EXHIBIT 99.2
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PRODUCTION PAYMENT
PURCHASE AND SALE AGREEMENT
between
PIONEER NATURAL RESOURCES USA, INC.
AND
PIONEER NATURAL RESOURCES PROPERTIES LP
as Seller,
and
WOLFCAMP OIL AND GAS TRUST
a Delaware Statutory Trust
as Buyer
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Dated as of April 18, 2005
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND REFERENCES......................................1
SECTION 1.01. Definitions....................................1
SECTION 1.02. References, Gender, Number.....................6
ARTICLE II SALE AND PURCHASE..............................................7
ARTICLE III CONSIDERATION AND PAYMENT.....................................7
SECTION 3.01. Consideration and Purchase Price...............7
SECTION 3.02. Payment Instructions...........................7
ARTICLE IV REPRESENTATIONS AND WARRANTIES.................................7
SECTION 4.01. Representations and Warranties of Seller.......7
SECTION 4.02. Representations and Warranties of Buyer.......13
ARTICLE V COVENANTS OF SELLER AND BUYER..................................14
SECTION 5.01. Confidentiality and Public Announcements......14
SECTION 5.02. Survival Past Closing.........................14
SECTION 5.03. Reasonable Cooperation........................14
SECTION 5.04. Preference Rights.............................15
ARTICLE VI CLOSING CONDITIONS............................................15
SECTION 6.01. Seller's Closing Conditions...................15
SECTION 6.02. Buyer's Closing Conditions....................15
ARTICLE VII CLOSING......................................................17
SECTION 7.01. Closing.......................................17
SECTION 7.02. Seller's Closing Obligations..................17
SECTION 7.03. Buyer's Closing Obligations...................17
ARTICLE VIII ASSUMPTION AND INDEMNIFICATION..............................17
SECTION 8.01. Covered Liabilities...........................17
SECTION 8.02. Indemnification by Seller.....................18
SECTION 8.03. Third Party Claims............................19
ARTICLE IX MISCELLANEOUS.................................................19
SECTION 9.01. Counterparts..................................19
SECTION 9.02. Governing Law; Consent to Jurisdiction........20
SECTION 9.03. WAIVER OF JURY TRIAL..........................20
SECTION 9.04. Entire Agreement..............................21
SECTION 9.05. Each Party Pays Own Expenses..................21
SECTION 9.06. Notices.......................................21
SECTION 9.07. Successors and Assigns........................21
SECTION 9.08. Headings......................................23
SECTION 9.09. Amendments and Waivers........................23
SECTION 9.10. Schedules and Exhibits........................23
SECTION 9.11. Interpretation................................23
SECTION 9.12. Agreement for the Parties' Benefit Only.......24
TABLE OF CONTENTS
(continued)
Page
SECTION 9.13. Severability..................................24
SECTION 9.14. No Retained Liens.............................24
SECTION 9.15. Limitations on Damages........................24
SECTION 9.16. Tax Treatment.................................25
SECTION 9.17. LIMITATION OF OWNER TRUSTEE LIABILITY.........25
SCHEDULES
Schedule 1 - Wiring Instructions
Schedule 2 - Insurance
Schedule 3 - Disclosures
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PRODUCTION PAYMENT PURCHASE AND SALE AGREEMENT
THIS PRODUCTION PAYMENT PURCHASE AND SALE AGREEMENT (herein referred to as
this "Agreement"), dated as of April 18, 2005, by and between Pioneer Natural
Resources USA, Inc., a Delaware corporation and Pioneer Natural Resources
Properties LP, a Delaware limited partnership (herein, together with their
successors and permitted assigns, each individually and collectively referred to
as "Seller"), and Wolfcamp Oil and Gas Trust, a Delaware statutory trust
(herein, together with its successors and permitted assigns, referred to as
"Buyer"),
WITNESSETH:
WHEREAS, Seller intends to sell to Buyer, and Buyer intends to purchase
from Seller, in a single transaction, two Production Payments consisting of term
overriding royalty interests carved out of the same mineral properties, upon the
terms and subject to the conditions described herein; and
WHEREAS, the purchase price payable hereunder for the Production Payments
takes into account the estimated present value of Buyer's future severance and
ad valorem tax obligations in respect of the Production Payments, in
consideration of Seller's promise to pay such taxes as they become due in the
future; and
WHEREAS, the performance of each obligation of each Seller hereunder and
under the Related Agreements shall be guaranteed by Pioneer Natural Resources
Company;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND REFERENCES
SECTION 1.01. Definitions.
Unless the context otherwise requires, each defined term shall be equally
applicable both to the singular and the plural forms of the term so defined.
When used in this Agreement, the following terms have the following meanings:
"Action" means any action, claim, suit, arbitration, inquiry, proceeding,
investigation, condemnation or audit by or before any court or other
Governmental Authority or any arbitrator or panel of arbitrators.
"Affiliate" has the meaning given to such term in the Conveyances.
"Approved Investment Grade" has the meaning given to such term in Section
9.07.
"Business" means the ownership, maintenance, development and operation of
the Subject Interests and the gathering, delivery, and sale of Hydrocarbons
produced therefrom.
"Buyer" means Wolfcamp Oil and Gas Trust, a Delaware statutory trust,
together with its successors and permitted assigns.
"Buyer Party" means Buyer, its trustee and trust beneficiaries, its
lenders, the Swap Counterparty, and their respective successors and permitted
assigns.
"Cash Purchase Price" has the meaning given to such term in Section 3.01.
"Closing" means the consummation of the transaction contemplated by Article
VII.
"Closing Date" means (a) April 18, 2005, or (b) such other date as may be
mutually agreed to by Seller and Buyer in writing.
"Conveyance" means either the Oil Conveyance or the Methane Conveyance and
"Conveyances" means both.
"Covered Liabilities" has the meaning given to such term in Section 8.01.
"Defensible Title" means such title as enables Seller to correctly,
accurately and truthfully make the representations in Section 6.3 of each
Conveyance.
"Delivery Points" has the meaning given to such term in the applicable
Conveyance.
"Environmental Laws" means all Laws that relate to (a) the prevention,
abatement or elimination of pollution, or the protection of the environment or
natural resources, (b) the generation, handling, treatment, storage, disposal,
release or transportation of waste materials or hazardous or toxic substances,
or (c) the regulation of or exposure to hazardous, toxic or other substances
alleged to be harmful, including the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. ss. 9601, et seq.; the Resource
Conservation and Recovery Act, 42 U.S.C. ss. 6901 et seq.; the Federal Water
Pollution Control Act (Clean Water Act), 33 U.S.C. ss. 1251, et seq.; the Clean
Air Act, 42 U.S.C. ss. 7401, et seq.; the Hazardous Materials Transportation
Act, 49 U.S.C. ss. 1471, et seq.; the Toxic Substances Control Act, 15 U.S.C.
ss. 2601, et seq.; the Oil Pollution Act, 33 U.S.C. ss. 2701 et seq.; the
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. ss. 11001, et
seq.; the Safe Drinking Water Act, 42 U.S.C. ▇▇.▇▇. 300f through 300j; and the
Endangered Species Act, 16 U.S.C. ss. 1531, et seq.; and all similar Laws of any
Governmental Authority having jurisdiction over the property in question.
"Gas" has the meaning given to such term in the Methane Conveyance.
"Governmental Authority" has the meaning given to such term in the
Conveyances.
"Guarantor" means Pioneer, its permitted successors and assigns under the
Pioneer Guaranty.
"Hazardous Materials" means (a) any substance or material that is listed,
defined or otherwise designated as a "toxic substance," "hazardous substance" or
"hazardous waste" under any Environmental Law, including Section 101(14) of the
Comprehensive Environmental Response, Compensation and Liability Act, (b) any
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radioactive material, asbestos or polychlorinated biphenyls and (c) any other
chemical, substance or waste that is regulated under any Environmental Law.
"Hydrocarbons" means, collectively, Oil and Gas.
"Imbalance" means, without duplication but excluding each Production
Payment, the sum (expressed in barrels of Oil or Mcfs of Gas) of (a) the
aggregate make-up, prepaid, or other volumes of Oil or Gas that are attributable
to or could burden either Production Payment and that Sellers are obligated as
of the Closing Date, on account of prepayment, advance payment, take-or-pay, gas
balancing or similar obligations, to deliver from the Subject Interests after
the Closing Date and (b), to the extent such obligations burden either
Production Payment or Buyer could incur any liability therefor as a result of
the transaction contemplated hereby and the same are not covered by clause (a)
above, the aggregate pipeline or processing plant imbalances or over deliveries
for which Seller is obligated to pay or deliver Hydrocarbons or cash to any
pipeline, gatherer, transporter, processor, co-owner, or purchaser in connection
with any Hydrocarbons attributable to either Production Payment.
"Indemnified Parties" has the meaning given to such term in Section 8.02.
"Initial Reserve Report" means the reserve engineering report prepared by
Seller's in-house engineering staff as of December 31, 2004, and delivered by
Seller to Buyer prior to and in anticipation of the Closing under a cover letter
dated April 15, 2005.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, and any successor thereto, together with all regulations promulgated
thereunder.
The term "knowledge" when used with reference to a particular fact,
circumstance or condition: (a) in the case of either Seller, means (i) the
actual knowledge of any director or officer of such Seller or any Affiliate of
such Seller or (ii) the actual knowledge of any director, officer or employee of
either Seller or any Affiliate of such Seller involved in the negotiation of,
any analysis or due diligence in connection with this Agreement; and (b) in the
case of Buyer, means the actual knowledge of any director, officer or employee
of Buyer or any Affiliate of Buyer involved in the negotiation of this
Agreement.
"Law" means any applicable statute, law (including case law), ordinance,
regulation, rule, ruling, order, restriction, requirement, writ, injunction,
decree, or other official act of or by any Governmental Authority.
"Marketing Agreement" means either the Oil Marketing Agreement or the
Methane Marketing Agreement, and "Marketing Agreements" means both.
"Methane" has the meaning given to such term in the Methane Conveyance.
"Methane Conveyance" means the Conveyance of Term Overriding Royalty
Interest of even date herewith from Seller to Buyer that is executed and
delivered at the Closing, under which the Subject Hydrocarbons are limited to
Methane.
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"Methane Marketing Agreement" means the Marketing Agreement of even date
herewith between Pioneer USA and Buyer that is executed and delivered at the
Closing with respect to Methane accruing to the Methane Production Payment.
"Methane Production Payment" means the "Production Payment" as defined in
the Methane Conveyance.
"Month" means the one-month period beginning at 9:00 a.m., Central Time, on
the first day of a calendar month and ending at 9:00 a.m., Central Time, on the
first day of the following calendar month.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc. or any successor to its
credit rating business.
"Net Revenue Interest" has the meaning given to such term in each
Conveyance, as applicable.
"Novation Agreement" means the Novation Confirmation of even date herewith
among Buyer, Pioneer USA and the Swap Counterparty that is executed and
delivered at the Closing.
"Oil" has the meaning given to such term in the Oil Conveyance.
"Oil Conveyance" means the Conveyance of Term Overriding Royalty Interest
of even date herewith from Seller to Buyer that is executed and delivered at the
Closing, under which the Subject Hydrocarbons are limited to Oil.
"Oil Marketing Agreement" means the Marketing Agreement of even date
herewith between Pioneer USA and Buyer that is executed and delivered at the
Closing with respect to Oil accruing to the Oil Production Payment.
"Oil Production Payment" means the "Production Payment" as defined in the
Oil Conveyance.
"PDNP Reserves" means proved, developed, non-producing reserves of Gas or
Oil.
"PDP Reserves" means proved, developed, producing reserves of Gas or Oil.
"Permits" means all licenses, permits, certificates, orders, approvals,
franchises, exemptions, variances, waivers and authorizations of any
Governmental Authority, including applications therefor, necessary or required
to own and operate (to the extent operated by either Seller) the Subject
Interests and conduct the Business (including those required by Environmental
Laws).
"Permitted Encumbrances" has the meaning given to such term in each
Conveyance, as applicable.
"Person" means any Governmental Authority or any individual, firm,
partnership, corporation, joint venture, trust, unincorporated organization, or
other entity or organization.
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"Petroleum Engineer" means Netherland, ▇▇▇▇▇▇ & Associates, Inc. and any
other nationally recognized reserve engineering firm that audits Sellers' oil
and gas reserves for Securities and Exchange Commission reporting purposes.
"Pioneer" means Pioneer Natural Resources Company.
"Pioneer Guaranty" means the Guaranty of even date herewith from Pioneer to
Buyer that is executed and delivered at the Closing.
"Pioneer LP" means Pioneer Natural Resources Properties LP, a Delaware
limited partnership.
"Pioneer USA" means Pioneer Natural Resources USA, Inc., a Delaware
corporation.
"Preference Right" means any right or agreement that enables or may enable
any Person to purchase or acquire any Subject Interest or any interest therein
or portion thereof as a result of the conveyance, sale, assignment, mortgage or
other transfer of either Production Payment or any interest therein or portion
thereof.
"Production Payment" means either the Oil Production Payment or the Methane
Production Payment, and "Production Payments" means both.
"Production Payment Documents" means this Agreement and the Related
Agreements.
"Production Payment Hydrocarbons" has the meaning given to such term in the
applicable Conveyance.
"Production Purchaser" and "Production Sales Contract" have the meanings
given to such terms in the applicable Marketing Agreement.
"PUD Reserves" means proved, undeveloped reserves of Gas or Oil.
"Related Agreements" means the Conveyances, the Marketing Agreements, the
Pioneer Guaranty and the Novation Agreement.
"S&P" means Standard and Poor's, a division of the ▇▇▇▇▇▇-▇▇▇▇ Companies,
or any successor to its credit rating business.
"Scheduled Quantity" has the meaning given to such term in the applicable
Conveyance.
"Seller" refers collectively to Pioneer Natural Resources USA, Inc.,
Pioneer Natural Resources Properties LP, and their respective successors and
permitted assigns. As used herein, terms such as "each Seller", "any Seller",
"either Seller", "neither Seller", and "such Seller" refer to the various
individual Persons that collectively make up "Seller".
"Subject Hydrocarbons" has the meaning given to such term in the applicable
Conveyance.
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"Subject Interests" has the meaning given to such term in the applicable
Conveyance.
"Subject ▇▇▇▇▇" has the meaning given to such term in the applicable
Conveyance.
"Swap Counterparty" means Barclays Bank PLC.
"Taxes" has the meaning given to such term in the applicable Conveyance.
"Title Failure" means a breach of any of Seller's representations and
warranties in Section 6.3 of the applicable Conveyance shall have occurred.
"Transfer Requirement" means any consent, approval, authorization or permit
of, or filing with or notification to, any Person which must be obtained, made
or complied with for or in connection with the conveyance of either Production
Payment or any portion thereof in order (a) for such conveyance to be effective,
(b) to prevent any termination, cancellation, default, acceleration, or change
in terms (or any right thereof from arising) under any terms, conditions, or
provisions of any Subject Interest (or of any agreement, instrument, or
obligation relating to or burdening any Subject Interest) as a result of such
conveyance, or (c) to prevent the creation or imposition of any lien, charge,
penalty, restriction, security interest or encumbrance on or with respect to
either Production Payment or the Subject Interests as a result of such
conveyance; provided, however, that a Preference Right shall not be a Transfer
Requirement.
"Unqualified Foreign Assignee" means any Person that is organized under the
Laws of a jurisdiction other than the United States, any State thereof, or the
District of Columbia, unless such Person (a) is exempt from withholding tax
under applicable federal and state Laws of the United States (including any
treaty entered into by the United States) with respect to the interest component
of the Production Payments for United States federal and state income tax
purposes, and (b) has, at the time or times prescribed by applicable law or
reasonably requested by Seller, delivered to Seller such properly completed and
executed documentation prescribed by applicable Law as will relieve Seller from
any obligation to withhold and pay taxes to the United States or any state
thereof.
SECTION 1.02. References, Gender, Number.
All references in this Agreement to an "Article," "Section," "Subsection,"
"Exhibit," or "Schedule" shall be to the specified Article, Section, or
Subsection of, or the specified Exhibit or Schedule to, this Agreement, unless
the context requires otherwise. Unless the context otherwise requires, the words
"this Agreement," "hereof," "hereunder," "herein," and "hereby" and words of
similar import shall refer to this Agreement as a whole and not to a particular
Article, Section, Subsection, clause, or other subdivision hereof. Whenever the
context requires, the words used herein shall include the masculine, feminine,
and neuter gender, and the singular and the plural. Defined terms used herein
not defined herein shall have the meaning provided in the Conveyances.
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ARTICLE II
SALE AND PURCHASE
On the terms and conditions of this Agreement, Seller agrees to sell and
convey to Buyer, and Buyer agrees to purchase from Seller, both of the
Production Payments.
ARTICLE III
CONSIDERATION AND PAYMENT
SECTION 3.01. Consideration and Purchase Price.
In consideration for and concurrently with the sale and conveyance of both
of the Production Payments to Buyer, Buyer shall (a) enter into the Novation
Agreement in order to assume the liabilities and duties (and acquire the rights)
of Pioneer USA under the hedging transactions described therein, and (b) pay to
Seller in accordance with the terms hereof the aggregate sum of $300,402,967.44
(herein referred to as the "Cash Purchase Price"). Each Seller acknowledges and
agrees that the foregoing consideration constitutes full payment to such Seller
of reasonably equivalent value for the portions of the Production Payments sold
by such Seller to Buyer pursuant to this Agreement.
SECTION 3.02. Payment Instructions.
At the Closing, Buyer shall wire transfer the Purchase Price in immediately
available funds to Seller, as directed in Schedule 1.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of Seller.
Pioneer USA and Pioneer LP jointly and severally represent and warrant to
Buyer as of the date hereof and as of the Closing Date as follows:
A. Organization and Qualification. Pioneer USA is a corporation duly
formed, validly existing, and in good standing under the Laws of the State of
Delaware. Pioneer LP is a limited partnership duly formed, validly existing, and
in good standing under the Laws of the State of Delaware. Each Seller has the
requisite legal power to carry on its business as it is now being conducted.
Each Seller is duly qualified to do business, and is in good standing, as
applicable, in each jurisdiction in which it owns any Subject Interests.
B. Authority. Each Seller has all requisite legal power and authority to
execute, deliver and perform its obligations under this Agreement and each of
the Related Agreements to which it is a party. The execution, delivery and
performance of this Agreement and each of the Related Agreements to which such
Seller is a party and the transactions contemplated hereby or thereby have been
duly and validly authorized by all requisite action on the part of each Seller.
C. Enforceability. This Agreement constitutes, and upon execution and
delivery by each Seller of each of the Related Agreements to which it is a
party, each of such Related Agreements will constitute, a valid and binding
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agreement of such Seller, enforceable in accordance with its terms, subject to
(i) applicable bankruptcy, insolvency, reorganization, moratorium, and other
similar Laws of general application with respect to creditors and (ii) general
principles of equity. Upon execution and delivery by each Seller of each
Conveyance and Buyer's payment of the Purchase Price, each Conveyance will
constitute the legal, valid and binding conveyance of the applicable Production
Payment out of the Subject Interests and each Production Payment will constitute
an interest in real property under applicable state laws owned by Buyer (and not
by either Seller) and a "production payment" as defined in Section 101(42A) of
the Bankruptcy Code and referred to in Section 541(b)(4)(B) of the Bankruptcy
Code.
D. No Conflict or Violation. Neither the execution and delivery of this
Agreement or the Related Agreements nor the consummation of the transactions and
performance of the terms and conditions contemplated hereby or thereby by either
Seller or Guarantor will (i) conflict with or result in any breach of any
provision of the articles of incorporation or bylaws, limited partnership
agreement (or other similar governing documents) of either Seller or Guarantor,
as applicable; (ii) conflict in any material respect with, or be rendered void
or ineffective in any way that adversely affects the value of either Production
Payment by, any agreement, instrument, or obligation to which either Seller or
Guarantor is a party or to which either Seller, Guarantor or the Subject
Interests are subject; (iii) subject to the limitations contained in Section
4.01C, violate or be rendered void or ineffective under any Law; or (iv) violate
any provision of the Public Utility Holding Company Act of 1935 ("PUHCA"), the
Natural Gas Act of 1935 ("NGA"), the Natural Gas Policy Act of 1978 ("NGPA") or
any of the regulations promulgated under PUHCA, NGA or NGPA.
E. Consents. Except as disclosed in Schedule 3, no consent, approval,
authorization, or permit of, or filing with or notification to, any Person
which, if not obtained or made, would be likely to adversely affect the value of
either Production Payment or would be likely to adversely affect in any material
respect the use or operation of the Subject Interests or would be likely to
interfere in any material respect with the transactions contemplated by this
Agreement or the Related Agreements, is required (i) for or in connection with
the execution and delivery of this Agreement or any Related Agreement by either
Seller or by Guarantor or for or in connection with the consummation of the
transactions and performance of the terms and conditions contemplated hereby or
thereby by either Seller or Guarantor, (ii) in order to prevent any change in
terms, termination, cancellation, default, or acceleration (or any right thereof
from arising) under the terms, conditions, or provisions of any Subject Interest
(or of any agreement, instrument, or obligation relating to or burdening any
Subject Interest) as a result of such execution, delivery, consummation, or
performance, or (iii) in order to prevent the creation or imposition of any
lien, charge, penalty, restriction, security interest, or encumbrance on or with
respect to any Subject Interest or either Production Payment as a result of such
execution, delivery, consummation, or performance.
F. Preference Rights and Transfer Requirements. Except as disclosed in
Schedule 3, the Subject Interests and the Production Payments are not and will
not be subject to, and neither Seller nor any Affiliate of either Seller is
bound by, any Preference Rights or Transfer Requirements which relate to the
conveyance of either Production Payment to Buyer and which, if not waived or
satisfied, would be likely to adversely affect the value of either Production
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Payment (after taking into account Buyer's rights and remedies under Section
5.04) or would be likely to adversely affect in any material respect the use or
operation of the Subject Interests or would be likely to interfere in any
material respect with the transactions contemplated by this Agreement or the
Related Agreements.
G. Actions; Orders. Except as disclosed in Schedule 3: (i) there are no
Actions pending or, to the knowledge of either Seller, threatened which would be
likely to adversely affect the value of either Production Payment or would be
likely to adversely affect in any material respect the use or operation of the
Subject Interests or would be likely to interfere in any material respect with
the transactions contemplated by this Agreement or the Related Agreements, and
(ii) there is no judgment or outstanding order, injunction, decree, or award
rendered by any Governmental Authority, arbitrator or panel of arbitrators
against either Seller or the Subject Interests which would be likely to
adversely affect the value of either Production Payment or would be likely to
adversely affect in any material respect the use or operation of the Subject
Interests or would be likely to interfere in any material respect with the
transactions contemplated by this Agreement or the Related Agreements.
H. Compliance With Laws. Except as disclosed in Schedule 3: (i) the Subject
Interests and the Business are in compliance in all material respects with all
Laws, (ii) neither Seller has received any notice of any violation or alleged
violation (or of any fact or circumstance which with notice or the passage of
time or both would constitute a violation) of any Law applicable to the Business
or the Subject Interests that would be likely to adversely affect the value of
either Production Payment or would be likely to adversely affect in any material
respect the use or operation of the Subject Interests or would be likely to
interfere in any material respect with the transactions contemplated by this
Agreement or the Related Agreements, and (iii) neither Seller nor, to the
knowledge of either Seller, any prior operator of the Subject Interests has
entered into any currently existing compliance or remediation agreements with
any Governmental Authority or filed any currently effective compliance or
remediation plans with any Governmental Authority which would be likely to
adversely affect the value of either Production Payment or would be likely to
adversely affect in any material respect the use or operation of the Subject
Interests or would be likely to interfere in any material respect with the
transactions contemplated by this Agreement or the Related Agreements.
I. Permits; Filings. Each Seller holds all material Permits. Except as
disclosed in Schedule 3, to either Seller's knowledge: (i) such Permits are in
full force and effect and all fees and charges relating thereto have been paid,
(ii) each Seller has in all material respects and in a timely manner complied
with, and operated the Subject Interests and the Business (to the extent either
Seller is the operator thereof) in accordance with, the conditions and
provisions of all such Permits, and (iii) no notices of violation have been
received by either Seller or any Affiliate of Sellers and no proceedings are
pending or threatened that present a material probability of resulting in any
modification, revocation, termination, or suspension of any such Permit or of
requiring any material corrective or remediation action with respect thereto. To
the extent required and to the knowledge of each such Seller, all applications
for renewal of such Permits have been timely filed.
J. Compliance With Contracts and Leases. Except as disclosed in Schedule 3,
with respect to all material contracts, agreements, leases, and arrangements
which are included in the Subject Interests or by which any of the Subject
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Interests is bound: (i) to each Seller's knowledge, such material contracts,
agreements, leases, and arrangements are in full force and effect; (ii) to each
Seller's knowledge there are no material violations or breaches thereof and no
existing facts or circumstances which upon notice or the passage of time or both
will constitute a material violation or breach thereof; (iii) no notice of the
exercise or attempted exercise of premature termination, price reduction,
market-out, or material curtailment has been received by either Seller or any
Affiliate of either Seller with respect thereto; (iv) no notice has been
received by either Seller or any Affiliate of either Seller that any party
thereto intends not to honor its obligations thereunder; and (v) neither Seller
is participating in any discussions or negotiations regarding modification
thereof that would be likely to adversely affect the value of either Production
Payment or would be likely to adversely affect in any material respect the use
or operation of the Subject Interests or would be likely to interfere in any
material respect with the transactions contemplated by this Agreement or the
Related Agreements.
K. Brokerage Fees and Commissions. Neither Seller nor any Affiliate of
either Seller has incurred any obligation or entered into any agreement for any
investment banking, brokerage, or finder's fee or commission in respect of the
transactions contemplated by this Agreement or the Related Agreements for which
Buyer shall incur any liability.
L. Imbalances. Schedule 3 lists all material Imbalances existing as of the
dates shown on such Schedule, and such Imbalances have not increased materially
since such dates.
M. Taxes. Each Seller has, to its knowledge, timely paid all Taxes levied
against the Subject Interests, or the production attributable thereto, which are
currently due and payable as required by Law, except for any such Taxes that are
being contested in good faith by appropriate proceedings.
N. Initial Reserve Report. Without limiting any of either Seller's
obligations under the Related Agreements, neither Seller makes any warranty or
representation as to quantity, quality, or recoverability of the Hydrocarbon
reserves attributable to the Subject Interests, except that each Seller warrants
and represents that (i) Pioneer and its subsidiaries maintain a database for use
in valuing their PDP Reserves, PDNP Reserves and PUD Reserves, which database is
audited by the Petroleum Engineer in connection with Pioneer's annual financial
statements, (ii) the production history data and data on operating history that
Pioneer and its subsidiaries include in such database with respect to the
Subject Interests and provide to the Petroleum Engineer as part of such audit
are true and correct in all material respects, and in providing the same Pioneer
and its subsidiaries did not omit any material information known to them that is
necessary to make such data not misleading in the context in which so provided,
(iii) the Initial Reserve Report is derived from such database and is consistent
with the conclusions of the Petroleum Engineer in its audit, (iv) the aggregated
net revenue interests included in the Initial Reserve Report with respect to the
Subject Interests as a whole correctly represent in all material respects
Sellers' Net Revenue Interests in the various Subject Interests, taking into
account on an aggregate basis any reductions in Sellers' interests due to either
Seller's failure to consent to proposed operations and any anticipated future
reductions in either Seller's interests due to the achievement of payouts and
similar events, (v) to each Seller's knowledge, substantially all Subject ▇▇▇▇▇
which were taken into account in the Initial Reserve Report were, and continue
to be, producing, (vi) all such Subject ▇▇▇▇▇ are included in or covered by the
Property Exhibit attached to the Conveyance, and (vii) the Initial Reserve
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Report does not cover any PDP Reserves, PDNP Reserves or PUD Reserves other than
the PDP Reserves, PDNP Reserves and PUD Reserves attributable to the Subject
Interests.
O. Environmental Matters.
(1) The Subject Interests, and the operation of the Business are, and,
to the knowledge of each Seller, at all times have been, in material compliance
with all applicable Environmental Laws, other than past violations that have
been settled or corrected and remediated in all material respects and for which
no material obligations remain outstanding except those being performed in the
ordinary course of business.
(2) To the knowledge of Seller, (i) neither Seller nor the Subject
Interests are subject to any consent decree, compliance order, or administrative
order issued pursuant to applicable Environmental Laws, and (ii) except for
routine matters, Seller has not received any currently pending written request
for information, notice of violation, demand letter, administrative inquiry,
complaint or claim from any Governmental Authority pursuant to any Environmental
Law with respect to the Subject Interests.
(3) To the knowledge of each Seller, the Subject Interests are not
subject to any liens recorded by any Governmental Authority under applicable
Environmental Laws.
P. Title. Each Seller's representations and warranties in Section 6.3 of
each Conveyance are true and correct. Upon production thereof, and also upon
delivery thereof at the Delivery Points, Buyer will have good title to the
Production Payment Hydrocarbons, free from any rights of third parties to take
title thereto, subject only to any applicable Permitted Encumbrances. In the
event Working Interest Owner delivers any Gas to Royalty Owner at the Delivery
Points other than Production Payment Hydrocarbons (such as deliveries
contemplated under Section 2.1(b) of the Methane Conveyance in connection with
bypassing a Processing Plant), Buyer will have good title to all such Gas so
delivered to Buyer.
Q. Subject ▇▇▇▇▇. All currently existing producing ▇▇▇▇▇ attributable to
the Subject Interests have been drilled and completed within the limits
permitted by lease, contract, pooling, or unit agreement and by Law. To the
knowledge of each Seller, all drilling and completion of such ▇▇▇▇▇ and all
related development and operations have been conducted in material compliance
with all Laws and in accordance with industry standards. Except as disclosed in
Schedule 3, to the knowledge of each Seller, no such well is subject to
penalties on allowables after the Closing Date because of any overproduction or
any other violation of Law.
R. Status of Seller. Neither Seller is a non-resident alien, foreign
corporation, foreign partnership, foreign trust or foreign estate (as those
terms are defined in the Internal Revenue Code). Neither Seller is an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, nor is either
Seller otherwise subject to regulation under or the restrictions of such act.
Neither Seller nor the Guarantor is a "public utility company" or a "public
utility holding company" or a subsidiary of a "public utility holding company"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
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S. Condition of Subject Interests. The machinery, equipment, tangible
personal property, fixtures and improvements used in connection with the Subject
Interests or used to process the Subject Hydrocarbons or transport them to the
Delivery Points (whether owned by either Seller or by a third party operator)
are adequate (except for ordinary repairs, replacement and maintenance) to
produce the net projected production of PDP Reserves as estimated in the Initial
Reserve Report.
T. Information True. No information, statement, or certificate with respect
to the Subject Interests furnished by either Seller or Guarantor or any
representative, employee, or consultant of either Seller or Guarantor pursuant
hereto or in connection with the transactions contemplated hereby and by the
Related Agreements, when taken as a whole with all other information provided to
Buyer, contains any untrue statement of a material fact or omits a material fact
necessary to make the statements contained therein under the circumstances in
which they are made not misleading. Neither Seller has knowledge of any fact
that has not been disclosed to Buyer which would be likely to adversely affect
the value of either Production Payment or would be likely to adversely affect in
any material respect the use or operation of the Subject Interests or would be
likely to interfere in any material respect with the transactions contemplated
by this Agreement or the Related Agreements. The engineering information with
respect to the Subject Interests supplied to Buyer by or on behalf of Sellers is
consistent with the Initial Reserve Report.
U. Bankruptcy. There are no bankruptcy, reorganization, assignment for the
benefit of creditors or arrangement proceedings pending against, being
contemplated by, or, to the knowledge of either Seller, threatened against
either Seller or Guarantor or any of their respective subsidiaries.
V. Dedicated Contracts and Refund Obligations. Other than contracts on
Schedule 3 of this Agreement and other Permitted Encumbrances, no Subject
Interest is dedicated or otherwise subject to any contract (other than a
contract to which Buyer is a party or a Production Sale Contract approved by
Buyer under a Marketing Agreement) for the sale or transportation of Subject
Hydrocarbons that would bind Buyer as the owner of such Subject Hydrocarbons.
Neither Seller nor, to the knowledge of either Seller, any of their predecessors
in title, has received prepayments (including payments for Oil or Gas not taken
pursuant to "take or pay" or similar contracts) for any Oil or Gas to be
produced from the Subject Interests after the Closing Date. Neither Seller is,
and Buyer as its successor will not be, subject to any kind of refund obligation
(other than Imbalances as addressed above) with respect to Oil or Gas produced
from the Subject Interests prior to the Closing Date.
W. No Material Adverse Change. From December 31, 2004, to the Closing Date,
there has not been any material adverse change (other than normal production,
fluctuations in the market prices for Gas and Oil generally, or changes that
have otherwise been disclosed to Buyer in Schedule 3 hereto) in the Subject
Interests taken as a whole, or to the ability of either Seller or Guarantor to
perform their respective obligations under the Related Agreements taken as a
whole.
X. Guarantor. Guarantor is rated BBB- by S&P and Baa3 by ▇▇▇▇▇'▇.
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Y. Insurance. Seller has in full force and effect insurance of the type and
in the amounts set forth in Schedule 2.
SECTION 4.02. Representations and Warranties of Buyer.
Buyer represents and warrants to Seller as follows as of the date hereof
and as of the Closing Date:
A. Organization, Power and Authorization. Buyer is a statutory trust duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Buyer has all requisite power and authority to execute and deliver
this Agreement and each of the Related Agreements to which it is a party and to
perform its obligations under this Agreement and each of the Related Agreements
to which it is a party. The execution, delivery and performance by Buyer of this
Agreement and the Related Agreements to which it is a party, and of the
transactions described herein and therein, have been duly and validly authorized
by all necessary action on the part of Buyer. Buyer is a "United States person"
within the meaning of Section 7701 of the Internal Revenue Code.
B. Purchase for Own Account. Buyer is acquiring the Production Payments for
its own account and not with any intention to transfer all or any part of either
Production Payment to others in violation of the Securities Act of 1933, as
amended, or any other applicable securities laws.
C. No Conflicts or Unobtained Consents. Neither the execution and delivery
of this Agreement or the Related Agreements to which Buyer is a party nor the
consummation of the transactions and performance of the terms and conditions
contemplated hereby or thereby by Buyer will (i) conflict with or result in any
breach of any provision of the certificate of incorporation or by-laws (or other
similar governing documents) of Buyer, or (ii) conflict with or be rendered void
or ineffective by or under the terms, conditions, or provisions of any mortgage,
agreement, instrument, or obligation to which Buyer is a party or is subject. No
consent, approval, authorization or permit of, or filing with or notification
to, any Person, that has not heretofore been obtained, made, or given is
required for or in connection with the execution and delivery of this Agreement
or any Related Agreement by Buyer or for or in connection with the consummation
of the transactions and performance of the terms and conditions contemplated
hereby or thereby by Buyer
D. Enforceability. This Agreement constitutes, and upon execution and
delivery thereof by Buyer each of the Related Agreements to which Buyer is a
party will constitute, the legal, valid and binding agreement of Buyer
enforceable against Buyer in accordance with its terms, subject, however, to
bankruptcy, insolvency, reorganization, moratorium and other laws affecting
creditors' rights generally and to general principles of equity.
E. Actions; Orders. (i) There are no Actions pending or, to the knowledge
of Buyer, threatened which relate to the transactions contemplated by this
Agreement or the Related Agreements and (ii) there is no judgment or outstanding
order, injunction, decree, or award rendered by any Governmental Authority by
which Buyer or any Affiliate of Buyer is bound that would be likely to adversely
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affect the transactions contemplated by this Agreement or the Related
Agreements.
F. Brokerage Fees and Commissions. Neither Buyer nor any Affiliate of Buyer
has incurred any obligation or entered into any agreement for any investment
banking, brokerage, or finder's fee or commission in respect of the transactions
contemplated by this Agreement or the Related Agreements for which either Seller
shall incur any liability.
ARTICLE V
COVENANTS OF SELLER AND BUYER
SECTION 5.01. Confidentiality and Public Announcements.
Section 8.10 of each Conveyance sets out the obligations of the parties
hereto with respect to certain confidential information, and each party hereto
shall, as provided in Section 8.10 of each Conveyance, hold in confidence any
confidential information it has obtained from another party hereto. The parties
acknowledge and agree, however, that such obligations shall not restrict Buyer,
Seller or Guarantor from filing this Agreement or the Related Agreements with
the Securities Exchange Commission or any other Governmental Authority or any
governmental department or agency in the United Kingdom or from describing this
Agreement, the Related Agreements, or the transactions contemplated herein or
therein in any press release or other public statement or any earnings or
analyst conference calls. Section 8.10 of each Conveyance and Section 9.15
hereof shall not be deemed to prevent the filing and recording of the
Conveyances or any mortgage, financing statement or similar agreement by any
lender (or trustee or agent on any lender's behalf) to Buyer in the public deed
records. Buyer's lenders and their Affiliates may also, at their own expense,
publish customary "tombstone" announcements in such publications as they deem
appropriate following the Closing Date, and the parties hereto and their
respective counsel may from time to time refer to such "tombstones" and repeat
the content thereof to third parties.
SECTION 5.02. Survival Past Closing.
All of the representations, warranties, covenants and agreements contained
in this Agreement shall survive the Closing and the delivery of the Conveyances
and continue until the termination of each Production Payment as provided in the
applicable Conveyance.
SECTION 5.03. Reasonable Cooperation.
From and after the date hereof, Seller and its Affiliates shall reasonably
cooperate with Buyer and its counsel in connection with the offering and sale of
loans, certificates of ownership interest, or other instruments secured by,
payable from or representing ownership interests in the Production Payments
(such instruments in this section called the "VPP Instruments"), provided,
however, that such reasonable cooperation shall be at Buyer's expense and shall
be limited to the following: (i) providing non-confidential information
available to Seller that Buyer reasonably deems necessary in connection with the
offering and sale of VPP Instruments; and (ii) making available to Buyer's
lenders, financiers and rating agencies such officers and engineers as Buyer may
reasonably request in order to assist Buyer in any such financing or
securitization.
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SECTION 5.04. Preference Rights.
If after the Closing, a third party properly and lawfully exercises a
Preference Right to purchase either Production Payment or any portion thereof
(whether or not such purchase is as a part of a purchase of any Subject Interest
or any portion thereof), then Buyer will reconvey such Production Payment or
such portion thereof to Seller in order that Seller may make the necessary
conveyance to such third party purchaser, and Seller and Buyer shall amend the
applicable Conveyance (including the Scheduled Quantities listed therein)
accordingly. The consideration payable by such third party purchaser upon the
exercise of such preferential right shall be paid over by Seller to Buyer in
consideration of Buyer's reconveyance. Since the entire purchase price paid
hereunder by Buyer for both Production Payments consists of both the Cash
Purchase Price and Buyer's assumption of certain hedging contracts with Swap
Counterparty pursuant to the Novation Agreement, Seller and Buyer shall together
decide whether to request Swap Counterparty to permit such third party
purchaser, as part of its purchase price, to assume a proportionate portion of
the liabilities under such hedging contracts or whether to calculate the value
of such liabilities as a component of the cash purchase price to be paid by such
third party purchaser. Seller will also indemnify and hold harmless Buyer for
any losses and expenses suffered by Buyer as the result of the exercise of any
such preferential right to purchase, to the extent not compensated by the
payment to Buyer of the consideration paid by such third party purchaser.
ARTICLE VI
CLOSING CONDITIONS
SECTION 6.01. Seller's Closing Conditions.
The obligation of Seller to consummate the transactions contemplated hereby
is subject, at the option of Seller, to the satisfaction on or prior to the
Closing Date of all of the following conditions:
A. Representations, Warranties, and Covenants. The representations and
warranties of Buyer contained in this Agreement shall have been true and correct
when made on and as of the date of this Agreement, and the covenants and
agreements of Buyer to be performed on or before the Closing Date in accordance
with this Agreement shall have been duly performed.
B. Certificate. Seller shall have received a certificate dated as of the
Closing Date, executed by Buyer, to the effect that the conditions set forth in
Subsection A of this Section 6.01 have been satisfied.
C. Related Agreements. Buyer shall have executed and delivered each of the
Related Agreements other than the Pioneer Guaranty.
SECTION 6.02. Buyer's Closing Conditions.
The obligation of Buyer to consummate the transactions contemplated hereby
is subject, at the option of Buyer, to the satisfaction on or prior to the
Closing Date of all of the following conditions:
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A. Representations, Warranties, and Covenants. The representations and
warranties of Seller contained in this Agreement and of Guarantor contained in
the Pioneer Guaranty shall have been true and correct when made on and as of the
date of this Agreement, and the covenants and agreements of Seller to be
performed on or before the Closing Date in accordance with this Agreement shall
have been duly performed. There shall have been no fraud committed by the either
Seller or Guarantor in connection with inducing Buyer to enter into this
Agreement or the Related Agreements.
B. Officer's Certificate. Buyer shall have received a certificate dated as
of the Closing Date, executed by a duly authorized officer of each Seller, to
the effect that to such officer's knowledge the conditions set forth in
Subsection A of this Section 6.02 have been satisfied.
C. Related Agreements. Each Seller shall have executed and delivered the
Conveyances, Pioneer USA shall have executed and delivered the Marketing
Agreements and the Novation Agreement, and Pioneer shall have executed and
delivered to Buyer the Pioneer Guaranty.
D. Opinion of Counsel. Seller shall have delivered to Buyer written
opinions, dated the Closing Date, of W. ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇, Senior Attorney,
counsel to Seller and Guarantor, and of ▇▇▇▇▇▇▇▇ & Knight LLP, special counsel
to Seller, in forms that are satisfactory to Buyer.
E. Production Sales Contract. Buyer shall have received copies of the
executed initial Production Sales Contract referred to in Section 2 of either
Marketing Agreement.
F. Organizational Documents; Incumbency. Buyer shall have received:
(1) copies of the articles or certificates of incorporation of Pioneer
USA and the partnership agreement of Pioneer LP and Guarantor, in each case
certified as of a recent date by an appropriate officer of the such Person, each
such certificate dated the Closing Date;
(2) signature and incumbency certificates of the officers of each Seller
and Guarantor executing this Agreement and the Related Agreements;
(3) resolutions of the board of directors or similar governing body of
each Seller and Guarantor approving and authorizing the execution, delivery and
performance of this Agreement and the Related Agreements, as applicable,
certified as of the Closing Date by its secretary or an assistant secretary as
being in full force and effect without modification or amendment; and
(4) a good standing certificate from the applicable Governmental
Authority of each Seller's and Guarantor's jurisdiction of incorporation, and
each jurisdiction in which such Seller owns S ubject Interests, each dated a
recent date prior to the Closing Date.
G. Insurance. Buyer shall have received a certificate from Sellers'
insurance broker confirming in reasonable detail that the insurance described in
Schedule 2 is in force.
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ARTICLE VII
CLOSING
SECTION 7.01. Closing.
The Closing shall be held on the Closing Date at 10:00 a.m., Dallas time,
at the offices of Seller's counsel in Dallas, Texas, or at such other time or
place as Seller and Buyer may otherwise agree. Each of Seller and Buyer is
obligated to the other to proceed to Closing, to satisfy the conditions to the
other's consummation of the transactions contemplated hereby that are set out in
Article VI hereof, and to deliver the documents (and funds, in the case of
Buyer) that are described in the remainder of this Article VII.
SECTION 7.02. Seller's Closing Obligations.
At Closing, each Seller shall execute and deliver, or cause to be executed
and delivered, to Buyer the following, against delivery of the Purchase Price:
A. Related Agreements. The Related Agreements;
B. Officer's Certificate. The certificate of such Seller referred to in
Section 6.02B;
C. Legal Opinions. The legal opinions referred to in Section 6.02D;
D. Sale Contract. The Production Sales Contract referred to in Section
6.02E;
E. Corporate Certificates. The various certificates referred to in Section
6.02F; and
F. Insurance Certificate. The Insurance Certificate referred to in Section
6.02G.
SECTION 7.03. Buyer's Closing Obligations.
At Closing, Buyer shall deliver, or cause to be delivered the Purchase
Price in immediately available funds to Seller in the manner provided in Section
3.02, and execute and deliver, or cause to be executed and delivered, to Seller
the following:
A. Related Agreements. The Related Agreements (other than the Pioneer
Guaranty); and
B. Certificate. The certificate of Buyer referred to in Section 6.01B.
ARTICLE VIII
ASSUMPTION AND INDEMNIFICATION
SECTION 8.01. Covered Liabilities.
As used herein, "Covered Liabilities" means:
17
(1) any and all liabilities, losses, costs, damages, penalties or fines
suffered by any Buyer Party as a result of either Seller's or Guarantor's breach
of any of its respective representations, warranties, covenants or obligations
under this Agreement or any of the Related Agreements, including, without
limitation, all of each Seller's obligations under Article VI of either
Conveyance, and including, without limitation, any Title Failure,
(2) any and all liabilities, losses, costs, damages, penalties or fines
suffered by an Indemnified Party as a result of (i) any injury to persons or
property or similar tort arising from or involving activities on the Subject
Lands or relating to the Subject Hydrocarbons, (ii) any violation on the Subject
Lands (or in connection with oil and gas operations or ancillary activities
relating to the Subject Hydrocarbons) of any Environmental Law or any other Law
or legal duty relating to public health or safety or the production or
conservation of Hydrocarbons or natural resources, (iii) the breach of any duty
imposed under any such Law, or under any Lease or Permitted Encumbrance,
relating to oil and gas operations and ancillary activities (including
environmental remediation) on the Subject Lands or relating to the Subject
Hydrocarbons, (iv) the delivery to or receipt by Buyer or a designee of Buyer of
any Hydrocarbons produced from or attributable to the Subject Interests
(including any claim relating to the quality or handling thereof) or (v) oil and
gas operations and ancillary activities on or involving the Subject Lands or
relating to the Subject Hydrocarbons, in each case regardless of whether the
foregoing arise under, out of, or in connection with any Action or any claim
therein, any order or decree of any Governmental Authority, or any arbitrator's
award;
(3) any and all liabilities, losses, costs, damages, penalties or fines
suffered by any Buyer Party (or any successor owners of the Production Payment)
as a result of any Action set forth on Schedule 3, and
(4) all reasonable costs and expenses of any Indemnified Party in
investigating or defending against any claims for such alleged damages, costs,
losses, liabilities, penalties or fines (including, without limitation, any
reasonable attorneys' fees).
SECTION 8.02. Indemnification by Seller.
Buyer will be the purchaser of overriding royalty interests in the Subject
Interests and Buyer will not own any rights to conduct or direct operations
thereon or any tangible property interest therein or any equipment located
thereon, all such rights, tangible property interests and equipment being
retained by either Seller. Buyer will not be responsible for the operation or
condition of any such property.
FROM AND AFTER THE CLOSING DATE, EACH SELLER SHALL JOINTLY AND SEVERALLY
INDEMNIFY AND HOLD HARMLESS EACH BUYER PARTY, THEIR PRESENT AND FORMER
DIRECTORS, OFFICERS, EMPLOYEES, AND AGENTS, AND EACH OF THE HEIRS, EXECUTORS,
SUCCESSORS, AND ASSIGNS OF ANY OF THE FOREGOING (COLLECTIVELY HEREIN REFERRED TO
AS THE "INDEMNIFIED PARTIES") FROM AND AGAINST ANY AND ALL COVERED LIABILITIES.
THE FOREGOING INDEMNITY SHALL APPLY WHETHER OR NOT THE COVERED LIABILITIES ARISE
OUT OF THE SOLE, JOINT OR CONCURRENT NEGLIGENCE, FAULT OR STRICT LIABILITY OF
18
ANY INDEMNIFIED PARTY OR ANY OTHER PERSON INDEMNIFIED HEREUNDER AND APPLIES,
WITHOUT LIMITATION, TO ANY COVERED LIABILITY IMPOSED UPON ANY INDEMNIFIED PARTY
AS A RESULT OF ANY LAW, THEORY OF STRICT LIABILITY OR OTHERWISE, EXCEPT TO THE
EXTENT CAUSED BY AN INDEMNIFIED PARTY'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
SECTION 8.03. Third Party Claims.
If a claim by a third party is made against an Indemnified Party and if
such Indemnified Party intends to seek indemnity with respect thereto under this
Article VIII, such Indemnified Party shall promptly notify Pioneer USA of such
claim. Pioneer USA shall have thirty (30) days after receipt of such notice to
undertake, conduct, and control, through counsel of its own choosing and at its
own expense, the settlement or defense thereof, and the Indemnified Party shall
cooperate with it in connection therewith; provided that Pioneer USA shall
permit the Indemnified Party to participate in such settlement or defense
through counsel chosen by such Indemnified Party at the expense of such
Indemnified Party and further provided that, to the extent that the Indemnified
Party reasonably appears to have defenses available to it that are different
from or additional to those available to either Seller, the assertion of such
different or additional defenses by such counsel shall be at the expense of
Seller. So long as Seller, at its own cost and expense, (a) has within such
thirty (30) days undertaken the defense of, and assumed full responsibility for
all Covered Liabilities with respect to, such claim, (b) is reasonably
contesting such claim in good faith by appropriate proceedings, and (c) has
taken such action (including the posting of a bond, deposit, or other security)
as may be necessary to prevent any action to foreclose a lien against or
attachment of the property of the Indemnified Party for payment of such claim,
the Indemnified Party shall not pay or settle any such claim. Notwithstanding
compliance by Seller with the preceding sentence, the Indemnified Party shall
have the right to pay or settle any such claim - if such claim can be settled by
the payment of money damages only - provided that, if Seller is in material
compliance with the preceding sentence at the time of such payment or settlement
by the Indemnified Party then in such event the Indemnified Party shall waive
any right to indemnity therefor by Seller for such claim. If, within thirty (30)
days after the receipt of the Indemnified Party's notice of a claim of indemnity
hereunder, Pioneer USA does not notify Buyer or the Indemnified Party that
Seller elects, at its cost and expense, to undertake the defense thereof and
assume full responsibility for all Covered Liabilities with respect thereto, or
gives such notice and thereafter fails to diligently contest such claim in good
faith by appropriate proceedings or to prevent action against the Indemnified
Party or to foreclose a lien against or attachment of the Indemnified Party's
property as contemplated above, the Indemnified Party shall have the right to
contest, settle, or compromise the claim but shall not thereby waive any right
to indemnity therefor pursuant to this Agreement.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Counterparts.
This Agreement may be executed in one or more counterparts and by separate
parties on separate counterparts, all of which shall be considered one and the
19
same agreement, and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other party.
SECTION 9.02. Governing Law; Consent to Jurisdiction.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAW RULES
OR PRINCIPLES THEREOF THAT WOULD DIRECT THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.
EACH OF SELLER AND BUYER HEREBY IRREVOCABLY SUBMITS ITSELF TO THE
NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN DALLAS
COUNTY, TEXAS AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON
IT IN ANY LEGAL PROCEEDING RELATING TO THIS AGREEMENT BY ANY MEANS ALLOWED UNDER
TEXAS OR FEDERAL LAW. EACH OF SELLER AND BUYER HEREBY WAIVES AND AGREES NOT TO
ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, THAT ANY PROCEEDING IN SUCH
VENUES ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT IS BROUGHT IN AN
INCONVENIENT FORUM OR THAT THE VENUE THEREOF IS IMPROPER, AND EACH FURTHER
CONSENTS TO ANY REQUESTED TRANSFER OF ANY SUCH PROCEEDING BROUGHT IN ANY OTHER
VENUE TO A FEDERAL COURT SITTING IN THE NORTHERN DISTRICT OF THE STATE OF TEXAS,
TO THE EXTENT THAT IT HAS SUBJECT MATTER JURISDICTION, AND OTHERWISE TO A STATE
COURT IN DALLAS COUNTY, TEXAS. IN FURTHERANCE THEREOF, EACH OF SELLER AND BUYER
HEREBY ACKNOWLEDGES AND AGREES THAT IT WILL BE NEITHER INCONVENIENT NOR UNFAIR
TO LITIGATE OR OTHERWISE RESOLVE ANY DISPUTES OR CLAIMS IN A COURT SITTING IN
SUCH COUNTY AND STATE.
SECTION 9.03. WAIVER OF JURY TRIAL.
EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING HEREUNDER OR
ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT. THE
SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES
THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS
TRANSACTION, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND
ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT
THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT
EACH HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT
EACH WILL CONTINUE TO RELY ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS. EACH
PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER
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WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER MAY BE
MODIFIED ONLY IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS HERETO. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
SECTION 9.04. Entire Agreement.
This Agreement and the Related Agreements contain the entire agreement
between the parties with respect to the subject matter hereof and there are no
agreements, understandings, representations, or warranties between the parties
other than those set forth or referred to herein or therein.
SECTION 9.05. Each Party Pays Own Expenses.
Except to the extent provided otherwise in Section 2.3 of either
Conveyance, Buyer shall be responsible for all income and other Taxes incurred
by or imposed on Buyer as the owner of the Production Payments and the Subject
Hydrocarbons allocable thereto. Seller shall be responsible for certain Taxes as
provided in Section 2.3 of each Conveyance, and Seller shall be responsible for
all income taxes and other Taxes incurred by or imposed on Seller with respect
to the sale of the Production Payments or as the owner of the residual interest
in the Subject Interests and the Subject Hydrocarbons. All other costs and
expenses incurred by each party hereto in connection with all things required to
be done by it hereunder, including attorneys' fees, accountant fees, reserve
engineering fees, recording fees, and the expense of title examination, shall be
borne by the party incurring the same.
SECTION 9.06. Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed sufficiently given for all purposes hereof if (a) delivered in
person, by courier or by registered or certified United States Mail to the
Person to be notified, with receipt obtained, or (b) sent by telecopy, telefax
or other facsimile or electronic transmission, with "answer back" or other
"evidence of receipt" obtained, in each case to the appropriate address or
number as set forth in Section 8.2 of the Oil Conveyance (or at such other
address or number for a party as shall be specified by like notice). Each notice
shall be deemed effective on receipt by the addressee as aforesaid; provided
that, notice received by telecopy, telefax or other facsimile or electronic
transmission after 5:00 p.m. at the location of the addressee of such notice
shall be deemed received on the first business day following the date of such
electronic receipt.
SECTION 9.07. Successors and Assigns.
A. General Provisions. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns; provided, however, that no party to any
Production Payment Document may assign or transfer its rights or duties under
such Production Payment Document unless the assignee is similarly assigned (and
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accepts in a writing delivered to the other parties thereto) the rights and
duties of such assignor party under all other Production Payment Documents.
B. Additional Restrictions on Buyer. Buyer may not grant any mortgage, lien
or security interest burdening either Production Payment or any Production
Payment Document or any interest therein unless (a) the recipient of such
mortgage, lien or security interest is obligated to Seller to join in or ratify
any releases and acknowledgments of termination that Buyer is required to give
under the Production Payment Documents and (b) the documents governing such
mortgage, lien or security interest provide that, in connection with
foreclosure, the successor to Buyer must accepts in a writing delivered to
Seller the rights and duties of Buyer under all of the Production Payment
Documents. Buyer may not assign or transfer either Production Payment or any
Production Payment Document or any interest therein (including any transfer upon
foreclosure of a mortgage, lien or security interest) to any Person that is, at
the time of such assignment or transfer, an Unqualified Foreign Assignee.
C. Additional Restrictions on Seller. Seller shall not assign the Subject
Interests or any part thereof (except as allowed under Sections 6.2 and 6.5 of
the Conveyances), unless (i) Seller's entire remaining interests (including
working interests and net revenue interests) in all the Subject Interests (after
creation of the Production Payment) are assigned to a single assignee, (ii) the
assignee has sufficient experience and capability in the oil business to perform
the obligations of Seller hereunder and under the Related Agreements, (iii)
Seller furnishes to Buyer a written instrument, in recordable form and for the
benefit of Buyer and the other beneficiaries under Section 7.1 of each
Conveyance, in which the assignee expressly assumes the obligations of Seller
under the Production Payment Documents, and (iv) either (a) Pioneer remains
obligated under the Pioneer Guaranty for such assignee's obligations under the
Production Payment Documents or (b) the assignee (or any Affiliate of the
assignee who provides Buyer with a guaranty, in substantially the same form as
the Pioneer Guaranty, of the assignee's obligations under the Production Payment
Documents) is rated Approved Investment Grade. Buyer will release, without
representation, warranty or recourse, the current Seller from its obligations
hereunder and under the other Production Payment Documents, and will release
Pioneer (or any allowed successor guarantor) from the Pioneer Guaranty (or any
successor guaranty), concurrently with (i) any assignment that is made in
compliance with the requirements of clauses (i), (ii), (iii) and (iv) of this
Subsection C, including the delivery to Buyer of the new guaranty, if any,
required by the preceding sub-clause C(iii)(b); provided, that notwithstanding
the foregoing, any obligations which any Person may have to indemnify, reimburse
or compensate Buyer or to make payments to Buyer on account of hydrocarbons
produced before such time shall survive such release unless expressly assumed by
a Person rated Approved Investment Grade.
D. Approved Investment Grade. A Person shall be deemed rated "Approved
Investment Grade" in 2005, 2006 or 2007 if the long-term senior unsecured
obligations of such Person are rated at or above "BBB+" by S&P and at or above
"Baa1" by ▇▇▇▇▇'▇, and a Person shall be deemed rated "Approved Investment
Grade" after 2007 if the long-term senior unsecured obligations of such Person
are rated at or above "BBB" flat (no plus or minus) by S&P and at or above
"Baa2" by ▇▇▇▇▇'▇.
E. Exception for Assignments to Seller's Affiliates. Notwithstanding the
foregoing Subsection C, Seller may assign some or all of the Subject Interests
to one or more Affiliates, whether by conveyance, merger, consolidation, or
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otherwise, provided Pioneer (or any allowed successor guarantor) remains
obligated under the Pioneer Guaranty (or any successor guaranty) for Seller's
(and any such Affiliate's) obligations under the Production Payment Documents,
and provided further that if such Subject Interests are assigned to more than
one Affiliate, the obligations of such Affiliates shall be joint and several.
Seller (or its successor by merger or consolidation) will remain liable under
the Production Payment Documents after any such assignment, provided that if
Seller assigns the Subject Interests of record to three or fewer such Affiliates
and furnishes to Buyer a written instrument, in recordable form and for the
benefit of Buyer and the other beneficiaries under Section 7.1 of each
Conveyance, in which such assignee or assignees expressly assume the obligations
of Seller under the Production Payment Documents, then Buyer will upon request
release Seller from its obligations under the Production Payment Documents.
SECTION 9.08. Headings.
The headings to Articles, Sections, and other subdivisions of this
Agreement are inserted for convenience of reference only and will not affect the
meaning or interpretation of this Agreement.
SECTION 9.09. Amendments and Waivers.
This Agreement may not be waived, modified or amended except by an
instrument or instruments in writing signed by the party against whom
enforcement of any such modification or amendment is sought. The waiver by any
party hereto of a breach of any term or provision of this Agreement shall not be
construed as a waiver of any subsequent breach.
SECTION 9.10. Schedules and Exhibits.
All Schedules and Exhibits hereto which are referred to herein are hereby
made a part hereof and incorporated herein by such reference.
SECTION 9.11. Interpretation.
In construing this Agreement:
A. Examples. Examples shall not be construed to limit, expressly or by
implication, the matter they illustrate;
B. Including. The word "includes" and its derivatives means "includes, but
is not limited to" and corresponding derivative expressions;
C. Location of Definitions. A defined term has its defined meaning
throughout this Agreement and each Schedule to this Agreement, regardless of
whether it appears before or after the place where it is defined;
D. Controlling Provisions. Each Schedule to this Agreement is a part of
this Agreement, but if there is any conflict or inconsistency between the main
23
body of this Agreement and any Schedule, the provisions of the main body of this
Agreement shall prevail; and
E. Neutral Interpretation. This Agreement is the result of arm's-length
negotiations from equal bargaining positions by all parties. It is expressly
agreed that this Agreement shall not be construed against any party, and no
consideration shall be given or presumption made on the basis of who drafted
this Agreement or any particular provision hereof or who supplied the form of
Agreement.
SECTION 9.12. Agreement for the Parties' Benefit Only.
Nothing in this Agreement is intended to confer upon any Person, other than
the parties and their respective successors and permitted assigns, any rights,
benefits, remedies or obligations hereunder; and no Person, other than the
parties and their respective successors and permitted assigns, is entitled to
rely on any representation, warranty, covenant, or agreement contained herein;
provided, however, that Buyer and its successors and permitted assigns shall be
entitled to enforce the terms of Article VIII for the benefit of any Persons who
are Indemnified Parties. Any claim for indemnification under Article VIII on
behalf of an Indemnified Party other than Buyer (or Buyer's successor or
permitted assign) must be made and administered by Buyer or its successor or
permitted assign.
SECTION 9.13. Severability.
If any term or other provision of this Agreement is invalid, illegal, or
incapable of being enforced by any rule of Law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any adverse manner to any party. Upon
such determination that any term or other provision is invalid, illegal, or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
SECTION 9.14. No Retained Liens.
No lien or encumbrance of whatsoever nature, express or implied, shall be
retained by or created in favor of either Seller in or against either Production
Payment as security for payment or performance of the Purchase Price or any
other obligations of Buyer; and each Seller hereby expressly waives and releases
any such express or implied liens and encumbrances.
SECTION 9.15. Limitations on Damages.
NEITHER PARTY HERETO SHALL BE RESPONSIBLE TO THE OTHER PARTY OR TO ANY
PERMITTED BENEFICIARY HEREOF FOR CONSEQUENTIAL DAMAGES OR PUNITIVE OR EXEMPLARY
DAMAGES.
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SECTION 9.16. Tax Treatment.
Although each Production Payment is a real property interest for purposes
of state law, the parties agree to treat each Production Payment as a mortgage
loan for federal income tax purposes. For avoidance of doubt, the parties
acknowledge that Sellers (and not Buyer) are entitled to all tax credits
(including credits under Section 29 of the Internal Revenue Code) attributable
to either Production Payment and the production attributable thereto.
SECTION 9.17. LIMITATION OF OWNER TRUSTEE LIABILITY.
IT IS EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES THAT (A) THIS DOCUMENT
IS EXECUTED AND DELIVERED BY WILMINGTON TRUST COMPANY, NOT INDIVIDUALLY OR
PERSONALLY, BUT SOLELY AS OWNER TRUSTEE, IN THE EXERCISE OF THE POWERS AND
AUTHORITY CONFERRED AND VESTED IN IT, PURSUANT TO THE TRUST AGREEMENT UNDER
WHICH BUYER HAS BEEN CREATED AS A DELAWARE STATUTORY TRUST, (B) EACH OF THE
REPRESENTATIONS, UNDERTAKINGS AND AGREEMENTS HEREIN MADE ON THE PART OF BUYER IS
MADE AND INTENDED NOT AS PERSONAL REPRESENTATIONS, UNDERTAKINGS AND AGREEMENTS
BY WILMINGTON TRUST COMPANY BUT IS MADE AND INTENDED FOR THE PURPOSE FOR BINDING
ONLY SUCH TRUST, (C) NOTHING HEREIN CONTAINED SHALL BE CONSTRUED AS CREATING ANY
LIABILITY ON WILMINGTON TRUST COMPANY, INDIVIDUALLY OR PERSONALLY, TO PERFORM
ANY COVENANT EITHER EXPRESSED OR IMPLIED CONTAINED HEREIN, ALL SUCH LIABILITY,
IF ANY, BEING EXPRESSLY WAIVED BY THE PARTIES HERETO AND BY ANY PERSON CLAIMING
BY, THROUGH OR UNDER THE PARTIES HERETO, AND (D) UNDER NO CIRCUMSTANCES SHALL
WILMINGTON TRUST COMPANY BE PERSONALLY LIABLE FOR THE PAYMENT OF ANY
INDEBTEDNESS OR EXPENSES OF SUCH TRUST OR BE LIABLE FOR THE BREACH OR FAILURE OF
ANY OBLIGATION, REPRESENTATION, WARRANTY OR COVENANT MADE OR UNDERTAKEN BY SUCH
TRUST UNDER THIS AGREEMENT OR ANY OTHER RELATED DOCUMENTS.
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IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of each
of the parties as of the day first above written.
BUYER:
WOLFCAMP OIL AND GAS TRUST
By: WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as
Owner Trustee
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Authorized Signatory
S-1
SELLER:
PIONEER NATURAL RESOURCES USA, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Executive Vice President and Chief
Financial Officer
PIONEER NATURAL RESOURCES PROPERTIES LP
By: Westpan Properties, Inc.,
its general partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Executive Vice President and Chief
Financial Officer
S-2