.17 "Termination Amount".................................. 4
1.18 "Threshold for Adjustment"............................ 4
ARTICLE II PURCHASE AND SALE AND OPTIONS......................... 5
2.1 Sale and Purchase..................................... 5
2.2 Reservations.......................................... 5
2.3 Exploration Rights.................................... 5
2.4 Right of First Offer.................................. 5
2.5 Approval of AFE....................................... 5
ARTICLE III PURCHASE PRICE AND PAYMENT............................ 6
3.1 Purchase Price........................................ 6
3.2 Adjustments to Purchase Price......................... 6
ARTICLE IV SELLERS' REPRESENTATIONS AND WARRANTIES............... 7
4.1 Sellers' Representations and Warranties............... 7
4.2 HHOC's Representations and Warranties................. 9
4.3 Assurance of Accuracy.................................11
ARTICLE V BUYER'S REPRESENTATIONS AND WARRANTIES................11
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5.1 Buyer's Representations and Warranties................11
ARTICLE VI ACCESS TO INFORMATION AND INSPECTION..................12
6.1 Records...............................................12
6.2 Confidentiality Agreement.............................12
6.3 Inspections...........................................12
ARTICLE VII TITLE AND OTHER ADJUSTMENT MATTERS....................13
7.1 Limitation of Warranties and Representations..........13
7.2 Buyer's Title Review..................................13
(a) Notice.......................................13
(b) Buyer's Remedies.............................13
(c) Arbitration..................................14
7.3 Casualty Loss.........................................15
7.4 Adjustment of Cash Consideration for Other Breaches...15
7.5 Limitation on Recoveries for Casualty Losses and
Other Breaches........................................15
7.6 East Cameron Block 378 Termination....................16
ARTICLE VIII PREFERENTIAL PURCHASE RIGHTS AND CONSENTS.............16
8.1 Preferential Purchase Rights and Consents.............16
8.2 Consents..............................................16
8.3 Required Actions......................................16
ARTICLE IX COVENANTS OF HHOC.....................................17
9.1 HHOC's Covenants......................................17
(a) Maintenance of Interests.....................17
(b) Eugene Island Blocks 64 and 65 Operations....17
(c) Restrictions.................................17
(d) Notification of Claims.......................17
(e) Maintenance of Confidentiality...............18
(f) Compliance with Law..........................18
(g) Obligation To Inform.........................18
(h) Exclusivity..................................18
(i) Operations in Progress.......................18
ARTICLE X CLOSINGS..............................................19
10.1 Closings..............................................19
10.2 Sellers' Closing Obligations..........................19
10.3 Buyer's Closing Obligations...........................19
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ARTICLE XI EFFECT OF CLOSING.....................................20
11.1 Assumed Obligations; Pre-Closing Liabilities..........20
11.2 Revenues and Expenses.................................20
11.3 HHOC Operated Properties..............................20
11.4 AMI...................................................20
ARTICLE XII LIMITATIONS OF WARRANTIES AND REMEDIES................21
12.1 Limitations...........................................21
12.2 Survival..............................................21
ARTICLE XIII DEFAULT AND REMEDIES..................................21
13.1 Liabilities Upon Termination or Breach................21
13.2 Attorneys Fees........................................22
ARTICLE XIV INDEMNITY.............................................22
14.1 Buyer's Indemnification...............................22
14.2 Eugene Island Block 65 Well No. 2 Indemnification.....22
14.3 HHOC's Indemnification................................22
14.4 Scope and Procedure for Indemnification...............23
ARTICLE XV TERMINATION...........................................24
15.1 Termination Pursuant to Section 7.6...................24
15.2 Expiration of Rights Under Sections 2.3 and 2.4.......24
15.3 Effect of Termination.................................24
ARTICLE XVI MISCELLANEOUS.........................................24
16.1 Certain Governmental Approvals........................24
16.2 Record Title in Seller................................24
16.3 Public Announcements..................................25
16.4 Filing and Recording of Assignments...................25
16.5 Further Assurances and Records........................25
16.6 Notices...............................................26
16.7 Incidental Expenses...................................26
16.8 Entire Agreement......................................27
16.9 Governing Law.........................................27
16.10 Exhibits..............................................27
16.11 Audits................................................27
16.12 Counterparts......................................... 27
16.13 Waiver................................................27
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16.14 Binding Effect; Assignment..........................27
16.15 Taxes...............................................28
-iv-
<PAGE>
CONFIDENTIAL
PURCHASE AND SALE AGREEMENT
This PURCHASE AND SALE AGREEMENT ("AGREEMENT") dated as of the 13th day
of February, 1997, is made by and among Hall-Houston Oil Company, a Texas
corporation ("HHOC"), Hall-Houston Oil Company Employee Royalty Trust ("HHERT"),
Hall-Houston 1996 Exploration and Development Facility Overriding Royalty Trust
("HHEDFORT"), Hall Family Trust ("HALL TRUST"), Gulf Royalty Interests, Inc., a
Texas corporation ("GULF ROYALTY" and HHERT, HHEDFORT, Hall Trust and Gulf
Royalty, collectively, "SELLERS") and Basin Exploration, Inc., a Delaware
corporation, doing business in Louisiana under the name Basin Exploration, Inc.
(Delaware) ("BUYER"). Sellers and Buyer are sometimes together referred to
herein as "PARTIES," and individually as a "PARTY".
W I T N E S S E T H:
A. Sellers own or have the right to acquire oil and gas leasehold
and other interests in Eugene Island Blocks 64, 65 and East Cameron Block 378
(the "BLOCKS"), such Blocks being situated in federal waters in the Gulf of
Mexico, Offshore of Louisiana, and described in EXHIBIT "A" attached hereto.
B. Sellers desire to sell portions of their right, title and
interest in the Blocks to Buyer under the terms of this Agreement.
C. HHOC desires to grant, and Buyer desires to acquire
options relating to CONFIDENTIAL PORTION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and subject to the terms and conditions of this
Agreement, the Parties agree as follows:
ARTICLE I
DEFINITIONS
In addition to any terms defined elsewhere in this Agreement, the
following terms, as used herein, shall have the following meanings:
1.1 "AGREEMENT" shall mean this Purchase and Sale Agreement
among HHOC, the other Sellers and Buyer, including the Exhibits
1
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CONFIDENTIAL
annexed or referred to herein, as the same may be amended, supplemented,
restated or otherwise modified from time to time in accordance with applicable
provisions hereof.
1.2 "ASSETS" shall mean all of Seller's right, title and interest in
and to the following (except to the extent constituting Excluded Assets):
(a) the Interests; and
(b) the Personal Property and Incidental Rights.
1.3 "ASSUMED OBLIGATIONS" shall mean (i) all liabilities, duties and
obligations that arise from and after the Effective Time from ownership or
operation of the Assets; (ii) all liabilities and obligations of HHOC prior to
the Effective Time and of Buyer on and after the Effective Time, with respect to
the installation of platforms or subsea facilities (including, but not limited
to, pipeline pipe and umbilical ordered by HHOC), plugging, replugging and
abandoning any wells, the restoration of any well sites, the proper removal,
disposal and abandonment of any platforms or other fixtures and the proper
capping and burying of all flow lines, which are included in the Assets; (iii)
all duties, liabilities and obligations arising on or after the Effective Time
under any contracts or agreements affecting the Assets in existence at the
Effective Time and listed on EXHIBIT "B" attached hereto or to which Buyer is a
party, (iv) all duties, liabilities and obligations that arise under the Leases
after the Effective Time, and (v) all other duties, liabilities and obligations
expressly assumed by Buyer under this Agreement.
1.4 "CLOSING" shall mean either the First Closing or the
Second Closing, as the case may be.
1.5 "CLOSING DATE" shall mean either the date of the First Closing or
the date of the Second Closing, as the case may be.
1.6 "EFFECTIVE TIME" shall mean 12:01 a.m. Central Standard
Time on February 13, 1997.
1.7 "EXCLUDED ASSETS" shall mean the following:
1.7.1 All cash, trade credits, accounts receivable, notes receivable
and other receivables attributable to Sellers' interest in the Assets with
respect to any period of time prior to the Effective Time, including payments
received by any Seller after the
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CONFIDENTIAL
Effective Time and which are attributable to the period prior to the Effective
Time under generally accepted accounting principles.
1.7.2 All corporate, financial and tax records of Sellers; however,
Buyer shall be entitled to receive copies of any financial and tax records which
directly relate to the Assets or any Assumed Obligations, or which are necessary
for Buyer's ownership, administration or operation of the Assets;
1.7.3 Except as provided in Section 7.3, all claims and causes of
action of any Seller () arising from acts, omissions or events, or damage to or
destruction of property, occurring prior to the Effective Time, or () with
respect to any of the Excluded Assets;
1.7.4 Except as otherwise provided in Section 7.3, all rights,
title, claims and interests of any Seller arising prior to the Effective Time
() under any policy or agreement of insurance or indemnity, () under any bond,
or () to any insurance or condemnation proceeds or awards; and
1.7.5 All Hydrocarbons produced from or attributable to the Assets with
respect to all periods prior to the Effective Time, together with all proceeds
from or of such Hydrocarbons, if any;
1.8 "EXPLORATION RIGHTS" shall mean the following:
CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
1.9 "FIRST CLOSING" shall mean the closing of the purchase and sale of
the Assets relating to Eugene Island Blocks 64 and 65.
1.10 "HYDROCARBONS" shall mean crude oil, natural gas, casinghead gas,
condensate, sulphur, natural gas liquids and other liquid or gaseous
hydrocarbons (including C02), and shall also refer to all other minerals of
every kind and character which may be covered by or included in the Leases and
Assets.
1.11 "INTERESTS" shall mean the working interests (and the net revenue
interest attributable thereto) and overriding royalty interests owned by Sellers
or which Seller has the right to acquire in the Leases in Eugene Island Blocks
64 and 65 and East Cameron Block 378 as described in EXHIBIT A.
1.12 "LEASES" shall mean the leases described in EXHIBIT A, as therein
limited by acreage and/or depth.
3
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CONFIDENTIAL
1.13 "PERSONAL PROPERTY AND INCIDENTAL RIGHTS" shall mean all right,
title and interest of Sellers in and to or derived from the following, insofar
as the same do not constitute Excluded Assets and are assignable and
attributable to, appurtenant to, incidental to, or used for the operation of the
Leases:
(a) all easements, rights-of-way, permits, licenses,
servitudes or other interests;
(b) all contracts, agreements and title instruments to the
extent attributable to and affecting the Assets in existence at the
Effective Time or otherwise entered into as permitted in this
Agreement, including, but not limited to, all Hydrocarbon sales,
purchase, gathering, transportation, treating, marketing, exchange,
processing and fractionating contracts, farmout agreements,
participation agreements and joint operating agreements, including,
without limitation, the Material Agreements listed on EXHIBIT B
attached hereto; and
(c) all wells, equipment and other personal property,
inventory, spare parts, tools, fixtures, pipelines, platforms, tank
batteries, appurtenances and improvements situated upon the Leases and
used or held for use in connection with the development or operation of
the Leases or the production, treatment, storage, compression,
processing or transportation of Hydrocarbons from or in the Leases,
including, without limitation, those wells and facilities listed on
EXHIBIT C
attached hereto;
(d) all of the files, records, and data of Sellers relating to
the items described in subsections (a), (b), and (c) above (the
"Records"), including, without limitation, lease records, well records,
and division order records; well files and prospect files; title
records (including abstracts of title, title opinions and memoranda,
and title curative documents related to the Leases); contracts and
contract files; correspondence; computer software and data files;
micro-fiche data files; geological, geophysical and seismic records (to
the extent transfer is not prohibited by existing contractual
restriction previously disclosed to Buyer), interpretations, data, maps
and information; production records, electric logs, core data, pressure
data, decline curves and graphical production curves; reserve reports;
and accounting records.
4
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CONFIDENTIAL
1.14 "PURCHASE PRICE" shall have the meaning provided in
Section 3.1.
1.15 "RESERVE REPORT" shall mean the cashflows (including projected
capital costs) dated as of January 1, 1997 by Ryder Scott Company relating to
East Cameron Block 378, a copy of which Seller has delivered to Buyer prior to
the execution of this Agreement.
1.16 "SECOND CLOSING" shall mean the date of the closing of the
purchase and sale of the Assets relating to East Cameron Block 378.
1.17 "TERMINATION AMOUNT" shall mean an aggregate amount of adjustments
to the Purchase Price allocated to the Assets relating to East Cameron Block 378
proposed by Buyer pursuant to Section 7.2, Section 7.3 and Section 7.4 equalling
$1,300,000.
1.18 "THRESHOLD FOR ADJUSTMENT" shall mean an aggregate amount of
adjustments to the Purchase Price proposed by Buyer pursuant to Section
7.2(b)(3), Section 7.3 and Section 7.4 equalling $100,000.
ARTICLE
PURCHASE AND SALE AND OPTIONS
2.1 SALE AND PURCHASE. Subject to the terms and conditions of this
Agreement, and subject to the reservations described in Section 2.2, Sellers
agree to sell and convey to Buyer and Buyer agrees to purchase and pay for the
Assets and to assume the Assumed Obligations.
2.2 RESERVATIONS. HHOC shall reserve from the assignments of the
Interests an undivided 50% of its working interest and the remaining Sellers
shall reserve all of their overriding royalty interests in (a) the South Half
(S/2) North Half (N/2) South Half (S/2) and the South Half (S/2) South Half
(S/2) East Cameron Block 378 as to those depths below 100' below the
stratigraphic equivalent of 3,743 feet true vertical depth as seen in the
electric log for the Anadarko Petroleum Corporation OCS-G 6660 No. 1 well
located in East Cameron Block 378 and (b) the balance of East Cameron Block 378
as to all depths. The interests reserved by Sellers under this Section shall be
deemed Excluded Assets.
2.3 EXPLORATION RIGHTS. Should Buyer elect to exercise its
option to acquire any Exploration Rights as provided in EXHIBIT G,
HHOC and Buyer shall schedule a closing, to occur no later than 5
days following the exercise of such option, but subject to
5
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CONFIDENTIAL
extension for up to an additional 30-day period as may be required to obtain
necessary waivers of (or the expiration of the exercise period with respect to)
preferential purchase rights, releases and consents to assignment and to
negotiate mutually acceptable processing agreements. At such closing, Seller
shall convey to Buyer its proportionate interest in the applicable Exploration
Rights acquired, with special warranty of title against claims arising by,
through or under Seller, and Buyer will deliver to Seller the amount of the
consideration allocated to the Exploration Rights conveyed as shown on EXHIBIT
G.
CONFIDENTIAL PORTION APPEARS IN BOLD
2.4 RIGHT OF FIRST OFFER. After the Second Closing, with respect to the
interests to be retained by HHOC in East Cameron Block 378 and, should Buyer
exercise its option granted in Section 2.3 as to Exploration Rights CONFIDENTIAL
PORTION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION ,
HHOC agrees that, should HHOC intend to dispose of any such retained interests,
it will advise Buyer in writing, no less than 10 days prior to contacting any
other person or entity regarding such retained interests, of HHOC's intention to
make any such disposition. For a period of 10 days following any such notice by
HHOC to Buyer, Buyer shall have an exclusive right to offer to acquire the
interests which HHOC proposes to dispose of. HHOC shall be under no obligation
to accept any such offer made by Buyer and, upon expiration of such 10 day
exclusivity period, HHOC may negotiate a disposition of the relevant interests
with others, whether on terms less or more favorable to HHOC than any offered by
Buyer, and shall be under no further obligation to Buyer as to the relevant
interests.
2.5 APPROVAL OF AFE. As a material part of the consideration to Buyer
for the transactions contemplated herein and in consideration of the
indemnification by Buyer provided in Section 14.2, HHOC hereby agrees to approve
the drilling of a second well on Eugene Island Block 65 when a proposal for such
well is generated by Buyer under the joint operating agreement covering such
Block 65 and agrees to deliver prior to the First Closing an executed authority
for expenditure ("AFE") for the drilling of such well (the "Eugene Island Block
65 Well No. 2 AFE"), if such AFE is issued by Buyer prior to such Closing. If a
competing proposal is generated for such well under such joint operating
agreement, HHOC agrees to support Buyer's proposal.
6
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CONFIDENTIAL
ARTICLE III
PURCHASE PRICE AND PAYMENT
3.1 PURCHASE PRICE. The Purchase Price payable to Sellers for the
Assets shall be Fourteen Million Four Hundred Twenty Five Thousand and No/100
($14,425,000.00) Dollars, subject to adjustment as set forth below and allocated
to the Assets as set forth in EXHIBIT D attached hereto.
3.2 ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price attributable to
the Assets to be acquired from HHOC shall be adjusted by an amount equal to the
difference between Buyer's Credits (as hereinafter defined) and Sellers' Credits
(as hereinafter defined).
(a) "SELLERS' CREDITS" shall equal Sellers' share of
the amount of all direct production and operating expenses (including
overhead paid to third-party operators) and capital expenditures
incurred by Seller attributable to the operation of the Assets after
the Effective Time and prior to the Closing in accordance with
generally accepted accounting principles and applicable provisions of
relevant joint operating agreements. Such expenses and expenditures
shall include, without limitation, royalties, rentals and other similar
charges, ad valorem, property, production, excise, severance, and any
other taxes (except income or franchise taxes) based upon or measured
by the ownership of property or the production of Hydrocarbons or the
receipt of proceeds therefrom.
(b) "BUYER'S CREDITS" shall equal the sum of the
following:
(1) Sellers' share of the amount of
all unpaid ad valorem, property, production,
severance and similar taxes and assessments (but not
including income or franchise taxes) based upon or
measured by the ownership of property or the
production of Hydrocarbons or the receipt of proceeds
therefrom which taxes and assessments become due and
payable or accrue to the Assets 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; and
7
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CONFIDENTIAL
(2) Sellers' unpaid joint interest
billings invoiced or accrued to the Effective Time
with respect to operations on Eugene Island Blocks 64
and 65.
(c) Prior to each Closing, Buyer and HHOC shall agree upon a
good-faith estimated accounting (the "PRELIMINARY SETTLEMENT
STATEMENT") showing the estimated amount of Sellers' Credits and the
estimated amount of Buyer's Credits, subject to being finally adjusted
within 90 days after the Closing as hereinafter provided, but subject
in any event to audit rights under applicable agreements. Within 90
days after the Closing, Buyer and HHOC shall attempt to agree upon an
accounting (the "FINAL SETTLEMENT STATEMENT") of the actual amounts of
Sellers' Credits and Buyer's Credits for the adjustment set out in this
Section 3.2. If Buyer and HHOC cannot reach mutual agreement as to
either Final Settlement Statement then the matter shall be resolved by
submittal to Arthur Andersen LLP or other comparable independent public
accounting firm, which decision shall be binding on the Parties. Those
credits agreed upon by Buyer and HHOC shall be netted and the final
settlement shall be paid in cash as directed in writing by the
receiving Party.
ARTICLE IV
SELLERS' REPRESENTATIONS AND WARRANTIES
4.1 SELLERS' REPRESENTATIONS AND WARRANTIES. Sellers, severally as to
each Seller or the Assets owned by such Seller, as the case may be, and not
jointly (except that HHOC makes such representations and warranties as to itself
and all other Sellers), represent and warrant to Buyer, as of the date hereof
and as of each Closing Date, that:
(a) If such Seller is a corporation, it is duly organized,
validly existing, and in good standing under the laws of its state of
incorporation, and is duly qualified to carry on its business in
Louisiana, and in the Outer Continental Shelf, Gulf of Mexico, or if
such Seller is another form of entity, it is duly formed and validly
existing;
(b) Such Seller has all requisite power and authority to carry
on its business as presently conducted, to enter into this Agreement
and the other documents and agreements contemplated hereby, and to
perform its obligations under this
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Agreement and the other documents and agreements contemplated hereby.
The consummation of the transactions contemplated by this Agreement
will not violate, nor be in conflict with, any provision of its
governing documents or, other than as provided in any Material
Agreement to which Buyer is a party, any agreement or instrument to
which it is a party or by which it is bound or any judgment, decree,
order, statute, rule or regulation applicable to such Seller;
(c) The execution, delivery, and performance of this Agreement
and the consummation of the transaction contemplated hereby have been
duly and validly authorized by all requisite action on the part of such
Seller. This Agreement constitutes, and all documents and instruments
required hereunder to be executed and delivered by such Seller at
Closing constitute, legal, valid and binding obligations of such Seller
enforceable in accordance with their respective terms, subject to
applicable bankruptcy and other similar laws of general application
with respect to creditors;
(d) There are no bankruptcy, reorganization or
receivership proceedings pending, being contemplated by, or to
the actual knowledge of Seller threatened against Seller;
(e) Such Seller has Good and Marketable Title to the Assets
owned by it, which for purposes of this Agreement shall mean, for the
Interests in East Cameron Block 378, title deducible of record in the
Cameron Parish clerk's office and from the records of the Minerals
Management Service, and for all of the Interests title (i) which is
free and clear of all
(x) operating agreements, farmout agreements, participation agreements,
exploration agreements, unit agreements, production purchase agreements,
marketing agreements, pipeline or other transportation agreements, processing
agreements, and other agreements material to the ownership, development,
operation and marketing of production except for those described in EXHIBIT B
attached hereto or to which Buyer is a party), and (y) all defects, claims,
liens, encumbrances and burdens except for those which could not reasonably be
expected to have an adverse effect on the ownership, operation, value,
mortgageability or use of any of the Assets and (ii) which at and after the
Effective Time entitles Buyer to receive not less than the undivided interests
set forth in EXHIBIT A as "Net Revenue Interests" or "Overriding Royalty
Interests" of all Hydrocarbons produced, saved and marketed from the respective
Leases and all wells located thereon or on land pooled or unitized therewith at
all times through the plugging,
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abandonment and salvage thereof, and at and after the Effective Time obligates
Buyer to bear costs and expenses relating to the development of and operations
on the Leases and all wells located thereon or on land pooled or unitized
therewith at all times through the plugging, abandonment and salvage of such
wells not greater than the "Working Interests" set forth in EXHIBIT A.
(f) Such Seller has not incurred liability, contingent or
otherwise, for brokers' or finders' fees relating to the transactions
contemplated by this Agreement for which Buyer shall have any
responsibility whatsoever.
(g) No suit, action, claim, investigation, or other proceeding
is pending or, to the best of such Seller's knowledge after due
inquiry, threatened before any court or governmental agency and to the
best of such Seller's knowledge after due inquiry no cause of action
exists that relates to the Assets or that might result in impairment or
loss of such Seller's title to any portion of the Assets or the value
thereof or that might hinder or impede the operation of any of the
Assets or wells thereon or such Seller's ability to consummate the
transactions contemplated by this Agreement.
(h) With respect to those Assets in which Buyer does not
currently own an interest, all consents required to be obtained by such
Seller for the assignment of the relevant Assets to Buyer have been
obtained and are in full force, and, except for those existing under
any Material Agreement to which Buyer is a party, there are no
preferential purchase rights with respect to the Assets that have not
been waived or have not expired.
(i) Such Seller is not aware of any material adverse change in
the Assets which could reasonably be expected to affect their value,
use or operation that is not known to Buyer.
(j) No Seller is obligated, by virtue of any prepayment
arrangement, "take or pay" arrangement, production payment, crediting
agreement, or any other arrangement, to deliver Hydrocarbons produced
from or attributable to the Assets at some future time without then or
thereafter receiving full payment therefor.
(k) Except pursuant to a Material Agreement to which Buyer is
a party, no Hydrocarbons produced from Seller's interest in the Assets
are subject to a sales contract (other
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than division orders or spot sales agreements terminable on no more
than 30 days notice) and no person has any call upon, option to
purchase or similar rights with respect to the production from Sellers'
interest in the Assets.
4.2 HHOC'S REPRESENTATIONS AND WARRANTIES. HHOC represents
and warrants to Buyer, as of the date hereof and the Closing Date,
that:
(a) All information heretofore provided by HHOC with respect
to the Assets, including, but not limited to, the information set forth
in the Exhibits hereto, was true and accurate as of the date of
delivery. Without limiting the foregoing, the factual data on which the
Reserve Report was based has been provided to Buyer and HHOC makes no
representation with respect thereto other than that the projected
capital expenditures included in the Reserve Report represent those
reasonably anticipated by HHOC to be required to place the East Cameron
Block 378 No. 2 Well on production. Seller has no knowledge of any
matter which materially and adversely affects the operations, prospects
or condition of any of the Leases in which Buyer does not currently own
an interest or wells located thereon which has not been set forth in
this Agreement or the Exhibits attached hereto.
(b) There exist no contracts or agreements material to the
ownership, operation, value, or use of the Assets, including the
marketing, transportation, or processing of production therefrom, other
than those agreements listed in EXHIBIT B (the "MATERIAL AGREEMENTS").
With respect to the Material Agreements in all respects: (i) neither
HHOC nor, to HHOC's knowledge, any other party thereto is in default
thereunder; (ii) all payments (including, without limitation, joint
interest or other billings under unit or operating agreements) due by
HHOC thereunder have been made by HHOC; and (iii) none of the Material
Agreements creates a material financial commitment or imposes an
obligation or otherwise has a financial impact on HHOC that has not
been reflected in the Reserve Report or disclosed to Buyer.
(c) With respect to those Leases to which Buyer is not
currently a party: the Leases are in full force and effect and are
valid and subsisting; no other party to any Lease is in material breach
or default with respect to any of its obligations thereunder; and
Seller does not know of any present default existing under any Lease.
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(d) With respect to the joint operating agreements relating to
the Assets to which Buyer is not a party: (i) there are no outstanding
calls or payments due by HHOC under AFE's; (ii) HHOC has informed Buyer
of the status of all material operations by less than all parties known
to HHOC; and (iii) there are no operations under such operating
agreements with respect to which HHOC has become a non-consenting
party;
(e) With respect to those wells on the Leases which were not
drilled by Buyer as operator or which Buyer does not currently operate:
Every such well has been drilled and completed within the Leases or
within the limits otherwise permitted by contract, pooling or unit
agreement and by law; the drilling, completing, equipping and operating
of all wells, the construction, installation and operation of all
production facilities, pipelines and other equipment, and the conduct
of all other operations on or affecting the Leases have been performed
in accordance with all necessary permits and authorizations, in
compliance with all applicable lease and contract provisions and laws,
ordinances, rules, regulations and permits of any court or governmental
body or agency and in accordance with prudent and generally recognized
industry practices and standards; and all such wells have been drilled,
completed, equipped and operated and all related fixtures and equipment
have been maintained in a state of repair so as to be adequate for
normal operations and are in good working order.
(f) With respect to those Assets not currently operated by
Buyer and as to operations previously conducted or presently being
conducted: All necessary plans for development, applications,
inspection reports, certificates and other instruments pertaining to
environmental matters have been filed with the appropriate authorities
and all permits necessary for the legal operation of the Assets in full
compliance, in all material respects, with all Environmental Laws (as
hereafter defined) have been obtained; HHOC and the operator of such
Assets are in compliance, in all material respects, with all
Environmental Laws; HHOC has not received nor, to the knowledge of
HHOC, has any other past or present operator of any of such Assets
received, notice of any past, present or future events, conditions,
circumstances, activities, practices, incidents, actions or plans which
are reasonably likely to interfere with or prevent continued
compliance, in all material respects, or which are reasonably likely to
give rise to any material liability under, any
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Environmental Laws; the Assets have been used solely for oil and gas
operations and related operations; at no time have the Assets been used
for the generation, storage or disposal of a Hazardous Substance (as
defined below) or as a landfill or other waste disposal site, and there
are no Hazardous Substances currently on the Leases that would subject
Buyer to a material liability. "Hazardous Substance" means any
hazardous substance, pollutant, contaminant, solid or hazardous waste,
hazardous waster constituents, hazardous material or toxic substance,
including, without limitation, asbestos, radioactive substances,
petroleum or petroleum-derived substances, or any other substance or
material that would constitute or cause a health, safety or
environmental hazard on or at the Assets under Environmental Laws.
"Environmental Laws" shall mean the Clean Air Act, Clean Water Act,
Coastal Zone Management Act, Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA"), Emergency Planning and
Community Right-to-Know Act, Endangered Species Act, Hazardous
Materials Transportation Act, Occupational Safety and Health Act, Oil
Pollution Act of 1990, Resource Conservation and Recovery Act, Safe
Drinking Water Act and Toxic Substances and Control Act; any
regulations promulgated under the foregoing federal statutes; any state
law counterparts; any similar state or local statutes, rules,
regulations or ordinances; any judicial or administrative order or
judgment, or any permit, license or other authorization, under any of
the foregoing; any federal, state or local law or regulation, and
administrative actions thereunder, relating to occupational health or
safety; and common law relating to such matters, as to all of the
foregoing as such are in effect as of the date hereof or during
ownership of the Assets by HHOC.
(g) With respect to those Assets in which Buyer does not
currently own an interest, all consents required to be obtained by HHOC
for the assignment of the Assets to Buyer have been obtained and are in
full force, and, except for those existing under any Material Agreement
to which Buyer is a party, there are no preferential purchase rights
with respect to the Assets that have not been waived or have not
expired.
(h) HHOC is unaware of any fact or circumstance which would
preclude or inhibit unconditional approval of Seller's assignment to
Buyer of the Assets relating to East Cameron Block 378 by the United
States Minerals Management Service or any governmental entity with
jurisdiction over same.
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4.3 ASSURANCE OF ACCURACY. Each Seller shall use all reasonable efforts
to assure that the warranties and representations made by it herein with respect
to it are true and correct as of each Closing and will give prompt written
notice to Buyer after execution of this Agreement of any matter which affects
any warranty or representation herein contained or which renders such warranty
or representation untrue.
ARTICLE V
BUYER'S REPRESENTATIONS AND WARRANTIES
5.1 BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents
and warrants to each Seller that as of the date hereof and the
Closing Date:
(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 Louisiana and in the Outer
Continental Shelf, Gulf of Mexico;
(b) Buyer has all requisite power and authority to carry on
its business as presently conducted, to enter this Agreement and the
other documents and agreements contemplated hereby, to purchase the
Assets on the terms described in this Agreement, and to perform the
obligations under this Agreement and the other documents and agreements
contemplated hereby;
(c) The consummation of the transactions contemplated by this
Agreement will not violate, nor be in conflict with, any provision of
Buyer's charter, by-laws or governing documents, or any material
agreement or instrument to which Buyer is a party or by which it is
bound, or any judgment, decree, order, statute, rule or regulation
applicable to Buyer, and the execution, delivery and performance of
this Agreement and the transactions contemplated hereunder have been
duly and validly authorized by all requisite corporate action on the
part of Buyer;
(d) This Agreement constitutes, and all documents and
instruments required hereunder to be executed and delivered by Buyer at
Closing will constitute, legal, valid and binding obligations of Buyer
in accordance with their respective terms, subject to bankruptcy and
other similar laws of general application with respect to creditors;
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(e) There are no bankruptcy, reorganization or
receivership proceedings pending, being contemplated by, or to
its actual knowledge, threatened against Buyer;
(f) Buyer has funds available with which to acquire the
Assets; and
(g) Buyer has no knowledge, as of the relevant Closing Date,
of any adjustments to the Purchase Price pursuant to Article VII or any
breach by any Seller with respect to the relevant Assets not
communicated to Sellers.
Buyer shall use all reasonable efforts to assure that the warranties and
representations herein contained are true and correct as of each Closing and
will give prompt written notice to Seller after the execution of this Agreement
of any matter which affects any warranty or representation herein contained or
which renders such warranty or representation untrue.
ARTICLE VI
ACCESS TO INFORMATION AND INSPECTION
6.1 RECORDS. Upon execution of this Agreement, Sellers shall permit
Buyer to review and copy at HHOC's offices, but at Buyer's expense, all Records.
To the extent any of the Records or any files, records, or data otherwise
related to the Assets are not in HHOC's possession, HHOC shall exercise all
reasonable efforts to () obtain such materials from third-party operators of the
Assets or other parties having custody thereof or () if such materials cannot be
obtained, obtain access for Buyer to the records of third-party operators or
other third parties in the offices of such third-party operators or other third
parties. Buyer shall also have the right to consult with Seller's officers,
employees, attorneys and agents (including, but not limited to, Sellers'
reservoir engineers or consulting petroleum engineers, if any), third-party
operators, production purchasers or other parties with respect to all Records or
any other matter or information affecting the Assets.
6.2 CONFIDENTIALITY AGREEMENT. All such information made available to
Buyer shall be maintained confidential by Buyer until the earlier of Closing as
to the Assets which are the subject of such Closing or termination of this
Agreement without there being a Closing. Any confidentiality agreements Buyer
has previously executed with Seller to the extent applicable to the Assets shall
continue in force until Closing, at which time such agreement shall terminate as
to the Assets which are the subject of such Closing.
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Buyer shall further take whatever reasonable steps which may be necessary to
ensure that Buyer's employees, consultants and agents comply with the provisions
of this Section 6.2. Notwithstanding anything to the contrary, any seismic or
geophysical data made available to Buyer shall be maintained confidential by
Buyer in accordance with existing data license agreements.
6.3 INSPECTIONS. At all times prior to the Closing, Buyer and the
employees, agents and representatives of Buyer shall have access to the Assets
not operated by Buyer and shall have the right to witness well tests thereon and
to conduct environmental, operational and production audits thereof, including
the right to consult with third-party operators or regulatory authority in
connection therewith. To the extent Seller is not the operator of any such
properties, HHOC shall exercise all reasonable efforts to secure access to such
properties for Buyer for such purposes.
ARTICLE VII
TITLE AND OTHER ADJUSTMENT MATTERS
7.1 LIMITATION OF WARRANTIES AND REPRESENTATIONS. SELLER SHALL CONVEY
SELLER'S INTERESTS IN AND TO THE ASSETS TO BUYER WITHOUT ANY WARRANTY OF TITLE,
EXPRESS OR IMPLIED, EXCEPT SEPARATELY AS TO TITLE CLAIMS ARISING BY, THROUGH AND
UNDER SELLER (BUT NOT OTHERWISE), AS PROVIDED IN THE FORMS OF ASSIGNMENT, BILL
OF SALE AND CONVEYANCE OF LEASES ATTACHED AS EXHIBIT "E" HERETO. EXCEPT AS
EXPRESSLY STATED IN THIS AGREEMENT, SELLER MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, WITH RESPECT TO THE ACCURACY, COMPLETENESS OR MATERIALITY OF
THE INFORMATION, RECORDS AND DATA NOW, HERETOFORE, OR HEREAFTER MADE AVAILABLE
TO BUYER IN CONNECTION WITH THE ASSETS OR THIS AGREEMENT (INCLUDING, WITHOUT
LIMITATION, QUALITY OR QUANTITY OF HYDROCARBON RESERVES, IF ANY, RECOMPLETION
OPPORTUNITIES, DECLINE RATES, POTENTIAL FOR PRODUCTION OF HYDROCARBONS FROM THE
LEASES, OR ANY OTHER MATTERS RELATING TO THE VALUATION OR CONDITION OF THE
ASSETS.
7.2 BUYER'S TITLE REVIEW.
(a) NOTICE. If any information or records reviewed by Buyer reflect the
existence of any encumbrance, encroachment, defect in or objection to title that
renders any Seller's warranties under Section 4.1(e) untrue or incorrect ("Title
Defects"), Buyer may deliver written notice of the Title Defects to HHOC on
behalf of the relevant Seller no later than the Closing Date with respect to the
relevant Assets. If Title Defects shall be so specified, HHOC, on behalf of the
relevant Seller, shall make all reasonable efforts
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to cure or remove the Title Defects at the expense of such Seller, and to the
extent they are not cured by the relevant Closing, the value allocated to such
Title Defects by Buyer in its notices shall be withheld from the Purchase Price
payable at such Closing.
(b) BUYER'S REMEDIES. If the Title Defects so notified to any Seller
are not cured or removed to the reasonable satisfaction of Buyer within 90 days
of Buyer's delivery of notice to such Seller of such Title Defects or 90 days
after the Closing, whichever is later, Buyer shall elect as follows:
(1) Buyer may elect to grant a further period or periods of
time, not to exceed 90 days after the end of such 90-day
period, within which the relevant Seller shall attempt to cure
or remove such Title Defects. If such Title Defects are cured
within such 90-day period, Buyer shall pay the amount of the
withheld Purchase Price to HHOC for the account of the
relevant Seller within three days of receipt of evidence of
such cure. If such Title Defects are not cured by the end of
such 90-day period, the Purchase Price for the affected Assets
shall be adjusted as provided in Section 7.1(b)(3) below.
(2) In the event the Net Revenue Interest to be conveyed to
Buyer in the affected Lease or well is less than the Net
Revenue Interest for such Lease or well shown on EXHIBIT A, or
in the event the Working Interest in the affected Lease or
well to be conveyed to Buyer is greater than the Working
Interest for such Lease or well shown on EXHIBIT A, the
Purchase Price shall be reduced by an amount equal to the
decrease caused by such variance in the Allocated Value for
the affected Lease or well contained in EXHIBIT D hereto. Such
decrease or increase shall be calculated by multiplying such
Allocated Value by whichever of the following is applicable:
(A) a fraction, the numerator of which is the actual Net
Revenue Interest in the affected Lease or well to be conveyed
to Buyer and the denominator of which is Buyer's share of the
Net Revenue Interest shown for such Lease or well on EXHIBIT
A, or (B) a fraction, the numerator of which is Buyer's share
of the Working Interest for such Lease or well as shown on
EXHIBIT A, and the denominator of which is the actual Working
Interest in such Lease or well to be conveyed to Buyer.
(3) For Title Defects other than the variances described
in subsection (2) above, Buyer shall be entitled to
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reduce the Purchase Price to the extent the Title Defect
causes a decrease in the value of the affected Lease or well.
For purposes of this paragraph, the amount of decrease in
value of the affected Lease or well shall be determined by
taking into account the Allocated Value assigned to the Lease
or well on EXHIBIT D, the method of arriving at such value,
the legal and practical effect of the Title Defect, and the
potential economic effect of the Title Defect over the life of
the property involved. In the event the value of such decrease
cannot mutually be agreed, any affected Party may submit the
question of value or existence of the defect to arbitration in
accordance with Section 7.2(c) below, in which event the
amount of the value allocated to the defect by Buyer in its
defect notices shall be retained by Buyer pending final
resolution of the arbitration proceeding.
Completion of any Closing shall not operate as a waiver by Buyer of any Title
Defects for which the Purchase Price has not been adjusted or which Buyer has
otherwise not specifically waived and Buyer shall be entitled to enforce the
warranties and representations and indemnifications hereunder to the extent
applicable to such Title Defect. Following each Closing, Sellers shall cooperate
with Buyer in performing title curative work with respect to any of the Assets.
(c) ARBITRATION. In the event any Seller and Buyer cannot agree on the
amount of a Title Defect adjustment or on whether a Title Defect exists, then
such issue shall be submitted to binding arbitration in accordance with the
following procedures. No later than 5 days following the end of the 90-day
period following the relevant Closing, or following the end of any extended
90-day period granted by Buyer to Seller to cure Title Defects after such
Closing, either affected Party may deliver to the other an election to arbitrate
such dispute. Within 15 days following delivery of such notice, the Parties will
each designate an arbitrator, and the two arbitrators will, within 10 days after
their designation, select a third arbitrator; provided, however, that if the two
arbitrators are not able to agree on a third arbitrator, the third arbitrator
shall be selected as soon as possible by the Chief United States District Judge
for the Southern District of Texas or by any party designated by him or her. The
three arbitrators so selected shall conduct a hearing in Houston, Texas no later
than 30 days following their selection, at which the relevant Seller or Sellers
and Buyer shall present such evidence and witnesses as they may choose, with or
without counsel. Adherence to formal rules of evidence shall not be required,
but the arbitrators shall consider
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any evidence and testimony that they determine to be relevant, in accordance
with procedures that they determine to be appropriate. The arbitrators shall
render their decision within 30 days following conclusion of the hearing;
decision by a majority of the arbitration panel shall be final and binding. Such
decision may be filed in any court of competent jurisdiction and may be enforced
by any party as a final judgment of such court. In determining the amount of a
Title Defect adjustment or the existence of a contested Title Defect, the
arbitrators shall consider the same factors listed in Section 7.2(b). The costs
and fees of the arbitrators shall be borne equally by Buyer and the relevant
Seller or Sellers, and each party shall bear its own attorneys' fees and other
expenses of the arbitration.
7.3 CASUALTY LOSS. If, prior to the Closing, any portion of the Assets
shall be destroyed by fire or other casualty, or if any portion of the Assets
shall be taken in condemnation or under the right of eminent domain or if
proceedings for such purposes shall be pending or threatened, Buyer may elect,
subject to the provisions of Section 7.5, to reduce the Purchase Price for the
affected Asset to reflect the estimated cost to repair or replace with property
of equivalent value. If Buyer does not elect such option, this Agreement shall
remain in full force and effect, notwithstanding any such destruction or taking,
and Seller shall at the relevant Closing or thereafter upon receipt pay to Buyer
all sums paid to the relevant Seller and attributable to the affected Assets by
reason of such destruction or taking and, at the relevant Closing, shall assign,
transfer and set over unto Buyer all of the right, title and interest of the
relevant Seller in and to any unpaid insurance proceeds, awards or other
payments arising out of such destruction or taking. No Seller shall voluntarily
compromise, settle or adjust any amounts payable by reason of such destruction
or taking without first obtaining the written consent of Buyer.
7.4 ADJUSTMENT OF CASH CONSIDERATION FOR OTHER BREACHES. Subject to the
provisions of Section 7.5 and the right of any affected Seller to submit to
arbitration, in the manner set forth in Section 7.2(c), any such reduction
proposed by Buyer in the event it is discovered prior to a Closing that any
Seller has breached any of the representations, warranties or covenants
contained in this Agreement and applicable to the Assets to be conveyed by such
Seller at such Closing, other than the title warranties for which an adjustment
procedure is provided in Section 7.2, and if Buyer does not elect to terminate
its obligations hereunder for such breach as may be permitted by this Agreement
or applicable law, then for each such breach the Purchase Price shall
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be adjusted at the relevant Closing to the extent of such expected loss or cost.
Consummation of any Closing shall not operate as a waiver of any breach by any
Seller of a provision of this Agreement unless the Purchase Price has been
adjusted to account for such breach.
7.5 LIMITATION ON RECOVERIES FOR CASUALTY LOSSES AND OTHER BREACHES.
Notwithstanding any provision of Section 7.2(b)(3), Section 7.3 or Section 7.4
to the contrary, Buyer shall not be entitled to any recovery (including, but not
limited to, under the indemnification provided in Section 14.3) or reduction of
the Purchase Price unless the aggregate amount of losses and costs asserted by
Buyer pursuant to Section 7.2(b)(3), Section 7.3 or Section 7.4, whether prior
to or after any Closing, equals the Threshold for Adjustment; provided, however,
once the Threshold for Adjustment is reached, Buyer shall be entitled to
recovery or Purchase Price reductions for all such losses and costs, including
those aggregating the Threshold for Adjustment.
7.6 EAST CAMERON BLOCK 378 TERMINATION. Notwithstanding any provision
of this Agreement to the contrary, should Buyer propose adjustments to the
Purchase Price with respect to the Assets relating to East Cameron Block 378 and
such adjustments equal or exceed, in the aggregate, the Termination Amount, then
either Sellers or Buyer may terminate this Agreement as to such Assets.
ARTICLE VIII
PREFERENTIAL PURCHASE RIGHTS AND CONSENTS
8.1 PREFERENTIAL PURCHASE RIGHTS AND CONSENTS. All Material Agreements
containing consent to assignment obligations and preferential right to purchase
provisions that must be complied with prior to the assignment of the Assets to
Buyer and to which Buyer is not otherwise a party are so identified in EXHIBIT B
hereto (except such agreements with respect to which all necessary consents to
assignment or waivers of preferential purchase rights have already been obtained
by Sellers). Sellers shall send prior to Closing such notices and other
documents as may be required in order to trigger preferential purchase rights
which have been identified or Sellers shall obtain prior to Closing a waiver of
the exercise of any preferential purchase rights; provided, however, the Closing
shall not be delayed pending the running of the period during which any such
right may be exercised or as a result of inability to obtain waivers of such
rights and Buyer shall acquire the Assets subject to any such preferential
rights. If a third party who has been offered an interest in an Asset pursuant
to a
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preferential right to purchase elects prior to Closing to purchase all or part
of such Asset pursuant to the aforesaid offer and Seller receives written notice
of such election prior to the Closing Date, the interest or part thereof so
affected will be eliminated from the Assets and the Purchase Price reduced by
the portion of the Purchase Price allocated to such interest or part thereof.
Should any such right be exercised subsequent to the Closing, Buyer shall convey
the relevant assets to the exercising party and shall be entitled to the
consideration to be paid therefor.
8.2 CONSENTS. Seller shall use all reasonable efforts to obtain all
consents to assignment prior to the Closing. If a lessor or other third party
who has the right to consent to the assignment of an Asset (or portion thereof)
or a Material Agreement refuses such consent prior to Closing, Buyer may elect
to eliminate the Block so affected from the Assets and the Purchase Price shall
be reduced by the portion of the Purchase Price allocated to such Block. Absent
such election by Buyer, the absence of any required consent shall not constitute
a Title Defect or breach of any warranty or representation of the Sellers and
Buyer shall accept the risk associated with its inability to obtain any such
required consent prior to or after the Closing.
8.3 REQUIRED ACTIONS. The Parties each agree to use their respective
reasonable efforts to take or cause to be taken all such action as may be
necessary to consummate and make effective the purchase and sale as set forth by
this Agreement and to assure that each will not be under any material corporate,
legal or contractual restriction that would prohibit or delay the timely
consummation of such purchase and sale.
ARTICLE IX
COVENANTS OF HHOC
9.1 HHOC'S COVENANTS. HHOC covenants as follows:
(a) MAINTENANCE OF INTERESTS. Prior to the Closing, HHOC shall cause
those Assets not operated by Buyer to be maintained and operated in a prudent
and workmanlike manner, in good condition and working order, shall maintain
insurance now in force with respect to the Assets, shall timely pay or cause to
be paid all costs and expenses incurred in connection therewith, shall keep the
Leases and Material Agreements in full force and effect and shall perform and
shall comply with the covenants and conditions contained therein; provided,
however, that, except as authorized pursuant to
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subsection (b) below, HHOC shall not commence or participate in the commencement
of operations for the drilling of any new well or the redrilling or completion
of an existing well included within the Assets after the date of this Agreement
and prior to the Closing without the prior written consent of Buyer.
(b) EUGENE ISLAND BLOCKS 64 AND 65 OPERATIONS. Prior to the Closing, if
Buyer so directs, HHOC will execute AFE's circulated by Buyer for operations on
existing wells, including installation of production facilities on Eugene Island
Blocks 64 and 65, and the drilling of a second well on Eugene Island Block 65 as
contemplated in the Eugene Island Block 65 Well No. 2 AFE.
(c) RESTRICTIONS. HHOC will promptly inform Buyer of all requests for
commitments to expend funds with respect to the Assets. Without the prior
written consent of Buyer, and except as provided in Section 9.1(b), Seller shall
not enter into any new agreements or commitments with respect to the Assets
which extend beyond the Closing, shall not commit to or incur any expenditures
in excess of $25,000 (net to HHOC's interest) with respect to any part of the
Assets, shall not make any nonconsent elections with respect to operations
affecting the Assets, shall not abandon or consent to the abandonment of any
well or release or consent to the release of all or any portion of any of the
Leases, shall not modify or terminate any of the Material Agreements or waive or
relinquish any right thereunder, shall not agree to any renegotiated price, take
or other terms under existing gas purchase agreements, shall not agree to any
credit or prepayment arrangement that would reduce the share of gas deliverable
with respect to the Assets following the Effective Time, shall not enter into
any agreement or instrument for the sale, treatment, or transportation of
production from the Assets (except for sales agreements terminable on no more
than 30 days' notice), and shall not encumber, sell or otherwise dispose of any
of the Assets, other than personal property that is replaced by equivalent
property or consumed in the normal operation of the Assets.
(d) NOTIFICATION OF CLAIMS. HHOC shall promptly notify Buyer of any
suit, action or other proceeding before any court or governmental agency and any
cause of action that relates to the Interests or that might result in impairment
or loss of any Seller's title to any portion of the Assets or the value thereof
or that might hinder or impede the operation of the Leases arising or threatened
prior to the Closing.
(e) MAINTENANCE OF CONFIDENTIALITY. HHOC shall exercise all
due diligence in safeguarding and maintaining secure all
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engineering, geological and geophysical data, reports and maps, and all other
confidential data in the possession of HHOC relating to the Assets.
(f) COMPLIANCE WITH LAW. HHOC will comply, and will use its reasonable
efforts to cause all third-party operators of the Leases to comply, with all
laws, rules, regulations, permits, ordinances and orders of all local, state and
federal governmental bodies, authorities and agencies having jurisdiction over
the Assets at all times until the Closing.
(g) OBLIGATION TO INFORM. HHOC shall keep Buyer currently and
completely informed as to all material developments affecting or potentially
affecting the Assets not operated by Buyer. Without limiting the foregoing, if
at or prior to the Closing HHOC becomes aware of any material change or
inaccuracy in any information furnished to Buyer by or on behalf of any Seller
or any material adverse change in the operation or condition of any of the
Assets not operated by Buyer, HHOC shall promptly notify Buyer of such change or
inaccuracy.
(h) EXCLUSIVITY. Until the Closing or the earlier termination of this
Agreement, neither HHOC nor any other Seller will (1) solicit, discuss, or
otherwise entertain, directly or indirectly, any offer to acquire any of the
Assets, (2) provide information to others concerning the Assets (except in the
ordinary course of operation of the Assets) or (3) enter into any negotiations
with, or enter into any agreement that provides for acquisition of the Assets or
any portion thereof by, a person other than Buyer.
(i) OPERATIONS IN PROGRESS. EXHIBIT F is a complete and correct list
and description of all operations on the Leases, other than those conducted by
Buyer, as to which it is anticipated that on and after the date of this
Agreement HHOC will be participating, including, but not limited to, drilling,
completion, installation of production or pipeline facilities (the "Operations
in Progress"). Seller shall notify Buyer of any such activities prior to the
implementation thereof and shall consult with Buyer regarding all such matters
and operations. HHOC shall not make any election with respect thereto under any
operating agreement or other agreement or abandon or permit the abandonment of
any Operations in Progress without the prior written consent of Buyer. HHOC
shall promptly notify Buyer in writing if the costs and expenses relating to any
Operation in Progress are likely to exceed the AFE estimates by more than
fifteen percent (15%) as to the costs incurred by HHOC under each AFE estimate.
Buyer shall
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not be liable for any costs or expenses in excess of such fifteen (15%) margin,
unless HHOC notifies Buyer as provided herein and Buyer expressly approves in
writing the continuation of the operation giving rise to such excess expense or
unless the excess expense cannot reasonably be avoided by reason of legal
obligations or prudent operating practices, including, but not limited to, the
necessity of plugging and abandoning a well in compliance with regulatory or
contractual requirements.
ARTICLE X
CLOSINGS
10.1 CLOSINGS. The closings of the transactions contemplated by this
Agreement shall be held beginning at 10:00 a.m. Local Time at the offices of
HHOC, 700 Louisiana, Suite 2100, Houston, Texas 77002, as follows: on February
14, 1997 as to the Assets relating to Eugene Island Blocks 64 and 65 and on
February 20, 1997 as to the Assets relating to East Cameron Block 378. All
events of each Closing shall each be deemed to have occurred simultaneously with
the other, regardless of when actually occurring, and each shall be a condition
precedent to the other; provided, however, HHOC's delivery of the executed
Eugene Island Block 65 Well No. 2 AFE shall be a condition to the occurrence of
the First Closing.
10.2 SELLERS' CLOSING OBLIGATIONS. At each Closing, except to
the extent comprising the Excluded Assets, Sellers shall deliver to
Buyer the following:
(a) Duly executed and acknowledged assignments substantially
in the form attached hereto as EXHIBIT "E," and such other documents as
may be reasonably necessary in the opinion of counsel for Buyer to
convey Sellers' interest in the Assets to Buyer in accordance with the
provisions hereof;
(b) Possession of the relevant Assets, including copies
of the relevant Records;
(c) A non-foreign person affidavit executed by each
Seller pursuant to Section 1445 of the Internal Revenue Code;
(d) An opinion of John H. Peper, Esq., General Counsel of
HHOC, counsel to Seller, in form reasonably satisfactory to Buyer, with
respect to the matters stated in Sections 4.1(a), (b), (c) and (g), but
as to HHOC only and only as to the First Closing; and
(e) The Preliminary Settlement Statement.
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10.3 BUYER'S CLOSING OBLIGATIONS. At each Closing, Buyer shall deliver
to HHOC (for its account and the account of all other Sellers, such other
Sellers hereby expressly consenting to such disbursement of the Purchase Price
by Buyer):
(a) The Purchase Price, adjusted pursuant to the
provisions hereof, by wire transfer of immediately available
funds;
(b) The Preliminary Settlement Statement; and
(c) An opinion of Howard L. Boigon, Esq., General Counsel to
Buyer, in form reasonably satisfactory to Sellers, with respect to the
matters stated in Sections 5.1(a), (b), (c) and (d).
ARTICLE XI
EFFECT OF CLOSING
11.1 ASSUMED OBLIGATIONS; PRE-CLOSING LIABILITIES. Subject to the
provisions of Section 16.1, upon and after Closing, Buyer shall own the Assets,
together with all the rights, duties, obligations and liabilities accruing after
Closing, and Buyer shall be obligated to assume and pay, perform, fulfill and
discharge all Assumed Obligations. To the extent not included in Assumed
Obligations or in those matters for which Seller is indemnified by Buyer
hereunder, Seller agrees to pay, perform, fulfill and discharge all costs,
expenses and liabilities attributable to the ownership or operation of the
Assets and accruing prior to the Effective Time.
11.2 REVENUES AND EXPENSES.
(a) To the extent not accounted for in Buyer's and Seller's Credits and
adjustments under Section 3.2 hereto, all proceeds, accounts receivable, income,
revenues and other items included in or attributable to the Excluded Assets (as
described in Section 1.7) and the Assets prior to the Effective Time shall
belong to and be retained or paid to Sellers, and all other proceeds, accounts
receivable, income, revenues and other items included on or attributable to the
Assets after the Effective Time shall belong to and be paid over to Buyer.
(b) POST-CLOSING OBLIGATIONS. If any funds are received by
a Party which belong to any other Party, the Party receiving such
funds shall immediately pay the funds over to such other Party
entitled thereto. If an invoice or other obligation to be
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discharged is under the terms of this Agreement partially the obligation of any
Seller and partially the obligation of Buyer, the Party receiving such invoice
or request to discharge the obligation shall promptly notify the other Party
which shall promptly pay over its share thereof after receipt of such notice.
11.3 HHOC OPERATED PROPERTIES. After Closing and until a successor
operator has been approved by the Minerals Management Service, HHOC shall
continue to operate those Assets which it is currently operating. Such continued
operations by HHOC shall be for the account of Buyer and other owners of the
relevant Assets and shall be conducted in accordance with the covenants in
Article IX of this Agreement, subject, however, to provisions of applicable
joint operating agreements. In connection with any such continued operation of
the Assets by HHOC, HHOC shall be reimbursed by Buyer for all costs and expenses
incurred by HHOC with respect thereto, including a charge for overhead, in the
same manner as provided in the applicable joint operating agreement. All costs
and expenses incurred by HHOC in conjunction with such continued operation of
the Assets shall be considered and handled as "Sellers' Credits" pursuant to
Section 3.2(a) to the extent such credits offset same. To the extent Sellers'
Credits are not sufficient to offset the costs and expenses incurred, Buyer
shall remain responsible therefor.
11.4 AMI. Should HHOC (or any affiliate of HHOC), within 18 months of
the date hereof, acquire any interest within Eugene Island Block 64 or 65, Buyer
shall be entitled to acquire 75% of the interest so acquired by HHOC (or an
affiliate of HHOC) in exchange for its payment of 75% of the out-of-pocket cost
of acquisition.
ARTICLE XII
LIMITATIONS OF WARRANTIES AND REMEDIES
12.1 LIMITATIONS. THE EXPRESS REPRESENTATIONS AND WARRANTIES OF SELLERS
CONTAINED IN THIS AGREEMENT ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER
REPRESENTATIONS AND WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, INCLUDING,
WITHOUT LIMITATION, ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE QUALITY,
QUANTITY OR VOLUME OF THE RESERVES, IF ANY, OF HYDROCARBONS IN OR UNDER THE
LEASES, OR THE ENVIRONMENTAL CONDITION OF THE ASSETS. THE ITEMS OF PERSONAL
PROPERTY, EQUIPMENT, IMPROVEMENTS, FIXTURES, AND APPURTENANCES CONVEYED AS PART
OF THE ASSETS ARE SOLD HEREUNDER "AS IS, WHERE IS" AND "WITH ALL FAULTS" AND NO
WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED,
INCLUDING ANY WARRANTY OF
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QUALITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR
CONDITION, ARE GIVEN BY OR ON BEHALF OF SELLER, EXCEPT THOSE
EXPRESSLY STATED HEREIN.
12.2 SURVIVAL. Except as otherwise provided therein, all
representations, warranties, covenants, indemnities and agreements made herein
shall survive the Closings and remain in effect for a period of one year
following the Second Closing or the date on which it was to occur; provided,
however, Article XI, Section 13.2, Section 14.1, Section 14.2, Section 14.3(i),
Section 14.4 and Article XVI shall survive indefinitely, as shall the
representations and warranties of the Sellers provided in Sections 4.1(a), (b)
and (c) and those of Buyer provided in Sections 5.1(a), (b), (c) and (d).
ARTICLE XIII
DEFAULT AND REMEDIES
13.1 LIABILITIES UPON TERMINATION OR BREACH. In addition to the
remedies provided under applicable law, each Party shall have the right to
recover damages for the breach by the other Party or Parties of any warranty,
covenant or agreement contained herein or for the failure of a representation of
the other Party or Parties contained in this Agreement to be true. In the event
any Party wrongfully fails to consummate a Closing, the other Party or Parties
shall have the following remedies in addition to any remedies provided under
applicable law: If Buyer is the Party wrongfully failing to close, Sellers shall
have the right to terminate Buyer's right to acquire any Assets not yet acquired
by Buyer hereunder and the options provided for in Section 2.3 and Section 2.4
and Sellers shall have the right to recover all damages suffered by Sellers as a
result of such failure and, if such failure occurs with respect to Eugene Island
Blocks 64 and 65, Sellers shall in addition have the right to recover any
amounts expended with respect to all AFEs approved as required under Section 2.5
or Section 9.1(b). If Sellers wrongfully fail to close, Sellers acknowledge that
the remedies provided at law would be inadequate and that, as a result, Buyer
shall be entitled to, and Sellers shall not object to, the remedy of specific
performance to compel such performance.
13.2 ATTORNEYS FEES. The prevailing Party in any legal proceeding
brought under or to enforce this Agreement shall be additionally entitled to
recover court costs and reasonable attorney's fees from the non-prevailing
Party.
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ARTICLE XIV
INDEMNITY
14.1 BUYER'S INDEMNIFICATION. After the Closing, Buyer agrees to
indemnify, defend and hold Sellers and their respective directors, officers,
shareholders, employees, trustees, partners, agents and attorneys (collectively,
the "Seller Indemnified Parties") harmless from and against any and all Losses
(as defined below) with respect to any liabilities and obligations, or alleged
or threatened liabilities or obligations, including, but not limited to, claims
for personal injury, illness, disease, wrongful death, damages to property,
liability based on strict liability or condition of the Assets, and fines,
penalties and other regulatory sanctions relating to or arising out of ()
Buyer's ownership or operation of the Assets for the period from and after the
Effective Time; () the Assumed Obligations; and () the failure of any
representation of Buyer in this Agreement to be true or the breach of any
warranty, covenant or agreement of Buyer in this Agreement BUT EXCLUDING from
Buyer's indemnity obligation hereunder any Loss resulting from or attributable
to the negligence or willful misconduct of any Seller Indemnified Party, its
officers, employees or agents with respect to the operation and maintenance of
the Assets prior to the Effective Time or the failure of any representation of
any Seller in this Agreement to be true or the breach of any warranty, covenant
or agreement of any Seller in this Agreement.
14.2 EUGENE ISLAND BLOCK 65 WELL NO. 2 INDEMNIFICATION. Further to the
provisions of Section 14.1, Buyer agrees to indemnify, defend and hold the
Seller Indemnified Parties harmless from and against (a) any amounts expended by
any Seller with respect to the Eugene Island Block 65 Well No. 2 AFE should
Buyer wrongfully fail or refuse to close hereunder with respect to the Assets
relating to Eugene Island Blocks 64 and 65 and (b) regardless of whether the
First Closing occurs, any and all Losses with respect to claims of other owners
of the Leases covering Eugene Island Blocks 64 and 65 based on approval by HHOC
of the proposal with respect to the Eugene Island Block 65 Well No. 2 or the
Eugene Island Block 65 Well No. 2 AFE or any other AFE approved by HHOC as
required pursuant to Section 9.1(b).
14.3 HHOC'S INDEMNIFICATION. After the Closing, HHOC agrees to
indemnify, defend and hold Buyer and its directors, officers, shareholders,
employees, agents and attorneys (collectively, the "Buyer Indemnified Parties")
harmless from and against any and all Losses with respect to all liabilities and
obligations or alleged or threatened liabilities and obligations, including, but
not
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limited to, claims for personal injury, illness, disease, wrongful death, damage
to property, liability based on strict liability or condition of the Assets, and
fines, penalties and other regulatory sanctions resulting from or arising out of
(i) ownership or operation of the Assets prior to the Effective Time; and (ii)
the failure of any representation of Seller in this Agreement to be true or the
breach of any warranty or covenant or agreement of Seller in this Agreement BUT
EXCLUDING from HHOC's indemnity obligation hereunder any Loss resulting from or
attributable to the negligence or willful misconduct of any Buyer Indemnified
Party with respect to the operation and maintenance of the Assets after the
Effective Time or the failure of any representation of Buyer in this Agreement
to be true or the breach of any warranty, covenant or agreement of Buyer in this
Agreement.
14.4 SCOPE AND PROCEDURE FOR INDEMNIFICATION.
(a) The indemnity provided for by each of Sections 14.1 and 14.2 shall
extend to any loss, cost, expense, liability or damage ("Loss") incurred or
suffered by the Seller Indemnified Party or Buyer Indemnified Party, as the case
may be, including reasonable fees and expenses of attorneys, technical experts
and expert witnesses reasonably incident to matters indemnified against. The
amount of each payment claimed by a Seller Indemnified Party or Buyer
Indemnified Party, as the case may be, to be owing as described in each of such
Sections, together with a list identifying, to the extent reasonably possible,
each separate item of Loss for which payment is so claimed, shall be set forth
by such claiming party in a statement delivered to the indemnifying Party
setting forth the basis of such claim and shall be paid by such indemnifying
Party as and to the extent required herein within thirty (30) days after receipt
of such statement. Within sixty (60) days after notification to a Seller
Indemnified Party or Buyer Indemnified Party, as the case may be, with respect
to any claim or legal action or other matter that could result in a Loss for
which indemnification may be sought under this Article XIV, but in any event in
time sufficient for the indemnifying Party to contest any action, claim or
proceeding that has become the subject of proceedings before any court or
tribunal, such Seller Indemnified Party or Buyer Indemnified Party, as the case
may be, shall give written notice of such claim, legal action or other matter to
the indemnifying Party and, at the request of such indemnifying Party, shall
furnish the indemnifying Party or its counsel with copies of all pleadings and
other information with respect to such claim, legal action or other matter and
shall, at the election of the indemnifying Party made within sixty (60) days
after receipt of such notice, permit the indemnifying Party to assume control of
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such claim, legal action or other matter (to the extent only that such claim,
legal action or other matter relates to a Loss for which the indemnifying Party
is liable), including the determination of all appropriate actions, the
negotiation of settlements on behalf of the Seller Indemnified Party or Buyer
Indemnified Party, as the case may be, and the conduct of litigation through
attorneys of the indemnifying Party's choice. In the event of such an election
by the indemnifying Party, (i) any expense incurred by the Seller Indemnified
Party or Buyer Indemnified Party, as the case may be thereafter for
investigation or defense of the matter shall be borne by the Seller Indemnified
Party or Buyer Indemnified Party, as the case may be, and (ii) the Seller
Indemnified Party or Buyer Indemnified Party, as the case may be, shall give all
reasonable information and assistance, other than pecuniary, that the
indemnifying Party shall deem reasonably necessary to the proper defense of such
claim, legal action, or other matter, subject to reimbursement for its
out-of-pocket expenses incurred in rendering such assistance.
(b) In the absence of such an election, the Seller Indemnified Party or
Buyer Indemnified Party, as the case may be, will use its best efforts to defend
any claim, legal action or other matter to which such indemnifying Party's
indemnification under this Article XIV applies. Failure to provide timely notice
pursuant to this Section 14.3 shall not deprive the party seeking
indemnification of its right to indemnification pursuant to this Article XIV,
although such party shall be liable for any damages occasioned by its delay in
affording the party entitled to notice with such notice and shall not be
entitled to indemnification for any costs incurred during the period of such
delay that could reasonably have been avoided by the indemnifying Party if
timely notice had been given.
(c) In the event Buyer makes a claim for indemnification for breach of
any Environmental Laws, upon Buyer's request HHOC shall, without limitation of
Buyer's remedies hereunder, assign to Buyer any right of HHOC for
indemnification for such matter from HHOC's predecessors in title.
ARTICLE XV
TERMINATION
15.1 TERMINATION PURSUANT TO SECTION 7.6. Should Buyer or
Sellers elect, pursuant to the provisions of Section 7.6, to
terminate this Agreement as to the Assets relating to East Cameron
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Block 378, then, as part of such termination, the then unexercised rights of
Buyer under Sections 2.3 and 2.4 shall terminate also.
15.2 EXPIRATION OF RIGHTS UNDER SECTIONS 2.3 AND 2.4. Rights of Buyer
under Sections 2.3 and 2.4 unexercised as of December 31, 1997, shall expire on
such date; provided, however, that if HHOC has not yet offered Buyer a right
with respect to the Exploration Rights associated with a particular offshore
block, but has acquired certain (although less than all required) rights with
respect to such block, HHOC shall then be obligated to offer to Buyer the right
to acquire a portion of such rights acquired by HHOC as provided in Section 2.3,
but paying therefor the consideration set forth in EXHIBIT G as to such block.
15.3 EFFECT OF TERMINATION. Any termination of this Agreement, whether
in whole or in part, shall not impact any previous performance of portions of
this Agreement or impair any rights or obligations accrued or vested prior to
such termination. Furthermore, all indemnifications provided in this Agreement
shall survive any such termination of this Agreement and the Closings.
ARTICLE XVI
MISCELLANEOUS
16.1 CERTAIN GOVERNMENTAL APPROVALS. Buyer agrees that promptly after
Closing it shall actively pursue unconditional approval by the Minerals
Management Service of the assignment of the Assets, and operatorship of those
Assets HHOC is currently operating. Buyer obligates itself to take any and all
action required by the Minerals Management Service or any other regulatory
agency in order to obtain such unconditional approval, including, but not
limited to, posting any and all bonds or other securities which may be required
of it or its Operating Agent, in excess of such parties' existing lease,
pipeline or area-wide bond.
16.2 RECORD TITLE IN SELLER. Until the governmental approvals provided
for in Section 16.1 are obtained, however, HHOC shall continue to hold record
title to the Assets as nominee for Buyer, during which time (i) subject to
Article XIV, Buyer shall indemnify and hold HHOC harmless from any and all
claims, expenses of any kind or character relating to such Assets accruing after
Closing and (ii) HHOC shall act as Buyer's nominee but shall be authorized to
act only upon and in accordance with Buyer's specific written instructions and
HHOC shall have no authority, responsibility or discretion to perform any tasks
or functions with respect to the Assets other than those which are purely
administrative or
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ministerial in nature, unless otherwise specifically requested and
authorized by Buyer in writing.
16.3 PUBLIC ANNOUNCEMENTS. Prior to making any public announcement or
statement with respect to the transactions contemplated by this Agreement, the
Party desiring to make such public announcement or statement shall consult with
the other Parties and exercise its best efforts to (i) agree upon the text of a
joint public announcement or statement to be made by all of such Parties or (ii)
obtain approval of the other Party or Parties to the text of a public
announcement or statement to be made solely by Sellers or Buyer, as the case may
be, such approval not to be unreasonably withheld. Nothing contained in this
paragraph shall be construed to require any Party to obtain approval of the
other Party or Parties to disclose information with respect to the transactions
contemplated by this Agreement to any state or federal governmental authority or
agency to the extent required by applicable law or by any applicable rules,
regulations or orders of any governmental authority or agency having
jurisdiction or necessary to comply with disclosure requirements of any stock
exchange and applicable securities laws.
16.4 FILING AND RECORDING OF ASSIGNMENTS. Buyer shall be solely
responsible for all filings and recording of assignments and other documents
related to the Assets and for all fees connected therewith, except as otherwise
provided in this Agreement. Buyer shall furnish Sellers with copies of all
filings made by it pursuant to this Agreement and of the pertinent recording
data pertaining to same. Sellers shall not be responsible for any loss to Buyer
because of Buyer's failure to file or record documents correctly or promptly.
Buyer shall promptly file all appropriate forms or declarations with the
Minerals Management Service relative to this Agreement and its assumption of the
Leases and operation to the extent provided hereunder, and Sellers shall
cooperate with Buyer in connection with such filings.
16.5 FURTHER ASSURANCES AND RECORDS.
(a) Each of the Parties will execute, acknowledge and deliver to the
other Party or Parties such further instruments and take such other action as
may be reasonably requested in order to more effectively assure to such Party
all of the respective properties, rights, titles, interests, estates and
privileges intended to be assigned, delivered or inuring to the benefit of such
Party in consummation of the transactions contemplated hereby.
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(b) Buyer agrees to maintain the files and records of Sellers that are
acquired pursuant to this Agreement for seven (7) years after Closing. Buyer
shall provide Sellers and their representatives reasonable access to and the
right to copy such files and records for the purposes of (i) preparing and
delivering any accounting provided for under this Agreement and adjusting,
prorating and settling the charges and credits provided for in this Agreement,
(ii) complying with any law, rule or regulation affecting Sellers' interest in
the relevant Assets prior to the relevant Closing Date, (iii) preparing any
audit of the books and records of any third party relating to Sellers' interest
in the relevant Assets prior to the relevant Closing Date, or responding to any
audit prepared by such third parties, (iv) preparing tax returns, (v) responding
to or disputing any tax audit or (vi) asserting, defending or otherwise dealing
with any claim or dispute under this Agreement.
(c) Buyer agrees that, as soon as practicable after each Closing, it
will remove or cause to be removed the names and marks used by Seller and all
variations and derivatives thereof and logos relating thereto from the relevant
Assets and will not thereafter make any use whatsoever of such names, marks and
logos.
(d) To the extent not obtained or satisfied as of the relevant Closing,
Sellers agree to continue to use all reasonable efforts, but without any
obligation to incur any cost or expense in connection therewith, and to
cooperate with Buyer's efforts to obtain for Buyer access to files, records and
data relating to the relevant Assets in the possession of either Sellers or
third parties. In the event Buyer shall obtain such files, records and data for
the account of Sellers or in the name of Sellers, Sellers shall maintain files,
records, and data pursuant to Section 16.6(b) of this Agreement.
16.6 NOTICES. Except as otherwise expressly provided herein, all
communications required or permitted under this Agreement shall be in writing
and any communication or delivery hereunder shall be deemed to have been duly
given and received when actually delivered to the address set forth below of the
party to be notified, addressed as follows, or when a legible facsimile copy is
received by the party's facsimile equipment at the number shown below (and the
Sellers other than HHOC expressly agree that notice given or received by HHOC in
such manner shall be binding on them):
If to any of Sellers:
Hall-Houston Oil Company
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Attn: John H. Peper
700 Louisiana, Suite 2100
Houston, Texas 77002
Phone: (713) 228-0711
Fax: (713) 225-7600
If to Buyer:
Basin Exploration, Inc.
Attn: Sam D. Winegrad
370 17th Street, Suite 3400
Denver, Colorado 80202
Phone: (303) 685-8000
Fax: (303) 685-8020
Provided, however, that any notice required or permitted under this Agreement
will be effective if given verbally within the time provided, so long as such
verbal notice is followed by written notice thereof in the manner provided
herein within twenty-four (24) hours following the end of such time period. Any
party may, by written notice so delivered to the other, change the address or
facsimile number to which delivery shall thereafter be made.
16.7 INCIDENTAL EXPENSES. Buyer shall bear and pay (i) all state or
local government sales, transfer, gross proceeds or similar taxes incident to or
caused by the transfer of any Assets to Buyer, (ii) all documentary, transfer
and other state and local government taxes incident to the transfer of any
Assets to Buyer, (iii) all filing, recording or registration fees for any
assignment or conveyance delivered hereunder, and (v) all normal costs or fees
required to obtain consent to assign any Assets. Each party shall bear its own
respective expenses incurred in connection with each Closing, including its own
consultants' fees, attorneys' fees, accountants' fees, and other similar costs
and expenses.
16.8 ENTIRE AGREEMENT. This Agreement (including all Exhibits to this
Agreement) embodies the entire agreement among the parties (superseding all
prior agreements, arrangements and understandings related to the subject matter
hereof), and may be supplemented, altered, amended, modified or revoked by
writing only, signed by the parties hereto. The headings herein are for
convenience only and shall have no significance in the interpretation hereof.
16.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS.
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CONFIDENTIAL
16.10 EXHIBITS. All Exhibits hereto, and the terms thereof, which are
referred to herein are hereby made a part hereof and incorporated herein by
reference.
16.11 AUDITS. Buyer shall have the right, during reasonable business
hours, to audit all records of Sellers pertaining to the Assets for the period
from the relevant Closing in which such Assets were conveyed until two (2) years
from the end of the calendar year in which such Closing occurs.
16.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each and every counterpart shall be deemed for all purposes
one agreement.
16.13 WAIVER. Any of the terms, provisions, covenants, representations,
warranties or conditions hereof may be waived only by a written instrument
executed by the Party waiving compliance. Except as otherwise expressly provided
in this Agreement, the failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect such Party's right
to enforce the same. No waiver by any Party of any condition, or of the breach
of any term, provision, covenant, representation or warranty contained in this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be or construed as a further or continuing waiver of any such
condition or breach or waiver of any other term, provision, covenant,
representation or warranty.
16.14 BINDING EFFECT; ASSIGNMENT. It is understood and agreed that
Buyer may designate or make any party other than Buyer the operator of the
Assets acquired by Buyer with the Minerals Management Service without the
consent of Sellers. All the terms, provisions, covenants, obligations,
indemnities, representations, warranties and conditions of this Agreement shall
be binding upon and inure to the benefit of and be enforceable by the Parties
hereto and their respective successors and assigns.
16.15 TAXES. Seller and Buyer agree that this transaction may be
subject to the reporting requirement of Section 1060 of the Internal Revenue
Code of 1986, as amended, and that, therefore, IRS Form 8594, Asset Acquisition
Statement, may be required to be filed for this transaction. In the event the
parties mutually agree that a filing of Form 8594 is required, the parties will
confer and cooperate in the preparation and filing of their respective forms to
reflect a consistent reporting of the agreed-upon allocation. Seller shall be
responsible for and shall pay all taxes attributable to or arising from the
ownership or operation of the
35
<PAGE>
CONFIDENTIAL
Assets prior to the Effective Time. Buyer shall be responsible for and shall pay
all taxes attributable to or arising from the ownership or operation of the
Assets after the Effective Time.
[SIGNATURES APPEAR ON FOLLOWING PAGES]
36
<PAGE>
CONFIDENTIAL
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
SELLERS:
Hall-Houston Oil Company
By:________________________________
Wayne P. Hall
President
Hall-Houston Oil Company Employee
Royalty Trust
By:________________________________
Gary L. Hall
Trustee
By:________________________________
Wayne P. Hall
Trustee
Hall-Houston 1996 Exploration and
Development Facility Overriding
Royalty Trust
By:________________________________
Gary L. Hall
Trustee
By:________________________________
Wayne P. Hall
Trustee
Hall Family Trust
By:________________________________
Gary L. Hall
Trustee
37
<PAGE>
CONFIDENTIAL
Gulf Royalty Interests, Inc.
By:________________________________
Gary L. Hall
President
BUYER:
Basin Exploration, Inc., a Delaware
corporation, doing business in
Louisiana as Basin Exploration,
Inc. (Delaware)
By:________________________________
Sam D. Winegrad
Vice President of
Corporate Development
38
<PAGE>
CONFIDENTIAL
EXHIBITS
EXHIBIT A: LEASES AND INTERESTS
EXHIBIT B: MATERIAL AGREEMENTS
EXHIBIT C: INVENTORY OF WELLS, FACILITIES AND EQUIPMENT
EXHIBIT D: ALLOCATED VALUES
EXHIBIT E: FORMS OF ASSIGNMENT
EXHIBIT F: EXISTING OPERATIONS
EXHIBIT G: EXPLORATION RIGHTS AND CONSIDERATION THEREFOR
39
<PAGE>
CONFIDENTIAL
EXHIBIT "A"
Attached to and made a part of that certain Purchase and Sale
Agreement effective February 13, 1997, by and between
Hall-Houston Oil Company et al, as Sellers, and Basin
Exploration,
Inc., as Buyer.
THE LEASES AND INTERESTS
1. Oil and Gas Lease bearing Serial No. OCS-G 12856, effective June 1,
1991 between the United States of America, as Lessor, and Hall-Houston
Oil Company, as Lessee, covering all of BLOCK 378, EAST CAMERON AREA,
SOUTH ADDITION, OCS Leasing Map, Louisiana Map No. 2A, INSOFAR AND ONLY
INSOFAR as said Lease covers:
A. The S/2S/2 and S/2N/2S/2 of Block 378, from the surface of the
earth down to 100 feet below the stratigraphic equivalent of
3743 feet true vertical depth (TVD) as found on the electric
log for the Anadarko OCS-G 6660 #1 well located in Block 378
("Productive Depth
Limitation").
Working Interest: 46.47059%
Net Revenue Interest: 35.19762%
Overriding Royalty Interest:
Gulf Royalty Interests, Inc. 0.500000%
Hall-Houston Oil Company
Employee Royalty Trust 0.500000%
Hall Family Trust 0.55556%
Hall-Houston 1996 Exploration
and Development Facility
Overriding Royalty Trust 1.85882%
Total 3.41438%
B. (I) the S/2S/2 and S/2N/2S/2 of Block 378 as to all
depths below the Productive Depth Limitation described
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<PAGE>
CONFIDENTIAL
above, and (ii) the N/2 and N/2N/2S/2 of Block 378 as to
all depths.
Working Interest: 23.23529%
Net Revenue Interest: 17.59881%
2. Oil and Gas Lease bearing Serial No. OCS-G 2098 effective
February 1, 1971, by and between the United States of America,
as Lessor, and Chevron Oil Company, as Lessee, covering the
S/2 OF BLOCK 64, EUGENE ISLAND AREA, Official Leasing Map,
Louisiana Map No. 4, containing approximately 2,500 acres.
Working Interest: 25.00000% Before Project Payout
20.00000% After Project Payout
Net Revenue Interest: 17.86458% Before Project Payout
14.29167% After Project Payout
3. Oil and Gas Lease bearing Serial No. OCS-G 16343 effective August 1,
1996, by and between the United States of America, as Lessor, and Basin
Exploration, Inc., as Lessee, covering all of BLOCK 65, EUGENE ISLAND
AREA, OCS Leasing Map, Louisiana Map No. 4, containing approximately
5,000 acres.
Working interest: 25.00000% Before Project Payout
20.00000% After Project Payout
Net Revenue Interest: 20.36458% Before Project Payout
16.29167% After Project Payout
END OF EXHIBIT "A"
41
<PAGE>
CONFIDENTIAL
EXHIBIT "B"
Attached to and made a part of that certain Purchase and Sale
Agreement effective February 13, 1997, by and between
Hall-Houston Oil Company et al, as Sellers, and Basin
Exploration, Inc., as Buyer.
MATERIAL AGREEMENTS
A. OCS-G 12856 EAST CAMERON AREA, BLOCK 378:
1. Operating Agreement effective September 23, 1996 between
Hall-Houston Oil Company, as Operator, and Zilkha Energy
Company and Ocean Front Oil & Gas, Inc., as Non-
Operators;
2. Letter of Intent dated December 10, 1996 between Anadarko
Petroleum Corporation and Hall-Houston Oil Company, regarding
East Cameron Block 378 and East Cameron Block 359 Production
Processing and Sharing.
B. OCS-G 2098 EUGENE ISLAND AREA, BLOCK 64:
1. Farmout Agreement dated August 15, 1996, as amended, by
and between Chevron U.S.A. Production Company, as
Farmoutor, and Basin Exploration, Inc., as Farmoutee.
2. Participation Agreement dated August 25, 1996, by and
between Basin Exploration, Inc. and Hall-Houston Oil
Company.
3. Operating Agreement dated August 25, 1996, by and between
Basin Exploration, Inc., as Operator, and Hall-Houston
Oil Company et al, as Non-Operators.
C. OCS-G 16343 EUGENE ISLAND AREA, BLOCK 65:
1. Participation Agreement dated August 25, 1996, by and
between Basin Exploration, Inc. and Hall-Houston Oil
Company.
2. Operating Agreement dated August 25, 1996, by and between
Basin Exploration, Inc., as Operator, and Hall-Houston
Oil Company et al, as Non-Operators.
END OF EXHIBIT "B"
42
<PAGE>
CONFIDENTIAL
EXHIBIT "C"
Attached to and made a part of that certain Purchase and Sale
Agreement effective February 13, 1997, by and between
Hall-Houston Oil Company et al, as Sellers, and Basin
Exploration, Inc., as Buyer.
INVENTORY OF WELLS
1. OCS-G 12856 Well #2, East Cameron Area, Block 378
2. OCS-G 2098 Well #2, Eugene Island Area, Block 64
3. OCS-G 16343 Well #1, Eugene Island Area, Block 65
FACILITIES AND EQUIPMENT
A. OCS-G 12856 East Cameron Area, Block 378:
1. Well #2: Cameron 3-1/6" 5,000 pound Subsea Tree and
Control Panel
B. OCS-G 2098 Eugene Island Area, Block 64:
N/A
C. OCS-G 16343 Eugene Island Area, Block 65:
N/A
END OF EXHIBIT "C"
43
<PAGE>
CONFIDENTIAL
EXHIBIT "D"
Attached to and made a part of that certain Purchase and Sale
Agreement effective February 13, 1997, by and between
Hall-Houston Oil Company et al, as Sellers, and Basin
Exploration, Inc., as Buyer.
<TABLE>
<CAPTION>
WORKING INTEREST AND ASSOCIATED NET REVENUE INTEREST:
Eugene Island 64/65 $7,000,000.00
East Cameron 378 $6,500,000.00
OVERRIDING ROYALTY INTERESTS:
<S> <C> <C> <C>
East Cameron 378 $925,000.00 3.41438% of 8/8ths
ALLOCATED BY ENTITY AS FOLLOWS:
Gulf Royalty Interests, Inc. $135,456.51 0.50000% of 8/8ths
Hall-Houston Oil Company
Employee Royalty Trust $135,456.51 0.50000% of 8/8ths
Hall Family Trust $150,508.44 0.55556% of 8/8ths
Hall-Houston 1996 Exploration
and Development Facility
Overriding Royalty Trust $503,578.54 1.85882% of 8/8ths
---------- -------
Totals $925,000.00 3.41438% of 8/8ths
</TABLE>
END OF EXHIBIT "D"
44
<PAGE>
CONFIDENTIAL
EXHIBIT "E-1"
Attached to and made a part of that certain Purchase and Sale
Agreement effective February 13, 1997, by and between
Hall-Houston Oil Company et al, as Sellers, and Basin
Exploration, Inc., as Buyer.
ASSIGNMENT OF OIL AND GAS LEASE
[East Cameron 378]
THE UNITED STATES OF AMERICA ss.
OUTER CONTINENTAL SHELF ss. KNOW ALL MEN BY THESE PRESENTS:
OFFSHORE LOUISIANA ss.
THAT, HALL-HOUSTON OIL COMPANY, a Texas corporation, whose address is 700
Louisiana, Suite 2100, Houston, Texas 77002 (hereinafter sometimes referred to
as "Assignor"), for and in consideration of Ten and no/100 Dollars ($10.00) and
other good and valuable consideration in hand paid to Assignor by BASIN
EXPLORATION, INC., a Delaware corporation, whose address is 370 17th Street,
Suite 3400, Denver, Colorado 80202 (hereinafter sometimes referred to as
"Assignee"), the receipt and sufficiency of which are hereby acknowledged, has
transferred, sold, assigned and conveyed, and by these presents does hereby
TRANSFER, SELL, ASSIGN AND CONVEY unto Assignee an undivided _____ percent
(___%) of 100% interest, subject to the Permitted Encumbrances (as defined
below), in and to the following described oil and gas lease:
Oil and Gas Lease bearing Serial No. OCS-G 12856 effective June 1,
1991, between the United States of America, as Lessor, and
Hall-Houston Oil Company, as Lessee, covering all of BLOCK 378, EUGENE
ISLAND AREA, OCS Leasing Map, Louisiana Map No.2A, INSOFAR AND ONLY
INSOFAR as concerns the aliquots __________(the "Lease").
This Assignment is expressly made subject to the terms and conditions
of the following agreements, overriding royalty interests, burdens, encumbrances
and other items (the "Permitted Encumbrances"):
4. The Lease and all limitations, restrictions, terms, covenants and
conditions thereof;
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<PAGE>
CONFIDENTIAL
5. Operating Agreement effective September 23, 1996 between
Hall-Houston Oil Company, as Operator, and Zilkha Energy Company
and Ocean Front Oil & Gas, Inc., as Non-Operators.
6. An undivided ____% of a .375% of 8/8ths overriding royalty
interest in favor of Summit Development Corporation;
7. An undivided ___% of a .25% of 8/8ths overriding royalty interest
in favor of Summit Royalty Company;
8. An undivided ___% of a .20% of 8/8ths overriding royalty interest
in favor of Larry C. Flowers;
9. An undivided ___% of a .10% of 8/8ths overriding royalty interest
in favor of Karen Mann Flowers;
10. An undivided ___% of a 1.11111% of 8/8ths overriding royalty
interest in favor of Nuevo Energy Corporation.
11. Purchase and Sale Agreement effective February 13, 1997, between
Hall-Houston Oil Company, Hall-Houston Oil Company Employee
Royalty Trust, Hall-Houston 1996 Exploration and Development
Facility Overriding Royalty Trust, and Gulf Royalty Interests,
Inc., as Sellers, and Basin Exploration, Inc., as Buyer
("Purchase and Sale Agreement").
For the same consideration and subject to the Permitted Encumbrances,
Assignor hereby sells, assigns, transfers and conveys unto Assignee an undivided
____ percent (___ %) of 100% interest in and to the hereinafter described
property ("Assets"):
(A) All contractual rights and other rights and claims against third
parties that arise out of the Lease and that accrue from and
after the effective date hereof;
(B) All of the real, personal and mixed property used or held for use
directly in operation thereof (whether located on or off such
Lease), which is owned by Assignor, in whole or in part (the
"Related Assets"), including, without limitation, the wells, well
equipment, casing, subsea tree and all other improvements used in
the operation thereof owned by Assignor; provided, however, that
Assignor and Assignee hereby acknowledge that, except as
otherwise specifically provided herein, the Related Assets do not
include (i) any cash, certificates of deposit, securities, claims
for federal or state income tax refunds, or other claims of
Assignor which do not arise out of ownership of the
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<PAGE>
CONFIDENTIAL
Lease; (ii) any other tangible or intangible asset of Assignor
which are not used directly in connection with the operation
of the Lease.
Assignee hereby assumes and agrees to pay and fully perform those
obligations and liabilities in respect of the interest assigned to Assignee
under this Assignment as set forth in the Purchase and Sale Agreement.
This Assignment shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
This Assignment is made expressly subject to the terms and provisions
of the Purchase and Sale Agreement. If any of the terms and provisions of this
Assignment conflict with the terms and provisions of the Purchase and Sale
Agreement, the Purchase and Sale Agreement shall prevail.
TO HAVE AND TO HOLD the Lease and the Assets and all rights thereunder
unto Assignee and its successors and assigns forever. Assignor hereby binds
itself and its successors and assigns to warrant and forever defend the
interests assigned hereby unto Assignee and its successors and assigns against
every person whomsoever lawfully claiming or to claim the same or any part
thereof by, through or under Assignor, but not otherwise. NO OTHER WARRANTY,
WHETHER STATUTORY, EXPRESS OR IMPLIED, IS MADE HEREIN.
IN WITNESS WHEREOF, this Assignment is executed on this ____ day of
February, 1997, but shall be effective for all purposes as of 12:01 a.m.,
Central Standard Time, February 13, 1997.
ASSIGNOR:
WITNESSES: HALL-HOUSTON OIL COMPANY
- ------------------------------
By: __________________________________
______________________________ Kelly D. Fry
Vice President - Land
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<PAGE>
CONFIDENTIAL
ASSIGNEE:
WITNESSES: BASIN EXPLORATION, INC.
- ------------------------------
By: __________________________________
______________________________ Sam D. Winegrad
Vice President of
Corporate Development
STATE OF TEXAS ss.
COUNTY OF HARRIS ss.
On this_____ day of February, 1997, before me appeared KELLY D. FRY,
to me personally known, who, being by me duly sworn (or affirmed) did say that
he is the VICE PRESIDENT - LAND of HALL-HOUSTON OIL COMPANY, a Texas
corporation, and that the instrument was signed on behalf of the corporation by
the authority of its Board of Directors and that KELLY D. FRY acknowledged the
instrument to be the free act and deed of the corporation.
--------------------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF TEXAS
STATE OF TEXAS ss.
COUNTY OF HARRIS ss.
On this ___ day of February, 1997, before me appeared SAM D. WINEGRAD,
to me personally known, who, being by me duly sworn (or affirmed) did say that
he is the Vice President of Corporate Development of BASIN EXPLORATION, INC., a
Delaware corporation, and
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<PAGE>
CONFIDENTIAL
that the instrument was signed on behalf of the corporation by the authority of
its Board of Directors and that SAM D. WINEGRAD acknowledged the instrument to
be the free act and deed of the corporation.
--------------------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF TEXAS
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<PAGE>
CONFIDENTIAL
EXHIBIT "E-2"
Attached to and made a part of that certain Purchase and Sale
Agreement effective February 13, 1997, by and between
Hall-Houston Oil Company et al, as Sellers, and Basin
Exploration, Inc., as Buyer.
ASSIGNMENT OF OPERATING RIGHTS
[East Cameron 378]
THE UNITED STATES OF AMERICA ss.
OUTER CONTINENTAL SHELF ss. KNOW ALL MEN BY THESE PRESENTS:
OFFSHORE LOUISIANA ss.
THAT, BASIN EXPLORATION, INC., a Delaware corporation, whose address
is 370 17th Street, Suite 3400, Denver, Colorado 80202 (hereinafter sometimes
referred to as "Assignor"), for and in consideration of Ten and no/100 Dollars
($10.00) and other good and valuable consideration in hand paid to Assignor by
HALL-HOUSTON OIL COMPANY, a Texas corporation, whose address is 700 Louisiana,
Suite 2100, Houston, Texas 77002 (hereinafter sometimes referred to as
"Assignee"), the receipt and sufficiency of which are hereby acknowledged, has
transferred, sold, assigned and conveyed, and by these presents does hereby
TRANSFER, SELL, ASSIGN AND CONVEY unto Assignee an undivided ________ percent
(___%) of 100% operating rights interest, subject to the Permitted Encumbrances
(as defined below), in and to the following described oil and gas lease:
Oil and Gas Lease bearing Serial No. OCS-G 12856 effective June 1,
1991, between the United States of America, as Lessor, and
Hall-Houston Oil Company, as Lessee, covering all of BLOCK 378, EUGENE
ISLAND AREA, OCS Leasing Map, Louisiana Map No.2A, INSOFAR AND ONLY
INSOFAR as concerns the aliquots __________and the depths (the
"Lease").
This Assignment is expressly made subject to the terms and conditions
of the following agreements, overriding royalty interests, burdens, encumbrances
and other items (the "Permitted Encumbrances"):
12. The Lease and all limitations, restrictions, terms, covenants and
conditions thereof;
Page 50
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CONFIDENTIAL
13. Operating Agreement effective September 23, 1996 between
Hall-Houston Oil Company, as Operator, and Zilkha Energy Company
and Ocean Front Oil & Gas, Inc., as Non-Operators.
14. An undivided __% of a .375% of 8/8ths overriding royalty interest
in favor of Summit Development Corporation;
15. An undivided __ % of a .25 % of 8/8ths overriding royalty
interest in favor of Summit Royalty Company;
16. An undivided ____% of a .20% of 8/8ths overriding royalty
interest in favor of Larry C. Flowers;
17. An undivided _____% of a .10% of 8/8ths overriding royalty
interest in favor of Karen Mann Flowers;
18. An undivided ____% of a 1.11111% of 8/8ths overriding royalty
interest in favor of Nuevo Energy Corporation.
19. Purchase and Sale Agreement effective February 13, 1997, between
Hall-Houston Oil Company, Hall-Houston Oil Company Employee
Royalty Trust, Hall-Houston 1996 Exploration and Development
Facility Overriding Royalty Trust, and Gulf Royalty Interests,
Inc., as Sellers, and Basin Exploration, Inc., as Buyer
("Purchase and Sale Agreement").
For the same consideration and subject to the Permitted Encumbrances,
Assignor hereby sells, assigns, transfers and conveys unto Assignee an undivided
____ percent (___%) of 100% operating rights interest in and to the hereinafter
described property ("Assets"):
(A) All contractual rights and other rights and claims against third
parties that arise out of the Lease and that accrue from and
after the effective date hereof;
(B) All of the real, personal and mixed property used or held for use
directly in operation thereof (whether located on or off such
Lease), which is owned by Assignor, in whole or in part (the
"Related Assets"), including, without limitation, the wells, well
equipment, casing, subsea tree and all other improvements used in
the operation thereof owned by Assignor; provided, however, that
Assignor and Assignee hereby acknowledge that, except as
otherwise specifically provided herein, the Related Assets do not
include (i) any cash, certificates of deposit, securities, claims
for federal or state income tax refunds, or other claims of
Assignor which do not arise out of ownership of the
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Lease; (ii) any other tangible or intangible asset of Assignor
which are not used directly in connection with the operation
of the Lease.
Assignee hereby assumes and agrees to pay and fully perform those
obligations and liabilities in respect of the interest assigned to Assignee
under this Assignment as set forth in the Purchase and Sale Agreement.
This Assignment shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
This Assignment is made expressly subject to the terms and provisions
of the Purchase and Sale Agreement. If any of the terms and provisions of this
Assignment conflict with the terms and provisions of the Purchase and Sale
Agreement, the Purchase and Sale Agreement shall prevail.
TO HAVE AND TO HOLD the Lease and the Assets and all rights thereunder
unto Assignee and its successors and assigns forever. Assignor hereby binds
itself and its successors and assigns to warrant and forever defend the
operating rights interests assigned hereby unto Assignee and its successors and
assigns against every person whomsoever lawfully claiming or to claim the same
or any part thereof by, through or under Assignor, but not otherwise. NO OTHER
WARRANTY, WHETHER STATUTORY, EXPRESS OR IMPLIED, IS MADE HEREIN.
IN WITNESS WHEREOF, this Assignment is executed on this _____ day of
February, 1997, but shall be effective for all purposes as of 12:01 a.m.,
Central Standard Time, February 13, 1997.
ASSIGNOR
WITNESSES: BASIN EXPLORATION, INC.
- ----------------------------------
By: _____________________________
__________________________________ Sam D. Winegrad
Vice President of
Corporate Development
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CONFIDENTIAL
ASSIGNEE:
WITNESSES: HALL-HOUSTON OIL COMPANY
- ----------------------------------
By: _____________________________
__________________________________ Kelly D. Fry
Vice President - Land
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<PAGE>
CONFIDENTIAL
STATE OF TEXAS ss.
COUNTY OF HARRIS ss.
On this ____ day of February, 1997, before me appeared SAM D.
WINEGRAD, to me personally known, who, being by me duly sworn (or affirmed) did
say that he is the Vice President of Corporate Development of BASIN EXPLORATION,
INC., a Delaware corporation, and that the instrument was signed on behalf of
the corporation by the authority of its Board of Directors and that SAM D.
WINEGRAD, acknowledged the instrument to be the free act and deed of the
corporation.
--------------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF TEXAS
STATE OF TEXAS ss.
COUNTY OF HARRIS ss.
On this ____ day of February, 1997, before me appeared KELLY D. FRY,
to me personally known, who, being by me duly sworn (or affirmed) did say that
he is the VICE PRESIDENT - LAND of HALL-HOUSTON OIL COMPANY, a Texas
corporation, and that the instrument was signed on behalf of the corporation by
the authority of its Board of Directors and that KELLY D. FRY acknowledged the
instrument to be the free act and deed of the corporation.
---------------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF TEXAS
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<PAGE>
CONFIDENTIAL
EXHIBIT "E-3"
Attached to and made a part of that certain Purchase and Sale
Agreement effective February 13, 1997, by and between
Hall-Houston Oil Company et al, as Sellers, and Basin
Exploration, Inc., as Buyer.
ASSIGNMENT OF OVERRIDING ROYALTY INTEREST
[East Cameron 378]
UNITED STATES OF AMERICA ss.
OUTER CONTINENTAL SHELF ss. KNOW ALL MEN BY THESE PRESENTS:
OFFSHORE LOUISIANA ss.
That, HALL-HOUSTON OIL COMPANY EMPLOYEE ROYALTY TRUST, whose Tax
Identification No is ____________________ and whose address is 700 Louisiana,
Suite 2100, Houston, Texas 77002 ("Assignor"), for and in consideration of One
Thousand Dollars ($1,000.00) and other good and valuable consideration, the
receipt of which is hereby acknowledged, does hereby SELL, ASSIGN, TRANSFER,
CONVEY and DELIVER unto BASIN EXPLORATION, INC., a Delaware corporation, whose
Tax Identification No. is _________ and whose address is 370 17th Street, Suite
3400, Denver, Colorado 80202 ("Assignee"), all of Assignor's right, title and
interest in and to that certain oil and gas lease ("Lease") described on Exhibit
"A", attached hereto and made a part hereof, being the same interest described
in that certain Assignment of Overriding Royalty Interest granted by
Hall-Houston Oil Company in favor of Assignor, executed on __________________,
199__, but effective as of __________________________ and recorded in
_____________________________ (hereinafter referred to as the "ASSIGNED
INTEREST").
TO HAVE AND TO HOLD, said ASSIGNED INTEREST in and to the Lease unto
Assignee, its successors and assigns forever, subject to the terms and
conditions of the Lease.
Assignor does hereby bind itself, its heirs, representatives,
successors and assigns to warrant and forever defend the ASSIGNED INTEREST
against every person whosoever lawfully claiming the same or any part thereof
by, through, or under Assignor, but not otherwise, however, Assignee shall have
the rights of full substitution and subrogation in and to any and all rights and
actions of warranty which Assignor may have against any and all preceding owners
of the Lease and ASSIGNED INTEREST. In addition, Assignor hereby warrants and
represents as against every person whosoever lawfully claiming the same or any
part thereof, by, through, or under Assignor, but not otherwise, that the
ASSIGNED INTEREST hereby conveyed to Assignee in the Lease shall entitle
Assignee to receive not less than ____ percent of eight-eighths (____ % of
8/8ths) of all hydrocarbons produced, saved and marketed from the Lease and the
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CONFIDENTIAL
wells associated therewith. NO OTHER WARRANTY, WHETHER STATUTORY, EXPRESS
OR IMPLIED IS MADE HEREIN.
This Assignment is subject to the terms of that certain Purchase and
Sale Agreement between Assignor and Assignee dated February 13, 1997. If any of
the provisions of this Assignment conflict with the terms and provisions of the
Purchase and Sale Agreement, the Purchase and Sale Agreement shall prevail.
IN WITNESS WHEREOF, this Assignment is executed before the undersigned
witnesses by Assignor and Assignee on the _____ day of February, 1997, but shall
be effective for all purposes as of 12:01 a.m., Central Standard Time, February
13, 1997.
ASSIGNOR:
WITNESSES TO BOTH HALL-HOUSTON OIL COMPANY
SIGNATURES: EMPLOYEE ROYALTY TRUST
- ------------------------------------
By: __________________________________
Gary L. Hall, Trustee
- ------------------------------------
By: __________________________________
Wayne P. Hall, Trustee
ASSIGNEE:
WITNESSES: BASIN EXPLORATION, INC.
- ------------------------------------
By: __________________________________
Sam D. Winegrad
____________________________________ Vice President of
Corporate Development
STATE OF TEXAS ss.
COUNTY OF HARRIS ss.
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<PAGE>
CONFIDENTIAL
On this ________ day of February, 1997, before me appeared WAYNE P.
HALL AND GARY L. HALL, to me personally known, who, being by me duly sworn (or
affirmed) did say that they are the Trustees of HALL-HOUSTON OIL COMPANY
EMPLOYEE ROYALTY TRUST and that the instrument was signed on behalf of the trust
and that WAYNE P. HALL AND GARY L. HALL acknowledged the instrument to be the
free act and deed of the trust.
-------------------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF TEXAS
THE STATE OF TEXAS ss.
COUNTY OF HARRIS ss.
On this ____ day of February, 1997, before me appeared SAM D.
WINEGRAD, to me personally known, who, being by me duly sworn (or affirmed) did
say that he is the Vice President of Corporate Development of BASIN EXPLORATION,
INC., a Delaware corporation, and that the instrument was signed on behalf of
the corporation by the authority of its board of directors and that SAM D.
WINEGRAD acknowledged the instrument to be the free act and deed of the
corporation.
--------------------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF TEXAS
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<PAGE>
CONFIDENTIAL
EXHIBIT "E-4"
Attached to and made a part of that certain Purchase and Sale
Agreement effective February 13, 1997, by and between
Hall-Houston Oil Company et al, as Sellers, and Basin
Exploration, Inc., as Buyer.
ASSIGNMENT OF RIGHTS
OCS-G 2098 EUGENE ISLAND BLOCK 64
OCS-G 16343 EUGENE ISLAND BLOCK 65
OFFSHORE LOUISIANA
THIS ASSIGNMENT is made February 14, 1997, but effective as of 12:01
a.m., Central Standard Time, February 13, 1977 (the "Effective Time") among
HALL-HOUSTON OIL COMPANY, a Texas corporation ("HHOC"), HALL-HOUSTON OIL COMPANY
EMPLOYEE ROYALTY TRUST, a Texas trust ("HHOCERT"), and HALL-HOUSTON 1996
EXPLORATION AND DEVELOPMENT FACILITY OVERRIDING ROYALTY TRUST, a Texas trust
("HHOCEDF"), (HHOC, HHOCERT and HHOCEDF, collectively referred to herein as
"Sellers"), and BASIN EXPLORATION, INC., a Delaware corporation doing business
in Louisiana under the name Basin Exploration, Inc. (Delaware) ("Buyer").
For and in consideration of Seven Million Dollars ($7,000,000) and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Sellers hereby assign and relinquish to Buyer all of their
respective rights, titles and interests in and to Federal Oil and Gas Leases
OCS-G 2098 covering the south-half (S/2) of Eugene Island Block 64 and OCS-G
16343 covering all of Eugene Island Block 65 (hereinafter collectively, the
"Blocks"), situated in Federal waters offshore Louisiana, and in all property
and rights related thereto, real, personal or mixed, including but not limited
to (a) the rights and interests of Sellers in the OCS-G 2098 #2 Well and the
OCS-G 16343 #1 Well located in the Blocks and the production therefrom, (b) the
rights and interests of HHOC arising under the Participation Agreement and the
Operating Agreement, both dated and effective August 25, 1996 between HHOC and
Buyer, (c) the rights and interests of HHOC arising under that certain Farmout
Agreement dated August 15, 1996, as amended, between Chevron U.S.A. Production
Company, as Farmoutor, and Buyer, as Farmoutee, and (d) the rights and interests
of HHOC in all permits, agreements, reservations, claims, and other benefits and
properties related to the ownership of or the right to acquire interests in said
Blocks or to the conduct of operations with respect thereto.
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CONFIDENTIAL
This Assignment is given pursuant to and is subject to that certain
Purchase and Sale Agreement dated as of the Effective Time between Buyer and
among others, the Sellers and is subject in all respects to such Agreement.
IN WITNESS WHEREOF, Sellers and Buyer have executed this Assignment as
of the Effective Time stated above.
SELLERS:
WITNESSES FOR ALL SIGNATURES: HALL-HOUSTON OIL COMPANY
By:______________________________
____________________________ Wayne P. Hall
President
HALL-HOUSTON OIL COMPANY
____________________________ EMPLOYEE ROYALTY TRUST
By:________________________________
Gary L. Hall, Trustee
By:________________________________
Wayne P. Hall, Trustee
HOUSTON 1996 EXPLORATION AND
DEVELOPMENT FACILITY OVERRIDING
ROYALTY TRUST
By:________________________________
Gary L. Hall, Trustee
By:________________________________
Wayne P. Hall, Trustee
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CONFIDENTIAL
BUYER:
WITNESSES: BASIN EXPLORATION, INC., a Delaware
corporation doing business in
__________________________ Louisiana under the name of Basin
(Delaware) Exploration, Inc.
- --------------------------
By:_________________________________
Sam D. Winegrad
Vice President of
Corporate Development
STATE OF TEXAS ss.
COUNTY OF HARRIS ss.
On this 14th day of February, 1997, before me appeared WAYNE P. HALL,
to me personally known, who, being by me duly sworn (or affirmed) did say that
he is the PRESIDENT OF HALL-HOUSTON OIL COMPANY, a Texas corporation, and that
the instrument was signed on behalf of the corporation by the authority of its
Board of Directors and that WAYNE P. HALL acknowledged the instrument to be the
free act and deed of the corporation.
------------------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF TEXAS
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<PAGE>
THE STATE OF TEXAS ss.
ss.
COUNTY OF HARRIS ss.
On this ____ day of February, 1997, before me appeared GARY L. HALL to
me personally known, who, being by me duly sworn (or affirmed) did say that he
is a TRUSTEE of the HALL-HOUSTON OIL COMPANY EMPLOYEE ROYALTY TRUST, and that
the instrument was signed on behalf of said trust and that GARY L. HALL
acknowledged said instrument to be the free act and deed of said trust.
--------------------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF TEXAS
THE STATE OF TEXAS ss.
ss.
COUNTY OF HARRIS ss.
On this ____ day of February, 1997, before me appeared WAYNE P. HALL
to me personally known, who, being by me duly sworn (or affirmed) did say that
he is a TRUSTEE of the HALL-HOUSTON OIL COMPANY EMPLOYEE ROYALTY TRUST, and that
the instrument was signed on behalf of said trust and that WAYNE P. HALL
acknowledged said instrument to be the free act and deed of said trust.
-------------------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF TEXAS
THE STATE OF TEXAS ss.
ss.
COUNTY OF HARRIS ss.
On this ____ day of February, 1997, before me appeared GARY L. HALL to
me personally known, who, being by me duly sworn (or affirmed) did say that he
is a TRUSTEE of the HALL-HOUSTON 1996 EXPLORATION AND DEVELOPMENT FACILITY
OVERRIDING ROYALTY TRUST, and that the instrument was signed on behalf of said
trust and that GARY L. HALL acknowledged said instrument to be the free act and
deed of said trust.
--------------------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF TEXAS
THE STATE OF TEXAS ss.
ss.
COUNTY OF HARRIS ss.
On this ____ day of February, 1997, before me appeared WAYNE P. HALL
to me personally known, who, being by me duly sworn (or affirmed) did say that
he is a TRUSTEE of the HALL-HOUSTON 1996 EXPLORATION AND DEVELOPMENT FACILITY
OVERRIDING
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CONFIDENTIAL
ROYALTY TRUST, and that the instrument was signed on behalf of said trust and
that WAYNE P. HALL acknowledged said instrument to be the free act and deed of
said trust.
-------------------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF TEXAS
STATE OF TEXAS ss.
COUNTY OF HARRIS ss.
On this 14th day of February, 1997, before me appeared SAM D.
WINEGRAD, to me personally known, who, being by me duly sworn (or affirmed) did
say that he is the Vice President of Corporate Development of BASIN EXPLORATION,
INC., a Delaware corporation doing business in Louisiana under the name Basin
Exploration, Inc. (Delaware) and that the instrument was signed on behalf of the
corporation by the authority of its Board of Directors and that SAM D. WINEGRAD
acknowledged the instrument to be the free act and deed of the corporation.
------------------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF TEXAS
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<PAGE>
CONFIDENTIAL
Exhibit "G"
Attached to and made a part of that certain Purchase and Sale
Agreement effective February 13, 1997, by and between
Hall-Houston Oil Company et al., as Sellers, and Basin
Exploration, Inc. as Buyer.
CONFIDENTIAL TREATMENT REQUESTED FOR ENTIRE
EXHIBIT WHICH HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
END of Exhibit "G"
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