SALE AND PURCHASE AGREEMENT
BY AND AMONG
DEVON ENERGY CORPORATION (NEVADA)
AND
NS GAS PROPERTIES, INC.
AND
DEVON ENERGY CORPORATION
AND
NORFOLK SOUTHERN CORPORATION
AND
NORFOLK SOUTHERN PROPERTIES, INC.
Effective January 1, 1995
SALE AND PURCHASE AGREEMENT
BY AND AMONG
DEVON ENERGY CORPORATION (NEVADA)
AND
NS GAS PROPERTIES, INC.
AND
DEVON ENERGY CORPORATION
AND
NORFOLK SOUTHERN CORPORATION
AND
NORFOLK SOUTHERN PROPERTIES, INC.
TABLE OF CONTENTS
Page
1. Agreement of Sale and Purchase Price 1
1.1 Sale and Conveyance of the Interests 1
1.2 Interests Defined 1
1.3 Effective Time 2
1.4 Purchase Price 2
2. Title 2
2.1 Title Material 2
2.2 Possession of Title Materials 4
2.3 Title Standard 4
3. Representations and Warranties of Seller 5
3.1 Agreement Valid 5
3.2 Seller Status and Power to Sell 5
3.3 Title to the Interests 5
3.4 Compliance with Leases and Laws 6
3.5 Processing, Sale and Transportation
of Production 6
3.6 Taxes 7
3.7 Brokers and Finders 7
3.8 Claims or Litigation 7
3.9 Contracts; Consents 8
3.10 Assignments Prior to Closing 8
3.11 Status of ▇▇▇▇▇ 8
3.12 Full Disclosure 8
3.13 Consummation of Transactions 9
3.14 Tax Partnerships 9
3.15 Equipment 9
3.16 Insurance 9
3.17 No Consents 9
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3.18 Miscellaneous 9
3.19 Ordinary Course 10
3.20 Restriction on Operations 10
4. Representations and Warranties of Buyer 10
4.1 Organization 10
4.2 Agreement Authorized 10
4.3 Valid Agreement 10
4.4 Authority to Purchase 10
4.5 Brokers and Finders 11
5. Matters Relating to Operations 11
5.1 Access of Buyer 11
5.2 Preparation of Description of Interests 11
6. Additional Agreement of the Parties 11
6.1 Further Assurances 11
6.2 Buyer's Mortgage 11
6.3 Management and Agency Agreement 11
6.4 Rights of Rescission 12
6.5 Preferential Right to Purchase and
Repurchase Option 13
6.6 Certain Federal Income Tax Matters 16
7. The Closing 16
8. Payment of Closing Payment and Interest 16
9. Execution and Delivery of Documents 16
9.1 Assignment 16
9.2 Management and Agency Agreement 17
9.3 Buyer's Mortgage 17
10. Possession 17
11. Obligations After Closing 17
11.1 Sales and Use Taxes 17
11.2 Receipts and Disbursements 17
11.3 Indemnity 17
11.4 Damages For Breach of Warranty 19
12. Miscellaneous 21
12.1 Notices 21
12.2 Binding Effect 21
12.3 Counterparts 21
12.4 Expenses 21
12.5 Section Headings 22
12.6 Superseding Effect 22
12.7 Governing Law 22
12.8 Waivers 22
12.9 Exhibits and Schedules 22
12.10 Announcements 22
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12.11 Survival of Warranties 22
12.12 Joinder by Devon Delaware, Norfolk
and Properties 22
12.13 No Restrictions on Production 23
12.14 Insurance 23
12.15 Production Payment Obligations --
Non-Recourse 23
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DEFINED TERMS
The following terms are defined in the Sale and
Purchase Agreement.
Terms Page Section
"Agreed Values" 1.4
"Assignment" 1.2
"Buyer" Para.1
"Claim" 11.4(c)
"Closing" 1.1
"Closing Date" 1.1
"Closing Payment" 1.4
"Code" 3.5
"Devon Delaware" Para.1
"Effective Time" 1.3
"Initial Report" 3.3(c)
"Interests" 1.2
"Management and Agency Agreement" 6.3
"Mortgage" 6.2
"NGPA" 2.1(n)
"Norfolk" Para.1
"Permitted Encumbrances" 2.3
"Production Payment" 1.2
"Purchase Price" 1.4
"Properties" Para.1
"Remaining Reserves" 6.5(b)(3)
"Seller" Para.1
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SALE AND PURCHASE AGREEMENT
THIS AGREEMENT is entered into effective January 1,
1995, by and among DEVON ENERGY CORPORATION (NEVADA), a Nevada
corporation ("Seller"); NS GAS PROPERTIES, INC., a Virginia
corporation ("Buyer"); DEVON ENERGY CORPORATION, a Delaware
corporation ("Devon Delaware"); NORFOLK SOUTHERN CORPORATION, a
Virginia corporation ("Norfolk"); and NORFOLK SOUTHERN
PROPERTIES, INC., a Virginia corporation ("Properties").
In consideration of the mutual covenants contained
herein and the benefits to be derived by each party hereunder,
and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as
follows:
1. Agreement of Sale and Purchase Price.
1.1 Sale and Conveyance of the Interests. Sub-
ject to the terms and conditions herein set forth, Seller will,
at the Closing provided for in Section 7 hereof (the "Closing"),
sell, transfer, assign, convey and deliver to Buyer the Inter-
ests, and Buyer will purchase, receive, accept delivery of, and
pay Seller for the Interests. The day appointed for the Closing
in Section 7 is called the "Closing Date."
1.2 Interests Defined. As used herein, the term
"Interests" means the aggregate of all right, title and interest
owned by Seller in, to and under the following:
(a) The oil, gas and mineral leases and the
operating rights, mineral interests, royalty interests,
overriding royalty interests, payments out of production and
interests in or under unit agreements described in Exhibit A,
insofar and only insofar as the same cover and relate to the
lands and depths also described in Exhibit A (the "Leases");
(b) All other contracts, agreements, leases,
licenses, permits, easements and orders to the extent relating to
the Leases, the operations conducted or to be conducted thereon,
or the production, treatment, sale or disposal of hydrocarbons or
water produced therefrom or attributable thereto (all of which,
to the extent they are material, are represented by Seller to be
identified and described on Schedule 3.9 hereto);
(c) All ▇▇▇▇▇ (including, without limita-
tion, disposal, supply or injection ▇▇▇▇▇), personal property,
fixtures (including, without limitation, gathering systems,
pipelines, compressors and dehydration and other treatment
facilities, but excluding inventory and supplies), equipment and
improvements as of the Effective Time (hereinafter defined) and
as of the Closing Date to the extent used or obtained in connec-
tion with the Leases or with the operation or maintenance
thereof, or with the production, treatment, sale or disposal of
hydrocarbons or water produced therefrom or attributable thereto;
and
(d) All other rights and interests in, to or
under or derived from the Leases, even though improperly
described in or omitted from Exhibit A;
EXCEPTING and RESERVING unto Seller, however, the production
payment (the "Production Payment") described in the Assignment,
Conveyance and ▇▇▇▇ of Sale (the "Assignment") attached as
Exhibit C hereto, together with all interests in the subject
matter of such Assignment, to the extent the same cover or relate
to lands and depths not described in Exhibit A.
1.3 Effective Time. As used herein, the term
"Effective Time" means 7:00 a.m., New Mexico time, on January 1,
1995.
1.4 Purchase Price. The purchase price for the
Interests ("Purchase Price") shall be the total of (i) the sum of
$10,827,145 (the "Closing Payment"), plus (ii) all sums payable
under the Production Payment, which are estimated to have a
present value of $153,463,018. The Purchase Price is therefore
estimated by the parties to be $164,290,163. The Purchase Price
has been allocated by the parties among the various items of the
Interests as set out in Exhibit B. The amounts so allocated
shall be deemed to be the respective fair market values of such
items of the Interests and are herein referred to as the "Agreed
Values" of such items of the Interests.
2. Title.
2.1 Title Material. Seller acknowledges and
understands that Buyer is relying on Seller's representations and
warranties as to the adequacy and sufficiency of Seller's title
to the Interests conveyed by Seller to Buyer, all of which
representations and warranties are material to Buyer and the
transactions contemplated herein. From and after the date hereof
Seller shall provide Buyer, its agents and representatives full
opportunity, at any time and from time to time during normal
business hours, to examine, inspect and copy, at Buyer's expense,
the books, records and files in the possession of Seller insofar
as they pertain to the Interests, pertaining to the following:
(a) All title opinions and reports pertain-
ing to the Interests;
(b) All abstracts of title and status re-
ports pertaining to the Interests;
(c) All documents comprising the Interests,
prior conveyances of interests therein or interests created
thereby, unitization, communitization, pooling and operating
agreements and division and transfer orders, together with all
other contracts and documents affecting the title to or the value
of the Interests;
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(d) All spacing, pooling, unitization,
exception, allowable and other orders of any local, state or
Federal court, agency, commission or other regulatory authority
in any way relating to the Interests or the operation thereof;
(e) The payment of delay rentals, shut-in
royalties, royalties and other payments due under the Interests;
(f) The payment of all ad valorem, property,
production, severance and similar taxes and assessments based on
or measured by the ownership of property or the production or
removal of hydrocarbons or the receipt of proceeds therefrom
attributable to the Interests;
(g) All ownership maps and surveys relating
to the Interests and the lands affected thereby;
(h) All lease records, production records
and data sheets relating to the Interests and to bonuses, delay
rentals, shut-in royalties and royalties payable thereunder;
(i) All division and transfer orders and all
purchase, sale, gathering, dehydration processing, exchange,
transportation and similar agreements relating to the sale,
dehydration, treatment, transportation or marketing of production
from the Interests;
(j) All bonds, insurance policies, leases,
permits, easements, licenses, salt water disposal agreements, gas
balancing agreements, pumping or pumper's agreements and other
agreements in any way relating to the Interests or the operation
thereof;
(k) All records relating to the inventory of
all personal property and fixtures included in the Interests;
(l) Records evidencing that all persons
responsible for distributing proceeds of sale of production from
the Interests are currently paying Seller for at least the net
revenue interests referred to in Section 3.3 hereof without
suspense or any indemnity other than the normal division order
warranty of title;
(m) Records evidencing that all operators of
the Interests are currently billing Seller for no more than the
working interests referred to in Section 3.3 hereof and that
Seller is current with all such operators for all costs and
expenses;
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(n) All regulatory filings relating to the
Interests, including, without limitation, all applications and
determinations under the Natural Gas Policy Act of 1978 ("NGPA");
and
(o) All other available records, files,
reports and documents pertaining to the Interests as Buyer
reasonably may request.
2.2 Possession of Title Material. Seller and
Buyer agree that, for as long as Seller shall continue to perform
the services and duties as Buyer's agent as provided in the
Management and Agency Agreement described in Section 6.3 hereof,
the documents and items referred to in clauses (a) through (o)
above shall remain in Seller's possession, subject to Buyer's
right to examine, inspect and copy the same, at Buyer's expense.
However, Seller agrees that it will, upon Buyer's reasonable
request, promptly deliver to Buyer, at Buyer's expense, copies of
any or all such documents and items as may be specified by Buyer,
to the extent that the same relate to and are necessary to
Buyer's quiet and continuing enjoyment of the Interests, and will
make any original copies of such documents in Seller's possession
available to Buyer at all reasonable times. Upon any termination
of the Management and Agency Agreement for a reason other than
Buyer's sale of all of the Interests to Seller, Seller promptly
will provide to Buyer or its designee, at Buyer's expense, all of
such documents and items as shall be specified by Buyer.
2.3 Title Standard. For the purposes of Seller's
title warranty in Section 3.3, Seller's title shall be good and
defensible (as distinguished from technically marketable);
provided, no Permitted Encumbrance shall constitute a title
defect. "Permitted Encumbrances" are, except as otherwise
provided herein, comprised of (i) matters described without
material omission in Schedule 3.5 or 3.9, (ii) royalties,
overriding royalties, production payments and other burdens on
production which do not reduce the interest in an item of the
Interests to less than that warranted in Section 3.3, (iii) liens
for taxes, labor and materials where payment is not due, (iv)
regulatory authority of governmental agencies not presently or
previously violated, easements, surface leases and rights, plat
restrictions and similar encumbrances, provided that they do not
detract from the value or increase the cost of operation of any
item of the Interests, and (v) regulatory filings with and
consents by regulatory authority if they are customarily obtained
subsequent to the sale or conveyance. For purposes of this
Section 2.3, "good and defensible title" shall mean a title that
is free from reasonable doubts or claims either as to matters of
law or fact, such as are sufficient to form a basis of (or would
reasonably subject Buyer to) litigation, or compel Buyer to
resort to parol evidence, not afforded by the official public
records (or to presumptions of fact that would probably, in the
event of suit, become genuine issues of fact), to defend Buyer's
title against such outstanding doubts or claims.
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3. Representations and Warranties of Seller. Seller
represents and warrants to Buyer as of the Effective Time and as
of the Closing Date, as follows:
3.1 Agreement Valid. Subject to the effects of
bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting creditors' rights, as well as to principles of
equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law), this agreement constitutes,
and all instruments required hereunder to be executed and de-
livered by Seller at the Closing will constitute, the valid and
binding agreement of Seller enforceable against Seller in ac-
cordance with its terms.
3.2 Seller Status and Power to Sell. Seller is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada, and is duly qualified to
carry on its business in each jurisdiction where any item of the
Interests is located. The execution and performance of this
agreement, the transactions contemplated hereby, and all things
necessary or desirable in order to accomplish the same have been
duly authorized by all necessary corporate action of Seller.
Seller has all necessary authority under its charter, bylaws and
other governing documents and otherwise has good right and lawful
authority to carry on its business as presently conducted and to
consummate all transactions contemplated by this agreement.
3.3 Title to the Interests.
(a) In accordance with the standards set out
in Section 2.3, Seller owns the Interests.
(b) Each of the Interests is good, valid,
subsisting and enforceable in accordance with its terms.
(c) Except as given effect in the ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ & Associates engineering report to Seller, dated January
10, 1995 and covering the Interests (the "Initial Report"),
Seller's interests in the Interests are not subject to being
increased or reduced by virtue of reversionary interests owned by
third parties or Seller.
(d) Seller has taken or caused to be taken
all actions which are reasonable and customary in the oil and gas
industry to assure that its title to the Interests is as
warranted herein, including without limitation the diligent and
thorough review of those of the items of the Interests which are
not reflected by documents which are a part of official public
records; inquiries to predecessors in interest and other
knowledgeable parties concerning matters not disclosed by
official public records; and the securing of title opinions from
outside legal counsel, and Seller has either corrected, cured or
satisfied each doubt, potential claim or requirement which
resulted from such efforts.
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3.4 Compliance With Leases and Laws. All oil and
gas leases which are a part of the Interests are valid, binding
and enforceable in accordance with their terms, and in full force
and effect. No default exists under any of the terms and
provisions, express or implied, of any of such oil and gas leases
or under any of the terms and provisions of any agreement,
contract, license, permit, easement, order or other instrument
comprising the Interests or to which the Interests are subject,
and Seller has not received notice of any claim of such default
or notice of facts which could constitute a default. All
rentals, shutin royalties and royalties due under the Interests
and applicable law, rules and regulations of the Federal and
state regulatory authorities having jurisdiction have been timely
and properly paid and are not in suspense for any reason. There
are no express provisions under any Interest or any agreement
which require the drilling of additional ▇▇▇▇▇ or operations to
earn or continue to hold any of the Interests. All ▇▇▇▇▇ on or
attributable to the Interests have been drilled, completed and
operated, and all production therefrom has been accounted for and
paid to the persons entitled thereto, in compliance with all
applicable Federal, state and local laws and applicable rules and
regulations of the Federal, state and local regulatory authori-
ties having jurisdiction thereof; all necessary regulatory
filings have been properly made in connection with the ownership
of and transfer to Buyer of the Interests, the transactions
contemplated by this Agreement, and the drilling, completion and
operation of such ▇▇▇▇▇ and all other operations on the Interests
or the land associated therewith; and all production and sales of
oil, gas and other hydrocarbons heretofore produced or sold from
the Interests have not been in excess of any production allowable
established by governmental authorities (plus permitted
tolerances) or price established by the applicable regulatory
authorities. There is no condition at, under or in connection
with the lands associated with the Interests for which Seller has
or Buyer could incur any liability, or have any remedial or
reporting obligation, under any law or regulation in any manner
concerning the protection of the environment or public health.
No gas produced from the Interests is subject to the certificate
and abandonment jurisdiction of the Federal Energy Regulatory
Commission under the Natural Gas Act of 1974. There is no claim,
action or proceeding under applicable environmental, public
health or other laws pending or threatened against Seller
relating to the Interests or the operation thereof.
3.5 Processing, Sale and Transportation of
Production. Except as described in Schedule 3.5, Seller has not
prior to the Effective Time produced or sold gas subject to
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balancing rights of third parties (including without limitation
other owners of interests in the land and purchasers of
production therefrom) or subject to balancing duties under
governmental requirements, and Seller is not and Buyer will not
be obligated by virtue of any prepayment made under any
production sales contract or any other contract containing a
take-or-pay clause, or under any similar arrangement, to deliver
oil, gas or other minerals produced from or allocated to any of
the Interests at any time after the Effective Time without re-
ceiving full payment therefor at the time of delivery. Prior to
the Effective Time, Seller has not collected any proceeds from
the sale of hydrocarbons produced from the Interests which are
subject to refund. Proceeds from the sale of oil, gas and
natural gas liquids from the Interests are being received by
Seller in a timely manner and are not being held in suspense for
any reason. Seller has described in Schedule 3.5 and furnished
to Buyer true and complete copies (with all amendments) of all
contracts and agreements (other than routine division orders
terminable by Seller upon less than sixty (60) days' notice)
pursuant to which hydrocarbons produced from the Interests are
treated, dehydrated, compressed, sold, transported, processed or
otherwise disposed of or marketed. The contracts and agreements
comprising the Interests or identified in the Schedules hereto,
do not contain nonstandard terms which could impose on Buyer
risks or burdens that are not customarily assumed by owners of
working interests. Except as disclosed in Schedule 3.5, no
person has any call upon, option to purchase or similar rights
with respect to the Interests or to the production therefrom.
Except for the Northeast ▇▇▇▇▇▇ Unit No. 479R Well, each existing
producing well listed on Exhibit A shall, as of the Effective
Time and the Closing Date, be eligible for the nonconventional
fuels income tax credit under Section 29 of the Internal Revenue
Code of 1986, as amended (the "Code"). Upon consummation of the
transactions contemplated hereby Buyer will have the right to
market production from the Interests on terms no less favorable
than the terms upon which Seller currently is marketing such
production.
3.6 Taxes. All (i) ad valorem, property, produc-
tion, severance and other taxes and assessments based on or
measured by the ownership of property or the production or
removal of hydrocarbons or the receipt of proceeds therefrom, and
(ii) state and local gross receipts and sales and use taxes
related to the Interests, have been timely paid.
3.7 Brokers and Finders. Seller has not incurred
any liability, contingent or otherwise, for brokers or finders
fees in respect of this transaction for which Buyer shall have
any responsibility whatsoever.
3.8 Claims or Litigation. There is no claim,
dispute, suit, action or other proceeding pending or threatened
against Seller or any of the Interests or any third party which
might result in the impairment or loss of Seller's title to any
of the Interests or the value thereof, or otherwise affect the
Interests or the cost of operation thereof, or result in any
loss, damage or cost to or the imposition of any liability on
Buyer.
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3.9 Contracts; Consents. Seller has described in
Schedule 3.9 (i) all operating agreements currently in effect
relating to the Interests, (ii) all partnership, joint venture,
farmin/farmout, dry hole, bottom hole, acreage contribution, area
of mutual interest and similar agreements and obligations of
which any terms remain executory and which affect the Interests,
(iii) all other executory contracts to which Seller is a party
which materially affect any item of the Interests, and (iv) all
governmental or court approvals and third party contractual
consents required in order to consummate the transactions con-
templated by this agreement, other than routine consents required
in connection with transfers of Federal and state leases. All
such agreements and contracts are valid, binding and enforceable
in accordance with their terms and are in full force and effect,
and there are no existing defaults thereunder or events that
would constitute a default thereunder. Seller has furnished to
Buyer true and correct copies (with all amendments) of all such
agreements, contracts, approvals and consents.
3.10 Assignments Prior to Closing. Except as
described in Schedule 3.5, Seller has not made any assignment,
conveyance or encumbrance of the Interests, other than personal
property replaced by equivalent property or consumed in the
operation of the Interests in the ordinary course of business.
3.11 Status of ▇▇▇▇▇. All ▇▇▇▇▇ included in the
Interests, and all ▇▇▇▇▇ located on the lands affected thereby
and not included in the Interests but with respect to which
Seller has, or after the Closing Buyer may have, any liability to
plug, either (i) are producing or capable of producing
hydrocarbons in commercial quantities without the necessity of
rework or recompletion operations, or (ii) are being utilized as
pressure observation, injection, water supply or disposal ▇▇▇▇▇
and are fully equipped for such operations, or (iii) have been
properly plugged and abandoned in accordance with all applicable
rules and regulations of governmental authorities having
jurisdiction with respect thereto.
3.12 Full Disclosure. No information furnished by
Seller to Buyer and no representation or warranty of Seller under
this agreement contains or will contain any untrue statement of a
fact or omits or will omit any fact necessary to make the
statements made therein or herein not misleading; provided, no
representations of any kind are made by Seller relating to
projected or estimated future production or reserves attributable
to the Interests. Notwithstanding the foregoing provision,
Seller is not aware of any facts or circumstances which could
cause a prudent person in the oil and gas industry to believe
that the assumptions and/or methodologies employed in the
preparation of or reflected in the Initial Report are unusual,
suspect or not customary in the industry, and none of such
assumptions or methodologies are known by Seller or its
representatives to be misleading or incorrect.
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3.13 Consummation of Transactions. Neither the
execution hereof nor the consummation of the transactions contem-
plated hereby will constitute a violation or breach of, or an
event of default under, any contract or agreement to which Seller
is a party, or constitute the happening of a condition upon which
any other party to such a contract may exercise any right or
option which will adversely affect any of the Interests or
Seller's or Buyer's rights therein or thereto; nor will the
happening of such events result in any liability of Buyer to any
person under the terms of any contracts of employment,
consultancy or for services of any kind.
3.14 Tax Partnerships. No item of the Interests
is treated for income tax purposes as being owned by a partner-
ship.
3.15 Equipment. The Interests include all
property, equipment, easements, rights and facilities necessary
for the proper operation of the Interests. All equipment and
property used in connection with the operation of the Interests
is in good condition and repair, ordinary wear and tear excepted,
and is adequate for the proper operation of the Interests.
3.16 Insurance. The insurance policies described
in Schedule 3.17 are presently maintained in connection with the
Interests and the operation thereof. Such policies are customary
for the operation of the Interests. There are no pending or
threatened claims, actions, suits or proceedings involving any
insurance maintained in connection with the Interests.
3.17 No Consents. Except as provided in Section
3.9 hereof, the sale, assignment and conveyance of the Interests
to Buyer is not subject to the consent or approval of, or the
giving of any notice to, any other person (except for such
consents or approvals as have been obtained and any notice which
has been given) and will not violate or constitute a default
under any of the Interests or any contract, agreement, permit,
order or other instrument relating to the Interests.
3.18 Miscellaneous. For purposes of each
representation, warranty or covenant in this Section 3 as to the
non-existence of any matter, condition or thing (including, but
not limited to any default, condition, suit, action, claim or
proceeding), all references thereto shall be deemed also to
include any event, condition or circumstance which, with the
giving of notice or the lapse of time or both, would constitute
such a matter, condition or thing.
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3.19 Ordinary Course. Since the Effective Time,
Seller has caused the Interests to be maintained and operated in
a good and workmanlike manner consistent with prudent oil and gas
practices, maintained the insurance which was in force on the
Closing Date, and timely paid or caused to be paid all costs and
expenses incurred in connection therewith.
3.20 Restrictions on Operations. Since the
Effective Time, no operations were conducted for the drilling of
any new well or the reworking, recompleting or redrilling of any
existing well, and Seller has not waived any rights or entered
into any new agreements or commitments, has not made any
expenditure attributable to any one project in excess of $100,000
(except when bound to do so under provisions of existing joint
operating agreements which do not require authority for
expenditures), andhas not abandoned any well or released or
abandoned any portion of the Interests.
4. Representations and Warranties of Buyer. Buyer
represents and warrants to Seller as of the Effective Time and as
of the Closing Date as follows:
4.1 Organization. Buyer is a corporation duly
organized, validly existing and in good standing under the laws
of the Commonwealth of Virginia, and is duly qualified to carry
out its business in New Mexico.
4.2 Agreement Authorized. This agreement has
been duly authorized, executed and delivered by Buyer and all
instruments required hereunder to be delivered by Buyer at the
Closing will be duly authorized, executed and delivered by Buyer
and all requisite corporate action has or will have been taken to
authorize the execution hereof, the transactions contemplated
hereby and all things necessary or desirable in order to ac-
complish the purchase of the Interests, and Buyer has all neces-
sary authority under its articles of incorporation, bylaws and
other governing documents to consummate the same.
4.3 Valid Agreement. Subject to the effects of
bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting creditors' rights, as well as to principles of
equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law), this agreement constitutes,
and all instruments required hereunder to be executed and de-
livered by Buyer at Closing will constitute, the valid and bind-
ing agreement of Buyer enforceable against Buyer in accordance
with its terms.
4.4 Authority to Purchase. Buyer has all
necessary corporate power and authority to purchase and pay for
the Interests as contemplated by this agreement.
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4.5 Brokers and Finders. Buyer has incurred no
liability, contingent or otherwise, for brokers or finders fees
in respect of this transaction for which Seller shall have any
responsibility whatsoever.
5. Matters Relating to Operations.
5.1 Access of Buyer. Buyer shall have free
access to the offices, properties, records, marketing agreements,
files, unrestricted seismic data, engineering reports and evalu-
ations, books of account, and all other information of Seller
pertaining to the Interests, including all land material, for the
investigation of the Interests, the status thereof and the title
thereto, through Buyer's employees, attorneys, independent public
accountants or outside consultants; provided, however, that such
investigation shall be conducted during normal business hours and
in a manner that does not unreasonably interfere with Seller's
normal operations and employee relationships. Seller shall cause
its personnel to assist Buyer in making such investigation and
shall cause the counsel, accountants, employees and other repre-
sentatives of Seller to be reasonably available to Buyer for such
purposes. During such investigation, Buyer shall have the right
to cause Seller to make copies, at Buyer's expense, of such
records, files and other materials as Buyer may deem advisable.
5.2 Preparation of Description of Interests.
Seller will, at its expense, prepare and furnish or cause to be
prepared and furnished to Buyer as promptly as possible, the
exhibit to be attached to the assignment and conveyance referred
to in Section 9.1 hereof, which shall correctly set forth and
describe each element of the Interests and the land applicable
thereto as contemplated thereby in appropriate detail, together
with the identification of each existing well associated
therewith.
6. Additional Agreements of the Parties.
6.1 Further Assurances. From time to time
(whether at or after Closing), as and when requested by Buyer or
its successors or assigns, Seller will execute, acknowledge and
deliver all such instruments and documents and take such other
action as Buyer may reasonably deem necessary or desirable in
order to more effectively consummate the transactions contem-
plated hereby and to transfer to Buyer the Interests; and Seller
will assist Buyer in the collection or reduction to possession
thereof.
6.2 Buyer's Mortgage. Attached hereto as
Exhibit F is a form of Mortgage and forms of Financing Statements
covering the Interests (together, the "Mortgage"), which Buyer
agrees to execute and deliver to Seller at Closing.
6.3 Management and Agency Agreement. Attached
hereto as Exhibit D is a form of Management and Agency Agreement
covering the Interests (the "Management and Agency Agreement")
which Seller and Buyer agree to execute and deliver to each other
at Closing.
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6.4 Rights of Rescission.
(a) This agreement may be rescinded under
the following conditions:
(i) By Buyer, provided notice of
Buyer's election to rescind and the reason therefor is given to
Seller prior to December 1, 1995, if the Internal Revenue Service
fails or refuses to issue a private letter ruling holding that
(A) Seller has not retained an economic interest in the Interests
and has transferred all of Seller's economic interest in the
Interests to Buyer, (B) the Production Payment is properly
characterized for income tax purposes as a purchase money
mortgage loan, and (C) any credit for producing fuel from a
nonconventional source, pursuant to Section 29 of the Code,
attributable to production from the Interests after the sale of
the Interests to Buyer is properly allocable to Buyer; and
(ii) By Seller, provided notice of
Seller's election to rescind and the reason therefor is given to
Buyer prior to December 1, 1995, if the Internal Revenue Service
fails or refuses to issue a private letter ruling holding that
recognition of gain by Seller upon reacquisition of the Interests
by exercise of the Repurchase Option granted in Section 6.5
hereof is determined pursuant to Section 1038 of the Code.
(b) If a condition for rescission exists and
proper notice of rescission is given, the parties shall, prior to
December 15, 1995, restore themselves to the relative positions
each would have occupied had this agreement never been made,
including without limitation (A) reconveyance by Buyer of the
Interests to Seller, (B) payment by Seller to Buyer of an amount
equal to all amounts paid by Buyer under this agreement and any
agreement made pursuant hereto, and (C) payment by Buyer to
Seller of an amount equal to all amounts received by Buyer under
this agreement and any agreement made pursuant hereto. If
rescission is properly elected, the failure of any party to take
all steps necessary for a complete rescission prior to January 1,
1996, shall be a breach of this agreement and, in addition to
other damages and remedies to which the aggrieved party may be
entitled, the indemnity in Section 11.3 hereof shall apply to any
third party claims arising from the breach.
(c) Seller agrees that it shall cause there
to be issued to Buyer at closing, and that it shall cause there
to be maintained in force a Letter of Credit in the form of that
attached hereto as Exhibit E. Buyer shall notify the issuer of
the Letter of Credit to terminate it upon the receipt by Buyer of
(i) the private letter rulings described in Section 6.4(a)(i)
hereof and a notice from Seller that it has received or waived
the private letter ruling described in Section 6.4(a)(ii) hereof,
or (ii) all payments from Seller due Buyer under Section 6.4(b),
hereof.
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(d) In the event of a rescission hereunder,
Seller shall agree to and shall indemnify, defend and hold Buyer,
its affiliates and their respective officers, agents and
employees harmless against all liabilities, losses, claims,
damages, costs and expenses (known, unknown, contingent or
otherwise) associated with, arising during or in connection with,
or resulting from Buyer's ownership of the Interests.
6.5 Preferential Right to Purchase and Repurchase
Option.
(a) Preferential Right to Purchase. Seller shall
have a preferential right to purchase the Interests subject to
the Production Payment (the "Option Interests") or any part
thereof, at any time prior to the "Termination Date," as defined
in the Assignment. In the event Buyer, or any of Buyer's
successors or assigns desire to sell all or any part of the
Interests, it shall promptly give written notice of such fact to
Seller, with full information concerning its proposed
disposition, which shall include the name and address of the
prospective transferee (who must be ready, willing and able to
purchase), the purchase price, a legal description sufficient to
identify the property involved, a complete description of the
Option Interests involved, and all other terms of the offer.
Seller shall then have an optional prior right, for a period of
forty-five (45) days after the notice is received by Seller, to
purchase for the stated consideration pertaining to the third
party offer on the same terms and conditions the Option Interests
which are proposed to be sold. The preferential right to
purchase described herein shall be applicable to any proposed
disposition of the Option Interests or any part thereof, whether
by purchase and sale, merger, reorganization or consolidation,
and shall be applicable to any proposed transfer of Option
Interests, whether to a third party, a subsidiary, a parent
company or to a subsidiary of a parent company.
(b) Repurchase Option. Seller shall also have
the option to purchase all or any undivided portion of the whole
of the Option Interests or any individual oil and gas lease or
leases which form the basis for undivided interests therein under
the terms and conditions of this Section 6.5(b), at any time.
(1) Notice of Exercise. Seller shall
exercise such option to purchase by giving Buyer written notice
(the "Repurchase Notice") of its election to exercise the option
at least 20 days prior to the date specified in the notice that
the purchase is to be closed (the "Option Closing Date").
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(2) Contents of Notice. The Repurchase
Notice shall (i) indicate that Seller is exercising its option
under this Section 6.5(b), (ii) specify a place of closing (which
shall be in the city of Seller's or Buyer's principal place of
business), (iii) specify the time and date of closing which shall
be on the last business day of a calendar month following the
expiration of the notice period, (iv) identify the applicable
part of the Option Interests being purchased, if less than the
whole, (v) be accompanied by a schedule prepared by Seller
calculating the purchase price according to the purchase price
determination procedures set forth in Section 6.5(b)(3) below and
(vi) be dated and signed by an officer of Seller.
(3) Determination of Purchase Price. The
purchase price under the option shall be determined with
reference to the gas reserve quantities attributed to the Option
Interests in the Initial Report, a copy of which has been
furnished to Buyer. The reserves for the Option Interests or the
applicable part thereof estimated in the Initial Report to exist
on the Option Closing Date shall be the basis for calculating
Seller's purchase price under the option without regard to the
actual reserves that may exist or be estimated to exist on the
Option Closing Date. If the Option Closing Date under the option
is to occur in a month other than December, the applicable
remaining reserves attributed in the Initial Report to the
calendar year of closing shall be reduced by a fraction, the
numerator of which is the number of months of the year that have
passed through and including the month of the Option Closing Date
(even if on other than the last day of that month) and the
denominator of which is 12. The applicable remaining gas reserve
quantities so calculated shall hereinafter be referred to as the
"Remaining Reserves." Seller's purchase price for the Option
Interests or the applicable part thereof shall be their agreed
upon market value which shall be calculated using the same cash
flow and discounting procedures as were used in preparing the
Initial Report; however, the agreed upon market value calculation
shall use (i) the weighted average price received for the sale of
gas from the Interests or the applicable part thereof during the
twelve month period preceding the month in which the Option
Closing Date is to occur, (ii) the production and ad valorem tax
rates in effect on the date of the Repurchase Notice, (iii)
operating expenses estimated in the Initial Report, adjusted for
known changes, including the "Administration Fee" payable under
the terms of the Management and Agency Agreement , (iv) future
known capital expenditures not contemplated in the Initial Report
and (v) a discount rate equal to One Hundred Twenty Percent
(120%) of the national Prime Rate as quoted in The Wall Street
Journal on the 10th business day preceding the date of the
Repurchase Notice.
(4) Option Closing Procedure.
(i) On the Option Closing Date, Buyer shall
sell, assign and convey the Interests or the applicable part
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thereof to Seller, pursuant to documents prepared by Seller and
satisfactory to Buyer, without representation or warranty of any
kind, except that Buyer shall represent to Seller that Buyer has
not (except as permitted hereby) transferred, assigned or further
encumbered the Interests (or such applicable part) since Buyer
acquired the same from Seller. Buyer shall assign to Seller all
prior rights in warranty to the extent such were received by
Buyer from Seller. The foregoing sale, assignment and conveyance
shall be subject to all necessary consents and approvals of third
parties, if any, which burdened the Interests when the same were
assigned and conveyed to Buyer, or which are subsequently
approved by Seller, and Seller shall be responsible for obtaining
and securing all necessary consents and approvals concerning the
same.
(ii) On the Option Closing Date, Seller shall
(i) release the Mortgage contemplated by Section 6.6 hereof as to
the Interests or the applicable part thereof, and (ii) pay Buyer
the purchase price for the Interests or the applicable part
thereof. Buyer shall also execute all necessary forms of
assignment and transfer customary in the oil and gas industry or
required by governmental authority, together with such transfer
orders or letters in lieu thereof as Seller shall reasonably
request (all of which shall be substantially similar to the
documentation furnished by Seller to Buyer on the date hereof in
connection with the conveyance of the Interests to Buyer), and
Buyer shall deliver to Seller possession of the Interests or the
applicable part thereof.
(5) Indemnification. As part of the closing
of any purchase by Seller hereunder, Seller agrees to and shall
indemnify, defend and hold Buyer, its affiliates and their
respective officers, agents and employees, harmless from and
against all liabilities, losses, claims, damage, costs and
expenses (known, unknown, contingent or otherwise) associated
with, arising during or in connection with, or resulting from
Buyer's ownership of the Interests or the portion thereof
purchased, regardless of cause save only the sole negligence of
Buyer.
(c) Affect on Production Payment Termination
Date. In the event less than the whole of the Option Interests
are purchased or repurchased under the provisions of this Section
6.5, the parties shall execute and record an appropriate document
clearly indicating a reduction in the volume of gas production
necessary to reach the "Termination Date," as set forth in
Section 1(b)(i) of the Assignment. The amount of such reduction
shall be equal to ninety percent (90%) of the Remaining Reserves
attributed in the Initial Report to the Option Interests or the
applicable part thereof which are purchased or repurchased under
the terms of this Section 6.5.
(d) Set-Off. In connection with any purchase by
Seller hereunder, Seller shall be authorized to set-off any and
all amounts due Seller under the Assignment and/or the Management
and Agency Agreement, in determining the net amount to be paid by
Seller to Buyer.
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(e) Taxation. This preferential right to
purchase or repurchase the Option Interests or a part thereof
shall, for federal income tax purposes, constitute a
reacquisition of all or the applicable part of the Interests in
satisfaction of all or the applicable part of the indebtedness
represented by the Production Payment with payment of additional
consideration to Buyer, the taxation of which shall be determined
under Section 1038 of the Code.
6.6 Certain Federal Income Tax Matters. Unless
otherwise finally determined by the Internal Revenue Service or a
court:
(a) Buyer and Seller agree to treat the
Production Payment as a purchase money debt instrument issued by
Buyer to Seller as partial consideration for the Interests; and
(b) Buyer and Seller agree that the issue
price of the Production Payment is determined under Section
1274(b)(3) of the Internal Revenue Code of 1986, as amended, and
Treasury Regulation Sec. 1.1274-2(b)(3) to be equal to the excess
of the agreed upon market value of the Interests (which is
$164,290,163) over the amount of the Closing Payment (which is
$10,827,145), or $153,463,018, as determined by Schedule 6.7(b)
attached hereto.
7. The Closing. The Closing is taking place
simultaneously with the execution of this agreement, in the
offices of McAfee & ▇▇▇▇ A Professional Corporation, Tenth Floor,
Two Leadership Square, Oklahoma City, Oklahoma.
8. Payment of Closing Payment and Interest. At
Closing, Buyer shall pay to Seller the Closing Payment, together
with interest thereon at eight and one-half percent (8.5%) for the
applicable period of time from the Effective Time to Closing, by
wire transfer into a bank account to be designated by Seller
prior to Closing.
9. Execution and Delivery of Documents.
9.1 Assignment. Seller shall execute and deliver
to Buyer the Assignment, conveying the Interests to Buyer. For
the purposes of Section 2(b)(vii) of the Assignment, the term
"Tax Credit Percentage" shall mean Eighty-Three and One-Third
Percent (83 %). Seller shall also prepare, execute, acknowledge,
and deliver all necessary forms of assignment and transfer
required by governmental authority in connection with the sale
and purchase of the Interests.
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9.2 Management and Agency Agreement. At the
Closing, Seller and Buyer shall execute and deliver to each other
the Management and Agency Agreement.
9.3 The Mortgage. At the Closing, Buyer shall
execute and deliver to Seller the Mortgage.
10. Possession. Seller shall deliver to Buyer at the
Closing possession of the Interests.
11. Obligations After Closing. In addition to the
other covenants contained in this agreement which are by their
terms to be performed wholly or partly after the Closing Date,
the parties agree as follows:
11.1 Sales and Use Taxes. It is understood that
the Purchase Price does not include sales and use taxes imposed
on account of the transactions contemplated hereby. Within the
time permitted by applicable law to do so, Buyer shall pay and
Seller shall collect and remit to the proper governmental au-
thorities all applicable sales and use taxes, if any, within the
time allowed by law for payment thereof and Buyer shall indemnify
and agree to defend and hold harmless Seller in connection with
any claim regarding the same.
11.2 Receipts and Disbursements. If Buyer
receives any funds relating to items of the Interests which
accrued to the owner of the Interests before the Effective Time,
or if Seller receives any funds relating to items of the
Interests which accrued to the owner of the Interests after the
Effective Time, then the party receiving such funds shall account
therefor and pay the same to the other party promptly after
receipt thereof. Likewise, if Buyer shall pay any amount
relating to items of the Interests which accrued to the owner of
the Interests before the Effective Time, or if Seller shall pay
any amount relating to items of the Interests which accrued to
the owner of the Interests after the Effective Time, then the
party making such payment shall invoice the other party for the
amount of such payment and the party receiving such invoice
promptly shall pay the same.
11.3 Indemnity.
(a) Buyer shall indemnify and save and hold
harmless Seller against all third party claims, and all costs,
expenses and liabilities with respect thereto to the extent the
same arise out of or apply to Buyer's ownership, operation and
management of the Interests arising out of events occurring after
the Closing Date (but not including those incurred by Seller with
respect to the sale of the Interests to Buyer or the negotiations
leading to such sale and not including those that result from or
are attributable to the acts, omissions, negligence or willful
misconduct of Seller, its employees or agents with respect to the
operation and maintenance of the Interests or from any
representation of Seller contained herein being untrue or a
breach of any warranty or covenant of Seller contained herein).
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(b) Seller shall indemnify and save and hold
harmless Buyer against all third party claims, and all costs,
expenses and liabilities with respect thereto to the extent the
same arise out of or apply to (i) Seller's or any of Seller's
predecessors in interest (by ownership or operation) ownership,
operation and management of the Interests arising out of events
occurring prior to the Closing Date (but not including those
incurred by Buyer with respect to the purchase of the Interests
by Buyer or the costs and expenses of negotiations leading to
such purchase and not including those that result from or are
attributable to any representation of Buyer contained herein
being untrue or a breach of any warranty or covenant of Buyer
contained herein); (ii) those which arise out of Seller's breach
of its representations and warranties contained in Section 3.3
hereof; and (iii) other representations and warranties contained
herein; however, nothing contained in (iii) above shall be
applicable to any claim involving any agreement, contract,
operation, event, relationship or other activity, obligation or
circumstance in or with which neither Seller nor Seller's
predecessor in interest (either by ownership or operation) were a
direct participant or otherwise directly involved.
(c) Nothing herein or in Section 11.4(a) or
(b) below shall be deemed or construed or shall have the effect
of granting, imputing or creating in favor of any third parties
any rights, claims or benefits whatsoever, now or in the future,
in or under this Agreement or against any party hereto, or their
successors or assigns.
(d) Notwithstanding anything else in this
Agreement, the indemnity granted by this Section 11.3(b), and the
rights and remedies pursuant hereto, shall not be limited to,
modified or affected in any manner whatsoever, and in no way
relate to, the matters covered by Section 11.4(a) and (b) below.
(e) For the purposes of this Section 11.3,
the indemnitee shall include the indemnitee, its affiliates and
their respective officers, agents and employees.
(f) Each indemnified party hereunder agrees
that within sixty (60) days after receiving actual notice of a
matter (or later, if Seller is not prejudiced in any way by the
delay) giving rise to a claim for indemnity under the provisions
of this agreement, including receipt by it of notice of any
demand, assertion, claim, action or proceeding, judicial or
otherwise, by any third party (such third party actions being
collectively referred to herein as a "Claim") with respect to any
matter as to which it is entitled to indemnity under the
provisions of this Section 11.3, it will give notice thereof in
writing to the indemnifying party together with a statement of
such information respecting any of the foregoing as it shall then
have. Such notice shall include a formal demand for
indemnification under this agreement. The indemnifying party
shall not be obligated to indemnify the indemnified party with
respect to any Claim if the indemnified party fails to notify the
indemnifying party thereof in accordance with the provisions of
this Section 11.3.
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(g) The indemnifying party shall be
entitled, at its cost and expense, to contest and defend by all
appropriate legal proceedings any Claim with respect to which it
has been called upon to indemnify the indemnified party under the
provisions of this Section 11.3; provided, however, that notice
of the intention so to contest shall be delivered by the in-
demnifying party to the indemnified party within twenty (20) days
from the date of mailing to the indemnifying party of the notice
by the indemnified party of the Claim. Any such contest may be
conducted in the name and on behalf of the indemnifying party or
the indemnified party, as may be appropriate. Such contest shall
be conducted by attorneys employed by the indemnifying party, but
the indemnified party shall have the right to participate in such
proceedings and to be represented by attorneys of its own choos-
ing at its cost and expense. If the indemnified party joins in
any such contest, the indemnifying party shall have full author-
ity to determine all action to be taken with respect thereto. If
after proper notice from the indemnified party, the indemnifying
party shall not elect to contest any such claim, the indemnifying
party shall be bound by the result obtained with respect thereto
by the indemnified party. At any time after the commencement of
defense of any Claim, the indemnifying party may request the
indemnified party to agree in writing to the abandonment of such
contest or to the payment or compromise by the indemnifying party
of such Claim, whereupon such action shall be taken unless the
indemnified party determines that the contest should be continued
and so notifies the indemnifying party in writing within fifteen
(15) days of such request from the indemnifying party. In the
event that the indemnified party determines that the contest
should be continued, the indemnifying party shall be liable to
the indemnified party under the provisions of this Section 11.3
only to the extent of the lesser of (i) the amount which the
other party to the contested Claim had agreed to accept in pay-
ment or compromise as of the time the indemnifying party made its
request therefor to the indemnified party, or (ii) such amount
for which the indemnifying party may be liable with respect to
such Claim by reason of the provisions hereof.
11.4 Damages for Breach of Warranty.
(a) The parties agree that their remedy,
among themselves, with respect to any inaccuracy of
representation or breach of warranty or covenant shall be limited
to the recovery of actual damages, as provided herein, and that
no incidental, indirect, consequential or other damages shall be
recoverable therefor.
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(b) The amount of any actual damages
resulting from any inaccuracy of representation or breach of
warranty or covenant on the part of Seller hereunder shall be
limited as follows.
(i) Except as provided in (ii) and (iii)
below, where the value of an item of the Interests affected by
any such inaccuracy or breach is less than its value would have
been had all of Seller's representations and warranties been true
and all covenants performed, then only the difference in value
shall be deemed to be actual damages; and the maximum actual
damages recoverable in connection with such item of the Interests
shall be limited to the Agreed Value for such item of the
Interests, less the portion of the Production Payment
attributable thereto.
(ii) With regard to any breach by Seller
of the representations and warranties set forth in Sections 3.3
concerning title, and those representations and warranties
applicable to ▇▇▇▇▇ qualifying for tax credits under Section 29
of the Code as set forth in Section 3.5, Seller shall reimburse
Buyer any amount of the tax credit payments made to Seller under
Section 2(b)(vii) (and the applicable provisions of Section 4
dealing therewith) of the Assignment, but which are determined,
by final order of a court of competent jurisdiction, not to be
allowed as a proper credit against Buyer's tax liability for the
sole reason that such facts and circumstances represented and
warranted by Seller therein were untrue.
(iii) In the event any payment is made by
Seller to Buyer under the provisions of (i) or (ii) above, Seller
shall also pay to Buyer interest on the amount(s) involved, at
the national Prime Rate of interest quoted day to day in The Wall
Street Journal for the applicable period of time from the date
such amount(s) were paid to Seller by Buyer to the date of
repayment hereunder.
(c) No actual damage resulting from any
inaccuracy or representation or breach of warranty or covenant
hereunder shall be payable by the breaching party unless (i) such
actual damage exceeds the sum of $10,000 (in which case the full
amount of such actual damage shall be payable by such breaching
party), or (ii) the total of all such individual items of actual
damages in amounts less than $10,000 exceeds the sum of $200,000
(in which case the full amount of such total and all other actual
damages thereafter incurred shall be payable by the breaching
party).
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12. Miscellaneous.
12.1 Notices. All communications required or
permitted under this agreement shall be in writing, sent by
facsimile or delivered personally or by courier or sent by
registered or certified mail, postage prepaid, addressed as set
forth below.
(a) Notices to Seller and/or Devon Delaware:
Devon Energy Corporation (Nevada)
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇. ▇. ▇▇▇▇▇▇▇, ▇▇.
Executive Vice President
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) Notices to Buyer, Properties and/or Norfolk:
Norfolk Southern Corporation
Three Commercial Place
Norfolk, Virginia 23510
Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇
Vice President
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may change its address for purposes of this Section by
giving written notice of the change of address to the other
parties in the manner herein provided for giving notice. Any
notice or communication hereunder shall be deemed to have been
given when (i) deposited in the United States mail, if by
certified mail, and (ii) received, if delivered personally or by
courier or by facsimile transmission.
12.2 Binding Effect. This agreement shall be
binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns; provided, no assignment
by any party shall relieve such party of any of its obligations
hereunder. Seller shall not assign or delegate any of its rights
or obligations hereunder, in the Mortgage, the Management and
Agency Agreement, and in the Assignment, including but not
limited to, the Production Payment, without the express written
consent of Buyer, which consent shall not be unreasonably
withheld.
12.3 Counterparts. This agreement may be executed
in any number of counterparts, which taken together shall cons-
titute one and the same instrument and each of which shall be
considered an original for all purposes.
12.4 Expenses. Except as otherwise herein pro-
vided, each party hereto will bear and pay its own expenses of
negotiating and consummating the transactions contemplated
hereby, except for fees and expenses of KPMG Peat Marwick LLP
which are issued in connection with obtaining the private letter
ruling referred to in Section 6.4, which shall be shared equally
by Buyer and Seller.
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12.5 Section Headings. The section headings
contained in this agreement are for convenient reference only and
shall not in any way affect the meaning or interpretation of this
agreement.
12.6 Superseding Effect. This agreement super-
sedes any prior agreement and understanding between the parties
with respect to the subject matter of this agreement.
12.7 Governing Law. This agreement shall be
governed by and construed in accordance with the laws of the
State of Oklahoma applicable to contracts made and performed
entirely therein.
12.8 Waivers. No party's rights hereunder will be
deemed waived except by a writing signed by such party. Without
limitation, the occurrence of the Closing shall not be deemed a
waiver of any party's rights except its right to refuse to close.
12.9 Exhibits and Schedules. The Exhibits and
Schedules referred to herein are attached hereto and by this
reference made a part hereof.
12.10 Announcements. Prior to the earlier of
obtaining the private letter ruling described in Section 6.4(a)
or December 31, 1995, Seller and Buyer shall consult with each
other with regard to all press releases and contacts with
journalists, broadcasters or other media concerning this
agreement or the transactions contemplated hereby, and except as
may be required by applicable laws or the applicable rules,
regulations or guidelines of any governmental agency or stock
exchange, neither Buyer nor Seller shall issue such press release
or other publicity without prior notice of such intent to the
other party.
12.11 Survival of Warranties. Nothing contained
in the Assignment shall be deemed to limit the representations
and warranties set forth herein with respect to Seller's title to
the Interests. The covenants, representations and warranties of
the parties in this agreement shall survive the Closing.
12.12 Joinder by Devon Delaware, Norfolk and
Properties.
(a) Devon Delaware joins in the execution
hereof solely for the purpose of guaranteeing, and Devon Delaware
does hereby guarantee the performance of all of Seller's
obligations hereunder.
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(b) Properties joins in the execution
hereof solely for the following purposes: (i) Properties
represents and warrants that it is the owner of all issued and
outstanding stock of Buyer; (ii) Properties agrees that it will
not during the term of the Production Payment, without the prior
written consent of Seller, transfer such ownership of such stock;
(iii) Properties agrees to cause Buyer to comply with all of the
provisions of Sections 6.4 and 6.5, in the event Seller exercises
any of its rights of rescission, purchase or repurchase
hereunder, and (iv) Properties shall guarantee, and Properties
does hereby guarantee, all representations and warranties to be
made by Buyer pursuant to Section 6.5(b)(4)(i) hereof.
(c) Norfolk joins in the execution hereof
solely for the purpose of guaranteeing, and Norfolk does hereby
guarantee the performance of all of Properties' obligations
hereunder.
(d) Devon Delaware, Properties and Norfolk
each waive, to the fullest extent permitted by law, all defenses
given to sureties or guarantors at law or in equity, other than
the defenses of performance or payment.
12.13 No Restrictions on Production. The parties
agree that any curtailment of production from the Interests might
cause reservoir damage. Accordingly, Buyer agrees not to
initiate any avoidable action which might have the consequence of
curtailing production from the Interests, during the term of the
Production Payment, without first consulting with and receiving
the written consent from Seller concerning such action, which
consent shall not be unreasonably withheld.
12.14 Insurance. In the event the same is not
carried on behalf of Buyer by the operator for any item of the
Interests, Buyer shall procure and maintain insurance from
companies of recognized responsibility in such amounts and with
such coverages as Seller reasonably deems appropriate in respect
to Buyer's ownership of and operations involving such item of the
Interests, and Buyer shall, upon request by Seller, submit to
Seller insurance certificates evidencing such coverage.
12.15 Production Payment Obligations -- Non-
Recourse. Seller agrees that it may only look to its rights
hereunder and under the Mortgage and the Management and Agency
Agreement should Buyer fail to timely make the required payments
under the Production Payment, and that Seller shall not be
entitled to a personal or deficiency judgment.
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Executed this 31st day of January, 1995.
SELLER:
DEVON ENERGY CORPORATION (NEVADA)
By:
▇. ▇. ▇▇▇▇▇▇▇, ▇▇., Executive
Vice President
DEVON DELAWARE:
DEVON ENERGY CORPORATION
By:
▇. ▇. ▇▇▇▇▇▇▇, ▇▇., Executive
Vice President
NORFOLK:
NORFOLK SOUTHERN CORPORATION
By:
▇▇▇▇▇ ▇. ▇▇▇▇▇
Vice President
BUYER:
NS GAS PROPERTIES, INC.
By:
▇▇▇▇▇ ▇. ▇▇▇▇▇
Vice President
PROPERTIES:
NORFOLK SOUTHERN PROPERTIES, INC.
By:
▇▇▇▇▇ ▇. ▇▇▇▇▇
Vice President
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