PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
▇▇▇ ▇. ▇▇▇▇, INC., ▇▇▇ ▇. ▇▇▇▇, INC.
KEYSTONE, INC., THRU LINE INC., W. D. Partners, L.P.,
▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇ ▇. ▇▇▇▇, Trustee
and ▇▇▇▇▇ ▇. ▇▇▇▇, Trustee
as Sellers
and
THE HOME-STAKE OIL & GAS COMPANY
as Buyer
Dated March 5, 1998
TABLE OF CONTENTS PAGE
1. Property to be Sold and Purchased................................. 1
2. Purchase Price.................................................... 2
3. Deposit........................................................... 2
4. Allocation of Base Purchase Price................................. 2
5. Seller's Representations.......................................... 2
6. Buyer's Representations........................................... 3
7. Covenants of Seller and Buyer Pending Closing..................... 3
8. Due Diligence Reviews............................................. 5
9. Adverse Environmental Conditions.................................. 7
10. Remedial Action; Compliance with Law.............................. 9
11. Certain Price Adjustments to the Base Purchase Price.............. 9
12. Conditions Precedent to Buyer's Obligations....................... 9
13. Conditions Precedent to Seller's Obligations...................... 10
14. The Closing....................................................... 10
15. After Closing..................................................... 12
16. Certain Accounting Adjustments to the Purchase Price.............. 12
17. Assumption and Indemnification.................................... 14
18. Environmental Assessment and Indemnification by Buyer............. 14
19. Disclaimer of Warranties.......................................... 15
20. Special Exception to Assumption and Identification ............... 15
21. Buyer's Covenant Not to ▇▇▇ Seller Group.......................... 16
22. Commissions....................................................... 16
23. Casualty Loss..................................................... 16
24. Notices........................................................... 16
25. Survival of Provisions............................................ 16
26. Miscellaneous Matters............................................. 17
Exhibit A - Oil and Gas Leases/ Mineral Interests *
Exhibit B - ▇▇▇▇▇ *
Exhibit C - Assignment and ▇▇▇▇ of Sale*
Exhibit D - Suits, Actions, or other Legal Proceedings Pending *
Exhibit E - Allocation of Values *
-----------------------
* Omitted. The Registrant agrees to furnish supplementally a copy of any such
omitted Exhibits to the Securities and Exchange Commission upon its
request.
PURCHASE AND SALE AGREEMENT
This Agreement, dated March 5, 1998 is made by and between the signatory
parties shown below under "Sellers" (hereinafter collectively called "Seller")
and The Home-Stake Oil & Gas Company, an Oklahoma Corporation (hereinafter
called "Buyer");
W I T N E S S E T H:
WHEREAS, Buyer desires to purchase the Properties, as defined below, from
Seller, and Seller desires to sell the same Properties to Buyer, subject to the
terms and conditions of this Agreement.
NOW, THEREFORE, In consideration of the mutual promises made herein and the
benefits to be derived hereunder, and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, Seller and Buyer agree as follows:
1. Properties to be Sold and Purchased. Seller agrees to sell, and Buyer
agrees to purchase, for the consideration herein set forth, and subject to the
terms and provisions herein contained, the following described properties,
rights, and interests:
(a) All rights, titles, and interests of Seller in and to: 1) the oil, gas,
and mineral leases and mineral interests described in Exhibit A hereto
(including landowner's royalty and any ratifications and amendments to such
leases, whether or not such ratifications and amendments are described in
Exhibit A); and 2) the ▇▇▇▇▇ described in Exhibit B hereto;
(b) All rights, titles, and interests of Seller in and to, or otherwise
derived from, all presently existing and valid oil, gas, and mineral
unitization, pooling, and communitization agreements, declarations, and
orders (including, without limitation, all units formed under orders,
rules, regulations, or other official acts of any federal, state, or other
authority having jurisdiction, and voluntary unitization agreements,
designations, and declarations) relating to the properties described in
subsection 1.(a) to the extent such rights, titles, and interests are
attributable to the properties described in subsection 1.(a);
(c) All rights, titles, and interests of Seller in and to all presently
existing and valid production sales contracts, operating agreements,
farmout agreements, farmin agreements, and other agreements and contracts
that relate to any of the properties described in subsections l.a. and
l.b., to the extent such rights, titles, and interests are assignable and
attributable to the properties described in subsections 1.(a) and 1.(b);
(d) All rights, titles, and interests of Seller in and to all
rights-of-way, easements, surface leases, permits, and licenses appurtenant
to the properties described in subsections 1.(a) and 1.(b); and
(e) All rights, titles, and interests of Seller in and to all materials,
supplies, machinery, equipment, improvements, and other personal property
and fixtures (including, but not limited to, wellhead equipment, pumping
units, flowlines, tanks, buildings, injection facilities, saltwater
disposal facilities, compression facilities, gathering systems, and other
equipment) located on the properties described in subsections 1.(a) and
1.(b) and/or used in connection with the exploration, development,
operation, or maintenance thereof.
The properties and interests specified in subsections 1.(a), 1.(b), 1.(c), 1.(d)
and 1.(e) are herein sometimes collectively called the "Properties". The defined
term "Properties" shall include seismic data, geological and geophysical data,
1
and other similar data related thereto. Seller shall provide Buyer with all data
Seller has in its files, excluding any data which Seller cannot provide to Buyer
without breaching, or risking a breach of, a confidentiality agreement with a
third party; provided, however, Seller agrees to use its best efforts to obtain
the consent of any such third party to the furnishing of such data to Buyer.
2. Purchase Price. The unadjusted purchase price for the Properties shall
be Six Million Six Hundred Eighty Five Thousand dollars ($6,685,000.00) payable
in United States dollars (herein called the "Base Purchase Price"). The Base
Purchase Price may be adjusted, as provided in Sections 7.(c) and 11. hereof.
The Base Purchase Price, as so adjusted and as otherwise adjusted by mutual
agreement of the parties herein, shall be called the "Purchase Price."
3. Deposit. Upon entering into this Agreement, as evidence of good faith,
Buyer shall pay to Seller Six Hundred Sixty Eight Thousand Five Hundred dollars
($668,500.00) hereinafter called the "Deposit". If Buyer and Seller consummate
the transaction contemplated hereby in accordance with the terms hereof, the
Deposit shall be applied to the Purchase Price. If Buyer and Seller do not
consummate the transaction contemplated hereby because of a material default by
Seller, Seller shall return the Deposit to Buyer. Except as provided in Sections
12. and 13., if Buyer fails or refuses to consummate the transaction
contemplated hereby, in violation of the provisions of this Agreement, Seller
may retain the Deposit. The Deposit is neither an ▇▇▇▇▇▇▇ money deposit nor an
amount pre-determined for purposes of liquidated damages. Forfeiture of the
Deposit as provided herein shall be in addition to, and not in lieu of, the
rights and remedies Seller may have at law or in equity for Buyer's failure to
perform as provided in this Agreement. In no event shall the Deposit accrue
interest.
4. Allocation of Base Purchase Price. Buyer has allocated the Base Purchase
Price to the Properties including equipment and personal property. These
allocations are shown on Exhibit E and have been made in good faith by Buyer and
may be relied upon by Seller for all purposes of this Agreement.
5. Seller's Representations. Each of the individual entities comprising
Seller represent to Buyer that:
(a) Each is a legal entity duly organized and legally existing under the
laws of the State of Texas, is qualified to do business in the State of
Oklahoma and is in good standing, or will be at Closing.
(b) Each has full power and ability to enter into this Agreement and
perform its obligations hereunder and has taken all necessary action to
enter into this Agreement and perform its obligations hereunder.
(c) Seller's execution and delivery of this Agreement, the consummation of
the transaction contemplated hereby, and Seller's compliance with the terms
hereof, will not result in any default under any agreement or instrument to
which Seller, or any individual party thereof, is a party or by which the
Properties are bound that would be material to this transaction. Seller's
execution and delivery of this Agreement will not violate any contractual
provision, order, writ, injunction, decree, statute, rule, or regulation
applicable to Seller, or any individual party thereof, or to the Properties
that would be material to this transaction, except the following:
(i) Any waivers of preferential rights to purchase that must be
obtained from third parties;
(ii) Compliance with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"); and,
2
(iii) Any approvals that must be obtained from governmental entities
who are lessors under leases included in the Properties (or who
administer such leases for such lessors) and that are customarily
obtained post-closing.
(d) This Agreement and the Assignment and ▇▇▇▇ of Sale provided for in
Section 14.(a)(i) hereof and any other documentation provided for herein to
be executed by Seller, will, when executed and delivered, constitute the
legal, valid, and binding obligations of Seller, enforceable according to
their terms, except as limited by bankruptcy or other laws applicable
generally to creditor's rights and as limited by general, equitable
principles.
(e) Except as disclosed on Exhibit D, there are no pending suits, actions,
or other proceedings in which Seller is a party that materially affect the
Properties (including, without limitation, any actions challenging or
pertaining to Seller's title to any of the Properties) or affect the
execution and delivery of this Agreement or the consummation of the
transaction contemplated hereby.
6. Buyer's Representations. Buyer represents to Seller that:
(a) Buyer is a corporation duly organized and legally existing under the
laws of its state of organization. Buyer is qualified to do business in the
State of Oklahoma and is in good standing, or will be at Closing.
(b) Buyer has full power and ability to enter into and perform its
obligations under this Agreement (including, but not limited to the payment
of the Purchase Price at Closing) and has taken all necessary action to
enter into this Agreement and perform its obligations hereunder.
(c) Buyer's execution and delivery of this Agreement, the consummation of
the transaction contemplated hereby, and Buyer's compliance with the terms
hereof, will not result in any default under any agreement or instrument to
which Buyer is a party or by which the Properties are bound that would be
material to this transaction. Buyer's execution and delivery of this
Agreement will not violate any contractual provision, order, writ,
injunction, decree, statute, rule, or regulation applicable to Buyer or to
the Properties that would be material to this transaction, except the
following:
(i) Any waivers of preferential rights to purchase that must be
obtained from third parties;
(ii) Compliance with the "HSR Act;" and,
(iii) Any approvals that must be obtained from governmental entities
who are lessors under leases included in the Properties (or who
administer such leases for such lessors) and that are customarily
obtained post-closing.
(d) This Agreement and the Assignment and ▇▇▇▇ of Sale provided for in
Section 14.(a)(i) hereof and any other documentation provided for herein to
be executed by Buyer, will, when executed and delivered, constitute the
legal, valid, and binding obligations of Buyer, enforceable according to
their terms, except as limited by bankruptcy or other laws applicable
generally to creditor's rights and as limited by general, equitable
principles.
(e) There are no pending suits, actions, or other proceedings in which
Buyer is a party that materially affect the execution and delivery of this
Agreement or the consummation of the transaction contemplated hereby.
3
(f) Buyer is a knowledgeable purchaser, owner, and operator of oil and gas
properties, has the ability to evaluate, and has evaluated, the Properties
for purchase, and is acquiring the Properties for its own account and not
with the intent to make a distribution within the meaning of the Securities
Act of 1933, as amended (and the rules and regulations pertaining thereto),
or a distribution thereof in violation of any other applicable securities
laws, rules, or regulations.
7. Covenants of Seller and Buyer Pending Closing. Between the date of this
Agreement and the Closing Date:
(a) Seller shall permit Buyer access as follows:
(i) Seller shall give Buyer and its attorneys and other
representatives, who have a legitimate need to know, access at all
reasonable times during normal business hours to the Properties and,
at Seller's office, to Seller's records (including, without
limitation, title files, division order files, well files, production
records, equipment inventories, and production severance, and ad
valorem tax records) pertaining to the ownership and operation of the
Properties, to conduct due diligence reviews as contemplated by
Section 8. below. Buyer may make copies of such records, at its
expense but shall, if Seller so requests, return all copies so made if
the Closing does not occur. Seller shall not be obligated to provide
Buyer with access to any records or data that Seller cannot provide to
Buyer without breaching, or risking a breach of, confidentiality
agreements with other parties, provided, however, Seller agrees to use
its best efforts to obtain the consent of any such third party to the
furnishing of such records or data to Buyer. All records and data
provided shall be subject to the previously executed Confidentiality
Agreement between Buyer and Seller. SELLER MAKES NO WARRANTY, AND
EXPRESSLY DISCLAIMS ALL WARRANTIES, AS TO THE ACCURACY OR COMPLETENESS
OF THE FILES AND OTHER INFORMATION THAT IT MAY PROVIDE TO BUYER OR
THAT MAY BE PROVIDED BY OTHERS.
(ii) Seller shall make a good faith effort to give Buyer, or Buyer's
authorized representatives, who have a legitimate need to know, at
reasonable times and upon adequate notice to Seller, physical access
to the Properties for the purpose of inspecting same. Buyer recognizes
that some of the Properties are operated by third parties and that
Seller's ability to obtain access to such properties, and the manner
and extent of such access, is subject to the consent of such third
parties. Buyer agrees to comply fully with the rules, regulations, and
any instructions issued by Seller or third party (where a Property is
operated by such third party) regarding the actions of Buyer while
upon, entering, or leaving the Properties.
(iii) If Buyer exercises rights of access under this Section or
otherwise, or conducts examinations or inspections under this Section
or otherwise, then (a) Buyer will be accompanied by Seller's
representative at all times; (b) such access, examination, and
inspection shall be at Buyer's sole risk, cost, and expense, and Buyer
waives and releases all claims against Seller (its affiliates and
their respective directors, officers, employees, attorneys,
contractors, and agents) arising in any way therefrom or in any way
connected therewith or arising in connection with the conduct of its
4
directors, officers, employees, attorneys, contractors, and agents in
connection therewith; and (c) BUYER SHALL RELEASE, INDEMNIFY, DEFEND,
AND HOLD HARMLESS SELLER (AND ITS PARENT, SUBSIDIARY COMPANIES, AND
OTHER AFFILIATES AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
ATTORNEYS, CONTRACTORS, AND AGENTS) (HEREINAFTER COLLECTIVELY REFERRED
TO AS "SELLER GROUP") FROM ANY AND ALL CLAIMS, ACTIONS, CAUSES OF
ACTION, LIABILITIES, DAMAGES, LOSSES, COSTS, OR EXPENSES (INCLUDING,
WITHOUT LIMITATION, COURT COSTS AND ATTORNEYS' FEES),OR LIENS OR
ENCUMBRANCES FOR LABOR OR MATERIALS, ARISING OUT OF OR IN ANY WAY
CONNECTED WITH SUCH ACCESS, EXAMINATION, AND INSPECTION. THE FOREGOING
RELEASE AND INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH CLAIMS,
ACTIONS, CAUSES OF ACTION, LIABILITIES, DAMAGES, LOSSES, COSTS, OR
EXPENSES ARISE OUT OF (i) NEGLIGENCE (INCLUDING SOLE NEGLIGENCE,
SIMPLE NEGLIGENCE, CONCURRENT NEGLIGENCE, ACTIVE OR PASSIVE
NEGLIGENCE, OR OTHERWISE, BUT EXPRESSLY NOT INCLUDING GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT) OF SELLER OR ANY OTHER INDEMNIFIED PARTY, OR
(ii) STRICT LIABILITY.
(b) Seller shall continue to conduct its business in its ordinary course,
and in accordance with all applicable ordinances, statutes, rules, and
regulations of all local, state, and federal governments. Seller shall not
enter into or assume any contract or commitment which is not in the
ordinary course of business as heretofore conducted in association with the
Properties and shall carry on its business and operate the Properties as a
reasonably prudent operator. Subject to existing contractual obligations,
Seller shall not conduct, or commit to participate in, on behalf of Buyer,
any operation affecting the Properties in which Seller's net share of
expense is greater than $50,000.00 for such operation without Buyer's prior
written consent. However, Seller may take such steps and incur such
expenses as it deems necessary in its sole opinion to deal with an
emergency to safeguard any part of the Property without first consulting
with Buyer. As soon as possible after the emergency, Seller shall advise
Buyer of such emergency action. Except as set forth in this Agreement,
Seller shall not sell, assign, transfer, mortgage, farmout, or otherwise
dispose of, abandon, or encumber any material portion of the Properties.
(c) Seller shall use reasonable efforts, consistent with industry practices
in transactions of this type, to identify, with respect to each material
portion of the Properties, (i) all preferential rights to purchase that
would apply to the transaction contemplated hereby and (ii) the parties
holding such rights. In attempting to identify the same, Seller shall not
be obligated to go beyond its own records. Seller shall request from the
parties so identified, and in accordance with the documents creating such
rights, waivers of the preferential rights to purchase. Seller shall have
no obligation hereunder other than to attempt to identify such preferential
rights and to request such waivers. Seller shall not be obligated to assure
that such waivers are obtained. Seller may tender to any party refusing to
waive such a preferential right the interest covered by such right at a
price equal to the value allocated to such interest according to Exhibit E.
To the extent that such an interest is actually sold to a party exercising
such a preferential right, it shall be excluded from the transaction
contemplated hereby, and the Base Purchase Price shall be reduced by the
amount such party paid to Seller for such interest unless the parties
hereto agree otherwise.
(d) If applicable, as soon as practicable after the execution hereof, Buyer
shall prepare and submit any necessary filings in connection with the
transaction contemplated by this Agreement under the HSR Act. Buyer shall
pay all filing fees in connection with such filing, shall request expedited
treatment of such filing by the Federal Trade Commission ("FTC"), shall
5
promptly make any appropriate or necessary subsequent or supplemental
filings, and shall furnish to Seller copies of all filings made under the
HSR Act at the same time they are filed with the FTC. Seller shall
cooperate with Buyer as to all filings required by the HSR Act.
(e) After both parties have executed this Agreement, Seller shall deliver
to Buyer a copy of its "pay list" for each well listed on Exhibit B (which
pay list shall include the name, address, social security number, and
applicable share of proceeds of production, to the extent such information
is contained in Seller's records, for each party to whom Seller is
disbursing proceeds of production with respect to such property); and, a
list of all parties for whom it is holding in suspense proceeds of
production. Seller does not represent or warrant to Buyer the accuracy of
the "pay lists" so delivered.
8. Due Diligence Reviews.
(a) The term "Defect" as used in this Section shall mean any of the
following:
(i) As of the Effective Date, Seller's ownership of a well listed on
Exhibit B hereto either, (A) entitles Seller to receive a share of the
oil, gas, and other hydrocarbons produced from, or allocated to, such
well that is less than the share set forth on Exhibit B for such well
in the columns headed "Net Revenue Interest (NRI)" and "Overriding
Royalty Interest (ORI)", excepting any decreases caused by an increase
in the landowner's royalty payable to the Federal and State
Governments or pursuant to contractual obligations, including, without
limitation, sliding scale overriding royalties, which are tied to
amount of production, or as mandated by Federal and State statutes as
promulgated in the respective Federal and State Rules and Regulations;
or, (B) causes Seller to bear a share of the cost of operating such
well greater than the share set forth on Exhibit B for such well in
the column headed "Working Interest (WI)" (without a proportionate
increase in the share of production to which Seller is entitled from
such well);
(ii) Seller's ownership of a Property is subject to a lien other than
(A) a lien that will be released at or before Closing, (B) a lien for
taxes not yet delinquent, or (C) a lien under an operating agreement
or similar agreement, to the extent the same relates to expenses
incurred that are not yet due;
(iii)Seller's ownership of a Property is subject to a preferential
right to purchase, unless a waiver of such right has been obtained
with respect to the transaction contemplated hereby or an appropriate
tender of the applicable interest has been made to the party holding
such right and the period of time required for such party to exercise
such right has expired without such party exercising such right;
(iv) Seller's ownership of a Property is subject to an imperfection in
title that, if asserted, would cause a Defect, as defined in clause
(i) above, to exist, and such imperfection in title normally would not
be waived by reasonable and prudent persons engaged in the oil and gas
business with knowledge of all the facts and their legal implications
and would materially impair or prevent Buyer from receiving payment
from the purchasers of production, and would prevent the economic
benefit Buyer could reasonably expect by acquiring the Properties;
6
(v) Seller's ownership of a non-producing Property is subject to an
imperfection in title that, if asserted, would cause Seller's
ownership as shown on Exhibit A to be less; and such imperfection in
title normally would not be waived by reasonable and prudent persons
engaged in the oil and gas business with knowledge of all the facts
and their legal implications and would materially prevent the economic
benefit Buyer could reasonably expect by acquiring such Property.
(b) Buyer may conduct, to the extent it deems appropriate and at its sole
risk and cost, such examinations and investigations as it may choose with
respect to the Properties in order to determine whether "Defects" exist.
Unless waived, Buyer shall notify Seller in writing of such Defects as soon
as they are identified, but no later than March 27, 1998, [unless extended
pursuant to 14.(i) or 14.(ii)] (hereinafter "Defect Notice Date"). Those
Defects identified in such notice to Seller are herein called "Asserted
Defects". Such notification shall include a description of the Asserted
Defect, the lease(s) described on Exhibit A affected by such Asserted
Defect, the well(s) listed on Exhibit B to which the Asserted Defect
relates, and all supporting documentation reasonably necessary fully to
describe in detail the basis for the Asserted Defect; and, for each
property, lease and applicable well, the size of any variance from "Net
Revenue Interest (NRI)", "Overriding Royalty Interest (ORI)", or "Working
Interest (WI)" set forth in Exhibit B that does or could result from such
Asserted Defect. Buyer hereby waives all Defects that it fails to identify
to Seller as Asserted Defects on or before the Defect Notice Date. If Buyer
timely notifies Seller of Asserted Defects, Seller (i) shall have the right
(but not the obligation) to attempt to cure such Asserted Defects prior to
Closing, and (ii) shall also have the right (which may be exercised at any
time before the Closing Date) to postpone the Closing by designating a new
Closing Date not later than thirty (30) days after the Closing Date then
existing, if Seller desires additional time to attempt to cure (including
determining if it will attempt to cure) one or more Asserted Defects. In
lieu of curing or attempting to cure an Asserted Defect, Seller may elect,
at any time prior to Closing with respect to any Asserted Defect, to
indemnify and hold Buyer harmless from and against any damages or loss
(including consequential damages, special damages, or similar damages)
Buyer may suffer as a result of a third party claim based on such Asserted
Defect. If Seller elects to indemnify Buyer as to an Asserted Defect, such
Asserted Defect will be treated under this Agreement as cured.
(c) Buyer shall have the right to make an environmental assessment of the
Properties during the period beginning on the date of execution of this
Agreement and ending on the Defect Notice Date. Subject to Buyer's rights
to access under Section 7. hereof, Buyer and its agents shall have the
right to enter upon the Properties and all buildings and improvements
thereon, inspect the same, conduct soil and water tests and borings, and
generally conduct such tests, examinations, investigations, and studies as
Buyer may deem necessary or appropriate for the preparation of appropriate
engineering and other reports in relation to the Properties and their
physical and environmental condition. If Buyer proposes to undertake an
environmental assessment, Buyer's proposed plan, the consultants to be
used, and testing protocol must be approved by Seller before the work may
begin, which approval will not be unreasonably withheld. Buyer agrees
promptly to provide to Seller a copy of the environmental assessment,
including any reports, data, and conclusions. Buyer shall keep all data and
information acquired by such examinations and the results of all analyses
of such data and information strictly confidential and shall not disclose
same to any person or agency without the prior written approval of Seller.
7
BUYER SHALL RELEASE, INDEMNIFY, DEFEND, AND HOLD HARMLESS THE SELLER GROUP
FROM AND AGAINST ANY AND ALL LOSS, COST, DAMAGE, EXPENSE, OR LIABILITY
WHATSOEVER, INCLUDING ATTORNEYS' FEES, ARISING OUT OF THE MAKING OF THE
ENVIRONMENTAL ASSESSMENT INCLUDING, BUT NOT LIMITED TO, INJURY TO OR DEATH
OF PERSONS OR DAMAGE TO PROPERTY OCCURRING IN, ON, OR ABOUT THE PROPERTIES
AS A RESULT OF SUCH ACTIVITIES (EXCEPT ANY SUCH INJURIES OR DAMAGES CAUSED
SOLELY BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY MEMBER OF THE
SELLER GROUP).
(d) After the Defect Notice Date, Buyer shall be deemed to have inspected
the Properties or waived its right to inspect the Properties for all
purposes.
9. Adverse Environmental Conditions.
(a) Buyer shall have until the Defect Notice Date to notify Seller of any
material adverse environmental condition of the Properties which Buyer
deems unacceptable and provide evidence of the condition to Seller. An
environmental condition is a material adverse environmental condition
("Condition") only if the following criteria are met:
(i) The environmental condition would have been required to be
remediated on the Effective Date under the Environmental Laws; and,
(ii) The total cost to remediate all environmental conditions
identified by Buyer affecting the Properties to the state required by
the Environmental Laws is reasonably estimated to be at least
$100,000.00.
(b) "Environmental Law" shall mean any federal, state, or local law, rule,
regulation, order, or ordinance in effect as of the Effective Date of this
Agreement pertaining to protecting the public health, welfare, and the
environment.
(c) At Closing, Seller may elect any of the following provided a Condition
exists:
(i) Decrease the Base Purchase Price by a mutually acceptable amount
reflecting Seller's proportionate share, based on its working
interest, of the cost reasonably estimated to remediate a Condition
affecting the Properties to such a state as required by the
Environmental Laws;
(ii) Remove the affected Properties from this Agreement and adjust the
Base Purchase Price by the amount allocated to the affected Properties
according to Exhibit E.
(iii) Remedy, or agree to remedy, the Condition, as provided below;
or,
(iv) Terminate this Agreement.
(d) If option (c)i. above is chosen, Buyer shall be responsible for any
remediation. If the actual cost to remediate a Condition exceeds the amount
of the estimate, Buyer shall pay the additional costs to remediate the
Condition as required by applicable law. If the actual cost to remediate a
Condition is less than the amount of the estimate, Buyer shall be entitled
to retain the amount by which the estimate exceeds the actual cost.
(e) If option (c)iii. above is chosen, the following shall govern the
remediation:
8
(i) Seller shall be responsible for all negotiations and contacts with
federal, state, and local agencies and authorities with regard to the
Condition or remediation. Buyer may not make any independent contacts
with any agency, authority, or other third party with respect to the
Condition or remediation and will keep all information regarding the
Condition and remediation confidential, except in each instance to the
extent required by applicable law.
(ii) Seller shall remediate the Condition to the state agreed upon by
Seller and Buyer, but in no event will Seller be required to remediate
the Condition beyond the state required by the Environmental Laws.
(iii) Buyer will use its best efforts to obtain access to the affected
Properties after Closing to Seller and third parties conducting
assessments or remediation, to the extent and as long as necessary to
conduct and complete the assessment or remediation work, to remove
equipment and facilities, and to perform any other activities
reasonably necessary in connection with assessment or remediation.
(iv) Buyer will use its best efforts not to interfere with Seller's
ingress and egress or assessment or remediation activities. Seller
shall make reasonable efforts to perform the work so as to minimize
disruption to Buyer's business activities and to the Properties.
(v) Seller shall continue remediation of the Condition until the first
of the following occurs:
(1) The appropriate governmental authorities provide written
notice to Seller or Buyer that no further remediation of the
Condition is required; or
(2) Seller and Buyer jointly agree that the Condition has been
remediated to the state required by the Environmental Laws or as
agreed by the parties.
Upon the occurrence of (1) above, Seller shall notify Buyer that
remediation of the Condition is complete and provide a copy of
the notification described in (1) above. Upon delivery of
Seller's notice, Seller shall be released from all liability and
have no further obligations under any provisions of this
Agreement in connection with a Condition.
(vi) Until Seller completes remediation of a Condition, Seller and
Buyer will each notify the other of any pending or threatened claim,
action, or proceeding by any authority or private party that relates
to or would affect the Condition, the assessment, or the remediation
of the affected Properties.
(vii) If Seller will assess or remediate the affected Properties after
Closing, the Assignment and ▇▇▇▇ of Sale or other recordable
instrument will restate the rights and obligations of this section.
10. Remedial Action; Compliance with Law. When any lease terminates, an
interest in which has been assigned under this Agreement, Buyer, to the extent
it can do so as non-operator will undertake testing, assessment, closure,
reporting, or remedial action with respect to the Properties affected by the
termination as is necessary to satisfy all local, state, or federal requirements
in effect at that time and necessary to restore the Properties. Buyer agrees to
release, indemnify, hold harmless, and defend Seller as to all claims and
9
liabilities arising therefrom to the same extent as described in Sections 17.
and 18.
11. Certain Price Adjustments to the Base Purchase Price.
(a) If Buyer presents Asserted Defects to Seller as a part of the due
diligence reviews provided for in Section 8. above, and if Seller is unable
or unwilling to cure such Asserted Defects prior to Closing, or if Buyer
has elected to treat a Property affected by a casualty loss pursuant to
Section 22. as if it were a Property affected by an Asserted Defect, then
an appropriate adjustment to the Base Purchase Price to account for such
Asserted Defects shall be made by using those values set forth in Exhibit E
hereto and those Properties, or any part thereof, associated with such
Asserted Defects shall be deleted from this Agreement and any rights of
Buyer thereto shall terminate.
(b) If it is determined that Seller's interest in a well listed on Exhibit
B is greater or lesser than the interest shown for such well under the
columns headed "Net Revenue Interest (NRI)" and "Overriding Royalty
Interest (ORI)" on Exhibit B, then Seller or Buyer may propose an increase
or decrease, as applicable, in the Base Purchase Price, in which case such
increase or decrease shall be handled in the same manner as provided above
with respect to adjustments for Asserted Defects; provided that the party
making such determination shall notify the other party of such adjustment
on or before the Defect Notice Date. Buyer shall have an affirmative
obligation to disclose to Seller circumstances discovered by Buyer in its
due diligence review that could result in an increase in the Base Purchase
Price hereunder.
(c) Notwithstanding the adjustments to be made pursuant to subsections
11.(a)and 11.(b) above, if such adjustments do not exceed $100,000.00, no
such adjustments shall be made and none of the Properties that would
otherwise have been excluded pursuant to subsection 11.(a) above shall be
excluded. If the adjustments to be made pursuant to subsections 11.(a) and
11.(b) above, do exceed $100,000.00, the Base Purchase Price shall be
adjusted by the amount of such adjustments.
12. Conditions Precedent to Buyer's Obligations. Buyer's obligations under
this Agreement are subject to each of the following conditions:
(a) Seller's representations under this Agreement shall be true and
accurate in all material respects as of the date when made and at Closing,
except as to changes specifically contemplated by this Agreement or
consented to by Buyer in writing.
(b) Seller shall have performed and complied in all material respects with
every covenant, agreement, and condition required by it under this
Agreement prior to or at the Closing unless performance or compliance
therewith shall have been waived by Buyer in writing.
(c) If applicable, Buyer and Seller shall have received approval from the
FTC under the HSR Act of the transaction contemplated by this Agreement, or
shall have received notification that the waiting period under such act has
been terminated, or the waiting period under such act shall have expired.
(d) The Base Purchase Price increase or decrease resulting from the
adjustments to be made pursuant to subsections 11.(a) and 11.(b) does not
exceed Seven Hundred Fifty Thousand dollars ($750,000.00).
10
(e) On the Closing Date, no material suit, action, or other proceeding
against Buyer or Seller shall be pending before any court or governmental
agency seeking to restrain, prohibit, or obtain damages or other relief in
connection with the consummation of the transaction contemplated by this
Agreement.
If any such condition precedent to the obligations of Buyer under this Agreement
is not met as of the Closing Date, this Agreement may be terminated at the
option of Buyer. If Buyer thus terminates this Agreement, the Deposit shall be
returned to Buyer and the parties shall have no further obligations to one
another hereunder (other than the indemnifications contained in Sections
7.(a)(iii), 8.(c), and 21. hereof, which shall survive such termination).
Notwithstanding the foregoing, if a condition set forth above, other than
condition 12. (c) or 12.(d), is not met (and is asserted by Buyer as a failure
of one of its conditions of Closing), and if the reasons such condition is not
met relate only to some, but not all, of the Properties, failure of such
condition to be met may, at the option of either Buyer or Seller, be treated as
an uncured Asserted Defect and handled in accordance with the process set forth
in Section 11. above.
13. Conditions Precedent to Seller's Obligations. Seller's
obligations under this Agreement are subject to each of the following
conditions:
(a) Buyer's representations under this Agreement shall be true and accurate
in all material respects as of the date when made and at Closing, except as
to changes specifically contemplated by this Agreement or consented to by
Seller.
(b) Buyer shall have performed and complied in all material respects with
every covenant, agreement, and condition required by it under this
Agreement prior to or at the Closing unless compliance therewith shall have
been waived by Seller.
(c) If applicable, Buyer and Seller shall have received approval from the
FTC under the HSR Act of the transaction contemplated by this Agreement, or
shall have received notification that the waiting period under such act has
been terminated, or the waiting period under such act shall have expired.
(d) The Base Purchase Price reduction resulting from the adjustments to be
made pursuant to subsections 11.(a) and 11.(b) does not exceed Seven
Hundred Fifty Thousand dollars $(750,000.00).
(e) On the Closing Date, no material suit, action, or other proceeding
against Seller shall be pending before any court or governmental agency
seeking to restrain, prohibit, or obtain damages or other relief in
connection with the consummation of the transaction contemplated by this
Agreement.
If any such condition precedent to the obligations of Seller under this
Agreement is not met as of the Closing Date, this agreement may be terminated at
the option of Seller. If Seller terminates this agreement because of Buyer's
failure to fulfill condition 13.(a) or 13.(b), the Deposit shall not be returned
to Buyer. If Seller terminates this Agreement because of conditions 13.(c),
13.(d), or 13.(e), the Deposit shall be returned to Buyer. Thereafter, Seller
and Buyer shall have no further obligations to one another hereunder (other than
the indemnifications contained in Section 7.(a)(iii), 8.(c), and 21. hereof,
which shall survive such termination).
14. The Closing. If the conditions referred to in Section 12. of this
Agreement (the "Conditions Precedent to Buyer's Obligations") and Section 13. of
this Agreement (the "Conditions Precedent to Sellers Obligations") have been
satisfied or waived, the consummation of the transaction contemplated hereby
("Closing") shall take place in the offices of Seller, at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, on March 31, 1998, at 1:00 p.m. Central Standard Time, or at
11
such other date and time (i) as the Buyer and Seller may agree or, (ii) to which
Seller may postpone the Closing pursuant to Section 8.(b) hereof (such date and
time herein called the "Closing Date"). At the Closing:
(a) Seller shall:
(i) Execute, acknowledge, and deliver to Buyer a conveyance of the
Properties containing a special warranty of title (the "Assignment and
▇▇▇▇ of Sale"), in the form attached hereto as Exhibit C (with
Exhibits A and B attached thereto), effective as of seven o'clock
a.m., (7:00 a.m.) Central Standard Time on January 1, 1998, (herein
called the "Effective Date");
(ii) Execute (and, where required, acknowledge) and deliver to Buyer
forms of conveyance or assignment as required by the applicable
authorities for transfers of interests in state or federal leases
included in the Properties;
(iii) Execute and deliver to Buyer letters in lieu of transfer orders
(or similar documentation), in form acceptable to both parties;
(iv) If Buyer requests, deliver to Buyer an affidavit or other
certification (as permitted by the Internal Revenue Code of 1986, as
amended) that Seller is not a "foreign person" within the meaning of
Section 1445 (or similar provisions) of such code (i.e., Seller is not
a non-resident alien, foreign corporation, foreign partnership,
foreign trust, or foreign estate, as those terms are defined in such
code and regulations promulgated thereunder);
(v) Deliver to Buyer certificates in form and substance satisfactory
to Buyer, effective as of the Closing Date and executed by Seller's
duly authorized officer, partner, or owner, as appropriate, to the
effect that (1) Seller has all requisite corporate, partnership, or
other power and authority to sell the Properties on the terms of this
Agreement and to perform its other obligations under this Agreement
and has fulfilled all corporate, partnership, or other prerequisites
to closing this transaction, and (2) each individual executing the
closing documents has the authority to act on behalf of Seller.
(vi) Deliver possession of the Properties to Buyer.
(b) Buyer shall:
(i) Deliver to Seller, by wire transfer to an account designated by
Seller in a bank located in the United States, an amount payable in
United States dollars equal to the amount as set forth on the Closing
Settlement Statement as provided for in Section 16.(c) below;
(ii) Deliver to Seller, except to the extent waived by Seller's,
certificates in form and substance satisfactory to Seller, effective
as of the Closing Date and executed by Buyer's duly authorized
officer, partner, or owner, as appropriate, to the effect that (1)
Buyer has all requisite corporate, partnership, or other power and
authority to purchase the Properties on the terms of this Agreement
and to perform its other obligations under this Agreement and has
fulfilled all corporate, partnership, or other prerequisites to
closing this transaction, and (2) each individual executing the
closing documents has the authority to act on behalf of Buyer.
12
(iii) Execute such forms and take such other steps as Seller may
reasonably require to (A) succeed Seller with respect to the
Properties under the rules and regulations of applicable authorities
and (B) assume any and all liabilities of Seller with respect to the
▇▇▇▇▇ described on Exhibit B; and,
(iv) Take possession of the Properties.
15. After Closing. Within thirty (30) days after Closing, Seller shall
deliver to Buyer all of Seller's files related to the Properties, including but
not limited to lease files, abstracts and title opinions, division order files,
production records, well files, copies of accounting records (but not including
general financial accounting or tax accounting records), and other similar files
and records that directly relate to the Properties. In addition, Seller shall
deliver to Buyer any seismic data, geological and geophysical data, and other
similar data, and any interpretations thereof or other data or records related
thereto except as expressly provided in Section 1. hereof. Seller shall retain
such files, or copies thereof, or such information as it deems necessary for
preparing a Final Settlement Statement as provided in Section 16., or for
purposes of filing tax returns covering the Properties. Any files or materials
retained by Seller after Closing pursuant hereto, shall be sent to Buyer as soon
as reasonably practicable after final payment is made in accordance with the
Final Settlement Statement. Seller may, at its own expense, have access to and
make copies of all, or any part thereof, of the files and records provided Buyer
hereunder at reasonable times and upon reasonable notice during regular business
hours for as long as the Properties remain in effect.
As to those ▇▇▇▇▇ which Seller is disbursing proceeds of production, Seller
shall continue to collect proceeds of production as long as it remains operator
and shall be responsible for making disbursements, in accordance with its normal
procedures (and at normal times), of such proceeds of production so collected to
the parties entitled to same, with any proceeds of production thereafter
collected by Seller to be forwarded promptly to its successor as operator.
16. Certain Accounting Adjustments to the Purchase Price.
(a) Appropriate adjustments to the Purchase Price shall be made between
Buyer and Seller to reflect the following:
(i) All rights to proceeds, receipts, reimbursements, credits, and
income attributable to the Properties and accruing before the
Effective Time, as defined below, shall be the property of Seller. All
proceeds, receipts, credits, income, and charges attributable to the
Properties acquired by Buyer hereunder and accruing on and after the
Effective Time shall be the property of Buyer. As to Properties
operated by Seller and purchased by Buyer hereunder and concerning
accounts held in suspense, Seller will pay in full the royalty
accounts that were suspended because the amount due is less than the
statutory or contractual minimum for payment. As to all other
suspended accounts, if any, Seller shall transfer to its successor as
operator all monies held in a suspended account which were received
for production produced from or allocated to the Properties on and
after the Effective Time. As to proceeds received for production
produced from or allocated to the Properties before the Effective Time
and held in a suspensed account, Seller may either: 1) Retain the
suspended amounts after Closing and, upon proof satisfactory to
Seller, release the money to the proper party; or, 2) Transfer the
suspended amounts to Buyer for future disbursement. Once suspended
amounts have been transferred to Buyer for future disbursement, Buyer
agrees to be responsible for disbursing the suspended monies to the
proper parties and shall release, indemnify, defend, and hold harmless
13
the Seller Group from any and all claims, actions, causes of action,
liabilities, damages, losses, costs, or expenses (including, without
limitation, court costs and attorneys' fees), arising out of or in any
way connected with making such disbursements, or failure to make a
disbursement.
(ii) Seller shall be responsible for and pay (A) all charges and
invoices for costs and expenses (including, without limitation, lease
maintenance payments, drilling and operating expenses, capital
expenditures, and overhead charges) accruing before the Effective Time
and attributable to the Properties and (B) necessary royalty
disbursements of proceeds realized from the sale of production
produced from and allocated to the Properties before the Effective
Time. Buyer shall be responsible for payment of (C) all charges and
invoices for costs and expenses (including, without limitation, lease
maintenance payments, drilling and operating expenses, capital
expenditures, and operator overhead charges) accruing on and after the
Effective Time and attributable to the Properties acquired hereunder
and (D) necessary royalty disbursements of proceeds realized from the
sale of production produced from and allocated to the Properties
acquired hereunder on and after the Effective Time. All payments made
by Seller for items under (C) above for which Buyer is responsible
shall be reimbursed by Buyer. Seller shall reimburse Buyer for all
monies received by Seller from non-operators as payment of Seller's
invoices for the operations of the ▇▇▇▇▇ described on Exhibit B for
periods on and after the Effective Time.
(b) In making such adjustments, the Parties agree that:
(i) Seller has caused such oil storage facilities which store oil
produced from the Properties to be gauged or strapped as of 7:00 a.m.
Central Standard Time on the Effective Date, hereinafter referred to
as the Effective Time. Seller also has caused the gas production meter
charts (or if such do not exist, the sales meter charts) or gas
production statements on the pipelines transporting gas production
from the Properties to be read as of the Effective Time. The results
of such gauging, strapping, or chart reading are conclusive and shall
be made available to Buyer. The production in such storage facilities
or through such meters on the gas pipelines as of the Effective Time
shall be owned by Seller; and, thereafter, production placed in such
storage facilities and gas production passing through the aforesaid
meters on the pipelines shall be owned by Buyer, insofar as to the
interests subject hereto as of Closing.
(ii) All ad valorem, production and similar taxes applicable to the
Properties shall be prorated between Seller and Buyer as of the
Effective Date. Therefore, all ad valorem, production and similar
taxes for 1997 and prior years levied against the Properties shall be
borne and paid by Seller; and, all ad valorem, production and similar
taxes for 1998 and thereafter levied against the Properties shall be
borne and paid by Buyer, irrespective if the amount levied is based on
the previous year's production or any other basis.
(iii) Each party shall be responsible for its own income taxes.
(c) With respect to matters that can be determined as of Closing, Seller
shall prepare, in accordance with the provisions of this Agreement and with
generally accepted accounting principles, a statement (the "Closing
Settlement Statement") setting forth each adjustment to the Base Purchase
Price and to the Purchase Price to the best of Seller's knowledge, whether
14
upward or downward, as may be required in accordance herewith. Seller shall
submit to Buyer the Closing Settlement Statement no later than five (5)
days prior to the Closing Date and shall afford Buyer access to Seller's
records pertaining to the computation of the Closing Settlement Statement.
Prior to the Closing, Buyer and Seller will agree upon the adjustments
stated therein to be made to the Purchase Price, or will specify the
adjustments to which there are differences and the adjustments to be
omitted therefrom. Only the agreed upon adjustments shall be taken into
account in computing the adjustments to be made to the Purchase Price at
Closing. Final adjustments to the Purchase Price to be made hereunder shall
be made within one hundred-twenty (120) days after the Closing Date for all
matters other than Asserted Defects according to (c) hereinbelow as
follows:
(d) As soon as practicable after the Closing, and in no event later than
sixty (60) days following the Closing Date, Seller shall deliver to Buyer,
in accordance with the provisions of this Agreement and with generally
accepted accounting principles, a statement ("Final Settlement Statement")
setting forth each adjustment under this Agreement which was not determined
as of the Closing. Within sixty (60) days after Buyer's receiving the Final
Settlement Statement, the Parties shall agree upon the adjustments and
payments stated in such Final Settlement Statement, and the net of such
adjustments and payments shall be paid in cash to the appropriate Party by
the other Party within five (5) days following agreement as to the Final
Settlement Statement.
17. Assumption and Indemnification. SUBJECT TO THE PROVISIONS OF SECTION
20. BELOW, UPON DELIVERY TO AND ACCEPTANCE BY BUYER OF THE ASSIGNMENT AND ▇▇▇▇
OF SALE, BUYER SHALL BE DEEMED TO HAVE ASSUMED, TO PAY AND PERFORM TIMELY, ALL
DUTIES, EXPENSES, OBLIGATIONS, LOSSES, HAZARDS AND LIABILITIES RELATING TO THE
OWNERSHIP OR OPERATION OF THE PROPERTIES ARISING ON AND AFTER THE EFFECTIVE DATE
(INCLUDING, WITHOUT LIMITATION, THOSE ARISING UNDER OR BY VIRTUE OF ANY LEASE,
CONTRACT, AGREEMENTS, DOCUMENT, PERMIT OR RULE, OR DELAY IN OBTAINING APPROVAL
OF FEDERAL OR STATE ASSIGNMENTS); AND, TO RELEASE, INDEMNIFY, DEFEND, AND HOLD
HARMLESS THE SELLER GROUP FROM AND AGAINST ANY AND ALL CLAIMS, ACTIONS,
LIABILITIES, LOSSES, DAMAGES, COSTS, OR EXPENSES (INCLUDING COURT COSTS AND
ATTORNEYS' FEES) OF ANY KIND OR CHARACTER ARISING OUT OF OR OTHERWISE RELATING
TO THE OWNERSHIP OR OPERATION OF THE PROPERTIES ON AND AFTER THE EFFECTIVE DATE.
IN CONNECTION WITH (BUT NOT IN LIMITATION OF) THE FOREGOING, IT IS SPECIFICALLY
UNDERSTOOD AND AGREED THAT MATTERS ARISING OUT OF OR OTHERWISE RELATING TO THE
OWNERSHIP OR OPERATION OF THE PROPERTIES ON AND AFTER THE EFFECTIVE DATE SHALL
BE DEEMED TO INCLUDE ALL MATTERS ARISING OUT OF THE STATUS AND THE CONDITION OF
THE PROPERTIES ON THE EFFECTIVE DATE INCLUDING, WITHOUT LIMITATION, ALL
OBLIGATIONS TO PROPERLY PLUG AND ABANDON ▇▇▇▇▇ LOCATED ON THE PROPERTIES, TO
RESTORE THE SURFACE OF THE PROPERTIES TO AS NEAR ITS ORIGINAL CONDITION AS
PRACTICABLE AND TO COMPLY WITH, OR BRING THE PROPERTIES INTO COMPLIANCE WITH,
APPLICABLE ENVIRONMENTAL LAWS AND REGULATIONS, INCLUDING ALL LIABILITY AND
EXPENSE FOR ANY RESTORATION, REMEDIATION, CLEAN-UP, DISPOSAL OF WASTE, OR
REMOVAL THAT MAY BE INCURRED AS A RESULT OF THE EXISTENCE OR DISCOVERY OF
NATURALLY OCCURRING RADIOACTIVE MATERIALS, OR OTHER HAZARDOUS OR DELETERIOUS
SUBSTANCES IN, ON, UNDER OR ASSOCIATED WITH THE PROPERTIES, REGARDLESS OF WHEN
THE EVENTS OCCURRED THAT GIVE RISE TO SUCH CONDITION, AND THE ABOVE PROVIDED FOR
ASSUMPTIONS AND INDEMNIFICATIONS BY BUYER SHALL EXPRESSLY COVER AND INCLUDE SUCH
MATTERS. THE FOREGOING ASSUMPTIONS AND INDEMNIFICATIONS SHALL APPLY WHETHER OR
NOT SUCH DUTIES, OBLIGATIONS, OR LIABILITIES, OR SUCH CLAIMS, ACTIONS, CAUSES OF
ACTION, LIABILITIES, DAMAGES, LOSSES, COSTS, OR EXPENSES ARISE OUT OF (I)
NEGLIGENCE (INCLUDING SOLE NEGLIGENCE, SIMPLE NEGLIGENCE, CONCURRENT NEGLIGENCE,
ACTIVE OR PASSIVE NEGLIGENCE, OR OTHERWISE, BUT EXPRESSLY NOT INCLUDING GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT) OF SELLER GROUP OR ANY OTHER INDEMNIFIED
PARTY, OR (II) STRICT LIABILITY.
18. Environmental Assessment and Indemnification By Buyer. BUYER EXPRESSLY
ACKNOWLEDGES THAT IT HAS MADE AN ENVIRONMENTAL ASSESSMENT OF THE PROPERTIES, OR
15
WILL BE GIVEN THE OPPORTUNITY TO DO SO SUBJECT TO THE TERMS OF THIS AGREEMENT.
SUBJECT TO THE PROVISIONS OF SECTION 20. BELOW, BUYER HEREBY AGREES TO ASSUME
THE RISKS THAT THE PROPERTIES MAY CONTAIN WASTE MATERIALS OR HAZARDOUS
SUBSTANCES, AND THAT ADVERSE PHYSICAL CONDITIONS, INCLUDING BUT NOT LIMITED TO
THE PRESENCE OF WASTE MATERIALS OR HAZARDOUS SUBSTANCES OR THE PRESENCE OF
UNKNOWN ABANDONED OIL AND GAS ▇▇▇▇▇, WATER ▇▇▇▇▇, SUMPS AND PIPELINES, MAY EXIST
IN, ON, OR UNDER THE PROPERTIES AS OF THE EFFECTIVE DATE, ALL RESPONSIBILITY AND
LIABILITY RELATED TO ALL SUCH CONDITIONS, WHETHER KNOWN OR UNKNOWN, WILL BE
TRANSFERRED FROM SELLER TO BUYER. SUBJECT TO THE PROVISIONS OF SECTION 20.
BELOW, BUYER ASSUMES FULL RESPONSIBILITY FOR, AND AGREES TO INDEMNIFY, HOLD
HARMLESS AND DEFEND SELLER FROM AND AGAINST ALL LOSS, LIABILITY, CLAIMS, FINES,
EXPENSES, COSTS (INCLUDING ATTORNEYS' FEES AND EXPENSES) AND CAUSES OF ACTION
CAUSED BY OR ARISING OUT OF ANY FEDERAL, STATE OR LOCAL LAWS, RULES, ORDERS AND
REGULATIONS APPLICABLE TO ANY NATURALLY OCCURRING RADIOACTIVE MATERIALS, WASTE
MATERIAL OR HAZARDOUS SUBSTANCES ON OR ASSOCIATED WITH THE PROPERTIES OR THE
PRESENCE, DISPOSAL, RELEASE OR THREATENED RELEASE OF ALL NATURALLY OCCURRING
RADIOACTIVE MATERIALS, WASTE MATERIAL OR HAZARDOUS SUBSTANCES FROM THE
PROPERTIES INTO THE ATMOSPHERE OR INTO OR UPON LAND OR ANY WATER COURSE OR BODY
OF WATER, INCLUDING GROUND WATER, WHETHER OR NOT ATTRIBUTABLE TO SELLER'S
ACTIVITIES OR THE ACTIVITIES OF THIRD PARTIES (REGARDLESS OF WHETHER OR NOT
SELLER WAS OR IS AWARE OF SUCH ACTIVITIES) PRIOR TO, DURING OR AFTER THE PERIOD
OF SELLER'S OWNERSHIP OF THE PROPERTIES. THIS INDEMNIFICATION AND ASSUMPTION
SHALL ALSO APPLY TO LIABILITY FOR VOLUNTARY ENVIRONMENTAL RESPONSE ACTIONS
UNDERTAKEN PURSUANT TO THE COMPREHENSIVE ENVIRONMENTAL RESPONSE COMPENSATION AND
LIABILITY ACT (CERCLA) OR ANY OTHER FEDERAL, STATE OR LOCAL LAW.
19. Disclaimer of Warranties. THE PROPERTIES SHALL BE CONVEYED PURSUANT
HERETO WITHOUT ANY WARRANTY OR REPRESENTATION WHATSOEVER, WHETHER EXPRESS,
IMPLIED OR STATUTORY (OTHER THAN A SPECIAL WARRANTY OF TITLE) AS TO,
DESCRIPTION, QUANTITY, QUALITY, FITNESS FOR A PARTICULAR PURPOSE, CONFORMITY TO
THE MODELS OR SAMPLES OF MATERIALS, OR MERCHANTABILITY OF ANY EQUIPMENT OR ITS
FITNESS FOR ANY PURPOSE, OR OTHERWISE. SUBJECT TO THE PROVISIONS OF SECTION 20.
BELOW, BUYER SHALL HAVE INSPECTED, OR WAIVED (AND AS OF THE DEFECT NOTICE DATE
SHALL BE DEEMED TO HAVE WAIVED) ITS RIGHT TO INSPECT, THE PROPERTIES FOR ALL
PURPOSES AND SATISFIED ITSELF AS TO THEIR PHYSICAL AND ENVIRONMENTAL CONDITION,
BOTH SURFACE AND SUBSURFACE, INCLUDING, BUT NOT LIMITED TO, CONDITIONS
SPECIFICALLY RELATED TO THE PRESENCE, RELEASE, OR DISPOSAL OF HAZARDOUS
SUBSTANCES, SOLID WASTES, ASBESTOS, OR OTHER MANMADE FIBERS OR NATURALLY
OCCURRING RADIOACTIVE MATERIALS ("NORM") IN, ON, OR UNDER THE PROPERTIES. BUYER
SHALL, EXCEPT AS PROVIDED OTHERWISE HEREIN, ACCEPT ALL OF THE SAME "AS IS, WHERE
IS". WITHOUT LIMITATION OF THE FOREGOING, SELLER MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, AS TO THE ACCURACY OR
COMPLETENESS OF ANY DATA, REPORTS, RECORDS, PROJECTIONS, INFORMATION, OR
MATERIALS NOW, HERETOFORE, OR HEREAFTER FURNISHED OR MADE AVAILABLE TO BUYER IN
CONNECTION WITH THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, PRICING
ASSUMPTIONS OR QUALITY OR QUANTITY OF HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE
TO THE PROPERTIES OR THE ABILITY OR POTENTIAL OF THE PROPERTIES TO PRODUCE
HYDROCARBONS OR THE ENVIRONMENTAL CONDITION OF THE PROPERTIES OR ANY OTHER
MATTERS CONTAINED IN THE PROPRIETARY DATA OR ANY OTHER MATERIALS FURNISHED OR
MADE AVAILABLE TO BUYER BY SELLER OR BY SELLER'S AGENTS OR REPRESENTATIVES. ANY
AND ALL SUCH DATA, RECORDS, REPORTS, PROJECTIONS, INFORMATION, AND OTHER
MATERIALS (WRITTEN OR ORAL) FURNISHED BY SELLER OR OTHERWISE MADE AVAILABLE OR
DISCLOSED TO BUYER ARE PROVIDED TO BUYER AS A CONVENIENCE AND SHALL NOT CREATE
NOR GIVE RISE TO ANY LIABILITY OF OR AGAINST SELLER, AND ANY RELIANCE ON OR USE
OF THE SAME SHALL BE AT BUYER'S SOLE RISK TO THE MAXIMUM EXTENT PERMITTED BY
LAW.
NOTWITHSTANDING THE ABOVE DISCLAIMER OF WARRANTIES, SELLER WARRANTS AND AGREES
TO DEFEND TITLE TO THE PROPERTIES AGAINST THE LAWFUL CLAIMS AND DEMANDS OF ALL
16
PERSONS CLAIMING THE SAME OR ANY PART THEREOF BY, THROUGH, OR UNDER SELLER, BUT
NOT OTHERWISE.
20. Special Exception To Assumption And Identification By Buyer For
Environmental Claims: THE PARTIES ACKNOWLEDGE BUYER'S ASSUMPTION OF
RESPONSIBILITY AND INDEMNIFICATION OF SELLER FOR ENVIRONMENTAL CLAIMS, COSTS AND
EXPENSES SET FORTH IN SECTIONS 17., 18. AND 19. ABOVE. NOTWITHSTANDING ANYTHING
CONTAINED IN SUCH SECTIONS TO THE CONTRARY, SUCH ASSUMPTION OF RESPONSIBILITY
AND INDEMNIFICATION BY BUYER DOES NOT APPLY TO AND SELLER WILL NOT BE SO
INDEMNIFIED FOR ENVIRONMENTAL CLAIMS PROVIDED THAT:
(i) SUCH CLAIM IS PROVEN TO BE CAUSED BY A CONDITION EXISTING ON THE
PROPERTIES PRIOR TO THE EFFECTIVE DATE, AND
(ii) SUCH CLAIM OR CONDITION GIVING RISE TO SUCH CLAIM IS DISCOVERED WITHIN
TWO (2) YEARS AFTER THE CLOSING; AND
(iii) BUYER NOTIFIES SELLER IN WRITING OF SUCH CLAIM WITHIN TWO (2) YEARS
AFTER THE CLOSING, SUCH NOTICE TO INCLUDE A DESCRIPTION OF THE CONDITION,
THE WELL OR ▇▇▇▇▇ LISTED ON EXHIBIT "B" AFFECTED BY SUCH CONDITION, THE
ENVIRONMENTAL LAW APPLICABLE TO SUCH CONDITION AND ALL SUPPORTING
DOCUMENTATION REASONABLY NECESSARY TO FULLY IN DETAIL DESCRIBE THE
CONDITION AND
(iv)THE NET ESTIMATED COST TO REMEDIATE THE CONDITION OR SATISFACTION OF
ANY CLAIM ARISING THEREFROM EXCEEDS TWENTY FIVE THOUSAND DOLLARS
($25,000.00).
SELLER AGREES TO BE FULLY RESPONSIBLE FOR EVERY CLAIM OR CLAIMS MEETING THE
SPECIFIC CRITERIA OF THIS SECTION AND SHALL RELEASE, INDEMNIFY, DEFEND AND HOLD
HARMLESS BUYER FROM AND AGAINST ANY AND ALL SUCH CLAIMS AND THE LIABILITIES,
LOSSES, DAMAGES, COSTS AND EXPENSES (INCLUDING COURT COSTS AND ATTORNEYS' FEES)
OF ANY KIND OR CHARACTER ARISING OUT OF OR OTHERWISE RELATING THERETO.
21. Buyer's Covenant Not to ▇▇▇ Seller Group. Except to enforce the
provisions of this agreement or the responsibilities and liabilities of Seller
for claims, costs and expenses with respect to the Properties prior to the
Effective Date according to Sections 17. and 20., Buyer covenants not to ▇▇▇
Seller Group with regard to any claim or liability relating to the Properties,
or this transaction, regardless of when or how the claim or liability arose or
arises or whether the claim or liability was foreseeable or unforeseeable.
BUYER'S COVENANT NOT TO ▇▇▇ SELLER GROUP INCLUDES CLAIMS AND LIABILITIES
RESULTING IN ANY WAY FROM THE NEGLIGENCE OR STRICT LIABILITY OF SELLER GROUP
(OTHER THAN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT), WHETHER THE NEGLIGENCE OR
STRICT LIABILITY IS ACTIVE, PASSIVE, JOINT, CONCURRENT OR SOLE.
22. Commissions. Seller agrees to indemnify and hold harmless Buyer, its
parent and subsidiary companies and other affiliates, and their directors,
officers, employees, and agents from and against any and all claims,
obligations, actions, liabilities, losses, damages, costs, or expenses
(including court costs and attorneys' fees) of any kind or character arising out
of or resulting from any agreement, arrangement, or understanding by, or on
behalf of, Seller with any broker or finder in connection with this Agreement or
the transaction contemplated hereby. Buyer agrees to indemnify and hold harmless
Seller Group from and against any and all claims, obligations, actions,
liabilities, losses, damages, costs, or expenses (including court costs and
attorneys' fees) of any kind or character arising out of or resulting from any
agreement, arrangement, or understanding by, or on behalf of, Buyer with any
broker or finder in connection with this Agreement or the transaction
contemplated hereby.
23. Casualty Loss. If the Properties are damaged by fire or other casualty
prior to the Closing, this Agreement shall remain in full force and effect, and
(unless Buyer and Seller shall otherwise agree) in such event as to each such
damaged Property that Seller, in its sole discretion, elects not to repair,
17
Buyer either may treat such Property as if it had an Asserted Defect or elect
not to adjust the Purchase Price therefor. If Buyer elects hereunder to treat
the damaged Property as if it had an Asserted Defect, the procedure provided for
in Section 11. shall apply to such Property, and all rights to insurance
proceeds and claims against third parties related thereto shall belong to
Seller. If Buyer elects hereunder not to adjust the Purchase Price for such
damaged Property, and if Seller is entitled to any claims under an insurance
policy with respect to such damage, Seller shall either collect and pay over, or
assign, such insurance claims to Buyer. Buyer shall then take title to such
Property without reduction of the Purchase Price. If Seller elects to repair a
damaged Property, all rights to insurance proceeds and claims against third
parties related thereto shall belong to Seller.
24. Notices. All notices and other communications required or permitted
under this Agreement shall be in writing, unless otherwise specifically provided
herein, and shall be delivered by recognized commercial courier or delivery
service (which provides a receipt), by facsimile (with receipt acknowledged), or
by registered or certified mail (postage prepaid), at the following addresses:
If to Buyer: The Home Stake Oil & Gas Company
▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
If to Seller: Bass Enterprises Production Co.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
All such notices and communications shall be considered delivered on the date of
receipt. Buyer or Seller may specify as its proper address any other address
within the continental United States by giving notice to the other party, in the
manner provided in this Section.
25. Survival of Provisions. All representations, warranties, and
indemnifications made herein, shall survive the Closing and the delivery of the
Assignment and ▇▇▇▇ of Sale. All obligations hereunder not satisfied at Closing
shall survive Closing and delivery of the Assignment and ▇▇▇▇ of Sale to the
extent the Parties intend for such obligations to be satisfied after Closing.
Buyer shall have until the Defect Notice Date in which to satisfy itself as to
the quantity and quality of Seller's title to the Properties.
26. Miscellaneous Matters.
(a) Further Assurances. After the Closing, Seller and Buyer shall execute
and deliver, and shall otherwise cause to be executed and delivered, from
time to time, such further instruments, notices, division orders, transfer
orders, and other documents, and do such other and further acts and things
as may be reasonably necessary more fully and effectively to grant, convey,
and assign the Property to Buyer and to effectuate the purposes of this
agreement.
(b) Assignability. Except as provided below, neither party shall have the
right to assign its rights under this Agreement without the prior written
consent of the other party, and any such assignment in violation of this
provision shall be void.
(c) Gas Balances. On the Closing Date (and upon the delivery to Buyer of
the Assignment and ▇▇▇▇ of Sale), Buyer shall assume the position of Seller
with respect to all gas imbalances affecting the Properties acquired
(whether wellhead imbalances or pipeline or gathering imbalances) and to
the position of Seller with respect to all make-up obligations unless the
applicable gas balancing agreement requires a cash settlement when an
interest is assigned, in which event, Seller reserves the gas imbalance
18
account and the right to the cash settlement. As a result of such
succession, Buyer (i) shall be entitled to receive any and all benefits,
including payments of proceeds of production in excess of amounts that it
would otherwise be entitled to produce and receive by virtue of ownership
of the Properties that Seller would have been entitled to receive by virtue
of such position and (ii) shall be obligated to suffer any detriments
(whether the same be in the form of obligations to deliver production that
would have otherwise been attributable to its ownership of the Properties
without receiving full payment therefor, or be in the form of the
obligation to make payment in cash) that Seller would have been obligated
to suffer by virtue of such position.
(d) Confidentiality Agreement. Any Confidentiality Agreement executed by
Buyer and Seller in connection with the transaction contemplated hereby
remains in full force and effect and is not superseded or modified by this
Agreement.
(e) Prior Entire Understanding/Headings/Gender. This Agreement contains the
entire understanding of the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements, understandings,
negotiations, and discussions among the parties with respect to such
subject matter, except as provided above with respect to any
Confidentiality Agreement. The headings contained in this Agreement are for
convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement. Within this Agreement,
words of any gender shall be held and construed to cover any other gender,
and words in the singular shall be held and construed to cover the plural,
unless the context otherwise requires. Time is of the essence in this
Agreement.
(f) Amendments. This Agreement may be amended, modified, supplemented,
restated, or discharged (and provisions hereof may be waived) only by an
instrument executed by both parties.
(g) Associated Expenses. Each party shall bear and pay all expenses it
incurred and that are associated with the transaction contemplated by this
Agreement. Payment of recording fees, filing fees, and any other fees
imposed on the Properties on and after the Effective Date, excluding
Seller's income taxes, shall be paid by Buyer. Seller shall remit on behalf
of Buyer all city, county and state sales taxes due on the equipment and
personal property included in the Properties. Buyer will reimburse Seller
at the Closing for all such sales taxes paid on behalf of Buyer.
(h) Successors and Assigns. This Agreement shall be binding on the parties
hereto and their respective heirs, successors, representatives, and
assigns.
(i) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
shall constitute one (1) and the same instrument. It shall not be necessary
for both parties to sign the same counterpart.
(j) Enforceability. WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW, THIS
AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OKLAHOMA.
(k) Publicity. Prior to Closing, Buyer shall not issue any publicity or
press release concerning this Agreement or the transaction contemplated
hereby without the prior written consent of Seller unless, in the written
opinion of legal counsel acceptable to Seller, such disclosure is required
by applicable law or other applicable rules or regulations of any
governmental authority or stock exchange and such publicity or press
19
release contains no more than the minimum information necessary to comply
therewith. This provision shall not replace or restrict any provision in
any prior agreement between the parties affecting confidentiality or the
disclosure of information about the Properties.
(l) Use of Seller's Name. Buyer agrees that, as soon as practicable after
the Closing, it shall remove or cause to be removed the names and signs
used by Seller, and all variations and derivatives thereof and logos
relating thereto from the Properties and shall not thereafter make any use
whatsoever of such names, signs, and logos. After Closing and as to those
Properties Buyer has taken over as operator, Seller reserves the right of
access to confirm that Buyer has removed Seller's name, signs, and logos.
If Seller is forced to remove its name, signs, and logos because Buyer has
failed to do so, Seller shall charge its costs to Buyer and Buyer shall pay
Seller's invoice within fifteen (15) days of receipt.
(m) Severability. If any term or provision of this Agreement is determined
to be 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 material fashion to either Buyer or Seller. Upon such determination
that any term or other provision is invalid, illegal, or incapable of being
enforced, Buyer and Seller 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.
(n) Reservation of Claims. Seller reserves all rights to claims, demands,
cause of action, and lawsuits concerning the Properties against third
parties that accrued before the Effective Date, whether discovered before
or after the Effective Date, excluding any rights or claims associated with
gas imbalances.
(o) Buyer's Duty to Defend. Where Buyer has agreed to indemnify, defend,
and hold Seller harmless under this Agreement, Seller, at its sole option,
may elect to (a) manage its own defense, in which event Buyer will
reimburse Seller for all attorney's fees, court, and other costs reasonably
incurred in defending a claim, upon delivery to Buyer of invoices for such
expenses; or (b) allow Buyer to be responsible for all aspects of defense.
(p) Exhibits. All exhibits referenced herein and attached hereto are by
reference incorporated into this Agreement.
20
IN WITNESS WHEREOF, this Agreement is executed by the parties hereto on the
date set forth above, but effective as of the Effective Date.
SELLERS
▇▇▇ ▇. ▇▇▇▇, Inc.
▇▇▇ ▇. ▇▇▇▇, Inc.
Keystone, Inc.
Thru Line Inc.
By: /s/ W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------------------
W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Vice President
W.D. Partners, L.P. by
D.W. Genpar, Inc., General
Partner
By: /s/ W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------------------
W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Vice President
/s/ W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ for
-----------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇
/s/ W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ for
-----------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇
/s/ W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ for
-----------------------------------------------
▇▇▇ ▇. ▇▇▇▇, Trustee
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇, Trustee
BUYER
ATTEST: THE HOME-STAKE OIL & GAS COMPANY
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------- -------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Secretary President
21