UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ___)*
COSTILLA ENERGY, INC.
______________________________________________________________
(Name of Issuer)
Common Stock, $.10 par value per share
______________________________________________________________
(Title of Class of Securities)
22161G103
______________________________________________________________
(CUSIP Number)
Philip B. Smith
20 E. 5th Street, Suite 1400
Tulsa, Oklahoma 74103
(918) 587-5816
_______________________________________________________________
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
- with copies to -
Robert A. Curry
Conner & Winters
A Professional Corporation
3700 First Place Tower
15 East 5th Street
Tulsa, Oklahoma 74103-4344
(918) 586-5711
June 29, 1999
_______________________________________________________________
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this Schedule
13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f)
or 13d-1(g), check the following box [ ].
Note: Schedules filed in paper format shall include a signed original
and five copies of the schedule, including all exhibits. See Rule
13d-7(b) for other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a
reporting person's initial filing on this form with respect to the
subject class of securities, and for any subsequent amendment
containing information which would alter disclosures provided in a
prior cover page.
The information required on the remainder of this cover page shall
not be deemed to be "filed" for the purpose of Section 18 of the
Securities Exchange Act of 1934 (the "Act") or otherwise subject to
the liabilities of that section of the Act but shall be subject to
all other provisions of the Act (however, see the Notes).
<PAGE>
<PAGE>
SCHEDULE 13D
CUSIP No. 22161G103 Page 2
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Prize Energy Resources, L.P.
73-1565425
_______________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
_______________________________________________________________
3 SEC USE ONLY
_______________________________________________________________
4 SOURCE OF FUNDS (See Instructions)
Not applicable
_______________________________________________________________
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
_______________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
________________________________________________________________
NUMBER OF 7 SOLE VOTING POWER
SHARES 4,000,000
_____________________________________________
BENEFICIALLY
8 SHARED VOTING POWER
OWNED BY
- 0 -
EACH ____________________________________________
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 4,000,000
______________________________________________
WITH
10 SHARED DISPOSITIVE POWER
- 0 -
________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,000,000
________________________________________________________________
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES (See Instructions) [ ]
________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
28.4%
________________________________________________________________
14 TYPE OF REPORTING PERSON (See Instructions)
PN
________________________________________________________________
<PAGE>
<PAGE>
SCHEDULE 13D
CUSIP No. 22161G103 Page 3
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Prize Operating Company
73-1565426
_______________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
_______________________________________________________________
3 SEC USE ONLY
_______________________________________________________________
4 SOURCE OF FUNDS (See Instructions)
Not applicable
_______________________________________________________________
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
_______________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
________________________________________________________________
NUMBER OF 7 SOLE VOTING POWER
SHARES 4,000,000
_____________________________________________
BENEFICIALLY
8 SHARED VOTING POWER
OWNED BY
- 0 -
EACH ____________________________________________
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 4,000,000
______________________________________________
WITH
10 SHARED DISPOSITIVE POWER
- 0 -
________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,000,000
________________________________________________________________
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES (See Instructions) [ ]
________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
28.4%
________________________________________________________________
14 TYPE OF REPORTING PERSON (See Instructions)
CO
________________________________________________________________
<PAGE>
<PAGE>
SCHEDULE 13D
CUSIP No. 22161G103 Page 4
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Prize Energy Corp.
73-1555685
_______________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
_______________________________________________________________
3 SEC USE ONLY
_______________________________________________________________
4 SOURCE OF FUNDS (See Instructions)
Not applicable
_______________________________________________________________
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
_______________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
________________________________________________________________
NUMBER OF 7 SOLE VOTING POWER
SHARES 4,000,000
_____________________________________________
BENEFICIALLY
8 SHARED VOTING POWER
OWNED BY
- 0 -
EACH ____________________________________________
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 4,000,000
______________________________________________
WITH
10 SHARED DISPOSITIVE POWER
- 0 -
________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,000,000
________________________________________________________________
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES (See Instructions) [ ]
________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
28.4%
________________________________________________________________
14 TYPE OF REPORTING PERSON (See Instructions)
CO
________________________________________________________________
<PAGE>
<PAGE>
SCHEDULE 13D
CUSIP No. 22161G103 Page 5
The information contained in this Schedule 13D is as of the
date hereof, unless otherwise expressly provided herein.
ITEM 1. SECURITY AND ISSUER
The class of equity securities to which this statement on
Schedule 13D relates is the common stock, par value $.10 per share
(the "Common Stock"), of Costilla Energy, Inc., a Delaware
corporation (the "Company"). The address of the Company's
principal executive offices is 400 West Illinois, Suite 1000,
Midland, Texas 79701.
ITEM 2. IDENTITY AND BACKGROUND
(a), (b), (c) and (f) This Schedule 13D is being filed by
Prize Energy Corp., a Delaware corporation ("Parent"), Prize
Operating Company, a Delaware corporation and wholly-owned
subsidiary of Parent ("POC"), and Prize Energy Resources, L.P., a
Delaware limited partnership of which POC is the sole general
partner (the "Partnership"). Parent, POC and the Partnership are
collectively referred to herein as the "Reporting Persons." The
principal business and office address of each Reporting Person is
20 E. 5th Street, Suite 1400, Tulsa, Oklahoma 74103. Parent is a
private independent oil and gas company that owns and operates most
of its assets through the Partnership and POC, respectively.
The executive officers of the Reporting Persons are Philip B.
Smith and Lon C. Kile. Each such executive officer is a United
States citizen whose business address is 20 E. 5th Street,
Suite 1400, Tulsa, Oklahoma 74103. Mr. Smith is the Chairman and
Chief Executive Officer of both Parent and POC. Mr. Kile is the
President and Chief Operating Officer of both Parent and POC.
Messrs. Smith and Kile are the directors of POC. The
Directors of Parent are Mr. Smith, Mr. Kile, David R. Albin,
Kenneth A. Hersh, Scott D. Sheffield and Mark L. Withrow. Each
such Director is a United States citizen. Mr. Albin and Mr. Hersh
are Managing Directors of Natural Gas Partners (an investment
company), whose business address is 777 Main Street, Suite 2250,
Fort Worth, Texas 76102. Mr. Sheffield is President and Chief
Executive Officer, and Mr. Withrow is Executive Vice President and
General Counsel, of Pioneer Natural Resources Company whose
business address is 1400 Williams Square West, 5205 N. O'Connor
Boulevard, Irving, Texas 75039.
(d) and (e) No Reporting Person, and none of the respective
executive officers or directors of any of the Reporting Persons,
has, during the last five years, been (i) convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors),
or (ii) party to a civil proceeding of a judicial or administrative
body of competent jurisdiction and as a result of which
<PAGE>
<PAGE>
SCHEDULE 13D
CUSIP No. 22161G103 Page 6
such person was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
On June 29, 1999, the Partnership acquired from Pioneer
Natural Resources USA, Inc., a Delaware corporation ("Pioneer
USA"), and Pioneer Resources Producing L.P., a Delaware limited
partnership ("Pioneer Resources"), certain oil and gas properties
and related assets and 4,000,000 shares of Common Stock (the
"Shares"), pursuant to a Purchase and Sale Agreement dated May 16,
1999, among Parent (and subsequently assigned to the Partnership),
Pioneer USA and Pioneer Resources (the "Purchase Agreement").
The total consideration paid by the Partnership under the
Purchase Agreement was $239,000,000, of which $209,000,000 was paid
in cash and the balance was paid in preferred stock of Parent. The
total consideration was funded out of a combination of debt and
equity financing. None of the consideration was allocated to
the Shares.
ITEM 4. PURPOSE OF THE TRANSACTION.
The Shares were acquired by the Partnership as a part of a
much larger transaction which involved the purchase of oil and gas
properties and related assets under the Purchase Agreement (as
described in Item 3 above). Pioneer USA had previously acquired
the Shares in connection with certain agreements among Pioneer USA,
Pioneer Resources and the Company relating to the Company's attempt
to acquire the same oil and gas properties which were ultimately
acquired by the Partnership under the Purchase Agreement.
Except as described in Item 6 below, no Reporting Person, and
none of the respective executive officers or directors of any
of the Reporting Persons, has any present plans or proposals which
relate to or would result in (i) the acquisition by any person of
additional securities of the Company, or the disposition of
securities of the Company, (ii) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation,
involving the Company or any of its subsidiaries, (iii) a sale or
transfer of a material amount of assets of the Company or any of
its subsidiaries, (iv) any change in the present board of directors
or management of the Company, including any plans or proposals to
change the number or term of directors or to fill any existing
vacancies on the board, (v) any material change in the present
capitalization or dividend policy of the Company, (vi) any other
material change to the Company's business or corporate structure,
(vii) changes in the Company's charter or bylaws or other actions
which may impede the acquisition of control of the Company by any
person, (viii) the Common Stock or any other class of securities
of the Company ceasing to be authorized to be quoted on The Nasdaq
Stock Market, (ix) the Common Stock or any other class of equity
<PAGE>
<PAGE>
SCHEDULE 13D
CUSIP No. 22161G103 Page 7
securities of the Company becoming eligible for termination of
registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934, or (x) any action similar to any of those
enumerated above.
Depending upon future developments and subject to the terms
of the Due Diligence Use Agreement described in Item 6 below, any
of the Reporting Persons may, in its discretion, develop plans
at any time or from time to time which could relate to or result
in one or more of such actions or events.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) and (b) Each Reporting Person is the beneficial owner of
the Shares, which represent 28.4% of the outstanding shares of
Common Stock. Each Reporting Person has the sole power to vote
and dispose of the Shares. No executive officer or director of
any Reporting Person is the beneficial owner of any shares of
Common Stock.
(c) and (d) No Reporting Person, and none of their respective
executive officers or directors, effected any transactions in the
Common Stock during the past 60 days (other than the acquisition of
the Shares), and, except as described in Item 6 below, no person
is known to have the right to receive or the power to direct the
receipt of dividends from, or the proceeds from the sale of,
the Shares.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS
WITH RESPECT TO SECURITIES OF THE ISSUER
On May 28, 1999, Parent and the Company entered into a certain
Due Diligence Use Agreement (the "Due Diligence Use Agreement"), under
which, among other things, Parent made a cash payment to the Company
in return for access to the due diligence data and information
developed by the Company relating to the oil and gas properties which
were ultimately purchased by the Partnership under the Purchase
Agreement.
Under the Due Diligence Use Agreement, the Reporting Persons are
required (i) through November 2000, to vote the Shares, on all issues
presented to the holders of the Common Stock, as the Company's Board of
Directors states is the desire of the then existing Board of Directors
of the Company; and (ii) to pay to the Company the proceeds, net of
reasonable commissions, derived from the sale of 1,500,000 of the
Shares, with such sales being made at the time, or from time to time,
in the volumes, and in the manner directed by the Company and in
accordance with applicable law.
<PAGE>
<PAGE>
SCHEDULE 13D
CUSIP No. 22161G103 Page 8
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit A - Purchase and Sale Agreement, dated May 16, 1999, by and
among Parent, Pioneer USA and Pioneer Resources.
Exhibit B - Due Diligence Use Agreement, dated May 28, 1999, between
Parent and the Company.
Exhibit C - Joint Filing Agreement, dated as of July 16, 1999, by
and among the Reporting Persons (pursuant to Rule 13d-
1(k)(l) under the Securities Exchange Act of 1934).
<PAGE>
SCHEDULE 13D
CUSIP No. 22161G103 Page 9
SIGNATURES
After reasonable inquiry and to the best of their knowledge
and belief, each of the undersigned certifies that the information
set forth in this statement is true, complete and correct.
Dated: July 16, 1999 PRIZE ENERGY CORP.
By: /s/ Philip B. Smith
___________________________
Philip B. Smith
Chairman and Chief
Executive Officer
Dated: July 16, 1999 PRIZE OPERATING COMPANY
By: /s/ Philip B. Smith
____________________________
Philip B. Smith
Chairman and Chief
Executive Officer
Dated: July 16, 1999 PRIZE ENERGY RESOURCES, L.P.
By: Prize Operating Company,
General Partner
By: /s/ Philip B. Smith
___________________________
Philip B. Smith
Chairman and Chief
Executive Officer
<PAGE>
SCHEDULE 13D
CUSIP No. 22161G103 Page 10
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
Exhibit A - Purchase and Sale Agreement, dated May 16, 1999, by and
among Parent, Pioneer USA and Pioneer Resources.
Exhibit B - Due Diligence Use Agreement, dated May 28, 1999, between
Parent and the Company.
Exhibit C - Joint Filing Agreement, dated as of July 16, 1999, by
and among the Reporting Persons (pursuant to Rule 13d-
1(k)(l) under the Securities Exchange Act of 1934).
EXHIBIT A
PURCHASE AND SALE AGREEMENT
by and between
PIONEER NATURAL RESOURCES USA, INC.
PIONEER RESOURCES PRODUCING, L.P.
as Seller
and
PRIZE ENERGY CORP.
as Purchaser
<PAGE>
<PAGE>
TABLE OF CONTENTS
ARTICLE 1. SALE AND PURCHASE
Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Sale and Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 2. CONSIDERATION
Consideration. . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Manner of Payment. . . . . . . . . . . . . . . . . . . . . . . . . . .9
Like Kind Exchange Option. . . . . . . . . . . . . . . . . . . . . . 10
Deposit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Allocations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 3. DEFECTS
Definition of Acceptable Title.. . . . . . . . . . . . . . . . . . . 11
Definition of Permitted Encumbrances.. . . . . . . . . . . . . . . . 11
Environmental and Physical Assessment. . . . . . . . . . . . . . . . 13
Notice of Defects. . . . . . . . . . . . . . . . . . . . . . . . . . 14
Remedy for Defects.. . . . . . . . . . . . . . . . . . . . . . . . . 15
Preferential Purchase Rights and Consents to Assign. . . . . . . . . 20
ARTICLE 4. SELLER'S REPRESENTATIONS, WARRANTIES AND DISCLAIMER
Existence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Power. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Foreign Person.. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
No Reservations. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . . . 22
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Litigation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Investment Representations.. . . . . . . . . . . . . . . . . . . . . 23
LIMITATION AND DISCLAIMER OF REPRESENTATIONS AND WARRANTIES. . . . . 23
ARTICLE 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
PURCHASER
Existence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Power. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Investment Intent. . . . . . . . . . . . . . . . . . . . . . . . . . 25
Due Diligence. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Sophisticated Buyer. . . . . . . . . . . . . . . . . . . . . . . . . 25
Economic Risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
<PAGE>
Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Accredited Investor. . . . . . . . . . . . . . . . . . . . . . . . . 26
Solicitation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Bankruptcy.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Financial Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 5A. ADDITIONAL COVENANTS
Maintenance of Assets. . . . . . . . . . . . . . . . . . . . . . . . 26
No Encumbrances. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Operations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Access to Records. . . . . . . . . . . . . . . . . . . . . . . . . . 28
Permissions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 6. SELLER'S CONDITIONS OF CLOSING
Representations. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Officer's Certificate. . . . . . . . . . . . . . . . . . . . . . . . 29
Pending Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 7. PURCHASER'S CONDITIONS OF CLOSING
Representations. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Officer's Certificate. . . . . . . . . . . . . . . . . . . . . . . . 30
Pending Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 8. CLOSING.
Time and Place of Closing. . . . . . . . . . . . . . . . . . . . . . 30
Closing Obligations. . . . . . . . . . . . . . . . . . . . . . . . . 30
Purchaser's Extension of Closing . . . . . . . . . . . . . . . . . . 31
ARTICLE 9. POST-CLOSING OBLIGATIONS
Receipts and Credits; Suspense Funds . . . . . . . . . . . . . . . . 32
Costs and Liabilities; Indemnity . . . . . . . . . . . . . . . . . . 33
Further Assurances.. . . . . . . . . . . . . . . . . . . . . . . . . 37
Delivery of Records. . . . . . . . . . . . . . . . . . . . . . . . . 37
Access to Data.. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Purchaser's Release of Seller. . . . . . . . . . . . . . . . . . . . 38
Retroactive Effect.. . . . . . . . . . . . . . . . . . . . . . . . . 39
Inducement to Seller.. . . . . . . . . . . . . . . . . . . . . . . . 39
Related Agreements.. . . . . . . . . . . . . . . . . . . . . . . . . 39
Disposal of Materials, Substances, and Wastes; Compliance and Law. . 39
Litigation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Seller's Indemnity of Purchaser. . . . . . . . . . . . . . . . . . . 39
ARTICLE 10. TERMINATION
Right of Termination.. . . . . . . . . . . . . . . . . . . . . . . . 40
Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . 40
<PAGE>
ARTICLE 11. TAXES
Apportionment of Ad Valorem and Property Taxes.. . . . . . . . . . . 41
Sales Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Other Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE 12. PHYSICAL CONDITION OF THE ASSETS
Prior Use of Assets. . . . . . . . . . . . . . . . . . . . . . . . . 42
Assumption of Assets in Present Condition. . . . . . . . . . . . . . 43
Casualty Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
No Year 2000 Compliance. . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 13. MISCELLANEOUS
Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Entire Agreement.. . . . . . . . . . . . . . . . . . . . . . . . . . 44
Waiver.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Captions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Assignability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Waiver of Consumer Rights/DTPA Waiver. . . . . . . . . . . . . . . . 46
Expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Severability.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
No Third Party Beneficiary.. . . . . . . . . . . . . . . . . . . . . 46
Survival.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Counterparts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Not to be Construed Against Drafter. . . . . . . . . . . . . . . . . 47
Waiver of Jury Trial.. . . . . . . . . . . . . . . . . . . . . . . . 47
Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Accounting.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Operatorship.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Seller's Employees.. . . . . . . . . . . . . . . . . . . . . . . . . 49
Time of Performance. . . . . . . . . . . . . . . . . . . . . . . . . 50
No Partnership Created.. . . . . . . . . . . . . . . . . . . . . . . 50
Express Negligence Rule; Conspicuousness.. . . . . . . . . . . . . . 50
Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Filing and Recording.. . . . . . . . . . . . . . . . . . . . . . . . 52
Removal of Signs.. . . . . . . . . . . . . . . . . . . . . . . . . . 52
Transition Agreement.. . . . . . . . . . . . . . . . . . . . . . . . 53
Exhibit "A" - Properties (wells and units)
Exhibit "A-1" Interests of Other Parties
Exhibit "A-2" Allocated Values
Exhibit "B-1" Form of Assignment and Bill of Sale
Exhibit "B-2" Form of Conveyance
Exhibit "C" Lands and Leases
Exhibit "E" Domestic Mineral Exclusion List
<PAGE>
Schedule 1-2(b) F Form of Seismic Data License Agreement
Schedule 2.1 (c) Preferred Stock Term Sheet
Schedule 4.10 Litigation
Schedule 5.14 Purchaser's Balance Sheet
Schedule 8.2(b) Transfer Orders and Letters in Lieu
Schedule 9.11 Assumed Litigation
Schedule 13.27 Transition Agreement
Schedule 1 to Exhibit "A" Compressor Inventory List (GC only)
Schedule 2 to Exhibit "A" Non-leasehold Equipment
Schedule 3 to Exhibit "A" Victoria Office and Yard
Schedule 4 to Exhibit "A" Undeveloped Leasehold (all)
Schedule 5 to Exhibit "A" Vehicle Report (all)
Schedule 6 to Exhibit "A" Gas Plants (PB &MC)
<PAGE>
<PAGE>
PURCHASE AND SALE AGREEMENT
This PURCHASE AND SALE AGREEMENT, including the exhibits and
schedules hereto (this "Agreement"), is made this 16th day of May,
1999, by and between PIONEER NATURAL RESOURCES USA, INC., a
Delaware corporation, and PIONEER RESOURCES PRODUCING L.P.,
(collectively, "Seller"); and PRIZE ENERGY CORP., a Delaware
corporation with the address of 20 E. Fifth Street, Suite 1400,
Tulsa, Oklahoma 74103 ("Purchaser").
RECITALS:
WHEREAS, Seller has agreed to sell and Purchaser has agreed to
purchase certain of Seller's interests in certain Assets (as
hereinafter defined) on the terms and conditions hereinafter set
forth.
NOW, THEREFORE, for the benefits to each Party contained
herein and other good and valuable consideration, the sufficiency
of which is hereby acknowledged, Seller and Purchaser hereby agree
as follows:
ARTICLE 1. SALE AND PURCHASE
1.1. Effective Time. The effective time and date of the
purchase and sale contemplated hereby shall be 12:01 a.m. Central
Time on July 1, 1999 (the "Effective Time").
1.2. Sale and Purchase. Subject to the terms and conditions
herein contained, at Closing (as defined below) and effective as of
the Effective Time, Seller shall sell, assign, transfer and convey
to Purchaser, and Purchaser shall purchase, accept and receive,
the right, title, and interest, if any, of Seller as of the
Effective Time in and to the following described assets, less and
except the Excluded Assets (the "Assets"):
(a) the oil, gas and mineral leases and leasehold interests
appurtenant to the wells and/or units described in
Exhibit "A" attached hereto and incorporated herein to
the extent and only to the extent they cover the lands
described on Exhibit "C" attached hereto and incorporated
herein, together with Seller's interest in any pooled,
communitized or unitized acreage, to the extent and only
to the extent any such wells are a part thereof, and all
of the rights appurtenant thereto (the "Subject
Properties" or "Subject Property") (reference being made
to Seller's records and files, with respect to the above
leases and wells, located at Seller's office at 303 Wall
Street, Midland, Texas, for a more complete legal
description of the leases, said interests to include all
of the lands covered by said leases appurtenant to the
wells listed on Exhibit "A" hereto, except in the
instance(s) where Seller has retained a well on or other
rights or interest in said leases and leaseholds in which
event Purchaser shall receive the pro-ration acreage
attributable to the affected well(s) listed on Exhibit
<PAGE>
"A" hereto (or other minimum spacing unit or acreage
applicable) or such other lands as Purchaser and Seller
may agree, said lands to be described on Exhibit "A" to
the Assignment and Bill of Sale, as hereinafter defined)
(the Assets described in this Section 1.2(a) being
sometimes referred to herein as the ("Sale Interest");
(b) to the extent, and only to the extent, attributable or
allocable to the Subject Properties: (1) all wells
(including, but not limited to, the wells described in
Exhibit "A" hereto and all other oil, gas, injection and
water wells, whether plugged or unplugged and whether
abandoned or not) ("Wells"), equipment, lease equipment,
gathering pipelines, gas facilities, gathering systems,
gathering, storage, distribution, treating, processing
and disposal facilities and tanks, tools, buildings, and
all other real or tangible personal property and fixtures
which are located on or directly and solely related to
the Subject Properties, including, without limitation,
gas gathering systems (not carrying gas of Seller or any
Affiliate of Seller from an Excluded Asset) which carry
gas produced on any of the Subject Properties and the
items of personal property described in Schedules 1, 2,
3 and 5 of Exhibit "A" hereto, specifically including
portable tools, snow vehicles, equipment, inventory, and
vehicles used exclusively on or exclusively appurtenant
to the Subject Properties or the Wells, but, except as
provided above, excluding personal property not used
exclusively on or exclusively appurtenant to the Wells
and personal property temporarily located on the Subject
Properties; (2) all oil, gas, mineral and other
hydrocarbon substances produced on or after the Effective
Time; (3) to the extent the same are assignable or
transferable by Seller, all orders, contracts, title
opinions and documents, abstracts of title, leases,
deeds, unitization agreements, pooling agreements,
operating agreements, division of interest statements,
participation agreements, gas purchase, sale,
transportation and processing agreements, and all other
agreements and instruments; (4) all surface leasehold
and surface fee estates (but only to the extent overlying
and within the boundaries of the lands comprising the
Subject Properties), easements, rights-of-way, licenses,
authorizations, permits and similar rights and interests,
limited by and subject to the rights of third parties
and applicable Related Agreements (as hereinafter
defined); (5) to the extent assignable, lease files, land
files, operating files, well files, oil and gas sales
contract files, gas processing files, logs, test data,
production histories, division order files, abstracts,
and title files (the "Records"), and all rights thereto,
limited by and subject to the rights, if any, retained by
Seller and those of third parties and applicable Related
Agreements; (6) royalty and overriding royalty interests
not related, pertaining to or derived from the Excluded
Minerals (as hereinafter defined) and to the extent and
only to the extent pertaining to both the Sale Interest
and the area underlying and within the boundaries of the
lands comprising the Subject Properties; (7) all other
rights, privileges, benefits and powers conferred upon
the owner and holder of leasehold in the Subject
Properties; (8) reversionary interests and farmout
rights and interests appurtenant to the Subject
Properties but not related, pertaining to or derived from
the Excluded Minerals (hereinafter described); (9) a
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license, pursuant to Seller's Seismic Data License
Agreement, substantially in the form attached hereto as
Schedule 1.2.(b)F and incorporated herein, to all
existing seismic and geophysical raw data possessed by
Seller on the Effective Time, wholly owned by Seller, to
the extent and only to the extent covering the area
directly within the boundaries of the Subject Properties
or within one mile of the Subject Properties (but only to
the extent it does not cross over onto the boundary of a
retained interest of Seller or an Excluded Asset) and
only to the extent permitted by the applicable agreements
and subject to all rights of third parties and all
conditions or restrictions imposed by said third parties;
(c) to the extent and only to the extent necessary for the
ownership, use or development of the Subject Properties
and limited by and subject to the rights of and
conditions or restrictions imposed by third parties and
applicable agreements, the concurrent, nonexclusive right
of ingress and egress with respect to the fee, fee
mineral, leasehold and royalty interest to the extent
owned or retained by Seller in the area of the Subject
Properties (at Purchaser's sole cost);
(d) the wells, real or personal property (or mixed
property), interests, assets, facilities and equipment
identified on Schedule 1, 2, 3, 4, 5 or 6 of Exhibit "A"
hereto, which may or may not be expressly included in the
engineering data previously furnished to Purchaser but
which constitute a part of the Subject Properties and
those interests, assets, facilities and equipment
appurtenant to the Subject Properties but which are
identified subsequent to the Execution Date by and placed
on Exhibit "A" or any of the Schedules listed immediately
above prior to Closing by Seller;
(e) the interests described on Exhibit "A-1 " attached hereto and
incorporated herein when offered by the owners thereof prior to
Closing (provided each such owner offers to sell all of such owner's
interest in each Well in a given field; in other words, no such
owner may sell an interest in one or more Wells under this
Section 12(e) while retaining an interest in another Well in the
same field) shall be purchased by Purchaser at Closing for a value
proportionate to the allocated value of Seller's related interest in
said Asset, whether or not such interests are acquired by the Seller
on or prior to Closing, unless such interests are subject to Defects
specifically included in any Notice of Defects delivered hereunder,
in which case, at Seller's sole option, (i) such affected interest
shall be excluded from the Assets or (ii) the value with respect to
such interest shall be reduced by the lesser of the cost to cure
said defect or the said defect value not to exceed the proportionate
allocated value for said interest, and such interest shall be
conveyed to Purchaser at Closing as part of the Assets; all such
interests acquired by Purchaser shall be deemed to be a part of the
Sale Interest and subject to the terms of this Agreement for all
purposes and the Purchase Price shall be increased at Closing by the
amount allocated to such acquired interests;
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(f) the undeveloped leasehold identified in Exhibit "A" hereto and more
fully described on Schedule 4 to Exhibit "A" together with all
contract rights, personal property and other rights directly
related thereto to the extent assignable, and subject to and
limited by the rights of third parties and Related Agreements and
recognizing that such undeveloped leasehold may have expired or
may expire after the Execution Date or may not have been renewed
or may not be renewed;
(g) the domestic U.S. mineral interests (and the royalty and overriding
royalty interests associated with said mineral interests) to the
extent covering lands outside the areas, land, counties, or parishes
in the states described on Exhibit "E" attached hereto and incor-
porated herein (the "Mineral Interest"), with Seller expressly
retaining, among the other things retained by Seller pursuant to
this Agreement or not otherwise covered hereby, all right, title
and interest in the domestic U.S. mineral interests, and the royalty
and overriding royalty interests associated with said mineral
interests, inside the areas, land, counties, or parishes in the
states described on said Exhibit "E", (with such retained interests
of Seller referred to as the "Excluded Minerals", with Excluded
Minerals being considered Excluded Assets for purposes of this
Agreement); provided, however, as to the Excluded Minerals, should
any land ultimately and specifically described on an Exhibit "A" to
any Assignment and Bill of Sale delivered to Purchaser by Seller
pursuant to this Agreement (and an interest in said land is intended
to be conveyed thereby) fall within the description for and conflict
with the description of Excluded Minerals, then, as to and only as
to the specific lands described in the said Assignment and Bill of
Sale between Seller and Purchaser, all mineral, royalty and
overriding royalty interests of Seller, if any, to the extent and
only to the extent directly pertaining to and within the boundaries
of said specifically described lands shall not be considered to be
Excluded Minerals and shall be considered to have been conveyed to
Purchaser pursuant to the terms of this Agreement, and only to the
extent assignable, and subject and limited by the rights of third
parties and Related Agreements;
(h) the plants described on Schedule 6 to Exhibit "A" hereto
(the "Gas Plants") and gathering systems appurtenant thereto and
all gas processing, gas purchase and sale contracts associated
therewith, subject to their terms and only to the extent assignable
and subject to and limited by the rights of third parties and
Related Agreements; and
(i) the four (4) million shares of the common stock of Costilla
Energy, Inc. ("Costilla Shares") possessed by Seller, subject to all
restrictions in effect with regard to the Costilla Shares on the
assignment or transfer of the Costilla Shares by Seller.
1.3. Excluded Assets. Notwithstanding anything in this
Agreement to the contrary, the Assets do not include and Purchaser
agrees and acknowledges that Seller has reserved and retained from
the Assets and hereby reserves and retains unto itself any and all
rights, titles and interests in and to (a) fee, leasehold, mineral
fee, royalty, overriding royalty, and other interests not expressly
included under Section 1.2. above; (b) the right of ingress and
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<PAGE>
egress over, across, under and through the Assets for the purpose
of mining, drilling, exploring, operating, holding, producing and
developing the fee, fee mineral, royalty interests and leasehold
interests reserved and retained by Seller for oil, gas, minerals
and other hydrocarbon substances and other lawful substances; (c)
seismic, geologic and geophysical records, information, and
interpretations relating to the Assets, subject to Section
1.2(b)(9) above; (d) any and all records which consist of previous,
contemporaneous or subsequent offers, discussions, or analyses
associated with the purchase, sale or exchange of the Assets or any
part thereof, proprietary or interpretive information, reserve
data, internal communications, personnel information (not related
to the personnel to whom Purchaser offers employment under Section
13.20 hereof), tax information, information covered by a non-
disclosure obligation and information or documents covered by a
legal privilege; (e) originals or copies of Records retained by
Seller; (f) all claims, rights and causes of action against third
parties, asserted and unasserted, known and unknown relating to the
period prior to the Effective Time relating to the Assets, except
to the extent and only to the extent that such claims, rights and
causes of action have been or are then being offset against actual
losses incurred by Purchaser as a result of, vested and existing
pre-Effective Time liabilities or obligations assumed and fulfilled
by Purchaser pursuant to the terms of this Agreement at the time
Seller receives the benefit related to such claim, right or cause
of action , relating to the same affected Assets but to the extent
and only to the extent the liabilities or obligations are those to
which such claims, rights and causes of action directly relate or
pertain; (g) to the extent Seller has reserved interests, including
deep rights, or to the extent Seller currently uses the following
rights for its operations in the area of the Subject Properties,
Seller reserves concurrent interests in any and all applicable
easements, rights of way, contracts, licenses, permits, or other
rights relating to the reserved interests or interests in the area;
(h) communication equipment (other than communication towers and
related equipment located at the Gas Plants or as listed on Exhibit
"A" hereto), leased or rented equipment or facilities, office
equipment, computer equipment and software; (i) all pipelines, gas
plants, equipment, and attendant agreements, and rights of way
owned or operated by Seller or by any Affiliate of Seller which are
not listed on Exhibit "A" (except the Gas Plants); (j) all oil or
gas or other hydrocarbons produced before the Effective Time or in
storage at the Effective Time; (k) any refund of taxes or other
costs or expenses borne by Seller or Seller's predecessors in title
attributable to the period of time prior to the Effective
Time,except to the extent and only to the extent that such claims,
rights and causes of action have been or are then being offset
against actual losses incurred by Purchaser as a result of, vested
and existing pre-Effective Time liabilities or obligations assumed
and fulfilled by Purchaser pursuant to the terms of this Agreement
at the time Seller receives the benefit related to such claim,
right or cause of action , relating to the same affected Assets but
to the extent and only to the extent the liabilities or obligations
are those to which such claims, rights and causes of action
directly relate or pertain; (l) any and all proceeds from the
settlements or final adjudication of contract disputes with
lessors, co-owners or operators of the Assets or with purchasers,
gatherers, processors or transporters of hydrocarbons from or
attributable to the Assets, including, without limitation,
settlement of royalty, take-or-pay, pricing or volume adjustment
disputes, insofar as said proceeds are attributable to periods of
time prior to the Effective Time, except to the extent and only to
the extent that such claims, rights and causes of action have been
or are then being offset against actual losses incurred by
Purchaser as a result of, vested and existing pre-Effective Time
liabilities or obligations assumed and fulfilled by Purchaser
5
<PAGE>
pursuant to the terms of this Agreement at the time Seller receives
the benefit related to such claim, right or cause of action,
relating to the same affected Assets but to the extent and only to
the extent the liabilities or obligations are those to which such
claims, rights and causes of action directly relate or pertain; (m)
Excluded Minerals; and (n) items or interests excluded or removed
elsewhere in or pursuant to this Agreement ((a) through (n),
collectively, the "Excluded Assets" or, individually, an "Excluded
Asset").
1.4. Defined Terms.
"Acceptable Title" has the meaning as set forth in Section 3.1.
"Act" means the Securities Act of 1933, as amended.
"Adjusted Purchase Price" has the meaning as set forth in Section 2.1.
"Affiliate" or "Affiliates" means, as to any Person each other Person
that directly or indirectly (through one or more intermediaries or
otherwise) controls, is controlled by, or is under common control
with, such Person. For purposes of this Agreement, Purchaser is not
and shall not be an Affiliate of Seller or any Person comprising
Seller.
"Agents" has the meaning as set forth in Section 3.3.
"Allocated Values" has the meaning as set forth in Section 2.5.
"Assets" has the meaning as set forth in Section 1.2.
"Assignment and Bill of Sale" means an assignment and bill of sale in
substantially the form attached hereto as Exhibit "B-1" and
incorporated herein.
"Business Day" or "Business Days" means a day or days excluding
Saturdays, Sundays and U.S. legal holidays.
"Casualty Loss" has the meaning as set forth in Section 12.3.
"Claims" has the meaning as set forth in Section 9.2(a).
"Closing" means the consummation of the purchase and sale of the Assets
by Purchaser and Seller as contemplated in this Agreement.
"Closing Date" has the meaning as set forth in Section 8.1.
"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Confidentiality Agreement" has the meaning as set forth in Section
13.2.
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"Conveyance" means a conveyance in substantially the form attached
hereto as Exhibit "B-2" and incorporated herein.
"Defect" and "Defects" have the meanings as set forth in Section 3.4.
"Deposit" has the meaning as set forth in Section 2.4.
"Effective Time" has the meaning as set forth in Section 1.1.
"Environmental Defect" has the meaning as set forth in Section 3.3.
"Environmental Laws" means any and all Laws that relate to: (a) the
prevention of pollution or environmental damages, (b) the abatement,
remediation or elimination of pollution or environmental damage,
(c) the protection of the environment generally, and/or (d) the
protection of Persons or property from actual or potential exposure
(or the effects of exposure) to pollution or environmental damage;
including without limitation, the Clean Air Act, as amended, the Clean
Water Act, as amended, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Federal Water
Pollution Control Act, as amended, the Resource Conservation and
Recovery Act of 1976, as amended, the Safe Drinking Water Act, as
amended, the Toxic Substance and Control Act, as amended, the
Superfund Amendments and Reauthorization Act of 1986, as amended, the
Hazardous and the Solid Waste Amendments Acts of 1984, as amended,
and the Oil Pollution Act of 1990, as amended.
"Examination Period" has the meaning as set forth in Section 3.3.
"Excluded Assets" has the meaning as set forth in Section 1.3.
"Execution Date" is the date on which the last of the Parties hereto
signs this Agreement.
"Final Accounting" has the meaning as set forth in Section 13.17.B.
"Final Accounting Date" has the meaning as set forth in Section
13.17.B.
"Gas Plants" has the meaning as set forth in Section 1.2(h).
"HSR Act" has the meaning as set forth in Section 13.19.
"Imbalances" has the meaning as set forth in Section 9.1.
"Knowledge of Seller" [or Purchaser, as the case may be] or "to the
best of Seller's knowledge and belief " [or Purchaser, as the case may
be ]or words of similar import shall mean only the then existing actual
knowledge of any president or vice president (without obligation of
further inquiries) of Seller [or Purchaser, as the case may be] and
is not intended to imply that such party in fact has actual knowledge
of the subject matter to which such terms apply.
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"Laws" means laws, statutes, ordinances, permits, decrees, orders,
judgments, rules or regulations (including without limitation Environ-
mental Laws) which are promulgated, issued or enacted by a govern-
mental entity (whether federal, state or local) or tribal authority
having appropriate jurisdiction.
"NORM" has the meaning as set forth in Section 9.2(b).
"Notice of Defects" has the meaning as set forth in Section 3.4.
"Notice Period" has the meaning as set forth in Section 9.2.(c).
"Occurrence" has the meaning as set forth in Section 3.5 (c)(7).
"Parties" means, collectively, Purchaser and Seller.
"Party" means either Purchaser or Seller.
"Permitted Encumbrances" has the meaning as set forth in Section 3.2.
"Person" means any individual, corporation, partnership, association,
join stock company, trust or trustee thereof, estate or executor
thereof, unincorporated organization or joint venture, court or other
governmental unit or other agency or subdivision thereof, or any other
legally recognizable entity.
"Preferential Rights" has the meaning as set forth in Section 3.2(c).
"Preliminary Settlement Statement" has the meaning set forth in Section
13.17.A.
"Property" is the real property or properties, surface and subsurface,
in which and on which the Assets, or any portion thereof, are located
or pertain and includes the land, if any, described or referred to in
Exhibit "A" hereto.
"Property Taxes" has the meaning as set forth in Section 11.1.
"Purchase Price" has the meaning as set forth in Section 2.1.
"Purchaser Shares" has the meaning as set forth in Section 2.1(c).
"Records" has the meaning as set forth in Section 1.2(b).
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"Related Agreements" has the meaning as set forth in Section 9.9.
"Representative" and "Representatives" have the meaning as set forth in
Section 9.2(e).
"Sale Interest" has the meaning as set forth in Section 1.2(a).
"Sellers Direct Ownership" is only that period from and after the time
at which Seller actually acquired the affected interest in the Affected
Asset to the Effective Time notwithstanding that the interest may have
been acquired, by merger, consolidation or other similar transaction,
and it expressly excludes any period of ownership by a merged, consoli-
dated or other predecessor or liability of any such predecessor prior
to such time notwithstanding that Seller may have assumed such
liability of such predecessor.
"Subject Properties" has the meaning as set forth in Section 1.2(a).
"Suspense Funds" has the meaning as set forth in Section 9.1.
"Title Defect" has the meaning as set forth in Section 3.4 (a).
"Wells" has the meaning as set forth in Section 1.2(b).
ARTICLE 2. CONSIDERATION
2.1. Consideration. As consideration for this Agreement, Purchaser
shall pay to Seller $245,000,000.00 (US$) (the "Purchase Price"), as may be
adjusted pursuant hereto (the "Adjusted Purchase Price"). The Purchase Price
shall be increased at the annual rate of ten (10%) per cent compounded daily
until Closing, if Closing has not occurred on or before June 29, 1999, under
the conditions as provided in Section 8.3. The components of the Purchase
Price are as follows:
a) $215 million (US$), to be paid in cash at Closing, as adjusted
pursuant to this Agreement;
b) 2,307,693 shares of 6% convertible preferred stock, of Purchaser,
to be delivered to Seller at Closing, as more fully described in
Schedule 2.1(c) and subject to terms and conditions as more fully
described in Schedule 2.1(c), which shares shall be deemed by the
Parties to have a value of $30 million (US$) (the "Preferred Shares").
2.2. Manner of Payment. At Closing, except as provided in the following
Section 2.3, Purchaser shall pay to Seller or Seller's designee the cash
payment component of the Purchase Price to be paid in accordance with Section
2.1(a) by wire transfer of immediately available funds. Seller will provide
Purchaser the necessary wiring instructions no later than two (2) business
days prior to Closing.
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2.3. Like Kind Exchange Option. Seller and Purchaser hereby agree
that Seller, in lieu of the sale of the Assets to Purchaser for the considera-
tion provided herein, shall have the right at any time prior to Closing to
assign all or a portion of its rights under this Agreement to a qualified
intermediary in order to accomplish the transactions contemplated hereby in
a manner that will comply, either in whole or in part, with the requirements
of a like kind exchange pursuant to Section 1031 of the Code. In the event
Seller assigns its rights under this Agreement pursuant to this Section 2.3,
Seller agrees to notify Purchaser in writing of such assignment before
Closing. If Seller assigns its rights under this Agreement, Purchaser agrees
to (i) consent to Seller's assignment of its rights in this Agreement, (ii)
deposit the Adjusted Purchase Price with the qualified escrow or qualified
trust account designated by Seller at Closing, and (iii) take such further
actions, at Seller's cost, as are reasonably required to effectuate the
transactions contemplated hereby pursuant to Code Section 1031, but, in so
acting, Purchaser shall have no liability to any Party in connection with such
actions. All risks associated with any like kind exchange and compliance
thereof with applicable laws, rules and regulations shall be the sole
responsibility of Seller, and Seller agrees to indemnify and hold Purchaser
harmless from and against all costs, expenses, liabilities and obligations
which arise as a result of Purchaser's agreement contained in this Section
2.3.
2.4. Deposit. Upon the execution hereof Purchaser shall pay to Seller
$10,000,000.00(US$) and, on or before June 7, 1999, Purchaser shall pay to
Seller an additional $5,000,000.00 (US$) totaling $15,000,000.00 (US$)so paid
to Seller (the "Deposit"). Except as provided in this Agreement, the Deposit
will be applied to the Purchase Price at Closing and is not refundable. If
Closing occurs, the Deposit and any interest earned thereon through June 29,
1999 shall be applied to reduce the cash portion of the Adjusted Purchase
Price. Interest earned after June 29, 1999 attributable to the Deposit shall
be the sole property of Seller, regardless of whether or not Closing occurs.
If Closing does not occur, the Deposit shall be applied as provided in Section
10.2. Until disposed of in accordance with the terms of this Agreement or
until termination of this Agreement, the Deposit shall be held and invested by
Seller in marketable obligations issued or unconditionally guaranteed by the
United States of America or an instrumentality or agency thereof and entitled
to the full faith and credit of the United States of America, or in money
market and/or mutual funds that invest solely in such obligations.
2.5. Allocations. Purchaser shall make a good faith allocation of the
Purchase Price among the Assets, and such allocation shall be set forth on
Exhibit A-2 (the form of which is attached hereto) which shall be completed by
Purchaser and delivered to Seller on or before 5:00 p.m. May 20, 1999,
whereupon it shall be incorporated in, and made a part of, this Agreement (the
"Allocated Values"). Purchaser agrees that its allocations pursuant to this
Section 2.5 shall be reasonable and based on the information available to
Purchaser on the Execution Date and evaluation standards or methodologies
consistent with those used in the oil and gas industry for similar properties.
Purchaser shall provide Seller, in reasonable detail, the methodologies and
standards behind and supporting its allocations hereunder within three (3)
Business Days after the written request of Seller. If additional or more
detailed allocations are needed for preferential purchase rights or other
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reasons, Purchaser shall provide such additional allocations within five (5)
days after any such request by Seller, each of which allocations shall also
be an Allocated Value.
ARTICLE 3. DEFECTS
3.1. Definition of Acceptable Title. As used herein, the term
"Acceptable Title" shall mean, (i) as to the Gas Plants, such right, title and
interest expressed on Exhibit "A" hereto that is free and clear of all liens,
claims and encumbrances, except for "Permitted Encumbrances" (provided
however, that the presence of a preferential right to purchase provision shall
not be considered a Defect); and (ii) as to the Subject Properties, such
right, title and interest that, as to the currently producing intervals in the
Wells (regardless of any change in the productive status of any Well), (a)
entitles Seller to receive not less than the net revenue interest set forth in
Exhibit "A" hereto of all oil, gas and associated liquid and gaseous
hydrocarbons produced, saved and marketed from the currently producing
intervals of the respective Wells, (b) obligates Seller to bear costs and
expenses relating to the maintenance, development, and operation of the Wells
relative to the respective Subject Properties in a percentage not greater than
the working interest set forth in Exhibit "A" hereto for each, unless there is
a corresponding increase in the applicable net revenue interest, and (c)
except for Permitted Encumbrances, is free and clear of all liens, claims and
encumbrances; provided, however that the presence of a preferential right to
purchase provision shall not be considered to be a Defect . Evidence that
Seller receives its full share of proceeds from a purchaser or third party
operator (not under a 100% or other division order requiring Seller to further
distribute proceeds to third parties) for an Asset creates a rebuttable
presumption that no Title Defect exists with respect to the Asset. As provided
herein, Purchaser must notify Seller in writing if Purchaser determines or
discovers that Seller's net revenue interest or working interest is greater
than that shown on Exhibit "A" hereto. Purchaser acknowledges and agrees that
any net revenue interests and working interests reflected on Exhibit "A"
hereto are for the convenience of Seller and Purchaser and included solely for
the purpose of determining Acceptable Title prior to Closing; Seller does not
and shall not represent or warrant that the Sale Interest is equal to any such
interests in any respect, but agrees that (i) for purposes of determining
Defects prior to Closing, with respect to those Subject Properties listed on
Exhibit "A" hereto with "0.0000" "APO" interests, the "APO" interests shall be
deemed to be the same as the corresponding "BPO" interests, and (ii) Purchaser
may assert as a Title Defect any matter reasonably expected, as to existing
production, to reduce the net revenue interest assigned to such Subject
Property or Well or any matter reasonably expected, as to existing production,
to increase the working interest assigned to such Subject Property and Well
unless there is a corresponding increase in the applicable net revenue
interest.
3.2. Definition of Permitted Encumbrances. As used herein, the term
"Permitted Encumbrances" shall mean the following items, provided none of the
following items shall operate, as of Closing, to increase the working interest
of Seller as set forth in Exhibit "A" hereto for any of the Subject
Properties, without a corresponding increase in the applicable net revenue
interest, or decrease the net revenue interest of Seller set forth in Exhibit
"A" hereto for any of the Subject Properties:
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(a) lessors' royalties, overriding royalties, production payments,
reversionary interests and similar burdens;
(b) division orders and sales contracts;
(c) preferential rights to purchase ("Preferential Rights");
(d) rights to consent to assignment of all or any of the Assets;
(e) materialman's, mechanic's, repairman's, employee's,
contractor's, operator's, tax, and other similar liens,
assessments or charges arising in the ordinary course of
business for obligations that are not yet due or
delinquent, or if delinquent, that are being
contested by Seller in good faith in the normal course of
business;
(f) rights to consent by, required notices to, filings with, or
other actions by governmental entities which are applicable
to the sale of Assets hereunder and not to a prior sale in
connection with the sale or conveyance of oil and gas leasehold
and fee estates or interests therein, which consents, notices,
filings and/or other actions are customarily obtained after
closing;
(g) easements, rights-of-way, servitudes, permits, surface leases
and other rights in respect of surface operations affecting the
Assets;
(h) rights reserved to or vested in any governmental, statutory or
public authority to control or regulate any of the Assets in
any manner, and all applicable laws, rules and orders of any
governmental authority affecting the Assets;
(i) operating agreements, unit agreements, unit operating
agreements, pooling agreements and pooling designations
affecting the Subject Properties which are of
public record or contained in the Records or otherwise
available to Purchaser and all actions taken or operations
occurring in the normal course of business pursuant to
such instruments;
(j) Defects that Purchaser may have expressly waived in writing or
which are deemed to have been waived pursuant to Section 3.5;
(k) all conveyances, reservations and exceptions of public record
or contained in the ecords affecting the Assets which in the
aggregate are not such as to interfere materially with the
operation or use of any of the Subject Properties or materially
reduce the value thereof; and
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(l) all other liens, charges, encumbrances, contracts, agreements,
instruments, obligations, defects and irregularities affecting
the Assets which are not such as to interfere materially with
the operation or use of the affected Subject Properties or
materially reduce the value thereof.
3.3. Environmental and Physical Assessment. Subject to the terms
hereof, Seller's customary Site Access Agreement (if Seller requests Purchaser
to execute same) and the Confidentiality Agreement, Purchaser shall have the
right at its sole risk and expense to make an environmental and other physical
assessment of the Assets during the period beginning on the Execution Date
and ending at 5:00 p.m. on the 15th Business Day prior to the Closing Date
(the "Examination Period"). If Purchaser desires to undertake an environmental
assessment, both the consultant(s) and the scope of the proposed assessment,
including testing protocols, must be acceptable to Seller before work may
begin; however, Seller will not unreasonably withhold its acceptance and will
respond to Purchaser's request in this regard by 5:00 p.m. the second Business
Day after such request. During Seller's normal business hours and subject to
the terms of this Agreement, Purchaser and its employees, contractors,
lenders, and consultants ("Agents") shall have the right to enter upon the
Assets operated by Seller and all buildings and improvements thereon (and
Seller shall use reasonable efforts to obtain permission for Purchaser to gain
access to Assets operated by others, but such access and the terms of such
access cannot be guaranteed)to inspect the same, conduct soil and water tests
and borings, and generally conduct such tests, examinations, investigations
and studies as may be reasonably necessary or appropriate for the preparation
of appropriate environmental and other reports relating to the Assets, their
condition, and the presence of wastes or contaminants. Purchaser shall provide
Seller with 48 hours prior notice of such activities related to the Assets,
regardless of who operates the same, and Seller shall have the right to (i)
witness all such tests and investigations, (ii) receive an equal distribution
of all samples taken by Purchaser or its Agents, and (iii) prohibit such tests
and investigations which it believes could materially damage its properties or
business interests. Entry onto the Assets by Purchaser or its Agents will be
subject to third-party restrictions, if any, and to Seller's safety,
industrial hygiene, and drug and alcohol policies and guidelines and Purchaser
will be responsible for assuring compliance with same by itself and its
Agents. In accordance with the terms of the Confidentiality Agreement, the
Purchaser and its Agents shall keep any data or information acquired by all
such examinations and the results of all analyses of such data and information
strictly confidential and not disclose any of the same to any Person unless
otherwise required by law or regulation and then only after written notice to
Seller of the need for disclosure and the identity of all intended recipients.
Seller hereby grants Purchaser access to the Assets to conduct its
environmental and other physical assessment upon the condition that, PURCHASER
HEREBY INDEMNIFIES, DEFENDS AND HOLDS SELLER AND ITS AFFILIATES AND THEIR
RESPECTIVE REPRESENTATIVES, INCLUDING WITHOUT LIMITATION, ANY PERSON THAT HAS
SERVED AS A DIRECTOR, OFFICER OR EMPLOYEE THEREOF, HARMLESS FROM AND AGAINST
ANY AND ALL CLAIMS OF WHATEVER NATURE FOR OR RELATED TO PERSONAL INJURY, DEATH
OR PROPERTY DAMAGE ARISING OUT OF OR AS A RESULT OF THE ACTIVITIES BY OR ON
BEHALF OF PURCHASER OR ITS AGENTS ON OR RELATED TO THE ASSETS IN CONDUCTING
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SUCH ENVIRONMENTAL AND PHYSICAL ASSESSMENTS OR THE EXERCISE OF ITS
RIGHT UNDER THIS SECTION 3.3. If, and only if, during the Examination Period,
Purchaser determines in good faith that there is an Environmental Defect which
directly arises from or is directly related to the Subject Properties or the
ownership or operation thereof and the environmental condition comprising the
Environmental Defect was not disclosed to or known by Purchaser on or before
the Execution Date, Purchaser may include notice of such Defect in any Notice
of Defects delivered hereunder; provided, that any such matter not included in
a Notice of Defects shall be and hereby is forever waived by Purchaser.
"Environmental Defect" means a condition or circumstance which constitutes a
violation of applicable Environmental Laws on the Execution Date.
3.4. Notice of Defects. If any matter is discovered by Purchaser that,
in Purchaser's reasonable, good faith opinion, would (a) cause any of the Sale
Interest not to be Acceptable Title (a "Title Defect"), (b) constitute an
Environmental Defect (subject to Section 3.3); [but as to (a) above, only to
the extent that each such matter exceeds a value of $15,000.00 and for, and
only for, (b) above individual defects must exceed a minimum of $100,000.00)
individually, a "Defect", and collectively, the "Defects", then if, and only
if, the total value of all Defects as to Section 3.4 (a) exceeds five percent
(5%) of the Purchase Price (the "Title Threshold") or Defects as to Section
3.4 (b) exceeds five percent (5%) of the Purchase Price, (the "Environmental
Threshold") Purchaser may provide written notice (a "Notice of Defects")
thereof actually delivered to Seller not later than noon, on the first
Business Day after the end of the Examination Period. "Title Defect" does not
include (A) a lien or encumbrance in the form of a judgment secured by a
supersedeas bond or other security approved by the court issuing the order;
(B) the loss of lease acreage between the Execution Date and the Closing
Date, because the lease term expires and or (C) the decline or loss of
production from any Well. The Title Threshold and the Environmental Threshold
are collectively the "Thresholds". A Notice of Defects shall specifically
identify the Defect and all positive adjustments to the net revenue interest
or working interest and include (i) Purchaser's purported value of each
specific Defect which value, as to each Subject Property or Asset,
collectively for all Defects for that Subject Property or Asset, cannot exceed
the allocated value of the affected Subject Property or Asset as set out on
Exhibit "A" hereto, (ii) an identification of each affected Asset, (iii)
Purchaser's basis for determining the existence and value of such Defect,
together with copies of all associated reports, title opinions, data, curative
information, evidence, valuations, assessments, conclusions and supporting
calculations, and (iv) Purchaser's statement of steps reasonably necessary
to cure each such Defect to its reasonable satisfaction, all of which shall be
kept strictly confidential by Purchaser and its Agents prior to Closing,
except to the extent required by law, regulation or order of any court or
other governmental authority or as may be necessary to address Defects
identified in a Notice of Defects. IN ADDITION TO PURCHASER'S OTHER
OBLIGATIONS AND RESPONSIBILIITES UNDER THIS AGREEMENT, PURCHASER, FOR THE
PURPOSES OF THIS AGREEMENT, SHALL BE SOLELY RESPONSIBLE FOR EACH AND EVERY
DEFECT BELOW THE LEVEL OF THE THRESHOLDS. NOTWITHSTANDING ANYTHING TO THE
CONTRARY CONTAINED IN THIS ARTICLE 3, THE DEFINITIONS OF DEFECT, TITLE DEFECT,
AND/OR ENVIRONMENTAL DEFECT (OR ANY PLURAL THEREOF) EXCLUDES ANY AND ALL
MATTERS, ISSUES, AND/OR DEFECTS RAISED BY OR ON BEHALF OF COSTILLA ENERGY,
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INC., IN THAT "NOTICE OF DEFECTS" DATED WEDNESDAY, OCTOBER 28, 1998,
DELIVERED TO PIONEER NATURAL RESOURCES USA, INC., ON OCTOBER 29, 1998, (A COPY
OF WHICH HAS BEEN PROVIDED TO PURCHASER) AND ALL SUPPORTING TITLE OPINIONS,
ENVIRONMENTAL REPORTS, SUMMARIES OR OTHER SUPPORTING DOCUMENTS
PROVIDED AS A PART THEREOF OR THEREWITH AND SUCH MATTERS, ISSUES AND/OR
DEFECTS SHALL NOT BE INCLUDED IN ANY NOTICE OF DEFECTS HEREUNDER OR OTHERWISE
AND ARE HEREBY FOREVER WAIVED BY PURCHASER FOR ALL PURPOSES EXCEPT THAT THE
ENVIRONMENTAL THRESHOLD SHALL BE REDUCED BY THE AMOUNT OF $1.5 MILLION TO
REFLECT AN AGREED CREDIT FOR ENVIRONMENTAL DEFECTS RAISED BY COSTILLA ENERGY,
INC.
3.5. Remedy for Defects. In Seller's sole discretion, but without
obligation, it may, at its sole cost, take such steps it deems appropriate or
as are identified by Purchaser's Notice pursuant to Section 3.4 (iv) above or
as are reasonably necessary to cure or minimize Defects identified in a
Notice of Defects. In addition to performing curative, Seller, at its sole
option and upon written notice to Purchaser, may remove the affected Subject
Property from this Agreement and adjust the Purchase Price by the allocated
value for the removed Subject Property unless Purchaser waives the subject
Defect(s) by written notice within two (2) days after the date of Seller's
notice to Purchaser hereunder. In the event Seller is unable or elects not to
cure or minimize any or all such Defects and if any examination by Purchaser
or Seller results in a finding that the interest of Seller is greater than
stated in Exhibit "A" hereto and such increase (which such increase must, if
found by Purchaser, be identified in such Notice to Seller) serves to increase
the value of the Subject Properties or component of the Assets, Seller and
Purchaser shall meet and discuss the validity of each such Defect claim and
the need for and the amount of any mutually acceptable Purchase Price
adjustment.
(a) Title Defect adjustments shall be made with reference (as
a maximum) to the allocated value for each affected Asset as set forth in
Exhibit "A" hereto and with the following criteria:
(1) If the Defect is based on Seller's owning a different net
revenue interest than that shown on Exhibit "A", then the Defect value will be
the absolute value of the number determined by calculating a ratio of change
between the Seller's net revenue interest shown on Exhibit "A" and the actual
or agreed interest by dividing the actual or agreed interest by the net
revenue interest shown on Exhibit "A" then subtracting the quotient from 1.00
and multiplying the results times the Purchaser's allocated value.
(2) If the claim is based on an obligation or burden that is
liquidated in amount, then the adjustment will be the sum agreed by the
Parties necessary to remove the obligation or burden from the affected Asset.
(3) If the claim is based on an obligation or burden that is
not liquidated, but can be estimated with reasonable certainty, the adjustment
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will be the sum agreed by the Parties necessary to compensate Purchaser
on the Closing Date for the adverse economic effect on the affected Asset.
(i) Subject to clause (ii) below, if the amount of the
adjustment for each Defect cannot be determined based on the above criteria,
and if the parties cannot otherwise agree on the amount of an adjustment,
Seller may, at its sole option and upon written notice to Purchaser, either:
(1) terminate this Agreement and refund the Deposit and all
accrued interest thereon subject to Section 10.2;
(2) remove the affected Asset from this Agreement and adjust
the Purchase Price by the allocated value for the Asset; or
(3) elect to resolve the dispute under the arbitration
provisions of this Agreement.
(ii) The Purchase Price will be adjusted only if the sum (i.e.
offsetting of increases and decreases) of all adjustments under this Section
3.5(a) (not otherwise resolved hereunder) as to Title Defects exceed, and
then only to the extent exceeding, the Title Threshold and as to Environmental
Defects only to the extent exceeding the Environmental Threshold. If the sum
of all agreed adjustments for Title Defects or Environmental Defects,
separately, would result in the Purchase Price being reduced by more than ten
(10) percent, or twenty (20) percent collectively, either Purchaser or Seller
may, upon written notice to the other Party, terminate this Agreement, and in
which case Seller shall refund the Deposit and all interest accrued thereon,
subject to Section 10.2.
(b) For environmental matters, Seller will have thirty days after
receipt of Purchaser's Notice of Defects, or until five days before the
Closing Date, if it determines that an Environmental Defect (whether material
or not) may exist with respect to an Asset, to elect any of the following:
(1) adjust the allocation for an Asset by a mutually
acceptable amount reflecting Seller's proportionate share, based on its
working interest, of the cost reasonably estimated to remediate the
Environmental Defect (in the manner described below) affecting the Assets;
(2) remove the affected Asset from this Agreement and adjust
the Purchase Price by the allocation for the affected Asset;
(3) remedy, or agree to remedy, the Environmental Defect as
provided below; or
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(4) terminate this Agreement and refund the Deposit and all
accrued interest thereon, subject to Section 10.2.
Seller may delay Closing until the end of this thirty-day period,
which delay will be in addition to and under the same terms as Seller's right
to delay Closing under Section 8.1.
If the Purchase Price is adjusted because of an Environmental
Defect, the amount of the adjustment will be the cost to remediate the
Environmental Defect, but only to the level required by the Environmental Laws
in effect on the Execution Date but not to exceed the allocated value for the
affected Asset(s). Seller may require Purchaser to remit the full allocation
at Closing, without adjustment for the Environmental Defect, but if it does
so, it will pay the amount of the adjustment to Purchaser when the remediation
performed by Purchaser is complete under applicable law. If the cost to
remediate exceeds the amount of the adjustment, Purchaser will pay the
additional costs to remediate the Environmental Defect as required by
applicable law.
(c) If Seller elects or agrees with Purchaser to remediate an
Environmental Defect or is required by governmental or regulatory agency to
remediate an Environmental Defect, the following will govern the remediation:
(1) Seller will be responsible for all negotiations and
contacts with federal, state, and local agencies and authorities with regard
to the Environmental Defect or remediation. Purchaser may not make any
independent contacts with agency, authority, or other third party with respect
to the Environmental Defect or remediation and will keep all information
regarding the Environmental Defect confidential, except in each instance to
the extent required by applicable law.
(2) Seller will remediate the Environmental Defect to the
level agreed upon by Seller and Purchaser, but in no event will Seller be
required to remediate the Environmental Defect beyond the level required by
the Environmental Laws in effect on the Execution Date.
(3) Purchaser will grant and warrant access to the Assets and
entry on the Property after Closing to Seller, its Representatives, 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.
(4) Purchaser will use its best efforts not to interfere with
Seller's ingress or egress or assessment or remediation activities. Seller
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will make reasonable efforts to perform the work so as to minimize disruption
to Purchaser's business activities and to the Assets and the Property.
(5) Seller will continue remediation of the Environmental
Defect until the first of the following occurs:
(a) The appropriate governmental authorities provide
written notice to Seller or Purchaser that no further remediation of the
Environmental Defect is required; or
(b) Seller determines that the Environmental Defect has
been remediated to the level required by the Environmental Laws or as agreed
by the Parties.
Upon the occurrence of either (a) or (b) above, Seller will
notify Purchaser that remediation of the Environmental Defect is complete and
provide a copy of the notification described in clause (a) above, if
applicable. Upon delivery of Seller's notice, Seller will be released,
without further action or documentation, from all liability and have no
further obligations under any provisions of this Agreement in connection with
said Environmental Defect.
(6) Until Seller completes remediation of an Environmental
Defect, Seller and Purchaser 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 environmental condition, the assessment, or the
remediation of the affected Assets or Property.
(7) After delivery of possession or Closing (whichever occurs
first) and before Seller has completed remediation of an Environmental Defect,
if a leak, spill, or discharge of any material or substance ("Occurrence")
occurs on the Property or Assets, or any part of them, Purchaser will promptly
notify Seller and act promptly to minimize the effects of the Occurrence. If
a spill, leak or discharge occurs and Seller determines that it may affect
that area where Seller is conducting remediation or assessment, Purchaser will
hire a consultant (who must be acceptable to Seller) to assess the effect of
the occurrence on the environmental condition of the Property and Seller's
remediation work and the cost of the additional work required as the result of
the Occurrence. Except to the extent the Occurrence was caused by Seller,
Purchaser will be responsible for the incremental cost of remediating the
impact of the Occurrence. If Seller's remediation is expanded to incorporate
remediation of the Occurrence, Purchaser will promptly pay its share of costs
and expenses to Seller as the work is performed, within thirty days of receipt
of invoices for the work (with supporting documentation). Payments not made
timely will bear interest at a rate of twelve percent per annum or the maximum
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lawful rate, whichever is less, compounded daily from the date of Purchaser's
receipt of the invoice until paid.
If the cost of the additional work equals or exceeds the cost which
would have been incurred but for the Occurrence, Seller will pay Purchaser the
cost that would have been incurred by Seller to complete the remediation but
for the Occurrence. As consideration for this payment, Purchaser will accept
the environmental condition of the Property and Assets as they exist on the
date of the payment, assume full responsibility for remediating the Property
and Assets and related off-site contamination in accordance with this
Agreement, and agree to release, indemnify, hold harmless, and defend Seller
and its Representatives as to Claims arising from the Occurrence to the same
extent as described in Article 9.
(8) If Seller undertakes remediation as to any Assets in which
Seller's ownership was less than 100%, Purchaser will bill the other working
interest owners for their share of the remediation expenses. Regardless of
whether Seller recoups any amount from the other working interest owners,
Purchaser will refund to Seller, within sixty days of each Seller invoice,
with documentation, any amounts expended by Seller over the amount formerly
attributable to Seller's working interest share.
(9) If Seller will assess or remediate the Assets or Property
after Closing, the Assignment and Bill of Sale or other recordable instrument
will restate the rights and obligations of this section.
(d) If (i) the net amount of Purchase Price adjustments mutually agreed
and/or as a result of Seller's removal of Assets hereunder, plus the amount of
any uninsured Casualty Losses and Casualty Losses not fully covered by
insurance (to the extent of such deficiency only), plus the value of any of
the Subject Properties (with reference to the allocated value thereof on
Exhibit "A" as a maximum) to the extent taken in condemnation or under the
right of eminent domain prior to the end of the Examination Period, or with
respect to which proceedings for such purposes shall be pending or threatened
in writing at such time, equals or exceeds twenty-five percent (25%) of the
Purchase Price, or (ii) the aggregate value of Subject Properties subject to
Preferential Rights to be exercised at Closing equals or exceeds fifty percent
(50%) of the Purchase Price, then Seller or Purchaser may, upon written notice
to the other, terminate this Agreement, without liability or further
obligation to the other Party, subject to Section 10.2. Seller shall have an
absolute right to terminate this Agreement upon written notice to Purchaser,
without liability or further obligation to Purchaser if the Defects presented
by Purchaser exceed ten percent (10%) of the Purchase Price, subject to
Section 10.2. Seller shall have no obligation hereunder to Purchaser or any
Person to sell, convey, deliver or otherwise transfer all or any part of the
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Assets if Purchaser or Seller terminates this Agreement pursuant to this
Section 3.6. Purchaser agrees and acknowledges that Seller has no obligation
to adjust the Purchase Price with respect to Defects. If Closing occurs,
Purchaser shall be deemed to have forever waived and/or assumed any and all
Claims, known and unknown, arising from or related to any and all Defects or
title to or defect or other condition of the Assets in whole or in part,
including, without limitation, whether or not identified in a Notice of
Defects, and notwithstanding the fact that Seller may not have cured any such
Defect(s) to Purchaser's satisfaction, and Seller shall have no obligation
with respect thereto.
(e) Notwithstanding any provision in this Section 3.5 to the contrary,
in the event Seller delivers a notice terminating this Agreement pursuant to
this Section 3.5, Purchaser shall have until 5:00 p.m. on the first Business
Day after receipt of said notice to forever waive, by written notice delivered
to Seller on or before said date and time, Defects which constitute the
grounds stated for termination in said termination notice and if Purchaser so
waives said Defects and matters the notice of termination delivered by Seller
shall be considered withdrawn.
3.6. Preferential Purchase Rights and Consents to Assign. Upon
written notification to Seller by Purchaser identifying Persons (and their
addresses) holding preferential rights to purchase affecting the Subject
Properties or Gas Plants or the right to consent with respect to any
assignments required hereby, other than such consents of governmental
authorities which are usually obtained in the normal course of business after
Closing, actually received by Seller not later than the earlier of (i) fifteen
(15) days prior to the Closing Date, or (ii) five (5) Business Days prior to
the latest date prior to Closing permitted by the subject agreement for such
notice to be provided, or upon Seller's own initiative but without any
obligation to so initiate, Seller shall send notice of this Agreement to all
such Persons (y) offering to sell to each such Person the Subject Properties
or Gas Plants for which a preferential right is held on and subject to the
terms hereof and for the same allocated value for such Subject Properties or
Gas Plants reflected on Exhibit "A" hereto, or (z) requesting, where
appropriate, consent to any assignment required in connection herewith.
Notwithstanding the foregoing, Purchaser shall be ultimately responsible for
obtaining all approvals and consents from each and every applicable Person,
including, but not limited to, lessors, joint interest owners, farmors,
sublessors, assignors, grantors, co-parties to Agreements, governmental bodies
having jurisdiction, or third parties and will provide Seller, upon request,
on or before the Closing Date, except as otherwise provided in this Agreement,
with proof of each consent, approval or waiver. Purchaser shall be entitled
to review and approve the form of all such notices; provided, that such
approval shall not be unreasonably withheld or delayed. If, prior to Closing,
any of such Persons asserting a preferential purchase right notifies Seller
that it intends to consummate the purchase of the Subject Properties or Gas
Plants to which it holds a preferential purchase right pursuant to the terms
and conditions hereof, or if the period allowed for acceptance of the notice
provided by Seller has not expired or will not expire as of Closing (subject
to Seller's right to extend the date of Closing) then, subject to clause (ii)
of Section 3.6 above, such Subject Properties or Gas Plant shall be excluded
at Closing from the Assets to be conveyed to Purchaser under this Agreement
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and the Purchase Price shall be reduced by the allocated value of such Subject
Properties or Gas Plants reflected in Exhibit "A" hereto; provided, however,
that if the holder of such preferential right fails to consummate the purchase
of such Subject Properties or Gas Plant before, on or within a reasonable time
after the Closing Date (taking into account the notice or acceptance period
for the right of preferential purchase and a reasonable amount of time, as
determined by Seller, to assemble documentation for such separate sale), then
Seller shall promptly so notify Purchaser, and Seller shall sell immediately
to Purchaser, and Purchaser shall purchase from Seller, for a price equal to
the allocated value of such Subject Properties or Gas Plants and upon the
other terms of this Agreement, the Subject Properties or Gas Plants to which
the preferential purchase right was asserted. All Subject Properties or Gas
Plants for which all preferential purchase rights have been waived or have not
been accepted prior to expiration after timely notice of the acceptance period
by the holder of such right, shall be sold to Purchaser at Closing pursuant
and subject to the provisions of this Agreement. If one (1) or more of the
holders of any preferential purchase rights notifies Seller subsequent to
Closing that it intends to assert its preferential purchase right, Seller
shall give notice thereof to Purchaser, whereupon Purchaser shall satisfy all
such preferential purchase right obligations of Seller to such holders
including, but not limited to, transferring the affected Assets to the holder
of such rights and shall indemnify and hold Seller, Seller's Affiliates and
their respective Representatives harmless from and against any and all Claims,
liabilities, losses, costs and expenses (including, without limitation, court
costs and reasonable attorneys' fees) in connection therewith, and Purchaser
shall be entitled to receive, upon satisfaction in full by Purchaser of all
the foregoing obligations, all proceeds received from such holders in
connection with such preferential purchase rights. Purchaser shall indemnify
and hold harmless Seller, Seller's Affiliates and their respective
Representatives from and against any and all Claims, liabilities, losses,
costs and expenses (including, without limitation, court costs and reasonable
attorneys' fees) asserted or incurred at any time (whether before, on or after
Closing) with respect to or arising directly or indirectly from the claims of
any Person to a preferential purchase right affecting any of the Assets
transferred to Purchaser hereunder.
ARTICLE 4. SELLER'S REPRESENTATIONS, WARRANTIES AND DISCLAIMERS
Seller represents and warrants to Purchaser that:
4.1. Existence. Pioneer Natural Resources USA, Inc. is a Delaware
corporation, duly organized, validly existing and in good standing under the
laws of the State of Delaware. Pioneer Resources Producing L.P. is a limited
partnership duly organized, validly existing and in good standing under the
laws of the Sate of Delaware.
4.2. Power. Seller has the requisite power and authority to enter into and
perform this Agreement and the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by Seller, and the
transactions contemplated hereby, will not (a) violate any provision of
Seller's Certificate of Incorporation or other governing documents, (b) to the
best knowledge and belief of Seller, conflict with, result in a breach of,
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constitute a default (or an event that with the lapse of time or notice, or
both would constitute a default) under any agreement or instrument to which
either Seller is a party or by which either Seller is bound, (c) to the best
knowledge and belief of Seller, violate any judgment, order, ruling, or decree
applicable to either Seller and entered or delivered in a proceeding in which
Seller was or is a named party, or (d) to the best knowledge and belief of
Seller, violate any applicable law, rule or regulation.
4.3. Authorization. The execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly and validly
authorized by all requisite action on the part of Seller. This Agreement has
been duly executed and delivered on behalf of Seller, and at the Closing all
documents and instruments required hereunder to be executed and delivered by
Seller shall be duly executed and delivered. This Agreement and such
documents and instruments shall constitute legal, valid and binding
obligations of Seller enforceable in accordance with their terms subject,
however, to the effect of bankruptcy, insolvency, reorganization, moratorium
and similar laws from time to time in effect relating to the rights and
remedies of creditors, as well as to general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity
or at law).
4.4. Brokers. Seller has incurred no obligation or liability, contingent
or otherwise, for brokers' or finders' fees in respect of the matters provided
for in this Agreement which will be the responsibility of Purchaser, and any
such obligation or liability that might exist shall be the sole obligation of
Seller.
4.5. Foreign Person. Seller is not a "foreign person" within the
meaning of the Code.
4.6. No Reservations. There are no reservations of Seller which affect
the Assets other than those currently of public record or identified or
referenced in this Agreement as a result thereof, including, without
limitation, other agreements by or among Seller and Purchaser or any
designated Purchaser pursuant to Section 13.5.
4.7. Permits. To the best of Seller's knowledge, Seller possesses all
material licenses, permits, certificates, orders, approvals and authorizations
necessary to own the Assets and to carry on its business as now being
conducted.
4.8. Compliance with Law. To the best of Seller's knowledge, Seller is
in material compliance with all laws, ordinances, rules, regulations and
orders applicable to the Assets, including, without limitation, all
environmental laws, ordinances, rules, regulations and orders, except to the
extent of any non-compliance that is not reasonably expected to result in a
material adverse effect on the Assets.
4.9. Taxes. All ad valorem, property, production, severance, excise, and
similar taxes and assessments based on or measured by the ownership of
property or the production of hydrocarbons or the receipt of proceeds
therefrom attributable to the Assets that have become due and payable
have been properly and timely paid, except to the extent of any failure that
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is not reasonably expected to result in a material adverse effect on the
Assets, and except to the extent that such taxes are due and payable but
contested, protested or appealed by Seller.
4.10. Litigation. To Seller's best knowledge and belief, no litigation,
investigation or other proceeding in which Seller (or its direct predecessor
in title) is a named party affecting any of the Assets is pending or
threatened in writing which is based upon omissions, events or occurrences
prior to the date of this Agreement, other than as disclosed on Schedule 4.10
attached hereto.
4.11. Investment Representations. Seller is acquiring the Purchaser
Shares for Seller's own account, for investment, and not with a view to, or
for resale in connection with, any distribution thereof within the meaning of
the Act. Seller is a sophisticated buyer, knowledgeable in the evaluation and
acquisition of oil and gas properties and related entities and understands
that, by acquiring an equity interest in Purchaser, Seller may be exposed to
risks and liabilities associated with the oil and gas business. Seller is
engaged in the business of exploring for and producing oil and gas as an
ongoing business. Seller is aware that ownership of the Purchaser Shares is
highly speculative and subject to substantial risks, and Seller is capable of
bearing the high degree of economic risk and burdens of the Purchaser Shares,
including, but not limited to, the possibility of the complete loss of the
value thereof, the lack of a public market and limited transferability of such
shares. Seller is an "accredited investor" as that term is used in Regulation
D of the Act. At no time was Seller presented with or solicited by or through
any public promotion or any form of advertising with respect to its
acquisition of the Purchaser Shares.
4.12. LIMITATION AND DISCLAIMER OF REPRESENTATIONS AND
WARRANTIES
THE EXPRESS REPRESENTATIONS AND WARRANTIES OF SELLER CONTAINED IN THIS
AGREEMENT ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER REPRESENTATIONS
AND WARRANTIES, EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, AND THE
REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN SHALL TERMINATE IN
ALL RESPECTS UPON CLOSING. ANY ASSIGNMENT AND BILL OF SALE OR OTHER
CONVEYANCE EXECUTED AND DELIVERED PURSUANT HERETO SHALL BE: (a)
WITHOUT ANY WARRANTY OR REPRESENTATION OF TITLE, EITHER EXPRESS,
IMPLIED, STATUTORY OR OTHERWISE; (b) WITHOUT ANY EXPRESS, IMPLIED,
STATUTORY OR OTHER WARRANTY OR REPRESENTATION AS TO THE CONDITION,
QUANTITY, QUALITY, FITNESS FOR A PARTICULAR PURPOSE, CONFORMITY TO
MODELS OR SAMPLES OF MATERIALS OR MERCHANTABILITY OF ANY OF THE
ASSETS OR THEIR FITNESS FOR ANY PURPOSE; AND (c) WITHOUT ANY OTHER
EXPRESS, IMPLIED, STATUTORY OR OTHER WARRANTY OR REPRESENTATION
WHATSOEVER. IN ADDITION, 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 PURCHASER IN CONNECTION WITH THIS AGREEMENT OR THE
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CONTEMPLATED TRANSACTIONS, INCLUDING, WITHOUT LIMITATION, ANY
DESCRIPTION OF THE ASSETS, PRICING ASSUMPTIONS, OR QUALITY OR QUANTITY
OF HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE TO THE ASSETS OR THE
ABILITY OR POTENTIAL OF THE ASSETS TO PRODUCE HYDROCARBONS OR THE
ENVIRONMENTAL CONDITION OF THE ASSETS OR PROPERTY OR ANY OTHER
MATTERS CONTAINED IN CONFIDENTIAL INFORMATION OR ANY OTHER MATERIALS
FURNISHED OR MADE AVAILABLE TO PURCHASER BY SELLER OR BY SELLER'S
REPRESENTATIVES. ANY AND ALL SUCH DATA, RECORDS, REPORTS, PROJECTIONS,
INFORMATION AND OTHER MATERIALS FURNISHED BY SELLER OR BY SELLER'S
REPRESENTATIVES OR OTHERWISE MADE AVAILABLE TO PURCHASER OR
PURCHASER'S REPRESENTATIVES ARE PROVIDED TO OR FOR THE BENEFIT OF
PURCHASER AS A CONVENIENCE, AND SHALL NOT CREATE OR GIVE RISE TO ANY
LIABILITY OF OR AGAINST SELLER, SELLER'S AFFILIATES OR THEIR RESPECTIVE
REPRESENTATIVES. ANY RELIANCE ON OR USE OF THE SAME SHALL BE AT
PURCHASER'S SOLE RISK. THE ASSIGNMENTS AND BILLS OF SALE OR OTHER
CONVEYANCES TO BE DELIVERED BY SELLER AT CLOSING SHALL EXPRESSLY SET
FORTH THE LIMITATIONS AND DISCLAIMERS OF REPRESENTATIONS AND
WARRANTIES CONTAINED IN THIS PARAGRAPH.
ARTICLE 5. REPRESENTATIONS, WARRANTIES AND
COVENANTS OF PURCHASER
Purchaser represents and warrants to and covenants with Seller that:
5.1. Existence. Purchaser is a Delaware corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
5.2. Power. Purchaser has the requisite power and authority to enter
into and perform this Agreement and the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by Purchaser, and the
transactions contemplated hereby, will not (a) violate any provision of
Purchaser's certificate of incorporation , bylaws or other governing
documents, (b) to the best knowledge and belief of Purchaser, conflict with,
result in a breach of, constitute a default (or an event that with the lapse
of time or notice, or both would constitute a default) under any agreement or
instrument to which Purchaser is a party or by which Purchaser is bound, (c)
to the best knowledge and belief of Purchaser, violate any judgment, order,
ruling, or decree applicable to Purchaser and entered or delivered in a
proceeding in which Purchaser was or is a named party, or (d) to the best
knowledge and belief of Purchaser, violate any applicable law, rule or
regulation.
5.3. Authorization. The execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly and validly
authorized by all requisite action on the part of Purchaser. This Agreement
has been duly executed and delivered on behalf of Purchaser, and at the
Closing all documents and instruments required hereunder to be executed and
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delivered by Purchaser shall have been duly executed and delivered. This
Agreement and such documents and instruments shall constitute legal, valid and
binding obligations of Purchaser enforceable in accordance with their terms,
subject, however, to the effect of bankruptcy, insolvency, reorganization,
moratorium and similar laws from time to time in effect relating to the rights
and remedies of creditors, as well as to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
5.4. Brokers. Purchaser has not incurred any obligation or liability,
contingent or otherwise, for brokers' or finders' fees in respect of the
matters provided for in this Agreement which will be the responsibility of
Seller, and any such obligation or liability that might exist shall be the
sole obligation of Purchaser.
5.5. Investment Intent. Purchaser is acquiring the Assets for
Purchaser's own account for investment, and not with a view to, or for resale
in connection with, any distribution thereof within the meaning of the Act.
5.6. Due Diligence. Purchaser represents, warrants and covenants that it
has or will perform prior to Closing sufficient review and due diligence,
including review of file data and inspections, to evaluate the Assets and
Property to Purchaser's complete satisfaction as a prudent and knowledgeable
purchaser. Further, at Closing, Purchaser shall have inspected or waived its
right to inspect the Records and the Assets for all purposes and satisfied
itself as to the accuracy and completeness of the Records, the physical and
environmental condition of the Assets, both surface and subsurface, including
but not limited to conditions specifically related to the presence, release
or disposal of hazardous substances. Purchaser is relying solely upon its own
inspection of the Assets and Property, and Purchaser shall accept all of the
same in their "as is, where is" condition, with all faults.
5.7. Sophisticated Buyer. Purchaser is a sophisticated buyer,
knowledgeable in the evaluation and acquisition of oil and gas properties, and
understands that by, purchasing oil and gas properties or interests, the
Purchaser may be exposed to risks and liabilities associated with the oil
and gas business. Purchaser is engaged in the business of exploring for or
producing oil and gas or other minerals as an ongoing business. By reason of
this knowledge and experience, Purchaser will evaluate the merits and risks of
the Assets, properties or interests to be purchased from Seller and will form
an opinion based solely upon Purchaser's knowledge and experience and not upon
any opinion or predictions by Seller, Seller's Affiliates or their respective
Representatives.
5.8. Economic Risk. Purchaser is aware that ownership of any of the oil
and gas properties or interests is highly speculative and subject to
substantial risks, and Purchaser is capable of bearing the high degree of
economic risk and burdens of any purchase of the Assets from Seller,
including, but not limited to, the possibility of the complete loss of the
Purchase Price, all contributed capital, the loss of all anticipated tax
benefits (if any), the lack of a public market and limited transferability of
such interests or properties.
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5.9. Financing. Purchaser has or will have adequate funding or
financing to pay the Purchase Price at Closing.
5.10. Accredited Investor. Purchaser is an "accredited investor" as
that term is used in Regulation D of the Act.
5.11. Solicitation. At no time was Purchaser presented with or
solicited by or through any public promotion or any form of advertising in
connection with its purchase of the Assets hereunder.
5.12. Bankruptcy. There are no bankruptcy, reorganization or
arrangement proceedings pending, being contemplated by or, to the knowledge of
Purchaser, threatened against Purchaser.
5.13. General. Purchaser will use its reasonable efforts in good
faith to take all actions and to do all things necessary or advisable in order
to consummate and make effective the transactions contemplated by this
Agreement.
5.14. Financial Matters The balance sheet of Purchaser as of May 1,
1999, a true and correct copy of which is attached hereto as Schedule 5.14 and
incorporated herein, fairly presents the financial position of Purchaser as of
such date. Since May 1, 1999, Purchaser has conducted business only in the
ordinary course, except for the transactions contemplated in this Agreement
and related matters. The capital commitments of the stockholders of Purchaser
which had not been paid as of that date (totaling $10,333,333) will be paid in
full prior to the Closing. In addition, between the Execution Date and the
Closing, the current stockholders of Purchaser will purchase a total of 25,000
additional shares of common stock in Purchaser at a purchase price of $1,000
per share, for a total amount of $25,000,000.
ARTICLE 5A. ADDITIONAL COVENANTS
Seller covenants and agrees that from and after the execution of this
Agreement and until the Closing Date:
5A.1. Maintenance of Assets. Seller will not sell, transfer, assign,
convey or otherwise dispose of any of the Assets subject to Seller's direct
control, other than (a) oil, gas and other hydrocarbons produced, saved and
sold in the ordinary course of business, (b) personal property and equipment
which is replaced with property and equipment of comparable or better value
and utility in the ordinary and routine maintenance and operation of the
Subject Properties, and (c) as required in connection with any exercise of
preferential rights or as otherwise required to satisfy obligations to third
parties under contracts presently existing.
5A.2. No Encumbrances. Seller will not create any lien, security
interest or encumbrance on any of the Assets, the oil or gas attributable to
the Assets, or the proceeds thereof, other than Permitted Encumbrances.
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5A.3. Operations. With respect to any of the Subject Properties and
the Gas Plants operated by Seller (and, as to Sections 5A.3.(b), (f), (h) and
(j) below, with regard to Subject Properties not operated by Seller), Seller
will endeavor in good faith until Closing (subject to this Agreement and
the rights of affected parties under applicable agreements) to:
(a) cause the Subject Properties and the Gas Plants to be
developed, maintained and operated in compliance with applicable laws,
ordinances, rules, regulations and orders and maintain insurance now in force
with respect to the Subject Properties, and pay or cause to be paid all costs
and expenses in connection therewith;
(b) not approve the drilling of any new well on the Subject
Properties without the advance written consent of Purchaser, which consent
(which may not be unreasonably withheld) or non-consent must be given by
Purchaser within three (3) days of the notice from Seller;
(c) not take any action or fail to take any action which is
reasonably expected to result in any termination of the leases forming a part
of the Subject Properties, provided that Seller has no obligation to renew,
extend or acquire new leases for or pertaining to the undeveloped leasehold
identified on Schedule 4 to Exhibit "A" hereto;
(d) perform and comply with all of its obligations under
agreements relating to or affecting the Subject Properties or the Gas Plants;
(e) carry on its business with respect to the Subject
Properties in substantially the same manner as it has heretofore;
(f) not enter into or assume any contract, agreement or
commitment which is not in the ordinary course of business as heretofore
conducted or which involves payments, receipts or potential liabilities with
respect to one individual Subject Property or Gas Plant of more than $50,000,
(net to Seller) excluding emergency expenditures; and
(g) not resign or otherwise voluntarily relinquish its rights
as operator of any Subject Property or Gas Plant for which it serves as
operator on the date hereof;
(h) not grant any preferential right to purchase or similar
right or agree to require the consent of any party to the transfer and
assignment of the Assets to Purchaser, subject to existing contractual
obligations;
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(i) not enter into any gas sales contract or crude oil sales
or supply contract with respect to any Subject Property or Gas Plant which is
not terminable without penalty upon notice of thirty (30) days or less;
(j) not enter into any transaction the effect of which,
considered as a whole, would be to cause Seller's ownership interest in any of
the Subject Properties or Gas Plants to be altered from its ownership interest
as of the date hereof;
(k) exercise reasonable efforts, as reasonably requested in
writing by Purchaser, to obtain all such required approvals or consents at
Purchaser's expense if any approval or consent by any federal, state or local
governmental authority is required to vest Acceptable Title to any of the
Subject Properties or Gas Plants in Purchaser at Closing;
(l) give prompt written notice to Purchaser until Closing, of
1) any notice of default (or written threat of default, whether disputed or
denied) received or given by Seller after the date hereof under any instrument
or agreement affecting the Subject Properties or the Gas Plants to which
Seller is a party or by which it or any of the Subject Properties is bound or,
2) any litigation filed and served upon Seller after the Execution Date
pertaining to any of the Assets;
(m) to the extent it can do so without violating any third
party agreement and subject to the rights of third parties, exercise its best
efforts to provide (as soon as practicable) to Purchaser a copy of each
material authority for expenditure and material contract affecting the Subject
Property or the Gas Plants entered into after the Execution Date; provided,
however, that the provision of such matters to Purchaser is for informational
purposes only and that Purchaser shall have not right to comment upon or
object to any such matter that is otherwise not in violation of this
Agreement; and
(n) use its reasonable efforts in good faith to take all
actions and to do all things necessary or advisable in order to consummate and
make effective the transactions contemplated by this Agreement.
5A.4. Access to Records. Seller will endeavor to provide Purchaser
and its Agents through the Examination Period (a) access to the Records during
normal business hours at Seller's offices where such Records are located, (b)
adequate work space (as determined solely by Seller) at Seller's offices to
review the Records, (c) access to a copy machine, at Purchaser's cost, at
Seller's offices, and (d) reasonable access to Seller's personnel during
normal business hours at the locations where such personnel work. Seller
will, at Purchaser's cost, electronically download Seller's Records regarding
the Subject Properties into Purchaser's accounting and land system on or
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before June 18, 1999, so long as such electronic downloading efforts are not
disruptive of Seller's business or accounting or land departments. Seller, at
Purchaser's cost, will assist Purchaser in obtaining access to and the right
to review and copy Records pertaining to the Subject Properties, producing
minerals and Gas Plants not in Seller's possession or control. From and after
the Execution Date through the Closing Date, Seller shall endeavor not to add
to or remove from the Records any contracts, instruments, documents or other
materials except for such additions and removals as are done in the ordinary
course of business with respect to on-going operations.
5A.5. Permissions. Seller will use reasonable efforts, at
Purchaser's cost, to assist Purchaser in obtaining all permissions, approvals
and consents of federal, state and local governmental authorities and other
third parties as may be required in order to consummate the sale contemplated
hereunder.
ARTICLE 6. SELLER'S CONDITIONS OF CLOSING
Seller's obligation to consummate the transactions provided for herein is
subject only to the satisfaction or waiver by Seller on or before the Closing
Date of the following conditions:
6.1. Representations. The representations and warranties of Purchaser
contained in Article 5 shall be true and correct in all material respects on
the Closing Date as though made on and as of that date.
6.2. Performance. Purchaser shall have performed in all material
respects the obligations, covenants and agreements hereunder to be performed
by it at or prior to the Closing, including but not limited to payment of the
Purchase Price and delivery of the Preferred Shares.
6.3. Officer's Certificate. Purchaser shall have delivered to Seller a
certificate of an executive officer of Purchaser dated the Closing Date,
certifying on behalf of such Purchaser that the conditions set forth in
Sections 6.1 and 6.2 have been fulfilled.
6.4. Pending Matters. No suit, action or other proceeding by a third
party or a governmental authority shall be pending or threatened which seeks
substantial damages from Seller in connection with, or seeks to restrain,
enjoin or otherwise prohibit, the consummation of the transactions
contemplated by this Agreement.
6.5. HSR Act. The waiting period required by the HSR Act shall have
expired or been terminated, if applicable.
ARTICLE 7. PURCHASER'S CONDITIONS OF CLOSING.
Purchaser's obligation to consummate the transactions provided for herein is
subject only to the satisfaction or waiver by Purchaser on or before the
Closing Date of the following conditions:
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7.1. Representations. The representations and warranties of Seller
contained in Article 4 shall be true and correct in all material respects on
the Closing Date as though made on and as of that date.
7.2. Performance. Seller shall have performed in all material respects
the obligations, covenants and agreements hereunder to be performed by it at
or prior to the Closing.
7.3. Officer's Certificate. Seller shall have delivered to Purchaser a
certificate of an executive officer of each Seller (or the General Partner
thereof, as applicable) dated the Closing Date, certifying on behalf of such
Seller that the conditions set forth in Sections 7.1 and 7.2 have been
fulfilled.
7.4. Pending Matters. No suit, action or other proceeding by a third
party or a governmental authority shall be pending or threatened which seeks
substantial damages from Purchaser in connection with or, seeks to restrain,
enjoin or otherwise prohibit, the consummation of the transactions
contemplated by this Agreement.
7.5. HSR Act. The waiting period required by the HSR shall have expired
or been terminated, if applicable.
ARTICLE 8. CLOSING.
8.1. Time and Place of Closing. If the conditions to Closing have been
satisfied or expressly waived by the party entitled to the benefits thereof,
the Closing shall take place at one of Seller's offices on or before June 29,
1999, at 9:00 a.m., or at such other place and time or in such other manner
agreed upon by Seller and Purchaser (such date being the "Closing Date");
provided, that Seller shall have the right to extend Closing for thirty (30)
days for any reason and that any extension by Seller shall not serve to
provide Purchaser rights not otherwise expressly provided herein, nor to
extend any rights of Purchaser contained herein, including, without
limitation, those contained in Section 3.4; and provided further, that
Purchaser shall have the right to extend Closing as set forth in Section 8.3.
8.2. Closing Obligations. At the Closing, the following events shall
occur, each being a condition precedent to the others and each being deemed to
have occurred simultaneously with the others:
(a) Seller shall execute, acknowledge and deliver to Purchaser
multiple originals of an Assignment and Bill of Sale or a Conveyance, where
applicable, as determined by Seller, in substantially the form attached hereto
as Exhibit "B-1" or "B-2", as the case may be (modified to conform to this
Agreement), conveying the Assets to Purchaser as provided hereby and Purchaser
shall, execute, acknowledge and deliver same to Seller;
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(b) Seller and Purchaser shall execute, acknowledge and deliver
transfer orders or letters in lieu thereof substantially in the form set forth
on Schedule 8.2(b) attached hereto directing all purchasers of production,
agreed upon by Seller, to make payment to Purchaser of proceeds attributable
to the Sale Interest;
(c) Purchaser shall deliver by wire transfer the Adjusted Purchase
Price, less the Deposit and any interest earned thereon to which Purchaser is
entitled as provided in Article 2, and shall deliver the Preferred Shares;
(d) Purchaser and Seller shall execute and deliver a settlement
statement (the "Preliminary Settlement Statement") prepared by Seller and
setting forth the Purchase Price and all adjustments thereto using information
to the extent then available and if not then available then Seller's
reasonable good faith estimate thereof, subject to Section 13.17;
(e) Purchaser and Seller shall execute and deliver appropriate
state or federal lease assignment forms and such other instruments and
certificates and take such other action as may be necessary to carry out their
respective obligations under this Agreement;
(f) subject to Section 13.18, Seller shall execute and deliver to
Purchaser appropriate resignation of operator and change of operator forms
reasonably requested by Purchaser; and
(g) For Seller-operated Assets, Purchaser shall deliver to Seller
(1) evidence of compliance with the rules and regulations dealing with the
plugging and abandoning of wells included in the Assets, including evidence of
the appropriate bond, surety letter, or letter of credit which as been
accepted by the relevant regulatory agency; (2) proof that Purchaser has been
approved by the relevant regulatory agency as operator of the Assets,
including all Wells that are subject to this Agreement; and (3) evidence that
Purchaser has obtained all necessary permits or transfers of permits to
operate the Assets.
8.3. Purchaser's Extension of Closing. Purchaser may extend Closing
until 9:00 a.m. July 29, 1999, upon written notice delivered to Seller no
later than noon June 28, 1999, including in such notice a good faith showing
of valid cause as to why Purchaser is unable to proceed to Closing on June 29,
1999, and with a workable plan with action steps and a time-line to cure or
resolve the identified impediments to its inability to proceed to the Closing
on June 29, 1999. Upon such notice, Purchaser shall forever waive any
objection to the form of conveyancing instruments and other deliverables
prepared by Seller for use in the Closing for June 29, 1999, and any
subsequent Seller generated data, ministerial, signature, or other minor
modifications needed or advisable thereto to change such instruments or
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deliverables to conform to or for use for Closing on the new Closing Date. In
addition, upon delivery of the notice provided for in this Section 8.3, the
Purchase Price will increase at the annualized rate of ten (10%) per cent
compounded daily, until Closing as provided in Section 2.1. Further, upon
delivery of the notice of Purchaser pursuant to this Section 8.3 and without
further documentation, Purchaser shall concede that Seller was ready for
Closing on June 29, 1999 and that there are not any claims or allegations
known by Purchaser on the date of the said notice that could have been
asserted validly at Closing by Purchaser in a notice terminating this
Agreement pursuant to Article 10. Purchaser's extension of Closing hereunder
shall not serve to provide Purchaser rights not otherwise expressly provided
in this section, nor to extend any deadlines of Purchaser for the Notice of
Defects or Examination Period or any other rights of Purchaser (which shall
all continue to be based on a June 29, 1999 Closing Date), except as otherwise
expressly contained in this section.
ARTICLE 9. POST-CLOSING OBLIGATIONS.
9.1. Receipts and Credits; Suspense Funds. Upon Closing and subject to
the terms hereof, all monies, refunds, proceeds, receipts, credits,
receivables, accounts and income attributable to the purchased Assets (a) for
all periods of time from and after the Effective Time shall be the sole
property and entitlement of Purchaser, and, to the extent received by Seller,
Seller shall fully disclose and account therefor to Purchaser promptly, and
(b) for all periods of time prior to the Effective Time shall be the sole
property and entitlement of Seller, and, to the extent received by Purchaser,
Purchaser shall fully disclose and account therefor to Seller promptly.
Purchaser shall pay Seller for Seller's share of hydrocarbons attributable to
the purchased Assets in storage above the pipeline connection or in transit at
the Effective Time based on actual, if available, or estimated inventories, at
Seller's relevant contract prices net of applicable taxes. Seller and
Purchaser recognize that, as of the Effective Time, there may be over or under
imbalances with respect to gas production, gathering, transportation or
processing attributable to the Subject Properties ("Imbalances") and hereby
agree that (i) Imbalances shall not be included in any Defects asserted
hereunder, and (ii) the Subject Properties will be conveyed specifically
subject to Imbalances which exist as of the Effective Time, with Purchaser, as
of Closing, bearing and assuming all obligations with respect to any
overproduction account or liability and receiving the benefit of and being
credited with any underproduction account or credit; provided, however, that
on or after Closing, there shall be a monetary adjustment pursuant to the
Preliminary Settlement Statement or Final Accounting to reflect any known net
overproduction or underproduction attributable to the Assets equal to $1.00
per MCF without any adjustment for royalties or severance taxes and without
affecting a Party's responsibility for the payment of such royalties or
severance taxes. At Closing, Seller shall deliver to Purchaser all amounts in
Seller's possession due third party owners of interests in the Subject
Properties, and Purchaser agrees that it shall be solely responsible for the
disposition of such funds, the payment thereof to the rightful owners and the
payment, if any, of royalty thereon (the "Suspense Funds").
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9.2. Costs and Liabilities; Indemnity
(a) As used in this Agreement, "Claims", "CLAIMS, "Claims" or
"CLAIMS" shall include costs, expenses, obligations, claims, demands, causes
of action, liabilities, damages, fines, penalties, debts, losses and judgments
of any kind or character, whether matured or, absolute or contingent, accrued
or unaccrued, liquidated or unliquidated, known or unknown, and all costs,
expenses and fees (including, without limitation, interest, attorneys' fees,
costs of experts, court costs and costs of investigation) incurred in
connection therewith, including, but not limited to claims arising from or
directly or indirectly related to death, personal injury, property damage,
environmental damage or the remediation thereof, royalty, contract, operating,
suspense and capital obligations attributable or relating in any way to the
Assets or the Property. As used in this Section 9.2, "Assets" shall include
the Suspense Funds.
(b) Notwithstanding anything in this Agreement to the contrary, it
is the express intent and agreement of Seller and Purchaser that, if Closing
occurs (and, in any event, upon delivery of the Adjusted Purchase Price and
the Assignment and Bill of Sale) PURCHASER shall accept the Assets and
Property in their "as is, where is" condition, subject to and with any and all
faults, defects, deficiencies, irregularities and claims related or
attributable in any manner thereto, including, without limitation, Title
Defects, Environmental Defects, Defects or any other matter affecting in any
respect the title or physical condition of, or the right to own, use, operate,
develop or enjoy, the Assets or the Property, whether known or unknown,
liquidated or unliquidated, fixed or contingent, direct or indirect. At, upon
and after Closing (and, in any event upon delivery of the Adjusted Purchase
Price and the Assignment and Bill of Sale) and without further action or
documentation, PURCHASER (1) shall assume, be responsible for and comply with
all duties and obligations, express or implied, arising at any time with
respect to the Assets, including, without limitation (i) those arising under
or by virtue of any Related Agreement, lease, contract, agreement, document,
permit, law, statute, rule, regulation or order of any governmental authority
or court (specifically including, without limitation, any governmental request
or other requirement to plug, re-plug or abandon or re-abandon any well of
whatsoever type, status or classification, or take any clean-up, remedial or
other action with respect to the Assets or Property), (ii) preferential rights
to purchase and (iii) third party consents; (2) shall assume, be responsible
for and pay all Claims affecting or arising, directly or indirectly, at any
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time in connection with the Assets, including, without limitation, claims for
personal or property injury or damage, environmental cleanup, remediation, or
compliance, or for any other relief, arising directly or indirectly from or
incident to, the use, occupation, operation, maintenance or abandonment of or
production from the Assets, or condition of the Assets or Property, whether
latent or patent, including, without limitation, contamination of property or
premises with Naturally Occurring Radioactive Materials ("NORM"), and whether
or not arising solely from or contributed to by the negligence in any form,
whether active or passive, or of any kind or nature, of Seller or its
predecessors in title or their respective Affiliates agents, employees or
contractors; and (3) SHALL DEFEND, INDEMNIFY AND HOLD SELLER HARMLESS FROM ANY
AND ALL CLAIMS ARISING, ASSERTED OR DUE AT ANY TIME, WHETHER BEFORE, ON OR
AFTER THE EFFECTIVE TIME, IN CONNECTION WITH THE FOREGOING; AND, FURTHER,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, PURCHASER SHALL INDEMNIFY,
DEFEND AND HOLD HARMLESS SELLER FROM ANY AND ALL CLAIMS ARISING AT ANY TIME,
WHETHER BEFORE, ON OR AFTER THE EFFECTIVE TIME, MADE BY ANY PERSON AND ARISING
OUT OF OR RESULTING FROM:
- THE REVIEW, INSPECTION AND ASSESSMENT OF THE ASSETS
OR THE PROPERTY BY PURCHASER;
- THE OWNERSHIP OR OPERATION OF THE ASSETS BY OR ON
BEHALF OF SELLER OR ITS PREDECESSORS IN TITLE OR ACTS
OR OMISSIONS BY OR ON BEHALF OF SELLER OR ITS
PREDECESSORS IN TITLE IN CONNECTION WITH OR
PERTAINING TO THE ASSETS;
- THE OWNERSHIP OR OPERATION OF THE ASSETS BY OR ON
BEHALF OF PURCHASER OR ITS SUCCESSORS IN TITLE OR
THE ACTS OR OMISSIONS BY OR ON BEHALF OF PURCHASER
OR ITS SUCCESSORS IN TITLE IN CONNECTION WITH OR
PERTAINING TO THE ASSETS;
- THE ACTS OR OMISSIONS OF THIRD PARTIES RELATING TO
AN ERROR IN DESCRIBING THE ASSETS;
- RIGHTS AND OBLIGATIONS OF THE PARTIES OR THIRD
PARTIES UNDER RELATED AGREEMENTS;
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- FAILURE BY THIRD PARTIES TO APPROVE OR CONSENT TO
ANY ASPECT OF THIS TRANSACTION OR THE SALE OR
TRANSFER OF THE ASSETS OR ANY PORTION THEREOF;
- OBLIGATIONS TO PLUG, RE-PLUG, ABANDON OR RE-
ABANDON WELLS, REMOVE FACILITIES, EQUIPMENT,
PIPELINES AND FLOWLINES, CLOSE PITS AND REMOVE
SUMPS, AND RESTORE, CLEAN UP AND/OR REMEDIATE THE
ASSETS OR PROPERTY;
- PAYMENTS, ROYALTIES OR DISBURSEMENTS PAYABLE BY
PURCHASER TO THIRD PARTIES WITH REGARD TO THE
ASSETS;
- THE PHYSICAL OR ENVIRONMENTAL CONDITION OF OR
RELATING TO THE ASSETS OR PROPERTY OR ANY DISPOSAL
SITE (WHETHER ON THE ASSETS OR PROPERTY OR OFFSITE)
CONTAINING MATERIALS OR WASTES FROM THE
OPERATIONS OR ACTIVITIES ON THE PROPERTY OR ASSETS
INCLUDING CLAIMS UNDER ANY LAW OR ENVIRONMENTAL
LAW;
- REMEDIATION ACTIVITIES, INCLUDING DAMAGES INCURRED
BY BUYER DURING OR ARISING FROM REMEDIATION
ACTIVITIES RELATING TO THE ASSETS OR PROPERTY;
- INABILITY OR FAILURE TO OBTAIN THE TRANSFER OF A
PERMIT OR AUTHORIZATION OR THE INABILITY TO OBTAIN
A PERMIT OR AUTHORIZATION RELATING TO THE ASSETS.
(c) From and after Closing, any demand for indemnity by Seller
hereunder shall be made by written notice, together with a written description
of any Claims asserted stating the nature and basis of such Claim and, if
ascertainable, the amount thereof. Purchaser shall have a period of twenty
(20) days after receipt of such notice within which to respond thereto or, in
the case of a demand which requires a shorter time for response, then within
such shorter period as specified by Seller in such notice (the "Notice
Period"). If Purchaser denies liability hereunder or fails to provide the
defense for any Claim, Seller may defend or compromise the Claim as it deems
appropriate without prejudice to any of Seller's rights hereunder, with no
right of Purchaser to approve or disapprove any actions taken in connection
therewith by Seller. If Purchaser accepts liability and responsibility for
the defense of any Claim, it shall so notify Seller as soon as is practicable
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prior to the expiration of the Notice Period and undertake the defense or
compromise of such Claim with counsel selected by Purchaser and reasonably
acceptable to Seller. If Purchaser undertakes the defense or compromise of
such Claim, Seller shall be entitled, at its own expense, to participate in
such defense. No compromise or settlement of any Claim shall be made without
reasonable notice to Seller, and without the prior written approval of Seller,
unless such compromise or settlement includes a general and complete release
of Seller, its Affiliates and their respective Representatives in respect of
the matter, with prejudice, and with no express or written admission of
liability on the part of Seller, its Affiliates and their respective
Representatives, and no constraints on the future conduct of its or their
respective businesses. Purchaser acknowledges that its obligations to
indemnify, defend and hold Seller and its Affiliates harmless under this
Agreement includes obligations to pay the attorneys' fees and court costs
incurred by Seller and its Affiliates in defending said Claims, regardless of
the merits of said Claims.
(d) Seller shall have the right at all times to participate, at its
sole cost, in the preparation for any hearing or trial related to the
indemnities set forth in this Agreement, as well as the right to appear on its
own behalf or to retain separate counsel to represent it at any such hearing
or trial.
(e) EXCEPT FOR SECTION 9.12, THE INDEMNITIES PROVIDED IN
THIS AGREEMENT SHALL EXTEND TO SELLER (AND SELLER'S
CORPORATE PREDECESSORS) AND ITS AFFILIATES AND ANY
PERSON WHO AT ANY TIME HAS SERVED OR IS SERVING AS A
DIRECTOR, OFFICER, EMPLOYEE, CONSULTANT (INCLUDING,
BUT NOT LIMITED TO, NETHERLAND, SEWELL & ASSOCIATES,
INC., CHASE SECURITIES, INC. ITS CORPORATE PARENT AND
SUBSIDIARIES AND THEIR RESPECTIVE OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, AND CONSULTANTS),
INVITEE OR AGENT THEREOF (EACH A "REPRESENTATIVE"
AND COLLECTIVELY "REPRESENTATIVES"), (HOWEVER, FOR
PURPOSES OF THIS AGREEMENT, PURCHASER IS NOT AND
SHALL NOT BE A REPRESENTATIVE OF SELLER OR EITHER
PERSON COMPRISING SELLER), AND EACH OF THEIR
RESPECTIVE HEIRS, EXECUTORS, SUCCESSORS AND ASSIGNS,
AND SHALL APPLY TO ALL CLAIMS SUBJECT TO
INDEMNITY HEREUNDER, INCLUDING THOSE BASED ON
NEGLIGENCE OF ANY NATURE, INCLUDING SOLE
NEGLIGENCE, SIMPLE NEGLIGENCE, CONCURRENT
NEGLIGENCE, ACTIVE NEGLIGENCE, PASSIVE NEGLIGENCE,
STRICT LIABILITY OR FAULT OF SELLER (OR ANY OTHER
INDEMNIFIED PARTY) OR ANY OTHER THEORY OF
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LIABILITY OR FAULT, WHETHER OF LAW (WHETHER
COMMON OR STATUTORY) OR IN EQUITY; PROVIDED,
HOWEVER, PURCHASER SHALL NOT BE REQUIRED TO
INDEMNIFY SELLER OR ANY SELLER REPRESENTATIVE FOR
ANY DISPUTED CLAIM ASSERTED BY PURCHASER PURSUANT
TO THIS AGREEMENT TO THE EXTENT AND ONLY TO THE
EXTENT ARISING DIRECTLY FROM A BREACH OF THIS
AGREEMENT BY SELLER, AND FOR WHICH AND ONLY TO
THE EXTENT THAT PURCHASER HAS OBTAINED AGAINST
SELLER A BINDING, FINAL, NON-APPEALABLE ARBITRATION
DECISION OR COURT JUDGMENT PURSUANT TO THIS
AGREEMENT THE INDEMNIFICATION PROVISIONS OF THIS
SECTION 9.2 SHALL BE IN ADDITION TO ANY OTHER
INDEMNITY PROVISIONS CONTAINED IN THIS AGREEMENT
AND SHALL SURVIVE CLOSING.
9.3. Further Assurances. After Closing, Seller and Purchaser agree to
take such further actions and to execute, acknowledge and deliver all such
further documents that are necessary or useful in carrying out the purposes
of this Agreement or of any document delivered pursuant hereto. The parties
will cooperate at all times after Closing to execute and record correction
instruments to correct scrivener's errors in the preparation of Closing
documents.
9.4. Delivery of Records As soon as reasonably possible but no
later than thirty (30) days after the Closing Date, Seller shall deliver to
Purchaser originals or copies of the Records, consistent with this Agreement,
at Seller's and Purchaser's equally shared cost; provided, that Seller (i)
shall exercise its best efforts to provide Purchaser at Closing or as soon
thereafter as is practicable with all Records necessary to assume and conduct
operations of the Assets, and (ii) shall have the right to retain, as its own,
original Records that pertain to Excluded Assets and copies of all other
Records. If originals of Records or other instruments or title conveyancing
documents are provided to Purchaser pursuant to or in accordance with this
Agreement, Purchaser shall assure that Seller shall have access to them at
reasonable times and upon reasonable notice during regular business hours,
with the right to copy same, for a period of seven (7) years after the
Closing Date. No later than thirty (30) days after Closing, Seller further
agrees to assist Purchaser (at Purchaser's cost) in making an electronic
transfer of all Records applicable to the Subject Properties. Such electronic
data shall include but is not limited to: Property Master files, Name and
Address files (owners, purchasers, operators, etc.), Division of Interest
decks for billing and revenue, Oil and Gas Purchaser Division Order/Property
cross-reference, Land Records (Leases, tracts, Critical Dates, Text file,
Ownership, Rentals, Billing), Chart of Accounts, Billing Category Codes,
County and State Code cross-reference, System Code Tables or Legends (Suspense
Codes, Interest Types, Product Codes, etc.), Gas Contract Records (Master
File, Text, Details, Fees, Calendar, etc.), Owner Netting Information,
Production Records (Tank Master, Closing Stock, Production Master, State
Information, etc.), AFE Information, Revenue Suspense, and/or Billing
suspense, Owner Net (Share) Revenue and Billing History, Property Gross (8/8)
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Revenue and Billing History, Operated Property Production Information (and
Non-Operated if available), Operated Property Production Tax History
Information, Land Records (Rental Payments), Payout information and Schedules,
1099 Information, Accounts Payable and Revenue information. Seller's
obligation pursuant to this Section 9.4 shall be limited to Seller's present
capability to perform such electronic transfers without disruption or
undue inconvenience to Seller's ongoing business. Seller shall not be
required to create, assemble or develop such electronic files or records.
9.5. Access to Data. Subject to the rights of third parties and
Seller's proprietary rights, Seller shall provide Purchaser with reasonable
access to Seller's books and records after Closing as necessary for Purchaser
to prepare its financial statements. To the extent, and only to the extent,
necessary to comply with requirements of the Securities and Exchange
Commission (the "SEC"), Purchaser shall have the right to audit, during normal
business hours of Seller, Seller's business and financial records to the
extent then existing, including without limitation property detail,
standardized measure data and reserve information, maintained in connection
with the Assets (except for income tax records) for all periods for which
audited financials may be required by the SEC to be prepared and filed by
Purchaser. Seller will assist Purchaser, at Purchaser's cost, in acquiring
the appropriate licenses, permits and authorizations to possess and use all or
part of the seismic and geophysical data possessed by Seller regarding the
Subject Properties, subject to the rights of third parties and to
confidentiality or limited use conditions or other conditions or restrictions
required by Seller or such third parties.
9.6. Purchaser's Release of Seller. At, upon and after Closing and without
further action or documentation, except as set forth in Sections 9.3, 9.4,
9.5, 9.11, 9.12 and 11.3, Purchaser releases and discharges Seller and
Seller's Affiliates and their respective Representatives from all Claims
relating in any way to the Assets, the Property or the transactions
contemplated by this Agreement, regardless of when or how the Claims arose or
arise or whether the Claims were foreseeable or unforeseeable. Purchaser's
release of Seller and its Affiliates and their respective Representatives
includes Claims resulting in any way from the negligence or strict liability
of Seller and its Affiliates and their respective Representatives, whether the
negligence or strict liability is active passive, joint, concurrent,
or sole. There are no exceptions to Purchaser's release of Seller and its
Affiliates and their respective Affiliates, except as set forth in Sections,
9.3, 9.4, 9.5, 9.11, 9.12 and 11.3, and this release is binding on Purchaser
and its successors and assigns. PURCHASER EXPRESSLY WARRANTS AND REPRESENTS
AND DOES HEREBY STATE AND REPRESENT THAT NO PROMISE OR AGREEMENT WHICH IS NOT
HEREIN EXPRESSED HAS BEEN MADE TO PURCHASER IN EXECUTING THIS AGREEMENT OR
AGREEING TO THIS RELEASE AND THAT PURCHASER IS NOT RELYING UPON ANY STATEMENT
OR REPRESENTATION OF SELLER OR ANY AFFILIATE OF SELLER OR ANY OF THEIR
RESPECTIVE REPRESENTATIVES. PURCHASER HAS BEEN REPRESENTED BY LEGAL COUNSEL
AND SAID COUNSEL HAS READ AND EXPLAINED TO PURCHASER THE ENTIRE CONTENTS OF
THIS AGREEMENT AND THIS RELEASE AND EXPLAINED THE LEGAL CONSEQUENCES THEREOF.
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9.7. Retroactive Effect. Purchaser acknowledges that its obligations to
release, indemnify, defend, and hold Seller and its Affiliates and their
respective Representatives harmless apply to matters occurring or arising
before, on and after the Effective Time to the extent provided in this
Agreement.
9.8. Inducement to Seller. Purchaser acknowledges that it evaluated its
obligations under this article before it determined and submitted its bid for
the Assets and that its assumption of these obligations is a material
inducement to Seller to enter into this Agreement with and Close the sale to
Purchaser.
9.9. Related Agreements. Unless specifically provided otherwise in this
Agreement, the sale of the Assets is made subject to all oil, gas and mineral
leases, assignments, subleases, farmout agreements, joint operating
agreements, pooling agreements, letter agreements, easements, rights of way,
and all other agreements with respect to or pertaining to the Assets to the
extent they are binding on Seller or Seller's Affiliates (the "Related
Agreements"). Purchaser expressly assumes the obligations and liabilities of
Seller or Seller's Affiliates under such agreements insofar as the obligations
and liabilities concern or pertain to the Assets and agrees to execute any
documents necessary to effectuate such assumption. The parties agree that
this Section 9.9 is applicable to all instruments whether they are recorded or
not.
9.10. Disposal of Materials, Substances, and Wastes; Compliance and Law.
Purchaser will store, handle, transport, and dispose of or discharge all
materials, substances, and wastes from the Assets and Property (including
produced water, drilling fluids, NORM, and other wastes), whether present
before or after the Effective Time, in accordance with applicable local,
state, and federal laws and regulations. Purchaser will keep records of
types, amounts, and location of materials, substances, and wastes that are
stored, transported, handled, discharged, released, or disposed of onsite and
offsite. When any lease terminates, an interest in which has been assigned
under this Agreement, Purchaser will undertake additional testing, assessment,
closure, reporting or remedial action with respect to the Assets or Property
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
Assets or Properties.
9.11. Litigation. Upon and after Closing, Purchaser shall assume all
obligations of Seller and be responsible and liable for all litigation and
proceedings listed on Schedule 9.11 and all matters, costs, judgments, and
expenses related thereto or arising therefrom. Notwithstanding any other
provision of this Agreement, Seller shall be responsible and liable for all
litigation and proceedings which have been filed and served on Seller before
the Execution Date to which Purchaser is not a party and Seller is a party and
which is not listed on Schedule 9.11 hereto. Seller reserves the right to
remove litigation from Schedule 9.11 on or before Closing.
9.12. Seller's Indemnity of Purchaser. Notwithstanding any other
provision of this Article 9, upon Closing and ending on the first anniversary
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of the Closing Date (the "Seller Indemnity Period") Seller shall defend,
indemnify and hold harmless Purchaser from any and all bona fide third party
claims (and excluding claims made by any successors in interest of Purchaser
or claims that Purchaser or any successor of Purchaser encourages any third
party to make) asserted during the Seller Indemnity Period to the extent, and
only to the extent, directly relating to the mis-payment, nonpayment or
underpayment of royalties with respect to the Sale Interest (net to Seller)
to the extent and only to the extent applicable to the period of Seller's
Direct Ownership of the affected Assets prior to the Effective Time. From and
after Closing, any such claim for indemnity arising under this Section 9.12
shall be made by written notice, together with a written description of such
claims stating, to the extent ascertainable, the nature and basis of such
claims and, if ascertainable, the amount thereof.
ARTICLE 10. TERMINATION
10.1. Right of Termination. This Agreement and the transactions
contemplated hereby may be terminated at any time on or prior to the Closing
as follows:
(a) By either Party if the Closing does not occur by 5:00 P.M.
August 18,1999; provided however, that no Party may so terminate this
Agreement if such Party is at such time in material default or breach of any
provision of this Agreement;
(b) By mutual consent of the parties;
(c) By Purchaser or Seller in accordance with Section 3.6;
(d) By Purchaser on the Closing Date if the conditions set forth
in Article 7 have not been satisfied in all material respects and such
non-satisfaction shall not have been caused or waived by the actions or
inactions of Purchaser; or
(e) By Seller on the Closing Date if the conditions set forth in
Section 6 have not been satisfied in all material respects and such
non-satisfaction shall not have been caused or waived by the actions or
inactions of Seller.
10.2. Effect of Termination. If this Agreement is terminated pursuant
to Section 10.1, this Agreement shall become void and of no further force or
effect (except for the provisions of Sections 2.4, 3.3, 4.4 and 5.4, Article
10 and Article 13 each of which shall survive such termination and continue in
full force and effect in accordance with its terms). If Seller terminates this
Agreement pursuant to Section 10.1(a) or (e) above by reason of a material
breach, misrepresentation or default by Purchaser under this Agreement, Seller
may elect to retain up to 100% of the Deposit without further liability or
obligation to Purchaser. The Deposit shall be returned to Purchaser if this
Agreement is terminated pursuant to Section 10.1 (b), (c) or (d) above or
pursuant to Section 10.1(a) or (e) above for any reason other than a material
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breach, misrepresentation or default by Purchaser under this Agreement. If
Seller elects to retain the Deposit, or a portion thereof as provided above,
then such retention by Seller of the Deposit, whether all or in part, shall be
treated by the Parties as liquidated damages, in lieu of other damages or
other remedies (it being agreed by the Parties that damages in said event
would be extremely difficult to determine, and that the Deposit (or the
portion thereof) retained by Seller represents a fair and reasonable estimate
of such damages to Seller under the circumstances, and does not constitute a
penalty). If the Deposit is returned to Purchaser, Seller shall have no
further obligation or liability to Purchaser and PURCHASER COVENANTS NOT
TO SUE SELLER, OR SELLER'S AFFILIATES OR ANY OF THEIR RESPECTIVE
REPRESENTATIVES OR INITIATE OR PURSUE ARBITRATION WITH REGARD TO
ANY DISPUTES, ISSUES OR CLAIMS ARISING OUT OF OR RELATING TO THE
DEPOSIT (OR ANY PURPORTEDLY LOST INTEREST THEREON) OR SELLER'S
RETENTION OF ALL OR PART OF THE DEPOSIT PURSUANT TO THIS SECTION 10.2.
If (a) this Agreement is validly terminated by Purchaser pursuant to Section
10.1(d) above by reason of a material breach, misrepresentation or default by
Seller under this Agreement, or (b) Seller fails to timely complete its
material obligations of Closing and Purchaser was otherwise itself ready,
willing and able to complete its obligations of Closing, and was not in
material default or breach of this Agreement , Seller shall pay to Purchaser
the sum of $1,000,000.00 plus Purchaser's verifiable out-of-pocket expenses
incurred after the Execution Date to perform its due diligence for
the Assets or the acquisition thereof, as well as for the actual premiums paid
in the aggregate for commodity derivatives related to the Assets (it being
agreed by the Parties that such amount shall be treated by the Parties as
liquidated damages, in lieu of all other damages and remedies of Purchaser,
and that damages in the event of such termination by Purchaser would be
extremely difficult to determine and that such amount to be paid Purchaser
represents a fair and reasonable estimate of such damages to Purchaser under
the circumstances and does not constitute a penalty). In order to allow Seller
an opportunity to cure, Purchaser shall provide prompt written notice of any
circumstances which it believes would indicate that Seller may be in material
breach or default under this Agreement. Notwithstanding anything to the
contrary contained in this Agreement, upon any termination of this Agreement
pursuant to Section 10.1, or as otherwise provided in this Agreement,
Seller shall be free immediately to enjoy all rights of ownership of the
Assets and may sell, transfer, encumber or otherwise dispose of the Assets to
any party without any restriction under this Agreement and without any
impairment of its rights hereunder to recover damages from Purchaser
arising from any default hereunder by Purchaser; provided, that Seller's right
to seek specific performance of Purchaser's obligations hereunder shall be
waived upon any such disposition of the Assets and that its right to seek or
recover any other damages from Purchaser shall be waived upon its express
election to retain all or a portion of the Deposit.
ARTICLE 11. TAXES
11.1. Apportionment of Ad Valorem and Property Taxes. All ad valorem
taxes, real property taxes, personal property taxes, and similar obligations
concerning the Assets with respect to the tax period in which the Effective
Time occurs ("Property Taxes") shall be apportioned as of the Effective Time
between Seller and Purchaser. Seller shall file or cause to be filed all
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required reports and returns incident to the Property Taxes and shall pay or
cause to be paid to the taxing authorities all Property Taxes relating to the
tax period in which the Effective Time occurs. Purchaser shall pay to Seller
Purchaser's pro rata portion of Property Taxes within thirty (30) days after
receipt of Seller's invoice therefor.
11.2. Sales Taxes. The Purchase Price excludes any sales taxes or
other taxes required to be paid in connection with the sale of property
pursuant to this Agreement. Purchaser shall be liable for all sales, gross
receipts, use and other taxes, conveyance, transfer and recording fees and
real estate transfer stamps or taxes that may be imposed on any transfer of
property pursuant to this Agreement. These taxes shall be collected and
remitted under applicable law. Purchaser shall indemnify and hold Seller
harmless with respect to the payment of any of these taxes including any
interest or penalties assessed thereon.
11.3. Other Taxes. All taxes (other than income taxes) which are imposed
on or with respect to the production of oil, natural gas or other hydrocarbons
or minerals or the receipt of proceeds therefrom (including but not limited to
severance, production, and excise taxes) shall be apportioned between the
parties based upon the respective shares of production taken by the parties
as to the Assets, prior to and after the Effective Time.. From and after
Closing, Purchaser shall be responsible for paying or withholding or causing
to be paid or withheld all such taxes and for filing all statements, returns,
and documents incident thereto.
11.4. Cooperation. Each party to this Agreement shall provide the other
party with reasonable access to all relevant documents, data and other
information which may be required by the other party for the purpose of
preparing tax returns and responding to any audit by any taxing jurisdiction.
Each party to this Agreement shall cooperate with all reasonable requests of
the other party made in connection with contesting the imposition of taxes.
Notwithstanding anything to the contrary in this Agreement, neither party to
this Agreement shall be required at any time to disclose to the other party
any tax return or other confidential tax information.
ARTICLE 12. CONDITION OF THE ASSETS
12.1. Prior Use of Assets. THE ASSETS AND PROPERTY HAVE BEEN USED OR
MAY HAVE BEEN USED FOR EXPLORATION, DEVELOPMENT, PRODUCTION,
STORAGE, TREATMENT, PROCESSING, AND TRANSPORTATION OF OIL AND GAS AND
RELATED OIL FIELD OPERATIONS. PHYSICAL CHANGES IN THE PROPERTY MAY
HAVE OCCURRED AS A RESULT OF SUCH USES. THE ASSETS OR THE PROPERTY
ALSO MAY INCLUDE BURIED PIPELINES, WASTES AND OTHER EQUIPMENT,
WHETHER OR NOT OF A SIMILAR NATURE, THE LOCATIONS OF WHICH MAY BE
HIDDEN OR NOT NOW BE KNOWN OR NOT READILY APPARENT BY A PHYSICAL
INSPECTION OF THE AFFECTED ASSETS. HYDROCARBONS AND OTHER
SUBSTANCES, INCLUDING HAZARDOUS SUBSTANCES, MAY HAVE COME TO BE
RELEASED OR LOCATED ON OR BENEATH THE SURFACE OF THE ASSETS OR THE
PROPERTY.
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12.2. Assumption of Assets in Present Condition. PURCHASER ACKNOWLEDGES
THAT (i) THE CONSUMMATION OF THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY BY PURCHASER SHALL BE SOLELY ON THE BASIS OF ITS
OWN INVESTIGATION OF THE PHYSICAL CONDITION OF THE ASSETS AND
PROPERTY, INCLUDING, WITHOUT LIMITATION, SUBSURFACE CONDITION; (ii) THE
ASSETS AND PROPERTY HAVE BEEN USED IN THE MANNER AND FOR THE PURPOSES
SET FORTH ABOVE AND THAT PHYSICAL CHANGES TO THE ASSETS AND THE
PROPERTY MAY HAVE OCCURRED AS A RESULT OF SUCH USE; AND (iii) NORM AND
ASBESTOS OR MAN-MADE MATERIAL FIBERS (COLLECTIVELY "MMMF") MAY BE
PRESENT AT SOME LOCATIONS. PURCHASER ACKNOWLEDGES THAT NORM IS A
NATURAL PHENOMENON ASSOCIATED WITH MANY OIL FIELDS IN THE UNITED
STATES AND THROUGHOUT THE WORLD. PURCHASER SHALL MAKE ITS OWN
DETERMINATION OF THIS PHENOMENON AND OTHER CONDITIONS. SELLER
DISCLAIMS ANY LIABILITY ARISING OUT OF OR IN CONNECTION WITH ANY
PRESENCE OF NORM OR MMMF ON OR AFFECTING THE ASSETS OR THE PROPERTY.
AT CLOSING, PURCHASER SHALL ASSUME THE RISK THAT THE ASSETS OR THE
PROPERTY MAY CONTAIN WASTES OR CONTAMINANTS AND ADVERSE PHYSICAL
CONDITIONS, INCLUDING THE PRESENCE OF PIPELINES, EQUIPMENT AND OTHER
ITEMS OF PERSONAL PROPERTY, TANK BOTTOMS, HEATER TREATER SLUDGE, AND
WASTES OR CONTAMINANTS WHICH MAY NOT HAVE BEEN REVEALED BY
PURCHASER'S INVESTIGATION. AT CLOSING, ALL RESPONSIBILITY AND LIABILITY
RELATED TO DISPOSALS, SPILLS, WASTES, OR CONTAMINATION, OR OTHER
ADVERSE PHYSICAL CONDITIONS ON, BELOW, OR RELATED TO OR AFFECTING THE
ASSETS AS WELL AS THE PROPERTY SHALL, EXCEPT AS SET FORTH IN SECTION 9.11,
BE ASSUMED BY PURCHASER AND PURCHASER SHALL, NOTWITHSTANDING WHEN
THE BASIS FOR ANY CLAIM, ACTION, SUIT, JUDGMENT (INCLUDING, WITHOUT
LIMITATION, THOSE FOR DEATH, PERSONAL INJURY OR PROPERTY DAMAGE) SHALL
HAVE OCCURRED OR MAY OCCUR, INDEMNIFY, DEFEND AND HOLD SELLER AND
SELLER'S AFFILIATES AND THEIR RESPECTIVE REPRESENTATIVES HARMLESS
THEREFROM PURSUANT TO THIS AGREEMENT.
12.3. Casualty Loss. In the event of any material damage by fire or
other casualty to any of the Assets prior to the Closing ("Casualty Loss"),
this Agreement shall remain in full force and effect, and as to each affected
Asset, Seller shall at its election either collect (and when collected pay
over to Purchaser) or assign to Purchaser any and all insurance (including
without limitation self-insurance) claims related to such damage, and
Purchaser shall take title to the affected Asset without reduction in the
Purchase Price, except to the extent of the amount of the deductible under
such insurance policies.
12.4. No Year 2000 Compliance. Purchaser accepts all the risk and
expense arising from or related to the lack of year 2000 compliance with
regard to any and all of the Assets. Seller makes no representations or
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warranties, and expressly negates and disclaims all such representations and
warranties, regarding the Assets' compliance with regard to year 2000 matters.
ARTICLE 13. MISCELLANEOUS
13.1. Governing Law. This Agreement and all instruments executed in
accordance herewith shall be governed by and interpreted in accordance with
the laws of the State of Texas, without regard to conflict of law rules that
would direct application of the laws of another jurisdiction, except to the
extent that it is mandatory that the law of the jurisdiction wherein the
Assets are located shall apply. Subject to Section 13.24, in the event of any
litigation or other proceeding in connection with this Agreement, the
exclusive venue for any such proceeding shall be in a court of competent
jurisdiction located in Dallas County, Texas, and the prevailing party shall
be entitled to recover its reasonable attorneys' fees and costs incurred
therein from the other party, in addition to any damages awarded. Purchaser
agrees to accept service of process by certified mail.
13.2. Entire Agreement. This Agreement, all agreements and instruments
executed in connection herewith, and the Confidentiality Agreement dated
April 30, 1999, between Purchaser and Seller (the "Confidentiality
Agreement")constitute the entire agreement between the Parties and supersede
all prior agreements, understandings, negotiations and discussions, whether
oral or written, of the Parties. The Confidentiality Agreement remains in full
force and effect in accordance with its terms. Purchaser may disclose
confidential information covered by the Confidentiality Agreement to its
lenders and potential lenders and to potential purchasers of portions of the
Assets, and such lenders potential lenders, and potential purchasers shall be
bound and subject to the terms of the Confidentiality Agreement with Purchaser
being responsible for any breaches of said Confidentiality Agreement by said
parties. No supplement, amendment, alteration, modification, waiver or
termination of this Agreement shall be binding unless executed in writing by
the Parties hereto. The delivery and/or recordation of the assignments or
other instruments to be delivered pursuant to this Agreement shall not cause,
under the doctrine of merger, confusion or otherwise, the extinguishment
of any representations, warranties or agreements contained in this Agreement.
In the event of any conflict between the terms of this Agreement and the terms
of such assignments or instruments, the terms of this Agreement shall govern
and control.
13.3. Waiver. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided
13.4. Captions. The captions in this Agreement are for convenience only
and shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.
13.5. Assignability. Purchaser shall not assign (whether before, at or
after Closing) this Agreement or any of its rights or obligations hereunder,
except as set forth below in this Section 13.5, without the prior written
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consent of the Seller, which may be withheld or conditioned for any or no
reason. Any assignment made without such consent shall be void. Except as
otherwise provided herein, this Agreement shall be binding upon and inure to
the benefit of the Parties hereto and their respective permitted successors
and assigns; however, in any event Purchaser shall remain responsible and
liable for the performance of the obligations of Purchaser under this
Agreement in addition to said successors and assigns. At Purchaser's written
request delivered to Seller on or before the fifth (5th) Business Day before
the Closing Date, Purchaser may substitute the name of a financially-qualified
third party entity for the purposes of receiving the Assignment and Bill of
Sale for a Gas Plant if such party is capable to Sellers reasonable
satisfaction, of assuming and expressly does assume, in a writing acceptable
to Seller, all the obligations, liabilities, indemnities and responsibilities
of Purchaser under this Agreement with regard or relation to such Gas Plant
(as if such third party were an original signatory Purchaser to this
Agreement, but only with respect to such Gas Plant), with Purchaser also
remaining liable therefor.
13.6. Notices. Any notice provided or permitted to be given under this
Agreement shall be in writing, and may be served by personal delivery,
facsimile, or by registered or certified U.S. mail, addressed to the Party to
be notified, postage prepaid, return receipt requested. Notice deposited in
the mail in the manner hereinabove described shall be deemed to have been
given and received on the date of the delivery as shown on the return receipt.
Notice served in any other manner (including by facsimile delivery) shall be
deemed to have been given and received only if and when actually received by
the addressee. For purposes of notice, the addresses of the Parties
shall be as follows:
SELLER:
Pioneer Natural Resources USA, Inc.
Attn: Ray Alameddine and W.T. Howard
1400 Williams Square West
5205 North O'Connor Blvd.
Irving, Texas 75039-3746
Telephone: (972) 444-9001
Facsimile: (972) 969-3570
PURCHASER:
Prize Energy Corp.
Attn: Philip B. Smith
20 E. 5th Street, Suite 1400
Tulsa, Oklahoma 74103
Telephone: (918) 582-5532
Facsimile: (918) 582-1547
Each Party shall have the right, upon giving three (3) days prior notice
to the other in the manner hereinabove provided, to change its address for
purposes of notice to any other appropriate street address.
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13.7. WAIVER OF CONSUMER RIGHTS/DTPA Waiver. TO THE EXTENT
APPLICABLE TO THE ASSETS OR ANY PORTION THEREOF, PURCHASER HEREBY
VOLUNTARILY WAIVES THE PROVISIONS OF THE TEXAS DECEPTIVE TRADE
PRACTICES ACT, CHAPTER 17, SUBCHAPTER E, SECTIONS 17.41 THROUGH 17.63,
INCLUSIVE (OTHER THAN SECTION 17.555, WHICH IS NOT WAIVED), TEX. BUS. &
COM. CODE., A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS.
IN ORDER TO EVIDENCE ITS ABILITY TO GRANT SUCH WAIVER, PURCHASER
HEREBY REPRESENTS AND WARRANTS TO SELLER THAT IT (i) IS IN THE BUSINESS
OF SEEKING OR ACQUIRING, BY PURCHASE OR LEASE, GOODS OR SERVICES FOR
COMMERCIAL OR BUSINESS USE; (ii) HAS CONSULTED WITH AN ATTORNEY OF
PURCHASER'S OWN CHOOSING; (iii) HAS KNOWLEDGE AND EXPERIENCE IN
FINANCIAL, BUSINESS AND OIL AND GAS MATTERS THAT ENABLE IT TO EVALUATE
THE MERITS AND RISKS OF THE TRANSACTIONS CONTEMPLATED HEREBY; (iv) IS
NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION; AND (v) THAT THIS
WAIVER IS A MATERIAL AND INTEGRAL PART OF THIS AGREEMENT AND THE
CONSIDERATION THEREOF. IN ADDITION, PURCHASER WAIVES ITS RIGHTS UNDER
ALL OTHER CONSUMER PROTECTION STATUTES APPLICABLE TO THIS
TRANSACTION AND /OR THE ASSETS OR THIS AGREEMENT TO THE MAXIMUM
EXTENT THAT SUCH STATUTES MAY BE WAIVED.
13.8. Expenses. Each Party shall be solely responsible for all expenses
incurred by it in connection with this transaction (including, without
limitation, fees and expenses of its own legal counsel and accountants).
13.9. Severability. If a court of competent jurisdiction finds any
clause or provision of this Agreement to be void, invalid, or otherwise
unenforceable, the other clauses and provisions shall remain in full force and
effect and the clauses and provisions which are determined to be void, invalid
or unenforceable shall be limited so that they shall remain in effect to the
full extent permissible by law.
13.10. Damages. The Parties waive any rights to special, indirect,
punitive, exemplary, or consequential damages resulting from a breach of this
Agreement.
13.11. No Third Party Beneficiary. This Agreement is not intended to
create, nor shall it be construed to create, any rights in any third party
under doctrines concerning third party beneficiaries.
13.12. Survival. The representations and warranties of the parties under
this Agreement shall not survive, but shall terminate upon and be extinguished
by, Closing; provided, however, that all representations, warranties, waivers,
disclaimers, releases, covenants, agreements and indemnities contained
entirely within Sections 1.2, 1.3, 2.3, 3.4, 3.6, 4.4, 4.11, 4.12, 5.4, 5.5,
5.6, 5.7, 5.8, 5.10 and 5.11, and Articles 9, 11, 12 and 13 of this Agreement
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shall survive the Closing, and notwithstanding anything herein to the
contrary, Purchaser expressly agrees and acknowledges that it shall have no
remedy or recourse against Seller or its Affiliates or any of their respective
Representatives with respect to the condition of the Assets or Property or any
representation or warranty made in connection with this Agreement, except as
expressly provided by Section 3.6.
13.13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same
instrument.
13.14. Not to be Construed Against Drafter. Purchaser and Seller
acknowledge that they have read this Agreement, have had the opportunity to
review it with an attorney of their respective choice, and have agreed to all
its terms. Under these circumstances, Purchaser and Seller agree that
the rule of construction that a contract be construed against the drafter
shall not be applied in interpreting this Agreement and that in the event of
any ambiguity in any of the terms or conditions of this Agreement, including
any exhibits hereto and whether or not placed of record, such ambiguity
shall not be construed for or against any Party hereto on the basis that such
Party did or did not author the same.
13.15. Waiver of Jury Trial. SUBJECT TO THE LIMITATIONS OF SECTION
13.24, SELLER AND PURCHASER DO HEREBY IRREVOCABLY WAIVE, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY
ACTION, SUIT OR OTHER LEGAL PROCEEDING BASED UPON, ARISING OUT OF OR
RELATING TO THIS AGREEMENT THE RIGHTS AND OBLIGATIONS UNDER THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
13.16. Publicity. Seller and Purchaser shall consult with each other
with regard to all publicity and other releases and disclosures to be made
prior to, at or after Closing concerning this Agreement and the transactions
contemplated hereby, which are not otherwise expressly permitted by the
Confidentiality Agreement, and, except as required by applicable law or the
applicable rules or regulations of any governmental body or stock exchange,
neither Party shall make any disclosure or issue any publicity or other
release without the prior written consent of the other Party, which consent
shall not be unreasonably withheld or delayed.
13.17. Accounting.
A. Seller shall deliver to Purchaser on or before the fourth Business
Day prior to Closing a preliminary settlement statement setting forth any
adjustments to the Purchase Price provided for in or required by this
Agreement including, without limitation, items such as the Purchase Price,
Deposit, expenses, prepaid items, revenue received, Property Taxes, excise and
energy taxes, copying and recording fees, to the extent such information is
available or estimated by Seller on or before Closing (the "Preliminary
Settlement Statement"). The Preliminary Settlement Statement shall be
prepared in accordance with this Agreement and with standard industry and
accounting practices. In connection with the preparation of the Preliminary
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Settlement Statement, the Purchase Price shall be (1) increased by (a) the
costs and expenses that are attributable to the Assets for the period from the
Effective Time to the Closing Date that are paid, incurred or assessed by
Seller (including, but not limited to, Seller's internal cost for
administrative overhead for each well operated by Seller at the rate of
$435.00 per well per month for wells not otherwise subject to an applicable
COPAS overhead rate under an operating agreement and an amount equal to the
applicable COPAS overhead rate less any non-operator billed overhead amounts
that have actually been received by Seller for wells subject to an applicable
COPAS under an operating agreement), and (b) other amounts due Seller and
contemplated hereby, and (2) reduced by (a) proceeds received by Seller for
hydrocarbons attributable to the Subject Properties produced after the
Effective Time, and (b) other amounts due Purchaser and contemplated hereby.
B. Within 150 days after the Closing, Seller shall prepare, in
accordance with this Agreement and with standard industry and accounting
practices, and deliver to Purchaser, a final accounting statement showing the
proration calculation of credits and payment obligations of Purchaser and
Seller hereunder. As soon as reasonably practicable after receipt thereof,
Purchaser shall deliver to Seller a written report containing any changes that
Purchaser proposes to be made to such statement. The Parties shall use their
best efforts to reach agreement (the "Final Accounting") on the final
accounting statement on or before the fifteenth (15) Business Day after
Purchaser's receipt of the final accounting statement (such date the "Final
Accounting Date", whether or not Seller and Purchaser have agreed on the Final
Accounting). Once the Final Accounting has been agreed to by Purchaser and
Seller, there shall be no further adjustments to the Cash Purchase Price and
Seller shall within thirty (30) days send a check to Purchaser for the agreed
amount owed by Seller or invoice Purchaser for the amount owed by Purchaser,
and Purchaser shall pay Seller the invoice amount within thirty (30) days of
the date of said invoice.
13.18. Operatorship. Seller does not represent to Purchaser that
Purchaser will automatically succeed to the operatorship of any given Subject
Property as to which Seller is currently the operator. Purchaser recognizes
and agrees that Purchaser will be required to comply with applicable operating
agreements, unit operating agreements or other similar contracts relating to
any elections or other selection procedures in order to succeed Seller as
operator.
13.19. HSR Act. The Parties shall exercise their best efforts to file
(or to cause their ultimate parent entities to file) with the United States
Federal Trade Commission and the United States Department of Justice all
notifications and reports required for the transaction contemplated hereby
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR Act"),
and shall request early termination of the prescribed waiting period. The
Parties will reasonably cooperate with each other in regards to providing
information to each other to facilitate the necessary filing. Both Parties
shall use their best efforts to promptly supply any supplemental or additional
information which may be requested in connection therewith pursuant to the HSR
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Act and shall comply in all material respects with the requirements of the HSR
Act. Closing of the transaction contemplated hereby shall not occur unless
and until all necessary filings and notifications under the HSR Act have been
made, including the provision of any required additional information or
documents, and the waiting period referred to in such Act shall have expired
or terminated. Subject to this Agreement, if the waiting period expires or
terminates prior to the Closing Date, the Parties will proceed to Closing on
the Closing Date and if the waiting period expires or terminates after the
scheduled Closing Date, the Parties shall close the subject transaction on or
prior to the fourth day after the expiration or termination of said waiting
period.
13.20. Seller's Employees. Purchaser will interview and evaluate in
accordance with its normal employment procedures those Persons employed by
Seller as field personnel in the capacity of pumper, foreman, operator,
technician, mechanic, superintendent, repairman, utility man, or other similar
field classifications in connection with the Subject Properties (such Persons
being identified in a letter of even date herewith from Seller to Purchaser)
who may desire to be considered for employment by Purchaser, and Purchaser
will offer in writing employment to those Persons for whom Purchaser in its
sole discretion determines a need. If Purchaser fails to offer such
employment to all of such Persons, as provided below, Purchaser shall not, as
a result of such failure, otherwise be in default under this Agreement, but
shall be required to reimburse Seller for severance benefits paid by Seller to
each such Person not offered employment by Purchaser; provided, that such
reimbursement shall not exceed that amount determined by multiplying each such
employee's normal weekly wage by twelve (12). Persons offered employment with
Purchaser will be offered employment at their current work location at
whatsoever wages may be determined by Purchaser and Purchaser's customary
benefits. For persons hired by Purchaser, Purchaser will (i) give all such
Persons credit for years of employment with Seller or its Affiliates, and (ii)
waive or cause the waiver of all waiting periods required before new employees
of Purchaser are normally entitled to Purchaser's employee benefits of any and
all nature, or make other accommodations equivalent to such a waiver. If
Purchaser offers a job to such Person or Persons (a) at the same wages which
that Person currently receives from Seller and on the other terms and
conditions described in the immediately preceding sentence, regardless of
whether such Persons accepts employment with Purchaser, Purchaser shall have
no severance obligation with respect to that Person under this Agreement,
except as specifically set forth below; and (b)at less than the terms or
conditions described in the immediately preceding two sentences or at lower
wages than currently being received from Seller, and such Persons accept the
offered employment, then Purchaser shall pay to Seller at Closing an amount
equal to four weeks wages of the normal wages for each such Person. All
offers shall be made prior to Closing, but shall be contingent upon the
occurrence of Closing and such employment shall not commence until Closing.
If any such Person employed by Purchaser is terminated by Purchaser within six
(6) months of Closing, except for cause, Purchaser shall pay such Person a
severance benefit equal to the amount determined by multiplying each such
employee's normal weekly wage by ten (10). Purchaser shall have no obligation
under this Section 13.20 with respect to Persons offered employment by
Purchaser pursuant to this Section 13.20 who decline such employment, except
that the foregoing provisions of this Section 13.20 shall apply to the extent
that such Person accepts employment with Purchaser or any of its Affiliates
within twelve (12) months of Closing. Without the express written permission
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of Seller, Purchaser shall not consider for employment, solicit or contact
employees of either Seller for the purpose of hiring same unless such Persons
are identified in the letter from Seller to Purchaser identified in this
Section 13.20.
13.21. Time of Performance. Time is of the essence in the performance of
all covenants and obligations under this Agreement.
13.22. No Partnership Created. It is not the purpose or intention of
this Agreement to create (and it shall not be construed as creating) a joint
venture, partnership or any type of association, and the Parties are not
authorized to act as agent or principal for each other with respect to any
matter related hereto.
13.23. Express Negligence Rule; Conspicuousness. BUYER ACKNOWLEDGES THAT
THE PROVISIONS IN THIS AGREEMENT THAT ARE SET OUT IN ITALICS, IN BOLD,
UNDERLINE OR CAPITALS, OR ANY COMBINATION THEREOF, SATISFY THE
REQUIREMENTS FOR THE EXPRESS NEGLIGENCE RULE AND/OR ARE CONSPICUOUS.
13.24. Arbitration. Because of the high cost of litigation in dollars,
time and resources, Purchaser and Seller intend to and do hereby establish an
efficient, fair and binding out-of-court dispute resolution procedure to be
followed in the unlikely event any claim or controversy should arise between
the parties after the date hereof out of or concerning in any respect any of
the following:
(1) the Property or Assets or either Seller's or Purchaser's
conduct with respect to the Property or Assets, either before, on, or after
the Effective Time, or
(2) the conduct of Seller or Purchaser prior to the execution of
this Agreement or the conduct of Seller or Purchaser prior to the Closing Date
or Effective Time (whichever is later),
(3) the performance, applicability, validity, enforceability, or
interpretation of the Agreement or any provision in this Agreement or any
Closing or post-Closing documents, or
Accordingly, Purchaser, its successors, and assigns, and Seller agree
that any claim or controversy as described above of whatever nature,
including, but not limited to, any action in tort, contract, or any statutory
action (hereinafter referred to as "Disputed Claim" or "Disputed Claims" in
this section), or the arbitrability of any such Disputed Claim, shall be
resolved in accordance with the terms, conditions, and procedures set forth
and will be binding on Purchaser, its successors, and assigns, and Seller.
Neither Purchaser, its successors, or assigns, nor Seller will prosecute or
commence any suit or action against the other Party relating to any matters
that are subject to this Section 13.24.
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Notwithstanding the above, any Disputed Claim by Purchaser for which
Purchaser has given notice to Seller prior to Closing that is not settled
prior to Closing and any Disputed Claim by either party arising out of facts
that are the subject of existing or prospective litigation filed by a third
party at any time against Purchaser or Seller will, at Seller's sole option,
not be subject to this Section 13.24.
Unless expressly provided otherwise in this Agreement, any and all
disputed claims arising under the terms of or in connection with this
Agreement shall be referred to and resolved through the use of binding
arbitration using three (3) arbitrators, in accordance with the commercial
arbitration rules of the American Arbitration Association, and the Federal
Arbitration Act (Title 9 of the United States Code). If there is any
inconsistency between such rules and any statute, such statute shall control
the rights and obligations of the parties. Further, if there is any
inconsistency between this Section 13.24 and any statute or such rules, the
terms of this Section 13.24 shall control the rights and obligations of the
Parties. Arbitration shall be initiated within the applicable time limits set
forth in this Agreement and not thereafter or, if no time limit is given,
within the time period allowed by the applicable statute of limitations.
Arbitration shall be initiated by one (1) Party ("Claimant") serving written
notice on the other Party ("Respondent") that the Claimant elects to refer the
arbitrable dispute to binding arbitration, and that the Claimant has appointed
an arbitrator, who shall be identified in such notice. The Respondent shall
respond to the Claimant within thirty (30) days after receipt of Claimant's
notice, identifying the arbitrator Respondent has appointed. The two (2)
arbitrators so chosen shall select a third arbitrator (who must have not less
than ten (10) years experience as an oil and gas lawyer) within thirty (30)
days after the second arbitrator has been appointed. If they fail to do so,
either Party may request the judge of the United States District Court for the
Northern District of Texas having greatest tenure, but not yet on retired
or senior status, to appoint the third arbitrator. If that judge fails to do
so within thirty (30) days, either Party may request the judge of that court
next senior to name the third arbitrator, and if that judge fails to do so
after ten (10) days, either Party may make the request of the judge of that
court next senior, and so on, until the Board of Arbitration is constituted.
Seller shall pay the compensation and expenses of the arbitrator named by or
for it, and Purchaser shall pay the compensation and expenses of the
arbitrator named by or for it. Seller and Purchaser shall each pay one-half
of the compensation and expenses of the third arbitrator. Unless expressly
provided otherwise in this Agreement, all arbitrators must be neutral parties
who have never been officers, directors or employees of the Parties or any of
their Affiliates. Additionally, unless expressly provided otherwise in this
Agreement, the two (2) arbitrators named by the Parties must have not less
than ten (10) years experience in the oil and gas industry, and must have a
formal education in the area in dispute (i.e., accounting for an accounting
dispute, etc.). The hearing shall be commenced within thirty (30) days after
the selection of the third arbitrator. The Parties and the arbitrators shall
proceed diligently and in good faith in order that the award shall be made as
promptly as possible. The decision of the arbitrators shall be by majority
vote if unanimity is not attained, shall be rendered in writing and shall be
binding on and non-appealable by the Parties. The arbitrators shall not have
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the authority to grant or award indirect, consequential, punitive or exemplary
damages. The sole forum for the arbitration shall be Dallas, Texas and all
hearings shall be conducted in Dallas, Texas.
13.25 Filing and Recording. Purchaser will file or record the various
originals of the Assignment and Bill of Sale and other conveyancing documents
promptly after Closing at Purchaser's sole cost. If Purchaser fails to
promptly record such documents then Seller may record such documents.
Purchaser shall reimburse Seller for the costs of filing, recording, and other
reasonable fees actually incurred by Seller if Seller records or files said
documents, such costs or fees to be used in the Final Accounting Settlement.
The recording Party will provide either the original or photocopies of the
recorded documents, including the recording data, to the non-recording
Party promptly.
13.26 Removal of Signs. Seller may either remove its name and signs
from the Seller-operated Assets and Property or require Purchaser to do so for
those Assets that it will operate. If Seller's name or signs remain on the
Property or Assets after Seller ceases to be operator and Purchaser has become
operator, Purchaser must (a) remove any remaining signs and references to
Seller promptly, but no later than the time required by applicable regulations
or forty-five days after Seller ceases to be operator, whichever occurs first,
(b) install signs complying with applicable governmental regulations,
including signs showing Purchaser as operator of the Assets it operates,
and (c) notify Seller of the removal and installation. Seller reserves a
right of access to the Assets and Property after it ceases to be operator to
remove its signs and name from all Wells, facilities and Property, or to
confirm that Purchaser has done so for the Assets operated by Purchaser. If
Seller removes signs because Purchaser has not done so, Seller will charge its
costs to Purchaser, and Purchaser will pay the invoice within fifteen days of
receipt.
Remainder of page intentionally left blank
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13.27 Transition Agreement. On or before Closing the Parties may choose
to enter into an agreement for the continued operation of the Assets, or a
portion thereof, substantially in the form attached hereto as Schedule 13.27
with the term and Seller's fee or compensation to be mutually agreed upon.
EXECUTED as of the date first set forth above.
SELLER:
PIONEER NATURAL RESOURCES USA, INC. PIONEER RESOURCES PRODUCING L.P.
By: Pioneer Resources, Inc. its
General Partner
By: /s/ W. T. Howard By: /s/ W. T. Howard
_________________________________ ______________________________
W. T. Howard W. T. Howard
Sr. Vice President Vice President
PURCHASER:
PRIZE ENERGY CORP.
By: /s/ Philip B. Smith
___________________________
Philip B. Smith
President
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The Schedules and Exhibits to the Purchase and Sale Agreement (see
the list at the end of the Table of Contents) have been omitted,
and the Reporting Persons agree to furnish supplementally a copy
of any of the omitted Exhibits to the Securities and Exchange
Commission upon its request.
EXHIBIT B
DUE DILIGENCE USE AGREEMENT
___________________________
This Due Diligence Use Agreement ("Agreement") is executed
this 28th day of May, 1999, by and between Costilla Energy, Inc.
("Costilla"), and Prize Energy Corp. ("Prize").
WHEREAS, Costilla entered into a Confidentiality Agreement
with Pioneer National Resources USA, Inc. ("Pioneer"), on or about
April 15, 1998 ("Pioneer Confidentiality Agreement") (see Exhibit
"A"), and pursuant thereto performed significant due diligence and
effort, but did not close a transaction with Pioneer,
WHEREAS, Costilla has data to support and document Costilla's
due diligence relative to the wells, leases, plants, personal
property and lands listed or described on Exhibit "B" attached
hereto ("Assets"),
WHEREAS, Prize and Pioneer have executed a definitive
agreement for Prize to acquire all or a portion of the Assets and
four (4) million shares of Costilla common stock from Pioneer
("Prize Acquisition"),
WHEREAS, in order to facilitate their acquisition from
Pioneer, Prize desires to acquire such due diligence from Costilla,
NOW THEREFORE, conditioned on Pioneer's consent to allow such
use of the confidential information provided to Costilla under the
Pioneer Confidentiality Agreement, Costilla and Prize agree as
follows:
1. Prize shall (1) pay $750,000 cash ("Cash Consideration");
(2) pay Costilla's expenses (as defined herein) in delivering the
Due Diligence (as defined herein); (3) if the Prize Acquisition
closes, deliver to Costilla an exploration agreement containing the
terms set forth in Paragraph 4 below ("Exploration Agreement"); (4)
if the Prize Acquisition closes, and Prize receives any shares of
the Costilla common stock, vote those shares consistent with the
desires of Costilla management as described herein and (5) if the
Prize Acquisition closes, pay Costilla the proceeds, net of
reasonable commissions, derived from the sale of 1.5 million shares
of Costilla common stock with such sales being made at the time, or
from time to time, in the volumes, and in the manner directed by
Costilla and in accordance with applicable law.
2. Upon payment of the Cash Consideration on or before 11:00
a.m. June 1, 1999, the Due Diligence that relates to Assets Prize
acquires directly from Pioneer, shall become the property of Prize.
3. The expenses incurred by Costilla for the use of
Costilla's employees, contractors, consultants or agents ("Costilla
Agents") to gather, prepare, deliver, or convey the Due Diligence
to Prize, whether in written form or by spoken word ("Expenses"),
shall be reimbursed by Prize within 10 (ten) days following the end
of the month in which Costilla bills Prize therefore. Costilla
Agents' time will be billed at the rates shown on Exhibit "C"
attached hereto. If and when such expenses reach a total of
$75,000, unless Prize agrees to pay more than $75,000 for expenses,
Costilla shall cease incurring out-of-pocket expenses and expending
more than nominal amounts of time to hand over the Due Diligence to
Prize. Other expenses incurred on behalf of Prize shall be billed
directly to Prize (i.e. outside copy charges, consultant,
land broker fees, etc.).
<PAGE>
4. Prize shall execute an exploration agreement in favor of
Costilla for all of the interest Prize receives from Pioneer in the
Provident City, Garwood and Graceland Prospects located in Lavaca,
Jackson and Colorado Counties, Texas, including the wells described
on Exhibit "D" attached hereto, (the "Prospects") on the following
terms:
A. Costilla shall have the option to commence the drilling
of a well on each of or any Prospect within 18 months
from closing of the Prize Acquisition ("Test Well"). The
purpose of each Test Well must be to test depths and
formation deeper than those currently producing in
existing wells.
B. Subject to A, E and F herein, production in each Test
Well earns Costilla an assignment of Prize's interest in
lands and leases that are within the boundaries
of spacing or proration unit established for each Test
Well.
C. The assignment will be subject only to the burdens of
record against the leases and lands which exist
immediately prior to the date of closing of the Prize
Acquisition.
D. The Exploration Agreement will allow Costilla to assign
all or part of its interest thereunder to third parties
provided that all promotion and benefits received by
Costilla over and above those granted in the Exploration
Agreement and over and above all costs borne out-of-
pocket by Costilla will be shared equally with Prize.
Alternatively, if Prize, in its sole opinion, deems that
such promotion and benefits are insufficiently
profitable, it may retain one-half of its interests for
each Test Well, and either participate or promote such
interest to another third party; however, such retention
shall not prohibit Costilla from drilling a Test Well and
enjoying intent of the Exploration Agreement.
E. The drilling of a well on any prospect will serve to
perpetuate the Exploration Agreement as to lands and
leases covered by that prospect for a period of 3
years from completion of the first well drilled on that
prospect. The Exploration Agreement may be perpetuated
beyond the 3 year period by continuously developing the
lands and leases covered by the prospect with no more
than 90 days elapsing between completion of one well and
spudding of the next well on that prospect. The
Exploration Agreement will grant Costilla the right to
drill as many wells on each prospect as it chooses so
long as the exploration agreement is in effect.
F. At the time each well is drilled under the Exploration
Agreement, Prize will meet with Costilla and endeavor to
enter into an additional agreement to provide to Costilla
rights to any zones which are not capable of being
Page 2
<PAGE>
produced from wells other than those drilled under this
Exploration Agreement existing on the date the test well
is spud.
G. The Exploration Agreement shall provide Costilla with
access to any and all seismic, geological and geophysical
data and information ("G&G Data") in the custody, control
or possession of Prize following the Prize Acquisition
that relate to the Prospects. The G&G Data to be
provided to Costilla shall include, but not be limited
to, all such data and information Prize acquires from
Pioneer either as a part of the Prize Acquisition or
otherwise.
5. Through November of 2000, Prize shall cast and vote on
all issues presented to the common shareholders of Costilla as the
Costilla Board of Directors states is the desire of the then
existing Costilla Board of Directors.
6. Subject to the prior consent of Pioneer, Costilla will
deliver to Prize all Evaluation Material (as defined in the Pioneer
Confidentiality Agreement) and all other information resulting from
the due-diligence conducted by or for the benefit of Costilla
(whether prepared, purchased or acquired by Costilla) relative to
such Evaluation Material and the Assets ("Due Diligence"),
including, but not limited to, engineering data, environmental
studies and reports, economic runs, land and title due diligence,
title and other legal opinions, interpretations, studies,
memoranda, and analysis. In addition, Costilla shall, at the
request of Prize, provide to all professionals, consultants,
agents, or other third parties (collectively, "Representatives")
retained by or for the benefit of Costilla in connection with the
Due Diligence, any and all consents, waivers of conflicts of
interest, or other authorizations that may be deemed necessary or
desirable by Prize or such Representative to permit such
Representative to be retained by Prize or any other participant in
the Prize Acquisition or to permit the work product of such
Representative to be delivered and utilized by Prize. Prior to the
delivery of any Due Diligence by Costilla, Prize acknowledges and
agrees that it will obtain and provide to Costilla the written
consent of Pioneer permitting Costilla's delivery of Evaluation
Material and Due Diligence to Prize pursuant to the terms
contemplated in this Agreement. If the Prize Acquisition does not
close by the terms of the Purchase and Sale Agreement between
Pioneer and Prize relating to the Prize Acquisition, Prize shall
promptly return all Due Diligence to Costilla.
7. Prize agrees to reimburse and indemnify and defend
Costilla, its officers, directors, employees and representatives
from any and all damages, loss, claims or expenses resulting from
any lawsuit or claim asserted against such parties as a result of
Prize's negligent or wrongful acts related to its use of the Due
Diligence and agrees that any use of the Due Diligence is at
Prize's own risk and subject to the Pioneer
Confidentiality Agreement.
8. This Agreement constitutes the entire agreement of the
parties with respect to the acquisition of the Due Diligence.
9. The Agreement shall be an exclusive agreement between the
parties only as the Due Diligence relates to Assets Prize acquires
prior to August 15, 1999.
Page 3
<PAGE>
10. The parties specifically agree that all originals of the
Due Diligence materials shall be placed in the office space which
will be subleased from Costilla to Prize at a rate of $10 per
square foot per year until the consummation of an acquisition by
Prize from Pioneer. Costilla shall have the right to copy and use
the Due Diligence, as Costilla deems useful and appropriate.
Further the parties agree that Costilla will have access to all Due
Diligence for one year following the consummation of the Prize
Acquisition or any part thereof.
11. The parties specifically agree that any and all Due
Diligence provided to Prize by Costilla shall be returned to
Costilla by August 19, 1999, as it relates to any portion of the
Assets not acquired from Pioneer by August 15, 1999.
12. As a condition to receiving the Due Diligence, and as a
covenant under this Agreement, Prize agrees that, for one (1) year
subsequent to the date of this Agreement without the prior written
consent of Costilla, it will not directly or indirectly, through
its officers, directors, employees, and any subsidiary either (1)
hire, solicit, entice, induce, interfere with, or contract any
current employee of Costilla, for the purpose of persuading or
influencing such employee to terminate his employment with
Costilla; or (ii) indirectly aid, assist, or abet any other person,
company, or business, in hiring, soliciting, enticing, interfering
with, or contacting any current employee of Costilla, for the
purpose of persuading or influencing such employee to terminate his
employment with Costilla. In the event that Prize should breach
the terms contained in this paragraph, it is agreed that Costilla
will incur certain damages and costs that are not accurately
ascertainable. Therefore, in the event of such a breach, Prize
shall pay to Costilla as liquidated damages, a sum equal to two (2)
times the annualized 12 month salary of any employee of Costilla
hired in violation of this Agreement.
13. If any confidential information pertaining to a party to
this Agreement, shall be disclosed to the other party in connection
with the performance of this Agreement, the party receiving such
confidential information (the "Recipient") agrees to maintain its
confidentiality during the period from the date hereof until
December 1, 2000, except that, such confidentiality obligation does
not apply to any information (1) which, at the time of disclosure
or thereafter, is generally available to and known by the public,
other than as result of disclosure directly, or indirectly by the
Recipient, (2) which was available to the Recipient on a non-
confidential basis from a source other than the other party to this
agreement, or its employees, agents, advisors or representatives,
provided that the Recipient has no knowledge that such source is
bound by a confidentiality agreement with the disclosing party, (3)
that has been independently acquired or developed by the Recipient
without violating any of its obligations hereunder, or (4) for
which the Recipient has become legally compelled to disclosed (by
deposition, interrogatory, subpoena, civil investigative demand or
similar process); provided, that the undersigned will provide the
disclosing party with prompt written notice thereof.
Page 4
<PAGE>
COSTILLA ENERGY, INC.
400 West Illinois, Suite 1000
Midland, TX 79702
Tel: (915) 683-3092
Fax: (915) 686-6083
By: /s/ Henry G. Musselman
___________________________
Henry G. Musselman
Executive Vice President
and
Chief Operating Officer
PRIZE ENERGY CORP.
20 E. 5th Street, Suite 1400
Tulsa, OK 74103
Tel: (918) 582-5532
Fax: (918) 582-1597
By: /s/ Philip B. Smith
___________________________
Philip B. Smith
President
Page 5
<PAGE>
The following Exhibits to the Due Diligence Agreement have
been omitted, and the Reporting Persons agree to furnish
supplementally a copy of any of the omitted Exhibits to the
Securities and Exchange Commission upon its request:
Exhibit A - Confidentiality Agreement dated
April 15, 1998, between Costilla
and Pioneer
Exhibit B - List of Assets
Exhibit C - Billing rates for Costilla
Personnel
Exhibit D - List of Prospects
EXHIBIT C
JOINT FILING AGREEMENT
This Joint Filing Agreement (this "Agreement") is made and
entered into as of the 16th day of July, 1999, by and among the
undersigned parties.
In accordance with Rule 13d-1(k)(1) under the Securities
Exchange Act of 1934, as amended, the undersigned agree to the
joint filing on behalf of each of them of a statement on
Schedule 13D (including amendments thereto) with respect to the
common stock of Costilla Energy, Inc., a Delaware corporation, and
further agree that this Agreement be included as an exhibit to such
joint filing (including amendments thereto). Each of the persons
named below acknowledges that the information contained in the
statement on Schedule 13D (including amendments thereto) respecting
such person is complete and accurate in all material respects and
that such person does not know and has no reason to believe that
the information respecting any other person named below is
inaccurate.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
PRIZE ENERGY RESOURCES, L.P. PRIZE OPERATING COMPANY
By: Prize Operating Company,
General Partner
By: /s/ Philip B. Smith By: /s/ Philip B. Smith
_________________________ _________________________
Philip B. Smith Philip B. Smith
Chairman and Chief Chairman and Chief
Executive Officer Executive Officer
PRIZE ENERGY CORP.
By: /s/ Philip B. Smith
_____________________________
Philip B. Smith
Chairman and Chief
Executive Officer
