<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): JUNE 29, 1999
(FEBRUARY 15, 1999)
PIONEER NATURAL RESOURCES COMPANY
---------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 1-13245 75-2702753
- ------------------------------- ------------ ----------------------
(State or other jurisdiction of Registration (I.R.S. Employer
incorporation or organization) File Number Identification Number)
1400 WILLIAMS SQUARE WEST, 5205 N. O'CONNOR BLVD., IRVING, TEXAS 75039
- ---------------------------------------------------------------- ----------
(Address of principal executive offices) (Zip code)
Registrant's Telephone Number, including area code : (972) 444-9001
Not applicable
---------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
<PAGE> 2
PIONEER NATURAL RESOURCES COMPANY
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Item 2. Acquisition or Disposition of Assets....................................................... 3
Item 7. Financial Statements and Exhibits
(b) Pro Forma Financial Information
Introductory Statement................................................................ 4
Unaudited Pro Forma Condensed Financial Statements:
Unaudited Pro Forma Condensed Balance Sheet for Pioneer Natural Resources
Company as of March 31, 1999....................................................... 5
Unaudited Pro Forma Condensed Statement of Operations for Pioneer Natural
Resources Company for the three months ended March 31, 1999........................ 6
Unaudited Pro Forma Condensed Statement of Operations for Pioneer Natural
Resources Company for the year ended December 31, 1998............................. 7
Notes to Unaudited Pro Forma Condensed Financial Statements.......................... 8
(c) Exhibits............................................................................... 12
Signatures ........................................................................................ 13
Exhibit Index....................................................................................... 14
</TABLE>
2
<PAGE> 3
PIONEER NATURAL RESOURCES COMPANY
The information in this document includes forward-looking statements that are
based on assumptions that in the future may prove not to have been accurate.
Those statements, and Pioneer Natural Resources Company's business and prospects
are subject to a number of risks including the volatility of oil and gas prices,
environmental risks, operating hazards and risks, risks associated with natural
gas processing plants, risks related to exploration and development drilling,
uncertainties about estimates of reserves, competition, government regulation,
and the ability of Pioneer Natural Resources Company to implement its business
strategy. These and other risks are described in the 1998 Annual Report on Form
10-K for Pioneer Natural Resources Company which is available from the United
States Securities and Exchange Commission.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
PRIZE DISPOSITION.
On June 29, 1999, the Company completed a sale of certain United States
oil and gas producing properties, gas plants and other assets to Prize Energy
Corp. ("Prize"), a private company based in Grapevine, Texas. The oil and gas
producing assets sold to Prize include properties located in the Gulf Coast, Mid
Continent and Permian Basin areas of the Company's United States region.
At December 31, 1998, the Company's interest in these properties
contained 63 million BOE of proved reserves (consisting of 26 million Bbls of
oil and NGL's, and 224 Bcf of gas), representing $199 million of SEC 10 value.
During 1998, daily production from these properties averaged 7,390 Bbls of oil,
1,904 Bbls of NGL's and 68,884 Mcf of gas.
In accordance with the terms of the purchase and sale agreement, the
Company received gross sales proceeds of $245 million, comprised of $215 million
of cash and 2,307.693 shares of six percent convertible preferred stock having a
liquidation preference and fair value of $30 million ($13,000 per share). The
convertible preferred stock provides for a six percent annual dividend payment,
payable quarterly in additional equity shares of Prize through 2001. Subsequent
to 2001, Prize has the option of paying the quarterly dividends on the
convertible preferred stock in equity shares or cash. Each share of the six
percent convertible preferred stock may, at the option of the Company, be
converted into one share of Prize common stock, subject to certain anti-dilution
adjustments. The cash sales proceeds, after payment of certain costs and
expenses, were used to reduce the Company's outstanding bank indebtedness.
The directors of Prize include Mr. Philip P. Smith, the Chief Executive
Officer of Prize; Mr. Kenneth A. Hersh; and, two directors to be elected by
Pioneer under the terms of the convertible preferred stock received in this
transaction. Messers. Smith and Hersh were members of the Board of Directors of
the Company and have resigned their positions with the Company. Additionally,
Mr. Lon C. Kile resigned his position as Executive Vice President of the Company
to accept the position of President and Chief Operating Officer of Prize. The
sale of assets to Prize was the result of an auction process that, upon receipt
of Prize's initial offer, was placed under the supervision of a special
independent committee (comprised of outside directors unrelated to Prize) of the
Company's Board of Directors. The independent Committee reviewed and considered
all offers presented to the Company for the purchase of the assets acquired by
Prize.
OTHER DISPOSITIONS.
During the first quarter of 1999, the Company completed the sale of a
gas plant and certain oil and gas properties for gross cash proceeds of $5
million.
During June 1999, the Company also completed the sales of certain oil
and gas properties for gross cash proceeds of $40 million, subject to normal
purchase price adjustments. Such proceeds include $31 million received under
seven separate purchase and sale agreements that divest non-strategic Canadian
oil and gas properties. The Company received the remaining $9 million of
proceeds from the sale of its interest in a West Texas oil and gas field. The
net cash proceeds from these dispositions were used to reduce the Company's
outstanding bank indebtedness.
3
<PAGE> 4
PIONEER NATURAL RESOURCES COMPANY
Additionally, during June, the Company executed definitive agreements
for the sale of certain natural gas properties in South Texas to CNG Producing
Company for $62 million of gross proceeds and certain other non-strategic
Canadian oil and gas properties for estimated proceeds of approximately $34
million. While these pending dispositions are expected to be completed during
the third quarter of 1999, there can be no assurances that the buyers will have
the financial wherewithal to complete the transactions.
At December 31, 1998, the Company's interest in these properties
contained 21 million BOE of proved reserves (consisting of 10 million Bbls of
oil and NGL's, and 65 Bcf of gas), representing $76 million of SEC 10 value.
During 1998, daily production from these properties averaged 8,110 Bbls of oil,
211 Bbls of NGL's and 28,732 Mcf of gas. The Canadian oil and gas properties
being divested by the Company represent approximately 57 percent of the
Company's Canadian production during 1998 and 26 percent of the Company's
Canadian proved oil and gas reserves as of December 31, 1998. The dispositions
of the Canadian and United States oil and gas properties were executed through
competitive bid processes with unrelated third party purchasers.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
INTRODUCTORY STATEMENT.
The unaudited pro forma condensed financial statements of the Company
have been prepared to give effect to (i) the sale of certain non-strategic oil
and gas properties, gas plants, and other assets to Prize Energy Corp. in June
1999 and (ii) the aggregate effect of both completed and pending sales
(evidenced by signed purchase and sale agreements) of certain non-strategic
Canadian and United States oil and gas properties, gas plants and related assets
during the period from February 15, 1999 to June 30, 1999 (items (i) and (ii)
collectively the "1999 Dispositions").
The unaudited pro forma condensed balance sheet and statements of
operations have been prepared to give effect to the 1999 Dispositions, as
described below:
o The unaudited pro forma condensed balance sheet of Pioneer as of March
31, 1999 has been prepared to give effect to the 1999 Dispositions as if
they were completed on March 31, 1999.
o The unaudited pro forma condensed statements of operations of Pioneer for
the three months ended March 31, 1999 and for the year ended December 31,
1998 have been prepared to give effect to the 1999 Dispositions as if
they had occurred on January 1, 1998.
The unaudited pro forma condensed financial statements included herein
are not necessarily indicative of the results that might have occurred had the
transactions taken place on the dates that are assumed for the pro forma
presentations and are not intended to be a projection of future results. Future
results may vary significantly from the results reflected in the accompanying
unaudited pro forma condensed financial statements because of normal production
declines, changes in product prices, future acquisitions and divestitures,
future development and exploration activities, and other factors.
The following unaudited pro forma condensed financial statements should
be read in conjunction with the Consolidated Financial Statements (and the
related notes) of Pioneer included in the Annual Report on Form 10-K for the
year ended December 31, 1998 and the Quarterly Report on Form 10-Q for the three
months ended March 31, 1999.
4
<PAGE> 5
PIONEER NATURAL RESOURCES COMPANY
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF MARCH 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
THE PRO FORMA PRO FORMA
COMPANY ADJUSTMENTS PIONEER
------------- ------------ -------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents......................... $ 33,563 $ $ 33,563
Accounts receivable............................... 109,021 109,021
Other current assets.............................. 28,696 28,696
------------- -------------
Total current assets.......................... 171,280 171,280
------------- -------------
Property, plant and equipment at cost:
Oil and gas properties, using the successful
efforts method of accounting.................... 4,002,844 (775,046)(a) 3,227,798
Accumulated depletion, depreciation and
amortization.................................... (998,541) 365,113 (a) (633,428)
------------- -------------
3,004,303 2,594,370
------------- -------------
Deferred income taxes............................... 98,200 98,200
Other assets, net................................... 143,346 22,625 (a) 165,971
------------- ------------
$ 3,417,129 $ 3,029,821
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt.............. $ 339,282 $(339,282)(a) $ --
Other current liabilities......................... 167,329 167,329
------------- ------------
Total current liabilities..................... 506,611 167,329
------------- ------------
Long-term debt, less current maturities............. 1,869,134 (12,006)(a) 1,857,128
Other noncurrent liabilities........................ 189,838 (1,678)(a) 188,160
Deferred income taxes............................... 64,800 64,800
Stockholders' equity:
Preferred stock................................... -- --
Common stock...................................... 1,008 1,008
Additional paid-in capital........................ 2,348,071 2,348,071
Treasury stock, at cost........................... (10,388) (10,388)
Retained deficit.................................. (1,554,943) (34,342)(a) (1,589,285)
Cumulative translation adjustment................. 2,998 2,998
------------- ------------
Total stockholders' equity.................... 786,746 752,404
Commitments and contingencies.......................
------------- ------------
$ 3,417,129 $ 3,029,821
============= ============
</TABLE>
See accompanying notes to unaudited pro forma condensed financial statements.
5
<PAGE> 6
PIONEER NATURAL RESOURCES COMPANY
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THE 1999 PRO FORMA PRO FORMA
COMPANY DISPOSITIONS ADJUSTMENTS PIONEER
----------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas........................... $ 147,151 $ (28,696) $ 118,455
Interest and other.................... 45,973 - 45,973
Gain on disposition of
assets, net....................... 67 - 67
----------- --------- ----------
193,191 (28,696) 164,495
----------- --------- ----------
Cost and expenses:
Oil and gas production................ 47,194 (10,286) 36,908
Depletion, depreciation and
amortization........................ 69,372 (13,953) 55,419
Exploration and abandonments.......... 11,776 (298) 11,478
General and administrative............ 10,249 - 10,249
Reorganization........................ 5,529 - 5,529
Interest.............................. 42,521 - (5,589)(b) 36,932
Other................................. 8,651 - 8,651
----------- --------- ----------
195,292 (24,537) 165,166
----------- --------- ----------
Loss from continuing operations before
income taxes.......................... (2,101) (4,159) (671)
Income tax provision.................... (400) - (100)(c) (500)
----------- --------- ----------
Loss from continuing operations......... $ (2,501) $ (4,159) $ (1,171)
=========== ========= ==========
Loss from continuing operations per
common share:
Basic................................. $ (.02) $ (.01)
=========== ==========
Diluted............................... $ (.02) $ (.01)
=========== ==========
Weighted average shares outstanding.... 100,300 100,300
=========== ==========
</TABLE>
See accompanying notes to unaudited pro forma condensed financial statements.
6
<PAGE> 7
PIONEER NATURAL RESOURCES COMPANY
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THE 1999 PRO FORMA PRO FORMA
COMPANY DISPOSITIONS ADJUSTMENTS PIONEER
----------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas.......................... $ 711,492 $ (151,134) $ 560,358
Interest and other................... 10,452 - 10,452
Loss on disposition of assets, net... (445) - (445)
----------- ---------- ----------
721,499 (151,134) 570,365
----------- ---------- ----------
Cost and expenses:
Oil and gas production............... 223,551 (51,656) 171,895
Depletion, depreciation and
amortization....................... 337,308 (72,163) 265,145
Impairment of long-lived assets...... 459,519 (33,738) 425,781
Exploration and abandonments......... 121,858 (5,824) 116,034
General and administrative........... 73,000 - 73,000
Reorganization....................... 33,199 - 33,199
Interest............................. 164,285 - (21,286)(b) 142,999
Other................................ 39,605 - 39,605
----------- ---------- ----------
1,452,325 (161,007) 1,267,658
----------- ---------- ----------
Loss from continuing operations before
income taxes....................... (730,826) 9,873 (697,293)
Income tax provision................... (15,600) - (18,700)(c) (34,300)
----------- ---------- ----------
Loss from continuing operations ....... $ (746,426) 9,873 $ (731,593)
=========== ========== ==========
Loss from continuing operations per
common share:
Basic.............................. $ (7.46) $ (7.31)
=========== ==========
Diluted............................ $ (7.46) $ (7.31)
=========== ==========
Weighted average shares outstanding.... 100,055 100,055
=========== ==========
</TABLE>
See accompanying notes to unaudited pro forma condensed financial statements.
7
<PAGE> 8
PIONEER NATURAL RESOURCES COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED
FINANCIAL STATEMENTS
MARCH 31, 1999 AND DECEMBER 31, 1998
NOTE 1. BASIS OF PRESENTATION
The unaudited pro forma condensed financial information of Pioneer
Natural Resources Company (the "Company") has been prepared to give effect to
(i) the sale of certain non-strategic oil and gas properties, gas plants and
other assets to Prize Energy Corp. ("Prize") in June 1999 and (ii) the aggregate
effect of both completed and pending sales (evidenced by signed purchase and
sale agreements) of certain non-strategic Canadian and United States oil and gas
properties, gas plants and related assets during the period from February 15,
1999 to June 30, 1999 (items (i) and (ii) collectively, the "1999
Dispositions"). The unaudited pro forma condensed balance sheet is presented as
if the 1999 Dispositions occurred on March 31, 1999 and the unaudited pro forma
condensed statements of operations are presented as if the 1999 Dispositions
occurred on January 1, 1998.
The following is a description of the individual columns included in
these unaudited pro forma condensed financial statements:
The Company - Represents the consolidated condensed balance sheet of
Pioneer Natural Resources Company as of March 31, 1999 and the consolidated
condensed statements of operations of Pioneer Natural Resources Company for
the three months ended March 31, 1999 and the year ended December 31, 1998.
1999 Dispositions - Reflects the results of operations (before income
taxes) for the three months ended March 31, 1999 and the year ended
December 31, 1998 from the oil and gas properties, gas plants and related
assets prior to their sale in 1999.
NOTE 2. PRO FORMA ADJUSTMENTS
Following are descriptions of the pro forma adjustments used in the
preparation of the accompanying unaudited pro forma condensed financial
statements:
(a) Pro forma adjustment to recognize the 1999 Dispositions and
the use of the cash proceeds, as if the transactions had
occurred on March 31, 1999. Included in this adjustment are
post-March 31, 1999 total proceeds of $381 million, comprised
of $351 million of cash and a $30 million investment in Prize.
(b) Respective pro forma adjustments to reduce interest expense
for the quarter ended March 31, 1999 and for the year ended
December 31, 1998 to reflect the use of $356 million of
cash proceeds from divestments to reduce outstanding bank
indebtedness. The adjustments for the quarter ended March 31,
1999 and the year ended December 31, 1998 are based on
historic average annual interest rates of 6.27 percent and
5.97 percent, respectively, incurred on bank indebtedness.
(c) Pro forma adjustments to the Company's Canadian income tax
provisions for the three months ended March 31, 1999 and the
year ended December 31, 1998. These adjustments are based on
an effective Canadian income tax rate of 43.7 percent. Due to
uncertainties regarding the recoverability of the Company's
United States net operating loss and tax credit carryovers,
neither income tax provisions nor benefits have been
recognized in the pro forma adjustments associated with pro
forma adjustments to pre-tax United States earnings.
NOTE 3. OIL AND GAS RESERVE DATA
The following unaudited pro forma supplemental information regarding
the oil and gas activities of the Company is presented pursuant to the
disclosure requirements promulgated by the Securities and Exchange Commission
and Statement of Financial Accounting Standards No. 69, "Disclosures About Oil
and Gas Producing Activities". The pro forma combined reserve information is
presented as if the 1999 Dispositions had occurred on January 1, 1998.
Information for oil and NGL's are presented in barrels (Bbls) and for gas in
thousands of cubic feet (Mcf).
The Company emphasizes that reserve estimates are inherently imprecise
and subject to revision and that estimates of new discoveries are more imprecise
than those of producing oil and gas properties. Accordingly, the estimates are
expected to change as future information becomes available; such changes could
be significant.
8
<PAGE> 9
Quantities of oil and gas reserves
Set forth below is a pro forma summary of the changes in the net
quantities of oil, NGL and natural gas reserves for the year ended December 31,
1998.
<TABLE>
<CAPTION>
Oil
& NGLs Gas
(MBbls) (MMcf) MBOE
-------- --------- -------
<S> <C> <C> <C>
TOTAL PROVED RESERVES:
UNITED STATES
Balance, January 1.................... 288,146 1,446,523 529,234
Revisions of previous estimates....... (23,641) (54,849) (32,784)
Purchases of minerals in place........ -- -- --
New discoveries and extensions........ 183 3,438 756
Production............................ (21,823) (102,111) (38,842)
Sales of minerals-in-place............ (323) (7,070) (1,501)
-------- --------- -------
Balance, December 31.................. 242,542 1,285,931 456,863
CANADA
Balance, January 1.................... 3,783 167,558 31,709
Revisions of previous estimates....... 249 65,662 11,193
Purchases of minerals in place........ 2 -- 2
New discoveries and extensions........ 261 5,951 1,253
Production............................ (670) (13,542) (2,927)
Sales of minerals-in-place............ (111) (5,465) (1,022)
-------- --------- -------
Balance, December 31.................. 3,514 220,164 40,208
ARGENTINA
Balance, January 1.................... 31,612 340,392 88,344
Revisions of previous estimates....... (7,615) 76,843 5,192
Purchases of minerals in place........ -- -- --
New discoveries and extensions........ 3,522 37,900 9,839
Production............................ (3,300) (26,801) (7,767)
Sales of minerals-in-place............ -- -- --
-------- --------- -------
Balance, December 31.................. 24,219 428,334 95,608
TOTAL
Balance, January 1.................... 323,541 1,954,473 649,287
Revisions of previous estimates....... (31,007) 87,656 (16,399)
Purchases of minerals in place........ 2 -- 2
New discoveries and extensions........ 3,966 47,289 11,848
Production............................ (25,793) (142,454) (49,536)
Sales of minerals-in-place............ (434) (12,535) (2,523)
-------- --------- -------
Balance, December 31.................. 270,275 1,934,429 592,679
======== ========= =======
PROVED DEVELOPED RESERVES:
January 1........................ 288,147 1,521,925 541,801
======== ========= =======
December 31...................... 216,409 1,200,300 416,459
======== ========= =======
</TABLE>
9
<PAGE> 10
Standardized measure of discounted future net cash flows
The standardized measure of discounted future net cash flow is computed
by applying year-end prices of oil and gas (with consideration of price changes
only to the extent provided by contractual arrangements) to the estimated future
production of oil and gas reserves less estimated future expenditures (based on
year-end costs) to be incurred in developing and producing the proved reserves
discounted using a rate of 10 percent per year to reflect the estimated timing
of the future cash flows. Future income taxes are calculated by comparing
discounted future cash flows to the tax basis of oil and gas properties plus
available carryforwards and credits and applying the current tax rate to the
difference.
<TABLE>
<S> <C>
UNITED STATES (in thousands)
Oil and gas producing activities:
Future cash inflows........................................ $ 4,352,050
Future production costs.................................... (2,011,439)
Future development costs................................... (192,273)
Future income tax expense.................................. --
-----------
2,148,338
10% annual discount factor................................. (1,148,881)
-----------
Standardized measure of discounted future net cash flows... $ 999,457
===========
ARGENTINA
Oil and gas producing activities:
Future cash inflows........................................ $ 686,911
Future production costs.................................... (196,446)
Future development costs................................... (45,710)
Future income tax expense.................................. --
-----------
444,755
10% annual discount factor................................. (211,956)
-----------
Standardized measure of discounted future net cash flows... $ 232,799
===========
CANADA
Oil and gas producing activities:
Future cash inflows........................................ $ 383,118
Future production costs.................................... (87,734)
Future development costs................................... (46,860)
Future income tax expense.................................. (30,566)
-----------
217,958
10% annual discount factor................................. (75,947)
-----------
Standardized measure of discounted future net cash flows... $ 142,011
===========
TOTAL
Oil and gas producing activities:
Future cash inflows........................................ $ 5,422,079
Future production costs.................................... (2,295,619)
Future development costs................................... (284,843)
Future income tax expense.................................. (30,566)
-----------
2,811,051
10% annual discount factor................................. (1,436,784)
-----------
Standardized measure of discounted future net cash flows... $ 1,374,267
===========
</TABLE>
10
<PAGE> 11
Changes relating to the standardized measure of discounted future net cash flows
The principal sources of the change in the pro forma combined
standardized measure of discounted future net cash flows for the year ended
December 31, 1998 are as follows (in thousands):
<TABLE>
<S> <C>
Oil, NGL and gas sales, net of production costs $ (389,382)
Net changes in prices and production costs (1,093,101)
Extension and discoveries 44,018
Sales of minerals-in-place (12,748)
Purchases of minerals-in-place 3
Revisions of estimated future development costs (14,780)
Revisions of previous quantity estimates (17,426)
Accretion of discount 251,217
Changes in production rates, timing and other 94,296
-----------
Change in present value of future net revenues (1,137,903)
Net change in present value of future income taxes 23,908
-----------
(1,113,995)
Balance, beginning of year 2,488,262
-----------
Balance, end of year $ 1,374,267
===========
</TABLE>
11
<PAGE> 12
PIONEER NATURAL RESOURCES COMPANY
(d) EXHIBITS
10.1 Purchase and Sale Agreement, dated May 16, 1999, by and between
Pioneer Natural Resources USA, Inc. and Pioneer Resources
Producing, L.P. as Seller and Prize Energy Corp. as Purchaser
12
<PAGE> 13
PIONEER NATURAL RESOURCES COMPANY
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duty caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PIONEER NATURAL RESOURCES COMPANY
Date: July 13, 1999 By: /s/ RICH DEALY
------------------------------------
Rich Dealy
Vice President and Chief Accounting
Officer
13
<PAGE> 14
PIONEER NATURAL RESOURCES COMPANY
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
10.1 Purchase and Sale Agreement, dated May 16, 1999, by and between
Pioneer Natural Resources USA, Inc. and Pioneer Resources
Producing, L.P. as Seller and Prize Energy Corp. as Purchaser 15
</TABLE>
14
<PAGE> 1
EXHIBIT 10.1
PURCHASE AND SALE AGREEMENT
by and between
PIONEER NATURAL RESOURCES USA, INC.
PIONEER RESOURCES PRODUCING, L.P.
as Seller
and
PRIZE ENERGY CORP.
as Purchaser
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1. SALE AND PURCHASE
Effective Time..............................................................................................1
Sale and Purchase...........................................................................................1
Excluded Assets.............................................................................................4
Defined Terms...............................................................................................6
ARTICLE 2. CONSIDERATION
Consideration...............................................................................................9
Manner of Payment...........................................................................................9
Like Kind Exchange Option...................................................................................9
Deposit....................................................................................................10
Allocations................................................................................................10
ARTICLE 3. DEFECTS
Definition of Acceptable Title.............................................................................11
Definition of Permitted Encumbrances.......................................................................11
Environmental and Physical Assessment......................................................................12
Notice of Defects..........................................................................................14
Remedy for Defects.........................................................................................15
Preferential Purchase Rights and Consents to Assign........................................................19
ARTICLE 4. SELLER'S REPRESENTATIONS, WARRANTIES AND DISCLAIMER
Existence..................................................................................................21
Power......................................................................................................21
Authorization..............................................................................................21
Brokers....................................................................................................21
Foreign Person.............................................................................................21
No Reservations............................................................................................22
Permits....................................................................................................22
Compliance with Law........................................................................................22
Taxes......................................................................................................22
Litigation.................................................................................................22
Investment Representations.................................................................................22
LIMITATION AND DISCLAIMER OF REPRESENTATIONS AND WARRANTIES................................................22
ARTICLE 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER
Existence..................................................................................................24
Power......................................................................................................24
Authorization..............................................................................................24
Brokers....................................................................................................24
Investment Intent..........................................................................................24
Due Diligence..............................................................................................24
Sophisticated Buyer........................................................................................24
Economic Risk..............................................................................................25
Financing..................................................................................................25
Accredited Investor........................................................................................25
Solicitation...............................................................................................25
Bankruptcy.................................................................................................25
General....................................................................................................25
Financial Matters..........................................................................................25
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE 5A. ADDITIONAL COVENANTS
Maintenance of Assets......................................................................................26
No Encumbrances............................................................................................26
Operations.................................................................................................26
Access to Records..........................................................................................28
Permissions................................................................................................28
ARTICLE 6. SELLER'S CONDITIONS OF CLOSING
Representations............................................................................................28
Performance................................................................................................28
Officer's Certificate......................................................................................28
Pending Matters............................................................................................28
HSR Act....................................................................................................28
ARTICLE 7. PURCHASER'S CONDITIONS OF CLOSING
Representations............................................................................................29
Performance................................................................................................29
Officer's Certificate......................................................................................29
Pending Matters............................................................................................29
HSR Act....................................................................................................29
ARTICLE 8. CLOSING.
Time and Place of Closing..................................................................................29
Closing Obligations........................................................................................29
Purchaser's Extension of Closing...........................................................................30
ARTICLE 9. POST-CLOSING OBLIGATIONS
Receipts and Credits; Suspense Funds.......................................................................31
Costs and Liabilities; Indemnity...........................................................................31
Further Assurances.........................................................................................36
Delivery of Records........................................................................................36
Access to Data.............................................................................................36
PURCHASER'S RELEASE OF SELLER..............................................................................37
RETROACTIVE EFFECT.........................................................................................37
INDUCEMENT TO SELLER.......................................................................................37
Related Agreements.........................................................................................37
Disposal of Materials, Substances, and Wastes; Compliance and Law..........................................38
Litigation.................................................................................................38
Seller's Indemnity of Purchaser............................................................................38
ARTICLE 10. TERMINATION
Right of Termination.......................................................................................38
Effect of Termination......................................................................................39
ARTICLE 11. TAXES
Apportionment of Ad Valorem and Property Taxes.............................................................40
Sales Taxes................................................................................................40
Other Taxes................................................................................................40
Cooperation................................................................................................40
ARTICLE 12. PHYSICAL CONDITION OF THE ASSETS
Prior Use of Assets........................................................................................41
Assumption of Assets in Present Condition..................................................................41
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
Casualty Loss..............................................................................................42
Year 2000 Compliance.......................................................................................42
ARTICLE 13. MISCELLANEOUS
Governing Law..............................................................................................42
Entire Agreement...........................................................................................42
Waiver.....................................................................................................43
Captions...................................................................................................43
Assignability..............................................................................................43
Notices....................................................................................................43
DTPA Waiver................................................................................................44
Expenses...................................................................................................44
Severability...............................................................................................44
Damages....................................................................................................44
No Third Party Beneficiary.................................................................................45
Survival...................................................................................................45
Counterparts...............................................................................................45
Not to be Construed Against Drafter........................................................................45
Waiver of Jury Trial.......................................................................................45
Publicity..................................................................................................45
Accounting.................................................................................................45
Operatorship...............................................................................................46
HSR Act....................................................................................................47
Seller's Employees.........................................................................................47
Time of Performance........................................................................................48
No Partnership Created.....................................................................................48
EXPRESS NEGLIGENCE RULE; CONSPICUOUSNESS...................................................................48
Arbitration................................................................................................48
Filing and Recording.......................................................................................50
Removal of Signs...........................................................................................50
Transition Agreement.......................................................................................51
EXHIBIT "A" - PROPERTIES (WELLS AND UNITS)
EXHIBIT "A-1" INTERESTS OF OTHER PARTIES
EXHIBIT "A-2" ALLOCATED VALUES
EXHIBIT "B-1" FORM OF ASSIGNMENT AND BILL OF SALE
EXHIBIT "B-2" FORM OF CONVEYANCE
EXHIBIT "C" LANDS AND LEASES
EXHIBIT "E" DOMESTIC MINERAL EXCLUSION LIST
SCHEDULE 1-2(b) F FORM OF SEISMIC DATA LICENSE AGREEMENT
SCHEDULE 2.1 (c) PREFERRED STOCK TERM SHEET
SCHEDULE 4.10 LITIGATION
SCHEDULE 5.14 PURCHASER'S BALANCE SHEET
SCHEDULE 8.2(b) TRANSFER ORDERS AND LETTERS IN LIEU
SCHEDULE 9.11 ASSUMED LITIGATION
SCHEDULE 13.27 TRANSITION AGREEMENT
SCHEDULE 1 TO EXHIBIT "A" COMPRESSOR INVENTORY LIST (GC ONLY)
SCHEDULE 2 TO EXHIBIT "A" NON-LEASEHOLD EQUIPMENT
SCHEDULE 3 TO EXHIBIT "A" VICTORIA OFFICE AND YARD
SCHEDULE 4 TO EXHIBIT "A" UNDEVELOPED LEASEHOLD (ALL)
SCHEDULE 5 TO EXHIBIT "A" VEHICLE REPORT (ALL)
SCHEDULE 6 TO EXHIBIT "A" GAS PLANTS (PB&MC)
</TABLE>
<PAGE> 5
PURCHASE AND SALE AGREEMENT
This PURCHASE AND SALE AGREEMENT, including the exhibits and schedules
hereto (this "Agreement"), is made this 16th day of May, 1999, by and between
PIONEER NATURAL RESOURCES USA, INC., a Delaware corporation, and PIONEER
RESOURCES PRODUCING L.P., (collectively, "Seller"); and PRIZE ENERGY CORP., a
Delaware corporation with the address of 20 E. Fifth Street, Suite 1400, Tulsa,
Oklahoma 74103 ("Purchaser").
RECITALS:
WHEREAS, Seller has agreed to sell and Purchaser has agreed to purchase
certain of Seller's interests in certain Assets (as hereinafter defined) on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, for the benefits to each Party contained herein and
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, Seller and Purchaser hereby agree as follows:
ARTICLE 1. SALE AND PURCHASE
1.1 Effective Time. The effective time and date of the purchase and
sale contemplated hereby shall be 12:01 a.m. Central Time on July 1, 1999 (the
"Effective Time").
1.2 Sale and Purchase. Subject to the terms and conditions herein
contained, at Closing (as defined below) and effective as of the Effective Time,
Seller shall sell, assign, transfer and convey to Purchaser, and Purchaser shall
purchase, accept and receive, the right, title, and interest, if any, of Seller
as of the Effective Time in and to the following described assets, less and
except the Excluded Assets (the "Assets"):
(a) the oil, gas and mineral leases and leasehold interests
appurtenant to the wells and/or units described in Exhibit "A"
attached hereto and incorporated herein to the extent and only
to the extent they cover the lands described on Exhibit "C"
attached hereto and incorporated herein, together with
Seller's interest in any pooled, communitized or unitized
acreage, to the extent and only to the extent any such wells
are a part thereof , and all of the rights appurtenant thereto
(the "Subject Properties" or "Subject Property") (reference
being made to Seller's records and files, with respect to the
above leases and wells, located at Seller's office at 303 Wall
Street, Midland, Texas, for a more complete legal description
of the leases, said interests to include all of the lands
covered by said leases appurtenant to the wells listed on
Exhibit "A" hereto, except in the instance(s) where Seller has
retained a well on or other rights or interest in said leases
and
1
<PAGE> 6
leaseholds in which event Purchaser shall receive the
pro-ration acreage attributable to the affected well(s) listed
on Exhibit "A" hereto (or other minimum spacing unit or
acreage applicable) or such other lands as Purchaser and
Seller may agree, said lands to be described on Exhibit "A" to
the Assignment and Bill of Sale, as hereinafter defined) (the
Assets described in this Section 1.2(a) being sometimes
referred to herein as the ("Sale Interest");
(b) to the extent, and only to the extent, attributable or
allocable to the Subject Properties: (1) all wells (including,
but not limited to, the wells described in Exhibit "A" hereto
and all other oil, gas, injection and water wells, whether
plugged or unplugged and whether abandoned or not) ("Wells"),
equipment, lease equipment, gathering pipelines, gas
facilities, gathering systems, gathering, storage,
distribution, treating, processing and disposal facilities and
tanks, tools, buildings, and all other real or tangible
personal property and fixtures which are located on or
directly and solely related to the Subject Properties,
including, without limitation, gas gathering systems (not
carrying gas of Seller or any Affiliate of Seller from an
Excluded Asset) which carry gas produced on any of the Subject
Properties and the items of personal property described in
Schedules 1, 2, 3 and 5 of Exhibit "A" hereto, specifically
including portable tools, snow vehicles, equipment, inventory,
and vehicles used exclusively on or exclusively appurtenant to
the Subject Properties or the Wells, but, except as provided
above, excluding personal property not used exclusively on or
exclusively appurtenant to the Wells and personal property
temporarily located on the Subject Properties; (2) all oil,
gas, mineral and other hydrocarbon substances produced on or
after the Effective Time; (3) to the extent the same are
assignable or transferable by Seller, all orders, contracts,
title opinions and documents, abstracts of title, leases,
deeds, unitization agreements, pooling agreements, operating
agreements, division of interest statements, participation
agreements, gas purchase, sale, transportation and processing
agreements, and all other agreements and instruments; (4) all
surface leasehold and surface fee estates (but only to the
extent overlying and within the boundaries of the lands
comprising the Subject Properties), easements, rights-of-way,
licenses, authorizations, permits and similar rights and
interests, limited by and subject to the rights of third
parties and applicable Related Agreements (as hereinafter
defined); (5) to the extent assignable, lease files, land
files, operating files, well files, oil and gas sales contract
files, gas processing files, logs, test data, production
histories, division order files, abstracts, and title files
(the "Records"), and all rights thereto, limited by and
subject to the rights, if any, retained by Seller and those of
third parties and applicable Related Agreements; (6) royalty
and overriding royalty interests not related, pertaining to or
derived from the Excluded Minerals (as hereinafter defined)
and to the extent and only to the extent pertaining to both
the Sale Interest and the area underlying and within the
boundaries of the lands comprising the Subject Properties; (7)
all other rights, privileges, benefits and powers conferred
upon the owner and holder of leasehold in the Subject
Properties; (8) reversionary interests and farmout rights and
interests appurtenant to the Subject Properties but not
related, pertaining to or derived from the Excluded Minerals
(hereinafter described); (9)
2
<PAGE> 7
a license, pursuant to Seller's Seismic Data License
Agreement, substantially in the form attached hereto as
Schedule 1.2.(b)F and incorporated herein, to all existing
seismic and geophysical raw data possessed by Seller on the
Effective Time, wholly owned by Seller, to the extent and only
to the extent covering the area directly within the boundaries
of the Subject Properties or within one mile of the Subject
Properties (but only to the extent it does not cross over onto
the boundary of a retained interest of Seller or an Excluded
Asset) and only to the extent permitted by the applicable
agreements and subject to all rights of third parties and all
conditions or restrictions imposed by said third parties;
(c) to the extent and only to the extent necessary for the
ownership, use or development of the Subject Properties and
limited by and subject to the rights of and conditions or
restrictions imposed by third parties and applicable
agreements, the concurrent, nonexclusive right of ingress and
egress with respect to the fee, fee mineral, leasehold and
royalty interest to the extent owned or retained by Seller in
the area of the Subject Properties (at Purchaser's sole cost);
(d) the wells, real or personal property (or mixed property),
interests, assets, facilities and equipment identified on
Schedule 1, 2, 3, 4, 5 or 6 of Exhibit "A" hereto, which may
or may not be expressly included in the engineering data
previously furnished to Purchaser but which constitute a part
of the Subject Properties and those interests, assets,
facilities and equipment appurtenant to the Subject Properties
but which are identified subsequent to the Execution Date by
and placed on Exhibit "A" or any of the Schedules listed
immediately above prior to Closing by Seller;
(e) the interests described on Exhibit "A-1 " attached hereto and
incorporated herein when offered by the owners thereof prior
to Closing (provided each such owner offers to sell all of
such owner's interest in each Well in a given field; in other
words, no such owner may sell an interest in one or more Wells
under this Section 12(e) while retaining an interest in
another Well in the same field) shall be purchased by
Purchaser at Closing for a value proportionate to the
allocated value of Seller's related interest in said Asset,
whether or not such interests are acquired by the Seller on or
prior to Closing, unless such interests are subject to Defects
specifically included in any Notice of Defects delivered
hereunder, in which case, at Seller's sole option, (i) such
affected interest shall be excluded from the Assets or (ii)
the value with respect to such interest shall be reduced by
the lesser of the cost to cure said defect or the said defect
value not to exceed the proportionate allocated value for said
interest, and such interest shall be conveyed to Purchaser at
Closing as part of the Assets; all such interests acquired by
Purchaser shall be deemed to be a part of the Sale Interest
and subject to the terms of this Agreement for all purposes
and the Purchase Price shall be increased at Closing by the
amount allocated to such acquired interests;
(f) the undeveloped leasehold identified in Exhibit "A" hereto and
more fully described on Schedule 4 to Exhibit "A" together
with all contract rights, personal
3
<PAGE> 8
property and other rights directly related thereto to the
extent assignable, and subject to and limited by the rights of
third parties and Related Agreements and recognizing that such
undeveloped leasehold may have expired or may expire after the
Execution Date or may not have been renewed or may not be
renewed;
(g) the domestic U.S. mineral interests (and the royalty and
overriding royalty interests associated with said mineral
interests) to the extent covering lands outside the areas,
land, counties, or parishes in the states described on Exhibit
"E" attached hereto and incorporated herein (the "Mineral
Interest"), with Seller expressly retaining, among the other
things retained by Seller pursuant to this Agreement or not
otherwise covered hereby, all right, title and interest in the
domestic U.S. mineral interests, and the royalty and
overriding royalty interests associated with said mineral
interests, inside the areas, land, counties, or parishes in
the states described on said Exhibit "E", (with such retained
interests of Seller referred to as the "Excluded Minerals",
with Excluded Minerals being considered Excluded Assets for
purposes of this Agreement); provided, however, as to the
Excluded Minerals, should any land ultimately and specifically
described on an Exhibit "A" to any Assignment and Bill of Sale
delivered to Purchaser by Seller pursuant to this Agreement
(and an interest in said land is intended to be conveyed
thereby) fall within the description for and conflict with the
description of Excluded Minerals, then, as to and only as to
the specific lands described in the said Assignment and Bill
of Sale between Seller and Purchaser, all mineral, royalty and
overriding royalty interests of Seller, if any, to the extent
and only to the extent directly pertaining to and within the
boundaries of said specifically described lands shall not be
considered to be Excluded Minerals and shall be considered to
have been conveyed to Purchaser pursuant to the terms of this
Agreement, and only to the extent assignable, and subject and
limited by the rights of third parties and Related Agreements;
(h) the plants described on Schedule 6 to Exhibit "A" hereto (the
"Gas Plants") and gathering systems appurtenant thereto and
all gas processing, gas purchase and sale contracts associated
therewith, subject to their terms and only to the extent
assignable and subject to and limited by the rights of third
parties and Related Agreements; and
(i) the four (4) million shares of the common stock of Costilla
Energy, Inc. ("Costilla Shares") possessed by Seller, subject
to all restrictions in effect with regard to the Costilla
Shares on the assignment or transfer of the Costilla Shares by
Seller.
1.3 Excluded Assets. Notwithstanding anything in this Agreement to the
contrary, the Assets do not include and Purchaser agrees and acknowledges that
Seller has reserved and retained from the Assets and hereby reserves and retains
unto itself any and all rights, titles and interests in and to (a) fee,
leasehold, mineral fee, royalty, overriding royalty, and other interests not
expressly included under Section 1.2. above; (b) the right of ingress and egress
over, across, under and through the Assets for the purpose of mining, drilling,
exploring, operating, holding, producing and developing the fee, fee mineral,
royalty interests and
4
<PAGE> 9
leasehold interests reserved and retained by Seller for oil, gas, minerals and
other hydrocarbon substances and other lawful substances; (c) seismic, geologic
and geophysical records, information, and interpretations relating to the
Assets, subject to Section 1.2(b)(9) above; (d) any and all records which
consist of previous, contemporaneous or subsequent offers, discussions, or
analyses associated with the purchase, sale or exchange of the Assets or any
part thereof, proprietary or interpretive information, reserve data, internal
communications, personnel information (not related to the personnel to whom
Purchaser offers employment under Section 13.20 hereof), tax information,
information covered by a non-disclosure obligation and information or documents
covered by a legal privilege; (e) originals or copies of Records retained by
Seller; (f) all claims, rights and causes of action against third parties,
asserted and unasserted, known and unknown relating to the period prior to the
Effective Time relating to the Assets, except to the extent and only to the
extent that such claims, rights and causes of action have been or are then being
offset against actual losses incurred by Purchaser as a result of, vested and
existing pre-Effective Time liabilities or obligations assumed and fulfilled by
Purchaser pursuant to the terms of this Agreement at the time Seller receives
the benefit related to such claim, right or cause of action , relating to the
same affected Assets but to the extent and only to the extent the liabilities or
obligations are those to which such claims, rights and causes of action directly
relate or pertain; (g) to the extent Seller has reserved interests, including
deep rights, or to the extent Seller currently uses the following rights for its
operations in the area of the Subject Properties, Seller reserves concurrent
interests in any and all applicable easements, rights of way, contracts,
licenses, permits, or other rights relating to the reserved interests or
interests in the area; (h) communication equipment (other than communication
towers and related equipment located at the Gas Plants or as listed on Exhibit
"A" hereto), leased or rented equipment or facilities, office equipment,
computer equipment and software; (i) all pipelines, gas plants, equipment, and
attendant agreements, and rights of way owned or operated by Seller or by any
Affiliate of Seller which are not listed on Exhibit "A" (except the Gas Plants);
(j) all oil or gas or other hydrocarbons produced before the Effective Time or
in storage at the Effective Time; (k) any refund of taxes or other costs or
expenses borne by Seller or Seller's predecessors in title attributable to the
period of time prior to the Effective Time,except to the extent and only to the
extent that such claims, rights and causes of action have been or are then being
offset against actual losses incurred by Purchaser as a result of, vested and
existing pre-Effective Time liabilities or obligations assumed and fulfilled by
Purchaser pursuant to the terms of this Agreement at the time Seller receives
the benefit related to such claim, right or cause of action , relating to the
same affected Assets but to the extent and only to the extent the liabilities or
obligations are those to which such claims, rights and causes of action directly
relate or pertain; (l) any and all proceeds from the settlements or final
adjudication of contract disputes with lessors, co-owners or operators of the
Assets or with purchasers, gatherers, processors or transporters of hydrocarbons
from or attributable to the Assets, including, without limitation, settlement of
royalty, take-or-pay, pricing or volume adjustment disputes, insofar as said
proceeds are attributable to periods of time prior to the Effective Time,except
to the extent and only to the extent that such claims, rights and causes of
action have been or are then being offset against actual losses incurred by
Purchaser as a result of, vested and existing pre-Effective Time liabilities or
obligations assumed and fulfilled by Purchaser pursuant to the terms of this
Agreement at the time Seller receives the benefit related to such claim, right
or cause of action , relating to the same affected Assets but to the extent and
only to the extent the liabilities or obligations are those to which such
claims, rights and causes of action directly relate or pertain;
5
<PAGE> 10
(m) Excluded Minerals; and (n) items or interests excluded or removed elsewhere
in or pursuant to this Agreement ((a) through (n), collectively, the "Excluded
Assets" or, individually, an "Excluded Asset").
1.4. Defined Terms.
"Acceptable Title" has the meaning as set forth in Section 3.1.
"Act" means the Securities Act of 1933, as amended.
"Adjusted Purchase Price" has the meaning as set forth in Section
2.1.
"Affiliate" or "Affiliates" means, as to any Person each other
Person that directly or indirectly (through one or more
intermediaries or otherwise) controls, is controlled by, or is
under common control with, such Person. For purposes of this
Agreement, Purchaser is not and shall not be an Affiliate of
Seller or any Person comprising Seller.
"Agents" has the meaning as set forth in Section 3.3.
"Allocated Values" has the meaning as set forth in Section 2.5.
"Assets" has the meaning as set forth in Section 1.2.
"Assignment and Bill of Sale" means an assignment and bill of sale
in substantially the form attached hereto as Exhibit "B-1" and
incorporated herein.
"Business Day" or "Business Days" means a day or days excluding
Saturdays, Sundays and U.S. legal holidays.
"Casualty Loss" has the meaning as set forth in Section 12.3.
"Claims" has the meaning as set forth in Section 9.2(a).
"Closing" means the consummation of the purchase and sale of the
Assets by Purchaser and Seller as contemplated in this Agreement.
"Closing Date" has the meaning as set forth in Section 8.1.
"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Confidentiality Agreement" has the meaning as set forth in
Section 13.2.
"Conveyance" means a conveyance in substantially the form attached
hereto as Exhibit "B-2" and incorporated herein.
6
<PAGE> 11
"Defect" and "Defects" have the meanings as set forth in Section
3.4.
"Deposit" has the meaning as set forth in Section 2.4.
"Effective Time" has the meaning as set forth in Section 1.1.
"Environmental Defect" has the meaning as set forth in Section
3.3.
"Environmental Laws" means any and all Laws that relate to: (a)
the prevention of pollution or environmental damages, (b) the
abatement, remediation or elimination of pollution or
environmental damage, (c) the protection of the environment
generally, and/or (d) the protection of Persons or property from
actual or potential exposure (or the effects of exposure) to
pollution or environmental damage; including without limitation,
the Clean Air Act, as amended, the Clean Water Act, as amended,
the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, the Federal Water Pollution
Control Act, as amended, the Resource Conservation and Recovery
Act of 1976, as amended, the Safe Drinking Water Act, as amended,
the Toxic Substance and Control Act, as amended, the Superfund
Amendments and Reauthorization Act of 1986, as amended, the
Hazardous and the Solid Waste Amendments Acts of 1984, as amended,
and the Oil Pollution Act of 1990, as amended.
"Examination Period" has the meaning as set forth in Section 3.3.
"Excluded Assets" has the meaning as set forth in Section 1.3.
"Execution Date" is the date on which the last of the Parties
hereto signs this Agreement.
"Final Accounting" has the meaning as set forth in Section
13.17.B.
"Final Accounting Date" has the meaning as set forth in Section
13.17.B.
"Gas Plants" has the meaning as set forth in Section 1.2(h).
"HSR Act" has the meaning as set forth in Section 13.19.
"Imbalances" has the meaning as set forth in Section 9.1.
"Knowledge of Seller" [or Purchaser, as the case may be] or "to
the best of Seller's knowledge and belief " [or Purchaser, as the
case may be ]or words of similar import shall mean only the then
existing actual knowledge of any president or vice president
(without obligation of further inquiries) of Seller [or Purchaser,
as the case may be] and is not intended to imply that such party
in fact has actual knowledge of the subject matter to which such
terms apply.
7
<PAGE> 12
"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.
"NORM" has the meaning as set forth in Section 9.2(b).
"Notice of Defects" has the meaning as set forth in Section 3.4.
"Notice Period" has the meaning as set forth in Section 9.2.(c).
"Occurrence" has the meaning as set forth in Section 3.5 (c)(7).
"Parties" means, collectively, Purchaser and Seller.
"Party" means either Purchaser or Seller.
"Permitted Encumbrances" has the meaning as set forth in Section
3.2.
"Person" means any individual, corporation, partnership,
association, join stock company, trust or trustee thereof, estate
or executor thereof, unincorporated organization or joint venture,
court or other governmental unit or other agency or subdivision
thereof, or any other legally recognizable entity.
"Preferential Rights" has the meaning as set forth in Section
3.2(c).
"Preliminary Settlement Statement" has the meaning set forth in
Section 13.17.A.
"Property" is the real property or properties, surface and
subsurface, in which and on which the Assets, or any portion
thereof, are located or pertain and includes the land, if any,
described or referred to in Exhibit "A" hereto.
"Property Taxes" has the meaning as set forth in Section 11.1.
"Purchase Price" has the meaning as set forth in Section 2.1.
"Purchaser Shares" has the meaning as set forth in Section 2.1(c).
"Records" has the meaning as set forth in Section 1.2(b).
"Related Agreements" has the meaning as set forth in Section 9.9.
"Representative" and "Representatives" have the meaning as set
forth in Section 9.2(e).
8
<PAGE> 13
"Sale Interest" has the meaning as set forth in Section 1.2(a).
"Sellers Direct Ownership" is only that period from and after the
time at which Seller actually acquired the affected interest in
the Affected Asset to the Effective Time notwithstanding that the
interest may have been acquired, by merger, consolidation or other
similar transaction, and it expressly excludes any period of
ownership by a merged, consolidated or other predecessor or
liability of any such predecessor prior to such time
notwithstanding that Seller may have assumed such liability of
such predecessor.
"Subject Properties" has the meaning as set forth in Section
1.2(a).
"Suspense Funds" has the meaning as set forth in Section 9.1.
"Title Defect" has the meaning as set forth in Section 3.4 (a).
"Wells" has the meaning as set forth in Section 1.2(b).
ARTICLE 2. CONSIDERATION
2.1 Consideration. As consideration for this Agreement, Purchaser shall
pay to Seller $245,000,000.00 (US$) (the "Purchase Price"), as may be adjusted
pursuant hereto (the "Adjusted Purchase Price"). The Purchase Price shall be
increased at the annual rate of ten (10%) per cent compounded daily until
Closing, if Closing has not occurred on or before June 29, 1999, under the
conditions as provided in Section 8.3. The components of the Purchase Price are
as follows:
a) $215 million (US$), to be paid in cash at Closing, as
adjusted pursuant to this Agreement;
b) 2,307,693 shares of 6% convertible preferred stock, of
Purchaser, to be delivered to Seller at Closing, as more fully
described in Schedule 2.1(c) and subject to terms and
conditions as more fully described in Schedule 2.1(c), which
shares shall be deemed by the Parties to have a value of $30
million (US$) (the "Preferred Shares").
2.2 Manner of Payment. At Closing, except as provided in the following
Section 2.3, Purchaser shall pay to Seller or Seller's designee the cash payment
component of the Purchase Price to be paid in accordance with Section 2.1(a) by
wire transfer of immediately available funds. Seller will provide Purchaser the
necessary wiring instructions no later than two (2) business days prior to
Closing.
2.3 Like Kind Exchange Option. Seller and Purchaser hereby agree that
Seller, in lieu
9
<PAGE> 14
of the sale of the Assets to Purchaser for the 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 qualified intermediary in order to
accomplish the transactions contemplated hereby in a manner that will comply,
either in whole or in part, with the requirements of a like kind exchange
pursuant to Section 1031 of the Code. In the event Seller assigns its rights
under this Agreement pursuant to this Section 2.3, Seller agrees to notify
Purchaser in writing of such assignment before Closing. If Seller assigns its
rights under this Agreement, Purchaser agrees to (i) consent to Seller's
assignment of its rights in this Agreement, (ii) deposit the Adjusted Purchase
Price with the qualified escrow or qualified trust account designated by Seller
at Closing, and (iii) take such further actions, at Seller's cost, as are
reasonably required to effectuate the transactions contemplated hereby pursuant
to Code Section 1031, but, in so acting, Purchaser shall have no liability to
any Party in connection with such actions. All risks associated with any like
kind exchange and compliance thereof with applicable laws, rules and regulations
shall be the sole responsibility of Seller, and Seller agrees to indemnify and
hold Purchaser harmless from and against all costs, expenses, liabilities and
obligations which arise as a result of Purchaser's agreement contained in this
Section 2.3.
2.4 Deposit. Upon the execution hereof Purchaser shall pay to Seller
$10,000,000.00 (US$) and, on or before June 7, 1999, Purchaser shall pay to
Seller an additional $5,000,000.00 (US$) totaling $15,000,000.00 (US$)so paid to
Seller (the "Deposit"). Except as provided in this Agreement, the Deposit will
be applied to the Purchase Price at Closing and is not refundable. If Closing
occurs, the Deposit and any interest earned thereon through June 29, 1999 shall
be applied to reduce the cash portion of the Adjusted Purchase Price. Interest
earned after June 29, 1999 attributable to the Deposit shall be the sole
property of Seller, regardless of whether or not Closing occurs. If Closing does
not occur, the Deposit shall be applied as provided in Section 10.2. Until
disposed of in accordance with the terms of this Agreement or until termination
of this Agreement, the Deposit shall be held and invested by Seller in
marketable obligations issued or unconditionally guaranteed by the United States
of America or an instrumentality or agency thereof and entitled to the full
faith and credit of the United States of America, or in money market and/or
mutual funds that invest solely in such obligations.
2.5 Allocations. Purchaser shall make a good faith allocation of the
Purchase Price among the Assets, and such allocation shall be set forth on
Exhibit A-2 (the form of which is attached hereto) which shall be completed by
Purchaser and delivered to Seller on or before 5:00 p.m. May 20, 1999, whereupon
it shall be incorporated in, and made a part of, this Agreement (the "Allocated
Values"). Purchaser agrees that its allocations pursuant to this Section 2.5
shall be reasonable and based on the information available to Purchaser on the
Execution Date and evaluation standards or methodologies consistent with those
used in the oil and gas industry for similar properties. Purchaser shall provide
Seller, in reasonable detail, the methodologies and standards behind and
supporting its allocations hereunder within three (3) Business Days after the
written request of Seller. If additional or more detailed allocations are needed
for preferential purchase rights or other reasons, Purchaser shall provide such
additional allocations within five (5) days after any such request by Seller,
each of which allocations shall also be an Allocated Value.
10
<PAGE> 15
ARTICLE 3. DEFECTS
3.1. Definition of Acceptable Title. As used herein, the term
"Acceptable Title" shall mean, (i) as to the Gas Plants, such right, title and
interest expressed on Exhibit "A" hereto that is free and clear of all liens,
claims and encumbrances, except for "Permitted Encumbrances" (provided however,
that the presence of a preferential right to purchase provision shall not be
considered a Defect); and (ii) as to the Subject Properties, such right, title
and interest that, as to the currently producing intervals in the Wells
(regardless of any change in the productive status of any Well), (a) entitles
Seller to receive not less than the net revenue interest set forth in Exhibit
"A" hereto of all oil, gas and associated liquid and gaseous hydrocarbons
produced, saved and marketed from the currently producing intervals of the
respective Wells, (b) obligates Seller to bear costs and expenses relating to
the maintenance, development, and operation of the Wells relative to the
respective Subject Properties in a percentage not greater than the working
interest set forth in Exhibit "A" hereto for each, unless there is a
corresponding increase in the applicable net revenue interest, and (c) except
for Permitted Encumbrances, is free and clear of all liens, claims and
encumbrances; provided, however that the presence of a preferential right to
purchase provision shall not be considered to be a Defect . Evidence that Seller
receives its full share of proceeds from a purchaser or third party operator
(not under a 100% or other division order requiring Seller to further distribute
proceeds to third parties) for an Asset creates a rebuttable presumption that no
Title Defect exists with respect to the Asset. As provided herein, Purchaser
must notify Seller in writing if Purchaser determines or discovers that Seller's
net revenue interest or working interest is greater than that shown on Exhibit
"A" hereto. Purchaser acknowledges and agrees that any net revenue interests and
working interests reflected on Exhibit "A" hereto are for the convenience of
Seller and Purchaser and included solely for the purpose of determining
Acceptable Title prior to Closing; Seller does not and shall not represent or
warrant that the Sale Interest is equal to any such interests in any respect,
but agrees that (i) for purposes of determining Defects prior to Closing, with
respect to those Subject Properties listed on Exhibit "A" hereto with "0.0000"
"APO" interests, the "APO" interests shall be deemed to be the same as the
corresponding "BPO" interests, and (ii) Purchaser may assert as a Title Defect
any matter reasonably expected, as to existing production, to reduce the net
revenue interest assigned to such Subject Property or Well or any matter
reasonably expected, as to existing production, to increase the working interest
assigned to such Subject Property and Well unless there is a corresponding
increase in the applicable net revenue interest.
3.2. Definition of Permitted Encumbrances. As used herein, the term
"Permitted Encumbrances" shall mean the following items, provided none of the
following items shall operate, as of Closing, to increase the working interest
of Seller as set forth in Exhibit "A" hereto for any of the Subject Properties,
without a corresponding increase in the applicable net revenue interest, or
decrease the net revenue interest of Seller set forth in Exhibit "A" hereto for
any of the Subject Properties:
(a) lessors' royalties, overriding royalties, production payments,
reversionary interests and similar burdens;
(b) division orders and sales contracts;
11
<PAGE> 16
(c) preferential rights to purchase ("Preferential Rights");
(d) rights to consent to assignment of all or any of the Assets;
(e) materialman's, mechanic's, repairman's, employee's,
contractor's, operator's, tax, and other similar liens,
assessments or charges arising in the ordinary course of
business for obligations that are not yet due or delinquent,
or if delinquent, that are being contested by Seller in good
faith in the normal course of business;
(f) rights to consent by, required notices to, filings with, or
other actions by governmental entities which are applicable to
the sale of Assets hereunder and not to a prior sale in
connection with the sale or conveyance of oil and gas
leasehold and fee estates or interests therein, which
consents, notices, filings and/or other actions are
customarily obtained after closing;
(g) easements, rights-of-way, servitudes, permits, surface leases
and other rights in respect of surface operations affecting
the Assets;
(h) rights reserved to or vested in any governmental, statutory or
public authority to control or regulate any of the Assets in
any manner, and all applicable laws, rules and orders of any
governmental authority affecting the Assets;
(i) operating agreements, unit agreements, unit operating
agreements, pooling agreements and pooling designations
affecting the Subject Properties which are of public record or
contained in the Records or otherwise available to Purchaser
and all actions taken or operations occurring in the normal
course of business pursuant to such instruments;
(j) Defects that Purchaser may have expressly waived in writing or
which are deemed to have been waived pursuant to Section 3.5;
(k) all conveyances, reservations and exceptions of public record
or contained in the 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; and
(l) all other liens, charges, encumbrances, contracts, agreements,
instruments, obligations, defects and irregularities affecting
the Assets which are not such as to interfere materially with
the operation or use of the affected Subject Properties or
materially reduce the value thereof.
3.3. Environmental and Physical Assessment. Subject to the terms
hereof, Seller's customary Site Access Agreement (if Seller requests Purchaser
to execute same) and the Confidentiality Agreement, Purchaser shall have the
right at its sole risk and expense to make an environmental and other physical
assessment of the Assets during the period beginning on the Execution Date and
ending at 5:00 p.m. on the 15th Business Day prior to the Closing Date (the
12
<PAGE> 17
"Examination Period"). If Purchaser desires to undertake an environmental
assessment, both the consultant(s) and the scope of the proposed assessment,
including testing protocols, must be acceptable to Seller before work may begin;
however, Seller will not unreasonably withhold its acceptance and will respond
to Purchaser's request in this regard by 5:00 p.m. the second Business Day after
such request. During Seller's normal business hours and subject to the terms of
this Agreement, Purchaser and its employees, contractors, lenders, and
consultants ("Agents") shall have the right to enter upon the Assets operated by
Seller and all buildings and improvements thereon (and Seller shall use
reasonable efforts to obtain permission for Purchaser to gain access to Assets
operated by others, but such access and the terms of such access cannot be
guaranteed)to inspect the same, conduct soil and water tests and borings, and
generally conduct such tests, examinations, investigations and studies as may be
reasonably necessary or appropriate for the preparation of appropriate
environmental and other reports relating to the Assets, their condition, and the
presence of wastes or contaminants. Purchaser shall provide Seller with 48 hours
prior notice of such activities related to the Assets, regardless of who
operates the same, and Seller shall have the right to (i) witness all such tests
and investigations, (ii) receive an equal distribution of all samples taken by
Purchaser or its Agents, and (iii) prohibit such tests and investigations which
it believes could materially damage its properties or business interests. Entry
onto the Assets by Purchaser or its Agents will be subject to third-party
restrictions, if any, and to Seller's safety, industrial hygiene, and drug and
alcohol policies and guidelines and Purchaser will be responsible for assuring
compliance with same by itself and its Agents. In accordance with the terms of
the Confidentiality Agreement, the Purchaser and its Agents shall keep any data
or information acquired by all such examinations and the results of all analyses
of such data and information strictly confidential and not disclose any of the
same to any Person unless otherwise required by law or regulation and then only
after written notice to Seller of the need for disclosure and the identity of
all intended recipients. Seller hereby grants Purchaser access to the Assets to
conduct its environmental and other physical assessment upon the condition that,
PURCHASER HEREBY INDEMNIFIES, DEFENDS AND HOLDS SELLER AND ITS AFFILIATES AND
THEIR RESPECTIVE REPRESENTATIVES, INCLUDING WITHOUT LIMITATION, ANY PERSON THAT
HAS SERVED AS A DIRECTOR, OFFICER OR EMPLOYEE THEREOF, HARMLESS FROM AND AGAINST
ANY AND ALL CLAIMS OF WHATEVER NATURE FOR OR RELATED TO PERSONAL INJURY, DEATH
OR PROPERTY DAMAGE ARISING OUT OF OR AS A RESULT OF THE ACTIVITIES BY OR ON
BEHALF OF PURCHASER OR ITS AGENTS ON OR RELATED TO THE ASSETS IN CONDUCTING SUCH
ENVIRONMENTAL AND PHYSICAL ASSESSMENTS OR THE EXERCISE OF ITS RIGHTS UNDER THIS
SECTION 3.3. If, and only if, during the Examination Period, Purchaser
determines in good faith that there is an Environmental Defect which directly
arises from or is directly related to the Subject Properties or the ownership or
operation thereof and the environmental condition comprising the Environmental
Defect was not disclosed to or known by Purchaser on or before the Execution
Date, Purchaser may include notice of such Defect in any Notice of Defects
delivered hereunder; provided, that any such matter not included in a Notice of
Defects shall be and hereby is forever waived by Purchaser. "Environmental
Defect" means a condition or circumstance which constitutes a violation of
applicable Environmental Laws on the Execution Date.
13
<PAGE> 18
3.4. Notice of Defects. If any matter is discovered by Purchaser that,
in Purchaser's reasonable, good faith opinion, would (a) cause any of the Sale
Interest not to be Acceptable Title (a "Title Defect"), (b) constitute an
Environmental Defect (subject to Section 3.3); [but as to (a) above, only to the
extent that each such matter exceeds a value of $15,000.00 and for, and only
for, (b) above individual defects must exceed a minimum of $100,000.00)
individually, a "Defect", and collectively, the "Defects", then if, and only if,
the total value of all Defects as to Section 3.4 (a) exceeds five percent (5%)
of the Purchase Price (the "Title Threshold") or Defects as to Section 3.4 (b)
exceeds five percent (5%) of the Purchase Price, (the "Environmental Threshold")
Purchaser may provide written notice (a "Notice of Defects") thereof actually
delivered to Seller not later than noon, on the first Business Day after the end
of the Examination Period. "Title Defect" does not include (A) a lien or
encumbrance in the form of a judgment secured by a supersedeas bond or other
security approved by the court issuing the order; (B) the loss of lease acreage
between the Execution Date and the Closing Date, because the lease term expires
and or (C) the decline or loss of production from any Well. The Title Threshold
and the Environmental Threshold are collectively the "Thresholds". A Notice of
Defects shall specifically identify the Defect and all positive adjustments to
the net revenue interest or working interest and include (i) Purchaser's
purported value of each specific Defect which value, as to each Subject Property
or Asset, collectively for all Defects for that Subject Property or Asset,
cannot exceed the allocated value of the affected Subject Property or Asset as
set out on Exhibit "A" hereto, (ii) an identification of each affected Asset,
(iii) Purchaser's basis for determining the existence and value of such Defect,
together with copies of all associated reports, title opinions, data, curative
information, evidence, valuations, assessments, conclusions and supporting
calculations, and (iv) Purchaser's statement of steps reasonably necessary to
cure each such Defect to its reasonable satisfaction, all of which shall be kept
strictly confidential by Purchaser and its Agents prior to Closing, except to
the extent required by law, regulation or order of any court or other
governmental authority or as may be necessary to address Defects identified in a
Notice of Defects. IN ADDITION TO PURCHASER'S OTHER OBLIGATIONS AND
RESPONSIBILIITES UNDER THIS AGREEMENT, PURCHASER, FOR THE PURPOSES OF THIS
AGREEMENT, SHALL BE SOLELY RESPONSIBLE FOR EACH AND EVERY DEFECT BELOW THE LEVEL
OF THE THRESHOLDS. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS
ARTICLE 3, THE DEFINITIONS OF DEFECT, TITLE DEFECT, AND/OR ENVIRONMENTAL DEFECT
(OR ANY PLURAL THEREOF) EXCLUDES ANY AND ALL MATTERS, ISSUES, AND/OR DEFECTS
RAISED BY OR ON BEHALF OF COSTILLA ENERGY, INC., IN THAT "NOTICE OF DEFECTS"
DATED WEDNESDAY, OCTOBER 28, 1998, DELIVERED TO PIONEER NATURAL RESOURCES USA,
INC., ON OCTOBER 29, 1998, (A COPY OF WHICH HAS BEEN PROVIDED TO PURCHASER) AND
ALL SUPPORTING TITLE OPINIONS, ENVIRONMENTAL REPORTS, SUMMARIES OR OTHER
SUPPORTING DOCUMENTS PROVIDED AS A PART THEREOF OR THEREWITH AND SUCH MATTERS,
ISSUES AND/OR DEFECTS SHALL NOT BE INCLUDED IN ANY NOTICE OF DEFECTS HEREUNDER
OR OTHERWISE AND ARE HEREBY FOREVER WAIVED BY PURCHASER FOR ALL PURPOSES EXCEPT
THAT THE ENVIRONMENTAL THRESHOLD SHALL BE REDUCED BY THE AMOUNT OF $1.5 MILLION
TO REFLECT AN AGREED CREDIT FOR ENVIRONMENTAL DEFECTS RAISED BY COSTILLA ENERGY,
INC.
14
<PAGE> 19
3.5. Remedy for Defects. In Seller's sole discretion, but without
obligation, it may, at its sole cost, take such steps it deems appropriate or as
are identified by Purchaser's Notice pursuant to Section 3.4 (iv) above or as
are reasonably necessary to cure or minimize Defects identified in a Notice of
Defects. In addition to performing curative, Seller, at its sole option and upon
written notice to Purchaser, may remove the affected Subject Property from this
Agreement and adjust the Purchase Price by the allocated value for the removed
Subject Property unless Purchaser waives the subject Defect(s) by written notice
within two (2) days after the date of Seller's notice to Purchaser hereunder. In
the event Seller is unable or elects not to cure or minimize any or all such
Defects and if any examination by Purchaser or Seller results in a finding that
the interest of Seller is greater than stated in Exhibit "A" hereto and such
increase (which such increase must, if found by Purchaser, be identified in such
Notice to Seller) serves to increase the value of the Subject Properties or
component of the Assets, Seller and Purchaser shall meet and discuss the
validity of each such Defect claim and the need for and the amount of any
mutually acceptable Purchase Price adjustment.
(a) Title Defect adjustments shall be made with reference (as a
maximum) to the allocated value for each affected Asset as set
forth in Exhibit "A" hereto and with the following criteria:
(1) If the Defect is based on Seller's owning a different
net revenue interest than that shown on Exhibit "A",
then the Defect value will be the absolute value of
the number determined by calculating a ratio of
change between the Seller's net revenue interest
shown on Exhibit "A" and the actual or agreed
interest by dividing the actual or agreed interest by
the net revenue interest shown on Exhibit "A" then
subtracting the quotient from 1.00 and multiplying
the results times the Purchaser's allocated value.
(2) If the claim is based on an obligation or burden that
is liquidated in amount, then the adjustment will be
the sum agreed by the Parties necessary to remove the
obligation or burden from the affected Asset.
(3) If the claim is based on an obligation or burden that
is not liquidated, but can be estimated with
reasonable certainty, the adjustment will be the sum
agreed by the Parties necessary to compensate
Purchaser on the Closing Date for the adverse
economic effect on the affected Asset.
(i) Subject to clause (ii) below, if the amount of the adjustment
for each Defect cannot be determined based on the above
criteria, and if the parties cannot otherwise agree on the
amount of an adjustment, Seller may, at its sole option and
upon written notice to Purchaser, either:
(1) terminate this Agreement and refund the Deposit and
all accrued interest thereon subject to Section 10.2;
(2) remove the affected Asset from this Agreement and
adjust the Purchase Price by the allocated value for
the Asset; or
15
<PAGE> 20
(3) elect to resolve the dispute under the arbitration
provisions of this Agreement.
(ii) The Purchase Price will be adjusted only if the sum (i.e.
offsetting of increases and decreases) of all adjustments
under this Section 3.5(a) (not otherwise resolved hereunder)
as to Title Defects exceed, and then only to the extent
exceeding, the Title Threshold and as to Environmental Defects
only to the extent exceeding the Environmental Threshold. If
the sum of all agreed adjustments for Title Defects or
Environmental Defects, separately, would result in the
Purchase Price being reduced by more than ten (10) percent, or
twenty (20) percent collectively, either Purchaser or Seller
may, upon written notice to the other Party, terminate this
Agreement, and in which case Seller shall refund the Deposit
and all interest accrued thereon, subject to Section 10.2.
(b) For environmental matters, Seller will have thirty days after
receipt of Purchaser's Notice of Defects, or until five days
before the Closing Date, if it determines that an
Environmental Defect (whether material or not) may exist with
respect to an Asset, to elect any of the following:
(1) adjust the allocation for an Asset by a mutually
acceptable amount reflecting Seller's proportionate
share, based on its working interest, of the cost
reasonably estimated to remediate the Environmental
Defect (in the manner described below) affecting the
Assets;
(2) remove the affected Asset from this Agreement and
adjust the Purchase Price by the allocation for the
affected Asset;
(3) remedy, or agree to remedy, the Environmental Defect
as provided below; or
(4) terminate this Agreement and refund the Deposit and
all accrued interest thereon, subject to Section
10.2.
Seller may delay Closing until the end of this thirty-day
period, which delay will be in addition to and under the same
terms as Seller's right to delay Closing under Section 8.1.
If the Purchase Price is adjusted because of an Environmental
Defect, the amount of the adjustment will be the cost to
remediate the Environmental Defect, but only to the level
required by the Environmental Laws in effect on the Execution
Date but not to exceed the allocated value for the affected
Asset(s). Seller may require Purchaser to remit the full
allocation at Closing, without adjustment for the
Environmental Defect, but if it does so, it will pay the
amount of the adjustment to Purchaser when the remediation
performed by Purchaser is complete under applicable law. If
the cost to remediate exceeds the amount of the adjustment,
16
<PAGE> 21
Purchaser will pay the additional costs to remediate the
Environmental Defect as required by applicable law.
(c) If Seller elects or agrees with Purchaser to remediate an
Environmental Defect or is required by governmental or
regulatory agency to remediate an Environmental Defect, the
following will govern the remediation:
(1) Seller will be responsible for all negotiations and
contacts with federal, state, and local agencies and
authorities with regard to the Environmental Defect
or remediation. Purchaser may not make any
independent contacts with agency, authority, or other
third party with respect to the Environmental Defect
or remediation and will keep all information
regarding the Environmental Defect confidential,
except in each instance to the extent required by
applicable law.
(2) Seller will remediate the Environmental Defect to the
level agreed upon by Seller and Purchaser, but in no
event will Seller be required to remediate the
Environmental Defect beyond the level required by the
Environmental Laws in effect on the Execution Date.
(3) Purchaser will grant and warrant access to the Assets
and entry on the Property after Closing to Seller,
its Representatives, and third parties conducting
assessments or remediation, to the extent and as long
as necessary to conduct and complete the assessment
or remediation work, to remove equipment and
facilities, and to perform any other activities
reasonably necessary in connection with assessment or
remediation.
(4) Purchaser will use its best efforts not to interfere
with Seller's ingress or egress or assessment or
remediation activities. Seller will make reasonable
efforts to perform the work so as to minimize
disruption to Purchaser's business activities and to
the Assets and the Property.
(5) Seller will continue remediation of the Environmental
Defect until the first of the following occurs:
(a) The appropriate governmental authorities
provide written notice to Seller or
Purchaser that no further remediation of the
Environmental Defect is required; or
(b) Seller determines that the Environmental
Defect has been remediated to the level
required by the Environmental Laws or as
agreed by the Parties.
Upon the occurrence of either (a) or (b) above,
Seller will notify Purchaser that remediation of the
Environmental Defect is complete and provide a copy
of the notification described in clause (a) above, if
applicable. Upon delivery of Seller's notice, Seller
will be released, without further action or
17
<PAGE> 22
documentation, from all liability and have no further
obligations under any provisions of this Agreement in
connection with said Environmental Defect.
(6) Until Seller completes remediation of an
Environmental Defect, Seller and Purchaser will each
notify the other of any pending or threatened Claim,
action, or proceeding by any authority or private
party that relates to or would affect the
environmental condition, the assessment, or the
remediation of the affected Assets or Property.
(7) After delivery of possession or Closing (whichever
occurs first) and before Seller has completed
remediation of an Environmental Defect, if a leak,
spill, or discharge of any material or substance
("Occurrence") occurs on the Property or Assets, or
any part of them, Purchaser will promptly notify
Seller and act promptly to minimize the effects of
the Occurrence. If a spill, leak or discharge occurs
and Seller determines that it may affect that area
where Seller is conducting remediation or assessment,
Purchaser will hire a consultant (who must be
acceptable to Seller) to assess the effect of the
occurrence on the environmental condition of the
Property and Seller's remediation work and the cost
of the additional work required as the result of the
Occurrence. Except to the extent the Occurrence was
caused by Seller, Purchaser will be responsible for
the incremental cost of remediating the impact of the
Occurrence. If Seller's remediation is expanded to
incorporate remediation of the Occurrence, Purchaser
will promptly pay its share of costs and expenses to
Seller as the work is performed, within thirty days
of receipt of invoices for the work (with supporting
documentation). Payments not made timely will bear
interest at a rate of twelve percent per annum or the
maximum lawful rate, whichever is less, compounded
daily from the date of Purchaser's receipt of the
invoice until paid.
If the cost of the additional work equals or exceeds
the cost which would have been incurred but for the
Occurrence, Seller will pay Purchaser the cost that
would have been incurred by Seller to complete the
remediation but for the Occurrence. As consideration
for this payment, Purchaser will accept the
environmental condition of the Property and Assets as
they exist on the date of the payment, assume full
responsibility for remediating the Property and
Assets and related off-site contamination in
accordance with this Agreement, and agree to release,
indemnify, hold harmless, and defend Seller and its
Representatives as to Claims arising from the
Occurrence to the same extent as described in Article
9.
(8) If Seller undertakes remediation as to any Assets in
which Seller's ownership was less than 100%,
Purchaser will bill the other working interest owners
for their share of the remediation expenses.
Regardless of whether Seller recoups any amount from
the other working interest
18
<PAGE> 23
owners, Purchaser will refund to Seller, within sixty
days of each Seller invoice, with documentation, any
amounts expended by Seller over the amount formerly
attributable to Seller's working interest share.
(9) If Seller will assess or remediate the Assets or
Property after Closing, the Assignment and Bill of
Sale or other recordable instrument will restate the
rights and obligations of this section.
(d) If (i) the net amount of Purchase Price adjustments mutually
agreed and/or as a result of Seller's removal of Assets
hereunder, plus the amount of any uninsured Casualty Losses
and Casualty Losses not fully covered by insurance (to the
extent of such deficiency only), plus the value of any of the
Subject Properties (with reference to the allocated value
thereof on Exhibit "A" as a maximum) to the extent taken in
condemnation or under the right of eminent domain prior to the
end of the Examination Period, or with respect to which
proceedings for such purposes shall be pending or threatened
in writing at such time, equals or exceeds twenty-five percent
(25%) of the Purchase Price, or (ii) the aggregate value of
Subject Properties subject to Preferential Rights to be
exercised at Closing equals or exceeds fifty percent (50%) of
the Purchase Price, then Seller or Purchaser may, upon written
notice to the other, terminate this Agreement, without
liability or further obligation to the other Party, subject to
Section 10.2. Seller shall have an absolute right to terminate
this Agreement upon written notice to Purchaser, without
liability or further obligation to Purchaser if the Defects
presented by Purchaser exceed ten percent (10%) of the
Purchase Price, subject to Section 10.2. Seller shall have no
obligation hereunder to Purchaser or any Person to sell,
convey, deliver or otherwise transfer all or any part of the
Assets if Purchaser or Seller terminates this Agreement
pursuant to this Section 3.6. Purchaser agrees and
acknowledges that Seller has no obligation to adjust the
Purchase Price with respect to Defects. If Closing occurs,
Purchaser shall be deemed to have forever waived and/or
assumed any and all Claims, known and unknown, arising from or
related to any and all Defects or title to or defect or other
condition of the Assets in whole or in part, including,
without limitation, whether or not identified in a Notice of
Defects, and notwithstanding the fact that Seller may not have
cured any such Defect(s) to Purchaser's satisfaction, and
Seller shall have no obligation with respect thereto.
(e) Notwithstanding any provision in this Section 3.5 to the
contrary, in the event Seller delivers a notice terminating
this Agreement pursuant to this Section 3.5, Purchaser shall
have until 5:00 p.m. on the first Business Day after receipt
of said notice to forever waive, by written notice delivered
to Seller on or before said date and time, Defects which
constitute the grounds stated for termination in said
termination notice and if Purchaser so waives said Defects and
matters the notice of termination delivered by Seller shall be
considered withdrawn.
3.6. Preferential Purchase Rights and Consents to Assign. Upon written
notification
19
<PAGE> 24
to Seller by Purchaser identifying Persons (and their addresses) holding
preferential rights to purchase affecting the Subject Properties or Gas Plants
or the right to consent with respect to any assignments required hereby, other
than such consents of governmental authorities which are usually obtained in the
normal course of business after Closing, actually received by Seller not later
than the earlier of (i) fifteen (15) days prior to the Closing Date, or (ii)
five (5) Business Days prior to the latest date prior to Closing permitted by
the subject agreement for such notice to be provided, or upon Seller's own
initiative but without any obligation to so initiate, Seller shall send notice
of this Agreement to all such Persons (y) offering to sell to each such Person
the Subject Properties or Gas Plants for which a preferential right is held on
and subject to the terms hereof and for the same allocated value for such
Subject Properties or Gas Plants reflected on Exhibit "A" hereto, or (z)
requesting, where appropriate, consent to any assignment required in connection
herewith. Notwithstanding the foregoing, Purchaser shall be ultimately
responsible for obtaining all approvals and consents from each and every
applicable Person, including, but not limited to, lessors, joint interest
owners, farmors, sublessors, assignors, grantors, co-parties to Agreements,
governmental bodies having jurisdiction, or third parties and will provide
Seller, upon request, on or before the Closing Date, except as otherwise
provided in this Agreement, with proof of each consent, approval or waiver.
Purchaser shall be entitled to review and approve the form of all such notices;
provided, that such approval shall not be unreasonably withheld or delayed. If,
prior to Closing, any of such Persons asserting a preferential purchase right
notifies Seller that it intends to consummate the purchase of the Subject
Properties or Gas Plants to which it holds a preferential purchase right
pursuant to the terms and conditions hereof, or if the period allowed for
acceptance of the notice provided by Seller has not expired or will not expire
as of Closing (subject to Seller's right to extend the date of Closing) then,
subject to clause (ii) of Section 3.6 above, such Subject Properties or Gas
Plant shall be excluded at Closing from the Assets to be conveyed to Purchaser
under this Agreement and the Purchase Price shall be reduced by the allocated
value of such Subject Properties or Gas Plants reflected in Exhibit "A" hereto;
provided, however, that if the holder of such preferential right fails to
consummate the purchase of such Subject Properties or Gas Plant before, on or
within a reasonable time after the Closing Date (taking into account the notice
or acceptance period for the right of preferential purchase and a reasonable
amount of time, as determined by Seller, to assemble documentation for such
separate sale), then Seller shall promptly so notify Purchaser, and Seller shall
sell immediately to Purchaser, and Purchaser shall purchase from Seller, for a
price equal to the allocated value of such Subject Properties or Gas Plants and
upon the other terms of this Agreement, the Subject Properties or Gas Plants to
which the preferential purchase right was asserted. All Subject Properties or
Gas Plants for which all preferential purchase rights have been waived or have
not been accepted prior to expiration after timely notice of the acceptance
period by the holder of such right, shall be sold to Purchaser at Closing
pursuant and subject to the provisions of this Agreement. If one (1) or more of
the holders of any preferential purchase rights notifies Seller subsequent to
Closing that it intends to assert its preferential purchase right, Seller shall
give notice thereof to Purchaser, whereupon Purchaser shall satisfy all such
preferential purchase right obligations of Seller to such holders including, but
not limited to, transferring the affected Assets to the holder of such rights
and shall indemnify and hold Seller, Seller's Affiliates and their respective
Representatives harmless from and against any and all Claims, liabilities,
losses, costs and expenses (including, without limitation, court costs and
reasonable attorneys' fees) in connection therewith, and Purchaser shall be
entitled to receive, upon satisfaction in full by Purchaser of all the foregoing
obligations, all proceeds received from
20
<PAGE> 25
such holders in connection with such preferential purchase rights. PURCHASER
SHALL INDEMNIFY AND HOLD HARMLESS SELLER, SELLER'S AFFILIATES AND THEIR
RESPECTIVE REPRESENTATIVES FROM AND AGAINST ANY AND ALL CLAIMS, LIABILITIES,
LOSSES, COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, COURT COSTS AND
REASONABLE ATTORNEYS' FEES) ASSERTED OR INCURRED AT ANY TIME (WHETHER BEFORE, ON
OR AFTER CLOSING) WITH RESPECT TO OR ARISING DIRECTLY OR INDIRECTLY FROM THE
CLAIMS OF ANY PERSON TO A PREFERENTIAL PURCHASE RIGHT AFFECTING ANY OF THE
ASSETS TRANSFERRED TO PURCHASER HEREUNDER.
ARTICLE 4. SELLER'S REPRESENTATIONS, WARRANTIES AND DISCLAIMERS
Seller represents and warrants to Purchaser that:
4.1. Existence. Pioneer Natural Resources USA, Inc. is a Delaware
corporation, duly organized, validly existing and in good standing under the
laws of the State of Delaware. Pioneer Resources Producing L.P. is a limited
partnership duly organized, validly existing and in good standing under the laws
of the Sate of Delaware.
4.2. Power. Seller has the requisite power and authority to enter into
and perform this Agreement and the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by Seller, and the
transactions contemplated hereby, will not (a) violate any provision of Seller's
Certificate of Incorporation or other governing documents, (b) to the best
knowledge and belief of Seller, conflict with, result in a breach of, constitute
a default (or an event that with the lapse of time or notice, or both would
constitute a default) under any agreement or instrument to which either Seller
is a party or by which either Seller is bound, (c) to the best knowledge and
belief of Seller, violate any judgment, order, ruling, or decree applicable to
either Seller and entered or delivered in a proceeding in which Seller was or is
a named party, or (d) to the best knowledge and belief of Seller, violate any
applicable law, rule or regulation.
4.3. Authorization. The execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly and validly
authorized by all requisite action on the part of Seller. This Agreement has
been duly executed and delivered on behalf of Seller, and at the Closing all
documents and instruments required hereunder to be executed and delivered by
Seller shall be duly executed and delivered. This Agreement and such documents
and instruments shall constitute legal, valid and binding obligations of Seller
enforceable in accordance with their terms subject, however, to the effect of
bankruptcy, insolvency, reorganization, moratorium and similar laws from time to
time in effect relating to the rights and remedies of creditors, as well as to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
4.4. Brokers. Seller has incurred no obligation or liability,
contingent or otherwise, for brokers' or finders' fees in respect of the matters
provided for in this Agreement which will be the responsibility of Purchaser,
and any such obligation or liability that might exist shall be the sole
obligation of Seller.
4.5. Foreign Person. Seller is not a "foreign person" within the
meaning of the Code.
21
<PAGE> 26
4.6. No Reservations. There are no reservations of Seller which affect
the Assets other than those currently of public record or identified or
referenced in this Agreement as a result thereof, including, without limitation,
other agreements by or among Seller and Purchaser or any designated Purchaser
pursuant to Section 13.5.
4.7. Permits. To the best of Seller's knowledge, Seller possesses all
material licenses, permits, certificates, orders, approvals and authorizations
necessary to own the Assets and to carry on its business as now being conducted.
4.8. Compliance with Law. To the best of Seller's knowledge, Seller is
in material compliance with all laws, ordinances, rules, regulations and orders
applicable to the Assets, including, without limitation, all environmental laws,
ordinances, rules, regulations and orders, except to the extent of any
non-compliance that is not reasonably expected to result in a material adverse
effect on the Assets.
4.9. Taxes. All ad valorem, property, production, severance, excise,
and similar taxes and assessments based on or measured by the ownership of
property or the production of hydrocarbons or the receipt of proceeds therefrom
attributable to the Assets that have become due and payable have been properly
and timely paid, except to the extent of any failure that is not reasonably
expected to result in a material adverse effect on the Assets, and except to the
extent that such taxes are due and payable but contested, protested or appealed
by Seller.
4.10. Litigation. To Seller's best knowledge and belief, no litigation,
investigation or other proceeding in which Seller (or its direct predecessor in
title) is a named party affecting any of the Assets is pending or threatened in
writing which is based upon omissions, events or occurrences prior to the date
of this Agreement, other than as disclosed on Schedule 4.10 attached hereto.
4.11. Investment Representations. Seller is acquiring the Purchaser
Shares for Seller's own account, for investment, and not with a view to, or for
resale in connection with, any distribution thereof within the meaning of the
Act. Seller is a sophisticated buyer, knowledgeable in the evaluation and
acquisition of oil and gas properties and related entities and understands that,
by acquiring an equity interest in Purchaser, Seller may be exposed to risks and
liabilities associated with the oil and gas business. Seller is engaged in the
business of exploring for and producing oil and gas as an ongoing business.
Seller is aware that ownership of the Purchaser Shares is highly speculative and
subject to substantial risks, and Seller is capable of bearing the high degree
of economic risk and burdens of the Purchaser Shares, including, but not limited
to, the possibility of the complete loss of the value thereof, the lack of a
public market and limited transferability of such shares. Seller is an
"accredited investor" as that term is used in Regulation D of the Act. At no
time was Seller presented with or solicited by or through any public promotion
or any form of advertising with respect to its acquisition of the Purchaser
Shares.
4.12. LIMITATION AND DISCLAIMER OF REPRESENTATIONS AND WARRANTIES
22
<PAGE> 27
THE EXPRESS REPRESENTATIONS AND WARRANTIES OF SELLER CONTAINED IN THIS AGREEMENT
ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER REPRESENTATIONS AND WARRANTIES,
EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, AND THE REPRESENTATIONS AND
WARRANTIES CONTAINED HEREIN SHALL TERMINATE IN ALL RESPECTS UPON CLOSING. ANY
ASSIGNMENT AND BILL OF SALE OR OTHER CONVEYANCE EXECUTED AND DELIVERED PURSUANT
HERETO SHALL BE: (a) WITHOUT ANY WARRANTY OR REPRESENTATION OF TITLE, EITHER
EXPRESS, IMPLIED, STATUTORY OR OTHERWISE; (b) WITHOUT ANY EXPRESS, IMPLIED,
STATUTORY OR OTHER WARRANTY OR REPRESENTATION AS TO THE CONDITION, QUANTITY,
QUALITY, FITNESS FOR A PARTICULAR PURPOSE, CONFORMITY TO MODELS OR SAMPLES OF
MATERIALS OR MERCHANTABILITY OF ANY OF THE ASSETS OR THEIR FITNESS FOR ANY
PURPOSE; AND (c) WITHOUT ANY OTHER EXPRESS, IMPLIED, STATUTORY OR OTHER WARRANTY
OR REPRESENTATION WHATSOEVER. IN ADDITION, SELLER MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AS TO THE ACCURACY OR
COMPLETENESS OF ANY DATA, REPORTS, RECORDS, PROJECTIONS, INFORMATION OR
MATERIALS NOW, HERETOFORE OR HEREAFTER FURNISHED OR MADE AVAILABLE TO PURCHASER
IN CONNECTION WITH THIS AGREEMENT OR THE CONTEMPLATED TRANSACTIONS, INCLUDING,
WITHOUT LIMITATION, ANY DESCRIPTION OF THE ASSETS, PRICING ASSUMPTIONS, OR
QUALITY OR QUANTITY OF HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE TO THE ASSETS
OR THE ABILITY OR POTENTIAL OF THE ASSETS TO PRODUCE HYDROCARBONS OR THE
ENVIRONMENTAL CONDITION OF THE ASSETS OR PROPERTY OR ANY OTHER MATTERS CONTAINED
IN CONFIDENTIAL INFORMATION OR ANY OTHER MATERIALS FURNISHED OR MADE AVAILABLE
TO PURCHASER BY SELLER OR BY SELLER'S REPRESENTATIVES. ANY AND ALL SUCH DATA,
RECORDS, REPORTS, PROJECTIONS, INFORMATION AND OTHER MATERIALS FURNISHED BY
SELLER OR BY SELLER'S REPRESENTATIVES OR OTHERWISE MADE AVAILABLE TO PURCHASER
OR PURCHASER'S REPRESENTATIVES ARE PROVIDED TO OR FOR THE BENEFIT OF PURCHASER
AS A CONVENIENCE, AND SHALL NOT CREATE OR GIVE RISE TO ANY LIABILITY OF OR
AGAINST SELLER, SELLER'S AFFILIATES OR THEIR RESPECTIVE REPRESENTATIVES. ANY
RELIANCE ON OR USE OF THE SAME SHALL BE AT PURCHASER'S SOLE RISK. THE
ASSIGNMENTS AND BILLS OF SALE OR OTHER CONVEYANCES TO BE DELIVERED BY SELLER AT
CLOSING SHALL EXPRESSLY SET FORTH THE LIMITATIONS AND DISCLAIMERS OF
REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS PARAGRAPH.
ARTICLE 5. REPRESENTATIONS, WARRANTIES AND
COVENANTS OF PURCHASER
Purchaser represents and warrants to and covenants with Seller that:
23
<PAGE> 28
5.1. Existence. Purchaser is a Delaware corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
5.2. Power. Purchaser has the requisite power and authority to enter
into and perform this Agreement and the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by Purchaser, and the
transactions contemplated hereby, will not (a) violate any provision of
Purchaser's certificate of incorporation , bylaws or other governing documents,
(b) to the best knowledge and belief of Purchaser, conflict with, result in a
breach of, constitute a default (or an event that with the lapse of time or
notice, or both would constitute a default) under any agreement or instrument to
which Purchaser is a party or by which Purchaser is bound, (c) to the best
knowledge and belief of Purchaser, violate any judgment, order, ruling, or
decree applicable to Purchaser and entered or delivered in a proceeding in which
Purchaser was or is a named party, or (d) to the best knowledge and belief of
Purchaser, violate any applicable law, rule or regulation.
5.3. Authorization. The execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly and validly
authorized by all requisite action on the part of Purchaser. This Agreement has
been duly executed and delivered on behalf of Purchaser, and at the Closing all
documents and instruments required hereunder to be executed and delivered by
Purchaser shall have been duly executed and delivered. This Agreement and such
documents and instruments shall constitute legal, valid and binding obligations
of Purchaser enforceable in accordance with their terms, subject, however, to
the effect of bankruptcy, insolvency, reorganization, moratorium and similar
laws from time to time in effect relating to the rights and remedies of
creditors, as well as to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
5.4. Brokers. Purchaser has not incurred any obligation or liability,
contingent or otherwise, for brokers' or finders' fees in respect of the matters
provided for in this Agreement which will be the responsibility of Seller, and
any such obligation or liability that might exist shall be the sole obligation
of Purchaser.
5.5. Investment Intent. Purchaser is acquiring the Assets for
Purchaser's own account for investment, and not with a view to, or for resale in
connection with, any distribution thereof within the meaning of the Act.
5.6. Due Diligence. Purchaser represents, warrants and covenants that
it has or will perform prior to Closing sufficient review and due diligence,
including review of file data and inspections, to evaluate the Assets and
Property to Purchaser's complete satisfaction as a prudent and knowledgeable
purchaser. Further, at Closing, Purchaser shall have inspected or waived its
right to inspect the Records and the Assets for all purposes and satisfied
itself as to the accuracy and completeness of the Records, the physical and
environmental condition of the Assets, both surface and subsurface, including
but not limited to conditions specifically related to the presence, release or
disposal of hazardous substances. Purchaser is relying solely upon its own
inspection of the Assets and Property, and Purchaser shall accept all of the
same in their "as is, where is" condition, with all faults.
5.7. Sophisticated Buyer. Purchaser is a sophisticated buyer,
knowledgeable in the
24
<PAGE> 29
evaluation and acquisition of oil and gas properties, and understands that by,
purchasing oil and gas properties or interests, the Purchaser may be exposed to
risks and liabilities associated with the oil and gas business. Purchaser is
engaged in the business of exploring for or producing oil and gas or other
minerals as an ongoing business. By reason of this knowledge and experience,
Purchaser will evaluate the merits and risks of the Assets, properties or
interests to be purchased from Seller and will form an opinion based solely upon
Purchaser's knowledge and experience and not upon any opinion or predictions by
Seller, Seller's Affiliates or their respective Representatives.
5.8. Economic Risk. Purchaser is aware that ownership of any of the oil
and gas properties or interests is highly speculative and subject to substantial
risks, and Purchaser is capable of bearing the high degree of economic risk and
burdens of any purchase of the Assets from Seller, including, but not limited
to, the possibility of the complete loss of the Purchase Price, all contributed
capital, the loss of all anticipated tax benefits (if any), the lack of a public
market and limited transferability of such interests or properties.
5.9. Financing. Purchaser has or will have adequate funding or
financing to pay the Purchase Price at Closing.
5.10. Accredited Investor. Purchaser is an "accredited investor" as
that term is used in Regulation D of the Act.
5.11. Solicitation. At no time was Purchaser presented with or
solicited by or through any public promotion or any form of advertising in
connection with its purchase of the Assets hereunder.
5.12. Bankruptcy. There are no bankruptcy, reorganization or
arrangement proceedings pending, being contemplated by or, to the knowledge of
Purchaser, threatened against Purchaser.
5.13. General. Purchaser will use its reasonable efforts in good faith
to take all actions and to do all things necessary or advisable in order to
consummate and make effective the transactions contemplated by this Agreement.
5.14. Financial Matters The balance sheet of Purchaser as of May 1,
1999, a true and correct copy of which is attached hereto as Schedule 5.14 and
incorporated herein, fairly presents the financial position of Purchaser as of
such date. Since May 1, 1999, Purchaser has conducted business only in the
ordinary course, except for the transactions contemplated in this Agreement and
related matters. The capital commitments of the stockholders of Purchaser which
had not been paid as of that date (totaling $10,333,333) will be paid in full
prior to the Closing. In addition, between the Execution Date and the Closing,
the current stockholders of Purchaser will purchase a total of 25,000 additional
shares of common stock in Purchaser at a purchase price of $1,000 per share, for
a total amount of $25,000,000.
ARTICLE 5A. ADDITIONAL COVENANTS
Seller covenants and agrees that from and after the execution of this
Agreement and until the Closing Date:
25
<PAGE> 30
5A.1. Maintenance of Assets. Seller will not sell, transfer, assign,
convey or otherwise dispose of any of the Assets subject to Seller's direct
control, other than (a) oil, gas and other hydrocarbons produced, saved and sold
in the ordinary course of business, (b) personal property and equipment which is
replaced with property and equipment of comparable or better value and utility
in the ordinary and routine maintenance and operation of the Subject Properties,
and (c) as required in connection with any exercise of preferential rights or as
otherwise required to satisfy obligations to third parties under contracts
presently existing.
5A.2. No Encumbrances. Seller will not create any lien, security
interest or encumbrance on any of the Assets, the oil or gas attributable to the
Assets, or the proceeds thereof, other than Permitted Encumbrances.
5A.3. Operations. With respect to any of the Subject Properties and the
Gas Plants operated by Seller (and, as to Sections 5A.3.(b), (f), (h) and (j)
below, with regard to Subject Properties not operated by Seller), Seller will
endeavor in good faith until Closing (subject to this Agreement and the rights
of affected parties under applicable agreements) to:
(a) cause the Subject Properties and the Gas Plants to be
developed, maintained and operated in compliance with
applicable laws, ordinances, rules, regulations and
orders and maintain insurance now in force with
respect to the Subject Properties, and pay or cause
to be paid all costs and expenses in connection
therewith;
(b) not approve the drilling of any new well on the
Subject Properties without the advance written
consent of Purchaser, which consent (which may not be
unreasonably withheld) or non-consent must be given
by Purchaser within three (3) days of the notice from
Seller;
(c) not take any action or fail to take any action which
is reasonably expected to result in any termination
of the leases forming a part of the Subject
Properties, provided that Seller has no obligation to
renew, extend or acquire new leases for or pertaining
to the undeveloped leasehold identified on Schedule 4
to Exhibit "A" hereto;
(d) perform and comply with all of its obligations under
agreements relating to or affecting the Subject
Properties or the Gas Plants;
(e) carry on its business with respect to the Subject
Properties in substantially the same manner as it has
heretofore;
(f) not enter into or assume any contract, agreement or
commitment which is not in the ordinary course of
business as heretofore conducted or which involves
payments, receipts or potential liabilities with
respect to one individual Subject Property or Gas
Plant of more than $50,000, (net to Seller) excluding
emergency expenditures; and
26
<PAGE> 31
(g) not resign or otherwise voluntarily relinquish its
rights as operator of any Subject Property or Gas
Plant for which it serves as operator on the date
hereof;
(h) not grant any preferential right to purchase or
similar right or agree to require the consent of any
party to the transfer and assignment of the Assets to
Purchaser, subject to existing contractual
obligations;
(i) not enter into any gas sales contract or crude oil
sales or supply contract with respect to any Subject
Property or Gas Plant which is not terminable without
penalty upon notice of thirty (30) days or less;
(j) not enter into any transaction the effect of which,
considered as a whole, would be to cause Seller's
ownership interest in any of the Subject Properties
or Gas Plants to be altered from its ownership
interest as of the date hereof;
(k) exercise reasonable efforts, as reasonably requested
in writing by Purchaser, to obtain all such required
approvals or consents at Purchaser's expense if any
approval or consent by any federal, state or local
governmental authority is required to vest Acceptable
Title to any of the Subject Properties or Gas Plants
in Purchaser at Closing;
(l) give prompt written notice to Purchaser until
Closing, of 1) any notice of default (or written
threat of default, whether disputed or denied)
received or given by Seller after the date hereof
under any instrument or agreement affecting the
Subject Properties or the Gas Plants to which Seller
is a party or by which it or any of the Subject
Properties is bound or, 2) any litigation filed and
served upon Seller after the Execution Date
pertaining to any of the Assets;
(m) to the extent it can do so without violating any
third party agreement and subject to the rights of
third parties, exercise its best efforts to provide
(as soon as practicable) to Purchaser a copy of each
material authority for expenditure and material
contract affecting the Subject Property or the Gas
Plants entered into after the Execution Date;
provided, however, that the provision of such matters
to Purchaser is for informational purposes only and
that Purchaser shall have not right to comment upon
or object to any such matter that is otherwise not in
violation of this Agreement; and
(n) use its reasonable efforts in good faith to take all
actions and to do all things necessary or advisable
in order to consummate and make effective the
transactions contemplated by this Agreement.
27
<PAGE> 32
5A.4. Access to Records. Seller will endeavor to provide Purchaser and
its Agents through the Examination Period (a) access to the Records during
normal business hours at Seller's offices where such Records are located, (b)
adequate work space (as determined solely by Seller) at Seller's offices to
review the Records, (c) access to a copy machine, at Purchaser's cost, at
Seller's offices, and (d) reasonable access to Seller's personnel during normal
business hours at the locations where such personnel work. Seller will, at
Purchaser's cost, electronically download Seller's Records regarding the Subject
Properties into Purchaser's accounting and land system on or before June 18,
1999, so long as such electronic downloading efforts are not disruptive of
Seller's business or accounting or land departments. Seller, at Purchaser's
cost, will assist Purchaser in obtaining access to and the right to review and
copy Records pertaining to the Subject Properties, producing minerals and Gas
Plants not in Seller's possession or control. From and after the Execution Date
through the Closing Date, Seller shall endeavor not to add to or remove from the
Records any contracts, instruments, documents or other materials except for such
additions and removals as are done in the ordinary course of business with
respect to on-going operations.
5A.5. Permissions. Seller will use reasonable efforts, at Purchaser's
cost, to assist Purchaser in obtaining all permissions, approvals and consents
of federal, state and local governmental authorities and other third parties as
may be required in order to consummate the sale contemplated hereunder.
ARTICLE 6. SELLER'S CONDITIONS OF CLOSING
Seller's obligation to consummate the transactions provided for herein
is subject only to the satisfaction or waiver by Seller on or before the Closing
Date of the following conditions:
6.1. Representations. The representations and warranties of Purchaser
contained in Article 5 shall be true and correct in all material respects on the
Closing Date as though made on and as of that date.
6.2. Performance. Purchaser shall have performed in all material
respects the obligations, covenants and agreements hereunder to be performed by
it at or prior to the Closing, including but not limited to payment of the
Purchase Price and delivery of the Preferred Shares.
6.3. Officer's Certificate. Purchaser shall have delivered to Seller a
certificate of an executive officer of Purchaser dated the Closing Date,
certifying on behalf of such Purchaser that the conditions set forth in Sections
6.1 and 6.2 have been fulfilled.
6.4. Pending Matters. No suit, action or other proceeding by a third
party or a governmental authority shall be pending or threatened which seeks
substantial damages from Seller in connection with, or seeks to restrain, enjoin
or otherwise prohibit, the consummation of the transactions contemplated by this
Agreement.
6.5. HSR Act. The waiting period required by the HSR Act shall have
expired or been terminated, if applicable.
28
<PAGE> 33
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. Representations. The representations and warranties of Seller
contained in Article 4 shall be true and correct in all material respects on the
Closing Date as though made on and as of that date.
7.2. Performance. Seller shall have performed in all material respects
the obligations, covenants and agreements hereunder to be performed by it at or
prior to the Closing.
7.3. Officer's Certificate. Seller shall have delivered to Purchaser a
certificate of an executive officer of each Seller (or the General Partner
thereof, as applicable) dated the Closing Date, certifying on behalf of such
Seller that the conditions set forth in Sections 7.1 and 7.2 have been
fulfilled.
7.4. Pending Matters. No suit, action or other proceeding by a third
party or a governmental authority shall be pending or threatened which seeks
substantial damages from Purchaser in connection with or, seeks to restrain,
enjoin or otherwise prohibit, the consummation of the transactions contemplated
by this Agreement.
7.5. HSR Act. The waiting period required by the HSR shall have expired
or been terminated, if applicable.
ARTICLE 8. CLOSING.
8.1. Time and Place of Closing. If the conditions to Closing have been
satisfied or expressly waived by the party entitled to the benefits thereof, the
Closing shall take place at one of Seller's offices on or before June 29, 1999,
at 9:00 a.m., or at such other place and time or in such other manner agreed
upon by Seller and Purchaser (such date being the "Closing Date"); provided,
that Seller shall have the right to extend Closing for thirty (30) days for any
reason and that any extension by Seller shall not serve to provide Purchaser
rights not otherwise expressly provided herein, nor to extend any rights of
Purchaser contained herein, including, without limitation, those contained in
Section 3.4; and provided further, that Purchaser shall have the right to extend
Closing as set forth in Section 8.3.
8.2. Closing Obligations. At the Closing, the following events shall
occur, each being a condition precedent to the others and each being deemed to
have occurred simultaneously with the others:
(a) Seller shall execute, acknowledge and deliver to Purchaser
multiple originals of an Assignment and Bill of Sale or a
Conveyance, where applicable, as determined by Seller, in
substantially the form attached hereto as Exhibit "B-1" or
"B-2", as
29
<PAGE> 34
the case may be (modified to conform to this Agreement),
conveying the Assets to Purchaser as provided hereby and
Purchaser shall, execute, acknowledge and deliver same to
Seller;
(b) Seller and Purchaser shall execute, acknowledge and deliver
transfer orders or letters in lieu thereof substantially in
the form set forth on Schedule 8.2(b) attached hereto
directing all purchasers of production, agreed upon by Seller,
to make payment to Purchaser of proceeds attributable to the
Sale Interest;
(c) Purchaser shall deliver by wire transfer the Adjusted Purchase
Price, less the Deposit and any interest earned thereon to
which Purchaser is entitled as provided in Article 2, and
shall deliver the Preferred Shares;
(d) Purchaser and Seller shall execute and deliver a settlement
statement (the "Preliminary Settlement Statement") prepared by
Seller and setting forth the Purchase Price and all
adjustments thereto using information to the extent then
available and if not then available then Seller's reasonable
good faith estimate thereof, subject to Section 13.17;
(e) Purchaser and Seller shall execute and deliver appropriate
state or federal lease assignment forms and such other
instruments and certificates and take such other action as may
be necessary to carry out their respective obligations under
this Agreement;
(f) subject to Section 13.18, Seller shall execute and deliver to
Purchaser appropriate resignation of operator and change of
operator forms reasonably requested by Purchaser; and
(g) For Seller-operated Assets, Purchaser shall deliver to Seller
(1) evidence of compliance with the rules and regulations
dealing with the plugging and abandoning of wells included in
the Assets, including evidence of the appropriate bond, surety
letter, or letter of credit which as been accepted by the
relevant regulatory agency; (2) proof that Purchaser has been
approved by the relevant regulatory agency as operator of the
Assets, including all Wells that are subject to this
Agreement; and (3) evidence that Purchaser has obtained all
necessary permits or transfers of permits to operate the
Assets.
8.3 Purchaser's Extension of Closing. Purchaser may extend Closing
until 9:00 a.m. July 29, 1999, upon written notice delivered to Seller no later
than noon June 28, 1999, including in such notice a good faith showing of valid
cause as to why Purchaser is unable to proceed to Closing on June 29, 1999, and
with a workable plan with action steps and a time-line to cure or resolve the
identified impediments to its inability to proceed to the Closing on June 29,
1999. Upon such notice, Purchaser shall forever waive any objection to the form
of conveyancing instruments and other deliverables prepared by Seller for use in
the Closing for June 29, 1999, and any subsequent Seller generated data,
ministerial, signature, or other minor modifications needed or advisable thereto
to change such instruments or deliverables to conform
30
<PAGE> 35
to or for use for Closing on the new Closing Date. In addition, upon delivery of
the notice provided for in this Section 8.3, the Purchase Price will increase at
the annualized rate of ten (10%) per cent compounded daily, until Closing as
provided in Section 2.1. Further, upon delivery of the notice of Purchaser
pursuant to this Section 8.3 and without further documentation, Purchaser shall
concede that Seller was ready for Closing on June 29, 1999 and that there are
not any claims or allegations known by Purchaser on the date of the said notice
that could have been asserted validly at Closing by Purchaser in a notice
terminating this Agreement pursuant to Article 10. Purchaser's extension of
Closing hereunder shall not serve to provide Purchaser rights not otherwise
expressly provided in this section, nor to extend any deadlines of Purchaser for
the Notice of Defects or Examination Period or any other rights of Purchaser
(which shall all continue to be based on a June 29, 1999 Closing Date), except
as otherwise expressly contained in this section.
ARTICLE 9. POST-CLOSING OBLIGATIONS.
9.1. Receipts and Credits; Suspense Funds. Upon Closing and subject to
the terms hereof, all monies, refunds, proceeds, receipts, credits, receivables,
accounts and income attributable to the purchased Assets (a) for all periods of
time from and after the Effective Time shall be the sole property and
entitlement of Purchaser, and, to the extent received by Seller, Seller shall
fully disclose and account therefor to Purchaser promptly, and (b) for all
periods of time prior to the Effective Time shall be the sole property and
entitlement of Seller, and, to the extent received by Purchaser, Purchaser shall
fully disclose and account therefor to Seller promptly. Purchaser shall pay
Seller for Seller's share of hydrocarbons attributable to the purchased Assets
in storage above the pipeline connection or in transit at the Effective Time
based on actual, if available, or estimated inventories, at Seller's relevant
contract prices net of applicable taxes. Seller and Purchaser recognize that, as
of the Effective Time, there may be over or under imbalances with respect to gas
production, gathering, transportation or processing attributable to the Subject
Properties ("Imbalances") and hereby agree that (i) Imbalances shall not be
included in any Defects asserted hereunder, and (ii) the Subject Properties will
be conveyed specifically subject to Imbalances which exist as of the Effective
Time, with Purchaser, as of Closing, bearing and assuming all obligations with
respect to any overproduction account or liability and receiving the benefit of
and being credited with any underproduction account or credit; provided,
however, that on or after Closing, there shall be a monetary adjustment pursuant
to the Preliminary Settlement Statement or Final Accounting to reflect any known
net overproduction or underproduction attributable to the Assets equal to $1.00
per MCF without any adjustment for royalties or severance taxes and without
affecting a Party's responsibility for the payment of such royalties or
severance taxes. At Closing, Seller shall deliver to Purchaser all amounts in
Seller's possession due third party owners of interests in the Subject
Properties, and Purchaser agrees that it shall be solely responsible for the
disposition of such funds, the payment thereof to the rightful owners and the
payment, if any, of royalty thereon (the "Suspense Funds").
9.2. Costs and Liabilities; Indemnity
(a) As used in this Agreement, "Claims", "CLAIMS,
"CLAIMS" or "CLAIMS" shall include costs, expenses,
obligations, claims, demands, causes of action,
liabilities, damages, fines, penalties, debts, losses
and
31
<PAGE> 36
judgments of any kind or character, whether matured
or, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, known or unknown, and all
costs, expenses and fees (including, without
limitation, interest, attorneys' fees, costs of
experts, court costs and costs of investigation)
incurred in connection therewith, including, but not
limited to claims arising from or directly or
indirectly related to death, personal injury,
property damage, environmental damage or the
remediation thereof, royalty, contract, operating,
suspense and capital obligations attributable or
relating in any way to the Assets or the Property. As
used in this Section 9.2, "Assets" shall include the
Suspense Funds.
(b) NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE
CONTRARY, IT IS THE EXPRESS INTENT AND AGREEMENT OF
SELLER AND PURCHASER THAT, IF CLOSING OCCURS (AND, IN
ANY EVENT, UPON DELIVERY OF THE ADJUSTED PURCHASE
PRICE AND THE ASSIGNMENT AND BILL OF SALE) PURCHASER
SHALL ACCEPT THE ASSETS AND PROPERTY IN THEIR "AS IS,
WHERE IS" CONDITION, SUBJECT TO AND WITH ANY AND ALL
FAULTS, DEFECTS, DEFICIENCIES, IRREGULARITIES AND
CLAIMS RELATED OR ATTRIBUTABLE IN ANY MANNER THERETO,
INCLUDING, WITHOUT LIMITATION, TITLE DEFECTS,
ENVIRONMENTAL DEFECTS, DEFECTS OR ANY OTHER MATTER
AFFECTING IN ANY RESPECT THE TITLE OR PHYSICAL
CONDITION OF, OR THE RIGHT TO OWN, USE, OPERATE,
DEVELOP OR ENJOY, THE ASSETS OR THE PROPERTY, WHETHER
KNOWN OR UNKNOWN, LIQUIDATED OR UNLIQUIDATED, FIXED
OR CONTINGENT, DIRECT OR INDIRECT. AT, UPON AND AFTER
CLOSING (AND, IN ANY EVENT UPON DELIVERY OF THE
ADJUSTED PURCHASE PRICE AND THE ASSIGNMENT AND BILL
OF SALE) AND WITHOUT FURTHER ACTION OR DOCUMENTATION,
PURCHASER (1) SHALL ASSUME, BE RESPONSIBLE FOR AND
COMPLY WITH ALL DUTIES AND OBLIGATIONS, EXPRESS OR
IMPLIED, ARISING AT ANY TIME WITH RESPECT TO THE
ASSETS, INCLUDING, WITHOUT LIMITATION (i) THOSE
ARISING UNDER OR BY VIRTUE OF ANY RELATED AGREEMENT,
LEASE, CONTRACT, AGREEMENT, DOCUMENT, PERMIT, LAW,
STATUTE, RULE, REGULATION OR ORDER OF ANY
GOVERNMENTAL AUTHORITY OR COURT (SPECIFICALLY
INCLUDING, WITHOUT LIMITATION, ANY GOVERNMENTAL
REQUEST OR OTHER REQUIREMENT TO PLUG, RE-PLUG OR
ABANDON OR RE-ABANDON ANY WELL OF WHATSOEVER TYPE,
STATUS OR CLASSIFICATION, OR TAKE ANY CLEAN-UP,
REMEDIAL OR OTHER ACTION WITH RESPECT TO THE ASSETS
OR PROPERTY), (ii) PREFERENTIAL RIGHTS TO PURCHASE
AND (iii) THIRD PARTY CONSENTS; (2) SHALL ASSUME, BE
RESPONSIBLE FOR AND PAY ALL CLAIMS AFFECTING OR
ARISING, DIRECTLY OR INDIRECTLY, AT ANY 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
32
<PAGE> 37
MATERIALS ("NORM"), AND WHETHER OR NOT ARISING SOLELY
FROM OR CONTRIBUTED TO BY THE NEGLIGENCE IN ANY FORM,
WHETHER ACTIVE OR PASSIVE, OR OF ANY KIND OR NATURE,
OF SELLER OR ITS PREDECESSORS IN TITLE OR THEIR
RESPECTIVE AFFILIATES AGENTS, EMPLOYEES OR
CONTRACTORS; AND (3) SHALL DEFEND, INDEMNIFY AND HOLD
SELLER HARMLESS FROM ANY AND ALL CLAIMS ARISING,
ASSERTED OR DUE AT ANY TIME, WHETHER BEFORE, ON OR
AFTER THE EFFECTIVE TIME, IN CONNECTION WITH THE
FOREGOING; AND, FURTHER, WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, PURCHASER SHALL
INDEMNIFY, DEFEND AND HOLD HARMLESS SELLER FROM ANY
AND ALL CLAIMS ARISING AT ANY TIME, WHETHER BEFORE,
ON OR AFTER THE EFFECTIVE TIME, MADE BY ANY PERSON
AND ARISING OUT OF OR RESULTING FROM:
- THE REVIEW, INSPECTION AND ASSESSMENT OF THE ASSETS
OR THE PROPERTY BY PURCHASER;
- THE OWNERSHIP OR OPERATION OF THE ASSETS BY OR ON
BEHALF OF SELLER OR ITS PREDECESSORS IN TITLE OR ACTS
OR OMISSIONS BY OR ON BEHALF OF SELLER OR ITS
PREDECESSORS IN TITLE IN CONNECTION WITH OR
PERTAINING TO THE ASSETS;
- THE OWNERSHIP OR OPERATION OF THE ASSETS BY OR ON
BEHALF OF PURCHASER OR ITS SUCCESSORS IN TITLE OR THE
ACTS OR OMISSIONS BY OR ON BEHALF OF PURCHASER OR ITS
SUCCESSORS IN TITLE IN CONNECTION WITH OR PERTAINING
TO THE ASSETS;
- THE ACTS OR OMISSIONS OF THIRD PARTIES RELATING TO AN
ERROR IN DESCRIBING THE ASSETS;
- RIGHTS AND OBLIGATIONS OF THE PARTIES OR THIRD
PARTIES UNDER RELATED AGREEMENTS;
- FAILURE BY THIRD PARTIES TO APPROVE OR CONSENT TO ANY
ASPECT OF THIS TRANSACTION OR THE SALE OR TRANSFER OF
THE ASSETS OR ANY PORTION THEREOF;
- OBLIGATIONS TO PLUG, RE-PLUG, ABANDON OR RE-ABANDON
WELLS, REMOVE FACILITIES, EQUIPMENT, PIPELINES AND
FLOWLINES, CLOSE PITS AND REMOVE SUMPS, AND RESTORE,
CLEAN UP AND/OR REMEDIATE THE ASSETS OR PROPERTY;
33
<PAGE> 38
- PAYMENTS, ROYALTIES OR DISBURSEMENTS PAYABLE BY
PURCHASER TO THIRD PARTIES WITH REGARD TO THE ASSETS;
- THE PHYSICAL OR ENVIRONMENTAL CONDITION OF OR
RELATING TO THE ASSETS OR PROPERTY OR ANY DISPOSAL
SITE (WHETHER ON THE ASSETS OR PROPERTY OR OFFSITE)
CONTAINING MATERIALS OR WASTES FROM THE OPERATIONS OR
ACTIVITIES ON THE PROPERTY OR ASSETS INCLUDING CLAIMS
UNDER ANY LAW OR ENVIRONMENTAL LAW;
- REMEDIATION ACTIVITIES, INCLUDING DAMAGES INCURRED BY
BUYER DURING OR ARISING FROM REMEDIATION ACTIVITIES
RELATING TO THE ASSETS OR PROPERTY;
- INABILITY OR FAILURE TO OBTAIN THE TRANSFER OF A
PERMIT OR AUTHORIZATION OR THE INABILITY TO OBTAIN A
PERMIT OR AUTHORIZATION RELATING TO THE ASSETS.
(c) From and after Closing, any demand for indemnity by
Seller hereunder shall be made by written notice,
together with a written description of any Claims
asserted stating the nature and basis of such Claim
and, if ascertainable, the amount thereof. Purchaser
shall have a period of twenty (20) days after receipt
of such notice within which to respond thereto or, in
the case of a demand which requires a shorter time
for response, then within such shorter period as
specified by Seller in such notice (the "Notice
Period"). If Purchaser denies liability hereunder or
fails to provide the defense for any Claim, Seller
may defend or compromise the Claim as it deems
appropriate without prejudice to any of Seller's
rights hereunder, with no right of Purchaser to
approve or disapprove any actions taken in connection
therewith by Seller. If Purchaser accepts liability
and responsibility for the defense of any Claim, it
shall so notify Seller as soon as is practicable
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
34
<PAGE> 39
future conduct of its or their respective businesses.
Purchaser acknowledges that its obligations to
indemnify, defend and hold Seller and its Affiliates
harmless under this Agreement includes obligations to
pay the attorneys' fees and court costs incurred by
Seller and its Affiliates in defending said Claims,
regardless of the merits of said Claims.
(d) Seller shall have the right at all times to
participate, at its sole cost, in the preparation for
any hearing or trial related to the indemnities set
forth in this Agreement, as well as the right to
appear on its own behalf or to retain separate
counsel to represent it at any such hearing or trial.
(e) EXCEPT FOR SECTION 9.12, THE INDEMNITIES PROVIDED IN
THIS AGREEMENT SHALL EXTEND TO SELLER (AND SELLER'S
CORPORATE PREDECESSORS) AND ITS AFFILIATES AND ANY
PERSON WHO AT ANY TIME HAS SERVED OR IS SERVING AS A
DIRECTOR, OFFICER, EMPLOYEE, CONSULTANT (INCLUDING,
BUT NOT LIMITED TO, NETHERLAND, SEWELL & ASSOCIATES,
INC., CHASE SECURITIES, INC. ITS CORPORATE PARENT AND
SUBSIDIARIES AND THEIR RESPECTIVE OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, AND CONSULTANTS),
INVITEE OR AGENT THEREOF (EACH A "REPRESENTATIVE" AND
COLLECTIVELY "REPRESENTATIVES"), (HOWEVER, FOR
PURPOSES OF THIS AGREEMENT, PURCHASER IS NOT AND
SHALL NOT BE A REPRESENTATIVE OF SELLER OR EITHER
PERSON COMPRISING SELLER), AND EACH OF THEIR
RESPECTIVE HEIRS, EXECUTORS, SUCCESSORS AND ASSIGNS,
AND SHALL APPLY TO ALL CLAIMS SUBJECT TO INDEMNITY
HEREUNDER, INCLUDING THOSE BASED ON NEGLIGENCE OF ANY
NATURE, INCLUDING SOLE NEGLIGENCE, SIMPLE NEGLIGENCE,
CONCURRENT NEGLIGENCE, ACTIVE NEGLIGENCE, PASSIVE
NEGLIGENCE, STRICT LIABILITY OR FAULT OF SELLER (OR
ANY OTHER INDEMNIFIED PARTY) OR ANY OTHER THEORY OF
LIABILITY OR FAULT, WHETHER OF LAW (WHETHER COMMON OR
STATUTORY) OR IN EQUITY; PROVIDED, HOWEVER, PURCHASER
SHALL NOT BE REQUIRED TO INDEMNIFY SELLER OR ANY
SELLER REPRESENTATIVE FOR ANY DISPUTED CLAIM ASSERTED
BY PURCHASER PURSUANT TO THIS AGREEMENT TO THE EXTENT
AND ONLY TO THE EXTENT ARISING DIRECTLY FROM A BREACH
OF THIS AGREEMENT BY SELLER, AND FOR WHICH AND ONLY
TO THE EXTENT THAT PURCHASER HAS OBTAINED AGAINST
SELLER A BINDING, FINAL, NON-APPEALABLE ARBITRATION
DECISION OR COURT JUDGMENT PURSUANT TO THIS AGREEMENT
THE INDEMNIFICATION PROVISIONS OF THIS SECTION 9.2
SHALL BE IN ADDITION TO ANY OTHER INDEMNITY
PROVISIONS CONTAINED IN THIS AGREEMENT AND SHALL
SURVIVE CLOSING.
35
<PAGE> 40
9.3 Further Assurances. After Closing, Seller and Purchaser agree to
take such further actions and to execute, acknowledge and deliver all such
further documents that are necessary or useful in carrying out the purposes of
this Agreement or of any document delivered pursuant hereto. The parties will
cooperate at all times after Closing to execute and record correction
instruments to correct scrivener's errors in the preparation of Closing
documents.
9.4 Delivery of Records As soon as reasonably possible but no later
than thirty (30) days after the Closing Date, Seller shall deliver to Purchaser
originals or copies of the Records, consistent with this Agreement, at Seller's
and Purchaser's equally shared cost; provided, that Seller (i) shall exercise
its best efforts to provide Purchaser at Closing or as soon thereafter as is
practicable with all Records necessary to assume and conduct operations of the
Assets, and (ii) shall have the right to retain, as its own, original Records
that pertain to Excluded Assets and copies of all other Records. If originals of
Records or other instruments or title conveyancing documents are provided to
Purchaser pursuant to or in accordance with this Agreement, Purchaser shall
assure that Seller shall have access to them at reasonable times and upon
reasonable notice during regular business hours, with the right to copy same,
for a period of seven (7) years after the Closing Date. No later than thirty
(30) days after Closing, Seller further agrees to assist Purchaser (at
Purchaser's cost) in making an electronic transfer of all Records applicable to
the Subject Properties. Such electronic data shall include but is not limited
to: Property Master files, Name and Address files (owners, purchasers,
operators, etc.), Division of Interest decks for billing and revenue, Oil and
Gas Purchaser Division Order/Property cross-reference, Land Records (Leases,
tracts, Critical Dates, Text file, Ownership, Rentals, Billing), Chart of
Accounts, Billing Category Codes, County and State Code cross-reference, System
Code Tables or Legends (Suspense Codes, Interest Types, Product Codes, etc.),
Gas Contract Records (Master File, Text, Details, Fees, Calendar, etc.), Owner
Netting Information, Production Records (Tank Master, Closing Stock, Production
Master, State Information, etc.), AFE Information, Revenue Suspense, and/or
Billing suspense, Owner Net (Share) Revenue and Billing History, Property Gross
(8/8) Revenue and Billing History, Operated Property Production Information (and
Non-Operated if available), Operated Property Production Tax History
Information, Land Records (Rental Payments), Payout information and Schedules,
1099 Information, Accounts Payable and Revenue information. Seller's obligation
pursuant to this Section 9.4 shall be limited to Seller's present capability to
perform such electronic transfers without disruption or undue inconvenience to
Seller's ongoing business. Seller shall not be required to create, assemble or
develop such electronic files or records.
9.5 Access to Data. Subject to the rights of third parties and Seller's
proprietary rights, Seller shall provide Purchaser with reasonable access to
Seller's books and records after Closing as necessary for Purchaser to prepare
its financial statements. To the extent, and only to the extent, necessary to
comply with requirements of the Securities and Exchange Commission (the "SEC"),
Purchaser shall have the right to audit, during normal business hours of Seller,
Seller's business and financial records to the extent then existing, including
without limitation property detail, standardized measure data and reserve
information, maintained in connection with the Assets (except for income tax
records) for all periods for which audited financials may be required by the SEC
to be prepared and filed by Purchaser. Seller will assist Purchaser, at
36
<PAGE> 41
Purchaser's cost, in acquiring the appropriate licenses, permits and
authorizations to possess and use all or part of the seismic and geophysical
data possessed by Seller regarding the Subject Properties, subject to the rights
of third parties and to confidentiality or limited use conditions or other
conditions or restrictions required by Seller or such third parties.
9.6 PURCHASER'S RELEASE OF SELLER. AT, UPON AND AFTER CLOSING AND
WITHOUT FURTHER ACTION OR DOCUMENTATION, EXCEPT AS SET FORTH IN SECTIONS 9.3,
9.4, 9.5, 9.11, 9.12 AND 11.3, PURCHASER RELEASES AND DISCHARGES SELLER AND
SELLER'S AFFILIATES AND THEIR RESPECTIVE REPRESENTATIVES FROM ALL CLAIMS
RELATING IN ANY WAY TO THE ASSETS, THE PROPERTY OR THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT, REGARDLESS OF WHEN OR HOW THE CLAIMS AROSE OR ARISE OR
WHETHER THE CLAIMS WERE FORESEEABLE OR UNFORESEEABLE. PURCHASER'S RELEASE OF
SELLER AND ITS AFFILIATES AND THEIR RESPECTIVE REPRESENTATIVES INCLUDES CLAIMS
RESULTING IN ANY WAY FROM THE NEGLIGENCE OR STRICT LIABILITY OF SELLER AND ITS
AFFILIATES AND THEIR RESPECTIVE REPRESENTATIVES, WHETHER THE NEGLIGENCE OR
STRICT LIABILITY IS ACTIVE PASSIVE, JOINT, CONCURRENT, OR SOLE. THERE ARE NO
EXCEPTIONS TO PURCHASER'S RELEASE OF SELLER AND ITS AFFILIATES AND THEIR
RESPECTIVE AFFILIATES, EXCEPT AS SET FORTH IN SECTIONS, 9.3, 9.4, 9.5, 9.11,
9.12 AND 11.3, AND THIS RELEASE IS BINDING ON PURCHASER AND ITS SUCCESSORS AND
ASSIGNS. PURCHASER EXPRESSLY WARRANTS AND REPRESENTS AND DOES HEREBY STATE AND
REPRESENT THAT NO PROMISE OR AGREEMENT WHICH IS NOT HEREIN EXPRESSED HAS BEEN
MADE TO PURCHASER IN EXECUTING THIS AGREEMENT OR AGREEING TO THIS RELEASE AND
THAT PURCHASER IS NOT RELYING UPON ANY STATEMENT OR REPRESENTATION OF SELLER OR
ANY AFFILIATE OF SELLER OR ANY OF THEIR RESPECTIVE REPRESENTATIVES. PURCHASER
HAS BEEN REPRESENTED BY LEGAL COUNSEL AND SAID COUNSEL HAS READ AND EXPLAINED TO
PURCHASER THE ENTIRE CONTENTS OF THIS AGREEMENT AND THIS RELEASE AND EXPLAINED
THE LEGAL CONSEQUENCES THEREOF.
9.7 RETROACTIVE EFFECT. PURCHASER ACKNOWLEDGES THAT ITS OBLIGATIONS TO
RELEASE, INDEMNIFY, DEFEND, AND HOLD SELLER AND ITS AFFILIATES AND THEIR
RESPECTIVE REPRESENTATIVES HARMLESS APPLY TO MATTERS OCCURRING OR ARISING
BEFORE, ON AND AFTER THE EFFECTIVE TIME TO THE EXTENT PROVIDED IN THIS
AGREEMENT.
9.8 INDUCEMENT TO SELLER. PURCHASER ACKNOWLEDGES THAT IT EVALUATED ITS
OBLIGATIONS UNDER THIS ARTICLE BEFORE IT DETERMINED AND SUBMITTED ITS BID FOR
THE ASSETS AND THAT ITS ASSUMPTION OF THESE OBLIGATIONS IS A MATERIAL INDUCEMENT
TO SELLER TO ENTER INTO THIS AGREEMENT WITH AND CLOSE THE SALE TO PURCHASER.
9.9 Related Agreements. Unless specifically provided otherwise in this
Agreement, the sale of the Assets is made subject to all oil, gas and mineral
leases, assignments, subleases, farmout agreements, joint operating agreements,
pooling agreements, letter agreements, easements, rights of way, and all other
agreements with respect to or pertaining to the Assets to the extent they are
binding on Seller or Seller's Affiliates (the "Related Agreements"). Purchaser
expressly assumes the obligations and liabilities of Seller or Seller's
Affiliates under such agreements insofar as the obligations and liabilities
concern or pertain to the Assets and agrees to execute any documents necessary
to effectuate such assumption. The parties agree that this Section 9.9 is
applicable to all instruments whether they are recorded or not.
37
<PAGE> 42
9.10 Disposal of Materials, Substances, and Wastes; Compliance and Law.
Purchaser will store, handle, transport, and dispose of or discharge all
materials, substances, and wastes from the Assets and Property (including
produced water, drilling fluids, NORM, and other wastes), whether present before
or after the Effective Time, in accordance with applicable local, state, and
federal laws and regulations. Purchaser will keep records of types, amounts, and
location of materials, substances, and wastes that are stored, transported,
handled, discharged, released, or disposed of onsite and offsite. When any lease
terminates, an interest in which has been assigned under this Agreement,
Purchaser will undertake additional testing, assessment, closure, reporting or
remedial action with respect to the Assets or Property affected by the
termination as is necessary to satisfy all local, state, or federal requirements
in effect at that time and necessary to restore the Assets or Properties.
9.11 Litigation. Upon and after Closing, Purchaser shall assume all
obligations of Seller and be responsible and liable for all litigation and
proceedings listed on Schedule 9.11 and all matters, costs, judgments, and
expenses related thereto or arising therefrom. Notwithstanding any other
provision of this Agreement, Seller shall be responsible and liable for all
litigation and proceedings which have been filed and served on Seller before the
Execution Date to which Purchaser is not a party and Seller is a party and which
is not listed on Schedule 9.11 hereto. Seller reserves the right to remove
litigation from Schedule 9.11 on or before Closing.
9.12 Seller's Indemnity of Purchaser. Notwithstanding any other
provision of this Article 9, upon Closing and ending on the first anniversary of
the Closing Date (the "Seller Indemnity Period") Seller shall defend, indemnify
and hold harmless Purchaser from any and all bona fide third party claims (and
excluding claims made by any successors in interest of Purchaser or claims that
Purchaser or any successor of Purchaser encourages any third party to make)
asserted during the Seller Indemnity Period to the extent, and only to the
extent, directly relating to the mis-payment, nonpayment or underpayment of
royalties with respect to the Sale Interest (net to Seller) to the extent and
only to the extent applicable to the period of Seller's Direct Ownership of the
affected Assets prior to the Effective Time. From and after Closing, any such
claim for indemnity arising under this Section 9.12 shall be made by written
notice, together with a written description of such claims stating, to the
extent ascertainable, the nature and basis of such claims and, if ascertainable,
the amount thereof.
ARTICLE 10. TERMINATION
10.1. Right of Termination. This Agreement and the transactions
contemplated hereby may be terminated at any time on or prior to the Closing as
follows:
(a) By either Party if the Closing does not occur by 5:00
P.M. August 18,1999; provided however, that no Party
may so terminate this Agreement if such Party is at
such time in material default or breach of any
provision of this Agreement;
38
<PAGE> 43
(b) By mutual consent of the parties;
(c) By Purchaser or Seller in accordance with Section
3.6;
(d) By Purchaser on the Closing Date if the conditions
set forth in Article 7 have not been satisfied in all
material respects and such non-satisfaction shall not
have been caused or waived by the actions or
inactions of Purchaser; or
(e) By Seller on the Closing Date if the conditions set
forth in Section 6 have not been satisfied in all
material respects and such non-satisfaction shall not
have been caused or waived by the actions or
inactions of Seller.
10.2. Effect of Termination. If this Agreement is terminated pursuant
to Section 10.1, this Agreement shall become void and of no further force or
effect (except for the provisions of Sections 2.4, 3.3, 4.4 and 5.4, Article 10
and Article 13 each of which shall survive such termination and continue in full
force and effect in accordance with its terms). If Seller terminates this
Agreement pursuant to Section 10.1(a) or (e) above by reason of a material
breach, misrepresentation or default by Purchaser under this Agreement, Seller
may elect to retain up to 100% of the Deposit without further liability or
obligation to Purchaser. The Deposit shall be returned to Purchaser if this
Agreement is terminated pursuant to Section 10.1 (b), (c) or (d) above or
pursuant to Section 10.1(a) or (e) above for any reason other than a material
breach, misrepresentation or default by Purchaser under this Agreement. If
Seller elects to retain the Deposit, or a portion thereof as provided above,
then such retention by Seller of the Deposit, whether all or in part, shall be
treated by the Parties as liquidated damages, in lieu of other damages or other
remedies (it being agreed by the Parties that damages in said event would be
extremely difficult to determine, and that the Deposit (or the portion thereof)
retained by Seller represents a fair and reasonable estimate of such damages to
Seller under the circumstances, and does not constitute a penalty). If the
Deposit is returned to Purchaser, Seller shall have no further obligation or
liability to Purchaser and PURCHASER COVENANTS NOT TO SUE SELLER, OR SELLER'S
AFFILIATES OR ANY OF THEIR RESPECTIVE REPRESENTATIVES OR INITIATE OR PURSUE
ARBITRATION WITH REGARD TO ANY DISPUTES, ISSUES OR CLAIMS ARISING OUT OF OR
RELATING TO THE DEPOSIT (OR ANY PURPORTEDLY LOST INTEREST THEREON) OR SELLER'S
RETENTION OF ALL OR PART OF THE DEPOSIT PURSUANT TO THIS SECTION 10.2. If (a)
this Agreement is validly terminated by Purchaser pursuant to Section 10.1(d)
above by reason of a material breach, misrepresentation or default by Seller
under this Agreement, or (b) Seller fails to timely complete its material
obligations of Closing and Purchaser was otherwise itself ready, willing and
able to complete its obligations of Closing, and was not in material default or
breach of this Agreement , Seller shall pay to Purchaser the sum of
$1,000,000.00 plus Purchaser's verifiable out-of-pocket expenses incurred after
the Execution Date to perform its due diligence for the Assets or the
acquisition thereof, as well as for the actual premiums paid in the aggregate
for commodity derivatives related to the Assets (it being agreed by the Parties
that such amount shall be treated by the Parties as liquidated damages, in lieu
of all other damages and remedies of Purchaser, and that damages in the event of
such termination by Purchaser would be extremely difficult to determine and that
such amount to be
39
<PAGE> 44
paid Purchaser represents a fair and reasonable estimate of such damages to
Purchaser under the circumstances and does not constitute a penalty). In order
to allow Seller an opportunity to cure, Purchaser shall provide prompt written
notice of any circumstances which it believes would indicate that Seller may be
in material breach or default under this Agreement. Notwithstanding anything to
the contrary contained in this Agreement, upon any termination of this Agreement
pursuant to Section 10.1, or as otherwise provided in this Agreement, Seller
shall be free immediately to enjoy all rights of ownership of the Assets and may
sell, transfer, encumber or otherwise dispose of the Assets to any party without
any restriction under this Agreement and without any impairment of its rights
hereunder to recover damages from Purchaser arising from any default hereunder
by Purchaser; provided, that Seller's right to seek specific performance of
Purchaser's obligations hereunder shall be waived upon any such disposition of
the Assets and that its right to seek or recover any other damages from
Purchaser shall be waived upon its express election to retain all or a portion
of the Deposit.
ARTICLE 11. TAXES
11.1. Apportionment of Ad Valorem and Property Taxes. All ad valorem
taxes, real property taxes, personal property taxes, and similar obligations
concerning the Assets with respect to the tax period in which the Effective Time
occurs ("Property Taxes") shall be apportioned as of the Effective Time between
Seller and Purchaser. Seller shall file or cause to be filed all required
reports and returns incident to the Property Taxes and shall pay or cause to be
paid to the taxing authorities all Property Taxes relating to the tax period in
which the Effective Time occurs. Purchaser shall pay to Seller Purchaser's pro
rata portion of Property Taxes within thirty (30) days after receipt of Seller's
invoice therefor.
11.2. Sales Taxes. The Purchase Price excludes any sales taxes or other
taxes required to be paid in connection with the sale of property pursuant to
this Agreement. Purchaser shall be liable for all sales, gross receipts, use and
other taxes, conveyance, transfer and recording fees and real estate transfer
stamps or taxes that may be imposed on any transfer of property pursuant to this
Agreement. These taxes shall be collected and remitted under applicable law.
Purchaser shall indemnify and hold Seller harmless with respect to the payment
of any of these taxes including any interest or penalties assessed thereon.
11.3. Other Taxes. All taxes (other than income taxes) which are
imposed on or with respect to the production of oil, natural gas or other
hydrocarbons or minerals or the receipt of proceeds therefrom (including but not
limited to severance, production, and excise taxes) shall be apportioned between
the parties based upon the respective shares of production taken by the parties
as to the Assets, prior to and after the Effective Time.. From and after
Closing, Purchaser shall be responsible for paying or withholding or causing to
be paid or withheld all such taxes and for filing all statements, returns, and
documents incident thereto.
11.4. Cooperation. Each party to this Agreement shall provide the other
party with reasonable access to all relevant documents, data and other
information which may be required by the other party for the purpose of
preparing tax returns and responding to any audit by any taxing jurisdiction.
Each party to this Agreement shall cooperate with all reasonable requests of the
other party made in connection with contesting the imposition of taxes.
Notwithstanding
40
<PAGE> 45
anything to the contrary in this Agreement, neither party to this Agreement
shall be required at any time to disclose to the other party any tax return or
other confidential tax information.
ARTICLE 12. CONDITION OF THE ASSETS
12.1. Prior Use of Assets. THE ASSETS AND PROPERTY HAVE BEEN USED OR
MAY HAVE BEEN USED FOR EXPLORATION, DEVELOPMENT, PRODUCTION, STORAGE, TREATMENT,
PROCESSING, AND TRANSPORTATION OF OIL AND GAS AND RELATED OIL FIELD OPERATIONS.
PHYSICAL CHANGES IN THE PROPERTY MAY HAVE OCCURRED AS A RESULT OF SUCH USES. THE
ASSETS OR THE PROPERTY ALSO MAY INCLUDE BURIED PIPELINES, WASTES AND OTHER
EQUIPMENT, WHETHER OR NOT OF A SIMILAR NATURE, THE LOCATIONS OF WHICH MAY BE
HIDDEN OR NOT NOW BE KNOWN OR NOT READILY APPARENT BY A PHYSICAL INSPECTION OF
THE AFFECTED ASSETS. HYDROCARBONS AND OTHER SUBSTANCES, INCLUDING HAZARDOUS
SUBSTANCES, MAY HAVE COME TO BE RELEASED OR LOCATED ON OR BENEATH THE SURFACE OF
THE ASSETS OR THE PROPERTY.
12.2. Assumption of Assets in Present Condition. PURCHASER ACKNOWLEDGES
THAT (i) THE CONSUMMATION OF THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY BY PURCHASER SHALL BE SOLELY ON THE BASIS OF ITS OWN INVESTIGATION OF
THE PHYSICAL CONDITION OF THE ASSETS AND PROPERTY, INCLUDING, WITHOUT
LIMITATION, SUBSURFACE CONDITION; (ii) THE ASSETS AND PROPERTY HAVE BEEN USED IN
THE MANNER AND FOR THE PURPOSES SET FORTH ABOVE AND THAT PHYSICAL CHANGES TO THE
ASSETS AND THE PROPERTY MAY HAVE OCCURRED AS A RESULT OF SUCH USE; AND (iii)
NORM AND ASBESTOS OR MAN-MADE MATERIAL FIBERS (COLLECTIVELY "MMMF") MAY BE
PRESENT AT SOME LOCATIONS. PURCHASER ACKNOWLEDGES THAT NORM IS A NATURAL
PHENOMENON ASSOCIATED WITH MANY OIL FIELDS IN THE UNITED STATES AND THROUGHOUT
THE WORLD. PURCHASER SHALL MAKE ITS OWN DETERMINATION OF THIS PHENOMENON AND
OTHER CONDITIONS. SELLER DISCLAIMS ANY LIABILITY ARISING OUT OF OR IN CONNECTION
WITH ANY PRESENCE OF NORM OR MMMF ON OR AFFECTING THE ASSETS OR THE PROPERTY. AT
CLOSING, PURCHASER SHALL ASSUME THE RISK THAT THE ASSETS OR THE PROPERTY MAY
CONTAIN WASTES OR CONTAMINANTS AND ADVERSE PHYSICAL CONDITIONS, INCLUDING THE
PRESENCE OF PIPELINES, EQUIPMENT AND OTHER ITEMS OF PERSONAL PROPERTY, TANK
BOTTOMS, HEATER TREATER SLUDGE, AND WASTES OR CONTAMINANTS WHICH MAY NOT HAVE
BEEN REVEALED BY PURCHASER'S INVESTIGATION. AT CLOSING, ALL RESPONSIBILITY AND
LIABILITY RELATED TO DISPOSALS, SPILLS, WASTES, OR CONTAMINATION, OR OTHER
ADVERSE PHYSICAL CONDITIONS ON, BELOW, OR RELATED TO OR AFFECTING THE ASSETS AS
WELL AS THE PROPERTY SHALL, EXCEPT AS SET FORTH IN SECTION 9.11, BE ASSUMED BY
PURCHASER AND PURCHASER SHALL, NOTWITHSTANDING WHEN THE BASIS FOR ANY CLAIM,
ACTION, SUIT, JUDGMENT (INCLUDING, WITHOUT
41
<PAGE> 46
LIMITATION, THOSE FOR DEATH, PERSONAL INJURY OR PROPERTY DAMAGE) SHALL HAVE
OCCURRED OR MAY OCCUR, INDEMNIFY, DEFEND AND HOLD SELLER AND SELLER'S AFFILIATES
AND THEIR RESPECTIVE REPRESENTATIVES HARMLESS THEREFROM PURSUANT TO THIS
AGREEMENT.
12.3. Casualty Loss. In the event of any material damage by fire or
other casualty to any of the Assets prior to the Closing ("Casualty Loss"), this
Agreement shall remain in full force and effect, and as to each affected Asset,
Seller shall at its election either collect (and when collected pay over to
Purchaser) or assign to Purchaser any and all insurance (including without
limitation self-insurance) claims related to such damage, and Purchaser shall
take title to the affected Asset without reduction in the Purchase Price, except
to the extent of the amount of the deductible under such insurance policies.
12.4. No Year 2000 Compliance. Purchaser accepts all the risk and
expense arising from or related to the lack of year 2000 compliance with regard
to any and all of the Assets. Seller makes no representations or warranties, and
expressly negates and disclaims all such representations and warranties,
regarding the Assets' compliance with regard to year 2000 matters.
ARTICLE 13. MISCELLANEOUS
13.1. Governing Law. This Agreement and all instruments executed in
accordance herewith shall be governed by and interpreted in accordance with the
laws of the State of Texas, without regard to conflict of law rules that would
direct application of the laws of another jurisdiction, except to the extent
that it is mandatory that the law of the jurisdiction wherein the Assets are
located shall apply. Subject to Section 13.24, in the event of any litigation or
other proceeding in connection with this Agreement, the exclusive venue for any
such proceeding shall be in a court of competent jurisdiction located in Dallas
County, Texas, and the prevailing party shall be entitled to recover its
reasonable attorneys' fees and costs incurred therein from the other party, in
addition to any damages awarded. Purchaser agrees to accept service of process
by certified mail.
13.2. Entire Agreement. This Agreement, all agreements and instruments
executed in connection herewith, and the Confidentiality Agreement dated April
30, 1999, between Purchaser and Seller (the "Confidentiality
Agreement")constitute the entire agreement between the Parties and supersede all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of the Parties. The Confidentiality Agreement remains in full force and
effect in accordance with its terms. Purchaser may disclose confidential
information covered by the Confidentiality Agreement to its lenders and
potential lenders and to potential purchasers of portions of the Assets, and
such lenders potential lenders, and potential purchasers shall be bound and
subject to the terms of the Confidentiality Agreement with Purchaser being
responsible for any breaches of said Confidentiality Agreement by said parties.
No supplement, amendment, alteration, modification, waiver or termination of
this Agreement shall be binding unless executed in writing by the Parties
hereto. The delivery and/or recordation of the assignments or other instruments
to be delivered pursuant to this Agreement shall not cause, under the doctrine
of merger, confusion or otherwise, the extinguishment of any representations,
warranties or
42
<PAGE> 47
agreements contained in this Agreement. In the event of any conflict between the
terms of this Agreement and the terms of such assignments or instruments, the
terms of this Agreement shall govern and control.
13.3. Waiver. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.
13.4. Captions. The captions in this Agreement are for convenience only
and shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.
13.5. Assignability. Purchaser shall not assign (whether before, at or
after Closing) this Agreement or any of its rights or obligations hereunder,
except as set forth below in this Section 13.5, without the prior written
consent of the Seller, which may be withheld or conditioned for any or no
reason. Any assignment made without such consent shall be void. Except as
otherwise provided herein, this Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their respective permitted successors and
assigns; however, in any event Purchaser shall remain responsible and liable for
the performance of the obligations of Purchaser under this Agreement in addition
to said successors and assigns. At Purchaser's written request delivered to
Seller on or before the fifth (5th) Business Day before the Closing Date,
Purchaser may substitute the name of a financially-qualified third party entity
for the purposes of receiving the Assignment and Bill of Sale for a Gas Plant if
such party is capable to Sellers reasonable satisfaction, of assuming and
expressly does assume, in a writing acceptable to Seller, all the obligations,
liabilities, indemnities and responsibilities of Purchaser under this Agreement
with regard or relation to such Gas Plant (as if such third party were an
original signatory Purchaser to this Agreement, but only with respect to such
Gas Plant), with Purchaser also remaining liable therefor.
13.6. Notices. Any notice provided or permitted to be given under this
Agreement shall be in writing, and may be served by personal delivery,
facsimile, or by registered or certified U.S. mail, addressed to the Party to be
notified, postage prepaid, return receipt requested. Notice deposited in the
mail in the manner hereinabove described shall be deemed to have been given and
received on the date of the delivery as shown on the return receipt. Notice
served in any other manner (including by facsimile delivery) shall be deemed to
have been given and received only if and when actually received by the
addressee. For purposes of notice, the addresses of the Parties shall be as
follows:
SELLER:
PIONEER NATURAL RESOURCES USA, INC.
Attn: Ray Alameddine and W.T. Howard
1400 Williams Square West
5205 North O'Connor Blvd.
Irving, Texas 75039-3746
Telephone: 972/444-9001
Facsimile: 972/969-3570
43
<PAGE> 48
PURCHASER:
PRIZE ENERGY CORP.
ATTN: PHILIP B. SMITH
20 E. 5TH STREET, SUITE 1400
TULSA, OKLAHOMA 74103
TELEPHONE: (918)_582-5532 FACSIMILE: (918) 582-1547
Each Party shall have the right, upon giving three (3) days prior
notice to the other in the manner hereinabove provided, to change its address
for purposes of notice to any other appropriate street address.
13.7. WAIVER OF CONSUMER RIGHTS/DTPA Waiver. TO THE EXTENT APPLICABLE
TO THE ASSETS OR ANY PORTION THEREOF, PURCHASER HEREBY VOLUNTARILY WAIVES THE
PROVISIONS OF THE TEXAS DECEPTIVE TRADE PRACTICES ACT, CHAPTER 17, SUBCHAPTER E,
SECTIONS 17.41 THROUGH 17.63, INCLUSIVE (OTHER THAN SECTION 17.555, WHICH IS NOT
WAIVED), TEX. BUS. & COM. CODE., A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND
PROTECTIONS. IN ORDER TO EVIDENCE ITS ABILITY TO GRANT SUCH WAIVER, PURCHASER
HEREBY REPRESENTS AND WARRANTS TO SELLER THAT IT (i) IS IN THE BUSINESS OF
SEEKING OR ACQUIRING, BY PURCHASE OR LEASE, GOODS OR SERVICES FOR COMMERCIAL OR
BUSINESS USE; (ii) HAS CONSULTED WITH AN ATTORNEY OF PURCHASER'S OWN CHOOSING;
(iii) HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL, BUSINESS AND OIL AND GAS
MATTERS THAT ENABLE IT TO EVALUATE THE MERITS AND RISKS OF THE TRANSACTIONS
CONTEMPLATED HEREBY; (iv) IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING
POSITION; AND (v) THAT THIS WAIVER IS A MATERIAL AND INTEGRAL PART OF THIS
AGREEMENT AND THE CONSIDERATION THEREOF. IN ADDITION, PURCHASER WAIVES ITS
RIGHTS UNDER ALL OTHER CONSUMER PROTECTION STATUTES APPLICABLE TO THIS
TRANSACTION AND /OR THE ASSETS OR THIS AGREEMENT TO THE MAXIMUM EXTENT THAT SUCH
STATUTES MAY BE WAIVED.
13.8. Expenses. Each Party shall be solely responsible for all expenses
incurred by it in connection with this transaction (including, without
limitation, fees and expenses of its own legal counsel and accountants).
13.9. Severability. If a court of competent jurisdiction finds any
clause or provision of this Agreement to be void, invalid, or otherwise
unenforceable, the other clauses and provisions shall remain in full force and
effect and the clauses and provisions which are determined to be void, invalid
or unenforceable shall be limited so that they shall remain in effect to the
full extent permissible by law.
13.10. Damages. The Parties waive any rights to special, indirect,
punitive, exemplary, or consequential damages resulting from a breach of this
Agreement.
44
<PAGE> 49
13.11. No Third Party Beneficiary. This Agreement is not intended to
create, nor shall it be construed to create, any rights in any third party under
doctrines concerning third party beneficiaries.
13.12. Survival. The representations and warranties of the parties
under this Agreement shall not survive, but shall terminate upon and be
extinguished by, Closing; provided, however, that all representations,
warranties, waivers, disclaimers, releases, covenants, agreements and
indemnities contained entirely within Sections 1.2, 1.3, 2.3, 3.4, 3.6, 4.4,
4.11, 4.12, 5.4, 5.5, 5.6, 5.7, 5.8, 5.10 and 5.11, and Articles 9, 11, 12 and
13 of this Agreement shall survive the Closing, and notwithstanding anything
herein to the contrary, Purchaser expressly agrees and acknowledges that it
shall have no remedy or recourse against Seller or its Affiliates or any of
their respective Representatives with respect to the condition of the Assets or
Property or any representation or warranty made in connection with this
Agreement, except as expressly provided by Section 3.6.
13.13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.14. Not to be Construed Against Drafter. Purchaser and Seller
acknowledge that they have read this Agreement, have had the opportunity to
review it with an attorney of their respective choice, and have agreed to all
its terms. Under these circumstances, Purchaser and Seller agree that the rule
of construction that a contract be construed against the drafter shall not be
applied in interpreting this Agreement and that in the event of any ambiguity in
any of the terms or conditions of this Agreement, including any exhibits hereto
and whether or not placed of record, such ambiguity shall not be construed for
or against any Party hereto on the basis that such Party did or did not author
the same.
13.15. Waiver of Jury Trial. SUBJECT TO THE LIMITATIONS OF SECTION
13.24, SELLER AND PURCHASER DO HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT OR
OTHER LEGAL PROCEEDING BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT
THE RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
13.16. Publicity. Seller and Purchaser shall consult with each other
with regard to all publicity and other releases and disclosures to be made prior
to, at or after Closing concerning this Agreement and the transactions
contemplated hereby, which are not otherwise expressly permitted by the
Confidentiality Agreement, and, except as required by applicable law or the
applicable rules or regulations of any governmental body or stock exchange,
neither Party shall make any disclosure or issue any publicity or other release
without the prior written consent of the other Party, which consent shall not be
unreasonably withheld or delayed.
13.17. Accounting.
45
<PAGE> 50
A. Seller shall deliver to Purchaser on or before the fourth
Business Day prior to Closing a preliminary settlement
statement setting forth any adjustments to the Purchase Price
provided for in or required by this Agreement including,
without limitation, items such as the Purchase Price, Deposit,
expenses, prepaid items, revenue received, Property Taxes,
excise and energy taxes, copying and recording fees, to the
extent such information is available or estimated by Seller on
or before Closing (the "Preliminary Settlement Statement").
The Preliminary Settlement Statement shall be prepared in
accordance with this Agreement and with standard industry and
accounting practices. In connection with the preparation of
the Preliminary Settlement Statement, the Purchase Price shall
be (1) increased by (a) the costs and expenses that are
attributable to the Assets for the period from the Effective
Time to the Closing Date that are paid, incurred or assessed
by Seller (including, but not limited to, Seller's internal
cost for administrative overhead for each well operated by
Seller at the rate of $435.00 per well per month for wells not
otherwise subject to an applicable COPAS overhead rate under
an operating agreement and an amount equal to the applicable
COPAS overhead rate less any non-operator billed overhead
amounts that have actually been received by Seller for wells
subject to an applicable COPAS under an operating agreement),
and (b) other amounts due Seller and contemplated hereby, and
(2) reduced by (a) proceeds received by Seller for
hydrocarbons attributable to the Subject Properties produced
after the Effective Time, and (b) other amounts due Purchaser
and contemplated hereby.
B. Within 150 days after the Closing, Seller shall prepare, in
accordance with this Agreement and with standard industry and
accounting practices, and deliver to Purchaser, a final
accounting statement showing the proration calculation of
credits and payment obligations of Purchaser and Seller
hereunder. As soon as reasonably practicable after receipt
thereof, Purchaser shall deliver to Seller a written report
containing any changes that Purchaser proposes to be made to
such statement. The Parties shall use their best efforts to
reach agreement (the "Final Accounting") on the final
accounting statement on or before the fifteenth (15) Business
Day after Purchaser's receipt of the final accounting
statement (such date the "Final Accounting Date", whether or
not Seller and Purchaser have agreed on the Final Accounting).
Once the Final Accounting has been agreed to by Purchaser and
Seller, there shall be no further adjustments to the Cash
Purchase Price and Seller shall within thirty (30) days send a
check to Purchaser for the agreed amount owed by Seller or
invoice Purchaser for the amount owed by Purchaser, and
Purchaser shall pay Seller the invoice amount within thirty
(30) days of the date of said invoice.
13.18. Operatorship. Seller does not represent to Purchaser that
Purchaser will automatically succeed to the operatorship of any given Subject
Property as to which Seller is currently the operator. Purchaser recognizes and
agrees that Purchaser will be required to comply with applicable operating
agreements, unit operating agreements or other similar contracts relating to any
elections or other selection procedures in order to succeed Seller as operator.
46
<PAGE> 51
13.19. HSR Act. The Parties shall exercise their best efforts to file
(or to cause their ultimate parent entities to file) with the United States
Federal Trade Commission and the United States Department of Justice all
notifications and reports required for the transaction contemplated hereby under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR Act"), and shall
request early termination of the prescribed waiting period. The Parties will
reasonably cooperate with each other in regards to providing information to each
other to facilitate the necessary filing. Both Parties shall use their best
efforts to promptly supply any supplemental or additional information which may
be requested in connection therewith pursuant to the HSR Act and shall comply in
all material respects with the requirements of the HSR Act. Closing of the
transaction contemplated hereby shall not occur unless and until all necessary
filings and notifications under the HSR Act have been made, including the
provision of any required additional information or documents, and the waiting
period referred to in such Act shall have expired or terminated. Subject to this
Agreement, if the waiting period expires or terminates prior to the Closing
Date, the Parties will proceed to Closing on the Closing Date and if the waiting
period expires or terminates after the scheduled Closing Date, the Parties shall
close the subject transaction on or prior to the fourth day after the expiration
or termination of said waiting period.
13.20. Seller's Employees. Purchaser will interview and evaluate in
accordance with its normal employment procedures those Persons employed by
Seller as field personnel in the capacity of pumper, foreman, operator,
technician, mechanic, superintendent, repairman, utility man, or other similar
field classifications in connection with the Subject Properties (such Persons
being identified in a letter of even date herewith from Seller to Purchaser) who
may desire to be considered for employment by Purchaser, and Purchaser will
offer in writing employment to those Persons for whom Purchaser in its sole
discretion determines a need. If Purchaser fails to offer such employment to all
of such Persons, as provided below, Purchaser shall not, as a result of such
failure, otherwise be in default under this Agreement, but shall be required to
reimburse Seller for severance benefits paid by Seller to each such Person not
offered employment by Purchaser; provided, that such reimbursement shall not
exceed that amount determined by multiplying each such employee's normal weekly
wage by twelve (12). Persons offered employment with Purchaser will be offered
employment at their current work location at whatsoever wages may be determined
by Purchaser and Purchaser's customary benefits. For persons hired by Purchaser,
Purchaser will (i) give all such Persons credit for years of employment with
Seller or its Affiliates, and (ii) waive or cause the waiver of all waiting
periods required before new employees of Purchaser are normally entitled to
Purchaser's employee benefits of any and all nature, or make other
accommodations equivalent to such a waiver. If Purchaser offers a job to such
Person or Persons (a) at the same wages which that Person currently receives
from Seller and on the other terms and conditions described in the immediately
preceding sentence, regardless of whether such Persons accepts employment with
Purchaser, Purchaser shall have no severance obligation with respect to that
Person under this Agreement, except as specifically set forth below; and (b)at
less than the terms or conditions described in the immediately preceding two
sentences or at lower wages than currently being received from Seller, and such
Persons accept the offered employment, then Purchaser shall pay to Seller at
Closing an amount equal to four weeks wages of the normal wages for each such
Person. All offers shall be
47
<PAGE> 52
made prior to Closing, but shall be contingent upon the occurrence of Closing
and such employment shall not commence until Closing. If any such Person
employed by Purchaser is terminated by Purchaser within six (6) months of
Closing, except for cause, Purchaser shall pay such Person a severance benefit
equal to the amount determined by multiplying each such employee's normal weekly
wage by ten (10). Purchaser shall have no obligation under this Section 13.20
with respect to Persons offered employment by Purchaser pursuant to this Section
13.20 who decline such employment, except that the foregoing provisions of this
Section 13.20 shall apply to the extent that such Person accepts employment with
Purchaser or any of its Affiliates within twelve (12) months of Closing. Without
the express written permission of Seller, Purchaser shall not consider for
employment, solicit or contact employees of either Seller for the purpose of
hiring same unless such Persons are identified in the letter from Seller to
Purchaser identified in this Section 13.20.
13.21. Time of Performance. Time is of the essence in the performance
of all covenants and obligations under this Agreement.
13.22. No Partnership Created. It is not the purpose or intention of
this Agreement to create (and it shall not be construed as creating) a joint
venture, partnership or any type of association, and the Parties are not
authorized to act as agent or principal for each other with respect to any
matter related hereto.
13.23. EXPRESS NEGLIGENCE RULE; CONSPICUOUSNESS. BUYER ACKNOWLEDGES
THAT THE PROVISIONS IN THIS AGREEMENT THAT ARE SET OUT IN ITALICS, IN BOLD,
UNDERLINE OR CAPITALS, OR ANY COMBINATION THEREOF, SATISFY THE REQUIREMENTS FOR
THE EXPRESS NEGLIGENCE RULE AND/OR ARE CONSPICUOUS.
13.24. Arbitration. Because of the high cost of litigation in dollars,
time and resources, Purchaser and Seller intend to and do hereby establish an
efficient, fair and binding out-of-court dispute resolution procedure to be
followed in the unlikely event any claim or controversy should arise between the
parties after the date hereof out of or concerning in any respect any of the
following:
(1) the Property or Assets or either Seller's or Purchaser's
conduct with respect to the Property or Assets, either before,
on, or after the Effective Time, or
(2) the conduct of Seller or Purchaser prior to the execution
of this Agreement or the conduct of Seller or Purchaser prior
to the Closing Date or Effective Time (whichever is later),
(3) the performance, applicability, validity, enforceability,
or interpretation of the Agreement or any provision in this
Agreement or any Closing or post-Closing documents, or
Accordingly, Purchaser, its successors, and assigns, and
Seller agree that any claim or controversy as described above of whatever
nature, including, but not limited to, any
48
<PAGE> 53
action in tort, contract, or any statutory action (hereinafter referred to as
"Disputed Claim" or "Disputed Claims" in this section), or the arbitrability of
any such Disputed Claim, shall be resolved in accordance with the terms,
conditions, and procedures set forth and will be binding on Purchaser, its
successors, and assigns, and Seller. Neither Purchaser, its successors, or
assigns, nor Seller will prosecute or commence any suit or action against the
other Party relating to any matters that are subject to this Section 13.24.
Notwithstanding the above, any Disputed Claim by Purchaser for
which Purchaser has given notice to Seller prior to Closing that is not settled
prior to Closing and any Disputed Claim by either party arising out of facts
that are the subject of existing or prospective litigation filed by a third
party at any time against Purchaser or Seller will, at Seller's sole option, not
be subject to this Section 13.24.
Unless expressly provided otherwise in this Agreement, any and
all disputed claims arising under the terms of or in connection with this
Agreement shall be referred to and resolved through the use of binding
arbitration using three (3) arbitrators, in accordance with the commercial
arbitration rules of the American Arbitration Association, and the Federal
Arbitration Act (Title 9 of the United States Code). If there is any
inconsistency between such rules and any statute, such statute shall control the
rights and obligations of the parties. Further, if there is any inconsistency
between this Section 13.24 and any statute or such rules, the terms of this
Section 13.24 shall control the rights and obligations of the Parties.
Arbitration shall be initiated within the applicable time limits set forth in
this Agreement and not thereafter or, if no time limit is given, within the time
period allowed by the applicable statute of limitations. Arbitration shall be
initiated by one (1) Party ("Claimant") serving written notice on the other
Party ("Respondent") that the Claimant elects to refer the arbitrable dispute to
binding arbitration, and that the Claimant has appointed an arbitrator, who
shall be identified in such notice. The Respondent shall respond to the Claimant
within thirty (30) days after receipt of Claimant's notice, identifying the
arbitrator Respondent has appointed. The two (2) arbitrators so chosen shall
select a third arbitrator (who must have not less than ten (10) years experience
as an oil and gas lawyer) within thirty (30) days after the second arbitrator
has been appointed. If they fail to do so, either Party may request the judge of
the United States District Court for the Northern District of Texas having
greatest tenure, but not yet on retired or senior status, to appoint the third
arbitrator. If that judge fails to do so within thirty (30) days, either Party
may request the judge of that court next senior to name the third arbitrator,
and if that judge fails to do so after ten (10) days, either Party may make the
request of the judge of that court next senior, and so on, until the Board of
Arbitration is constituted. Seller shall pay the compensation and expenses of
the arbitrator named by or for it, and Purchaser shall pay the compensation and
expenses of the arbitrator named by or for it. Seller and Purchaser shall each
pay one-half of the compensation and expenses of the third arbitrator. Unless
expressly provided otherwise in this Agreement, all arbitrators must be neutral
parties who have never been officers, directors or employees of the Parties or
any of their Affiliates. Additionally, unless expressly provided otherwise in
this Agreement, the two (2) arbitrators named by the Parties must have not less
than ten (10) years experience in the oil and gas industry, and must have a
formal education in the area in dispute (i.e., accounting for an accounting
dispute, etc.). The hearing shall be commenced within thirty (30) days after the
selection of the third arbitrator. The Parties and the arbitrators shall proceed
diligently and in good faith in order that
49
<PAGE> 54
the award shall be made as promptly as possible. The decision of the arbitrators
shall be by majority vote if unanimity is not attained, shall be rendered in
writing and shall be binding on and non-appealable by the Parties. The
arbitrators shall not have the authority to grant or award indirect,
consequential, punitive or exemplary damages. The sole forum for the arbitration
shall be Dallas, Texas and all hearings shall be conducted in Dallas, Texas.
13.25 Filing and Recording. Purchaser will file or record the various
originals of the Assignment and Bill of Sale and other conveyancing documents
promptly after Closing at Purchaser's sole cost. If Purchaser fails to promptly
record such documents then Seller may record such documents. Purchaser shall
reimburse Seller for the costs of filing, recording, and other reasonable fees
actually incurred by Seller if Seller records or files said documents, such
costs or fees to be used in the Final Accounting Settlement. The recording Party
will provide either the original or photocopies of the recorded documents,
including the recording data, to the non-recording Party promptly.
13.26 Removal of Signs. Seller may either remove its name and signs
from the Seller-operated Assets and Property or require Purchaser to do so for
those Assets that it will operate. If Seller's name or signs remain on the
Property or Assets after Seller ceases to be operator and Purchaser has become
operator, Purchaser must (a) remove any remaining signs and references to Seller
promptly, but no later than the time required by applicable regulations or
forty-five days after Seller ceases to be operator, whichever occurs first, (b)
install signs complying with applicable governmental regulations, including
signs showing Purchaser as operator of the Assets it operates, and (c) notify
Seller of the removal and installation. Seller reserves a right of access to the
Assets and Property after it ceases to be operator to remove its signs and name
from all Wells, facilities and Property, or to confirm that Purchaser has done
so for the Assets operated by Purchaser. If Seller removes signs because
Purchaser has not done so, Seller will charge its costs to Purchaser, and
Purchaser will pay the invoice within fifteen days of receipt.
Remainder of page intentionally left blank
50
<PAGE> 55
13.27 Transition Agreement. On or before Closing the Parties may choose
to enter into an agreement for the continued operation of the Assets, or a
portion thereof, substantially in the form attached hereto as Schedule 13.27
with the term and Seller's fee or compensation to be mutually agreed upon.
EXECUTED as of the date first set forth above.
SELLER:
<TABLE>
<S> <C> <C>
PIONEER NATURAL RESOURCES USA, INC. PIONEER RESOURCES PRODUCING L.P.
By: Pioneer Resources, Inc. its General
Partner
By: By:
------------------------------ ----------------------------
W. T. Howard W. T. Howard
Sr. Vice President Vice President
</TABLE>
PURCHASER:
PRIZE ENERGY CORP.
By:
------------------------------
Philip B. Smith
President
51
