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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D/A
Under the Securities Exchange Act of 1934 (Amendment No. 1)*
COSTILLA ENERGY, INC.
(Name of Issuer)
COMMON STOCK, $.10 PAR VALUE
(Title of Class of Securities)
22161G103
(CUSIP Number)
MARK L. WITHROW, ESQ.
PIONEER NATURAL RESOURCES COMPANY
5205 N. O'CONNOR BOULEVARD
IRVING, TEXAS 75039
(972) 444-9001
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
APRIL 15, 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 that 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
[ ].
*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.
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1) Names of Reporting Persons. I.R.S. Identification Nos. of Above Persons
(entities only): Pioneer Natural Resources Company
2) Check the Appropriate Box if a Member of a Group (See Instructions):
(a) [ ]
(b) [ ]
3) SEC Use Only
4) Source of Funds (See Instructions): 00
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: 4,000,000
Shares
Beneficially 8) Shared Voting Power: 0
Owned by
Each 9) Sole Dispositive Power: 4,000,000
Reporting
Person 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
2
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1) Names of Reporting Persons. I.R.S. Identification Nos. of Above Persons
(entities only): Pioneer Natural Resources USA, Inc.
2) Check the Appropriate Box if a Member of a Group (See Instructions):
(a) [ ]
(b) [ ]
3) SEC Use Only
4) Source of Funds (See Instructions): 00
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: 4,000,000
Shares
Beneficially 8) Shared Voting Power: 0
Owned by
Each 9) Sole Dispositive Power: 4,000,000
Reporting
Person 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
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Reference is hereby made to the statement on Schedule 13D filed by the
Reporting Persons with the Securities and Exchange Commission on December 22,
1998 (the "Schedule 13D"). Capitalized terms used herein but not otherwise
defined herein shall have the meanings ascribed to such terms in the Schedule
13D.
The Schedule 13D is hereby amended as follows:
ITEM 1. SECURITY AND ISSUER.
No modification.
ITEM 2. IDENTITY AND BACKGROUND.
Paragraph 2 of Item 2 is hereby amended by deleting therefrom all
references to Mel Fischer and his positions with Parent and Pioneer USA. Mr.
Fischer is no longer an executive officer of the Reporting Persons.
Paragraph 3 of Item 2 is hereby amended by deleting therefrom all
references to Guy J. Turcotte, his position as a Director of Parent, and all
other information pertaining specifically to Mr.
Turcotte. Mr. Turcotte is no longer a Director of Parent.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Item 3 is hereby amended by adding the following paragraph thereto:
On April 1, 1999, the Company, Pioneer USA and an affiliate of Pioneer
USA entered into a Purchase and Sale Agreement (the "Purchase Agreement")
providing for the purchase by the Company of certain oil and gas properties
owned by Pioneer USA and such affiliate. The Purchase Agreement superseded and
replaced a purchase and sale agreement that the same parties entered into on
December 16, 1998. Pursuant to the terms of the Purchase Agreement, and as
further consideration to Pioneer USA, the Company delivered to Pioneer USA
1,000,000 additional shares of Common Stock (the "Additional Shares"). If the
closing of the transactions contemplated by the Purchase Agreement occurred on
or before April 15, 1999, or if the Company terminated the Purchase Agreement in
accordance with the terms thereof, then Pioneer USA was obligated to redeliver
the Additional Shares to the Company. If, however, Pioneer USA terminated the
Purchase Agreement in accordance with the terms thereof, then Pioneer USA was
entitled to retain the Additional Shares as its sole and exclusive remedy at law
or in equity under the Purchase Agreement. On April 15, 1999, Pioneer USA, by
written notice to the Company, terminated the Purchase Agreement and retained
the Additional Shares.
ITEM 4. PURPOSE OF THE TRANSACTION.
Item 4 is hereby amended by adding the following paragraph immediately
after the first paragraph thereof:
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Pioneer USA acquired the Additional Shares upon notifying the Company
that Pioneer USA was terminating the Purchase Agreement in accordance with the
terms thereof (see item 3).
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
Item 5 is hereby amended in its entirety to read as follows:
(a) and (b). Each Reporting Person is the beneficial owner of 4,000,000
shares of Common Stock, or 28.4% of the outstanding shares of Common Stock. Each
Reporting Person has the sole power to vote and dispose of the Shares and the
Additional Shares.
(c) and (d). Neither Reporting Person, nor any of the respective
executive officers or directors of the Reporting Persons, effected any
transactions in the Common Stock during the past 60 days, and 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 or the Additional Shares.
(e). Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Item 6 is hereby amended in its entirety to read as follows:
None.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Item 7 is hereby amended by adding the following thereto:
(3) Purchase and Sale Agreement, dated April 1, 1999, by and among
the Company, Pioneer USA, and Pioneer Resources Producing,
L.P.
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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: April 21, 1999 PIONEER NATURAL RESOURCES COMPANY
By: /s/ Mark L. Withrow
-------------------------------------
Name: Mark L. Withrow
Title: Executive Vice President
Dated: April 21, 1999 PIONEER NATURAL RESOURCES USA, INC.
By: /s/ Mark L. Withrow
-------------------------------------
Name: Mark L. Withrow
Title: Executive Vice President
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
-------- ------------
<S> <C>
(3) Purchase and Sale Agreement, dated April 1, 1999, by and among
the Company, Pioneer USA, and Pioneer Resources Producing,
L.P.
</TABLE>
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EXHIBIT 3
EXECUTION COPY
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement is dated April 1, 1999 (the "Execution
Date") and is by and among PIONEER NATURAL RESOURCES USA, INC. ("Pioneer USA"),
PIONEER RESOURCES PRODUCING, L.P. ("Pioneer LP") (collectively, the "Seller")
and COSTILLA ENERGY, INC. ("Costilla") (the "Purchaser").
Reference is made to that Purchase and Sale Agreement dated December
16, 1998, by and among Purchaser and Seller (the "Recent Prior Agreement") in
which Seller agreed to sell and Purchaser agreed to buy certain oil and gas
properties and related interests and rights and which Recent Prior Agreement was
terminated by Seller in accordance with its terms on March 31, 1999.
Reference is made to that certain terminated Purchase and Sale
Agreement dated September 4, 1998, by and between Pioneer USA and Costilla (the
"Prior Agreement"). Pursuant to the Prior Agreement, Pioneer USA agreed to sell
and Costilla agreed to purchase Pioneer USA's interest in certain oil and gas
properties and related interests and rights.
Pioneer USA, Pioneer LP and Costilla previously entered into that
Option to Purchase Agreement dated December 16, 1998 (the "Option Agreement")
which terminated pursuant to its terms.
For good and valuable consideration and for the mutual covenants herein
contained, the 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 7:00 a.m. January 1, 1999, at the site of the
respective Subject Properties as defined below (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 [and, as to 1.2(a) below (the "Sale Interest")] 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
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the extent and only to the extent they cover the lands described
on Exhibit C attached hereto together with Seller's interest in
any pooled, communitized or unitized acreage to the extent and
only to the extent any such interest directly pertains to such
wells and lands and all of the rights appurtenant thereto (the
"Subject Properties") (said interests to include all of the lands
covered by said leases appurtenant to the wells on Exhibit "A"
except in the instance(s) where Seller has retained a well on or
other rights or interests in said leases and leaseholds in which
event Purchaser shall receive the pro-ration acreage attributable
to the affected well(s) listed on Exhibit "A" (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.);
(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" and all other oil,
gas, injection and water wells whether plugged or unplugged and
whether abandoned or not) ("Wells"), 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, as to each of the foregoing items,
are located on or directly and solely related to the Subject
Properties, including, without limitation, items of personal
property described in Schedules 1, and 2, to Exhibit "A", and
specifically including portable tools, snow vehicles, equipment,
inventory, and the vehicles listed on Schedule 5 to Exhibit "A"
(collectively, the "Rolling Stock") used exclusively on or
exclusively appurtenant to the Subject Properties or the Wells but
except as provided above, excluding personal property not solely
appurtenant to the Wells and personal property temporarily located
on the Subject Properties; (2) all oil, gas, mineral and other
hydrocarbon substances produced, saved and sold 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 or exclusively appurtenant
to or exclusively held and exclusively used in connection with the
operations of the Subject Properties), easements, rights-of-way,
licenses, authorizations, permits and similar rights and
interests, limited by and subject to the rights, conditions and
restrictions of third parties; (5) to the extent assignable and
limited by and subject to the rights of third parties, 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, title files and
materials, and all other books, files and records (the "Records"),
and all rights thereto, limited by and subject to the rights of
third parties; (6) all other rights, privileges, benefits and
powers conferred upon the owner and holder of interests in the
Subject Properties; (7) all other interests in oil, gas and other
minerals of whatever nature directly appurtenant to the Subject
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Properties, including, without limitation, all fee mineral and
royalty interests, reversionary interests, farmout rights and
overriding royalty interests; (8) a license, on Seller's customary
terms, 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 retained or owned by Seller in
the area of the Subject Properties.
(d) the wells, real or personal property (or mixed property),
interests, assets, facilities or equipment identified on Exhibit
"A", Schedules 1, 2, 3, 4, 5 or 6, 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-I" attached hereto when
offered by the owners thereof prior to Closing 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 material defects in title,
excluding Permitted Encumbrances, which have arisen entirely after
the Execution Date, and Purchaser so advises Seller no later than
10 Business Days prior to closing, 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.
(f) the undeveloped leasehold identified in Exhibit A and more fully
described on Schedule 4 to Exhibit "A" together with all contract
rights, personal property or other rights directly related thereto
to the extent assignable, and subject to and limited by the rights
of third parties and Related Agreements.
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(g) the domestic U.S. mineral interests, royalty and overriding
royalty interests to the extent covering lands outside the areas,
land, counties, or parishes in the states described on Exhibit E,
with Seller expressly retaining, among other things, all right,
title and interest in the domestic U.S. mineral interests, royalty
and overriding royalty interests inside the areas, land, counties,
or parishes in the states described on 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 such
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 (the "Gas Plants") described on Schedule 6 to Exhibit A
and gathering systems appurtenant thereto to the extent assignable
and subject to and limited by the rights of third parties and
Related Agreements.
(i) the Mesa Offshore Royalty Partnership (MORP) (including the
position of Managing General Partner or similar role) and the
properties or interests affected or burdened by the interest owned
by the MORP and/or included in the Mesa Offshore Trust (MOT),
however, if Seller determines in its sole discretion it will be
unable to convey the MORP or any property or interest included in
the MOT or any affected property or related interest or
partnership interest (including the position of Managing General
Partner or similar role) at Closing, or is unable to convey the
same in a timely manner or without undue conditions or
restrictions (as determined in Seller's sole discretion) then in
such event Seller will advise Purchaser, the affected Assets will
be removed from this Agreement, and an adjustment in the Purchase
Price will be made at Closing by the allocation for said affected
Assets.
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) Excluded
Minerals, leasehold and other interests pertaining to lands and leasehold not
within the boundaries of the lands comprising the Subject Properties (b) the
right of ingress and egress with respect to the Assets for the purpose of
mining, drilling, exploring, operating, holding, producing and developing any
interest including, without limitation, the oil,
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gas and mineral leasehold, fee, fee mineral and royalty interests retained or
owned by Seller for oil, gas, minerals and other hydrocarbon substances, or
other lawful substances, (c) seismic, geologic and geophysical records,
information, and interpretations relating to the Assets, subject to Section
1.2(b)(8)above and Section 9.5(iii), (d) any and all records which consist of
previous or contemporaneous 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 unrelated to the personnel interviewed and evaluated by Purchaser
pursuant to Section 13.19 below, tax information, information covered by a
non-disclosure obligation and information or documents covered by a legal
privilege;(the "Excluded Records") (e) originals or copies of Excluded Records
and 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; (g)
to the extent Seller has reserved interests, including deep rights, or to the
extent Seller currently uses or may need to use 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, licenses, permits,
contracts or other rights relating to the reserved interests or interests in the
area; (h) communication equipment, leased or rented equipment or facilities,
office equipment, computer equipment and software; (i) all pipelines, gas
plants, equipment and rights of way owned or operated by Seller or any affiliate
of Seller and which are not solely appurtenant to the Wells or used exclusively
therewith (except the Gas Plants); (j) all oil in storage at the Effective Time;
(k) wells, leases or leasehold interests or other interests described on Exhibit
A or any Schedule thereto, which pursuant to and in accordance with this
Agreement are not included in an Assignment and Bill of Sale or another
conveyancing instrument delivered to Purchaser on or after Closing; (l)
[INTENTIONALLY LEFT BLANK]; (m) an overriding royalty equal to an undivided
1/32nd of eight eighths proportionately reduced to the interest conveyed by
Seller pursuant to this Agreement in and to the WARWINK West wells and lands
appurtenant thereto as identified in Exhibit A or Exhibit C to this Agreement;
(n) those properties, wells, oil and gas leases, units, prospects, pipelines,
facilities, lands, equipment, easements, or those other interests described on
Schedule 1.3(n) attached hereto (including all personal property, rights,
interests of or pertaining or appurtenant thereto) even though the same may be
described or referred to on another exhibit or schedule hereto or otherwise
described as an Asset and this Subsection 1.3(n) is intended to exclude from
Assets all of Seller's right, title and interest in or pertaining to the
following fields: (1) Bayou De Fleur, South Field (AKA Goose Bayou Prospect),
(2) Lusk Fields, (3) Huntley North Field, (4) Velrex Field, (5) Hostetter
Fields, (6) Perry Point Field, (7) Levelland Field, and (8) Buchel Field,
regardless of whether such interests are specifically or fully described in this
subsection 1.3(n) or Schedule 1.3(n); and (o) items excluded elsewhere in or
pursuant to this Agreement, (a) through (o), collectively, the "Excluded
Assets").
1.4. Defined Terms.
"Act" means the Securities Act of 1933.
"Adjusted Purchase Price" has the meaning set forth in Section
2.1.
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"Affiliate" 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.
"Agents" means, as to any Person, its employees, contractors,
lenders and consultants.
"Assets" has the meaning as set forth in Section 1.2.
"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.
"Days" or "days" means calendar days unless stated otherwise.
"Effective Time" has the meaning as set forth in Section 1.2.
"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.
"Excluded Assets" has the meaning as set forth in Section 1.3.
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"Execution Date" means that date on which the Seller and Purchaser
signed this Agreement, which is April 1, 1999.
"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.
"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 [or Purchaser's as the case may be] knowledge
and belief" or words of similar import shall mean only the then
existing actual non-privileged 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.
"Laws" means laws, statutes, ordinances, permits, decrees, orders,
judgments, rules or regulations (including without limitation
Environmental Laws) which are promulgated, issued or enacted by a
governmental entity (whether federal, state or local) or tribal
authority having appropriate jurisdiction.
"Letter Agreement" has the meaning as set forth in Section 13.2.
"NORM" has the meaning as set forth in Section 9.2.c.
"Notice Period" has the meaning as set forth in Section 9.2.d.
"Party" means Purchaser or Seller.
"Parties" means collectively the Purchaser and Seller.
"Permitted Encumbrances" has the meaning as set forth in Section
3.2.
"Person" means and individual, corporation, partnership,
association, joint 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.
"Gas Plants" has the meaning set forth in Section 1.2(h).
"Preferential Rights" has the meaning set forth in Section 3.4.
"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".
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"Property Taxes" has the meaning as set forth in Section 11.1.
"Purchase Price" has the meaning as set forth in Section 2.1.
"Records" has the meaning as set forth in Section 1.2.b.
"Related Agreements" has the meaning as set forth in Section 9.10.
"Representative" and "Representatives" have the same meanings as
set forth in Section 9.2.f.
"Sale Interest" has the meaning as set forth in Section 1.2.
"Shares" has the meaning ascribed thereto in the Option Agreement.
"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.
"Wells" has the meaning as set forth in Section 1.2.b.
ARTICLE 2. CONSIDERATION
2.1. Consideration. As consideration for this Agreement and the
benefits contained herein, at Closing, Purchaser shall pay to Seller Two Hundred
Fifty-Three Million Six Hundred Fifty-Four Thousand Two Hundred Fifty-Five
Dollars $253,654,255 (US$) (the "Purchase Price"), as may be adjusted pursuant
hereto (the "Adjusted Purchase Price"). At Closing, at Seller's sole option,
Seller may accept Costilla convertible preferred stock having a purchase price
of up to Twenty-Five Million Dollars ($25,000,000) on such terms as are
acceptable to Seller and the cash portion of the Purchase Price shall be reduced
by the purchase price of the said Costilla convertible preferred stock.
2.2. Manner of Payment. At Closing, except as provided in the following
Section 2.3, Purchaser shall pay Seller or Seller's designee the Adjusted
Purchase Price by wire transfer of immediately available funds as follows:
Account: Pioneer Natural Resources USA, Inc.
Account No: 1290288845
NationsBank, N.A.
ABA Routing No: 111000012
Attention: Denise Ashford Smith
NationsBank N.A.- Dallas
(214) 209-1261
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 cash
consideration 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
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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 Internal
Revenue Code of 1986, as amended ("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 Intentionally Deleted
2.5 ALLOCATIONS. THE PURCHASE PRICE SHALL BE ALLOCATED BY PURCHASER TO
THE ASSETS PROPORTIONATE TO THE PRIOR ALLOCATION PURSUANT TO THE RECENT PRIOR
AGREEMENT AS REDUCED BY THE SAID PRIOR ALLOCATION VALUE FOR THE EXCLUDED ASSETS
DESCRIBED UNDER SUBSECTION 1.3(n) AND SUCH ALLOCATION BEING PROVIDED BY
PURCHASER TO SELLER ON OR BEFORE APRIL 7, 1999.
ARTICLE 3. TITLE
3.1. Title and Due Diligence. Purchaser has performed extensive due
diligence regarding the Assets, including the ownership and title of Seller
thereof, and Purchaser accepts the condition of title to the Assets as of the
Execution Date including all liens and encumbrances.
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 owned as of the Execution Date for any of the Subject Properties,
without a corresponding increase in the applicable net revenue interest, or
decrease the net revenue interest of Seller owned as of the Execution Date for
any of the Subject Properties:
(a) lessors' royalties, overriding royalties, production payments,
reversionary interests and similar burdens;
(b) division orders and sales contracts;
(c) Preferential rights to purchase or rights of first refusal in
existence on the Execution Date;
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(d) rights or requirements to consent to assignments, conveyances,
transfers or other disposals, which rights and/or requirements are
in existence on the Execution Date;
(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 or the affected operator 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 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
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;
(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) title defects that Purchaser may have expressly waived in writing
or which are deemed to have been waived pursuant this Agreement;
(k) all conveyances, reservations and exceptions of public record or
contained in the Records 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;
(l) all liens and encumbrances in existence on the Execution Date; and
(m) 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. Purchaser has performed
extensive due diligence and examinations regarding the Assets and has found the
environmental and physical
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conditions thereof to be satisfactory and accepts the conditions of the Assets
without the need for further due diligence. Until the Closing, 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. PURCHASER HEREBY
INDEMNIFIES, DEFENDS AND HOLDS SELLER AND ITS AFFILIATES AND THEIR RESPECTIVE
REPRESENTATIVES HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS OF WHATEVER NATURE
FOR OR RELATED TO PERSONAL INJURY, DEATH OR PROPERTY DAMAGE ARISING OUR 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 ALL SUCH ENVIRONMENTAL AND PHYSICAL
EXAMINATIONS.
3.4. Preferential Purchase Rights. Recognizing the brief period between
the Execution Date and the Closing Date, Purchaser agrees to and shall assume
all responsibility and liability regarding preferential purchase rights, rights
of first refusal (collectively, "Preferential Rights") and restrictions on
assignment or consents to assign ("Consents") relating to the Assets and/or any
transfer, assignment or conveyance thereof. Purchaser shall identify Persons
(and their addresses) holding preferential rights to purchase affecting the
Assets and shall send notice of this Agreement to all such Persons offering to
sell to each such Person the Assets for which a Preferential Right is held on
and subject to the terms hereof and for the same allocated value for such Assets
provided to Seller pursuant to Section 2.5 hereof. Purchaser shall be
ultimately responsible for obtaining all waivers, 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 Related
Agreements, or other third parties and will provide Seller upon request with
proof of each such waiver, consent or approval and the form of all related
notices. If, after the Execution Date and prior to Closing, any of such Persons
asserting a preferential purchase right notifies Seller that it intends to
consummate the purchase of the Assets to which it holds a preferential purchase
right pursuant to the terms and conditions hereof then such Assets shall be
excluded at Closing from the Assets to be conveyed to Purchaser under this
Agreement and the Purchase Price shall be reduced by the allocated value of such
Assets reflected in Purchaser's allocation under Section 2.5; provided, however,
that if the holder of such preferential right fails to consummate the purchase
of such Assets 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
Assets and upon the other terms of this Agreement, the Assets to which the
Preferential Right was asserted. All Assets for which all Preferential Rights
exist 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 Rights notifies Seller or Purchaser subsequent to Closing that it
intends to assert its Preferential Right, in the event Seller receives such
notice, Seller shall give notice thereof to Purchaser, and Purchaser shall
satisfy all such Preferential Right obligations of Seller or Purchaser to such
holders including, but not limited to, transferring the affected Assets to the
holder of such rights and PURCHASER SHALL INDEMNIFY, DEFEND, RELEASE AND HOLD
SELLER HARMLESS FROM AND AGAINST ANY AND ALL
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CLAIMS, LIABILITIES, LOSSES, COSTS AND EXPENSES (INCLUDING WITHOUT LIMITATION,
PIONEER'S INTERNAL EXPENSES AND COURT COSTS AND REASONABLE ATTORNEY'S FEES) IN
CONNECTION THEREWITH. 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 Rights, exercised after
Closing. PURCHASER SHALL INDEMNIFY AND HOLD HARMLESS SELLER 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 RIGHT OR
CONSENT AFFECTING ANY OF THE ASSETS TRANSFERRED, ASSIGNED OR CONVEYED OR
PURPORTEDLY TRANSFERRED, ASSIGNED OR CONVEYED TO PURCHASER HEREUNDER.
3.5 Will O Gas Plant. Notwithstanding the other terms of this
Agreement, unless the surface lease for operation of the Will O Gas Plant and
the surface lease for road use and access to the oil and gas leases out of the
Subject Properties that deliver gas to the Will O Gas Plant are renewed or
entered into in substantially the form attached hereto as Exhibit "F-1 and F-2"
on or prior to the Closing Date, the Will O Gas Plant and associated oil and gas
leases, equipment and vehicles (as described on page 3 of 3 on Schedule 6 to
Exhibit "A" and on page 86 and page 154 of Exhibit "A", or elsewhere on Exhibit
"A") shall be removed from this Agreement and not be included in the Closing and
the Purchase Price shall be reduced at Closing by the allocated value for said
interests amounting to $9,126,631.
ARTICLE 4. SELLER'S REPRESENTATIONS AND DISCLAIMERS
Seller represents to Purchaser that:
4.1. Existence. Pioneer Natural Resources USA, Inc. is a Delaware
corporation, duly formed, validly existing and in good standing under the laws
of the State of Delaware. Pioneer Resources Producing L.P. is a limited
partnership duly formed, validly existing and in good standing under the laws of
the State 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
Articles of Incorporation or other governing documents, (b) 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 Seller is a Party or by which Seller is bound, (c) to the
best knowledge and belief of Seller, violate any judgment, order, ruling, or
decree applicable to 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.
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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. 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.
4.7. 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
affect on the Assets.
4.8. 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 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.
4.9. 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 affects any of the Assets whether 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 4.9 attached hereto.
4.10. LIMITATION AND DISCLAIMER OF REPRESENTATIONS AND WARRANTIES. THE
EXPRESS REPRESENTATIONS AND/OR 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/OR
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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. 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 PHYSICAL AND ENVIRONMENTAL CONDITION OF THE ASSETS
AND PROPERTY 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. IN ADDITION, EXCEPT AS EXPRESSLY PROVIDED OTHERWISE IN
THIS AGREEMENT, 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,
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 AGENTS OR
REPRESENTATIVES. ANY AND ALL SUCH DATA, RECORDS, REPORTS, PROJECTIONS,
INFORMATION AND OTHER MATERIALS FURNISHED BY SELLER OR BY SELLER'S AGENTS OR
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 OR SELLER'S AGENTS OR 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.
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ARTICLE 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER
Purchaser represents and warrants to and covenants to 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 any
Purchaser's certificate or articles of incorporation or organization, as the
case may be, bylaws, regulations 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 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 any distribution
thereof within the meaning of the Securities Act of 1933 (the "Act"), and shall
not resell any or all of the Assets except in compliance with all applicable
securities laws.
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.
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5.7. Sophisticated Buyer. The 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. The Purchaser is engaged in the business of exploring for or
production oil and gas or other minerals as an ongoing business. By reason of
this knowledge and experience, the Purchaser will evaluate the merits and risks
of the properties or interests to be purchased from Seller and will form an
opinion based solely upon the Purchaser's knowledge and experience and not upon
any opinion or predictions by Seller, its employees, agents, or representatives.
5.8. Economic Risk. The Purchaser is aware that ownership of any of the
oil and gas properties or interests is highly speculative and subject to
substantial risks, and the 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;
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 item is defined in Regulation D promulgated under the Act.
ARTICLE 5A. ADDITIONAL COVENANTS
Seller covenants and agrees that from and after the Execution Date 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. In the event Seller after the Execution Date sells, assigns,
conveys or otherwise disposes of any of the Assets subject to Seller's direct
control prior to the Closing Date, other than as provided in (a) through (c)
above, and Seller is unable to cause such Assets to be conveyed to Purchaser at
Closing, then Purchaser shall be entitled to an adjustment of the Purchase Price
at Closing in an amount equal to the higher of the allocated value of the
affected Assets or the value received by Seller for such Assets; provided,
however, that in the event the aggregate allocated value of the affected Assets
sold, assigned, conveyed or otherwise disposed after the Execution Date which
Seller cannot cause to be conveyed to Purchaser at Closing exceeds 20% of the
Purchase Price then Purchaser shall have the option to terminate pursuant to
Section 10.1(a)this Agreement upon written notice to such effect delivered to
Seller prior to Closing.
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5A.2. No Encumbrances. Seller will not create any lien, security
interest, or contractual encumbrance on the Assets, the oil or gas attributable
to the Assets, or the proceeds thereof, other than Permitted Encumbrances. To
the extent liens, security interests or contractual encumbrances on the Assets
or any part thereof are created by Seller subsequent to Execution Date, Seller,
at Seller's option shall either (i) deliver to Purchaser releases of same,
including associated financing statements on or before Closing, or (ii)
indemnify, defend and hold harmless Purchaser for the amount outstanding of said
lien, security interest or contractual encumbrance, or (iii) otherwise
contractually protect Purchaser for said amount, provided such contractual
protection is reasonably satisfactory to Purchaser.
5A.3. Operations. Recognizing that Seller has reduced its workforce
substantially in contemplation of an earlier Sale to Purchaser and may not be
able to fully staff or maintain the Subject Properties and/or the Gas Plants in
substantially the same manner as it has heretofore, with respect to any of the
Subject Properties and the Gas Plants operated by Seller, (and as to 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 or third parties under applicable
agreements) to and except in situations involving emergencies in which event
Seller shall not be bound by this Section 5A.3 to the extent necessary to deal
with said emergency:
(a) cause the Subject Properties and 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;
(d) perform and comply with all of its obligations under agreements
relating to or affecting the Subject Properties and Gas Plants;
(e) Intentionally Omitted;
(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 any one of the Subject Properties or
Gas Plants of more than $50,000, (net to Seller) excluding
emergency expenditures; and
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(g) not resign or otherwise voluntarily relinquish its rights as
operator of any of the Subject Properties or Gas Plants 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;
(i) not enter into any gas sales contract or crude oil sales or supply
contract with respect to the Subject Properties or Gas Plants
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 decreased from its
ownership interest as of the date hereof;
(k) if any approval or consent by any federal, state or local
governmental authority is required to vest title, excluding
Permitted Encumbrances, to any of the Sale Interest or Gas Plants,
in Purchaser at Closing, Seller shall as reasonably requested in
writing by Purchaser, reasonably cooperate with Purchaser in
Purchaser's efforts, to obtain all such required approvals or
consents which shall be at Purchaser's sole risk and expense;
(l) through Closing, endeavor to give prompt written notice to
Purchaser of 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 to which Seller is a Party or by which it or
any of the Subject Properties is bound;
(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) Purchaser with a
copy of each material authority for expenditure and material
contract affecting the Subject Properties or 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 no right to comment
upon or object to any such matter that is otherwise not in
violation of this Agreement.
5A.4. Access to Records. Seller will endeavor to provide Purchaser and
its Agents (1) access to the Records located in Seller's Midland, Texas office
at 303 W. Wall, during normal business hours at Seller's Midland office at 303
W. Wall, (2) adequate work space (as determined solely by Seller) at such
offices to review the Records, (3) access to a copy machine, at Purchaser's
cost, at such office, and (4) reasonable access to Seller's personnel who are
located in such Midland office during normal business hours. 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 to not add to or
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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
required of Seller as may be required 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.
6.3. Officer's Certificate. Purchaser shall have delivered to Seller a
certificate of an executive officer dated the Closing Date, certifying on behalf
of 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.
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:
7.1. Intentionally Deleted.
7.2. Officer's Certificate. Seller shall have delivered to Purchaser a
certificate of an executive officer or general partner dated the Closing Date
certifying on behalf of Seller that the representations contained in the first
sentence, and the first sentence only, of each of Section 4.1 through Section
4.5 are true and correct in all material respects on the Closing Date.
7.3. Seller's Performance. Seller shall have performed in all material
respects the obligations in this Agreement to be performed by Seller at Closing
pursuant to Section 8.2.
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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
consummation of the transactions contemplated hereby ("Closing") shall take
place at Seller's Midland, Texas office located at 303 West Wall on or before
April 15, 1999 at 9:00 a.m., or at such other place and time or in such other
manner agreed upon by Seller and Purchaser ("Closing Date"); provided, that
Seller shall have the right to extend Closing for up to 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 in this Agreement.
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 indicated herein below in the form
attached hereto as either "B-1" for the Assignment and Bill of
Sale or "B-2" for the Conveyance, and Purchaser shall execute,
acknowledge and deliver same to Seller (Seller may require the
parties to execute separate instruments for each state, county or
parish in which the Assets are located to facilitate recording).
For the purposes of this Section 8.2 (a) Seller shall if requested
by Purchaser deliver a Conveyance for any county or parish in any
state in which the sole interest being conveyed by Seller in that
county or parish in that state is a non-producing interest in the
oil, gas or other minerals and in which county or parish in that
state there are not any other interests that are to be conveyed to
Purchaser or any Excluded Assets, assets or interests owned by or
retained by Seller.
(b) Seller and Purchaser shall execute, acknowledge and deliver
transfer orders or letters in lieu directing all purchasers of
production to make payment to Purchaser of proceeds attributable
to the Sale Interest;
(c) Purchaser shall deliver by wire transfer the Adjusted Purchase
Price;
(d) [INTENTIONALLY DELETED]
(e) Purchaser and Seller shall execute and deliver appropriate
required state or federal lease assignment forms, appropriate
required resignation or change of operator forms and other
instruments and certificates; and
(f) Subject to Section 13.18, Seller shall execute and deliver to
Purchaser appropriate resignation of operator and change of
operator forms.
8.3 Prepared Documents. Pursuant to the Recent Prior Agreement, the
Parties
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prepared and approved all the documents required under Subsections 8.2(a), (b),
(e) and (f) and the Parties agree that the form of such documents are acceptable
for the Closing contemplated by this Agreement, as to the Assets hereunder,
subject to signature and date changes, references to this Agreement and other
minor or ministerial alterations.
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 Assets (a) for all periods of time from
and after the Effective Time shall be the sole property and entitlement of the
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
to the extent received by Purchaser or Seller prior to the Final Accounting Date
or allocated to Seller in the Final Accounting, and if 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 on
the Effective Time at the relevant contract price, net applicable taxes. Seller
and Purchaser recognize that as of the Effective Time there may be over or under
imbalances with respect to gas production attributable to the Subject Properties
("Imbalances") and hereby agree that 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
with respect to Subject Properties that are subject to gas balancing agreements,
Purchaser at Closing shall pay Seller an amount determined by multiplying the
net underproduced Imbalance by $1.00/MCF or Seller at Closing shall pay
Purchaser an amount determined by multiplying the net overproduced imbalances by
$1.00/MCF 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. 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").
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, lawsuits, 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,
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royalty, operating, contractual, suspense and capital obligations
attributable 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, Purchaser shall accept the Assets and Property in
their "as is, where is" condition, subject to any and all faults,
defects, deficiencies, irregularities and claims related or
attributable in any manner thereto, including, without limitation,
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, whether known or unknown, liquidated or unliquidated,
fixed or contingent, direct or indirect.
(c) At, upon and after Closing 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 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
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
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THE EFFECTIVE TIME, IN CONNECTION WITH THE FOREGOING; AND,
FURTHER, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
PURCHASER WILL INDEMNIFY, DEFEND AND HOLD HARMLESS SELLER FROM 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 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 THE ASSETS;
- THE REVIEW, INSPECTION AND ASSESSMENT OF THE ASSETS BY PURCHASER;
- AN ERROR IN DESCRIBING THE ASSETS;
- RIGHTS AND OBLIGATIONS OF THE PARTIES OR THIRD PARTIES UNDER
RELATED AGREEMENTS;
- FAILURE BY THIRD PARTIES TO APPROVE OR CONSENT TO ANY ASPECT OF
THIS TRANSACTION;
- 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 PAID OR PAYABLE BY SELLER OR
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
OPERATION'S OR ACTIVITIES ON THE PROPERTY OR ASSETS INCLUDING
CLAIMS UNDER ANY LAW OR ENVIRONMENTAL LAW;
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- 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.
(d) From and after Closing, any claim for indemnity 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 claim 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
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.
(e) 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.
(f) EXCEPT FOR SECTION 9.13 HERETO, THE INDEMNITIES PROVIDED IN THIS
AGREEMENT SHALL EXTEND TO SELLER AND ITS AFFILIATES AND ANY PERSON
WHO AT ANY TIME HAS SERVED OR IS SERVING AS A DIRECTOR, OFFICER,
EMPLOYEE, CONSULTANT, INVITEE OR AGENT THEREOF (EACH A
"REPRESENTATIVE" AND COLLECTIVELY
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"REPRESENTATIVES"), 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 LIABILITY OR FAULT, WHETHER OF LAW (WHETHER
COMMON OR STATUTORY) OR IN EQUITY.; PROVIDED, HOWEVER, PURCHASER
SHALL NOT BE LIABLE FOR OR INDEMNIFY SELLER FOR ANY CLAIM ASSERTED
BY PURCHASER ARISING DIRECTLY FROM A BREACH OF A MATERIAL TERM OF
THIS AGREEMENT BY SELLER AND FOR WHICH AND ONLY TO THE EXTENT
THAT, PURCHASER HAS OBTAINED AGAINST SELLER A BINDING, FINAL,
NON-APPEALABLE COURT JUDGEMENT. THE INDEMNIFICATION PROVISIONS OF
THIS SECTION 9.2 SHALL BE IN ADDITION TO ANY OTHER INDEMNITY
PROVISIONS CONTAINED IN THIS AGREEMENT, AND IT IS EXPRESSLY
UNDERSTOOD AND AGREED THAT THE TERMS OF THIS SECTION 9.2 SHALL
CONTROL OVER ANY CONFLICTING OR CONTRADICTING TERMS OR 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 originals or
copies consistent with this Agreement at Seller's and Purchaser's equally shared
cost, of the Records to Purchaser; 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 the Excluded Assets and copies (at Seller's and Purchaser's
equally shared cost) of all other Records. 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 to 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 (Lease, 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
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(Share) Revenue and Billing History, Property Gross (8/8) 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, and further, Seller shall not be required to create, assemble or
develop such electronic files or records.
9.5. Access to Data and Records. Subject to the rights of third parties
and Seller's proprietary rights, Seller shall (i) provide Purchaser and its
Agents with reasonable access to Seller's books and records relating to the
Assets (both paper and electronic) after Closing as necessary for Purchaser, at
Purchaser's cost, to prepare its financial statements, and (ii) assist Purchaser
after Closing, 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 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 and,
further, Seller will endeavor in good faith to identify and transfer to
Purchaser a license, on Seller's customary terms, on Seller's proprietary
seismic and geophysical data owned by Seller on the Execution Date regarding the
Subject Properties, on the same terms and conditions as provided in Section
1.2(b)(8).
9.6. PURCHASER'S RELEASE OF SELLER. FROM AND AFTER CLOSING AND WITHOUT
FURTHER DOCUMENTATION, PURCHASER RELEASES AND DISCHARGES SELLER AND SELLERS
AFFILIATES FROM ALL CLAIMS RELATING TO THE ASSETS, THE PROPERTY OR THIS
TRANSACTION, REGARDLESS OF WHEN OR HOW THE CLAIM AROSE OR ARISES OR WHETHER THE
CLAIM WAS FORESEEABLE OR UNFORESEEABLE. PURCHASER'S RELEASE OF SELLER AND ITS
AFFILIATES INCLUDES CLAIMS RESULTING IN ANY WAY FROM THE NEGLIGENCE OR STRICT
LIABILITY OF SELLER AND ITS AFFILIATES, WHETHER THE NEGLIGENCE OR STRICT
LIABILITY IS ACTIVE PASSIVE, JOINT, CONCURRENT, OR SOLE. THERE ARE NO EXCEPTIONS
TO PURCHASERS RELEASE OF SELLER AND ITS AFFILIATES, 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 AGENT OR AFFILIATE OF SELLER.
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.
9.7. RETROACTIVE EFFECT. PURCHASER ACKNOWLEDGES THAT PURCHASER'S
OBLIGATIONS TO RELEASE, INDEMNIFY, DEFEND, AND HOLD SELLER AND ITS AFFILIATES
HARMLESS APPLY TO MATTERS OCCURRING OR ARISING BEFORE, ON AND AFTER THE
EFFECTIVE TIME TO THE EXTENT PROVIDED IN THIS AGREEMENT.
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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. PURCHASER'S INDEMNITY. EXCEPT FOR SELLER'S INDEMNITY CONTAINED IN
SECTION 9.13 BELOW, IT IS THE INTENT OF PURCHASER AND SELLER THAT SELLER BE
INDEMNIFIED, DEFENDED AND HELD HARMLESS BY PURCHASER IN A MANNER SO THAT SELLER
WILL BE PROTECTED AS IF IT HAS NEVER AT ANY TIME OWNED OR OPERATED THE ASSETS OR
THE PROPERTY OR ANY INTEREST THEREIN OR PERTAINING THERETO, IN WHOLE OR IN PART.
9.10. RELATED AGREEMENTS. WITHOUT FURTHER ACTION OR DOCUMENTATION,
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"). UPON AND AFTER CLOSING, 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 WILL EXECUTE ANY DOCUMENTS NECESSARY TO
EFFECTUATE SUCH ASSUMPTION. THE PARTIES AGREE THAT THIS SECTION 9.10 IS
APPLICABLE TO ALL INSTRUMENTS WHETHER THEY ARE RECORDED OR NOT.
9.11. Litigation. Upon and after Closing, Purchaser shall assume all
obligations of Seller and Seller's Affiliates and be responsible and liable for
all litigation listed on Schedule 9.11 and all matters, costs, judgments, and
expenses related thereto or arising therefrom. Notwithstanding Section 9.2 (c)
above, 9.6, 9.9, and 12.2, upon Closing, Seller shall be responsible and liable
for all litigation which has 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. Seller reserves the right to remove litigation
from Schedule 9.11 on or before Closing.
9.12. Evidence of Compliance. For Seller-operated Assets, Purchaser
shall deliver to Seller on or prior to 120 days after the Closing (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 has 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. For matters
which Purchaser has been unable to provide the necessary evidence and proof,
Purchaser shall provide Seller with a status report and action plan for
obtaining such required evidence and proof and continue diligently in its
efforts until all such matters have been achieved. Purchaser shall indemnify,
defend and hold harmless Seller and Seller's Representatives from all Claims
arising from or relating to Purchaser's failure to obtain or failure to obtain
in a timely manner the evidence or proof described in this Section 9.12 (1), (2)
and (3) above.
9.13 Seller's Indemnity. Notwithstanding any other provision of this
Article 9, for the period beginning on the Closing Date and ending on the first
anniversary of the Closing Date (the
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"Seller Indemnity Period") Seller shall defend, indemnify and hold harmless
Purchaser from any and all bona fide third party claims asserted during the
Seller Indemnity Period to the extent, and only to the extent, directly relating
to the mispayment, nonpayment or underpayment of royalties for the for the Sale
Interest applicable to the period of Seller's ownership of the affected Assets.
From and after Closing, any claim for indemnity arising under this Section 9.13
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. Seller shall have a period of twenty (20)
days after receipt of such notice within which to respond thereto or, in the
case of a claim which requires a shorter time for response, then within such
shorter period as specified by Purchaser in such notice (the "Notice Period").
If Seller denies liability hereunder or fails to provide the defense for any
claim, Purchaser may defend or compromise the claim as it deems appropriate
without prejudice to any of Purchaser's rights hereunder, with no right of
Seller to approve or disapprove any actions taken in connection therewith by
Purchaser. If Seller accepts liability and responsibility for the defense of any
claim, it shall so notify Purchaser as soon as is practicable prior to the
expiration of the Notice Period and undertake the defense or compromise of such
claim, with counsel selected by Seller and reasonably acceptable to Purchaser.
If Seller undertakes the defense or compromise of such claim, Purchaser 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 Purchaser,
and without the prior written approval of Purchaser, which approval shall not be
unreasonably delayed or denied.
ARTICLE 10. TERMINATION
10.1. Right of Termination. This Agreement and the transactions
contemplated hereby may be terminated at the Closing:
(a) By Purchaser by notice delivered to Seller at Closing if all
conditions described in Article 7 shall not have been met and
such noncompliance shall not have been caused or waived by the
actions or inactions of Purchaser; or
(b) By Seller by notice delivered to Purchaser at Closing if all
conditions described in Article 6 shall not have been met and
such noncompliance shall not have been caused or waived by the
actions or inactions of Seller,
10.2 Automatic Termination Event. This Agreement shall automatically
terminate if Purchaser fails to deliver the Common Shares to Pioneer USA on or
before April 8, 1999, as required by Section 14.1 of this Agreement.
10.3. Effect of Termination. If this Agreement is terminated pursuant
to Section 10.1 or Section 10.2, this Agreement shall become void and of no
further force or effect (except for the provisions of Section 3.3, 3.4, Article
5 (except Section 5.9), Article 10, Article 13 and Article 14, each of which
shall survive such termination and continue in full force and effect). If this
Agreement is terminated by Purchaser pursuant to Section 10.1 (a) above, in the
absence of a default by Purchaser, Purchaser may, at its sole option, seek to
enforce whatever legal or equitable rights and remedies may be appropriate and
applicable, including, without limitation, claims for damages and/or specific
performance of this Agreement. Subject to the first sentence of
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this Section 10.3, if this Agreement is terminated by Seller pursuant to Section
10.1(b) above or automatically terminates pursuant to Section 10.2 above, then
neither Purchaser nor Seller shall have any further liability to the other Party
or Parties pursuant to this Agreement and Seller shall be entitled to receive
the Common Shares from Purchaser and thereafter retain the Common Shares as
Seller's sole and exclusive remedy at law or in equity under this Agreement.
Notwithstanding anything to the contrary contained in this Agreement, upon any
termination of this Agreement pursuant to Section 10.1 by Seller or pursuant to
Section 10.2, 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.
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 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.
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 for a period of at least 12
months.
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ARTICLE 12. PHYSICAL CONDITION OF THE ASSETS
12.1. Prior Use of Assets. THE ASSETS AND PROPERTY HAVE BEEN USED FOR
EXPLORATION, DEVELOPMENT, PRODUCTION, STORAGE, 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.
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
LIMITATIONS, 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. IN
ACCORDANCE WITH SECTION 9.2 AND 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. IN
ACCORDANCE WITH SECTION 9.2 AND 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 BE ASSUMED BY PURCHASER AND PURCHASER SHALL NOT WITHSTANDING
WHEN THE BASIS FOR ANY CLAIM, ACTION, SUIT, JUDGMENT (INCLUDING, WITHOUT
LIMITATION, THOSE FOR DEATH, PERSONAL INJURY OR PROPERTY DAMAGE) SHALL HAVE
OCCURRED, INDEMNIFY, DEFEND AND HOLD SELLER HARMLESS THEREFROM PURSUANT TO
SECTION 9.2.
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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 claims related to such
damage, and Purchaser shall take title to the affected Asset without reduction
in the Purchase Price.
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. In the event of any litigation or other proceeding in
connection with this Agreement, the 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 attorney's fees and
costs incurred therein from the other Party, in addition to any damages awarded.
13.2. Entire Agreement. This Agreement, all agreements and instruments
executed in connection herewith at Closing and the Confidentiality Agreement
dated April 15, 1998, between Purchaser and Pioneer USA (the "Confidentiality
Agreement") and the "Letter Agreement" dated September 1, 1998 by and between
the Purchaser and Pioneer USA constitute the entire agreement between the
Parties and supersede all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the Parties. The Letter Agreement and
the Confidentiality Agreement remain in full force and effect. No supplement,
amendment, alteration, or modification, of this Agreement shall be binding
unless executed in writing by the Parties hereto.
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. Except as provided for in Section 14.3 hereof,
Purchaser shall not assign (whether before, at or after Closing) this Agreement
or any of its rights or obligations hereunder without the prior written consent
of the Seller, which may be withheld or conditioned for any or no reason. Any
assignment made without such consent shall be void. Seller shall not assign this
Agreement or any of its rights or obligations hereunder without the prior
written consent of Purchaser, which consent shall not be unreasonably withheld.
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
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Agreement. All future conveyances of all or a portion of the Assets shall
expressly recognize and perpetuate the rights and obligations set out in this
Agreement.
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 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.
PIONEER RESOURCES PRODUCING L.P.
Attn: Ray Alameddine and W.T. Howard
1400 Williams Square West
5205 North O'Connor Blvd.
Irving, Texas 75039-3746
Telephone: 972/444-9001
Fax: 972/969-3570
PURCHASER:
COSTILLA ENERGY, INC.
Attn: Clifford N. Hair, Jr.
400 West Illinois, Suite 1000
Midland, Texas 79701
Telephone: 915/686-6030
Fax: 915/686-6083
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.
13.7 WAIVER OF CONSUMER RIGHTS . TO THE EXTENT APPLICABLE TO THE ASSETS
OR ANY PORTION THEREOF, PURCHASER HEREBY VOLUNTARILY WAIVES IT'S RIGHTS UNDER
THE TEXAS DECEPTIVE TRADE PRACTICES ACT, SECTION 17.41 ET SEQ., 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,
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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.
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. The provisions of this Agreement are severable at
Seller's option. If a court of competent jurisdiction finds any part of this
Agreement to be void, invalid, or otherwise unenforceable, then Seller may
decide whether to enforce this Agreement without the void, invalid, or
unenforceable parts or to terminate this Agreement.
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, disclaimers, releases, waivers, covenants, agreements and
indemnities contained within Sections 1.2, 2.3, 3.3, 3.4, 4.10 and 5.1 through
5.10, and Articles 9, 11, 12, 13 and 14 of this Agreement shall survive the
Closing, further provided, that, 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.
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. SELLER AND PURCHASER DO HEREBY IRREVOCABLY
WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND
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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 and Purchaser have agreed, for Closing purposes, to a
settlement statement, the "Preliminary Settlement Statement"
attached hereto as Schedule 13.17(A) setting forth the
adjustments to the Purchase Price provided for in or required by
this Agreement including, without limitation, items such as the
Purchase Price, 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 Purchase Price shall be
reduced at Closing by the amount of $3,654,255 as a result of
said Preliminary Settlement Statement. The Purchase Price shall
also be adjusted at Closing as a result of Asset removal as
allowed pursuant to this Agreement with such adjustments to be
made based upon the allocated value thereof under Section 2.5.
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 and calculation of
credits and payment obligations of Purchaser and Seller
hereunder. In connection with the Final Accounting (defined
below), the Purchase Price shall, taking into account
adjustments made at Closing, 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. 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
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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 150th day after the Closing Date
(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 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. Seller's Employees. Purchaser will interview and evaluate in
accordance with its normal employment procedures those Persons employed as field
personnel in the capacity of pumper, foreman, operator, technician, mechanic,
superintendent, repairman, utility man, or other similar field classifications
by Seller in connection with the Subject Properties and identified by letter of
even date herewith from Seller to Purchaser who desire to be considered for
employment by Purchaser, and 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, 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 with
compensation and benefits comparable to those provided to Purchaser's current
employees performing similar tasks, or, if none, with compensation and benefits
comparable to those provided by Seller Such 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, 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 13.19 with respect to Persons offered
employment by Purchaser pursuant to this Section 13.19 who decline such
employment, except that the foregoing provisions shall apply to the extent that
such Person accepts employment with Purchaser or any of its Affiliates within
twelve (12) months of Closing.
13.20. Time of Performance. Time is of the essence in the performance
of all covenants and obligations under this Agreement.
13.21. 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
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association, and the Parties are not authorized to act as agent or principal for
each other with respect to any matter related hereto.
13.22. 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.
13.23. [intentionally omitted]
13.24. 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. The recording Party will
provide either the original or photocopies of the recorded documents, including
the recording data, to the non-recording Party promptly. If Purchaser fails to
promptly record such documents then Seller may record such documents. Purchaser
will 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.
13.25. 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 its operates, and (c) notify
Seller of the removal and installation. Seller reserves the right of access to
the Assets and Property after its ceases to be operator to remove its signs and
name from all Assets, 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.
13.26. Retention of Originals and Copies. If originals or the
last-remaining copies of any data or records have been provided to Purchaser,
Seller may have access to them at reasonable times and upon reasonable notice
during regular business hours for as long as any Asset is in effect after the
Effective Time (or for twenty-one years in the case of a mineral fee or other
non-leasehold interest or a longer period if required by law or governmental
regulation). Seller may, during this period and at its expense, make copies of
the data and records pursuant to a reasonable request.
13.27. Exhibits. Except for Schedule 1.3(n) and Schedule 13.17.A.
attached to this Agreement, all references herein to specified exhibits and
schedules shall be deemed references to the so specified Exhibits and Schedules
attached to the Recent Prior Agreement or incorporated into the Recent Prior
Agreement in Section 13.27 thereof by reference to the Prior Agreement, which
specified Exhibits and Schedules are incorporated herein by reference.
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13.28. No Revivor. This Agreement supersedes all of the terms and
provisions of the Recent Prior Agreement. No reference in this Agreement to
other agreements or documents (including but not limited to the Prior Agreement,
Recent Prior Agreement or the Option Agreement) shall serve to revive or
reinstate such agreements or documents to the extent the same have lapsed,
expired or terminated.
ARTICLE 14. THE COMMON SHARES AND THE SHARES
14.1 Delivery and Registration Obligation. As further consideration to
Pioneer USA, Costilla shall deliver to Pioneer USA on or before April 8, 1999,
one million (1,000,000) shares of the common stock of Costilla Energy, Inc. (the
"Common Shares"). Purchaser shall, as promptly as practicable after the
Execution Date supplement the existing registration statement Form-S-3 (the
"Registration Statement") pursuant to Rule 415 under the Securities Act of 1933,
as amended, and all rules and regulations under such Act (the "Securities Act")
to include the Common Shares with the Shares (as defined in the Option
Agreement). Purchaser shall use its best efforts to (a) have the said supplement
to the Registration Statement declared effective under the Securities Act as
soon as reasonably practicable, but in any event on or prior to April 15, 1999,
and (b) keep the Registration Statement as supplemented continuously effective
under the Securities Act until the date which is 24 months from the effective
date of the Registration Statement.
14.2 Redelivery of Common Shares. If Closing hereunder occurs on or
before April 15, 1999, Seller shall redeliver the Common Shares by tendering the
same to Purchaser at Closing or if Purchaser terminates this Agreement under
Section 10.1(a), Seller shall redeliver the Common Shares by tendering the same
to Purchaser immediately upon receiving Purchaser's notice of termination.
14.3 Holding Period. If Closing occurs, Purchaser may prior to May 30,
1999 repurchase the Shares by tendering to Pioneer USA $13,000,000 in cash and
Seller agrees not to sell, assign or otherwise dispose of the Shares prior to
May 30, 1999. If Closing does not occur because of Seller's termination of this
Agreement pursuant to Section 10.1(b) or the automatic termination of this
Agreement under Section 10.2, Purchaser shall not have the right to repurchase
the Shares and Seller may sell, assign or otherwise dispose of the Shares as it
deems appropriate. Notwithstanding Section 13.5 of this Agreement, Purchaser may
assign its rights under this Section 14.3.
EXECUTED as of the date first set forth above.
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SELLER:
PIONEER NATURAL RESOURCES USA, INC.
By: /s/ W. T. Howard
----------------------------------
Name: W. T. Howard
Its: Senior Vice President, Land
PIONEER RESOURCES PRODUCING L.P.
By: Pioneer Resources, Inc.
General Partner
By: /s/ W.T. Howard
----------------------------------
Name: W. T. Howard
Its: Vice President
PURCHASER:
COSTILLA ENERGY, INC.
By: /s/ Clifford N. Hair, Jr.
----------------------------------
Name: Clifford N. Hair, Jr.
Its: Senior Vice President - Land
38
