<PAGE>
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): April 9, 1996
ZAPATA CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
Delaware I-4219 C-74-1339132
<S> <C> <C>
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
</TABLE>
1717 St. James Place, Suite 550
Houston, Texas 77056
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (713) 940-6100
1
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 9, 1996, Zapata Corporation, a Delaware corporation (the "Company"),
sold substantially all of the assets of its natural gas gathering and processing
business conducted by its Cimarron Gas Holding Company ("Cimarron") subsidiary
to Conoco Inc. ("Conoco") and Enogex Products Corporation ("Enogex"). Conoco
purchased certain of the Texas-based assets and Enogex purchased certain of the
Oklahoma-based assets of Cimarron. The aggregate cash consideration paid by
Conoco and Enogex totaled $23 million, subject to final post-closing date
adjustments provided for in the agreement relating to the sale.
A copy of the agreement dated March 26, 1996 is attached as Exhibit 2.1 hereto
and is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(B) PRO FORMA FINANCIAL INFORMATION
Filed herewith is pro forma financial information for Zapata Corporation and
subsidiary companies as of December 31, 1995.
UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENT
The following unaudited pro forma condensed balance sheet reflects the financial
position of the Company as of December 31, 1995 historically and on a pro forma
basis giving effect to the sale of Cimarron's assets as if the sale had been
consummated as of December 31, 1995. This unaudited pro forma balance sheet
should be read in conjunction with the historical consolidated financial
statements of the Company and related notes and "Management's Discussion and
Analysis of Results of Operations and Financial Conditions" contained in the
Company's Annual Report on Form 10-K for the year ended September 30, 1995. The
unaudited pro forma condensed balance sheet set forth below is not necessarily
indicative of what the actual financial condition would have been had this event
occurred as of the date indicated.
ZAPATA CORPORATION
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS TOTAL
---------- ----------- ---------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $102,075 $ 23,026 $121,679
(1,593)
(1,829)
Receivables 9,992 899 10,891
Inventories:
Fish products 19,353 19,353
Materials, parts and supplies 3,244 3,244
Prepaid expenses and other current
assets 3,043 3,043
Net assets of discontinued operations 21,475 (21,475) -
--------- ---------- ---------
Total current assets 159,182 (972) 158,210
--------- ---------- ---------
Investments and other assets:
Notes receivable 8,864 8,864
Investments in unconsolidated affiliates 18,271 18,271
Deferred income taxes 4,585 2,354 6,939
Other assets 16,145 16,145
--------- ---------- ---------
47,865 2,354 50,219
--------- ---------- ---------
Property and equipment 74,958 74,958
Accumulated depreciation (35,810) (35,810)
--------- ---------- ---------
39,148 - 39,148
--------- ---------- ---------
Total assets $ 246,195 $ 1,382 $247,577
========= ========== =========
Current liabilities:
Current maturities of long-term debt $ 8,357 $ 8,357
Accounts payable and accrued
liabilities 24,801 4,400 29,201
Net liabilities of discontinued
operations - 482 482
--------- ---------- ---------
Total current liabilities 33,158 4,882 38,040
--------- ---------- ---------
Long-term debt 34,179 34,179
--------- ---------- ---------
Other liabilities 19,293 19,293
--------- ---------- ---------
Stockholders' equity:
Preferred and preference stock 3 3
Common stock 7,387 7,387
Capital in excess of par value 131,962 131,962
Reinvested earnings from
October 1, 1990 20,213 (3,500) 16,713
---------- ---------- ---------
159,565 (3,500) 156,065
---------- ----------- ---------
Total liabilities and stockholders'
equity $246,195 $ 1,382 $247,577
========== =========== =========
</TABLE>
The following note sets forth the explanations and assumptions used in preparing
the unaudited pro forma condensed balance sheet as of December 31, 1995 (amounts
in thousands).
The Company completed the sale of substantially all of the assets of Cimarron
for $23,026 on April 9, 1996. The remaining assets are expected to be sold for
approximately $899 within the next few months. These sales are expected to
result in net proceeds to the Company of approximately $15,204 comprised of
gross proceeds of $23,925 less: a $1,593 repayment of debt, $4,400 in estimated
federal and state income taxes and $1,829 in estimated commissions, fees,
severance and other expenses. As a result of the Company's decision to sell the
assets of Cimarron, the results of Cimarron's operations have been reported as a
discontinued operation. The sale resulted in an estimated after-tax book loss of
$3,500 which is based on sales proceeds of $23,925 less: $22,984 for the book
value of the assets sold and to be sold and the write-off of remaining
unamortized goodwill and deferred cost balances and $1,829 for estimated
commissions, fees, severance and other expenses associated with the sale. The
estimated loss also includes pre-tax losses from operations of approximately
$566 incurred from September 30, 1995 to the date of sale and a $2,048 book tax
provision.
(C) EXHIBITS.
2.1 Purchase and Sale Agreement dated March 26, 1996 by and among Cimarron
Gas Holding Company, Conoco Inc. and Enogex Products Corporation.
2.2 Amendment and Clarification of Purchase and Sale Agreement, Waiver and
Closing Agreement dated April 9, 1996.
The Company agrees to furnish supplementally a copy of any omitted schedule
to the Commission upon request.
2
<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 hereunto duly authorized.
ZAPATA CORPORATION
By: /s/ Joseph L. von Rosenberg, III
--------------------------------------
Joseph L. von Rosenberg, III
Executive Vice President, General
Counsel and Secretary
Date: April 23, 1996
3
<PAGE>
EXHIBIT 2.1
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "AGREEMENT") is made and entered into
as of March 26, 1996, by and between CONOCO INC., a Delaware corporation, with
offices at 600 N. Dairy Ashford, Houston, Texas 77079 ("CONOCO"), and ENOGEX
PRODUCTS CORPORATION, an Oklahoma corporation, with offices at 600 Central Park
Two, 515 Central Park Drive, Oklahoma City, Oklahoma 73105 ("ENOGEX"), (Conoco
and Enogex are also sometimes referred to herein individually as "BUYER" or
collectively as "BUYERS"), and CIMARRON GAS HOLDING COMPANY, with offices at Two
Warren Place, Suite 812, 6120 South Yale Avenue, Tulsa, Oklahoma 74136-4235
("SELLER").
RECITALS
Seller desires to sell and Buyers desire to purchase all of Seller's right,
title and interest in and to the Assets defined herein pursuant to the terms and
conditions of this Agreement.
As between the Buyers, Conoco wishes to purchase all of Seller's right,
title and interest in and to the Texas Assets as defined herein, and Enogex
wishes to purchase all of Seller's right, title and interest in and to the
Oklahoma Assets as defined herein.
Therefore, Seller agrees to sell and Conoco agrees to purchase the Texas
Assets, and Seller agrees to sell and Enogex agrees
to purchase the Oklahoma
Assets on the terms and conditions set forth in this Agreement.
ARTICLE 1. PURCHASE AND SALE
1.1 Assets. Subject to the terms of this Agreement, Seller agrees to convey,
transfer and assign to Buyers, and Buyers agree to accept, as of the Effective
Date, all of Seller's right, title and interest in and to certain gas processing
plants along with associated gathering systems and independent gathering systems
(hereinafter collectively referred to as the "ASSETS"). The Assets include,
without limitation, the following:
1.1.1 Plants. All of Seller's right, title and interest in the gas
processing plants described in Exhibit A-Texas, Schedule 1 and Exhibit A-
Oklahoma, Schedule 1 to this Agreement (the "PLANTS"):
1.1.2 Plant Facilities, Equipment and Personal Property. All of
Seller's right, title and interest in the equipment, personal property, fixtures
and other facilities related to the Plants, including, without limitation, those
described on Exhibit A-Texas, Schedule 2 and Exhibit A-Oklahoma, Schedule 2 (the
"PLANT FACILITIES");
4
<PAGE>
1.1.3 Pipelines. All of Seller's right, title and interest in the
gathering lines, pipelines and related facilities associated with the Plants and
the gathering lines, pipelines and related facilities associated with
independent gathering systems, including without limitation those described in
Exhibit A-Texas, Schedule 3 and Exhibit A-Oklahoma, Schedule 3 (the
"PIPELINES");
1.1.4 Real Property and Rights of Way. All of Seller's real property
interest in the Plants, Plant Facilities and Pipelines, including without
limitation all fee property interests, surface leases and other rights to use
the surface in connection with the ownership or operation of the Plants, Plant
Facilities and Pipelines (collectively, the "REAL PROPERTY") as specifically
described in Exhibit A-Texas, Schedule 4 and Exhibit A-Oklahoma, Schedule 4, and
all of Seller's right, title and interest in easements, rights-of-way,
servitudes, railroad permits or licenses and other related instruments
specifically related to the Plants, Plant Facilities and the Pipelines
(collectively, the "RIGHTS-OF-WAY"), including, without limitation, those
described in Exhibit A-Texas, Schedule 4 and Exhibit A-Oklahoma, Schedule 4;
1.1.5 Contracts. All of Seller's right, title and interest in the
written, fully executed contracts and agreements related to Seller's ownership
interest in the Plants, Plant Facilities and Pipelines including without
limitation partnership agreements, joint venture agreements, operating
agreements and agreements for the supply, processing or transportation of
natural gas or natural gas liquids at the tailgate of the Plants and the other
agreements listed in Exhibit A-Texas, Schedule 5 and Exhibit A-Oklahoma,
Schedule 5 (the "CONTRACTS");
1.1.6 Permits. All of Seller's right, title and interest in the
environmental and other governmental permits, licenses, orders, franchises and
other related instruments and rights related to Seller's ownership or operation
of the Plants, Plant Facilities and Pipelines including, without limitation,
those described in Exhibit A-Texas, Schedule 6 and Exhibit A-Oklahoma, Schedule
6 (the "PERMITS");
1.1.7 Inventories. Subject to existing sales agreements, all of
Seller's right, title and interest in the inventory of liquid hydrocarbons and
products refined from the liquid hydrocarbons located in storage facilities or
transportation facilities on or near the site of the Plants and Pipelines on the
Effective Date that have not passed through custody transfer meters to other
facilities not being transferred to Buyers under this Agreement (the
"INVENTORIES"); and
1.1.8 Records. All of Seller's right, title and interest in all files,
records and other data in the actual possession of Seller related to the Plants,
Plant Facilities and Pipelines including without limitation all title records,
operational records, technical records, processing records, division orders (if
applicable), measurement, network lease settlement reference and contract
reference
5
<PAGE>
information, plant property and right-of-way files, regulatory compliance files,
contract files, and copies of computer spreadsheets used for accounting and
allocations, but excluding tax records, computer tapes and disks, computer
programs, and any documents covered by the attorney-client communication or
attorney work product privileges, and any data or information that Seller
reasonably considers proprietary or confidential in nature or which is subject
to third-party restrictions (the "SELLER PLANT RECORDS").
1.2 Retained Assets. The Assets to be conveyed to Buyers do not include any
items which are not described in Section 1.1, including, without limitation, the
following property:
1.2.1 Intellectual Property. Except to the extent licensed to Buyers
pursuant to this Agreement, all of Seller's intellectual property used in
developing or operating the Assets, including without limitation proprietary
computer software, patents, trade secrets, copyrights, names, marks and logos,
all of which Buyers will remove as soon as possible, but not later than 90 days,
after Closing;
1.2.2 Records. Any of Seller's corporate, financial and accounting and tax
records, legal files, electronic records and computer programs, except that
Seller will provide Buyers with copies of any tax records that are necessary for
Buyer's ownership, administration or operation of the Assets;
1.2.3 Confidential Information. Notwithstanding any other provision of
this Agreement to the contrary, any records or data that Seller reasonably
considers proprietary or confidential (including without limitation employee
information), or which Seller cannot provide to Buyer because of third-party
restrictions;
1.2.4 Specific Seller Assets. The assets and items constituting or related
to the Plants, Plant Facilities and Pipelines that are listed in Exhibit A-
Texas, Schedule 7 and Exhibit A-Oklahoma, Schedule 7; and
1.2.5 Office Buildings/Rented Space. All of Seller's leased office
space and the contents thereof in Tulsa, Oklahoma and Houston, Texas, as well as
any owned or leased office space in Schleicher County, Texas (the Eldorado
office), other than that which is located on the plant site.
1.2.6 Cash. Subject to Section 2.2 hereof, all of Seller's cash.
1.2.7 Accounts Receivable. All of Seller's accounts receivables
relating to operations prior to the Effective Date.
1.2.8 Tax Refunds. Any tax refunds due to Seller pertaining to any
period prior to the Effective Date.
6
<PAGE>
1.2.9 Oral Agreements. Any oral contracts or agreements of Seller.
1.2.10 TEPI Indemnity or Warranty. Any indemnity or warranty of Texaco
Exploration and Production, Inc. ("TEPI") set forth in the Asset Purchase
Agreement dated February 26, 1993 between TEPI and Seller, or otherwise, which
relates to an Environmental Condition (as defined in Section 8.2.3 hereof)
relating to any matters set forth in the letter to Enogex dated January 16, 1996
from Roberts/Schornick & Associates, Inc.
1.2.11 Trident Indemnity or Warranty. Any indemnity or warranty of
Trident NGL, Inc. ("Trident") set forth in the Purchase and Sale Agreement dated
as of January 13, 1993 between Trident and Seller, or otherwise, which relates
to an Environmental Claim (as defined in Section 8.2.3 hereof) relating to any
matters set forth in the letter to Enogex dated January 16, 1996 from
Roberts/Schornick & Associates, Inc.
1.3 General Property References. General references in this Agreement to the
Plant Facilities, Pipelines, Real Property, Rights-of-Way, Plant Contracts,
Permits, Inventories, or Plant Records mean the Plant Facilities, Pipelines,
Real Property, Rights-of-Way, Contracts, Permits, Inventories and Seller Plant
Records, as the context requires.
1.4 Texas Assets and Oklahoma Assets. The Assets are sometimes referred to
in this agreement as the Texas Assets and the Oklahoma Assets. All references
to the Texas Assets mean those Assets located in Texas, along with all related
Contracts, Permits and Records, wherever located (the "TEXAS ASSETS"), all
references to the Oklahoma Assets mean those Assets located in Oklahoma, along
with all related Contracts, Permits and Records, wherever located (the "OKLAHOMA
ASSETS"), it being the intent that the Texas Assets and the Oklahoma Assets
together comprise all of the Assets. The Assets set forth on Exhibit A-Texas
relate to the Texas Assets. The Assets set forth on Exhibit A-Oklahoma relate
to the Oklahoma Assets. Seller and Enogex acknowledge that certain of the
Oklahoma Assets are subject to the exercise of rights of first refusal and that
should a party exercise such right and purchase the related part of the Oklahoma
Assets prior to Closing, Seller and Enogex agree that those corresponding assets
will be excluded from Exhibit A-Oklahoma.
1.5 Effective Date. Upon Closing (as defined in Section 6.1), the effective
date of the transfer of the Assets between Seller and Buyers will be 7:00 a.m.
CDT on January 1, 1996, regardless of when the parties execute this Agreement
(the "EFFECTIVE DATE").
7
<PAGE>
1.6 Definition of "Material". The words "material" or "materially" when used
in this Agreement shall mean that the third-party cost associated with such item
(including, but not limited to claims, damages, demands, causes of action,
fines, penalties, or losses) or any dimunition in value of the Texas Assets or
Oklahoma Assets resulting from such item is equal to or exceeds twenty-five
thousand dollars ($25,000) for each such item. This definition shall not apply
to Material Contracts and Material Rights-of-Way which shall have the respective
definitions set forth in Section 3.2.1.
ARTICLE 2. CONSIDERATION AND PAYMENT
2.1 Consideration. At Closing, Buyers will pay Seller Twenty-Three Million
Six Hundred Thousand Dollars ($23,600,000) in cash, of which Conoco will pay
$16,100,000 for the Texas Assets and Enogex will pay $7,500,000 for the Oklahoma
Assets, each amount being subject to adjustment as provided in Section 2.2 of
this Agreement (collectively the "CASH CONSIDERATION"). Conoco will pay an
additional Two-Hundred-Fifty Thousand Dollars ($250,000) in cash as additional
Cash Consideration to Seller on or before 5:00 p.m. CDT on May 6, 1996, if gas
deliveries have commenced pursuant to that certain Letter Agreement dated March
4, 1996 (the "Letter Agreement"), between Louis Dreyfus Natural Gas Corp. and
Stellar Energy Corporation; provided, however, that such additional Cash
Consideration due shall be prorated to the extent that the average daily gas
volume under the Letter Agreement for the period April 1, 1996 - April 30, 1996
is less than 1,500 MMBtu per day. Conoco covenants to use its best efforts to
ensure the movement of maximum daily gas volume under the Letter Agreement.
2.2 Adjustments to the Cash Consideration at Closing. Adjustments to the
Cash Consideration shall be made as between the Seller and the Buyer (Conoco or
Enogex, as the case may be) only as to events that affect the Assets being
conveyed to the relevant Buyer, as follows:
2.2.1 Preliminary Settlement Statement. The Cash Consideration payable to
Seller at Closing will be subject to the adjustments set forth in Sections 2.2.2
and 2.2.3. No later than five (5) business days prior to Closing, the Seller
will prepare and provide to Buyers a preliminary settlement statement showing
all adjustments to the Cash Consideration to be made at Closing pursuant to this
Section 2.2. Seller and Buyers acknowledge that some items in the preliminary
settlement statements may be estimates or otherwise subject to change. Prior to
Closing, Buyers may provide Seller with written exceptions to any of the items
in the preliminary settlement statement that Buyers believe in good faith to be
questionable. Any such disputed items will not be an adjustment to the Cash
Consideration at Closing, but instead will be treated and resolved as disputed
items, under Section 2.3.3.
8
<PAGE>
2.2.2 Upward Adjustments. The Cash Consideration will be increased by:
(i) The value of the Inventories on the Effective Date, such value
to be the average of the high and low OPIS price (non-TET,
where applicable) at Mont Belvieu, Texas for the applicable
product, reported for January 1, 1996, less five and one-half
cents ($0.055) per gallon;
(ii) The amount of all costs and expenses paid by Seller on or
prior to the Closing Date in connection with operation of the
Plants, Plant Facilities and Pipelines that are attributable
to the period on and after the Effective Date, including
without limitation expenses paid under the Contracts and/or
gas gathering, gas processing or gas transportation fees paid
by Seller;
(iii) Any proceeds from the sale of Seller's share of residue gas,
liquid hydrocarbons or plant products from the Plants that are
received by Buyers and attributable to the period prior to the
Effective Date.
2.2.3 Downward Adjustments. The Cash Consideration will be decreased
by (i) any proceeds from the sale of Buyer's interest in residue gas, liquid
hydrocarbons or plant products from the Assets that are received by Seller and
attributable to the period on and after the Effective Date, (ii) gas gathering,
gas processing or gas transportation fees received by Seller, and (iii) any
adjustments required by Section 5.3.2 hereof. In addition, in the event that a
party should exercise its right of first refusal with respect to any of the
Oklahoma Assets prior to Closing, the Cash Consideration to be paid by Enogex
shall be decreased for the corresponding amount of such purchase price.
2.3 Adjustments to the Cash Consideration After Closing.
2.3.1 Final Settlement Statement. Within 60 days after Closing, Seller,
with respect to the Assets it has transferred under this Agreement to each
Buyer, will provide each Buyer with a final settlement statement containing a
final reconciliation of the adjustments to the Cash Consideration set forth in
Section 2.2 for the Assets conveyed to the respective Buyers. (However, failure
of Seller to complete the final settlement statement within 60 days after
Closing will not constitute a waiver of any right to an adjustment otherwise
due.) Each Buyer will have 30 days after receiving the final settlement
statement to provide Seller with any written exceptions to any items in the
final settlement statement that Buyer believes in good faith to be questionable.
Any such disputed items will be resolved as provided in Section 2.3.3. All
items in the final settlement statement to which Buyer does not except in
writing within the 30-day review period will be deemed correct.
9
<PAGE>
2.3.2 Payment of Undisputed Adjustments. Seller and Buyers will pay each
other the undisputed adjustments to the Cash Consideration contained in each
final settlement statement within 10 days after the expiration of Buyer's 30-day
review period for the final settlement statement. Seller and Buyers by agreement
may offset any amounts they owe each other pursuant to the final settlement
statements, so that only one payment from each Buyer with respect to all of the
Assets conveyed to that Buyer is required.
2.3.3 Resolution of Disputed Adjustments. If Seller and either Buyer are
unable, within 10 business days after the expiration of such Buyer's initial 30-
day review period for each final settlement statement, to resolve any disputed
items pertaining to that final settlement statement, the Seller and the affected
Buyer agree to promptly, and in no event later than 10 business days after such
10 business day period, and jointly retain an independent accounting firm to
evaluate the items in dispute as between such parties and render an opinion on
their validity, with each such affected party paying one-half of the charges of
the independent accounting firm. The determination of the accounting firm will
be final and binding on the parties. Upon determination of such item by the
independent accounting firm, the owing party shall pay the full amount
determined by the independent accounting firm to be due within 10 business days
after receiving written notice of the independent accounting firm's decision.
2.3.4 Further Revenues and Expenses. After the completion of the post-
Closing adjustments under this Section 2.3, (i) if any party receives revenues
that belong to another party under this Agreement, the party receiving the
revenues agrees to promptly remit those revenues to the other party, or (ii) if
any party pays expenses that are the responsibility of another party under this
Agreement, the party on whose behalf the expenses were paid agrees to promptly
reimburse the other party for the expenses paid on its behalf upon receiving
satisfactory evidence of such payment. However, no party will be obligated to
reimburse another party for any expense in excess of $5,000 unless it has been
consulted about that expense prior to payment.
2.4 Payment Method. Unless the parties otherwise agree in writing, all
payments under this Agreement will be by wire transfer in immediately available
funds to an account designated by the party receiving payment.
2.4.1 Seller Account Information. Prior to Closing, Seller will designate
an account for receipt of wire transfers to Seller under this Agreement.
2.4.2 Buyers Account Information. Prior to Closing, Conoco and Enogex will
designate accounts for receipt of all wire transfers to Conoco and Enogex under
this Agreement.
10
<PAGE>
ARTICLE 3. REPRESENTATIONS
3.1 Reciprocal Representations. By their execution of this Agreement, Seller
and each Buyer (as to the Assets to be conveyed to each such Buyer) make the
following representations as to themselves as an executing party. These
representations are deemed to be made as of the Closing Date.
3.1.1 Requisite Authority. Conoco is a corporation duly organized and in
good standing under the laws of Delaware, is duly qualified to carry on its
business in the state of Texas, and has all the requisite power and authority to
enter into and perform this Agreement. Enogex is a corporation duly organized
and in good standing under the laws of the State of Oklahoma, is duly qualified
to carry on its business in the State of Oklahoma, and has all the requisite
power and authority to enter into and perform this Agreement. Seller is a
corporation duly organized and in good standing under the laws of Delaware, is
duly qualified to carry on its business in the States of Texas and Oklahoma, and
has all the requisite power and authority to enter into and perform this
Agreement.
3.1.2 Requisite Approvals. The executing party has taken all necessary or
appropriate actions to authorize (i) the execution and delivery of this
Agreement and the other transaction documents referenced in this Agreement; (ii)
the performance of its obligations under this Agreement and the other
transaction documents; and (iii) the consummation of this transaction.
3.1.3 Validity of Obligation. This Agreement and the other transaction
documents referenced in this Agreement (i) have been duly executed and delivered
by the executing party, (ii) constitute the legal, valid and binding obligations
of the executing party; and (iii) are enforceable against the executing party in
accordance with their respective terms.
3.1.4 No Conflicts or Impediments. The consummation of the transactions
contemplated by this Agreement (i) does not require the approval, authorization,
consent or other action by, or filing with, any governmental authority,
administrative agency, court or other party; (ii) will not breach, violate or
conflict with any material agreement or instrument to which either the executing
party or the Assets being transferred by the executing party is subject,
including without limitation covenants imposed on the executing party by any
bank or other financial institution, lender or debtholder; and (iii) does not
violate any judgment, decree, law, rule or regulation of any governmental
authority or administrative agency, in the case of each clause (i), (ii) and
(iii), in a manner that would adversely affect the transactions.
3.1.5 Bankruptcy. There are no bankruptcy, reorganization or receivership
proceedings
11
<PAGE>
pending, being contemplated by, or to its actual knowledge, threatened against
it.
3.1.6 Broker's Fees. The executing party has not incurred any obligation
for brokers, finders or similar fees for which the other executing party or
parties would be liable.
3.1.7 Tax Partnerships. The Assets to be transferred pursuant to this
Agreement are not subject to any Tax Partnership Agreement or provisions
requiring a Partnership Income Tax Return to be filed under Subchapter K of
Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended, or any
similar state statute.
3.2 Seller's Representations. By its execution of this Agreement, Seller
makes the following representations to each Buyer as to the Assets purchased by
each Buyer. These representations are deemed to be made as of the Closing Date.
3.2.1 Preferential Rights and Consents. There are no prior or preferential
rights to purchase, rights of first refusal, or other similar rights vested in
any other party to purchase or otherwise acquire the Assets which apply to the
transactions contemplated by this Agreement or which will not otherwise have
been either waived or terminated prior to the Closing Date. The Rights of Way
listed on Schedule 4 of Exhibit A-Texas and Exhibit A-Oklahoma which are marked
with an asterisk shall be referred to herein as the "Material Rights of Way",
and the Rights of Way listed on Schedule 4 of Exhibit A-Texas and Exhibit A-
Oklahoma which are not so marked shall be referred to herein as the "Immaterial
Rights of Way." The Contracts listed on Schedule 5 of Exhibit A-Texas and
Exhibit A-Oklahoma which are marked with an asterisk shall be referred to herein
as the "Material Contracts" and the Contracts listed on Schedule 5 of Exhibit A-
Texas and Exhibit A-Oklahoma which are not so marked shall be referred to herein
as the "Immaterial Contracts." Seller shall secure prior to the Closing Date all
third party consents or waivers which may be necessary to effect the proper
assignment of Seller's interest in the Material Contracts and the Material
Rights of Way to Buyers in accordance with their respective terms and to obtain
waivers of all preferential rights to purchase, rights of first refusal or other
similar rights vested in any other party to purchase or otherwise acquire the
Assets; provided, however, that the proper assignment of the Immaterial
Contracts and the Immaterial Rights of Way shall not be a condition to the
Closing, and to the extent such assignments of Immaterial Contracts and
Immaterial Rights of Way are not secured prior to the Closing Date, such
assignments may be secured after the Closing Date. Seller shall use good faith
(as defined in the Uniform Commercial Code) efforts to effect the proper
assignment of the Immaterial Contracts and the Immaterial Rights of Way. Buyers
agree to cooperate with Seller in attempting to secure all of such consents or
waivers before and after the
12
<PAGE>
Closing Date. Seller's failure, after making reasonable commercial efforts to
obtain consents or waivers for the Material Contracts, the Immaterial Contracts,
the Material Rights of Way and the Immaterial Rights of Way, shall not be deemed
a breach of this Agreement.
3.2.2 Mortgages and Other Instruments. The transfer of the Assets does not
violate any covenants or restrictions imposed on Seller by any bank or other
financial institution in connection with a mortgage or other instrument, and
will not result in the creation or imposition of a lien on any portion of the
Assets .
3.2.3 Compliance with Law and Agreements. Except as set forth on Schedule
3.2.3 or as disclosed to Buyers in writing at least 10 business days prior to
Closing, to the best of Seller's knowledge, (i) Seller is in material compliance
with all applicable laws, rules, and regulations of federal, state and local
authorities in connection with Seller's ownership and operation of the Assets;
and (ii) Seller is in material compliance with all of its obligations under the
Contracts, Permits, Right-of-Way agreements and any other permits, contracts and
agreements relating to the Assets.
3.2.4 Litigation and Claims. To the best of Seller's knowledge, there are
no actions, suits or other proceedings pending before any court or governmental
agency in which Seller is a party or which would have a material adverse effect
on the Assets or any other material claims that (i) would result in loss of
title to the Assets as warranted under this Agreement, (ii) would affect the
value of the Assets, or (iii) would subject Buyers to any legal or monetary
liability, except for those listed in Schedule 3.2.4 to this Agreement.
3.2.5 Imbalances. Except as disclosed on Schedule 3.2.5, Seller
represents that, at the Effective Date, there was not any imbalance with respect
to operations relating to the Assets, including imbalances pursuant to any
contracts relating to the sale or transportation of natural gas or natural gas
liquids attributable to those Assets.
3.2.6 Underground Storage Tanks. There are no underground storage
tanks as defined in the Resource Conservation and Recovery Act, 42 U.S.C. (S)
6901 et seq., owned or operated by Seller and located on the real property
within the Assets, which are not in compliance with applicable laws.
3.2.7 FIRPTA. Seller is not a "FOREIGN PERSON" as defined in Section 1445
of the Internal Revenue Code of 1986, as amended, and will deliver to each of
the Buyers a Non-Foreign Affidavit in the form of Exhibit C.
3.3 Buyers' Representations. By execution of this Agreement, each Buyer (as
to the Assets to be conveyed to each such Buyer) makes the following
representations as to themselves
13
<PAGE>
as an executing party. These representations are deemed to be made as of the
Closing Date:
3.3.1 Licensing. Each Buyer acknowledges that such Buyer has met all of
the material requirements under applicable local, state and federal law to
accept assignment of the Assets, and is not otherwise prevented from having the
Assets transferred to such Buyer, and is properly authorized to operate said
Assets and to do business in the state where the Assets are located. These
requirements include, but are not limited to, acquisition of bonds, letters of
credit or other evidence of financial security or any other requirements of all
appropriate regulatory agencies.
3.3.2 Non-Affiliate Status. Each Buyer is not an affiliate of the other
Buyer.
3.4 Notice of Changes. Seller and each of the Buyers agree to give to the
relevant Buyer or Seller, as appropriate, prompt written notice of any matter
materially affecting any of their representations under this Article 3.
ARTICLE 4. WARRANTIES AND WARRANTY DISCLAIMERS
4.1 Special Title Warranty. Seller hereby gives Buyers a special warranty
of title with respect to the Assets, warranting Seller's title by, through or
under Seller, but not otherwise. SELLER MAKES NO OTHER WARRANTY OR
REPRESENTATION, WHETHER EXPRESS, STATUTORY, IMPLIED, COMMON LAW OR OTHERWISE
WITH RESPECT TO SELLER'S TITLE TO THE ASSETS.
4.2 Encumbrances. Seller represents and warrants that it owns and is
assigning, conveying and transferring full legal and beneficial ownership of
Seller's interest in the Assets, free and clear of all assessments, charges,
liens, claims, pledges, mortgages, security interests and other encumbrances
caused by Seller, other than Permitted Liens. For purposes of this Agreement,
"PERMITTED LIENS" means the following:
(i) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and existing on the
Real Property which, in the aggregate, are not substantial in amount and which
do not in any case materially detract from the value of the Real Property
subject thereto or materially interfere with the ordinary conduct of business;
(ii) leases of Assets being conveyed to Buyers which were entered
into in the ordinary course of business; or
(iii) liens imposed but not perfected by operating agreements to
which Seller is a party.
14
<PAGE>
4.3 Condition and Fitness of Assets. Except as provided in Sections 4.1 and
4.2 of this Agreement, SELLER CONVEYS THE ASSETS WITHOUT ANY EXPRESS, STATUTORY,
IMPLIED, COMMON LAW OR OTHER WARRANTY OR REPRESENTATION OF ANY KIND, INCLUDING
WARRANTIES RELATING TO (i) THE CONDITION OR MERCHANTABILITY OF THE ASSETS, OR
(ii) THE FITNESS OF THE ASSETS FOR A PARTICULAR PURPOSE. BUYERS ACCEPT THE
ASSETS AS IS, WHERE IS, AND WITH ALL FAULTS.
4.4 Subrogation of Warranties. Seller will give and grant to each Buyer, its
successors and assigns, as to the Assets received by each, full power and right
of substitution and subrogation in and to all covenants and warranties
(including warranties of title) by preceding owners, vendors, or others, given
or made with respect to the Assets or any part thereof prior to the Effective
Date of this Agreement, to the extent such covenants and warranties are provided
for in the Contracts and such Contracts have been properly assigned to such
Buyer. Each Buyer will promptly reimburse Seller for any reasonably incurred
third party costs or expenses (including, without limitation, attorneys' fees)
of Seller in the event that such Buyer requests Seller to enforce such
substitution or subrogation on behalf of such Buyer.
4.5 Representations and Warranties Exclusive. All representations and
warranties contained in this Agreement (including without limitation those in
Articles 3 and 4 of this Agreement) are exclusive, and are given in lieu of all
other representations and warranties, express or implied.
4.6 WAIVER OF DTPA ACTS. EACH BUYER HEREBY IRREVOCABLY WAIVES ANY RIGHTS AND
REMEDIES UNDER THE DECEPTIVE TRADE PRACTICE ACT OF OKLAHOMA AND THE DECEPTIVE
TRADE PRACTICES ACT OF TEXAS.
4.7 Other Restrictions. It is understood by the parties that the Seller's
interest in the Assets to be transferred to Buyers is, in the cases of certain
Assets, a fractional undivided interest, that Seller is not operator of all of
the plants and gathering systems to which the Assets relate, and that the
acquisition of certain of such interests is expressly subject to certain rights
of first refusal agreements that permit third parties in certain cases to
exercise an option to purchase certain of the Assets on the same terms as
offered to Buyers.
ARTICLE 5. DUE DILIGENCE PRIOR TO CLOSING
5.1 Records Review. To allow Buyers to confirm Seller's title and conduct
other due diligence with respect to the Assets, Seller shall give Buyers, and
Buyers' authorized representatives, at mutually agreeable times before Closing,
access to all contract, land and lease, and operational records, to the extent
such data and records are in Seller's
15
<PAGE>
possession and relate to the Assets. With Seller's permission, Buyers may
photocopy such records at their sole expense. Buyers shall keep confidential
all information made available to Buyers until the later of the Closing Date or
the Effective Date; provided, however, these confidential provisions shall
continue in full force and effect for two years after the Closing Date in the
event that this Agreement expires or is terminated by either party. Any
confidentiality agreement previously executed by Seller and Buyers with respect
to information about the Assets will continue in force until the later of the
Closing Date or the Effective Date, and for as long thereafter as provided in
the confidentiality agreement. Buyers shall take all reasonable steps necessary
to ensure that Buyers' authorized representatives comply with the provisions of
this Section 5.1 and any confidentiality agreement in effect.
5.2 Inspection. Before Closing or termination of this Agreement, Seller will
permit each Buyer and its representatives, at their sole risk and expense, to
conduct reasonable inspections of the Assets to be transferred to such Buyer, at
times approved by Seller. Each Buyer shall repair any damage to the Assets
inspected by such Buyer resulting from its inspection and shall indemnify,
defend and hold Seller harmless from and against any and all losses, damages,
obligations, claims, liabilities, expenses (including court costs and attorney's
fees), or causes of action arising from Buyer's inspecting and observing the
Assets, including, without limitation, claims for personal injuries or death of
employees of the inspecting Buyer, its contractors, agents, consultants and
repre sentatives, and property damages, regardless of whether such claims are
caused by the concurrent negligence of Seller or the condition of the Assets
inspected by such Buyer.
5.3 Casualty Losses.
5.3.1 Notice of Casualty Losses. If, prior to the Closing Date, all or
part of the Assets are physically damaged or destroyed by fire, flood, storm or
other casualty ("CASUALTY LOSS"), Seller must promptly notify the Buyer of the
affected Assets in writing of the nature and extent of the Casualty Loss and
Seller's good faith estimate of the cost required to repair or replace that
portion of the Assets affected by the Casualty Loss.
5.3.2 Adjustments to Cash Consideration for Casualty Losses. With respect
to each Casualty Loss to the Assets, the Buyer of the affected Assets will have
the following rights.
(i) Subject to the following sentence, if Seller in its good faith
judgment concludes that the cost to repair or replace the portion of
the Assets affected by the Casualty Loss is less than $750,000, then
the Cash Consideration will be adjusted downward by such cost of the
Casualty Loss and the parties will proceed with Closing. The affected
Buyer may disagree with such determination by Seller if such Buyer
determines in its
16
<PAGE>
good faith commercially reasonable judgment that Seller's
determination is materially incorrect. In such event Seller and such
Buyer will negotiate in good faith to promptly reconcile the amount
of such repair or replacement costs, and if the parties agree that
such amount is less than $750,000, then the cash consideration will
be adjusted downward by the agreed cost of the Casualty Loss and the
parties will proceed to the Closing. If the parties cannot agree
within five business days after Buyer informs Seller of its
disagreement, then the parties will proceed with the procedures set
forth in Section 5.3.2(ii).
(ii) If Seller and the affected Buyer are unable to agree on the cost to
repair or replace the portion of the Assets affected by the Casualty
Loss, then the parties shall submit the issue to arbitration, as
provided for in Section 9.13, and if the arbitration derived cost of
the Casualty Loss is less than $750,000, then the Cash Consideration
will be adjusted by such arbitration derived cost and the parties
shall proceed with closing.
(iii) If as a result of any of the procedures set forth in clauses (i) and
(ii) above, it shall be finally determined that a Casualty Loss
shall be $750,000 or greater, then either Seller or the affected
Buyer may terminate this Agreement, and neither party will have any
further obligation to conclude the transfer of the Assets under this
Agreement. Any such termination by one of the Buyers will not affect
the purchase and sale obligations between Seller and the other Buyer
hereunder. Any party exercising a right of termination under this
Section 5.3.2(iii) must notify the other parties in writing on or
before the Closing Date of its election to terminate this Agreement.
5.3.3 Insurance Proceeds and Settlement Payments. In the event of a
Casualty Loss, Seller will be entitled to retain (i) all insurance proceeds
payable to Seller with respect to such Casualty Loss, and (ii) all sums paid to
Seller by third parties by reason of the Casualty Loss.
5.4 Hart-Scott-Rodino Act. The parties acknowledge that the waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
rules and regulations promulgated pursuant thereto, with respect to the
transactions contemplated by this Agreement, has been terminated.
ARTICLE 6. CLOSING AND POST-CLOSING OBLIGATIONS
6.1 Closing. If all of the conditions to Closing set forth in Section 6.2
have been fulfilled, the closing of the sale (the "CLOSING") shall take place at
10:00 a.m. on April 1, 1996, (the actual date on which Closing occurs being the
"CLOSING DATE") at the offices of
17
<PAGE>
Conoco, 600 N. Dairy Ashford, Houston, Texas, unless the parties agree in
writing to another time or location. If all of the conditions to Closing set
forth in Section 6.2 have not been fulfilled prior to April 1, 1996, then the
Closing shall take place at 10:00 a.m. on such date which is two business days
after the date on which such conditions are fulfilled, or on such date as the
parties shall agree. Either party may terminate this Agreement if Closing does
not occur by June 30, 1996, unless (i) the parties agree in writing to extend
the Closing Date, (ii) some provision of this Agreement expressly provides for
automatic extension of the Closing Date past June 30, 1996, or (iii) the failure
to complete Closing by June 30, 1996 (or any other Closing Date on which the
parties agree) is the result of a party's breach of its obligations under this
Agreement, in which case only the non-breaching party will have the right to
terminate this Agreement. Any termination of this Agreement by a non-breaching
party due to another party's breach of its obligations under this Agreement will
not be an election of remedies, and the non-breaching party will be entitled to
seek all damages and remedies to which the non-breaching party may be entitled.
It is intended that Closing of the sale of Assets to both Buyers will occur at
the same time. IT IS SPECIFICALLY UNDERSTOOD AND AGREED THAT THE OBLIGATIONS OF
CONOCO AND ENOGEX UNDER THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO CLOSING,
ARE SEVERAL AND NOT JOINT.
6.2 Conditions to Closing.
6.2.1 Buyers' General Closing Conditions. Neither Buyer is obligated to
close the transaction described in this Agreement, and will have the right to
terminate this Agreement as to that portion of the Assets to be transferred to
such Buyer, unless each of the following closing conditions is satisfied, any
one or more of which the affected Buyer may waive in whole or part:
(i) Seller's Representations and Warranties. As of the Closing
Date, all representations and warranties of Seller are true and
correct and are not misleading in any material respect.
(ii) Performance of Seller's Obligations. Seller has performed all
material obligations Seller is required to perform under this
Agreement on or before the Closing Date.
(iii) Compliance with Law and Agreements. As of the Closing Date, (a)
Seller is in material compliance with all applicable laws,
rules, and regulations of federal, state and local authorities
in connection with Seller's ownership and operation of the
Assets the Seller is transferring to such Buyer; and (b) Seller
is in material compliance with all of its obligations under the
Contracts, Permits, Right-of-Way agreements and any other
permits, contracts and agreements relating to the Assets such
18
<PAGE>
Buyer is to receive under this Agreement.
(iv) Material Contracts and Materials Rights of Way. As of the
Closing Date, Seller shall have obtained all consents required
by Section 3.2.1 to the assignment of the Material Contracts
and Material Rights of Way to the Buyers.
6.2.2 Seller's General Closing Conditions. Seller is not obligated to
close the transaction described in this Agreement, and will have the right to
terminate this Agreement as to that portion of the Assets to be transferred to
the either of the respective Buyers, unless each of the following closing
conditions is satisfied, any one or more of which Seller may waive in whole or
part:
(i) Buyers' Representations and Warranties. As of the Closing Date,
all representations and warranties of Buyers are true and
correct and are not misleading in any material respect.
(ii) Performance of Buyers' Obligations. Buyers have performed all
material obligations Buyers are required to perform with
respect to the Assets to be transferred to such Buyer under
this Agreement on or before the Closing Date.
(iii) Simultaneous Closings. Each of the closings with Enogex and
Conoco will occur simultaneously (provided, however, that
Seller may, in its sole discretion, waive this condition and
proceed with only one of the closings if other conditions still
remain pending for the other closing).
6.2.3 Mutual Closing Conditions. Neither Seller nor Buyers is
obligated to close the transaction described in this Agreement, and Seller or
either Buyer may terminate this Agreement as to that portion of the Assets to be
transferred to such Buyer, unless each of the following closing conditions is
satisfied, any one or more of which the parties may waive in whole or part by
mutual agreement:
(i) Legal Proceedings. There are no material suits or other
proceedings pending or threatened before any court or
governmental agency seeking to restrain or prohibit the
transaction contemplated by this Agreement, or seeking
substantial damages in connection with this transaction, and
there is no reasonable basis for any such suit or proceeding.
(ii) No Violations. Closing shall not violate any order or decree of
any court or governmental body having competent jurisdiction.
6.2.4 Notice of Termination. Any party exercising a right of termination
under this
19
<PAGE>
Section 6.2 must notify the other parties in writing on or before the Closing
Date of its election to terminate this Agreement. If any party terminates this
Agreement pursuant to its termination rights in this Section 6.2, neither Seller
nor the affected Buyer will have any further rights or obligations under this
Agreement as to that portion of the Assets to have been transferred to such
Buyer, except as provided in Section 6.1 with respect to termination of this
Agreement due to a party's breach of its obligations under this Agreement.
6.3 Closing Obligations. At Closing, the following events will occur, each
being a condition precedent to the others and each being deemed to have occurred
simultaneously with the others.
6.3.1 Payment of Cash Consideration. Buyers will pay Seller their
respective shares of the Cash Consideration, adjusted as provided in Section 2.2
of this Agreement, by wire transfer.
6.3.2 Execution and Delivery of Closing Documents. Seller and Buyers will
execute, acknowledge, and deliver the following closing documents.
(i) Seller will execute, acknowledge and deliver to Conoco an
Assignment, Assumption and Bill of Sale (in sufficient
counterparts for recording) transferring Seller's interest in
the Texas Assets to Conoco or its designee and pursuant to
which Conoco agrees to unconditionally and irrevocably assume,
pay, perform and discharge the Buyer's Assumed Obligations (as
defined in Section 8.2). The Assignment and Bill of Sale will
be in the form set forth in Exhibit B-1.
(ii) Seller will execute, acknowledge and deliver to Enogex an
Assignment, Assumption and Bill of Sale (in sufficient
counterparts for recording) transferring Sellers's interest in
the Oklahoma Assets to Enogex or its designee and pursuant to
which Enogex agrees unconditionally and irrevocably to assume,
pay, perform and discharge the Buyer's Assumed Obligations (as
defined in Section 8.2). The Assignment and Bill of Sale will
be in the form set forth in Exhibit B-2.
(iii) Seller will execute and deliver to each Buyer a Non-Foreign
Affidavit in the form set forth in Exhibit C.
(iv) Seller will procure and deliver to each Buyer a Parent Company
Guaranty from Zapata Corporation, which shall provide a
guaranty of all obligations of Seller under this Agreement,
including but not limited to post-Closing accounting
adjustments and indemnification. The Parent Company Guaranty
will be in the form set forth in Exhibit "D".
20
<PAGE>
(v) Enogex will procure and deliver to Seller a Parent Company
Guaranty from Enogex Inc., which shall provide a guaranty of
all obligations of Enogex under this Agreement, including but
not limited to post-closing accounting adjustments and
indemnifications. The Parent Company Guaranty will be in the
form set forth in Exhibit "E".
(vi) Seller and Buyers will execute and deliver any other documents
and instruments necessary to consummate the transactions
contemplated by this Agreement.
6.4 Post-Closing Obligations.
6.4.1 Recording Transfer Documents. Each Buyer, within thirty (30) days
after Closing, will record the Assignment, Assumption and Bill of Sale and all
other instruments that must be recorded to effectuate the transfer of the Assets
the Seller is transferring to such Buyer and assumption of Buyer's Assumed
obligation. All costs of recording and filing these documents will be the
responsibility of the Buyer acquiring the relevant Assets.
6.4.2 Files and Records. No later than 60 days after Closing, Seller will
deliver to each Buyer (at a location designated by such Buyer) the originals or
legible copies of the Seller Plant Records relating to the Assets, other than
those Seller Plant Records located at the Plant Facilities, the Seller is
transferring to such Buyer. Thereafter, Seller will forward to the affected
Buyer any other correspondence, documents and other information Seller receives
relating to the Assets the Seller transfers to such Buyer. If Seller retains any
original Seller Plant Records, the Buyer of the relevant Assets will have the
right to review those original Seller Plant Records during normal business
hours. Seller will have the right to destroy any Seller Plant Records it retains
in accordance with its usual and customary records retention policies. Nothing
herein shall be deemed to require the Buyer to maintain or refrain from
disposing of any books and records transferred pursuant to this Agreement for
any period of time after the Closing Date. However, if Buyer desires to dispose
of any such books or records within five (5) years of the Closing Date, Buyer
agrees to give Seller notice of such intention and the opportunity to retain
such books and records, at Seller's expense.
6.4.3 Further Assurances. Seller and Buyers agree to execute and deliver
from time to time such further instruments and do such other acts as may be
reasonably necessary to effectuate the purposes of this Agreement.
ARTICLE 7. INVENTORIES, REVENUES, EXPENSES AND TAXES
7.1 Accounting for Hydrocarbons Inventories. The Seller Inventories will be
gauged and
21
<PAGE>
measured as of 7:00 a.m. CDT on the Effective Date. Each Buyer will purchase
the Seller Inventories, relative to the portion of the Assets being transferred
to such Buyer, from Seller as provided in Section 2.2.2(i).
7.2 Expenses. Seller will be responsible for the payment of all operating
expenses and capital expenditures related to the Assets the Seller transfers
under this Agreement and attributable to the period prior to the Effective Date.
Each Buyer will be responsible for the payment of all operating expenses and
capital expenditures related to the Assets such Buyer receives attributable to
the period on and after the Effective Date. Any party that pays any expenses
that are the responsibility of another party will be reimbursed for those
expenses as provided in Sections 2.2 and 2.3 of this Agreement.
7.3 Taxes and Incidental Expenses.
7.3.1 Ad Valorem, Real Property and Personal Property Taxes. Ad valorem,
real property, personal property and similar obligations on the Assets the
Seller transfers under this Agreement are the obligation of Seller for periods
before the Effective Date and are the obligation of the affected Buyer for
periods after the Effective Date. All such taxes will be prorated as of the
Effective Date and accounted for as a closing adjustment to the Cash
Consideration, as provided in Section 2.2 of this Agreement.
7.3.2 Income Taxes. Each party shall be responsible for its own state
income and federal income taxes, if any, as may result from this transaction.
7.3.3 Sales and Use Taxes. Each Buyer will be responsible for all sales,
use and similar taxes applicable to the transfer of the Assets it receives. If
Seller is required to pay such sales, use and similar taxes on behalf of either
Buyer, such Buyer will reimburse Seller at Closing for all such sales, use and
similar taxes.
7.3.4 Franchise Taxes. Seller will be responsible for any franchise taxes
assessed, based on the Seller's ownership of the Assets before the Effective
Date. Each Buyer will be responsible for any franchise taxes assessed, based on
such Buyer's ownership of the Assets after the Effective Date.
7.3.5 Incidental Expenses. Each party shall bear its own respective
expenses incurred in connection with the negotiation and Closing of this
transaction, including its own consultants' fees, attorneys' fees, accountants'
fees, and other similar costs and expenses.
22
<PAGE>
ARTICLE 8. RETAINED AND ASSUMED RIGHTS AND OBLIGATIONS
8.1 Buyers' Rights After Closing. Upon and after Closing, Buyers will
receive and assume their respective portion of all of Seller's right, title and
interest to the Assets, as of the Effective Date.
8.2 Buyers' Obligations After Closing. Upon and after Closing, subject to
Section 8.3, each Buyer will unconditionally and irrevocably assume, pay,
perform and discharge all of the liabilities, obligations and duties arising on
and after the Effective Date with respect to the ownership or operation of the
Assets it receives (collectively, the "BUYER'S ASSUMED OBLIGATIONS"). Subject
to Section 8.3, the Buyer's Assumed Obligations include without limitation:
8.2.1 All performance obligations under the Contracts, Permits and Right-
of-Way agreements the Buyer receives;
8.2.2 All Claims (as defined in Section 8.4.1) arising from Buyer's
ownership or operation of the Assets such Buyer receives; and
8.2.3 All Claims related to Environmental Conditions arising from Buyer's
ownership or operation of the Assets such Buyer receives. For purposes of this
Agreement, "Environmental Condition" shall mean any condition which exists with
respect to the Texas Assets, in the case of Conoco, or the Oklahoma Assets, in
the case of Enogex, that (i) violates applicable environmental, land use,
surface disturbance, or licensing rules, regulations, demands or orders of
appropriate state or federal regulatory agencies, including, without limitation,
failure to acquire any necessary air, water or noise permit, (ii) adversely
affects the quality of the air, the groundwater, or the surface or subsurface of
the ground, (iii) requires clean-up responses, and/or further assessment,
control, remediation or compliance with respect to surface and/or subsurface
pollution, and/or (iv) relates to the disposal in violation of any applicable
environmental laws (onsite or offsite) of any hazardous substances, wastes,
materials and products generated by, stored or used in connection with the
Assets such Buyer receives under this Agreement. However, changes in
environmental laws and regulations on or after the Effective Date shall not be
the basis for an Environmental Condition, or any other Claim, for the purposes
of this Agreement. In addition, any Claim or Claims relating to any matters set
forth in the letter to Enogex dated January 16, 1996 from Roberts/Schornick &
Associates, Inc., shall not be the basis for an Environmental Condition, or any
other Claim, for purposes of this Agreement, it being agreed that Seller and
Enogex have previously allocated the risk of such a Claim or Claims and
reflected such allocation as a downward adjustment to the Cash Consideration for
the Oklahoma Assets.
23
<PAGE>
8.3 Seller's Obligations After Closing. After Closing, Seller will
unconditionally and irrevocably (to the extent set forth below) pay, perform and
discharge the following liabilities, obligations and duties with respect to the
ownership or operation of the Assets before the Effective Date which are set
forth below (collectively, the "SELLER'S RETAINED OBLIGATIONS"):
8.3.1 All performance obligations under the Permits and Right-of-Ways
attributable to the period before the Effective Date, for which a written notice
of claim for indemnity under this Article 8, including written notice of facts
as to which an indemnifiable Claim is expected to be incurred, and which
specifically cites this Agreement as a basis for indemnification, shall have
been given to Seller by Buyer within one year after the Effective Date, provided
however that such Claim has not already been satisfied pursuant to the
adjustments set forth in Sections 2.2 or 2.3 (such obligation is referred to as
a "Seller Retained Permit/Right of Way Obligation").
8.3.2 All Claims arising out of Environmental Conditions to the extent
caused by Seller's ownership and/or operation of the Assets before the Effective
Date, for which a written notice of a claim for indemnity under this Article 8,
including written notice of facts as to which an indemnifiable Claim is expected
to be incurred, and which specifically cites this Agreement as a basis for
indemnification, shall have been given to Seller by Buyer within three years
after the Effective Date (such obligation is referred to as a "Seller Retained
Environmental Obligation").
8.3.3. All Claims arising out of any suits, claims or proceedings brought
or asserted by a third party and which are alleged to have arisen or are
attributable to the period prior to the Effective Date and for which a written
notice of claim for indemnity under this Article 8, including written notice of
facts as to which an indemnifiable Claim is expected to be incurred, and which
specifically cites this Agreement as a basis for indemnification, shall have
been given to Seller by Buyer within three years after the Effective Date (such
obligations referred to herein as a "Seller Retained Third Party Claim
Obligation").
8.3.4. All performance obligations under the Contracts attributable to
the period before the Effective Date, for which a written notice of claim for
indemnity under this Article 8, including written notice of facts as to which an
indemnifiable Claim is expected to be incurred, and which specifically cites
this Agreement as a basis for indemnification, shall have been given to Seller
by Buyer within five years after the Effective Date, provided however that such
Claim has not already been satisfied pursuant to the adjustments set forth in
Sections 2.2 or 2.3 (such obligation is referred to as a "Seller Retained
Contract Obligation").
24
<PAGE>
8.4 Indemnities.
8.4.1 Definition of Claims. As used in this Agreement, the term "Claims"
means any and all losses, liabilities, damages, obligations, expenses, fines,
penalties, costs, claims, causes of action and judgments for: (i) breaches of
contract; (ii) loss or damage to property, injury to or death of persons, and
other tortious injury; (iii) liability assessments due to strict liability of
which notice has been given by the relevant third party, and (iv) violations of
which notice has been given by the relevant third party of published, binding
and applicable laws, rules, regulations, orders or any other legal right or duty
actionable at law or equity. The term "CLAIMS" also includes reasonable
attorneys' fees and court costs resulting from the defense of any claim or cause
of action within the scope of the indemnities in this Agreement.
8.4.2 Application of Indemnities. All indemnities set forth in this
Agreement extend to the officers, directors, employees and affiliates of the
party indemnified. The indemnities set forth in this Agreement do not extend to
any part of an indemnified Claim to the extent caused by the gross negligence,
willful misconduct or fraud of the indemnified party or the result of the
imposition of punitive damages on the indemnified party.
8.4.3 Seller's Indemnity. To the extent that a Buyer is not otherwise
reimbursed pursuant to indemnification provisions of Contracts or covenants and
warranties (including warranties of title) by preceding owners, vendors or
others, that have been conveyed, transferred and assigned to such Buyer in
connection with this Agreement, Seller shall indemnify, defend and hold each
Buyer harmless from and against any and all Claims caused by, resulting from or
incidental to Seller's Retained Obligations described in Section 8.3 of this
Agreement, to the extent such Claims relate to the portion of the Assets
transferred to such Buyer.
8.4.4 Buyer's Indemnity. Each Buyer shall indemnify, defend and hold Seller
harmless from and against any and all Claims caused by, resulting from or
incidental to such Buyer's Assumed Obligations set forth in Section 8.2 of this
Agreement, to the extent such Claims relate to the portion of the Assets
transferred to such Buyer.
8.4.5 Notices and Defense of Claims. Each party shall immediately notify
the other affected party of any Claim of which it becomes aware and for which it
is entitled to indemnification from the other party under this Agreement. The
indemnifying party shall be obligated to defend at the indemnifying party's sole
expense any litigation or other administrative or adversarial proceeding against
the indemnified party relating to any Claim for which the indemnifying party has
agreed to indemnify and hold the indemnified party harmless under this
Agreement.
25
<PAGE>
However, the indemnified party shall have the right to participate with the
indemnifying party in the defense of any such Claim at its own expense.
8.4.6 Limitations. Each representation, warranty, covenant and agreement of
indemnity contained in this Agreement shall survive the Closing for the relevant
time period set forth in Section 8.2 or Section 8.3 to which such
representation, warranty, covenant, or indemnity relates and the delivery of
instruments of conveyance by the parties hereto shall not be deemed to have been
superseded by the terms and conditions of the instruments delivered at the
Closing.
8.4.7 Limitation of Seller's Liability.
(i) Notwithstanding anything to the contrary contained in this
Agreement, after the Closing, the aggregate liability of the
Seller to Enogex for any Claim, individually or in the
aggregate with all other Claims of Enogex covered by this
Agreement, for which indemnification is required by Seller
pursuant to Section 8.4.3, shall be limited to one million
dollars ($1,000,000). Enogex agrees to hold Seller harmless for
any Claims greater than such amount.
(ii) Notwithstanding anything to the contrary contained in this
Agreement, after the Closing, the aggregate liability of the
Seller to Conoco for any Claim, individually or in the
aggregate with all other Claims of Conoco covered by this
Agreement, for which indemnification is required by Seller
pursuant to Section 8.4.3, shall be limited to an aggregate of
six million dollars ($6,000,000) which shall be apportioned as
follows: (i) two million dollars ($2,000,000) for all Claims up
to an aggregate of $2,000,000 so that Seller's liability shall
be for 100% of such Claims (subject to Section 8.4.7(iii)
hereof), and (ii) after the utilization of such $2,000,000
amount set forth in the preceding clause (i), four million
dollars ($4,000,000) so that for all Claims greater than
$2,000,000 in the aggregate, and less than seven million, three
hundred and thirty-three thousand and three hundred and thirty
three dollars ($7,333,333) in the aggregate, Seller's liability
shall be for 75% of such Claims. In no event shall Seller have
any liability to Conoco for any Claims in the aggregate greater
than $7,333,333 or which would cause Seller to provide
indemnification to Conoco in the aggregate for greater than
$6,000,000. Conoco agrees to hold Seller harmless for Claims
greater than such amount.
(iii) Each Buyer is entitled to indemnification pursuant to this
Agreement only to the extent that the amount of any Claim,
individually or in the aggregate with all other Claims of such
Buyer covered by this Agreement
26
<PAGE>
(i) is not a Buyer Assumed Obligation and (ii) exceeds the following
amounts:
a) In the event of a Seller Retained Permit/Right of Way
Obligation, $25,000;
b) In the event of a Seller Retained Environmental Obligation,
$100,000;
c) In the event of a Seller Retained Third Party Claim
Obligation, $50,000; and
d) In the event of a Seller Retained Contract Obligation,
$50,000.
8.4.8 Limitation of Buyer's Liability.
(i) Notwithstanding anything to the contrary contained in this
Agreement, after the Closing, the aggregate liability of each
Buyer for any Claim, individually or in the aggregate with all
other Claims covered by this Agreement, for which indemnification
is required by a Buyer pursuant to Section 8.4.4, shall be
limited to, with respect to each Buyer, (i) Buyer's Assumed
Obligations, the aggregate amount of the Buyer's Assumed
Obligations for such Buyer, and (ii) with respect to such Buyer's
representations under Article 3 of this Agreement, one million
dollars ($1,000,000).
(ii) The Seller is entitled to indemnification pursuant to this
Agreement only to the extent that the amount of any Claim,
individually or in the aggregate with all other Claims covered by
this Agreement, exceeds $75,000 and is not a Seller's Retained
Obligation. In such event, the Seller shall be entitled to
recover the full amount of such Claim in excess of $75,000.
8.4.9 Limitation on Claims. No party to this Agreement shall make a claim
against another party to this Agreement except pursuant to, and subject to the
limitations contained in, this Section 8.4.
8.4.10 Inconsistent Provisions. The provisions of this Section 8.4 shall
govern and control over any inconsistent provisions of this Agreement.
ARTICLE 9. MISCELLANEOUS PROVISIONS
9.1 Interim Operations of Seller Plants. From the date of this Agreement
until the Closing
27
<PAGE>
Date, and for any additional period on which the relevant parties may agree,
Seller will continue to operate the Assets in accordance with the Interim
Operating Agreements between each Buyer and Seller to be executed and delivered
contemporaneously with this Agreement. The Interim Operating Agreements are
attached to this Agreement as Exhibit F-1 and F-2.
9.2 Employees. Prior to Closing, each Buyer may interview, investigate and
review the personnel records of Seller employees employed directly in the
operation of the Assets such Buyer is acquiring. Each Buyer at its sole
discretion may offer employment to those Seller employees it wishes to hire in
connection with such Buyer's operation of the Assets after Closing. However,
neither Buyer will have any obligation to offer employment to any Seller
employees, and Seller will have no obligation to make recommendation as to which
Seller employees either Buyer should or should not consider employing.
9.3 Notices. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be deemed to have been given when
delivered by certified mail (postage prepaid, return receipt requested) or
prepaid Federal Express (return receipt requested) to the respective parties as
follows:
<TABLE>
<CAPTION>
Conoco Seller
------ --------
<S> <C>
Pre-Closing Pre-Closing and Post Closing
- ----------- ----------------------------
Conoco Inc. Cimarron Gas Holding Company
600 North Dairy Ashford (77079) c/o Zapata Corporation
P. O. Box 2197 1717 St. James Place, Suite 550
Houston, Texas 77252 Houston, Texas 77056
Attn: NGGP Attn: General Counsel
Director, Fax: (713) 940-6122
Business Development
Fax: (713) 293-5387 with courtesy copy (which shall not
constitute notice) to:
Post-Closing
- ------------
Gene Lewis, Esq.
Conoco Inc. Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.
600 North Dairy Ashford (77079) 3400 Texas Commerce Tower
P. O. Box 2197 Houston, Texas 77002
Houston, Texas 77252 Fax: (713) 223-3717
Attn: NGGP
General Manager, Operations
and Engineering
Fax: (713) 293-5387
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Enogex
------
Pre-Closing Post-Closing
- ----------- ------------
<S> <C>
Enogex Products Corporation Enogex Products Corporation
600 Central Park Two 600 Central Park Two
515 Central Park Drive 515 Central Park Drive
Oklahoma City, Oklahoma 73105 Oklahoma City, Oklahoma 73105
Attn.: Roger A. Farrell Attn.: Director of Gas Processing
Fax: (405) 558-4618 Fax: (405) 557-5258
</TABLE>
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
9.4 Public Announcements. Neither party to the transfer of the Texas Assets
or to the Oklahoma Assets, respectively, may make press releases or other public
announcements concerning the relevant portion of this transaction, without the
other affected party's prior approval and agreement to the form of the
announcement, except as may be required by applicable laws or rules and
regulation of any governmental agency or stock exchange.
9.5 Exhibits. The Exhibits attached to this Agreement are incorporated into
and made a part of this Agreement. In the event of a conflict between the
provisions of the Exhibits or the executed Closing documents and the foregoing
provisions of this Agreement, the provisions of this Agreement shall take
precedence. In the event of a conflict between the provisions of the pro forma
Closing documents attached to this Agreement as Exhibits and the Closing
documents actually executed by the parties, the provisions of the executed
Closing documents shall take precedence. The omission of certain provisions of
this Agreement from the Closing documents does not constitute a conflict between
this Agreement and the Closing documents and will not effect a merger of the
omitted provisions.
9.6 Integration and Amendment. This Agreement represents the entire
agreement between the parties, superseding all prior negotiations, and may not
be amended or modified except by written agreement between duly authorized
representatives of the parties.
9.7 Successors and Assigns. This Agreement binds and inures to the benefit
of the parties hereto their respective permitted successors and assigns, and
nothing contained in this Agreement, express or implied, is intended to confer
upon any other person or entity any benefits, rights, or remedies. Neither this
Agreement, the agreements contemplated hereby nor any of the rights, interests
and obligations hereunder or thereunder shall be
29
<PAGE>
assigned by any of the parties hereto without the prior written consent of the
other affected party.
9.8 Severability. If any provision of this Agreement is found by a court of
competent jurisdiction to be invalid or unenforceable, that provision will be
deemed modified to the extent necessary to make it valid and enforceable and if
it cannot be so modified, it shall be deemed deleted and the remainder of the
Agreement shall continue and remain in full force and effect.
9.9 Counterparts. This Agreement may be executed in counterparts, each of
which shall constitute an original and all of which shall constitute one
document.
9.10 Governing Law. This Agreement shall be governed by the laws of the
State of Texas as to the sale of the Texas Assets and by the laws of Oklahoma as
to the sale of the Oklahoma Assets, excluding any provision of Texas or Oklahoma
law that would apply the law of another jurisdiction.
9.11 Bulk Sales Waiver. All parties hereto waive any and all compliance by
any party with the requirements of any bulk sales act concerning or relating to
the transactions contemplated by this Agreement.
9.12 Trident NGL Agreement. Pursuant to Section 11.7 of the Purchase and
Sale Agreement dated January 13, 1993 (the "TRIDENT NGL AGREEMENT") by and
between Trident NGL, Inc., as seller, and Cimarron Gas Holding Company, as
buyer, the Seller hereby, to the extent permitted by the Trident NGL Agreement,
makes those Oklahoma Assets which were assets purchased by Seller pursuant to
the Trident NGL Agreement subject to the indemnity provisions set forth in
Article IV and V of the Trident NGL Agreement.
9.13 Arbitration.
(i) All disputes, differences or questions arising out of or relating
to this Agreement (including, without limitation, those as to the
validity, interpretation, breach, violation or termination hereof)
shall, at the written request of any party hereto, be finally
determined and settled pursuant to binding arbitration in Houston,
Texas, by three arbitrators, one to be appointed by Buyers, and
one by Seller, and a neutral arbitrator to be appointed by such
two appointed arbitrators. The neutral arbitrator shall be an
attorney and shall act as chairman. Should (a) either party fail
to appoint an arbitrator as hereinabove contemplated within ten
(10) days after the party not requesting arbitration has received
such written request, or (b) the two arbitrators appointed by or
on behalf of the parties as contemplated by this Section 9.13 fail
to appoint a neutral arbitrator as hereinabove contemplated within
ten (10) days after the date of the appointment of the last
arbitrator appointed, then any person sitting as a Judge of the
United States
30
<PAGE>
District Court for the Southern District of Texas, Houston
Division, upon application of Seller or of Buyer, shall appoint
an arbitrator to fill such position with the same force and
effect as though such arbitrator had been appointed as
hereinabove contemplated.
(ii) The arbitration proceeding shall be conducted in Houston, Texas,
in accordance with the Rules of the American Arbitration
Association. A determination, award or other action shall be
considered the valid action of the arbitrators if supported by
the affirmative vote of two or three of the three arbitrators.
The costs of arbitration (exclusive of attending the arbitration,
and of the fees and expenses of legal counsel to such party, all
of which shall be borne by such party) shall be shared equally by
Buyers and Seller. The arbitration award shall be final and
conclusive and shall receive recognition, and judgment upon such
award may be entered and enforced in any court of competent
jurisdiction.
ARTICLE 10. EMPLOYMENT MATTERS
10.1 Employment. The full-time and part-time employees of Seller and its
subsidiaries, whether currently employed, or employed between the date hereof
and the Closing Date, are collectively referred to as the "CIMARRON EMPLOYEES".
As soon as reasonably practicable after the date of this Agreement, each Buyer
shall furnish Seller with a list of the names of each of the Cimarron Employees
to whom Buyer reasonably expect to extend offers of employment on the Closing
Date ("CONTINUING EMPLOYEES").
10.2 Buyers' Responsibility for Cimarron Employees' Retirement and Other
Benefits.
(i) Buyers will cause to be provided pension, medical, 401(k) plan and
other benefits to all Continuing Employees from and after the
Closing Date to the same extent provided to similarly situated
employees of Buyers.
(ii) Seller will retain responsibility for and continue to pay all
medical, life insurance, disability and other welfare plan
expenses and benefits for each Cimarron Employee with respect to
claims incurred by such employees or their covered dependents
under any benefit plan and subject to the terms thereof prior to
the Closing Date. Expenses and benefits with respect to claims
incurred by Continuing Employees or their covered dependents on or
after the Closing Date shall be the responsibility of Buyers, in
accordance with the Buyers' plans. For purposes of this paragraph,
a claim is deemed incurred when, in accordance with a Buyer's
plans, the services that are the subject of the claim are
performed; provided, however, that in the case of life insurance,
a claim is deemed incurred when the death occurs and in the case
of long-term disability benefits, when the disability occurs. With
respect to each Cimarron Employee who is not a Continuing Employee
or such employee's dependent, the Seller shall be
31
<PAGE>
responsible for health care continuation rights under Section 4980B
of the federal tax code and Sections 601-609 of ERISA for those
Cimarron Employees.
10.3 No Third Party Beneficiaries. No provisions of this Article 10 shall
create any third party beneficiary or other rights in any employee or former
employee (including any beneficiary or dependent thereof) of the Seller in
respect to continued employment or resumed employment with either the Buyers or
Seller and no provision of this Article 10 shall create any such rights in any
employee or former employee (including any beneficiary or dependent thereof) of
Seller or Buyer with respect to any benefits that may be provided directly or
indirectly in any benefit plan or other employee benefit plan or program.
IN WITNESS WHEREOF, the authorized representatives of the Parties
executed this Agreement on the date indicated in the opening paragraph of this
Agreement.
CONOCO INC. ENOGEX PRODUCTS CORPORATION
By: /s/ James L. Rockwell By: /s/ Roger A. Farrell
--------------------- --------------------
James L. Rockwell Roger A. Farrell
Manager - Business & Strategic Development Attorney in Fact
Natural Gas & Gas Products
CIMARRON GAS HOLDING COMPANY
By: /s/ Joseph L. von Rosenberg III
-------------------------------
Joseph L. von Rosenberg III
Vice President
32
<PAGE>
EXHIBIT 2.2
AMENDMENT AND CLARIFICATION OF PURCHASE AND SALE AGREEMENT,
WAIVER AND CLOSING AGREEMENT
This Amendment and Clarification of Purchase and Sale Agreement, Waiver and
Closing Agreement (the "Agreement"), dated April 9, 1996, is made by and between
Cimarron Gas Holding Company ("Cimarron"), Conoco Inc. ("Conoco") and Enogex
Products Corporation ("Enogex"), collectively referred to as the "Parties."
Capitalized terms not otherwise defined herein shall have the meaning
assigned to them in that certain Purchase and Sale Agreement dated March 26,
1996.
RECITALS
--------
WHEREAS, the Parties have previously executed that certain Purchase and
Sale Agreement (the "Purchase and Sale Agreement") dated March 26, 1996;
WHEREAS, certain of Cimarron's Oklahoma Assets are subject to exercise of
rights of first refusal provisions;
WHEREAS, certain third parties have elected to exercise their respective
rights of first refusal to purchase certain of Cimarron's Oklahoma Assets;
WHEREAS, the Parties hereto desire to further clarify the Purchase and Sale
Agreement with regards to those assets conveyed from Cimarron to Enogex;
WHEREAS, the Purchase and Sale Agreement provides that Cimarron shall have
obtained all consents
required to assign the Material Contracts and Material
Rights of Way to Conoco and Enogex, respectively;
WHEREAS, Conoco and Enogex desire to waive such requirements with respect
to certain of the Material Contracts and Material Rights of Way as set forth
herein;
WHEREAS, the Parties desire to amend the Purchase and Sale Agreement with
respect to certain reciprocal representations made regarding Assets subject to
tax partnership agreements or similar provisions requiring a partnership income
tax return under Subchapter K of Chapter 1 of Subtitle A of the Internal Revenue
Code, as amended, or any similar state statute; and
WHEREAS, the Parties desire to further clarify the terms of the Purchase
and Sale Agreement and related Post-Closing obligations as provided herein.
NOW, THEREFORE, in consideration of the premises and intending to be
legally bound, for good and valuable consideration, the parties hereby agree as
follows:
33
<PAGE>
1. The Parties hereto recognize and agree that notwithstanding anything
to the contrary in the Purchase and Sale Agreement or related Exhibits thereto,
the Oklahoma Assets conveyed from Cimarron to Enogex pursuant to the terms of
the Purchase and Sale Agreement are not intended to and do not include those
Assets related to those independent gas gathering systems more commonly known as
the Kouns Farms Pipeline System and the Cottonwood Gathering System.
2. Conoco recognizes and agrees that Cimarron has used good faith efforts
to obtain, prior to Closing, all necessary third party consents and waivers
necessary to effect the proper assignment of Cimarron's interest in the Material
Contracts and the Material Rights of Way to Conoco. In this respect, Conoco
hereby waives the requirement set forth in Section 3.2.1 of the Purchase and
Sale Agreement with respect to obtaining, prior to Closing, consents or waivers
to assignment of those agreements described on the attached Schedule 2.1.
3. Enogex recognizes and agrees that Cimarron has used good faith efforts
to obtain, prior to Closing, all necessary third party consents and waivers
necessary to effect the proper assignment of Cimarron's interest in the Material
Contracts and the Material Rights of Way to Enogex; however, Cimarron has been
unable, as of the date of this Agreement, to obtain the necessary third party
consents with respect to those agreements described on the attached Schedule
2.2. Cimarron and Enogex hereby agree that Enogex shall have the right to
withhold from the Cash Consideration provided at Closing the amount of
$148,722.00; provided, however, that such amount shall be paid by Enogex to
Cimarron with 3 days of receipt of (1) the necessary third party consents with
respect to those agreements described on the attached Schedule 2.2, or (2) the
signing of any new agreement or agreements in substitution of those agreements
described on the attached Schedule 2.2.
4. The Parties hereto agree to amend the Purchase and Sale Agreement by
deleting Section 3.1.7 in its entirety and replacing such Section with the
following:
"3.1.7 Tax Partnerships. Except for assets owned by partnerships governed
by those partnership agreements described on the attached Schedule 3.1.7,
the Assets to be transferred pursuant to this Agreement are not subject to
any tax partnership agreement or provisions requiring a partnership income
tax return to be filed under Subchapter K of Chapter 1 of Subtitle A of the
Internal Revenue Code of 1986, as amended, or any similar state statute."
5. The Parties hereto agree to amend the Purchase and Sale Agreement by
adding the following Section 3.1.8:
"3.1.8 Other Tax Matters. Seller and Buyers acknowledge that this
transaction is subject to the reporting requirements of Section 1060 of the
Internal Revenue Code of 1986, as amended, and that IRS Form 8594, the
Asset Acquisition Statement, is required to be and will be filed for this
transaction. The parties
34
<PAGE>
hereby agree to cooperate and act in good faith in arriving at a mutually
agreeable allocation and will provide to the other parties any reasonably
requested partnership records, agreements or previously filed tax returns."
6. Cimarron agrees to use good faith efforts to obtain a renewal of that
certain original Surface Lease Agreement dated November 1, 1974, by and among
Claude W. Meadows, Jr., Henry E. Meadows, Sarah M. Meadows Seay and Charles E.
Seay and PGP Gas Products, Inc. (more commonly known as the Ozona Yard
Interconnect with Oasis) and to assign such Surface Lease Agreement to Conoco.
7. Cimarron agrees to use good faith efforts to obtain a renewal of that
certain Easement No. 6552 granted by the University of Texas System and to
assign such Easement to Conoco.
8. Within 10 business days of the Closing Date, Cimarron agrees to
provide to Conoco and Enogex, respectively, all necessary title transfer
documents related to those vehicles more fully described in Exhibit A-Texas,
Schedule 2 and Exhibit A-Oklahoma, Schedule 2.
9. The Parties hereby agree and recognize that Exhibit A to the Purchase
and Sale Agreement, as attached to this Agreement and provided to the Parties at
Closing, shall supercede and replace in its entirety any previous draft of such
Exhibit A provided to the Parties.
10. This document may be executed in multiple counterparts.
IN WITNESS WHEREOF, the undersigned have set their hands on the date first
written above.
CONOCO INC. ENOGEX PRODUCTS CORPORATION
By: /s/ James L. Rockwell By: /s/ Roger A. Farrell
--------------------- --------------------
James L. Rockwell Roger A. Farrell
Manager - Business & Strategic Development Attorney in Fact
Natural Gas & Gas Products
CIMARRON GAS HOLDING COMPANY
By: /s/ Joseph L. von Rosenberg III
-------------------------------
Joseph L. von Rosenberg III
Vice President
35
