<PAGE>
UNITED STATES
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
April 30, 1997
Date of Report (Date of earliest event reported)____________________
MAGNUM HUNTER RESOURCES, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEVADA 1-12508 87-0462881
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission IRS Employer
of incorporation) File Number) Identification No.)
600 East Las Colinas Boulevard, Suite 1200, Irving, Texas 75039
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (972) 401-0752
- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
1
<PAGE>
Item 2. Acquisition or Disposition of Assets
On April 30, 1997, the Company acquired from Burlington Resources Oil & Gas
Company and Glacier Park Company, two wholly-owned subsidiaries of Burlington
Resources, Inc., effective as of January 1, 1997, certain properties consisting
of 25 field areas in west Texas and 22 field areas in southeast New Mexico (the
"Permian Basin Properties"), for a net purchase price of $133.0 million after
adjustments of $10.5 million for production cash flow from January 1, 1997 to
the closing date and other minor adjustments. The primary producing formations
include the Yates, Seven Rivers and Queen in Lea and Eddy Counties, New Mexico;
the Atoka in the Brunson Ranch Field in Loving County, Texas; the Clearfork in
the Westbrook Field in Mitchell County, Texas; the San Andres in the
Levelland/Slaughter Field in Cochran County, Texas; and the Canyon Sand in
Sutton County, Texas. The Permian Basin Properties include 1,852 producing oil
and natural gas wells on approximately 113,810 gross acres (82,175 net acres).
One of the Company's subsidiaries, Gruy Petroleum Management Co., serves as
operator on approximately 66% of the wells on the Permian Basin Properties.
During 1996, daily net production from the Permian Basin Properties was
25.8 MMcf per day of natural gas and over 2,500 Bbl/d of oil. According to Ryder
Scott Co., independent petroleum engineers engaged by the Company to evaluate
the Permian Basin Properties, as of December 31, 1996, the Permian Basin
Properties had proved reserves of 15.3 MMBbl of oil and 99.9 Bcf of natural gas,
or on a natural gas equivalent basis, 191.6 Bcfe. Ryder Scott Co. further
estimated the future net cash flows and the SEC PV-10 for the Permian Basin
Properties to be $468.8 million and $243.3 million, respectively, as of December
31, 1996 based on prices of $23.61 per Bbl of oil and $4.12 per Mcf of natural
gas at December 31, 1996. As of December 31, 1996, approximately 68% of the
proved reserves were classified as proved developed producing reserves.
The Company financed the acquisition of the Permian Basin Properties
with a new $130.0 million credit facility (the "New Credit Facility") and a
senior subordinated credit facility of $60.0 million (the "Term Loan Facility").
Borrowings of $119.5 million under the New Credit Facility and $60.0 million
under the Term Loan Facility were used to pay the $123.0 million balance of the
$133.0 million net purchase price for the Permian Basin Properties, to repay the
$53.7 million in outstanding indebtedness as of April 30, 1997 under the
Company's previous $100.0 million credit facility and to pay the costs
associated with the Permian Basin Acquisition and the related financings.
The New Credit Facility currently bears interest at 9.0% per annum.
Upon repayment of the Term Loan Facility, the New Credit Facility will initially
bear interest at LIBOR plus 1.75% per annum, which would be 7.6% based on the
LIBOR rate at April 30, 1997. The unpaid principal amount under the New Credit
Facility matures on April 30, 2002. At April 30, 1997, the interest rate on the
Term Loan Facility was 11.5% per annum. The Term Loan Facility initially matures
on April 30, 1998, at which time the Company has the option to extend such
facility for an additional five years.
2
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired
Financial Statements of Permian Basin Properties
Independent Auditors' Report-Hein + Associates LLP . . .. . . . . . . . F-1
Historical Summaries of Revenues and Direct Operating Expenses
of the Permian Basin Properties for the year ended December 31, 1996
and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Notes to Historical Summaries of Revenues and Direct Operating Expenses
for the Years Ended December 31, 1996 and 1995 . . . . . . . . . . . .F-3
(b) Pro forma financial information
Unaudited Pro Forma Combined Financial Data
Introduction............................................................F-6
Unaudited Pro Forma Combined Balance Sheet as of March 31, 1997 . . . . F-7
Unaudited Pro Forma Combined Income Statement for the three month period
ended March 31, 1997..................................................F-8
Unaudited Pro Forma Combined Income Statement for the year ended
December 31, 1996 ....................................................F-9
Notes To Unaudited Pro Forma Combined Financial Data . . . . . . . . . F-10
(c) Exhibits
10.8 Purchase and Sale Agreement, dated February 27, 1997, among Burlington
Resources Oil & Gas Company, Glacier Park Company and Magnum Hunter Production,
Inc.
3
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Magnum Hunter Resources, Inc.
Irving, Texas
We have audited the accompanying historical summaries of revenue and
direct operating expenses of properties to be acquired April 30, 1997 (the
"Permian Basin Properties"), for the years ended December 31, 1996 and 1995. The
historical summaries are the responsibility of the Company's management. Our
responsibility is to express an opinion on the historical summaries 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 historical summaries are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the historical summary. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall historical summary presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying historical summaries were prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission (for inclusion in the Form 8-K) of Magnum Hunter Resources, Inc.) as
described in Note 1 and are not intended to be a complete presentation of the
properties' revenues and expenses.
In our opinion, the historical summaries referred to above present
fairly, in all material respects, the revenue and direct operating expenses of
the properties to be acquired April 30, 1997, in conformity with generally
accepted accounting principles.
HEIN + ASSOCIATES LLP
April 23, 1997
Dallas, Texas
F-1
<PAGE>
MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
PERMIAN BASIN PROPERTIES
HISTORICAL SUMMARIES OF REVENUES AND DIRECT OPERATING EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
Year Ended 1996 Year Ended 1995
OIL AND GAS SALES........................ $39,433,000 $30,098,000
DIRECT OPERATING EXPENSES................ (11,646,000) (11,711,000)
----------------- ----------------
NET REVENUE.............................. $27,787,000 $18,387,000
================= ================
See Notes to Historical Summaries of Revenues and
Direct Operating Expenses for the Years Ended
December 31, 1996 and 1995.
F-2
<PAGE>
MAGNUM HUNTER RESOURCES, INC. AND SUBSIDIARIES
PERMIAN BASIN PROPERTIES
NOTES TO HISTORICAL SUMMARIES OF REVENUES
AND DIRECT OPERATING EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
NOTE 1 - BASIS OF PREPARATION
The accompanying historical summaries of revenues and direct operating
expenses relate to the operations of the oil and gas properties to be acquired
by Magnum Hunter Resources, Inc. (the "Company") on April 30, 1997 from
Burlington Resources Oil and Gas Company (Burlington). The properties are to be
acquired for approximately $133,000,000 net of purchase adjustments.
Revenues are recorded when the Company's share of oil or natural gas
and related liquids are sold. Direct operating expenses are recorded when the
related liability is incurred. Direct operating expenses include lease operating
expenses, ad valorem taxes and production taxes. Depreciation and amortization
of oil and gas properties, general and administrative expenses and income taxes
have been excluded from operating expenses in the accompanying historical
summaries because the amounts would not be comparable to those resulting from
proposed future operations. Sales of natural gas and oil (until August 1996)
have generally been made to an affiliated entity of Burlington.
The historical summaries presented herein were prepared for the
purposes of complying with the financial statement requirements of a business
acquisition to be filed on Form 8-K as promulgated by Regulation S-B Item 3-10
of the Securities Exchange Act of 1934.
NOTE 2 - CONTINGENCIES
The properties to be acquired are subject to several lawsuits against
Burlington that have arisen from the ordinary course of operations. Burlington
has indemnified the Company in the Purchase and Sale Agreement against any
liability from those claims.
In the Purchase and Sale Agreement, Burlington agreed to indemnify the
Company against environmental claims relating to the acquired properties and
arising prior to January 1, 1997 provided that the Company notifies Burlington
of such claims by December 31, 1997. Burlington will provide indemnification
against such claims up to $10,762,500 and share the next $21,525,000 of claims
with the Company on an equal basis. Burlington represented in the Purchase and
Sale Agreement that no material environmental claims have been asserted; however
certain of these properties require remediation which, in the Company's opinion,
will not result in material costs.
NOTE 3 - SUPPLEMENTAL INFORMATION ON OIL AND GAS RESERVES (UNAUDITED)
Proved oil and gas reserves consist of those estimated quantities of
crude oil, natural gas, and natural gas liquids that geological and engineering
data demonstrate with reasonable certainty to be recoverable in future years
from known reservoirs under existing economic and operating conditions. Proved
developed oil and gas reserves are reserves that can be expected to be recovered
through existing wells with existing equipment and operating methods.
F-3
<PAGE>
The following estimates of proved reserves have been made by
independent engineers. The estimated net interests in proved reserves are based
upon subjective engineering judgments and may be affected by the limitations
inherent in such estimation. The process of estimating reserves is subject to
continual revision as additional information becomes available as a result of
drilling, testing, reservoir studies and production history. There can be no
assurance that such estimates will not be materially revised in subsequent
periods.
Estimated quantities of proved oil and gas reserves of the properties
to be acquired April 30, 1997 are as follows:
Natural Gas
(Thousand Cubic
Oil (Barrels) Feet)
December 31, 1996
Proved reserves....................... 15,291,000 99,876,000
=============== =============
Proved developed reserves............. 8,968,000 77,373,000
============== ==============
December 31, 1995
Proved reserves....................... 16,176,000 108,476,000
============== ==============
Proved developed reserves................ 9,853,000 85,973,000
============== ==============
The changes in proved reserves for the years ended December 31, 1996
and 1995 were as follows:
Natural Gas
(Thousand Cubic
Oil (Barrels) Feet)
--------------- ---------------
Reserves at January 1, 1995............... 17,121,000 118,076,000
Revisions and other....................... 73,000 730,000
Production................................ (1,018,000) (10,330,000)
--------------- ---------------
Reserves at December 31, 1995.............. 16,176,000 108,476,000
Revisions and other........................ 29,000 808,000
Production................................. (914,000) (9,408,000)
--------------- ---------------
Reserves at December 31, 1996.............. 15,291,000 99,876,000
=============== ==============
F-4
<PAGE>
The standardized measure of discounted estimated future net cash flows
related to proved oil and gas reserves at December 31, 1996 and 1995 were as
follows:
1996 1995
---- ----
Future cash inflows..........................$769,681,000 $410,721,000
Future development and production costs..... (300,868,000) (275,252,000)
------------- -------------
Future net cash flows, before income tax..... 468,813,000 135,469,000
Future income taxes..........................(116,660,000) -
------------- -------------
Future Net Cash Flows........................ 352,153,000 135,469,000
10% annual discount..........................(169,385,000) (60,181,000)
------------- -------------
Standardized Measure of Discounted Future
Net Cash Flows...............................$182,768,000 $75,288,000
============= ============
The primary changes in the standardized measure of discounted estimated
future net cash flows for the years ended December 31, 1996 and 1995 were as
follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Beginning of year.................................................... $75,288,000 $74,793,000
Sales of oil and gas produced, net of production costs............... (27,787,000) (18,387,000)
Net change in price and costs........................................ 182,919,000 10,160,000
Change in quantity estimates and other............................... 933,000 432,000
Accretion of discount................................................ 7,528,000 7,800,000
Net change in income taxes........................................... (56,113,000) 490,000
------------------ -------------------
End of year.......................................................... $182,768,000 $75,288,000
================== ===================
</TABLE>
Estimated future cash inflows are computed by applying year-end prices
of oil and gas to year-end quantities of proved reserves. Estimated future
development and production costs are determined by estimating the expenditures
to be incurred in developing and producing the proved oil and gas reserves at
the end of the year, based on year-end costs and assuming continuation of
existing economic conditions. Estimated future income tax expense is calculated
by applying year-end statutory tax rates to estimated future pre-tax net cash
flow related to proved oil and gas reserves, less the tax basis of the
properties involved.
The assumptions used to compute the standardized measure are those
prescribed by the Financial Accounting Standards Board and as such, do not
necessarily reflect the Company's expectations of actual revenues to be derived
from those reserves nor their present worth. The limitations inherent in the
reserve quantity estimation process are equally applicable to the standardized
measure computations since these estimates are the basis for the valuation
process.
F-5
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following unaudited pro forma combined financial data are derived
from the consolidated financial statements of the Company and certain historical
financial data in respect of various assets acquired by the Company. The
historical revenues and oil and gas production and gas gathering and marketing
expenses of the McLean Gas Plant, the Panoma Properties and the Permian Basin
Properties represent amounts recorded with respect to such properties for the
period indicated. The Unaudited Pro Forma Balance Sheet of the Company as of
March 31, 1997 has been prepared assuming the Permian Basin acquisition
(including the incurrence of indebtedness under the New Credit Facility and the
Term Loan Facility and the use of proceeds therefrom) had been consummated on
March 31, 1997. The Unaudited Pro Forma Income Statement for the year ended
December 31, 1996 has been prepared assuming the Panoma acquisition, the
issuance of the TCW Preferred Stock, the McLean Plant acquisition, the
conversion of the Series B and Series C Preferred Stock into Common Stock, the
Permian Basin acquisition (including the incurrence of indebtedness under the
New Credit Facility and the Term Loan Facility and the use of proceeds
therefrom) had been consummated as of January 1, 1996. The Unaudited Pro Forma
Income Statement for the three months ended March 31, 1997 has been prepared
assuming the Permian Basin acquisition had occurred on January 1, 1997. However,
the historical amounts used for the Permian Basin Properties are for the three
months ended December 31, 1996, because the information for the three months
ended March 31, 1997 is not available. The pro forma adjustments set forth on
the attached Unaudited Pro Forma Balance Sheet and Unaudited Pro Forma Income
Statements reflect the following as if they occurred on the dates hereinabove
set forth:
(1) Recent Transactions (December 31, 1996 Income Statement data only). The
Panoma acquisition completed in July 1996; the conversion or redemption
of the Series B and Series C Preferred Stock in 1996; the issuance of
the TCW Preferred Stock in December 1996; and the McLean Plant
acquisition in January 1997.
(2) Permian Basin Acquisition. The Permian Basin acquisition completed in
April 1997 (including the incurrence of indebtedness under the New
Credit Facility and the Term Loan Facility to finance the Permian Basin
acquisition and repay the indebtedness under the Previous Credit
Facility).
The Unaudited Pro Forma Balance Sheet reflects the preliminary
allocations of the purchase price for the acquisition of the Permian Basin
Properties to the assets and liabilities of the Company. The final allocation of
the purchase price, and the resulting effect on depreciation and depletion
expense in the accompanying Unaudited Pro Forma Combined Income Statements, may
differ based on the actual post-closing adjustments, which will be determined in
October 1997.
The unaudited pro forma combined financial data should be read in
conjunction with the notes thereto and with the consolidated financial
statements of the Company and the notes thereto as filed in the Company's Form
10-KSB and Form 10-QSB and the historical summaries of revenues and direct
operating expenses of the Permian Basin Properties, which are included elsewhere
in this document.
The unaudited pro forma combined financial data are not indicative of
the financial position or results of operations of the Company which would
actually have occurred if the transactions described above had occurred at the
dates presented or which may be obtained in the future. In addition, future
results may vary significantly from the results reflected in such statements due
to normal oil and natural gas production declines, changes in prices paid for
oil and natural gas, future acquisitions, drilling activity and other factors.
F-6
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
As of March 31, 1997
(dollars in thousands)
<TABLE>
<CAPTION>
Magnum Hunter Pro Forma Pro Forma
Historical Adjustments
-------------------- ----------------- ----------------
<S> <C> <C> <C>
Assets:
Cash and cash equivalents........... $3,109 $939 (2) $4,048
Accounts receivable................. 5,569 - 5,569
Notes receivable from affiliate..... 348 - 348
Other current assets................ 403 - 403
------------------- ----------------- ----------------
Total current assets........ 9,429 939 10,368
Property, plant and equipment:
Oil and gas properties........... 73,778 133,000 (1) 206,778
Pipelines........................ 9,617 - 9,617
Other property................... 427 - 427
------------------ ------------------ ----------------
83,822 133,000 216,822
Accumulated depreciation,
depletion and impairment....... (5,950) - (5,950)
----------------- ------------------ ----------------
Net property, plant, and
equipment....................... 77,872 133,000 210,872
Other assets........................ 12,552 (10,000)(1) 5,052
2,500 (3)
----------------- ------------------ ----------------
Total assets................ $99,853 $126,439 $226,292
================= ================= ================
Liabilities and Stockholders' Equity:
Current liabilities................. $7,788 $(300)(4) $7,488
Long-term debt (including current
maturities)...................... 52,761 126,739 (4) 179,500
Production payment liability........ 910 - 910
Minority interest................... 38 - 38
Deferred income taxes............... 3,620 - 3,620
----------------- ------------------ -----------------
Total liabilities........... 65,117 126,439 191,556
Stockholders' Equity:
Preferred stock.................. 1 - 1
Common stock..................... 29 - 29
Additional paid-in-capital....... 39,771 - 39,771
Accumulated deficit.............. 5,111) - (5,111)
Other............................ 46 - 46
Total stockholders' equity....... 34,736 - 34,736
--------------- ------------------ -----------------
Total liabilities and
stockholders' equity........... $99,853 $126,439 $226,292
=============== ================= =================
</TABLE>
See accompanying notes to Unaudited Pro Forma Combined Financial Data.
F-7
<PAGE>
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
Three Months Ended March 31, 1997
(dollars in thousands)
<TABLE>
<CAPTION>
Pro Forma
Magnum Adjustments for Pro Forma
Hunter Permian Basin Permian Basin
Historical Acquisition Acquisition
----------- --------------- ---------------
<S> <C> <C> <C>
Operating Revenues:
Oil and gas sales............... $ 3,263 $ 11,317 (5) $14,580
Gas gathering, marketing
and processing.................. 3,892 - 3,892
Oil field services and
international sales................. 3,471 - 3,471
------------- -------------- ---------------
Total operating revenue................ 10,626 11,317 21,943
Operating Costs and Expenses:
Oil and gas production................. 1,597 2,618 (5) 4,215
Gas gathering, marketing and
processing.................... 2,960 - 2,960
Oil field services and international
sales......................... 3,338 - 3,338
Depreciation and depletion............. 1,081 3,240 (16) 4,321
General and administrative............. 222 38 (6) 260
------------- -------------- ---------------
Total operating costs and expenses..... 9,198 5,896 15,094
------------- -------------- ---------------
Operating profit....................... 1,428 5,421 6,849
Other income.................. 72 - 72
Interest expense.............. (1,068) (3,434) (18) (4,502 )
------------- -------------- ---------------
Income (loss) before income taxes...... 432 1,987 2,419
Provision for deferred income taxes... (164) (745) (13) (909)
------------- -------------- ---------------
Income before minority interest.... 268 1,242 1,510
Minority interest in subsidiary
earnings............................... (18) - (18)
------------ ------------- ----------------
Net Income............................. 250 1,242 1,492
Dividends applicable to preferred
shares........................ (219) - (219)
------------ ------------- ----------------
Income (loss) applicable to common
shares........................ $ 31 $1,242 $1,273
Net income (loss)
per share....................... $ 0.00 $0.09 $0.09
============ ============== ===============
</TABLE>
See accompanying notes to Unaudited Pro Forma Combined Financial Data.
F-8
<PAGE>
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
Year Ended December 31, 1996
(dollars in thousands)
<TABLE>
<CAPTION>
Pro Forma Pro Forma Pro Forma Recent
Magnum Adjustments Adjustments for Transactions and
Hunter for Recent Permian Basin Permian Basin
Historical Transactions Acquisition Acquisition
------------ ------------ -------------- -----------------
<S> <C> <C> <C> <C>
Operating Revenues:
Oil and gas sales............... $10,248 $3,267 (7) $39,433 (15) $52,948
Gas gathering, marketing and
processing................... 5,768 3,562 (8) - 10,304
974 (7)
Oil field services and
international sales.......... 396 - - 396
------------ ------------ -------------- ----------------
Total operating revenue...... 16,412 7,803 39,433 63,648
Operating Costs and Expenses:
Oil and gas production.......... 4,390 1,049 (7) 11,646 (15) 17,085
Gas gathering, marketing and
processing................... 4,708 1,476 (8) - 6,879
695 (7)
Oil field services and
international sales.......... 267 - 267
Depreciation and depletion...... 2,951 1,203 (9) 12,961 (16) 17,282
167 (10)
General and administrative...... 1,225 100 (11) 150 (17) 1,475
----------- ------------- -------------- ---------------
Total operating costs and
expenses................... 13,541 4,690 24,757 42,988
------------ ------------- -------------- ---------------
Operating profit................... 2,871 3,113 14,676 20,660
Other income.................... 344 - - 344
Interest expense................ (2,394) (1,555)(12) (14,059)(18) (18,008)
------------ ------------- -------------- ---------------
Income before income taxes......... 821 1,558 617 2,996
Provision for deferred
income taxes................. (312) (584)(13) (231)(13) (1,127)
------------- ------------- -------------- --------------
Net income......................... 509 974 386 1,869
Dividends applicable to
preferred shares............. (406) 389 (14) - (875)
(858)(14)
-------------- ------------- -------------- --------------
Income applicable to common
shares....................... $103 $505 $386 $994
============== ============= ============== ==============
Net income
per share................... $.01 $.04 $.03 $.08
============== ============= ============== =============
</TABLE>
See accompanying notes to Unaudited Pro Forma Combined Financial Data.
F-9
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
(dollars in thousands)
(1) To record the acquisition of the Permian Basin Properties for a net
purchase price of $133,000 ($143,500 gross purchase price less $10,500 of
closing adjustments to reflect production cash flow from January 1 through April
30, 1997 and other minor adjustments). The Permian Basin acquisition is
accounted for under the purchase method of accounting. The Company deposited
$10,000 of the net purchase price on February 27, 1997 which has been included
under "Other assets" in the Company's historical consolidated balance sheet as
of March 31, 1997; and the remaining $123,000 of the net purchase price was
funded by the Company's New Credit Facility and the Term Loan Facility.
(2) To record additional borrowings in April 1997 incurred under the
Previous Credit Facility.
(3) To record the debt issuance costs associated with the New Credit
Facility and Term Loan Facility as follows:
New Credit Facility debt issuance costs...................... $700
Term Loan Facility debt issuance costs....................... 1,800
----------
$2,500
==========
The Company would incur additional debt issuance costs in the event the
amounts outstanding under the Term Loan Facility and the New Credit Facility are
not reduced as anticipated with subsequent financing transactions.
(4) To record the borrowings under the New Credit Facility and Term Loan
Facility to acquire the Permian Basin Properties and refinance the Previous
Credit Facility as follows:
New Credit Facility...................................... $119,500
Term Loan Facility....................................... 60,000
Additional debt incurred in April 1997 under
Previous Credit Facility................................. 939
Repayment of Previous Credit Facility.................... (53,700)
------------
Net borrowing amount................................... $126,739
============
As part of the refinancing, $300 of accrued interest on the previous Credit
Facility was repaid and is included as an adjustment to current liabilities.
(5) To record the operating revenues and oil and gas production expenses of
the Permian Basin Properties as if they had been acquired on January 1, 1997.
The amounts are for the three months ended December 31, 1996, because the
amounts for the three months ended March 31,1997 were not available.
(6) To record the Company's estimates of general and administrative
expenses that would have been incurred if the Permian Basin Properties had been
acquired on January 1, 1997, net of estimated fees
F-10
<PAGE>
that would have been earned by the Company from third parties on the operated
properties as follows:
Additional general and administrative expenses $175
Operating fees earned from third parties (137)
------
38
======
(7) To record the operating revenues and oil and natural gas production
expenses and gas gathering and marketing expenses for the first six months of
1996 for the Panoma Properties that were acquired effective July 1, 1996 as if
the Panoma acquisition had occurred on January 1, 1996.
(8) To record operating revenues and gas gathering and marketing expenses
related to the Company's 50% interest in the McLean Gas Plant, which was
acquired for $2,500 in January 1997, for the year ended December 31, 1996 as if
the McLean Gas Plant had been acquired on January 1, 1996. The Company will
receive 100% of the net profits generated by the facility until the $2,500
purchase price is recovered, after which it will receive 50% of the net profits.
If the Company had received 50% of the net profits generated by the McLean Gas
Plant during the pro forma period presented, its gross margin would have been
reduced by $1,043.
(9) To record the pro forma depletion adjustment to reflect the Company's
depletion expense as if the Panoma Properties that were acquired effective July
1, 1996 had been acquired on January 1, 1996.
(10) To record one year of depreciation expense on the McLean Gas Plant
(depreciable life is 15 years) as if the McLean Gas Plant had been acquired on
January 1, 1996.
(11) To record estimated additional general and administrative expenses
that would have been incurred if the Panoma Properties that were acquired
effective July 1, 1996 had been acquired on January 1, 1996.
(12) To record interest expense as if the McLean Plant acquisition and the
Panoma acquisition had occurred on January 1, 1996 as set forth below. These
acquisitions were assumed to be financed by the Previous Credit Facility with an
average interest rate during 1996 of 7.625%.
McLean Gas Plant-interest....................................... $191
Panoma Properties-interest...................................... 1,321
Panoma Properties-amortization of associated debt issuance costs. 43
--------
$1,555
========
(13) To record the effect of the pro forma adjustments on deferred and
current federal and state income taxes at an assumed tax rate of 37.5% after
consideration of available net operating losses and other carryforwards.
(14) To remove the $389 of dividends applicable to Series B and Series C
Preferred Stock that was redeemed or converted to Common Stock in late 1996 as
if the redemption or conversion had occurred on January 1, 1996, and to record
dividends at a rate of 8.75% on the TCW Preferred Stock issued in December 1996
as if it had been outstanding since January 1, 1996.
F-11
<PAGE>
(15) To record the 1996 Permian Basin Properties operating revenues and oil
and gas production expenses as if the Permian Basin acquisition had occurred on
January 1, 1996.
(16) To record the pro forma depletion adjustment to reflect the Company's
depletion expense as if the Permian Basin Properties had been acquired at the
beginning of the respective periods
(17) To record the Company's estimates of general and administrative
expenses that would have been incurred if the Permian Basin Properties had been
acquired on January 1, 1996, net of estimated fees that would have been earned
by the Company from third parties on the operated properties as follows:
Additional general and administrative expenses................. $702
Operating fees earned from third parties........................ (552)
----------
$150
==========
(18) To record the interest expense associated with the borrowing of
$119,500 under the New Credit Facility and $60,000 under the Term Loan Facility
to complete the Permian Basin acquisition and to refinance the Previous Credit
Facility as if the acquisition and refinancing had closed on January 1, 1996.
The New Credit Facility and the Term Loan Facility are assumed to have
interest rates of 9.0% and 11.5%, respectively. The debt issuance costs
associated with the facilities are described in Note 2 above. The components of
this interest expense adjustment are as follows:
<TABLE>
<CAPTION>
1996 1997
----------------- ---------------
<S> <C> <C>
Elimination of pro forma interest adjustments for McLean Plant
Acquisition and Panoma Acquisition and amortization of
associated debt issuance costs............................................ $(1,555) $ -
Elimination of historical interest expense on Previous Credit Facility....... (2,394) (1,068)
Interest on New Credit Facility.............................................. 10,755 2,689
Amortization of debt issuance costs on New Credit Facility................... 133 33
Interest on Term Loan Facility............................................... 6,900 1,725
Amortization of debt issuance costs on Term Loan Facility.................... 220 55
------------- ----------
$14,059 $3,434
============ ==========
</TABLE>
F-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Magnum Hunter Resources, Inc.
/s/ Gary C. Evans
BY:____________________________
Gary C. Evans
President, Chief Executive
Officer and Chief Financial Officer
Dated: May 14, 1997
4
<PAGE>
Exhibit Index
Exhibit Sequentially
Number Number Page
- ------- ------------
10.8 Purchase and Sale Agreement between Magnum Hunter
Production,Inc.and Burlington Resources Oil & Gas
Company and Glacier Park Company, dated
February 27, 1997 6
5
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT dated this 27th day of February, 1997, is between BURLINGTON
RESOURCES OIL & GAS COMPANY, a Delaware corporation, and GLACIER PARK COMPANY, a
Delaware corporation (collectively, "Seller"), with offices at 5051 Westheimer,
Suite 1400, Houston, Texas 77056-2124, and MAGNUM HUNTER PRODUCTION, INC., a
Texas corporation ("Buyer"), with offices at 600 East Las Colinas Boulevard,
Irving, Texas 75039.
WHEREAS, Seller desires to sell, and Buyer desires to purchase, upon and
subject to the terms and conditions hereinafter set forth, all of Seller's
right, title, and interest in and to the following assets:
(i) The oil and gas leases, leasehold interests, overriding royalty
interests, term royalty interests, rights and interests attributable or
allocable to the oil and gas leases or leasehold interests by virtue of pooling,
unitization, cornmunitization, and operating agreements, licenses, permits and
other agreements, and other properties and interests described on Exhibit "A-1"
(limited as to the interests, lands and depths indicated in the Exhibit)
attached hereto (collectively, the "Leases"), together with Seller's right,
title and interest in and to the property and rights incident thereto,
including, but not limited to, as of the Effective Time, rights in, to, and
under leases, permits, rights-of-way, easements, licenses, farmouts, farming,
options, orders, and other contracts or agreements of a similar nature in any
way relating thereto;
(ii) The wells, equipment, materials, fixtures and improvements on the
Leases as of the Effective Time, appurtenant thereto or used or obtained in
connection with the Leases or with the production, treatment, sale or disposal
of hydrocarbons or waste produced therefrom or attributable thereto, and other
appurtenances "hereunto belonging (the "Equipment"); provided, however,
Equipment shall not include leased equipment located on the Leases:
(iii) The unitization, pooling and operating agreements, and the units
created thereby which relate to the Leases or interests described in Exhibit
"A-1" or which relate to units or wells located on the Leases, including the
units formed under orders, regulations, rules, and other official acts of the
governmental authority having jurisdiction, together with any right, title, and
interest created thereby in the Leases;
(iv) Gas purchase contracts and product purchase and sale agreements
related to the Leases;
(v) Equipment leases and rental contracts, as more particularly described
on Exhibit "A-2" attached hereto (to the extent the same are assignable); and
<PAGE>
(vi) Gas gathering agreements, gas processing agreements, contracts and
other agreements of a similar nature used primarily in connection with the
Leases (to the extent the same are assignable).
Seller's interests in these assets is herein collectively referred to as
the "Interests"; provided, however, the Interests shall not include, and there
is excepted, reserved and excluded from this Agreement the following
(collectively, the "Excluded Interests"): (i) the personal and real property set
forth in Exhibit "A-3" attached hereto, (ii) any mineral interests (as to which
a conveyance in the form of Exhibit "C-4" shall be made), and (iii) the
gathering lateral lines and appurtenances included in the gathering systems that
are used to perform the services under the Gathering Agreements (to be executed
and delivered at Closing) and such portion of the surface use servitudes created
by the Leases as necessary to permit Seller to own, maintain, and operate such
lines and appurtenances (which reserved rights shall be non-exclusive).
NOW, THEREFORE, in consideration of the above recitals and of the covenants
and agreements herein contained, Seller and Buyer agree as follows:
1. Purchase and Sale. Subject to and upon all of the terms and conditions
herein set forth, Seller shall sell, transfer, assign, convey, and deliver the
Interests to Buyer, and Buyer shall purchase, receive, pay for, and accept the
Interests from Seller, effective January 1, 1997, 7 a.m. local time at the
Leases (the "Effective Time").
2. Purchase Price and Performance Deposit.
(a) The purchase price for the Interests shall be ONE HUNDRED FORTY-THREE
MILLION FIVE HUNDRED THOUSAND DOLLARS ($143,500,000) (the "Base Purchase
Price"), subject to any applicable purchase price adjustment as provided for
herein.
(b) Buyer shall, upon execution of this Agreement, deliver to Seller a
performance deposit of TEN MILLION DOLLARS ($10,000,000) (the "Performance
Deposit") to assure Buyer's performance hereunder. At Closing, the Performance
Deposit, plus interest from, but excluding, the date of this Agreement to, and
including, the Closing Date at a simple rate of eight percent (8%) per annum,
shall be a Buyer's credit against the Base Purchase Price. If this Agreement is
terminated without a Closing, then the Performance Deposit shall be governed by
the provisions of Section 27.
(c) Seller and Buyer agree that the Base Purchase Price shall be allocated
among the Interests as set forth on Exhibit "B" for the purpose of (i)
establishing a basis for certain taxes, (ii) giving notices of value to the
owners of any preferential rights to purchase the Interests, and (iii)
determining the value of a Title Defect or an Environmental Defect and handling
those instances in which the Base Purchase Price is to be adjusted.
3. Title Defects As used herein, the term:
<PAGE>
(a) "Defensible Title" shall mean, as to the Interests, such title held by
Seller, that, subject to and except for Permitted Encumbrances (as hereinafter
defined):
(i) Entitles Seller to receive not less than the "Net Revenue Interest" as
set forth in Exhibit "B" of all oil, gas, and associated liquid and gaseous
hydrocarbons produced, saved, and marketed from the Interests;
(ii) Obligates Seller to bear costs and expenses relating to the
maintenance, development, and operation of all wells located on the Interests in
an amount not greater than the "Working Interest" set forth in Exhibit "B";
(iii) Is free and clear of any and all encumbrances, charges and liens; and
(iv) Is free and clear of any provision or obligation affecting the
Interests contained in any contract or agreement disclosed in the Records
(hereinafter defined) that is not customary to currently accepted oil and gas
industry standards for the area in which the Interests are located and (a)
requires an extraordinary expenditure in connection with the acquisition,
exploration, development or operation of the Interests, or (b) would materially
diminish the Net Revenue Interest, or materially increase the Working Interest
without a proportionate increase in the Net Revenue Interest, in each case as
such interests are set forth in Exhibit "B".
(b) "Permitted Encumbrances" shall mean:
(i) Lessor's royalties, overriding royalties, production payments, and
reversionary interests if the net cumulative effect of such burdens does not
operate to reduce the Net Revenue Interest of any Interest to less than the Net
Revenue Interest set forth in Exhibit "B";
(ii) Sales contracts covering oil, gas or associated liquid or gaseous
hydrocarbons;
(iii) Preferential rights to purchase and required third party consents to
assignments and similar agreements with respect to which (i) waivers or consents
are obtained from the appropriate parties, or (ii) required notices have been
given to the holders of such rights and the appropriate time period for
asserting such rights has expired without an exercise of such rights;
(iv) Liens for taxes or assessments not due or not delinquent on the
Closing Date;
(v) All rights to consent by, required notices to, filings with, or other
actions by governmental agencies in connection with the sale or conveyance of
oil and gas leases or interests therein or sale of production therefrom if the
same are customarily obtained subsequent to such sale or conveyance;
<PAGE>
(vi) Easements, rights-of-way, servitudes, permits, surface leases, and
other rights in respect of surface operations on or over any of the Interests
which do not operate to interfere with current operations on the Interests;
(vii) Liens of operators relating to obligations not yet due or pursuant to
which Seller is not in default, and materialmen's, mechanics', repairmen's, or
other similar liens or charges arising in the ordinary course of business
incidental to construction, maintenance or operation of the Interests that are
not such as to interfere with the operation, value or use of the Interests;
(viii) The agreements set forth on Exhibit "F" attached hereto; and
(ix) Any Title Defects waived by Buyer pursuant to the terms of this
Agreement.
(c) The Interests shall be deemed to have a "Title Defect" if Seller has
less than Defensible Title to the Interests.
4. Purchase Price Adjustments for Title Defects.
(a) Buyer may, by delivery of written notice to Seller of the existence of
an alleged Title Defect, request reduction of the purchase price for the
Interest affected. The Title Defect notice shall clearly indicate the nature of
the Title Defect, the Interest to which it relates, an explanation of the Title
Defect including the supporting legal theories, the allocated value of the
Interest as to which all or some portion of which is affected by the Title
Defect, and the amount by which Buyer believes the value of the affected
Interest has been reduced because of the Title Defect, with the computation and
information upon which Buyer's belief is based. In determining whether a portion
of an Interest contains a Title Defect, it is the intent of the parties to
include, when possible, only that portion of such Interest materially and
adversely affected. If the value properly allocated to a Title Defect cannot be
determined directly from Exhibit "B" because the Title Defect is included
within, but does not totally comprise, the Interest to which the allocated value
relates, Buyer and Seller shall attempt, where feasible, to proportionately
reduce the allocated value in Exhibit "B".
(b) The Title Defect notice by Buyer shall be delivered to Seller on or
before April 18, 1997. In the event any such notice is not timely delivered, all
Title Defects shall be deemed waived for all purposes and Buyer shall thereafter
have no right to claim Title Defects; and in the event the Title Defect notice
is timely delivered, all Title Defects not claimed in such notice shall be
deemed waived for all purposes. Seller shall have the right, but not the
obligation, to attempt to cure any alleged Title Defect prior to Closing. In the
event Seller is unable or unwilling to cure an alleged Title Defect, Buyer and
Seller shall meet and use their reasonable efforts to agree on the validity of
the claim of Title Defect and the amount of any required purchase price
adjustment. In evaluating the significance of a fact,
<PAGE>
circumstance or condition for purposes of determining an alleged Title
Defect, due consideration shall be given to the length of time that the
particular Lease has been producing hydrocarbon substances and whether such
fact, circumstance or condition is of the type expected to be encountered in the
area involved, and is usual and customarily acceptable to reasonable and prudent
persons engaged in the business of the ownership, development, and operation of
oil and gas properties with knowledge of all of the facts and appreciation of
their legal significance.
(c) In the event the parties cannot mutually agree on a purchase price
adjustment for an alleged Title Defect, Buyer shall have the right to (i)
proceed to Closing and accept the Interest with the alleged Title Defect with no
purchase price adjustment, or (ii) terminate this Agreement as to the Interest
affected by the alleged Title Defect and receive a purchase price adjustment for
such Interest as set forth in Exhibit "B", or, where feasible, the proportionate
allocated value.
(d) There shall be no purchase price adjustment for Title Defects unless
the aggregate total of all purchase price adjustments for Title Defects exceeds
SEVEN HUNDRED SEVENTEEN THOUSAND AND FIVE HUNDRED DOLLARS ($717,500).
(e) In the event that Buyer shall determine that Seller's net revenue
interests in the Interests are greater than the Net Revenue Interests set forth
on Exhibit "B", Buyer shall notify Seller and Seller shall be entitled to a
mutually agreeable purchase price adjustment.
5. Conditions of Closing by Seller. The obligation of Seller to close is
subject to the satisfaction of the following conditions:
(a) The representations of Buyer contained in Section 8 hereof are true on
and as of the Closing Date;
(b) Buyer shall have delivered to Seller a legal opinion rendered by
counsel to the effect that (i) Buyer is a corporation validly existing and in
good standing under the laws of the State of Texas and has all requisite power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby; (ii) the execution and delivery of, and
consummation of the transactions contemplated by, this Agreement by Buyer have
been duly authorized by all necessary action on the part of the Buyer; and (iii)
this Agreement has been duly executed and delivered by Buyer and constitutes a
legal, valid and binding obligation of Buyer and is enforceable against Buyer in
accordance with its terms, except that such enforcement may be subject to
bankruptcy, insolvency, moratorium or similar laws affecting creditors' rights;
(c) Adjustments to the purchase price in accordance with the provisions of
Sections 4 and 13 hereof shall not have exceeded FOURTEEN MILLION THREE HUNDRED
AND FIFTY THOUSAND DOLLARS ($14,350,000);
<PAGE>
(d) On or before Closing, Seller shall have obtained the approval of the
Board of Directors of its parent, Burlington Resources Inc., to consummate the
transactions contemplated by this Agreement; and
(e) Buyer shall have delivered to Seller a guaranty in the form set forth
on Exhibit "K" attached hereto wherein Magnum Petroleum, Inc. and Gruy Petroleum
Management Company, collectively as guarantor, guarantee the performance of
Buyer under this Agreement.
6. Conditions of Closing by Buver. The obligation of Buyer to close is
subject to the satisfaction of the following conditions:
(a) The representations of Seller contained in Section 7 shall be true on
and as of the Closing Date;
(b) Buyer and Seller shall have adjusted the Base Purchase Price for Title
Defects and Environmental Defects in accordance with the provisions of Sections
4 and 13 hereof; and
(c) Seller shall have delivered to Buyer a legal opinion rendered by
Seller's corporate counsel to the effect that (i) Seller is a corporation
validly existing and in good standing under the laws of the State of Delaware
and has all requisite power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby; (ii) the execution and
delivery of, and consummation of the transactions contemplated by, this
Agreement by Seller have been duly authorized by all necessary action on the
part of Seller; and (iii) this Agreement has been duly executed and delivered by
Seller and constitutes a legal, valid and binding obligation of Seller and is
enforceable against Seller in accordance with its terms, except that such
enforcement may be subject to bankruptcy, insolvency, moratorium or similar laws
affecting creditors' rights.
7. Representations of Seller. Seller represents to Buyer that:
(a) Seller is a corporation validly existing and in good standing under the
laws of the State of Delaware and is duly qualified to own its properties and
assets and to carry on its business as now being conducted;
(b) Subject to the condition set forth in Section 5(d) hereof, Seller has
the requisite power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby, and the execution and delivery
of this Agreement by Seller and the consummation of the transactions
contemplated hereby have been duly authorized;
(c) Subject to the condition set forth in Section 5(d) hereof, this
Agreement has been duly executed and delivered by Seller and constitutes the
valid and binding obligation of Seller, enforceable against it in accordance
with the terms hereof, subject to the effects of bankruptcy, insolvency,
reorganization, moratorium, and similar laws affecting creditors' rights, and no
other act, approval or proceeding on the part of Seller or any other party is
<PAGE>
required to authorize the execution and delivery of this Agreement by
Seller or the consummation of the transactions contemplated hereby;
(d) Subject to the condition set forth in Section 5(d) hereof, this
Agreement, and the execution and delivery hereof by Seller, does not and the
consummation of the transactions contemplated hereby will not (i) conflict with
or result in a breach of the charter or bylaws of Seller or any other governing
documents of Seller, (ii) violate, or conflict with, or constitute a default
under, or result in the creation or imposition of any security interest, lien or
encumbrance upon any property or assets of Seller under any mortgage, indenture
or agreement to which it is a party or by which the Interests are bound, which
violation, conflict or default might adversely affect the ability of Seller to
perform its obligation under this Agreement, or (iii) violate any statute or law
or any judgment, decree, order, writ, injunction, regulation or rule of any
court or governmental authority, which violation might adversely affect the
ability of Seller to perform its obligations under this Agreement;
(e) Seller has incurred no liability, contingent or otherwise, for brokers'
or finders' fees relating to the transactions contemplated by this Agreement for
which Buyer shall have any responsibility whatsoever;
(f) Seller is not a "foreign person" as defined in Section 1445 of the
Internal Revenue Code of 1986 and in any regulations promulgated thereunder;
(g) Except as set forth on Exhibit "E" attached hereto, to the best of
Seller's knowledge after a review of the Records, there are no claims, actions,
suits or proceedings (including condemnation or similar proceedings) filed or
threatened against the Interests or any portion thereof that would have a
material adverse affect on the value or operation of the Interests; and
(h) None of the Interests are encumbered by take-or-pay or other similar
arrangements with purchasers of oil or gas whereby Seller is obligated (i) to
deliver production without receiving payment therefor (ii) to repay monies
received for production paid for but not taken:
(i) To the best of Seller's knowledge, neither Seller, nor the Operator of
those Interests operated by third parties, have violated any laws, statutes,
regulations or orders (including environmental statutes, rules or orders)
applicable to any of the Interests or the operation thereof which violation (i)
would have a material adverse affect on the value or operation of the affected
Interests or (ii) has not been remedied; and
(j) Seller has received no written notice of default with respect to the
Leases or any other agreements, contracts, or documents related to the Interests
which would have a material
<PAGE>
adverse effect on the value or operations of the Interests, and to the best
of Seller's knowledge there have occurred no events which with the giving of
notice would cause any such agreement or instrument to be in default.
In those instances where Seller's representations are made on the basis of "the
best of Seller's knowledge", such representations are made by Seller on the
basis of Seller's actual knowledge, without any investigation; provided,
however, that Seller's supervisory personnel have no notice of material facts
which would cause them to reasonably believe that an investigation should be
conducted.
8. Representations of Buyer. Buyer represents to Seller that:
(a) Buyer is a corporation validly existing and in good standing under the
laws of the State of Texas and is duly qualified to own its properties and
assets and to carry on its business as now being conducted;
(b) Buyer has the requisite power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Buyer and the consummation of the transactions
contemplated hereby have been duly authorized;
(c) This Agreement has been duly executed and delivered by Buyer and
constitutes the valid and binding obligation of Buyer, enforceable against it in
accordance with the terms hereof, subject to the effects of bankruptcy,
insolvency, reorganization, moratorium, and similar laws affecting creditors'
rights. No other act, approval or proceeding on the part of Buyer or any other
party is required to authorize the execution and delivery of this Agreement by
Buyer or the consummation of the transactions contemplated hereby;
(d) This Agreement, and the execution and delivery hereof by Buyer, does
not and the consummation of the transactions contemplated hereby will not (i)
conflict with or result in a breach of the charter or bylaws of Buyer or any
other governing documents of Buyer, or (ii) violate any statute or law or any
judgment, decree, order, writ, injunction, regulation or rule of any court or
governmental authority, which violation might adversely affect the ability of
Buyer to perform its obligations under this Agreement;
(e) Buyer or its affiliate possesses all required governmental licenses,
permits, bonds, certificates, orders, and authorizations necessary to own or
operate the Interests;
(f) Buyer has, and will have on the Closing Date and thereafter, sufficient
cash to enable it to make payment in immediately available funds of the purchase
price when due and any other amounts to be paid by it hereunder;
<PAGE>
(g) Buyer is an experienced and knowledgeable investor in the oil and gas
business. Buyer is not acquiring the Interests in connection with a distribution
or resale thereof in violation of federal or state securities laws and the rules
and regulations thereunder; and
(h) Buyer has incurred no liability, contingent or otherwise, for brokers'
or finders' fees relating to the transactions contemplated by this Agreement for
which Seller shall have any responsibility whatsoever.
9. Claims.
(a) "Claims" shall mean any and all claims, losses, damages, costs,
expenses, diminutions in value, suits, causes of action or judgments of any kind
or character with respect to any and all liabilities and obligations or alleged
or threatened liabilities and obligations, including, but not limited to, any
interest, penalty, and any attorneys' fees and other costs and expenses incurred
in connection with investigating or defending any claims or actions, whether or
not resulting in any liability.
(b) An "Existing Violation" shall mean a Claim attributable to or arising
out of a violation (i) of any statute, rule, regulation or order of any
governmental agency having jurisdiction over the Interests or Seller pertaining
to health, safety or the environment and in effect and applicable to conditions
existing on the Effective Time, and (ii) to which prompt remedial or corrective
action either is required or would be undertaken by a prudent operator of oil
and gas properties which exceeds FIFTY THOUSAND DOLLARS ($50,000). For the sole
purpose of determining if an Existing Violation exceeds $50,000, occurrences
(whether single or multiple) of different Existing Violations shall be
considered a single Existing Violation with respect to the same site or facility
in a prospect or field.
(c) An "Environmental Defect" shall mean an Existing Violation known to
Buyer prior to Closing.
(d) An "Environmental Claim" shall mean an Existing Violation known to
Buyer subsequent to Closing.
10. Indemnities of Seller.
(a) Seller shall, to the fullest extent permitted by law, protect, defend,
indemnify, and hold Buyer and its affiliates, including its directors, officers,
employees, agents, and representatives of each of them, harmless from and
against any and all Claims attributable to or arising out of (i) any act or
omission by Seller involving or related to the Interests occurring before the
Effective Time, except as limited in (x), (y) and (z) below, (ii) the matters
set forth on Exhibit "E" hereto, and (iii) the breach by Seller of the
representations contained in Section 7 hereof; provided, however, this indemnity
is limited and shall not cover or include (x) matters pertaining to title to the
Interests, all of which will be governed
<PAGE>
by Section 4 hereof, (y) any Claims with respect to any and all gas
balancing liabilities and obligations or alleged or threatened liabilities and
obligations, all of which will be governed by Section 14 hereof, or (z) any
Claims with respect to any violation of Environmental Laws (regardless of the
dollar amount in issue) other than Environmental Defects not waived pursuant to
Section 13 hereof or Environmental Claims made pursuant to Section 1 0(d)
hereof. Seller shall also indemnify Buyer from any loss of a Lease that
constitutes a material part of the Interests if such loss results solely from
the failure of Seller to pay any required shut-in royalty or delay rental prior
to Closing.
(b) After Closing, any assertion by Buyer that Seller is liable under the
terms of the indemnities provided by Section 10(a) (other than Section
10(a)(ii)) must be made by Buyer in writing and must be given to Seller on or
prior to December 31, 1997; provided however, there shall be no time limitation
for Claims related to the proper payment of (i) taxes, (ii) royalties,
overriding royalties, and similar burdens on production, (iii) joint interest
audits for periods prior to the Effective Time, or (iv) broker's or finder's
fees. Any notice to Seller shall state the facts known to Buyer that give rise
to such notice in sufficient detail to allow Seller to evaluate the assertion.
(c) If a Claim arises for which Buyer intends to seek indemnity with
respect thereto under Section 10(a) (other than Section 10(a)(ii)), Buyer shall
promptly notify Seller of such Claim. Seller shall have thirty (30) days after
receipt of such notice to undertake, conduct and control, through counsel of its
own choosing and at its own expense, the settlement or defense thereof, and
Buyer shall cooperate with Seller in connection therewith. So long as Seller has
undertaken the defense of, and responsibility for, any such Claim and is
reasonably contesting any such Claim in good faith, by appropriate proceedings
(including the filing or posting of appeal bonds, supersedeas bonds and similar
bonds), Buyer shall not pay or settle any such Claim. Buyer shall have the right
to pay or settle any such Claim, provided that in such event it shall waive any
right to indemnity by Seller for such Claim. If Seller does not notify Buyer
within thirty (30) days after the receipt of Buyer's notice of a claim of
indemnity hereunder that it elects to undertake the defense thereof, then Buyer
shall have the right to contest, settle or compromise the Claim, but shall not
thereby waive any right to indemnity therefor pursuant to this Section 10.
(d) In the event of any notice of a Claim which is an Environmental Claim
given by Buyer to Seller pursuant to this Section 10, Seller's total liability
hereunder for any and all such Environmental Claims shall be limited to TWENTY
ONE MILLION FIVE HUNDRED TWENTY-FIVE THOUSAND DOLLARS ($21,535,000), payable as
follows:
(i) the first TEN MILLION SEVEN HUNDRED SIXTY-TWO THOUSAND AND FIVE HUNDRED
DOLLARS ($ 10,762,500) toward satisfaction of any such Claims shall be Seller's
sole responsibility; and
<PAGE>
(ii) the next TWENTY ONE MILLION FIVE HUNDRED TWENTY-FIVE THOUSAND DOLLARS
($21,535,000) toward satisfaction of any such Claims shall be split equally
between Seller and Buyer.
11. Assumption of Obligations and Indemnities of Buver.
(a) As of the Effective Time, Buyer agrees to assume and perform any and
all of the liabilities and obligations or alleged or threatened liabilities and
obligations of Seller that arise under the agreements set forth on Exhibit "F",
the Interests and all assignments, operating agreements, leases, permits,
rights-of-way, licenses, easements, options, orders, gas purchase contracts,
product purchase and sale agreements, gas gathering agreements, gas processing
agreements, or any other agreements or contracts attributable to, affecting, or
otherwise relating to the Interests, including, but not limited to, any and all
liabilities and obligations (i) to pay and deliver royalties, overriding
royalties, non-participating royalties, and other burdens on production, (ii) in
connection with or arising out of balancing of overproduction or underproduction
from the Interests, and (iii) necessary to comply with all laws and governmental
regulations with respect to the Interests, including, but not limited to, the
lawful plugging and abandonment of oil and gas wells and the restoration of the
surface of the land, or any governmental request or other requirement to abandon
any pipeline or facility or take any clean-up, remedial or other action with
respect to the Interests, regardless of when the events occurred that caused
such condition to exist or the obligation to arise. Without limitation of the
foregoing, as of the Effective Time Buyer agrees to assume and perform any and
all of the obligations and liabilities or alleged or threatened liabilities and
obligations of Seller for Environmental Claims with respect to the Interests,
regardless of when the events occurred that caused such condition to exist or
the obligation to arise.
(b) Buyer shall, to the fullest extent permitted by law, protect, defend,
indemnify, and hold Seller and its directors, officers, employees, agents, and
representatives of each of them (the "Seller Parties"), harmless from and
against any and all Claims attributable to or arising out of the following (but
only to the extent Seller has not agreed to provide Buyer with indemnity
pursuant to Section 10 hereof): (i) Buyer's ownership or operation of the
Interests subsequent to the Effective Time, (ii) Buyer's assumption of any
obligation or liability contained in this Section 11, (iii) the breach by Buyer
of the representations contained in Section 8 hereof; and (iv) the breach by
Buyer of any of the agreements and covenants contained in this Agreement.
(c) THE INDEMNIFICATION, RELEASE AND ASSUMPTION PROVISIONS PROVIDED FOR IN
THIS AGREEMENT SHALL BE APPLICABLE WHETHER OR NOT THE LOSSES, COSTS, EXPENSES
AND DAMAGES IN QUESTION AROSE SOLELY OR IN PART FROM THE GROSS, ACTIVE, PASSIVE,
COMPARATIVE, OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF THE
SELLER PARTIES.
<PAGE>
12. Due Diligence Review.
(a) Prior to Closing, Seller, in Seller's offices, will make available to
Buyer and Buyer's authorized representatives for examination as Buyer may
reasonably request, all lease files, land files, well files, product purchase
and sale contracts, division order files, abstracts, title opinions, engineering
and geological data, reports, maps, logs, and well records contained in Seller's
files relating to the Interests (collectively the "Records"); provided, however,
the Records shall not include any (i) geophysical data, or (ii) information
subject to third party confidentiality agreements for which a consent or waiver
cannot be secured by Seller after reasonable efforts. Prior to Closing, Buyer,
at Buyer's sole cost, may copy any portion of the Records as Buyer may
reasonably request.
(b) Seller shall permit Buyer and Buyer's authorized representatives to
consult with Seller's employees during reasonable business hours and to conduct,
at Buyer's sole risk and expense, wellsite inspections and inventories of the
Interests that are Seller-operated. During such inspections, Buyer shall have
the right to review the Interests to determine the environmental condition of
the Equipment and Lease premises. To the extent Buyer desires similar access to
Seller's non-operated Interests, Seller shall assist Buyer in obtaining such
access; provided, however, Buyer shall not contact the Operator of the
nonoperated Interests directly.
13. Purchase Price Adjustments for Environmental Defects.
(a) Buyer may, by delivery of written notice to Seller of the existence of
an alleged Environmental Defect, request reduction of the purchase price for the
Interest affected. The Environmental Defect notice shall clearly indicate the
nature and a detailed description of the Environmental Defect, the Interest to
which it relates, and the dollar amount which Buyer believes it would take to
rectify or remediate the Environmental Defect.
(b) The Environmental Defect notice by Buyer shall be delivered to Seller
on or before April 18, 1997. In the event any such notice is not timely
delivered, all Environmental Defects of which Buyer has notice as of such date
shall be deemed waived for all purposes and Buyer shall thereafter have no right
to claim Environmental Defects; and in the event the Environmental Defect notice
is timely delivered, all Environmental Defects of which Buyer has notice as of
such date and not claimed in such notice shall be deemed waived for all
purposes. Seller shall have the right, but not the obligation, to attempt to
cure any alleged Environmental Defect prior to Closing. In the event Seller is
unable or unwilling to cure an alleged Environmental Defect, Buyer and Seller
shall meet and use their reasonable efforts to agree on the validity of the
claim of the Environmental Defect and the amount of any required purchase price
adjustment.
(c) In the event the parties cannot mutually agree on the purchase price
adjustment for an alleged Environmental Defect, Buyer shall have the right to
(i) proceed to Closing and
<PAGE>
accept the Interest with the alleged Environmental Defect with no purchase
price adjustment, or (ii) terminate this Agreement as to the Interest affected
by the alleged Environmental Defect and receive a purchase price adjustment for
such Interest as set forth in Exhibit "B", or, where feasible, the proportionate
allocated value.
(d) There shall be no purchase price adjustment for Environmental Defects
unless the aggregate total of all Environmental Defects exceeds SEVEN HUNDRED
SEVENTEEN THOUSAND AND FIVE HUNDRED DOLLARS ($717,500).
14. Gas Imbalances. Seller's estimate of the aggregate gas imbalance as of
the Effective Time for all the Interests is 332,068 MCF, cumulative working
interest under-produced, as more particularly set forth for each of the
Interests on Exhibit "G". On or before April 18, 1997, Seller shall provide
Buyer with a revised gas imbalance schedule for all the Interests as of the
Effective Time. There shall be a purchase price adjustment at Closing for the
volumetric difference in the estimated and revised imbalance calculated on
Seller's net revenue interest at a price of $1.00 per MCF. To the extent that
there is any difference between Seller's actual aggregate gas imbalance as of
the Effective Time and the imbalance position settled at Closing, then an
adjustment shall be made at the $1.00 per net MCF rate in the Final Closing
Statement. There shall be no further gas imbalance adjustments after the
Post-Closing adjustment. In the event of a Title Defect affecting all or a
portion of the Interests, the aggregate gas imbalance shown above shall be
adjusted to take into account the affected Interest. Any purchase price
adjustments for gas imbalances shall be made only on those Interests purchased
by Buyer.
15. Other Purchase Price Adjustments.
(a) As used herein, the following terms have the meanings assigned:
"Casualty Loss" shall mean, with respect to all or any portion of the
Interests, any destruction by fire, blowout, storm or other casualty of all or
any portion of the Interests between the Effective Time and Closing. Seller
shall promptly notify Buyer of any Casualty Loss of which Seller becomes aware.
"Preferential Purchase Right" shall mean any option, right or first refusal
or similar preferential purchase right burdening a Lease.
"Required Consent" shall mean any rights to consent to an assignment or
transfer of a Lease, other than filings with governmental entities or notices to
third parties customarily obtained subsequent to a sale or transfer, where the
failure to receive such consent could reasonably render the transfer of such
Lease to Buyer void or voidable.
(b) If any Casualty Loss occurs prior to Closing to any of the Interests
and such Casualty Loss may be repaired prior to Closing and, when repaired, the
value of such Interests shall not be materially diminished, then Seller may
repair such Casualty Loss prior to Closing at
<PAGE>
Seller's cost and shall notify Buyer of such election. In the event Seller
(i) elects to repair such Casualty Loss and such repair is not completed prior
to Closing or the repair completed by Seller does not cause the value of such
Interests to be substantially the same as such value prior to the Casualty Loss,
or (ii) is unable or unwilling to repair the Casualty Loss, then Buyer shall
have the right to (x) proceed to Closing and accept the Interest with the
Casualty Loss with no purchase price adjustment, or (y)terminate this Agreement
as to the Interest affected by the Casualty Loss and receive a purchase price
adjustment for such Interest as set forth in Exhibit "B", or where feasible, the
proportionate allocated value.
(c) Seller shall promptly give notices to all third parties holding any
Preferential Purchase Right known to Seller or identified to Seller by Buyer
prior to Closing. Seller shall use all reasonable efforts, but without
obligation to incur any unreasonable cost or expense, to obtain waivers of, or
to comply with, such Preferential Purchase Right prior to Closing. If a
Preferential Purchase Right is exercised prior to Closing, the purchase price
shall be reduced by the amount set forth in Exhibit "B"for the affected
Interest, or where feasible, the proportionate allocated value, and Seller shall
convey the affected Interest to the holder of such right and be entitled to all
amounts paid by such holder.
(d) Seller shall promptly give notices to all third parties holding any
Required Consents known to Seller or identified to Seller by Buyer prior to
Closing. Seller shall use all reasonable efforts, but without obligation to
incur any unreasonable cost or expense, to obtain such Required Consents. Unless
waived by Buyer, if a Required Consent is not obtained prior to Closing, the
purchase price shall be reduced by the amount set forth in Exhibit "B" for the
affected Interest, or where feasible, the proportionate allocated value, and
such Interest shall be excluded from the purchase and sale under this Agreement.
Any Required Consent waived by Buyer shall be deemed a Permitted Encumbrance.
16. Confidentiality.. All Records, all accounting data, and all other
confidential data provided to Buyer, whether before or after the date of this
Agreement, and all title matters and environmental reports prepared by Buyer or
Buyer's representatives relating to the Interests, shall be treated by Buyer as
strictly confidential, and shall not be disclosed to any person, fimn or
corporation without the prior written consent of Seller. In the event this
purchase and sale does not close, this covenant shall survive termination of
this Agreement and Buyer shall promptly return all copies of the Records in its
possession; and in the event the sale closes, this covenant shall terminate at
Closing.
17. DISCLAIMERS. THE INSTRUMENTS OF CONVEYANCE EXECUTED PURSUANT HERETO
SHALL BE EXECUTED WITHOUT ANY REPRESENTATION, WARRANTY OR COVENANT OF TITLE OF
ANY KIND OR NATURE, EITHER EXPRESS, IMPLIED OR STATUTORY; PROVIDED, HOWEVER,
SELLER SHALL SPECIALLY WARRANT AND AGREE TO DEFEND THE TITLE TO THE INTERESTS
AGAINST THE LAWFUL CLAIMS AND DEMANDS OF ALL PERSONS
<PAGE>
OR ENTITIES CLAIMING THE SAME OR ANY PART THEREOF BY, THROUGH OR UNDER
SELLER, BUT NOT OTHERWISE. THE INTERESTS ARE BEING CONVEYED AND ASSIGNED TO AND
ACCEPTED BY l ~ BUYER IN THEIR "AS IS, WHERE IS" CONDITION AND STATE OF REPAIR,
AND WITH ALL FAULTS AND DEFECTS, WITHOUT ANY REPRESENTATION, WARRANTY OR
COVENANT OF ANY KIND OR NATURE, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, BUT
NOT LIMITED TO, WARRANTIES OF MARKETABILITY, QUALITY, CONDITION, CONFORMITY TO
SAMPLES, MERCHANTABILITY, AND/OR FITNESS FOR A PARTICULAR PURPOSE, ALL OF WHICH
ARE EXPRESSLY DISCLAIMED BY SELLER AND WAIVED BY BUYER THE INTERESTS HAVE BEEN
USED FOR OIL AND GAS DRILLING, PRODUCTION, PIPELINE, TRANSPORTATION, STORAGE AND
RELATED OPERATIONS. PHYSICAL CHANGES IN THE INTERESTS AND IN THE LANDS BURDENED
THEREBY MAY HAVE OCCURRED AS A RESULT OF SUCH USES. THE INTERESTS MAY ALSO
INCLUDE BURIED PIPELINES AND OTHER EQUIPMENT, THE LOCATIONS OF WHICH MAY NOT BE
KNOWN BY SELLER OR READILY APPARENT BY A PHYSICAL INSPECTION OF THE INTERESTS.
IT IS UNDERSTOOD AND AGREED THAT BUYER SHALL HAVE INSPECTED PRIOR TO CLOSING (OR
SHALL BE DEEMED TO HAVE WAIVED ITS RIGHT TO INSPECT) THE LEASES, THE EQUIPMENT
AND THE ASSOCIATED PREMISES AND SATISFIED ITSELF AS TO THEIR PHYSICAL AND
ENVIRONMENTAL CONDITION, BOTH SURFACE AND SUBSURFACE, AND THAT BUYER SHALL
ACCEPT ALL OF THE SAME IN THEIR "AS IS, WHERE IS" CONDITION AND STATE OF REPAIR,
AND WITH ALL FAULTS AND DEFECTS, INCLUDING, BUT NOT LIMITED TO, THE PRESENCE OF
NATURALLY OCCURRING RADIO ACTIVE MATERIAL (NORM) AND MAN-MADE MATERIAL FIBERS
(MMMF). IN ADDITION, SELLER AND ITS ADVISORS, MORGAN STANLEY & CO. AND RANDALL &
DEWEY, INC., MAKES NO REPRESENTATION, COVENANT OR WARRANTY, EXPRESS, IMPLIED OR
STATUTORY, AS TO THE ACCURACY OR COMPLETENESS OF ANY DATA OR RECORDS DELIVERED
TO THE BUYER WITH RESPECT TO THE INTERESTS, OR CONCERNING THE QUALITY OR
QUANTITY OF HYDROCARBON RESERVES, IF ANY, ATTRIBUTABLE TO THE INTERESTS, OR THE
ABILITY OF THE INTERESTS TO PRODUCE HYDROCARBONS, OR THE PRICES WHICH BUYER IS
OR WILL BE ENTITLED TO RECEIVE FOR ANY SUCH HYDROCARBONS.
18. DTPA Waiver. TO THE EXTENT APPLICABLE TO THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT, BUYER HEREBY WAIVES ITS RIGHTS UNDER THE PROVISIONS OF THE
TEXAS DECEPTIVE TRADE PRACTICES ACT, CHAPTER 17, SUBCHAPTER E, SECTIONS 17.41
THROUGH 17.63, INCLUSIVE (OTHER THAN SECTION 17.555, WHICH IS NOT WAIVED), OF
THE TEXAS BUSINESS & COMMERCIAL CODE (A LAW THAT GIVES CONSUMERS SPECIAL
<PAGE>
RIGHTS AND PROTECTIONS). AFTER CONSULTATION WITH AN ATTORNEY OF ITS CHOICE,
BUYER VOLUNTARILY CONSENTS TO THIS WAIVER.
19. Closing The Closing shall be held on or before April 30, 1997, at the
offices of Seller at 5051 Westheimer, Suite 1400, Houston, Texas, or at such
other time and place as Seller and Buyer may mutually agree in writing (the
"Closing" or the "Closing Date").
20. Transactions at Closing.
(a) Seller shall execute, acknowledge, and deliver to Buyer the instruments
of conveyance in the forms as set forth in Exhibits "C-1" through "C-8" hereto
conveying the Interests;
(b) Seller and Buyer shall execute and deliver a Preliminary Closing
Statement that shall set forth the Base Purchase Price and each adjustment and
the calculation of such adjustments used to determine such amount (the "Closing
Amount") in the form as set forth in Exhibit "D" hereto;
(c) Seller shall deliver to Buyer the Records (but shall be authorized to
keep a copy of the Records);
(d) Seller and Buyer shall execute, acknowledge and deliver mutually
agreeable transfer orders or letters-in-lieu prepared by the Buyer, directing
all purchasers of production to make future payments of proceeds attributable to
production from the Interests to Buyer;
(e) Seller shall deliver to Buyer (i) a certificate stating that the
representations of Seller contained in Section 7 hereof are true as of the
Closing Date, and (ii) a "non-foreign person" affidavit in the form as set forth
in Exhibit "H" hereto, and (iii) executed change of operator forms to be filed
with the relevant regulatory authorities naming Buyer or its designee as
operator of the Interests operated by Seller at Closing;
(f) Seller shall deliver to Buyer the legal opinion referenced in Section
6(c) hereof;
(g) Buyer shall deliver to Seller a certificate stating that the
representations of Buyer contained in Section 8 hereof are true as of the
Closing Date;
(h) Buyer shall deliver to Seller the legal opinion referenced in Section
5(b) hereof;
(i) Buyer shall deliver to Seller a complete copy of Buyer's environmental
assessment, including, but not limited to, reports, data, valuation, assessments
and conclusions;
(j) Seller shall deliver to Buyer possession of the Interests, subject to
any applicable operating agreement or other related agreement affecting the
Interests;
(k) Seller and Buyer shall execute the License Agreement in the form as set
forth in Exhibit "I" hereto;
<PAGE>
(1) Seller and Buyer shall execute the Gathering Agreements in the form as
set forth in Exhibits "J- l " and "J-2" hereto;
(m) Buyer shall deliver to Seller the guaranty in the form set forth in
Exhibit "K " hereto; and
(n) Buyer shall deliver to Seller cash by wire transfer in the amount of
the Closing Amount to the following account
Bank: Mellon Bank, Pittsburgh, PA.
ABA/Routing Number: 043-000-261
Account: 104-9050
For Credit To: Burlington Resources Services Inc.
21. Further Assurance. Incidental and subsequent to Closing, each of the
parties shall execute, acknowledge, and deliver to the other such further
instruments, and take such other actions as may be reasonably necessary to carry
out the provisions of this Agreement.
22. Post-Closing Adjustments. On or before November 1, 1997, the parties
shall undertake to agree with respect to the adjustments or payments that were
not finally determined as of Closing, and the amount due from Buyer or Seller,
as the case may be, pursuant to the Post-Closing adjustment. On or before
October 15, 1997, Seller shall provide Buyer with a Final Closing Statement
setting forth the Post-Closing adjustments. Seller shall provide Buyer access to
such of Seller's records as may be reasonably necessary to verify the
Post-Closing adjustments. Payment by Buyer or Seller shall be made in
immediately available funds within five (5) days of agreement. If the Final
Closing Statement has not been agreed upon on or before the date set forth
herein, either party may seek to enforce any rights it claims pursuant to this
Agreement.
23. Proration of Taxes. All ad valorem taxes, real property taxes, and
similar obligations with respect to the tax period in which the Effective Time
occurs (the "current tax period") shall be apportioned between Seller and Buyer
as of the Effective Time based on an estimate of the immediately preceding tax
period assessment, and the Base Purchase Price shall be reduced at Closing by
the amount of such estimated taxes owed by Seller for that portion of the
current tax period prior to the Effective Time.
24. Proceeds.
(a) All proceeds, including, but not limited to, proceeds held in suspense
or escrow and proceeds received after the Effective Time for oil produced and
held in storage on the Leases but not sold as of the Effective Time,
attributable to the Interests and accruing to
<PAGE>
the period prior to the Effective Time shall belong to Seller. Seller shall
retain overhead charges and rates received by Seller in its capacity as Operator
under any operating agreement or COPAS accounting procedure attributable to the
Interests through the end of the first full calendar month prior to the month in
which Closing occurs.
(b) All proceeds attributable to the Interests and accruing to the period
on and after the Effective Time shall belong to Buyer. In the event Seller has
received proceeds belonging to Buyer after the Effective Time, Seller will
account to Buyer for such proceeds at the same price Seller received for the
production in accordance with its existing product purchase and sale contracts.
(c) Buyer and Seller agree that after Closing oil sales from the Interests
shall continue under the contracts listed in Exhibit "L" attached hereto through
the first full calendar month following Closing. After Closing Seller shall give
the notices necessary to terminate such contracts as to the Interests at the end
of such calendar month.
25. Employees. Buyer intends to continue to operate the Interests in the
ordinary course of business. Buyer shall interview the employees of Seller
listed on Exhibit "M". At Closing, Buyer shall offer employment or independent
contractor agreements to substantially all employees reasonably determined by
Buyer essential to the ongoing operation of the Interests. Persons offered
full-time employment shall receive from Buyer substantially the same employee
benefits as Buyer's current employees are receiving.
26. Hart-Scott-Rodino Filing. This Agreement is subject in all respects to
and conditioned upon compliance by the parties of the Hart Scott Rodino
Antitrust Improvements Act of 1976, and rules and regulations promulgated
pursuant thereto (the "Act"), to the extent that the Act is applicable to the
transactions contemplated by this Agreement. The parties shall make such filings
within five (5) business days after execution of this Agreement, and provide
such information to the Federal Trade Commission and their attorneys as are
required in connection with the Act as soon as practicable after a request
therefor.
27. Failure to Close. Subject to the other provisions of this Section, if
all of the conditions to Closing set forth in Sections 5, 6 and 26 hereof have
not been satisfied or waived by the respective parties on or before May 7, 1997
(or such later date as hereafter may be mutually agreed upon by the parties in
writing), this Agreement shall terminate automatically, and no party hereto
shall have any further obligations or any liability to the other party pursuant
to this Agreement; provided, however, that nothing herein shall relieve any
party from liability for its willful failure to satisfy any conditions to
Closing required to be satisfied by it. If the conditions to Buyer's obligations
to close as set forth in Section 6 hereof have not been satisfied or waived by
such date, or in the event this transaction is not consummated due to the
conditions of Closing contained in Sections 5(c), 5(d), or 26 hereof, the
Performance Deposit shall be returned to Buyer, plus interest from, but
excluding, the date of this Agreement to, and including, the date of payment at
a simple rate of eight percent (8%) per annum. If this
<PAGE>
transaction is not consummated on such date for any reason other than the
conditions to Buyer's obligations to close as set forth in Section 6 hereof have
not been satisfied or the conditions to Closing by Seller contained in Sections
5(c), 5(d) and 26 hereof, Seller may retain the Performance Deposit, as agreed
liquidated damages and not as a penalty, it being agreed that actual damages
would be difficult to ascertain and that such amount is reasonable. Upon any
termination of this Agreement, Seller shall be free immediately to enjoy all
rights of ownership of the Interests and to sell, transfer, encumber or
otherwise dispose of the Interests to any party without any restriction under
this Agreement.
28. Use of Seller Names. Buyer agrees that, as soon as practicable after
Closing, it will remove or cause to be removed the names and marks Burlington
Resources, Meridian Oil, El Paso Production, or Southland Royalty, where and if
they exist, and all variations and derivatives thereof and logos relating
thereto from the Interests and will not thereafter make any use whatsoever of
such names, marks, and logos.
29. Operations Pending Closing. Seller shall operate the Seller-operated
Interests using the same standard of care as imposed on the "Operator" under the
applicable joint operating agreements until Closing, or such later time as any
applicable joint operating agreement may require, when such operation shall be
turned over to, and become the responsibility of, Buyer or its designees. During
the period from the date of this Agreement to Closing, Seller shall:
(i) consult with Buyer with respect to all AFE's over FIFTY THOUSAND
DOLLARS ($50,000) net to the interests of Seller which are received by Seller
with respect to any Interest, and consult with Buyer with respect to all
material decisions to be made with respect to the Interests, including, without
limitation, the incurring of costs for discretionary expenditures for operations
in excess of FIFTY THOUSAND DOLLARS ($50,000) net to the interest of Seller for
which AFE's are not prepared;
(ii) not transfer, sell, hypothecate, encumber, abandon or otherwise
dispose of any material portion of the Interests (other than the sale of
production in the ordinary course of business) or as required in connection with
the exercise of third parties of preferential rights to purchase any of the
Interests without the express written consent of Buyer;
(iii) permit Buyer and its representatives, at Buyer's sole risk and
expense, to have reasonable access to the Interests operated by Seller, and
shall assist Buyer in gaining reasonable access to the Interests operated by
third parties.
30. Operations. Should Seller presently operate any Interest, Seller makes
no representation, warranty or covenant that the Buyer will become operator of
any or all of the Interests. Buyer acknowledges that operations will be governed
by the applicable operating agreements or other related agreements affecting the
Interests.
<PAGE>
31. Occasional Sale. Seller and Buyer believe that this purchase and sale
of the Interests constitutes an isolated or occasional sale and is not subject
to sales tax; provided, however, if any sales, transfers, use taxes or other
similar taxes are due or should hereafter become due (including penalty and
interest thereon) by reason of this transaction, Buyer shall timely pay and
solely bear all such taxes.
32. Recording Documents. Buyer shall pay all documentary, filing, and
recording fees incurred in connection with the filing and recording of the
instruments of conveyance. As soon as practicable after Closing, Buyer shall
provide Seller with recorded copies of all documents conveying the Interests to
Buyer.
33. Notices. All notices hereunder shall be sufficiently given for all
purposes hereunder if in writing and delivered personally, or to the extent
receipt is confirmed by the party charged with notice, sent by documented
overnight delivery service, by United States Mail, telecopy, telefax or other
electronic transmission service to the appropriate address or number as set
forth below. Notices to Seller or Buyer shall be addressed to:
SELLER BUYER
Burlington Resources Oil & Magnum Hunter Production, Inc
Gas Company
5051 Westheimer 600 East Las Colinas Boulevard
Suite 1400 Suite 1200
Houston, Texas 77056-2124 Irving, Texas 75039
Attn: Kent Beers Attn: Morgan Johnston
Fax: 713-624-9640 Fax: 972-401-3110
34. Entire Agreement. This instrument states the entire agreement and
supersedes all prior agreements (except any prior Confidentiality Agreement
between the Buyer and Seller) between the parties concerning the subject matter
hereof. This Agreement may be supplemented, altered, amended, modified or
revoked by writing only, signed by both parties.
35. Counterpart. This Agreement may be executed by Buyer and Seller in any
number of counterparts, each of which shall be deemed an original instrument,
but all of which together shall constitute one and the same instrument.
36. Time of Essence. Time is of the essence in this Agreement.
37. Announcements. Seller and Buyer shall consult with each other prior to
the release of any press releases and other announcements concerning this
Agreement or the transactions contemplated hereby. Any press release or other
announcements will be at a time and in a form reasonably acceptable to Seller
and Buyer.
<PAGE>
38. Waiver. Any of the terms, provisions, covenants, representations,
warranties or conditions hereof may be waived only by a written instrument
executed by the party waiving compliance. The failure of any party at any time
or times to require performance of any provisions hereof shall in no manner
affect such party's right to enforce the same. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provisions hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
39. Survival of Representations and Covenants. All representations and
covenants of the parties to the extent not fully performed or waived prior to
Closing shall survive the Closing other than those contained in Sections 4, 5,
6, and 13 hereof. Claims for a breach of a representation or covenant covered by
the provisions of Sections 1 0 and 11 shall be governed exclusively by the
provisions of such Sections.
40. Reliance. Prior to executing and/or closing this Agreement, Buyer has
been afforded an opportunity to (i) examine the Interests and such materials as
it has requested to be provided to it by Seller, (ii) discuss with
representatives of Seller such materials and the nature and operation of the
Interests and (iii) investigate of the condition, including subsurface
condition, of the Interests. In entering into and closing this Agreement, Buyer
has relied solely on the express representations and covenants of Seller in this
Agreement, its independent investigation of, and judgment with respect to, the
Interests, and the advice of its own legal, tax, economic, environmental,
engineering, geological and geophysical advisors, and not on any comments or
statements of Seller or any representatives or agents of, or consultants or
advisors engaged by, Seller.
41. Governing Law. This Agreement and the rights and obligations of the
parties hereto shall be governed, construed, and enforced in accordance with the
laws of the State of Texas. The parties agree that any litigation relating
directly or indirectly to this Agreement must be brought before and determined
by a court of competent jurisdiction within the State of Texas, except as the
laws of any other jurisdiction mandatorily apply.
42. Legal Fees. The prevailing party in any legal proceeding brought under
or to enforce this Agreement shall be additionally entitled to recover court
costs and reasonable attorneys' fees from the non-prevailing party.
43. Agreement for the Parties' Benefit Only. This Agreement is not intended
to confer upon any person not a party hereto any rights or remedies hereunder,
and no person, including, but not limited to, those persons affected by Section
25 hereof, other than the parties hereto is entitled to rely on any
representation, covenant, or agreement contained herein.
44. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal
<PAGE>
substance of the transactions contemplated hereby is not affected in any
adverse manner to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled to the extent
possible.
45. Binding Effect; Assignment. All the terms, provisions, covenants,
representations, and conditions of this Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors; provided, however, this Agreement or any portion thereof
and the rights and obligations hereunder shall not be assignable or delegable by
any party without the express prior written consent of the non assigning or
non-delegating party.
46. Enforcement Should Seller default in the performance of this Agreement,
then Buyer shall be entitled to enforce specific performance of this Agreement,
or exercise any other right or remedy it may have at law or in equity by reason
of such default. Should Buyer default in the performance of this Agreement, then
Seller shall be entitled to retain the Performance Deposit as liquidated
damages, as herein provided, as its sole and exclusive remedy, and the parties
agree that such liquidated damage amount is reasonable and that the extent of
actual damages would be difficult impossible to assess.
47. Access to Information.
(a) Seller agrees to provide Buyer (or its designated representatives) with
statements of all revenues and expenses attributable to the Interests for the
three year period ending with the end of Seller's fiscal year immediately
preceding Closing, and access to Seller's accounting records in its offices in
Fort Worth and Midland, Texas, during the period from the date hereof until July
1, 1997, as reasonably necessary to allow Buyer to prepare audited financial
statements with respect to the Interests sufficient for filing with the
Securities and Exchange Commission. Such access shall be provided on reasonable
advance notice during Seller's normal business hours in a manner that does not
unreasonably interfere with Seller's normal business activities, and Buyer may,
at its expense, copy audit information found in Seller's files.
(b) During the period provided in paragraph (a) immediately preceding,
Seller's employees shall co-operate and assist Buyer during Seller's normal
business hours in a manner that does not unreasonably interfere with Seller's
normal business activities in securing information from Seller's accounting
records as reasonably requested by Buyer or its representatives for the
preparation of the audited financial statements referred to in paragraph (a)
immediately preceding.
(c) During the period from the date hereof until Closing, Seller shall
provide Buyer with updated "lease operating statements" substantially similar to
those provided for Buyer's
<PAGE>
inspection in the "data room" maintained at the offices of Randal & Dewey,
Inc. in the period from October, 19g6, through January, 1997, to the extent such
are prepared in Seller's normal course of business and are available.
EXECUTED as of the date first above mentioned.
SELLER
BURLINGTON RESOURCES GLACIER PARK COMPANY
OIL & GAS, COMPANY
By: Mark Ellis By: Mark Ellis
Its: Vice President Its: Vice President
BUYER
MAGNUM HUNTER PRODUCTION, INC.
By: Gary C. Evans
Its: Chairman
