<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 20, 1998
REGISTRATION NO. 333-61547
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CONTINENTAL RESOURCES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
OKLAHOMA 1311 73-0767549
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) No.)
</TABLE>
--------------------------
302 NORTH INDEPENDENCE ROGER CLEMENT
SUITE 300 302 NORTH INDEPENDENCE
ENID, OKLAHOMA 73701 SUITE 300
(580) 233-8955 ENID, OKLAHOMA 73701
(Address, including Zip Code, and (580) 233-8955
telephone (Name, address, including Zip
number, including area code, of Code, and telephone number,
registrant's principal executive including area code, of agent for
offices) service)
--------------------------
COPIES TO:
THEODORE M. ELAM, ESQ.
BRICE TARZWELL, ESQ.
MCAFEE & TAFT A PROFESSIONAL CORPORATION
TENTH FLOOR, TWO LEADERSHIP SQUARE
OKLAHOMA CITY, OKLAHOMA 73102
(405) 235-9621
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement under the earlier effective registration statement for
the same offering. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
10 1/4% Senior Subordinated Notes due
2008................................ $150,000,000 100% $150,000,000 $44,250(1)
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(f)(2).
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8 OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8, MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ADDITIONAL REGISTRANTS
CONTINENTAL GAS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
OKLAHOMA 1311 73-1363922
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
302 NORTH INDEPENDENCE, SUITE 300
ENID, OKLAHOMA 73701
(580) 233-8955
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
ROGER CLEMENT
SENIOR VICE PRESIDENT, TREASURER
AND CHIEF FINANCIAL OFFICER
302 NORTH INDEPENDENCE, SUITE 300
ENID, OKLAHOMA 73701
(580) 233-8955
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
CONTINENTAL CRUDE CO.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
OKLAHOMA 1311 73-1541220
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
302 NORTH INDEPENDENCE, SUITE 300
ENID, OKLAHOMA 73701
(580) 233-8955
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
ROGER CLEMENT
SENIOR VICE PRESIDENT, TREASURER
AND CHIEF FINANCIAL OFFICER
302 NORTH INDEPENDENCE, SUITE 300
ENID, OKLAHOMA 73701
(580) 233-8955
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
<PAGE>
PRELIMINARY PROSPECTUS (SUBJECT TO COMPLETION)
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
ISSUED OCTOBER 20, 1998
OFFER TO EXCHANGE
ALL OUTSTANDING
10 1/4% SENIOR SUBORDINATED NOTES DUE 2008
($150,000,000 PRINCIPAL AMOUNT OUTSTANDING)
FOR
10 1/4% SENIOR SUBORDINATED NOTES DUE 2008
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
OF
CONTINENTAL RESOURCES, INC.
----------------
The Exchange Offer will expire at 5:00 p.m., New York City time, on November
, 1998, unless extended (if and as extended, the "Expiration Date"). The
Company will accept for exchange any and all validly tendered Old Notes on or
prior to 5:00 p.m., New York City time, on the Expiration Date. Tenders of Old
Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on
the Expiration Date. See "The Exchange Offer."
--------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A DISCUSSION OF CERTAIN FACTORS
WHICH INVESTORS SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER AND AN
INVESTMENT IN THE NEW NOTES OFFERED HEREBY.
--------------------------
Continental Resources, Inc., an Oklahoma corporation (the "Company" or
"Continental"), hereby offers (the "Exchange Offer"), upon the terms and subject
to the conditions set forth in this Prospectus and the accompanying Letter of
Transmittal to exchange $1,000 principal amount of its 10 1/4% Senior
Subordinated Notes Due 2008 (the "New Notes"), which have been registered under
the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement of which this Prospectus is a part, for each $1,000
principal amount of its outstanding 10 1/4% Senior Subordinated Notes Due 2008
(the "Old Notes"), of which an aggregate of $150,000,000 in principal amount was
outstanding as of October 16, 1998. The New Notes and the Old Notes are
collectively referred to herein as the "Notes."
(COVER CONTINUED ON PAGE II.)
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------------
Interest on the New Notes will be paid in cash at a rate of 10 1/4% per
annum on each February 1 and August 1, commencing February 1, 1999. The New
Notes may be redeemed at the option of the Company, in whole or in part, at any
time on or after August 1, 2003 at 105.125% of their principal amount, plus
accrued interest, declining ratably to 100% of their principal amount, plus
accrued interest, on or after August 1, 2006. In addition, at any time prior to
August 1, 2001, the Company may redeem up to 35% of the aggregate principal
amount of the New Notes with the net proceeds of one or more sales of capital
stock of the Company, at 110.250% of their principal amount, plus accrued
interest; provided that after any such redemption at least $97.5 million
aggregate principal amount of Notes remains outstanding. See "Description of
Notes."
This Prospectus, together with the Letter of Transmittal, is being sent to
all registered holders of Old Notes as of October 16, 1998. As of such date, a
nominee for The Depository Trust Company was the only registered holder of the
Old Notes.
The Company will not receive any proceeds from this Exchange Offer. No
dealer-manager is being used in connection with this Exchange Offer. See "Use of
Proceeds" and "Plan of Distribution."
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
--------------------------
THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE>
The New Notes will be general unsecured obligations of the Company entitled
to the benefits of the Indenture governing the Notes (as defined herein). The
New Notes will be subordinated in right of payment to all existing and future
Senior Debt (as defined in the Indenture), including indebtedness under the
Company's revolving credit facility with Bank One, Oklahoma, N.A. (the "Credit
Facility"), will rank equally in right of payment with the Old Notes and all
other senior indebtedness of the Company, and will rank senior in right of
payment to all other subordinated indebtedness of the Company. Payment of
principal, premium, if any, and interest on the New Notes will be
unconditionally guaranteed, jointly and severally, on a senior unsecured basis,
by the Company's two wholly owned subsidiaries, Continental Gas, Inc. and
Continental Crude Co., and by its future Restricted Subsidiaries (as defined in
the Indenture) (the "Subsidiary Guarantors"). The Old Notes are, and the New
Notes will be, subordinated in right of payment to all existing and future
Senior Debt, will rank equally in right of payment to all other senior debt and
will rank senior in right of payment to all other subordinated indebtedness of
the Subsidiary Guarantors. As of June 30, 1998, the Company had, on a
consolidated basis, $3.8 million of Senior Debt (exclusive of $75.0 million of
unused commitments under the Credit Facility), all of which ranks senior to the
Notes, the Company had no senior subordinated debt outstanding (exclusive of the
Notes), and the Subsidiary Guarantors had no indebtedness outstanding other than
the guarantees of the Credit Facility and the Subsidiary Guarantees. The form
and terms of the New Notes are identical in all material respects to the form
and terms of the Old Notes except that the New Notes have been registered under
the Securities Act. Any Old Notes not tendered and accepted in the Exchange
Offer will remain outstanding and will be entitled to all the rights and
preferences and will be subject to the limitations applicable thereto under the
Indenture. Following consummation of the Exchange Offer, the holders of the Old
Notes will continue to be subject to the existing restrictions upon transfer
thereof and the Company will have no further obligation to such holders to
provide for the registration under the Securities Act of the Old Notes held by
them. Following the completion of the Exchange Offer, none of the Notes will be
entitled to the contingent increase in interest rate provided pursuant to the
Old Notes. The Exchange Offer is being made pursuant to the terms of the
registration rights agreement (the "Registration Rights Agreement") entered into
between the Company and Chase Securities Inc. (the "Initial Purchaser") pursuant
to the terms of the Purchase Agreement dated July 21, 1998 between the Company
and the Initial Purchases. See "The Exchange Offer--Purpose and Effect of the
Exchange Offer."
Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Company believes the New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold and otherwise
transferred by any holder thereof (other than broker-dealers, as set forth
below, and any such holder that is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such holder's
business and that such holder has no arrangement or understanding with any
person to participate in the distribution of such New Notes. Any holder who
tenders in the Exchange Offer with the intention to participate, or for the
purpose of participating, in a distribution of the New Notes or who is an
affiliate of the Company may not rely upon such interpretations by the staff of
the Commission and, in the absence of an exemption therefrom, must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction. Holders of Old Notes wishing
to accept the Exchange offer must represent to the Company in the Letter of
Transmittal that such conditions have been met.
Each broker-dealer (other than an affiliate of the Company) that receives
New Notes for its own account pursuant to the Exchange Offer as a result of
market making activities must acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such New Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of New Notes received in exchange for Old
Notes where such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the last date Old Notes are accepted for
exchange pursuant to the Exchange Offer (the "Exchange Date"), it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution." Any broker-dealer who is an affiliate of the
Company may not rely on such no-action letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Periodic Reports........................................................................................... iv
Available Information...................................................................................... iv
Summary.................................................................................................... 1
Risk Factors............................................................................................... 13
The Exchange Offer......................................................................................... 21
Unaudited Pro Forma Consolidated Financial Statements...................................................... 29
Selected Consolidated Financial Data....................................................................... 34
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 36
Business and Properties.................................................................................... 45
Management................................................................................................. 62
Summary Compensation Table................................................................................. 64
Certain Relationships and Related Transactions............................................................. 65
Principal Shareholders..................................................................................... 66
Description of Credit Facility............................................................................. 66
Description of Notes....................................................................................... 67
Certain United States Tax Consequences..................................................................... 99
Plan of Distribution....................................................................................... 103
Legal Matters.............................................................................................. 104
Experts.................................................................................................... 104
Glossary of Terms.......................................................................................... 105
Index to Financial Statements.............................................................................. F-1
</TABLE>
------------------------
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
OR THE ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY.
------------------------
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD SHARES IN ANY JURISDICTION IN WHICH
THIS EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH
THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, NOR ANY EXCHANGE
MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THE INFORMATION HEREIN
IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
iii
<PAGE>
PERIODIC REPORTS
The Company has agreed that, whether or not required by the rules and
regulations of the Commission, so long as any Old Notes or New Notes are
outstanding, the Company will file with the Commission all such reports and
other information as it would be required to file with the Commission by Section
13(a) or 15(d) under the Securities Exchange Act of 1934 (the "Exchange Act") as
if it were subject thereto. The Company will supply the Trustee appointed with
respect to the Old Notes or New Notes and each holder of Old Notes or New Notes,
without cost, copies of such report and other information.
------------------------
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Registration Statement"), which term includes all amendments,
exhibits, annexes and schedules thereto) pursuant to the Securities Act, and the
rules and regulations promulgated thereunder, covering the New Notes being
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. Statements made in this
Prospectus as to the contents of any contracts, agreement or other document
referred to are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference.
The Company is not currently subject to the informational reporting
requirements of the Securities Exchange Act of 1934, as amended. Upon
effectiveness of a registration statement with respect to an exchange offer or a
shelf registration statement with respect to resales of the Notes (see
"Description of the Notes--Registration Rights"), the Company will become
subject to the informational requirements of the Exchange Act.
------------------------
THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS". ALL STATEMENTS
REGARDING THE COMPANY'S AND ITS SUBSIDIARIES' EXPECTED FINANCIAL POSITION,
BUSINESS AND FINANCING PLANS ARE FORWARD-LOOKING STATEMENTS. ALTHOUGH THE
COMPANY AND ITS SUBSIDIARIES BELIEVE THAT THE EXPECTATIONS REFLECTED IN SUCH
FORWARD-LOOKING STATEMENTS ARE REASONABLE, THEY CAN GIVE NO ASSURANCE THAT SUCH
EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT. IMPORTANT FACTORS THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM SUCH EXPECTATIONS ("CAUTIONARY
STATEMENTS") ARE DISCLOSED IN THIS PROSPECTUS, INCLUDING, WITHOUT LIMITATION, IN
CONJUNCTION WITH THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS PROSPECTUS AND
UNDER "RISK FACTORS." ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS
ATTRIBUTABLE TO THE COMPANY, ITS SUBSIDIARIES OR PERSONS ACTING ON THEIR BEHALF
ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS.
iv
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS,
INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS THE
CONTEXT OTHERWISE REQUIRES, ALL REFERENCES TO "CONTINENTAL" OR THE "COMPANY"
INCLUDE CONTINENTAL RESOURCES, INC. AND ITS CONSOLIDATED SUBSIDIARIES,
CONTINENTAL GAS, INC. AND CONTINENTAL CRUDE CO. PRO FORMA INFORMATION GIVES
EFFECT TO THE WORLAND FIELD ACQUISITION AND THE RELATED FINANCING, INCLUDING THE
OFFERING. THE TERM "PV-10" AND CERTAIN OTHER INDUSTRY TERMS ARE DEFINED IN THE
GLOSSARY.
THE COMPANY
Continental Resources, Inc. is engaged in the development, exploitation,
exploration and acquisition of oil and gas reserves, primarily in the Rocky
Mountains and the Mid-Continent and, to a lesser extent, in the Gulf Coast
region of Texas and Louisiana. In addition to its exploration, development and
production activities, the Company's subsidiary, Continental Gas, Inc., owns and
operates 1,000 miles of natural gas pipelines, five gas gathering systems and
three gas processing plants in its operating areas. Continental Gas, Inc. also
engages in natural gas marketing, gas pipeline construction and saltwater
disposal. Capitalizing on its growth through the drill-bit and its acquisition
strategy, on a pro forma basis the Company increased its estimated proved
reserves from 12.7 MMBoe in 1993 to 64.9 MMBoe in 1997, and increased its annual
production from 2.0 MMBoe in 1993 to 5.2 MMBoe in 1997. At December 31, 1997, on
a pro forma basis, approximately 80% of the Company's estimated proved reserves
were oil and approximately 63% of its total estimated reserves were classified
as proved developed. At June 30, 1998, the Company had interests in 1,399
producing wells of which it operated 1,114.
The Company's Rocky Mountain activities are concentrated in the Williston
Basin of North Dakota, South Dakota and Montana and in the Big Horn Basin of
Wyoming. The Company's operations in the Williston Basin are focused on the
Cedar Hills Field which the Company believes is, potentially, one of the largest
onshore discoveries in the lower 48 states since 1971. The Cedar Hills Field
represented approximately 45% of the PV-10 attributable to the Company's
estimated proved reserves at December 31, 1997, on a pro forma basis. In the
Williston Basin, the Company owns approximately 470,000 net leasehold acres and
has interests in 322 gross (252 net) wells, has identified 105 potential
drilling locations and conducts both primary drilling and enhanced recovery
operations. The Company recently expanded its activities into the Big Horn Basin
through the acquisition of producing and non-producing properties in the Worland
Field. The Company currently owns approximately 35,000 net leasehold acres in
the Big Horn Basin and has interests in 292 gross (125 net) producing wells
which, on a pro forma basis, represented approximately 10% of the PV-10
attributable to the Company's estimated proved reserves at December 31, 1997. In
the Big Horn Basin the Company has identified 164 potential drilling locations
which represent significant opportunities.
The Company's Mid-Continent activities are conducted primarily in the
Anadarko Basin of western Oklahoma, southwestern Kansas and the Texas Panhandle
and, to a lesser extent, in the Arkoma Basin of southeastern Oklahoma, and in
southern Illinois. At December 31, 1997 the Company's Anadarko Basin properties
represented approximately 95% of the PV-10 attributable to the Company's
estimated proved reserves in the Mid-Continent and approximately 36% of the
Company's total estimated proved reserves, on a pro forma basis. In the Anadarko
Basin the Company owns approximately 57,000 net leasehold acres, has interests
in 658 gross (408 net) producing wells and has identified 11 potential drilling
locations. The Company also owns leasehold interests and expects to expand its
exploration activities in the Arkoma Basin and Gulf Coast region of Texas and
Louisiana.
RECENT EVENTS
WORLAND FIELD ACQUISITION. Effective June 1, 1998 the Company completed an
$86.5 million acquisition of producing and non-producing oil and gas properties
in the Worland Field of the Big Horn Basin in
1
<PAGE>
northern Wyoming (the "Worland Field Acquisition"). Effective the same date, the
Company sold an undivided 50% interest in the Worland Field properties
(excluding inventory and certain items of equipment) to Harold Hamm, the
Company's principal shareholder for $42.6 million. See "Certain Relationships
and Related Transactions." All references to the Worland Field Acquisition and
the related properties refer only to the Company's interest in the Worland Field
properties after giving effect to the sale to the Company's principal
shareholder. See "Principal Shareholders."
Continental's interests in the Worland Field include 35,000 net leasehold
acres, on which are located 292 producing wells, 272 of which are operated by
the Company. As of December 31, 1997, the estimated net proved reserves
attributable to the Company's interest in the Worland Field properties were 32.0
MMBoe, with an estimated PV-10 of $25.4 million. The Worland Field properties
include six identified exploratory prospects for further extension of the known
producing reservoirs. The Worland Field Acquisition materially increases the
Company's proved reserves and provides additional exploration and exploitation
opportunities in areas similar to and near Continental's Williston Basin
operating area.
CEDAR HILLS FIELD TRANSACTION. On May 15, 1998, the Company entered into a
definitive agreement whereby, effective December 1, 1998, Continental and
Burlington Resources Oil & Gas Company ("Burlington"), an unrelated joint
interest owner in the Cedar Hills Field, will exchange undivided interests so
that the Company will ultimately own working interests ranging from 90% to 92%
in approximately 65,000 gross (59,000 net) leasehold acres in the northern half
of the Cedar Hills Field and the joint interest owner will acquire a substantial
portion of the Company's interests in the southern half of the Cedar Hills
Field. As a result of this agreement, the Company will enhance its ability to
unitize all interests in the northern half of the Cedar Hills Field which is
necessary in order for the Company to initiate its planned HPAI enhanced
recovery operations. See "Business--Rocky Mountains" for a discussion of a
dispute that may impede the consummation of the exchange of interests.
------------------------
The Company's principal executive and operating offices are located at Suite
300, Continental Tower, 302 North Independence, Enid, Oklahoma 73701, and its
telephone number is (580) 233-8955.
2
<PAGE>
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER
This Exchange Offer is being made pursuant to the terms of the registration
rights agreement (the "Registration Rights Agreement") entered into between the
Company and Chase Securities, Inc. (the "Initial Purchaser") pursuant to the
terms of the Purchase Agreement dated July 21, 1998 between the Company and the
Placement Agents. See "The Exchange Offer--Purpose and Effect of the Exchange
Offer."
<TABLE>
<S> <C>
The Exchange Offer................ Pursuant to the Exchange Offer, $1,000 principal amount
of New Notes will be issued in exchange for each $1,000
principal amount of Old Notes that are validly tendered
and not withdrawn. As of October 16, 1998, a nominee for
The Depository Trust Company was the only registered
holder of Old Notes and $150,000,000 aggregate principal
amount of Old Notes are outstanding. Holders of Old
Notes whose Old Notes are not tendered and accepted in
the Exchange Offer will continue to hold such Old Notes
and will be entitled to all the rights and preferences
and will be subject to the limitations applicable
thereto under the Indenture governing the Old Notes and
the New Notes. Following consummation of the Exchange
Offer, the holders of Old Notes will continue to be
subject to the existing restrictions upon transfer
thereof and the Company will have no further obligation
to such holders to provide for the registration under
the Securities Act of the Old Notes held by them.
Following the completion of the Exchange Offer, none of
the Notes will be entitled to the contingent increase in
interest rate provided with respect to the Old Notes.
Resale............................ Based on interpretations by the staff of the Commission
set forth in no-action letters issued to third parties,
the Company believes the New Notes issued pursuant to
the Exchange Offer may be offered for resale, resold and
otherwise transferred by any holder thereof (other than
broker-dealers, as set forth below, and any such holder
that is an affiliate of the Company within the meaning
of Rule 405 under the Securities Act) without compliance
with the registration and prospectus delivery provisions
of the Securities Act, provided that such New Notes are
acquired in the ordinary course of such holder's
business and that such holder has no arrangement or
understanding with any person to participate in the
distribution of such New Notes. Any holder who tenders
in the Exchange Offer with the intention to participate,
or for the purpose of participating, in a distribution
of the New Notes or who is an affiliate of the Company
may not rely upon such interpretations by the staff of
the Commission and, in the absence of an exemption
therefrom, must comply with the registration and
prospectus delivery requirements of the Securities Act
in connection with any secondary resale transaction.
Failure to comply with such requirements in such
instance may result in such holder incurring liabilities
under the Securities Act for which the holder is not
indemnified by the Company. Each broker-dealer (other
than an affiliate of the
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
Company) that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it
will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of such
New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an
underwriter within the meaning of the Securities Act.
The Company has agreed that, for a period of 180 days
after the Exchange Date, it will make this Prospectus
available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."
The Exchange Offer is not being made to, nor will the
Company accept surrenders for exchange from, holders of
Old Notes in any jurisdiction in which this Exchange
Offer or the acceptance thereof would not be in
compliance with the securities or blue sky laws of such
jurisdiction.
Expiration Date................... The Exchange Offer will expire at 5:00 p.m., New York
City time, on November , 1998, unless extended, in
which case the term Expiration Date shall mean the
latest date and time to which the Exchange Offer is
extended. Any extension, if made, will be publicly
announced through a release to the Dow Jones News
Service and as otherwise required by applicable law or
regulations.
Conditions to the Exchange
Offer........................... The Exchange Offer is subject to certain conditions,
which may be waived by the Company. See "The Exchange
Offer-- Conditions of the Exchange Offer." The Exchange
Offer is not conditioned upon any minimum principal
amount of Old Notes being tendered.
Procedures for Tendering
Old Notes....................... Each holder of Old Notes wishing to accept the Exchange
Offer must complete, sign and date the Letter of
Transmittal, or a facsimile thereof, in accordance with
the instructions contained herein and therein, and mail
or otherwise deliver such Letter of Transmittal, or a
facsimile thereof, together with such Old Notes and any
other required documentation to United States Trust
Company of New York, the Exchange Agent, at the address
set forth herein and therein. By executing the Letter of
Transmittal, each holder will represent to the Company
that, among other things, the New Notes acquired
pursuant to the Exchange Offer are being obtained in the
ordinary course of business of the person receiving such
New Notes, whether or not such person is the holder,
that neither the holder nor any such other person has an
arrangement or understanding with any person to
participate in the distribution of such New Notes and
that neither the holder nor any such other person is an
affiliate of the Company within the meaning of Rule 405
under the Securities Act. See "The Exchange Offer--Terms
of the Exchange Offer--Procedures for Tendering Old
Notes" and "The Exchange Offer--Terms of the Exchange
Offer--Guaranteed Delivery Procedures."
Special Procedures for Beneficial
Owners.......................... Any beneficial owner whose Old Notes are registered in
the
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
name of a broker, dealer, commercial bank, trust company
or other nominee and who wishes to tender such Old Notes
in the Exchange Offer should contact such registered
holder promptly and instruct such registered holder to
tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on its own behalf,
such owner must, prior to completing and executing the
Letter of Transmittal and delivering its Old Notes,
either make appropriate arrangements to register
ownership of the Old Notes in such owner's name or
obtain a properly completed stock power from the
registered holder. The transfer of registered ownership
may take considerable time and may not be able to be
completed prior to the Expiration Date. See "The
Exchange Offer--Terms of the Exchange Offer--Procedures
for Tendering Old Notes."
Guaranteed Delivery Procedures.... Holders of Old Notes who wish to tender their Old Notes
and whose Old Notes are not immediately available or who
cannot deliver their Old Notes, the Letter of
Transmittal or any other documents required by the
Letter of Transmittal to the Exchange Agent prior to the
Expiration Date, must tender their Old Notes according
to the guaranteed delivery procedures set forth in "The
Exchange Offer--Terms of the Exchange Offer-- Guaranteed
Delivery Procedures."
Acceptance of Old Notes and
Delivery of New Notes........... Subject to certain conditions (as described more fully
in "The Exchange Offer--Conditions of the Exchange
Offer"), the Company will accept for exchange any and
all Old Notes which are properly tendered in the
Exchange Offer and not withdrawn prior to 5:00 p.m., New
York City time, on the Expiration Date. The New Notes
issued pursuant to the Exchange Offer will be delivered
as promptly as practicable following the Expiration
Date.
Withdrawal Rights................. Except as otherwise provided herein, tenders of Old
Notes may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the Expiration Date. See "The
Exchange Offer--Terms of the Exchange Offer--Withdrawal
of Tenders of Old Notes."
Certain Federal Income Tax
Considerations.................. For a discussion of certain federal income tax
considerations relating to the exchange of New Notes for
Old Notes, see "Certain United States Tax Consequences."
Exchange Agent.................... United States Trust Company of New York is the Exchange
Agent. The address, telephone number and facsimile
number of the Exchange Agent are set forth in "The
Exchange Offer-- Exchange Agent."
</TABLE>
5
<PAGE>
TERMS OF THE NEW NOTES
The Exchange Offer applies to all $150,000,000 aggregate principal amount of
Old Notes outstanding. The form and terms of the New Notes will be identical in
all material respects to the form and terms of the Old Notes except that the New
Notes will be registered under the Securities Act and, therefore, will not bear
legends restricting the transfer thereof. The New Notes will evidence the same
debt as the Old Notes, will be entitled to the benefits of the Indenture and
will be treated as a single class thereunder with any Old Notes that remain
outstanding. Following the Exchange Offer, none of the Notes will be entitled to
the contingent increase in interest rate provided for in accordance with the
terms of the Registration Rights Agreement which rights will terminate upon
consummation of the Exchange Offer. See "Description of the Notes."
<TABLE>
<S> <C>
Issuer............................ Continental Resources, Inc.
Securities Offered................ $150,000,000 aggregate principal amount of 10 1/4%
Senior Subordinated Notes due 2008.
Maturity Date..................... August 1, 2008.
Interest Payment Dates............ February 1 and August 1 of each year, commencing on
February 1, 1999.
Mandatory Redemption.............. None.
Optional Redemption............... Except as described below, the Notes will not be
redeemable at the Company's option prior to August 1,
2003. Thereafter, the Notes will be subject to
redemption at any time at the option of the Company, in
whole or in part, at the redemption prices set forth
herein, plus accrued and unpaid interest thereon to the
applicable redemption date. In addition, prior to August
1, 2001, the Company may, at its option, on any one or
more occasions, redeem up to 35% of the original
aggregate principal amount of the Notes at a redemption
price of 110.25% of the principal amount thereof, plus
accrued and unpaid interest, if any, thereon to the
redemption date, with the net cash proceeds of one or
more public offerings of common stock of the Company;
provided that at least 65% of the original aggregate
principal amount of the Notes remains outstanding
immediately after the occurrence of such redemption. See
"Description of Notes-- Optional Redemption."
Change of Control................. Upon the occurrence of a Change of Control, (i) the
Company will have the option, at any time, on or prior
to August 1, 2003 (but in no event more than 90 days
after the occurrence of such Change of Control), to
redeem the Notes, in whole but not in part, at a
redemption price equal to 100% of the principal amount
thereof plus the Applicable Premium as of, and accrued
and unpaid interest, if any, to, the date of redemption,
and (ii) if the Company does not so redeem the Notes,
the Company will be required to offer to repurchase all
or a portion of each Holder's Notes, at an offer price
in each case equal to 101% of the aggregate principal
amount of such Notes plus accrued and unpaid interest,
if any, to the date of repurchase, and to repurchase all
Notes tendered pursuant to such offer. The Credit
Facility prohibits the Company from repurchasing any
Notes pursuant to a Change of Control offer prior to the
repayment in full of the Senior Debt under the Credit
Facility. If a Change of Control were to occur, the
Company may not have
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
sufficient available funds to purchase all Notes
tendered pursuant to the Change of Control offer after
first satisfying its obligations under the Credit
Facility or other Senior Debt that may then be
outstanding, if accelerated. The failure by the Company
to purchase all Notes tendered pursuant to the Change of
Control offer would constitute an Event of Default (as
defined). If any Event of Default occurs, the Trustee
(as defined) or holders of at least 25% in principal
amount of the Notes then outstanding may declare the
principal of and the accrued and unpaid interest on such
Notes to be due and payable immediately. However, such
repayment would be subject to certain subordination
provisions in the Indenture (as defined). See "Risk
Factors--Repurchase of Notes Upon a Change of Control
and Certain Other Events" and "Description of
Notes--Ranking and Subordination" and "--Repurchase at
the Option of Holders--Change of Control," and "--Events
of Default and Remedies."
Ranking........................... The Notes are general unsecured obligations of the
Company and are subordinated in right of payment to all
existing and future Senior Debt of the Company, which
will include borrowings under the Credit Facility. The
Notes will rank equally in right of payment with all
other senior subordinated debt of the Company and any
other indebtedness which does not expressly provide that
it is subordinated in right of payment to the Notes. As
of June 30, 1998, on a pro forma basis after giving
effect to the consummation of the Offering and the
application of the proceeds therefrom and the Worland
Field Acquisition and related financing, the aggregate
principal amount of Senior Debt outstanding would have
been approximately $3.8 million (exclusive of $75.0
million of unused commitments under the Credit Facility)
and there would have been no senior subordinated debt
outstanding (exclusive of the Notes). The Notes will
also be effectively subordinated to all secured
indebtedness of the Company, including indebtedness
under the Credit Facility. See "Capitalization,"
"Description of Notes-- Ranking and Subordination" and
"Description of Credit Facility."
Subsidiary Guarantees............. The Company's payment obligations under the Notes are
jointly, severally and unconditionally guaranteed on a
senior subordinated basis by each Restricted Subsidiary
of the Company and any future Restricted Subsidiary of
the Company. The Subsidiary Guarantees are subordinated
to all Guarantor Senior Debt of the Subsidiary
Guarantors substantially to the same extent and manner
as the Notes are subordinated to Senior Debt. At June
30, 1998, on a pro forma basis, there would have been no
Guarantor Senior Debt outstanding other than the
guarantees of the Credit Facility and the Subsidiary
Guarantees. Each Subsidiary Guarantee will be
effectively subordinated to all secured indebtedness of
the relevant Subsidiary Guarantor, including
indebtedness under the Credit Facility. See "Description
of Notes--Subsidiary Guarantees" and "Description of
Credit Facility."
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Certain Covenants................. The Notes are issued pursuant to an indenture (the
"Indenture") containing certain covenants that, among
other things, limits the ability of the Company and its
Restricted Subsidiaries to incur additional indebtedness
and issue Disqualified Capital Stock (as defined), pay
dividends, make distributions, make investments, make
certain other Restricted Payments (as defined), enter
into certain transactions with affiliates, dispose of
certain assets, incur liens securing Indebtedness (as
defined) of any kind other than Permitted Liens (as
defined) and engage in mergers and consolidations. See
"Description of Notes--Certain Covenants."
Book-Entry; Delivery
and Form........................ Transfers of Notes between participants and The
Depository Trust Company ("DTC") will be effected in the
ordinary way in accordance with DTC rules and will be
settled in same-day funds. See "Description of the
Notes."
</TABLE>
USE OF PROCEEDS
The Company will not receive any proceeds from the issuance of the New Notes
pursuant to this Prospectus. The net proceeds from the issuance and sale of the
Old Notes were $145.9 million. The Company used $143.2 million of such net
proceeds to reduce the outstanding balance under the Credit Facility and the
balance for general corporate purposes. Advances under the Credit Facility were
used to complete the Worland Field Acquisition, for operations and for working
capital, and bore interest at variable rates for which the weighted average
annual rate at June 30, 1998, was 7.5%.
RISK FACTORS
See "Risk Factors," immediately following this Summary, for a discussion of
certain factors relating to the Company, its business and an investment in the
Notes.
8
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following tables set forth certain historical and pro forma financial
data. The pro forma financial information gives effect to the Worland Field
Acquisition and the related financing, including the Offering, as described in
the notes to the Unaudited Pro Forma Financial Statements. The pro forma
statement of operations data give effect to the Worland Field Acquisition and
related financing, including the Offering, as if they had occurred on January 1,
1997, and the pro forma balance sheet data give effect to the Worland Field
Acquisition and related financing, including the Offering, as if they had
occurred on June 30, 1998. The pro forma financial information does not purport
to represent what the Company's results of operations would have been if the
Worland Field Acquisition and related financing, including the Offering, had
been completed on such dates nor does it indicate the future financial position
or future results of operations of the Company. The information set forth below
should be read in conjunction with "Unaudited Pro Forma Consolidated Financial
Statements," "Selected Consolidated Financial Data," "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and the
Financial Statements included elsewhere herein.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------- ----------------------------------
PRO FORMA PRO FORMA
1995 1996 1997 1997 1997 1998 1998
--------- --------- --------- ----------- --------- ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Oil and gas sales........................... $ 30,576 $ 75,016 $ 78,599 $ 88,725 $ 39,135 $ 31,291 $ 33,418
Gathering, marketing and processing......... 20,639 25,766 25,021 25,021 15,522 9,804 9,804
Oil and gas service operations.............. 6,148 6,491 6,405 6,405 3,715 3,062 3,062
--------- --------- --------- ----------- --------- ---------- -----------
Total revenues................................ 57,363 107,273 110,025 120,151 58,372 44,157 46,284
Operating costs and expenses:
Production expenses and taxes............... 7,611 19,338 20,748 25,958 10,622 9,074 10,342
Exploration expenses........................ 6,184 4,512 6,806 6,806 3,410 2,650 2,650
Gathering, marketing and processing......... 13,223 21,790 22,715 22,715 12,873 8,409 8,409
Oil and gas service operations.............. 3,680 4,034 3,654 3,654 1,855 1,825 1,825
Depreciation, depletion and amortization.... 9,614 22,876 33,354 34,930 16,713 16,483 17,935
General and administrative.................. 8,260 9,155 8,990 8,990 3,986 4,914 4,914
--------- --------- --------- ----------- --------- ---------- -----------
Total operating costs and expenses............ 48,572 81,705 96,267 103,053 49,459 43,355 46,075
--------- --------- --------- ----------- --------- ---------- -----------
Operating income.............................. 8,791 25,568 13,758 17,098 8,913 802 209
Interest income............................... 137 312 241 1,591 104 780 830
Interest expense.............................. (2,396) (4,550) (4,804) (15,684) (2,313) (5,174) (7,836)
Other income (expense), net(1)................ (411) 233 8,061 8,061 685 93 92
--------- --------- --------- ----------- --------- ---------- -----------
Income (loss) before income taxes............. 6,121 21,563 17,256 11,066 7,389 (3,499) (6,705)
Federal and state income taxes (benefit)(2)... 2,252 8,238 (8,941) (8,941) (8,941) -- --
--------- --------- --------- ----------- --------- ---------- -----------
Net income (loss)............................. $ 3,869 $ 13,325 $ 26,197 $ 20,007 $ 16,330 $ (3,499) $ (6,705)
--------- --------- --------- ----------- --------- ---------- -----------
--------- --------- --------- ----------- --------- ---------- -----------
OTHER FINANCIAL DATA:
Adjusted EBITDA(3).......................... $ 24,315 $ 53,502 $ 54,721 $ 61,447 $ 29,825 $ 20,808 $ 21,716
Net cash provided by operations............. 18,985 41,724 51,477 46,963 27,948 9,669 794
Net cash used in investing.................. (58,022) (50,619) (78,359) (116,710) (39,673) (116,132) (73,581)
Net cash provided by (used in) financing.... 37,994 10,494 24,863 99,190 8,556 106,498 64,725
Capital expenditures(4)..................... 58,226 50,341 80,937 114,838 41,678 116,534 116,534
RATIOS:
Adjusted EBITDA to interest expense......... 10.1x 11.8x 11.4x 3.9x 12.9x 4.0x 2.8x
Total debt to Adjusted EBITDA............... 1.8x 1.0x 1.5x 2.5x n/a n/a n/a
Earnings to fixed charges(5)................ 3.6x 5.7x 4.6x 1.7x 4.2x n/a n/a
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
AT JUNE 30, 1998
----------------------
ACTUAL PRO FORMA
--------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................................................ $ 1,336 $ 2,114
Total assets............................................................................. 257,863 247,613
Long-term debt, including current maturities............................................. 164,052 153,802
Stockholders' equity..................................................................... 74,765 74,765
</TABLE>
- --------------------------
(1) In 1997, other income includes $7.5 million resulting from the settlement of
certain litigation matters.
(2) Effective June 1, 1997, the Company elected to be treated as a S Corporation
for federal income tax purposes. The conversion resulted in the elimination
of the Company's deferred income tax assets and liabilities existing at May
31, 1997, and, after being netted against the then existing tax provision,
resulted in a net income tax benefit to the Company of $8.9 million.
(3) Adjusted EBITDA represents earnings before interest expense, income taxes,
depreciation, depletion, amortization and exploration expense, excluding
proceeds from litigation settlements. Adjusted EBITDA is not a measure of
cash flow as determined by generally accepted accounting principles
("GAAP"). Adjusted EBITDA should not be considered as an alternative to, or
more meaningful than, net income or cash flow as determined in accordance
with GAAP or as an indicator of a company's operating performance or
liquidity. Certain items excluded from Adjusted EBITDA are significant
components in understanding and assessing a company's financial performance,
such as a company's cost of capital and tax structure, as well as historic
costs of depreciable assets, none of which are components of Adjusted
EBITDA. The Company's computation of Adjusted EBITDA may not be comparable
to other similarly titled measures of other companies. The Company believes
that Adjusted EBITDA is a widely followed measure of operating performance
and may also be used by investors to measure the Company's ability to meet
future debt service requirements, if any. Even though the volume of oil and
gas produced by the Company during the six months ended June 30, 1998, on an
actual and pro forma basis, was greater than in the comparable period in
1997, the Company's Adjusted EBITDA for the 1998 period was less than in
1997. The decrease in Adjusted EBITDA for the 1998 period was attributable
to declines in oil and gas prices. Adjusted EBITDA does not give effect to
the Company's exploration expenditures, which are largely discretionary by
the Company and which, to the extent expended, would reduce cash available
for debt service, repayment of indebtedness and dividends.
(4) Capital expenditures include costs related to acquisitions of producing oil
and gas properties.
(5) For purposes of computing the ratio of earnings to fixed charges, earnings
are computed as income before taxes from continuing operations, plus fixed
charges. Fixed charges consist of interest expense and amortization of costs
incurred in the Offering.
10
<PAGE>
SUMMARY RESERVE AND OPERATING DATA
The following tables set forth summary information with respect to estimated
proved oil and gas reserves and certain operating data as of December 31, 1995,
1996, 1997 and June 30, 1997 and 1998 and on a pro forma basis as of December
31, 1997 and June 30, 1998 to give effect to the Worland Field Acquisition. See
"Risk Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business and Properties" "Reserve Engineers" and the
Financial Statements included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
PRO
FORMA
1995 1996 1997 1997(1)
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
ESTIMATED PROVED RESERVES (at December 31):
Oil and condensate (MBbl)......................................... 17,501 19,492 24,719 51,967
Natural gas (MMcf)................................................ 54,820 50,535 49,378 77,848
Oil equivalents (MBoe)............................................ 26,638 27,915 32,949 64,942
Percent oil....................................................... 65.7% 69.8% 75.0% 80.0%
Percentage proved developed....................................... 80.3% 84.0% 83.0% 63.0%
PRODUCT PRICES (at December 31)(2):
Oil and condensate (per Bbl)(3)................................... $ 23.00 $ 23.00 $ 18.06 $ 14.59
Natural gas (per Mcf)(3).......................................... 3.28 3.28 2.25 2.07
FUTURE NET CASH FLOWS BEFORE TAX ($000):
Undiscounted(3)................................................... 405,329 420,211 386,810 545,029
Discounted(3)(4).................................................. 206,650 258,278 241,625 267,016
Standardized measure of discounted future cash flows(5)...........
ESTIMATED RESERVE LIFE INDEX (years)(6)............................. 12.0 7.0 7.0 12.5
RESERVE ADDITIONS (MBoe):
Acquisition....................................................... 6,968 307 - 31,993
Extensions, discoveries and revisions............................. 4,941 5,246 9,894 9,894
--------- --------- --------- ---------
Net additions..................................................... 11,909 5,553 9,894 41,887
--------- --------- --------- ---------
--------- --------- --------- ---------
COSTS INCURRED ($000):
Acquisitions...................................................... $ 16,293 $ 3,327 $ 476 $ 44,426
Exploration and development....................................... 22,516 37,501 59,060 59,060
--------- --------- --------- ---------
Total costs incurred.............................................. $ 38,809 $ 40,828 $ 59,536 $ 103,486
--------- --------- --------- ---------
--------- --------- --------- ---------
AVERAGE FINDING COSTS (per Boe)(7).................................. $ 3.26 $ 7.35 $ 6.02 $ 2.47
THREE YEAR WEIGHTED AVERAGE FINDING COSTS
(per Boe)(8)...................................................... 3.39 4.69 5.09 3.09
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
-------------------------------------------- ---------------------------------
PRO PRO
FORMA FORMA
1995 1996 1997 1997(9) 1997 1998 1998(9)
--------- --------- --------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
PRODUCTION VOLUMES(10):
Oil and condensate (MBbls).................... 1,199 2,888 3,518 4,146 1,615 1,983 2,244
Natural gas (MMcf)............................ 5,880 6,527 5,789 6,399 2,881 2,933 3,314
Total (MBoe).................................. 2,179 3,976 4,483 5,213 2,095 2,472 2,796
UNIT ECONOMICS:
Average sales price per Bbl................... $ 17.11 $ 20.78 $ 18.61 $ 18.14 $ 20.08 $ 13.14 $ 12.45
Average sales price per mcf................... 1.40 2.13 2.21 2.03 2.33 1.79 1.66
Average equivalent price (per Boe)(11)........ $ 14.03 $ 18.87 $ 17.53 $ 17.02 $ 18.68 $ 12.66 $ 11.95
Lifting cost (per Boe)(12).................... 3.49 4.86 4.63 4.98 5.07 3.67 3.60
Depreciation, depletion and amortization (per
Boe)(12).................................... 3.76 5.44 6.74 6.01 7.31 5.95 5.62
General and administrative expense(13)........ 2.74 1.64 1.47 1.26 1.04 .58 1.40
--------- --------- --------- ----------- --------- --------- -----------
Gross margin.................................. $ 4.04 $ 6.93 $ 4.69 $ 4.77 $ 5.26 $ 1.46 $ 1.83
--------- --------- --------- ----------- --------- --------- -----------
--------- --------- --------- ----------- --------- --------- -----------
</TABLE>
See Notes to Summary Reserve and Operating Data.
11
<PAGE>
NOTES TO SUMMARY RESERVE AND OPERATING DATA
(1) To give effect to the Worland Field Acquisition as if it had occurred on
December 31, 1997.
(2) Reflects the actual realized prices received by the Company, including the
results of the Company's hedging activities. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
(3) In 1996, the Company changed its fiscal year-end from May 31 to December 31.
Because reports on a December 31 year-end basis prior to 1996 were not
available, information as of December 31, 1995 was determined from the
Company's production, drilling, acquisition and sale data as applied to its
December 31, 1996 reserve report.
(4) Represents the present value of estimated future net cash flows before
income tax discounted at 10%, using prices in effect at the end of the
respective periods presented and including the effects of hedging
activities. In accordance with applicable requirements of the Commission,
estimates of the Company's proved reserves and future net cash flows are
made using oil and gas sales prices estimated to be in effect as of the date
of such reserve estimates and are held constant throughout the life of the
properties (except to the extent a contract specifically provides for
escalation). The prices used in calculating PV-10 as of December 31, 1997
were $18.06 per Bbl of oil and $2.25 per Mcf of natural gas. Average prices
as of September 30, 1998, on a pro forma basis, were $12.95 per Bbl of oil
and $1.66 per Mcf of natural gas. These prices, if applied to estimated
proved reserves of the Company as of December 31, 1997, would result in a
PV-10, on a pro forma basis, of $208.7 million at such date, as estimated by
the Company.
(5) The discounted future net cash flows before tax have been determined on the
same basis as the Standardized Measure of Discounted Future Cash Flows under
SFAS 69, except that no effect was given for future income taxes because the
Company is an S Corporation for federal income tax purposes and is not a
taxpaying entity.
(6) Reserve life index is calculated by dividing proved reserves by annual
production (on a Boe basis).
(7) Average finding cost is calculated by dividing total costs incurred by
reserve additions.
(8) The three year weighted average finding cost is calculated by dividing the
sum of the finding costs for the three years ended on December 31 of each of
the referenced years by the sum of the reserve additions for each of such
years.
(9) To give effect to the Worland Field Acquisition as if it had occurred on
January 1, 1997.
(10) Production volumes are derived from the Company's production records and
reflect actual quantities of oil and gas produced without regard to the time
of receipt of proceeds from the sale of such production.
(11) Calculated by dividing oil and gas revenues, as reflected on the Financial
Statements, by production volumes on a Boe basis. Oil and gas revenues
reflected in the Financial Statements are recognized as production is sold
and may differ from oil and gas revenues reflected on the Company's
production records which reflect oil and gas revenues by date of production.
(12) Relates to drilling and development activities.
(13) Relates to drilling and development activities, net of operating overhead
income.
12
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION SET FORTH ELSEWHERE IN THIS PROSPECTUS,
THE FOLLOWING FACTORS RELATING TO THE COMPANY AND THE OFFERING SHOULD BE
CONSIDERED WHEN EVALUATING AN INVESTMENT IN THE NOTES OFFERED HEREBY.
VOLATILITY OF OIL AND GAS PRICES
The Company's revenues, profitability and future rate of growth are
substantially dependent upon prevailing prices for oil and gas and natural gas
liquids, which are dependent upon numerous factors such as weather, economic,
political and regulatory developments and competition from other sources of
energy. The Company is affected more by fluctuations in oil prices than natural
gas prices, because a majority of its production is oil. The volatile nature of
the energy markets and the unpredictability of actions of OPEC members make it
particularly difficult to estimate future prices of oil and gas and natural gas
liquids. Prices of oil and gas and natural gas liquids are subject to wide
fluctuations in response to relatively minor changes in circumstances, and there
can be no assurance that future prolonged decreases in such prices will not
occur. All of these factors are beyond the control of the Company. Any
significant decline in oil and, to a lesser extent, in natural gas prices would
have a material adverse effect on the Company's results of operations and
financial condition. Although the Company may enter into hedging arrangements
from time to time to reduce its exposure to price risks in the sale of its oil
and gas, the Company's hedging arrangements are likely to apply to only a
portion of its production and provide only limited price protection against
fluctuations in the oil and gas markets. See "Management' s Discussion and
Analysis of Financial Condition and Results of Operations" and "Business and
Properties--Oil and Gas Marketing."
REPLACEMENT OF RESERVES
The Company's future success depends upon its ability to find, develop or
acquire additional oil and gas reserves that are economically recoverable.
Unless the Company successfully replaces the reserves that it produces (through
successful development, exploration or acquisition), the Company's proved
reserves will decline. There can be no assurance that the Company will continue
to be successful in its effort to increase or replace its proved reserves.
Approximately 37% of the Company's estimated proved reserves at December 31,
1997, on a pro forma basis, was attributable to undeveloped reserves. Recovery
of such reserves will require significant capital expenditures and successful
drilling operations. There can be no certainty regarding the results of
developing these reserves. To the extent the Company is unsuccessful in
replacing or expanding its estimated proved reserves, the Company may be unable
to pay the principal of and interest on the Notes in accordance with their
terms, or otherwise to satisfy certain of its covenants contained in the
Indenture. See "Description of Notes--Certain Covenants."
UNCERTAINTY OF ESTIMATES OF OIL AND GAS RESERVES AND FUTURE NET CASH FLOWS
This Prospectus contains estimates of the Company's oil and gas reserves and
the future net cash flows from those reserves which have been prepared by the
Company and certain independent petroleum consultants. Reserve engineering is a
subjective process of estimating the recovery from underground accumulations of
oil and gas that cannot be measured in an exact manner, and the accuracy of any
reserve estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. There are numerous
uncertainties inherent in estimating quantities and future values of proved oil
and gas reserves, including many factors beyond the control of the Company. Each
of the estimates of proved oil and gas reserves, future net cash flows and
discounted present values relies upon various assumptions, including assumptions
required by the Commission as to constant oil and gas prices, drilling and
operating expenses, capital expenditures, taxes and availability of funds. The
process of estimating oil and gas reserves is complex, requiring significant
decisions and assumptions in the evaluation of available geological,
geophysical, engineering and economic data for each reservoir. As a result, such
estimates are inherently imprecise. Actual future production, oil and gas
prices, revenues, taxes, development expenditures, operating expenses and
quantities of recoverable oil and gas reserves may vary substantially from
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those estimated in the report. Any significant variance in these assumptions
could materially affect the estimated quantity and value of reserves set forth
in this Prospectus. In addition, the Company's reserves may be subject to
downward or upward revision, based upon production history, results of future
exploration and development, prevailing oil and gas prices and other factors,
many of which are beyond the Company's control. The PV-10 of the Company's
proved oil and gas reserves does not necessarily represent the current or fair
market value of such proved reserves, and the 10% discount rate required by the
Commission may not reflect current interest rates, the Company's cost of capital
or any risks associated with the development and production of the Company's
proved oil and gas reserves. At December 31, 1997, the estimated future net cash
flows and PV-10 of $545.0 million and $267.0 million, respectively, attributable
to the Company's proved oil and gas reserves, on a pro forma basis, are based on
prices in effect at that date ($14.59 per Bbl of oil and $2.07 per Mcf of
natural gas), which may be materially different than actual future prices. As of
September 30, 1998, the average prices were $12.95 Bbl of oil and $1.66 per Mcf
of natural gas, on a pro forma basis. If such prices were applied to the
Company's proved oil and gas reserves at December 31, 1997, the estimated future
net cash flows and PV-10 at December 31, 1997 would have been approximately
$472.9 million and $208.7 million, respectively.
PROPERTY ACQUISITION RISKS
The Company's growth strategy includes the acquisition of oil and gas
properties. There can be no assurance, however, that the Company will be able to
identify attractive acquisition opportunities, obtain financing for acquisitions
on satisfactory terms or successfully acquire identified targets. In addition,
no assurance can be given that the Company will be successful in integrating
acquired businesses into its existing operations, and such integration may
result in unforeseen operational difficulties or require a disproportionate
amount of management's attention. Future acquisitions may be financed through
the incurrence of additional indebtedness to the extent permitted under the
Indenture or through the issuance of capital stock. Furthermore, there can be no
assurance that competition for acquisition opportunities in these industries
will not escalate, thereby increasing the cost to the Company of making further
acquisitions or causing the Company to refrain from making additional
acquisitions.
The Company is subject to risks that properties acquired by it (including
those acquired in the Worland Field Acquisition) will not perform as expected
and that the returns from such properties will not support the indebtedness
incurred or the other consideration used to acquire, or the capital expenditures
needed to develop, the properties. The addition of the Worland Field properties
may result in additional impairment of the Company's oil and gas properties to
the extent the Company's net book value of such properties exceeds the projected
discounted future net revenues of the related proved reserves. See "--Writedown
of Carrying Values." In addition, expansion of the Company's operations may
place a significant strain on the Company's management, financial and other
resources. The Company's ability to manage future growth will depend upon its
ability to monitor operations, maintain effective cost and other controls and
significantly expand the Company's internal management, technical and accounting
systems, all of which will result in higher operating expenses. Any failure to
expand these areas and to implement and improve such systems, procedures and
controls in an efficient manner at a pace consistent with the growth of the
Company's business could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the
integration of acquired properties with existing operations will entail
considerable expenses in advance of anticipated revenues and may cause
substantial fluctuations in the Company's operating results. There can be no
assurance that the Company will be able to successfully integrate the properties
acquired and to be acquired or any other businesses it may acquire.
SUBSTANTIAL CAPITAL REQUIREMENTS
The Company has made, and will continue to make, substantial capital
expenditures in connection with the acquisition, development, exploitation,
exploration and production of its oil and gas properties. Historically, the
Company has funded its capital expenditures through borrowings from banks and
from its
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principal stockholder, and cash flow from operations. Future cash flows and the
availability of credit are subject to a number of variables, such as the level
of production from existing wells, borrowing base determinations, prices of oil
and gas and the Company's success in locating and producing new oil and gas
reserves. If revenues were to decrease as a result of lower oil and gas prices,
decreased production or otherwise, and the Company had no availability under its
Credit Facility or other sources of borrowings, the Company could have limited
ability to replace its oil and gas reserves or to maintain production at current
levels, resulting in a decrease in production and revenues over time. If the
Company's cash flow from operations and availability under the Credit Facility
are not sufficient to satisfy its capital expenditure requirements, there can be
no assurance that additional debt or equity financing will be available.
EFFECTS OF LEVERAGE
At June 30, 1998, on a pro forma, consolidated basis, the Company and the
Subsidiary Guarantors would have had $153.8 million of indebtedness (including
current maturities of long-term indebtedness) compared to the Company's
stockholders' equity of $75.0 million. See "Use of Proceeds" and
"Capitalization." Although the Company's cash flow from operations has been
sufficient to meet its debt service obligations in the past, there can be no
assurance that the Company's operating results will continue to be sufficient
for the Company to meet its obligations. See "Unaudited Pro Forma Consolidated
Financial Statements," "Selected Consolidated Financial Data," "Capitalization"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
The degree to which the Company is leveraged could have important
consequences to the holders of the Notes, including the following: (i) the
Company's ability to obtain additional financing for acquisitions, capital
expenditures, working capital or general corporate purposes may be impaired in
the future; (ii) a substantial portion of the Company's cash flow from
operations must be dedicated to the payment of principal of and interest on the
Notes and the borrowings under the Credit Facility, thereby reducing funds
available to the Company for its operations and other purposes; (iii) certain of
the Company's borrowings are and will continue to be at variable rates of
interest, which expose the Company to the risk of increased interest rates; (iv)
indebtedness outstanding under the Credit Facility is senior in right of payment
of, is secured by substantially all of the Company's proved reserves and certain
other assets, and will mature prior to the Notes; and (v) the Company may be
substantially more leveraged than certain of its competitors, which may place it
at a relative competitive disadvantage and make it more vulnerable to changing
market conditions and regulations. See "Description of Credit Facility" and
"Description of Notes."
The Company's ability to make scheduled payments or to refinance its
obligations with respect to its indebtedness will depend on its financial and
operating performance, which, in turn, is subject to the volatility of oil and
gas prices, production levels, prevailing economic conditions and to certain
financial, business and other factors beyond its control. If the Company's cash
flow and capital resources are insufficient to fund its debt service
obligations, the Company may be forced to sell assets, obtain additional debt or
equity financing or restructure its debt. Even if additional financing could be
obtained, there can be no assurance that it would be on terms that are favorable
or acceptable to the Company. There can be no assurance that the Company's cash
flow and capital resources will be sufficient to pay its indebtedness in the
future. In the absence of such operating results and resources, the Company
could face substantial liquidity problems and might be required to dispose of
material assets or operations to meet debt service and other obligations, and
there can be no assurance as to the timing of such sales or the adequacy of the
proceeds which the Company could realize therefrom. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" and "Description of Credit Facility."
RESTRICTIVE COVENANTS
The Credit Facility and the Indenture include certain covenants that, among
other things, restrict: (i) the making of investments, loans and advances and
the paying of dividends and other restricted
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payments; (ii) the incurrence of additional indebtedness; (iii) the granting of
liens, other than liens created pursuant to the Credit Facility and certain
permitted liens; (iv) mergers, consolidations and sales of all or a substantial
part of the Company's business or property; (v) the sale of assets; and (vi) the
making of capital expenditures. The Credit Facility requires the Company to
maintain certain financial ratios, including interest coverage and leverage
ratios. All of these restrictive covenants may restrict the Company's ability to
expand or pursue its business strategies. The ability of the Company to comply
with these and other provisions of the Credit Facility may be affected by
changes in economic or business conditions, results of operations or other
events beyond the Company's control. The breach of any of these covenants could
result in a default under the Credit Facility, in which case, depending on the
actions taken by the lenders thereunder or their successors or assignees, such
lenders could elect to declare all amounts borrowed under the Credit Facility,
together with accrued interest, to be due and payable, and the Company could be
prohibited from making payments with respect to the Notes until the default is
cured or all Senior Debt is paid or satisfied in full. If the Company were
unable to repay such borrowings, such lenders could proceed against their
collateral. If the indebtedness under the Credit Facility were to be
accelerated, there can be no assurance that the assets of the Company would be
sufficient to repay in full such indebtedness and the other indebtedness of the
Company, including the Notes. See "Description of Credit Facility" and
"Description of Notes--Ranking and Subordination."
OPERATING HAZARDS AND UNINSURED RISKS; PRODUCTION CURTAILMENTS
Oil and gas drilling activities are subject to numerous risks, many of which
are beyond the Company's control, including the risk that no commercially
productive oil and gas reservoirs will be encountered. The cost of drilling,
completing and operating wells is often uncertain, and drilling operations may
be curtailed, delayed or canceled as a result of a variety of factors, including
unexpected drilling conditions, pressure irregularities in formations, equipment
failure or accidents, adverse weather conditions, title problems and shortages
or delays in the delivery of equipment. The Company's future drilling activities
may not be successful and, if unsuccessful, such failure will have an adverse
effect on future results of operations and financial condition.
The Company's properties may be susceptible to hydrocarbon drainage from
production by other operators on adjacent properties. Industry operating risks
include the risk of fire, explosions, blow-outs, pipe failure, abnormally
pressured formations and environmental hazards such as oil spills, gas leaks,
ruptures or discharges of toxic gases, the occurrence of any of which could
result in substantial losses to the Company due to injury or loss of life,
severe damage to or destruction of property, natural resources and equipment,
pollution or other environmental damage, clean-up responsibilities, regulatory
investigation and penalties and suspension of operations. In accordance with
customary industry practice, the Company maintains insurance against the risks
described above. There can be no assurance that any insurance will be adequate
to cover losses or liabilities. The Company cannot predict the continued
availability of insurance, or its availability at premium levels that justify
its purchase.
GAS GATHERING AND MARKETING
The Company's gas gathering and marketing operations depend in large part on
the ability of the Company to contract with third party producers to purchase
their gas, to obtain sufficient volumes of committed natural gas reserves, to
replace production from declining wells, to assess and respond to changing
market conditions in negotiating gas purchase and sale agreements and to obtain
satisfactory margins between the purchase price of its natural gas supply and
the sales price for such natural gas. In addition, the Company's operations are
subject to changes in regulations relating to gathering and marketing of oil and
gas. The inability of the Company to attract new sources of third party natural
gas or to promptly respond to changing market conditions or regulations in
connection with its gathering and marketing operations could have a material
adverse effect on the Company's financial condition and results of operations.
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SUBORDINATION OF NOTES AND GUARANTEES
The Notes are subordinated in right of payment to all existing and future
Senior Debt of the Company, including borrowings under the Credit Facility. In
the event of bankruptcy, liquidation or reorganization of the Company, the
assets of the Company will be available to pay obligations on the Notes only
after all Senior Debt has been paid in full, and there may not be sufficient
assets remaining to pay amounts due on any or all of the Notes outstanding. The
aggregate principal amount of Senior Debt of the Company, as of June 30, 1998,
on a pro forma basis, would have been $3.8 million exclusive of $75.0 million of
unused commitments under the Credit Facility. The Subsidiary Guarantees are
subordinated to Guarantor Senior Debt to the same extent and in the same manner
as the Notes are subordinated to Senior Debt. Additional Senior Debt may be
incurred by the Company or the Subsidiary Guarantors from time to time, subject
to certain restrictions. In addition to being subordinated to all existing and
future Senior Debt of the Company, the Notes will not be secured by any of the
Company's assets, unlike the borrowings under the Credit Facility. See
"Description of Notes--Ranking and Subordination."
POSSIBLE UNENFORCEABILITY OF SUBSIDIARY GUARANTEES; DEPENDENCE ON DISTRIBUTIONS
BY SUBSIDIARIES
Historically, the Company has derived approximately 10% of its operating
cash flows from its subsidiary, Continental Gas, Inc. The Company's other
subsidiary, Continental Crude Co., is recently formed and has not engaged in any
business activities. The holders of the Notes will have no direct claim against
such subsidiaries other than a claim created by one or more of the Subsidiary
Guarantees, which may themselves be subject to legal challenge in a bankruptcy
or reorganization case or a lawsuit by or on behalf of creditors of a Subsidiary
Guarantor. See "--Fraudulent Conveyance Considerations." If such a challenge
were upheld, such Subsidiary Guarantees would be invalid and unenforceable. To
the extent that any of such Subsidiary Guarantees are not enforceable, the
rights of the holders of the Notes to participate in any distribution of assets
of any Subsidiary Guarantor upon liquidation, bankruptcy, reorganization or
otherwise will, as is the case with other unsecured creditors of the Company, be
subject to prior claims of creditors of that Subsidiary Guarantor. The Company
relies in part upon distributions from its subsidiaries to generate the funds
necessary to meet its obligations, including the payment of principal of and
interest on the Notes. The Indenture contains covenants that restrict the
ability of the Company's subsidiaries to enter into any agreement limiting
distributions and transfers to the Company, including dividends. However, the
ability of the Company's subsidiaries to make distributions may be restricted by
among other things, applicable state corporate laws and other laws and
regulations or by terms of agreements to which they are or may become a party.
In addition, there can be no assurance that such distributions will be adequate
to fund the interest and principal payments on the Credit Facility and the Notes
when due. See "Description of Notes."
REPURCHASE OF NOTES UPON A CHANGE OF CONTROL AND CERTAIN OTHER EVENTS
Upon a Change of Control, holders of the Notes may have the right to require
the Company to repurchase all Notes then outstanding at a purchase price equal
to 101% of the principal amount thereof, plus accrued interest to the date of
repurchase. In the event of certain asset dispositions, the Company will be
required under certain circumstances to use the Excess Cash (as defined herein)
to offer to repurchase the Notes at 100% of the principal amount thereof, plus
accrued interest to the date of repurchase (an "Excess Cash Offer"). See
"Description of Notes--Repurchase at the Option of Holders" and "--Certain
Covenants."
The events that constitute a Change of Control or require an Excess Cash
Offer under the Indenture may also be events of default under the Credit
Facility or other Senior Debt of the Company and the Subsidiary Guarantors, the
terms of which may prohibit the purchase of the Notes by the Company until the
Company's indebtedness under the Credit Facility or other Senior Debt is paid in
full. In addition, such events may permit the lenders under such debt
instruments to accelerate the debt and, if the debt is not paid, to enforce
security interests on substantially all the assets of the Company and the
Subsidiary Guarantors, thereby limiting the Company's ability to raise cash to
repurchase the Notes and reducing the
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practical benefit of the offer to repurchase provisions to the holders of the
Notes. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources." There can be no
assurance that the Company will have sufficient funds available at the time of
any Change of Control or Excess Cash Offer to make any debt payment (including
repurchases of Notes) as described above. Any failure by the Company to
repurchase Notes tendered pursuant to a Change of Control Offer (as defined
herein) or an Excess Cash Offer will constitute an Event of Default under the
Indenture. See "Description of Notes--Certain Covenants."
RISK OF HEDGING AND OIL TRADING ACTIVITIES
From time to time the Company may use energy swap and forward sale
arrangements to reduce its sensitivity to oil and gas price volatility. If the
Company's reserves are not produced at the rates estimated by the Company due to
inaccuracies in the reserve estimation process, operational difficulties or
regulatory limitations, or otherwise, the Company would be required to satisfy
its obligations under potentially unfavorable terms. If the Company enters into
financial instrument contracts for the purpose of hedging prices and the
estimated production volumes are less than the amount covered by these
contracts, the Company would be required to mark-to-market these contracts and
recognize any and all losses within the determination period. Further, under
financial instrument contracts, the Company may be at risk for basis
differential, which is the difference in the quoted financial price for contract
settlement and the actual physical point of delivery price. The Company will
from time to time attempt to mitigate basis differential risk by entering into
physical basis swap contracts. Substantial variations between the assumptions
and estimates used by the Company in the hedging activities and actual results
experienced could materially adversely affect the Company's anticipated profit
margins and its ability to manage risk associated with fluctuations in oil and
gas prices. Furthermore, the fixed price sales and hedging contracts limit the
benefits the Company will realize if actual prices rise above the contract
prices. The Company had no energy swap or forward sale arrangements in place at
December 31, 1997 or at June 30, 1998. The Company plans to reduce its hedging
transactions. In August 1998, the Company began entering into oil trading
arrangements as part of its oil marketing activities. Under these arrangements,
the Company contracts to purchase oil from one source and to sell oil to an
unrelated purchaser, usually at disparate prices. Should the Company's purchaser
fail to complete the contracts for purchase, the Company may suffer a loss. The
Company's realized gains on these arrangements, determined before $.1 million of
transportation costs and related expenses, of $1.6 million for July, $1.2
million for August and $.8 million for September 1998. The Company's policy is
to limit its exposure from open positions to $1.0 million at any one time.
WRITEDOWN OF CARRYING VALUES
The Company periodically reviews the carrying value of its oil and gas
properties in accordance with Statement of Financial Accounting Standards No.
121 "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to
be Disposed Of" ("SFAS No. 121"). SFAS No. 121 requires that long-lived assets,
including proved oil and gas properties, and certain identifiable intangibles to
be held and used by the Company be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. In performing the review for recoverability, the Company
estimates the future cash flows expected to result from the use of the asset and
its eventual disposition. If the sum of the expected future cash flows
(undiscounted and without interest charges) is less than the carrying value of
the asset, an impairment loss is recognized in the form of additional
depreciation, depletion and amortization expense. Measurement of an impairment
loss for proved oil and gas properties is calculated on a property-by-property
basis as the excess of the net book value of the property over the projected
discounted future net cash flows of the impaired property, considering expected
reserve additions and price and cost escalations. The Company may be required to
write down the carrying value of its oil and gas properties when oil and gas
prices are depressed or unusually volatile, which would result in a charge to
earnings. Once incurred, a writedown of oil and gas properties is not reversible
at a later date.
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LAWS AND REGULATIONS; ENVIRONMENTAL RISK
Oil and gas operations are subject to various federal, state and local
governmental regulations which may be changed from time to time in response to
economic or political conditions. From time to time, regulatory agencies have
imposed price controls and limitations on production in order to conserve
supplies of oil and gas. In addition, the production, handling, storage,
transportation and disposal of oil and gas, by-products thereof and other
substances and materials produced or used in connection with oil and gas
operations are subject to regulation under federal, state and local laws and
regulations. See "Business and Properties--Regulation."
The Company is subject to a variety of federal, state and local governmental
regulations related to the storage, use, discharge and disposal of toxic,
volatile or otherwise hazardous materials. These regulations subject the Company
to increased operating costs and potential liability associated with the use and
disposal of hazardous materials. Although these laws and regulations have not
had a material adverse effect on the Company's financial condition or results of
operations, there can be no assurance that the Company will not be required to
make material expenditures in the future. If such laws and regulations become
increasingly stringent in the future, it could lead to additional material costs
for environmental compliance and remediation by the Company. See "Business and
Properties--Regulation."
The Company's twenty years of experience with the use of HPAI technology has
not resulted in any known environmental claims. The Company's saltwater
injection operations will pose certain risks of environmental liability to the
Company. Although the Company will monitor the injection process, any leakage
from the subsurface portions of the wells could cause degradation of fresh
groundwater resources, potentially resulting in suspension of operation of the
wells, fines and penalties from governmental agencies, expenditures for
remediation of the affected resource, and liability to third parties for
property damages and personal injuries. In addition, the sale by the Company of
residual crude oil collected as part of the saltwater injection process could
impose liability on the Company in the event the entity to which the oil was
transferred fails to manage the material in accordance with applicable
environmental health and safety laws.
Any failure by the Company to obtain required permits for, control the use
of, or adequately restrict the discharge of, hazardous substances under present
or future regulations could subject the Company to substantial liability or
could cause its operations to be suspended. Such liability or suspension of
operations could have a material adverse effect on the Company's business,
financial condition and results of operations.
COMPETITION
The Company operates in a highly competitive environment. The Company
competes with major and independent oil and gas companies and with individual
producers and developers for the acquisition of desirable oil and gas
properties, as well as for the equipment and labor required to develop and
operate such properties. Many of these competitors have financial and other
resources substantially greater than those of the Company. See "Business and
Properties--Competition."
CONTROLLING SHAREHOLDER
At August 31, 1998, Harold Hamm, President and Chief Executive Officer and a
Director of the Company, beneficially owned 44,496 shares of Common Stock
representing, in the aggregate, approximately 91% of the outstanding Common
Stock of the Company. As a result, Harold Hamm is in a position to control the
Company. The Company is provided oilfield services by several affiliated
companies controlled by Harold Hamm. Such transactions will continue in the
future and may result in conflicts of interest between the Company and such
affiliated companies. There can be no assurance that such conflicts will be
resolved in favor of the Company. If Harold Hamm ceases to be an executive
officer of the Company, such would constitute an event of default under the
Credit Facility, unless waived by the
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requisite percentage of banks. See "Principal Shareholders," "Certain
Relationships and Related Transactions" and "Description of Credit Facility."
ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFER
The Notes are a new issue of securities for which there has been no public
market and there can be no assurance that such a market for the Notes will
develop or, if such a market develops, as to the liquidity of such market. The
Company does not intend to apply for listing of the Notes on any securities
exchange; however, the Notes have been designated for trading in the PORTAL
market. If the Notes are traded after their initial issuance, they may trade at
a discount from their initial offering price, depending upon prevailing interest
rates, the market for similar securities, the performance of the Company and
certain other factors. Although the Initial Purchaser has informed the Company
that it intends to make a market in the Notes as permitted by applicable laws
and regulations the Initial Purchaser is not obligated to do so and any such
market making activities may be discontinued at any time without notice. See
"Transfer Restrictions," "Exchange and Registration Rights Agreement" and "Plan
of Distribution."
FRAUDULENT CONVEYANCE CONSIDERATIONS
The incurrence of indebtedness (such as the Notes) is subject to review
under relevant federal bankruptcy and state fraudulent conveyance statutes in a
bankruptcy or reorganization proceeding or a lawsuit by or on behalf of
creditors of the Company. The Company's obligations under the Notes will be
guaranteed on a subordinated, unsecured basis by existing and future Restricted
Subsidiaries pursuant to the provisions of the Indenture. Under such laws, to
the extent a court were to find that (a) the Notes or a Subsidiary Guarantee was
incurred with the intent to hinder, delay or defraud any present or future
creditor or that the Company or such Subsidiary Guarantor contemplated
insolvency with a design to favor one or more creditors to the exclusion in
whole or in part of other creditors or (b) at the time such person incurred
obligations under the Notes or a Subsidiary Guarantee, it received less than
fair consideration or reasonably equivalent value therefor, and (c) either (i)
was insolvent, (ii) was rendered insolvent by such guarantee or pledge, (iii)
was engaged in a business or transaction for which its remaining unencumbered
assets constituted unreasonably small capital or (iv) intended to incur or
believed that it would incur debts beyond its ability to pay such debts as they
matured, such court could void such obligations and direct the return of any
amounts paid with respect thereto. The measure of insolvency for purposes of the
foregoing will vary depending on the law of the jurisdiction being applied.
Generally, however, an entity would be considered insolvent if the sum of its
debts (including contingent or unliquidated debts) is greater than all of its
property at a fair valuation or if the present fair salable value of its assets
is less than the amount that would be required to pay its probable liability on
its existing debts as they become absolute and mature. There can be no assurance
that, after providing for all prior claims, if any, there would be sufficient
assets to satisfy the claims of the holders of the Notes relating to any voided
portion of a Subsidiary Guarantee. To the extent a Subsidiary Guarantee is
voided as a fraudulent conveyance or held unenforceable for any other reason,
the holders of the Notes would cease to have any claim in respect of such
Subsidiary Guarantor and would be creditors solely of the Company and any other
Subsidiary Guarantors.
CONSEQUENCES OF THE EXCHANGE OFFER ON NON-TENDERING HOLDERS OF OLD NOTES.
In the event the Exchange Offer is consummated, the Company and the
Subsidiary Guarantors will not be required to register any Old Notes not
tendered and accepted in the Exchange Offer (other than, in certain
circumstances, Notes entitled to be covered by a shelf registration statement).
In such event, holders of Old Notes seeking liquidity in their investment would
have to rely on exemptions to the registration requirements under the securities
laws, including the Securities Act. Following the Exchange Offer, assuming the
Company and the Subsidiary Guarantors have no shelf registration obligation with
respect to any Notes, none of the holders of Notes will be entitled to receive
liquidated damages. See "The Exchange Offer--Purpose and Effect of The Exchange
Offer."
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were sold by the Company on July 24, 1998 to Chase Securities,
Inc. (the "Initial Purchaser") in reliance on Section 4(2) of the Securities
Act. The Placement Agents offered and sold the Old Notes only (i) to "qualified
institutional buyers" (as defined in Rule 144A) in compliance with Rule 144A and
(ii) outside the United States to persons other than U.S. Persons, which term
includes dealers or other professional fiduciaries in the United States acting
on a discretionary basis for foreign beneficial owners (other than an estate or
trust), in reliance upon Regulation S under the Securities Act.
In connection with the sale of the Old Notes, the Company and the Initial
Purchaser entered into a Registration Rights Agreement dated as of July 21, 1998
(the "Registration Rights Agreement"), which requires the Company (i) to cause
the Old Notes to be registered under the Securities Act, or (ii) to file with
the Commission a registration statement under the Securities Act with respect to
an issue of New Notes of the Company identical in all material respects to the
Old Notes and use its best efforts to cause such registration statement to
become effective under the Securities Act and, upon the effectiveness of that
registration statement, to offer to the holders of the Old Notes the opportunity
to exchange their Old Notes for a like principal amount of New Notes, which will
be issued without a restrictive legend and which may be reoffered and resold by
the holder without restrictions or limitations under the Securities Act. A copy
of the Registration Rights Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The Exchange Offer is
being made pursuant to the Registration Rights Agreement to satisfy the
Company's obligations thereunder. The term "holder" with respect to the Exchange
Offer means any person in whose name Old Notes are registered on the Company's
books or any other person who has obtained a properly completed stock power from
the registered holder, or any person whose Old Notes are held of record by The
Depository Trust Company ("DTC") who desires to deliver such Old Notes by
book-entry transfer at DTC.
The Company has not requested, and does not intend to request, an
interpretation by the staff of the Commission with respect to whether the New
Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be
offered for sale, resold or otherwise transferred by any holder without
compliance with the registration and prospectus delivery provisions of the
Securities Act. Based on interpretations by the staff of the Commission set
forth in no-action letters issued regarding EXXON CAPITAL HOLDINGS CORPORATION
(available May 13, 1989) and MORGAN STANLEY & CO. INCORPORATED (available June
5, 1991), the Company believes the New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold and otherwise
transferred by any holder thereof (other than broker-dealers, as set forth
below, and any such holder that is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such holder's
business and that such holder has no arrangement or understanding with any
person to participate in the distribution of such New Notes. Any holder who
tenders in the Exchange Offer with the intention to participate, or for the
purpose of participating, in a distribution of the New Notes or who is an
affiliate of the Company may not rely upon such interpretations by the staff of
the Commission and, in the absence of an exemption therefrom, must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction. Failure to comply with such
requirements in such instance may result in such holder incurring liabilities
under the Securities Act for which the holder is not indemnified by the Company.
Each broker-dealer (other than an affiliate of the Company) that receives New
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. The Company has agreed that, for a period of 180 days after the
Exchange Date, it will make the
21
<PAGE>
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
The Exchange Offer is not being made to, nor will the Company accept
surrenders for exchange from, holders of Old Notes in any jurisdiction in which
this Exchange Offer or the acceptance thereof would not be in compliance with
the securities or blue sky laws of such jurisdiction.
By tendering in the Exchange Offer, each holder of Old Notes will represent
to the Company that, among other things, (i) the New Notes acquired pursuant to
the Exchange Offer are being obtained in the ordinary course of business of the
person receiving such New Notes, whether or not such person is the holder, (ii)
neither the holder of Old Notes nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such New
Notes, (iii) if the holder is not a broker-dealer, or is a broker-dealer but
will not receive New Notes for its own account in exchange for Old Notes,
neither the holder nor any such other person is engaged in or intends to
participate in the distribution of such New Notes, and (iv) neither the holder
nor any such other person is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act or, if such holder is an "affiliate," that
such holder will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable.
Each holder, by tendering, also acknowledges and agrees that any holder
using the Exchange Offer to participate in a distribution of the New Notes (a)
could not rely on the position of the Commission enunciated in EXXON CAPITAL
HOLDINGS CORPORATION (available May 13, 1998) and MORGAN STANLEY AND CO., INC.
(available June 5, 1991) as interpreted in the Commission's letter to SHERMAN &
STERLING (available July 2, 1993), and similar no-action letters, and (b) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction and that such a
secondary resale transaction should be covered by an effective registration
statement containing the selling security holder information required by Item
507 or 508, as applicable, of Regulation S-K if the resales are of New Notes
obtained by such holder in exchange for Old Notes acquired by such holder
directly from the company.
Following the completion of the Exchange Offer, none of the Old Notes will
be entitled to the contingent increase in interest rate applicable to the Old
Notes. Following the consummation of the Exchange Offer, holders of Old Notes
will not have any further registration rights, and the Old Notes will continue
to be subject to certain restrictions on transfer. See "--Consequences of
Failure to Exchange." Accordingly, the liquidity of the market for the Old Notes
could be adversely affected. See "Risk Factors-- Consequences of the Exchange
Offer on Non-Tendering Holders of the Old Notes."
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Old Notes are urged to
consult their financial and tax advisors in making their own decisions on
whether to participate in the Exchange Offer.
TERMS OF THE EXCHANGE OFFER
GENERAL. Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letter of Transmittal, the Company will accept any and all
Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Company will issue $1,000 principal amount of
New Notes in exchange for each $1,000 principal amount of Old Notes accepted in
the Exchange Offer. Holders may tender some or all of their Old Notes pursuant
to the Exchange Offer. However, Old Notes may be tendered only in amounts that
are integral multiples of $1,000 principal amount.
The form and terms of the New Notes will be identical in all material
respects to the form and terms of the Old Notes except that the New Notes will
be registered under the Securities Act and, therefore, certificates representing
New Notes will not bear legends restricting the transfer thereof. The New Notes
will evidence the same debt as the Old Notes, will be entitled to the benefits
of the Indenture and will be
22
<PAGE>
treated as a single class thereunder with any Old Notes that remain outstanding.
The Exchange Offer is not conditioned upon any minimum number of Old Notes being
tendered for exchange.
As of October 16, 1998, $150,000,000 aggregate principal amount of the Old
Notes were outstanding. This Prospectus, together with the Letter of
Transmittal, is being sent to all registered holders.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the Oklahoma General Corporation Act or the Indenture in connection with the
Exchange Offer. The Company intends to conduct the Exchange Offer in accordance
with the provisions of the Registration Rights Agreement and the applicable
requirements of the Exchange Act, and the rules and regulations of the
Commission thereunder. Old Notes which are not tendered for exchange in the
Exchange Offer will remain outstanding and interest thereon will continue to
accrue, but such Old Notes will not be entitled to any rights or benefits under
the Registration Rights Agreement.
The Company will be deemed to have accepted validly tendered Old Notes when,
as and if the Company has given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering holders for the
purposes of receiving the New Notes from the Company. If any tendered Old Notes
are not accepted for exchange because of an invalid tender, the occurrence of
certain other events set forth herein or otherwise, certificates for any such
unaccepted Old Notes will be returned, without expense, to the tendering holder
thereof as promptly as practicable after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes described below, in connection with the
Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS. The term "Expiration Date" shall
mean 5:00 p.m., New York City time, on November , 1998, unless the Company, in
its sole discretion, extends the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date and time to which the Exchange
Offer is extended. Although the Company has no current intention to extend the
Exchange Offer, the Company reserves the right to extend the Exchange Offer at
any time and from time to time by giving oral or written notice to the Exchange
Agent and by timely public announcement communicated, unless otherwise required
by applicable law or regulation, by making a release to the Dow Jones News
Service. During any extension of the Exchange Offer, all Old Notes previously
tendered pursuant to the Exchange Offer and not withdrawn will remain subject to
the Exchange Offer. The date of the exchange of the New Notes for Old Notes will
be as soon as practicable following the Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "--Conditions of
the Exchange Offer" shall not have been satisfied, by giving oral or written
notice of such delay, extension or termination to the Exchange Agent, or (ii) to
amend the terms of the Exchange Offer in any manner. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof to the registered holders. If the
Exchange Offer is amended in any manner determined by the Company to constitute
a material change, the Company will promptly disclose such amendment by means of
a prospectus supplement that will be distributed to the registered holders, and
the Company will extend the Exchange Offer for a period of time, depending upon
the significance of the amendment and the manner of disclosure to the registered
holders, if the Exchange Offer would otherwise expire during such period.
In all cases, issuance of the New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of a properly completed and duly executed Letter of
Transmittal and all other required documents; provided, however, that the
Company reserves the absolute right to waive any conditions of the Exchange
Offer or defects or
23
<PAGE>
irregularities in the tender of Old Notes. If any tendered Old Notes are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Old Notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or non-exchanged Old Notes or
substitute Old Notes evidencing the unaccepted portion, as appropriate, will be
returned without expense to the tendering holder, unless otherwise provided in
the Letter of Transmittal, as promptly as practicable after the expiration or
termination of the Exchange Offer.
INTEREST ON THE NEW NOTES. Holders of Old Notes that are accepted for
exchange will not receive accrued interest thereon at the time of exchange.
However, each New Note will bear interest from the most recent date to which
interest has been paid on the Old Notes or New Notes, or if no interest has been
paid on the Old Notes or the New Notes, from June 12, 1998.
PROCEDURES FOR TENDERING OLD NOTES. The tender to the Company of Old Notes
by a holder thereof pursuant to one of the procedures set forth below will
constitute an agreement between such holder and the Company in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal. A holder of the Old Notes may tender such Old Notes by (i) properly
completing and signing a Letter of Transmittal or a facsimile thereof (all
references in this Prospectus to a Letter of Transmittal shall be deemed to
include a facsimile thereof) and delivering the same, together with any
corresponding certificate or certificates representing the Old Notes being
tendered (if in certificated form) and any required signature guarantees, to the
Exchange Agent at its address set forth in the Letter of Transmittal on or prior
to the Expiration Date (or complying with the procedure for book-entry transfer
described below), or (ii) complying with the guaranteed delivery procedures
described below.
If tendered Old Notes are registered in the name of the signer of the Letter
of Transmittal and the New Notes to be issued in exchange therefor are to be
issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder (which term, for the purposes described herein, shall include
any participant in DTC (also referred to as a book-entry facility) whose name
appears on a security listing as the owner of Old Notes), the signature of such
signer need not be guaranteed. In any other case, the tendered Old Notes must be
endorsed or accompanied by written instruments of transfer in form satisfactory
to the Company and duly executed by the registered holder and the signature on
the endorsement or instrument of transfer must be guaranteed by an eligible
guarantor institution which is a member of one of the following recognized
signature guarantee programs (an "Eligible Institution"): (i) The Securities
Transfer Agents Medallion Program (STAMP), (ii) The New York Stock Exchange
Medallion Signature Program (MSF), or (iii) The Stock Exchange Medallion Program
(SEMP). If the New Notes or Old Notes not exchanged are to be delivered to an
address other than that of the registered holder appearing on the note register
for the Old Notes, the signature in the Letter of Transmittal must be guaranteed
by an Eligible Institution.
THE METHOD OF DELIVERY OF OLD NOTES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE
HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT
TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
The Company understands that the Exchange Agent has confirmed with DTC that
any financial institution that is a participant in DTC's system may utilize
DTC's Automated Tender Offer Program ("ATOP") to tender Old Notes. The Company
further understands that the Exchange Agent will request, within two business
days after the date the Exchange Offer commences, that DTC establish an account
with respect to the Old Notes for the purpose of facilitating the Exchange
Offer, and any participant may
24
<PAGE>
make book-entry delivery of Old Notes by causing DTC to transfer such Old Notes
into the Exchange Agent's account in accordance with DTC's ATOP procedures for
transfer. However, the exchange of the Old Notes so tendered will only be made
after timely confirmation (a "Book-Entry Confirmation") of such book-entry
transfer and timely receipt by the Exchange Agent of an Agent's Message (as
defined in the next sentence), and any other documents required by the Letter of
Transmittal. The term "Agent's Message" means a message, transmitted by DTC and
received by the Exchange Agent and forming part of Book-Entry Confirmation,
which states that DTC has received an express acknowledgment from a participant
tendering Old Notes which are the subject of such Book-Entry Confirmation and
that such participant has received and agrees to be bound by the terms of the
Letter of Transmittal and that the Company may enforce such agreement against
such participant.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at DTC), is received by the Exchange
Agent, or (ii) a Notice of Guaranteed Delivery or letter, telegram or facsimile
transmission to similar effect (as provided below) from an Eligible Institution
is received by the Exchange Agent. Issuances of New Notes in exchange for Old
Notes tendered pursuant to a Notice of Guaranteed Delivery or letter, telegram
or facsimile transmission to similar effect (as provided below) by an Eligible
Institution will be made only against submission of a duly signed Letter of
Transmittal (and any other required documents) and deposit of the tendered Old
Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Old Notes will be
determined by the Company, whose determination will be final and binding. The
Company reserves the absolute right to reject any or all tenders not in proper
form or the acceptance for exchange of which may, in the opinion of the
Company's counsel, be unlawful. The Company also reserves the absolute right to
waive any of the conditions of the Exchange Offer or any defect or irregularity
in the tender of any Old Notes. None of the Company, the Exchange Agent or any
other person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification. Any Old Notes received by the Exchange Agent that are not validly
tendered and as to which the defects or irregularities have not been cured or
waived, or if Old Notes are submitted in principal amount greater than the
principal amount of Old Notes being tendered by such tendering holder, such
unaccepted or non-exchanged Old Notes will be returned by the Exchange Agent to
the tendering holder, unless otherwise provided in the Letter of Transmittal, as
soon as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion (a) to
purchase or make offers for any Old Notes that remain outstanding subsequent to
the Expiration Date, and (b) to the extent permitted by applicable law, to
purchase Old Notes in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers will differ from the terms
of the Exchange Offer.
GUARANTEED DELIVERY PROCEDURES. If the holder desires to accept the
Exchange Offer and time will not permit a Letter of Transmittal or Old Notes to
reach the Exchange Agent before the Expiration Date or the procedure for
book-entry transfer cannot be completed on a timely basis, a tender may be
effected if the Exchange Agent has received at its office, on or prior to the
Expiration Date, a letter, telegram or facsimile transmission from an Eligible
Institution setting forth the name and address of the tendering holder, the
name(s) in which the Old Notes are registered and the certificate number(s) of
the Old Notes to be tendered, and stating that the tender is being made thereby
and guaranteeing that, within three New York Stock Exchange trading days after
the date of execution of such letter, telegram or facsimile transmission by the
Eligible Institution, such Old Notes, in proper form for transfer (or a
confirmation of book-entry transfer of such Old Notes into the Exchange Agent's
account at DTC), will be delivered by such Eligible Institution together with a
properly completed and duly executed Letter of Transmittal (and any other
required documents). Unless Old Notes being tendered by the above-described
method are deposited with the Exchange Agent within the time period set forth
above (accompanied or preceded by a
25
<PAGE>
properly competed Letter of Transmittal and any other required documents), the
Company may, at its option, reject the tender. Copies of a Notice of Guaranteed
Delivery which may be used by Eligible Institutions for the purposes described
in this paragraph are available from the Exchange Agent.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL. The Letter of
Transmittal contains, among other things, the following terms and conditions,
which are part of the Exchange Offer.
The party tendering Old Notes for exchange (the "Transferor") exchanges,
assigns and transfers the Old Notes to the Company and irrevocably constitutes
and appoints the Exchange Agent as the Transferor's agent and attorney-in-fact
to cause the Old Notes to be assigned, transferred and exchanged. The Transferor
represents and warrants that it has full power and authority to tender,
exchange, assign and transfer the Old Notes and to acquire New Notes issuable
upon the exchange of such tendered Old Notes, and that, when the same are
accepted for exchange, the Company will acquire good and unencumbered title to
the tendered Old Notes, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim. The Transferor also warrants
that it will, upon request, execute and deliver any additional documents deemed
by the Company to be necessary or desirable to complete the exchange, assignment
and transfer of tendered Old Notes or to transfer ownership of such Old Notes on
the account books maintained by DTC. All authority conferred by the Transferor
will survive the death, bankruptcy or incapacity of the Transferor and every
obligation of the Transferor shall be binding upon the heirs, personal
representatives, executors, administrators, successors, assigns, trustees in
bankruptcy and other legal representatives of such Transferor.
By executing a Letter of Transmittal, each holder will make to the Company
the representations set forth above under the heading "--Purpose and Effect of
the Exchange Offer."
WITHDRAWAL OF TENDERS OF OLD NOTES. Except as otherwise provided herein,
tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) contain a statement that
such holder is withdrawing its election to have such Old Notes exchanged, (iv)
be signed by the holder in the same manner as the original signature on the
Letter of Transmittal by which such Old Notes were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee with respect to the Old Notes register the
transfer of such Old Notes in the name of the person withdrawing the tender, and
(v) specify the name in which any such Old Notes are to be registered, if
different from that of the Depositor. If Old Notes have been tendered pursuant
to the procedure for book-entry transfer, any notice of withdrawal must specify
the name and number of the account at the book-entry transfer facility. All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company, whose determination shall be
final and binding on all parties. Any Old Notes so withdrawn will be deemed not
to have been validly tendered for purposes of the Exchange Offer and no New
Notes will be issued with respect thereto unless the Old Notes so withdrawn are
validly retendered. Any Old Notes which have been tendered but which are not
accepted for exchange will be returned to the holder thereof without cost to
such holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described above under
"--Procedures for Tendering Old Notes" at any time prior to the Expiration Date.
26
<PAGE>
CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, or any extension of
the Exchange Offer, the Company shall not be required to accept for exchange, or
exchange New Notes for, any Old Notes, and may terminate the Exchange Offer as
provided herein before the acceptance of such Old Notes, if:
(a) any statute, rule or regulation shall have been enacted, or any
action shall have been taken by any court or governmental authority which,
in the reasonable judgment of the Company, would prohibit, restrict or
otherwise render illegal consummation of the Exchange Offer; or
(b) any change, or any development involving a prospective change, in
the business or financial affairs of the Company or any of its subsidiaries
has occurred which, in the sole judgment of the Company, might materially
impair the ability of the Company to proceed with the Exchange Offer or
materially impair the contemplated benefits of the Exchange Offer to the
Company; or
(c) there shall occur a change in the current interpretations by the
staff of the Commission which, in the Company's reasonable judgment, might
materially impair the Company's ability to proceed with the Exchange Offer.
If the Company determines in its sole discretion that any of the above
conditions are not satisfied, the Company may (i) refuse to accept any Old Notes
and return all tendered Old Notes to the tendering holders, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the Expiration Date,
subject, however, to the right of holders to withdraw such Old Notes (see
"--Terms of the Exchange Offer--Withdrawal of Tenders of Old Notes"), or (iii)
waive such unsatisfied conditions with respect to the Exchange Offer and accept
all validly tendered Old Notes which have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offer, the Company will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to the registered holders, and the Company will extend the Exchange
Offer for a period of time, depending upon the significance of the waiver and
the manner of disclosure to the registered holders, if the Exchange Offer would
otherwise expire during such period.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange Agent
for the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notices of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
United States Trust Company United States Trust Company United States Trust Company
of New York of New York of New York
P. O. Box 844 Corporate Trust Operations 111 Broadway
Cooper Station Department Lower Level
New York, NY 10276-0844 770 Broadway - 13th Floor New York, NY 10006
Attn: Corporate Trust New York, NY 10003 Attn: Corporate Trust
Services Services
(registered or certified mail
recommended)
By Facsimile:
(212) 420-6152
(For Eligible Institutions Only)
Confirm by Telephone:
(800) 548-6565
</TABLE>
27
<PAGE>
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telecopy, telephone or in person by officers and regular
employees of the Company and its affiliates. No additional compensation will be
paid to any such officers and employees who engage in soliciting tenders.
The Company has not retained any dealer-manager or other soliciting agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others soliciting acceptance of the Exchange Offer. The Company,
however, will pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith. The Company may also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus, the Letter of
Transmittal and related documents to the beneficial owners of the Old Notes and
in handling or forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer will be
paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and transfer agent and registrar, accounting and legal fees and printing
costs, among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of the Old Notes pursuant to the Exchange Offer. If, however, New Notes, or Old
Notes for principal amounts not tendered or accepted for exchange, are to be
delivered to, or are to be issued in the name of, any person other than the
registered holder of the Old Notes tendered or if a transfer tax is imposed for
any reason other than the exchange of the Old Notes pursuant to the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for New Notes pursuant to the Exchange
Offer will remain restricted securities within the meaning of Rule 144 of the
Securities Act. Accordingly, such Old Notes may be resold only (i) to the
Company or any subsidiary thereof, (ii) to a qualified institutional buyer in
compliance with Rule 144A, (iii) to an institutional accredited investor that,
prior to such transfer, furnishes to the Trustee a signed letter containing
certain representations and agreements relating to the restrictions on transfer
of the Old Notes (the form of which letter can be obtained from the Trustee)
and, if such transfer is in respect of an aggregate principal amount of Old
Notes at the time of transfer of less than $100,000, an opinion of counsel
acceptable to the Company that such transfer is in compliance with the
Securities Act, (iv) outside the United States in compliance with Rule 904 under
the Securities Act, (v) pursuant to the exemption from registration provided by
Rule 144 under the Securities Act (if available), or (vi) pursuant to an
effective registration statement under the Securities Act. The liquidity of the
Old Notes could be adversely affected by the Exchange Offer. Following the
consummation of the Exchange Offer, holders of the Senior Preferred Stock will
have no further registration rights under the Registration Rights Agreement and
will not be entitled to the contingent increase in the dividend rate applicable
to the Old Notes.
28
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The Unaudited Pro Forma Combined Statements of Operations and other
financial data for the year ended December 31, 1997, and for the six months
ended June 30, 1998, and the Unaudited Pro Forma Combined Balance Sheet at June
30, 1998, reflect the historical results and the historical financial position,
respectively, of the Company, adjusted to give effect to the Offering and the
application of the net proceeds therefrom, the completion of the Worland Field
Acquisition and the related financing, as though each of the transactions had
occurred on January 1, 1997 with regard to the Unaudited Pro Forma Combined
Statements of Operations and on June 30, 1998 with regard to the Unaudited Pro
Forma Combined Balance Sheet. The pro forma adjustments are based upon available
information and assumptions that management of the Company believes are
reasonable. The Unaudited Pro Forma Consolidated Financial Statements do not
purport to represent the financial position or results of operations which would
have occurred had such transactions been consummated on the dates indicated or
the Company's financial position or results of operations for any future date or
period. The Unaudited Pro Forma Consolidated Financial Statements and notes
thereto should be read in conjunction with the Financial Statements included
elsewhere in this Prospectus.
29
<PAGE>
CONTINENTAL RESOURCES, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AT JUNE 30, 1998
<TABLE>
<CAPTION>
ADJUSTMENTS
--------------------------------------------
JUNE 30, WORLAND FIELD
1998 ACQUISITION COMBINING OFFERING PRO FORMA
----------- -------------- ----------- --------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................... $ 1,336 $ 19,581(a) $ 1,336 $ 145,335(c) $ 2,113
(19,581)(b) (140,669)(d)
(3,889)(e)
Accounts receivable:
Oil and gas sales.......................... 6,350 6,350 6,350
Joint interest and other................... 9,383 9,383 9,383
Inventories.................................. 4,963 4,963 4,963
Prepaid expenses............................. 360 360 360
Advances to affiliates....................... 19,625 (19,581)(a) 44 44
----------- -------------- ----------- --------------- -----------
Total current assets........................... 42,017 (19,581) 22,436 777 23,213
----------- -------------- ----------- --------------- -----------
Oil and gas properties(f):
Producing properties......................... 233,600 233,600 233,600
Non-producing properties..................... 49,029 49,029 49,029
Gas gathering and processing facilities........ 22,561 22,561 22,561
Service properties, equipment and other........ 13,650 13,650 13,650
----------- -------------- ----------- --------------- -----------
Total property and equipment, net.............. 318,840 -- 318,840 318,840
Less--accumulated depreciation, depletion and
amortization.................................. (103,918) (103,918) (103,918)
----------- -------------- ----------- -----------
Net property and equipment..................... 214,922 -- 214,922 214,922
3,889(e)
Other assets................................... 924 924 4,665(c) 9,478
----------- -------------- ----------- --------------- -----------
Total assets................................... $ 257,863 $ (19,581) $ 238,282 $ 9,331 $ 247,613
----------- -------------- ----------- --------------- -----------
----------- -------------- ----------- --------------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................. $ 12,235 $ 12,235 $ 12,235
Current portion of long-term debt............ 315 315 315
Revenues and royalties payable............... 3,654 3,654 3,654
Accrued liabilities and other................ 2,951 2,951 2,951
----------- -------------- ----------- --------------- -----------
Total current liabilities...................... 19,155 -- 19,155 19,155
----------- -------------- ----------- --------------- -----------
Long-term debt, net of current portion......... 163,737 (19,581)(b) 144,156 $ 150,000(c) 153,487
(140,669)(d)
Other non-current liabilities.................. 206 206 206
Stockholders' equity........................... 74,765 74,765 74,765
----------- -------------- ----------- --------------- -----------
Total liabilities and stockholders' equity..... $ 257,863 $ (19,581) $ 238,282 $ 9,331 $ 247,613
----------- -------------- ----------- --------------- -----------
----------- -------------- ----------- --------------- -----------
</TABLE>
See Notes to Unaudited Pro Forma Combined Balance Sheet.
30
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(a) To record payment by principal shareholder for balance owed on sale of
Worland Field Properties.
(b) To apply proceeds from principal shareholder received on sale of Worland
Field Properties to outstanding balance owed on Credit Facility.
(c) To record the proceeds from the Offering, net of Offering costs of $4.7
million, and the related debt.
(d) To record the use of the net proceeds of the Offering to reduce debt
outstanding under the Credit Facility.
(e) To record a $3.9 million settlement of a forward interest rate swap contract
which the Company entered into in May 1998 to hedge its exposure to changes
in prevailing interest rates in connection with the Old Notes Offering. Due
to changes in interest rates for U.S. treasury notes, the Company was
required to pay $3.9 million, which will result in an increase of
approximately 0.5% to the Company's effective interest rate on the Notes and
which will increase interest expense on the Notes by approximately $0.4
million per year through 2008.
(f) See "Business--Oil and Gas Reserves" for information regarding pro forma
reserve quantities and the standardized measure of discounted cash flows
with respect to such pro forma reserve quantities.
31
<PAGE>
CONTINENTAL RESOURCES, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
ADJUSTMENTS
--------------------------------------------
WORLAND FIELD
HISTORICAL ACQUISITION COMBINING OFFERING PRO FORMA
----------- -------------- ----------- --------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenue:
Oil and gas sales.......................... $ 78,599 $ 10,126(a) $ 88,725 $ 88,725
Gathering, marketing and processing........ 25,021 25,021 25,021
Oil and gas service operations............. 6,405 6,405 6,405
----------- -------------- ----------- -----------
Total revenues............................... 110,025 10,126 120,151 120,151
Operating costs and expenses:
Production expenses and taxes.............. 20,748 5,210(a) 25,958 25,958
Exploration expenses....................... 6,806 6,806 6,806
Gathering, marketing and processing........ 22,715 22,715 22,715
Oil and gas service operations............. 3,654 3,654 3,654
Depreciation, depletion and amortization... 33,354 1,116(b) 34,470 $ 460(c) 35,319
389(d)
General and administrative................. 8,990 8,990 8,990
----------- -------------- ----------- --------------- -----------
Total operating costs and expenses........... 96,267 6,326 102,593 849 103,442
----------- -------------- ----------- --------------- -----------
Operating income............................. 13,758 3,800 17,558 (849) 16,709
Interest income.............................. 241 241 1,350(e) 1,591
Interest expense............................. (4,804) (4,804) (10,880)(f) (15,684)
Other income (expense), net.................. 8,061 8,061 8,061
----------- -------------- ----------- --------------- -----------
Income before income taxes................... 17,256 3,800 21,056 (10,379) 10,677
Federal and state income taxes (benefit)..... (8,941) (8,941) (8,941)
----------- -------------- ----------- --------------- -----------
Net income................................... $ 26,197 $ 3,800 $ 29,997 $ (10,379) $ 19,618
----------- -------------- ----------- --------------- -----------
----------- -------------- ----------- --------------- -----------
</TABLE>
- --------------------------
(a) To record the revenues and direct operating expenses attributable to the
Company's net interest in oil and gas properties acquired in the Worland
Field Acquisition for the periods indicated.
(b) To record estimated pro forma depreciation, depletion and amortization
related to the Company's net interest in the Worland Field properties as if
the Worland Field Acquisition had occurred on January 1, 1997. The estimated
pro forma depreciation, depletion and amortization was at an average rate of
$1.53 per Boe based on an allocation of the purchase price to the individual
properties acquired and the actual production during the year ended December
31, 1997.
(c) To record the pro forma amortization of estimated costs of the Offering,
assuming the Offering was completed on January 1, 1997.
(d) To record the pro forma amortization expense of capitalized interest rate
hedge associated with the sale of the Old Notes assuming such sale was
completed on January 1, 1997. In May 1998, the Company entered into a
forward interest rate swap contract to hedge its exposure to changes in
prevailing interest rates. Due to changes in treasury note rates, the
Company paid $3.9 million to settle the forward interest rate swap contract.
This payment will result in an increase of approximately 0.5% to the
Company's effective interest rate or an increase in interest expense of
approximately $0.4 million per year over the next 10 years.
(e) To record the estimated pro forma interest income resulting from an
investment at a 5% interest rate of the net proceeds of the Offering
remaining after payment of the Credit Facility, assuming the Offering was
consummated on January 1, 1997.
(f) To record the pro forma effect of interest expense related to the Notes
assuming (i) the Offering occurred on January 1, 1997 and (ii) the net
proceeds from the Offering are used to reduce debt outstanding under the
Credit Facility which was incurred to finance the Worland Field Acquisition,
and taking into consideration the proceeds from the sale of a 50% interest
in the Worland Field properties to the Company's principal shareholder as if
the sale had occurred on January 1, 1997.
32
<PAGE>
CONTINENTAL RESOURCES, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
ADJUSTMENTS
-----------------------------------------
WORLAND FIELD
HISTORICAL ACQUISITION COMBINING OFFERING PRO FORMA
----------- ------------- ----------- ------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenue:
Oil and gas sales............................ $ 31,291 $ 2,127(a) $ 33,418 $ 33,418
Gathering, marketing and processing.......... 9,804 9,804 9,804
Oil and gas service operations............... 3,062 3,062 3,062
----------- ------------- ----------- -----------
Total revenues................................. 44,157 2,127 46,284 0 46,284
----------- ------------- ----------- -----------
Operating costs and expenses:
Production expenses and taxes................ 9,074 1,268(a) 10,342 10,342
Exploration expenses......................... 2,650 2,650 2,650
Gathering, marketing and processing.......... 8,409 8,409 8,409
Oil and gas service operations............... 1,825 1,825 1,825
Depreciation, depletion and amortization..... 16,483 1,025(b) 17,508 $ 233(c) 17,935
194(d)
General and administrative................... 4,914 4,914 4,914
----------- ------------- ----------- ------------- -----------
Total operating costs and expenses............. 43,355 2,293 45,648 427 46,075
----------- ------------- ----------- ------------- -----------
Operating income............................... 802 (166) 636 (427) 209
Interest income................................ 780 780 50(e) 830
Interest expense............................... (5,174) (5,174) (2,662)(f) (7,836)
Other income (expense), net.................... 92 92 92
----------- ------------- ----------- ------------- -----------
Total other income and (expenses).............. (4,302) -- (4,302) (2,612) (6,914)
Income (loss) before income taxes.............. (3,500) (166) (3,666) (3,039) (6,705)
Federal and state income taxes................. 0 0 0 0 0
----------- ------------- ----------- ------------- -----------
Net income (loss).............................. $ (3,500) $ (166) $ (3,666) $ (3,039) $ (6,705)
----------- ------------- ----------- ------------- -----------
----------- ------------- ----------- ------------- -----------
Earnings (loss) per common share............... $ (71.37) $ (74.75) $ (136.73)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
- --------------------------
(a) To record the revenues and direct operating expenses attributable to the
Company's net interest in oil and gas properties acquired in the Worland
Field Acquisition for the periods indicated.
(b) To record the estimated pro forma depreciation, depletion and amortization
related to the Company's net interest in the Worland Field properties as if
the Worland Field Acquisition had occurred on January 1, 1997. The estimated
pro forma depreciation, depletion and amortization was at an average rate of
$3.16 per Boe based on an estimated allocation of the purchase price to the
individual properties acquired in 1998 and the actual production during the
six months ended June 30, 1998.
(c) To record the pro forma amortization of estimated costs of the Offering,
assuming the Offering was completed on January 1, 1997.
(d) To record the pro forma amortization expense of capitalized interest rate
hedge associated with the sale of the Old Notes assuming such sale was
completed on January 1, 1997. In May 1998, the Company entered into a
forward interest rate swap contract to hedge its exposure to changes in
prevailing interest rates. Due to changes in treasury note rates, the
Company paid $3.9 million to settle the forward interest rate swap contract.
This payment will result in an increase of approximately 0.5% to the
Company's effective interest rate or an increase in interest expense of
approximately $0.4 million per year over the next 10 years.
(e) To record the estimated pro forma interest income resulting from an
investment at a 5% interest rate of the net proceeds of the Offering
remaining after payment of the Credit Facility, assuming the Offering was
consummated on January 1, 1997.
(f) To record the pro forma effect of interest expense related to the Notes
assuming (i) the Offering occurred on January 1, 1997 and (ii) the net
proceeds from the Offering are used to reduce debt outstanding under the
Credit Facility which was incurred to finance the Worland Field Acquisition,
and taking into consideration the proceeds from the sale of a 50% interest
in the Worland Field properties to the Company's principal shareholder as if
the sale had occurred on January 1, 1997.
33
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected historical consolidated financial
data for the periods ended and as of the dates indicated. The statements of
operations and other financial data for the periods ended December 31, 1994,
1995, 1996 and 1997, and the balance sheet data as of December 31, 1995, 1996
and 1997 have been derived from, and should be reviewed in conjunction with, the
consolidated financial statements of the Company, and the notes thereto, which
have been audited by Arthur Andersen LLP, independent public accountants. The
statements of operations and other financial data for the periods ended December
31, 1993, June 30, 1997 and June 30, 1998, and the balance sheet data as of
December 31, 1994, June 30, 1997 and June 30, 1998, have been derived from the
unaudited financial statements of the Company, which, in the opinion of
management, include all adjustments necessary to present fairly the data for
such periods. The financial statements as of December 31, 1996, December 31,
1997 and June 30, 1998 and for the years ended December 31, 1995, 1996 and 1997
and for the periods ended June 30, 1997 and June 30, 1998 are included elsewhere
in this Prospectus. The data should be read in conjunction with
"Capitalization," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Financial Statements and the related notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- ---------
1993 1994 1995 1996 1997 1997
--------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Oil and gas sales........................................... $ 16,002 $ 21,427 $ 30,576 $ 75,016 $ 78,599 $ 39,135
Gathering, marketing and processing......................... 3,061 14,806 20,639 25,766 25,021 15,522
Oil and gas service operations.............................. 3,063 5,630 6,148 6,491 6,405 3,715
--------- --------- --------- --------- --------- ---------
Total revenues................................................ 22,126 41,863 57,363 107,273 110,025 58,372
Operating costs and expenses:
Production expenses and taxes............................... 2,455 6,905 7,611 19,338 20,748 10,622
Exploration expenses........................................ 1,996 6,338 6,184 4,512 6,806 3,410
Gathering, marketing and processing......................... 2,436 8,415 13,223 21,790 22,715 12,873
Oil and gas service operations.............................. 1,975 2,708 3,680 4,034 3,654 1,855
Depreciation, depletion and amortization.................... 4,816 6,068 9,614 22,876 33,354 16,713
General and administrative.................................. 3,658 6,396 8,260 9,155 8,990 3,986
--------- --------- --------- --------- --------- ---------
Total operating costs and expenses............................ 17,336 36,830 48,572 81,705 96,267 49,459
--------- --------- --------- --------- --------- ---------
Operating income.............................................. 4,790 5,033 8,791 25,568 13,758 8,913
Interest income............................................... 138 108 137 312 241 104
Interest expense.............................................. (314) (670) (2,396) (4,550) (4,804) (2,313)
Other revenue (expense), net(1),(2)........................... 4,132 -- (411) 233 8,061 685
--------- --------- --------- --------- --------- ---------
Income before income taxes.................................... 8,746 4,471 6,121 21,563 17,256 7,389
Federal and state income taxes (benefit)(3)................... 2,974 1,596 2,252 8,238 (8,941) (8,941)
--------- --------- --------- --------- --------- ---------
Net income.................................................... $ 5,772 $ 2,875 $ 3,869 $ 13,325 $ 26,197 $ 16,330
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
OTHER FINANCIAL DATA:
EBITDA(4)..................................................... $ 11,872 $ 17,547 $ 24,315 $ 53,502 $ 54,721 $ 29,825
Net cash provided by operations............................... 12,758 18,787 18,985 41,724 51,477 27,948
Net cash used in investing.................................... (12,402) (19,256) (58,022) (50,619) (78,359) (39,673)
Net cash provided by (used in) financing...................... 2,963 (1,138) 37,994 10,494 24,863 8,556
Capital expenditures(5)....................................... 11,818 20,143 58,226 50,341 80,937 41,678
RATIOS:
Adjusted EBITDA to interest expense........................... 37.8x 26.2x 10.1x 11.8x 11.4x 12.9x
Total debt to adjusted EBITDA................................. 0.6x 0.4x 1.8x 1.0x 1.5x n/a
Earnings to fixed charges(6).................................. 28.9x 7.7x 3.6x 5.7x 4.6x 4.2x
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents..................................... $ 4,373 $ 2,766 $ 1,722 $ 3,320 $ 1,301 $ 151
Total assets.................................................. 49,592 56,759 107,825 145,693 188,386 159,755
Long-term debt, including current maturities.................. 7,514 6,272 44,265 54,759 79,632 63,325
Stockholders' equity.......................................... 32,008 34,883 38,752 52,077 78,264 68,398
<CAPTION>
1998
---------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Oil and gas sales........................................... $ 31,291
Gathering, marketing and processing......................... 9,804
Oil and gas service operations.............................. 3,062
---------
Total revenues................................................ 44,157
Operating costs and expenses:
Production expenses and taxes............................... 9,074
Exploration expenses........................................ 2,650
Gathering, marketing and processing......................... 8,409
Oil and gas service operations.............................. 1,825
Depreciation, depletion and amortization.................... 16,483
General and administrative.................................. 4,914
---------
Total operating costs and expenses............................ 43,355
---------
Operating income.............................................. 802
Interest income............................................... 780
Interest expense.............................................. (5,174)
Other revenue (expense), net(1),(2)........................... 93
---------
Income before income taxes.................................... (3,499)
Federal and state income taxes (benefit)(3)................... 0
---------
Net income.................................................... $ (3,499)
---------
---------
OTHER FINANCIAL DATA:
EBITDA(4)..................................................... $ 20,808
Net cash provided by operations............................... 9,669
Net cash used in investing.................................... (116,132)
Net cash provided by (used in) financing...................... 106,498
Capital expenditures(5)....................................... 116,534
RATIOS:
Adjusted EBITDA to interest expense........................... 4.0x
Total debt to adjusted EBITDA................................. n/a
Earnings to fixed charges(6).................................. n/a
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents..................................... $ 1,336
Total assets.................................................. 257,863
Long-term debt, including current maturities.................. 164,052
Stockholders' equity.......................................... 74,765
</TABLE>
See Notes to Selected Consolidated Financial Data.
34
<PAGE>
NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA
(1) In 1993, other income includes $4.0 million resulting from the settlement of
certain litigation matters.
(2) In 1997, other income includes $7.5 million resulting from the settlement of
certain litigation matters.
(3) Effective June 1, 1997, the Company elected to be treated as a S Corporation
for federal income tax purposes. The conversion resulted in the elimination
of the Company's deferred income tax assets and liabilities existing at May
31, 1997 and, after being netted against the then existing tax provision,
resulted in a net income tax benefit to the Company of $8.9 million.
(4) Adjusted EBITDA represents earnings before interest expense, income taxes,
depreciation, depletion, amortization and exploration expense, excluding
proceeds from litigation settlements. Adjusted EBITDA is not a measure of
cash flow as determined in accordance with GAAP. Adjusted EBITDA should not
be considered as an alternative to, or more meaningful than, net income or
cash flow as determined in accordance with GAAP or as an indicator of a
company's operating performance or liquidity. Certain items excluded from
adjusted EBITDA are significant components in understanding and assessing a
company's financial performance, such as a company's cost of capital and tax
structure, as well as historic costs of depreciable assets, none of which
are components of adjusted EBITDA. The Company's computation of adjusted
EBITDA may not be comparable to other similarly titled measures of other
companies. The Company believes that adjusted EBITDA is a widely followed
measure of operating performance and may also be used by investors to
measure the Company's ability to meet future debt service requirements, if
any. Even though the volume of oil and gas produced by the Company during
the six months ended June 30, 1998, on an actual and pro forma basis, was
greater than in the comparable period in 1997, the Company's Adjusted EBITDA
for the 1998 period was less than in 1997. The decrease in Adjusted EBITDA
for the 1998 period was attributable to declines in oil and gas prices.
Adjusted EBITDA does not give effect to the Company's exploration
expenditures, which are largely discretionary by the Company and which, to
the extent expended, would reduce cash available for debt service, repayment
of indebtedness and dividends.
(5) Capital expenditures include costs related to acquisitions of producing oil
and gas properties.
(6) For purposes of computing the ratio of earnings to fixed charges, earnings
are computed as income before taxes from continuing operations, plus fixed
charges. Fixed charges consist of interest expense and amortization of costs
incurred in the Offering.
35
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
consolidated financial statements and notes thereto and the Selected
Consolidated Financial Data included elsewhere herein.
OVERVIEW
The Company's revenue, profitability and cash flow are substantially
dependent upon prevailing prices for oil and gas and the volumes of oil and gas
it produces. Although the Company produced more oil and gas in the first quarter
of 1998 than in the first quarter of 1997, it experienced a significant decline
in revenues, net income and Adjusted EBITDA in the first half of 1998 compared
to the first half of 1997 because of lower prevailing oil and gas prices. These
lower prices have continued to adversely affect the Company's revenues and
results of operation since June 30, 1998. Given the volatile nature of oil and
gas prices, it is difficult to predict whether such effects will continue during
the remainder of 1998. Average prices as of September 30, 1998, on a pro forma
basis, were $12.95 per Bbl of oil and $1.66 per Mcf of natural gas compared to
$18.06 per Bbl of oil and $2.25 per Mcf of natural gas as of December 31, 1997.
If the September 30, 1998 pro forma prices were applied to the Company's
estimated proved reserves as of December 31, 1997, the Company's pro forma PV-10
would have been approximately $208.7 million compared to a pro forma PV-10 of
$267.0 million using December 31, 1997 prices. In addition, the Company's proved
reserves and oil and gas production will decline as oil and gas are produced
unless the Company is successful in acquiring producing properties or conducting
successful exploration and development drilling activities.
The Company uses the successful efforts method of accounting for its
investment in oil and gas properties. Under the successful efforts method of
accounting, costs to acquire mineral interests in oil and gas properties, to
drill and provide equipment for exploratory wells that find proved reserves and
to drill and equip development wells are capitalized. These costs are amortized
to operations on a unit-of-production method based on petroleum engineer
estimates. Geological and geophysical costs, lease rentals and costs associated
with unsuccessful exploratory wells are expensed as incurred. Maintenance and
repairs are expensed as incurred, except that the cost of replacements or
renewals that expand capacity or improve production are capitalized. Significant
downward revisions of quantity estimates or declines in oil and gas prices that
are not offset by other factors could result in a writedown for impairment of
the carrying value of oil and gas properties. Once incurred, a writedown of oil
and gas properties is not reversible at a later date, even if oil or gas prices
increase.
The Company is a S Corporation for federal income tax purposes. The Company
currently anticipates it will pay quarterly dividends in amounts sufficient to
enable the Company's shareholders to pay their income tax obligations with
respect to the Company's taxable earnings.
36
<PAGE>
RESULTS OF OPERATIONS
The following tables set forth selected financial and operating information
for each of the three years in the period ended December 31, 1997 and for the
six months ended June 30, 1997 and 1998:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
--------------------------------- --------------------
1995 1996 1997 1997 1998
--------- ---------- ---------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PRICE DATA)
<S> <C> <C> <C> <C> <C>
Revenues................................................ $ 57,363 $ 107,273 $ 110,025 $ 58,372 $ 44,157
Operating expenses...................................... 48,572 81,705 96,267 49,459 43,355
Non-Operating income (expense).......................... (2,670) (4,005) 3,498 (1,524) (4,301)
Net income after tax.................................... 3,869 13,325 26,197 16,330 (3,499)
Adjusted EBITDA(1)...................................... 24,315 53,502 54,721 29,825 20,807
Production Volumes(2):
Oil and condensate (MBbls)............................ 1,199 2,888 3,518 1,615 1,983
Natural gas (MMcf).................................... 5,880 6,527 5,789 2,881 2,933
Oil equivalents (MBoe)................................ 2,179 3,976 4,483 2,095 2,472
Average Prices(3):
Oil and condensate (per Bbl).......................... $ 17.11 $ 20.78 $ 18.61 $ 20.08 $ 13.14
Natural gas (per Mcf)................................. 1.40 2.13 2.21 2.33 1.79
Oil equivalents (per Boe)............................. 14.03 18.87 17.53 18.68 12.66
</TABLE>
- --------------------------
(1) Adjusted EBITDA represents earnings before interest expense, income taxes,
depreciation, depletion, amortization and exploration expense, excluding
proceeds from litigation settlements. EBITDA is not a measure of cash flow
as determined in accordance with GAAP. Adjusted EBITDA should not be
considered as an alternative to, or more meaningful than, net income or cash
flow as determined in accordance with GAAP or as an indicator of a company's
operating performance or liquidity. Certain items excluded from Adjusted
EBITDA are significant components in understanding and assessing a company's
financial performance, such as a company's cost of capital and tax
structure, as well as historic costs of depreciable assets, none of which
are components of EBITDA. The Company's computation of Adjusted EBITDA may
not be comparable to other similarly titled measures of other companies. The
Company believes that Adjusted EBITDA is a widely followed measure of
operating performance and may also be used by investors to measure the
Company's ability to meet future debt service requirements, if any. Even
though the volume of oil and gas produced by the Company during the six
months ended June 30, 1998, on an actual and pro forma basis, was greater
than in the comparable period in 1997, the Company's adjusted EBITDA for the
1998 period was less than in 1997. The decrease in adjusted EBITDA for the
1998 period was attributable to declines in oil and gas prices. Adjusted
EBITDA does not give effect to the Company's exploration expenditures, which
are largely discretionary by the Company and which, to the extent expended,
would reduce cash available for debt service, repayment of indebtedness and
dividends.
(2) Production volumes of oil and condensate, and natural gas, are derived from
the Company's production records and reflect actual quantities produced
without regard to the time of receipt of proceeds from the sale of such
production. Production volumes of oil equivalents (on a Boe basis) are
determined by dividing the total Mcfs of natural gas produced by six and by
adding the resultant sum to barrels of oil and condensate produced.
(3) Average prices of oil and condensate, and of natural gas, are derived from
the Company's production records which are maintained on an "as produced"
basis, which give effect to gas balancing and oil produced and in the tanks,
and, accordingly, may differ from oil and gas revenues for the same periods
as reflected in the Financial Statements. Average prices of oil equivalents
were calculated by dividing oil and gas revenues, as reflected in the
Financial Statements, by production volumes on a per Boe basis. Average sale
prices per Boe realized by the Company, according to its production records
which are maintained on an "as produced" basis, for the years ended December
31, 1995, 1996 and 1997, were $13.19, $18.59 and $17.53, respectively.
37
<PAGE>
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
OIL AND GAS SALES revenue for the six months ended June 30, 1998 decreased
$7.8 million, or 20%, to $31.3 million from $39.1 million for the comparable
period in 1997. Oil price decreases from an average of $20.08 per Bbl in the
period during 1997 to $13.14 per Bbl in 1998 which resulted in an $11.2 million
reduction in revenues. The effect of the price reduction was partially offset by
a 368 MBbl increase in oil production. The increase in production, based on 1998
prices, resulted in $4.8 million of additional revenue for the six month period
in 1998. Gas revenues for the six months ended June 30, 1998 decreased by $1.5
million, or 22%, to $5.2 million from $6.7 million during the comparable period
in 1997, attributable mainly to lower gas prices for the six-month period in
1998 on relatively stable gas volumes. Average prices fell to $1.79 per Mcf
during the six-month period in 1998 from $2.33 per Mcf in the comparable period
in 1997.
GATHERING, MARKETING AND PROCESSING revenue for the six months ended June
30, 1998 was $9.8 million, a decrease of $5.7 million, or 37%, from $15.5
million in the same period in 1997, which was attributable primarily to the
elimination of purchases and resales of third party gas for marketing purposes
and a refocus on purchases to supply the Company's gas plants.
OIL AND GAS SERVICE OPERATIONS revenue for the six months ended June 30,
1998 was $3.1 million, a decrease of $0.6 million, or 18%, compared to $3.7
million in the same period in 1997, which was attributable to declining oil
prices on reclaimed oil sales.
PRODUCTION EXPENSES AND TAXES for the six months ended June 30, 1998 were
$9.1 million, a decrease of $1.5 million, or 15%, compared to $10.6 million in
the same period in 1997, which was attributable to increased production
efficiencies and lower gross production taxes per Boe due to price declines.
EXPLORATION EXPENSES for the six months ended June 30, 1998 were $2.6
million, a decrease of $0.8 million, or 22%, compared to $3.4 million in the
same period in 1997, resulting primarily from a $0.3 million decrease in expired
lease expense and a $0.6 million decrease in geological expense. During the
period from July 1, 1998 through December 31, 1998, leases on approximately
26,000 net leasehold acres, with a cost of $1.4 million, will expire and in
1999, leases on approximately 40,000 net acres, with a cost of $2.2 million,
will expire. The Company has not yet determined if all or any of these leases
will be drilled, renewed or allowed to expire.
GATHERING, MARKETING AND PROCESSING EXPENSE for the six months ended June
30, 1998 was $8.4 million, a $4.5 million, or 35% decrease compared to $12.9
million in the same period in 1997. The decrease was attributable primarily to
the eliminations of purchases of third party gas not used for gas plant supply,
but sold as part of the Company's gas marketing activities.
DEPRECIATION, DEPLETION AND AMORTIZATION ("DD&A") EXPENSE for the six months
ended June 30, 1998 was $16.5 million, a $0.2 million, or .1% decrease compared
to $16.7 million in 1997. The insignificant decrease in DD&A expense is
primarily attributable to a reduction in the rate of production on the Company's
older properties, and the fact that the older properties are almost fully
depreciated and incur less depreciation expense each year. The unit rate of DD&A
expense per Boe in the first half of 1998 was $6.95, compared with $7.31 in the
1997 period.
GENERAL AND ADMINISTRATIVE ("G&A") EXPENSE for the six months ended June 30,
1998 was $4.9 million minus overhead reimbursement of $1.0 million for a net G&A
expense of $3.9 million, or an increase of $1.7 million, or 80%, compared to G&A
expense of $4.0 million in the first half of 1997 minus overhead reimbursement
of $1.8 million for a net G&A expense of $2.2 million. The increase was
primarily due to an employment and benefits increase of $0.5 million and a
reduction of overhead reimbursement of $0.8 million.
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INTEREST EXPENSE for the six months ended June 30, 1998 was $5.2 million, an
increase of $2.9 million, or 124%, compared to $2.3 million in the 1997 period
attributable primarily to higher levels of indebtedness outstanding during 1998.
In May 1998, the Company entered into a forward interest rate swap contract to
hedge its exposure to changes in the prevailing interest rates in connection
with its planned debt offering. Due to the change in treasury note rates, the
Company paid $3.9 million to settle the forward interest rate swap contract,
which will result in an increase of approximately 0.5% to the Company's
effective interest rate, or an annual increase in interest expense of
approximately $2.4 million in 1998.
INTEREST AND OTHER INCOME for the six months ended June 30, 1998 was $0.8
million, an increase of $0.7 million, or 652%, from $0.1 million realized in the
same period in 1997. Other income decreased $0.6 million or 87%, to $0.1 million
for the six months ended June 30, 1998 from $0.7 million for the comparable 1997
period. The decrease was due to lower gains on the sale of assets. The Company
has orally agreed to sell all of its interests in certain Illinois properties to
the operator of the properties. Based on a sales price of $3.5 million, it is
estimated that the Company will recognize a gain of approximately $2.7 million
during 1998.
INCOME BEFORE INCOME TAXES for the six months ended June 30, 1998 was a loss
of $3.5 million, a decrease of $10.9 million, or 147%, from $7.4 million in the
1997 period, attributable primarily to lower revenues from oil and gas sales,
and increased interest expense, partially offset by reduced operations expenses.
NET INCOME for the six months ended June 30, 1998 was a net loss of $3.5
million, a decrease of $19.8 million, or 121%, compared to the 1997 period. Net
income for the period declined by a $14.2 million reduction in revenues because
of lower oil and gas prices which was partially offset by a $6.1 million
reduction in operating expenses, and an increase of $2.9 million in interest
expense. Net income for 1997 also included a $8.9 million tax benefit due to the
"S" election that will not have an impact on 1998 net income.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
OIL AND GAS SALES revenue in 1997 was $78.6 million, an increase of $3.6
million, or 5.0%, over $75.0 million in 1996. In 1997, the Company sold an
aggregate of 3,518 MBbls, a 22% increase over 1996 oil sales of 2,888 MBbls. The
Company's natural gas sales in 1997 aggregated to 5,789 MMcf, an 11% decrease
over its 1996 natural gas sales of 6,527 MMcf. In 1997, the Company received
average prices of $18.61 per Bbl and $2.21 per Mcf, compared to $20.78 per Bbl
and $2.13 per Mcf, respectively, in 1996.
GATHERING, MARKETING AND PROCESSING revenue in 1997 was $25.0 million, a
decrease of $0.8 million, or 3.0%, from $25.8 million in 1996, which was
attributable primarily to lower spot prices for natural gas.
OIL AND GAS SERVICE OPERATIONS revenue in 1997 was $6.4 million, a decrease
of $0.1 million, or 1%, compared to $6.5 million in 1996.
PRODUCTION EXPENSES AND TAXES in 1997 were $20.7 million, an increase of
$1.4 million, or 7%, compared to $19.3 million in 1996, which was attributable
to a 13% increase in production volume offset by a 5% decrease in production
costs per Boe.
EXPLORATION EXPENSES were $6.8 million in 1997, an increase of $2.3 million,
or 51%, compared to $4.5 million in 1996, resulting primarily from a $0.5
million increase in expired lease expense and a $1.0 million increase in 3-D
seismic expenditures.
GATHERING, MARKETING AND PROCESSING EXPENSE in 1997 was $22.7 million, a
$0.9 million, or 4% increase, compared to $21.8 million, which in 1996 was
attributable to reduced margins on natural gas and natural gas liquids.
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OIL AND GAS SERVICE OPERATIONS EXPENSE in 1997 was $3.7 million, a $0.3
million, or 9%, decrease from $4.0 million in 1996, attributable to a reduction
in saltwater disposal activity and warehouse activity.
DD&A EXPENSE in 1997 was $33.4 million, a $10.5 million, or 46% increase
compared to $22.9 million in 1996. DD&A expense related to oil and gas
operations in 1997 was $30.2 million, an $8.6 million, or 40% increase, compared
to $21.6 million in 1996, attributable primarily to higher production levels in
1997. The unit rate of DD&A expense per Boe in 1997 was $6.74, compared with
$5.44 in 1996. The 1997 DD&A rate included $5.0 million of additional impairment
for writedown of certain long-lived assets in accordance with the provisions of
SFAS No. 121, or $1.12 per Boe.
G&A EXPENSE for 1997 was $9.0 million minus overhead reimbursement of $2.4
million for a net G&A expense of $6.6 million, which was equal to net G&A
expense of 6.6 million in 1996.
INTEREST EXPENSE in 1997 was $4.8 million, an increase of $0.2 million, or
6%, compared to $4.6 million in 1996, attributable primarily to higher levels of
indebtedness outstanding during 1997.
INTEREST AND OTHER INCOME in 1997 was $8.3 million, a $7.8 million, or
1,560%, increase over $0.5 million realized in 1996. The substantial increase in
1997 was primarily attributable to non-recurring income of approximately $7.5
million resulting from the settlement of certain litigation matters.
INCOME BEFORE INCOME TAXES in 1997 was $17.3 million, a decrease of $4.3
million, or 20%, from $21.6 million in 1996, attributable primarily to increased
production expenses and taxes, exploration expenses, gathering, marketing and
processing expenses and DD&A expense, partially offset by an increase in total
revenues of approximately $10.5 million, which included approximately $7.5
million related to the settlement of certain litigation matters.
NET INCOME in 1997 was $26.2 million, an increase of $12.9 million, or 97%,
compared to $13.3 million in 1996, primarily attributable to an $8.9 million tax
benefit realized in 1997, compared to a $8.2 million tax expense in 1996, and
the recognition of approximately $7.5 million related to the settlement of
certain litigation matters.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
OIL AND GAS SALES revenue in 1996 was $75.0 million, an increase of $44.4
million, or 145%, over $30.6 million in 1995. In 1996, the Company sold an
aggregate of 2,888 MBbls, a 141% increase over 1995 oil sales of 1,199 MBbls.
During 1995 and 1996 the Company drilled 33 and 34 net wells, respectively, and
in December 1995 acquired four High Pressure Air Injection units and 10
individual wells from Koch Exploration Co. Production in 1996 from the wells
drilled in 1995 and 1996 was 407 MBbls and 411 Mbbls, respectively, and
production from the acquired properties added an additional 839 Mbbls of oil to
production. The Company's natural gas sales in 1996 aggregated to 6,527 MMcf, an
11% increase over its 1995 natural gas sales of 5,880 MMcf. In 1996, the Company
received average prices of $20.78 per Bbl and $2.13 per Mcf, compared to $17.11
per Bbl and $1.40 per Mcf, respectively, in 1995.
GATHERING, MARKETING AND PROCESSING revenue in 1996 was $25.8 million, an
increase of $5.2 million, or 25%, from $20.6 million in 1995, attributable to
increased throughput on the Company's natural gas gathering systems.
OIL AND GAS SERVICE OPERATIONS revenue in 1996 was $6.5 million, an increase
of $0.4 million, or 6%, compared to $6.1 million in 1995, attributable to an
increase in warehouse pipe sales.
PRODUCTION EXPENSES AND TAXES in 1996 were $19.3 million, an increase of
$11.7 million, or 154%, compared to $7.6 million in 1995, attributable to
increased production volumes.
EXPLORATION EXPENSES in 1996 were $4.5 million, a decrease of $1.6 million,
or 27%, compared to $6.2 million in 1995, resulting primarily from a reduction
of dry hole expenses of $1.6 million.
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GATHERING, MARKETING AND PROCESSING EXPENSE in 1996 was $21.8 million, an
$8.6 million, or 65% increase, compared to $13.2 million in 1995, was
attributable to increased throughput on the Company's natural gas gathering
systems.
OIL AND GAS SERVICE OPERATIONS EXPENSE in 1996 was $4.0 million, a $0.3
million, or 10%, increase from $3.7 million in 1995, attributable to an increase
in repairs on saltwater disposal wells.
DD&A EXPENSE in 1996 was $22.9 million, a $13.3 million, or 138% increase
compared to $9.6 million in 1995. DD&A expense related to oil and gas operations
in 1996 was $21.6 million, a $12.6 million, or 140% increase, compared to $9.0
million in 1995, attributable primarily to higher production levels in 1996. The
unit rate of DD&A expense per Boe in 1996 was $5.44, compared with $3.76 in
1995. The 1996 DD&A rate included $2.1 million of additional impairment for
writedown of certain long-lived assets in accordance with the provisions of SFAS
No. 121, or $0.53 per Boe.
G&A EXPENSE in 1996 was $9.2 million minus overhead reimbursed of $2.6
million for a net G&A expense of $6.6 million, an increase of $0.6 million, or
9%, compared to G&A expense of $8.3 million in 1995 minus overhead reimbursement
of $2.3 million for net G&A expense of $6 million. The increase was attributable
to an increase in salaries and hiring of additional employees.
INTEREST EXPENSE in 1996 was $4.6 million, an increase of $2.2 million, or
90%, compared to $2.4 million in 1995, attributable primarily to higher levels
of indebtedness outstanding during 1996 related to drilling activities in North
Dakota.
INTEREST AND OTHER INCOME in 1996 was $0.5 million, a $0.8 million, or 299%,
increase over $(0.3) million realized in 1995. The increase in 1996 was
primarily attributable to gain on the sale of assets.
INCOME BEFORE INCOME TAXES in 1996 was $21.6 million, an increase of $15.5
million, or 252%, from $6.1 million in 1995, attributable primarily to increased
oil and gas sales and gathering, marketing and processing revenues, partially
offset by increases in production expenses and taxes, gathering, marketing and
processing expenses and DD&A expense.
NET INCOME in 1996 was $13.3 million, an increase of $9.4 million, or 244%,
compared to $3.9 million in 1995, primarily attributable to increased income
before income taxes partially offset by a larger income tax expense.
LIQUIDITY AND CAPITAL RESOURCES
During 1997, and the six months ended June 30, 1998, the Company utilized
its beginning cash balance, cash flow from operations and financing provided by
a bank and by the Company's principal shareholder to fund its exploration and
development expenditures, as well as the construction of a natural gas
processing plant and pipeline infrastructure in the Williston Basin.
CASH FLOW FROM OPERATIONS. Net cash provided by operating activities was
$51.5 million for 1997, a 23% and 171% increase from the $41.7 million and $19.0
million in 1996 and 1995, respectively. Net cash provided by operating
activities was $9.7 million for the six months ended June 30, 1998, a 66%
decrease from the $28.0 million for the six months ended June 30, 1997. Cash and
short-term cash investments decreased to $1.3 million at December 31, 1997, from
$3.3 million at year-end 1996, and increased to $1.3 million at June 30, 1998,
from $.2 million at June 30, 1997.
RESERVES ADDED AND FINDING COST. During 1997 and the six months ended June
30, 1998, the Company spent $59.5 million and $114.0 million, respectively, on
acquisitions, exploration, exploitation and development of oil and gas
properties. The 1998 amount includes the acquisition of the Worland Field
properties. Total estimated proved reserves of natural gas decreased from 50.5
Bcf at year-end 1996 to 49.4 Bcf at year-end 1997, and estimated total proved
oil reserves increased from 19.5 MMBbls at year-end 1996 to 24.7 MMBbls at
year-end 1997.
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FINANCING. Long-term debt at December 31, 1997 and June 30, 1998 was $79.3
million and $163.7 million, respectively. The $84.4 million, or 106%, increase
was mainly due to the acquisition of approximately $86.5 million of producing
and non-producing oil and gas properties and certain other related assets in the
Worland Field effective as of June 1, 1998.
CREDIT FACILITY. Long-term debt outstanding under the Credit Facility at
December 31, 1997 and June 30, 1998 included $53.7 million and $160.3 million,
respectively, of revolving credit debt under the Credit Facility. The effective
rate of interest under the Credit Facility was 7.7% at December 31, 1997 and was
7.5% at June 30, 1998. On July 24, 1998 the balance under the Credit Facility
was $162.8 million which was paid off with $19.6 million in proceeds from the
sale of a 50% interest in the Worland Properties and $143.2 million of the
proceeds from the issuance of the Notes. Upon issuance of the Notes and payment
of the outstanding balance on the Credit Facility the Credit Facility was
amended to a $75.0 million Credit Facility with a $75.0 million borrowing base.
The Credit Facility matures May 14, 2001. The Credit Facility provides for
interest based on the prime rate of Bank One Oklahoma, N.A., or the London
Interbank Offered Rate for 1, 2, 3 or 6-month offshore deposits as offered by
Bank One to major banks in the London Interbank Market, rounded upwards, if
necessary, to the nearest 1/16%, and adjusted for maximum cost of reserves, if
any. As of August 20, 1998 the Company has borrowed $4.0 million against this
Credit Facility.
SENIOR NOTES. On July 24, 1998, the Company consummated a private sale of
$150.0 million principal amount of Old Notes. Interest on the Old Notes (and New
Notes issued in exchange therefor) accrues at an annual rate of 10 1/4% and is
payable semiannually on each February 1 and August 1, commencing February 1999.
Approximately $143.2 million of the net proceeds from the sale of the Old Notes
was used to reduce indebtedness under the Credit Facility, which indebtedness
had been incurred in order to consummate the Worland Field Acquisition. As a
result of the issuance of the Old Notes the maturity of the Company's
outstanding indebtedness was extended from four to ten years, availability under
the Company's Credit Facility was increased by $50 million, and the interest
rate on outstanding indebtedness was increased by 2.5%. The issuance of the Old
Notes and the application of the net proceeds therefrom has not adversely
impacted the Company's liquidity.
CAPITAL EXPENDITURES. The Company expects higher production volumes in 1998
compared to 1997. The expected increase in volume is primarily due to the
production associated with the Worland Field properties, as well as certain new
oil and gas properties expected to commence production during the year. Revenue
in 1998, however, has been and continues to be adversely impacted by lower
prevailing oil and gas prices, which are expected to remain volatile. The
Company's 1998 capital expenditures budget is $45.4 million, exclusive of
acquisitions. During the six months ended June 30, 1998, the Company incurred
$30.0 million of capital expenditures, exclusive of acquisitions. The Company
expects to fund the 1998 capital budget through cash flow from operations and
its Credit Facility.
PURCHASE OF WORLAND FIELD. On May 18, 1998, the Company consummated the
purchase for approximately $86.5 million of producing and non-producing oil and
gas properties and certain other related assets in the Worland Properties
effective as of June 1, 1998, which the Company funded through borrowings on its
line of credit. Subsequently, and effective June 1, 1998, the Company sold an
undivided 50% interest in the Worland Properties (excluding inventory and
certain equipment) to the Company's principal stockholder for approximately
$42.6 million. Of the total sale price to the stockholder, approximately
$23,000,000 plus interest of approximately $.3 million was offset against the
outstanding balance of notes payable to the stockholder and approximately $19.6
million was recorded as an increase in advances to affiliates in the
accompanying June 30, 1998 consolidated condensed balance sheet. Based on
current contract prices and production levels, proceeds from the sale of oil
produced by the Worland Field properties are sufficient to cover operating costs
and interest expense. The Company expects that the development potential of its
Worland Field properties should increase future cash flows from such properties.
At present, the Worland Field Acquisition has not materially affected the
Company's liquidity.
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SHAREHOLDER DISTRIBUTION. The 1997 tax returns of the Company's
shareholders are expected to be filed by October 15, 1998. The Company expects
to distribute a dividend of approximately $2.5 million to its shareholders prior
to December 31, 1998 to cover the shareholders' 1997 tax liability. Because of
funds available to the Company under its Credit Facility, such dividend will not
have a material effect on the Company's liquidity.
YEAR 2000. The Company is reviewing its computer software and hardware,
telecommunications systems, process control systems and business relationships
to locate potential operational problems associated with the year 2000.
The Company's computer consultant has reviewed the Company's mainframe
hardware and operating software and updates to both have been performed. One
additional programming change has been provided for the operating system, and it
will be installed before the end of 1998. At that time the Company believes the
mainframe computer system will be year 2000 compatible. The financial software
package utilized on the mainframe computer has already been tested and updated
by the software vendor. The Company is in the process of developing a plan to
further test the financial software during the first quarter of 1999 to insure
the compatibility of the software with the year 2000. Assessment of other less
critical software systems and various types of computer equipment is continuing
and should be completed by November 1998. The Company believes that the
potential impact, if any, of these systems not being year 2000 compliant may, at
most, require employees to manually complete otherwise automated tasks or
calculations.
The telephone system billing software utilized in tracking telephone usage
is known to be incompatible with the year 2000. A plan is already in place to
increase the capacity of the telephone system and new software will be installed
at that time to make the system year 2000 compatible. The cost of this update
will be less than $15,000. The Company believes that the radios being used for
communications with field operations will not be impacted. The Company also
relies on various public telephone companies to supply normal voice and
electronic data service and service to operating locations which utilize process
control alarms. These alarms notify Company personnel if there are operations
abnormalities that need to be checked and, if necessary, corrected. If the
telephone service were disrupted, the operations would need to be more closely
monitored by Company personnel, but because the operations are not actually
controlled through the phone systems, there should be no interruption in
operations. Surveys will be made of all telephone companies to determine their
system readiness and contingency plans will be developed for those areas where
service that is year 2000 compliant has not been verified.
The gas measurement systems and gas processing facilities that the Company
operates use various Program Logic Controllers ("PLC's") and alarm mechanisms.
The Company has been verbally notified that the measurement systems that it
currently uses are year 2000 compatible and Company tests have been done to
verify that information. The dates on test meters were adjusted to December 29,
1999 and the meters were ran for several days. When the meters rolled to the
year 2000, and for several days after the change to the new year, there were no
complications encountered. However, the Company utilizes a third party for gas
chart integration and has not verified the readiness of that company to
integrate charts which cross into the year 2000. The Company will include the
third party in surveys to be sent to vendors prior to the end of March, 1999. At
this time there has been no action taken to evaluate the gas processing
facilities for potential problem areas. The management of these facilities has
been notified of the need to evaluate the systems and is in the process of
putting together a plan of action which will coincide with routine maintenance.
The Company believes that the PLC and alarms at its Medicine Pole Hills Gas
Plant are the most likely to be at risk for incompatibility and could be
replaced at a cost of about $20,000.
There can be no guarantee that the systems of other companies on which the
Company's systems rely will be timely converted, or that a failure to convert by
another company, or a conversion that is incompatible with the Company's systems
would not have a material adverse effect on the Company. The Company will be
evaluating its relationships with third parties to determine any critical
services, suppliers,
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or customers. The third parties will include financial services, utility
services, oil and gas purchasers and parts and supply vendors. Once critical
relationships have been identified the third parties will be surveyed and their
preparedness for year 2000 evaluated. If the Company believes that the third
parties have not minimized risk satisfactorily it will evaluate alternatives to
the current relationships. The survey and evaluation of preparedness should be
completed by June 30, 1999.
The Company believes that there is minimal risk associated with internal
operating systems in relation to year 2000 compatibility. Plans are already in
place to address known areas of incompatibility at costs estimated to be less
than $100,000. Because of the immaterial nature of the expenditures on an
individual basis, the Company plans to finance all costs through normal
operating funds.
HEDGING. From time to time, the Company may use energy swap and forward
sale arrangements to reduce its sensitivity to oil and gas price volatility.
However, the Company had no energy swap or forward sale arrangement in place at
December 31, 1997 or at June 30, 1998. The Company plans to reduce its hedging
transactions. In August, 1998, the Company began engaging in oil trading
arrangements as part of its oil and gas marketing activities. See "Business--Oil
and Gas Marketing."
The Company has only limited involvement with derivative financial
instruments, as defined in SFAS No. 119 "Disclosure About Derivative Financial
Instruments and Fair Value of Financial Instruments" and does not use them for
trading purposes. The Company's objective is to hedge a portion of its exposure
to price volatility from producing oil and natural gas. These arrangements
expose the Company to the credit risk of its counterparties and to basis risk.
In connection with the Notes Offering, the Company entered into an interest
rate hedge on which it experienced a $3.9 million loss. The Company has no
present plans to engage in further interest rate hedges. See "Unaudited Pro
Forma Consolidated Financial Statements."
OTHER. The Company follows the "sales method" of accounting for its gas
revenue, whereby the Company recognizes sales revenue on all gas sold,
regardless of whether the sales are proportionate to the Company's ownership in
the property. A liability is recognized only to the extent that the Company has
a net imbalance in excess of its share of the reserves in the underlying
properties. The Company's historical aggregate imbalance positions have been
immaterial. The Company believes that any future periodic settlements of gas
imbalances will have little impact on its liquidity.
The Company has sold a number of non-strategic oil and gas properties and
other properties over the past three years, recognizing a pretax loss of
approximately $411,000 in 1995, and pretax gains of approximately $233,000 and
$674,000 in 1996 and 1997, respectively. Total amounts of oil and gas reserves
associated with these dispositions during the last three years were 294 MBbls of
oil and 2,298 MMcf of natural gas.
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BUSINESS AND PROPERTIES
GENERAL
Continental is engaged in the development, exploitation, exploration and
acquisition of oil and gas reserves, primarily in the Rocky Mountains and the
Mid-Continent and, to a lesser extent, in the Gulf Coast region of Texas and
Louisiana. In addition to its exploration, development and production
activities, the Company owns and operates 1,000 miles of natural gas pipelines,
five gas gathering systems and three gas processing plants in its operating
areas. The Company also engages in natural gas marketing, gas pipeline
construction and saltwater disposal. Capitalizing on its growth through the
drill-bit and its acquisition strategy, on a pro forma basis the Company has
increased its estimated proved reserves from 12.7 MMBoe in 1993 to 64.9 MMBoe in
1997, and increased its annual production from 2.0 MMBoe in 1993 to 5.2 MMBoe in
1997. At December 31, 1997, on a pro forma basis, approximately 80% of the
Company's estimated proved reserves were oil and approximately 63% of its total
estimated reserves were classified as proved developed. At June 30, 1998, the
Company had interests in 1,399 producing wells of which it operated 1,114.
The Company's Rocky Mountain activities are concentrated in the Williston
and Big Horn Basins. The Company's operations in the Williston Basin are focused
on the Cedar Hills Field, which the Company believes is, potentially, one of the
largest onshore discoveries in the lower 48 states since 1971. The Cedar Hills
Field represented approximately 45% of the PV-10 attributable to the Company's
estimated proved reserves at December 31, 1997, on a pro forma basis. In the
Williston Basin, the Company owns approximately 465,000 net leasehold acres and
has interests in 328 gross (255 net) wells, has identified 105 potential
drilling locations and conducts both primary drilling and enhanced recovery
operations. The Company recently expanded its activities into the Big Horn Basin
through the acquisition of producing and non-producing properties in the Worland
Field. The Company currently owns approximately 35,000 net leasehold acres in
the Big Horn Basin and has interests in 292 gross (127 net) producing wells
which, on a pro forma basis, represented approximately 10% of the PV-10
attributable to the Company's estimated proved reserves at December 31, 1997,
and it operates 272 of such wells. In the Big Horn Basin the Company has
identified 164 potential drilling locations which represent significant
opportunities.
The Company's Mid-Continent activities are conducted primarily in the
Anadarko Basin of western Oklahoma, southwestern Kansas and the Texas Panhandle
and, to a lesser extent, in the Arkoma Basin of southeastern Oklahoma and in
southern Illinois. At December 31, 1997 the Company's Anadarko Basin properties
represented approximately 95% of the PV-10 attributable to the Company's
estimated proved reserves in the Mid-Continent and approximately 36% of the
Company's total estimated proved reserves, on a pro forma basis. In the Anadarko
Basin the Company owns approximately 55,000 net leasehold acres, has interests
in 661 gross (408 net) producing wells and has identified 11 potential drilling
locations. The Company also owns leasehold interests and expects to expand its
exploration activities in the Arkoma Basin and Gulf Coast region of Texas and
Louisiana.
The Company was originally formed in 1967 as Shelly Dean Oil Company to
explore, develop and produce oil and gas properties in Oklahoma. In 1991, the
Company changed its name to Continental Resources, Inc. In 1993, the Company
acquired interests in the Williston Basin and expanded its operations into that
area and has since focused its operations in the Rocky Mountains.
The Company formed Continental Gas, Inc. as a gas marketing company in April
1990. Continental Gas , Inc. has developed into a company specializing in gas
marketing, pipeline construction, gas gathering systems and gas plant
operations.
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BUSINESS STRENGTHS
The Company believes that it has certain strengths that provide it with
significant competitive advantages, including the following:
PROVEN GROWTH RECORD. Continental has demonstrated consistent growth
through a balanced program of development and exploratory drilling and
acquisitions. During the five years ended December 31, 1997, the Company
increased proved reserves by 411%, production by 161% and EBITDA by 414%, on a
pro forma basis.
SUBSTANTIAL DEVELOPMENT DRILLING INVENTORY. The Company has identified over
275 potential development drilling locations based on geological and geophysical
evaluations. As of June 30, 1998, on a pro forma basis, the Company held
approximately 583,000 net acres, of which approximately 64% were classified as
undeveloped. Management believes that its current acreage holdings could support
five to seven years of drilling activities based upon oil and gas prices in
effect at June 30, 1998.
LONG-LIFE NATURE OF RESERVES. Continental's producing reserves are
primarily characterized by low rate, relatively stable, mature production that
is subject to gradual decline rates. As a result of the long-lived nature of its
properties, the Company has relatively low reinvestment requirements to maintain
reserve quantities, primary and secondary production levels and reserve values.
At December 31, 1997, on a pro forma basis, the Company's proved reserve life
index was 12.5 years.
SUCCESSFUL DRILLING RECORD. The Company has maintained a successful
drilling record. In the blanket type Red River B formation of the Williston
Basin, the Company's success rate during the three years ended December 31, 1997
was 92%, while in its other areas, the success rate was 65%, resulting in an
overall success rate of 85%. During the five years ended December 31, 1997 the
Company participated in 253 gross (175 net) wells which resulted in the addition
of 24.9 MMBoe at an average cost of $5.50 per Boe.
SIGNIFICANT OPERATIONAL CONTROL. Approximately 94% of the Company's PV-10
at December 31, 1997, on a pro forma basis, was attributable to wells operated
by the Company, giving Continental significant control over the amount and
timing of capital expenditures and production, operating and marketing
activities.
TECHNOLOGICAL LEADERSHIP. The Company has demonstrated significant
expertise in the rapidly evolving technologies of 3-D seismic evaluation and
precision horizontal drilling, and is among the few companies in North America
to successfully utilize high pressure air injection ("HPAI") enhanced recovery
technology on a large scale. Through the combination of precision horizontal
drilling and HPAI secondary recovery technology, the Company has significantly
enhanced the recoverable reserves underlying its oil and gas properties. Since
its inception, Continental has experienced a 300% to 400% increase in
recoverable reserves through use of these technologies.
EXPERIENCED AND COMMITTED MANAGEMENT. Continental's senior management team
has extensive experience in the oil and gas industry. The Chief Executive
Officer, Harold Hamm, began his career in the oil and gas industry in 1967 and
has grown Continental's revenues to $120.2 million in 1997, on a pro forma
basis. Seven senior officers have an average of 20 years of oil and gas industry
experience. Additionally, the Company's technical staff, which includes ten
petroleum engineers and ten geoscientists, has an average of over 20 years
experience in the industry.
BUSINESS STRATEGY
The Company's strategy is to increase reserves, production and cash flow.
Key elements of the Company's strategy are:
MAINTAIN A BALANCED DRILLING PROGRAM. Continental has historically grown
through a balanced program of exploratory and development drilling and
acquisitions. Commencing in 1993, approximately 70%
46
<PAGE>
of wells drilled by the Company have been development wells and the Company
expects a similar balance from its current drilling inventory. Approximately 85%
of the Company's current inventory is focused on further expansion and
development of oil projects in the Rocky Mountains, while the remainder is
focused on natural gas projects in the Mid-Continent and the Gulf Coast. The
Company currently has an inventory of 252 potential development drilling
locations. The Company's drilling budget for 1998 is $36.0 million, which is
expected to fund the drilling of 38 gross (26.6 net) wells; and for the six
months ended June 30, 1998, the Company expended $24.6 million in drilling 25
gross (16.8 net) wells.
MAXIMIZE RESERVE RECOVERY. The Company routinely uses advanced technology
such as precision horizontal drilling, 3-D seismic technology and HPAI
technology in its operations. Management believes that its expertise in
horizontal drilling and its record of over 20 years of successfully utilizing
HPAI technology provide the Company with a distinct competitive advantage for
its development and exploration program. Since its inception, Continental has
drilled 130 and participated in another 27 horizontal wells. The Company
currently operates four of the eight active HPAI projects in North America and
six traditional water-flood projects, and is evaluating three additional
waterflood and two additional HPAI projects, as well as approximately 185
workovers of existing wells. The Company intends to continue to apply HPAI
technology to its Cedar Hills Field and West Medicine Pole Hills properties to
maximize oil recoveries. Based on its experience in operating HPAI projects,
Continental believes that the use of HPAI technology coupled with precision
horizonal drilling in secondary recovery operations will increase total oil
recovery by 300% to 400% over average primary production, or by 50% over
secondary recovery utilizing traditional waterflooding.
ACQUISITIONS OF OIL AND GAS RESERVES. The Company focuses on acquisitions
that (i) complement its existing exploration program, (ii) provide opportunities
to utilize the Company's technological advantages, (iii) have the potential for
enhanced recovery activities, and/or (iv) provide new core areas for the
Company's operations.
MAINTAIN LOW COST STRUCTURE. The management team is committed to a low cost
structure in order to maximize cash flow and earnings. Continental has achieved
low operating and general and administrative costs through economies of scale
and geographic focus. The Company's finding costs are expected to decline over
time as the benefits of secondary recovery methods are realized.
EXPAND GAS GATHERING AND MARKETING. Continental's extensive gas gathering
infrastructure and its regional natural gas marketing operations are integral to
the Company's low cost structure and high revenues per unit of gas production.
The Company intends to expand its gas gathering systems to further improve the
rate of return on drilling and development activities and to increase the
throughput of natural gas from third parties. The gas marketing operation
provides a ready market for increased production, allowing the Company to
increase its marketing of third-party gas as well as its own production.
DEVELOPMENT, EXPLOITATION AND EXPLORATION ACTIVITIES
DEVELOPMENT AND EXPLOITATION. The Company's development and exploitation
activities include drilling of development wells, precision drilling of
horizontal wells, infill drilling, waterfloods, workovers, recompletions and
HPAI projects. The Company's development activities are focused primarily in the
Rocky Mountains, specifically in the Cedar Hills Field, the Medicine Pole Hills,
Buffalo, South Buffalo and West Buffalo Units in the Williston Basin and the
Worland Field in the Big Horn Basin. Approximately 85% of the Company's
development drilling inventory (252 wells) is focused on further expansion and
development of these areas. In addition, the Company is planning two HPAI oil
recovery projects and approximately 156 workovers of existing wells in the Rocky
Mountains. In the Mid-Continent, the Company is evaluating four new waterflood
projects to complement the six waterfloods it currently operates and has 35
workovers planned. All are oil projects in areas where the Company has
operational
47
<PAGE>
experience and technical expertise and benefits from economies of scale. The
following table sets forth information pertaining to the Company's proven
development inventory at June 30, 1998:
<TABLE>
<CAPTION>
NUMBER OF DEVELOPMENT PROJECTS
--------------------------------------------------------------
ENHANCED
DRILLING WORKOVERS AND RECOVERY
LOCATIONS RECOMPLETIONS PROJECTS TOTAL
------------- ----------------- --------------- -----
<S> <C> <C> <C> <C>
ROCKY MOUNTAINS:
Williston Basin......................................... 67 10 2 79
Big Horn Basin.......................................... 158 146 - 304
MID-CONTINENT:
Anadarko Basin.......................................... 11 30 3 44
Arkoma Basin............................................ 10 5 - 15
Southern Illinois....................................... - - 1 1
GULF COAST................................................ 6 2 - 8
--
--- --- ---
TOTAL................................................. 252 193 6 451
--
--
--- --- ---
--- --- ---
</TABLE>
The Company currently anticipates that it will initiate 50 to 100
development projects in 1998. Assuming that 100 projects per year are initiated,
the Company currently has more than a five year inventory of development
projects. Continental expects to spend approximately $130 million over the next
three years for development projects.
EXPLORATION ACTIVITIES. The Company's existing inventory of exploration
projects varies in risk and reward based on their depth, location and geology.
The Company intends to use advanced technology, including 3-D seismic,
horizontal drilling and improved completion techniques, to enhance a significant
portion of the Company's existing and future exploration projects. The Company
currently estimates that it will spend $3.1 million on seismic activities over
the next three years. The Company is pursuing ten higher risk/reward exploration
prospects in the Gulf Coast and Rocky Mountains. In these ten prospects, the
Company has an inventory of 43 exploratory drilling locations in various stages
of readiness.
The Gulf Coast prospects include the Jefferson Island project in Iberia
Parish, Louisiana, and the Pebble Beach project in Neuces County, Texas. The
Jefferson Island project is an underdeveloped salt dome that produces from a
series of prolific Miocene sands. To date the field has produced 22.0 MMBoe,
from approximately one quarter of the total dome. The remaining three quarters
of the dome are essentially unexplored or are underdeveloped. The Company
controls 6,283 gross (2,742 net) acres over the entire salt dome and has
identified 12 exploratory locations. The Company has an agreement with a third
party who, at its expense, acquired 35 square miles of 3-D seismic data covering
the entire salt dome, in exchange for which the third party will earn the right
to a 50% interest in the project. The 3-D data is currently being processed and
prepared for interpretation. Drilling is expected to commence in the fourth
quarter of 1998. In the Pebble Beach project, 20 square miles of 3-D seismic
data has been acquired over the project area and two wells have been drilled to
date, neither of which was commercial. Currently, there are ten additional
drilling locations in the Pebble Beach project based on 3-D seismic data.
In the Rocky Mountains, the Company has identified ten exploratory
prospects, representing 21 exploratory drilling locations. In the Lustre Field
and the NE Autumn prospect of the Williston Basin, the Company owns
approximately 90,000 net leasehold acres, and intends to combine 3-D seismic and
horizontal drilling to further develop and explore for oil on this acreage.
48
<PAGE>
The following table sets forth information pertaining to the Company's
existing exploration project inventory at June 30, 1998:
<TABLE>
<CAPTION>
NUMBER OF EXPLORATION PROJECTS
--------------------------------------
DRILLING LOCATION 3-D SEISMIC
--------------------- ---------------
<S> <C> <C>
ROCKY MOUNTAINS:
Williston Basin........................................................ 19 3
Big Horn Basin......................................................... 6 1
MID-CONTINENT............................................................ - -
GULF COAST............................................................... 22 1
-- --
TOTAL.................................................................... 47 5
-- --
-- --
</TABLE>
SPECIALIZED TECHNOLOGY
HORIZONTAL DRILLING OPERATIONS. The Company's development, exploitation and
exploration activities include extensive use of precision horizontal drilling.
Through the use of precision horizontal drilling the Company has experienced a
400% to 700% increase in initial flow rates and, when coupled with HPAI
secondary recovery operations, a 300% to 400% increase in recovered reserves.
The increased recovered reserves, combined with increased production rates
offered by horizontal drilling, permitted the Company to co-discover and develop
the Cedar Hills Field from a reservoir that was historically perceived to be
non-commercial. From inception, the Company had drilled 136 horizontal wells in
the Rocky Mountains and Mid-Continent. The Company's primary horizontal drilling
objectives are non-fractured reservoirs that decline at a slower rate than
fractured reservoirs. For example, the horizontal wells in the Cedar Hills Field
have an average productive life of approximately 25 years, based solely on
primary production.
HIGH PRESSURE AIR INJECTION. The Company has successfully utilized high
pressure air injection technology to enhance the recovery of oil from its
properties in the Medicine Pole Hills, Buffalo, West Buffalo and South Buffalo
units in the Williston Basin. The Company expects to initiate HPAI in the Cedar
Hills Field and expand its use in the western part of the Medicine Pole Hills
Unit. HPAI consists of injecting compressed air into the target reservoir
through an injection well. As the compressed air is forced deeper into the
subsurface, air pressure and temperature increase, and the combination of
pressure, fuel and high temperature develops a burn front, creating gasses which
push further into the oil bearing formation. This pressure forces the oil in the
formation to move away from the pressure and, eventually, into the Company's
horizontal and vertical collector wells. In the Williston Basin, the use of HPAI
technology in secondary recovery operations, when coupled with precision
horizontal drilling, has increased total oil recovery by 300% to 400% over
average primary production, or by 50% over secondary recovery utilizing
traditional waterflooding. The Company's experience with HPAI technology has
demonstrated that production response using HPAI technology generally occurs in
one to three years, rather than five to six years using traditional
waterflooding. The Company currently conducts four of the eight active HPAI
projects in North America, the oldest of which has been operating for over 20
years.
ACQUISITION ACTIVITIES
The Company seeks to acquire properties that have the potential to be
immediately accretive to cash flow, have long-lived, lower risk, relatively
stable production potential, and provide long-term growth in production and
reserves. The Company focuses on acquisitions that complement its existing
exploration program, provide opportunities to utilize the Company's
technological advantages, have the potential for enhanced recovery activities,
and/or provide new core areas for the Company's operations. See "--Principal Oil
and Gas Properties."
49
<PAGE>
PRINCIPAL OIL AND GAS PROPERTIES
Until 1993, the Company's oil and gas activities were focused in the
Mid-Continent. In 1993 the Company made the strategic move to increase oil
production and reserves by expanding its development and exploration activities
into the Rocky Mountains. The Company currently controls approximately 505,000
net acres in the Rocky Mountains and is ranked among the largest oil producers
in the Rocky Mountains. Continental's oil production is characterized by long
lived, stable production with high secondary and enhanced oil recovery potential
which perpetuates production and cash flow from its properties. On a pro forma
basis, approximately 80% of its estimated proved reserves at December 31, 1997
were oil. To achieve a more balanced reserve mix, the Company is focusing on
generating an increased inventory of natural gas drilling opportunities in the
Mid-Continent and Gulf Coast. Currently, 85% of the Company's drilling inventory
is focused on further expansion and development of its Rocky Mountain oil
fields, and the remaining 15% is focused on natural gas projects in the
Mid-Continent and Gulf Coast. The Company's Gulf Coast activities are conducted
onshore the Texas and Louisiana coasts. In the Gulf Coast, the Company holds
approximately 9,400 net leasehold acres and has identified 28 potential drilling
locations.
The following table provides information with respect to the Company's net
proved reserves for its principal oil and gas properties as of December 31,
1997, on a pro forma basis:
<TABLE>
<CAPTION>
OIL
OIL GAS EQUIVALENT PERCENT OF
AREA (MBBL) (MMCF) (MBOE) PV-10
- ------------------------------------------------------------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C>
ROCKY MOUNTAINS:
Williston Basin............................................ 21,495 4,741 22,285 52.9%
Big Horn Basin............................................. 27,248 28,470 31,993 9.5
MID-CONTINENT:
Anadarko Basin............................................. 3,039 41,427 9,944 35.6
Arkoma Basin............................................... - 2,967 494 1.4
Southern Illinois.......................................... 177 - 177 0.4
GULF COAST................................................... 8 243 49 0.2
--------- --------- ----------- -----
TOTALS....................................................... 51,967 77,848 64,942 100.0%
--------- --------- ----------- -----
--------- --------- ----------- -----
</TABLE>
ROCKY MOUNTAINS
The Company's Rocky Mountain properties are located primarily in the
Williston Basin of North Dakota, South Dakota and Montana and in the Big Horn
Basin of Wyoming. Estimated proved reserves for its Rocky Mountains properties
at December 31, 1997, on a pro forma basis, totaled 54.3 MMBoe and represented
62.4% of the Company's PV-10. Approximately 56.3% of these estimated proved
reserves are proved developed. During the six months ended June 30, 1998, net
daily production from these properties averaged 9,699 Bbls of oil and 1,530 Mcf
of natural gas, or 9,954 Boe per day. The Company's leasehold interests include
146,832 net developed and 355,122 net undeveloped acres, which represent 25% and
61% of the Company's total leasehold, respectively. This leasehold is expected
to be developed utilizing 3-D seismic, precision horizontal drilling and HPAI,
where applicable. As of June 30, 1998, the Company's Rocky Mountain properties
included an inventory of 225 development and 25 exploratory drilling locations.
WILLISTON BASIN
CEDAR HILLS FIELD. The Cedar Hills Field was discovered in November 1994
and is still under development. During the six months ended June 30, 1998, the
Cedar Hills Field properties produced 6,923 net Bbls per day to the Company
interests and represented 45% of the PV-10 attributable to the Company's
estimated proved reserves as of December 31, 1997 on a pro forma basis. The
Cedar Hills Field
50
<PAGE>
produces oil from the Red River "B" Formation, a thin (eight feet),
non-fractured, blanket-type, dolomite reservoir found at depths of 8,000 to
9,500 feet. All wells drilled by the Company in the Red River "B" Formation were
drilled exclusively with precision horizontal drilling technology. The Cedar
Hills Field covers approximately 200 square miles and has a known oil column of
1,000 feet. Through June 30, 1998, the Company drilled or participated in 146
gross (97 net) horizontal wells, of which 139 were successfully completed, for a
95% net success rate.
The Company believes that the Red River "B" formation in the Cedar Hills
Field is well suited for enhanced secondary recovery using HPAI technology. On
four nearby HPAI projects operated by the Company, HPAI technology has increased
oil recoveries 200% to 300% over primary recovery with ultimate recoveries
reaching up to 40% of the original oil in place. The Company intends to initiate
installation of HPAI secondary recovery on certain of its Cedar Hills Field
properties upon completion of field unitization, which is expected to occur in
1999. The Company believes that HPAI could increase its total recovery from the
Cedar Hills Field by as much as 75 million net barrels. On May 15, 1998, the
Company and Burlington entered into a definitive agreement to exchange undivided
interests so that effective December 1, 1998 the Company will own working
interests ranging from 90% to 92% in approximately 65,000 gross (59,000 net)
leasehold acres in the northern half of the Cedar Hills Field. As a result of
the agreement, the Company will enhance its ability to unitize all interests in
the northern half of the Cedar Hills Field, which is necessary in order for the
Company to initiate the planned HPAI enhanced recovery operations in the Cedar
Hills Field. On August 19, 1998, the Company instituted a declaratory judgment
action against Burlington in the District Court of Garfield County, Oklahoma
(Case No. CJ-98-613-03) alleging that Burlington provided false and misleading
information regarding certain of Burlington's oil and gas properties to a third
party consultant charged with determining the relative values of oil and gas
properties owned by the Company and Burlington which served as the basis for the
exchange of interests. The Company also claims that the consultant relied on
such false and misleading information in determining the relative fair values of
the oil and gas interests. The Company seeks a declaratory judgment determining
that it is excused from further performance under its exchange agreement with
Burlington. Burlington has denied the Company's allegations and seeks specific
performance by the Company, plus monetary damages of an unspecified amount.
Burlington has removed the action to the United States District Court for the
Western District of Oklahoma (CIV. 98-1253-W). The Company has requested that
the case be remanded to the Oklahoma state court.
As of June 30, 1998, there were 12 horizontal drilling locations in
inventory, all of which are development well locations.
MEDICINE POLE HILLS, BUFFALO, WEST BUFFALO AND SOUTH BUFFALO UNITS. In
1995, the Company acquired the following interests in four production units in
the Williston Basin: Medicine Pole Hills (63%); Buffalo (86%); West Buffalo
(82%); and South Buffalo (85%). During the six months ended June 30, 1998, these
units produced 2,221 Bbls per day, net to the Company's interests, and
represented 4.6 MMBoe or 7% of the pro forma PV-10 attributable to the Company's
estimated proved reserves as of December 31, 1997. These units are HPAI enhanced
recovery projects that produce from the Red River "B" Formation and are operated
by the Company. These units were discovered and developed with conventional
vertical drilling. The oldest vertical well in these units has been producing
for 44 years, demonstrating the long lived production characteristic of the Red
River "B" Formation. There are 104 producing wells in these units and current
estimates of remaining reserve life range from four to 16 years. The Company
plans to further develop these units and enhance production by drilling
strategically placed horizontal wells. There are currently 51 development
drilling locations identified in these units.
LUSTRE AND MIDFORK FIELDS. In January 1992, the Company acquired the Lustre
and Midfork Fields which, during the six months ended June 30, 1998, produced
299 Bbls per day, net to the Company's interests and represented 0.6 MMBoe or 1%
of the pro forma PV-10 attributable to its estimated proved reserves as of
December 31, 1997. Wells in both the Lustre and Midfork Fields produce from the
Charles "C" dolomite, at depths of 5,500 to 6,000 feet. Historically, production
from the Charles "C" has a low
51
<PAGE>
daily production rate and is long lived. There are currently 37 wells producing
in the two fields, and no secondary recovery is underway in either field. The
Company currently owns 90,000 net acres in the Lustre and Midfork Fields and
plans to utilize 3-D seismic combined with horizontal drilling to further
exploit the Charles "C" reservoir, and to generate drilling opportunities for
deeper objectives underlying the Lustre and Midfork Fields as well as guide
exploration for new fields on its substantial undeveloped leasehold.
BIG HORN BASIN
WORLAND FIELD. On May 14, 1998, the Company consummated the purchase for
$86.5 million of producing and non-producing oil and gas properties and certain
other related assets in the Worland Field, effective as of June 1, 1998.
Subsequently, and effective as of June 1, 1998, the Company sold an undivided
50% interest in the Worland Field properties (excluding inventory and certain
equipment) to Harold Hamm, the Company's principal shareholder, for $42.6
million. The sale of the 50% interest in the Worland Field properties was
effected to reduce the size of the Company's exposure in one area, to reduce the
amount of future capital expenditures by the Company and to reduce the Company's
investment in oil, rather than natural gas, properties. See "Certain
Relationships and Related Transactions." The Worland Field properties cover
35,000 net leasehold acres in the Worland Field of the Big Horn Basin in
northern Wyoming, of which 22,753 net acres are held by production and 12,635
net acres are non-producing or prospective. Approximately two-thirds of the
Company's producing leases in the Worland Field are within five federal units,
the largest of which (the Cottonwood Creek Unit) has been producing for over 40
years. All of the units produce principally from the Phosphoria formation, which
is the most prolific oil producing formation in the Worland Field. Four of the
units are unitized as to all depths, with the Cottonwood Creek Field Extension
(Phosphoria) Unit being unitized only as to the Phosphoria formation. The
Company is the operator of all five of the federal units. The Company also
operates 40 of the 60 producing wells located on non-unitized acreage. The
Company's Worland Field properties include interests in 292 producing wells, 272
of which are operated by the Company.
As of December 31, 1997, the estimated net proved reserves attributable to
the Company's Worland Field properties were approximately 32.0 MMBoe, with an
estimated PV-10 of $25.4 million. Approximately 85% of these proved reserves
consist of oil, principally in the Phosphoria formation. Oil produced from the
Company's Worland Field properties is low gravity, sour (high sulphur content)
crude, resulting in a lower sales price per barrel than non-sour crude, and is
sold into a Marathon pipeline or is trucked from the lease. Gas produced from
the Worland Field properties is also sour, resulting in a sale price that is
less per Mcf than non-sour natural gas. From the effective date of the Worland
Field Acquisition through September 30, 1998, the average price of crude oil
produced by the Worland Field properties was $5.19 per Bbl less than the NYMEX
price of crude oil. The Company entered into a new contract effective October 1,
1998 through March 31, 1999 to sell crude oil produced from its Worland Field
properties at an average price of $3.19 per Bbl less than the NYMEX price.
In addition to the proved reserves, the Company has identified 158 locations
on its Worland Field properties, to further develop and exploit the undeveloped
portion of the Worland Field. Over 100 wells have been identified for acid
fracture stimulation, most of which have been classified as having proved
developed non-producing reserves. The Company believes that secondary and
tertiary recovery projects will have significant potential for the addition of
reserves. In addition, six drilling prospects have been identified on the
Company's Worland Field properties in which prospects the Company and its
principal shareholder, together, have a majority leasehold position, allowing
for further exploration for and exploitation of the Phosphoria, Tensleep,
Frontier and Muddy formations and other prospective formations for additional
reserves.
MID-CONTINENT
The Company's Mid-Continent properties are located primarily in the Anadarko
Basin of western Oklahoma, southwestern Kansas and the Texas Panhandle, and to a
lesser extent, in the Arkoma Basin of
52
<PAGE>
southeastern Oklahoma ("Arkoma Basin"), and in southern Illinois. At December
31, 1997, the Company's estimated proved reserves in the Mid-Continent totaled
10.6 MMBoe, representing 37.4% of the Company's PV-10 at such date, on a pro
forma basis, and 97% of these reserves were proved developed. At such date,
approximately 70% of the Company's estimated proved reserves in the
Mid-Continent were natural gas. Net daily production from these properties
during the first half of 1998 averaged 1,126 Bbls of oil and 14,310 Mcf of
natural gas, or 3,511 Boe to the Company's interests. The Company's
Mid-Continent leasehold position includes 64,536 net developed and 9,282 net
undeveloped acres, representing 11% and 2% of the Company's total pro forma
leasehold, respectively, at June 30, 1998.
As of June 30, 1998, the Company's Mid-Continent properties included an
inventory of 21 development drilling locations, 11 of which were in the Anadarko
Basin.
ANADARKO BASIN. The Anadarko Basin properties contained 95% of the
Company's estimated proved reserves for the Mid-Continent and 35.6% of the
Company's total PV-10 at December 31, 1997, on a pro forma basis, and at such
date, represented 53% of the Company's estimated proved reserves of natural gas.
During the six months ended June 30, 1998, net daily production from its
Anadarko Basin properties averaged 1,126 Bbls of oil and 13,253 Mcf of natural
gas, or 3,335 Boe to the Company's interest from 661 gross (407 net) producing
wells, 506 of which are operated by the Company. The Anadarko Basin wells
produce from a variety of sands and carbonates in both stratigraphic and
structural traps in the Arbuckle, Oil Creek, Viola, Mississippian, Springer,
Morrow, Red Ford, Oswego, Skinner and Tonkawa formations, at depths ranging from
6,000 to 12,000 feet. These properties are currently being re-evaluated for
further development drilling and workover potential.
OTHER MID-CONTINENT PROPERTIES. The Company's remaining Mid-Continent
properties include those located in the Arkoma Basin and in southern Illinois.
In the Arkoma Basin, the Company is focused on coal bed methane, where it owns
approximately 14,000 acres and has 43 producing wells from the Hartshorne coal
at depths of 2,500 to 3,500 feet. The Company plans to drill two pilot
horizontal tests in the coal in 1998. In Illinois, the Company participates with
another operator in two waterflood projects and up to three wells per year for
production from shallow Mississippian age sands and carbonates.
53
<PAGE>
NET PRODUCTION, UNIT PRICES AND COSTS
The following table presents certain information with respect to oil and gas
production, prices and costs attributable to all oil and gas property interests
owned by the Company for the periods shown:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------------------- --------------------
WORLAND PRO
FIELD PROPERTIES FORMA
1995 1996 1997 1997 1997(1) 1997 1998
--------- --------- --------- ------------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
NET PRODUCTION DATA:
Oil and condensate (MBbls)...... 1,199 2,888 3,518 628 4,146 1,615 1,983
Natural gas (MMcf).............. 5,880 6,527 5,789 610 6,399 2,881 2,933
Total (MBoe).................... 2,179 3,976 4,483 730 5,213 2,095 2,472
UNIT ECONOMICS
Average sales price per Bbl..... $ 17.11 $ 20.78 $ 18.61 $ 15.58 $ 18.14 $ 20.08 $ 13.14
Average sales price per Mcf..... 1.40 2.13 2.21 .22 2.03 2.33 1.79
Average equivalent price (per
Boe)(2)....................... 14.03 18.87 17.53 13.69 17.02 18.69 12.46
Lifting cost (per Boe)(3)....... 3.49 4.86 4.63 7.04 4.98 5.07 3.67
DD&A expense (per Boe)(3)....... 3.76 5.44 6.74 1.51 6.01 7.31 5.95
General and administrative
expense (per Boe)(4).......... 2.74 1.64 1.47 -- 1.26 1.04 1.58
--------- --------- --------- ------ ----------- --------- ---------
Gross margin.................... $ 4.04 $ 6.93 $ 4.69 $ 5.14 $ 4.77 $ 5.26 $ 1.46
--------- --------- --------- ------ ----------- --------- ---------
--------- --------- --------- ------ ----------- --------- ---------
<CAPTION>
WORLAND PRO
FIELD PROPERTIES FORMA
1998 1998(1)
--------------------- -----------
<S> <C> <C>
NET PRODUCTION DATA:
Oil and condensate (MBbls)...... 261 2,244
Natural gas (MMcf).............. 380 3,314
Total (MBoe).................... 324 2,796
UNIT ECONOMICS
Average sales price per Bbl..... $ 7.22 $ 12.45
Average sales price per Mcf..... .64 1.66
Average equivalent price (per
Boe)(2)....................... 6.56 11.95
Lifting cost (per Boe)(3)....... 3.05 3.60
DD&A expense (per Boe)(3)....... 3.16 5.62
General and administrative
expense (per Boe)(4).......... -- 1.40
----- -----------
Gross margin.................... $ .35 $ 1.83
----- -----------
----- -----------
</TABLE>
- --------------------------
(1) Pro forma to reflect the Worland Field Acquisition as if it had occurred
January 1, 1997.
(2) Calculated by dividing oil and gas revenues, as reflected on the Financial
Statements, by production volumes on a Boe basis. Oil and gas revenues
reflected in the Financial Statements are recognized as production is sold
and may differ from oil and gas revenues reflected on the Company's
production records which reflect oil and gas revenues by date of production.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
(3) Related to drilling and development activities.
(4) Related to drilling and development activities, net of operating overhead
income.
54
<PAGE>
PRODUCING WELLS
The following table sets forth the number of productive wells in which the
Company owned an interest as of June 30, 1998:
<TABLE>
<CAPTION>
OIL NATURAL GAS
-------------------- ----------------------
GROSS NET GROSS NET
--------- --- ----------- ---
<S> <C> <C> <C> <C>
ROCKY MOUNTAINS:
Williston Basin................................................................. 328 255 - -
Big Horn Basin(1)............................................................... 292 127 - -
MID-CONTINENT:
Anadarko Basin.................................................................. 424 298 237 109
Other........................................................................... 70 32 38 32
GULF COAST........................................................................ 6 3 4 2
--------- --- --- ---
Total......................................................................... 1,120 715 279 143
--------- --- --- ---
--------- --- --- ---
</TABLE>
- ------------------------
(1) Represents Worland Field properties acquired by the Company in the Worland
Field Acquisition.
ACREAGE
The following table sets forth the Company's developed and undeveloped gross
and net leasehold acreage as of June 30, 1998:
<TABLE>
<CAPTION>
DEVELOPED UNDEVELOPED
-------------------- --------------------
GROSS NET GROSS NET
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
ROCKY MOUNTAINS:
Williston Basin.................................................... 164,137 124,079 454,342 340,487
Big Horn Basin(1).................................................. 47,492 22,753 25,269 12,635
MID-CONTINENT:
Anadarko Basin..................................................... 80,977 49,991 11,703 5,382
Other.............................................................. 21,539 14,545 5,026 3,900
GULF COAST........................................................... 1,355 1,235 12,217 8,202
--------- --------- --------- ---------
Total............................................................ 315,500 212,603 508,557 370,606
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
- ------------------------
(1) Represents Worland Field properties acquired by the Company in the Worland
Field Acquisition.
DRILLING ACTIVITIES
The following table sets forth the Company's drilling activity on its
properties for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
1995 1996 1997
---------------------- ---------------------- ----------------------
GROSS NET GROSS NET GROSS NET
----------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
DEVELOPMENT WELLS:
Productive.................................... 19 14.50 49 28.43 63 42.41
Non-productive................................ 1 1.00 2 1.48 - -
-- -- --
--------- --------- ---------
Total....................................... 20 15.5 51 29.91 63 42.41
-- -- --
-- -- --
--------- --------- ---------
--------- --------- ---------
EXPLORATORY WELLS:
Productive.................................... 20 18.15 8 5.13 15 11.29
Non-productive................................ 4 3.00 5 3.17 5 1.98
-- -- --
--------- --------- ---------
Total....................................... 24 21.15 13 8.30 20 13.27
-- -- --
-- -- --
--------- --------- ---------
--------- --------- ---------
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1998
----------------------
GROSS NET
----------- ---------
<S> <C> <C>
DEVELOPMENT WELLS:
Productive.................................... 23 16.04
Non-productive................................ - -
--
---------
Total....................................... 23 16.04
--
--
---------
---------
EXPLORATORY WELLS:
Productive.................................... 2 .75
Non-productive................................ - -
--
---------
Total....................................... 2 .75
--
--
---------
---------
</TABLE>
55
<PAGE>
OIL AND GAS RESERVES
The following table summarizes the estimates of the Company's net proved
reserves and the related PV-10 of such reserves at the dates shown. Ryder Scott
Company Petroleum Engineers ("Ryder Scott") prepared the reserve and present
value data with respect to the Company's oil and gas properties which
represented 72% of the PV-10 at December 31, 1997 and Worland Field properties
which represented 77% of the PV-10 of the Worland Field properties at the same
date. The Company prepared the reserve and present value data on all other
Company and Worland Field properties.
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------------------
PRO FORMA
1995 1996 1997 1997(1)
------------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
RESERVE DATA:
Proved developed reserves:
Oil (MBbls)............................................... 12,627 15,265 19,411 30,819
Natural gas (MMcf)........................................ 52,588 49,082 47,676 60,394
Total (MBoe)............................................ 21,392 23,445 27,357 40,885
Proved undeveloped reserves:
Oil (MBbls)............................................... 4,874 4,227 5,308 21,148
Natural gas (MMcf)........................................ 2,232 1,453 1,702 17,454
Total (MBoe)............................................ 5,246 4,469 5,592 24,057
Total proved reserves:
Oil (MBbls)............................................... 17,501 19,492 24,719 51,967
Natural gas (MMcf)........................................ 54,820 50,535 49,378 77,848
Total (MBoe)............................................ 26,638 27,915 32,949 64,942
PV-10(2)(3)(4).............................................. $ 206,650 $ 258,278 $ 241,625 $ 267,016
</TABLE>
- --------------------------
(1) Pro forma to reflect the Worland Field Acquisition as if it had occurred on
December 31, 1997.
(2) PV-10 represents the present value of estimated future net cash flows before
income tax discounted at 10% using prices in effect at the end of the
respective periods presented and including the effects of hedging
activities. In accordance with applicable requirements of the Commission,
estimates of the Company's proved reserves and future net cash flows are
made using oil and gas sales prices estimated to be in effect as of the date
of such reserve estimates and are held constant throughout the life of the
properties (except to the extent a contract specifically provides for
escalation). The prices used in calculating PV-10 as of December 31, 1997
were $18.06 per Bbl of oil and $2.25 per Mcf of natural gas. The average
prices used in calculating the pro forma PV-10 as of December 31, 1997 were
$14.59 per Bbl of oil and $2.07 per Mcf of natural gas. Average prices as of
September 30, 1998 were $12.95 per Bbl of oil and $1.66 per Mcf of natural
gas. These prices, if applied to estimated proved reserves of the Company as
of December 31, 1997, would result in a PV-10, on a pro forma basis, of
$208.7 million at such date, as estimated by the Company.
(3) In 1996, the Company changed its fiscal year-end from May 31 to December 31.
Because reports on a December 31 year-end basis prior to 1996 were not
available, information as of December 31, 1995 was determined from the
Company's production, drilling, acquisition and sale data as applied to its
December 31, 1996 reserve report.
(4) At December 31, 1997, the standardized measure of discounted future net cash
flows attributable to the Company's proved oil and gas reserves and those
acquired in the Worland Field Acquisition, and on a pro forma basis to give
effect to the Worland Field Acquisition, are as follows:
<TABLE>
<CAPTION>
STANDARDIZED MEASURE OF
FUTURE CASH FLOWS
------------------------
(IN THOUSANDS OF
DOLLARS)
<S> <C>
Continental Resources, Inc. And Subsidiary............................ $ 241,625
Worland Field Acquisition............................................. 25,391
--------
Pro Forma Combined Standardized Measure of Future Cash Flows.......... $ 267,016
</TABLE>
See Note 8 to the Company's Consolidated Financial Statement and Note 2 to
the Statements of Revenues and Direct Operating Expenses of Oil and Gas
Properties Initiated in the Purchase Agreement between Continental
Resources, Inc. and Bass Enterprises Production Co.
56
<PAGE>
Estimated quantities of proved reserves and future net cash flows therefrom
are affected by oil and gas prices, which have fluctuated widely in recent
years. There are numerous uncertainties inherent in estimating oil and gas
reserves and their values, including many factors beyond the control of the
producer. The reserve data set forth in this Prospectus represent only
estimates. Reservoir engineering is a subjective process of estimating
underground accumulations of oil and gas that cannot be measured in an exact
manner. The accuracy of any reserve estimate is a function of the quality of
available data and of engineering and geological interpretation and judgment. As
a result, estimates of different engineers, including those used by the Company,
may vary. In addition, estimates of reserves are subject to revision based upon
actual production, results of future development and exploration activities,
prevailing oil and gas prices, operating costs and other factors, which
revisions may be material. Accordingly, reserve estimates are often different
from the quantities of oil and gas that are ultimately recovered. The
meaningfulness of such estimates is highly dependent upon the accuracy of the
assumptions upon which they are based.
In general, the volume of production from oil and gas properties declines as
reserves are depleted. Except to the extent the Company acquires properties
containing proved reserves or conducts successful exploitation and development
activities, the proved reserves of the Company will decline as reserves are
produced. The Company's future oil and gas production is, therefore, highly
dependent upon its level of success in finding or acquiring additional reserves.
See "Risk Factors--Replacement of Reserves" and "--Uncertainty of Estimates of
Oil and Gas Reserves and Future Net Cash Flows."
GAS GATHERING SYSTEMS
The Company's gas gathering systems are owned by CGI. Natural gas and
casinghead gas are purchased at the wellhead primarily under either
market-sensitive percent-of-proceeds-index contracts or keep-whole gas purchase
contracts. Under percent-of-proceeds-index contracts, CGI receives a fixed
percentage of the monthly index posted price for natural gas and a fixed
percentage of the resale price for natural gas liquids. CGI generally receives
between 20% and 30% of the posted index price for natural gas sales and from 20%
to 30% of the proceeds received from natural gas liquids sales. Under keep-whole
gas purchase contracts, CGI retains all natural gas liquids recovered by its
processing facilities and keeps the producers whole by returning to the
producers at the tailgate of its plants an amount of residue gas equal on a BTU
basis to the natural gas received at the plant inlet. The keep-whole component
of the contract permits the Company to benefit when the value of natural gas
liquids is greater as a liquid than as a portion of the residue gas stream.
OIL AND GAS MARKETING
The Company's oil and gas production is sold primarily under market
sensitive or spot price contracts. The Company sells substantially all of its
casinghead gas to purchasers under varying percentage-of-proceeds contracts. By
the terms of these contracts, the Company receives a fixed percentage of the
resale price received by the purchaser for sales of natural gas and natural gas
liquids recovered after gathering and processing the Company's gas. The Company
normally receives between 80% and 100% of the proceeds from natural gas sales
and from 80% to 100% of the proceeds from natural gas liquids sales received by
the Company's purchasers when the products are resold. The natural gas and
natural gas liquids sold by these purchasers are sold primarily based on spot
market prices. The revenues received by the Company from the sale of natural gas
liquids is included in natural gas sales. As a result of the natural gas liquids
contained in the Company's production, the Company has historically improved its
price realization on its natural gas sales as compared to Henry Hub or other
natural gas price indexes. For the year ended December 31, 1997, purchases of
the Company's natural gas production by GPM Gas Corporation, Warren NGL, Inc.,
and Oklahoma Natural Gas Company accounted for 14.7%, 12.7% and 12.6% of the
Company's total gas sales for such period, respectively. For the year ended
December 31, 1997, purchases of the Company's oil production by Koch Oil Company
and Sun Oil Company accounted
57
<PAGE>
for 74.2% and 10.0% of the Company's total oil sales for such period. Due to the
availability of other markets, the Company does not believe that the loss of
Koch Oil Company or any other crude oil or gas customer would have a material
adverse effect on the Company's results of operations.
Periodically the Company utilizes various hedging strategies to hedge the
price of a portion of its future oil and gas production. The Company does not
establish hedges in excess of its expected production. These strategies
customarily emphasize forward-sale, fixed-price contracts for physical delivery
of a specified quantity of production or swap arrangements that establish an
index-related price above which the Company pays the hedging partner and below
which the Company is paid by the hedging partner. These contracts allow the
Company to predict with greater certainty the effective oil and gas prices to be
received for its hedged production and benefit the Company when market prices
are less than the fixed prices provided in its forward-sale contracts. However,
the Company does not benefit from market prices that are higher than the fixed
prices in such contracts for its hedged production. As of June 30, 1998, no
forward-sale contracts were in place with respect to the Company's future
production of oil or natural gas. The Company plans to reduce its hedging
transactions. In August 1998, the Company began engaging in oil trading
arrangements as part of its oil marketing activities. Under these arrangements,
the Company contracts to purchase oil from one source and to sell oil to an
unrelated purchaser, usually at disparate prices. The Company realized gains on
these arrangements, determined before $.1 million of transportation costs and
related expenses, of $1.6 million for July, $1.2 million in August and $.8
million for September 1998. The Company's policy is to limit its exposure from
open positions to $1 million at any one time.
EMPLOYEES
As of August 31, 1998, the Company employed 196 people, 77 of which were
administrative personnel, 14 of which were geological personnel, 11 of which
were engineers and the remainder were field personnel. The Company's future
success will depend partially on its ability to attract, retain and motivate
qualified personnel. The Company is not a party to any collective bargaining
agreements and has not experienced any strikes or work stoppages. The Company
considers its relations with its employees to be satisfactory.
COMPETITION
The oil and gas industry is highly competitive. The Company competes for the
acquisition of oil and gas properties, primarily on the basis of the price to be
paid for such properties, with numerous entities including major oil companies,
other independent oil and gas concerns and individual producers and operators.
Many of these competitors are large, well established companies and have
financial and other resources substantially greater than those of the Company.
The Company's ability to acquire additional oil and gas properties and to
discover reserves in the future will depend upon its ability to evaluate and
select suitable properties and to consummate transactions in a highly
competitive environment.
LEGAL PROCEEDINGS
From time to time, the Company is party to litigation or other legal
proceedings that it considers to be a part of the ordinary course of its
business. The Company is not involved in any legal proceedings nor is it party
to any pending or threatened claims that could reasonably be expected to have a
material adverse effect on its financial condition or results of operations.
However, the Company is engaged in litigation with Burlington with respect to
the agreement to exchange interests in the Cedar Hills Field. See "--Rocky
Mountains."
REGULATION
GENERAL. Various aspects of the Company's oil and gas operations are
subject to extensive and continually changing regulation, as legislation
affecting the oil and gas industry is under constant review for
58
<PAGE>
amendment or expansion. Numerous departments and agencies, both federal and
state, are authorized by statute to issue, and have issued, rules and
regulations binding upon the oil and gas industry and its individual members.
REGULATION OF SALES AND TRANSPORTATION OF NATURAL GAS. The Federal Energy
Regulatory Commission (the "FERC") regulates the transportation and sale for
resale of natural gas in interstate commerce pursuant to the Natural Gas Act of
1938 and the Natural Gas Policy Act of 1978. In the past, the federal government
has regulated the prices at which oil and gas could be sold. While sales by
producers of natural gas and all sales of crude oil, condensate and natural gas
liquids can currently be made at uncontrolled market prices, Congress could
reenact price controls in the future. The Company's sales of natural gas are
affected by the availability, terms and cost of transportation. The price and
terms for access to pipeline transportation are subject to extensive regulation
and proposed regulation designed to increase competition within the natural gas
industry, to remove various barriers and practices that historically limited
non-pipeline natural gas sellers, including producers, from effectively
competing with interstate pipelines for sales to local distribution companies
and large industrial and commercial customers and to establish the rates
interstate pipelines may charge for their services. Similarly, the Oklahoma
Corporation Commission and the Texas Railroad Commission have been reviewing
changes to their regulations governing transportation and gathering services
provided by intrastate pipelines and gatherers. While the changes being
considered by these federal and state regulators would affect the Company only
indirectly, they are intended to further enhance competition in natural gas
markets. The Company cannot predict what further action the FERC or state
regulators will take on these matters, however, the Company does not believe
that any actions taken will have an effect materially different than the effect
on other natural gas producers with which it competes.
Additional proposals and proceedings that might affect the natural gas
industry are pending before Congress, the FERC, state commissions and the
courts. The natural gas industry historically has been very heavily regulated;
therefore, there is no assurance that the less stringent regulatory approach
recently pursued by the FERC and Congress will continue.
OIL PRICE CONTROLS AND TRANSPORTATION RATES. Sales of crude oil, condensate
and gas liquids by the Company are not currently regulated and are made at
market prices. The price the Company receives from the sale of these products
may be affected by the cost of transporting the products to market.
ENVIRONMENTAL. Extensive federal, state and local laws regulating the
discharge of materials into the environment or otherwise relating to the
protection of the environment affect the Company's oil and gas operations.
Numerous governmental departments issue rules and regulations to implement and
enforce such laws, which are often difficult and costly to comply with and which
carry substantial civil and even criminal penalties for failure to comply. Some
laws, rules and regulations relating to protection of the environment may, in
certain circumstances, impose strict liability for environmental contamination,
rendering a person or entity liable for environmental damages and cleanup costs
without regard to negligence or fault on the part of such person or entity.
Other laws, rules and regulations may restrict the rate of oil and gas
production below the rate that would otherwise exist or even prohibit
exploration and production activities in sensitive areas. In addition, state
laws often require various forms of remedial action to prevent pollution, such
as closure of inactive pits and plugging of abandoned wells. The regulatory
burden on the oil and gas industry increases the Company's cost of doing
business and consequently affects the Company's profitability. The Company
believes that it is in substantial compliance with current applicable
environmental laws and regulations and that continued compliance with existing
requirements will not have a material adverse impact on the Company's
operations. However, environmental laws and regulations have been subject to
frequent changes over the years, and the imposition of more stringent
requirements could have a material adverse effect upon the capital expenditures
or competitive position of the Company.
59
<PAGE>
The Company currently owns or leases, and has in the past owned or leased,
numerous properties that have been used for the exploration and production of
oil and gas and for other uses associated with the oil and gas industry.
Although the Company followed operating and disposal practices that it
considered appropriate under applicable laws and regulations, hydrocarbons or
other wastes may have been disposed of or released on or under the properties
owned or leased by the Company or on or under other locations where such wastes
were taken for disposal. In addition, the Company owns or leases properties that
have been operated by third parties in the past. The Company could incur
liability under the Comprehensive Environmental Response, Compensation and
Liability Act or comparable state statutes for contamination caused by wastes it
generated or for contamination existing on properties it owns or leases, even if
the contamination was caused by the waste disposal practices of the prior owners
or operators of the properties. In addition, it is not uncommon for landowners
and other third parties to file claims for personal injury and property damage
allegedly caused by the release of produced fluids or other pollutants into the
environment.
The Federal Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976 ("RCRA"), regulates the generation,
transportation, storage, treatment and disposal of hazardous wastes and can
require cleanup of hazardous waste disposal sites. RCRA currently excludes
drilling fluids, produced waters and certain other wastes associated with the
exploration, development or production of oil and gas from regulation as
"hazardous waste." A similar exemption is contained in many of the state
counterparts to RCRA. Disposal of such oil and gas exploration, development and
production wastes usually is regulated by state law. Other wastes handled at
exploration and production sites or used in the course of providing well
services may not fall within this exclusion. Moreover, stricter standards for
waste handling and disposal may be imposed on the oil and gas industry in the
future. From time to time legislation has been proposed in Congress that would
revoke or alter the current exclusion of exploration, development and production
wastes from the RCRA definition of "hazardous wastes" thereby potentially
subjecting such wastes to more stringent handling and disposal requirements. If
such legislation were enacted, or if changes to applicable state regulations
required the wastes to be managed as hazardous wastes, it could have a
significant impact on the operating costs of the Company, as well as the oil and
gas industry in general.
The Company's operations are also subject to the Clean Air Act (the "CAA")
and comparable state and local requirements. Amendments to the CAA were adopted
in 1990 and contain provisions that may result in the gradual imposition of
certain pollution control requirements with respect to air emissions from
operations of the Company. The Company may be required to incur certain capital
expenditures in the next several years for air pollution control equipment in
connection with obtaining and maintaining operating permits and approvals for
air emissions. However, the Company believes its operations will not be
materially adversely affected by any such requirements, and the requirements are
not expected to be any more burdensome to the Company than to other similarly
situated companies involved in oil and gas exploration and production activities
or well servicing activities.
The Federal Water Pollution Control Act of 1972 (the "FWPCA") imposes
restrictions and strict controls regarding the discharge of wastes, including
produced waters and other oil and gas wastes, into navigable waters. These
controls have become more stringent over the years, and it is probable that
additional restrictions will be imposed in the future. Permits must be obtained
to discharge pollutants into state and federal waters. The FWPCA provides for
civil, criminal and administrative penalties for unauthorized discharges of oil
and other hazardous substances and imposes substantial potential liability for
the costs of removal or remediation. State laws governing discharges to water
also provide varying civil, criminal and administrative penalties and impose
liabilities in the case of a discharge of petroleum or its derivatives, or other
hazardous substances, into state waters. In addition, the Environmental
Protection Agency has promulgated regulations that require many oil and gas
production sites, as well as other facilities, to obtain permits to discharge
storm water runoff. The Company believes that compliance with
60
<PAGE>
existing requirements under the FWPCA and comparable state statutes will not
have a material adverse effect on the Company's financial condition or results
of operations.
REGULATION OF OIL AND GAS EXPLORATION AND PRODUCTION. Exploration and
production operations of the Company are subject to various types of regulation
at the federal, state and local levels. Such regulations include requiring
permits and drilling bonds for the drilling of wells, regulating the location of
wells, the method of drilling and casing wells, and the surface use and
restoration of properties upon which wells are drilled. Many states also have
statutes or regulations addressing conservation matters, including provisions
for the utilization or pooling of oil and gas properties, the establishment of
maximum rates of production from oil and gas wells and the regulation of
spacing, plugging and abandonment of such wells. Some state statutes limit the
rate at which oil and gas can be produced from the Company's properties. See
"Risk Factors--Laws and Regulations; Environmental Risk."
TITLE TO PROPERTIES
The Company believes it has satisfactory title to all of its properties in
accordance with standards generally accepted in the oil and gas industry. As is
customary in the oil and gas industry, the Company makes only a cursory review
of title to farmout acreage and to undeveloped oil and gas leases upon execution
of any contracts. Prior to the commencement of drilling operations, a title
examination is conducted and curative work is performed with respect to
significant defects. To the extent title opinions or other investigations
reflect title defects, the Company, rather than the seller of the undeveloped
property, is typically responsible to cure any such title defects at its
expense. If the Company were unable to remedy or cure any title defect of a
nature such that it would not be prudent to commence drilling operations on the
property, the Company could suffer a loss of its entire investment in the
property. The Company has obtained title opinions on substantially all of its
producing properties. Prior to completing an acquisition of producing oil and
gas leases, the Company performs a title review on a material portion of the
leases. The Company's oil and gas properties are subject to customary royalty
interests, liens for current taxes and other burdens that the Company believes
do not materially interfere with the use of or affect the value of such
properties.
61
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth names, ages and titles of the directors and
executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------- --- --------------------------------------------------------------------------
<S> <C> <C>
Harold Hamm(1)(2).............. 52 Chairman of the Board of Directors, President, Chief Executive Officer and
Director
Jack Stark(1)(3)............... 43 Senior Vice President--Exploration and Director
Jeff Hume(1)(4)................ 48 Senior Vice President--Drilling Operations and Director
Randy Moeder(1)(2)............. 39 Senior Vice President, General Counsel, Secretary and Director
Roger Clement(1)(3)............ 53 Senior Vice President, Chief Financial Officer, Treasurer and Director
Tom Luttrell................... 40 Senior Vice President--Land
Jeff White..................... 32 Senior Vice President--Business Development
</TABLE>
- --------------------------
(1) Member of the Executive, Compensation and Audit Committees.
(2) Term expires in 2001.
(3) Term expires in 2000.
(4) Term expires in 1999.
HAROLD HAMM, LL.M. has been President and Chief Executive Officer and a
Director of the Company since its inception in 1967. Mr. Hamm has served as
President of the Oklahoma Independent Petroleum Association Wildcatter's Club
since 1989. Mr. Hamm was the founder and is Chairman of the Oklahoma Natural Gas
Industry Task Force. Mr. Hamm has served as a member of the Interstate of Oil
and Gas Compact Commission and is a founding board member of the Oklahoma Energy
Resources Board. Mr. Hamm was named the 1992 Oklahoma Independent Petroleum
Association Member of the Year. Mr. Hamm serves on the Tax Steering Committee of
the Independent Petroleum Association of America and is a director of the Rocky
Mountain Oil and Gas Association.
JACK STARK joined the Company as Vice President of Exploration in June 1992
and was promoted to Senior Vice President in May 1998. Mr. Stark has been a
Director of the Company since September 1996. He holds a Masters degree in
Geology from Colorado State University and has 20 years of exploration
experience in the Mid-Continent, Gulf Coast and Rocky Mountain regions. Prior to
joining the Company, Mr. Stark was the exploration manager for the Western
Mid-Continent Region for Pacific Enterprises from August 1988 to June 1992. From
1978 to 1988, he held various staff and middle management positions with Cities
Service Co. and TXO Production Corp. Mr. Stark is a member of the American
Association of Petroleum Geologists, Oklahoma Independent Petroleum Association,
Rocky Mountain Association of Geologists, Houston Geological Society and
Oklahoma Geological Society.
JEFF HUME has been Vice President of Drilling Operations and a Director of
the Company since September 1996 and was promoted to Senior Vice President in
May, 1998. From May 1983 to September 1996, Mr. Hume was Vice President of
Engineering and Operations. Prior to joining the Company, Mr. Hume held various
engineering positions with Sun Oil Company, Monsanto Company and FCD Oil
Corporation. Mr. Hume is a Registered Professional Engineer and member of the
Society of Petroleum Engineers, Oklahoma Independent Petroleum Association, and
the Oklahoma and National Professional Engineering Societies.
RANDY MOEDER has been Vice President, General Counsel and a Director of the
Company since November 1990 and has served as Secretary of the Company since
February 1994 and as President of
62
<PAGE>
Continental Gas, Inc. since January 1995 and was Vice President of Continental
Gas, Inc. from November 1990 to January 1995. Mr. Moeder was promoted to Senior
Vice President of the Company in May, 1998. From January 1988 to summer 1990,
Mr. Moeder was in private law practice. From 1982 to 1988, Mr. Moeder held
various positions with Amoco Corporation. Mr. Moeder is a member of the Oklahoma
Independent Petroleum Association, the Oklahoma and American Bar Associations.
Mr. Moeder is also a Certified Public Accountant.
ROGER CLEMENT became Vice President, Chief Financial Officer and Treasurer
and a Director of the Company in March 1989 and was promoted to Senior Vice
President in May, 1998. Prior to joining the Company, Mr. Clement was a partner
in the accounting firm of Hunter and Clement in Oklahoma City, Oklahoma. Mr.
Clement is a Certified Public Accountant.
TOM LUTTRELL has been Vice President--Land of the Company since February
1997 and was promoted to Senior Vice President in May, 1998. From 1991 to
February 1997, Mr. Luttrell was Senior Landman of the Company. Prior to joining
the Company, Mr. Luttrell served as a landman for Terra Resources, Inc., Pacific
Enterprises Oil & Gas Company and Alexander Energy Corporation, all independent
oil and gas exploration companies. Mr. Luttrell is a member of the American
Association of Petroleum Landmen.
JEFF WHITE has been Vice President--Business Development of the Company
since July 1996 and was promoted to Senior Vice President--Business Development
in May, 1998. From 1993 to July 1996, Mr. White served as Special Assistant to
the Chairman of the Federal Deposit Insurance Corporation and also served as a
Financial Analyst for the Federal Deposit Insurance Corporation. From July, 1990
to December, 1992, Mr. White served as a financial/budget analyst on issues
relating to Resolution Trust Corporation funding. Prior to 1990, Mr. White
served as an analyst to the Banking Committee of the House of Representatives.
COMPOSITION OF BOARD OF DIRECTORS
The Company's Board of Directors presently consists of five directors.
Directors and executive officers of the Company are elected to serve until they
resign or are removed, or are otherwise disqualified to serve, or until their
successors are elected and qualified. Directors of the Company are elected for
one-year terms at the annual meeting of stockholders. Officers of the Company
are appointed at the Board's first meeting after each annual meeting of
stockholders.
DIRECTOR COMPENSATION
Directors receive no additional compensation for services rendered as
directors but are reimbursed for any out-of-pocket expenses incurred in
attending meetings.
EXECUTIVE COMPENSATION
The following table sets forth the cash and non-cash compensation during
1997 earned by the Company's chief executive officer and its other four most
highly compensated executive officers as of December 31, 1997 (the "Named
Executive Officers").
63
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
SECURITIES
ANNUAL COMPENSATION UNDERLYING
--------------------------- OTHER ANNUAL OPTION AWARDS ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) COMPENSATION($)(1) (# OF SHARES) COMPENSATION($)(2)
- ----------------------------- ------------- ------------ ------------------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
Harold Hamm.................. $ 187,506.00 $ -- $ -- -- $ 857.12
Chairman of the Board,
President, and Chief
Executive Officer
Jack Stark................... 116,550.32 10,249.50 -- -- 9,815.92
Senior Vice President--
Exploration
Jeff Hume.................... 113,350.64 10,249.50 -- -- 11,162.12
Senior Vice President--
Operations
Randy Moeder................. 90,743.18 10,436.86 -- -- 18,666.78
Senior Vice President,
General Counsel and
Secretary
Roger Clement................ 89,968.00 9,718.83 -- -- 3,118.72
Senior Vice President,
Chief Financial Officer
and Treasurer
</TABLE>
- ------------------------
(1) Represents the value of perquisites and other personal benefits in excess of
10% of annual salary and bonus for the year ended December 31, 1997, the
Company paid no other annual compensation to its Named Executive Officers.
(2) Represents contributions made by the Company to the accounts of the
executive officer under the Company's profit sharing plan and under the
Company's nonqualified compensation plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Continental does not have a separate compensation committee of its board of
directors. The board of directors sets the compensation for its executive
officers and Harold Hamm, Chairman of the Board and President, is a director and
participates in these deliberations concerning executive officer compensation.
Each of the directors of Continental also serve on the board of directors of
subsidiaries of Continential. As such, each of the directors participates in the
deliberations concerning executive officers' compensation for Continential and
its subsidiaries.
EMPLOYMENT AGREEMENTS
The Company does not have any employment agreeements with its named
Executive Officers.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Set forth below is a description of transactions entered into between the
Company and certain of its officers, directors, employees and stockholders since
January 1, 1995. Certain of these transactions will continue in the future and
may result in conflicts of interest between the Company and such individuals,
and there can be no assurance that conflicts of interest will always be resolved
in favor of the Company.
OIL AND GAS OPERATIONS. In its capacity as operator of certain oil and gas
properties, the Company obtains oilfield services from related companies,
including Hamm & Phillips Service Company, Stride Well Service Company, Oil Tool
Rentals, Inc. and Catworks, Inc. These services include leasehold acquisition,
well location, site construction and other well site services, saltwater
trucking, use of rigs for completion and workover of oil and gas wells and the
rental of oil field tools and equipment. Harold Hamm is the chief executive
officer and principal shareholder of each of these related companies. The
aggregate amounts paid by Continental to these related companies during 1995,
1996, 1997 and during the six months ended June 30, 1998 were $5.9 million, $5.9
million, $11.9 million, and $6.9 million, respectively. The total amount paid to
these affiliated companies, a portion of which is billed to other interest
owners, was approximately $11.9 million in 1997. The services discussed above
were provided at costs and upon terms that management believes are no less
favorable to the Company than could have been obtained from unrelated parties.
In addition, Harold Hamm and certain companies controlled by him own interests
in wells operated by the Company. At December 31, 1997 and June 30, 1998, the
Company owed such persons an aggregate of $200,000 and $100,000, respectively,
representing their shares of oil and gas production sold by the Company.
SHAREHOLDER LOANS AND ADVANCES. In 1997 and 1998, the Company obtained
loans and advances from Harold Hamm and certain of his affiliates. Such loans
and advances were unsecured and were repaid from time to time in varying
amounts, with interest at an annual rate of 8.25%. The maximum aggregate amount
of such loans and advances outstanding at any time during 1997 and during the
six months ended June 30, 1998 was $22.0 million and $ million, respectively.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
OFFICE LEASE. The Company leases office space under operating leases
directly or indirectly from Harold Hamm and Continental Management Company,
L.L.C., a Company owned in part by Harold Hamm. In 1997, the Company paid rents
associated with these leases of approximately $294,000. The Company believes
that the terms of its lease are no less favorable to the Company than those
which would be obtained from unaffiliated parties
PARTICIPATION IN WELLS. Certain officers and directors of the Company have
participated and may participate in the future in wells drilled by the Company.
In 1997, Harold Hamm participated in Company wells on terms similar to those
available to unrelated third parties and was billed an aggregate of $515,000,
for his share of drilling, completion, equipping and operating costs. At
December 31, 1997, the aggregate unpaid balance owed to the Company by such
officers and directors was $4,565, none of which was past due.
WORLAND FIELD. Effective June 1, 1998, the Company sold an undivided 50%
interest in the 70,000 net leasehold acres it acquired in the Worland Field
Acquisition to its principal shareholder, Harold Hamm. The Worland Field sale
did not include inventory and certain items of equipment which the Company had
acquired in the Worland Field Acquisition. The $42.6 million purchase price paid
by Harold Hamm equals the Company's cost basis in such leasehold acres. Harold
Hamm paid $19.3 million of the purchase price in cash and the balance of $23.3
million by the cancellation of indebtedness owed by Harold Hamm to the Company.
Harold Hamm is subject to the applicable unit agreements in place with respect
to his interests in the Worland Field. Harold Hamm intends to sell some or all
of the interests acquired from the Company, although no arrangements,
understandings or agreements for any such sale currently exist.
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PRINCIPAL SHAREHOLDERS
Harold Hamm, Chairman of the Board, President and Chief Executive Officer
and a Director of the Company beneficially owns 44,496 shares (90.7%) of the
Company's outstanding common stock. The remaining 4,545 shares (9.3%) of the
outstanding common stock is beneficially owned by the Harold Hamm Delta Trust,
an irrevocable trust over which Harold Hamm has no voting or investment power.
DESCRIPTION OF CREDIT FACILITY
The following summary of the Credit Facility does not purport to be complete
and is subject to, and qualified in its entirety by reference to, the Credit
Facility. Bank One, Oklahoma, N.A., as agent for the lenders under the Credit
Facility ("Agent"), has consented to the terms of the Indenture and the issuance
of the Notes.
At August 31, 1998, $4.0 million was outstanding under the Credit Facility.
The Credit Facility is payable in full on May 14, 2001. All amounts outstanding
under the Credit Facility are secured by a first lien on substantially all of
the Company's proved oil and gas reserves, wells, systems, plants, related
personal property and contract rights.
INTEREST AND FEES. Amounts advanced under the Credit Facility bear interest
determined with reference to a sliding scale that takes into account the ratio
of the aggregate amount outstanding to the Borrowing Base (as defined in the
Credit Facility). The applicable rate may, at the Company's option, be based
either on the LIBOR rate or the Agent's prime rate. The rates range from the
LIBOR rate plus a margin of 100 to 175 basis points, or the Agent's prime rate
with no margin. The Company pays a non-use fee of 0.1875% to 0.25% per annum on
the amount by which the Borrowing Base exceeds the aggregate amount outstanding,
and an agency fee equal to $50,000 per annum.
BORROWING BASE. The amount of credit available at any time under the Credit
Facility is the lesser of the commitment amount or the Borrowing Base. The
commitment amount, initially, was $175.0 million. Upon completion of the
Offering and application of the net proceeds therefrom, the commitment amount
and the Borrowing Base was reduced to $75.0 million. The Borrowing Base is
redetermined semi-annually by the banks and may be redetermined more frequently
at the request of the Company, the Agent or banks holding 66 2/3% of the
outstanding balance under the Credit Facility. To the extent the amount
outstanding under the Credit Facility exceeds the Borrowing Base, the Company
must either reduce the amount outstanding or furnish additional collateral. At
June 30, 1998, the Borrowing Base was $175.0 million, which was more than the
amount outstanding under the Credit Facility at that date. The next scheduled
Borrowing Base redetermination date will be November 1, 1998.
COVENANTS. The Credit Facility contains customary affirmative and
restrictive covenants which, among other things, require periodic financial and
reserve reporting, require that the Company not allow the ratio of its
indebtedness to tangible net worth to exceed 3.25 to 1 as of the end of any
fiscal quarter, require that the Company not allow its minimum debt service
coverage ratio to be less than 1.2 to 1 as of the end of any fiscal quarter for
the immediately preceding four quarters, maintain a current ratio of at least
1.0 to 1 at the end of any fiscal quarter, and limit the Company and its
Restricted Subsidiaries with respect to indebtedness, liabilities, liens,
dividends, loans, lines of business, transactions with affiliates, changes in
management, investments, amendments to organizational documents, purchases and
sales of assets and speculative trading activities, unless the requisite number
of banks otherwise consent.
EVENTS OF DEFAULT. The Credit Facility contains customary events of
default, including, among other things and subject to applicable grace periods,
payment defaults, material misrepresentations, covenant defaults, certain
bankruptcy events, and judgment defaults. It also is an event of default under
the Credit Facility if any indebtedness of the Company or the Restricted
Subsidiaries in excess of $250,000, including the Notes, is accelerated or if a
change in management occurs.
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DESCRIPTION OF NOTES
GENERAL
The Old Notes were issued pursuant to the Indenture among the Company, the
Subsidiary Guarantors and United States Trust Company of New York, as trustee
(the "Trustee"). The New Notes will be issued under the Indenture, which will be
subject to the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"). As used herein the term "Notes" includes the Old Notes and the New Notes.
The terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act. The Notes are subject
to all such terms, and Holders of the Notes are referred to the Indenture and
the Trust Indenture Act for a statement thereof. The following summary of
certain provisions of the Indenture does not purport to be complete and is
qualified in its entirety by reference to the Indenture, including the
definitions therein of certain terms used below. The definitions of certain
terms used in the following summary are set forth below under "--Certain
Definitions."
The Notes will be general unsecured obligations of the Company and will be
subordinated in right of payment to Senior Debt. The Notes will be guaranteed on
a senior subordinated basis by each Restricted Subsidiary of the Company and any
future Restricted Subsidiary of the Company. The obligations of the Subsidiary
Guarantors under the Subsidiary Guarantees will be general unsecured obligations
of each of the Subsidiary Guarantors and will be subordinated in right of
payment to all obligations of the Subsidiary Guarantors in respect of Guarantor
Senior Debt. See "--Subsidiary Guarantees" and "Risk Factors-- Subordination of
Notes and Guarantees."
For purposes of this section, the term "Company" means Continental
Resources, Inc. As of the date of the Indenture, all of the Company's
Subsidiaries will be Restricted Subsidiaries. Under certain circumstances,
however, the Company will be able to designate current and future Subsidiaries
as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to
many of the restrictive covenants set forth in the Indenture. See "--Certain
Covenants."
TERMS OF THE NOTES
The Notes are limited in aggregate principal amount to $150 million and will
mature on August 1, 2008. Interest on the Notes will accrue at the rate of
10 1/4% per annum and will be payable semi-annually in arrears on February 1 and
August 1 of each year, commencing February 1, 1999, to Holders of the Notes of
record on the immediately preceding January 15 and July 15. Interest on the
Notes will accrue from the most recent date on which interest has been paid or,
if no interest has been paid, from the date of original issuance.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months. Principal, premium, if any, and interest on the Notes will be
payable at the office or agency of the Company maintained for such purpose
within the City and State of New York or, at the option of the Company, payment
of interest may be made by check mailed to the Holders of the Notes at their
respective addresses set forth in the applicable register of Holders of the
Notes. Until otherwise designated by the Company, the Company's office or agency
in New York will be the office of the Trustee maintained for such purpose. The
Notes will be fully registered as to principal and interest in minimum
denominations of $1,000 and integral multiples of $1,000 in excess thereof.
OPTIONAL REDEMPTION
Except as otherwise described below, the Notes will not be redeemable at the
Company's option prior to August 1, 2003. Thereafter, the Notes will be subject
to redemption at the option of the Company, in whole or in part, upon not less
than 30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest thereon to the
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applicable redemption date, if redeemed during the twelve-month period beginning
on August 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---------------------------------------------------------------------------------- -----------
<S> <C>
2003.............................................................................. 105.125%
2004.............................................................................. 103.417%
2005.............................................................................. 101.708%
2006 and thereafter............................................................... 100.000%
</TABLE>
Prior to August 1, 2001, the Company may, at its option, on any one or more
occasions, redeem up to 35% of the original aggregate principal amount of the
Notes at a redemption price equal to 110.25% of the principal amount thereof,
plus accrued and unpaid interest, if any, thereon to the redemption date, with
all or a portion of the net proceeds of public sales of common stock of the
Company; PROVIDED that at least 65% of the original aggregate principal amount
of the Notes remains outstanding immediately after the occurrence of such
redemption; and PROVIDED, FURTHER, that such redemption shall occur within 60
days of the date of the closing of the related sale of common stock of the
Company.
At any time on or prior to August 1, 2003, the Notes may also be redeemed as
a whole at the option of the Company upon the occurrence of a Change of Control
(but in no event more than 90 days after the occurrence of such Change of
Control) at a redemption price equal to 100% of the principal amount thereof,
plus the Applicable Premium as of, and accrued but unpaid interest, if any, to,
the date of redemption (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date).
SELECTION AND NOTICE
In the case of any partial redemption, selection of the Notes for redemption
will be made by the Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which the Notes are listed, or, if such
other Notes are not so listed, on a pro rata basis, by lot or by such method as
such Trustee shall deem fair and appropriate; PROVIDED that no Note of $1,000 or
less shall be redeemed in part. Notices of redemption shall be mailed by first
class mail at least 30 but not more than 60 days before the redemption date to
each Holder of the Notes to be redeemed at its registered address. If any Note
is to be redeemed in part only, the notice of redemption that relates to such
Note shall state the portion of the principal amount thereof to be redeemed. A
new Note in principal amount equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of the original Note.
On and after the redemption date, interest will cease to accrue on the Notes or
portions of them called for redemption unless the Company defaults in payment of
the redemption price.
RANKING AND SUBORDINATION
The payment of principal of, premium, if any, and interest on the Notes and
any other payment obligations of the Company in respect of the Notes (including
any obligation to repurchase the Notes) will be subordinated in right of
payment, as set forth in the Indenture, to the prior payment in full in cash of
all Senior Debt, whether outstanding on the date of the Indenture or thereafter
incurred.
Upon any payment or distribution of property or securities to creditors of
the Company in a liquidation or dissolution of the Company or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or its property, or in an assignment for the benefit of creditors or any
marshalling of the Company's assets and liabilities, the holders of Senior Debt
will be entitled to receive payment in full of all Obligations due in respect of
such Senior Debt (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Debt, whether or not a
claim for such interest would be allowed in a proceeding) before the Holders of
the Notes will be entitled to receive any payment with respect to the Notes, and
until all Obligations with respect to Senior Debt are
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paid in full, any distribution to which the Holders of the Notes would be
entitled shall be made to the holders of Senior Debt (except that Holders of the
Notes may receive payments made from the trust described under "--Legal
Defeasance and Covenant Defeasance").
The Company also may not make any payment (whether by redemption, purchase,
retirement, defeasance or otherwise) upon or in respect of the Notes (except
from the trust described under "--Legal Defeasance and Covenant Defeasance") if
(i) a default in the payment of the principal of, premium, if any, or interest
on Designated Senior Debt occurs ("payment default") or (ii) any other default
occurs and is continuing with respect to Designated Senior Debt that permits, or
with the giving of notice or passage of time or both (unless cured or waived)
will permit, holders of the Designated Senior Debt as to which such default
relates to accelerate its maturity ("nonpayment default") and (solely with
respect to this clause (ii)) the Trustee receives a notice of such default (a
"Payment Blockage Notice") from the Company or the holders (or their
representative) of any Designated Senior Debt. Cash payments on the Notes shall
be resumed (a) in the case of a payment default, upon the date on which such
default is cured or waived and (b) in case of a nonpayment default, the earlier
of the date on which such nonpayment default is cured or waived or 179 days
after the date on which the applicable Payment Blockage Notice is received,
unless the maturity of any Designated Senior Debt has been accelerated or a
default of the type described in clause (ix) under the caption "Events of
Default and Remedies" has occurred and is continuing. No new period of payment
blockage may be commenced unless and until 360 days have elapsed since the date
of commencement of the payment blockage period resulting from the immediately
prior Payment Blockage Notice. No nonpayment default in respect of Designated
Senior Debt that existed or was continuing on the date of delivery of any
Payment Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice unless such default shall have been cured or
waived for a period of no less than 90 days.
The Indenture further requires that the Company promptly notify holders of
Senior Debt if payment of the Notes is accelerated because of an Event of
Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency of the Company, Holders of the Notes may recover
less ratably than creditors of the Company who are holders of Senior Debt. As of
March 31, 1998, on a pro forma basis, after giving effect to the Worland Field
Acquisition and the related financings and the application of the net proceeds
from the Offering, (i) the principal amount of Senior Debt outstanding would
have been $3.9 million (exclusive of $75 million of unused commitments under the
Credit Facility), (ii) there would have been no Senior Subordinated Debt of the
Company outstanding (exclusive of the Notes) and (iii) the Subsidiary Guarantors
would have had no Indebtedness outstanding other than guarantees of the Credit
Facility and the Subsidiary Guarantees. The Indenture will limit, subject to
certain financial tests, the amount of additional Indebtedness, including Senior
Debt, that the Company and its Subsidiaries can incur. See "--Certain
Covenants-- Incurrence of Indebtedness and Issuance of Disqualified Stock."
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Notes will be jointly, severally
and unconditionally guaranteed by the Company's two wholly owned subsidiaries,
Continental Gas, Inc. and Continental Crude Co., each of which is a Subsidiary
Guarantor, and by any future Restricted Subsidiary of the Company. The
Subsidiary Guarantees will be subordinated to Guarantor Senior Debt of the
Subsidiary Guarantors to the same extent and in the same manner as the Notes are
subordinated to the Senior Debt. As of March 31, 1998, on a pro forma basis
after giving effect to the Worland Field Acquisition and the relating financing
and the Offering, there would have been no Guarantor Senior Debt of Subsidiary
Guarantors outstanding other than the Subsidiary Guarantees and guarantees of
borrowings under the Credit Facility. Although the Indenture contains
limitations on the amount of additional Indebtedness that the Company's
Restricted Subsidiaries may incur, under certain circumstances the amount of
such Indebtedness could be
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substantial and, in any case, such Indebtedness may be Guarantor Senior Debt.
See "--Certain Covenants--Incurrence of Indebtedness and Issuance of
Disqualified Stock" and "--Ranking and Subordination".
The obligations of each Subsidiary Guarantor will be limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor (including, without limitation, any
guarantees in respect of Indebtedness under the Credit Facility) and after
giving effect to any collections from or payments made by or on behalf of any
other Subsidiary Guarantor in respect of the obligations of such other
Subsidiary Guarantor under its Subsidiary Guarantee or pursuant to its
contribution obligations under the Indenture, result in the obligations of such
Subsidiary Guarantor under its Subsidiary Guarantee not constituting a
fraudulent conveyance or fraudulent transfer under federal or state law.
Each Subsidiary Guarantor may consolidate with or merge into or sell its
assets to the Company or another Subsidiary Guarantor without limitation. Each
Subsidiary Guarantor may consolidate with or merge into or sell all or
substantially all its assets to a corporation, partnership or trust other than
the Company or another Subsidiary Guarantor (whether or not affiliated with the
Subsidiary Guarantor). Upon the sale or disposition of a Subsidiary Guarantor
(by merger, consolidation, the sale of its Capital Stock or the sale of all or
substantially all of its assets) to a Person (whether or not an Affiliate of the
Subsidiary Guarantor) which is not a Subsidiary of the Company, which sale or
disposition is otherwise in compliance with the Indenture (including the
covenant described under "--Repurchase at the Option of Holders--Asset Sales"),
such Subsidiary Guarantor will be deemed released from all its obligations under
the Indenture and its Subsidiary Guarantee and such Subsidiary Guarantee will
terminate; PROVIDED, HOWEVER, that any such termination will occur only to the
extent that all obligations in respect of Indebtedness of such Subsidiary
Guarantor under the Credit Facility and all of its guarantees of, and under all
of its pledges of assets or other security interests which secure, any other
Indebtedness of the Company will also terminate upon such release, sale or
transfer.
Any Subsidiary Guarantor that is designated an Unrestricted Subsidiary in
accordance with the terms of the Indenture shall, upon such designation, be
released and relieved of its obligations under its Subsidiary Guarantee and any
Unrestricted Subsidiary whose designation as such is revoked and any newly
formed or newly acquired Subsidiary that becomes a Restricted Subsidiary will be
required to execute a Subsidiary Guarantee in accordance with the terms of the
Indenture.
MANDATORY REDEMPTION
Except as set forth below under "--Repurchase at the Option of Holders," the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of the Notes will,
unless the Company shall have elected to redeem the Notes prior to August 1,
2003 upon a Change of Control as permitted by the third paragraph of "--Optional
Redemption," have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount of the Notes
plus accrued and unpaid interest, if any, thereon to the date of purchase (the
"Change of Control Payment"). Within 30 days following any Change of Control,
the Company will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offer to repurchase the
Notes pursuant to the procedures required by the Indenture and described in such
notice on a date no earlier than 30 days nor later than 60 days from the date
such notice is mailed (the "Change of Control Payment Date").
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On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all the Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the relevant Notes so accepted together with an Officers' Certificate
stating the aggregate principal amount of such Notes or portions thereof being
purchased by the Company. The Paying Agent will promptly mail to each Holder of
the Notes so tendered the Change of Control Payment for such Notes, and the
Trustee will promptly authenticate and mail (or cause to be transferred by book
entry) to each tendering Holder a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered, if any; PROVIDED that each such
new Note will be in a principal amount of $1,000 or an integral multiple
thereof. The Indenture will provide that, prior to complying with the provisions
of this covenant, but in any event within 30 days following a Change of Control,
the Company will either repay all outstanding Senior Debt or obtain the
requisite consents, if any, under all agreements governing outstanding Senior
Debt to permit the repurchase of the Notes required by this covenant. The
Company will publicly announce the results of the Change of Control Offer on or
as soon as practicable after the Change of Control Payment Date.
Except as described above with respect to a Change of Control, the Indenture
will not contain provisions that permit the Holders of the Notes to require that
the Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
The Company will not be required to make a Change of Control Offer if a
third party makes the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements set forth in the Indenture
applicable to a Change of Control Offer made by the Company and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of the Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
In the event that the Company makes an offer to purchase the Notes pursuant
to the provisions of this "--Change of Control" covenant, the Company intends to
comply with any applicable securities laws and regulations, including any
applicable requirements of Section 14(e) of, and Rule 14e-1 under, the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
ASSET SALES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, engage in an Asset Sale unless (i) the Company
or the Restricted Subsidiary, as the case may be, receives consideration at the
time of such Asset Sale at least equal to the fair market value (as determined
in good faith by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee, which determination shall be
conclusive evidence of compliance with this provision) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 85% of the
consideration therefor received by the Company or such Restricted Subsidiary
from such Asset Sale is in the form of cash, Cash Equivalents, properties and
capital assets to be used by the Company or any Restricted Subsidiary in the Oil
and Gas Business or oil and gas properties owned or held by another Person which
are to be used in the Oil and Gas Business of the Company or its Restricted
Subsidiaries, or any combination thereof (collectively the "Cash
Consideration"); PROVIDED that the amount of (x) any liabilities (as shown on
the Company's or such Restricted Subsidiary's most recent balance sheet) of the
Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any guarantee
thereof) that are assumed by the transferee of any such assets pursuant to a
customary novation agreement that releases the Company or such Restricted
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Subsidiary from further liability and (y) any non-cash consideration received by
the Company or any such Restricted Subsidiary from such transferee that are
converted by the Company or such Restricted Subsidiary into cash within 180 days
of closing such Asset Sale, shall be deemed to be cash for purposes of this
provision (to the extent of the cash received); PROVIDED, HOWEVER, that the
Company and its Restricted Subsidiaries may make Asset Sales with a fair market
value not exceeding $10 million in the aggregate in each fiscal year free from
any of the restrictions, requirements or other provisions under this "--Asset
Sales" section.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds, at its option, in any order or
combination, (a) to reduce Senior Debt or Guarantor Senior Debt, (b) to make
Permitted Investments, (c) to make investments in interests in other Oil and Gas
Businesses or (d) to make capital expenditures in respect of the Company's or
its Restricted Subsidiaries' Oil and Gas Business or to purchase long-term
assets that are used or useful in the Oil and Gas Business. Pending the final
application of any such Net Proceeds, the Company may temporarily reduce Senior
Debt that is revolving debt or otherwise invest such Net Proceeds in any manner
that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that
are not applied as provided in the first sentence of this paragraph will (after
the expiration of the periods specified in this paragraph) be deemed to
constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $15 million, the
Company will be required to make an offer to all Holders of the Notes and, to
the extent required by the terms thereof, to all holders or lenders of Pari
Passu Indebtedness (an "Asset Sale Offer") to purchase the maximum principal
amount of the Notes and any such Pari Passu Indebtedness to which the Asset Sale
Offer applies that may be purchased out of the Excess Proceeds, at an offer
price in cash equal to 100% of the principal amount thereof plus accrued and
unpaid interest thereon to the date of purchase, in accordance with the
procedures set forth in the Indenture or the agreements governing the Pari Passu
Indebtedness, as applicable. To the extent that the aggregate principal amount
of the Notes and Pari Passu Indebtedness (or accreted value, as the case may be)
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company may use any remaining Excess Proceeds for general corporate purposes. If
the aggregate principal amount of the Notes surrendered by Holders thereof and
other Pari Passu Indebtedness surrendered by holders or lenders thereof,
collectively, exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes and Pari Passu Indebtedness to be purchased on a pro rata basis, based
on the aggregate principal amount thereof (or accreted value, as the case may
be) surrendered in such Asset Sale Offer. Upon completion of such Asset Sale
Offer, the amount of Excess Proceeds shall be reset at zero.
In the event that the Company makes an offer to purchase the Notes pursuant
to the provisions of this "--Asset Sales" covenant, the Company intends to
comply with any applicable securities laws and regulations, including any
applicable requirements of Section 14(e) of, and Rule 14e-1 under, the Exchange
Act.
The Credit Facility may prohibit the Company from purchasing any Notes and
also provides that certain change of control events with respect to the Company
would constitute a default thereunder. Any future credit agreements or other
agreements relating to Senior Debt to which the Company becomes a party may
contain similar restrictions and provisions. In the event a Change of Control or
Asset Sale Offer occurs at a time when the Company is prohibited from purchasing
the Notes by the terms of the Credit Facility or other agreements relating to
other Senior Debt, the Company could seek the consent of its lenders to the
purchase or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or refinance such
borrowings, the Company may remain prohibited from purchasing the Notes. In such
case, the Company's failure to purchase tendered Notes would constitute an Event
of Default under the Indenture which would, in turn, constitute a default under
the Credit Facility. In such circumstances, the subordination provisions in the
Indenture would likely restrict payments to the Holders of the Notes.
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CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of the Equity
Interests of the Company or any Restricted Subsidiary (including, without
limitation, any payment in connection with any merger or consolidation involving
the Company) to the direct or indirect holders of Equity Interests of the
Company or any Restricted Subsidiary in their capacity as such (other than
dividends or distributions payable in Equity Interests of the Company or a
Restricted Subsidiary (other than Disqualified Stock) and other than dividends
or distributions payable to the Company or a Restricted Subsidiary so long as,
in the case of any dividend or distribution payable on or in respect of any
class or series of securities issued by a Subsidiary other than a Wholly Owned
Restricted Subsidiary, the Company or a Restricted Subsidiary receives at least
its pro rata share of such dividend or distribution in accordance with its
Equity Interests in such class or series of securities); (ii) purchase, redeem
or otherwise acquire or retire for value any Equity Interests of the Company or
any Subsidiary of the Company that is not a Wholly Owned Restricted Subsidiary
of the Company; (iii) make any principal payment on, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Notes, except at final maturity or as a mandatory or sinking
fund repayment; or (iv) make any Restricted Investment (all such payments and
other actions set forth in clauses (i) through (iv) above being collectively
referred to as "Restricted Payments"), unless, at the time of and after giving
effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described below under the caption "--Incurrence of Indebtedness and Issuance
of Disqualified Stock"; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries
after the date of the Indenture (excluding Restricted Payments permitted by
clauses (1), (3), (4) and (6) of the next succeeding paragraph), is less
than the sum of (i) 50% of the Consolidated Net Income of the Company for
the period (taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the date of the Indenture to the end of the
Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), PLUS (ii) 100% of the aggregate net cash proceeds received by the
Company from the issue or sale since the date of the Indenture of Equity
Interests of the Company or of debt securities of the Company that have been
converted into or exchanged for such Equity Interests (other than Equity
Interests (or convertible debt securities) sold to a Subsidiary of the
Company and other than Disqualified Stock or debt securities that have been
converted into Disqualified Stock), PLUS (iii) to the extent that any
Restricted Investment that was made after the date of the Indenture is sold
for cash or otherwise liquidated or repaid for cash or the receipt of
properties used in the Oil and Gas Business, the lesser of (A) the net cash
proceeds of such sale, liquidation or repayment or the fair market value of
property received in exchange therefor and (B) the amount of such Restricted
Investment, PROVIDED, however, that the foregoing provisions of this
paragraph (c) will not prohibit Restricted Payments in an aggregate amount
not to exceed $15 million.
The foregoing provisions will not prohibit (1) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (2) the redemption, repurchase, retirement or other acquisition of
any Equity
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Interests of the Company in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Subsidiary of the Company) of
other Equity Interests of the Company (other than a sale of Disqualified Stock);
PROVIDED that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement or other acquisition shall be excluded
from clause (c)(ii) of the preceding paragraph; (3) the defeasance, redemption
or repurchase of subordinated Indebtedness with the net cash proceeds from an
incurrence of subordinated Permitted Refinancing Debt or the substantially
concurrent sale (other than to a Subsidiary of the Company) of Equity Interests
(other than Disqualified Stock) of the Company; PROVIDED that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase,
retirement or other acquisition shall be excluded from clause (c)(ii) of the
preceding paragraph; (4) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Company or any Subsidiary of
the Company held by any of the Company's (or any of its Subsidiaries') employees
pursuant to any management equity subscription agreement or stock option
agreement in effect as of the date of the Indenture; PROVIDED that the aggregate
price paid for all such repurchased, redeemed, acquired or retired Equity
Interests shall not exceed $2 million in any twelve-month period; and PROVIDED
FURTHER that no Default or Event of Default shall have occurred and be
continuing immediately after such transaction; (5) repurchases of Equity
Interests deemed to occur upon exercise of stock options if such Equity
Interests represent a portion of the exercise price of such options; (6) the
making of loans by the Company or any of its Restricted Subsidiaries to officers
or directors of the Company; PROVIDED that the aggregate outstanding amount of
such loans shall not exceed, at any time, $2 million plus any such loans
outstanding on the date of the Indenture; and (7) during the period the Company
is subject to Subchapter S of the Internal Revenue Code of 1986, as amended (the
"Code"), and after such period to the extent relating to the liability for such
period, the making of payments or distributions or the payment of dividends in
amounts equal to the amounts required for the Company's stockholders to pay
Federal, state and local income taxes to the extent such income taxes are
attributable to the taxable income of the Company.
The amount of all Restricted Payments (other than cash) shall be the fair
market value (as determined in good faith by a resolution of the Board of
Directors set forth in an Officers' Certificate delivered to the Trustee) on the
date of the Restricted Payment of the asset(s) proposed to be transferred by the
Company or the applicable Restricted Subsidiary, as the case may be, pursuant to
the Restricted Payment. In computing Consolidated Net Income of the Company
under paragraph (c) above, (1) the Company shall use audited financial
statements for the portions of the relevant period for which audited financial
statements are available on the date of determination and unaudited financial
statements and other current financial data based on the books and records of
the Company for the remaining portion of such period and (2) the Company shall
be permitted to rely in good faith on the financial statements and other
financial data derived from the books and records of the Company that are
available on the date of determination.
DESIGNATION OF UNRESTRICTED SUBSIDIARIES
The Board of Directors of the Company may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not cause
a Default. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated will be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under clause (c) of the first paragraph of the covenant
"Restricted Payments." All such outstanding Investments will be deemed to
constitute Investments in an amount equal to the greater of the fair market
value or the book value of such Investments at the time of such designation.
Such designation will only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
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INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness or issue any Disqualified Stock and the Company will not permit any
of its Restricted Subsidiaries to issue any shares of Disqualified Stock to any
Person other than the Company or a Wholly-Owned Restricted Subsidiary of the
Company; PROVIDED, HOWEVER, that the Company and any Subsidiary Guarantor may
incur Indebtedness or issue shares of Disqualified Stock if:
(i) the Fixed Charge Coverage Ratio for the Company's most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have
been at least 2.5 to 1, determined on a pro forma basis as set forth in the
definition of Fixed Charge Coverage Ratio; and
(ii) no Default or Event of Default shall have occurred and be
continuing at the time such additional Indebtedness is incurred or such
Disqualified Stock is issued or would occur as a consequence of the
incurrence of the additional Indebtedness or the issuance of the
Disqualified Stock.
Notwithstanding the foregoing, the Indenture does not prohibit any of the
following (collectively, "Permitted Indebtedness"): (a) the Indebtedness
evidenced by the Notes; (b) the incurrence by the Company or any of its
Restricted Subsidiaries of Indebtedness pursuant to Credit Facilities, so long
as the aggregate principal amount of all Indebtedness outstanding under all
Credit Facilities does not, at any one time, exceed the greater of (i) $175
million and (ii) the Borrowing Base, provided that the Company may incur more
than $175 million of Indebtedness pursuant to Credit Facilities only if the
Fixed Charge Coverage Ratio for the Company's most recently ended four full
fiscal quarters for which internal financial statements are available would have
been at least 2.0 to 1, determined on a pro forma basis as set forth in the
definition of Fixed Charge Coverage Ratio; (c) the guarantee by any Subsidiary
Guarantor of any Indebtedness that is permitted by the Indenture to be incurred
by the Company; (d) all Indebtedness of the Company and its Restricted
Subsidiaries in existence as of the date of the Indenture; (e) intercompany
Indebtedness between or among the Company and any of its Wholly Owned Restricted
Subsidiaries; PROVIDED, HOWEVER, that if the Company is the obligor on such
Indebtedness, (A) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than the Company
or a Wholly Owned Restricted Subsidiary and (B) any sale or other transfer of
any such Indebtedness to a Person that is not either the Company or a Wholly
Owned Restricted Subsidiary shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as
the case may be; (f) Indebtedness in connection with one or more standby letters
of credit, guarantees, performance bonds or other reimbursement obligations, in
each case, issued in the ordinary course of business and not in connection with
the borrowing of money or the obtaining of advances or credit (other than
advances or credit on open account, includible in current liabilities, for goods
and services in the ordinary course of business and on terms and conditions
which are customary in the Oil and Gas Business, and other than the extension of
credit represented by such letter of credit, guarantee or performance bond
itself), not to exceed in the aggregate at any given time 5% of Total Assets;
(g) Indebtedness under Interest Rate Hedging Agreements entered into for the
purpose of limiting interest rate risks, PROVIDED that the obligations under
such agreements are related to payment obligations on Indebtedness otherwise
permitted by the terms of this covenant and that the aggregate notional
principal amount of such agreements does not exceed 105% of the principal amount
of the Indebtedness to which such agreements relate; (h) Indebtedness under Oil
and Gas Hedging Contracts, PROVIDED that such contracts were entered into in the
ordinary course of business for the purpose of limiting risks that arise in the
ordinary course of business of the Company and its Restricted Subsidiaries; (i)
the incurrence by the Company and its Restricted Subsidiaries of Indebtedness
not otherwise permitted to be incurred pursuant
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to this paragraph, PROVIDED that the aggregate principal amount of all
Indebtedness incurred pursuant to this clause (i), together with all Permitted
Refinancing Debt incurred pursuant to clause (j) of this paragraph in respect of
Indebtedness previously incurred pursuant to this clause (i), does not exceed
$20 million at any one time outstanding; (j) Permitted Refinancing Debt incurred
in exchange for, or the net proceeds of which are used to refinance, extend,
renew, replace, defease or refund, Indebtedness that was permitted by the
Indenture to be incurred (including Indebtedness previously incurred pursuant to
this clause (j), but excluding Indebtedness under clauses (b), (e), (f), (g),
(h), (k), (l) and (m)); (k) accounts payable or other obligations of the Company
or any Restricted Subsidiary to trade creditors created or assumed by the
Company or such Restricted Subsidiary in the ordinary course of business in
connection with the obtaining of goods or services; (l) Indebtedness consisting
of obligations in respect of purchase price adjustments, guarantees or
indemnities in connection with the acquisition or disposition of assets; (m)
production imbalances occurring in the ordinary course of business that do not,
at any one time outstanding, exceed 2% of the Total Assets of the Company; (n)
rents and royalties due others incurred in the ordinary course of the Oil and
Gas Business; and (o) Indebtedness of a Subsidiary Guarantor in respect of the
Subsidiary Guarantee of such Subsidiary Guarantor.
The Indenture provides that the Company will not permit any Unrestricted
Subsidiary to incur any Indebtedness other than Non-Recourse Debt; PROVIDED,
HOWEVER, if any such Indebtedness ceases to be Non-Recourse Debt, such event
shall be deemed to constitute an incurrence of Indebtedness by the Company.
NO LAYERING
The Indenture provides that (i) the Company will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Senior Debt and senior in any
respect in right of payment to the Notes and (ii) the Subsidiary Guarantors will
not directly or indirectly incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in right of
payment to Guarantor Senior Debt and senior in any respect in right of payment
to the Subsidiary Guarantees, PROVIDED, HOWEVER, that the foregoing limitations
will not apply to distinctions between categories of Indebtedness that exist by
reason of any Liens arising or created in accordance with the provisions of the
Indenture in respect of some but not all such Indebtedness.
LIENS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, create, incur, assume or otherwise cause or
suffer to exist or become effective any Lien securing Indebtedness of any kind
(other than Permitted Liens) upon any of its property or assets, now owned or
hereafter acquired, unless all payments under the Notes are secured by such Lien
prior to, or on an equal and ratable basis with, the Indebtedness so secured for
so long as such Indebtedness is secured by such Lien.
SALE AND LEASEBACK TRANSACTIONS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, enter into any sale and leaseback transaction;
PROVIDED that the Company or its Restricted Subsidiaries may enter into a sale
and leaseback transaction if (i) the Company could have incurred Indebtedness in
an amount equal to the Attributable Debt relating to such sale and leaseback
transaction pursuant to the test set forth in the first paragraph of the
covenant described above under the caption "Incurrence of Indebtedness and
Issuance of Disqualified Stock" or (ii) the gross cash proceeds of such sale and
leaseback transaction are at least equal to the fair market value (as determined
in good faith by a resolution the Board of Directors set forth in an Officers'
Certificate delivered to the Trustee) of the property that is the subject of
such sale and leaseback transaction and the transfer of assets in such sale
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and leaseback transaction is permitted by, and the Company applies the net
proceeds of such transaction in compliance with, the covenant described above
under the caption "Repurchase at the Option of Holders-- Asset Sales."
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(x) pay dividends or make any
other distributions to the Company or any of the Restricted Subsidiaries of the
Company (1) on its Capital Stock or (2) with respect to any other interest or
participation in, or measured by, its profits, or (y) pay any Indebtedness owed
to the Company or any Restricted Subsidiaries of the Company, (ii) make loans or
advances to the Company or any Restricted Subsidiaries of the Company or (iii)
transfer any of its properties or assets to the Company or any Restricted
Subsidiaries of the Company, except for such encumbrances or restrictions
existing under or by reason of (a) the Credit Facility as in effect as of the
date of the Indenture and any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings thereof or any
other Credit Facility, PROVIDED that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements,
refinancings or other Credit Facilities are no more restrictive with respect to
such dividend and other payment restrictions than those contained in the Credit
Facility as in effect on the date of the Indenture, (b) the Indenture and the
Notes, (c) applicable law, (d) any instrument governing Indebtedness or Capital
Stock of a Person acquired by the Company or any of its Restricted Subsidiaries
as in effect at the time of such acquisition (except, in the case of
Indebtedness, to the extent such Indebtedness was incurred in connection with or
in contemplation of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person and its Subsidiaries, or the property or assets of the Person and its
Subsidiaries, so acquired, PROVIDED that, such Indebtedness or Capital Stock was
permitted by the terms of the Indenture to be incurred, (e) customary
non-assignment provisions in leases entered into in the ordinary course of
business, (f) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in clause
(iii) above on the property so acquired, (g) Permitted Refinancing Debt,
PROVIDED that the restrictions contained in the agreements governing such
Permitted Refinancing Debt are no more restrictive than those contained in the
agreements governing the Indebtedness being refinanced, (h) any other security
agreement, instrument or document relating to Senior Debt hereafter in effect,
provided that such encumbrances or restrictions are customary in connection with
such documents and that the terms and conditions of such encumbrances or
restrictions are no more restrictive than those encumbrances or restrictions
imposed in connection with the Credit Facility, (i) Permitted Liens, (j)
customary provisions in joint venture agreements and other similar agreements
relating to the distribution of revenues from such joint venture or other
business venture, or (k) any agreement relating to a sale and leaseback
transaction or capital lease, but only on the property subject to such
transaction or lease and only to the extent that such restrictions or
encumbrances are customary with respect to a sale and leaseback transaction or
capital lease.
LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES
The Indenture provides that the Company will not sell or otherwise dispose
of any shares of Capital Stock of a Restricted Subsidiary, and shall not permit
any Restricted Subsidiary, directly or indirectly, to issue or sell or otherwise
dispose of any shares of its Capital Stock except (i) to the Company or a Wholly
Owned Restricted Subsidiary, (ii) if, immediately after giving effect to such
issuance, sale or other disposition, such Restricted Subsidiary remains a
Restricted Subsidiary, (iii) shares of nonvoting Capital Stock of Restricted
Subsidiaries may be issued or sold to employees or directors of the Company or
any Subsidiary, or (iv) if all shares of Capital Stock of such Restricted
Subsidiary are sold or otherwise disposed. In connection with any sale or
disposition of Capital Stock of a Restricted Subsidiary, the
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Company will be required to comply with the covenant described under the caption
"Repurchase at the Option of Holders--Asset Sales" above.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture provides that the Company may not consolidate or merge with or
into (whether or not the Company is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets, in one or more related transactions, to another Person,
and the Company may not permit any of its Restricted Subsidiaries to enter into
any such transaction or series of transactions if such transaction or series of
transactions would, in the aggregate, result in a sale, assignment, transfer,
lease, conveyance, or other disposition of all or substantially all of the
properties or assets of the Company to another Person unless (i) the Company is
the surviving corporation or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (the "Surviving Entity") is a corporation organized or existing under the
laws of the United States, any state thereof or the District of Columbia; (ii)
the Surviving Entity (if the Company is not the continuing obligor under the
Indenture) assumes all the obligations of the Company under the Notes and the
Indenture pursuant to a supplemental indenture in a form reasonably satisfactory
to the Trustee; (iii) immediately before and after giving effect to such
transaction or series of transactions no Default or Event of Default exists;
(iv) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (and treating any Indebtedness not previously
an obligation of the Company and its Restricted Subsidiaries which becomes the
obligation of the Company or any of its Restricted Subsidiaries as a result of
such transaction as having been incurred at the time of such transaction or
series of transactions), the Consolidated Net Worth of the Company or the
Surviving Entity (if the Company is not the continuing obligor under the
Indenture) is equal to or greater than the Consolidated Net Worth of the Company
immediately prior to such transaction or series of transactions; and (v) the
Company or the Surviving Entity (if the Company is not the continuing obligor
under the Indenture) will, at the time of such transaction or series of
transactions and after giving pro forma effect thereto as if such transaction or
series of transactions had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the test set forth in the first paragraph of the
covenant described above under the caption "--Incurrence of Indebtedness and
Issuance of Disqualified Stock." Each Subsidiary Guarantor, if any, unless it is
the other party to the transactions described above, shall have confirmed by
supplemental indenture that its Subsidiary Guarantee shall apply to such
Person's obligations under the Indenture and the Notes. Notwithstanding the
restrictions described in the foregoing clauses (iv) and (v), any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to the Company, and any Wholly Owned Restricted Subsidiary
may consolidate with, merge into or transfer all or part of its properties and
assets to another Wholly Owned Restricted Subsidiary.
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any of
its Affiliates (each of the foregoing, an "Affiliate Transaction"), unless (i)
such Affiliate Transaction is on terms that are no less favorable to the Company
or the relevant Restricted Subsidiary than those that would have been obtained
in a comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person and (ii) the Company delivers to the Trustee (a) with respect
to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $1 million but less than or equal
to $5 million, an Officer's Certificate certifying that such Affiliate
Transaction complies with clause (i) above, (b) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving
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aggregate consideration in excess of $5 million but less than or equal to $10
million, a resolution of the Board of Directors set forth in an Officer's
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction has been approved in good faith by a
majority of the members of the Board of Directors who have no financial interest
in such Affiliate Transaction, which resolution shall be conclusive evidence of
compliance with this provision, and (c) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $10 million, an Officer's Certificate as described in
clause (b) above and an opinion as to the fairness to the Company or such
Subsidiary of such Affiliate Transaction from a financial point of view issued
by an accounting, appraisal, engineering or investment banking firm of national
standing (for purposes of this clause (c) such opinion and the resolution
described in clause (b) above shall be conclusive evidence of compliance with
this provision); PROVIDED that the following shall not be deemed Affiliate
Transactions: (1) reasonable fees and compensation paid to (including issuances
and grants of securities and stock options), and employment agreements and stock
option and ownership plans for the benefit of, officers, directors, employees or
consultants of the Company or any Restricted Subsidiary of the Company as
determined in good faith by the Company's Board of Directors or senior
management, (2) transactions contemplated by any employment agreement or other
compensation plan or arrangement entered into by the Company or any of its
Subsidiaries in the ordinary course of business and consistent with past
practice of the Company or such Subsidiary, (3) transactions between or among
the Company and/or its Restricted Subsidiaries, (4) Restricted Payments and
Permitted Investments that are permitted by the provisions of the Indenture
described above under the caption "--Restricted Payments" and the definition of
Permitted Investments, (5) indemnification payments made to officers, directors
and employees of the Company or its Subsidiaries pursuant to charter, by-law,
statutory or contractual provisions, (6) any contracts, agreements and
understandings existing as of the date of the Indenture, and (7) oil and gas
leasehold acquisition, drilling, well servicing and leasehold operations
services provided by or to such Affiliate in the ordinary course of the Oil and
Gas Business on terms that are no less favorable to the Company or the relevant
Restricted Subsidiary than those that would have been obtained in a comparable
transaction by the Company or such Restricted Subsidiary with an unrelated
Person.
ADDITIONAL SUBSIDIARY GUARANTEES
The Indenture provides that if the Company or any of its Restricted
Subsidiaries shall acquire or create another Restricted Subsidiary after the
date of the Indenture, then such newly acquired or created Restricted Subsidiary
will be required to execute a Subsidiary Guarantee in accordance with the terms
of the Indenture.
BUSINESS ACTIVITIES
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any material respect in any business other than the Oil and Gas
Business.
COMMISSION REPORTS
Notwithstanding that the Company is not subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company will file
with the Commission and, within 15 days after such filing, provide the Trustee
and Holders with the annual reports and the information, documents and other
reports which are specified in Sections 13 and 15(d) of the Exchange Act. In the
event that the Company is not permitted to file such reports, documents and
information with the Commission, the Company will provide substantially similar
information to the Trustee and the Holders as if the Company were subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act within 15 days
of the date the Company would have been obligated to file such reports with the
Commission, were the Company permitted to file such reports with the Commission.
The Company also will comply with the other provisions of Section 314(a) of the
Trust Indenture Act.
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EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) a default for 30 consecutive days in the payment when due of
interest on the Notes (whether or not prohibited by the subordination provisions
of the Indenture); (ii) a default in payment when due of the principal of or
premium, if any, on the Notes (whether or not prohibited by the subordination
provisions of the Indenture); (iii) the failure by the Company or a Subsidiary
Guarantor to comply with its obligations under "Certain Covenants--Merger,
Consolidation or Sale of Assets" above; (iv) the failure by the Company for 30
days after notice from the Trustee or the Holders of at least 25% in aggregate
principal amount of the Notes then outstanding to comply with the provisions
described under the captions "Repurchase at the Option of Holders" and "Certain
Covenants" other than the provisions described under "--Merger, Consolidation or
Sale of Assets"; (v) failure by the Company for 60 consecutive days after notice
from the Trustee or the Holders of at least 25% in aggregate principal amount of
the Notes then outstanding to comply with any of its other agreements in the
Indenture or the Notes; (vi) except as permitted by the Indenture, any
Subsidiary Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect or a Subsidiary Guarantor, or any Person acting on behalf of such
Subsidiary Guarantor, shall deny or disaffirm its obligations under its
Subsidiary Guarantee; (vii) a default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the Company or
any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date of the Indenture, which default (a) is
caused by a failure to pay principal of such Indebtedness prior to the
expiration of the grace period provided in such Indebtedness on the date of such
default (a "Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there is then existing a Payment Default or the
maturity of which has been so accelerated, aggregates $10 million or more;
(viii) the failure by the Company or any of its Restricted Subsidiaries to pay
final, non-appealable judgments aggregating in excess of $10 million, which
judgments remain unpaid or discharged for a period of 60 days; and (ix) certain
events of bankruptcy or insolvency with respect to the Company or any of its
Restricted Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in aggregate principal amount of the Notes then outstanding may
declare the principal of and accrued but unpaid interest on such Notes to be due
and payable immediately. Notwithstanding the foregoing, in the case of an Event
of Default arising from certain events of bankruptcy or insolvency, with respect
to the Company or any Restricted Subsidiary, all outstanding Notes will become
due and payable without further action or notice. Holders of the Notes may not
enforce the Indenture or the Notes except as provided in the Indenture. Subject
to certain limitations, Holders of a majority in principal amount of the Notes
then outstanding may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest) if it determines that withholding notice
is in their interest.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest or premium on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required, within
five business days of becoming aware of any Default or Event of Default, to
deliver to the Trustee a statement specifying such Default or Event of Default.
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LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes and have each
Subsidiary Guarantor's, if any, obligation discharged with respect to its
Subsidiary Guarantee ("Legal Defeasance") except for (i) the rights of Holders
of such outstanding Notes to receive payments in respect of the principal of,
premium, if any, or interest on such Notes when such payments are due from the
trust referred to below, (ii) the Company's obligations with respect to such
Notes concerning issuing temporary Notes, registration of such Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payments, (iii) the rights, powers, trusts, duties and immunities of the
Trustee, and the Company's obligations in connection therewith and (iv) the
Legal Defeasance provisions of the Indenture. In addition, the Company may, at
its option and at any time, elect to have the obligations of the Company
released with respect to certain covenants that are described in the Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default. In the event
Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described under
"Events of Default and Remedies" will no longer constitute an Event of Default.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest on the outstanding Notes
on the stated maturity or on the applicable redemption date, as the case may be,
and the Company must specify whether the Notes are being defeased to maturity or
to a particular redemption date; (ii) in the case of Legal Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to such Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred; (iii) in the
case of Covenant Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to such Trustee
confirming that the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred; (iv) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit (other than a Default or
Event of Default resulting from the borrowing of funds to be applied to such
deposit) or insofar as Events of Default from bankruptcy or insolvency events
are concerned, at any time in the period ending on the 91st day after the date
of deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in
a breach or violation of, or constitute a default under, any material agreement
or instrument (other than the Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound; (vi) the Company must have delivered to the Trustee an opinion of counsel
to the effect that after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; (vii) the
Company must deliver to the Trustee an Officers' Certificate stating that the
deposit was not made by the Company with the intent of preferring the Holders of
the Notes over the other creditors of the Company, or with the intent of
defeating, hindering, delaying or defrauding creditors of the Company or others;
and (viii) the Company must deliver to the Trustee an Officers' Certificate and
an opinion of counsel, each stating that
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all conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may, subject to certain restrictions, transfer or exchange Notes in
accordance with the Indenture. The Registrar and the Trustee may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and the Company may require a Holder to pay any taxes and fees
required by law or permitted by the Indenture. The Company is not required to
transfer or exchange any Note selected for redemption. Also, the Company is not
required to transfer or exchange any Note for a period of 15 days before a
selection of the Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture, the
Notes or the Subsidiary Guarantees may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the Notes
then outstanding (including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for, the Notes), and any
existing default or compliance with any provision of the Indenture or the Notes
or the Subsidiary Guarantees may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for the Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of the Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any Note or alter the provisions with respect to the redemption of the Notes
as described above under "Optional Redemption" or "Repurchase at the Option of
Holders", (iii) reduce the rate of or change the time for payment of interest on
any Note, (iv) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in principal
amount of such Notes and a waiver of the payment default that resulted from such
acceleration), (v) make any Note payable in money other than that stated in the
Notes, (vi) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of Holders of the Notes to receive
payments of principal of or premium, if any, or interest on the Notes, (vii)
make any change in the foregoing amendment and waiver provisions or (viii)
except as provided under the third paragraph of "Subsidiary Guarantees" or
"Legal Defeasance and Covenant Defeasance," release a Subsidiary Guarantor, if
any, from its obligations under its Subsidiary Guarantee, if any, or make any
change in a Subsidiary Guaranty, if any, that would adversely affect the
Holders. In addition, any amendment to the provisions of Article 10 of the
Indenture (which relates to subordination) will require the consent of the
Holders of at least 66 2/3% in principal amount of the Notes then outstanding if
such amendment would adversely affect the rights of Holders of such Notes.
However, no amendment may be made to the subordination provisions of the
Indenture that adversely affects the rights of any holder of Senior Debt then
outstanding unless the holders of such Senior Debt (or any group or
representative thereof authorized to give a consent) consents to such change.
Notwithstanding the foregoing, without the consent of any Holder of the
Notes the Company and the Trustee may amend or supplement the Indenture or the
Notes to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes (provided,
however, that the uncertificated Notes are issued in registered form for
purposes of section 163(f) of the Code, or in a manner such that the
uncertificated Notes are described in Section 163(f)(2)(B) of the Code), to
provide for the assumption of the Company's obligations to Holders of the Notes
in the case of a merger or consolidation, to make any change that would provide
any additional rights or benefits to the
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Holders of the Notes or that does not adversely affect the legal rights under
the Indenture of any such Holder, to add Guarantees with respect to the Notes or
to secure the Notes, or to comply with requirements of the Commission in order
to effect or maintain the qualification of the Indenture under the Trust
Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest, it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of the Notes, unless such Holder shall have offered to
such Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
GOVERNING LAW
The Indenture, the Notes and the Subsidiary Guarantees provide that they
will be governed by the laws of the State of New York.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full definition of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or becomes a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.
"APPLICABLE PREMIUM" means, with respect to a Note at the redemption date,
the greater of (i) 1% of the principal amount of such Note and (ii) the excess
of (A) the present value at such time of (1) the redemption price of such Note
at August 1, 2003 (such redemption price being described under "--Optional
Redemption"), PLUS (2) all required interest payments (excluding accrued but
unpaid interest) due on such Note through August 1, 2003, computed using a
discount rate equal to the Treasury Rate plus 50 basis points, over (B) the
then-outstanding principal amount of such Note.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition by
the Company or any of its Restricted Subsidiaries (but excluding the creation of
a Lien) of any assets including, without limitation, by
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way of a sale and leaseback (provided that the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company and its
Subsidiaries taken as a whole will be governed by the provisions of the
Indenture described above under the caption "--Repurchase at the Option of
Holders-- Change of Control" and/or the provisions described above under the
caption "--Certain Covenants-- Merger, Consolidation, or Sale of Assets" and not
by the provisions described above under "--Repurchase at the Option of
Holders--Asset Sales"), and (ii) the issue or sale by the Company or any of its
Restricted Subsidiaries of Equity Interests of any of the Company's Subsidiaries
(including the sale by the Company or a Restricted Subsidiary of Equity
Interests in an Unrestricted Subsidiary), in the case of either clause (i) or
(ii), whether in a single transaction or a series of related transactions (a)
that have a fair market value in excess of $5 million or (b) for Net Proceeds in
excess of $5 million. Notwithstanding the foregoing, the following shall not be
deemed to be Asset Sales: (i) a transfer of assets by the Company to a
Restricted Subsidiary of the Company or by a Restricted Subsidiary of the
Company to the Company or to another Restricted Subsidiary of the Company, (ii)
an issuance of Equity Interests by a Wholly Owned Restricted Subsidiary of the
Company to the Company or to another Wholly Owned Restricted Subsidiary of the
Company, (iii) the making of a Restricted Payment or Permitted Investment that
is permitted by the covenant described above under the caption "--Certain
Covenants--Restricted Payments"; provided that the sale, lease, conveyance or
other disposition by the Company or any of its Restricted Subsidiaries of an
Investment shall be deemed an Asset Sale, (iv) the abandonment, farm-out, lease
or sublease of undeveloped oil and gas properties in the ordinary course of
business, (v) the trade or exchange by the Company or any Restricted Subsidiary
of the Company of any oil and gas property or interest therein owned or held by
the Company or such Restricted Subsidiary for any oil and gas property or
interest therein owned or held by another Person, including any cash or Cash
Equivalents necessary in order to achieve an exchange of equivalent value;
provided that any such cash or Cash Equivalents received by the Company or such
Restricted Subsidiary will be subject to the provisions described in the second
and third paragraphs under "Repurchase at the Option of Holders--Asset Sales,"
which the Board of Directors of the Company determines in good faith by
resolution to be of approximately equivalent value, (vi) the sale or transfer of
hydrocarbons or other mineral products in the ordinary course of business, (vii)
the sale of oil and gas properties in connection with tax credit transactions
complying with Section 29 or any successor or analogous provisions of the
Internal Revenue Code or (viii) the sale or transfer of surplus or obsolete
equipment in the ordinary course of business.
"ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction means, at
the time of determination, the present value (discounted at the rate of interest
implicit in such transaction, determined in accordance with GAAP) of the
obligation of the lessee for net rental payments during the remaining term of
the lease included in such sale and leaseback transaction (including any period
for which such lease has been extended or may, at the option of the lessor, be
extended).
"BORROWING BASE" means, as of any date, the aggregate amount of borrowing
availability as of such date under all Credit Facilities that determines
availability on the basis of a borrowing base or other asset-based calculation.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited), (iv) in the case of a limited liability company or
similar entity, any membership or similar interests therein and (v) any other
interest or participation that confers on a Person the right to receive a share
of the profits and losses of, or distributions of assets of, the issuing Person.
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"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than twelve
months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of twelve months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding twelve months
and overnight bank deposits, in each case with any lender party to any of the
Credit Facilities or with any domestic commercial bank having capital and
surplus in excess of $500 million and a Thompson Bank Watch Rating of "B" or
better, (iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above, (v) commercial paper having a rating of at least P1 from
Moody's Investors Service, Inc. (or its successor) and a rating of at least A1
from Standard & Poor's Rating Group (or its successor) and (vi) investments in
money market or other mutual funds substantially all of whose assets comprise
securities of types described in clauses (ii) through (v) above.
"CHANGE OF CONTROL" means the occurrence of any of the following:
(i) prior to the first public offering of Voting Stock of the Company,
either (x) Permitted Holders cease to be the "beneficial owner(s)" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, of more than 50% of the total voting power of the Voting Stock
of the Company, or (y) Permitted Holders cease to be entitled by voting
power, contract or otherwise to elect or cause the election of directors of
the Company having a majority of the total voting power of the Board or
Directors, in each case, whether as a result of issuance of securities of
the Company, any merger, consolidation, liquidation or dissolution of the
Company, any direct or indirect transfer of securities by any Permitted
Holder or otherwise (for purposes of this clause (i) and clause (ii) below,
Permitted Holders shall be deemed to beneficially own any Voting Stock of an
entity (the "specified entity") held by any other entity (the "parent
entity") so long as the Permitted Holders beneficially own, directly or
indirectly, a majority of the Voting Stock of the parent entity;
(ii) following the first public offering of Voting Stock of the Company,
any "Person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than one or more Permitted Holders, is or becomes the
beneficial owner (as defined in clause (i) above, except that a Person shall
be deemed to have "beneficial ownership" of all shares that any such Person
has the right to acquire within one year), directly or indirectly, of more
than 50% of the Voting Stock of the Company; PROVIDED that the Permitted
Holders beneficially own (as defined in clause (i) above), directly or
indirectly, in the aggregate a lesser percentage of the Voting Stock of the
Company than such other Person and do not have the right or ability by
voting power, contract or otherwise to elect or designate for election a
majority of the Board of Directors;
(iii) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and
its Subsidiaries taken as a whole to any "Person" or group of related
Persons (a "Group"); (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act);
(iv) the adoption of a plan relating to the liquidation or dissolution
of the Company; and
(v) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (together with
any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Company was approved by a
vote of a majority of the directors of the Company then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors then in office.
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"COMMISSION" means the Securities and Exchange Commission.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person and its Restricted Subsidiaries for
such period increased by (i) an amount equal to any extraordinary or
non-recurring loss, and any net loss realized in connection with an Asset Sale
(together with any related provision for taxes) to the extent such losses were
included in computing such Consolidated Net Income, PLUS (ii) provision for
taxes based on income or profits of such Person and its Restricted Subsidiaries
for such period, to the extent that such provision for taxes was included in
computing such Consolidated Net Income, PLUS (iii) consolidated interest expense
of such Person and its Restricted Subsidiaries for such period, whether paid or
accrued (including, without limitation, amortization of original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letters
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Interest Rate Hedging Agreements), to the extent that any such expense was
included in computing such Consolidated Net Income, PLUS (iv) depreciation,
depletion and amortization expenses (including amortization of goodwill and
other intangibles) for such Person and its Restricted Subsidiaries for such
period to the extent that such depreciation, depletion and amortization expenses
were included in computing such Consolidated Net Income, PLUS (v) exploration
expenses for such Person and its Restricted Subsidiaries for such period to the
extent such exploration expenses were included in computing such Consolidated
Net Income, PLUS (vi) costs incurred in connection with acquisitions that would
be eligible for capitalization treatment under GAAP, but have been expensed at
the time of incurrence, PLUS (vii) other non-cash charges (excluding any such
non-cash charge to the extent that it represents an accrual of or reserve for
cash charges in any future period or amortization of a prepaid cash expense that
was paid in a prior period) of such Person and its Restricted Subsidiaries for
such period, including, without limitation, any ceiling limitation writedowns
and non-cash losses or charges to net income resulting from the net change in
value of such Person's mark-to-market portfolio of Oil and Gas Commodity Price
Risk Management Contracts, to the extent that such other non-cash charges were
included in computing such Consolidated Net Income, in each case, on a
consolidated basis and determined in accordance with GAAP. Notwithstanding the
foregoing, the provision for taxes on the income or profits of, and the
depreciation, depletion and amortization and other non-cash charges and expenses
of, a Restricted Subsidiary of the relevant Person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the extent
(and in the same proportion) that the Net Income of such Restricted Subsidiary
was included in calculating the Consolidated Net Income of such Person and only
if a corresponding amount would be permitted at the date of determination to be
dividended to such Person by such Restricted Subsidiary without prior
governmental approval (that has not been obtained), and without direct or
indirect restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Restricted Subsidiary or its stockholders.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
PROVIDED that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded and (iv) the cumulative effect of a change in accounting principles
shall be excluded; provided, however, that for
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purposes of a determination pursuant to the provisions of the covenant described
above under the caption "--Certain Covenants--Restricted Payments", there will
be deducted from the Net Income of the Company and its Restricted Subsidiaries
for such period an amount equal to payments, distributions and dividends paid by
the Company pursuant to clause (7) of the second paragraph of such covenant.
"CONSOLIDATED NET WORTH" means the total of the amounts shown on the balance
sheet of the Company and its consolidated Restricted Subsidiaries, determined on
a consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company ending prior to the taking of any action for the
purpose of which the determination is being made and for which financial
statements are available (but in no event ending more than 135 days prior to the
taking of such action), as (i) the par or stated value of all outstanding
Capital Stock of the Company, plus (ii) paid-in capital or capital surplus
relating to such Capital Stock plus (iii) any retained earnings or earned
surplus less (A) any accumulated deficit (in each case excluding any minority
interest) and (B) any amounts attributable to Disqualified Stock.
"CREDIT FACILITY" means that certain Credit Agreement, dated as of May 14,
1998, among the Company, Bank One, Oklahoma, N.A., as Agent and lender and the
other parties thereto, including any related notes, guarantees, security or
pledge agreements, collateral documents, instruments and agreements executed by
the Company or any Subsidiary of the Company in connection therewith, and in
each case as amended, restated, modified, renewed, increased, supplemented,
refunded, replaced or refinanced, in whole or in part, from time to time,
whether or not with the same or other lenders or agents and whether provided
under the original Credit Facility or any other credit agreement or indenture.
"CREDIT FACILITIES" means, with respect to the Company, one or more debt
facilities (including, without limitation, the Credit Facility) or commercial
paper facilities with banks or other institutional lenders providing for
revolving credit loans, term loans, production payments, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, in each case, as amended, restated, modified, renewed, increased,
supplemented, refunded, replaced or refinanced in whole or in part from time to
time. Indebtedness under Credit Facilities outstanding on the date on which the
Notes are first issued and authenticated under the Indenture (after giving
effect to the use of proceeds thereof) shall be deemed to have been incurred on
such date in reliance on the exception provided by clause (b) of the definition
of Permitted Indebtedness.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"DESIGNATED SENIOR DEBT" means (i) the Credit Facility and (ii) any other
Senior Debt permitted under the Indenture which, at the date of determination,
has an aggregate principal amount outstanding of, or under which, at the date of
determination, the holders thereof are committed to lend up to, at least $10
million and is specifically designated by the Company in the instrument
evidencing or governing such Senior Debt as "Designated Senior Debt" for
purposes of the Indenture.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, is convertible
or is exchangeable for Indebtedness or Disqualified Stock or redeemable at the
option of the holder thereof, in whole or in part, in each case on or prior to
the date that is 91 days after (x) the date on which the Notes mature or (y) the
date on which there are no Notes outstanding.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"FIXED CHARGES" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of original issue discount, non-cash
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interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, imputed interest with respect to Attributable Debt, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to Interest
Rate Hedging Agreements), (ii) the consolidated interest expense of such Person
and its Restricted Subsidiaries that was capitalized during such period, (iii)
any interest expense on Indebtedness of another Person that is guaranteed by
such Person or any of its Restricted Subsidiaries or secured by a Lien on assets
of such Person or any of its Restricted Subsidiaries (whether or not such
guarantee or Lien is called upon) and (iv) the product of (a) all cash dividend
payments (and non-cash dividend payments in the case of a Person that is a
Restricted Subsidiary, unless paid in Equity Interests that are not Disqualified
Stock) on any series of preferred stock of such Person or any of its Restricted
Subsidiaries, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state and
local statutory tax rate of such Person, expressed as a decimal, in each case,
on a consolidated basis and in accordance with GAAP. When calculating the amount
of Fixed Charges, any interest expense attributable to any Person shall be
included in such calculation to the same extent the Net Income of such Person
was included in the calculation of Consolidated Net Income in connection with
calculating the Fixed Charge Coverage Ratio.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Restricted Subsidiaries incurs, assumes, guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues or
redeems preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, guarantee or redemption
of Indebtedness, or such issuance or redemption of preferred stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. In addition, for purposes of making the computation referred to above,
(i) acquisitions that have been made by the referent Person or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the Calculation
Date (including, without limitation, any acquisition to occur on the Calculation
Date) shall be deemed to have occurred on the first day of the four-quarter
reference period and any cost savings or expense reductions attributable at the
time of such computation or to be attributable in the future to such
acquisition, shall be included in such computation, to the extent that such
adjustments would be permitted under Article 11 of Regulation S-X and
Consolidated Cash Flow for such reference period shall be calculated without
giving effect to clause (iii) of the proviso set forth in the definition of
Consolidated Net Income, (ii) the net proceeds of Indebtedness incurred or
Disqualified Stock issued by the referent Person pursuant to the first paragraph
of the covenant described under the caption "Certain Covenants--Incurrence of
Indebtedness and Issuance of Disqualified Stock" during the four-quarter
reference period or subsequent to such reference period and on or prior to the
Calculation Date shall be deemed to have been received by the referent Person or
any of its Restricted Subsidiaries on the first day of the four-quarter
reference period and applied to its intended use on such date, (iii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (iv) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements
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by such other entity as have been approved by a significant segment of the
accounting profession, which are in effect on the Issuance Date.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"GUARANTOR SENIOR DEBT" means any Indebtedness of a Subsidiary Guarantor
permitted to be incurred under the terms of the Indenture, unless the instrument
under which such Indebtedness is incurred expressly provides that it is on a
parity with or subordinated in right of payment to the Subsidiary Guarantee of
such Subsidiary Guarantor, including interest accruing subsequent to the filing
of, or which would have accrued but for the filing of, a petition of bankruptcy,
whether or not such interest is an allowable claim in such bankruptcy
proceeding. Notwithstanding anything to the contrary in the foregoing sentence,
Guarantor Senior Debt will not include (a) any liability for federal, state,
local or other taxes owed or owing by any Subsidiary Guarantor, (b) any
obligation of a Subsidiary Guarantor to the Company or to any other Restricted
Subsidiary of the Company, (c) any accounts payable or trade liabilities of a
Subsidiary Guarantor arising in the ordinary course of business (including
instruments evidencing such liabilities), (d) any Indebtedness of a Subsidiary
Guarantor that is incurred in violation of the Indenture, (e) Indebtedness of a
Subsidiary Guarantor which, when incurred and without respect to any election
under Section 1111(b) of Title 11, United States Code, is without recourse to
such Subsidiary Guarantor, and (f) Indebtedness evidenced by a Subsidiary
Guarantee.
"INDEBTEDNESS" means, with respect to any Person, without duplication, (a)
any indebtedness of such Person, whether or not contingent, (i) in respect of
borrowed money, (ii) evidenced by bonds, notes, debentures or similar
instruments, (iii) evidenced by letters of credit (or reimbursement agreements
in respect thereof) or banker's acceptances, (iv) representing Capital Lease
Obligations, (v) representing the balance deferred and unpaid of the purchase
price of any property, except any such balance that constitutes an accrued
expense or trade payable, (vi) representing any obligations in respect of
Interest Rate Hedging Agreements or Oil and Gas Hedging Contracts, and (vii) in
respect of any production payment, (b) all indebtedness of others secured by a
Lien on any asset of such Person (whether or not such indebtedness is assumed by
such Person), (c) obligations of such Person in respect of production
imbalances, (d) Acquired Debt of such Person, (e) Attributable Debt of such
Person, and (f) to the extent not otherwise included in the foregoing, the
guarantee by such Person of any Indebtedness of any other Person.
The amount of Indebtedness of any Person at any date will be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, on the occurrence of the contingency giving rise to the
obligation, of any contingent obligations described above. The amount of
Indebtedness at any date in respect of (i) Credit Facilities shall be the
outstanding principal amount thereof at such date plus any outstanding letters
of credit (or reimbursement obligations in respect thereof) issued thereunder at
such date and (ii) Interest Rate Hedging Agreements or Oil and Gas Hedging
Contracts at such date shall be an amount equal to the net termination value of
such agreement or arrangement giving rise to such obligation that would be
payable at such time.
"INTEREST RATE HEDGING AGREEMENTS" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations but
excluding trade credit and other ordinary course advances customarily made in
the Oil and Gas Business), advances (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
capital contributions, purchases or other acquisitions for
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consideration of Indebtedness, Equity Interests or other securities, together
with all items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP; PROVIDED that the following shall not
constitute Investments: (i) an acquisition of assets, Equity Interests or other
securities by the Company for consideration consisting of common equity
securities of the Company, (ii) Interest Rate Hedging Agreements entered into in
accordance with the limitations set forth in clause (g) of the second paragraph
of the covenant described under the caption "--Certain Covenants-- Incurrence of
Indebtedness and Issuance of Disqualified Stock," (iii) Oil and Gas Hedging
Agreements entered into in accordance with the limitations set forth in clause
(h) of the second paragraph of the covenant described under the caption
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Disqualified
Stock", (iv) endorsements of negotiable instruments and documents in the
ordinary course of
business, (v) extensions of trade credit on commercially reasonable terms in
accordance with normal trade practices, and (vi) Cash Equivalents, bonds, notes,
debentures or other securities received in compliance with covenants described
under the caption "--Repurchase at the Option of Holders--Asset Sales." If the
Company or any Restricted Subsidiary of the Company sells or otherwise disposes
of any Equity Interests of any direct or indirect Restricted Subsidiary of the
Company such that, after giving effect to any such sale or disposition, such
entity is no longer a Subsidiary of the Company, the Company shall be deemed to
have made an Investment on the date of any such sale or disposition equal to the
fair market value of the Equity Interests of such Subsidiary not sold or
disposed of.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain or loss,
together with any related provision for taxes on such gain or loss, realized in
connection with (a) any Asset Sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions) or (b) the disposition of any
securities by such Person or any of its Restricted Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Restricted
Subsidiaries and (ii) any extraordinary or nonrecurring gain or loss, together
with any related provision for taxes on such extraordinary or nonrecurring gain
or loss.
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale, but excluding cash amounts
placed in escrow, until such amounts are released to the Company), net of the
direct costs relating to such Asset Sale (including, without limitation, legal,
accounting, investment banking and other professional fees and expenses, and
sales commissions) and any relocation expenses incurred as a result thereof,
taxes paid or payable as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing arrangements), amounts
required to be applied to the repayment of Indebtedness (other than Indebtedness
under any Senior Debt) secured by a Lien on the asset or assets that were the
subject of such Asset Sale and any reserve for adjustment in respect of the sale
price of such asset or assets established in accordance with GAAP and any
reserve established for future liabilities.
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"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides any guarantee or credit
support of any kind (including any undertaking, guarantee, indemnity, agreement
or instrument that would constitute Indebtedness), or (b) is directly or
indirectly liable (as guarantor or otherwise); and (ii) no default with respect
to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time, or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) the explicit terms of which provide that there is
no recourse against any of the assets of the Company or its Restricted
Subsidiaries.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OIL AND GAS BUSINESS" means (i) the acquisition, exploration, exploitation,
development, operation and disposition of interests in oil, gas and other
hydrocarbon properties, (ii) the gathering, marketing, distribution, treating,
processing, storage, selling and transporting of any production from such
interests or properties of the Company and its Subsidiaries and the marketing of
oil and gas obtained from unrelated Persons, (iii) any business relating to
exploration for or development, production, treatment, processing, storage,
transportation, gathering or marketing of oil, gas and other minerals and
products produced in association therewith, (iv) any business relating to
oilfield sales and service and (v) any activity that is ancillary to or
necessary or appropriate for the activities described in clauses (i) through
(iv) of this definition.
"OIL AND GAS HEDGING CONTRACTS" means any oil and gas purchase or commodity
price risk management hedging agreement, and other agreement or arrangement,
entered into in the ordinary course of business, in each case, that is designed
to provide protection against oil and gas price fluctuations.
"PARI PASSU INDEBTEDNESS" means Indebtedness that ranks PARI PASSU in right
of payment to the Notes.
"PERMITTED HOLDERS" means (i) any stockholder of the Company on the Issue
Date; (ii) family members or relatives of the persons described in clause (i);
(iii) any trusts created for the benefit of the persons described in clauses (i)
or (ii); (iv) in the event of the incompetence or death of any of the persons
described in clauses (i) or (ii), such person's estate, executor, administrator,
committee or other personal representatives or beneficiaries; and (v) any
Permitted Holder Subsidiary.
"PERMITTED HOLDER SUBSIDIARY" means, with respect to any Permitted Holder,
(i) any corporation more than 50% of the outstanding voting stock of which is
owned, directly or indirectly, by one or more Permitted Holders, or by one or
more other Permitted Holder Subsidiaries of such Permitted Holders, or by one or
more Permitted Holders and one or more other Permitted Holder Subsidiaries of
such Permitted Holders, (ii) any general partnership, limited liability company,
joint venture or similar entity more than 50% of the outstanding partnership,
membership or similar interest of which is owned directly or indirectly, by one
or more Permitted Holders, or by one or more other Permitted Holder Subsidiaries
of such Permitted Holders, or by one or more Permitted Holders and one or more
other Permitted Holder Subsidiaries of such Permitted Holders and (iii) any
limited partnership of which one or more Permitted Holders or any Permitted
Holder Subsidiary of such Permitted Holders is a general partner.
"PERMITTED INDEBTEDNESS" has the meaning given in the covenant described
under the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance
of Disqualified Stock."
"PERMITTED INVESTMENTS" means (a) any Investment in the Company or in a
Restricted Subsidiary of the Company; (b) any Investment in Cash Equivalents;
(c) any Investment by the Company or any Restricted Subsidiary of the Company in
a Person if, as a result of such Investment and any related transactions that at
the time of such Investment are contractually mandated to occur, (i) such Person
becomes a Restricted Subsidiary of the Company or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys all or
substantially all of its assets to, or is liquidated into, the Company or a
Restricted
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Subsidiary of the Company; (d) any Investment made as a result of the receipt of
non-cash portion of the Cash Consideration from an Asset Sale that was made
pursuant to and in compliance with the covenant described above under the
caption "--Repurchase at the Option of Holders--Asset Sales" or not constituting
an Asset Sale by reason of the 5 million threshold contained in the definition
thereof; (e) any Investment by the Company in any Person engaged in the Oil and
Gas Business or assets used in the Oil and Gas Business in exchange for Equity
Interests in the Company (other than Disqualified Stock), (f) shares of Capital
Stock received in connection with any good faith settlement of a bankruptcy
proceeding involving a trade creditor, (g) Interest Rate Hedging Agreements or
Oil and Gas Hedging Contracts; (h) loans and advances to employees in the
ordinary course of business for bona fide business purposes; (i) operating
agreements, joint ventures, partnership agreements, working interests, royalty
interests, mineral leases, processing agreements, farm-out or farm-in
agreements, contracts for the sale, transportation or exchange of oil and
natural gas, unitization agreements, pooling arrangements, area of mutual
interest agreements, production sharing agreements or other similar or customary
agreements, transactions, properties, interests or arrangements, and Investments
and expenditures in connection therewith or pursuant thereto, in each case made
or entered into in the ordinary course of the Oil and Gas Business, excluding
however, Investments in corporations other than any Investment received pursuant
to the Asset Sale provision; and (j) any other Investments in any Person or
Persons not otherwise permitted to be made pursuant to clauses (a)-(i) above,
when taken together with all other Investments made pursuant to this clause (j)
that are at the time outstanding, having an aggregate amount (such amount to be
calculated on a cost basis) not to exceed the greater of (i) $15 million and
(ii) 5% of Total Assets, as calculated at the time of such Investment.
"PERMITTED LIENS" means
(i) Liens securing Indebtedness of a Subsidiary or Liens securing Senior
Debt that is outstanding on the date of issuance of the Notes and Liens
securing Senior Debt that is permitted by the terms of the Indenture to be
incurred;
(ii) Liens in favor of the Company or any Restricted Subsidiary;
(iii) Liens on property existing at the time of acquisition thereof by
the Company or any Subsidiary of the Company and Liens on property or assets
of a Subsidiary existing at the time it became a Subsidiary, provided that
such Lien was not created in contemplation of the acquisition of the
property, and provided further that no such Lien shall extend to any assets
other than the acquired property or the property of the acquired Subsidiary;
(iv) Liens incurred on deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance or other
kinds of social security, or to secure the payment or performance of
tenders, statutory or regulatory obligations, surety or appeal bonds,
performance bonds or other obligations of a like nature incurred in the
ordinary course of business (including lessee or operator obligations under
statutes, governmental regulations or instruments related to the ownership,
exploration and production of oil, gas and minerals on state or federal
lands or waters);
(v) Liens existing on the date of the Indenture;
(vi) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
PROVIDED that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(vii) statutory liens of landlords, mechanics, suppliers, vendors,
warehousemen, carriers or other like Liens arising in the ordinary course of
business;
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(viii) judgment Liens not giving rise to an Event of Default so long as
any appropriate legal proceeding that may have been duly initiated for the
review of such judgment shall not have been finally terminated or the period
within which such proceeding may be initiated shall not have expired;
(ix) Liens on, or related to, properties or assets to secure all or part
of the costs incurred in the ordinary course of the Oil and Gas Business for
the exploration, exploitation, drilling, development, production, gathering,
processing, transportation, marketing, storage or operation thereof;
(x) Liens on pipeline or pipeline facilities that arise under operation
of law;
(xi) Liens arising under operating agreements, joint venture agreements,
partnership agreements, oil and gas leases, farm-out or farm-in agreements,
division orders, contracts for the sale, transportation or exchange of oil
or natural gas, unitization and pooling declarations and agreements, area of
mutual interest agreements and other agreements that are customary in the
Oil and Gas Business;
(xii) Liens reserved in oil and gas mineral leases for bonus or rental
payments and for compliance with the terms of such leases;
(xiii) Liens securing the Notes;
(xiv) Liens constituting survey exceptions, encumbrances, easements, and
reservations of, and rights to others for, rights-of-way, zoning and other
restrictions as to the use of real properties, and minor defects of title
which, in the case of any of the foregoing, do not secure the payment of
borrowed money, and in the aggregate do not materially adversely affect the
value of the assets of the Company and its Restricted Subsidiaries, taken as
a whole, or materially impair the use of such properties for the purposes
for which such properties are held by the Company or such subsidiaries;
(xv) any interest or title of a lessor under any Capital Lease Obligation
or operating lease;
(xvi) Liens resulting from the deposit of funds or evidences of
Indebtedness in trust for the purpose of defeasing Indebtedness of the
Company or any of the Restricted Subsidiaries;
(xvii) Liens securing obligations under Interest Rate Hedging Agreements
or Oil and Gas Commodity Price Risk Management Contracts;
(xviii) Liens upon specific items of inventory or other goods and proceeds
of the Company or any Restricted Subsidiary securing the Company's or such
Restricted Subsidiary's, as the case may be, obligations in respect of
bankers' acceptances issued or created for the account of the Company or
such Restricted Subsidiary, as the case may be, to facilitate the purchase,
shipment or storage of such inventory or other goods;
(xix) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to
such letters of credit and products and proceeds thereof;
(xx) Liens encumbering property or assets under construction arising from
progress or partial payments by a customer of the Company or its Restricted
Subsidiaries relating to such property or assets;
(xxi) Liens encumbering deposits made to secure Obligations arising from
statutory, regulatory, contractual or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and
set-off;
(xxii) Liens securing Purchase Money Debt; provided however that the
related Purchase Money Debt shall not be secured by any property or assets
of the Company or any Restricted Subsidiary other than the property and
assets acquired by the Company with the proceeds of such Purchase Money
Debt;
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(xxiii) Liens on the Capital Stock of Unrestricted Subsidiaries;
(xxiv) Liens to secure any Permitted Refinancing Debt, provided that the
Indebtedness so exchanged, extended, refinanced, renewed, replaced, defeased
or refunded was secured by Liens permitted pursuant to clause (iii) or (v)
of this definition, provided however, that (a) such new Liens shall be
limited to all or part of the same property that secured the original Lien,
plus improvements on the property and (b) the Permitted Refinancing Debt
secured by such Lien at such time is not increased to any amount greater
than the sum of (x) the outstanding principal amount or, if greater, the
committed amount of the Indebtedness secured by Liens described under clause
(iii) or (v) of this definition at the time the original Lien became a Lien
permitted in accordance with the Indenture and (y) an amount necessary to
pay any fees and expenses, including premiums, related to such exchange,
extension, refinancing, renewal, replacement, defeasement or refunding;
(xxv) Liens securing Attributable Debt under any sale and leaseback
transaction permitted by the terms of the Indenture, but only on the
property subject to such sale and leaseback transaction; and
(xxvi) Liens not otherwise permitted by clauses (i) through (xxv) that are
incurred in the ordinary course of business of the Company or any Subsidiary
with respect to obligations that do not exceed $5 million at any one time
outstanding.
"PERMITTED REFINANCING DEBT" means any Indebtedness of the Company or any of
its Restricted Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness (other than Indebtedness incurred under a Credit Facility) of the
Company or any of its Restricted Subsidiaries; PROVIDED that: (i) the principal
amount of such Permitted Refinancing Debt does not exceed the principal amount
of the Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses incurred in connection
therewith (other than increases resulting from the capitalization of interest or
fees)); (ii) such Permitted Refinancing Debt has a final maturity date on or
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes
or the Subsidiary Guarantees, as the case may be, such Permitted Refinancing
Debt has a final maturity date later than the final maturity date of, and is
subordinated in right of payment to, the Notes or the Subsidiary Guarantees, as
the case may be, on terms at least as favorable taken as a whole to the Holders
of the Notes, or the Subsidiary Guarantees, as the case may be, as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness
is incurred either by the Company or by the Restricted Subsidiary who is the
obligor on the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"PURCHASE MONEY DEBT" means Indebtedness incurred in connection with the
purchase by the Company or any of its Subsidiaries of any equipment, real or
personal property, or any other asset, other than Equity Interests of any Person
(i) as to which the obligee expressly waives the provisions of Section 1111 (b)
of Title 11, United States Code; (ii) as to which neither the Company nor any of
its Restricted Subsidiaries (a) provides any guarantee or credit support of any
kind (including any undertaking, guarantee, indemnity, agreement or instrument
that would constitute Indebtedness), or (b) is directly or indirectly liable (as
guarantor or otherwise) other than the pledge of the equipment, real or personal
property or other assets acquired with the proceeds of such Indebtedness; (iii)
no default with respect to which (including any rights that the holders thereof
may have to take enforcement actions against an Unrestricted Subsidiary) would
permit (upon notice, lapse of time, or both) any holder of any other
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Indebtedness of the Company or any of its Restricted Subsidiaries to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity; and (iv) the explicit terms
of which provide that there is no recourse against any of the assets of the
Company or its Restricted Subsidiaries, other than recourse against the
equipment, real or personal property or other assets acquired with the proceeds
of such Indebtedness.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" means any direct or indirect Subsidiary of the
Company that is not an Unrestricted Subsidiary.
"SENIOR DEBT" means (i) Indebtedness of the Company or any Subsidiary of the
Company under or in respect of any Credit Facility, whether for principal,
interest (including interest accruing after the filing of a petition initiating
any proceeding pursuant to any bankruptcy law, whether or not the claim for such
interest is allowed as a claim in such proceeding), reimbursement obligations,
fees, commissions, expenses, indemnities or other amounts, and (ii) any other
Indebtedness permitted under the terms of the Indenture, unless the instrument
under which such Indebtedness is incurred expressly provides that it is on a
parity with or subordinated in right of payment to the Notes. Notwithstanding
anything to the contrary in the foregoing sentence, Senior Debt will not include
(w) any liability for federal, state, local or other taxes owed or owing by the
Company, (x) any Indebtedness of the Company to any of its Subsidiaries or other
Affiliates, (y) any trade payables or (z) any Indebtedness that is incurred in
violation of the Indenture (other than Indebtedness under (i) the Credit
Facility or (ii) any other Credit Facility that is incurred on the basis of a
representation by the Company to the applicable lenders that it is permitted to
incur such Indebtedness under the Indenture).
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock, entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or one or more Subsidiaries
of such Person (or any combination thereof).
"SUBSIDIARY GUARANTEE" means any guarantee of any Subsidiary of the Company
under the Indenture and the Notes in accordance with the provisions of the
Indenture.
"SUBSIDIARY GUARANTORS" means each Restricted Subsidiary of the Company
existing on the date of the Indenture (such Subsidiaries being Continental Gas,
Inc. and Continental Crude Co.), and any future Restricted Subsidiary of the
Company that executes a Subsidiary Guarantee in accordance with the provisions
of the Indenture, and, in each case, their respective successors and assigns.
"TOTAL ASSETS" means, with respect to any Person, the total consolidated
assets of such Person and its Restricted Subsidiaries, as shown on the most
recent balance sheet of such Person.
"TREASURY RATE" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519) which
has become publicly available at least two Business Days prior to the redemption
date (or, if such Statistical Release is no longer published, any publicly
available source or similar market data)) most nearly equal to the period from
the redemption date to August 1, 2003; PROVIDED that if the period from the
redemption date to August 1, 2003 is not equal to the constant maturity of a
United States Treasury security for which a weekly average yield is given, the
Treasury Rate shall be obtained by linear interpolation (calculated to the
nearest one-twelfth of a year) from the weekly average yields of United States
Treasury securities for which such yields are given, except that if the period
from
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the redemption date to August 1, 2003 is less than one year, the weekly average
yield on actually traded United States Treasury securities adjusted to a
constant maturity of one year shall be used.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company which at
the time of determination shall be an Unrestricted Subsidiary (as designated by
the Board of Directors of the Company, as provided below) and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Company
may designate any Subsidiary of the Company (including any newly acquired or
newly formed Subsidiary or a Person becoming a Subsidiary through merger or
consolidation or Investment therein) to be an Unrestricted Subsidiary only if
(a) such Subsidiary does not own any Capital Stock of, or own or hold any Lien
on any property of, any other Subsidiary of the Company which is not a
Subsidiary of the Subsidiary to be so designated or otherwise an Unrestricted
Subsidiary; (b) all the Indebtedness of such Subsidiary shall, at the date of
designation, and will at all times thereafter, consist of Non-Recourse Debt; (c)
the Company certifies that such designation complies with the limitations of the
"Restricted Payments" covenant; (d) such Subsidiary, either alone or in the
aggregate with all other Unrestricted Subsidiaries, does not operate, directly
or indirectly, all or substantially all of the business of the Company and its
Subsidiaries; (e) such Subsidiary does not, directly or indirectly, own any
Indebtedness of or Equity Interest in, and has no investments in, the Company or
any Restricted Subsidiary; (f) such Subsidiary is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation to maintain or preserve such Person's financial condition or
to cause such Person to achieve any specified levels of operating results; and
(g) on the date such Subsidiary is designated an Unrestricted Subsidiary, such
Subsidiary is not a party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary with terms
substantially less favorable to the Company or such Restricted Subsidiary than
those that might have been obtained from Persons who are not Affiliates of the
Company. Any such designation by the Board of Directors of the Company shall be
evidenced to the Trustee by filing with the Trustee a resolution of the Board of
Directors of the Company giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions. If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, if shall thereafter cease
to be an Unrestricted Subsidiary for purposes of the Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred as of such date.
The Board of Directors of the Company may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; PROVIDED, that (i) immediately after giving
effect to such designation, no Default or Event of Default shall have occurred
and be continuing or would occur as a consequence thereof and the Company could
incur at least $1.00 of additional Indebtedness (excluding Permitted
Indebtedness) pursuant to the first paragraph of the "Incurrence of Indebtedness
and Issuance of Disqualified Stock" covenant on a pro forma basis taking into
account such designation and (ii) such Subsidiary executes a Subsidiary
Guarantee pursuant to the terms of the Indenture.
"VOTING STOCK" of an entity means all classes of Capital Stock of such
entity then outstanding and normally entitled to vote in the election of
directors or all interests in such entity with the ability to control the
management or actions of such entity.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned, directly or indirectly, by such Person or by one or more
Wholly Owned Restricted Subsidiaries of such Person.
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BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the New Notes will initially be represented by
one or more permanent global Notes in definitive, fully registered form without
interest coupons (each a "Restricted Global Note"; and together with the
Regulation S Global Note, the "Global Notes") and will be deposited with the
Trustee as custodian for, and registered in the name of a nominee of, DTC. Old
Notes sold in offshore transactions in reliance on Regulation S under the
Securities Act were initially represented by one or more temporary global Notes
in definitive, fully registered form without interest coupons (each a "Temporary
Regulation S Global Note") and were deposited with the Trustee as custodian for,
and registered in the name of a nominee of, DTC for the accounts of Euroclear
and Cedel Bank. The Temporary Regulation S Global Note is exchangeable for one
or more permanent global Notes (each a "Permanent Regulation S Global Note"; and
together with the Temporary Regulation S Global Notes, the "Regulation S Global
Note") on or after the 40th day following July 24, 1998 upon certification that
the beneficial interests in such global Note are owned by non-U.S. persons.
Prior to the 40th day after the Closing Date, beneficial interests in the
Temporary Regulation S Global Note may only be held through Euroclear or Cedel
Bank.
Ownership of beneficial interests in a Global Note are limited to persons
who have accounts with DTC ("participants") or persons who hold interests
through participants. Ownership of beneficial interests in a Global Note will be
shown on, and the transfer of that ownership will be effected only through,
records maintained by DTC or its nominee (with respect to interests of
participants) and the records of participants (with respect to interests of
persons other than participants). Qualified institutional buyers may hold their
interests in a Restricted Global Note directly through DTC if they are
participants in such system, or indirectly through organizations which are
participants in such system.
Investors may hold their interests in a Regulation S Global Note directly
through Cedel Bank or Euroclear, if they are participants in such systems, or
indirectly through organizations that are participants in such systems. Cedel
Bank and Euroclear will hold interests in the Regulation S Global Notes on
behalf of their participants through DTC.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Notes represented by such Global Note for all
purposes under the Indenture and the Notes. No beneficial owner of an interest
in a Global Note will be able to transfer that interest except in accordance
with DTC's applicable procedures, in addition to those provided for under the
Indenture and, if applicable, those of Euroclear and Cedel Bank.
Payments of the principal of, and interest on, a Global Note will be made to
DTC or its nominee, as the case may be, as the registered owner thereof. Neither
the Company, the Trustee nor any Paying Agent will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in a Global Note or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Note, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Note as shown on the records of
DTC or its nominee. The Company also expects that payments by participants to
owners of beneficial interests in such Global Note held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers registered
in the names of nominees for such customers. Such payments will be the
responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds. Transfers
between participants in Euroclear and Cedel Bank will be effected in the
ordinary way in accordance with their respective rules and operating procedures.
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The Company expects that DTC will take any action permitted to be taken by a
holder of Notes (including the presentation of Notes for exchange as described
below) only at the direction of one or more participants to whose account the
DTC interests in a Global Note are credited and only in respect of such portion
of the aggregate principal amount of Notes as to which such participant or
participants has or have given such direction. However, if there is an Event of
Default under the Notes, DTC will exchange the applicable Global Note for
Certificated Notes, which it will distribute to its participants and which may
be legended as set forth under the heading "Transfer Restrictions."
The Company understands that DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code and a "Clearing Agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its participants
and facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of certificates
and certain other organizations. Indirect access to the DTC system is available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly ("indirect participants").
Although DTC, Euroclear and Cedel Bank are expected to follow the foregoing
procedures in order to facilitate transfers of interests in a Global Note among
participants of DTC, Euroclear and Cedel Bank, they are under no obligation to
perform or continue to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC, Euroclear or Cedel Bank or their
respective participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Notes and a successor depositary is not appointed by the Company
within 90 days, the Company will issue Certificated Notes, which may bear the
legend referred to under "Transfer Restrictions," in exchange for the Global
Notes. Holders of an interest in a Global Note may receive Certificated Notes,
which may bear the legend referred to under "Transfer Restrictions," in
accordance with DTC's rules and procedures in addition to those provided for
under the Indenture.
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CERTAIN UNITED STATES TAX CONSEQUENCES
The following summary describes certain United States federal income and
estate tax consequences resulting from the purchase, ownership, and disposition
of Notes as of the date hereof. It deals only with Notes held as "capital
assets" within the meaning of Section 1221 of the Code by initial purchasers who
purchased Notes at the initial issue price. Further, this discussion does not
address the situation of persons who may be subject to special tax rules,
including, by way of illustration and not limitation, rules applicable to
dealers in securities or currencies, financial institutions, tax-exempt
entities, life insurance companies, persons who hold Notes as a hedge, as part
of a constructive sale, or as a position in a "straddle" for income tax
purposes, or to persons who have a "functional currency" other than the U.S.
Dollar. As used herein, a "United States Holder" means a beneficial owner who is
a citizen or resident of the United States, a corporation, limited liability
company or partnership (unless the Treasury regulations provide otherwise)
created or organized in or under the laws of the United States or any political
subdivision thereof, an estate the income of which is subject to U.S. federal
income taxation regardless of its source, or a trust which is subject to the
supervision of a court within the United States and the control of one or more
U.S. persons as described in Section 7701(a)(30) of the Code. As used herein,
the term "Non-United States Holder" means any person or entity that is not a
United States Holder. An individual may, subject to certain exceptions, be
deemed to be a resident (as opposed to a non-resident alien) of the United
States by virtue of being present in the United States on at least 31 days in
the calendar year and for an aggregate of at least 183 days during a three year
period ending in the current calendar year, determined by counting each day
present in the U.S. during the current calendar year as a full day, each day
present in the U.S. during the immediately preceding calendar year as one-third
of a day, and each day present in the U.S. during the second preceding year as
one-sixth of a day.
The discussion set forth below is based upon the provisions of the Code, the
Treasury Regulations, and administrative and judicial decisions thereunder as of
the date hereof, and such authorities may be repealed, revoked or modified with
possible retroactive effect so as to result in federal income tax consequences
different from those discussed below. This summary does not purport to cover all
possible tax consequences associated with the purchase, ownership, and
disposition of Notes, such as any applicable foreign, state, local, or other tax
laws, nor to address all relevant estate or gift tax considerations. PERSONS
CONSIDERING THE PURCHASE, OWNERSHIP, OR DISPOSITION OF NOTES SHOULD CONSULT
THEIR OWN TAX ADVISORS CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES IN LIGHT
OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE
LAWS OF ANY OTHER TAXING JURISDICTION.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
INTEREST ON THE NOTES
The Notes were not issued with original issue discount ("OID"). Except as
described below, interest on a Note will be taxable to a United States Holder as
ordinary income from domestic cources at the time it is paid or accrued in
accordance with the United States Holder's regular method of accounting for
United States tax purposes.
SALE, RETIREMENT, OR OTHER DISPOSITION OF NOTES
Upon the sale, retirement, or other disposition of a Note (including any
sale to the Company in connection with the Company's option to purchase the
Note), a holder will recognize gain or loss equal to the difference between the
amount realized on the sale, retirement, or other disposition and the holder's
tax basis in the Note. Such gain or loss will be capital gain or loss and will
be long-term capital gain or loss if, at the time of the sale, retirement, or
other disposition, the Note has been held for more than one year. The Taxpayer
Relief Act of 1997 includes substantial changes to the federal taxation of
capital gains recognized by certain noncorporate taxpayers, such as individuals,
including a 20% maximum tax rate for
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certain gains from the sale of capital assets held for more than 18 months. The
deductibility of capital losses is subject to certain limitations. A holder's
tax basis in a Note will, in general, equal the cost of the Note to the holder.
TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
INTEREST ON NOTES
Subject to the discussion below concerning backup withholding, no
withholding of United States federal income tax will be required with respect to
the payment by the Company or any paying agent of principal or interest on a
Note owned by a Non-United States Holder, provided that the beneficial owner (i)
does not actually or constructively own 10% or more of the total combined voting
power of all classes of stock of the Company entitled to vote within the meaning
of Section 871(h)(3) of the Code and the regulations thereunder, (ii) is not a
controlled foreign corporation related, directly or indirectly, to the Company
through stock ownership, (iii) is not a bank whose receipt of interest on a Note
is described in Section 881(c)(3)(A) of the Code and (iv) satisfies the
statement requirement (described generally below) set forth in Section 871(h)
and Section 881(c) of the Code and the regulations thereunder.
To satisfy the requirement referred to in clause (iv) above, the beneficial
owner of such Note, or a financial institution holding the Note on behalf of
such owner, must provide, in accordance with specified procedures, the Company
or its paying agent with a statement to the effect that the beneficial owner is
not a U.S. person. These requirements will be met if (1) the beneficial owner
provides his name and address, and certifies, under penalties of perjury, that
he is not a U.S. person (which certification may be made on an IRS Form W-8 (or
successor form)) or (2) a financial institution holding the Note on behalf of
the beneficial owner certifies, under penalties of perjury, that such statement
has been received by it and furnishes a paying agent with a copy thereof. Under
finalized Treasury Regulations, the statement requirement referred to in clause
(iv) above may also be satisfied with other documentary evidence for interest
paid after December 31, 1999 with respect to an offshore account or through
certain foreign intermediaries.
In the event any of the above requirements are not satisfied, the Company
will nonetheless not withhold federal income tax on interest paid to a
Non-United States Holder if it receives IRS Form 4224 (or successor form) from
the Non-United States Holder, establishing that such income is effectively
connected with the conduct of a trade or business in the United States, unless
the Company has knowledge to the contrary. Interest paid to a Non-United States
Holder (other than a partnership) which is effectively connected with the
conduct by the holder of a trade or business in the United States is generally
taxed at the graduated rates that are applicable to United States persons. In
the case of a Non-United States Holder that is a corporation, such effectively
connected income may also be subject to the United States federal branch profits
tax (which is generally imposed on a foreign corporation on the deemed
repatriation from the United States of effectively connected earnings and
profits) at a 30% rate (unless the rate is reduced or eliminated by an
applicable income tax treaty and the holder is a qualified resident of the
treaty country). In the case of a partnership that has foreign partners (i.e.,
persons who would be Non-United States Holders if they held the Notes directly),
such effectively connected income allocable to the foreign partner would
generally be subject to United Stated federal withholding tax (regardless of
whether such income is, in fact, distributed to such foreign partner) at a 35%
rate if the foreign partner is a corporation, or at a 39.6% rate if the foreign
partner is not a corporation. Any foreign partner of such a partnership would be
entitled to a credit against his United States federal income tax for his share
of the withholding tax paid by the partnership.
If a Non-United States Holder cannot satisfy the requirements of any of the
above-described exceptions to withholding, payments of interest made to a
Non-United States Holder will be subject to a 30% withholding tax unless the
beneficial owner of the Note provides the Company or its paying agent, as
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the case may be, with a properly executed IRS Form 1001 (or successor form)
claiming an exemption from or reduced rate of withholding under the benefit of
an applicable tax treaty.
Under the Final Regulations, Non-United States Holders will generally be
required to provide IRS Form W-8 in lieu of IRS Form 4224 or IRS Form 1001,
although alternative documentation may be applicable in certain situations.
SALE, EXCHANGE, REDEMPTION OR OTHER DISPOSITION OF NOTES
A Non-United States Holder will generally not be subject to United States
federal income tax with respect to gain recognized on a sale, exchange,
redemption or other disposition of Notes unless (i) the gain is effectively
connected with a trade or business of the Non-United States Holder in the United
States, (ii) in the case of a Non-United States Holder who is an individual and
holds the Notes as a capital asset, such holder is present in the United States
for 183 or more days in the taxable year of the sale or other disposition and
certain other conditions are met, or (iii) the Non-United States Holder is
subject to tax pursuant to certain provisions of the Code applicable to United
States expatriates. Subject to the discussion below concerning backup
withholding, no withholding of United States federal income tax will be required
with respect to any gain or income realized by a Non-United States Holder upon
the sale, exchange, retirement or other disposition of a Note.
Gains derived by a Non-United States Holder (other than a partnership) from
the sale or other disposition of Notes that are effectively connected with the
conduct by the Holder of a trade or business in the United States are generally
taxed at the graduated rates that are applicable to United States persons. In
the case of a Non-United States Holder that is a corporation, such effectively
connected income may also be subject to the United States branch profits tax. In
the case of a partnership that has foreign partners (i.e., persons who would be
Non-United States Holders if they held the Notes directly) withholding will be
made at a 35% rate if the foreign partner is a corporation, or at 39.6% rate if
the foreign partner is not a corporation. Any foreign partner of such a
partnership would be entitled to a credit against his United States federal
income tax for his share of the withholding tax paid by the partnership. If an
individual Non-United States Holder falls under clause (ii) of the immediately
preceding paragraph of this discussion, he will be subject to a flat 30% tax on
the gain derived from the sale or other disposition, which may be offset by
United States capital losses recognized within the same taxable year as such
sale or other disposition (notwithstanding the fact that he is not considered a
resident of the United States).
FEDERAL ESTATE TAX
A Note beneficially owned by an individual who at the time of death is a
Non-United States Holder will not be subject to United States federal estate tax
as a result of such individual's death, provided that such individual does not
actually or constructively own 10% or more of the total combined voting power of
all classes of stock of the Company entitled to vote within the meaning of
Section 871(h)(3) of the Code and provided that the interest payments with
respect to such Note would not have been, if received at the time of such
individual's death, effectively connected with the conduct of a United States
trade or business by such individual.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments of principal and interest on the Notes and to the proceeds of sale of a
Note made to United States Holders other than certain exempt recipients (such as
corporations). A 31% backup withholding tax will apply to such payments if the
United States Holder fails to provide a taxpayer identification number or
certification of foreign or other exempt status or fails to report in full
dividend and interest income.
No information reporting or backup withholding will be required with respect
to payments made by the Company or any paying agent to Non-United States Holders
if a statement described in clause
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(iv) under "Tax Consequences to Non-United States Holders--Interest on Notes"
has been received and the payor does not have actual knowledge that the
beneficial owner is a United States person.
Information reporting and backup withholding will not apply if payments of
interest on a Note are made outside the United States to an account maintained
at an office or branch of a United States or foreign bank or other financial
institution, provided certain procedures are in place, and are observed, between
the Company and the foreign bank or financial institution.
Payments on the sale, exchange or other disposition of a Note made to or
through a foreign office of a broker generally will not be subject to backup
withholding. However, payments made by a broker that is a United States person,
a controlled foreign corporation for United States federal income tax purposes,
a foreign person 50 percent or more of whose gross income is effectively
connected with a United States trade or business for a specified three year
period, or (with respect to payments after December 31, 1999) a foreign
partnership with certain connections to the United States, will be subject to
information reporting unless the broker has in its records documentary evidence
that the beneficial owner is not a United States person and certain other
conditions are met, or the beneficial owner otherwise establishes an exemption.
Backup withholding may apply to any payment that such broker is required to
report if the broker has actual knowledge that the payee is a United States
person. Payments to or through the United States office of a custodian, nominee
or agent or the payment by the United States office of a broker of the proceeds
of a sale will be subject to information reporting and backup withholding unless
the Holder certifies, under penalties of perjury, that it is not a United States
person or otherwise establishes an exemption.
For payments made after December 31, 1999, with respect to Notes held by
foreign partnerships, Treasury regulations require that the certification
described in (iv) under "Tax Consequences to Non-United States Holders--Interest
on Notes" above be provided by the partners, rather than by the foreign
partnership, and that the partnership provide certain information, including a
United States taxpayer identification number. A look-through rule will apply in
the case of tiered partnerships.
Non-United States Holders should consult their tax advisors regarding the
application of information reporting and backup withholding in their particular
situations, the availability of an exemption therefrom, and the procedures for
obtaining such an exemption, if available. Any amounts withheld under the backup
withholding rules will be allowed as a refund or credit against the Non-United
States Holder's U.S. federal income tax liability and may entitle such Holder to
a refund, provided the required information is furnished to the IRS.
EFFECT OF EXCHANGE
The exchange of Old Notes for New Notes in the Exchange Offer should not
constitute a taxable event to holders. Consequently, no gain or loss will be
recognized by a holder upon receipt of an Exchange Note, the holding period of
the New Note will include the holding period of the Old Note exchanged therefor,
and the basis of the New Note will be the same as the basis of the Note
immediately before the exchange. In any event, persons considering the exchange
of Old Notes for New Notes should consult their own tax advisors concerning the
United States federal income tax consequences in light of their particular
situations as well as any consequences arising under the laws of any other
taxing jurisdiction.
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PLAN OF DISTRIBUTION
There has previously been only a limited secondary market and no public
market for the Old Notes. The Company does not intend to apply for the listing
of the Notes on a national securities exchange or for their quotation through
The Nasdaq Stock Market. The Notes are eligible for trading in the PORTAL
market. The Company has been advised by the Initial Purchaser that the Initial
Purchaser currently intends to make a market in the Notes; however, the Initial
Purchaser is not obligated to do so and any market making may be discontinued by
any Placement Agent at any time. In addition, such market making activity may be
limited during the Exchange Offer. Therefore, there can be no assurance that an
active market for the Old Notes or the New Notes will develop. If a trading
market does not develop or is not maintained, holders of Notes may experience
difficulty in reselling Notes. If a trading market develops for the Notes,
future trading prices of such securities will depend on many factors, including,
among other things, prevailing interest rates, the Company's results of
operations and the market for similar securities. Depending on such factors,
such securities may trade at a discount from their offering price.
BROKER-DEALERS WHO DID NOT ACQUIRE OLD NOTES AS A RESULT OF MARKET MAKING
ACTIVITIES OR TRADING ACTIVITIES MAY NOT PARTICIPATE IN THE EXCHANGE OFFER.
With respect to resale of New Notes, based on an interpretation by the staff
of the Commission set forth in no-action letters issued to third parties, the
Company believes that a holder (other than a person that is an affiliate of the
Company within the meaning of Rule 405 under the Securities Act or a "broker" or
"dealer" registered under the Exchange Act) who exchanges Old Notes for New
Notes in the ordinary course of business and who is not participating, does not
intend to participate, and has no arrangement or understanding with any person
to participate, in the distribution of the New Notes, will be allowed to resell
the New Notes to the public without further registration under the Securities
Act and without delivering to the purchasers of the New Notes a prospectus that
satisfies the requirements of Section 10 thereof. However, if any holder
acquires New Notes in the Exchange Offer for the purpose of distributing or
participating in a distribution of the New Notes, such holder cannot rely on the
position of the staff of the Commission enunciated in EXXON CAPITAL HOLDINGS
CORPORATION (available May 13, 1988) or similar no-action letters or any similar
interpretive letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction, unless an exemption from registration is otherwise
available.
As contemplated by the no-action letters mentioned above and the
Registration Rights Agreement, each holder accepting the Exchange Offer is
required to represent to the Company in the Letter of Transmittal that (i) the
New Notes are to be acquired by the holder in the ordinary course of business,
(ii) the holder is not engaging and does not intend to engage in the
distribution of the New Notes, and (iii) the holder acknowledges that, if such
holder participates in the Exchange Offer for the purpose of distributing the
New Notes, such holder must comply with the registration and prospectus delivery
requirements of the Securities Act and cannot rely on the above no-action
letters.
Any broker or dealer registered under the Exchange Act (each a
"Broker-Dealer") who holds Old Notes that were acquired for its own account as a
result of market-making activities or other trading activities (other than Old
Notes acquired directly from the Company or an affiliate of the Company) may
exchange such Old Notes for New Notes pursuant to the Exchange Offer; however,
such Broker-Dealer may be deemed an underwriter within the meaning of the
Securities Act and, therefore, must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of the New
Notes received by it in the Exchange Offer, which prospectus delivery
requirement may be satisfied by the delivery by such Broker-Dealer of this
Prospectus. The Company has agreed to cause the Exchange Offer Registration
Statement, of which this Prospectus is a part, to remain continuously effective
for a period of 180 days, if required, from the Exchange Date, and to make this
Prospectus, as amended or supplemented, available to any such Broker-Dealer for
use in connection with resales. Any Broker-Dealer participating in
103
<PAGE>
the Exchange Offer will be required to acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resales of New Notes received by it in the Exchange Offer. The delivery by a
Broker-Dealer of a prospectus in connection with resales of New Notes shall not
be deemed to be an admission by such Broker-Dealer that it is an underwriter
within the meaning of the Securities Act. The Company will not receive any
proceeds from any sale of New Notes by a Broker-Dealer.
New Notes received by Broker-Dealers for their own account pursuant to the
Exchange Offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the New Notes or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such Broker-Dealer and/or the
purchasers of any such New Notes.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Notes are being
passed upon for the Company by McAfee & Taft A Professional Corporation,
Oklahoma City, Oklahoma.
EXPERTS
The Financial Statements of the Company and of the oil and gas properties
included in the Worland Field Acquisition included in this Prospectus, to the
extent and for the periods indicated in their reports, have been audited by
Arthur Andersen LLP, independent public accountants, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
Certain information relating to the estimated proved reserves of oil and
natural gas and the related estimates of future net cash flows and present
values thereof as of December 31, 1997, included in this Prospectus and in the
notes to the financial statements of the Company have been prepared by Ryder
Scott Company Petroleum Engineers, Denver, Colorado.
104
<PAGE>
GLOSSARY OF TERMS
The definitions set forth below shall apply to the indicated terms as used
in this Prospectus. All volumes of natural gas referred to herein are stated at
the legal pressure base to the state or area where the reserves exit and at 60
degrees Fahrenheit and in most instances are rounded to the nearest major
multiple.
BBL. One stock tank barrel, or 42 U.S. gallons liquid volume.
BCF. One billion cubic feet of natural gas.
BOE. One barrel of oil equivalent, determined using the ratio of six Mcf of
natural gas to one Bbl of crude oil, condensate or natural gas liquids.
COMMERCIAL WELL; COMMERCIALLY PRODUCTIVE WELL. An oil and gas well which
produces oil and gas in sufficient quantities such that proceeds from the sale
of such production exceed production expenses and taxes.
COMPLETION. The installation of permanent equipment for the production of
oil and natural gas, or in the case of a dry hole, the reporting of abandonment
to the appropriate agency.
DEVELOPED ACREAGE. The number of acres which are allocated or assignable to
producing wells or wells capable of production.
DEVELOPMENT WELL. A well drilled within the proved areas of an oil or
natural gas reservoir to the depth of a stratigraphic horizon known to be
productive.
DRY HOLE OR WELL. A well found to be incapable of producing hydrocarbons in
sufficient quantities such that proceeds from the sale of such production exceed
production expenses and taxes.
EXPLORATORY WELL. A well drilled to find and produce oil or natural gas
reserves not classified as proved, to find a new reservoir in a field previously
found to be productive of oil or natural gas in another reservoir or to extend a
known reservoir.
FIELD. An area consisting of a single reservoir or multiple reservoirs all
grouped or related to the same individual geological structural feature and/or
stratigraphic condition.
FORMATION. A succession of sedimentary beds that were deposited under the
same general geologic conditions.
GROSS ACRES OR GROSS WELLS. The total acres or wells, as the case may be,
in which a working interest is owned.
HORIZONTAL DRILLING. A drilling technique that permits the operator to
contact and intersect a larger portion of the producing horizon than
conventional vertical drilling techniques and can result in both increased
production rates and greater ultimate recoveries of hydrocarbons. Horizontal
wells are drilled at angles greater than 70 degrees from vertical.
MBBLS. One thousand barrels of oil.
MBOE. One thousand barrels of oil equivalent, determined using the ratio of
one Bbl of crude oil, condensate or natural gas liquids to six Mcf of natural
gas.
MCF. One thousand cubic feet.
MCFE. One thousand cubic feet equivalent, determined using the ratio of six
Mcf of natural gas to one Bbl of crude oil, condensate or natural gas liquids.
105
<PAGE>
MMBBLS. One million barrels of oil.
MMBOE. One million barrels of oil equivalent, determined using the ratio of
one Bbl of crude oil, condensate or natural gas liquids to six Mcf of natural
gas.
MMCF. One million cubic feet.
MMCFE. One million cubic feet of gas equivalent determined using the ratio
of one Bbl of crude oil, condensate or natural gas liquids to six Mcf of natural
gas.
NET ACRES OR NET WELLS. The sum of the fractional working interests owned
in gross acres or gross wells, as the case may be.
OIL. Crude oil, condensate and natural gas liquids.
PV-10. When used with respect to oil and natural gas reserves, the
estimated future gross revenue to be generated from the production of proved
reserves, net of estimated production and future development costs, using prices
and costs in effect as of the date indicated, without giving effect to
non-property related expenses such as general and administrative expenses, debt
service and future income tax expenses or to depreciation, depletion and
amortization, discounted using an annual discount rate of 10%. PV-10, as used in
this Prospectus, is determined on the same basis as the Standardized Measure of
Discounted Future Net Cash Flows as required by the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 69 except that
PV-10 gives no effect to future income tax expense because the Company is an "S
Corporation" for federal income tax purposes and is not a federal income
tax-paying entity.
PRODUCTIVE WELL. A well that is found to be capable of producing
hydrocarbons in sufficient quantities such that proceeds from the sale of such
production exceed production expenses and taxes.
PROVED DEVELOPED PRODUCING RESERVES. Proved developed reserves that are
expected to be recovered from completion intervals currently open in existing
wells and capable of production.
PROVED DEVELOPED RESERVES. Proved reserves that are expected to be
recovered from existing wellbores with existing equipment and operating methods,
whether or not currently producing, without drilling additional wells.
Production of such reserves may require a recompletion includes additional oil
and gas expected to be obtained through the application of fluid injection or
other improved recovery techniques for supplementing the natural forces and
mechanisms of primary recovery only after testing by pilot project or after
operation of an installed program has confirmed through production response that
increased recovery will be achieved.
PROVED RESERVES. The estimated quantities of crude oil, natural gas and
natural gas liquids which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions. Includes reserves which can be
produced economically through application of improved recovery techniques when
successful testing by a pilot project, the operation of a installed program in
the reservoir, provide support for the engineering analysis on which the project
or program was based.
PROVED UNDEVELOPED LOCATION. A site on which a development well can be
drilled consistent with spacing rules for purposes of recovering proved
undeveloped reserves.
PROVED UNDEVELOPED RESERVES. Proved reserves that are expected to be
recovered from new wells drilled to a known reservoir on undrilled acreage or
from existing wells where a relatively major expenditure is required for
recompletion does not include acreage for which an application of fluid
injection or other improved recovery technique is contemplated unless such
techniques have been proved effective by actual tests in the area and in the
same reservoir.
106
<PAGE>
RECOMPLETION. The completion for production of an existing wellbore in
another formation from that in which the well has been previously completed.
RESERVE LIFE. A ratio determined by dividing the existing reserves by
production from such reserves for the prior twelve month period.
RESERVOIR. A porous and permeable underground formation containing a
natural accumulation of producible oil and/or natural gas that is confined by
impermeable rock or water barriers and is individual and separate from other
reserves.
ROYALTY INTEREST. An interest in an oil and natural gas property entitling
the owner to a share of oil or natural gas production free of costs of
production.
UNDEVELOPED ACREAGE. Lease acreage on which wells have not been drilled or
completed to a point that would permit the production of commercial quantities
of oil and natural gas regardless of whether such acreage contains proved
reserves.
WELLBORE. The hole drilled by the bit.
WORKING INTEREST. The operating interest that gives the owner the right to
drill, produce and conduct operating activities on the property and a share of
production.
WORKOVER. Operations on a producing well to restore or increase production.
107
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
CONTINENTAL RESOURCES, INC.
Report of Independent Public Accountants............................................. F-2
Consolidated Balance Sheets as of December 31, 1996 and 1997, and
June 30, 1998 (Unaudited).......................................................... F-3
Consolidated Statements of Operations for the Years Ended December 31, 1995, 1996 and
1997, and for the Six Months Ended June 30, 1997 and 1998 (Unaudited).............. F-4
Consolidated Statements of Stockholders' Equity for the Years Ended December 31,
1995, 1996 and 1997, and for the Six Months Ended June 30, 1998 (Unaudited)........ F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1996 and
1997, and for the Six Months Ended June 30, 1997 and 1998 (Unaudited).............. F-6
Notes to Consolidated Financial Statements........................................... F-7
BASS ENTERPRISES PRODUCTION CO.
Report of Independent Public Accountants............................................. F-19
Statements of Revenues and Direct Operating Expenses of Oil and Gas Properties
Included in the Purchase Agreement Between Continental Resources, Inc. and Bass
Enterprises Production Co. for the Years Ended December 31, 1995, 1996 and 1997,
and for the Six Months Ended June 30, 1997 and for the Five Months Ended May 31,
1998 (Unaudited)................................................................... F-20
Notes to Statements of Revenues and Direct Operating Expenses of Oil and Gas
Properties Included in the Purchase Agreement Between Continental Resources, Inc.
and Bass Enterprises Production Co................................................. F-21
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
of Continental Resources, Inc.:
We have audited the accompanying consolidated balance sheets of Continental
Resources, Inc. (an Oklahoma corporation) and subsidiary as of December 31, 1997
and 1996, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1997. These consolidated financial statements and the supplementary
information referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Continental
Resources, Inc. and subsidiary as of December 31, 1997 and 1996, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1997, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma,
April 22, 1998
F-2
<PAGE>
CONTINENTAL RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------------ --------------
1996 1997 1998
-------------- -------------- --------------
<S> <C> <C> <C>
(UNAUDITED)
CURRENT ASSETS:
Cash........................................................... $ 3,320,130 $ 1,301,115 $ 1,336,110
Accounts receivable--
Oil and gas sales............................................ 15,249,670 11,432,273 6,349,546
Joint interest and other, net................................ 5,923,216 13,711,270 9,383,015
Inventories.................................................... 3,556,190 3,548,547 4,962,746
Prepaid income taxes........................................... 1,764,484 -- --
Prepaid expenses............................................... 2,072,124 382,725 359,898
Advances to affiliates......................................... 460,551 59,541 19,624,860
-------------- -------------- --------------
Total current assets....................................... 32,346,365 30,435,471 42,016,174
-------------- -------------- --------------
PROPERTY AND EQUIPMENT:
Oil and gas properties (successful efforts method)--
Producing properties......................................... 137,403,821 195,785,302 233,600,015
Nonproducing leaseholds...................................... 16,878,253 17,047,404 49,029,303
Gas gathering and processing facilities........................ 8,430,318 20,794,944 22,561,309
Service properties, equipment and other........................ 8,453,513 12,848,701 13,650,019
-------------- -------------- --------------
Total property and equipment............................... 171,165,905 246,476,351 318,840,647
Less--Accumulated depreciation, depletion and
amortization............................................. 57,845,700 88,559,352 (103,918,055)
-------------- -------------- --------------
Net property and equipment................................. 113,320,205 157,916,999 214,922,591
-------------- -------------- --------------
OTHER ASSETS..................................................... 26,195 33,696 924,487
-------------- -------------- --------------
Total assets............................................... $ 145,692,765 $ 188,386,166 $ 257,863,253
-------------- -------------- --------------
-------------- -------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................................... $ 17,635,561 $ 19,614,068 $ 12,234,726
Current portion of long-term debt.............................. 3,422,447 315,113 315,113
Revenues and royalties payable................................. 6,807,664 7,497,011 3,653,778
Accrued liabilities and other.................................. 2,212,397 3,164,735 2,951,451
-------------- -------------- --------------
Total current liabilities.................................. 30,078,069 30,590,927 19,155,068
-------------- -------------- --------------
LONG-TERM DEBT, net of current portion........................... 51,336,696 79,316,913 163,737,232
DEFERRED INCOME TAXES............................................ 11,978,570 -- --
OTHER NONCURRENT LIABILITIES..................................... 222,207 213,877 205,862
STOCKHOLDERS' EQUITY:
Common stock, $1 par value, 75,000 shares authorized, 49,045
shares issued, 49,041 shares outstanding..................... 49,045 49,045 49,041
Additional paid-in capital..................................... 2,731,075 2,731,075 2,721,079
Treasury stock, 4 shares, at cost.............................. -- (10,000) --
Retained earnings.............................................. 49,297,103 75,494,329 71,994,971
-------------- -------------- --------------
Total stockholders' equity................................. 52,077,223 78,264,449 74,765,091
-------------- -------------- --------------
Total liabilities and stockholders' equity................. $ 145,692,765 $ 188,386,166 $ 257,863,253
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE>
CONTINENTAL RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE YEARS ENDED DECEMBER 31 ENDED JUNE 30,
------------------------------------ ----------------------
1995 1996 1997 1997 1998
---------- ----------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Oil and gas sales............................ $30,575,937 $75,016,352 $78,599,075 $39,135,128 $31,291,036
Gathering, marketing and processing.......... 20,638,962 25,765,782 25,020,764 15,522,153 9,803,962
Oil and gas service operations............... 6,148,487 6,490,759 6,405,387 3,714,776 3,062,320
---------- ----------- ----------- ---------- ----------
Total revenues............................. 57,363,386 107,272,893 110,025,226 58,372,057 44,157,318
---------- ----------- ----------- ---------- ----------
OPERATING COSTS AND EXPENSES:
Production expenses and taxes................ 7,610,850 19,337,987 20,748,414 10,621,812 9,074,294
Exploration expenses......................... 6,184,239 4,512,355 6,806,491 3,409,693 2,649,514
Gathering, marketing and processing.......... 13,223,476 21,789,861 22,715,336 12,872,663 8,408,877
Oil and gas service operations............... 3,680,089 4,033,547 3,654,277 1,854,812 1,824,746
Depreciation, depletion and amortization..... 9,613,747 22,875,743 33,354,430 16,712,641 16,482,968
General and administrative................... 8,260,416 9,154,725 8,988,984 3,986,405 4,914,457
---------- ----------- ----------- ---------- ----------
Total operating costs and expenses......... 48,572,817 81,704,218 96,267,932 49,458,026 43,354,856
---------- ----------- ----------- ---------- ----------
OPERATING INCOME............................... 8,790,569 25,568,675 13,757,294 8,914,031 802,462
---------- ----------- ----------- ---------- ----------
OTHER INCOME AND EXPENSES
Interest income.............................. 136,757 311,981 241,456 103,665 779,897
Interest expense............................. (2,395,626) (4,550,488) (4,803,837) (2,313,297) (5,174,113)
Other income (expense)....................... 410,765 232,947 8,060,863 685,348 92,396
---------- ----------- ----------- ---------- ----------
Total other income and (expenses).......... (2,669,634) (4,005,560) 3,498,482 (1,524,284) (4,301,820)
---------- ----------- ----------- ---------- ----------
INCOME BEFORE INCOME TAXES..................... 6,120,935 21,563,115 17,255,776 7,389,747 (3,499,358)
INCOME TAX BENEFIT (EXPENSE)................... (2,251,591) (8,238,124) 8,941,450 8,941,450 --
---------- ----------- ----------- ---------- ----------
NET INCOME..................................... $3,869,344 $13,324,991 $26,197,226 $16,331,197 $(3,499,358)
---------- ----------- ----------- ---------- ----------
---------- ----------- ----------- ---------- ----------
EARNINGS PER COMMON SHARE...................... $ 78.89 $ 271.69 $ 534.18 $ 333.00 $ (71.36)
---------- ----------- ----------- ---------- ----------
---------- ----------- ----------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
CONTINENTAL RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN TREASURY RETAINED STOCKHOLDERS'
STOCK CAPITAL STOCK EARNINGS EQUITY
--------- ------------ ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994.................... $ 49,045 $ 2,731,075 $ -- $ 32,102,768 $ 34,882,888
Net income.................................. -- -- -- 3,869,344 3,869,344
--------- ------------ ---------- ------------- -------------
BALANCE, December 31, 1995.................... 49,045 2,731,075 -- 35,972,112 38,752,232
Net income.................................. -- -- -- 13,324,991 13,324,991
--------- ------------ ---------- ------------- -------------
BALANCE, December 31, 1996.................... 49,045 2,731,075 -- 49,297,103 52,077,223
Purchase shares of treasury stock........... -- -- (10,000) -- (10,000)
Net income.................................. -- -- -- 26,197,226 26,197,226
--------- ------------ ---------- ------------- -------------
BALANCE, December 31, 1997.................... 49,045 2,731,075 (10,000) 75,494,329 78,264,449
--------- ------------ ---------- ------------- -------------
Retirement of treasury stock (unaudited).... (4) (9,996) 10,000 -- --
Net income (unaudited)...................... -- -- -- (3,499,358) (3,499,358)
--------- ------------ ---------- ------------- -------------
BALANCE, June 30, 1998 (unaudited)............ $ 49,041 $ 2,721,079 $ -- $ 71,994,971 $ 74,765,091
--------- ------------ ---------- ------------- -------------
--------- ------------ ---------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
CONTINENTAL RESOURCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
FOR THE YEARS ENDED DECEMBER 31 JUNE 30,
------------------------------------- ------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................... $ 3,869,344 $13,324,991 $26,197,226 $16,331,198 $(3,499,358)
Adjustments to reconcile net income to net cash
provided by operating activities--
Depreciation, depletion and amortization..... 9,613,747 22,875,743 33,354,430 16,712,641 16,482,968
(Gain)/loss on sale of assets................ 410,765 (232,947) (674,091) (643,279) (21,696)
Dry hole cost and impairment of undeveloped
leases..................................... 2,417,378 1,167,204 1,467,235 2,238,969 129,925
Deferred income taxes........................ 1,618,130 8,238,124 (11,978,570) (11,978,570) --
Other noncurrent assets...................... -- -- -- (321,492) (8,015)
Changes in current assets and liabilities--
Increase in accounts receivable................ (5,273,021) (10,238,194) (3,970,657) 2,164,717 9,410,982
Decrease/(increase) in inventories............. (102,471) (624,052) 7,643 (439,566) (1,414,199)
Decrease/(increase) in prepaid income taxes and
expenses..................................... (58,964) 1,246,074 3,453,883 2,508,048 22,822
Increase in accounts payable................... 9,561,493 264,922 1,978,507 3,519,245 (7,379,342)
Increase/(decrease) in revenues and royalties
payable...................................... (504,304) 5,230,072 689,347 (1,666,771) (3,843,233)
Increase/(decrease) in accrued liabilities and
other........................................ (2,567,587) 471,680 952,338 (476,926) (213,284)
----------- ----------- ----------- ----------- -----------
Net cash provided by operating
activities............................... 18,984,510 41,723,617 51,477,291 27,948,214 9,667,570
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Exploration and development.................... (37,212,880) (43,588,567) (63,701,798) (36,120,893) (28,866,225)
Gas gathering and processing facilities and
service properties, equipment and other...... (4,720,755) (3,428,080) (16,759,814) (5,352,478) (2,567,683)
Purchase of producing properties............... (16,292,607) (3,323,952) (475,535) (204,810) (85,100,000)
Proceeds from sale of assets................... 204,116 182,040 2,176,948 2,010,800 387,124
Advances from (to) affiliates.................. -- (460,551) 401,010 (5,809) 16,168
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities...... (58,022,126) (50,619,110) (78,359,189) (39,673,190) (116,130,616)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock....................... -- -- (10,000) -- --
Proceeds from line of credit and other........... 41,034,977 14,144,383 33,493,240 20,000,000 109,014,597
Repayment of line of credit and other............ (3,041,181) (3,650,610) (30,570,357) (11,443,740) (1,625,765)
Loans from majority stockholder.................. -- -- 21,950,000 -- (890,791)
----------- ----------- ----------- ----------- -----------
Net cash provided by financing
activities............................... 37,993,796 10,493,773 24,862,883 8,556,260 106,498,041
----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH.................... (1,043,820) 1,598,280 (2,019,015) (3,168,716) 34,995
CASH, beginning of period.......................... 2,765,670 1,721,850 3,320,130 3,320,130 1,301,115
----------- ----------- ----------- ----------- -----------
CASH, end of period................................ $ 1,721,850 $ 3,320,130 $ 1,301,115 $ 151,414 $ 1,336,110
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid.................................... $ 2,395,626 $ 4,550,488 $ 4,301,977 $ 2,313,297 $ 5,174,113
Income taxes paid................................ $ 2,713,000 $ 589,000 $ 300,000 $ -- $23,315,151
NONCASH INVESTING AND FINANCING ACTIVITIES:
Advance to affiliate made with sale of 50%
interest in producing properties............... -- -- -- -- $19,581,487
Satisfaction of note payable to principal
stockholder through sale of 50% interest in
producing properties........................... -- -- -- -- $22,968,513
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
CONTINENTAL RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION:
Continental Resources, Inc. ("CRI") was incorporated in Oklahoma on November
16, 1967, as Shelly Dean Oil Company. On September 23, 1976, the name was
changed to Hamm Production Company. In January 1987, the Company acquired all of
the assets and assumed the debt of Continental Trend Resources, Inc. Affiliated
entities, J.S. Aviation and Wheatland Oil Co. were merged into Hamm Production
Company, and the corporate name was changed to Continental Trend Resources, Inc.
at that time. In 1991, the Company's name was changed to Continental Resources,
Inc.
The Company has one wholly-owned subsidiary, Continental Gas, Inc. ("CGI").
CGI was incorporated in April 1990.
CRI's principal business is oil and natural gas exploration, development and
production. CRI has interests in approximately 1,000 wells and serves as the
operator in the majority of such wells. CRI's operations are primarily in
Oklahoma, North Dakota, South Dakota, Montana, Illinois and Texas.
CGI is engaged principally in natural gas marketing, gathering and
processing activities and operates six gas gathering systems and two gas
processing plants in Oklahoma. In addition, CGI participates with CRI in certain
oil and natural gas wells.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts and
operations of CRI and CGI (collectively the "Company"). All significant
intercompany accounts and transactions have been eliminated in the consolidated
financial statements.
INTERIM FINANCIAL INFORMATION
The interim consolidated financial statements as of March 31, 1998, and for
the six months ended June 30, 1997 and 1998, are unaudited, and certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principals have been
omitted. In the opinion of management, all adjustments, consisting of normal
recurring adjustments, necessary to fairly present the financial position,
results of operations and cash flows with respect to the consolidated interim
financial statements have been included.
ACCOUNTS RECEIVABLE
The Company operates exclusively in the oil and natural gas exploration and
production, gas gathering and processing and gas marketing industries. The
Company's joint interest receivables at December 31, 1996 and 1997, are recorded
net of an allowance for doubtful accounts of approximately $200,000 and
$467,000, respectively, in the accompanying consolidated balance sheets.
INVENTORIES
Inventories consist primarily of tubular goods, production equipment and
crude oil in tanks, which are stated at the lower of average cost or market. At
December 31, 1996 and 1997, tubular goods and production equipment totaled
approximately $2,773,000 and $2,692,000, respectively; crude oil in tanks
totaled approximately $783,000 and $856,000, respectively.
F-7
<PAGE>
CONTINENTAL RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
PROPERTY AND EQUIPMENT
The Company utilizes the successful efforts method of accounting for oil and
gas activities whereby costs to acquire mineral interests in oil and gas
properties, to drill and equip exploratory wells that find proved reserves and
to drill and equip development wells are capitalized. These costs are amortized
to operations on a unit-of-production method based on proved developed oil and
gas reserves, allocated property by property, as estimated by petroleum
engineers. Geological and geophysical costs, lease rentals and costs associated
with unsuccessful exploratory wells are expensed as incurred. Nonproducing
leaseholds are periodically assessed for impairment based on exploration results
and planned drilling activity. Maintenance and repairs are expensed as incurred,
except that the costs of replacements or renewals that expand capacity or
improve production are capitalized. Gas gathering systems and gas processing
plants are depreciated using the straight-line method over an estimated useful
life of 14 years. Service properties and equipment and other is depreciated
using the straight-line method over estimated useful lives of 5 to 40 years.
INCOME TAXES
The Company filed a consolidated income tax return based on a May 31 fiscal
tax year end. Through May 31, 1997, deferred income taxes were provided for
temporary differences between financial reporting and income tax bases of assets
and liabilities. The estimated Federal and state income taxes on income or loss
generated between June 1 and December 31 is included in deferred income taxes at
each calendar year end prior to December 31, 1997.
Effective June 1, 1997, the Company converted to an "S-corporation" under
Subchapter S of the Internal Revenue Code. As a result, income taxes
attributable to Federal taxable income of the Company after May 31, 1997, if
any, will be payable by the stockholders of the Company. The effect of
eliminating the deferred tax assets and liabilities were recognized in the
results of operations for the year ended December 31, 1997, the year of
adoption.
EARNINGS PER COMMON SHARE
Earnings per common share includes no dilution and is computed by dividing
income available to common stockholders by the weighted-average number of shares
outstanding for the period. There are no common stock equivalents or securities
outstanding which would result in material dilution. The weighted-average number
of shares used to compute earnings per common share was 49,045 in 1995 and 1996
and 49,042 in 1997.
FUTURES CONTRACTS
CGI, in the normal course of business, enters into fixed price contracts for
either the purchase or sale of natural gas at future dates. Due to fluctuations
in the natural gas market, CGI buys or sells natural gas futures contracts to
hedge the price and basis risk associated with the specifically identified
purchase or sales contracts. CGI accounts for changes in the market value of
futures contracts as a deferred gain or loss until the production month of the
hedged transaction, at which time the gain or loss on the natural gas futures
contract is recognized in the results of operations. At December 31, 1996 and
1997, there were no open natural gas futures contracts. Net gains and losses on
futures contracts are included in gas gathering,
F-8
<PAGE>
CONTINENTAL RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
marketing and processing revenues in the accompanying consolidated statements of
operations and were immaterial for the years ended December 31, 1995, 1996 and
1997.
GAS BALANCING ARRANGEMENTS
The Company follows the "sales method" of accounting for its gas revenue
whereby the Company recognizes sales revenue on all gas sold to its purchasers,
regardless of whether the sales are proportionate to the Company's ownership in
the property. A liability is recognized only to the extent that the Company has
a net imbalance in excess of their share of the reserves in the underlying
properties. The Company's aggregate imbalance positions at December 31, 1996 and
1997 were not material.
SIGNIFICANT CUSTOMER
During 1995, 1996 and 1997 approximately 13.1%, 41.3% and 46.6%,
respectively, of the Company's total revenue were derived from sales made to a
single customer.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash, trade
receivables, trade payables and bank debt. The carrying value of cash, trade
receivables and trade payables are considered to be representative of their
respective fair values, due to the short maturity of these instruments. The fair
value of bank debt approximates its carrying value based on the borrowing rates
currently available to the Company for bank loans with similar terms and
maturities.
PRESENTATION
Certain prior year information has been reclassified to conform to the 1997
presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Of the
estimates and assumptions that affect reported results, the estimate of the
Company's oil and natural gas reserves, which is used to compute depreciation,
depletion, amortization and impairment on producing oil and gas properties, is
the most significant.
F-9
<PAGE>
CONTINENTAL RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. LONG-TERM DEBT:
Long-term debt as of December 31, 1996 and 1997, consists of the following:
<TABLE>
<CAPTION>
1996 1997
------------- -------------
<S> <C> <C>
Line of credit agreement (a)............................................. $ 54,759,143 $ 53,725,403
Notes payable to majority stockholder (b)................................ -- 21,950,000
Note payable to General Electric Capital Corporation (c)................. -- 3,865,962
Capital lease agreements (d)............................................. -- 90,661
------------- -------------
Outstanding debt....................................................... 54,759,143 79,632,026
Less--Current portion.................................................... 3,422,447 315,113
------------- -------------
Total long-term debt................................................... $ 51,336,696 $ 79,316,913
------------- -------------
------------- -------------
</TABLE>
(a) The line of credit with a bank allows borrowings up to $75,000,000. The
Company has collateralized the loan with substantially all of its oil and
natural gas interests, and gathering, marketing and processing properties.
This loan bears interest at either Wall Street Journal Prime (8.5% at
December 31, 1997) or Adjusted LIBOR which includes the LIBOR rate (5.9% for
ninety day LIBOR at December 31, 1997) posted in the Wall Street Journal
adjusted for a capacity fee. The LIBOR rate can be locked in for thirty,
sixty or ninety days as determined by the Company through the use of various
principal tranches; or the Company can elect to leave the interest amount
based on the Prime interest rate. Interest is payable monthly on Prime
balances and at the expiration of LIBOR tranches with all outstanding
principal and interest due at maturity on December 31, 2000.
(b) Throughout 1997 (May to December), CRI and CGI entered into various notes
with the majority stockholder of the Company. These notes bear interest at
8.25% with interest payments due monthly or quarterly for twenty-four to
thirty-six months. On December 31, 1997, the notes between CRI and the
majority shareholder were combined into one note totaling $21,750,000
bearing interest at 8.25% with interest payments due on a quarterly basis
for twenty-four months. The balance is to be paid in full by December 31,
2002. The note between CGI and the majority shareholder bears interest at
8.25% with interest payments due on a quarterly basis for thirty-six months.
After the three-year period, the balance owed by CGI can be converted to an
amortization schedule payable by November 2002. Subsequent to December 31,
1997, the CGI note was paid in full.
(c) In July 1997, the Company borrowed $4,000,000 from General Electric Capital
Corporation to finance the purchase of an airplane. The note accrues
interest at 7.91% to be paid in one hundred nineteen (119) consecutive
monthly installments of principal and interest of $48,341 each and a final
installment of approximately $48,000. It is secured by the airplane.
(d) During 1997, the Company entered into two capital lease agreements to
purchase a copier and computer equipment. The agreements require monthly
payments of principal and interest for forty-two and sixty months,
respectively.
F-10
<PAGE>
CONTINENTAL RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. LONG-TERM DEBT: (CONTINUED)
The annual maturities of debt subsequent to December 31, 1997, are as
follows:
<TABLE>
<S> <C>
1998................................................... $ 315,113
1999................................................... 338,423
2000................................................... 61,335,261
2001................................................... 7,711,569
2002 and thereafter.................................... 9,931,660
----------
Total maturities..................................... $79,632,026
----------
----------
</TABLE>
4. INCOME TAXES:
The Company follows Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes." As mentioned in Note 2, effective June 1,
1997, the Company converted to an S-Corporation resulting in the taxable income
or loss of the Company from that date being reported to the shareholders and
included in their respective Federal and state income tax returns. Accordingly,
the deferred income tax assets and liabilities at May 31, 1997, were eliminated
through recording a provision for income tax benefit. The components of income
tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1995 1996 1997
--------- --------- ----------
<S> <C> <C> <C>
Current........................................................ $ 633 $ -- $ 3,038
Deferred....................................................... 1,619 8,238 (11,979)
--------- --------- ----------
Income tax expense (benefit)............................... $ 2,252 $ 8,238 $ (8,941)
--------- --------- ----------
--------- --------- ----------
</TABLE>
The provision for income taxes differs from an amount computed at the
statutory rates at December 31, as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
1995 1996 1997
--------- --------- ----------
<S> <C> <C> <C>
Federal income tax at statutory rates.......................... $ 2,142 $ 7,547 $ 6,040
State income taxes............................................. 184 647 518
Statutory depletion............................................ (73) - -
Nondeductible expenses......................................... 4 21 30
Conversion to S-corporation.................................... - - (15,529)
Other.......................................................... (5) 23 -
--------- --------- ----------
Income tax expense (benefit)................................. $ 2,252 $ 8,238 $ (8,941)
--------- --------- ----------
--------- --------- ----------
</TABLE>
F-11
<PAGE>
CONTINENTAL RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES: (CONTINUED)
Deferred tax assets and (liabilities) at December 31, 1996, arising from
temporary differences between tax bases and the financial reporting carrying
amounts for certain assets and liabilities are as follows (in thousands):
<TABLE>
<S> <C>
Exploration and development costs................................. $ (11,532)
Alternative minimum tax carryforward.............................. 1,789
Investment tax credit carryforward................................ 717
Net operating loss carryforward................................... 1,836
Income between tax year end and December 31....................... (5,537)
Other............................................................. 748
---------
$ (11,979)
---------
---------
</TABLE>
The investment tax credit carryforward was utilized during the Company's tax
year ended May 31, 1997.
5. COMMITMENTS AND CONTINGENCIES:
The Company maintains a defined contribution pension plan for its employees
under which it contributes to the plan 4% of the annual compensation of all
employees at least 21 years old with a minimum of six months service. Pension
expense for the years ended December 31, 1995, 1996 and 1997, was approximately
$144,000, $152,000 and $242,000, respectively.
The Company and other affiliated companies participate jointly in a
self-insurance pool (the "Pool") covering health and workers' compensation
claims made by employees up to the first $50,000 and $500,000, respectively, per
claim. Any amounts paid above these are reinsured through third-party providers.
Premiums charged to the Company are based on estimated costs per employee of the
Pool. Premiums are expensed as incurred. No additional premium assessments are
anticipated for periods prior to December 31, 1997. Property and general
liability insurance is maintained through third-party providers with a $50,000
deductible on each policy.
The Company is involved in various legal proceedings in the normal course of
business, none of which, in the opinion of management, will have a material
adverse effect on the financial position or results of operations of the
Company. The Company has been successful in Federal courts in its lawsuit
against a gas purchaser arising from tortious interference with business
relations. A judgment was awarded for actual and punitive damages under the
Federal lawsuit totaling $30,269,000 plus accrued interest. In May 1996, this
decision was remanded by the U.S. Supreme Court back to the Tenth Circuit Court
of Appeals for further consideration. No amounts were included in the
accompanying financial statements for this judgment as the ultimate outcome was
uncertain at December 31, 1996. During 1997, this lawsuit was settled with an
aggregate judgment of $9,500,000 of which the Company's share was approximately
$7,500,000. It is included in other income in the accompanying statement of
operations for the year ended December 31, 1997.
Due to the nature of the oil and gas business, the Company is exposed to
possible environmental risks. The Company has implemented various policies and
procedures to avoid environmental contamination and risks from environmental
contamination. The Company is not aware of any material potential environmental
issues or claims.
F-12
<PAGE>
CONTINENTAL RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. RELATED PARTY TRANSACTIONS:
The Company, acting as operator on certain properties, utilizes affiliated
companies to provide oilfield services such as drilling and trucking. The total
amount paid to these companies, a portion of which is billed to other interest
owners, was approximately $5,899,000, $5,870,000 and $11,852,000 during the
years ended December 31, 1995, 1996 and 1997, respectively. These services are
provided at amounts which management believes approximate the costs which would
have been paid to an unrelated party for the same services. At December 31, 1996
and 1997, the Company owed approximately $826,000 and $1,094,000, respectively,
to these companies which is included in accounts payable and accrued liabilities
in the accompanying consolidated balance sheets. These companies and other
companies owned by the Company's majority stockholder also own interests in
wells operated by the Company. At December 31, 1996 and 1997, approximately
$461,000 and $336,000, respectively, from affiliated companies is included in
joint interest accounts receivable in the accompanying consolidated balance
sheets.
Beginning in 1996, a portion of the Company's Oklahoma, South Dakota, North
Dakota and Montana crude oil production sold by the Company to an unrelated
purchaser. In unrelated transactions, Independent Trading and Transportation
Company ("ITT") an affiliate of the Company, purchased, resold and traded crude
oil at various delivery points. The Company realized no gain or loss on
transactions by ITT.
During the years ended December 31, 1996 and 1997, the Company and CGI
advanced certain amounts to affiliates primarily for operating expenditures. The
advances outstanding to affiliates at December 31, 1996 and 1997, totaled
approximately $461,000 and $60,000, respectively. Interest income earned during
the years ended December 31, 1995, 1996 and 1997, was approximately $13,000,
$33,000 and $33,000, respectively, on advances to affiliates.
The Company leases office space under operating leases directly or
indirectly from the majority stockholder. Rents paid associated with these
leases totaled approximately $228,000, $232,000 and $294,000 for the years ended
December 31, 1995, 1996 and 1997, respectively.
During 1997, advances were made to the Company from the majority
stockholder. Interest paid or accrued during the year related to these advances
totaled approximately $744,000.
7. IMPAIRMENT OF LONG-LIVED ASSETS:
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." The Company adopted SFAS No. 121 in the year ended December 31,
1996. During 1996 and 1997, the Company reviewed its oil and gas properties
which are maintained under the successful efforts method of accounting, to
identify properties with excess of net book value over projected future net
revenue of such properties. Any such excess net book values identified were
evaluated further considering such factors as future price escalation,
probability of additional oil and gas reserves and a discount to present value.
If an impairment was determined appropriate an additional charge was added to
depreciation, depletion and amortization ("DD&A") expense. The Company
recognized additional DD&A impairment in 1996 and 1997 of approximately
$2,100,000 and $5,000,000, respectively.
F-13
<PAGE>
CONTINENTAL RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED):
PROVED OIL AND GAS RESERVES (UNAUDITED)
The following reserve information was developed from reserve reports as of
December 31, 1996 and 1997, prepared by independent reserve engineers and by the
Company's internal reserve engineers and set forth the changes in estimated
quantities of proved oil and gas reserves of the Company during each of the
three years presented. Information prior to December 31, 1996, was determined
from the Company's production, drilling, acquisition and sale data as applied to
the December 31, 1996, reserve reports as reports on a December 31 year-end
basis prior to 1996 were not available.
<TABLE>
<CAPTION>
CRUDE OIL AND
NATURAL GAS CONDENSATE
(MMCF) (BBLS IN THOUSANDS)
----------- -------------------
<S> <C> <C>
Proved reserves as of December 31, 1994........................................ 55,900 7,591
Revisions of previous estimates.............................................. -- --
Extensions, discoveries and other additions.................................. 4,747 4,150
Production................................................................... (5,880) (1,199)
Sale of minerals in place.................................................... -- --
Purchase of minerals in place................................................ 53 6,959
----------- ------
Proved reserves as of December 31, 1995........................................ 54,820 17,501
Revisions of previous estimates.............................................. -- --
Extensions, discoveries and other additions.................................. 2,232 4,874
Production................................................................... (6,527) (2,888)
Sale of minerals in place.................................................... (387) (236)
Purchase of minerals in place................................................ 397 241
----------- ------
Proved reserves as of December 31, 1996........................................ 50,535 19,492
Revisions of previous estimates.............................................. 3,640 6,731
Extensions, discoveries and other additions.................................. 2,903 2,072
Production................................................................... (5,789) (3,518)
Sale of minerals in place.................................................... (1,911) (58)
Purchase of minerals in place................................................ -- --
----------- ------
Proved reserves as of December 31, 1997........................................ 49,378 24,719
----------- ------
----------- ------
</TABLE>
Proved reserves are estimated quantities of crude oil, natural gas and
natural gas liquids which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions.
There are numerous uncertainties inherent in estimating quantities of proved
oil and gas reserves. Oil and gas reserve engineering is a subjective process of
estimating underground accumulations of oil and gas that cannot be precisely
measured, and estimates of engineers other than the Company's might differ
materially from the estimates set forth herein. The accuracy of any reserve
estimate is a function of the quality of available data and of engineering and
geological interpretation and judgment. Results of drilling, testing and
production subsequent to the date of the estimate may justify revision of such
estimate. Accordingly, reserve estimates are often different from the quantities
of oil and gas that are ultimately recovered.
F-14
<PAGE>
CONTINENTAL RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED): (CONTINUED)
Gas imbalance receivables and liabilities for each of the three years ended
December 31, 1995, 1996 and 1997, were not material and have not been included
in the reserve estimates.
PROVED DEVELOPED OIL AND GAS RESERVES (UNAUDITED)
The following reserve information was developed by the Company and set forth
the estimated quantities of proved developed oil and gas reserves of the Company
as of the beginning of each year.
<TABLE>
<CAPTION>
CRUDE OIL AND
NATURAL GAS CONDENSATE
PROVED DEVELOPED RESERVES (MMCF) (BBLS IN THOUSANDS)
- ----------------------------------------------------------- ----------- -------------------
<S> <C> <C>
January 1, 1995 55,900 7,591
January 1, 1996 52,588 12,627
January 1, 1997 49,082 15,265
January 1, 1998 47,676 19,411
</TABLE>
Proved developed reserves are proved reserves which are expected to be
recovered through existing wells with existing equipment and operating methods.
COSTS INCURRED IN OIL AND GAS ACTIVITIES
Costs incurred in connection with the Company's oil and gas acquisition,
exploration and development activities during the year are shown below (in
thousands of dollars). Amounts are presented in accordance with SFAS No. 19, and
may not agree with amounts determined using traditional industry definitions.
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Property acquisition costs:
Proved............................................................... $ 16,293 $ 3,327 $ 476
Unproved............................................................. 14,697 6,085 4,641
--------- --------- ---------
Total property acquisition costs................................... 30,990 9,412 5,117
Exploration costs...................................................... 18,276 16,901 9,792
Development costs...................................................... 4,240 20,600 49,268
--------- --------- ---------
Total.............................................................. $ 53,506 $ 46,913 $ 64,177
--------- --------- ---------
--------- --------- ---------
</TABLE>
AGGREGATE CAPITALIZED COSTS
Aggregate capitalized costs relating to the Company's oil and gas producing
activities, and related accumulated DD&A, as of December 31 (in thousands of
dollars):
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Unproved oil and gas properties................................................. $ 16,878 $ 17,047
Proved oil and gas properties................................................... 137,404 195,785
---------- ----------
Total......................................................................... 154,282 212,832
Less--Accumulated DD&A.......................................................... 51,282 82,157
---------- ----------
Net capitalized costs........................................................... $ 103,000 $ 130,675
---------- ----------
---------- ----------
</TABLE>
F-15
<PAGE>
CONTINENTAL RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED): (CONTINUED)
OIL AND GAS OPERATIONS (UNAUDITED)
Aggregate results of operations for each period ended December 31, in
connection with the Company's oil and gas producing activities are shown below
(in thousands of dollars):
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Revenues............................................................... $ 30,576 $ 75,016 $ 78,599
Production costs....................................................... 7,611 19,338 20,748
Exploration expenses................................................... 6,184 4,512 6,806
DD&A and valuation provision*.......................................... 8,999 21,635 30,202
--------- --------- ---------
Income................................................................. 7,782 29,531 20,843
Income tax expense**................................................... 2,957 11,222 3,300
--------- --------- ---------
Results of operations from producing activities (excluding corporate
overhead and interest costs)......................................... $ 4,825 $ 18,309 $ 17,543
--------- --------- ---------
--------- --------- ---------
</TABLE>
- --------------------------
* Includes $2.1 million and $5 million in 1996 and 1997, respectively, of
additional DD&A as a result of adoption of SFAS No. 121.
** The 1997 income tax provision was computed based on estimated oil and gas
operations income for the five months ended May 31, 1997, times the
estimated effective income tax rate. The Company's S-Corporation status was
effective June 1, 1997.
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL
AND GAS RESERVES (UNAUDITED)
The following information is based on the Company's best estimate of the
required data for the Standardized Measure of Discounted Future Net Cash Flows
as of December 31, 1995, 1996, and 1997 as required by Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 69. The
Standard requires the use of a 10 percent discount rate. This information is not
the fair market value nor does it represent the expected present value of future
cash flows of the Company's proved oil and gas reserves (in thousands of
dollars).
<TABLE>
<CAPTION>
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Future cash inflows.............................................. $ 619,081 $ 612,158 $ 576,330
Future production and development costs.......................... (213,752) (191,947) (189,520)
Future income tax expenses....................................... (145,620) (141,487) --
----------- ----------- -----------
Future net cash flows............................................ 259,709 278,724 386,810
10% annual discount for estimated timing of cash flows........... (105,182) (101,591) (145,185)
----------- ----------- -----------
Standardized measure of discounted future net cash flows......... $ 154,527 $ 177,133 $ 241,625
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Future cash inflows are computed by applying year-end prices of oil and gas
relating to the Company's proved reserves to the year-end quantities of those
reserves. The year-end weighted average oil price utilized in the computation of
future cash inflows was approximately $18.06 per BBL at December 31, 1997 and
$23.00 per BBL at December 31, 1995 and 1996. The year-end weighted average gas
price utilized in the computation of future cash inflows was approximately $2.25
per MCF at December 31, 1997 and $3.28 per MCF at December 31, 1995 and 1996.
F-16
<PAGE>
CONTINENTAL RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED): (CONTINUED)
Future production and development costs, which include dismantlement and
restoration expense, are computed by estimating the expenditures to be incurred
in developing and producing the Company's proved oil and gas reserves at the end
of the year, based on year-end costs, and assuming continuation of existing
economic conditions.
Future income tax expenses are computed by applying the appropriate year-end
statutory tax rates to the future pretax net cash flows relating to the
Company's proved oil and gas reserves, less the tax bases of the properties
involved. The future income tax expenses give effect to tax credits and
allowances, but do not reflect the impact of general and administrative costs
and exploration expenses of ongoing operations relating to the Company's proved
oil and gas reserves. Income taxes were not computed at December 31, 1997, as
the Company elected S-Corporation status effective June 1, 1997.
Principal changes in the aggregate standardized measure of discounted future
net cash flows attributable to the Company's proved oil and gas reserves at
year-end are shown below (in thousands of dollars):
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Standardized measure of discounted future net cash flows at the
beginning of the year............................................ $ 126,687 $ 154,527 $ 177,133
Extensions, discoveries and improved recovery, less related
costs............................................................ 23,489 28,815 16,352
Revisions of previous quantity estimates........................... -- -- 58,001
Changes in estimated future development costs...................... -- -- (36,901)
Purchases/sales of minerals in place............................... 27,615 -- (3,233)
Net changes in prices and production costs......................... -- -- (51,456)
Accretion of discount.............................................. 12,669 15,453 17,713
Sales of oil and gas produced, net of production costs............. (22,965) (55,678) (57,851)
Development costs incurred during the period....................... -- 23,212 32,474
Net change in income taxes......................................... (15,787) 3,200 89,915
Change in timing of estimated future production, and other......... 2,819 7,604 (522)
---------- ---------- ----------
Standardized measure of discounted future net cash flows at the end
of the year...................................................... $ 154,527 $ 177,133 $ 241,625
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The standardized measure and changes in standardized measure prior to
December 31, 1996, were determined from production, drilling, acquisition and
sale records of the Company applied to the reserve reports as of December 31,
1996, without revision for oil and gas price assumptions.
9. SUBSEQUENT EVENTS (UNAUDITED):
On May 18, 1998, the Company consummated the purchase of approximately
$86,500,000 of producing and non-producing oil and gas properties and certain
other related assets in the Worland Field (the "Worland Field Properties")
effective as of June 1, 1998, which the Company funded through borrowings on its
line of credit. Subsequently, and effective June 1, 1998, the Company sold an
undivided 50% interest in the Worland Field Properties (excluding inventory and
certain equipment) to the Company's principal stockholder for approximately
$42.6 million. Of the total sale price to the stockholder, approximately $23.0
million plus interest of approximately $0.3 million was offset against the
outstanding balance of notes
F-17
<PAGE>
CONTINENTAL RESOURCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. SUBSEQUENT EVENTS (UNAUDITED): (CONTINUED)
payable to the stockholder and approximately $19.6 million was recorded as an
increase in advances to affiliates in the accompanying June 30, 1998
consolidated condensed balance sheet.
In May 1998, the Company entered into a forward interest rate swap contract
to hedge its exposure to changes in prevailing interest rates on the anticipated
debt offering described in the following paragraph. Due to changes in treasury
note rates, the Company paid $3.9 million to settle the forward interest rate
swap contract. This payment will result in an increase of approximately 0.5% to
the Company's effective interest rate or an increase in interest expense of
approximately $0.4 million per year over the next 10 years.
On July 24, 1998, the Company issued $150 million of 10 1/4% Senior
Subordinated Notes due August 1, 2008 (the "Notes") in a private transaction
under Securities Act Rule 144A. In connection with the issuance of the Notes,
the Company incurred debt issuance costs of approximately $4.6 million, which
has been capitalized as other assets and is being amortized on a straight-line
basis over the life of the Notes.
On July 24, 1998, the outstanding balance under the line of credit of
approximately $162.8 million was repaid using approximately $19.6 million in
proceeds received from the principal stockholder relating to the sale of a 50%
undivided interest in the Worland Properties and approximately $143.2 million in
proceeds from the Notes. Upon issuance of the Notes and payment of the
outstanding balance under the line of credit, the line of credit was amended to
allow borrowings up to $75.0 million.
F-18
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Continental Resources, Inc.:
We have audited the accompanying statements of revenues and direct operating
expenses of the oil and gas properties included in the Purchase Agreement
between Continental Resources Inc. and Bass Enterprises Production Co. (the
"Properties") for the three years in the period ended December 31, 1997. These
statements are the responsibility of Continental Resources management. Our
responsibility is to express an opinion on these statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statements of revenues and direct
operating expenses are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statements of revenues and direct operating expenses. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
The accompanying statements of revenues and direct operating expenses were
prepared in connection with the purchase of the Properties and, as described in
Note 1, exclude general and administrative expenses, depreciation, depletion and
amortization, interest, income tax expenses, and other items as these expenses
would not be comparable to those resulting from the proposed future operations
of the Properties.
In our opinion, the statements of revenues and direct operating expenses
referred to above present fairly, in all material respects, the revenues and
direct operating expenses of the Properties for the three years in the period
ended December 31, 1997.
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma,
June 4, 1998
F-19
<PAGE>
STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
OF OIL AND GAS PROPERTIES INCLUDED IN THE PURCHASE AGREEMENT BETWEEN
CONTINENTAL RESOURCES, INC. AND BASS ENTERPRISES PRODUCTION CO.
<TABLE>
<CAPTION>
FOR THE SIX
FOR THE YEARS ENDED DECEMBER 31, MONTHS ENDED FOR THE FIVE
------------------------------------------ JUNE 30, MONTHS ENDED
1995 1996 1997 1997 MAY 31, 1998
------------ ------------- ------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Oil sales.............................. $ 9,002,941 $ 13,463,786 $ 9,993,174 $ 5,605,242 $ 1,883,222
Gas sales.............................. 189,592 110,020 132,750 63,297 243,345
------------ ------------- ------------- ------------ ------------
Total revenues....................... 9,192,533 13,573,806 10,125,924 5,668,539 2,126,567
DIRECT OPERATING EXPENSES:
Production and operating expenses...... 3,634,950 4,845,364 5,209,488 3,109,314 1,268,409
------------ ------------- ------------- ------------ ------------
REVENUES IN EXCESS OF DIRECT OPERATING
EXPENSES............................... $ 5,557,583 $ 8,728,442 $ 4,916,436 $ 2,559,225 $ 858,150
------------ ------------- ------------- ------------ ------------
------------ ------------- ------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE>
NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
OF OIL AND GAS PROPERTIES INCLUDED IN THE PURCHASE AGREEMENT BETWEEN
CONTINENTAL RESOURCES, INC. AND BASS ENTERPRISES PRODUCTION CO.
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying statements present revenues and direct operating expenses
of working and royalty interests in oil and gas properties located near the town
of Worland in the Bighorn Basin of Wyoming included in the Purchase Agreement
between Continental Resources, Inc. ("Continental") and Bass Enterprises
Production Co., adjusted for Continental's sale of a 50% interest in the oil and
gas properties to Continental's majority shareholder (the "Properties").
The accompanying statements of revenues and direct operating expenses were
prepared on the accrual basis of accounting and relate only to the Properties
described above. These historical results may not be indicative of future
operations. The statements do not include general and administrative expenses,
interest, depreciation, depletion and amortization, Federal and state income
taxes and other items because such amounts would not be indicative of those
expenses which will be incurred by Continental.
The unaudited statements of revenues and direct operating expenses for the
six month period ended June 30, 1997 and the five month period ended May 31,
1998, in the opinion of Continental management, were prepared on a basis
consistent with the audited statements of revenues and direct operating expenses
of the Properties for the three years in the period ended December 31, 1997, and
include all adjustments, consisting only of normal recurring accruals, necessary
to present fairly the revenues and direct operating expenses for the indicated
periods. The statement of revenues and direct operating expenses for the five
month period ended May 31, 1998 represents the revenues and direct operating
expenses of the Properties up to the time of their acquisition by Continental on
June 1, 1998.
USE OF ESTIMATES
The preparation of the statements of revenues and direct operating expenses
in conformity with generally accepted accounting principles requires Continental
to make estimates and assumptions that affect the reported amounts of revenues
and direct operating expenses during the reporting periods. Actual results could
differ from those estimates as additional information becomes available.
CONCENTRATION OF REVENUE AND LIMITED NUMBER OF CUSTOMERS
Approximately 84%, 78% and 75% of revenues were derived from one property
during 1995, 1996 and 1997, respectively. In addition, virtually all of the
production of the properties was purchased by three purchasers during the
periods.
2. SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED):
PROVED OIL AND GAS RESERVES (UNAUDITED)
The following reserve information was developed from reserve reports as of
January 1, 1998, prepared by independent reserve engineers and set forth the
changes in estimated quantities of proved oil and gas reserves of the Properties
during each of the three years presented. Information prior to January 1, 1998,
F-21
<PAGE>
NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
OF OIL AND GAS PROPERTIES INCLUDED IN THE PURCHASE AGREEMENT BETWEEN
CONTINENTAL RESOURCES, INC. AND BASS ENTERPRISES PRODUCTION CO. (CONTINUED)
2. SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED): (CONTINUED)
was determined from production and drilling as applied to the January 1, 1998,
reserve reports as reports prior to January 1, 1998, were not available.
<TABLE>
<CAPTION>
CRUDE OIL AND
NATURAL GAS CONDENSATE
(MMCF) (BBLS IN THOUSANDS)
----------- -------------------
<S> <C> <C>
Proved reserves as of December 31, 1994.............................. 29,791 26,783
Extensions, discoveries and other additions........................ -- 592
Production......................................................... (367) (565)
----------- ------
Proved reserves as of December 31, 1995.............................. 29,424 26,810
Extensions, discoveries and other additions........................ 177 1,119
Production......................................................... (521) (675)
----------- ------
Proved reserves as of December 31, 1996.............................. 29,080 27,254
Extensions, discoveries and other additions........................ -- 622
Production......................................................... (610) (628)
----------- ------
Proved reserves as of December 31, 1997.............................. 28,470 27,248
----------- ------
----------- ------
</TABLE>
Proved reserves are estimated quantities of crude oil, natural gas and
natural gas liquids which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions.
There are numerous uncertainties inherent in estimating quantities of proved
oil and gas reserves. Oil and gas reserve engineering is a subjective process of
estimating underground accumulations of oil and gas that cannot be precisely
measured, and estimates of other engineers might differ materially from the
estimates set forth herein. The accuracy of any reserve estimate is a function
of the quality of available data and of engineering and geological
interpretation and judgment. Results of drilling, testing and production
subsequent to the date of the estimate may justify revision of such estimate.
Accordingly, reserve estimates are often different from the quantities of oil
and gas that are ultimately recovered.
PROVED DEVELOPED OIL AND GAS RESERVES (UNAUDITED)
The following reserve information was developed by Continental and set forth
the estimated quantities of proved developed oil and gas reserves of the
Properties as of the beginning of each year.
<TABLE>
<CAPTION>
CRUDE OIL AND
NATURAL GAS CONDENSATE (BBLS IN
PROVED DEVELOPED RESERVES (MMCF) THOUSANDS)
- --------------------------------------------------------------------- ----------- -------------------
<S> <C> <C>
January 1, 1995...................................................... 13,889 10,879
January 1, 1996...................................................... 13,699 10,906
January 1, 1997...................................................... 13,355 11,350
January 1, 1998...................................................... 12,565 11,344
</TABLE>
F-22
<PAGE>
NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
OF OIL AND GAS PROPERTIES INCLUDED IN THE PURCHASE AGREEMENT BETWEEN
CONTINENTAL RESOURCES, INC. AND BASS ENTERPRISES PRODUCTION CO. (CONTINUED)
2. SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED): (CONTINUED)
Proved developed reserves are proved reserves which are expected to be
recovered through existing wells with existing equipment and operating methods.
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED
OIL AND GAS RESERVES (UNAUDITED)
The following information is based on Continental's best estimate of the
required data for the Standardized Measure of Discounted Future Net Cash Flows
as of December 31, 1995, 1996, and 1997 as required by Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 69. The
Standard requires the use of a 10 percent discount rate. This information is not
the fair market value nor does it represent the expected present value of future
cash flows of Continental's proved oil and gas reserves (in thousands of
dollars).
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Future cash inflows................................................ $ 361,538 $ 348,847 $ 339,212
Future production and development costs............................ 204,874 192,407 180,945
---------- ---------- ----------
Future net cash flows.............................................. 156,664 156,440 158,267
10% annual discount for estimated timing of cash flows............. 137,116 135,184 132,876
---------- ---------- ----------
Standardized measure of discounted future net cash flows........... $ 19,548 $ 21,256 $ 25,391
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Future cash inflows are computed by applying year-end prices of oil and gas
relating to the Properties' proved reserves to the year-end quantities of those
reserves. The year-end weighted average oil price utilized in the computation of
future cash inflows was approximately $11.44 per BBL at December 31, 1995, 1996
and 1997. The year-end weighted average gas price utilized in the computation of
future cash inflows was approximately $1.00 per MCF at December 31, 1995, 1996
and 1997.
Future production and development costs, which include dismantlement and
restoration expense, are computed by estimating the expenditures to be incurred
in developing and producing the Properties' proved oil and gas reserves at the
end of the year, based on year-end 1997 costs, and assuming continuation of
existing economic conditions.
F-23
<PAGE>
NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
OF OIL AND GAS PROPERTIES INCLUDED IN THE PURCHASE AGREEMENT BETWEEN
CONTINENTAL RESOURCES, INC. AND BASS ENTERPRISES PRODUCTION CO. (CONTINUED)
2. SUPPLEMENTAL OIL AND GAS INFORMATION (UNAUDITED): (CONTINUED)
Principal changes in the aggregate standardized measure of discounted future
net cash flows attributable to the Properties' proved oil and gas reserves at
year-end are shown below (in thousands of dollars):
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Standardized measure of discounted future net cash flows at the
beginning of the year............................................ $ 16,715 $ 19,548 $ 21,256
Extensions, discoveries and improved recovery, less related
costs............................................................ 468 884 491
Accretion of discount.............................................. 1,778 1,932 2,308
Sales of oil and gas produced, net of production costs............. (5,558) (8,729) (4,917)
Development costs incurred during the period....................... 6,145 7,621 6,253
---------- ---------- ----------
Standardized measure of discounted future net cash flows at the end
of the year...................................................... $ 19,548 $ 21,256 $ 25,391
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The standardized measure and changes in standardized measure prior to
December 31, 1997, were determined from production and drilling records of the
Properties applied to the reserve reports as of January 1, 1998, without
revision for oil and gas price assumptions.
F-24
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by the Oklahoma General Corporation Act under which the Company
is incorporated, the Company's Certificate of Incorporation, as amended,
provides for indemnification of each of the Company's officers and directors
against (a) expenses, including attorney's fees, judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
any action, suit or proceeding brought by reason of his being or having been a
director, officer, employee or agent of the Company, or of any other
corporation, partnership, joint venture, or other enterprise at the request of
the Company, other than an action by or in the right of the Company, provided
that he acted in good faith and in a manner he reasonably believed to be in the
best interest of the Company, and with respect to any criminal action, he had no
reasonable cause to believe that his conduct was unlawful and (b) expenses
(including attorney's fees) actually and reasonably incurred by him in
connection with the defense or settlement of any action or suit by or in the
right of the Company brought by reason of his being or having been a director,
officer, employee or agent of the Company, or any other corporation,
partnership, joint venture, or other enterprise at the request of the Company,
provided that he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interest of the Company; except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged liable to the Company, unless and
only to the extent that the court in which such action or suit was decided has
determined that the person is fairly and reasonably entitled to indemnification
for such expenses which the court shall deem proper. The Company's bylaws
provide for similar indemnification. These provisions may be sufficiently broad
to indemnify such persons for liabilities arising under the Securities Act of
1933, as amended.
The Company's directors and officers are also insured against claims arising
out of the performance of their duties in such capacities.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------------
<S> <C>
3.1 Registrant's Certificate of Incorporation, as amended and restated
3.2 Registrant's Bylaws, as amended and restated
3.3* Certificate of Incorporation of Continental Gas, Inc.
3.4* Bylaws of Continental Gas, Inc., as amended and restated
3.5* Certificate of Incorporation of Continental Crude Co.
3.6* Bylaws of Continental Crude Co.
4.1 Restated Credit Agreement dated May 12, 1998 among Continental Resources, Inc. and Continental
Gas, Inc., as Borrowers and Bank One, Oklahoma, N.A. and the Institutions named therein as
Banks and Bank One, Oklahoma, N.A., as Agent (the "Credit Agreement")
4.2 Form of Revolving Note under the Credit Agreement
4.3* Indenture dated as of July 24, 1998 between the Registrant, as Issuer, the Subsidiary
Guarantors named therein and United States Trust Company of New York, as Trustee
4.4 Exchange and Registration Rights Agreement dated July 24, 1998 between the Registrant, the
Subsidiary Guarantors named therein and Chase Securities, Inc.
5 Opinion of McAfee & Taft A Professional Corporation
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------------
<S> <C>
10.1* Purchase and Sale Agreement dated March 28, 1998 by and between Bass Enterprises Production
Co., et al. as Sellers and Continental Resources, Inc. as Buyer
10.2* Worland Area Purchase and Sale Agreement, as amended, dated June 25, 1998 by and between
Continental Resources, Inc. as Seller and Harold G. Hamm, Trustee of the Harold G. Hamm
Revocable Intervivos Trust dated April 23, 1984 as Buyer
12.1* Statement re computation of ratio of debt to EBITDA
12.2* Statement re computation of ratio of earnings to fixed charges
12.3* Statement re computation of ratio of EBITDA to interest expense
21 Subsidiaries
23.1 Consent of McAfee & Taft A Professional Corporation is contained in Exhibit 5 hereto
23.2* Consent of Arthur Andersen LLP
23.3* Consent of Ryder Scott Company Petroleum Engineers
24* Power of Attorney
25 Statement of eligibility of Trustee
27* Financial Data Schedule
99.1* Letter of Transmittal
99.2 Notice of Guarantee of Delivery
99.3 Company letter
99.4 Client letter
99.5 Guidelines for certification of taxpayer identification number
</TABLE>
- ------------------------
* Filed herewith.
(b) Financial Statement Schedules
None
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof.
II-2
<PAGE>
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registration pursuant to the provisions described under Item 20, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnifications against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Oklahoma
City, State of Oklahoma, on October 19, 1998.
<TABLE>
<S> <C> <C>
CONTINENTAL RESOURCES, INC.
By: /s/ HAROLD HAMM
-----------------------------------------
Harold Hamm
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities indicated on October 19, 1998.
<TABLE>
<CAPTION>
NAME TITLE
- ------------------------------ --------------------------
<C> <S> <C>
Chairman of the Board,
/s/ HAROLD HAMM President and Chief
- ------------------------------ Executive Officer
Harold Hamm (Principal Executive
Officer) and Director
/s/ JACK H. STARK
- ------------------------------ Senior Vice President and
Jack H. Stark Director
Senior Vice President,
Treasurer and Chief
/s/ ROGER V. CLEMENT Financial Officer
- ------------------------------ (Principal Financial and
Roger V. Clement Accounting Officer) and
Director
/s/ JEFF HUME
- ------------------------------ Senior Vice President,
Jeff Hume Director
/s/ RANDY MOEDER Senior Vice President,
- ------------------------------ General Counsel,
Randy Moeder Secretary and Director
</TABLE>
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the following
additional Registrant has duly caused this Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Oklahoma City, State of Oklahoma, on October 19,
1998.
<TABLE>
<S> <C> <C>
CONTINENTAL GAS, INC.
By: /s/ HAROLD HAMM
-----------------------------------------
Harold Hamm
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE
OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities indicated on October 19, 1998.
SIGNATURE TITLE
- ------------------------------ ----------------------------------------
/s/ HAROLD HAMM Chairman of the Board, Chief Executive
- ------------------------------ Officer (Principal Executive Officer)
Harold Hamm and Director of Continental Gas, Inc.
/s/ RANDY MOEDER
- ------------------------------ President and Director of Continental
Randy Moeder Gas, Inc.
Assistant Secretary and Chief Financial
/s/ ROGER V. CLEMENT Officer (Principal Financial Officer
- ------------------------------ and Principal Accounting Officer) of
Roger V. Clement Continental Gas, Inc.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the following
additional Registrant has duly caused this Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Oklahoma City, State of Oklahoma, on October 19,
1998.
<TABLE>
<S> <C> <C>
CONTINENTAL CRUDE CO.
By: /s/ JEFF WHITE
-----------------------------------------
Jeff White
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities indicated on October 19, 1998.
SIGNATURE TITLE
- ------------------------------ ----------------------------------------
/s/ JEFF WHITE President, Chief Executive Officer
- ------------------------------ (Principal Executive Officer) and
Jeff White Director of Continental Crude Co.
Treasurer and Chief Financial Officer
/s/ ROGER V. CLEMENT (Principal Financial Officer and
- ------------------------------ Principal Accounting Officer) and
Roger V. Clement Director of Continental Crude Co.
/s/ RANDY MOEDER
- ------------------------------ Secretary
Randy Moeder
II-6
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 20, 1998
REGISTRATION NO. 333-61547
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
EXHIBITS
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CONTINENTAL RESOURCES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
OKLAHOMA 1311 73-0767549
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) No.)
</TABLE>
------------------------
302 NORTH INDEPENDENCE ROGER CLEMENT
SUITE 300 302 NORTH INDEPENDENCE
ENID, OKLAHOMA 73701 SUITE 300
(580) 233-8955 ENID, OKLAHOMA 73701
(Address, including Zip Code, and (580) 233-8955
telephone (Name, address, including Zip
number, including area code, of Code, and telephone number,
registrant's principal including area code, of
executive offices) agent for service)
------------------------
COPIES TO:
THEODORE M. ELAM, ESQ.
BRICE TARZWELL, ESQ.
MCAFEE & TAFT A PROFESSIONAL CORPORATION
TENTH FLOOR, TWO LEADERSHIP SQUARE
OKLAHOMA CITY, OKLAHOMA 73102
(405) 235-9621
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------------
<S> <C>
3.1 Registrant's Certificate of Incorporation, as amended and restated
3.2 Registrant's Bylaws, as amended and restated
3.3* Certificate of Incorporation of Continental Gas, Inc.
3.4* Bylaws of Continental Gas, Inc., as amended and restated
3.5* Certificate of Incorporation of Continental Crude Co.
3.6* Bylaws of Continental Crude Co.
4.1 Restated Credit Agreement dated May 12, 1998 among Continental Resources, Inc. and Continental
Gas, Inc., as Borrowers and Bank One, Oklahoma, N.A. and the Institutions named therein as
Banks and Bank One, Oklahoma, N.A., as Agent (the "Credit Agreement")
4.2 Form of Revolving Note under the Credit Agreement
4.3* Indenture dated as of July 24, 1998 between the Registrant, as Issuer, the Subsidiary
Guarantors named therein and United States Trust Company of New York, as Trustee
4.4 Exchange and Registration Rights Agreement dated July 24, 1998 between the Registrant, the
Subsidiary Guarantors named therein and Chase Securities, Inc.
5 Opinion of McAfee & Taft A Professional Corporation
10.1* Purchase and Sale Agreement dated March 28, 1998 by and between Bass Enterprises Production
Co., et al. as Sellers and Continental Resources, Inc. as Buyer
10.2* Worland Area Purchase and Sale Agreement, as amended, dated June 25, 1998 by and between
Continental Resources, Inc. as Seller and Harold G. Hamm, Trustee of the Harold G. Hamm
Revocable Intervivos Trust dated April 23, 1984 as Buyer
12.1* Statement re computation of ratio of debt to EBITDA
12.2* Statement re computation of ratio of earnings to fixed charges
12.3* Statement re computation of ratio of EBITDA to interest expense
21 Subsidiaries
23.1 Consent of McAfee & Taft A Professional Corporation is contained in Exhibit 5 hereto
23.2* Consent of Arthur Andersen LLP
23.3* Consent of Ryder Scott Company Petroleum Engineers
24* Power of Attorney
25 Statement of eligibility of Trustee
27* Financial Data Schedule
99.1* Letter of Transmittal
99.2 Notice of Guarantee of Delivery
99.3 Company letter
99.4 Client letter
99.5 Guidelines for certification of taxpayer identification number
</TABLE>
- ------------------------
* Filed herewith.
<PAGE>
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
[GREAT SEAL OF THE STATE OF OKLAHOMA -- 1907]
CERTIFICATE OF INCORPORATION
To all to Whom these Presents shall come Greetings:
WHEREAS, the Certificate of Incorporation duly signed and required of
CONTINENTAL GAS, INC.
has been filed in the office of the Secretary of State as provided by the
Laws of the State of Oklahoma.
NOW THEREFORE, I, the undersigned, Secretary of State of the State of
Oklahoma by virtue of the powers vested in me by law do hereby issue this
Certificate of Incorporation.
IN TESTIMONY WHEREOF, I hereunto set my hand and cause to be affixed the
Great Seal of the State of Oklahoma.
Filed at the City of Oklahoma City this 4th day of April, 1990.
[Great Seal of the State
of Oklahoma -- 1907]
/s/ HANNAH D. ATKINS
---------------------------
Secretary of State
By: /s/ BETH R. GARNER
---------------------------
<PAGE>
FEE: $1.00 PER $1,000.00 FILED
ON AUTHORIZED CAPITAL APRIL 2, 1990
MINIMUM FEE: $50.00 OKLAHOMA SECRETARY OF STATE
FOR OFFICE USE ONLY
CERTIFICATE OF INCORPORATION
(PROFIT)
FILE IN DUPLICATE
PRINT CLEARLY
TO THE SECRETARY OF STATE OF THE STATE OF OKLAHOMA
1. The name of this corporation is
Continental Gas, Inc.
- -------------------------------------------------------------------------------
(Please refer to procedure sheet for statutory words required to be included in
the corporate name.)
2. The address of the registered office in the State of Oklahoma and the name
of the registered agent at such address are
Harold Hamm 621 S. Harding Enid Garfield 73703
- -------------------------------------------------------------------------------
NAME NUMBER & STREET ADDRESS CITY COUNTY ZIP CODE
(P.O. BOXES ARE NOT ACCEPTABLE.)
---
3. The duration of the corporation is Perpetual
-------------------------------------
(Perpetual unless otherwise stated)
4. The purpose or purposes for which the corporation is formed are:
To engage in any lawful act or activity for which corporations may be
organized under the general corporation law of Oklahoma.
RECEIVED
April 24, 1990
Oklahoma Secretary of State
5. The aggregate number of shares which the corporation shall have authority
to issue, the designation of each class, the number of shares of each class, and
the par value of the shares of each class are as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES SERIES PAR VALUE PER SHARE
(Or, if without par value, so state)
<S> <C> <C>
Common 100 (Common) Zero (0)
----- ----------
Preferred Zero (0) N/A
--------- ----------
TOTAL NO. SHARES 100 TOTAL AUTHORIZED CAPITAL ZERO (0)
----- ----------
</TABLE>
<PAGE>
6. If the powers of the incorporator(s) are to terminate upon the filing of
the certificate of incorporation, the names and mailing addresses of the persons
who are to serve as directors:
NAME MAILING ADDRESS CITY STATE ZIP CODE
---- --------------- ---- ----- --------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
7. The name and mailing address of the undersigned incorporator(s):
NAME MAILING ADDRESS CITY STATE ZIP CODE
---- --------------- ---- ----- --------
HAROLD HAMM P.O. BOX 10549 ENID, OK 73706
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THE UNDERSIGNED, for the purpose of forming a corporation under the laws
of the State of Oklahoma does certify that the facts herein stated are true,
and has accordingly hereunto set my hand this 23RD day of APRIL , 19 90 .
/s/ HAROLD HAMM
------------------------------
Signature
------------------------------
Signature
-2-
<PAGE>
FEE: $10.00
FILED
CHANGE OR DESIGNATION
OF MAY 6, 1993
REGISTERED AGENT
AND/OR Okla. Secretary of State
LOCATION OF
REGISTERED OFFICE FOR OFFICE USE ONLY
FILE IN DUPLICATE
PLEASE PRINT CLEARLY
PLEASE NOTE: this form MUST be filed with a letter from the Oklahoma Tax
Commission stating the franchise tax has been paid by the corporation for the
current fiscal year, with the EXCEPTION of not for profit corporations.
TO: THE OKLAHOMA SECRETARY OF STATE, 101 State Capitol, Oklahoma City, OK
73105
The undersigned, for the purpose of changing its registered agent and/or
registered office pursuant to Section 1023/1026 of the Oklahoma General
Corporation Act, hereby certifies:
8. The name of the corporation Is: Continental Gas, Inc.
-------------------------------------------
RECEIVED
- -------------------------------------------------------------------------------
MAY 6, 1993
9. The location of the registered office of this corporation is:
OKLA. SECRETARY OF STATE
302 North Independence - 3rd Floor Enid Garfield 73701
- -------------------------------------------------------------------------------
Street Address City County Zip Code
(P.O. Boxes are NOT acceptable.)
10. The name of the registered agent at such address upon whom process against
this corporation may be served is:
Harold Hamm
- -------------------------------------------------------------------------------
IN WITNESS WHEREOF, said corporation has caused this certificate to be
signed by its __________ President and attested by its _______ Secretary, this
28TH day of APRIL, 1993.
/s/ HAROLD HAMM Harold Hamm
- ------------------------------------------ -----------------------------------
by _____President (Please Print name)
ATTEST:
/s/ CHRISTINE ROBERTS Christine Roberts
- ------------------------------------------ -----------------------------------
by _____Secretary (Please Print name)
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
CONTINENTAL GAS, INC.
MAY 13, 1998
ARTICLE I. OFFICES
The principal office of the Corporation in the State of Oklahoma shall
be located in the City of Enid, County of Garfield. The Corporation may have
such other offices, either with-in or without the State of Oklahoma, as the
Board of Directors may designate or as the business of the Corporation may
require from time to time.
ARTICLE II. SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the Shareholders
shall be held on the first Tuesday in the month of December in each year, at the
hour of 10:00 o'clock a.m., for the purpose of electing Directors and for the
transaction of such other business as may come before the meeting. If the day
fixed for the annual meeting shall be a legal holiday in the State of Oklahoma,
such meeting shall be held on the next succeeding business day. If the election
of Directors shall not be held on the shareholders, or at any adjournment
thereof, the Board of Directors shall cause the election to be held at a special
meeting of the shareholders as soon thereafter as conveniently may be.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders,
for any purpose or purposes, may be called by the President or by the Board
of Directors, and shall be called by the President or at the request of the
holders of a majority of all the outstanding shares of the Corporation
entitled to vote at the
<PAGE>
meeting.
SECTION 3. PLACE OF MEETING. Meetings of the shareholders of the
Corporation shall be held at the principal office of the Corporation or at any
other place, within or without the State of Oklahoma, designated by the
President of the Corporation upon his receiving such a request in writing from
the holders of a majority of the outstanding shares of the Corporation.
SECTION 4. NOTICE OF MEETING. Written or printed notice stating
the place, day and hour of the meeting and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than two (2) days before the date of the meeting, either personally or by mail,
by or at the direction of the President, or the Secretary, or the officer or
persons calling the meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail, addressed to the
shareholders at his address as it appears on the stock transfer book of the
Corporation, with postage thereon prepaid. Notice of any meeting may be waived
in writing by any shareholder or by his attendance at the meeting. Such written
waiver may be given before or after the meeting and shall be filed with
Secretary.
SECTION 5. ADJOURNED MEETINGS. If any meeting of the shareholders
be adjourned for not more than forty (40) days, no notice as to such adjourned
meeting need be given other than announcement at the meeting at which such
adjournment is taken.
-2-
<PAGE>
SECTION 6. DETERMINATION OF VOTERS. Each shareholder shall be
entitled to one vote for each share of stock standing in his or her name on the
books of the Corporation ten (10) days prior to any such meeting. The stock
ledger shall be the only evidence as to who are shareholders who are entitled to
vote at any adjournment of any such meeting or to receive notice of the meeting,
notwithstanding any transfer of any share on the books of the Corporation after
said date.
SECTION 7. VOTING LISTS. On the day of any meeting of the
shareholders, the Secretary shall have available for inspection at the place of
meeting the share ledger which shall show in alphabetical order all persons
entitled to represent shares at the meeting.
SECTION 8. QUORUM. A majority of the outstanding shares of the
Corporation entitled to vote, represented in person to by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of
the outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice.
At such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
SECTION 9. PROXIES. At all meetings of shareholders, a
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<PAGE>
shareholder may vote by proxy executed in writing by the shareholder or by his
duly authorized attorney in fact. Such proxy shall be filed with the secretary
of the Corporation before or at the time of the meeting.
SECTION 10. INFORMAL ACTION BY SHAREHOLDERS. Unless otherwise
provided by law, any action required to be taken at a meeting of the
shareholders, or any other action which may be taken without if a consent in
writing, setting forth the action so taken, shall be signed by all of the
shareholders entitled to vote with respect to the subject matter thereof.
ARTICLE III. BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the
Corporation shall be managed by its Board of Directors.
SECTION 2. NUMBER, ELECTION, TENURE AND QUALIFICATIONS. The
number of directors which shall constitute the entire board shall not be less
than one (1) nor more than nine (9), and shall consist of two (2) directors
until, within the limits above specified, a different number of directors,
which shall constitute the wholte board, shall be determined by resolution of
the board. Each director shall hold office until the next annual meeting of
shareholders and until his successor shall have been elected and qualified. At
each annual meeting of shareholders, the shareholders shall elect directors for
the ensuing year.
SECTION 3. REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held without other notice than this bylaw immediately after,
and at the same place as, the annual
-4-
<PAGE>
meeting of shareholders. The Board of Directors may provide, by resolution,
the time and place for the holding of additional regular meetings without
other notice than such resolution.
SECTION 4. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of the President or any one (1)
director. The person or persons authorized to call special meetings of the
Board of Directors may fix the place for holding any special meeting of the
Board of Directors called by them.
SECTION 5. NOTICE. Notice of any special meeting shall be given
at least two (2) days previously thereto by written notice delivered personally
or mailed to each director at his business address. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail so
addressed, with postage thereon prepaid. Any directors may waive notice of any
meeting either before or after such meeting. The attendance of a director at a
meeting shall constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened.
SECTION 6. QUORUM. A majority of the number of directors fixed by
Section 2 of this Article III shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors, but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice. The act of the
-5-
<PAGE>
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
SECTION 7. ACTION WITHOUT A MEETING. Any action which might be
taken at a meeting of the Board of Directors may be taken without a meeting if a
record or memorandum thereof be made in writing and signed by all members of the
Board.
SECTION 8. VACANCIES. Any vacancy occurring in the Board of
Directors may be filled by the affirmative vote of a majority of the remaining
directors though less than a quorum for the Board of Directors. A director
elected to fill a vacancy shall be elected for the unexpired term of his
predecessor in office.
SECTION 9. COMPENSATION. By resolution of the Board of Directors,
the Directors may be paid their expenses, if any, of attendance at each meeting
of the Board of Directors, and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as Director. Any director
may also serve the Corporation in any other capacity and receive compensation
therefor.
SECTION 10. REMOVAL. The entire Board of Directors or any
individual director may be removed from office, with or without cause, by a vote
of the shareholders holding a majority of the outstanding shares entitled to
vote at any annual or special meeting of shareholders. In the event anyone or
more directors are so removed, new directors may be elected at the same meeting.
SECTION 11. INTERESTED DIRECTOR. Any director who
-6-
<PAGE>
also serves the Corporation in some other office or capacity shall be
entitled to vote upon his own salary and such vote shall be counted as the
votes of other directors are counted.
SECTION 12. ANNUAL REPORT. The Board of Directors shall not be
required to furnish an annual report to the shareholders.
SECTION 13. POST-INCORPORATION SUBSCRIPTION. The Board of
Directors shall have authority and power to act upon post-incorporation
subscriptions.
ARTICLE IV. OFFICERS
SECTION 1. NUMBER. The officers of the Corporation shall be such
officers as may be necessary to enable the corporation to sign instruments
and stock certificates which comply with the Oklahoma General Corporation
Act. Such officers may include a Chief Executive Officer, a President, one or
more Vice-Presidents (who may be designated by different classes), a
Secretary and a Treasurer, each of whom shall be elected by the Board of
Directors. Such other officers and assistant officers as may be deemed
necessary may be elected or appointed by the Board of Directors. Any two (2)
or more offices may be held by the same person, except for President and
Secretary. None of the officers, except the President, need be directors.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the
Corporation to be elected by the Board of Directors shall be elected annually by
the Board of Directors at the first meeting of the Board of Directors held after
each annual meeting of the
-7-
<PAGE>
shareholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as convenient may be. Each
officer shall hold office until his successor shall have been duly elected
and shall have qualified or until his death or until he shall resign or shall
have been removed in the manner hereinafter provided.
SECTION 3. REMOVAL. Any officer or agent elected or appointed by
the Board of Directors may be removed by the Board of Directors whenever in its
judgment the best interests of the Corporation would be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. Any officer or agent may be removed by a vote of the shareholders
of a majority of the outstanding shares, with or without cause.
SECTION 4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
SECTION 5. CHAIRMAN OF THE BOARD. The chairman of the board, if
one has been elected, shall preside at all meetings of the board, shareholders
and committees of which he is a member. He shall have such powers and perform
such duties as may be authorized by the board of directors.
SECTION 6. CHIEF EXECUTIVE OFFICER. If the board of directors has
elected a chairman of the board, it may designate the chairman of the board as
the chief executive officer of the
-8-
<PAGE>
corporation. If no chairman of the board has been elected, or in his absence
or inability to act, or if no such designation has been made by the board of
directors, the president shall be the chief executive officer of the
corporation. The chief executive officer shall (i) have the overall
supervision of the business of the corporation and shall direct the affairs
and policies of the corporation, subject to any directions which may be given
by the board of directors, (ii) shall have authority to designate the duties
and powers of officers and delegate special powers and duties to specified
officers, so long as such designations shall not be inconsistent with the
laws of the State of Oklahoma, these bylaws or action of the board of
directors, and shall in general have all other powers and shall perform all
other duties incident to the chief executive officer of a corporation and
such other powers and duties as may be prescribed by the board of directors
from time to time.
SECTION 7. PRESIDENT. If the board of directors has elected a
chairman of the board and designated such officer as the chief executive officer
of the corporation, the president shall serve as chief operating officer and be
subject to the control of the board of directors and the chairman of the board.
He shall have such powers and perform such duties as from time to time may be
assigned to him by the board of directors or the chairman of the board. If the
board of directors has not elected a chairman of the board, or if one has been
elected and has not been designated the chief executive officer of the
corporation, then
-9-
<PAGE>
the president shall be the chief executive officer of the corporation with
the powers and duties provided in Article IV, Section 7, of these bylaws. In
any event, the president shall have the power to execute, and shall execute,
bonds, deeds, mortgages, extensions, agreements, modification of mortgage
agreements, leases and contracts or other instruments of the corporation
except where required or permitted by law to be otherwise signed and executed
and except where the signing and execution thereof shall be expressly
delegated by the board of directors or by the president to some other officer
or agent of the corporation. The president may sign with the secretary or an
assistant secretary, certificates for shares of stock of the corporation, the
issuance of which shall have been duly authorized by the board of directors,
and shall vote, or give a proxy to any other person to vote, all shares of
the stock of any other corporation standing in the name of the corporation.
The president, in general, shall have all other powers and shall perform all
other duties as may be prescribed by the board of directors from time to time.
SECTION 8. VICE-PRESIDENT. In the absence of the President or in
the event of his death, inability or refusal to act, the Vice-President (or if
there is more than one vice president, in the order designated by the board,
absent such designation, in the order of their first election to that office)
shall perform the duties of the President, and when so acting, shall have all
the powers of and be subject to all the
-10-
<PAGE>
restrictions upon the President. The Vice-President shall perform such other
duties as from time to time may be assigned to him by the Chairman of the
Board, by the President or by the Board of Directors.
SECTION 9. SECRETARY. The Secretary shall: (a) keep the minutes
of the shareholders and of the Board of Directors that all notices are duly
given in accordance with the provisions of these bylaws or as required by law;
(b) be custodian of the corporate records and that the seal of the Corporation
is affixed to all documents, the execution of which on behalf of the Corporation
under its seal is duly authorized; and (c) in general, perform all duties as
from time to time may be assigned to him by the President or by the Board of
Directors.
SECTION 10. TREASURER. If required by the Board of Directors, the
Treasurer shall give a bond for the faithful discharge of his duties in such sum
and with such surety or sureties as the Board of Directors shall determine. He
shall: (a) have charge and custody of and be responsible for all funds and
securities of the Corporation; receive and give receipts for moneys due and
payable to the Corporation from any source whatsoever, and deposit of all such
moneys in the name of the Corporation in such banks, trust companies or other
depositories as shall be selected in accordance with the provisions of Articles
VI of these bylaws; (b) keep correct and complete records of account showing the
financial condition of the Corporation and furnish a financial statement of
financial condition whenever
-11-
<PAGE>
requested by the Board of Directors; and (c) in general perform all of the
duties as from time to time may be assigned to him by the President or by the
Board of Directors.
SECTION 11. SALARIES. The salaries of the Officers shall be fixed
from time to time by the Board of Directors and no officers shall be
prevented from receiving such salary by reason of the fact that he is also a
director of the Corporation.
ARTICLE V. INDEMNIFICATION OF DIRECTORS,
OFFICERS AND EMPLOYEES
The Corporation shall indemnify any director, officer, or employee, or
former directors, officers, or employees of the Corporation, or any person who
may have served at its request as director, officer, or employee of another
corporation in which it owns shares of stock, or of which it is a creditor,
against expenses actually and necessarily incurred by him in connection with the
defense of any action, suit or proceeding in which he is made a party by reason
of being or having been such director, officer, or employee, except in relation
to matters as to which he shall adjudge in such action, suit, or proceeding to
be liable for negligence or misconduct in the performance of duty. The
Corporation may also reimburse to any director, officer, or employee the
reasonable costs of settlement of any such action, suit, or proceeding, if it
shall be found by a majority of a committee composed of the directors not
involved in the matter in controversy (whether or not a quorum) that it was to
the interests of the Corporation that such settlement be made and that such
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<PAGE>
director, officer, or employee was not guilty of negligence or misconduct. Such
rights or indemnification and reimbursement shall not be deemed exclusive of any
other right to which such director, officer, or employee may be entitled under
bylaw, agreement, vote of shareholders, or otherwise.
ARTICLE VI. NEGOTIABLE INSTRUMENTS,
DEEDS AND CONTRACTS
SECTION 1. EXECUTION OF NEGOTIABLE INSTRUMENTS. All checks,
drafts, notes, bonds, bills of exchange and orders for the payment of money of
the Corporation shall, unless otherwise directed by the Board of Directors, or
unless otherwise required by laws, be signed by any two of the following
officers: President, Vice-President, Treasurer, Assistant Treasurer, Secretary,
Assistant Secretary.
SECTION 2. EXECUTIVE OF DEEDS, CONTRACTS, ETC. Subject always to
the specific directions of the Board of Directors, all deeds and mortgages made
by the Corporation and all other written contracts and agreements to which the
Corporation shall be a party shall be executed in its name by the President or
the Vice-President and attested by the Secretary, or an Assistant Secretary; and
the Secretary or an Assistant Secretary, when necessary or required, shall affix
the Corporate seal thereto.
SECTION 3. DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board of Directors
may select.
-13-
<PAGE>
ARTICLE VII. CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing
shares of the Corporation shall be in such form as shall be determined by the
Board of Directors. Such certificates shall be signed by the President and by
the Secretary or by such other officers authorized by law and by the Board of
Directors so to do. All certificates for shares shall be consecutively numbered
or otherwise identified. The name and address of the person to whom the shares
and dates of issue, shall be entered on the stock transfer books of the
Corporation. All certificates surrendered to the Corporation for transfer shall
be cancelled and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and cancelled, except
that in case of a lost, destroyed or mutilated certificate a new one may be
issued therefor upon such terms and indemnity to the Corporation as the Board of
Directors may prescribe.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of the
Corporation shall be made only on the stock transfer books of the Corporation by
the holder of record thereof or by his legal representative, who shall furnish
proper evidence of authority to transfer, or by his attorney hereunto authorized
by power of attorney duly executed and filed with the Secretary of the
Corporation, and on surrender for cancellation of the certificate for such
shares. The person in whose name shares stand on the books of the Corporation
shall be deemed by the Corporation to be
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<PAGE>
the owner thereof for all purposes.
SECTION 3. RESTRICTIONS ON TRANSFERS. Any transfer of stock of
the Corporation, whether inter vivos, testate to by operation of law, shall be
made only in the following manner;
(a) The transferor must first offer to the Corporation the
right to redeem such shares upon the affirmative vote of a majority of the Board
of Directors.
(b) If said offer, as provided in (a), is refused, the
transferor must offer the stock to the other shareholders of the Corporation
according to their proportionate holdings.
(c) If said offers as provided in (a) and (b) are refused,
the transferor must offer the stock to any of the shareholders who may wish to
purchase same.
(d) The consideration to be paid for transfers in
accordance with (a), (b) and (c) shall be an amount equal to the proportion of
the total fair market value of the assets of the Corporation which such stock
bears to the total number of outstanding shares or the fair market value of said
stock at the time of transfer, whichever is lesser.
ARTICLE VIII. FISCAL YEAR
The fiscal year of the Corporation shall begin on the 1st day of
January and end on the 31st day of December in each year.
ARTICLE IX. DIVIDENDS
SECTION 1. DECLARATION. The Board of Directors may from
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<PAGE>
time to time declare, and the Corporation may pay, dividends on its
outstanding shares in the manner and upon the terms and conditions provided
by law and its CertificateIncorporation.
SECTION 2. DETERMINATION OF SHAREHOLDERS ENTITLED TO DIVIDENDS.
The Board of Directors shall fix a time, not exceeding forty (40) days preceding
date of payment, as a record date for the determination of shareholders entitled
to dividends, and only registered shareholders on the date so fixed shall be
entitled to such dividends, notwithstanding any transfers of any shares on the
books of the Corporation after the record date.
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the Corporation
and the state of incorporation and the words, "Corporate Seal".
ARTICLE X. AMENDMENTS
These bylaws may be altered, amended or repealed or new bylaws may be
adopted in accordance with the Corporation's Certificate of Incorporation and
the Oklahoma General Corporation Act.
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<PAGE>
OFFICE OF THE SECRETARY OF STATE
STATE OF OKLAHOMA
[GREAT SEAL OF THE STATE OF OKLAHOMA -- 1907]
CERTIFICATE OF INCORPORATION
WHEREAS, the Certificate of Incorporation of
CONTINENTAL CRUDE CO.
has been filed in the office of the Secretary of State as provided by the
laws of the State of Oklahoma.
NOW THEREFORE, I, the undersigned, Secretary of State of the State of
Oklahoma, by virtue of the powers vested in me by law, do hereby issue this
certificate evidencing such filing.
IN TESTIMONY WHEREOF, I hereunto set my hand and cause to be affixed the
Great Seal of the State of Oklahoma.
Filed in the City of Oklahoma City this 6th day of May, 1998.
[Great Seal of the State
of Oklahoma -- 1907]
/s/ TOM COLE
----------------------------
Secretary of State
By: /s/ BETH R. GARNER
----------------------------
<PAGE>
CERTIFICATE OF INCORPORATION
STATE OF OKLAHOMA )
) ss.
COUNTY OF OKLAHOMA )
TO SECRETARY OF STATE OF THE STATE OF OKLAHOMA
ARTICLE ONE
The name of this Corporaiton is:
CONTINENTAL CRUDE CO.
ARTICLE TWO
The address of its registered office in the State of Oklahoma is:
302 N. Independence, Enid, Oklahoma 73701
ARTICLE THREE
The name of its registered agent is: Harold Hamm.
ARTICLE FOUR
The duration of the corporation is perpetual.
ARTICLE FIVE
The purposes for which this Corporation is fored are:
1. To engage in the business of oil and gas marketing;
2. To engage in any lawful act or activity for which corporations may
organize under the general corporation laws of Oklahoma.
ARTICLE SIX
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<PAGE>
The aggregate number of shares which the corporation shall have authority to
issue, the designation of each class, the number of shares of each class, and
the par value of each class are as follows:
Class - Common
Total number of shares - 3,000
Par value - $1.00
Total Authorized Capital - $3,000.00
ARTICLE SEVEN
The name and mailing address of the incorporator is:
Harold Hamm, 302 N. Independence, Enid, Oklahoma 73701.
THE UNDERSIGNED, for the purpose of forming a corporation under the laws
of the State of Oklahoma does hereby certify that the facts herein stated are
true, and has accordingly hereunto set his hand this 6th day of May, 1998.
/s/ HAROLD HAMM
------------------------
Signature
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<PAGE>
BYLAWS
OF
CONTINENTAL CRUDE CO.
July 1, 1998
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article I - Shareholders' Meetings ........................ 1
Section 1 - Annual Meeting .............................. 1
Section 2 - Special Meetings ............................ 1
Section 3 - Notice of Meetings .......................... 1
Section 4 - Quorum ...................................... 2
Section 5 - Voting ...................................... 2
Section 6 - List of Shareholders ........................ 2
Section 7 - Action by Written Consent of Shareholders ... 2
Section 8 - Order of Business............................ 3
Article II - Directors .................................... 3
Section 1 - Powers ...................................... 3
Section 2 - Number ...................................... 3
Section 3 - Vacancies.................................... 3
Section 4 - Place of Meetings ........................... 3
Section 5 - Regular Meetings ............................ 3
Section 6 - Special Meetings ............................ 3
Section 7 - Quorum ...................................... 4
Section 8 - Presence at Meeting ......................... 4
Section 9 - Action Without Meeting ...................... 4
Section 10- Committees of the Board ..................... 4
Section 11- Compensation ................................ 5
Section 12- Advisory Directors .......................... 5
Article III - Officers and Employees ...................... 5
Section 1 - Election .................................... 5
Section 2 - Term, Removal and Vacancies ................. 5
Section 3 - Chairman of the Board ....................... 5
Section 4 - Chief Executive Officer ..................... 6
Section 5 - President ................................... 6
Section 6 - Vice Presidents ............................. 7
Section 7 - Secretary ................................... 7
Section 8 - Treasurer ................................... 7
Section 9 - Divisional Officers ......................... 7
Article IV - Stock Certificates and Transfer Books ........ 7
Section l - Certificates ................................ 7
Section 2 - Record Ownership ............................ 8
Section 3 - Transfer Agent and Registrar................. 8
Section 4 - Lost Certificates ........................... 8
Section 5 - Transfer of Stock ........................... 8
Section 6 - Fixing Date for Determination of Share-
holders of Record ........................ 9
<PAGE>
Article V - General Provisions ............................ 9
Section 1 - Offices ..................................... 9
Section 2 - Voting of Stock ............................. 9
Section 3 - Notices ..................................... 9
Section 4 - Waiver of Notice ............................ 10
Article VI - Indemnification of Officers,
Directors, Employees and Agents ........... 10
Section 1 - Actions Other Than in the Right of the
Corporation ............................... 10
Section 2 - Actions by or in the Right of the
Corporation ............................... 10
Section 3 - Advancement of Expenses ..................... 11
Section 4 - Insurance ................................... 11
Section 5 - Indemnification Required .................... 11
Section 6 - Entitlement; Nonexclusivity ................. 11
Article VII - Amendments .................................. 12
</TABLE>
ii
<PAGE>
BYLAWS
OF
CONTINENTAL CRUDE CO.
ARTICLE I
SHAREHOLDERS' MEETINGS
SECTION 1. ANNUAL MEETING. The annual meeting of shareholders for the election
of directors and the transaction of such other business as may properly come
before the meeting shall be held at 10:00 a.m. on the first Tuesday in the month
of December of each year or at such other time as shall be determined by the
board of directors. If the day fixed for the annual meeting is a legal holiday,
such meeting shall be held on the next succeeding business day. The meeting
shall be held at the principal offices of the corporation or at such other place
as shall be determined by a majority of the directors.
SECTION 2. SPECIAL MEETINGS. Special meetings of shareholders may be called by
the board of directors, or by the president, and shall be held at such places,
within or without the State of Oklahoma, as may be specified in the call of any
meeting. Further, the president, or in his absence, the secretary, shall call a
special meeting at the request in writing of shareholders owning not less than a
majority of the entire capital stock of the corporation issued and outstanding
and entitled to vote, provided that such request states the purpose or purposes
for the proposed meeting.
SECTION 3. NOTICE OF MEETINGS. Unless otherwise provided in the Oklahoma
General Corporation Act, written notice of every meeting of shareholders stating
the place, date, hour and, in the case of a special meeting, purposes thereof,
shall, except when otherwise required by law, be given not less than two (2) nor
more than sixty (60) days before the date of the meeting to each shareholder
entitled to vote thereat; provided that such notice may be waived in writing,
signed by the person entitled to notice either before or after the time stated
therein. Neither the business to be transacted at nor the purpose of any
meeting need be specified in such written waiver of notice.
At any meeting at which a quorum of shareholders is present, in person
or represented by proxy, the chairman of the meeting or the holders of the
majority of the shares of stock present or represented by proxy may adjourn from
time to time until the meeting's business is completed. At the adjourned
meeting, the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each shareholder of
record entitled to vote at the meeting. Otherwise, no notice need be
<PAGE>
given.
If mailed, notice shall be deemed to be given when deposited in the
United States mail, addressed to the shareholder at his address as it appears on
the records of the corporation, with postage thereon prepaid.
SECTION 4. QUORUM. The holders of a majority of the shares of stock entitled
to vote, present in person or by proxy, shall, except as otherwise provided by
law, constitute a quorum for the transaction of business at all meetings of the
shareholders.
SECTION 5. VOTING. Each shareholder shall at every meeting of shareholders be
entitled to one vote, in person or by proxy, for each share of stock having
voting power held by such shareholder. Unless otherwise provided by law, no
proxy shall be voted on after three years from its date unless the proxy
provides for a longer period. All matters other than elections shall be decided
by a majority of the votes in person or by proxy, except as otherwise required
by the laws of Oklahoma. All elections of directors shall be decided by a
plurality.
SECTION 6. LIST OF SHAREHOLDERS. Unless otherwise provided in the Oklahoma
General Corporation Act, at least ten days before every meeting of
shareholders, a complete list of the shareholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
shareholder, and the number of shares registered in the name of each
shareholder, shall be prepared by the officer in charge of the stock ledger.
Such list shall be open to the examination of any shareholder, for any
purpose germane to the meeting, during ordinary business hours, for a period
of at least ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice
of the meeting, or, if not specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof and may be inspected by any shareholder
who is present. The stock ledger shall be the only evidence as to who are
shareholders entitled to examine the stock ledger, the list required by this
section or the books of the corporation, or to vote in person or by proxy at
any meeting of shareholders.
SECTION 7. ACTION BY WRITTEN CONSENT OF SHAREHOLDERS. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes which would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. The board of
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<PAGE>
directors may fix, in advance, the record date for determining shareholders
entitled to express consent to corporate action in writing without a meeting,
which shall not be more than sixty (60) days prior to the taking of such
action. Prompt notice of the taking of corporate action without a meeting by
less than unanimous written consent shall be given to those shareholders who
have not consented in writing.
SECTION 8. ORDER OF BUSINESS. The chairman of the meeting shall determine the
order of business and the procedure at the meeting, including regulation of the
manner of voting and the conduct of discussion.
ARTICLE II
DIRECTORS
SECTION 1. POWERS. The business and affairs of the corporation shall be
managed by or under the direction of its board of directors.
SECTION 2. NUMBER. The number of directors which shall constitute the entire
board shall not be less than two (2) nor more than nine (9) and shall consist of
three (3) directors until, within the limits above specified, a different number
of directors, which shall constitute the whole board, shall be determined by
resolution of the board.
SECTION 3. VACANCIES. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, though less than a quorum, and the directors so
chosen shall hold office until the next annual election of the class for which
each such director has been chosen and until his successor is duly elected and
qualified, or until his earlier resignation or removal.
SECTION 4. PLACE OF MEETINGS. Board meetings may be held at such places,
within or without the State of Oklahoma, as stated in these bylaws or as the
board may from time to time determine or as may be specified in the call of any
meetings.
SECTION 5. REGULAR MEETINGS. The annual meeting of the board shall be held
without call or notice immediately after and at the same general place as the
annual meeting of the shareholders, for the purpose of electing officers and
transacting any other business that may properly come before the meeting.
Additional regular meetings of the board may be held without call or notice at
such place and at such time as shall be fixed by resolution of the board but in
the absence of such resolution shall be held upon call by the president or a
majority of directors.
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<PAGE>
SECTION 6. SPECIAL MEETINGS. Special meetings of the board may be called by
the chairman of the board or the president or by a majority of the directors
then in office. Notice of special meetings shall be given to each director at
least two (2) days before the meeting. Such notice shall set forth the time and
place of such meeting, but need not, unless otherwise required by law, state the
purposes of the meeting. A majority of the directors present at any meeting may
adjourn the meeting from time to time without notice other than announcement at
the meeting.
SECTION 7. QUORUM. A majority of the total number of directors, excluding any
vacancies, shall constitute a quorum for the transaction of business at any
meeting of the board; provided, however, that in no event shall a number which
is less than one-third (1/3) of the total number of directors constitute a
quorum. If at any meeting a quorum is not present, a majority of the directors
present may adjourn the meeting from time to time without notice other than
announcement at the meeting until a quorum is present. The act of a majority of
directors present in person at a meeting at which a quorum is present shall be
the act of the board of directors.
SECTION 8. PRESENCE AT MEETING. Members of the board of directors, or of any
committee thereof, may participate in a meeting of such board or committee by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and such
participation shall be deemed presence in person at such meeting.
SECTION 9. ACTION WITHOUT MEETING. Any action required or permitted to be
taken at any meeting of the board of directors, or of any committee thereof, may
be taken without a meeting if all members of the board or such committee, as the
case may be, consent thereto in writing, and such written consent is filed with
the minutes of the proceedings of the board or such committee.
SECTION 10. COMMITTEES OF THE BOARD. The board of directors may, by
resolution passed by a majority of the whole board, designate one or more
committees, each such committee to consist of one or more of the directors
of the corporation and have such name or names as may be determined from time
to time by resolution adopted by the board. The board may designate one or
more directors as alternate members of any committee who may replace any
absent or disqualified member at any meeting of the committee. Any such
committee, to the extent provided in the resolution, shall have and may
exercise the powers of the board of directors in the management of the
business and affairs of the corporation, and generally perform such duties
and exercise such powers as may be directed or delegated by the board of
directors from time to time, and, furthermore, may authorize the seal of the
corporation to be
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<PAGE>
affixed to all papers which may require it. In the absence or
disqualification of any member of such committee or committees, the member or
members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint
another member of the board to act at the meeting in the place of such absent
or disqualified member. Each such committee shall keep regular minutes of
its proceedings and report the same to the board of directors as and when
required.
SECTION 11. COMPENSATION. Each director shall be reimbursed for reasonable
expenses incurred in attending any meeting of the board or of any committee of
which such director shall be a member. The board may by resolution allow
reasonable fees to some or all of the directors for attendance at any board or
committee meeting. No such payment shall preclude any directors from serving
the corporation in any other capacity and receiving compensation therefor.
SECTION 12. ADVISORY DIRECTORS. The board of directors may appoint individuals
who may but need not be directors, officers, or employees of the corporation to
serve as members of an advisory board of directors of the corporation and may
fix fees or compensation for attendance at meetings of any such advisory boards.
The members of any such advisory board may adopt and from time to time may amend
rules and regulations for the conduct of their meetings and shall keep minutes
which shall be submitted to the board of directors of the corporation. The term
of office of any member of the advisory board of directors shall be at the
pleasure of the board of directors and shall expire the day of the annual
meeting of the shareholders of the corporation. The function of any such
advisory board of directors shall be to advise with respect to the affairs of
the corporation.
ARTICLE III
OFFICERS AND EMPLOYEES
SECTION 1. ELECTION. At the annual meeting of the board, there shall be
elected such officers as may be necessary to enable the corporation to sign
instruments and stock certificates which comply with the Oklahoma General
Corporation Act. Such officers may include a chairman of the board, chief
executive officer, a president, one or more vice presidents (who may be
designated by different classes), a secretary, a treasurer and other
officers. No officer need be a director. Two or more offices may be held by
the same person.
SECTION 2. TERM, REMOVAL AND VACANCIES. All officers shall serve at the
pleasure of the board. Any officer elected or appointed by the board may be
removed at any time by the board whenever in its
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<PAGE>
judgment the best interests of the corporation would be served thereby, but
such removal shall be without prejudice to the contract rights, if any, of
the person so removed. A vacancy in any office shall be filled by the board
of directors.
SECTION 3. CHAIRMAN OF THE BOARD. The chairman of the board, if one has been
elected, shall preside at all meetings of the board, shareholders and committees
of which he is a member. He shall have such powers and perform such duties as
may be authorized by the board of directors.
SECTION 4. CHIEF EXECUTIVE OFFICER. If the board of directors has elected a
chairman of the board, it may designate the chairman of the board as the
chief executive officer of the corporation. If no chairman of the board has
been elected, or in his absence or inability to act, or if no such
designation has been made by the board of directors, the president shall be
the chief executive officer of the corporation. The chief executive officer
shall (i) have the overall supervision of the business of the corporation and
shall direct the affairs and policies of the corporation, subject to any
directions which may be given by the board of directors, (ii) shall have
authority to designate the duties and powers of officers and delegate special
powers and duties to specified officers, so long as such designations shall
not be inconsistent with the laws of the State of Oklahoma, these bylaws or
action of the board of directors, and shall in general have all other powers
and shall perform all other duties incident to the chief executive officer of
a corporation and such other powers and duties as may be prescribed by the
board of directors from time to time.
SECTION 5. PRESIDENT. If the board of directors has elected a chairman of
the board and designated such officer as the chief executive officer of the
corporation, the president shall serve as chief operating officer and be
subject to the control of the board of directors and the chairman of the
board. He shall have such powers and perform such duties as from time to
time may be assigned to him by the board of directors or the chairman of the
board. If the board of directors has not elected a chairman of the board, or
if one has been elected and has not been designated the chief executive
officer of the corporation, then the president shall be the chief executive
officer of the corporation with the powers and duties provided in Article
III, Section 4, of these bylaws. In any event, the president shall have the
power to execute, and shall execute, bonds, deeds, mortgages, extensions,
agreements, modification of mortgage agreements, leases and contracts or
other instruments of the corporation except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the board of directors or
by the president to some other officer or agent of the corporation. The
president
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<PAGE>
may sign with the secretary or an assistant secretary, certificates
for shares of stock of the corporation, the issuance of which shall have been
duly authorized by the board of directors, and shall vote, or give a proxy to
any other person to vote, all shares of the stock of any other corporation
standing in the name of the corporation. The president, in general, shall
have all other powers and shall perform all other duties as may be prescribed
by the board of directors from time to time.
SECTION 6. VICE PRESIDENTS. A vice president shall perform such duties as may
from time to time be assigned to him by the board or by the chairman or the
president. In the absence or inability to act of the president, the vice
president (or if there is more than one vice president, in the order designated
by the board and, absent such designation, in the order of their first election
to that office) shall perform the duties and discharge the responsibilities of
the president.
SECTION 7. SECRETARY. The secretary shall be the keeper of the corporate
records, and shall give notice of, attend, and record minutes of meetings of
shareholders and directors. He shall, in general, perform all duties incident
to the office of secretary and such other duties as may be assigned to him by
the board or by the president. The assistant secretaries, if any, shall have
such duties as shall be delegated to them by the secretary and, in the
absence of the secretary, the senior of them present shall discharge the
duties of the secretary.
SECTION 8. TREASURER. The treasurer shall be responsible for (i) the custody
and safekeeping of all of the funds and securities of the corporation, (ii) the
receipt and deposit of all moneys paid to the corporation, (iii) where necessary
or appropriate, the endorsement for collection on behalf of the corporation of
all checks, drafts, notes and other obligations payable to the corporation, (iv)
the disbursement of funds of the corporation under such rules as the board may
from time to time adopt, (v) maintaining the general books of account of the
corporation, and (vi) the performance of such further duties as are incident to
the office of treasurer or as may be assigned to him by the board or by the
president. The assistant treasurers, if any, shall have such duties as shall be
delegated to them by the treasurer, and in the absence of the treasurer, the
senior one of them present shall discharge the duties of the treasurer.
SECTION 9. DIVISIONAL OFFICERS. The board may from time to time appoint
officers of various divisions of the corporation. Divisional officers shall
not by virtue of such appointment become officers of the corporation.
Subject to the direction of the president of the corporation, the president
of a division shall have general charge, control and supervision of all the
business operations of his division, and the other divisional officers shall
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<PAGE>
have such duties and authority as may be prescribed by the president of the
division.
ARTICLE IV
STOCK CERTIFICATES AND TRANSFER BOOKS
SECTION 1. CERTIFICATES. Every shareholder shall be entitled to have a
certificate in such form as the board shall from time to time approve, signed
by, or in the name of the corporation by (i) the chairman of the board, if
any, the president or any vice president and (ii) the treasurer, or assistant
treasurer, or the secretary or an assistant secretary, certifying the number
of shares owned by him in the corporation. During the time in which the
corporation is authorized to issue more than one class of stock or more than
one series of any class, there shall be set forth on the face or back of each
certificate issued a statement that the corporation will furnish without
charge to each shareholder who so requests, the designations, preferences and
relative, participating, option or other special rights of each class of
stock or series thereof of the corporation and the qualifications,
limitations or restrictions of such preferences and/or rights.
The signatures of any of the officers on a certificate may be
facsimiles. In case any officer who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer
before such certificate is issued, it may be issued by the corporation with
the same effect as if he were such officer at the date of issue.
SECTION 2. RECORD OWNERSHIP. A record of the name and address of the holder
of each certificate, the number of shares represented thereby, and the date
of issue thereof shall be made on the corporation's books. The corporation
shall be entitled to treat the holder of record of any share or shares of
stock as the holder in fact thereof, and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in any share on the
part of any other person, whether or not it shall have express or other
notice thereof, except as required by the laws of Oklahoma.
SECTION 3. TRANSFER AGENT AND REGISTRAR. The corporation may maintain one
or more transfer offices or agencies, each in charge of a transfer agent
designated by the board, where the shares of stock of the corporation shall
be transferable. The corporation may also maintain one or more registry
offices, each in charge of a registrar designated by the board, wherein such
shares of stock shall be registered. To the extent authorized by the board,
the same entity may serve both as a transfer agent and registrar.
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<PAGE>
SECTION 4. LOST CERTIFICATES. Any person claiming a stock certificate in
lieu of one lost, stolen, mutilated or destroyed shall give the corporation
an affidavit as to his ownership of the certificate and of the facts which go
to prove its loss, theft, mutilation or destruction. He shall also, if
required by the board, give the corporation a bond, in such form as may be
approved by the board, sufficient to indemnify the corporation against any
claim that may be made against it on account of the alleged loss or theft of
the certificate or the issuance of a new certificate.
SECTION 5. TRANSFER OF STOCK. Transfer of shares shall, except as provided
in Section 4 of this Article IV, be made on the books of the corporation only
by direction of the person named in the certificate or his attorney, lawfully
constituted in writing, and only upon surrender for cancellation of the
certificate therefor, duly endorsed or accompanied by a written assignment of
the shares evidenced thereby.
SECTION 6. FIXING DATE FOR DETERMINATION OF SHAREHOLDERS OF RECORD.
(a) In order that the corporation may determine the shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or to express consent to any corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion or exchange of stock or for the purpose
of any other lawful action, the board may fix, in advance, a record date,
which shall not be more than sixty (60) nor less than ten (10) days before
the date of such meetings, nor more than sixty (60) prior to any other action.
(b) A determination of shareholders of record entitled to notice of and
to vote at a meeting of shareholders shall apply to any adjournment of the
meeting; provided, however, that the board may fix a new record date for the
adjourned meeting.
ARTICLE V
GENERAL PROVISIONS
SECTION 1. OFFICES. The principal office of the corporation shall be
maintained in Enid, Oklahoma, or at such other place as the board may
determine. The corporation may have such other offices as the board may from
time to time determine.
SECTION 2. VOTING OF STOCK. Unless otherwise ordered by the board, the
chairman of the board, if any, the president or any
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<PAGE>
vice president shall have full power and authority, in the name and on behalf
of the corporation, to attend, act and vote at any meeting of shareholders of
any company in which the corporation may hold shares of stock, and at any
such meeting shall possess and may exercise any and all rights and powers
incident to the ownership of such shares and which, as the holder thereof,
the corporation might possess and exercise if personally present, and may
exercise such power and authority through the execution of proxies or may
delegate such power and authority to any other officer, agent or employee of
the corporation.
SECTION 3. NOTICES. Unless otherwise provided herein, whenever notice is
required to be given, it shall not be construed to require personal notice, but
such notice may be given in writing by depositing the same in the United States
mail, addressed to the individual to whom notice is being given at such address
as appears on the records of the corporation, with postage there on prepaid.
Such notice shall be deemed to be given at the time when the same shall be thus
deposited.
SECTION 4. WAIVER OF NOTICE. Whenever any notice is required to be given, a
waiver thereof in writing, signed by the person or persons entitled to the
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE VI
INDEMNIFICATION OF OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS
SECTION 1. ACTIONS OTHER THAN IN THE RIGHT OF THE CORPORATION. The
corporation shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation) by reason of the fact
that he is or was a director, officer, employee or agent of the corporation
or is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture
or other enterprise against expenses (including attorney's fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him
in connection with such action, suit or proceeding, if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interest of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that his conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent
shall not of itself create a presumption that the person did not act in good
faith and
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in a manner which he reasonably believed to be in or not opposed to
the best interest of the corporation and with respect to any criminal action
or proceeding had reasonable cause to believe that his conduct was unlawful.
SECTION 2. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The corporation
shall indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including
attorney's fees) actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit, if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interest of the corporation; except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that
the court in which such action or suit was brought shall determine, upon
application, that despite the adjudication of liability, but in the view of
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the court shall deem proper.
SECTION 3. ADVANCEMENT OF EXPENSES. Expenses incurred in defending a civil or
criminal action, suit or proceeding may be paid by the corporation in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized herein.
SECTION 4. INSURANCE. The corporation may purchase (upon resolution duly
adopted by the board of directors) and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability.
SECTION 5. INDEMNIFICATION REQUIRED. To the extent that a director, officer,
employee or agent of the corporation has been successful on the merits or
otherwise in defense of any action,
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suit, or proceeding referred to herein or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
SECTION 6. ENTITLEMENT; NONEXCLUSIVITY. Every such person shall be
entitled, without demand by him upon the corporation or any action by the
corporation, to enforce his right to such indemnity in an action at law
against the corporation. The right of indemnification and advancement of
expenses hereinabove provided shall not be deemed exclusive of any rights to
which any such person may now or hereafter be otherwise entitled and
specifically, without limiting the generality of the foregoing, shall not be
deemed exclusive of any rights pursuant to statute or otherwise, of any such
person in any such action, suit or proceeding to have assessed or allowed in
his favor against the corporation or otherwise, his costs and expenses
incurred therein or in connection therewith or any part thereof.
ARTICLE VII
AMENDMENTS
These bylaws may be altered, amended or repealed or new bylaws may be
adopted in accordance with the corporation's Certificate of Incorporation and
the Oklahoma General Corporation Act.
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INDENTURE dated as of July 24, 1998 among Continental Resources, Inc.,
an Oklahoma corporation (the "COMPANY"), as issuer, the Subsidiary Guarantors
(as hereinafter defined) as guarantors and United States Trust Company of New
York, as trustee (the "TRUSTEE").
The Company, the Subsidiary Guarantors and the Trustee agree as
follows for the benefit of each other and for the equal and ratable benefit
of the Holders (as hereinafter defined) of the 10 1/4% Senior Subordinated
Notes due 2008 of the Company (the "INITIAL SECURITIES"), and if and when
issued in exchange for Initial Securities as provided in the Registration
Rights Agreement (as hereinafter defined), the Company's 10 1/4% Senior
Subordinated Notes due 2008 (the "EXCHANGE SECURITIES" and, together with the
Initial Securities, the "SECURITIES"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.1. DEFINITIONS.
"ACQUIRED DEBT" means, with respect to any specified Person (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or becomes a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.
"AGENT" means any Registrar, Paying Agent or co-registrar.
"APPLICABLE PREMIUM" means, with respect to a Security at the
redemption date, the greater of (i) 1% of the principal amount of such Security
and (ii) the excess of (A) the present value at such time of (1) the redemption
price of such Security at August 1, 2003, as set forth in Section 3.7, PLUS (2)
all required interest payments (excluding accrued but unpaid interest) due on
such Security through August 1, 2003, computed
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2
using a discount rate equal to the Treasury Rate plus 50 basis
points, over (B) the then-outstanding principal amount of such Security.
"ASSET SALE" means (i) the sale, lease, conveyance or other
disposition by the Company or any of its Restricted Subsidiaries (but excluding
the creation of a Lien) of any assets including, without limitation, by way of a
sale and leaseback; PROVIDED that the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company and its
Subsidiaries taken as a whole shall be governed by Sections 4.13 and/or 5.1
hereof and not by Section 4.10 hereof), and (ii) the issue or sale by the
Company or any of its Restricted Subsidiaries of Equity Interests of any of the
Company's Subsidiaries (including the sale by the Company or a Restricted
Subsidiary of Equity Interests in an Unrestricted Subsidiary), in the case of
either clause (i) or (ii), whether in a single transaction or a series of
related transactions (a) that have a fair market value in excess of $5.0 million
or (b) for net proceeds in excess of $5.0 million. Notwithstanding the
foregoing, the following shall not be deemed to be Asset Sales: (1) a transfer
of assets by the Company to a Wholly Owned Restricted Subsidiary of the Company
or by a Wholly Owned Restricted Subsidiary of the Company to the Company or to
another Wholly Owned Restricted Subsidiary of the Company, (2) an issuance of
Equity Interests by a Wholly Owned Restricted Subsidiary of the Company to the
Company or to another Wholly Owned Restricted Subsidiary of the Company, (3) the
making of a Permitted Investment or a Restricted Payment that is permitted by
Section 4.7 PROVIDED that the sale, lease, conveyance or other disposition by
the Company or any of its Restricted Subsidiaries of an Investment shall be
deemed an Asset Sale, (4) the abandonment, farm-out, lease or sublease of
undeveloped oil and gas properties in the ordinary course of business, (5) the
trade or exchange by the Company or any Restricted Subsidiary of the Company of
any oil and gas property owned or held by the Company or such Restricted
Subsidiary for any oil and gas property or interest therein owned or held by
another Person, including any cash or Cash Equivalents necessary in order to
achieve an exchange of equivalent value; provided that any such cash or Cash
Equivalents received by the Company or such Restricted Subsidiary will be
subject to the provisions described in the second and third paragraphs in
Section 4.10 which the Board of Directors of the Company determines in good
faith to be of approximately equivalent value, (6) the sale or transfer of
hydrocarbons or other mineral products in the ordinary course of business, (7)
the sale of oil and gas properties in connection with tax credit transactions
complying with Section 29 or any successor or analogous provisions of the
Internal Revenue Code of 1986, as amended (the "Code") or (8) the sale or
transfer of surplus or obsolete equipment in the ordinary course of business.
"ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such
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3
transaction, determined in accordance with GAAP) of the obligation of the
lessee for net rental payments during the remaining term of the lease
included in such sale and leaseback transaction (including any period for
which such lease has been extended or may, at the option of the lessor, be
extended.
"BANKRUPTCY CODE" means Title 11 of the United States Code, as
amended.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or a
Subsidiary Guarantor, as applicable, or any authorized committee of such Board
of Directors.
"BORROWING BASE" means, as of any date, the aggregate amount of
borrowing availability as of such date under all Credit Facilities that
determines availability on the basis of a borrowing base or other asset-based
calculation.
"BUSINESS DAY" means any day other than a Legal Holiday.
"CAPITAL LEASE OBLIGATION" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited), (iv) in the case of a limited liability
company or similar entity, any membership or similar interests therein and (v)
any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than twelve months from the date of acquisition, (iii) certificates of
deposit and eurodollar time deposits with maturities of twelve months or less
from the date of acquisition, bankers' acceptances with maturities not exceeding
twelve months and overnight bank deposits, in each case with any lender party to
any of the Credit Facilities or with any domestic commercial bank having capital
and surplus in excess of $500 million and a Thompson Bank Watch Rating of "B" or
better, (iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above, (v) commercial paper having a rating of at least P1 from
Moody's and a rating of at least A1 from S&P, and (vi) investments in money
market or other mutual funds
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4
substantially all of whose assets comprise securities of types described in
clauses (ii) through (v) above.
"CHANGE OF CONTROL" means the occurrence of any of the following:
(i) prior to the first public offering of Voting Stock of the Company,
either (x) Permitted Holders cease to be the "beneficial owner(s)" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, of more than 50% of the total voting power of the Voting Stock
of the Company, or (y) Permitted Holders cease to be entitled by voting
power, contract or otherwise to elect or cause the election of directors of
the Company having a majority of the total voting power of the Board of
Directors, in each case, whether as a result of issuance of securities of
the Company, any merger, consolidation, liquidation or dissolution of the
Company, any direct or indirect transfer of securities by any Permitted
Holder or otherwise (for purposes of this clause (i) and clause (ii) below,
Permitted Holders shall be deemed to beneficially own any Voting Stock of
an entity (the "specified entity") held by any other entity (the "parent
entity") so long as the Permitted Holders beneficially own, directly or
indirectly, a majority of the Voting Stock of the parent entity;
(ii) following the first public offering of Voting Stock of the
Company, any "Person"(as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or becomes
the beneficial owner (as defined in clause (i) above, except that a Person
shall be deemed to have "beneficial ownership" of all shares that any such
Person has the right to acquire within one year), directly or indirectly,
of more than 50% of the Voting Stock of the Company; PROVIDED that the
Permitted Holders beneficially own (as defined in clause (i) above),
directly or indirectly, in the aggregate a lesser percentage of the Voting
Stock of the Company than such other Person and do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors;
(iii) the sale, lease, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of
related transactions, of all or substantially all of the assets of the
Company and its Subsidiaries taken as a whole to any "Person" or group of
related Persons (a "Group"); (as such term is used in Sections 13(d) and
14(d) of the Exchange Act);
(iv) the adoption of a plan relating to the liquidation or dissolution
of the Company; and
(v) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (together with
any new directors
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5
whose election by such Board of Directors or whose nomination for election
by the shareholders of the Company was approved by a vote of a majority of
the directors of the Company then still in office who were either directors
at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors then in office.
"COMMISSION" means the Securities and Exchange Commission.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any
period, the Consolidated Net Income of such Person and its Restricted
Subsidiaries for such period INCREASED BY (i) an amount equal to any
extraordinary or non-recurring loss, and any net loss realized in connection
with an Asset Sale (together with any related provision for taxes), to the
extent such losses were included in computing such Consolidated Net Income, PLUS
(ii) provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries for such period, to the extent that such provision for
taxes was included in computing such Consolidated Net Income, PLUS (iii)
consolidated interest expense of such Person and its Restricted Subsidiaries for
such period, whether paid or accrued (including, without limitation,
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, imputed interest with
respect to Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letters of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Interest Rate Hedging Agreements), to the
extent that any such expense was included in computing such Consolidated Net
Income, PLUS (iv) depreciation, depletion and amortization expenses (including
amortization of goodwill and other intangibles) for such Person and its
Restricted Subsidiaries for such period to the extent that such depreciation,
depletion and amortization expenses were included in computing such Consolidated
Net Income, PLUS (v) exploration expenses for such Person and its Restricted
Subsidiaries for such period to the extent such exploration expenses were
included in computing such Consolidated Net Income, PLUS (vi) costs incurred in
connection with acquisitions that would be eligible for capitalization treatment
under GAAP, but have been expensed at the time of incurrence, PLUS (vii) other
non-cash charges (excluding any such non-cash charge to the extent that it
represents an accrual of or reserve for cash charges in any future period or
amortization of a prepaid cash expense that was paid in a prior period) of such
Person and its Restricted Subsidiaries for such period, including, without
limitation, any ceiling limitation writedowns and non-cash losses or charges to
net income resulting from the net change in value of such Person's
mark-to-market portfolio of Oil and Gas Commodity Price Risk Management
Contracts, to the extent that
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6
such other non-cash charges were included in computing such Consolidated Net
Income, in each case, on a consolidated basis and determined in accordance
with GAAP. Notwithstanding the foregoing, the provision for taxes on the
income or profits of, and the depreciation, depletion and amortization and
other non-cash charges and expenses of, a Restricted Subsidiary of the
relevant Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent (and in the same proportion) that
the Net Income of such Restricted Subsidiary was included in calculating the
Consolidated Net Income of such Person and only if a corresponding amount
would be permitted at the date of determination to be dividended to such
Person by such Restricted Subsidiary without prior governmental approval
(that has not been obtained), and without direct or indirect restriction
pursuant to the terms of its charter and all agreements, instruments,
judgments, decrees, orders, statutes, rules and governmental regulations
applicable to that Restricted Subsidiary or its stockholders.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; PROVIDED that (i) the Net Income (but not loss) of any Person that is
not a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded and (iv) the cumulative effect of a change in accounting principles
shall be excluded, provided, however, that for purposes of a determination
pursuant to the provisions of Section 4.7 hereof, there shall be deducted from
the Net Income of the Company and its Restricted Subsidiaries for such period an
amount equal to payments, distributions and dividends paid by the Company
pursuant to clause (7) of the second paragraph of Section 4.7.
"CONSOLIDATED NET WORTH" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Restricted Subsidiaries,
determined on a consolidated basis in accordance with GAAP, as of the end of the
most recent fiscal quarter of the Company ending prior to the taking of any
action for the purpose of which the determination is being made and for which
financial statements are available (but in no event ending more than 135 days
prior to the taking of such action), as (i)
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7
the par or stated value of all outstanding Capital Stock of the Company, PLUS
(ii) paid-in capital or capital surplus relating to such Capital Stock, PLUS
(iii) any retained earnings or earned surplus, LESS (a) any accumulated
deficit (in each case excluding any minority interest) and (b) any amounts
attributable to Disqualified Stock.
"CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of the
Trustee specified in Section 12.2 hereof or such other address as to which the
Trustee may give notice to the Company.
"CREDIT FACILITIES" means, with respect to the Company, one or more
debt facilities (including, without limitation, the Existing Credit Facility) or
commercial paper facilities with banks or other institutional lenders providing
for revolving credit loans, term loans, production payments, receivables
financing (including through the sale of receivables to such lenders or to
special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended, restated, modified,
renewed, increased, supplemented, refunded, replaced or refinanced in whole or
in part from time to time. Indebtedness under Credit Facilities outstanding on
the date on which the Securities are first issued and authenticated under this
Indenture (after giving effect to the use of proceeds thereof) shall be deemed
to have been incurred on such date in reliance on the exception provided by
clause (b) of the definition of Permitted Indebtedness set forth in Section 4.9
hereof.
"DEFAULT" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"DEPOSITARY" means, with respect to the Securities issued in the form
of one or more Global Securities, The Depository Trust Company or another Person
designated as Depositary by the Company, which must be a clearing agency
registered under the Exchange Act.
"DESIGNATED SENIOR DEBT" means (i) the Existing Credit Facility and
(ii) any other Senior Debt permitted under this Indenture which, at the date of
determination, has an aggregate principal amount outstanding of, or under which,
at the date of determination, the holders thereof are committed to lend up to,
at least $10 million and is specifically designated by the Company in the
instrument evidencing or governing such Senior Debt as "Designated Senior Debt"
for purposes of this Indenture.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, is
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8
convertible or is exchangeable for Indebtedness or Disqualified Stock or
redeemable at the option of the holder thereof, in whole or in part, in each
case on or prior to the date that is 91 days after (x) the date on which the
Securities mature or (y) the date on which there are no Securities
outstanding.
"DOLLAR-DENOMINATED PRODUCTION PAYMENTS" means production payment
obligations recorded as liabilities in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE SECURITIES" means, if and when issued in exchange for the
Initial Securities as provided in the Exchange and Registration Rights
Agreement, the Company's 10 1/4% Senior Subordinated Notes due 2008.
"EXISTING CREDIT FACILITY" means that certain Credit Agreement, dated
as of May 14, 1998, among the Company, Bank One, Oklahoma, N.A., as Agent and
lender and the other parties thereto, including any related notes, guarantees,
security or pledge agreements, collateral documents, instruments and agreements
executed by the Company or any Subsidiary of the Company in connection
therewith, and in each case as amended, restated, modified, renewed, increased,
supplemented, refunded, replaced or refinanced, in whole or in part, from time
to time, whether or not with the same or other lenders or agents and whether
provided under the original Existing Credit Facility or any other credit
agreement or indenture.
"FIXED CHARGES" means, with respect to any Person for any period, the
sum, without duplication, of (i) the consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Interest Rate Hedging Agreements); (ii) the consolidated interest expense of
such Person and its Restricted Subsidiaries that was capitalized during such
period; (iii) any interest expense on Indebtedness of another Person that is
guaranteed by such Person or any of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or any of its Restricted Subsidiaries (whether or
not such guarantee or Lien is called upon) and (iv)
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9
the product of (a) all cash dividend payments (and non-cash dividend payments
in the case of a Person that is a Restricted Subsidiary, unless paid in
Equity Interests that are not Disqualified Stock) on any series of preferred
stock of such Person or any of its Restricted Subsidiaries, times (b) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate
of such Person, expressed as a decimal, in each case, on a consolidated basis
and in accordance with GAAP. When calculating the amount of Fixed Charges,
any interest expense attributable to any Person shall be included in such
calculation to the same extent the Net Income of such Person was included in
the calculation of Consolidated Net Income in connection with calculating the
Fixed Charge Coverage Ratio.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Restricted Subsidiaries incurs, assumes, guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues or
redeems preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, guarantee or redemption
of Indebtedness, or such issuance or redemption of preferred stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. In addition, for purposes of making the computation referred to above,
(i) acquisitions that have been made by the referent Person or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the Calculation
Date (including, without limitation, any acquisition to occur on the Calculation
Date) shall be deemed to have occurred on the first day of the four-quarter
reference period and any cost savings or expense reductions attributable at the
time of such computation or to be attributable in the future to such
acquisition, shall be included in such computation, to the extent that such
adjustments would be permitted under Article 11 of Regulation S-X and
Consolidated Cash Flow for such reference period shall be calculated without
giving effect to clause (iii) of the proviso set forth in the definition of
Consolidated Net Income, (ii) the net proceeds of Indebtedness incurred or
Disqualified Stock issued by the referent Person pursuant to the first paragraph
of Section 4.9 hereof during the four-quarter reference period or subsequent to
such reference period and on or prior to the Calculation Date shall be deemed to
have been received by the referent Person or any of its Restricted Subsidiaries
on the first day of the four-quarter reference period and applied to its
intended use on such date, (iii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of
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10
prior to the Calculation Date, shall be excluded and (iv) the Fixed Charges
attributable to discontinued operations, as determined in accordance with
GAAP, and operations or businesses disposed of prior to the Calculation Date,
shall be excluded, but only to the extent that the obligations giving rise to
such Fixed Charges shall not be obligations of the referent Person or any of
its Restricted Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession which are in effect on the date hereof.
"GOVERNMENT SECURITIES" means securities that are (a) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (b) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act), as custodian with respect to any such Government
Security or a specific payment of principal of or interest on any such
Government Security held by such custodian for the account of the holder of such
depository receipt; PROVIDED, that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of
the Government Security or the specific payment of principal of or interest on
the Government Security evidenced by such depository receipt.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"HOLDER" means a Person in whose name a Security is registered on the
Registrar's books.
"INDEBTEDNESS" means, with respect to any Person, without duplication,
(a) any indebtedness of such Person, whether or not contingent, (i) in respect
of borrowed money, (ii) evidenced by bonds, notes, debentures or similar
instruments, (iii) evidenced by letters of credit (or reimbursement agreements
in respect thereof) or banker's acceptances, (iv) representing Capital Lease
Obligations, (v) representing the balance deferred and unpaid of the purchase
price of any property, except any such
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11
balance that constitutes an accrued expense or trade payable, (vi)
representing any obligations in respect of Interest Rate Hedging Agreements
or Oil and Gas Hedging Contracts, and (vii) in respect of any Production
Payment, (b) all indebtedness of others secured by a Lien on any asset of
such Person (whether or not such indebtedness is assumed by such Person),
(c) obligations of such Person in respect of production imbalances,
(d) Acquired Debt of such Person, (e) Attributable Debt of such Person, and
(f) to the extent not otherwise included in the foregoing, the guarantee by
such Person of any Indebtedness of any other Person.
The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as
described above and the maximum liability, on the occurrence of the
contingency giving rise to the obligation, of any contingent obligations
described above. The amount of indebtedness at any date in respect of
(i) Credit Facilities shall be the outstanding principal amount thereof at
such date plus any outstanding letters of credit (or reimbursement
obligations in respect thereof) issued thereunder at such date and
(ii) Interest Rate Hedging Agreements or Oil and Gas Hedging Contracts at
such date shall be an amount equal to the net termination value of such
agreement or arrangement giving rise to such obligation that would be payable
at such time.
"INDENTURE" means this Indenture, as amended or supplemented from
time to time.
"INITIAL PURCHASER" means Chase Securities Inc. as initial
purchaser of the Notes.
"INSTITUTIONAL ACCREDITED INVESTORS" means an institutional
"accredited investor" within the meaning of Rules 501(a)(1), (2), (3) or (7)
under the Securities Act.
"INTEREST RATE HEDGING AGREEMENTS" means, with respect to any
Person, the obligations of such Person under (i) interest rate swap
agreements, interest rate cap agreements and interest rate collar agreements
and (ii) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates.
"INVESTMENTS" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations,
but excluding trade credit and other ordinary course advances customarily
made in the Oil and Gas Business) advances (excluding commission, travel and
similar advances to officers and employees made in the ordinary course of
business), capital contributions, purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities, together
with all items that are or would be classified as investments on a balance
sheet prepared in accordance with GAAP; PROVIDED that the following shall not
constitute Investments: (i) an acquisition of assets, Equity
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12
Interests or other securities by the Company for consideration consisting of
common equity securities of the Company, (ii) Interest Rate Hedging
Agreements entered into in compliance with the covenant set forth in clause (g)
of the second paragraph of Section 4.9, (iii) Oil and Gas Hedging Agreements
entered into in compliance with the covenant set forth in clause (h) of the
second paragraph of Section 4.9, (iv) endorsements of negotiable instruments
and documents in the ordinary course of business, (v) extensions of trade
credit on commercially reasonable terms in accordance with normal trade
practices, and (vi) Cash Equivalents, bonds, notes, debentures or other
securities received in accordance with the limitations set forth in Section
4.10. If the Company or any Restricted Subsidiary of the Company sells or
otherwise disposes of any Equity Interests of any direct or indirect
Restricted Subsidiary of the Company such that, after giving effect to any
such sale or disposition, such entity is no longer a Subsidiary of the
Company, the Company shall be deemed to have made an Investment on the date
of any such sale or disposition equal to the fair market value of the Equity
Interests of such Subsidiary not sold or disposed of.
"ISSUE DATE" means the date on which the Initial Securities are
originally issued.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which
banking institutions in The City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed. If a
payment date is a Legal Holiday at a place of payment, payment may be made at
that place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period.
"LIEN" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such asset, whether or not filed, recorded or otherwise perfected under
applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give a security interest in and any filing of or agreement to give
any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
"MOODY'S" means Moody's Investors Service, Inc. and its successors.
"NET INCOME" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however, (i) any
gain or loss, together with any related provision for taxes on such gain or
loss, realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or
(b) the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any
of its
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13
Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain or
loss, together with any related provision for taxes on such extraordinary or
nonrecurring gain or loss.
"NET PROCEEDS" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale, but
excluding cash amounts placed in escrow, until such amounts are released to
the Company), net of the direct costs relating to such Asset Sale (including,
without limitation, legal, accounting, investment banking and other
professional fees and expenses, and sales commissions) and any relocation
expenses incurred as a result thereof, taxes paid or payable as a result
thereof (after taking into account any available tax credits or deductions
and any tax sharing arrangements), amounts required to be applied to the
repayment of Indebtedness (other than Indebtedness under any Senior Debt)
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such
asset or assets established in accordance with GAAP and any reserve
established for future liabilities.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides any guarantee or
credit support of any kind (including any undertaking, guarantee, indemnity
or agreement or instrument that would constitute Indebtedness) or (b) is
directly or indirectly liable (as a guarantor or otherwise); (ii) no default
with respect to which (including any rights that the holders thereof may have
to take enforcement action against an Unrestricted Subsidiary) would permit
(upon notice, lapse of time, or both) any holder of any other Indebtedness of
the Company or any of its Restricted Subsidiaries to declare a default on
such other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity; and (iii) the explicit terms of which
provide that there is no recourse against any of the assets of the Company or
its Restricted Subsidiaries.
"NOTE CUSTODIAN" means the Trustee or the Registrar, as custodian
with respect to the Securities in global form, or any successor entity
thereto or any entity acting as custodian with respect to Securities in
global form.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFERING" means the offering of the Securities by the Company.
"OFFICER" means, with respect to any Person, the
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14
Chairman of the Board, the Chief Executive Officer, the President, the Chief
Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant
Treasurer, the Controller, the Secretary, the Assistant Secretary or any
Vice-President of such Person.
"OFFICERS' CERTIFICATE" means a certificate signed on behalf of the
Company, by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 12.5 hereof.
"OIL AND GAS BUSINESS" means (i) the acquisition, exploration,
exploitation, development, operation and disposition of interests in oil, gas
and other hydrocarbon properties, (ii) the gathering, marketing,
distribution, treating, processing, storage, selling and transporting of any
production from such interests or properties of the Company and its
subsidiaries and the marketing of oil and gas obtained from unrelated
Persons, (iii) any business relating to exploration for or development,
production, treatment, processing, storage, transportation, gathering or
marketing of oil, gas and other minerals and products produced in association
therewith, (iv) any business relating to oilfield sales and service and (v) any
activity that is ancillary to or necessary or appropriate for the activities
described in clauses (i) through (iv) of this definition.
"OIL AND GAS HEDGING CONTRACTS" means any oil and gas purchase or
commodity price risk management hedging agreement, and other agreement or
arrangement, entered into in the ordinary course of business, in each case,
that is designed to provide protection against oil and gas price fluctuations.
"OPINION OF COUNSEL" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of
Section 12.5 hereof. The counsel may be an employee of or counsel to the
Company, any Subsidiary Guarantor or the Trustee.
"PARI PASSU INDEBTEDNESS" means indebtedness which ranks PARI PASSU
in right of payment to the Securities.
"PERMITTED HOLDERS" means (i) any stockholder of the Company on the
Issue Date; (ii) family members or relatives of the persons described in
clause (i); (iii) any trusts created for the benefit of the persons described
in clauses (i) or (ii); (iv) in the event of the incompetence or death of any
of the persons described in clauses (i) or (ii), such person's estate,
executor, administrator, committee or other personal representatives or
beneficiaries; and (v) any Permitted Holder Subsidiary.
"PERMITTED HOLDER SUBSIDIARY" means, with respect to any Permitted
Holder, (i) any corporation more than 50% of the
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15
outstanding voting stock of which is owned, directly or indirectly, by one or
more Permitted Holders, or by one or more other Permitted Holder Subsidiaries
of such Permitted Holders,or by one or more Permitted Holders and one or more
other Permitted Holder Subsidiaries of such Permitted Holders, (ii) any
general partnership, limited liability company, joint venture or similar
entity more than 50% of the outstanding partnership, membership or similar
interest of which is owned directly or indirectly, by one or more Permitted
Holders, or by one or more other Permitted Holder Subsidiaries of such
Permitted Holders, or by one or more Permitted Holders and one or more other
Permitted Holder Subsidiaries of such Permitted Holders and (iii) any limited
partnership of which one or more Permitted Holders or any Permitted Holder
Subsidiary of such Permitted Holders is a general partner.
"PERMITTED INDEBTEDNESS" has the meaning given in the covenant
described in Section 4.9.
"PERMITTED INVESTMENTS" means (a) any Investment in the Company or
in a Restricted Subsidiary of the Company; (b) any Investment in Cash
Equivalents; (c) any Investment by the Company or any Restricted Subsidiary
of the Company in a Person if, as a result of such Investment and any related
transactions that at the time of such Investment are contractually mandated
to occur, (i) such Person becomes a Restricted Subsidiary of the Company or
(ii) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys all or substantially all of its assets to, or is
liquidated into, the Company or a Restricted Subsidiary of the Company; (d) any
Investment made as a result of the receipt of non-cash portion of the Cash
Consideration from an Asset Sale that was made pursuant to and in compliance
with Section 4.10 hereof or not constituting an Asset Sale by reason of the
$5 million threshold contained in the definition thereof; (e) any Investment
by the Company in any Person engaged in the Oil and Gas Business or assets
used in the Oil and Gas Business in exchange for Equity Interests in the
Company (other than Disqualified Stock); (f) shares of Capital Stock received
in connection with any good faith settlement of a bankruptcy proceeding
involving a trade creditor; (g) Interest Rate Hedging Agreements or Oil and
Gas Hedging Contracts; (h) loans and advances to employees in the ordinary
course of business for bona fide business purposes; (i) operating agreements,
joint ventures, partnership agreements, working interests, royalty interests,
mineral leases, processing agreements, farm-out or farm-in agreements,
contracts for the sale, transportation or exchange of oil and natural gas,
unitization agreements, pooling arrangements, area of mutual interest
agreements, production sharing agreements or other similar or customary
agreements, transactions, properties, interests or arrangements, and
Investments and expenditures in connection therewith or pursuant thereto, in
each case made or entered into in the ordinary course of the Oil and Gas
Business, excluding however, Investments in corporations other than any
Investment received pursuant to the provisions set forth in Section 4.10; and
(j) any other Investments in any Person or Persons not otherwise permitted to
<PAGE>
16
be made pursuant to clauses (a)-(i) above, when taken together with all other
Investments made pursuant to this clause (j) that are at the time
outstanding, having an aggregate amount (such amount to be calculated on a
cost basis) not to exceed the greater of (i) $15 million and (ii) 5% of Total
Assets, as calculated at the time of such Investment.
"PERMITTED LIENS" means (i) Liens securing Indebtedness of a
Subsidiary or Liens securing Senior Debt that is outstanding on the date of
issuance of the Securities and Liens securing Senior Debt that is permitted
by the terms of this Indenture to be incurred; (ii) Liens in favor of the
Company or any Restricted Subsidiary; (iii) Liens on property existing at the
time of acquisition thereof by the Company or any Subsidiary of the Company
and Liens on property or assets of a Subsidiary existing at the time it
became a Subsidiary, PROVIDED that such Lien was not created in contemplation
of the acquisition of the property and provided further that no such Lien
shall extend to any assets other than the acquired property or the property
of the acquired Subsidiary; (iv) Liens incurred on deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance or other kinds of social security, or to secure the
payment or performance of tenders, statutory or regulatory obligations,
surety or appeal bonds, performance bonds or other obligations of a like
nature incurred in the ordinary course of business (including lessee or
operator obligations under statutes, governmental regulations or instruments
related to the ownership, exploration and production of oil, gas and minerals
on state or federal lands or waters); (v) Liens existing on the date of this
Indenture; (vi) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good faith
by appropriate proceedings promptly instituted and diligently concluded,
PROVIDED that any reserve or other appropriate provision as shall be required
in conformity with GAAP shall have been made therefor; (vii) statutory liens
of landlords, mechanics, suppliers, vendors, warehousemen, carriers or other
like Liens arising in the ordinary course of business; (viii) judgment Liens
not giving rise to an Event of Default so long as any appropriate legal
proceeding that may have been duly initiated for the review of such judgment
shall not have been finally terminated or the period within which such
proceeding may be initiated shall not have expired; (ix) Liens on, or related
to, properties or assets to secure all or part of the costs incurred in the
ordinary course of the Oil and Gas Business for the exploration,
exploitation, drilling, development, production, gathering, processing,
transportation, marketing, storage or operation thereof; (x) Liens on
pipeline or pipeline facilities that arise under operation of law; (xi) Liens
arising under operating agreements, joint venture agreements, partnership
agreements, oil and gas leases, farm-out or farm-in agreements, division
orders, contracts for the sale, transportation or exchange of oil or natural
gas, unitization and pooling declarations and agreements, area of mutual
interest agreements and other agreements that are customary in the Oil and
Gas Business; (xii) Liens reserved in
<PAGE>
17
oil and gas mineral leases for bonus or rental payments and for compliance
with the terms of such leases, (xiii) Liens securing the Securities,
(xiv) Liens constituting survey exceptions, encumbrances, easements, and
reservations of, and rights to others for, rights-of-way, zoning and other
restrictions as to the use of real properties, and minor defects of title
which, in the case of any of the foregoing, do not secure the payment of
borrowed money, and in the aggregate do not materially adversely affect the
value of the assets of the Company and its Restricted Subsidiaries, taken as
a whole, or materially impair the use of such properties for the purposes for
which such properties are held by the Company or such Subsidiaries, (xv) any
interest or title of a lessor under any Capital Lease Obligation or operating
lease, (xvi) Liens resulting from the deposit of funds or evidences of
Indebtedness in trust for the purpose of defeasing Indebtedness of the
Company or any of the Restricted Subsidiaries, (xvii) Liens securing
obligations under Interest Rate Hedging Agreements or Oil and Gas Commodity
Price Risk Management Contracts, (xviii) Liens upon specific items of
inventory or other goods and proceeds of the Company or any Restricted
Subsidiary securing the Company's or such Restricted Subsidiary's, as the
case may be, obligations in respect of bankers' acceptances issued or created
for the account of the Company or such Restricted Subsidiary, as the case may
be, to facilitate the purchase, shipment or storage of such inventory or
other goods, (xix) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof,
(xx) Liens encumbering property or assets under construction arising from
progress or partial payments by a customer of the Company or its Restricted
Subsidiaries relating to such property or assets, (xxi) Liens encumbering
deposits made to secure Obligations arising from statutory, regulatory,
contractual or warranty requirements of the Company or any of its Restricted
Subsidiaries, including rights of offset and set-off, (xxii) Liens securing
Purchase Money Debt; provided however that the related Purchase Money Debt
shall not be secure by any property or assets of the Company or any
Restricted Subsidiary other than the property and assets acquired by the
Company with the proceeds of such Purchase Money Debt, (xxiii) Liens on the
Capital Stock of Unrestricted Subsidiaries, (xxiv) Liens to secure any
Permitted Refinancing Debt, provided that the Indebtedness so exchanged,
extended, refinanced, renewed, replaced, defeased or refunded was secured by
Liens permitted pursuant to clause (iii) or (iv) of this definition, provided
however, that (a) such new Liens shall be limited to all or part of the same
property that secured the original Lien, plus improvements on the property
and (b) the Permitted Refinancing Debt secured by such Lien at such time is
not increased to any amount greater than the sum of (x) the outstanding
principal amount or, if greater, the committed amount of the Indebtedness
secured by Liens described under clause (iii) or (iv) of this definition at
the time the original Lien became a Lien permitted in accordance with this
Indenture and (y) an amount necessary to pay any fees and expenses, including
premiums, related to such exchange, extension, refinancing,
<PAGE>
18
renewal, replacement, defeasement or refunding, (xxv) Liens securing
Attributable Indebtedness under any sale and leaseback transaction permitted
by the terms of this Indenture, but only on the property subject to such sale
and leaseback transaction; and (xxvi) Liens not otherwise permitted by
clauses (i) through (xxv) that are incurred in the ordinary course of
business of the Company or any Subsidiary with respect to obligations that do
not exceed $5 million at any one time outstanding.
"PERMITTED REFINANCING DEBT" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness (other than Indebtedness incurred under a Credit
Facility) of the Company or any of its Restricted Subsidiaries; PROVIDED
that: (i) the principal amount of such Permitted Refinancing Debt does not
exceed the principal amount of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of reasonable
expenses incurred in connection therewith (other than increases resulting
from the capitalization of interest or fees)); (ii) such Permitted
Refinancing Debt has a final maturity date on or later than the final
maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded is subordinated in right of payment to the Securities or the
Subsidiary Guarantees, as the case may be, such Permitted Refinancing Debt
has a final maturity date later than the final maturity date of, and is
subordinated in right of payment to, the Securities or the Subsidiary
Guarantees, as the case may be, on terms at least as favorable taken as a
whole to the Holders of the Securities as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either
by the Company or by the Restricted Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or
any other entity.
"PRIVATE EXCHANGE SECURITIES" shall have the meaning set forth in
the Registration Rights Agreement.
"PRODUCTION PAYMENTS" means Dollar-Denominated Production Payments
and Volumetric Production Payments, collectively.
"PURCHASE AGREEMENT" means the Purchase Agreement, dated July 21,
1998, between the Company and the Initial Purchaser relating to the Offering.
<PAGE>
19
"PURCHASE MONEY DEBT" means Indebtedness incurred in connection
with the purchase by the Company or any of its Subsidiaries of any equipment,
real or personal property, or any other asset, other than Equity Interests of
any Person (i) as to which the obligee expressly waives the provisions of
Section 1111 (b) of Title 11, United States Code; (ii) as to which neither
the Company nor any of its Restricted Subsidiaries (a) provides any guarantee
or credit support of any kind (including any undertaking, guarantee,
indemnity, agreement or instrument that would constitute Indebtedness), or
(b) is directly or indirectly liable (as guarantor or otherwise) other than
the pledge of the equipment, real or personal property or other assets
acquired with the proceeds of such Indebtedness; (iii) no default with
respect to which (including any rights that the holders thereof may have to
take enforcement actions against an Unrestricted Subsidiary) would permit
(upon notice, lapse of time, or both) any holder of any other Indebtedness of
the Company or any of its Restricted Subsidiaries to declare a default on
such other indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity; and (iv) the explicit terms of which
provide that there is no recourse against any of the assets of the Company or
its Restricted Subsidiaries, other than recourse against the equipment, real
or personal property or other assets acquired with the proceeds of such
Indebtedness.
"QIB" means any "qualified institutional buyer" (as defined in
Rule 144A under the Securities Act").
"REGISTERED EXCHANGE OFFER" means the offer to exchange the Initial
Securities for the Exchange Securities issued under a registration statement
filed pursuant to the terms of the Registration Rights Agreement.
"REGISTRATION RIGHTS AGREEMENT" means the Exchange and Registration
Rights Agreement, dated July 24, 1998, among the Company and the Initial
Purchaser.
"RESPONSIBLE OFFICER" when used with respect to the Trustee, means
any officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED PERIOD" means the 40 consecutive days beginning on and
including the later of (A) the day on which the Initial Securities are
offered to persons other than distributors (as defined in Regulation S under
the Securities Act) and (B) the Issue Date.
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20
"RESTRICTED SECURITIES LEGEND" means the Private Placement Legend
set forth in clause (A) of Section 2.1(c) or the Regulation S Legend set
forth in clause (B) of Section 2.1(c), as applicable.
"RESTRICTED SUBSIDIARY" means any direct or indirect Subsidiary of
the Company that is not an Unrestricted Subsidiary.
"S&P" means Standard & Poor's Ratings Group and its successors.
"SECURITIES" means the securities issued under this Indenture.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHELF REGISTRATION STATEMENT" has the meaning ascribed to such
term in the Registration Rights Agreement.
"SUBORDINATED INDEBTEDNESS" means any Indebtedness of the Company
or any Restricted Subsidiary (whether outstanding on the Issue Date or
thereafter incurred) which is subordinate or junior in right of payment to
the Securities pursuant to a written agreement.
"SUBSIDIARY" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of
the total voting power of shares of Capital Stock entitled (without regard to
the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are such
Person or of one or more Subsidiaries of such Person (or any combination
thereof).
"SUBSIDIARY GUARANTEE" means any Guarantee of payment of the
Securities by a Subsidiary Guarantor pursuant to the terms of this Indenture,
and, collectively, all such Guarantees. Each such Subsidiary Guarantee by
any Restricted Subsidiary acquired or created by the Company or any of its
Restricted Subsidiaries after the date of this Indenture shall be in
substantially the form set forth in Exhibit C to this Indenture or in such
other form as shall be acceptable to the Trustee.
"SUBSIDIARY GUARANTORS" means each Restricted Subsidiary of the
Company existing on the date of this Indenture (such Subsidiaries being
Continental Gas, Inc. and Continental Crude Co.), and any future Restricted
Subsidiary of the Company that incurs a Subsidiary Guarantee in accordance
with the provisions of this Indenture, and, in each case, their respective
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21
successors and assigns.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"TOTAL ASSETS" means, with respect to any Person, the total
consolidated assets of such Person and its Restricted Subsidiaries, as shown on
the most recent balance sheet of such Person.
"TREASURY RATE" means the yield to maturity at the time of computation
of United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519) which
has become publicly available at least two Business Days prior to the redemption
date (or, if such Statistical Release is no longer published, any publicly
available source or similar market data)) most nearly equal to the period from
the redemption date to August 1, 2003; PROVIDED that if the period from the
redemption date to August 1, 2003 is not equal to the constant maturity of a
United States Treasury security for which a weekly average yield is given, the
Treasury Rate shall be obtained by linear interpolation (calculated to the
nearest one-twelfth of a year) from the weekly average yields of United States
Treasury securities for which such yields are given, except that if the period
from the redemption date to August 1, 2003 is less than one year, the weekly
average yield on actually traded United States Treasury securities adjusted to a
constant maturity of one year shall be used.
"TRUSTEE" means the party named as such in the preamble to this
Indenture until a successor replaces it in accordance with the applicable
provisions of this Indenture and thereafter means the successor serving
hereunder.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company
which at the time of determination shall be an Unrestricted Subsidiary (as
designated by the Board of Directors of the Company, as provided below) and (ii)
any Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the
Company may designate any Subsidiary of the Company (including any newly
acquired or newly formed Subsidiary or a Person becoming a Subsidiary through
merger or consolidation or Investment therein) to be an Unrestricted Subsidiary
only if: (a) such Subsidiary does not own any Capital Stock of, or own or hold
any Lien on any property of, any other Subsidiary of the Company which is not a
Subsidiary of the Subsidiary to be so designated or otherwise an Unrestricted
Subsidiary; (b) all the Indebtedness of such Subsidiary shall at the date of
designation, and will at all times thereafter consist of, Non-Recourse Debt; (c)
the Company certifies that such designation was permitted by Section 4.7;
(d) such Subsidiary, either alone or in the aggregate with all other
Unrestricted Subsidiaries, does not operate, directly or indirectly, all or
substantially all of the business of the
<PAGE>
22
Company and its Subsidiaries; (e) such Subsidiary does not, directly or
indirectly, own any Indebtedness of or Equity Interest in, and has no
Investments in, the Company or any Restricted Subsidiary; (f) such Subsidiary
is a Person with respect to which neither the Company nor any of its
Restricted Subsidiaries has any direct or indirect obligation to maintain or
preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results; and (g) on the date such
Subsidiary is designated an Unrestricted Subsidiary, such Subsidiary is not a
party to any agreement, contract, arrangement or understanding with the
Company or any Restricted Subsidiary with terms substantially less favorable
to the Company or such Restricted Subsidiary than those that might have been
obtained from Persons who are not Affiliates of the Company. Any such
designation by the Board of Directors of the Company shall be evidenced to
the Trustee by filing with the Trustee a resolution of the Board of Directors
of the Company giving effect to such designation and an Officer's Certificate
certifying that such designation complied with the foregoing conditions. If,
at any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be
an Unrestricted Subsidiary for purposes of this Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred as of such
date. The Board of Directors of the Company may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; PROVIDED, that (1) immediately
after giving effect to such designation, no Default or Event of Default shall
have occurred and be continuing or would occur as a consequence thereof and
the Company could incur at least $1.00 of additional Indebtedness (excluding
Permitted Indebtedness) pursuant to Section 4.9 on a pro forma basis taking
into account such designation and (2) such Subsidiary executes a Subsidiary
Guarantee pursuant to Section 11.4 of this Indenture.
"VOLUMETRIC PRODUCTION PAYMENTS" means production payment obligations
recorded as deferred revenue in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"VOTING STOCK" of an entity means all classes of Capital Stock of such
entity then outstanding and normally entitled to vote in the election of
directors or all interests in such entity with the ability to control the
management or actions of such entity.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such
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23
Indebtedness.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned, directly or indirectly, by such Person or by one or more
Wholly Owned Restricted Subsidiaries of such Person.
Section 1.2. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Affiliate Transaction" . . . . . . . . . . . . . . . . . . 4.11
"Asset Sale Offer". . . . . . . . . . . . . . . . . . . . . 3.9
"Bankruptcy Law". . . . . . . . . . . . . . . . . . . . . . 10.2
"Cash Consideration". . . . . . . . . . . . . . . . . . . . 4.10
"Change of Control Offer" . . . . . . . . . . . . . . . . . 4.13
"Change of Control Payment" . . . . . . . . . . . . . . . . 4.13
"Change of Control Payment Date". . . . . . . . . . . . . . 4.13
"Change of Control Redemption Payment". . . . . . . . . . . 3.7
"Common Stock". . . . . . . . . . . . . . . . . . . . . . . 3.7
"Covenant Defeasance" . . . . . . . . . . . . . . . . . . . 8.3
"Custodian" . . . . . . . . . . . . . . . . . . . . . . . . 6.1
"DTC" . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
"Definitive Securities" . . . . . . . . . . . . . . . . . . 2.1
"Event of Default". . . . . . . . . . . . . . . . . . . . . 6.1
"Excess Proceeds" . . . . . . . . . . . . . . . . . . . . . 4.10
"Exchange Global Note". . . . . . . . . . . . . . . . . . . 2.1
"Global Securities" . . . . . . . . . . . . . . . . . . . . 2.1
"Guarantor Senior Debt. . . . . . . . . . . . . . . . . . . 10.2
"incur" . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9
"Institutional Accredited Investor
Global Note" . . . . . . . . . . . . . . . . . . . . . . 2.1
"Institutional Accredited Investor Note". . . . . . . . . . 2.1
"Legal Defeasance". . . . . . . . . . . . . . . . . . . . . 8.2
"Notice of Default" . . . . . . . . . . . . . . . . . . . . 6.1
"Offer Amount". . . . . . . . . . . . . . . . . . . . . . . 3.9
"Offer Period". . . . . . . . . . . . . . . . . . . . . . . 3.9
"Paying Agent". . . . . . . . . . . . . . . . . . . . . . . 2.3
"Payment Blockage Notice" . . . . . . . . . . . . . . . . . 10.4
"Payment Default" . . . . . . . . . . . . . . . . . . . . . 6.1
"Permitted Indebtedness". . . . . . . . . . . . . . . . . . 4.9
"Private Placement Legend". . . . . . . . . . . . . . . . . 2.1
"Purchase Date" . . . . . . . . . . . . . . . . . . . . . . 3.9
"Register". . . . . . . . . . . . . . . . . . . . . . . . . 2.3
"Registrar" . . . . . . . . . . . . . . . . . . . . . . . . 2.3
"Regulation S". . . . . . . . . . . . . . . . . . . . . . . 2.1
"Regulation S Certificate". . . . . . . . . . . . . . . . . 2.1
"Regulation S Global Note". . . . . . . . . . . . . . . . . 2.1
"Regulation S Legend" . . . . . . . . . . . . . . . . . . . 2.1
"Regulation S Note" . . . . . . . . . . . . . . . . . . . . 2.1
"Regulation S Permanent Global Note". . . . . . . . . . . . 2.1
"Regulation S Temporary Global Note". . . . . . . . . . . . 2.1
"Release Date". . . . . . . . . . . . . . . . . . . . . . . 2.1
<PAGE>
24
"Resale Restriction Termination Date" . . . . . . . . . . . 2.3
"Representative". . . . . . . . . . . . . . . . . . . . . . 10.2
"Restricted Payments" . . . . . . . . . . . . . . . . . . . 4.7
"Rule 144A" . . . . . . . . . . . . . . . . . . . . . . . . 2.1
"Rule 144A Global Note" . . . . . . . . . . . . . . . . . . 2.1
"Rule 144A Note". . . . . . . . . . . . . . . . . . . . . . 2.1
"Senior Debt" . . . . . . . . . . . . . . . . . . . . . . . 10.2
"Subsequent Series Securities". . . . . . . . . . . . . . . 2.2
</TABLE>
Section 1.3. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"INDENTURE SECURITIES" means the Securities;
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee;
"OBLIGOR" with respect to the Securities means the Company and with
respect to the Subsidiary Guarantees means the Subsidiary Guarantors and any
successor obligor upon the Securities and the Subsidiary Guarantees,
respectively.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by rule enacted by the
Commission under the TIA have the meanings so assigned to them.
Section 1.4. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "OR" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act shall
be deemed to include substitute, replacement of successor sections or rules
adopted by the Commission from time to time.
<PAGE>
25
<PAGE>
26
ARTICLE 2
THE SECURITIES
Section 2.1. FORM, DATING AND TERMS.
(a) The Initial Securities are being offered and sold by the Company
pursuant to the Purchase Agreement.
Initial Securities offered and sold to the qualified institutional
buyers (as defined in Rule 144A under the Securities Act ("RULE 144A")) in the
United States of America (the "RULE 144A NOTE") will be issued on the Issue Date
in the form of a permanent global Security substantially in the form of Exhibit
A, which is hereby incorporated by reference and made a part of this Indenture,
together with appropriate legends as set forth in Section 2.1(c) (the "RULE
144A GLOBAL NOTE"), deposited with the Trustee, as custodian for the Depositary,
duly executed by the Company and authenticated by the Trustee as hereinafter
provided. The Rule 144A Global Note may be represented by more than one
certificate, if so required by the Depositary's rules regarding the maximum
principal amount to be represented by a single certificate. The aggregate
principal amount of the Rule 144A Global Note may from time to time be increased
or decreased by adjustments made on the records of the Trustee, as custodian for
the Depositary or its nominee, as hereinafter provided.
<PAGE>
27
Initial Securities offered and sold outside the United States of
America ("Regulation S Note") in reliance on Regulation S will be issued on the
Issue Date in the form of a temporary global Security, without interest coupons,
substantially in the form set forth in Exhibit A, which is hereby incorporated
by reference and made a part of this Indenture, together with appropriate
legends as set forth in Section 2.1(c) (a "REGULATION S TEMPORARY GLOBAL NOTE").
Beneficial interests in a Regulation S Temporary Global Note will be
exchangeable for beneficial interests in a single permanent global Security (the
"REGULATION S PERMANENT GLOBAL NOTE", together with the Regulation S Temporary
Global Note, the "REGULATION S GLOBAL NOTE") on or after the expiration of the
Restricted Period (the "RELEASE DATE") upon the receipt by the Trustee or its
agent of a certificate certifying that the Holder of the beneficial interest in
the Regulation S Temporary Global Note is a non-United States Person within the
meaning of Regulation S (a "REGULATION S CERTIFICATE"), substantially in the
form set forth in Section 2.14. Upon receipt by the Trustee or Paying Agent of
a Regulation S Certificate, (i) with respect to the first such Regulation S
Certificate, the Company shall execute and upon receipt of a written order of
the Company signed by two officers for authentication, the Trustee shall
authenticate and deliver to the Note Custodian, the Regulation S Permanent
Global Note and (ii) with respect to the first and all subsequent Regulation S
Certificates, the Note Custodian shall exchange on behalf of the applicable
beneficial owners the portion of the Regulation S Temporary Global Note covered
by such Regulation S Certificates for a comparable portion of the Regulation S
Permanent Global Note. Upon any exchange of a portion of a Regulations S
Temporary Global Note for a comparable portion of a Regulation S Permanent
Global Note, the Note Custodian shall endorse on the schedules affixed to each
of such Regulation S Global Note (or on continuations of such schedules affixed
to each of such Regulation S Global Note and made parts thereof) appropriate
notations evidencing the date of transfer and (x) with respect to the Regulation
S Temporary Global Note, a decrease in the principal amount thereof equal to the
amount covered by the applicable certification and (y) with respect to the
Regulation S Permanent Global Note, an increase in the principal amount thereof
equal to the principal amount of the decrease in the Regulation S Temporary
Global Note pursuant to clause (x) above. The Regulation S Global Note will be
deposited with the Note Custodian for the Depositary, duly executed by the
Company and authenticated by the Trustee as hereinafter provided. The
Regulation S Global Note may be represented by more than one certificate, if so
required by the Depositary's rules regarding the maximum principal amount to be
represented by a single certificate. The aggregate principal amount of the
Regulation S Global Note may from time to time be increased or decreased by
adjustments ade on the records of the Note Custodian for the Depositary or its
nominee, as hereinafter provided.
Initial Securities resold to institutional "accredited investors" (as
defined in Rules 501(a)(1), (2), (3) and (7) under
<PAGE>
28
the Securities Act) in the United States of America (the "INSTITUTIONAL
ACCREDITED INVESTOR NOTE") will be issued in the form of a permanent global
Security substantially in the form of Exhibit A, which is hereby incorporated
by reference and made a part of this Indenture, together with appropriate
legends as set forth in Section 2.1(c) (the "INSTITUTIONAL ACCREDITED
INVESTOR GLOBAL NOTE") deposited with the Note Custodian, duly executed by
the Company and authenticated by the Trustee as hereinafter provided. The
Institutional Accredited Investor Global Note may be represented by more than
one certificate, if so required by the Depositary's rules regarding the
maximum principal amount to be represented by a single certificate. The
aggregate principal amount of the Institutional Accredited Investor Global
Note may from time to time be increased or decreased by adjustments made on
the records of the Note Custodian for the Depositary or its nominee, as
hereinafter provided.
Exchange Securities exchanged for interests in the Rule 144A Note, the
Regulation S Note and the Institutional Accredited Investor Note will be issued
in the form of a permanent global Security substantially in the form of Exhibit
B, which is hereby incorporated by reference and made a part of this Indenture,
deposited with the Trustee as hereinafter provided, with the appropriate legend
set forth in Section 2.1(c) (the "EXCHANGE GLOBAL NOTE"). The Exchange Global
Note may be represented by more than one certificate, if so required by the
Depositary's rules regarding the maximum principal amount to be represented by a
single certificate.
The Rule 144A Global Note, the Regulation S Global Note, the Exchange
Global Note and the Institutional Accredited Investor Global Note are sometimes
collectively herein referred to as the "Global Securities."
The principal of (and premium, if any) and interest on the Securities
shall be payable at the office or agency of the Company maintained for such
purpose in The City of New York, or at such other office or agency of the
Company as may be maintained for such purpose pursuant to Section 2.3; PROVIDED,
HOWEVER, that, at the option of the Company, each installment of interest may be
paid by (i) check mailed to addresses of the Persons entitled thereto as such
addresses shall appear on the Register or (ii) wire transfer to an account
located in the United States maintained by the payee.
The Private Exchange Securities shall be in the form of Exhibit A.
The Securities may have notations, legends or endorsements required by law,
stock exchange rule or usage, in addition to those set forth on Exhibits A and B
and in Section 2.1(c). The Company and the Trustee shall approve the forms of
the Securities and any notation, endorsement or legend on them. Each Security
shall be dated the date of its authentication. The terms of the Securities set
forth in Exhibit A and Exhibit B are part of the terms of this Indenture and, to
the extent applicable, the Company and the Trustee, by their execution and
<PAGE>
29
delivery of this Indenture, expressly agree to be bound by such terms.
(b) DENOMINATIONS. The Securities shall be issuable only in fully
registered form, without coupons, and only in denominations of $1,000 and any
integral multiple thereof.
(c) RESTRICTIVE LEGENDS. Unless and until (i) an Initial Security is
sold under an effective registration statement or (ii) an Initial Security is
exchanged for an Exchange Security in connection with an effective registration
statement, in each case pursuant to the Registration Rights Agreement, (A) such
Rule 144A Global Note and the Institutional Accredited Investor Global Note
shall bear the following legend (the "PRIVATE PLACEMENT LEGEND") on the face
thereof:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY
WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A)
TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF
RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN
INSTITUTIONAL INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM
PRINCIPAL AMOUNT OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR
FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND
THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSES (D), (E) AND (F)
<PAGE>
30
TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON
THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.";
and
(B) the Regulation S Global Note shall bear the following legend (the
"REGULATION S LEGEND") on the face thereof:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS NOT A U.S. PERSON NOR IS IT
PURCHASING FOR THE ACCOUNT OF A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN
OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT
("REGULATION S"), (2) BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY
WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A)
TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S,
(E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3)
OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL INVESTOR ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE
SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR
OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES
ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S
RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR
(F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM AND IN THE CASE OF THE FOREGOING CLAUSE
(E), A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS
SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE COMPANY AND THE
TRUSTEE. THIS LEGEND WILL BE REMOVED AFTER 40 CONSECUTIVE DAYS BEGINNING ON AND
INCLUDING THE LATER OF (A) THE DAY ON WHICH THE SECURITIES ARE OFFERED TO
PERSONS OTHER THAN
<PAGE>
31
DISTRIBUTORS (AS DEFINED IN REGULATION S) AND (B) THE DATE OF THE
CLOSING OF THE ORIGINAL OFFERING. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT."
The Global Securities, whether or not an Initial Security, shall bear
the following legend on the face thereof:
"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH
THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE
HEREOF.
THIS SECURITY IS SUBORDINATED TO SENIOR DEBT, AS DEFINED IN THE
INDENTURE (AS DEFINED HEREIN), AND THE OBLIGATIONS OF EACH SUBSIDIARY
GUARANTOR UNDER THE SUBSIDIARY GUARANTEE CONTAINED IN THE INDENTURE
ARE SUBORDINATED TO GUARANTOR SENIOR INDEBTEDNESS, AS DEFINED IN THE
INDENTURE, OF SUCH SUBSIDIARY GUARANTOR."
The Regulation S Temporary Global Note shall also bear the following
legend on the face thereof:
"THIS GLOBAL NOTE IS A TEMPORARY GLOBAL NOTE FOR PURPOSES OF
REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT"). NEITHER THIS TEMPORARY GLOBAL NOTE NOR ANY
INTEREST HEREIN MAY BE OFFERED, SOLD OR DELIVERED, EXCEPT AS PERMITTED
UNDER THE INDENTURE REFERRED TO BELOW.
NO BENEFICIAL OWNERS OF THIS TEMPORARY GLOBAL NOTE SHALL BE
ENTITLED TO RECEIVE PAYMENT OF PRINCIPAL OR INTEREST HEREON UNLESS THE
REQUIRED CERTIFICATIONS HAVE BEEN DELIVERED PURSUANT TO THE TERMS OF
THE INDENTURE."
(d) BOOK-ENTRY PROVISIONS. (i) This Section 2.1(d) shall apply only
to Global Securities deposited with the Trustee, as Note Custodian for the
Depositary.
<PAGE>
32
(ii) Each Global Security initially shall (x) be registered in the
name of the Depositary for such Global Security or the nominee of the
Depositary, (y) be delivered to the Note Custodian and (z) bear legends as set
forth in Section 2.1(c).
(iii) Members of, or participants in, the Depositary ("AGENT
MEMBERS") shall have no rights under this Indenture with respect to any Global
Security held on their behalf by the Depositary or by the Note Custodian or
under such Global Security, and the Depositary may be treated by the Company,
the Trustee and any agent of the Company or the Trustee as the absolute owner of
such Global Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any agent of
the Company or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depositary or impair, as between
the Depositary and its Agent Members, the operation of customary practices of
the Depositary governing the exercise of the rights of a holder of a beneficial
interest in any Global Security.
(iv) In connection with any transfer of a portion of the beneficial
interest in a Global Security pursuant to subsection (e) of this Section to
beneficial owners who are required to hold Definitive Securities, the Trustee
shall reflect on its books and records the date and a decrease in the principal
amount of such Global Security in an amount equal to the principal amount of the
beneficial interest in the Global Security to be transferred, and the Company
shall execute, and the Trustee shall authenticate and deliver, one or more
Definitive Securities of like tenor and amount.
(v) In connection with the transfer of an entire Global Security to
beneficial owners pursuant to subsection (e) of this Section, such Global
Security shall be deemed to be surrendered to the Trustee for cancellation, and
the Company shall execute, and the Trustee shall authenticate and deliver, to
each beneficial owner identified by the Depositary in exchange for its
beneficial interest in such Global Security, an equal aggregate principal amount
of Definitive Securities of authorized denominations.
(e) DEFINITIVE SECURITIES. Except as provided below, owners of
beneficial interests in Global Securities will not be entitled to receive
certificated Securities ("DEFINITIVE SECURITIES"). If required to do so
pursuant to any applicable law or regulation, beneficial owners may obtain
Definitive Securities in exchange for their beneficial interests in a Global
Security upon written request in accordance with the Depositary's and the
Registrar's procedures. In addition, Definitive Securities shall be transferred
to all beneficial owners in exchange for their beneficial interests in a Global
Security if (i) the Depositary notifies the Company in writing that it is
unwilling or unable to continue as depositary for such Global Security or the
Depositary ceases to be a clearing agency
<PAGE>
33
registered under the Exchange Act, at a time when the Depositary is required
to be so registered in order to act as depositary, and in each case a
successor depositary is not appointed by the Company within 90 days of such
notice or, (ii) the Company executes and delivers to the Trustee and
Registrar an Officers' Certificate stating that such Global Security shall be
so exchangeable or (iii) an Event of Default has occurred and is continuing
and the Registrar has received a request from the Depositary to do so.
(f) Any Definitive Security delivered in exchange for an interest in
a Global Security pursuant to Section 2.1(d)(iv) or (v) shall, except as
otherwise provided by Section 2.6(c), bear the applicable legend regarding
transfer restrictions applicable to the Definitive Security set forth in Section
2.1(c).
(g) The registered holder of a Global Security may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
Section 2.2. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Securities for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Securities
and may be in facsimile form.
If an Officer whose signature is on a Security no longer holds that
office at the time a Security is authenticated, the Security shall nevertheless
be valid.
A Security shall not be valid until authenticated by the manual
signature of an authorized signatory of the Trustee. The signature shall be
conclusive evidence that the Security has been authenticated under this
Indenture.
The Trustee shall authenticate and make available for delivery (1)
Initial Securities for original issue in an aggregate principal amount of $150.0
million, and (2) Exchange Securities for issue only in a Registered Exchange
Offer, pursuant to the Registration Rights Agreement, in exchange for Initial
Securities of an equal principal amount, and (3) additional series of notes
which may be offered subsequent to the Issue Date (the "SUBSEQUENT SERIES
SECURITIES") in an aggregate principal amount not to exceed $150,000,000, in
each case upon a written order of the Company signed by two Officers. Such
order shall specify the amount of the Securities to be authenticated, the date
on which the original issue of Securities is to be authenticated and whether the
Securities are to be Initial Securities or Exchange Securities or Subsequent
Series Securities. The aggregate principal amount of notes which may be
authenticated and delivered under this Indenture is limited to $300.0 million
outstanding except as provided in Section 2.7. No Subsequent Series Securities
may be authenticated and
<PAGE>
34
delivered in an aggregate principal amount of less than $25,000,000. All
Securities issued on the Issue Date and all Subsequent Series Securities
shall be identical in all respects other than issue dates, the date from
which interest accrues and any changes relating thereto. Notwithstanding
anything to the contrary contained in this Indenture, all notes issued under
this Indenture shall vote and consent together on all matters as one class
and no series of notes will have the right to vote or consent as a separate
class on any matter.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. An authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate of the Company.
Section 2.3. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency in the Borough of
Manhattan, The City of New York where (i) Securities may be presented for
registration of transfer or for exchange ("REGISTRAR") and (ii) Securities may
be presented for payment ("PAYING AGENT"). The Registrar shall keep a register
of the Securities and of their transfer and exchange (the "Register"). The
Company may appoint one or more co-registrars and one or more additional paying
agents. The term "Registrar" includes any co-registrar and the term "Paying
Agent" includes any additional paying agent. The Company may change any Paying
Agent or Registrar without notice to any Holder. The Company shall enter into
an appropriate agency agreement with any Registrar, Paying Agent or co-registrar
not a party to this Indenture, which shall incorporate the terms of the TIA.
The agreement shall implement the provisions of this Indenture that relate to
such agent. The Company shall notify the Trustee in writing of the name and
address of any Agent not a party to this Indenture. If the Company fails to
appoint or maintain another entity as Registrar or Paying Agent, the Trustee
shall act as such. The Company or any of its Subsidiaries may act as Paying
Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Securities.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Securities.
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Section 2.4. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent, including the Trustee
(who shall be deemed to have agreed by its execution of this Indenture), to
agree in writing that the Paying Agent shall hold in trust for the benefit of
Holders or the Trustee (unless the Paying Agent is the Trustee, in which case it
shall hold in trust for the Holders) all money held by the Paying Agent for the
payment of principal, premium, if any, or interest, on the Securities, and shall
notify the Trustee of any default by the Company or any Subsidiary Guarantor in
making any such payment. While any such default continues, the Trustee may
require a Paying Agent to pay all money held by it to the Trustee. The Company
at any time may require a Paying Agent to pay all money held by it to the
Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the
Company or a Subsidiary) shall have no further liability for the money. If the
Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Holders all money held by it as
Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the
Company or a Subsidiary, the Trustee shall serve as sole Paying Agent for the
Securities.
Section 2.5. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders. If the Trustee is not the Registrar, the Company shall furnish to
the Trustee at least seven Business Days before each interest payment date and
at such other times as the Trustee may request in writing, a list in such form
and as of such date as the Trustee may reasonably require of the names and
addresses of the Holders of Securities, which list may be conclusively relied
upon by the Trustee.
Section 2.6. TRANSFER AND EXCHANGE.
(a) The following provisions shall apply with respect to any proposed
transfer of a Rule 144A Note or an Institutional Accredited Investor Note prior
to the date which is two years after the later of the date of original issue and
the last date on which the Company or any affiliate of the Company was the owner
of such Securities (or any predecessor thereto) (the "RESALE RESTRICTION
TERMINATION DATE"):
(1) a transfer of a Rule 144A Note or an Institutional
Accredited Investor Note or a beneficial interest therein to a QIB shall be
made upon the representation of the transferee that it is purchasing the
Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A, and is
aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding
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36
the Company as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that
the transferor is relying upon its foregoing representations in order to
claim the exemption from registration provided by Rule 144A;
(2) a transfer of a Rule 144A Note or an Institutional
Accredited Investor Note or a beneficial interest therein to an
institutional accredited investor shall be made upon receipt by the Trustee
or its agent of a certificate substantially in the form set forth in
Section 2.13 from the proposed transferee and, if requested by the Company
or the Trustee, the delivery of an opinion of counsel, certification and/or
other information satisfactory to each of them; and
(3) a transfer of a Rule 144A Note or an Institutional
Accredited Investor Note or a beneficial interest therein to a Non-U.S.
Person shall be made upon receipt by the Trustee or its agent of a
certificate substantially in the form set forth in Section 2.14 from the
proposed transferee and, if requested by the Company or the Trustee, the
delivery of an opinion of counsel, certification and/or other information
satisfactory to each of them.
(b) The following provisions shall apply with respect to any proposed
transfer of a Regulation S Note prior to the expiration of the Restricted
Period:
(1) a transfer of a Regulation S Note or a beneficial interest
therein to a QIB shall be made upon the representation of the transferee,
in the form of assignment on the reverse of the certificate, that it is
purchasing the Security for its own account or an account with respect to
which it exercises sole investment discretion and that it and any such
account is a "qualified institutional buyer" within the meaning of
Rule 144A, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding
the Company as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon its foregoing representations in order to claim
the exemption from registration provided by Rule 144A;
(2) a transfer of a Regulation S Note or a beneficial interest
therein to an institutional accredited investor shall be made upon receipt
by the Trustee or its agent of a certificate substantially in the form set
forth in Section 2.13 from the proposed transferee and, if requested by the
Company or the Trustee, the delivery of an opinion of counsel,
certification and/or other information satisfactory to each of them; and
(3) a transfer of a Regulation S Note or a
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37
beneficial interest therein to a Non-U.S. Person shall be made upon
receipt by the Trustee or its agent of a certificate substantially in
the form set forth in Section 2.14 from the proposed transferee and, if
requested by the Company or the Trustee, receipt by the Trustee or its
agent of an opinion of counsel, certification and/or other information
satisfactory to each of them.
After the expiration of the Restricted Period, interests in the
Regulation S Note may be transferred without requiring certification set forth
in Section 2.14 or any additional certification.
(c) RESTRICTED SECURITIES LEGEND. Upon the transfer, exchange or
replacement of Securities not bearing a Restricted Securities Legend, the
Registrar shall deliver Securities that do not bear a Restricted Securities
Legend. Upon the transfer, exchange or replacement of Securities bearing a
Restricted Securities Legend, the Registrar shall deliver only Securities that
bear a Restricted Securities Legend unless, in the case of a Regulation S Note,
such transfer, exchange or replacement occurs after the Restricted Period or
there is delivered to the Registrar an Opinion of Counsel to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act.
(d) The Company shall deliver to the Trustee an Officers' Certificate
setting forth the Resale Restriction Termination Date.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.1 or this Section 2.6.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
(e) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF
SECURITIES.
(1) To permit registrations of transfers and exchanges, the
Company shall, subject to the other terms and conditions of this Article
II, execute and the Trustee shall authenticate Definitive Securities and
Global Securities at the Registrar's or co-registrar's request.
(2) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax, assessments, or similar
governmental charge payable in connection therewith (other than any such
transfer taxes, assessments or similar governmental charges payable upon
exchange or transfer pursuant to Sections 4.10, 4.13 or 9.5 or pursuant to
paragraph 5 of the Securities).
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38
(3) The Registrar or co-registrar shall not be required to
register the transfer of or exchange of (A) any Definitive Security
selected for redemption in whole or in part pursuant to Article III, except
the unredeemed portion of any Definitive Security being redeemed in part or
(B) any Security for a period beginning (1) 15 Business Days before the
mailing of a notice of an offer to repurchase or redeem Securities and
ending at the close of business on the day of such mailing or (2) 15
Business Days before an interest payment date and ending on such interest
payment date.
(4) Prior to the due presentation for registration of transfer
of any Security, the Company, the Trustee, the Paying Agent, the Registrar
or any co-registrar may deem and treat the person in whose name a Security
is registered as the absolute owner of such Security for the purpose of
receiving payment of principal of and interest on such Security and for all
other purposes whatsoever, whether or not such Security is overdue, and
none of the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar shall be affected by notice to the contrary.
(5) Any Definitive Security delivered in exchange for an
interest in a Global Security pursuant to Section 2.1(d) shall, except as
otherwise provided by Section 2.6(c), bear the applicable legend regarding
transfer restrictions applicable to the Definitive Security set forth in
Section 2.1(c).
(6) All Securities issued upon any transfer or exchange pursuant
to the terms of this Indenture shall evidence the same debt and shall be
entitled to the same benefits under this Indenture as the Securities
surrendered upon such transfer or exchange.
(f) NO OBLIGATION OF THE TRUSTEE. (1) The Trustee shall have no
responsibility or obligation to any beneficial owner of a Global Security, a
member of, or a participant in, the Depositary or other Person with respect to
the accuracy of the records of the Depositary or its nominee or of any
participant or member thereof, with respect to any ownership interest in the
Securities or with respect to the delivery to any participant, member,
beneficial owner or other Person (other than the Depositary) of any notice
(including any notice of redemption) or the payment of any amount or delivery of
any Securities (or other security or property) under or with respect to such
Securities. All notices and communications to be given to the Holders and all
payments to be made to Holders in respect of the Securities shall be given or
made only to or upon the order of the registered Holders (which shall be the
Depositary or its nominee in the case of a Global Security). The rights of
beneficial owners in any Global Security shall be exercised only through the
Depositary subject to the applicable rules and procedures of the Depositary.
The Trustee may rely and shall be fully protected in relying upon information
furnished by the Depositary with respect to its members, participants and any
beneficial owners.
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39
(2) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer imposed
under this Indenture or under applicable law with respect to any transfer of any
interest in any Security (including any transfers between or among the
Depositary participants, members or beneficial owners in any Global Security);
PROVIDED that the Trustee shall have the right to require such certifications,
Opinions of Counsel or other documentation in respect of exchanges of beneficial
ownership interests in Global Securities for Definitive Securities as it may
reasonably request.
Section 2.7. REPLACEMENT SECURITIES.
If any mutilated Security is surrendered to the Registrar, or if the
Holder of a Security claims that the Security has been lost, destroyed or
wrongfully taken, the Company and the Trustee receive evidence to their
satisfaction of the destruction, loss or theft of any Security, the Company
shall issue and the Trustee, upon the receipt of a written authentication order
of the Company signed by two Officers of the Company, shall authenticate a
replacement Security if the Trustee's requirements are met. If required by the
Trustee or the Company, an indemnity bond must be supplied by the Holder that is
sufficient in the judgment of the Trustee and the Company to protect the
Company, the Trustee, any Agent and any authenticating agent from any loss that
any of them may suffer if a Security is replaced. The Company and the Trustee
may charge for its expenses in replacing a Security.
Every replacement Security is an additional obligation of the Company
and shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Securities duly issued hereunder.
Section 2.8. OUTSTANDING SECURITIES.
The Securities outstanding at any time are all the Securities
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation, those reductions in the interest in a Global Note
effected by the Trustee in accordance with the provisions hereof, and those
described in this Section as not outstanding. A Security does not cease to be
outstanding because the Company or an Affiliate of the Company holds the
Security.
If a Security is replaced pursuant to Section 2.7 hereof, it ceases to
be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Securities payable on that date, then on and after that date
such Securities shall
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40
be deemed to be no longer outstanding and shall cease to accrue interest.
Section 2.9. TEMPORARY SECURITIES.
Until Definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of Definitive Securities but may
have variations that the Company considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate Definitive Securities and make them available for delivery in
exchange for temporary Securities.
Section 2.10. CUSIP NUMBER.
The Company in issuing the Securities may use a "CUSIP" number, and if
so, the Trustee shall use the CUSIP number in notices of redemption or exchange
as a convenience to Holders; PROVIDED that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Securities and that reliance may be placed only
on the other identification numbers printed on the Securities.
In the event that the Company shall issue and the Trustee shall
authenticate any Subsequent Series Securities pursuant to Section 2.2, the
Company shall use its best efforts to obtain the same CUSIP number for such
Subsequent Series Securities as is printed on the Securities outstanding at such
time; PROVIDED, HOWEVER, that if any series of Subsequent Series Securities is
determined to be a different class of security than the Securities outstanding
at such time for federal income tax purposes, the Company may obtain a CUSIP
number for such series of Subsequent Series Securities that is different from
the CUSIP number printed on the Securities then outstanding.
Section 2.11. CANCELLATION.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Securities surrendered to them for registration of transfer, exchange or
payment. The Trustee and no one else shall cancel all Securities surrendered
for registration of transfer, exchange, payment, replacement or cancellation and
shall destroy cancelled Securities (subject to the record retention requirements
of the Exchange Act). Certification of the destruction of all cancelled
Securities shall be delivered to the Company. The Company may not issue new
Securities to replace Securities that it has paid or that have been delivered to
the Trustee for cancellation.
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41
Section 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Securities,
it shall pay the defaulted interest in any lawful manner PLUS, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate
provided in the Securities and in Section 4.1 hereof. The Company shall
notify the Trustee in writing of the amount of defaulted interest proposed to
be paid on each Security and the date of the proposed payment. The Company
shall fix or cause to be fixed each such special record date and payment
date, PROVIDED that no such special record date shall be less than 10 days
prior to the related payment date for such defaulted interest. At least 15
days before the special record date, the Company (or, upon the written
request of the Company, the Trustee in the name and at the expense of the
Company) shall mail or cause to be mailed to Holders a notice that states the
special record date, the related payment date and the amount of such interest
to be paid.
SECTION 2.13. FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION
WITH TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS.
[Date]
United States Trust Company of New York
114 West 47th Street, 25th Floor
New York, NY 10036
Attention: Corporate Trust Administration
Dear Sirs:
This certificate is delivered to request a transfer of $________
principal amount of the 10 1/4% Senior Subordinated Notes due 2008 (the
"Securities") of Continental Resources, Inc. (the "Company").
The undersigned represents and warrants to you that:
(1) We are an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended
(the "Securities Act")) purchasing for our own account or for the account of
such an institutional "accredited investor" at least $250,000 principal
amount of the Securities, and we are acquiring the Securities not with a view
to, or for offer or sale in connection with, any distribution in violation of
the Securities Act. We have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risk of our
investment in the Securities and we invest in or purchase securities similar
to the Securities in the normal course of our business. We and any accounts
for which we are acting are each able to bear the economic risk of our or its
investment.
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42
(2) We understand that the Securities have not been registered
under the Securities Act and, unless so registered, may not be sold except as
permitted in the following sentence. We agree on our own behalf and on
behalf of any investor account for which we are purchasing Securities to
offer, sell or otherwise transfer such Securities prior to the date which is
two years after the later of the date of original issue and the last date on
which the Company or any affiliate of the Company was the owner of such
Securities (or any predecessor thereto) (the "Resale Restriction Termination
Date") only (a) to the Company, (b) pursuant to a registration statement
which has been declared effective under the Securities Act, (c) in a
transaction complying with the requirements of Rule 144A under the Securities
Act, to a person we reasonably believe is a qualified institutional buyer
under Rule 144A (a "QIB") that purchases for its own account or for the
account of a QIB and to whom notice is given that the transfer is being made
in reliance on Rule 144A, (d) pursuant to offers and sales that occur outside
the United States within the meaning of Regulation S under the Securities
Act, (e) to an institutional "accredited investor" (within the meaning of
Rule 501(a)(1), (2), (3) or (7) under the Securities Act) that is purchasing
for its own account or for the account of such an institutional "accredited
investor," in each case in a minimum principal amount of Securities of
$250,000 or (f) pursuant to any other available exemption from the
registration requirements of the Securities Act, subject in each of the
foregoing cases to any requirement of law that the disposition of our
property or the property of such investor account or accounts be at all times
within our or their control and in compliance with any applicable state
securities laws. The foregoing restrictions on resale will not apply
subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Securities is proposed to be made pursuant to lause (e)
above prior to the Resale Restriction Termination Date, the transferor shall
deliver a letter from the transferee substantially in the form of this letter
to the Company and the Trustee, which shall provide, among other things, that
the transferee is an institutional "accredited investor" (within the meaning
of Rule 501(a)(1), (2), (3) or (7) under the Securities Act) and that it is
acquiring such Securities for investment purposes and not for distribution in
violation of the Securities Act. Each purchaser acknowledges that the
Company and the Trustee reserve the right prior to any offer, sale or other
transfer prior to the Resale Termination Date of the Securities pursuant to
clauses (d), (e) or (f) above to require the delivery of an opinion of
counsel, certifications and/or other information satisfactory to the Company
and the Trustee.
TRANSFEREE:
----------------------------
BY
--------------------------------------
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SECTION 2.14. FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH
TRANSFERS PURSUANT TO REGULATION S.
[Date]
United States Trust Company of New York
114 West 47th Street, 25th Floor
New York, NY 10036
Attention: Corporate Trust Administration
Re: Continental Resources, Inc.
10 1/4% SENIOR SUBORDINATED NOTES DUE 2008 (THE "SECURITIES")
Ladies and Gentlemen:
In connection with our proposed sale of $________ aggregate principal
amount of the Securities, we confirm that such sale has been effected pursuant
to and in accordance with Regulation S under the United States Securities Act
of 1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(a) the offer of the Securities was not made to a person in the
United States;
(b) either (i) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United
States or (ii) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;
(c) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable; and
(d) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
In addition, if the sale is made during a restricted period and the
provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable
thereto, we confirm that such sale has been made in accordance with the
applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may be.
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You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate
have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
-------------------------------------
----------------------------------------
Authorized Signature Medallion Guaranteed
SECTION 2.15. COMPUTATION OF INTEREST. Interest on the Securities
shall be computed on the basis of a 360-day year of twelve 30-day months.
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.1. NOTICES TO TRUSTEE.
If the Company elects to redeem Securities pursuant to the optional
redemption provisions of Section 3.7 hereof, then it shall furnish to the
Trustee, at least 30 days but not more than 60 days before a redemption date,
an Officers' Certificate setting forth (i) the paragraph of the Securities
and/or Section of this Indenture pursuant to which the redemption shall occur,
(ii) the redemption date, (iii) the principal amount of Securities to be
redeemed and (iv) the redemption price.
Section 3.2. SELECTION OF SECURITIES TO BE REDEEMED.
If less than all of the Securities are to be redeemed at any time,
selection of Securities for redemption shall be made by the Trustee in
compliance with the requirements of the principal national securities
exchange, if any, on which the Securities are listed, or, if the Securities
are not so listed, on a pro rata basis, by lot or by such method as the
Trustee shall deem fair and appropriate; PROVIDED that no Security of $1,000
or less shall be redeemed in part. In the event of partial redemption by
lot, the particular Securities to be redeemed shall be selected, unless
otherwise provided herein, not less than 30 nor more than 60 days prior to
the redemption date by the Trustee from the outstanding Securities not
previously called for redemption.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Security selected
for partial redemption, the principal amount thereof to be redeemed.
Securities and portions
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of Securities selected shall be in amounts of $1,000 or whole multiples of
$1,000; except that if all of the Securities of a Holder are to be redeemed,
the entire outstanding amount of Securities held by such Holder, even if not
a multiple of $1,000, shall be redeemed. A new Security in principal amount
equal to the unredeemed portion thereof shall be issued in the name of the
Holder thereof upon cancellation of the original Security. On and after the
redemption date, unless the Company defaults in payment of the redemption
price, interest ceases to accrue on Securities or portions of them called for
redemption. Except as provided in this Section 3.2, provisions of this
Indenture that apply to Securities called for redemption also apply to
portions of Securities called for redemption.
The provisions of the two preceding paragraphs of this Section 3.2
shall not apply with respect to any redemption affecting only a Global Note,
whether such Global Note is to be redeemed in whole or in part. In case of
any such redemption in part, the unredeemed portion of the principal amount
of the Global Note shall be in an authorized denomination.
Section 3.3. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.9 hereof, at least 30 days
but not more than 60 days before a redemption date, the Company shall mail or
cause to be mailed, by first class mail, a notice of redemption to each
Holder of Securities to be redeemed at such Holder's registered address,
provided, however, that the Company shall provide notice to the Trustee in
accordance with Section 3.1 hereof at least five days prior to the mailing of
the notice pursuant to this Section 3.3.
The notice shall identify the Securities to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
redemption date upon surrender of such Security, a new Security or Securities
in principal amount equal to the unredeemed portion shall be issued upon
cancellation of the original Security;
(d) the name and address of the Paying Agent;
(e) that Securities called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Securities called for redemption ceases to accrue on and
after the redemption date;
(g) the paragraph of the Securities and/or Section of
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46
this Indenture pursuant to which the Securities called for redemption are
being redeemed, and, if the redemption is to occur pursuant to Section 3.7, a
description of the transaction or transactions that constitute the Change of
Control; and
(h) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed on the
Securities.
If any of the Securities to be redeemed is in the form of a Global
Note, then such notice shall be modified in form but not substance to the
extent appropriate to accord with the procedures of the Depositary applicable
to redemptions.
At the Company's request and expense, the Trustee shall give the
notice of redemption in the Company's name; PROVIDED, HOWEVER, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, a notice signed by two officers requesting that the Trustee
give such notice and setting forth the information to be stated in such
notice as provided in the preceding paragraph.
Section 3.4. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.3
hereof, Securities called for redemption become irrevocably due and payable on
the redemption date at the redemption price. A notice of redemption may not be
conditional.
Section 3.5. DEPOSIT OF REDEMPTION PRICE.
Prior to 10:00 a.m. New York City time on any redemption date, the
Company shall deposit with the Trustee or with the Paying Agent money sufficient
to pay the redemption price of and accrued interest on all Securities to be
redeemed on that date. The Trustee or the Paying Agent shall promptly return to
the Company any money deposited with the Trustee or the Paying Agent by the
Company in excess of the amounts necessary to pay the redemption price of and
accrued interest on, all Securities to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue
on the Securities or the portions of Securities called for redemption. If a
Security is redeemed on or after an interest record date but on or prior to
the related interest payment date, then any accrued and unpaid interest shall
be paid to the Person in whose name such Security was registered at the close
of business on such record date. If any Security called for redemption shall
not be so paid upon surrender for redemption because of the failure of the
Company to comply with the preceding paragraph, interest shall be paid on the
unpaid principal, from the redemption date until such principal is paid, and
to the extent lawful on any interest not paid on such unpaid principal, in
each case at the rate provided in the Securities and in Section 4.1 hereof.
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47
Section 3.6. SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is redeemed in part, the Company
shall issue and, upon the receipt of a written authentication order of the
Company signed by two Officers of the Company, the Trustee shall authenticate
for the Holder at the expense of the Company a new Security equal in
principal amount to the unredeemed portion of the Security surrendered.
Section 3.7. OPTIONAL REDEMPTION.
(a) Except as set forth in clauses (b) and (c) of this Section
3.7, the Company shall not have the option to redeem the Securities pursuant
to this Section 3.7 prior to August 1, 2003. From and after August 1, 2003,
the Company shall have the option to redeem the Securities, in whole or in
part, upon not less than 30 nor more than 60 days notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on August 1 of each of the
years indicated below:
<TABLE>
<CAPTION>
Percentage of
Year Principal Amount
---- ----------------
<S> <C>
2003........................ 105.125%
2004........................ 103.417%
2005........................ 101.708%
2006 and thereafter......... 100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this Section
3.7, at any time prior to August 1, 2001, the Company may, at its option, on
any one or more occasions, redeem up to 35% of the original aggregate
principal amount of Securities at a redemption price of 110.25% of the
principal amount thereof, plus accrued and unpaid interest, if any, thereon
to the redemption date with all or a portion of the net proceeds of public
sales of common stock of the Company (the "Common Stock"); PROVIDED that at
least 65% of the original aggregate principal amount of Securities remains
outstanding immediately after the occurrence of such redemption; and
PROVIDED, FURTHER, that such redemption shall occur within 60 days of the
date after the closing of the related sale of such Common Stock.
(c) Notwithstanding the provisions of clause (a) of this Section
3.7, upon the occurrence of a Change of Control at any time on or prior to
August 1, 2003, the Company may, at its option, redeem in whole but not in
part, the Securities at a redemption price equal to 100% of the principal
amount thereof, plus the Applicable Premium as of, and accrued but unpaid
interest, if any, to, the date of redemption (the "Change of
<PAGE>
48
Control Redemption Payment") (subject to the right of Holders of record on
the relevant record date to receive interest due on the relevant interest
payment date) provided that such redemption shall be made no more than 90
days after the occurrence of a Change of Control. Provided the Company
complies with Section 3.3 and the other provisions hereof applicable to such
redemption, a redemption pursuant to this Section 3.7(c) can occur
simultaneously with the occurrence of a Change of Control. Notwithstanding
any provision of Section 3.7(d), the Company shall notify the Trustee and, by
mail, the Holders of the Securities of its decision to redeem the Securities
pursuant to this Section 3.7(c) no later than 30 days after the occurrence of
a Change of Control.
(d) Any redemption pursuant to this Section 3.7 shall be made
pursuant to the provisions of Sections 3.1 through 3.6 hereof and, as to
Section 3.7(c) only, pursuant to the provisions of Section 4.13.
Section 3.8. MANDATORY REDEMPTION.
Except as set forth under Sections 4.10 and 4.13 hereof, the
Company shall not be required to make mandatory redemption or sinking fund
payments with respect to the Securities.
Section 3.9. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the Company
shall be required to commence an offer to all Holders of Securities and, to
the extent required by the terms thereof, to all holders or lenders of other
Pari Passu Indebtedness, to purchase Securities and any such Pari Passu
Indebtedness (an "ASSET SALE OFFER"), it shall follow the procedures
specified below.
The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "OFFER PERIOD"). No later
than five Business Days after the termination of the Offer Period (the
"PURCHASE DATE"), the Company shall purchase the principal amount of
Securities required to be purchased pursuant to Section 4.10 hereof, giving
effect to any related offer for Pari Passu Indebtedness pursuant to Section
4.10, (the "OFFER AMOUNT") or, if less than the Offer Amount has been
tendered, all Securities tendered in response to the Asset Sale Offer.
Payment for any Securities so purchased shall be made in the same manner as
interest payments are made.
If the Purchase Date is on or after an interest record date and on
or before the related interest payment date, any accrued and unpaid interest
shall be paid to the Person in whose name a Security is registered at the
close of business on such record date, and no additional interest shall be
payable to
<PAGE>
49
Holders who tender Securities pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall
send, by first class mail, a notice to the Trustee and each of the Holders.
The notice shall contain all instructions and materials necessary to enable
such Holders to tender Securities pursuant to the Asset Sale Offer. The
Asset Sale Offer shall be made to all Holders. The notice, which shall
govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.9 and Section 4.10 hereof and the length of time the Asset Sale Offer
shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Security not tendered or accepted for payment shall
continue to accrue interest;
(d) that, unless the Company defaults in making such payment, any
Security accepted for payment pursuant to the Asset Sale Offer shall cease
to accrue interest after the Purchase Date;
(e) that Holders electing to have a Security purchased pursuant to an
Asset Sale Offer may only elect to have all of such Security purchased and
may not elect to have only a portion of such Security purchased;
(f) that Holders electing to have a Security purchased pursuant to
any Asset Sale Offer shall be required to surrender the Security, with the
form entitled "OPTION OF HOLDER TO ELECT PURCHASE" on the reverse of the
Security completed, or transfer by book-entry transfer, to the Company, a
Depositary, if appointed by the Company, or a Paying Agent at the address
specified in the notice at least three Business Days before the Purchase
Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the Depositary or the Paying Agent, as the case may be, receives,
not later than the expiration of the Offer Period, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Security the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such
Security purchased;
(h) that, if the aggregate principal amount of Securities surrendered
by Holders exceeds the Offer Amount, the Company shall select the
Securities to be purchased on a PRO RATA basis (with such adjustments as
may be deemed appropriate by the Company so that only Securities in
denominations of $1,000, or integral multiples thereof, shall be purchased)
in the manner provided in Section 4.10;
<PAGE>
50
and
(i) that Holders whose Securities were purchased only in part shall
be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered (or transferred by book-entry
transfer).
If any of the Securities subject to an Asset Sale Offer is in the
form of a Global Note, then such notice may be modified in form but not
substance to the extent appropriate to accord with the procedures of the
Depositary applicable to repurchases.
On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a PRO RATA basis to the extent necessary, the
Offer Amount of Securities or portions thereof tendered pursuant to the Asset
Sale Offer, or if less than the Offer Amount has been tendered, all
Securities tendered, and shall deliver to the Trustee an Officers'
Certificate stating that such Securities or portions thereof were accepted
for payment by the Company in accordance with the terms of this Section 3.9.
The Company, the Depositary or the Paying Agent, as the case may be, shall
promptly (but in any case not later than five days after the Purchase Date)
mail or deliver to each tendering Holder an amount equal to the purchase
price of the Securities tendered by such Holder and accepted by the Company
for purchase, and the Company shall promptly issue a new Security, and the
Trustee, upon receipt of a written authentication order of the Company signed
by two Officers of the Company, shall authenticate and mail or deliver such
new Security to such Holder, in a principal amount equal to any unpurchased
portion of the Security surrendered. Any Security not so accepted shall be
promptly mailed or delivered by the Company to the Holder thereof. The
Company shall publicly announce the results of the Asset Sale Offer on the
Purchase Date.
Other than as specifically provided in this Section 3.9, any
purchase pursuant to this Section 3.9 shall be made pursuant to the
provisions of Sections 3.1 through 3.6 hereof.
ARTICLE 4
COVENANTS
Section 4.1. PAYMENT OF SECURITIES.
The Company shall pay or cause to be paid the principal of,
premium, if any, and interest on the Securities on the dates and in the
manner provided in the Securities. Principal, premium, if any, and interest
shall be considered paid on the date due if the Paying Agent, if other than
the Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on
the due date money deposited by the Company in immediately available funds
and designated for and sufficient to pay all such amounts then due.
The Company shall pay interest (including post-petition
<PAGE>
51
interest in any proceeding under any Bankruptcy Law) on overdue principal at
the rate equal to 1% per annum in excess of the then applicable interest rate
on the Securities to the extent lawful; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest (without regard to any applicable grace period) at
the same rate to the extent lawful.
Section 4.2. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, The City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where principal,
premium, if any, and interest on the Securities will be paid and where
Securities may be surrendered for registration of transfer or for exchange
and where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served. The Company shall give prompt
written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
PROVIDED, HOWEVER, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York for such purposes. The Company
shall give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or
agency.
The Company hereby designates the following office of an Affiliate
of the Trustee as one such office or agency of the Company in accordance with
Section 2.3: the Corporate Trust Office of the Trustee.
<PAGE>
52
Section 4.3. COMMISSION REPORTS.
Notwithstanding that the Company is not subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company shall
file with the Commission and, within 15 days after such filing, provide the
Trustee and Holders and prospective Holders (upon request) with the annual
reports and the information, documents and other reports which are specified
in Sections 13 and 15(d) of the Exchange Act (but without exhibits in the
case of the Holders and prospective Holders). In the event that the Company
is not permitted to file such reports, documents and information with the
Commission, the Company will provide substantially similar information to the
Trustee, the Holders and prospective Holders as if the Company were subject
to the reporting requirements of Section 13 or 15(d) of the Exchange Act
within 15 days of the date the Company would have been obligated to file such
reports with the Commission, were the Company permitted to file such reports
with the Commission. The Company also will comply with the other provisions
of Section 314(a) of the Trust Indenture Act.
Section 4.4. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 90 days after
the end of each fiscal year, an Officers' Certificate stating that a review
of the activities of the Company and its Subsidiaries during the preceding
fiscal year has been made under the supervision of the signing Officers with
a view to determining whether the Company has kept, observed, performed and
fulfilled its obligations under this Indenture, and further stating, as to
each such Officer signing such certificate, that to the best of his or her
knowledge the Company has kept, observed, performed and fulfilled each and
every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions of
this Indenture (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which he or she may have
knowledge and what action the Company is taking or proposes to take with
respect thereto) and that to the best of his or her knowledge no event has
occurred and remains in existence by reason of which payments on account of
the principal of, premium, if any, or interest on the Securities is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto. As of
the date hereof, the Company's fiscal year ends on December 31 of each
calendar year. In the event the Company changes its fiscal year, it shall
promptly notify the Trustee of such change.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the fiscal year-end
financial statements delivered pursuant to Section 4.3 above shall be
accompanied by a written statement of the Company's independent public
accountants (who shall be a firm of established national reputation) that in
<PAGE>
53
making the examination necessary for certification of such financial
statements, nothing has come to their attention that would lead them to
believe that the Company has violated any provisions of Article 4 or Article
5 hereof or, if any such violation has occurred, specifying the nature and
period of existence thereof, it being understood that such accountants shall
not be liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation.
(c) The Company shall, so long as any of the Securities are
outstanding, deliver to the Trustee, within five Business Days of any Officer
becoming aware of any Default or Event of Default, a certificate of two
officers specifying such Default or Event of Default and what action the
Company is taking or proposes to take with respect thereto.
Section 4.5. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate
proceedings or where the failure to effect such payment is not adverse in any
material respect to the Holders of the Securities.
Section 4.6. STAY, EXTENSION AND USURY LAWS.
Each of the Company and the Subsidiary Guarantors covenants (to the
extent that it may lawfully do so) that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture; and each of the Company and the Subsidiary Guarantors (to the
extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted
to the Trustee, but shall suffer and permit the execution of every such power
as though no such law has been enacted.
<PAGE>
54
Section 4.7. RESTRICTED PAYMENTS.
The Company shall not and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or
make any other payment or distribution on account of the Equity Interests of
the Company or any Restricted Subsidiary (including, without limitation, any
payment in connection with any merger or consolidation involving the Company)
to the direct or indirect holders of Equity Interests of the Company or any
Restricted Subsidiary in their capacity as such (other than dividends or
distributions payable in Equity Interests of the Company or a Restricted
Subsidiary (other than Disqualified Stock) and other than dividends or
distributions payable to the Company or a Restricted Subsidiary so long as,
in the case of any dividend or distribution payable on or in respect of any
class or series of securities issued by a Subsidiary other than a Wholly
Owned Restricted Subsidiary, the Company or a Restricted Subsidiary receives
at least its pro rata share of such dividend or distribution in accordance
with its Equity Interests in such class or series of securities); (ii)
purchase, redeem or otherwise acquire or retire for value any Equity
Interests of the Company or any Subsidiary of the Company that is not a
Wholly Owned Restricted Subsidiary of the Company; (iii) make any principal
payment on, or purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness that is subordinated to the Securities, except at
final maturity or as a mandatory or sinking fund repayment; or (iv) make any
Restricted Investment (all such payments and other actions set forth in
clauses (i) through (iv) above being collectively referred to as "Restricted
Payments"), unless, at the time of and after giving effect to such Restricted
Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
Section 4.9 hereof; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries
after the date of this Indenture (excluding Restricted Payments permitted
by clauses (1), (3), (4) and (6) of the next succeeding paragraph), is less
than the sum of (i) 50% of the Consolidated Net Income of the Company for
the period (taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the date of this Indenture to the end of
the Company's most recently ended fiscal quarter for which internal
financial statements are
<PAGE>
55
available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), PLUS (ii) 100% of the aggregate net cash proceeds received by
the Company from the issue or sale since the date of this Indenture of
Equity Interests of the Company or of debt securities of the Company
that have been converted into or exchanged for such Equity Interests
(other than Equity Interests (or convertible debt securities) sold to a
Subsidiary of the Company and other than Disqualified Stock or debt
securities that have been converted into Disqualified Stock), PLUS
(iii) to the extent that any Restricted Investment that was made after
the date of this Indenture is sold for cash or otherwise liquidated or
repaid for cash or the receipt of properties used in the Oil and Gas
Business, the lesser of (A) the net cash proceeds of such sale,
liquidation or repayment or the fair market value of property received
in exchange therefor and (B) the amount of such Restricted Investment;
PROVIDED, however, that the foregoing provisions of this paragraph (c)
will not prohibit Restricted Payments in an aggregate amount not to
exceed $15 million.
The foregoing provisions shall not prohibit (1) the payment of any
dividend within 60 days after the date of declaration thereof, if at said
date of declaration such payment would have complied with the provisions of
this Indenture; (2) the redemption, repurchase, retirement or other
acquisition of any Equity Interests of the Company in exchange for, or out of
the proceeds of, the substantially concurrent sale (other than to a
Subsidiary of the Company) of other Equity Interests of the Company (other
than any sale of Disqualified Stock); PROVIDED that the amount of any such
net cash proceeds that are utilized for any such redemption, repurchase,
retirement or other acquisition shall be excluded from clause (c)(ii) of the
preceding paragraph; (3) the defeasance, redemption or repurchase of
Subordinated Indebtedness with the net cash proceeds from an incurrence of
subordinated Permitted Refinancing Debt or the substantially concurrent sale
(other than to a Subsidiary of the Company) of Equity Interests (other than
Disqualified Stock) of the Company; PROVIDED that the amount of any such net
cash proceeds that are utilized for any such redemption, repurchase,
retirement or other acquisition shall be excluded from clause (c)(ii) of the
preceding paragraph; (4) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Company or any Subsidiary
of the Company held by any of the Company's (or any of its Subsidiaries')
employees pursuant to any management equity subscription agreement or stock
option agreement in effect as of the date of this Indenture; PROVIDED that
the aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interests shall not exceed $2.0 million in any twelve-month
period; and PROVIDED FURTHER that no Default or Event of Default shall have
occurred and be continuing immediately after such transaction; (5)
repurchases of Equity Interests deemed to occur upon exercise of stock
options if such Equity Interests represent a portion of
<PAGE>
56
the exercise price of such options; (6) the making of loans by the Company or
any of its Restricted Subsidiaries to officers or directors of the Company;
PROVIDED that the aggregate outstanding amount of such loans shall not
exceed, at any time, $2.0 million plus any such loans outstanding on the date
of this Indenture; and (7) during the period the Company is subject to
Subchapter S of the Code, and after such period to the extent relating to the
liability for such period, the making of payments or distributions or the
payment of dividends in amounts equal to the amounts required for the
Company's stockholders to pay Federal, state and local income taxes to the
extent such income taxes are attributable to the taxable income of the
Company.
The amount of all Restricted Payments (other than cash) shall be the
fair market value (as determined in good faith by a resolution of the Board
of Directors set forth in a certificate of two officers delivered to the
Trustee, which determination shall be conclusive evidence of compliance with
this provision) on the date of the Restricted Payment of the asset(s)
proposed to be transferred by the Company or the applicable Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. Not
later than five days after the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officer's Certificate stating that
such Restricted Payment is permitted and setting forth the basis upon which
the calculations required by this Section 4.7 were computed.
In computing Consolidated Net Income of the Company for purposes of this
Section 4.7, (1) the Company shall use audited financial statements for the
portions of the relevant period for which audited financial statements are
available on the date of determination and unaudited financial statements and
other current financial data based on the books and records of the Company
for the remaining portion of such period and (2) the Company shall be
permitted to rely in good faith on the financial statements and other
financial data derived from the books and records of the Company that are
available on the date of determination. If the Company makes a Restricted
Payment which, at the time of the making of such Restricted Payment, would on
the good faith determination of the Company be permitted under the
requirements of this Indenture, such Restricted Payment shall be deemed to
have been made in compliance with this Indenture notwithstanding any
subsequent adjustments made in good faith to the Company's financial
statements affecting Consolidated Net Income of the Company for any period.
Section 4.8. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer
to exist or become effective any encumbrance or restriction on the ability of
any Restricted Subsidiary to (i)(x) pay dividends or make any other
distributions to the Company or any of the Restricted Subsidiaries of the
Company (1) on its Capital Stock or (2) with
<PAGE>
57
respect to any other interest or participation in, or measured by, its
profits, or (y) pay any Indebtedness owed to the Company or any Restricted
Subsidiaries of the Company, (ii) make loans or advances to the Company or
any Restricted Subsidiaries of the Company or (iii) transfer any of its
properties or assets to the Company or any Restricted Subsidiaries of the
Company, except for such encumbrances or restrictions existing under or by
reason of (a) the Existing Credit Facility as in effect as of the date of
this Indenture, and any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings thereof or
any other Credit Facility, PROVIDED that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements,
refinancings or other Credit Facilities are no more restrictive with respect
to such dividend and other payment restrictions than those contained in the
Existing Credit Facility as in effect on the date of this Indenture, (b) this
Indenture and the Securities, (c) applicable law, (d) any instrument
governing Indebtedness or Capital Stock of a Person acquired by the Company
or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except, in the case of Indebtedness, to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person and
its Subsidiaries, or the property or assets of the Person and its
Subsidiaries, so acquired, PROVIDED that, such Indebtedness or Capital Stock
was permitted by the terms of this Indenture to be incurred, (e) by reason of
customary non-assignment provisions in leases entered into in the ordinary
course of business, (f) purchase money obligations for property acquired in
the ordinary course of business that impose restrictions of the nature
described in clause (iii) above on the property so acquired, (g) Permitted
Refinancing Debt, PROVIDED that the restrictions contained in the agreements
governing such Permitted Refinancing Debt are no more restrictive than those
contained in the agreements governing the Indebtedness being refinanced, or
(h) any other security agreement, instrument or document relating to Senior
Debt hereafter in effect, provided that such encumbrances or restrictions are
customary in connection with such documents and that the terms and conditions
of such encumbrances or restrictions are no more restrictive than those
encumbrances or restrictions imposed in connection with the Existing Credit
Facility, (i) Permitted Liens, (j) customary provisions in joint venture
agreements and other similar agreements relating to the distribution of
revenues from such joint venture or other business venture, or (k) any
agreement relating to a sale and leaseback transaction or capital lease, but
only on the property subject to such transaction or lease and only to the
extent that such restrictions or encumbrances are customary with respect to a
sale and leaseback transaction or capital lease.
<PAGE>
58
Section 4.9. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF
DISQUALIFIED STOCK.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness or issue
any Disqualified Stock and the Company shall not permit any of its Restricted
Subsidiaries to issue any shares of Disqualified Stock to any Person other
than the Company or a Wholly-Owned Restricted Subsidiary of the Company;
PROVIDED, HOWEVER, that the Company and any Subsidiary Guarantor may incur
Indebtedness or issue shares of Disqualified Stock if:
(i) the Fixed Charge Coverage Ratio for the Company's most
recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued
would have been at least 2.5 to 1, determined on a pro forma basis as set
forth in the definition of Fixed Charge Coverage Ratio; and
(ii) no Default or Event of Default shall have occurred and be
continuing at the time such additional Indebtedness is incurred or such
Disqualified Stock is issued or would occur as a consequence of the
incurrence of the additional Indebtedness or the issuance of the
Disqualified Stock.
Notwithstanding the foregoing, this Indenture shall not prohibit any of
the following (collectively, "Permitted Indebtedness"): (a) the Indebtedness
evidenced by the Securities; (b) the incurrence by the Company or any of its
Restricted Subsidiaries of Indebtedness pursuant to Credit Facilities, so
long as the aggregate principal amount of all Indebtedness outstanding under
all Credit Facilities does not, at any one time, exceed the greater of (i)
$175 million and (ii) the Borrowing Base, provided that the Company may incur
more than $175 million of Indebtedness pursuant to Credit Facilities only if
the Fixed Charge Coverage Ratio for the Company's most recently ended four
full fiscal quarters for which internal financial statements are available
would have been at least 2.0 to 1, determined on a pro forma basis as set
forth in the definition of Fixed Charge Coverage Ratio; (c) the guarantee by
any Subsidiary Guarantor of any Indebtedness that is permitted by this
Indenture to be incurred by the Company; (d) all Indebtedness of the Company
and its Restricted Subsidiaries in existence as of the date of this
Indenture; (e) intercompany Indebtedness between or among the Company and any
of its Wholly Owned Restricted Subsidiaries; PROVIDED, HOWEVER, that if the
Company is the obligor on such Indebtedness, (i) any subsequent issuance or
transfer of Equity Interests that results in any such Indebtedness being held
by a Person other than the Company or a Wholly Owned Restricted Subsidiary
and (ii) any sale or other
<PAGE>
59
transfer of any such Indebtedness to a Person that is not either the Company
or a Wholly Owned Restricted Subsidiary shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Restricted Subsidiary, as the case may be; (f) Indebtedness in connection
with one or more standby letters of credit, guarantees, performance bonds or
other reimbursement obligations, in each case, issued in the ordinary course
of business and not in connection with the borrowing of money or the
obtaining of advances or credit (other than advances or credit on open
account, includible in current liabilities, for goods and services in the
ordinary course of business and on terms and conditions which are customary
in the Oil and Gas Business, and other than the extension of credit
represented by such letter of credit, guarantee or performance bond itself),
not to exceed in the aggregate at any given time 5.0% of Total Assets; (g)
Indebtedness under Interest Rate Hedging Agreements entered into for the
purpose of limiting interest rate risks, PROVIDED that the obligations under
such agreements are related to payment obligations on Indebtedness otherwise
permitted by the terms of this covenant and that the aggregate notional
principal amount of such agreements does not exceed 105% of the principal
amount of the Indebtedness to which such agreements relate; (h) Indebtedness
under Oil and Gas Hedging Contracts, PROVIDED that such contracts were
entered into in the ordinary course of business for the purpose of limiting
risks that arise in the ordinary course of business of the Company and its
Restricted Subsidiaries; (i) the incurrence by the Company and its Restricted
Subsidiaries of Indebtedness not otherwise permitted to be incurred pursuant
to this paragraph, PROVIDED that the aggregate principal amount of all
Indebtedness incurred pursuant to this clause (i), together with all
Permitted Refinancing Debt incurred pursuant to clause (j) of this paragraph
in respect of Indebtedness previously incurred pursuant to this clause (i),
does not exceed $20.0 million at any one time outstanding; (j) Permitted
Refinancing Debt incurred in exchange for, or the net proceeds of which are
used to refinance, extend, renew, replace, defease or refund, Indebtedness
that was permitted by this Indenture to be incurred (including Indebtedness
previously incurred pursuant to this clause (j), but excluding Indebtedness
under clauses (b), (e), (f), (g), (h), (k), (l) and (m)); (k) accounts
payable or other obligations of the Company or any Restricted Subsidiary to
trade creditors created or assumed by the Company or such Restricted
Subsidiary in the ordinary course of business in connection with the
obtaining of goods or services; (l) Indebtedness consisting of obligations in
respect of purchase price adjustments, guarantees or indemnities in
connection with the acquisition or disposition of assets; (m) production
imbalances occurring in the ordinary course of business that do not, at any
one time outstanding, exceed 2% of the Total Assets of the Company; (n) rents
and royalties due others incurred in the ordinary course of the Oil and Gas
Business; and (o) Indebtedness of a Subsidiary Guarantor in respect of the
Subsidiary Guarantee of such Subsidiary Guarantor.
The Company shall not permit any Unrestricted
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Subsidiary to incur any Indebtedness other than Non-Recourse Debt; provided,
however, if any such Indebtedness ceases to be Non-Recourse Debt, such event
shall be deemed to constitute an incurrence of Indebtedness by the Company.
Section 4.10. ASSET SALES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, engage in an Asset Sale unless (i) the Company or the
Restricted Subsidiary, as the case may be, receives consideration at the time
of such Asset Sale at least equal to the fair market value (as determined in
good faith by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee, which determination shall be
conclusive evidence of compliance with this provision) of the assets or
Equity Interests issued or sold or otherwise disposed of and (ii) at least
85% of the consideration therefor received by the Company or such Restricted
Subsidiary from such Asset Sale is in the form of cash, Cash Equivalents,
properties and capital assets to be used by the Company or any Restricted
Subsidiary in the Oil and Gas Business or oil and gas properties owned or
held by another Person which are to be used in the Oil and Gas Business of
the Company or its Restricted Subsidiaries, or any combination thereof
(collectively the "cash consideration"); PROVIDED that the amount of (x) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet) of the Company or any Restricted Subsidiary (other than
contingent liabilities and liabilities that are by their terms subordinated
to the Securities or any guarantee thereof) that are assumed by the
transferee of any such assets pursuant to a customary novation agreement that
releases the Company or such Restricted Subsidiary from further liability and
(y) any non-cash consideration received by the Company or any such Restricted
Subsidiary from such transferee that are converted by the Company or such
Restricted Subsidiary into cash within 180 days of closing such Asset Sale,
shall be deemed to be cash for purposes of this provision (to the extent of
the cash received); PROVIDED, HOWEVER, that the Company and its Restricted
Subsidiaries may make Asset Sales with a fair market value not exceeding $10
million in the aggregate in each fiscal year free from any of the
restrictions, requirements or other provisions set forth in this Section 4.10.
Within 360 days after the receipt of any Net Proceeds from an Asset
Sale, the Company may apply such Net Proceeds, at its option, in any order or
combination, (a) to reduce Senior Debt or Guarantor Senior Debt, (b) to make
Permitted Investments, (c) to make investments in interests in other Oil and
Gas Businesses or (d) to make capital expenditures in respect of the
Company's or its Restricted Subsidiaries' Oil and Gas Business or to purchase
long-term assets that are used or useful in the Oil and Gas Business.
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce Senior Debt that is revolving debt or otherwise invest
such Net Proceeds in any manner that is not prohibited by this Indenture.
Any Net
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Proceeds from Asset Sales that are not applied as provided in the first
sentence of this paragraph shall (after the expiration of the periods
specified in this paragraph) be deemed to constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $15 million, the
Company shall make an Asset Sale Offer to purchase the maximum principal amount
of Securities and any other Pari Passu Indebtedness to which the Asset Sale
Offer applies that may be purchased out of the Excess Proceeds, at an offer
price in cash in an amount equal to, in the case of the Securities, 100% of the
principal amount thereof plus accrued and unpaid interest thereon to the date of
purchase or, in the case of any other Pari Passu Indebtedness, 100% of the
principal amount thereof (or with respect to discount Pari Passu Indebtedness,
the accrued value thereof) on the date of purchase, in each case, in accordance
with the procedures set forth in Section 3.9 hereof or the agreements governing
Pari Passu Indebtedness, as applicable. To the extent that the aggregate
principal amount (or accreted value, as the case may be) of the Securities and
Pari Passu Indebtedness tendered pursuant to an Asset Sale Offer is less than
the Excess Proceeds, the Company may use any remaining Excess Proceeds for
general corporate purposes. If the sum of (i) the aggregate principal amount of
Securities surrendered by Holders thereof, and (ii) the aggregate principal
amount or accreted value, as the case may be, of other Pari Passu Indebtedness
surrendered by holders or lenders thereof, exceeds the amount of Excess
Proceeds, the Trustee and the trustee or other lender representatives for the
Pari Passu Indebtedness shall select the Securities and other Pari Passu
Indebtedness to be purchased on a pro rata basis, based on the aggregate
principal amount (or accreted value, as applicable) thereof surrendered in such
Asset Sale Offer. Upon completion of such Asset Sale Offer, Excess Proceeds
shall be reset at zero.
Section 4.11. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Subsidiaries
to, make any payment to, or sell, lease, transfer or otherwise dispose of any of
its properties or assets to, or purchase any property or assets from, or enter
into or make or amend any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any of its Affiliates (each of the
foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is
on terms that are no less favorable to the Company or the relevant Subsidiary
than those that would have been obtained in a comparable transaction by the
Company or such Subsidiary with an unrelated Person and (ii) the Company
delivers to the Trustee (a) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate consideration in excess of
$1.0 million but less than or equal to $5.0 million, an Officers' Certificate to
the Trustee certifying that such Affiliate Transaction complies with clause (i)
above, (b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $5.0
million but less than or equal to
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$10 million, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction or series of related
Affiliate Transactions complies with clause (i) above and that such Affiliate
Transaction or series of related Affiliate Transactions has been approved in
good faith by a majority of the members of the Board of Directors who have no
financial interest in such Affiliate Transactions, which resolution shall be
conclusive evidence of compliance with this provision and (c) with respect to
any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $10 million, an Officer's
Certificate as described in clause (b) above and an opinion as to the
fairness to the Company or such Subsidiary of such Affiliate Transaction from
a financial point of iew issued by an accounting, appraisal, engineering or
investment banking firm of national standing (for purposes of this clause (c)
such opinion and the resolution described in clause (b) above shall be
conclusive evidence of compliance with this provision); PROVIDED that the
following shall not be deemed Affiliate Transactions: (1) reasonable fees
and compensation paid to (including issuances and grants of securities and
stock options), and employment agreements and stock option and ownership
plans for the benefit of, officers, directors, employees or consultants of
the Company or any Restricted Subsidiary of the Company as determined in good
faith by the Company's Board of Directors or senior management, (2)
transactions contemplated by any employment agreement or other compensation
plan or arrangement entered into by the Company or any of its Subsidiaries in
the ordinary course of business and consistent with past practice of the
Company or such Subsidiary, (3) transactions between or among the Company
and/or its Restricted Subsidiaries, (4) Restricted Payments and Permitted
Investments that are permitted by Section 4.7 and the definition of Permitted
Investments, (5) indemnification payments made to officers, directors and
employees of the Company or its Subsidiaries pursuant to charter, by-law,
statutory or contractual provisions, (6) any contracts, agreements,
understandings existing as of the date of this Indenture and (7) oil and gas
leasehold acquisition, drilling, well servicing and leasehold operations
services provided by or to any Affiliate in the ordinary course of the Oil
and Gas Business on terms that are no less favorable to the Company or the
relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person.
Section 4.12. LIENS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or
become effective any Lien securing Indebtedness of any kind (other than
Permitted Liens) upon any of its property or assets, now owned or hereafter
acquired, unless all payments under the Securities are secured by such Lien
prior to, or on an equal and ratable basis with, the Indebtedness so secured for
so long as such Indebtedness is secured by such Lien.
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Section 4.13. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder of the
Securities shall, unless the Company shall have elected to redeem the Securities
prior to August 1, 2003 pursuant to Section 3.7(c), have the right to require
the Company to repurchase all or any part (equal to $1,000 or an integral
multiple thereof) of such Holder's Securities pursuant to the offer described
below (the "CHANGE OF CONTROL OFFER") at an offer price in cash equal to 101% of
the aggregate principal amount of the Securities plus accrued and unpaid
interest if any, thereon to the date of purchase (the "CHANGE OF CONTROL
PAYMENT"). Within 30 days following any Change of Control, the Company shall
mail a notice to each Holder stating: (1) a description of the transaction or
transactions that constitute the Change of Control; (2) that the Change of
Control Offer is being made pursuant to this Section 4.13 and that all
Securities tendered shall be accepted for payment; (3) the purchase price and
the purchase date described below (the "CHANGE OF CONTROL PAYMENT DATE");
(4) that any Security not tendered shall continue to accrue interest, if any;
(5) that, unless the Company defaults in the payment of the Change of Control
Payment, all Securities accepted for payment pursuant to the Change of Control
Offer shall cease to accrue interest, if any, after the Change of Control
Payment Date; (6) that Holders electing to have any Securities purchased
pursuant to a Change of Control Offer shall be required to surrender the
Securities, with the form entitled "OPTION OF HOLDER TO ELECT PURCHASE" on the
reverse of the Securities completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the third Business Day
preceding the Change of Control Payment Date; (7) that Holders shall be entitled
to withdraw their election if the Paying Agent receives, not later than the
close of business on the second Business Day preceding the Change of Control
Payment Date, a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of Securities delivered for
purchase, and a statement that such Holder is withdrawing his election to have
the Securities purchased; and (8) that Holders whose Securities are being
purchased only in part shall be issued new Securities equal in principal amount
to the unpurchased portion of the Securities surrendered, which unpurchased
portion must be equal to $1,000 in principal amount or an integral multiple
thereof. The Company and each Subsidiary Guarantor shall comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable to such party in connection with the repurchase of the Securities as
a result of a Change of Control.
(b) On a Business Day that is no earlier than 30 days nor later than
60 days from the date that the Company mails or causes to be mailed notice of
the Change of Control to the Holders (the "CHANGE OF CONTROL PAYMENT DATE"), the
Company shall, to the extent lawful, (i) accept for payment all
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Securities or portions thereof properly tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent an amount equal to the
Change of Control Payment in respect of all the Securities or portions
thereof so tendered and (iii) deliver or cause to be delivered to the Trustee
the Securities so accepted together with an Officers' Certificate stating the
aggregate principal amount of such Securities or portions thereof being
purchased by the Company. The Paying Agent shall promptly mail to each
Holder of the Securities so tendered the Change of Control Payment for such
Securities, and the Trustee shall promptly authenticate and mail (or cause to
be transferred by book entry) to each Holder a new Security equal in
principal amount to any unpurchased portion of the Securities surrendered, if
any; PROVIDED that each such new Security shall be in a principal amount of
$1,000 or an integral multiple thereof. The Company shall publicly
announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
(c) Prior to complying with the provisions this Section 4.13, but in
any event within 30 days following a Change of Control, the Company shall either
repay all outstanding Senior Debt or obtain the requisite consents, if any,
under all agreements governing outstanding Senior Debt to permit the repurchase
of the Securities required by this Section 4.13.
The Change of Control provisions described above shall be applicable
whether or not any other provisions of this Indenture are applicable.
The Company shall not be required to make a Change of Control Offer if
a third party makes the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements set forth in this Section 4.13 and
purchases all Securities (or portions thereof) validly tendered and not
withdrawn under such Change of Control Offer.
Section 4.14. ADDITIONAL SUBSIDIARY GUARANTEES.
In the event that the Company or any of its Restricted Subsidiaries
shall acquire or create another Restricted Subsidiary after the date of this
Indenture, the Company shall cause such newly acquired or created Restricted
Subsidiary to execute and deliver to the Trustee a Subsidiary Guarantee pursuant
to which such Restricted Subsidiary will guarantee, jointly and severally with
other Subsidiary Guarantors, to the Holders and the Trustee, subject to
subordination provisions in Article 10, the full and prompt payment of the
Securities in accordance with Article 11 and become a party to the Indenture.
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Section 4.15. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company and the Subsidiaries shall do
or cause to be done all things necessary to preserve and keep in full force and
effect (i) its corporate existence, and the corporate, partnership or other
existence of each of the Subsidiaries, in accordance with the respective
organizational documents (as the same may be amended from time to time) of the
Company or any such Subsidiary and (ii) the rights (charter, partnership
agreement and statutory), licenses and franchises of the Company and the
Subsidiaries; PROVIDED, HOWEVER, that the Company and the Subsidiaries shall not
be required to preserve any such right, license or franchise, or the corporate,
partnership or other existence of any of the Subsidiaries, if the Board of
Directors of the relevant Person shall determine that the preservation thereof
is no longer desirable in the conduct of the business of the Company and the
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders of the Securities.
Section 4.16. NO LAYERING.
Notwithstanding the provisions of Section 4.9 hereof, (i) the Company
shall not incur, create, issue, assume, guarantee or otherwise become liable for
any Indebtedness that is subordinate or junior in right of payment to any Senior
Debt of the Company and senior in any respect in right of payment to the
Securities and (ii) the Subsidiary Guarantors shall not directly or indirectly
incur, create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is subordinate or junior in right of payment to Guarantor
Senior Debt and senior in any respect in right of payment to the Subsidiary
Guarantees; PROVIDED, HOWEVER, that the foregoing limitations shall not apply to
distinctions between categories of Indebtedness that exist by reason of any
Liens arising or created in respect of some but not all such Indebtedness.
Section 4.17. BUSINESS ACTIVITIES.
The Company shall not, and shall not permit any Restricted Subsidiary
to, engage in any material respect in any business other than the Oil and Gas
Business.
Section 4.18. SALE AND LEASEBACK TRANSACTIONS.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; PROVIDED that
the Company or its Restricted Subsidiaries may enter into a sale and leaseback
transaction if (i) the Company could have incurred Indebtedness in an amount
equal to the Attributable Debt relating to such sale and leaseback transaction
pursuant to the first paragraph of Section 4.9 or (ii) the gross cash proceeds
of such sale and leaseback transaction are at least equal to the fair market
value (as determined in good faith by a resolution of the Board of
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Directors set forth in an Officers' Certificate delivered to the Trustee) of
the property that is subject to such sale and leaseback transaction and the
transfer of assets in such sale and leaseback transaction is permitted by,
and the Company applies the net proceeds of such transaction in compliance
with, the provisions of Section 4.10.
Section 4.19. DESIGNATION OF UNRESTRICTED SUBSIDIARIES.
The Board of Directors of the Company may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not cause
a Default. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated shall be deemed to be Restricted
Payments at the time of such designation and shall reduce the amount available
for Restricted Payments under clause (c) of the first paragraph of Section 4.7.
All such outstanding Investments shall be deemed to constitute Investments in an
amount equal to the greater of the fair market value or the book value of such
Investments at the time of such designation. Such designation shall only be
permitted if such Restricted Payment would be permitted at such time and if such
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
ARTICLE 5
SUCCESSORS
Section 5.1. MERGER, CONSOLIDATION, OR SALE OF SUBSTANTIALLY ALL
ASSETS.
The Company shall not consolidate or merge with or into (whether or
not the Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets, in one or more related transactions, to another Person, and the Company
may not permit any of its Restricted Subsidiaries to enter into any such
transaction or series of transactions if such transaction or series of
transactions would, in the aggregate, result in a sale, assignment, transfer,
lease, conveyance, or other disposition of all or substantially all of the
properties or assets of the Company to another Person, in either case unless (i)
the Company is the surviving corporation or the Person formed by or surviving
any such consolidation or merger (if other than the Company) or to which such
sale, assignment, transfer, lease, conveyance or other disposition shall have
been made (the "Surviving Entity") is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) the Surviving Entity (if the Company is not the continuing obligor under
this Indenture) assumes all the obligations of the Company under the Securities
and this Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee; (iii) immediately before and after giving effect to
such
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transaction or series of transactions no Default or Event of Default exists;
(iv) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (and treating any Indebtedness not
previously an obligation of the Company or any of its Restricted Subsidiaries
which becomes the obligation of the Company or any of its Restricted
Subsidiaries as a result of such transaction or series of transactions as
having been incurred at the time of such transaction or series of
transactions), the Consolidated Net Worth of the Company (if the Company is
not the continuing obligor under this Indenture) is equal to or greater han
the Consolidated Net Worth of the Company immediately prior to such
transaction or series of transactions and (v) the Company or Surviving Entity
(if the Company is not the continuing obligor under this Indenture) will, at
the time of such transaction or series of transactions and after giving pro
forma effect thereto as if such transaction or series of transactions had
occurred at the beginning of the applicable four-quarter period, be permitted
to incur at least $1.00 of additional Indebtedness pursuant to the test set
forth in the first paragraph of Section 4.9 hereof. Each Subsidiary
Guarantor, if any, unless it is the other party to the transactions described
above, shall have confirmed by supplemental indenture that its Subsidiary
Guarantee shall apply to such Person's obligations under the Indenture and
the Securities. Notwithstanding the foregoing clauses (iv) and (v), any
Restricted Subsidiary may consolidate with, merge into or transfer all or
part of its properties and assets to the Company, and any Wholly Owned
Restricted Subsidiary may consolidate with, merge into or transfer all or
part of its properties and assets to another Wholly Owned Restricted
Subsidiary.
None of the provisions of this Section 5.1 shall be deemed to prevent
the merger of the Company with an Affiliate incorporated solely for the purpose
of reincorporating the Company in another jurisdiction. This Section 5.1 shall
not apply to any consolidation, merger, sale, assignment, transfer, lease or
other disposition if the Company shall have elected to redeem the Securities
pursuant to Section 3.7 and such redemption takes place prior to or
simultaneously with the Company's consolidation or merger with or into another
Person.
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Section 5.2. SUCCESSOR CORPORATION SUBSTITUTED; SUBSIDIARY GUARANTORS
CONFIRMED.
(a) Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of the Company in accordance with Section 5.1 hereof, the Surviving
Entity shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "COMPANY" shall refer instead to
the Surviving Entity and not to the Company), and may exercise every right and
power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; PROVIDED, HOWEVER, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Securities except in the case of a sale of all
of the Company's assets that meets the requirements of Section 5.1 hereof.
(b) Upon any consolidation or merger, or any sale, assignment,
transfer, lease conveyance or other disposition of all or substantially all of
the assets of the Company in accordance with Section 5.1 hereof, each Subsidiary
Guarantor (unless such Subsidiary Guarantor is the Surviving Entity) shall
confirm by executing a supplemental indenture that its Subsidiary Guarantee
guarantees the Surviving Entity's Obligations under this Indenture and the
Securities.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.1. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" occurs if:
(1) the Company defaults in the payment of interest, if any, on the
Securities when the same becomes due and payable and the Default continues
for a period of 30 consecutive days, whether or not such payment is
prohibited by the provisions of Article 10 hereof;
(2) the Company defaults in the payment of the principal of or
premium, if any, on the Securities, whether or not such payment is
prohibited by the provisions of Article 10 hereof;
(3) the Company or a Subsidiary Guarantor fails to observe or perform
any covenant, condition or agreement on the part of the Company or a
Subsidiary Guarantor to be observed or performed pursuant to Article 5
hereof;
(4) the Company fails to observe or perform any covenant, condition
or agreement on the part of the Company to be observed or performed
pursuant to Sections 4.3, 4.7,
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4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.16, 4.17, 4.18 and 4.19 hereof
and the Default continues for the period and after the notice specified
below;
(5) the Company fails to comply with any of its other agreements or
covenants in, or provisions of, the Securities or this Indenture and the
Default continues for 60 consecutive days after the notice specified below;
(6) except as permitted herein, any Subsidiary Guarantee shall be
held in any judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect or a Subsidiary
Guarantor, or any Person acting on behalf of a Subsidiary Guarantor, shall
deny or disaffirm such Subsidiary Guarantor's obligation under its
Subsidiary Guarantee;
(7) a default occurs under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Restricted Subsidiaries), whether such Indebtedness
or guarantee now exists or shall be created hereafter, which default (a) is
caused by a failure to pay principal of such Indebtedness prior to the
expiration of the grace period provided in such Indebtedness on the date of
such default (a "PAYMENT DEFAULT") or (b) results in the acceleration of
such Indebtedness prior to its express maturity and, in each case, the
principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there is then existing a
Payment Default or the maturity of which has been so accelerated,
aggregates $10 million or more;
(8) a final non-appealable judgment or order or final non-appealable
judgments or orders are rendered against the Company or any Restricted
Subsidiary that remain unpaid or discharged for a period of 60 consecutive
days and that require the payment of money, either individually or in an
aggregate amount, in excess of $10 million;
(9) the Company or any Restricted Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(a) commences a voluntary case or proceeding,
(b) consents to the entry of an order for relief against it in
an involuntary case or proceeding,
(c) consents to the appointment of a Note Custodian of it or for
all or substantially all of its property or
(d) makes a general assignment for the benefit of its creditors;
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(10) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(a) is for relief against the Company or any Restricted
Subsidiary in an involuntary case or proceeding,
(b) appoints a Custodian of the Company, any Restricted
Subsidiary or for all or substantially all of the property of the Company
or any Restricted Subsidiary or
(c) orders the liquidation of the Company or any Restricted
Subsidiary
and in each case the order or decree remains unstayed and in effect for 60
consecutive days.
The term "CUSTODIAN" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law.
A Default under clause (4) is not an Event of Default until the
Trustee notifies the Company, or the Holders of at least 25% in aggregate
principal amount of the then outstanding Securities notify the Company and the
Trustee, of the Default and the Company does not cure the Default within 30
consecutive days after receipt of the notice. A Default under clause (5) is not
an Event of Default until the Trustee notifies the Company, or the Holders of at
least 25% in aggregate principal amount of the then outstanding Securities
notify the Company and the Trustee, of the Default and the Company does not cure
the Default within 60 consecutive days after receipt of the notice. Each notice
must specify the Default, demand that it be remedied and state that the notice
is a "NOTICE OF DEFAULT."
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Section 6.2. ACCELERATION.
If an Event of Default (other than an Event of Default specified in
clauses (9) and (10) of Section 6.1 hereof) occurs and is continuing, the
Trustee by notice to the Company, or the Holders of at least 25% in aggregate
principal amount of the then outstanding Securities by written notice to the
Company and the Trustee, may declare the unpaid principal amount of and any
accrued and unpaid interest on all the Securities to be due and payable
immediately. If payment of the Securities is accelerated because of an Event of
Default, the Company or the Trustee shall notify the holders of Designated
Senior Debt of such acceleration. Upon such declaration the principal and
interest shall be due and payable immediately; PROVIDED, HOWEVER, that so long
as any Designated Senior Debt or any commitment therefor is outstanding, any
such notice or declaration shall not become effective until the earlier of
(a) five Business Days after such notice is delivered to the representative for
the Designated Senior Debt or (b) the acceleration of any Designated Senior Debt
and thereafter, payments on the Securities pursuant to this Article 6 shall be
made only to the extent permitted pursuant to Article 10 herein.
Notwithstanding the foregoing, if any Event of Default specified in clause (9)
or (10) of Section 6.1 hereof relating to the Company or any Restricted
Subsidiary occurs, such an amount shall IPSO FACTO become and be immediately due
and payable without any declaration or other act or notice on the part of the
Trustee or any Holder.
After a declaration of acceleration under this Indenture, but before a
judgment or decree for payment of principal, premium, if any, and interest on
the Securities due under this Article 6 has been obtained by the Trustee,
Holders of a majority in aggregate principal amount of the then outstanding
Securities by written notice to the Company and the Trustee may rescind an
acceleration and its consequences if (i) the Company or any Subsidiary Guarantor
has paid or deposited with the Trustee a sum sufficient to pay (a) all sums paid
or advanced by the Trustee under this Indenture and the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel and
(b) all overdue interest on the Securities, if any, (ii) the rescission would
not conflict with any judgment or decree of a court of competent jurisdiction
and (iii) all existing Events of Default (except nonpayment of principal,
premium, if any, or interest that has become due solely because of the
acceleration) have been cured or waived.
Section 6.3. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Securities or to enforce the performance of any
provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does
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not possess any of the Securities or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Holder of a Security
in exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. All remedies are cumulative to the extent permitted by law.
Section 6.4. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal amount of
the Securities then outstanding by notice to the Trustee may on behalf of the
Holders of all of the Securities waive an existing Default or Event of Default
and its consequences hereunder, except a continuing Default or Event of Default
in the payment of principal of, premium and liquidated damages, if any, or
interest on, the Securities (including in connection with an offer to purchase)
(PROVIDED, HOWEVER, that the Holders of a majority in aggregate principal amount
of the then outstanding Securities may rescind an acceleration and its
consequences, including any related payment default that resulted from such
acceleration). Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
Section 6.5. CONTROL BY MAJORITY.
Holders of a majority in aggregate principal amount of the then
outstanding Securities may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture that the Trustee determines
may be unduly prejudicial to the rights of other Holders of Securities or that
may involve the Trustee in personal liability it being understood that (subject
to Section 7.1) the Trustee shall have no duty to ascertain whether or not such
actions or forebearances are unduly prejudicial to such holders.
Section 6.6. LIMITATION ON SUITS.
A Holder of a Security may pursue a remedy with respect to this
Indenture or the Securities only if:
(a) the Holder of a Security gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in aggregate principal amount of the
then outstanding Securities make a written request to the Trustee to pursue
the remedy;
(c) such Holder of a Security or Holders of Securities offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or
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expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in aggregate
principal amount of the then outstanding Securities do not give the Trustee
a direction inconsistent with the request.
A Holder of a Security may not use this Indenture to prejudice the rights of
another Holder of a Security or to obtain a preference or priority over another
Holder of a Security.
Section 6.7. RIGHTS OF HOLDERS OF SECURITIES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Security to receive payment of principal, premium, if any, and
interest on the Security, on or after the respective due dates expressed in the
Security (including in connection with an offer to purchase), or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
Section 6.8. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.1(1) or (2) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Company or any Subsidiary Guarantor
for the whole amount of principal of, premium, if any, and interest remaining
unpaid on the Securities and interest on overdue principal and, to the extent
lawful, interest and such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
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Section 6.9. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Securities allowed in any judicial proceedings relative to the
Company or any of the Subsidiary Guarantors (or any other obligor upon the
Securities), its creditors or its property and shall be entitled and empowered
to collect, receive and distribute any money or other property payable or
deliverable on any such claims and any custodian in any such judicial proceeding
is hereby authorized by each Holder to make such payments to the Trustee, and in
the event that the Trustee shall consent to the making of such payments directly
to the Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.7 hereof. To
the extent that the payment of any such compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, and any other amounts due
the Trustee under Section 7.7 hereof out of the estate in any such proceeding,
shall be denied for any reason, payment of the same shall be secured by a Lien
on, and shall be paid out of, any and all distributions, dividends, money,
securities and other properties that the Holders may be entitled to receive in
such proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding
provided, however, that the Truste may, on behalf of the Holders, vote for the
election of a trustee in bankruptcy or similar official and may be a member of
the creditors' committee.
Section 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall,
subject to the provisions of Article 10, pay out the money in the following
order:
FIRST: to the Trustee, its agents and attorneys for amounts due under
Sections 6.8 and 7.7 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
SECOND: to Senior Debt to the extent required by Article 10;
THIRD: to Holders of Securities for amounts due and unpaid on the
Securities for principal, premium, if any, and
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accrued interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Securities for principal,
premium, if any, and accrued interest, as the case may be, respectively; and
FOURTH: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Securities pursuant to this Section 6.10.
Section 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Security pursuant to Section 6.7 hereof, or a suit by Holders of more than 10%
in principal amount of the then outstanding Securities.
Section 6.12. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then, and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Company, Trustee and the Holders shall
continue as though no such proceeding had been instituted.
ARTICLE 7
TRUSTEE
Section 7.1. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
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(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any notices, requests, statements,
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.5 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders, unless such Holder shall have furnished to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
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Section 7.2. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document believed by
it to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall
not be liable for any action it takes or omits to take in good faith in reliance
on such Officers' Certificate or Opinion of Counsel. The Trustee may consult
with counsel and the written advice of such counsel or any Opinion of Counsel
shall be full and complete authorization and protection from liability in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent (other than any
agent who is an employee of the Trustee) appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company or any Subsidiary
Guarantor shall be sufficient if signed by an Officer of the Company or such
Subsidiary Guarantor.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have furnished to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
(g) Except with respect to Sections 4.1 and 4.4 hereof, the Trustee
shall have no duty to inquire as to the performance of the Company's covenants
in Article 4 hereof. In addition, the Trustee shall not be deemed to have
knowledge of any Default or Event of Default except (i) any Event of Default
occurring pursuant to Sections 4.1, 4.4 and 6.1(1) or (2) hereof or (ii) any
Default or Event of Default of which the Trustee shall have received written
notification. For purposes of determining the Trustee's responsibility
hereunder, whenever reference is made in this Indenture to a Default or Event of
Default, such reference shall be construed to refer only to a Default or Event
of Default of which the Trustee is deemed to have notice pursuant to this
Section 7.2(g)
(h) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties
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hereunder.
(i) the Trustee shall not be bound to ascertain or inquire as to the
performance or observance of any covenants, conditions, or agreements on the
part of the Company or any Subsidiary Guarantor, except as otherwise set forth
herein, but the Trustee may require of the Company full information and advice
as to the performance of the covenants, conditions and agreements contained
herein and shall be entitled in connection herewith to examine the books,
records and premises of the Company.
(j) The permissive rights of the Trustee to perform the acts
enumerated in this Indenture shall not be construed as a duty and the Trustee
shall not be answerable for other than its gross negligence or willful
misconduct.
Section 7.3. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company, the
Subsidiary Guarantors or any Affiliate of the Company with the same rights it
would have if it were not Trustee. However, in the event that the Trustee
acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the Commission for permission to continue as trustee or resign.
Any Agent may do the same with like rights and duties. The Trustee is also
subject to Sections 7.10 and 7.11 hereof.
Section 7.4. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture, the Securities, or the
Subsidiary Guarantees, it shall not be accountable for the Company's use of the
proceeds from the Securities or any money paid to the Company or upon the
Company's direction under any provision of this Indenture, it shall not be
responsible for the use or application of any money received by any Paying Agent
other than the Trustee, and it shall not be responsible for any statement or
recital herein or in any certificate delivered pursuant hereto or any statement
in the Securities or any other document in connection with the sale of the
Securities or pursuant to this Indenture other than its certificate of
authentication.
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Section 7.5. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
actually known to the Trustee, the Trustee shall mail to Holders of Securities a
notice of the Default or Event of Default within 90 days after it occurs.
Except in the case of a Default or Event of Default in payment of principal of,
premium, if any, or interest on, any Security, the Trustee may withhold the
notice if and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of the Holders of the
Securities.
Section 7.6. REPORTS BY TRUSTEE TO HOLDERS OF THE SECURITIES.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Securities remain outstanding,
the Trustee shall mail to the Holders of the Securities a brief report dated as
of such reporting date that complies with TIA Section 313(a) (but if no event
described in TIA Section 313(a) has occurred within the twelve months preceding
the reporting date, no report need be transmitted). The Trustee also shall
comply with TIA Section 313(b)(2) and transmit by mail all reports as required
by TIA Section 313(c).
A copy of each report at the time of its mailing to the Holders of
Securities shall be mailed to the Company and filed with the Commission and each
stock exchange on which the Securities are listed in accordance with TIA Section
313(d). The Company shall promptly notify the Trustee when the Securities are
listed on any stock exchange.
Section 7.7. COMPENSATION AND INDEMNITY.
The Company and the Subsidiary Guarantors shall pay to the Trustee
from time to time reasonable compensation for its acceptance of this Indenture
and services hereunder, including, without limitation, extraordinary services
such as default administration. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company and
the Subsidiary Guarantors shall reimburse the Trustee upon demand for all
reasonable disbursements, advances and expenses incurred or made by it in
addition to the compensation for its services. Such expenses shall include the
reasonable compensation, disbursements and expenses of the Trustee's agents and
counsel.
The Company and the Subsidiary Guarantors shall indemnify the Trustee
against any and all losses, liabilities or expenses incurred by it arising out
of or in connection with the acceptance or administration of its duties under
this Indenture, including the costs and expenses of enforcing this Indenture
against the Company and the Subsidiary Guarantors (including this Section 7.7)
and investigating or defending itself against any
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claim (whether asserted by the Company, the Subsidiary Guarantors or any
Holder or any other Person) or liability in connection with the exercise or
performance of any of its powers or duties hereunder, except to the extent
any such loss, liability or expense may be attributable to its gross
negligence or bad faith. The Trustee shall notify the Company and the
Subsidiary Guarantors promptly of any claim for which it may seek indemnity.
Failure by the Trustee to so notify the Company and the Subsidiary Guarantors
shall not relieve the Company and the Subsidiary Guarantors of their
obligations hereunder. The Company and the Subsidiary Guarantors shall
defend the claim and the Trustee shall cooperate in the defense. The Trustee
may have separate counsel and the Company and the Subsidiary Guarantors shall
pay the reasonable fees and expenses of such counsel. The Company and the
Subsidiary Guarantors need not pay for any settlement made without their
consent, which consent shall not be unreasonably withheld.
The obligations of the Company and the Subsidiary Guarantors under
this Section 7.7 are joint and several and shall survive the resignation or
removal of the Trustee, the satisfaction and discharge of this Indenture and any
rejection or termination under any Bankruptcy Law.
To secure the Company's and the Subsidiary Guarantors' payment
obligations in this Section, the Trustee shall have a Lien prior to the
Securities on all money or property held or collected by the Trustee. Such Lien
shall survive the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(9) or (10) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section 313(b)(2)
to the extent applicable.
Section 7.8. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of Securities
of a majority in principal amount of the then outstanding Securities may remove
the Trustee by so notifying the Trustee and the Company in writing. The Company
may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
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(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the then outstanding
Securities may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.
If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee, the
Company, or the Holders of Securities of at least 10% in principal amount of
the then outstanding Securities may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Security
who has been a Holder of a Security for at least six months, fails to comply
with Section 7.10, such Holder of a Security may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of
a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and
the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. The successor Trustee shall mail a notice of
its succession to Holders of the Securities. The retiring Trustee shall
promptly transfer all property held by it as Trustee to the successor
Trustee, PROVIDED all sums owing to the Trustee hereunder have been paid and
subject to the Lien provided for in Section 7.7 hereof. Notwithstanding
replacement of the Trustee pursuant to this Section 7.8, the Company's
obligations under Section 7.7 hereof shall continue for the benefit of the
retiring Trustee and the Company shall pay to such replaced or removed
Trustee all amounts owed under Section 7.7 upon such replacement or removal.
Section 7.9. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
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Section 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States
of America or of any state thereof that is authorized under such laws to
exercise corporate trustee power, that is subject to supervision or
examination by federal or state authorities and that has a combined capital
and surplus of at least $50 million as set forth in its most recent published
annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject
to TIA Section 310(b).
Section 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the
extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.1. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT
DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced
by a resolution set forth in an Officers' Certificate, at any time, elect to
have either Section 8.2 or 8.3 hereof be applied to all outstanding
Securities upon compliance with the conditions set forth below in this
Article 8.
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Section 8.2. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.1 hereof of the option
applicable to this Section 8.2, the Company and the Subsidiary Guarantors
shall, subject to the satisfaction of the conditions set forth in Section 8.4
hereof, be deemed to have been discharged from their obligations with respect
to all outstanding Securities and the Subsidiary Guarantees thereof on the
date the conditions set forth below are satisfied (hereinafter, "LEGAL
DEFEASANCE"). For this purpose, Legal Defeasance means that the Company
shall be deemed to have paid and discharged the entire Indebtedness
represented by the outstanding Securities, which shall thereafter be deemed
to be "OUTSTANDING" only for the purposes of Section 8.5 hereof and the other
Sections of this Indenture referred to in (a) and (b) below, and to have
satisfied all its other obligations under such Securities and this Indenture
(and the Trustee, on demand of and at the expense of the Company, shall
execute proper instruments acknowledging the same), except for the following
provisions which shall survive until otherwise terminated or discharged
hereunder: (a) the rights of Holders of outstanding Securities to receive
payments in respect of the principal of, premium, if any, and interest on
such Securities when such payments are due from the trust fund described in
Section 8.4 hereof, and as more fully set forth in such Section, (b) the
Company's obligations with respect to such Securities under Article 2 and
Section 4.2 hereof, (c) the rights, powers, trusts, duties and immunities of
the Trustee hereunder and the Company's obligations in connection therewith
and (d) this Article 8. Subject to compliance with this Article 8, the
Company may exercise its option under this Section 8.2 notwithstanding the
prior exercise of its option under Section 8.3 hereof.
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Section 8.3. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.1 hereof of the option
applicable to this Section 8.3, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.4 hereof, be released
from their obligations under the covenants contained in Sections 4.3, 4.5,
4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.16, 4.17, 4.18 and 4.19 hereof
and in clause (iv) of Section 5.1 on and after the date the conditions set
forth below are satisfied (hereinafter, "COVENANT DEFEASANCE"), and the
Securities shall thereafter be deemed not "OUTSTANDING" for the purposes of
any compliance certificate, direction, waiver, consent or declaration or act
of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "OUTSTANDING" for all other
purposes hereunder (it being understood that such Securities shall not be
deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Securities, the
Company may omit to comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any
such covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to comply shall
not constitute a Default or an Event of Default under Section 6.1 hereof,
but, except as specified above, with respect to the remainder of this
Indenture, such Securities and the Subsidiary Guarantees shall be unaffected
thereby. In addition, upon the Company's exercise under Section 8.1 hereof
of the option applicable to this Section 8.3 hereof, subject to the
satisfaction of the conditions set forth in Section 8.4 hereof, Sections
6.1(3) (but only with respect to the Company's failure to observe or perform
the covenants, conditions and agreements of the Company under clause (iv) of
Section 5.1), 6.1(4), 6.1(7) and 6.1(8) hereof shall not constitute Events of
Default.
Section 8.4. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.2 or 8.3 hereof to the outstanding Securities:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders of the Securities, cash in United
States dollars, non-callable Government Securities, or a combination thereof,
in such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal of,
premium, if any, and interest, on the outstanding Securities on the stated
maturity or on the applicable redemption date, as the
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case may be, and the Company must specify whether the Securities are being
defeased to maturity or to a particular redemption date;
(b) in the case of an election under Section 8.2 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that (A) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of this Indenture, there has
been a change in the applicable federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel shall confirm that,
the Holders of the outstanding Securities will not recognize income, gain or
loss for federal income tax purposes as a result of such Legal Defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Legal Defeasance
had not occurred;
(c) in the case of an election under Section 8.3 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that the
Holders of the outstanding Securities will not recognize income, gain or loss
for federal income tax purposes as a result of such Covenant Defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Covenant Defeasance
had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such deposit)
or insofar as Section 6.1(9) or 6.1(10) hereof is concerned, at any time in
the period ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result
in a breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(g) the Company shall deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders of the Securities over the other creditors
of the Company, or with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others; and
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(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
Section 8.5. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD
IN TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.6 hereof, all money and non-callable
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this
Section 8.5, the "TRUSTEE") pursuant to Section 8.4 hereof in respect of the
outstanding Securities shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as Paying Agent) as the Trustee may determine, to the Holders of such
Securities of all sums due and to become due thereon in respect of principal,
premium, if any, and interest, but such money need not be segregated from
other funds except to the extent required by law.
The Company and the Subsidiary Guarantors shall pay and indemnify
the Trustee against any tax, fee or other charge imposed on or assessed
against the cash or non-callable Government Securities deposited pursuant to
Section 8.4 hereof or the principal and interest received in respect thereof
other than any such tax, fee or other charge which by law is for the account
of the Holders of the outstanding Securities.
Anything in this Article 8 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the
request of the Company any money or non-callable Government Securities held
by it as provided in Section 8.4 hereof which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.4(a) hereof), are in excess of the amount thereof
that would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
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Section 8.6. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, premium,
if any, or interest on any Security and remaining unclaimed for two years
after such principal, premium, if any, or interest has become due and payable
shall be paid to the Company on its request or (if then held by the Company)
shall be discharged from such trust; and the Holder of such Security shall
thereafter, as a general creditor, look only to the Company for payment
thereof, and all liability of the Trustee or such Paying Agent with respect
to such trust money, and all liability of the Company as trustee thereof,
shall thereupon cease; PROVIDED, HOWEVER, that the Trustee or such Paying
Agent, before being required to make any such repayment, may at the expense
of the Company cause to be published once, in the NEW YORK TIMES and THE WALL
STREET JOURNAL (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30
days from the date of such notification or publication, any unclaimed balance
of such money then remaining shall be repaid to the Company.
Section 8.7. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.2
or 8.3 hereof, as the case may be, by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the obligations of the Company and the
Subsidiary Guarantors under this Indenture, the Securities and the Subsidiary
Guarantees shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.2 or 8.3 hereof, as the case may be; PROVIDED, HOWEVER,
that if the Company or any Subsidiary Guarantor makes any payment of
principal of, premium, if any, or interest on any Security following the
reinstatement of its obligations, the Company or such Subsidiary Guarantor
shall be subrogated to the rights of the Holders of such Securities to
receive such payment from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.1. WITHOUT CONSENT OF HOLDERS OF SECURITIES.
Notwithstanding Section 9.2 of this Indenture, the Company, the
Subsidiary Guarantors and the Trustee may amend or supplement this Indenture,
the Securities or the Subsidiary Guarantees without the consent of any Holder
of a Security:
(a) to cure any ambiguity, defect or inconsistency;
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(b) to provide for uncertificated Securities in addition to or in
place of certificated Securities (PROVIDED, HOWEVER, that the
uncertificated Securities are issued in registered form for purposes of
section 163(f) of the Code, or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code);
(c) to provide for the assumption of the Company's obligations to the
Holders of the Securities in the case of a merger or consolidation pursuant
to Article 5 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Securities or that does not adversely affect
the legal rights hereunder of any Holder of the Security;
(e) to add Guarantees with respect to the Securities or to secure the
Securities; or
(f) to comply with requirements of the Commission in order to effect
or maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of the
Board of Directors of the Company and each of the Subsidiary Guarantors, as
the case may be, authorizing the execution of any such amended or
supplemental indenture, and upon receipt by the Trustee of the documents
described in Section 7.2 hereof, the Trustee shall join with the Company and
the Subsidiary Guarantors in the execution of any amended or supplemental
indenture authorized or permitted by the terms of this Indenture and to make
any further appropriate agreements and stipulations that may be therein
contained, but the Trustee shall not be obligated to enter into such amended
or supplemental Indenture that affects its own rights, duties or immunities
under this Indenture or otherwise.
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Section 9.2. WITH CONSENT OF HOLDERS OF SECURITIES.
Except as provided below in this Section 9.2, the Company, the
Subsidiary Guarantors and the Trustee may amend or supplement this Indenture,
the Securities and the Subsidiary Guarantees with the consent of the Holders
of at least a majority in aggregate principal amount of the Securities then
outstanding (including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for the Securities),
and, subject to Sections 6.4 and 6.7 hereof, any existing Default or Event of
Default (other than a Default or Event of Default in the payment of the
principal of, premium, if any, or interest on the Securities) or compliance
with any provision of this Indenture, the Securities or the Subsidiary
Guarantees may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Securities (including, without
limitation, consents obtained in connection with a purchase of, or tender
offer or exchange offer for the Securities).
In addition, any amendment to the provisions of Article 10 of this
Indenture shall require the consent of the Holders of at least 66_% in
aggregate principal amount of the Securities then outstanding if such
amendment would adversely affect the rights of Holders of Securities;
provided that, no amendment may be made to the provisions of Article 10 of
this Indenture that adversely affects the rights of any holder of Senior Debt
then outstanding unless the holders of such Senior Debt (or any group or
representative thereof authorized to consent) consent to such change.
Subject to Sections 6.4 and 6.7 hereof, the Holders of a majority
in aggregate principal amount of the Securities then outstanding may waive
compliance in a particular instance by the Company or any Subsidiary
Guarantor with any provision of this Indenture, the Securities or the
Subsidiary Guarantees. However, without the consent of each Holder affected,
an amendment or waiver may not (with respect to any Securities held by a
non-consenting Holder):
(a) reduce the principal amount of Securities whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any
Security or alter the provisions with respect to the redemption of the
Securities (except as provided above with respect to Sections 3.9, 4.10 and
4.13 hereof);
(c) reduce the rate of or change the time for payment of interest on
any Security;
(d) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Securities (except a rescission
of acceleration of the Securities by the Holders of at least a majority in
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principal amount of the Securities and a waiver of the payment default that
resulted from such acceleration);
(e) make any Security payable in money other than that stated in the
Securities;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Securities to receive
payments of principal or premium, if any, or interest on the Securities;
(g) make any change in the foregoing amendment and waiver provisions;
or
(h) except as provided under Section 11.4 or Article 8, release any
Subsidiary Guarantor from its obligations under its Subsidiary Guarantee or
make any change in a Subsidiary Guaranty that would adversely affect the
Holders.
Upon the request of the Company accompanied by a resolution of the
Board of Directors of the Company and each of the Subsidiary Guarantors, as
the case may be, authorizing the execution of any such amended or
supplemental indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Securities as
aforesaid, and upon receipt by the Trustee of the documents described in
Section 7.2 hereof, the Trustee shall join with the Company and the
Subsidiary Guarantors in the execution of such amended or supplemental
indenture unless such amended or supplemental indenture affects the Trustee's
own rights, duties or immunities under this indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such amended or supplemental indenture.
It shall not be necessary for the consent of the Holders of
Securities under this Section 9.2 to approve the particular form of any
proposed amendment or waiver, but it shall be sufficient if such consent
approves the substance thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Securities affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental indenture or waiver.
Section 9.3. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Securities
shall be set forth in an amended or supplemental Indenture that complies with
the TIA as then in effect.
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Section 9.4. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Security is a continuing consent by the Holder
of a Security and every subsequent Holder of a Security or portion of a
Security that evidences the same debt as the consenting Holder's Security,
even if notation of the consent is not made on any Security. However, any
such Holder of a Security or subsequent Holder of a Security may revoke the
consent as to its Security if the Trustee receives written notice of
revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in
accordance with its terms and thereafter binds every Holder.
Section 9.5. NOTATION ON OR EXCHANGE OF SECURITIES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Security thereafter authenticated. The Company
in exchange for all Securities may issue and the Trustee shall authenticate
new Securities that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Security
shall not affect the validity and effect of such amendment, supplement or
waiver.
Section 9.6. TRUSTEE TO SIGN AMENDMENT, ETC.
The Trustee shall sign any amended or supplemental indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the
Trustee. Neither the Company nor any Subsidiary Guarantor may sign an
amendment or supplemental Indenture until its respective Board of Directors
approves it. In executing any amended or supplemental indenture, the Trustee
shall be entitled to receive and (subject to Section 7.1) shall be fully
protected in relying upon, an Officer's Certificate and an Opinion of Counsel
stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture and that there has been compliance
with all conditions precedent.
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ARTICLE 10
SUBORDINATION
Section 10.1. AGREEMENT TO SUBORDINATE.
The Company and each Subsidiary Guarantor agree, and each Holder by
accepting a Security and the related Subsidiary Guarantee agrees, that (i)
the Indebtedness evidenced by (a) the Securities, including, but not limited
to, the payment of principal of, premium, if any, and interest on the
Securities, and any other payment Obligation of the Company in respect of the
Securities (including any obligation to repurchase the Securities) is
subordinated in right of payment, to the extent and in the manner provided in
this Article, to the prior payment in full in cash of all Senior Debt of the
Company (whether outstanding on the date hereof or hereafter created,
incurred, assumed or guaranteed), and (b) the Subsidiary Guarantees and other
payment Obligations in respect of the Subsidiary Guarantees are subordinated
in right of payment, to the extent and in the manner provided in this
Article, to the prior payment in full in cash of all Guarantor Senior Debt of
each Subsidiary Guarantor and (ii) the subordination is for the benefit of
the Holders of Senior Debt and Guarantor Senior Debt.
Section 10.2. CERTAIN DEFINITIONS.
"BANKRUPTCY LAW" means title 11, U.S. Code or any similar Federal
or state law for the relief of debtors.
"GUARANTOR SENIOR DEBT" means any Indebtedness of a Subsidiary
Guarantor permitted to be incurred under the terms of this Indenture, unless
the instrument under which such Indebtedness is incurred expressly provides
that it is on a parity with or subordinated in right of payment to the
Subsidiary Guarantee of such Subsidiary Guarantor, including interest
accruing subsequent to the filing of, or which would have accrued but for the
filing of, a petition of bankruptcy, whether or not such interest is an
allowable claim in such bankruptcy proceeding. Notwithstanding anything to
the contrary in the foregoing sentence, Guarantor Senior Debt shall not
include (1) any liability for federal, state, local or other taxes owed or
owing by any Subsidiary Guarantor, (2) any obligation of a Subsidiary
Guarantor to the Company or to any other Restricted Subsidiary of the
Company, (3) any accounts payable or trade liabilities of a Subsidiary
Guarantor arising in the ordinary course of business (including instruments
evidencing such liabilities), (4) any Indebtedness of Subsidiary Guarantor
that is incurred in violation of this Indenture, (5) Indebtedness of a
Subsidiary Guarantor which, when incurred and without respect to any election
under Section 1111(b) of Title 11, United States Code, is without recourse to
such Subsidiary Guarantor, and (6) Indebtedness evidenced by a Subsidiary
Guarantee.
"REPRESENTATIVE" means the indenture trustee or other
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trustee, agent or representative for any Senior Debt or Guarantor Senior
Debt, as the case may be.
"SENIOR DEBT" means (i) Indebtedness of the Company or any
Subsidiary of the Company under or in respect of any Credit Facility, whether
for principal, interest (including interest accruing after the filing of a
petition initiating any proceeding pursuant to any bankruptcy law, whether or
not the claim for such interest is allowed as a claim in such proceeding),
reimbursement obligations, fees, commissions, expenses, indemnities or other
amounts, and (ii) any other Indebtedness permitted under the terms of this
Indenture, unless the instrument under which such Indebtedness is incurred
expressly provides that it is on a parity with or subordinated in right of
payment to the Securities. Notwithstanding anything to the contrary in the
foregoing sentence, Senior Debt will not include (w) any liability for
federal, state, local or other taxes owed or owing by the Company, (x) any
Indebtedness of the Company to any of its Subsidiaries or other Affiliates,
(y) any trade payables or (z) any Indebtedness that is incurred in violation
of this Indenture (other than Indebtedness under (i) the Existing Credit
Facility or (ii) any other Credit Facility that is incurred on the basis of a
representation by the Company to the applicable lenders that it is permitted
to incur such Indebtedness under this Indenture).
A "distribution" may consist of cash, securities or other property,
by set-off or otherwise.
All Designated Senior Debt now or hereafter existing and all other
Obligations relating thereto shall not be deemed to have been paid in full
unless the holders or owners thereof shall have received payment in full in
cash (or other form of payment consented to by the holders of such Designated
Senior Debt) with respect to such Designated Senior Debt and all other
Obligations with respect thereto.
Section 10.3. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
(a) Upon any payment or distribution of property or securities to
creditors of the Company in a liquidation or dissolution of the Company or in
a bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property, or in an assignment for the benefit
of creditors or any marshalling of the Company's assets and liabilities:
(1) the holders of Senior Debt of the Company shall be entitled to
receive payment in full in cash of all Obligations in respect of such
Senior Debt (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Debt, whether or
not a claim for such interest would be allowed in such proceeding) before
the Holders of Securities shall be entitled to receive any payment with
respect to the Securities and related Obligations (except in each case that
Holders of Securities may receive securities that are
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subordinated at least to the same extent as the Securities to Senior
Debt and any securities issued in exchange for Senior Debt and payments
made from any defeasance trust created pursuant to Section 8.1 hereof
provided that the applicable deposit does not violate Article 8 or 10 of
this Indenture); and
(2) until all Obligations with respect to Senior Debt of the
Company (as provided in subsection (1) above) are paid in full in cash,
any payment or distribution to which the Holders of Securities and the
related Subsidiary Guarantees would be entitled shall be made to holders
of Senior Debt of the Company (except that Holders of Securities and the
related Subsidiary Guarantees may receive securities that are
subordinated at least to the same extent as the Securities to Senior
Debt and any securities issued in exchange for Senior Debt and payments
made from any defeasance trust created pursuant to Section 8.1 hereof
provided that the applicable deposit does not violate Article 8 or 10 of
this Indenture).
(b) Upon any payment or distribution of property or securities to
creditors of a Subsidiary Guarantor in a liquidation or dissolution of such
Subsidiary Guarantor or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to such Subsidiary Guarantor or its
property, or in an assignment for the benefit of creditors or any marshalling of
such Subsidiary Guarantor's assets and liabilities:
(1) the holders of Guarantor Senior Debt of such Subsidiary
Guarantor shall be entitled to receive payment in full in cash of all
Obligations in respect of such Guarantor Senior Debt (including interest
after the commencement of any such proceeding at the rate specified in
the applicable Senior Debt, whether or not a claim for such interest
would be allowed in such proceeding) before the Holders of Securities
and the related Subsidiary Guarantees shall be entitled to receive any
payment or distribution with respect to the Subsidiary Guarantee made by
such Subsidiary Guarantor (except in each case that Holders of
Securities and the related Subsidiary Guarantees may receive securities
that are subordinated at least to the same extent as the Securities to
Senior Debt and any securities issued in exchange for Senior Debt and
payments made from any defeasance trust created pursuant to Section 8.1
hereof provided that the applicable deposit does not violate Article 8
or 10 of this Indenture); and
(2) until all Obligations with respect to Guarantor Senior Debt of
such Subsidiary Guarantor (as provided in subsection (1) above) are paid
in full in cash, any payment or distribution to which the Holders of
Securities and the related Subsidiary Guarantees would be entitled shall
be made to holders of Guarantor Senior Debt of such Subsidiary Guarantor
(except that Holders of Securities and the related
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Subsidiary Guarantees may receive securities that are subordinated at
least to the same extent as the Securities to Senior Debt and any
securities issued in exchange for Senior Debt and payments made from any
defeasance trust created pursuant to Section 8.1 hereof provided that
the applicable deposit does not violate Article 8 or 10 of this
Indenture).
Under the circumstances described in this Section 10.3, the
Company, any Subsidiary Guarantor or any receiver, trustee in bankruptcy,
liquidating trustee, agent or other similar person making any payment or
distribution of cash or other property or securities is authorized or
instructed to make any payment or distribution to which the Holders of the
Securities and the related Subsidiary Guarantees would otherwise be entitled
(other than securities that are subordinated at least to the same extent as
the Securities to Senior Debt and any securities issued in exchange for
Senior Debt and payments made from any defeasance trust referred to in the
second parenthetical clause of each of clauses (a)(1), (b)(1), (c)(1),
(a)(2), (b)(2) and (c)(2) above, which shall be delivered or paid to the
Holders of Securities as set forth in such clauses) directly to the holders
of the Senior Debt of the Company and the holders of Guarantor Senior Debt of
any Subsidiary Guarantor, as applicable, (PRO RATA to such holders on the
basis of the respective amounts of Senior Debt of the Company and Guarantor
Senior Debt of any Subsidiary Guarantor, as applicable, held by such holders)
or their Representatives, or to any trustee or trustees under any other
indenture pursuant to which any such Senior Debt or Guarantor Senior Debt, as
the case may be, may have been issued, as their respective interests appear,
to the extent necessary to pay all such Senior Debt or Guarantor Senior Debt,
as the case may be, in full, in cash or cash equivalents after giving effect
to any concurrent payment, distribution or provision therefor to or for the
holders of such Senior Debt or Guarantor Senior Debt, as the case may be.
To the extent any payment of or distribution in respect of Senior
Debt or Guarantor Senior Debt (whether by or on behalf of the Company or any
Subsidiary Guarantor, as proceeds of security or enforcement of any right of
setoff or otherwise) is declared to be fraudulent or preferential, set aside
or required to be paid to any receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person under any bankruptcy, insolvency,
receivership, fraudulent conveyance or similar law, then if such payment or
distribution is recovered by, or paid over to, such receiver, trustee in
bankruptcy, liquidating trustee, agent or other similar Person, the Senior
Debt or Guarantor Senior Debt or part thereof originally intended to be
satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred. To the extent the obligation to repay any Senior Debt is
declared to be fraudulent, invalid or otherwise set aside under any
bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then the obligation so declared fraudulent, invalid or otherwise set aside
(and all other amounts that would come due with respect thereto
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had such obligation not been so affected) shall be deemed to be reinstated
and outstanding as Senior Debt for all purposes hereof as if such
declaration, invalidity or setting aside had not occurred.
Section 10.4. DEFAULT ON DESIGNATED SENIOR DEBT.
The Company and the Subsidiary Guarantors may not make any payment
(whether by redemption, purchase, retirements, defeasance or otherwise) upon
or in respect of the Securities and the related Subsidiary Guarantees (other
than securities that are subordinated at least to the same extent as the
Securities to Senior Debt and any securities issued in exchange for Senior
Debt and payments and other distributions made from any defeasance trust
created pursuant to Section 8.1 hereof if the applicable deposit does not
violate Article 8 or 10 of this Indenture) until all principal and other
Obligations with respect to the Senior Debt of the Company have been paid in
full if:
(i) a default in the payment of any principal of, premium, if
any, or interest on Designated Senior Debt occurs; or
(ii) any other default occurs and is continuing with respect to
Designated Senior Debt that permits, or with the giving of notice or
passage of time or both (unless cured or waived) would permit, holders of
the Designated Senior Debt as to which such default relates to accelerate
its maturity and the Trustee receives a notice of the default (a "PAYMENT
BLOCKAGE NOTICE") from the Company or the holders of any Designated Senior
Debt. If the Trustee receives any such Payment Blockage Notice, no
subsequent Payment Blockage Notice shall be effective for purposes of this
Section unless and until 360 days shall have elapsed since the date of
commencement of the payment blockage period resulting from the immediately
prior Payment Blockage Notice. No nonpayment default in respect of any
Designated Senior Debt that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be
made, the basis for a subsequent Payment Blockage Notice unless such
default shall have been cured or waived for a period of no less than 90
days.
The Company shall resume payments on and distributions in respect
of the Securities and any Subsidiary Guarantor shall resume making payments
and distributions pursuant to the Subsidiary Guarantees upon:
(1) in the case of a default referred to in Section 10.4(i) hereof
the date upon which the default is cured or waived, or
(2) in the case of a default referred to in Section 10.4(ii) hereof,
the earliest of (1) the date on which such nonpayment default is cured or
waived or (2) 179 days after the date on which the applicable Payment
Blockage Notice is
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received unless (A) the maturity of any Designated Senior Debt has been
accelerated or (B) a Default or Event of Default under Section 6.1(9) OR
(10) has occurred and is continuing,
if this Article otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
Section 10.5. ACCELERATION OF SECURITIES.
If payment of the Securities is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Debt and
Guarantor Senior Debt of the acceleration.
Section 10.6. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives any payment or
distribution of or in respect of any Obligations with respect to the
Securities or the Subsidiary Guarantees at a time when such payment or
distribution is prohibited by Section 10.3 or Section 10.4 hereof, such
payment or distribution shall be held by the Trustee (if the Trustee has
actual knowledge that such payment or distribution is prohibited by Section
10.3 or 10.4) or such Holder, in trust for the benefit of, and shall be paid
forthwith over and delivered to, the holders of Senior Debt or Guarantor
Senior Debt, as the case may be, as their interests may appear or their
Representative under the indenture or other agreement (if any) pursuant to
which such Senior Debt or Guarantor Senior Debt, as the case may be, may have
been issued, as their respective interests may appear, for application to the
payment of all Obligations with respect to Senior Debt or Guarantor Senior
Debt, as the case may be, remaining unpaid to the extent necessary to pay
such Obligations in full in accordance with their terms, after giving effect
to any concurrent payment or distribution to or for the holders of Senior
Debt or Guarantor Senior Debt, as the case may be.
With respect to the holders of Senior Debt and Guarantor Senior
Debt, the Trustee undertakes to perform only such obligations on the part of
the Trustee as are specifically set forth in this Article 10, and no implied
covenants or obligations with respect to the holders of Senior Debt or
Guarantor Senior Debt, as the case may be shall be read into this Indenture
against the Trustee. The Trustee shall not be deemed to owe any fiduciary
duty to the holders of Senior Debt or Guarantor Senior Debt, and, except as
provided in Section 10.12, shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders of Securities
or the Company, the Subsidiary Guarantors or any other Person money or assets
to which any holders of Senior Debt and Guarantor Senior Debt shall be
entitled by virtue of this Article 10, except if such payment is made as a
result of the willful misconduct or gross negligence of the Trustee.
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Section 10.7. NOTICE BY COMPANY.
The Company and the Subsidiary Guarantors shall promptly notify the
Trustee and the Paying Agent of any facts known to the Company or any
Subsidiary Guarantor that would cause a payment of any Obligations with
respect to the Securities or the related Subsidiary Guarantees to violate
this Article, but failure to give such notice shall not affect the
subordination of the Securities and the related Subsidiary Guarantees to the
Senior Debt and Guarantor Senior Debt as provided in this Article.
Section 10.8. SUBROGATION.
After all Senior Debt and Guarantor Senior Debt is paid in full and
until the Securities are paid in full, Holders of Securities and the related
Subsidiary Guarantees shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Securities and the Subsidiary Guarantees) to
the rights of holders of Senior Debt or Guarantor Senior Debt, as the case
may be, to receive distributions and payments applicable to Senior Debt or
Guarantor Senior Debt, as the case may be, to the extent that distributions
and payments otherwise payable to the Holders of Securities and the related
Subsidiary Guarantees have been applied to the payment of Senior Debt or
Guarantor Senior Debt, as the case may be. A payment or distribution made
under this Article to holders of Senior Debt or Guarantor Senior Debt, as the
case may be, that otherwise would have been made to Holders of Securities and
the related Subsidiary Guarantees is not, as between the Company and Holders
of Securities, a payment by the Company on the Securities or, as between a
Subsidiary Guarantor and Holders of the related Subsidiary Guarantee, a
payment by such Subsidiary Guarantor on such Subsidiary Guarantee.
Section 10.9. RELATIVE RIGHTS.
This Article defines the relative rights of Holders of Securities
and the related Subsidiary Guarantees and holders of Senior Debt and
Guarantor Senior Debt. Nothing in this Indenture shall:
(1) impair, as between the Company or the Subsidiary Guarantors,
as the case may be, and Holders of Securities, the obligation of the
Company and the Subsidiary Guarantors, which is absolute and
unconditional, to pay principal of and interest on the Securities in
accordance with their terms and, in the case of the Subsidiary
Guarantors, the terms of the Subsidiary Guarantees;
(2) affect the relative rights of Holders of Securities and the
related Subsidiary Guarantees and creditors of the Company other than
their rights in relation to holders of Senior Debt or Guarantor Senior
Debt, as the case may be; or
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(3) prevent the Trustee or any Holder from exercising its
available remedies upon a Default or Event of Default, subject to the
rights of holders and owners of Senior Debt or Guarantor Senior Debt, as
the case may be, to receive distributions and payments otherwise payable
to Holders of Securities and the related Subsidiary Guarantees.
If the Company fails because of this Article to pay principal of or
interest on a Security on the due date, the failure is still a Default or Event
of Default.
Section 10.10. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY OR THE
SUBSIDIARY GUARANTORS.
No right of any present or future holders of any Senior Debt or
Guarantor Senior Debt, as the case may be, to enforce subordination as
provided in this Article 10 will at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or any
Subsidiary Guarantor or by any act or failure to act, in good faith, by any
such holder, or by any noncompliance by the Company or any Subsidiary
Guarantor with the terms of this Indenture, regardless of any knowledge
thereof that any such holder of Senior Debt or Guarantor Senior Debt, as the
case may be, may have or otherwise be charged with. The provisions of this
Article Ten are intended to be for the benefit of, and shall be enforceable
directly by, the holders of Senior Debt and Guarantor Senior Debt.
Section 10.11. PAYMENT, DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a payment or distribution is to be made or a notice given
to holders of Senior Debt or Guarantor Senior Debt, as the case may be, the
distribution may be made and the notice given to their Representative.
Upon any payment or distribution of assets or securities of the
Company or any Subsidiary Guarantor referred to in this Article 10, the
Trustee and the Holders of Securities and the related Subsidiary Guarantees
shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction or upon any certificate of such Representative or of
the liquidating trustee or agent or other Person making any payment or
distribution to the Trustee or to the Holders of Securities and the related
Subsidiary Guarantees for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of the Senior Debt,
Guarantor Senior Debt and other Indebtedness of the Company or any Subsidiary
Guarantor, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this
Article 10.
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Section 10.12. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge
of the existence of any facts that would prohibit the making of any payment
or distribution by the Trustee, and the Trustee and the Paying Agent may
continue to make payments on the Securities and the Subsidiary Guarantees,
unless the Trustee shall have received at its Corporate Trust Office at least
one Business Day prior to the date of such payment written notice of facts
that would cause the payment of any Obligations with respect to the
Securities or Subsidiary Guarantees to violate this Article, which notice
shall specifically refer to Section 10.3 or 10.4 hereof. Only the Company or
a Representative may give the notice. Nothing in this Article 10 shall
impair the claims of, or payments to, the Trustee under or pursuant to
Section 7.7 hereof.
The Trustee in its individual or any other capacity may hold Senior
Debt and Guarantor Senior Debt with the same rights it would have if it were
not Trustee. Any Agent may do the same with like rights.
Section 10.13. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder by the Holder's acceptance thereof authorizes and
directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as the Holder's attorney-in-fact
for any and all such purposes. If the Trustee does not file a proper proof
of claim or proof of debt in the form required in any proceeding referred to
in Section 6.9 hereof at least 30 days before the expiration of the time to
file such claim, each lender under the Existing Credit Facility is hereby
authorized to file an appropriate claim for and on behalf of the Holders of
the Securities and the related Subsidiary Guarantees.
Section 10.14. AMENDMENTS.
No amendment may be made to the provisions of or the definitions of
any terms appearing in this Article 10, or to the provisions of Section 6.2
relating to the Designated Senior Debt, that adversely affects the rights of
any holder of Senior Debt or Guarantor Senior Debt, as the case may be, then
outstanding unless the holders of such Senior Debt or Guarantor Senior Debt,
as the case may be, (or any group or Representative authorized to give a
consent) consent to such change.
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Section 10.15. NO WAIVER OF SUBORDINATION PROVISIONS.
Without in any way limiting the generality of Section 10.9 of this
Indenture, the holders of Senior Debt or Guarantor Senior Debt, as the case
may be, may, at any time and from time to time, without the consent of or
notice to the Trustee or the Holders, without incurring responsibility to the
Holders and without impairing or releasing the subordination provided in this
Article Ten or the obligations hereunder of the Holders to the holders of
Senior Debt or Guarantor Senior Debt, as the case may be, do any one or more
of the following: (a) change the manner, place or terms of payment or extend
the time of payment of, or renew or alter, Senior Debt or Guarantor Senior
Debt, as the case may be, or any instrument evidencing the same or any
agreement under which Senior Debt or Guarantor Senior Debt, as the case may
be, is outstanding or secured; (b) sell, exchange, release or otherwise deal
with any property pledged, mortgaged or otherwise securing Senior Debt or
Guarantor Senior Debt, as the case may be; (c) release any Person liable in
any manner for the collection of Senior Debt or Guarantor Senior Debt, as the
case may be; and (d) exercise or refrain from exercising any rights against
the Company and each Subsidiary Guarantor and any other Person.
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ARTICLE 11
THE SUBSIDIARY GUARANTEES
Section 11.1. THE SUBSIDIARY GUARANTEES.
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Each of the Subsidiary Guarantors hereby, jointly and severally,
unconditionally guarantees to each Holder of a Security authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the
Securities or the obligations of the Company hereunder or thereunder, that:
(a) the principal of and premium and interest, on the Securities shall be
promptly paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue principal of and
interest on premium and interest, on the Securities, if any, if lawful, and
all other obligations of the Company to the Holders or the Trustee hereunder
or thereunder shall be promptly paid in full or performed, all in accordance
with the terms hereof and thereof; and (b) in case of any extension of time
of payment or renewal of any Securities or any of such other obligations,
that the same shall be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. Failing payment when due of any
amount so guaranteed or any performance so guaranteed for whatever reason,
the Subsidiary Guarantors shall be jointly and severally obligated to pay the
same immediately. The Subsidiary Guarantors hereby agree that their
obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Securities or this Indenture, the absence
of any action to enforce the same, any waiver or consent by any Holder with
respect to any provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge or defense of
a guarantor. Each of the Subsidiary Guarantors hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, ay right to require a proceeding
first against the Company, protest, notice and all demands whatsoever and
covenant that this Subsidiary Guarantee shall not be discharged except by
complete performance of the obligations contained in the Securities and this
Indenture. If any Holder or the Trustee is required by any court or
otherwise to return to the Company or the Subsidiary Guarantors, or any
Custodian, Trustee, liquidator or other similar official acting in relation
to either the Company or the Subsidiary Guarantors, any amount paid by either
to the Trustee or such Holder, this Subsidiary Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and effect. Each
of the Subsidiary Guarantors agrees that it shall not be entitled to any
right of subrogation in relation to the Holders of Securities in respect of
any obligations guaranteed hereby until payment in full of all obligations
guaranteed hereby. Each of the Subsidiary Guarantors further agrees that, as
between the Subsidiary Guarantors, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the obligations guaranteed
hereby may be accelerated as provided in Article 6 for the purposes of this
Subsidiary Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the obligations
guaranteed hereby and (y) in the event of any declaration of
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acceleration of such obligations as provided in Article 6, such obligations
(whether or not due and payable) shall forthwith become due and payable by
the Subsidiary Guarantors for the purpose of this Subsidiary Guarantee. The
Subsidiary Guarantors shall have the right to seek contribution from any
Subsidiary Guarantor not paying so long as the exercise of such right does
not impair the rights of the Holders under the Subsidiary Guarantees.
Section 11.2. SUBORDINATION OF SUBSIDIARY GUARANTEES.
The obligations of each of the Subsidiary Guarantors under its
Subsidiary Guarantee pursuant to this Article 11 shall be junior and
subordinated to the Guarantor Senior Debt of the Subsidiary Guarantor
pursuant to Article 10 hereof. For the purposes of the foregoing sentence,
the Trustee and the Holders shall have the right to receive and/or retain
payments or distributions by or on behalf of any of the Subsidiary Guarantors
only at such times as they may receive and/or retain payments in respect of
the Securities pursuant to this Indenture, including Article 10 hereof.
Section 11.3. SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC., ON
CERTAIN TERMS.
No Subsidiary Guarantor may consolidate with or merge with or into
(whether or not such Subsidiary Guarantor is the Surviving Person), another
Person other than the Company or another Subsidiary Guarantor, whether or not
affiliated with such Subsidiary Guarantor, unless:
(a) subject to the provisions of Section 11.4 hereof, the Person
formed by or surviving any such consolidation or merger (if other than such
Subsidiary Guarantor) assumes all the obligations of such Subsidiary
Guarantor pursuant to a supplemental indenture in form reasonably
satisfactory to the Trustee in respect of the Securities, this Indenture
and such Subsidiary Guarantor's Guarantee;
(b) immediately after giving effect to such transaction, no Default
or Event of Default exists; and
(c) such transaction does not violate any of Sections 4.3, 4.7, 4.8,
4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.16, 4.17, 4.18 and 4.19.
Notwithstanding the foregoing, none of the Subsidiary Guarantors shall be
permitted to consolidate with or merge with or into (whether or not such
Subsidiary Guarantor is the surviving Person), another corporation, Person or
entity pursuant to the preceding sentence if such consolidation or merger
would not be permitted by Section 5.1 hereof.
In case of any such consolidation or merger and upon the assumption
by the successor corporation, by supplemental indenture, executed and
delivered to the Trustee and satisfactory
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105
in form to the Trustee, of the Subsidiary Guarantee endorsed upon the
Securities and the due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by such Subsidiary Guarantor,
such successor corporation shall succeed to and be substituted for such
Subsidiary Guarantor with the same effect as if it had been named herein as a
Subsidiary Guarantor. Such successor corporation thereupon may cause to be
signed any or all of the Subsidiary Guarantees to be endorsed upon all of the
Securities issuable hereunder which theretofore shall not have been signed by
the Company and delivered to the Trustee. All the Subsidiary Guarantees so
issued shall in all respects have the same legal rank and benefit under this
Indenture as the Subsidiary Guarantees theretofore and thereafter issued in
accordance with the terms of this Indenture as though all of such Subsidiary
Guarantees had been issued at the date of the execution hereof.
Except as set forth in Articles 4 and 5 hereof, nothing contained
in this Indenture or in any of the Securities shall prevent any consolidation
or merger of any Subsidiary Guarantor with or into the Company or another
Subsidiary Guarantor, or shall prevent any sale or conveyance of the property
of any Subsidiary Guarantor as an entirety or substantially as an entirety to
the Company or any Subsidiary Guarantor.
Section 11.4. RELEASES OF SUBSIDIARY GUARANTEES.
In the event of a sale or other disposition of all or substantially
all of the assets of any Subsidiary Guarantor or a sale or other disposition
of all of the capital stock of any Subsidiary Guarantor, to any corporation
or other Person (including an Unrestricted Subsidiary) by way of merger,
consolidation, or otherwise, in a transaction that does not violate any of
the covenants of this Indenture, then such Subsidiary Guarantor (in the event
of a sale or other disposition, by way of such merger, consolidation or
otherwise, of all the capital stock of such Subsidiary Guarantor) shall be
released and relieved of any obligations under its Subsidiary Guarantee and
such acquiring corporation or other Person (in the event of a sale or other
disposition of all or substantially all of the assets of such Subsidiary
Guarantor), if other than a Subsidiary Guarantor, shall have no obligation to
assume or otherwise become liable under such Subsidiary Guarantee; PROVIDED
that the Net Proceeds of such sale or other disposition are applied in
accordance with Section 4.10 hereof. Upon delivery by the Company to the
Trustee of an Officers' Certificate and an Opinion of Counsel to the effect
that such sale or other disposition was made by the Company in accordance
with the provisions of this Indenture, including without limitation Section
4.10, the Trustee shall execute any documents reasonably required in order to
evidence the release of any Subsidiary Guarantor from its obligations under
its Subsidiary Guarantee.
Any Subsidiary Guarantor not released from its obligations under
its Subsidiary Guarantee shall remain liable for the full amount of principal
of and interest on the
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106
Securities and for the other obligations of such Subsidiary Guarantor under
this Indenture as provided in this Article 11.
Any Subsidiary Guarantor that is designated an Unrestricted
Subsidiary in accordance with the terms of this Indenture shall, upon such
designation, be released from and relieved of its obligations under its
Subsidiary Guarantee and any Unrestricted Subsidiary whose obligation as such
is revoked and any newly created or newly acquired Subsidiary that is or
becomes a Restricted Subsidiary shall be required to execute a Subsidiary
Guarantee in accordance with the terms of this Indenture.
Section 11.5. LIMITATION ON SUBSIDIARY GUARANTOR LIABILITY.
For purposes hereof, each Subsidiary Guarantor's liability shall be
that amount from time to time equal to the aggregate liability of such
Subsidiary Guarantor thereunder, but shall be limited to the lesser of (i)
the aggregate amount of the Obligations of the Company under the Securities
and this Indenture and (ii) the amount, if any, which would not have (A)
rendered such Subsidiary Guarantor "INSOLVENT" (as such term is defined in
the federal Bankruptcy Law and in the Debtor and Creditor Law of the State of
New York) or (B) left it with unreasonably small capital at the time its
Subsidiary Guarantee of the Securities was entered into, after giving effect
to the incurrence of existing Indebtedness immediately prior to such time;
PROVIDED that, it shall be a presumption in any lawsuit or other proceeding
in which such Subsidiary Guarantor is a party that the amount guaranteed
pursuant to its Subsidiary Guarantee is the amount set forth in clause (i)
above unless any creditor, or representative of creditors of such Subsidiary
Guarantor, or debtor in possession or trustee in bankruptcy of such
Subsidiary Guarantor, otherwise proves in such a lawsuit that the aggregate
liability of such Subsidiary Guarantor is limited to the amount set forth in
clause (ii). In making any determination as to the solvency or sufficiency
of capital of a Subsidiary Guarantor in accordance with the previous
sentence, the right of such Subsidiary Guarantor to contribution from other
Subsidiary Guarantors and any other rights such Subsidiary Guarantor may
have, contractual or otherwise, shall be taken into account.
Section 11.6. "TRUSTEE" TO INCLUDE PAYING AGENT.
In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the term
"TRUSTEE" as used in Article 10 and this Article 11 shall in such case
(unless the context shall otherwise require) be construed as extending to and
including such Paying Agent within its meaning as fully and for all intents
and purposes as if such Paying Agent were named in Article 10 and this
Article 11 in place of the Trustee.
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ARTICLE 12
MISCELLANEOUS
Section 12.1. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by TIA Section 318(c), the imposed duties shall
control. If any provisions of this Indenture modifies or excludes any
provision of the TIA that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or
excluded, as the case may be.
Section 12.2. NOTICES.
Any notice or communication by the Company or the Subsidiary
Guarantors or the Trustee to the others is duly given if in writing and
delivered in Person or mailed by first class mail (registered or certified,
return receipt requested), telecopier or overnight air courier guaranteeing
next day delivery, to the others' address:
If to the Company or any Subsidiary Guarantor:
Continental Resources, Inc.
302 North Independence, 3rd Floor
P.O. Box 1032
Enid, OK 73702
Telecopier No.: (580) 548-5281
Attention: Harold Hamm and Roger Clement
With a copies to:
McAfee & Taft A Professional Corporation
Tenth Floor, Two Leadership Square
211 North Robinson
Oklahoma City, Oklahoma 73102-7103
Telecopier No.: (405) 235-0439
Attention: Theodore Elam
If to the Trustee:
United States Trust Company of New York
114 West 47th Street, 25th Floor
New York, NY 10036
Telecopier No.: (212) 852-1626
Attention: Corporate Trust Administration
Ref: Continental Resources, Inc.
The Company or any Subsidiary Guarantor or the Trustee, by notice
to the others may designate additional or different addresses for subsequent
notices or communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time
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108
delivered by hand, if personally delivered; five Business Days after being
deposited in the mail, postage prepaid, if mailed; when receipt acknowledged,
if by telecopy; and the next Business Day after timely delivery to the
courier, if sent by overnight air courier guaranteeing next day delivery
(except that a notice of change of address and any notice to the Trustee
shall not be deemed to have been given until actually received by the
addressee).
Any notice or communication to a Holder shall be mailed by first
class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on
the register kept by the Registrar. Any notice or communication shall also
be so mailed to any Person described in TIA Section 313(c), to the extent
required by the TIA. Failure to mail a notice or communication to a Holder or
any defect in it shall not affect its sufficiency with respect to other
Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company or any Subsidiary Guarantor mails a notice or
communication to Holders, it shall mail a copy to the Trustee and each Agent
at the same time.
Section 12.3. COMMUNICATION BY HOLDERS OF SECURITIES WITH OTHER
HOLDERS OF SECURITIES.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Securities.
The Company, the Subsidiary Guarantors, the Trustee, the Registrar and anyone
else shall have the protection of TIA Section 312(c).
Section 12.4. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company or any Subsidiary
Guarantor to the Trustee to take any action under this Indenture, the Company
or such Subsidiary Guarantor, as the case may be, shall furnish to the
Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.5 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.5 hereof) stating that, in the opinion of such counsel, all
such conditions
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109
precedent have been complied with.
Section 12.5. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a
certificate provided pursuant to TIA Section 314(a)(4)) shall comply with
the provisions of TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him or her
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with; PROVIDED, that with
respect to matters of fact an Opinion of Counsel may rely on an Officer's
Certificate and/or certificates of public officials.
Section 12.6. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 12.7. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS,
EMPLOYEES AND STOCKHOLDERS.
No director, officer, employee, incorporator or stockholder of the
Company or any Subsidiary, as such, shall have any liability for any
obligations of the Company under the Securities or this Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Securities, by accepting a Security, waives and
releases all such liability. The waiver and release are part of the
consideration for issuance of the Securities. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is
the view of the Commission that such a waiver is against public policy.
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110
Section 12.8. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED
TO CONSTRUE THIS INDENTURE, THE SECURITIES AND THE SUBSIDIARY GUARANTEES.
Section 12.9. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture,
loan or debt agreement of the Company or their respective Subsidiaries or of
any other Person. Any such indenture, loan or debt agreement may not be used
to interpret this Indenture and the Subsidiary Guarantees.
Section 12.10. SUCCESSORS.
All agreements of the Company and each Subsidiary Guarantor in this
Indenture, the Securities and the Subsidiary Guarantees shall bind its
respective successors. All agreements of the Trustee in this Indenture shall
bind its successors.
Section 12.11. SEVERABILITY.
In case any provision in this Indenture or in the Securities shall
be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
Section 12.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
Section 12.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
<PAGE>
SIGNATURES
Dated as of
July 24, 1998
CONTINENTAL RESOURCES, INC.
Attest: By: /s/ RANDY MOEDER
Name: Randy Moeder
/s/ CHRISTINE ROBERTS Title: Senior Vice President,
General Counsel and Secretary
CONTINENTAL CRUDE CO.
Attest: By: /s/ JEFF WHITE
Name: Jeff White
/s/ RANDY MOEDER Title: President
CONTINENTAL GAS, INC.
Attest: By: /s/ RANDY MOEDER
Name: Randy Moeder
/s/ CHRISTINE ROBERTS Title: President
UNITED STATES TRUST COMPANY OF NEW YORK
Attest: By: /s/ LOUIS P. YOUNG
Name: Louis P. Young
/s/ M. CIESMELEWSKI Title: Vice President
<PAGE>
EXHIBIT A
[FORM OF FACE OF INITIAL SECURITY]
SERIES A NOTE
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK,
NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL
BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
THIS SECURITY IS SUBORDINATED TO SENIOR INDEBTEDNESS, AS DEFINED IN
THE INDENTURE (AS DEFINED HEREIN), AND THE OBLIGATIONS OF EACH SUBSIDIARY
GUARANTOR UNDER THE SUBSIDIARY GUARANTEE CONTAINED IN THE INDENTURE ARE
SUBORDINATED TO GUARANTOR SENIOR INDEBTEDNESS, AS DEFINED IN THE INDENTURE,
OF SUCH SUBSIDIARY GUARANTOR.
[Restricted Securities Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE
OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE
"RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF
THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR
OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR
SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER
THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL
A-1
<PAGE>
BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A,
(D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN "ACCREDITED
INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT THAT IS AN INSTITUTIONAL INVESTOR ACQUIRING THE SECURITY FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED
INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF $250,000, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION
WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY
SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) AND (F) TO REQUIRE
THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF
THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
[Regulation S Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO OR FOR THE ACCOUNT OR BENEFIT
OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT IT IS NOT A U.S. PERSON
NOR IS IT PURCHASING FOR THE ACCOUNT OF A U.S. PERSON AND IS ACQUIRING THIS
SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE
SECURITIES ACT ("REGULATION S"), (2) BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE
"RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF
THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR
OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR
SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER
THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF REGULATION S, (E) TO AN "ACCREDITED INVESTOR"
WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT THAT IS AN INSTITUTIONAL INVESTOR ACQUIRING THE SECURITY FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN
EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION
WITH ANY DISTRIBUTION IN VIOLATION OF THE
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<PAGE>
SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND
THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND IN
THE CASE OF THE FOREGOING CLAUSE (E), A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY
THE TRANSFEROR TO THE COMPANY AND THE TRUSTEE. THIS LEGEND WILL BE REMOVED
AFTER 40 CONSECUTIVE DAYS BEGINNING ON AND INCLUDING THE LATER OF (A) THE DAY
ON WHICH THE SECURITIES ARE OFFERED TO PERSONS OTHER THAN DISTRIBUTORS (AS
DEFINED IN REGULATION S) AND (B) THE DATE OF THE CLOSING OF THE ORIGINAL
OFFERING. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES"
AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT.
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<PAGE>
CONTINENTAL RESOURCES, INC.
10 1/4% Senior Subordinated Notes due 2008
No. 1 $150,000,000
CUSIP Number: 212013AA4
Continental Resources, Inc., an Oklahoma corporation, promises to
pay to Cede & Co., or registered assigns, the principal sum of One Hundred
Fifty Million Dollars on August 1, 2008.
Interest Payment Dates: February 1 and August 1.
Record Dates: January 15 and July 15.
Additional provisions of this Security are set forth on the other
side of this Security.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers and a
facsimile of its corporate seal to be affixed hereto and imprinted hereon.
Dated: ____________, 1998
CONTINENTAL RESOURCES, INC.
By ______________________________________
Name:
Title:
By ______________________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee, certifies that this is
one of the Securities referred to in the
within-mentioned Indenture:
By _____________________________________
Authorized Signatory
Dated: ____________, 1998
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<PAGE>
(Back of Security)
10 1/4% Senior Subordinated Notes due 2008
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Continental Resources, Inc., an Oklahoma corporation
(the "COMPANY"), promises to pay interest on the principal amount of this
Security at the rate of 10 1/4% per annum, which interest shall be payable in
cash semiannually in arrears on each February 1 and August 1, or if any such
day is not a Business Day, on the next succeeding Business Day (each an
"INTEREST PAYMENT DATE"); PROVIDED that the first Interest Payment Date shall
be February 1, 1999. Interest on the Securities will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of original issuance. Interest will be computed on the basis
of a 360-day year comprised of twelve 30-day months.
2. METHOD OF PAYMENT. On each Interest Payment Date the Company
will pay interest to the Person who is the Holder of record of this Security
as of the close of business on the January 15 or July 15 immediately
preceding such Interest Payment Date, even if this Security is cancelled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
Principal, premium, if any, and interest on this Security will be payable at
the office or agency of the Company maintained for such purpose within The
City and State of New York or, in the event the Securities do not remain in
book-entry form, at the option of the Company, payment of interest may be
made by check mailed to the Holder of this Security at its address set forth
in the register of Holders of Securities; PROVIDED that all payments with
respect to the Global Securities and Definitive Securities having an
aggregate principal amount of $5.0 million or more the Holders of which have
given wire transfer instructions to the Company at least 10 Business Days
prior to the applicable payment date will be required to be made by wire
transfer of immediately available funds to the accounts specified by the
Holders thereof. Such payment shall be in such coin or currency of the
United States of America as at the time of payment is legal tender for
payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, United States Trust
Company of New York, the Trustee under the Indenture, will act as Paying
Agent and Registrar. The Company may change any Paying Agent or Registrar
without notice to any Holder. The Company or any Subsidiary Guarantor or any
other of the Company's Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Securities under an Indenture
dated as of July 24, 1998 ("INDENTURE") among
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<PAGE>
the Company, the Subsidiary Guarantors and the Trustee. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended
(15 U.S. Code Sections 77aaa-77bbbb). The Securities are subject to all
such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. The Securities are general unsecured obligations of
the Company equal in an aggregate principal amount to $150,000,000 and will
mature on August 1, 2008.
The Securities are general unsecured senior subordinated obligations
of the Company limited to $150,000,000 million aggregate principal amount
(subject to Section 2.7 of the Indenture). The aggregate principal amount of
notes which may be authenticated and delivered under the Indenture, including
the Securities, is limited to $300.0 million (subject to Section 2.7 of the
Indenture). This Security is one of the Initial Securities referred to in
the Indenture. The Securities include the Initial Securities and any
Exchange Securities issued in exchange for the Initial Securities pursuant to
the Indenture and the Registration Rights Agreement. The Initial Securities
and the Exchange Securities are treated as a single class of securities under
the Indenture. The Indenture imposes certain limitations on the incurrence
of Indebtedness by the Company and its Restricted Subsidiaries, the payment
of dividends and other distributions on the Capital Stock of the Company and
its Restricted Subsidiaries, the purchase or redemption of Capital Stock of
the Company and Capital Stock of such Restricted Subsidiaries, certain
purchases or redemptions of Subordinated Indebtedness, the sale or transfer
of assets and Capital Stock of Restricted Subsidiaries, the issuance or sale
of Capital Stock of Restricted Subsidiaries, the Investments of the Company
and its Subsidiaries and transactions with Affiliates. In addition, the
Indenture limits the ability of the Company and its Restricted Subsidiaries
to restrict distributions and dividends from Restricted Subsidiaries.
To guarantee the due and punctual payment of the principal, premium,
if any, and interest on the Securities and all other amounts payable by the
Company under the Indenture and the Securities when and as the same shall be
due and payable, whether at maturity, by acceleration or otherwise, according
to the terms of the Securities and the Indenture, the Subsidiary Guarantors
have unconditionally guaranteed (and future Subsidiary Guarantors, together
with the Subsidiary Guarantors, will unconditionally guarantee), jointly and
severally, such obligations on a senior subordinated basis pursuant to the
terms of the Indenture.
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<PAGE>
5. OPTIONAL REDEMPTION.
(a) The Securities are not redeemable at the Company's option prior
to August 1, 2003. From and after August 1, 2003, the Securities will be
subject to redemption at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below PLUS accrued
and unpaid interest thereon to the applicable redemption date, if redeemed
during the twelve-month period beginning on August 1 of the years indicated
below:
<TABLE>
<CAPTION>
Percentage of
Year Principal Amount
---- ----------------
<S> <C>
2003....................................105.125%
2004....................................103.417%
2005....................................101.708%
2006 and thereafter.....................100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this Paragraph 5,
prior to August 1, 2001 the Company may, at its option, on any one or more
occasions, redeem up to 35% of the original aggregate principal amount of
Securities at a redemption price equal to 110.250% of the principal amount
thereof, plus accrued and unpaid interest, if any, thereon to the redemption
date, with the net proceeds of sales of public common stock of the Company;
PROVIDED that at least 65% of the original aggregate principal amount of
Securities must remain outstanding immediately after the occurrence of such
redemption; and PROVIDED, further, that any such redemption shall occur
within 60 days after the date of the closing of the related sale of such
common stock.
(c) Notwithstanding the provisions of clause (a) of this Paragraph 5,
upon the occurrence of a Change of Control at any time on or prior to August 1,
2003, the Company may, at its option, redeem in whole but not in part, the
Securities at a redemption price equal to 100% of the principal amount
thereof, plus the Applicable Premium as of, and accrued but unpaid interest,
if any, to, the date of redemption (subject to the right of Holders of record
on the relevant record date to receive interest due on the relevant interest
payment date) provided that such redemption shall be made no more than 90 days
after the occurrence of a Change of Control. The Company shall notify the
Trustee and, by mail, the Holders of the Securities of its decision to redeem
the Securities pursuant to this Paragraph 5(c) within 30 days of the
occurrence of a Change of Control.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption or sinking fund payments with respect
to the Securities.
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<PAGE>
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, if the Company does
not redeem the Securities pursuant to paragraph 5(c), each Holder of
Securities shall have the right to require the Company to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of such Holder's
Securities pursuant to the offer described below (the "Change of Control
Offer") at an offer price in cash equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest, if any, thereon to the date
of purchase (the "Change of Control Payment"). The right of the Holders of
the Securities to require the Company to repurchase such Securities upon a
Change of Control may not be waived by the Trustee without the approval of
the Holders of the Securities required by Section 9.2 of the Indenture.
Within 30 days following any Change of Control, the Company will mail a
notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Securities
pursuant to the procedures required by the Indenture and described in such
notice. The Change of Control Payment shall be made on a business day not
less than 30 days nor more than 60 days after such notice is mailed. The
Company and each Subsidiary Guarantor will comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable
in connection with the repurchase of the Securities as a result of a Change
of Control.
(b) If the Company or a Restricted Subsidiary consummates any
Asset Sales permitted by the Indenture, when the aggregate amount of Excess
Proceeds exceeds $15 million, the Company shall make an Asset Sale Offer to
purchase the maximum principal amount of Securities and any other Pari Passu
Indebtedness to which the Asset Sale Offer applies that may be purchased out
of the Excess Proceeds, at an offer price in cash in an amount equal to, in
the case of the Securities, 100% of the principal amount thereof, plus
accrued and unpaid interest thereon to the date of purchase or, in the case
of any Pari Passu Indebtedness, 100% of the principal amount thereof (or with
respect to discount Pari Passu Indebtedness, the accreted value thereof) on
the date of purchase, in each case, in accordance with the procedures set
forth in Section 3.9 of the Indenture or the agreements governing the Pari
Passu Indebtedness, as applicable. To the extent that the aggregate
principal amount (or accreted value, as the case may be) of Securities, and
Pari Passu Indebtedness tendered pursuant to an Asset Sale Offer is less than
the Excess Proceeds, the Company may use any remaining Excess Proceeds for
general corporate purposes. If the sum of (i) the aggregate principal amount
of Securities surrendered by Holders thereof and (ii) the aggregate principal
amount or accreted value, as the case may be, of Pari Passu Indebtedness
surrendered by holders or lenders thereof exceeds the amount of Excess
Proceeds, the Trustee and the trustee or other lender representative for the
Pari Passu Indebtedness shall select the Securities and the other Pari Passu
Indebtedness to be purchased on a pro rata basis, based on the aggregate
principal amount (or accreted value, as applicable) thereof surrendered in
such Asset
A-8
<PAGE>
Sale Offer. Upon completion of such Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Securities are to be redeemed at its registered address.
Securities in denominations larger than $1,000 may be redeemed in part but
only in integral multiples of $1,000, unless all of the Securities held by a
Holder are to be redeemed. On and after the redemption date interest ceases
to accrue on the aggregate principal amount of the Securities called for
redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Securities may be issued
initially in the form of one or more fully registered Global Securities. The
Securities may also be issued in registered form without coupons in minimum
denominations of $1,000 and integral multiples of $1,000. The transfer of
Securities may be registered and Securities may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and
the Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Security or portion of a Security selected for redemption,
except for the unredeemed portion of any Security being redeemed in part.
Also, it need not exchange or register the transfer of any Security for a
period of 15 days before a selection of Securities to be redeemed or during
the period between a record date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Security may
be treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture or the Securities may be amended or supplemented
with the consent of the Holders of at least a majority in aggregate principal
amount of the Securities then outstanding (including, without limitation,
consents obtained in connection with a purchase of, or the tender offer or
exchange offer for, such Securities), and any existing Default or Event of
Default under, or compliance with any provision of the Indenture or the
Securities may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Securities. Without the consent of
any Holder of a Security, the Indenture or the Securities may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Securities in addition to or in place of certificated
Securities, to provide for the assumption of the Company's obligations to
Holders of the Securities in case of a merger or consolidation, to make any
change that would provide any additional rights or benefits to the Holders of
the Securities or that does not adversely affect the legal rights under the
Indenture of any such Holder, to add guarantees with respect to the
Securities or to secure the Securities or to comply with the requirements of
the Commission in order to effect
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<PAGE>
or maintain the qualification of the Indenture under the Trust Indenture Act.
12. DEFAULTS AND REMEDIES. Events of Default include: (i)
default for 30 consecutive days in the payment when due of interest on the
Securities (whether or not prohibited by the provisions of Article 10 of the
Indenture); (ii) default in payment when due of the principal of or premium,
if any, on the Securities (whether or not prohibited by the provisions of
Article 10 of the Indenture); (iii) failure by the Company or any Subsidiary
Guarantor to comply with the provisions of Article 5 of the Indenture; (iv)
failure by the Company for 30 consecutive days after notice from the Trustee
or the Holders of at least 25% in aggregate principal amount of the
Securities then outstanding to comply with the provisions of Sections 4.3,
4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.16, 4.17, 4.18 and 4.19 of the
Indenture; (v) failure by the Company for 60 consecutive days after notice
from the Trustee or the Holders of at least 25% in aggregate principal amount
of the Securities then outstanding to comply with any of its other agreements
or covenants in, or provisions of, this Security or in the Indenture; (vi)
except as permitted by the Indenture, any Subsidiary Guarantee shall be held
in any judicial proceeding to be unenforceable or invalid or shall cease for
any reason to be in full force and effect or a Subsidiary Guarantor or any
Person acting on behalf of a Subsidiary Guarantor, shall deny or disaffirm
such Subsidiary Guarantor's obligations under its Subsidiary Guarantee; (vii)
default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any Restricted Subsidiary whether such
Indebtedness or guarantee now exists, or is created after the date of the
Indenture, which default (a) is caused by a failure to pay principal of such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results
in the acceleration of such Indebtedness prio to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there is then
existing a Payment Default or the maturity of which has been so accelerated,
aggregates $10 million or more; (viii) a final non-appealable judgment or
order or final non-appealable judgments or orders are rendered against the
Company or any Restricted Subsidiary that remain unpaid or discharged for a
period of 60 days and that require the payment in money, either individually
or in an aggregate amount, that is more than $10 million; and (ix) certain
events of bankruptcy or insolvency with respect to the Company or any
Restricted Subsidiary. If any Event of Default (other than an Event of
Default described in clause (ix) above) occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of the then
outstanding Securities may declare all the Securities to be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency with respect
to the Company or any Restricted Subsidiary, all outstanding Securities will
become due and payable without further action or notice. Holders of the
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<PAGE>
Securities may not enforce the Indenture or the Securities except as provided
in the Indenture. Subject to certain limitations, Holders of a majority in
aggregate principal amount of the then outstanding Securities may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the Securities notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the
Securities then outstanding by notice to the Trustee may on behalf of the
Holders of all of the Securities waive any existing Default or Event of
Default and its consequences under the Indenture except a continuing Default
or Event of Default in the payment of interest or premium on, or the
principal of, the Securities. The Company is required to deliver to the
Trustee annually a statement regarding compliance with the Indenture, and the
Company is required, within 5 Business days after becoming aware of any
Default or Event of Default, to deliver to the Trustee a statement specifying
such Default or Event of Default.
13. SUBORDINATION. The Securities are subordinated to Senior Debt
of the Company and the Subsidiary Guarantees are subordinated to Guarantor
Senior Debt of the Subsidiary Guarantors. To the extent provided in the
Indenture, Senior Debt must be paid before the Securities may be paid and
Guarantor Senior Debt of a Subsidiary Guarantor must be paid before a
Subsidiary Guarantor may pay under its Subsidiary Guarantee. The Company
agrees, and each Holder by accepting a Security agrees, that the Indebtedness
evidenced by the Securities, including, but not limited to, the payment of
principal of, premium, if any, and interest on the Securities, and any other
payment Obligation of the Company in respect of the Securities and the
obligations of each Subsidiary Guarantor under its Subsidiary Guarantee are
subordinated in right of payment, to the extent and in the manner provided in
the Indenture, to the prior payment in full in cash of all Senior Debt of the
Company and, in the case of a Subsidiary Guarantee, all Guarantor Senior Debt
of such Subsidiary Guarantor (whether outstanding on the date hereof or
hereafter created, incurred, assumed or guaranteed) and authorizes the
Trustee to give effect and appoints the Trustee as attorney-in-fact for such
purpose.
14. TRUSTEE DEALINGS WITH COMPANY. The Indenture contains certain
limitations on the rights of the Trustee, should it become a creditor of the
Company, to obtain payment of claims in certain cases, or to realize on
certain property received in respect of any such claim as security or
otherwise. The Trustee will be permitted to engage in other transactions;
however, if it acquires any conflicting interest it must eliminate such
conflict within 90 days, apply to the Commission for permission to continue
or resign.
15. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or stockholder of the Company, as such, shall have any liability
for any obligations of the Company under the Securities or the Indenture or
for any claim based on, in
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<PAGE>
respect of, or by reason of, such obligations or their creation. Each Holder
of Securities, by accepting a Security, waives and releases all such
liability. The waiver and release are part of the consideration for issuance
of the Securities. Such waiver may not be effective to waive liabilities
under the federal securities laws and it is the view of the Commission that
such a waiver is against public policy.
16. AUTHENTICATION. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Securities and the Trustee may use
CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed
on the Securities or as contained in any notice of redemption and reliance
may be placed only on the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
Continental Resources, Inc.
302 North Independence, 3rd Floor
P.O. Box 1032
Enid, OK 73702
Telecopier No.: (580) 548-5281
Attention: Roger Clement
A-12
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer
this Security on the books of the Company. The agent may
substitute another to act for him.
- -------------------------------------------------------------------------------
Date: ______________________ Your Signature: ___________________________
Signature Guarantee:* ______________________________
(Signature must be guaranteed)
- -------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
In connection with any transfer or exchange of any of the Securities
evidenced by this certificate occurring prior to the date that is two years
after the later of the date of original issuance of such Securities and the
last date, if any, on which such Securities were owned by the Company or any
Affiliate of the Company, the undersigned confirms that such Securities are
being:
CHECK ONE BOX BELOW:
1/ /1 acquired for the undersigned's own account, without transfer (in
satisfaction of Section 2.6(a)(ii)(A) or Section 2.6(d)(i)(A) of
the Indenture); or
2/ /2 transferred to the Company; or
3/ /3 transferred pursuant to and in compliance with Rule 144A under
the Securities Act of 1933; or
4/ /4 transferred pursuant to an effective registration statement under
the Securities Act; or
5/ /5 transferred pursuant to and in compliance with Regulation S under
the Securities Act of 1933, with transferee furnishing to the
Trustee a signed letter containing certain representations and
- ------------------------
*/ Participant in a recognized Signature Guarantee Medallion Program (or
other signature guarantor acceptable to the Trustee).
A-13
<PAGE>
agreements (the form of which letter substantially appears in
Section 2.14 of the Indenture); or
6/ /6 transferred to an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of
1933), that has furnished to the Trustee a signed letter
containing certain representations and agreements (the form of
which letter appears in Section 2.13 of the Indenture); or
7/ /7 transferred pursuant to another available exemption from the
registration requirements of the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any
of the Securities evidenced by this certificate in the name of any person
other than the registered holder thereof; PROVIDED, HOWEVER, that if box (5),
(6) or (7) is checked, the Trustee or the Company may require, prior to
registering any such transfer of the Securities, in their sole discretion,
such legal opinions, certifications and other information as the Trustee or
the Company may reasonably request to confirm that such transfer is being
made pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933, such as the
exemption provided by Rule 144 under such Act.
---------------------------------------
Signature
Signature Guarantee:(*)
- --------------------------------- ---------------------------------------
(Signature must be guaranteed) Signature
- ------------------------------------------------------------------------------
- ----------------------
*/ Participant in a recognized Signature Guarantee Medallion Program (or
other signature guarantor acceptable to the Trustee).
A-14
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.10 or 4.13 of the Indenture, check the box below:
/ /8 Section 4.10 / /9 Section 4.13
If you want to elect to have only part of the Security purchased by
the Company pursuant to Section 4.10 or Section 4.13 of the Indenture, state
the principal amount you elect to have purchased: $______________
Date: Your Signature:
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(Sign exactly as your name appears on the face of this Security)
Signature Guarantee:(*)
-----------------------------------------
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*/ Participant in a recognized Signature Guarantee Medallion Program (or
other signature guarantor acceptable to the Trustee).
A-15
<PAGE>
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have been
made:
<TABLE>
<CAPTION>
Amount of decrease in Amount of increase in Principal Amount of Signature of
Date of Principal Amount of Principal Amount of this Global Security authorized officer of
Exchange this Global Security this Global Security following such Trustee or Note
decrease or increase Custodian
<S> <C> <C> <C> <C>
</TABLE>
A-16
<PAGE>
EXHIBIT B
(Form of Face of Exchange Security)
SERIES B NOTE
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR
TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL Security SHALL
BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
THIS SECURITY IS SUBORDINATED TO SENIOR DEBT, AS DEFINED IN THE
INDENTURE (AS DEFINED HEREIN), AND THE OBLIGATIONS OF EACH SUBSIDIARY
GUARANTOR UNDER THE SUBSIDIARY GUARANTEE CONTAINED IN THE INDENTURE ARE
SUBORDINATED TO GUARANTOR SENIOR INDEBTEDNESS, AS DEFINED IN THE INDENTURE,
OF SUCH SUBSIDIARY GUARANTOR.
B-1
<PAGE>
CONTINENTAL RESOURCES, INC.
10 1/4% Senior Subordinated Notes due 2008
No. 1 $150,000,000
CUSIP Number: _____________
Continental Resources, Inc., an Oklahoma corporation, promises to pay
to Cede & Co., or registered assigns, the principal sum of One Hundred Fifty
Million Dollars on August 1, 2008.
Interest Payment Dates: February 1 and August 1.
Record Dates: January 15 and July 15.
Additional provisions of this Security are set forth on the other
side of this Security.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officers and a
facsimile of its corporate seal to be affixed hereto and imprinted hereon.
Dated: ________, 1998
CONTINENTAL RESOURCES, INC.
By
-------------------------------------
Name:
Title:
By
-------------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee, certifies that this is
one of the Securities referred to in the
within-mentioned Indenture:
By
----------------------------------
Authorized Signatory
Dated: , 1998
------------
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<PAGE>
(Back of Note)
10 1/4% Senior Subordinated Notes due 2008
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Continental Resources, Inc., an Oklahoma
corporation (the "COMPANY"), promises to pay interest on the principal amount
of this Security at the rate of 10 1/4% per annum, which interest shall be
payable in cash semiannually in arrears on each February 1 and August 1, or
if any such day is not a Business Day, on the next succeeding Business Day
(each an "INTEREST PAYMENT DATE"); PROVIDED that the first Interest Payment
Date shall be February 1, 1999. Interest on the Securities will accrue from
the most recent date to which interest has been paid or, if no interest has
been paid, from the date of original issuance. Interest will be computed on
the basis of a 360-day year comprised of twelve 30-day months.
2. METHOD OF PAYMENT. On each Interest Payment Date the Company
will pay interest to the Person who is the Holder of record of this Security
as of the close of business on the January 15 or July 15 immediately
preceding such Interest Payment Date, even if this Security is cancelled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
Principal, premium, if any, and interest on this Security will be payable at
the office or agency of the Company maintained for such purpose within The
City and State of New York or, in the event the Securities do not remain in
book-entry form, at the option of the Company, payment of interest may be
made by check mailed to the Holder of this Security at its address set forth
in the register of Holders of Securities; PROVIDED that all payments with
respect to the Global Securities and Definitive Securities having an
aggregate principal amount of $5.0 million or more the Holders of which have
given wire transfer instructions to the Company at least 10 Business Days
prior to the applicable payment date will be required to be made by wire
transfer of immediately available funds to the accounts specified by the
Holders thereof. Such payment shall be in such coin or currency of the
United States of America as at the time of payment is legal tender for
payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, United States Trust
Company of New York, the Trustee under the Indenture, will act as Paying
Agent and Registrar. The Company may change any Paying Agent or Registrar
without notice to any Holder. The Company or any Subsidiary Guarantor or any
other of the Company's Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Securities under an
Indenture dated as of July 24, 1998 ("INDENTURE") among the Company, the
Subsidiary Guarantors and the Trustee. The
B-3
<PAGE>
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code Sections 77aaa-77bbbb). The Securities are subject to
all such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. The Securities are general unsecured obligations of
the Company equal in an aggregate principal amount to $150,000,000 and will
mature on August 1, 2008.
The Securities are general unsecured senior subordinated
obligations of the Company limited to $150,000,000 million aggregate
principal amount (subject to Section 2.7 of the Indenture). The aggregate
principal amount of notes which may be authenticated and delivered under the
Indenture, including the Securities, is limited to $300.0 million (subject to
Section 2.7 of the Indenture). This Security is one of the Exchange
Securities referred to in the Indenture. The Securities include the Initial
Securities and any Exchange Securities issued in exchange for the Initial
Securities pursuant to the Indenture and the Registration Rights Agreement.
The Initial Securities and the Exchange Securities are treated as a single
class of securities under the Indenture. The Indenture imposes certain
limitations on the incurrence of Indebtedness by the Company and its
Restricted Subsidiaries, the payment of dividends and other distributions on
the Capital Stock of the Company and its Restricted Subsidiaries, the
purchase or redemption of Capital Stock of the Company and Capital Stock of
such Restricted Subsidiaries, certain purchases or redemptions of
Subordinated Indebtedness, the sale or transfer of assets and Capital Stock
of Restricted Subsidiaries, the issuance or sale of Capital Stock of
Restricted Subsidiaries, the Investments of the Company and its Subsidiaries
and transactions with Affiliates. In addition, the Indenture limits the
ability of the Company and its Restricted Subsidiaries to restrict
distributions and dividends from Restricted Subsidiaries.
To guarantee the due and punctual payment of the principal,
premium, if any, and interest on the Securities and all other amounts payable
by the Company under the Indenture and the Securities when and as the same
shall be due and payable, whether at maturity, by acceleration or otherwise,
according to the terms of the Securities and the Indenture, the Subsidiary
Guarantors have unconditionally guaranteed (and future Subsidiary Guarantors,
together with the Subsidiary Guarantors, will unconditionally guarantee),
jointly and severally, such obligations on a senior subordinated basis
pursuant to the terms of the Indenture.
B-4
<PAGE>
5. OPTIONAL REDEMPTION.
(a) The Securities are not redeemable at the Company's option
prior to August 1, 2003. From and after August 1, 2003, the Securities will
be subject to redemption at the option of the Company, in whole or in part,
upon not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below PLUS accrued
and unpaid interest thereon to the applicable redemption date, if redeemed
during the twelve-month period beginning on August 1 of the years indicated
below:
<TABLE>
<CAPTION>
PERCENTAGE OF
YEAR PRINCIPAL AMOUNT
---- ----------------
<S> <C>
2003..........................................105.125%
2004..........................................103.417%
2005..........................................101.708%
2006 and thereafter...........................100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this Paragraph
5, prior to August 1, 2001 the Company may, at its option, on any one or more
occasions, redeem up to 35% of the original aggregate principal amount of
Securities at a redemption price equal to 110.250% of the principal amount
thereof, plus accrued and unpaid interest, if any, thereon to the redemption
date, with the net proceeds of sales of public common stock of the Company;
PROVIDED that at least 65% of the original aggregate principal amount of
Securities must remain outstanding immediately after the occurrence of such
redemption; and PROVIDED, further, that any such redemption shall occur
within 60 days after the date of the closing of the related sale of such
common stock.
(c) Notwithstanding the provisions of clause (a) of this Paragraph
5, upon the occurrence of a Change of Control at any time on or prior to
August 1, 2003, the Company may, at its option, redeem in whole but not in
part, the Securities at a redemption price equal to 100% of the principal
amount thereof, plus the Applicable Premium as of, and accrued but unpaid
interest, if any, to, the date of redemption (subject to the right of Holders
of record on the relevant record date to receive interest due on the relevant
interest payment date) provided that such redemption shall be made no more
than 90 days after the occurrence of a Change of Control. The Company shall
notify the Trustee and, by mail, the Holders of the Securities of its
decision to redeem the Securities pursuant to this Paragraph 5(c) within 30
days of the occurrence of a Change of Control.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption or sinking fund payments with respect
to the Securities.
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<PAGE>
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, if the Company
does not redeem the Securities pursuant to paragraph 5(c), each Holder of
Securities shall have the right to require the Company to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of such Holder's
Securities pursuant to the offer described below (the "Change of Control
Offer") at an offer price in cash equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest, if any, thereon to the date
of purchase (the "Change of Control Payment"). The right of the Holders of
the Securities to require the Company to repurchase such Securities upon a
Change of Control may not be waived by the Trustee without the approval of
the Holders of the Securities required by Section 9.2 of the Indenture.
Within 30 days following any Change of Control, the Company will mail a
notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Securities
pursuant to the procedures required by the Indenture and described in such
notice. The Change of Control Payment shall be made on a business day not
less than 30 days nor more than 60 days after such notice is mailed. The
Company and each Subsidiary Guarantor will comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable
in connection with the repurchase of the Securities as a result of a Change
of Control.
(b) If the Company or a Restricted Subsidiary consummates any
Asset Sales permitted by the Indenture, when the aggregate amount of Excess
Proceeds exceeds $15 million, the Company shall make an Asset Sale Offer to
purchase the maximum principal amount of Securities and any other Pari Passu
Indebtedness to which the Asset Sale Offer applies that may be purchased out
of the Excess Proceeds, at an offer price in cash in an amount equal to, in
the case of the Securities, 100% of the principal amount thereof, plus
accrued and unpaid interest thereon to the date of purchase or, in the case
of any Pari Passu Indebtedness, 100% of the principal amount thereof (or with
respect to discount Pari Passu Indebtedness, the accreted value thereof) on
the date of purchase, in each case, in accordance with the procedures set
forth in Section 3.9 of the Indenture or the agreements governing the Pari
Passu Indebtedness, as applicable. To the extent that the aggregate
principal amount (or accreted value, as the case may be) of Securities, and
Pari Passu Indebtedness tendered pursuant to an Asset Sale Offer is less than
the Excess Proceeds, the Company may use any remaining Excess Proceeds for
general corporate purposes. If the sum of (i) the aggregate principal amount
of Securities surrendered by Holders thereof and (ii) the aggregate principal
amount or accreted value, as the case may be, of Pari Passu Indebtedness
surrendered by holders or lenders thereof exceeds the amount of Excess
Proceeds, the Trustee and the trustee or other lender representative for the
Pari Passu Indebtedness shall select the Securities and the other Pari Passu
Indebtedness to be purchased on a pro rata basis, based on the aggregate
principal amount (or accreted value, as applicable) thereof surrendered in
such Asset
B-6
<PAGE>
Sale Offer. Upon completion of such Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Securities are to be redeemed at its registered address.
Securities in denominations larger than $1,000 may be redeemed in part but
only in integral multiples of $1,000, unless all of the Securities held by a
Holder are to be redeemed. On and after the redemption date interest ceases
to accrue on the aggregate principal amount of the Securities called for
redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Securities may be
issued initially in the form of one or more fully registered Global
Securities. The Securities may also be issued in registered form without
coupons in minimum denominations of $1,000 and integral multiples of $1,000.
The transfer of Securities may be registered and Securities may be exchanged
as provided in the Indenture. The Registrar and the Trustee may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and the Company may require a Holder to pay any taxes and fees
required by law or permitted by the Indenture. The Company need not exchange
or register the transfer of any Security or portion of a Security selected
for redemption, except for the unredeemed portion of any Security being
redeemed in part. Also, it need not exchange or register the transfer of any
Security for a period of 15 days before a selection of Securities to be
redeemed or during the period between a record date and the corresponding
Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Security
may be treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture or the Securities may be amended or supplemented
with the consent of the Holders of at least a majority in aggregate principal
amount of the Securities then outstanding (including, without limitation,
consents obtained in connection with a purchase of, or the tender offer or
exchange offer for, such Securities), and any existing Default or Event of
Default under, or compliance with any provision of the Indenture or the
Securities may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Securities. Without the consent of
any Holder of a Security, the Indenture or the Securities may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Securities in addition to or in place of certificated
Securities, to provide for the assumption of the Company's obligations to
Holders of the Securities in case of a merger or consolidation, to make any
change that would provide any additional rights or benefits to the Holders of
the Securities or that does not adversely affect the legal rights under the
Indenture of any such Holder, to add guarantees with respect to the
Securities or to secure the Securities or to comply with the requirements of
the Commission in order to effect
B-7
<PAGE>
or maintain the qualification of the Indenture under the Trust Indenture Act.
12. DEFAULTS AND REMEDIES. Events of Default include: (i)
default for 30 consecutive days in the payment when due of interest on the
Securities (whether or not prohibited by the provisions of Article 10 of the
Indenture); (ii) default in payment when due of the principal of or premium,
if any, on the Securities (whether or not prohibited by the provisions of
Article 10 of the Indenture); (iii) failure by the Company or any Subsidiary
Guarantor to comply with the provisions of Article 5 of the Indenture; (iv)
failure by the Company for 30 consecutive days after notice from the Trustee
or the Holders of at least 25% in aggregate principal amount of the
Securities then outstanding to comply with the provisions of Sections 4.3,
4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.16, 4.17, 4.18 and 4.19 of the
Indenture; (v) failure by the Company for 60 consecutive days after notice
from the Trustee or the Holders of at least 25% in aggregate principal amount
of the Securities then outstanding to comply with any of its other agreements
or covenants in, or provisions of, this Security or in the Indenture; (vi)
except as permitted by the Indenture, any Subsidiary Guarantee shall be held
in any judicial proceeding to be unenforceable or invalid or shall cease for
any reason to be in full force and effect or a Subsidiary Guarantor or any
Person acting on behalf of a Subsidiary Guarantor, shall deny or disaffirm
such Subsidiary Guarantor's obligations under its Subsidiary Guarantee; (vii)
default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any Restricted Subsidiary whether such
Indebtedness or guarantee now exists, or is created after the date of the
Indenture, which default (a) is caused by a failure to pay principal of such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results
in the acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there is then
existing a Payment Default or the maturity of which has been so accelerated,
aggregates $10 million or more; (viii) a final non-appealable judgment or
order or final non-appealable judgments or orders are rendered against the
Company or any Restricted Subsidiary that remain unpaid or discharged for a
period of 60 days and that require the payment in money, either individually
or in an aggregate amount, that is more than $10 million; and (ix) certain
events of bankruptcy or insolvency with respect to the Company or any
Restricted Subsidiary. If any Event of Default (other than an Event of
Default described in clause (ix) above) occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the then outstanding
Securities may declare all the Securities to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising
from certain events of bankruptcy or insolvency with respect to the Company
or any Restricted Subsidiary, all outstanding Securities will become due and
payable without further action or notice. Holders of the Securities may not
B-8
<PAGE>
enforce the Indenture or the Securities except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in aggregate principal
amount of the then outstanding Securities may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Securities notice of any continuing Default or Event of Default (except a
Default or Event of Default relating to the payment of principal or interest)
if it determines that withholding notice is in their interest. The Holders
of a majority in aggregate principal amount of the Securities then
outstanding by notice to the Trustee may on behalf of the Holders of all of
the Securities waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of
Default in the payment of interest or premium on, or the principal of, the
Securities. The Company is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and the Company is
required, within 5 Business days after becoming aware of any Default or Event
of Default, to deliver to the Trustee a statement specifying such Default or
Event of Default.
13. SUBORDINATION. The Securities are subordinated to Senior Debt
of the Company and the Subsidiary Guarantees are subordinated to Guarantor
Senior Debt of the Subsidiary Guarantors. To the extent provided in the
Indenture, Senior Debt must be paid before the Securities may be paid and
Guarantor Senior Debt of a Subsidiary Guarantor must be paid before a
Subsidiary Guarantor may pay under its Subsidiary Guarantee. The Company
agrees, and each Holder by accepting a Security agrees, that the Indebtedness
evidenced by the Securities, including, but not limited to, the payment of
principal of, premium, if any, and interest on the Securities, and any other
payment Obligation of the Company in respect of the Securities and the
obligations of each Subsidiary Guarantor under its Subsidiary Guarantee are
subordinated in right of payment, to the extent and in the manner provided in
the Indenture, to the prior payment in full in cash of all Senior Debt of the
Company and, in the case of a Subsidiary Guarantor, all Guarantor Senior Debt
of such Subsidiary Guarantor (whether outstanding on the date hereof or
hereafter created, incurred, assumed or guaranteed) and authorizes the
Trustee to give effect and appoints the Trustee as attorney-in-fact for such
purpose.
14. TRUSTEE DEALINGS WITH COMPANY. The Indenture contains certain
limitations on the rights of the Trustee, should it become a creditor of the
Company, to obtain payment of claims in certain cases, or to realize on
certain property received in respect of any such claim as security or
otherwise. The Trustee will be permitted to engage in other transactions;
however, if it acquires any conflicting interest it must eliminate such
conflict within 90 days, apply to the Commission for permission to continue
or resign.
15. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or stockholder of the Company, as such, shall have any liability
for any obligations of the Company under the Securities or the Indenture or
for any claim based on, in
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<PAGE>
respect of, or by reason of, such obligations or their creation. Each Holder
of Securities, by accepting a Security, waives and releases all such
liability. The waiver and release are part of the consideration for issuance
of the Securities. Such waiver may not be effective to waive liabilities
under the federal securities laws and it is the view of the Commission that
such a waiver is against public policy.
16. AUTHENTICATION. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A
(= Uniform Gifts to Minors Act).
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Securities and the Trustee may use
CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed
on the Securities or as contained in any notice of redemption and reliance
may be placed only on the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
Continental Resources, Inc.
302 North Independence, 3rd Floor
P.O. Box 1032
Enid, OK 73702
Telecopier No.: (580) 548-5281
Attention: Roger Clement
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<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer
this Security on the books of the Company. The agent may
substitute another to act for him.
- ------------------------------------------------------------------------------
Date: Your Signature:
----------------------- -----------------------------
Signature Guarantee:(*)
----------------------------------------
(Signature must be guaranteed)
- ------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
In connection with any transfer or exchange of any of the Securities
evidenced by this certificate occurring prior to the date that is two years
after the later of the date of original issuance of such Securities and the
last date, if any, on which such Securities were owned by the Company or any
Affiliate of the Company, the undersigned confirms that such Securities are
being:
CHECK ONE BOX BELOW:
1/ /10 acquired for the undersigned's own account, without transfer (in
satisfaction of Section 2.6(a)(ii)(A) or Section 2.6(d)(i)(A) of
the Indenture); or
2/ /11 transferred to the Company; or
3/ /12 transferred pursuant to and in compliance with Rule 144A under
the Securities Act of 1933; or
4/ /13 transferred pursuant to an effective registration statement under
the Securities Act; or
5/ /14 transferred pursuant to and in compliance with Regulation S under
the Securities Act of 1933, with transferee furnishing to the
Trustee a signed
- --------------------
(*)/ Participant in a recognized Signature Guarantee Medallion Program (or
other signature guarantor acceptable to the Trustee).
B-11
<PAGE>
letter containing certain representations and agreements (the
form of which letter substantially appears in Section 2.14 of the
Indenture); or
6/ /15 transferred to an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of
1933), that has furnished to the Trustee a signed letter
containing certain representations and agreements (the form of
which letter appears in Section 2.13 of the Indenture); or
7/ /16 transferred pursuant to another available exemption from the
registration requirements of the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any
of the Securities evidenced by this certificate in the name of any Person
other than the registered holder thereof; PROVIDED, HOWEVER, that if box (5),
(6) or (7) is checked, the Trustee or the Company may require, prior to
registering any such transfer of the Securities, in their sole discretion,
such legal opinions, certifications and other information as the Trustee or
the Company may reasonably request to confirm that such transfer is being
made pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933, such as the
exemption provided by Rule 144 under such Act.
---------------------------------------
Signature
Signature Guarantee:(*)
- -------------------------------- ---------------------------------------
(Signature must be guaranteed) Signature
- ------------------------------------------------------------------------------
- ---------------
(*)/ Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
B-12
<PAGE>
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security
have been made:
<TABLE>
<CAPTION>
Amount of decrease in Amount of increase in Principal Amount of Signature of
Date of Principal Amount of Principal Amount of this Global Security authorized officer of
Exchange this Global Security this Global Security following such Trustee or Note
decrease or increase Custodian
<S> <C> <C> <C> <C>
</TABLE>
B-13
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.10 or 4.13 of the Indenture, check the box below:
/ /17 Section 4.10 / /18 Section 4.13
If you want to elect to have only part of the Security purchased by
the Company pursuant to Section 4.10 or Section 4.13 of the Indenture, state
the principal amount you elect to have purchased: $______________
Date: Your Signature:
-------------------- ---------------------------
(Sign exactly as your name
appears on the face of this
Security)
Signature Guarantee:(*)
-------------------
________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
B-14
<PAGE>
EXHIBIT C
FORM OF SUBSIDIARY GUARANTEE
This Supplemental Indenture, dated as of [__________] (this
"Supplemental Indenture" or "Guarantee"), among [name of future Subsidiary
Guarantor] (the "Guarantor"), Continental Resources, Inc. (together with its
successors and assigns, the "Company"), each other then existing Subsidiary
Guarantor under the Indenture referred to below, and United States Trust
Company of New York as Trustee under the Indenture referred to below.
W I T N E S S E T H:
WHEREAS, the Company and the Trustee have heretofore executed and
delivered an Indenture, dated as of July 24, 1998 (as amended, supplemented,
waived or otherwise modified, the "INDENTURE"), providing for the issuance of
an aggregate principal amount of $150.0 million of 10 1/4% Senior Subordinated
Notes due 2008 of the Company (the "Securities";
WHEREAS, Section 4.14 of the Indenture provides that the Company is
required to cause each Restricted Subsidiary acquired or created by the
Company or any Restricted Subsidiary to execute and deliver to the Trustee a
Subsidiary Guarantee pursuant to which such Subsidiary Guarantor will
unconditionally guarantee, jointly and severally with the other Subsidiary
Guarantors, the full and prompt payment of the Securities pursuant to Article
11 of the Indenture subject to the subordination provisions of Article 10 of
the Indenture; and
WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee and
the Company are authorized to execute and deliver this Supplemental Indenture
to amend the Indenture, without the consent of any Securityholder;
NOW, THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the Guarantor, the Company, the other Subsidiary Guarantors and the Trustee
mutually covenant and agree for the equal and ratable benefit of the holders
of the Securities as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINED TERMS. As used in this Subsidiary Guarantee,
terms defined in the Indenture or in the preamble or recital hereto are used
herein as therein defined, except that the term "Holders" in this Guarantee
shall refer to the term "Holders" as defined in the Indenture and the Trustee
acting on behalf or for the benefit of such holders. The words "herein,"
"hereof" and "hereby" and other words of similar import used in this
Supplemental Indenture refer to this Supplemental Indenture
C-1
<PAGE>
as a whole and not to any particular section hereof.
ARTICLE 2
AGREEMENT TO BE BOUND; GUARANTEE
SECTION 2.1 AGREEMENT TO BE BOUND. The Guarantor hereby becomes a
party to the Indenture as a Subsidiary Guarantor and as such will have all of
the rights and be subject to all of the obligations and agreements of a
Subsidiary Guarantor under the Indenture. The Guarantor agrees to be bound
by all of the provisions of the Indenture applicable to a Subsidiary
Guarantor and to perform all of the obligations and agreements of a
Subsidiary Guarantor under the Indenture.
SECTION 2.2 GUARANTEE. (a) The Guarantor hereby jointly and
severally, unconditionally guarantees to each Holder of a Security
authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, irrespective of the validity and enforceability of
the Indenture, the Securities or the obligations of the Company thereunder,
that: (a) the principal of and premium and interest, on the Securities shall
be promptly paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue principal of and
interest on premium and interest, on the Securities, if any, if lawful, and
all other obligations of the Company to the Holders or the Trustee thereunder
shall be promptly paid in full or performed, all in accordance with the terms
thereof; and (b) in case of any extension of time of payment or renewal of
any Securities or any of such other obligations, that the same shall be
promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, whether at stated maturity, by acceleration or
otherwise in accordance with the provisions of Article 11 of the Indenture.
(b) The Guarantor agrees that the Indebtedness evidenced by its
Subsidiary Guarantee shall be subordinated in right of payment, to the extent
and in the manner provided in Article 10 of the Indenture, to the prior
payment when due in cash or Cash Equivalents of all Guarantor Senior Debt of
the Guarantor and that the subordination is for the benefit of and
enforceable by the holders of Guarantor Senior Debt of the Guarantor.
ARTICLE 3
MISCELLANEOUS
SECTION 3.1 NOTICES. All notices and other communications to the
Guarantor shall be given as provided in the Indenture to the Guarantor, at
its address set forth below, with a copy to the Company as provided in the
Indenture for notices to the Company.
SECTION 3.2 PARTIES. Nothing expressed or mentioned herein is
intended or shall be construed to give any Person, firm or corporation, other
than the Holders and the Trustee and the
C-2
<PAGE>
holders of any Guarantor Senior Indebtedness, any legal or equitable right,
remedy or claim under or in respect of this Supplemental Indenture or the
Indenture or any provision herein or therein contained.
SECTION 3.3 GOVERNING LAW. This Supplemental Indenture shall be
governed by the laws of the State of New York.
SECTION 3.4 SEVERABILITY CLAUSE. In case any provision in this
Supplemental Indenture shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby and such provision shall be
ineffective only to the extent of such invalidity, illegality or
unenforceability.
SECTION 3.5 RATIFICATION OF INDENTURE; SUPPLEMENTAL INDENTURES
PART OF INDENTURE. Except as expressly amended hereby, the Indenture is in
all respects ratified and confirmed and all the terms, conditions and
provisions thereof shall remain in full force and effect. This Supplemental
Indenture shall form a part of the Indenture for all purposes, and every
holder of Securities heretofore or hereafter authenticated and delivered
shall be bound hereby. The Trustee makes no representation or warranty as to
the validity or sufficiency of this Supplemental Indenture.
SECTION 3.6 COUNTERPARTS. The parties hereto may sign one or more
copies of this Supplemental Indenture in counterparts, all of which together
shall constitute one and the same agreement.
SECTION 3.7 HEADINGS. The headings of the Articles and the
sections in this Guarantee are for convenience of reference only and shall
not be deemed to alter or affect the meaning or interpretation of any
provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed as of the date first above written.
[NAME OF GUARANTOR],
as a Subsidiary Guarantor
By:
------------------------------------
Name:
Title:
C-3
<PAGE>
CONTINENTAL RESOURCES, INC.
By:
------------------------------------
Name:
Title:
CONTINENTAL GAS
as a Subsidiary Guarantor
By:
------------------------------------
Name:
Title:
CONTINENTAL CRUDE CO.
as a Subsidiary Guarantor
By:
------------------------------------
Name:
Title:
[Add signature block for any other
existing Subsidiary Guarantors]
UNITED STATES TRUST COMPANY OF NEW YORK
By:
------------------------------------
Name:
Title:
C-4
<PAGE>
EXECUTION COPY
- --------------------------------------------------------------------------------
CONTINENTAL RESOURCES, INC.
As Issuer
CONTINENTAL GAS, INC.
CONTINENTAL CRUDE CO.
As Subsidiary Guarantors
10 1/4% SENIOR SUBORDINATED NOTES DUE 2008
-------------------
INDENTURE
Dated as of July 24, 1998
-------------------
UNITED STATES TRUST COMPANY OF NEW YORK
As Trustee
-------------------
- --------------------------------------------------------------------------------
C-5
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- ---------
<S> <C>
310 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311 (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312 (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.3
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.3
313 (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.7
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6; 12.2
(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
314 (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3; 12.2
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.4
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.4
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.3-10.5
(e). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.5
(f). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315 (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5; 12.2
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1
(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1
(e). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316 (a)(last sentence) . . . . . . . . . . . . . . . . . . . . . . . . 2.9
(a)(1)(A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5
(a)(1)(B). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.12
317 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.8
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
318 (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.1
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.1
</TABLE>
_____________
N.A. means not applicable.
* This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE. . . . . . . . . . . . . . . . 1
Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Other Definitions . . . . . . . . . . . . . . . . . . . 23
Section 1.3. Incorporation By Reference of Trust Indenture Act . . . 24
Section 1.4. Rules of Construction . . . . . . . . . . . . . . . . . 25
ARTICLE 2
THE SECURITIES. . . . . . . . . . . . . . . . 26
Section 2.1. Form, Dating and Terms. . . . . . . . . . . . . . . . . 26
Section 2.2. Execution and Authentication. . . . . . . . . . . . . . 32
Section 2.3. Registrar and Paying Agent. . . . . . . . . . . . . . . 33
Section 2.4. Paying Agent to Hold Money in Trust . . . . . . . . . . 34
Section 2.5. Holder Lists. . . . . . . . . . . . . . . . . . . . . . 34
Section 2.6. Transfer and Exchange . . . . . . . . . . . . . . . . . 35
Section 2.7. Replacement Securities. . . . . . . . . . . . . . . . . 38
Section 2.8. Outstanding Securities. . . . . . . . . . . . . . . . . 39
Section 2.9. Temporary Securities. . . . . . . . . . . . . . . . . . 39
Section 2.10. CUSIP Number. . . . . . . . . . . . . . . . . . . . . . 39
Section 2.11. Cancellation. . . . . . . . . . . . . . . . . . . . . . 40
Section 2.12. Defaulted Interest. . . . . . . . . . . . . . . . . . . 40
SECTION 2.13. Form of Certificate to be Delivered in Connection
with Transfers to Institutional Accredited Investors. . 41
SECTION 2.14. Form of Certificate to be Delivered in Connection
with Transfers Pursuant to Regulations. . . . . . . . . 42
SECTION 2.15. Computation of Interest . . . . . . . . . . . . . . . . 43
ARTICLE 3
REDEMPTION AND PREPAYMENT . . . . . . . . . . . . . . 44
Section 3.1. Notices to Trustee. . . . . . . . . . . . . . . . . . . . 44
Section 3.2. Selection of Securities to Be Redeemed. . . . . . . . . . 44
Section 3.3. Notice of Redemption. . . . . . . . . . . . . . . . . . . 45
Section 3.4. Effect of Notice of Redemption. . . . . . . . . . . . . . 46
Section 3.5. Deposit of Redemption Price . . . . . . . . . . . . . . . 46
Section 3.6. Securities Redeemed in Part . . . . . . . . . . . . . . . 46
Section 3.7. Optional Redemption . . . . . . . . . . . . . . . . . . . 46
Section 3.8. Mandatory Redemption. . . . . . . . . . . . . . . . . . . 48
Section 3.9. Offer to Purchase By Application of Excess Proceeds . . . 48
ARTICLE 4
COVENANTS . . . . . . . . . . . . . . . . . . 50
Section 4.1. Payment of Securities. . . . . . . . . . . . . . . . . . . 50
Section 4.2. Maintenance of Office or Agency. . . . . . . . . . . . . . 51
Section 4.3. Commission Reports . . . . . . . . . . . . . . . . . . . . 51
Section 4.4. Compliance Certificate . . . . . . . . . . . . . . . . . . 52
Section 4.5. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 4.6. Stay, Extension and Usury Laws . . . . . . . . . . . . . . 53
Section 4.7. Restricted Payments. . . . . . . . . . . . . . . . . . . . 53
Section 4.8. Dividend and Other Payment Restrictions Affecting
-i-
<PAGE>
Page
----
Restricted Subsidiaries. . . . . . . . . . . . . . . . . . 56
Section 4.9. Incurrence of Indebtedness and Issuance of
Disqualified Stock . . . . . . . . . . . . . . . . . . . . 57
Section 4.10. Asset Sales. . . . . . . . . . . . . . . . . . . . . . . . 59
Section 4.11. Transactions with Affiliates . . . . . . . . . . . . . . . 61
Section 4.12. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 4.13. Offer to Repurchase Upon Change of Control . . . . . . . . 62
Section 4.14. Additional Subsidiary Guarantees . . . . . . . . . . . . . 64
Section 4.15. Corporate Existence. . . . . . . . . . . . . . . . . . . . 64
Section 4.16. No Layering. . . . . . . . . . . . . . . . . . . . . . . . 64
Section 4.17. Business Activities. . . . . . . . . . . . . . . . . . . . 65
Section 4.18. Sale and Leaseback Transactions . . . . . . . . . . . . . 65
Section 4.19. Designation of Unrestricted Subsidiaries . . . . . . . . . 65
ARTICLE 5
SUCCESSORS. . . . . . . . . . . . . . . . . . 66
Section 5.1. Merger, Consolidation, or Sale of Substantially All
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 5.2. Successor Corporation Substituted; Subsidiary
Guarantors Confirmed . . . . . . . . . . . . . . . . . . . 67
ARTICLE 6
DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . 67
Section 6.1. Events of Default. . . . . . . . . . . . . . . . . . . . . 67
Section 6.2. Acceleration . . . . . . . . . . . . . . . . . . . . . . . 70
Section 6.3. Other Remedies . . . . . . . . . . . . . . . . . . . . . . 70
Section 6.4. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . 71
Section 6.5. Control by Majority. . . . . . . . . . . . . . . . . . . . 71
Section 6.6. Limitation on Suits. . . . . . . . . . . . . . . . . . . . 71
Section 6.7. Rights of Holders of Securities to Receive Payment . . . . 72
Section 6.8. Collection Suit by Trustee . . . . . . . . . . . . . . . . 72
Section 6.9. Trustee May File Proofs of Claim . . . . . . . . . . . . . 72
Section 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 6.11. Undertaking for Costs. . . . . . . . . . . . . . . . . . . 74
Section 6.12. Restoration of Rights and Remedies . . . . . . . . . . . . 74
ARTICLE 7
TRUSTEE. . . . . . . . . . . . . . . . . . . 74
Section 7.1. Duties of Trustee. . . . . . . . . . . . . . . . . . . . . 74
Section 7.2. Rights of Trustee. . . . . . . . . . . . . . . . . . . . . 76
Section 7.3. Individual Rights of Trustee . . . . . . . . . . . . . . . 77
Section 7.4. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . 77
Section 7.5. Notice of Defaults . . . . . . . . . . . . . . . . . . . . 77
Section 7.6. Reports by Trustee to Holders of the Securities. . . . . . 78
Section 7.7. Compensation and Indemnity . . . . . . . . . . . . . . . . 78
Section 7.8. Replacement of Trustee . . . . . . . . . . . . . . . . . . 79
Section 7.9. Successor Trustee by Merger, etc . . . . . . . . . . . . . 80
Section 7.10. Eligibility; Disqualification. . . . . . . . . . . . . . . 81
Section 7.11. Preferential Collection of Claims Against Company. . . . . 81
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE. . . . . . . . . . 81
Section 8.1. Option to Effect Legal Defeasance or Covenant Defeasance. . 81
Section 8.2. Legal Defeasance and Discharge. . . . . . . . . . . . . . . 81
-ii-
<PAGE>
Page
----
Section 8.3. Covenant Defeasance . . . . . . . . . . . . . . . . . . . . 82
Section 8.4. Conditions to Legal or Covenant Defeasance. . . . . . . . . 83
Section 8.5. Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions . . . . . . . . . . . 84
Section 8.6. Repayment to Company. . . . . . . . . . . . . . . . . . . . 85
Section 8.7. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . 85
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER. . . . . . . . . . . . . . 86
Section 9.1. Without Consent of Holders of Securities. . . . . . . . . . 86
Section 9.2. With Consent of Holders of Securities . . . . . . . . . . . 87
Section 9.3. Compliance with Trust Indenture Act . . . . . . . . . . . . 89
Section 9.4. Revocation and Effect of Consents . . . . . . . . . . . . . 89
Section 9.5. Notation on or Exchange of Securities . . . . . . . . . . . 89
Section 9.6. Trustee to Sign Amendment, etc. . . . . . . . . . . . . . . 89
ARTICLE 10
SUBORDINATION. . . . . . . . . . . . . . . . . . 90
Section 10.1. Agreement to Subordinate. . . . . . . . . . . . . . . . . . 90
Section 10.2. Certain Definitions . . . . . . . . . . . . . . . . . . . . 90
Section 10.3. Liquidation; Dissolution; Bankruptcy. . . . . . . . . . . . 91
Section 10.4. Default on Designated Senior Debt . . . . . . . . . . . . . 94
Section 10.5. Acceleration of Securities. . . . . . . . . . . . . . . . . 95
Section 10.6. When Distribution Must Be Paid Over . . . . . . . . . . . . 95
Section 10.7. Notice by Company . . . . . . . . . . . . . . . . . . . . . 96
Section 10.8. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 10.9. Relative Rights . . . . . . . . . . . . . . . . . . . . . . 96
Section 10.10. Subordination May Not Be Impaired by Company or the
Subsidiary Guarantors . . . . . . . . . . . . . . . . . . . 97
Section 10.11. Payment, Distribution or Notice to Representative . . . . . 97
Section 10.12. Rights of Trustee and Paying Agent. . . . . . . . . . . . . 98
Section 10.13. Authorization to Effect Subordination . . . . . . . . . . . 98
Section 10.14. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . 99
Section 10.15. No Waiver of Subordination Provisions . . . . . . . . . . . 99
ARTICLE 11
THE SUBSIDIARY GUARANTEES. . . . . . . . . . . . . . . 99
Section 11.1. The Subsidiary Guarantees . . . . . . . . . . . . . . . . . 99
Section 11.2. Subordination of Subsidiary Guarantees. . . . . . . . . . . 101
Section 11.3. Subsidiary Guarantors May Consolidate, etc., on Certain
Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Section 11.4. Releases of Subsidiary Guarantees . . . . . . . . . . . . . 102
Section 11.5. Limitation on Subsidiary Guarantor Liability. . . . . . . . 103
Section 11.6. "Trustee" to Include Paying Agent . . . . . . . . . . . . . 103
ARTICLE 12
MISCELLANEOUS. . . . . . . . . . . . . . . . . . 104
Section 12.1. Trust Indenture Act Controls. . . . . . . . . . . . . . . . 104
Section 12.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Section 12.3. Communication by Holders of Securities with Other Holders
of Securities. . . . . . . . . . . . . . . . . . . . . . . 105
Section 12.4. Certificate and Opinion as to Conditions Precedent. . . . . 105
Section 12.5. Statements Required in Certificate or Opinion . . . . . . . 106
Section 12.6. Rules by Trustee and Agents . . . . . . . . . . . . . . . . 106
Section 12.7. No Personal Liability of Directors, Officers,
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Page
----
Employees and Stockholders. . . . . . . . . . . . . . . . . 106
Section 12.8. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 107
Section 12.9. No Adverse Interpretation of Other Agreements . . . . . . . 107
Section 12.10. Successors. . . . . . . . . . . . . . . . . . . . . . . . . 107
Section 12.11. Severability. . . . . . . . . . . . . . . . . . . . . . . . 107
Section 12.12. Counterpart Originals . . . . . . . . . . . . . . . . . . . 107
Section 12.13. Table of Contents, Headings, Etc. . . . . . . . . . . . . . 107
</TABLE>
EXHIBITS
Exhibit A FORM OF INITIAL SECURITY
Exhibit B FORM OF EXCHANGE SECURITY
EXHIBIT C FORM OF SUBSIDIARY GUARANTEE
-iv-
<PAGE>
PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
BASS ENTERPRISES PRODUCTION CO., ET AL
AS SELLERS
AND
CONTINENTAL RESOURCES, INC.
AS BUYER
DATED MARCH 28, 1998
<PAGE>
<TABLE>
TABLE OF CONTENTS PAGE
<S> <C>
1. Property to be Sold and Purchased . . . . . . . . . . . . 1
2. Purchase Price. . . . . . . . . . . . . . . . . . . . . . 2
3. Deposit . . . . . . . . . . . . . . . . . . . . . . . . . 2
4. Allocation of Base Purchase Price . . . . . . . . . . . . 2
5. Seller's Representations . . . . . . . . . . . . . . . . 2
6. Buyer's Representations . . . . . . . . . . . . . . . . . 3
7. Covenants of Seller and Buyer Pending Closing . . . . . . 4
8. Due Diligence Reviews . . . . . . . . . . . . . . . . . . 6
9. Adverse Environmental Conditions. . . . . . . . . . . . . 8
10. Disposal of Materials, Substances, and Wastes;
Compliance with Law . . . . . . . . . . . . . . . . . . 10
11. Certain Price Adjustments to the Base Purchase Price . . 11
12. Conditions Precedent to Buyer's Obligations . . . . . . . 12
13. Conditions Precedent to Seller's Obligations . . . . . . 13
14. The Closing . . . . . . . . . . . . . . . . . . . . . . . 13
15. After Closing . . . . . . . . . . . . . . . . . . . . . . 15
16. Certain Accounting Adjustments to the Purchase Price . . 16
17. Assumption and Indemnification. . . . . . . . . . . . . . 18
18. Environmental Assessment and Indemnification by Buyer . . 19
19. Disclaimer of Warranties. . . . . . . . . . . . . . . . . 19
20. Buyer's Covenant Not to Sue Seller Group . . . . . . . . 20
21. Commissions . . . . . . . . . . . . . . . . . . . . . . . 20
22. Casualty Loss . . . . . . . . . . . . . . . . . . . . . . 20
23. Notices . . . . . . . . . . . . . . . . . . . . . . . . . 20
24. Survival of Provisions. . . . . . . . . . . . . . . . . . 20
25. Miscellaneous Matters . . . . . . . . . . . . . . . . . . 21
</TABLE>
Exhibit A - Oil and Gas Leases
Exhibit B - Wells
Exhibit C - Assignment and Bill of Sale
Exhibit D - Suits, Actions, or other Legal Proceedings Pending
Exhibit E - Allocation of Values
<PAGE>
PURCHASE AND SALE AGREEMENT
This Agreement, dated March 28, 1998, is made by and between the
signatory parties shown below under "Sellers" whose address is 201 Main
Street, Fort Worth, Texas 76102 (hereinafter collectively called "Seller")
and Continental Resources, Inc., whose address is P.O. Box 1032, Enid,
Oklahoma 73702 (hereinafter called Buyer");
W I T N E S S E T H:
WHEREAS, Buyer desires to purchase the Properties, as defined below,
from Seller, and Seller desires to sell the same Properties to Buyer, subject
to the terms and conditions of this Agreement.
WHEREAS, It is the parties' intent that Buyer assume all responsibility
and liability as provided herein for all matters relating to the Properties
to be assigned.
NOW, THEREFORE, In consideration of the mutual promises made herein and
the benefits to be derived hereunder, and other good and valuable
consideration, the sufficiency of which is hereby acknowledged, Seller and
Buyer agree as follows:
1. PROPERTY TO BE SOLD AND PURCHASED. Seller agrees to sell, and
Buyer agrees to purchase, for the consideration herein set forth, and subject
to the terms and provisions herein contained, the following described
Properties, rights, and interests:
(a) All rights, titles, and interests of Seller in and to: 1) the
oil, gas, and mineral leases described in Exhibit A hereto; and 2) the
wells described in Exhibit B hereto;
(b) All rights, titles, and interests of Seller 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 authority having jurisdiction, and voluntary
unitization agreements, designations, and declarations) relating to
the properties described in subsection 1.(a) to the extent such
rights, titles, and interests are attributable to the properties
described in subsection 1.(a);
(c) All rights, titles, and interests of Seller 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 1.a. and 1.b., to the extent
such rights, titles, and interests are assignable and attributable to
the properties described in subsections 1.(a) and 1.(b);
(d) All rights, titles, and interests of Seller in and to all
rights-of-way, easements, surface leases, permits, and licenses
appurtenant to the properties described in subsections 1.(a) and
1.(b); and
(e) All rights, titles, and interests of Seller in and to all
materials, supplies, machinery, equipment, improvements, and other
personal property and fixtures (including, but not limited to,
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 1.(a) and 1.(b) and used in
connection with the exploration, development, operation, or
maintenance thereof.
The properties and interests specified in subsections 1.(a), 1.(b), 1.(c),
1.(d) and 1.(e) are herein sometimes collectively called the "Properties".
The defined term "Properties" shall include seismic data, geological or
geophysical data, including interpretations, environmental studies, or other
similar data, or any interpretations thereof or other data or records related
thereto. Seller shall provide Buyer with such data Seller has in its files,
excluding any interpretations, engineering
1
<PAGE>
reports and evaluations, Seller financial information and all data which
Seller considers proprietary or confidential or that Seller cannot provide to
Buyer without breaching, or risking a breach of, an agreement with a third
party.
2. PURCHASE PRICE. The unadjusted purchase price for the Properties
shall be Eighty Six Million Five Hundred Thousand Dollars ($86,500,000.00),
payable in United States dollars, (herein called the "Base Purchase Price").
The Base Purchase Price may be adjusted, as provided in Sections 7.(c), 11.
and 16. hereof. The Base Purchase Price, as so adjusted and as otherwise
adjusted by mutual agreement of the parties herein, shall be called the
"Purchase Price."
3. DEPOSIT. Upon entering into this Agreement, as evidence of good
faith, Buyer shall pay to Seller Eight Million Six Hundred Fifty Thousand
Dollars ($8,650,000.00) hereinafter called the "Deposit". If Buyer and
Seller consummate the transaction contemplated hereby in accordance with the
terms hereof, the Deposit shall be applied to the Base Purchase Price. If
Buyer and Seller do not consummate the transaction contemplated hereby
because of a material default by Seller, in the absence of a default by
Buyer, Seller shall return the Deposit to Buyer and shall, in addition, pay
to Buyer the sum of Two Million Five Hundred Thousand Dollars ($2,500,000.00)
as liquidated damages and not as a penalty. Except as provided in Section
12., if Buyer fails or refuses to consummate the transaction contemplated
hereby, Seller shall retain the Deposit as liquidated damages and not as a
penalty. Buyer stipulates that Seller's damages in the event of Buyer's
wrongful failure to close would be uncertain and that the amount of
liquidated damages provided herein is reasonable. Forfeiture of the Deposit
as liquidated damages as provided herein shall be Seller's sole remedy at law
or in equity for Buyer's failure to close as provided in this Agreement. In
no event shall the Deposit accrue interest.
4. ALLOCATION OF BASE PURCHASE PRICE. Buyer has allocated the Base
Purchase Price to the Properties by various categories. These categories and
the allocations thereto are shown on Exhibit E and have been made in good
faith by Buyer and may be relied upon by Seller for all purposes of this
Agreement.
5. SELLER'S REPRESENTATIONS. Each of the individuals and entities
comprising Seller represent to Buyer that:
(a) Each (other than natural persons) is a legal entity duly
organized and legally existing under the laws of the State of Texas.
Each corporation and limited partnership is qualified to do business
in Wyoming and is in good standing, or will be at Closing.
(b) Each has full power to enter into this Agreement and perform its
obligations hereunder and has taken all necessary action to enter into
this Agreement and perform its obligations hereunder.
(c) Execution and delivery of this Agreement, the consummation of the
transaction contemplated hereby, and compliance with the terms hereof,
will not result in any default under any agreement or instrument to
which Seller, or any individual party thereof, is a party or by which
the Properties are bound that would be material to this transaction.
Execution and delivery of this Agreement will not violate any
contractual provision, order, writ, injunction, decree, statute, rule,
or regulation applicable to Seller, or any individual party thereof,
or to the Properties that would be material to this transaction,
except the following:
(i) Any 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 "HSR Act"); and,
2
<PAGE>
(iii) Any approvals that must be obtained from governmental entities
who are lessors under leases included in the Properties (or who
administer such leases for such lessors) and that are customarily
obtained post-closing.
(d) This Agreement and the Assignment and Bill of Sale provided for
in Section 14.(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 in 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 affect the execution and delivery of this Agreement or
the consummation of the transaction contemplated hereby.
6. 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 in Wyoming and is in good standing, or will be at Closing.
(b) Buyer has full power and ability to enter into and perform its
obligations under this Agreement (including, but not limited to the
payment of the Purchase Price at Closing) and has taken all necessary
action to enter into this Agreement and perform its obligations
hereunder.
(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 any default under
any agreement or instrument to which Buyer is a party or by which the
Properties are bound that would be material to this transaction.
Buyer's execution and delivery of this Agreement will not violate any
contractual provision, order, writ, injunction, decree, statute, rule,
or regulation applicable to Buyer or to the Properties that would be
material to this transaction, except the following:
(i) Any waivers of preferential rights to purchase that must be
obtained from third parties;
(ii) Compliance with the "HSR Act;" and,
(iii) Any approvals that must be obtained from governmental
entities who are lessors under leases included in the Properties
(or who administer such leases for such lessors) and that are
customarily obtained post-closing.
(d) This Agreement and the Assignment and Bill of Sale provided for
in Section 14.(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 in
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
3
<PAGE>
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) Buyer wishes to replace Seller as operator in every well
described on Exhibit B which Seller presently operates. Accordingly,
Buyer is, or will become, qualified to operate such Properties under
the applicable laws, rules, and regulations of the jurisdiction in
which such Properties are located.
7. COVENANTS OF SELLER AND BUYER PENDING CLOSING. Between the date of
this Agreement and the Closing Date:
(a) Seller shall permit Buyer access as follows:
(i) Seller shall give Buyer and its attorneys and other
representatives, who have a legitimate need to know, access at
all reasonable times during normal business hours to the
Properties and, at Seller's office, to Seller's records
(including, without limitation, title files, division order
files, well files, production records, equipment inventories, and
production severance, and ad valorem tax records) pertaining to
the ownership and operation of the Properties, to conduct due
diligence reviews as contemplated by Section 8. below. Buyer may
make copies of such records at its expense but shall, if Seller
so requests, return all copies so made if the Closing does not
occur. 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
breaching, or risking a breach of, confidentiality agreements
with other parties. Until Closing, all records and data provided
shall be subject to the previously executed Confidentiality
Agreement between Buyer and Seller. SELLER MAKES NO WARRANTY, AND
EXPRESSLY DISCLAIMS ALL WARRANTIES, AS TO THE ACCURACY OR
COMPLETENESS OF THE FILES AND OTHER INFORMATION THAT IT MAY
PROVIDE TO BUYER OR THAT MAY BE PROVIDED BY OTHERS.
(ii) Seller shall make a good faith effort to give Buyer, or
Buyer's authorized representatives, who have a legitimate need to
know, at reasonable times and upon adequate notice to Seller,
physical access to the Properties for the purpose of inspecting
same. Buyer recognizes that some of the Properties are operated
by third parties and that Seller's ability to obtain access to
such Properties, and the manner and extent of such access, is
subject to the consent of such third parties. Buyer agrees to
comply fully with the rules, regulations, and any instructions
issued by Seller or third party (where a Property is operated by
such third party) regarding the actions of Buyer while upon,
entering, or leaving the Properties.
(iii) If Buyer exercises rights of access under this Section or
otherwise, or conducts examinations or inspections under this
Section or otherwise, then (a) Buyer will be accompanied by
Seller's representative at all times; (b) 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 (c) BUYER SHALL RELEASE, INDEMNIFY, DEFEND, AND
HOLD HARMLESS SELLER (AND
4
<PAGE>
ITS PARENT, SUBSIDIARY COMPANIES, AND OTHER AFFILIATES
AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
ATTORNEYS, CONTRACTORS, AND AGENTS) (HEREINAFTER COLLECTIVELY
REFERRED TO AS "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, EXAMINATION, AND INSPECTION. 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,
SIMPLE NEGLIGENCE, CONCURRENT NEGLIGENCE, ACTIVE OR PASSIVE
NEGLIGENCE, OR OTHERWISE, BUT EXPRESSLY NOT INCLUDING GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT) OF SELLER OR ANY OTHER
INDEMNIFIED PARTY, OR (ii) STRICT LIABILITY.
(b) Seller shall continue to conduct its business in its ordinary
course, and in accordance with all applicable ordinances, statutes,
rules, and regulations of all local, state, and federal governments.
Seller shall not enter into or assume any contract or commitment which
is not in the ordinary course of business as heretofore conducted in
association with the Properties and shall carry on its business and
operate the Properties as a reasonably prudent operator. Subject to
existing contractual obligations, Seller shall not conduct, or commit
to participate in, on behalf of Buyer, any operation on the
Properties, or lands pooled or unitized therewith and shall not enter
into a contract for the sale of crude oil from the Properties
continuing in effect past the Effective Date without Buyer's prior
written consent. However, Seller may take such steps and incur such
expenses as it deems necessary in its sole opinion to deal with an
emergency to safeguard any part of the Property without first
consulting with Buyer. As soon as possible after the emergency,
Seller shall advise Buyer of such emergency action. Except as set
forth in this Agreement, Seller shall not sell, assign, transfer,
mortgage, farmout, or otherwise dispose of, abandon, or encumber any
material portion of the Properties.
(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, (i) all preferential rights
to purchase that would apply to the transaction contemplated hereby
and (ii) 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. Seller shall have no obligation hereunder other
than to attempt to identify such preferential rights and to request
such waivers. Seller shall not be obligated to assure that such
waivers are obtained. Seller may tender to any party refusing to
waive such a preferential right the interest covered by such right at
a value as mutually agreed to by Buyer and Seller which shall be made
in good faith, but in no event shall the value of a well exceed the
value assigned to it by Ryder-Scott Company, an independent petroleum
reservoir engineering company, in its recent Reserve Report dated
January 14, 1998, prepared on behalf of Seller (hereinafter referred
to as the "Ryder-Scott Report") using the present value (future net
income before income taxes discounted at ten percent (10%)) of the
total proved reserves. If Buyer and Seller are unable to agree on a
value, the value for a well shall be determined as provided in Section
11.(a)(ii) using the V/T = PVW/PVC equation for Properties falling in
Categories A and B as shown on Exhibit E. This value shall be used in
determining the value of any
5
<PAGE>
interest in a well covered by a preferential right to purchase.
The value shall be determined using the formula as provided in
Section 11.(a)(iii) for Properties falling in Category C where
F=Seller's net acres subject to a preferential right to purchase.
To the extent that such an interest is actually sold to a party
exercising such a preferential right, it shall be excluded from
the transaction contemplated hereby, and the Base Purchase Price
shall be 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 necessary filings in connection
with the transaction contemplated by this Agreement under the HSR Act.
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 promptly make any appropriate or necessary
subsequent or supplemental filings, and shall furnish to Seller copies
of all filings made under the HSR Act at the same time they are filed
with the FTC. Seller shall cooperate with Buyer as to all filings
required by the HSR Act.
(e) After both parties have executed this Agreement, Seller shall
deliver to Buyer a copy of its "pay list" for each well listed on
Exhibit B (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 property); and, a list of all parties for whom it is holding
in suspense proceeds of production. Seller does not represent or
warrant to Buyer the accuracy of the "pay lists" so delivered.
(f) At such time that all Asserted Defects (as hereinafter defined)
have been fully resolved to the satisfaction of both Parties or if no
Defects have been asserted by Buyer as of the Defect Notice Date (as
hereinafter defined)upon Seller's receipt of Buyer's written
confirmation and assurance that all Defects, if any, have been
resolved and Buyer is prepared to close the transaction subject only
to Seller's performance of its closing obligations as set forth in
Section 14(a), Seller shall give Buyer and its accountants access to
any and all accounting information in Seller's possession reasonably
requested by Buyer for the preparation by Buyer, at its sole expense
and risk, of pro-forma financial statements reflecting the financial
performance of the Properties for the most recent three (3) calendar
year(s). Buyer agrees that none of the information compiled for the
purpose of this limited audit shall be used for the purpose of due
diligence by Buyer or otherwise to assert any claim against Seller.
Seller shall have no responsibility whatever for the financial
statements so prepared by Buyer.
8. DUE DILIGENCE REVIEWS.
(a) The term "Defect" as used in this Section shall mean any of the
following:
(i) As of the Effective Date, Seller's ownership of a well
listed on Exhibit B hereto either, (A) entitles Seller to receive
a share of the oil, gas, and other hydrocarbons produced from, or
allocated to, such well that is less than the share set forth on
Exhibit B for such well in the columns headed "Net Revenue
Interest (NRI)" and "Overriding Royalty Interest (ORI)",
excepting any decreases caused by an increase in the landowner's
royalty payable to the Federal and State Governments or pursuant
to contractual obligations, including, without limitation,
sliding scale overriding royalties, which are tied to amount of
production, or as mandated by Federal and State statutes or as
promulgated in the respective Federal and State Rules and
Regulations; or, (B) causes Seller to bear a share of the cost of
operating such well greater than the share set forth on Exhibit B
for such well in the column headed "Working Interest (WI)"
(without a proportionate increase in the share of
6
<PAGE>
production to which Seller is entitled from such well);
(ii) Seller's ownership of a Property 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, or (C) a lien under an
operating agreement or similar agreement, to the extent the same
relates to expenses incurred that are not yet due;
(iii) Seller's ownership of a Property is subject to a
preferential right to purchase, unless a waiver of such right has
been obtained with respect to the transaction contemplated hereby
or an appropriate tender of the applicable interest has been made
to the party holding such right and the period of time required
for such party to exercise such right has expired without such
party exercising such right;
(iv) Seller's ownership of a Property is subject to an
imperfection in title that, if asserted, would cause a Defect, as
defined in clause (i) above, to exist, and such imperfection in
title normally would not be waived by reasonable and prudent
persons engaged in the oil and gas business with knowledge of all
the facts and their legal bearing and would materially impair or
prevent Buyer from receiving payment from the purchasers of
production, and would prevent the economic benefit Buyer could
reasonably expect by acquiring the Properties;
(v) Seller's ownership of a non-producing Property is subject to
an imperfection in title that, if asserted, would cause Seller's
ownership as shown on Exhibit A to be less; and such imperfection
in title normally would not be waived by reasonable and prudent
persons engaged in the oil and gas business with knowledge of all
the facts and their legal bearing and would materially prevent
the economic benefit Buyer could reasonably expect by acquiring
such Property.
(b) Buyer may conduct, to the extent it deems appropriate and at its
sole risk and cost, such examinations and investigations as it may
choose with respect to the Properties in order to determine whether
"Defects" exist. Unless waived, Buyer shall notify Seller in writing
of such Defects as soon as they are identified, but no later than ten
(10) days prior to the date upon which Closing is scheduled to occur
pursuant to Section 14. [and not as extended pursuant to 14.(i) or
14.(ii)] (hereinafter "Defect Notice Date"). Those Defects identified
in such notice to Seller are herein called "Asserted Defects". Such
notification shall include a description of the Asserted Defect, the
lease(s) described on Exhibit A affected by such Asserted Defect, the
well(s) listed on Exhibit B to which the Asserted Defect relates, and
all supporting documentation reasonably necessary fully to describe in
detail the basis for the Asserted Defect; and, for each property,
lease and applicable well, the size of any variance from "Net Revenue
Interest (NRI)", "Overriding Royalty Interest (ORI)", or "Working
Interest (WI)" set forth in Exhibit B that does or could result from
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 timely 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 also 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, if Seller
desires additional time to attempt to cure (including determining 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 with respect to any Asserted Defect, to
indemnify and hold Buyer harmless from and against any actual damages
or loss (but specifically excluding consequential damages, special
damages, or similar damages) Buyer may suffer as a result of a third
party claim based on such Asserted Defect; provided,
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unless Buyer consents, Seller may not so elect to indemnify Buyer
in lieu of curing such Asserted Defect(s) if the amount attributable
to such Asserted Defect(s) exceeds One Million Dollars($1,000,000.00).
If Seller elects to indemnify Buyer as to an Asserted Defect, such
Asserted Defect will be treated under this Agreement as cured and, as
to such indemnified Asserted Defect, SELLER SHALL RELEASE, INDEMNIFY,
DEFEND, AND HOLD HARMLESS BUYER FROM AND AGAINST ANY AND ALL LOSS,
COST, DAMAGE, EXPENSE, OR LIABILITY WHATSOEVER, INCLUDING ATTORNEYS'
FEES, ARISING OUT OF THE ASSERTED DEFECT SELLER HAS ELECTED TO
INDEMNIFY (EXCEPT ANY CAUSED SOLELY BY THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF BUYER).
(c) Buyer shall have the right to make an environmental assessment of
the Properties during the period beginning on the date of execution of
this Agreement and ending on the Defect Notice Date. Subject to the
provisions regarding Buyer's rights to access under Section 7 hereof,
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 Buyer may deem necessary
or appropriate for the preparation of appropriate engineering and
other reports in relation to the Properties and their physical and
environmental condition. If Buyer proposes to undertake an
environmental assessment, Buyer's proposed plan, the consultants to be
used, and testing protocol must be approved by Seller before the work
may begin. Buyer agrees promptly to provide to Seller a copy of the
environmental assessment, including any reports, data, and
conclusions. Buyer shall keep all data and 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
ENVIRONMENTAL ASSESSMENT INCLUDING, BUT NOT LIMITED TO, INJURY TO OR
DEATH OF PERSONS OR DAMAGE TO PROPERTY OCCURRING IN, ON, OR ABOUT THE
PROPERTIES AS A RESULT OF SUCH ACTIVITIES (EXCEPT ANY SUCH INJURIES OR
DAMAGES CAUSED SOLELY BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
ANY MEMBER OF THE SELLER GROUP).
(d) 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.
9. ADVERSE ENVIRONMENTAL CONDITIONS.
Seller represents to Buyer that to the best of its knowledge there are
no environmental conditions, as hereinafter defined, existing as of
the date hereof which Seller has not disclosed to Buyer. Seller will
advise Buyer of any Condition that Seller becomes aware of from the
date hereof to the Closing Date.
(a) Buyer shall have until the Defect Notice Date to notify Seller of
any material adverse environmental condition of the Properties which
Buyer deems unacceptable and provide evidence of the condition to
Seller. An environmental condition is a material adverse
environmental condition ("Condition") only if the following criteria
are met:
(i) The environmental condition would have been required to be
remediated on the Effective Date under the Environmental Laws;
and,
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(ii) The total cost to remediate all environmental conditions
identified by Buyer affecting the Properties to the state
required by the Environmental Laws is reasonably estimated to be
at least $100,000.00.
(b) "Environmental Law" shall mean any federal, state, or local law,
rule, regulation, order, or ordinance in effect as of the Effective
Date of this Agreement pertaining to protecting the public health,
welfare, and the environment.
(c) At Closing, Seller may elect any of the following provided a
Condition exists:
(i) Decrease the Purchase Price by a mutually acceptable amount
reflecting Seller's proportionate share, based on its working
interest, of the cost reasonably estimated to remediate a
Condition affecting the Properties to such a state as required by
the Environmental Laws;
(ii) Remove the affected Properties from this Agreement and
adjust the Base Purchase Price by an amount mutually agreed to by
Seller and Buyer. If Buyer and Seller are unable to agree on an
amount, the value of Properties falling in Categories A and B
shall be determined as provided in Section 11.(a)(ii) using the
V/T = PVW/PVC equation and an appropriate adjustment will be made
using this value. The value of all affected Properties falling in
Category C shall be determined using the formula in Section
11.(a)(iii) where F=Seller's net acres affected by the Condition.
(iii) Remedy, or, if applicable, agree to indemnify, Buyer in
accordance with Section 8(b); the Condition, as provided below.
(d) If option (c)(i) above is chosen, Buyer shall be responsible for
any remediation and if the actual cost to remediate a Condition
exceeds the amount of the estimate, Buyer shall pay the additional
costs to remediate the Condition as required by applicable law.
(e) If option (c.)(iii). above is chosen, the following shall govern
the remediation:
(i) Seller shall be responsible for all negotiations and
contacts with federal, state, and local agencies and authorities
with regard to the Condition or remediation. Buyer shall not make
any independent contacts with any agency, authority, or other
third party with respect to the Condition or remediation and will
keep all information regarding the Condition and remediation
confidential, except in each instance to the extent required by
applicable law.
(ii) Seller shall remediate the Condition to the state agreed
upon by Seller and Buyer, but in no event will Seller be required
to remediate the Condition beyond the state required by the
Environmental Laws.
(iii) Buyer will grant and warrant access to the affected
Properties after Closing to Seller and third parties conducting
assessments or remediation, to the extent and as long as
necessary to conduct and complete the assessment or remediation
work, to remove equipment and facilities, and to perform any
other activities reasonably necessary in connection with
assessment or remediation.
(iv) Buyer will use its best efforts not to interfere with
Seller's ingress and egress or assessment or remediation
activities. Seller shall make reasonable
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efforts to perform the work so as to minimize disruption to
Buyer's business activities and to the Properties.
(v) Seller shall continue remediation of the Condition until the
first of the following occurs:
(1) The appropriate governmental authorities provide
written notice to Seller or Buyer that no further
remediation of the Condition is required;
(2) The parties agree that the Condition has been
remediated to the state required by the Environmental Laws
or as agreed by the parties.
Upon the occurrence of either (1) or (2) above, Seller shall
notify Buyer that remediation of the Condition is complete
and provide a copy of the notification described in (1)
above, if applicable. Upon delivery of Seller's notice,
Seller shall be released from all liability and have no
further obligations under any provisions of this Agreement
in connection with a Condition.
(vi) Until Seller completes remediation of a Condition, Seller
and Buyer will each notify the other of any pending or threatened
claim, action, or proceeding by any authority or private party
that relates to or would affect the environmental condition, the
assessment, or the remediation of the affected Properties.
(vii) After Buyer takes over as operator, and before Seller has
completed remediation of a Condition, if a leak, spill, or
discharge of any material or substance ("Occurrence") occurs on
the affected Properties, or any part of them, Buyer will promptly
notify Seller and act promptly to minimize the effects of the
Occurrence. If a spill, leak, or discharge occurs and Seller
determines that it may affect the area where Seller is conducting
remediation or assessment, Buyer will hire a consultant (who must
be acceptable to Seller) to assess the effect of the Occurrence
on the environmental condition of the affected Properties, and
the cost of Seller's remediation work and the cost of the
additional work required as the result of the Occurrence. Unless
the Occurrence was caused solely by Seller, Buyer will be
responsible for the incremental cost of remediating the impact of
the Occurrence. If Seller's remediation is expanded to
incorporate remediation of the Occurrence, Buyer will promptly
pay its share of costs and expenses to Seller as the work is
performed, within thirty (30) days of receipt of invoices for the
work (with supporting documentation). Payments not made timely
will bear interest at a rate of twelve percent (12%) per annum or
the maximum lawful rate, whichever is less, compounded daily from
the date of Buyer's receipt of the invoice until paid.
If the cost of the additional work equals or exceeds the cost to
complete the remediation which would have been incurred but for
the Occurrence, Seller will pay Buyer the cost that would have
been incurred by Seller to complete the remediation but for the
Occurrence. As consideration for this payment, Buyer will accept
the environmental condition of the affected Properties as they
exist on the date of the payment, assume full responsibility for
remediating the affected Properties and related off-site
contamination in accordance with this Agreement, and agrees to
release, not to sue, indemnify, hold harmless, and defend Seller
as to claims and liabilities arising from the Occurrence to the
same extent as described in Sections 17., 18., and 20.
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(viii) If Seller undertakes remediation as to any Properties in
which Seller's ownership was less than 100%, and provided that
the expense(s) incurred by Seller in such remediation are fair
and reasonable, Buyer will bill the other working interest owners
for their share of the remediation expenses. Regardless of
whether Buyer recoups any amount from the other working interest
owners, Buyer will refund to Seller, within sixty (60) days of
each Seller invoice, with documentation, any amounts expended by
Seller over the amount attributable to Seller's former working
interest share.
(ix) If Seller will assess or remediate the affected Properties
after Closing, the Assignment and Bill of Sale or other
recordable instrument will restate the rights and obligations of
this section.
10. DISPOSAL OF MATERIALS, SUBSTANCES, AND WASTES; COMPLIANCE WITH LAW.
Buyer will store, handle, transport, and dispose of or discharge all
materials, substances, and wastes from the Properties (including produced
water, drilling fluids, NORM, and other wastes), whether present before or
after the Effective Date, in accordance with applicable local, state, and
federal laws and regulations. Buyer will keep records of the types, amounts,
and location of materials, substances, and wastes that are stored,
transported, handled, discharged, released, or disposed of onsite and
offsite. When any lease terminates, an interest in which has been assigned
under this Agreement, Buyer will undertake additional testing, assessment,
closure, reporting, or remedial action with respect to the Properties
affected by the termination as is necessary to satisfy all local, state, or
federal requirements in effect at that time and necessary to restore the
Properties. Buyer shall assume full responsibility for the operations
conducted pursuant to this Section 10. and agrees to release, not to sue,
indemnify, hold harmless, and defend Seller as to all claims and liabilities
arising therefrom to the same extent as described in Sections 17., 18., and
20.
11. CERTAIN PRICE ADJUSTMENTS TO THE BASE PURCHASE PRICE.
(a) If Buyer presents Asserted Defects to Seller as a part of the due
diligence reviews provided for in Section 8. above, and if Seller is
unable or unwilling to cure such Asserted Defects prior to Closing, or
if Buyer has elected to treat a Property affected by a casualty loss
pursuant to Section 22. as if it were a Property affected by an
Asserted Defect, then an appropriate adjustment to the Base Purchase
Price to account for such Asserted Defects shall be made as follows:
(i) Buyer and Seller shall attempt to agree upon an appropriate
adjustment to the Base Purchase Price to account for an Asserted
Defect which Seller either is unable or unwilling to cure prior
to Closing, and those Properties, or any part thereof, associated
with the Asserted Defect shall be excluded from this Agreement
and any rights of Buyer hereunder to such Properties shall
terminate.
(ii) If Buyer and Seller are unable to agree upon an appropriate
adjustment with respect to an Asserted Defect which affects
Seller's interest in any Property falling in either Category A or
B as shown on Exhibit E, adjustments shall be made as follows:
Determine the value of all wells contained in the Unit in which
the Property affected by the Asserted Defect falls by using the
following equation and solve for V. "Unit" as used herein shall
mean a drilling and spacing unit as determined by order or rule
of the Wyoming Oil & Gas Conservation Commission or as otherwise
permitted by law, or the Participating Area affected by the
Asserted Defect.
V/T = PVW/PVC
T = Total amount ($) allocated to category containing Unit
as shown
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on Exhibit E.
PVW = BFIT PV @ 10% (Future net income before income taxes
discounted at ten percent (10%)) of total proved reserves in all
wells in Unit as contained in the Ryder-Scott Report.
PVC = BFIT PV @ 10% (Future net income before income taxes
discounted at ten percent (10%)) of total proved reserves in all
wells in Category as contained in the Ryder-Scott Report.
The Base Purchase Price shall be adjusted by the absolute value
of an amount using the following formula:
Adjustment = V X (1-[B/C])
V = Value of wells as determined above.
B = Correct net revenue interest for all wells in Unit
including any overriding royalty interest.
C = Net revenue interest, including any overriding royalty
interest, as shown on Exhibit B in all wells in Unit.
(iii) If an Asserted Defect affects Seller's interest in any
Property falling in Category C and Buyer and Seller cannot
mutually agree on an appropriate adjustment to the Base Purchase
Price, adjustments shall be made using the following formula:
Adjustment = T X F/25,000
T = Total amount ($) allocated to Category C as shown on
Exhibit E.
F = Seller's net acres affected by uncured Asserted Defect.
(b) If it is determined that Seller's interest in a well listed on
Exhibit B is greater or lesser than the interest shown for such well
under the columns headed "Net Revenue Interest (NRI)" and "Overriding
Royalty Interest (ORI)" on Exhibit B, then Seller or Buyer may propose
an increase or decrease, as applicable, in the Base Purchase Price, in
which case such increase or decrease shall be handled in the same
manner as provided above with respect to adjustments for Asserted
Defects; provided that the party making such determination shall
notify the other party of such adjustment on or before the Defect
Notice Date. Buyer shall have an affirmative obligation to disclose
to Seller circumstances discovered by Buyer in its due diligence
review that could result in an increase in the Base Purchase Price
hereunder. No increase in the Base Purchase Price will result from
any royalty reduction resulting under the Federal Royalty Reduction
Program.
(c) Notwithstanding the adjustments to be made pursuant to
subsections 11.(a) and 11.(b) above, if such adjustments do not exceed
$250,000 in the aggregate, no such adjustments shall be made and none
of the Properties that would otherwise have been excluded pursuant to
subsection 11.(a) above shall be excluded. If the adjustments to be
made pursuant to subsections 11.(a) and 11.(b) above, do exceed
$250,000.00, the Base Purchase Price shall be adjusted according
thereto.
12. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. Buyer's obligations at
Closing 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
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material respects as of the date when made and at Closing, except
as to changes specifically contemplated by this Agreement or consented
to by Buyer in writing.
(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 in writing.
(c) If applicable, Buyer and Seller shall have received approval from
the FTC under the HSR Act of the transaction contemplated by this
Agreement, or shall have received notification that the waiting period
under such act has been terminated, or the waiting period under such
act shall have expired.
(d) The Base Purchase Price increase or decrease resulting from the
adjustments to be made pursuant to subsections 11.(a) and 11.(b) does
not exceed twenty percent (20%) of the Base Purchase Price.
(e) On the Closing Date, no material suit, action, or other
proceeding against Buyer shall be pending before any court or
governmental agency seeking to restrain, prohibit, or obtain damages
or other relief in connection with the consummation of the transaction
contemplated by this Agreement.
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, this Agreement may be terminated at the option of Buyer.
If Buyer thus terminates this Agreement, the Deposit shall be returned to Buyer
and the parties shall have no further obligations to one another hereunder
(other than the indemnifications contained in Sections 7.(a)(iii), 8.(c), and
21. hereof, which shall survive such termination). Notwithstanding the
foregoing, if a condition set forth above, other than condition 12.(c) or
12.(d), 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 some, 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 process set forth in Section 11.
above.
13. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS. Seller's obligations at
Closing under this Agreement are subject to 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, 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 from
the FTC under the HSR Act of the transaction contemplated by this
Agreement, or shall have received notification that the waiting period
under such act has been terminated, or the waiting period under such
act shall have expired.
(d) The Base Purchase Price reduction or increase resulting from the
adjustments to be made pursuant to subsections 11.(a) and 11.(b) does
not exceed twenty percent (20%) of the Base Purchase Price.
(e) On the Closing Date, no material suit, action, or other
proceeding against Seller shall be pending before any court or
governmental agency seeking to restrain, prohibit, or obtain damages
or other relief in connection with the consummation of the transaction
contemplated by this Agreement.
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If any such condition precedent to the obligations of Seller under this
Agreement is not met as of the Closing Date, this Agreement may be terminated
at the option of Seller. If Seller terminates this Agreement because of
Buyer's failure to fulfill condition 13.(a) or 13.(b), the Deposit shall not
be returned to Buyer. If Seller terminates this Agreement because of
conditions 13.(c), 13.(d), or 13.(e), and Buyer is not in material default
under this Agreement, the Deposit shall be returned to Buyer. Thereafter,
Seller and Buyer shall have no further obligations to one another hereunder
(other than the indemnifications contained in Section 7.(a)(iii), 8.(c), and
21. hereof, which shall survive such termination).
14. THE CLOSING. If the conditions referred to in Section 12. of this
Agreement (the "Conditions Precedent to Buyer's Obligations") and Section 13.
of this Agreement (the "Conditions Precedent to Sellers Obligations") have
been satisfied or waived, the consummation of the transaction contemplated
hereby ("Closing") shall take place in the offices of Seller, at 201 Main
Street, Fort Worth, Texas 76102, on May 14, 1998, at 10:00 a.m. Central
Standard Time, or at such other date and time (i) as the Buyer and Seller may
agree or, (ii) to which Seller may postpone the Closing pursuant to Section
8.(b) hereof (such date and time herein called the "Closing Date"). It is
provided however, that Seller shall not be permitted to extend the Closing
Date pursuant to Section 8(b) beyond July 14, 1998, unless Buyer consents.
At the Closing:
(a) Seller shall:
(i) Execute, acknowledge, and deliver to Buyer a conveyance of
the Properties (the "Assignment and Bill of Sale"), which shall
include a warranty of title as against claims arising by through
or under Seller, and not otherwise, and in the form attached
hereto as Exhibit C (with Exhibits A and B attached thereto),
effective as of seven o'clock a.m., (7:00 a.m.) Mountain Standard
Time on June 1, 1998, (herein called the "Effective Date");
(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) Execute and deliver to Buyer letters in lieu of transfer
orders (or similar documentation), in form acceptable to both
parties;
(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);
(v) With respect to Properties operated by Seller and to the
extent available, deliver to Buyer all requisite consents of
non-operators under any operating agreement naming Buyer as
successor operator; and copies of such requests for consent which
were sent but not obtained prior to Closing;
(vi) Deliver to Buyer resignations of operator and/or Changes of
Operator/Owner Forms properly executed on behalf of Seller for
all Seller-operated wells acquired by Buyer; and, any other forms
required by governmental authorities having jurisdiction which
must be initiated by Seller to change the operator from Seller to
Buyer as of the Effective Date; and,
(vii) Certificates in form and substance satisfactory to Seller,
effective as of the Closing Date and executed by Seller's duly
authorized officer, partner, or owner, as appropriate, to the
effect that (1) Seller has all requisite corporate,
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partnership, or other power and authority to sell the
Properties on the terms of this Agreement and to perform its
other obligations under this Agreement and has fulfilled all
corporate, partnership, or other prerequisites to closing
this transaction, and (2) each individual executing the
closing documents has the authority to act on behalf of
Seller.
(viii) Deliver possession of the Properties to Buyer as of the
Effective Date.
(b) 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
payable in United States dollars equal to the amount as set forth
on the Closing Settlement Statement as provided for in Section
16.(c) below;
(ii) Deliver to Seller, except to the extent waived by Seller:
(A) Evidence of compliance with the requirements of all laws, rules,
and regulations relating to the transfer of operatorship from Seller
to Buyer;
(B) Evidence of Buyer's bond coverage as required by all laws, rules,
and regulations, or that a cash deposit, certificate of deposit,
letter of credit, or some other permitted financial security has been
accepted by the proper regulatory agency for each well requiring such
coverage;
(C) Evidence of compliance with the requirements of all laws, rules,
and regulations that Buyer is qualified to succeed to Seller's
interest in the Properties; and,
(D) Certificates in form and substance satisfactory to Seller,
effective as of the Closing Date and executed by Buyer's duly
authorized officer, partner, or owner, as appropriate, to the effect
that (1) Buyer has all requisite corporate, partnership, or other
power and authority to purchase the Properties on the terms of this
Agreement and to perform its other obligations under this Agreement
and has fulfilled all corporate, partnership, or other prerequisites
to closing this transaction, and (2) each individual executing the
closing documents has the authority to act on behalf of Buyer.
(iii) Execute such forms and take such other steps as Seller may
reasonably require to (A) succeed Seller with respect to the
Properties under the rules and regulations of applicable authorities
and (B) assume any and all liabilities of Seller with respect to the
wells described on Exhibit B; and,
(iv) Take possession of the Properties.
15. AFTER CLOSING. Within thirty (30) days after Closing, Seller shall
make available for delivery to Buyer at Seller's offices 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
breaching, or risking a breach of, confidentiality agreements with other
parties. It is expressly understood that Buyer is not entitled to acquire any
records except as expressly provided in Section 1. hereof. Seller may retain
such files, or copies thereof, or such information as it deems necessary for all
purposes, including but not limited to, preparing a Final Settlement Statement
as provided in Section 16., or for purposes of filing tax returns covering the
Properties. Any files or materials retained by Seller after Closing pursuant
hereto, shall be sent to Buyer as soon as reasonably practicable after final
payment is made in accordance with the Final
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Settlement Statement. Seller may, at its own expense, have access to and
make copies of all, or any part thereof, of the files and records provided
Buyer hereunder at reasonable times and upon reasonable notice during regular
business hours for as long as the Properties remain in effect.
As to those wells which Seller is disbursing proceeds of production, Seller
shall continue to collect proceeds of production as long as it remains
operator 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 its
successor as operator.
Provided Buyer succeeds Seller as operator, Buyer shall become responsible
for all disbursements of proceeds of production and such disbursement
activities shall be included in the matters that Buyer assumes and with
respect to which Buyer indemnifies Seller under Section 17 below.
SELLER GIVES NO ASSURANCE HEREUNDER THAT BUYER SHALL SUCCEED SELLER AS
OPERATOR OF ANY PROPERTY WHERE PARTIES OTHER THAN SELLER OWN INTERESTS IN
SUCH PROPERTY. It is understood that in most (if not all) of the operating
agreements affecting the Properties, Seller does not have the right to
transfer operations of the leasehold interests subject thereto to Buyer.
However, Seller shall use its best efforts to secure consent from all
non-operators naming Buyer as Operator under such operating agreements prior
to Closing, to be effective on the Closing Date and provided Closing takes
place. After Closing, Buyer shall use its best efforts to comply with the
terms of any operating agreements to name a successor operator thereunder for
which Seller was unable to obtain prior to Closing. Upon obtaining consent
from non-operators naming Buyer as successor operator, Seller and Buyer
promptly shall file all forms required by any governmental agency having
authority, to change the operator from Seller to Buyer.
Seller shall operate the Seller-operated Properties until the Effective Date
and thereafter, if necessary, until such time as provided under the
applicable operating agreement, plan of unitization, or law requires. As
soon as practicable thereafter, operations shall be turned over to, and
become the responsibility of, Seller's successor as Operator To the extent
Seller so operates any Property after the Effective Date, its obligations to
Buyer with respect to such operations shall be no greater than those that it
would have to a non-operator under the applicable operating agreement. In
the absence of an operating agreement, those terms and provisions contained
in the AAPL 610 (1382 Revision) form Operating Agreement shall apply. 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.
As to all wells acquired by Buyer hereunder which Seller continues to operate
on behalf of Buyer and for Buyer's account after the Effective Date because a
successor operator has not been approved by the requisite governmental
authority, or consent of non-operators has not been obtained, by mutual
agreement or otherwise, Seller will be paid the producing well overhead rates
shown in the operating agreement applicable to such wells and if there is no
such established rate, Buyer shall pay Seller for its proportionate share
thereof based upon the rate of five hundred dollars ($500.00) per month, or
any part thereof, for each well.
16. CERTAIN ACCOUNTING ADJUSTMENTS TO THE PURCHASE PRICE.
(a) Appropriate adjustments to the Purchase Price shall be made
between Buyer and Seller to reflect the following:
(i) All rights to proceeds, receipts, reimbursements, credits,
and income attributable to the Properties and accruing before the
Effective Time, as defined below, shall be the property of
Seller. All proceeds, receipts, credits, income, and charges
attributable to the Properties acquired by Buyer hereunder and
accruing on and after the Effective Time shall be the property
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of Buyer. As to Properties operated by Seller and purchased by
Buyer hereunder and concerning accounts held in suspense, Seller
will pay in full the royalty accounts that were suspended because
the amount due is less than the statutory or contractual minimum
for payment. As to all other suspended accounts, if any, Seller
shall transfer to its successor as operator all monies held in a
suspended account which were received for production produced
from or allocated to the Properties on and after the Effective
Time. As to proceeds received for production produced from or
allocated to the Properties before the Effective Time and held in
a suspense account at Buyer's option, Seller may either: 1)
Retain the suspended amounts after Closing and, upon proof
satisfactory to Seller, release the money to the proper party;
or, 2) Transfer the suspended amounts to Buyer for future
disbursement. Once suspended amounts have been transferred to
Buyer for future disbursement, Buyer agrees to be responsible for
disbursing the suspended monies to the proper parties and shall
release, indemnify, defend, and hold harmless 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), arising out of or
in any way connected with making such disbursements, or failure
to make a disbursement.
(ii) Seller shall be responsible for and pay (A) all charges and
invoices for costs and expenses (including, without limitation,
lease maintenance payments, drilling and operating expenses,
capital expenditures, and overhead charges) accruing before the
Effective Time and attributable to the Properties and (B)
necessary royalty disbursements of proceeds realized from the
sale of production produced from and allocated to the Properties
before the Effective Time. Buyer shall be responsible for
payment of (C) all charges and invoices for costs and expenses
(including, without limitation, lease maintenance payments,
drilling and operating expenses, capital expenditures, and
overhead charges) accruing on and after the Effective Time and
attributable to the Properties acquired hereunder and (D)
necessary royalty disbursements of proceeds realized from the
sale of production produced from and allocated to the Properties
acquired hereunder on and after the Effective Time. All payments
made by Seller for items under (C) above for which Buyer is
responsible shall be reimbursed by Buyer. Seller shall reimburse
Buyer for all monies received by Seller from non-operators as
payment of Seller's invoices for the operations of the wells
described on Exhibit B for periods on and after the Effective
Time.
(iii) Seller will be credited with an amount equal to the simple
interest accrued on the Adjusted Purchase Price for the period
beginning with the Closing Date and continuing through the
Effective Date at seven percent (7%) simple annual interest
calculated as follows:
INTEREST = Adjusted Purchase Price x number of days from
closing to Effective Date x 7% divided by 365;
The amount of interest credited to the Buyer will not exceed
$250,000.00 regardless of the above calculation, and further
such credit shall be only be applied if Closing occurs before
the Effective Date.
(b) In making such adjustments, the Parties agree that:
(i) Seller will cause such oil storage facilities which store oil
produced from the Properties to be gauged or strapped as of 7:00
a.m. Mountain Standard Time on the Effective Date, herein also
referred to as the Effective Time. Seller also has caused the
gas production meter charts (or if such do not exist, the sales
meter charts) on the pipelines transporting gas production
17
<PAGE>
from the Properties to be read as of the Effective Time. The
results of such gauging, strapping, or chart reading are
conclusive and shall be made available to Buyer. The
production in such storage facilities or through such meters
on the gas pipelines as of the Effective Time shall be owned
by Seller; and, thereafter, production placed in such oil
storage facilities and gas production passing through the
aforesaid meters on the pipelines shall be owned by Buyer,
insofar as to the interests subject hereto as of Closing.
(ii) All ad valorem, severance, production and similar taxes
applicable to the Properties shall be prorated between Seller and
Buyer as of the Effective Date. Therefore, all such taxes for
1997 and prior years and for the portion of 1998 prior to the
Effective Date levied against the Properties shall be borne and
paid by Seller; and, all ad valorem and similar taxes for the
remainder of 1998 and thereafter levied against the Properties
shall be borne and paid by Buyer, irrespective if the amount
levied is based on the previous year's production or any other
basis.
(iii) Where Seller owns one-hundred percent (100%) of the
working interest under a well and there is no overhead charge for
determining the overhead expense to be charged to Buyer on and
after the Effective Date, the overhead charge shall be deemed to
be five hundred dollars ($500.00) per month, or any part thereof,
per well.
(iv) Each party shall be responsible for its own income taxes.
(c) With respect to matters that can be determined as of Closing,
Seller shall prepare, in accordance with the provisions of this
Agreement and with generally accepted accounting principles, a
statement (the "Closing Settlement Statement") setting forth each
adjustment to the Base Purchase Price to the best of Seller's
knowledge, whether upward or downward, as may be required in
accordance herewith. Seller shall submit to Buyer the Closing
Settlement Statement no later than five (5) days prior to the Closing
Date and shall afford Buyer access to Seller's records pertaining to
the computation of the Closing Settlement Statement. Prior to the
Closing, Buyer and Seller will agree upon the adjustments stated
therein to be made to the Purchase Price, or will specify the
adjustments to which there are differences and the adjustments to be
omitted therefrom. Only the agreed upon adjustments shall be taken
into account in computing the adjustments to be made to the Purchase
Price at Closing. Final adjustments to the Purchase Price to be made
hereunder shall be made within one hundred-twenty (120) days after the
Closing Date for all matters other than Asserted Defects according to
(d) hereinbelow as follows:
(d) As soon as practicable after the Closing, and in no event later
than sixty (60) days following the Closing Date, Seller shall deliver
to Buyer, in accordance with the provisions of this Agreement and with
generally accepted accounting principles, a statement ("Final
Settlement Statement") setting forth each adjustment under this
Agreement which was not determined as of the Closing. Within sixty
(60) days after Buyer's receiving the Final Settlement Statement, the
Parties shall agree upon the adjustments and payments stated in such
Final Settlement Statement, and the net of such adjustments and
payments shall be paid in cash to the appropriate Party by the other
Party within five (5) days following agreement as to the Final
Settlement Statement. If the Parties fail to reach agreement as to
all adjustment within said sixty (60) day period, the net amount of
all undisputed adjustments shall be paid and any remaining disputed
items shall be submitted for determination by a nationally recognized
firm of public accountants selected by the parties, whose decision
shall be final and binding. The parties shall share equally the costs
of such determination.
17. ASSUMPTION AND INDEMNIFICATION. UPON DELIVERY TO AND
18
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ACCEPTANCE BY BUYER OF THE ASSIGNMENT AND BILL OF SALE, BUYER SHALL BE DEEMED
TO HAVE ASSUMED, TO PAY AND PERFORM TIMELY, ALL DUTIES, EXPENSES,
OBLIGATIONS, LOSSES, HAZARDS AND LIABILITIES RELATING TO THE OWNERSHIP OR
OPERATION OF THE PROPERTIES ARISING ON AND AFTER THE EFFECTIVE DATE
(INCLUDING, WITHOUT LIMITATION, THOSE ARISING UNDER OR BY VIRTUE OF ANY
LEASE, CONTRACT, AGREEMENTS, DOCUMENT, PERMIT OR RULE, OR DELAY IN OBTAINING
APPROVAL OF FEDERAL OR STATE ASSIGNMENTS); AND, 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 ON AND
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 ON
AND AFTER THE EFFECTIVE DATE SHALL BE DEEMED TO INCLUDE ALL MATTERS ARISING
OUT OF THE STATUS AND THE CONDITION OF THE PROPERTIES ON THE EFFECTIVE DATE
INCLUDING, WITHOUT LIMITATION, ALL OBLIGATIONS TO PROPERLY PLUG AND ABANDON
WELLS LOCATED ON THE PROPERTIES, TO RESTORE THE SURFACE OF THE PROPERTIES TO
AS NEAR ITS ORIGINAL CONDITION AS PRACTICABLE AND TO COMPLY WITH, OR BRING
THE PROPERTIES INTO COMPLIANCE WITH, APPLICABLE ENVIRONMENTAL LAWS AND
REGULATIONS, INCLUDING ALL LIABILITY AND EXPENSE FOR ANY RESTORATION,
REMEDIATION, CLEAN-UP, DISPOSAL OF WASTE, OR REMOVAL THAT MAY BE INCURRED AS
A RESULT OF THE EXISTENCE OR DISCOVERY OF NATURALLY OCCURRING RADIOACTIVE
MATERIALS, OR OTHER HAZARDOUS OR DELETERIOUS SUBSTANCES IN, ON, UNDER OR
ASSOCIATED WITH THE PROPERTIES, REGARDLESS OF WHEN THE EVENTS OCCURRED THAT
GIVE RISE TO SUCH CONDITION, AND THE ABOVE PROVIDED FOR ASSUMPTIONS AND
INDEMNIFICATIONS BY BUYER SHALL EXPRESSLY COVER AND INCLUDE SUCH MATTERS. THE
FOREGOING ASSUMPTIONS AND INDEMNIFICATIONS SHALL APPLY WHETHER OR NOT SUCH
DUTIES, OBLIGATIONS, OR LIABILITIES, OR SUCH CLAIMS, ACTIONS, CAUSES OF
ACTION, LIABILITIES, DAMAGES, LOSSES, COSTS, OR EXPENSES ARISE OUT OF (i)
NEGLIGENCE (INCLUDING SOLE NEGLIGENCE, SIMPLE NEGLIGENCE, CONCURRENT
NEGLIGENCE, ACTIVE OR PASSIVE NEGLIGENCE, OR OTHERWISE, BUT EXPRESSLY NOT
INCLUDING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) OF SELLER GROUP OR ANY
OTHER INDEMNIFIED PARTY, OR (ii) STRICT LIABILITY.
18. ENVIRONMENTAL ASSESSMENT AND INDEMNIFICATION BY BUYER. BUYER
EXPRESSLY ACKNOWLEDGES THAT IT HAS MADE AN ENVIRONMENTAL ASSESSMENT OF THE
PROPERTIES, OR WILL BE GIVEN THE OPPORTUNITY TO DO SO SUBJECT TO THE TERMS OF
THIS AGREEMENT. BUYER HEREBY AGREES TO ASSUME THE RISKS THAT THE PROPERTIES
MAY CONTAIN WASTE MATERIALS OR HAZARDOUS SUBSTANCES, AND THAT ADVERSE
PHYSICAL CONDITIONS, INCLUDING BUT NOT LIMITED TO THE PRESENCE OF WASTE
MATERIALS OR HAZARDOUS SUBSTANCES OR THE PRESENCE OF UNKNOWN ABANDONED OIL
AND GAS WELLS, WATER WELLS, SUMPS AND PIPELINES, MAY EXIST IN, ON, OR UNDER
THE PROPERTIES AS OF THE EFFECTIVE DATE, ALL RESPONSIBILITY AND LIABILITY
RELATED TO ALL SUCH CONDITIONS, WHETHER KNOWN OR UNKNOWN, WILL BE TRANSFERRED
FROM SELLER TO BUYER. BUYER ASSUMES FULL RESPONSIBILITY FOR, AND AGREES TO
INDEMNIFY, HOLD HARMLESS AND DEFEND SELLER FROM AND AGAINST ALL LOSS,
LIABILITY, CLAIMS, FINES, EXPENSES, COSTS (INCLUDING ATTORNEYS' FEES AND
EXPENSES) AND CAUSES OF ACTION CAUSED BY OR ARISING OUT OF ANY FEDERAL, STATE
OR LOCAL LAWS, RULES, ORDERS AND REGULATIONS
19
<PAGE>
APPLICABLE TO ANY NATURALLY OCCURRING RADIOACTIVE MATERIALS, WASTE MATERIAL
OR HAZARDOUS SUBSTANCES ON OR ASSOCIATED WITH THE PROPERTIES OR THE PRESENCE,
DISPOSAL, RELEASE OR THREATENED RELEASE OF ALL NATURALLY OCCURRING
RADIOACTIVE MATERIALS, WASTE MATERIAL OR HAZARDOUS SUBSTANCES FROM THE
PROPERTIES INTO THE ATMOSPHERE OR INTO OR UPON LAND OR ANY WATER COURSE OR
BODY OF WATER, INCLUDING GROUND WATER, WHETHER OR NOT ATTRIBUTABLE TO
SELLER'S ACTIVITIES OR THE ACTIVITIES OF THIRD PARTIES (REGARDLESS OF WHETHER
OR NOT SELLER WAS OR IS AWARE OF SUCH ACTIVITIES) PRIOR TO, DURING OR AFTER
THE PERIOD OF SELLER'S OWNERSHIP OF THE PROPERTIES. THIS INDEMNIFICATION AND
ASSUMPTION SHALL ALSO APPLY TO LIABILITY FOR VOLUNTARY ENVIRONMENTAL RESPONSE
ACTIONS UNDERTAKEN PURSUANT TO THE COMPREHENSIVE ENVIRONMENTAL RESPONSE
COMPENSATION AND LIABILITY ACT (CERCLA) OR ANY OTHER FEDERAL, STATE OR LOCAL
LAW.
19. DISCLAIMER OF WARRANTIES. THE PROPERTIES SHALL BE CONVEYED
PURSUANT HERETO WITHOUT ANY WARRANTY OR REPRESENTATION WHATSOEVER, WHETHER
EXPRESS, IMPLIED OR STATUTORY AS TO, DESCRIPTION, 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, OR
OTHERWISE. BUYER SHALL HAVE INSPECTED, OR WAIVED (AND AS OF THE DEFECT NOTICE
DATE 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 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 NOR 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.
20. BUYER'S COVENANT NOT TO SUE SELLER GROUP. Except to enforce the
provisions of this Agreement or the responsibilities and liabilities of
Seller for claims, costs and expenses with respect to the Properties prior to
the Effective Date according to Section 17., Buyer covenants not to sue
Seller Group with regard to any claim or liability relating to the
Properties, or this transaction, regardless of when or how the claim or
liability arose or arises or whether the claim or liability was
20
<PAGE>
foreseeable or unforeseeable. BUYER'S COVENANT NOT TO SUE SELLER GROUP
INCLUDES CLAIMS AND LIABILITIES RESULTING IN ANY WAY FROM THE NEGLIGENCE OR
STRICT LIABILITY OF SELLER GROUP, WHETHER THE NEGLIGENCE OR STRICT LIABILITY
IS ACTIVE, PASSIVE, JOINT, CONCURRENT OR SOLE.
21. 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.
22. CASUALTY LOSS. If the Properties are damaged by fire or other
casualty prior to the Closing, this Agreement shall remain in full force and
effect, and (unless Buyer and Seller shall otherwise agree) in such event as
to each such damaged Property that Seller, in its sole discretion, elects not
to repair, Buyer either may treat such Property as if it had an Asserted
Defect or elect not to adjust the Purchase Price therefor. If Buyer elects
hereunder to treat the damaged Property as if it had an Asserted Defect, the
procedure provided for in Section 11. shall apply to such Property, 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 Property, and if Seller is entitled to any claims
under an insurance policy with respect to such damage, Seller shall either
collect and pay over, or assign, such insurance claims to Buyer. Buyer shall
then take title to such Property without reduction of the Purchase Price. If
Seller elects to repair a damaged Property, all rights to insurance proceeds
and claims against third parties related thereto shall belong to Seller.
23. 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 by recognized commercial
courier or delivery service (which provides a receipt), by facsimile (with
receipt acknowledged), or by registered or certified mail (postage prepaid),
at the following addresses:
If to Buyer: Continental Resources, Inc.
P.O. Box 1032
Enid, Oklahoma 73702
Attn: Land Manager
Fax No. (405) 548-5182
If to Seller: Bass Enterprises Production Co.
210 Main Street
Fort Worth, Texas 76102
Attn: W. Frank McCreight
Fax No. (817) 390-8893
All such notices and communications shall be considered delivered on the date
of receipt. Buyer or Seller may specify as its proper address any other
address within the continental United States by giving notice to the other
party, in the manner provided in this Section.
24. SURVIVAL OF PROVISIONS. All representations, warranties, and
indemnifications made herein, except as to any warranty of title by Seller,
shall survive the Closing and the delivery of the Assignment and Bill of
Sale. All obligations hereunder not satisfied at Closing shall survive
Closing and delivery of the Assignment and Bill of Sale to the extent the
Parties intend for such
21
<PAGE>
obligations to be satisfied after Closing. Buyer shall have until the Defect
Notice Date in which to satisfy itself as! to the quantity and quality of
Seller's title to the Properties.
25. MISCELLANEOUS MATTERS.
(a) FURTHER ASSURANCES. 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 further acts and things as may be reasonably necessary more
fully and effectively to grant, convey, and assign the Properties to
Buyer.
(b) ASSIGNABILITY. Except as provided below, 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.
(c) GAS BALANCES. Seller represents that there are no gas imbalances
or make-up obligations affecting or relating to any of the properties.
(d) WAIVER AND REPRESENTATION: 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 Twenty Five Million Dollars ($25,000,000.00) 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) CONFIDENTIALITY AGREEMENT. Until Closing, 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) PRIOR ENTIRE UNDERSTANDING/HEADINGS/GENDER. 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 above with respect
to any Confidentiality Agreement. 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) AMENDMENTS. This Agreement may be amended, modified,
supplemented, restated, or discharged (and provisions hereof may be
waived) only by an instrument executed by both Parties.
(h) ASSOCIATED EXPENSES. Each party shall bear and pay all expenses
it incurred and that are associated with the transaction contemplated
by this Agreement. Payment of recording fees, filing fees,
documentary stamp taxes, all sales taxes (if any, plus penalty and
interest) and any other fees and taxes imposed on the Properties on
and after the Effective Date, excluding Seller's income taxes, shall
be
22
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paid by Buyer.
(i) SUCCESSORS AND ASSIGNS. This Agreement shall be binding on the
parties hereto and their respective heirs, successors,
representatives, and assigns.
(j) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of
which shall constitute one (1) and the same instrument. It shall not
be necessary for both parties to sign the same counterpart.
(k) ENFORCEABILITY. 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) PUBLICITY. 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.
(m) USE OF SELLER'S NAME. Buyer agrees that, as soon as practicable
after the Closing, it shall remove or cause to be removed the names
and signs used by Seller, and all variations and derivatives thereof
and logos relating thereto from the Properties and shall not
thereafter make any use whatsoever of such names, signs, and logos.
After Closing and as to those Properties Buyer has taken over as
operator, Seller reserves the right of access to confirm that Buyer
has removed Seller's name, signs, and logos. If Seller is forced to
remove its name, signs, and logos because Buyer has failed to do so,
Seller shall charge its costs to Buyer and Buyer shall pay Seller's
invoice within fifteen (15) days of receipt.
(n) SEVERABILITY. If any term or provision of this Agreement is
determined to be invalid, illegal, or incapable of being enforced by
any rule of law or public policy, all other conditions and provisions
of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any material fashion to either
Buyer or Seller. Upon such determination that any term or other
provision is invalid, illegal, or incapable of being enforced, Buyer
and Seller shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the Parties as closely as possible
in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the extent possible.
(o) RESERVATION OF CLAIMS. Seller reserves all rights to claims,
demands, cause of action, and lawsuits concerning the Properties
against third parties that accrued before the Effective Date, whether
discovered before or after the Effective Date, excluding any rights or
claims associated with gas imbalances.
(p) DUTY TO DEFEND. Where a party ("indemnitor") has agreed to
indemnify, defend, and hold the other party ("indemnitee") harmless
under this Agreement the indemnitee, at its sole option if it is the
sole defendant, may elect to (a) manage its
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own defense, in which event the indemnitor will reimburse the
indemnitee for all attorney's fees, court, and other costs
reasonably incurred in defending a claim, upon delivery to the
indemnitor of invoices for such expenses; or (b) allow the
indemnitor to be responsible for all aspects of defense. If both
parties are defendants in a claim, they shall reasonably endeavor
to arrange for joint defense to minimize defense costs, but
failure to reach such agreement shall in no event eliminate or
limit any indemnity obligations hereunder.
(q) EXHIBITS. All exhibits referenced herein and attached hereto are
by reference incorporated into this Agreement.
IN WITNESS WHEREOF, this Agreement is executed by the parties hereto on the
date set forth above, but effective as of the Effective Date.
SELLERS
BASS ENTERPRISES PRODUCTION CO.
By: /s/ W. FRANK MCCREIGHT
-----------------------------------
W. Frank McCreight
Vice President
PERRY R. BASS, INC.,
SID R. BASS, INC.,
LEE M. BASS, INC.,
KEYSTONE, INC.,
THRU LINE INC.
By: /s/ W. FRANK MCCREIGHT
-----------------------------------
W. Frank McCreight
Vice President of all named corporations
GOLIAD PARTNERS, L.P.
By its Managing Partners
PRB-GP, Inc.
LMB-GP, Inc.
WPH-GP, Inc.
By: /s/ W. FRANK MCCREIGHT
-----------------------------------
W. Frank McCreight
Vice President of all named corporations
THE BASS MANAGEMENT TRUST
By: /s/ PERRY R. BASS
-----------------------------------
Perry R. Bass, Trustee
SID R. BASS, MANAGEMENT TRUST
By: /s/ SID R. BASS
-----------------------------------
Sid R. Bass, Trustee
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By: /s/ LEE M. BASS
-----------------------------------
Lee M. Bass
D W GENPAR, INC.
By: /s/ W. FRANK MCCREIGHT
-----------------------------------
W. Frank McCreight
Vice President
W D. PARTNERS, L. P.
By DW Genpar, Inc., General Partner
By: /s/ W. FRANK MCCREIGHT
-----------------------------------
W. Frank McCreight
Vice President
WPH-GP, INC.
By: /s/ W. FRANK MCCREIGHT
-----------------------------------
W. Frank McCreight
Vice President
WORLAND ASSOCIATES, Texas General Partnership
By: Sid R. Bass, Inc. Managing Partner
By: /s/ W. FRANK MCCREIGHT
-----------------------------------
W. Frank McCreight
Vice President
WORLAND ASSOCIATES II
By: Sid R. Bass, Inc. Managing Partner
By: /s/ W. FRANK MCCREIGHT
-----------------------------------
W. Frank McCreight
Vice President
BUYER
CONTINENTAL RESOURCES, INC.
By: /s/ HAROLD HAMM
-----------------------------------
Harold Hamm
President
25
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EXHIBIT A
ASSIGNMENT AND BILL OF SALE DATED MAY 14, 1998
EFFECTIVE JUNE 1, 1998
<TABLE>
<CAPTION>
EXHIBIT
<S> <C>
UNITS
Cottonwood Creek Unit (48 pages) . . . . . . . . . . . . . . . . . . . . . . A-1
Cottonwood Creek Field Extension (Phosphoria) Unit (23 pages). . . . . . . . A-2
No Water Creek Unit (7 pages). . . . . . . . . . . . . . . . . . . . . . . . A-3
Slick Creek Unit (11 pages). . . . . . . . . . . . . . . . . . . . . . . . . A-4
South Frisby Unit (2 pages). . . . . . . . . . . . . . . . . . . . . . . . . A-5
NON-UNITIZED ASSETS
Producing - Big Horn County (1 page) . . . . . . . . . . . . . . . . . . . . A-6
Producing - Washakie County (26 pages) . . . . . . . . . . . . . . . . . . . A-7
Non-Producing - Big Horn County (1 page) . . . . . . . . . . . . . . . . . . A-8
Non-Producing - Washakie County (4 pages). . . . . . . . . . . . . . . . . . A-9
PROSPECTS
East Lamb Prospect (2 pages) . . . . . . . . . . . . . . . . . . . . . . . . A-10
Honeycomb Prospect (2 pages) . . . . . . . . . . . . . . . . . . . . . . . . A-11
Marconi Prospect (2 pages) . . . . . . . . . . . . . . . . . . . . . . . . . A-12
N. W. Zimmerman Prospect (1 page). . . . . . . . . . . . . . . . . . . . . . A-13
South Fork Prospect (4 pages). . . . . . . . . . . . . . . . . . . . . . . . A-14
Treasure Prospect (4 pages). . . . . . . . . . . . . . . . . . . . . . . . . A-15
EASEMENTS (2 pages). . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-16
</TABLE>
<PAGE>
Page 1 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS
2 TOWNSHIP 47 NORTH, RANGE 90 WEST USA W-01265 U.S.A.
Section 7: Lots 7 and 8, E/2SW/4 158.56 HBP All
Bass Lease 34696
4 TOWNSHIP 47 NORTH, RANGE 91 WEST USA W-03769 U.S.A.
Section 1: SE/4NW/4 40.00 HBU All
Bass Lease 33483
(SEE NOTE 1)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2 Goliad Partners, L.P. Rocky Mtn. Properties Goliad Partners, L.P.
43.750000% .01000000 43.750000%
Sid R. Bass, Inc. John T. Hoenshell Sid R. Bass. Inc.
18.750000% .00500000 18.750000%
Keystone, Inc. Alice Van Arsdale Keystone, Inc.
18.750000% .00500000 18.750000%
Thru Line Inc. Byron E. Van Arsdale, Jr. Thru Line Inc.
18.750000% .00500000 18.750000%
* * * * * * * * * * * * * * * * * *
4 Amoco Production Company Harris E. Kerisch SURFACE TO BASE OF PHOSPHORIA
100.000000% .02500000 FORMATION:
Perry R. Bass, Inc.
25.000000%
Sid R. Bass, Inc.
18.750000%
Lee M. Bass, Inc.
18.750000%
Keystone, Inc.
18.750000%
Thru Line Inc.
18.750000%
---------
BELOW BASE OF PHOSPHORIA
FORMATION:
Amoco Production Company
43.525000%
Perry R. Bass, Inc.
14.118750%
</TABLE>
<PAGE>
Page 2 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO.
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER
- -------------------------------------------------------------------------
<S> <C> <C> <C>
4 FEDERAL LANDS (cont'd)
5A TOWNSHIP 47 NORTH, RANGE 91 WEST USA W-03995
Section 15: NE/4, N/2SE/4 240.00 HBP
Bass Lease 33489
(SEE NOTE 1)
<CAPTION>
TRACT ROYALTY OWNER LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
4 Sid R. Bass, Inc.
10.589063%
Lee M. Bass, Inc.
10.589063%
Keystone, Inc.
10.589062%
Thru Line Inc.
10.589062%
5A U.S.A Amoco Production Company Bruce Anderson SURFACE TO BASE OF PHOSPHORIA
All 100.000000% .01250000 FORMATION:
Doane College
.01250000 Goliad Partners, L. P.
31.250000%
Sid R. Bass, Inc.
18.750000%
Keystone, Inc.
18.750000%
Thru Line Inc.
18.750000%
Perry R. Bass, Inc.
12.500000%
----------
BELOW BASE OF PHOSPHORIA
FORMATION:
Amoco Production Company
43.525000%
Goliad Partners, L. P.
17.648437%
Sid R. Bass, Inc.
10.589063%
</TABLE>
<PAGE>
Page 3 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO.
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER
- --------------------------------------------------------------------------
<S> <C> <C> <C>
5A FEDERAL LANDS (CONT'D)
5B TOWNSHIP 47 NORTH, RANGE 91 WEST USA W-021765
Section 15: S/2SE/4 80.00 HBP
Bass Leases 33490
and 33950
<CAPTION>
TRACT ROYALTY OWNER LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5A Keystone, Inc.
10.589062%
Thru Line Inc.
10.589062%
Perry R. Bass, Inc.
7.059375%
* * * * * *
5B U.S.A. Amoco Production Company Bruce Anderson SURFACE TO BASE OF PHOSPHORIA
All 28.602900% .01250000 FORMATION:
Goliad Partners, L.P. Mary Ann Ploehm
31.236232% .00312500 Goliad Partners, L.P.
Sid R. Bass, Inc. F. Joseph Vlock 40.174638%
13.386956% .00312500 Sid R. Bass, Inc.
Keystone, Inc. John E. Vlock 18.750000%
13.386956% .00312500 Keystone, Inc.
Thru Line Inc. Robert C. Vlock 18.750000%
13.386956% .00312500 Thru Line Inc.
18.750000%
Perry R. Bass, Inc.
3.575362%
---------
BELOW BASE OF PHOSPHORIA
FORMATION:
Goliad Partners, L.P.
35.705435%
Sid R. Bass, Inc.
16.068478%
Keystone, Inc.
16.068478%
Thru Line Inc.
16.068478%
</TABLE>
<PAGE>
Page 4 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
6 TOWNSHIP 47 NORTH, RANGE 91 WEST USA W-03996 U.S.A
Section 11: E/2 320.00 HBP All
Bass Lease 33600
7 TOWNSHIP 47 NORTH, RANGE 90 WEST USA W-04079 U.S.A.
Section 6: Lots 12 and 13, E/2SW/4 478.51 HBP All
Section 7: Lots 5 and 6, E/2NW/4, Bass Lease 33471
SE/4
(SEE NOTE 1)
8 TOWNSHIP 48 NORTH, RANGE 91 WEST USA W-04081 U.S.A.
Section 35: SW/4 160.00 HBU All
Bass Lease 33479
(SEE NOTE 1)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
5B Amoco Production Company
14.301450%
Perry R. Bass, Inc.
1.787681%
* * * * * *
6 Goliad Partners, L. P. Bruce Anderson Goliad Partners, L.P.
31.250000% .01000000 31.250000%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.750000% 18.750000%
Keystone, Inc. Keystone, Inc.
18.750000% 18.750000%
Thru Line Inc. Thru Line Inc.
18.750000% 18.750000%
Perry R. Bass, Inc. Perry R. Bass, Inc.
12.500000% 12.500000%
* * * * * * * * * * * *
7 Amoco Production Company Elliott-Hall Company Goliad Partners, L.P.
100.000000% .02500000 31.250000%
Elliott Industries Sid R. Bass, Inc.
.02500000 18.750000%
Keystone, Inc.
18.750000%
Thru Line Inc.
18.750000%
Perry R. Bass, Inc.
12.500000%
* * * * * *
8 Amoco Production Company Elliott-Hall Company SURFACE TO BASE OF PHOSPHORIA
100.000000% .02500000 FORMATION:
Elliott Industries
.02500000
</TABLE>
<PAGE>
Page 5 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1,1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
9 TOWNSHIP 47 NORTH, RANGE 91 WEST USA W-04082 U.S.A.
Section 17: S/2SW/4 80.00 HBP All
Bass Lease 33494
(SEE NOTE 1)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
Perry R. Bass, Inc.
25.000000%
Sid R. Bass, Inc.
18.750000%
Lee M. Bass, Inc.
18.750000%
Keystone, Inc.
18.750000%
Thru Line Inc.
18.750000%
- - - - - -
BELOW BASE OF PHOSPHORIA
FORMATION:
Amoco Production Company
43.525000%
Perry R. Bass, Inc.
14.118750%
Sid R. Bass, Inc.
10.589063%
Lee M. Bass, Inc.
10.589063%
Keystone, Inc.
10.589062%
Thru Line Inc.
10.589062%
* * * * * *
9 Amoco Production Company Elliott-Hall Company SURFACE TO BASE OF PHOSPHORIA
100.000000% .02500000 FORMATION:
Elliott Industries
.02500000 Goliad Partners, L. P.
31.250000%
</TABLE>
<PAGE>
Page 6 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
10 TOWNSHIP 47 NORTH, RANGE 91 WEST USA W-04083 U.S.A.
Section 9: NE/4, N/2SE4 1,920.00 HBP All
Section 10: All Bass Lease 33487
Section 13: All
Section 15: W/2
Section 24: N/2NW14
(SEE NOTE 1)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sid R. Bass, Inc.
18.750000%
Keystone, Inc.
18.750000%
Thru Line Inc.
18.750000%
Perry R. Bass, Inc.
12.500000%
- - - - - -
BELOW BASE OF PHOSPHORIA
FORMATION:
Amoco Production Company
43.525000%
Goliad Partners, L. P.
17.648437%
Sid R. Bass, Inc.
10.589063%
Keystone, Inc.
10.589062%
Thru Line Inc.
10.589062%
Perry R. Bass, Inc.
7.059375%
* * * * * *
10 Amoco Production Company Elliott-Hall Company SURFACE TO BASE OF PHOSPHORIA
100.000000% .02500000 FORMATION:
Elliott Industries
.02500000 Goliad Partners, L. P.
31.250000%
Sid R. Bass, Inc.
18.750000%
</TABLE>
<PAGE>
Page 7 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
11 TOWNSHIP 47 NORTH, RANGE 91 WEST USA W-04084 U.S.A.
Section 1: Lots 7 and 8, SW/4NW/4, 2,515.13 HBP All
SW/4 Bass Lease 33482
Section 2: Lots 5 and 6, S/2NE/4
Section 3: All
Section 4: All
Section 5: SW/4
Section 12: All
(SEE NOTE 1)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Keystone, Inc.
18.750000%
Thru Line Inc.
18.750000%
Perry R. Bass, Inc.
12.500000%
- - - - - -
BELOW BASE OF PHOSPHORIA
FORMATION:
Amoco Production Company
43.525000%
Goliad Partners, L.P.
17.648437%
Sid R. Bass, Inc.
10.589063%
Keystone, Inc.
10.589062%
Thru Line Inc.
10.589062%
Perry R. Bass, Inc.
7.059375%
* * * * * *
11 Amoco Production Company Elliott-Hall Company SURFACE TO BASE OF PHOSPHORIA
100.000000% .02500000 FORMATION:
Elliott Industries
.02500000 Goliad Partners, L.P.
31.250000%
Sid R. Bass, Inc.
18.750000%
Keystone, Inc.
18.750000%
</TABLE>
<PAGE>
Page 8 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
12 TOWNSHIP 47 NORTH, RANGE 91 WEST 720.00 USA W-04085 U.S.A.
Section 21: N/2 HBP All
Section 22: N/2 Bass Lease 33495
Section 24: N/2SW/4
(SEE NOTE 1)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
Thru Line Inc.
18.750000%
Perry R. Bass, Inc.
12.500000%
- - - - - -
BELOW BASE OF PHOSPHORIA
FORMATION:
Amoco Production Company
43.525000%
Goliad Partners, L.P
17.648437%
Sid R. Bass, Inc.
10.589063%
Keystone, Inc.
10.589062%
Thru Line Inc.
10.589062%
Perry R. Bass, Inc.
7.059375%
* * * * * *
12 Amoco Production Company Elliott-Hall Company SURFACE TO BASE OF PHOSPHORIA
100.000000% .02500000 FORMATION:
Elliott Industries
.02500000 Goliad Partners, L.P.
31.250000%
Sid R. Bass, Inc.
18.750000%
Keystone, Inc.
18.750000%
Thru Line Inc.
18.750000%
</TABLE>
<PAGE>
Page 9 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
13 TOWNSHIP 47 NORTH, RANGE 91 WEST USA W-04086 U.S.A.
Section 7: SE/4 1,600.00 HBP All
Section 8: All Bass Lease 33486
Section 9: NW/4, N/2SW/4,
S/2S/2
Section 17: NW/4, N/2SW/4, SE/4
(SEE NOTE 1)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Perry R. Bass, Inc.
12.500000%
- - - - - -
BELOW BASE OF PHOSPHORIA
FORMATION:
Amoco Production Company
43.525000%
Goliad Partners, L.P.
17.648437%
Sid R. Bass, Inc.
10.589063%
Keystone, Inc.
10.589062%
Thru Line Inc.
10.589062%
Perry R. Bass, Inc.
7.059375%
* * * * * *
13 Amoco Production Company Elliott-Hall Company SURFACE TO BASE OF PHOSPHORIA
100.000000% .02500000 FORMATION:
Elliott Industries
.02500000 Goliad Partners, L.P.
31.250000%
Sid R. Bass, Inc.
18.750000%
Keystone, Inc.
18.750000%
Thru Line Inc.
18.750000%
</TABLE>
<PAGE>
Page 10 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
16 TOWNSHIP 48 NORTH, RANGE 91 WEST USA W-04223 U.S.A.
Section 34: All 720.00 HBU All
Section 35: E/2SE/4 Bass Lease 33478
(SEE NOTE 1)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Perry R. Bass, Inc.
12.500000%
- - - - - -
BELOW BASE OF PHOSPHORIA
FORMATION:
Amoco Production Company
43.525000%
Goliad Partners, L.P.
17.648437%
Sid R. Bass, Inc.
10.589063%
Keystone, Inc.
10.589062%
Thru Line Inc.
10.589062%
Perry R. Bass, Inc.
7.059375%
* * * * * *
16 Amoco Production Company Bill Tomberline SURFACE TO BASE OF PHOSPHORIA
100.000000% .0125000 FORMATION:
Jane Tomberline
.0125000 Perry R. Bass, Inc.
25.000000%
Sid R. Bass, Inc.
18.750000%
Lee M. Bass, Inc.
18.750000%
Keystone, Inc.
18.750000%
Thru Line Inc.
18.750000%
- - - - - -
</TABLE>
<PAGE>
Page 11 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
21 TOWNSHIP 47 NORTH, RANGE 90 WEST USA W-04643 U.S.A.
Section 18: All 1,114.16 HBP All
Section 19: Lots 5, 6, and 7, E/2NW/4, Bass Lease 33506
NE/4SW4, NE/4, N/2SE/4
(SEE NOTE 1)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BELOW BASE OF PHOSPHORIA
FORMATION:
Amoco Production Company
43.525000%
Perry R. Bass, Inc.
14.118750%
Sid R. Bass, Inc.
10.589063%
Lee M. Bass, Inc.
10.589063%
Keystone, Inc.
10.589062%
Thru Line Inc.
10.589062%
* * * * * *
21 Amoco Production Company Rocky Mtn. Properties SURFACE TO BASE OF PHOSPHORIA
100.000000% .01000000 FORMATION:
Charles Byrd McLean
.00400000 Goliad Partners, L.P.
Neil Thomas McLean 31.250000%
.00400000 Sid R. Bass, Inc.
Anthony Charles McLean 18.750000%
.00200000 Keystone, Inc.
Linda G. Austin 18.750000%
.00125000 Thru Line Inc.
Andrew E. Gitlitz: 18.750000%
.00125000 Perry R. Bass, Inc.
12.500000%
- - - - - -
</TABLE>
<PAGE>
Page 12 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
25 TOWNSHIP 48 NORTH, RANGE 91 WEST USA W-05378 U.S.A.
Section 29: W/2SE/4, SW/4 240.00 HBP All
Bass Lease 33296
(SEE NOTE 1)
28 TOWNSHIP 48 NORTH, RANGE 91 WEST USA W-05406 U.S.A.
Section 28: W/2SW/4 160.00 HBP All
Section 29: E/2SE/4 Bass Lease 33297
(SEE NOTE 1)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pearl F. Lagos BELOW BASE OF PHOSPHORIA
.00083333 FORMATION:
Jerry W. Housel
.00041667 Amoco Production Company
43.525000%
Goliad Partners, L.P.
17.648437%
Sid R. Bass, Inc.
10.589063%
Keystone, Inc.
10.589062%
Thru Line Inc.
10.589062%
Perry R. Bass, Inc.
7.059375%
* * * * * *
25 Goliad Partners, L. P. Elizabeth C. Burroughs Goliad Partners, L.P.
31.250000% .00750000 31.250000%
Sid R. Bass, Inc. Ruth E. Gammill Sid R. Bass, Inc.
18.750000% .00750000 18.750000%
Keystone, Inc. Rolland G. Gautsche Keystone, Inc.
18.750000% .00750000 18.750000%
Thru Line Inc. A. M. Culver Company Thru Line Inc.
18.750000% .00375000 18.750000%
Perry R. Bass, Inc. Clive & Ruth J. Stoelk Perry R. Bass, Inc.
12.500000% .00375000 12.500000%
* * * * * * * * * * * * * * * * * *
28 Goliad Partners, L. P. Elizabeth C. Burroughs Goliad Partners, L.P.
31.250000% .03000000 31.250000%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.750000% 18.750000%
Keystone, Inc. Keystone, Inc.
18.750000% 18.750000%
</TABLE>
<PAGE>
Page 13 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
30 TOWNSHIP 48 NORTH, RANGE 91 WEST USA W-05449 U.S.A.
Section 28: NE/4SW/4 40.00 HBU All
Bass Lease 33298
(SEE NOTE 1)
32 TOWNSHIP 48 NORTH, RANGE 91 WEST USA W-05472 U.S.A.
Section 28: SE/4, SE/4SW/4 1,960.00 HBP All
Section 30: SE/4 Bass Lease 33477
Section 31: E/2
Section 32: All
Section 33: All
(SEE NOTE 1)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Thru Line Inc. Thru Line Inc.
18.750000% 18.750000%
Perry R. Bass, Inc. Perry R. Bass, Inc.
12.500000% 12.500000%
* * * * * * * * * * * *
30 Perry R. Bass, Inc. Meyer Koscove Perry R. Bass, Inc.
25.000000% .02500000 25.000000%
Sid R. Bass, Inc. Joseph E. Pepper Sid R. Bass, Inc.
18.750000% .02500000 18.750000%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.750000% 18.750000%
Keystone, Inc. Keystone, Inc.
18.750000% 18.750000%
Thru Line Inc. Thru Line Inc.
18.750000% 18.750000%
* * * * * * * * * * * *
32 Amoco Production Company None SURFACE TO BASE OF PHOSPHORIA
100.000000% FORMATION:
Goliad Partners, L.P.
31.250000%
Sid R. Bass, Inc.
18.750000%
Keystone, Inc.
18.750000%
Thru Line Inc.
18.750000%
Perry R. Bass, Inc.
12.500000%
</TABLE>
<PAGE>
Page 14 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
33 TOWNSHIP 47 NORTH, RANGE 91 WEST USA W-05491 U.S.A.
Section 1: Lots 5 and 6, S/2NE/4, 1,119.14 HBP All
SE/4 Bass Lease 33481
Section 23: N/2, N/2S/2
Section 24: NE/4, N/2SE/4, S/2NW/4
(SEE NOTE 1)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BELOW BASE OF PHOSPHORIA
FORMATION:
Amoco Production Company
43.525000%
Goliad Partners, L.P.
17.648437%
Sid R. Bass, Inc.
10.589063%
Keystone, Inc.
10.589062%
Thru Line Inc.
10.589062%
Perry R. Bass, Inc.
7.059375%
* * * * * *
33 Amoco Production Company None SURFACE TO BASE OF PHOSPHORIA
100.000000% FORMATION:
Goliad Partners, L.P.
31.250000%
Sid R. Bass, Inc.
18.750000%
Keystone, Inc.
18.750000%
Thru Line Inc.
18.750000%
Perry R. Bass, Inc.
12.500000%
- - - - - -
BELOW BASE OF PHOSPHORIA
FORMATION:
</TABLE>
<PAGE>
Page 15 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
34 TOWNSHIP 47 NORTH, RANGE 91 WEST Buffalo U.S.A.
Section 17: NE/4 160.00 039524-A All
HBP
Bass Lease 34083
37 TOWNSHIP 47 NORTH, RANGE 91 WEST USA WA-44460 U.S.A.
Section 6: Lots 8 and 9, S/2NE/4, 477.29 HBP All
SE/4
Section 7: NE/4
(Noncommitted acreage within Unit)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Amoco Production Company
43.525000%
Goliad Partners, L.P.
17.648437%
Sid R. Bass, Inc.
10.589063%
Keystone, Inc.
10.589062%
Thru Line Inc.
10.589062%
Perry R. Bass, Inc.
7.059375%
* * * * * *
34 Goliad Partners, L. P. The Hawks Company Goliad Partners, L.P.
43.750000% .01000000 43.750000%
Sid R. Bass, Inc. K & B Company Sid R. Bass, Inc.
18.750000% .00500000 18.750000%
Keystone, Inc. Marjorie J. Schrantz Keystone, Inc.
18.750000% .00500000 18.750000%
Thru Line Inc. Wheatley Oil Company Thru Line Inc.
18.750000% .00500000 18.750000%
* * * * * * * * * * * * * * * * *
37 ANR Production Company None SURFACE TO 10,590 FEET:
100.000000%
ANR Production Company
50.000000%
Hanson Oil Corporation
37.500000%
International Technology
Resources Petroleum, Inc.
10.000000%
</TABLE>
<PAGE>
Page 16 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
38 TOWNSHIP 47 NORTH, RANGE 91 WEST Buffalo U.S.A.
Section 2: Lots 7 and 8, SW/4, 1,195.05 041711 All
W/2SE/4, S/2NW/4 HBP
Section 5: Lots 5, 6, 7, and 8, Bass Lease 33485
S/2N/2, SE/4
Section 11: W/2
(SEE NOTE 1)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Damson 1977-78 Natural
Gas Income Fund
Series 1978-1 .66%
Series 1978-2 .66%
Series 1978-3 .66%
Damson Oil Corporation .52%
-----------
BELOW 10,590 FEET:
ANR Production Company
100.000000%
***********
38 Amoco Production Company Betty H. Clark SURFACE TO BASE OF PHOSPHORIA
100.000000% .00325000 FORMATION:
A. Joyce McDade Trust,
A. Joyce Biggs McDade, Goliad Partners, L.P.
Trustee .00187500 31.250000%
Dent N. Hand Sid R. Bass, Inc.
.00125000 18.750000%
Margaret E. Mefford, Keystone, Inc.
Living Trust .00125000 18.750000%
Sisk Enterprises Thru Line Inc.
.00125000 18.750000%
Sylvan K. Burt Perry R. Bass, Inc.
.00083340 12.500000%
Eunice L. Shishkowsky -----------
.00083340 BELOW BASE OF PHOSPHORIA
David S. Burt FORMATION:
.00083330
Harold G. Burt Amoco Production Company
.00083330 43.525000%
Lee C. Burt Goliad Partners, L.P.
.00083330 17.648437%
</TABLE>
<PAGE>
Page 17 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
39 TOWNSHIP 47 NORTH, RANGE 91 WEST Buffalo U.S.A.
Section 14: All 640.00 041712 All
HBP
(SEE NOTE 1) Bass Lease 33488
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Holly S. Gleave Sid R. Bass, Inc.
.00062500 10.589063%
Alan T. Heavens Keystone, Inc.
.00062500 10.589062%
Melva C. Nelson Thru Line Inc.
.00062500 10.589062%
Mark C. Regan Perry R. Bass, Inc.
.00062500 7.059375%
Robert Brighton Schick
.00062500
R. W. Slemaker
.00062500
L. D. Chilton
.00041670
Clyde D. Graeber
.00020830
Roger Dell Graeber
.00020830
* * * * * *
39 Amoco Production Company Betty H. Clark SURFACE TO BASE OF PHOSPHORIA
100.000000% .00325000 FORMATION:
UMC Petroleum Corp.
.00300000
A. Joyce Biggs McDade Goliad Partners, L.P.
Trustee, A. Joyce McDade 31.250000%
Trust .00125000 Sid R. Bass, Inc.
R. A. Campbell 18.750000%
.00125000 Keystone, Inc.
Dent N. Hand 18.750000%
.00125000 Thru Line Inc.
Melva C. Nelson 18.750000%
.00125000
</TABLE>
<PAGE>
Page 18 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ruth C. Warren, Trustee, Perry R. Bass. Inc.
Warren Family Trust 12.500000%
.00125000 ----------
Sylvan K. Burt BELOW BASE OF PHOSPHORIA
.00083340 FORMATION:
Eunice L. Shishkowsky
.00083340 Amoco Production Company
David S. Burt 43.525000%
.00083330 Goliad Partners, L.P.
Harold Q. Burt 17.648437%
.00083330 Sid R. Bass, Inc.
Lee C. Burt 10.589063%
.00083330 Keystone. Inc.
Alan T. Heavens 10.589062%
.00062500 Thru Line Inc.
Holly S. Gleave 10.589062%
.00062500 Perry R. Bass, Inc.
Mark C. Regan 7.059375%
.00062500
Robert Brighton Schick
.00062500
R. W. Slemaker
.00062500
L.D. Chilton
.00041670
Clyde D. Graeber
.00020830
Roger Dell Graeber
.00020830
</TABLE>
<PAGE>
Page 19 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
40 TOWNSHIP 47 NORTH, RANGE 91 WEST Buffalo U.S.A.
Section 2: E/2SE/4 80.00 042332 All
HBP
(SEE NOTE 1) Bass Lease 33484
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
40 Amoco Production Company Lyle Wostenberg SURFACE TO BASE OF PHOSPHORIA
100.000000% .03000000 FORMATION:
Goliad Partners, L.P.
31.250000%
Sid R. Bass, Inc.
18.750000%
Keystone, Inc.
18.750000%
Thru Line Inc.
18.750000%
Perry R. Bass, Inc.
12.500000%
------
BELOW BASE OF PHOSPHORIA
FORMATION:
Amoco Production Company
43.525000%
Goliad Partners, L.P.
17.648437%
Sid R. Bass, Inc.
10.589063%
Keystone, Inc.
10.589062%
Thru Line Inc.
10.589062%
Perry R. Bass, Inc.
7.059375%
</TABLE>
<PAGE>
Page 20 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
42 TOWNSHIP 48 NORTH, RANGE 91 WEST USA W-105377 U.S.A.
Section 35: W/2SE/4 80.00 (08/01/97) HBU All
Bass Lease 33480
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
42 Amoco Production Company D L M Partners SURFACE TO BASE OF PHOSPHORIA
100.000000% .04000000 FORMATION:
Perry R. Bass, Inc.
25.000000%
Sid R. Bass, Inc.
18.750000%
Lee M. Bass, Inc.
18.750000%
Keystone, Inc.
18.750000%
Thru Line Inc.
18.750000%
------
BELOW BASE OF PHOSPHORIA
FORMATION:
Amoco Production Company
50.000000%
Perry R. Bass, Inc.
12.500000%
Sid R. Bass, Inc.
9.375000%
Lee M. Bass, Inc.
9.375000%
Keystone, Inc.
9.375000%
Thru Line Inc.
9.3750000%
</TABLE>
<PAGE>
Page 21 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
47 TOWNSHIP 47 NORTH, RANGE 91 WEST USA W-05673 U.S.A
Section 23: SE/4SW/4 40.00 HBP All
Bass Lease 33496
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
47 Amoco Production Company Dale Arthur Clay SURFACE TO BASE OF PHOSPHORIA
100.000000% .00750000 FORMATION:
Shirley S. Sawyer, Trustee
Shirley S. Sawyer Revocable Goliad Partners, L.P.
Trust .00750000 31.250000%
Bitterroot Public Library Sid R. Bass, Inc.
.00500000 18.750000%
Marianne Clay Barnes Keystone, Inc.
.00500000 18.750000%
Julianne Kline Thru Line Inc.
.00500000 18.750000%
Carolyn Sue Clay Perry R. Bass, Inc.
.00333334 12.500000%
Lawrence John Clay -------
.00333333 BELOW BASE OF PHOSPHORIA
Rosalind Grace McCluskey FORMATION:
.00333333
Verna Charlotte Clay, Trustee, Amoco Production Company
Clay Trust dated 11/25/87 50.000000%
.00250000 Goliad Partners, L.P.
Bruce W. Crawford 15.625000%
.00250000 Sid R. Bass, Inc.
Catherine A. Crawford 9.375000%
.00250000 Keystone, Inc.
Alison Crawford Stone 9.375000%
.00250000 Thru Line Inc.
9.375000%
Perry R. Bass, Inc.
6.250000%
</TABLE>
<PAGE>
Page 22 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
48 TOWNSHIP 47 NORTH, RANGE 91 WEST USA W-05674 U.S.A.
Section 24: SE/4SE/4 40.00 HBP All
Bass Lease 33497
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
48 Amoco Production Company Dale Arthur Clay SURFACE TO BASE OF PHOSPHORIA
100.000000% .00750000 FORMATION:
Shirley S. Sawyer, Trustee
Shirley S. Sawyer Revocable Goliad Partners, L.P.
Trust .00750000 31.250000%
Bitterroot Public Library Sid R. Bass, Inc.
.00500000 18.750000%
Marianne Clay Barnes Keystone, Inc.
.00500000 18.750000%
Julianne Kline Thru Line Inc.
.00500000 18.750000%
Carolyn Sue Clay Perry R. Bass, Inc.
.00333334 12.500000%
Lawrence John Clay --------
.00333333 BELOW BASE OF PHOSPHORIA
Rosalind Grace McCluskey FORMATION:
.00333333
Verna Charlotte Clay, Trustee, Amoco Production Company
Clay Trust dated 11/25/87 50.000000%
.00250000 Goliad Partners, L.P.
Bruce W. Crawford 15.625000%
.00250000 Sid R. Bass, Inc.
Catherine A. Crawford 9.375000%
.00250000 Keystone, Inc.
Alison Crawford Stone 9.375000%
.00250000 Thru Line Inc.
9.375000%
Perry R. Bass, Inc.
6.250000%
</TABLE>
<PAGE>
Page 23 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
49 TOWNSHIP 47 NORTH, RANGE 91 WEST USA W-05675 U.S.A.
Section 24: SW/4SE/4 40.00 HBP All
Bass Lease 33498
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
49 Amoco Production Company Dale Arthur Clay SURFACE TO BASE OF PHOSPHORIA
100.000000% .00750000 FORMATION:
Shirley S. Sawyer, Trustee
Shirley S. Sawyer Revocable Goliad Partners, L.P.
Trust .00750000 31.250000%
Bitterroot Public Library Sid R. Bass, Inc.
.00500000 18.750000%
Marianne Clay Barnes Keystone, Inc.
.00500000 18.750000%
Julianne Kline Thru Line Inc.
.00500000 18.750000%
Carolyn Sue Clay Perry R. Bass, Inc.
.00333334 12.500000%
Lawrence John Clay -------
.00333333 BELOW BASE OF PHOSPHORIA
Rosalind Grace McCluskey FORMATION:
.00333333
Verna Charlotte Clay, Trustee, Amoco Production Company
Clay Trust dated 11/25/87 50.000000%
.00250000 Goliad Partners, L.P.
Bruce W. Crawford 15.625000%
.00250000 Sid R. Bass, Inc.
Catherine A. Crawford 9.375000%
.00250000 Keystone, Inc.
Alison Crawford Stone 9.375000%
.00250000 Thru Line Inc.
9.375000%
Perry R. Bass, Inc.
6.250000%
</TABLE>
<PAGE>
Page 24 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
50 TOWNSHIP 47 NORTH, RANGE 90 WEST USA W-021053-A U.S.A.
Section 19: Lot 8, SE/4SW/4, 159.20 HBU All
S/2SE/4 Bass Lease 33507
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
50 Amoco Production Company Neil A. McLean SURFACE TO BASE OF PHOSPHORIA
100.000000% .01000000 FORMATION:
Rocky Mtn. Properties
.01000000 Perry R. Bass, Inc.
Linda G. Austin 25.000000%
.00125000 Sid R. Bass, Inc.
Andrew E. Gitlitz 18.750000%
.00125000 Lee M. Bass, Inc.
Leta Higgins 18.750000%
.00125000 Keystone, Inc.
Pearl F. Lagos 18.750000%
.00083333 Thru Line Inc.
Jerry W. Housel 18.750000%
.00041667 ------
BELOW BASE OF PHOSPHORIA
FORMATION:
Amoco Production Company
50.000000%
Perry R. Bass, Inc.
12.500000%
Sid R. Bass, Inc.
9.375000%
Lee M. Bass, Inc.
9.375000%
Keystone, Inc.
9.375000%
Thru Line Inc.
9.375000%
</TABLE>
<PAGE>
Page 25 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
51 TOWNSHIP 47 NORTH, RANGE 91 WEST USA W-021466 U.S.A.
Section 23: S/2SE/4 80.00 HBP All
51A TOWNSHIP 47 NORTH, RANGE 91 WEST USA W-021466 U.S.A.
Section 21: SE/4 160.00 HBP All
52 TOWNSHIP 47 NORTH, RANGE 91 WEST USA W-021468 U.S.A.
Section 24: S/2SW/4 80.00 HBP All
52A TOWNSHIP 47 NORTH, RANGE 91 WEST USA W-021468 U.S.A.
Section 22: 5/2 480.00 HBP All
Section 25: NE/4
52B TOWNSHIP 47 NORTH, RANGE 91 WEST USA W-021468 U.S.A.
Section 25: NW/4 160.00 HBP All
53 TOWNSHIP 47 NORTH, RANGE 91 WEST 40.00 USA W-021469 U.S.A.
Section 23: SW/4SW/4 HBP All
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
51 Elliott-Hall Company None Elliott-Hall Company
50.000000% 50.000000%
Elliott Industries Elliott Industries
50.000000% 50.000000%
51A Elliott-Hall Company None Elliott-Hall Company
50.000000% 50.000000%
Elliott Industries Elliott Industries
50.000000% 50.000000%
52 Elliott-Hall Company None Elliott-Hall Company
50.000000% 50.000000%
Elliott Industries Elliott Industries
50.000000% 50.000000%
52A Elliott-Hall Company None Elliott-Hall Company
50.000000% 50.000000%
Elliott Industries Elliott Industries
50.000000% 50.000000%
52B Elliott-Hall Company None Elliott-Hall Company
50.000000% 50.000000%
Elliott Industries Elliott Industries
50.000000% 50.000000%
53 Elliott-Hall Company None Elliott-Hall Company
50.000000% 50.000000%
Elliott Industries Elliott Industries
50.000000% 50.000000%
</TABLE>
<PAGE>
Page 26 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
53A TOWNSHIP 47 NORTH, RANGE 91 WEST 320.00 USA W-021469 U.S.A.
Section 26: NW/4 HBP All
Section 27: NW/4
53B TOWNSHIP 47 NORTH, RANGE 91 WEST 320.00 USA W-021469 U.S.A.
Section 26: NE/4 HBP All
Section 27: NE/4
54 TOWNSHIP 47 NORTH, RANGE 90 WEST 160.00 USA W-03731-B U.S.A.
Section 7: NE/4 HBP All
Bass Lease 33472
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
53A Elliott-Hall Company None Elliott-Hall Company
50.000000% 50.000000%
Elliott Industries Elliott Industries
50.000000% 50.000000%
53B Elliott-Hall Company None Elliott-Hall Company
50.000000% 50.000000%
Elliott Industries Elliott Industries
50.000000% 50.000000%
****** ******
54 Amoco Production Company Marvel Lowrance Goliad Partners, L. P.
100.000000% .01333330 31.250000%
Louis J. Baker & Gloria C. Sid R. Bass, Inc.
.00250000 18.750000%
Floyd D. Gorrell & Dorothy E. Keystone, Inc.
.00222220 18.750000%
Thomas Miller McKinney Est Thru Line Inc.
Trust, Priscilla Ann Dunnum, 18.750000%
Trustee .00222220 Perry R. Bass, Inc.
Jeanne H. O'Mahoney 12.500000%
.00222220
P. L. Bacheller
.00071430
William A. Bayerd
.00071430
Emily Curtiss Huntington
.00071430
Richard Huntington & Ethel
.00071430
Genevieve Ruble
.00071430
</TABLE>
<PAGE>
Page 27 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
55 TOWNSHIP 47 NORTH, RANGE 90 WEST USA W-03731-C U.S.A.
Section 8: S/2NW/4 80.00 HBP All
Bass Leases 33476
(SEE NOTE 2) and 33948
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Buford W. Olson, Jr.
.00035720
Jane E. Bangert
.00017860
Fred Huntington
.00017860
Joan Markovich
.00017860
Judith A. Metzger
.00017860
Demores Susan Furtwangler
.00011900
Buford Willard Olson, III
.00011900
Douglas H. Olson
.00011900
*******
55 Goliad Partners, L. P. Marvel Lowrance PER DONLEY DRILLING UNIT AS TO
43.750000% .02000000 PHOSPHORIA FORMATION ONLY:
Sid R. Bass, Inc. Floyd D. Gorrell & Dorothy E.
18.750000% .00333333 Goliad Partners, L. P.
Keystone, Inc. Thomas Miller McKinney Est 33.116250%
18.750000% Trust .00333333 Sid R. Bass, Inc.
Thru Line Inc. Jeanne H. O'Mahoney 18.750000%
18.750000% .00333333 Keystone, Inc.
Louis J. Baker & Gloria C. 18.750000%
.00250000 Thru Line Inc.
P. L. Bacheller 18.750000%
.00071428 Perry R. Bass, Inc.
William A. Bayerd 10.633750%
.00071428 ********
Emily Curtiss Huntington REMAINING ZONES:
.00071428
</TABLE>
<PAGE>
Page 28 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
56 TOWNSHIP 47 NORTH, RANGE 90 WEST USA W-04643-A U.S.A.
Section 9: S/2SE/4 80.00 HBP All
Bass Leases 33504,
33764, 34008, and
38846
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Richard Huntington & Ethel Goliad Partners, L. P.
.00071428 43.750000%
Genevieve Ruble Sid R. Bass, Inc.
.00071428 18.750000%
Buford W. Olson, Jr. Keystone, Inc.
.00035714 18.750000%
Jane E. Bangert Thru Line Inc.
.00017857 18.750000%
Fred Huntington
.00017857
Joan Markovich
.00017857
Judith A. Metzger
.00017857
Demores Susan Furtwangler
.00011904
Buford Willard Olson, III
.00011904
Douglas H. Olson
.00011904
******
56 Goliad Partners, L. P. Rocky Mtn. Properties SURFACE TO BASE OF PHOSPHORIA
25.781250% .01500000 FORMATION:
RES Oil & Gas Ltd. Trilon Oil Company, Inc.
12.500000% .01250000 Goliad Partners, L. P.
Tricon Oil Co., Inc. James Dawson Hancock, Jr. & 30.468750%
12.500000% Margaret Fox Hancock, Sid R. Bass, Inc.
VLS Oil & Gas Ltd. Trustees, the Hanco Trust 14.062500%
12.500000% .00694480 Keystone, Inc.
Sid R. Bass, Inc. Charles Byrd McLean 14.062500%
11.718750% .00400000 Thru Line Inc.
Keystone, Inc. Neil Thomas McLean 14.062500%
11.718750% .00400000
</TABLE>
<PAGE>
Page 29 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Thru Line Inc. John L. and Mary Kathryne RES Oil & Gas Ltd.
11.718750% Hancock, Trustees, JLH Minroy 12.500000%
Perry R. Bass, Inc. Trust .00277770 VLS Oil & Gas Ltd.
1.562500% Emile Guidroz 12.500000%
.00208330 Perry P. Bass, Inc.
Virginia Nelle Rouer 2.343750%
.00208330 *********
Anthony Charles McLean BELOW BASE OF PHOSPHORIA
.00200000 FORMATION:
Carol L. Collins Zachau
.00156260 Goliad Partners, L. P.
Anne Luckett Fisher 29.492188%
.00156250 Sid R. Bass, Inc.
John J. Dorie 13.476562%
.00138882 Keystone, Inc.
G. W. Shipman 13.476562%
.00104165 Thru Line Inc.
Warren W. Shipman III 13.476563%
.00104165 RES Oil & Gas Ltd.
Leona O'Keefe Green 12.500000%
.00104160 VLS Oil & Gas Ltd.
Oral Mae Rodgers 12.500000%
.00104160 Amoco Production Company
Virginia Green Sparkman 3.125000%
.00104160 Perry R. Bass, Inc.
John Hancock Dorie 1.953125%
.00046296
Mark Henry Dorie
.00046296
Martha Dorie Fordyce
.00046296
</TABLE>
<PAGE>
Page 30 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
57 TOWNSHIP 47 NORTH, RANGE 90 WEST USA W-04643-B U.S.A.
Section 8: S/2 480.00 HBP All
Section 9: SW/4 Bass Leases 33473,
33502, and 38847
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. DESCRIPTION OF LAND & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
57 Amoco Production Company Rocky Mtn. Properties SECTION 8: SW/4
50.000000% .01500000
RES Oil & Gas Ltd. Charles Byrd McLean Goliad Partners, L.P.
12.500000% .00400000 26.562500%
VLS Oil & Gas Ltd. Neil Thomas McLean Sid R. Bass, Inc.
12.500000% .00400000 14.062500%
Goliad Partners, L.P. Anthony Charles McLean Keystone, Inc.
10.937500% .00200000 14.062500%
Sid R. Bass, Inc. James Dawson Hancock, Jr. Thru Line Inc.
4.687500% & Margaret Fox Hancock, 14.062500%
Keystone, Inc. Trustees, the Hanco Trust RES Oil & Gas Ltd.
4.687500% .00104170 12.500000%
Thru Line Inc. John L. and Mary Kathryne VLS Oil & Gas Ltd.
4.687500% Hancock, Trustees, JLH Minroy 12.500000%
Trust .00041670 Perry R. Bass, Inc.
Emile Guidroz 6.250000%
.00031250 ------
Virginia Nelle Rouer SECTION 8: SE/4:
.00031250 SECTION 9: SW/4:
Anne Luckett Fisher
.00023440 SURFACE TO BASE OF PHOSPHORIA
Carol L. Collins Zachau FORMATION:
.00023440
John J. Dorie Goliad Partners, L.P.
.00020835 26.562500%
G. W. Shipman Sid R. Bass, Inc.
.00015625 14.062500%
Warren W. Shipman III Keystone, Inc.
.00015625 14.062500%
Leona O'Keefe Green Thru Line Inc.
.00015620 14.062500%
</TABLE>
<PAGE>
Page 31 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
58 TOWNSHIP 47 NORTH, RANGE 90 WEST USA W-04645 U.S.A.
Section 8: NW/4NW/4 40.00 HBP All
Bass Lease 33474
(SEE NOTE 2)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. DESCRIPTION OF LAND & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
57 Oral Mae Rodgers RES Oil & Gas Ltd.
.00015620 12.500000%
Virginia Green Sparkman VLS Oil & Gas Ltd.
.00015620 12.500000%
John Hancock Dorie Perry R. Bass, Inc.
.00006945 6.250000%
Mark Henry Dorie ----------
.00006945 BELOW BASE OF PHOSPHORIA
Martha Dorie Fordyce FORMATION:
.00006945
Amoco Production Company
25.000000%
Goliad Partners, L.P.
18.750000%
RES Oil & Gas Ltd.
12.500000%
VLS Oil & Gas Ltd.
12.500000%
Sid R. Bass, Inc.
9.375000%
Keystone, Inc.
9.375000%
Thru Line Inc.
9.375000%
Perry R. Bass, Inc.
3.125000%
58 TOWNSHIP 47 NORTH, RANGE 90 WEST Amoco Production Company Theresa Gurrieri PER DONLEY DRILLING UNIT AS TO
Section 8: NW/4NW/4 100.000000% .01500000 PHOSPHORIA FORMATION ONLY:
Anne Marie Wiley
.00375000
</TABLE>
<PAGE>
Page 32 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
59 TOWNSHIP 47 NORTH, RANGE 90 WEST USA W-020846-A U.S.A.
Section 8: S/2NE/4 80.00 HBP All
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. DESCRIPTION OF LAND & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
58 Thomas R. Wiley Goliad Partners, L.P.
.00375000 33.116250%
Jean D. Binford Sid R. Bass, Inc.
.00187500 18.750000%
Ruth M. Donley Keystone, Inc.
.00187500 18.750000%
Robert D. Gensch Thru Line Inc.
.00187500 18.750000%
Betty G. Lester Perry R. Bass, Inc.
.00187500 10.633750%
-------
REMAINING ZONES:
Goliad Partners, L.P.
31.250000%
Sid R. Bass, Inc.
18.750000%
Keystone, Inc.
18.750000%
Thru Line Inc.
18.750000%
Perry R. Bass, Inc.
12.500000%
* * * * *
59 TOWNSHIP 47 NORTH, RANGE 90 WEST Amoco Production Company Elliott-Hall Company SURFACE TO BASE OF PHOSPHORIA
Section 8: S/2NE/4 100.000000% .02500000 FORMATION:
Elliott Industries
.02500000 Goliad Partners, L.P.
31.250000%
Sid R. Bass, Inc.
18.750000%
Keystone, Inc.
18.750000%
</TABLE>
<PAGE>
Page 33 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
60 TOWNSHIP 47 NORTH, RANGE 90 WEST USA W-020846-C U.S.A.
Section 9: N/2, N/2SE/4 400.00 HBP All
Bass Lease 33503
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Thru Line Inc.
18.750000%
Perry R. Bass, Inc.
12.500000%
(Assignments Pending)
- - - - - -
BELOW BASE OF PHOSPHORIA
FORMATION:
Amoco Production Company
50.000000%
Goliad Partners, L. P.
15.625000%
Sid R. Bass, Inc.
9.375000%
Keystone, Inc.
9.375000%
Thru Line Inc.
9.375000%
Perry R. Bass, Inc.
6.250000%
(Assignments Pending)
* * * * * *
Amoco Production Company Elliott-Hall Company SURFACE TO BASE OF PHOSPHORIA
100.000000% .0250000 FORMATION:
Elliott Industries
.0250000 Goliad Partners, L. P.
Sprague Petroleum Co. 31.250000%
.0100000 Sid R. Bass, Inc.
18.750000%
Keystone, Inc.
18.750000%
</TABLE>
<PAGE>
Page 34 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
61 TOWNSHIP 47 NORTH, RANGE 90 WEST USA W-020999 U.S.A.
Section 17: All 640.00 HBP All
Bass Lease 34697
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Thru Line Inc.
18.750000%
Perry R. Bass, Inc.
12.500000%
(Assignments Pending)
- - - - - -
BELOW BASE OF PHOSPHORIA
FORMATION:
Amoco Production Company
50.000000%
Goliad Partners, L. P.
15.625000%
Sid R. Bass, Inc.
9.375000%
Keystone, Inc.
9.375000%
Thru Line Inc.
9.375000%
Perry R. Bass, Inc.
6.250000%
(Assignments Pending)
* * * * * *
Goliad Partners, L. P. Rocky Mtn. Properties Goliad Partners, L. P.
43.750000% .01000000 43.750000%
Sid R. Bass, Inc. John T. Hoenshell Sid R. Bass, Inc.
18.750000% .00500000 18.750000%
Keystone, Inc. Alice Van Arsdale Keystone, Inc.
18.750000% .00500000 18.750000%
Thru Line Inc. Byron E. Van Arsdale, Jr. Thru Line Inc.
18.750000% .00500000 18.750000%
</TABLE>
<PAGE>
Page 35 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
62 TOWNSHIP 47 NORTH, RANGE 90 WEST Buffalo U.S.A.
Section 20: NW/4 160.00 040123-A All
HBP
Bass Lease 33508
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Amoco Production Company Thomas Miller McKinney SURFACE TO BASE OF PHOSPHORIA
100.000000% Estate Trust, Priscilla Ann FORMATION:
Dunnum, Trustee
.04000000 Goliad Partners, L. P.
Wilma V. Pierce 31.250000%
.00500000 Sid R. Bass, Inc.
Dale R. and Beth Ann Say 18.750000%
.00500000 Keystone, Inc.
18.750000%
Thru Line Inc.
18.750000%
Perry R. Bass, Inc.
12.500000%
BELOW BASE OF PHOSPHORIA
FORMATION:
Amoco Production Company
50.000000%
Goliad Partners, L. P.
15.625000%
Sid R. Bass, Inc.
9.375000%
Keystone, Inc.
9.375000%
Thru Line Inc.
9.375000%
Perry R. Bass, Inc.
6.250000%
</TABLE>
<PAGE>
Page 36 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
63 TOWNSHIP 47 NORTH, RANGE 90 WEST Buffalo U.S.A.
Section 8: NE/4NE/4 40.00 043410 All
HBU
Bass Lease 34743
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
63 Perry R. Bass, Inc. Charles R. Hetzler Perry R. Bass, Inc.
25.000000% .01000000 25.000000%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.750000% 18.750000%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.750000% 18.750000%
Keystone, Inc. Keystone, Inc.
18.750000% 18.750000%
Thru Line Inc. Thru Line Inc.
18.750000% 18.750000%
TOTAL FEDERAL LANDS - 20,377.04 ACRES, OR 95.14% OF UNIT AREA.
</TABLE>
<PAGE>
Page 37 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STATE LANDS
44 TOWNSHIP 47 NORTH, RANGE 91 WEST State State of
Section 16: N/2SW/4, SE/4 240.00 0-10937 Wyoming
HBP All
(SEE NOTE 1) Bass Lease 33492
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
44 Amoco Production Company None SURFACE TO BASE OF PHOSPHORIA
100.000000% FORMATION:
WPH-GP, Inc.
31.250000%
Sid R. Bass, Inc.
18.750000%
Keystone, Inc.
18.750000%
Thru Line Inc.
18.750000%
Perry R. Bass, Inc.
12.500000%
------
BELOW BASE OF PHOSPHORIA
FORMATION:
Amoco Production Company
43.525000%
WPH-GP, Inc.
17.648437%
Sid R. Bass, Inc.
10.589063%
Keystone, Inc.
10.589062%
Thru Line Inc.
10.589062%
Perry R. Bass, Inc.
7.059375%
</TABLE>
<PAGE>
Page 38 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STATE LANDS (CONT'D)
45 TOWNSHIP 47 NORTH, RANGE 91 WEST State State of
Section 16: S/2SW/4 80.00 0-10938 Wyoming
HBP All
(SEE NOTE 1) Bass Lease 33493
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
45 Amoco Production Company Amanda D. Carpenter SURFACE TO BASE OF PHOSPHORIA
100.000000% .02500000 FORMATION:
WPH-GP, Inc.
31.250000%
Sid R. Bass, Inc.
18.750000%
Keystone, Inc.
18.750000%
Thru Line Inc.
18.750000%
Perry R. Bass, Inc.
12.500000%
----------
BELOW BASE OF PHOSPHORIA
FORMATION:
Amoco Production Company
43.525000%
WPH-GP, Inc.
17.648437%
Sid R. Bass, Inc.
10.589063%
Keystone, Inc.
10.589062%
Thru Line Inc.
10.589062%
Perry R. Bass, Inc.
7.059375%
</TABLE>
<PAGE>
Page 39 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STATE LANDS (CONT'D)
46 TOWNSHIP 47 NORTH, RANGE 91 WEST State State of
Section 16: N/2 320.00 0-10939 Wyoming
HBP All
(SEE NOTE 1) Bass Lease 33491
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
46 Amoco Production Company Betty L. Bower SURFACE TO BASE OF PHOSPHORIA
100.000000% .01250000 FORMATION:
Al J. Johnson
.01250000 WPH-GP, Inc.
31.250000%
Sid R. Bass, Inc.
18.750000%
Keystone, Inc.
18.750000%
Thru Line Inc.
18.750000%
Perry R. Bass, Inc.
12.500000%
----------
BELOW BASE OF PHOSPHORIA
FORMATION:
Amoco Production Company
43.525000%
WPH-GP, Inc.
17.648437%
Sid R. Bass, Inc.
10.589063%
Keystone, Inc.
10.589062%
Thru Line Inc.
10.589062%
Perry R. Bass, Inc.
7.059375%
</TABLE>
<PAGE>
Page 40 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STATE LANDS (CONT'D)
64 TOWNSHIP 47 NORTH, RANGE 90 WEST State State of
Section 16: NE/4 160.00 0-10517 Wyoming
HBP All
Bass Lease 38844
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
64 Perry R. Bass, Trustee L. A. Purtell Perry R. Bass, Trustee
18.750000% .03125000 18.750000%
Sid R. Bass, Inc. Rocky Mtn. Properties Sid R. Bass, Inc.
14.062500% .01500000 14.062500%
Lee M. Bass, Inc. Frances K. Kellogg & Richard Lee M. Bass, Inc.
14.062500% John Kellogg, Co-Trustees, 14.062500%
Keystone, Inc. Frances K. Kellogg Family Trust Keystone, Inc.
14.062500% .01000000 14.062500%
Thru Line Inc. James Dawson Hancock, Jr. & Thru Line Inc.
14.062500% Margaret Fox Hancock, 14.062500%
RES Oil & Gas Ltd. Trustees, the Hanco Trust RES Oil & Gas Ltd.
12.500000% .00694440 12.500000%
VLS Oil & Gas Ltd. John L. and Mary Kathryne VLS Oil & Gas Ltd.
12.500000% Hancock, Trustees, JLH Minroy 12.500000%
Trust .00277780
Emile Guidroz
.00208330
Virginia Nelle Rouer
.00208330
Carol L. Collins Zachau
.00156260
Anne Luckett Fisher
.00156250
John J. Dorie
.00138892
Leona O'Keefe Green
.00104170
Oral Mae Rodgers
.00104170
</TABLE>
<PAGE>
Page 41 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STATE LANDS (CONT'D)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
STATE LANDS (CONT'D)
64 Virginia Green Sparkman
.00104170
G. W. Shipman
.00104165
Warren W. Shipman III
.00104165
John Hancock Dorie
.00046296
Mark Henry Dorie
.00046296
Martha Dorie Fordyce
.00046296
* * * * * *
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
65 TOWNSHIP 47 NORTH, RANGE 90 WEST State State of
Section 16: NW/4 160.00 0-15817 Wyoming
HBP All
Bass Leases 33505
and 38845
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
65 Amoco Production Company Frances K. Kellogg & Richard SURFACE TO BASE OF PHOSPHORIA
50.000000% John Kellogg, Co-Trustees, FORMATION:
RES Oil & Gas Ltd. Frances K. Kellogg Family Trust
12.500000% .01000000 WPH-GP, Inc.
VLS Oil & Gas Ltd. Rocky Mtn. Properties 15.625000%
12.500000% .01000000 Sid R. Bass, Inc.
Perry R. Bass, Trustee Joan C. Carr & Fred H. Carr, 14.062500%
6.250000% Co-Trustees, Joan C. Carr Keystone, Inc.
Sid R. Bass, Inc. Living Trust 14.062500%
4.687500% .00500000 Thru Line Inc.
Lee M. Bass, Inc. James Dawson Hancock, Jr. & 14.062500%
4.687500% Margaret Fox Hancock, RES Oil & Gas Ltd.
Keystone, Inc. Trustees, the Hanco Trust 12.500000%
4.687500% .00104170 VLS Oil & Gas Ltd.
Thru Line Inc. John L. and Mary Kathryne 12.500000%
4.687500% Hancock, Trustees, JLH Minroy Perry R. Bass, Trustee
Trust .00041670 6.250000%
</TABLE>
<PAGE>
Page 42 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STATE LANDS (CONT'D)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Emile Guidroz Perry R. Bass, Inc.
.00031250 6.250000%
Virginia Nelle Rouer Lee M. Bass, Inc.
.00031250 4.687500%
Anne Luckett Fisher ----------
.00023440 BELOW BASE OF PHOSPHORIA
Carol L. Collins Zachau FORMATION:
.00023440
John J. Dorie Amoco Production Company
.00020835 25.000000%
G. W. Shipman RES Oil & Gas Ltd.
.00015625 12.500000%
Warren W. Shipman III VLS Oil & Gas Ltd.
.00015625 12.500000%
Leona O'Keefe Green Sid R. Bass, Inc.
.00015620 9.375000%
Oral Mae Rodgers Keystone, Inc.
.00015620 9.375000%
Virginia Green Sparkman Thru Line Inc.
.00015620 9.375000%
John Hancock Dorie WPH-GP, Inc.
.00006945 7.812500%
Mark Henry Dorie Perry R. Bass, Trustee
.00006945 6.250000%
Martha Dorie Fordyce Lee M. Bass, Inc.
.00006945 4.687500%
Perry R. Bass, Inc.
3.125000%
TOTAL STATE LANDS - 960.00 ACRES, OR 4.48% OF UNIT AREA.
</TABLE>
<PAGE>
Page 43 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PATENTED LANDS
66 TOWNSHIP 47 NORTH, RANGE 90 WEST HBP 10% ROYALTY
Section 8: NE/4NW/4 40.00 Bass Leases 33475 DIVIDED AS FOLLOWS:
Recorded in Book 2, Page 42 33500, 34744, and James K. Cooper
34745 21/192 of 10%
(SEE NOTE 2) Susan Donnell
Konkel 1/9 of
42/192 of 10%
John R. Donnell, Jr.
1/9 of 42/192 of 10%
R. Kennedy & Ann
Donnell Davis Revocable
Trust, Norwest Bank,
Trustee
1/9 of 42/192 of 10%
William W. Donnell
1/9 of 42/192 of 10%
Thomas B. Donnell
1/9 of 42/192 of 10%
Richard H. Donnell
1/9 of 42/192 of 10%
Bruce B. Donnell
1/9 of 42/192 of 10%
Sandra D. Donnell
1/9 of 42/192 of 10%
Nancy D. Lilly
1/9 of 42/192 of 10%
Harriett L. Hares Testamentary Trust
21/192 of 10%
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
66 Goliad Partners, L. P. None PER DONLEY DRILLING UNIT AS TO
43.750000% PHOSPHORIA FORMATION ONLY:
Sid R. Bass, Inc.
18.750000% Goliad Partners, L. P.
Keystone, Inc. 33.116250%
18.750000% Sid R. Bass, Inc.
Thru Line Inc. 18.750000%
18.750000% Keystone, Inc.
18.750000%
Thru Line Inc.
18.750000%
Perry R. Bass, Inc.
10.633750%
-----------
REMAINING ZONES:
Goliad Partners, L. P.
43.750000%
Sid R. Bass, Inc.
18.750000%
Keystone, Inc.
18.750000%
Thru Line Inc.
18.750000%
</TABLE>
<PAGE>
Page 44 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PATENTED LANDS (CONT'D)
Marilee Endrizzl Walton Trust,
First Interstate Bank, Agent
for Trustee
8/192 of 10%
Perry R. Bass, Trustee
75% of 1/4 of 29/192 of 10%
Perry R. Bass, Inc.,
25% of 1/4 of 29/192 of 10%
Sid R. Bass, Inc.
3/16 of 29/192 of 10%
Lee M. Bass, Inc.
3/16 of 29/192 of 10%
Keystone, Inc.
3/16 of 29/192 of 10%
Thru Line Inc.
3/16 of 29/192 of 10%
States Inc.
21/192 of 10%
* (Uncommitted to CA and/or Unit Agreement) Helen Strailiff *
21/192 of 10%
Ronald A. Winsryg
21/192 of 10%
* * * * * * * *
67 TOWNSHIP 47 NORTH, RANGE 90 WEST HBP 10% ROYALTY
Section 8: NW/4NE/4 40.00 Bass Leases 33475, DIVIDED AS FOLLOWS:
Recorded in Book 2, Page 42 33500, 34744, and FROM SURFACE TO BASE
34745 OF PHOSPHORIA
FORMATION:
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
67 Perry R. Bass, Inc. None Perry R. Bass, Inc.
25.000000% 25.000000%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.750000% 18.750000%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.750000% 18.750000%
</TABLE>
<PAGE>
Page 45 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER LESSEE OF RECORD
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE & PERCENTAGE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PATENTED LANDS (CONT'D)
James K. Cooper Keystone, Inc.
21/192 of 10% 18.750000%
Susan Donnell Thru Line Inc.
Konkel 1/9 of 18.750000%
42/192 of 10%
John R. Donnell, Jr.
1/9 of 42/192 of 10%
Ann Donnell Davis
Revocable Trust,
Norwest Bank, Trustee
1/9 of 42/192 of 10%
William W. Donnell
1/9 of 42/192 of 10%
Thomas B. Donnell
1/9 of 42/192 of 10%
Richard H. Donnell
1/9 of 42/192 of 10%
Bruce B. Donnell
1/9 of 42/192 of 10%
Sandra D. Donnell
1/9 of 42/192 of 10%
Nancy D. Lilly
1/9 of 42/192 of 10%
Harriett L. Hares Testamentary Trust
21/192 of 10%
Marilee Endrizzi Walton Trust,
First Interstate Bank, Agent
for Trustee
8/192 of 10%
Perry R. Bass, Trustee
75% of 1/4 of 29/192 of 10%
<CAPTION>
TRACT OVERRIDING ROYALTY WORKING INTEREST
NO. & DECIMAL INTEREST & PERCENTAGE
- ---------------------------------------------------------
<S> <C> <C>
Keystone, Inc.
18.750000%
Thru Line Inc.
18.750000%
</TABLE>
<PAGE>
Page 46 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER LESSEE OF RECORD
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE & PERCENTAGE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PATENTED LANDS (CONT'D)
Perry R. Bass, Inc.
25% of 1/4 of 29/192 of 10%
Sid R. Bass, Inc.
3/16 of 29/192 of 10%
Lee M. Bass, Inc.
3/16 of 29/192 of 10%
Keystone, Inc.
3/16 of 29/192 of 10%
Thru Line Inc.
3/16 of 29/192 of 10%
States Inc.
21/192 of 10%
* (Uncommitted to CA and/or Unit Agreement) Helen Straitiff *
21/192 of 10%
Ronald A. Winsryg
21/192 of 10%
---------------
BELOW PHOSPHORIA FORMATION:
James K. Cooper
21/192 of 10%
Susan Donnell
Konkel 1/9 of
42/192 of 10%
John R. Donnell, Jr.
1/9 of 42/192 of 10%
Ann Donnell Davis
Revocable Trust,
Norwest Bank, Trustee
1/9 of 42/192 of 10%
<CAPTION>
TRACT OVERRIDING ROYALTY WORKING INTEREST
NO. & DECIMAL INTEREST & PERCENTAGE
- -----------------------------------------------------
<S> <C> <C>
</TABLE>
<PAGE>
Page 47 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER LESSEE OF RECORD
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE & PERCENTAGE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PATENTED LANDS (CONT'D)
William W. Donnell
1/9 of 42/192 of 10%
Thomas B. Donnell
1/9 of 42/192 of 10%
Richard H. Donnell
1/9 of 42/192 of 10%
Bruce B. Donnell
1/9 of 42/192 of 10%
Sandra D. Donnell
1/9 of 42/192 of 10%
Nancy D. Lilly
1/9 of 42/192 of 10%
Harriett L. Hares Testamentary Trust
21/192 of 10%
Marilee Endrizzi Walton Trust,
First Interstate Bank, Agent
for Trustee
8/192 of 10%
Perry R. Bass, Trustee
1/2 of 75% of 1/4 of 29/192 of 10%
Perry R. Bass, Inc.
1/2 of 25% of 1/4 of 29/192 of 10%
Sid R. Bass, Inc.
1/2 of 3/16 of 29/192 of 10%
Lee M. Bass, Inc.
1/2 of 3/16 of 29/192 of 10%
Keystone, Inc.
1/2 of 3/16 of 29/192 of 10%
Thru Line Inc.
1/2 of 3/16 of 29/192 of 10%
<CAPTION>
TRACT OVERRIDING ROYALTY WORKING INTEREST
NO. & DECIMAL INTEREST & PERCENTAGE
- --------------------------------------------------
<S> <C> <C>
</TABLE>
<PAGE>
Page 48 of 48
EXHIBIT A-1 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER LESSEE OF RECORD
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE & PERCENTAGE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PATENTED LANDS (CONT'D)
Amoco Production Company
1/2 of 29/192 of 10%
States Inc.
21/192 of 10%
* (Uncommitted to CA and/or Unit Agreement) Helen Straitiff *
21/192 of 10%
Ronald A. Winsryg
21/192 of 10%
TOTAL PATENTED LANDS - 80.00 ACRES, OR .38% OF UNIT AREA.
</TABLE>
RECAPITULATION
<TABLE>
<CAPTION>
LAND ACRES PERCENTAGE
-------- --------- ----------
<S> <C> <C>
Federal 20,377.04 95.14%
State 960.00 4.48%
Patented 80.00 .38%
--------- ----------
TOTAL 21,417.04 100.00%
</TABLE>
NOTE 1: This lease is subject to Pooling Agreement dated September 8, 1952, as
amended, between Stanolind Oil and Gas Company and General Petroleum
Corporation which provided for the sharing of costs and production as
follows: Stanolind/Amoco - 87.05%
General/Mobil - 12.95%
Deep rights reflect pooled interests. Bass acquired 100% of interest in
shallow depths subject to Pooling Agreement.
NOTE 2: This lease is committed to the Donley Drilling Unit dated June 29,
1956, and to Communitization Agreement No. 14-08-001-3468, effective
August 9, 1956, approved November 5, 1956. Said Agreements cover
Tracts 55, 58, and 66, containing 160.00 acres, more or less.
<PAGE>
Page 1 of 23
EXHIBIT A-2 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK FIELD EXTENSION (PHOSPHORIA) UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS
1 TOWNSHIP 46 NORTH, RANGE 91 WEST USA W-688 U.S.A.
Section 1: Lots 5, 6, 11, and 12 124.68 HBP 100%
Bass Leases 31102, 32241,
33400, 34266, 38358, and 40495
2 TOWNSHIP 46 NORTH, RANGE 91 WEST USA W-688 U.S.A.
Section 1: Lots 13,14, S/2NE/4 160.00 HBP 100%
Bass Leases 31102, 32241,
33400, 34266, 38358, and 40495
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Worland Associates Burton G. Lowe SURFACE TO TOP OF PHOSPHORIA
100.000000% .00666667 FORMATION:
Joseph S. Pollare Living Trust,
Joseph S. Pollare Trustee Worland Associates
.00666667 100.000000%
Swinehart 1973 Trust, John C. - - - - - -
Swinehart and Leslie Mallett, PHOSPHORIA FORMATION ONLY:
Co-Trustees
.00666666 Worland Associates
50.000000%
Worland Associates II
50.000000%
- - - - - -
BELOW BASE OF PHOSPHORIA
FORMATION:
Worland Associates
100.000000%
* * * * * *
2 Worland Associates Lakeview Oil Company SURFACE TO BASE OF PHOSPHORIA
100.000000% .01237500 FORMATION, OR WHERE THE
Allagesh Oil Company PHOSPHORIA FORMATION IS NOT
.01000000 FOUND, TO A DEPTH OF 9,580
E.E. Engleman FEET:
.01000000
Sims Properties Goliad Partners, L. P.
.01000000 37.500000%
Sid R. Bass, Inc.
18.750000%
</TABLE>
<PAGE>
Page 2 of 23
EXHIBIT A-2 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK FIELD EXTENSION (PHOSPHORIA) UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
3 TOWNSHIP 47 NORTH, RANGE 90 WEST USA W-03441-A U.S.A.
Section 29: S/2SW/4, NW/4SW/4 120.00 HBP 100%
Bass Leases 33350, 33509,
38848, 38855, and 39039
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
T-Bar Oil & Gas, Ltd. Keystone, Inc.
.00850000 18.750000%
Burton G. Lowe Thru Line Inc.
.00667000 18.750000%
Joseph S. Pollare Living Trust, Perry R. Bass, Inc.
Joseph S. Pollare Trustee 6.250000%
.00667000 - - - - - -
Swinehart 1973 Trust, John C. BELOW BASE OF PHOSPHORIA
Swinehart and Leslie Mallett, FORMATION, OR WHERE THE
Co-Trustees PHOSPHORIA FORMATION IS NOT
.00666000 FOUND, TO A DEPTH OF 9,580
Harry M. Perry FEET:
.00412500
Worland Associates
100.000000%
* * * * * *
3 Mobil Expl. & Prod. North Rocky Mtn. Properties PHOSPHORIA FORMATION ONLY:
America, Inc. .02500000
100.000000% Devon Energy Corporation Goliad Partners, L. P.
.01000000 34.080923%
Betty S. Veronda Sid R. Bass, Inc.
.01000000 18.750000%
Perry R. Bass, Inc. Keystone, Inc.
.00125000 18.750000%
Sid R. Bass, Inc. Thru Line Inc.
.00093750 18.750000%
Lee M. Bass, Inc. Perry R. Bass, Inc.
.00093750 9.669077%
Keystone, Inc. - - - - - -
.00093750 ALL OTHER FORMATIONS:
</TABLE>
<PAGE>
Page 3 of 23
EXHIBIT A-2 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK FIELD EXTENSION (PHOSPHORIA) UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
4 TOWNSHIP 47 NORTH, RANGE 91 WEST USA W-06876 U.S.A.
Section 26: SE14 160.00 HBP 100%
Bass Leases 33349, 33499,
38856, and 39037
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Thru Line Inc. Mobil Expl. & Prod. Co.
.00093750 100.000000%
* * * * * * * * * * * *
4 Mobil Expl. & Prod. North V. H. Knisely SURFACE TO BASE OF PHOSPHORIA
America, Inc. .01750000 FORMATION:
100% Mobil Expl. & Prod. North
America, Inc. Goliad Partners, L. P.
.01500000 34.080923%
Bruce Anderson Sid R. Bass, Inc.
.00875000 18.750000%
K & R Enterprises Keystone, Inc.
.00500000 18.750000%
Richard L. Peterson Thru Line Inc.
.00375000 18.750000%
Perry R. Bass, Inc.
9.669077%
--------
BELOW BASE OF PHOSPHORIA
FORMATION:
Goliad Partners, L. P.
33.128216%
Sid R. Bass, Inc.
18.178376%
Keystone, Inc.
18.178375%
Thru Line Inc.
18.178375%
Perry R. Bass, Inc.
9.287993%
</TABLE>
<PAGE>
Page 4 of 23
EXHIBIT A-2 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK FIELD EXTENSION (PHOSPHORIA) UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
5 TOWNSHIP 47 NORTH, RANGE 90 WEST USA W-44459 U.S.A.
Section 32: W/2NE/4 80.00 HBP 100%
Bass Leases 33354, 33382,
33390, 33394, 33513,
38854, and 39038
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Amoco Production Company
3.048665%
* * * * * *
5 Goliad Partners, L.P. Lakeview Oil Company SURFACE TO BASE OF PHOSPHORIA
30.678025% .00529290 FORMATION:
Sid R. Bass, Inc. Frank Lovett
17.415372% .00176430 Goliad Partners, L.P.
Keystone, Inc. 31.790212%
17.415371% Sid R. Bass, Inc.
Thru Line Inc. 18.082684%
17.415371% Keystone, Inc.
Perry R. Bass, Inc. 18.082684%
9.957841% Thru Line Inc.
William G. Helis Estate 18.082684%
3.559020% Perry R. Bass, Inc.
Amoco Production Company 10.402716%
3.559000% William G. Helis Estate
3.559020%
* * * * * *
BELOW BASE OF PHOSPHORIA
FORMATION:
Goliad Partners, L.P.
31.234119%
Sid R. Bass, Inc.
17.749028%
Keystone Inc.
17.749027%
Thru Line Inc.
17.749027%
</TABLE>
<PAGE>
Page 5 of 23
EXHIBIT A-2 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK FIELD EXTENSION (PHOSPHORIA) UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5 FEDERAL LANDS (CONT'D)
6 TOWNSHIP 46 NORTH, RANGE 90 WEST USA W-32937 U.S.A.
Section 6: S/2NE/4, NE/4SW/4 120.00 HBP 100%
Bass Leases 33391,
33401, 34267, and 38359
7 TOWNSHIP 46 NORTH, RANGE 90 WEST USA W-32937 U.S.A.
Section 6: N/2SE/4 80.00 HBP 100%
Bass Leases 33391,
33401, 34267, and 38359
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Perry R. Bass, Inc.
10.180279%
William G. Helis Estate
3.559020%
Amoco Production Company
1.779500%
* * * * * *
6 Goliad Partners, L. P. Maurice W. Brown Goliad Partners, L.P.
35.416667% .04000000 35.416667%
Sid R. Bass, Inc. Joseph S. Rose, Jr. Sid R. Bass, Inc.
18.750000% .01000000 18.750000%
Keystone, Inc. Lakeview Oil Company Keystone, Inc.
18.750000% .00825000 18.750000%
Thru Line Inc. T-Bar Oil & Gas, Ltd. Thru Line Inc.
18.750000% .00566666 18.750000%
Perry R. Bass, Inc. Frank Lovett Perry R. Bass, Inc.
8.333333% .00275000 8.333333%
* * * * * * * * * * * * * * * * * *
7 Goliad Partners, L. P. Maurice W. Brown Goliad Partners, L.P.
35.416667% .04000000 35.416667%
Sid R. Bass, Inc. Joseph S. Rose, Jr. Sid R. Bass, Inc.
18.750000% .01000000 18.750000%
Keystone, Inc. Lakeview Oil Company Keystone, Inc.
18.750000% .00825000 18.750000%
Thru Line Inc. T-Bar Oil & Gas, Ltd. Thru Line Inc.
18.750000% .00566666 18.750000%
Perry R. Bass, Inc. Frank Lovett Perry R. Bass, Inc.
8.333333% .00275000 8.333333%
</TABLE>
<PAGE>
Page 6 of 23
EXHIBIT A-2 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK FIELD EXTENSION (PHOSPHORIA) UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
8 TOWNSHIP 46 NORTH, RANGE 90 WEST USA W-36572 U.S.A.
Section 6: Lots 16 and 17 80.00 HBP 100%
Bass Leases 33392,
33402, 34268, and 38357
9 TOWNSHIP 46 NORTH, RANGE 90 WEST USA W-0134933 U.S.A.
Section 5: S/2NW/4 80.00 HBP 100%
Bass Lease 33360
10 TOWNSHIP 47 NORTH, RANGE 90 WEST USA W-0134988-B U.S.A.
Section 32: W/2SE/4 80.00 HBP 100%
Bass Lease 33352
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
8 Goliad Partners, L. P. T-Bar Oil & Gas, Ltd. Goliad Partners, L. P.
35.416667% .01700000 35.416667%
Sid R. Bass, Inc. Lakeview Oil Company Sid R. Bass, Inc.
18.750000% .00875000 18.750000%
Keystone, Inc. Frank Lovett Keystone, Inc.
18.750000% .00291700 18.750000%
Thru Line Inc. Thru Line Inc.
18.750000% 18.750000%
Perry R. Bass, Inc. Perry R. Bass, Inc.
8.333333% 8.333333%
* * * * * * * * * * * *
9 Goliad Partners, L. P. Sella R. Hayutin Goliad Partners, L. P.
31.250000% .04000000 31.250000%
Sid R. Bass, Inc. Rosalie Hayutin VanHorn Sid R. Bass, Inc.
18.750000% .04000000 18.750000%
Keystone, Inc. Keystone, Inc.
18.750000% 18.750000%
Thru Line Inc. Thru Line Inc.
18.750000% 18.750000%
Perry R. Bass, Inc. Perry R. Bass, Inc.
12.500000% 12.500000%
* * * * * * * * * * * *
10 Goliad Partners, L. P. A. M. Culver Company Goliad Partners, L. P.
31.250000% .04000000 31.250000%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.750000% 18.750000%
Keystone, Inc. Keystone, Inc.
18.750000% 18.750000%
Thru Line Inc. Thru Line Inc.
18.750000% 18.750000%
</TABLE>
<PAGE>
Page 7 of 23
EXHIBIT A-2 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK FIELD EXTENSION (PHOSPHORIA) UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
11 TOWNSHIP 47 NORTH, RANGE 90 WEST USA W-0148758-B U.S.A.
Section 31: SE/4 160.00 HBP 100%
Bass Leases 33355,
33395, 34269, and 38352
12 TOWNSHIP 46 NORTH, RANGE 90 WEST USA W-0168275 U.S.A.
Section 5: Lots 7, 8, 9, 10, 15, 206.00 HBP 100%
and 16 Bass Leases 33357, 33397,
34270, and 38353
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
11 Perry R. Bass, Inc. Perry R. Bass, Inc.
12.500000% 12.500000%
****** ******
Goliad Partners, L.P. A. M. Culver Company Goliad Partners, L.P.
34.375000% .03000000 34.375000%
Sid R. Bass, Inc. Lakeview Oil Company Sid R. Bass, Inc.
18.750000% .00618750 18.750000%
Keystone, Inc. T-Bar Oil & Gas, Ltd. Keystone, Inc.
18.750000% .00425000 18.750000%
Thru Line Inc. Sims Properties Thru Line Inc.
18.750000% .00333340 18.750000%
Perry R. Bass, Inc. Allagesh Oil Company Perry R. Bass, Inc.
9.375000% .00333330 9.375000%
E. E. Engleman
.00333330
Harry M. Perry
.00206250
* * * * * *
12 Goliad Partners, L.P. Elaine Wolf Goliad Partners, L.P.
31.250000% .03000000 31.250000%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.750000% 18.750000%
Keystone, Inc. Keystone, Inc.
18.750000% 18.750000%
Thru Line Inc. Thru Line Inc.
18.750000% 18.750000%
Perry R. Bass, Inc. Perry R. Bass, Inc.
12.500000% 12.500000%
</TABLE>
<PAGE>
Page 8 of 23
EXHIBIT A-2 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK FIELD EXTENSION (PHOSPHORIA) UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
13 TOWNSHIP 46 NORTH, RANGE 90 WEST USA W-0168275 U.S.A.
Section 6: Lot 21 36.34 HBP 100%
Bass Leases 33357, 33397,
34270, and 38353
14 TOWNSHIP 46 NORTH, RANGE 90 WEST USA W-0168275 U.S.A.
Section 6: Lots 8, 9, 14, and 15 125.52 HBP 100%
Bass Leases 33357, 33397,
34270, and 38353
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
13 Goliad Partners, L.P. Elaine Wolf Goliad Partners, L.P.
31.250000% .03000000 34.375000%
Sid R. Bass, Inc. Lakeview Oil Company Sid R. Bass, Inc.
18.750000% .00618750 18.750000%
Keystone, Inc. T-Bar Oil & Gas, Ltd. Keystone, Inc.
18.750000% .00425000 18.750000%
Thru Line Inc. Sims Properties Thru Line Inc.
18.750000% .00333400 18.750000%
Perry R. Bass, Inc. Allagesh Oil Company Perry R. Bass, Inc.
12.500000% .00333300 9.375000%
E. E. Engleman
.00333300
Harry M. Perry
.00206250
******
14 Goliad Partners, L.P. Elaine Wolf Goliad Partners, L.P.
31.250000% .03000000 34.375000%
Sid R. Bass, Inc. Lakeview Oil Company Sid R. Bass, Inc.
18.750000% .00618750 18.750000%
Keystone, Inc. T-Bar Oil & Gas, Ltd. Keystone, Inc.
18.750000% .00425000 18.750000%
Thru Line Inc. Sims Properties Thru Line Inc.
18.750000% .00333340 18.750000%
Perry R. Bass, Inc. Allagesh Oil Company Perry R. Bass, Inc.
12.500000% .00333330 9.375000%
E.E. Engleman
.00333330
Harry M. Perry
.00206250
</TABLE>
<PAGE>
Page 9 of 23
EXHIBIT A-2 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK FIELD EXTENSION (PHOSPHORIA) UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
15 TOWNSHIP 47 NORTH, RANGE 90 WEST USA W-0254680-A U.S.A.
Section 31: Lots 5, 6, E/2NW/4 158.56 HBP 100%
Bass Leases 33351, 33393,
34271, and 38351
16 TOWNSHIP 47 NORTH, RANGE 90 WEST USA W-0254680-A U.S.A.
Section 31: Lots 7, 8, E/2SW/4 158.72 HBP 100%
Bass Leases 33351,
33393, 34271, and 38351
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
15 Goliad Partners, L.P. Allagesh Oil Company Goliad Partners, L.P.
31.250000% .00750000 34.375000%
Sid R. Bass, Inc. E. E. Engleman Sid R. Bass, Inc.
18.750000% .00750000 18.750000%
Keystone, Inc. Sims Properties Keystone, Inc.
18.750000% .00750000 18.750000%
Thru Line Inc. Lakeview Oil Company Thru Line Inc.
18.750000% .00618750 18.750000%
Perry R. Bass, Inc. Robert J. Connaghan Perry R. Bass, Inc.
12.500000% .00500000 9.375000%
T-Bar Oil & Gas, Ltd.
.00425000
Harry M. Perry
.00206250
*******
16 Goliad Partners, L.P. Allagesh Oil Company Goliad Partners, L.P.
31.250000% .01500000 34.375000%
Sid R. Bass, Inc. Sims Properties Sid R. Bass, Inc.
18.750000% .00750000 18.750000%
Keystone, Inc. Lakeview Oil Company Keystone, Inc.
18.750000% .00618800 18.750000%
Thru Line Inc. Robert J. Connaghan Thru Line Inc.
18.750000% .00500000 18.750000%
Perry R. Bass, Inc. T-Bar Oil & Gas, Ltd. Perry R. Bass, Inc.
12.500000% .00425000 9.375000%
Harry M. Perry
.00206300
</TABLE>
<PAGE>
Page 10 of 23
EXHIBIT A-2 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK FIELD EXTENSION (PHOSPHORIA) UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
17 TOWNSHIP 47 NORTH, RANGE 90 WEST USA W-0325327 U.S.A.
Section 30: Lots 7, 8, E/2SW/4, 318.46 HBP 100%
SE/4 Bass Lease 33510
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
17 Amoco Production Company G E O Exploration Inc. SURFACE TO BASE OF PHOSPHORIA
50.000000% .03125 x .875 to .750 FORMATION:
William G. Helis Estate Sliding Scale (.02734380)
50.000000% William G. Helis Estate
50.000000%
Goliad Partners, L. P.
15.625000%
Sid R. Bass, Inc.
9.375000%
Keystone, Inc.
9.375000%
Thru Line Inc.
9.375000%
Perry R. Bass, Inc.
6.250000%
----------
BELOW BASE OF PHOSPHORIA
FORMATION:
William C. Helis Estate
50.000000%
Amoco Production Company
25.000000%
Goliad Partners, L. P.
7.812500%
Sid R. Bass, Inc.
4.687500%
Keystone, Inc.
4.687500%
</TABLE>
<PAGE>
Page 11 of 23
EXHIBIT A-2 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK FIELD EXTENSION (PHOSPHORIA) UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
18 TOWNSHIP 47 NORTH, RANGE 91 WEST USA W-0325328 U.S.A.
Section 25: S/2 320.00 HBP 100%
Bass Leases 33384 and
39040
19 TOWNSHIP 46 NORTH, RANGE 90 WEST USA W-0168275 U.S.A.
Section 6: Lots 10, 11, and 13 82.60 HBP 100%
Bass Leases 33357, 33397,
34270, and 38353
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Thru Line Inc.
4.687500%
Perry R. Bass, Inc.
3.125000%
******
18 Goliad Partners, L. P. None Goliad Partners, L. P.
41.156750% 41.156750%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.750000% 18.750000%
Keystone, Inc. Keystone, Inc.
18.750000% 18.750000%
Thru Line Inc. Thru Line Inc.
18.750000% 18.750000%
Perry R. Bass, Inc. Perry R. Bass, Inc.
2.593250% 2.593250%
****** ******
19 Goliad Partners, L. P. Elaine Wolf Goliad Partners, L. P.
31.250000% .03000000 34.375000%
Sid R. Bass, Inc. Allagesh Oil Company Sid R. Bass, Inc.
18.750000% .00666670 18.750000%
Keystone, Inc. Lakeview Oil Company Keystone, Inc.
18.750000% .00618750 18.750000%
Thru Line Inc. T-Bar Oil & Gas, Ltd. Thru Line Inc.
18.750000% .00425000 18.750000%
Perry R. Bass, Inc. Sims Properties Perry R. Bass, Inc.
12.500000% .00333330 9.375000%
Harry M. Perry
.00206250
</TABLE>
<PAGE>
Page 12 of 23
EXHIBIT A-2 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK FIELD EXTENSION (PHOSPHORIA) UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
19 TOWNSHIP 46 NORTH, RANGE 90 WEST 35.82 USA W-079516 U.S.A.
Section 6: Lot 12 HBP 100%
Bass Leases 33356, 33396,
34272, and 38355
Total Tract 19 118.42 (Communitization Agreement NW - 348)
20 TOWNSHIP 46 NORTH, RANGE 90 WEST USA W-079516 U.S.A.
Section 6: Lot 18 40.00 HBP 100%
Bass Leases 33356, 33396,
34272, and 38355
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
19 Goliad Partners, L. P. Lakeview Oil Company Goliad Partners, L. P.
34.375000% .00618750 34.375000%
Sid R. Bass, Inc. T-Bar Oil & Gas, Ltd. Sid R. Bass, Inc.
18.750000% .00425000 18.750000%
Keystone, Inc. Jerome B. Guinand Keystone, Inc.
18.750000% .00350000 18.750000%
Thru Line Inc. Allagesh Oil Company Thru Line Inc.
18.750000% .00333330 18.750000%
Perry R. Bass, Inc. Eunice D. Lowe Perry R. Bass, Inc.
9.375000% .00250000 9.375000%
Kearns-Tribune Investments Inc.
.01575000
Paul T. Walton 1990 Revocable
Trust .01575000
Mary L. Tuttle Hagstrom
.00250000
Harry M. Perry
.00206250
Sims Properties
.00166670
20 Goliad Partners, L. P. Helen E. Walton Goliad Partners, L. P.
34.375000% .03150000 34.375000%
Sid R. Bass, Inc. Lakeview Oil Company Sid R. Bass, Inc.
18.750000% .00618750 18.750000%
Keystone, Inc. T-Bar Oil & Gas, Ltd. Keystone, Inc.
18.750000% .00425000 18.750000%
Thru Line Inc. Jerome S. Guinand Thru Line Inc.
18.750000% .00350000 18.750000%
</TABLE>
<PAGE>
Page 13 of 23
EXHIBIT A-2 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK FIELD EXTENSION (PHOSPHORIA) UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
20 TOWNSHIP 46 NORTH, RANGE 90 WEST 36.00 USA W-079516-A U.S.A.
Section 6: Lot 19 HBP 100%
Bass Leases 33358, 33398,
34273, and 38356
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
20 Perry R. Bass, Inc. Allagesh Oil Company Perry R. Bass, Inc.
9.375000% .00333330 9.375000%
Eunice D. Lowe
.00250000
Mary L. Tuttle Hagstrom
.00250000
Harry M. Perry
.00206250
Sims Properties
.00166670
---------
Goliad Partners, L. P. Helen E. Walton Goliad Partners, L. P.
34.375000% .03150000 34.375000%
Sid R. Bass, Inc. Lakeview Oil Company Sid R. Bass, Inc.
18.750000% .00618750 18.750000%
Keystone, Inc. T-Bar Oil & Gas, Ltd. Keystone, Inc.
18.750000% .00425000 18.750000%
Thru Line Inc. Jerome B. Guinand Thru Line Inc.
18.750000% .00350000 18.750000%
Perry R. Bass, Inc. Allagesh Oil Company Perry R. Bass, Inc.
9.375000% .00333330 9.375000%
Eunice D. Lowe
.00250000
Mary L. Tuttle Hagstrom
.00250000
Harry M. Perry
.00206250
Sims Properties
.00166670
</TABLE>
<PAGE>
Page 14 of 23
EXHIBIT A-2 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK FIELD EXTENSION (PHOSPHORIA) UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
20 TOWNSHIP 46 NORTH, RANGE 90 WEST 36.17 USA W-0168275 U.S.A.
Section 6: Lot 20 HBP 100%
Bass Leases 33357, 33397,
34270, and 38353
20 TOWNSHIP 46 NORTH, RANGE 90 WEST 40.00 USA W-098502-A U.S.A.
Section 6: SE/4NW/4 HBP 100%
Bass Leases 33359, 33399,
34274, and 38354
Total Tract 20 152.17 (Communitization
Agreement NW-351)
21 TOWNSHIP 47 NORTH, RANGE 90 WEST USA W-11767 U.S.A.
Section 32: NE/4SW/4 40.00 HBP 100%
Bass Lease 33514
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
20 Goliad Partners, L. P. Elaine Wolf Goliad Partners, L. P.
31.250000% .03000000 34.375000%
Sid R. Bass, Inc. Allagesh Oil Company Sid R. Bass, Inc.
18.750000% .00666670 18.750000%
Keystone, Inc. Lakeview Oil Company Keystone, Inc.
18.750000% .00618750 18.750000%
Thru Line Inc. Sims Properties Thru Line Inc.
18.750000% .00333330 18.750000%
Perry R. Bass, Inc. Harry M. Perry Perry R. Bass, Inc.
12.500000% .00206250 9.375000%
T-Bar Oil & Gas, Ltd.
.00425000
---------
Goliad Partners, L. P. Zena H. Andrews Estate Goliad Partners, L. P.
34.375000% .03000000 34.375000%
Sid R. Bass, Inc. Allagesh Oil Company Sid R. Bass, Inc.
18.750000% .00666670 18.750000%
Keystone, Inc. Lakeview Oil Company Keystone, Inc.
18.750000% .00618750 18.750000%
Thru Line Inc. T-Bar Oil & Gas, Ltd. Thru Line Inc.
18.750000% .00425000 18.750000%
Perry R. Bass, Inc. Sims Properties Perry R. Bass, Inc.
9.375000% .00333330 9.375000%
Harry M. Perry
.00206250
----------
Amoco Production Company Perry R. Bass, Inc. SURFACE TO BASE OF PHOSPHORIA
50.000000% .01562500 FORMATION:
William G. Helis Estate Sid R. Bass, Inc.
50.000000% .01171875
</TABLE>
<PAGE>
Page 15 of 23
EXHIBIT A-2 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK FIELD EXTENSION (PHOSPHORIA) UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- -------------------------------------------------------- ------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
* Bass and Amoco have no
working interest in this Tract
until Well #27-32 pays out.
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lee M. Bass, Inc. William G. Helis Estate
.01171875 50.000000%
Keystone, Inc. Goliad Partners, L. P.
.01171875 15.625000% *
Thru Line Inc. Sid R. Bass, Inc.
.01171875 9.375000% *
Keystone, Inc.
9.375000% *
Thru Line Inc.
9.375000% *
Perry R. Bass, Inc.
6.2500000% *
-----------
BELOW BASE OF PHOSPHORIA
FORMATION:
William G. Helis Estate
50.000000%
Amoco Production Company
25.000000% *
Goliad Partners, L. P.
7.812500% *
Sid R. Bass, Inc.
4.687500% *
Keystone, Inc.
4.687500% *
Thru Line Inc.
4.687500% *
Perry R. Bass, Inc.
3.125000% *
</TABLE>
<PAGE>
Page 16 of 23
EXHIBIT A-2 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK FIELD EXTENTION (PHOSPHORIA) UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
21 TOWNSHIP 47 NORTH, RANGE 90 WEST 120.00 USA W-7871 U.S.A.
Section 32: NW/4SW/4, S/2SW/4 HBP 100%
Bass Lease 33512
*Bass and Amoco have no
working interest in this Tract
until Well #27-32 pays out.
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Amoco Production Company Audrey L. Foster Trust SURFACE TO BASE OF PHOSPHORIA
50.000000% .01500000 FORMATION:
William G. Helis Estate Helen D. McVey
50.000000% .01500000 William G. Helis Estate
Perry R. Bass, Inc. 50.000000%
.00812500 Goliad Partners, L. P.
Sid R. Bass, Inc. 15.625000% *
.00609375 Sid R. Bass, Inc.
Lee M. Bass, Inc. 9.375000% *
.00609375 Keystone, Inc.
Keystone, Inc. 9.375000% *
.00609375 Thru Line Inc.
Thru Line Inc. 9.375000% *
.00609375 Perry R. Bass, Inc.
6.250000%
---------
BELOW BASE OF PHOSPHORIA
FORMATION:
William G. Helis Estate
50.000000%
Amoco Production Company
25.000000% *
Goliad Partners, L. P.
7.812500% *
Sid R. Bass, Inc.
4.687500% *
Keystone, Inc.
4.687500% *
</TABLE>
<PAGE>
Page 17 of 23
EXHIBIT A-2 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK FIELD EXTENSION (PHOSPHORIA) UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
Total Tract 21 160.00 (Communitization
Agreement NW - 434)
22 TOWNSHIP 47 NORTH, RANGE 90 WEST USA W-1 1765 U.S.A.
Section 32: N/2NW/4 80.00 HBP 100%
Bass Lease 33511
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Thru Line Inc.
4.687500% *
Perry R. Bass, Inc.
3.125000% *
* * * * * *
Amoco Production Company G E O Exploration Inc. SURFACE TO BASE OF PHOSPHORIA
50.000000% .03125 x .875 to .750 FORMATION:
William G. Helis Estate Sliding Scale (.02734375)
50.000000% William G. Helis Estate
50.000000%
Goliad Partners, L. P.
15.625000%
Sid R. Bass, Inc.
9.375000%
Keystone, Inc.
9.375000%
Thru Line Inc.
9.375000%
Perry R. Bass, Inc.
6.250000%
---------
BELOW BASE OF PHOSPHORIA
FORMATION:
William G. Helis Estate
50.000000%
Amoco Production Company
25.000000%
Goliad Partners, L. P.
7.812500%
</TABLE>
<PAGE>
Page 18 of 23
EXHIBIT A-2 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK FIELD EXTENSION (PHOSPHORIA) UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
22 TOWNSHIP 47 NORTH, RANGE 90 WEST 80.00 USA W-0134988-B U.S.A.
Section 32: S/2NW/4 HBP 100%
Bass Lease 33352
Total Tract 22 160.00 (Communitization
Agreement NW - 461)
23 TOWNSHIP 47 NORTH, RANGE 90 WEST USA W-0254680-A U.S.A.
Section 31: S/2NE/4 80.00 HBP 100%
Bass Leases 33351, 33393,
34271, and 38351
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sid R. Bass, Inc.
4.687500%
Keystone, Inc.
4.687500%
Thru Line Inc.
4.687500%
Perry R. Bass, Inc.
3.125000%
----------
Goliad Partners, L. P. A. M. Culver Company Goliad Partners, L. P.
31.250000% .04000000 31.250000%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.750000% 18.750000%
Keystone, Inc. Keystone, Inc.
18.750000% 18.750000%
Thru Line Inc. Thru Line Inc.
18.750000% 18.750000%
Perry R. Bass, Inc. Perry R. Bass, Inc.
12.500000% 12.500000%
* * * * * * * * * * * *
Goliad Partners, L. P. Allagesh Oil Company Goliad Partners, L. P.
31.250000% .00750000 34.375000%
Sid R. Bass, Inc. E. E. Engleman Sid R. Bass, Inc.
18.750000% .00750000 18.750000%
Keystone, Inc. Sims Properties Keystone, Inc.
18.750000% .00750000 18.750000%
Thru Line Inc. Lakeview Oil Company Thru Line Inc.
18.750000% .00652500 18.750000%
Perry R. Bass, Inc. Robert J. Connaghan Perry R. Bass, Inc.
12.500000% .00500000 9.375000%
</TABLE>
<PAGE>
Page 19 of 23
EXHIBIT A-2 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK FIELD EXTENSION (PHOSPHORIA) UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
23 TOWNSHIP 47 NORTH, RANGE 90 WEST 40.00 USA W-0325327 U.S.A.
Section 31: NW/4NE/4 HBP 100%
Bass Lease 33510
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
T-Bar Oil & Gas, Ltd.
.00425000
Harry M. Perry
.00217500
------------
Amoco Production Company G E O Exploration Inc. SURFACE TO BASE OF PHOSPHORIA
50.000000% .03125 x .875 to .750 FORMATION:
William G. Helis Estate Sliding Scale (.02734375)
50.000000% William G. Helis Estate
50.000000%
Goliad Partners, L. P.
15.625000%
Sid R. Bass, Inc.
9.375000%
Keystone, Inc.
9.375000%
Thru Line Inc.
9.375000%
Perry R. Bass, Inc.
6.250000%
---------
BELOW BASE OF PHOSPHORIA
FORMATION:
William G. Helis Estate
50.000000%
Amoco Production Company
25.000000%
Goliad Partners, L. P.
7.812500%
</TABLE>
<PAGE>
Page 20 of 23
EXHIBIT A-2 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK FIELD EXTENSION (PHOSPHORIA) UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
23 TOWNSHIP 47 NORTH, RANGE 90 WEST 40.00 USA W-11765 U.S.A.
Section 31: NE/4NE/4 HBP 100%
Bass Lease 33511
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sid R. Bass, Inc.
4.687500%
Keystone, Inc.
4.687500%
Thru Line Inc.
4.687500%
Perry R. Bass, Inc.
3.125000%
----------
23 Amoco Production Company G E O Exploration Inc. SURFACE TO BASE OF PHOSPHORIA
50.000000% .03125 x .875 to .750 FORMATION:
William G. Helis Estate Sliding Scale (.02734375)
50.000000% William G. Helis Estate
50.000000%
Goliad Partners, L.P.
15.625000%
Sid R. Bass, Inc.
9.375000%
Keystone, Inc.
9.375000%
Thru Line Inc.
9.375000%
Perry R. Bass, Inc.
6.250000%
---------
BELOW BASE OF PHOSPHORIA
FORMATION:
</TABLE>
<PAGE>
Page 21 of 23
EXHIBIT A-2 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK FIELD EXTENSION (PHOSPHORIA) UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
Total Tract 23 160.00 (Communitization Agreement NW - 474)
23 FEDERAL TRACTS 3,318.87 ACRES OR 89.24404% OF THE UNIT AREA
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
23 William G. Helis Estate
50.000000%
Amoco Production Company
25.000000%
Goliad Partners, L.P.
7.812500%
Sid R. Bass, Inc.
4.687500%
Keystone, Inc.
4.687500%
Thru Line Inc.
4.687500%
Perry R. Bass, Inc.
3.125000%
</TABLE>
<PAGE>
Page 22 of 23
EXHIBIT A-2 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK FIELD EXTENSION (PHOSPHORIA) UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STATE LANDS
24 TOWNSHIP 47 NORTH, RANGE 91 WEST WYO-66-12831 State of Wyo.
Section 36: E/2 320.00 HBP 100%
Bass Lease 33383
25 TOWNSHIP 47 NORTH, RANGE 91 WEST WYO-70-5767 State of Wyo.
Section 36: N/2NW/4 80.00 HBP 100%
Bass Leases 21328 and
(Part of lands in lease fall 38853
outside of Unit Outline.)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
24 WPH-GP, Inc. Karel Untermeyer WPH-GP, Inc.
31.250000% .05000000 31.250000%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.750000% 18.750000%
Keystone, Inc. Keystone, Inc.
18.750000% 18.750000%
Thru Line Inc. Thru Line Inc.
18.750000% 18.750000%
Perry R. Bass, Inc. Perry R. Bass, Inc.
12.500000% 12.500000%
* * * * * * * * * * * * * *
25 WPH-GP, Inc. Perry R. Bass, Trustee WPH-GP, Inc.
43.750000% .00937500 43.750000%
Sid R. Bass, Inc. Sid R. Bass, Inc. Sid R. Bass, Inc.
18.750000% .00703125 18.750000%
Keystone, Inc. Lee M. Bass, Inc. Keystone, Inc.
18.750000% .00703125 18.750000%
Thru Line Inc. Keystone, Inc. Thru Line Inc.
18.750000% .00703125 18.750000%
Thru Line Inc.
.00703125
Robert W. Scott
.00660000
Lester Stanley Estate
.00660000
Dorothy M. Vail and
Donald Vail
.00500000
Warren D. Driskell Estate
.00160000
</TABLE>
<PAGE>
Page 23 of 23
EXHIBIT A-2 PURCHASE AND SALE AGREEMENT DATED _________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE COTTONWOOD CREEK FIELD EXTENSION (PHOSPHORIA) UNIT AREA
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STATE LANDS (CONT'D)
2 STATE TRACTS 400.00 ACRES OR 10.75596% OF THE UNIT AREA
TOTAL UNIT - 25 TRACTS 3,718.87 ACRES
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
25 Sam T. Boltz, Jr.
.00140000
Eugene A. O'Brien
.00140000
O. L. Rickard
.00140000
Monty M. Brosious
.00036800
J. Paul Mathias
.00031600
Willard J. Pearson, Jr. Estate
.00031600
</TABLE>
<TABLE>
<CAPTION>
R E C A P I T U L A T I O N
LAND ACRES PERCENTAGE
---- ----- ----------
<S> <C> <C>
Federal 3,318.87 89.24%
State 400.00 10.76%
Patented 0 0
-------- -------
TOTAL 3,718.87 100.00%
-------- -------
-------- -------
</TABLE>
<PAGE>
Page 1 of 7
EXHIBIT A-3 PURCHASE AND SALE AGREEMENT DATED ____________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE NO WATER CREEK UNIT
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS
1 TOWNSHIP 47 NORTH, RANGE 91 WEST B-039524 U.S.A.
Section 32: SW/4 160.00 01/31/58 (HBP) All
Bass Leases 31100,
NOTE: This tract is not committed to Unit. 31529, and 34084
(Part of lease falls outside Unit Outline)
7 TOWNSHIP 47 NORTH, RANGE 91 WEST W-084518 U.S.A.
Section 31: Lot 12, E/2SW/4, SE/4 280.00 10/31/69 (HBP) All
Bass Lease 34082
(Part of lease falls outside Unit Outline)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Perry R. Bass, Inc. Worland Associates Worland Associates
25.000000% .05097220 50.000000%
Sid R. Bass, Inc. Cottonwood Properties Perry R. Bass, Inc.
18.750000% .01000000 12.500000%
Lee M. Bass, Inc. Guy R. Campbell Sid R. Bass, Inc.
18.750000% .00500000 9.375000%
Keystone, Inc. Guy R. Campbell, Jr. & Co. Lee M. Bass, Inc.
18.750000% .00500000 9.375000%
Thru Line Inc. K&B Company Keystone, Inc.
18.750000% .00050000 9.375000%
Wheatley Oil Co. Thru Line Inc.
.00500000 9.375000%
Anna Stark
.00027600
********
2 Perry R. Bass, Inc. Arla A. Connaghan Perry R. Bass, Inc.
25.000000% .01350000 25.000000%
Sid R. Bass, Inc. Barbara Fuller Sid R. Bass, Inc.
18.750000% .01250000 18.750000%
Lee M. Bass, Inc. Kenneth Hurd Lee M. Bass, Inc.
18.750000% .01250000 18.750000%
Keystone, Inc. Erving Wolf Keystone, Inc.
18.750000% .00500000 18.750000%
Thru Line Inc. George Winston Nelson, Jr. Thru Line Inc.
18.750000% .00450000 18.750000%
Elizabeth V. Nelson Taylor
.00450000
</TABLE>
<PAGE>
Page 2 of 7
EXHIBIT A-3 PURCHASE AND SALE AGREEMENT DATED ___________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE NO WATER CREEK UNIT
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
8 TOWNSHIP 46 NORTH, RANGE 91 WEST W-088064 U.S.A
Section 5: Lot 7 22.12 04/30/70 (HBP) All
Bass Lease 34079
(Part of lease falls outside Unit Outline)
16 Parcel 2 W-0198736 U.S.A.
TOWNSHIP 46 NORTH, RANGE 91 WEST 204.12 05/31/72 (HBP) All
Section 6: Lots 8, 9,16,17, 25, Bass Leases 31115,
& 28 31154, and 38364
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
8 Perry R. Bass, Inc. April Ann Nelson Winter Perry R. Bass, Inc.
25.000000% .00450000 25.000000%
Sid R. Bass, Inc. Betty B. Shaffer Sid R. Bass, Inc.
18.750000% .00300000 18.750000%
Lee M. Bass, Inc. Burton G. Lowe Lee M. Bass, Inc.
18.750000% .00250000 18.750000%
Keystone, Inc. Mary L. Tuttle Hagstrom Keystone, Inc.
18.750000% .00250000 18.750000%
Thru Line Inc. Thru Line Inc.
18.750000% 18.750000%
****** ******
16 Bridwell Oil Company SURFACE TO BASE OF PHOSPHORIA SURFACE TO BASE OF PHOSPHORIA
100.000000% FORMATION: FORMATION:
Bridwell Oil Company Worland Associates
.06250000 50.000000%
(Until Payout of No. 5 * Posse Petroleum Ltd.
No Water Creek Unit Well) 21.500000%
(After Payout .10000000) ** Perry R. Bass, Inc.
John J. Pedry 7.125000%
.02000000 ** Sid R. Bass, Inc.
Harry Ptasynski 5.343750%
.01000000 ** Lee M. Bass, Inc.
------ 5.343750%
BELOW BASE OF PHOSPHORIA ** Keystone, Inc.
FORMATION: 5.343750%
** Thru Line Inc.
Harry Ptasynski 5.343750%
.01000000 ------
</TABLE>
* Several assignments need to be
filed with the BLM in order to
bring the ownership current.
Said assignments have been filed
in the Washakie County records.
** Interest acquired from R. S. Brennand, Jr. Trust, Assignments Pending.
<PAGE>
Page 3 of 7
EXHIBIT A-3 PURCHASE AND SALE AGREEMENT DATED ___________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE NO WATER CREEK UNIT
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
16 Parcel 3 W-0198736 U.S.A
TOWNSHIP 46 NORTH, RANGE 91 WEST 120.00 05/31/72 (HBP) All
Section 5: NE/4SW/4 Bass Leases 31115,
Section 6: E/2SW/4 31154, and 38364
16 Parcel 4 W-0198736 U.S.A.
TOWNSHIP 46 NORTH, RANGE 91 WEST 160.00 05/31/72 (HBP) All
Section 5: Lot 15, SE/4NW/4 Bass Leases 31115,
Section 6: W/2SE/4 31154, and 38364
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BELOW BASE OF PHOSPORIA
FORMATION:
Bridwell Oil Company
100.000000%
-----
16 Bridwell Oil Company SURFACE TO BASE OF PHOSPHORIA SURFACE TO BASE OF PHOSPHORIA
100.000000% FORMATION: FORMATION:
Bridwell Oil Company Worland Associates
BPO: .09000000 100.000000%
APO: .12500000 ------
Harry Ptasynski BELOW BASE OF PHOSPHORIA
.01000000 FORMATION:
------
BELOW BASE OF PHOSPHORIA Bridwell Oil Company
FORMATION: 100.000000%
Harry Ptasynski
.01000000
******
Bridwell Oil Company SURFACE TO BASE OF PHOSPHORIA SURFACE TO BASE OF PHOSPHORIA
100.000000% FORMATION: FORMATION:
Bridwell Oil Company Perry R. Bass, Inc.
BPO: .09000000 25.000000%
APO: .12500000 Sid R. Bass, Inc.
Harry Ptasynski 18.750000%
.01000000 Lee M. Bass, Inc.
18.750000%
</TABLE>
<PAGE>
Page 4 of 7
EXHIBIT A-3 PURCHASE AND SALE AGREEMENT DATED ___________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE NO WATER CREEK UNIT
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
18 TOWNSHIP 46 NORTH, RANGE 91 WEST W-0238809 U.S.A.
Section 6: Lot 12 24.13 01/31/73 (HBP) All
Bass Lease 31105
(Part of lease falls outside Unit Outline)
23 TOWNSHIP 46 NORTH, RANGE 91 WEST W-0283968 U.S.A.
Section 5: Lots 8, 9, 10, 16, 222.07 11/30/73 (HBP) All
SW/4NW/4, NW/4SW/4 Bass Lease 34080
(Part of lease falls outside Unit Outline)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Keystone, Inc.
18.750000%
Thru Line Inc.
18.750000%
------
BELOW BASE OF PHOSPHORIA BELOW BASE OF PHOSPHORIA
FORMATION: FORMATION:
Harry Ptasynski Bridwell Oil Company
.01000000 100.000000%
******
18 Worland Associates Richard Altman and Co. Worland Associates
100.000000% .02865160 100.000000%
Magic M&R LLC
.02464038
F. J. Bradshaw Family Trust
.01134840
ROEC Inc.
.00114606
******
23 Perry R. Bass, Inc. A. M. Culver Company Perry R. Bass, Inc.
25.000000% .03000000 25.000000%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.750000% 18.750000%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.750000% 18.750000%
Keystone, Inc. Keystone, Inc.
18.750000% 18.750000%
Thru Line Inc. Thru Line Inc.
18.750000% 18.750000%
</TABLE>
<PAGE>
Page 5 of 7
EXHIBIT A-3 PURCHASE AND SALE AGREEMENT DATED ___________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE NO WATER CREEK UNIT
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
32 Parcel 1 W-0315800 U.S.A.
TOWNSHIP 46 NORTH, RANGE 91 WEST 486.95 03/31/75 (HBP) All
Section 6: Lots 18, 19, 20, 21, 22, Bass Leases 31106
23, and 24, S/2NE/4, and 34077
SE/4NW/4, E/2SE/4
32 Parcel 2 W-0315800 U.S.A.
TOWNSHIP 46 NORTH, RANGE 91 WEST 167.77 03/31/75 (HBP) All
Section 6: Lots 10, 11, 13, 14, Bass Leases 31106
& 15 and 34077
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
32 Perry R. Bass, Inc. None Perry R. Bass, Inc.
25.000000% 25.000000%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.750000% 18.750000%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.750000% 18.750000%
Keystone, Inc. Keystone, Inc.
18.750000% 18.750000%
Thru Line Inc. Thru Line Inc.
18.750000% 18.750000%
****** ******
32 Perry R. Bass, Inc. SURFACE TO 285 FEET BELOW SURFACE TO 285 FEET BELOW
25.000000% TOP OF PHOSPHORIA FORMATION TOP OF PHOSPHORIA FORMATION
Sid R. Bass, Inc. OR STRATIGRAPHIC EQUIVALENT: OR STRATIQRAPHIC EQUIVALENT:
18.750000%
Lee M. Bass, Inc. John J. Pedry Worland Associates
18.750000% .02000000 50.000000%
Keystone, Inc. Perry R. Bass, Inc. * Posse Petroleum Ltd.
18.750000% .01250000 21.500000%
Thru Line Inc. Sid R. Bass, Inc. ** Perry R. Bass, Inc.
18.750000% .00937500 7.125000%
Lee M. Bass, Inc. ** Sid R. Bass, Inc.
.00937500 5.343750%
Keystone, Inc. ** Lee M. Bass, Inc.
.00937500 5.343750%
Thru Line Inc. ** Keystone, Inc.
.00937500 5.343750%
------ ** Thru Line Inc.
5.343750%
------
</TABLE>
* Several assignments need to be
filed with the BLM in order to
bring the ownership current.
Said assignments have been filed
in the Washakie County records.
** Interest acquired from R. S. Brennand, Jr., Trust. Assignments Pending.
<PAGE>
Page 6 of 7
EXHIBIT A-3 PURCHASE AND SALE AGREEMENT DATED ___________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE NO WATER CREEK UNIT
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
48 TOWNSHIP 46 NORTH, RANGE 91 WEST W-0320416 U.S.A.
Section 6: Lots 26 & 27 86.69 11/30/75 (HBP) All
Bass Lease 31110
(Part of lease falls outside Unit Outline)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BELOW 285 FEET BELOW TOP BELOW 285 FEET BELOW TO
OF PHOSPHORIA FORMATION OR OF PHOSPHORIA FORMATION OR
STRATIGRAPHIC EQUIVALENT: STRATIGRAPHIC EQUIVALENT.
None Perry R. Bass, Inc.
25.000000%
Sid R. Bass, Inc.
18.750000%
Lee M. Bass, Inc.
18.750000%
Keystone, Inc.
18.750000 %
Thru Line Inc.
18.750000%
******
48 * Mesa Petroleum Company Catherine A. Grieve Worland Associates
25.000000% .02000000 50.000000%
* Prudential Funds, Inc. Sam D. Ayres * Posse Petroleum Ltd.
25.000000% .01500000 21.500000%
Worland Associates Legacy Energy Royalty ** Perry R. Bass, Inc.
50.000000% Income Fund Ltd. 7.125000%
.01500000 ** Sid R. Bass, Inc.
5.343750%
** Lee M. Bass, Inc.
5.343750%
** Keystone, Inc.
5.343750%
** Thru Line Inc.
5.343750%
</TABLE>
* Several assignments need to be
filed with the BLM in order to
bring the ownership current.
Said assignments have been filed
in the Washakie County records.
** Interest acquired from R. S. Brennand, Jr., Trust. Assignments Pending.
<PAGE>
Page 7 of 7
EXHIBIT A-3 PURCHASE AND SALE AGREEMENT DATED ___________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE NO WATER CREEK UNIT
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO: ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TOTAL 8 FEDERAL TRACTS
1,933.85 ACRES IN THE ENTIRE UNIT AREA.
1,773.85 ACRES COMMITTED TO UNIT.
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
R E C A P I T U L A T I O N
LAND ACRES PERCENTAGE
---- ----- ----------
<S> <C> <C>
Federal 1,773.85 100.00%
State 0 0
Patented 0 0
-------- ------
TOTAL 1,773.85 100.00%
</TABLE>
- ------------------------------------------------------------------------------
<PAGE>
Page 1 of 11
EXHIBIT A-4 PURCHASE AND SALE AGREEMENT DATED ___________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE SLICK CREEK UNIT
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER LESSEE OF RECORD
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE & PERCENTAGE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FEDERAL LANDS
3 TOWNSHIP 47 NORTH, RANGE 92 WEST B-041449 U.S.A. Worland Associates
Section 33: N/2NE/4, NE/4NW/4 400.00 HBP All 50.000000%
Section 34: N/2N/2 Bass Lease 31132 Perry R. Bass, Inc.
Section 35: SE/4NE/4, N/2NW/4 12.500000%
Sid R. Bass, Inc.
9.375000%
Lee M. Bass, Inc.
9.375000%
Keystone, Inc.
9.375000%
Thru Line Inc.
9.375000%
<CAPTION>
TRACT OVERRIDING ROYALTY WORKING INTEREST
NO. & DECIMAL INTEREST & PERCENTAGE
- ---------------------------------------------------------------
<S> <C> <C>
3 Marguerite Sample Worland Associates
.02000000 50.000000%
Columbine II Limited Perry R. Bass, Inc.
.01000000 12.500000%
B.S.&.B Oil Company Sid R. Bass, Inc.
.00500000 9.375000%
Robert A. Prescott, Jr. Lee M. Bass, Inc.
.00500000 9.375000%
Marion E. Newnam, Jr. Keystone, Inc.
.00250000 9.375000%
Raymond W. Robbins & Thru Line Inc.
Betty Mae Robbins 9.375000%
.00142857
Jacquelyn Newnam
.00125000
Marian Lorraine Newnam
.00125000
Joseph L. and
Jean B. Fusselman
.00071429
Higer Oil, Inc.
.00047619
Saratex, Inc.
.00047619
Windfall Oil, Inc.
.00047619
</TABLE>
<PAGE>
Page 2 of 11
EXHIBIT A-4 PURCHASE AND SALE AGREEMENT DATED ___________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE SLICK CREEK UNIT
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER LESSEE OF RECORD
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE & PERCENTAGE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
5 TOWNSHIP 47 NORTH, RANGE 92 WEST B-044366 U.S.A. Worland Associates
Section 32: SE/4SW/4, SE/4, 1,640.00 HBP All 100.00%
SE/4NE/4 Bass Lease 31133
Section 33: S/2, S/2N/2
Section 34: S/2, S/2N/2
Section 35: S/2, S/2NW/4, SW/4NE/4
7 TOWNSHIP 46 NORTH, RANGE 92 WEST B-044702 U.S.A Worland Associates
Section 10: NE/4NE/4 80.00 HBP All 100.00%
Section 11: NW/4NW/4 Bass Lease 31134
<CAPTION>
TRACT OVERRIDING ROYALTY WORKING INTEREST
NO. & DECIMAL INTEREST & PERCENTAGE
- ------------------------------------------------------------------
<S> <C> <C>
5 Willard & Shirley Worland Associates
Chandler Residuary Trust- 95.750000%
Adele Chandler & Norwest Perry R. Bass, Inc.
Bank Wyo., Co-Trustees 1.062520%
.00500000 Sid R. Bass, Inc.
W. Eugene Chandler .796870%
.00500000 Lee M. Bass, Inc.
.796870%
Keystone, Inc.
.796870%
Thru Line Inc.
.796870%
******
7 Columbine II Limited Worland Associates
.00500000 95.750000%
Intoil, Inc. Perry R. Bass, Inc.
.00500000 1.062520%
Sid R. Bass, Inc.
.796870%
Lee M. Bass, Inc.
.796870%
Keystone, Inc.
.796870%
Thru Line Inc.
.796870%
</TABLE>
<PAGE>
Page 3 of 11
EXHIBIT A-4 PURCHASE AND SALE AGREEMENT DATED ___________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE SLICK CREEK UNIT
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER LESSEE OF RECORD
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE & PERCENTAGE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
9 TOWNSHIP 46 NORTH, RANGE 92 WEST B-044704 U.S.A Worland Associates
Section 2: Lots 5, 6, 7, and 8, 991.52 HBP All 100.00%
S/2NW/4, SW/4NE/4, Bass Lease 31135
NW/4SE/4, SW/4
Section 3: Lots 5, 6, 7, and 8,
S/2N/2, N/2SE/4,
SE/4SE/4
<CAPTION>
TRACT OVERRIDING ROYALTY WORKING INTEREST
NO. & DECIMAL INTEREST & PERCENTAGE
- ---------------------------------------------------------------------
<S> <C> <C>
9 Juanita Herzeelle Worland Associates
.00500000 95.750000%
Worland Associates Perry R. Bass, Inc.
.00103125 1.062520%
Frank Jeppi By-Pass Trust, Sid R. Bass, Inc.
Harold Clifton, Trustee .796870%
.00075000 Lee M. Bass, Inc.
George L. Bradford Estate- .796870%
Peter C. Bradford, Executor Keystone, Inc.
.00059375 .796870%
Rosoff Revocable Inter-Vivos Thru Line Inc.
Trust, Harold Jay & Kay K. .796870%
Rosoff, Co-Trustees
.00059375
James C. Branas
.00029688
Marilyn B. Wedegaertner
.00029687
Stella F. Birk
.00025000
John A. Grine
.00025000
James E. Ludlam, III
.00018750
University Southern Calif.
.00018750
Dorothy Lee Ingebretsen
.00012500
</TABLE>
<PAGE>
Page 4 of 11
EXHIBIT A-4 PURCHASE AND SALE AGREEMENT DATED ___________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE SLICK CREEK UNIT
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER LESSEE OF RECORD
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE & PERCENTAGE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
10 TOWNSHIP 46 NORTH, RANGE 92 WEST B-044705 U.S.A. Worland Associates
Section 4: Lots 5, 6, 7, and 8 195.28 HBP All 100.000000%
Bass Lease 31136
11 TOWNSHIP 46 NORTH, RANGE 92 WEST Wyo. 0173-A U.S.A. Worland Associates
Section 5: Lot 13 and that portion of 48.51 (Out of B-037924) All 100.000000%
Lot 14 Located in the NE/4NE/4 HBP
(Previously Lot 5) Bass Lease 31137
<CAPTION>
TRACT OVERRIDING ROYALTY WORKING INTEREST
NO. & DECIMAL INTEREST & PERCENTAGE
- -----------------------------------------------------------------
<S> <C> <C>
Margo S. Andrews Trust, First
Interstate Bank N.A., Trustee
.00007292
Catherine Jo Roush
.00007292
Suzanne Zimmerman Sims
.00007292
Robert L. Zimmerman
.00007292
W. James Saul
0.00007291
Patricia W. Zimmerman
.00007291
******
10 Perry R. Bass, Inc. Worland Associates
.00250000 95.750000%
Sid R. Bass, Inc. Perry R. Bass, Inc.
.00187500 1.062520%
Lee M. Bass, Inc. Sid R. Bass, Inc.
.00187500 .796870%
Keystone, Inc. Lee M. Bass, Inc.
.00187500 .796870%
Thru Line Inc. Keystone, Inc.
.00187500 .796870%
Thru Line Inc.
.796870%
******
11 Norman Family Trust Worland Associates
.01333334 95.750000%
Hall Family Trust Perry R. Bass, Inc.
.01333333 1.062520%
</TABLE>
<PAGE>
Page 5 of 11
EXHIBIT A-4 PURCHASE AND SALE AGREEMENT DATED ___________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE SLICK CREEK UNIT
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER LESSEE OF RECORD
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE & PERCENTAGE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
<CAPTION>
TRACT OVERRIDING ROYALTY WORKING INTEREST
NO. & DECIMAL INTEREST & PERCENTAGE
- -------------------------------------------------------------------
<S> <C> <C>
Alice Van Arsdale Sid R. Bass, Inc.
.00666667 .796870%
Byron E. Van Arsdale, Jr. Lee M. Bass, Inc.
.00666666 .796870%
Perry R. Bass, Inc. Keystone, Inc.
.00250000 .796870%
Sid R. Bass, Inc. Thru Line Inc.
.00187500 .796870%
Lee M. Bass, Inc.
.00187500
Keystone, Inc.
.00187500
Thru Line Inc.
.00187500
</TABLE>
<PAGE>
Page 6 of 11
EXHIBIT A-4 PURCHASE AND SALE AGREEMENT DATED ___________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE SLICK CREEK UNIT
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER LESSEE OF RECORD
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE & PERCENTAGE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATE LANDS
13 TOWNSHIP 47 NORTH, RANGE 92 WEST State 0-8644 State of Wyo. Worland Associates
Section 36: W/2SW/4 80.00 HBP 100% 100.000000%
Bass Lease 31138
<CAPTION>
TRACT OVERRIDING ROYALTY WORKING INTEREST
NO. & DECIMAL INTEREST & PERCENTAGE
- --------------------------------------------------------------------
<S> <C> <C>
13 None Worland Associates
95.750000%
Perry R. Bass, Trustee
1.062490%
Sid R. Bass, Inc.
.796890%
Lee M. Bass, Inc.
.796880%
Keystone, Inc.
.796880%
Thru Line Inc.
.796860%
</TABLE>
<PAGE>
Page 7 of 11
EXHIBIT A-4 PURCHASE AND SALE AGREEMENT DATED ___________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE SLICK CREEK UNIT
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PATENTED LANDS
15 TOWNSHIP 47 NORTH, RANGE 92 WEST Geraldine M. Burton
Section 32: NE/4SW/4 40.00 HBP .10000000
Recorded in Book 8, Page 70 Bass Lease 31139 Virginia Black
.02500000
16 TOWNSHIP 47 NORTH, RANGE 92 WEST Marjorie H. Colby
Section 32: W/2NE/4, SE/4NW/4 120.00 HBP .03750000
Recorded in Book 8, Page 72 Bass Lease 31140 Lisa Bang
.01250000
Ann Parsons Estay
.01125000
Jerry Hastings
.00937500
Roger D. Hastings
.00937500
Wesley Hastings
.00937500
Alice J. Kraft
.00937500
Alice V. Parsons
.00625000
Roderick L. Dungan
.00305554
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
15 Worland Associates None Worland Associates
95.750000% 95.750000%
Perry R. Bass, Trustee Perry R. Bass, Trustee
1.062520% 1.062520%
Sid R. Bass, Inc. Sid R. Bass, Inc.
.796870% .796870%
Lee M. Bass, Inc. Lee M. Bass, Inc.
.796870% .796870%
Keystone, Inc. Keystone, Inc.
.796870% .796870%
Thru Line Inc. Thru Line Inc.
.796870% .796870%
****** ******
16 Worland Associates None Worland Associates
95.750000% 95.750000%
Perry R. Bass, Trustee Perry R. Bass, Trustee
1.062520% 1.062520%
Sid R. Bass, Inc. Sid R. Bass, Inc.
.796870% .796870%
Lee M. Bass, Inc. Lee M. Bass, Inc.
.796870% .796870%
Keystone, Inc. Keystone, Inc.
.796870% .796870%
Thru Line Inc. Thru Line Inc.
.796870% .796870%
</TABLE>
<PAGE>
Page 8 of 11
EXHIBIT A-4 PURCHASE AND SALE AGREEMENT DATED ___________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE SLICK CREEK UNIT
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PATENTED LANDS (CONT'D)
Laura Ann Shaw
.00250000
Francis L. Farmer
.00180554
Robert R. Pisto and
Margaret L. Pisto Trust
.00180554
Mary Eloise L. Shaw
.00180554
David Grant Laird
.00138887
Penelope Laird Carroll
Trust, Norwest Bank
Wyoming NA, Trustee
.00083334
Loren E. Laird Trust, Norwest
Bank Wyoming NA, Trustee
.00083334
Florence S. Laird Trust,
Norwest Bank Wyoming
NA, Trustee
.00083333
R. E Laird Trust, Norwest
Bank Wyoming NA, Trustee
.00083333
Julia Laird Wortham Trust,
Norwest Bank Wyoming
NA, Trustee
.00083333
Frank W. Laird
.00060188
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
</TABLE>
<PAGE>
Page 9 of 11
EXHIBIT A-4 PURCHASE AND SALE AGREEMENT DATED ___________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE SLICK CREEK UNIT
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER LESSEE OF RECORD
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE & PERCENTAGE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PATENTED LANDS (CONT'D)
Stephanie L. Arries
.00060187
Penelope Laird Carroll
.00055554
Loren Edward Laird
.00055554
Julia Laird Wortham
.00055554
Glendon Leroy Laird
.00041667
Matthew Laird
.00009263
Meghan Laird
.00009263
******
17 TOWNSHIP 47 NORTH, RANGE 92 WEST Roderick L. Dungan Worland Associates
Section 32: NE/4NE/4 80.00 HBP .01909711 95.750000%
Section 33: NW/4NW/4 Bass Lease 31141 Laura Ann Shaw Perry R. Bass, Trustee
Recorded in Book 11, Page 566 .01562500 1.062520%
Francis L. Farmer Sid R. Bass, Inc.
.01128470 .796870%
Robert R. Pisto and Lee M. Bass, Inc.
Margaret L. Pisto Trust .796870%
.01128470 Keystone, Inc.
Mary Eloise L. Shaw .796870%
.01128470 Thru Line Inc.
David Grant Laird .796870%
.00868053
<CAPTION>
TRACT OVERRIDING ROYALTY WORKING INTEREST
NO. & DECIMAL INTEREST & PERCENTAGE
- -----------------------------------------------------------------------
<S> <C> <C>
17 None Worland Associates
95.750000%
Perry R. Bass, Trustee
1.062520%
Sid R. Bass, Inc.
.796870%
Lee M. Bass, Inc.
.796870%
Keystone, Inc.
.796870%
Thru Line Inc.
.796870%
</TABLE>
<PAGE>
Page 10 of 11
EXHIBIT A-4 PURCHASE AND SALE AGREEMENT DATED ___________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE SLICK CREEK UNIT
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PATENTED LANDS (CONT'D)
Penelope Laird Carroll
Trust, Norwest Bank to
Wyoming NA, Trustee
.00520834
Loren E. Laird Trust,
Norwest Bank Wyoming
NA, Trustee
.00520834
Florence S. Laird Trust,
Norwest Bank Wyoming
NA, Trustee
.00520833
R. E Laird Trust, Norwest
Bank Wyoming NA, Trustee
.00520833
Julia Laird Wortham Trust,
Norwest Bank Wyoming
NA, Trustee
.00520833
Stephanie L. Arries
.00376167
Frank W. Laird
.00376167
Penelope Laird Carroll
.00347220
Loren Edward Laird
.00347220
Julia Laird Wortham
.00347220
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
</TABLE>
<PAGE>
Page 11 of 11
EXHIBIT A-4 PURCHASE AND SALE AGREEMENT DATED ___________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE SLICK CREEK UNIT
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER LESSEE OF RECORD
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE & PERCENTAGE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PATENTED LANDS (CONT'D)
Glendon Leroy Laird
.00260416
Matthew Laird
.00057875
Meghan Laird
.00057874
<CAPTION>
TRACT OVERRIDING ROYALTY WORKING INTEREST
NO. & DECIMAL INTEREST & PERCENTAGE
- ----------------------------------------------------------------------
<S> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
R E C A P I T U L A T I O N
LAND ACRES PERCENTAGE
---- ----- ----------
<S> <C> <C>
Federal 3,355.31 91.29%
State 80.00 2.18%
Patented 240.00 6.53%
-------- -------
TOTAL 3,675.31 100.00%
</TABLE>
<PAGE>
Page 1 of 2
EXHIBIT A-5 PURCHASE AND SALE AGREEMENT DATED ___________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE SOUTH FRISBY UNIT
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS
1 TOWNSHIP 47 NORTH, RANGE 91 WEST W-0314025 U.S.A.
Section 19: Lots 11 and 12 131.49 HBP All
Bass Lease 31109
TOWNSHIP 47 NORTH, RANGE 92 WEST
Section 24: SW/4NE/4, NE/4SE/4
(Part of lease falls outside Unit Outline)
Recorded in Book 108, Page 177
3 TOWNSHIP 47 NORTH, RANGE 92 WEST W-11773 U.S.A.
Section 24: NW/4, NE/4SW/4 200.00 HBP All
(Part of lease falls outside Unit Outline) Bass Lease 31121
Recorded in Book 32, Page 616
5 TOWNSHIP 47 NORTH, RANGE 92 WEST W-11775 U.S.A
Section 24: NW/4SE/4, S/2SE/4 280.00 HBP All
Section 25: E/2NE/4, NW/4NE/4, Bass Lease 31123
NE/4SE/4
(Part of lease falls outside Unit Outline)
Recorded in Book 116, Page 23
6 TOWNSHIP 47 NORTH, RANGE 91 WEST W-32357 U.S.A
Sec. 30: Lots 5, 6, 7, 8, 9, and10 274.83 HBP All
E/2NW/4, NE/4SW/4 Bass Lease 31144
Recorded in Book 131, Page 436
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Worland Associates Key Production Co. Inc. Worland Associates
100% .01500000 100%
LaCoy Family Trust, James F.
LaCoy or Mildred H. LaCoy or
Lorraine A. LaCoy, Trustees
.00500000
3 Worland Associates None Worland Associates
100% 100%
5 Worland Associates None Worland Associates
100% 100%
6 Worland Associates Myron Grossman Worland Associates
100% .01350000 100%
William D. Bonilla, Sr.
.00337500
Sandra Fay Bornstein
.00337500
Sharon Bornstein Erenwert
.00337500
Rosalyn Bornstein Marcum
.00337500
</TABLE>
<PAGE>
Page 2 of 2
EXHIBIT A-5 PURCHASE AND SALE AGREEMENT DATED ___________, 1998
REVISED EXHIBIT B
JANUARY 1, 1998
ATTACHED TO AND MADE A PART OF UNIT AGREEMENT FOR THE DEVELOPMENT
AND OPERATION OF THE SOUTH FRISBY UNIT
WASHAKIE COUNTY, WYOMING
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
7 TOWNSHIP 47 NORTH, RANGE 91 WEST W-38586 U.S.A
Section 30: Lots 11 and 12, SE/4SW/4 91.73 HBP All
Recorded in Book 131, Page 436 Bass Lease 31146
8 TOWNSHIP 47 NORTH, RANGE 92 WEST W-50465 U.S.A
Section 25: SE/4SE/4 40.00 HBP All
Recorded in Book 44, Page 2114 Bass Lease 31149
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Jon Nelson
.00150000
Sherman Nelson
.00150000
******
7 Worland Associates Myron Grossman Worland Associates
100% .01350000 100%
William D. Bonilla, Sr.
.00337500
Sandra Fay Bornstein
.00337500
Sharon Bornstein Erenwert
.00337500
Rosalyn Bornstein Marcum
.00337500
Jon Nelson
.00150000
Sherman Nelson
.00150000
******
8 Worland Associates Hurley Oil Properties Worland Associates
100% .04000000 100%
</TABLE>
<TABLE>
<CAPTION>
RECAPITULATION
LAND ACRES PERCENTAGE
---- ----- ----------
<S> <C> <C>
Federal 1,018.05 100.00%
State 0 0
Patented 0 0
-------- ----------
TOTAL UNIT 1,018.05 100.00%
</TABLE>
<PAGE>
Page 1 of 1
NON-UNITIZED, PRODUCING EXHIBIT A-6
BIG HORN COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
<TABLE>
<CAPTION>
TRACT NO. SERIAL NO. & ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES EXPIRATION DATE & PERCENTAGE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS
N/A TOWNSHIP 51 NORTH, RANGE 92 WEST W-58669 U.S.A
Section 23: Tract 58M 447.92 HBP All
Section 24: Tracts 58N, 58O, 58P, and 59 Bass Lease 34851
Section 25: Lot 4
Section 26: Tracts 50A, 50B, 50C, 50F,
50G, and 50H
N/A TOWNSHIP 51 NORTH, RANGE 92 WEST WYW-113553 U.S.A
Section 24: Lot 3 446.45 HBP All
Section 25: Lots 1 and 2, Tracts 48A, Bass Lease 35159
48B, 49I, 49J, 49K, 49N,
49O, and 49P
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
N/A Arthur L. Vermillion Perry R. Bass, Inc. Arthur L. Vermillion
100.00% .01000000 100.00%
Sid R. Bass, Inc.
.00750000
Lee M. Bass, Inc.
.00750000
Keystone, Inc.
.00750000
Thru Line Inc.
.00750000
******
N/A Arthur L. Vermillion Perry R. Bass, Inc. Arthur L. Vermilion
100.00% .00207500 100.00%
Sid R. Bass, Inc.
.00155625
Lee M. Bass, Inc.
.00155625
Keystone, Inc.
.00155625
Thru Line Inc.
.00155625
</TABLE>
<PAGE>
NON-UNITIZED, PRODUCING EXHIBIT A-7 Page 1 of 26
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS
N/A TOWNSHIP 47 NORTH, RANGE 91 WEST W-53020 U.S.A.
Section 34: E/2SE/4 680.00 HBP All
Section 35: E/2, E/2W/2, SW/4NW/4, Bass Lease 20073
W/2SW/4
Subject to C.A. NRM-1872 for Phosphoria Formation
covering the NW/4 Section 35-47N-91W.
N/A TOWNSHIP 46 NORTH, RANGE 91 WEST W-57014 U.S.A.
Section 1: Lots 8, 9, and 16, 750.99 HBP All
SW/4NW/4, SW/4 Bass Lease 20074
Section 2: Lots 5, 6, 7, 8, 10, 11, 12, 13, 14,
and 15, S/2NE/4, SE/4NW/4
N/A TOWNSHIP 46 NORTH, RANGE 91 WEST W-29763-C U.S.A
Section 2: SE/4 320.00 HBP All
Section 11: NE/4 Bass Lease 23335
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
N/A Perry R. Bass, Inc. D. J. Brew Perry R. Bass, Inc.
25.000000% .02500000 25.000000%
Sid R. Bass, Inc. Joseph J. C. Paine Sid R. Bass, Inc.
18.750000% .02500000 18.750000%
Lee M. Bass, Inc. Viking Exploration Lee M. Bass, Inc.
18.750000% .01250000 18.750000%
Keystone, Inc. Keystone, Inc.
18.750000% 18.750000%
Thru Line Inc. Thru Line Inc.
18.750000% 18.750000%
****** ******
N/A W. D. Partners, L. P. Viking Exploration W. D. Partners, L.P.
25.000000% .05250000 25.000000%
Sid R. Bass, Inc. Mildred M. Einarsen Sid R. Bass, Inc.
18.750000% .01000000 18.750000%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.750000% 18.750000%
Keystone, Inc. Keystone, Inc.
18.750000% 18.750000%
Thru Line Inc. Thru Line Inc.
18.750000% 18.750000%
****** ******
N/A Perry R. Bass, Inc. E. E. Engleman Perry R. Bass, Inc.
25.000000% .02250000 25.000000%
Sid R. Bass, Inc. L. R. Company Sid R. Bass, Inc.
18.750000% .02250000 18.750000%
Lee M. Bass, Inc. Gene R. George Lee M. Bass, Inc.
18.750000% .00500000 18.750000%
Keystone, Inc. Keystone, Inc.
18.750000% 18.750000%
Thru Line Inc. Thru Line Inc.
18.750000% 18.750000%
</TABLE>
<PAGE>
NON-UNITIZED, PRODUCING EXHIBIT A-7 Page 2 of 26
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
N/A TOWNSHIP 47 NORTH, RANGE 91 WEST W-8238 U.S.A.
Section 29: NE/4 200.00 HBP All
Section 35: NW/4NW/4 Bass Leases 25280,
31107, and 31613
Subject to C.A. NRM-1872 for Phosphoria
Formation covering the NW/4 Section 35-47N-91W.
N/A TOWNSHIP 47 NORTH, RANGE 91 WEST W-45483 U.S.A
Section 26: SW/4 480.00 HBP All
Section 27: S/2 Bass Leases 30938
and 38796
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
N/A Worland Associates Pioneer Production AS TO NW/4NW/4 SECTION 35
100.000000% .03000000 SURFACE TO 9,862 FEET:
Rex Randolph
.02000000 Worland Associates
50.000000%
Perry R. Bass, Inc.
12.500000%
Sid R. Bass, Inc.
9.375000%
Lee M. Bass, Inc.
9.375000%
Keystone, Inc.
9.375000%
Thru Line Inc.
9.375000%
------
BELOW 9,862 FEET:
Worland Associates
100.000000%
------
AS TO NE/4 SECTION 29:
Worland Associates
100.000000%
******
N/A Mobil Exploration & Prod. AS TO SW/4 SECTION 26: FROM SURFACE TO STRATIGRAPHIC
North America, Inc. EQUIVALENT OF 9,906 FEET:
100.000000% Mobil Expl. & Production (CCU FEDERAL #26-23)
.09000000
Barbara J. Kaley AS TO NW/4SW/4 SECTION 26:
.04500000
</TABLE>
<PAGE>
NON-UNITIZED, PRODUCING EXHIBIT A-7 Page 3 of 26
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
V. H. Knisely Perry R. Bass, Inc.
.03500000 25.000000%
------ Keystone, Inc.
AS TO S/2 SECTION 27: 18.750000%
Thru Line Inc.
Mobil Oil Corp. 18.750000%
.12500000 Sid R. Bass, Trustee
Bruce Anderson 11.250000%
7/8ths of .01000000 Lee M. Bass
V. H. Knisely 11.250000%
.01750000 Sid R. Bass, Inc.
Lance Creek Royalties Co. 7.500000%
1/2 of .01000000 Lee M. Bass, Inc.
Richard L. Peterson 7.500000%
3/8ths of .01000000 ------
AS TO SE/4SW/4 SECTION 26:
Perry R. Bass, Inc.
25.000000%
Sid R. Bass, Trustee
18.750000%
Lee M. Bass
18.750000%
Keystone, Inc.
18.750000%
Thru Line Inc.
18.750000%
------
AS TO DEEP RIGHTS OF ABOVE LANDS
AND ALL DEPTHS AS TO REMAINING
LANDS:
</TABLE>
<PAGE>
NON-UNITIZED, PRODUCING EXHIBIT A-7 Page 4 of 26
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
N/A TOWNSHIP 47 NORTH, RANGE 91 WEST W-91920 U.S.A.
Section 20: E/2 480.00 HBP All
Section 21: SW/4 Bass Lease 30948
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Perry R. Bass, Inc.
25.000000%
Sid R. Bass, Inc.
18.750000%
Lee M. Bass, Inc.
18.750000%
Keystone, Inc.
18.750000%
Thru Line Inc.
18.750000%
******
N/A Perry R. Bass, Inc. None AS TO SE/4SW/4 SECTION 21:
25.000000%
Sid R. Bass, Inc. FROM SURFACE TO STRATIGRAPHIC
18.750000% EQUIVALENT OF 10.445 FEET
Lee M. Bass, Inc. (CCU FEDERAL #21-23):
18.750000%
Keystone, Inc. Perry R. Bass, Inc.
18.750000% 25.000000%
Thru Line Inc. Sid R. Bass, Trustee
18.750000% 18.750000%
Lee M. Bass
18.750000%
Keystone, Inc.
18.750000%
Thru Line Inc.
18.750000%
------
BELOW AND AS TO ALL DEPTHS OF
REMAINING LANDS:
</TABLE>
<PAGE>
NON-UNITIZED, PRODUCING EXHIBIT A-7 Page 5 of 26
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
N/A TOWNSHIP 47 NORTH, RANGE 91 WEST B-039524 U.S.A.
Section 32: S/2, NE/4 800.00 HBP All
Section 33: N/2 Bass Leases 31100,
(Other lands in lease fall in Marconi 31529, and 34084
Prospect)
NOTE: SW/4 of Section 32 falls in
No Water Creek Unit Outline; however,
was not committed to Unit. Lands also
appear on No Water Creek Unit Exhibit.
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Perry R. Bass, Inc.
25.000000%
Sid R. Bass, Inc.
18.750000%
Lee M. Bass, Inc.
18.750000%
Keystone, Inc.
18.750000%
Thru Line, Inc.
18.750000%
******
N/A Perry R. Bass, Inc. * Burdens Only Worland's AS TO ALL LANDS EXCEPT:
25.000000% Interest: Worland Associates NE/4 SECTION 32 FROM SURFACE
Sid R. Bass, Inc. .03125000 TO 10,625 FEET:
18.750000% NW/4 SECTION 33 FROM SURFACE
Lee M. Bass, Inc. AS TO ALL LANDS EXCEPT NE/4 TO 10,463 FEET:
18.750000% SECTION 33:
Keystone, Inc. Worland Associates
18.750000% Worland Associates 50.000000% *
Thru Line Inc. .01972400 Perry R. Bass, Inc.
18.750000% Cottonwood Properties 12.500000%
.01000000 Sid R. Bass, Inc.
Guy R. Campbell 9.375000%
.00500000 Lee M. Bass, Inc.
Guy R. Campbell, Jr. & Co. 9.375000%
.00500000 Keystone, Inc.
K&B Company 9.375000%
.00500000 Thru Line Inc.
Wheatley Oil Company 9.375000%
.00500000
Anna Stark
.00027600
</TABLE>
<PAGE>
NON-UNITIZED, PRODUCING EXHIBIT A-7 Page 6 of 26
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AS TO SECTION 33 NE/4:
Worland Associates
.01472400
Cottonwood Properties
.01000000
Guy R. Campbell
.00500000
Guy R. Campbell, Jr. & Co.
.00500000
Carl Hoelzel
.00500000
K&B Company
.00500000
Wheatley Oil Company
.00500000
Anna Stark
.00027600
------
AS TO SECTION 32: NE/4 (SURFACE
TO 10,625 FEET:
SECTION 33: NW/4 (SURFACE TO
TO 10,463 FEET:
Worland Associates Has an
Additional .00625000
Perry R. Bass, Inc.
25.00% x .03750000
Sid R. Bass, Inc.
18.75% x .03750000
Lee M. Bass, Inc.
18.75% x .03750000
Keystone, Inc.
18.75% x .03750000
</TABLE>
<PAGE>
NON-UNITIZED, PRODUCING EXHIBIT A-7 Page 7 of 26
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
N/A TOWNSHIP 47 NORTH, RANGE 91 WEST W-5741 U.S.A.
Section 28: NW/4, S/2 480.00 HBP All
Bass Lease 31101
N/A TOWNSHIP 47 NORTH, RANGE 91 WEST W-0320078 U.S.A.
Section 7: Lots 9, 10, 11, and 12, 1,164.96 HBP All
SE/4SW/4 Bass Leases 31103
Section 18: Lots 5, 6, 7, 8, and 9, and 41142
E/2NW/4
Section 20: W/2
Section 29: W/2, SE/4
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Thru Line Inc.
18.75% x .03750000
NOTE: Historically, ORI
has not merged into WI.
******
N/A Worland Associates AS TO SE/4SW/4: SURFACE TO AS TO SE/4NW/4: SURFACE TO
100.000000% BASE OF PHOSPHORIA FORMATION: BASE OF PHOSPHORIA FORMATION:
Worland Associates Worland Associates *
.05000000-.17500000 12.500000%
------
AS TO SE/4NW/4: SURFACE TO * Subject to conversion to ORI
BASE OF PHOSPHORIA FORMATION: if daily average production
of the Tenneco USA#3 Well
Worland Associates exceeds 15 BOPD for 60 days.
.05000000 ------
AS TO SE/4SW/4, SE/4NW/4
BELOW BASE OF PHOSPHORIA
FORMATION AND REMAINING
LANDS AS TO ALL DEPTHS:
Worland Associates
100.000000%
******
N/A Worland Associates C. A. Caldwell, Jr. AS TO W/2 SECTION 20, SE/4
100.000000% .02500000 SECTION 29 AND BELOW BASE OF
Joyce Wolf PHOSPHORIA FORMATION IN
.01000000 REMAINING LANDS:
------
AS TO SECTION 18 LANDS AND W/2 Worland Associates
SECTION 29: SURFACE TO BASE OF 100.000000%
PHOSPHORIA FORMATION:
</TABLE>
<PAGE>
NON-UNITIZED, PRODUCING EXHIBIT A-7 Page 8 of 26
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
Subject to C.A. NRM-1195 for Phosphoria Formation
covering Lots 9, 10, 11, and 12, E/2SW/4 Section 18-47N-91W.
Subject to C.A. NRM-1767 for Phosphoria Formation
covering Lots 9, 10, 11, and 12, SE/4SW/4, NE/4SW/4
Section 7-A7N-91W.
N/A TOWNSHIP 47 NORTH, RANGE 91 WEST W-6255-A U.S.A.
Section 18: SE/4SW/4 40.00 HBP All
Bass Lease 31104
Subject to C.A. NRM-1195 for Phosphoria
Formation covering Lots 9, 10, 11, and 12,
E/2SW/4 Section 18-47N-91W.
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Worland Associates FROM SURFACE TO BASE OF
.09000000 PHOSPHORIA FORMATION AS TO
SECTION 7 LANDS:
Worland Associates
50.000000%
------
FROM SURFACE TO BASE OF
PHOSPHORIA FORMATION:
AS TO W/2 SECTION 29:
Perry R. Bass, Inc.
25.00% x 4.84%
Sid R. Bass, Inc.
18.75% x 4.84%
Lee M. Bass, Inc.
18.75% x 4.84%
Keystone, Inc.
18.75% x 4.84%
Thru Line Inc.
18.75% x 4.84%
(Assignments Pending)
******
N/A Worland Associates Raymond Chorney BELOW BASE OF PHOSPHORIA
100.000000% .02000000 FORMATION:
------
FROM SURFACE TO BASE OF Worland Associates
PHOSPHORIA FORMATION: 100.000000%
Worland Associates
.10500000
</TABLE>
<PAGE>
NON-UNITIZED, PRODUCING EXHIBIT A-7 Page 9 of 26
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
N/A TOWNSHIP 46 NORTH, RANGE 91 WEST W-0238809 U.S.A.
Section 17: SW/4SE/4 40.00 HBP All
(Other lands in lease fall in No Water Bass Lease 31105
Creek Unit)
N/A TOWNSHIP 47 NORTH, RANGE 92 WEST W-5444 U.S.A.
Section 13: NE/4, N/2SE/4, 280.00 HBP All
SE/4SE/4 Bass Lease 31108
N/A TOWNSHIP 47 NORTH, RANGE 91 WEST W-0314025 U.S.A.
Section 19: Lots 7, 8, 9, and 10, 302.80 HBP All
E/2SW/4 Bass Lease 31109
TOWNSHIP 47 NORTH, RANGE 92 WEST
Section 24: N/2NE/4, SE/4NE/4
(Other lands in lease fall in S. Frisby
Unit)
N/A TOWNSHIP 46 NORTH, RANGE 91 WEST W-0320416 U.S.A.
Section 7: Lot 6 43.31 HBP All
(Other lands in lease fall in No Water Bass Lease 31110
Creek Unit)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
N/A Worland Associates F. J. Bradshaw Worland Associates
100.000000% .04000000 100.000000%
N/A Worland Associates F. W. Crowley BELOW BASE OF PHOSPHORIA
100.000000% .03000000 FORMATION:
------
FROM SURFACE TO BASE OF Worland Associates
PHOSPHORIA FORMATION: 100.000000%
Worland Associates
.09500000
******
N/A Worland Associates Key Production Company, Inc. Worland Associates
100.00000000% .01500000 100.000000%
The LaCoy Family Trust
.00500000
N/A Worland Associates Catherine A. Grieve Worland Associates
75.000000% .02000000 75.000000%
S.D. Ayers
.01500000
Legacy Energy Royalty Income
Fund, Ltd.
.01500000
</TABLE>
<PAGE>
NON-UNITIZED, PRODUCING EXHIBIT A-7 Page 10 of 26
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
N/A TOWNSHIP 43 NORTH, RANGE 92 WEST W-8243 U.S.A.
Section 1: Lots 6, 10, and 11, SW/4, 448.70 HBP All
SW/4NE/4, SE/4NW/4, Bass Lease 31111
W/2SE/4
N/A TOWNSHIP 47 NORTH, RANGE 92 WEST W-0254904-A U.S.A.
Section 11: All 640.00 HBP All
Bass Leases 31116
and 32635
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
N/A Worland Associates J. Perry AS TO LOT 6. SW/4NE/4.
50.000000% .02000000 SE/4NW/4 - ALL DEPTHS AND AS
S. D. Ayers TO REMAINING LANDS BELOW BASE
.01500000 OF PHOSPHORIA FORMATION:
A. W. Cullen
.01500000 Worland Associates
------ 50.000000%
AS TO LOTS 10 AND 11, W/2SE/4,
SW/4 FROM SURFACE TO BASE OF
PHOSPHORIA FORMATION:
Worland Associates
.05000000
******
N/A AS TO NW/4: W. H. Brown AS TO ALL LANDS EXCEPT SE/4
.02500000 NW/4 FROM SURFACE TO BASE OF
Perry R. Bass, Inc. Key Production Company, Inc. PHOSPHORIA FORMATION:
25.000000% .02500000
Sid R. Bass, Inc. Worland Associates
18.750000% 50.000000%
Lee M. Bass, Inc. Perry R. Bass, Inc.
18.750000% 12.500000%
Keystone, Inc. Sid R. Bass, Inc.
18.750000% 9.375000%
Thru Line Inc. Lee M. Bass, Inc.
18.750000% 9.375000%
------ Keystone, Inc.
AS TO NE/4, S/12: 9.375000%
Thru Line Inc.
Worland Associates 9.375000%
50.000000%
</TABLE>
<PAGE>
NON-UNITIZING, PRODUCING EXHIBIT A-7 Page 11 of 26
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
N/A TOWNSHIP 47 NORTH, RANGE 92 WEST W-2607-A U.S.A.
Section 1: Lots 1, 2, 3, and 4 959.42 HBP All
S/2N/2, S/2 Bass Leases 31117,
Section 12: N/2 32634, and 41144
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Perry R. Bass, Inc. AS TO SE/4NW/4 FROM
12.500000% SURFACE TO BASE OF PHOSPHORIA
Sid R. Bass, Inc. FORMATION:
9.375000%
Lee M. Bass, Inc. Worland Associates
9.375000% 5.000000%
Keystone, Inc.
9.375000%
Thru Line Inc.
9.375000%
******
N/A Worland Associates Key Production Company, Inc. AS TO SECTION 1 LANDS:
50.000000% .03375000 BELOW BASE OF TENSLEEP:
Perry R. Bass, Inc. R. Scheere AS TO SECTION 12 NW/4 AS TO
12.500000% .01125000 ALL DEPTHS:
Sid R. Bass, Inc. James D. Beard, et ux
9.375000% .00500000 AS TO SECTION 12 NE/4 BELOW
Lee M. Bass, Inc. ------ BASE OF PHOSPHORIA FORMATION:
9.375000% AS TO SECTION 1 LANDS:
Keystone, Inc. SURFACE TO BASE OF Worland Associates
9.375000% PHOSPHORIA FORMATION: 50.000000%
Thru Line Inc. Perry R. Bass, Inc.
9.375000% Worland Associates 12.500000%
.01875000 Sid R. Bass, Inc.
------ 9.375000%
BASE OF PHOSPHORIA FORMATION Lee M. Bass, Inc.
TO BASE OF TENSLEEN FORMATION: 9.375000%
Keystone, Inc.
Worland Associates 9.375000%
.03750000 Thru Line Inc.
9.375000%
</TABLE>
<PAGE>
NON-UNITIZED, PRODUCING EXHIBIT A-7 Page 12 of 26
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AS TO NE/4 SECTION 12 SURFACE AS TO SECTION 1 LANDS FROM
TO BASE OF PHOSPHORIA SURFACE TO BASE OF PHOSPHORIA
FORMATION: FORMATION:
SW/4:
Worland Associates Perry R. Bass, Inc.
.06250000 6.665000%
Sid R. Bass, Inc.
Convertible APO of Fed 1-12 4.998750%
Well in NW/4NE/4 Section 12 Lee M. Bass, Inc.
to 12.50% ORI or 25.00% WI. 4.998750%
Keystone, Inc.
Perry R. Bass, Inc. 4.998750%
.78125000% Thru Line Inc.
Sid R. Bass, Inc. 4.998750%
.58593750% (Assignments Pending)
Lee M. Bass, Inc. Lots 3 and 4, S/2NW/4:
.58593750% Perry R. Bass, Inc.
Keystone, Inc. 1.210000%
.58593750% Sid R. Bass, Inc.
Thru Line Inc. 0.907500%
.58593750% Lee M. Bass, Inc.
0.907500%
Keystone, Inc.
0.907500%
Thru Line Inc.
0.907500%
(Assignments Pending)
Lots 1 and 2, S/2NE/4, SE/4
Perry R. Bass, Inc.
5.682500%
Sid R. Bass, Inc.
4.261875%
</TABLE>
<PAGE>
NON-UNITIZED, PRODUCING EXHIBIT A-7 Page 13 of 26
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
N/A TOWNSHIP 47 NORTH, RANGE 92 WEST W-4190 U.S.A.
Section 14: N/2 880.00 HBP All
Section 15: E/2, S/2NW/4, SW/4 Bass Leases 31118
and 41146
N/A TOWNSHIP 47 NORTH, RANGE 92 WEST W-0314025-B U.S.A.
Section 13: W/2 320.00 HBP All
Bass Leases 31119
and 32637
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lee M. Bass, Inc
4.261875%
Keystone, Inc.
4.261875%
Thru Line Inc.
4.261875%
(Assignments Pending)
******
N/A Worland Associates FROM SURFACE TO BASE OF AS TO ALL LANDS BELOW BASE
50.000000% PHOSPHORIA FORMATION: OF PHOSPHORIA FORMATION:
Worland Associates Worland Associates
.06250000 50.000000%
------
AS TO NE/4 SECTION 14 FROM
SURFACE DOWN TO BASE OF
PHOSPHORIA FORMATION:
Perry R. Bass, Inc.
6.665000%
Sid R. Bass, Inc.
4.998750%
Lee M. Bass, Inc.
4.998750%
Keystone, Inc.
4.998750%
Thru Line Inc.
4.998750%
(Assignments Pending)
******
N/A Worland Associates Key Production Company, Inc. Worland Associates
50.000000% .03750000 50.000000%
Perry R. Bass, Inc. The James F. LaCoy FamiIy Perry R. Bass, Inc.
12.500000% Trust .01250000 12.500000%
</TABLE>
<PAGE>
NON-UNITIZED, PRODUCING EXHIBIT A-7 Page 14 of 26
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
N/A TOWNSHIP 47 NORTH, RANGE 92 WEST W-0187646 U.S.A.
Section 2: Lots 1, 2, 3, and 4, 319.95 HBP All
S/2N/2 Bass Leases 31120
and 32636
N/A TOWNSHIP 47 NORTH, RANGE 92 WEST W-11773 U.S.A.
Section 23: SE/4NE/4, NE/4SE/4 120.00 HBP All
Section 24: NW/4SW/4 Bass Lease 31121
(Other lands in lease fall in S. Frisby
Unit)
N/A TOWNSHIP 47 NORTH, RANGE 92 WEST W-11774 U.S.A.
Section 23: SE/4SE/4 240.00 HBP All
Section 24: S/25W/4 Bass Lease 31122
Section 25: N/2NW/4, SE/4NW/4
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sid R. Bass, Inc. Sid R. Bass, Inc.
9.375000% 9.375000%
Lee M. Bass, Inc. Lee M. Bass, Inc.
9.375000% 9.375000%
Keystone, Inc. Keystone, Inc.
9.375000% 9.375000%
Thru Line Inc. Thru Line Inc.
9.375000% 9.375000%
****** ******
N/A Worland Associates Westmont Engineering Co. Worland Associates
50.000000% .05000000 50.000000%
Perry R. Bass, Inc. Perry R. Bass, Inc.
12.500000% 12.500000%
Sid R. Bass, Inc. Sid R. Bass, Inc.
9.375000% 9.375000%
Lee M. Bass, Inc. Lee M. Bass, Inc.
9.375000% 9.375000%
Keystone, Inc. Keystone, Inc.
9.375000% 9.375000%
Thru Line Inc. Thru Line Inc.
9.375000% 9.375000%
****** ******
N/A Worland Associates None Worland Associates
100.000000% 100.000000%
N/A Worland Associates FROM SURFACE TO BASE OF BELOW BASE OF PHOSPHORIA
100.000000% PHOSPHORIA FORMATION: FORMATION:
</TABLE>
<PAGE>
NON-UNITIZED, PRODUCING EXHIBIT A-7 Page 15 of 26
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
N/A TOWNSHIP 47 NORTH, RANGE 92 WEST W-11775 U.S.A.
Section 25: SW/4NE/4 40.00 HBP All
(Other Lands in lease fall in S. Frisby Bass Lease 31123
Unit)
N/A TOWNSHIP 45 NORTH, RANGE 92 WEST W-18806 U.S.A.
Section 19: Lots 5 and 6, E/2E/2, 280.00 HBP All
NW/4NE/4 Bass Lease 31130
N/A TOWNSHIP 46 NORTH, RANGE 92 WEST W-0319221 U.S.A.
Section 2: SE/4NE/4, E/2SE/4, 160.00 HBP All
SW/4SE/4 Bass Leases 31142
and 34078
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Worland Associates Worland Associates
.03000000-.07500000 100.000000%
****** ******
N/A Worland Associates FROM SURFACE TO BASE OF BELOW BASE OF PHOSPHORIA
100.000000% PHOSPHORIA FORMATION: FORMATION:
Worland Associates Worland Associates
.10250000-.15500000 100.000000%
****** ******
N/A Worland Associates None Worland Associates
100.000000% 100.000000%
****** ****** ******
N/A Perry R. Bass, Inc. FROM SURFACE DOWN TO 150 FEET FROM SURFACE DOWN TO 150 FEET
25.000000% BELOW TOP OF PHOSPHORIA BELOW TOP OF PHOSPHORIA
Sid R. Bass, Inc. FORMATION: FORMATION:
18.750000%
Lee M. Bass, Inc. .05000000-.0625000 Worland Associates
18.750000% Owned by: 100.000000%
Keystone, Inc. Perry R. Bass, Inc. ------
18.750000% 25.00% BELOW:
Thru Line Inc. Sid R. Bass, Inc.
18.750000% 18.75% Perry R. Bass, Inc.
Lee M. Bass, Inc. 25.000000%
18.75% Sid R. Bass, Inc.
Keystone, Inc. 18.750000%
18.75% Lee M. Bass, Inc.
Thru Line Inc. 18.750000%
18.75% Keystone, Inc.
18.750000%
Thru Line Inc.
18.750000%
</TABLE>
<PAGE>
NON-UNITIZED, PRODUCING EXHIBIT A-7 Page 16 of 26
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
N/A TOWNSHIP 47 NORTH, RANGE 91 WEST W-30870 U.S.A.
Section 18: Lot 12, NE/4SW/4 240.00 HBP All
Section 19: N/2SE/4, SE/4SE/4 Bass Lease 31143
Section 30: NE/4NE/4
Subject to C.A. NRM-1 195 for Phosphoria Formation
covering Lots 9, 10, 11, and 12, E/2SW/4 Section 18-47N-91W.
Subject to C.A. NRM-1737 for Phosphoria Formation
covering the NE/4 Section 30-47N-91W.
Subject to C.A. NRM-1736 for Phosphoria Formation
covering the SE/4 Section 19-47N-91W.
N/A TOWNSHIP 47 NORTH, RANGE 92 WEST W-7168 U.S.A.
Section 27: NE/4, S/2NW/4, S/2 720.00 HBP All
Section 28: SE/4 Bass Leases 31145
and 41147
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
N/A Worland Associates Doreen Smith AS TO SECTION 18 LANDS BELOW
100.000000% .02000000 BASE OF PHOSPHORIA FORMATION
------ AND REMAINING LANDS:
AS TO SECTION 18 LANDS FROM
SURFACE TO BASE OF PHOSPHORIA Worland Associates
FORMATION: 100.000000%
Worland Associates
.10500000
N/A Worland Associates Marvin Wolf BELOW BASE OF PHOSPHORIA
100.000000% .03000000 FORMATION:
John J. Pedry
.01000000 Worland Associates
------ 100.000000%
FROM SURFACE TO BASE OF ------
PHOSPHORIA FORMATION: AS TO SW/4 SECTION 27 FROM
SURFACE TO BASE OF
Worland Associates PHOSPHORIA FORMATION:
.08500000
Perry R. Bass, Inc.
6.665000%
Sid R. Bass, Inc.
4.998750%
Lee M. Bass, Inc.
4.998750%
Keystone, Inc.
4.998750%
Thru Line Inc.
4.998750%
(Assignments Pending)
</TABLE>
<PAGE>
NON-UNITIZED, PRODUCING EXHIBIT A-7 Page 17 of 26
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
N/A TOWNSHIP 47 NORTH, RANGE 91 WEST W-44255 U.S.A.
Section 19: SW/4SE/4 320.00 HBP All
Section 30: NW/4NE/4, S/2NE/4, SE/4 Bass Lease 31147
Subject to C.A. NRM-1736 for Phosphoria Formation
covering the SE/4 Section 19-47N-91W.
Subject to C.A. NRM-1737 for Phosphoria Formation
covering the NE/4 Section 30-47N-91W.
N/A TOWNSHIP 46 NORTH, RANGE 92 WEST W-49937 U.S.A.
Section 25: Lot 4, W/2NW/4, 280.06 HBP All
SE/4NW/4, NE/4SW/4, Bass Lease 31148
W/2SE/4
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AS TO SE/4 SECTION 28 FROM
SURFACE TO BASE OF PHOSPHORIA
FORMATION:
Perry R. Bass, Inc.
1.210000%
Sid R. Bass, Inc.
0.907500%
Lee M. Bass, Inc.
0.907500%
Keystone, Inc.
0.907500%
Thru Line Inc.
0.907500%
(Assignments Pending )
******
N/A Worland Associates James O. Shetterly, Jr. AS TO SE/4 SECTION 30:
100.000000% .03000000 FROM SURFACE TO 10.890 FEET:
*Worland has a .065 ORI in Worland Associates
Schetterly #1-30 Well BPO, 40.000000% *
convertible to 40% WI APO. ------
BELOW 10,890 FEET AND
REMAINING LANDS:
Worland Associates
100.000000%
******
N/A Worland Associates Mary B. Sprinkle BELOW BASE OF PHOSPHORIA
100.000000% .05000000 FORMATION:
FROM SURFACE TO BASE OF Worland Associates
PHOSPHORIA FORMATION: 100.000000%
</TABLE>
<PAGE>
NON-UNITIZED, PRODUCING EXHIBIT A-7 Page 18 of 26
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
N/A TOWNSHIP 47 NORTH, RANGE 92 WEST W-59507 U.S.A.
Section 25: SW/4SE/4 40.00 HBP All
Bass Lease 31150
N/A TOWNSHIP 47 NORTH, RANGE 91 WEST W-66869 U.S.A.
Section 7: NE/4SW/4 40.00 HBP All
Bass Lease 31151
Subject to C.A. NRM-1767 for Phosphoria
Formation covering Lots 9, 10, 11, and 12,
SE/4SW/4, NE/4SW/4 Section 7-47N-91 W.
N/A TOWNSHIP 45 NORTH, RANGE 92 WEST W-77143 U.S.A.
Section 19: Lots 13, 14, 15, 16, 23, 360.00 HBP All
and 24, SW/4NE/4, Bass Lease 31152
W/2SE/4
N/A TOWNSHIP 46 NORTH, RANGE 91 WEST W-8232 U.S.A.
Section 10: N/2 320.00 HBP All
Bass Leases 31153
and 34081
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Worland Associates
.12500000% *
* Convertible to like working
interest when average monthly
production less than or equal to
15 BOPD per well.
******
N/A Worland Associates G. William Hurley BELOW BASE OF PHOSPHORIA
100.000000% .04000000 FORMATION:
------
FROM SURFACE TO BASE OF Worland Associates
PHOSPHORIA FORMATION: 100.000000%
Worland Associates
.10000000
******
N/A Worland Associates None Worland Associates
75.000000% 75.000000%
N/A Worland Associates None Worland Associates
100.000000% 100.000000%
****** ******
N/A Perry R. Bass, Inc. Worland Associates Perry R. Bass, Inc.
25.000000% .01972400 25.000000%
Sid R. Bass, Inc. Cottonwood Properties Sid B. Bass, Inc.
18.750000% .01000000 18.750000%
Lee M. Bass, Inc. Guy R. Campbell Lee M. Bass, Inc.
18.750000% .00500000 18.750000%
Keystone, Inc. Guy R. Campbell, Jr. & Co. Keystone, Inc.
18.750000% .00500000 18.750000%
</TABLE>
<PAGE>
NON-UNITIZED, PRODUCING EXHIBIT A-7 Page 19 of 26
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
N/A TOWNSHIP 47 NORTH, RANGE 91 WEST W-021469 U.S.A.
Section 28: NE/4 160.00 HBP All
Bass Lease 31939
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Thru Line Inc. K&B Company Thru Line Inc.
18.750000% .00500000 18.750000%
Wheatley Oil Co.
.00500000
Anna Stark
.00027600
******
N/A Frank Elliott, Trustee Frank Elliott, Trustee AS TO S/2NE/4, NE/4NE/4
50.000000% .06250000 FROM SURFACE TO 10,485 FEET:
Edna Ione Hall, Trustee Edna Ione Hall, Trustee
50.000000% .06250000 Perry R. Bass, Inc.
------ 25.000000%
AS TO NW/4NE/4 FROM SURFACE Sid R. Bass, Inc.
TO 10,485 FEET: 18.750000%
Lee M. Bass, Inc.
Sid R. Bass, Inc. 18.750000%
.00937500 Keystone, Inc.
Lee M. Bass, Inc. 18.750000%
.00937500 Thru Line Inc.
18.750000%
------
AS TO NW/4NE/4 FROM SURFACE
TO 10485 FEET:
Perry R. Bass, Inc.
25.000000%
Sid R. Bass, Trustee
18.750000%
</TABLE>
<PAGE>
NON-UNITIZED, PRODUCING EXHIBIT A-7 Page 20 of 26
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
N/A TOWNSHIP 47 NORTH, RANGE 90 WEST W-45484 U.S.A.
Section 32: E/2SE/4 80.00 HBP All
Bass Lease 33353
N/A TOWNSHIP 46 NORTH, RANGE 91 WEST W-0283968 U.S.A.
Section 5: S/2SW/4 80.00 HBP All
(Other lands in lease fall in No Water Bass Lease 34080
Creek Unit)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lee M. Bass
18.750000%
Keystone, Inc.
18.750000%
Thru Line Inc.
18.750000%
******
N/A Perry R. Bass, Inc. Associated Royalty Co. Perry R. Bass, Inc.
25.000000% .04000000 25.000000%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.750000% 18.750000%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.750000% 18.750000%
Keystone, Inc. Keystone, Inc.
18.750000% 18.750000%
Thru Line Inc. Thru Line Inc.
18.750000% 18.750090%
****** ******
N/A Perry R. Bass, Inc. A. M. Culver Perry R. Bass, Inc.
25.000000% .03000000 25.000000%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.750000% 18.750000%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.750000% 18.750000%
Keystone, Inc. Keystone, Inc.
18.750000% 18.750000%
Thru Line Inc. Thru Line Inc.
18.750000% 18.750000%
</TABLE>
<PAGE>
NON-UNITIZED, PRODUCING EXHIBIT A-7 Page 21 of 26
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
N/A TOWNSHIP 47 NORTH, RANGE 91 WEST W-084518 U.S.A.
Section 31: Lots 5, 6, 7, 8, 9, 10, and 407.52 HBP All
11, E/2NW/4, NE/4 Bass Lease 34082
(Other lands in lease fall in No Water
Creek Unit)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
N/A Perry R. Bass, Inc. Arta A. Connaghan AS TO LOTS 5 AND 8. E/2NW/4
25.000000% .01350000 BELOW 10,847 FEET AND ALL
Sid R. Bass, Inc. Erving Wolf DEPTHS TO REMAINING LANDS:
18.750000% .00500000
Lee M. Bass, Inc. Geo Winston Nelson, Jr. Perry R. Bass, Inc.
18.7500000% .00450000 25.000000%
Keystone, Inc. Elizabeth V. Nelson Taylor Sid R. Bass, Inc.
18.750000% .00450000 18.750000%
Thru Line Inc. April A. Nelson Winter Lee M. Bass, Inc.
18.750000% .00450000 18.750000%
Betty B. Shaffer Keystone, Inc.
.00300000 18.750000%
------ Thru Line Inc.
AS TO LOTS 5 AND 8, E/2NW/4 18.750000%
FROM SURFACE TO 10,847 FEET:
.0500000-.0900000 OWNED AS
FOLLOWS:
Perry R. Bass, Inc.
25.0000000
Sid R. Bass, Inc.
18.7500000
Lee M. Bass, Inc.
18.7500000
Keystone, Inc.
18.7500000
Thru Line Inc.
18.7500000
</TABLE>
<PAGE>
NON-UNITIZED, PRODUCING EXHIBIT A-7 Page 22 of 26
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
N/A TOWNSHIP 48 NORTH, RANGE 92 WEST WYW-121343 U.S.A.
Section 24: E/2SW/4, SE/4 240.00 HBP All
(Other lands in lease fall in Treasure Bass Lease 34752
Prospect)
Subject to C.A. WYW-112025 for Phosphoria
Formation covering All of Section 24-48N-92W.
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
N/A Perry R. Bass, Inc. FROM SURFACE TO BASE OF AS TO ALL DEPTHS EXCEPT THE
25.000000% PHOSPHORIA FORMATION IN THE PHOSPHORIA FORMATION (9,680
Sid R. Bass, Inc. NW/4SE/4 SECTION 24; AND, FEET TO 9,976 FEET) IN THE E/2
18.750000% AS TO THE PHOSPHORIA FORMATION SW/4, E/2SE/4. SW/4SE/4
Lee M. Bass, Inc. (9,680 FEET TO 9,976 FEET) IN THE SECTION 24; AND BELOW THE
18.750000% E/2SW/4, E/2SE/4. SW/4SE/4 PHOSPHORIA FORMATION IN THE
Keystone, Inc. SECTION 24: NW/4SE/4 SECTION 24:
18.750000%
Thru Line Inc. BEFORE PAYOUT OF 1-H BASS Perry R. Bass, Inc.
18.750000% FEDERAL #33-24 WELL: 25.000000%
Sid R. Bass, Inc.
Perry R. Bass, Inc. 18.750000%
.02125000 Lee M. Bass, Inc.
Sid R. Bass, Inc. 18.750000%
.01593750 Keystone, Inc.
Lee M. Bass, Inc. 18.750000%
.01593750 Thru Line Inc.
Keystone, Inc. 18.750000%
.01593750
Thru Line Inc.
.01593750
------
AFTER PAYOUT OF 1-H BASS
FEDERAL #33-24 WELL:
Perry R. Bass, Inc.
.03875000
Sid R. Bass, Inc.
.02906250
Lee M. Bass, Inc.
.02906250
</TABLE>
<PAGE>
NON-UNITIZED, PRODUCING EXHIBIT A-7 Page 23 of 26
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
N/A TOWNSHIP 48 NORTH, RANGE 92 WEST W-83731 U.S.A
Section 24: NE/4NW/4, W/2W/2 200.00 HBP All
(Other lands in lease fall in Treasure Bass Lease 35173
Prospect)
Subject to C.A. WYW-112025 for Phosphoria
Formation covering All of Section 24-48N-92W.
N/A TOWNSHIP 47 NORTH, RANGE 91 WEST W-44461 U.S.A.
Section 18: SE/4NE/4, NW/4SE/4, 160.00 HBP All
S/2SE/4 Bass Lease 38791
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Keystone, Inc.
.02906250
Thru Line Inc.
.02906250
******
N/A Perry R. Bass, Inc. Mary B. Sprinkle AS TO ALL DEPTHS EXCEPT THE
25.000000% .06250000 PHOSPHORIA FORMATION (9,680
Sid R. Bass, Inc. Union Oil Company of Calif. FEET TO 9,976 FEET):
18.750000% .02250000
Lee M. Bass, Inc. ------ Perry R. Bass, Inc.
18.750000% AFTER PAYOUT OF 1-H BASS 25.000000%
Keystone, Inc. FEDERAL #33-24 WELL AS TO Sid R. Bass, Inc.
18.750000% PHOSPHORIA FORMATION: 18.750000%
Thru Line Inc. Lee M. Bass, Inc.
18.750000% Perry R. Bass, Inc. 18.750000%
.01750000 Keystone, Inc.
Sid R. Bass, Inc. 18.750000%
.01312500 Thru Line Inc.
Lee M. Bass,Inc. 18.750000%
.01312500
Keystone, Inc.
.01312500
Thru Line, Inc.
.01312500
******
N/A ------------------- Brent Exploration Co. FROM SURFACE DOWN TO 10,590
.02000000 FEET:
******
Perry R. Bass, Inc.
2.500000%
Sid R. Bass, Inc.
1.875000%
</TABLE>
<PAGE>
NON-UNITIZED, PRODUCING EXHIBIT A-7 Page 24 of 26
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
N/A TOWNSHIP 47 NORTH, RANGE 90 WEST W-45482 U.S.A.
Section 29: NE/4SW/4 40.00 HBP All
Bass Lease 38849
N/A TOWNSHIP 46 NORTH, RANGE 92 WEST W-71852 U.S.A.
Section 11: E/2NW/4, SW/4NW/4, 200.00 HBP All
W/2SW/4 Bass Lease 40725
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lee M. Bass, Inc.
1.875000%
Keystone, Inc.
1.875000%
Thru Line Inc.
1.875000%
******
N/A ------ Perry R. Bass, Inc. ------
.00125000
Sid R. Bass, Inc.
.00093750
Lee M. Bass, Inc.
.00093750
Keystone, Inc.
.00093750
Thru Line Inc.
.00093750
******
N/A Herbaly Petroleum Corp. Herbaly Petroleum Corp. Perry R. Bass, Inc.
100.000000% .03000000 25.000000%
Sid R. Bass, Inc.
18.750000%
Lee M. Bass, Inc.
18.750000%
Keystone, Inc.
18.750000%
Thru Line Inc.
18.750000%
</TABLE>
<PAGE>
NON-UNITIZED, PRODUCING EXHIBIT A-7 Page 25 of 26
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STATE LANDS
N/A TOWNSHIP 47 NORTH, RANGE 91 WEST 70-5767 State of
Section 36: S/2NW/4, SW/4 240.00 HBP Wyoming
(Other lands in lease fall in Cotton- Bass Leases 21328 100%
wood Creek Field Extension and 38853
(Phosphoria) Unit)
N/A TOWNSHIP 47 NORTH, RANGE 92 WEST 66-4412 State of
Section 36: N/2, E/2SW/4, SE/4 560.00 HBP Wyoming
Bass Leases 31114 100%
and 41143
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
N/A D. W. Genpar, Inc. Key Production Co.,Inc. D. W. Genpar, Inc.
25.000000% .05750000 25.000000%
Sid R. Bass, Inc. Donald & Dorothy M. Vail Sid R. Bass, Inc.
18.750000% .00500000 18.750000%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.750000% 18.750000%
Keystone, Inc. Keystone, Inc.
18.750000% 18.750000%
Thru Line Inc. Thru Line Inc.
18.750000% 18.750000%
****** ******
N/A Worland Associates Estate of Raymond Chorney, AS TO N/2 BELOW BASE OF
50.000000% deceased .02500000 PHOSPHORIA FORMATION AND AS
John J. Pedry TO ALL DEPTHS IN REMAINING LANDS:
.02000000
Arden R. Boland Worland Associates
.00500000 50.000000%
------
AS TO N/2 FROM SURFACE DOWN AS TO NE/4 FROM SURFACE TO
TO BASE OF PHOSPHORIA FORMA- 10,903 FEET:
TION (10,903 FEET):
Bass Enterprises Production Co.
Worland Associates 26.666640% *
.03750000 (Assignments Pending.)
------
* This interest also burdened AS TO NW/4:
with 26.66664/76.625 of:
8/11 x 1/3 x 50% x 7.5% - Bass Enterprises Production Co.
Worland Associates (part of 22.736810% **
3.75% above) (Assignments Pending.)
8/11 x 1/3 x 25% x 12.5% - The
</TABLE>
<PAGE>
NON-UNITIZED, PRODUCING EXHIBIT A-7 Page 26 of 26
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
<TABLE>
<CAPTION>
TRACT NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES SERIAL NUMBER & PERCENTAGE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STATE LANDS (CONT'D)
N/A TOWNSHIP 48 NORTH, RANGE 92 WEST 74-17879 State of
Section 36: All 640.00 HBP Wyoming
Bass Lease 39639 100%
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Prudential Group, Inc.
.496875% - W. R. Grace
**This interest also burdened with
22.73681/25 of:
Surface to 10,903 feet:
1/2 x 3.125% - The Prudential
Group, Inc.
1/2 x 3.75% - Worland Associates
(part of 3.75% above)
7.5% x 7.5% - W. R. Grace
Below 10,903;
3.125% - The Prudential Group, Inc.
******
N/A D. W. Genpar, Inc. Donald C. Grotjan D. W. Genpar, Inc.
25.000000% .03000000 25.000000%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.750000% 18.750000%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.750000% 18.750000%
Keystone, Inc. Keystone, Inc.
18.750000% 18.750000%
Thru Line Inc. Thru Line Inc.
18.750000% 18.750000%
</TABLE>
<PAGE>
Page 1 of 1
<TABLE>
<CAPTION>
NON-UNITIZED, NON-PRODUCING EXHIBIT A-8
BIG HORN COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED____________, 1998
EFFECTIVE JANUARY 1, 1998
TRACT NO. SERIAL NO. & ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES EXPIRATION DATE & PERCENTAGE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS
N/A TOWNSHIP 51 NORTH, RANGE 92 WEST WYW-141305 U.S.A
Section 31: E/2NE/4, SE/4 553.77 03/31/2007 All
Section 32: E/2NE/4, W/2SE/4 Bass Lease 40901
Section 33: Lots 4 and 5, W/2SW/4
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
N/A Perry R. Bass, Inc. None Perry R. Bass, Inc.
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
</TABLE>
<PAGE>
Page 1 of 4
<TABLE>
<CAPTION>
NON-UNITIZED, NON-PRODUCING EXHIBIT A-9
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED____________, 1998
EFFECTIVE JANUARY 1, 1998
TRACT NO. SERIAL NO. & ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES EXPIRATION DATE & PERCENTAGE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
N/A TOWNSHIP 47 NORTH, RANGE 90 WEST WYW-132963 U.S.A.
Section 20: NE/4 160.00 07/31/2004 All
Bass Lease 39402
N/A TOWNSHIP 46 NORTH, RANGE 91 WEST WYW-133662 U.S.A.
Section 1: N/2SE/4 80.00 09/30/2004 All
Bass Lease 39435
N/A TOWNSHIP 47 NORTH, RANGE 92 WEST WYW-141293 U.S.A
Section 14: SW/4 160.00 03/31/2007 All
Bass Lease 40900
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
N/A Perry R. Bass, Inc. None Perry R. Bass, Inc.
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
****** ******
N/A Perry R. Bass, Inc. None Perry R. Bass, Inc.
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
****** ******
N/A Perry R. Bass, Inc. None Perry R. Bass, Inc.
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
</TABLE>
<PAGE>
Page 2 of 4
<TABLE>
<CAPTION>
NON-UNITIZED, NON-PRODUCING EXHIBIT A-9
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED____________, 1998
EFFECTIVE JANUARY 1, 1998
TRACT NO. SERIAL NO. & ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES EXPIRATION DATE & PERCENTAGE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEE LANDS
N/A TOWNSHIP 47 NORTH, RANGE 92 WEST 06/16/2000 * Templin Farms Inc.
Section 29: SW/4 160.00 Bass Lease 41235 12.50%
Recorded in Micro Book 74, Page 2181
N/A TOWNSHIP 47 NORTH, RANGE 92 WEST 06/17/2000 * Geraldine M. Burton, et vir
Section 32: W/2SW/4 80.00 Bass Lease 41236A 12.50%
Recorded in Micro Book 74, Page 2179
N/A TOWNSHIP 47 NORTH, RANGE 92 WEST 07/12/2000 * Dale A. Black, et ux
Section 32: W/2SW/4 (80.00) Bass Lease 41236B 12.50%
Recorded in Micro Book 75, Page 420
* Option to extend for two (2) years.
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
N/A Perry R. Bass, Trustee None Perry R. Bass, Trustee
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
****** ******
N/A Perry P. Bass, Trustee None Perry R. Bass, Trustee
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
****** ******
N/A Perry R. Bass, Trustee None Perry R. Bass, Trustee
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
</TABLE>
<PAGE>
Page 3 of 4
<TABLE>
<CAPTION>
NON-UNITIZED, NON-PRODUCING EXHIBIT A-9
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED____________, 1998
EFFECTIVE JANUARY 1, 1998
TRACT NO. SERIAL NO. & ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES EXPIRATION DATE & PERCENTAGE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEE LANDS (CONT'D)
N/A TOWNSHIP 47 NORTH RANGE 92 WEST 07/03/2000* Charles W. Kraft, et ux
Section 32: W/2NW/4, NE/4NW/4 120.00 Bass Lease 41406A 12.50%
Recorded in Micro Book 75, Page 1655
N/A TOWNSHIP 47 NORTH, RANGE 92 WEST 07/03/2000* Jerry L. Hastings, et ux
Section 32: W/2NW/4, NE/4NW/4 (120.00) Bass Lease 41406B 12.50%
Recorded in Micro Book 75, Page 1653
N/A TOWNSHIP 47 NORTH, RANGE 92 WEST 07/03/2000* The J. Donald & Marjorie
Section 32: W/2NW/4, NE/4NW/4 (120.00) Bass Lease 41406C H. Colby Trust
Recorded in Micro Book 75, Page 1651 12.50%
* Option to extend for two (2) years.
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
N/A Perry R. Bass, Trustee None Perry R. Bass, Trustee
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
****** ******
N/A Perry R. Bass, Trustee None Perry R. Bass, Trustee
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
****** ******
N/A Perry R. Bass, Trustee None Perry R. Bass, Trustee
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
</TABLE>
<PAGE>
Page 4 of 4
<TABLE>
<CAPTION>
NON-UNITIZED, NON-PRODUCING EXHIBIT A-9
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED____________, 1998
EFFECTIVE JANUARY 1, 1998
TRACT NO. SERIAL NO. & ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES EXPIRATION DATE & PERCENTAGE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEE LANDS (CONT'D)
N/A TOWNSHIP 47 NORTH, RANGE 92 WEST 07/03/2000* Wesley W. Hastings, et ux
Section 32: W/2NW/4, NE/4NW/4 (120.00) Bass Lease 41406D 12.50%
Recorded in Micro Book 75, Page 1943
N/A TOWNSHIP 47 NORTH, RANGE 92 WEST 07/03/2000* Roger D. Hastings, et ux
Section 32: W/2NW/4, NE/4NW/4 (120.00) Bass Lease 41406E 12.50%
Recorded in Micro Book 75, Page 1945
* Option to extend for two (2) years.
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
N/A Perry R. Bass, Trustee None Perry R. Bass, Trustee
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
****** ******
N/A Perry R. Bass, Trustee None Perry R. Bass, Trustee
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
</TABLE>
<PAGE>
Page 1 of 2
<TABLE>
<CAPTION>
EAST LAMB PROSPECT EXHIBIT A-10
BIG HORN COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED____________, 1998
EFFECTIVE JANUARY 1, 1998
TRACT NO. SERIAL NUMBER ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES & EXPIRATION DATE & PERCENTAGE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS
N/A TOWNSHIP 51 NORTH, RANGE 92 WEST WYW-142156 U.S.A.
Section 4: S/2N/2, S/2 1,425.98 07/31/2007 All
Section 9: Lots 1-3 Bass Lease 41150
Section 11: Tract 61B
Section 14: Tract 61B, 61C, 61D,
61E, 61F, 61G, 61H, 61I
Section 15: Lot 4, N/2, Tract 55A,
55B, 55C, 61I, 61J
Section 16: Tract 55C
N/A TOWNSHIP 52 NORTH, RANGE 92 WEST WYW-142158 U.S.A
Section 26: SW/4 1,674.72 07/31/2007 All
Section 27: All Bass Lease 41151
Section 34: Lots 1-3, N/2NE/4,
SW/4NE/4, W/2, Tract
38C, 38D, 65C, 65D
Section 35: Lots 1-4, Tract 38A,
38B, 38C, 64A, 65A,
65B, 65C
N/A TOWNSHIP 52 NORTH, RANGE 92 WEST WYW-140640 U.S.A
Section 34: SE/4NE/4 76.07 01/31/2007 All
Section 35: Lot 5 Bass Lease 41237
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
N/A Perry R. Bass, Inc. None Perry R. Bass, Inc.
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
****** ******
N/A Perry R. Bass, Inc. None Perry R. Bass, Inc.
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
****** ******
N/A Perry R. Bass, Inc. F. S. DiGrappa Perry R. Bass, Inc.
25.00% .015000 25.00%
Sid R. Bass, Inc. Thomas L. DiGrappa Sid R. Bass, Inc.
18.75% .015000 18.75%
Lee M. Bass, Inc. Richard D. Robertson Lee M. Bass, Inc.
18.75% .010000 18.75%
</TABLE>
<PAGE>
Page 2 of 2
<TABLE>
<CAPTION>
EAST LAMB PROSPECT EXHIBIT A-10
BIG HORN COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED____________, 1998
EFFECTIVE JANUARY 1, 1998
TRACT NO. SERIAL NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES & EXPIRATION DATE & PERCENTAGE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
N/A TOWNSHIP 51 NORTH, RANGE 92 WEST WYW-141297 U.S.A
Section 4: Lots 5, 6, 7, 8 1,697.92 03/31/2007 All
Section 6: Lots 8-21, S/2NE/4, SE/4 Bass Lease 41238
Section 7: Lots 5-11, Lot 16, E/2,
E/2 of Lots 12 and 15
N/A TOWNSHIP 51 NORTH, RANGE 92 WEST WYW-141298 U.S.A
Section 8: Lots 1 and 2, N/2, SW/4, 1,116.05 03/31/2007 All
N/2SE/4 Bass Lease 41239
Section 9: N/2, N/25/2
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
****** ******
N/A Perry R. Bass, Inc. F. S. DiGrappa Perry R. Bass, Inc.
25.00% .015000 25.00%
Sid R. Bass, Inc. Thomas L. DiGrappa Sid R. Bass, Inc.
18.75% .015000 18.75%
Lee M. Bass, Inc. Richard D. Robertson Lee M. Bass, Inc.
18.75% .010000 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
****** ******
N/A Perry R. Bass, Inc. F. S. DiGrappa Perry R. Bass, Inc.
25.00% .015000 25.00%
Sid R. Bass, Inc. Thomas L. DiGrappa Sid R. Bass, Inc.
18.75% .015000 18.75%
Lee M. Bass, Inc. Richard D. Robertson Lee M. Bass, Inc.
18.75% .010000 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
</TABLE>
<PAGE>
Page 1 of 2
<TABLE>
<CAPTION>
HONEYCOMB PROSPECT EXHIBIT A-11
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED____________, 1998
EFFECTIVE JANUARY 1, 1998
TRACT NO. SERIAL NUMBER ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES & EXPIRATION DATE & PERCENTAGE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS
N/A TOWNSHIP 46 NORTH, RANGE 90 WEST WYW-140294 U.S.A.
Section 3: S/2 1,360.00 11/30/2006 All
Section 9: All Bass Lease 40785
Section 10: W/2, W/2NE/4
N/A TOWNSHIP 46 NORTH, RANGE 90 WEST WYW-140295 U.S.A
Section 4: Lots 5-16, S/2N/2, S/2 1,179.16 11/30/2006 All
Section 5: Lots 5, 6, 11-14, S/2NE/4 Bass Lease 40786
N/A TOWNSHIP 46 NORTH, RANGE 90 WEST WYW-140296 U.S.A
Section 5: S/2 1,185.10 11/30/2006 All
Section 6: Lot 22, SE/4SW/4, S/2SE/4 Bass Lease 40787
Section 7: N/2NE/4, SE/4NE/4
Section 8: Lots 2-4, N/2S/2, N/2
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
N/A Perry R. Bass, Inc. None Perry R. Bass, Inc.
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
****** ******
N/A Perry R. Bass, Inc. None Perry R. Bass, Inc.
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
****** ******
N/A Perry R. Bass, Inc. None Perry R. Bass, Inc.
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
</TABLE>
<PAGE>
Page 2 of 2
<TABLE>
<CAPTION>
HONEYCOMB PROSPECT EXHIBIT A-11
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED____________, 1998
EFFECTIVE JANUARY 1, 1998
TRACT NO. SERIAL NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES & EXPIRATION DATE & PERCENTAGE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
STATE LANDS
N/A TOWNSHIP 46 NORTH, RANGE 90 WEST St. of Wy-96-00430 St. of WY
Tract 40 (Formerly All of Section 16) 640.00 12/01/2001 All
Bass Lease 40777
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
****** ******
N/A Perry R. Bass, Trustee None Perry R. Bass, Trustee
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
</TABLE>
<PAGE>
Page 1 of 2
<TABLE>
<CAPTION>
MARCONI PROSPECT EXHIBIT A-12
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED____________, 1998
EFFECTIVE JANUARY 1, 1998
TRACT NO. SERIAL NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES & EXPIRATION DATE & PERCENTAGE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS
N/A TOWNSHIP 46 NORTH, RANGE 91 WEST B-039524 U.S.A.
Section 4: Lots 5-16, S/2N/2 S/2 1,209.08 HBP All
Bass Leases 31100,
TOWNSHIP 47 NORTH, RANGE 91 WEST 31529, and 34084
Section 33: S/2
(Other lands in lease fall in Non-Unitized,
Producing)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AS TO SECTION 4: LOTS 11-16,
AS TO ALL LANDS: S/2N/2, S/2
N/A Perry R. Bass, Inc. Worland Associates Perry R. Bass, Inc.
25.00% .019724 25.000%
Sid R. Bass, Inc. Cottonwood Properties Sid R. Bass, Inc.
18.75% .010000 18.750%
Lee M. Bass, Inc. Guy R. Campbell Lee M. Bass, Inc.
18.75% .005000 18.750%
Keystone, Inc. Guy R. Campbell, Jr. & Co. Keystone, Inc.
18.75% .005000 18.750%
Thru Line Inc. K&B Company Thru Line Inc.
18.75% .005000 18.750%
Wheatley Oil Co. ------
.005000 REMAINING LANDS:
Anna Stack
.000276 Worland Associates
------ 50.00% *
Perry R. Bass, Inc.
12.500%
* BURDENS ONLY WORLAND'S Sid R. Bass, Inc.
INTEREST: Worland Associates 9.375%
.03125 NOTE: Historically, Lee M. Bass, Inc.
ORI has not merged into WI. 9.375%
Keystone, Inc.
9.375%
Thru Line Inc.
9.375%
</TABLE>
<PAGE>
Page 2 of 2
<TABLE>
<CAPTION>
MARCONI PROSPECT EXHIBIT A-12
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED____________, 1998
EFFECTIVE JANUARY 1, 1998
TRACT NO. SERIAL NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES & EXPIRATION DATE & PERCENTAGE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
N/A TOWNSHIP 46 NORTH, RANGE 91 WEST W-088064 U.S.A.
Section 5: Lots 5, 6, 11, 12, 13, and 284.37 HBP All
14, S/2NE/4 Bass Lease 34079
(Other lands in lease fall in No Water
Creek Unit.)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
N/A Perry R. Bass, Inc. Estate of Gordon Hurd, Perry R. Bass, Inc.
25.00% deceased .030000 25.000%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.750%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.750%
Keystone, Inc. Keystone, Inc.
18.75% 18.750%
Thru Line Inc. Thru Line Inc.
18.75% 18.750%
</TABLE>
<PAGE>
Page 1 of 1
<TABLE>
<CAPTION>
NW ZIMMERMAN PROSPECT EXHIBIT A-13
HOT SPRINGS COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED____________, 1998
EFFECTIVE JANUARY 1, 1998
TRACT NO. SERIAL NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES & EXPIRATION DATE & PERCENTAGE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS
N/A TOWNSHIP 44 NORTH, RANGE 94 WEST WYW-136569 U.S.A.
Section 1: Lots 6, 7, W/2SE/4 885.22 06/30/2005 All
Section 12: Lots 4-6, 9, N/2NE/4, SE/4 Bass Lease 40885
Section 13: E/2NE/4, NW/4, NW/4SW/4,
NE/4SE/4
N/A TOWNSHIP 44 NORTH, RANGE 93 WEST WYW-136570 U.S.A
Section 5: SW/4 2,057.74 06/30/2005 All
Section 6: Lots 5-7, S/2NE/4, Bass Lease 40886
SE/4NW/4, E/2SW/4, SE/4
Section 7: Lots 1-10, E/2SW/4, SE/4
Section 8: Lots 3-6, S/2
Section 18: Lots 1, 2, NE/4, E/2NW/4
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
N/A Perry R. Bass, Inc. The Wallway Revocable Trust Perry R. Bass, Inc.
25.00% .030000 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
****** ******
N/A Perry R. Bass, Inc. The Wallway Revocable Trust Perry R. Bass, Inc.
25.00% .030000 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
</TABLE>
<PAGE>
Page 1 of 4
<TABLE>
<CAPTION>
SOUTH FORK PROSPECT EXHIBIT A-14
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED____________, 1998
EFFECTIVE JANUARY 1, 1998
TRACT NO. SERIAL NUMBER ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES & EXPIRATION DATE & PERCENTAGE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS
N/A TOWNSHIP 46 NORTH, RANGE 92 WEST WYW-135712 U.S.A.
Section 3: N/2SW/4, SW/4SE/4 960.00 03/31/2005 All
Section 9: SW/4SE/4 Bass Lease 39558
Section 10: S/2N/2, S/2
Section 15: W/2
N/A TOWNSHIP 46 NORTH, RANGE 92 WEST W-132324 U.S.A.
Section 26: SE/4NE/4 40.00 05/31/2004 All
Bass Lease 40724
N/A TOWNSHIP 46 NORTH, RANGE 92 WEST WYW-130172 U.S.A
Section 22: SE/4SE/4 600.00 08/31/2003 All
Section 26: W/2NE/4, W/2, SE/4 Bass Lease 40727
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
N/A Perry R. Bass, Inc. None Perry R. Bass, Inc.
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
****** ******
N/A Perry R. Bass, Inc. Herbaly Petroleum Corp. Perry R. Bass, Inc.
25.00% .030000 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
****** ******
N/A Perry R. Bass, Inc. Elmer L. Herbaly Perry R. Bass, Inc.
25.00% .030000 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
</TABLE>
<PAGE>
Page 2 of 4
<TABLE>
<CAPTION>
SOUTH FORK PROSPECT EXHIBIT A-14
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED____________, 1998
EFFECTIVE JANUARY 1, 1998
TRACT NO. SERIAL NUMBER ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES & EXPIRATION DATE & PERCENTAGE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
N/A TOWNSHIP 45 NORTH, RANGE 91 WEST WYW-140321 U.S.A
Section 6: Lots 8-18; S/2NE/4, 1,635.01 11/30/2006 All
SE/4NW/4, E/2SW/4, SE/4 Bass Lease 40788
Section 7: Lots 5-12, E/2W/2, E/2
N/A TOWNSHIP 46 NORTH, RANGE 92 WEST WYW-115475 U.S.A
Section 25: NW/4SW/4, S/2SW/4 120.00 03/31/99 All
Bass Lease 41149
DRILLING COMMITMENT:
A well must be drilled on or before
August 1, 1998, or reassign lease to
Hayes Oil & Gas Co.
N/A TOWNSHIP 46 NORTH, RANGE 91 WEST WYW-142961 U.S.A
Section 18: Lot 7 128.20 09/30/2007 All
Section 30: Lots 11 and 12 Bass Lease 41317
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
****** ******
N/A Perry R. Bass, Inc. None Perry R. Bass, Inc.
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
****** ******
N/A Perry R. Bass, Inc. Nilsen Energy Perry R. Bass, Inc.
25.00% 050000 25.00%
Sid R. Bass, Inc. Hayes Oil & Gas Co. Sid R. Bass, Inc.
18.75% .032500 18.75%
Lee M. Bass, Inc. Rod Hayes et al Lee M. Bass, Inc.
18.75% .012500 18.75%
Keystone, Inc. Herbaly Petroleum Corp. Keystone, Inc.
18.75% .005000 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
****** ******
N/A Perry R. Bass, Inc. None Perry R. Bass, Inc.
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
</TABLE>
<PAGE>
Page 3 of 4
<TABLE>
<CAPTION>
SOUTH FORK PROSPECT EXHIBIT A-14
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED____________, 1998
EFFECTIVE JANUARY 1, 1998
TRACT NO. SERIAL NUMBER ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES & EXPIRATION DATE & PERCENTAGE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
N/A TOWNSHIP 46 NORTH, RANGE 92 WEST WYW-142982 U.S.A
Section 21: All 1,920.02 09/30/2007 All
Section 22: N/2, SW/4, N/2SE/4, Bass Lease 41318
SW/4SE/4
Section 23: SW/4NE/4, W/2NW/4,
SE/4NW/4, S/2
Section 24: SW/4SW/4
Section 25: Lot 3, SW/4NE/4,
NE/4NW/4
Section 26: NE/4NE/4
STATE LANDS
N/A TOWNSHIP 46 NORTH, RANGE 92 WEST St. of Wy-94-00059 ST WY
Section 36: All 640.00 04/02/99 All
Bass Lease 40726
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
****** ******
N/A Perry R. Bass, Inc. AS TO SECTION 23 NW/4NW/4, Perry R. Bass, Inc.
25.00% S/2NW/4, SW/4NE/4, S/2 25.00%
Sid R. Bass, Inc. SECTION 24: SW/SW/4 Sid R. Bass, Inc.
18.75% SECTION 25: LOT 3, SW/4NE/4, 18.75%
Lee M. Bass, Inc. NE/4NW/4 Lee M. Bass, Inc.
18.75% SECTION 26: NE/4NE/4 18.75%
Keystone, Inc. Keystone, Inc.
18.75% Herbaly Petroleum Corp. 18.75%
Thru Line Inc. .015000 Thru Line Inc.
18.75% 18.75%
N/A Perry R. Bass, Trustee Herbaly Petroleum Corp. Perry R. Bass, Trustee
25.00% .030000 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
</TABLE>
<PAGE>
Page 4 of 4
<TABLE>
<CAPTION>
SOUTH FORK PROSPECT EXHIBIT A-14
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED____________, 1998
EFFECTIVE JANUARY 1, 1998
TRACT NO. SERIAL NUMBER ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES & EXPIRATION DATE & PERCENTAGE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STATE LANDS (CONT'D)
N/A TOWNSHIP 46 NORTH, RANGE 92 WEST St. of Wy-97-00152 ST WY
Section 16: E/2SW/4, SE/4 240.00 04/02/2002 All
Bass Lease 40962
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
N/A Perry R. Bass, Trustee None Perry R. Bass, Trustee
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
</TABLE>
<PAGE>
Page 1 of 4
<TABLE>
<CAPTION>
TREASURE PROSPECT EXHIBIT A-15
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED____________, 1998
EFFECTIVE JANUARY 1, 1998
TRACT NO. SERIAL NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES & EXPIRATION DATE & PERCENTAGE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS
N/A TOWNSHIP 48 NORTH, RANGE 92 WEST WYW-121343 U.S.A.
Section 25: NE/4, E/2NW/4 240.00 HBP All
(Other lands in lease fall in Bass Lease 34752
Non-Unitized, Producing)
N/A TOWNSHIP 48 NORTH, RANGE 92 WEST W-83731 U.S.A.
Section 12: W/2, SE/4 560.00 HBP All
Section 23: E/2SW/4 Bass Lease 35173
(Other lands in lease fall in
Non-Unitized, Producing)
N/A TOWNSHIP 48 NORTH, RANGE 92 WEST W-132325 U.S.A
Section 13: NE/4NE/4, W/2E/2, W/2 680.00 05/31/2004 All
Section 14: SE/4 Bass Lease 39238
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
N/A Perry R. Bass, Inc. None Perry R. Bass, Inc.
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
****** ******
N/A Perry R. Bass, Inc. Mary B. Sprinkle Perry R. Bass, Inc.
25.00% .062500 25.00%
Sid R. Bass, Inc. Union Oil Company Sid R. Bass, Inc.
18.75% .022500 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
****** ******
N/A Perry R. Bass, Inc. None Perry R. Bass, Inc.
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
</TABLE>
<PAGE>
Page 2 of 4
<TABLE>
<CAPTION>
TREASURE PROSPECT EXHIBIT A-15
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED____________, 1998
EFFECTIVE JANUARY 1, 1998
TRACT NO. SERIAL NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES & EXPIRATION DATE & PERCENTAGE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
N/A TOWNSHIP 48 NORTH, RANGE 92 WEST WYW-134314 U.S.A
Section 22: SE/4NE/4 40.00 10/31/2004 All
Bass Lease 39457
N/A TOWNSHIP 48 NORTH, RANGE 92 WEST WYW-135713 U.S.A
Section 13: SE/4NE/4, NE/4SE/4 320.00 03/31/2005 All
Section 22: W/2NE/4, SE/4 Bass Lease 39559
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
****** ******
N/A Perry R. Bass, Inc. None Perry R. Bass, Inc.
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
****** ******
N/A Perry R. Bass, Inc. None Perry R. Bass, Inc.
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
</TABLE>
<PAGE>
Page 3 of 4
<TABLE>
<CAPTION>
TREASURE PROSPECT EXHIBIT A-15
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED____________, 1998
EFFECTIVE JANUARY 1, 1998
TRACT NO. SERIAL NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES & EXPIRATION DATE & PERCENTAGE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEDERAL LANDS (CONT'D)
N/A TOWNSHIP 48 NORTH, RANGE 92 WEST WYW-138488 U.S.A
Section 25: SW/4 480.00 02/28/2006 All
Section 26: N/2NE/4, SE/4NE4, Bass Lease 40600
SW/4SE/4
Section 35: W/2E/2
N/A TOWNSHIP 48 NORTH, RANGE 92 WEST WYW-140354 U.S.A
Section 23: NE/4, N/2SE/4 240.00 11/30/2006 All
Bass Lease 40784
FEE LANDS
N/A TOWNSHIP 48 NORTH, RANGE 92 WEST STT, Inc. STT, Inc.
Section 4: Lots 1-4, S/2N/2, S/2 634.31 08/16/98 15.00%
(Less and except 7.82 Bass Lease 39438
acre metes and bounds
description)
Recorded in Microfilm Book 67,
Page 1552
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
N/A Perry R. Bass, Inc. None Perry R. Bass, Inc.
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
****** ******
N/A Perry R. Bass, Inc. None Perry R. Bass, Inc.
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
N/A Perry R. Bass, Trustee None Perry R. Bass, Trustee
25.00% 25.00%
Sid R. Bass, Inc. Sid R. Bass, Inc.
18.75% 18.75%
Lee M. Bass, Inc. Lee M. Bass, Inc.
18.75% 18.75%
</TABLE>
<PAGE>
Page 4 of 4
<TABLE>
<CAPTION>
TREASURE PROSPECT EXHIBIT A-15
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED____________, 1998
EFFECTIVE JANUARY 1, 1998
TRACT NO. SERIAL NO. ROYALTY OWNER
NO. DESCRIPTION OF LAND ACRES & EXPIRATION DATE & PERCENTAGE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FEE LANDS (CONT'D)
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY WORKING INTEREST
NO. & PERCENTAGE & DECIMAL INTEREST & PERCENTAGE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Keystone, Inc. Keystone, Inc.
18.75% 18.75%
Thru Line Inc. Thru Line Inc.
18.75% 18.75%
</TABLE>
<PAGE>
Page 1 of 2
<TABLE>
<CAPTION>
EASEMENTS EXHIBIT A-16
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
TRACT NO. SERIAL NO. &
NO. DESCRIPTION OF LAND ACRES EXPIRATION DATE GRANTOR
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TRAVERSES
N/A TOWNSHIP 47 NORTH, RANGE 91 WEST W-94104 U.S.A.
Section 7: Lot 11 37.88 02/04/2021
Section 19: Lots 9 and 12, NE/4SW/4, Bass Lease 36727
SE/4
Section 20: SW/4NW/4, NW/4SW/4
Section 28: SW/4, NW/4SE/4
Section 29: S/2S/2
Section 30: Lots 5-10, N/2NE/4,
E/2NW/4, NE/4SW/4, SE/4
Section 33: NW/4NE/4, NE/4NW/4
TOWNSHIP 47 NORTH, RANGE 92 WEST
Section 1: S/2NW/4, E/2SW/4, SW/4SE/4
Section 2: Lot 1, SE/4NE/4, E/2SW/4,
N/2SE/4, SW/4SE/4
Section 11: W/2NE/4, SE/4NE/4, NE/4NW/4,
NE/4SE/4
Section 12: W/2NE/4, SE/4NE/4, W/2SW/4,
SE/4SW/4, NE/4SE/4
Section 13: SW/4NE/4, E/2NW/4, W/2SE/4
Section 24: NW/4NE/4, SE/4SW/4, SW/4SE/4
Section 25: N/2NE/4, SE/4NE/4
Width: 25 Feet
Length: 66,000 Feet
For: Natural Gas Pipeline
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY
NO. & PERCENTAGE & DECIMAL INTEREST HOLDER
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
N/A N/A N/A Bass Enterprises Production Co.
</TABLE>
<PAGE>
Page 2 of 2
<TABLE>
<CAPTION>
EASEMENTS EXHIBIT A-16
WASHAKIE COUNTY, WYOMING PURCHASE AND SALE AGREEMENT DATED ___________, 1998
EFFECTIVE JANUARY 1, 1998
TRACT NO. SERIAL NO. &
NO. DESCRIPTION OF LAND ACRES EXPIRATION DATE GRANTOR
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TRAVERSES
N/A TOWNSHIP 47 NORTH, RANGE 91 WEST W-32516 U.S.A.
Section 7: Lots 7 and 8, SE/4NW/4, N/A Indefinite Term
S/2NE/4 Bass Lease 39198
Section 8: N/2N/2
TOWNSHIP 47 NORTH, RANGE 92 WEST
Section 10: S/2SE/4
Section 11: S/2SW/4, W/2SE/4, NE/4SE/4
Section 12: N/2SW/4, S/2NE/4
Section 14: NW/4NW/4
Section 15: N/2N/2
Width: 25 Feet on Either Side of Natural Gas Pipeline
Length: 5.1276 Miles
For: Natural Gas Pipeline
<CAPTION>
TRACT LESSEE OF RECORD OVERRIDING ROYALTY
NO. & PERCENTAGE & DECIMAL INTEREST HOLDER
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
N/A N/A N/A Bass Enterprises Production Co.
</TABLE>
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 001 49043053070000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 002 49043053230000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 004 49043052760000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 005 49043052820000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 006 49043052730000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 007 49043053010000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 008 49043052860000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 008X 49043207830000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 009 49043053030000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 010 49043052650000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 010X 49043207190000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 011 49043052450000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 012 49043052690000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 014 49043052510000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 015 49043052460000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 015X 49043207200000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 016 49043052710000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 017 49043052300000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 018 49043052870000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 018X 49043207210000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 019 49043052520000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 020 49043052700000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 021 49043052530000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 022 49043052320000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 023 49043053040000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 024 49043052380000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 025 49043052400000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 026 49043052980000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 027 49043052390000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 028 49043052670000 COTTONWOOD CREEK BEPCO PA
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 001 SW SW 02 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 002 SW NE 03 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 004 SE SE 07 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 005 NW SW 07 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 006 NW NE 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 007 NW NW 07 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 008 NW SE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 008X NW SE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 009 NW NE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 010 NW NW 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 010X NW NW 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 011 NW SE 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 012 NW NE 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 014 NW SW 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 015 NW SW 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 015X NW SW 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 016 NW NE 14 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 017 NW NW 19 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 018 NW SW 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 018X NW SW 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 019 NW SE 14 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 020 NW NW 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 021 NW SE 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 022 NW NE 19 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 023 NW SW 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 024 NW NW 24 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 025 NW NE 24 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 026 NW NW 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 027 NW NE 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 028 NW NW 14 47N 91W .91098801 .76677372 .00004650
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 1
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 029 49043052490000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 030 49043052950000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 031 49043052500000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 032 49043052360000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 033 49043052480000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 034 49043052680000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 035 49043052840000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 036 49043052340000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 037 49043052970000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 038 49043052350000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 039 49043052830000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 040 49043051960000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 041 49043053160000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 042 49043052810000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 043 49043053710000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 044 49043052640000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 045 49043052960000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 046 49043052990000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 047 49043053300000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 048 49043052780000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 050 49043052660000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 051 49043052330000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 052 49043052630000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 053 49043053290000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 054 49043053520000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 055 49043053130000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 059 49043051970000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 060 49043051920000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 061 49043051940000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 062 49043051950000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 063 49043051870000 COTTONWOOD CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 029 NW SW 14 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 030 NW NW 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 031 NW SE 15 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 032 NW NW 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 033 NW SW 15 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 034 NW NE 15 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 035 NW SW 10 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 036 NW NW 22 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 037 NW NE 09 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 038 NW NE 22 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 039 NW SE 09 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 040 NW SE 24 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 041 NW SE 04 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 042 NW SW 05 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 043 NW NE 32 48N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 044 NW NE 16 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 045 NW NW 09 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 046 NW NW 10 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 047 NW NW 04 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 048 NW SE 08 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 050 NW NW 15 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 051 NW NE 21 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 052 NW NW 16 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 053 NW NE 04 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 054 NW SE 32 48N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 055 NW SW 04 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 059 NW SE 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 060 NW SW 24 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 061 NW SW 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 062 NW SE 22 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 063 NW NE 26 47N 91W .91098801 .76677372 .00004650
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 2
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 064 49043051880000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 066 49043052940000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 067 49043052880000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 068 49043052770000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 069 49043052920000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 070 49043052720000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 070X 49043207170000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 071 49043052620000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 072 49043052750000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 073 49043052570000 COTTONWOOD CREEK BEPCO SI
COTTONWOOD CREEK UNIT 074 49043052580000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 074X 49043208070000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 075 49043052410000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 077 49043052470000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 078 49043052850000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 081 49043051860000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 081A 49043206300000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 082 49043052740000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 083 49043052910000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 084 49043053020000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 086 49043052930000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 087 49043052790000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 088 49043055890000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 089 49043200180000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 090 49043200170000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 091 49043200220000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 092 49043056060000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 094 49043200090000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 095 49043200350000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 096 49043200310000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 097 49043200360000 COTTONWOOD CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 064 NW NW 25 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 066 SW NW 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 067 NW SW 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 068 SE SE 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 069 NW SW 09 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 070 NW NW 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 070X NW NW 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 071 NW NE 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 072 NW NW 16 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 073 NW SW 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 074 NW SE 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 074X SW SE 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 075 NW NW 20 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 077 NW SE 16 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 078 NW SE 10 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 081 NW NE 27 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 081A NW NE 27 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 082 NW NE 16 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 083 NW SE 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 084 NW NE 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 086 NW SE 07 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 087 NE SW 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 088 SE SE 09 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 089 SE NW 15 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 090 SE NE 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 091 SE SE 15 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 092 SE SE 01 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 094 SE SW 01 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 095 SE SW 06 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 096 NW SW 19 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 097 SE SE 02 47N 91W .91098801 .76677372 .00004650
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 3
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 098 49043200550000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 101 49043201130000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 102 49043201880000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 103 49043201900000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 104 49043201520000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 105 49043201850000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 106 49043201830000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 107 49043203870000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 108 49043201970000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 111 49043202110000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 113 49043202150000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 114 49043202140000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 115 49043202170000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 116 49043202160000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 118 49043202180000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 120 49043203110000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 121 49043204450000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 122 49043204450000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 123 49043204310000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 124 49043204380000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 125 49043204300000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 126 49043204320000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 127 49043204370000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 128 49043204430000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 129 49043204590000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 130 49043204500000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 131 49043204510000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 132 49043204580000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 133 49043204570000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 134 49043204560000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 134X 49043207300000 COTTONWOOD CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 098 NW SE 19 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 101 NW NW 26 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 102 NW NE 17 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 103 SE SE 22 47N 91W .91098601 .76677372 .00004650
COTTONWOOD CREEK UNIT 104 SE SE 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 105 SE NE 24 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 106 SE SW 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 107 SE SW 14 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 108 SE NE 16 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 111 NE SE 07 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 113 SE NE 17 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 114 SE NE 27 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 115 SE NW 16 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 116 SW NW 22 47N 92W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 118 SE NW 07 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 120 SE NW 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 121 NW SW 05 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 122 SW SW 17 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 123 SE SE 16 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 124 SE NW 19 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 125 SE NW 26 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 126 SE SW 22 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 127 SE NW 22 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 128 SE SW 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 129 SE SW 09 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 130 SE NW 24 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 131 SE NE 26 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 132 SE SW 15 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 133 SE NE 22 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 134 SE NW 27 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 134X SE NW 27 47N 91W .91098801 .76677372 .00004650
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 4
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 135 49043204650000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 136 49043204630000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 139 49043204930000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 141 49043264850000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 145 49043205040000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 151 49043205680000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 156 49043205640000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 157 49043205790000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 158 49043205650000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 159 49043205660000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 160 49043205800000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 161 49043205810000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 162 49043205630000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 163 49043205670000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 165 49043205630000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 166 49043205840000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 167 49043206110000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 168 49043206050000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 169 49043206040000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 171 49043206060000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 172 49043206090000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 173 49043206130000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 174 49043206150000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 175 49043206120000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 179 49043206200000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 180 49043206210000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 182 49043206190000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 183 49043206350000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 184 49043206370000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 165 49043206380000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 186 49043206420000 COTTONWOOD CREEK BEPCO TA
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 135 NW SE 31 48N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 136 SW SE 07 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 139 SE NW 21 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 141 SE SW 24 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 145 SE SE 08 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 151 SE SE 14 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 156 NW NE 10 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 157 SE NW 10 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 158 SE SE 10 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 159 SE SW 10 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 160 SE NE 09 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 161 SE NW 09 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 162 SE NE 15 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 163 SE NW 14 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 165 SE NW 17 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 166 SE SW 08 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 167 SW SE 04 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 168 SE NE 14 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 169 SW SW 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 171 NE NW 19 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 172 NE NE 27 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 173 SE NE 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 174 SE SE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 175 SE NE 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 179 SE SW 09 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 180 SE SW 04 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 182 SE NW 04 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 183 NW NW 17 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 184 SW NW 25 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 185 NW NE 05 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 186 NW SW 17 47N 91W .91098801 .76677372 .00004650
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 5
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 199 49043206480000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 200 49043206470000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 201 49043206460000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 208 49043206490000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 210 49043207290000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 211 49043207270000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 212 49043207280000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 213 49043207260000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 214 49043207390000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 215 49043207410000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 216 49043207420000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 217 49043207350000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 218 49043207360000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 219 49043207400000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 220 49043207370000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 221 49043207430000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 222 49043207450000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 223 49043207460000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 224 49043207470000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 225 49043207490000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 226 49043207500000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 227 49043207480000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 228 49043207630000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 229 49043207650000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 230 49043207660000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 231 49043207670000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 232 49043207680000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 233 49043207690000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 234 49043207740000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 235 49043207730000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 236 49043207700000 COTTONWOOD CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 199 SE NE 18 47N 90W .91098801 .76577372 .00004650
COTTONWOOD CREEK UNIT 200 SE NE 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 201 SE NW 13 47N 92W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 208 SE NW 16 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 210 SE NW 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 211 SW SW 07 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 212 SE SW 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 213 SE SE 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 214 SE SW 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 215 SE NW 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 216 NE NE 19 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 217 SE NE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 218 SE NW 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 219 SW SW 09 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 220 SE SE 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 221 SE SW 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 222 NW NE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 223 NE SE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 224 SW SE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 225 SW SW 07 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 226 SE NE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 227 SW NE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 228 SW NW 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 229 NE NW 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 230 SE NE 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 231 NW SE 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 232 SE SE 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 233 SE SW 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 234 LOT 05 19 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 235 NW NE 19 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 236 NE NE 13 47N 91W .91098801 .76677372 .00004650
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 6
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 237 49043207620000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 238 49043207520000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 239 49043207530000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 240 49043207710000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 241 49043207720000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 242 49043207750000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 243 49043207840300 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 244 49043207850000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 245 49043207980000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 246 49043207950000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 247 49043207960000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 248 49043207970000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 249 49043208010000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 250 49043207990000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 251 49043208050000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 252 49043207770000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 253 49043207780000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 254 49043207790000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 255 49043207800000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 256 49043207810000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 257 49043207820000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 258 49043208000000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 259 49043208020000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 260 49043208030000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 261 49043207860000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 263 49043207880000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 267 49043208190000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 269 49043208210000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 271 49043208110000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 272 49043208150000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 273 49043208120000 COTTONWOOD CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 237 NE NE 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 238 NW SW 33 48N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 239 SW NE 08 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 240 SW SE 07 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 241 SE NW 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 242 SE NW 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 243 SE SE 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 244 SW SE 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 245 NE SE 14 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 246 SW NE 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 247 SE NW 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 248 NE NE 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 249 NE NW 24 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 250 NE NE 14 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 251 SE NE 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 252 SW SW 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 253 NW NE 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 254 NE NE 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 255 SE NE 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 256 SW NW 20 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 257 SE NW 20 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 258 SW SE 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 259 SW SE 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 260 NW SE 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 261 NW SW 09 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 263 SW SE 32 48N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 267 NW NE 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 269 SW NW 26 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 271 NE NW 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 272 SE SE 02 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 273 NE NW 12 47N 91W .91098801 .76677372 .00004650
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 7
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 274 49043208130000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 275 49043208140000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 276 49043208170000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 277 49043208080000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 278 49043208090000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 279 04043208060000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 280 49043208100000 COTTONWOOD CREEK BEPCO PRD
1277602 COTTONWOOD CREEK UNIT - TENSLP
TENSLEEP UNIT 065 49043053000000 COTTONWOOD CREEK BEPCO PRD
TENSLEEP UNIT 110 49043202070000 COTTONWOOD CREEK BEPCO PRD
TENSLEEP UNIT 117 49043202190000 COTTONWOOD CREEK BEPCO PRD
TENSLEEP UNIT 119 49043202310000 COTTONWOOD CREEK BEPCO PRD
1277604 COTTONWOOD CREEK UNIT WELL#189
COTTONWOOD CREEK NPA 189 49043206400000 COTTONWOOD CREEK BEPCO PRD
1277605 COTTONWOOD CREEK UNIT WELL#190
COTTONWOOD CREEK NPA 190 49043206410000 COTTONWOOD CREEK BEPCO PRD
1277606 COTTONWOOD CREEK UNIT WELL #56
COTTONWOOD CREEK NPA 056 49043053510000 COTTONWOOD CREEK BEPCO TA
1277608 COTTONWOOD CREEK UNIT WELL #76
COTTONWOOD CREEK NPA 076 49043052800000 COTTONWOOD CREEK BEPCO TA
1277610 COTTONWOOD CREEK UNIT WELL #85
COTTONWOOD CREEK NPA 085 49043051850000 COTTONWOOD CREEK BEPCO TA
1277611 COTTONWOOD CREEK UNIT WELL#197
COTTONWOOD CREEK NPA 197 49043206440000 COTTONWOOD CREEK BEPCO TA
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 274 SE NE 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 275 NE SW 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 276 NE NW 24 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 277 NW SE 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 278 NW SE 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 279 NE NW 16 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 280 NW NE 16 47N 90W .91098801 .76677372 .00004650
1277602 COTTONWOOD CREEK UNIT - TENSLP
TENSLEEP UNIT 065 NW NE 07 47N 90W 1.00000000 .83746144 .00000000
TENSLEEP UNIT 110 SW NE 07 47N 90W 1.00000000 .83746144 .00000000
TENSLEEP UNIT 117 NW SE 07 47N 90W 1.00000000 .83746144 .00000000
TENSLEEP UNIT 119 NE NW 07 47N 90W 1.00000000 .83746144 .00000000
1277604 COTTONWOOD CREEK UNIT WELL#189
COTTONWOOD CREEK NPA 189 NW SE 07 47N 91W 1.00000000 .82500000 .00000000
1277605 COTTONWOOD CREEK UNIT WELL#190
COTTONWOOD CREEK NPA 190 NW NW 08 47N 91W 1.00000000 .82500000 .00000000
1277606 COTTONWOOD CREEK UNIT WELL #56
COTTONWOOD CREEK NPA 056 NW SW 32 48N 91W .91956760 .80462150 .00000000
1277608 COTTONWOOD CREEK UNIT WELL #76
COTTONWOOD CREEK NPA 076 NW SW 08 47N 91W .92203300 .67747480 .00000000
1277610 COTTONWOOD CREEK UNIT WELL #85
COTTONWOOD CREEK NPA 085 NW NW 27 47N 91W .91328560 .73088980 .00000000
1277611 COTTONWOOD CREEK UNIT WELL#197
COTTONWOOD CREEK NPA 197 NW SE 09 47N 90W 1.00000000 .81500000 .00000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 8
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1277613 COTTONWOOD CREEK UNIT - FRONTIER
COTTONWOOD CREEK UNIT 209 49043202580000 COTTONWOOD CREEK UNIT BEPCO TA
1277614 COTTONWOOD CREEK NPA - #109
COTTONWOOD CREEK NPA 109 49043202050000 COTTONWOOD CREEK UNIT BEPCO TA
1277617 COTTONWOOD CREEK UNIT #262
COTTONWOOD CREEK NPA 262 49043207870000 COTTONWOOD CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1277613 COTTONWOOD CREEK UNIT - FRONTIER
COTTONWOOD CREEK UNIT 209 NE NW 8 47N 90W .00000000 .00000000 .00000000
1277614 COTTONWOOD CREEK NPA - #109
COTTONWOOD CREEK NPA 109 NW SE 17 47N 91W .91098801 .76677372 .00004650
1277617 COTTONWOOD CREEK UNIT #262
COTTONWOOD CREEK NPA 262 SE SW 05 47N 91W .91000750 .75075619 .00000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 9
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK FIELD EXTENSION (PHOSPHORIA) UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1196001 COTTONWOOD CREEK EXT UNIT
CC EXTENSION UNIT 1-1 49043201540000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 11-1 49043201700000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 14-1 49043201760000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 16-1 49043201410000 COTTONWOOD CREEK BEPCO PA
CC EXTENSION UNIT 16-1X 49043207230000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 18-1 49043056030000 COTTONWOOD CREEK BEPCO PA
CC EXTENSION UNIT 19-1 49043201490000 COTTONWOOD CREEK BEPCO PA
CC EXTENSION UNIT 19-1X 49043206170000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 20-1 49043201500000 COTTONWOOD CREEK BEPCO PA
CC EXTENSION UNIT 20-1X 49043207240000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 21-1 49043201740000 COTTONWOOD CREEK BEPCO PA
CC EXTENSION UNIT 22-1 49043201840000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 23-1 49043201860000 COTTONWOOD CREEK BEPCO PA
CC EXTENSION UNIT 24-1 49043200080000 COTTONWOOD CREEK BEPCO PA
CC EXTENSION UNIT 26-1 49043206280000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 27-1 49043206270000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 28-1 49043206260000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 29-1 49043207920000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 3-1 49043051750000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 30-1 49043208160000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 31-1 49043208220000 COTTONWOOD CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1196001 COTTONWOOD CREEK EXT UNIT
CC EXTENSION UNIT 1-1 LOT 5 01 46N 91W .96870790 .81103222 .00061900
CC EXTENSION UNIT 11-1 NW SE 31 47N 90W .96870790 .81103222 .00061500
CC EXTENSION UNIT 14-1 LOT 14 06 46N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 16-1 NW SW 31 47N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 16-1X LOT 7 31 47N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 18-1 NE SW 25 47N 91W .96870790 .81103222 .00061900
CC EXTENSION UNIT 19-1 LOT 12 06 46N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 19-1X LOT 13 06 46N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 20-1 LOT 20 06 46N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 20-1X LOT 18 06 46N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 21-1 SW SW 32 47N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 22-1 SW NW 32 47N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 23-1 SW NE 31 47N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 24-1 NW NE 36 47N 91W .96870790 .81103222 .00061900
CC EXTENSION UNIT 26-1 SE SW 25 47N 91W .96870790 .81103222 .00061900
CC EXTENSION UNIT 27-1 LOT 12 06 46N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 28-1 SE SW 31 47N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 29-1 NW SW 25 47N 91W .96870790 .81103222 .00061900
CC EXTENSION UNIT 3-1 SW SW 29 47N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 30-1 SE SE 26 47N 91W .96870790 .81103222 .00061900
CC EXTENSION UNIT 31-1 LOT 08 31 47N 90W .96870790 .81103222 .00061900
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 1
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
NO WATER CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1252302 NO WATER CREEK UNIT
NO WATER CREEK UNIT 11 49043200970000 NO WATER CREEK BEPCO TA
NO WATER CREEK UNIT 12 49043201100000 NO WATER CREEK BEPCO TA
NO WATER CREEK UNIT 14 49043201330000 NO WATER CREEK BEPCO TA
NO WATER CREEK UNIT 17 49043207640000 NO WATER CREEK BEPCO PRD
NO WATER CREEK UNIT 18 49043207930000 NO WATER CREEK BEPCO PRD
NO WATER CREEK UNIT 19 49043208260000 NO WATER CREEK BEPCO PRD
NO WATER CREEK UNIT 2 49043200280000 NO WATER CREEK BEPCO PA
NO WATER CREEK UNIT 20 49043208250000 NO WATER CREEK BEPCO PRD
NO WATER CREEK UNIT 3 49043200450000 NO WATER CREEK BEPCO PA
NO WATER CREEK UNIT 5 49043200530000 NO WATER CREEK BEPCO PRD
NO WATER CREEK UNIT 6 49043200640000 NO WATER CREEK BEPCO TA
NO WATER CREEK UNIT 7 49043200690000 NO WATER CREEK BEPCO TA
NO WATER CREEK UNIT 9 49043200810000 NO WATER CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1252302 NO WATER CREEK UNIT
NO WATER CREEK UNIT 11 SW NW 05 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 12 NW SE 06 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 14 NE SW 06 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 17 LOT 16 05 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 18 LOT 13 06 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 19 LOT 11 06 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 2 LOT 13 06 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 20 SE NW 06 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 3 LOT 22 06 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 5 LOT 16 06 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 6 LOT 19 06 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 7 SW SE 31 47N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 9 LOT 09 05 46N 91W .94441730 .78727357 .00000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 1
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
SLICK CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1252208 SLICK CREEK UNIT (PHOSPHORIA)
SLICK CREEK H20 INJ #2 49043050020000 SLICK CREEK BEPCO DAI
SLICK CREEK PHOSPHORIA 02 49043050020000 SLICK CREEK BEPCO TA
SLICK CREEK PHOSPHORIA 03 49043051620000 SLICK CREEK BEPCO PA
SLICK CREEK PHOSPHORIA 05 49043051700000 SLICK CREEK BEPCO PA
SLICK CREEK PHOSPHORIA 06 49043051680000 SLICK CREEK BEPCO PA
SLICK CREEK PHOSPHORIA 07 49043051660000 SLICK CREEK BEPCO PA
SLICK CREEK PHOSPHORIA 1 49043051670000 SLICK CREEK BEPCO PRD
SLICK CREEK PHOSPHORIA 10 49043201520000 SLICK CREEK BEPCO PRD
SLICK CREEK PHOSPHORIA 11 49043201530000 SLICK CREEK BEPCO PA
SLICK CREEK PHOSPHORIA 12 49043201580000 SLICK CREEK BEPCO PA
SLICK CREEK PHOSPHORIA 21 49043210990000 SLICK CREEK BEPCO PRD
SLICK CREEK PHOSPHORIA 22 49043202250000 SLICK CREEK BEPCO PRD
SLICK CREEK PHOSPHORIA 30 49043205330000 SLICK CREEK BEPCO PRD
SLICK CREEK PHOSPHORIA 34-43 49043206530000 SLICK CREEK BEPCO PRD
SLICK CREEK PHOSPHORIA 35-31 49043206360000 SLICK CREEK BEPCO PRD
SLICK CREEK PHOSPHORIA 4 49043051610000 SLICK CREEK BEPCO PRD
SLICK CREEK PHOSPHORIA 8 49043051640000 SLICK CREEK BEPCO TA
1252209 SLICK CREEK UNIT (FRONTIER)
SLICK CREEK FRONTIER 13 49043201630000 SLICK CREEK BEPCO PA
SLICK CREEK FRONTIER 15 49043201640000 SLICK CREEK BEPCO PRD
SLICK CREEK FRONTIER 19 49043201690000 SLICK CREEK BEPCO PA
SLICK CREEK FRONTIER 20 49043201670000 SLICK CREEK BEPCO PRD
SLICK CREEK FRONTIER 8 49043051640000 SLICK CREEK BEPCO PA
1252210 SLICK CREEK UNIT (MUDDY)
SLICK CREEK MUDDY 06 49043051680000 SLICK CREEK BEPCO PA
SLICK CREEK MUDDY 07 49043051660000 SLICK CREEK BEPCO PA
SLICK CREEK MUDDY 11 49043201530000 SLICK CREEK BEPCO PA
SLICK CREEK MUDDY 16 49043201650000 SLICK CREEK BEPCO PA
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1252208 SLICK CREEK UNIT (PHOSPHORIA)
SLICK CREEK H20 INJ #2 SE NW 34 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 02 SE NW 34 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 03 LOT 8 02 46N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 05 SE NW 35 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 06 SE NW 33 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 07 NE SE 33 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 1 SE NE 32 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 10 SE SW 35 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 11 SE SE 32 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 12 NE SW 32 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 21 NW NE 02 46N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 22 NE NE 34 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 30 NE SW 33 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 34-43 SE NE 34 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 35-31 NW SE 35 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 4 LOT 8 03 46N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 8 SW SE 34 47N 92W 1.00000000 .86266071 .00054626
1252209 SLICK CREEK UNIT (FRONTIER)
SLICK CREEK FRONTIER 13 NW SE 34 47N 92W 1.00000000 .86500050 .00103100
SLICK CREEK FRONTIER 15 LOT 8 02 46N 92W 1.00000000 .86500050 .00103100
SLICK CREEK FRONTIER 19 NW SE 33 47N 92W 1.00000000 .86500050 .00103100
SLICK CREEK FRONTIER 20 NW SW 35 47N 92W 1.00000000 .86500050 .00103100
SLICK CREEK FRONTIER 8 SW SE 34 47N 92W 1.00000000 .86500050 .00103100
1252210 SLICK CREEK UNIT (MUDDY)
SLICK CREEK MUDDY 06 SE NW 33 47N 92W .00000000 .00000000 .00000000
SLICK CREEK MUDDY 07 NE SE 33 47N 92W .00000000 .00000000 .00000000
SLICK CREEK MUDDY 11 SE SE 32 47N 92W .00000000 .00000000 .00000000
SLICK CREEK MUDDY 16 NE SW 32 47N 92W .00000000 .00000000 .00000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 1
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
SLICK CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1252210 SLICK CREEK UNIT (MUDDY)
SLICK CREEK MUDDY 17 49043201660000 SLICK CREEK BEPCO PA
SLICK CREEK UNIT
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1252210 SLICK CREEK UNIT (MUDDY)
SLICK CREEK MUDDY 17 LOT 8 03 46N 92W .00000000 .00000000 .00000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 2
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
SOUTH FRISBY UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1252214 SOUTH FRISBY UNIT
SOUTH FRISBY 2 49043202040000 SOUTH FRISBY BEPCO PRD
SOUTH FRISBY 24-33 49043206390000 SOUTH FRISBY BEPCO PRD
SOUTH FRISBY 3 49043202350000 SOUTH FRISBY BEPCO TA
SOUTH FRISBY 4 49043202600000 SOUTH FRISBY BEPCO PA
SOUTH FRISBY 6 49043202950000 SOUTH FRISBY BEPCO PRD
SOUTH FRISBY 7 49043203940000 SOUTH FRISBY BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1252214 SOUTH FRISBY UNIT
SOUTH FRISBY 2 NW SE 24 47N 92W 1.00000000 .86004334 .00000000
SOUTH FRISBY 24-33 SE SE 24 47N 92W 1.00000000 .86004334 .00000000
SOUTH FRISBY 3 SE NW 24 47N 92W 1.00000000 .86004334 .00000000
SOUTH FRISBY 4 NE NE 25 47N 92W 1.00000000 .86004334 .00000000
SOUTH FRISBY 6 LOT 9 30 47N 91W 1.00000000 .86004334 .00000000
SOUTH FRISBY 7 SE NW 30 47N 91W 1.00000000 .86004334 .00000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 1
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
NON-UNITIZED ASSETS (COOP)
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1161201 COTTONWOOD CREEK FEDERAL
COTTONWOOD CREEK 35-1 49043203730000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK 35-44 49043205970000 COTTONWOOD CREEK BEPCO PRD
1161202 COTTONWOOD CREEK STATE
COTTONWOOD CREEK 36-1 49043204090000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK 36-24 49043205690000 COTTONWOOD CREEK BEPCO PRD
1161203 COTTONWOOD CREEK FEDERAL #35-2
COTTONWOOD CREEK 35-2 49043204050000 COTTONWOOD CREEK BEPCO PRD
1161204 COTTONWOOD CREEK FEDERAL #35-3
COTTONWOOD CREEK 35-3 49043204020000 COTTONWOOD CREEK BEPCO PRD
1161205 COTTONWOOD CREEK FEDERAL #2-1
COTTONWOOD CREEK 2-1 49043204260000 COTTONWOOD CREEK BEPCO PRD
1161207 COTTONWOOD CREEK FEDERAL #2-34
COTTONWOOD CREEK 2-34 49043204730000 COTTONWOOD CREEK BEPCO PRD
1161212 COTTONWOOD CREEK FEDERAL #26-23
COTTONWOOD CREEK 26-23 49043206250000 COTTONWOOD CREEK BEPCO PRD
1161213 COTTONWOOD CREEK FEDERAL #21-23
COTTONWOOD CREEK 21-23 49043206500000 COTTONWOOD CREEK BEPCO PRD
1161214 COTTONWOOD CREEK FEDERAL #28-41
COTTONWOOD CREEK 28-41 49043206450000 COTTONWOOD CREEK BEPCO TA
1161215 COTTONWOOD CREEK FEDERAL #26-21
COTTONWOOD CREEK 26-21 49043206510000 COTTONWOOD CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1161201 COTTONWOOD CREEK FEDERAL
COTTONWOOD CREEK 35-1 NW NE 35 47N 91W 1.00000000 .81250000 .00000000
COTTONWOOD CREEK 35-44 NE NE 35 47N 91W 1.00000000 .81250000 .00000000
1161202 COTTONWOOD CREEK STATE
COTTONWOOD CREEK 36-1 SW NW 36 47N 91W 1.00000000 .81250000 .00000000
COTTONWOOD CREEK 36-24 NE SW 36 47N 91W 1.00000000 .81250000 .00000000
1161203 COTTONWOOD CREEK FEDERAL #35-2
COTTONWOOD CREEK 35-2 NW NW 35 47N 91W 1.00000000 .81562500 .00000000
1161204 COTTONWOOD CREEK FEDERAL #35-3
COTTONWOOD CREEK 35-3 NW SE 35 47N 91W 1.00000000 .81250000 .00000000
1161205 COTTONWOOD CREEK FEDERAL #2-1
COTTONWOOD CREEK 2-1 LOT 11 2 46N 91W 1.00000000 .81250000 .00000000
1161207 COTTONWOOD CREEK FEDERAL #2-34
COTTONWOOD CREEK 2-34 NE SE 2 46N 91W 1.00000000 .82500000 .00000000
1161212 COTTONWOOD CREEK FEDERAL #26-23
COTTONWOOD CREEK 26-23 SE SW 26 47N 91W 1.00000000 .70312500 .00187500
1161213 COTTONWOOD CREEK FEDERAL #21-23
COTTONWOOD CREEK 21-23 SE SW 21 47N 91W 1.00000000 .80937500 .06562500
1161214 COTTONWOOD CREEK FEDERAL #28-41
COTTONWOOD CREEK 28-41 NW NE 28 47N 91W 1.00000000 .73125000 .01875000
1161215 COTTONWOOD CREEK FEDERAL #26-21
COTTONWOOD CREEK 26-21 NW SW 26 47N 91W 1.00000000 .71290000 .00000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 1
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
NON-UNITIZED ASSETS (CO-OP)
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1161217 KNISLEY FEDERAL #1
KNISELY FEDERAL #1 49043051760000 COTTONWOOD CREEK BEPCO PRD
1252201 EARL SCHRANTZ USA
SCHRANTZ USA 1 49043051730000 COTTONWOOD CREEK BEPCO PRD
SCHRANTZ USA 3 49043200500000 COTTONWOOD CREEK BEPCO PRD
SCHRANTZ USA 4 49043200510000 COTTONWOOD CREEK BEPCO PA
SCHRANTZ USA 5 49043208240000 COTTONWOOD CREEK BEPCO PRD
1252202 TOLMAN USA
TOLMAN USA 2 49043200330000 COTTONWOOD CREEK BEPCO PRD
TOLMAN USA 3 49043200590000 COTTONWOOD CREEK BEPCO PRD
1252203 CALDWELL USA #1-7
CALDWELL USA 1-7 49043203830000 COTTONWOOD CREEK BEPCO PRD
1252204 FAURE USA
USA FAURE 1 49043200430000 RATTLESNAKE BEPCO PRD
USA FAURE 2 49043200570000 RATTLESNAKE BEPCO PA
USA FAURE 4 49043201020000 RATTLESNAKE BEPCO PRD
1252205 FAURE "A" USA
USA FAURE A2-2 49043203840000 RATTLESNAKE BEPCO PRD
1252206 LACOY FEDERAL
LACOY FEDERAL 13-1 49043200770000 RATTLESNAKE BEPCO PRD
1252207 BEARD FEDERAL
BEARD FEDERAL 1 49043201090000 RATTLESNAKE BEPCO PA
1252211 ROME FEDERAL
ROME FEDERAL 1 49043201720000 SLICK CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1161217 KNISLEY FEDERAL #1
KNISELY FEDERAL #1 NW SE 27 47N 91W 1.00000000 .71500000 .00000000
1252201 EARL SCHRANTZ USA
SCHRANTZ USA 1 NW NE 33 47N 91W 1.00000000 .79375000 .05035164
SCHRANTZ USA 3 SW SE 32 47N 91W 1.00000000 .79375000 .05035164
SCHRANTZ USA 4 SW SW 32 47N 91W 1.00000000 .79375000 .05035164
SCHRANTZ USA 5 NE SW 32 47N 91W 1.00000000 .79375000 .05035164
1252202 TOLMAN USA
TOLMAN USA 2 NW SW 28 47N 91W 1.00000000 .87500000 .00000000
TOLMAN USA 3 NW NW 28 47N 91W 1.00000000 .87500000 .00000000
1252203 CALDWELL USA #1-7
CALDWELL USA 1-7 LO 12 07 47N 91W .55480654 .47179217 .00000000
1252204 FAURE USA
USA FAURE 1 NW NW 11 47N 92W 1.00000000 .82500000 .00000000
USA FAURE 2 NW SE 11 47N 92W 1.00000000 .82500000 .00000000
USA FAURE 4 NW SW 11 47N 92W 1.00000000 .82500000 .00000000
1252205 FAURE "A" USA
USA FAURE A2-2 NE NE 02 47N 92W 1.00000000 .82500000 .00000000
1252206 LACOY FEDERAL
LACOY FEDERAL 13-1 NW NW 13 47N 92W 1.00000000 .82500000 .00000000
1252207 BEARD FEDERAL
BEARD FEDERAL 1 NW NW 12 47N 92W 1.00000000 .84900000 .00000000
1252211 ROME FEDERAL
ROME FEDERAL 1 SE SE 02 46N 92W 1.00000000 .81250000 .06250000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 2
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
NON-UNITIZED ASSETS (CO-OP)
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1252213 NEIBER II UNIT (TENSLEEP)
NEIBER UNIT II-I 49043202610000 NEIBER DOME BEPCO PRD
1252215 SOUTH FRISBY LACOY FED #5 & #8
SOUTH FRISBY 5 49043202630000 SOUTH FRISBY BEPCO PRD
SOUTH FRISBY 8 49043203950000 SOUTH FRISBY BEPCO PRD
1252217 CALDWELL USA #20
CALDWELL 1-20 49043203960000 COTTONWOOD CREEK BEPCO PRD
CALDWELL 2-20 49043203990000 COTTONWOOD CREEK BEPCO PRD
1252218 SMITH USA #30
SMITH USA 1-30 49043203620000 SOUTH FRISBY BEPCO PRD
1252219 TENNECO FEDERAL #23
TENNECO FEDERAL 1-23 49043204960000 SOUTH FRISBY BEPCO PRD
1252220 COTTONWOOD CREEK FEDERAL #19
COTTONWOOD CREEK FED 19-1 49043203520000 SOUTH FRISBY BEPCO PRD
1252328 NO WATER CREEK #4
NO WATER CREEK 4 49043200540000 NO WATER CREEK BEPCO PA
1252329 NO WATER CREEK #8
NO WATER CREEK 8 49043201180000 NO WATER CREEK BEPCO TA
1252330 NO WATER CREEK #13
NO WATER CREEK 13 49043201230000 NO WATER CREEK BEPCO TA
1252331 NO WATER CREEK #15
NO WATER CREEK 15 49043201290000 NO WATER CREEK BEPCO TA
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1252213 NEIBER II UNIT (TENSLEEP)
NEIBER UNIT II-I LOT 15 19 45N 92W .76909143 .67295528 .00000000
1252215 SOUTH FRISBY LACOY FED #5 & #8
SOUTH FRISBY 5 LOT 9 19 47N 91W 1.00000000 .85500000 .00000000
SOUTH FRISBY 8 NE NE 24 47N 92W 1.00000000 .85500000 .00000000
1252217 CALDWELL USA #20
CALDWELL 1-20 SW SW 20 47N 91W 1.00000000 .84000000 .00000000
CALDWELL 2-20 SW NW 20 47N 91W 1.00000000 .84000000 .00000000
1252218 SMITH USA #30
SMITH USA 1-30 NE NE 30 47N 91W 1.00000000 .84750000 .00000000
1252219 TENNECO FEDERAL #23
TENNECO FEDERAL 1-23 SE NE 23 47N 92W 1.00000000 .87500000 .00000000
1252220 COTTONWOOD CREEK FEDERAL #19
COTTONWOOD CREEK FED 19-1 NW SE 19 47N 91W 1.00000000 .85250000 .00000000
1252328 NO WATER CREEK #4
NO WATER CREEK 4 LOT 9 31 47N 91W 1.00000000 .82500000 .00000000
1252329 NO WATER CREEK #8
NO WATER CREEK 8 SW NE 31 47N 91W 1.00000000 .82500000 .00000000
252330 NO WATER CREEK #13
NO WATER CREEK 13 LOT 11 05 46N 91W 1.00000000 .84500000 .00000000
1252331 NO WATER CREEK #15
NO WATER CREEK 15 SW NE 05 46N 91W 1.00000000 .84500000 .00000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 3
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
NON-UNITIZED ASSETS (CO-OP)
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1305001 CHAMBERS STATE
CHAMBERS STATE #1-36 49043203040000 RATTLESNAKE BEPCO PRD
CHAMBERS STATE #2-36 49043203140000 RATTLESNAKE BEPCO PRD
CHAMBERS STATE #3-36 49043203210000 RATTLESNAKE BEPCO PA
CHAMBERS STATE #4-36 49043207940000 RATTLESNAKE BEPCO PRD
CHAMBERS STATE #5-36 49043208200000 RATTLESNAKE BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1305001 CHAMBERS STATE
CHAMBERS STATE #1-36 SW SW 36 48N 92W 1.00000000 .84500000 .00000000
CHAMBERS STATE #2-36 SW SE 36 48N 92W 1.00000000 .84500000 .00000000
CHAMBERS STATE #3-36 SW NW 36 48N 92W 1.00000000 .84500000 .00000000
CHAMBERS STATE #4-36 NE SW 36 48N 92W 1.00000000 .84500000 .00000000
CHAMBERS STATE #5-36 SW NE 36 48N 92W 1.00000000 .84500000 .00000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 4
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
NON-UNITIZED ASSETS (OSO)
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1252303 COSEKA FEDERAL #18-3 & #18-4
ALTUS GOVERNMENT 18-3 49043203460000 COTTONWOOD CREEK WAGNER & BROWN, LTD. PRD
ALTUS GOVERNMENT 18-4 49043205420000 COTTONWOOD CREEK WAGNER & BROWN, LTD. PRD
1252304 GOVERNMENT 29-1
GOVERNMENT 29-1 49043202960000 COTTONWOOD CREEK SAMSON RESOURCES CORP PA
1252305 COSEKA FEDERAL #13-1, 2 & 3
ALTUS GOVERNMENT 13-1 49043203310000 COTTONWOOD CREEK WAGNER & BROWN, LTD. SI
ALTUS GOVERNMENT 13-2 49043203470000 COTTONWOOD CREEK WAGNER & BROWN, LTD. SI
ALTUS GOVERNMENT 13-3 49043205560000 COTTONWOOD CREEK WAGNER & BROWN, LTD. SI
1252306 COSEKA FEDERAL #18-1 & #18-5
ALTUS GOVERNMENT 18-1 49043203200000 COTTONWOOD CREEK WAGNER & BROWN, LTD. PRD
ALTUS GOVERNMENT 18-5 49043205740000 COTTONWOOD CREEK WAGNER & BROWN, LTD. PRD
1252307 BRENT FEDERAL #2 & #3 FED #32-1
BRENT FEDERAL 2 49043203920000 COTTONWOOD CREEK BRENT EXPLORATION, INC. SI
BRENT FEDERAL 3 49043203930000 COTTONWOOD CREEK BRENT EXPLORATION, INC. SI
FEDERAL 32-1 49043205090000 COTTONWOOD CREEK BRENT EXPLORATION, INC. SI
1252308 MARTIN FEDERAL #29-2
MARTIN FEDERAL 29-2 49043203300000 COTTONWOOD CREEK SAMSON RESOURCES CORP PRD
1252309 GOVERNMENT #14-2
GOVERNMENT #14-2 49043202920000 RATTLESNAKE SAMSON RESOURCES CORP SI
1252310 TENNECO GOVERNMENT #1-1 & 1-2
TENNECO GOVERNMENT 1-2 49043202940000 COTTONWOOD CREEK SAMSON RESOURCES CORP SI
1252311 GOVERNMENT #27-1
GOVERNMENT 27-1 49043202810000 COTTONWOOD CREEK MARKUS PRODUCTION, INC. PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1252303 COSEKA FEDERAL #18-3 & #18-4
ALTUS GOVERNMENT 18-3 SE NW 18 47N 91W .00000000 .00000000 .09000000
ALTUS GOVERNMENT 18-4 NW NW 18 47N 91W .00000000 .00000000 .09000000
1252304 GOVERNMENT 29-1
GOVERNMENT 29-1 SW SW 29 47N 91W .00000000 .00000000 .00000000
1252305 COSEKA FEDERAL #13-1, 2 & 3
ALTUS GOVERNMENT 13-1 NE NE 13 47N 92W .00000000 .00000000 .09500000
ALTUS GOVERNMENT 13-2 NE SE 13 47N 92W .00000000 .00000000 .09500000
ALTUS GOVERNMENT 13-3 NW NE 13 47N 92W .00000000 .00000000 .09500000
1252306 COSEKA FEDERAL #18-1 & #18-5
ALTUS GOVERNMENT 18-1 Lot 12 18 47N 91W .00000000 .00000000 .08874760
ALTUS GOVERNMENT 18-5 NE SW 18 47N 91W .00000000 .00000000 .08874760
1252307 BRENT FEDERAL #2 & #3 FED #32-1
BRENT FEDERAL 2 SW NE 32 47N 91W .00000000 .00000000 .09472400
BRENT FEDERAL 3 SW NW 33 47N 91W .00000000 .00000000 .09472400
FEDERAL 32-1 NE NE 32 47N 91W .00000000 .00000000 .09472400
1252308 MARTIN FEDERAL #29-2
MARTIN FEDERAL 29-2 SW NW 29 47N 91W .04848480 .03636360 .09000000
1252309 GOVERNMENT #14-2
GOVERNMENT #14-2 NW NW 14 47N 92W .00000000 .00000000 .06250000
1252310 TENNECO GOVERNMENT #1-1 & 1-2
TENNECO GOVERNMENT 1-2 SW NW 01 47N 92W .00000000 .00000000 .01875000
1252311 GOVERNMENT #27-1
GOVERNMENT 27-1 SW SW 27 47N 92W .26666640 .19999980 .08500000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 1
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
NON-UNITIZED ASSETS (OSO)
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1252313 BRENT FEDERAL #11-1
BRENT FEDERAL 11-1 49043204440000 COTTONWOOD CREEK WASHAKIE ENERGIES CO. LT PRD
1252314 BRENT FEDERAL #16-1
BRENT FEDERAL 16-1 49043204480000 COTTONWOOD CREEK WASHAKIE ENERGIES CO. LT PRD
1252316 SCHETTERLY #1-30
ALTUS SCHETTERLY 1-30 49043203630000 SOUTH FRISBY BRENT EXPLORATION, INC. PRD
1252317 BRENT FEDERAL #3-25
BRENT FEDERAL 3-25 49043204330000 SOUTH FRISBY BRENT EXPLORATION, INC. PRD
1252318 BRENT FEDERAL 13-24
BRENT FEDERAL 13-24 49043204600000 FRISBY SOUTH BRENT EXPLORATION, INC. PRD
1252319 BRENT FEDERAL 25-7
BRENT FEDERAL 25-7 49043205360000 FRISBY SOUTH ANDERSON MYERS PA
1252320 TENNECO USA #1
TENNECO USA 1 49043205910000 COTTONWOOD CREEK CAROL-HOLLY OIL CORP. PRD
1252321 GOVERNMENT #25-1
GOVERNMENT 25-1 49043202990000 SOUTH FORK MARKUS PRODUCTION, INC. PRD
1252322 GOVERNMENT #36-1
GOVERNMENT 36-1 49043202890000 COTTONWOOD CREEK MARKUS PRODUCTION, INC. SI
1252324 TENNECO USA 2
TENNECO USA 2 49043206080000 COTTONWOOD CREEK WYOMING RESOURCES PA
1252325 TENNECO USA #3
TENNECO USA 3 49043206230000 COTTONWOOD CREEK CAROL-HOLLY OIL CORP. PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1252313 BRENT FEDERAL #11-1
BRENT FEDERAL 11-1 NE SW 01 46N 92W .00000000 .00000000 .05000000
1252314 BRENT FEDERAL #16-1
BRENT FEDERAL 16-1 SE SE 01 46N 92W .00000000 .00000000 .05000000
1252316 SCHETTERLY #1-30
ALTUS SATTTERLY 1-30 NE SE 30 47N 91W .00000000 .00000000 .06500000
1252317 BRENT FEDERAL #3-25
BRENT FEDERAL 3-25 NE NW 25 47N 92W .00000000 .00000000 .05000000
1252318 BRENT FEDERAL 13-24
BRENT FEDERAL 13-24 SW SW 24 47N 92W .00000000 .00000000 .05000000
1252319 BRENT FEDERAL 25-7
BRENT FEDERAL 25-7 SW NE 25 47N 92W .00000000 .00000000 .00000000
1252320 TENNECO USA #1
TENNECO USA 1 SW SE 25 47N 92W .00000000 .00000000 .10000000
1252321 GOVERNMENT #25-1
GOVERNMENT 25-1 SE NW 25 46N 92W .00000000 .00000000 .12500000
1252322 GOVERNMENT #36-1
GOVERNMENT 36-1 NE NE 36 47N 92W .26666640 .19999980 .03750000
1252324 TENNECO USA 2
TENNECO USA 2 SE SW 28 47N 91W .00000000 .00000000 .00000000
1252325 TENNECO USA #3
TENNECO USA 3 SE NW 28 47N 91W .12500000 .11312500 .05000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 2
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
NON-UNITIZED ASSETS (OSO)
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1252327 RATTLESNAKE USA #4
RATTLESNAKE 4 49043206330000 COTTONWOOD CREEK CAROL-HOLLY OIL CORP. SI
1252332 BRENT FEDERAL #1
BRENT FEDERAL #1 49043203910000 COTTONWOOD CREEK BRENT EXPLORATION CO SI
1252333 HONEY BUTTE FEDERAL #3
HONEY BUTTE FEDERAL #3 49043203390000 RATTLESNAKE HANSON OPERATING COMPANY PRD
1252334 GOVERNMENT #14-1
GOVERNMENT 14-1 49043201140000 RATTLESNAKE MARKUS PRODUCTION, INC. SI
1252335 TENNECO GOVERNMENT #1-3
TENNECO GOVERNMENT 1-3 49043203030000 COTTONWOOD CREEK SAMSON RESOURCES CORP PRD
1252336 TENNECO GOVERNMENT #1-4
TENNECO GOVERNMENT 1-4 49043203010000 COTTONWOOD CREEK SAMSON RESOURCES CORP PRD
1252337 GOVERNMENT #28-1
GOVERNMENT 28-1 49043202970000 COTTONWOOD CREEK MARKUS PRODUCTION, INC. SI
1252338 GOVERNMENT #36-2
GOVERNMENT 36-2 49043203050000 COTTONWOOD CREEK MARKUS PRODUCTION, INC. SI
1256101 BASS FEDERAL 33-24 #1H
#1 H BASS FEDERAL 33-24 49043207100000 MARSHALL UNION PACIFIC RESOURCES PRD
1288501 SAGEBUSH FEDERAL #13-25
SAGEBUSH FED #13-25 49003208230000 SAGEBUSH ALV COMPANY PRD
1288502 SAGEBUSH FEDERAL #32-26
SAGEBUSH #32-26 49003208270000 SAGEBUSH ALV COMPANY PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1252327 RATTLESNAKE USA #4
RATTLESNAKE 4 SE NW 11 47N 92W .05000000 .04245000 .00000000
1252332 BRENT FEDERAL #1
BRENT FEDERAL #1 NE NW 31 47N 91W .00000000 .00000000 .09000000
1252333 HONEY BUTTE FEDERAL #3
HONEY BUTTE FEDERAL #3 SW SE 16 47N 91W .10000000 .08350000 .00000000
1252334 GOVERNMENT #14-1
GOVERNMENT 14-1 NW NE 14 47N 92W .26666640 .19999978 .06250000
1252335 TENNECO GOVERNMENT #1-3
TENNECO GOVERNMENT 1-3 SW NE 01 47N 92W .25291700 .18652630 .01875000
1252336 TENNECO GOVERNMENT #1-4
TENNECO GOVERNMENT 1-4 SW SE 01 47N 92W .22736810 .16768400 .01875000
1252337 GOVERNMENT #28-1
GOVERNMENT 28-1 SW SE 28 47N 92W .04848480 .03636360 .08500000
1252338 GOVERNMENT #36-2
GOVERNMENT 36-2 NE NW 36 47N 92W .22736810 .17052610 .03750000
1256101 BASS FEDERAL 33-24 #1H
#1 H BASS FEDERAL 33-24 SW SE 24 48N 92W .00000000 .00000000 .03187499
1288501 SAGEBUSH FEDERAL #13-25
SAGEBUSH FED #13-25 NW SW 25 51N 92W .00000000 .00000000 .00830000
1288502 SAGEBUSH FEDERAL #32-26
SAGEBUSH #32-26 SW NE 26 51N 92W .00000000 .00000000 .04000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 3
<PAGE>
Exhibit "C"
PURCHASE AND SALE AGREEMENT
DATED: MARCH 28. 1998
ASSIGNMENT AND BILL OF SALE
STATE OF WYOMING )
) KNOW ALL MEN BY THESE PRESENTS, THAT
COUNTY OF __________ )
THIS ASSIGNMENT AND BILL OF SALE ("Assignment") is made effective as of
7:00 a.m., Mountain Standard Time on June 1, 1998 (the "Effective Time") by and
between the undersigned parties under "ASSIGNORS" (hereinafter collectively
referred to as "Assignor"), all having an address of 201 Main Street, Fort
Worth, Texas 76102; and Continental Resources, Inc. (hereinafter referred to as
"Assignee"), whose address is P.O. Box 1032, Enid, Oklahoma 73702.
Assignor, for Ten Dollars ($10.00) and other good and valuable
consideration in hand by Assignee, the receipt and sufficiency of which is
hereby acknowledged, by these PRESENTS DOES hereby GRANT, BARGAIN, SELL, CONVEY,
ASSIGN, TRANSFER, SET OVER, AND DELIVER unto Assignee, the following described
properties:
A. All rights, titles, and interests of Assignor in an to: 1) the oil,
gas, and mineral leases described in Exhibit A hereto (including
landowner's royalty and any ratifications and amendments to such leases,
whether such ratifications and amendments are described in Exhibit A); and
2) the wells described in Exhibit B hereto;
B. All rights, titles, and interests of Assignor 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
authority having jurisdiction, and voluntary unitization agreements,
designations, and declarations) relating to the properties described in
Paragraph A. to the extent such rights, titles, and interests are
attributable to the properties described in Paragraph A.;
C. All rights, titles, and interests of Assignor 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 Paragraphs A. and B., to the extent such rights, titles, and
interests are assignable and attributable to the properties described in
Paragraphs A. and B.;
D. All rights, titles, and interests of Assignor in and to all
rights-of-way, easements, surface leases, permits, and licenses appurtenant
to the properties described in Paragraphs A. and B.; and,
E. All rights, titles, and interests of Assignor in and to all materials,
supplies, machinery. equipment, improvements, and other personal property
and fixtures (including, but not limited to, 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 Paragraphs A. and B. and
used in connection with the exploration, development, operation, or
maintenance thereof.
The rights, titles, and interests of Assignor described above in Paragraphs A.,
B., C., D., and E. and conveyed to Assignee hereby are herein sometimes
collectively called the "Purchased Properties".
TO HAVE AND TO HOLD unto Assignee, its successors and assigns, forever the
Purchased Properties subject to the following terms and conditions:
<PAGE>
1. PURCHASE AND SALE AGREEMENT: This Assignment is made subject to that
certain Purchase and Sale Agreement dated ________________, by and between
Assignor and Assignee affecting the sale of the Purchased Properties.
2. ASSUMPTION AND INDEMNIFICATION: Assignee, by acceptance of this
Assignment, hereby covenants and agrees to assume, to pay and perform
timely, all duties, expenses, obligations, losses, hazards, and liabilities
relating to the ownership or operation of the Purchased Properties arising
on and after the Effective Time (including, without limitation, those
arising under or by virtue of any lease, contract, agreements, document,
permit or rule, or delay in obtaining approval of federal or state
assignments); and, to release, indemnify, defend, and hold harmless
Assignor 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 Purchased Properties on and after the Effective Time.
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 Purchased Properties on and
after the Effective Time shall be deemed to include all matters arising out
of the status and the condition of the Purchased Properties on the
Effective Time including, without limitation, all obligations to properly
plug and abandon wells located on the Purchased Properties, to restore the
surface of the Purchased Properties to as near its original condition as
practicable and to comply with, or bring the Purchased Properties into
compliance with applicable environmental laws and regulations, including
all liability and expense for any restoration, remediation, clean-up,
disposal of waste, or removal that may be incurred as a result of the
existence or discovery of naturally occurring radioactive materials, or
other hazardous or deleterious substances in, on, under, or associated with
the Purchased Properties, regardless of when the events occurred that give
rise to such condition, and the above provided for assumptions and
indemnifications by Assignee shall expressly cover and include such
matters. The foregoing assumptions and indemnifications shall apply whether
or not such duties, obligations, or liabilities, or such claims, actions,
causes of action, liabilities~ damages, losses, costs, or expenses arise
out of (i) negligence (including sole negligence, simple negligence,
concurrent negligence, active or passive negligence, or otherwise, but
expressly not including gross negligence or willful misconduct) of
Assignor, or (ii) strict liability.
3. ENVIRONMENTAL ASSESSMENT AND INDEMNIFICATION BY ASSIGNEE: Assignee
hereby acknowledges that it has made an environmental assessment of the
Purchased Properties, or has been afforded the opportunity to do so, and
satisfied itself as to the physical and environmental condition of the
Purchased Properties, both surface and subsurface. Assignee hereby assumes
the risks that the Purchased Properties may contain waste materials or
hazardous substances, and that adverse physical conditions, including, but
not limited to, the presence of waste materials or hazardous substances or
the presence of unknown abandoned oil and gas wells, water wells, sumps and
pipelines, may exist in, on, or under the properties as of the Effective
Time, all responsibility and liability related to all such conditions,
whether known or unknown, are hereby transferred from Assignor to Assignee.
Assignee assumes full responsibility for, and agrees to indemnify, hold
harmless, and defend Assignor from and against all loss, liability, claims,
fines, expenses, costs (including attorneys' fees and expenses), and causes
of action caused by or arising out of any federal, state, or local laws,
rules, orders, and regulations applicable to any naturally occurring
radioactive materials, waste material, or hazardous substances on or
associated with the Purchased Properties or the presence, disposal, release
or threatened release of all naturally occurring radioactive materials,
waste material, or hazardous substances from the Purchased Properties into
the atmosphere or into or upon land or any water course or body of water,
including ground water, whether attributable to Assignor's activities or
the activities of third parties (regardless of whether Assignor was or is
aware of such activities prior to, during, or after the period of
Assignor's ownership of the Purchased Properties. This indemnification and
assumption shall also apply to liability or voluntary environmental
response actions undertaken pursuant to the Comprehensive Environmental
Response Compensation and Liability Act (CERCLA) or any other federal,
state or local law.
4. DISCLAIMER OF WARRANTIES: Assignee acknowledges that it has relied
solely on its own independent investigation of the Purchased Properties,
both surface and subsurface, in making its decision to acquire the
Purchased Properties; and, that Assignor has made no
<PAGE>
representations or warranties as to the accuracy or completeness of any
information which may have been provided Assignee by Assignor. Assignee
accepts all personal property and fixtures associated with the Purchased
Properties "AS IS" and "WHERE IS" and Assignor hereby expressly disclaims,
negates, and makes this Assignment with NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, AT COMMON LAW, BY STATURE, OR OTHERWISE, RELATING TO
THE PURCHASED PROPERTIES AS TO DESCRIPTION, QUANTITY, QUALITY,
CONDITION, FITNESS FOR A PARTICULAR PURPOSE, CONFORMITY TO MODELS, OR
SAMPLES OF MATERIALS, OR MERCHANTABILITY, OR OTHERWISE.
5. FEDERAL AND STATE ASSIGNMENTS: Separate state and federal assignments
of the Purchased Properties will be prepared by Assignor into Assignee
using the approved forms of the appropriate governmental agency. Such
assignments shall be deemed to contain all of the rights, titles,
interests, assumptions, indemnifications, disclaimers, and lack of
warranties as set forth herein, as though fully set forth in such
assignments, but no more. The interests conveyed by such separate
assignments are the same and. not in addition to, the interests conveyed
hereunder.
6. WARRANTY OF TITLE: This Assignment is made without warranty of title
of any kind, express or implied, except that Assignor agrees to defend
title against claims and demands of all persons claiming the same by,
through or under Assignor, but not otherwise. This Assignment may be signed
in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall constitute but one and the same
Assignment.
All of the terms and provisions of this Assignment shall be binding upon
and inure to the benefit of Assignee and Assignor and their respective heirs,
successors, representatives, and assigns.
All exhibits referenced herein and attached hereto are by reference
incorporated into this Assignment.
IN WITNESS WHEREOF, this Assignment was executed on the dates contained in
the acknowledgments herein, but to be effective as of the Effective Time as
stated in the first paragraph hereof.
ASSIGNORS
BASS ENTERPRISES PRODUCTION CO.
By:
----------------------------------------
Perry R. Bass, Inc.,
Sid R. Bass, Inc.,
Lee M. Bass, Inc.,
Keystone, Inc.,
Thru Line Inc.
By:
----------------------------------------
GOLIAD PARTNERS,
LIMITED PARTNERSHIP
<PAGE>
By:
----------------------------------------
, General Partner
----------------------------------------
PERRY R. BASS, TRUSTEE
----------------------------------------
SID R. BASS, TRUSTEE
----------------------------------------
Sid R. Bass
----------------------------------------
Lee M. Bass
D. W. GENPAR, INC.
By:
----------------------------------------
W. D. PROPERTIES,
LIMITED PARTNERSHIP
By:
----------------------------------------
, General Partner
WPH-GP, INC.
By:
----------------------------------------
WORLAND ASSOCIATES
By:
----------------------------------------
WORLAND ASSOCIATES II
By:
----------------------------------------
ASSIGNEE
ATTEST:
By: By:
---------------------------- ----------------------------------------
NAME: Name:
---------------------------- --------------------------------------
Title: Title:
-------------------------- -------------------------------------
<PAGE>
(ACKNOWLEDGMENTS ATTACHED)
STATE OF_____________ )
) ss.
COUNTY OF___________ )
Before me, the undersigned, a Notary Public, in and for said County and
State, on this _____ day of _____________, 19___, personally appeared
__________________________________________________________________________,
known to me to be the identical person who executed the within and foregoing
instrument and acknowledged to me that _____ executed the same as _____ free
and voluntary act and deed for the uses and purposes therein set forth.
Given under my hand and seal the day and year last above written.
My Commission Expires:
---------------------------------------
Notary Public
- ---------------------
STATE OF_____________ )
) ss.
COUNTY OF___________ )
Before me, the undersigned, a Notary Public, in and for said County and
State, on this _____ day of _____________, 19___, personally appeared
__________________________________________________________________________,
known to me to be the identical person who executed the within and foregoing
instrument and acknowledged to me that _____ executed the same as _____ free
and voluntary act and deed for the uses and purposes therein set forth.
Given under my hand and seal the day and year last above written.
My Commission Expires:
---------------------------------------
Notary Public
- ---------------------
STATE OF_____________ )
) ss.
COUNTY OF___________ )
Before me, the undersigned, a Notary Public, in and for said County and
State, on this _____ day of _____________, 19___, personally appeared
____________________________________________________________________________,
known to me to be the identical person who executed the within and foregoing
instrument and acknowledged to me that _____ executed the same as _____ free
and voluntary act and deed for the uses and purposes therein set forth.
Given under my hand and seal the day and year last above written.
My Commission Expires:
---------------------------------------
Notary Public
- ---------------------
<PAGE>
EXHIBIT "D"
PURCHASE AND SALE AGREEMENT
DATED MARCH 28, 1998
SUITS, ACTIONS, OR OTHER LEGAL PROCEEDINGS PENDING
-NONE-
<PAGE>
EXHIBIT "E"
PURCHASE AND SALE AGREEMENT
DATED MARCH 28, 1998
<TABLE>
<CAPTION>
TOTAL
CATEGORY SUB-ALLOCATION ALLOCATION
- -------- -------------- ----------
<S> <C> <C>
A. PRODUCING UNITS:
1. Cottonwood Creek Unit $45,834,673.00
2. Cottonwood Creek Field 8,368,161.00
Extension (Phosphoria) Unit
3. No Water Creek Unit 4,813,056.00
4. Slick Creek Unit 9,956,948.00
5. South Frisby Unit 3,057,508.00
TOTAL CATEGORY A. $72,030,346.00
B. PRODUCING NON-UNITIZED PROPERTIES: $11,969,654.00
C. NON-PRODUCING LEASEHOLD: $ 2,500,000.00
BASE PURCHASE PRICE $86,500,000.00
</TABLE>
<PAGE>
WORLAND AREA PURCHASE AND SALE AGREEMENT
This Worland Area Purchase and Sale Agreement ("Agreement") is made and
entered into on this 25th day of June, 1998 by and between Continental
Resources, lnc., ("Seller") and Harold G. Hamm, Trustee of the Harold G. Hamm
Revocable Intervivos Trust dated April 23, 1984 ("Buyer").
WHEREAS, pursuant to that certain Purchase and Sale Agreement dated
March 28, 1998, a copy of which is attached hereto as Exhibit "A", and
subsequent Assignment and Bill of Sale documents, which are described on the
Exhibit "B" attached hereto, Seller did acquire certain oil and gas wells,
leases and other rights from several parties. Such documents are
collectively referred to herein as the "BEPCO documents". The conveyance of
interest effected by such documents is herein referred to as the "BEPCO
Acquisition".
AND WHEREAS, the Buyer desires to purchase, and Seller desires to sell,
an undivided fifty percent (50%) of all right, title and interest of
whatsoever nature which Seller acquired in the BEPCO Acquisition.
NOW THEREFORE, in consideration of the mutual benefit to accrue to the
parties hereto and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Seller and Buyer do hereby agree
as follows:
1. PURCHASE PRICE AND PROPERTY BEING SOLD AND PURCHASED: In and for a
total purchase price of $42,550,000.00, Seller shall sell, assign, transfer
and convey unto Buyer an undivided fifty (50%) of all Seller's right, title
and interest in and to the following:
A. All oil & gas leases, overriding royalty interests, mineral and
royalty interests, easements and rights-of-way, contractual rights and
interests, together with all rights and interests appurtenant thereto
or used or obtained in connection therewith which were acquired by
Seller in connection with the BEPCO Acquisition and by virtue of the
BEPCO Documents, and;
B. All oil and gas wells and interests therein, together with all
materials, supplies, machinery, equipment, improvements and other
personal property and fixtures located thereon, associated therewith
or appurtenant thereto that were acquired by Seller in connection with
the BEPCO Acquisition and by virtue of the BEPCO Documents. Such
wells are described on Exhibit "C" hereto
2. EFFECTIVE DATE: The Effective Time of the conveyance contemplated
by this Agreement shall be 7:00 a.m., Mountain Standard Time on June 1, 1998.
It is the intent of the parties that the interest is conveyed from Seller to
Buyer effective as of the same time which Seller received the interests
pursuant to the BEPCO Documents, same as if Buyer had been a party thereto.
<PAGE>
3. COVENANTS AND REPRESENTATIONS OF SELLER AND BUYER: To the extent
applicable, Seller and Buyer do hereby adopt and make the same covenants and
representations to one another as were made by the Seller and Buyer in the
Purchase and Sale Agreement attached hereto as Exhibit "A".
4. DESIGNATION OF OPERATOR: Buyer agrees that Seller shall remain and
be Operator of all jointly owned existing or hereafter drilled, created or
acquired units, wells and leases. Buyer agrees to execute any required
Operating Agreements, Unit Agreements or other documents that are now or
hereafter may become necessary to effectuate and/or support Seller being
designated as Operator of such jointly owned units, wells or leases.
5. AREA OF MUTUAL INTEREST: An Area of Mutual Interest ("AMI") is
hereby created which covers the lands outlined on the plat attached hereto as
Exhibit "D". During the term of the AMI, which is ten (10) years from the
date hereof, should either party acquire an interest of whatsoever nature in
the AMI, it shall immediately offer the other party it's proportionate part
of such acquired interest. The non-acquiring party shall have thirty (30)
days from receipt of notice within which to advise the acquiring party
whether it wants to acquire it's proportionate part of such interest for the
actual acquisition cost thereof. The parties proportionate interests in the
AMI is 50% each.
6. CLOSING: On or before July 1, 1998 Buyer shall deliver to Seller
the full purchase price. Immediately upon receipt thereof, Seller shall
deliver to Buyer a fully executed Assignment and Bill of Sale which conveys
interests to the properties, rights and interests being purchased. Such
Assignment and Bill of Sale shall be in the form attached hereto as Exhibit
"E".
IN WITNESS WHEREOF, this Agreement is made and entered into on this 25th
day of June, 1998.
CONTINENTAL RESOURCES, INC.
By: /s/ TOM LUTTRELL
Tom Luttrell
Vice President - Land
HAROLD G. HAMM REVOCABLE INTERVIVOS
TRUST DATED APRIL 23, 1984
By: /s/ HAROLD HAMM
Harold G. Hamm, Trustee
<PAGE>
CONTINENTAL RESOURCES, INC.
July 13, 1998
Harold G. Hamm, Trustee of the Harold G. Hamm
Revocable Intervivos Trust
P.O. Box 1032
Enid, OK 73702
RE: Worland Area Purchase and Sale Agreement
dated June 25, 1998
Dear Harold,
Reference is hereby made to that certain Worland Area Purchase and Sale
Agreement dated June 25, 1998 between Continental Resources, Inc., as Seller
and The Harold G. Hamm Revocable Intervivos Trust, as Buyer.
This letter is to set forth in writing the agreement of both parties to
change the Closing date provided for the referenced Agreement by amending
Article 6, thereof to read as follows: "On or before July 17, 1998 Buyer
shall deliver to Seller the full purchase price. Immediately upon receipt
...". All other provisions shall remain as originally written.
If the foregoing is acceptable with you, please indicate your agreement by
signing in the space provided below and returning one (1) executed copy of
this letter to the undersigned. Thank you.
Sincerely,
/s/ TOM LUTTRELL
Tom Luttrell
Vice President - Land
Agreed to and accepted this 13th day of July, 1998
The Harold G. Hamm Revocable Intervivos Trust dated April 23, 1984
By: /s/ HAROLD HAMM
Harold G. Hamm, Trustee
302 N. Independence
P.O. Box 1032 Enid, Oklahoma 73702
(580) 233-8955
<PAGE>
EXHIBIT A
PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
BASS ENTERPRISES PRODUCTION CO., ET AL
AS SELLERS
AND
CONTINENTAL RESOURCES, INC.
AS BUYER
DATED MARCH 28, 1998
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
1. Property to be Sold and Purchased . . . . . . . . . . . . . . . . . 1
2. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4. Allocation of Base Purchase Price . . . . . . . . . . . . . . . . . 2
5. Seller's Representations . . . . . . . . . . . . . . . . . . . . . . 2
6. Buyer's Representations . . . . . . . . . . . . . . . . . . . . . . 3
7. Covenants of Seller and Buyer Pending Closing . . . . . . . . . . . 4
8. Due Diligence Reviews . . . . . . . . . . . . . . . . . . . . . . . 6
9. Adverse Environmental Conditions . . . . . . . . . . . . . . . . . . 8
10. Disposal of Materials, Substances, and Wastes; Compliance
with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
11. Certain Price Adjustments to the Base Purchase Price . . . . . . . . 11
12. Conditions Precedent to Buyer's Obligations . . . . . . . . . . . . 12
13. Conditions Precedent to Seller's Obligations . . . . . . . . . . . . 13
14. The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
15. After Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
16. Certain Accounting Adjustments to the Purchase Price . . . . . . . . 16
17. Assumption and Indemnification . . . . . . . . . . . . . . . . . . . 18
18. Environmental Assessment and Indemnification by Buyer . . . . . . . 19
<PAGE>
19. Disclaimer of Warranties . . . . . . . . . . . . . . . . . . . . . . 19
20. Buyer's Covenant Not to Sue Seller Group . . . . . . . . . . . . . . 20
21. Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
22. Casualty Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
23. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
24. Survival of Provisions . . . . . . . . . . . . . . . . . . . . . . . 20
25. Miscellaneous Matters . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
Exhibit A - Oil and Gas Leases
Exhibit B - Wells
Exhibit C - Assignment and Bill of Sale
Exhibit D - Suits, Actions, or other Legal Proceedings Pending
Exhibit E - Allocation of Values
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PURCHASE AND SALE AGREEMENT
This Agreement, dated March 28, 1998, is made by and between the
signatory parties shown below under "Sellers" whose address is 201 Main
Street, Fort Worth, Texas 76102 (hereinafter collectively called "Seller")
and Continental Resources, Inc., whose address is P. O. Box 1032, Enid,
Oklahoma 73702 (hereinafter called Buyer");
W I T N E S S E T H:
WHEREAS, Buyer desires to purchase the Properties, as defined below,
from Seller, and Seller desires to sell the same Properties to Buyer, subject
to the terms and conditions of this Agreement.
WHEREAS, It is the parties' intent that Buyer assume all responsibility
and liability as provided herein for all matters relating to the Properties
to be assigned.
NOW, THEREFORE, In consideration of the mutual promises made herein and
the benefits to be derived hereunder, and other good and valuable
consideration, the sufficiency of which is hereby acknowledged, Seller and
Buyer agree as follows:
1. PROPERTY TO BE SOLD AND PURCHASED. Seller agrees to sell, and
Buyer agrees to purchase, for the consideration herein set forth, and subject
to the terms and provisions herein contained, the following described
Properties, rights, and interests:
(a) All rights, titles, and interests of Seller in and to: 1) the
oil, gas, and mineral leases described in Exhibit A hereto; and 2) the
wells described in Exhibit B hereto;
(b) All rights, titles, and interests of Seller 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 authority having jurisdiction, and voluntary
unitization agreements, designations, and declarations) relating to
the properties described in subsection 1.(a) to the extent such
rights, titles, and interests are attributable to the properties
described in subsection 1.(a);
(c) All rights, titles, and interests of Seller 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 l.a. and l.b., to the extent
such rights, titles, and interests are assignable and attributable to
the properties described in subsections 1.(a) and 1.(b);
(d) All rights, titles, and interests of Seller in and to all
rights-of-way, easements, surface leases, permits, and licenses
appurtenant to the properties described in subsections 1.(a) and
1.(b); and
(e) All rights, titles, and interests of Seller in and to all
materials, supplies, machinery, equipment, improvements, and other
personal property and fixtures (including, but not limited to,
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 1.(a) and 1.(b) and used in
connection with the exploration, development, operation, or
maintenance thereof.
The properties and interests specified in subsections l.(a), l.(b), l.(c), l.(d)
and l.(e) are herein sometimes collectively called the "Properties". The
defined term "Properties" shall include seismic data, geological or geophysical
data, including interpretations, environmental studies, or other similar data,
or any interpretations thereof or other data or records related thereto. Seller
shall
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provide Buyer with such data Seller has in its files, excluding any
interpretations, engineering reports and evaluations, Seller financial
information and all data which Seller considers proprietary or confidential
or that Seller cannot provide to Buyer without breaching, or risking a breach
of, an agreement with a third party.
2. PURCHASE PRICE. The unadjusted purchase price for the Properties
shall be Eighty Six Million Five Hundred Thousand Dollars ($86,500,000.00),
payable in United States dollars, (herein called the "Base Purchase Price").
The Base Purchase Price may be adjusted, as provided in Sections 7.(c), 11.
and 16. hereof. The Base Purchase Price, as so adjusted and as otherwise
adjusted by mutual agreement of the parties herein, shall be called the
"Purchase Price."
3. DEPOSIT. Upon entering into this Agreement, as evidence of good
faith, Buyer shall pay to Seller Eight Million Six Hundred Fifty Thousand
Dollars ($8,650,000.00) hereinafter called the "Deposit". If Buyer and
Seller consummate the transaction contemplated hereby in accordance with the
terms hereof, the Deposit shall be applied to the Base Purchase Price. If
Buyer and Seller do not consummate the transaction contemplated hereby
because of a material default by Seller, in the absence of a default by
Buyer, Seller shall return the Deposit to Buyer and shall, in addition, pay
to Buyer the sum of Two Million Five Hundred Thousand Dollars ($2,500,000.00)
as liquidated damages and not as a penalty. Except as provided in Section
12., if Buyer fails or refuses to consummate the transaction contemplated
hereby, Seller shall retain the Deposit as liquidated damages and not as a
penalty. Buyer stipulates that Seller's damages in the event of Buyer's
wrongful failure to close would be uncertain and that the amount of
liquidated damages provided herein is reasonable. Forfeiture of the Deposit
as liquidated damages as provided herein shall be Seller's sole remedy at law
or in equity for Buyer's failure to close as provided in this Agreement. In
no event shall the Deposit accrue interest.
4. ALLOCATION OF BASE PURCHASE PRICE. Buyer has allocated the Base
Purchase Price to the Properties by various categories. These categories and
the allocations thereto are shown on Exhibit E and have been made in good
faith by Buyer and may be relied upon by Seller for all purposes of this
Agreement.
5. SELLER'S REPRESENTATIONS. Each of the individuals and entities
comprising Seller represent to Buyer that:
(a) Each (other than natural persons) is a legal entity duly
organized and legally existing under the laws of the State of Texas.
Each corporation and limited partnership is qualified to do business
in Wyoming and is in good standing, or will be at Closing.
(b) Each has full power to enter into this Agreement and perform
its obligations hereunder and has taken all necessary action to enter
into this Agreement and perform its obligations hereunder.
(c) Execution and delivery of this Agreement, the consummation of
the transaction contemplated hereby, and compliance with the terms
hereof, will not result in any default under any agreement or
instrument to which Seller, or any individual party thereof, is a
party or by which the Properties are bound that would be material to
this transaction. Execution and delivery of this Agreement will not
violate any contractual provision, order, writ, injunction, decree,
statute, rule, or regulation applicable to Seller, or any individual
party thereof, or to the Properties that would be material to this
transaction, except the following:
(i) Any 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 "HSR Act"); and,
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(iii) Any approvals that must be obtained from governmental entities
who are lessors under leases included in the Properties (or who
administer such leases for such lessors) and that are customarily
obtained post-closing.
(d) This Agreement and the Assignment and Bill of Sale provided for
in Section 14.(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 in 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 affect the execution and delivery of this Agreement or
the consummation of the transaction contemplated hereby.
6. 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 in Wyoming and is in good standing, or will be at Closing.
(b) Buyer has full power and ability to enter into and perform its
obligations under this Agreement (including, but not limited to the
payment of the Purchase Price at Closing) and has taken all necessary
action to enter into this Agreement and perform its obligations
hereunder.
(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 any default under
any agreement or instrument to which Buyer is a party or by which the
Properties are bound that would be material to this transaction.
Buyer's execution and delivery of this Agreement will not violate any
contractual provision, order, writ, injunction, decree, statute, rule,
or regulation applicable to Buyer or to the Properties that would be
material to this transaction, except the following:
(i) Any waivers of preferential rights to purchase that must
be obtained from third parties;
(ii) Compliance with the "HSR Act;" and,
(iii) Any approvals that must be obtained from governmental
entities who are lessors under leases included in the
Properties (or who administer such leases for such lessors) and
that are customarily obtained post-closing.
(d) This Agreement and the Assignment and Bill of Sale provided for
in Section 14.(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 in
which Buyer is a party that materially affect the execution and
delivery of this Agreement or the consummation of the
transaction contemplated hereby.
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<PAGE>
(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) Buyer wishes to replace Seller as operator ln every well
described on Exhibit B which Seller presently operates. Accordingly,
Buyer is, or will become, qualified to operate such Properties under
the applicable laws, rules, and regulations of the jurisdiction in
which such Properties are located.
7. COVENANTS OF SELLER AND BUYER PENDING CLOSING. Between the date of
this Agreement and the Closing Date:
(a) Seller shall permit Buyer access as follows:
(i) Seller shall give Buyer and its attorneys and other
representatives, who have a legitimate need to know, access at
all reasonable times during normal business hours to the
Properties and, at Seller's office, to Seller's records
(including, without limitation, title files, division order
files, well files, production records, equipment inventories,
and production severance, and ad valorem tax records)
pertaining to the ownership and operation of the Properties, to
conduct due diligence reviews as contemplated by Section 8.
below. Buyer may make copies of such records at its expense but
shall, if Seller so requests, return all copies so made if the
Closing does not occur. 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 breaching, or risking a breach
of, confidentiality agreements with other parties. Until
Closing, all records and data provided shall be subject to the
previously executed Confidentiality Agreement between Buyer and
Seller. SELLER MAKES NO WARRANTY, AND EXPRESSLY DISCLAIMS ALL
WARRANTIES, AS TO THE ACCURACY OR COMPLETENESS OF THE FILES AND
OTHER INFORMATION THAT IT MAY PROVIDE TO BUYER OR THAT MAY BE
PROVIDED BY OTHERS.
(ii) Seller shall make a good faith effort to give Buyer, or
Buyer's authorized representatives, who have a legitimate need
to know, at reasonable times and upon adequate notice to
Seller, physical access to the Properties for the purpose of
inspecting same. Buyer recognizes that some of the Properties
are operated by third parties and that Seller's ability to
obtain access to such Properties, and the manner and extent of
such access, is subject to the consent of such third parties.
Buyer agrees to comply fully with the rules, regulations, and
any instructions issued by Seller or third party (where a
Property is operated by such third party) regarding the actions
of Buyer while upon, entering, or leaving the Properties.
(iii) If Buyer exercises rights of access under this Section
or otherwise, or conducts examinations or inspections under
this Section or otherwise, then (a) Buyer will be accompanied
by Seller's representative at all times; (b) 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 (c) BUYER SHALL RELEASE, INDEMNIFY,
DEFEND, AND HOLD HARMLESS
4
<PAGE>
SELLER (AND ITS PARENT, SUBSIDIARY COMPANIES, AND OTHER
AFFILIATES AND THEIR RESPECTIVE OFFICERS, DIRECTORS,
EMPLOYEES, ATTORNEYS, CONTRACTORS, AND AGENTS) (HEREINAFTER
COLLECTIVELY REFERRED TO AS "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, EXAMINATION, AND INSPECTION. 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, SIMPLE NEGLIGENCE, CONCURRENT
NEGLIGENCE, ACTIVE OR PASSIVE NEGLIGENCE, OR OTHERWISE, BUT
EXPRESSLY NOT INCLUDING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT)
OF SELLER OR ANY OTHER INDEMNIFIED PARTY, OR (ii) STRICT
LIABILITY.
(b) Seller shall continue to conduct its business in its ordinary
course, and in accordance with all applicable ordinances, statutes,
rules, and regulations of all local, state, and federal governments.
Seller shall not enter into or assume any contract or commitment which
is not in the ordinary course of business as heretofore conducted in
association with the Properties and shall carry on its business and
operate the Properties as a reasonably prudent operator. Subject to
existing contractual obligations, Seller shall not conduct, or commit
to participate in, on behalf of Buyer, any operation on the
Properties, or lands pooled or unitized therewith and shall not enter
into a contract for the sale of crude oil from the Properties
continuing in effect past the Effective Date without Buyer's prior
written consent. However, Seller may take such steps and incur such
expenses as it deems necessary in its sole opinion to deal with an
emergency to safeguard any part of the Property without first
consulting with Buyer. As soon as possible after the emergency,
Seller shall advise Buyer of such emergency action. Except as set
forth in this Agreement, Seller shall not sell, assign, transfer,
mortgage, farmout, or otherwise dispose of, abandon, or encumber any
material portion of the Properties.
(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, (i) all preferential rights
to purchase that would apply to the transaction contemplated hereby
and (ii) 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. Seller shall have no obligation hereunder other
than to attempt to identify such preferential rights and to request
such waivers. Seller shall not be obligated to assure that such
waivers are obtained. Seller may tender to any party refusing to
waive such a preferential right the interest covered by such right at
a value as mutually agreed to by Buyer and Seller which shall be made
in good faith, but in no event shall the value of a well exceed the
value assigned to it by Ryder-Scott Company, an independent petroleum
reservoir engineering company, in its recent Reserve Report dated
January 14, 1998, prepared on behalf of Seller (hereinafter referred
to as the "Ryder-Scott Report") using the present value (future net
income before income taxes discounted at ten percent (10%)) of the
total proved reserves. If Buyer and Seller are unable to agree on a
value, the value for a well shall be determined as provided in Section
11.(a)(ii) using the V/T = PVW/PVC equation for Properties falling in
Categories A and B as shown on Exhibit E. This value shall be used in
determining the value of any interest
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in a well covered by a preferential right to purchase. The value
shall be determined using the formula as provided in Section
11.(a)(iii) for Properties falling in Category C where F=Seller's net
acres subject to a preferential right to purchase. To the extent
that such an interest is actually sold to a party exercising such a
preferential right, it shall be excluded from the transaction
contemplated hereby, and the Base Purchase Price shall be 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 necessary filings in
connection with the transaction contemplated by this Agreement under
the HSR Act. 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 promptly make any appropriate
or necessary subsequent or supplemental filings, and shall furnish to
Seller copies of all filings made under the HSR Act at the same time
they are filed with the FTC. Seller shall cooperate with Buyer as to
all filings required by the HSR Act.
(e) After both parties have executed this Agreement, Seller shall
deliver to Buyer a copy of its "pay list" for each well listed on
Exhibit B (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 property); and, a list of all parties for whom it is holding
in suspense proceeds of production. Seller does not represent or
warrant to Buyer the accuracy of the "pay lists" so delivered.
(f) At such time that all Asserted Defects (as hereinafter defined)
have been fully resolved to the satisfaction of both Parties or if no
Defects have been asserted by Buyer as of the Defect Notice Date (as
hereinafter defined)upon Seller's receipt of Buyer's written
confirmation and assurance that all Defects, if any, have been
resolved and Buyer is prepared to close the transaction subject only
to Seller's performance of its closing obligations as set forth in
Section 14(a), Seller shall give Buyer and its accountants access to
any and all accounting information in Seller's possession reasonably
requested by Buyer for the preparation by Buyer, at its sole expense
and risk, of pro-forma financial statements reflecting the financial
performance of the Properties for the most recent three (3) calendar
year(s). Buyer agrees that none of the information compiled for the
purpose of this limited audit shall be used for the purpose of due
diligence by Buyer or otherwise to assert any claim against Seller.
Seller shall have no responsibility whatever for the financial
statements so prepared by Buyer.
8. DUE DILIGENCE REVIEWS.
(a) The term "Defect" as used in this Section shall mean any of the
following:
(i) As of the Effective Date, Seller's ownership of a well
listed on Exhibit B hereto either, (A) entitles Seller to
receive a share of the oil, gas, and other hydrocarbons
produced from, or allocated to, such well that is less than the
share set forth on Exhibit B for such well in the columns
headed "Net Revenue Interest (NRI)" and "Overriding Royalty
Interest (ORI)", excepting any decreases caused by an increase
in the landowner's royalty payable to the Federal and State
Governments or pursuant to contractual obligations, including,
without limitation, sliding scale overriding royalties, which
are tied to amount of production, or as mandated by Federal and
State statutes or as promulgated in the respective Federal and
State Rules and Regulations; or, (B) causes Seller to bear a
share of the cost of operating such well greater than the share
set forth on Exhibit B for such well in the column headed
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<PAGE>
"Working Interest (WI)" (without a proportionate increase in
the share of production to which Seller is entitled from such
well);
(ii) Seller's ownership of a Property 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, or (C) a lien
under an operating agreement or similar agreement, to the
extent the same relates to expenses incurred that are not yet
due;
(iii) Seller's ownership of a Property is subject to a
preferential right to purchase, unless a waiver of such right
has been obtained with respect to the transaction contemplated
hereby or an appropriate tender of the applicable interest has
been made to the party holding such right and the period of
time required for such party to exercise such right has expired
without such party exercising such right;
(iv) Seller's ownership of a Property is subject to an
imperfection in title that, if asserted, would cause a Defect,
as defined in clause (i) above, to exist, and such imperfection
in title normally would not be waived by reasonable and prudent
persons engaged in the oil and gas business with knowledge of
all the facts and their legal bearing and would materially
impair or prevent Buyer from receiving payment from the
purchasers of production, and would prevent the economic
benefit Buyer could reasonably expect by acquiring the
Properties;
(v) Seller's ownership of a non-producing Property is subject
to an imperfection in title that, if asserted, would cause
Seller's ownership as shown on Exhibit A to be less; and such
imperfection in title normally would not be waived by
reasonable and prudent persons engaged in the oil and gas
business with knowledge of all the facts and their legal
bearing and would materially prevent the economic benefit Buyer
could reasonably expect by acquiring such Property.
(b) Buyer may conduct, to the extent it deems appropriate and at
its sole risk and cost, such examinations and investigations as it may
choose with respect to the Properties in order to determine whether
"Defects" exist. Unless waived, Buyer shall notify Seller in writing
of such Defects as soon as they are identified, but no later than ten
(10) days prior to the date upon which Closing is scheduled to occur
pursuant to Section 14. [and not as extended pursuant to 14.(i) or
14.(ii)] (hereinafter "Defect Notice Date"). Those Defects identified
in such notice to Seller are herein called "Asserted Defects". Such
notification shall include a description of the Asserted Defect, the
lease(s) described on Exhibit A affected by such Asserted Defect, the
well(s) listed on Exhibit B to which the Asserted Defect relates, and
all supporting documentation reasonably necessary fully to describe in
detail the basis for the Asserted Defect; and, for each property,
lease and applicable well, the size of any variance from "Net Revenue
Interest (NRI)", "Overriding Royalty Interest (ORI)", or "Working
Interest (WI)" set forth in Exhibit B that does or could result from
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 timely 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 also 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, if Seller
desires additional time to attempt to cure (including determining 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 with respect to any Asserted Defect, to
indemnify and hold Buyer harmless from and against any actual damages
or loss (but specifically excluding consequential damages, special
damages, or similar damages) Buyer may
7
<PAGE>
suffer as a result of a third party claim based on such Asserted
Defect; provided, unless Buyer consents, Seller may not so elect to
indemnify Buyer in lieu of curing such Asserted Defect(s) if the
amount attributable to such Asserted Defect(s) exceeds One Million
Dollars($1,000,000.00). If Seller elects to indemnify Buyer as to an
Asserted Defect, such Asserted Defect will be treated under this
Agreement as cured and, as to such indemnified Asserted Defect,
SELLER SHALL RELEASE, INDEMNIFY, DEFEND, AND HOLD HARMLESS BUYER FROM
AND AGAINST ANY AND ALL LOSS, COST, DAMAGE, EXPENSE, OR LIABILITY
WHATSOEVER, INCLUDING ATTORNEYS' FEES, ARISING OUT OF THE ASSERTED
DEFECT SELLER HAS ELECTED TO INDEMNIFY (EXCEPT ANY CAUSED SOLELY BY
THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF BUYER).
(c) Buyer shall have the right to make an environmental assessment
of the Properties during the period beginning on the date of execution
of this Agreement and ending on the Defect Notice Date. Subject to
the provisions regarding Buyer's rights to access under Section 7
hereof, 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 Buyer may
deem necessary or appropriate for the preparation of appropriate
engineering and other reports in relation to the Properties and their
physical and environmental condition. If Buyer proposes to undertake
an environmental assessment, Buyer's proposed plan, the consultants to
be used, and testing protocol must be approved by Seller before the
work may begin. Buyer agrees promptly to provide to Seller a copy of
the environmental assessment, including any reports, data, and
conclusions. Buyer shall keep all data and 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
ENVIRONMENTAL ASSESSMENT INCLUDING, BUT NOT LIMITED TO, INJURY TO OR
DEATH OF PERSONS OR DAMAGE TO PROPERTY OCCURRING IN, ON, OR ABOUT THE
PROPERTIES AS A RESULT OF SUCH ACTIVITIES (EXCEPT ANY SUCH INJURIES OR
DAMAGES CAUSED SOLELY BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
ANY MEMBER OF THE SELLER GROUP).
(d) 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.
9. ADVERSE ENVIRONMENTAL CONDITIONS.
Seller represents to Buyer that to the best of its knowledge there are
no environmental conditions, as hereinafter defined, existing as of
the date hereof which Seller has not disclosed to Buyer. Seller will
advise Buyer of any Condition that Seller becomes aware of from the
date hereof to the Closing Date.
(a) Buyer shall have until the Defect Notice Date to notify Seller
of any material adverse environmental condition of the Properties
which Buyer deems unacceptable and provide evidence of the condition
to Seller. An environmental condition is a material adverse
environmental condition ("Condition") only if the following criteria
are met:
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(i) The environmental condition would have been required to be
remediated on the Effective Date under the Environmental Laws;
and,
(ii) The total cost to remediate all environmental conditions
identified by Buyer affecting the Properties to the state
required by the Environmental Laws is reasonably estimated to
be at least $100,000.00.
(b) "Environmental Law" shall mean any federal, state, or local
law, rule, regulation, order, or ordinance in effect as of the
Effective Date of this Agreement pertaining to protecting the public
health, welfare, and the environment.
(c) At Closing, Seller may elect any of the following provided a
Condition exists:
(i) Decrease the Purchase Price by a mutually acceptable
amount reflecting Seller's proportionate share, based on its
working interest, of the cost reasonably estimated to remediate
a Condition affecting the Properties to such a state as
required by the Environmental Laws;
(ii) Remove the affected Properties from this Agreement and
adjust the Base Purchase Price by an amount mutually agreed to
by Seller and Buyer. If Buyer and Seller are unable to agree on
an amount, the value of Properties falling in Categories A and
B shall be determined as provided in Section 11.(a)(ii) using
the V/T = PVW/PVC equation and an appropriate adjustment will
be made using this value. The value of all affected Properties
falling in Category C shall be determined using the formula in
Section 11.(a)(iii) where F=Seller's net acres affected by the
Condition.
(iii) Remedy, or, if applicable, agree to indemnify, Buyer in
accordance with Section 8(b); the Condition, as provided below.
(d) If option (c)(i) above is chosen, Buyer shall be responsible
for any remediation and if the actual cost to remediate a Condition
exceeds the amount of the estimate, Buyer shall pay the additional
costs to remediate the Condition as required by applicable law.
(e) If option (c.) (iii). above is chosen, the following shall
govern the remediation:
(i) Seller shall be responsible for all negotiations and
contacts with federal, state, and local agencies and
authorities with regard to the Condition or remediation. Buyer
shall not make any independent contacts with any agency,
authority, or other third party with respect to the Condition
or remediation and will keep all information regarding the
Condition and remediation confidential, except in each instance
to the extent required by applicable law.
(ii) Seller shall remediate the Condition to the state agreed
upon by Seller and Buyer, but in no event will Seller be
required to remediate the Condition beyond the state required
by the Environmental Laws.
(iii) Buyer will grant and warrant access to the affected
Properties after Closing to Seller and third parties conducting
assessments or remediation, to the extent and as long as
necessary to conduct and complete the assessment or remediation
work, to remove equipment and facilities, and to perform any
other activities reasonably necessary in connection with
assessment or remediation.
(iv) Buyer will use its best efforts not to interfere with
Seller's ingress and egress or assessment or remediation
activities. Seller shall make reasonable
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efforts to perform the work so as to minimize disruption to
Buyer's business activities and to the Properties.
(v) Seller shall continue remediation of the Condition until
the first of the following occurs:
(1) The appropriate governmental authorities provide
written notice to Seller or Buyer that no further
remediation of the Condition is required;
(2) The parties agree that the Condition has been
remediated to the state required by the Environmental
Laws or as agreed by the parties.
Upon the occurrence of either (1) or (2) above, Seller
shall notify Buyer that remediation of the Condition is
complete and provide a copy of the notification
described in (1) above, if applicable. Upon delivery of
Seller's notice, Seller shall be released from all
liability and have no further obligations under any
provisions of this Agreement in connection with a
Condition.
(vi) Until Seller completes remediation of a Condition, Seller
and Buyer will each notify the other of any pending or
threatened claim, action, or proceeding by any authority or
private party that relates to or would affect the environmental
condition, the assessment, or the remediation of the affected
Properties.
(vii) After Buyer takes over as operator, and before Seller
has completed remediation of a Condition, if a leak, spill, or
discharge of any material or substance ("Occurrence") occurs on
the affected Properties, or any part of them, Buyer will
promptly notify Seller and act promptly to minimize the effects
of the Occurrence. If a spill, leak, or discharge occurs and
Seller determines that it may affect the area where Seller is
conducting remediation or assessment, Buyer will hire a
consultant (who must be acceptable to Seller) to assess the
effect of the Occurrence on the environmental condition of the
affected Properties, and the cost of Seller's remediation work
and the cost of the additional work required as the result of
the Occurrence. Unless the Occurrence was caused solely by
Seller, Buyer will be responsible for the incremental cost of
remediating the impact of the Occurrence. If Seller's
remediation is expanded to incorporate remediation of the
Occurrence, Buyer will promptly pay its share of costs and
expenses to Seller as the work is performed, within thirty (30)
days of receipt of invoices for the work (with supporting
documentation). Payments not made timely will bear interest at
a rate of twelve percent (12%) per annum or the maximum lawful
rate, whichever is less, compounded daily from the date of
Buyer's receipt of the invoice until paid.
If the cost of the additional work equals or exceeds the cost
to complete the remediation which would have been incurred but
for the Occurrence, Seller will pay Buyer the cost that would
have been incurred by Seller to complete the remediation but
for the Occurrence. As consideration for this payment, Buyer
will accept the environmental condition of the affected
Properties as they exist on the date of the payment, assume
full responsibility for remediating the affected Properties and
related off-site contamination in accordance with this
Agreement, and agrees to release, not to sue, indemnify, hold
harmless, and defend Seller as to claims and liabilities
arising from the Occurrence to the same extent as described in
Sections 17., 18., and 20.
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(viii) If Seller undertakes remediation as to any Properties
in which Seller's ownership was less than 100%, and provided
that the expense(s) incurred by Seller in such remediation are
fair and reasonable, Buyer will bill the other working interest
owners for their share of the remediation expenses. Regardless
of whether Buyer recoups any amount from the other working
interest owners, Buyer will refund to Seller, within sixty (60)
days of each Seller invoice, with documentation, any amounts
expended by Seller over the amount attributable to Seller's
former working interest share.
(ix) If Seller will assess or remediate the affected
Properties after Closing, the Assignment and Bill of Sale or
other recordable instrument will restate the rights and
obligations of this section.
10. DISPOSAL OF MATERIALS, SUBSTANCES, AND WASTES; COMPLIANCE WITH LAW.
Buyer will store, handle, transport, and dispose of or discharge all
materials, substances, and wastes from the Properties (including produced
water, drilling fluids, NORM, and other wastes), whether present before or
after the Effective Date, in accordance with applicable local, state, and
federal laws and regulations. Buyer will keep records of the types, amounts,
and location of materials, substances, and wastes that are stored,
transported, handled, discharged, released, or disposed of onsite and
offsite. When any lease terminates, an interest in which has been assigned
under this Agreement, Buyer will undertake additional testing, assessment,
closure, reporting, or remedial action with respect to the Properties
affected by the termination as is necessary to satisfy all local, state, or
federal requirements in effect at that time and necessary to restore the
Properties. Buyer shall assume full responsibility for the operations
conducted pursuant to this Section 10. and agrees to release, not to sue,
indemnify, hold harmless, and defend Seller as to all claims and liabilities
arising therefrom to the same extent as described in Sections 17., 18., and
20.
11. CERTAIN PRICE ADJUSTMENTS TO THE BASE PURCHASE PRICE.
(a) If Buyer presents Asserted Defects to Seller as a part of the
due diligence reviews provided for in Section 8. above, and if Seller
is unable or unwilling to cure such Asserted Defects prior to Closing,
or if Buyer has elected to treat a Property affected by a casualty
loss pursuant to Section 22. as if it were a Property affected by an
Asserted Defect, then an appropriate adjustment to the Base Purchase
Price to account for such Asserted Defects shall be made as follows:
(i) Buyer and Seller shall attempt to agree upon an
appropriate adjustment to the Base Purchase Price to account
for an Asserted Defect which Seller either is unable or
unwilling to cure prior to Closing, and those Properties, or
any part thereof, associated with the Asserted Defect shall be
excluded from this Agreement and any rights of Buyer hereunder
to such Properties shall terminate.
(ii) If Buyer and Seller are unable to agree upon an
appropriate adjustment with respect to an Asserted Defect which
affects Seller's interest in any Property falling in either
Category A or B as shown on Exhibit E, adjustments shall be
made as follows:
Determine the value of all wells contained in the Unit in which
the Property affected by the Asserted Defect falls by using the
following equation and solve for V. "Unit" as used herein shall
mean a drilling and spacing unit as determined by order or rule
of the Wyoming Oil & Gas Conservation Commission or as
otherwise permitted by law, or the Participating Area affected
by the Asserted Defect.
V/T = PVW/PVC
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T = Total amount ($) allocated to category containing
Unit as shown on Exhibit E.
PVW = BFIT PV @ 10% (Future net income before income
taxes discounted at ten percent (10%)) of total proved reserves
in all wells in Unit as contained in the Ryder-Scott Report.
PVC = BFIT PV @ 10% (Future net income before income
taxes discounted at ten percent (10%)) of total proved reserves
in all wells in Category as contained in the Ryder-Scott
Report.
The Base Purchase Price shall be adjusted by the absolute value
of an amount using the following formula:
Adjustment = V X (1-[B/C])
V = Value of wells as determined above.
B = Correct net revenue interest for all wells in Unit
including any overriding royalty interest.
C = Net revenue interest, including any overriding
royalty interest, as shown on Exhibit B in all wells in Unit.
(iii) If an Asserted Defect affects Seller's interest in any
Property falling in Category C and Buyer and Seller cannot
mutually agree on an appropriate adjustment to the Base
Purchase Price, adjustments shall be made using the following
formula:
Adjustment = T X F/25,000
T = Total amount ($) allocated to Category C as shown on
Exhibit E.
F = Seller's net acres affected by uncured Asserted
Defect.
(b) If it is determined that Seller's interest in a well listed on
Exhibit B is greater or lesser than the interest shown for such well
under the columns headed "Net Revenue Interest (NRI)" and "Overriding
Royalty Interest (ORI)" on Exhibit B, then Seller or Buyer may propose
an increase or decrease, as applicable, in the Base Purchase Price, in
which case such increase or decrease shall be handled in the same
manner as provided above with respect to adjustments for Asserted
Defects; provided that the party making such determination shall
notify the other party of such adjustment on or before the Defect
Notice Date. Buyer shall have an affirmative obligation to disclose
to Seller circumstances discovered by Buyer in its due diligence
review that could result in an increase in the Base Purchase Price
hereunder. No increase in the Base Purchase Price will result from
any royalty reduction resulting under the Federal Royalty Reduction
Program.
(c) Notwithstanding the adjustments to be made pursuant to
subsections 11.(a) and 11.(b) above, if such adjustments do not exceed
$250,000 in the aggregate, no such adjustments shall be made and none
of the Properties that would otherwise have been excluded pursuant to
subsection 11.(a) above shall be excluded. If the adjustments to be
made pursuant to subsections 11.(a) and 11.(b) above, do exceed
$250,000.00, the Base Purchase Price shall be adjusted according
thereto.
12. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. Buyer's obligations
at Closing under this Agreement are subject to each of the following
conditions:
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(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, except as to changes specifically contemplated by this
Agreement or consented to by Buyer in writing.
(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 in writing.
(c) If applicable, Buyer and Seller shall have received approval
from the FTC under the HSR Act of the transaction contemplated by this
Agreement, or shall have received notification that the waiting period
under such act has been terminated, or the waiting period under such
act shall have expired.
(d) The Base Purchase Price increase or decrease resulting from the
adjustments to be made pursuant to subsections 11.(a) and 11.(b) does
not exceed twenty percent (20%) of the Base Purchase Price.
(e) On the Closing Date, no material suit, action, or other
proceeding against Buyer shall be pending before any court or
governmental agency seeking to restrain, prohibit, or obtain damages
or other relief in connection with the consummation of the transaction
contemplated by this Agreement.
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, this Agreement may be terminated at the
option of Buyer. If Buyer thus terminates this Agreement, the Deposit shall
be returned to Buyer and the parties shall have no further obligations to one
another hereunder (other than the indemnifications contained in Sections
7.(a)(iii), 8.(c), and 21. hereof, which shall survive such termination).
Notwithstanding the foregoing, if a condition set forth above, other than
condition 12. (c) or 12.(d), 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 some, 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 process set forth in Section 11. above.
13. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS. Seller's obligations
at Closing under this Agreement are subject to 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, 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
from the FTC under the HSR Act of the transaction contemplated by this
Agreement, or shall have received notification that the waiting period
under such act has been terminated, or the waiting period under such
act shall have expired.
(d) The Base Purchase Price reduction or increase resulting from
the adjustments to be made pursuant to subsections 11.(a) and 11.(b)
does not exceed twenty percent (20%) of the Base Purchase Price.
(e) On the Closing Date, no material suit, action, or other
proceeding against Seller shall be pending before any court or
governmental agency seeking to restrain,
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prohibit, or obtain damages or other relief in connection with the
consummation of the transaction contemplated by this Agreement.
If any such condition precedent to the obligations of Seller under this
Agreement is not met as of the Closing Date, this Agreement may be terminated
at the option of Seller. If Seller terminates this Agreement because of
Buyer's failure to fulfill condition 13.(a) or 13.(b), the Deposit shall not
be returned to Buyer. If Seller terminates this Agreement because of
conditions 13.(c), 13.(d), or 13.(e), and Buyer is not in material default
under this Agreement, the Deposit shall be returned to Buyer. Thereafter,
Seller and Buyer shall have no further obligations to one another hereunder
(other than the indemnifications contained in Section 7.(a)(iii), 8.(c), and
21. hereof, which shall survive such termination).
14. THE CLOSING. If the conditions referred to in Section 12. of this
Agreement (the "Conditions Precedent to Buyer's Obligations") and Section 13.
of this Agreement (the "Conditions Precedent to Sellers Obligations") have
been satisfied or waived, the consummation of the transaction contemplated
hereby ("Closing") shall take place in the offices of Seller, at 201 Main
Street, Fort Worth, Texas 76102, on May 14, 1998, at 10:00 a.m. Central
Standard Time, or at such other date and time (i) as the Buyer and Seller may
agree or, (ii) to which Seller may postpone the Closing pursuant to Section
8.(b) hereof (such date and time herein called the "Closing Date"). It is
provided however, that Seller shall not be permitted to extend the Closing
Date pursuant to Section 8(b) beyond July 14, 1998, unless Buyer consents.
At the Closing:
(a) Seller shall:
(i) Execute, acknowledge, and deliver to Buyer a conveyance
of the Properties (the "Assignment and Bill of Sale"), which
shall include a warranty of title as against claims arising by
through or under Seller, and not otherwise, and in the form
attached hereto as Exhibit C (with Exhibits A and B attached
thereto), effective as of seven o'clock a.m., (7:00 a.m.)
Mountain Standard Time on June 1, 1998, (herein called the
"Effective Date");
(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) Execute and deliver to Buyer letters in lieu of transfer
orders (or similar documentation), in form acceptable to both
parties;
(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);
(v) With respect to Properties operated by Seller and to the
extent available, deliver to Buyer all requisite consents of
non-operators under any operating agreement naming Buyer as
successor operator; and copies of such requests for consent
which were sent but not obtained prior to Closing;
(vi) Deliver to Buyer resignations of operator and/or Changes
of Operator/Owner Forms properly executed on behalf of Seller
for all Seller-operated wells acquired by Buyer; and, any other
forms required by governmental authorities having jurisdiction
which must be initiated by Seller to change the operator from
Seller to Buyer as of the Effective Date; and,
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(vii) Certificates in form and substance satisfactory to
Seller, effective as of the Closing Date and executed by
Seller's duly authorized officer, partner, or owner, as
appropriate, to the effect that (1) Seller has all requisite
corporate, partnership, or other power and authority to sell
the Properties on the terms of this Agreement and to perform
its other obligations under this Agreement and has fulfilled
all corporate, partnership, or other prerequisites to closing
this transaction, and (2) each individual executing the closing
documents has the authority to act on behalf of Seller.
(viii) Deliver possession of the Properties to Buyer as of the
Effective Date.
(b) 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 payable in United States dollars equal to the amount as
set forth on the Closing Settlement Statement as provided for
in Section 16.(c) below;
(ii) Deliver to Seller, except to the extent waived by Seller:
(A) Evidence of compliance with the requirements of all laws,
rules, and regulations relating to the transfer of operatorship from
Seller to Buyer;
(B) Evidence of Buyer's bond coverage as required by all laws,
rules, and regulations, or that a cash deposit, certificate of
deposit, letter of credit, or some other permitted financial security
has been accepted by the proper regulatory agency for each well
requiring such coverage;
(C) Evidence of compliance with the requirements of all laws,
rules, and regulations that Buyer is qualified to succeed to Seller's
interest in the Properties; and,
(D) Certificates in form and substance satisfactory to Seller,
effective as of the Closing Date and executed by Buyer's duly
authorized officer, partner, or owner, as appropriate, to the effect
that (1) Buyer has all requisite corporate, partnership, or other
power and authority to purchase the Properties on the terms of this
Agreement and to perform its other obligations under this Agreement
and has fulfilled all corporate, partnership, or other prerequisites
to closing this transaction, and (2) each individual executing the
closing documents has the authority to act on behalf of Buyer.
(iii) Execute such forms and take such other steps as Seller may
reasonably require to (A) succeed Seller with respect to the
Properties under the rules and regulations of applicable authorities
and (B) assume any and all liabilities of Seller with respect to the
wells described on Exhibit B; and,
(iv) Take possession of the Properties.
15. AFTER CLOSING. Within thirty (30) days after Closing, Seller shall
make available for delivery to Buyer at Seller's offices 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 breaching, or risking a breach of, confidentiality
agreements with other parties. It is expressly understood that Buyer is not
entitled to acquire any records except as expressly provided in Section 1.
hereof. Seller may retain such files, or copies thereof, or such information
as it deems necessary for all purposes, including but not limited to,
preparing a Final Settlement Statement as
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provided in Section 16., or for purposes of filing tax returns covering the
Properties. Any files or materials retained by Seller after Closing pursuant
hereto, shall be sent to Buyer as soon as reasonably practicable after final
payment is made in accordance with the Final Settlement Statement. Seller
may, at its own expense, have access to and make copies of all, or any part
thereof, of the files and records provided Buyer hereunder at reasonable
times and upon reasonable notice during regular business hours for as long as
the Properties remain in effect.
As to those wells which Seller is disbursing proceeds of production, Seller
shall continue to collect proceeds of production as long as it remains
operator 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 its
successor as operator.
Provided Buyer succeeds Seller as operator, Buyer shall become responsible
for all disbursements of proceeds of production and such disbursement
activities shall be included in the matters that Buyer assumes and with
respect to which Buyer indemnifies Seller under Section 17 below.
SELLER GIVES NO ASSURANCE HEREUNDER THAT BUYER SHALL SUCCEED SELLER AS
OPERATOR OF ANY PROPERTY WHERE PARTIES OTHER THAN SELLER OWN INTERESTS IN
SUCH PROPERTY. It is understood that in most (if not all) of the operating
agreements affecting the Properties, Seller does not have the right to
transfer operations of the leasehold interests subject thereto to Buyer.
However, Seller shall use its best efforts to secure consent from all
non-operators naming Buyer as Operator under such operating agreements prior
to Closing, to be effective on the Closing Date and provided Closing takes
place. After Closing, Buyer shall use its best efforts to comply with the
terms of any operating agreements to name a successor operator thereunder for
which Seller was unable to obtain prior to Closing. Upon obtaining consent
from non-operators naming Buyer as successor operator, Seller and Buyer
promptly shall file all forms required by any governmental agency having
authority, to change the operator from Seller to Buyer.
Seller shall operate the Seller-operated Properties until the Effective Date
and thereafter, if necessary, until such time as provided under the
applicable operating agreement, plan of unitization, or law requires. As
soon as practicable thereafter, operations shall be turned over to, and
become the responsibility of, Seller's successor as Operator To the extent
Seller so operates any Property after the Effective Date, its obligations to
Buyer with respect to such operations shall be no greater than those that it
would have to a non-operator under the applicable operating agreement. In
the absence of an operating agreement, those terms and provisions contained
in the AAPL 610 (1382 Revision) form Operating Agreement shall apply. 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.
As to all wells acquired by Buyer hereunder which Seller continues to operate
on behalf of Buyer and for Buyer's account after the Effective Date because a
successor operator has not been approved by the requisite governmental
authority, or consent of non-operators has not been obtained, by mutual
agreement or otherwise, Seller will be paid the producing well overhead rates
shown in the operating agreement applicable to such wells and if there is no
such established rate, Buyer shall pay Seller for its proportionate share
thereof based upon the rate of five hundred dollars ($500.00) per month, or
any part thereof, for each well.
16. CERTAIN ACCOUNTING ADJUSTMENTS TO THE PURCHASE PRICE.
(a) Appropriate adjustments to the Purchase Price shall be made
between Buyer and Seller to reflect the following:
(i) All rights to proceeds, receipts, reimbursements, credits,
and income attributable to the Properties and accruing before
the Effective Time, as
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defined below, shall be the property of Seller. All proceeds,
receipts, credits, income, and charges attributable to the
Properties acquired by Buyer hereunder and accruing on and
after the Effective Time shall be the property of Buyer. As
to Properties operated by Seller and purchased by Buyer
hereunder and concerning accounts held in suspense, Seller
will pay in full the royalty accounts that were suspended
because the amount due is less than the statutory or
contractual minimum for payment. As to all other suspended
accounts, if any, Seller shall transfer to its successor as
operator all monies held in a suspended account which were
received for production produced from or allocated to the
Properties on and after the Effective Time. As to proceeds
received for production produced from or allocated to the
Properties before the Effective Time and held in a suspense
account at Buyer's option, Seller may either: 1) Retain the
suspended amounts after Closing and, upon proof satisfactory to
Seller, release the money to the proper party; or, 2) Transfer
the suspended amounts to Buyer for future disbursement. Once
suspended amounts have been transferred to Buyer for future
disbursement, Buyer agrees to be responsible for disbursing the
suspended monies to the proper parties and shall release,
indemnify, defend, and hold harmless 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), arising out of or
in any way connected with making such disbursements, or failure
to make a disbursement.
(ii) Seller shall be responsible for and pay (A) all charges
and invoices for costs and expenses (including, without
limitation, lease maintenance payments, drilling and operating
expenses, capital expenditures, and overhead charges) accruing
before the Effective Time and attributable to the Properties
and (B) necessary royalty disbursements of proceeds realized
from the sale of production produced from and allocated to the
Properties before the Effective Time. Buyer shall be
responsible for payment of (C) all charges and invoices for
costs and expenses (including, without limitation, lease
maintenance payments, drilling and operating expenses, capital
expenditures, and overhead charges) accruing on and after the
Effective Time and attributable to the Properties acquired
hereunder and (D) necessary royalty disbursements of proceeds
realized from the sale of production produced from and
allocated to the Properties acquired hereunder on and after the
Effective Time. All payments made by Seller for items under
(C) above for which Buyer is responsible shall be reimbursed by
Buyer. Seller shall reimburse Buyer for all monies received by
Seller from non-operators as payment of Seller's invoices for
the operations of the wells described on Exhibit B for periods
on and after the Effective Time.
(iii) Seller will be credited with an amount equal to the
simple interest accrued on the Adjusted Purchase Price for the
period beginning with the Closing Date and continuing through
the Effective Date at seven percent (7%) simple annual interest
calculated as follows:
INTEREST = Adjusted Purchase Price x number of days from
closing to Effective Date x 7% divided by 365;
The amount of interest credited to the Buyer will not exceed
$250,000.00 regardless of the above calculation, and further
such credit shall be only be applied if Closing occurs before
the Effective Date.
(b) In making such adjustments, the Parties agree that:
(i) Seller will cause such oil storage facilities which store
oil produced from the Properties to be gauged or strapped as of
7:00 a.m. Mountain Standard
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Time on the Effective Date, herein also referred to as the
Effective Time. Seller also has caused the gas production
meter charts (or if such do not exist, the sales meter charts)
on the pipelines transporting gas production from the
Properties to be read as of the Effective Time. The results of
such gauging, strapping, or chart reading are conclusive and
shall be made available to Buyer. The production in such
storage facilities or through such meters on the gas pipelines
as of the Effective Time shall be owned by Seller; and,
thereafter, production placed in such oil storage facilities
and gas production passing through the aforesaid meters on the
pipelines shall be owned by Buyer, insofar as to the interests
subject hereto as of Closing.
(ii) All ad valorem, severance, production and similar taxes
applicable to the Properties shall be prorated between Seller
and Buyer as of the Effective Date. Therefore, all such taxes
for 1997 and prior years and for the portion of 1998 prior to
the Effective Date levied against the Properties shall be borne
and paid by Seller; and, all ad valorem and similar taxes for
the remainder of 1998 and thereafter levied against the
Properties shall be borne and paid by Buyer, irrespective if
the amount levied is based on the previous year's production or
any other basis.
(iii) Where Seller owns one-hundred percent (100%) of the
working interest under a well and there is no overhead charge
for determining the overhead expense to be charged to Buyer on
and after the Effective Date, the overhead charge shall be
deemed to be five hundred dollars ($500.00) per month, or any
part thereof, per well.
(iv) Each party shall be responsible for its own income taxes.
(c) With respect to matters that can be determined as of Closing,
Seller shall prepare, in accordance with the provisions of this
Agreement and with generally accepted accounting principles, a
statement (the "Closing Settlement Statement") setting forth each
adjustment to the Base Purchase Price to the best of Seller's
knowledge, whether upward or downward, as may be required in
accordance herewith. Seller shall submit to Buyer the Closing
Settlement Statement no later than five (5) days prior to the Closing
Date and shall afford Buyer access to Seller's records pertaining to
the computation of the Closing Settlement Statement. Prior to the
Closing, Buyer and Seller will agree upon the adjustments stated
therein to be made to the Purchase Price, or will specify the
adjustments to which there are differences and the adjustments to be
omitted therefrom. Only the agreed upon adjustments shall be taken
into account in computing the adjustments to be made to the Purchase
Price at Closing. Final adjustments to the Purchase Price to be made
hereunder shall be made within one hundred-twenty (120) days after the
Closing Date for all matters other than Asserted Defects according to
(d) hereinbelow as follows:
(d) As soon as practicable after the Closing, and in no event later
than sixty (60) days following the Closing Date, Seller shall deliver
to Buyer, in accordance with the provisions of this Agreement and with
generally accepted accounting principles, a statement ("Final
Settlement Statement") setting forth each adjustment under this
Agreement which was not determined as of the Closing. Within sixty
(60) days after Buyer's receiving the Final Settlement Statement, the
Parties shall agree upon the adjustments and payments stated in such
Final Settlement Statement, and the net of such adjustments and
payments shall be paid in cash to the appropriate Party by the other
Party within five (5) days following agreement as to the Final
Settlement Statement. If the Parties fail to reach agreement as to
all adjustment within said sixty (60) day period, the net amount of
all undisputed adjustments shall be paid and any remaining disputed
items shall be submitted for determination by a nationally
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recognized firm of public accountants selected by the parties, whose
decision shall be final and binding. The parties shall share equally
the costs of such determination.
17. ASSUMPTION AND INDEMNIFICATION. UPON DELIVERY TO AND ACCEPTANCE BY
BUYER OF THE ASSIGNMENT AND BILL OF SALE, BUYER SHALL BE DEEMED TO HAVE
ASSUMED, TO PAY AND PERFORM TIMELY, ALL DUTIES, EXPENSES, OBLIGATIONS,
LOSSES, HAZARDS AND LIABILITIES RELATING TO THE OWNERSHIP OR OPERATION OF THE
PROPERTIES ARISING ON AND AFTER THE EFFECTIVE DATE (INCLUDING, WITHOUT
LIMITATION, THOSE ARISING UNDER OR BY VIRTUE OF ANY LEASE, CONTRACT,
AGREEMENTS, DOCUMENT, PERMIT OR RULE, OR DELAY IN OBTAINING APPROVAL OF
FEDERAL OR STATE ASSIGNMENTS); AND, 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 ON AND 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 ON AND
AFTER THE EFFECTIVE DATE SHALL BE DEEMED TO INCLUDE ALL MATTERS ARISING OUT
OF THE STATUS AND THE CONDITION OF THE PROPERTIES ON THE EFFECTIVE DATE
INCLUDING, WITHOUT LIMITATION, ALL OBLIGATIONS TO PROPERLY PLUG AND ABANDON
WELLS LOCATED ON THE PROPERTIES, TO RESTORE THE SURFACE OF THE PROPERTIES TO
AS NEAR ITS ORIGINAL CONDITION AS PRACTICABLE AND TO COMPLY WITH, OR BRING
THE PROPERTIES INTO COMPLIANCE WITH, APPLICABLE ENVIRONMENTAL LAWS AND
REGULATIONS, INCLUDING ALL LIABILITY AND EXPENSE FOR ANY RESTORATION,
REMEDIATION, CLEAN-UP, DISPOSAL OF WASTE, OR REMOVAL THAT MAY BE INCURRED AS
A RESULT OF THE EXISTENCE OR DISCOVERY OF NATURALLY OCCURRING RADIOACTIVE
MATERIALS, OR OTHER HAZARDOUS OR DELETERIOUS SUBSTANCES IN, ON, UNDER OR
ASSOCIATED WITH THE PROPERTIES, REGARDLESS OF WHEN THE EVENTS OCCURRED THAT
GIVE RISE TO SUCH CONDITION, AND THE ABOVE PROVIDED FOR ASSUMPTIONS AND
INDEMNIFICATIONS BY BUYER SHALL EXPRESSLY COVER AND INCLUDE SUCH MATTERS. THE
FOREGOING ASSUMPTIONS AND INDEMNIFICATIONS SHALL APPLY WHETHER OR NOT SUCH
DUTIES, OBLIGATIONS, OR LIABILITIES, OR SUCH CLAIMS, ACTIONS, CAUSES OF
ACTION, LIABILITIES, DAMAGES, LOSSES, COSTS, OR EXPENSES ARISE OUT OF (i)
NEGLIGENCE (INCLUDING SOLE NEGLIGENCE, SIMPLE NEGLIGENCE, CONCURRENT
NEGLIGENCE, ACTIVE OR PASSIVE NEGLIGENCE, OR OTHERWISE, BUT EXPRESSLY NOT
INCLUDING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) OF SELLER GROUP OR ANY
OTHER INDEMNIFIED PARTY, OR (ii) STRICT LIABILITY.
18. ENVIRONMENTAL ASSESSMENT AND INDEMNIFICATION BY BUYER. BUYER
EXPRESSLY ACKNOWLEDGES THAT IT HAS MADE AN ENVIRONMENTAL ASSESSMENT OF THE
PROPERTIES, OR WILL BE GIVEN THE OPPORTUNITY TO DO SO SUBJECT TO THE TERMS OF
THIS AGREEMENT. BUYER HEREBY AGREES TO ASSUME THE RISKS THAT THE PROPERTIES
MAY CONTAIN WASTE MATERIALS OR HAZARDOUS SUBSTANCES, AND THAT ADVERSE
PHYSICAL CONDITIONS, INCLUDING BUT NOT LIMITED TO THE PRESENCE OF WASTE
MATERIALS OR HAZARDOUS SUBSTANCES OR THE PRESENCE OF UNKNOWN ABANDONED OIL
AND GAS WELLS, WATER WELLS, SUMPS AND PIPELINES, MAY EXIST IN, ON, OR UNDER
THE PROPERTIES AS OF THE EFFECTIVE DATE, ALL RESPONSIBILITY AND LIABILITY
RELATED TO ALL SUCH CONDITIONS, WHETHER KNOWN OR UNKNOWN, WILL BE TRANSFERRED
FROM SELLER TO BUYER. BUYER ASSUMES FULL RESPONSIBILITY FOR, AND AGREES TO
INDEMNIFY, HOLD HARMLESS AND DEFEND SELLER FROM AND AGAINST ALL
19
<PAGE>
LOSS, LIABILITY, CLAIMS, FINES, EXPENSES, COSTS (INCLUDING ATTORNEYS' FEES
AND EXPENSES) AND CAUSES OF ACTION CAUSED BY OR ARISING OUT OF ANY FEDERAL,
STATE OR LOCAL LAWS, RULES, ORDERS AND REGULATIONS APPLICABLE TO ANY
NATURALLY OCCURRING RADIOACTIVE MATERIALS, WASTE MATERIAL OR HAZARDOUS
SUBSTANCES ON OR ASSOCIATED WITH THE PROPERTIES OR THE PRESENCE, DISPOSAL,
RELEASE OR THREATENED RELEASE OF ALL NATURALLY OCCURRING RADIOACTIVE
MATERIALS, WASTE MATERIAL OR HAZARDOUS SUBSTANCES FROM THE PROPERTIES INTO
THE ATMOSPHERE OR INTO OR UPON LAND OR ANY WATER COURSE OR BODY OF WATER,
INCLUDING GROUND WATER, WHETHER OR NOT ATTRIBUTABLE TO SELLER'S ACTIVITIES OR
THE ACTIVITIES OF THIRD PARTIES (REGARDLESS OF WHETHER OR NOT SELLER WAS OR
IS AWARE OF SUCH ACTIVITIES) PRIOR TO, DURING OR AFTER THE PERIOD OF SELLER'S
OWNERSHIP OF THE PROPERTIES. THIS INDEMNIFICATION AND ASSUMPTION SHALL ALSO
APPLY TO LIABILITY FOR VOLUNTARY ENVIRONMENTAL RESPONSE ACTIONS UNDERTAKEN
PURSUANT TO THE COMPREHENSIVE ENVIRONMENTAL RESPONSE COMPENSATION AND
LIABILITY ACT (CERCLA) OR ANY OTHER FEDERAL, STATE OR LOCAL LAW.
19. DISCLAIMER OF WARRANTIES. THE PROPERTIES SHALL BE CONVEYED
PURSUANT HERETO WITHOUT ANY WARRANTY OR REPRESENTATION WHATSOEVER, WHETHER
EXPRESS, IMPLIED OR STATUTORY AS TO, DESCRIPTION, 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, OR
OTHERWISE. BUYER SHALL HAVE INSPECTED, OR WAIVED (AND AS OF THE DEFECT NOTICE
DATE 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 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 NOR 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.
20. BUYER'S COVENANT NOT TO SUE SELLER GROUP. Except to enforce the
provisions of this Agreement or the responsibilities and liabilities of
Seller for claims, costs and expenses with respect
20
<PAGE>
to the Properties prior to the Effective Date according to Section 17., Buyer
covenants not to sue Seller Group with regard to any claim or liability
relating to the Properties, or this transaction, regardless of when or how
the claim or liability arose or arises or whether the claim or liability was
foreseeable or unforeseeable. BUYER'S COVENANT NOT TO SUE SELLER GROUP
INCLUDES CLAIMS AND LIABILITIES RESULTING IN ANY WAY FROM THE NEGLIGENCE OR
STRICT LIABILITY OF SELLER GROUP, WHETHER THE NEGLIGENCE OR STRICT LIABILITY
IS ACTIVE, PASSIVE, JOINT, CONCURRENT OR SOLE.
21. 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.
22. CASUALTY LOSS. If the Properties are damaged by fire or other
casualty prior to the Closing, this Agreement shall remain in full force and
effect, and (unless Buyer and Seller shall otherwise agree) in such event as
to each such damaged Property that Seller, in its sole discretion, elects not
to repair, Buyer either may treat such Property as if it had an Asserted
Defect or elect not to adjust the Purchase Price therefor. If Buyer elects
hereunder to treat the damaged Property as if it had an Asserted Defect, the
procedure provided for in Section 11. shall apply to such Property, 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 Property, and if Seller is entitled to any claims
under an insurance policy with respect to such damage, Seller shall either
collect and pay over, or assign, such insurance claims to Buyer. Buyer shall
then take title to such Property without reduction of the Purchase Price. If
Seller elects to repair a damaged Property, all rights to insurance proceeds
and claims against third parties related thereto shall belong to Seller.
23. 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 by recognized commercial
courier or delivery service (which provides a receipt), by facsimile (with
receipt acknowledged), or by registered or certified mail (postage prepaid),
at the following addresses:
If to Buyer: Continental Resources, Inc.
P. O. Box 1032
Enid, Oklahoma 73702
Attn: Land Manager
Fax No. (405) 548-5182
If to Seller: Bass Enterprises Production Co.
210 Main Street
Fort Worth, Texas 76102
Attn: W. Frank McCreight
Fax No. (817) 390-8893
All such notices and communications shall be considered delivered on the date
of receipt. Buyer or Seller may specify as its proper address any other
address within the continental United States by giving notice to the other
party, in the manner provided in this Section.
24. SURVIVAL OF PROVISIONS. All representations, warranties, and
indemnifications made herein, except as to any warranty of title by Seller,
shall survive the Closing and the delivery of the
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Assignment and Bill of Sale. All obligations hereunder not satisfied at
Closing shall survive Closing and delivery of the Assignment and Bill of Sale
to the extent the Parties intend for such obligations to be satisfied after
Closing. Buyer shall have until the Defect Notice Date in which to satisfy
itself as! to the quantity and quality of Seller's title to the Properties.
25. MISCELLANEOUS MATTERS.
(a) FURTHER ASSURANCES. 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 further acts and things as may be reasonably necessary more
fully and effectively to grant, convey, and assign the Properties to
Buyer.
(b) ASSIGNABILITY. Except as provided below, 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.
(c) GAS BALANCES. Seller represents that there are no gas
imbalances or make-up obligations affecting or relating to any of the
properties.
(d) WAIVER AND REPRESENTATION: 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 Twenty Five Million Dollars ($25,000,000.00) 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) CONFIDENTIALITY AGREEMENT. Until Closing, 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) PRIOR ENTIRE UNDERSTANDING/HEADINGS/GENDER. 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 above with respect
to any Confidentiality Agreement. 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) AMENDMENTS. This Agreement may be amended, modified,
supplemented, restated, or discharged (and provisions hereof may be
waived) only by an instrument executed by both Parties.
(h) ASSOCIATED EXPENSES. Each party shall bear and pay all
expenses it incurred and that are associated with the transaction
contemplated by this Agreement. Payment of recording fees, filing
fees, documentary stamp taxes, all sales taxes (if any, plus penalty
and interest) and any other fees and taxes imposed on the Properties
22
<PAGE>
on and after the Effective Date, excluding Seller's income taxes,
shall be paid by Buyer.
(i) SUCCESSORS AND ASSIGNS. This Agreement shall be binding on the
parties hereto and their respective heirs, successors,
representatives, and assigns.
(j) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of
which shall constitute one (1) and the same instrument. It shall not
be necessary for both parties to sign the same counterpart.
(k) ENFORCEABILITY. 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) PUBLICITY. 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.
(m) USE OF SELLER'S NAME. Buyer agrees that, as soon as
practicable after the Closing, it shall remove or cause to be removed
the names and signs used by Seller, and all variations and derivatives
thereof and logos relating thereto from the Properties and shall not
thereafter make any use whatsoever of such names, signs, and logos.
After Closing and as to those Properties Buyer has taken over as
operator, Seller reserves the right of access to confirm that Buyer
has removed Seller's name, signs, and logos. If Seller is forced to
remove its name, signs, and logos because Buyer has failed to do so,
Seller shall charge its costs to Buyer and Buyer shall pay Seller's
invoice within fifteen (15) days of receipt.
(n) SEVERABILITY. If any term or provision of this Agreement is
determined to be invalid, illegal, or incapable of being enforced by
any rule of law or public policy, all other conditions and provisions
of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any material fashion to either
Buyer or Seller. Upon such determination that any term or other
provision is invalid, illegal, or incapable of being enforced, Buyer
and Seller shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the Parties as closely as possible
in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the extent possible.
(o) RESERVATION OF CLAIMS. Seller reserves all rights to claims,
demands, cause of action, and lawsuits concerning the Properties
against third parties that accrued before the Effective Date, whether
discovered before or after the Effective Date, excluding any rights or
claims associated with gas imbalances.
(p) DUTY TO DEFEND. Where a party ("indemnitor") has agreed to
indemnify, defend, and hold the other party ("indemnitee") harmless
under this Agreement the indemnitee, at its sole option if it is the
sole defendant, may elect to (a) manage its
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<PAGE>
own defense, in which event the indemnitor will reimburse the
indemnitee for all attorney's fees, court, and other costs reasonably
incurred in defending a claim, upon delivery to the indemnitor of
invoices for such expenses; or (b) allow the indemnitor to be
responsible for all aspects of defense. If both parties are
defendants in a claim, they shall reasonably endeavor to arrange for
joint defense to minimize defense costs, but failure to reach such
agreement shall in no event eliminate or limit any indemnity
obligations hereunder.
(q) EXHIBITS. All exhibits referenced herein and attached hereto
are by reference incorporated into this Agreement.
IN WITNESS WHEREOF, this Agreement is executed by the parties hereto on
the date set forth above, but effective as of the Effective Date.
SELLERS
BASS ENTERPRISES PRODUCTION CO.
By: /s/ W. FRANK MCCREIGHT
------------------------------------------
W. Frank McCreight
Vice President
PERRY R. BASS, INC.,
SID R. BASS, INC.,
LEE M. BASS, INC.,
KEYSTONE, INC.,
THRU LINE INC.
By: /s/ W. FRANK MCCREIGHT
------------------------------------------
W. Frank McCreight
Vice President of all named corporations
GOLIAD PARTNERS, L.P.
By its Managing Partners
PRB-GP, Inc.
LMB-GP, Inc.
WPH-GP, Inc.
By: /s/ W. FRANK MCCREIGHT
------------------------------------------
W. Frank McCreight
Vice President of all named corporations
THE BASS MANAGEMENT TRUST
By: /s/ PERRY R. BASS
------------------------------------------
Perry R. Bass, Trustee
SID R. BASS, MANAGEMENT TRUST
By: /s/ SID R. BASS
------------------------------------------
Sid R. Bass, Trustee
24
<PAGE>
By: /s/ LEE M. BASS
------------------------------------------
Lee M. Bass
D W GENPAR, INC.
By: /s/ W. FRANK MCCREIGHT
------------------------------------------
W. Frank McCreight
Vice President
W D. PARTNERS, L. P.
By DW Genpar, Inc., General Partner
By: /s/ W. FRANK MCCREIGHT
------------------------------------------
W. Frank McCreight
Vice President
WPH-GP, INC.
By: /s/ W. FRANK MCCREIGHT
------------------------------------------
W. Frank McCreight
Vice President
WORLAND ASSOCIATES, Texas General Partnership
By: Sid R. Bass, Inc. Managing Partner
By: /s/ W. FRANK MCCREIGHT
------------------------------------------
W. Frank McCreight
Vice President
WORLAND ASSOCIATES II
By: Sid R. Bass, Inc. Managing Partner
By: /s/ W. FRANK MCCREIGHT
------------------------------------------
W. Frank McCreight
Vice President
BUYER
CONTINENTAL RESOURCES, INC.
By:/s/ HAROLD HAMM
------------------------------------------
Harold Hamm
President
25
<PAGE>
EXHIBIT "A"
Attached to and made a part of that certain Assignment and Bill of Sale
dated July 15th, 1998 by and between Continental Resources, Inc., Assignor, and
Harold G. Hamm, as Trustee of the Harold G. Hamm Revocable Intervivos Trust
dated April 23, 1984
BIG HORN COUNTY, WYOMING:
Assignment and Bill of Sale dated effective June 1, 1998 by and between BASS
ENTERPRISES PRODUCTION CO., et al, ASSIGNORS, and CONTINENTAL RESOURCES,
INC., Assignee, recorded in Book MF42, Page 914-926, Big Horn County, Wyoming.
WASHAKIE COUNTY, WYOMING:
Assignment and Bill of Sale dated effective June 1, 1998 by and between BASS
ENTERPRISES PRODUCTION CO., et al, ASSIGNORS, and CONTINENTAL RESOURCES,
INC., Assignee, recorded in Book 77, Page 1227-1396, Washakie County, Wyoming.
HOT SPRINGS COUNTY, WYOMING:
Assignment and Bill of Sale dated effective June 1, 1998 by and between BASS
ENTERPRISES PRODUCTION CO., et al, ASSIGNORS, and CONTINENTAL RESOURCES,
INC., Assignee, recorded in Book 77, Page 138-147, Hot Springs County,
Wyoming.
<PAGE>
EXHIBIT B
ASSIGNMENT AND BILL OF SALE
WASHAKIE COUNTY: WYO. NO. 466643
RECORDED MICRO BOOK 77 PAGE 1227-1396
DATE May 19, 1998 8:00 a.m. O'CLOCK
STATE OF WYOMING )
) KNOW ALL MEN BY THESE PRESENTS, THAT
COUNTIES OF BIG HORN )
HOT SPRINGS, AND )
WASHAKIE )
THIS ASSIGNMENT AND BILL OF SALE ("Assignment") is made effective as of
7:00 a.m., Mountain Standard Time on June 1, 1998 (the "Effective Time") by and
between the undersigned parties under "ASSIGNORS" (hereinafter collectively
referred to as "Assignor"), all having an address of 201 Main Street, Fort
Worth, Texas 76102; and Continental Resources, Inc. (hereinafter referred to as
"Assignee"), whose address is P.O. Box 1032, Enid, Oklahoma 73702.
Assignor, for Ten Dollars ($10.00) and other good and valuable
consideration in hand by Assignee, the receipt and sufficiency of which is
hereby acknowledged, by these PRESENTS DOES hereby GRANT, BARGAIN, SELL, CONVEY,
ASSIGN, TRANSFER, SET OVER, AND DELIVER unto Assignee, the following described
properties:
A. All rights, titles, and interests of Assignor in an to: 1) the oil,
gas, and mineral leases described in Exhibit A hereto (including
landowner's royalty and any ratifications and amendments to such leases,
whether such ratifications and amendments are described in Exhibit A); and
2) the wells described in Exhibit B hereto;
B. All rights, titles, and interests of Assignor 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
authority having jurisdiction, and voluntary unitization agreements,
designations, and declarations) relating to the properties described in
Paragraph A. to the extent such rights, titles, and interests are
attributable to the properties described in Paragraph A.;
C. All rights, titles, and interests of Assignor 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 Paragraphs A. and B., to the extent such rights, titles, and
interests are assignable and attributable to the properties described in
Paragraphs A. and B.;
D. All rights, titles, and interests of Assignor in and to all
rights-of-way, easements. surface leases, permits, and licenses appurtenant
to the properties described in Paragraphs A. and B.; and,
E. All rights, titles, and interests of Assignor in and to all materials,
supplies, machinery. equipment, improvements, and other personal property
and fixtures (including, but not limited to, 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 Paragraphs A. and B. and
used in connection with the exploration, development, operation, or
maintenance thereof. The rights, titles, and interests of Assignor
described above in Paragraphs A., B., C., D., and E. and conveyed to
Assignee hereby are herein sometimes collectively called the "Purchased
Properties".
<PAGE>
TO HAVE AND TO HOLD unto Assignee, its successors and assigns, forever the
Purchased Properties subject to the following terms and conditions:
1. PURCHASE AND SALE AGREEMENT: This Assignment is made subject to that
certain Purchase and Sale Agreement dated March 28, 1998, by and between
Assignor and Assignee affecting the sale of the Purchased Properties.
2. ASSUMPTION AND INDEMNIFICATION: Assignee, by acceptance of this
Assignment, hereby covenants and agrees to assume, to pay and perform
timely, all duties. expenses, obligations, losses, hazards, and liabilities
relating to the ownership or operation of the Purchased Properties arising
on and after the Effective Time (including, without limitation, those
arising under or by virtue of any lease, contract, agreements, document,
permit or rule, or delay in obtaining approval of federal or state
assignments); and, to release, indemnify, defend, and hold harmless
Assignor 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 Purchased Properties on and after the Effective Time.
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 Purchased Properties on and
after the Effective Time shall be deemed to include all matters arising out
of the status and the condition of the Purchased Properties on the
Effective Time including, without limitation, all obligations to properly
plug and abandon wells located on the Purchased Properties, to restore the
surface of the Purchased Properties to as near its original condition as
practicable and to comply with, or bring the Purchased Properties into
compliance with applicable environmental laws and regulations, including
all liability and expense for any restoration, remediation, clean-up,
disposal of waste, or removal that may be incurred as a result of the
existence or discovery of naturally occurring radioactive materials, or
other hazardous or deleterious substances in, on, under, or associated with
the Purchased Properties, regardless of when the events occurred that give
rise to such condition, and the above provided for assumptions and
indemnifications by Assignee shall expressly cover and include such
matters. The foregoing assumptions and indemnifications shall apply whether
or not such duties, obligations, or liabilities, or such claims, actions,
causes of action, liabilities~ damages, losses, costs, or expenses arise
out of (i) negligence (including sole negligence, simple negligence,
concurrent negligence, active or passive negligence, or otherwise, but
expressly not including gross negligence or willful misconduct) of
Assignor, or (ii) strict liability.
3. ENVIRONMENTAL ASSESSMENT AND INDEMNIFICATION BY ASSIGNEE: Assignee
hereby acknowledges that it has made an environmental assessment of the
Purchased Properties, or has been afforded the opportunity to do so, and
satisfied itself as to the physical and environmental condition of the
Purchased Properties, both surface and subsurface. Assignee hereby assumes
the risks that the Purchased Properties may contain waste materials or
hazardous substances, and that adverse physical conditions, including, but
not limited to, the presence of waste materials or hazardous substances or
the presence of unknown abandoned oil and gas wells, water wells, sumps and
pipelines, may exist in, on, or under the properties as of the Effective
Time, all responsibility and liability related to all such conditions,
whether known or unknown, are hereby transferred from Assignor to Assignee.
Assignee assumes full responsibility for, and agrees to indemnify, hold
harmless, and defend Assignor from and against all loss, liability, claims,
fines, expenses, costs (including
2
<PAGE>
attorneys' fees and expenses), and causes of action caused by or arising
out of any federal, state, or local laws, rules, orders, and regulations
applicable to any naturally occurring radioactive materials, waste
material, or hazardous substances on or associated with the Purchased
Properties or the presence, disposal, release or threatened release of
all naturally occurring radioactive materials, waste material, or
hazardous substances from the Purchased Properties into the atmosphere
or into or upon land or any water course or body of water, including
ground water, whether attributable to Assignor's activities or the
activities of third parties (regardless of whether Assignor was or is
aware of such activities prior to, during, or after the period of
Assignor's ownership of the Purchased Properties. This indemnification
and assumption shall also apply to liability or voluntary environmental
response actions undertaken pursuant to the Comprehensive Environmental
Response Compensation and Liability Act (CERCLA) or any other federal,
state or local law.
4. DISCLAIMER OF WARRANTIES: Assignee acknowledges that it has relied
solely on its own independent investigation of the Purchased Properties,
both surface and subsurface, in making its decision to acquire the
Purchased Properties; and, that Assignor has made no representations or
warranties as to the accuracy or completeness of any information which may
have been provided Assignee by Assignor. Assignee accepts all personal
property and fixtures associated with the Purchased Properties "AS IS" and
"WHERE IS" and Assignor hereby expressly disclaims, negates, and makes this
Assignment with NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, AT
COMMON LAW, BY STATURE, OR OTHERWISE, RELATING TO THE PURCHASED PROPERTIES
AS TO DESCRIPTION, QUANTITY, QUALITY, CONDITION, FITNESS FOR A PARTICULAR
PURPOSE, CONFORMITY TO MODELS, OR SAMPLES OF MATERIALS, OR MERCHANTABILITY,
OR OTHERWISE.
5. FEDERAL AND STATE ASSIGNMENTS: Separate state and federal assignments
of the Purchased Properties will be prepared by Assignor into Assignee
using the approved forms of the appropriate governmental agency. Such
assignments shall be deemed to contain all of the rights, titles,
interests, assumptions, indemnifications, disclaimers, and lack of
warranties as set forth herein, as though fully set forth in such
assignments, but no more. The interests conveyed by such separate
assignments are the same and. not in addition to, the interests conveyed
hereunder.
6. WARRANTY OF TITLE: This Assignment is made without warranty of title
of any kind, express or implied, except that Assignor agrees to defend
title against claims and demands of all persons claiming the same by,
through or under Assignor, but not otherwise.
This Assignment may be signed in any number of counterparts, each of which
shall be deemed to be an original, but all such counterparts shall constitute
but one and the same Assignment.
All of the terms and provisions of this Assignment shall be binding upon
and inure to the benefit of Assignee and Assignor and their respective heirs,
successors, representatives, and assigns.
All exhibits referenced herein and attached hereto are by reference
incorporated into this Assignment.
IN WITNESS WHEREOF, this Assignment was executed on the dates contained in
the acknowledgments herein, but to be effective as of the Effective Time as
stated in the first paragraph hereof.
3
<PAGE>
ASSIGNORS
CORPORATE SEAL OF BASS ENTERPRISES PRODUCTION CO.
BASS ENTERPRISES PRODUCTION CO.
ATTEST:
By: /s/ DORSEY D. CROUSE By: /s/ W. FRANK McCREIGHT
------------------------------- -----------------------------------
Dorsey D. Crouse, Assistant W. Frank McCreight, Vice President
Secretary
CORPORATE SEALS OF
PERRY R. BASS, INC. Perry R. Bass, Inc.,
SID R. BASS, INC. Sid R. Bass, Inc.,
LEE M. BASS, INC. Lee M. Bass, Inc.,
KEYSTONE, INC. Keystone, Inc.,
THRU LINE INC. Thru Line Inc.
ATTEST:
By: /s/ DORSEY D. CROUSE By: /s/ W. FRANK McCREIGHT
------------------------------- -----------------------------------
Dorsey D. Crouse, Assistant W. Frank McCreight, Vice President
Secretary of all named corporations
GOLIAD PARTNERS, L.P.
CORPORATE SEALS OF By: Its Managing Partners
PRB-GP, INC. PRB-GP, Inc.
LMB-GP, INC. LMB-GP, Inc.
WPH-GP, INC. WPH-GP, Inc.
ATTEST:
By:/s/ DORSEY D. CROUSE By: /s/ W. FRANK McCREIGHT
------------------------------- -----------------------------------
Dorsey D. Crouse, Assistant W. Frank McCreight, Vice President
Secretary
/s/ PERRY R. BASS
--------------------------------------
PERRY R. BASS, TRUSTEE
/s/ SID R. BASS
--------------------------------------
SID R. BASS, TRUSTEE
/s/ LEE M. BASS
--------------------------------------
Lee M. Bass
CORPORATE SEAL OF DW GENPAR, INC.
DW GENPAR, INC.
ATTEST:
By: /s/ DORSEY D. CROUSE By: /s/ W. FRANK McCREIGHT
------------------------------- -----------------------------------
Dorsey D. Crouse, Assistant W. Frank McCreight, Vice President
Secretary
CORPORATE SEAL OF WD PARTNERS, L. P.
DW GENPAR, INC. By: DW Genpar, Inc., General Partner
ATTEST:
By: /s/ DORSEY D. CROUSE By: /s/ W. FRANK McCREIGHT
------------------------------- -----------------------------------
Dorsey D. Crouse, Assistant W. Frank McCreight, Vice President
Secretary
4
<PAGE>
CORPORATE SEAL OF WPH-GP, INC.
WPH-GP, INC.
ATTEST:
By: /s/ DORSEY D. CROUSE By: /s/ W. FRANK McCREIGHT
------------------------------- -----------------------------------
Dorsey D. Crouse, Assistant W. Frank McCreight, Vice President
Secretary
CORPORATE SEAL OF WORLAND ASSOCIATES, a Texas General
SID R. BASS, INC. Partnership
By: Sid R. Bass, Inc., Managing
ATTEST: Partner
By: /s/ DORSEY D. CROUSE By: /s/ W. FRANK McCREIGHT
------------------------------- -----------------------------------
Dorsey D. Crouse, Assistant W. Frank McCreight, Vice President
Secretary
CORPORATE SEAL OF WORLAND ASSOCIATES II, a Texas
SID R. BASS, INC. General Partnership
By: Sid R. Bass, Inc., Managing
ATTEST: Partner
By: /s/ DORSEY D. CROUSE By: /s/ W. FRANK McCREIGHT
------------------------------- -----------------------------------
Dorsey D. Crouse, Assistant W. Frank McCreight, Vice President
Secretary
ASSIGNEE
CORPORATE SEAL OF CONTINENTAL RESOURCES, INC.
CONTINENTAL RESOURCES, INC.
ATTEST:
By: /s/ RANDY MOEDER By: /s/ TOM LUTTRELL
------------------------------- -----------------------------------
Tom Luttrell, Vice President-Land
(ACKNOWLEDGEMENTS ATTACHED)
5
<PAGE>
STATE OF TEXAS )
) ss.
COUNTY OF TARRANT )
The foregoing instrument was acknowledged before me by W. FRANK MCCREIGHT,
as VICE PRESIDENT OF BASS ENTERPRISES PRODUCTION CO., PERRY R. BASS, INC., SID
R. BASS, INC., LEE M. BASS, INC., KEYSTONE, INC., THRU LINE INC., PRB-GP, INC.,
LMB-GP, INC., WPH-GP, INC., and GW GENPAR, INC., this 14th day of May, 1998.
Witness my hand and official seal.
My Commission Expires:
/s/ BETTY H. PALMORE
----------------------------------
05/07/2001 Notary Public
- ---------------------
NOTARY SEAL OF BETTY H. PALMORE
STATE OF TEXAS )
) ss.
COUNTY OF TARRANT )
The foregoing instrument was acknowledged before me by Perry R. Bass,
Trustee, this 14th day of May, 1998.
Witness my hand and official seal.
My Commission Expires:
/s/ BETTY H. PALMORE
----------------------------------
05/07/2001 Notary Public
- ---------------------
NOTARY SEAL OF BETTY H. PALMORE
STATE OF TEXAS )
) ss.
COUNTY OF TARRANT )
The foregoing instrument was acknowledged before me by Sid R. Bass, this
14th day of May, 1998.
Witness my hand and official seal.
My Commission Expires:
/s/ BETTY H. PALMORE
----------------------------------
05/07/2001 Notary Public
- ---------------------
NOTARY SEAL OF BETTY H. PALMORE
STATE OF TEXAS )
) ss.
COUNTY OF TARRANT )
The foregoing instrument was acknowledged before me by Lee M. Bass, this
14th day of May, 1998.
Witness my hand and official seal.
My Commission Expires:
/s/ BETTY H. PALMORE
----------------------------------
05/07/2001 Notary Public
- ---------------------
NOTARY SEAL OF BETTY H. PALMORE
6
<PAGE>
STATE OF TEXAS )
) ss.
COUNTY OF TARRANT )
The foregoing instrument was acknowledged before me by Tom Luttrell as Vice
President - Land - for Continental Resources, Inc., this 14th day of May, 1998.
Witness my hand and official seal.
My Commission Expires:
/s/ BETTY H. PALMORE
----------------------------------
05/07/2001 Notary Public
- ---------------------
NOTARY SEAL OF BETTY H. PALMORE
7
<PAGE>
EXHIBIT C
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 001 49043053070000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 002 49043053230000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 004 49043052760000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 005 49043052820000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 006 49043052730000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 007 49043053010000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 008 49043052860000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 008X 49043207830000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 009 49043053030000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 010 49043052650000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 010X 49043207190000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 011 49043052450000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 012 49043052690000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 014 49043052510000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 015 49043052460000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 015X 49043207200000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 016 49043052710000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 017 49043052300000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 018 49043052870000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 018X 49043207210000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 019 49043052520000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 020 49043052700000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 021 49043052530000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 022 49043052320000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 023 49043053040000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 024 49043052380000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 025 49043052400000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 026 49043052980000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 027 49043052390000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 028 49043052670000 COTTONWOOD CREEK BEPCO PA
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 001 SW SW 02 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 002 SW NE 03 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 004 SE SE 07 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 005 NW SW 07 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 006 NW NE 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 007 NW NW 07 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 008 NW SE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 008X NW SE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 009 NW NE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 010 NW NW 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 010X NW NW 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 011 NW SE 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 012 NW NE 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 014 NW SW 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 015 NW SW 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 015X NW SW 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 016 NW NE 14 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 017 NW NW 19 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 018 NW SW 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 018X NW SW 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 019 NW SE 14 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 020 NW NW 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 021 NW SE 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 022 NW NE 19 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 023 NW SW 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 024 NW NW 24 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 025 NW NE 24 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 026 NW NW 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 027 NW NE 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 028 NW NW 14 47N 91W .91098801 .76677372 .00004650
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 1
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 029 49043052490000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 030 49043052950000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 031 49043052500000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 032 49043052360000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 033 49043052480000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 034 49043052680000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 035 49043052840000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 036 49043052340000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 037 49043052970000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 038 49043052350000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 039 49043052830000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 040 49043051960000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 041 49043053160000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 042 49043052810000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 043 49043053710000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 044 49043052640000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 045 49043052960000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 046 49043052990000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 047 49043053300000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 048 49043052780000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 050 49043052660000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 051 49043052330000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 052 49043052630000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 053 49043053290000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 054 49043053520000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 055 49043053130000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 059 49043051970000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 060 49043051920000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 061 49043051940000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 062 49043051950000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 063 49043051870000 COTTONWOOD CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 029 NW SW 14 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 030 NW NW 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 031 NW SE 15 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 032 NW NW 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 033 NW SW 15 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 034 NW NE 15 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 035 NW SW 10 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 036 NW NW 22 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 037 NW NE 09 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 038 NW NE 22 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 039 NW SE 09 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 040 NW SE 24 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 041 NW SE 04 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 042 NW SW 05 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 043 NW NE 32 48N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 044 NW NE 16 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 045 NW NW 09 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 046 NW NW 10 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 047 NW NW 04 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 048 NW SE 08 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 050 NW NW 15 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 051 NW NE 21 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 052 NW NW 16 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 053 NW NE 04 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 054 NW SE 32 48N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 055 NW SW 04 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 059 NW SE 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 060 NW SW 24 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 061 NW SW 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 062 NW SE 22 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 063 NW NE 26 47N 91W .91098801 .76677372 .00004650
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 2
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 064 49043051880000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 066 49043052940000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 067 49043052880000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 068 49043052770000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 069 49043052920000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 070 49043052720000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 070X 49043207170000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 071 49043052620000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 072 49043052750000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 073 49043052570000 COTTONWOOD CREEK BEPCO SI
COTTONWOOD CREEK UNIT 074 49043052580000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 074X 49043208070000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 075 49043052410000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 077 49043052470000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 078 49043052850000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 081 49043051860000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 081A 49043206300000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 082 49043052740000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 083 49043052910000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 084 49043053020000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 086 49043052930000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 087 49043052790000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 088 49043055890000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 089 49043200180000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 090 49043200170000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 091 49043200220000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 092 49043056060000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 094 49043200090000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 095 49043200350000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 096 49043200310000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 097 49043200360000 COTTONWOOD CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 064 NW NW 25 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 066 SW NW 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 067 NW SW 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 068 SE SE 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 069 NW SW 09 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 070 NW NW 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 070X NW NW 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 071 NW NE 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 072 NW NW 16 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 073 NW SW 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 074 NW SE 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 074X SW SE 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 075 NW NW 20 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 077 NW SE 16 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 078 NW SE 10 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 081 NW NE 27 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 081A NW NE 27 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 082 NW NE 16 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 083 NW SE 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 084 NW NE 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 086 NW SE 07 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 087 NE SW 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 088 SE SE 09 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 089 SE NW 15 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 090 SE NE 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 091 SE SE 15 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 092 SE SE 01 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 094 SE SW 01 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 095 SE SW 06 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 096 NW SW 19 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 097 SE SE 02 47N 91W .91098801 .76677372 .00004650
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 3
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 098 49043200550000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 101 49043201130000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 102 49043201880000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 103 49043201900000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 104 49043201520000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 105 49043201850000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 106 49043201830000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 107 49043203870000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 108 49043201970000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 111 49043202110000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 113 49043202150000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 114 49043202140000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 115 49043202170000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 116 49043202160000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 118 49043202180000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 120 49043203110000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 121 49043204450000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 122 49043204450000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 123 49043204310000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 124 49043204380000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 125 49043204300000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 126 49043204320000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 127 49043204370000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 128 49043204430000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 129 49043204590000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 130 49043204500000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 131 49043204510000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 132 49043204580000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 133 49043204570000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 134 49043204560000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 134X 49043207300000 COTTONWOOD CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 098 NW SE 19 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 101 NW NW 26 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 102 NW NE 17 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 103 SE SE 22 47N 91W .91098601 .76677372 .00004650
COTTONWOOD CREEK UNIT 104 SE SE 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 105 SE NE 24 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 106 SE SW 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 107 SE SW 14 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 108 SE NE 16 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 111 NE SE 07 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 113 SE NE 17 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 114 SE NE 27 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 115 SE NW 16 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 116 SW NW 22 47N 92W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 118 SE NW 07 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 120 SE NW 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 121 NW SW 05 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 122 SW SW 17 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 123 SE SE 16 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 124 SE NW 19 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 125 SE NW 26 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 126 SE SW 22 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 127 SE NW 22 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 128 SE SW 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 129 SE SW 09 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 130 SE NW 24 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 131 SE NE 26 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 132 SE SW 15 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 133 SE NE 22 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 134 SE NW 27 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 134X SE NW 27 47N 91W .91098801 .76677372 .00004650
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 4
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 135 49043204650000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 136 49043204630000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 139 49043204930000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 141 49043264850000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 145 49043205040000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 151 49043205680000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 156 49043205640000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 157 49043205790000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 158 49043205650000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 159 49043205660000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 160 49043205800000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 161 49043205810000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 162 49043205630000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 163 49043205670000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 165 49043205630000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 166 49043205840000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 167 49043206110000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 168 49043206050000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 169 49043206040000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 171 49043206060000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 172 49043206090000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 173 49043206130000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 174 49043206150000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 175 49043206120000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 179 49043206200000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 180 49043206210000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 182 49043206190000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 183 49043206350000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 184 49043206370000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 165 49043206380000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 186 49043206420000 COTTONWOOD CREEK BEPCO TA
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 135 NW SE 31 48N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 136 SW SE 07 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 139 SE NW 21 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 141 SE SW 24 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 145 SE SE 08 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 151 SE SE 14 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 156 NW NE 10 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 157 SE NW 10 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 158 SE SE 10 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 159 SE SW 10 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 160 SE NE 09 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 161 SE NW 09 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 162 SE NE 15 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 163 SE NW 14 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 165 SE NW 17 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 166 SE SW 08 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 167 SW SE 04 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 168 SE NE 14 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 169 SW SW 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 171 NE NW 19 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 172 NE NE 27 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 173 SE NE 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 174 SE SE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 175 SE NE 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 179 SE SW 09 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 180 SE SW 04 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 182 SE NW 04 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 183 NW NW 17 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 184 SW NW 25 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 185 NW NE 05 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 186 NW SW 17 47N 91W .91098801 .76677372 .00004650
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 5
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 199 49043206480000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 200 49043206470000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 201 49043206460000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 208 49043206490000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 210 49043207290000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 211 49043207270000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 212 49043207280000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 213 49043207260000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 214 49043207390000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 215 49043207410000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 216 49043207420000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 217 49043207350000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 218 49043207360000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 219 49043207400000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 220 49043207370000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 221 49043207430000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 222 49043207450000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 223 49043207460000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 224 49043207470000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 225 49043207490000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 226 49043207500000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 227 49043207480000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 228 49043207630000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 229 49043207650000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 230 49043207660000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 231 49043207670000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 232 49043207680000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 233 49043207690000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 234 49043207740000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 235 49043207730000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 236 49043207700000 COTTONWOOD CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
COTTONWOOD CREEK UNIT 199 SE NE 18 47N 90W .91098801 .76577372 .00004650
COTTONWOOD CREEK UNIT 200 SE NE 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 201 SE NW 13 47N 92W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 208 SE NW 16 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 210 SE NW 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 211 SW SW 07 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 212 SE SW 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 213 SE SE 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 214 SE SW 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 215 SE NW 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 216 NE NE 19 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 217 SE NE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 218 SE NW 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 219 SW SW 09 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 220 SE SE 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 221 SE SW 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 222 NW NE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 223 NE SE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 224 SW SE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 225 SW SW 07 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 226 SE NE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 227 SW NE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 228 SW NW 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 229 NE NW 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 230 SE NE 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 231 NW SE 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 232 SE SE 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 233 SE SW 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 234 LOT 05 19 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 235 NW NE 19 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 236 NE NE 13 47N 91W .91098801 .76677372 .00004650
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 6
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 237 49043207620000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 238 49043207520000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 239 49043207530000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 240 49043207710000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 241 49043207720000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 242 49043207750000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 243 49043207840300 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 244 49043207850000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 245 49043207980000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 246 49043207950000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 247 49043207960000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 248 49043207970000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 249 49043208010000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 250 49043207990000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 251 49043208050000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 252 49043207770000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 253 49043207780000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 254 49043207790000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 255 49043207800000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 256 49043207810000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 257 49043207820000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 258 49043208000000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 259 49043208020000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 260 49043208030000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 261 49043207860000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 263 49043207880000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 267 49043208190000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 269 49043208210000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 271 49043208110000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 272 49043208150000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 273 49043208120000 COTTONWOOD CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 237 NE NE 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 238 NW SW 33 48N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 239 SW NE 08 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 240 SW SE 07 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 241 SE NW 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 242 SE NW 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 243 SE SE 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 244 SW SE 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 245 NE SE 14 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 246 SW NE 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 247 SE NW 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 248 NE NE 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 249 NE NW 24 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 250 NE NE 14 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 251 SE NE 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 252 SW SW 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 253 NW NE 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 254 NE NE 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 255 SE NE 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 256 SW NW 20 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 257 SE NW 20 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 258 SW SE 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 259 SW SE 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 260 NW SE 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 261 NW SW 09 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 263 SW SE 32 48N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 267 NW NE 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 269 SW NW 26 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 271 NE NW 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 272 SE SE 02 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 273 NE NW 12 47N 91W .91098801 .76677372 .00004650
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 7
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 274 49043208130000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 275 49043208140000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 276 49043208170000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 277 49043208080000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 278 49043208090000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 279 04043208060000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 280 49043208100000 COTTONWOOD CREEK BEPCO PRD
1277602 COTTONWOOD CREEK UNIT - TENSLP
TENSLEEP UNIT 065 49043053000000 COTTONWOOD CREEK BEPCO PRD
TENSLEEP UNIT 110 49043202070000 COTTONWOOD CREEK BEPCO PRD
TENSLEEP UNIT 117 49043202190000 COTTONWOOD CREEK BEPCO PRD
TENSLEEP UNIT 119 49043202310000 COTTONWOOD CREEK BEPCO PRD
1277604 COTTONWOOD CREEK UNIT WELL#189
COTTONWOOD CREEK NPA 189 49043206400000 COTTONWOOD CREEK BEPCO PRD
1277605 COTTONWOOD CREEK UNIT WELL#190
COTTONWOOD CREEK NPA 190 49043206410000 COTTONWOOD CREEK BEPCO PRD
1277606 COTTONWOOD CREEK UNIT WELL #56
COTTONWOOD CREEK NPA 056 49043053510000 COTTONWOOD CREEK BEPCO TA
1277608 COTTONWOOD CREEK UNIT WELL #76
COTTONWOOD CREEK NPA 076 49043052800000 COTTONWOOD CREEK BEPCO TA
1277610 COTTONWOOD CREEK UNIT WELL #85
COTTONWOOD CREEK NPA 085 49043051850000 COTTONWOOD CREEK BEPCO TA
1277611 COTTONWOOD CREEK UNIT WELL#197
COTTONWOOD CREEK NPA 197 49043206440000 COTTONWOOD CREEK BEPCO TA
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 274 SE NE 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 275 NE SW 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 276 NE NW 24 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 277 NW SE 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 278 NW SE 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 279 NE NW 16 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 280 NW NE 16 47N 90W .91098801 .76677372 .00004650
1277602 COTTONWOOD CREEK UNIT - TENSLP
TENSLEEP UNIT 065 NW NE 07 47N 90W 1.00000000 .83746144 .00000000
TENSLEEP UNIT 110 SW NE 07 47N 90W 1.00000000 .83746144 .00000000
TENSLEEP UNIT 117 NW SE 07 47N 90W 1.00000000 .83746144 .00000000
TENSLEEP UNIT 119 NE NW 07 47N 90W 1.00000000 .83746144 .00000000
1277604 COTTONWOOD CREEK UNIT WELL#189
COTTONWOOD CREEK NPA 189 NW SE 07 47N 91W 1.00000000 .82500000 .00000000
1277605 COTTONWOOD CREEK UNIT WELL#190
COTTONWOOD CREEK NPA 190 NW NW 08 47N 91W 1.00000000 .82500000 .00000000
1277606 COTTONWOOD CREEK UNIT WELL #56
COTTONWOOD CREEK NPA 056 NW SW 32 48N 91W .91956760 .80462150 .00000000
1277608 COTTONWOOD CREEK UNIT WELL #76
COTTONWOOD CREEK NPA 076 NW SW 08 47N 91W .92203300 .67747480 .00000000
1277610 COTTONWOOD CREEK UNIT WELL #85
COTTONWOOD CREEK NPA 085 NW NW 27 47N 91W .91328560 .73088980 .00000000
1277611 COTTONWOOD CREEK UNIT WELL#197
COTTONWOOD CREEK NPA 197 NW SE 09 47N 90W 1.00000000 .81500000 .00000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 8
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1277613 COTTONWOOD CREEK UNIT - FRONTIER
COTTONWOOD CREEK UNIT 209 49043202580000 COTTONWOOD CREEK UNIT BEPCO TA
1277614 COTTONWOOD CREEK NPA - #109
COTTONWOOD CREEK NPA 109 49043202050000 COTTONWOOD CREEK UNIT BEPCO TA
1277617 COTTONWOOD CREEK UNIT #262
COTTONWOOD CREEK NPA 262 49043207870000 COTTONWOOD CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1277613 COTTONWOOD CREEK UNIT - FRONTIER
COTTONWOOD CREEK UNIT 209 NE NW 8 47N 90W .00000000 .00000000 .00000000
1277614 COTTONWOOD CREEK NPA - #109
COTTONWOOD CREEK NPA 109 NW SE 17 47N 91W .91098801 .76677372 .00004650
1277617 COTTONWOOD CREEK UNIT #262
COTTONWOOD CREEK NPA 262 SE SW 05 47N 91W .91000750 .75075619 .00000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 9
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK FIELD EXTENSION (PHOSPHORIA) UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1196001 COTTONWOOD CREEK EXT UNIT
CC EXTENSION UNIT 1-1 49043201540000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 11-1 49043201700000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 14-1 49043201760000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 16-1 49043201410000 COTTONWOOD CREEK BEPCO PA
CC EXTENSION UNIT 16-1X 49043207230000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 18-1 49043056030000 COTTONWOOD CREEK BEPCO PA
CC EXTENSION UNIT 19-1 49043201490000 COTTONWOOD CREEK BEPCO PA
CC EXTENSION UNIT 19-1X 49043206170000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 20-1 49043201500000 COTTONWOOD CREEK BEPCO PA
CC EXTENSION UNIT 20-1X 49043207240000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 21-1 49043201740000 COTTONWOOD CREEK BEPCO PA
CC EXTENSION UNIT 22-1 49043201840000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 23-1 49043201860000 COTTONWOOD CREEK BEPCO PA
CC EXTENSION UNIT 24-1 49043200080000 COTTONWOOD CREEK BEPCO PA
CC EXTENSION UNIT 26-1 49043206280000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 27-1 49043206270000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 28-1 49043206260000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 29-1 49043207920000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 3-1 49043051750000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 30-1 49043208160000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 31-1 49043208220000 COTTONWOOD CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1196001 COTTONWOOD CREEK EXT UNIT
CC EXTENSION UNIT 1-1 LOT 5 01 46N 91W .96870790 .81103222 .00061900
CC EXTENSION UNIT 11-1 NW SE 31 47N 90W .96870790 .81103222 .00061500
CC EXTENSION UNIT 14-1 LOT 14 06 46N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 16-1 NW SW 31 47N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 16-1X LOT 7 31 47N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 18-1 NE SW 25 47N 91W .96870790 .81103222 .00061900
CC EXTENSION UNIT 19-1 LOT 12 06 46N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 19-1X LOT 13 06 46N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 20-1 LOT 20 06 46N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 20-1X LOT 18 06 46N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 21-1 SW SW 32 47N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 22-1 SW NW 32 47N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 23-1 SW NE 31 47N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 24-1 NW NE 36 47N 91W .96870790 .81103222 .00061900
CC EXTENSION UNIT 26-1 SE SW 25 47N 91W .96870790 .81103222 .00061900
CC EXTENSION UNIT 27-1 LOT 12 06 46N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 28-1 SE SW 31 47N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 29-1 NW SW 25 47N 91W .96870790 .81103222 .00061900
CC EXTENSION UNIT 3-1 SW SW 29 47N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 30-1 SE SE 26 47N 91W .96870790 .81103222 .00061900
CC EXTENSION UNIT 31-1 LOT 08 31 47N 90W .96870790 .81103222 .00061900
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 1
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
NO WATER CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1252302 NO WATER CREEK UNIT
NO WATER CREEK UNIT 11 49043200970000 NO WATER CREEK BEPCO TA
NO WATER CREEK UNIT 12 49043201100000 NO WATER CREEK BEPCO TA
NO WATER CREEK UNIT 14 49043201330000 NO WATER CREEK BEPCO TA
NO WATER CREEK UNIT 17 49043207640000 NO WATER CREEK BEPCO PRD
NO WATER CREEK UNIT 18 49043207930000 NO WATER CREEK BEPCO PRD
NO WATER CREEK UNIT 19 49043208260000 NO WATER CREEK BEPCO PRD
NO WATER CREEK UNIT 2 49043200280000 NO WATER CREEK BEPCO PA
NO WATER CREEK UNIT 20 49043208250000 NO WATER CREEK BEPCO PRD
NO WATER CREEK UNIT 3 49043200450000 NO WATER CREEK BEPCO PA
NO WATER CREEK UNIT 5 49043200530000 NO WATER CREEK BEPCO PRD
NO WATER CREEK UNIT 6 49043200640000 NO WATER CREEK BEPCO TA
NO WATER CREEK UNIT 7 49043200690000 NO WATER CREEK BEPCO TA
NO WATER CREEK UNIT 9 49043200810000 NO WATER CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1252302 NO WATER CREEK UNIT
NO WATER CREEK UNIT 11 SW NW 05 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 12 NW SE 06 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 14 NE SW 06 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 17 LOT 16 05 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 18 LOT 13 06 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 19 LOT 11 06 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 2 LOT 13 06 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 20 SE NW 06 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 3 LOT 22 06 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 5 LOT 16 06 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 6 LOT 19 06 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 7 SW SE 31 47N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 9 LOT 09 05 46N 91W .94441730 .78727357 .00000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 1
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
SLICK CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1252208 SLICK CREEK UNIT (PHOSPHORIA)
SLICK CREEK H20 INJ #2 49043050020000 SLICK CREEK BEPCO DAI
SLICK CREEK PHOSPHORIA 02 49043050020000 SLICK CREEK BEPCO TA
SLICK CREEK PHOSPHORIA 03 49043051620000 SLICK CREEK BEPCO PA
SLICK CREEK PHOSPHORIA 05 49043051700000 SLICK CREEK BEPCO PA
SLICK CREEK PHOSPHORIA 06 49043051680000 SLICK CREEK BEPCO PA
SLICK CREEK PHOSPHORIA 07 49043051660000 SLICK CREEK BEPCO PA
SLICK CREEK PHOSPHORIA 1 49043051670000 SLICK CREEK BEPCO PRD
SLICK CREEK PHOSPHORIA 10 49043201520000 SLICK CREEK BEPCO PRD
SLICK CREEK PHOSPHORIA 11 49043201530000 SLICK CREEK BEPCO PA
SLICK CREEK PHOSPHORIA 12 49043201580000 SLICK CREEK BEPCO PA
SLICK CREEK PHOSPHORIA 21 49043210990000 SLICK CREEK BEPCO PRD
SLICK CREEK PHOSPHORIA 22 49043202250000 SLICK CREEK BEPCO PRD
SLICK CREEK PHOSPHORIA 30 49043205330000 SLICK CREEK BEPCO PRD
SLICK CREEK PHOSPHORIA 34-43 49043206530000 SLICK CREEK BEPCO PRD
SLICK CREEK PHOSPHORIA 35-31 49043206360000 SLICK CREEK BEPCO PRD
SLICK CREEK PHOSPHORIA 4 49043051610000 SLICK CREEK BEPCO PRD
SLICK CREEK PHOSPHORIA 8 49043051640000 SLICK CREEK BEPCO TA
1252209 SLICK CREEK UNIT (FRONTIER)
SLICK CREEK FRONTIER 13 49043201630000 SLICK CREEK BEPCO PA
SLICK CREEK FRONTIER 15 49043201640000 SLICK CREEK BEPCO PRD
SLICK CREEK FRONTIER 19 49043201690000 SLICK CREEK BEPCO PA
SLICK CREEK FRONTIER 20 49043201670000 SLICK CREEK BEPCO PRD
SLICK CREEK FRONTIER 8 49043051640000 SLICK CREEK BEPCO PA
1252210 SLICK CREEK UNIT (MUDDY)
SLICK CREEK MUDDY 06 49043051680000 SLICK CREEK BEPCO PA
SLICK CREEK MUDDY 07 49043051660000 SLICK CREEK BEPCO PA
SLICK CREEK MUDDY 11 49043201530000 SLICK CREEK BEPCO PA
SLICK CREEK MUDDY 16 49043201650000 SLICK CREEK BEPCO PA
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1252208 SLICK CREEK UNIT (PHOSPHORIA)
SLICK CREEK H20 INJ #2 SE NW 34 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 02 SE NW 34 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 03 LOT 8 02 46N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 05 SE NW 35 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 06 SE NW 33 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 07 NE SE 33 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 1 SE NE 32 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 10 SE SW 35 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 11 SE SE 32 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 12 NE SW 32 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 21 NW NE 02 46N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 22 NE NE 34 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 30 NE SW 33 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 34-43 SE NE 34 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 35-31 NW SE 35 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 4 LOT 8 03 46N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 8 SW SE 34 47N 92W 1.00000000 .86266071 .00054626
1252209 SLICK CREEK UNIT (FRONTIER)
SLICK CREEK FRONTIER 13 NW SE 34 47N 92W 1.00000000 .86500050 .00103100
SLICK CREEK FRONTIER 15 LOT 8 02 46N 92W 1.00000000 .86500050 .00103100
SLICK CREEK FRONTIER 19 NW SE 33 47N 92W 1.00000000 .86500050 .00103100
SLICK CREEK FRONTIER 20 NW SW 35 47N 92W 1.00000000 .86500050 .00103100
SLICK CREEK FRONTIER 8 SW SE 34 47N 92W 1.00000000 .86500050 .00103100
1252210 SLICK CREEK UNIT (MUDDY)
SLICK CREEK MUDDY 06 SE NW 33 47N 92W .00000000 .00000000 .00000000
SLICK CREEK MUDDY 07 NE SE 33 47N 92W .00000000 .00000000 .00000000
SLICK CREEK MUDDY 11 SE SE 32 47N 92W .00000000 .00000000 .00000000
SLICK CREEK MUDDY 16 NE SW 32 47N 92W .00000000 .00000000 .00000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 1
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
SLICK CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1252210 SLICK CREEK UNIT (MUDDY)
SLICK CREEK MUDDY 17 49043201660000 SLICK CREEK BEPCO PA
SLICK CREEK UNIT
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1252210 SLICK CREEK UNIT (MUDDY)
SLICK CREEK MUDDY 17 LOT 8 03 46N 92W .00000000 .00000000 .00000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 2
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
SOUTH FRISBY UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1252214 SOUTH FRISBY UNIT
SOUTH FRISBY 2 49043202040000 SOUTH FRISBY BEPCO PRD
SOUTH FRISBY 24-33 49043206390000 SOUTH FRISBY BEPCO PRD
SOUTH FRISBY 3 49043202350000 SOUTH FRISBY BEPCO TA
SOUTH FRISBY 4 49043202600000 SOUTH FRISBY BEPCO PA
SOUTH FRISBY 6 49043202950000 SOUTH FRISBY BEPCO PRD
SOUTH FRISBY 7 49043203940000 SOUTH FRISBY BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1252214 SOUTH FRISBY UNIT
SOUTH FRISBY 2 NW SE 24 47N 92W 1.00000000 .86004334 .00000000
SOUTH FRISBY 24-33 SE SE 24 47N 92W 1.00000000 .86004334 .00000000
SOUTH FRISBY 3 SE NW 24 47N 92W 1.00000000 .86004334 .00000000
SOUTH FRISBY 4 NE NE 25 47N 92W 1.00000000 .86004334 .00000000
SOUTH FRISBY 6 LOT 9 30 47N 91W 1.00000000 .86004334 .00000000
SOUTH FRISBY 7 SE NW 30 47N 91W 1.00000000 .86004334 .00000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 1
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
NON-UNITIZED ASSETS (COOP)
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1161201 COTTONWOOD CREEK FEDERAL
COTTONWOOD CREEK 35-1 49043203730000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK 35-44 49043205970000 COTTONWOOD CREEK BEPCO PRD
1161202 COTTONWOOD CREEK STATE
COTTONWOOD CREEK 36-1 49043204090000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK 36-24 49043205690000 COTTONWOOD CREEK BEPCO PRD
1161203 COTTONWOOD CREEK FEDERAL #35-2
COTTONWOOD CREEK 35-2 49043204050000 COTTONWOOD CREEK BEPCO PRD
1161204 COTTONWOOD CREEK FEDERAL #35-3
COTTONWOOD CREEK 35-3 49043204020000 COTTONWOOD CREEK BEPCO PRD
1161205 COTTONWOOD CREEK FEDERAL #2-1
COTTONWOOD CREEK 2-1 49043204260000 COTTONWOOD CREEK BEPCO PRD
1161207 COTTONWOOD CREEK FEDERAL #2-34
COTTONWOOD CREEK 2-34 49043204730000 COTTONWOOD CREEK BEPCO PRD
1161212 COTTONWOOD CREEK FEDERAL #26-23
COTTONWOOD CREEK 26-23 49043206250000 COTTONWOOD CREEK BEPCO PRD
1161213 COTTONWOOD CREEK FEDERAL #21-23
COTTONWOOD CREEK 21-23 49043206500000 COTTONWOOD CREEK BEPCO PRD
1161214 COTTONWOOD CREEK FEDERAL #28-41
COTTONWOOD CREEK 28-41 49043206450000 COTTONWOOD CREEK BEPCO TA
1161215 COTTONWOOD CREEK FEDERAL #26-21
COTTONWOOD CREEK 26-21 49043206510000 COTTONWOOD CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1161201 COTTONWOOD CREEK FEDERAL
COTTONWOOD CREEK 35-1 NW NE 35 47N 91W 1.00000000 .81250000 .00000000
COTTONWOOD CREEK 35-44 NE NE 35 47N 91W 1.00000000 .81250000 .00000000
1161202 COTTONWOOD CREEK STATE
COTTONWOOD CREEK 36-1 SW NW 36 47N 91W 1.00000000 .81250000 .00000000
COTTONWOOD CREEK 36-24 NE SW 36 47N 91W 1.00000000 .81250000 .00000000
1161203 COTTONWOOD CREEK FEDERAL #35-2
COTTONWOOD CREEK 35-2 NW NW 35 47N 91W 1.00000000 .81562500 .00000000
1161204 COTTONWOOD CREEK FEDERAL #35-3
COTTONWOOD CREEK 35-3 NW SE 35 47N 91W 1.00000000 .81250000 .00000000
1161205 COTTONWOOD CREEK FEDERAL #2-1
COTTONWOOD CREEK 2-1 LOT 11 2 46N 91W 1.00000000 .81250000 .00000000
1161207 COTTONWOOD CREEK FEDERAL #2-34
COTTONWOOD CREEK 2-34 NE SE 2 46N 91W 1.00000000 .82500000 .00000000
1161212 COTTONWOOD CREEK FEDERAL #26-23
COTTONWOOD CREEK 26-23 SE SW 26 47N 91W 1.00000000 .70312500 .00187500
1161213 COTTONWOOD CREEK FEDERAL #21-23
COTTONWOOD CREEK 21-23 SE SW 21 47N 91W 1.00000000 .80937500 .06562500
1161214 COTTONWOOD CREEK FEDERAL #28-41
COTTONWOOD CREEK 28-41 NW NE 28 47N 91W 1.00000000 .73125000 .01875000
1161215 COTTONWOOD CREEK FEDERAL #26-21
COTTONWOOD CREEK 26-21 NW SW 26 47N 91W 1.00000000 .71290000 .00000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 1
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
NON-UNITIZED ASSETS (CO-OP)
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1161217 KNISLEY FEDERAL #1
KNISELY FEDERAL #1 49043051760000 COTTONWOOD CREEK BEPCO PRD
1252201 EARL SCHRANTZ USA
SCHRANTZ USA 1 49043051730000 COTTONWOOD CREEK BEPCO PRD
SCHRANTZ USA 3 49043200500000 COTTONWOOD CREEK BEPCO PRD
SCHRANTZ USA 4 49043200510000 COTTONWOOD CREEK BEPCO PA
SCHRANTZ USA 5 49043208240000 COTTONWOOD CREEK BEPCO PRD
1252202 TOLMAN USA
TOLMAN USA 2 49043200330000 COTTONWOOD CREEK BEPCO PRD
TOLMAN USA 3 49043200590000 COTTONWOOD CREEK BEPCO PRD
1252203 CALDWELL USA #1-7
CALDWELL USA 1-7 49043203830000 COTTONWOOD CREEK BEPCO PRD
1252204 FAURE USA
USA FAURE 1 49043200430000 RATTLESNAKE BEPCO PRD
USA FAURE 2 49043200570000 RATTLESNAKE BEPCO PA
USA FAURE 4 49043201020000 RATTLESNAKE BEPCO PRD
1252205 FAURE "A" USA
USA FAURE A2-2 49043203840000 RATTLESNAKE BEPCO PRD
1252206 LACOY FEDERAL
LACOY FEDERAL 13-1 49043200770000 RATTLESNAKE BEPCO PRD
1252207 BEARD FEDERAL
BEARD FEDERAL 1 49043201090000 RATTLESNAKE BEPCO PA
1252211 ROME FEDERAL
ROME FEDERAL 1 49043201720000 SLICK CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1161217 KNISLEY FEDERAL #1
KNISELY FEDERAL #1 NW SE 27 47N 91W 1.00000000 .71500000 .00000000
1252201 EARL SCHRANTZ USA
SCHRANTZ USA 1 NW NE 33 47N 91W 1.00000000 .79375000 .05035164
SCHRANTZ USA 3 SW SE 32 47N 91W 1.00000000 .79375000 .05035164
SCHRANTZ USA 4 SW SW 32 47N 91W 1.00000000 .79375000 .05035164
SCHRANTZ USA 5 NE SW 32 47N 91W 1.00000000 .79375000 .05035164
1252202 TOLMAN USA
TOLMAN USA 2 NW SW 28 47N 91W 1.00000000 .87500000 .00000000
TOLMAN USA 3 NW NW 28 47N 91W 1.00000000 .87500000 .00000000
1252203 CALDWELL USA #1-7
CALDWELL USA 1-7 LO 12 07 47N 91W .55480654 .47179217 .00000000
1252204 FAURE USA
USA FAURE 1 NW NW 11 47N 92W 1.00000000 .82500000 .00000000
USA FAURE 2 NW SE 11 47N 92W 1.00000000 .82500000 .00000000
USA FAURE 4 NW SW 11 47N 92W 1.00000000 .82500000 .00000000
1252205 FAURE "A" USA
USA FAURE A2-2 NE NE 02 47N 92W 1.00000000 .82500000 .00000000
1252206 LACOY FEDERAL
LACOY FEDERAL 13-1 NW NW 13 47N 92W 1.00000000 .82500000 .00000000
1252207 BEARD FEDERAL
BEARD FEDERAL 1 NW NW 12 47N 92W 1.00000000 .84900000 .00000000
1252211 ROME FEDERAL
ROME FEDERAL 1 SE SE 02 46N 92W 1.00000000 .81250000 .06250000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 2
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
NON-UNITIZED ASSETS (CO-OP)
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1252213 NEIBER II UNIT (TENSLEEP)
NEIBER UNIT II-I 49043202610000 NEIBER DOME BEPCO PRD
1252215 SOUTH FRISBY LACOY FED #5 & #8
SOUTH FRISBY 5 49043202630000 SOUTH FRISBY BEPCO PRD
SOUTH FRISBY 8 49043203950000 SOUTH FRISBY BEPCO PRD
1252217 CALDWELL USA #20
CALDWELL 1-20 49043203960000 COTTONWOOD CREEK BEPCO PRD
CALDWELL 2-20 49043203990000 COTTONWOOD CREEK BEPCO PRD
1252218 SMITH USA #30
SMITH USA 1-30 49043203620000 SOUTH FRISBY BEPCO PRD
1252219 TENNECO FEDERAL #23
TENNECO FEDERAL 1-23 49043204960000 SOUTH FRISBY BEPCO PRD
1252220 COTTONWOOD CREEK FEDERAL #19
COTTONWOOD CREEK FED 19-1 49043203520000 SOUTH FRISBY BEPCO PRD
1252328 NO WATER CREEK #4
NO WATER CREEK 4 49043200540000 NO WATER CREEK BEPCO PA
1252329 NO WATER CREEK #8
NO WATER CREEK 8 49043201180000 NO WATER CREEK BEPCO TA
1252330 NO WATER CREEK #13
NO WATER CREEK 13 49043201230000 NO WATER CREEK BEPCO TA
1252331 NO WATER CREEK #15
NO WATER CREEK 15 49043201290000 NO WATER CREEK BEPCO TA
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1252213 NEIBER II UNIT (TENSLEEP)
NEIBER UNIT II-I LOT 15 19 45N 92W .76909143 .67295528 .00000000
1252215 SOUTH FRISBY LACOY FED #5 & #8
SOUTH FRISBY 5 LOT 9 19 47N 91W 1.00000000 .85500000 .00000000
SOUTH FRISBY 8 NE NE 24 47N 92W 1.00000000 .85500000 .00000000
1252217 CALDWELL USA #20
CALDWELL 1-20 SW SW 20 47N 91W 1.00000000 .84000000 .00000000
CALDWELL 2-20 SW NW 20 47N 91W 1.00000000 .84000000 .00000000
1252218 SMITH USA #30
SMITH USA 1-30 NE NE 30 47N 91W 1.00000000 .84750000 .00000000
1252219 TENNECO FEDERAL #23
TENNECO FEDERAL 1-23 SE NE 23 47N 92W 1.00000000 .87500000 .00000000
1252220 COTTONWOOD CREEK FEDERAL #19
COTTONWOOD CREEK FED 19-1 NW SE 19 47N 91W 1.00000000 .85250000 .00000000
1252328 NO WATER CREEK #4
NO WATER CREEK 4 LOT 9 31 47N 91W 1.00000000 .82500000 .00000000
1252329 NO WATER CREEK #8
NO WATER CREEK 8 SW NE 31 47N 91W 1.00000000 .82500000 .00000000
252330 NO WATER CREEK #13
NO WATER CREEK 13 LOT 11 05 46N 91W 1.00000000 .84500000 .00000000
1252331 NO WATER CREEK #15
NO WATER CREEK 15 SW NE 05 46N 91W 1.00000000 .84500000 .00000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 3
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
NON-UNITIZED ASSETS (CO-OP)
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1305001 CHAMBERS STATE
CHAMBERS STATE #1-36 49043203040000 RATTLESNAKE BEPCO PRD
CHAMBERS STATE #2-36 49043203140000 RATTLESNAKE BEPCO PRD
CHAMBERS STATE #3-36 49043203210000 RATTLESNAKE BEPCO PA
CHAMBERS STATE #4-36 49043207940000 RATTLESNAKE BEPCO PRD
CHAMBERS STATE #5-36 49043208200000 RATTLESNAKE BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1305001 CHAMBERS STATE
CHAMBERS STATE #1-36 SW SW 36 48N 92W 1.00000000 .84500000 .00000000
CHAMBERS STATE #2-36 SW SE 36 48N 92W 1.00000000 .84500000 .00000000
CHAMBERS STATE #3-36 SW NW 36 48N 92W 1.00000000 .84500000 .00000000
CHAMBERS STATE #4-36 NE SW 36 48N 92W 1.00000000 .84500000 .00000000
CHAMBERS STATE #5-36 SW NE 36 48N 92W 1.00000000 .84500000 .00000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 4
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
NON-UNITIZED ASSETS (OSO)
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1252303 COSEKA FEDERAL #18-3 & #18-4
ALTUS GOVERNMENT 18-3 49043203460000 COTTONWOOD CREEK WAGNER & BROWN, LTD. PRD
ALTUS GOVERNMENT 18-4 49043205420000 COTTONWOOD CREEK WAGNER & BROWN, LTD. PRD
1252304 GOVERNMENT 29-1
GOVERNMENT 29-1 49043202960000 COTTONWOOD CREEK SAMSON RESOURCES CORP PA
1252305 COSEKA FEDERAL #13-1, 2 & 3
ALTUS GOVERNMENT 13-1 49043203310000 COTTONWOOD CREEK WAGNER & BROWN, LTD. SI
ALTUS GOVERNMENT 13-2 49043203470000 COTTONWOOD CREEK WAGNER & BROWN, LTD. SI
ALTUS GOVERNMENT 13-3 49043205560000 COTTONWOOD CREEK WAGNER & BROWN, LTD. SI
1252306 COSEKA FEDERAL #18-1 & #18-5
ALTUS GOVERNMENT 18-1 49043203200000 COTTONWOOD CREEK WAGNER & BROWN, LTD. PRD
ALTUS GOVERNMENT 18-5 49043205740000 COTTONWOOD CREEK WAGNER & BROWN, LTD. PRD
1252307 BRENT FEDERAL #2 & #3 FED #32-1
BRENT FEDERAL 2 49043203920000 COTTONWOOD CREEK BRENT EXPLORATION, INC. SI
BRENT FEDERAL 3 49043203930000 COTTONWOOD CREEK BRENT EXPLORATION, INC. SI
FEDERAL 32-1 49043205090000 COTTONWOOD CREEK BRENT EXPLORATION, INC. SI
1252308 MARTIN FEDERAL #29-2
MARTIN FEDERAL 29-2 49043203300000 COTTONWOOD CREEK SAMSON RESOURCES CORP PRD
1252309 GOVERNMENT #14-2
GOVERNMENT #14-2 49043202920000 RATTLESNAKE SAMSON RESOURCES CORP SI
1252310 TENNECO GOVERNMENT #1-1 & 1-2
TENNECO GOVERNMENT 1-2 49043202940000 COTTONWOOD CREEK SAMSON RESOURCES CORP SI
1252311 GOVERNMENT #27-1
GOVERNMENT 27-1 49043202810000 COTTONWOOD CREEK MARKUS PRODUCTION, INC. PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1252303 COSEKA FEDERAL #18-3 & #18-4
ALTUS GOVERNMENT 18-3 SE NW 18 47N 91W .00000000 .00000000 .09000000
ALTUS GOVERNMENT 18-4 NW NW 18 47N 91W .00000000 .00000000 .09000000
1252304 GOVERNMENT 29-1
GOVERNMENT 29-1 SW SW 29 47N 91W .00000000 .00000000 .00000000
1252305 COSEKA FEDERAL #13-1, 2 & 3
ALTUS GOVERNMENT 13-1 NE NE 13 47N 92W .00000000 .00000000 .09500000
ALTUS GOVERNMENT 13-2 NE SE 13 47N 92W .00000000 .00000000 .09500000
ALTUS GOVERNMENT 13-3 NW NE 13 47N 92W .00000000 .00000000 .09500000
1252306 COSEKA FEDERAL #18-1 & #18-5
ALTUS GOVERNMENT 18-1 Lot 12 18 47N 91W .00000000 .00000000 .08874760
ALTUS GOVERNMENT 18-5 NE SW 18 47N 91W .00000000 .00000000 .08874760
1252307 BRENT FEDERAL #2 & #3 FED #32-1
BRENT FEDERAL 2 SW NE 32 47N 91W .00000000 .00000000 .09472400
BRENT FEDERAL 3 SW NW 33 47N 91W .00000000 .00000000 .09472400
FEDERAL 32-1 NE NE 32 47N 91W .00000000 .00000000 .09472400
1252308 MARTIN FEDERAL #29-2
MARTIN FEDERAL 29-2 SW NW 29 47N 91W .04848480 .03636360 .09000000
1252309 GOVERNMENT #14-2
GOVERNMENT #14-2 NW NW 14 47N 92W .00000000 .00000000 .06250000
1252310 TENNECO GOVERNMENT #1-1 & 1-2
TENNECO GOVERNMENT 1-2 SW NW 01 47N 92W .00000000 .00000000 .01875000
1252311 GOVERNMENT #27-1
GOVERNMENT 27-1 SW SW 27 47N 92W .26666640 .19999980 .08500000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 1
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
NON-UNITIZED ASSETS (OSO)
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1252313 BRENT FEDERAL #11-1
BRENT FEDERAL 11-1 49043204440000 COTTONWOOD CREEK WASHAKIE ENERGIES CO. LT PRD
1252314 BRENT FEDERAL #16-1
BRENT FEDERAL 16-1 49043204480000 COTTONWOOD CREEK WASHAKIE ENERGIES CO. LT PRD
1252316 SCHETTERLY #1-30
ALTUS SCHETTERLY 1-30 49043203630000 SOUTH FRISBY BRENT EXPLORATION, INC. PRD
1252317 BRENT FEDERAL #3-25
BRENT FEDERAL 3-25 49043204330000 SOUTH FRISBY BRENT EXPLORATION, INC. PRD
1252318 BRENT FEDERAL 13-24
BRENT FEDERAL 13-24 49043204600000 FRISBY SOUTH BRENT EXPLORATION, INC. PRD
1252319 BRENT FEDERAL 25-7
BRENT FEDERAL 25-7 49043205360000 FRISBY SOUTH ANDERSON MYERS PA
1252320 TENNECO USA #1
TENNECO USA 1 49043205910000 COTTONWOOD CREEK CAROL-HOLLY OIL CORP. PRD
1252321 GOVERNMENT #25-1
GOVERNMENT 25-1 49043202990000 SOUTH FORK MARKUS PRODUCTION, INC. PRD
1252322 GOVERNMENT #36-1
GOVERNMENT 36-1 49043202890000 COTTONWOOD CREEK MARKUS PRODUCTION, INC. SI
1252324 TENNECO USA 2
TENNECO USA 2 49043206080000 COTTONWOOD CREEK WYOMING RESOURCES PA
1252325 TENNECO USA #3
TENNECO USA 3 49043206230000 COTTONWOOD CREEK CAROL-HOLLY OIL CORP. PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1252313 BRENT FEDERAL #11-1
BRENT FEDERAL 11-1 NE SW 01 46N 92W .00000000 .00000000 .05000000
1252314 BRENT FEDERAL #16-1
BRENT FEDERAL 16-1 SE SE 01 46N 92W .00000000 .00000000 .05000000
1252316 SCHETTERLY #1-30
ALTUS SATTTERLY 1-30 NE SE 30 47N 91W .00000000 .00000000 .06500000
1252317 BRENT FEDERAL #3-25
BRENT FEDERAL 3-25 NE NW 25 47N 92W .00000000 .00000000 .05000000
1252318 BRENT FEDERAL 13-24
BRENT FEDERAL 13-24 SW SW 24 47N 92W .00000000 .00000000 .05000000
1252319 BRENT FEDERAL 25-7
BRENT FEDERAL 25-7 SW NE 25 47N 92W .00000000 .00000000 .00000000
1252320 TENNECO USA #1
TENNECO USA 1 SW SE 25 47N 92W .00000000 .00000000 .10000000
1252321 GOVERNMENT #25-1
GOVERNMENT 25-1 SE NW 25 46N 92W .00000000 .00000000 .12500000
1252322 GOVERNMENT #36-1
GOVERNMENT 36-1 NE NE 36 47N 92W .26666640 .19999980 .03750000
1252324 TENNECO USA 2
TENNECO USA 2 SE SW 28 47N 91W .00000000 .00000000 .00000000
1252325 TENNECO USA #3
TENNECO USA 3 SE NW 28 47N 91W .12500000 .11312500 .05000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 2
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
NON-UNITIZED ASSETS (OSO)
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1252327 RATTLESNAKE USA #4
RATTLESNAKE 4 49043206330000 COTTONWOOD CREEK CAROL-HOLLY OIL CORP. SI
1252332 BRENT FEDERAL #1
BRENT FEDERAL #1 49043203910000 COTTONWOOD CREEK BRENT EXPLORATION CO SI
1252333 HONEY BUTTE FEDERAL #3
HONEY BUTTE FEDERAL #3 49043203390000 RATTLESNAKE HANSON OPERATING COMPANY PRD
1252334 GOVERNMENT #14-1
GOVERNMENT 14-1 49043201140000 RATTLESNAKE MARKUS PRODUCTION, INC. SI
1252335 TENNECO GOVERNMENT #1-3
TENNECO GOVERNMENT 1-3 49043203030000 COTTONWOOD CREEK SAMSON RESOURCES CORP PRD
1252336 TENNECO GOVERNMENT #1-4
TENNECO GOVERNMENT 1-4 49043203010000 COTTONWOOD CREEK SAMSON RESOURCES CORP PRD
1252337 GOVERNMENT #28-1
GOVERNMENT 28-1 49043202970000 COTTONWOOD CREEK MARKUS PRODUCTION, INC. SI
1252338 GOVERNMENT #36-2
GOVERNMENT 36-2 49043203050000 COTTONWOOD CREEK MARKUS PRODUCTION, INC. SI
1256101 BASS FEDERAL 33-24 #1H
#1 H BASS FEDERAL 33-24 49043207100000 MARSHALL UNION PACIFIC RESOURCES PRD
1288501 SAGEBUSH FEDERAL #13-25
SAGEBUSH FED #13-25 49003208230000 SAGEBUSH ALV COMPANY PRD
1288502 SAGEBUSH FEDERAL #32-26
SAGEBUSH #32-26 49003208270000 SAGEBUSH ALV COMPANY PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1252327 RATTLESNAKE USA #4
RATTLESNAKE 4 SE NW 11 47N 92W .05000000 .04245000 .00000000
1252332 BRENT FEDERAL #1
BRENT FEDERAL #1 NE NW 31 47N 91W .00000000 .00000000 .09000000
1252333 HONEY BUTTE FEDERAL #3
HONEY BUTTE FEDERAL #3 SW SE 16 47N 91W .10000000 .08350000 .00000000
1252334 GOVERNMENT #14-1
GOVERNMENT 14-1 NW NE 14 47N 92W .26666640 .19999978 .06250000
1252335 TENNECO GOVERNMENT #1-3
TENNECO GOVERNMENT 1-3 SW NE 01 47N 92W .25291700 .18652630 .01875000
1252336 TENNECO GOVERNMENT #1-4
TENNECO GOVERNMENT 1-4 SW SE 01 47N 92W .22736810 .16768400 .01875000
1252337 GOVERNMENT #28-1
GOVERNMENT 28-1 SW SE 28 47N 92W .04848480 .03636360 .08500000
1252338 GOVERNMENT #36-2
GOVERNMENT 36-2 NE NW 36 47N 92W .22736810 .17052610 .03750000
1256101 BASS FEDERAL 33-24 #1H
#1 H BASS FEDERAL 33-24 SW SE 24 48N 92W .00000000 .00000000 .03187499
1288501 SAGEBUSH FEDERAL #13-25
SAGEBUSH FED #13-25 NW SW 25 51N 92W .00000000 .00000000 .00830000
1288502 SAGEBUSH FEDERAL #32-26
SAGEBUSH #32-26 SW NE 26 51N 92W .00000000 .00000000 .04000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 3
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 001 49043053070000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 002 49043053230000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 004 49043052760000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 005 49043052820000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 006 49043052730000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 007 49043053010000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 008 49043052860000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 008X 49043207830000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 009 49043053030000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 010 49043052650000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 010X 49043207190000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 011 49043052450000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 012 49043052690000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 014 49043052510000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 015 49043052460000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 015X 49043207200000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 016 49043052710000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 017 49043052300000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 018 49043052870000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 018X 49043207210000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 019 49043052520000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 020 49043052700000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 021 49043052530000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 022 49043052320000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 023 49043053040000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 024 49043052380000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 025 49043052400000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 026 49043052980000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 027 49043052390000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 028 49043052670000 COTTONWOOD CREEK BEPCO PA
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 001 SW SW 02 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 002 SW NE 03 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 004 SE SE 07 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 005 NW SW 07 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 006 NW NE 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 007 NW NW 07 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 008 NW SE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 008X NW SE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 009 NW NE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 010 NW NW 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 010X NW NW 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 011 NW SE 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 012 NW NE 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 014 NW SW 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 015 NW SW 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 015X NW SW 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 016 NW NE 14 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 017 NW NW 19 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 018 NW SW 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 018X NW SW 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 019 NW SE 14 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 020 NW NW 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 021 NW SE 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 022 NW NE 19 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 023 NW SW 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 024 NW NW 24 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 025 NW NE 24 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 026 NW NW 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 027 NW NE 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 028 NW NW 14 47N 91W .91098801 .76677372 .00004650
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 1
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 029 49043052490000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 030 49043052950000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 031 49043052500000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 032 49043052360000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 033 49043052480000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 034 49043052680000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 035 49043052840000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 036 49043052340000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 037 49043052970000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 038 49043052350000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 039 49043052830000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 040 49043051960000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 041 49043053160000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 042 49043052810000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 043 49043053710000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 044 49043052640000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 045 49043052960000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 046 49043052990000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 047 49043053300000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 048 49043052780000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 050 49043052660000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 051 49043052330000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 052 49043052630000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 053 49043053290000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 054 49043053520000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 055 49043053130000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 059 49043051970000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 060 49043051920000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 061 49043051940000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 062 49043051950000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 063 49043051870000 COTTONWOOD CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 029 NW SW 14 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 030 NW NW 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 031 NW SE 15 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 032 NW NW 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 033 NW SW 15 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 034 NW NE 15 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 035 NW SW 10 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 036 NW NW 22 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 037 NW NE 09 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 038 NW NE 22 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 039 NW SE 09 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 040 NW SE 24 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 041 NW SE 04 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 042 NW SW 05 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 043 NW NE 32 48N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 044 NW NE 16 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 045 NW NW 09 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 046 NW NW 10 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 047 NW NW 04 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 048 NW SE 08 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 050 NW NW 15 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 051 NW NE 21 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 052 NW NW 16 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 053 NW NE 04 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 054 NW SE 32 48N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 055 NW SW 04 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 059 NW SE 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 060 NW SW 24 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 061 NW SW 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 062 NW SE 22 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 063 NW NE 26 47N 91W .91098801 .76677372 .00004650
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 2
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 064 49043051880000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 066 49043052940000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 067 49043052880000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 068 49043052770000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 069 49043052920000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 070 49043052720000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 070X 49043207170000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 071 49043052620000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 072 49043052750000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 073 49043052570000 COTTONWOOD CREEK BEPCO SI
COTTONWOOD CREEK UNIT 074 49043052580000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 074X 49043208070000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 075 49043052410000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 077 49043052470000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 078 49043052850000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 081 49043051860000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 081A 49043206300000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 082 49043052740000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 083 49043052910000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 084 49043053020000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 086 49043052930000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 087 49043052790000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 088 49043055890000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 089 49043200180000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 090 49043200170000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 091 49043200220000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 092 49043056060000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 094 49043200090000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 095 49043200350000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 096 49043200310000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 097 49043200360000 COTTONWOOD CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 064 NW NW 25 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 066 SW NW 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 067 NW SW 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 068 SE SE 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 069 NW SW 09 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 070 NW NW 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 070X NW NW 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 071 NW NE 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 072 NW NW 16 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 073 NW SW 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 074 NW SE 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 074X SW SE 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 075 NW NW 20 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 077 NW SE 16 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 078 NW SE 10 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 081 NW NE 27 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 081A NW NE 27 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 082 NW NE 16 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 083 NW SE 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 084 NW NE 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 086 NW SE 07 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 087 NE SW 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 088 SE SE 09 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 089 SE NW 15 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 090 SE NE 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 091 SE SE 15 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 092 SE SE 01 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 094 SE SW 01 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 095 SE SW 06 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 096 NW SW 19 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 097 SE SE 02 47N 91W .91098801 .76677372 .00004650
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 3
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 098 49043200550000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 101 49043201130000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 102 49043201880000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 103 49043201900000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 104 49043201520000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 105 49043201850000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 106 49043201830000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 107 49043203870000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 108 49043201970000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 111 49043202110000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 113 49043202150000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 114 49043202140000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 115 49043202170000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 116 49043202160000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 118 49043202180000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 120 49043203110000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 121 49043204450000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 122 49043204450000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 123 49043204310000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 124 49043204380000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 125 49043204300000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 126 49043204320000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 127 49043204370000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 128 49043204430000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 129 49043204590000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 130 49043204500000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 131 49043204510000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 132 49043204580000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 133 49043204570000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 134 49043204560000 COTTONWOOD CREEK BEPCO PA
COTTONWOOD CREEK UNIT 134X 49043207300000 COTTONWOOD CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 098 NW SE 19 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 101 NW NW 26 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 102 NW NE 17 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 103 SE SE 22 47N 91W .91098601 .76677372 .00004650
COTTONWOOD CREEK UNIT 104 SE SE 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 105 SE NE 24 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 106 SE SW 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 107 SE SW 14 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 108 SE NE 16 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 111 NE SE 07 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 113 SE NE 17 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 114 SE NE 27 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 115 SE NW 16 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 116 SW NW 22 47N 92W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 118 SE NW 07 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 120 SE NW 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 121 NW SW 05 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 122 SW SW 17 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 123 SE SE 16 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 124 SE NW 19 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 125 SE NW 26 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 126 SE SW 22 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 127 SE NW 22 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 128 SE SW 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 129 SE SW 09 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 130 SE NW 24 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 131 SE NE 26 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 132 SE SW 15 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 133 SE NE 22 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 134 SE NW 27 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 134X SE NW 27 47N 91W .91098801 .76677372 .00004650
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 4
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 135 49043204650000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 136 49043204630000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 139 49043204930000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 141 49043264850000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 145 49043205040000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 151 49043205680000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 156 49043205640000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 157 49043205790000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 158 49043205650000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 159 49043205660000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 160 49043205800000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 161 49043205810000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 162 49043205630000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 163 49043205670000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 165 49043205630000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 166 49043205840000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 167 49043206110000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 168 49043206050000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 169 49043206040000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 171 49043206060000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 172 49043206090000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 173 49043206130000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 174 49043206150000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 175 49043206120000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 179 49043206200000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 180 49043206210000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 182 49043206190000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 183 49043206350000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 184 49043206370000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 165 49043206380000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 186 49043206420000 COTTONWOOD CREEK BEPCO TA
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 135 NW SE 31 48N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 136 SW SE 07 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 139 SE NW 21 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 141 SE SW 24 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 145 SE SE 08 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 151 SE SE 14 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 156 NW NE 10 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 157 SE NW 10 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 158 SE SE 10 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 159 SE SW 10 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 160 SE NE 09 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 161 SE NW 09 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 162 SE NE 15 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 163 SE NW 14 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 165 SE NW 17 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 166 SE SW 08 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 167 SW SE 04 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 168 SE NE 14 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 169 SW SW 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 171 NE NW 19 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 172 NE NE 27 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 173 SE NE 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 174 SE SE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 175 SE NE 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 179 SE SW 09 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 180 SE SW 04 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 182 SE NW 04 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 183 NW NW 17 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 184 SW NW 25 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 185 NW NE 05 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 186 NW SW 17 47N 91W .91098801 .76677372 .00004650
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 5
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 199 49043206480000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 200 49043206470000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 201 49043206460000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 208 49043206490000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 210 49043207290000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 211 49043207270000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 212 49043207280000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 213 49043207260000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 214 49043207390000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 215 49043207410000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 216 49043207420000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 217 49043207350000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 218 49043207360000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 219 49043207400000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 220 49043207370000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 221 49043207430000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 222 49043207450000 COTTONWOOD CREEK BEPCO TA
COTTONWOOD CREEK UNIT 223 49043207460000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 224 49043207470000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 225 49043207490000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 226 49043207500000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 227 49043207480000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 228 49043207630000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 229 49043207650000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 230 49043207660000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 231 49043207670000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 232 49043207680000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 233 49043207690000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 234 49043207740000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 235 49043207730000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 236 49043207700000 COTTONWOOD CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 199 SE NE 18 47N 90W .91098801 .76577372 .00004650
COTTONWOOD CREEK UNIT 200 SE NE 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 201 SE NW 13 47N 92W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 208 SE NW 16 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 210 SE NW 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 211 SW SW 07 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 212 SE SW 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 213 SE SE 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 214 SE SW 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 215 SE NW 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 216 NE NE 19 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 217 SE NE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 218 SE NW 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 219 SW SW 09 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 220 SE SE 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 221 SE SW 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 222 NW NE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 223 NE SE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 224 SW SE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 225 SW SW 07 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 226 SE NE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 227 SW NE 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 228 SW NW 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 229 NE NW 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 230 SE NE 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 231 NW SE 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 232 SE SE 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 233 SE SW 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 234 LOT 05 19 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 235 NW NE 19 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 236 NE NE 13 47N 91W .91098801 .76677372 .00004650
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 6
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 237 49043207620000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 238 49043207520000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 239 49043207530000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 240 49043207710000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 241 49043207720000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 242 49043207750000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 243 49043207840300 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 244 49043207850000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 245 49043207980000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 246 49043207950000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 247 49043207960000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 248 49043207970000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 249 49043208010000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 250 49043207990000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 251 49043208050000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 252 49043207770000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 253 49043207780000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 254 49043207790000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 255 49043207800000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 256 49043207810000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 257 49043207820000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 258 49043208000000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 259 49043208020000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 260 49043208030000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 261 49043207860000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 263 49043207880000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 267 49043208190000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 269 49043208210000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 271 49043208110000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 272 49043208150000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 273 49043208120000 COTTONWOOD CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 237 NE NE 18 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 238 NW SW 33 48N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 239 SW NE 08 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 240 SW SE 07 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 241 SE NW 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 242 SE NW 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 243 SE SE 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 244 SW SE 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 245 NE SE 14 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 246 SW NE 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 247 SE NW 13 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 248 NE NE 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 249 NE NW 24 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 250 NE NE 14 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 251 SE NE 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 252 SW SW 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 253 NW NE 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 254 NE NE 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 255 SE NE 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 256 SW NW 20 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 257 SE NW 20 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 258 SW SE 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 259 SW SE 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 260 NW SE 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 261 NW SW 09 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 263 SW SE 32 48N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 267 NW NE 23 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 269 SW NW 26 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 271 NE NW 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 272 SE SE 02 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 273 NE NW 12 47N 91W .91098801 .76677372 .00004650
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 7
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 274 49043208130000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 275 49043208140000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 276 49043208170000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 277 49043208080000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 278 49043208090000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 279 04043208060000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK UNIT 280 49043208100000 COTTONWOOD CREEK BEPCO PRD
1277602 COTTONWOOD CREEK UNIT - TENSLP
TENSLEEP UNIT 065 49043053000000 COTTONWOOD CREEK BEPCO PRD
TENSLEEP UNIT 110 49043202070000 COTTONWOOD CREEK BEPCO PRD
TENSLEEP UNIT 117 49043202190000 COTTONWOOD CREEK BEPCO PRD
TENSLEEP UNIT 119 49043202310000 COTTONWOOD CREEK BEPCO PRD
1277604 COTTONWOOD CREEK UNIT WELL#189
COTTONWOOD CREEK NPA 189 49043206400000 COTTONWOOD CREEK BEPCO PRD
1277605 COTTONWOOD CREEK UNIT WELL#190
COTTONWOOD CREEK NPA 190 49043206410000 COTTONWOOD CREEK BEPCO PRD
1277606 COTTONWOOD CREEK UNIT WELL #56
COTTONWOOD CREEK NPA 056 49043053510000 COTTONWOOD CREEK BEPCO TA
1277608 COTTONWOOD CREEK UNIT WELL #76
COTTONWOOD CREEK NPA 076 49043052800000 COTTONWOOD CREEK BEPCO TA
1277610 COTTONWOOD CREEK UNIT WELL #85
COTTONWOOD CREEK NPA 085 49043051850000 COTTONWOOD CREEK BEPCO TA
1277611 COTTONWOOD CREEK UNIT WELL#197
COTTONWOOD CREEK NPA 197 49043206440000 COTTONWOOD CREEK BEPCO TA
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1277601 COTTONWOOD CREEK UNIT - PHOSPH
COTTONWOOD CREEK UNIT 274 SE NE 11 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 275 NE SW 12 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 276 NE NW 24 47N 91W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 277 NW SE 08 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 278 NW SE 17 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 279 NE NW 16 47N 90W .91098801 .76677372 .00004650
COTTONWOOD CREEK UNIT 280 NW NE 16 47N 90W .91098801 .76677372 .00004650
1277602 COTTONWOOD CREEK UNIT - TENSLP
TENSLEEP UNIT 065 NW NE 07 47N 90W 1.00000000 .83746144 .00000000
TENSLEEP UNIT 110 SW NE 07 47N 90W 1.00000000 .83746144 .00000000
TENSLEEP UNIT 117 NW SE 07 47N 90W 1.00000000 .83746144 .00000000
TENSLEEP UNIT 119 NE NW 07 47N 90W 1.00000000 .83746144 .00000000
1277604 COTTONWOOD CREEK UNIT WELL#189
COTTONWOOD CREEK NPA 189 NW SE 07 47N 91W 1.00000000 .82500000 .00000000
1277605 COTTONWOOD CREEK UNIT WELL#190
COTTONWOOD CREEK NPA 190 NW NW 08 47N 91W 1.00000000 .82500000 .00000000
1277606 COTTONWOOD CREEK UNIT WELL #56
COTTONWOOD CREEK NPA 056 NW SW 32 48N 91W .91956760 .80462150 .00000000
1277608 COTTONWOOD CREEK UNIT WELL #76
COTTONWOOD CREEK NPA 076 NW SW 08 47N 91W .92203300 .67747480 .00000000
1277610 COTTONWOOD CREEK UNIT WELL #85
COTTONWOOD CREEK NPA 085 NW NW 27 47N 91W .91328560 .73088980 .00000000
1277611 COTTONWOOD CREEK UNIT WELL#197
COTTONWOOD CREEK NPA 197 NW SE 09 47N 90W 1.00000000 .81500000 .00000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 8
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1277613 COTTONWOOD CREEK UNIT - FRONTIER
COTTONWOOD CREEK UNIT 209 49043202580000 COTTONWOOD CREEK UNIT BEPCO TA
1277614 COTTONWOOD CREEK NPA - #109
COTTONWOOD CREEK NPA 109 49043202050000 COTTONWOOD CREEK UNIT BEPCO TA
1277617 COTTONWOOD CREEK UNIT #262
COTTONWOOD CREEK NPA 262 49043207870000 COTTONWOOD CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1277613 COTTONWOOD CREEK UNIT - FRONTIER
COTTONWOOD CREEK UNIT 209 NE NW 8 47N 90W .00000000 .00000000 .00000000
1277614 COTTONWOOD CREEK NPA - #109
COTTONWOOD CREEK NPA 109 NW SE 17 47N 91W .91098801 .76677372 .00004650
1277617 COTTONWOOD CREEK UNIT #262
COTTONWOOD CREEK NPA 262 SE SW 05 47N 91W .91000750 .75075619 .00000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 9
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
COTTONWOOD CREEK FIELD EXTENSION (PHOSPHORIA) UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1196001 COTTONWOOD CREEK EXT UNIT
CC EXTENSION UNIT 1-1 49043201540000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 11-1 49043201700000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 14-1 49043201760000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 16-1 49043201410000 COTTONWOOD CREEK BEPCO PA
CC EXTENSION UNIT 16-1X 49043207230000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 18-1 49043056030000 COTTONWOOD CREEK BEPCO PA
CC EXTENSION UNIT 19-1 49043201490000 COTTONWOOD CREEK BEPCO PA
CC EXTENSION UNIT 19-1X 49043206170000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 20-1 49043201500000 COTTONWOOD CREEK BEPCO PA
CC EXTENSION UNIT 20-1X 49043207240000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 21-1 49043201740000 COTTONWOOD CREEK BEPCO PA
CC EXTENSION UNIT 22-1 49043201840000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 23-1 49043201860000 COTTONWOOD CREEK BEPCO PA
CC EXTENSION UNIT 24-1 49043200080000 COTTONWOOD CREEK BEPCO PA
CC EXTENSION UNIT 26-1 49043206280000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 27-1 49043206270000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 28-1 49043206260000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 29-1 49043207920000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 3-1 49043051750000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 30-1 49043208160000 COTTONWOOD CREEK BEPCO PRD
CC EXTENSION UNIT 31-1 49043208220000 COTTONWOOD CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1196001 COTTONWOOD CREEK EXT UNIT
CC EXTENSION UNIT 1-1 LOT 5 01 46N 91W .96870790 .81103222 .00061900
CC EXTENSION UNIT 11-1 NW SE 31 47N 90W .96870790 .81103222 .00061500
CC EXTENSION UNIT 14-1 LOT 14 06 46N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 16-1 NW SW 31 47N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 16-1X LOT 7 31 47N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 18-1 NE SW 25 47N 91W .96870790 .81103222 .00061900
CC EXTENSION UNIT 19-1 LOT 12 06 46N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 19-1X LOT 13 06 46N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 20-1 LOT 20 06 46N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 20-1X LOT 18 06 46N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 21-1 SW SW 32 47N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 22-1 SW NW 32 47N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 23-1 SW NE 31 47N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 24-1 NW NE 36 47N 91W .96870790 .81103222 .00061900
CC EXTENSION UNIT 26-1 SE SW 25 47N 91W .96870790 .81103222 .00061900
CC EXTENSION UNIT 27-1 LOT 12 06 46N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 28-1 SE SW 31 47N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 29-1 NW SW 25 47N 91W .96870790 .81103222 .00061900
CC EXTENSION UNIT 3-1 SW SW 29 47N 90W .96870790 .81103222 .00061900
CC EXTENSION UNIT 30-1 SE SE 26 47N 91W .96870790 .81103222 .00061900
CC EXTENSION UNIT 31-1 LOT 08 31 47N 90W .96870790 .81103222 .00061900
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 1
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
NO WATER CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1252302 NO WATER CREEK UNIT
NO WATER CREEK UNIT 11 49043200970000 NO WATER CREEK BEPCO TA
NO WATER CREEK UNIT 12 49043201100000 NO WATER CREEK BEPCO TA
NO WATER CREEK UNIT 14 49043201330000 NO WATER CREEK BEPCO TA
NO WATER CREEK UNIT 17 49043207640000 NO WATER CREEK BEPCO PRD
NO WATER CREEK UNIT 18 49043207930000 NO WATER CREEK BEPCO PRD
NO WATER CREEK UNIT 19 49043208260000 NO WATER CREEK BEPCO PRD
NO WATER CREEK UNIT 2 49043200280000 NO WATER CREEK BEPCO PA
NO WATER CREEK UNIT 20 49043208250000 NO WATER CREEK BEPCO PRD
NO WATER CREEK UNIT 3 49043200450000 NO WATER CREEK BEPCO PA
NO WATER CREEK UNIT 5 49043200530000 NO WATER CREEK BEPCO PRD
NO WATER CREEK UNIT 6 49043200640000 NO WATER CREEK BEPCO TA
NO WATER CREEK UNIT 7 49043200690000 NO WATER CREEK BEPCO TA
NO WATER CREEK UNIT 9 49043200810000 NO WATER CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1252302 NO WATER CREEK UNIT
NO WATER CREEK UNIT 11 SW NW 05 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 12 NW SE 06 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 14 NE SW 06 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 17 LOT 16 05 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 18 LOT 13 06 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 19 LOT 11 06 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 2 LOT 13 06 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 20 SE NW 06 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 3 LOT 22 06 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 5 LOT 16 06 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 6 LOT 19 06 46N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 7 SW SE 31 47N 91W .94441730 .78727357 .00000000
NO WATER CREEK UNIT 9 LOT 09 05 46N 91W .94441730 .78727357 .00000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 1
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
SLICK CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1252208 SLICK CREEK UNIT (PHOSPHORIA)
SLICK CREEK H20 INJ #2 49043050020000 SLICK CREEK BEPCO DAI
SLICK CREEK PHOSPHORIA 02 49043050020000 SLICK CREEK BEPCO TA
SLICK CREEK PHOSPHORIA 03 49043051620000 SLICK CREEK BEPCO PA
SLICK CREEK PHOSPHORIA 05 49043051700000 SLICK CREEK BEPCO PA
SLICK CREEK PHOSPHORIA 06 49043051680000 SLICK CREEK BEPCO PA
SLICK CREEK PHOSPHORIA 07 49043051660000 SLICK CREEK BEPCO PA
SLICK CREEK PHOSPHORIA 1 49043051670000 SLICK CREEK BEPCO PRD
SLICK CREEK PHOSPHORIA 10 49043201520000 SLICK CREEK BEPCO PRD
SLICK CREEK PHOSPHORIA 11 49043201530000 SLICK CREEK BEPCO PA
SLICK CREEK PHOSPHORIA 12 49043201580000 SLICK CREEK BEPCO PA
SLICK CREEK PHOSPHORIA 21 49043210990000 SLICK CREEK BEPCO PRD
SLICK CREEK PHOSPHORIA 22 49043202250000 SLICK CREEK BEPCO PRD
SLICK CREEK PHOSPHORIA 30 49043205330000 SLICK CREEK BEPCO PRD
SLICK CREEK PHOSPHORIA 34-43 49043206530000 SLICK CREEK BEPCO PRD
SLICK CREEK PHOSPHORIA 35-31 49043206360000 SLICK CREEK BEPCO PRD
SLICK CREEK PHOSPHORIA 4 49043051610000 SLICK CREEK BEPCO PRD
SLICK CREEK PHOSPHORIA 8 49043051640000 SLICK CREEK BEPCO TA
1252209 SLICK CREEK UNIT (FRONTIER)
SLICK CREEK FRONTIER 13 49043201630000 SLICK CREEK BEPCO PA
SLICK CREEK FRONTIER 15 49043201640000 SLICK CREEK BEPCO PRD
SLICK CREEK FRONTIER 19 49043201690000 SLICK CREEK BEPCO PA
SLICK CREEK FRONTIER 20 49043201670000 SLICK CREEK BEPCO PRD
SLICK CREEK FRONTIER 8 49043051640000 SLICK CREEK BEPCO PA
1252210 SLICK CREEK UNIT (MUDDY)
SLICK CREEK MUDDY 06 49043051680000 SLICK CREEK BEPCO PA
SLICK CREEK MUDDY 07 49043051660000 SLICK CREEK BEPCO PA
SLICK CREEK MUDDY 11 49043201530000 SLICK CREEK BEPCO PA
SLICK CREEK MUDDY 16 49043201650000 SLICK CREEK BEPCO PA
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1252208 SLICK CREEK UNIT (PHOSPHORIA)
SLICK CREEK H20 INJ #2 SE NW 34 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 02 SE NW 34 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 03 LOT 8 02 46N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 05 SE NW 35 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 06 SE NW 33 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 07 NE SE 33 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 1 SE NE 32 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 10 SE SW 35 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 11 SE SE 32 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 12 NE SW 32 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 21 NW NE 02 46N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 22 NE NE 34 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 30 NE SW 33 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 34-43 SE NE 34 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 35-31 NW SE 35 47N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 4 LOT 8 03 46N 92W 1.00000000 .86266071 .00054626
SLICK CREEK PHOSPHORIA 8 SW SE 34 47N 92W 1.00000000 .86266071 .00054626
1252209 SLICK CREEK UNIT (FRONTIER)
SLICK CREEK FRONTIER 13 NW SE 34 47N 92W 1.00000000 .86500050 .00103100
SLICK CREEK FRONTIER 15 LOT 8 02 46N 92W 1.00000000 .86500050 .00103100
SLICK CREEK FRONTIER 19 NW SE 33 47N 92W 1.00000000 .86500050 .00103100
SLICK CREEK FRONTIER 20 NW SW 35 47N 92W 1.00000000 .86500050 .00103100
SLICK CREEK FRONTIER 8 SW SE 34 47N 92W 1.00000000 .86500050 .00103100
1252210 SLICK CREEK UNIT (MUDDY)
SLICK CREEK MUDDY 06 SE NW 33 47N 92W .00000000 .00000000 .00000000
SLICK CREEK MUDDY 07 NE SE 33 47N 92W .00000000 .00000000 .00000000
SLICK CREEK MUDDY 11 SE SE 32 47N 92W .00000000 .00000000 .00000000
SLICK CREEK MUDDY 16 NE SW 32 47N 92W .00000000 .00000000 .00000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 1
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
SLICK CREEK UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1252210 SLICK CREEK UNIT (MUDDY)
SLICK CREEK MUDDY 17 49043201660000 SLICK CREEK BEPCO PA
SLICK CREEK UNIT
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1252210 SLICK CREEK UNIT (MUDDY)
SLICK CREEK MUDDY 17 LOT 8 03 46N 92W .00000000 .00000000 .00000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 2
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
SOUTH FRISBY UNIT
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1252214 SOUTH FRISBY UNIT
SOUTH FRISBY 2 49043202040000 SOUTH FRISBY BEPCO PRD
SOUTH FRISBY 24-33 49043206390000 SOUTH FRISBY BEPCO PRD
SOUTH FRISBY 3 49043202350000 SOUTH FRISBY BEPCO TA
SOUTH FRISBY 4 49043202600000 SOUTH FRISBY BEPCO PA
SOUTH FRISBY 6 49043202950000 SOUTH FRISBY BEPCO PRD
SOUTH FRISBY 7 49043203940000 SOUTH FRISBY BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1252214 SOUTH FRISBY UNIT
SOUTH FRISBY 2 NW SE 24 47N 92W 1.00000000 .86004334 .00000000
SOUTH FRISBY 24-33 SE SE 24 47N 92W 1.00000000 .86004334 .00000000
SOUTH FRISBY 3 SE NW 24 47N 92W 1.00000000 .86004334 .00000000
SOUTH FRISBY 4 NE NE 25 47N 92W 1.00000000 .86004334 .00000000
SOUTH FRISBY 6 LOT 9 30 47N 91W 1.00000000 .86004334 .00000000
SOUTH FRISBY 7 SE NW 30 47N 91W 1.00000000 .86004334 .00000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 1
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
NON-UNITIZED ASSETS (COOP)
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1161201 COTTONWOOD CREEK FEDERAL
COTTONWOOD CREEK 35-1 49043203730000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK 35-44 49043205970000 COTTONWOOD CREEK BEPCO PRD
1161202 COTTONWOOD CREEK STATE
COTTONWOOD CREEK 36-1 49043204090000 COTTONWOOD CREEK BEPCO PRD
COTTONWOOD CREEK 36-24 49043205690000 COTTONWOOD CREEK BEPCO PRD
1161203 COTTONWOOD CREEK FEDERAL #35-2
COTTONWOOD CREEK 35-2 49043204050000 COTTONWOOD CREEK BEPCO PRD
1161204 COTTONWOOD CREEK FEDERAL #35-3
COTTONWOOD CREEK 35-3 49043204020000 COTTONWOOD CREEK BEPCO PRD
1161205 COTTONWOOD CREEK FEDERAL #2-1
COTTONWOOD CREEK 2-1 49043204260000 COTTONWOOD CREEK BEPCO PRD
1161207 COTTONWOOD CREEK FEDERAL #2-34
COTTONWOOD CREEK 2-34 49043204730000 COTTONWOOD CREEK BEPCO PRD
1161212 COTTONWOOD CREEK FEDERAL #26-23
COTTONWOOD CREEK 26-23 49043206250000 COTTONWOOD CREEK BEPCO PRD
1161213 COTTONWOOD CREEK FEDERAL #21-23
COTTONWOOD CREEK 21-23 49043206500000 COTTONWOOD CREEK BEPCO PRD
1161214 COTTONWOOD CREEK FEDERAL #28-41
COTTONWOOD CREEK 28-41 49043206450000 COTTONWOOD CREEK BEPCO TA
1161215 COTTONWOOD CREEK FEDERAL #26-21
COTTONWOOD CREEK 26-21 49043206510000 COTTONWOOD CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1161201 COTTONWOOD CREEK FEDERAL
COTTONWOOD CREEK 35-1 NW NE 35 47N 91W 1.00000000 .81250000 .00000000
COTTONWOOD CREEK 35-44 NE NE 35 47N 91W 1.00000000 .81250000 .00000000
1161202 COTTONWOOD CREEK STATE
COTTONWOOD CREEK 36-1 SW NW 36 47N 91W 1.00000000 .81250000 .00000000
COTTONWOOD CREEK 36-24 NE SW 36 47N 91W 1.00000000 .81250000 .00000000
1161203 COTTONWOOD CREEK FEDERAL #35-2
COTTONWOOD CREEK 35-2 NW NW 35 47N 91W 1.00000000 .81562500 .00000000
1161204 COTTONWOOD CREEK FEDERAL #35-3
COTTONWOOD CREEK 35-3 NW SE 35 47N 91W 1.00000000 .81250000 .00000000
1161205 COTTONWOOD CREEK FEDERAL #2-1
COTTONWOOD CREEK 2-1 LOT 11 2 46N 91W 1.00000000 .81250000 .00000000
1161207 COTTONWOOD CREEK FEDERAL #2-34
COTTONWOOD CREEK 2-34 NE SE 2 46N 91W 1.00000000 .82500000 .00000000
1161212 COTTONWOOD CREEK FEDERAL #26-23
COTTONWOOD CREEK 26-23 SE SW 26 47N 91W 1.00000000 .70312500 .00187500
1161213 COTTONWOOD CREEK FEDERAL #21-23
COTTONWOOD CREEK 21-23 SE SW 21 47N 91W 1.00000000 .80937500 .06562500
1161214 COTTONWOOD CREEK FEDERAL #28-41
COTTONWOOD CREEK 28-41 NW NE 28 47N 91W 1.00000000 .73125000 .01875000
1161215 COTTONWOOD CREEK FEDERAL #26-21
COTTONWOOD CREEK 26-21 NW SW 26 47N 91W 1.00000000 .71290000 .00000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 1
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
NON-UNITIZED ASSETS (CO-OP)
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1161217 KNISLEY FEDERAL #1
KNISELY FEDERAL #1 49043051760000 COTTONWOOD CREEK BEPCO PRD
1252201 EARL SCHRANTZ USA
SCHRANTZ USA 1 49043051730000 COTTONWOOD CREEK BEPCO PRD
SCHRANTZ USA 3 49043200500000 COTTONWOOD CREEK BEPCO PRD
SCHRANTZ USA 4 49043200510000 COTTONWOOD CREEK BEPCO PA
SCHRANTZ USA 5 49043208240000 COTTONWOOD CREEK BEPCO PRD
1252202 TOLMAN USA
TOLMAN USA 2 49043200330000 COTTONWOOD CREEK BEPCO PRD
TOLMAN USA 3 49043200590000 COTTONWOOD CREEK BEPCO PRD
1252203 CALDWELL USA #1-7
CALDWELL USA 1-7 49043203830000 COTTONWOOD CREEK BEPCO PRD
1252204 FAURE USA
USA FAURE 1 49043200430000 RATTLESNAKE BEPCO PRD
USA FAURE 2 49043200570000 RATTLESNAKE BEPCO PA
USA FAURE 4 49043201020000 RATTLESNAKE BEPCO PRD
1252205 FAURE "A" USA
USA FAURE A2-2 49043203840000 RATTLESNAKE BEPCO PRD
1252206 LACOY FEDERAL
LACOY FEDERAL 13-1 49043200770000 RATTLESNAKE BEPCO PRD
1252207 BEARD FEDERAL
BEARD FEDERAL 1 49043201090000 RATTLESNAKE BEPCO PA
1252211 ROME FEDERAL
ROME FEDERAL 1 49043201720000 SLICK CREEK BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1161217 KNISLEY FEDERAL #1
KNISELY FEDERAL #1 NW SE 27 47N 91W 1.00000000 .71500000 .00000000
1252201 EARL SCHRANTZ USA
SCHRANTZ USA 1 NW NE 33 47N 91W 1.00000000 .79375000 .05035164
SCHRANTZ USA 3 SW SE 32 47N 91W 1.00000000 .79375000 .05035164
SCHRANTZ USA 4 SW SW 32 47N 91W 1.00000000 .79375000 .05035164
SCHRANTZ USA 5 NE SW 32 47N 91W 1.00000000 .79375000 .05035164
1252202 TOLMAN USA
TOLMAN USA 2 NW SW 28 47N 91W 1.00000000 .87500000 .00000000
TOLMAN USA 3 NW NW 28 47N 91W 1.00000000 .87500000 .00000000
1252203 CALDWELL USA #1-7
CALDWELL USA 1-7 LO 12 07 47N 91W .55480654 .47179217 .00000000
1252204 FAURE USA
USA FAURE 1 NW NW 11 47N 92W 1.00000000 .82500000 .00000000
USA FAURE 2 NW SE 11 47N 92W 1.00000000 .82500000 .00000000
USA FAURE 4 NW SW 11 47N 92W 1.00000000 .82500000 .00000000
1252205 FAURE "A" USA
USA FAURE A2-2 NE NE 02 47N 92W 1.00000000 .82500000 .00000000
1252206 LACOY FEDERAL
LACOY FEDERAL 13-1 NW NW 13 47N 92W 1.00000000 .82500000 .00000000
1252207 BEARD FEDERAL
BEARD FEDERAL 1 NW NW 12 47N 92W 1.00000000 .84900000 .00000000
1252211 ROME FEDERAL
ROME FEDERAL 1 SE SE 02 46N 92W 1.00000000 .81250000 .06250000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 2
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
NON-UNITIZED ASSETS (CO-OP)
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1252213 NEIBER II UNIT (TENSLEEP)
NEIBER UNIT II-I 49043202610000 NEIBER DOME BEPCO PRD
1252215 SOUTH FRISBY LACOY FED #5 & #8
SOUTH FRISBY 5 49043202630000 SOUTH FRISBY BEPCO PRD
SOUTH FRISBY 8 49043203950000 SOUTH FRISBY BEPCO PRD
1252217 CALDWELL USA #20
CALDWELL 1-20 49043203960000 COTTONWOOD CREEK BEPCO PRD
CALDWELL 2-20 49043203990000 COTTONWOOD CREEK BEPCO PRD
1252218 SMITH USA #30
SMITH USA 1-30 49043203620000 SOUTH FRISBY BEPCO PRD
1252219 TENNECO FEDERAL #23
TENNECO FEDERAL 1-23 49043204960000 SOUTH FRISBY BEPCO PRD
1252220 COTTONWOOD CREEK FEDERAL #19
COTTONWOOD CREEK FED 19-1 49043203520000 SOUTH FRISBY BEPCO PRD
1252328 NO WATER CREEK #4
NO WATER CREEK 4 49043200540000 NO WATER CREEK BEPCO PA
1252329 NO WATER CREEK #8
NO WATER CREEK 8 49043201180000 NO WATER CREEK BEPCO TA
1252330 NO WATER CREEK #13
NO WATER CREEK 13 49043201230000 NO WATER CREEK BEPCO TA
1252331 NO WATER CREEK #15
NO WATER CREEK 15 49043201290000 NO WATER CREEK BEPCO TA
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1252213 NEIBER II UNIT (TENSLEEP)
NEIBER UNIT II-I LOT 15 19 45N 92W .76909143 .67295528 .00000000
1252215 SOUTH FRISBY LACOY FED #5 & #8
SOUTH FRISBY 5 LOT 9 19 47N 91W 1.00000000 .85500000 .00000000
SOUTH FRISBY 8 NE NE 24 47N 92W 1.00000000 .85500000 .00000000
1252217 CALDWELL USA #20
CALDWELL 1-20 SW SW 20 47N 91W 1.00000000 .84000000 .00000000
CALDWELL 2-20 SW NW 20 47N 91W 1.00000000 .84000000 .00000000
1252218 SMITH USA #30
SMITH USA 1-30 NE NE 30 47N 91W 1.00000000 .84750000 .00000000
1252219 TENNECO FEDERAL #23
TENNECO FEDERAL 1-23 SE NE 23 47N 92W 1.00000000 .87500000 .00000000
1252220 COTTONWOOD CREEK FEDERAL #19
COTTONWOOD CREEK FED 19-1 NW SE 19 47N 91W 1.00000000 .85250000 .00000000
1252328 NO WATER CREEK #4
NO WATER CREEK 4 LOT 9 31 47N 91W 1.00000000 .82500000 .00000000
1252329 NO WATER CREEK #8
NO WATER CREEK 8 SW NE 31 47N 91W 1.00000000 .82500000 .00000000
252330 NO WATER CREEK #13
NO WATER CREEK 13 LOT 11 05 46N 91W 1.00000000 .84500000 .00000000
1252331 NO WATER CREEK #15
NO WATER CREEK 15 SW NE 05 46N 91W 1.00000000 .84500000 .00000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 3
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
NON-UNITIZED ASSETS (CO-OP)
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1305001 CHAMBERS STATE
CHAMBERS STATE #1-36 49043203040000 RATTLESNAKE BEPCO PRD
CHAMBERS STATE #2-36 49043203140000 RATTLESNAKE BEPCO PRD
CHAMBERS STATE #3-36 49043203210000 RATTLESNAKE BEPCO PA
CHAMBERS STATE #4-36 49043207940000 RATTLESNAKE BEPCO PRD
CHAMBERS STATE #5-36 49043208200000 RATTLESNAKE BEPCO PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1305001 CHAMBERS STATE
CHAMBERS STATE #1-36 SW SW 36 48N 92W 1.00000000 .84500000 .00000000
CHAMBERS STATE #2-36 SW SE 36 48N 92W 1.00000000 .84500000 .00000000
CHAMBERS STATE #3-36 SW NW 36 48N 92W 1.00000000 .84500000 .00000000
CHAMBERS STATE #4-36 NE SW 36 48N 92W 1.00000000 .84500000 .00000000
CHAMBERS STATE #5-36 SW NE 36 48N 92W 1.00000000 .84500000 .00000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 4
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
NON-UNITIZED ASSETS (OSO)
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1252303 COSEKA FEDERAL #18-3 & #18-4
ALTUS GOVERNMENT 18-3 49043203460000 COTTONWOOD CREEK WAGNER & BROWN, LTD. PRD
ALTUS GOVERNMENT 18-4 49043205420000 COTTONWOOD CREEK WAGNER & BROWN, LTD. PRD
1252304 GOVERNMENT 29-1
GOVERNMENT 29-1 49043202960000 COTTONWOOD CREEK SAMSON RESOURCES CORP PA
1252305 COSEKA FEDERAL #13-1, 2 & 3
ALTUS GOVERNMENT 13-1 49043203310000 COTTONWOOD CREEK WAGNER & BROWN, LTD. SI
ALTUS GOVERNMENT 13-2 49043203470000 COTTONWOOD CREEK WAGNER & BROWN, LTD. SI
ALTUS GOVERNMENT 13-3 49043205560000 COTTONWOOD CREEK WAGNER & BROWN, LTD. SI
1252306 COSEKA FEDERAL #18-1 & #18-5
ALTUS GOVERNMENT 18-1 49043203200000 COTTONWOOD CREEK WAGNER & BROWN, LTD. PRD
ALTUS GOVERNMENT 18-5 49043205740000 COTTONWOOD CREEK WAGNER & BROWN, LTD. PRD
1252307 BRENT FEDERAL #2 & #3 FED #32-1
BRENT FEDERAL 2 49043203920000 COTTONWOOD CREEK BRENT EXPLORATION, INC. SI
BRENT FEDERAL 3 49043203930000 COTTONWOOD CREEK BRENT EXPLORATION, INC. SI
FEDERAL 32-1 49043205090000 COTTONWOOD CREEK BRENT EXPLORATION, INC. SI
1252308 MARTIN FEDERAL #29-2
MARTIN FEDERAL 29-2 49043203300000 COTTONWOOD CREEK SAMSON RESOURCES CORP PRD
1252309 GOVERNMENT #14-2
GOVERNMENT #14-2 49043202920000 RATTLESNAKE SAMSON RESOURCES CORP SI
1252310 TENNECO GOVERNMENT #1-1 & 1-2
TENNECO GOVERNMENT 1-2 49043202940000 COTTONWOOD CREEK SAMSON RESOURCES CORP SI
1252311 GOVERNMENT #27-1
GOVERNMENT 27-1 49043202810000 COTTONWOOD CREEK MARKUS PRODUCTION, INC. PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1252303 COSEKA FEDERAL #18-3 & #18-4
ALTUS GOVERNMENT 18-3 SE NW 18 47N 91W .00000000 .00000000 .09000000
ALTUS GOVERNMENT 18-4 NW NW 18 47N 91W .00000000 .00000000 .09000000
1252304 GOVERNMENT 29-1
GOVERNMENT 29-1 SW SW 29 47N 91W .00000000 .00000000 .00000000
1252305 COSEKA FEDERAL #13-1, 2 & 3
ALTUS GOVERNMENT 13-1 NE NE 13 47N 92W .00000000 .00000000 .09500000
ALTUS GOVERNMENT 13-2 NE SE 13 47N 92W .00000000 .00000000 .09500000
ALTUS GOVERNMENT 13-3 NW NE 13 47N 92W .00000000 .00000000 .09500000
1252306 COSEKA FEDERAL #18-1 & #18-5
ALTUS GOVERNMENT 18-1 Lot 12 18 47N 91W .00000000 .00000000 .08874760
ALTUS GOVERNMENT 18-5 NE SW 18 47N 91W .00000000 .00000000 .08874760
1252307 BRENT FEDERAL #2 & #3 FED #32-1
BRENT FEDERAL 2 SW NE 32 47N 91W .00000000 .00000000 .09472400
BRENT FEDERAL 3 SW NW 33 47N 91W .00000000 .00000000 .09472400
FEDERAL 32-1 NE NE 32 47N 91W .00000000 .00000000 .09472400
1252308 MARTIN FEDERAL #29-2
MARTIN FEDERAL 29-2 SW NW 29 47N 91W .04848480 .03636360 .09000000
1252309 GOVERNMENT #14-2
GOVERNMENT #14-2 NW NW 14 47N 92W .00000000 .00000000 .06250000
1252310 TENNECO GOVERNMENT #1-1 & 1-2
TENNECO GOVERNMENT 1-2 SW NW 01 47N 92W .00000000 .00000000 .01875000
1252311 GOVERNMENT #27-1
GOVERNMENT 27-1 SW SW 27 47N 92W .26666640 .19999980 .08500000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 1
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
NON-UNITIZED ASSETS (OSO)
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1252313 BRENT FEDERAL #11-1
BRENT FEDERAL 11-1 49043204440000 COTTONWOOD CREEK WASHAKIE ENERGIES CO. LT PRD
1252314 BRENT FEDERAL #16-1
BRENT FEDERAL 16-1 49043204480000 COTTONWOOD CREEK WASHAKIE ENERGIES CO. LT PRD
1252316 SCHETTERLY #1-30
ALTUS SCHETTERLY 1-30 49043203630000 SOUTH FRISBY BRENT EXPLORATION, INC. PRD
1252317 BRENT FEDERAL #3-25
BRENT FEDERAL 3-25 49043204330000 SOUTH FRISBY BRENT EXPLORATION, INC. PRD
1252318 BRENT FEDERAL 13-24
BRENT FEDERAL 13-24 49043204600000 FRISBY SOUTH BRENT EXPLORATION, INC. PRD
1252319 BRENT FEDERAL 25-7
BRENT FEDERAL 25-7 49043205360000 FRISBY SOUTH ANDERSON MYERS PA
1252320 TENNECO USA #1
TENNECO USA 1 49043205910000 COTTONWOOD CREEK CAROL-HOLLY OIL CORP. PRD
1252321 GOVERNMENT #25-1
GOVERNMENT 25-1 49043202990000 SOUTH FORK MARKUS PRODUCTION, INC. PRD
1252322 GOVERNMENT #36-1
GOVERNMENT 36-1 49043202890000 COTTONWOOD CREEK MARKUS PRODUCTION, INC. SI
1252324 TENNECO USA 2
TENNECO USA 2 49043206080000 COTTONWOOD CREEK WYOMING RESOURCES PA
1252325 TENNECO USA #3
TENNECO USA 3 49043206230000 COTTONWOOD CREEK CAROL-HOLLY OIL CORP. PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1252313 BRENT FEDERAL #11-1
BRENT FEDERAL 11-1 NE SW 01 46N 92W .00000000 .00000000 .05000000
1252314 BRENT FEDERAL #16-1
BRENT FEDERAL 16-1 SE SE 01 46N 92W .00000000 .00000000 .05000000
1252316 SCHETTERLY #1-30
ALTUS SATTTERLY 1-30 NE SE 30 47N 91W .00000000 .00000000 .06500000
1252317 BRENT FEDERAL #3-25
BRENT FEDERAL 3-25 NE NW 25 47N 92W .00000000 .00000000 .05000000
1252318 BRENT FEDERAL 13-24
BRENT FEDERAL 13-24 SW SW 24 47N 92W .00000000 .00000000 .05000000
1252319 BRENT FEDERAL 25-7
BRENT FEDERAL 25-7 SW NE 25 47N 92W .00000000 .00000000 .00000000
1252320 TENNECO USA #1
TENNECO USA 1 SW SE 25 47N 92W .00000000 .00000000 .10000000
1252321 GOVERNMENT #25-1
GOVERNMENT 25-1 SE NW 25 46N 92W .00000000 .00000000 .12500000
1252322 GOVERNMENT #36-1
GOVERNMENT 36-1 NE NE 36 47N 92W .26666640 .19999980 .03750000
1252324 TENNECO USA 2
TENNECO USA 2 SE SW 28 47N 91W .00000000 .00000000 .00000000
1252325 TENNECO USA #3
TENNECO USA 3 SE NW 28 47N 91W .12500000 .11312500 .05000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 2
<PAGE>
EXHIBIT B PURCHASE AND SALE AGREEMENT DATED _________________ , 1998
NON-UNITIZED ASSETS (OSO)
<TABLE>
<CAPTION>
STATUS
PP NO. PROPERTY NAME/WELL NAME API FIELD OPERATOR 01/01/98
- ------ ----------------------- --- ----- -------- --------
<S> <C> <C> <C> <C> <C>
1252327 RATTLESNAKE USA #4
RATTLESNAKE 4 49043206330000 COTTONWOOD CREEK CAROL-HOLLY OIL CORP. SI
1252332 BRENT FEDERAL #1
BRENT FEDERAL #1 49043203910000 COTTONWOOD CREEK BRENT EXPLORATION CO SI
1252333 HONEY BUTTE FEDERAL #3
HONEY BUTTE FEDERAL #3 49043203390000 RATTLESNAKE HANSON OPERATING COMPANY PRD
1252334 GOVERNMENT #14-1
GOVERNMENT 14-1 49043201140000 RATTLESNAKE MARKUS PRODUCTION, INC. SI
1252335 TENNECO GOVERNMENT #1-3
TENNECO GOVERNMENT 1-3 49043203030000 COTTONWOOD CREEK SAMSON RESOURCES CORP PRD
1252336 TENNECO GOVERNMENT #1-4
TENNECO GOVERNMENT 1-4 49043203010000 COTTONWOOD CREEK SAMSON RESOURCES CORP PRD
1252337 GOVERNMENT #28-1
GOVERNMENT 28-1 49043202970000 COTTONWOOD CREEK MARKUS PRODUCTION, INC. SI
1252338 GOVERNMENT #36-2
GOVERNMENT 36-2 49043203050000 COTTONWOOD CREEK MARKUS PRODUCTION, INC. SI
1256101 BASS FEDERAL 33-24 #1H
#1 H BASS FEDERAL 33-24 49043207100000 MARSHALL UNION PACIFIC RESOURCES PRD
1288501 SAGEBUSH FEDERAL #13-25
SAGEBUSH FED #13-25 49003208230000 SAGEBUSH ALV COMPANY PRD
1288502 SAGEBUSH FEDERAL #32-26
SAGEBUSH #32-26 49003208270000 SAGEBUSH ALV COMPANY PRD
<CAPTION>
PP NO. PROPERTY NAME/WELL NAME LOCATION WI NRI(1) ORI(2)
- ------ ----------------------- -------- -- ------ ------
<S> <C> <C> <C> <C> <C>
1252327 RATTLESNAKE USA #4
RATTLESNAKE 4 SE NW 11 47N 92W .05000000 .04245000 .00000000
1252332 BRENT FEDERAL #1
BRENT FEDERAL #1 NE NW 31 47N 91W .00000000 .00000000 .09000000
1252333 HONEY BUTTE FEDERAL #3
HONEY BUTTE FEDERAL #3 SW SE 16 47N 91W .10000000 .08350000 .00000000
1252334 GOVERNMENT #14-1
GOVERNMENT 14-1 NW NE 14 47N 92W .26666640 .19999978 .06250000
1252335 TENNECO GOVERNMENT #1-3
TENNECO GOVERNMENT 1-3 SW NE 01 47N 92W .25291700 .18652630 .01875000
1252336 TENNECO GOVERNMENT #1-4
TENNECO GOVERNMENT 1-4 SW SE 01 47N 92W .22736810 .16768400 .01875000
1252337 GOVERNMENT #28-1
GOVERNMENT 28-1 SW SE 28 47N 92W .04848480 .03636360 .08500000
1252338 GOVERNMENT #36-2
GOVERNMENT 36-2 NE NW 36 47N 92W .22736810 .17052610 .03750000
1256101 BASS FEDERAL 33-24 #1H
#1 H BASS FEDERAL 33-24 SW SE 24 48N 92W .00000000 .00000000 .03187499
1288501 SAGEBUSH FEDERAL #13-25
SAGEBUSH FED #13-25 NW SW 25 51N 92W .00000000 .00000000 .00830000
1288502 SAGEBUSH FEDERAL #32-26
SAGEBUSH #32-26 SW NE 26 51N 92W .00000000 .00000000 .04000000
</TABLE>
(1) Does not reflect reduced federal royalty rate, if applicable, on oil
production.
(2) May be subject to sliding scale/contractual adjustment/calculation.
Page: 3
<PAGE>
EXHIBIT "D"
52N/94W 44N/91W
52N/93W 44N/90W
52N/92W 43N/94W
52N/91W 43N/93W
52N/90W 43N/92W
51N/94W 43N/91W
51N/93W 43N/90W
51N/92W
51N/91W
51N/90W
50N/94W
50N/93W
50N/92W
50N/91W
50N/90W
49N/94W
49N/93W
49N/92W
49N/91W
49N/90W
48N/94W
48N/93W
48N/92.5W
48N/92W
48N/91W
48N/90W
47N/94W
47N/93W
47N/92.5W
47N/92W
47N/91W
47N/90W
46N/94W
46N/93W
46N/92W
46N/91W
46N/90W
45N/94W
45N/93W
45N/92W
45N/91W
45N/90W
44N/94W
44N/93W
44N/92W
<PAGE>
EXHIBIT E
ASSIGNMENT AND BILL OF SALE
KNOW ALL MEN BY THE PRESENTS:
This Assignment and Bill of Sale ("Assignment") is made and entered into
this _____ day of July, 1998 by and between CONTINENTAL RESOURCES, INC.,
whose address is P.O. Box 1032, Enid, OK 73702, hereinafter referred to as
"Assignor" and HAROLD G. HAMM, AS TRUSTEE OF THE HAROLD G. HAMM REVOCABLE
INTERVIVOS TRUST DATED APRIL 23, 1984, whose address is P.O. Box 1032, Enid,
OK 73702, hereinafter referred to as "Assignee".
Assignor, in and for Ten Dollars ($10.00) and other good and valuable
consideration, the receipt of which is hereby acknowledged, does hereby
grant, bargain, sell, assign and convey unto Assignee, an undivided fifty
percent (50%) of all Assignor's right, title and interest in and to the
following:
(1) All oil & gas leases, overriding royalty interests, mineral and
royalty interests, easements and rights-of-way, contractual rights and
interests, together with all rights and interests appurtenant thereto or used
or obtained in connection therewith which were acquired by Assignor pursuant
to each of the Assignment and Bill of Sale documents described on the Exhibit
"A" attached hereto, insofar as such interests relate to the lands described
on the Exhibit "B" attached hereto;
(2) All oil and gas wells and interests therein, together with all
materials, supplies, machinery, equipment, improvements and other personal
property and fixtures located thereon, associated therewith or appurtenant
thereto that were acquired by Assignor pursuant to each of the Assignment and
Bill of Sale documents described on the Exhibit "A" attached hereto. Such
wells are described on Exhibit "C" hereto
It is Assignor's intent by this Assignment to convey unto Assignee an
undivided fifty percent (50%) of all interests of whatsoever nature which
Assignor acquired pursuant to the Assignment and Bill of Sale documents
described on the Exhibit "A" attached hereto, to be effective as of the same
time which Assignor received the interests pursuant to such documents, same
as if Assignee had been a party thereto.
The interest conveyed hereby shall bear it's proportionate part of all
royalty interests, overriding royalty interests, production payments and
other burdens relating to the interests hereby conveyed. Assignee agrees to
assume it's proportionate part of all obligations associated with the
interests hereby conveyed and be bound and abide by all contracts, agreements
and governmental rules and regulations associated with such interests.
<PAGE>
The conveyance made by this Assignment is effective June 1, 1998 at 7:00
a.m., Mountain Standard Time.
The terms and provisions of this Assignment shall be binding upon and
inure to the benefit of the parties hereto together with their respective
heirs, successors and assigns.
This Assignment is made and delivered to Assignee without warranty of
title, express or implied.
This Assignment is made subject to the terms and provisions of that
certain Worland Area Purchase and Sale Agreement dated June 25, 1998 between
Assignor and Assignee.
IN WITNESS WHEREOF, this Assignment is executed this ______ day of July,
1998.
CONTINENTAL RESOURCES, INC.
By: ____________________________
Tom Luttrell
Vice President - Land
STATE OF OKLAHOMA )
)
COUNTY OF GARFIELD )
Before me, the undersigned Notary Public in and for said County and
State, on this ____ day of July, 1998 personally appeared Tom Luttrell who
executed the foregoing document as Vice-President-Land for Continental
Resources, Inc., an Oklahoma Corporation, who acknowledged to me that he
executed same as his free and voluntary act and deed on behalf of said
Corporation.
My commission expires:
- ------------------------------- -------------------------------
Notary Public
2
<PAGE>
EXHIBIT "D"
<TABLE>
<CAPTION>
<S> <C>
52N/94W 44N/91W
52N/93W 44N/90W
52N/92W 43N/94W
52N/91W 43N/93W
52N/90W 43N/92W
51N/94W 43N/91W
51N/93W 43N/90W
51N/92W
51N/91W
51N/90W
50N/94W
50N/93W
50N/92W
50N/91W
50N/90W
49N/94W
49N/93W
49N/92W
49N/91W
49N/90W
48N/94W
48N/93W
48N/92.5W
48N/92W
48N/91W
48N/90W
47N/94W
47N/93W
47N/92.5W
47N/92W
47N/91W
47N/90W
46N/94W
46N/93W
46N/92W
46N/91W
46N/90W
45N/94W
45N/93W
45N/92W
45N/91W
45N/90W
44N/94W
44N/93W
44N/92W
</TABLE>
<PAGE>
EXHIBIT 12.1 - COMPUTATION OF RATIO OF DEBT TO ADJUSTED EBITDA
CONTINENTAL RESOURCES, INC.
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
YEAR ENDED SIX MONTHS SIX MONTHS
YEAR ENDED DECEMBER 31, DECEMBER 31 ENDED JUNE 30, ENDED JUNE 30,
-----------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1997 1997 1998 1998
------ ------ ------ ------ ------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET INCOME 5,772 2,875 3,869 13,325 26,197 20,007 16,330 (3,499) (6,705)
INCOME TAXES 2,974 1,596 2,252 8,238 (8,941) (8,941) (8,941) 0 0
INTEREST EXPENSE 314 670 2,396 4,550 4,804 15,684 2,313 5,174 7,836
AMORTIZATION OF OFFERING COSTS 460 427
DD&A 4,816 6,068 9,614 22,876 33,354 34,931 16,713 16,483 17,508
EXPLORATION EXPENSE 1,996 6,338 6,184 4,513 6,807 6,806 3,410 2,650 2,650
LITIGATION SETTLEMENT (4,000) (7,500) (7,500)
-----------------------------------------------------------------------------------------
ADJUSTED EBITDA(1) 11,872 17,547 24,315 53,502 54,721 61,447 29,825 20,808 21,716
TOTAL DEBT 7,514 6,272 44,265 54,759 79,632 153,957
TOTAL DEBT TO ADJUSTED EBITDA 0.6 0.4 1.8 1 1.5 2.5 N/A N/A N/A
</TABLE>
(1) Adjusted EBITDA represents earnings before interest expense, income
taxes, depreciation, depletion, amortization and exploration expense,
excluding proceeds from the litigation settlements. Adjusted EBITDA is not a
measure of cash flow as determined by generally accepted accounting
principles ("GAAP"). Adjusted EBITDA should not be considered as an
alternative to, or more meaningful than, net income or cash flow as
determined in accordance with GAAP or as an indicator of a company's
operating performance or liquidity. Certain items excluded from Adjusted
EBITDA are significant components in understanding and assessing a company's
financial performance, such as a company's cost of capital and tax structure,
as well as historic costs of depreciable assets, none of which are components
of Adjusted EBITDA. The Company's computations of Adjusted EBITDA may not be
comparable to other similarly titled measures of other companies. The Company
believes that Adjusted EBITDA is a widely followed measure of operating
performance and may also be used by investors to measure the Company's
ability to meet future debt service requirements, if any.
<PAGE>
EXHIBIT 12.2 - COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
CONTINENTAL RESOURCES, INC.
<TABLE>
PRO FORMA PRO FORMA
YEAR ENDED SIX MONTHS SIX MONTHS
YEAR ENDED DECEMBER 31, DECEMBER 31, ENDED JUNE 30, ENDED JUNE 30,
-----------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1997 1997 1998 1998
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EARNINGS(1) 8,746 4,471 6,121 21,563 17,256 11,066 7,389 (3,499) (6,705)
FIXED CHARGES(2) 314 670 2,396 4,550 4,804 16,144 2,313 5,174 8,263
-----------------------------------------------------------------------------------
TOTAL EARNINGS AND FIXED CHARGES 9,060 5,141 8,517 26,113 22,060 27,210 9,702 1,675 1,558
RATIO 28.9 7.7 3.6 5.7 4.6 1.7 4.2 N/A N/A
</TABLE>
(1) "Earnings" represents income (loss) before provision for federal and
state income taxes or income tax benefits. "Fixed charges" consists of
interest expense and amortization of costs incurred in connection with
the Offering.
(2) Pro forma to give effect to the issuance of $150 million of Senior
Subordinated Notes due 2008 with an interest rate of 10.25%. For
purposes of computing the Ratio of Earnings to Fixed Charges, interest
expense includes interest on the Senior Subordinated notes together with
amortization of the underwriting discounts and expenses of the Offering;
for the period ended December 31, 1997, amortization expense was
$460,000 and for the period ended June 30, 1998 amortization expense
was $232,000.
<PAGE>
EXHIBIT 12.3 - COMPUTATION OF RATIO OF ADJUSTED EBITDA TO INTEREST EXPENSE
CONTINENTAL RESOURCES, INC.
<TABLE>
PRO FORMA PRO FORMA
YEAR ENDED SIX MONTHS SIX MONTHS
YEAR ENDED DECEMBER 31, DECEMBER 31, ENDED JUNE 30, ENDED JUNE 30,
--------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1997 1997 1998 1998
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET INCOME 5,772 2,875 3,869 13,325 26,197 20,007 16,330 (3,499) (6,705)
INCOME TAXES 2,974 1,596 2,252 8,238 (8,941) (8,941) (8,941) 0 0
INTEREST EXPENSE 314 670 2,396 4,550 4,804 15,684 2,313 5,174 7,836
AMORTIZATION OF OFFERING COSTS 460 427
DD&A 4,816 6,068 9,614 22,876 33,354 34,931 16,713 16,483 17,508
EXPLORATION EXPENSE 1,996 6,338 6,184 4,513 6,807 6,806 3,410 2,650 2,650
LITIGATION SETTLEMENT (4,000) (7,500) (7,500)
-----------------------------------------------------------------------------------
ADJUSTED EBITDA(1) 11,872 17,547 24,315 53,502 54,721 61,447 29,825 20,808 21,716
TOTAL ADJUSTED EBITDA TO INTEREST 37.8 26.2 10.1 11.8 11.4 3.9 12.9 4.0 2.8
</TABLE>
(1) Adjusted EBITDA represents earnings before interest expense, income taxes,
depreciation, depletion, amortization and exploration expense, excluding
proceeds from litigation settlements. Adjusted EBITDA is not a measure
of cash flow as determined by generally accepted accounting principles
("GAAP"). Adjusted EBITDA should not be considered as an alternative to,
or more meaningful than net income or cash flow as determined in
accordance with GAAP or as an indicator of a company's operating
performance or liquidity. Certain items excluded from Adjusted EBITDA
are significant components in understanding and assessing a company's
financial performance, such as a company's cost of capital and tax
structure, as well as historic costs of depreciable assets, none of
which are components of adjusted EBITDA. The Company's computations of
Adjusted EBITDA may not be comparable to other similarly titled measures
of other companies. The Company believes that Adjusted EBITDA is a
widely followed measure of operating performance and may also be used by
investors to measure the Company's ability to meet future debt service
requirements, if any.
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated April 22, 1998, on the consolidated financial statements of Continental
Resources, Inc. and subsidiary and our report dated June 4, 1998, on the
Statements of Revenues and Direct Operating Expenses of Oil and Gas Properties
Included in the Purchase Agreement Between Continental Resources, Inc. and Bass
Enterprises Production Co. and to all references to our Firm included in this
registration statement.
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma
October 16, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF RYDER SCOTT COMPANY PETROLEUM ENGINEERS
As independent petroleum engineers, we hereby consent to the use of our review
and all references to our firm included or made a part of the Registration
Statement of Continental Resources, Inc. and its subsidiaries on Form S-4.
/s/ RYDER SCOTT COMPANY PETROLEUM ENGINEERS
---------------------------------------------------
RYDER SCOTT COMPANY PETROLEUM ENGINEERS
Denver, Colorado
October 16, 1998
<PAGE>
POWER OF ATTORNEY
(Senior Subordinated Notes)
We, the undersigned officers and directors of Continental Resources, Inc.
(hereinafter, the "Company"), hereby severally constitute and appoint Harold
Hamm, Roger V. Clement and Randy Moeder, and each of them, severally, our true
and lawful attorneys-in-fact and agents, each with full power to act without the
other and with full power of substitution and resubstitution, to sign for us, in
our names as officers or directors, or both, of the Company, and file with the
Securities and Exchange Commission and any state securities regulatory board or
commission any documents relating to the securities offered pursuant to this
Registration Statement on Form S-4, including any amendments to this
Registration Statement on Form S-4 (including post-effective amendments) and any
registration statement for the same offering that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933 and any documents
required to be filed with respect thereto, granting unto said attorneys-in-fact
and agents, and each of them, full power and authority to do and to perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as each of us might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their substitutes, may lawfully do or cause to be
done by virtue hereof.
DATED this 21st day of August, 1998.
/s/ HAROLD HAMM /s/ JACK H. STARK
- ------------------------------ ------------------------------
Harold Hamm, Chairman of the Jack H. Stark, Senior Vice
Board, President, Chief President and Director
Executive Officer (Principal
Executive Officer) and
Director
/s/ ROGER V. CLEMENT /s/ JEFF HUME
- ------------------------------ ------------------------------
Roger V. Clement, Senior Vice Jeff Hume, Senior Vice
President, Treasurer and Chief President and Director
Financial Officer (Principal
Financial and Accounting
Officer) and Director
/s/ RANDY MOEDER
- ------------------------------
Randy Moeder, Senior Vice
President, General Counsel,
Secretary and Director
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS AT DECEMBER
31, 1996 AND 1997, AND THE UNAUDITED CONSOLIDATED BALANCE SHEET AT JUNE 30, 1998
AND CONSOLIDATED STATEMENT OF OPERATIONS AT JUNE 30, 1998 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000732834
<NAME> CONTINENTAL RESOURCES INC
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 JUN-30-1998
<CASH> 1,301,115 1,336,110
<SECURITIES> 0 0
<RECEIVABLES> 25,143,543 15,732,561
<ALLOWANCES> 0 0
<INVENTORY> 3,548,547 4,962,746
<CURRENT-ASSETS> 30,435,471 42,016,174
<PP&E> 246,476,351 318,840,647
<DEPRECIATION> (88,559,352) (103,918,055)
<TOTAL-ASSETS> 188,386,166 257,863,253
<CURRENT-LIABILITIES> 30,590,927 19,155,068
<BONDS> 0 0
0 0
0 0
<COMMON> 49,045 49,041
<OTHER-SE> 78,215,404 74,716,050
<TOTAL-LIABILITY-AND-EQUITY> 188,386,166 257,863,253
<SALES> 103,619,839 41,094,998
<TOTAL-REVENUES> 110,025,226 44,157,318
<CGS> 43,463,750 17,483,171
<TOTAL-COSTS> 96,267,932 43,354,856
<OTHER-EXPENSES> (8,060,863) (92,396)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,803,837 5,174,113
<INCOME-PRETAX> 17,255,776 (3,499,358)
<INCOME-TAX> (8,941,450) 0
<INCOME-CONTINUING> 17,255,776 (3,499,358)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 26,197,226 (3,499,358)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<PAGE>
LETTER OF TRANSMITTAL
FOR
TENDER OF ALL OUTSTANDING
10-1/4% SENIOR SUBORDINATED NOTES DUE 2008
IN EXCHANGE FOR
10-1/4% SENIOR SUBORDINATED NOTES DUE 2008
OF
CONTINENTAL RESOURCES, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON ________________, 1998 (THE "EXPIRATION DATE"),
UNLESS EXTENDED BY CONTINENTAL RESOURCES, INC.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
UNITED STATES TRUST COMPANY OF NEW YORK
<TABLE>
BY MAIL: BY OVERNIGHT COURIER: BY HAND: BY FACSIMILE:
<S> <C> <C> <C>
United States Trust United States Trust United States Trust (212) 420-6152
Company of New York Company of New York Company of New York (For Eligible Institutions
P.O. Box 844 Corporate Trust Operations 111 Broadway Only)
Cooper Station Department Lower Level
New York, NY 10276-0844 770 Broadway-13th Floor New York, NY 10006 CONFIRM BY TELEPHONE:
Attention: Corporate New York, NY 10003 Attention: Corporate (800) 548-6565
Trust Services Trust Services
(registered or certified
mail recommended)
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated
______________, 1998 (the "Prospectus") of Continental Resources, Inc.
("Continental") which, together with this Letter of Transmittal (the "Letter
of Transmittal"), constitutes Continental's offer (the "Exchange Offer") to
exchange $1,000 principal amount of 10-1/4% Senior Subordinated Notes due
2008 (the "New Notes") of Continental for each $1,000 principal amount of
outstanding 10-1/4% Senior Subordinated Notes due 2008 (the "Old Notes") of
Continental. The terms of the New Notes are identical in all material
respects (including, with respect to interest and upon redemption) to the
terms of the Old Notes for which they may be exchanged pursuant to the
Exchange Offer, except that the New Notes have been registered under the
Securities Act of 1933, as amended, and, therefore, will not bear legends
restricting the transfer thereof.
The Exchange Offer is being made pursuant to the Registration Rights
Agreement dated as of June 21, 1998 (the "Registration Rights Agreement"),
and all Old Notes validly tendered will be accepted for exchange. Any Old
Notes not tendered will remain outstanding and continue to accrue interest,
but will not retain any rights under the Registration Rights Agreement.
Holders electing to have Old Notes exchanged
<PAGE>
pursuant to the Exchange Offer will be required to surrender such Old Notes,
together with the Letter of Transmittal, to the Exchange Agent at the address
specified herein prior to the close of business on the Expiration Date.
Holders will be entitled to withdraw their election, at any time prior to
5:00 p.m., New York City time on the Expiration Date, by sending to the
Exchange Agent at the address specified herein a facsimile transmission or
letter setting forth the name of such Holder, the principal amount of Old
Notes delivered for exchange and a statement that such Holder is withdrawing
this election to have such Old Notes exchanged.
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE
FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF
THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE
AGENT.
List below the Old Notes to which this Letter of Transmittal relates. If
the space provided below is inadequate, the Certificate Numbers should be
listed on a separate signed schedule affixed hereto.
<TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES TENDERED HEREWITH
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Name(s) and Address(es) of Certificate Aggregate Amount
Registered Holder(s) Number(s) Principal Amount Tendered*
(Please fill in) Represented by
Notes
Total
- --------------------------------------------------------------------------------
* Unless otherwise indicated, the holder will be deemed to have tendered
all Old Notes included. See Instruction 2.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
This Letter of Transmittal is to be used if certificates for Old Notes
are to be forwarded herewith.
Unless the context requires otherwise, the term "Holder" for purposes of
this Letter of Transmittal means any person in whose name Old Notes are
registered or any other person who has obtained a properly completed bond
power from the registered holder.
Holders whose Old Notes are not immediately available or who cannot
deliver their Old Notes and
-2-
<PAGE>
all other documents required hereby to the Exchange Agent on or prior to the
Expiration Date may tender their Old Notes according to the guaranteed
delivery procedure set forth in the Prospectus under the captions "The
Exchange Offer -- Terms of the Exchange Offer -- Procedures for Tendering Old
Notes" and "The Exchange Offer -- Terms of the Exchange Offer -- Guaranteed
Delivery Procedures."
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s):___________________________________
Name of Eligible Institution that Guaranteed Delivery:____________________
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:__________________________________________________
Address:_______________________________________________
-3-
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to Continental the above-described aggregate
principal amount of Old Notes. Subject to, and effective upon, the acceptance
for exchange of the Old Notes tendered herewith, the undersigned hereby
exchanges, assigns and transfers to, or upon the order of, Continental all
right, title and interest in and to such Old Notes. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent as the true and
lawful agent and attorney-in-fact of the undersigned (with full knowledge
that said Exchange Agent acts as the agent of the undersigned in connection
with the Exchange Offer) to cause the Old Notes to be assigned, transferred
and exchanged. The undersigned represents and warrants that it has full power
and authority to tender, exchange, assign and transfer the Old Notes and to
acquire New Notes issuable upon the exchange of such tendered Old Notes, and
that, when the same are accepted for exchange, Continental will acquire good
and unencumbered title to the tendered Old Notes, free and clear of all
liens, restrictions, charges and encumbrances and not subject to any adverse
claim. The undersigned also warrants that it will, upon request, execute and
deliver any additional documents deemed by Continental to be necessary or
desirable to complete the exchange, assignment and transfer of tendered Old
Notes or to transfer ownership of such Old Notes on the account books
maintained by The Depository Trust Company.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Exchange Offer -- Conditions of the
Exchange Offer." The undersigned recognizes that as a result of these
conditions (which may be waived, in whole or in part, by Continental) as more
particularly set forth in the Prospectus, Continental may not be required to
exchange any of the Old Notes tendered hereby and, in such event, the Old
Notes not exchanged will be returned to the undersigned at the address shown
below the signature of the undersigned.
By tendering, each Holder of Old Notes represents to Continental that
(i) the New Notes acquired pursuant to the Exchange Offer are being obtained
in the ordinary course of business of the person receiving such New Notes,
whether or not such person is such Holder, (ii) neither the Holder of Old
Notes nor any such other person has an arrangement or understanding with any
person to participate in the distribution of such New Notes, (iii) if the
Holder is not a broker-dealer or is a broker-dealer but will not receive New
Notes for its own account in exchange for Old Notes, neither the Holder nor
any such other person is engaged in or intends to participate in a
distribution of the New Notes and (iv) neither the Holder nor any such other
person is an "affiliate" of Continental within the meaning of Rule 405 under
the Securities Act of 1933, as amended (the "Securities Act") or, if such
Holder is an "affiliate," that such Holder will comply with the registration
and prospectus delivery requirements of the Securities Act to the extent
applicable. If the tendering Holder is a broker-dealer (whether or not it is
also an "affiliate" of Continental within the meaning of Rule 405 under the
Securities Act) that will receive New Notes for its own account in exchange
for Old Notes where such Old Notes were acquired for its own account as a
result of market-making or other trading activities, it acknowledges that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes. By acknowledging that it will
deliver and by delivering a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes, the
undersigned is not deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
All authority herein conferred or agreed to be conferred shall survive
the death, bankruptcy or incapacity of the undersigned and every obligation
of the undersigned hereunder shall be binding upon the
-4-
<PAGE>
heirs, personal representatives, executors, administrators, successors,
assigns, trustees in bankruptcy and other legal representatives of the
undersigned. Tendered Old Notes may be withdrawn at any time prior to 5:00
p.m., New York City Time on the Expiration Date.
Certificates for all New Notes delivered in exchange for tendered Old
Notes and any Old Notes delivered herewith but not exchanged, in each case
registered in the name of the undersigned, shall be delivered to the
undersigned at the address shown below the signature of the undersigned.
TENDERING HOLDER(S) SIGN HERE
- ---------------------------------------------------
- ---------------------------------------------------
Signature(s) of Holder(s)
Date: ____________________, 1998
(Must be signed by registered Holder(s) exactly as name(s) appear(s) on
certificate(s) for Old Notes or by any person(s) authorized to become
registered Holder(s) by endorsements and documents transmitted herewith. If
signature by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, please set forth the full title of such person.)
See Instruction 3.
Name(s):
---------------------------------------------------------
- -----------------------------------------------------------------
(Please Print)
Capacity (full title):
-------------------------------------------
Address:
---------------------------------------------------------
- --------------------------------------------------------- (Including Zip Code)
Area Code and Telephone No.:
---------------------------------------------------
Tax Identification No.:
---------------------------------------------------------
-5-
<PAGE>
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTION 3)
Authorized Signature:
---------------------------------------------------------
Name:
--------------------------------------------------------------------------
Title:
-------------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
Name of Firm:
------------------------------------------------------------------
Area Code and Telephone No.:
---------------------------------------------------
Dated:_________________, 1998
<TABLE>
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
PAYOR'S NAME: CONTINENTAL RESOURCES, INC.
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
<S> <C>
SUBSTITUTE Name (If joint names, list first and circle the name of
FORM W-9 the person or entity whose number you enter in Part I
below.)
Department of
the Treasury
Internal Revenue
Service
Payor's Request for
Taxpayer
Identification
Number ("TIN") and
Certification ----------------------------------------------------------------------------------
Address
----------------------------------------------------------------------------------
City, state and Zip Code
----------------------------------------------------------------------------------
Part I - PLEASE PROVIDE YOUR TAXPAYER IDENTIFICATION Social Security number
NUMBER ("TIN") IN THE BOX AT RIGHT AND CERTIFY BY or Employer Identification
SIGNING AND DATING BELOW Number
----------------------------------------------------------------------------------
/ /
Part II - If exempt from backup withholding, check the box to the right.
Also provide your TIN in Part I and sign and date this form in Part III.
----------------------------------------------------------------------------------
Part III - Under penalties of perjury, I certify that:
1. The number shown on this form is my correct taxpayer identification number
(or I am waiting for a number to be issued to me), AND
2. I am not subject to backup withholding: (a) I am exempt from backup
withholding; or (b) I have not been notified by the Internal Revenue Service
that I am subject to backup withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified me that I am no longer
subject to backup withholding.
CERTIFICATION INSTRUCTIONS. You must cross out item 2 above if you have been
notified by the IRS that you are currently subject to backup withholding because
of underreporting interest or dividends on your tax return.
Signature _________________________________ Date ___________________
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Note: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
-6-
<PAGE>
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
-7-
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES.
Certificates for all physically delivered Old Notes, as well as a properly
completed and duly executed copy of this Letter of Transmittal or facsimile
thereof, and any other documents required by this Letter of Transmittal, must
be received by the Exchange Agent at any of its addresses set forth herein on
or prior to the Expiration Date.
THE METHOD OF DELIVERY OF OLD NOTES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER AND, EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. INSTEAD OF
DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND
DELIVERY SERVICE.
Holders whose Old Notes are not immediately available or who cannot
deliver their Old Notes and all other required documents to the Exchange
Agent on or prior to the Expiration Date may tender their Old Notes pursuant
to the guaranteed delivery procedure set forth in the Prospectus under "The
Exchange Offer -- Terms of the Exchange Offer -- Guaranteed Delivery
Procedures." Pursuant to such procedure: (i) such tender must be made by or
through an Eligible Institution (as defined in the Prospectus); (ii) on or
prior to the Expiration Date, the Exchange Agent must have received from such
Eligible Institution a letter, telegram or facsimile transmission setting
forth the name and address of the tendering Holder, the name(s) in which such
Old Notes are registered, and the certificate number(s) of the Old Notes to
be tendered; and (iii) all tendered Old Notes as well as this Letter of
Transmittal and all other documents required by this Letter of Transmittal
must be received by the Exchange Agent within three New York Stock Exchange
trading days after the date of execution of such letter, telex, telegram or
facsimile transmission, all as provided in the Prospectus under the caption
"The Exchange Offer -- Terms of the Exchange Offer -- Guaranteed Delivery
Procedures."
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders, by execution of this Letter of Transmittal
(or facsimile thereof), shall waive any right to receive notice of the
acceptance of the Old Notes for exchange.
2. PARTIAL TENDERS; WITHDRAWALS. If less than the entire number of
Old Notes evidenced by a submitted certificate is tendered, the tendering
Holder must fill in the number of shares tendered in the column entitled
"Amount Tendered." A newly issued certificate for the number of Old Notes
submitted but not tendered will be sent to such Holder as soon as practicable
after the Expiration Date. All Old Notes delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated. To withdraw
a tender of Old Notes in the Exchange Offer, a written or facsimile
transmission notice of withdrawal must be received by the Exchange Agent at
its address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including the certificate number
or number of such Old Notes), (iii) contain a statement that such Holder is
withdrawing its election to have such Old Notes exchanged, (iv) be signed by
the Holder in the same manner as the original signature on the Letter of
Transmittal by which such Old Notes were tendered (including any required
signature guarantees) or be accompanied by documents of transfer
-8-
<PAGE>
sufficient to have the Trustee with respect to the Old Notes register the
transfer of such Old Notes in the name of the person withdrawing the tender
and (v) specify the name in which any such Old Notes are to be registered, if
different from that of the Depositor. If Old Notes have been tendered
pursuant to the procedure for book-entry transfer, any notice of withdrawal
must specify the name and number of the account at the book-entry transfer
facility. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by Continental, whose
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of
the Exchange Offer and no New Notes will be issued with respect thereto
unless the Old Notes so withdrawn are validly retendered. Any Old Notes which
have been tendered but which are not accepted for exchange will be returned
to the Holder thereof without cost to such Holder as soon as practicable
after withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described herein at any time prior to the business day prior to
the Expiration Date.
3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is
signed by the registered Holder(s) of the Old Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of
certificates without alteration, enlargement or any change whatsoever.
If tendered Old Notes are registered in the name of the signer of the
Letter of Transmittal and the New Notes to be issued in exchange therefor are
to be issued (and any untendered Old Notes are to be reissued) in the name of
the registered Holder (including any participant in The Depository Trust
Company (also referred to as a book-entry facility) whose name appears on a
security listing as the owner of Old Notes), the signature of such signer
need not be guaranteed. In any other case, the tendered Old Notes must be
endorsed or accompanied by written instruments of transfer in form
satisfactory to Continental and duly executed by the registered Holder and
the signature on the endorsement or instrument of transfer must be guaranteed
by an eligible guarantor institution which is a member of one of the
following recognized signature guarantee programs (an "Eligible
Institution"): (i) The Securities Transfer Agents Medallion Program (STAMP),
(ii) The New York Stock Exchange Medallion Signature Program (MSF), or (iii)
The Stock Exchange Medallion Program (SEMP).
If the New Notes or Old Notes not exchanged are to be delivered to an
address other than that of the registered Holder appearing on the note
register for the Old Notes, the signature in the Letter of Transmittal must
be guaranteed by an Eligible Institution.
Endorsements on certificates or signatures on separate written
instruments of transfer or exchange required by this Instruction 3 must be
guaranteed by an Eligible Institution.
If any of the Old Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Old Notes registered in different names are tendered, it
will be necessary to complete, sign and submit as many separate copies of
this Letter of Transmittal as there are different registrations of Old Notes.
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When this Letter of Transmittal is signed by the registered Holder or
Holders of Old Notes listed and tendered hereby, no endorsements of
certificates or separate written instruments of transfer or exchange are
required.
If this Letter of Transmittal is signed by a person other than the
registered Holder or Holders of the Old Notes listed, such Old Notes must be
endorsed or accompanied by separate written instruments of transfer or
exchange in form satisfactory to Continental and duly executed by the
registered Holder or Holders, in either case signed exactly as the name or
names of the registered Holder or Holders appear(s) on the Old Notes.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, such persons should
so indicate when signing, and, unless waived by Continental, proper evidence
satisfactory to Continental of their authority so to act must be submitted.
4. TRANSFER TAXES. Continental shall pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes, or Old Notes for principal
amounts not tendered or accepted for exchange, are to be delivered to, or are
to be issued in the name of, any person other than the registered Holder of
the Old Notes tendered hereby, or if a transfer tax is imposed for any reason
other than the exchange of Old Notes pursuant to the Exchange Offer, then the
amount of any such transfer taxes (whether imposed on the registered Holder
or any other person) will be payable by the tendering Holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted herewith, the amount of such transfer taxes will be billed directly
to such tendering Holder.
Except as provided in this Instruction 4, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
5. WAIVER OF CONDITIONS. Continental reserves the absolute right to
waive, in whole or in part, any of the conditions to the Exchange Offer set
forth in the Prospectus.
6. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any Holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated above for further instructions.
7. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating
to the procedure for tendering and other questions relating to the Exchange
Offer, as well as requests for assistance or additional copies of the
Prospectus and this Letter of Transmittal, may be directed to the Exchange
Agent at the address and telephone number set forth above and in the
Prospectus.
8. IRREGULARITIES. All questions as to the validity, form,
eligibility (including time of receipt), and acceptance of Letters of
Transmittal or Old Notes will be resolved by Continental, whose determination
will be final and binding. Continental reserves the absolute right to reject
any or all Letters of Transmittal or tenders that are not in proper form or
the acceptance of which would, in the opinion of Continental's counsel, be
unlawful. Continental also reserves the right to waive any irregularities or
conditions of tender as to the particular Old Notes covered by any Letter of
Transmittal or tendered pursuant to such Letter of Transmittal.
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None of Continental, the Exchange Agent or any other person will be under any
duty to give notification of any defects or irregularities in tenders or
incur any liability for failure to give any such notification. Continental's
interpretation of the terms and conditions of the Exchange Offer shall be
final and binding.
9. DEFINITIONS. Capitalized terms used in this Letter of Transmittal
and not otherwise defined have the meanings given in the Prospectus.
10. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a
Holder of any Old Notes which are accepted for exchange must provide
Continental (as payor) with its correct taxpayer identification number
("TIN"), which, in the case of a Holder who is an individual, is his or her
social security number. If Continental is not provided with the correct TIN,
the Holder may be subject to a $50 penalty imposed by the Internal Revenue
Service. (If withholding results in an over-payment of taxes, a refund may be
obtained.) Certain Holders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements; however, these Holders still must submit the
Substitute Form W-9. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional
instructions.
To prevent backup withholding, each tendering Holder must provide such
Holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such Holder is awaiting
a TIN), and that (i) the Holder has not been notified by the Internal Revenue
Service that such Holder is subject to backup withholding as a result of
failure to report all interest or dividends or (ii) the Internal Revenue
Service has notified the Holder that such Holder is no longer subject to
backup withholding. The Form must be signed, even if the Holder is exempt
from backup withholding. If the Old Notes are registered in more than one
name or are not in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for information on which TIN to report.
Continental reserves the right in its sole discretion to take whatever
steps are necessary to comply with its obligation regarding backup
withholding.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER
WITH CERTIFICATES FOR OLD NOTES AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE
OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO
THE EXPIRATION DATE.
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