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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported): August 15, 1997
INLAND RESOURCES INC.
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(Exact name of registrant as specified in its charter)
Washington 0-16487 91-1307042
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(State of incorporation) (Commission File No.) (IRS Employer
Identification No.)
475 17TH STREET, SUITE 1500, DENVER, COLORADO 80202
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(Address of principal execute offices, including zip code)
(303) 292-0900
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(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS
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On August 15, 1997, Inland Resources Inc. (the "Company") acquired the
"Enserch Properties" from Enserch Exploration, Inc. ("Enserch") for $10.1
million in cash. The Enserch Properties consist of 153 gross (46.9 net) oil and
gas wells, 9,600 net undeveloped acres, water rights and a water transportation
and distribution system. The undeveloped acreage provides the Company with
approximately 240 additional drillsites in the Monument Butte Field. The
acquisition of the Enserch Properties also included operating rights to two
approved water flood units (encompassing 42 of the wells acquired).
Management believes that the Enserch Properties have significant
development potential which will enable the Company to increase its cash flow
from operations and reserve base at a cost efficient rate due to the proximity
of the Enserch Properties to the Company's existing properties. The Enserch
Properties are geographically concentrated in proximity to the Company's
properties in the Monument Butte Field, thereby enabling the Company to operate
the properties without incurring significant incremental general and
administrative expenses. Of the 153 gross wells acquired, the Company already
operated 43 of the wells and Enserch operated 52 of the wells so that the
Company now operates 95 of the wells.
The Company financed the acquisition of the Enserch Properties with a
portion of the proceeds of its existing credit facility with Canadian Imperial
Bank of Commerce.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
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(c) Exhibits - The following exhibit is filed herewith:
10.1 Purchase and Sale Agreement between Enserch Exploration, Inc. and
Inland Production Company dated July 10, 1997.
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
August 21, 1997
INLAND RESOURCES INC.
By: /s/ Kyle R. Miller
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Kyle R. Miller, President and
Chief Executive Officer
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EXHIBIT 10.1
PURCHASE AND SALE AGREEMENT
between
ENSERCH EXPLORATION, INC.,
as Seller,
and
INLAND PRODUCTION COMPANY,
as Buyer.
July 10, 1997
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TABLE OF CONTENTS
1. Property to be Sold and Purchased.................................. 1
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2. Purchase Price..................................................... 2
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3. Deposit............................................................ 2
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4. Seller's Representations........................................... 2
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5. Buyer's Representations............................................ 3
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6. Covenants of Seller and Buyer Pending Closing...................... 5
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7. Due Diligence Reviews.............................................. 7
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8. Price Adjustments.................................................. 9
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9. Conditions Precedent to Buyer's Obligations........................ 11
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10. Conditions Precedent to Seller's Obligations....................... 12
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11. The Closing........................................................ 13
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12. Accounting Adjustments............................................. 15
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13. Assumption and Indemnification..................................... 17
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14. Disclaimer of Warranties........................................... 18
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15. Commissions........................................................ 19
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16. Casualty Loss...................................................... 19
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17. Notices............................................................ 20
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18. Survival of Provisions............................................. 21
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19. Miscellaneous Matters.............................................. 21
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EXHIBIT "A"............................................................. A-1
EXHIBIT "B"............................................................. B-1
EXHIBIT "C"............................................................. C-1
EXHIBIT "D"............................................................. D-1
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PURCHASE AND SALE AGREEMENT
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This Agreement, dated July 10, 1997, is made by and between ENSERCH
EXPLORATION, INC. ("Seller") and INLAND PRODUCTION COMPANY ("Buyer").
1. Property to be Sold and Purchased. Seller agrees to sell, and
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Buyer agrees to purchase, for the consideration hereinafter set forth, and
subject to the terms and conditions contained herein, the following described
properties, rights, and interests:
(a) All of Seller's right, title, and interest in and to the oil, gas,
and mineral leases described in Exhibit "A," which is attached hereto and
made a part hereof (and any ratifications and amendments to such leases,
whether or not such ratifications and amendments are described in Exhibit
"A"), and all of Seller's right, title, and interest in and to the fee
mineral interests described in Exhibit "A," if any; and
(b) All of Seller's right, title, and interest in and to, or otherwise
derived from, all presently existing and valid oil, gas, and mineral
unitization, pooling, and communitization agreements, declarations, and
orders (including, without limitation, all units formed under orders,
rules, regulations, or other official acts of any federal, state, or other
governmental authority having jurisdiction, and voluntary unitization
agreements, designations, and declarations) relating to the properties,
rights, and interests described in Section 1.(a), to the extent such right,
title, and interest are attributable to the properties, rights, and
interests described in Section 1.(a); and
(c) All of Seller's right, title, and interest in and to all presently
existing and valid production sales contracts, operating agreements, and
other agreements and contracts that relate to any of the properties,
rights, and interests described in Sections 1.(a) and 1.(b), to the extent
such right, title, and interest are attributable to the properties, rights,
and interests described in Sections 1.(a) and 1.(b); and
(d) All of Seller's right, title, and interest in and to all
materials, supplies, machinery, equipment, improvements, and other personal
property and fixtures located on the properties described in Sections 1.(a)
and 1.(b) and used in connection with the exploration, development,
operation, or maintenance thereof (including, but not limited to, all
wells, wellhead equipment, pumping units, flowlines, tanks, buildings,
injection facilities, saltwater disposal facilities, compression
facilities, gathering systems, and other equipment).
The properties, rights, and interests described in Sections 1.(a), 1.(b), 1.(c),
and 1.(d) shall hereinafter sometimes collectively be referred to as the
"Properties." The term "Properties" shall
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not include seismic data, geological or geophysical data, any interpretations
thereof, or other similar data.
2. Purchase Price. The unadjusted purchase price for the Properties shall
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be Ten Million One Hundred Thousand and No/100 Dollars ($10,100,000.00), which
shall hereinafter be referred to as the "Base Purchase Price." The Base
Purchase Price may be adjusted, as provided for hereinafter in this Section and
in Sections 6.(c) and 8. hereof. The Base Purchase Price, as so adjusted and as
otherwise adjusted by agreement of the parties herein, shall hereinafter be
referred to as the "Purchase Price." Buyer shall pay the Purchase Price to
Seller at Closing, as provided in Section 11. hereof.
3. Deposit. Contemporaneous with its execution of this Agreement, Buyer
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shall pay to Seller One Million Ten Thousand and No/100 Dollars ($1,010,000.00),
which shall hereinafter be referred to as the "Deposit." If Buyer and Seller
consummate the transaction contemplated by this Agreement, the Deposit shall be
applied to the Purchase Price. If Buyer and Seller do not consummate the
transaction contemplated by this Agreement because of a material default by
Seller in the absence of a default by Buyer, Seller shall return the Deposit to
Buyer. If Buyer and Seller terminate this Agreement pursuant to Section 9. or
Section 10. hereof under circumstances where such Section requires the return of
the Deposit, then Seller shall return the Deposit to Buyer. Except as provided
in the preceding sentence, if Buyer fails or refuses to consummate the
transaction contemplated by this Agreement, or if the transaction contemplated
by this Agreement otherwise fails to close on the Closing Date, Seller shall
retain the Deposit as liquidated damages. The parties agree that damages in
such an event would be extremely difficult to determine, that the Deposit
represents a fair and reasonable estimate of such damages under the
circumstances, and that such a retention of the Deposit does not constitute a
penalty.
4. Seller's Representations. Seller represents to Buyer that:
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(a) Seller is a corporation duly organized and legally existing under
the laws of its state of incorporation. Seller is qualified to do business
and is in good standing, or will be at Closing, in each state in which
Properties are located where the laws of such state require a corporation
owning the Properties located in such state to qualify to do business.
(b) Seller has full power to enter this Agreement and perform its
obligations hereunder and has taken all proper action to enter this
Agreement and perform its obligations hereunder.
(c) Seller's execution and delivery of this Agreement, the
consummation of the transaction contemplated hereby, and Seller's
compliance with the terms hereof, will not result in a default under any
agreement or instrument to which Seller is a party or by which the
Properties are bound that would be material to the transaction contemplated
hereby. Seller's execution and delivery of this Agreement will not violate
any order, writ,
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injunction, decree, statute, rule, or regulation applicable to Seller or to
the Properties that would be material to the transaction contemplated
hereby, except the following:
(i) Any consents to transfer or waivers of preferential rights to
purchase that must be obtained from third parties;
(ii) Compliance with the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "Hart-Scott-Rodino Act");
(iii) Any approval required from a governmental entity that is
the lessor under a lease included in the Properties (or that
administers such lease for such lessor) and that is customarily
obtained post-closing; and
(iv) Any maintenance of uniform interest provision contained in
any operating agreement or other agreement.
(d) This Agreement constitutes the legal, valid, and binding
obligation of Seller, enforceable according to its terms, except as limited
by bankruptcy or other laws applicable generally to creditor's rights and
as limited by general equitable principles. The Assignment and Bill of
Sale provided for in Section 11.(a)(i) hereof, and any other documentation
provided for herein to be executed by Seller, will, when executed and
delivered, constitute the legal, valid, and binding obligations of Seller,
enforceable according to their terms, except as limited by bankruptcy or
other laws applicable generally to creditor's rights and as limited by
general equitable principles.
(e) Except as disclosed on Exhibit "D," there are no pending suits,
actions, or other proceedings filed by parties other than Seller, and to
which Seller is a party, that materially affect the Properties (including,
without limitation, any actions challenging or pertaining to Seller's title
to any of the Properties) or that affect the execution and delivery of this
Agreement or the consummation of the transaction contemplated hereby.
5. Buyer's Representations. Buyer represents to Seller that:
-----------------------
(a) Buyer is a corporation duly organized and legally existing under
the laws of its state of organization. Buyer is qualified to do business
and is in good standing, or will be at Closing, in each state in which
Properties are located where the laws of such state require a corporation
owning the Properties located in such state to qualify to do business.
(b) Buyer has full power to enter this Agreement and perform its
obligations hereunder and has taken all proper action to enter this
Agreement and perform its obligations hereunder.
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(c) Buyer's execution and delivery of this Agreement, the consummation
of the transaction contemplated hereby, and Buyer's compliance with the
terms hereof, will not result in a default under any agreement or
instrument to which Buyer is a party or by which the Properties are bound
that would be material to the transaction contemplated hereby. Buyer's
execution and delivery of this Agreement will not violate any order, writ,
injunction, decree, statute, rule, or regulation applicable to Buyer or to
the Properties that would be material to the transaction contemplated
hereby, except the following:
(i) Any consents to transfer or waivers of preferential rights to
purchase that must be obtained from third parties;
(ii) Compliance with the Hart-Scott-Rodino Act;
(iii) Any approval required from a governmental entity that is
the lessor under a lease included in the Properties (or that
administers such lease for such lessor) and that is customarily
obtained post-closing; and
(iv) Any maintenance of uniform interest provision contained in
any operating agreement or other agreement.
(d) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable according to its terms, except as limited
by bankruptcy or other laws applicable generally to creditor's rights and
as limited by general equitable principles. The Assignment and Bill of
Sale provided for in Section 11.(a)(i) hereof and any other documentation
provided for herein to be executed by Buyer, will, when executed and
delivered, constitute the legal, valid, and binding obligations of Buyer,
enforceable according to their terms, except as limited by bankruptcy or
other laws applicable generally to creditor's rights and as limited by
general equitable principles.
(e) There are no pending suits, actions, or other proceedings filed by
parties other than Buyer, and to which Buyer is a party, that materially
affect the execution and delivery of this Agreement or the consummation of
the transaction contemplated hereby.
(f) Buyer is a knowledgeable purchaser, owner, and operator of oil and
gas properties, has the ability to evaluate, and has evaluated, the
Properties for purchase, and is acquiring the Properties for its own
account and not with the intent to make a distribution within the meaning
of the Securities Act of 1933, as amended (and the rules and regulations
pertaining thereto), or a distribution thereof in violation of any other
applicable securities laws, rules, or regulations.
(g) With regard to those Properties that Buyer seeks to operate, Buyer
is qualified to operate such Properties under the applicable laws, rules,
and regulations of the jurisdiction in which such Properties are located,
or will become so qualified before operating such Properties.
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6. Covenants of Seller and Buyer Pending Closing. Between the date of
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this Agreement and the Closing Date:
(a) Seller shall permit Buyer access to the Properties as follows:
(i) Seller shall give Buyer access at all reasonable times during
normal business hours to the Properties and, at Seller's office, to
Seller's records pertaining to the ownership and operation of the
Properties (including, without limitation, title files; division order
files; well files; production records; equipment inventories; and
production, severance, and ad valorem tax records). Buyer may make
copies of such records at its expense. If the Closing does not occur,
Buyer shall return all such copies to Seller. Seller shall not be
obligated to provide Buyer with access to any records or data that
Seller considers to be proprietary or confidential or that Seller
cannot provide to Buyer without, in Seller's opinion, breaching, or
risking a breach of, confidentiality agreements with other parties.
Any records or data provided hereunder shall be subject to any
confidentiality agreement entered between Buyer and Seller in
contemplation of this Agreement. Seller makes no representation or
warranty of any kind as to the accuracy or completeness of any
materials made available to Buyer in connection with the transaction
contemplated hereby.
(ii) Seller shall make a good faith effort to give Buyer, at
reasonable times, and upon adequate notice to Seller, physical access
to inspect the Properties. Buyer recognizes that some or all of the
Properties may be operated by parties other than Seller and that
Seller's ability to obtain access to such Properties, and the manner
and extent of such access, may be subject to the consent of such third
parties. While Buyer is upon, entering, or leaving the Properties, it
agrees to comply fully with the rules, regulations, and instructions
issued by Seller and, where any portion of the Properties are operated
by other parties, such third parties.
(iii) Exculpation and Indemnification. If Buyer exercises
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rights of access under this Section, or otherwise, or conducts
examinations or inspections under this Section, or otherwise, then (a)
such access, examination, and inspection shall be at Buyer's sole
risk, cost, and expense, and Buyer waives and releases all claims
against Seller (its affiliates and their respective directors,
officers, employees, attorneys, contractors, and agents) arising in
any way therefrom or in any way connected therewith or arising in
connection with the conduct of its directors, officers, employees,
attorneys, contractors, and agents in connection therewith; and (b)
BUYER SHALL RELEASE, INDEMNIFY, DEFEND, AND HOLD HARMLESS SELLER, AND
ITS PARENT OR SUBSIDIARY COMPANIES AND OTHER AFFILIATES, AND THEIR
RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS, CONTRACTORS,
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AND AGENTS (HEREINAFTER COLLECTIVELY REFERRED TO AS THE "SELLER
GROUP"), FROM ANY AND ALL CLAIMS, ACTIONS, CAUSES OF ACTION,
LIABILITIES, DAMAGES, LOSSES, COSTS, OR EXPENSES (INCLUDING, WITHOUT
LIMITATION, COURT COSTS AND ATTORNEYS' FEES), OR LIENS OR ENCUMBRANCES
FOR LABOR OR MATERIALS ARISING OUT OF OR IN ANY WAY CONNECTED WITH
SUCH ACCESS, EXAMINATIONS, OR INSPECTIONS. THE FOREGOING RELEASE AND
INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH CLAIMS, ACTIONS,
CAUSES OF ACTION, LIABILITIES, DAMAGES, LOSSES, COSTS, OR EXPENSES
ARISE OUT OF (I) NEGLIGENCE (INCLUDING SOLE NEGLIGENCE, SINGLE
NEGLIGENCE, CONCURRENT NEGLIGENCE, ACTIVE NEGLIGENCE, OR PASSIVE
NEGLIGENCE, BUT EXPRESSLY NOT INCLUDING GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT) OF SELLER OR ANY OTHER INDEMNIFIED PARTY, OR (II) STRICT
LIABILITY.
(b) Until the Closing Date, Seller shall continue to operate in the
ordinary course of its business any portion of the Properties over which it
serves as operator and to manage in the ordinary course of its business any
portion of the Properties over which it does not serve as operator. Except
as set forth in this Agreement, Seller shall not sell or otherwise dispose
of any material portion of the Properties. If Seller receives or desires
to make a proposal to drill a well on the Properties or to conduct other
operations on the Properties that require the consent of non-operators
under any applicable operating agreement, it shall notify Buyer thereof and
shall consult with Buyer concerning such proposal. However, Seller shall
make its decision regarding such proposal in its own discretion and in the
ordinary course of its business.
(c) Seller shall use reasonable efforts, consistent with industry
practices in transactions of this type, to identify, with respect to each
material portion of the Properties, all preferential rights to purchase and
all rights of third parties to withhold consent to a transfer that would
apply to the transaction contemplated hereby and the parties holding such
rights. In attempting to identify the same, Seller shall not be obligated
to go beyond its own records. Seller shall request from the parties so
identified (and in accordance with the documents creating such rights)
waivers of the preferential rights to purchase and consents to transfer so
identified. Seller shall have no obligation hereunder other than to
attempt to identify such preferential rights and rights to withhold consent
to transfer and to request such waivers and consents. Seller shall not be
obligated to assure that such waivers and consents are obtained. Seller may
tender to any party refusing to waive such a preferential right the
interest covered by such right at a price equal to the amount specified in
Exhibit "B" for such interest. To the extent that such an interest actually
is transferred to a party exercising such a preferential right, it shall be
excluded from the transaction contemplated hereby, and the Base Purchase
Price shall be
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reduced by the amount such party paid to Seller for such interest, unless
the parties hereto agree otherwise.
(d) If applicable, as soon as practicable after the execution hereof,
Buyer shall prepare and submit any filing required under the Hart-Scott-
Rodino Act in connection with the transaction contemplated by this
Agreement. Buyer shall pay all filing fees in connection with such filing,
shall request expedited treatment of such filing by the Federal Trade
Commission ("FTC"), shall make any appropriate or necessary subsequent or
supplemental filings, and shall furnish to Seller copies of all filings
made under the Hart-Scott-Rodino Act at the same time they are filed with
the FTC. Seller shall cooperate with Buyer as to all filings required by
the Hart-Scott-Rodino Act.
7. Due Diligence Reviews.
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(a) The term "Defect," as used in this Section, shall mean the
following:
(i) Seller's ownership of a well, unit, or undeveloped tract
listed on Exhibit "B" (A) entitles Seller to receive a share of the
oil, gas, and other hydrocarbons produced from, or allocated to, such
well, unit, or undeveloped tract that is less than the share set forth
on Exhibit "B" for such well, unit, or undeveloped tract in the column
headed "Net Revenue Interest," or (B) causes Seller to bear a share of
the cost of operating such well, unit, or undeveloped tract greater
than the share set forth on Exhibit "B" for such well, unit, or
undeveloped tract in the column headed "Operating Interest" (without a
proportionate increase in the share of production to which Seller is
entitled from such well, unit, or undeveloped tract); or
(ii) Seller's ownership of the Properties is subject to a lien
other than (A) a lien that will be released at or before Closing, (B)
a lien for taxes not yet delinquent, (C) a mechanic's or materialmen's
lien (or other similar lien), or (D) a lien under an operating
agreement or similar agreement, to the extent the same relates to
expenses incurred that are not yet due; or
(iii) Seller's ownership of the Properties is subject to a
preferential right to purchase, unless the party holding such right
has waived it for the transaction contemplated hereby or has not
exercised it within the required period of time; or
(iv) Seller's ownership of the Properties is subject to an
imperfection in title that, if asserted, would cause a Defect, as
defined in Section 7.(a)(i) hereof, to exist and such imperfection in
title normally would not be waived by persons engaged in the oil and
gas business purchasing producing property; or
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(v) The Properties are in violation of Applicable Environmental
Laws (as hereinafter defined) in any material respect, unless such
violation is disclosed on Exhibit "D." "Applicable Environmental
Laws" shall mean all federal, state, or local laws, rules, orders, or
regulations in effect on the Effective Date of this Agreement
pertaining to health or the environment, including those relating to
waste materials and hazardous substances.
(b) A gas imbalance does not constitute a Defect and shall be subject
to the provisions of Section 12. hereof.
(c) Buyer may conduct such examinations and investigations, at its
sole cost, that it deems are appropriate to determine whether Defects
exist. Buyer shall notify Seller, in writing, of each Defect that Buyer is
unwilling to waive hereunder (an "Asserted Defect") as soon as Buyer
identifies such Defect, but no later than ten (10) days prior to the date
upon which Closing is scheduled to occur pursuant to Section 11., but not
as extended pursuant to 11.(i) or 11.(ii) (hereinafter the "Defect Notice
Date"). Such notification shall include: (i) a description of the
Asserted Defect, the lease or mineral interest described in Exhibit "A"
that such Asserted Defect affects, the wells, units, and undeveloped tracts
listed on Exhibit "B" to which the Asserted Defect relates, and all
supporting documentation reasonably necessary fully to describe the basis
for the Asserted Defect; (ii) for each applicable well, unit, or
undeveloped tract, the size of any variance from the "Net Revenue Interest"
or "Operating Interest" set forth in Exhibit "B" that does or could result
from such Asserted Defect; and (iii) the amount by which Buyer proposes to
adjust the Purchase Price because of such Asserted Defect. Buyer hereby
waives all Defects that it fails to identify to Seller as Asserted Defects
on or before the Defect Notice Date. If Buyer notifies Seller of Asserted
Defects, Seller (i) shall have the right (but not the obligation) to
attempt to cure such Asserted Defects prior to Closing, and (ii) shall have
the right (which may be exercised at any time before the Closing Date) to
postpone the Closing by designating a new Closing Date not later than
thirty (30) days after the Closing Date then existing in order to attempt
to cure, or to determine if it will attempt to cure, one or more Asserted
Defects. In lieu of curing or attempting to cure an Asserted Defect,
Seller may elect, at any time prior to Closing, to indemnify and hold Buyer
harmless from and against any actual damages or loss (but specifically
excluding consequential, special, or similar damages) Buyer may suffer as a
result of a third-party claim based on such Asserted Defect. Each such
Asserted Defect shall be treated under this Agreement as cured.
(d) Buyer shall have the right to make an environmental assessment of
the Properties during the period beginning on the date this Agreement is
fully executed and ending on the Defect Notice Date. Buyer and its agents
shall have the right to enter upon the Properties and all buildings and
improvements thereon, inspect the same, conduct soil and water tests and
borings, and generally conduct such tests, examinations, investigations,
and studies as may be necessary or appropriate for the preparation of
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appropriate engineering and other reports in relation to the Properties,
their condition, and the presence of Hazardous Substances (as the term
"Hazardous Substance" is defined in the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Sec. 9601, et seq).
Buyer agrees to provide Seller with a copy of the environmental assessment
promptly upon Buyer's completion thereof, including any reports, data, and
conclusions. Buyer shall keep any data or information acquired by such
examinations and the results of all analyses of such data and information
strictly confidential and shall not disclose same to any person or agency
without the prior written approval of Seller. BUYER SHALL RELEASE,
INDEMNIFY, DEFEND, AND HOLD HARMLESS THE SELLER GROUP FROM AND AGAINST ANY
AND ALL LOSS, COST, DAMAGE, EXPENSE, OR LIABILITY WHATSOEVER, INCLUDING
ATTORNEYS' FEES, ARISING OUT OF ANY INJURY TO OR DEATH OF PERSONS OR DAMAGE
TO PROPERTY OCCURRING IN, ON, OR ABOUT THE PROPERTIES AS A RESULT OF SUCH
ENVIRONMENTAL ASSESSMENT (EXCEPT ANY SUCH INJURIES OR DAMAGES CAUSED SOLELY
BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY MEMBER OF THE SELLER
GROUP). After the Defect Notice Date, Buyer shall be deemed to have
inspected the Properties or waived its right to inspect the Properties for
all purposes and satisfied itself as to their physical and environmental
condition, both surface and subsurface, including, but not limited to,
conditions specifically related to the presence, release, or disposal of
Hazardous Substances.
8. Price Adjustments.
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(a) If Buyer presents Asserted Defects to Seller as part of the due
diligence reviews provided for in Section 7., and if Seller is unable or
unwilling to cure all such Asserted Defects prior to Closing, or if Buyer
has elected to treat a portion of the Properties affected by a casualty
loss pursuant to Section 16. as if it were affected by an Asserted Defect,
then:
(i) Buyer and Seller shall, with respect to each portion of the
Properties affected by such matters, attempt to agree upon an
appropriate amount by which the Base Purchase Price should be
decreased; and
(ii) For each such portion of the Properties on which Buyer and
Seller are unable to agree upon an amount by which the Base Purchase
Price should be decreased, the amount of such decrease shall be the
amount attributed on Exhibit "B" to such portion of the Properties.
(b) Buyer shall disclose to Seller circumstances discovered by Buyer
in the due diligence review provided for in Section 7. hereof that could
result in an increase in the Purchase Price hereunder. If Seller is shown
to be entitled to a share of production from
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a well or unit listed on Exhibit "B" greater than the share shown for such
well or unit under the column headed "Net Revenue Interest" on Exhibit "B,"
then:
(i) Buyer and Seller shall, with respect to each portion of the
Properties affected thereby, attempt to agree upon an appropriate
amount by which the Base Purchase Price should be increased; and
(ii) For each such portion of the Properties on which Buyer and
Seller are unable to agree upon an amount by which the Base Purchase
Price should be increased, the amount of such increase shall be the
difference between the amount attributed on Exhibit "B" to the wells
located on such portion of the Properties and the units in which such
portion of the Properties participates (or, as applicable, the
undeveloped tract located on such portion of the Properties) and a
fraction times the amount attributed on Exhibit "B" to the wells
located on such portion of the Properties and the units in which such
portion of the Properties participates (or, as applicable, the
undeveloped tract located on such portion of the Properties), the
numerator of which fraction shall be the net revenue interest for such
well or unit (or, as applicable, the undeveloped tract located on such
portion of the Properties) to which Seller actually is shown to be
entitled and the denominator of which fraction shall be the share
shown for such well or unit (or, as applicable, the undeveloped tract
located on such portion of the Properties) under the column headed
"Net Revenue Interest" on Exhibit "B."
(c) If the total amount by which the Base Purchase Price is to be
decreased under Section 8.(a) for all Properties, when subtracted from the
total amount by which the Base Purchase Price is to be increased under
Section 8.(b) for all Properties, equals more than four percent (4%) of the
Base Purchase Price, the portion of the Properties affected by a decrease
under Section 8.(a) shall be excluded from the transaction contemplated
hereby, and the Purchase Price hereunder shall equal the Base Purchase
Price minus the amount by which such decrease exceeds four percent (4%) of
the Base Purchase Price. If the total amount by which the Base Purchase
Price should be decreased under Section 8.(a) for all Properties, when
subtracted from the total amount by which the Base Purchase Price should be
increased under Section 8.(b) for all Properties, equals four percent (4%)
or less of the Base Purchase Price, the portion of the Properties affected
by a decrease under Section 8.(a) shall not be excluded from the
transaction contemplated hereby, and the Base Purchase Price shall not be
adjusted hereunder. If the total amount by which the Base Purchase Price
should be increased under Section 8.(b) for all Properties, after
subtracting the total amount by which the Base Purchase Price should be
decreased under Section 8.(a) for all Properties, equals more than four
percent (4%) of the Base Purchase Price, the Purchase Price hereunder shall
equal the Base Purchase Price plus the amount by which such increase
exceeds four percent (4%) of the Base Purchase Price. If the total amount
by which the Base Purchase Price should be increased under Section 8.(b)
for all Properties, after subtracting the total amount by which the Base
Purchase Price should be
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decreased under Section 8.(a) for all Properties, equals four percent (4%)
or less of the Base Purchase Price, the Base Purchase Price shall not be
adjusted hereunder.
9. Conditions Precedent to Buyer's Obligations. Buyer's obligations
-------------------------------------------
under this Agreement are subject to each of the following conditions:
(a) Seller's representations under this Agreement shall be true and
accurate in all material respects as of the date when made and at Closing.
At Closing, Seller's representations under this Agreement shall be true and
accurate in all material respects except as to changes specifically
contemplated by this Agreement or consented to by Buyer.
(b) Seller shall have performed and complied in all material respects
with every covenant, agreement, and condition required by it under this
Agreement prior to or at the Closing unless performance or compliance
therewith shall have been waived by Buyer.
(c) If applicable, Buyer and Seller shall have received approval of
the transaction contemplated by this Agreement from the FTC under the Hart-
Scott-Rodino Act, or shall have received notification that the waiting
period under the Hart-Scott-Rodino Act has terminated, or the waiting
period under the Hart-Scott-Rodino Act shall have expired.
(d) The Purchase Price increase resulting from the procedure set forth
in Section 8. does not exceed five percent (5%) of the Base Purchase Price.
(e) On the Closing Date, no material suit, action, or other proceeding
seeking to restrain or prohibit the consummation of the transaction
contemplated by this Agreement or to obtain damages or other relief in
connection therewith shall be pending against Buyer before any court or
governmental agency.
If any such condition precedent to the obligations of Buyer under this Agreement
is not met as of the Closing Date, and if Buyer is not in material breach of its
obligations hereunder, Buyer may terminate this Agreement by giving written
notice thereof to Seller. If Buyer thus terminates this Agreement, Seller shall
return the Deposit to Buyer, and the parties shall have no further obligations
to one another hereunder, other than the obligations under Sections 6.(a)(iii)
and 15. hereof and the confidentiality obligations under Section 7.(d) hereof,
which shall survive such termination. Notwithstanding the foregoing, if a
condition in Section 9.(a), 9.(b), or 9.(e) is not met and is asserted by Buyer
as a failure of one of its conditions of Closing, and if the reasons such
condition is not met relate only to a portion, but not all, of the Properties,
failure of such condition to be met may, at the option of either Buyer or
Seller, be treated as an uncured Asserted Defect and handled in accordance with
the procedure set forth in Section 8. hereof.
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10. Conditions Precedent to Seller's Obligations. Seller's obligations
--------------------------------------------
under this Agreement are subject to the each of the following conditions:
(a) Buyer's representations under this Agreement shall be true and
accurate in all material respects as of the date when made and at Closing.
At Closing, Buyer's representations under this Agreement shall be true and
accurate in all material respects except as to changes specifically
contemplated by this Agreement or consented to by Seller.
(b) Buyer shall have performed and complied in all material respects
with every covenant, agreement, and condition required by it under this
Agreement prior to or at the Closing unless compliance therewith shall have
been waived by Seller.
(c) If applicable, Buyer and Seller shall have received approval of
the transaction contemplated by this Agreement from the FTC under the Hart-
Scott-Rodino Act, or shall have received notification that the waiting
period under the Hart-Scott-Rodino Act has terminated, or the waiting
period under the Hart-Scott-Rodino Act shall have expired.
(d) The Purchase Price reduction resulting from the procedure set
forth in Section 8. hereof does not exceed five percent (5%) of the Base
Purchase Price.
(e) On the Closing Date, no material suit, action, or other proceeding
seeking to restrain or prohibit the consummation of the transaction
contemplated by this Agreement or to obtain damages or other relief in
connection therewith shall be pending against Seller before any court or
governmental agency.
If any such condition precedent to the obligations of Seller under this
Agreement is not met as of the Closing Date, Seller may terminate this Agreement
by giving written notice thereof to Buyer. If Seller terminates this Agreement
because of Buyer's failure to fulfill a condition in Section 10.(a) or 10.(b),
Seller shall not return the Deposit to Buyer. If Seller terminates this
Agreement because a condition in Section 10.(c), 10.(d), or 10.(e) is not met,
and if Buyer is not in material default under this Agreement, Seller shall
return the deposit to Buyer. Thereafter, Seller and Buyer shall have no further
obligations to one another hereunder, other than the obligations under Sections
6.(a)(iii) and 15. hereof and the confidentiality obligations under Section
7.(d) hereof, which shall survive such termination.
11. The Closing. The consummation of the transaction contemplated hereby
-----------
(the "Closing") shall take place in the offices of Seller, at 6688 North Central
Expressway, Dallas, Texas 75206, on August 15, 1997, at 10:00 a.m. Central Time,
or at such other date and time (i) as Buyer and Seller may agree or (ii) to
which Seller may postpone the Closing pursuant to Section 7. hereof (such date
and time, as changed pursuant to clauses (i) and (ii) being herein called the
"Closing Date").
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(a) At the Closing, Seller shall:
(i) execute, acknowledge, and deliver to Buyer a conveyance of
the Properties (the "Assignment and Bill of Sale"), in the form
attached hereto as Exhibit "C" (with Exhibit "A" hereto being attached
thereto, subject to any changes made hereunder), effective as to runs
of oil and deliveries of gas as of 7:00 a.m., local time at the
locations of the Properties, respectively, on March 31, 1997 (herein
called the "Effective Date"); and
(ii) execute (and, where required, acknowledge) and deliver to
Buyer forms of conveyance or assignment as required by the applicable
authorities for transfers of interests in state or federal leases
included in the Properties;
(iii) if Buyer requests, execute and deliver to Buyer letters in
lieu of transfer orders (or similar documentation), in form acceptable
to both parties; and
(iv) if Buyer requests, deliver to Buyer an affidavit or other
certification (as permitted by the Internal Revenue Code of 1986, as
amended) that Seller is not a "foreign person" within the meaning of
Section 1445 (or similar provisions) of such code (i.e., Seller is not
a non-resident alien, foreign corporation, foreign partnership,
foreign trust, or foreign estate, as those terms are defined in such
code and regulations promulgated thereunder); and
(v) to the extent Seller is able to do so, turn over possession
of the Properties to Buyer.
(b) At the Closing, Buyer shall:
(i) deliver to Seller, by wire transfer to an account designated
by Seller in a bank located in the United States, an amount equal to
(A) the Purchase Price, less (B) the Deposit, less (or plus, as the
case may be) (C) any adjustments made at Closing under Section 12.
hereof; and
(ii) with respect to Properties operated by Seller, and subject
to applicable operating agreement requirements, execute and deliver to
Seller appropriate evidence reflecting change of operator as required
by applicable authorities, and such evidence as Seller may require
that Buyer is qualified with such authorities to succeed Seller as
operator; and
(iii) execute such forms and take such other steps as Seller
reasonably may require to (i) succeed Seller with respect to the
Properties under the rules and regulations of applicable authorities
and (ii) assume any plugging liabilities of Seller with respect to the
wells located on the Properties or on units in which the
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<PAGE>
Properties participate (including, without limitation, compliance with
state statutes).
(c) Within fifteen (15) days after Closing, Seller shall deliver to
Buyer all of Seller's lease files, abstracts and title opinions, division
order files, production records, well files, copies of accounting records
(but not including general financial accounting or tax accounting records),
and other similar files and records that directly relate to the Properties.
Notwithstanding the foregoing, Seller shall not be required to deliver to
Buyer materials that Seller considers proprietary or confidential or that
Seller legally cannot provide to Buyer without, in its opinion, breaching,
or risking a breach of, confidentiality agreements with other parties. It
is expressly understood that Buyer is not acquiring, and Seller is not
obligated to transfer to Buyer, any seismic data, geological or geophysical
data, or other similar data, or any interpretations thereof or other data
or records related thereto. With respect to each portion of the Properties
from which Seller is disbursing proceeds of production attributable to
other parties:
(i) Seller shall continue to collect proceeds of production
through the production month that includes the Closing Date and shall
be responsible for making disbursements, in accordance with its normal
procedures (and at normal times), of such proceeds of production so
collected to the parties entitled to same, with any proceeds of
production thereafter collected by Seller to be forwarded promptly to
Buyer (who shall thereafter account for same to the parties entitled
thereto), and
(ii) After execution of this Agreement, Seller shall deliver to
Buyer (A) a copy of its "pay list" for each such portion of the
Properties (which pay list shall include the name, address, social
security number, and applicable share of proceeds of production, to
the extent such information is contained in Seller's records, for each
party to whom Seller is disbursing proceeds of production with respect
to such portion of the Properties), and (B) a list of all parties for
whom it is holding in suspense proceeds of production.
(d) Following delivery of the materials referred to in Section
11.(c)(ii) hereof, Buyer shall become responsible for all disbursements of
proceeds of production commencing with the production month after the month
that includes the Closing Date, and such disbursement activities shall be
included in the matters that Buyer assumes and with respect to which Buyer
indemnifies Seller under Section 13. hereof. It is understood and agreed
that Seller does not represent or warrant to Buyer the accuracy of the "pay
lists" so delivered.
(e) SELLER GIVES NO ASSURANCE THAT BUYER SHALL SUCCEED SELLER AS
OPERATOR OF ANY PORTION OF THE PROPERTIES IN WHICH A PARTY OTHER THAN
SELLER OWNS AN INTEREST. On any portion of the
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Properties where Buyer shall succeed Seller as operator, Buyer and Seller
shall cooperate during the transitional period between Seller's
relinquishment of such operations and Buyer's assumption of such
operations. To the extent Seller remains an operator after Closing (which
it shall have no obligation to do), it shall serve as operator under the
applicable operating agreement in the manner provided by such agreement
and, to the extent Seller so operates any portion of the Properties after
Closing, its obligations to Buyer with respect to such operations shall be
no greater than those it would have to a non-operator under the applicable
operating agreement (and, in the absence of an operating agreement, under
the AAPL 610 (1989 Revision) form operating agreement). THE PARTIES
RECOGNIZE THAT UNDER SUCH AGREEMENTS AND SUCH FORM OF AGREEMENT THE
OPERATOR IS NOT RESPONSIBLE TO THE OTHER PARTIES THERETO FOR ITS OWN
NEGLIGENCE AND HAS NO RESPONSIBILITY TO SUCH OTHER PARTIES OTHER THAN FOR
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
12. Accounting Adjustments.
----------------------
(a) Appropriate adjustments shall be made between Buyer and Seller so
that:
(i) all expenses (including, without limitation, all drilling
costs, all capital expenditures, and all overhead charges under
applicable operating agreements, regardless of whether such operating
agreements are with third parties or related entities, and regardless
of whether Seller is the operator or a non-operator) and all other
overhead charges actually charged by third parties and incurred in the
operation of the Properties after the Effective Date shall be
allocated to Buyer, and all proceeds (net of applicable production,
severance, and similar taxes) from the sale of oil, gas, and other
minerals produced from the Properties after the Effective Date shall
be allocated to Buyer; and
(ii) all expenses (including, without limitation, drilling costs,
capital expenditures, overhead charges under applicable operating
agreements, regardless of whether such operating agreements are with
third parties or related entities, and regardless of whether Seller is
the operator or a non-operator) and all other overhead charges
actually charged by third parties and incurred in the operation of the
Properties before the Effective Date shall be allocated to Seller, and
all proceeds (net of applicable production, severance, and similar
taxes) from the sale of oil, gas, and other minerals produced from the
Properties before the Effective Date shall be allocated to Seller.
(b) In making such adjustments, the parties agree that:
(i) oil above pipeline connections that was produced from the
Properties and that was stored in tanks located on the Properties on
the Effective Date (or
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<PAGE>
located elsewhere but used by Seller to store oil produced from the
Properties prior to delivery to oil purchasers) shall be deemed to
have been produced before the Effective Date; and
(ii) ad valorem and similar taxes assessed for periods prior to
the Effective Date shall be borne by Seller, and ad valorem taxes
assessed for periods on or after the Effective Date shall be borne by
Buyer (ad valorem and similar taxes shall be considered assessed for
the period for which they are stated to be assessed, even if the same
are based on production or other activities occurring in prior
periods); and
(iii) ad valorem taxes with respect to the period containing
the Effective Date shall be prorated between Buyer and Seller based on
the number of days in such period that fall before and after the
Effective Date (with the Effective Date being counted in the period
after the Effective Date); and
(iv) no consideration shall be given to the local, state, or
federal income tax liabilities of any party.
(c) In addition, Buyer and Seller shall determine (i) the total amount
of overproduction of gas (measured in Mcf) with respect to the Properties
as of the Effective Date (e.g. volumes of gas taken from wells on the
Properties, or on lands unitized therewith, by the owners of the Properties
in excess of those volumes that the ownership of the Properties would
entitle such owners to receive) and (ii) total amount of underproduction of
gas (measured in Mcf) with respect to the Properties as of the Effective
Date (e.g. the amount by which the volume of gas from wells on the
Properties, or on lands unitized therewith, that the ownership of the
Properties would entitle the owners thereof to take exceeds the volumes
taken from such wells by owners). If the total amount of overproduction
exceeds the total amount of underproduction, Buyer shall be credited with
an amount equal to $1.00 times such excess. If the total amount of
underproduction exceeds the total amount of overproduction, Seller shall be
credited with an amount equal to $1.00 times such excess. Buyer and Seller
also shall determine the amount of all pipeline and gathering system
imbalances that existed as of the Effective Date with respect to deliveries
from the Properties. Seller shall receive credit for all benefits arising
out of such imbalances, and Buyer shall receive credit for all obligations
arising out of such imbalances.
(d) At or before Closing, the parties shall determine, based upon the
best information reasonably available to them (and as to adjustments under
Section 12.(a), based on amounts actually received or paid by Seller prior
to such time), the amount of the adjustments provided for in Sections
12.(a) and 12.(b). If the amount of such adjustments resulting in a credit
to Buyer exceeds the amount of such adjustments resulting in a credit to
Seller, Buyer shall receive a credit for the amount of such excess. If the
16
<PAGE>
amount of such adjustments resulting in a credit to Seller exceeds the
amount of such adjustments resulting in a credit to Buyer, Buyer shall pay
to Seller the amount of such excess. On or before one hundred twenty (120)
days after Closing, Buyer and Seller shall review any additional
information pertaining to the adjustments provided for in Sections 12.(a)
and 12.(b), shall determine if any additional adjustments should be made
beyond those made at Closing (whether the same be made to account for
expenses or revenues, or overproduction or underproduction volumes, not
considered in making the adjustments made at Closing, or to correct errors
made in such adjustments), and shall make any such adjustments by
appropriate payments from Seller to Buyer or from Buyer to Seller.
Following such additional adjustments, no further adjustments shall be made
under this Agreement.
13. Assumption and Indemnification. On the date of Closing, Buyer shall
------------------------------
agree (and, upon the delivery to Buyer of the Assignment and Bill of Sale shall
be deemed to have agreed): (a) to assume, pay, and perform timely all duties,
obligations, and liabilities relating to the ownership or operation of the
Properties after the Effective Date (including, without limitation, those
arising under the contracts and agreements described in Section 1.(c) hereof),
and (b) to release, indemnify, defend, and hold harmless the Seller Group from
and against any and all claims, actions, liabilities, losses, damages, costs, or
expenses (including court costs and attorneys' fees) of any kind or character
arising out of or otherwise relating to the ownership or operation of the
Properties after the Effective Date. In connection with (but not in limitation
of) the foregoing, it is specifically understood and agreed that matters arising
out of or otherwise relating to the ownership or operation of the Properties
after the Effective Date shall be deemed to include all matters arising out of
the condition of the Properties on the Effective Date including, without
limitation, all obligations properly to plug and abandon wells located on the
Properties, to restore the surface of the Properties, and to comply with, or to
bring the Properties into compliance with, applicable environmental laws,
including all liability and expense for any restoration, clean-up, disposal, or
removal that may be incurred as a result of the existence or discovery of
Hazardous Substances or other deleterious substances in, on, or under the
Properties, regardless of when the events occurred that give rise to such
condition, and the assumptions and indemnifications by Buyer set forth in this
Section shall expressly cover and include such matters. Except as otherwise
provided in this Section, Seller agrees to indemnify Buyer against any and all
claims, actions, liabilities, damages, costs or expenses (including court costs
and attorneys' fees) of any kind or character arising out of or otherwise
relating to its ownership or operation of the Properties prior to the Effective
Date. Any waste, contaminants, substances, or materials that were present or
stored on the Properties prior to Closing and that were shipped, transferred,
removed, or disposed of off the Properties prior to Closing are the sole
responsibility of Seller, and Seller agrees to indemnify and hold Buyer harmless
from and against any and all claims, actions, liabilities, damages, costs, or
expenses (including court costs and attorneys' fees) relating to such waste,
contaminants, substances, or materials. THE ASSUMPTIONS AND INDEMNIFICATIONS SET
FORTH IN THIS SECTION SHALL APPLY WHETHER OR NOT SUCH DUTIES, OBLIGATIONS, OR
LIABILITIES, OR SUCH CLAIMS, ACTIONS, CAUSES OF ACTION, LIABILITIES, DAMAGES,
LOSSES, COSTS, OR EXPENSES
17
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ARISE OUT OF (I) NEGLIGENCE (INCLUDING SOLE NEGLIGENCE, SINGLE NEGLIGENCE,
CONCURRENT NEGLIGENCE, ACTIVE OR PASSIVE NEGLIGENCE, BUT EXPRESSLY NOT INCLUDING
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) OF SELLER OR ANY OTHER INDEMNIFIED
PARTY, OR (II) STRICT LIABILITY.
14. Disclaimer of Warranties. THE EXPRESS REPRESENTATIONS AND WARRANTIES
------------------------
OF SELLER CONTAINED IN SECTION 4. (OR IN THE ASSIGNMENT AND BILL OF SALE
EXECUTED PURSUANT TO THIS AGREEMENT) ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER
REPRESENTATIONS AND WARRANTIES, EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, AND
SELLER EXPRESSLY DISCLAIMS ANY AND ALL SUCH OTHER REPRESENTATIONS AND
WARRANTIES. WITHOUT LIMITATION OF THE FOREGOING, THE PROPERTIES SHALL BE
CONVEYED PURSUANT HERETO WITHOUT ANY WARRANTY OR REPRESENTATION, WHETHER
EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE RELATING TO THE CONDITION, QUANTITY,
QUALITY, FITNESS FOR A PARTICULAR PURPOSE, CONFORMITY TO THE MODELS OR SAMPLES
OF MATERIALS, OR MERCHANTABILITY OF ANY EQUIPMENT OR ITS FITNESS FOR ANY
PURPOSE, AND, EXCEPT AS PROVIDED OTHERWISE IN THE FIRST SENTENCE OF THIS
PARAGRAPH, WITHOUT ANY OTHER EXPRESS, IMPLIED, STATUTORY, OR OTHER WARRANTY OR
REPRESENTATION WHATSOEVER. BUYER SHALL HAVE INSPECTED, OR WAIVED (AND UPON
CLOSING SHALL BE DEEMED TO HAVE WAIVED) ITS RIGHT TO INSPECT, THE PROPERTIES FOR
ALL PURPOSES AND SATISFIED ITSELF AS TO THEIR PHYSICAL AND ENVIRONMENTAL
CONDITION, BOTH SURFACE AND SUBSURFACE, INCLUDING, BUT NOT LIMITED TO,
CONDITIONS SPECIFICALLY RELATED TO THE PRESENCE, RELEASE, OR DISPOSAL OF
HAZARDOUS SUBSTANCES, SOLID WASTES, ASBESTOS OR OTHER MANMADE FIBERS OR
NATURALLY OCCURRING RADIOACTIVE MATERIALS ("NORM") IN, ON, OR UNDER THE
PROPERTIES. BUYER IS RELYING SOLELY UPON ITS OWN INSPECTION OF THE PROPERTIES,
AND BUYER SHALL, EXCEPT AS PROVIDED OTHERWISE HEREIN, ACCEPT ALL OF THE SAME "AS
IS, WHERE IS." WITHOUT LIMITATION OF THE FOREGOING, SELLER MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, AS TO THE ACCURACY OR
COMPLETENESS OF ANY DATA, REPORTS, RECORDS, PROJECTIONS, INFORMATION, OR
MATERIALS NOW, HERETOFORE, OR HEREAFTER FURNISHED OR MADE AVAILABLE TO BUYER IN
CONNECTION WITH THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, PRICING
ASSUMPTIONS OR QUALITY OR QUANTITY OF HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE
TO THE PROPERTIES OR THE ABILITY OR POTENTIAL OF THE PROPERTIES TO PRODUCE
HYDROCARBONS OR THE ENVIRONMENTAL CONDITION OF THE PROPERTIES OR ANY OTHER
MATTERS CONTAINED IN THE PROPRIETARY DATA OR ANY OTHER MATERIALS FURNISHED OR
MADE AVAILABLE TO BUYER BY SELLER
18
<PAGE>
OR BY SELLER'S AGENTS OR REPRESENTATIVES. ANY AND ALL SUCH DATA, RECORDS,
REPORTS, PROJECTIONS, INFORMATION, AND OTHER MATERIALS (WRITTEN OR ORAL)
FURNISHED BY SELLER OR OTHERWISE MADE AVAILABLE OR DISCLOSED TO BUYER ARE
PROVIDED TO BUYER AS A CONVENIENCE AND SHALL NOT CREATE OR GIVE RISE TO ANY
LIABILITY OF OR AGAINST SELLER, AND ANY RELIANCE ON OR USE OF THE SAME SHALL BE
AT BUYER'S SOLE RISK TO THE MAXIMUM EXTENT PERMITTED BY LAW.
15. Commissions. Seller agrees to indemnify and hold harmless Buyer, its
-----------
parent and subsidiary companies and other affiliates, and their directors,
officers, employees, and agents from and against any and all claims,
obligations, actions, liabilities, losses, damages, costs, or expenses
(including court costs and attorneys' fees) of any kind or character arising out
of or resulting from any agreement, arrangement, or understanding by, or on
behalf of, Seller with any broker or finder in connection with this Agreement or
the transaction contemplated hereby. Buyer agrees to indemnify and hold
harmless Seller Group from and against any and all claims, obligations, actions,
liabilities, losses, damages, costs, or expenses (including court costs and
attorneys' fees) of any kind or character arising out of or resulting from any
agreement, arrangement, or understanding by, or on behalf of, Buyer with any
broker or finder in connection with this Agreement or the transaction
contemplated hereby.
16. Casualty Loss. If the Properties are damaged by fire or other
-------------
casualty prior to Closing, this Agreement shall remain in full force and effect.
Seller shall have no obligation to repair any portion of the Properties so
damaged. If Seller elects not to repair such a damaged portion of the
Properties, Buyer either may treat such portion of the Properties as if it had
an Asserted Defect or may elect not to adjust the Purchase Price therefor. If
Buyer elects hereunder to treat the damaged portion of the Properties as if it
had an Asserted Defect, the procedure provided for in Section 8. shall apply to
such portion of the Properties, and all rights to insurance proceeds and claims
against third parties related thereto shall belong to Seller. If Buyer elects
hereunder not to adjust the Purchase Price for such damaged portion of the
Properties, and if Seller is entitled to any claims under an insurance policy
with respect to such damage, Seller either shall collect and pay over, or
assign, such insurance claims to Buyer. In addition, if Buyer elects hereunder
not to adjust the Purchase Price for such damaged portion of the Properties,
Seller shall assign unto Buyer all claims against third parties with respect to
such damage. Buyer shall then take title to such portion of the Properties
without reduction of the Purchase Price. If Seller elects to repair a damaged
portion of the Properties, all rights to insurance proceeds and claims against
third parties related thereto shall belong to Seller.
17. Notices. All notices and other communications required or permitted
-------
under this Agreement shall be in writing, unless otherwise specifically provided
herein, and shall be delivered personally, by recognized commercial courier or
delivery service (which provides a receipt), by telex or telecopier (with
receipt acknowledged), or by registered or certified mail (postage prepaid), to
the following addresses:
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If to Buyer:
Inland Production Company
475 17th Street
Suite 1500
Denver, Colorado 80202
Attention: Mr. David P. Donegan
Fax: (303) 296-4070
If to Seller:
Enserch Exploration, Inc.
4849 Greenville Avenue
Suite 1200
Dallas, Texas 75206
Attention: Mr. Jeffrey B. Camp
Fax: (214) 890-4734
With a copy to:
Vice President and General Counsel
Enserch Exploration, Inc.
6688 North Central Expressway
Suite 1000
Dallas, Texas 75206
Fax: (214) 890-4711
All such notices and communications shall be considered delivered on the date of
receipt. A party may specify as its proper address any other post office
address within the continental limits of the United States by giving notice to
the other party, in the manner provided in this Section.
18. Survival of Provisions. All representations and warranties made by
----------------------
Seller in Section 4. and by Buyer in Section 5. shall be continuing and shall be
true and correct on the Closing Date with the same force and effect as if made
at that time (and shall inure to the benefit of the respective successors and
assigns of Buyer and Seller). All such representations and warranties shall
survive the Closing and the delivery of the Assignment and Bill of Sale. The
obligations of the parties under Section 11. (to the extent the same are, by
agreement, not performed at Closing), and Sections 12., 13., 14., 15., 17., 18.,
and 19. also shall survive the Closing (subject to any limitations set forth in
such Sections) and the delivery of the Assignment and Bill of Sale.
19. Miscellaneous Matters.
---------------------
(a) After the Closing, Seller and Buyer shall execute and deliver, and
shall otherwise cause to be executed and delivered, from time to time, such
further instruments, notices, division orders, transfer orders, and other
documents, and do such other and
20
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further acts as reasonably may be necessary more fully and effectively to
grant, convey, and assign the Properties to Buyer.
(b) Except as provided in the following sentence, neither party shall
have the right to assign its rights under this Agreement without the prior
written consent of the other party, and any such assignment in violation of
this provision shall be void. Without Buyer's consent, Seller may assign
its rights under this Agreement to a direct or indirect parent of Seller,
to a direct or indirect subsidiary of Seller, or to an entity that is a
direct or indirect subsidiary of a direct or indirect parent of Seller.
(c) On the Closing Date (and upon the delivery to Buyer of the
Assignment and Bill of Sale), Buyer shall succeed to the position of Seller
with respect to all gas imbalances (whether wellhead imbalances or pipeline
or gathering imbalances) and to the position of Seller with respect to all
make-up obligations. As a result of such succession, Buyer (i) shall be
entitled to receive any and all benefits, including payments of proceeds of
production in excess of amounts that it would otherwise be entitled to
produce and receive by virtue of ownership of the Properties, that Seller
would have been entitled to receive by virtue of such position and (ii)
shall be obligated to suffer any detriments (whether the same are in the
form of obligations to deliver production that would have otherwise been
attributable to its ownership of the Properties without receiving full
payment therefor, or are in the form of the obligation to make payment in
cash) that Seller would have been obligated to suffer by virtue of such
positions.
(d) To the extent applicable to the transaction contemplated hereby,
or any portion thereof, Buyer waives the provisions of the Texas Deceptive
Trade Practices Act, Chapter 17, Subchapter E, Sections 17.41 through
17.63, inclusive (other than Section 17.555 which is not waived), Texas
Business and Commerce Code. In connection with such waiver, Buyer hereby
represents and warrants to Seller that Buyer (a) is in the business of
seeking or acquiring, by purchase or lease, goods or services for
commercial or business use, (b) has assets of Five Million and No/100
Dollars ($5,000,000.00) or more according to its most recent financial
statement, (c) has knowledge and experience in financial and business
matters that enable it to evaluate the merits and risks of the transaction
contemplated hereby, and (d) is not in a significantly disparate bargaining
position.
(e) Any confidentiality agreement executed by Buyer and Seller in
connection with the transaction contemplated hereby remains in full force
and effect and is not superseded or modified by this Agreement.
(f) This Agreement contains the entire understanding of the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations, and discussions among the parties
with respect to such subject matter, except as provided in Sections
6.(a)(i) and 19.(e) with respect to any confidentiality agreement.
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<PAGE>
The headings contained in this Agreement are for convenience only and shall
not control or affect the meaning or construction of any provision of this
Agreement. Within this Agreement, words of any gender shall be held and
construed to cover any other gender, and words in the singular shall be
held and construed to cover the plural, unless the context otherwise
requires. Time is of the essence in this Agreement.
(g) This Agreement may be amended, modified, supplemented, restated,
or discharged (and provisions hereof may be waived) only by an instrument
in writing signed by the party against whom enforcement of the amendment,
modification, supplement, restatement, or discharge (or waiver) is sought.
(h) Each party shall bear and pay all expenses it incurred in
connection with the transaction contemplated by this Agreement.
(i) This Agreement shall be binding on the parties hereto and their
respective successors and assigns.
(j) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which shall constitute one
and the same instrument. It shall not be necessary for both parties to
sign the same counterpart.
(k) WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW, THIS AGREEMENT
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF TEXAS APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED
ENTIRELY WITHIN SUCH STATE AND BY THE LAWS OF THE UNITED STATES OF AMERICA,
EXCEPT THAT, TO THE EXTENT THE LAW OF A STATE IN WHICH THE PROPERTIES ARE
LOCATED NECESSARILY GOVERNS, THE LAW OF SUCH STATE SHALL, TO SUCH EXTENT,
APPLY TO THE PROPERTIES.
(l) Prior to Closing, Buyer shall not issue any publicity or press
release concerning this Agreement or the transaction contemplated hereby
without the prior written consent of Seller, unless, in the written opinion
of legal counsel acceptable to Seller, such disclosure is required by
applicable law or other applicable rules or regulations of any governmental
authority or stock exchange and such publicity or press release contains no
more than the minimum information necessary to comply therewith. This
provision shall not replace or restrict any provision in any prior
agreement between the parties affecting confidentiality or the disclosure
of information about the Properties.
IN WITNESS WHEREOF, this Agreement is executed by the parties hereto on the
date set forth above.
22
<PAGE>
ENSERCH EXPLORATION, INC.
By:
--------------------------------------
David R. Henderson
Executive Vice President and Chief Operating Officer
INLAND PRODUCTION COMPANY
By:
--------------------------------------
Kyle R. Miller
President and Chief Executive Officer
23
<PAGE>
ACKNOWLEDGEMENTS
----------------
STATE OF TEXAS (S)
(S)
COUNTY OF DALLAS (S)
This instrument was acknowledged before me, Notary Public, this 10th day of
July, 1997, by DAVID R. HENDERSON, EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING
OFFICER of ENSERCH EXPLORATION, INC., a Texas corporation, on behalf of the
corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
----------------------------
Notary Public
My commission expires:
- ------------------------
STATE OF ______________________ (S)
(S)
COUNTY OF _____________________ (S)
This instrument was acknowledged before me, Notary Public, this ____ day of
July, 1997, by KYLE R. MILLER, PRESIDENT AND CHIEF EXECUTIVE OFFICER of INLAND
PRODUCTION COMPANY, a Texas corporation, on behalf of the corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
----------------------------
Notary Public
My commission expires:
- ------------------------
24
<PAGE>
EXHIBIT "A"
-----------
(example)
Recorded Land
--------
Lease No. Lessor Lessee Date Book Page Description County State
- --------- ------ ------ ---- ---- ---- ----------- ------ -----
A-1
<PAGE>
EXHIBIT "B"
-----------
(example)
Operating Net Revenue
Well or Unit Name API Number County State Interest Interest Amount
- ----------------- ---------- ------ ----- --------- ----------- ------
B-1
<PAGE>
EXHIBIT "C"
-----------
ASSIGNMENT AND BILL OF SALE
---------------------------
ENSERCH EXPLORATION, INC. ("Grantor"), for Ten Dollars and other good
and valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), hereby GRANTS, BARGAINS, SELLS, CONVEYS, ASSIGNS, TRANSFERS, SETS
OVER, and DELIVERS unto INLAND PRODUCTION COMPANY, whose address is 475 17th
Street, Suite 1500, Denver, Colorado 80202 (herein called "Grantee"), the
following described properties, rights, and interests:
(a) All of Grantor's right, title, and interest in and to the oil,
gas, and mineral leases described in Exhibit "A" hereto (and any
ratifications and amendments to such leases, whether or not such
ratifications and amendments are described in Exhibit "A") and all of
Grantor's right, title, and interest in and to the fee mineral interests
described in Exhibit "A," if any; and
(b) All rights, titles, and interests of Grantor in and to, or
otherwise derived from, all presently existing and valid oil, gas, and
mineral unitization, pooling, and communitization agreements, declarations,
and orders (including, without limitation, all units formed under orders,
rules, regulations, or other official acts of any federal, state, or other
governmental authority having jurisdiction, and voluntary unitization
agreements, designations and declarations) relating to the properties
described in subsection (a) to the extent such rights, titles, and
interests are attributable to the properties described in subsection (a);
and
(c) All rights, titles, and interests of Grantor in and to all
presently existing and valid production sales contracts, operating
agreements, and other agreements and contracts that relate to any of the
properties described in subsections (a) and (b), to the extent such rights,
titles, and interests are attributable to the properties described in
subsections (a) and (b); and
(d) All rights, titles, and interests of Grantor in and to all
materials, supplies, machinery, equipment, improvements, and other personal
property and fixtures (including, but not limited to, all wells, wellhead
equipment, pumping units, flowlines, tanks, buildings, injection
facilities, saltwater disposal facilities, compression facilities,
gathering systems, and other equipment) located on the properties described
in subsections (a) and (b) and used in connection with the exploration,
development, operation, or maintenance thereof.
The properties and interests specified in subsections (a), (b), (c), and (d) are
herein sometimes collectively called the "Properties."
C-1
<PAGE>
TO HAVE AND TO HOLD the Properties unto Grantee, its successors and
assigns, forever.
THIS ASSIGNMENT AND BILL OF SALE IS MADE WITHOUT WARRANTIES OR
REPRESENTATIONS OF ANY KIND, ALL REPRESENTATIONS AND WARRANTIES BEING EXPRESSLY
DISCLAIMED. SPECIFICALLY IN THIS CONNECTION, BUT WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, ALL EQUIPMENT, OTHER PERSONAL PROPERTY, AND
FIXTURES SOLD AND CONVEYED TO GRANTEE ARE SOLD AND CONVEYED ON AN "AS IS" AND
"WHERE IS" BASIS, AND GRANTOR EXPRESSLY DISCLAIMS ANY AND ALL SUCH OTHER
REPRESENTATIONS AND WARRANTIES. WITHOUT LIMITATION OF THE FOREGOING, THE
PROPERTIES SHALL BE CONVEYED PURSUANT HERETO WITHOUT ANY WARRANTY OR
REPRESENTATION, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, RELATING TO
THE CONDITION, QUANTITY, QUALITY, FITNESS FOR A PARTICULAR PURPOSE, CONFORMITY
TO THE MODELS OR SAMPLES OF MATERIALS OR MERCHANTABILITY OF ANY EQUIPMENT OR ITS
FITNESS FOR ANY PURPOSE WITHOUT ANY OTHER EXPRESS, IMPLIED, STATUTORY OR OTHER
WARRANTY OR REPRESENTATION WHATSOEVER. GRANTEE SHALL HAVE INSPECTED, OR WAIVED
(AND UPON CLOSING SHALL BE DEEMED TO HAVE WAIVED) ITS RIGHT TO INSPECT, THE
PROPERTIES FOR ALL PURPOSES AND SATISFIED ITSELF AS TO THEIR PHYSICAL AND
ENVIRONMENTAL CONDITION, BOTH SURFACE AND SUBSURFACE, INCLUDING BUT NOT LIMITED
TO CONDITIONS SPECIFICALLY RELATED TO THE PRESENCE, RELEASE OR DISPOSAL OF
HAZARDOUS SUBSTANCES, SOLID WASTES, ASBESTOS OR OTHER MANMADE FIBERS OR
NATURALLY OCCURRING RADIOACTIVE MATERIALS ("NORM") IN, ON OR UNDER THE
PROPERTIES. GRANTEE IS RELYING SOLELY UPON ITS OWN INSPECTION OF THE
PROPERTIES, AND GRANTEE SHALL, EXCEPT AS PROVIDED OTHERWISE HEREIN, ACCEPT ALL
OF THE SAME IN THEIR "AS IS, WHERE IS" CONDITION. ALSO WITHOUT LIMITATION OF
THE FOREGOING, GRANTOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS, IMPLIED,
STATUTORY OR OTHERWISE, AS TO THE ACCURACY OR COMPLETENESS OF ANY DATA, REPORTS,
RECORDS, PROJECTIONS, INFORMATION OR MATERIALS NOW, HERETOFORE OR HEREAFTER
FURNISHED OR MADE AVAILABLE TO GRANTEE IN CONNECTION WITH THIS AGREEMENT
INCLUDING, WITHOUT LIMITATION, RELATIVE TO PRICING ASSUMPTIONS, OR QUALITY OR
QUANTITY OF HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE TO THE PROPERTIES OR THE
ABILITY OR POTENTIAL OF THE PROPERTIES TO PRODUCE HYDROCARBONS OR THE
ENVIRONMENTAL CONDITION OF THE PROPERTIES OR ANY OTHER MATTERS CONTAINED IN THE
PROPRIETARY DATA OR ANY OTHER MATERIALS FURNISHED OR MADE AVAILABLE TO GRANTEE
BY GRANTOR OR BY GRANTOR'S AGENTS OR REPRESENTATIVES. ANY AND ALL
C-2
<PAGE>
SUCH DATA, RECORDS, REPORTS, PROJECTIONS, INFORMATION AND OTHER MATERIALS
(WRITTEN OR ORAL) FURNISHED BY GRANTOR OR OTHERWISE MADE AVAILABLE OR DISCLOSED
TO GRANTEE SHALL NOT CREATE OR GIVE RISE TO ANY LIABILITY OF OR AGAINST GRANTOR
AND ANY RELIANCE ON OR USE OF THE SAME SHALL BE AT GRANTEE'S SOLE RISK TO THE
MAXIMUM EXTENT PERMITTED BY LAW.
This Assignment and Bill of Sale is subject to the terms and provisions of
that certain Purchase and Sale Agreement, dated July 10, 1997, between Grantor
and Grantee.
This Assignment and Bill of Sale may be executed in several counterparts
all of which are identical, except that, to facilitate recordation, in certain
counterparts hereof, only that portion of Exhibit "A" that contains specific
descriptions of properties located in the recording jurisdiction in which the
particular counterpart is to be recorded are included, and other portions of
Exhibit "A" are included by reference only. All such counterparts together
shall constitute one and the same instrument. Complete copies of this
Assignment and Bill of Sale containing the entire Exhibit "A" have been retained
by Grantor and Grantee.
IN WITNESS WHEREOF, this Assignment and Bill of Sale has been executed and
delivered on August 15, 1997, effective as to runs of oil and deliveries of gas,
and for all other purposes, as of 7:00 a.m., local time at the locations of the
Properties, respectively, on March 31, 1997.
ENSERCH EXPLORATION, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
INLAND PRODUCTION COMPANY
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
C-3
<PAGE>
STATE OF TEXAS (S)
(S)
COUNTY OF DALLAS (S)
On this ___ day of _________, before me, a Notary Public of said state, duly
commissioned and sworn, appeared _____________________________, known to me to
be the person whose name is subscribed to the within instrument as
_________________ of ENSERCH EXPLORATION, INC., a Texas corporation, and
acknowledged to me that such corporation executed the same.
Witness my hand and official seal.
--------------------------------------
Notary Public, State of Texas
My Commission Expires:
- ---------------------
STATE OF ______________ (S)
(S)
COUNTY OF _____________ (S)
On this ___ day of __________, before me, a Notary Public of said state, duly
commissioned and sworn, appeared _______________________, known to me to be the
person whose name is subscribed to the within instrument as ____________________
of INLAND PRODUCTION COMPANY, a Texas corporation, and acknowledged to me that
such corporation executed the same.
Witness my hand and official seal.
---------------------------------------
Notary Public, State of ______
My Commission Expires:
- ---------------------
C-4
<PAGE>
EXHIBIT "D"
Disclosure Schedule
-------------------
1. Certain litigation:
Enserch Exploration, Inc. v. Duchesne County, Utah, Eighth Judicial
District Court of Duchesne County, Utah, Civil No. 960800014.
2. Certain environmental matters:
None.
D-1
