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 18, 1995
DEVON ENERGY CORPORATION
(Exact Name of Registrant as Specified in its Charter)
OKLAHOMA 1-10067 73-1474008
(State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer
Incorporation or Organization) Identification Number)
20 NORTH BROADWAY, SUITE 1500, OKLAHOMA CITY, OK 73102
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (405) 235-3611
Page 1 of 79 total pages
(Exhibit Index is found on page 16)
<PAGE>
Item 2. Acquisition or Disposition of Assets
Terms of the Acquisition
On December 18, 1995, Devon Energy Corporation ("Devon" or
the "Company") closed the acquisition of certain Wyoming oil and
natural gas properties and a gas processing plant (the "Worland
Properties") from Union Oil Company of California for
approximately $50.3 million. The purchase increased the
Company's proven oil and gas reserves by approximately 90
equivalent billion cubic feet ("EBcf"), or approximately 15%, as
of the closing date. Approximately $46 million of bank debt and
$4.3 million of the Company's cash on hand were used to fund the
purchase.
Properties Acquired
All of the assets purchased are associated with a 24,646
acre federal unit in north central Wyoming. There are currently
38 producing wells in the block. Of the $50.3 million total
purchase price, $46.3 million is attributable to these producing
wells, 16 proved undeveloped locations, the processing plant and
natural gas liquids to be extracted at the plant. The remaining
$4 million is associated with approximately 13,000 acres of
undeveloped leasehold.
Devon estimates the cost to drill and complete the 16 new
wells to be $9 million. Drilling is expected to commence in
early 1996. The Company expects to spend another $4 million to
$5 million to expand the capacity of the gas plant from 16
million cubic feet of gas per day to 28 million per day.
Prior to closing, Devon already owned an approximate six
percent interest in the Worland Properties. The acquisition
raises Devon's working interest in the properties to between 70%
and 100%, depending upon the individual well or asset. Devon
assumed operational control of the properties upon closing.
Financial Effects of the Acquisition
The acquisition is being accounted for under the purchase
method. Accordingly, the Worland Properties will add revenues
and expenses to Devon's 1995 consolidated operations for only the
two weeks following closing. Therefore, the Worland Properties'
impact on Devon's 1995 operations will be immaterial.
Item 7 of this report on Form 8-K includes certain
historical and pro forma financial information regarding the
Worland Properties for the year 1994 and the first nine months of
1995. Such financial information does not include the expected
impact of Devon's future drilling and development plans.
Therefore, such financial information is not necessarily
indicative of the future impact which the Worland Properties are
expected to have on Devon's operations.
2
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of the Worland Properties
Independent Auditors' Report
Statements of Revenues and Direct Operating Expenses for the
Year Ended December 31, 1994 and the Nine Months Ended
September 30, 1995 (Unaudited)
Notes to Statements of Revenues and Direct Operating Expenses
(b) Pro Forma Financial Information - Devon Energy Corporation
Unaudited Pro Forma Balance Sheet as of September 30, 1995
Unaudited Pro Forma Statements of Operations for the Year Ended
December 31, 1994 and the Nine Months Ended
September 30, 1995
Notes to Unaudited Pro Forma Financial Statements
(c) Exhibits
Exhibit
Number
2 Purchase and Sale Agreement between Union Oil
Company of California and Devon Energy Corporation
(Nevada)
23 Consent of KPMG Peat Marwick LLP
SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
DEVON ENERGY CORPORATION
Date: December 29, 1995 /s/Danny J. Heatly
Danny J. Heatly
Controller
3
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Devon Energy Corporation:
We have audited the accompanying statement of revenues and
direct operating expenses of the Worland Properties for the year
ended December 31, 1994. This financial statement is the
responsibility of the Company's management. Our responsibility
is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the statement is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in that financial statement. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and direct operating
expenses was prepared for the purpose of complying with the rules
and regulations of the Securities and Exchange Commission and
excludes material expenses, described in Note 1 of the financial
statements, that would not be comparable to those resulting from
the proposed future operations of the properties.
In our opinion, the statement of revenues and direct
operating expenses referred to above presents fairly, in all
material respects, the revenues and direct operating expenses of
the Worland Properties for the year ended December 31, 1994, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Oklahoma City, Oklahoma
December 19, 1995
4
<PAGE>
<TABLE>
WORLAND PROPERTIES
Statements of Revenues and Direct Operating Expenses
<CAPTION>
Nine
Year Ended Months Ended
December 31, 1994 September 30, 1995
(Unaudited)
Revenues:
<S> <C> <C>
Gas sales $3,256,685 1,603,100
Oil sales 1,030,191 739,120
Natural gas liquids sales 2,010,023 1,686,814
Total revenues 6,296,899 4,029,034
Direct Operating Expenses:
Production and operating expenses 2,049,769 1,308,972
Revenues in excess of direct operating
expenses $4,247,130 2,720,062
See accompanying notes to financial statements.
</TABLE>
5
<PAGE>
WORLAND PROPERTIES
Notes to Statements of Revenues and Direct Operating Expenses
December 31, 1994 and September 30, 1995 (Unaudited)
1. Basis of Presentation and Summary of Significant Accounting
Policies
Basis of Presentation
The accompanying statements present revenues and direct
operating expenses of working interests in certain oil, gas and
natural gas liquids ("NGL") producing properties and a gas
processing plant in Wyoming which were purchased by Devon Energy
Corporation ("Devon") on December 18, 1995. Collectively, these
properties and the plant are hereafter referred to as the
"Worland Properties". The accompanying statements have been
prepared using the accrual basis of accounting for the purpose of
complying with certain rules and regulations of the Securities
and Exchange Commission ("the SEC") and present the results of
operations for the working interests in the Worland Properties
which were acquired by Devon. All adjustments (all of which are
normal and recurring) have been made which are necessary to state
fairly revenues and direct operating expenses of the Worland
Properties for the nine months ended September 30, 1995.
General and administrative expenses and other indirect
expenses related to the property interests are not included, as
the amounts cannot be readily determined or specifically
allocated to the property interests. The accompanying statements
do not reflect provisions for depreciation, depletion and
amortization, as the amounts cannot be determined and since the
acquisition by Devon has been accounted for utilizing the
purchase method.
Gas Balancing
During the course of normal operations, joint interest
owners of natural gas reservoirs may take more or less than their
ownership share of the natural gas volumes produced. These
volumetric imbalances are monitored over the lives of the wells'
production capability. If an imbalance exists at the time the
wells' reserves are depleted, cash settlements are made among the
joint interest owners under a variety of arrangements.
For the Worland Properties, the sales method of accounting
for gas imbalances is used. A liability is recorded only if
excess takes of natural gas volumes for the Worland Properties
exceed their estimated remaining recoverable reserves. No
receivables are recorded for those wells where the Worland
Properties have been credited with less than their actual share
of gas production.
6
<PAGE>
Income Taxes
Oil and gas property interests are not taxpaying entities.
Taxable income, if any, arising from the operations of such
properties accrues to the property interest owner. Accordingly,
no provision for income taxes has been reflected in the
accompanying statements.
2. Supplemental Information on Oil and Gas Operations (Unaudited)
The following supplemental information regarding the oil and
gas producing activities of the Worland Properties is presented
pursuant to the disclosure requirements promulgated by the SEC
and Statement of Financial Accounting Standards No. 69,
"Disclosures About Oil and Gas Producing Activities".
Quantities of Gas Reserves
Set forth below is a summary of the net quantities of oil,
gas and NGL reserves attributable to the Worland Properties
purchased by Devon. The December 31, 1994 quantities were
estimated by Devon's in-house petroleum engineers. The December
31, 1993 quantities have been calculated by adding quantities
produced during the year 1994 to the estimated December 31, 1994
quantities.
<TABLE>
<CAPTION>
Oil Gas NGL
(Bbls) (Mcf) (Boe)
<S> <C> <C> <C>
Proved reserves as of December 31, 1993 1,897,000 64,600,000 4,049,000
Production (78,000) (2,443,000) (198,000)
Proved reserves as of December 31, 1994 1,819,000 62,157,000 3,851,000
Proved developed reserves as of
December 31, 1994 766,000 25,325,000 1,974,000
</TABLE>
Standardized Measure of Discounted Future Net Cash Flows
The following table presents the standardized measure of
discounted future net cash flows related to the Worland
Properties' proved oil, gas and NGL reserves as of December 31,
1994.
<TABLE>
<S> <C>
Future cash inflows $179,641,000
Future development costs (9,515,000)
Future production expenses (54,368,000)
Future net cash flows 115,758,000
10% discount to reflect timing of
cash flows (58,319,000)
Standardized measure of future
net cash flows $ 57,439,000
</TABLE>
7
<PAGE>
Future cash inflows are computed by applying year-end prices
(averaging $13.83 per barrel of oil, $1.68 per Mcf of gas and
$13.02 per Boe of NGL at December 31, 1994) to the year-end
quantities of proved reserves. Future production and operating
expenses are computed by estimating the expenses to be incurred
in producing the year-end reserves, based on year-end costs and
assuming continuation of existing economic conditions. No effect
has been given to future income taxes for the same reasons
specified in note 1.
The 10% annual discount is applied to reflect the timing of
the future net cash flows. The standardized measure of
discounted future net cash flows is the future net cash flows
less the computed discounts.
Changes Relating to the Standardized Measure of Discounted Future
Net Cash Flows
Presented below is a reconciliation of the standardized
measure of discounted future net cash flows from December 31,
1993 to December 31, 1994. The December 31, 1993 amount has been
calculated by revising the December 31, 1994 amount for the
effects of actual net sales, price and cost changes and the
accretion of the 10% discount during the year 1994.
<TABLE>
<S> <C>
Balance as of December 31, 1993 $41,054,000
Sales of oil, natural gas, and natural
gas liquids net of production and
operating expenses (4,247,000)
Net changes in prices and production
and operating expenses 16,527,000
Accretion of discount 4,105,000
Balance as of December 31, 1994 $57,439,000
</TABLE>
8
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following pro forma balance sheet combines the accounts
of Devon and the Worland Properties assuming the purchase had
occurred as of September 30, 1995. The pro forma statements of
operations for the year ended December 31, 1994 and the nine
months ended September 30, 1995 have been prepared under the
assumption that the purchase had occurred as of January 1, 1994.
The pro forma financial information should be read in conjunction
with the notes thereto, and the statements of revenues and direct
operation expenses, and related notes thereto, of the Worland
Properties included elsewhere in this Form 8-K.
The pro forma results of operations are not necessarily
indicative of Devon's future operations. The effect of the
Worland Properties on the pro forma results is not indicative of
the future effect which is expected from such properties. Devon
plans to spend approximately $9 million during 1996 and 1997 to
drill an additional 16 wells on the Worland Properties, and Devon
also anticipates spending $4 million to $5 million to expand the
capacity of the gas plant by approximately 75%. These actions
are expected to increase the Worland Properties' effect on
Devon's future operations.
9
<PAGE>
<TABLE>
UNAUDITED PRO FORMA BALANCE SHEET
September 30, 1995
(Dollars in Thousands)
<CAPTION>
Historical Adjustments
Devon (Note 3) Pro Forma
Assets:
<S> <C> <C> <C>
Current assets $ 27,609 (4,256)(a) 23,353
Oil and gas properties, net 332,243 50,856 (a) 383,099
Other assets, net 8,407 (67)(a) 8,340
Total assets $368,259 46,533 414,792
Liabilities:
Current liabilities 15,736 533 (a) 16,269
Revenues and royalties due
to others 1,383 1,383
Other liabilities 6,472 6,472
Long-term debt 97,000 46,000 (a) 143,000
Deferred revenue 1,251 1,251
Deferred income taxes 31,245 31,245
Total liabilities 153,087 46,533 199,620
Stockholders' Equity:
Common stock 2,210 2,210
Additional paid-in capital 167,285 167,285
Retained earnings 45,677 45,677
Total stockholders' equity 215,172 215,172
Total liabilities and
stockholders' equity $368,259 46,533 414,792
See accompanying notes to unaudited pro forma financial statements.
</TABLE>
10
<PAGE>
<TABLE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Year Ended December 31, 1994
<CAPTION>
Historical Data
Worland Adjustments
Devon Properties (Note 3) Pro Forma
(Thousands, Except Per Share Data)
Revenues:
<S> <C> <C> <C> <C>
Gas sales $56,372 3,257 59,629
Oil sales 38,086 1,030 39,116
Natural gas liquids sales 4,908 2,010 6,918
Other 1,407 1,407
Total revenues 100,773 6,297 107,070
Costs and expenses:
Production and operating
expenses 31,420 2,050 33,470
Depreciation, depletion
and amortization 34,132 2,442 (b) 36,574
General and administrative 8,425 8,425
Interest expense 5,439 2,430 (c) 7,869
Total costs and expenses 79,416 2,050 4,872 86,338
Earnings before income taxes 21,357 4,247 (4,872) 20,732
Income tax expense 7,612 (238)(d) 7,374
Net earnings $13,745 4,247 (4,634) 13,358
Net earnings per share $0.64 0.62
Weighted average shares
outstanding 21,552 21,552
See accompanying notes to unaudited pro forma financial statements.
</TABLE>
11
<PAGE>
<TABLE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1995
<CAPTION>
Historical Data
Worland Adjustments
Devon Properties (Note 3) Pro Forma
(Thousands, Except Per Share Data)
Revenues:
<S> <C> <C> <C> <C>
Gas sales $36,798 1,603 38,401
Oil sales 40,905 739 41,644
Natural gas liquids sales 4,738 1,687 6,425
Other 743 743
Total revenues 83,184 4,029 87,213
Costs and expenses:
Production and operating
expenses 25,337 1,309 26,646
Depreciation, depletion
and amortization 28,550 1,560 (b) 30,110
General and administrative 6,334 6,334
Interest expense 5,214 2,236 (c) 7,450
Total costs and
expenses 65,435 1,309 3,796 70,540
Earnings before income taxes 17,749 2,720 (3,796) 16,673
Income tax expense 7,632 (43)(d) 7,589
Net earnings $ 10,117 2,720 (3,753) 9,084
Net earnings per share $0.46 0.41
Weighted average shares
outstanding 22,065 22,065
See accompanying notes to unaudited pro forma financial statements.
</TABLE>
12
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
December 31, 1994 and September 30, 1995
1. Basis of Presentation
The accompanying unaudited pro forma financial information
is presented to reflect Devon's purchase of the Worland
Properties as described elsewhere herein. The unaudited pro
forma balance sheet is presented as if the purchase occurred on
September 30, 1995. The unaudited pro forma statements of
operations for the year ended December 31, 1994 and the nine
months ended September 30, 1995 are presented as if the purchase
occurred as of January 1, 1994.
The accompanying unaudited pro forma financial information
has been prepared based on estimates and assumptions deemed
appropriate by Devon and does not purport to be indicative of the
financial position or results of operations which would actually
have been obtained if the purchase had occurred as presented in
such statements, or which may be obtained in the future. In
addition, future results may vary significantly from those
reflected in the pro forma statements due to normal oil and gas
production variations, price changes, future acquisitions and
other factors, including Devon's drilling and development plans
for the Worland Properties.
2. Method of Accounting for the Purchase
The assets acquired have been accounted for at their
estimated "fair values" as required by the purchase method of
accounting for business combinations. The purchase price has
been allocated to individual assets acquired based on Devon's
estimates of such assets' relative value.
3. Pro Forma Adjustments
(a) The accompanying pro forma balance sheet includes the
adjustment to reflect the purchase of the Worland
Properties from the seller by paying cash on hand of
$4.3 million and borrowing $46 million from existing
credit lines which mature in March 1998.
In addition to the $50.3 million paid to the seller,
$0.6 million of costs related to the acquisition are
also capitalized as oil and gas property costs. Such
costs include approximately $0.1 million which had
already been incurred and included as other assets on
Devon's September 30, 1995 balance sheet. The
remaining $0.5 million is shown on the pro forma
balance sheet as an addition to current liabilities.
The accompanying pro forma statements of operations include
the following adjustments:
(b) To adjust depreciation, depletion and amortization
("DD&A") for the effect of adding the production from
the Worland Properties. Devon's actual rates of DD&A
per equivalent Mcf ("EMcf") produced were $0.58 per
EMcf for the year 1994 and $0.61 per EMcf for the first
nine months of 1995. There were no changes in these
rates on a pro forma basis after including the Worland
Properties.
13
<PAGE>
(c) To record additional interest expense, using Devon's historic
weighted average interest rates for the respective periods,
due to the additional amounts borrowed to partially fund the
purchase price.
(d) To adjust income tax expense for the effect of the
additional revenues and expenses added by the Worland
Properties.
4. Supplemental Pro Forma Information on Oil and Gas Operations
The following pro forma supplemental information regarding
oil and gas activities is presented pursuant to the disclosure
requirements promulgated by the SEC and Statement of Financial
Accounting Standards No. 69, "Disclosures About Oil and Gas
Producing Activities."
Quantities of Oil and Gas Reserves
Set forth below is a pro forma summary of the changes in the
net quantities of crude oil, natural gas and natural gas liquids
reserves for the year ended December 31, 1994, as estimated by
independent petroleum consultants and in-house engineers,
assuming the purchase of the Worland Properties was consummated
as of January 1, 1994.
<TABLE>
<CAPTION>
Natural Gas
Oil (Bbl) Gas (Mcf) Liquids (Boe)
<S> <C> <C> <C>
Proved reserves as of December 31, 1993 14,897,000 369,254,000 1,854,000
Purchase of the Worland Properties 1,897,000 64,600,000 4,049,000
Revisions of previous estimates 3,157,000 (5,540,000) 1,733,000
Extensions and discoveries 2,008,000 13,206,000 183,000
Purchase of reserves 25,201,000 13,492,000 2,181,000
Production (2,545,000) (41,778,000) (699,000)
Sale of reserves (631,000) (3,517,000) (8,000)
Proved reserves as of December 31, 1994 43,984,000 409,717,000 9,293,000
Proved developed reserves as of December
31, 1994 19,484,000 349,627,000 5,097,000
</TABLE>
Standardized Measure of Discounted Future Net Cash Flows
The accompanying table reflects the pro forma standardized
measure of discounted future net cash flows relating to Devon's
interests in proved oil and gas reserves as of December 31, 1994,
assuming consummation of the purchase of the Worland Properties
as of December 31, 1994:
<TABLE>
<S> <C>
Future cash inflows $1,366,486,000
Future costs:
Development (84,630,000)
Production (455,044,000)
Future income tax expense (84,379,000)
Future net cash flows 742,433,000
10% discount to reflect timing of
cash flows (333,214,000)
Standardized measure of discounted
future net cash flows $409,219,000
Discounted future net cash flows
before income taxes $455,645,000
</TABLE>
14
<PAGE>
Future cash inflows are computed by applying year-end prices of oil,
natural gas and natural gas liquids relating to the year-end pro forma
quantities of those reserves, except in those instances where
fixed and determinable gas price escalations are provided by
contractual arrangements in existence at year-end. Future
development and production costs are computed by independent
petroleum consultants and in-house engineers by estimating the
expenditures to be incurred in developing and producing proved
oil and gas reserves at the end of the year, based on year-end
costs and assuming continuation of existing economic conditions.
Future income tax expenses are computed by applying the
appropriate statutory tax rates to the future pro forma pretax
net cash flows relating to proved reserves, net of the tax basis
of the properties involved. The future income tax expenses give
effect to permanent differences and tax credits, but do not
reflect the impact of continuing operations.
Changes Relating to the Standardized Measure of Discounted Future
Net Cash Flows
Principal changes in the pro forma standardized measure of
discounted future net cash flows attributable to proved reserves
for the year ended December 31, 1994 is as follows, assuming
consummation of the purchase of the Worland Properties as of
January 1, 1994:
<TABLE>
<S> <C>
Balance as of December 31, 1993 $343,550,000
Purchase of Worland Properties 38,742,000
Sales of oil and gas, net of production
costs (72,192,000)
Net changes in prices and production costs (92,419,000)
Extensions, discoveries, and improved
recovery, net of future development costs 18,625,000
Purchase of reserves 133,103,000
Development costs incurred during the
period which reduced future development
costs 9,186,000
Revisions of quantity estimates 26,167,000
Sales of reserves in-place (5,281,000)
Accretion of discount 42,310,000
Net change in income taxes (5,616,000)
Other, primarily changes in timing (26,956,000)
Balance as of December 31, 1994 $409,219,000
</TABLE>
15
<PAGE>
EXHIBIT INDEX
Page
2 Purchase and Sale Agreement between Union Oil Company
of California and Devon Energy Corporation (Nevada) 17
23 Consent of KPMG Peat Marwick LLP 79
16
<PAGE>
PURCHASE AND SALE AGREEMENT
BETWEEN
UNION OIL COMPANY OF CALIFORNIA
AND
DEVON ENERGY CORPORATION (NEVADA)
PURCHASE AND SALE AGREEMENT
TABLE OF CONTENTS
RECITALS 1
DEFINITIONS 1
PURCHASE AND SALE 6
2.1 Assets 6
2.2 Excluded Assets 6
PURCHASE PRICE AND PAYMENTS 7
3.1 Purchase Price 7
3.2 Payment Procedures 7
3.3 Adjusted Purchase Price 8
3.4 Payment at Closing 8
TITLE EXAMINATION 9
4.1 Access to Title Information 9
4.2 Title Defects 9
4.3 Notice of Title Defect 10
4.4 Remedies for Title Defects and Price
Adjustment for Preferential Rights 10
4.4.3 Purchase Price Adjustment for Title
Defects 12
4.5 Preferential Purchase Rights 13
ENVIRONMENTAL MATTERS 14
5.1 No Admission Against Interest 14
5.2 Disclaimers Related to Property 14
5.2.1 Physical Condition of the Assets 14
5.2.2 Endangered Species, Critical Habitat,
Wetlands, Geologic Hazards and
Flooding 14
5.3 Environmental Due Diligence 15
5.3.1 Environmental Assessment 15
5.3.2 Buyer's Access to Assets;
Indemnification; Insurance 16
5.4 Assumption and Remedies 17
5.4.1 Assumption of Environmental
Liabilities 17
5.4.1.1 Pre-Closing 17
5.4.1.2 Post-Closing 18
5.4.2 Limitation 20
5.4.3. Termination Due to Material
Environmental Deficiencies 20
5.4.4 Determination of Value: 20
OPERATIONS AND CASUALTY LOSS 22
6.1 Operations 22
6.2 Casualty Loss 22
6.3 Successor Operator 22
6.4 Post-Closing Accounting Assistance 23
REPRESENTATIONS AND WARRANTIES OF UNOCAL 23
7.1 Organization 23
7.2 Authority to do Business 23
7.3 Binding Obligation 23
7.4 Litigation, Suits or Claims 24
7.5 Relation to Assumed Liabilities 24
7.6 Disclaimer of Warranties 24
7.7 Gas Imbalance 24
7.8 Disclosure 24
7.9 No Breach 25
7.10 Environmental Condition of Assets 25
7.11 Compliance with Laws and Agreements 25
7.12 Title 25
7.13 Taxes 25
7.14 Brokers 25
7.15 Assignment Prior to Closing 25
7.16 Tax Partnership 25
7.17 Equipment and Off-Lease Facilities 25
7.18 Other Property 26
7.19 Tanks Gauged 26
7.20 Contracts; Consents 26
7.21 Administration 26
7.22 Environmental 26
REPRESENTATIONS AND WARRANTIES OF BUYER 26
8.1 Organization 26
8.2 Authority; Enforceability 27
8.3 Consents 27
8.4 Litigation, Suits or Claims 27
8.5 Disclosure 27
8.6 No Breach 28
8.7 Investigations of Assets 28
8.8 No Distribution 28
8.9 Resale Registration 28
8.10 Oil and Gas Experience 28
8.11 Federal Leases 28
8.12 Brokers 28
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF UNOCAL 29
9.1 Purchase Price 29
9.2 Buyer's Representations and Warranties
True 29
9.3 Officer's Certificate; Opinion of Counsel 29
9.4 Pre-Closing Performance 30
9.5 Authorization 30
9.6 Absence of Litigation 30
9.7 Bonds 30
9.8 Preferential Purchase Rights 30
9.9 Hart-Scott-Rodino Act 30
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER 31
10.1 Delivery of Instruments of Transfer 31
10.2 Representations and Warranties 31
10.3 Authorization 31
10.4 Opinion of Unocal's Counsel 31
10.5 Absence of Litigation 32
10.6 Officer's Certificate 32
10.7 Hart-Scott Rodino Act 32
10.8 Condition of Equipment 32
10.9 Affidavit of Unocal 32
COVENANTS 33
11.1 Investigation and Decision 33
11.1.1 Investigation of Assets 33
11.1.2 Independent Decision 33
11.2 Access to Information 33
11.3 General Liabilities 34
11.3.1 General Liabilities Assumed 34
11.3.2 General Liabilities Retained 34
11.4 Gas Imbalance 35
11.5 Hart-Scott-Rodino Act 35
11.6 Third-Party Consents 35
11.7 Completion of Due Diligence 36
11.8 Additional Agreements 36
11.9 Payment of Certain Expenses Due and Payable
After the Effective Date 36
11.10 Environmental Notices 37
11.11 Notification of Certain Matters 37
11.12 Announcements 37
11.13 Termination of Guarantees and Other
Commitments 37
11.14 Like Kind Exchange 38
11.15 Access to Geologic and Geophysical
Information 38
11.16 Restrictions on Operations 38
11.17 Worland Plant Royalties and Severance
Tax Dispute 39
11.18 Participating Area Dispute 39
11.19 Consent to Lease Assignment 39
EMPLOYEE MATTERS 40
12.1 Employee List 40
12.2 Job Classification 40
12.3 Disclosure 40
12.4 Resumes 40
12.5 Hired Employee List 40
12.6 Terminated Employees 40
TAXES 41
13.1 Apportionment of Ad Valorem and Property
Taxes 41
13.2 Sales Taxes, Filing Fees, Etc. 41
13.3 Other Taxes 41
TERMINATION 41
14.1 Termination 41
14.2 Effect of Termination 42
14.3 Liquidated Damages 42
14.4 Specific Performance 43
MISCELLANEOUS 43
15.1 Governing Law 43
15.2 Assignment 43
15.3 Written Notices 44
15.4 Expenses 45
15.5 Waiver of Compliance with Bulk Transfer
Laws 45
15.6 Deceptive Trade Practices Waiver 45
15.7 Waiver of Jury Trial 45
15.8 Limitation of Liability 46
15.9 No Admissions 46
15.10 Use of Unocal's Name 46
15.11 Exhibits Incorporated 46
15.12 Entire Agreement, Etc. 46
15.13 Parties in Interest 46
15.14 Severability 47
15.15 Consents 47
SURVIVAL AND INDEMNIFICATION 47
16.1 Survival 47
16.2 Indemnification 47
16.3 Third Party Claims 48
16.4 Method of Asserting Claims 48
16.5 Right to Cure 51
CLOSING 51
17.1 Time of Essence 51
17.2 Place and Date 52
17.3 Unocal's Actions at Closing 52
17.4 Buyer's Actions at Closing 53
17.5 Notices 53
ACTIONS AFTER CLOSING 53
18.1 Final Accounting 53
18.2 Receipts and Credits 54
18.3 Suspended Funds 54
18.4 Further Assurances 54
18.5 Recording 55
18.6 Books and Records 55
18.7 Access to Properties and Records by Buyer 55
18.8 Access to Properties and Records by Unocal 55
18.9 Financial Statements 56
SCHEDULE OF EXHIBITS
Exhibit "A" - Leasehold Property
Exhibit "A-1" - Leasehold Property
Exhibit "A-2" - Excluded Assets
Exhibit "B" - Warehouse Stock and Idle Equipment
Exhibit "C" - Intangible Contractual Rights and Other
Intangible Property
Exhibit "D" - Gas Imbalance
Exhibit "E" - Satisfactory Completion of Due Diligence
Exhibit "F" - Disclosure Schedule
Exhibit "G" - Geophysical Data Licensing Agreement
There is no Exhibit "H"
There is no Exhibit "I"
Exhibit "J" - Assignment of Leases, Bill of Sale and
Assignment of Intangible Contractual Rights
and Other Intangible Property
Exhibit "K" - Quitclaim Deed
Exhibit "L" - Assumption Agreement
There is no Exhibit "M"
Exhibit "N" - Unocal's Termination Allowance Plan
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT ("AGREEMENT")
is entered into this 1st day of November, 1995, by and between Union Oil
Company of California, a California corporation, with an office at 14141
Southwest Freeway, Sugar Land, Texas 77478 (hereinafter referred to as
"Unocal"), and Devon Energy Corporation (Nevada), a Nevada corporation,
whose address is 20 North Broadway, Suite 1500, Oklahoma City, OK 73102-
8260 (hereinafter referred to as "Buyer").
RECITALS
WHEREAS, Unocal is the holder of certain assets which include oil and
gas interests and properties in the state of Wyoming; and
WHEREAS, Unocal desires to sell all of such oil and gas interests,
properties and related rights, as hereinafter described, to Buyer and Buyer
desires to purchase such interests, properties and rights from Unocal, upon the
terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein, Unocal and Buyer agree as follows:
SECTION 1
DEFINITIONS
Capitalized terms used in this Agreement shall have the meanings defined either
in this Section 1 or elsewhere in this Agreement.
"Adjusted Purchase Price" shall have the meaning specified in Section 3.3.
"Affiliate" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, such Per-
son; for purposes of this definition, "control" shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of an entity, whether through the ownership of voting
securities or otherwise.
"Assets" or "Property" shall have the meaning specified in Section 2.1.
"Assumed Liabilities" shall mean all liabilities assumed by Buyer under the
terms of Sections 4.5.3, 5.4.1 and 11.3 or elsewhere in this Agreement.
" Buyer's Report Value" shall mean the value of the discounted future net pre-
tax incomes determined by Buyer for the proved reserves in each property. These
future incomes are discounted on a continuous basis at 10% and form the basis
of the values determined by Buyer and reflected in the report dated March 17,
1995, prepared by Buyer, entitled "Buyer's Report as of October 1, 1994, var-
ious interests in the Worland Unit and Gas Plant, Washakie and Big Horn Coun-
ties, Wyoming", as received March 21, 1995, by Steven H. Gault from H.R.
Sanders, Jr.
"Buyer's Report" means the report described in the definition of Buyer's Report
Value.
"Cash Settlement" shall have the meaning specified in Section 3.4.2.
"Casualty Loss" means a loss of personalty, excluding oil, gas and other
minerals in place or that have not been reduced to possession, that is caused by
a sudden, unexpected or unusual event.
"Claim Notice" shall have the meaning specified in Section 16.4.
"Claim Value" shall have the meaning specified in Section 4.4.1.
"Closing" means the consummation of the transactions contemplated in Sections
17.3 and 17.4.
"Closing Date" shall have the meaning specified in Section 17.2.
"Confidentiality Agreement" means that certain Confidentiality Agreement
dated August 19, 1994 between Unocal and Buyer.
"Disclosure Schedule" means Exhibit "F" to this Agreement, containing certain
disclosures
made by Unocal to Buyer.
"Due Diligence Period" shall have the meaning specified in Section 11.2.
"Effective Date" shall mean October 1, 1994.
"Environmental Assessment" shall mean the Phase I Environmental Site
Assessments dated June, 1994 prepared by Dames & Moore covering the Assets.
"Environmental Law" includes any Legal Requirements applicable to the
Assets, (or operations thereon or related to such Assets) that relate to pollu-
tion or protection or cleanup of the environment (including, but not limited to,
ambient air, surface water, groundwater, land surface or subsurface strata), and
any Legal Requirements relating to:
(i) release, emission, discharge, spill, escape, containment,
control, removal, remediation, response, cleanup or abate
ment of any sort of Hazardous Substance;
(ii) the production, extraction, manufacture, generation, formula
tion, processing, labelling, distribution, use, permitting,
treatment, handling, storage, disposal or transportation of any
Hazardous Substance;
(iii) the physical structure or condition of a building, facility,
fixture or other structure which involves the management,
use, storage, release, disposal, cleanup, removal or control of
asbestos, polychlorinated biphenyls or any other Hazardous
Substance;
(iv) restoration or reimbursement of costs to restore natural
resources, or any natural resource damage assessment; and
(v) federal and state occupational safety and health laws.
"Environmental Liabilities" means any and all losses, liabilities, claims,
fines, penalties, expenses, damages, costs (including attorney's fees and ex-
penses) and causes of action created by, related to, or arising out of any
Environmental Law, or breach of any Environmental Law. Excluded from the defin-
ition of Environmental Liabilities shall be all usual and normal prudent opera-
tions for the plugging, abandonment and surface restoration of oil, gas, injec-
tion, water or other wells, sumps, pits, ponds, tanks, impoundments, founda-
tions, pipelines, structures and equipment of any kind or description.
"Excluded Assets" shall have the meaning specified in Section 2.2.
"Final Accounting" shall have the meaning specified in Section 18.1.
"Gas Imbalance" means the difference between the volume of produced gas that
Unocal took from an Asset(s) and the volume of Unocal's gas entitlement under
the applicable agreement or arrangement.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated thereunder.
"Hazardous Substance" means (i) any substance, product, waste or other
material of any nature whatsoever which is or becomes listed as a hazardous
substance, hazardous waste, hazardous material or pollutant, or is regulated or
addressed with respect to health, safety or environmental matters pursuant to
any Legal Requirements, (ii) any substance, product, waste or other material of
any nature whatsoever which may give rise to liability under any Legal Require-
ments, (iii) petroleum and its fractions, crude oil and other petroleum pro-
ducts, and (iv) radioactive materials including but not limited to naturally
occurring radioactive materials.
"Indemnified Party" or "Indemnifying Party" shall have the meaning
specified in Section 16.4.
"Interest Rate" means seven and one-half percent (7.5%) compounded annually.
"Knowledge After Due Inquiry" as to Unocal shall mean the knowledge of
John Merritt after due inquiry of Unocal's salaried employees that are directly
and presently assigned to the management of the Assets. As to Buyer, it shall
mean the knowledge of H.R. Sanders, Jr. or Steven G. Cromwell. It shall also
include the knowledge of the Party's officers and salaried employees directly
and immediately involved in the transactions which are the subject matter of
this Agreement.
"Leasehold Property" shall have the meaning specified in Section 2.1.1.
"Legal Requirements" mean any and all applicable:
(i) federal, state and local laws (statutory, judicial or otherwise),
rules, ordinances, regulations and permits;
(ii) judgments, orders, decrees, decisions of and agreements with
federal, state or local courts, or any governmental authority,
bureau or agency, including any such action applying or
interpreting any other Legal Requirements, authorities or the
common law;
as any of the foregoing matters described in (i), or (ii), may be amended, sub-
ject to variance or otherwise modified.
"Liens" means any and all liens, mortgages, charges, pledges, security inter-
ests, burdens or other encumbrances of any nature whatsoever, including, but not
limited to, such as may arise under any contracts or judgments.
"Material Environmental Deficiency" means a deficiency(ies) in the Assets
arising out of Environmental Liabilities disclosed by Unocal or discovered by
Buyer prior to the end of the Due Diligence Period whose cumulative "value
estimate", as defined in 5.4.4.4, subject to the limitation in Section 5.4.3,
when combined with the value of Title Defects not assumed by Buyer under Section
4.4.3 (i) and the total cost of restoration of equipment to satisfy Section 10.8
is likely to create a liability in excess of Five Percent (5%) of the Purchase
Price.
"Minimal Environmental Liabilities" shall have the meaning specified in
Section 5.4.3.
"Minimal Title Defects" shall have the meaning specified in Section 4.4.3 (i).
"Minimal Qualified Claims" shall have the meaning specified in Section 5.4.1.3
(i).
"Net Leasehold Acres" means the total number of net leasehold acres in the
lands described in Exhibit "A" owned by Unocal, provided that regardless of any
horizontal severance of ownership, no leasehold acre shall be included in said
total more than once.
"NORM" means naturally occurring radioactive material.
"Party" or "Parties" means Unocal or Buyer, or Unocal and Buyer respectively.
"Party Adverse Effect" shall mean an effect, taking into account all facts and
circumstances, on the business, properties, condition (financial or otherwise)
or operations of a Party, which has had or could reasonably be expected to have
a material adverse effect on the ability of such Party to perform its obliga-
tions under this Agreement.
"Permits" means any and all permits, including temporary permits to construct
or operate, authorizations, approvals, registrations, rights-of-way, orders,
waivers, variances or other licenses issued or granted by any federal, state or
local administrative or governmental authority, bureau or agency.
"Person" means any individual, partnership, joint venture, firm, corporation,
association, trust or other entity or any government or political subdivision or
any agency, department or instrumentality thereof.
"Proved Developed Reserves" means the Assets designated in the Buyer's
Report as proved developed reserves.
"Proved Undeveloped Reserves" means the Assets designated in the Buyer's
Report as proved undeveloped reserves.
"Purchase Price" shall have the meaning specified in Section 3.1.
"Qualified Claims" shall have the meaning specified in Section 5.4.1.2 (ii).
"Title Defect" shall have the meaning specified in Section 4.2.
"Unocal's Termination Allowance Plan" means Exhibit "N" to this Agreement,
containing the description of Unocal's Termination Allowance Plan.
"Worland Plant" means the gas processing plant located in Section 17,
Township 48 North, Range 92 West, County of Washakie, State of Wyoming.
<PAGE>
SECTION 2
PURCHASE AND SALE
2.1 Assets: Subject to the terms and conditions of this Agreement, Unocal
shall sell and Buyer shall purchase on the Closing Date, without warran-
ty of title, either express or implied, except express warranties herein
which terminate on the Closing Date, all of Unocal's right, title and
interest in the following assets ("Assets" or "Property"):
2.1.1 The lands, and oil and gas leasehold estates as set forth in
Exhibit "A" attached hereto and made a part hereof ("Lease
hold Property");
2.1.2 All wells, equipment and facilities, including the Worland
Plant, as may exist at Closing, which are located on or used
directly in connection with the production, treatment,
processing of gas, or transportation of oil and gas from the
Leasehold Property, less and except any materials and
equipment which may be leased or temporarily located on the
Leasehold Property, and less and except any materials,
equipment, pipelines, facilities or interests in the land which
may be owned by any purchaser and/or transporter of oil
and/or gas therefrom;
2.1.3 All warehouse stock and idle equipment as set forth in
Exhibit "B" attached hereto and made a part hereof, and
2.1.4 Any easements, rights-of-way, Permits, licenses, surface
leases, agreements, and servitudes (Intangible Contractual
Rights and Other Intangible Property) whether or not set
forth in Exhibit "C", to the extent assignable, and only to the
extent used in connection with the Leasehold Property on the
Effective Date or the Closing Date.
2.2 Excluded Assets: It is specifically agreed that Unocal is only selling
the above described Assets and is excluding all other properties of any
kind, including but not limited to the following excluded assets
("Excluded Assets"):
2.2.1 All overriding royalty interests or net profits interests which
are not shown on Exhibit "A-1" attached hereto;
2.2.2 All rights and interests in the lands and oil and gas leasehold
estates set forth on Exhibit "A-2" attached hereto;
2.2.3 Items sold, transferred, disposed of or consumed and con
tracts terminated prior to the Closing Date in the ordinary
course of business;
2.2.4 Any right to use the "Unocal" name, marks, trade dress or
insignia, or to use the name of any other subsidiary of Unocal
Corporation;
2.2.5 All of Unocal's right, title and interest in all audit exceptions,
if any, as they apply to the Assets prior to the Effective Date;
2.2.6 Any insurance contracts or bonds held by Unocal or its
Affiliates for Unocal's benefit; and any employment, consult
ing, office lease, accounting or other service contracts or
agreements;
2.2.7 All rights and interests in any pipeline downstream of the
point of sale; and
2.2.8 All seismic data; provided, however, Buyer shall have access
to certain seismic data covering the Assets pursuant to the
terms and provisions in Section 17.3.7.
SECTION 3
PURCHASE PRICE AND PAYMENTS
3.1 Purchase Price: The Purchase Price for the Assets due on the Closing
Date shall be $51,000,000.00 ("Purchase Price"), in United States
currency, such Purchase Price being allocated among the Assets as
follows:
(i) The Worland Plant: $11,051,315
(ii) Proved Developed Reserves: $20,128,468
(iii) Proved Undeveloped Reserves: $16,070,217
(iv) Net Leasehold Acres: $3,750,000
3.2 Payment Procedures:
3.2.1 Contemporaneously with the execution of this Agreement,
Buyer shall pay and deliver to Unocal either by cashier's
check or wire transfer of cash, as specified by Unocal, an
earnest money deposit of five percent (5%) of the Purchase
Price.
3.2.2 At Closing, Buyer shall pay to Unocal the remainder of the
Adjusted Purchase Price plus or minus any Cash Settlement
which may be due by wire transfer of immediately available
funds in a manner specified by Unocal.
3.2.3 Buyer shall pay Unocal interest at the Interest Rate, on the
Adjusted Purchase Price plus or minus the Cash Settlement
amount for the period of time from February 20, 1995 to the
date of Closing.
3.3 Adjusted Purchase Price: The net price which Buyer shall pay for the
Assets ("Adjusted Purchase Price") shall be:
3.3.1 The Purchase Price as set forth in Section 3.1 above;
3.3.2 Plus any postive adjustment or less any negative adjustment
for Title Defects as determined in Section 4 below;
3.3.3 Less the allocated value of any exercised preferential pur
chase right as determined in accordance with Section 4.5
below; and
3.3.4 Less any adjustment for Assets eliminated from the sale as set
forth in Section 6.2.
3.4 Payment at Closing: At least five days before Closing Unocal shall
furnish Buyer with an estimated Closing statement which will include the
following:
3.4.1 The Adjusted Purchase Price calculated in accordance with
Section 3.3; and
3.4.2 Cash Settlement ("Cash Settlement") determined by adding
or subtracting as follows:
(i) subtract the amount of earnest money deposit
previously paid by Buyer;
(ii) add the amount of estimated expenditures, exclud
ing workers' compensation insurance, made by
Unocal that are attributable to the Assets for the
period between the Effective Date and Closing
Date including, without limitation, royalties actu
ally paid, taxes, rentals and similar charges and
expenses, including those billed under applicable
operating agreements, all disclosed or normal
course of business prepaid expenses, and the sum
of $11,645.00 per month, for each month or
partial month, from the Effective Date to the date
this Agreement is executed by Buyer and Unocal;
and
(iii) add the value of all liquid hydrocarbons and
Worland Plant products, as described in the dis
closed gauge report, in storage tanks above the
pipeline connection at approximately 7:00 a.m.
(local time) on the Effective Date valued at market
or contract price in effect as of the Effective Date
after deducting royalty and tax obligations;
(iv) subtract the amount of estimated revenues re
ceived by Unocal attributable to the Assets accru
ing after the Effective Date; and
(v) subtract the sums to be withheld for Title Defects
as provided in Section 4.4.2 (ii).
SECTION 4
TITLE EXAMINATION
4.1 Access to Title Information: After the date of this Agreement and until
the end of the Due Diligence Period, Unocal shall make the records
described in Section 17.3.7 available to Buyer at Unocal's offices loca-
ted at 14141 Southwest Freeway, Sugar Land, Texas 77478, or such other
place as deemed appropriate by Unocal, during normal business hours,
for examination by Buyer. Unocal shall not be obligated to perform any
title work, and no abstracts or title opinions will be made current by
Unocal. NO WARRANTY OF ANY KIND IS MADE BY UNOCAL
AS TO THE INFORMATION SO SUPPLIED, AND BUYER AGREES
THAT ANY CONCLUSIONS DRAWN THEREFROM SHALL BE
THE RESULT OF ITS OWN INDEPENDENT REVIEW AND
JUDGMENT. SUBJECT TO THE OTHER PROVISIONS OF THIS
AGREEMENT, BUYER ASSUMES THE RISK OF ANY TITLE
DEFECTS AND/OR CONFLICTING ADVERSE RIGHT(S), TI
TLE(S) AND/OR INTEREST(S) WHICH A RECORD TITLE CHECK
AND/OR PHYSICAL INSPECTION REVEALS OR WOULD HAVE
REVEALED.
4.2 Title Defects: In this Agreement, a "Title Defect" shall mean a defect
in one or more of the following respects only:
4.2.1 Unocal owns more or less than the interest shown in Exhibit
"A-1" in one or more of the Assets;
4.2.2 Unocal's rights and interests in one or more of the Assets are
subject to being reduced by virtue of the exercise by a third
party of a reversionary, back-in or similar right not reflected
in Exhibit "A-1" or Exhibit "F";
4.2.3 Unocal's title at the Closing Date, as to one or more of the
Assets, is subject to any lien, claim, defect, encumbrance or
deficiency, other than Section 4.2.1 or 4.2.2 Title Defects,
such that Unocal does not have good and defensible (as
distinguished from technically marketable) title to any part of
the Assets; provided, no permitted encumbrance shall
constitute a Title Defect.
4.2.4 The following shall be permitted encumbrances:
(i) Materialman's, mechanic's, repairman's,
employee's, contractor's, operator's, tax and other
similar liens or charges arising in the ordinary
course of business (i) if they have not been filed
pursuant to law, (ii) if filed, and if disclosed to
Buyer, that have not yet become due and payable
or payment is being withheld as provided by law,
or (iii) as to those disclosed to Buyer, if their
validity is being contested in good faith by
appropriate action;
(ii) All rights to consent by, required notices to, filings
with, or other actions by governmental entities in
connection with the sale or conveyance of oil and
gas leases or interests therein if they are
customarily obtained subsequent to the sale or
conveyance;
(iii) Easements, rights-of-way, servitudes, permits,
surface leases and other rights and respective
surface operations;
(iv) All rights reserved to or vested in any
governmental, statutory or public authority to
control or regulate any of the Assets in any
manner, and all applicable laws, rules and orders of
governmental authorities;
(v) All matters disclosed in Exhibit "F";
(vi) Any lien or encumbrance in the form of a judgment
secured by a supersedeas bond or security, other
than the Assets, approved by a court of competent
jurisdiction issuing such order.
4.3 Notice of Title Defect: Upon discovery of a Title Defect, the Party
discovering the Title Defect shall within a reasonable amount of time
notify the other Party in writing of the nature of the Title Defect. Any
Title Defect which is not brought to Unocal's attention by the end of
the Due Diligence Period shall conclusively be deemed waived by Buyer
for all purposes.
4.4 Remedies for Title Defects and Price Adjustment for Preferential
Rights: Upon timely delivery of notice by either Party of a Title
Defect, Buyer and Unocal shall meet and use their best efforts to agree
on the validity of the Title Defect. The value of a Title Defect or
exercised preferential right shall be determined in accordance with the
following guidelines:
4.4.1 If a claim of Title Defect is made pursuant to Section 4.2.1 or
4.2.2 above, or if a preferential right is exercised by a third
party pursuant to Section 4.5, the value of the claim ("Claim
Value") shall be calculated as follows:
Claim Value (U.S. Dollars) = [(20,128,468 x B/A) +
(16,070,217 x D/C) + (11,051,315 x F/E) + (3,750,000 x
H/G)] - 51,000,000
where the preceding terms have the following meanings:
"A" shall mean the initial aggregate of the Buyer's
Report for the Proved Developed Reserves in the
Properties described in Exhibit "A".
"B" shall mean the revised aggregate of the
Buyer's Report for the Proved Developed
Reserves in the Properties described in Exhibit "A"
after adjusting the Exhibit "A-1" ownership
interest factors to the correct ownership interest
factors.
"C" shall mean the initial aggregate of the Buyer's
Report for the Proved Undeveloped Reserves in
the Properties described in Exhibit "A".
"D" shall mean the revised aggregate of the
Buyer's Report for the Proved Undeveloped
Reserves in the Properties described in Exhibit "A"
after adjusting the Exhibit "A-1" ownership
interest factors to the correct ownership interest
factors.
"E" shall mean the initial value in the Buyer's
Report for the Worland Plant.
"F" shall mean the revised value in the Buyer's
Report for the Worland Plant after adjusting the
ownership interest factor to the ownership interest
actually assigned to Buyer.
"G" shall mean the initial aggregate of 22,319 Net
Leasehold Acres.
"H" shall mean the revised aggregate of the total
Net Leasehold Acres conveyed pursuant to this
Agreement.
4.4.2 (i) If a claim of Title Defect is made pursuant to
Section 4.2.3, and represents a liquidated
obligation then the value of the Title Defect shall
be the sum necessary to be paid to the obligee to
remove the Title Defect. Subject to Section 4.4.3
below, Unocal at its option may pay such sum to
obligee on or before Closing, or agree to pay such
sum on the charge due date, and thereby cure the
Title Defect. However, Unocal reserves the right
to retain the obligation of this Title Defect and
elect to challenge the validity of any such Title
Defect or any portion thereof, and Buyer shall
extend reasonable cooperation to Unocal in such
efforts at no risk or expense to Buyer. If a Title
Defect represents an unliquidated obligation or
burden upon the affected property but can be
estimated with reasonable certainty, the value of
the Title Defect claim shall be the sum so
estimated.
(ii) Unocal shall have the option to cure any and all
Title Defects which are allocated to it under
Section 4.4.3 below. If Unocal chooses to cure
the Title Defect, but has not been able to do so by
the Closing Date, Unocal shall proceed with the
Closing, but the affected Property shall not be
assigned and the Cash Settlement at Closing shall
be adjusted for the Title Defect based on the
values determined in Section 4.4.1 for the affected
Property. Unocal shall retain the right to cure any
such Title Defect for a period not to exceed one
year after the Closing Date. Within thirty (30)
days of Buyer's receipt in writing of curative docu-
ments which completely eliminate the Title Defect,
Buyer shall tender the sum withheld at Closing to
Unocal and Unocal shall assign the affected
Property to Buyer effective for all purposes as of
the Effective Date.
(iii) Unocal's option to cure Sections 4.2.1 or 4.2.2
Title Defects under Section 4.4.2(ii) shall include
the option to so cure the Title Defects or to cure
a Title Defect so as to reduce the cumulative total
value of the Title Defects to below a particular
level as Unocal shall in its sole discretion
determine.
4.4.3 Purchase Price Adjustment for Title Defects: The
Purchase Price will or will not be adjusted for Title Defect
claims as follows:
(i) If and to the extent the calculated value of a
separate and distinct Title Defect is less than or
equal to $10,000 ("Minimal Title Defects"), there
shall be no adjustment of the Purchase Price and
Buyer shall obtain the benefit of, or assume
liability for, all such Title Defects; provided that
the cumulative loss to Buyer due to Title Defects
when combined with the estimated value of
Minimal Environmental Liabilities shall not exceed
$200,000;
(ii) As to all Title Defects, except those assumed by
Buyer in Section 4.4.3 (i), up to but not greater
than the five percent (5%) of the Purchase Price
termination amount described in Section 4.4.3 (iii),
if the Title Defects are of the kind described in
Sections 4.2.1 and 4.2.2 the Purchase Price shall
be adjusted pursuant to Section 4.4.1, and if the
Title Defects are of the kind described in Section
4.2.3 they shall be allocated to and satisfied by
Unocal;
(iii) If the cumulative value of Title Defects,
Environmental Liabilities (excluding Minimal Title
Defects and Minimal Environmental Liabilities)
and the total cost of restoration of equipment to
satisfy Section 10.8 is greater than five percent
(5%) of the Purchase Price, then Unocal or Buyer
may, upon written notice to the other Party,
terminate this Agreement under Section 14.1.3 and
the same shall be of no further force and effect,
and Unocal and Buyer shall have no further
obligation or liability of any kind hereunder or with
respect thereto, except as may otherwise be
provided by this Agreement.
4.5 Preferential Purchase Rights:
4.5.1 With respect to each preferential purchase right affecting the
Assets which has not been duly waived, Unocal shall send to
the holder of such right a notice offering to sell to such
holder, in accordance with the provisions of the agreement
applicable to such right, those Assets covered by such right
on substantially the same terms hereof and for the value
allocated to such Asset in Section 4.4.1. If the holder of a
preferential right exercises such right under this Section 4.5,
the Purchase Price shall be reduced by the Claim Value of the
affected Assets. The notice shall disclose the identity of
Buyer, and inform the holders that Buyer desires to be the
successor operator under the terms of the applicable
operating agreement.
4.5.2 If an owner of a preferential purchase right obtains judicial
relief which permanently enjoins the consummation of the
transactions contemplated under this Agreement, such
enjoinder shall be deemed a termination of this Agreement
under Section 14.1.1.
4.5.3 In the event of a claim for judicial relief other than, or in
addition to, injunctive relief by the holder or owner of a
preferential purchase right, or by a person claiming to hold or
own a preferential purchase right, Buyer shall, for a period
beginning upon execution of this Agreement and ending on
the tenth anniversary of Closing, indemnify and hold harmless
Unocal, its successors and assigns, against, and in respect of,
any and all damages, claims, lawsuits, liabilities and expenses,
including, without limitation, reasonable legal, accounting and
other expenses arising out of or relating to such claim, to the
extent the claim involves the transaction contemplated by this
Agreement. Any claim by Unocal pursuant to this Section
4.5.3 shall be asserted and resolved in accordance with the
provisions of Section 16.4.
SECTION 5
ENVIRONMENTAL MATTERS
5.1 No Admission Against Interest: Nothing contained in this Section 5,
or elsewhere in this Agreement, shall be construed to be an admission
against interest as to Unocal or Buyer. Unocal and Buyer have not
included Environmental Liability related provisions herein due to any
perceived liability and specifically disclaim the existence of any such
liability to third parties (including governmental entities) based on
contracts or otherwise.
5.2 Disclaimers Related to Property:
5.2.1 Physical Condition of the Assets: Buyer acknowledges that
the Assets have been used for oil and gas drilling and
production operations, related oil field operations and
possibly for the storage and disposal of Hazardous
Substances, and the Assets may be contaminated with such
materials. Physical changes in or under the Leasehold
Properties or adjacent lands may have occurred as a result of
such uses. The Assets may contain wells, sumps, landfills,
pits, ponds, tanks, impoundments, foundations, pipelines and
other equipment, whether or not of a similar nature, any of
which may be buried and contain Hazardous Substances, and
the locations of which may not be known to Unocal or be
readily apparent by a physical inspection of the property.
Further, spills, leaks, blowouts and routine operations may
have led to contamination of the Assets with Hazardous
Substances, the locations of which may not be known to
Unocal or be readily apparent by a physical inspection of the
property. Buyer understands that Unocal does not have the
requisite information with which to determine the exact
nature or condition of the Assets nor the effect any use has
had on the physical condition of the Assets. In addition
Buyer acknowledges that some oil field production
equipment may contain asbestos and/or NORM. In this
regard, Buyer expressly understands that NORM may affix or
attach itself to the inside of wells, materials and equipment as
scale or in other forms, and that wells, materials and
equipment located on the Assets described herein may
contain asbestos and NORM and that asbestos and NORM
containing materials may be buried or have been otherwise
disposed of on the Property. Buyer also expressly
understands that special procedures may be required for the
removal and disposal of asbestos, NORM, and other
Hazardous Substances from the Property where they may be
found.
5.2.2 Endangered Species, Critical Habitat, Wetlands,
Geologic Hazards and Flooding: "Endangered Species" as
used herein shall have the same meaning as "endangered
species" is defined pursuant to 16 U.S.C. 1532(6) or the laws
of the state of Wyoming; as "threatened species" is defined
pursuant to 16 U.S.C. 1533(30) or the laws of the state of
Wyoming; and/or, as a candidate species for such listing
under federal or state law. "Critical Habitat" as used herein
shall have the meaning as defined pursuant to 16 U.S.C.
1532(5). "Wetland" as used herein shall have the meaning as
defined in 40 Code of Federal Regulations Section 230.3(a), or
under the laws of the state of Wyoming. "Geologic Hazards"
as used herein shall include seismic hazard and any earth
slides or other earth movement. "Flooding" as used herein
shall include the risks associated with a flood plain, flood way
or restriction zone and/or any diminution in the value of the
Property or restriction of its use by reason of the risk of
water entering or remaining thereon. WITHOUT IN ANY
WAY LIMITING THE DISCLAIMER OF WARRANTY
UNDER SECTION 7.6 AND NOTWITHSTANDING ANY
DISCLOSURES MADE BY UNOCAL TO BUYER,
UNOCAL DISCLAIMS ANY EXPRESS OR IMPLIED
WARRANTY OR REPRESENTATION AS OF THE DATE
OF THIS AGREEMENT AND/OR AS OF THE CLOSING
OF THE COMPLETENESS OF ANY SUCH
DISCLOSURE OR THAT THE PROPERTY IS FREE
FROM ANY ENDANGERED SPECIES OR THAT ALL
OR ANY PART OF THE PROPERTY IS NOT A
CRITICAL HABITAT OR A WETLAND, OR THAT ANY
PART OF THE ASSETS DOES NOT INCLUDE A
GEOLOGIC HAZARD, OR THAT ANY PART OF THE
PROPERTY IS NOT SUBJECT TO FLOODING.
Notwithstanding any knowledge that could be imputed to
Unocal, Buyer has the obligation to ascertain the presence of
and extent of any Endangered Species, Critical Habitat,
Wetland, Geologic Hazards and the risk of Flooding on the
Property.
5.3 Environmental Due Diligence: Buyer will have sixty (60) days from
the date of execution of this Agreement by both Parties to perform its
due diligence.
5.3.1 Environmental Assessment: From the date of execution of
this Agreement by both Parties, Unocal will provide Buyer
(or its contractor) with reasonable access to the Assets
operated by Unocal for a period of 60 days, during which
Buyer will, as part of Buyer's due diligence, conduct, at its
sole risk and expense, such environmental site assessment as
Buyer determines is appropriate. Buyer agrees to
immediately provide to Unocal a copy of the environmental
assessment, including all reports, data and conclusions.
Buyer shall keep any data or information acquired by all such
examinations and the results of all analyses of such data and
information strictly confidential and, unless required by law,
will not disclose same to any person or agency without the
prior written approval of Unocal except to the extent such
disclosure is to financial institutions, environmental
consultants, legal counsel or other parties to whom disclosure
is appropriate and desirable to consummate this transaction,
but subject to the prior agreement of any such party to
maintain the confidentiality of the information.
5.3.2 Buyer's Access to Assets; Indemnification; Insurance:
5.3.2.1 Unocal shall grant Buyer access to the Property to
conduct its due diligence including but not limited
to the environmental assessment referred to in
Section 5.3.1. Buyer shall not perform any act or
permit the performance of any act that would
injure the Property or disrupt Unocal's activities
thereon.
5.3.2.2 Buyer releases and will hold harmless Unocal, its
directors, officers, employees, agents and Affiliates
against all claims for injury to, or death of, persons
or damage to property arising in any way from the
exercise of access rights granted to Buyer for due
diligence purposes or the activities of Buyer or its
employees, agents or contractors on the Assets.
Buyer shall indemnify Unocal, its directors,
officers, employees, agents and Affiliates against
and hold each and all of said indemnitees harmless
from any and all loss, cost, damage, expense or
liability, including attorney's fees, arising out of (i)
any and all third party statutory or common-law
Liens or other encumbrances for labor or materials
furnished in connection with such tests, samplings,
studies or surveys as Buyer may conduct with
respect to the Assets; and (ii) any injury to or
death of persons or damage to property occurring
in, on or about the Assets as the sole result of
Buyer's due diligence activities (except for any
such injuries or damages caused solely by the
active negligence or willful misconduct of any said
indemnitees). The foregoing obligation of
indemnity shall survive Closing or termination of
this Agreement without Closing.
5.3.2.3 Buyer shall obtain and maintain insurance
acceptable to Unocal which is primary as to any
insurance or self-insurance available to Unocal and
which names Unocal as an additional insured with
respect to liability arising out of Buyer's or its
agents' activities on the Assets pursuant to this
Section 5.3.2, including a severability of interest
clause (cross liability), which additional insured
endorsement shall not exclude coverage based
upon the alleged or actual negligence of the
additional insured. Such insurance shall include:
(i) commercial general liability insurance
occurrence form or the equivalent
with the amendment-aggregate limits
of insurance covering contractual
liability, subcontractor's liability,
blanket contractual liability, and,
unless waived in writing by Unocal,
liability arising from explosion,
collapse, or underground property
damage, all with a minimum combined
single limit of $1,000,000.00 each
occurrence, $2,000,000.00 aggregate,
for bodily injury, death, property
damage, business interruption and
personal injury;
(ii) comprehensive automobile liability
insurance or business auto policy on
an occurrence basis covering all
owned, hired or otherwise operated
non-owned vehicles with a minimum
combined single limit of
$1,000,000.00 each occurrence for
bodily injury, death and property
damage;
(iii) workers' compensation insurance as
required by law; and
(iv) employers' liability insurance with a
minimum limit of $1,000,000.00 each
occurrence.
Such insurance shall be written by a carrier with a Best's rating of A IX or
above. Before the entry by Buyer upon the Assets, Buyer shall provide Unocal
with policies or certificates of the aforesaid insurance acceptable in form and
substance to Unocal which shall provide that coverage shall not be canceled or
materially changed prior to thirty (30) days' written notice to Unocal.
Subrogation against Unocal shall be waived with respect to all of the insurance
policies set forth above (including without limitation, policies of any consul-
tant). An alternate employer endorsement may be substituted for the additional
insured endorsement with respect to worker's compensation insurance and
employer's liability insurance only. The insurance required by this provision
in no way limits Buyer's obligations under any other Section of this Agreement.
Further, the insurance to be carried shall in no way be limited by any limita-
tion expressed elsewhere in this Agreement, or any limitation placed on the
indemnity herein given or as a matter of law.
5.4 Assumption and Remedies:
5.4.1 Assumption of Environmental Liabilities: Buyer shall
assume and discharge any and all Environmental Liabilities
for operations on, or conditions on, relating to or arising from
the Assets, whether relating to or arising from ownership or
operations before or after the Effective Date, except as
follows:
5.4.1.1 Pre-Closing:
(i) Buyer assumes no Environmental
Liabilities unless and until Closing
occurs; and
(ii) Unocal shall retain all Environmental
Liabilities, if any, for wastes
generated by and disposed from the
Assets prior to the Closing Date that
were disposed of at a location off the
physical boundaries of the Assets.
Any Environmental Liability
associated with such waste disposal
shall not be considered in the calcula-
tion of a Material Environmental
Deficiency.
5.4.1.2 Post-Closing:
(i) Unocal shall retain all Environmental
Liabilities, if any, for wastes
generated by and disposed from the
Assets prior to the Closing Date that
were disposed of at a location off the
physical boundaries of the Assets, and
Unocal shall indemnify and hold
Buyer harmless from any and all
damages and expenses, including
reasonable attorney's fees, incurred as
a result of the disposal of such wastes
off the Assets.
(ii) Subject to the allocation of costs and
expenses in Section 5.4.1.3, Unocal
shall be responsible for a portion of
the costs and expenses for
Environmental Liabilities for
operations on, or conditions on,
relating to or arising from ownership
or operation of the Assets prior to the
Effective Date which meet all of the
following conditions ("Qualified
Claims"):
(a) A Qualified Claim must be
based on a specific written
claim made within 912
days of the Effective Date
either; by a governmental
entity or a third party that
is not an Affiliate of Buyer,
with a Claim Notice
provided by Buyer to
Unocal at once but in no
case later than thirty (30)
days after Buyer's receipt
of such claim; or by Buyer
if Buyer is required by law
to report the Environmen-
tal Liability to a
governmental agency;
provided, however, if a
claim is based on a
requirement by law that
Buyer report the
Environmental Liabilities
to a governmental agency,
Buyer's report to the agen-
cy must be made in a
timely manner, and said
report documented in
submittal of the Qualified
Claim provided by Buyer
to Unocal at once but no
later than thirty (30) days
of Buyer's report to the
agency; and said report to
the agency must result in a
specific written claim to
Buyer by a governmental
entity or third party not an
Affiliate of Buyer within
the above stated 912 days,
and such government or
third party claim must be
provided by Buyer to
Unocal at once but no later
than thirty (30) days after
Buyer's receipt of such
claim; and
(b) a Qualified Claim must
arise out of an Environ-
mental Law; provided that
Environmental Law for
purposes of Qualified
Claims shall not include
Legal Requirements as
they may be amended,
varied or modified in the
future, but shall be limited
to Legal Requirements in
effect and applicable to the
Assets as of or prior to the
Effective Date.
5.4.1.3 Any costs and expenses incurred by Buyer or
Unocal in satisfying a Qualified Claim under
Section 5.4.1.2 shall be allocated and satisfied by
the Parties as follows:
(i) Each separate and distinct Qualified
Claim for which the cost of
remediation is $10,000 or less
("Minimal Qualified Claims") shall be
allocated to and satisfied by Buyer;
provided, however, Buyer's obligation
hereunder for the cumulative sum of
all Minimal Qualified Claims, Minimal
Environmental Liabilities and Minimal
Title Defects shall not exceed
$200,000;
(ii) cumulative costs and expenses, except
those assumed by Buyer in Section
5.4.1.3 (i), up to five percent (5%) of
the Purchase Price are allocated to
and shall be satisfied by Unocal;
(iii) cumulative costs and expenses,except
those assumed by Buyer in Section
5.4.1.3 (i), above five percent (5%)
and up to one hundred percent
(100%) of the Purchase Price are
allocated to and shall be satisfied one-
half by Buyer and one-half by Unocal;
(iv) all costs and expenses, excluding
those assumed by Buyer in Section
5.4.1.3 (i), above one hundred percent
(100%) of the Purchase Price are
allocated to and shall be satisfied by
Buyer.
5.4.2 Limitation: No obligations allocated to or assumed by
Unocal or Buyer under this Agreement shall include any
obligation to remediate Hazardous Substances in or upon
land or any water course or body of water including ground
water beyond the lawful requirements of the government
agency or agencies with jurisdiction over the Assets, or, if
greater, under common law requirements, nor shall such
obligations include any action, cost or expense other than
actions, costs, or expenses required by law. Between the
Parties, Unocal shall have the right but not the obligation to
direct and control any work required to remedy Environmen-
tal Liabilities if it may be responsible for more than fifty
percent (50%) of the costs and expenses of such work
attributable to the interest of the Parties; provided, however,
if the Parties have control, regardless of which Party directs
and controls any required work to remedy Environmental
Liabilities, all such actions shall be the most cost efficient
possible to comply with applicable Legal Requirements and
which are consistent with continued use of the Assets for the
same purposes they were being used on the Closing Date, and
shall be based on mutually acceptable actions after consulta-
tion with the other Party.
5.4.3. Termination Due to Material Environmental
Deficiencies: If it is determined during the Due Diligence
Period that a Material Environmental Deficiency exists,
pursuant to Section 5.4.4, either Buyer or Unocal may elect
to terminate this Agreement under Section 14.1.3. Any
separate and distinct Environmental Liability for which the
"value estimates", as defined in Section 5.4.4.4, are $10,000
or less ("Minimal Environmental Liabilities") shall not be
included in the calculation of a Material Environmental
Deficiency, however, the cumulative value of all Minimal
Environmental Liabilities hereunder, when combined with
Buyer's cost for Minimal Title Defects under Section 4.4.3
(i), which is over and above $200,000 shall be included in the
calculation of a Material Environmental Deficiency.
5.4.4 Determination of Value:
5.4.4.1 Upon delivery of notice by Buyer to Unocal of a
Material Environmental Deficiency, Buyer and
Unocal shall meet and use their best efforts to
agree on whether such a Material Environmental
Deficiency exists. The value of Environmental
Liabilities shall be based on the "value estimates"
as defined in Section 5.4.4.4.
5.4.4.2 If, during the Due Diligence Period, Buyer
determines there is a Material Environmental Defi-
ciency and desires to terminate this Agreement
pursuant to Section 5.4.3, it shall immediately
notify Unocal. Unocal shall respond on the earlier
of the Date of Closing or seven (7) days from the
date of notice whether it concurs with Buyer's
determination. In the event Unocal concurs in
Buyer's determination, the termination of this
Agreement shall be treated as a termination by
mutual consent under Section 14.1.1.
5.4.4.3 If Unocal timely notifies Buyer that it does not
concur with the Buyer's determination of value,
Buyer may terminate this Agreement and request
that the earnest money deposit be placed in the
hands of an escrow holder pending a determination
of the value of the Environmental Liabilities by the
following procedure: The parties will submit the
issue of the existence of a Material Environmental
Deficiency to three (3) neutral parties, one
designated by each Party and a third selected by
the two designated parties. If the neutral parties
determine by majority vote that a Material
Environmental Deficiency does not exist, Buyer
will pay the neutral parties' costs and shall not be
entitled to the return of the earnest money deposit.
If the neutral parties by majority vote find that a
Material Environmental Deficiency does exist,
Unocal will pay the neutral parties' costs and shall
return Buyer's earnest money deposit with interest
at the Interest Rate within fifteen (15) business
days.
5.4.4.4 Any and all disagreements between Buyer and
Unocal regarding the value of Environmental
Liabilities shall be resolved by the majority of the
three (3) neutral parties chosen in accordance with
the provisions of Section 5.4.4.3., and in all
instances the neutral parties shall determine the
value of Environmental Liabilities. For purposes
of determining the value of any Environmental
Liability, "value estimates" shall be an estimate of
the cost to remedy an Environmental Liability
based on the most cost effective methods of
remediation which meet applicable Legal Require-
ments and which are consistent with the continued
use of the Assets for the same purposes they were
being used for on the Closing Date. The neutral
parties may use any information resources
available in making their determination; provided,
however, they may not submit the specific dispute
to a governmental entity for advice or to obtain an
opinion if such request would require a disclosure
of the identity of the Parties or the Assets, but may
do so if advice or an opinion may be obtained
without such disclosure.
SECTION 6
OPERATIONS AND CASUALTY LOSS
6.1 Operations: Between the Effective Date and Closing, as to the portion
of the Assets to be conveyed which Unocal now operates, it shall operate
the same in a good and workmanlike manner. At Closing such
operations shall be turned over to and become the responsibility of
Buyer, unless an applicable unit, pooling, communitization or operating
agreement requires otherwise, in which case (unless Buyer and Unocal
otherwise agree) Unocal shall continue the physical operation of such
portion of the Assets, pursuant to and under the terms of such applic-
able agreement, until such time after Closing as such applicable agree-
ment may require. However, for periods after the Effective Date, Unocal
shall have no liability as operator to Buyer, for any operations by
Unocal under this Section 6.1, for loss or damages sustained, or lia-
bilities incurred, except as may result directly from, and in no event
shall Buyer have any liability to Unocal resulting from, Unocal's gross
negligence or willful misconduct. Such operations from and after the
Closing shall be conducted by Unocal for and on behalf of Buyer, and
Unocal shall make appropriate charges to Buyer pursuant to any appli-
cable operating agreement. In the absence of any applicable operating
agreement, for any such services performed by Unocal as operator of the
Assets (or portions thereof) from and after the Effective Date, Buyer
shall pay to Unocal the applicable Asset's working interest percentage
of an overhead operating charge of $500 per month per active well oper-
ated by Unocal plus Buyer shall reimburse all reasonable and necessary
expenses incurred by Unocal in such operation, protection or maintenance
of the Assets as are not normally included within the operating charge
in standard form accounting procedures but are paid as direct charges
thereunder. Any such charges and expenses shall be recovered by Unocal
as part of the Closing or Final Accounting adjustments as appropriate.
6.2 Casualty Loss: The risk of Casualty Loss relating to the Assets shall
pass from Unocal to Buyer as of the date this Agreement is executed by
Buyer and Unocal, and Buyer shall assume all risk of any change in the
condition of the Assets caused by a Casualty Loss from the date this
Agreement is executed by Buyer and Unocal. In the event of any such
change in condition of the Assets caused prior to the execution of this
Agreement by a Casualty Loss, if Unocal elects not to restore the
changed Assets, such Assets shall be deleted from this Agreement in the
same manner as though subject to a Title Defect, and the Purchase Price
shall be adjusted in an amount determined by the Claim Value formula in
Section 4.4.1.
6.3 Successor Operator: Buyer acknowledges and agrees that Unocal
cannot and does not covenant or warrant that Buyer shall become
successor operator of all or any portion of the Assets, since the Assets
or portions thereof may be subject to unit, pooling, communitization,
operating or other agreements which control the appointment of a
successor operator.
6.4 Post-Closing Accounting Assistance: Subsequent to Closing, at
Buyer's request, Unocal shall continue performing accounting obligations
for the Worland Plant for a period of time not to exceed two (2) months.
Unocal shall be compensated the sum of $3,200.00 per month for each
month or portion thereof during which Buyer requests such assistance.
Unocal shall have no obligation to provide accounting assistance post-
Closing for any portion of the Assets other than the Worland Plant,
except as is reasonable in good faith in a transaction of this type to
transfer files and necessary information to Buyer.
SECTION 7
REPRESENTATIONS AND WARRANTIES OF UNOCAL
Unocal hereby represents and warrants to Buyer as follows:
7.1 Organization: Unocal is a corporation duly organized, validly existing
and in good standing under the laws of the state of California, and is
qualified to do business and is in good standing as a foreign corpora-
tion in the state of Wyoming.
7.2 Authority to do Business: Unocal has all requisite power and authority
to own or lease and operate the Assets and to carry on the business as
now conducted.
7.3 Binding Obligation:
7.3.1 Unocal has all requisite corporate power and authority to
enter into and perform its obligations under this Agreement
and to carry out the transactions contemplated hereby.
7.3.2 All corporate acts and other proceedings required to be taken
by Unocal to authorize the execution, delivery and
performance by Unocal of this Agreement, have been duly
and properly taken.
7.3.3 This Agreement has been duly executed and delivered by
Unocal and constitutes the valid and binding obligation of
Unocal, enforceable against Unocal in accordance with its
terms.
7.3.4 The execution, delivery and performance by Unocal of this
Agreement does not and will not conflict with, or result in
any violation of or default under any provision of the Articles
of Incorporation or By-laws of Unocal or any law, ordinance,
rule, regulation, order, decree, agreement, instrument or
license applicable to Unocal or to the Assets.
7.4 Litigation, Suits or Claims: To Unocal's Knowledge After Due
Inquiry, except as disclosed in Exhibit "F", there are no actions, suits
or proceedings pending or threatened in writing against Unocal which if
decided unfavorably to Unocal could have a Party Adverse Effect on
Unocal, or a material adverse effect on the value of the Assets.
7.5 Relation to Assumed Liabilities: Nothing contained in this Section 7
shall be deemed a representation or warranty by Unocal with respect to
the obligations of Buyer with respect to the investigation of, and
independent decision under Section 11.1; and Buyer's obligations with
respect to the investigation of, and independent decision under Section
11.1, are not diminished by this Section 7.
7.6 Disclaimer of Warranties: EXCEPT AS SPECIFICALLY
WARRANTIED HEREIN, THE ASSETS ARE SOLD "AS IS,"
"WHERE IS" AND "WITH ALL FAULTS AS TO ALL MATTERS,"
AND UNOCAL EXPRESSLY DISCLAIMS AND NEGATES ANY
REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT
COMMON LAW, BY STATUTE, OR OTHERWISE RELATING TO
(a) THE CONDITIONS OF THE ASSETS (INCLUDING, WITHOUT
LIMITATION, ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY, OF FITNESS FOR A PARTICULAR
PURPOSE, OR OF CONFORMITY TO MODELS OR SAMPLES OF
MATERIALS), (b) ANY INFRINGEMENT BY UNOCAL OF ANY
PATENT OR PROPRIETARY RIGHT OF ANY THIRD PARTY, (c)
ANY INFORMATION, DATA OR OTHER MATERIALS (WRITTEN
OR ORAL) FURNISHED TO BUYER BY OR ON BEHALF OF
UNOCAL (INCLUDING WITHOUT LIMITATION, IN RESPECT OF
GEOLOGICAL AND ENGINEERING DATA, THE EXISTENCE OR
EXTENT OF OIL, GAS OR OTHER MINERAL RESERVES, THE
RECOVERABILITY OF OR THE COST OF RECOVERING ANY
SUCH RESERVES, THE VALUE OF SUCH RESERVES, ANY
PRODUCT PRICING ASSUMPTIONS, AND THE ABILITY TO
SELL OIL OR GAS PRODUCTION AFTER CLOSING), AND (d)
THE ENVIRONMENTAL CONDITION AND OTHER CONDITION
OF THE ASSETS AND ANY POTENTIAL LIABILITY ARISING
FROM OR RELATED TO THE ASSETS.
7.7 Gas Imbalance: To Unocal's Knowledge After Due Inquiry, except as
described in Exhibit "D", Unocal is not obligated by virtue of any
prepayment made under any production sales contract or any other
contract containing a take-or-pay clause, or under any similar arrange-
ment, to deliver oil, gas or other minerals produced from or allocated
to any of the Properties at any time after the Effective Date without
receiving full payment therefor at the time of delivery.
7.8 Disclosure: To Unocal's Knowledge After Due Inquiry, neither this
Agreement nor any certificate to be furnished by Unocal contains or,
upon delivery thereof, will contain any untrue statement of a material
fact or omission, or upon delivery thereof, will omit to state a mater-
ial fact necessary to make the statements herein or therein, in light of
the circumstances under which they were or are made, not misleading.
7.9 No Breach: To Unocal's Knowledge After Due Inquiry, Unocal is not
party to, or subject to, or bound by any provision of any judgment,
order, writ, injunction or decree of any court, or governmental body, or
any statute, rule or regulation applicable to Unocal which prohibits or
would be violated by, or which allows for the termination or modifica-
tion of this Agreement due to Unocal entering into, executing, deliver-
ing or consummating same.
7.10 Environmental Condition of Assets: To Unocal's Knowledge After
Due Inquiry, all environmental problems affecting the Assets are re-
flected in the Environmental Assessment, on Exhibit "F" or in the docu-
ments or files made available to Buyer by Unocal.
7.11 Compliance with Laws and Agreements: To Unocal's Knowledge
After Due Inquiry, Unocal is in substantial compliance with all permits,
contracts and agreements relating to the Assets, and in substantial
compliance with all laws, rules and regulations of federal, state or
local entities which have jurisdiction over Unocal or the Assets to be
sold hereunder such that any failure of compliance will not have a
material adverse effect on the value of the Assets.
7.12 Title: Except as disclosed on Exhibit "F", to Unocal's Knowledge After
Due Inquiry, Unocal's title to the Assets is not subject to any Title
Defects that would cause title to the Assets to not be "defensible" (as
such term is defined in Section 4.2) on the date of Closing. This
representation and warranty shall not survive Closing.
7.13 Taxes: Except as disclosed on Exhibit "F", all ad valorem, property,
production, severance and similar taxes and assessments based on or
measured by the ownership of property or the production or removal of
hydrocarbons or the receipt of proceeds therefrom and relating to the
Assets, to the extent such taxes and assessments have become due and
payable, have been timely paid.
7.14 Brokers: Unocal has not incurred any obligations or liability, contin-
gent or otherwise, for any fee payable to a broker or finder with
respect to the matters provided for in this Agreement which could be
attributable to Buyer.
7.15 Assignment Prior to Closing: Unocal has not since the Effective Date
made any assignment or conveyance, or otherwise encumbered the
Assets.
7.16 Tax Partnership: No part of the Assets is treated for Federal income
tax purposes as being owned by a partnership except as disclosed in
Exhibit "F".
7.17 Equipment and Off-Lease Facilities: To Unocal's Knowledge After
Due Inquiry, all equipment being used in connection with the operation
of the Assets on the Effective Date is still being so used and shall
continue to be so used through the date of execution of this Agreement
by Buyer and Unocal, and such equipment is capable, taking into
consideration normal wear and tear, of functioning at the same level of
performance at which it was functioning on the Effective Date. This
representation and warranty as to the condition and fitness of equipment
shall not survive Closing and SELLER MAKES NO EXPRESS OR
IMPLIED WARRANTY OR REPRESENTATION AS TO THE MER-
CHANTABILITY OF ANY OF THE EQUIPMENT COMPRISING
THE ASSETS, OR ITS FITNESS FOR ANY PURPOSE THAT
SURVIVES CLOSING. IT BEING UNDERSTOOD THAT BUYER
SHALL ACCEPT THE SAME IN ITS "AS IS, WHERE IS"
CONDITION.
7.18 Other Property: Neither Unocal, nor an Affiliate of Unocal operates or
has any interest in any gathering system, compression facilities or salt
water disposal facilities presently being used or employed in connection
with the Assets and being billed as a direct charge which is not includ-
ed in the Assets.
7.19 Tanks Gauged: The product storage tanks for the Assets were gauged
at approximately 7:00 a.m. (local time) on the Effective Date, and the
gauge reports have been provided to Buyer.
7.20 Contracts; Consents: To Unocal's Knowledge After Due Inquiry, the
files made available to Buyer pursuant to Section 11.2 contain
information regarding all executory contracts to which Unocal is a
participant which materially affect any item of the Assets, including
all third party contractual consents (including but not limited to pre-
feren tial rights to purchase) required in order to consummate the
transactions contemplated by this Agreement.
7.21 Administration: Between the Effective Date and Closing Unocal has
complied with the provisions of Section 11.16.
7.22 Environmental: To Unocal's Knowledge After Due Inquiry, between
the Effective Date and the date this Agreement is fully executed, Unocal
has taken no action, or failed to take any action, that created or caus-
ed an Environmental Liability.
SECTION 8
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Unocal as follows:
8.1 Organization:
8.1.1 Buyer is a corporation duly organized, validly existing and in
good standing under the Laws of the state wherein it was
incorporated or organized, and is qualified to do business and
is in good standing as a foreign corporation in every other
jurisdiction where the failure to so qualify would have a Party
Adverse Effect on Buyer.
8.1.2 Buyer is authorized to do business in the State of Wyoming.
8.1.3 Prior to the date of this Agreement, Buyer has delivered to
Unocal true, correct and complete copies of Buyer's
Certificates or Articles of Incorporation and Bylaws and
Certificates of Good-Standing, as currently in effect.
8.1.4 Buyer's headquarters and principal offices are located in the
State of Oklahoma.
8.2 Authority; Enforceability:
8.2.1 Buyer has all requisite corporate power and authority to enter
into and perform its obligations under this Agreement and to
carry out the transactions contemplated hereby.
8.2.2 All corporate acts and other proceedings required to be taken
by Buyer to authorize the execution, delivery and
performance by Buyer of this Agreement, have been duly and
properly taken.
8.2.3 This Agreement has been duly executed and delivered by
Buyer and constitutes the legal, valid and binding obligation
of Buyer, enforceable against Buyer in accordance with its
terms.
8.2.4 The execution, delivery and performance of this Agreement
by Buyer and the consummation by Buyer of the transactions
contemplated by this Agreement does not and will not
conflict with, or result in any violation of or default under any
provision of the Articles of Incorporation or By-laws of
Buyer, or any law, ordinance, rule, regulation, judgment,
order, decree, agreement, instrument or license applicable to
Buyer or to its properties or assets.
8.3 Consents: Except for the consents of governmental agencies regarding
the transfer of leases, licenses and Permits which apply to the Assets,
no consent, approval, authorization, notice, filing, registration or
qualification is required to be obtained or effected by Buyer for the
execution, delivery or performance by Buyer of this Agreement.
8.4 Litigation, Suits or Claims: To Buyer's Knowledge After Due Inquiry,
there are no actions, suits or proceedings pending or threatened in
writing against Buyer which if decided unfavorably to Buyer could have
a Party Adverse Effect on Buyer, or a material adverse effect on the
value of the Assets.
8.5 Disclosure: To Buyer's Knowledge After Due Inquiry, neither this
Agreement nor any certificate to be furnished to Unocal contains or,
upon delivery thereof, will contain any untrue statement of a material
fact or omission, or upon delivery thereof, will omit to state a mater-
ial fact necessary to make the statements herein or therein, in light of
the circumstances under which they were or are made, not misleading.
8.6 No Breach: To Buyer's Knowledge After Due Inquiry, Buyer is not
party to, or subject to, or bound by any provision of any judgment,
order, writ, injunction or decree of any court, or governmental body, or
any statute, rule or regulation applicable to Buyer which prohibits or
would be violated by, or which allows for the termination or modifica-
tion of this Agreement due to Buyer entering into, executing, deliver-
ing or consummating same.
8.7 Investigations of Assets: In accordance with Section 11.1, Buyer has
made, or will make or arrange for others to make, such inspection of the
Assets as it deems appropriate, and, except as otherwise provided here-
in, Buyer will accept the Assets "AS IS," "WHERE IS" AND "WITH ALL
FAULTS AS TO ALL MATTERS."
8.8 No Distribution: Buyer is acquiring the Assets for its own account for
investment purposes and not with a view to or for sale in connection
with any distribution thereof within the meaning of the Securities Act
of 1933, as amended, and the rules and regulations thereunder and any
applicable state securities laws.
8.9 Resale Registration: Buyer will not sell, transfer, lease or otherwise
convey in any manner, in whole or in part, the Assets without the
necessary registrations, or exemptions therefrom, under applicable
federal and state securities laws.
8.10 Oil and Gas Experience: Buyer (or its predecessor, if any) is and has
been during the preceding two years primarily engaged in the business of
exploring for, drilling for, producing or refining oil or gas and de-
rives at least 80%, or $5,000,000 of its annual gross income, from
exploring for, drilling for, producing or refining oil or gas.
8.11 Federal Leases: Buyer is qualified to hold federal leases and will be
so qualified at Closing.
8.12 Brokers: Buyer has not incurred any obligations or liability, contin-
gent or otherwise, for any fee payable to a broker or finder with
respect to the matters provided for in this Agreement which could be
attributable to Unocal.
SECTION 9
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF UNOCAL
The obligation of Unocal to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment at Closing of each of the follow-
ing conditions, each of which may be waived by Unocal except as otherwise re-
quired by law:
9.1 Purchase Price: At Closing, Buyer shall deliver the Adjusted Purchase
Price plus or minus the Cash Settlement to Unocal in accordance with
Section 3 hereto, plus interest pursuant to 3.2.3.
9.2 Buyer's Representations and Warranties True: The representations
and warranties of Buyer contained herein on the date hereof shall have
been correct in all material respects when made, and shall be correct in
all material respects on and as of the Closing with the same force and
effect as though made at and as of such time, except for the
representations and warranties specifically relating to a time or times
other than the Closing, or as may be affected by transactions
contemplated hereby.
9.3 Officer's Certificate; Opinion of Counsel: Buyer shall deliver to
Unocal the following:
9.3.1 A certificate of an officer of Buyer certifying that:
(i) the representations and warranties of Buyer
contained in this Agreement are true and correct in
all material respects on and as of the Closing Date
with the same force and effect as though made at
and as of such time, except for representations and
warranties specifically relating to a time or times
other than the Closing Date, or except as may be
affected by the transactions contemplated hereby;
and
(ii) Buyer has performed all of its obligations
contained in this Agreement required to be
performed by it prior to Closing.
9.3.2 An opinion rendered by legal counsel of Buyer, dated as of
the Closing, to the effect that:
(i) Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of
the state wherein it was incorporated or organized
and is authorized to do business in the State of
Wyoming;
(ii) Buyer has full power to carry out the transactions
provided for in this Agreement; this Agreement
has been duly executed and delivered by Buyer;
and this Agreement is the legal and binding
obligation of Buyer, enforceable in accordance
with its terms except as enforceability may be
limited or denied by bankruptcy, insolvency,
reorganization, moratorium or similar laws from
time to time in effect that affect the rights of
creditors generally and except as enforcement or
remedies may be limited or denied by general
equitable principles; and
(iii) The execution, delivery and performance of this
Agreement by Buyer and the consummation by
Buyer of the transactions contemplated by this
Agreement will not constitute a breach, violation,
or default under the Certificate or Articles of
Incorporation or By-laws of Buyer.
9.4 Pre-Closing Performance: Buyer shall have performed, observed or
complied in all material respects with all its obligations and condi-
tions required by this Agreement to be performed, observed or complied
with by it at or prior to Closing.
9.5 Authorization: All corporate actions necessary to authorize the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby shall have been
duly and validly taken by Buyer.
9.6 Absence of Litigation: No litigation or administrative proceeding shall
be pending (or threatened), and no investigation shall have been
commenced (and be pending), by Buyer or any third party seeking to
restrain or prohibit (or questioning the validity or legality of) the
consummation of the transactions contemplated by this Agreement or
seeking damages in connection therewith which makes it unreasonable to
proceed with the consummation of the transactions contemplated hereby.
9.7 Bonds: Buyer shall have delivered to Unocal either copies of such
bonds, in form and substance and issued by corporate sureties
satisfactory to Unocal, covering the Assets as may be required under any
laws, rules or regulations of any federal, Indian tribe, state or local
government agencies having jurisdiction over the Assets, or a
commitment by a surety company, satisfactory to Unocal, to issue such
bonds upon Closing.
9.8 Preferential Purchase Rights: All preferential purchase right
obligations attributable to the Assets shall have been satisfied,
assumed or waived.
9.9 Hart-Scott-Rodino Act: Any applicable waiting period under the Hart-
Scott-Rodino Act shall have been satisfied.
SECTION 10
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment, at or prior to Closing, of each
of the following conditions, each of which may be waived by Buyer except as
otherwise required by law:
10.1 Delivery of Instruments of Transfer: At Closing, Unocal shall deliver
to Buyer executed, and where appropriate recordable, bill of sale, lease
assignments, and other instruments of conveyance in accordance with
Section 17.3 hereto.
10.2 Representations and Warranties: The representations and warranties
of Unocal contained in this Agreement shall be true and correct in all
material respects as of the date hereof and as of the Closing, as though
made on and as of each such time, except for changes permitted or
contemplated by this Agreement or otherwise specifically consented to
by Buyer in writing, and except for representations and warranties
relative to a specific time or times, and each of the obligations of
Unocal required by this Agreement to be performed and complied with
prior to or at the Closing shall have been duly performed and complied
with prior to or at the Closing.
10.3 Authorization: All corporate actions necessary to authorize the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby shall have been
duly and validly taken by Unocal.
10.4 Opinion of Unocal's Counsel: Buyer shall have been furnished with the
opinion of legal counsel for Unocal, dated as of the Closing, to the
effect that Unocal:
10.4.1 is a Corporation duly organized, validly existing, and in good
standing under the laws of the state of California and is
authorized to do business in the State of Wyoming;
10.4.2 has full power to carry out the transactions provided for in
this Agreement; this Agreement has been duly executed and
delivered by Unocal; and this Agreement is the legal and
binding obligation of Unocal, enforceable in accordance with
its terms except as enforceability may be limited or denied by
bankruptcy, insolvency, reorganization, moratorium or similar
laws from time to time in effect that affect the rights of
creditors generally and except as enforcement or remedies
may be limited or denied by general equitable principles; and
10.4.3 the execution, delivery and performance of this Agreement by
Unocal and the consummation by Unocal of the transactions
contemplated by this Agreement will not constitute a breach,
violation, or default under the Articles of Incorporation or
By-laws of Unocal.
10.5 Absence of Litigation: No litigation or administrative proceeding shall
be pending (or threatened), and no investigation shall have been
commenced (and be pending), by Unocal or any third party seeking to
restrain or prohibit (or questioning the validity or legality of) the
consummation of the transactions contemplated by this Agreement,
seeking damages in connection therewith or pertaining to the Assets
which makes it unreasonable to proceed with the consummation of the
transactions contemplated hereby.
10.6 Officer's Certificate: Unocal shall have furnished Buyer a certificate
of an officer of Unocal certifying that:
10.6.1 the representations and warranties of Unocal contained in this
Agreement are true and correct in all material respects on and
as of the Closing Date with the same force and effect as
though made at and as of such time, except for
representations and warranties specifically relating to a time
or times other than the Closing Date, or except as may be
affected by the transactions contemplated hereby; and
10.6.2 Unocal has performed all of its obligations contained in this
Agreement required to be performed by it prior to Closing.
10.7 Hart-Scott Rodino Act: Any applicable waiting period under the Hart-
Scott-Rodino Act shall have been satisfied.
10.8 Condition of Equipment: As of the date of execution of this
Agreement by Buyer and Seller, all equipment being used in connection
with the operation of the Assets on the Effective Date is in good,
working condition, taking into consideration normal wear and tear,
adequate to function in the capacity in which it was functioning on the
Effective Date.
10.9 Affidavit of Unocal: Unocal shall have furnished Buyer an affidavit
executed by John Merritt which states that to his Knowledge After Due
Inquiry, the representations and warranties of Unocal that are limited
to its Knowledge After Due Inquiry are true and correct.
SECTION 11
COVENANTS
11.1 Investigation and Decision: The Parties further covenant as follows:
11.1.1 Investigation of Assets: During the Due Diligence Period
Buyer shall (i) make, or arrange for others to make, such
inspection and investigation of the Assets and Assumed
Liabilities as it deems appropriate; (ii) investigate and have
knowledge of operative or proposed laws and Legal
Requirements to which the Assets are or may be subject; (iii)
accept the Assets and Assumed Liabilities upon the basis of
its review and determination of the applicability and effect of
such laws and Legal Requirements; (iv) have reviewed and
evaluated any data room materials or other materials to which
access has been provided to Buyer by Unocal under this
Agreement; and (v) have made such investigations of the title,
condition, status under Environmental Laws, oil and gas laws
and any other aspects of the Assets and Assumed Liabilities
as may be necessary or appropriate. Buyer agrees that such
inspections shall not unreasonably interfere with the business
and operations of Unocal, and that such inspections and all
such documents shall be subject to the Confidentiality
Agreement.
11.1.2 Independent Decision: Buyer has made its own
independent judgment of the commercial potential, condition
and usefulness of the Assets, taking into consideration all
current Environmental Laws and Legal Requirements and the
likelihood that such Environmental Laws and Legal
Requirements will change in the future. Buyer has such
knowledge and experience in business and financial affairs in
general, securities and investments, and of the oil and gas
business as conducted and regulated in the State of Wyoming
in particular, as to be capable of evaluating the merits and
risks of purchasing the Assets.
11.2 Access to Information:
Unocal has afforded to Buyer and to Buyer's accountants, counsel and
other representatives, reasonable access during the period prior to the
execution of this Agreement and will continue to afford to Buyer
reasonable access until Closing to all of Unocal's properties, books,
contracts, documents and records relating to the Assets, and, during such
period, Unocal has used and will continue to use reasonable efforts to
furnish promptly to Buyer all material information concerning the
business and properties relating to the ownership and operations of the
Assets (subject to existing confidentiality agreements with third parties
and subject also to the attorney-client privilege), including, to the extent
prepared in the ordinary course, such data and operating reports as may
reasonably be necessary or appropriate for any relevant purposes of
investigation and analysis related to this Agreement. Upon Buyer's
reasonable request, Unocal shall attempt to secure waiver of any such
confidentiality agreements. Unocal shall, to the best of its ability, arrange
for Buyer and its representatives to discuss with appropriate officers,
employees, consultants, contractors and representatives of Unocal such
matters related to the transactions provided for herein as Buyer may
reasonably request. Buyer will hold such information in confidence in
accordance with the Confidentiality Agreement. The period of time from
the execution date of this Agreement and continuing for a period of sixty
(60) days shall be referred to herein as the "Due Diligence Period";
Provided, however, if the Closing Date is extended due to litigation filed
by a third party, other than an Affiliate of Buyer, to a date beyond seven
(7) days following the end of the Due Diligence Period, the Due
Diligence Period shall be extended the same number of days, an updated
letter of completion of due diligence, pursuant to Section 11.7, shall be
provided within three (3) days of the end of the extended Due Diligence
Period and all other provisions herein relating to time measured from the
Closing Date or Due Diligence Period shall be measured from the
extended Closing Date and Due Diligence Period.
11.3 General Liabilities: Subject to Section 6.1, Buyer shall assume and
Unocal shall retain the general liabilities as follows:
11.3.1 General Liabilities Assumed: Excluding Environmental
Liabilities, which shall be governed by the provisions of
Section 5, Buyer shall assume and discharge all duties,
liabilities and obligations arising from ownership or operation
of the Assets after the Effective Date; including, but not
limited to, all applicable valid recorded agreements;
unrecorded but disclosed agreements; disclosed gas balancing
agreements or arrangements; disclosed contracts and
instruments; duties imposed by governmental laws and
regulations; all usual and normal prudent operations
regarding the duty to plug, abandon, remove or cleanup oil,
gas, injection, water or other wells, sumps, pits, ponds, tanks,
impoundments, foundations, pipelines, and structures and
equipment of any kind or description, and the restoration of
the Assets and surface of the land as may be required under
applicable Legal Requirements; and, all duties, liabilities and
obligations arising from ownership or operation of the Assets
prior to the Effective Date except as retained by Unocal in
Section 11.3.2.
11.3.2 General Liabilities Retained: Excluding Environmental
Liabilities, which shall be governed by the provisions of
Section 5, Unocal shall discharge the following retained
duties, liabilities and obligations arising from ownership or
operation of the Assets prior to the Effective Date; provided
Unocal receives notice of a claim of a specific breach by
written notification from Buyer within five (5) years of the
Closing Date:
(i) All liability for defense of litigation or govern-
mental actions filed or commenced regarding the
Assets, including all liability for satisfaction of any
judgment or fine, regardless of when filed or
rendered if Unocal timely received the written
notice of claim provided for above in this Section
11.3.2.;
(ii) All obligations to properly pay royalties or taxes;
provided, however, liability for royalties and taxes
shall be determined as of the Effective Date as
provided in other provisions herein; and
(iii) The obligation to replug oil, gas, injection, water
or other wells plugged prior to the Effective Date
that require replugging to comply with contractual
or legal requirements.
11.4 Gas Imbalance: In the event it is determined Gas Imbalances exist, the
Parties agree that:
11.4.1 Unocal will furnish Buyer with a statement, in the form of
Exhibit "D", showing the most current estimate of the over or
under production between the owners as of the Effective
Date.
11.4.2 From and after the Effective Date, any and all benefits,
obligations and liabilities associated with such Gas
Imbalances shall accrue to and be the responsibility of Buyer.
Buyer shall assume Unocal's overproduced or underproduced
position in the wells located on the Leasehold Properties as
of the Effective Date, including but not limited to the
responsibility for the payment of royalties on the volume of
such gas which Unocal took in excess of its entitlement and
any obligation to balance whether in cash or in kind. The
Final Accounting shall include an adjustment for any Gas
Imbalance differences between the volume shown on Exhibit
"D" and the Gas Imbalances at the Effective Date.
Adjustments will be on an individual property basis in
accordance with the actual average price paid during the
period between April 1, 1994 and the Effective Date.
11.5 Hart-Scott-Rodino Act: Each Party shall, at its sole cost and expense,
prepare and submit, within five (5) days of the execution of this
Agreement, any necessary filings in connection with the transactions
contemplated by this Agreement under the Hart-Scott-Rodino Act. The
Parties shall request expedited treatment of such filing by the Federal
Trade Commission, shall promptly make any appropriate or necessary
subsequent or supplemental filings, and shall furnish to each other
copies of all filings made under the Hart-Scott-Rodino Act at the same
time they are filed with the government.
11.6 Third-Party Consents: Certain of the transfers contemplated by this
Agreement are subject to various forms of third-party consents, includ-
ing compliance with the provisions of the Hart-Scott-Rodino Act, which
have been identified on Exhibit "F". Unocal and Buyer shall cooperate
and shall promptly take such action as may be required to obtain all
necessary consents prior to Closing. Unocal and Buyer agree that to the
extent any contract or Permit that would otherwise be assigned under
this Agreement as contemplated by Section 17.3.4 is not capable of being
assigned, transferred, subleased or sublicensed without the consent of,
or waiver by any other party thereto, or any other Person, or if such
assignment, transfer, sublease or sublicense or attempted assignment,
transfer, sublease or sublicense would constitute a breach thereof, or a
violation of any law, this Agreement shall not constitute an assignment,
transfer, sublease or sublicense, or an attempted assignment, transfer,
sublease or sublicense of any such contract or Permit. With respect to
each contract that, but for the reasons set forth in the first sentence
of this Section 11.6, would be assigned, Unocal agrees to provide Buyer
with the benefits (including the right to terminate any such contract or
Permit in accordance with the terms thereof) of such contract or Permit,
to the extent related to transactions or periods that occur at or after
Closing, and to the extent it is possible to do so; and, if and to the
extent such benefits are provided to Buyer, Buyer agrees to observe and
perform such contract or Permit. Unocal shall continue to use its
reasonable efforts to obtain an assignment to Buyer of each contract or
Permit that, but for the reasons set forth in the first sentence of this
Section 11.6, would be assigned; provided, however, that Unocal shall
not be required to pay any consideration or suffer any financial
disadvantage to obtain such assignment.
11.7 Completion of Due Diligence: Within three (3) days of the end of the
Due Diligence Period Buyer shall give Unocal a letter of satisfactory
completion of due diligence and proof of financing substantially in the
form attached hereto as Exhibit "E".
11.8 Additional Agreements: Unocal and Buyer shall execute such further
documents and instruments, requested by either Party, as may be
necessary or reasonably desirable to consummate the transactions
contemplated by this Agreement or any part thereof. Subject to the
other terms and conditions of this Agreement, each of the Parties, hereto
agrees to use its best efforts at its own expense to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws to consummate and make
effective the transactions contemplated by this Agreement. Unocal and
Buyer shall execute a joint closing statement acknowledging the payment
of the Purchase Price, the transfer of the Assets, and the assumption of
liabilities at the Closing. Further, Unocal and Buyer shall execute the
Geophysical Data Licensing Agreement in the form attached hereto as
Exhibit "G".
11.9 Payment of Certain Expenses Due and Payable After the Effective
Date: Buyer shall pay, as and when due, all fees and bills due and
payable after the Closing Date, and Unocal shall reimburse Buyer within
thirty (30) days after invoice for any amounts under such bills attribu-
table to any period prior to the Effective Date; provided, however that
if after Closing Unocal is obligated to continue as operator under an
existing agreement Unocal shall make payments for Buyer's account and at
Buyer's expense.
11.10 Environmental Notices: Buyer shall, as soon as possible, but no later
than two (2) working days after the date of receipt thereof, provide
Unocal with a facsimile copy of all environmental notices, advisement or
complaints proposing or demanding a civil or criminal penalty for which
Unocal may be responsible under the terms of this Agreement or any
other notice, advisement or complaint naming Unocal as a Party, or
involving any cause of action or matter which may arise in whole or in
part from the Assets or Unocal's operations prior to the Closing Date.
Buyer shall also place a hard copy of such notice, advisement or
complaint in the mail, postage prepaid, to Unocal within five (5) work-
ing days of receipt thereof.
11.11 Notification of Certain Matters: Between the Effective Date and
Closing, Unocal and Buyer will each give prompt notice to the other of
(i) any information that indicates that any representation or warranty
contained herein was not true and correct as of the date hereof or will
not be true and correct as of the Closing Date; (ii) the occurrence of
any event which will result, or has a reasonable prospect of resulting,
in the failure to consummate the transactions contemplated hereunder on
or before the Closing Date or to satisfy a condition specified in Sec-
tions 9 or 10, as the case may be; (iii) any notice or other communica-
tion from any third party alleging that the consent or waiver of such
third party is required in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated by
this Agreement; and (iv) any notice of, or other communication relating
to any default or event which, with notice or lapse of time or both,
would become a default under any contract to be assigned at Closing.
11.12 Announcements: At all times prior to Closing, Unocal and Buyer,
including their respective Affiliates, shall use their best efforts to
cooperate in the development and distribution of all news releases and
other public disclosures relating to the proposed transactions described
in this Agreement, and ensure that no such releases or disclosures are
made without prior notice to the other Party; provided, however, that
from the date of this Agreement and continuing for twelve (12) months
after the Closing if reserve volumes are estimated in a news release in
conjunction with a Purchase Price disclosure the release must state that
the reserve estimates are the disclosing Party's reserve estimates, and
no news release or media disclosure whatsoever by Buyer may disclose the
identity of Unocal or a specific description of the Assets unless both
Parties agree to the form and content of such disclosure, each being
under no obligation to agree and having the right to withhold agreement
for any reason; provided, also that either Party may make all disclo-
sures which are required or prudent under applicable laws or Legal
Requirements, including, but not limited to, rules, regulations and
guidelines of the Securities and Exchange Commission and applicable
stock exchanges.
11.13 Termination of Guarantees and Other Commitments:
11.13.1 Subject to applicable laws, as of the Closing Date, all of the
following shall be canceled or terminated as to Buyer: (i)
undertakings, comfort letters or guarantees by Unocal or any
of its Affiliates to third parties in connection with the Assets;
(ii) letters of credit, surety bonds, and related indemnity
agreements arranged and maintained by Unocal or any of its
Affiliates with respect to the Assets; and (iii) any credit card
accounts issued by Unocal or any of its Affiliates to any
employees in connection with the Assets.
11.13.2 Buyer understands and agrees that all insurance policies,
provided to or for the Assets through Unocal, any Affiliate of
Unocal, or a self-insurance program of Unocal will be
terminated as to Buyer as of the date this Agreement is
executed by Buyer and Unocal.
11.13.3 Unocal and Unocal's Affiliates shall have no responsibility or
liability under this Agreement to provide for insurance
coverage or any such security for the Assets in any manner
whatsoever after the date this Agreement is executed by
Buyer and Unocal.
11.14 Like Kind Exchange: Without affecting its obligations hereunder, with
appropriate prior notice to the other Party, either Party shall have the
option, at or before Closing, to structure the Closing of this trans-
action in such a manner so as to qualify as a like kind exchange pursu-
ant to Section 1031 of the Internal Revenue Code of 1986, as amended,
provided that such a structure shall not delay the Closing in any way.
The other Party will cooperate with the electing Party to facilitate a
like kind exchange but will in no event be required to take title to any
replacement properties. In the event either Party desires such exchange,
it shall timely notify the other Party, in writing, of its intent and the
electing Party shall be responsible for arranging the structure of the
exchange, compliance with time limits for like kind exchanges, the
preparation of appropriate documents to complete the transaction, and
all additional costs directly related thereto. The electing Party shall
indemnify the other Party against all losses, costs, expenses, taxes,
fines, penalties or assessments arising out of any like kind exchange
structure.
11.15 Access to Geologic and Geophysical Information: As long as the
same remains in Buyer's possession or control, Unocal retains the right
to copy any and all geologic and geophysical information transferred to
Buyer hereunder, and Buyer agrees to co-operate with Unocal in
granting access to such information in accordance with Section 18.8.
11.16 Restrictions on Operations: Unocal shall (i) between the execution
date and the Closing Date incur no liability or enter into any
commitments exceeding $25,000 net to Unocal with respect to the
Assets, (ii) between the Effective Date and the Closing Date not release,
sell, transfer, make any disposition of, abandon or relinquish any right,
title or interest in the Assets or in personal property related to the
Assets, except in the ordinary course of business, (iii) between the
execution date and the Closing Date not cancel any contract associated
with the Assets except in the ordinary course of business, and shall
disclose on Exhibit "F" all contracts and liabilities incurred or
commitments made with a value in excess of $25,000 which are associated
with the Assets and which are entered into or canceled between the
Effective Date and the execution date, if any, and (iv) between the
Effective Date and the Closing Date not enter into any hedging, forward
sales or similar agreements with respect to production from the Assets.
11.17 Worland Plant Royalties and Severance Tax Dispute: The Parties are
aware of existing disputes described on Exhibit "F" with the State of
Wyoming and Washakie County regarding the calculation of severance
taxes and ad valorem taxes, including interest and additional taxes for
prior taxable years, and the Secretary of the Interior of the United
States acting through the Wyoming Department of Audit regarding the
calculation of royalties, including interest and underpayment for prior
years, arising from the gas processed through the Worland Plant. Unocal
retains any and all liability of any kind for taxes, royalties, penal-
ties and interest assessed against Unocal as a result of said disputes
for all periods of time prior to the Effective Date, and Buyer shall be
liable for all taxes and royalties assessed for periods of time after
the Effective Date, regardless of whether the tax obligation or royalty
obligation of Buyer after the Effective Date is increased as a result of
the resolution of the above referenced disputes.
11.18 Participating Area Dispute: The Parties are aware of a dispute which
has existed between Unocal and The Philip T. Sharples Trust, Sharples
Associates and the Samuel Butler, Jr. Marital Trust regarding the Third
Frontier Participating Area in the Worland Unit. Unocal shall retain
any and all liability of any kind involving, and all responsibility and
authority for, the continuing resolution of this dispute. Prior to
execution of this Agreement, the Bureau of Land Management determined
that Unocal's second revision order included acreage which was not
reasonably proven as productive and a third revision order, effective
March 1, 1995, was issued which reduces the number of acres in the Third
Frontier Participating Area by 351.54 acres from 4,438.75 to 4,087.21
acres. To the extent the third revision order changes the acreage area
of the Third Frontier Participating Area such that the working interest
or net revenue interest of Unocal is different from the allocated work-
ing interest or net revenue interest reflected in Exhibit "A-1" the
Purchase Price shall be adjusted, effective as of the Effective Date,
based on the Claim Value formula and a Net Leasehold Acres price adjust-
ment pursuant to Section 4.4.1 and 4.4.3. It is further agreed that
Buyer shall not oppose, or take a legal position in any proceeding
inconsistent with the Worland Unit boundaries as revised by all area
revision orders in effect as of the Effective Date and reflected in the
Buyer's Report Value for the Assets, and agrees to support Unocal's
position in this dispute.
11.19 Consent to Lease Assignment: The oil and gas lease dated October 11,
1944, executed by the Chicago, Burlington & Quincy Railroad Company
covering certain lands in the NW/4NW/4 of Section 4; E/2 of Section 5;
E/2 of Section 17; the E/2, SE/4SW/4 and a tract in the NE/4 of Section
20, the W/2 of Section 29 and the W/2 of Section 32, all in Township
48N, Range 92W; and the W/2 SW/4 and the NW/4 of Section 5,
Township 47N, Range 92W, all in Washakie County, Wyoming is
included within the definition of Leasehold Property as set forth on
Exhibit "A". The lease requires the Lessor's prior written consent to an
assignment by the Lessee. If Unocal is unable to obtain a consent to the
assignment, to the extent the inability to obtain such consent affects the
Net Leasehold Acres or ownership interest factors described in Exhibit
"A-1", the Purchase Price shall be adjusted, effective as of the Effective
Date, based on the Claim Value Formula and a Net Leasehold Acres
price adjustment pursuant to Sections 4.4.1 and 4.4.3.
SECTION 12
EMPLOYEE MATTERS
12.1 Employee List: Within ten days after execution of this Agreement,
Unocal shall provide Buyer a list of field employees at each work
location for the Assets, indicating name, job classification and years
of service with Unocal.
12.2 Job Classification: Within ten days after execution of this Agreement
Buyer shall provide Unocal a summary of Buyer's job classifications for
the Assets together with minimum and maximum pay scales.
12.3 Disclosure: Buyer authorizes Unocal to disclose the summary to Unocal
field employees working on the Assets or their representatives.
12.4 Resumes: Unocal shall advise field employees at each work location for
the Assets that they may submit their resumes and work history to Buyer
for Buyer's consideration regarding employment.
12.5 Hired Employee List: Within thirty days after Closing, Buyer shall
provide Unocal with a list of all Unocal field employees hired by Buyer
and their base pay rate.
12.6 Terminated Employees: For any Unocal field employee hired by Buyer
and terminated without cause by Buyer within 180 days of Closing,
Buyer shall pay one-quarter and Unocal shall pay three-quarters of such
employee severance benefits in accordance with Unocal's Termination
Allowance Plan on the same terms and conditions as if such employee
had been terminated by Unocal on the Closing Date and not employed by
Buyer. Unocal's share of such payment will be reduced by any
termination allowance already paid by Unocal.
SECTION 13
TAXES
13.1 Apportionment of Ad Valorem and Property Taxes: All ad valorem
taxes, real property taxes, personal property taxes and similar obliga-
tions shall be apportioned as of the Effective Date between Buyer and
Unocal. All such taxes allocable to the periods before the Effective
Date shall be paid by Unocal, and all such taxes allocable to the
Effective Date and after shall be paid by Buyer. Any refunds of taxes
allocable to periods prior to the Effective date shall be the property
of Unocal. Buyer shall file or cause to be filed all required reports
and returns incident to such taxes which are due on or after the Closing
Date, and shall pay or cause to be paid to the taxing authorities all
such taxes reflected on such reports and returns.
13.2 Sales Taxes, Filing Fees, Etc.: The Purchase Price provided for
hereunder is net of any sales taxes or other transfer taxes. Buyer
shall be liable for any sales tax or other transfer tax as well as any
applicable conveyance, transfer and recording fees, and real estate
transfer stamp or taxes imposed upon the sale pursuant to this Agree-
ment, and Buyer shall defend any action by a governmental agency to
collect such taxes or fees, and will hold Unocal harmless from any cost
or liability for taxes, fees, penalty, interest or costs, including
reasonable attorney's fees, assessed as a result of this transaction.
13.3 Other Taxes: All production, severance or excise taxes, conservation
fees and other similar such taxes or fees (other than income taxes)
relating to oil and gas produced and sold from the Assets prior to the
Effective Date shall be paid by Unocal, and all such taxes and fees
relating to such oil and gas produced and sold on the Effective Date and
after shall be paid or reimbursed by Buyer. In the event such taxes
attributable to the Assets are not assessed on a current year basis, it
is agreed that when such taxes are assessed, insofar as they accrued to
the Assets on or before the Effective Date, they shall be paid by Unocal
upon receipt of a statement and supporting documentation.
SECTION 14
TERMINATION
14.1 Termination: This Agreement and the transaction contemplated herein
may be terminated at any time prior to Closing:
14.1.1 by mutual consent of the Parties;
14.1.2 by either Party, without impairing any other rights hereunder, if
there has been a material breach of covenant or agreement
contained in this Agreement on the part of the other Party, or a
failure of a condition and such breach of a covenant or
agreement or failure of a condition has not been promptly cured;
14.1.3 by either Party, upon written notice to the other Party under the
provisions of Sections 4.4.3 (iii) and 5.4.3; or
14.1.4 by Buyer pursuant to Section 5.4.4.3.
14.2 Effect of Termination:
14.2.1 In the event of termination of this Agreement by either Party as
provided in Section 14.1.1 or Section 14.1.3 above, this
Agreement shall forthwith become void and there shall be no
liability or obligation on the part of either Party or their
respective officers or directors or shareholders except as
otherwise set forth herein. Unocal shall in such event return the
earnest money deposit within fifteen (15) business days of such
termination plus interest calculated at the Interest Rate.
14.2.2 In the event this Agreement is terminated under Section 14.1.2
by Buyer:
(i) If Unocal concurs with Buyer that a material breach
of covenant or agreement or failure of a condition as
provided in Section 14.1.2 occurred and was not
promptly cured, Unocal shall return the earnest
money deposit within fifteen (15) business days of
such termination, plus interest calculated at the
Interest Rate;
(ii) If Unocal does not concur with Buyer that a material
breach of covenant or agreement or failure of a
condition as provided in Section 14.1.2 occurred and
was not promptly cured, Unocal shall interplead the
earnest money deposit, plus interest calculated at the
Interest Rate, into a court of competent jurisdiction;
and the prevailing party shall receive the interplead
monies and the losing party shall pay the prevailing
Party's costs and reasonable attorney's fees incurred
in conjunction with the proceeding; provided,
however, that if Buyer prevails in the interpleader
action, it shall also be entitled to recover actual
damages suffered or incurred as a result of Unocal's
breach in an amount up to but not exceeding
$500,000.
14.3 Liquidated Damages: If Closing does not occur as contemplated herein
by reason of any material breach or default by Buyer as provided in
Section 14.1.2 or unauthorized failure to proceed under the terms of
this Agreement by Buyer, then Unocal shall, in consideration of holding
the Assets off the market and refraining from dealing with others con-
cerning the Assets and as liquidated damages in lieu of all other
damages, retain the earnest money deposit made by Buyer. The Parties
hereby acknowledge that the extent of damages to Unocal occasioned by
such breach or default or failure to proceed by Buyer would be impos-
sible or extremely impractical to ascertain and that the earnest money
deposit is a fair and reasonable estimate of such damages under the
circumstances. Provided, however, unless Buyer contests Unocal's
termination by written notification within ten (10) days, Unocal shall
be free to enjoy all rights of ownership of the Assets and to sell,
transfer, encumber or otherwise dispose of the Assets to any party with-
out any restriction under this Agreement.
14.4 Specific Performance: If Closing does not occur as contemplated
herein by reason of Unocal's determination under Sections 14.1.2 and
14.3 that Buyer has breached this Agreement, Buyer may contest
Unocal's termination of this Agreement under Section 14.1.2 and seek
specific performance of the Agreement, provided it notifies Unocal in
writing of its election to seek specific performance within ten (10)
days of Unocal's notice of termination. The losing Party shall pay the
prevailing Party's costs and reasonable attorney's fees together with
any actual damages suffered or incurred. In the event Unocal prevails,
the earnest money deposit shall be forfeited as provided in Section 14.3.
SECTION 15
MISCELLANEOUS
15.1 Governing Law: THIS AGREEMENT SHALL BE GOVERNED BY
AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF WYOMING. All assignments and instruments
executed in accordance with this Agreement shall be governed by and
interpreted in accordance with the laws of the state where the Assets
conveyed thereby are located.
15.2 Assignment:
15.2.1 This Agreement and the rights and obligations hereunder shall
not be assignable by either Party hereto without the prior written
consent of the other; provided, however, that Unocal and Buyer
shall have the right without the other Party's consent, to assign
this Agreement, but not the right to assign any duties or
obligations hereunder, to an Affiliate(s) or a subsidiary
company.
15.2.2 Any Party hereto may assign or delegate any of its rights,
benefits, duties or obligations hereunder (i) to any Person, if it
has received the prior written consent provided for in Section
15.2.1, (ii) to its legal successor, if it merges (whether or not
it is the surviving corporation), or (iii) to any Person to whom it
has made any sale, lease, transfer or other disposition of all or
substantially all of its assets; provided, however, that no Party
may make an assignment or delegation described in clauses (ii)
and (iii), above, unless such Party delivers to the other Party
hereto such written assumptions, affirmations and/or legal
opinions as such other Party may reasonably request to preserve
their rights and remedies hereunder.
15.2.3 Subject to Section 15.2.1 the rights, benefits, duties and
obligations of each Party hereto shall inure to the benefit of, and
be binding upon, each Party's successors, assigns or delegates.
15.3 Written Notices: Any notices required to be given hereunder shall be
in writing and transmitted by telex or telecopier, delivered by air
courier, or deposited in the mail, postage prepaid and certified, and
addressed as follows or as otherwise specified by Unocal and Buyer by
notice hereunder:
To Unocal:
Union Oil Company of California
P.O. Box 4551
Houston, Texas 77210-4551
Fax No. (713) 287-5850
Attention: Supervisor-Administration
with a copy to:
Union Oil Company of California
2141 Rosecrans Avenue, #4000
El Segundo, CA 90245
Attention: Vice President and General Counsel,
To Buyer:
Devon Energy Corporation (Nevada)
20 North Broadway, Suite 1500
Oklahoma City, OK 73102-8260
Attention: H.R. Sanders, Jr.
with a copy to:
Terry Barrett
McAfee & Taft, a P.C.
10th Floor
Two Leadership Square
Oklahoma City, OK 73102
Notices shall be effective upon receipt.
15.4 Expenses: Except as otherwise provided herein, each Party shall be
solely responsible for all expenses incurred by it in connection with
this transaction (including without limitation, fees and expenses of its
own counsel and accountants).
15.5 Waiver of Compliance with Bulk Transfer Laws: Buyer waives
compliance with any applicable bulk transfer law relating to the
transactions contemplated by this Agreement, and agrees to assume all
risk and liability in connection with the failure to so comply.
15.6 Deceptive Trade Practices Waiver: TO THE EXTENT
APPLICABLE TO THE ASSETS OR ANY PORTION THEREOF,
BUYER HEREBY WAIVES THE PROVISIONS OF THE WYOMING
CONSUMER PROTECTION LAWS REGARDING FALSE,
MISLEADING AND DECEPTIVE BUSINESS PRACTICES,
UNCONSCIONABLE ACTIONS AND BREACHES OF
WARRANTY; PROVIDED, HOWEVER, THAT NOTHING HEREIN
CONTAINED SHALL BE DEEMED A WAIVER BY BUYER
WHERE SUCH WAIVER IS PROHIBITED BY LAW. IN ORDER
TO EVIDENCE ITS ABILITY TO GRANT SUCH WAIVER, BUYER
HEREBY REPRESENTS AND WARRANTS TO UNOCAL THAT
BUYER (i) IS IN THE BUSINESS OF SEEKING OR ACQUIRING,
BY PURCHASE OR LEASE, GOODS, OR SERVICES FOR
COMMERCIAL OR BUSINESS USE, (ii) HAS ASSETS OF FIVE
MILLION DOLLARS OR MORE ACCORDING TO ITS MOST
RECENT FINANCIAL STATEMENT PREPARED IN
ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES, (iii) HAS KNOWLEDGE AND EXPERIENCE IN
FINANCIAL MATTERS THAT ENABLE IT TO EVALUATE THE
MERITS AND RISKS OF THE TRANSACTION CONTEMPLATED
HEREBY, AND (iv) IS NOT IN A SIGNIFICANTLY DISPARATE
BARGAINING POSITION. Nothing in this Section 15.6 shall be
interpreted as a waiver of the express representations and warranties in
this Agreement.
15.7 Waiver of Jury Trial: UNOCAL AND BUYER DO HEREBY
IRREVOCABLY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY AND ALL RIGHT TO A TRIAL BY
JURY IN ANY ACTION, SUIT OR OTHER LEGAL PROCEEDING
BASED UPON, ARISING OUT OF, OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
15.8 Limitation of Liability: Notwithstanding anything herein provided to
the contrary, Unocal and Buyer do hereby covenant and agree that, after
Closing, the recovery by either Party hereto of any damages suffered or
incurred by it as a result of any breach by the other Party of any of
its covenants, agreements, representations, guaranties, warranties,
disclaimers, waivers or continuing obligations under this agreement
shall be limited to the actual damages suffered or incurred by the non-
breaching Party as a result of the breach by the breaching Party of its
covenants, agreements, representations, guaranties, warranties,
disclaimers, waivers, or continuing obligations hereunder plus costs and
reasonable attorney's fees and in no event shall the breaching Party be
liable to the non-breaching Party for consequential damages as a result
of the breach by the breaching Party of any of its covenants, agree-
ments, representations, guaranties, warranties, disclaimers, waivers or
continuing obligations hereunder; provided, however that nothing herein
contained shall be deemed a limitation on either Party's indemnity
obligations contained in this Agreement.
15.9 No Admissions: Buyer and Unocal agree that neither this Agreement,
nor any part hereof, nor any performance under this Agreement, nor any
payment of any amount pursuant to any provision of this Agreement shall
constitute or be construed as a finding, evidence of, or an admission or
acknowledgment of any liability, fault, or past or present wrongdoing,
or violation of any law, rule, regulation, or policy, by either Unocal
or Buyer or by their respective officers, directors, employees, or
agents.
15.10 Use of Unocal's Name: As soon as practicable after Closing, and in any
event no later than 180 calendar days after Closing, Buyer shall remove
or cause to be removed the names and marks used by Unocal and all
variations and derivations thereof and logos relating thereto from the
Assets and shall not make any use whatsoever of those names, marks and
logos.
15.11 Exhibits Incorporated: All Exhibits hereto are deemed a part of this
Agreement and are incorporated hereby as though fully set forth herein.
15.12 Entire Agreement, Etc.: This Agreement, including the Exhibits
referred to herein or delivered pursuant to this Agreement and the
Confidentiality Agreement, which is incorporated herein by this refer-
ence as though fully set forth hereby, constitutes the entire agreement
between Unocal and Buyer with respect to the subject matter hereof, and
supersedes all prior oral or written agreements, commitments or
understandings with respect thereto. No amendment of this Agreement
shall be binding on the Parties unless in writing and signed by the
authorized representatives of both Parties hereto. Any waiver of any
breach of any term or condition of this Agreement shall not operate as a
waiver of any other breach of such term or condition or of any other
term or condition of this Agreement. The headings used in this Agree-
ment are for convenience of reference only and shall not be used to
define the meaning of any provision.
15.13 Parties in Interest: Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason
of this Agreement on any Persons other than the Parties to it and their
permitted respective successors and assigns, nor is anything in this
Agreement intended to relieve or discharge the obligation or liability
of any third Persons to any Party to this Agreement, nor shall any pro-
vision give any third Persons any right of subrogation or action over
and against any Party to this Agreement.
15.14 Severability: If any provision of this Agreement shall be held to be
invalid or unenforceable under present or future law in whole or in part
by any court of any jurisdiction, such provision shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without invalidating the remaining provisions of this
Agreement or affecting the validity or enforceability of such provisions
in any other jurisdiction.
15.15 Consents: When a consent is required of either Party hereto, such
consent shall not be unreasonably withheld.
SECTION 16
SURVIVAL AND INDEMNIFICATION
16.1 Survival: Notwithstanding any investigation conducted by any Party
hereto and any information which any Party may receive, a claim for a
breach of any of the representations, warranties or covenants contained
in this Agreement, or in any Exhibit, certificate, document or statement
delivered pursuant hereto, or pursuant to any indemnification under
Section 16.2.1, or of any third party claims under Section 16.3.1,
excepting the representations and warranties in Sections 7.12 and 7.17,
must be made within one (1) year following Closing; provided, however,
that if and to the extent specific time limits for such matters are pro-
vided for elsewhere in this Agreement nothing in this Section 16.1 shall
be construed to limit the time for making a claim by Unocal against
Buyer with regard to Assumed Liabilities or by Buyer against Unocal for
retained liabilities; and, provided further, that a claim for breach of
the representations and warranties in Sections 7.12 and 7.17 must be
made on or before Closing.
16.2 Indemnification:
16.2.1 Except as otherwise set forth in this Section 16 and except for
Assumed Liabilities of Buyer, Unocal shall indemnify and hold
harmless Buyer, and its successors and assigns, against, and in
respect of, any and all damages, claims, losses, liabilities and
expenses, including, without limitation, reasonable legal,
accounting and other expenses, which may arise out of: (i) any
breach or violation of this Agreement by Unocal; (ii) any breach
of any of the representations, warranties or covenants made in
this Agreement by Unocal; or (iii) liabilities expressly retained
by Unocal in this Agreement.
16.2.2 Buyer shall indemnify and hold harmless Unocal, and its
successors and assigns, against, and in respect of, any and all
damages, claims, losses, liabilities and expenses, including,
without limitation, reasonable legal, accounting and other
expenses, which may arise out of: (i) any breach or violation of
this Agreement by Buyer; (ii) any breach of any of the
representations, warranties or covenants made in this Agreement
by Buyer; or (iii) Assumed Liabilities of Buyer.
16.3 Third Party Claims:
16.3.1 Except as otherwise set forth in this Section 16 and except for
Assumed Liabilities of Buyer, Unocal shall indemnify and hold
Buyer and its successors and assigns harmless against any and
all damages, claims, losses, liabilities and expenses, including,
without limitation, reasonable legal, accounting and other
expenses, arising out of any third party claim, legal suit or
proceeding against Buyer, which claim, legal suit or proceeding
arises from the conduct of the business of Unocal or the
ownership of the properties owned or leased by Unocal prior to
the Effective Date; provided, however, that Unocal's indemnity
obligation hereunder shall be limited to the value of the Purchase
Price, and shall include but not be limited to the period of time
from the Effective Date to the Closing Date as to liabilities
retained by Unocal in Section 11.3.2.
16.3.2 Buyer shall indemnify and hold Unocal and its successors and
assigns harmless against any and all damages, claims, losses,
liabilities and expenses, including, without limitation, reasonable
legal, accounting and other expenses, arising out of any third
party legal suit or proceeding against Unocal, which legal suit
or proceeding arises from the conduct of the business of Buyer
or the ownership of the properties owned or leased by Buyer
after the Effective Date, or from Assumed Liabilities.
16.3.3 There are no third party beneficiaries to this Agreement.
Nothing in this Agreement, express or implied, is intended to
confer upon any Person, other than the Parties hereto and their
respective successors, and assigns, any benefit, right, remedy or
obligation.
16.4 Method of Asserting Claims: The Party making a claim under this
Section 16 is hereinafter referred to as the "Indemnified Party" and the
Party against whom such claims are asserted under this Section 16 is
hereinafter referred to as the "Indemnifying Party". All claims by an
Indemnified Party under this Section 16 shall be asserted and resolved
as follows:
16.4.1 If any claim or demand for which an Indemnifying Party would
be liable to an Indemnified Party hereunder is asserted against or
sought to be collected from such Indemnified Party by a third
party, such Indemnified Party shall as promptly as is practicable
after its receipt of such claim or demand notify in writing the
Indemnifying Party of such claim or demand, specifying the
nature of and specific basis for such claim or demand and the
amount or the estimated amount thereof to the extent then
feasible (which estimate shall not be conclusive of the final
amount of such claim and demand) (a "Claim Notice");
provided, however, that any failure to give such notice will not
waive any rights of the Indemnified Party except to the extent
that either the rights of the Indemnifying Party are actually
prejudiced or such notice is not given within the applicable time
periods set forth in this Agreement.
The Indemnifying Party may, and upon request of the
Indemnified Party shall, retain counsel of its choice to represent
the Indemnified Party and any others the Indemnifying Party
may reasonably designate in connection with such claim or
demand and shall pay the fees and disbursements of such counsel
with regard thereto; provided, however, that any Indemnified
Party is hereby authorized prior to the date on which it receives
written notice from the Indemnifying Party designating such
counsel to retain counsel whose reasonable fees and expenses
shall be at the expense of the Indemnifying Party to file any
action, answer or other pleading and take such other action
which it shall reasonably deem necessary to protect its interests
or those of the Indemnifying Party until the date on which the
Indemnified Party receives such notice from the Indemnifying
Party.
In the event that the Indemnifying Party shall retain such
counsel, the Indemnified Party shall have the right to retain its
own counsel but the fees and expenses of such counsel shall be
at the expense of the Indemnified Party unless:
(i) the Indemnifying Party and the Indemnified Party
shall have mutually agreed to the retention of such
counsel; or
(ii) the named parties to any such proceeding (including,
but not limited to, any impleaded parties) include
both the Indemnifying Party and the Indemnified
Party and representation of both Parties by the same
counsel would involve such counsel in an actual or
potential conflict of interest in violation of applicable
principles of professional ethics.
16.4.2 If requested by the Indemnifying Party, the Indemnified Party
agrees to cooperate with the Indemnifying Party and its counsel
in contesting any claim or demand that the Indemnifying Party
defends, or, if appropriate and related to the claim in question,
in making any counterclaim against the Person asserting the
third party claim or demand, or any cross-complaint against any
Person. If the Indemnifying Party has accepted responsibility in
writing, no claim or demand that would result in an
Indemnifying Party being liable hereunder may be settled
without the consent of the Indemnifying Party which consent
shall not be unreasonably withheld. Unless the Indemnifying
Party shall have agreed in writing that any and all damages to
the Indemnified Party related to a claim or demand are fully
covered by the indemnities provided herein, no such claim or
demand may be settled without the consent of the Indemnified
Party, which consent will not be unreasonably withheld. Except
with respect to settlements entered into without the Indemnified
Party's consent pursuant to the immediately preceding sentence,
to the extent it shall be determined that the Indemnified Party
shall have no right pursuant to this Section to be indemnified by
the Indemnifying Party, the Indemnified Party shall promptly pay
to the Indemnifying Party:
(i) any amounts previously paid or advanced by the
Indemnifying Party to the Indemnified Party with
respect to such matters pursuant to this Section; plus
(ii) interest thereon until paid by the Indemnified Party
at the Interest Rate for the period commencing on
the date on which such amount was paid or
advanced and ending sixty (60) days after the date
on which it was finally determined that the
Indemnified Party had no such right to be
indemnified.
16.4.3 In the event the Indemnified Party should have a claim against
the Indemnifying Party hereunder which does not involve a
claim or demand being asserted against or sought to be collected
from it by a third party, the Indemnified Party shall as promptly
as is practical send a Claim Notice with respect to such claim to
the Indemnifying Party; provided, however, that any failure to
give such notice will not waive any rights of the Indemnified
Party except to the extent that either the rights of the
Indemnifying Party are actually prejudiced or such notice is not
given within the applicable time periods set forth in this
Agreement. If the Indemnifying Party notifies in writing the
Indemnified Party that it does not dispute such claim, the
amount of such claim shall be conclusively deemed a liability of
the Indemnifying Party hereunder and shall be paid to the
Indemnified Party immediately. If the Indemnifying Party
disputes such claim, such dispute shall be resolved by good faith
negotiations between the Parties.
16.4.4 From and after the delivery of a Claim Notice hereunder, at the
reasonable request of the Indemnifying Party, the Indemnified
Party shall grant the Indemnifying Party and its representatives
full and complete access to the books, records and properties of
the Indemnified Party to the extent reasonably related to the
matters with which the Claim Notice is concerned. The
Indemnifying Party will not, and shall require that its
representatives do not, use (except in connection with such
Claim Notice) or disclose to any third Person other than the
Indemnifying Party's representatives (except as may be required
by applicable Legal Requirements) any information obtained
pursuant to this Section 16.4.4 that is designated as confidential
by the Indemnified Party, unless such information is:
(i) generally available to the public other than as the
result of a wrongful act or omission by the
Indemnifying Party;
(ii) already within the knowledge of the Indemnifying
Party;
(iii) available to the Indemnifying Party through rights
other than as provided in this Section 16.4.4, or
(iv) provided to the Indemnifying Party in writing by a
third party who is under no obligation to the
Indemnified Party to protect the confidentiality
thereof.
All such access shall be granted during normal business hours, shall be
subject to the normal safety regulations of the Indemnified Party, and
shall be granted under conditions that will not interfere with the business
and operations of the Indemnified Party. Nothing contained in this
Section 16.4.4 shall be construed to expand or contract the rights or
obligations of the Indemnifying Party with respect to any information
previously provided to the Indemnifying Party pursuant to any other
confidentiality agreement.
16.5 Right to Cure: Any Party that is obligated to indemnify, defend and/or
hold harmless any other Party pursuant to any provision of this Section
16 shall have the right to cure, within a reasonable time and in a man-
ner reasonably satisfactory to such Indemnified Party, any matter giving
rise to such obligation; provided, however, that any such cure shall not
relieve or reduce any such obligation to the extent that such cure is
inadequate. The Indemnified Party may, if there is no attempt to cure
or if the cure is inadequate, expend reasonable sums to cure which sums
shall be reimbursed together with interest at the Interest Rate.
SECTION 17
CLOSING
17.1 Time of Essence: Time is expressly declared to be of essence under this
Agreement.
17.2 Place and Date: Closing shall occur at Unocal's offices at 14141
Southwest Freeway, Sugar Land, Texas 77478 within seven (7) days
from the end of the Due Diligence Period ("Closing Date"), unless
extended by agreement of the parties.
17.3 Unocal's Actions at Closing: At Closing, Unocal shall perform the
following actions:
17.3.1 Unocal shall deliver to Buyer the opinion and executed
certificate contemplated by Sections 10.4 and 10.6;
17.3.2 Unocal shall execute and deliver to Buyer a Bill of Sale for the
warehouse stock and idle equipment in the form attached hereto
as Exhibit "J";
17.3.3 Unocal shall execute and deliver to Buyer a Quitclaim Deed in
the form attached hereto as Exhibit "K";
17.3.4 Unocal shall execute and deliver to Buyer an Assignment of
Intangible Contractual Rights and Other Intangible Property,
listed on Exhibit "C", in the form attached hereto as Exhibit "J";
17.3.5 Unocal shall execute, acknowledge and deliver to Buyer an
Assignment of Leases in the form attached hereto as Exhibit "J",
and Unocal shall deliver to Buyer any required assignment forms
for any state, federal or Indian tribal oil and gas leases;
17.3.6 Unocal shall (subject to the terms of applicable operating
agreements and other provisions hereof) deliver to Buyer
exclusive possession of the Assets;
17.3.7 Unocal shall, at or as promptly as reasonably possible after
Closing, provide Buyer, subject to the attorney-client privilege
and applicable copyright laws, the following original records
relating to the Interests to the extent they are in Unocal's
possession: lease files; unit files; lease contract files; plant
accounting computer programs; Worland Plant accounting files;
product marketing files; compression, gathering and processing
files; oil and gas sales contracts; third party consents; DXF files
containing lease and unit mapping data; division of ownership
files and spreadsheets for the Worland Plant, all participating
areas and the balance of the Assets on diskette and hard copy,
if available; and all well files, but specifically excluding all
other records, including, but not limited to, corporate records,
computer programs and general tax records. Unocal shall also
provide copies of all seismic data covering the Assets at Buyer's
cost and expense, subject to Buyer's execution of an agreement
prepared in the form of Exhibit "G" covering such seismic data,
that Unocal is not contractually or otherwise legally restricted
from disclosing. As to any seismic data Unocal is contractually
or otherwise legally restricted from disclosing, Buyer may
prepare and provide Unocal with documents requesting waivers
of the applicable restrictions, and Unocal shall forward such
requests as well as provide Buyer such other assistance in
obtaining waivers of the applicable restrictions as is reasonable
under the circumstances. All data files, programs and records
provided hereunder are provided WITHOUT WARRANTY AS
TO THE ACCURACY OR COMPLETENESS OF THE
INFORMATION CONTAINED THEREIN, and shall be at
Buyer's sole risk and expense. Any other provision of this
Agreement to the contrary notwithstanding, Unocal shall not
provide Buyer with copies of any records or data or access to
any records or data which Unocal cannot legally provide to
Buyer because of third party restrictions on Unocal; and
17.3.8 Unocal shall deliver to Buyer a certificate of an informed officer
of Unocal to the effect that, as of the Closing Date, it is not a
foreign person as defined in the Internal Revenue Code of 1986,
as amended, and Income Tax Regulations, such certificate to be
substantially in the form described in Treasury Regulation
Section 1.1445-2(b)(2)(iii)(B) or otherwise within the
requirements of Section 1. 1445-2(b)(2) of that regulation.
17.4 Buyer's Actions at Closing: At Closing, Buyer shall perform the
following actions:
17.4.1 Buyer shall execute and deliver to Unocal an Assumption
Agreement in the form attached hereto as Exhibit "L";
17.4.2 Buyer shall execute and deliver to Unocal the certificate and
opinion contemplated by Section 9.3; and
17.4.3 Buyer shall make the payments contemplated in Section 3.2.2
and 3.2.3.
17.5 Notices: Immediately after Closing, Buyer shall notify all operators,
non-operators, oil or gas purchasers, government agencies and royalty
owners that it has purchased the Assets.
SECTION 18
ACTIONS AFTER CLOSING
18.1 Final Accounting: Within 120 days after Closing Unocal shall provide
Buyer with a statement of accounting ("Final Accounting"). Buyer shall
have the right to cause its accountant, in consultation with Unocal's
accountant, to review the Final Accounting within an additional seven
(7) days following Unocal's delivery of such notice. If Buyer's
accountant and Unocal's accountant are unable to agree upon the Final
Accounting within an additional fourteen (14) days following completion
of Buyer's review of the Final Accounting described above, then the two
accountants jointly shall select, within such fourteen (14) day period,
an independent accounting firm of national reputation which shall deter-
mine the final accounting as soon as reasonably possible but in no event
later than 180 days after Closing. The determination by such indepen-
dent accounting firm shall be conclusive. The expense of such indepen-
dent accounting firm shall be borne one-half by Unocal and one-half by
Buyer.
18.2 Receipts and Credits: Notwithstanding Section 18.1, all monies,
proceeds, receipts, credits and income attributable to the Assets for
all periods of time subsequent to the Effective Date except as otherwise
provided herein, shall be the sole property and entitlement of Buyer,
and to the extent received by Unocal, Unocal shall account for and re-
flect the same to Buyer in the Final Accounting after Closing. All
monies, proceeds, receipts and income attributable to the Assets except
as otherwise provided in this Agreement for all periods of time prior to
the Effective Date shall be the sole property and entitlement of Unocal
and, to the extent received by Buyer, Buyer shall fully disclose,
account for and transmit same to Unocal promptly. All costs, expenses
and disbursements attributable to the Assets for periods of time prior
to the Effective Date except as otherwise provided herein, regardless of
when due or payable, shall be the sole obligation of Unocal and Unocal
shall promptly pay, or if paid by Buyer, promptly reimburse Buyer for
and hold Buyer harmless from and against same. All costs, expenses and
disbursements attributable to the Assets for periods of time subsequent
to the Effective Date regardless of when due or payable, shall be the
sole obligation of Buyer and Buyer shall promptly pay, or if paid by
Unocal, promptly reimburse Unocal for and hold Unocal harmless from and
against same. Unocal shall be entitled to a credit for and reimburse-
ment in an amount equal to any amount received by Buyer after Closing
for any delivery or performance by Unocal prior to the Effective Date,
and Buyer shall be entitled to a credit for and reimbursement in an
amount equal to any amount received by Unocal after Closing for any
delivery or performance by Buyer after the Effective Date.
18.3 Suspended Funds: After the Closing, Unocal will provide to Buyer a
listing showing all proceeds from production attributable to the
Leasehold Interests which are currently held in suspense and shall
transfer to Buyer all of those suspended proceeds. Buyer shall be
responsible for proper distribution of all the suspended proceeds, to
the extent turned over to it by Unocal, to the parties lawfully entitled
to them, and hereby agrees to indemnify, defend and hold harmless Unocal
from and against any and all claims, liabilities, losses, costs and
expenses, arising out of or relating to those suspended proceeds.
18.4 Further Assurances: After Closing, Unocal and Buyer agree to take
such further actions and to execute, acknowledge and deliver all such
further documents that are necessary or useful in carrying out the
purposes of this Agreement or of any document delivered pursuant
hereto.
18.5 Recording: Buyer shall, at its own cost, immediately record the
Assignments and Bill of Sale in the appropriate office of the state and
county in which the lands covered by the Assignments are located.
Buyer shall immediately file for and obtain the necessary approval of
all federal, Indian tribal or state government agencies to the assign-
ment of the Assets. The assignment of any state, federal or Indian tri-
bal oil and gas leases shall be filed in the appropriate governmental
offices on a form required and in compliance with the applicable rules
of the applicable government agencies. Buyer shall supply Unocal, at
Unocal's cost, with a true and accurate photocopy of all the recorded
and filed assignments within a reasonable period of time after their
recording and filing.
18.6 Books and Records: Notwithstanding any other provision herein
contained, Buyer shall retain all original documents delivered to Buyer
pursuant to Section 17.3.7 pertaining to the Assets for as long as it so
desires and make the same available after the Closing for inspection and
copying by Unocal at Buyer's expense during normal business hours,
upon reasonable request and upon reasonable notice; provided, however,
that during the first ten (10) years after Closing, such books, records
or documents shall not be disposed of or destroyed by Buyer without
first advising Unocal in writing and giving Unocal reasonable opportu-
nity to obtain possession thereof.
18.7 Access to Properties and Records by Buyer: From and after the
Closing Date, Unocal will afford to Buyer and its authorized
representatives reasonable access during normal business hours to the
then current officers and employees of Unocal retained by Unocal who
were employed in connection with the Assets and will cooperate with
Buyer in making available to Buyer at Buyer's expense, unless the action
is an action by Buyer against Unocal, as a witness or deponent such
employees of Unocal in each case only so long as such persons are then
employees of Unocal or an Affiliate of Unocal, as Buyer may request for
(a) financial reporting, (b) tax or similar purposes or (c) purposes of
investigating claims, or conducting litigation or administrative
proceedings with third parties or government agencies. Unocal will also
afford to Buyer and its authorized representatives, for appropriate
purposes, such reasonable access during normal business hours to the
properties and relevant books and records of Unocal associated with the
Assets prior to the Closing Date but not transferred to Buyer.
18.8 Access to Properties and Records by Unocal: From and after the
Closing Date, Buyer will afford to Unocal and its authorized
representatives reasonable access, during normal business hours, to the
transferred employees, as shall at such time be employees of Buyer and
who were prior to the Closing Date associated with the Assets, and to
such properties, books and records relating to the Assets transferred to
Buyer hereunder without charge, and will furnish to Unocal such
additional information, and will cooperate with Unocal in such other
respects, including the making available to Unocal at Unocal's expense,
unless the action is an action by Unocal against Buyer, as a witness or
deponent such former employees of Unocal as shall be at the time
employees of Buyer, as Unocal may request for (a) financial reporting,
(b) tax or similar purposes or (c) purposes of investigating claims, or
conducting litigation or administrative proceedings with third parties
or government agencies. Buyer will also provide to Unocal's authorized
representatives such reasonable access without charge during normal
business hours to the officers, employees, properties, books and records
transferred to Buyer in connection with this Agreement.
18.9 Financial Statements: Seller shall provide Buyer reasonable assistance
in the preparation and audit of the financial statements and footnotes
relative to the Properties to the extent required for inclusion in a
Form 8-K which must be filed by Buyer with the Securities and Exchange
Commission no later than seventy-five (75) days after Closing. Such
assistance shall be provided by Unocal to an accounting firm acceptable
to Buyer and Unocal, and at the sole cost and expense of Buyer.
IN WITNESS WHEREOF, the Parties have executed this Agreement
as of the date first above written.
UNION OIL COMPANY OF CALIFORNIA
By:
David J. Kinzelman
Attorney-in-Fact
DEVON ENERGY CORPORATION (Nevada)
By:
H.R. Sanders, Jr.
Executive Vice President
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Devon Energy Corporation:
We consent to incorporation by reference in the Registration
Statements (No. 33-32378 and 33-67924) on Form S-8 of Devon
Energy Corporation of our report dated December 19, 1995, with
respect to the statement of revenues and direct operating
expenses of the Worland Properties for the year ended December
31, 1994, which report appears in the Form 8-K of Devon Energy
Corporation dated December 18, 1995.
KPMG Peat Marwick LLP
Oklahoma City, Oklahoma
December 28, 1995
79
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