SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________
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 26, 1997
CALLON PETROLEUM COMPANY
(Exact name of Registrant as specified in its charter)
Delaware 0-16866 64-0844345
(State or other jurisdiction of Commission (I.R.S. Employer
incorporation or organization) File Number Identification No.)
200 North Canal Street
Natchez, Mississippi 39120
(Address of Principal Executive Offices) (Including Zip Code)
(601) 442-1601
(Registrant's telephone number,including area code)
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Item 2. Acquisition or Disposition of Assets
On June 26, 1997, Callon Petroleum Operating Company ("CPOC"), a wholly
owned subsidiary of Callon Petroleum Company (the "Company"), and Elf
Exploration, Inc. ("Elf") executed a purchase and sale agreement where-
by CPOC purchased an 18.8% working interest in the Mobile Area Block 864
Unit. The purchase included a 17.5% working interest in Mobile Area
Blocks 863 and 907 and a 35% working interest in Mobile Area Block 908.
The Unit, operated by Chevron, is located approximately 12 miles south-
southwest of the Company's North Dauphin Island Field which is located
in shallow Alabama state waters.
The net purchase price of $11.8 million was funded from the credit
facility of the Company. The purchase price was based on the discounted
present value of reserves attributable to the wells and the fair value
of the related production platforms, facilities, equipment and acreage
outside of the producing Unit.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Properties Acquired
It is impracticable to provide the required financial statements
by the date this Report is required to be filed with the
Securities and Exchange Commission (the "Commission") and none
of the required financial statements will be available on such
date. The Company will provide such statements under cover of
Form 8-K/A as soon as practical, but in any event not later
than 60 days after the date this Report is required to be filed
with the Commission.
(b) Pro Forma Financial Information
It is impracticable to provide the required pro forma financial
information by the date this Report is required to be filed with
the Commission and none of the required information will be
available on such date. The Company will provide such inform-
ation under cover of Form 8-K/A as soon as practicable, but in
any event not later than 60 days after the date of this Report
is required to be filed with the Commission.
(c) Exhibits.
1. Underwriting Agreement*
2. Plan of acquisition, reorganization, arrangement,
liquidation or succession
2.1 Purchase and Sale Agreement dated June 26, 1997
between CPOC and Elf Exploration, Inc.
4. Instruments defining the rights of security holders,
including indentures*
16. Letter re change in certifying accountants*
17. Letter re director resignation*
20. Other documents or statements to security holders*
23. Consents of experts and counsel*
24. Power of attorney*
27. Financial Data Schedule*
99. Additional exhibits*
* Inapplicable to this filing
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CALLON PETROLEUM COMPANY
Date July 10, 1997 By: /s/ John S. Weatherly
John S. Weatherly, Senior Vice
President, Chief Financial
Officer and Treasurer
<PAGE>
Exhibit 2.1
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement ("Agreement") dated as of the ___ day
of June, 1997, is made by Elf Exploration, Inc. (hereinafter referred to as the
"Seller") in favor of Callon Petroleum Operating Company (hereinafter referred
to as the "Purchaser").
RECITALS
Whereas, Seller desires to sell and Purchaser desires to purchase
certain oil and gas properties and related rights on the terms and conditions
provided in the Agreement;
Now, therefore, in consideration of the premises and the respective
promises, representations, warranties, covenants, agreements and conditions
contained herein, Seller and Purchaser hereby agree as follows:
I.
DEFINITIONS
As used in this Purchase and Sale Agreement, including the Exhibits,
all initially capitalized terms shall have the meanings ascribed to them below.
1.1 Accounting Adjustment. shall have the meaning denoted in para-
graph 3.3(b).
1.2 Agreement. shall have the meaning denoted in the Preamble.
1.3 Assignee. shall have the meaning denoted in the Preamble of
Exhibit C.
1.4 Assignor. shall have the meaning denoted in the Preamble of
Exhibit C.
1.5 Cash Payment. shall have the meaning denoted in paragraph 2.1.
1.6 Closing. shall have the meaning denoted in Article IX.
1.7 Closing Amount. shall have the meaning denoted in paragraphs
3.2(a) and 3.3(b).
1.8 Closing Date. shall have the meaning denoted in paragraph 3.1.
1.9 Effective Date. shall have the meaning denoted in paragraph
3.1.
1.10 Expenditures. shall have the meaning denoted in paragraph
3.3(a).
1.11 Facilities. shall have the meaning denoted in paragraph
2.1(d).
1.12 Final Settlement Statement. shall have the meaning denoted in
paragraph 3.3(c).
1.13 Hydrocarbons. shall have the meaning denoted in paragraph
2.1(c).
1.14 Indemnified Parties. shall have the meaning denoted in para-
graph 13.1(b)
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1.15 Leases. shall have the meaning denoted in paragraph 2.1(a).
1.16 MMS. shall have the meaning denoted in paragraph 3.2(b).
1.17 Net Revenue Interest. shall have the meaning denoted in para-
graph 4.6.
1.18 NORM. shall have the meaning denoted in paragraph 13.2(f).
1.19 Oil and Gas Properties. shall have the meaning denoted in
paragraph 2.1(a).
1.20 Other Parties. shall have the meaning denoted in paragraph
13.1(b).
1.21 Preliminary Settlement Statement. shall have the meaning
denoted in paragraph 3.3(b).
1.22 Property. shall have the meaning denoted in paragraph 2.1.
1.23 Properties. shall have the meaning denoted in paragraph 2.1.
1.24 Purchase Price. shall have the meaning denoted in paragraph
3.2.
1.25 Purchaser. shall have the meaning denoted in the Preamble.
1.26 Revenues. shall have the meaning denoted in paragraph 3.3(a).
1.27 Seller. shall have the meaning denoted in the Preamble.
1.28 Specified Interest. shall have the meaning denoted in
paragraph 2.1(a).
1.29 Wells. shall have the meaning denoted in paragraph 2.1(b).
1.30 Working Interest. shall have the meaning denoted in paragraph
4.6.
II
AGREEMENT TO BUY AND SELL
2.1 Agreement to Sell The Properties. In consideration of Twelve Million
Four Hundred Sixty Thousand and no/100 Dollars ($12,460,000.00) (the "Cash
Payment") and other good and valuable consideration to be paid Seller at
Closing, the sufficiency of which is hereby acknowledged by Seller, Seller
agrees to sell and Purchaser agrees to pay and buy, subject to the terms,
conditions, representations, warranties, indemnities and disclaimers
contained in this Agreement, One Hundred Percent (100%) of Seller's interest
in the following (collectively, the "Property" or "Properties"):
(a) Specified Interest, Leases and Oil and Gas Properties. Seller's
undivided interest (the "Specified Interest") in and to those certain
oil and gas leases to a depth of 4200 feet from the surface of the
earth, all as more fully described on Exhibit "A" attached hereto (the
"Leases") as to which Leases Seller represents, but does not warrant,
that Seller owns the Working Interest and Net Revenue Interest reflected
on Exhibit A and all rights with respect to pooled, unitized or
communitized acreage by virtue of the properties covered by the Leases
being part hereof, together with all right, title, interest, tenements,
hereditaments, appurtenances, benefits and privileges of Seller
attributable to the foregoing properties described in this Paragraph
(a) (collectively, the "Oil and Gas Properties").
<PAGE>
(b) Wells. The Specified Interest in and to the oil, condensate
or natural gas well(s), water source well(s), and water or other types
of injection well(s) located on the Oil and Gas Properties or acreage
pooled therewith, whether producing, operating, shut-in or temporarily
abandoned (the "Wells") on and after the Effective Date as more fully
identified in Exhibit A.
(c) Hydrocarbons. The severed crude oil, natural gas, casing head
gas, drip gasoline, natural gasoline, petroleum, natural gas liquids,
condensate, products, liquids and other hydrocarbons and other minerals
or materials of every kind and description produced from the Oil and
Gas Properties on and after the Effective Date (collectively, the
"Hydrocarbons").
(d) Facilities. The Specified Interest in and to the physical
facilities or interests therein, separators. compressors. metering
facilities. well protector, the platform, pipeline, gathering lines,
equipment and fixtures of every type and description to the extent
that the same are used or held for use in connection with the
ownership of the properties described in Paragraphs (a), (b) and (c)
above, whether located on or off such properties, including, without
limitation, all casing and tubular in the Wells (collectively the
"Facilities").
(e) Licenses, etc. The leases, easements, privileges, rights-of-way
agreements, permits, licenses or other agreements relating to the use or
ownership of surface or subsurface properties and structures that are
used or held for use in connection with the exploration for and produc-
tion of the Hydrocarbons.
(f) Books and Records. The (i) lease and land files, other docu-
ments and instruments that relate to the properties described in Para-
graphs (a) through (e) above and (g) and (h) below and which are in the
possession of Seller; (ii) production and other uninterpreted technical
data that are in Seller's files and relate to the Oil and Gas Properties
or the Wells except to the extent transfer of same is restricted or pro-
hibited by agreement with a third party; and (iii) other books, records
and files containing title or other information that are in possession
of Seller and relate to the properties described in Paragraphs (a)
through (e) above.
(g) Commitments. The contracts, commitments, agreements and
arrangements that in any way relate to the properties described in
Paragraphs (a) through (e) above and to any period of time after the
Effective Date, including the production, storage, treatment,
transportation, processing, purchase, sale or other disposal of
Hydrocarbons therefrom or in connection therewith and any and all
amendments, ratifications or extensions of the foregoing, together
with all rights of Seller thereunder to audit the records of any party
thereto and receive refunds of any nature thereunder, relating to
periods on or after the Effective Date.
(h) Accounts and Security Interests. The (i) accounts, instruments
and general intangibles (as such terms are defined in the Uniform Com-
mercial Code of the State of Texas) attributable to the properties
described in Paragraphs (a) through (g) above with respect to any period
of time on or after the Effective Date and (ii) liens and security
interest in favor of Seller, whether choate or inchoate, under any law,
rule or regulation or under the contracts described in Paragraph (g)
arising from the ownership, operation or sale or other disposition on
or after the Effective Date of any of the properties described in
Paragraphs (a) through (h).
<PAGE>
2.2. Assets Not Sold Relating to the Properties. The following are excluded:
(a) Accounts Receivable associated with the Leases, Oil and Gas
Properties, Wells, Hydrocarbons and Facilities and relating to opera-
tions prior to the Effective Date of sale.
(b) Hydrocarbons in pipelines and Hydrocarbons in tanks above the
pipeline connections as of 7:00 A.M. Central Time, April 1, 1997 (which
shall be sold to Purchaser separately and shall be part of the deter-
mination of Cash Payment Adjustments provided for in paragraph 3.3); and
(c) All seismic data held or used under license or agreement to,
from or with a third party owner of such data, except such seismic data
as may be transferred to Seller's successors or assigns pursuant to such
license or agreement.
2.3 Assumption of Obligations. Unless specifically excepted or reserved,
Purchaser and Seller agree that the sale of the Properties will be made subject
to the assumption by Purchaser of those agreements described in Exhibit B and
to any and all assignments, subleases, farmout agreements, joint operating
agreements, unit agreements, unit operating agreements, partnership agreements,
letter agreements, easements, rights-of-way, permits, licenses, leases,
contracts and all other agreements with respect to or pertaining to the
Properties to the extent that they are binding on Seller and of which Purchaser
has actual knowledge or record notice. Purchaser further agrees to expressly
assume the obligations and liabilities of Seller under such assignments,
subleases, farmout agreements, joint operating agreements, unit agreements,
unit operating agreements, partnership agreements, letter agreements, ease-
ments, rights-of-way, permits, licenses, leases, contracts and agreements
insofar as such obligations or liabilities concern or pertain to the
Properties and to execute any documents necessary to effectuate such agreement.
Purchaser's assumption of the obligations and agreements specified above
insofar as it relates to obligations accrued prior to the Effective Date
is for the sole benefit of Seller and not for the benefit of any third party.
III.
PURCHASE AND SALE
3.1 Transfer of the Properties. Subject to the terms and conditions of this
Agreement, on or before June 26, 1997, at 10:00 a.m. Central Time ("Closing
Date") Seller shall sell and Purchaser shall purchase and pay the Purchase
Price, as adjusted hereunder, for all of Seller's right, title, and interest
in and to the Properties effective as of 7:00 a.m. Central Time, April 1, 1997
(the "Effective Date").
3.2 Purchase Price. At Closing the Cash Payment, as adjusted hereunder,
and Assumption of Abandonment Obligation as described below (hereinafter
collectively referred to as the "Purchase Price") shall be delivered as follows.
(a) Payment. Purchaser shall make the "Cash Payment" as adjusted
(the "Closing Amount") to Seller for all of Seller's right, title and
interest in and to the Properties. The Closing Amount shall be payable
at Closing, in cash or by wire transfer of immediately available funds,
to the following account:
Credit to: Elf Exploration, Inc.
Account Number: 910-2-763605
Bank: Chase Manhattan Bank
New York, NY
ABA Number: 021000021
(b) Assumption by Purchaser of Abandonment Obligation. Purchaser
recognizes and specifically assumes Seller's obligation to properly
plug and abandon any and all wells; remove all equipment, platforms and
<PAGE>
facilities, including, but not limited to, pipelines and treatment
facilities associated with the Property when appropriate and in
accordance with the rules, regulations, and requirements of any
governmental authority having jurisdiction thereof and in accordance
with all obligations, express or implied, in any agreement assumed
by Purchaser. Purchaser agrees to pay all costs and expenses
associated with any such plugging and abandoning or removal.
Purchaser agrees to furnish the Minerals Management Service, United
States Department of the Interior (the "MMS") any bond or supplemental
bond required by the MMS.
3.3 Determination of Cash Payment Adjustments. At or in connection with the
Closing, the following accounting shall be effected between Seller and
Purchaser:
(a) During the period between the Effective Date and the Closing
Date, Seller shall retain all proceeds from Seller's interest in Hydro-
carbons and interest in the Properties. All Hydrocarbons produced prior
to the Effective Date (irrespective of whether payment for the same has
been made or received) which is attributable to Seller's interest in
the Properties shall be and remain the property of Seller. Oil above
the pipeline connection at 7:00 a.m., Central Time, on the Effective
Date shall be considered to have been produced prior to the Effective
Date. Purchaser shall be (i) credited with all Seller's interest in
Hydrocarbons during the period from the Effective Date to the Closing
Date ("Revenues") and (ii) charged with all capital and operating costs
incurred in connection with Seller's interest in the Properties
(including without limitation delay rentals and shut-in payments, over-
riding royalties, royalties and other payments out of Hydrocarbons and
production, severance and sales taxes to the extent not previously
deducted from Revenues) during the period from the Effective Date to the
Closing Date ("Expenditures").
(b) Not less than two (2) business days prior to Closing, Seller
shall cause to be prepared an unaudited settlement statement (the
"Preliminary Settlement Statement") setting forth a good faith estimate
of the Revenues and Expenditures. The Cash Payment shall be increased
by that dollar amount which is equal to that amount, if any, by which
Expenditures exceed Revenues or decreased by that dollar amount which
is equal to that amount, if any, by which Revenues exceed Expenditures.
Purchaser or Seller, as the case may be, shall pay to the other, at
Closing, that estimated net amount (the "Accounting Adjustment") which
is due and payable by giving effect to this subsection (b) and sub-
sections (d) and (e) of this Section 3.3. The Cash Payment paid at
Closing, as increased or decreased by the Accounting Adjustment, shall
be referred to hereinafter as the "Closing Amount".
(c) As soon as practicable after the Closing, but not later than
ninety (90) days thereafter, Seller and Purchaser shall agree on, in
accordance with generally accepted accounting principles, a statement
(the "Final Settlement Statement") setting forth each adjustment or pay-
ment that was estimated as of the Closing and showing the calculation of
the resulting final Purchase Price. If the Final Settlement Statement
reveals that either party owes a sum of money to the other, then the
party owing same shall promptly pay to the other party such sum by
cashier's or certified check or other guaranteed funds.
(d) Ad valorem taxes assessed in the jurisdiction in which the
Properties are located are payable in arrears, and such taxes shall be
included in the accounting for adjustment to the Purchase Price at
Closing on a prorated basis based on 1996 taxes.
(e) All prepaid charges, including insurance applicable to periods
following the Effective Date and before the Closing Date and prepaid
rentals or royalties paid under the Leases or any contracts for periods
<PAGE>
subsequent to the Effective Date, shall be prorated as of the Effective
Date and the pro rata share of Purchaser shall be included in the
accounting for adjustment to the Purchase Price as an increase thereto.
(f) Purchaser shall pay all sales, use or transfer taxes that may
be or become due on account of the sale and purchase herein provided
for.
(g) Seller's and Purchaser's Respective Obligations with Respect to
Oil and Gas Imbalances: Operator's statement indicates that Seller is
overproduced as of March 31, 1997 by 1,902 MCF as to production from the
Properties for all periods prior to the Effective Date. This over-
production shall be part of the adjustment to the Cash Payment provided
for in paragraph 3.3.(b). From and after the Effective Date, any and
all benefits, obligations, and liabilities associated with any oil or
gas production imbalance accounts shall accrue to and be the
responsibility of Purchaser.
IV.
REPRESENTATIONS OF SELLER
Seller represents and warrants to Purchaser that:
4.1 Existence. Seller is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, and is duly qualified
in accordance with the Outer Continental Shelf Lands Act as Amended to hold oil
and gas leases of submerged lands from the United States of America.
4.2 Power. Seller has the corporate power to enter into and perform this
Agreement and the transactions contemplated hereby, subject to rights to consent
by, required notices to, and filings with or other actions by governmental
entities where the same are customarily obtained subsequent to the assignment of
oil and gas interests and leases. The execution, delivery and performance of
this Agreement by Seller, and the transactions contemplated hereby, will not
violate (i) any provision of the certificates of incorporation or bylaws of
Seller, (ii) any material agreement or instrument to which Seller is a party
or by which Seller is bound, (iii) any judgment, order, ruling, or decree
applicable to Seller as a party in interest, or (iv) any law, rule or
regulation applicable to Seller.
4.3 Authorization. The execution, delivery and performance of this Agree-
ment and the transactions contemplated hereby have been duly and validly
authorized by all requisite corporate action on the part of Seller. This
Agreement has been duly executed and delivered on behalf of Seller, and at
the Closing all documents and instruments required hereunder to be executed
and delivered by Seller shall have been duly executed and delivered. This
Agreement does, and such documents and instruments shall, constitute legal,
valid and binding obligations of Seller enforceable in accordance with their
terms, subject, however, to the effect of bankruptcy, insolvency,
reorganization, moratorium and similar laws from time to time in effect
relating to the rights and remedies of creditors, as well as to general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or law.
4.4 Broker. Seller has not incurred any liability, contingent or otherwise,
for broker's or finder's fees relating to the transaction contemplated by this
Agreement for which Purchaser shall have any responsibility whatsoever.
4.5 Litigation. There is no litigation or administrative proceeding pending
or, to Seller's knowledge threatened, or any order, injunction or decree out-
standing, against or relating to Seller or the Properties that, if adversely
determined, would have a material adverse effect upon the Properties or the
continued operation of the Properties, and to Seller's knowledge, (i) Seller
is not in violation of any applicable law, regulation, ordinance, or any other
applicable requirement of any governmental body or court, which violation would
<PAGE>
have a material adverse effect upon the Properties or the continued operation
of the Properties, and (ii) no notice has been received by Seller alleging any
such violation.
4.6 Limited Warranty of Title. "PURCHASER" SHALL MAKE SUCH EXAMINATIONS OF
"SELLER'S" FILES, THE "MMS" RECORDS AND ALL OTHER RECORDS IT DEEMS NECESSARY TO
SATISFY ITSELF AS TO THE EXTENT AND FORM OF THE TITLE INTO "SELLER". "SELLER"
SHALL CONVEY ALL OF ITS INTEREST IN THE "LEASES" TO "PURCHASER" SUBJECT TO ALL
ROYALTIES AND THOSE EXISTING CONTRACTS LISTED ON EXHIBIT B, AND THOSE CONTRACTS
OF WHICH PURCHASER HAS ACTUAL KNOWLEDGE OR CONSTRUCTIVE NOTICE WITHOUT WARRANTY
OF TITLE, EXPRESS, STATUTORY OR IMPLIED, EXCEPT THAT "SELLER" SPECIALLY WARRANTS
AND AGREES TO DEFEND TITLE TO THE WORKING INTEREST AND NET REVENUE INTEREST IN
THE "LEASES" SET FORTH IN EXHIBIT A (THE "WORKING INTEREST(S)" AND THE "NET
REVENUE INTEREST(S)"), AGAINST THE LAWFUL CLAIMS AND DEMANDS OF ALL PERSONS
CLAIMING TITLE TO THE "LEASES", THE "WORKING INTEREST(S)" AND THE "NET REVENUE
INTEREST(S)" BY, THROUGH AND UNDER "SELLER", BUT NOT OTHERWISE.
4.7 Gas Sales. Except as shown in Exhibit B, none of the Leases are
subject to any long term gas contract as to the Specified Interest.
4.8 Schedules and Exhibits. Without limiting Purchaser's right to object to
material changes made therein, all schedules and exhibits attached or which may
later be attached shall be updated to Closing.
4.9 Taxes. To the best of Seller's knowledge, the Properties are not
subject to liens for taxes other than taxes not due and payable or being
contested in good faith.
4.10 Take-or-Pay, Other Settlements and Calls on Production. To the best
of Seller's knowledge, there are no take-or-pay settlements or gas sales
contract buy-downs or buy-outs or calls on production that will affect the
Properties after the Effective Time, for which Purchaser will have any
responsibility whatsoever or for which Purchaser will owe any additional
royalty after the Effective Time or which will adversely affect Purchaser in
any way.
4.11 Contract Compliance. To the best of the Seller's knowledge, all of
the material contracts and other obligations of Seller that relate to the
Properties are in full force and effect and Seller has not received any
written notice of any intention to seek cancellation of such contracts and
obligations which would have a negative material impact on the Properties.
4.12 Proper Payments. To the best of Seller's knowledge, all rentals,
royalties, overriding royalties and all other payments due with respect to the
Properties have been properly and timely paid unless reasonable grounds exist
to hold any such payments without jeopardizing title to any of the Properties.
V.
REPRESENTATIONS OF PURCHASER
Purchaser represents and warrants to Seller that:
5.1 Existence. Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and is duly quali-
fied in accordance with the Outer Continental Shelf Lands Act as Amended to
hold, as a lessee, oil and gas leases of submerged lands from the United States
of America.
5.2 Power. Purchaser has the corporate power to enter into and perform this
Agreement and the transactions contemplated hereby, subject to rights to con-
sent by, required notices to, and filings with or other actions by governmental
entities where the same are customarily obtained subsequent to the assignment
of oil and gas interests and leases. The execution, delivery and performance
of this Agreement by Purchaser, and the transactions contemplated hereby, will
<PAGE>
not violate (i) any provision of the certificates of incorporation or bylaws of
Purchaser, (ii) any material agreement or instrument to which Purchaser is a
party or by which Purchaser is bound, (iii) any judgment, order, ruling, or
decree applicable to Purchaser as a party in interest, or (iv) any law, rule
or regulation applicable to Purchaser.
5.3 Authorization. The execution, delivery and performance of this Agree-
ment and the transactions contemplated hereby have been duly and validly
authorized by all requisite corporate action on the part of Purchaser. This
Agreement has been duly executed and delivered on behalf of Purchaser, and at
the Closing all documents and instruments required hereunder to be executed
and delivered by Purchaser shall have been duly executed and delivered. This
Agreement does, and such documents and instruments shall, constitute legal,
valid and binding obligations of Purchaser enforceable in accordance with their
terms, subject, however, to the effect of bankruptcy, insolvency, reorgani-
zation, moratorium and similar laws from time to time in effect relating to
the rights and remedies of creditors, as well as to general principles of
equity (regardless of whether such enforceability is considered in a pro-
ceeding in equity or at law).
5.4 Independent Evaluation and Review. Purchaser acknowledges that
Purchaser is an experienced and knowledgeable investor in the oil and gas
business. Purchaser also acknowledges that other than as expressly set out
in this Agreement, Seller has made no representations or warranties as to the
accuracy or completeness of any information supplied to Purchaser, or as to
title to the Properties. Based on such acknowledgments, in entering into and
performing this Agreement, Purchaser has relied and will rely solely upon its
independent investigation of, and judgment with respect to, the Properties,
their condition, value and Seller's title thereto.
5.5 Further Distribution. Purchaser is acquiring the Properties for its
own account and not with a view to, or for offer or resale in connection with,
a distribution thereof within the meaning of the Securities Act of 1933 and
the rules and regulations pertaining to it or a distribution thereof in
violation of any applicable securities laws.
5.6 Brokers. Purchaser has incurred no liability, contingent or otherwise,
for broker's or finder's fees relating to the transactions contemplated by this
Agreement for which Seller shall have any responsibility whatsoever.
5.7 Litigation. There is no litigation or other proceeding pending or to
Purchaser's knowledge threatened, or any order, injunction or decree outstand-
ing against or relating to Purchaser which would prevent Purchaser from entering
into this Agreement.
VI.
PRE-CLOSING TRANSACTIONS
6.1 Operation of the Properties Pending the Closing Date.
(a) Prior to the Closing Date, Seller agrees to use its best
efforts, unless specifically waived by Purchaser in writing (i)
to cause such Properties to be operated in a good and workmanlike
manner and in substantially the same manner as Operator has hereto-
fore operated the same; (ii) pay Operator timely for all of Seller's
share of the costs and expenses incurred in connection with the Pro-
perties; (iii) not enter into any material new agreements or amend or
terminate any material existing agreements relating to the Properties;
(iv) not encumber, sell, or otherwise dispose of any of the Properties
other than in the ordinary course of business; (v) not abandon any well
included in the Properties or release or abandon any portion of the
Leases included in the Properties; (vi) not waive, compromise or settle
any material right or claim that would materially adversely affect the
ownership or operation of the Properties after the Closing Date; (vii)
<PAGE>
maintain insurance now in force with respect to the Properties; and
(viii) use reasonable efforts to cause the Leases and contracts to be
kept in full force and effect and perform and comply with all of the
material covenants and conditions contained in same. Seller shall
afford Purchaser and its representatives access to the Properties,
all at Purchaser's risk and expense.
(b) Seller shall not propose any operation under the terms of any
applicable operating agreement after the date of execution of this
Agreement. In connection with any operation proposed by a party other
than Seller, Seller shall furnish Purchaser any data and other informa-
tion furnished to Seller under any such operating agreement by the
party proposing such operation. Purchaser shall then advise Seller
whether Purchaser desires Seller to consent or not to consent to such
operation; however, Seller shall have the final decision as to whether
or not to consent.
6.2 Casualty; Insurance. Purchaser shall assume the risk of any change in
condition of the Properties from the Effective Date until Closing. Should any
of the Wells producing from the Leases covered by or constituting a part of the
Properties be destroyed, lost or cease to produce because of blowout, fire,
storm, casing collapse, Act of God or other casualty pending the Closing Date,
such event shall not constitute a title defect nor shall Purchaser be relieved
of its obligation to Close hereunder but shall be entitled to receive an assign-
ment of any insurance claims or causes of action that Seller may be entitled to
assert or pursue against insurers or operators or third parties who may be
liable if the casualty was the result of the operator's or such third party's
negligence.
6.3 Third Party Notifications and Approvals. Purchaser recognizes that the
sale of the Properties may require the approval or consent of lessors, joint
interest owners, farmors, sublessors, assignors, grantors, parties to agree-
ments, or governmental bodies having jurisdiction and, except as provided here-
in, Purchaser agrees to assume full responsibility for obtaining any such
consent and approval fromthe above-mentioned parties, including, as necessary,
obtaining waivers of maintenance of uniform interest provisions from joint
interest owners, and furnishing Seller with proof of such consent or approval.
Seller will cooperate with Purchaser in its efforts to obtain such approvals
and consents. Purchaser further acknowledges that it is Seller's responsibility
(a) To notify all owners of any preferential rights to purchase any
of the Properties.
(i) Seller has proposed to Purchaser the forms of notice it intends
to send to all holders of preferential purchase rights in the Propert-
ies. Seller shall incorporate any revisions or additions to the forms
of notice requested by Purchaser and reasonably satisfactory to Seller
in order to assure full compliance with the applicable notice provisions
and effective waiver of the exercise of such rights if no affirmative
exercise is received. Seller shall transmit to the respective holders
of preferential purchase rights all such notices no later than five (5)
days following the execution of the Agreement.. Seller shall keep
Purchaser informed on a current basis as receipt of responses from the
holders of preferential purchase rights are received or applicable
exercise periods expire without exercise or response from the holders.
Seller shall provide Purchaser with copies of all such correspondence
between Seller and such holders of preferential purchase rights as such
correspondence is received.
(ii) To the extent any preferential purchase rights are exercised
by any Third Person entitled to exercise such rights, then the Pro-
perties subject to such preferential purchase rights shall not be sold
to Purchaser and shall be excluded from the Agreement. The Purchase
Price shall be adjusted by the mutually agreed portion of the Purchase
Price representing the portion of the Properties subject to such exer-
<PAGE>
cised preferential purchase right. In the event any Third Person
initially elects to exercise a particular preferential right, but
subsequently refuses or elects not to consummate the purchase under the
preferential right and such refusal occurs prior to ten (10) days
following the Closing Date, Purchaser shall purchase such interest
covered by the preferential right for its allocated value as of the
Effective Date and the closing of such transaction shall take place
on a date mutually acceptable to Seller and Purchaser not more than
thirty (30) days following such failure or refusal; and
(b) To notify NGC Corporation (as successor to Chevron U.S.A. Inc.)
of the pending transfer of the Properties by Seller to Purchaser and the
assignment of Seller's rights and obligations under the Natural Gas
Purchase/Sale Agreement between Chevron U.S.A. Inc. and Elf Exploration,
Inc., dated April 1, 1991, as amended (item No. 14 of Exhibit B attached
to the Agreement) and to request consent to such assignment.
VII.
SELLER'S CONDITIONS OF CLOSING
Seller's obligation to consummate the transaction provided for herein is subject
to the satisfaction or waiver by Seller of the following conditions:
7.1 Representations. The representations and warranties of Purchaser con-
tained in Article V shall be true and correct in all material respects on the
date of Closing as though made on and as of that date.
7.2 Performance. Purchaser shall have performed in all material respects
the obligation, covenants and agreements hereunder to be performed by it at or
prior to the Closing.
7.3 Pending Matters. No suit, action or other proceeding by a third party
or a governmental authority shall be pending or threatened which seeks substan-
tial damages from Seller in connection with, or seeks to restrain, enjoin or
otherwise prohibit, the consummation of the transaction contemplated by this
Agreement.
7.4 Officer's Certificate. Purchaser shall have delivered to Seller a cer-
tificate of a corporate officer, dated the date of Closing, certifying on behalf
of Purchaser that the conditions set forth in Sections 7.1 and 7.2 have been
fulfilled.
7.5 Purchaser's Opinion. Purchaser shall have delivered to Seller a legal
opinion addressed to Seller dated as of Closing, in form and substance satis-
factory to Seller, to the effect that: (i) Purchaser is a corporation organized,
validly existing and in good standing under the laws of the State of Delaware
and is duly qualified to carry on its business in the State of Mississippi and
with the MMS; (ii) the execution, delivery and performance of this Agreement
and the transactions contemplated hereby have been duly and validly authorized
by all requisite corporate action on the part of the Purchaser; and (iii) this
Agreement and all documents and instruments executed by Purchaser at Closing
have been duly executed and delivered on behalf of Purchaser and constitute
legal, valid and binding obligations of Purchaser enforceable in accordance
with their terms.
In giving this legal opinion, Purchaser's attorney may rely upon certificates
of governmental officials and of Purchaser's officers as to matters of fact,
and may qualify the legal opinion with such other assumptions and exceptions
as are reasonable under the circumstances.
7.6 Compliance With Laws. Except for any non-compliance that has not had,
or is reasonably expected not to have, a material adverse effect on the value
of the Properties taken as a whole, to the best of its knowledge after due
inquiry Purchaser shall have complied as of the Closing Date with all laws,
<PAGE>
orders, regulations, rules and ordinances issued or promulgated by all govern-
mental authorities having jurisdiction with respect thereto.
7.7 Financial Guaranty Agreement. Purchaser shall have delivered to Seller
a Financial Guaranty Agreement, dated the date of Closing, guaranteeing to
Seller the full and complete financial performance of Purchaser as to the
obligations and liabilities assumed by Purchaser under the Agreement and the
Assignments made pursuant to the Agreement. The Financial Guaranty Agreement
shall be in the form attached hereto as Exhibit F.
VIII.
PURCHASER'S CONDITIONS OF CLOSING
Purchaser's obligation to consummate the transactions provided for herein is
subject to the satisfaction or waiver by Purchaser of the following conditions:
8.1 Representations. The representations and warranties of Seller contained
in Article IV shall be true and correct in all material respects on the date of
Closing as though made on and as of that date.
8.2 Performance. Seller shall have performed in all material respect the
obligations, covenants and agreements hereunder to be performed by it at or
prior to the Closing.
8.3 Pending Matters. No suit, action or other proceeding by a third party
or a governmental authority shall be pending or threatened which seeks substan-
tial damages from Purchaser in connection with, or seeks to restrain, enjoin or
otherwise prohibit, the consummation of the transactions contemplated by this
Agreement.
8.4 Officer's Certificate. Seller shall have delivered to Purchaser a cer-
tificate of a corporate officer, dated the date of Closing, certifying on behalf
of Seller that the conditions set forth in Sections 8.1 and 8.2 have been ful-
filled.
8.5 Seller's Opinion. Seller shall have delivered to Purchaser a legal
opinion addressed to Purchaser dated as of Closing, in form and substance
satisfactory to Purchaser, to the effect that: (i) Seller is a corporation
organized, validly existing and in good standing under the laws of the State
of Delaware and is duly qualified to carry on its business in the State of
Texas and with the MMS; (ii) the execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly and validly
authorized by all requisite corporate action on the part of Seller; and (iii)
this Agreement and all documents and instruments executed by Seller at Closing
have been duly executed and delivered on behalf of Seller and constitute legal,
valid and binding obligations of Seller enforceable in accordance with their
terms.
In giving this legal opinion, Seller's attorney may rely upon certificates of
governmental officials and of Seller's officers as to matters of fact, and may
qualify the legal opinion with such other assumptions and exceptions as are
reasonable under the circumstances.
8.6 Compliance With Laws. Except for any non-compliance that has not had,
or is reasonably expected not to have, a material adverse effect on the value
of the Properties taken as a whole, to the best of its knowledge after due
inquiry Seller shall have complied as of the Closing Date with all laws, codes,
regulations, rules and ordinances issued or promulgated by all governmental
authorities having jurisdiction with respect thereto.
8.7 Preferential Rights. The time for exercising all required preferential
purchase rights held by third parties shall have expired or been waived.
<PAGE>
IX.
CLOSING
9.1 Time and Place of Closing. If the conditions of closing have been
satisfied or waived, the consummation of the transactions contemplated hereby
(the "Closing") shall be held as soon as possible, but not later than, the
Closing Date at Seller's offices located at Suite 3800, 1000 Louisiana Street,
Houston, Texas 77002 or other mutually acceptable location.
9.2 Closing Obligations. At the Closing:
(a) Seller shall execute, acknowledge and deliver an Assignment of
Operating Rights to convey title to the Properties to Purchaser with
special limited warranty of title (in sufficient counterparts to facil-
itate recording), in the form of Exhibit C or Exhibit E (whichever is
applicable), attached.
(b) Seller shall execute and deliver a Bill of Sale in the form of
Exhibit D attached relating to the Facilities and shall execute such
other instruments and take such other action as may be necessary to
carry out its obligations under this Agreement including without
limitation the delivery of the books and records described in
paragraph 2.1(f).
(c) Purchaser shall pay the Closing Amount by wire transfer of
immediately available funds and shall deliver a properly executed
Financial Guaranty Agreement in the form of Exhibit F attached.
(d) Purchaser shall execute, acknowledge and accept the Assignment
of Operating Rights executed by Seller. Purchaser shall execute such
other instruments and take such other action as may be necessary to
carry out its obligations under this Agreement.
(e) Seller and Purchaser shall, if needed, execute, acknowledge and
deliver transfer orders or letters in lieu thereof directing all
purchasers of production to make payment to Purchaser of proceeds
attributable to Seller's interest in the Properties.
(f) In the event Seller is responsible at the time of the Closing
for the disbursement of proceeds from production from the Properties to
third parties and in the event Purchaser requires additional time after
the Closing to assume this responsibility from Seller in order to avoid
any interruption in the payments to third parties as the result of sale
of the Properties, Seller and Purchaser shall enter into a mutually
acceptable letter agreement, the terms of which will provide for Seller
to retain responsibility for disbursement of proceeds for a period not
to exceed ninety (90) days from the first day of the month nearest to
the Closing Date. Such letter agreement shall contain provisions
consistent with those normally used by Seller under similar circum-
stances in the usual conduct of its business.
(g) If the Closing occurs, (i) Purchaser shall be deemed to have
represented and warranted to Seller that, except as disclosed to Seller
in writing at Closing, Purchaser has performed or complied with all
material terms of the Agreement required to be performed or complied
with by it prior to Closing, and the representations and warranties of
Purchaser contained in the Agreement are, if qualified by materiality
standards, true and correct, and if not so qualified, are true and
correct in all material respects, at and as of the Closing as if such
representations and warranties were made at and as of the Closing, and
(ii) Seller shall be deemed to have represented and warranted to Pur-
chaser that except as disclosed to Purchaser in writing at Closing,
Seller has performed and complied with all material terms of this
Agreement required to be performed or complied with by it prior to
<PAGE>
Closing and the representations and warranties of Seller contained in
this Agreement are, if qualified by materiality standards, true and
correct, and if not so qualified, are true and correct in all material
respects,at and as of the Closing as if such representations and
warranties were made at and as of the Closing.
X.
POST-CLOSING OBLIGATIONS
10.1 Receipts and Credits. All monies, proceeds, receipts, credits and
income attributable to Seller's interest in the Properties for all periods
of time subsequent to the Effective Date shall be the sole property and
entitlement of the Purchaser, and, to the extent received by Seller after
the Closing, Seller shall fully disclose, account for and transmit same to
Purchaser promptly. All monies, proceeds, receipts and income attributable
to Seller's interest in the Properties for all periods of time prior to the
Effective Date shall be the sole property and entitlement of Seller and, to
the extent received by Purchaser, Purchaser shall fully disclose, account for
and transmit same to Seller promptly. Pursuant to the provisions of this
Agreement, all costs, expenses, taxes (subject to Article XII) and disburse-
ments, attributable to periods of time prior to the Effective Date, regardless
of when due or payable, shall be the sole obligation of Seller and Seller shall
promptly pay, or if paid by Purchaser, promptly reimburse Purchaser for same.
All costs, expenses, taxes (subject to Article XII) and disbursements,
attributable to periods of time subsequent to the Effective Date, regardless
of when due or payable, shall be the sole obligation of the Purchaser, and if
paid by Seller, Seller shall be promptly reimbursed by the Purchaser. Seller
shall been titled to a credit for and reimbursement in an amount equal to any
amount received by Purchaser after Closing for any delivery or performance by
Seller prior to the Effective Date. All uncollected accounts receivable
attributable to the Properties, after the Effective Date, shall be assigned
to Purchaser.
To the extent the provisions of this Section 10.1 may be interpreted to conflict
with the provisions of Article XIII below, the provisions of Article XIII shall
be deemed to control; provided, however, in no event shall the provisions of
Article XIII be interpreted to apply to the Receipts and Credits provided for
in this paragraph 10.1.
XI.
TERMINATION
11.1 Right of Termination. This Agreement and the transactions contemplated
hereby may be terminated at any time at or prior to the Closing:
a) By mutual consent of the parties; or
b) By either party if the Closing shall not have occurred as here-
inabove provided, due to the failure of the other party to meet a
material condition to Closing.
c) If preferential purchase rights with respect to the entirety of
the Properties are timely exercised; provided however, in the event such
rights are exercised only as to a proportionate share of the entirety
of the properties this Agreement shall not terminate and Purchaser
shall purchase Seller's remaining proportionate share of the Properties.
11.2 Effect of Termination. If this Agreement is terminated pursuant to this
Article, this Agreement shall become void and of no further force or effect and
each party shall bear alone its respective costs and expenses incurred prior to
such termination and neither party shall be liable to the other for any actual,
consequential, or incidental damages, including, but not limited to, lost
profits. Upon any termination of this Agreement pursuant to this Article,
<PAGE>
Seller shall be free to immediately enjoy all existing rights of ownership
of the Properties and to sell, transfer, encumber of otherwise dispose of
Seller's interest in the Properties to any party without any restrictions under
this Agreement.
XII.
TAXES
12.1 Sales Taxes. The Purchase Price provided for hereunder is net of any
sales taxes or other transfer taxes in connection with the sale of Seller's
interest in the Properties. Purchaser shall be liable for any sales tax or
other transfer tax, as well as any applicable conveyance, transfer and recording
fees, and real estate transfer stamps or taxes imposed on the transfer of
Seller's interest in the Properties pursuant to this Agreement. Purchaser
shall defend, indemnify and hold harmless Seller with respect to the payment
of any of those taxes including any interest or penalties assessed thereon.
12.2 Other Taxes. All production, severance, excise, conservation fees and
other such similar taxes or fees (other than income taxes) relating to produc-
tion of oil, gas and condensate attributable to Seller's interest in the Pro-
perties prior to the Effective Date shall be paid by Seller, and all such taxes
relating to such production on or after the Effective Date shall be paid by
Purchaser.
12.3 Cooperation. Each party to this Agreement shall:
(a) Provide the other party with reasonable access to all relevant
documents, data and other information which may be required by the other
party for the purpose of preparing tax returns and responding to any
audit by any taxing jurisdiction. Each party to this Agreement shall
cooperate with all reasonable requests of the other party made in
connection with contesting the imposition of taxes. Notwithstanding
anything to the contrary in this Agreement, neither party to this
Agreement shall be required at any time to disclose to the other party
any tax returns or other confidential tax information.
(b) Cooperate with the other party to provide information required
by the Internal Revenue Service on asset sales and acquisitions.
XIII.
INDEMNITIES, INDEPENDENT INVESTIGATION AND DISCLAIMER
13.1 (a) Indemnity Obligation. Purchaser and Seller agree that the terms
"Release", "Defend", Indemnify" and "Hold Harmless" as used in this Article XIII
mean that the indemnifying party shall release, indemnify, hold harmless and
defend (including payment of reasonable attorney's fees and cost of litigation)
the indemnified party from and against any and all expenses, claims, demands,
causes of action, damages, judgments and awards of any kind or character
(including civil fines and penalties), without limit and without regard to
the cause or causes thereof, including pre-existing conditions, whether such
conditions be patent or latent, breach of representation or warranty, express
or implied, strict liability, tort, breach of contract, or the negligence of
any person or persons including that of the indemnified party, whether such
negligence be sole, joint or concurrent, active, passive, or any other theory
of legal liability.
(b) Indemnified Parties. An indemnifying party's obligation con-
tained in this Agreement shall also extend to the indemnified party and
its affiliated companies, and the officers, directors, employees,
agents, owners, shareholders and insurers of each (the "Indemnified
Parties"). If Seller, under any agreement assumed under paragraph 2.3,
is required to indemnify, in whole or in part, a co-lessee, partner,
contractor or consultant (the "Other Parties"), then as to claims
<PAGE>
involving the Other Parties the term "Indemnified Parties" shall also
include the Other Parties to the extent Seller would be required to
indemnify such Other Parties but not otherwise. The Indemnified
Parties may be represented by its own counsel (at the expense of the
Indemnified Parties) and may participate in proceedings to which it is
a defendant without compromising the indemnity provided for in this
Agreement; provided, however, the indemnifying party shall control
the defense thereof.
(c) No Express or Implied Representation or Warranty as to Informa-
tion. Although Seller believes that all of the information contained
herein and in its records and documents, is accurate, Seller expressly
disclaims any liability for express or implied representations or
warranties contained herein or therein, or for omissions herefrom or
therefrom or for the accuracy or completeness of any other written or
oral communication transmitted or made available to Purchaser. Only
those particular representations and warranties which are made to the
Purchaser in this Purchase and Sale Agreement, if any, and subject to
such limitations and restrictions as may be specified herein, shall
have legal effect. Any reliance on other information shall be at the
sole risk and expense of the Purchaser.
13.2 (a) Independent Investigation and Disclaimer. Purchaser acknow-
ledges that in making the decision to enter into this Agreement and consum-
mate the transactions contemplated hereby, Purchaser has relied solely on its
own independent investigation of the Properties, and upon the representations,
warranties and covenants in this Agreement. Accordingly, Purchaser acknowledges
that Seller has not made, AND "SELLER" HEREBY EXPRESSLY DISCLAIMS AND NEGATES,
ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT COMMON LAW, BY STATUTE,
OR OTHERWISE RELATING TO (i) THE CONDITION OF THE PROPERTIES (INCLUDING WITH-
OUT LIMITATION, ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY OF FITNESS
FOR A PARTICULAR PURPOSE, OR OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS)
AND (ii) ANY INFORMATION, DATA OR OTHER MATERIALS (WRITTEN OR ORAL) FURNISHED
TO "PURCHASER" BY OR ON BEHALF OF "SELLER" relating to (INCLUDING, WITHOUT
LIMITATION), THE EXISTENCE OR EXTENT OF OIL, GAS OR OTHER MINERAL RESERVES,
THE RECOVERABILITY OF OR THE COST OF RECOVERING ANY SUCH RESERVES, THE VALUE
OF SUCH RESERVES, ANY PRODUCT PRICING ASSUMPTIONS, PRESENT OR PAST PRODUCTION
RATES, COMPLIANCE WITH "LEASE" TERMS, THE CONDITION OF ANY "WELL", AND THE
ABILITY TO SELL OIL OR GAS PRODUCTION AFTER "CLOSING"; provided, however, that
the foregoing disclaimer and negation of representations and warranties shall
not affect or impair the representations and warranties of Seller set forth in
Article IV hereof.
(b) Claims Relating to Ownership or Operation of Properties.
"PURCHASER" AGREES TO RELEASE, DEFEND, INDEMNIFY, AND HOLD HARMLESS "SELLER"
FROM ANY DAMAGES AND OTHER COSTS INCURRED AS A RESULT OF CLAIMS NOT NOW KNOWN
TO THE "SELLER" AND ASSERTED ON OR AFTER THE "EFFECTIVE DATE" AS A RESULT OF
THE OWNERSHIP OR THE OPERATION OF, OR FOR ANY ACT OR OMISSION IN CONNECTION
WITH, THE "PROPERTIES" TRANSFERRED, SUBSEQUENT TO THE "EFFECTIVE DATE" OF
THE AGREEMENT AND BEFORE THE EFFECTIVE DATE OF THE AGREEMENT, UNLESS THE CLAIM
(OTHER THAN CLAIMS RELATING TO ENVIRONMENTAL MATTERS, RECLAMATION AND THE
PLUGGING AND ABANDONING OF WELLS LOCATED ON THE PROPERTIES) IS ASSERTED ON OR
BEFORE MARCH 31, 1998, BY "PURCHASER", BY "SELLER", OR BY OTHER PARTIES, OR FOR
ANY ACT OR OMISSION BY "PURCHASER" OR BY "SELLER" UNDER ANY AGREEMENT ASSUMED
BY "PURCHASER", OR FOR ANY ACT OR OMISSION OF "PURCHASER" UNDER THIS "AGREE-
MENT" INCLUDING, BUT NOT LIMITED TO, CLAIMS, DEMANDS, AND CAUSES OF ACTION
ASSERTED BY THIRD PARTIES (INCLUDING, BUT NOT LIMITED TO, ANY LOCAL, STATE,
OR FEDERAL GOVERNMENT, AGENCY OR BODY THEREOF, AND PERSONS HOLDING RIGHTS UNDER
ANY AGREEMENT ASSUMED BY "PURCHASER") FOR DEATH, INJURY, DAMAGE TO PROPERTY, OR
FOR FAILURE TO COMPLY WITH THE EXPRESS OR IMPLIED TERMS OF THE "LEASE" AND FOR
ANY COSTS AND EXPENSES ARISING OUT OF, OR IN CONNECTION WITH, THE PLUGGING AND
ABANDONING OF ANY WELLS, REMOVAL OR MODIFICATION (INCLUDING PIPELINES) AND
RESTORATION OF THE OCEAN FLOOR SURFACE REGARDLESS OF WHETHER THE OBLIGATION
TO PLUG, REMOVE, MODIFY OR RESTORE AROSE PRIOR TO OR SUBSEQUENT TO SAID
"EFFECTIVE DATE". THE FOREGOING INDEMNIFICATION SHALL NOT APPLY TO CLAIMS
<PAGE>
ASSERTED BY "SELLER'S" EMPLOYEES FOR INJURIES SUFFERED WITH RESPECT TO THE
"PROPERTIES" PRIOR TO SAID "EFFECTIVE DATE", OR TO CLAIMS ASSERTED BY THE
FEDERAL GOVERNMENT FOR ROYALTIES WITH RESPECT TO PRODUCTION FROM THE
"PROPERTIES" PRIOR TO THE "EFFECTIVE DATE".
(c) Disclaimer of Warranties as to Facilities, Wells and Equipment.
"PURCHASER" UNDERSTANDS AND AGREES THAT THIS "AGREEMENT" IS MADE ON AN "AS IS,
WHERE IS" BASIS, AND "PURCHASER" RELEASES "SELLER" FROM ANY LIABILITY WITH
RESPECT TO THE "FACILITIES" BEING ASSIGNED HEREUNDER WHETHER OR NOT CAUSED BY
OR ATTRIBUTABLE TO "SELLER'S" NEGLIGENCE AND WHETHER OR NOT ARISING DURING THE
PERIOD OF, OR FROM, OR IN CONNECTION WITH "SELLER'S" OWNERSHIP OF THE INTERESTS
OR USE OF THE "PROPERTIES". WITHOUT LIMITING THE ABOVE, "PURCHASER" WAIVES ITS
RIGHT TO RECOVER FROM "SELLER" AND FOREVER RELEASES AND DISCHARGES "SELLER"
AND AGREES TO HOLD "SELLER" HARMLESS FROM ANY AND ALL CLAIMS AND EXPENSES
WHATSOEVER THAT MAY ARISE ON ACCOUNT OF OR IN ANY WAY BE CONNECTED WITH THE
PHYSICAL CONDITION OF THE "FACILITIES", "PROPERTIES", AND THE "WELLS" OR ANY
LAW OR REGULATION APPLICABLE THERETO, INCLUDING, WITHOUT LIMITATION, THE COM-
PREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT OF 1980, AS
AMENDED (42 U.S.C. 9601 et seq.), THE RESOURCES CONSERVATION AND RECOVERY
ACT OF 1976 (42 U.S.C. 6901 et seq.), THE CLEAN WATER ACT (33 U.S.C. 466
et seq.), THE SAFE DRINKING WATER ACT (14 U.S.C. 1401-1450), THE HAZARDOUS
MATERIALS TRANSPORTATION ACT (49 U.S.C. 1801 et seq.), THE TOXIC SUBSTANCE
CONTROL ACT (15 U.S.C. 2601-2629), THE CLEAN AIR ACT (42 U.S.C. 7401 et
seq.), AS AMENDED, THE CLEAN AIR ACT AMENDMENTS OF 1990, AND ALL OTHER FEDERAL
LAWS.
(d) Environmental Assessment and Indemnification. "PURCHASER"
EXPRESSLY ACKNOWLEDGES THAT IT HAS MADE OR WILL HAVE MADE PRIOR TO CLOSING AN
ENVIRONMENTAL ASSESSMENT OF THE "PROPERTIES" PRIOR TO EXECUTION OF THIS "AGREE-
MENT". BASED UPON SUCH ASSESSMENT, "PURCHASER" HEREBY AGREES TO ASSUME THE
RISKS THAT THE "PROPERTIES" MAY CONTAIN WASTE MATERIALS OR HAZARDOUS SUBSTANCES
OR THE PRESENCE OF UNKNOWN ABANDONED OIL AND GAS WELLS, SUMPS AND PIPELINES
WHICH MAY NOT HAVE BEEN REVEALED BY "PURCHASER'S" INVESTIGATION. ALL RESPON-
SIBILITY AND LIABILITY RELATED TO ALL SUCH CONDITIONS, WHETHER KNOWN OR UNKNOWN,
WILL BE TRANSFERRED FROM "SELLER" TO "PURCHASER". "PURCHASER" ASSUMES FULL
RESPONSIBILITY FOR, AND AGREES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW TO RELEASE, INDEMNIFY, HOLD HARMLESS, AND DEFEND "SELLER" FROM AND AGAINST
ALL CLAIMS, EXPENSES, COSTS OF CLEAN-UP, COSTS OF REMOVAL OR MODIFICATION OF
"FACILITIES" ON THE "PROPERTIES" AND PLUGGING LIABILITIES FOR ANY AND ALL
"WELLS", ASSERTED OR ARISING ON OR AFTER THE "EFFECTIVE DATE" BY ANY AND ALL
PERSONS (INCLUDING BUT NOT LIMITED TO, "PURCHASER'S" AND "SELLER'S" EMPLOYEES,
AGENTS, OR REPRESENTATIVES AND ANY PRIVATE CITIZENS, PERSONS, ORGANIZATIONS,
AND ANY AGENCY, BRANCH OR REPRESENTATIVE OF FEDERAL, STATE, OR LOCAL GOVERN-
MENT), ON ACCOUNT OF ANY PERSONAL INJURY, DEATH, DAMAGE, DESTRUCTION, LOSS
OF PROPERTY, OR CONTAMINATION OF NATURAL RESOURCE (INCLUDING SOIL, AIR, SURFACE
WATER OR GROUND WATER) RESULTING FROM, ARISING OUT OF, CAUSED BY, OR CONNECTED
WITH ANY ENVIRONMENTAL CONDITION OF THE "PROPERTIES", WHETHER PRIOR TO OR SUB-
SEQUENT TO THE "EFFECTIVE DATE" OF THIS "AGREEMENT", INCLUDING, BUT NOT LIMITED
TO, THE PRESENCE, DISPOSAL, OR RELEASE OF ANY MATERIAL OF ANY KIND, IN, ON, OR
UNDER THE "PROPERTIES" OR OTHER PROPERTY (WHETHER NEIGHBORING OR OTHERWISE) OR
CAUSED BY OR CONNECTED WITH ACTS OR OMISSIONS OF "PURCHASER", "SELLER" OR BY
OTHER PARTIES OR FOR ANY ACT OR OMISSION BY "PURCHASER" OR "SELLER" UNDER ANY
AGREEMENT ASSUMED BY "PURCHASER" PURSUANT TO THIS "AGREEMENT, THEIR EMPLOYEES,
REPRESENTATIVES, OR AGENT WITH REGARD TO THE USE, OWNERSHIP, OR OPERATORSHIP
OF THE "PROPERTIES". "PURCHASER'S" INDEMNIFICATION SHALL EXTEND TO AND INCLUDE,
BUT NOT BE LIMITED TO (i) THE NEGLIGENCE OF "PURCHASER", "SELLER" AND THIRD
PARTIES, WHETHER SUCH NEGLIGENCE IS ACTIVE OR PASSIVE, JOINT, SOLE OR CON-
CURRENT, (ii) "SELLER'S" STRICT LIABILITY, AND (iii) "SELLER'S" LIABILITY OR
OBLIGATIONS UNDER THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND
LIABILITY ACT OF 1980, AS AMENDED (42 U.S.C. 9601, et seq.), THE RESOURCE
CONSERVATION AND RECOVERY ACT OF 1976 (42 U.S.C. 6901 et seq.) THE CLEAN
WATER ACT (33 U.S.C. 466 et seq.), THE SAFE DRINKING WATER ACT (14 U.S.C.
1401-1450), THE HAZARDOUS MATERIALS TRANSPORTATION ACT (49 U.S.C. 1801
et seq.), THE TOXIC SUBSTANCE CONTROL ACT (15 U.S.C. 2601-2629), THE CLEAN
AIR ACT (42 U.S.C. 7401 et seq.), AS AMENDED, THE CLEAN AIR ACT AMENDMENTS
<PAGE>
OF 1990, AND ALL OTHER FEDERAL LAWS. THIS INDEMNIFICATION SHALL BE IN ADDITION
TO ANY OTHER INDEMNITY PROVISIONS CONTAINED IN THE "AGREEMENT", AND IT IS
EXPRESSLY UNDERSTOOD AND AGREED THAT ANY TERMS OF THIS PROVISION SHALL CONTROL
OVER ANY CONFLICTING OR CONTRADICTING TERMS OR PROVISIONS CONTAINED IN THIS
"AGREEMENT".
It is the intention of the parties that the Purchaser's indemnity of Seller
shall not extend to any claims, demands or causes of action known to Seller
as of the Effective Date.
(e) NORM. It is expressly recognized and acknowledged that
naturally occurring radioactive material (`NORM") may be associated with
oil and gas producing operations and as a result the facilities and pro-
duction equipment transferred herein may be contaminated by NORM.
Purchaser expressly assumes the obligation of Seller, if any, of dis-
posal of equipment and/or of deposits and scale, whether stored on or
off the Properties, contained therein pursuant to the regulations of
any governmental agencies having jurisdiction, regardless of whether
the NORM, if any, was deposited before or after the Effective Date.
(f) Limited Indemnity by Seller. NOTWITHSTANDING ANYTHING HEREIN
TO THE CONTRARY, AFTER THE CLOSING OCCURS, THE SELLER SHALL RETAIN AND
SHALL BE RESPONSIBLE FOR AND AGREES TO INDEMNIFY, DEFEND (INCLUDING
WITHOUT LIMITATION REASONABLE ATTORNEYS' FEES AND COURT COSTS) AND HOLD
HARMLESS PURCHASER, ITS OFFICERS, DIRECTORS, AGENT OR EMPLOYEES FROM AND
AGAINST (i) ANY OBLIGATIONS AND LIABILITIES KNOWN TO SELLER AND/OR
ASSERTED ON OR BEFORE MARCH 31, 1998, WHICH, IN THE ABSENCE OF THE
CLOSING, SELLER WOULD HAVE FOR DAMAGES TO PROPERTY (OTHER THAN ENVIRON-
MENTAL MATTERS, RECLAMATION AND THE PLUGGING AND ABANDONING OF WELLS
LOCATED ON THE PROPERTIES), OR INJURY OR DEATH TO PERSONS WHICH ARISE
OUT OF AN EVENT RELATED TO THE OWNERSHIP OR USE OF THE PROPERTIES WHICH
EVENT OCCURS PRIOR TO THE EFFECTIVE DATE, AND (ii) SELLER'S PART OF ANY
OBLIGATIONS, DUE BEFORE THE EFFECTIVE DATE, ON ANY CONTRACTS ASSIGNED
TO AND ASSUMED BY PURCHASER.
XIV.
MISCELLANEOUS
14.1 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCLUSIVE OF ITS CONFLICTS OF
LAWS RULES WHICH MIGHT REQUIRE THE APPLICATION OF THE LAWS OF OTHER JURIS-
DICTIONS. THE PARTIES AGREE TO SUBMIT AND HEREBY CONSENT TO THE NON-EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN HARRIS COUNTY, TEXAS,
AND AGREE THAT VENUE IN SUCH COURTS IS PROPER AND CONVENIENT. THE PARTIES
AGREE THAT, SHOULD ANY DISPUTE ARISE OUT OF OR IN CONNECTION WITH THE SUBJECT
MATTER OF THIS "AGREEMENT", THEY WILL MAKE AN ATTEMPT TO RESOLVE SUCH DISPUTE
THROUGH NON-BINDING MEDIATION IN ADVANCE OF RESORTING TO LITIGATION.
14.2 Deceptive Trade Practices Act. Seller and Purchaser certify that they
are not "Consumers" within the meaning of the Texas Deceptive Trade Practices
- -Consumer Protection Act, Subchapter E of Chapter 17, Sections 17.41, et seq.,
of the Texas Business and Commerce Code, as amended (the "DTPA"). The parties
covenant, for themselves and for and in behalf of any successors and assignees,
that if the DTPA is applicable, (a) the parties are "business consumers" there-
under; (b) each party hereby waives and releases all of its rights and remedies
thereunder (other than Section 17.555, Texas Business and Commercial Code) as
applicable to the other party and its successors; and (c) each party shall
defend and indemnify the other from and against any and all claims, demands,
or causes of action of or by that party or any successor or any of its
affiliates based in whole or in part on the DTPA, arising out of or in con-
nection with the transaction set forth in this Agreement.
14.3 Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes all prior agreements, understandings,
<PAGE>
negotiations and discussions, whether oral or written, of the parties. No
supplement, amendment, alteration, modification, waiver or termination of this
Agreement shall be binding unless executed in writing by the parties hereto.
No parole evidence, custom, or customary dealing between the parties may be
used to effect a change, waiver, discharge or termination of this Agreement.
14.4 Notices. Except as otherwise provided in this Agreement, all notices
required or permitted by this Agreement shall be in writing and shall be
delivered in person or by mail, courier service, telegram, telecopier, or any
other form of facsimile transmission, with postage and charges prepaid,
addressed to the parties at the addresses indicated below. The originating
notice shall deemed to have been delivered only when received by the party to
whom it was directed, and the period for a party to deliver a notice in
response thereto shall begin on the date the originating notice is received or
deemed to have been received, whichever is applicable. Receipt of written
notice means actual delivery of the notice to the address of the party to be
notified, as specified in this Agreement, or to the telegraph, telecopy, or
other facsimile machine of that party. Any notice requiring a timely response
to be made which is received on Saturday, Sunday, legal holiday or received
after 4:00 p.m. in the offices of the recipient, for purposes of determining
the response date only, shall be deemed to have been delivered on the business
day next following the actual date of receipt. A responsive notice shall be
deemed to have been delivered when it is deposited in the United States mail,
delivered to a courier or telegraph service, transmitted by telecopy or
facsimile transmission, receipt confirmed by telephone contact, or personally
delivered to the party to be notified. A message left on an answering machine
or with an answering service or other third person shall not be deemed to be
adequate notice.
Seller: Purchaser:
Elf Exploration, Inc. Callon Petroleum Operating Company
1000 Louisiana Street 200 North Canal Street
Suite 3800 Natchez, Mississippi 39121
Houston, Texas 77002
Attention: Richard Cope Attention: Mr. Charles E. Hall
Telephone: (713) 739-2094 Telephone: (601) 442-1601
Fax: 713) 739-2134 Fax: (601) 446-1363
Each party shall have the right, upon giving ten (10) days' prior notice to
the other, in the manner hereinabove provided, to change its address for
purposes of notice.
14.5 Severability. If any term or other provision of this Agreement is held
invalid, illegal or incapable of being enforced under any rule of law, 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 trans-
actions contemplated hereby is not affected in a materially adverse manner with
respect to either party.
14.6 Publicity. Seller and Purchaser shall consult with each other with
regard to all publicity and other releases issued at or prior to the Closing
concerning this Agreement and the transactions contemplated hereby and, except
as required by applicable law or the applicable rules or regulations of any
governmental body or stock exchange, neither party shall issue any publicity
or other release without the prior written consent of the other party.
14.7 Limitation of Damages. Notwithstanding any other provisions herein, the
parties hereto waive any and all rights, claims, or causes of action arising
under this Agreement for incidental, consequential or punitive damages. Any
damages resulting from a breach of this Agreement by either party shall be
limited to actual damages incurred by the party claiming damages.
14.8 Reporting Obligation. In order that Purchaser may comply with its
financial and other reporting obligations pursuant to the Securities Act of
<PAGE>
1933 ("Securities Act") and the Securities Exchange Act of 1934 ("Exchange
Act"), Seller agrees that from and after the Closing Date, Seller shall
provide Purchaser and its designated representatives with access to, and
shall cause Seller's auditors to provide Purchaser and its designated re-
presentatives with access to Seller's existing financial statements, books
and records, including any working papers prepared by Seller's auditors,
relating solely to the Properties for the period beginning three years prior
to the end of Seller's fiscal year ending prior to the Closing Date and end-
ing on the Closing Date. Such access shall be provided during Seller's normal
business hours and shall be provided in a prompt manner so as not to unreason-
ably delay Purchaser in meeting its filing requirements pursuant to the
Securities Act or the Exchange Act. Purchaser may copy such materials at
Purchaser's sole expense and Purchaser shall reimburse Seller, and/or Seller's
auditors for their reasonable expense incurred in providing the Purchaser
with such information.
14.9 Binding Effect. Upon execution by all parties, this Agreement shall
be binding upon and inure to the benefit of the parties, their respective
approved successors and assigns. All representations, promises, agreements,
releases and indemnities made in this Agreement shall survive the Closing
and remain actionable thereafter. This Agreement shall constitute a covenant
running with the land and the Leases comprising the Properties. This Agree-
ment does not benefit or create any rights in any person or entity not a
party to this Agreement.
14.10 Assignability. Before Closing neither Seller nor Purchaser may assign
any of their respective rights under this Agreement except as may be provided
for herein.
14.11 Construction and Interpretation of This Agreement. The interpretation
and construction of the terms of this Agreement will be governed by the follow-
ing conventions:
(a) Headings for Convenience. All the table of contents, captions,
numbering sequences, and paragraph headings used in this Agreement are
inserted for convenience only and shall in no way define, limit or
describe the scope or intent of this Agreement or any part thereof;
nor have any legal effect other than to aid a reasonable interpretation
of this Agreement.
(b) Gender and Number. The use of pronouns in whatever gender or
number shall be deemed to be a proper reference to the parties to this
Agreement though the parties may be individuals, business entities or
groups thereof. Any necessary grammatical changes required to make the
provisions of this Agreement refer to the correct gender or number shall
in all instances be assumed as though each case was fully expressed.
(c) Drafting of Agreement. Each of the parties declare that they
have contributed to the drafting of this Agreement or have had it re-
viewed by their counsel before execution. Each party agrees that it
has been purposefully drawn and correctly reflects their understanding
of the transaction that it contemplates.
14.12 Further Assurances. Each of Seller and Purchaser agrees to refrain from
taking any action, either expressly or impliedly, which would have the effect of
prohibiting or hindering the performance of any party to this Agreement. Each
party (along with their approved successors and assigns, if any) further agrees
to execute, acknowledge, and deliver any instrument or take any action
necessary or appropriate to effectuate the terms of this Agreement or any
Exhibit, instrument, certificate, or other document delivered pursuant hereto.
Such documents shall be prepared and executed by both parties within thirty
(30) days of a receipt of a written request for same from either party.
Special forms of assignments in addition to the Assignments may be executed
on officially approved forms by such parties in sufficient counterparts to
satisfy applicable statutory and regulatory requirements. Such special forms
<PAGE>
of assignments shall be deemed to contain the special or limited warranties
contained in the Assignments and all of the exceptions, reservations, rights,
titles, power and privileges set forth herein and therein as fully as though
they were set forth in each such Assignment. The interests conveyed by such
separate Assignments are the same, and not in addition to, the Specified
Interest.
14.13 Time Limits and Waivers. Time is essential to this Agreement and,
accordingly, all time limits shall be strictly construed and enforced. The
failure or delay of either party in the enforcement of the rights and obliga-
tions detailed in this Agreement shall not constitute a waiver nor be the basis
of estoppel. Such party may exercise its rights under this Agreement despite
any delay or failure to enforce the rights when the right or obligation arose.
14.14 Expenses. Except as otherwise specifically provided herein, each party
to this Agreement shall pay its own expenses (including without limitation, the
fees and expenses of their respective agents, representatives, counsel and
accountants) with respect to the negotiation, execution and the delivery of
this Agreement and the consummation of the transactions under this Agreement.
14.15 Legal Fees. If any legal action or other proceeding is brought for the
enforcement of this Agreement or any Assignment because of an alleged dispute,
breach, default or misrepresentation in connection with this Agreement or the
transactions contemplated hereby, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs incurred in
connection with such action or proceeding, in addition to any other relief to
which it may be entitled.
14.16 Counterparts. This Agreement may be executed in one or more counter-
parts, each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
14.17 Third Party Beneficiaries. This Agreement is for the sole and exclusive
benefit of the parties hereto. Nothing expressed or implied herein is intended
to benefit any other person or entity not a party hereto, and no such person or
entity shall have any legal or equitable right, remedy or claim under this
Agreement.
14.18 Exhibits. Each of the Exhibits are intrinsic to this Agreement and each
Exhibit is incorporated into the body of this Agreement as fully as if the text
of each Exhibit were set forth within the main text of this Agreement. In the
event of any inconsistency between the provisions of any Exhibit and the pro-
visions of the body of this Agreement, the provisions of the body of this Agree-
ment will control over the terms of the Exhibits.
14.19 Survival of Representations & Warranties. All of the representations,
warranties, indemnities and agreements contained herein shall survive the
Closing of this transaction as provided herein and shall not merge into the
conveyancing documents. This Purchase and Sale Agreement and its respective
covenants shall be referenced in any Assignment affecting the Properties and
shall constitute covenants running with the land.
ARTICLE XV
DUE DILIGENCE
15.1 Access to Records and Properties. Seller shall have or will grant
Purchaser access for purposes of due diligence during Seller's normal business
hours (by appointment only) to the Books and Records which shall be made avail-
able at their present location, and to the Properties. Purchaser shall complete
its due diligence no later than five (5) days prior to Closing and shall give
Seller notice of any defects which it encounters that breach any representation
or warranty by Seller under this Agreement. Any such applicable defect shall
be treated as a title defect under Section 15.2(d) and (e) hereinafter.
<PAGE>
15.2 Title.
(a) Title Review. Seller has or within three (3) business days
after the execution of this Agreement, shall make available and/or
furnish to Purchaser copies of all title opinions and curative material
in Seller's possession regarding title to the Properties. Any title
opinions furnished to Purchaser by Seller shall be made available with-
out express or implied warranty of any kind of the accuracy of such
information. Seller shall not perform any additional title work and
existing abstracts and title opinions will not be made current by
Seller. Purchaser specifically agrees that any conclusions made from
any examination done or caused to be done shall result from its own
independent review and judgment only.
(b) Marketable Title. As used herein, the term "Marketable Title"
shall mean, with respect to each of the Leases, such record and bene-
ficial right, title and interest that (i) entitles Seller to receive a
percentage of all oil, gas and hydrocarbon minerals produced, save and
marketed from each of the Leases and units identified on Exhibit A
hereto not less than the interest set forth in Exhibit A as the "Net
Revenue Interest" or "NRI" of Seller for such lease and/or unit, (ii)
obligates Seller to bear a percentage of the costs and expenses relating
to operations on and the maintenance and development of the Leases not
greater than the "Working Interest" or "WI" of Seller for each Lease and
unit identified on Exhibit A, and (iii) except for Permitted Encum-
brances, is free and clear of all liens and encumbrances.
(c) Permitted Encumbrances. As used herein, the term "Permitted
Encumbrances" shall mean those items referred to on Exhibit B attached
hereto.
(d) Notice of Title Defect. As soon as practicable, but in no event
later than three (3) working days prior to the Closing Date, Purchaser
shall notify Seller in writing of any matters that would cause Seller's
title to any of the Leases not to be Marketable Title ("Title Defect").
(e) Remedies for Title Defects. Seller shall have the right, but
not the obligation to cure any Title Defect at its expense that it has
received timely notice of from Purchaser. In the event Seller is un-
willing or unable to cure any such Title Defect on or before three (3)
working days prior to the Closing Date, Purchaser and Seller shall meet
and mutually agree to an adjustment of the Purchase Price as remedy for
the Title Defect(s). If Purchaser and Seller cannot mutually agree in
good faith to an adjustment of the Purchase Price, then either party may
terminate this Agreement by written notice.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Purchase and Sale
Agreement to be duly executed on this the 9th day of June, 1997 but effective
April 1, 1997 (the "Effective Date").
Signatures
SELLER:
ELF EXPLORATION, INC.
By: Harry D. Martin
Senior Vice President
PURCHASER:
CALLON PETROLEUM OPERATING COMPANY
By: Dennis W. Christian
Chief Operating Officer
<PAGE>
EXHIBIT A
Attached to and made a part of that certain Purchase and Sale Agreement dated
effective April 1, 1997 by and between Elf Exploration, Inc., as Seller, and
Callon Petroleum Operating Company, as Purchaser
I. The Specified Interest:
(a) Blocks (from the surface of the earth to 4200 feet)
Net
Working Revenue
Interest Interest
Mobile Area Blocks 863 (OCS-G 5748) 17.50% 14.583333%
Mobile Area Block 907 (OCS-G 7844) 17.50% 14.583333%
Mobile Area Block 908 (OCS-G 5071) 35.00% 29.166667%
(b) Unit (from the surface of the earth to 4200 feet)
Net
Working Revenue
Interest Interest
Mobile 864 Unit comprised of part of
Mobile Blocks 863, 864, 907 and 908 18.8075% 15.6729%
II. The Lease Operating Rights from the Surface to a depth of 4,200 feet
subsea in the following Leases:
Oil and Gas Lease of Submerged Lands dated July 1, 1983, bearing Serial No.
OCS-G 5748, by and between the United States of America, as Lessor, and
Tenneco Oil Company, Atlantic Richfield Company, Murphy Oil U.S.A. Inc., Elf
Aquitaine, Inc. and Odeco Oil & Gas Company, as Lessees, being all of Block
863, Mobile, Official Protraction Diagram, NH 16-4.
Oil and Gas Lease of Submerged Lands dated August 1, 1985, bearing Serial
No. OCS-G 7844, by and between the United States of America, as Lessor, and
Tenneco Oil Company, Atlantic Richfield Company, Murphy Oil U.S.A. Inc., Elf
Aquitaine, Inc. and Odeco Oil & Gas Company, as Lessees, being all of Block
907, Mobile, Official Protraction Diagram, NH 16-4.
Oil and Gas Lease of Submerged Lands dated April 1, 1982, bearing Serial No.
OCS-G 5071, by and between the United States of America, as Lessor, and
Atlantic Richfield Company, Odeco Oil & Gas Company, Murphy Oil Corporation
and Texasgulf Inc., as Lessees, being all of Block 908, Mobile, Official
Protraction Diagram, NH 16-4.
<PAGE>
III. The Wells and the Facilities:
Mobile Area Block 864 Unit
(i) Wells:
Mobile 863 #1
Mobile 907 #1
Mobile 908 #2
Mobile 863 #2
Mobile 864 #2
(ii) Platform/Facilities:
All platforms, facilities and equipment utilized in the production of
oil and gas from the Oil and Gas Properties from the surface of the
earth to 4200 feet described briefly as follows:
Two 4-pile platforms, one of which is a Well Protector Platform and
one of which is a Production Platform with quarters and production
related equipment and facilites, connected by a bridge connector.
The Production Platform location (Block 908 Structure "A") is 65
feet from the North line and 1,680 feet from the West line of Block
908.
The Well Protector Structure location (Block 864 Structure "A") is
15,783 feet from the North line and 1,528 feet from the West line of
Block 864.
Additional Exhibits attached to and made a part of that certain Purchase
and Sale Agreement dated effective April 1, 1997 by and between Elf
Exploration, Inc., as Seller, and Callon Petroleum Operating Company,
as Purchaser, are available upon request:
Exhibit B -- RELATED CONTRACTS AND PERMITTED ENCUMBRANCES
EXHIBIT C -- ASSIGNMENT OF OPERATING RIGHTS IN FEDERAL OCS OIL & GAS LEASE
EXHIBIT D -- BILL OF SALE
EXHIBIT E -- ASSIGNMENT OF OIL AND GAS RIGHTS IN WORKING INTEREST UNIT
EXHIBIT F -- FINANCIAL GUARANTY AGREEMENT
