<PAGE>
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
COSTILLA ENERGY, INC. ,
AS
SELLER
AND
LOUIS DREYFUS NATURAL GAS CORP.
AS
BUYER
NOTICE: THIS AGREEMENT CONTAINS INDEMNITY PROVISIONS WHICH INDEMNIFY AND
RELEASE THE INDEMNIFIED PARTY FROM ITS OWN NEGLIGENCE AND OTHER LEGAL FAULT.
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("AGREEMENT") dated as of April 20,
2000 (the "EXECUTION DATE") is between COSTILLA ENERGY, INC., a Delaware
corporation, whose address is 400 West Illinois, Suite 1000, Midland, Texas
79701 ("SELLER"), and LOUIS DREYFUS NATURAL GAS CORP., an Oklahoma corporation
whose address is 14000 Quail Springs Parkway, Suite 600, Oklahoma City,
Oklahoma, 73134 ("BUYER").
In consideration of the mutual covenants and agreements contained
herein, the benefits to be derived by each party hereunder, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, SELLER and BUYER agree as follows:
ARTICLE 1. PURCHASE AND SALE
1.1 THE PROPERTIES. Subject to the terms and conditions of this
Agreement, SELLER agrees to sell and convey to BUYER, and BUYER agrees to
purchase from SELLER, effective as of 7:00 a.m. April 1, 2000, at the location
of the respective Properties (as herein defined) (the "EFFECTIVE TIME") all of
SELLER's right, title, and interest (the "SALE INTEREST") in and to all of the
following described assets and properties of SELLER, less and except the
"EXCLUDED ASSETS" (as herein defined):
(a) All oil, gas and/or other mineral ownership rights and
estates of every kind and nature, wheresoever situated, including, without
limitation, the oil, gas and/or other mineral leases, leasehold estates and
other oil and gas interests, described in EXHIBIT "A" attached hereto (the
"LEASES"), in and to the lands described in Exhibit "A" attached hereto (the
"LANDS");
(b) All producing, nonproducing, shut-in and abandoned oil
and gas wells, salt water disposal wells, injection wells, and water wells
located on the Lands or lands pooled or unitized therewith (the "WELLS"),
including, without limitation, the wells described on Exhibit "B" attached
hereto, and all personal property, equipment, fixtures, compressors,
pipelines, gathering, disposal, transportation, storage and treating
facilities and other improvements located on, related to, appurtenant to or
used or useful in connection with the Wells, Leases or Lands;
(c) All rights, privileges, benefits and power held by or
conferred upon the Seller as to any pooled or unitized acreage included as a
whole or in part within the unit(s) for any Leases and Lands or that accrue or
are attributable to the Wells, including all production from the pooled or
unitized acreage allocated to any such Leases or Wells; all interests in any
Wells within the unit or pool associated with such Leases whether such
unitized or pooled production comes from Wells located within or without the
areas covered by any Leases; and tenements, hereditaments and appurtenances
belonging to such pooled or unitized acreage, including, without limitation,
the units described on Exhibit "B" ("UNITS");
-2-
<PAGE>
(d) Together with;
(i) That certain Due Diligence Use Agreement dated
May 28, 1999, between SELLER and Prize Energy Corp. and covering lands in
Lavaca, Jackson and Colorado Counties, Texas (the "Prize Agreement"), and to
the extent transferable by SELLER, all farmout and farmin agreements,
operating agreements, joint exploration agreements, due diligence use
agreements, production sales and purchase contracts, saltwater disposal
agreements, surface leases, division and transfer orders, licenses, rights and
obligations with respect to Imbalances (as herein defined) and other contracts
or agreements covering or affecting any or all of the interests described or
referred to above (the "CONTRACTS");
(ii) To the extent transferable, all easements,
rights-of-way, surface leases, fee estates, licenses, authorizations, permits,
and similar rights and interests applicable to, or used or useful in
connection with, any or all of the above-described interests;
(iii) All of SELLER's proprietary geophysical and
seismic data (including, but not limited to, that described on Schedule
1.1(d)(iii)), geological and other technical data and interpretations, and to
the extent transferable without charge or cost to SELLER, all similar
non-proprietary data and information;
(iv) All oil, condensate, natural gas, natural gas
liquids, other gases (including carbon dioxide) and other minerals produced
after the Effective Time attributable to the above described interests;
(v) The Records as defined in Section 12.3.
(e) All trucks, trailers and other certificated vehicles of
SELLER (the "VEHICLES"), including without limitation the Vehicles depicted on
Schedule 1.1(e) hereto; and
(f) All ownership rights of SELLER in plants, yards and
other facilities, together with all structures, fixtures, tools, equipment and
other machinery situated on the above described interests, including without
limitation the lands on which the plants, yards and other facilities are
situated as described on Schedule 1.1(f) and the compressors owned by SELLER
listed on Schedule 1.1(f-l) hereto.
All of the above real and personal properties, rights, titles, and
interests described in subparagraphs (a) through (f) above (excluding the
Records), less and except the Excluded Assets are hereinafter collectively
called the "PROPERTIES" or, individually, a "PROPERTY".
1.2 EXCLUDED ASSETS. All monies in bank accounts and investment
accounts, all trade credits, account receivables and note receivables, all
furnishings, fixtures, office equipment and
-3-
<PAGE>
machines, supplies, computers including all computer software situated in
SELLER's offices in Midland and Corpus Christi, Texas, all stock and other
equity interest and claims in Costilla Energy Pipeline Corporation and
Costilla Redeco Energy, L.L.C., all employment contracts, production proceeds
from production sold, claims and causes of action (except for any Imbalances),
attributable to the Sale Interest in the Properties with respect to any period
or time prior to the Effective Time, are excluded from this Agreement and
shall remain the property of SELLER and be excluded from this sale, unless
specified otherwise elsewhere herein, ("EXCLUDED ASSETS").
ARTICLE 2. PURCHASE PRICE
2.1 PURCHASE PRICE. BUYER shall pay to SELLER at Closing (as defined
herein) as consideration for the purchase of the Properties the sum of One
Hundred Million and No/100 Dollars ($100,000,000) (the "PURCHASE PRICE"), as
may be adjusted pursuant to this Agreement (the "ADJUSTED PURCHASE PRICE") to
be paid at Closing.
2.2 DEPOSIT. BUYER shall deposit with SELLER $2,000,000 upon entry of
an order approving the Expense Motion (as defined herein) and an additional
$8,000,000 upon the issuance of an order approving the Sale Motion (as
hereinafter defined) (either and/or both sums upon deposit, or at such time
deposit is herein required, the "DEPOSIT") by wire transfer of immediately
available funds to a segregated account to be established by SELLER. If
Closing occurs, the Deposit shall be applied to the Purchase Price. If Closing
does not occur, the Deposit shall be applied as provided in Section 12.7.
Until disposed of in accordance with the terms of this Agreement, the Deposit
shall be held by Seller in a segregated account, with Seller as the designated
Trustee Depositor and invested by SELLER in marketable obligations issued or
unconditionally guaranteed by the United States of America or an
instrumentality or agent thereof and entitled to the full faith and credit of
the United States of America, or in money market and/or mutual funds that
invest solely in such obligations. The Deposit shall not constitute property
of the estate under Section 541 of the Code (as herein defined) until and
unless this Agreement is terminated and SELLER is entitled to the Deposit as a
remedy upon termination pursuant to Section 12.7, at which time the Deposit
will constitute property of the estate of SELLER.
2.3 ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price shall be
adjusted by the following:
(a) The Purchase Price shall be increased by an amount equal
to the sum of the following amounts (determined without duplication and on an
accrual basis in accordance with generally accepted accounting principles
consistently applied ["GAAP"]):
(i) The value, less taxes (other than taxes on net
income), of merchantable oil and other liquids in storage in the tanks (above
the pipeline connection, if applicable) as of the Effective Time that is
credited to the Sale Interest in the Properties, based on applicable arm's
length
-4-
<PAGE>
contract prices, or in the absence thereof, at the prevailing market value at
the time of sale in the area, adjusted for grade and gravity;
(ii) The amount of all expenses incurred and paid
or to be paid by or on behalf of SELLER, in connection with or attributable to
the ownership or operation of the Sale Interest in the Properties during the
period from the Effective Time to the Closing Date, including, but not limited
to, royalties, rentals, and other charges and expenses billed under applicable
operating agreements, or in the absence of an operating agreement, expenses of
the sort customarily billed under such agreements, and including the customary
overhead charges billed by third party operators related to the Sale Interest
in the Properties, but exclusive of overhead charges billed by SELLER;
(iii) An amount equal to all prepaid expenses
attributable to the Sale Interest in the Properties that are paid by or on
behalf of SELLER prior to the Closing Date and that are, in accordance with
GAAP, attributable to the period after the Effective Time, including, without
limitation, prepaid ad valorem, property, production, severance, and similar
taxes (but not including income taxes) based upon or measured by the ownership
of property or the production of hydrocarbons or the receipt of proceeds
therefrom (any refund of ad valorem tax attributable to the period before the
Effective Time and received by BUYER shall be paid to SELLER);
(iv) As compensation to SELLER for operating the
Properties in accordance with this Agreement for all periods of time
subsequent to the Effective Time, but prior to the Closing Date, an amount
equal to One Hundred Ninety-seven Thousand, Two Hundred Fifty and No/100
Dollars ($197,250) per month (proportionately reduced for any partial month
based on a thirty (30) day month), (the "OPERATING FEE"); and
(v) Any other amounts required under this Agreement
or otherwise agreed upon by SELLER and BUYER.
(b) The Purchase Price shall be decreased by an amount equal
to the sum of the following amounts (determined without duplication and on an
accrual basis in accordance with GAAP):
(i) The amount of all proceeds received by SELLER
prior to the Closing Date attributable to the Sale Interest in the Properties
and that are attributable to the time after the Effective Time, except the
Operating Fee;
(ii) The amount of all proceeds billed and received
or to be received by SELLER from third parties for combined fixed rate
overhead charges that are attributable to the Properties for the period from
the Effective Time until the Closing Date;
(iii) An amount equal to all unpaid ad valorem,
property, production, severance, and similar taxes and assessments (but not
including income taxes) based upon or
-5-
<PAGE>
measured by the ownership of property or the production of hydrocarbons or the
receipt of proceeds therefrom accruing to the Sale Interest in the Properties
prior to the Effective Time, which to the extent not actually assessed shall
be computed based upon such taxes assessed against the applicable portion of
the Sale Interest in the Properties for the preceding calendar year or, if
such taxes are assessed on other than a calendar year basis, for the
tax-related year last ended;
(iv) The amount of all direct third party costs and
expenditures incurred prior to the Effective Time and chargeable to SELLER's
interest and not paid by SELLER that are attributable to the drilling,
completion, recompletion, reworking, operation and maintenance of the
Properties prior to the Effective Time, as well as lease rentals and shut-in
payments due prior to the Effective Time, bonuses, net profits interests,
amounts relating to obligations arising under the applicable contracts and
transportation and marketing costs, and COPAS charges accrued prior to the
Effective Time;
(v) An amount for Properties withdrawn and Defects
as determined pursuant to Section 3.6; and
(vi) Any other amounts required under this
Agreement or otherwise agreed upon by SELLER and BUYER.
ARTICLE 3. TITLE
3.1 DEFINITION OF ACCEPTABLE TITLE. As used herein, the term
"ACCEPTABLE TITLE" shall mean, as of the Closing Date, as to each of the
Properties, such right, title and interest that as to the existing production
from the currently producing intervals in the proved developed producing
("PDP") Wells and Units, as to the evaluated interval(s) in the proved
undeveloped ("PU") Wells and Units and as to the evaluated interval(s) in the
proved developed non-producing ("BHP") Wells and Units described on EXHIBIT
"B", (a) entitles SELLER to receive not less than the net revenue interest for
the Wells or Units, as set forth in Exhibit "B", of all oil, gas and
associated liquid and gaseous hydrocarbons produced, saved and marketed from
the Leases or Units as indicated for the respective Wells thereon, without
reduction (potential or otherwise) due to any reversionary or back- in
interest or similar rights, (b) obligates SELLER to bear costs and expenses
relating to the maintenance, development, and operation of the Leases or
Units, as indicated for the respective Wells thereon at all times in an amount
not greater than the working interest set forth on Exhibit "B", unless there
is a corresponding increase in the applicable net revenue interest, and (c)
except for Permitted Encumbrances (as herein defined), is free and clear of:
(i) all liens, claims and encumbrances; (ii) any default or potential default
under any Lease or Contract that adversely affects any Property; and (iii) any
facts or circumstances that result or could result in a restriction or
termination of BUYER's right to own, operate or use any Property; PROVIDED,
however, that (x) the presence of a preferential right to purchase provision
("Preferential Rights") shall not be considered to be a Defect (as defined in
Section 3.5 below); and (y) no Title Defect (as hereinafter defined) may be
asserted by BUYER
-6-
<PAGE>
in connection with matters that are customarily acceptable defects, such as,
but not limited to, defects that have been cured by possession under
applicable statutes of limitation, defects in the early chain of title such as
failure to recite marital status in documents, omission of heirship or
succession proceedings, lack of survey, and failure to record releases of
liens, production payments or mortgages that have expired by their own terms
or the enforcement of which are barred by applicable statutes of limitation.
BUYER acknowledges and agrees that any net revenue interests and working
interests reflected on Exhibit "B" are for the convenience of SELLER and BUYER
and included solely for the purpose of determining Acceptable Title. SELLER
does not and shall not represent or warrant that the Sale Interest is equal to
any such interests in any respect except as otherwise may be provided in this
Agreement.
3.2 DEFINITION OF PERMITTED ENCUMBRANCES. As used herein, the term
"PERMITTED ENCUMBRANCES" shall mean the following items, provided none of the
following items shall operate to increase the working interest of SELLER as
set forth on Exhibit "B" for any of the respective Wells, without a
corresponding increase in the applicable net revenue interest, or decrease the
net revenue interest of SELLER as set forth on Exhibit "B" for any of the
respective Wells:
(a) lessors' royalties, overriding royalties, production
payments, reversionary interests and similar burdens;
(b) division orders and sales contracts;
(c) Preferential Rights;
(d) rights to consent to assignments required by this
Agreement held by persons or entities (other than governmental entities)
("CONSENTS TO ASSIGN"), to the extent consents are obtained from the
appropriate parties or such rights are rendered unenforceable pursuant to
Section 365 of the Bankruptcy Code (as hereinafter defined);
(e) materialman's, mechanic's, repairman's, employee's,
contractor's, operator's, tax, and other similar liens or charges arising in
the ordinary course of business for obligations that are not delinquent and
that will be paid and discharged by SELLER in the ordinary course of business;
(f) rights to consent by, required notices to, filings with,
or other actions by governmental entities in connection with the sale or
conveyance of oil and gas leasehold and fee estates or interests therein,
which consents, notices, filings and/or other actions are customarily obtained
after closing;
(g) easements, rights-of-way, servitudes, permits, surface
leases and other rights in respect of surface operations affecting the
Properties which in the aggregate are not such as to
-7-
<PAGE>
interfere materially with the operation or use of any of the Properties or
materially reduce the value thereof;
(h) rights reserved to or vested in any governmental,
statutory or public authority to control or regulate any of the Properties in
any manner, and all applicable laws, rules and orders of any governmental
authority affecting the Properties;
(i) operating agreements, and unit agreements, unit
operating agreements, pooling agreements and pooling designations affecting
the Properties which are of public record or referenced in the public record
or contained in the Records;
(j) Title Defects (as defined herein) that BUYER has
expressly waived in writing;
(k) all conveyances, reservations and exceptions of public
record or referenced in the public records or contained in the Records
affecting the Properties which in the aggregate are not such as to interfere
materially with the operation or use of any of the Properties or materially
reduce the value thereof;
(l) liens and security interests in favor of SELLER's
lenders, which are to be released at Closing; and
(m) all other liens, charges, encumbrances, contracts,
agreements, instruments, obligations, defects and irregularities affecting the
Properties which in the aggregate are not such as to materially and adversely
affect the ownership, operation or use of any of the affected Properties or
materially reduce the value thereof.
3.3 ENVIRONMENTAL STUDIES. BUYER shall have the right to make an
environmental and other physical assessment of the Properties during the
period beginning on the date of execution of this Agreement and ending at 5:00
P.M. C.D.S.T. on the twenty-eighth (28th) day after the entry of an order
approving the Expense Motion (defined hereinafter) ("EXAMINATION PERIOD").
BUYER and its Representatives (as herein defined) shall have the right to
enter upon the Properties and all buildings and improvements thereon, inspect
the same, and to the extent that SELLER reasonably believes that the
Properties will NOT be damaged thereby, conduct soil and water tests and
borings, and generally conduct such tests, examinations, investigations and
studies ("ENVIRONMENTAL STUDIES") as may be reasonably necessary or
appropriate for the preparation of appropriate environmental and other reports
relating to the Properties, their condition, and the presence of wastes or
contaminants. SELLER shall be provided 24 hours written notice of such
activities and shall have the right to witness all such tests and
investigations and receive an equal distribution of all samples taken by
BUYER, or its Representatives. BUYER agrees to provide SELLER copies of each
site assessment report obtained in connection with the Environmental Studies,
and copies of any and all test results, reports or collected data obtained as
to the Properties within three (3) business days of the receipt
-8-
<PAGE>
thereof by BUYER. To the extent necessary, SELLER hereby grants BUYER access
to the Properties to conduct its Environmental Studies UPON THE CONDITION THAT
BUYER INDEMNIFIES AND HOLDS SELLER AND ITS AFFILIATES AND THEIR RESPECTIVE
REPRESENTATIVES HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS FOR OR RELATED TO
PERSONAL INJURY OR PROPERTY DAMAGE DIRECTLY ARISING OUT OF OR AS A DIRECT
RESULT OF THE ACTIVITIES OF BUYER OR ITS REPRESENTATIVES ON THE PROPERTIES IN
CONDUCTING ANY TESTS OR ITS OTHER ACTIVITIES ON THE PROPERTIES, IN CONNECTION
WITH ITS ENVIRONMENTAL STUDIES. If during the Examination Period, BUYER
discovers in good faith that (i) there is a condition or circumstance which
constitutes an actual violation of an applicable Environmental Law (as defined
herein) that affects the value of the Property(ies), or (ii) there is a claim,
demand, filing, investigation, action, suit or other legal or administrative
proceeding asserted or otherwise initiated by a governmental authority or any
other person or entity and arising from or related to the Properties or the
ownership or operation of any thereof ("ENVIRONMENTAL DEFECT"), BUYER may
include notice of such Environmental Defect in a Notice of Defects ("NOTICE OF
DEFECTS") delivered hereunder, PROVIDED, that any such matter not included in
a Notice of Defects shall be waived by BUYER. BUYER acknowledges that certain
of the Properties may currently or have in the past contained asbestos or
natural occurring radioactive materials ("NORM") and that special procedures
may be required for the assessment, remediation, removal, transportation or
disposal of such asbestos and NORM. Notwithstanding anything contained in this
Agreement to the contrary, BUYER agrees to accept full responsibility for and
shall pay all costs and expenses associated with the assessment, remediation,
removal, transportation and disposal of the asbestos or NORM associated with
the Properties, and shall not be entitled to claim the fact that the asbestos
or NORM exists or that the assessment, remediation, removal, transportation or
disposal of the asbestos or NORM is not complete or that additional costs will
be required to complete the assessment, remediation, removal, transportation
or disposal of the asbestos or NORM as a Defect and BUYER (on behalf of
itself, its officers, agents, employees, affiliates, successors and assigns)
irrevocably waives such claims.
As used in this Agreement, "ENVIRONMENTAL LAWS" shall mean all laws,
statutes, ordinances, permits, decrees, judgments, orders, rules or
regulations which are promulgated, issued or enacted by a governmental entity,
or agency thereof that relate to: (1) the prevention of pollution or
environmental damages, (2) the abatement, remediation or elimination of
pollution or environmental damage, (3) the protection of the environment
generally, and/or (4) the protection of persons or property from actual or
potential exposure (or the effects of exposure) to pollution or environmental
damage; including without limitation, the Clean Air Act, as amended, the Clean
Water Act, as amended, the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, the Federal Water Pollution Act, as
amended, the Resource Conservation and Recovery Act of 1976, as amended, the
Safe Drinking Water Act, as amended, the Toxic Substance and Control Act, as
amended, the Superfund Amendments and Reauthorization Act of 1986, as amended,
the Hazardous and the Solid Waste Amendments Acts of 1984, as amended, and the
Oil Pollution Act of 1990, as amended.
-9-
<PAGE>
3.4 IDENTIFIED CLAIMS. During the Examination Period SELLER (insofar
as it has the right to do so) shall make available to BUYER for examination
and copying (at BUYER's cost) any of SELLER's non-privileged accounting,
engineering, geological, geophysical, production, environmental and land
records relating to the Properties as BUYER may reasonably request. SELLER
shall also permit BUYER's Representatives to consult with SELLER's employees
who have knowledge concerning the Properties during normal business hours
regarding such records; PROVIDED, that such consultation shall not
unreasonably disrupt the performance by such employee of his or her regular
duties with SELLER. If during the Examination Period BUYER determines in good
faith that (i) royalties, rentals or other payments due in respect of the
Properties prior to the Effective Time have not been paid (except for those
amounts in suspense), or (ii) other than those discharged or to be discharged
in the Bankruptcy Proceeding (as herein defined), there are unsatisfied
defects, claims, demands, losses, liabilities or obligations in respect of the
Properties based upon omissions, events or occurrences prior to the Effective
Time (collectively, "IDENTIFIED CLAIMS"), BUYER may include notice of such
Identified Claims in the Notice of Defects delivered hereunder; PROVIDED, that
the Prize Agreement may not be the subject of any Identified Claim, and
further any Identified Claim not included in the Notice of Defects shall be
waived by BUYER as an Identified Claim.
3.5 NOTICE OF DEFECTS. If during the Examination Period any matter is
discovered by BUYER that, in BUYER's reasonable, good faith opinion, would:
(a) cause any of the Sale Interest to fail to have
Acceptable Title (a "TITLE DEFECT");
(b) constitute an Environmental Defect; or
(c) constitute an Identified Claim, then the items pursuant
to (a) through (c) shall herein be individually referred to as a "DEFECT", and
shall herein be collectively referred to as the "DEFECTS"; PROVIDED, HOWEVER,
the items pursuant to (a) and (c) may be asserted as Defects only in the
event, and then only to the extent, that the value of each such matter,
calculated on the basis of the Allocated Value (as defined herein), exceeds a
value of $10,000, net to SELLER's interest. If the total value of all asserted
Defects exceeds $1,500,000 (the "MINIMUM DEFECT THRESHOLD"), BUYER may cause a
written notice (a "NOTICE OF DEFECTS") thereof to be actually delivered to
SELLER during the Examination Period, and that, if so delivered, BUYER's sole
remedy therefor shall be as provided in Section 3.6. The Notice of Defects
shall specifically identify the Defect and to the extent reasonably possible
include:
(i) BUYER's purported value of each specific
Defect, which value, except for Environmental Defects and Identified Claims,
cannot exceed the Allocated Value of the affected Well or Property;
(ii) an identification of each affected Property;
-10-
<PAGE>
(iii) BUYER's basis for determining the existence
and value of such Defect, together with the appropriate associated reports,
opinions, data, valuations, assessments, conclusions and supporting
calculations sufficient to reasonably support the asserted Defect; and
(iv) BUYER's statement of steps necessary to cure
each such Defect to its reasonable satisfaction, all of which shall be kept
strictly confidential, except to the extent required by law, regulation or
order of any court or other governmental authority or as may be necessary to
address Defects identified in a Notice of Defects.
3.6 REMEDY FOR DEFECTS ASSERTED IN NOTICE OF DEFECTS.
(a) In SELLER's sole discretion, but without obligation, it
may, at its own cost, take such steps as are reasonably necessary to cure to
BUYER's reasonable satisfaction any Defects identified in a Notice of Defects.
In the event SELLER is unable or elects not to cure any or all such Defects
within five (5) business days after receipt of the Notice of Defects, SELLER
and BUYER shall use their best efforts to agree on the value of such Defect(s)
and in the absence of such agreement, the value of the Defect(s) shall be the
value asserted by BUYER in the Notice of Defects. Further, SELLER at its sole
discretion may by written notice delivered to BUYER within seven (7) business
days after receipt of the Notice of Defects, withdraw from this Agreement any
Property which BUYER asserts as affected by a Defect, and the Purchase Price
shall be adjusted by the Allocated Value for such Property. The sum of: (x)
the agreed value of each Defect not cured and, (y) the asserted value of each
such Defect (in the absence of an agreed value) remaining after SELLER has
withdrawn any Property from this Agreement, shall be herein referred to as the
"TOTAL DEFECT VALUE". If the Total Defect Value:
(i) is less than the Minimum Defect Threshold,
then, BUYER shall accept and purchase the Properties, except Properties
withdrawn by SELLER, without any adjustment to the Purchase Price for Defects;
(ii) is equal to or greater than the Minimum Defect
Threshold, but less than $7,000,000, THEN, BUYER shall accept and purchase the
Properties, except Properties withdrawn by SELLER, but including any other
Property subject to any Defect, and the Purchase Price shall be adjusted for
Defects by an amount equal to the Total Defect Value less the Minimum Defect
Threshold; or
(iii) equals or exceeds $7,000,000 ("TERMINATION
THRESHOLD"), then SELLER may by written notice delivered to BUYER within ten
(10) business days after receipt of the Notice of Defects elect to agree to
accept an adjustment to the Purchase Price for Defects in an amount equal to
the Total Defect Value less the Minimum Defect Threshold, or SELLER may elect
to terminate this Agreement. If SELLER fails to terminate, BUYER may elect to
terminate this
-11-
<PAGE>
Agreement by written notice delivered to SELLER within two (2) business days
following the end of said ten (10) business day period; PROVIDED if neither
SELLER nor BUYER elects to terminate this Agreement, then BUYER shall accept
and purchase the Properties, except Properties withdrawn by SELLER, but
including any other Property subject to any Defect, and the Purchase Price
shall be adjusted by an amount equal to the Total Defect Value less the
Minimum Defect Threshold.
(b) POST-CLOSING. If a claimed Defect has not been cured,
waived by BUYER or the affected Property withdrawn by SELLER prior to Closing,
SELLER, at its election made at least two (2) business days prior to Closing
by giving notice of such election to BUYER, shall have ninety (90) days after
the Closing Date (the "CURE PERIOD") within which to cure to the reasonable
satisfaction of BUYER such Defect. If SELLER elects to cure such Defect after
Closing, BUYER shall deposit into an escrow account, mutually agreed upon, a
sum equal to the lesser of the Allocated Value of the Property affected by the
claimed Defect, or BUYER's good faith estimate of the Defect amount, and such
amount shall be deducted from the amount of the Purchase Price paid to SELLER
at Closing and the affected Property shall be assigned to BUYER at Closing. If
such claimed Defects are cured, to the reasonable satisfaction of BUYER, or if
they are waived by BUYER, on or before the expiration of such ninety (90) day
period, the Defect amount shall be deemed to be zero and BUYER and SELLER
shall jointly instruct the escrow agent, mutually agreed upon, to distribute
to SELLER the Defect amount attributable to the claimed Defects so cured or
waived, plus all interest earned thereon, and SELLER shall have no further
liability to BUYER with respect thereto. If BUYER does not waive such claimed
Defect and SELLER is unable to cure the claimed Defect to BUYER's reasonable
satisfaction, within ninety (90) days after Closing, SELLER may either (i) in
writing elect to withdraw the affected Property(ies) from this Agreement and
BUYER shall reconvey to SELLER such Property(ies) and the BUYER and SELLER
shall jointly instruct the escrow agent to distribute to BUYER the escrow
amount for such Property(ies) and SELLER shall pay to BUYER the difference, if
any, between the escrow amount and the Allocated Value for such Property(ies);
or (ii) if SELLER fails to elect to withdraw the affected Property(ies), the
claimed Defect will be deemed to be accepted by SELLER, the Purchase Price
will be adjusted by the finally determined Defect amount, and the BUYER and
SELLER shall jointly instruct the escrow agent to distribute to BUYER the
finally determined Defect amount, plus the interest thereon;
(c) SELLER shall have no obligation hereunder to any person
to sell, convey, deliver or otherwise transfer all or any part of the
Properties if BUYER or SELLER terminates this Agreement if Total Defect Value
exceeds the Termination Threshold. If Closing occurs, except for Defects for
which monies are escrowed pursuant to this Section paragraph (b), BUYER shall
be DEEMED TO HAVE WAIVED OR ASSUMED any and all claims, known and unknown,
arising from or related to any and all Defects or title to or other condition
of the Properties, including, without limitation, whether or not identified in
a Notice of Defects, and notwithstanding the fact that SELLER may not have
cured any such Defect(s) to BUYER's satisfaction, and SELLER shall have no
obligation with respect thereto.
-12-
<PAGE>
3.7 ALLOCATED VALUE OF PROPERTIES. "ALLOCATED VALUE" shall mean, with
respect to any Well or Unit, the amount set forth in good faith by BUYER for
the Sale Interest in each such Well or Unit, which collectively shall total
the Purchase Price, in a letter to be delivered by BUYER to SELLER
contemporaneously with the execution of this Agreement.
3.8 PREFERENTIAL PURCHASE RIGHTS AND CONSENTS TO ASSIGN. On or about
the time that the Sale Motion (as herein defined) is filed, SELLER shall make
a good faith effort to send written notice of this Agreement to all persons or
entities holding Preferential Rights affecting the Properties or Consents to
Assign, other than such consents of governmental authorities which are usually
obtained in the normal course of business after Closing, (a) offering to sell
to each such person or entity the affected Property for which a Preferential
Right is held and subject to the terms hereof and for the Allocated Value for
such Property or Properties; or (b) requesting, where appropriate, consent to
any assignment required in connection herewith. In this regard, SELLER shall
prepare the typewritten notices addressed to the appropriate parties (along
with an electronic copy of same) in form and content acceptable to BUYER and
SELLER, relative to all such Preferential Rights and/or Consents to Assign and
shall attach to each such notice a copy of the instrument or document or the
pertinent portion of each instrument or document which created such
Preferential Rights and/or Consents to Assign as the case may be. SELLER shall
also send such notices as instructed by BUYER for any additional Preferential
Rights or Consents to Assign identified by BUYER to SELLER in writing during
the Examination Period. If one (1) or more of the holders of any Preferential
Rights or Consents to Assign notifies SELLER in writing that it commits to
assert its Preferential Rights, or deny its Consent to Assign, as the case may
be, or if the holder of a Consent to Assign otherwise fails or refuses to
grant such consent, SELLER shall promptly give notice thereof to BUYER. SELLER
shall then promptly seek an order of the Bankruptcy Court authorizing an
assignment and sale of such Properties free of any unobtained, required
Consents to Assign. In the event SELLER does not obtain the required Consents
to Assign or an order of the Bankruptcy Court authorizing a sale free of such
required Consents to Assign, BUYER may at its option elect to: (x) accept an
assignment of such Property(ies) without the required Consent to Assign, or
(y) to the extent that any required Consent not obtained expressly provides
for forfeiture, or termination of the estate assigned, or substantial
liquidated damages for an assignment without consent, exclude any or all of
such Property(ies) and the Purchase Price shall be reduced by the Allocated
Value thereof. In the event a holder of a Preferential Right commits to assert
such right, then the affected Property(ies) shall be excluded from this
Agreement and the Purchase Price shall be reduced by the Allocated Value
thereof. If Closing occurs prior to the expiration of any period permitted for
consideration and exercise of a Preferential Right and BUYER pays for a
Property subject to such Preferential Right, BUYER shall be entitled to
receive, and SELLER hereby assigns to BUYER all of SELLER's rights to, all
proceeds due from such holders in connection with such Preferential Rights.
3.9 RISK OF LOSS. If, after the Effective Time and prior to the
Closing, any part of the Properties shall be destroyed or harmed by fire or
any other casualty or cause or shall be taken by condemnation or the exercise
of eminent domain, this Agreement shall remain in full force and effect
-13-
<PAGE>
as to each affected Property, and SELLER shall at its election either collect
(and when collected pay over to BUYER) or assign to BUYER any and all
insurance or other claims related to such damage or loss, and BUYER shall take
title to the affected Property without claiming any Defect with respect to
such loss and without reduction in the Purchase Price.
ARTICLE 4. REPRESENTATIONS OF SELLER
SELLER represents and warrants to BUYER as follows:
4.1 EXISTENCE. SELLER is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware, and is
duly qualified to do business in Texas.
4.2 AUTHORIZATION. Subject to obtaining the approval and
authorization of the United States Bankruptcy Court for the Western District
of Texas (the "BANKRUPTCY COURT") in Cause No. 99-70653, styled "In Re:
Costilla Energy, Inc." (the "BANKRUPTCY PROCEEDING"), SELLER has all authority
necessary to enter into this Agreement and to perform all its obligations
hereunder. This Agreement has been duly executed and delivered on SELLER's
behalf, and at the Closing all documents and instruments required hereunder to
be executed and delivered by SELLER will have been duly executed and
delivered. This Agreement and all such documents and instruments shall
constitute legal, valid, and binding obligations of SELLER enforceable in
accordance with their respective terms, except to the extent enforceability
may be affected by bankruptcy, reorganization, insolvency, or similar laws
affecting creditors' rights generally.
4.3 POWER. Subject to obtaining the approval and authorization of the
Bankruptcy Court, and to Preferential Rights and restrictions on assignment of
the type typically found in the oil and gas industry, and to rights to consent
by, required notices to, and filings with or actions by other governmental
entities, SELLER's execution, delivery, and performance of this Agreement and
the transactions contemplated hereby will not: (i) violate or conflict with
any provision of its articles of incorporation, bylaws or other governing
documents; (ii) result in the breach of any term or condition of, or
constitute a default or cause the acceleration of any obligation under any
agreement or instrument to which it is a party or by which it is bound; or
(iii) violate or conflict with any applicable judgment, decree, order, permit,
law, rule, or regulation.
4.4 BROKERS. SELLER has incurred no liability, contingent or
otherwise, for broker's or finder's fees in respect of this transaction for
which BUYER shall have any responsibility, whatsoever.
4.5 LITIGATION. Except as set forth on Schedule 4.5, as of the date
of this Agreement, there is no suit, action or other proceeding pending for
which SELLER has been notified or served by citation or, to the best of
SELLER's knowledge threatened, before any court or governmental body,
-14-
<PAGE>
authority or agency which relates to the Properties or to SELLER's ability to
consummate the transactions contemplated by this Agreement.
4.6 MARKETING AGREEMENTS. The existing oil and gas production
attributable to the Sale Interest in the Properties operated by SELLER is, to
the knowledge of SELLER and except as disclosed on Schedule 4.6 hereto, not
committed or dedicated to any product sales, processing or marketing agreement
having a term remaining in excess of ninety (90) days.
4.7 PERMITS. To the knowledge of SELLER, SELLER possesses all
licenses, permits, variances, exemptions, consents, certificates, orders,
approvals and authorizations necessary to own the Properties operated by
SELLER and to carry on its business as now being conducted.
4.8 TAX PARTNERSHIPS. None of the Properties operated by SELLER is
subject to a tax partnership.
4.9 TAXES. To SELLER's knowledge, all ad valorem, property,
production, severance and similar taxes and assessments based on or measured
by the ownership of property or the production of hydrocarbons or the receipt
of proceeds therefrom on the Properties operated by SELLER have been or will
be properly paid.
4.10 INSURANCE. Schedule 4.10 hereto lists all material insurance
policies covering the Properties and operations of SELLER as of the Effective
Time, and (i) all such insurance policies are in force and effect; (ii) SELLER
has not received notice from any carrier of such insurance of the intention to
discontinue any coverage afforded to SELLER; and (iii) to the knowledge of
SELLER, SELLER is not in default with respect to any such insurance policy,
has not failed to give any notice or present any claim required or permitted
under any such insurance policy in due and timely fashion, and has not waived
or released any rights thereunder.
4.11 CONDEMNATION. To the knowledge of SELLER, it has not received
notice of any actual or threatened taking of any material part of the
Properties by reason of condemnation.
4.12 IMBALANCES. No hydrocarbons produced from the Properties are
subject to a material Imbalance (as herein defined), except as set forth on
Schedule 4.12, which sets forth both Imbalances subject to written gas
balancing agreements and Imbalances which are not subject to written gas
balancing agreements.
4.13 CALL ON PRODUCTION. No party has any call upon, option to
purchase, rights to match, or similar rights under any agreement with respect
to the production from the Properties operated by SELLER.
4.14 COMPLIANCE WITH LAW. To the knowledge of SELLER, SELLER is in
compliance with all laws, ordinances, rules, regulations, judgments, decrees
and orders applicable to the
-15-
<PAGE>
Properties, except to the extent that any non-compliance is not reasonably
expected to result in a material adverse effect on the Properties and SELLER
has not received any notice of any claimed noncompliance therewith. To the
knowledge of SELLER, there are no facts, conditions or circumstances in
connection with, related to or associated with the Properties that could
reasonably be expected to give rise to any claim or assertion that SELLER, the
Properties or the ownership or operation of any thereof is not in material
compliance with any applicable law, rule, regulation, ordinance, or order of
any governmental authority or with any term or conditions of any applicable
permit, license, approval, variance, exemption, consent, certificate or other
authorization.
4.15 ENVIRONMENTAL MATTERS. The Properties have been used by SELLER
solely for oil and gas and related operations; at no time have the Properties
been used by SELLER or, to the best knowledge of SELLER, by anyone else for
the generation, storage or disposal of a Hazardous Substance or as a landfill
or a waste disposal site for regulated waste. "Hazardous Substance" means any
substance defined as a hazardous substance under any Environmental Law except
any substance exempt, when used or generated in oil and gas operations, within
the jurisdiction to which such Environmental Law applies.
4.16 PRIZE AGREEMENT. SELLER is an executing party to the Prize
Agreement, and since its execution, has not sold, assigned or otherwise
alienated any rights of SELLER under such Agreement.
4.17 DEFINITION OF KNOWLEDGE. As used in this Agreement, the term "TO
THE KNOWLEDGE OF" shall mean, the actual conscious knowledge at the time the
assertion regarding knowledge is made of any officer after reasonable inquiry
of the party making such assertion.
ARTICLE 5. REPRESENTATIONS OF BUYER
BUYER represents and warrants to SELLER as follows:
5.1 EXISTENCE. BUYER is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Oklahoma and is
duly qualified to do business in each State where its business operations
require such qualification.
5.2 AUTHORIZATION. BUYER has all authority necessary to enter into
this Agreement and to perform all its obligations hereunder. This Agreement
has been duly executed and delivered on BUYER's behalf, and at the Closing all
documents and instruments required hereunder to be executed and delivered by
BUYER will have been duly executed and delivered. This Agreement, and all such
documents and instruments shall constitute legal, valid, and binding
obligations of BUYER enforceable in accordance with their respective terms,
except to the extent enforceability may be affected by bankruptcy,
reorganization, insolvency, or similar laws affecting creditors' rights
generally.
-16-
<PAGE>
5.3 POWER. BUYER's execution, delivery, and performance of this
Agreement and the transactions contemplated hereby will not: (i) violate or
conflict with any provision of its certificate of incorporation, by-laws, or
other governing documents; (ii) result in the breach of any term or condition
of, or constitute a default or cause the acceleration of any obligation under
any agreement or instrument to which it is a party or by which it is bound; or
(iii) violate or conflict with any applicable judgment, decree, order, permit,
law, rule, or regulation.
5.4 BROKERS. BUYER has incurred no liability, contingent or
otherwise, for broker's or finder's fees in respect of this transaction for
which SELLER shall have any responsibility whatsoever.
5.5 FURTHER DISTRIBUTION. BUYER (i) is acquiring an interest in the
Properties for its own account and without a view to the distribution thereof
within the meaning of the Securities Act of 1933, as amended; and (ii) has
such knowledge and experience in business, financial, and oil and gas matters
that it is capable of evaluation of the merits and risks of entering into and
of carrying out its obligations in connection with the acquisition of an
interest in the Properties in the manner contemplated herein.
5.6 FINANCIAL CONDITION. BUYER will have at Closing financial
resources sufficient to consummate the transactions contemplated by this
Agreement and fulfill its obligations hereunder.
ARTICLE 6. DISCLAIMER OF CERTAIN WARRANTIES
6.1 INFORMATION PROVIDED. All the information, statistics, summaries,
and facsimiles furnished by or on behalf of SELLER herewith, hereunder, or
prior to the execution of this Agreement are furnished or will be furnished
for BUYER's use at BUYER's sole risk. All such information has been compiled
or prepared by SELLER based upon its files and records and such information
represents true and correct copies of materials out of its files or materials
delivered to it by third parties and it has no actual knowledge of facts
different from the facts set forth in the materials delivered, but SELLER
MAKES NO REPRESENTATION, EXPRESS OR IMPLIED, AS TO THE ACCURACY, CORRECTNESS,
COMPLETENESS, OR THE ADEQUACY OF SAME AND DOES NOT WARRANT OR GUARANTEE SUCH
INFORMATION IN ANY WAY. SELLER HAS MADE NO STATEMENTS OR REPRESENTATIONS
CONCERNING THE PRESENT OR FUTURE VALUE OF THE ANTICIPATED INCOME, COSTS, OR
PROFITS, IF ANY, TO BE DERIVED FROM THE PROPERTIES. BUYER IS RESPONSIBLE FOR
MAKING SUCH INDEPENDENT INVESTIGATION AND EVALUATION OF THE PROPERTIES AS
BUYER SHALL DEEM APPROPRIATE, REALIZING THAT SELLER DOES NOT ASSUME AND SHALL
HAVE NO LIABILITY TO BUYER OR ANY OTHER PARTY FOR ANY RELIANCE WHICH MAY BE
PLACED ON THE INFORMATION, STATISTICS, SUMMARIES, OR FACSIMILES FURNISHED
HEREWITH OR HEREUNDER.
-17-
<PAGE>
SPECIFICALLY, BUT WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, ANY
DESCRIPTION OF WELLS AND EQUIPMENT INCLUDED IN THE PROPERTIES HAS BEEN
COMPILED STRICTLY FROM SELLER'S RECORDS RATHER THAN FROM AN ON-THE-GROUND
INVENTORY.
6.2 WARRANTIES. EXCEPT AS OTHERWISE PROVIDED HEREIN, CONVEYANCE OF
THE SALE INTEREST IN ALL REAL AND PERSONAL PROPERTY WILL BE MADE ON AN "AS IS,
WHERE IS" BASIS, WITHOUT WARRANTIES, EXPRESS OR IMPLIED IN FACT OR IN LAW, AS
TO MERCHANTABILITY, DURABILITY, USE, OPERATION, OR FITNESS FOR ANY PARTICULAR
PURPOSE.
ARTICLE 7. COVENANTS OF SELLER
SELLER covenants and agrees with BUYER as follows:
7.1 ACCESS TO RECORDS. Prior to the Closing Date, SELLER shall grant
BUYER and its Representatives reasonable access to the Records for the review
and copying thereof, at BUYER's expense, during SELLER's normal business hours
upon reasonable prior notification, subject to any confidentiality agreements
previously signed by BUYER. The Records shall be made available at their
present location together with suitable office facilities for review and
copying purposes. BUYER will use its best efforts to conduct such operations
in a manner that will not disrupt SELLER's normal business activities.
7.2 MAINTENANCE OF PROPERTIES. SELLER will not sell, transfer,
assign, convey or otherwise dispose of any of the Properties subject to
SELLER's direct control, other than (a) oil, gas and other hydrocarbons
produced, saved and sold in the ordinary course of business, (b) personal
property and equipment which is replaced with property and equipment of
comparable or better value and utility in the ordinary and routine maintenance
and operation of the Properties, and (c) as required in connection with any
exercise of Preferential Rights or as otherwise required to satisfy
obligations to third parties under farmout, farmin, operating or other similar
agreements presently existing.
7.3 OPERATIONS. With respect to any of the Properties, SELLER will,
subject to any limitations imposed by the Bankruptcy Court, endeavor in good
faith until Closing (subject to this Agreement and the rights of affected
parties under applicable agreements) to:
(a) use reasonable efforts to provide BUYER access to the
Properties;
(b) cause the Properties to be developed, maintained and
operated in compliance with applicable laws, ordinances, rules, regulations
and order and in a prudent, good and
-18-
<PAGE>
workmanlike manner, maintain all insurance now in force with respect to the
Properties, and pay or cause to be paid all costs and expenses in connection
therewith;
(c) not approve the drilling of any new well on the
Properties without the advance written consent of BUYER, which consent (which
may not be unreasonably withheld) or non- consent must be given by BUYER
within three business (3) days of the notice from SELLER;
(d) not take any action or fail to take any action which is
reasonably expected to result in any termination of the Leases forming a part
of the Properties;
(e) perform and comply with all of its obligations under
agreements relating to or affecting the Properties;
(f) carry on its business with respect to the Properties in
substantially the same manner as it has heretofore;
(g) not enter into or assume any contract, agreement,
consent order with any governmental agency, administrative body or court or
commitment which is not in the ordinary course of business as heretofore
conducted or which involves payments, receipts or potential liabilities with
respect to any one of the Properties of more than $50,000.00, (net to SELLER)
excluding emergency expenditures;
(h) not resign or otherwise voluntarily relinquish its
rights as operator of any of the Properties for which it serves as operator on
the date hereof;
(i) not grant any preferential right to purchase or similar
right or agree to require the consent of any party to the transfer and
assignment of the Properties to BUYER, subject to existing contractual
obligations;
(j) not enter into any gas sales contract or crude oil sales
or supply contract with respect to the Properties which is not terminable
without penalty upon notice of thirty (30) days or less;
(k) not enter into any transaction the effect of which,
considered as a whole, would be to cause SELLER's ownership interest in any of
the Properties to be decreased from its ownership interest as of the date
hereof;
(l) if any approval or consent by any federal, state or
local governmental authority is required to vest Acceptable Title to any of
the Sale Interest in BUYER at Closing, exercise its best efforts, as
reasonably requested in writing by BUYER, to obtain all such required
approvals or consents at BUYER's expense;
-19-
<PAGE>
(m) through Closing, endeavor to give prompt written notice
to BUYER of any notice of default (or written threat, whether disputed or
denied) received or given by SELLER after the date hereof under any instrument
or agreement affecting the Properties to which SELLER is a party or by which
it or any of the Properties is bound; and
(n) to the extent it can do so without violating any third
party agreement and subject to the rights of third parties, exercise its best
efforts to provide (as soon as practicable) BUYER with a copy of any material
authority for expenditure and material contract affecting the Properties
entered into after the Effective Time, provided, however, that the provision
of such matters to BUYER is for informational purposes only and that BUYER
shall have no right to comment upon or object to any such matter that is
otherwise not in violation of this Agreement.
7.4 PERMISSIONS. SELLER will use reasonable efforts to obtain all
permissions, approvals, and consents of federal, state, and local governmental
authorities and other third parties as may be required to consummate the sale
contemplated hereunder (excluding governmental permissions, approvals, and
consents which are customarily obtained after the consummation of transactions
of the type contemplated hereunder).
7.5 EXCLUSIVE DEALING. Upon execution of this Agreement, SELLER shall
not, directly or indirectly, through any Representatives (defined below) or
otherwise, initiate the solicitation of any proposal from any person, other
than BUYER, relating to the acquisition of SELLER or any stock, business or
substantial asset of SELLER, whether through purchase, merger, consolidation,
transfer, business combination, or otherwise. In addition, upon execution of
this Agreement, SELLER shall not, directly or indirectly, through any
Representatives, or otherwise, affirmatively sell or transfer a material
portion of the Properties or a significant equity interest in SELLER to any
person or entity other than BUYER. "REPRESENTATIVES" means, collectively, a
party's directors, officers, financial advisors, attorneys, accountants,
consultants, agents, affiliates, employees or other representatives. SELLER
may, however, provide information to and discuss a potential sale with any
entity which submits an unsolicited inquiry or proposal to SELLER to acquire
the Properties in any way (including, without limitation, by sale or merger).
SELLER may advise the Bankruptcy Court of any such competing proposal and its
views of such proposal, if SELLER determines in good faith, after consultation
with its legal counsel, that such action is required to comply with its
fiduciary duties as imposed by applicable law.
7.6 MOTION TO APPROVE AGREEMENT AND TRANSACTION. SELLER shall file
in the Bankruptcy Court (i) on or before April 28, 2000, a motion acceptable
to BUYER (the "SALE MOTION") seeking approval of the Agreement and the
transaction contemplated herein pursuant to Sections 363(f) and 365 of Title
11 of the United States Code (the "CODE"); (ii) on or before April 21, 2000, a
motion acceptable to BUYER to approve the payment to BUYER of the Break-Up Fee
pursuant to Section 12.8 of this Agreement and to approve the payment to BUYER
of the Expense Fee pursuant to Section 12.9 of this Agreement in a form
acceptable to BUYER (the "EXPENSE MOTION"); and (iii) on or before April 28,
2000, a motion acceptable to BUYER to establish bidding
-20-
<PAGE>
proceedings for subsequently submitted proposals to purchase the Properties
containing a provision that all competing bids for the Properties must be in
excess of $5,000,000 in additional value than is afforded SELLER pursuant to
this Agreement, and on substantially the same terms as provided in this
Agreement, and a provision for the approval by the Bankruptcy Court of the
exclusive dealing requirements of Section 7.5 of this Agreement. BUYER shall
not be required to perform any of its obligations pursuant to this Agreement
until an order approving the relief requested in the Expense Motion (the
"EXPENSE ORDER") is entered and is not vacated or stayed. If an appeal is
taken from the Expense Order, or the time to file such an appeal has not
expired, BUYER may, but shall not be required to, perform any or all of its
obligations pursuant to this Agreement pending resolution of such appeal or
the expiration of such period.
ARTICLE 8. COVENANTS OF BUYER
BUYER covenants and agrees with SELLER as follows:
8.1 RETURN OF DATA. BUYER agrees that if this Agreement is terminated
for any reason whatsoever, BUYER shall promptly return to SELLER all
information and data furnished by or on behalf of SELLER to BUYER, its
officers, employees, and representatives in connection with this Agreement,
and BUYER shall destroy all copies, extracts, or excerpts of such information
and data.
8.2 INDEMNITY REGARDING ACCESS. BUYER AGREES TO PROTECT, INDEMNIFY,
DEFEND, AND HOLD HARMLESS SELLER FROM AND AGAINST ANY AND ALL LOSSES IN
CONNECTION WITH PERSONAL INJURIES, DEATH, OR PROPERTY DAMAGE ARISING OUT OF OR
RELATING TO THE ACCESS OF BUYER, ITS OFFICERS, EMPLOYEES, AND REPRESENTATIVES
TO THE PROPERTIES FROM THE DATE HEREOF TO THE CLOSING DATE, REGARDLESS OF
WHETHER SUCH INJURIES, DEATH, OR DAMAGES ARE CAUSED IN PART BY THE SOLE,
PARTIAL OR CONCURRENT NEGLIGENCE OF SELLER.
ARTICLE 9. SELLER'S CONDITIONS OF CLOSING
The obligation of SELLER to close this transaction shall be subject
to and conditioned upon the following, any one or more of which may be waived
by SELLER, in whole or in part:
9.1 REPRESENTATIONS. The representations of BUYER under Article 5 of
this Agreement shall be true and accurate in all material respects as of the
date when made and shall be deemed to be made again at and as of the time of
the Closing and shall then be true and accurate in all material respects.
-21-
<PAGE>
9.2 PERFORMANCE. BUYER shall have performed and complied with each
covenant, agreement, and condition required by this Agreement to be performed
or complied with by it prior to or at Closing.
9.3 PENDING MATTERS. At Closing, no litigation, proceeding,
investigation, or inquiry (other than between the parties to this Agreement
and other than objections by any third party to the Sale Motion not ruled upon
or otherwise considered by the Bankruptcy Court) shall be pending or
threatened to enjoin or prevent the consummation of the transactions
contemplated by this Agreement.
9.4 OFFICER'S CERTIFICATE. BUYER shall have delivered to SELLER a
certificate of an executive officer of BUYER, dated the Closing Date,
certifying on behalf of BUYER that the conditions in Sections 9.1, 9.2 and, to
the knowledge of BUYER, 9.3 above have been fulfilled.
9.5 COURT APPROVAL. SELLER shall have obtained an order of the
Bankruptcy Court, in a form acceptable to BUYER, pursuant to Section 363(f)
and Section 365 of the Code authorizing and approving the sale of the
Properties and assignment of the Contracts pursuant to this Agreement, free
and clear of liens, claims, interests, mortgages and encumbrances other than
the Permitted Encumbrances which order has not been reversed, vacated or
stayed (the "SALE ORDER").
ARTICLE 10. BUYER'S CONDITIONS OF CLOSING
The obligation of BUYER to close this transaction shall be subject to
and conditioned upon the following, any one or more of which may be waived by
BUYER, in whole or in part:
10.1 REPRESENTATIONS. The representations of SELLER under Article 4
of this Agreement shall be true and accurate in all material respects as of
the date when made and, except as to any matter discovered by BUYER and
disclosed to SELLER relating to a representation qualified by "knowledge",
shall be deemed to be made again at and as of the time of the Closing and
shall then be true and accurate in all material respects.
10.2 PERFORMANCE. SELLER shall have performed and complied with each
covenant, agreement, and condition required by this Agreement to be performed
or complied with by it prior to or at Closing.
10.3 PENDING MATTERS. At Closing, no litigation, proceeding,
investigation, or inquiry (other than between the parties to this Agreement
and other than objections by any third parties to the Sale Motion not ruled
upon or otherwise considered by the Bankruptcy Court) shall be pending or
threatened to enjoin or prevent the consummation of the transactions
contemplated by this Agreement.
-22-
<PAGE>
10.4 OFFICER'S CERTIFICATE. SELLER shall have delivered to BUYER a
certificate of an executive officer of SELLER, dated the Closing Date,
certifying on behalf of SELLER that the conditions contained in Sections 10.1,
10.2 and, to the knowledge of SELLER, 10.3 have been fulfilled.
10.5 RELEASE OF SELLER LIENS. SELLER shall have delivered to BUYER
evidence satisfactory to BUYER that the Properties can be conveyed to BUYER
free and clear of any lien, mortgage or encumbrance held by SELLER's lenders.
10.6 COURT APPROVAL. SELLER shall have obtained the Sale Order.
ARTICLE 11. CLOSING
11.1 TIME AND PLACE OF CLOSING. Subject to the conditions stated in
this Agreement, the consummation of the transactions contemplated hereby (the
"CLOSING") shall occur on such date that the parties may mutually agree upon
and designate in writing but in absence of such Agreement, on the later of the
fifth (5th) business day after the entry of the Sale Order or the thirteenth
(13th) business day after receipt by SELLER of the Notice of Defects at 11:00
A.M. C.D.S.T.,(the "CLOSING DATE"). The Closing shall be held at SELLER's
office in Midland, Texas, or at such other location as may be mutually agreed
upon by SELLER and BUYER.
11.2 CLOSING OBLIGATIONS.
(a) At Closing, SELLER shall deliver to BUYER the following:
(i) Executed title certificates for the Vehicles
and executed Assignments, Bills of Sale and Conveyances of the Sale Interest
in the Properties, in the form attached hereto as EXHIBIT "C" and in
sufficient counterparts for recording in each appropriate filing jurisdiction;
(ii) An initial settlement statement reflecting
adjustments to the Purchase Price as provided in Article 2 above (SELLER shall
provide BUYER a copy of the statement at least three (3) business days prior
to the Closing Date);
(iii) Letters-in-lieu of transfer orders, directing
that all proceeds of production from the Sale Interest in the Properties which
have heretofore been paid to SELLER shall be paid to the account of BUYER as
of and after the Effective Time;
(iv) SELLER's Officer's Certificate in compliance
with Section 10.4 hereof;
(v) Possession of the Sale Interest in the
Properties;
-23-
<PAGE>
(vi) One copy of the Sale Order certified by the
Clerk of the Bankruptcy Court;
(vii) An Assignment of SELLER's ownership rights in
the Prize Agreement in a form as agreed to by BUYER and SELLER; and
(viii) Executed transfer of operatorship forms (RRC
Form P-4) for all Properties for which BUYER will assume operatorship.
(b) At Closing, BUYER shall:
(i) Deliver to SELLER the Adjusted Purchase Price
by wire transfer to SELLER's account as follows:
Name of Bank: Bank of America, N.A.
Bank ABA Number: 111000012
Account Name: Costilla Energy, Inc. - Operating Account
Account Number: 375 0767438
Contact: Celia Zinn
(ii) Execute the Assignments, Bills of Sale and
Conveyances delivered by SELLER to BUYER at Closing, evidencing BUYER's
acceptance of same; and
(iii) Deliver to SELLER BUYER's Officer's
Certificate in compliance with Section 9.4 hereof.
11.3 FURTHER ASSURANCES. Prior to and for six (6) months subsequent
to Closing, the parties shall execute, acknowledge, and deliver any other
documents and shall take such other actions as may be necessary to carry out
their obligations under this Agreement.
ARTICLE 12. ADDITIONAL AGREEMENTS
12.1 POST CLOSING ADJUSTMENTS TO PURCHASE PRICE. Within 120 days
after the Closing, SELLER shall prepare, in accordance with this Agreement and
with GAAP, and deliver to BUYER a statement setting forth each adjustment to
the Purchase Price required pursuant to Section 12.2 and showing the
calculation of each such adjustment. Within 14 after receipt of such statement
from SELLER, BUYER shall deliver to SELLER a written report containing all
changes with explanations and documentation therefor that BUYER proposes be
made to such statement, it being agreed that BUYER's failure to deliver such
report to SELLER within such time period shall constitute acceptance by BUYER
of SELLER's statement. From and after the expiration of such 14 day period, no
additional changes to the statement provided by SELLER shall be considered by
the
-24-
<PAGE>
parties. If BUYER has timely delivered such written report, the parties shall
then undertake to agree on the items in dispute and the final adjustment no
later than 30 days after the receipt by SELLER of BUYER's statement of
proposed changes. Following the final determination of the adjustment pursuant
to this Section 12.1, SELLER or BUYER, as the case may be, shall make the
payment required within 3 business days after such final determination. SELLER
and BUYER will provide any information reasonably requested by the other in
order to prepare such statement or verify BUYER's written report.
12.2 RECEIPTS AND CREDITS. Notwithstanding anything contained in
Section 1.2 of this Agreement to the contrary:
(a) Subject to the terms hereof and except to the extent the
same have already been taken into account as an adjustment to the Purchase
Price, all monies, proceeds, receipts, credits, and income attributable to the
Sale Interest in the Properties:
(i) for the period subsequent to the Effective
Time, shall be the sole property and entitlement of BUYER, and, to the extent
received by SELLER, SELLER shall fully disclose, account for, and transmit
same to BUYER promptly;
(ii) for the period prior to the Effective Time,
shall be the sole property and entitlement of SELLER, and, to the extent
received by BUYER, BUYER shall fully disclose, account for, and transmit same
to SELLER promptly.
(b) Subject to the terms of this Agreement and except to the
extent same have already been taken into account as an adjustment to the
Purchase Price, all costs, expenses, disbursements, obligations, and
liabilities attributable to the Sale Interest in the Properties:
(i) for the period prior to the Effective Time,
regardless of when due or payable, shall be the sole obligation of SELLER and
SELLER shall, to the extent ordered by the Bankruptcy Court, promptly pay
same; and
(ii) for the period subsequent to the Effective
Time, regardless of when due or payable, shall be the sole obligation of BUYER
and BUYER shall promptly pay, or if paid by SELLER, promptly reimburse SELLER
for and hold SELLER harmless from and against same.
12.3 RECORDS. The originals of all files, records, documentation, and
data of SELLER that BUYER may reasonably request relating to (or evidencing)
SELLER's ownership or rights in the Properties or other rights and interests
described herein, including, but not limited to lease files, land files, well
files, production sales agreements files, division order files, title opinions
and abstracts, governmental filings, production reports, production logs, core
sample reports, and land maps, as such data is assembled and maintained in the
normal course of business (collectively, the "RECORDS"), will be delivered at
Closing at their current location to BUYER; provided, however, that SELLER
-25-
<PAGE>
may retain during the Cure Period such of the Records needed to cure Defects
pursuant to Section 3.6(b). To the extent not obtained or satisfied as of
Closing, SELLER agrees to continue to use all reasonable efforts and to
cooperate with BUYER's efforts to obtain for BUYER access to files, records
and data relating to the Property in the possession of third parties.
12.4 NOTICES. All notices hereunder shall be in writing and any
communication or delivery hereunder shall be deemed to have been duly made
when personally delivered to the individual indicated below, or if mailed,
when received by the party charged with such notice and addressed as follows:
SELLER: Costilla Energy, Inc.
400 West Illinois, Suite 1000
Midland, Texas 79701
Attention: Mr. Clifford Hair
and Marc Dingler
Facsimile: (915) 686-6083
BUYER: Louis Dreyfus Natural Gas Corp.
14000 Quail Springs Parkway, Suite 600
Oklahoma City, Oklahoma 73134
Attention: Mr. Mark E. Monroe
and Richard E. Bross
Facsimile: (405) 749-9385
Any party may, by written notice so delivered to the other, change the address
of, or the individual to which or to whom, delivery shall thereafter be made.
12.5 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 a schedule reflecting the recording information for all
recorded documents conveying the Sale Interest in the Properties to BUYER and
copies of the recorded documents.
12.6 RIGHT OF TERMINATION. This Agreement and the transactions
contemplated herein may be terminated:
(a) At any time prior to Closing by SELLER and BUYER by
mutual written agreement;
(b) At any time prior to Closing by SELLER or BUYER in the
event:
-26-
<PAGE>
(i) that there shall be any actual or threatened
litigation (other than between the parties to this Agreement and other than
objections by any third party to the Sale Motion not ruled upon or otherwise
considered by the Bankruptcy Court) challenging the validity or legality of
this Agreement or the consummation hereof or seeking to restrain or invalidate
any of the transactions contemplated hereunder which would, in the judgment of
such party acting reasonably, based upon the advice of counsel, involve
material expense or lapse of time which would be materially adverse to the
interests of such party; or
(ii) such party is exercising a right of
termination specifically provided for in Article 3 in this Agreement; or
(c) By SELLER if at any time after:
(i) Forty-five (45) days after the date the
Bankruptcy Court enters the Expense Order, the conditions to Closing detailed
in Sections 9.1, 9.2 or 9.4 are not satisfied and SELLER is not otherwise in
material default hereunder; or
(ii) Forty-five (45) days after the date the
Bankruptcy Court enters the Expense Order, the condition to Closing detailed
in Section 9.5 is not satisfied and SELLER is not otherwise in material
default hereunder.
(d) By BUYER if at any time after;
(i) Forty-five (45) days after the date the
Bankruptcy Court enters the Expense Order, the conditions to Closing detailed
in Sections 10.1, 10.2, 10.4 or 10.5 are not satisfied and BUYER is not
otherwise in material default hereunder; or
(ii) Forty-five (45) days after the date the
Bankruptcy Court enters the Expense Order, the condition to Closing detailed
in Section 10.6 is not satisfied and BUYER is not otherwise in material
default hereunder.
(e) By BUYER if SELLER should take any action (other than
those actions in furtherance of its fiduciary duties as permitted in Section
7.5 hereof) to pursue any sale or transfer of the Properties or sale or
transfer of control of SELLER to any entity other than BUYER, or if SELLER
withdraws the Sale Motion or the Expense Motion, or if SELLER , prior to any
denial by the Bankruptcy Court to enter the Sale Order, otherwise pursues a
plan of reorganization that does not incorporate the transactions contemplated
by this Agreement; and
(f) By BUYER if the Bankruptcy Court does not enter the
Expense Order on or before ten (10) days from the Execution Date, or if such
order is vacated or reversed after its entry. If the Expense Order is denied,
or is vacated or reversed, BUYER must elect and notify SELLER within ten (10)
days after BUYER has received notice that the Expense Order has been denied,
-27-
<PAGE>
vacated or reversed, as to whether BUYER will terminate this Agreement or
perform its obligations under this Agreement without the Expense Order
(including the obligation to fund the Deposit for $2,000,000).
12.7 EFFECT OF TERMINATION AND REMEDIES UPON BREACH.
(a) If this Agreement is terminated by BUYER and SELLER
pursuant to Section 12.6(a), by SELLER pursuant to Section 12.6(b) or
12.6(c)(ii), or by BUYER pursuant to Section 12.6(b), 12.6(d)(ii) or Section
12.6(f), SELLER shall promptly refund the Deposit to BUYER, and this Agreement
shall become void and of no further force or effect (except for the indemnity
obligations in Section 3.3 and Sections 8.1, 8.2 and 14.10 and the rights and
obligations in Sections 12.8 and 12.9, which shall survive such termination)
and neither party shall have any other obligation or liability to the other
party.
(b) If this Agreement is terminated by SELLER pursuant to
Section 12.6(c)(i), or if the transaction contemplated by this Agreement does
not close because of a material breach of this Agreement by BUYER, SELLER
shall as its sole and exclusive remedy retain the Deposit as liquidated
damages, and this Agreement shall be of no further force or effect (except for
the indemnity obligations in Section 3.3 and Sections 8.1, 8.2 and 14.10,
which shall survive such termination) and neither party shall have any other
obligation or liability to the other party.
(c) If this Agreement is terminated by BUYER pursuant to
Section 12.6(d)(i) or Section 12.6(e), or if the transaction contemplated by
this Agreement does not close because of a material breach of this Agreement
by SELLER, SELLER shall promptly refund the Deposit to BUYER and pay to BUYER,
the sum of $2,000,000, as liquidated damages which shall be the sole and
exclusive remedy for BUYER, and this Agreement shall be of no further force or
effect, (except for the indemnity obligations in Section 3.3 and Sections 8.1,
8.2 and 14.10, which shall survive such termination) and neither party shall
have any other obligation or liability to the other.
12.8 BREAK-UP FEE. In the event this Agreement is terminated by
SELLER pursuant to Section 12.6(c)(ii), or by BUYER pursuant to Section
12.6(d)(ii) and BUYER is otherwise not entitled to recover liquidated damages
pursuant to Section 12.7(c), and;
(a) BUYER was not in breach of the Agreement at the time of
termination; and
(b) SELLER sells substantially all of its assets or all of
its stock to a third party within one-hundred forty (140) days after the
12.6(c)(ii) or 12.6(d)(ii) termination event, then SELLER shall promptly pay
to BUYER the sum of $2,000,000 (herein the "BREAK-UP FEE").
12.9 EXPENSE FEE. In the event this Agreement is terminated by SELLER
pursuant to Section 12.6(c)(ii), or by BUYER pursuant to Section 12.6(d)(ii),
and BUYER is otherwise not entitled to recover liquidated damages pursuant to
Section 12.7(c), and;
-28-
<PAGE>
(a) BUYER was not in breach of the Agreement at the time of
termination; and
(b) SELLER does not sell substantially all of its assets or
all of its stock to a third party within one-hundred forty (140) days after
the 12.6(c)(ii) or 12.6(d)(ii) termination event, then SELLER shall promptly
reimburse BUYER for reasonable out of pocket expenses as approved by the
Bankruptcy Court as incurred by BUYER in connection with its good faith
actions in furtherance of performance pursuant to this Agreement, including
without limitation the due diligence of BUYER with respect to the Properties;
up to, but not to exceed $500,000 (herein the "EXPENSE FEE").
12.10 PRIZE MOTION. After execution of this Agreement, SELLER shall
promptly seek the Bankruptcy Court's approval, either in the Sale Motion or a
separate motion or adversary proceeding, to sell and transfer all of SELLER's
rights in and to the Prize Agreement to BUYER without restriction, penalty or
diminution in SELLER's rights such that BUYER stands in the place of SELLER
under the Prize Agreement as if no assignment thereof had been made. If within
ninety (90) days from the date of entry of the Sale Order, Bankruptcy Court
has entered an order approving the transfer of SELLER's rights in and to the
Prize Agreement without restriction, penalty or diminution in SELLER's rights
(whether through the Sale order itself or a separate order or judgment), the
Purchase Price shall be adjusted upward in an amount equal to $250,000 and
accounted for during the post closing under Section 12.1 of this Agreement.
BUYER shall have the right without objection from SELLER to intervene in and
pursue on behalf of SELLER any motion or adversary proceeding before the
Bankruptcy Court regarding the transfer of the Prize Agreement. BUYER shall
also have the right, at its sole election and upon notice to SELLER at any
time prior to an entry of an order by the Bankruptcy Court concerning the
Prize Agreement, to terminate the obligation of SELLER to take any further
action regarding the Prize Agreement as contemplated in this Section, and no
Purchase Price adjustment shall be made.
12.11 SALES TAXES. The Purchase Price provided for hereunder excludes
any sales taxes or other taxes in connection with the sale of the Sale
Interest in the Properties pursuant to this Agreement. If a determination is
ever made that a sales tax or other transfer tax applies, BUYER shall pay such
tax as well as any applicable conveyance, transfer, and recording fees, and
real estate transfer stamps or taxes imposed on any transfer of property
pursuant to this Agreement. SELLER shall use its best efforts to minimize
taxes in accordance with Section 1146 of the Code and other applicable law.
BUYER SHALL DEFEND, INDEMNIFY, AND HOLD SELLER HARMLESS WITH RESPECT TO THE
REPORTING AND PAYMENT OF ALL SUCH TAXES, IF ANY, INCLUDING ANY INTEREST OR
PENALTIES ASSESSED THEREON.
12.12 TAXES. All ad valorem, severance, or other such production or
property taxes relating to the Sale Interest in the Properties shall be shared
in proportion to the period of ownership of the Sale Interest in the
Properties. Any such ad valorem, severance, or other such production or
property tax relating to the period prior to the Effective Time shall be the
responsibility of the SELLER. Any such ad valorem, severance, or other such
production or property tax relating to the period after the
-29-
<PAGE>
Effective Time and beyond shall be the responsibility of the BUYER. Accounting
for taxes shall be made as provided in Section 2.3.
ARTICLE 13. ASSUMPTION OF OBLIGATIONS; INDEMNIFICATION
13.1 DEFINITIONS. As used in this Agreement, "LOSSES" means any
liabilities, losses, claims, demands, causes of action, costs and expenses
(including, but not limited to, court costs and reasonable attorneys' fees and
other costs and expenses incident to proceedings or investigations respecting,
or the prosecution or defense of, a claim) of every kind and character.
13.2 ASSUMPTION OF CONTRACTS. The sale of the Sale Interest in the
Properties is and will be made subject to the Contracts to which the
Properties are presently subject. BUYER shall assume and be responsible only
for all obligations accruing under the Contracts after the Effective Time.
13.3 IMBALANCES. SELLER and BUYER hereby agree that (i) over or
under imbalances with respect to gas production attributable to the Properties
("IMBALANCES") shall not be included in any Identified Claims asserted
hereunder, and (ii) the Properties will be conveyed specifically subject to
Imbalances which exist as of the Effective Time, with BUYER, as of Closing,
bearing and assuming all obligations with respect to any overproduction
account or liability and receiving the benefit of and being credited with any
underproduction account or credit.
13.4 BUYER'S INDEMNITY. BUYER SHALL BE RESPONSIBLE FOR AND
INDEMNIFY, DEFEND AND HOLD HARMLESS SELLER, ITS DIRECTORS, OFFICERS AND
SHAREHOLDERS FROM AND AGAINST ALL LOSSES THAT IN ANY WAY RESULT FROM OR ARISE
OUT OF THE USE, OWNERSHIP OR OPERATION OF THE PROPERTIES AND WHICH ACCRUE AND
ARE BASED ON OCCURRENCES OR EVENTS AFTER THE EFFECTIVE TIME INCLUDING, WITHOUT
LIMITATION (I) ANY LOSSES ARISING FROM ANY INJURY OR OCCURRENCE ON OR RELATING
TO THE PROPERTIES, AND (II) ALL LOSSES, INCLUDING BUT NOT LIMITED TO ANY CIVIL
FINES, PENALTIES, EXPENSES, COSTS OF CLEAN-UP OR REMEDIATION, AND PLUGGING
LIABILITIES FOR ANY AND ALL WELLS, BROUGHT BY ANY AND ALL PERSONS, INCLUDING,
BUT NOT LIMITED TO, BUYER'S AND SELLER'S EMPLOYEES, AGENTS, OR REPRESENTATIVES
AND ALSO ANY PRIVATE CITIZENS, PERSONS, OR ORGANIZATIONS AND ANY AGENCY,
BRANCH, OR REPRESENTATIVE OF FEDERAL, STATE, OR LOCAL GOVERNMENT, ON ACCOUNT
OF ANY PERSONAL INJURY, DISEASE, OR DEATH OR ANY DAMAGE, DESTRUCTION, LOSS OF
PROPERTY OR CONTAMINATION OF NATURAL RESOURCES (INCLUDING AIR, SOIL, SURFACE
WATER, OR GROUND WATER) RESULTING FROM OR ARISING OUT OF ANY LIABILITY CAUSED
BY OR CONNECTED WITH ANY ENVIRONMENTAL CONDITION OF, ON, OR RESULTING FROM THE
PROPERTIES INCLUDING, BUT NOT LIMITED TO, THE PRESENCE, DISPOSAL, OR RELEASE
OF ANY MATERIAL OF ANY KIND IN, ON OR UNDER THE PROPERTIES OR OTHER AFFECTED
-30-
<PAGE>
PROPERTY, OR CAUSED BY OR CONNECTED WITH ACTS OR OMISSIONS OF ANY PARTY'S
EMPLOYEES, REPRESENTATIVES, OR AGENTS WITH REGARD TO THE USE, OWNERSHIP, OR
OPERATORSHIP OF THE PROPERTIES AFTER THE EFFECTIVE TIME.
13.5 LITIGATION. Upon Closing, SELLER shall be responsible for and
to the extent not discharged in the Bankruptcy Proceeding retain all
litigation which has been filed and served on SELLER before the execution of
this Agreement to which BUYER is not a party and SELLER is a party.
ARTICLE 14. MISCELLANEOUS
14.1 AMENDMENT. This Agreement may not be amended nor any rights
hereunder waived except by an instrument in writing signed by the party to be
charged with such amendment or waiver and delivered by such party to the party
claiming the benefit of such amendment or waiver.
14.2 GENDER. References made in this Agreement, including use of a
pronoun, shall be deemed to include where applicable, masculine, feminine,
singular or plural, individuals, partnerships, or corporations. As used in
this Agreement, "person or entity" shall mean any natural person, corporation,
partnership, trust, estate, or other entity.
14.3 ENTIRE AGREEMENT. This Agreement and that certain
Confidentiality Agreement dated August 11, 1999 constitute the entire
understanding among the parties with respect to the subject matter hereof,
superseding all negotiations, prior discussions, and prior agreements and
understandings relating to such subject matter.
14.4 SUCCESSORS AND ASSIGNS . This Agreement shall be binding upon
and shall inure to the benefit of, the parties hereto and, except as otherwise
prohibited, their respective successors and assigns; and except as otherwise
stated herein, nothing contained in this Agreement, or implied herefrom, is
intended to confer upon any other person or entity any benefits, rights, or
remedies.
14.5 SURVIVABILITY. Except for Sections 3.3, 3.6(b), 4.16, 8.1, 8.2,
12.1, 12.8, 12.9, 12.10 and 14.10, no indemnifications, covenants, agreements,
representations, guaranties, and warranties shall survive the Closing.
14.6 SEVERABILITY. If a court of competent jurisdiction determines
that any clause or provisions of this Agreement is void, illegal, or
unenforceable, the other clauses and provisions of the Agreement shall remain
in full force and effect and the clauses and provisions which are determined
to be void, illegal, or unenforceable shall be limited so that they shall
remain in effect to the extent permissible by law.
14.7 GOVERNING LAW, JURISDICTION AND VENUE. This Agreement shall be
governed and construed under the laws of the State of Texas (excluding any
conflict of laws provision that would
-31-
<PAGE>
require the application of any other jurisdiction), and exclusive jurisdiction
and venue for any dispute concerning the validity, construction,
interpretation or enforcement of this Agreement shall be in the Bankruptcy
Court, as a proceeding ancillary to the Bankruptcy Proceeding.
14.8 CONFIDENTIALITY. Until Closing SELLER and BUYER agree to keep
all information regarding the terms and provisions of this Agreement and the
transactions contemplated hereby confidential at all times and agree not to
disclose any information which cannot be obtained from public sources, except
where required to do so by law, without the prior written consent of the other
party, which consent shall not be unreasonably withheld.
14.9 ASSIGNABILITY. Neither party hereto shall assign this Agreement
or any of its rights or obligations hereunder without the prior written
consent of the other party.
14.10 EXPRESS NEGLIGENCE RULE; CONSPICUOUSNESS. BUYER ACKNOWLEDGES
THAT THE PROVISIONS IN THIS AGREEMENT THAT ARE SET OUT IN ITALICS, IN BOLD,
UNDERLINE OR CAPITALS (OR ANY COMBINATION THEREOF) SATISFY THE REQUIREMENTS
FOR THE EXPRESS NEGLIGENCE RULE AND/OR ARE CONSPICUOUS.
14.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each
party and delivered to the other party.
14.12 PRESS RELEASE. SELLER and BUYER shall consult with each other
with regard to all press releases and other public announcements issued
concerning this Agreement or the transactions contemplated hereby and, except
as may be required by applicable laws or the applicable rules and regulations
of any governmental agency, stock exchange or over-the-counter market, neither
BUYER nor SELLER shall issue any such press release or make any other public
announcement without the prior written consent of the other party, which
consent shall not be unreasonably withheld.
The parties have executed this Agreement as of the date first above
mentioned.
BUYER:
By:
------------------------------------
Name: Mark E. Monroe
Title: President and Chief Executive Officer
-32-
<PAGE>
SELLER:
COSTILLA ENERGY, INC.
By:
------------------------------------
Name: Cadell S. Liedtke
Title: Chairman of the Board
STATE OF OKLAHOMA Section
Section
COUNTY OF _________ Section
This instrument was acknowledged before me on _____________________,
2000, by Mark E. Monroe, the President and Chief Executive Officer of Louis
Dreyfus Natural Gas Corp., a ________ corporation on behalf of said
corporation.
---------------------------------------
Notary Public
My Commission Expires:________________
STATE OF TEXAS Section
Section
COUNTY OF MIDLAND Section
This instrument was acknowledged before me on _____________________,
2000, by Cadell Liedtke, the Chairman of the Board of Costilla Energy, Inc., a
Texas corporation on behalf of said corporation.
---------------------------------------
Notary Public
My Commission Expires:________________
-33-
