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EXHIBIT 10.15
PURCHASE AND SALE AGREEMENT
BETWEEN
CROSS TIMBERS OIL COMPANY
AND
ENCORE OPERATING, L.P.
DATED FEBRUARY 23, 2000
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TABLE OF CONTENTS
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ARTICLE 1. PURCHASE AND SALE.....................................................................................4
1.1 The Properties...........................................................................................4
1.2 Excluded and Excepted Assets.............................................................................5
1.2 Credits: Accounts Receivable.............................................................................6
ARTICLE 2. PURCHASE PRICE........................................................................................6
2.1 Purchase Price...........................................................................................6
2.2 Earnest Money............................................................................................6
2.3 Adjustments to Purchase Price............................................................................6
ARTICLE 3. REPRESENTATIONS OF SELLER.............................................................................7
3.1 Existence................................................................................................7
3.2 Authorization............................................................................................7
3.3 Power....................................................................................................7
3.4 Brokers..................................................................................................8
3.5 Foreign Person...........................................................................................8
3.6 Litigation...............................................................................................8
3.7 Taxes....................................................................................................8
3.8 Leases...................................................................................................8
3.9 Permits..................................................................................................8
3.10 Compliance with Laws.....................................................................................8
3.11 Seller's Title...........................................................................................8
3.12 Imbalances...............................................................................................9
3.13 Basic Documents..........................................................................................9
3.14 Take or Paz..............................................................................................9
3.15 Knowledge................................................................................................9
ARTICLE 4. REPRESENTATIONS OF BUYER.............................................................................10
4.1 Existence...............................................................................................10
4.2 Authorization...........................................................................................10
4.3 Power...................................................................................................10
4.4 Brokers.................................................................................................10
4.5 Further Distribution....................................................................................10
ARTICLE 5. DISCLAIMER OF WARRANTIES.............................................................................11
5.1 Information Provided....................................................................................11
5.2 Regulatory Status.......................................................................................11
5.3 No Warranties...........................................................................................12
5.4 Buyer Inspection........................................................................................12
5.5 Prior Operations........................................................................................12
ARTICLE 6. TITLE MATTERS........................................................................................13
6.1 Definition of Marketable Title..........................................................................13
6.2 Definition of Permitted Encumbrances....................................................................14
6.3 Notice of Title Defect..................................................................................16
6.4 Remedies for Title Defects; Title Increases.............................................................16
6.5 Value of Leasehold Interest or Title Defect.............................................................17
6.6 Consents; Preferential Rights...........................................................................18
6.7 Risk of Loss............................................................................................18
ARTICLE 7. ENVIRONMENTAL MATTERS................................................................................18
7.1 Environmental Assessment................................................................................18
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7.2 Environmental Defects...................................................................................19
7.3 Limitations.............................................................................................19
7.4 Environmental Laws......................................................................................20
ARTICLE 8. COVENANTS OF SELLER..................................................................................20
8.1 Access to Records.......................................................................................20
8.2 Operations..............................................................................................20
8.3 Permissions.............................................................................................21
8.4 Resignation as Operator.................................................................................21
ARTICLE 9. COVENANTS OF BUYER...................................................................................21
9.1 Return of Data..........................................................................................21
9.2 Indemnity Regarding Access..............................................................................21
ARTICLE 10. SELLER'S CONDITIONS OF CLOSING......................................................................22
10.1 Representations.........................................................................................22
10.2 Performance.............................................................................................22
10.3 Pending Matters.........................................................................................22
10.4 Bonds...................................................................................................22
10.5 Other Adjustments.......................................................................................22
ARTICLE 11. BUYER'S CONDITIONS OF CLOSING.......................................................................22
11.1 Representations.........................................................................................22
11.2 Performance.............................................................................................22
11.3 Pending Matters.........................................................................................23
11.4 Other Adjustments.......................................................................................23
ARTICLE 12. CLOSING.............................................................................................23
12.1 Time and Place of Closing...............................................................................23
12.2 Closing Obligations.....................................................................................23
12.3 Further Assurances......................................................................................24
ARTICLE 13. ADDITIONAL AGREEMENTS...............................................................................24
13.1 Calculation of Adjusted Purchase Price..................................................................24
13.2 Suspended Funds.........................................................................................25
13.3 Receipts and Credits....................................................................................25
13.4 Employee Matters........................................................................................25
13.5 Signs...................................................................................................25
13.6 Records.................................................................................................25
13.7 Notices.................................................................................................26
13.8 Recording Documents.....................................................................................26
13.9 Right of Termination....................................................................................26
13.10 Sales Taxes.............................................................................................27
ARTICLE 14. ASSUMPTION OF OBLIGATIONS; INDEMNIFICATION..........................................................27
14.1 Definitions.............................................................................................27
14.2 Assumption of Contracts.................................................................................28
14.3 Imbalances..............................................................................................28
14.4 Seller's Limited Indemnity..............................................................................28
14.5 Buyer's General Indemnity...............................................................................28
14.6 Operations Prior to Closing.............................................................................28
14.7 Buyer's Environmental Indemnification...................................................................29
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14.8 Buyer's Plugging Liability..............................................................................29
ARTICLE 15. ARBITRATION.........................................................................................29
15.1 Selection of Arbitrators................................................................................29
15.2 Determination...........................................................................................30
15.3 Decision Binding........................................................................................30
ARTICLE 16. MISCELLANEOUS.......................................................................................30
16.1 Amendment...............................................................................................30
16.2 Gender..................................................................................................30
16.3 Entire Agreement........................................................................................30
16.4 Successors and Assigns..................................................................................30
16.5 Survivability...........................................................................................30
16.6 Severability............................................................................................31
16.7 Governing Law...........................................................................................31
16.8 Press Releases..........................................................................................31
16.9 Section Headings........................................................................................31
16.10 Waiver..................................................................................................31
16.11 Tax Deferred Exchange Election..........................................................................31
16.12 ARIES Data Base.........................................................................................31
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EXHIBITS AND SCHEDULES
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Description of Leases Being Conveyed..........................................................Exhibit "A"
Description of Wells and
Interests Being Conveyed....................................................................Exhibit "A-1"
Excepted Interests..........................................................................Exhibit "A-2"
Allocation of Values..........................................................................Exhibit "B"
Assignment and Bill of Sale...................................................................Exhibit "C"
Accounting Agreement..........................................................................Exhibit "D"
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Litigation...................................................................................Schedule 3.6
Imbalances..................................................................................Schedule 3.12
Employees...................................................................................Schedule 13.4
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PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement ("Agreement") dated as of February 23,
2000, is between CROSS TIMBERS OIL COMPANY, a Delaware corporation, whose
address is 810 Houston Street, Suite 2000, Fort Worth, Texas 76102 ("Seller"),
and ENCORE OPERATING, L. P., a Texas limited partnership, whose address is 777
Main Street, Suite 1400, Fort Worth, Texas 76102 ("Buyer").
In consideration of the mutual covenants and agreements contained
herein, the benefits to be derived by each party hereunder, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Seller and Buyer agree as follows:
ARTICLE 1. PURCHASE AND SALE
1.1 The Properties. Subject to the terms and conditions of this
Agreement, Seller agrees to sell and convey to Buyer, and Buyer agrees to
purchase from Seller, but effective as of 7:00 a.m. Standard Time, April 1,
2000, at the location of the respective Properties (the "Effective Time") all of
Seller's right, title, and interest in and to the following:
(a) The oil, gas and mineral leases described in Exhibit "A" attached
hereto, and the leasehold estates created thereby, and the mineral or royalty
interests described in said Exhibit "A" (collectively called the "Leases"),
insofar only as the Leases cover and relate to the land(s) specifically
described in Exhibit "A" (the "Land"), together with corresponding interests in
and to all the property and rights incident thereto, including all rights in any
pooled or unitized acreage by virtue of the Land being a part thereof, all
production from the pool or unit allocated to any such Land, and all interests
in any wells on the Land or within the pool or unit associated with the Land,
including, without limitation of the foregoing, the wells or units (the "Wells")
described on Exhibit "A-1" attached hereto; provided that, it is Seller's intent
to assign to Buyer all of Seller's rights and interests in Crockett County,
Texas, other than the Excepted Interests;
(b) All producing, nonproducing, shut-in, and abandoned oil and gas
wells, salt water disposal wells, injection wells, and water wells located on
the Leases or lands pooled or unitized therewith, and all personal property
(including pipelines), equipment, fixtures, and improvements located on and
appurtenant to the Leases and Land insofar as they are used or obtained in
connection with the operation of the Leases and the Wells and/or insofar as they
relate to the production, treatment, sale, or disposal of hydrocarbons or water
produced from the Leases or Land or attributable thereto;
(c) To the extent transferable by Seller without material restriction
under applicable law or third-party agreements (without the payment of any funds
or consideration), all contracts and contractual rights, obligations, and
interests, including all farmout and farmin agreements, operating agreements,
production sales and purchase contracts, saltwater disposal agreements, surface
leases, gas gathering or transportation agreements, division and transfer
orders, and other contracts or agreements covering or affecting any or all of
the interests described or referred to in
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this Section 1.1 (the "Contracts");
(d) All oil, condensate, natural gas, natural gas liquids, and other
minerals produced after the Effective Time attributable to Seller's interest in
the Properties;
(e) All of the rights, interests and estates created under those
certain easements, rights-of-way, servitudes, prescriptions, licenses, leases,
permits and/or other agreements described in Exhibit "A" attached hereto and
made a part hereof, including all rights and interests of Seller related to
gathering systems and/or salt water disposal agreements presently serving the
Leases, Wells, and Land, Additionally, all of Seller's right, title and interest
in and to all improvements, fixtures, and other real and/or personal property
(including, without limitation, all equipment, tanks, pipelines, flow lines,
gathering lines, compressors, dehydration units, separators, meters, metering
stations, buildings, fittings, pipe, pipe connector, valves, regulators, drips,
storage facilities, absorbers, dehydrators, and power, telephone and telegraph
lines) located on or under, or which in any way relate to, the Leases, Wells and
Land;
(f) All of Seller's rights under that certain Purchase and Sale
Agreement dated effective January 15, 1998, with Rio Arriba Investments, LLC,
the recorded Memorandum of Management Agreement and Power of Attorney dated
effective January 15, 1998, the recorded Option to Purchase Oil and Gas
Interests dated effective January 15, 1998, and the recorded Assignment of Oil
and Gas Leases with Reservation of Production Payment dated effective January
15, 1998, insofar as the said "January 15, 1998 Rio Arriba Tax Credit
Agreements" cover and affect Seller's interests in the Wells and Leases.
All of the above real and personal properties, rights, titles, and
interests described in subparagraphs (a) through (f) above, subject to the
limitations and terms expressly set forth herein and in the Exhibit "A" attached
hereto, but excluding the Excluded Property and the Excepted Interests described
below, are hereinafter collectively called the "Properties" or, individually, a
"Property".
1.2 Excluded and Excepted Assets . Seller specifically excludes from
this transaction all vehicles and other transportation equipment, furniture,
office supplies and equipment, telephones and radio or other telecommunication
systems, tools, store stock, spare parts, and equipment, and any other assets
not specifically used in connection with the operation of the Leases and Wells
(the "Excluded Property"). Seller will remove the Excluded Property either prior
to the Closing or within 30 days thereafter.
Additionally, SELLER SPECIFICALLY EXCEPTS FROM THIS AGREEMENT, AND
RESERVES UNTO ITSELF, AND ITS SUCCESSORS AND ASSIGNS any and all interests in
oil, gas and other minerals (whether royalty interests, overriding royalty
interests, leasehold interests, mineral interests, or otherwise) described on
Exhibit "A-2", or related to the leases or instruments described on Exhibit
"A-2" attached hereto. (Such interests being herein called the "Excepted
Interests").
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1.3 Credits: Accounts Receivable. All trade credits, accounts
receivable, notes receivable, and other receivables attributable to the
Properties with respect to any period or time prior to the Effective Time of the
purchase and sale shall remain the property of Seller and be excluded from this
sale.
ARTICLE 2. PURCHASE PRICE
2.1 Purchase Price. Buyer shall pay to Seller at Closing the sum of
Forty Three Million and No/100 Dollars ($43,000,000.00) (the "Purchase Price").
The Purchase Price shall be increased to include interest at the rate of nine
percent (9%) per annum on the Purchase Price (without any adjustments)
compounded on the first day of each month for the period commencing on the
Effective Date and ending on the Closing Date.
2.2 Earnest Money. Upon execution of this Agreement, Buyer shall tender
to Seller by wire transfer or certified check 10% of the above stated Purchase
Price as a performance deposit (the "Deposit"), which shall be retained by
Seller if Closing occurs and credited against the Purchase Price.
2.3 Adjustments to Purchase Price. The Purchase Price shall be adjusted
by the following:
(a) The Purchase Price shall be increased by an amount equal to the sum
of the following amounts (determined without duplication and on an accrual basis
in accordance with generally accepted accounting principles consistently
applied):
(i) The value, less taxes (other than taxes on net income), of
merchantable oil and other liquids in storage in the tanks (above
the pipeline connection, if applicable) as of the Effective Time
that is credited to the Properties, at the prevailing market
value at the time of sale in the area, adjusted for grade and
gravity;
(ii) The amount of all expenses incurred and paid or to be paid
by or on behalf of Seller, in connection with or attributable to
the ownership or operation of the Properties during the period
from the Effective Time to the Closing Date, including, but not
limited to, royalties, rentals, and other charges and expenses
billed under applicable operating agreements, or in the absence
of an operating agreement, expenses of the sort customarily
billed under such agreements, and including the customary
overhead charges related to the Properties;
(iii) An amount equal to all prepaid expenses attributable to the
Properties that are paid or to be paid by or on behalf of Seller
prior to the Closing Date and that are, in accordance with
generally accepted accounting principles, attributable to the
period after the Effective Time, including, without limitation,
prepaid ad valorem, property, production, severance, and similar
taxes (but not including income taxes) based upon or measured by
the ownership of property or the
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production of hydrocarbons or the receipt of proceeds
therefrom (any refund of ad valorem tax attributable to the
period before the Effective Time and received by Buyer shall
be paid to Seller); and
(iv) Any other amounts required under this Agreement or
otherwise agreed upon by Seller and Buyer.
(b) The Purchase Price shall be decreased by an amount equal to the sum
of the following amounts (determined without duplication and on an accrual basis
in accordance with generally accepted accounting principles consistently
applied):
(i) The amount of all proceeds received by Seller prior to
the Closing Date attributable to the Properties and that are
attributable to the time after the Effective Time;
(ii) An amount equal to all unpaid ad valorem, property,
production, severance, and similar taxes and assessments
(but not including income taxes) based upon or measured by
the ownership of property or the production of hydrocarbons
or the receipt of proceeds therefrom accruing to the
Properties prior to the Effective Time, which amount shall
be computed based upon such taxes assessed against the
applicable portion of the Properties for the preceding
calendar year or, if such taxes are assessed on other than a
calendar year basis, for the tax-related year last ended;
and
(iii) Any other amounts required under this Agreement or
otherwise agreed upon by Seller and Buyer.
ARTICLE 3. REPRESENTATIONS OF SELLER
3.1 Existence. Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the state of its incorporation,
and is duly qualified to do business in the states in which the Properties are
located.
3.2 Authorization. Seller has all authority necessary to enter into
this Agreement and to perform all its obligations hereunder. This Agreement has
been duly executed and delivered on its behalf, and at the Closing all documents
and instruments required hereunder will have been duly executed and delivered.
This Agreement, and all such documents and instruments shall constitute legal,
valid, and binding obligations enforceable in accordance with their respective
terms, except to the extent enforceability may be affected by bankruptcy,
reorganization, insolvency, or similar laws affecting creditors' rights
generally.
3.3 Power. Subject to preferential purchase rights and restrictions on
assignment of the type typically found in the oil and gas industry, and to
rights to consent by, required notices to, and filings with or actions by other
governmental entities, Seller's execution, delivery, and
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performance of this Agreement and the transactions contemplated hereby will not:
(i) violate or conflict with any provision of its certificate of incorporation,
by-laws, or other governing documents; (ii) result in the breach of any term or
condition of, or constitute a default or cause the acceleration of any
obligation under any agreement or instrument to which it is a party or by which
it is bound; or (iii) violate or conflict with any applicable judgment, decree,
order, permit, law, rule, or regulation.
3.4 Brokers. Seller has incurred no liability, contingent or otherwise,
for broker's or finder's fees in respect of this transaction, for which Buyer
shall have any responsibility whatsoever.
3.5 Foreign Person. Seller is not a "foreign person" within the meaning
of the Internal Revenue Code of 1986, as amended (the "Code"), Section 1445 and
7701 (i.e. Seller is not a nonresident alien, foreign corporation, foreign
partnership, foreign trust, or foreign estate as those terms are defined in the
Code and any regulations promulgated thereunder).
3.6 Litigation. Except as set forth on Schedule 3.6, there are no
lawsuits directly involving the Properties with respect to which Seller has
received service of process.
3.7 Taxes. To Seller's knowledge, all ad valorem, property, production,
excise, severance, windfall profit, and similar taxes and assessments based on
or measured by the ownership of property or the production or removal of
hydrocarbons or the receipt of proceeds therefrom on the Properties since the
acquisition of each interest in the Properties by Seller have been paid timely.
3.8 Leases. To Seller's knowledge, (a) Seller has not received notice
of any, and is not in material default under the terms and provisions of the
Leases; (b) all royalties, rentals, and other payments due thereunder by Seller
have been timely paid in full on or before the due dates thereof; and (c) all of
the wells have been drilled and completed within the boundaries of the Leases or
within the limits otherwise permitted by contract, pooling, or unit agreement.
3.9 Permits. Seller, or to Seller's knowledge, the operator of the
Properties, has obtained and holds, or has caused to be obtained and to be held,
in good standing, all licenses, permits, or other authorizations necessary to
carry on business connected with the Properties as currently conducted where
failure to obtain such licenses, permits, or other authorizations would have a
material adverse effect on the Properties or operations thereof by Buyer.
3.10 Compliance with Laws. To Seller's knowledge, Seller is not in
material violation of any applicable laws or statutes, or any applicable
regulations, rules or orders promulgated by the Federal Energy Regulatory
Commission, the MMS, or any other federal or state regulatory agency, or any of
their predecessor agencies, which might have a material adverse effect on the
ownership or operation of the Properties or the production therefrom.
3.11 Seller's Title. Seller has Marketable Title to the Properties,
and Seller agrees to
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warrant its title to the Properties by, through, and under Seller, but not
otherwise; provided that, any claimed deficiency or discrepancy in the Seller's
Marketable Title of the interests stated on Exhibit "A-1" in the Properties
shall only be adjusted pursuant to the provisions of Section 6.4 at Closing.
3.12 Imbalances. To Seller's knowledge, there exists no imbalances
regarding production taken or marketed from any Well or Leases except as set
forth on Schedule 3.12 hereof.
3.13 Basic Documents. With respect to the "Basic Documents" (defined
below), to the knowledge of Seller: (i) all of such Basic Documents are in full
force and effect and are the valid and legally binding obligations of the
parties thereto, (ii) Seller is not in breach or default with respect to any
material obligations pursuant to any such Basic Document or any regulations
incorporated therein or governing same; (iii) all material payments (including,
without limitation, joint interest or other billings under unit or operating
agreements) due thereunder have been made by Seller or will be made by Seller
prior to Closing; (iv) no other party to any Basic Document (or any successor in
interest thereto) is in breach or default with respect to any of its material
obligations thereunder; and (v) neither Seller not any other party to any Basic
Document has given or threatened to give notice of any action to terminate,
cancel, rescind or procure a judicial reformation of any Basic Document or any
provision thereof. As used herein the term "Basic Documents" shall mean all
contracts for the sale and purchase of gas produced from the Properties,
farmout, dry hole, bottom hole, acreage contribution, purchase and acquisition
agreements, operating agreements, area of mutual interest agreements, salt water
disposal agreements, servicing contracts, easement and/or right-of-way
agreements, unitization or pooling agreements and all other material executory
contracts and agreements relating to the Properties, other than the leases.
3.14 Take or Pay. To Seller's knowledge no contract for the sale of gas
produced from any of the Properties contains any obligation to deliver in the
future to the purchaser thereunder gas previously paid or under any "take or
pay" provision and none of the Properties is subject to penalties on allowables
after the Effective Date because of overproduction or any violation of
applicable laws, rules or regulations of any governmental authority which would
prevent such Property from being entitled to its full and regular allowable from
and after the Effective Date.
3.15 Knowledge. As used in these representations and other provisions
in this Agreement, the phrase "to Seller's knowledge," or other similar language
which qualifies a statement as to the knowledge of Seller, will mean that within
the actual present knowledge of a Responsible Officer (i.e., any Vice President,
Comptroller, Assistant Comptroller, General Counsel or Senior Vice President)
such Officer has received no verbal information from an employee of Seller or
any written information indicating that the specific statement so qualified is
not accurate. In no event will any representation or other statement qualified,
to Seller's knowledge, give rise to any implication or presumption that a
specific inquiry or any inquiry has been made by any Responsible Officer to
confirm or negate the matter being represented; and Buyer acknowledges that any
such representation will be based solely on the actual present
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knowledge of the Responsible Officers as described herein above.
ARTICLE 4. REPRESENTATIONS OF BUYER
4.1 Existence. Buyer is a limited partnership duly organized, validly
existing, and in good standing under the laws of the state of its organization,
and is duly qualified to do business in the states in which the Properties are
located.
4.2 Authorization. Buyer has all authority necessary to enter into this
Agreement and to perform all its obligations hereunder. This Agreement has been
duly executed and delivered on its behalf, and at the Closing all documents and
instruments required hereunder will have been duly executed and delivered. This
Agreement, and all such documents and instruments shall constitute legal, valid,
and binding obligations enforceable in accordance with their respective terms,
except to the extent enforceability may be affected by bankruptcy,
reorganization, insolvency, or similar laws affecting creditors' rights
generally.
4.3 Power. Subject to rights to consents by, required notices to, and
filings with or other actions by governmental entities, Buyer's execution,
delivery, and performance of this Agreement and the transactions contemplated
hereby will not: (i) violate or conflict with any provision of its certificate
of incorporation, by-laws, or other governing documents; (ii) result in the
breach of any term or condition of, or constitute a default or cause the
acceleration of any obligation under any agreement or instrument to which it is
a party or by which it is bound; or (iii) violate or conflict with any
applicable judgment, decree, order, permit, law, rule, or regulation.
4.4 Brokers. Buyer has incurred no liability, contingent or otherwise,
for broker's or finder's fees in respect of this transaction, for which Seller
shall have any responsibility whatsoever.
4.5 Further Distribution. Buyer (i) is acquiring the Properties for its
own account and without a view to the distribution thereof within the meaning of
the Securities Act of 1933, as amended; (ii) has such knowledge and experience
in business, financial, and oil and gas matters that it is capable of evaluating
the merits and risks of entering into and of carrying out its obligations in
connection with the acquisition of the Properties in the manner contemplated
herein; (iii) has received to date all information concerning the Properties and
such other information relating to this Agreement which it requested; and (iv)
is able to bear the economic risk of its investment in the Properties for an
indefinite period of time. Further, Buyer acknowledges that Seller is relying
upon the representations contained in the foregoing sentence and that absent
such representations the proposed sale to Buyer would not be entered into and
this Agreement would not be executed and delivered by Seller.
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ARTICLE 5. DISCLAIMER OF WARRANTIES
5.1 Information Provided. All the information, statistics, summaries,
and facsimiles furnished by or on behalf of Seller herewith or hereunder are
furnished or will be furnished for Buyer's use at Buyer's sole risk. All such
information has been compiled or prepared by or on behalf of Seller based upon
Sellers files and records, and such information is believed to be correct;
provided that, NEITHER SELLER, RANDALL & DEWEY, INC., LEHMAN BROTHERS, NOR ANY
OF THEIR RESPECTIVE AFFILIATES, EMPLOYEES, OR REPRESENTATIVES, MAKES OR HAS MADE
ANY REPRESENTATION, EXPRESS OR IMPLIED, AS TO THE ACCURACY, CORRECTNESS,
COMPLETENESS, OR THE ADEQUACY OF SAME AND DOES NOT WARRANT OR GUARANTEE SUCH
INFORMATION IN ANY WAY. NEITHER SELLER, RANDALL & DEWEY, INC., LEHMAN BROTHERS,
NOR ANY OF THEIR RESPECTIVE AFFILIATES, EMPLOYEES, OR REPRESENTATIVES, HAS MADE
ANY STATEMENTS OR REPRESENTATIONS CONCERNING THE ENVIRONMENTAL CONDITION OF THE
PROPERTIES, PRODUCTION RATES, RECOMPLETION OPPORTUNITIES, DECLINE RATES,
GEOLOGICAL OR GEOPHYSICAL DATA OR INTERPRETATIONS, THE QUALITY, QUANTITY,
RECOVERABILITY OR COST OF RECOVERY OF ANY HYDROCARBON RESERVES, ANY PRODUCT
PRICING ASSUMPTIONS, THE ABILITY TO SELL OR MARKET ANY HYDROCARBONS AFTER
CLOSING, OR THE PRESENT OR FUTURE VALUE OF THE ANTICIPATED INCOME, COSTS, OR
PROFITS, IF ANY, TO BE DERIVED FROM THE PROPERTIES. BUYER IS RESPONSIBLE FOR
MAKING SUCH INDEPENDENT INVESTIGATION AND EVALUATION OF THE PROPERTIES AS BUYER
SHALL DEEM APPROPRIATE, REALIZING THAT SELLER DOES NOT ASSUME AND SHALL HAVE NO
LIABILITY TO BUYER OR ANY OTHER PARTY FOR ANY RELIANCE WHICH MAY BE PLACED ON
THE INFORMATION, STATISTICS, SUMMARIES, OR FACSIMILES FURNISHED OR ANY
STATEMENTS MADE RELATED TO THIS TRANSACTION. SPECIFICALLY, BUT WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING THE DESCRIPTION OF LEASES INCLUDED IN THE
PROPERTIES, THE ACREAGE PURPORTED TO BE COVERED THEREBY, DEPTH LIMITATIONS (IF
ANY), ROYALTY AND OTHER BURDENS AFFECTING SAME, AND QUANTUM OF INTEREST HAVE
BEEN DERIVED STRICTLY FROM SELLER'S RECORDS AND SELLER HAS NOT UNDERTAKEN ANY
EXAMINATION OF TITLE TO VERIFY SAME. EXCEPT AS TO THE LIMITED SPECIAL WARRANTY
OF TITLE DESCRIBED HEREIN, SELLER DOES NOT WARRANT TITLE TO THE PROPERTIES AND
BUYER SHOULD THEREFORE UNDERTAKE SUCH TITLE EXAMINATION AS IT DEEMS APPROPRIATE
PRIOR TO CLOSING.
5.2 Regulatory Status. SELLER MAKES NO WARRANTY OR REPRESENTATION
WHATSOEVER AS TO THE REGULATORY STATUS OF THE PROPERTIES, AND BUYER SHOULD
SATISFY ITSELF AS TO SUCH MATTERS PRIOR TO THE CLOSING.
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5.3 No Warranties. CONVEYANCE OF THE PROPERTIES WILL BE MADE WITHOUT
WARRANTIES OR COVENANTS, EXPRESS OR IMPLIED IN FACT OR IN LAW, AS TO TITLE,
MERCHANTABILITY, DURABILITY, USE, OPERATION, FITNESS FOR ANY PARTICULAR PURPOSE,
CONDITION, SAFETY OF THE PROPERTIES, COMPLIANCE WITH REGULATORY AND
ENVIRONMENTAL REQUIREMENTS OR OTHERWISE.
5.4 Buyer Inspection. BUYER HEREBY AGREES THAT IT WILL INSPECT THE
PROPERTIES, INCLUDING THE LEASES AND THE CONTRACTS, WELLS, PERSONAL PROPERTY,
AND EQUIPMENT ASSIGNED AND CONVEYED HEREIN AND THAT IT WILL ACCEPT THE SAME "AS
IS, WHERE IS" AND "WITH ALL FAULTS". BUYER RELEASES SELLER GROUP (AS DEFINED
HEREIN) FROM LOSSES (AS DEFINED HEREIN) WITH RESPECT TO THE PROPERTIES, WHETHER
OR NOT CAUSED BY OR ATTRIBUTABLE TO SELLER'S NEGLIGENCE AND WHETHER OR NOT
ARISING FROM OR IN CONNECTION WITH OR DURING THE PERIOD OF SELLER'S OWNERSHIP OR
USE OF THE PROPERTIES. WITHOUT LIMITING THE ABOVE, BUYER WAIVES ITS RIGHT TO
RECOVER FROM SELLER GROUP AND FOREVER RELEASES AND DISCHARGES SELLER GROUP FROM
ANY AND ALL LOSSES, PENALTIES, FINES, LIENS, JUDGMENTS, COSTS AND EXPENSES
WHATSOEVER (INCLUDING, WITHOUT LIMITATION, ATTORNEY'S FEES AND COSTS), WHETHER
DIRECT OR INDIRECT, KNOWN OR UNKNOWN, FORESEEN OR UNFORESEEN, THAT MAY ARISE ON
ACCOUNT OF OR IN ANY WAY BE CONNECTED WITH THE PHYSICAL CONDITION OF THE
PROPERTIES OR ANY LAW OR REGULATION APPLICABLE THERETO, INCLUDING, WITHOUT
LIMITATION, THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY
ACT OF 1980, AS AMENDED (42 U.S.C. 9601 ET. SEQ.), THE RESOURCE CONSERVATION AND
RECOVERY ACT OF 1976 (42 U.S.C. 6901 ET. SEQ.), THE CLEAN WATER ACT (33 U.S.C.
466 ET. SEQ.), THE SAFE DRINKING WATER ACT (14 U.S.C. 1401-1450), THE HAZARDOUS
MATERIALS TRANSPORTATION ACT (49 U.S.C. 1801 ET SEQ.), THE TOXIC SUBSTANCE
CONTROL ACT (15 U.S.C. 2601-2629) AND ALL APPLICABLE STATE OR LOCAL LAWS.
5.5 Prior Operations. Buyer acknowledges that the Properties have been
utilized for the purpose of production and development of oil and gas, and some
oil field production equipment may contain asbestos or naturally occurring
radioactive material (hereinafter referred to as "NORM"). In this regard Buyer
expressly understands that NORM may affix or attach itself to the inside of
wells, tubulars and equipment as scale, or in other forms, and that said wells
tubulars and equipment located on the Properties or included therein may contain
NORM, and that NORM-containing material may be buried or otherwise disposed of
on the Properties. Buyer also expressly understands that special procedures may
be required for the remediation, removal, transportation and disposal of
asbestos and NORM from the Properties where it may be found, and Buyer assumes
all responsibility and liability for or in connection with assessment,
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remediation, removal, transportation, and disposal of any such materials in
accordance with all rules, regulations and requirements of governmental
agencies.
ARTICLE 6. TITLE MATTERS
6.1 Definition of Marketable Title. As used herein, the term
"Marketable Title" shall mean, in the case of the Leases listed on Exhibit "A",
such right, title and interest (owned beneficially or of record) that, except
for Permitted Encumbrances:
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(a) is free from reasonable doubt to the end that a prudent person
engaged in the business of purchasing and owning, developing and operating
producing oil and gas properties with knowledge of all of the facts and their
legal bearing would be willing to accept the same;
(b) entitles Seller to receive not less than the interest set forth in
Exhibit "A-1" as the "Net Revenue Interest" or "NRI" with respect to the oil,
gas, and associated hydrocarbon minerals produced, saved and marketed from each
unit or Well, as the case may be, that relates to the presently producing
intervals in the Land included within each property identified on Exhibit "A"
(each such identified property being herein referred to as a "Property");
(c) obligates Seller to pay costs and expenses relating to the
operations on and the maintenance and development of each unit or well, as the
case may be, that relates to the presently producing intervals in the Land
included within each Property, in an amount not greater than the "Working
Interest" or "WI" set forth in Exhibit "A-1" with respect to such Property,
without a corresponding increase in the Net Revenue Interest for such Property;
and
(d) is free and clear of any encumbrances, mortgages, liens, or consent
requirements.
6.2 Definition of Permitted Encumbrances. As used herein, the term
"Permitted Encumbrances" shall mean:
(a) Lessors' royalties, overriding royalties, reversionary interests,
net profits interests, and similar burdens affecting a Lease if the net
cumulative effect of such burdens does not operate to reduce the interest of
Seller with respect to oil and gas produced from any units or Wells below the
"Net Revenue Interest" or "NRI" set forth in Exhibit "A-1" for the Property to
which such units or Wells relate;
(b) Division orders and sales contracts terminable without penalty upon
no more than 90 days notice to the purchaser;
(c) Preferential rights to purchase and required third-party consents
to assignments and similar agreements with respect to which waivers or consents
are obtained from the appropriate parties or the appropriate time period for
asserting the rights has expired without an exercise of such rights;
(d) Materialman's, mechanic's, repairman's, employee's, contractor's,
operator's, tax, and other similar liens or charges arising in the ordinary
course of business for obligations that are not delinquent or that will be paid
and discharged in the ordinary course of business or, if delinquent, that are
being contested in good faith by appropriate action;
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(e) All rights to consent by, required notices to, filings with, or
other actions by governmental entities in connection with the sale or conveyance
of oil and gas leases or interests therein;
(f) Conventional rights of reassignment upon the abandonment or
termination of any lease, requiring notice to the holders of such rights;
(g) Easements, rights-of-way, servitudes, permits, surface leases, and
other rights of third parties in respect of surface operations, in each instance
containing provisions not considered unduly burdensome in the industry;
(h) All other liens, charges, encumbrances, contracts, agreements,
obligations, title defects, or irregularities affecting the Leases or the units
or Wells to which they relate that, individually or in the aggregate, with
respect to an individual Property:
(i) are not such as to materially interfere with the operation
or use of the Leases (or portion thereof) affected thereby;
(ii) do not presently delay the receipt or prevent Seller from
receiving its share of the proceeds of production from any of the units
or Wells to which the Leases relate;
(iii) do not presently reduce the interest of Seller with
respect to all oil and gas produced from any unit or Well to which the
Leases relate below the "Net Revenue Interest" or "NRI" set forth in
Exhibit "A-1" for the Property to which such unit or Well relates; and
(iv) do not presently increase Seller's portion of the costs
and expenses relating to the operations on and the maintenance and
development of the Land included in any unit or Well to which the
Leases relate above the "Working Interest" or "WI" set forth in Exhibit
"A-1" for the Property to which such unit or Well relates;
(i) All rights reserved to or vested in any municipality or
governmental statutory or public authority to control or regulate any of the
Leases in any manner, and all applicable laws, rules, and orders of any such
authority;
(j) Any Title Defects Buyer may have expressly waived in writing or
which are deemed to have been waived under Section 6.3 or any other matters that
are included in the adjustments to the Purchase Price pursuant to Section 2.3;
(k) The terms and provisions of all operating agreements, unit
agreements, unit operating agreements, communitization agreements, net profits
agreements, and tax credit agreements affecting the Leases identified on Exhibit
"A", and all pooling agreements and pooling designations affecting the Leases
(other than any terms or provisions of such pooling agreements and pooling
designations that affect the NRI or WI of such Leases); and
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(l) Calls on or preferential rights to purchase production, held by
parties other than Seller or its affiliates.
6.3 Notice of Title Defect. Buyer shall notify Seller in writing, as
soon as reasonably practicable after Buyer has knowledge thereof, and in any
event on or before 4:00 p.m., Central Time, on March 27, 2000 (the "Notification
Deadline"), of any matter ("Title Defect") that would cause Seller's title to
any of the Properties not to be Marketable Title, in each case together with a
detailed explanation of (a) the nature of such Title Defect, (b) the Leases (or
portions thereof) affected thereby, and (c) Buyer's proposed Defect Value (as
hereinafter defined) for such Title Defect. Any matters that would otherwise
constitute Title Defects but which are not specifically raised in writing (with
the detailed explanation as contemplated in the immediately preceding sentence)
by Buyer prior to the Notification Deadline shall conclusively be deemed waived
by Buyer. As used herein, the term "Defect Value" shall mean with respect to
each Title Defect, the reduction in the "Allocated Value" of the affected Leases
as a result of such Title Defect, as determined pursuant to Section 6.5.
6.4 Remedies for Title Defects; Title Increases.
(a) Seller shall have the right, but not the obligation, to attempt to
cure any Title Defect with respect to which it has received notice from Buyer
prior to the Notification Deadline.
(b) With respect to any Title Defect for which Seller received the
required notice from Buyer before the Notification Deadline, Seller may, subject
to the terms of the last sentence of this Section 6.4(b), elect at Closing from
among the following options with respect to Title Defects that remain uncured:
(i) Seller may elect to indemnify Buyer against all liability,
loss, cost, and expense resulting from such Title Defect, in which
event the Purchase Price shall not be reduced and the Lease subject to
such Title Defect shall be sold to Buyer hereunder (it being understood
and agreed, however, that in no event shall Seller's liability under
any such indemnity exceed the Defect Value of the Title Defect to which
such indemnity relates);
(ii) Seller may elect to exclude the Lease subject to the
Title Defect from the sale hereunder, in which event the Purchase Price
shall be reduced by the Allocated Value (as defined in Section 6.5) of
such Lease; or
(iii) If Seller has not elected any of the foregoing, the
Lease subject to such Title Defect shall be sold to Buyer hereunder and
the Purchase Price shall be reduced by the Defect Value for such Title
Defect.
No adjustment to the Purchase Price for Title Defects shall be made unless and
until, and only to the extent that the individual value of each Title Defect
exceeds $25,000.00, and the aggregate
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value of all Title Defects (less any Title Increase (as defined below)) exceeds
$1,720,000.00. No adjustment shall be made for the first $1,720,000.00 of Title
Defects (less any Title Increases).
(c) To the extent that same are discovered by either party prior to the
Notification Deadline, Seller and Buyer acknowledge and agree that the Purchase
Price shall be increased (a "Title Increase") by an amount equal to the value
allocated to the following:
(i) any increase in Seller's Net Revenue Interest shown on
Exhibit "A" for a Property without a corresponding increase for
Seller's Working Interest above that shown on Exhibit "A" for such
Property; or
(ii) any decrease in Seller's Working Interest below that
shown on Exhibit "A" for any Property without a corresponding decrease
in the Net Revenue Interest shown on Exhibit "A" for such Property;
in each case with such values to be agreed upon by Seller and Buyer (taking into
account the Allocated Value for such Property) or otherwise determined pursuant
to the procedures set forth in Section 6.5; provided, there shall be no increase
in the Purchase Price for Title Increases pursuant to the terms of this Section
6.4(c) unless and until the aggregate of all Title Increase values (less any
Title Defects) exceeds $1,720,000.00 and then only with respect to the excess of
such aggregate net Title Increase values over $1,720,000.00.
(d) Notwithstanding anything to the contrary contained in this
Agreement:
(i) the existence of a Title Defect shall not result in Buyer
having any right to exclude any Lease from the sale hereunder or to
fail to perform its obligations at Closing; and
(ii) there shall be no adjustment to the Purchase Price as a
result of Seller's title to any of the Properties other than the
Leases.
6.5 Value of Leasehold Interest or Title Defect. As used herein, the
term "Allocated Value" shall mean, with respect to any Lease, or any unit or
well relating thereto, the amount set forth on Exhibit "B" for each Property. If
Seller does not agree with Buyer's proposed Defect Value or the parties are
unable to agree upon whether a Title Defect exists, the Allocated Value of a
Property or the value allocated to a Title Increase, in each case for purposes
of Section 6.4, then the parties shall enter into good faith negotiations and
shall attempt to agree on such matter. If the parties are unable to reach an
agreement on the existence of a Title Defect or the Defect Value of a Title
Defect or the value allocated to any Title Increases, in any such case within 10
days after the commencement of good faith negotiations, at either party's
option, upon notice to the other party, such shall be determined by arbitration
as provided in Article 15. In the event arbitration is not concluded prior to
the Closing Date, the Property affected by the alleged Title Defect shall be
excluded from the sale to Buyer under this Agreement, and the Purchase Price
shall be reduced by the Allocated Value therefor. If the arbitration determines
that there should
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be an adjustment to the Allocated Value, Seller will elect among the options in
Section 6.4(b) as to the affected Property; if the arbitration determines that
there should be no adjustment to the Allocated Value, then Seller will convey
the Property to Buyer and Buyer will pay to Seller the Allocated Value.
6.6 Consents; Preferential Rights. Should any of the Contracts require
a consent to assignment of any of the Properties, then the sale of the
Properties affected thereby will be subject to Seller obtaining such consent or
a waiver of such consent. Seller shall not be obligated to incur any expenses to
obtain such consent or waiver and shall not be liable to Buyer by reason of any
inability or failure to obtain any such waiver or consent. If any of the
Properties are subject to a preferential right to purchase and, prior to
Closing, any holder of a preferential right to purchase notifies Seller that it
intends to consummate the purchase of the Property to which its preferential
right applies, or if the preferential purchase right has not been waived or
expired, then the affected Properties shall be excluded from the sale to Buyer
under this Agreement, and the Purchase Price shall be reduced by the Allocated
Value of such Property; provided, however, that if the holder of such
preferential right fails to exercise or consummate the purchase of the Property
covered by such right, then within 60 days following the Closing Date, Seller
shall so notify Buyer, and within 30 days after Buyer's receipt of such notice
from Seller, Seller shall sell to Buyer, and Buyer shall purchase from Seller,
for a price equal to the Allocated Value of such Property (as adjusted pursuant
to the provisions of Section 2.3 above) and upon the other terms of this
Agreement (to the extent applicable), the Property to which the preferential
right applied.
6.7 Risk of Loss. No adjustment to the Purchase Price shall be made if,
after the date hereof and prior to the Closing, any part of the Properties shall
be destroyed or harmed by fire or any other casualty or cause or shall be taken
by condemnation or the exercise of eminent domain, but Buyer shall be entitled
to any applicable insurance proceeds (to the extent actually received by Seller
and not payable from a captive insurance carrier or subject to reimbursement or
repayment by Seller or its affiliates) or condemnation awards.
ARTICLE 7. ENVIRONMENTAL MATTERS
7.1 Environmental Assessment. Buyer shall have the right, at Buyer's
sole risk and expense, to make an environmental assessment of the Properties
during the period beginning on the date of execution of this Agreement and
ending at the close of business on March 15, 2000 ("Examination Period") subject
to the confidentiality agreement dated February 17, 2000 previously signed by
Buyer. During Seller's normal business hours and after providing Seller 48 hours
prior notice of any such activities, Buyer and its representatives shall have
the right to enter upon the Properties and all buildings and improvements
thereon, inspect the same, conduct soil and water tests and borings, and
generally conduct such tests, examinations, and investigations as may be
necessary for the preparation of appropriate environmental reports relating to
the Properties and their condition. Seller will have the right to (i) witness
all tests and investigations, (ii) receive an equal distribution of all samples
taken by Buyer or its representative, and (iii) promptly receive a copy of any
environmental report prepared. Further, Seller grants Buyer access to the
Properties to conduct its environmental assessment upon the
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condition that Buyer indemnifies and holds Seller Group harmless from and
against any and all claims arising out of or as a result of the activities of
Buyer or its representatives on the Property in conducting such environmental
assessment.
7.2 Environmental Defects. Buyer will notify Seller on or before March
15, 2000, at 4:00 p.m., Central Time (the "Environmental Notice Deadline") of
(i) the existence of any environmental condition on the real property comprising
any property that constitutes a violation of Environmental Laws as in effect on
the date hereof and requires immediate remediation under such laws, and (ii) the
cost to remediate such condition as to any individual Property, determined
utilizing the most cost effective method of remediation available. In the event
the cost of remediation is in excess of $25,000.00 as to any individual affected
Property (an "Environmental Defect") and the aggregate remediation costs of all
such Environmental Defects exceed $1,720,000.00, then Seller may, at its sole
option, and as to each such Property affected, elect to:
(a) agree to undertake such remedial action as may be required to cause
such Property to be brought into compliance with Environmental Laws as in effect
on the date hereof (which remedial action would be undertaken by Seller promptly
following Closing), in which event the affected Property would be purchased by
Buyer at Closing and the Purchase Price would not be reduced on account of such
Environmental Defect; or
(b) exclude the affected Property and reduce the Purchase Price by the
Allocated Value for such Property; or
(c) adjust the Purchase Price in the amount that the agreed aggregate
remediation costs exceed the limitation amount in Section 7.3; or
(d) indemnify Buyer for remediation costs when and if such remediation
is actually undertaken.
If Seller elects to undertake remedial action or indemnify Buyer for remediation
costs pursuant to the foregoing provisions, Buyer shall be responsible for the
first $1,720,000.00 in remediation costs incurred. Buyer agrees, to the full
extent that it has the right to do so, to grant Seller such access as may be
necessary to permit Seller to complete such remedial action.
7.3 Limitations.
(a) No adjustment to the Purchase Price will be made and Seller will
not be obligated to undertake any action in respect to the first $1,720,000.00
of remediation costs for Environmental Defects.
(b) Seller shall not be responsible to remediate or to pay for
remediation costs in excess of the Allocated Value of the affected Property.
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(c) Any environmental condition which was disclosed to or known by
Buyer before the execution of this Agreement will not qualify as an
Environmental Defect under Section 7.2.
(d) The indemnification, if any, provided under Section 7.2(d) shall
terminate, and Seller shall have no further obligation under Section 7.2, for
remediation projects commenced more than one year after the date of this
Agreement.
7.4 Environmental Laws. As used herein, the term "Environmental Laws"
shall mean any and all laws, statutes, regulations, rules, orders, ordinances,
permits, or determinations of any governmental authority pertaining to health or
conservation or protection of the environment, wildlife, or natural reserves in
effect in any and all jurisdictions in which the Property is located, including,
without limitation, the Clean Air Act, as amended, the Federal Water Pollution
Control Act, as amended, the Safe Drinking Water Act, as amended, the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
as amended, the Superfund Amendments and Reauthorization Act of 1986 ("SARA"),
as amended, the Resource Conservation and Recovery Act ("RCRA"), as amended, the
Hazardous and Solid Waste Amendments Act of 1984, as amended, the Toxic
Substances Control Act, as amended, and the Occupational Safety and Health Act
("OSHA"), as amended. The terms "hazardous substance", "release", and
"threatened release" shall have the meanings specified in CERCLA; provided,
however, that to the extent the laws of the state in which the Property is
located are applicable and have established a meaning for "hazardous substance",
"release", "threatened release", "solid waste", "hazardous waste", and
"disposal" that is broader than that specified in CERCLA or RCRA, such broader
meaning shall apply with respect to the matters covered by such laws.
ARTICLE 8. COVENANTS OF SELLER
8.1 Access to Records. Prior to the Closing Date, Seller shall grant
Buyer access to the Records during Seller's normal business hours upon
reasonable prior notification, subject to the confidentiality agreement
previously signed by Buyer. The Records shall be made available at their present
location together with suitable office facilities for review purposes.
8.2 Operations. From the date of this Agreement until Closing (the
"Interim Period"), except as otherwise approved by Buyer (which approval shall
not be unreasonably withheld), Seller:
(a) shall permit Buyer to have access to those Properties operated by
Seller and shall use reasonable efforts to provide Buyer access to those
Properties not operated by Seller;
(b) shall operate the Properties for which it is the operator in
accordance with past practices;
(c) shall not transfer, sell, hypothecate, encumber, or otherwise
dispose of any of the Properties (other than sale of production in the ordinary
course of business or as required in
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connection with the exercise by third parties of preferential rights to purchase
any of the Properties);
(d) shall not abandon any wells or surrender any Leases (other than as
required by law or governmental order or regulation or in connection with an
emergency);
(e) shall not enter into any production sale, processing, or treating
agreements affecting the Properties not terminable on no more than 30 days'
notice;
(f) shall promptly notify Buyer of any written notice received by
Seller relating to any claims or lawsuits relating to the Properties; and
(g) shall not make any commitments to expend funds in connection with
the ownership or operation of the Properties (other than as required by law or
governmental order or regulation or in connection with an emergency) in an
amount in excess of $50,000 net to Seller's interest. If Buyer fails to respond
within a period reasonably requested by Seller (taking into account any time
limitations imposed on Seller) following delivery by Seller of a request for
approval with respect to any such proposed action or expenditure, then Buyer
shall be deemed to have agreed with Seller's election or other determination
with respect thereto.
8.3 Permissions. During the Interim Period, Seller will use reasonable
efforts to obtain all permissions, approvals, and consents of federal, state,
and local governmental authorities and others as may be required to consummate
the sale contemplated hereunder (excluding governmental permissions, approvals,
and consents which are customarily obtained after the consummation of
transactions of the type contemplated hereunder).
8.4 Resignation as Operator. As to the Properties which are operated by
Seller, Seller will tender its resignation as operator as of the Closing and
will cooperate with Buyer in seeking to have Buyer selected as successor
operator as soon as is practicable.
ARTICLE 9. COVENANTS OF BUYER
9.1 Return of Data. Buyer agrees that if this Agreement is terminated
for any reason whatsoever, Buyer shall, at Seller's request, promptly return to
Seller all information and data furnished by or on behalf of Seller to Buyer,
its officers, employees, and representatives in connection with this Agreement
or Buyer's investigation of the Properties, and Buyer shall deliver to Seller or
destroy all copies, extracts, or excerpts of such information and data and all
documents generated by Buyer that contain any portion of such information or
data.
9.2 Indemnity Regarding Access. Buyer agrees to protect, indemnify,
defend, and hold harmless Seller Group from and against any and all Losses in
connection with personal injuries, including death, or property damage arising
out of or relating to the access of Buyer, its officers, employees, and
representatives to the Properties and any information relating thereto as
permitted under this Agreement, REGARDLESS OF WHETHER SUCH INJURIES, DEATH,
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OR DAMAGES ARE CAUSED IN WHOLE OR PART BY THE SOLE, PARTIAL, CONCURRENT, OR
OTHER NEGLIGENCE, STRICT LIABILITY, OR OTHER FAULT OF SELLER GROUP.
ARTICLE 10. SELLER'S CONDITIONS OF CLOSING
The obligation of Seller to close this transaction shall be subject to
and conditioned upon the following, any one or more of which may be waived by
Seller, in whole or in part:
10.1 Representations. The representations of Buyer under Article 4 of
this Agreement shall be true and accurate in all material respects as of the
date when made and shall be deemed to be made again at and as of the time of the
Closing and shall then be true and accurate in all material respects.
10.2 Performance. Buyer shall have performed and complied with each
covenant, agreement, and condition required by this Agreement to be performed or
complied with by it prior to or at Closing.
10.3 Pending Matters. At Closing, no litigation, proceeding,
investigation, or inquiry shall be pending or threatened to enjoin or prevent
the consummation of the transactions contemplated by this Agreement.
10.4 Bonds. Where applicable, Buyer shall have furnished evidence
satisfactory to Seller that Buyer has obtained any requisite plugging bonds and
other assurances required by governmental authorities having jurisdiction,
including, where applicable, qualification to assume operatorship.
10.5 Other Adjustments. The aggregate sum of Title Defect, Title
Increase, and Environmental Defect adjustments does not exceed fifteen (15%)
percent of the Purchase Price.
ARTICLE 11. BUYER'S CONDITIONS OF CLOSING
The obligation of Buyer to close this transaction shall be subject to
and conditioned upon the following, any one or more of which may be waived by
Buyer, in whole or in part:
11.1 Representations. The representations of Seller under Article 3 of
this Agreement shall be true and accurate in all material respects as of the
date when made and shall be deemed to be made again at and as of the time of the
Closing and shall then be true and accurate in all material respects.
11.2 Performance. Seller shall have performed and complied with each
covenant, agreement, and condition required by this Agreement to be performed or
complied with by Seller prior to or at the Closing.
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11.3 Pending Matters. At Closing, no suit or action shall have been
instituted or threatened that questions or reasonably appears to portend
subsequent questioning of the validity or legality of this Agreement or the
transactions contemplated by this Agreement.
11.4 Other Adjustments. The aggregate sum of Title Defect, Title
Increase, and Environmental Defect adjustments does not exceed fifteen (15%)
percent of the Purchase Price.
ARTICLE 12. CLOSING
12.1 Time and Place of Closing. Subject to the conditions stated in
this Agreement, the consummation of the transactions contemplated hereby (the
"Closing") shall occur on March 30, 2000 (the "Closing Date"). The Closing shall
be held at Seller's offices located at 810 Houston Street, Suite 2000, Fort
Worth, Texas, or at such other location as may be mutually agreed upon by Seller
and Buyer.
12.2 Closing Obligations.
(a) At Closing, Seller shall deliver to Buyer the following:
(i) Executed Assignment and Bill of Sale of the Properties, in
the form attached hereto as Exhibit "C";
(ii) An initial settlement statement reflecting adjustments to
the Purchase Price as provided in Article 2 above;
(iii) Resignations of Seller as operator of any of the
Properties of which Seller is operated;
(iv) Executed change of operator forms, relating to all units
and Wells included within the Properties;
(v) Executed Accounting Agreement relating to the Properties,
in the form attached hereto as Exhibit "D";
(vi) Possession of the Properties; and
(vii) Letters in lieu of transfer orders prepared by Buyer,
directing the payment to Buyer of proceeds of production from
the Properties as of and after the Effective Time.
(b) At Closing, Buyer shall:
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(i) Deliver to Seller the Purchase Price, as adjusted pursuant
to Article 2, less the amount of the Deposit, by wire transfer
to Seller's account as identified by Seller;
(ii) Execute the Assignment and Bill of Sale delivered by
Seller to Buyer at Closing, evidencing Buyer's acceptance of
same and assumption of all obligations thereunder;
(iii) Provide evidence to Seller that Buyer has obtained any
requisite plugging bonds and other assurances required by
governmental authorities having jurisdiction, including, where
applicable, qualification to assume operatorship;
(iv) Execute the change of operator forms, executed copies of
which shall be retained by Seller; and
(v) Execute the Accounting Agreement delivered by Seller to
Buyer at Closing, evidencing Buyer's acceptance of same and
assumption of all obligations thereunder.
12.3 Further Assurances. The parties shall execute, acknowledge, and
deliver any other documents and shall take such other actions as may be
necessary to carry out their obligations under this Agreement.
ARTICLE 13. ADDITIONAL AGREEMENTS
13.1 Calculation of Adjusted Purchase Price. Within 120 days after the
Closing, Seller shall prepare, in accordance with this Agreement and with
generally accepted accounting principles consistently applied, and deliver to
Buyer a statement setting forth each adjustment to the Purchase Price required
pursuant to Section 2.3 and showing the calculation of each such adjustment.
Within 30 days after receipt of such statement from Seller, Buyer shall deliver
to Seller a written report containing all changes with explanations and
documentation therefor that Buyer proposes be made to such statement, it being
agreed that Buyer's failure to deliver such report to Seller within such time
period shall constitute acceptance by Buyer of Seller's statement. From and
after the expiration of such 30-day period, no additional changes to the
statement provided by Seller shall be considered by the parties. If Buyer has
timely delivered such written report, the parties shall then undertake to agree
on the items in dispute and the final Adjusted Purchase Price no later than 30
days after the receipt by Seller of Buyer's statement of proposed changes (it
being agreed that any disputes as to adjustments relating to Title Defects shall
be resolved prior to such time pursuant to the provisions of Article 6).
Following the final determination of the Adjusted Purchase Price pursuant to
this Section 13.1, Seller or Buyer, as the case may be, shall make the payment
required within five business days after such final determination. Buyer will
provide any information reasonably requested by Seller in order for Seller to
prepare such statement or verify Buyer's written report.
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13.2 Suspended Funds. As soon as practicable after the Closing, Seller
shall provide to Buyer a listing showing all proceeds from production
attributable to the Properties that are currently held in suspense and shall
transfer to Buyer all such suspended proceeds. Buyer shall be responsible for
proper distribution of all the suspended proceeds to the parties lawfully
entitled to them, and hereby agrees to indemnify, defend, and hold harmless
Seller from and against any and all Losses arising out of or relating to Buyer's
retention or distribution of such suspended proceeds.
13.3 Receipts and Credits. Subject to the terms hereof and except to
the extent same have already been taken into account as an adjustment to the
Purchase Price, all monies, proceeds, receipts, credits, and income accruing to
the Properties (a) for the period subsequent to the Effective Time, shall be the
sole property and entitlement of Buyer, and, to the extent received by Seller,
Seller shall fully disclose, account for, and transmit same to Buyer promptly,
and (b) for the period prior to the Effective Time, shall be the sole property
and entitlement of Seller and, to the extent received by Buyer, Buyer shall
fully disclose, account for, and transmit same to Seller promptly.
13.4 Employee Matters. Buyer may offer employment, to be effective upon
the Closing, only to those employees of Seller and/or its affiliates that are
primarily involved in the operations of the Assets and that are listed on
Schedule 13.4 hereto (the "Employees"). Prior to Closing, Buyer shall provide to
Seller, in writing, a list of those Employees to whom Buyer has made offers of
employment. Buyer shall have full discretion in determining the terms,
conditions and benefits relating to such employment.
13.5 Signs. Seller shall have the option to remove Seller's name and
signs from the operated Properties or to require Buyer to do so. Buyer hereby
grants Seller a right of access to remove Seller's signs and name from all wells
and facilities on the Properties or to confirm that Buyer has done so. If there
are any remaining Seller signs and name on the Properties after Closing, Buyer
shall promptly, but no later than required by applicable rules and regulations
or forty-five (45) days thereafter, whichever is earlier, remove any remaining
signs and references to Seller and shall erect or install all signs complying
with any applicable governmental rules and regulations, including but not
limited to, those showing Buyer as operator of the Properties.
13.6 Records. All files, records, documentation, and data of Seller
relating to (or evidencing) Seller's ownership or rights in the Properties or
other rights and interests described herein, including, but not limited to,
lease files, land files, well files, production sales agreements files, division
order files, title opinions and abstracts, governmental filings, production
reports, production logs, core sample reports, and land maps, as such data is
assembled and maintained in the normal course of business, excluding any such
data that is proprietary or that Seller is prohibited from conveying
(collectively, the "Records"), will be, as soon as is reasonably possible after
Closing, delivered to Buyer at Seller's offices. Seller will be entitled to
retain a copy of the Records. Buyer agrees to use reasonable efforts to maintain
the Records for five (5) years after Closing. Buyer shall provide Seller and its
representatives reasonable access to and the right to copy the Records (at
Seller's sole expense). If Buyer decides to destroy any Records
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prior to the expiration of the five years, it will so notify Seller and Seller
shall have the right to instead obtain such files at its sole expense. To the
extent not obtained or satisfied as of Closing, Seller agrees to continue to use
all reasonable efforts, but without any obligation to incur any cost or expense
in connection therewith, and to cooperate with Buyer's efforts to obtain for
Buyer access to files, records and data relating to the Property in the
possession of third parties.
13.7 Notices. All notices hereunder shall be in writing and any
communication or delivery hereunder shall be deemed to have been duly made when
personally delivered to the individual indicated below, or if mailed, when
received by the party charged with such notice and addressed as follows:
SELLER: Cross Timbers Oil Company
810 Houston Street, Suite 2000
Fort Worth, Texas 76102
Attention: Edwin S. Ryan, Jr.
Fax: (817) 885-2224
With a copy to: E. E. "Rett" Storm III
810 Houston Street, Suite 2000
Fort Worth, Texas 76102
Fax: (817) 885-2278
BUYER: Encore Acquisition Partners, Inc.
777 Main Street, Suite 1400
Fort Worth, Texas 76102
Attention: Jonny Brumley
Fax: (817) 877-1655
Any party may, by written notice so delivered to the other, change the address
of the individual to which or to whom delivery shall thereafter be made.
13.8 Recording Documents. Buyer shall pay all documentary, filing, and
recording fees incurred in connection with the filing and recording of the
instruments of conveyance. As soon as practicable after Closing, Buyer shall
provide Seller with copies of all recorded documents conveying the Properties to
Buyer.
13.9 Right of Termination.
(a) This Agreement and the transactions contemplated hereby may be
terminated in the following instances:
(i) By Seller if any of the conditions set forth in Article 10
are not satisfied in all material respects or waived as of the Closing
Date.
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(ii) By Buyer if any of the conditions set forth in Article 11
are not satisfied in all material respects or waived as of the Closing
Date.
(iii) At any time by the mutual written agreement of Buyer and
Seller.
provided, however, no party may exercise its right of termination under this
Section 13.9 if the event giving rise to termination right is due to the willful
failure of such party to perform or observe in any material respect any of the
covenants or agreements of such party under this Agreement.
(b) In the event of the termination of this Agreement by Seller in
accordance with Section 13.9(a)(i), Seller shall have no liability hereunder of
any nature whatsoever to Buyer, including any liability for damages. If Buyer
terminates this Agreement in accordance with Section 13.9(a)(ii) above, if the
parties terminate this Agreement in accordance with Section 13.9(iii), or Seller
terminates it due to failure of either of the conditions in Sections 10.3 and
10.5, Buyer shall have no liability hereunder of any nature whatsoever to Seller
including any liability for damages, and shall be entitled to return of the
Deposit with interest as provided in Section 2.2. If Buyer terminates this
Agreement other than in accordance with Section 13.9(a)(ii), or if Seller
terminates this Agreement in accordance with Section 13.9(a)(i) (except based on
the Section 10.3 and 10.5 conditions), Seller shall retain the Deposit with all
interest earned thereon and Buyer shall have no further liability hereunder of
any nature whatsoever to Seller including any liability for damages.
(c) Except as provided above in this Section 13.9, nothing contained
herein shall be construed to limit Seller's or Buyer's legal or equitable
remedies in the event of breach of this Agreement.
13.10 Sales Taxes. The Purchase Price provided for hereunder excludes
any sales taxes or other taxes in connection with the sale of Properties
pursuant to this Agreement. If a determination is ever made that a sales tax or
other transfer tax applies, Buyer shall pay such tax as well as any applicable
conveyance, transfer, and recording fees, and real estate transfer stamps or
taxes imposed on any transfer of property pursuant to this Agreement. Buyer
shall defend, indemnify, and hold Seller harmless with respect to the reporting
and payment of all such taxes, if any, including any interest or penalties
assessed thereon.
ARTICLE 14. ASSUMPTION OF OBLIGATIONS; INDEMNIFICATION
14.1 Definitions. As used in this Agreement:
(a) "Losses" means any liabilities, losses, claims, demands, causes of
action, costs and expenses (including, but not limited to, court costs and
reasonable attorneys' fees and other costs and expenses incident to proceedings
or investigations respecting, or the prosecution or defense of, a claim) of
every kind and character.
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(b) "Seller Group" means Seller and its officers, directors,
contractors, agents, employees, professional advisors, and representatives.
14.2 Assumption of Contracts. The sale of the Properties is and will be
made subject to the Contracts to which the Properties are presently subject.
Buyer shall assume and be responsible for all obligations accruing under the
Contracts as of and after the Effective Time.
14.3 Imbalances. For purposes of this Section 14.3, an "imbalance"
includes any imbalance regarding production taken or marketed from any Lease or
Well which could result in (i) a portion of Buyer's interest in production
therefrom to be taken or delivered after the Effective Date without Buyer
receiving payment therefor and at the price it would have received absent such
imbalance; (ii) Buyer being obligated to make payment to any person or entity as
a result of such imbalance; or (iii) production being shut-in or curtailed after
the Effective Date due to non-compliance with allowables, production quotas,
proration rules, or similar orders or regulations of governmental authorities.
Prior to Closing, Buyer will verify the existence of any production imbalance
(including those listed by Seller on Schedule 14.3 hereof), as of the Effective
Date, as to the Seller's interest in the Properties, and the Purchase Price will
be adjusted at Closing. Such adjustment shall be calculated by multiplying the
volume of the net production imbalance by One Dollar ($1.00) per mcf. At
Closing, Buyer shall accept all production imbalances that exist on the
Properties as of the Effective Time and shall assume all responsibility to
settle with other interest owners for any such over or under gas or oil
imbalances that exist on the Properties. If the production imbalance on a
particular Property is a net liability, Buyer shall defend, indemnify, and hold
Seller harmless for that net liability.
14.4 Seller's Limited Indemnity. Seller shall be responsible for any
and all Losses arising out of, incident to, or in connection with personal
injuries, including death, arising out of the operation of the Properties, or
the accounting or payment to royalty owners and working interest owners in the
Leases and/or Wells comprising a part of the Properties, insofar as such Losses
relate to the period of time within two (2) years prior to the Effective Time,
and Seller agrees to defend, indemnify, and hold Buyer Group harmless from and
against any and all Losses that result from such claims, if any, that are filed
within a period of two (2) years after the Effective Time.
14.5 Buyer's General Indemnity. Buyer hereby agrees to assume all
responsibility for the wells, the casing, and all other leasehold equipment in
and on said wells, and all other personal property and fixtures used on or in
connection with the Leases before, on, and after the Effective Time. Subject
only to Seller's indemnification in Section 14.4, Buyer agrees to defend,
indemnify, and hold Seller Group harmless from and against any and all Losses
arising out of, incident to, or in connection with the Properties, or Buyer's or
other parties' operations on the Properties, arising and occurring before, on,
or after the Effective Time.
14.6 Operations Prior to Closing. Buyer hereby releases Seller Group,
and agrees to indemnify, defend and hold Seller Group harmless, from all Losses
with respect to continued operations by Seller under Section 8.2, WHETHER OR NOT
CAUSED IN WHOLE OR IN
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PART BY, AND INCLUDING, ANY SOLE OR CONCURRENT NEGLIGENCE OR STRICT LIABILITY OF
SELLER, UNLESS CAUSED BY SELLER'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
14.7 Buyer's Environmental Indemnification. Except as to the
indemnification, if any, provided under Section 7.2(d), Buyer, its successors
and assigns, hereby agree to indemnify against, and defend and hold Seller Group
harmless from all Losses (including but not limited to any civil fines,
penalties, expenses, costs of clean-up or remediation, and plugging liabilities
for any and all wells) brought by any and all persons, including, but not
limited to, Buyer's and Seller's employees, agents, or representatives and also
any private citizens, persons, or organizations and any agency, branch, or
representative of federal, state, or local government, on account of any
personal injury, disease, or death or any damage, destruction, loss of property
or contamination of natural resources (including air, soil, surface water, or
ground water) resulting from, arising out of any liability caused by, or
connected with any environmental condition of, on, or resulting from the
Properties before, on, or after the Effective Time, including, but not limited
to, the presence, disposal, or release of any material of any kind in, on or
under the Properties or other affected property, or at any time caused by or
connected with acts or omissions of any party's employees, representatives, or
agents with regard to the use, ownership, or operatorship of the Properties.
BUYER'S INDEMNIFICATION SHALL EXTEND TO AND INCLUDE (i) THE NEGLIGENCE OF SELLER
GROUP, BUYER, AND PARTIES ACTING ON BEHALF OF BUYER, WHETHER SUCH NEGLIGENCE IS
ACTIVE OR PASSIVE, JOINT, SOLE, OR CONCURRENT, AND (ii) SELLER'S STRICT
LIABILITY. This indemnification shall be in addition to any other indemnity
provisions contained in this Agreement, and it is expressly understood and
agreed that any terms of this Section 14.7 shall control over any conflicting or
contradicting terms or provisions contained in this Agreement, except as to the
indemnity, if any, provided under Section 7.2(d).
14.8 Buyer's Plugging Liability. Buyer shall properly plug and abandon
at Buyer's expense all wells herein assigned or located on the Properties and
shall clean and restore the surface at Buyer's expense and in accordance with
the applicable Lease provisions and state and federal rules and regulations
pertaining to the plugging and abandoning of such wells and the restoration of
such surface. Buyer shall indemnify, defend, and hold Seller Group harmless from
and against all Losses as a result of Buyer's failure to comply with the
provisions of this Section.
ARTICLE 15. ARBITRATION
15.1 Selection of Arbitrators. Any controversy between the parties
hereto arising under this Agreement and not resolved by agreement shall be
determined by a board of arbitration upon notice of submission given by either
party to the other, which notice shall name a qualified, independent arbitrator.
Within ten (10) days after the receipt of such notice, the other party shall
name a qualified, independent arbitrator, or failing to do so, the party giving
notice shall name the second. The two arbitrators so appointed shall name the
third qualified, independent arbitrator, or failing to do so, the third
arbitrator may be appointed by the Senior Judge (in service) of the United
States District Court for the Northern District of Texas.
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15.2 Determination. The arbitrators selected to act hereunder shall be
qualified by education and experience to pass on the particular question in
dispute. The arbitrators shall promptly hear and determine (after due notice of
hearing and giving the parties a reasonable opportunity to be heard) the
questions submitted, and shall render their decision within sixty days after
appointment of the third arbitrator. If within said period a decision is not
rendered by the board, or majority thereof, new arbitrators may be named and
shall act hereunder at the election of either Buyer or Seller in like manner as
if none had been previously named.
15.3 Decision Binding. The decision of the arbitrators, or the majority
thereof, made in writing shall be final and binding upon the parties hereto as
to the questions submitted, and Buyer and Seller will abide by and comply with
such decision. The expenses of arbitration, including reasonable compensation to
the arbitrators, shall be borne equally by the parties hereto, except that each
party shall bear the compensation and expenses of its own counsel, witnesses,
and employees.
ARTICLE 16. MISCELLANEOUS
16.1 Amendment. This Agreement may not be amended nor any rights
hereunder waived except by an instrument in writing signed by the party to be
charged with such amendment or waiver and delivered by such party to the party
claiming the benefit of such amendment or waiver.
16.2 Gender. References made in this Agreement, including use of a
pronoun, shall be deemed to include where applicable, masculine, feminine,
singular or plural, individuals, partnerships, or corporations. As used in this
Agreement, "person" shall mean any natural person, corporation, partnership,
trust, estate, or other entity.
16.3 Entire Agreement. This Agreement constitutes the entire
understanding among the parties with respect to the subject matter hereof,
superseding all negotiations, prior discussions, and prior agreements and
understandings relating to such subject matter.
16.4 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of, the parties hereto and, except as otherwise
prohibited, their respective successors and assigns; and except as otherwise
stated herein, nothing contained in this Agreement, or implied herefrom, is
intended to confer upon any other person or entity any benefits, rights, or
remedies.
16.5 Survivability. All representations provided in this Agreement will
terminate at closing, provided that, all indemnifications and covenants provided
herein shall survive the Closing and the delivery and recordation of any
assignments or bills of sale which convey the Properties from Seller to Buyer.
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16.6 Severability. If a court of competent jurisdiction determines that
any clause or provision of this Agreement is void, illegal, or unenforceable,
the other clauses and provisions of the Agreement shall remain in full force and
effect and the clauses and provisions which are determined to be void, illegal,
or unenforceable shall be limited so that they shall remain in effect to the
extent permissible by law.
16.7 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Texas (excluding any conflict of laws provision
that would require the application of the law of any other jurisdiction).
16.8 Press Releases. Seller and Buyer shall consult with each other
prior to the issuance of any press releases or other public announcements
concerning this transaction.
16.9 Section Headings. The section headings contained in this Agreement
are for convenience only and shall not in any way affect the meaning or
interpretation of this Agreement.
16.10 Waiver. No waiver of any provision of or rights under this
Agreement shall be effective unless in a writing signed by the waiving party. No
waiver of any specified right or provision shall be construed as a waiver of any
other right or provision.
16.11 Tax Deferred Exchange Election. Seller may, at or before the
Closing, designate in writing one or more properties which Buyer will acquire
and trade to Seller for the Properties (herein collectively called the "Exchange
Property"). In the event Seller has not found a suitable Exchange Property prior
to the Closing, Seller may elect, by notice to Buyer delivered on or before the
Closing Date, to have the Sale Price paid to a qualified intermediary until
Seller has designated the Exchange Property. The Exchange Property shall be
designated by Seller and acquired by the qualified intermediary within the time
periods prescribed in Section 1031(a)(3) of the Internal Revenue Code of 1986,
as amended (the "Code"), and shall thereupon be conveyed to Seller. In the event
Seller fails to designate and the qualified intermediary fails to acquire the
Exchange Property within such time periods, the agency or trust shall terminate
and the proceeds then held by the qualified intermediary shall be paid
immediately to Seller. The rights and responsibilities of Seller, Buyer and the
qualified intermediary shall be documented with such agreements containing such
terms and provisions as shall be determined by Seller to be necessary to
accomplish a tax free exchange under Section 1031 of the Code; subject, however,
to the limitations on costs and liabilities of Buyer set forth below. If Seller
makes a tax deferred exchange election, Buyer shall not be obligated to pay any
additional costs or incur any additional obligations in the acquisition of the
Interests. Seller shall indemnify, defend and hold Buyer harmless from and
against any and all Claims to the extent same are the result of or are
attributable to (i) any transactions undertaken by Seller pursuant to this
paragraph, and (ii) any act or omission of Seller relating to any transaction
contemplated by this paragraph.
16.12 ARIES Data Base. The Working Interest and Net Revenue Interest
numbers reflected on Exhibit "A-1" for each particular Property are intended to
duplicate the interests
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shown on the ARIES Data Base for the Crockett County Sales Package previously
delivered to Buyer. In the event of a disparity between Exhibit "A-1" and the
ARIES Data Base as to the numbers shown related to a particular Property, the
parties hereby agree that the ARIES Data Base will control, and will be utilized
for the resolution of Title Defects and for all other purposes under this
Agreement
The parties have executed this Agreement as of the date first above
mentioned.
SELLER:
CROSS TIMBERS OIL COMPANY
By: /s/ VAUGHN O. VENNERBERG, II
-------------------------------
Name: Vaughn O. Vennerberg, II
Title: Executive Vice President-
Administration
BUYER:
ENCORE OPERATING, L. P.,
a Texas limited partnership
By: EAP Operating, Inc.,
a Delaware corporation,
By: /s/ JON S. BRUMLEY
---------------------------------------
Name: Jon S. Brumley
Title: Executive Vice President
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EXHIBIT "A"
Attached to and made a part of that certain Purchase and Sale Agreement dated
February 23, 2000, between CROSS TIMBERS OIL COMPANY and ENCORE OPERATING, L.P.
DESCRIPTION OF LEASES BEING CONVEYED
<PAGE> 36
EXHIBIT "A-1"
Attached to and made a part of that certain Purchase and Sale Agreement dated
February 23, 2000, between CROSS TIMBERS OIL COMPANY and ENCORE OPERATING, L.P.
DESCRIPTION OF WELLS AND INTERESTS BEING CONVEYED
<PAGE> 37
EXHIBIT "A-2"
Attached to and made a part of that certain Purchase and Sale Agreement dated
February 23, 2000, between CROSS TIMBERS OIL COMPANY and ENCORE OPERATING, L.P.
EXCEPTED INTERESTS
<PAGE> 38
EXHIBIT "B"
Attached to and made a part of that certain Purchase and Sale Agreement dated
February 23, 2000, between CROSS TIMBERS OIL COMPANY and ENCORE OPERATING, L.P.
ALLOCATION OF VALUES
[NOTE: The Allocation of Values will be prepared by Buyer within five (5) days
after the execution of this Purchase and Sale Agreement, and after approval by
Seller, will be included on this Exhibit "B".]
<PAGE> 39
EXHIBIT "C"
Attached to and made a part of that certain Purchase and Sale Agreement dated
February 23, 2000, between CROSS TIMBERS OIL COMPANY and ENCORE OPERATING, L.P.
ASSIGNMENT AND BILL OF SALE
(CROCKETT COUNTY PACKAGE)
THE STATE OF __________ Section
Section
COUNTY OF ____________ Section
CROSS TIMBERS OIL COMPANY, a Delaware corporation, whose address is 810
Houston Street, Suite 2000, Fort Worth, Texas 76102 (hereinafter called
"Assignor"), for and in consideration of the sum of Ten and No/100ths Dollars
($10.00) and other good and valuable consideration, the receipt, adequacy and
sufficiency of which are hereby acknowledged, does hereby sell, transfer, assign
and convey unto __________________________________, a ____________________,
whose address is ___________________________________ (hereinafter called
"Assignee"), all of Assignor's right, title and interest in and to the
following:
(a) The oil, gas and mineral leases described in Exhibit "A" attached
hereto, and the leasehold estates created thereby, and the mineral or royalty
interests described in said Exhibit "A" (collectively called the "Leases"),
insofar only as the Leases cover and relate to the land(s) specifically
described in Exhibit "A" (the "Land"), together with corresponding interests in
and to all the property and rights incident thereto, including all rights in any
pooled or unitized acreage by virtue of the Land being a part thereof, all
production from the pool or unit allocated to any such Land, and all interests
in any Wells on the Land or within the pool or unit associated with the Land;
provided that, it is Assignor's intent to assign to Assignee all of Assignor's
rights and interests in Crockett County, Texas, other than the Excepted
Interests;
(b) All producing, nonproducing, shut-in, and abandoned oil and gas
wells, salt water disposal wells, injection wells, and water wells located on
the Leases or lands pooled or unitized therewith, and all personal property
(including pipelines), equipment, fixtures, and improvements located on and
appurtenant to the Leases and Land insofar as they are used or obtained in
connection with the operation of the Leases and the Wells and/or insofar as they
relate to the production, treatment, sale, or disposal of hydrocarbons or water
produced from the Leases or Land or attributable thereto;
(c) To the extent transferable by Assignor without material restriction
under applicable law or third-party agreements (without the payment of any funds
or consideration), all contracts and contractual rights, obligations, and
interests, including all farmout and farmin agreements, operating agreements,
production sales and purchase contracts, saltwater disposal agreements, surface
leases, gas gathering or transportation agreements, division and transfer
orders, and other contracts or agreements covering or affecting any or all of
the interests described or referred to in this Assignment (the "Contracts");
<PAGE> 40
(d) All oil, condensate, natural gas, natural gas liquids, and other
minerals produced after the Effective Time attributable to Assignor's interest
in the Properties;
(e) All of the rights, interests and estates created under those
certain easements, rights-of-way, servitudes, prescriptions, licenses, leases,
permits and/or other agreements described in Exhibit "A" attached hereto and
made a part hereof, including all rights and interests of Assignor related to
gathering systems and/or salt water disposal agreements presently serving the
Leases, Wells, and Land, Additionally, all of Assignor's right, title and
interest in and to all improvements, fixtures, and other real and/or personal
property (including, without limitation, all equipment, tanks, pipelines, flow
lines, gathering lines, compressors, dehydration units, separators, meters,
metering stations, buildings, fittings, pipe, pipe connector, valves,
regulators, drips, storage facilities, absorbers, dehydrators, and power,
telephone and telegraph lines) located on or under, or which in any way relate
to, the Leases, Wells and Land;
(f) All of Assignor's rights under that certain Purchase and Sale
Agreement dated effective January 15, 1998, with Rio Arriba Investments, LLC,
the recorded Memorandum of Management Agreement and Power of Attorney dated
effective January 15, 1998, the recorded Option to Purchase Oil and Gas
Interests dated effective January 15, 1998, and the recorded Assignment of Oil
and Gas Leases with Reservation of Production Payment dated effective January
15, 1998, insofar as the said "January 15, 1998 Rio Arriba Tax Credit
Agreements" cover and affect Seller's interests in the Wells and Leases.
All of the above real and personal properties, rights, titles, and
interests described in subparagraphs (a) through (f) above, subject to the
limitations and terms expressly set forth herein and in the Exhibit "A" attached
hereto, but excluding the Excluded Property and the Excepted Interests described
below, are hereinafter collectively called the "Properties" or, individually, a
"Property".
Assignor specifically excludes from this Assignment all vehicles and other
transportation equipment, furniture, office supplies and equipment, telephones
and radio or other telecommunication systems, tools, store stock, spare parts,
and equipment, and any other assets not specifically used in connection with the
operation of the Leases and Wells (the "Excluded Property").
Additionally, ASSIGNOR SPECIFICALLY EXCEPTS FROM THIS AGREEMENT, AND
RESERVES UNTO ITSELF, AND ITS SUCCESSORS AND ASSIGNS any and all interests in
oil, gas and other minerals (whether royalty interests, overriding royalty
interests, leasehold interests, mineral interests, or otherwise) described on
Exhibit "A-2", or related to the leases or instruments described on Exhibit
"A-2" attached hereto. (Such interests being herein called the "Excepted
Interests").
This Assignment shall be effective as of April 1, 2000, at 7:00 a.m.
local time where each Property is located ("Effective Time").
THIS ASSIGNMENT IS MADE WITHOUT WARRANTIES OR COVENANTS, EXPRESSED OR
IMPLIED IN FACT OR IN LAW, AS TO TITLE, MERCHANTABILITY, DURABILITY, USE,
OPERATION, FITNESS FOR ANY PARTICULAR PURPOSE,
<PAGE> 41
CONDITION, SAFETY OF THE PROPERTY, COMPLIANCE WITH REGULATORY AND ENVIRONMENTAL
REQUIREMENTS OR OTHERWISE. ASSIGNOR DOES NOT IN ANY WAY REPRESENT OR WARRANT THE
ACCURACY OR COMPLETENESS OF ANY INFORMATION, DATA OR OTHER MATERIALS (WRITTEN OR
ORAL) FURNISHED TO ASSIGNEE BY OR ON BEHALF OF ASSIGNOR.
ASSIGNEE HEREBY AGREES THAT IT HAS INSPECTED OR HAS BEEN GIVEN THE
OPPORTUNITY TO INSPECT THE PROPERTY, INCLUDING THE LEASES AND ASSOCIATED
AGREEMENTS, WELLS, PERSONAL PROPERTY, AND EQUIPMENT ASSIGNED AND CONVEYED HEREIN
AND THAT IT ACCEPTS THE SAME "AS IS, WHERE IS" AND "WITH ALL FAULTS". Assignee
agrees to assume all responsibility for the wells, the casing and all other
leasehold equipment in and on said wells, and all other personal property and
fixtures used on or in connection therewith before, on and after the Effective
Time.
Assignee shall properly plug and abandon at Assignee's expense all
wells herein assigned or located on the Property and shall clean and restore the
surface at Assignee's expense and in accordance with the applicable lease
provisions and State and Federal rules and regulations pertaining to the
plugging and abandoning of such wells and the restoration of such surface.
Assignee shall indemnify, defend and hold Assignor Group harmless from and
against all Losses as a result of Assignee's failure to comply with the
provisions of this paragraph and this Assignment.
All taxes, including but not limited to ad valorem, property, severance
and windfall profit taxes, shall be prorated between Assignor and Assignee as of
the Effective Time, with Assignor responsible for all such taxes accruing prior
thereto and Assignee responsible for all such taxes accruing thereafter.
Assignee shall bear and pay any real property transfer taxes and any recording
fees associated with the transfer of the Property. Assignee agrees to be solely
responsible for any and all sales taxes, if any, due on equipment, material and
property hereby assigned and sold, and Assignee shall remit such sales taxes to
the proper taxing authority.
Assignee agrees to perform all operations in compliance with all
applicable Local, State, Indian and Federal laws, orders, rules and regulations,
and to observe, perform and abide by all of the lease terms and provisions,
express and implied, applicable to Assignor's interest in the Property. Assignee
further agrees to secure the bonds, permits and other documents as required by
the appropriate regulatory authority which are necessary to effectuate the
transfer of interests hereby and to cause the release of Assignor's continued
liability as lessee or operator. The parties hereto agree to execute such
additional documents or instruments as necessary to transfer Assignor's interest
in any State, Federal or Indian oil and gas properties assigned hereby to
Assignee.
Assignee accepts this transfer of the Properties subject to any and all
covenants in instruments in the chain of title and to any outstanding
agreements, whether recorded or not, which may include, but is not limited to,
agreements for options, leases, permits, rights-of-way, easements, water
disposal systems, licenses, operating agreements and production sales
agreements; and in this regard, Assignee assumes all duties and obligations
associated with said outstanding agreements, including, but not limited to, all
of Assignor's rights and obligations in
<PAGE> 42
and for any gas sales, production or transportation imbalances, whether as a
result of overproduction or underproduction by Assignor.
Assignor expressly reserves the nonexclusive rights of access to and
use of the rights-of-ways and easements assigned herein or associated with the
Leases to the extent necessary to develop or make use of any leasehold or
mineral interests retained by Assignor.
This Assignment and Bill of Sale shall be binding upon and inure to the
benefit of the heirs, successors, personal representatives and assigns of the
respective parties hereto.
This Assignment and Bill of Sale is subject to the terms and
conditions, including, but not limited to, the assumptions and indemnifications,
contained in that certain Purchase and Sale Agreement dated ___________, between
Assignor, as Seller, and Assignee, as Buyer.
EXECUTED this ____ day of _______________, 2000, but effective as of
the Effective Time.
ASSIGNOR:
CROSS TIMBERS OIL COMPANY
By:
--------------------------------
Edwin S. Ryan, Jr.
Vice President - Land
ASSIGNEE:
--------------------------------
By:
-----------------------------
-----------------------------------
<PAGE> 43
STATE OF TEXAS )
)
COUNTY OF TARRANT )
This instrument was acknowledged before me on the ____ day of
____________, 2000, by Edwin S. Ryan, Jr., Vice President - Land of Cross
Timbers Oil Company, a Delaware corporation, on behalf of such corporation.
My Commission Expires: -------------------------------
Notary Public
-----------------------
STATE OF ______________ )
)
COUNTY OF ______________ )
This instrument was acknowledged before me on the ____ day of
____________, 2000, by ________________________, _____________________ of
_________________________, a ___________________, on behalf of such
_______________.
My Commission Expires: -------------------------------
Notary Public
-----------------------
<PAGE> 44
EXHIBIT "D"
Attached to and made a part of that certain Purchase and Sale Agreement dated
February 23, 2000, between CROSS TIMBERS OIL COMPANY and ENCORE OPERATING, L.P.
[NOTE: THIS AGREEMENT WILL BE COMPLETED AT CLOSING.]
ACCOUNTING AGREEMENT
Seller: Cross Timbers Oil Company Buyer:
-----------------------
Properties:
---------------------------------------------------------------------
1. Buyer will promptly notify utility companies to effect a change in
ownership and billing responsibility.
2. Seller will notify any operator of change in ownership as soon as
possible after the closing and will request that future billings be
addressed to Buyer.
3. Buyer will obtain a gas contract, or if applicable, oil contract,
effective on _____________, or will notify the operator otherwise.
4. Seller will continue to pay royalties and severance taxes for sales
through the production month of ____________, 19___. If any revenue is
received by Seller for later months, it will be credited 100 percent to
Buyer in the final settlement. However, Seller will not pay any
royalties or severance taxes, out of that revenue. Buyer will be
responsible for the payment of royalties and severance taxes, if
applicable, after the production month of ____________, 19___.
5. Seller will pay and continue to bill the joint owners for expenses
invoiced through the accounting month of ____________, 19___. All later
expenses will be returned to the vendor for rebilling to buyer.
6. Seller will continue to pay the operator for joint billings for the
billing month of _________, 19___. All subsequent bills will be
forwarded to Buyer for payment, or if already paid by Seller, will be
charged against Buyer in the final settlement.
7. Seller will continue to prepare all regulatory and other monthly
production reports through the production month of ____________, 19___.
Copies, for production after the Effective Time, will be provided to
Buyer, along with the final ending inventory balance.
8. Buyer will pay current year Ad Valorem taxes. Any statements received
by Seller will be forwarded promptly to Buyer for payment. Proration of
taxes through the Effective Time will be handled in the final
settlement.
<PAGE> 45
9. Seller will continue to pay all shut-in royalties, minimum royalties,
delay rentals and other lease obligations, if any, through the month of
__________, 19___.
10. Buyer will file all appropriate documents of record at the appropriate
courthouses and agencies.
11. Buyer will notify all product purchasers, processors, and transporters
of the change of ownership, and will be solely responsible for the
transfer of payments from Seller to Buyer.
SELLER: BUYER:
CROSS TIMBERS OIL COMPANY
By: By:
------------------------------
Name: Name:
----------------------------
Title: Title:
---------------------------
Date: Date:
----------------------------
<PAGE> 46
SCHEDULE "3.6"
Attached to and made a part of that certain Purchase and Sale Agreement dated
February 23, 2000, between CROSS TIMBERS OIL COMPANY and ENCORE OPERATING, L.P.
LITIGATION
NONE
<PAGE> 47
SCHEDULE "3.12"
Attached to and made a part of that certain Purchase and Sale Agreement dated
February 23, 2000, between CROSS TIMBERS OIL COMPANY and ENCORE OPERATING, L.P.
IMBALANCES
NONE
<PAGE> 48
SCHEDULE "13.4"
Attached to and made a part of that certain Purchase and Sale Agreement dated
February 23, 2000, between CROSS TIMBERS OIL COMPANY and ENCORE OPERATING, L.P.
EMPLOYEES
J. W. Reddin (Reddin's Pumping Service)
