SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 13, 1996
Berry Petroleum Company
(Exact name of registrant as specified in its charter)
Delaware 1-9735 77-0079387
(State or other (Commission IRS Employer
jurisdiction of File Number) Identification No.
incorporation)
28700 Hovey Hills Road, P.O. Bin X, Taft, CA 93268
(Address of principal executive offices)
Registrant's telephone number, including area code (805) 769-8811
N/A
(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets.
On December 13, 1996 Berry Petroleum Company, a Delaware
corporation (the "Company"), purchased certain assets from Exxon
Corporation, a New Jersey corporation ("Exxon"), for the
aggregate consideration of $49.5 million (net of operations from
July 1, 1996). The consideration was paid from the Company's
existing working capital and borrowing from the Company's
unsecured credit facility with NationsBank of Texas. The
effective date of the transaction is July 1, 1996.
The assets purchased include all of the outstanding capital
stock of San Joaquin Production Company ("SJPC"), a Louisiana
corporation, formerly known as the Exxon San Joaquin Production
Company. The primary assets of SJPC are the Formax Property
which includes 200 acres of heavy oil producing properties and
other assets associated with heavy oil producing activities. The
Formax oil producing properties are located adjacent to the
Company's South Midway-Sunset field properties. These Formax
properties are currently producing about 1,050 barrels per day
("BPD") of heavy (13 degree API) crude oil from 130 wells and
have estimated reserves of approximately 20 million barrels.
The Formax property is subject to a 2-1/2% convertible
overriding royalty plus a variable overriding royalty interest
("ORRI") reserved by Exxon. This ORRI provides for Exxon to
receive an annual payment equal to 75% of the posted price
applicable for 13 degree API crude oil in excess, if any, of a
base price. The base price is defined as $12.70 per barrel for
1996, escalated at 2% per year.
Item 7. Financial Statements and Exhibits.
(a). Financial Statements. It is impracticable to
provide the required financial statements and pro forma financial
information at this time and such financial statements and pro
forma financial information will be filed as soon as they are
available, but in no event later than 60 days after the date this
Form 8-K is required to be filed.
(b). Pro Forma Financial Information. See Item 7(a) above.
(c). Exhibits.
10.1 Stock Purchase Agreement, dated December 11, 1996, by
and between the Registrant and Exxon Corporation, a New
Jersey corporation.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
Date: December 17, 1996 BERRY PETROLEUM COMPANY,
a Delaware corporation
/s/ Ralph J. Goehring
By: Ralph J. Goehring,
Chief Financial Officer
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S T O C K P U R C H A S E A G R E E M E N T
This Stock Purchase Agreement ("Agreement") is between Exxon Corporation,
a New Jersey Corporation with an address of P.O. Box 2180, Houston, Texas
77252-2180 ("Exxon"), as seller, and Berry Petroleum Company, a Delaware
Corporation with an address of Post Office Bin X, Taft, California 93268
("Buyer"), as Buyer, effective on the Effective Date.
Buyer desires to purchase all of the outstanding capital stock of the San
Joaquin Production Company, a Louisiana Corporation, formerly known as the
Exxon San Joaquin Production Company ("SJPC"), and Exxon desires to sell such
stock to Buyer, subject to the terms and conditions of this Agreement. SJPC
and Formax Oil Company, a California Corporation ("Formax") join in this
Agreement for the purpose of agreeing to take all actions required by them
under the terms herein. It is the parties' intent that Buyer have
responsibility for all matters relating to SJPC and Formax (but not for the
SJPC Property, as defined below), whether related to events occurring before
or after closing this transaction, except to the limited extent provided
in this Agreement.
In consideration of their mutual promises under this Agreement, the
benefits to be derived by each party, and other good and valuable
consideration, Buyer and Exxon agree as follows:
ARTICLE 1. DEFINITIONS
The following terms as used in this Agreement will have the following
definitions:
1.01. Additional Instruments. The instruments, if any, executed by
Buyer before Closing and delivered to Exxon in connection with this
transaction, including Buyer's investigation of and bid for the SJPC stock.
1.02. Associated Parties. Successors, assigns, directors, officers,
employees, agents, contractors, and affiliates. It is expressly understood
and agreed, that, for Exxon, Associated Parties shall include SJPC and Formax,
their successors, assigns, directors, officers, employees, agents, contractors,
and affiliates, provided that, notwithstanding the foregoing, it is understood
and agreed that, SJPC and Formax, their successors, assigns, directors,
officers, employees, agents, contractors and affiliates, shall not be deemed
affiliates of Exxon with regard to any matter or action arising after the
Closing Date.
1.03. Base Purchase Price. The amount set forth in Section 3.01.
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1.04. Business Day. Any day that the headquarters offices
of Exxon Company, U.S.A., a division of Exxon Corporation, in
Houston, Texas, are scheduled to be and are open for business.
1.05. Claim or Claims. Collectively, claims, demands,
causes of action, and lawsuits asserted or filed by any person,
including an artificial or natural person; a local, state, or
federal governmental entity; an Associated Party of Buyer,
Exxon, SJPC or Formax; or a third party.
1.06. Closing. The delivery of the stock certificates and
executed stock powers and funds by the parties to close the
purchase and sale of the SJPC stock.
1.07. Closing Date. The date on which Closing is scheduled
to and does occur.
1.08. Code. The Internal Revenue Code of 1986, as amended.
1.09. Condition. Defined in Section 12.02.
1.10. Effective Date. The date on which the last of the
parties executes this Agreement.
1.11. Effective Time. 7 a.m. local time where the Formax
Property is located, on July 1, 1996.
1.12. Environmental Laws. Applicable federal, state, and
local laws, including statutes, regulations, orders, ordinances,
and common law, currently enacted or enacted in the future and
relating to protection of public health, welfare, and the
environment, including those laws relating to storage, handling,
and use of chemicals and other hazardous materials; those
relating to the generation, processing, treatment, storage,
transport, disposal, cleanup, remediation, or other management
of waste materials or hazardous substances of any kind; and
those relating to the protection of environmentally sensitive or
protected areas. "Environmental Laws" includes, but is not
limited to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, the Clean Water Act, the
Safe Drinking Water Act, the Hazardous Materials Transportation
Act, the Toxic Substance Control Act, and the Clean Air Act, as
each is amended from time to time.
1.13. Formax Property. That real and personal property
described on Exhibit A hereto.
1.14. SJPC Property. Any and all property owned by SJPC
other than the stock of Formax.
1.15. Liability or Liabilities. Collectively, all damages
(including consequential and punitive damages), including those
for personal injury, death, or damage to personal or real
property (both surface and subsurface) and costs for
remediation, restoration, or clean up of contamination, whether
the injury, death, or damage occurred or occurs on or off the
Formax Property by migration, disposal, or otherwise, losses,
fines, penalties, expenses, costs to remove
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or modify facilities on or under the Formax Property, plugging
liabilities for all Wells, attorneys' fees, court and other legal
costs incurred in defending any Claim, liens, and judgments, whether
these damages and other costs are known or unknown, foreseeable or
unforeseeable.
1.16. NORM. Naturally occurring radioactive material.
1.17. Oil. Crude oil, distillate, drip gasoline,
condensate, and liquid hydrocarbons.
1.18. Occurrence. Defined in Section 12.03.
1.19. Operator. The person designated as operator of an oil
and gas property by the applicable regulatory agency.
1.20. Strict liability. Includes strict statutory liability
and strict products liability.
1.21. Well or Wells. Oil and gas wells, both abandoned
and unabandoned.
1.22. Net Working Capital. The amount equal to the
difference between: (a) the sum of the combined net balances
(after giving effect to applicable allowances or reserves) of the
cash accounts, accounts receivable, current prepaid accounts, and
all other current period asset accounts of Formax and SJPC, with
the exception of the product inventory accounts; and (b) the sum
of the combined net balances of the accounts payable, and all
other current liability accounts of Formax and SJPC, but
excluding all income, ad valorem and severance taxes under the
taxes payable account, all determined in accordance with GAAP and
consistent with past reporting practices.
1.23. Governmental Authority. Means any federal, state,
local, or other governmental or administrative authority,
agency, court, tribunal, commission, board or bureau.
1.24. Income Tax. Means any tax based solely on or measured
solely by taxable or net income (including the California
franchise tax), including any interest, penalty, or addition to
tax, imposed by any Governmental Authority and excluding,
without limitation, any ad valorem tax, excise tax, sales tax,
use tax, real or personal property tax, transfer tax, gross
receipts tax, or other tax, assessment, duty, fee, levy or other
Governmental charge, together with and including without
limitation, any and all interest, fines, penalties, assessments
and additions to tax resulting from, relating to, or incurred in
connection with any such tax or any contest or dispute thereof.
1.25. Income Tax Return. Means any report, statement, form,
return or other document or information required to be supplied
to a Taxing Authority in connection with Income Taxes.
1.26. Proceeding. Means any action, suit or other judicial
or administrative proceeding, at law or in equity, before any
Governmental Authority.
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1.27. Return. Means any and all returns, declarations of
estimated tax, reports, statements and other documents relating
to or required to be filed in respect of Taxes, including information
returns or reports with respect to backup withholding and other
payments to third parties.
1.28. Taxing Authority. Means any Governmental Authority
having jurisdiction over the assessment, determination,
collection, or other imposition of Tax.
1.29. Tax. Means any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code Section 59A), customs
duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property,
personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of
any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
1.30. Estimated Depletable Tax Basis. The estimated total
depletable tax basis in the Formax Property as of the Effective
Time, determined by Formax prior to Closing.
1.31. Assumed Depletable Tax Basis. A total depletable tax
basis of $45 million.
1.32 Estimated Depreciable Tax Basis. The estimated
total depreciable tax basis in the Formax Property as of the
Effective Time, determined by Formax prior to Closing.
1.33 Assumed Depreciable Tax Basis. A total depreciable
tax basis of $6 million.
ARTICLE 2. PURCHASE AND SALE
2.01. Agreement to Sell. Pursuant to Buyer's offer, Exxon
agrees to sell all the outstanding capital stock of SJPC to
Buyer, and Buyer agrees to buy all such stock from Exxon, for
the consideration recited in and subject to the terms of this
Agreement.
2.02. Assets to be Sold and Retained.
(a) It is understood that, as of the Effective Time,
Formax's sole material asset is the Formax Property.
(b) It is expressly agreed that, prior to Closing:
(i) Effective one minute prior to the Effective Time SJPC
shall have conveyed all of its interest in the SJPC
Property, to Exxon, or an entity designated by Exxon, on
that form attached hereto as Exhibit B-1, it being expressly
understood and agreed that: 1) neither this Agreement, nor
any instrument executed in relation hereto, is intended to
grant or convey to Buyer any interest in, or obligations
pertaining to, the SJPC Property, and
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2) the provisions hereof concerning inspections, indemnities,
and matters related thereto shall not be applicable to the SJPC
Property, it being understood and agreed that, for the purposes
of the application of this Agreement, the parties shall treat
the SJPC Property as though it had been conveyed, pursuant to
this provision, prior to the Effective Time; and
(ii) Effective as of two minutes prior to the Effective Time, Formax
shall have conveyed to SJPC, on the form attached hereto as
Exhibit B-2, an Overriding Royalty upon the terms and conditions
more specifically set out in said Exhibit B-2. Effective as
of one minute prior to the Effective Time, SJPC shall have
conveyed said Overriding Royalty to Exxon on the form attached
hereto as Exhibit B-3.
(c) If either party determines, either before or after the Closing Date,
that the description of any interest contained in the instruments
described in (b) (i) and (ii), above, is in error, then Exxon and
Buyers will meet and use their best efforts to resolve the error. If
necessary after Closing, the parties will execute and record
appropriate correction and other instruments to correct the error.
ARTICLE 3. PURCHASE PRICE
3.01. Base Purchase Price. The Base Purchase Price is U.S. Fifty One
Million, Five Hundred Thousand Dollars ($51,500,000) subject to adjustment
as provided herein.
3.02. Performance Deposit and Payment. As evidence of good faith,
Buyer has deposited with Exxon a performance deposit of U.S. Five Million
Dollars ($5,000,000). The performance deposit will be credited to the Base
Purchase Price at Closing, will not bear interest, and is not refundable
except as provided in this Agreement. The performance deposit is not an
earnest money deposit or liquidated damages, and forfeiture of the performance
deposit as provided in this Agreement will be in addition to, and not in lieu
of, the rights and remedies Exxon may have under law or in equity for Buyer's
failure to perform as provided in this Agreement.
ARTICLE 4. TAX MATTERS
4.01 Tax Matters. SJPC and Formax have filed or will have filed by
the Closing Date all Tax Returns required to be filed, and have paid all Taxes
shown thereon as owing, except where the failure to file Tax Returns or to pay
Taxes would not have an adverse effect on the financial condition of Buyer.
The income of SJPC and Formax will be apportioned to the period up to and
including the Closing Date and the period after the Closing Date by closing
the books of SJPC and Formax as of the end of the Closing Date. Buyer, SJPC,
and Formax, in accordance with the past custom and practice of SJPC and
Formax, will furnish Tax information to Exxon for inclusion in Exxon's Returns
for the period which includes the Closing Date. Subject to allocation as
provided in Article 10, Exxon and its Associated Parties will be responsible
for all Taxes resulting from operations of SJPC and Formax on or prior to
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the Closing Date. Exxon and its Associated Parties will remain liable, and
shall indemnify Buyer against and hold it harmless from, any Claims for such
Taxes, penalties, interest, or assessments which relate to any Tax filing or
Return which has been, will, or should be filed, and the Tax paid, by Exxon.
4.02 Income Tax Sharing Agreements. Any Income Tax sharing agreement
between or among Exxon, SJPC, and Formax is terminated as of the Closing Date.
4.03 Taxes. Buyer, SJPC, and Formax will be responsible for all Taxes
with respect to SJPC and Formax, resulting from operations subsequent to the
Closing Date and will file the appropriate Returns relating to such Taxes.
Buyer, SJPC, and Formax shall indemnify Exxon against and hold it harmless
from any Claims for Taxes, penalties, interest, or assessments which relate to
any such required Tax filing or Return which will or should be filed and the
Tax paid by Buyer, SJPC, or Formax subsequent to the Closing Date. Up until
five years after the Closing Date Exxon will furnish to Buyer Tax information
relating to Formax, as reasonably requested, for inclusion in Buyer's, SJPC's
or Formax's Income Tax Returns.
4.04 Post-Closing Elections. At Exxon's request, Buyer will cause
SJPC and Formax to make or join with Exxon in making any other election for
any post acquisition period, if the making of such election does not have a
material adverse impact on Buyer or limit Buyer's utilization of its or SJPC's
investment in the Formax stock.
4.05 Claims and Suits for Refund. With respect to any pending or
subsequently filed Claim for refund of any Tax for or in respect to periods
ending on or prior to the Closing Date, Buyer agrees to notify Exxon within
ten (10) days of such Claim. Exxon will retain complete discretion to
prosecute, settle or abandon on behalf of SJPC or Formax each of such Claims.
Buyer will provide Exxon with all reasonable cooperation in obtaining
such refunds (including the execution of appropriate powers of attorney) and
will make the records and personnel of SJPC and Formax available to assist
Exxon or any counsel designated by Exxon to prosecute any such Claim.
In the event that any refund of any such Taxes is received by Buyer,
SJPC, or Formax with respect to periods ending on or prior to the Closing
Date, Buyer will pay to Exxon within fifteen (15) days an amount equal to
such refund plus any interest received on such refund.
4.06 Assistance and Records (Exxon). Buyer, SJPC, and Formax shall
provide Exxon with such assistance as Exxon may reasonably request in
connection with the preparation of Income Tax Returns or Returns relating to
any other Taxes required to be filed by Exxon or its Associated Parties, any
audit or other examination by any Taxing Authority, any Proceedings relating
to liability for Income Taxes or other Taxes, or any Claim for refund with
respect to such Taxes relating to the business or operations of SJPC, Formax,
or the Formax Property prior to the Closing Date. Such assistance shall
include making employees
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available to Exxon and its counsel, providing additional information and
explanation of any material to be provided, furnishing to or permitting the
copying by Exxon or its counsel, of any records, Returns, schedules,
documents, work papers or other relevant materials which might reasonably be
expected to be used in connection with such Return, audit, examination,
Proceeding or Claim.
(a) Exxon will retain complete discretion in conducting and resolving
any audit, administrative or judicial Proceeding relating to any
such Tax with respect to periods ending on or before the Closing
Date. Buyer will notify Exxon within five (5) days of any such
audit, proposed adjustment or related matter that could affect
Exxon's Income Tax or other Tax liability.
(b) Exxon will identify and retain either originals or copies of any
records or information which, in Exxon's sole discretion, may be
relevant to such Return, audit, examination Proceeding, or Claim.
Buyer will otherwise retain and, upon the request of Exxon, provide
any records or information which may be relevant to such Return,
audit, examination, Proceeding, or Claim.
4.07 Assistance and Records (Buyer). Exxon shall provide Buyer, SJPC,
and Formax with reasonable assistance relating to the Taxes, including ad
valorem and severance taxes, concerning SJPC and any of its assets as of
Closing as Buyer, SJPC and Formax may reasonably request within 5 years after
the Closing Date in connection with the preparation of Income Tax Returns or
Returns relating to any other Taxes required to be filed by Buyer, SJPC or
Formax, any audit or other examination by any Taxing Authority, any
Proceedings relating to liability for Income Taxes or other Taxes, or any
Claim for refund with respect to such Taxes relating only to the operations
of the Formax Property. It is expressly agreed that, in the event that
Buyer shall request any type of audited financial records, Buyer shall enter
into an agreement for the provision of such records with an accounting firm
approved by Exxon, and Buyer shall be solely responsible for the cost of
obtaining such financial records.
ARTICLE 5. BUYER'S REVIEW
5.01. Buyer's Review before Signing this Agreement. Exxon gathered
data relating to SJPC, Formax and the Formax Property for the Buyer to review
before submitting a bid and signing this Agreement. The data included files
in the possession of Exxon, SJPC, and Formax, concerning the Formax Property
(for example, geological, geophysical, production, engineering, and other
technical data and records; contract, land, lease, and permit records; and
files concerning petroleum, produced water, wastes and other materials that
may have leaked, spilled, or been disposed of on-site, with locations, pits
and pit closures, burial, landfarming, landspreading, underground injection,
and solid waste disposal sites).
Buyer must notify Exxon in writing if it wishes to review any additional
files or data, but Exxon's obligation to provide additional data is limited
to data that are reasonably available to it. Exxon and its Associated Parties
have no obligation to provide access to, and Buyer waives any claims to
inspect, Exxon's or its Associated Parties' interpretive, predictive,
confidential,
<PAGE 8>
private, proprietary, or privileged information (including personnel records),
or information whose dissemination is restricted by agreements between Exxon
or its Associated Parties and third parties. Exxon and its Associated
Parties have no obligation to provide any information to Buyer that is
available to the general public, whether in the public records or from a
governmental entity or agency on request.
Buyer represents by entering into this Agreement that it has reviewed
the records related to SJPC, Formax, and the Formax Property, and all other
relevant records to its satisfaction to enable it to make its bid and execute
this Agreement. Buyer may request adjustments to the Base Purchase Price
after the Effective Date only for Title Defects, Conditions, and Material
Differences, as provided below. Buyer has undertaken all appropriate inquiry,
to its satisfaction, and has made an informed decision to acquire all of the
outstanding capital stock of SJPC on the basis of its own investigations and
without reliance on statements or investigations by any other person,
including Exxon and its Associated Parties.
5.02. Access to Formax Property. Buyer had the opportunity to inspect
and inventory the Formax Property before signing this Agreement. On Buyer's
request, Exxon will provide additional access to the Formax Property at any
reasonable time before Closing. Buyer may inspect the premises and conduct
an environmental assessment of the Formax Property, including investigations
to identify wetlands and sensitive and protected habitats. If this Agreement
is terminated, Buyer must restore the premises of the Formax Property to their
pre-entry condition.
Buyer's visits to the Formax Property will be scheduled by mutual consent
of the parties, subject to Buyer's providing Exxon at least five days written
notice of the locations that it wishes to visit and the proposed times. Exxon
may accompany Buyer during its site visits. Entry onto the Formax Property
will be subject to third-party restrictions, if any, and to Exxon's safety,
industrial hygiene, drug and alcohol and firearm requirements, and will be at
Buyer's sole risk and expense.
If Buyer undertakes an environmental assessment, both the consultant (if
consultants are employed) and the scope of the proposed assessment, including
testing protocols, must be reasonably acceptable to Exxon before the work may
begin. If Buyer and Exxon cannot agree on Buyer's proposed environmental
assessment plan, then Exxon may, at its sole option, terminate this Agreement
and Exxon will refund the performance deposit to Buyer.
If Buyer takes samples from the Property, Exxon may require splitting of
each sample. Buyer will deliver, at Buyer's cost, copies of all draft and
final reports, results, data, and analyses of the site visits, inspections,
and assessments to Exxon within five days of Buyer's receipt of them, at
Buyer's cost. Exxon and its Associated Parties will have no confidentiality
obligation with regard to this information and may disclose it to third
parties and use it for any purpose.
5.03. Materials and Equipment. Facilities and major items of material
and equipment included in the Formax Property have been described to Buyer.
By signing this Agreement, Buyer acknowledges that it has had the opportunity
to inspect and inventory the facilities, material and equipment and is
satisfied with them, including their condition. There will be no
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adjustment to the Base Purchase Price on the basis of facilities, material
and equipment. Facilities, material and equipment observed during Buyer's
inspection are subject to replacement or depletion before Closing as a result
of normal and customary operations.
5.04. No Warranty of Accuracy; Disclaimer. Exxon and its Associated
Parties make no warranty, and expressly disclaim all warranties, as to the
accuracy or completeness of the files and other information that they may
provide to Buyer. If Buyer determines during its review that any files or
data may be incomplete or inaccurate, it will either notify Exxon of its
conclusions in writing not later than ten days before the Closing Date or be
deemed to have waived complaints as to the incompleteness or inaccuracy of
the files or data.
5.05. Buyer's Confidentiality Obligations. Buyer will keep confidential
all information provided pursuant to the terms hereof, except to the extent
that information (a) was public knowledge when Buyer received the information;
(b) becomes public knowledge without breach of this Agreement by Buyer; or
(c) was known to Buyer before receipt or discovery of the information in
connection with its review of SJPC, Formax, and the Formax Property. Buyer
may not use the information for any purpose other than evaluation of SJPC and
may not divulge the information to any person except those who need to know it
in order to evaluate SJPC for Buyer under this Agreement. Buyer will enforce
this confidentiality obligation as to all persons with whom it shares the
information and is liable to Exxon for a breach of this obligation by any
person to whom Buyer has disclosed the information. If this transaction does
not close, Buyer will return to Exxon all information that it obtained from
Exxon or its Associated Parties, destroy all of its work papers and analysis
that incorporate the information, and be subject to these confidentiality
obligations for five years after the Effective Date. Buyer's confidentiality
obligation will not, however, survive Closing.
ARTICLE 6. TITLE AND TITLE DEFECTS
6.01. Title Defect. "Title Defect" means any one of the following:
(a) Formax's title at the Effective Time as to all or any part of
the Formax Property is subject to an outstanding mortgage, deed
of trust, lien or other monetary encumbrance or adverse claim not
listed or referenced on Exhibit A that would induce a purchaser
to suspend payment of proceeds for the Formax Property or require
the furnishing of security or indemnity. Evidence that Formax is
currently receiving its full share of proceeds from a purchaser or
third-party Operator (not under a 100% or other division order
requiring Formax to further distribute proceeds to third parties)
for the Formax Property creates a presumption that no Title Defect
exists with respect to the Formax Property.
(b) Formax's net revenue interest or working interest in the Formax
Property at the Effective Time is less than that shown on
Exhibit A, provided that, for the purposes hereof, Formax's net
revenue interest in the Formax Property shall not be deemed to be
reduced as a result of the existence of any of those interests
described on Exhibit A, including, but not limited to a back-in
to a working interest
<PAGE> 10
or an increase in an overriding royalty, which occurs under the
terms of said interests.
(c) Formax's interest would be reduced if a third party were to
exercise a reversionary, back-in, or other similar right
not listed or referenced on Exhibit A.
(d) Formax is in material default under some material provision of
a lease, farmout agreement, or other agreement resulting in
loss of all or any part of the Formax Property.
(e) The title of Exxon to all of SJPC stock or the title of SJPC
to all of Formax stock is subject to an outstanding mortgage,
deed of trust, lien or other monetary encumbrance or claim.
(f) Exxon has not complied with the warranties set out in
Section 19.01.
"Title Defect" does not include (A) a lien or encumbrance in the form of
a judgment secured by a supersedeas bond or other security approved by the
court issuing the order; or (B) the loss of lease acreage between the
Effective Time and the Effective Date (whichever is earlier) and the
Closing Date, because the lease term expires.
Buyer must promptly notify Exxon in writing if Buyer determines that
Formax's net revenue interest or working interest for the Formax Property
is greater than that shown on Exhibit A.
6.02. Adjustments to Base Purchase Price.
(a) At any time on or before the tenth day before the Closing Date,
Buyer may request an adjustment to the Base Purchase Price based
on a Title Defect. At any time before the Closing Date, Exxon
may request an adjustment to the Base Purchase Price if
Formax 's net revenue interest or working interest in the
Formax Property is greater than that shown on Exhibit A. A
notice requesting an adjustment must be timely and in writing
and include appropriate documentation to substantiate the
adjustment, or the claimant will be deemed to have waived its
claim to adjust the Base Purchase Price for the matter
stated in the notice.
(b) If either party gives notice under the previous section, the
parties will meet and use their best efforts to agree on the
validity of the claim and, if applicable, the amount of the
adjustment, using the following criteria:
(1) If the claim is based on Formax owning a different net
revenue interest than that shown on Exhibit A, then the
Base Purchase Price will be adjusted upward (in the event
Formax owns a greater interest) or downward (in the event
Formax owns a lesser interest) by an amount equal to the
absolute value of the amount yielded by the following
formula:
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Adjustment = A x (1-[B/C])
A = Base Purchase Price
B = correct net revenue interest
C = net revenue interest as shown on Exhibit A.
(2) If the claim is based on a lien, encumbrance, or other
monetary charge on a property that is liquidated in
amount, then the adjustment will be the sum necessary to
remove the encumbrance from the affected property.
(3) If the claim is based on an obligation or burden that is
not liquidated, but can be estimated with reasonable
certainty, the adjustment will be the sum necessary to
compensate Buyer on the Closing Date for the adverse
economic effect on the affected property.
(c) If the amount of the adjustment for each Title Defect cannot be
determined based on the above criteria, and if the parties
cannot otherwise agree on the amount of an adjustment, Exxon
may, at its sole option and upon written notice to Buyer,
either:
(1) terminate this Agreement and refund the performance deposit
or
(2) elect to arbitrate the dispute under the provisions of
Exhibit C.
(d) The Base Purchase Price will be adjusted only if the net amount
of all adjustments under this section, plus the amount of all
adjustments made under Section 12.02, is greater than $250,000.
If the net amount of all adjustments would result in the Base
Purchase Price being reduced by more than ten percent Exxon may,
upon written notice to Buyer, terminate this Agreement and
refund the performance deposit.
(e) Exxon may, at its sole option, elect by written notice to Buyer
before the Closing Date to cure some or all of the Title
Defects. No price adjustment will be made at Closing for the
Title Defects that Exxon elects to cure. If any Title Defect
is not cured within ninety days after Closing, the price
adjustment will be determined under the criteria set forth
in this section, including, but not limited to, the provisions
of Section 6.02(d).
ARTICLE 7. CHANGE OF OPERATORSHIP
<PAGE 12>
7.01. Buyer must apply for and obtain, where possible under applicable
regulations, regulatory approvals and permits and satisfy requirements of
financial security to operate the Formax Property provided in Section 8.04.
ARTICLE 8. CLOSING
8.01. Closing Date. The Closing Date will be on or before
December 13, 1996, unless delayed as provided in this Agreement, at a
place to be agreed upon by Exxon and Buyer. If the parties agree,
Closing may be handled by exchange of documents, by mail or courier.
No price adjustment will be made as a result of Closing being delayed.
8.02. Buyer's Request to Delay Closing. Buyer shall have the
right to delay Closing for a period of up to 14 days after the date
stated in Section 8.01, to make the environmental assessment of the
Formax Property under Section 5.02 hereof or to obtain and examine
additional information if Buyer determines in its review that any files
or data may be incomplete or inaccurate as specified in Section 5.01
hereof. If Buyer requests that Closing be delayed for any other reason,
and in any case if Buyer requests that Closing be delayed for a period
longer than 14 days, such delay must be approved by Exxon in writing, and
Exxon may require Buyer to pay, as consideration for and a condition of
its agreement to such delay, an additional performance deposit equal to
the original performance deposit as set forth in Section 3.02 due to Exxon
in cash or its equivalent within five days of Exxon's agreement to delay.
This additional performance deposit will be treated as the performance
deposit for all purposes under this Agreement.
8.03. Exxon's Right to Delay Closing. Upon written notice to Buyer,
Exxon may, at its sole option and for any reason, delay Closing for up to
14 days after the date stated in Section 8.01. It is expressly understood
and agreed that the maximum amount that Closing may be delayed under this
Section and Section 8.02 is a total of 14 days, and that any additional
delay provided for in Section 8.02 at Exxon's option may require the
payment of an additional performance deposit.
8.04. Closing Obligations.
(a) Certificates of Authority. Exxon may require Buyer to deliver,
at least five days before the Closing Date, certificates in form
and substance satisfactory to Exxon, 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 all of the outstanding capital stock of SJPC 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.
<PAGE 13>
(b) Change of Operatorship. Buyer will deliver to Exxon on or
before the Closing Date the following: (1) evidence of
compliance with the requirements of all laws and regulations
relating to the transfer of operatorship of the Formax Property,
including those regarding the assumption of responsibility for
the plugging and abandoning of each Well thereon, including, as
applicable, evidence that the appropriate bond, surety letter,
letter of credit, or other financial security has been accepted
by the relevant regulatory agency; and (2) evidence that Buyer
has, where possible under applicable regulations, obtained all
necessary permits or transfers of permits to operate the Formax
Property.
(c) Closing Settlement Statement. Exxon will provide a closing
settlement statement including items such as Base Purchase Price,
adjustments to the Base Purchase Price, performance deposit,
adjustments under Article 10, and copying costs, to the extent
this information is available at Closing. Exxon will use
estimates in the closing settlement statement to the extent that
estimates are necessary and may correct the estimates in the
final settlement statement to be prepared under Article 14.
(d) Closing Documents.
(1) Upon payment of the Purchase Price, Exxon will deliver
to Buyer:
(i) Certificates representing all the outstanding capital
stock of SJPC together with stock powers executed to
Buyer. All requisite stock transfer taxes, if any,
shall be the responsibility of Buyer and no adjustment
to the Purchase Price for their cost will be made.
(ii) A Certificate of Non-foreign Status.
(iii) Change-of-operator forms for Wells on the Formax
Property.
(iv) The closing settlement statement.
(v) An executed letter from each present director, officer
and secretary of SJPC and Formax in each case resigning
their respective office with effect from Closing.
(vi) Other documents reasonably required to close this
transaction and implement the terms of this Agreement.
(2) At Closing, in addition to paying the Purchase Price, Buyer
shall deliver:
(i) a certificate that all its representations under
this Agreement and the Additional Instruments are
true as of the Closing Date. (ii) Other
<PAGE 14>
documents reasonably required to close this
transaction and implement the terms of this Agreement.
(e) Payment to Exxon. At Closing, Buyer will pay Exxon the net amount
shown on the closing settlement statement by funds transfer as
that term is defined in code section 4A.104(1) of the Texas
Business and Commerce Code. This amount is subject to further
adjustment after Closing as provided in this Agreement.
Notwithstanding any other provision of this Agreement, Buyer
must make payment by the specific means stated, or Exxon may
refuse to proceed with Closing until Exxon, in its sole
discretion, is satisfied that it has received full payment.
This right is in addition to all other rights and remedies Exxon
may have under this Agreement, at law, or in equity.
8.05. Condition Precedent. Buyer's performance of its obligations
under this Article is a condition precedent to Exxon's obligation to close
this transaction.
8.06 Insurance. Exxon will terminate all insurance that it has
provided for the SJPC, Formax, and the Formax Properties. If the Effective
Time is before the Closing Date, the termination will be retroactive to the
Effective Time. Buyer relinquishes and waives, on its behalf and on behalf
of all persons subrogated to Buyer's rights, all rights to claim against
any insurance provided by Exxon and its Associated Parties.
ARTICLE 9. POST-CLOSING OBLIGATIONS
9.01. Copies. Within sixty days after the Closing Date, Exxon will
deliver to Buyer, at Buyer's cost and request, the originals of the data
and records described in Section 5.01. Buyer must advise Exxon prior to
Closing which data and records that it wants. To the extent that Buyer
already has copies of the data and records, it shall exchange such copies
for the originals. To the extent that Buyer does not have copies of
such records, Exxon shall arrange for them to be copied, at Buyer's expense.
If Buyer requests geophysical data and if Exxon is not restricted from
releasing the data to Buyer, Buyer's execution of a licensing agreement
satisfactory to Exxon will be a condition of Exxon's delivering the data to
Buyer.
9.02. Buyer's Compliance. Buyer will comply with all rules,
regulations, statutes, and laws applicable to Buyer's ownership or
operation of SJPC, Formax and the Formax Property.
9.03. Plugging and Abandoning Wells; Remediation. Buyer recognizes,
and will cause Formax to perform properly and in accordance with applicable
law, all obligations to abandon, restore, and remediate the Formax Property,
whether arising before or after the Effective Time, including, but not
limited to, obligations to:
(a) obtain plugging exceptions in Buyer's name for each Well with
a current plugging exception, if required under applicable law,
or permanently plug and abandon the Well;
<PAGE 15>
(b) plug, abandon, and reabandon, if necessary, each Well as required
under applicable law;
(c) remove all equipment and facilities, including flowlines and
pipelines;
(d) close all pits; and
(e) restore the surface and subsurface as appropriate and in
accordance with all requirements under law, including the rules,
regulations, and requirements of all governmental authorities
with jurisdiction, and in accordance with all obligations,
express or implied, under any agreement with respect to or
pertaining to the Formax Property.
Buyer will pay all costs and expenses associated with the obligations
assumed under this section.
ARTICLE 10. ACCOUNTS, ALLOCATION OF PRODUCTION AND REVENUE, EXPENSE
OF OPERATION, TAXES, LIABILITIES, AND PERSONNEL
10.01. Accounts. At Closing and/or in the Final Settlement Statement
provided for in Article 14, in addition to any adjustments, and other payments
provided for herein, it is understood and agreed that the Base Purchase Price
shall be adjusted as follows:
(a) Exxon shall be credited with an amount equal to the sum of:
(i) All Oil in storage on the Formax Property as of the
Effective Time, it being understood and agreed that Exxon,
at its sole option, may include as "Oil in storage" all Oil
in the system downstream of the wellhead at the Effective
Time, including Oil in stock tanks, wash tanks and heater
treaters, and Exxon, at its sole option, may either run
or gauge the oil in storage and will read and replace all gas
meter charts at the Effective Time. Oil inventories will be
priced at the price received by Exxon as of the Effective Time;
(ii) The expenses incurred in operating the Formax Property between
the Effective Time and the Closing Date, it being expressly
understood and agreed that such expenses shall be deemed to be
the sum of the following: (1) Operation and Maintenance
Expenses, which shall be the actual costs incurred for and
incidental to the operation, protection, and maintenance of the
Formax Property (but excluding costs under (2) below), provided
that, to the extent that such actual costs are not available
for such period, such costs shall be based on the average
costs for the Formax Property for the preceding three-month
period; (2) Other Costs which shall include workover costs,
plugging, abandoning, and reabandoning costs, and other costs
incurred by Exxon incidental to the operation, protection, and
maintenance of the Formax
<PAGE> 16
Property, on an actual-cost basis; and (3) Overhead, at a rate
equal to 25% of the sum of the amounts under paragraphs
(1) and (2) above; and
(iii) Any Taxes paid by Exxon for which Buyer is liable pursuant to
the terms of Section 10.03 hereof.
(b) Buyer shall be credited with an amount equal to the sum of:
(i) The revenue received by Formax for its share of production
from the Formax Property, less any applicable revenue based
taxes, from the Effective Time to the Closing Date; and
(ii) Any other Taxes paid by Buyer for which Exxon is liable
pursuant to the terms of Section 10.03 hereof.
10.02. Contracts. Prior to Closing, Exxon and Buyer, acting together,
in good faith, shall determine what actions shall be taken with regard to
any contracts between SJPC and/or Formax and any third party. Upon Closing,
all current interaffiliate agreements between SJPC and/or Formax and Exxon
or its Associated Parties shall terminate, any applicable periods for notice
of termination shall be deemed waived, and SJPC, Formax and Buyer shall
have no remaining rights (e.g., insurance coverage for Claims arising prior
to the Effective Time or Closing, whichever is later) or obligations under
said agreements. Prior to Closing, Buyer will be responsible for making
suitable arrangements to replace the services provided to SJPC and Formax
by Exxon and its Associated Parties.
10.03. Allocation of Taxes. Taxes with respect to Formax and the
Formax Property for the Tax year in which the Effective Time occurs shall
be prorated to the Effective Time. Exxon shall be liable for a fraction
thereof based upon the number of days in the Tax year prior to the Effective
Time, and Buyer shall be liable for the balance thereof. After the
Effective Time, Formax, in the normal course of its business, will pay
Taxes as they become due.
The Income Tax allocation will be based upon Formax's forecasted
taxable income as determined by Formax in the regular course of business
for the December 15, 1996 Federal income tax estimated payment. The Income
Tax liability will be determined by applying the applicable Federal and
State Income Tax rates to the taxable income of Formax as if Formax were
not a member of Exxon's consolidated group. The Income Tax allocation
will be exclusive of any gain or loss associated with the distribution of
assets, or any other previous intercompany transaction, which will inure
to Exxon according to the Consolidated Return Regulations.
The allocation for ad valorem taxes will be based on the 1996
assessment for the 1996-1997 tax year, or, if that assessment is not known,
then the apportionment will be based on the assessment for the previous
Tax year. It is expressly understood and agreed that Buyer shall be solely
liable for 1996-1997 tax year ad valorem Taxes.
<PAGE 17>
The allocation for severance taxes will be based on the assessment for
the 1996 Tax year, although that assessment may be based on the previous
years production.
10.04 No Adjustment for SJPC. There will be no adjustment to the Base
Purchase Price for Taxes relating to SJPC or the SJPC Property.
10.05 Adjustment for Depletable Tax Basis. There shall be an
adjustment to the Base Purchase Price for the difference between the
Estimated Depletable Tax Basis and the Assumed Depletable Tax Basis. To the
extent that the Estimated Depletable Tax Basis is greater than the Assumed
Depletable Tax Basis, the Base Purchase Price will be adjusted upward by
16.7% of the difference. To the extent that the Estimated Depletable Tax
Basis is less than the Assumed Depletable Tax Basis, the Base Purchase Price
will be adjusted downward by 16.7% of the difference.
10.06 Adjustment for Depreciable Tax Basis. There shall be an
adjustment to the Base Purchase Price for the difference between the
Estimated Depreciable Tax Basis and the Assumed Depreciable Tax Basis.
To the extent that the Estimated Depreciable Tax Basis is greater than the
Assumed Depreciable Tax Basis, the Base Purchase Price will be adjusted
upward by 32% of the difference. To the extent that the Estimated
Depreciable Tax Basis is less than the Assumed Depreciable Tax Basis,
the Base Purchase Price will be adjusted downward by 32% of the difference.
10.07 Adjustment for Tax Basis. If the sum of the Estimated
Depreciable Tax Basis and the Estimated Depletable Tax Basis differs by
more than $5,000,000 from the sum of the Assumed Depreciable Tax Basis and
the Assumed Depletable Tax Basis, then, Exxon and Buyer shall negotiate
in good faith to agree upon an adjustment to the Purchase Price in lieu of
the adjustment provided for in Sections 10.05 and 10.06, that takes into
account the discrepancy. In the event that Exxon and Buyer cannot agree
upon such an adjustment, the matter shall be handled under the alternative
dispute resolution procedures set out in Section 11.06 hereof.
10.08. Sales, Transfer, and Recordation Taxes and Fees. Notwithstanding
anything to the contrary contained herein, Buyer agrees to pay any sales, use
or transfer taxes due as a result of the sale of the stock of SJPC. Buyer
agrees to pay any recordation fees incident to the sale.
10.09. Net Working Capital. Exxon will make reasonable efforts to
cause the Net Working Capital remaining on the balance sheets of SJPC and
Formax to be reduced to as close to zero as possible. Where feasible,
Exxon will cash settle, or cause to be cash settled, individual current
period asset and liability accounts prior to Closing.
(i) In the event that a positive Net Working Capital balance exists
on the combined balance sheets of SJPC and Formax as of the
Closing Date, any amount owing to Buyer under 10.01 (b), above,
will be reduced by the amount of the positive Net Working Capital
balance.
<PAGE 18>
(ii) In the event that a negative Net Working Capital balance exists
on the combined balance sheets of SJPC and Formax as of the
Closing Date, any amount owing to Buyer under 10.01 (b), above,
will be increased by the amount of the negative Net Working
Capital balance.
10.10. Liabilities and Claims. Except as provided in Section 10.01 to
the contrary, there will be no adjustment in the Base Purchase Price at
Closing or in the final settlement for any Claim or Liability relating to
SJPC, Formax or the Formax Property, regardless of how or when the Claim or
Liability arose or arises or whether it was foreseeable or unforeseeable.
10.11. Personnel. As of the Effective Time and Closing Date, SJPC
and Formax will have no employees or obligations relating thereto. All
current directors and officers of SJPC and Formax will resign from their
respective office effective upon Closing.
ARTICLE 11. BUYER'S RELEASE AND COVENANT NOT TO SUE; BUYER'S
OBLIGATIONS TO INDEMNIFY, DEFEND, AND HOLD HARMLESS; DISPUTE RESOLUTION
11.01. Buyer's Release of Exxon and its Associated Parties. Except
as otherwise provided in this Agreement, Buyer releases and discharges
Exxon and its Associated Parties from each and every Claim or Liability
relating to SJPC, Formax, and the Formax Property, and 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
release of Exxon and its Associated Parties includes Claims and Liabilities
resulting in any way from the negligence or strict liability of Exxon and
its Associated Parties, whether the negligence or strict liability is
active, passive, joint, concurrent, or sole. Except as otherwise provided
in this Agreement, there are no exceptions to Buyer's release of Exxon
and its Associated Parties, and this release is binding on Buyer and its
successors and assigns. The release granted herein by Buyer shall also be
deemed to have been granted to Exxon by SJPC and Formax as of Closing, and
after Closing all of the terms and conditions of such release shall be
binding upon SJPC and Formax.
11.02. Buyer's Covenant Not to Sue Exxon or its Associated Parties.
Except as otherwise provided in this Agreement, Buyer covenants not to sue
Exxon or its Associated Parties with regard to any Claim or Liability
relating to SJPC, Formax, the Formax Property, and this transaction,
regardless of when or how the Claim or Liability arose or arises or
whether the Claim or Liability is foreseeable or unforeseeable. Buyer's
covenant not to sue Exxon or its Associated Parties includes Claims and
Liabilities resulting in any way from the negligence or strict liability
of Exxon and its Associated Parties, whether the negligence or strict
liability is active, passive, joint, concurrent or sole. Except as
otherwise provided in this Agreement, there are no exceptions to Buyer's
covenant not to sue Exxon or its Associated Parties, and this covenant is
binding on Buyer and its successors and assigns. The covenant not to
sue made herein by Buyer shall also be deemed to have been granted to
Exxon by SJPC and Formax as of Closing, and after Closing all of the
terms and conditions of such covenant shall be binding upon SJPC and
Formax.
<PAGE 19>
11.03. Buyer's Duty to Indemnify, Defend, and Hold Exxon and its
Associated Parties Harmless. Buyer will indemnify, defend, and hold Exxon
and its Associated Parties harmless from all Claims and Liabilities arising at
any time, whether before or after the Effective Time, whether known or unknown,
foreseeable or unforeseeable, made by any person and arising out of or
resulting from:
(a) the ownership of Formax by SJPC, the operation of Formax or the
Formax Property by Exxon or its Associated Parties, or acts or
omissions by Exxon or its Associated Parties in connection with
SJPC, Formax or the Formax Property. Buyer's indemnification
shall also cover Claims and Liabilities arising out of Exxon's
ownership or operation of SJPC, or acts or omissions by Exxon in
connection with SJPC, to the extent, and only to the extent, that
such Claims and Liabilities are directly related to Formax or the
Formax Property. In each instance, Buyer's indemnity hereunder
shall include Claims and Liabilities resulting from the
negligence or strict liability of Exxon or its Associated
Parties, whether the negligence or strict liability is active,
passive, joint, concurrent, or sole;
(b) the ownership of SJPC by Buyer, the continued ownership of Formax
by SJPC following this transaction, the operation of SJPC, Formax
or the Formax Property by Buyer or its Associated Parties, or the
acts or omissions of Buyer or its Associated Parties in connection
with SJPC, Formax or the Formax Property or under this Agreement,
in each instance including Claims and Liabilities resulting from
the negligence or strict liability of Exxon or its Associated
Parties, whether the negligence or strict liability is active,
passive, joint, concurrent, or sole; or
(c) the acts or omissions of third parties relating to, Formax or the
Formax Property, and the acts or omissions of third parties
relating to SJPC to the extent, and only to the extent, of any
Claims or Liabilities that are directly related to Formax or the
Formax Property, in each instance including Claims and Liabilities
resulting from the negligence or strict liability of Exxon,
Formax or its Associated Parties, whether the negligence or strict
liability is active, passive, joint, concurrent, or sole.
(d) any preferential right of purchase and/or similar right or
interest provided for in the instruments creating those
interests described on Exhibit A hereto.
Subject to the terms of Article 19 hereof, Buyer's obligations under this
Agreement to indemnify, defend, and hold Exxon and its Associated Parties
harmless include Claims and Liabilities arising in any manner from the
following:
(i) the review, inspection, and assessment of SJPC, Formax, the
Formax Property by Buyer and its Associated Parties as described
in Article 5;
<PAGE 20>
(ii) obligations to plug and abandon Wells and remediate the Formax
Property, as described in Section 9.03;
(iii) the physical or environmental condition of SJPC, Formax, or the
Formax Property, including Claims and Liabilities under the
Environmental Laws, as described in Article 12, or failure to
comply with the Environmental Laws;
(iv) remediation activities, as described in Sections 12.02 and 12.03,
including damages incurred by Buyer or its Associated Parties
during or arising from remediation activities;
(v) lawsuits filed before the Effective Time, but amended after the
Effective Time to include Exxon, SJPC, Formax, the Formax
Property or Exxon's ownership of or activities regarding SJPC,
Formax, or the Formax Property; and
(vi) lawsuits filed after the Effective Time relating to Exxon, SJPC,
Formax, the Formax Property or Exxon's or its Associated Parties'
ownership of or activities regarding SJPC, Formax, or the Formax
Property.
The indemnities granted above by Buyer shall also be deemed to have been
granted to Exxon by SJPC and Formax as of Closing, and after Closing all
of the terms and conditions of such indemnities shall be binding upon
SJPC and Formax.
Buyer's obligations to indemnify, defend, and hold Exxon and its
Associated Parties harmless do not apply to Claims and Liabilities that
result from a judgment rendered or settlement reached in a lawsuit filed
before the Effective Time against Exxon, SJPC or Formax, such Claims and
Liabilities being covered by Section 19.03 hereof.
11.04. Buyer's Duty to Defend. Buyer acknowledges that its obligations
to indemnify, defend, and hold Exxon and its Associated Parties harmless under
this Agreement includes obligations to pay the attorneys' fees and court and
other costs incurred by Exxon and its Associated Parties in defending all
Claims. As to each Claim and Liability, Exxon, at its sole option, may elect
to (a) manage its own defense, in which event Buyer will reimburse Exxon and
its Associated Parties for all attorneys' fees and court and other costs
reasonably incurred in defending a claim, upon delivery to Buyer of invoices
for these fees and costs (including in-house staff costs); or (b) tender
its defense as to any Claim to Buyer, in which event Buyer will be responsible
for all aspects of defending the Claim at issue and resulting Liabilities.
11.05. The SJPC Property. Notwithstanding anything contained herein to
the contrary, it is expressly understood that Buyer shall not assume any
responsibility for the SJPC Property, which was retained by Exxon pursuant to
Section 2.02, and that the covenant not to sue and the indemnities provided
for herein shall not apply to any Claim or Liability pertaining to the SJPC
Property.
<PAGE 21>
11.06. Alternate Dispute Resolution and Arbitration. This section
applies to any dispute between the parties, arising at any time, that is not
subject to Buyer's release under Section 11.01 or Buyer's covenant not to sue
under Section 11.02 or is not specifically excluded under this section.
Whether a dispute is subject to Section 11.01 or 11.02 or this section (or
is excluded from this section by its terms) and whether there is a contract
between the parties are issues that will be resolved under the alternate
dispute resolution and arbitration provisions of this section.
As to the disputes subject to this section, any Claim or controversy of
whatever nature, including an action in tort or contract or a statutory action
("Disputed Claim"), or the arbitrability of a Disputed Claim, will be resolved
under the terms, conditions, and procedures of Exhibit C and will be binding on
both parties and their respective successors and assigns. Neither party may
prosecute or commence any suit or action against the other party relating to
any matters that are subject to this section.
It is expressly understood and agreed that this section shall be
applicable to any dispute that arises between Exxon and Buyer and/or its
Associated Parties over the payment of the overriding royalty created under
Exhibit B-2 hereof, in the event that such dispute is not resolved by the
procedures set out therein, provided that nothing contained herein shall be
deemed to impair the remedies of the owner of said overriding royalty that
are also set out therein.
Exxon will determine, at its sole discretion, whether a Claim filed by a
third party against Buyer or Exxon will be subject to this section. If Buyer
has notified Exxon before Closing of a Disputed Claim and the Disputed Claim
is not resolved prior to Closing, the Disputed Claim will not be subject to
this section unless agreed by the parties.
The addresses for notice under this section are:
Exxon: Buyer:
c/o Exxon Company, U.S.A. Berry Petroleum Co.
P.O. Box 2180 P.O. Bin X
Houston, Texas 77252-2180 Taft, California 93268
Attention: J. R. Kahn Attention: Jerry V. Hoffman
Asset Manager President and Chief
Executive Officer
11.07. Buyer's Waiver of Consumer Protection Laws. As
partial consideration to Exxon to enter into this Agreement,
Buyer can and does expressly waive the provisions of the Texas
Deceptive Trade Practices Consumer Protection Act, Sections
17.41 through 17.63, Texas Business and Commerce Code, other
than Section 17.555, which is not waived, and all other consumer
protection laws in other states applicable to this transaction
that may be waived by the parties.
<PAGE 22>
11.08. Retroactive Effect. Buyer acknowledges that its obligations to
release, not to sue, indemnify, defend, and hold Exxon and its Associated
Parties harmless apply to matters occurring or arising before the Effective
Date to the extent provided in this Agreement.
11.09. Inducement to Exxon. Buyer acknowledges that it evaluated its
obligations under this article before it determined and submitted its bid for
SJPC and that its assumption of these obligations is a material inducement to
Exxon to enter into this Agreement with, and close the sale to, Buyer.
ARTICLE 12 ENVIRONMENTAL MATTERS
12.01. Buyer's Acknowledgment Concerning Possible Contamination of the
Formax Property. Buyer is aware that the Formax Property has been used for
exploration, development, and production of oil and gas and that there may be
petroleum, produced water, wastes, or other materials located on or under,
or associated with, the Formax Property. Equipment and sites included in the
Formax Property may contain asbestos, hazardous substances, or NORM. NORM
may affix or attach itself to the inside of wells, materials, and equipment
as scale, or in other forms; the wells, materials, and equipment located on
the Formax Property or used in connection therewith may contain NORM and
other wastes or hazardous substances; and NORM-containing material and other
wastes or hazardous substances may have been buried, come in contact with the
soil, or otherwise been disposed of on the Formax Property. Special
procedures may be required for the remediation, removal, transportation, or
disposal of wastes, asbestos, hazardous substances, and NORM from the
Formax Property.
Buyer, SJPC and Formax will assume and/or retain all liability for the
assessment, remediation, removal, transportation, and disposal of wastes,
asbestos, hazardous substances, and NORM from the Formax Property and
associated activities, and Buyer will cause SJPC and Formax to conduct these
activities in accordance with all applicable laws and regulations, including
all Environmental Laws.
12.02. Adverse Environmental Conditions.
(a) Buyer will have until 10 days before the Closing Date to notify
Exxon of any material adverse environmental condition of the
Formax Property that Buyer finds unacceptable and provide
evidence of the condition to Exxon. An environmental condition
is a material adverse environmental condition ("Condition") only
if all the following criteria are met:
(1) The environmental condition is required to be remediated
on the Effective Date under the Environmental Laws in
effect on the Effective Date;
(2) The total amount of adjustments to be made for Title
Defects under Section 6.02, plus the total of the cost
to remediate all environmental conditions identified by
Buyer to levels required by the Environmental
<PAGE> 23
Laws in effect on the Effective Date is reasonably
estimated to be more than $250,000; and
(3) The environmental condition was not disclosed to or known
by Buyer before the Effective Date.
(b) Exxon will have until the later of: (i) thirty days after
receipt of Buyer's notice under the preceding paragraph, or
(ii) five days before the Closing Date if it determines that an
adverse environmental condition (whether material or not) may
exist with respect to the Formax Property, to elect any of the
following:
(1) adjust the Base Purchase Price by a mutually acceptable
amount reflecting Exxon's proportionate share, based on
Formax's working interest, of the cost reasonably
estimated to remediate a Condition affecting the Formax
Property;
(2) remedy, or agree to remedy, the Condition as provided
below; or
(3) terminate this Agreement.
Exxon may delay Closing until the end of this thirty-day period,
which delay will be in addition to and under the same terms as
Exxon's and Buyer's right to delay Closing under Sections 8.02
and 8.03.
(c) If Exxon and Buyer agree to an adjustment under paragraph (b)(1),
the adjustment will be the cost to remediate the Condition, but
only to the level required by the Environmental Laws in effect
on the Effective Date.
12.03. Remediation. If Exxon agrees with Buyer to remediate a Condition
or is required by a governmental or regulatory agency to remediate a Condition,
the following will govern the remediation:
(a) Exxon will be responsible for all negotiations and contacts with
federal, state, and local agencies and authorities with regard
to the Condition or remediation. Buyer may 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.
(b) Exxon will remediate the Condition to the level agreed upon by
Exxon and Buyer, but in no event will Exxon be required to
remediate the Condition beyond the level required by the
Environmental Laws in effect on the Effective Date.
(c) Buyer will grant and warrant access to, and entry on, the Formax
Property after Closing to Exxon, its Associated Parties, and
third parties conducting
<PAGE> 24
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 such
assessments or remediation.
(d) Buyer will use its best efforts not to interfere with Exxon's
ingress and egress or assessment or remediation activities.
Exxon will make reasonable efforts to perform the work so as to
minimize disruption to Buyer's operations on the Formax Property.
(e) Exxon will continue remediation of the Condition until the first
of the following occurs:
(1) the appropriate governmental authorities provide written
notice to Exxon or Buyer that no further remediation of the
Condition is required; or
(2) Exxon determines that the Condition has been remediated to
the level required by the Environmental Laws or as agreed
by the parties.
Upon the occurrence of either (1) or (2) above, Exxon will notify
Buyer that remediation of the Condition is complete and provide a
copy of the notification described in subsection (1) above, if
applicable. Upon delivery of Exxon's notice, Exxon will be
released from all liability and have no further obligations under
any provisions of this Agreement in connection with a Condition.
(f) Until Exxon completes remediation of a Condition, Exxon 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 Formax Property.
(g) After delivery of possession or Closing (whichever occurs first)
and before Exxon has completed remediation of a Condition, if a
leak, spill, or discharge of any material or substance
("Occurrence") occurs on the Formax Property or any part of it,
Buyer will promptly notify Exxon and act promptly to minimize the
effects of the Occurrence. If a spill, leak or discharge occurs
and Exxon determines that it may affect the area where Exxon is
conducting a remediation or assessment, Buyer will hire a
consultant (who must be acceptable to Exxon) to assess the
effect of the occurrence on the environmental condition of the
Formax Property, and Exxon's remediation work and the cost of the
additional work required as the result of the Occurrence.
Unless the Occurrence was caused solely by Exxon, Buyer will be
responsible for the incremental cost of remediating the impact
of the Occurrence. If Exxon's remediation is expanded to
incorporate remediation of the Occurrence, Buyer will promptly
pay its share of costs and expenses to Exxon as the work is
performed, within thirty days of receipt of invoices for the work
(with supporting documentation). Payments not
<PAGE> 25
made timely will bear interest at a rate of twelve percent per
annum or the maximum lawful rate, whichever is less, compounded
daily from the date of Buyer's receipt of the invoice until paid.
If the cost of the additional work equals or exceeds the cost
which would have been incurred but for the Occurrence, Exxon will
pay Buyer the cost that would have been incurred by Exxon to
complete the remediation but for the Occurrence. As consideration
for this payment, Buyer will accept the environmental condition
of the Formax Property as it exists on the date of the payment,
assume full responsibility for remediating the Formax Property and
related off-site contamination in accordance with this Agreement,
and agree to release, not to sue, indemnify, hold harmless, and
defend Exxon and its Associated Parties as to Claims and
Liabilities arising from the Occurrence to the same extent as
described in Article 11.
12.04. Disposal of Materials, Substances, and Wastes; Compliance with
Law. Buyer will cause SJPC and Formax to store, handle,
transport, and dispose of or discharge all materials, substances,
and wastes from the Formax Property (including produced water,
drilling fluids, NORM, and other wastes), whether present before
or after the Effective Time, in accordance with applicable
local, state, and federal laws and regulations. Buyer will
cause SJPC and Formax to 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.
ARTICLE 13. BUYER'S REPRESENTATIONS
13.01. Representations Not Exclusive. Buyer's representations under
this article are in addition to its other representations under this Agreement
and the Additional Instruments.
13.02. Securities Laws.
(a) Buyer acknowledges that the solicitation of an offer for and the
sale of all of the outstanding capital stock of SJPC by Exxon
has not been registered under any securities laws.
(b) Buyer intends to acquire SJPC stock for its own benefit and
account and is not acquiring the stock with the intent of
distributing it or otherwise selling it in a manner that would
be subject to regulation by federal or state securities laws.
If Buyer sells, transfers, or otherwise disposes of the stock in
the future, it will do so in compliance with applicable federal
and state laws.
(c) Buyer represents that at no time has it been presented with or
solicited by or through any public promotion or other form of
advertising in connection with this transaction.
<PAGE 26>
13.03. Basis of Buyer's Decision. Buyer represents that:
(a) It has reviewed SJPC's records, Formax's records and the Formax
Property to its satisfaction to enable it to evaluate SJPC in
order to enter into this Agreement (subject, however, to the
limitations described in Section 5.01).
(b) Buyer has performed sufficient review and investigation to
evaluate SJPC, Formax and the Formax Property (but not including
the SJPC Property) to its satisfaction and to enable it to make
an informed decision, as a prudent and knowledgeable purchaser,
to acquire SJPC.
(c) It is knowledgeable and experienced in the evaluation,
acquisition, and operation of oil and gas properties and
companies.
(d) It has evaluated the merits and risks of purchasing SJPC and has
formed an opinion based solely upon its knowledge and experience
and not upon any statements or actions by Exxon or its Associated
Parties.
(e) It has not relied on statements or actions by Exxon or its
Associated Parties in making its decision to enter into this
Agreement.
(f) It accepts the condition of SJPC, Formax, and the Formax Property,
including any and all matters whatsoever related to SJPC, Formax,
and the Formax Property "AS IS, WHERE IS" and without any
representation, warranty or guarantee, express or implied, as to
the merchantability, fitness for a particular purpose or otherwise
as to the condition, size, extent, quantity, type or value of the
business, liabilities or assets of SJPC, Formax and the
Formax Property.
13.04. Express Negligence Rule; Conspicuousness. Buyer acknowledges
that the provisions of this Agreement that are set out in italics satisfy the
requirements of the express negligence rule and/or are conspicuous.
13.05. Material Factor. Buyer acknowledges that its representations
under this article, the rest of this Agreement, and the Additional Instruments
are a material inducement to Exxon to enter into this Agreement with, and
close the sale to, Buyer.
ARTICLE 14. FINAL SETTLEMENT STATEMENT
Exxon will prepare a final settlement statement after Closing. The final
settlement statement will be submitted to Buyer within 120 days after the
Closing Date. The final settlement statement will deduct amounts due to Exxon
from amounts due to Buyer as provided in this Agreement, will include
adjustments as necessary for items identified after Closing, and may set off
any resulting amount due to Buyer against amounts that Buyer may owe to Exxon
and its Associated Parties when the final settlement statement is prepared.
<PAGE 27>
Buyer must respond with objections and proposed corrections within thirty
days of receiving the final settlement statement. If the parties cannot
resolve their differences within ninety days of Exxon's receipt of Buyer's
objections, then the alternate-dispute-resolution and arbitration procedures
under Section 11.06 will be triggered. If Buyer does not respond to the
final settlement statement by signing or objecting within the thirty-day
period, the statement will be deemed approved by Buyer. After approval of
the final settlement statement, Exxon will send a check or invoice to Buyer
for the net amount. If payment is not made within thirty days of Buyer's
receiving the invoice, the amount due will bear interest at a rate of twelve
percent per annum or the maximum lawful rate, whichever is less, compounded
daily from the date of Buyer's receipt of the invoice until paid. Inquiries
regarding the final settlement statement must be in writing, addressed to:
Exxon
c/o Exxon Company, U.S.A.
P.O. Box 2180
Houston, Texas 77252-2180
Attention: A. H. Barber
Evaluation & Marketing Manager
ARTICLE 15. BROKER'S AND FINDER'S FEES
Exxon and Buyer each represents and warrants to the other that it has
incurred no liability, contingent or otherwise, for broker's or finder's
fees in connection with this Agreement or the transaction contemplated by it
for which the other party will have any responsibility.
ARTICLE 16. COMMUNICATIONS
Unless otherwise provided in this Agreement, communications (including
notices) under this Agreement that must be in writing and delivered by a
specified date will be deemed to have been made when received at the following
addresses by registered or certified mail, postage prepaid, or by messenger:
Exxon Buyer:
c/o Exxon Company, U.S.A. Berry Petroleum Co.
P.O. Box 2180 P. O. Bin X
Houston, Texas 77252-2180 Taft, California 93268
Attention: J. R. Kahn Attention: Jerry V. Hoffman
Asset Manager President and Chief
Executive Officer
ARTICLE 17. BUYER'S DEFAULT
If Buyer defaults under this Agreement in a material way, including
Buyer's failure to perform its obligations to close this transaction, Exxon
may, at its sole option, terminate this
<PAGE 28>
Agreement and retain the performance deposit, in addition to all of its other
rights at law or in equity.
ARTICLE 18. HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS
ACT OF 1976
The parties have determined that the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "Act") does not apply to this transaction.
ARTICLE 19. WARRANTIES AND DISCLAIMERS OF WARRANTIES
19.01 Warranties. Exxon hereby represents and warrants to Buyer as
follows:
(a) Corporate Organization. SJPC and Formax are corporations duly
organized, validly existing and in good standing under the laws of the State
of Louisiana and California, respectively, and each has full power and
authority to conduct its business as currently conducted and to own and
operate the assets it now owns, operates or holds.
(b) Outstanding Stock. The authorized capital stock of SJPC consists
of one class of 1,050,000 authorized shares of common stock of which 102,566
shares are issued and outstanding. The authorized capital stock of Formax
consists of one class of 5,000 authorized shares of common stock of which
4,600 shares are issued and outstanding. SJPC owns all of the outstanding
shares of common stock of Formax and Exxon owns all of the outstanding shares
of common stock of SJPC and all of the common stock of both corporations have
been duly authorized and validly issued and are fully paid and non-assessable
and were not issued in violation of any preemptive rights or other preferential
rights of subscription or purchase by any person. All of the referenced
common stock is owned free of any encumbrances or liens, beneficially or of
record and there are no outstanding options, warrants, convertible securities,
calls, rights, commitments, preemptive rights, agreements, arrangements or
understandings of any character obligating either Exxon or SJPC or Formax ,
respectively: (i) to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of capital stock of either SJPC or Formax or any
securities or obligations convertible into or exchangeable for such shares, or
(ii) to grant, extend, or enter into any such option, warrant, convertible
security, call right, commitment, preemptive right, agreement, arrangement or
understanding described above.
(c) Effective Agreement. The execution, delivery and performance of
this Agreement by Exxon and SJPC and the consummation of the transaction
contemplated hereby do not require the consent, approval, clearance, waiver,
order or authorization of any person, do not violate any provision of the
Articles of Incorporation or Bylaws of SJPC or Formax and do not conflict with
or violate any permit, concession, grant, franchise, statute, law, rule or
regulation of any governmental entity or any order, judgment, award of decree
of any court or other governmental entity to which Exxon, SJPC or Formax is
subject or any of its assets is bound, in each case, of which failure,
violation, conflict or breach would, in the aggregate, hinder or impair the
consummation of the transaction contemplated by this Agreement.
<PAGE 29>
(d) Employees. For the last five (5) years, neither SJPC nor Formax has
had any employees.
(e) Pension Plans. SJPC and Formax are not currently, and have not for
the past five years been, a party to any employee pension or welfare plan to
which ERISA applies or to which either Company was required to make
contributions.
(f) Lawsuits. As of one day prior to the Effective Date, neither Exxon,
SJPC nor Formax has been served with any lawsuit filed in the States of
California, Louisiana, New Jersey, or Texas which, if adversely determined
would have a material adverse effect on SJPC, Formax or the Formax Property.
19.02 Disclaimer of Warranties. Except as provided in Article 19, Exxon
and its Associated Parties have not made, and will not make, any warranty or
representation, express, implied, or statutory, whatsoever in connection with
this Agreement or the transaction contemplated by it, including the accuracy
or completeness of data, information, or materials furnished at any time to
Buyer in connection with SJPC, Formax, or the Formax Property, or the quality
or quantity of hydrocarbon reserves (if any) attributable to the Formax
Property, or the ability of the Formax Property to produce hydrocarbons.
None of Exxon's Associated Parties is authorized to make any warranty or
representation on Exxon's behalf. All data, information, and other materials
furnished by Exxon or its Associated Parties are provided to Buyer as a
convenience, and reliance on or use of them is at Buyer's sole risk.
19.03 Indemnification. Notwithstanding any provisions contained herein
to the contrary, Exxon agrees to indemnify, defend and hold Buyer and its
Associated Parties harmless from and against any and all loss, liability,
damage, cost and expenses (including interest, penalties, settlements, fines,
costs and expenses incurred in connection with investigating and defending any
claims or causes of action, and reasonable attorneys' fees) that the Buyer or
its Associated Parties may incur or become subject to:
(a) arising out of or due to the breach of any of the warranties of
Exxon contained in this Agreement, or any breach of the
representation contained in Section 4.01.
(b) as a result of any Claim or Liability based on personal injury,
and/or any property damage associated with such personal injury,
arising as the result of a specific incident that occurs between
the Effective Time and the date of Closing, provided that:
(i) Exxon's indemnification under this subsection shall only
cover Claims or Liabilities to the extent that the collective
monetary amount of all of such Claims and Liabilities exceeds an
amount equal to the amount credited to Buyer under Section 10.01
(b)(i) hereof less the amount credited to Exxon under Section
10.01(a)(ii) hereof.; (ii) in order for the indemnity contained
in this Section 19.03(b) to be effective with regard to any Claim
or Liability, Buyer must provide Exxon with written notification
of such Claim or Liability within fourteen (14) months of the
Closing Date; and (iii) it is expressly understood and agreed
that this indemnity shall not cover any Claims or Liabilities
arising out of any violation of any
<PAGE 30>
environmental laws, or the presence of any asbestos, hazardous
substances or NORM.
(c) As a result of any Claim or Liability resulting from a judgment
rendered or settlement reached in a lawsuit filed before the
Effective Time against Exxon, SJPC or Formax. The parties
recognize that certain lawsuits may have been filed before the
Effective Time, but concern SJPC or Formax activities continuing
after the Effective Time. For these lawsuits, Buyer will
indemnify, defend, and hold Exxon and its Associated Parties
harmless from the Effective Time forward as to activities
occurring after the Effective Time, however, Exxon will continue
to defend an action under this paragraph for which it remains
responsible after the Effective Time. For any lawsuit for which
Exxon retains responsibility, Buyer will cause SJPC and Formax
to cooperate with Exxon and will itself cooperate in the defense
of said lawsuit. It is expressly understood and agreed that the
alternative dispute resolution procedures set out in Section
11.06 hereof, shall apply to any disputes arising with regard to
the indemnity provided for herein.
(d) As a result of all Claims and Liabilities arising out of or
related to the SJPC Property whensoever arising.
ARTICLE 20. MISCELLANEOUS
20.01. Entire Agreement. This Agreement and the Additional Instruments
constitute the entire agreement between the parties as to the transaction
described in this Agreement. All previous negotiations and communications
between the parties as to these matters are merged into this Agreement and the
Additional Instruments.
20.02. Successors and Assigns; Amendment; Survival. This Agreement is
binding on and inures to the benefit of the parties and their respective
successors, heirs, representatives, and assigns and may be supplemented,
altered, amended, modified, or revoked only in writing signed by both parties.
Neither the assignment of this Agreement nor of any interest in SJPC, Formax,
or the Formax Property, will relieve Buyer of its obligations under this
Agreement unless and to the extent Exxon consents in writing to release Buyer,
which consent may be withheld for any reason. All provisions of this Agreement
and the Additional Instruments that cannot be performed before Closing or the
earlier termination of this Agreement and all representations, promises,
releases, and indemnities under this Agreement and the Additional Instruments
will survive Closing.
20.03. Choice of Law. This Agreement and its performance will be
construed in accordance with, and enforced under, the internal laws of the
State of Texas, without regard to choice of law rules of any jurisdiction,
including Texas.
20.04. Assignment. Neither this Agreement nor the rights and obligations
under it may be assigned or delegated by Buyer, and an attempted assignment or
delegation is void, provided
<PAGE 31>
that SJPC and/or Formax may assign any obligations imposed hereunder to Buyer
in a reorganization in which the party assigning the obligation is being
merged into Buyer.
20.05. No Admissions. Neither this Agreement, nor any part of it, nor
any performance under this Agreement, nor any payment of any amount under this
Agreement will constitute or may be construed as a finding, evidence of, or an
admission or acknowledgment of any liability, fault, past or present
wrongdoing, or violation of law, rule, regulation, or policy, by either Exxon,
its Associated Parties or Buyer and its Associated Parties, or their
respective representatives.
20.06. No Third-Party Beneficiaries. There are no third-party
beneficiaries of this Agreement.
20.07. Public Communications. Prior to Closing and for a period of
ninety (90) days after the date of this Agreement, Exxon and Buyer shall
consult and coordinate with each other with respect to any press conference
or announcement concerning this Agreement or the transaction contemplated
hereunder, which releases any information not currently in the public domain.
In addition, at no time shall Buyer disclose (i) the consideration paid
hereunder; or (ii) any reserve estimates for the Formax Property. The
restriction imposed by this provision shall not apply to any disclosures
required by applicable law or the applicable rules or regulations of any
governmental body or stock or securities exchange, provided that Buyer shall,
to the extent practical, consult with Exxon prior to making any such
required disclosure.
20.08. Headings and Titles. The headings and titles in this Agreement
are for guidance and convenience of reference only and do not limit or
otherwise affect or interpret the terms or provisions of this Agreement.
20.09. Exhibits. All exhibits referenced in and attached to this
Agreement are incorporated into it.
20.10. Includes. The word "includes" and its syntactical variants mean
"includes, but is not limited to" and corresponding syntactical variants. The
rule ejusdem generis may not be invoked to restrict or limit the scope of the
general term or phrase followed or preceded by an enumeration of particular
examples.
20.11. Severability. The provisions of this Agreement are severable at
Exxon's option. If a court of competent jurisdiction finds any part of this
Agreement to be void, invalid, or otherwise unenforceable, then Exxon may
decide whether to enforce this Agreement without the void, invalid, or
unenforceable parts or to terminate this Agreement.
20.12. Counterparts. This Agreement may be executed in multiple
counterparts, all of which together will be considered one instrument.
20.13. Conflicts. If the text of this Agreement conflicts with the terms
of any exhibit to this Agreement, then the text of this Agreement will control.
<PAGE 32>
20.14. Not to Be Construed against Drafter. Buyer acknowledges that it
has read this Agreement, has had opportunity to review it with an attorney of
its choice, and has agreed to all of its terms. Under these circumstances, the
parties agree that the rule of construction that a contract be construed
against the drafter may not be applied in interpreting this Agreement.
20.15. Execution by the Parties. Neither the submission of this
instrument nor any information concerning SJPC, Formax or the Formax Property
for Buyer's examination, nor discussions or negotiations between the parties
constitute an offer to sell, a reservation of, or an option for the stock of
SJPC or Formax, or the Formax Property, and this instrument and the underlying
transaction will become enforceable and binding between the parties only upon
its execution and delivery by both of them.
The parties have executed this Agreement on the date below their
signatures, to be enforceable and binding as of the Effective Date.
BERRY PETROLEUM COMPANY EXXON CORPORATION
By: /s/ Jerry V. Hoffman By: /s/ J. H. Perry
Name: Jerry V. Hoffman Name: J. H. Perry
Title: President and CEO Title: Agent and Attorney in Fact
Date: 12/9/96 Date: 12/11/96
SAN JOAQUIN PRODUCTION COMPANY FORMAX OIL COMPANY
By: /s/ K. P. Pepper By: /s/ K. P. Pepper
Name: K. P. Pepper Name: K. P. PEPPER
Title: President Title: President
Date: 12/11/96 Date: 12/11/96
<PAGE 33>
EXHIBIT A
Attached to and made a part of the
STOCK PURCHASE AGREEMENT
between
EXXON CORPORATION
and
BERRY PETROLEUM COMPANY
DESCRIPTION OF THE INTERESTS
FORMAX FEE
File No. 817490
Legal Description of the Formax Fee
Parcel 1: Lot 1, the southeast quarter of the northwest quarter; the east
half of the east half of the southwest quarter of the northwest quarter; and
that portion of the northeast quarter of the northwest quarter of fractional
Section 36, Township 32 South, Range 23 East, Mount Diablo Meridian, in the
unincorporated area of the County of Kern, State of California, according to
the official plat thereof, described as follows:
Beginning at the southwest corner of said northeast quarter of the northwest
quarter; thence northerly on the west line of said northeast quarter of the
northwest quarter 620 feet; thence at right angles easterly 500 feet; thence at
right angles northerly 300 feet; thence at right angles easterly 400 feet;
thence at right angles northerly 400 feet to the north line of said section;
thence easterly along said section line to the north quarter corner; thence
southerly 1320 feet to the southeast corner of said northeast quarter of the
northwest quarter; thence westerly to the point of beginning.
Parcel 2: The north 20 acres of Lot 4 and the north half of Lot 5 of
fractional Section 36, Township 32 South, Range 23 East, Mount Diablo Meridian,
in the unincorporated area of the County of Kern, State of California,
according to the official plat thereof.
<PAGE 34>
Formax Agreements
1. File No. 87490 (D-345) - Waste Water Agreement dated May 19, 1987
between Surprise Oil Company and Formax Oil Company.
2. File No. 817490 (D-344) -Pipeline Agreement dated May 19, 1987 between
Berry Petroleum Company and Formax Oil Company.
3. File No. 817490 (D-346) - Roadway Agreement dated May 12, 1987 between
Texaco, Inc. and Celeron Oil and Gas Company.
4. File No. 817490 (D-347) - Easement Agreement dated April 21, 1987
between Chevron USA, Inc. and Celeron Oil and Gas Company.
5. File No. 817490 (D-349) - Road License Agreement dated May 1, 1987
between Tenneco Oil Company and Formax Oil Company.
6. File No. 817490 (D-338) - Easement Agreement dated October 11, 1985
between Chevron USA Inc. and Formax Oil Company.
7. File No. 817490 (ROW-10) - Easement dated October 27, 1986
between Formax Oil Company and Pacific Gas and Electric Company.
8. File No. 817490 - Operating Agreement between Exxon San Joaquin
Production Company and Exxon Company USA (canceled at Closing).
9. Agreement to provide services dated December 4, 1987 between Exxon
Company, USA and Exxon San Joaquin Production Company (canceled at
Closing).
10. Policy of Title Insurance being policy number G579560 issued by
Ticor Title Insurance Company of California.
11. Agency Agreement dated December 4, 1987 between Exxon San Joaquin
Production Company and Exxon Company, USA (canceled at Closing).
12. Industrial Water Services Agreement dated October 21, 1988 between
West Kern Water District and Exxon Company, USA. (Cancellation
Notice has been given. Agreement will expire in February, 1998.)
13. Electric Service Agreement dated February 14, 1990 between
Pacific Gas and Electric Company and Exxon Company USA.
14. Stock Purchase Agreement dated December 20, 1985 between
Celeron Oil and Gas Company and Formax Oil Company.
15. Acquisitions Rights Agreement dated December 20, 1985 between Celeron
Oil and Gas Company and Hovey Hill, Inc., a California corporation.
<PAGE 35>
16. Stock Purchase Agreement dated December 1, 1987 between Exxon
Corporation and the Goodyear Tire and Rubber Company and Goodyear
Energy, Inc.
17. Assignment of Convertible Royalty dated December 31, 1985 and recorded
in Book 5844, Page 676 in Kern County, California, Official Records.
18. Assignment of Overriding Royalty Interest effective January 1, 1986
from Celeron to Gale L. Galloway, et al, recorded in Book 5969,
Page 949 in Kern County, California, Official Records.
19. Assignment of Overriding Royalty Interest effective January 1, 1986
from Celeron to Jimmie D. Simmons, et al, recorded in Book 5969,
Page 954 of Kern County, California, Official Records.
20. Conveyance of Overriding Royalty between Formax Oil Company and Exxon
San Joaquin Production Company, effective as of 6:58 a.m., Local Time,
July 1, 1996 (to be recorded).
21. Conveyance of Overriding Royalty between Exxon San Joaquin Production
Company and Exxon Corporation, effective as of 6:59 a.m., Local Time,
July 1, 1996 (to be recorded).
22. Settlement Agreement dated September 13, 1989 between various
overriding royalty owners and Exxon San Joaquin Production Company
and Exxon Corporation.
23. Oil Sales Contract dated October 9, 1992 between Exxon and
Union Oil Company of California.
24. Gas Exchange Agreement (K 4642) between Chevron and Exxon whereby
Chevron provides fuel gas to the Formax Fee (to be canceled after
Closing).
25. District Agreement No. 11 by and between West Kern Water
District and Exxon San Joaquin Production Company.
26. An Easement for telephone and telegraph lines and an oil pipeline in
favor of General Pipeline Co. of California, recorded October 2, 1912
in Book 278, Page 1 of Deeds.
27. An Easement for a pipeline in favor of General Petroleum Corporation,
recorded March 1, 1924 in Book 6, Page 285, Official Records.
28. An Easement for telegraph or telephone line and a pipeline in favor of
Producers Transportation Company recorded April 25, 1924 in Book 19,
Page 365, Official Records.
29. An Easement for a pipeline and telegraph or telephone line in favor of
Producers Transportation Company recorded June 6, 1924 in Book 24,
Page 354, Official Records.
30. An Easement for a water pipeline in favor of General Petroleum
Corporation recorded March 20, 1937 in Book 709, Page 371, Official
Records.
31. An Easement for a pipeline in favor of Union Oil Company of California
recorded July 1, 1970 in Book 4413, Page 237, Official Records, and as
amended by instrument recorded March 18, 1971 in Book 4503, Page 257,
Official Records.
<PAGE 36>
32. An Easement for poles, aerial wires, cables, electrical conductors in
favor of Pacific Gas and Electric Company recorded February 27, 1985
in Book 5737, Page 2043, Official Records.
33. An Easement for pole lines in favor of Pacific Gas and Electric
Company recorded December 23, 1986 in Book 5951, Page 1082, Official
Records.
34. An Easement for a 12" pipeline in favor of Southern California Gas
Company recorded November 15, 1988 in book 6181, Page 2275, Official
Records.
<PAGE 37>
EXHIBIT A (Continued)
Attached to and made a part of the
STOCK PURCHASE AGREEMENT
between
EXXON CORPORATION
and
BERRY PETROLEUM COMPANY
DESCRIPTION OF THE INTERESTS
FORMAX FEE WELLS
All wells in the Midway Sunset Field in Kern County, California
(Section 36, T-32-S, R-23-E)
API Reservoir Well #
04-029-01206 01-100 68
04-029-01207 01-100 69
04-029-01208 01-100 70
04-029-38614 01-100 1
04-029-38615 01-100 2
04-029-38616 01-100 3
04-029-38617 01-100 4
04-029-38618 01-100 5
04-029-38619 01-100 6
04-029-38621 01-100 0007A
04-029-38622 01-100 8
04-029-38623 01-100 9
04-029-38624 01-100 10
04-029-38625 01-100 11
04-029-38626 01-100 12
04-029-38627 01-100 13
04-029-38630 01-100 16
04-029-38631 01-100 17
04-029-38632 01-100 18
04-029-38633 01-100 19
04-029-38634 01-100 20
04-029-38635 01-100 21
04-029-38636 01-200 22
04-029-38637 01-100 23
04-029-38638 01-100 24
04-029-38639 01-100 25
04-029-38640 01-100 26
04-029-38641 01-100 27
04-029-38642 01-100 28
04-029-38643 01-100 29
04-029-38644 01-100 30
04-029-38645 01-100 31
04-029-38646 01-100 32
<PAGE 38>
API Reservoir Well #
04-029-38647 01-100 33
04-029-38648 01-100 34
04-029-38649 01-100 35
04-029-38650 01-100 36
04-029-38651 01-100 37
04-029-38652 01-100 38
04-029-38653 01-100 39
04-029-38654 01-200 40
04-029-38655 01-100 41
04-029-38656 01-100 42
04-029-38657 01-100 43
04-029-38658 01-100 44
04-029-38659 01-100 45
04-029-38662 01-100 48
04-029-38663 01-100 49
04-029-38664 01-100 50
04-029-38665 01-100 51
04-029-38666 01-100 52
04-029-38667 01-100 53
04-029-38668 01-100 54
04-029-38669 01-100 55
04-029-38670 01-100 56
04-029-38671 01-100 57
04-029-38672 01-100 58
04-029-38673 01-100 59
04-029-38674 01-100 60
04-029-38675 01-100 61
04-029-38676 01-100 62
04-029-38677 01-100 63
04-029-38678 01-100 64
04-029-38679 01-200 65
04-029-38680 01-200 66
04-029-38681 01-100 67
04-029-43211 01-100 71
04-029-43212 01-100 72
04-029-43213 01-100 73
04-029-43214 01-100 74
04-029-43215 01-100 75
04-029-44983 01-200 76
04-029-44984 01-100 77
04-029-44985 01-100 78
04-029-47384 01-100 79
04-029-47595 01-100 80
04-029-47596 01-100 81
04-029-48450 01-100 82
04-029-48451 01-100 83
<PAGE 39>
API Reservoir Well #
04-029-48452 01-100 84
04-029-49089 01-100 85
04-029-49090 01-100 86
04-029-50040 01-100 87
04-029-50041 01-100 91
04-029-50042 01-100 88
04-029-50043 01-100 89
04-029-50044 01-100 90
04-029-52378 01-200 92
04-029-53313 01-100 93
04-029-53314 01-100 94
04-029-53315 01-100 95
04-029-53370 01-200 96
04-029-55291 01-100 97
04-029-57641 01-100 99
04-029-57642 01-100 100
04-029-57643 01-200 101
04-029-57644 01-100 102
04-029-59348 01-100 103
04-029-59349 01-100 104
04-029-61342 01-100 106
04-029-61343 01-100 107
04-029-61344 01-100 108
04-029-61890 01-200 105
04-029-65546 01-100 109
04-029-65547 01-100 110
04-029-65548 01-100 111
04-029-65549 01-100 112
04-029-66774 01-100 113
04-029-66775 01-100 114
04-029-68729 01-100 115
04-029-68730 01-100 116
04-029-68731 01-100 117
04-029-68837 01-100 118
04-029-71867 01-100 119
04-029-73181 01-100 120
04-029-73182 01-100 121
04-029-73183 01-100 122
04-029-79423 01-100 0015X
04-029-79425 01-300 0034X
04-029-79426 01-100 0042X
04-029-79427 01-100 0045X
04-029-79428 01-100 0077X
04-029-80114 01-100 S0014
04-029-80116 01-100 U0026
04-029-80170 01-100 T0015
<PAGE 40>
API Reservoir Well #
04-029-80177 01-100 W0022
04-029-84650 01-100 A0011
04-029-84651 01-100 B0007
04-029-84652 01-100 B0009
04-029-84653 01-100 B0011
04-029-84654 01-100 B0013
04-029-84655 01-100 C0007
04-029-84656 01-100 C0009
04-029-84657 01-100 C0013
04-029-84658 01-100 E0003
04-029-84660 01-100 F0013
04-029-84661 01-100 F0016
04-029-84662 01-100 F0017
04-029-84663 01-100 G0003
04-029-84664 01-100 G0007
04-029-84665 01-100 G0013
04-029-84666 01-100 A0007
04-029-84667 01-100 A0009
04-029-84668 01-100 A0014
04-029-85212 01-100 C0012
04-029-85234 01-100 E0011
04-029-85235 01-100 A0008
04-029-85236 01-100 A0010
04-029-85237 01-100 A0012
04-029-85238 01-100 A0013
04-029-85239 01-100 E0001
04-029-85240 01-100 G0001
04-029-85241 01-100 H0002
04-029-85242 01-100 C0010
04-029-85243 01-100 E0009
04-029-85244 01-100 E0013
04-029-85245 01-100 E0017
04-029-85246 01-100 E0019
04-029-85247 01-100 F0002
04-029-85248 01-100 F0003
04-029-85249 01-100 G0005
04-029-85250 01-100 J0015
04-029-85273 01-100 D0009
04-029-85274 01-100 F0001
04-029-85275 01-100 H0001
04-029-85276 01-100 J0001
04-029-85374 01-100 E0023
04-029-85375 01-100 F0008
04-029-85377 01-100 L0013
04-029-85378 01-100 F0018
04-029-85379 01-100 F0019
API Reservoir Well #
04-029-85380 01-100 F0020
04-029-85381 01-100 F0021
04-029-85382 01-100 F0022
04-029-85383 01-100 F0023
04-029-85384 01-100 G0015
04-029-85385 01-100 G0017
04-029-85386 01-100 H0014
04-029-85387 01-100 E0024
04-029-85388 01-100 F0024
04-029-85389 01-100 J0014
04-029-85752 01-100 H0012
04-029-85937 01-100 J0011
04-029-85938 01-100 J0013
04-029-85939 01-100 K0013
04-029-85940 01-100 K0015
04-029-85941 01-100 L0015
04-029-85992 01-100 K0001
04-029-85995 01-100 I0007
04-029-85998 01-100 J0003
04-029-85999 01-100 J0005
04-029-86000 01-100 J0007
04-029-86001 01-100 J0009
04-029-86002 01-100 K0003
04-029-86003 01-100 K0005
04-029-86004 01-100 K0007
04-029-86005 01-100 K0009
04-029-86006 01-100 K0011
04-029-86006 02-300 K0011
04-029-87504 01-100 M0015
04-029-87505 01-100 M0013
04-029-87506 01-300 T0003
04-029-87520 01-100 N0011
04-029-80114 02-100 I0011
04-029-85993 01-100 I0003
04-029-85994 01-100 I0005
04-029-85996 01-100 I0009
04-029-85997 01-100 I0013
04-029-53370 02-100 96
04-029-86445 01-100 W0001
<PAGE> 42
EXHIBIT A (Continued)
Attached to and made a part of the
STOCK PURCHASE AGREEMENT
between
EXXON CORPORATION
and
BERRY PETROLEUM COMPANY
DESCRIPTION OF THE INTERESTS
FORMAX FEE
Producing working interest and net revenue interests for current
production are believed to be as follows while interest for non-producing
tracts and depth intervals are not given.
Working Interest Net Revenue Interest
% %
Formax Fee 100%* 97.5%**
* & ** Subject to being reduced in accordance with the terms and
conditions of the following:
*1. Assignment of Convertible Royalty dated December 31, 1985 and recorded
in book 5844, Page 676 in Kern County, California, Official Records.
**2. Assignment of Overriding Royalty Interest effective January 1, 1986
from Celeron to Gale L. Galloway, et al, recorded in book 5969,
Page 949, Kern County, California, Official Records.
**3. Assignment of Overriding Royalty Interest effective January 1, 1986
from Celeron to Jimmie D. Simmons, et al, recorded in Book 5969,
Page 954, of Kern County, California, Official Records.
**4. Conveyance of Overriding Royalty between Formax Oil Company and Exxon
San Joaquin Production Company, effective as of 6:58 a.m., Local Time,
July 1, 1996 (to be recorded).
**5. Conveyance of Overriding Royalty between Exxon San Joaquin Production
Company and Exxon Corporation, effective as of 6:59 a.m., Local Time,
July 1, 1996 (to be recorded).
**6. Settlement Agreement dated September 13, 1989 between various
overriding royalty owners and Exxon San Joaquin Production Company and
Exxon Corporation.
<PAGE> 43
EXHIBIT B-1
Attached to and made a part of that certain
STOCK PURCHASE AGREEMENT
between
Exxon
and
Berry Petroleum Company
ASSIGNMENT, GRANT DEED, AND BILL OF SALE
THE STATE OF CALIFORNIA
COUNTY OF KERN
San Joaquin Production Company, a Louisiana Corporation, whose address is
_________________ ("Assignor"), for ten dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency of all of which are hereby
acknowledged, paid by Exxon Corporation, a New Jersey Corporation, whose
address is _______________ ("Assignee"), does hereby grant convey and sell
unto Assignee all of Assignor's right, title, and interest in all of the real
and personal property and fixtures described on Exhibit "A" hereto
(hereinafter collectively described as "said Property").
It is expressly understood and agreed that Assignee shall receive and
assume all of the benefits, rights, obligations and responsibilities for said
Property regardless of when they arose or accrued.
It is further expressly understood and agreed that the intent of this
instrument is to convey to Assignee all of the real and personal property
owned by Assignor, save and except the stock of Formax Oil Company.
The rights, titles and interest herein assigned shall inure to the benefit
of the respective parties, and their legal representatives, successor and
assigns.
Executed on the dates shown below, but effective as of 6:59 a.m., local
time, July, 1 1996.
<PAGE> 44
SAN JOAQUIN PRODUCTION COMPANY EXXON CORPORATION
By: By:
Name: Name:
Title: Title:
Date: Date:
STATE OF _______________________
COUNTY OF _______________________
This instrument was acknowledged before me on _____________, 1996,
by ___________________________ ________, ____________________ of
SAN JOAQUIN PRODUCTION COMPANY, a ___________________ corporation, on
behalf of said corporation.
My Commission Expires: _________________________
Notary Public in and for
the State of _____________
STATE OF TEXAS
COUNTY OF ___________________
This instrument was acknowledged before me on _____________, 1996, by
_______________________________, ________________________ of
EXXON CORPORATION, a New Jersey corporation, on behalf of said corporation.
My Commission Expires: ____________________
Notary Public in and for
the State of Texas
<PAGE> 45
EXHIBIT B-2
Attached to and made a part of that certain
STOCK PURCHASE AGREEMENT
between
Exxon
and
Berry Petroleum Company
CONVEYANCE OF OVERRIDING ROYALTY
STATE OF CALIFORNIA
COUNTY OF KERN
Formax Oil Company, a California Corporation, whose address is
_________________ ("Assignor"), for ten dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency of all of which are hereby
acknowledged, paid by San Joaquin Production Company, a Louisiana Corporation,
whose address is _____________________ ("Assignee"), does hereby grant, convey,
and sell unto Assignee an Overriding Royalty in the following described lands:
Parcel 1:
Lot 1: the southeast quarter of the northwest quarter; the east half of the
east half of the southwest quarter of the northwest quarter; and that portion
of the northeast quarter of the northwest quarter of fractional Section 36,
Township 32 South, Range 23 East, Mount Diablo Meridian, in the unincorporated
area of the County of Kern, State of California, according to the official plat
thereof, described as follows:
Beginning at the southwest corner of said northeast quarter of the
northwest quarter; thence northerly on the west line of said northeast
quarter of the northwest quarter 620 feet; thence at right angles
easterly 500 feet; thence at right angles northerly 300 feet; thence at
right angles easterly 400 feet; thence at right angles northerly 400
feet to the north line of said section; thence easterly along said
section line to the north quarter corner; thence southerly 1320 feet to
the southeast corner of said northeast quarter of the northwest quarter;
thence westerly to the point of beginning.
Parcel 2: The north 20 acres of Lot 4 and the north half of Lot 5 of
fractional Section 36, Township 32 South, Range 23 East, Mount Diablo Meridian,
in the unincorporated area of the County of Kern, State of California,
according to the official plat thereof.
(hereinafter described as the "Subject Property")
<PAGE> 46
Said Overriding Royalty shall be calculated and paid, on an annual basis,
as follows: For each month, Assignor shall subtract the Base Price from the
Posted Price per barrel for oil produced and saved from the Subject Property,
and multiply the resulting number by the number of barrels produced from the
property and allocated to Assignor to yield a "Monthly Amount," it being
understood that said Monthly Amount may be positive or negative. At the end
of each calendar year Assignor shall add the Monthly Amounts, and multiply the
resulting total by .75 to yield the amount due Assignee hereunder. It is
expressly understood and agreed that, if the sum of the Monthly Amounts for a
given year is zero or less than zero (i) no amount shall be payable to Assignee
hereunder for that year; (ii) no amount shall be due Assignor as a refund or
otherwise, as a result of such amount being less than zero; and (iii) the
resulting negative number shall not be carried over to adjust payments in
future years.
It is understood and agreed that the "number of barrels produced from the
Subject Property and allocated to Assignor" shall be the proportionate number
of barrels allocated to the Net Revenue Interest owned by Assignor immediately
prior to the effective date hereof, provided that it is understood and agreed
that such Net Revenue Interest may change pursuant to the terms of one or more
of the interests burdening said Net Revenue Interest immediately prior to the
said effective date, and that it is understood that said Net Revenue Interest
shall not be deemed to be reduced as a result of the Overriding Royalty granted
herein.
It is further understood and agreed that: (i) the "Base Price" for oil
shall be $12.70 for 1996 and shall thereafter be increased at the beginning of
each calendar year by two percent (2%), compounded yearly and rounded to three
decimal places; and (ii) the "Posted Price" for crude oil produced from the
Subject Property shall be deemed to be the average of the wellhead prices
posted by Chevron, Texaco, and Mobil, corrected for gravity, but with no
deductions for any costs, for Midway Sunset crude, provided that, in the event
that any of these entities ceases posting for such crude, the parties shall
negotiate in good faith to agree upon a substitute poster to be used for the
purposes hereof, and that, until the parties reach such agreement, the postings
of the remaining parties shall be used for the purposes hereof.
An example of how this Overriding Royalty is to be calculated is set out
on Attachment 1 hereto.
The Overriding Royalty due hereunder shall be paid within sixty (60) days
of the end of the year in which it is due. In the event that payment is not
made within the time prescribed, the "number of barrels produced from the
Subject Property and allocated to Assignor" shall be increased for every month
for the year in question by an amount equal to one percent (1%) for each month,
or fraction thereof, by which such payment is delayed, and the payment due
shall be calculated utilizing the formula provided herein, but based on such
increased number of barrels.
It is expressly understood and agreed that this Overriding Royalty shall:
(i) not bear any of the expenses of exploring, developing or operating the
Subject Property, nor any of the expenses of marketing production therefrom,
including gathering and/or transportation costs; (ii) not be subject to any ad
valorem or severance taxes (any such tax liability imposed shall be
<PAGE> 47
paid by Assignor) (iii) be exclusive of, and in addition to, any royalties,
overriding royalties or payments out of production affecting the Subject
Property; and (iv) be a permanent burden on the Subject Property, and shall not
terminate due to the termination of any other instrument or interests covering
or affecting the Subject Property. It is further understood and agreed that,
as the Overriding Royalty is an economic interest in the minerals in place, the
royalties from the Overriding Royalty shall constitute gross income, subject to
depletion, for the Assignee. The Overriding Royalty shall not constitute gross
income to the Assignor.
Each payment of the Overriding Royalty granted herein shall be accompanied
by a statement detailing the calculation of the amount due, and containing at
least the following information, by month: (i) barrels of oil produced;
(ii) the Posted Price; and (iii) the prices that were used to determine
the Posted Price, including any gravity corrections that were applied. Said
statement shall also indicate the Base Price utilized for the year in question.
In the event that Assignor determines that no payment is due for a particular
year, Assignor shall nonetheless provide the above described statement within
the time period that would be required for making payment if one was due.
Assignee, upon notice in writing to Assignor, shall have the right to audit
Assignor's accounts and records relating to the revenues from the Subject
Property, and any other records relating to the determination of the amounts
due hereunder, for any calendar year within the twenty-four (24) month period
following the end of such calendar year.
It is understood and agreed that any method used by Assignor to measure
the production of oil from the Subject Property must be approved by Assignee,
with such approval to be not unreasonably withheld. In addition, Assignee
shall have the right to require that the meters and/or other equipment
utilized for such measurement be tested at reasonable intervals and Assignee
shall have the right to witness such metering, all in accordance with
procedures to be agreed upon by the parties acting in good faith.
In the event that Assignee disputes the amount of the annual Overriding
Royalty Payment, and/or the calculations used to determine such payment, then
Assignee shall provide written notice to Assignor of such dispute. If Assignee
and Assignor are unable to resolve the matter with correspondence, then within
10 days (or any period agreed to by Assignee and Assignor) following the
initial notice of dispute, then the representatives of the parties shall meet
at least once in an attempt to negotiate a resolution of the dispute, at which
meeting at least one representative must be a line manager of each party. If
the dispute is not resolved within 10 days (or any period agreed to by
Assignee and Assignor) after the first meeting for informal negotiations, then
Assignor shall, within 5 working days thereafter, submit a final written offer
for settling the dispute. Within 5 days of receipt of the offer, Assignee
must either accept or reject the offer, if any, or submit its own settlement
offer. Within 5 days of its receipt of Assignee's response, Assignor must
accept or reject Assignee's offer. Failure to respond by any party shall be
deemed a rejection of the outstanding offer. If the dispute is not settled
within 5 working days of the last offer, then Assignee shall have all of the
rights specified in the next succeeding paragraph. It is expressly understood
and agreed that the foregoing procedure shall only apply to those amounts
that are actually in dispute, and that
<PAGE> 48
Assignee shall at all times have the rights specified in the following
paragraph with regard to any unpaid amounts that are not in dispute.
In the event that Assignor fails to pay to Assignee any amounts due
hereunder within fifteen (15) days of the receipt of a written demand for such
payment from Assignee, or in the event that Assignor files for protection,
whether voluntarily or involuntarily, under the bankruptcy laws of the United
States, or in the event that any dispute is not settled in accordance with the
immediately preceding paragraph, then Assignor hereby grants to Assignee
(i) the right to collect from the purchaser the proceeds from the sale of
Assignor's share of oil produced from the Subject Property any amounts due
Assignee hereunder (including interest) and not paid in accordance with the
terms hereof. Each purchaser shall be entitled to rely on Assignee's written
statement regarding the amount due Assignee hereunder and (ii) the right to
take in kind up to fifty percent (50%) of the oil produced from the
Subject Property (with the specific percentage taken to be determined by
Assignee) until Assignee has received in kind an amount of oil equal in value
to all amounts due Assignee hereunder (including interest). It is understood
and agreed that the oil taken by Assignee under the terms hereof shall be
valued by applying the formula for determining the Posted Price hereunder,
utilizing prices in effect at the time such oil is taken by Assignee. It is
further understood and agreed that, Assignee shall not incur any liability for
the expenses of operating the Subject Property as a result of its taking oil
under the terms hereof. It is expressly understood and agreed that the rights
of Assignee granted in this paragraph are and shall be rights in and to the
property covered hereby.
All, notices, and any correspondence regarding the matters provided for
herein shall be sent to the following addresses which may be changed by thirty
(30) days written notification:
For Assignor: For Assignee:
____________________ ____________________
____________________ ____________________
____________________ ____________________
The rights, titles and interest herein assigned shall inure to the benefit
of the respective parties, and their legal representatives, successor and
assigns.
Executed on the dates shown on the acknowledgments below, but effective as
of 6:58 a.m., local time, July 1, 1996, it being understood that the first year
for which the Overriding Royalty provided for herein shall be determined and
paid shall consist of that period from July 1, 1996 to December 31, 1996, and
that said Override shall be determined and paid on an annual basis thereafter.
<PAGE> 49
FORMAX OIL COMPANY SAN JOAQUIN PRODUCTION COMPANY
By: By:
Name: Name:
Title: Title:
Date: Date:
STATE OF
COUNTY OF
This instrument was acknowledged before me on _____________, 1996, by
______________________________, _________________________ of
FORMAX OIL COMPANY, a ___________________ corporation, on behalf of said
corporation.
My Commission Expires: _______________________
Notary Public in and for
the State of _______________
STATE OF TEXAS
COUNTY OF
This instrument was acknowledged before me on _____________, 1996, by
_________________________________, ___________________________ of
SAN JOAQUIN PRODUCTION COMPANY, a Louisiana corporation, on behalf of said
corporation.
My Commission Expires: ________________________
Notary Public in and for
the State of Texas
<PAGE> 50
ATTACHMENT 1
to Conveyance of Overriding
Royalty from Formax Oil Company
to San Joaquin Production Company
Sample Calculation of the Overriding Royalty for 1998. To be used solely
as an illustrative example and not for the purpose of reflecting any
actual amounts payable.
Base price=$13.213 ($12.70 escalated at 2%/year since 1996)
Average Difference Barrels Produced "Monthly
Month Posted Price from Base per Month Amount"
January $14.00 +.787 30000 $23,610.00
February $13.00 -.213 25000 -$5,325.00
March $13.25 +.037 22500 +$832.50
April $12.50 -.713 30000 -$21,390.00
May $12.75 -.463 35000 -$16,205.00
June $14.00 +.787 25000 +$19,675.00
July $14.50 +1.287 27500 +$35,392.50
August $12.00 -1.213 25000 -$30,325.00
September $13.00 -.213 30000 -$6,390.00
October $13.75 +.537 32500 +$17,452.50
November $14.00 +.787 30000 +$23,610.00
December $13.00 -.213 27500 -$5,857.50
Total $35,080
X .75
Amount Due $26,310
<PAGE> 51
EXHIBIT B-3
Attached to and made a part of that certain
STOCK SALE AGREEMENT
between
Exxon
and
Berry Petroleum Company
CONVEYANCE OF OVERRIDING ROYALTY
STATE OF CALIFORNIA
COUNTY OF KERN
San Joaquin Production Company, a Louisiana Corporation, whose address is
_________________ ("Assignor"), for ten dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency of all of which are hereby
acknowledged, paid by Exxon Corporation, a New Jersey Corporation, whose
address is _____________________ ("Assignee"), does hereby grant, convey, and
sell unto Assignee that same Overriding Royalty that was granted to Assignor by
Formax Oil Company, by that Conveyance of Overriding Royalty ("said
Conveyance"), which was effective as of ___________, said Overriding Royalty
covering the following described lands:
Parcel 1:
Lot 1: the southeast quarter of the northwest quarter; the east half of
the east half of the southwest quarter of the northwest quarter; and that
portion of the northeast quarter of the northwest quarter of fractional Section
36, Township 32 South, Range 23 East, Mount Diablo Meridian, in the
unincorporated area of the County of Kern, State of California, according to
the official plat thereof, described as follows:
Beginning at the southwest corner of said northeast quarter of the
northwest quarter; thence northerly on the west line of said northeast
quarter of the northwest quarter 620 feet; thence at right angles easterly
500 feet; thence at right angles northerly 300 feet; thence at right
angles easterly 400 feet; thence at right angles northerly 400 feet to the
north line of said section; thence easterly along said section line to the
north quarter corner; thence southerly 1320 feet to the southeast corner
of said northeast quarter of the northwest quarter; thence westerly to the
point of beginning.
<PAGE> 52
Parcel 2: The north 20 acres of Lot 4 and the north half of Lot 5 of
fractional Section 36, Township 32 South, Range 23 East, Mount Diablo
Meridian, in the unincorporated area of the County of Kern, State of
California, according to the official plat thereof.
It is understood and agreed that the purpose of this assignment is to
grant to Assignee all rights and interests acquired by Assignor under said
Conveyance, and Assignee hereby accepts all of such rights and interests
subject to all of the terms and conditions of said Conveyance.
It is agreed that the addresses for payment, notification, and
correspondence provided for in said Conveyance are modified as follows, and
this modification shall be provided to the Assignor in said Conveyance and
shall constitute the notice required for a change of address under said
Conveyance.
For Assignor: For Assignee:
____________________ ____________________
____________________ ____________________
____________________ ____________________
The rights, titles and interest herein assigned shall inure to the benefit
of the respective parties, and their legal representatives, successor and
assigns.
Executed on the dates shown on the acknowledgments below, but effective
as of 6:59 a.m. local time, July 1, 1996.
SAN JOAQUIN PRODUCTION COMPANY EXXON CORPORATION
By: By:
Name: Name:
Title: Title:
Date: Date:
<PAGE> 53
STATE OF TEXAS
COUNTY OF
This instrument was acknowledged before me on _____________, 1996, by
_________________________________, ___________________________ of
SAN JOAQUIN PRODUCTION COMPANY, a Louisiana corporation, on behalf of said
corporation.
My Commission Expires: _________________________
Notary Public in and for
the State of Texas
STATE OF
COUNTY OF
This instrument was acknowledged before me on _____________, 1996, by
_________________________________, ___________________________ of
EXXON CORPORATION, a New Jersey Corporation, on behalf of said corporation.
My Commission Expires: _________________________
Notary Public in and for
the State of Texas
<PAGE> 54
EXHIBIT C
Attached to and made a part of that certain
PURCHASE AND SALE AGREEMENT
between
Exxon CORPORATION
and
Berry Petroleum Company
ALTERNATE DISPUTE RESOLUTION AND ARBITRATION
I. NEGOTIATION PHASE
A. A party (referred to as "plaintiff" on occasion) may
initiate negotiation proceedings by delivery of a certified
or registered letter to the opposing party, referring to
this Exhibit C and describing the dispute ("Claim" or
"Claims"), a list of documents, data, and information
relied upon in support of its contentions (copies of which
must be attached), the terms (if any) of the Agreement
and/or Closing or post-Closing documents that are relevant,
and a proposed resolution of the dispute.
B. The opposing party (referred to as "defendant" on occasion)
must respond within thirty working days to the address set
forth in Article 16, setting out its contentions, a list of
documents, data, and information in support of its position
(copies of which must be attached), and its response to the
proposed resolution, including any counterclaims. Each
party will then have ten working days to amend, alter, or
supplement its correspondence with further contentions and
further documentation.
If the opposing party does not respond, the party initiating the
negotiation will send a second notice and, after a reasonable time,
may proceed to submit a written settlement offer as provided in
I.D. of this Exhibit.
C. If the parties are unable to resolve a dispute with correspondence,
then within twenty working days (or any agreed period) following the
completion of all supplements, alterations, or amendments,
representatives of the parties will meet at least once and attempt to
negotiate a resolution of all Claims. Each party may be represented
at any meeting by persons of its choice, but at least one
representative must be a line manager of the party. The
meeting will occur at a place selected by the parties or,
if they cannot agree, in the place Exxon designates.
D. If a Claim is not resolved within thirty working days (or
any agreed period) of the first meeting for informal
negotiation, then the plaintiff will, within five working days,
<PAGE> 55
submit a final written offer for settling all Claims (including
defendant's counterclaims, if any) or a notice that it will not
offer to settle the dispute. Within five working days of its receipt
of the offer or notice, the defendant must either accept or reject
the offer, if any, or submit its own settlement offer as to all Claims
(including defendant's counterclaims, if any). Within five working
days of its receipt of the defendant's response, plaintiff must accept
or reject defendant's offer as to all Claims. Failure to respond shall
be deemed a rejection of the outstanding settlement offer. If the
Claims are not settled within five working days of the last settlement
offer, either party may submit the Claims to binding arbitration under
this Exhibit C by notice to the other party within thirty days.
If neither party submits any remaining Claim to binding arbitration
within thirty days, then the Claim may not be submitted to binding
arbitration without beginning the Negotiation Phase again.
E. If the parties have settled any Claim, they will immediately execute
settlement agreements and releases.
II. BINDING ARBITRATION PHASE
A. Arbitrators
1. Number of Arbitrators. Unless the parties otherwise agree,
three arbitrators will decide the Claims.
2. Qualification of Arbitrators. Each arbitrator will be an attorney
admitted to practice in Texas or California, actively engaged in
the practice of law on behalf of oil and gas producers for not
less than ten years before selection and experienced with
arbitration proceedings.
If a Claim involves material factual issues concerning any science
or engineering, one of the three arbitrators may, however, be a
registered professional in Texas or Californian the most relevant
discipline, actively engaged in his or her profession on behalf of
oil and gas producers for not less than ten years.
In addition, each arbitrator will disclose to the parties, before
selection, the details of his or her previous representation or
work for either party and any financial or personal interest in,
or bias with respect to, either party or SJPC, Formax, the Formax
Property, or with respect to the result of the arbitration
proceeding.
3. Selection of Arbitrators. Each party may nominate for the other
party's consideration a candidate for each arbitrator position by
giving notice to the other party. A party receiving a nomination
must accept or reject the nomination in writing.
<PAGE> 56
If after forty working days after the notice of arbitration, the
parties have failed to select the arbitrators who must be
attorneys, then application will be made to the American
Arbitration Association ("AAA") to provide a list of five
qualified nominees. Each party will have five working days after
receiving the list to strike one nominee. If two or more
nominees remain for any one position after each party makes its
strikes, AAA will select the remaining arbitrator from the
remaining nominees.
A similar procedure will be followed for the selection of the
technical arbitrator, except that the two arbitrators who are
attorneys will propose a list of three nominees for strikes and
select the arbitrator from the nominees, if necessary.
If either party fails to respond to nominations or fails to vote
on nominations, the opposing party may select the arbitrators and
proceed with the arbitration proceedings as provided in these
Arbitration terms.
To avoid prejudice toward either party, either a neutral third
party will be engaged to contact the nominees regarding
availability, qualifications, and fees or the parties will make
all contacts with potential arbitrators jointly.
4. General Duties and Authority of the Arbitrators. Throughout the
proceedings, the arbitrators will promptly provide the parties
with copies of all documents filed by a party and not provided to
the other party or prepared by the arbitrators relating to
the proceedings.
The arbitrators will decide by majority vote all Claims and other
issues in dispute, including whether any Claim may be arbitrated,
conduct of the arbitration, discovery issues, admissibility of
evidence, and interpretation and application of these Arbitration
Terms will be decided by majority vote of the arbitrators.
5. Proceeding Ex Parte. The arbitrators have authority and power to
proceed ex parte if either party fails, after reasonable notice,
to strike proposed arbitrators, attend hearings or conferences
with the arbitrators, furnish the arbitrators with required
papers, information, or briefs, or take any action required by
these Arbitration Terms.
6. Resignation. If an arbitrator becomes unwilling or unable to
serve or proceed with the arbitration, a replacement arbitrator
will be selected under II.A.3. of this Exhibit; provided,
however, nominations must be made within fifteen days of the
arbitrator's notice to the parties of his or her resignation or
the parties' becoming aware of the arbitrator's inability to
proceed.
B. Representation The parties may be represented by legal counsel or
other technical or professional persons.
<PAGE> 57
C. Pre-hearing Procedures
1. Preliminary Hearing. Unless the parties agree otherwise, a
preliminary hearing with the arbitrators will be held within ten
working days of the selection of the arbitrators, to assist the
arbitrators in establishing procedures and setting the hearing
date and for other purposes necessary or desirable for the
efficient and expedient disposition of the proceedings.
Unless the parties agree otherwise, the maximum length
of the arbitration hearing will be five consecutive and
mutually convenient working days. The arbitrators will
select the dates if the parties cannot agree. The
arbitrators will send a notice of the arbitration
hearing to each party, stating the procedures to be
followed, including the order of testimony.
2. Discovery.
a. The parties intend that there be a good faith, but
limited, exchange of information, but only that
information relevant to a disputed issue, without
duplicating the costly, time-consuming, and
burdensome procedures available in civil litigation.
b. The parties will promptly designate and exchange the
names and addresses of all witnesses who may be
called at the arbitration hearing; a brief statement
of each witness's expected testimony; and lists and
copies of exhibits that may be presented at the
hearing. A witness may be designated as a fact
witness, an expert witness, or both.
c. The parties may depose any persons who may be called
to testify at the hearing.
d. Each party may submit to the arbitrators one set of
requests for production of relevant documents, one
set of interrogatories containing not more than
thirty questions (including subparts) soliciting
relevant information, and requests for depositions
of individuals with relevant information who are not
identified by the opposing party as witnesses. The
arbitrators may order responses if the discovery
requests are reasonable in scope. Each party
requesting documents, interrogatories, or
depositions of persons who will not testify at the
hearing will reimburse the opposing party for the
opposing party's reasonable costs to respond to the
requests, including, but not limited to, attorneys'
fees, reproduction costs, staff time, and travel
expenses. These costs are deemed to be the
requesting party's costs under III.D. of this Exhibit.
e. The time limit for each deposition is eight hours.
The arbitrators may allow additional time if it can
be shown that the deposition cannot reasonably be
<PAGE> 58
completed within eight hours. Each deposition will
be held at a location convenient for the deponent.
f. The arbitrators may subpoena persons designated as
witnesses, representatives of the parties, and
persons with information relevant to the dispute to
appear for oral deposition.
g. The arbitrators will establish a procedure to
resolve discovery disputes and rule on dispositive
motions promptly and efficiently. The procedure may
include presenting motions by letter, as opposed to
formal pleadings, and resolution by telephone conferences.
h. The arbitrators may impose sanctions that they deem
appropriate (including, but not limited to, awarding
costs and attorneys' fees) for a party's failure to
identify witnesses and the substances of their
testimonies, to provide copies of exhibits, or to
respond timely and in good faith to discovery
requests. The arbitrators may extend any deadline
in the interest of fairness if a party fails to
comply with the Arbitration Terms.
3. Pre-hearing Statements. At least thirty working days
before the hearing, the parties will jointly prepare
and file with the arbitrators an agreed pre-hearing
statement setting out the disputed issues to be decided
by the arbitration, a statement of agreed facts, the
identity of witnesses, a list of exhibits that will be
used, and copies of the documents concerning the
disputed issues that the parties agree should be
provided to the arbitrators.
4. Pre-hearing Briefs. Each party will also submit pre-
hearing briefs. Unless the parties agree otherwise,
the plaintiff's brief as to all Claims (including
defendant's counterclaims) will be due twenty working
days before the arbitration hearing; defendant's brief
as to all Claims (including defendant's counterclaims)
will be due ten working days before the hearing.
D. Hearing
1. Site of Hearing. The arbitration hearing will be held
in Houston, Texas, at a location designated by Exxon,
unless the parties agree otherwise.
2. Conduct of Hearing. The hearing will begin on a Monday
no later than seventy working days after the
preliminary hearing. The maximum length of the hearing
is five consecutive working days. Each party will have
one-half of the scheduled hearing time for its case
including direct, redirect, and rebuttal testimony,
cross-examination of the opposing parties witnesses,
and opening and closing statements, but excluding time
attributable to the opposing party's objections during
the hearing and questions. The arbitrators will
preside at the hearing and rule on the admission and
exclusion of evidence and procedural questions and may
exercise all
<PAGE> 59
other powers conferred by statute on arbitrators. The hearing
will be conducted as if it were an informal court trial. The
arbitrators may question any witness appearing at the arbitration
hearing. The parties may change these provisions by agreement.
3. Attendance of Witnesses and Production of Evidence.
a. The arbitrators may subpoena witnesses and require
production of documents.
b. In addition to presenting evidence at the arbitration
hearing through the testimony of qualified witnesses,
either party may submit testimony by affidavit as
follows. Testimony offered by affidavit must be
submitted to the opposing party and the arbitrators
at least thirty working days before the arbitration
hearing. Either the opposing party or any arbitrator
may, by written notice at least fifteen working days
before the arbitration hearing, request that an
individual affiant appear at the arbitration hearing
for cross-examination. If the affiant was not
previously identified as a witness, the opposing
party will also have a reasonable opportunity to
depose the affiant and to require that the affiant
appear at the hearing. If, after notice within five
working days of the deposition, the affiant is unable
to appear at the hearing, the hearing will be
rescheduled. If an affiant does not appear as
requested either for the arbitration hearing or the
deposition for whatever reason after timely request
by a party, the testimony of the affiant will be
disregarded by the arbitrator for all purposes.
A party may not advance an issue at the arbitration
hearing unless the party identified the issue in
writing to the opposing party and the arbitrators at
least thirty working days before the hearing. A
party may not introduce or advance documentary
evidence at the arbitration hearing unless it
furnished a copy and identified it as an exhibit to
the opposing party as provided in II.C.2.b. of this
Exhibit and to the arbitrators at least thirty
working days before the hearing. A party may not
call a witness unless the opposing party has had an
opportunity to depose the witness and the nature of
the testimony was previously disclosed in writing to
the opposing party as provided in II.C.2.b. of this
Exhibit and to the arbitrators at least thirty
working days before the hearing.
c. If a witness (or affiant who is required to appear)
is unable for good cause to appear at the hearing,
the arbitrators may extend or postpone the hearing if
reasonably necessary in the interest of fairness.
d. All witnesses will give oral testimony at the hearing
under oath administered by a court reporter, and all
arbitrators must be present when evidence is adduced
and admitted.
<PAGE> 60
4. Presentation of Evidence. The arbitrators will be
guided by common sense and justice in allowing evidence
to be presented. No federal or state rule relating to
the order of proof, the conduct of the hearing, or the
presentation and admissibility of evidence will be
applicable in the arbitration hearing, except that the
arbitrators must recognize and apply the attorney-
client privilege and the work-product-immunity doctrine
during pre-hearing discovery and at the hearing. Any
relevant evidence, including hearsay, may be admitted
by the arbitrators if responsible persons would
reasonably rely on it in the conduct of serious
affairs, regardless of the admissibility of the
evidence in a court of law.
5. Completion of Hearing. The arbitrators will declare
the hearing closed after the parties have presented
their evidence and made their closing arguments. The
time limit within which the arbitrators are required to
make their decision will begin on the date the hearing closes.
Unless expressly requested by the arbitrators, no briefs or
other documents may be submitted by any party after the
arbitration hearing concludes.
6. Extension of Time. The parties acknowledge that they
have agreed to this arbitration provision to expedite
settlement of their disputes, and the arbitrators are
instructed that any extension of time must be
reasonable and of the shortest length of time necessary
to accommodate the reason for the delay.
E. Award and Enforcement
1. Time, Bounds, and Form of Decision. Unless the parties
agree otherwise, the arbitrators will decide each Claim
and disputed issue within twenty working days after the
date the hearing closes, based on applicable law and
the testimony, documents, and other materials the
parties submit before and during the arbitration
hearing. The decision must be within the bounds set by
the contentions of the parties. The decision must be
in writing, including findings of fact and conclusions
of law. Each arbitrator must sign the opinion, and
each must indicate whether he or she supports the
decision on each Claim and disputed issue.
2. Decision of Arbitrators. The decision of the
arbitrators is final and binding on the parties and
nonappealable.
3. Award. The arbitrators may award compensatory damages
only. The arbitrators may not award, and the parties
specifically waive their rights to, multiple damage
awards that may be allowed by statute, punitive or
exemplary damages, specific performance, rescission, or
any other legal or equitable remedy.
4. Enforcement. Judgment may be entered on the award, and
the award may be judicially enforced. The award is
final and binding, and no appeal from the award may be
taken on the grounds of error in the application of the
law or the findings of
<PAGE> 61
fact. After the arbitrators issue their decision, an aggrieved
party may request an appropriate court to vacate the decision only
under the circumstances set out in Section 10 of the U.S.
Arbitration Act.
III. GENERAL TERMS
A. Extensions of Time. The parties may modify any time period
provided in the Arbitration Terms Agreement.
B. Law. The substantive law (including time bars) applicable
to all Claims and disputed issues is the law of the Texas,
without regard to the choice of law rules of Texas or any
other jurisdiction. The substantive law applicable to
these arbitration provisions is the United States (Federal)
Arbitration Act. The arbitration will be held in
accordance with these Arbitration Terms and, for matters
not specifically addressed in these Arbitration Terms in
accordance with the U.S. (Federal) Arbitration Act, 9
U.S.C. code section 1, et seq. This Agreement, in which these
Arbitration Terms are referenced, is a contract involving
commerce within the meaning of the United States
Arbitration Act, and, accordingly, the arbitrators are
vested with all powers and authorities conferred under the
Act and under these Arbitration Terms.
C. Ex parte Communications. Except as expressly provided in
II.A.5. of this Exhibit, no party may have any ex parte
communication with the arbitrators. For the purposes of
these Arbitration Terms, "ex parte communications" means
both oral communications without the participation of a
representative from the opposing party (or the written
consent of the opposing party) and written communications
unless a complete copy of the communication is provided to
the representative of the opposing party simultaneously
with service on the arbitrators.
D. Payment of Expenses. If the arbitrators' award as to all
Claims equals or exceeds plaintiff's final settlement offer
as to all Claims as provided in I.D. of this Exhibit (or
the total amount claimed if plaintiff declined or failed to
make a settlement offer), the arbitrators will award the
plaintiff an additional sum equal to its reasonable costs.
If the arbitrators' award as to all Claims equals or is
less than the defendant's settlement offer as to all Claims
as provided in I.D. of this Exhibit (or zero if defendant
declined or failed to make a settlement offer), the
arbitrators will award the defendant a sum equal to its
reasonable costs. If the arbitrators' award for all Claims
is greater than the defendant's final settlement offer as
to all Claims (or zero if the defendant declined or failed
to make a settlement offer), but less than the plaintiff's
final settlement offer as to all Claims (or the total
amount claimed if the plaintiff declined or failed to make
a settlement offer), each party will pay its own costs and
its one-half share of the arbitrators' fees and expenses
and the other arbitration costs. "Costs" as used in this
III.D. of this Exhibit includes a party's attorneys' fees
and expenses, staff time, and expenses, including the
party's discovery costs under II.C.2.d. of this Exhibit and
the party's one-half share of the arbitrators' fees and
expenses and other arbitration costs.
<PAGE> 62
E. Stenographic Record. Subject to III.F. of this Exhibit,
either party may hire a court reporter to produce a
stenographic record at depositions, the hearing, or other
proceedings. The requesting party must notify the other
party of the arrangements in advance and must pay the costs
incurred. If the opposing party wants a copy of the
record, that party will be provided a copy upon payment of
one-half of the cost of the stenographic record.
F. Confidentiality. All proceedings and all information
obtained during discovery or the proceedings, and the
settlement agreement, if any, or arbitrators' award will be
kept confidential and may not be disclosed or used by
either party for a period of seven years from the date of
the arbitrators' award, except as provided in these
Arbitration Terms and except in connection with an action
to enforce or challenge the arbitrators' award, if any, or
as may be required by law or court order.
G. Time. In computing any period prescribed or allowed by
these Arbitration Terms, the day of the act, event, or
default from which the designated period begins to run will
not be included. The last day of the period is included,
unless it is a Saturday, Sunday, or legal holiday
(including a Texas state holiday), in which event the
period runs until the end of the next day that is not a
Saturday, Sunday, or legal holiday. The last day of the
period will end for purposes of compliance with this
Agreement at 5 p.m. Central Standard Time (or Central
Daylight Savings Time when applicable).
H. Designated Representatives/Notice. Whenever these
Arbitration Terms provide for notice, exchange of
information, or other communications between the parties,
notice will be delivered to the representatives designated
in Section 11.06 of the Agreement.
Notice to or service on any person other than a party's
designated representative will not constitute notice or
service on a party for purposes of these Arbitration Terms.
Written notice to a party may be accomplished by personal
service, overnight courier, facsimile, or U.S. mail.
Service is accomplished upon receipt at the business office
of the designated representative. Notices, exchanges of
information, and other communications must also be
delivered to designated counsel, if any, for each party, in
the same manner as notice or service is provided a party's
designated representative.
I. Venue. An action to enforce or challenge these Arbitration
Terms, including an action to confirm or vacate an
arbitration award, must be brought in the U.S. federal
district court in Houston, Texas.
J. Waiver of Rules. Any party that proceeds under these
Arbitration Terms after it knows or should have known that
a party or arbitrator has not complied with any provision
or requirement of these Arbitration Terms and that fails to
file a written objection with the arbitrators within five
calendar days after it knows or should have known of that
noncompliance will be deemed to have waived its right to object.
