SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) June 28, 1996
MAGNUM PETROLEUM, INC.
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(Exact name of registrant as specified in its charter)
Nevada
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(State or other jurisdiction of incorporation)
1-12508 87-0462881
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(Commission File Number) (IRS Employer Identification No.)
600 East Las Colinas Boulevard, Suite 1200, Irving, Texas 75039
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 401-0752
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(Former name or former address, if changed since last report)
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Item 2. Acquisition of Assets.
On June 28, 1996, the Registrant purchased approximately 500 natural gas wells
and 427 miles of a gas gathering pipeline system from Meridian Oil Inc.
("Meridian"), a wholly-owned subsidiary of Burlington Resources, Inc. The net
purchase price after certain purchase price adjustments was approximately $35
million for all of Meridian's interest in certain gas wells and a gas gathering
system located in the Panhandle of Texas and Western Oklahoma, more commonly
referred to as the "Panoma Properties."
The aforementioned consideration was determined as a result of arm's length
negotiations between Meridian and the Registrant. The principal factors
considered in the determination of the consideration given for the Panoma
Properties include (a) the reserve and pipeline values of the Panoma Properties,
(b) the results of past operations of the Panoma Properties and (c) the expected
future operations and related contributions that the Panoma Properties is
expected to make to the total value of the Registrant.
The current daily production volumes from the acquired wells is approximately 14
million cubic feet per day with total delivery, including third party gas
purchased by the gathering system, of almost 19 million cubic feet per day. The
Registrant has estimated the monthly cash flow from the acquisition of the
Panoma Properties to be approximately $500,000 per month. The existing wells and
gas gathering system are in three fields, the West Panhandle Field, the East
Panhandle Field, and the South Erick Field, all located in Gray, Wheeler,
Collingsworth and Donley Counties, Texas and Beckham and Greer Counties,
Oklahoma. The Registrant's wholly-owned subsidiary, Gruy Petroleum Management
Co., has become the operator of all wells, the gas gathering pipeline system,
and associated assets.
The Registrant funded the acquisition by drawing on its line of credit with
Wells Fargo Bank, N.A., as Agent, and Banque Paribas, as Co-agent.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired
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It is impracticable at this time to file the required financial statements of
the acquired business. The Registrant, however, believes that such information
will be filed within 45 days and hereby undertakes to file such information as
soon as practicable, but in no event later than 60 days from July 15, 1996.
(b) Pro Forma Financial Information
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It is impracticable at this time to file the required pro forma financial
information relative to the acquired business. The Registrant, however, believes
that such information will be filed within 45 days and hereby undertakes to file
such information as soon as practicable, but in no event later than 60 days from
July 15, 1996.
(c) Exhibits
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2.1 Purchase and Sale Agreement between the Registrant and Meridian dated
May 17, 1996.
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MAGNUM PETROLEUM, INC.
/s/ Gary C. Evans
By: Gary C. Evans
President and CEO
Dated: July 11, 1996
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EXHIBIT INDEX
Exhibit Sequentially
Number Numbered Page
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2.1 Purchase and Sale Agreement between the Registrant
and Meridian dated May 17, 1996.
EXHIBIT 2.1
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PURCHASE AND SALE AGREEMENT
THIS AGREEMENT dated this 17th day of May, 1996, is between MERIDIAN OIL INC., a
Delaware corporation ("Seller"), with offices at 5051 Westheimer, Suite 1400,
Houston, Texas 77056-2124, and CONMAG ENERGY CORPORATION, a Texas corporation
("Buyer"), with offices at 600 East Las Colinas Boulevard, Suite 1200, Irving,
Texas 75039.
WHEREAS, Seller desires to sell, and Buyer desires to purchase, upon and subject
to the terms and conditions hereinafter set forth, all of Seller's right, title,
and interest in and to the following assets:
(i) The oil and gas leases, leasehold interests, term royalty
interests, rights and interests attributable or allocable to the
oil and gas leases or leasehold interests by virtue of pooling,
unitization, communitization, and operating agreements, licenses,
permits and other agreements, and other properties and interests
described on Exhibit "A-1" attached hereto (collectively, the
"Leases"), together with identical undivided interests in and to
the property and rights incident thereto, including, but not
limited to, as of the Effective Time, rights in, to, and under
agreements, leases, permits, rights-of-way, easements, licenses,
farmouts, farmins, options, orders, and other contracts or
agreements of a similar nature in any way relating thereto;
(ii) The wells, equipment, materials, fixtures and improvements on the
Leases as of the Effective Time, appurtenant thereto or used or
obtained in connection with the Leases or with the production,
treatment, sale or disposal of hydrocarbons or waste produced
therefrom or attributable thereto, and other appurtenances
thereunto belonging (the "Equipment"); provided, however,
Equipment shall not include leased equipment located on the
Leases;
(iii)The unitization, pooling and operating agreements, and the units
created thereby which relate to the Leases or interests described
in Exhibit "A-1" or which relate to units or wells located on the
Leases, including the units formed under orders, regulations,
rules, and other official acts of the governmental authority
having jurisdiction, together with any right, title, and interest
created thereby in the Leases;
(iv) Gas purchase contracts and product purchase and sale agreements
related to the Leases;
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(v) The Panoma No. 1 Field Plant together with all equipment,
supplies, machinery, materials, taps, meters, compressors,
dehydrator, auxiliary electrical generators, valves, piping and
other personal property, and certain real property, all as more
particularly set forth on Exhibit "A-2" attached hereto
(collectively, the "Field Plant");
(vi) The Panoma No. 2 Compressor Station together with all equipment,
supplies, machinery, materials, taps, meters, compressors,
valves, piping and other personal property, and certain real
property, all as more particularly set forth on Exhibit "A-3"
attached hereto (collectively, the "Compressor Station");
(vii)Gathering lines more particularly described on Exhibit "A-4"
attached hereto, liquid and gas lines, taps, meters and all other
equipment, supplies, machinery, materials or facilities
appurtenant to or considered part of such lines (the "Gathering
System");
(viii) Rights-of-way, easements, and surface use leases appurtenant to
the Gathering System, as more particularly described on Exhibit
"A-5" attached hereto (the "Easements");
(ix) Equipment leases and rental contracts, as more particularly
described on Exhibit "A-6" attached hereto (to the extent the
same are assignable);
(x) Gas gathering agreements, gas processing agreements, contracts
and other agreements of a similar nature used primarily in
connection with the Leases, the Equipment, the Field Plant, the
Compressor Station, and the Gathering System (to the extent the
same are assignable);
(xi) Vehicles, as set forth on Exhibit "A-7" attached hereto; and
(xii)Shamrock office facility, including all equipment, fixtures,
supplies, machinery, materials and other personal property
appurtenant thereto, located on certain real property set forth
on Exhibit "A-8" (the "Shamrock Facility").
Seller's interests in these assets is herein collectively referred to as the
"Interests"; provided, however, the Interests shall not include, and there is
excepted, reserved and excluded from this Agreement the personal and real
property set forth in Exhibit "G" attached hereto (the "Excluded Interests").
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NOW, THEREFORE, in consideration of the above recitals and of the covenants and
agreements herein contained, Seller and Buyer agree as follows:
1. PURCHASE AND SALE. Subject to and upon all of the terms and conditions
herein set forth, Seller shall sell, transfer, assign, convey, and deliver
the Interests to Buyer, and Buyer shall purchase, receive, pay for, and
accept the Interests from Seller, effective April 1, 1996, 7 a.m. local
time at the Leases (the "Effective Time").
2. PURCHASE PRICE AND PERFORMANCE DEPOSIT.
(a) The purchase price for the Interests shall be THIRTY SIX MILLION
FIVE HUNDRED THOUSAND DOLLARS ($36,500,000) (the "Base Purchase
Price"), subject to any applicable purchase price adjustment as
provided for herein.
(b) Buyer shall, upon execution of this Agreement, deliver to Seller
a performance deposit of TWO MILLION DOLLARS ($2,000,000) (the
"Performance Deposit") to assure Buyer's performance hereunder.
At Closing, the Performance Deposit, plus interest at a simple
rate of nine percent (9%) per annum, shall be a Buyer's credit
against the Base Purchase Price. The Performance Deposit shall be
refundable to Buyer only in the event that the conditions to
Buyer's obligations to close as set forth in Section 6 have not
been met, in which event Seller shall promptly return the
Performance Deposit, together with interest thereon, to Buyer. In
the event this transaction is not consummated on the Closing Date
for any reason other than the condition of Closing by Seller
contained in Section 5(c) hereof, Seller may retain the
Performance Deposit, together with interest thereon, as agreed
liquidated damages and not as a penalty, it being agreed that
actual damages would be difficult to ascertain and that such
amount is reasonable.
(c) Seller and Buyer agree that the Base Purchase Price shall be
allocated among the Interests as set forth on Exhibit "B" for the
purpose of (i) establishing a basis for certain taxes, (ii)
giving notices of value to the owners of any preferential rights
to purchase the Interests, and (iii) determining the value of a
Title Defect or an Environmental Defect and handling those
instances in which the Base Purchase Price is to be adjusted.
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3. TITLE DEFECTS. As used herein, the term:
(a) "Defensible Title" shall mean, as to the Interests, such title
held by Seller, that, subject to and except for Permitted
Encumbrances (as hereinafter defined):
(i) Entitles Seller to receive not less than the "Net Revenue
Interest" as set forth in Exhibit "B" of all oil, gas, and
associated liquid and gaseous hydrocarbons produced, saved,
and marketed from the Interests;
(ii) Obligates Seller to bear costs and expenses relating to the
maintenance, development, and operation of all wells located
on the Interests in an amount not greater than the "Working
Interest" set forth in Exhibit "B";
(iii)Is free and clear of any and all encumbrances, charges and
liens;
(iv) Is free and clear of any provision or obligation affecting
the Interests contained in any contract or agreement
disclosed in the Records (as hereafter defined) which is not
customary to currently accepted oil and gas industry
standards and (a) requires an extraordinary expenditure in
connection with the acquisition, exploration, development or
operation of the Interests or (b) would materially diminish
the Net Revenue Interest set forth on Exhibit "B", or
materially increase the Working Interest set forth on
Exhibit "B".
(b) "Permitted Encumbrances" shall mean:
(i) Lessor's royalties, overriding royalties, production
payments, and reversionary interests if the net cumulative
effect of such burdens does not operate to reduce the Net
Revenue Interest of any Interest to less than the Net
Revenue Interest set forth in Exhibit "B";
(ii) Sales contracts covering oil, gas or associated liquid or
gaseous hydrocarbons;
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(iii)Preferential rights to purchase and required third party
consents to assignments and similar agreements with respect
to which (i) waivers or consents are obtained from the
appropriate parties, or (ii) required notices have been
given to the holders of such rights and the appropriate time
period for asserting such rights has expired without an
exercise of such rights;
(iv) Liens for taxes or assessments not due or not delinquent on
the Closing Date;
(v) All rights to consent by, required notices to, filings with,
or other actions by governmental agencies in connection with
the sale or conveyance of oil and gas leases or interests
therein or sale of production therefrom if the same are
customarily obtained subsequent to such sale or conveyance;
(vi) Easements, rights-of-way, servitudes, permits, surface
leases, and other rights in respect of surface operations on
or over any of the Interests which do not operate to
interfere with current operations on the Interests;
(vii)Liens of operators relating to obligations not yet due or
pursuant to which Seller is not in default, and
materialmen's, mechanics, repairmen's, or other similar
liens or charges arising in the ordinary course of business
incidental to construction, maintenance or operation of the
Interests that are not such as to interfere with the
operation, value or use of the Interests;
(viii) The agreements set forth on Exhibit "I" attached hereto;
and
(ix) Any Title Defects waived by Buyer pursuant to the terms of
this Agreement.
(c) The Interests shall be deemed to have a "Title Defect" if Seller
has less than Defensible Title to the Interests.
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4. PURCHASE PRICE ADJUSTMENTS FOR TITLE DEFECTS.
(a) Buyer may, by delivery of written notice to Seller of the
existence of an alleged Title Defect, request reduction of the
purchase price for the Interest affected. The Title Defect notice
shall clearly indicate the nature of the Title Defect, the
Interest to which it relates, an explanation of the Title Defect
including the supporting legal theories, the allocated value of
the Interest as to which all or some portion of which is affected
by the Title Defect, and the amount by which Buyer believes the
value of the affected Interest has been reduced because of the
Title Defect, with the computation and information upon which
Buyer's belief is based. In determining whether a portion of an
Interest contains a Title Defect, it is the intent of the parties
to include, when possible, only that portion of such Interest
materially and adversely affected. If the value properly
allocated to a Title Defect cannot be determined directly from
Exhibit "B" because the Title Defect is included within, but does
not totally comprise, the Interest to which the allocated value
relates, Buyer and Seller shall attempt, where feasible, to
proportionately reduce the allocated value in Exhibit "B".
(b) The Title Defect notice by Buyer shall be delivered to Seller on
or before June 17, 1996. In the event any such notice is not
timely delivered, all Title Defects shall be deemed waived for
all purposes and Buyer shall thereafter have no right to claim
Title Defects; and in the event the Title Defect notice is timely
delivered, all Title Defects not claimed in such notice shall be
deemed waived for all purposes. Seller shall have the right, but
not the obligation, to attempt to cure any alleged Title Defect
prior to Closing. In the event Seller is unable or unwilling to
cure an alleged Title Defect, Buyer and Seller shall meet and use
their best efforts to agree on the validity of the claim of Title
Defect and the amount of any required purchase price adjustment.
In evaluating the significance of a fact, circumstance or
condition for purposes of determining an alleged Title Defect,
due consideration shall be given to the length of time that the
particular Lease has been producing hydrocarbon substances and
whether such fact, circumstance or condition is of the type
expected to be encountered in the area involved, and is usual and
customarily acceptable to reasonable and prudent persons engaged
in the business of the ownership, development, and operation of
oil and gas properties with knowledge of all of the facts and
appreciation of their legal significance.
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(c) In the event the parties cannot mutually agree on a purchase
price adjustment for an alleged Title Defect, Buyer shall have
the right to (i) proceed to Closing and accept the Interest with
the alleged Title Defect with no purchase price adjustment, or
(ii) terminate this Agreement as to the Interest affected by the
alleged Title Defect and receive a purchase price adjustment for
such Interest as set forth in Exhibit "B", or, where feasible,
the proportionate allocated value.
(d) There shall be no purchase price adjustment for Title Defects
unless the aggregate total of all Title Defects exceeds ONE
HUNDRED EIGHTY TWO THOUSAND FIVE HUNDRED DOLLARS ($182,500).
(e) In the event that Buyer shall determine that Seller's net revenue
interests in the Interests are greater than the Net Revenue
Interests set forth on Exhibit "B", Buyer shall notify Seller and
Seller shall be entitled to a mutually agreeable purchase price
adjustment.
5. CONDITIONS OF CLOSING BY SELLER. The obligation of Seller to close is
subject to the satisfaction of the following conditions:
(a) The representations of Buyer contained in Section 8 hereof are
true on and as of the Closing Date;
(b) Buyer shall have delivered to Seller a legal opinion rendered by
counsel to the effect that (i) Buyer is a corporation validly
existing and in good standing under the laws of the State of
Texas and has all requisite power and authority to execute and
deliver this Agreement and to consummate the transactions
contemplated hereby; (ii) the execution and delivery of, and
consummation of the transactions contemplated by, this Agreement
by Buyer have been duly authorized by all necessary action on the
part of the Buyer; and (iii) this Agreement has been duly
executed and delivered by Buyer and constitutes a legal, valid
and binding obligation of Buyer and is enforceable against Buyer
in accordance with its terms, except that such enforcement may be
subject to bankruptcy, insolvency, moratorium or similar laws
affecting creditors' rights;
(c) Adjustments to the purchase price in accordance with the
provisions of Sections 4 and 13 hereof shall not have exceeded
THREE MILLION SIX HUNDRED FIFTY THOUSAND DOLLARS ($3,650,000);
(d) On or before Closing, Seller shall have obtained the consent and
approval of the Board of Directors of its parent, Burlington
Resources Inc., to consummate the transactions contemplated by
this Agreement; and
(e) Buyer shall have delivered to Seller a guaranty in the form set
forth on Exhibit "H" attached hereto wherein Magnum Petroleum
Inc., Magnum Hunter Production, Inc. and Gruy Petroleum
Management Company, collectively as guarantor, guarantee the
performance by Buyer under this Agreement.
6. CONDITIONS OF CLOSING BY BUYER. The obligation of Buyer to close is subject
to the satisfaction of the following conditions:
(a) The representations of Seller contained in Section 7 shall be
true on and as of the Closing Date;
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(b) Buyer and Seller shall have adjusted the Base Purchase Price for
Title Defects and Environmental Defects in accordance with the
provisions of Sections 4 and 13 hereof; and
(c) Seller shall have delivered to Buyer a legal opinion rendered by
Seller's corporate counsel to the effect that (i) Seller is a
corporation validly existing and in good standing under the laws
of the State of Delaware and has all requisite power and
authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby; (ii) the execution and
delivery of, and consummation of the transactions contemplated
by, this Agreement by Seller have been duly authorized by all
necessary action on the part of Seller; and (iii) this Agreement
has been duly executed and delivered by Seller and constitutes a
legal, valid and binding obligation of Seller and is enforceable
against Seller in accordance with its terms, except that such
enforcement may be subject to bankruptcy, insolvency, moratorium
or similar laws affecting creditors' rights.
7. REPRESENTATIONS OF SELLER. Seller represents to Buyer that:
(a) Seller is a corporation validly existing and in good standing
under the laws of the State of Delaware and is duly qualified to
own its properties and assets and to carry on its business as now
being conducted;
(b) Subject to the condition set forth in Section 5(d) hereof, Seller
has the requisite power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Seller and the
consummation of the transactions contemplated hereby have been
duly authorized;
(c) Subject to the condition set forth in Section 5(d) hereof, this
Agreement has been duly executed and delivered by Seller and
constitutes the valid and binding obligation of Seller,
enforceable against it in accordance with the terms hereof,
subject to the effects of bankruptcy, insolvency, reorganization,
moratorium, and similar laws affecting creditors' rights. No
other act, approval or proceeding on the part of Seller or any
other party is required to authorize the execution and delivery
of this Agreement by Seller or the consummation of the
transactions contemplated hereby;
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(d) Subject to the condition set forth in Section 5(d) hereof, this
Agreement, and the execution and delivery hereof by Seller, does
not and the consummation of the transactions contemplated hereby
will not (i) conflict with or result in a breach of the charter
or bylaws of Seller or any other governing documents of Seller,
(ii) violate, or conflict with, or constitute a default under, or
result in the creation or imposition of any security interest,
lien or encumbrance upon any property or assets of Seller under
any mortgage, indenture or agreement to which it is a party or by
which the Interests are bound, which violation, conflict or
default might adversely affect the ability of Seller to perform
its obligation under this Agreement, or (iii) violate any statute
or law or any judgment, decree, order, writ, injunction,
regulation or rule of any court or governmental authority, which
violation might adversely affect the ability of Seller to perform
its obligations under this Agreement;
(e) Seller has incurred no 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;
(f) Seller is not a "foreign person" as defined in Section 1445 of
the Internal Revenue Code of 1986 and in any regulations
promulgated thereunder;
(g) Except as set forth on Exhibit "E" attached hereto, to the best
of Seller's knowledge, there are no claims, actions, suits or
proceedings (including condemnation or similar proceedings) filed
or threatened against the Interests or any portion thereof that
would have a material adverse affect on the value or operation of
the Interests;
(h) To the best of Seller's knowledge, Seller has not violated any
environmental statute, rule, regulation or order applicable to
the Interests which violation would have a material adverse
effect on the value or operation of the Interests; and
(i) To the best of Seller's knowledge and after Seller's review of
the Records (as hereafter defined), Seller has received no notice
of default with respect to the Leases and any other agreements,
contracts, leases, permits, rights-of-way, easements or other
agreements or contracts related to the Leases which would have a
material adverse effect on the value or operation of the
Interests assigned to Buyer and, to the best of Seller's
knowledge, (i) no events have occurred which with the giving of
notice or the passage of time or both could cause any such
agreement or instruments to be in default, and (ii) all monies
and performance due and required under the terms thereof through
the Effective Time shall have been paid and performed.
In those instances where Seller's representations are made on the basis
of "Seller's knowledge", such representations are made by Seller on the
basis of Seller's actual knowledge, without any investigation; provided,
however, that Seller's supervisory personnel have no notice of material
facts which would cause them to reasonably believe that an investigation
should be conducted.
8. REPRESENTATIONS OF BUYER. Buyer represents to Seller that:
(a) Buyer is a corporation validly existing and in good standing
under the laws of the State of Texas and is duly qualified to own
its properties and assets and the Interests and to carry on its
business as now being conducted;
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(b) Buyer has the requisite power and authority to execute and
deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement
by Buyer and the consummation of the transactions contemplated
hereby have been duly authorized;
(c) This Agreement has been duly executed and delivered by Buyer and
constitutes the valid and binding obligation of Buyer,
enforceable against it in accordance with the terms hereof,
subject to the effects of bankruptcy, insolvency, reorganization,
moratorium, and similar laws affecting creditors' rights. No
other act, approval or proceeding on the part of Buyer or any
other party is required to authorize the execution and delivery
of this Agreement by Buyer or the consummation of the
transactions contemplated hereby;
(d) This Agreement, and the execution and delivery hereof by Buyer,
does not and the consummation of the transactions contemplated
hereby will not (i) conflict with or result in a breach of the
charter or bylaws of Buyer or any other governing documents of
Buyer, or (ii) violate any statute or law or any judgment,
decree, order, writ, injunction, regulation or rule of any court
or governmental authority, which violation might adversely affect
the ability of Buyer to perform its obligations under this
Agreement;
(e) Buyer's affiliate, Gruy Petroleum Management Company, possesses
all required governmental licenses, permits, bonds, certificates,
orders, and authorizations necessary to own or operate the
Interests and will be named on such documents as operator of the
Interests;
(f) Buyer has, and will have on the Closing Date and thereafter,
sufficient cash or credit to enable it to make payment in
immediately available funds of the purchase price when due and
any other amounts to be paid by it hereunder;
(g) Buyer is an experienced and knowledgeable investor in the oil and
gas business. Buyer is not acquiring the Interests in connection
with a distribution or resale thereof in violation of federal or
state securities laws and the rules and regulations thereunder;
and
(h) Buyer has incurred no liability, contingent or otherwise, for
brokers' or finders' fees relating to the transactions
contemplated by this Agreement for which Seller shall have any
responsibility whatsoever.
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9. CLAIMS. "Claims" shall mean any and all claims, losses, damages, costs,
expenses, diminutions in value, suits, causes of action or judgments of any
kind or character with respect to any and all liabilities and obligations
or alleged or threatened liabilities and obligations, including, but not
limited to, any interest, penalty, and any attorneys' fees and other costs
and expenses incurred in connection with investigating or defending any
claims or actions, whether or not resulting in any liability. An
"Environmental Claim" means a Claim attributable to or arising out of a
violation (i) of any environmental statute, rule, regulation or order of
any governmental agency having jurisdiction over the Interests or Seller in
effect and applicable to conditions existing on the Effective Time and (ii)
to which prompt remedial or corrective action either is required or would
be undertaken by a prudent operator of oil and gas properties and/or gas
gathering systems.
10. INDEMNITIES OF SELLER.
(a) Seller shall, to the fullest extent permitted by law, protect,
defend, indemnify, and hold Buyer and its affiliates, including
its directors, officers, employees, agents, and representatives
of each of them, harmless from and against any and all Claims
attributable to or arising out of (i) any act or omission by
Seller involving or related to the Interests occurring before the
Effective Time, except as limited in (x), (y) and (z) below, (ii)
the lawsuit styled Retha Sue Penney, et al, v. C&S Transport,
Incorporated, Meridian Oil Inc., and Franklin S. Oren, as set
forth on Exhibit "E" hereto, and (iii) the breach by Seller of
the representations contained in Section 7 hereof; provided,
however, this indemnity is limited and shall not cover or include
(x) matters pertaining to title to the Interests, all of which
will be governed by Section 4 hereof, (y) any Claims with respect
to any and all gas balancing liabilities and obligations or
alleged or threatened liabilities and obligations, all of which
will be governed by Section 11 hereof, or (z) any Claims with
respect to any Environmental Defects waived pursuant to Section
13 hereof.
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(b) Seller shall, to the fullest extent permitted by law, protect,
defend, and indemnify and hold Buyer and its affiliates,
including its directors, officers, employees, agents and
representatives of each of them, harmless from and against (i)
all Claims of persons or entities claiming under the GLA
Assignment (referenced on Exhibit "E" hereto) for improper
payment of overriding royalties prior to the Effective Time, and
(ii) all Claims of persons or entities claiming under the GLA
Assignment for payment of overriding royalties on or after the
Effective Time in amounts in excess of the amount determined due
and owing (without regard to the Amendment to the GLA Assignment
dated March 31, 1976, or any other amendment attempting to set or
further define market value) as calculated in accordance with the
following:
On gas, including casinghead gas or other gaseous substance,
sold or used off the premises or in the manufacture of
gasoline or other products therefrom, the market value at
the well of a 3/32nds of the gas so sold or used, provided
that on gas sold at the well the overriding royalty shall be
3/32nds of the amount realized from such sale.
Provided, however, this indemnity is limited and shall not cover
or include any Claims made for payments due after the Effective
Time relating to Buyer's deduction of any post-production costs,
including, but not limited to, costs and expenses of compression,
dehydration, treating, gathering, transportation, processing, and
marketing.
(c) After Closing, any assertion by Buyer that Seller is liable under
the terms of the indemnities provided by Section 10(a)(i) or
10(a)(iii) must be made by Buyer in writing and must be given to
Seller on or prior to December 31, 1996; provided however, there
shall be no time limitation for Claims related to the proper
payment of (i) taxes, (ii) royalties, overriding royalties, and
similar burdens on production, (iii) joint interest audits for
periods prior to the Effective Time, or (iv) broker's or finder's
fees. Any notice to Seller shall state the facts known to Buyer
that give rise to such notice in sufficient detail to allow
Seller to evaluate the assertion.
(d) If a Claim arises for which Buyer intends to seek indemnity with
respect thereto under Section 10(a)(i) or 10(a)(iii), Buyer shall
promptly notify Seller of such Claim. Seller shall have thirty
(30) days after receipt of such notice to undertake, conduct and
control, through counsel of its own choosing and at its own
expense, the settlement or defense thereof, and Buyer shall
cooperate with Seller in connection therewith. So long as Seller
has undertaken the defense of, and responsibility for, any such
Claim and is reasonably contesting any such Claim in good faith,
by appropriate proceedings (including the filing or posting of
appeal bonds, supersedeas bonds and similar bonds), Buyer shall
not pay or settle any such Claim. Buyer shall have the right to
pay or settle any such Claim, provided that in such event it
shall waive any right to indemnity by Seller for such Claim. If
Seller does not notify Buyer within thirty (30) days after the
receipt of Buyer's notice of a claim of indemnity hereunder that
it elects to undertake the defense thereof, then Buyer shall have
the right to contest, settle or compromise the Claim, but shall
not thereby waive any right to indemnity therefor pursuant to
this Section 10.
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(e) In the event of any notice of a Claim which is an Environmental
Claim given by Buyer to Seller pursuant to this Section 10,
Seller's total liability hereunder for any and all such
Environmental Claims shall be limited to THREE MILLION SIX
HUNDRED FIFTY THOUSAND DOLLARS ($3,650,000), payable as follows:
(i) the first FIVE HUNDRED THOUSAND DOLLARS ($500,000) toward
satisfaction of any such Claims shall be Seller's sole
responsibility; and
(ii) the next SIX MILLION THREE HUNDRED THOUSAND DOLLARS
($6,300,000) toward satisfaction of any such Claims shall be
split equally between Seller and Buyer.
11. ASSUMPTION OF OBLIGATIONS AND INDEMNITIES OF BUYER.
(a) As of the Effective Time, Buyer agrees to assume and perform any
and all of the liabilities and obligations or alleged or
threatened liabilities and obligations of Seller that arise under
the agreements set forth on Exhibit "I", existing oil and gas
leases, assignments, operating agreements, leases, permits,
rights-of-way, licenses, easements, options, orders, gas purchase
contracts, product purchase and sale agreements, gas gathering
agreements, gas processing agreements, or any other agreements or
contracts attributable to, affecting, or otherwise relating to
the Interests, including, but not limited to, any and all
liabilities and obligations (i) to pay and deliver royalties,
overriding royalties, non-participating royalties, and other
burdens on production, (ii) in connection with or arising out of
balancing of overproduction or underproduction from the
Interests, and (iii) necessary to comply with all laws and
governmental regulations with respect to the Interests,
including, but not limited to, the lawful plugging and
abandonment of oil and gas wells and the restoration of the
surface of the land or any governmental request or other
requirement to abandon any pipeline or facility or take any
clean-up, remedial or other action with respect to the Interests,
regardless of when the events occurred that caused such condition
to exist or the obligation to arise. Without limitation of the
foregoing, as of the Effective Time Buyer agrees to assume and
perform any and all of the obligations and liabilities or alleged
or threatened liabilities and obligations of Seller for
Environmental Claims with respect to the Interests, regardless of
when the events occurred that caused such condition to exist or
the obligation to arise. The assumption of liabilities hereunder
by Buyer shall include those arising solely from or contributed
to by the negligence of Seller, whether active or passive, or of
any kind or nature.
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(b) Buyer shall, to the fullest extent permitted by law, protect,
defend, indemnify, and hold Seller and its directors, officers,
employees, agents, and representatives of each of them (the
"Seller Parties"), harmless from and against any and all Claims
attributable to or arising out of (i) Buyer's ownership or
operation of the Interests subsequent to the Effective Time, (ii)
Buyer's assumption of any obligation or liability contained in
this Section 11 (but only to the extent Seller has not agreed to
provide Buyer with indemnity pursuant to Section 10 hereof),
(iii) the breach by Buyer of the representations contained in
Section 8 hereof; and (iv) the breach by Buyer of any of the
agreements and covenants contained in this Agreement.
(c) THE INDEMNIFICATION, RELEASE AND ASSUMPTION PROVISIONS PROVIDED
FOR IN THIS AGREEMENT SHALL BE APPLICABLE WHETHER OR NOT THE
LOSSES, COSTS, EXPENSES AND DAMAGES IN QUESTION AROSE SOLELY OR
IN PART FROM THE GROSS, ACTIVE, PASSIVE, COMPARATIVE, OR
CONCURRENT NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF THE
SELLER PARTIES.
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12. DUE DILIGENCE REVIEW.
(a) Prior to Closing, Seller, in Seller's offices, will make
available to Buyer and Buyer's authorized representatives for
examination as Buyer may reasonably request, all lease files,
land files, well files, product purchase and sale contracts,
division order files, abstracts, title opinions, engineering and
geological data, reports, maps, logs, and well records contained
in Seller's files relating to the Interests (collectively the
"Records"); provided, however, the Records shall not include any
geophysical data. Prior to Closing, Buyer, at Buyer's sole cost,
may copy any portion of the Records as Buyer may reasonably
request. Prior to Closing, Seller, in Seller's offices, will also
make available to Buyer and Buyer's authorized representatives
for examination as Buyer may reasonably request, any joint
interest billings, check receipts and third party disbursement
records, and any records relating to ad valorem, excise and other
production related taxes relating to the Interests ("Accounting
Data"). Prior to Closing, Buyer, at Buyer's sole cost, may copy
any portion of the Accounting Data as Buyer may reasonably
request.
(b) Seller shall permit Buyer and Buyer's authorized representatives
to consult with Seller's employees during reasonable business
hours and to conduct, at Buyer's sole risk and expense, wellsite
inspections and inventories of the Interests that are
Seller-operated. During such inspections, Buyer shall have the
right to review the Interests to determine the environmental
condition of the Equipment, Field Plant, Compressor Station,
Gathering System, Shamrock Facility, and Lease premises. To the
extent Buyer desires similar access to Seller's non-operated
Interests, Seller shall assist Buyer in obtaining such access;
provided, however, Buyer shall not contact the Operator of the
non-operated Interests directly.
13. PURCHASE PRICE ADJUSTMENTS FOR ENVIRONMENTAL DEFECTS.
(a) "Environmental Defect" shall mean a violation (i) of any
environmental statute, rule, regulation or order of any
governmental agency having jurisdiction over the Interests or
Seller and (ii) to which prompt remedial or corrective action
either is required or would be undertaken by a prudent operator
of oil and gas properties and/or gas gathering systems.
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(b) Buyer may, by delivery of written notice to Seller of the
existence of an alleged Environmental Defect, request reduction
of the purchase price for the Interest affected. The
Environmental Defect notice shall clearly indicate the nature and
a detailed description of the Environmental Defect, the Interest
to which it relates, and the dollar amount which Buyer believes
it would take to rectify or remediate the Environmental Defect.
(c) The Environmental Defect notice by Buyer shall be delivered to
Seller on or before June 17, 1996. In the event any such notice
is not timely delivered, all Environmental Defects of which Buyer
has notice as of such date shall be deemed waived for all
purposes and Buyer shall thereafter have no right to claim
Environmental Defects; and in the event the Environmental Defect
notice is timely delivered, all Environmental Defects of which
Buyer has notice as of such and not claimed in such notice shall
be deemed waived for all purposes. Seller shall have the right,
but not the obligation, to attempt to cure any alleged
Environmental Defect prior to Closing. In the event Seller is
unable or unwilling to cure an alleged Environmental Defect,
Buyer and Seller shall meet and use their best efforts to agree
on the validity of the claim of the Environmental Defect and the
amount of any required purchase price adjustment.
(d) In the event the parties cannot mutually agree on the purchase
price adjustment for an alleged Environmental Defect, Buyer shall
have the right to (i) proceed to Closing and accept the Interest
with the alleged Environmental Defect with no purchase price
adjustment, or (ii) terminate this Agreement as to the Interest
affected by the alleged Environmental Defect and receive a
purchase price adjustment for such Interest as set forth in
Exhibit "B", or, where feasible, the proportionate allocated
value.
(e) There shall be no purchase price adjustment for Environmental
Defects unless the aggregate total of all Environmental Defects
exceeds ONE HUNDRED EIGHTY TWO THOUSAND FIVE HUNDRED DOLLARS
($182,500).
14. CONFIDENTIALITY. All Records, Accounting Data, and all other confidential
data provided to Buyer, whether before or after the date of this Agreement,
and all title matters and environmental reports prepared by Buyer or
Buyer's representatives relating to the Interests, shall be treated by
Buyer as strictly confidential, and shall not be disclosed to any person,
firm or corporation without the prior written consent of Seller. In the
event this purchase and sale does not close, this covenant shall survive
termination of this Agreement; and in the event the sale closes, this
covenant shall terminate at Closing.
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15. DISCLAIMERS. THE INSTRUMENTS OF CONVEYANCE EXECUTED PURSUANT HERETO SHALL
BE EXECUTED WITHOUT ANY REPRESENTATION, WARRANTY OR COVENANT OF TITLE OF
ANY KIND OR NATURE, EITHER EXPRESS, IMPLIED OR STATUTORY. THE INTERESTS ARE
BEING CONVEYED AND ASSIGNED TO AND ACCEPTED BY THE BUYER IN THEIR "AS IS,
WHERE IS" CONDITION AND STATE OF REPAIR, AND WITH ALL FAULTS AND DEFECTS,
WITHOUT ANY REPRESENTATION, WARRANTY OR COVENANT OF ANY KIND OR NATURE,
EXPRESS, IMPLIED OR STATUTORY, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MARKETABILITY, QUALITY, CONDITION, CONFORMITY TO SAMPLES, MERCHANTABILITY,
AND/OR FITNESS FOR A PARTICULAR PURPOSE, ALL OF WHICH ARE EXPRESSLY
DISCLAIMED BY SELLER AND WAIVED BY BUYER. THE INTERESTS HAVE BEEN USED FOR
OIL AND GAS PIPELINE, TRANSPORTATION, STORAGE AND RELATED OPERATIONS.
PHYSICAL CHANGES IN THE INTERESTS AND IN THE LANDS BURDENED THEREBY MAY
HAVE OCCURRED AS A RESULT OF SUCH USES. THE INTERESTS MAY ALSO INCLUDE
BURIED PIPELINES AND OTHER EQUIPMENT, THE LOCATIONS OF WHICH MAY NOT BE
KNOWN BY SELLER OR READILY APPARENT BY A PHYSICAL INSPECTION OF THE
INTERESTS. IT IS UNDERSTOOD AND AGREED THAT BUYER SHALL HAVE INSPECTED
PRIOR TO CLOSING (OR SHALL BE DEEMED TO HAVE WAIVED ITS RIGHT TO INSPECT)
THE LEASES, THE EQUIPMENT, THE FIELD PLANT, THE COMPRESSOR STATION, THE
GATHERING SYSTEM, THE SHAMROCK FACILITY AND THE ASSOCIATED PREMISES AND
SATISFIED ITSELF AS TO THEIR PHYSICAL AND ENVIRONMENTAL CONDITION, BOTH
SURFACE AND SUBSURFACE, AND THAT BUYER SHALL ACCEPT ALL OF THE SAME IN
THEIR "AS IS, WHERE IS" CONDITION AND STATE OF REPAIR, AND WITH ALL FAULTS
AND DEFECTS, INCLUDING, BUT NOT LIMITED TO, THE PRESENCE OF NATURALLY
OCCURRING RADIO ACTIVE MATERIAL (NORM) AND MAN-MADE MATERIAL FIBERS (MMMF).
IN ADDITION, SELLER MAKES NO REPRESENTATION, COVENANT OR WARRANTY, EXPRESS,
IMPLIED OR STATUTORY, AS TO THE ACCURACY OR COMPLETENESS OF ANY DATA OR
RECORDS DELIVERED TO THE BUYER WITH RESPECT TO THE INTERESTS, OR CONCERNING
THE QUALITY OR QUANTITY OF HYDROCARBON RESERVES, IF ANY, ATTRIBUTABLE TO
THE INTERESTS, OR THE ABILITY OF THE INTERESTS TO PRODUCE HYDROCARBONS, OR
THE PRICES WHICH BUYER IS OR WILL BE ENTITLED TO RECEIVE FOR ANY SUCH
HYDROCARBONS.
16. DTPA Waiver. TO THE EXTENT APPLICABLE TO THE INTERESTS OR ANY PORTION
THEREOF, BUYER AND SELLER HEREBY WAIVE THEIR RIGHTS UNDER THE PROVISIONS OF
THE TEXAS DECEPTIVE TRADE PRACTICES ACT, CHAPTER 17, SUBCHAPTER E, SECTIONS
17.41 THROUGH 17.63, INCLUSIVE (OTHER THAN SECTION 17.555, WHICH IS NOT
WAIVED), OF THE TEXAS BUSINESS & COMMERCIAL CODE (A LAW THAT GIVES
CONSUMERS SPECIAL RIGHTS AND PROTECTIONS). AFTER CONSULTATION WITH AN
ATTORNEY OF ITS CHOICE, BUYER AND SELLER VOLUNTARILY CONSENT TO THIS
WAIVER.
17. CLOSING. The Closing shall be held on or before June 28, 1996, at the
offices of Seller at 5051 Westheimer, Suite 1400, Houston, Texas, or at
such other time and place as Seller and Buyer may mutually agree in writing
(the "Closing" or the "Closing Date").
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18. TRANSACTIONS AT CLOSING.
(a) Seller shall execute, acknowledge, and deliver to Buyer the
instruments of conveyance in the forms as set forth in Exhibits
"C-1", "C-2", "C-3", "C-4", "C-5", "C-6", "C-7" and "C-8" hereto
conveying the Interests;
(b) Seller and Buyer shall execute and deliver a Preliminary Closing
Statement that shall set forth the Base Purchase Price and each
adjustment and the calculation of such adjustments used to
determine such amount (the "Closing Amount") in the form as set
forth in Exhibit "D" hereto;
(c) Seller shall deliver to Buyer copies of the Records;
(d) Seller and Buyer shall execute, acknowledge and deliver mutually
agreeable transfer orders or letters-in-lieu prepared by the
Buyer, directing all purchasers of production to make future
payments of proceeds attributable to production from the
Interests to Buyer;
(e) Seller shall deliver to Buyer a certificate stating that the
representations of Seller contained in Section 7 hereof are true
as of the Closing Date;
(f) Seller shall deliver to Buyer the legal opinion referenced in
Section 6(c) hereof;
(g) Buyer shall deliver to Seller a certificate stating that the
representations of Buyer contained in Section 8 hereof are true
as of the Closing Date;
(h) Buyer shall deliver to Seller the legal opinion referenced in
Section 5(b) hereof;
(i) Buyer shall deliver to Seller a complete copy of Buyer's
environmental assessment, including, but not limited to, reports,
data, valuation, assessments and conclusions;
(j) Seller shall deliver to Buyer possession of the Interests,
subject to any applicable operating agreement or other related
agreement affecting the Interests;
(k) Buyer shall deliver to Seller the guaranty in the form set forth
on Exhibit "H" hereto;
(l) Seller shall deliver to Buyer executed change-of-operator forms
to be filed with the relevant regulatory agency naming Buyer or
its designee the operator of the Interests, including all wells
(active and inactive) that are subject to this Agreement; and
(m) Buyer shall deliver to Seller cash by wire transfer in the amount
of the Closing Amount to the following account:
Bank: Mellon Bank, Pittsburgh, PA.
ABA/Routing Number: 043-000-261
Account: 104-9050
For Credit To: Meridian Oil Services Inc.
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19. FURTHER ASSURANCE. Incidental and subsequent to Closing, each of the
parties shall execute, acknowledge, and deliver to the other such further
instruments, and take such other actions as may be reasonably necessary to
carry out the provisions of this Agreement.
20. POST-CLOSING ADJUSTMENTS. On or before November 1, 1996, the parties shall
undertake to agree with respect to the adjustments or payments that were
not finally determined as of Closing, and the amount due from Buyer or
Seller, as the case may be, pursuant to the Post-Closing adjustment. On or
before October 1, 1996, Seller shall provide Buyer with a Final Closing
Statement setting forth the Post-Closing adjustments. Seller shall provide
Buyer access to such of Seller's records as may be reasonably necessary to
verify the Post-Closing adjustments. Payment by Buyer or Seller shall be
made in immediately available funds within five (5) days of agreement. If
the Final Closing Statement has not been agreed upon on or before the date
set forth herein, either party may seek to enforce any rights it claims
pursuant to this Agreement.
21. PRORATION OF TAXES. All ad valorem taxes, real property taxes, and similar
obligations with respect to the tax period in which the Effective Time
occurs (the "current tax period") shall be apportioned between Seller and
Buyer as of the Effective Time based on an estimate of the immediately
preceding tax period assessment, and the Base Purchase Price shall be
reduced at Closing by the amount of such estimated taxes owed by Seller for
that portion of the current tax period prior to the Effective Time.
22. PROCEEDS.
(a) All proceeds, including, but not limited to, proceeds held in
suspense or escrow and proceeds for oil produced and held in
storage on the Leases but not sold as of the Effective Time,
attributable to the Interests and accruing to the period prior to
the Effective Time shall belong to Seller. Seller shall not
retain overhead charges and rates received by Seller in its
capacity as Operator under any operating agreement or COPAS
accounting procedure attributable to the Interests from the
Effective Time through the end of the month in which Closing
occurs.
(b) All proceeds attributable to the Interests and accruing to the
period on and after the Effective Time shall belong to Buyer. In
the event Seller has received proceeds belonging to Buyer after
the Effective Time, Seller will account to Buyer for such
proceeds at the same price Seller received for the production in
accordance with its existing product purchase and sale contracts.
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23. EMPLOYEES. Buyer intends to continue to operate the Interests in the
ordinary course of business. Buyer shall evaluate all active, full-time
employees of Seller currently employed by Seller and directly engaged in
the operation of the Interests as set forth on Exhibit "F" attached hereto.
At Closing, Buyer shall offer employment or independent contractor
agreements to substantially all employees reasonably determined by Buyer
essential to the ongoing operation of the Interests. Persons offered
full-time employment by Buyer shall receive from Buyer substantially the
same employee benefits as Buyer's current employees are receiving.
24. OPERATIONS PENDING CLOSING. Seller shall operate the Seller-operated
Interests using the same standard of care as an ordinary prudent Operator
under the same or similar circumstances until Closing, or such later time
as any applicable joint operating agreement may require, when such
operation shall be turned over to, and become the responsibility of, Buyer
or its designee. During the period from the date of this Agreement to
Closing, Seller shall (i) permit Buyer, at its sole risk and expense, to
have access to, for inspection only, those Interests operated by Seller and
use reasonable efforts to provide Buyer with access to those Interests not
operated by Seller, (ii) consult with Buyer with respect to all AFE's over
TEN THOUSAND DOLLARS ($10,000) net to the interests of Seller which are
received by Seller with respect to any Interest and will receive Buyer's
consent before approving such AFE's, and with respect to all material
decisions to be made with respect to the Interests, including, without
limitation, settlement of any gas imbalances and incurring of costs for
discretionary expenditures for operations in excess of TEN THOUSAND DOLLARS
($10,000) net to the interest of Seller for which AFE's are not prepared,
(iii) shall operate the Interests in its ordinary course of business and in
accordance with applicable industry standards and the terms and conditions
of all applicable contracts, laws and regulations, (iv) not transfer, sell,
hypothecate, encumber, abandon or otherwise dispose of any material portion
of the Interests (other than the sale of production in the ordinary course
of business) or as required in connection with the exercise of third
parties of preferential rights to purchase any of the Interests without the
express written consent of Buyer, and (v) notify Buyer of any cessation of
production in connection with the Interests.
25. NOTICES. All notices hereunder shall be sufficiently given for all purposes
hereunder if in writing and delivered personally, or to the extent receipt
is confirmed by the party charged with notice, sent by documented overnight
delivery service, by United States Mail, telecopy, telefax or other
electronic transmission service to the appropriate address or number as set
forth below. Notices to Seller or Buyer shall be addressed to:
SELLER BUYER
Meridian Oil Inc. ConMag Energy Corporation
5051 Westheimer 600 East Las Colinas Blvd.
Suite 1400 Suite 1200
Houston, Texas 77056-2124 Irving, Texas 75039
Attn: Manager, Divestitures Attn: Gary C. Evans, President
Fax: 713-624-9449 Fax: 214-401-3110
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26. ENTIRE AGREEMENT. This instrument states the entire agreement and
supersedes all prior agreements (except any prior Confidentiality Agreement
between the Buyer and Seller) between the parties concerning the subject
matter hereof. This Agreement may be supplemented, altered, amended,
modified or revoked by writing only, signed by both parties.
27. OPERATIONS. Should Seller presently operate any Interest, Seller makes no
representation, warranty or covenant that the Buyer will become operator of
any or all of the Interests. Buyer acknowledges that operations will be
governed by the applicable operating agreements or other related agreements
affecting the Interests.
28. OCCASIONAL SALE. Seller and Buyer believe that this purchase and sale of
the Interests constitutes an isolated or occasional sale and is not subject
to sales tax; provided, however, if any sales, transfers, use taxes or
other similar taxes are due or should hereafter become due (including
penalty and interest thereon) by reason of this transaction, Buyer shall
timely pay and solely bear all such taxes.
29. RECORDING DOCUMENTS. Buyer shall pay all documentary, filing, and recording
fees incurred in connection with the filing and recording of the
instruments of conveyance. As soon as practicable after Closing, Buyer
shall provide Seller with recorded copies of all documents conveying the
Interests to Buyer.
30. COUNTERPART. This Agreement may be executed by Buyer and Seller in any
number of counterparts, each of which shall be deemed an original
instrument, but all of which together shall constitute one and the same
instrument.
31. TIME OF ESSENCE. Time is of the essence in this Agreement.
32. ANNOUNCEMENTS. Seller and Buyer shall consult with each other prior to the
release of any press releases and other announcements concerning this
Agreement or the transactions contemplated hereby. Any press release or
other announcements will be at a time and in a form reasonably acceptable
to Seller and Buyer.
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33. 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. The failure of any party at any
time or times to require performance of any provisions hereof shall in no
manner affect such party's right to enforce the same. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provisions hereof (whether or not similar), nor shall
such waiver constitute a continuing waiver unless otherwise expressly
provided.
34. SURVIVAL OF REPRESENTATIONS AND COVENANTS. All representations and
covenants of the parties to the extent not fully performed or waived prior
to Closing shall survive the Closing other than those contained in Sections
4, 5, 6, and 13 hereof.
35. RELIANCE. Prior to executing and/or closing this Agreement, Buyer has been
afforded an opportunity to (i) --------- examine the Interests and such
materials as it has requested to be provided to it by Seller, (ii) to
discuss with representatives of Seller such materials and the nature and
operation of the Interests and (iii) to investigate of the condition,
including subsurface condition, of the Interests. In entering into and
closing this Agreement, Buyer has relied solely on the express
representations and covenants of Seller in this Agreement, its independent
investigation of, and judgment with respect to, the Interests, and the
advice of its own legal, tax, economic, environmental, engineering,
geological and geophysical advisors, and not on any comments or statements
of Seller or any representatives or agents of, or consultants or advisors
engaged by, Seller.
36. GOVERNING LAW. This Agreement and the rights and obligations of the parties
hereto shall be governed, construed, and enforced in accordance with the
laws of the State of Texas. The parties agree that any litigation relating
directly or indirectly to this Agreement must be brought before and
determined by a court of competent jurisdiction within the State of Texas.
37. LEGAL 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 attorneys' fees from the non-prevailing party.
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38. AGREEMENT FOR THE PARTIES' BENEFIT ONLY. This Agreement is not intended to
confer upon any person not a party hereto any rights or remedies hereunder,
and no person, including, but not limited to, those persons affected by
Section 23 hereof, other than the parties hereto is entitled to rely on any
representation, covenant, or agreement contained herein.
39. SEVERABILITY. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy,
all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance
of the transactions contemplated hereby is not affected in any adverse
manner to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
40. BINDING EFFECT; ASSIGNMENT. All the terms, provisions, covenants,
representations, 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; provided, however, this Agreement or any portion
thereof and the rights and obligations hereunder shall not be assignable or
delegable by any party without the express prior written consent of the
non-assigning or non-delegating party.
41. ENFORCEMENT. Should Buyer or Seller default in the performance of this
Agreement, the non-defaulting party shall be entitled to enforce specific
performance of this Agreement, or exercise any other right or remedy it may
have at law or in equity by reason of such default.
42. FAILURE TO CLOSE. If all of the conditions to Closing set forth in Sections
5 and 6 have not been satisfied or waived by the respective parties on or
before July 15, 1996 (or such later date as hereafter may be mutually
agreed upon by the parties in writing), this Agreement shall terminate
automatically, and no party hereto shall have any further obligations or
any liability to the other party pursuant to this Agreement; provided,
however, that in the event that the conditions to Buyer's obligations to
close as set forth in Section 6 hereof have not been satisfied or waived by
such date, or in the event this transaction is not consummated due to the
condition of Closing contained in Section 5(c) hereof, the Performance
Deposit, together with interest thereon, shall be returned to Buyer;
provided, further, that nothing herein shall relieve any party from
liability for its willful failure to satisfy any conditions to Closing
required to be satisfied by it. Upon any termination of this Agreement,
Seller shall be free immediately to enjoy all rights of ownership of the
Interests and to sell, transfer, encumber or otherwise dispose of the
Interests to any party without any restriction under this Agreement.
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EXECUTED as of the date first above mentioned.
SELLER
MERIDIAN OIL INC.
By:/s/ Mark E. Ellis
Mark E. Ellis, Vice President
BUYER
CONMAG ENERGY CORPORATION
By:/s/ Gary C. Evans
Gary C. Evans, President
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