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UNITED STATES
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 January 27, 1997
Commission File Number 0-26662
PANACO, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction or incorporation)
43 - 1593374
(IRS Employer Identification No.)
1050 West Blue Ridge Boulevard, PANACO Building,
Kansas City, MO 64145-1216
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (816) 942 - 6300
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<PAGE>
Item 2. Acquisition or Disposition of Assets
Effective September 1, 1996 the Company sold its Bayou Sorrel Field in
Iberville Parish, Louisiana to National Energy Group, Inc. for $11 million. The
Company received $9 million in cash and 477,612 shares of National Energy Group,
Inc. common stock which were valued at $2 million as of November 22, 1996, the
closing date. These shares are restricted securities and are not freely
tradeable. The Company has demand registration rights and has made such a
demand. The Company retained a 3% overriding royalty interest in the deep rights
of the field below 11,000 feet.
As of December 27, 1995 the Company acquired from Shell Western E & P, Inc.
all of its interest in the Bayou Sorrel Field. The purchase price of the field
and a related receivable of $600,000 was $10,455,000 in cash including a
$205,000 brokers' fee.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of business acquired.
None
(b) Pro Forma Financial Information
Unaudited Pro Forma Financial Information for the nine months ended
September 30, 1996.
(c) Exhibits
10.14 Purchase and Sale Agreement, dated November 11, 1996, between
National Energy Group, Inc. and PANACO, Inc.
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 hereunto duly authorized.
PANACO, Inc.
/s/Todd R. Bart
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Todd R. Bart
Chief Financial Officer
<PAGE>
PRO FORMA FINANCIAL INFORMATION
Effective September 1, 1996 the Company sold the Bayou Sorrel Field to
National Energy Group, Inc. for a sale price of $11 million, consisting of $9
million in cash and 477,612 shares of National Energy Group, Inc. common stock,
which were valued at $2 million as of the closing date.
PANACO, INC.
Pro Forma Combined Statement of Income (Operations)
For the Nine Months Ended September 30, 1996
(Amounts in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Bayou
Sorrell
Pro Forma PANACO, Inc.
Adjustments Pro Forma
PANACO, Inc. (Note 3) Combined
REVENUES
<S> <C> <C> <C>
Oil and gas sales $ 13,257 $ (2,010) $ 11,247
COSTS AND EXPENSES
Lease operating 6,049 (733) 5,316
Depreciation, depletion, and amortization 4,981 (888) 4,093
Exploration expenses - - -
Provision for losses and (gains) on
disposition and write-down of assets (4) - (4)
General and administrative 573 - 573
Production and ad valorem taxes 429 (239) 190
West Delta fire loss 500 - 500
--------- -------- ---------
Total 12,528 (1,860) 10,668
--------- -------- ---------
NET OPERATING INCOME (LOSS) 729 (150) 579
--------- -------- ---------
OTHER INCOME (EXPENSE)
Interest expense (net) (1,347) 588 (759)
--------- -------- ---------
NET INCOME (LOSS) (618) 438 (180)
========= ======== =========
EARNINGS (LOSS) PER COMMON SHARE $ (.05) (.01)
========= =========
Weighted average shares outstanding 12,253 12,253
========= =========
</TABLE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME (OPERATIONS)
For the nine months ended September 30, 1996
1. Basis of Presentation
The Unaudited Pro Forma Statement of Income (Operations) for nine months
ended September 30, 1996 presents the combined effects of the sale of the Bayou
Sorrel Field, effective September 1, 1996 and closed on November 22, 1996, as if
this transaction had been consummated on January 1, 1996.
2. Bayou Sorrel Pro Forma Adjustments
The adjustments with respect to the sale of the Bayou Sorrel Field
represent the revenues and expenses of the Field from January 1 to August 31.
Interest expense is reduced to reflect the elimination of the financing for the
acquisition, acquired on December 28, 1995. The reduction in interest expense is
based on the Company's pro forma elimination of the debt associated with the
purchase of the Bayou Sorrel Field. The Company borrowed $10.5 million for the
purchase effective September 1, 1996 on December 28, 1995, and had reduced this
amount throughout 1996. The interest rate averaged approximately 7.25%
throughout 1996. The purchase price for the Field was $10,455,000 which included
a related receivable of $600,000 and a brokers fee of $205,000.
<PAGE>
Exhibit 10.14
PURCHASE AND SALE AGREEMENT
PANACO, INC., as Seller
and
NATIONAL ENERGY GROUP, INC., as Purchaser
BAYOU SORREL FIELD
IBERVILLE PARISH, LOUISIANA
November 11, 1996
<PAGE>
PURCHASE AND SALE AGREEMENT
Index
1. Property Being Sold 1
a. Leases
b. Rights in Production
c. Rights; Working Interests
d.Easements
e. Permits
f . Wells
g.Facilities
h.Equipment
i. Exclusions
2. Purchase Price 4
3. Closing and Performance Deposit 5
a. Closing
b. Performance Deposit
4. Closing 5
a. Payment
b. Stock
c. Conveyance
d. Overriding Royalty
e. Abandonment Agreement
f. Registration Rights Agreement
5. Further Assurances 6
6. Effective Date 6
7. Disclaimers/Acknowledgments 7
a. No Warranty, Express Or Implied
b. SWEPI's Disclaimer and Indemnity Re: Litigation
c. Acknowledgments of Purchaser at Closing
8. Independent Evaluation 11
9. Consents 11
10 Title 13
a. Title Examination
11 Representations by PANACO 13
a. Due Organization
b. Corporate Power
c. Duly Executed
d. No Litigation
12 Representations of Purchaser 14
a. Due Organization
b. Corporate Power
c. Duly Executed
d. No Litigation
13 PANACO's Conditions 15
a. Representations True
b. No Pending Suits
14. Purchaser's Conditions 15
a. Representations True
b. No Pending Suits
15. Operations and Production After the Effective Date 16
a. Operations Between the Effective Date and Closing
b. Expenses
c. Allocation of Production and Proceeds
d. Interim Accounting, Payment and Collection Services
e. Post Closing Settlement
f. Audit
g. No Application to Income Taxes
16. Taxes, Costs and Fees 19
a. Taxes
b. No Brokers
<PAGE>
17. Operations by Purchaser 20
a. Compliance with Laws
b. Assumption of Obligations
18. Indemnification 21
a. General Indemnity by Purchaser
b. Environmental Indemnity by Purchaser
c. General Indemnity by SWEPI
d. Environmental Indemnity by SWEPI
e. Limitations
f. Definitions
g. Indemnified Party's Participation
19. Existing Contracts 31
a. Assumption of Contracts
20. Notices 32
21. Parties in Interest 32
22. Complete Agreement 33
23. Applicable Law 33
24. Miscellaneous Provisions 33
a. Captions
b. Partial Invalidity
c. Modification
d. Assignment
e. Counterparts
f. Expenses
g. Signs
h. Press Releases
i. SWEPI and SOC Call on Production
j. No Recording
k. Survival
l. Exhibits
m. Time of Essence
n. No Partnership
o. File Transfers
p. Intervenor
<PAGE>
PURCHASE AND SALE AGREEMENT
PANACO, INC., a Delaware corporation, herein referred to as "PANACO",
and NATIONAL ENERGY GROUP, INC., a Delaware corporation, herein referred to as
"PURCHASER," enter into this Purchase and Sale Agreement, herein called the
"AGREEMENT," in consideration of PANACO's agreement to sell, and PURCHASER's
agreement to buy, property described in this AGREEMENT, all pursuant to the
terms and conditions of this AGREEMENT. PANACO and PURCHASER may also be
referred to herein individually as a "Party" or, collectively, as the "Parties."
1 . PROPERTY BEING SOLD. Subject to the terms and conditions set forth
hereinafter, PANACO agrees to convey to PURCHASER the PROPERTY (as defined
below) and PURCHASER agrees to accept the PROPERTY, and tender consideration
therefor, in the manner and of the type and amount as hereinafter required. For
purposes of this AGREEMENT, PROPERTY shall mean all of PANACO's right, title and
interest in and to (i) the property and property interests described in EXHIBIT
"A" hereto and (ii) all property and property interests listed in subsections
(a) through (h) of this section 1, to the extent such property or property
interests are a part of, grant rights in or with respect to, or are located on
the property and property interests described in EXHIBIT "A"; but excluding the
property in subsection (i).
(a) Leases. Leasehold interests in oil, gas or other minerals,
including working interests, carried working interests, rights of assignment and
reassignment, and other interests under or in oil, gas or mineral leases, and
interests in rights to explore for and produce oil, gas and other minerals.
(b) Rights In Production. Royalties, overriding royalties, production
payments, rights to take royalties in kind, or other interests in production of
oil, gas or other minerals.
(c) Rights, Working Interests. Rights and interests in or
derived from unit agreements, orders or decisions of state and federal
regulatory, authorities establishing units, joint operating agreements, enhanced
recovery and injection agreements, farmout agreements and farmin agreements,
options, drilling agreements, exploration agreements, assignments of operating
rights, working interests, subleases and rights above or below certain footage
depths, horizons or interests described in paragraphs (a)-(c) above except those
contracts or agreements described in subsection (i) below.
(d) Easements. To the extent transferable, rights-of-way,
surface or ground leases, easements, servitudes and franchises located on or
granting rights to the property or property interests described in EXHIBIT "A"
hereto and acquired or used in connection with operations for the exploration,
production, processing and transportation of oil, gas or other minerals with
respect to the properties and interests described in subsections (a)-(c) above,
and such other rights-of-way, surface or ground leases, easements and servitudes
which are not located on or grant rights to such property or property interests,
but which were acquired or used in such operations with respect to such property
or property interests.
(e) Permits. To the extent transferable, permits and licenses
of any nature owned, held or operated in connection with operations for the
exploration, production, processing and transportation of oil, gas or other
minerals.
(f) Wells. Producing, non-producing, shut-in and abandoned oil
and gas wells, salt water disposal wells, injection wells and water wells
located on the property or property interests described in EXHIBIT "A" hereto
and used in connection with the properties or interests described in subsections
(a)-(e) above.
(g) Facilities. All facilities, buildings, improvements,
gathering lines, flow lines, injection lines and pipelines and appurtenances
located on the real property and on lands included in the property and property
interests described on EXHIBIT "A"; provided that the PROPERTY shall also
include the existing oil transportation pipeline commencing at a location on the
PROPERTY and terminating at the inlet flange of the first LACT unit at White
Castle Field, Iberville Parish, Louisiana; provided, however, that at no time
shall PANACO's predecessor in title, Shell Western E&P, Inc., ("SWEPI"), or its
Affiliates, pay a transportation charge or tariff to PURCHASER, or its
Affiliates, for the transportation of oil (i) bought from PURCHASER by SWEPI or
its Affiliates, or (ii) transported by PURCHASER or its Affiliates for SWEPI or
its Affiliates from White Castle Field to the Grand River Terminal.
(h) Equipment. All surface and down-hole equipment, fixtures,
inventory and personal property located on the property and property interests
described in EXHIBIT "A" hereto, and used in connection with the properties or
interests described in subsections (a)-(g) above.
(i) Exclusions. The PROPERTY shall not include any
rights-of-way, surface or ground leases, easements, franchises, permits,
licenses, or other contracts or agreements which by their own terms are not
transferable; all vehicles, and other transportation equipment, rental
equipment, communications equipment (subject to leasing of adequate space
thereon to PURCHASER), televisions, VCR, copy machines and store stock left on
consignment and belonging to PANACO or third parties; provided, however, that
the PROPERTY shall include, and PANACO agrees to assign to PURCHASER, that
certain option to license proprietary seismic data from SWEPI for a price of
$43,000.00, which option continues for a period of three (3) years from October
1, 1995, which option is described in Section 1(i) of that certain Purchase and
Sale Agreement dated November 30, 1995, by and between SWEPI and PANACO covering
the Property (the "SWEPI Agreement"), the terms and provisions of which are
incorporated herein by reference.
<PAGE>
2. PURCHASE PRICE. As consideration for the sale of the PROPERTY by
PANACO to PURCHASER, PURCHASER shall pay and give to PANACO, at Closing, the
total purchase price of ELEVEN MILLION TWO HUNDRED TWENTY-SEVEN THOUSAND EIGHT
HUNDRED NINETY-SEVEN AND 60/100 DOLLARS ($11,227,897.60), plus the Overriding
Royalty (defined below), subject to adjustments as set forth herein, which shall
consist of the following: (a) the sum of NINE MILLION, TWENTY-FIVE THOUSAND AND
NO/100 DOLLARS ($9,025,000.00), in cash by wire transfer into an account
designated by PANACO, plus (b) the sum of TWO HUNDRED TWO THOUSAND EIGHT HUNDRED
NINETY- SEVEN AND 60/100 DOLLARS ($202,897.60) (being the total amount currently
held in escrow pursuant to that certain Pledge of Production Proceeds and Trust
Agreement dated December 28, 1995, by and among SWEPI, PANACO and First National
Bank of Commerce, New Orleans, Louisiana, as Trustee), in cash by wire transfer
into an account designated by PANACO, plus (c) the sum of TWO MILLION AND NO/100
DOLLARS ($2,000,000.00) in the form of unregistered common stock of PURCHASER,
the number of shares to be derived by averaging the closing price per share of
PURCHASER's common stock for the ten (10) trading days prior to the Closing
("Consideration Shares"), plus (d) the conveyance to PANACO of a three percent
(3%) overriding royalty interest in and to the PROPERTY insofar only as to
depths below eleven thousand (11,000) feet (the "Overriding Royalty") plus (e)
the assumption by PURCHASER of all of the rights and obligations of PANACO under
that certain Pledge of Production Proceeds and Trust Agreement dated December
28, 1995, (the "Pledge and Trust Agreement"), by and among SWEPI, PANACO and
First National Bank of Commerce, New Orleans, Louisiana, (collectively, the
"Purchase Price"). PANACO acknowledges and agrees that the Consideration Shares
are restricted securities within the meaning of the Securities Act of 1933, as
amended (the "Act") and the rules and regulations of the Securities and Exchange
Commission ("SEC") promulgated thereunder, and may not be offered or sold absent
an effective registration statement covering such shares or an opinion of
PANACO's counsel, acceptable to PURCHASER, that such registration is not
required. PANACO further acknowledges and agrees that with respect to the
Consideration Shares PANACO will acquire hereunder that (i) the Consideration
Shares are not registered under the Act and are being so acquired for investment
and not with a view to the distribution thereof, (ii) it is an "accredited
investor" within the meaning of Regulation D of the General Rules and
Regulations under the Act and has knowledge and experience in financial and
business matters to enable it to evaluate the merits and risks of consummating
the Agreement and acquiring shares of PURCHASER's common stock, and that it is
able to bear the economic risks of this investment, including the risk of
complete loss; (iii) it agrees to not dispose of any such shares of PURCHASER's
common stock acquired in connection herewith in violation of the Act and all
applicable governmental rules thereunder and (iv) the certificates representing
the Consideration Shares of PURCHASER's common stock issued pursuant to this
Agreement shall bear the following legend:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR UNDER STATE SECURITIES LAWS. SUCH SHARES OF COMMON STOCK
MAY NOT BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID
SECURITIES ACT COVERING THE TRANSFER OR AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER THAT REGISTRATION UNDER SAID
SECURITIES ACT IS NOT REQUIRED.
Consistent herewith, PANACO and PURCHASER agree at Closing (as hereinafter
defined) to execute the registration rights agreement (the Stock Registration
Agreement") referenced in Section 4 hereinbelow, and PANACO's right to dispose
of the Consideration Shares shall be controlled by the Stock Registration
Agreement.
3. CLOSING AND PERFORMANCE DEPOSIT.
(a) Closing. Closing shall occur on or before November 22,
1996, or at such later date as may be agreed by the Parties, (the "Closing
Date"), at a mutually agreeable time and place. "Closing" shall mean the
consummation of the sale by execution of an act of assignment of PANACO's
ownership in the PROPERTY, payment of the Purchase Price, execution of the other
assignments and agreements specified in Section 4 below of this Agreement and
the transfer of the operation and possession of the PROPERTY from PANACO to
PURCHASER.
(b) Performance Deposit. Immediately upon the execution of
this Agreement, PURCHASER will deposit by wire transfer into an account
designated by PANACO the sum of $1,000,000.00 as a good faith deposit, which sum
so deposited by PURCHASER (exclusive of any interest or income earned thereon)
shall be a performance deposit (the "Performance Deposit"), and shall be held,
administered, and disbursed in the manner specified in this AGREEMENT.
<PAGE>
4. CLOSING. At Closing, the following shall occur:
(a) Payment. PURCHASER shall make payment of the cash portion of Purchase
Price above, less the sum of $1,000,000.00 referred to in Section 3(b) hereof,
by wire transfer to an account to be designated by PANACO.
(b) Stock. PURCHASER shall deliver to PANACO one or more stock certificates
representing the Consideration Shares issued in the name of PANACO.
(c) Conveyance. PANACO will convey the PROPERTY to PURCHASER by executing
and delivering (i) an Assignment and Conveyance and (ii) a Bill of Sale in
substantially the form attached hereto as EXHIBITS "B" and "C," respectively.
(d) Overriding Royalty. PURCHASER shall convey to PANACO the Overriding
Royalty by executing and delivering an Assignment of Overriding Royalty
substantially in the form attached hereto as EXHIBIT "D".
(e) Pledge and Trust Agreement. PURCHASER shall assume, be substituted in
the place and stead of PANACO and agree to be bound by the Pledge and Trust
Agreement attached hereto as EXHIBIT "E" by executing and delivering the
Assignment and Assumption of Pledge of Production Proceeds and Trust Agreement
substantially in the form attached hereto as EXHIBIT "F."
(f) Registration Rights Agreement. PURCHASER and PANACO agree to be bound
by the Stock Registration Agreement to be executed and delivered, substantially
in the form of EXHIBIT "G" attached hereto.
5. FURTHER ASSURANCES. PANACO and PURCHASER each agree to execute and
deliver to the other Party all division orders, transfer orders and all other
documents necessary to fully vest in PURCHASER the rights, obligations and
benefits acquired pursuant to this AGREEMENT.
6. EFFECTIVE DATE. The conveyance from PANACO to PURCHASER of the Property,
the conveyance by PURCHASER to PANACO of the Overriding Royalty and the
assignment to and assumption by PURCHASER of the Pledge and Trust Agreement
shall be effective as of September 1, 1996, at 7:00 a.m. local time where the
PROPERTY is located, herein called the "Effective Date."
7. DUE DILIGENCE.
(a) PURCHASER may conduct, to the extent it deems appropriate
and at its sole cost and expense, a due diligence investigation and title
examination of the PROPERTY ("Due Diligence"). PANACO agrees that for the period
from and including November 11, 1996, through November 15, 1996, PURCHASER, its
agents, contractors, and designees shall have the right to conduct a Due
Diligence investigation of the PROPERTY (the "Review Period"), and PANACO shall
cooperate and assist PURCHASER in such investigation in making all relevant
documents available to PURCHASER as follows:
(1) To the extent PANACO has the right to grant such rights to PURCHASER,
and only after notice to any operator of the PROPERTY, to enter all or any part
of the PROPERTY at any reasonable time and from time to time, during the REVIEW
PERIOD, and to inspect, inventory, investigate (including environmental
assessments and evaluations), study and examine the same and the operations
conducted thereon; and
(2) To inspect and review at PANACO's offices located in Houston, Texas and
Kansas City, Missouri, (or any other location where Due Diligence materials may
be located) at reasonable times and upon reasonable notice, all non-privileged
files, records, documents and data related to the above matters, including, but
not limited to, any of the following which PANACO may have: Original Well Record
Files on all wells (i.e., all existing wells situated on the PROPERTY regardless
of whether previously plugged and abandoned), Regulatory, Accounting,
Environmental, Pipeline, Maintenance, Transportation, Processing, Production and
Engineering files and records.
<PAGE>
(3) To inspect and review all complaints, pleadings, filings or other court
documents with respect to the Litigation defined in Section 8(b)(1) hereof which
are in the possession of PANACO. PURCHASER shall maintain the results of its
investigation, testing and evaluation and review of files and records, including
title examination review, confidential until Closing has occurred; provided,
however, that if this Agreement is terminated for any reason, then PURCHASER
shall return to PANACO all information, including without limitation, title,
engineering, geological and geophysical data, reports and maps, and maintain all
such information confidential. Upon request by PANACO, PURCHASER shall provide
PANACO a copy of any assessment reports of or about the PROPERTY, including
without limitations, any reports, data and conclusions developed during the
REVIEW PERIOD, and PANACO shall be permitted to discuss the contents of any such
assessment reports with the party who prepared such reports.
(b) In the event PURCHASER determines in its sole judgment
that as to any portion of the PROPERTY: (i) the environmental condition thereof
is unacceptable for PURCHASER's purposes; (ii) there has been such a substantial
deterioration in the physical condition of the PROPERTY as it existed on the
Effective Date that PURCHASER will be unable to continue to possess, operate,
use or maintain the PROPERTY in the same manner and to the same extent
possessed, operated, used or maintained by PANACO prior the Effective Date
(provided, however, a lack of equipment on the PROPERTY shall not be considered
a substantial deterioration in the physical condition of the PROPERTY for
purposes of this subsection unless the equipment was removed by PANACO from the
PROPERTY after the Effective Date without PURCHASER's consent and the lack of
such removed equipment will materially adversely affect PURCHASER's ability to
use, operate or maintain the PROPERTY after Closing), or (iii) the extent of
existing, potential or contingent liabilities pose or create an unacceptable
risk; the, PURCHASER may give written notice to PANACO on or before two (2) days
prior to the Closing Date of such condition (the "Notice"). Such Notice shall
include PURCHASER's estimated cost to cure or remedy the listed conditions.
Failure to give any such notice within the REVIEW PERIOD shall foreclose
PURCHASER from securing the benefits of Section 7(c) below and shall not excuse
PURCHASER from failing to close because of matters arising out of such REVIEW
PERIOD.
(c) Upon receipt of such Notice by PANACO, if the aggregate of
the conditions set forth in the Notice are Material (as defined below),
PURCHASER may terminate this AGREEMENT by giving written notice of such
termination to PANACO on or before one (1) day prior to the Closing Date. Upon
the giving of such termination notice, neither Party shall have any further
rights or obligations hereunder except for PURCHASER's obligations to return and
to maintain information confidential as set forth in Section 7(a) above and
PURCHASER shall be entitled to a return of the Performance Deposit with interest
at the "prime rate" of interest established by Bank One, N.A., Dallas, Texas.
(d) If the aggregate of the conditions set forth in the Notice
are not Material, or if PURCHASER elects not to terminate this AGREEMENT as
provided herein, PURCHASER shall acquire the PROPERTY "where-is" and "as-is"
with no right to recover from PANACO for any liabilities, costs or expenses
related to the condition of the PROPERTY (including, without limitation,
environmental conditions and damages to natural resources). Acquisition of the
PROPERTY by PURCHASER "where-is" and "as-is" shall constitute PURCHASER's
general release and agreement to defend, indemnify and hold SWEPI and/or PANACO,
their Affiliates, directors, officers, employees, agents and representatives
harmless from all liabilities, costs or expenses related to the conditions of
the PROPERTY (including, without limitation, non-material environmental
conditions and damages to natural resources) as otherwise provided herein. For
purposes of this Section 7, "Material" shall be defined as a cost to cure in
excess of SEVEN HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($750,000.00).
<PAGE>
8. DISCLAIMERS/ACKNOWLEDGMENTS.
(a) No Warranty, Express or Implied. CONVEYANCE OF THE
PROPERTY BY PANACO TO PURCHASER SHALL BE WITHOUT WARRANTY WHATSOEVER, EXPRESS,
STATUTORY, OR IMPLIED (EVEN FOR RETURN OF THE PURCHASE PRICE) AS TO TITLE,
DESCRIPTION, PHYSICAL CONDITION OF THE PROPERTY (INCLUDING, WITHOUT LIMITATION,
THE ENVIRONMENTAL CONDITION OF THE PROPERTY) QUALITY, VALUE, FITNESS FOR
PURPOSE, MERCHANTABILITY, OR OTHERWISE. PURCHASER shall satisfy itself, prior to
the Closing, as to the type, condition, quality and extent of the property and
property interests which comprise the PROPERTY it is receiving pursuant to this
AGREEMENT and under this sale. PURCHASER shall have the right of full
substitution and subrogation to any and all rights and actions of which PANACO
has or may have against any and all preceding owners or vendors of the PROPERTY.
(b) SWEPI's Disclaimer and Indemnity Re: Litigation.
(1) Pursuant to Section 9(b) of the SWEPI Agreement, PANACO acknowledged
the existence of the Litigation (as hereinafter defined), and certain matters
related thereto, and SWEPI agreed to defend, indemnify and hold PANACO harmless
with respect to certain matters related to the Litigation. Further, pursuant to
Section 23 of the SWEPI Agreement, PANACO and SWEPI agreed that the terms and
provisions of the SWEPI Agreement shall inure to the benefit of and be binding
upon PANACO and SWEPI and their respective successors and assigns. Accordingly,
from and after the Effective Date, PANACO and PURCHASER shall be entitled to the
rights and benefits afforded by Section 9(b) of the SWEPI Agreement. Further,
PURCHASER acknowledges (i) that it is aware and knowledgeable of the litigation
entitled "Doris Allain et al. v. Shell Western E&P Inc.", No. 42,197 on the
docket of the 18th Judicial District Court for the Parish of lberville, State of
Louisiana (the "Litigation"), the various issues therein, and that the
Litigation pertains directly to the Property being purchased hereunder, (ii)
that it has been provided with and reviewed all pleadings filed in the
Litigation and has had full opportunity to discuss the status thereof, and (iii)
that the Litigation may affect operations on the Property depending upon the
outcome thereof, including operations pertaining to the burial of existing and
future flowlines, release of non-producing acreage, pre-depletion abandonment of
non-producing facilities, site restoration, environment remediation, and salt
water injection. In addition, PURCHASER acknowledges the existence of the
injunction regarding document retention issued in the Litigation, and agrees
that no documents transferred hereunder shall be altered or destroyed until
PANACO or SWEPI notifies PURCHASER of the conclusion of the Litigation.
(2) Pursuant to Section 9(b) and Section 23 of the SWEPI Agreement, SWEPI
has agreed to defend, indemnify, and hold harmless PANACO, its successors and
assigns, (including PURCHASER), from any final unappealable judgment or
settlement entered in the Litigation as follows:
(i) For all money damages, costs, and expenses, if any, awarded;
(ii) For all reasonable and direct costs, if any, of the one-time burial of
pipelines ordered to be buried below plow depth (SWEPI shall have the option to
conduct such burial operations itself and remove unused or abandoned lines or
portions thereof);
(iii) For all costs, if any, required to be paid to the Litigation
plaintiffs for disposal or injection of salt water produced from the Property
prior to the date of such judgment;
(iv) For all reasonable costs, if any, of environmental remediation of
conditions existing as of October 1, 1995, but not including any costs
attributable to site restoration, plug and abandonment, and removal of
facilities required as a matter of law absent the Litigation;
(v) For the fair market value of any lease or portion thereof cancelled.
(3) Further pursuant to Section 9(b) of the SWEPI Agreement, SWEPI's
indemnity is restricted solely to the Litigation as limited in such Section 9(b)
(and set forth in Section 7(b) of this Agreement) and does not extend to future
lawsuits, claims, or liability except as otherwise expressly provided for in
Section 20 of the SWEPI Agreement (and referenced in Section 19 of this
Agreement).
(4) Further, pursuant to Section 9(b) and Section 23 of the SWEPI
Agreement, in the event PANACO and/or PURCHASER (as PANACO's successor and
assign) is added as a defendant in the Litigation as to indemnified claims,
PANACO and/or PURCHASER shall be defended by SWEPI's attorney of record, at
SWEPI's cost, and all decisions respecting any indemnified claims shall be made
by SWEPI.
<PAGE>
(c) Acknowledgments of PURCHASER at Closing. By closing on the
transaction provided for in this AGREEMENT, PURCHASER shall be deemed to have
acknowledged and does acknowledge and admit that: (i) PURCHASER has been given
the opportunity to adequately inspect the PROPERTY for all purposes prior to
Closing; (ii) PURCHASER is aware that the PROPERTY has been used for the
exploration, development, production, treating and transporting of oil and gas
and that physical changes may have occurred as a result of such use and that
PANACO has disclosed, and PURCHASER is further aware, that there exists the
possibility that there could have occurred from such use one or more releases of
hazardous substances or releases of Chemical Substances (as defined in
subsection 19(f)(3) below) into, or other pollution or contamination of or into,
the ambient air, surface water, ground water, or land surface and subsurface
strata of any real property included in the PROPERTY and of contiguous, or a
series of contiguous, real properties not associated with the PROPERTY; (iii)
PURCHASER has entered into this AGREEMENT on the basis of its own investigation
of the physical condition of the PROPERTY and the land related thereto
(including the environmental condition of the PROPERTY); and (iv) PURCHASER with
the full knowledge of the foregoing and after conducting the above described
investigation and evaluation IS ACQUIRING THE PROPERTY ON A "WHERE IS" AND "AS
IS" BASIS; and, except with respect to the indemnification obligations specified
in section 19(b) below, PURCHASER, by acquiring the PROPERTY on a "where is" and
"as is" basis waives any other rights of indemnification, contribution or
recourse it may have against or from PANACO or SWEPI with respect to the
condition of the PROPERTY, including, without limitation, the environmental
condition of the PROPERTY and damage to natural resources associated with the
PROPERTY; and (v) PURCHASER shall further acknowledge that it has had the full
opportunity to review and is aware of the matters with respect to the PROPERTY
which are disclosed in the files provided by PANACO.
9. INDEPENDENT EVALUATION. PURCHASER has made an independent evaluation
of the PROPERTY and acknowledges that PANACO has made no statements or
representations concerning the present or future value of the anticipated
income, costs, or profits, if any, to be derived from the PROPERTY or the
quantity and quality of any oil and gas or other minerals that may be produced
from the PROPERTY and THAT PANACO DOES NOT IMPLIEDLY OR EXPRESSLY (EVEN FOR
RETURN OF THE PURCHASE PRICE) WARRANT DESCRIPTION, TITLE, VALUE, QUALITY,
PHYSICAL CONDITION OF THE PROPERTY (INCLUDING, WITHOUT LIMITATION, THE
ENVIRONMENTAL CONDITION OF THE PROPERTY), MERCHANTABILITY, OR FITNESS FOR
PURPOSE OF ANY OF THE PROPERTIES OR THE WELLS, EQUIPMENT, PIPELINES, FACILITIES,
OR OTHER PROPERTY LOCATED THEREON OR USED IN CONNECTION THEREWITH. PURCHASER
further acknowledges that, in entering into this AGREEMENT, it has relied solely
upon its independent examination of the PROPERTY and public records relating to
the PROPERTY and its independent estimates, computations, evaluations, reports
and studies based thereon.
10. CONSENTS. In the event the conveyance or transfer to PURCHASER of
any interests in the PROPERTY requires the consent of a third party, then the
conveyance or transfer of the interest subject to such consent shall be
conditioned upon the necessary waiver or consent being obtained; provided,
however, that, notwithstanding whether any such third party consent has been
obtained or waived, PURCHASER shall be obligated to consummate the sale and
purchase of the Property as contemplated by this Agreement on the Closing Date,
subject to PURCHASER's right to terminate the AGREEMENT as set forth herein
below. PANACO shall not be liable to PURCHASER by reason of any inability or
failure to obtain any such waiver of consent to assignment.
If PANACO is unable to obtain a required waiver or consent and PANACO
determines that such consent has been withheld on reasonable grounds, such
failure to obtain the waiver or consent shall be considered a "Significant Title
Defect" (as defined below) unless waived in writing by PURCHASER; provided,
however, that the prior termination or lapse of or a requirement that any
license, permit, right-of-way, pipeline franchise or easement affecting any
interests in or other portions of the PROPERTY which is non-transferable, must
be renegotiated or is subject to consent upon a transfer of ownership shall not
constitute a significant title defect under this AGREEMENT. As used in this
AGREEMENT, the term "Significant Title Defect" shall include (i) any defect
which results in a loss of title in PANACO such that PANACO's net revenue
interest with respect to an interest which is part of the PROPERTY is
substantially reduced or PANACO's right to use such interest as an owner,
lessee, license or permittee is extinguished or severely restricted, or (ii) the
inability of PANACO to obtain the waiver of a preferential right to an interest
included in the PROPERTY or a consent to assignment of an interest included in
the PROPERTY which consent PANACO believes is being withheld on reasonable
grounds. PURCHASER shall give PANACO written notice of such Significant Title
Defect on or before two (2) days prior to the Closing Date, together with full
particulars relating thereto. PURCHASER shall be deemed to have waived all
Significant Title Defects and any other defect of which PANACO has not been
given written notice as provided in this AGREEMENT. Upon receipt of such notice
of Significant Title Defects by PANACO, PURCHASER may terminate this AGREEMENT
by giving written notice of termination to PANACO on or before one (1) day prior
to the Closing Date, and upon the giving of such notice, neither Party shall
have any further rights or obligations hereunder; provided that PURCHASER shall
be obligated to return and to maintain information confidential as set forth in
Section 7(a) above and PURCHASER shall be entitled to a return of any
Performance Deposit with interest as provided in Section 7(c) above.
<PAGE>
Notwithstanding the foregoing, PURCHASER acknowledges that (a) certain
third party consents to transfers of interests in the Property were not obtained
in connection with the transfer and conveyance by SWEPI to PANACO of certain
interests in the Property, which required but not obtained third party consents
are more fully set forth on EXHIBIT "H" hereto (the "Unobtained Consents", and
the interests in the Property subject to the Unobtained Consents being herein
referred to as the "Unobtained Consents Property"); (b) the assignment and
conveyance to PANACO by SWEPI of interests in the Property subject to the
Unobtained Consents specifically provided that the assignment of such interests
in the Property "shall not be construed as an assignment of such [Property]
until all consents to assignment have been obtained;" and (c) in light of the
existence of the Litigation and SWEPI's inability to obtain the Unobtained
Consents, or a waiver thereof, that consents (or waivers thereof) to the
conveyance and transfer by PANACO to PURCHASER of the Unobtained Consents
Property will not be forthcoming prior to Closing. PURCHASER agrees to purchase
the Unobtained Consents Property (without regard to whether the Unobtained
Consents are obtained) upon the same terms and conditions as such Property was
acquired by PANACO from SWEPI, and further agrees that PANACO shall have no
liability with respect to the Unobtained Consents Property by reason of any
past, present or future inability or failure to obtain the Unobtained Consents
or a waiver thereof.
11. TITLE.
(a) Title Examination. PURCHASER assumes the risk of
description and title to the PROPERTY and agrees to satisfy itself with respect
thereto. PANACO has made available to PURCHASER for examination by PURCHASER
such title information and abstract coverage as may have been available in
PANACO's land and contract files located in the offices of PANACO in Kansas
City, Missouri, or Houston, Texas.
12. REPRESENTATIONS BY PANACO. PANACO represents to PURCHASER, each of
which representations shall survive Closing, that as of the date of the
AGREEMENT and as of Closing:
(a) Due Organization. PANACO is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware.
(b) Corporate Power. PANACO has all requisite corporate power and authority
to carry on its business as presently conducted, to enter into the AGREEMENT,
and, to perform its obligations under the AGREEMENT. The consummation of the
transactions contemplated by the AGREEMENT will not violate nor be in conflict
with (i) any provision of its charter or bylaws or (ii) any agreement or
instrument to which it is a party or is bound (except for preferential rights to
purchase and required third party consents to assignment, if any).
(c) Duly Executed. The AGREEMENT has been duly executed and delivered on
behalf of PANACO, and at Closing, all documents and instruments required
hereunder to be executed and delivered by it shall have been duly executed and
delivered.
(d) No Litigation. There are no pending or, to the best of PANACO's
knowledge, threatened claims, lawsuits, administrative proceedings, or
governmental investigations or inquiries involving the Property (other than the
Litigation as described in Section 7(b) above) or PANACO's right to consummate
the sale contemplated hereunder except those claims, lawsuits, administrative
proceedings, and government investigations and inquiries that PANACO has
disclosed to PURCHASER in writing, if any.
(e) Absence of Certain Changes. Since the Effective Date, there has been no
material damage to, or destruction of, or other material adverse change in the
physical condition or operation of the PROPERTY.
(f) Litigation, Etc. Except as defined herein as the Litigation, no action,
suit, proceeding or investigation is pending or, to the knowledge of PANACO,
threatened, against, it or any of it's directors or officers relating to or
affecting the PROPERTY, or which questions the validity of this AGREEMENT or
challenges any of the transactions contemplated hereby.
(g) Brokerage Agreements. PANACO has incurred no liability contingent or
otherwise to any broker, finder, consultant or other intermediary in connection
with the transactions contemplated by this AGREEMENT who would be entitled to
any commission or broker's or finder's fee payable by PURCHASER in connection
with the transactions contemplated herein; provided, however, that PANACO shall
be solely responsible for payment of the $25,000.00 commission to Burks Energy
Associates, Inc. upon the sale of the PROPERTY at Closing.
(h) Availability of Information. To the best of its knowledge, PANACO has
made available to PURCHASER for review and examination by PURCHASER the files
and records of PANACO related to the PROPERTY as contemplated by this AGREEMENT.
13. REPRESENTATIONS OF PURCHASER. PURCHASER represents to PANACO, each of
which representations shall survive Closing, that as of the date of the
AGREEMENT and as of Closing:
<PAGE>
(a) Due Organization. PURCHASER is a corporation duly organized, validly
existing, and in good standing under the laws of the state of its incorporation
and is duly qualified to do business in Louisiana.
(b) Corporate Power. PURCHASER has all requisite corporate power and
authority to carry on its business as presently conducted, to enter into the
AGREEMENT, to purchase the PROPERTY on the terms described in the AGREEMENT and
to perform its other obligations under the AGREEMENT. The consummation of the
transactions contemplated by the AGREEMENT will not violate, nor be in conflict
with, (i) any provision of its charter or bylaws or (ii) any agreement or
instrument to which it is a party or is bound.
(c) Duly Executed. The AGREEMENT has been duly executed and delivered on
behalf of PURCHASER, and at Closing, all documents and instruments required
hereunder to be executed and delivered by it shall have been duly executed and
delivered and the transactions contemplated hereby shall have been duly and
validly authorized by all requisite corporate action.
(d) No Litigation. There are no pending or, to the best of PURCHASER's
knowledge, threatened claims, lawsuits, Administrative proceedings, or
governmental investigations or inquiries involving PURCHASER's right to
consummate the sale contemplated hereunder except those claims, lawsuits,
administrative proceedings, and Governmental investigations and inquiries that
PURCHASER has disclosed to PANACO in writing, if any.
(e) Brokerage Agreements. PURCHASER has incurred no liability contingent or
otherwise to any broker, finder, consultant or other intermediary in connection
with the transactions contemplated by this AGREEMENT who would be entitled to
any commission or broker's or finder's fee payable by PANACO in connection with
the transactions contemplated herein; provided, however, that PANACO shall be
solely responsible for payment of the $25,000.00 commission to Burks Energy
Associates, Inc. upon the sale of the PROPERTY at Closing.
14. PANACO'S CONDITIONS. The obligations of PANACO to be performed at
Closing are subject to the satisfaction at or prior to Closing of the following
conditions, any of which may be waived by PANACO:
(a) Representations True. All representations of PURCHASER contained in
this AGREEMENT shall be true in all material respects at and as of Closing as if
such representations were made at and as of Closing, and PURCHASER shall have
performed and satisfied in all material respects all obligations required by
this AGREEMENT to be performed and satisfied by it at or prior to Closing.
(b) No Pending Suits. No suit or other proceeding shall be pending or
threatened before any court or governmental agency seeking to restrain, prohibit
or declare illegal, or seeking substantial damages as a result or in expectation
of the contemplated purchase.
(c) No Act of Termination. This Agreement shall not have been terminated as
provided herein.
15. PURCHASER'S CONDITIONS. The obligations of PURCHASER to be performed at
Closing are subject to the satisfaction at or prior to Closing of the following
conditions, any of which may be waived by PURCHASER:
(a) Representations True. All representations of PANACO contained in this
AGREEMENT shall be true in all material respects at and as of Closing as if such
representations were made at and as of Closing, and PANACO shall have performed
and satisfied in all material respects all agreements required by this AGREEMENT
to be performed and satisfied by it at or prior to the Closing.
(b) No Pending Suits. No suit or other proceeding shall be pending or
threatened before any court or governmental agency seeking to restrain, prohibit
or declare illegal, or seeking substantial damages as a result or in expectation
of the contemplated purchase.
(c) No Act of Termination. This Agreement shall not have been terminated as
provided herein.
<PAGE>
16. OPERATIONS AND PRODUCTION AFTER THE EFFECTIVE DATE.
(a) Operations Between the Effective Date and Closing. As Closing will
occur subsequent to the Effective Date, PANACO will continue to operate the
PROPERTY, or cause the PROPERTY to be operated, as appropriate, at PURCHASER's
sole risk and for the account of PURCHASER from the Effective Date until
Closing. Upon Closing, PURCHASER shall assume the risk of any change in the
condition of the PROPERTY from the Effective Date to the Closing Date, except to
the extent any change in the condition is attributable to the gross negligence
or willful misconduct of PANACO and, notwithstanding the foregoing, except as
may be otherwise provided in Section 19.
(b) Expenses. Subject to the provisions of Section 19, PANACO shall be
responsible for payment of all Expenses (as defined below) related to the
PROPERTY prior to the Effective Date. From and after the Effective Date,
PURCHASER shall be responsible for the payment of all Expenses related to the
PROPERTY, and for the costs and expenses resulting from the assumption of the
obligations and implied covenants as specified in Section 18 hereof incurred or
accrued from and after the Effective Date and for royalty payments made by or on
behalf of PANACO prior to the Effective Date to the extent recouped or
recoupable from production after the Effective Date. "Expenses" as used in this
section shall mean any expenses incurred or accrued in connection with the
operation, use, protection maintenance or ownership of the PROPERTY including,
without limitation, expenses for or related to all lease rentals, shut-in
royalties, minimum royalties, payments in lieu of production royalties
(including royalties paid in kind), overriding royalties, production payments,
net profits payments, contractual payments, operating costs, expenses, fees,
vendor and contractor invoices, billings, taxes, charges (including, without
limitation, any charges for overhead provided for in any operating agreements
related to the PROPERTY at the rates specified in such agreements), rental
payments, franchise fees, permits and license fees, assessments and other
indebtedness and obligations due, payable, incurred, accrued or attributable to
the ownership, operation, use, protection or maintenance of or otherwise
relating to or associated with the PROPERTY, together with an overhead charge of
15% of all costs and expenses associated with the operation of the PROPERTY.
(c) Allocation of Production and Proceeds. All production from oil and/or
gas wells, and all proceeds from the sale thereof including, without limitation,
proceeds from any imbalance and oil in storage above the pipeline connection,
and take-or-pay collections/rights and accounts receivable attributable to
production prior to the Effective Date and all other monetary payments
(including, without limitation, proceeds from the sale of mineral production,
credits, tax refunds, insurance proceeds, salvage payments and reimbursement of
joint operating costs and expenses) attributable to the ownership, use or
operation of the PROPERTY prior to the Effective Date shall be the property of
PANACO. All such production proceeds, and other monetary payments, attributable
to production on and after the Effective Date shall be the property of
PURCHASER.
(d) Interim Accounting, Payment and Collection Services. From the Effective
Date until the end of the month in which Closing occurrs, PANACO shall, for the
account of and at the sole cost to PURCHASER, provide or have provided all
necessary and appropriate financial accounting services for the PROPERTY and all
related operations and administration of the PROPERTY in the same manner and to
the same extent provided by or on behalf of PANACO prior to the Effective Date,
taking into account and acting consistent with the provisions of Sections 16(b)
and 16(c) above. PANACO shall, for the account of and at the sole cost to
PURCHASER, pay all Expenses (as provided in Section 16(b)) which are the
obligation of PURCHASER and collect all proceeds and other monetary payments
which are allocated to PURCHASER (as provided in Section 16(c)).
(e) Post Closing Settlement. Within ninety (90) days after Closing, PANACO
and PURCHASER shall make a final post-Closing settlement to account for all
production proceeds and other monetary payments collected for PURCHASER's
account by PANACO and all other costs and expenses and taxes paid for
PURCHASER's account by PANACO pursuant to this Section 16. In addition, PANACO
and PURCHASER shall account for and settle any royalty payments made by or on
behalf of PANACO prior to the Effective Date which are recouped or recoupable
from production after the Effective Date. PANACO and PURCHASER agree to promptly
remit any sum determined from such post-closing settlement to be owed to the
other.
(f) Audit. Within one (1) year of the Closing, either Party may at its own
expense audit the other Party's books, accounts and records relating to
production proceeds, other monetary payments, Expenses, other costs and expenses
and taxes (other than income taxes) paid or received which may have been
adjusted on account of this transaction. Such audit shall be conducted so as to
cause a minimum of inconvenience to the audited Party.
(g) No Application to Income Taxes. All references to taxes and tax refunds
shall not apply to income taxes and income tax refunds.
<PAGE>
17. TAXES COSTS AND FEES.
(a) Taxes. PURCHASER shall be responsible for the economic
burden and payment of all taxes relating to the PROPERTY from and after the
Effective Date, regardless of when they are actually assessed. PANACO shall be
responsible for the economic burden and payment of all taxes relating to the
PROPERTY prior to the Effective Date, regardless of when they are actually
assessed. PURCHASER shall pay to PANACO at Closing, in addition to and separate
from the Purchase Price, an amount equal to all state and local taxes payable by
PANACO on the transfer of ownership of any tangible personal property calculated
at the then-current rates. PURCHASER shall indemnify PANACO and hold PANACO
harmless from any liability, including without limitation, penalties, interest
and attorney's fees, arising out of PURCHASER's failure to pay to PANACO at
Closing, in addition to and separate from the Purchase Price, the amount equal
to all state and local taxes payable by PANACO on the transfer of ownership of
any tangible personal property. PURCHASER shall pay all costs associated with
documentary transfer taxes, other transfer taxes and any recording costs
assessed by any federal, state, county or other governmental offices or other
transfer fees and shall indemnify and hold PANACO harmless for such transfer
taxes, costs and fees.
(b) No Brokers. Each Party shall pay and indemnify and hold
the other Party harmless from any commission or brokerage fee it has incurred in
connection with this transaction; except that PANACO shall be solely responsible
for payment of the $25,000.00 commission to Burks Energy Associates, Inc. upon
the sale of the Property at Closing.
18. OPERATIONS BY PURCHASER.
(a) Compliance with Laws. PURCHASER shall comply with all
applicable laws, ordinances, rules and regulations, orders, terms of permits and
authorizations of any governmental body which may have jurisdiction with respect
to the PROPERTY to be transferred hereunder (including, without limitation, the
filing with such governmental bodies of any and all compliance reports, notices,
or other compliance documents which are due after the Closing Date regardless of
the period covered by such reports, notices or documents) and shall promptly
obtain and maintain all permits and bonds required by public authorities in
connection with the PROPERTY.
(b) Assumption of Obligations. Upon Closing, PURCHASER shall
assume, as of the Effective Date, and agree to perform, at PURCHASER's sole cost
and expense, (i) all obligations and implied covenants of PANACO relating to the
PROPERTY (whether such obligations and covenants are to a lessor, a governmental
body or any other person or entity), including, but not limited to (1) any
obligations arising in respect to the plugging, replugging, and abandonment of
all existing wells (whether or not such wells are active, inactive, idle, or
have been previously abandoned as of the Effective Date), (2) any obligations to
file or submit compliance reports, notices and documents required by
governmental bodies, (3) the removal of related oil and gas equipment including,
without limitation, pipelines, sumps, foundations, and other facilities, whether
the existence of same is known or unknown to the Parties at Closing, and (4) the
complete and lawful restoration and reclamation of the lands used in connection
with such wells and related equipment, pipelines, sumps and other facilities in
compliance with all federal, state and local laws, rules and regulations, with
respect to such plugging and abandonment, removal and restoration and
reclamation of associated lands, and (ii) all obligations under licenses,
permits, franchises, easements, and rights-of-way associated with or included in
the PROPERTY, and (iii) any obligations with respect to the reabandonment of
previously abandoned wells on lands included in the PROPERTY, and (iv)
remediation and clean-up with respect to the PROPERTY. As set forth in Section
19(a)(1), PURCHASER shall defend, indemnify and hold PANACO harmless with
respect to the performance or failure to perform of PURCHASER's obligations
under this Section 18.
19. INDEMNIFICATION. Capitalized terms used in this Section 19 which are
not defined elsewhere in this AGREEMENT are defined in subsection 19(f) below.
(a) General Indemnity by PURCHASER. To the fullest extent
permitted by law, but no further, PURCHASER shall indemnify and hold harmless
SWEPI, PANACO, their Affiliates and their officers, directors, employees and
agents, from any and all Claims for which a Claim Notice is delivered to
PURCHASER and which such Claims directly or indirectly arise or result from or
are caused by the use, operation, maintenance, occupation, ownership or
abandonment of the PROPERTY after the Effective Date even though such Claims may
have been contributed to or caused by the sole, joint, or concurrent fault or
negligence of PANACO or SWEPI occurring prior to Closing (except for (i)
Environmental Claims or Environmental Cleanup Liability which are separately
provided for in Section 19(b) below, and (ii) any such Claims caused by the
willful misconduct or gross negligence of PANACO or SWEPI during the time it
owned the Property). PURCHASER further covenants and agrees to defend any suits
brought against SWEPI, PANACO, their Affiliates or their respective officers,
directors, employees and agents, on account of any such Claims indemnified
hereunder and to pay or discharge the full amount or obligation of such Claims
incurred by, accruing to or imposed on SWEPI, PANACO, their Affiliates or their
respective officers, directors, employees or agents resulting from any such suit
or suits. In addition, PURCHASER shall pay to SWEPI, PANACO, their Affiliates or
their respective officers, directors, employees or agents, as applicable, all
reasonable attorneys fees incurred by SWEPI, PANACO, their Affiliates or their
respective officers, directors, employees or agents, as applicable, in enforcing
PURCHASER's indemnity in this Subsection 19(a).
<PAGE>
(b) Environmental Indemnity by PURCHASER. To the fullest
extent permitted by law, but no further, PURCHASER shall indemnify and hold
harmless SWEPI, PANACO, their Affiliates and their respective officers,
employees, and agents, from and against any and all Environmental Claims or
Environmental Cleanup Liability which arises directly or indirectly from the
use, operation, maintenance, occupation, ownership or abandonment of the
PROPERTY (i) after the Effective Date, and (ii) before December 28, 1995, with
respect to any Environmental Claim or Environmental Cleanup Liability initially
made against or sought to be imposed upon SWEPI, PANACO, their Affiliates or
their respective officers, directors, employees and agents, two (2) years or
more after December 28, 1995, even though caused, or contributed to, by the
negligence or fault of SWEPI or PANACO. Solely with respect to Section
19(b)(ii), to the best of PANACO's knowledge, there are no pending or threatened
Environmental Claims or Environmental Cleanup Liabilities made against or sought
to be imposed upon SWEPI, PANACO, their Affiliates or their respective officers,
directors, employees and agents. PURCHASER further covenants and agrees to
defend any suits or administrative proceedings brought against SWEPI, PANACO,
their Affiliates and their respective officers, directors, employees and agents,
on account of any such Environmental Claims or Environmental Cleanup Liability
and to pay or discharge the full amount or obligation of such Environmental
Claims or Environmental Cleanup Liability incurred by, accruing to or imposed on
SWEPI, PANACO, their Affiliates, or their respective officers, directors,
employees or agents, as applicable, resulting from any such suit or suits or any
amounts resulting from the settlement or resolution of such suit or suits or
administrative proceedings; provided that PURCHASER shall have agreed in writing
to any non-judicial settlement or resolution. In addition, PURCHASER shall pay
to SWEPI, PANACO, their Affiliates, or their respective officers, directors,
employees or agents, as applicable, all reasonable attorney fees incurred by
SWEPI, PANACO, their Affiliates, or their respective officers, directors,
employees or agents, as applicable, in enforcing PURCHASER's indemnity in this
subsection 19(b).
(c) General Indemnity by SWEPI. Pursuant to Section 20(c) and
Section 23 of the SWEPI Agreement, SWEPI agreed to indemnify and hold harmless
PANACO and its successors and assigns with respect to the matters more fully set
forth in such Section 20(c). Accordingly, from and after the Effective Date,
PANACO and PURCHASER shall be entitled to the rights and benefits afforded by
Section 20(c) of the SWEPI Agreement. Pursuant to Section 20(c) and Section 23
of the SWEPI Agreement, and to the fullest extent permitted by law but no
further and subject to the limitations set forth in subsection 19(e) below,
SWEPI has agreed to indemnify and hold harmless PANACO, its successors and
assigns including PURCHASER, their officers, directors, employees and agents,
from any and all claims (except for (i) Environmental Claims or Environmental
Cleanup Liability which are provided for in Section 19(d) below; and (ii) any
such claims to the extent caused by the willful misconduct or gross negligence
of PANACO or its successors or assigns, including PURCHASER, as the case may be)
for which a Claim Notice is delivered to SWEPI within one (1) year after
December 28, 1995, and (I) which directly arise, result from or are caused by
the use, operation, maintenance, occupation and ownership of the PROPERTY by
SWEPI prior to October 1, 1995, and (II) are based on law (including statutory,
regulatory and case law) existing as of October 1, 1995. SWEPI has further
covenanted and agreed to defend any suits brought against PANACO and/or its
successors and assigns including PURCHASER on account of any such claims so
indemnified and to pay or discharge the full amount or obligation of any such
claims incurred by, accruing to or imposed on PANACO and/or its successors and
assigns including PURCHASER resulting from any such suit or suits.
(d) Environmental Indemnity by SWEPI. Pursuant to Section
20(d) and Section 23 of the SWEPI Agreement, SWEPI agreed to indemnify and hold
harmless PANACO and its successors and assigns with respect to the matters more
fully set forth in such Section 20(d) of the SWEPI Agreement. Accordingly, from
and after the Effective Date, PANACO and PURCHASER shall be entitled to the
rights and benefits afforded by Section 20(d) of the SWEPI Agreement. Pursuant
to Section 20(d) and Section 23 of the SWEPI Agreement, and to the fullest
extent permitted by law but no further and subject to the limitations set forth
in subsection 19(e) below, SWEPI has agreed to indemnify and defend PANACO, its
successors and assigns, including PURCHASER, their officers, directors,
employees and agents, from and against any and all Environmental Claims and
Environmental Cleanup Liability for which a Claim Notice is delivered to SWEPI
within one (1) year after December 28, 1995, and (i) which arises wholly out of
the use, operation, maintenance, occupation or ownership of the PROPERTY by
SWEPI prior to October 1, 1995, and (ii) which are based on Environmental Law in
effect as of October 1, 1995, except for any such Environmental Claims or
Environmental Cleanup Liability in any degree caused by PANACO or its successors
and assigns including PURCHASER, as the case may be, or which is not Material
(within the meaning of and in accordance with Subsections 9(c)(e) and (4) of the
SWEPI Agreement).
<PAGE>
(e) Limitations. The indemnification obligations of SWEPI contained in
Sections 19(c) and (d) are subject to the following limitations and conditions:
(1) Such indemnification obligations do not and shall not limit the
disclaimers of warranties and the acknowledgments of PURCHASER with respect to
the PROPERTY as specified in Sections 8 and 9 above, and such indemnities shall
have no application to matters of description, title (including, without
limitation, the existence or non-existence of easements, licenses,
rights-of-way, permits, franchises, liens, leases or other encumbrances or other
agreements or the failure to procure governmental or necessary third party
consents or approvals of assignment of the PROPERTY), quality, value, fitness
for purpose or merchantability of the PROPERTY;
(2) Such indemnification obligations do not and shall not limit PURCHASER's
obligations (including indemnification obligations) under this Agreement with
respect to removal and abandonment of facilities and wells located on the
PROPERTY including, without limitation, the plugging and abandoning of wells,
removal of concrete foundations, sumps, pipelines, vessels, tanks and similar
items of oil field equipment and facilities, and restoration of the PROPERTY and
such indemnities by SWEPI shall have no application to any costs, losses or
liabilities incurred by PURCHASER in connection with fulfilling such removal,
abandonment and restoration obligations;
(f) Definitions. For purposes of this Agreement:
(1) "Affiliate" shall mean a Party's "Parent Company" and "Affiliated
Companies." "Parent Company," "Affiliated Companies" and "Controlling Interest"
shall have the following meanings:
(i) A Party's "Parent Company" shall mean an entity having a "Controlling
Interest" in such Party;
(ii) A Party's "Affiliated Companies" shall mean any and all entities in
which the Party or the Parent Company of such Party has a direct or indirect
"Controlling Interest," and
(iii) "Controlling Interest" shall mean a legal or beneficial ownership of
fifty percent (50%) or more of the voting stock or other voting rights in an
entity.
(2) "Arises." An Environmental Claim or Environmental Cleanup Liability
shall be deemed to Arise upon (i) each discrete, operationally-related Release
of Chemical Substance, as measured on a daily basis, or (ii) each discrete,
operationally-related occurrence of pollution, contamination or migration, as
measured on a daily basis.
(3) "Chemical Substances" shall mean any chemical substance, including, but
not limited to, any sort of pollutants, contaminants, chemicals, raw materials,
intermediates, products, industrial, solid, toxic or hazardous substances,
materials, wastes, or petroleum products, including crude oil or any component
thereof.
(4) "Claims" shall mean any and all claims, demands, loss, liability,
liens, demands, judgments, settlements, suits, causes of action, fines,
penalties, compliances, costs, and any costs, expenses and fees associated with
the investigation, defense and resolution of the foregoing, including, without
limitation, reasonable attorney's fees. Claims may be based on any theory of
tort, contract, strict liability, statutory liability (including, without
limitation, penalties, obligations or requirements) or any other basis for
liability and shall include, without limitation, any Claims arising, occurring
or resulting from, related to or based on the injury, disease, or death of any
persons (including, without limitation, the Indemnifying Party's employees,
agents and representatives) or damage to, loss or destruction of any property,
real or personal (including, without limitation, the Indemnifying Party's
property).
(5) "Claim Notice" shall mean a notice delivered to either Party, in
writing, that the other Party has received a claim or demand from a Third Party
or been served with process by or on behalf of a Third Party asserting Claims,
Environmental Claims or Environmental Cleanup Liability indemnified hereunder.
(6) "Environmental Claim" shall mean any claim, demand, action, suit or
proceeding for the injury, disease or death of any person (including, without
limitation, the Indemnifying Party's employees, agents and representatives),
property damage, damage to the environment or damage to natural resources made,
asserted or prosecuted by or on behalf of any Third Party (whether based on
negligent acts or omissions, statutory liability, or strict liability without
fault or otherwise) arising or alleged to arise under any Environmental Law.
Environmental Claim includes any damages, settlement amounts, fines and
penalties assessed or costs of complying with any orders or decrees of courts,
administrative tribunals or other governmental entities (other than such
compliance costs related to Environmental Cleanup Liability) associated with
resolving such claims, demands, actions, suits or proceedings and any costs,
expenses and fees, including, without limitation, reasonable attorneys fees
incurred in the investigation, defense and resolution of such claims, demands,
actions, suits and proceedings.
<PAGE>
(7) "Environmental Cleanup Liability" shall mean any cost or expense of any
nature whatsoever incurred (in order to comply with the provisions of any
Environmental Law or the provisions of any order or decree of any court or
Administrative or regulatory tribunal or agency enforcing any Environmental Law)
to contain, remove, remedy, respond to, clean up, or abate any Release of
Chemical Substances or other contamination or pollution of the air, surface
water, groundwater, land surface or subsurface strata related to the operation,
use, maintenance and ownership of the PROPERTY, whether such Release,
contamination or pollution is located on, within, under or above real property
included in the PROPERTY ("on site") or is located off site, including, but not
limited to, any Release of Chemical Substances or other contamination or
pollution arising out of or resulting from the manufacture, generation,
formulation, processing, labeling, distribution, introduction into commerce, or
on site or off site use, treatment, handling, storage, disposal or
transportation of any Chemical Substances. Environmental Cleanup Liability
includes, without limitation, any judgments, damages, settlements, costs or
expenses (including, without limitation, attorneys', consultants' and experts'
fees and expenses) incurred with respect to (i) any investigation, study,
assessment, legal representation, cost recovery by a governmental agency or
Third Party, or monitoring or testing in connection therewith, (ii) the PROPERTY
as a result of actions or measures necessary to implement or effectuate any such
containment, removal, remediation, response, cleanup or abatement and (iii) the
resolution of such liabilities.
(8) "Environmental Law" means any statutes, rules, regulations, controlling
judicial decisions or legal requirements relating to or regulating the pollution
protection or cleanup of the environment or damage to of remediation of damage
to real property and natural resources (including, but not limited to, ambient
air, surface water, groundwater, and land surface or subsurface strata)
including, without limitation, legal requirements contained in the Comprehensive
Environmental Response, Compensation and Liability Act of 1990, 42 U.S.C.
ss.9601 et seq., as amended (CERCLA); the Resources Conservation and Recovery
Act of 1976, 42 U.S.C. ss.6901, et seq., as amended (RCRA), the Superfund
Amendments and Reauthorization Act of 1986, Pub. L.99-499, as amended (SARA);
the Clean Air Act, 42 U.S.C. ss.7401, et seq., as amended; Federal Water
Pollution Control Act, 33 U.S.C. ss.2601 et seq., as amended; National
Environmental Policy Act, 42 U.S.C. ss.4321, et seq., as amended (NEPA); and the
Safe Drinking Water Act, 42 U.S.C., ss.300 j-b et seq., as amended; and/or any
other federal, state or local laws, statutes, ordinances, rules, regulations or
orders (including decisions of any court or administrative body) relating to the
pollution, protection or cleanup of the environment as specified above.
Environmental Law shall also mean the Toxic Substance Control Act, 25 U.S.C.
ss.1502, et seq., as amended (TOSCA) and/or any other federal, state (including,
without limitation, laws with respect to trespass, nuisance and other torts or
similar legal theories which may be applied to establish liability or
responsibility for Environmental Cleanup or Environmental Claims) or local laws,
statutes, ordinances, rules, regulations or orders (including decisions of any
court or Administrative body) relating to (i) release, containment removal,
remediation, response, cleanup or abatement of any sort of Chemical Substance,
(ii) the manufacture, generation, formulation, processing, labeling,
distribution introduction into commerce, use, treatment, handling, storage,
disposal or transportation of any Chemical Substance, (iii) exposure of persons,
including employees of SWEPI, PANACO or PURCHASER, to any Chemical Substance and
other occupational safety or health matters, or (iv) the physical structure or
condition of a building, facility, fixture or other structure, including,
without limitation, those relating to the management use, storage, disposal,
cleanup or removal of asbestos, asbestos-containing materials, polychlorinated
biphenyls or any other Chemical Substance.
(9) "Release" shall mean any spilling, leaking, pumping, pouring emitting,
emptying, discharging, escaping, leaching, dumping or disposing of any Chemical
Substance into the environment (including, but not limited to, the ambient air,
surface water, groundwater and land surface or subsurface strata) of any kind
whatsoever (including also the abandonment or discarding of barrels, containers,
tanks or other receptacles containing or previously containing any Chemical
Substance).
<PAGE>
(10) "Third Party" shall mean any person (other than a Party or its
Affiliates) including, without limitation, any such natural person, business
entity (corporation, partnership, trust, sole proprietorship or other business
entity), any federal, state or local governmental entity, agency or
administrative body, employee of PURCHASER or of PANACO or of SWEPI, former
employee of PURCHASER or of PANACO or of SWEPI or their respective legal
representatives, heirs, beneficiaries or estates.
(g) Indemnified Party's Participation. Any indemnified Party
shall have the right at all times, if it so elects and without relieving the
indemnifying Party of its obligations to defend hereunder, to participate in the
preparation for and conducting of any hearing or trial related to these
indemnification provisions, as well as the right to appear on its own behalf at
any such hearing or trial. Any such participation or appearance by an
indemnified Party shall be at its sole cost and expense.
An indemnified Party shall not execute a consent order nor
accept any settlement regarding an indemnified matter without the indemnifying
Party's prior written approval. The indemnified Party shall cooperate fully with
the indemnifying Party in the defense of any matter hereunder by the
indemnifying Party and shall take those actions reasonably, within its power to
take which are reasonably necessary to preserve any legal defenses to
indemnified matters hereunder until the indemnifying Party has assumed the
defense of the matter.
20. EXISTING CONTRACTS.
(a) Assumption of Contracts. The sale contemplated hereunder
shall be made subject to any and all existing operating agreements, unit
agreements, and gas processing agreements, as well as any and all other
agreements, permits, franchises, leases, licenses, easements and rights-of-way
to which the PROPERTY is subject, including without limitation the SWEPI
Agreement, and PURCHASER shall assume and be responsible for all obligations of
PANACO accruing under such agreements. Notwithstanding the foregoing, PURCHASER
acknowledges that certain of the agreements to which the sale contemplated
hereunder shall be made subject were not assignable or delegable by SWEPI to
PANACO and, therefore, are not subject to being assigned by PANACO to PURCHASER
and assumed by PURCHASER. However, PURCHASER further acknowledges that, under
the SWEPI Agreement, SWEPI retained the right, but not the obligation, with
respect to such non-assignable or non-delegable agreements, to perform, at its
sole discretion, such agreements on behalf of PANACO, and PANACO agreed in such
instances to reimburse promptly, upon notice, SWEPI for SWEPI's costs, expenses
and obligations incurred in performing such agreements. Accordingly, PURCHASER
agrees that the conveyance of the Property contemplated by this Agreement shall
be made subject to all of the agreements referenced hereinabove, whether or not
assignable or delegable, and further agrees to reimburse SWEPI promptly, upon
notice, for SWEPI's costs, expenses and obligations incurred in performing such
non-assignable or non-delegable agreements if SWEPI, in its sole discretion,
elects to perform such agreements on behalf of PURCHASER.
21. NOTICES. All notices and communications required or permitted under
this AGREEMENT shall be in writing, delivered to or sent by U.S. Mail or
nationally recognized commercial courier service, postage or delivery charges
prepaid, or by telecopy, addressed as follows (or such other address as may be
specified by ten (10) days prior written notice to the other Party):
PURCHASER
National Energy Group, Inc.
ATTN: Miles Bender
1400 One Energy Square
4925 Greenville Avenue
Dallas, TX 75206
Phone: (214) 692-9211
Telefax: (214) 692-5055
<PAGE>
PANACO
PANACO, Inc.
ATTN: H. James Maxwell
1050 West Blue Ridge Boulevard
PANACO Building
Kansas City, MO 64145-1216
Phone: (816) 942-6300
Telefax: (816) 942-6305
Notice shall be deemed to have been duly given when delivered to or sent to the
other Party in the manner prescribed herein and actually received by the Party
to whom the notice is given.
22. PARTIES IN INTEREST. Subject to subsection 25(d) below, this AGREEMENT
shall inure to the benefit of and be binding upon PANACO and PURCHASER and their
respective successors and assigns. However, no assignment by any Party shall
relieve any Party of any duties or obligations under this AGREEMENT.
23. COMPLETE AGREEMENT. When executed by the authorized representatives
of PANACO and PURCHASER, this AGREEMENT, together with the executed copies of
the exhibits hereto and documents referred to herein, shall supersede all prior
written or oral and all contemporaneous oral agreements and understandings
between the Parties, including without limitation, all and any bid solicitation,
bid offer, bid acceptance letters, and other letter agreements, and shall
constitute the complete agreement between the Parties regarding the purchase and
sale of the PROPERTY.
24. APPLICABLE LAW. THIS AGREEMENT, THE OTHER DOCUMENTS EXECUTED AND
DELIVERED PURSUANT HERETO, AND THE LEGAL RELATIONS BETWEEN THE PARTIES WITH
RESPECT TO THIS AGREEMENT, SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF LOUISIANA WITHOUT REGARD TO RULES CONCERNING CONFLICTS
OF LAWS; PROVIDED, THAT THE VALIDITY OF THE VARIOUS CONVEYANCES TRANSFERRING
TITLE TO REAL OR IMMOVABLE PROPERTY AND REAL OR IMMOVABLE PROPERTY INTERESTS
UNDER THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE JURISDICTION IN WHICH SUCH REAL OR IMMOVABLE PROPERTY OR REAL OR
IMMOVABLE PROPERTY INTERESTS ARE LOCATED.
25. MISCELLANEOUS PROVISIONS.
(a) Captions. Captions have been inserted for reference purposes only and
shall not define or limit the terms of this AGREEMENT.
(b) Partial Invalidity. If any provision of this AGREEMENT is held invalid,
such invalidity shall not affect the remaining provisions.
(c) Modification. This AGREEMENT cannot be modified or amended except by a
written instrument duly executed by PANACO and PURCHASER.
(d) Assignment. Neither PANACO nor PURCHASER, without the prior written
consent of the other Party, shall assign any right or obligation under this
AGREEMENT prior to Closing, or attempt to delegate any duty to be performed
under this AGREEMENT, except that PANACO may make such an assignment and/or
delegation to an Affiliate without the consent of PURCHASER. Consent to assign
shall not be unreasonably withheld by either Party. Any attempted assignment or
delegation without such consent shall be void and of no effect.
(e) Counterparts. This AGREEMENT may be executed in any number of
counterparts, each of which shall be deemed an original instrument, but all of
which together shall constitute but one and the same instrument.
(f) Expenses. Except as otherwise expressly provided herein, all expenses
incurred by each Party in connection with the transaction contemplated herein,
including, without limitation, attorneys fees, are for the account of the Party
incurring the same and the Party incurring such expenses shall defend, indemnify
and hold harmless the other Party from and against such expenses.
(g) Signs. PURCHASER shall, promptly after Closing, remove all signs,
placards, notices or other posted documents or information and any other like
property which refers to PANACO's or SWEPI's ownership of the Property or
responsibility for the operation conducted thereon. Notwithstanding the
foregoing, PANACO and SWEPI shall have the right but not the obligation to
remove all of their respective signs, placards, notices, or other posted
documents or information and any other like property, if any, which refers to
their respective ownership of the PROPERTY or responsibility for the operations
conducted thereon.
(h) Press Releases. No information in connection with this sale or exchange
shall be released to the public, including, without limitation, through press
releases, without the express written permission of PANACO and PURCHASER, which
permission will not be unreasonably withheld.
<PAGE>
(i) SWEPI and SOC Call on Production. PURCHASER acknowledges that SWEPI and
Shell Oil Company ("SOC") have, pursuant to Section 27(i) of the SWEPI
Agreement, a right of first refusal to purchase crude oil and other liquid
hydrocarbons produced from the Property, and PURCHASER expressly agrees that
PURCHASER shall be bound by and the sale of the Property contemplated by this
Agreement shall be subject to such right of first refusal in favor of SWEPI and
SOC. Pursuant to Section 27(i) of the SWEPI Agreement, SWEPI's and SOC's right
of first refusal to purchase crude oil and other liquid hydrocarbons produced
from the Property is exercisable at any time and from time to time by the giving
of thirty (3) days written notice to PURCHASER from either SWEPI or SOC and is
on the basis of the highest legal price posted by a major purchaser during the
month applicable to production from the field for oil of like grade and gravity
or similar liquid hydrocarbons at the time and place of delivery. It is further
provided in Section 27(i) of the SWEPI Agreement that the foregoing price may be
reduced by pipeline or truck transportation costs, if applicable; provided,
however, that in the event PURCHASER receives a bona fide third party offer to
purchase the crude in excess of the foregoing price, then PURCHASER may sell
such crude subject to SWEPI or SOC having the right within four (4) business
days of the receipt of notice thereof to match the offer and purchase the crude
for itself. In no event shall SWEPI's or SOC's failure to assert its right of
first refusal preclude it from exercising such right in connection with any
subsequent offer.
(j) No Recording. This AGREEMENT shall not be recorded or filed by any
Party or their successors or assigns, in or with any public or governmental
office, officer, agency or records repository without the prior written consent
of the other Party; provided that each Party shall have the right (without any
other Party's prior consent) to make any and all filings, recordings or
disclosures it deems appropriate and necessary in the opinion of its counsel in
order to comply with the Securities and Exchange Commission, any rules or
regulations promulgated thereby, or any requirements of the NASDAQ or other
exchange upon which a Party may secure a listing.
(k) Survival. All representations, indemnifications, covenants, obligations
and promises of the Parties or SWEPI set forth in this AGREEMENT shall survive
Closing. All documents conveying, transferring or assigning the PROPERTY shall
incorporate by reference the terms and conditions of this AGREEMENT.
(l) Exhibits. The Exhibits listed below are attached to this AGREEMENT:
EXHIBIT "A" Property and Property Interests Subject to this AGREEMENT
EXHIBIT "B" Assignment and Conveyance
EXHIBIT "C" Bill of Sale
EXHIBIT "D" Assignment of Overriding Royalty
EXHIBIT "E" Pledge of Production Proceeds and Trust Agreement
EXHIBIT "F" Assignment and Assumption of Pledge of Production Proceed
and Trust Agreement
EXHIBIT "G" Stock Registration Agreement
EXHIBIT "H" Unobtained Consents
<PAGE>
(m) Time of Essence. Time is of the essence in the performance of this
AGREEMENT.
(n) No Partnership. Nothing contained in this AGREEMENT shall be deemed to
create a joint venture, partnership, tax partnership or agency relationship
between the Parties.
(o) File Transfers. Within a reasonable time after Closing, PANACO will
transfer to PURCHASER, subject to SWEPI's and PANACO's continuing right of
access as hereinafter set forth, the following original PANACO files, records,
documents and data relating to the PROPERTY, or such similar files, records,
documents and data to the extent held or maintained by PANACO: Oil, Gas and
Mineral Lease, Fee, Easement and Right of Way, Surface Lease, Operating
Agreement Farmout, Unitization and Pooling and Land Abstract files and records
as well as original Well Record Files on all wells (i.e., all existing wells
situated on the PROPERTY regardless of whether previously plugged and abandoned
as of the Closing Date).
PANACO and SWEPI retain the continuing right of complete
access to the above files and records, which right of access may be exercised by
PANACO and SWEPI at reasonable times, upon giving PURCHASER reasonable notice
and which shall include, at the sole cost and expense of PANACO or SWEPI, as the
case may be, the right to copy or duplicate any and all contents therein. Should
PANACO or SWEPI be required by a governmental or court rule or order to produce
the original of any document described in this subsection, PURCHASER will, to
the best of its ability, make such document available to enable PANACO or SWEPI
to comply with said rule or order upon receiving proper assurance that such
document will be promptly returned to PURCHASER.
Pursuant to Section 27(o) of the SWEPI Agreement, SWEPI
granted to PANACO certain rights of access to SWEPI files, records, documents
and data relating to the Property. Accordingly, and pursuant to Section 23 of
the SWEPI Agreement, PURCHASER, as successor in interest to PANACO, shall also
have the right of access, after the Closing Date, to the following SWEPI files,
records, documents and data relating to the Property: Division Order, Transfer
Order, Letters-in-lieu, Regulatory, Accounting, Environmental, Pipeline,
Maintenance, Transportation, Processing, Production and Engineering files and
records not conveyed and transferred by SWEPI to PANACO. The right of access of
PANACO and its successors and assigns including PURCHASER may be exercised at
reasonable times, upon giving SWEPI reasonable notice and shall include, at the
sole cost and expense of PANACO, or its successors or assigns including
PURCHASER, as the case may be, the right to copy any and all contents therein
not otherwise excluded subject to the following: (1) only division of interest
sheets, division orders, transfer orders, letters-in-lieu, title opinions and
title curative material may be copied from Division Order files and (2) only gas
contracts and amendments or agreements relating thereto and pertinent outside
correspondence may be copied from gas files. Should PANACO or its successors or
assigns including PURCHASER be required by a governmental rule or order to
produce the original of any document to which the right of access has been
granted by this subsection, SWEPI has agreed, to the best of its ability, to
make such documents available to enable PANACO or its successors or assigns
including PURCHASER, as the case may be, to comply with said rule or order upon
receiving proper assurance that such document will be promptly returned to
SWEPI.
EXECUTED by the Parties hereto as indicated below by the
signatures of their respective representatives; however, for identification
purposes, this AGREEMENT shall be deemed dated as of the date the last Party
hereto signs this AGREEMENT.
NATIONAL ENERGY GROUP, INC.
By:
Name: ______________________________
Title: _____________________________
Date:
PANACO, INC.
By:
H. James Maxwell
President and Chief Executive Officer
Date:
