PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (the "Agreement"), effective 7:00 a.m., M.S.T.,
January 1, 1997 (the "Effective Date"), is between CHAPARRAL RESOURCES, INC. a
Colorado corporation, (hereinafter collectively referred to as "SELLER"), and
CONOCO INC., a Delaware corporation ("BUYER").
RECITALS:
SELLER owns certain oil and gas properties located in Rio Blanco County,
Colorado, and related contractual rights and desires to sell these properties
and transfer these contractual rights.
BUYER desires to purchase these properties from SELLER and acquire these
contractual rights.
Accordingly, in consideration of the mutual promises contained in this
Agreement, BUYER and SELLER agree as follows:
ARTICLE 1. PURCHASE AND SALE
1.1 The Property. Subject to the terms of this Agreement, SELLER agrees to sell
and assign to BUYER and BUYER agrees to purchase and acquire from SELLER all of
SELLER's right and title to, and interest in, the following (collectively the
"Property"):
1.1.1 The oil, gas and mineral lease(s) and other interests in oil and
gas described in Exhibit A and all rights, privileges and obligations
appurtenant to the leases INSOFAR AND ONLY INSOFAR AS the leases cover
and include the lands, depths and rights described in Exhibit A
("Leases");
1.1.2 All rights in any unit in which the Leases are included, to the
extent that these rights arise from and are associated with the Leases,
including without limitation all rights derived from any unitization,
pooling, operating, communitization or other agreement or from any
declaration or order of any governmental authority;
1.1.3 All of SELLER'S rights and interests in and to producing,
non-producing, shut-in, and abandoned oil, gas and condensate wells,
water source, water injection and other injection or disposal wells and
associated facilities located on the Leases or lands unitized or pooled
with the Leases;
1.1.4 All equipment, facilities and other personal property on the
Leases used in developing or operating the Leases or producing,
treating, storing, gathering, compressing, processing or transporting
hydrocarbons on or from the Leases.;
1.1.5 All easements, rights-of-way, licenses, permits, servitudes and
similar interests applicable to or used in operating the Leases or the
personal property described above;
1.1.6 All contracts and contractual rights, obligations and interests
relating to the Leases, including without limitation unit agreements,
farmout agreements, farmin agreements, operating agreements, and
hydrocarbon sales, purchase, gathering, transportation, treating,
marketing, exchange, processing and fractionating agreements ("Related
Contracts"), including without limitation those Related Contracts
described in Exhibit A; and
1.2 Exclusions. The Property sold and assigned under this Agreement does not
include:
1.2.1 SELLER's intellectual property used in developing or operating
the Property, including without limitation proprietary computer
software, patents, trade secrets, copyrights, names, marks and logos,
all of which SELLER will remove before or as soon as possible after
Closing;
1.2.2 Trade credits, accounts and notes receivable, and adjustments or
refunds (including without limitation transportation tariff refunds,
take-or-pay claims, and audit adjustments) attributable to the Property
with respect to any period before the Effective Date;
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1.3 Ownership of Production from the Property.
1.3.1 Production Before the Effective Date. SELLER owns all
merchantable oil, gas, condensate and distillate ("Hydrocarbons")
produced from the Property before the Effective Date. If Hydrocarbons
produced from the Property before the Effective Date are stored in the
Lease stock tanks on the Effective Date ("Stock Tank Oil"), BUYER shall
purchase the Stock Tank Oil above pipeline connections in the stock
tanks from SELLER at the prevailing market value in the area, adjusted
for grade and gravity and less taxes. BUYER will pay SELLER for the
Stock Tank Oil by upward adjustment to the Purchase Price, as provided
in Section 6.5.3.1. SELLER and BUYER shall accept the Lease operator's
tank gauge readings or other inventory records of the Stock Tank Oil.
1.3.2 Production After the Effective Date. BUYER owns all Hydrocarbons
produced from the Property on and after the Effective Date. SELLER will
sell on BUYER's behalf all Hydrocarbons produced from the Property
between the Effective Date and the Closing Date. SELLER will credit
BUYER for the proceeds of these sales as a downward adjustment to the
Purchase Price, as provided in Section 6.5.3.2. Subject to any
continuing sale obligations under the Related Contracts, BUYER may sell
Hydrocarbons produced from the Property on and after the Closing Date
as it deems appropriate.
ARTICLE 2. PURCHASE PRICE
2.1 Purchase Price. BUYER shall pay SELLER a purchase price for the Property of
$270,000 ("Purchase Price"), allocated $27,000 to depreciable assets and
$243,000 to nondepreciable assets, subject to any adjustments to the Purchase
Price made at Closing or in the post-closing final settlement.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES
3.1 Reciprocal Representations and Warranties. SELLER and BUYER each represent
and warrant to the other that as of the Effective Date and the Closing Date:
3.1.1 Corporate Authority. It is a corporation duly organized and in
good standing under the laws of its state of incorporation, is duly
qualified to carry on its business in the state where the Property is
located, and has all the requisite power and authority to enter into
and perform this Agreement.
3.1.2 Requisite Approvals. It has taken all necessary actions pursuant
to its Articles of Incorporation, By-laws and other governing documents
to fully authorize it to consummate the transaction contemplated by
this Agreement.
3.1.3 Validity of Obligation. This Agreement and all documents it is to
execute and deliver on or before the Closing Date have been duly
executed by its appropriate officials and constitute valid and legally
binding obligations, enforceable against it in accordance with the
terms of this Agreement and such documents.
3.1.4 Impediments to Consummation of Agreement. Its executing,
delivering and performing this Agreement does not conflict with or
violate any agreement or instrument to which it is a party, or any law,
rule, regulation, ordinance, judgment, decree or order to which it is
subject.
3.1.5 Bankruptcy. There are no bankruptcy, reorganization or
receivership proceedings pending, being contemplated by, or to its
actual knowledge, threatened against it.
3.2 BUYER's Representations and Warranties. BUYER represents and warrants to
SELLER that as of the Effective Date and the Closing Date:
3.2.1 Independent Evaluation. BUYER is an experienced and knowledgeable
investor in the oil and gas business. BUYER has been advised by and
has relied solely on its own expertise and legal, tax, reservoir
engineering and other professional counsel concerning this
transaction.
3.2.2 Qualification. BUYER is now or at Closing will be, and thereafter
will continue to be, qualified to own and operate federal and State of
Colorado oil, gas and mineral leases, including meeting all bonding
requirements.
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Consummating the transaction contemplated in this Agreement will not
cause BUYER to be disqualified or to exceed any acreage limitation
imposed by law, statute or regulation.
3.2.3 Securities Laws. BUYER has complied with all federal and state
securities laws applicable to the sale of the Property and will comply
with such laws if it subsequently disposes of all or any part of the
Property.
3.3 SELLER's Representations and Warranties. SELLER represents and warrants to
BUYER that as of the Effective Date and the Closing Date:
3.3.1 Lawsuits and Claims. SELLER has not been notified of any action,
suit, proceeding, claim or investigation by any person, entity,
administrative agency or governmental body pending or threatened in
writing against SELLER that may adversely affect title to any of the
Property or the value thereof or otherwise hinder operations on the
Property and, to the best of SELLER's knowledge, there is no reasonable
basis for any such action, suit, proceeding, claim or investigation.
3.3.2 Environmental Proceedings. SELLER has not been notified that the
Property is the subject of any pending environmental enforcement
proceeding, investigation, inquiry or claim of noncompliance by any
governmental agency or private party and, except as disclosed to BUYER
in writing, there is no reasonable basis to the best of SELLER's
knowledge, for any such proceeding, investigation, inquiry or claim.
3.3.3 Leases and Contracts. The Leases and Related Contracts are in
full force and effect, and SELLER has made all payments (including
royalties, minimum royalties, delay rentals and shut-in payments) due
thereunder or required to be made to maintain the leases and other
agreements in effect. To the best of SELLER's knowledge, all unrecorded
agreements to which the Property is subject are described in Exhibit A.
3.3.4 Sales Agreements. Crude oil , condensate, and/or natural gas
production from the Property is not subject to any sale or exchange
contracts or arrangements, a "take or pay" arrangement, production
payment or any other arrangement to deliver hydrocarbons that cannot be
terminated at any time after the Effective Date, without breach or
penalty, upon 60 days' notice. SELLER further represents that
production from the Property is not subject to any call on production
or preferential right to purchase the production by any party.
3.3.5 Adverse Changes. To the best of SELLER's knowledge, since the
Effective Date, there has been no material adverse change in the
physical condition of, or title to the Property, except depletion
through normal production, and depreciation of equipment through
ordinary wear and tear.
3.4 Notice. SELLER and BUYER shall each give the other prompt written notice of
any matter materially affecting any of its representations or warranties under
this Article 3 or rendering any such warranty or representation untrue.
ARTICLE 4. WARRANTIES
4.1 Title and Encumbrances. SELLER SELLS AND TRANSFERS THE PROPERTY TO BUYER
SUBJECT TO ALL ROYALTIES, OVERRIDING ROYALTIES, BURDENS AND ENCUMBRANCES, AND
WITHOUT WARRANTY OF TITLE, EXPRESS, STATUTORY, OR IMPLIED, PROVIDED, HOWEVER,
SELLER SHALL AGREE TO DEFEND THE TITLE TO THE PROPERTY AGAINST THE LAWFUL CLAIMS
AND DEMANDS OF ALL PERSONS OR ENTITIES CLAIMING THE SAME OR ANY PART THEREOF BY,
THROUGH OR UNDER SELLER, BUT NOT OTHERWISE.
4.2 Information About the Property. SELLER MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS, STATUTORY OR IMPLIED, AS TO (i) THE ACCURACY, COMPLETENESS, OR
MATERIALITY OF ANY DATA, INFORMATION OR RECORDS FURNISHED TO BUYER IN CONNECTION
WITH THE PROPERTY; (ii) THE QUALITY AND QUANTITY OF HYDROCARBON RESERVES (IF
ANY) ATTRIBUTABLE TO THE PROPERTY; (iii) THE ABILITY OF THE PROPERTY TO PRODUCE
HYDROCARBONS, INCLUDING WITHOUT LIMITATION PRODUCTION RATES, DECLINE RATES AND
RECOMPLETION OPPORTUNITIES; (iv) ALLOWABLES OR OTHER REGULATORY MATTERS, OR (v)
THE PRESENT OR FUTURE VALUE OF THE ANTICIPATED INCOME, COSTS OR PROFITS, IF ANY,
TO BE DERIVED FROM THE PROPERTY. ANY AND ALL DATA, INFORMATION OR OTHER RECORDS
FURNISHED BY SELLER ARE PROVIDED TO BUYER AS A CONVENIENCE AND BUYER'S RELIANCE
ON OR USE OF THE SAME IS AT BUYER'S SOLE RISK.
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ARTICLE 5. TITLE EXAMINATION AND PHYSICAL INSPECTION
5.1 Information and Access. Prior to Closing, to allow BUYER to confirm SELLER's
title to the Property, SELLER shall give BUYER and BUYER's authorized
representatives, during normal business hours, the right to examine all
contract, land and lease records, to the extent such data and records are in
SELLER's possession and relate to the Property. BUYER may photocopy such records
at its sole expense. BUYER shall keep confidential all information made
available to BUYER until Closing.
5.2 Preferential Rights and Consents to Assign.
5.2.1 If any of the Property is subject to preferential purchase
rights, rights of first refusal, or similar rights (collectively, "Preferential
Rights"), or consents to assign, lessor's approvals or similar rights
(collectively, "Consents"), SELLER shall (i) notify the holders of the
Preferential Rights and Consents that it intends to sell the Property to BUYER,
(ii) provide them with any information about the sale of the Property to which
they are entitled, and (iii) in the case of Consents, ask the holders of the
Consents to consent to the assignment of the affected Property to BUYER. SELLER
shall promptly notify BUYER whether Preferential Rights are exercised, waived or
deemed waived, or if any Consents are denied. SELLER will not be liable to BUYER
if any Preferential Rights are exercised, or any Consents are denied.
5.2.2. If SELLER is unable before Closing to obtain the required
Consents (other than Consents ordinarily obtained after Closing) and waivers of
all Preferential Rights, at the option of the BUYER, that portion of the
Property affected by the unwaived Preferential Rights or Consents will be
excluded from the transaction under this Agreement, and the Purchase Price will
be adjusted by the Allocated Value of the affected Property listed in Exhibit
"D" to this Agreement (the "Allocated Value"), and proceed with Closing.
5.3 Title Pending Governmental Consents. Until SELLER and BUYER obtain federal
and state approval of the sale and assignment of Leases requiring such approval,
SELLER will continue to hold record title to such Leases as nominee for BUYER.
Until the required approvals are obtained, SELLER will act only upon and in
accordance with BUYER's specific written instructions and will have no
authority, responsibility or discretion to perform any tasks with respect to
such Leases other than purely administrative or ministerial tasks, unless
otherwise specifically requested and authorized by BUYER in writing. If any
required approval is finally denied, SELLER shall refund to BUYER the Allocated
Value of the Leases and other Property affected and BUYER shall immediately
reassign such Leases and other Property to SELLER.
5.4 Title Defects
5.4.1 BUYER will review title to the Property prior to Closing and
notify SELLER in writing of any title defect it discovers as soon a reasonably
practicable after its discovery, but in no event less than three business days
prior to the Closing Date. BUYER will be deemed to have conclusively waived any
title defect about which it fails to notify SELLER in writing at least three
business days prior to the Closing Date.
5.4.2 If BUYER properly notifies SELLER of any title defect, BUYER
shall have the option to either (i) waive the title defect and close,
(ii) request SELLER to cure the title defect, but SELLER will have no
obligation to cure any title defects in the Property, or (iii) if
SELLER declines to cure a material title defect, exclude the portion of
the Property affected by the title defect from the transaction under
this Agreement, in which case the Purchase Price will be reduced by the
Allocated Value of the excluded Property. If BUYER asks SELLER to cure
a material title defect, and SELLER agrees to attempt to cure the title
defect, SELLER will have 180 days after the Closing Date to correct the
title defect. With respect to all material title defects that SELLER
fails to cure by 180 days after the Closing Date, BUYER may rescind its
purchase of that portion of the Property affected by those title
defects, after which SELLER shall refund the Allocated Value of the
affected Property to BUYER, and BUYER (at SELLER's sole option) shall
immediately reassign the affected Property to SELLER.
5.5 Inspection; Assumption of Risk. Promptly after the execution of this
Agreement and until Closing, SELLER, at times approved by SELLER, shall allow
BUYER and its representatives, at their sole risk and expense, to conduct
reasonable inspections of the Property.
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ARTICLE 6. CLOSING AND FINAL SETTLEMENT
6.1 Closing Date. Unless BUYER and SELLER otherwise agree, the closing of this
purchase and sale ("Closing") will occur on or before February 28, 1997 (the
actual date on which Closing occurs being the "Closing Date") in SELLER's
offices in Denver, Colorado. If SELLER and BUYER agree to close the purchase and
sale of the Property by mail rather than in person, the Closing Date of this
purchase and sale will be the date on which SELLER receives payment of the
Purchase Price.
6.2 Conditions to Closing. BUYER or SELLER are not obligated to close the
transaction that is the subject of this Agreement if:
6.2.1 Any matter represented or warranted by the other party in this
Agreement is not true, or is misleading in any material respect, as of
the Closing Date or any obligation of the other party before the
Closing Date is not satisfied on the Closing Date.
6.2.2 Any suit or other proceeding is pending or threatened before any
court or governmental agency seeking to restrain, prohibit, or declare
illegal, or seeking substantial damages in connection with, the
transaction that is the subject of this Agreement, or there is
reasonable basis for any such suit or other proceeding.
6.2.3 Any necessary waivers of Preferential Rights and Consents (other
than Consents typically obtained after Closing) have not been secured.
6.3 Preliminary Settlement. At Closing, BUYER and SELLER shall execute a
settlement statement (the "Preliminary Settlement Statement") prepared by
SELLER, subject to the approval of BUYER, which shall set forth adjustments (as
set forth in this paragraph) to the Purchase Price to be paid by BUYER at
Closing. At least three days prior to Closing, SELLER agrees to furnish BUYER
the Preliminary Settlement Statement for BUYER's review.
6.3.1 Increase to Purchase Price. The Purchase Price to be paid by
BUYER to SELLER at Closing shall be increased by:
(i) The amount of lease operating expenses which accrued to the
Property from operations, and under the Joint Operating Agreement subsequent to
the Effective Date and which have been paid by SELLER.
(ii) An amount equal to the market value of the Stock Tank Oil above
the pipeline connection as measured on the Effective Date.
(iii) An amount equal to the estimated value of underproduced oil
and/or gas production from the Property on the Effective Date.
6.3.2 Decrease Purchase Price. The Purchase Price to be paid by BUYER
to SELLER shall be decreased by:
(i) The amount of capital expenditures (including without limitation,
drilling costs, completion costs, equipment, and construction costs) and lease
operating expenses which accrued to the Property prior to the Effective Date
which have not been paid by SELLER.
(ii) An amount equal to all estimated and unpaid ad valorem, property,
production, severance and similar taxes and assessments based upon or measured
by the ownership of the Property or the production of hydrocarbons or the
receipt of proceeds therefrom accruing to the Property prior to the Effective
Date.
(iii) An amount equal to the Allocated Value for that portion of the
Property not conveyed as a result of the exercising of Preferential Rights or
denial of Consents to Assign pursuant to Section 5.2.
(iv) An amount equal to any title defects as set forth in Section 5.4.
(v) An amount equal to the estimated value of overproduced oil and/or
gas production from the Property on the Effective Date;
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6.4 Closing. SELLER and BUYER have the following obligations at Closing:
6.4.1 SELLER's Obligations. At Closing, SELLER shall deliver to BUYER:
(i) An executed and acknowledged Assignment and Bill of
Sale (in sufficient counterparts for recording) in
the form of Exhibit B (the "Assignment and Bill of
Sale"); and
(ii) Any other appropriate instruments necessary to effect
or support the transaction contemplated in this
Agreement, including, without limitation, any lease
assignment forms or other forms or filings required
by federal or state agencies to transfer ownership of
the Property.
6.4.2 BUYER's Obligations. At Closing, BUYER shall:
(i) Pay SELLER the Purchase Price, as adjusted under
Section 6.3, either by cashier's check or wire
transfer of immediately available funds into an
account designated by SELLER in accordance with
SELLER's instructions;
(ii) Furnish fully executed change of operator notices,
which BUYER shall file with the appropriate
regulatory authorities, if BUYER becomes operator;
and
(iii) Any ratification and joinder instruments required to
transfer the SELLER's rights, obligations and
interests in the Related Contracts and other
Property.
6.5 Post-Closing Obligations. SELLER and BUYER have the following post-closing
obligations:
6.5.1 Property Records. At or as soon as possible after Closing, SELLER
shall deliver to BUYER the originals of all lease, contract or well
records (excluding any internal valuation or interpretive data or
documentation) relating to the Property (the "Property Records"), at a
location designated by BUYER.
6.5.2 Recording and Filing. BUYER, within a reasonable time after
Closing, shall (i) record the Assignment and Bill of Sale and all other
instruments that must be recorded to effectuate the transfer of the
Property; and (ii) file for approval with the applicable government
agencies all state and federal transfer and assignment documents for
the Property. BUYER shall provide SELLER a recorded copy of the
Assignment and Bill of Sale and other recorded instruments, and
approved copies of the state and federal transfer and assignment
documents as soon as they are available.
6.5.3 Settlement Statement. SELLER shall use its best efforts to
deliver to BUYER, within 90 days after the Closing Date, a final
settlement statement that will adjust the Purchase Price as follows;
however, SELLER's failure to deliver the final settlement statement
within 90 days will not constitute a waiver of any right to an
adjustment otherwise due.
6.5.3.1 The Purchase Price will be adjusted upward by the amount
of:
(i) All actual production expenses, operating
expenses, overhead under the applicable
operating agreements, and capital
expenditures (including without limitation
royalties, minimum royalties, rentals, and
prepaid charges) paid or incurred by SELLER
and attributable to operation of the
Property on and after the Effective Date;
(ii) The actual value of the Stock Tank Oil from
any proceeds received by BUYER for the sale
of production from the Property before the
Effective Date; and
(iii) Any other amounts to which SELLER is
entitled under this Agreement that are not
paid as part of the Purchase Price at
Closing.
6.5.3.2 The Purchase Price will be adjusted downward by the amount
of:
(i) Any proceeds received by SELLER for
production from the Property on and after
the Effective Date, as provided in Section
1.3.2 of this Agreement;
(ii) Any other amounts to which BUYER is entitled
under this Agreement that are not paid or
reimbursed at Closing.
6.5.4 Final Settlement. The parties will attempt to agree to the final
settlement statement within 30 days after its delivery to BUYER, and
settlement will be made (taking into account adjustment for the
estimate made under Section 6.3 and deducted from the Purchase Price
under Section 6.4.2(i) by company check, or wire transfer, at the
receiving party's option, within 15 days after agreement. Thereafter,
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if SELLER or BUYER receives additional proceeds or pays additional
expenses for or on behalf of the other party, they shall promptly
invoice the other party for expenses paid or remit to the other party
any proceeds received.
6.5.5 Further Assurances. BUYER and SELLER agree to execute and deliver
from time to time such further instruments and do such other acts as
may be reasonably necessary to effectuate the purposes of this
Agreement.
ARTICLE 7. ASSUMPTION OF OBLIGATIONS
7.1 Ownership and Operations. Except as provided in Section 10.1, upon and after
Closing, BUYER shall assume and perform all the rights, duties, obligations and
liabilities of ownership and operation of the Property, including without
limitation: (i) all of SELLER's express and implied obligations and covenants
under the terms of the Leases, the Related Contracts and all other orders and
contracts to which the Property is subject; (ii) responsibility for all
royalties, overriding royalties, production payments, net profits obligations,
rentals, shut-in payments and other burdens or encumbrances to which the
Property is subject accruing after the Effective Date; (iii) responsibility for
compliance with all applicable laws, ordinances, rules and regulations
pertaining to the Property, and the procurement and maintenance of all permits
required by public authorities in connection with the Property; and (iv) all
other obligations assumed by BUYER under this Agreement. With respect to (i) any
part of the Property for which BUYER is not duly elected operator, or (ii) any
non-operating interests in the Property being transferred to BUYER under this
Agreement, BUYER shall assume full responsibility and liability for that portion
of the foregoing rights, duties, obligations and liabilities for which
non-operators are responsible. SELLER will remain responsible for all costs,
expenses and liabilities incurred by SELLER in connection with the ownership or
operation of the Property before the Effective Date, except those for which
BUYER indemnifies SELLER, or which BUYER assumes in the Agreement.
7.2 Plugging and Abandonment Obligations. From and after the Effective Date,
BUYER assumes full responsibility and liability for the following obligations
related to the Property ("Plugging and Abandonment Obligations"): (i) plugging,
replugging and abandoning all wells on the Property plugged after the Effective
Date; (ii) removing and disposing of all structures and equipment located on or
comprising part of the Property; (iii) the necessary and proper capping and
burying of all associated flow lines located on or comprising part of the
Property; (iv) restoring the leasehold premises of the Property, both surface
and subsurface, to the condition they were in before commencement of oil and gas
operations, as may be required by applicable laws, regulation or contract; and
(v) any necessary disposal of Property contaminated by naturally occurring
radioactive material ("NORM"). BUYER shall conduct all plugging, replugging,
abandonment, removal, disposal and restoration operations in a good and
workmanlike manner and in compliance with all applicable laws and regulations.
With respect to any non-operating interests in the Property being transferred to
BUYER under this Agreement, BUYER shall assume full responsibility and
liability, from and after the Effective Date, for that portion of the Plugging
and Abandonment Obligations for which non-operators are responsible.
7.3 Environmental Obligations. BUYER assumes full responsibility and liability
for the following occurrences, events and activities on or related to the
Property ("Environmental Obligations") whether arising before or after the
Effective Date: (i) environmental pollution or contamination, including
pollution of the soil, groundwater or air; (ii) underground injection activities
and waste disposal onsite; (iii) clean-up responses, and the cost of
remediation, control or compliance with respect to surface and subsurface
pollution caused by spills, pits, ponds or lagoons; (iv) failure to comply with
applicable land use, surface disturbance, licensing or notification
requirements; and (v) violation of environmental or land use rules, regulations,
demands or orders of appropriate state or federal regulatory agencies. With
respect to any non-operating interests in the Property being transferred to
BUYER under this Agreement, BUYER agrees to assume full responsibility and
liability, from and after the Effective Date, for that portion of the
Environmental Obligations for which non-operators are responsible.
ARTICLE 8. INDEMNITIES
8.1 Definition of Claims. As used in this Agreement, the term "Claims" means any
and all losses, liabilities, damages, obligations, expenses, fines, penalties,
costs, claims, causes of action and judgments for (i) breaches of contract; (ii)
loss or damage to property; and (iii) violations of applicable laws, rules,
regulations, orders or any other legal right or duty actionable at law or
equity. The term "Claims" also includes attorneys fees and court costs resulting
from the defense of any claim or cause of action within the scope of the
indemnities in this Agreement.
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8.2 Application of Indemnities. Unless this Agreement expressly provides to the
contrary, the indemnities set forth in this Agreement apply regardless of
whether: (i) the indemnified party (or its employees, agents, contractors,
successors or assigns) causes, in whole or part, an indemnified Claim; (ii) an
indemnified Claim arises out of or results from the indemnified party's (or its
employees', agents', contractors', successors' or assigns') sole or concurrent
negligence; (iii) the indemnified party (or its employees, agents, contractors,
successors or assigns) is deemed to be strictly liable, in whole or part, for an
indemnified Claim; or (iv) any part of an indemnified Claim is the result of the
imposition of punitive damages. All indemnities set forth in this Agreement
extend to the officers, directors, employees and affiliates of the party
indemnified, and cover the acts and omissions of the officers, directors,
employees, contractors, successors and assigns of the indemnifying party.
8.3 BUYER's Indemnity. BUYER shall indemnify, defend and hold SELLER harmless
from and against any and all Claims caused by, resulting from or incidental to:
(i) BUYER's ownership or operation of the Property after the Effective Date,
including without limitation the obligations assumed by BUYER in Section 7.1;
(ii) all Plugging and Abandonment Obligations arising after the Effective Date;
(iii) all Environmental Obligations, whether arising before or after the
Effective Date; (iv) BUYER's disbursement of production proceeds from the
Property accruing after the Effective Date, including funds in any suspense
accounts received from SELLER; (v) any obligations for broker's fees incurred by
BUYER in connection with the purchase of the Property; (vi) BUYER'S acts or
omissions; (vii) any failure by BUYER to comply with applicable laws,
ordinances, rules and regulations pertaining to the Property, and procure and
maintain permits required by public authorities in connection with the Property;
(viii) any violation by BUYER of state or federal securities laws, or BUYER's
dealings with its partners, investors, financial institutions and other third
parties with respect to this Agreement; and (ix) SELLER's operation of the
Property under Article 10, if applicable, except to the extent caused by
SELLER's gross negligence or willful misconduct. BUYER further agrees to
indemnify, defend and hold SELLER harmless from and against any and all claims
for personal injury, illness, disease and wrongful death which arise or are
asserted after the Effective Date and which are attributable to the ownership
and operation of the Property by BUYER, including without limitation, any
interest, penalty, reasonable attorney's fees and other costs and expenses
incurred in connection therewith or the defense thereof.
8.4 SELLER's Indemnity. SELLER shall indemnify, defend and hold BUYER harmless
from and against any and all Claims caused by, resulting from or incidental to:
(i) SELLER's ownership or operation of the Property before the Effective Date,
except to the extent such obligations are assumed by BUYER in Section 8.3; (ii)
SELLER's disbursement of production proceeds from the Property accruing before
the Effective Date; (iii) any failure by SELLER to comply with applicable laws,
ordinances, rules and regulations pertaining to the Property, or to procure and
maintain permits required by public authorities in connection with the Property;
(iv) any violation by SELLER of state or federal securities laws, or SELLER's
dealings with its partners, investors, financial institutions and other third
parties with respect to this Agreement; and (v) SELLER's operation of the
Property under Article 10, if applicable, to the extent caused by SELLER's gross
negligence or willful misconduct. SELLER further agrees to indemnify, defend and
hold BUYER harmless from and against any and all claims for personal injury,
illness, disease, and wrongful death which arise or are asserted prior to the
Effective Date or are asserted after Effective Date and are solely attributable
to the ownership and operation of the Property by SELLER prior to the Effective
Date, including without limitation, any interest, penalty, reasonable attorney's
fees, and other costs and expenses in connection therewith or in defense
thereof. It is understood and agreed that SELLER's indemnity under this Section
is limited to claims against BUYER by third parties, including government
agencies.
8.5 NORM. BUYER ACKNOWLEDGES THAT IT HAS BEEN INFORMED THAT OIL AND GAS
PRODUCING FORMATIONS CAN CONTAIN NATURALLY OCCURRING RADIOACTIVE MATERIAL. SOME
OR ALL OF THE EQUIPMENT, MATERIALS AND OTHER PROPERTY SUBJECT TO THIS AGREEMENT
MAY HAVE LEVELS OF NORM ABOVE BACKGROUND LEVELS. A HEALTH HAZARD MAY EXIST IN
CONNECTION WITH THIS EQUIPMENT, MATERIALS AND OTHER PROPERTY. THEREFORE, BUYER
MAY NEED TO FOLLOW SAFETY PROCEDURES WHEN HANDLING THIS EQUIPMENT, AND OTHER
PROPERTY.
ARTICLE 9. TAXES AND EXPENSES.
9.1 Recording Expenses. BUYER shall pay the cost of recording and filing the
Assignment and Bill of Sale for the Property, all state and federal transfer and
assignment documents, and all other instruments.
9.2 Ad Valorem, Real Property and Personal Property Taxes. Unless paid pursuant
to Article 6.3, all Ad Valorem Taxes, Real Property Taxes, Personal Property
Taxes, and similar obligations ("Property Taxes") on the Property are SELLER's
obligation for periods before the Effective Date and BUYER's obligation for
periods after the Effective Date.
8
9.3 Severance Taxes. SELLER shall bear and pay all severance or other taxes
measured by Hydrocarbon production from the Property, or the receipt of proceeds
therefrom, to the extent attributable to production from the Property before the
Effective Date. BUYER shall bear and pay all such taxes on production from the
Property on and after the Closing Date.
9.4 Sales Taxes. SELLER shall remit on behalf of BUYER all state and county
sales taxes due on the Property, using the Allocated Values listed in Exhibit D.
BUYER will reimburse SELLER at Closing for all sales taxes paid on behalf of
BUYER.
ARTICLE 10. INTERIM OPERATION OF THE PROPERTY
10.1 Operations by SELLER. If SELLER is operator of the Property, SELLER shall
continue to operate the Property during the period between the Effective Date
and 7:00 a.m., local time where the Property is located, on the first day of the
month following the month in which Closing occurs, or such later date to which
SELLER and BUYER agree in writing ("Interim Period"), but SELLER has no
obligation to operate the Property after the Interim Period. SELLER shall
operate the Property during the Interim Period in a prudent manner consistent
with generally accepted industry practices and standards, applicable laws and
regulations, and all applicable lease and other agreement terms. SELLER is
entitled to retain any overhead payments received and attributable to operations
during the Interim Period. SELLER makes no representation or warranty that BUYER
will become operator of any portion of the Property, as that matter is
controlled by the applicable operating agreements and governmental regulatory
requirements.
10.2 Marketing of Production. If SELLER continues to operate the Property after
the Closing Date under this Article 10, SELLER and BUYER will agree on continued
marketing of production, disbursement of proceeds of production, billing and
collection of amounts due from the nonoperating interest owners, and payment of
all delay rentals, minimum royalties, shut-in royalties and other lease payments
until BUYER begins operating the Property.
ARTICLE 11. MISCELLANEOUS
11.1 Purchase and Sale/Qualified Intermediary. Subject to the terms and
conditions of this Agreement, SELLER agrees to sell and convey to BUYER, and
BUYER agrees to purchase, pay for and receive the Assets and to assume the
obligations as provided herein. SELLER and BUYER hereby agree that BUYER, in
lieu of the purchase of the Assets from SELLER for the cash consideration
provided herein, shall have the right at any time prior to Closing to assign all
or a portion of its rights under this Agreement to a Qualified Intermediary (as
that term is defined in Section 1.1031(k)- 1(g)(4)(v) of the Treasury
Regulations) in order to accomplish the transaction in a manner that will
comply, either in whole or in part, with the requirements of a like-kind
exchange pursuant to Section 1031 of the Internal Revenue Code of 1986, as
amended, ("Code"). Likewise, SELLER shall have the right at any time prior to
Closing to assign all or a portion of its rights under this Agreement to a
Qualified Intermediary for the same purpose. In the event either Party assigns
its rights under this Agreement pursuant to this Section 11.1, such Party agrees
to notify the other Party in writing of such assignment at or before Closing. If
SELLER assigns its rights under this Agreement for this purpose, BUYER agrees to
(i) consent to SELLER's assignment of its rights in this Agreement in the form
attached hereto as Exhibit "E-1", and (ii) pay the Purchase Price into a
qualified escrow or qualified trust account at Closing as directed in writing.
If BUYER assigns its rights under this Agreement for this purpose, SELLER agrees
to (i) consent to BUYER's assignment of its rights in this Agreement in the form
of Exhibit "E-2", (ii) and accept the Purchase Price from the qualified escrow
or qualified trust account at Closing, and (iii) at Closing, convey and assign
directly to BUYER the Assets which are the subject of this Agreement upon
satisfaction of the other conditions to Closing and other terms and conditions
hereof. SELLER and BUYER acknowledge and agree that any assignment of this
Agreement to a Qualified Intermediary shall not release either Party from any of
their respective liabilities and obligations to each other under this Agreement,
and that neither Party represents to the other that any particular tax treatment
will be given to either Party as a result thereof.
11.2 Broker's Fees. Each party represents that it has not incurred any
obligation for brokers, finders or similar fees for which the other party would
be liable.
11.3 Press Releases. After Closing, either BUYER or SELLER may make a statement
to the press concerning this transaction, provided such statement shall not make
reference to the Purchase Price or consideration paid.
9
11.4 Notices. All notices under this Agreement must be in writing. Any notice
under this Agreement may be given by personal delivery, facsimile transmission,
U.S. mail (postage prepaid), or commercial delivery service, and will be deemed
duly given when received by the party charged with such notice and addressed as
follows:
SELLER: CHAPARRAL RESOURCES, INC. BUYER: CONOCO INC.
- ------ -----
3400 Bissonnet, Suite 135 10 Desta Drive, Suite 100W
Houston, TX 77005 Midland, TX 79705-4500
Howard Karren Attn: Division Manager
FAX: (713) 669-0994 FAX: (915) 686-5422
Any party, by written notice to the other, may change the address or the
individual to which or to whom notices are to be sent under this Agreement.
11.5 Assignment. Neither party may assign its rights or obligations under this
Agreement without the prior written consent of the other, unless the assignment
occurs by merger, reorganization or sale of all of a party's assets.
11.6 Entirety of Agreement; Amendment. This Agreement constitutes the entire
understanding between the parties with respect to the subject matter hereof,
superseding all negotiations, prior discussions, representations, and prior
agreements and understandings relating to such subject matter. This Agreement
may be amended, modified, and supplemented only in a writing duly executed by
BUYER and SELLER.
11.7 Successors and Assigns. This Agreement binds and inures to the benefit of
the parties hereto their respective permitted successors and assigns, and
nothing contained in this Agreement, express or implied, is intended to confer
upon any other person or entity any benefits, rights, or remedies.
11.8 Governing Law. This Agreement is governed by and must be construed in
accordance with the laws of the State of Colorado, excluding any
conflicts-of-law rule or principle that might apply the law of another
jurisdiction.
11.9 Survival. All of the representations, warranties, and agreements of or by
the parties to this Agreement survive the execution and delivery of the
Assignment and Bill of Sale and the transfer of the Property to BUYER.
11.10 Exhibits. The Exhibits attached to this Agreement are incorporated into
and made a part of this Agreement. In the event of a conflict between the
provisions of the Exhibits or the executed Assignment and Bill of Sale and the
foregoing provisions of this Agreement, the provisions of the Exhibits and the
executed Assignment and Bill of Sale take precedence over the foregoing
provisions of this Agreement. In the event of a conflict between the provisions
of the pro forma Assignment and Bill of Sale attached to this Agreement as
Exhibit B and the executed Assignment and Bill of Sale, the provisions of the
executed Assignment and Bill of Sale take precedence.
This instrument may be executed in any number of counterparts, each of which
shall be considered an original for all purposes.
The authorized representatives of SELLER and BUYER sign below indicating their
agreement to the terms of this Agreement.
SELLER: BUYER:
CHAPARRAL RESOURCES, INC. CONOCO INC.
By: By:
--------------------------------------- ---------------------------------
Name: Howard Karren Name:
------------------------------------ -------------------------------
Title: Chairman & Chief Executive Officer Title:
------------------------------------ -------------------------------
Date: Date:
------------------------------------ -------------------------------
10
EXHIBIT B
FORM OF
ASSIGNMENT AND BILL OF SALE
STATE OF COLORADO ss.
ss.
COUNTY OF RIO BLANCO ss.
CHAPARRAL RESOURCES, INC., a Colorado corporation ("SELLER"), in
consideration of the agreements set forth herein, hereby sells and assigns to
CONOCO INC., a Delaware corporation ("BUYER"), all of SELLER's right, title and
interest in and to the Property described in this Assignment and Bill of Sale
("Assignment"), subject to the terms of this Assignment, effective as of January
1, 1997 (the "Effective Date"). This Assignment relates to the Purchase and Sale
Agreement, effective January 1, 1997 between SELLER and BUYER (the "Agreement").
ARTICLE 1. PURCHASE AND SALE
1.1 The Property. Subject to the terms of this Assignment, SELLER agrees to sell
and assign to BUYER and BUYER agrees to purchase and acquire from SELLER all of
SELLER's right and title to, and interest in, the following (collectively the
"Property"):
1.1.1 The oil, gas and mineral lease(s) and other interests in oil and
gas described in Attachment 1 and all rights, privileges and
obligations appurtenant to the leases INSOFAR AND ONLY INSOFAR AS the
leases cover and include the lands, depths and rights described in
Attachment 1 ("Leases");
1.1.2 All rights in any unit in which the Leases are included, to the
extent that these rights arise from and are associated with the Leases,
including without limitation all rights derived from any unitization,
pooling, operating, communitization or other agreement or from any
declaration or order of any governmental authority;
1.1.3 All of SELLER'S rights and interest in and to producing,
non-producing, shut-in, and abandoned oil, gas, and condensate wells,
water source, water injection and other injection or disposal wells and
associated facilities located on or from the Leases;
1.1.4 All equipment, facilities and other personal property on the
Leases used in developing or operating the Leases or producing,
treating, storing, gathering, compressing, processing or transporting
hydrocarbons on or from the Leases;
1.1.5 All easements, rights-of-way, licenses, permits, servitudes and
similar interests applicable to or used in operating the Leases or the
personal property described above; and
1.1.6 All contracts and contractual rights, obligations and interests
relating to the Leases, including without limitation unit agreements,
farmout agreements, farmin agreements, operating agreements, and
hydrocarbon sales, purchase, gathering, transportation, treating,
marketing, exchange, processing and fractionating agreements ("Related
Contracts"), including without limitation those Related Contracts
described in Attachment 1.
1.2 Exclusions. The Property sold and assigned under this Assignment does not
include:
1.2.1 SELLER's intellectual property used in developing or operating
the Property, including without limitation proprietary computer
software, patents, trade secrets, copyrights, names, marks and logos;
1.2.2 Trade credits, accounts and notes receivable, and adjustments or
refunds (including without limitation transportation tariff refunds,
take-or-pay claims, and audit adjustments) attributable to the Property
with respect to any period before the Effective Date;
1
ARTICLE 2. WARRANTIES
2.1 Title; Encumbrances. SELLER SELLS AND TRANSFERS THE PROPERTY TO BUYER
SUBJECT TO ALL ROYALTIES, OVERRIDING ROYALTIES, BURDENS AND ENCUMBRANCES, AND
WITHOUT WARRANTY OF TITLE, EXPRESS, STATUTORY, OR IMPLIED, PROVIDED, HOWEVER,
SELLER SHALL AGREE TO DEFEND THE TITLE TO THE PROPERTY AGAINST THE LAWFUL CLAIMS
AND DEMANDS OF ALL PERSONS OR ENTITIES CLAIMING THE SAME OR ANY PART THEREOF BY,
THROUGH OR UNDER SELLER, BUT NOT OTHERWISE.
2.2 Information About the Property. SELLER MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS, STATUTORY OR IMPLIED, AS TO (i) THE ACCURACY, COMPLETENESS, OR
MATERIALITY OF ANY DATA, INFORMATION OR RECORDS FURNISHED TO BUYER IN CONNECTION
WITH THE PROPERTY; (ii) THE QUALITY AND QUANTITY OF HYDROCARBON RESERVES (IF
ANY) ATTRIBUTABLE TO THE PROPERTY; (iii) THE ABILITY OF THE PROPERTY TO PRODUCE
HYDROCARBONS, INCLUDING WITHOUT LIMITATION PRODUCTION RATES, DECLINE RATES AND
RECOMPLETION OPPORTUNITIES; (iv) ALLOWABLES OR OTHER REGULATORY MATTERS, OR (v)
THE PRESENT OR FUTURE VALUE OF THE ANTICIPATED INCOME, COSTS OR PROFITS, IF ANY,
TO BE DERIVED FROM THE PROPERTY. ANY AND ALL DATA, INFORMATION OR OTHER RECORDS
FURNISHED BY SELLER ARE PROVIDED TO BUYER AS A CONVENIENCE AND BUYER'S RELIANCE
ON OR USE OF THE SAME IS AT BUYER'S SOLE RISK.
ARTICLE 3. ASSUMPTION OF OBLIGATIONS
3.1 Ownership and Operations. Except as provided in Section 5.1, upon and after
Closing, BUYER shall assume and perform all the rights, duties, obligations and
liabilities of ownership and operation of the Property, including without
limitation: (i) all of SELLER's express and implied obligations and covenants
under the terms of the Leases, the Related Contracts and all other orders and
contracts to which the Property is subject; (ii) responsibility for all
royalties, overriding royalties, production payments, net profits obligations,
rentals, shut-in payments and other burdens or encumbrances to which the
Property is subject accruing after the Effective Date; (iii) responsibility for
compliance with all applicable laws, ordinances, rules and regulations
pertaining to the Property, and the procurement and maintenance of all permits
required by public authorities in connection with the Property; and (iv) all
other obligations assumed by BUYER under this Assignment. With respect to (i)
any part of the Property for which BUYER is not duly elected operator, or (ii)
any non-operating interests in the Property being transferred to BUYER under
this Agreement, BUYER shall assume full responsibility and liability for that
portion of the foregoing rights, duties, obligations and liabilities for which
non-operators are responsible. SELLER will remain responsible for all costs,
expenses and liabilities incurred by SELLER in connection with the ownership or
operation of the Property before the Effective Date, except those for which
BUYER indemnifies SELLER, or which BUYER assumes in the Agreement.
3.2 Plugging and Abandonment Obligations. From and after the Effective Date,
BUYER assumes full responsibility and liability for the following obligations
related to the Property ("Plugging and Abandonment Obligations"): (i) plugging,
replugging and abandoning all wells on the Property plugged after the Effective
Date; (ii) removing and disposing of all structures and equipment located on or
comprising part of the Property; (iii) the necessary and proper capping and
burying of all associated flow lines located on or comprising part of the
Property; (iv) restoring the leasehold premises of the Property, both surface
and subsurface, to the condition they were in before commencement of oil and gas
operations, as may be required by applicable laws, regulation or contract; and
(v) any necessary disposal of Property contaminated by naturally occurring
radioactive material ("NORM"). BUYER shall conduct all plugging, replugging,
abandonment, removal, disposal and restoration operations in a good and
workmanlike manner and in compliance with all applicable laws and regulations.
With respect to any non-operating interests in the Property being transferred to
BUYER under this Agreement, BUYER shall assume full responsibility and
liability, from and after the Effective Date, for that portion of the Plugging
and Abandonment Obligations for which non-operators are responsible.
3.3 Environmental Obligations. BUYER assumes full responsibility and liability
for the following occurrences, events and activities on or related to the
Property ("Environmental Obligations") whether arising before or after the
Effective Date: (i) environmental pollution or contamination, including
pollution of the soil, groundwater or air; (ii) underground injection activities
and waste disposal onsite; (iii) clean-up responses, and the cost of
remediation, control or compliance with respect to surface and subsurface
pollution caused by spills, pits, ponds or lagoons; (iv) failure to comply with
applicable land use, surface disturbance, licensing or notification
requirements; and (v) violation of environmental or land use rules, regulations,
demands or orders of appropriate state or federal regulatory agencies. With
respect to any non-operating interests in the Property being transferred to
BUYER under this Assignment, BUYER agrees to assume full responsibility and
liability, from and after the Effective Date, for that portion of the
Environmental Obligations for which non-operators are responsible.
2
ARTICLE 4. INDEMNITIES
4.1 Definition of Claims. As used in this Assignment, the term "Claims" means
any and all losses, liabilities, damages, obligations, expenses, fines,
penalties, costs, claims, causes of action and judgments for (i) breaches of
contract; (ii) loss or damage to property; and (iii) violations of applicable
laws, rules, regulations, orders or any other legal right or duty actionable at
law or equity. The term "Claims" also includes attorneys fees and court costs
resulting from the defense of any claim or cause of action within the scope of
the indemnities in this Assignment
4.2 Application of Indemnities. Unless this Assignment expressly provides to the
contrary, the indemnities set forth in this Assignment apply regardless of
whether: (i) the indemnified party (or its employees, agents, contractors,
successors or assigns) causes, in whole or part, an indemnified Claim; (ii) an
indemnified Claim arises out of or results from the indemnified party's (or its
employees', agents', contractors', successors' or assigns') sole or concurrent
negligence; (iii) the indemnified party (or its employees, agents, contractors,
successors or assigns) is deemed to be strictly liable, in whole or part, for an
indemnified Claim; or (iv) any part of an indemnified Claim is the result of the
imposition of punitive damages. All indemnities set forth in this Assignment
extend to the officers, directors, employees and affiliates of the party
indemnified, and cover the acts and omissions of the officers, directors,
employees, contractors, successors and assigns of the indemnifying party.
4.3 BUYER's Indemnity. BUYER shall indemnify, defend and hold SELLER harmless
from and against any and all Claims caused by, resulting from or incidental to:
(i) BUYER's ownership or operation of the Property after the Effective Date,
including without limitation the obligations assumed by BUYER in Section 3.1;
(ii) all Plugging and Abandonment Obligations arising after the Effective Date;
(iii) all Environmental Obligations, whether arising before or after the
Effective Date; (iv) BUYER's disbursement of production proceeds from the
Property accruing after the Effective Date, including funds in any suspense
accounts received from SELLER; (v) any obligations for broker's fees incurred by
BUYER in connection with the purchase of the Property; (vi) BUYER'S acts or
omissions; (vii) any failure by BUYER to comply with applicable laws,
ordinances, rules and regulations pertaining to the Property, and procure and
maintain permits required by public authorities in connection with the Property;
(viii) any violation by BUYER of state or federal securities laws, or BUYER's
dealings with its partners, investors, financial institutions and other third
parties with respect to this Agreement; and (ix) SELLER's operation of the
Property under Article 10, if applicable, except to the extent caused by
SELLER's gross negligence or willful misconduct. BUYER further agrees to
indemnify, defend and hold SELLER harmless from and against any and all claims
for personal injury, illness, disease and wrongful death which arise or are
asserted after the Effective Date and which are attributable to the ownership
and operation of the Property by BUYER, including without limitation, any
interest, penalty, reasonable attorney's fees and other costs and expenses
incurred in connection therewith or the defense thereof.
4.4 SELLER's Indemnity. SELLER shall indemnify, defend and hold BUYER harmless
from and against any and all Claims caused by, resulting from or incidental to:
(i) SELLER's ownership or operation of the Property before the Effective Date,
except to the extent such obligations are assumed by BUYER in Section 4.3; (ii)
SELLER's disbursement of production proceeds from the Property accruing before
the Effective Date; (iii) any failure by SELLER to comply with applicable laws,
ordinances, rules and regulations pertaining to the Property, or to procure and
maintain permits required by public authorities in connection with the Property;
(iv) any violation by SELLER of state or federal securities laws, or SELLER's
dealings with its partners, investors, financial institutions and other third
parties with respect to this Agreement; and (v) SELLER's operation of the
Property under Article 5, if applicable, to the extent caused by SELLER's gross
negligence or willful misconduct. SELLER further agrees to indemnify, defend and
hold BUYER harmless from and against any and all claims for personal injury,
illness, disease, and wrongful death which arise or are asserted prior to the
Effective Date or are asserted after Effective Date and are solely attributable
to the ownership and operation of the Property by SELLER prior to the Effective
Date, including without limitation, any interest, penalty, reasonable attorney's
fees, and other costs and expenses in connection therewith or in defense
thereof. It is understood and agreed that SELLER's indemnity under this Section
is limited to claims against BUYER by third parties, including government
agencies.
3
4.5 NORM. BUYER ACKNOWLEDGES THAT IT HAS BEEN INFORMED THAT OIL AND GAS
PRODUCING FORMATIONS CAN CONTAIN NATURALLY OCCURRING RADIOACTIVE MATERIAL. SOME
OR ALL OF THE EQUIPMENT, MATERIALS AND OTHER PROPERTY SUBJECT TO THIS ASSIGNMENT
MAY HAVE LEVELS OF NORM ABOVE BACKGROUND LEVELS. A HEALTH HAZARD MAY EXIST IN
CONNECTION WITH THIS EQUIPMENT, MATERIALS AND OTHER PROPERTY. THEREFORE, BUYER
MAY NEED TO FOLLOW SAFETY PROCEDURES WHEN HANDLING THIS EQUIPMENT, AND OTHER
PROPERTY.
ARTICLE 5. INTERIM OPERATION OF THE PROPERTY
5.1 Operations by SELLER. If SELLER is the operator of the Property,
SELLER shall continue to operate the Property during the period between the
Effective Date and 7:00 a.m., local time, where the Property is located, on the
Closing Date, or such later date to which SELLER and BUYER agree in writing (the
"Interim Period"), but SELLER has no obligation to operate the Property after
the Interim Period. SELLER shall operate the Property during the Interim Period
in a prudent manner consistent with generally accepted industry practices and
standards, applicable laws and regulations, and all applicable lease and other
agreement terms. SELLER is entitled to retain any overhead payments received and
attributable to operations during the Interim Period. SELLER makes no
representation or warranty that BUYER will become operator of any portion of the
Property, as that matter is controlled by the applicable operating agreements
and governmental regulatory requirements.
5.2 Marketing of Production. If SELLER continues to operate the
Property after the Closing Date under this Article 5, SELLER and BUYER will
agree on continued marketing of production, disbursement of proceeds of
production, billing and collection of amounts due from the nonoperating interest
owners, and payment of all delay rentals, minimum royalties, shut-in royalties
and other lease payments until BUYER begins operating the Property.
ARTICLE 6. TAXES AND EXPENSES
6.1 Recording Expenses. BUYER shall pay all costs of recording and
filing the Assignment and Bill of Sale for the Property, all state and federal
transfer and assignment documents, and all other instruments.
6.2 Ad Valorem, Real Property and Personal Property Taxes. Except as
adjusted pursuant to the terms of the Agreement, all Ad Valorem Taxes, Real
Property Taxes, Personal Property Taxes, and similar obligations ("Property
Taxes") on the Property are SELLER's obligation for periods before the Effective
Date and BUYER's obligation for periods after the Effective Date.
6.3 Severance Taxes. SELLER shall bear and pay all severance or other
taxes measured by production from the Property, or the receipt of proceeds
therefrom, to the extent attributable to production from the Property before the
Effective Date. BUYER shall bear and pay all such taxes on production from the
Property on and after the Closing Date.
6.4 Sales Taxes. SELLER shall remit on behalf of BUYER all state and
county sales taxes due on the Property, using the allocated values listed in
Exhibit D of the Agreement. BUYER will reimburse SELLER at Closing for all sales
taxes paid on behalf of BUYER.
ARTICLE 7. MISCELLANEOUS
7.1 Covenant Running With the Land. This Assignment and all of its rights,
reservations, and covenants are covenants running with the land and inure to and
are binding upon the parties hereto, their heirs, successors, and assigns. BUYER
shall make any transfer or encumbrance of any of the Property expressly subject
to this Assignment and the assignee or transferee must assume all obligations
set forth herein.
4
7.2 Purchase and Sale Agreement. The terms of the Agreement are incorporated by
reference in this Assignment. In the event of a conflict between the provisions
of this Assignment and the provisions of the Agreement, the provisions of this
Assignment prevail.
The authorized representatives of SELLER and BUYER sign below indicating their
agreement to the terms of this Assignment.
SELLER: BUYER:
CHAPARRAL RESOURCES, INC. CONOCO INC.
By: By:
--------------------------------------- ---------------------------------
Name: Howard Karren Name:
------------------------------------ -------------------------------
Title: Chairman & Chief Executive Officer Title:
------------------------------------ -------------------------------
Date: Date:
------------------------------------ -------------------------------
[Add Appropriate Acknowledgment Forms]
5
- -----------------------------------------------------------------------------------------------------------------------
PROPERTY NAME COUNTY STATE OPERATOR GWI NRI ALLOCATED VALUE
- -----------------------------------------------------------------------------------------------------------------------
SDC #6 Rio Blanco CO Chaparral Resources, Inc. 0.150000 0.106876 $5,000.00
- -----------------------------------------------------------------------------------------------------------------------
SDC #1-B Rio Blanco CO Chaparral Resources, Inc. 0.150000 0.107509 $11,100.00
- -----------------------------------------------------------------------------------------------------------------------
SDC #22 Rio Blanco CO Chaparral Resources, Inc. 0.150000 0.112500 $13,200.00
- -----------------------------------------------------------------------------------------------------------------------
SDC #23 Rio Blanco CO Chaparral Resources, Inc. 0.150000 0.112500 $15,500.00
- -----------------------------------------------------------------------------------------------------------------------
Superior Fee #1-18 Rio Blanco CO Chaparral Resources, Inc. 0.150000 0.107510 $6,500.00
- -----------------------------------------------------------------------------------------------------------------------
SDC Fee #20 Rio Blanco CO Chaparral Resources, Inc. 0.150000 0.111708 $1,000.00
- -----------------------------------------------------------------------------------------------------------------------
SDC #16 Rio Blanco CO Chaparral Resources, Inc. 0.300000 0.223417 $8,600.00
- ------------------------------------------------------------------------------------------------------------------------
SDC #13 Rio Blanco CO Chaparral Resources, Inc. 0.300000 0.225000 combined with SDC #16
- ------------------------------------------------------------------------------------------------------------------------
SDC #31 Rio Blanco CO Chaparral Resources, Inc. 0.150000 0.112500 $200.00
- ------------------------------------------------------------------------------------------------------------------------
SDC #10 Rio Blanco CO Chaparral Resources, Inc. 0.300000 0.227219 $300.00
- ------------------------------------------------------------------------------------------------------------------------
SDC #7 Rio Blanco CO Chaparral Resources, Inc. 0.150000 0.106875 $6,200.00
- ------------------------------------------------------------------------------------------------------------------------
SDC #25 Rio Blanco CO Chaparral Resources, Inc. 0.150000 0.112500 $44,700.00
- ------------------------------------------------------------------------------------------------------------------------
SDC #26 Rio Blanco CO Chaparral Resources, Inc. 0.150000 0.112500 $7,500.00
- ------------------------------------------------------------------------------------------------------------------------
SDC #21 Rio Blanco CO Chaparral Resources, Inc. 0.150000 0.112500 $9,900.00
- ------------------------------------------------------------------------------------------------------------------------
SDC #24 Rio Blanco CO Chaparral Resources, Inc. 0.150000 0.112500 $13,500.00
- ------------------------------------------------------------------------------------------------------------------------
Tipperary #7-3 Rio Blanco CO Chaparral Resources, Inc. 0.135000 0.105469 $23,400.00
- ------------------------------------------------------------------------------------------------------------------------
SDC #17-2 Rio Blanco CO Chaparral Resources, Inc. 0.150000 0.112500 $1,500.00
- ------------------------------------------------------------------------------------------------------------------------
SDC #29 Rio Blanco CO Chaparral Resources, Inc. 0.211100 0.151464 $29,500.00
- ------------------------------------------------------------------------------------------------------------------------
Fuelco #7-4 Rio Blanco CO Chaparral Resources, Inc. 0.150000 0.123750 $16,900.00
- ------------------------------------------------------------------------------------------------------------------------
SDC Fee #15 Rio Blanco CO Chaparral Resources, Inc. 0.300000 0.228573 $300.00
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SDC #12 Rio Blanco CO Chaparral Resources, Inc. 0.300000 0.220500 $300.00
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SDC #30 Rio Blanco CO Chaparral Resources, Inc. 0.150000 0.107510 $800.00
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Superior #12-1 Rio Blanco CO Chaparral Resources, Inc. 0.221250 0.166055 $300.00
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SDC #14 Rio Blanco CO Chaparral Resources, Inc. 0.300000 0.241266 $300.00
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Government 32-3 Rio Blanco CO Chaparral Resources, Inc. 0.300000 0.236250 $15,800.00
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SDC #1M-34 Rio Blanco CO Chaparral Resources, Inc. 0.168750 0.134531 $200.00
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Undeveloped Acreage Rio Blanco CO Chaparral Resources, Inc. $37,500.00
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TOTAL $270,000.00
---------------------------------------------
Rio Blanco County, Colorado Oil and Gas Leases/Surface Leases/Mineral
Interests
Lessor Lessee Description Date Exp. Gross Ac.
Hill Foundation F.S. Di Grappa T4S-R102W 8/8/75 HBP 320.000
Sec 12: S/2SW/4
Sec 13: E/2W/2
Sec 24: E/2NW/4
Robert M. Allan III F.S. Di Grappa T4S-R102W 8/1/75 HBP
Sec 12: S/2SW/4
Sec 13: E/2W/2
Sec 24: E/2NW/4
Gerald Buckles et al F.S. Di Grappa T4S-R102W 8/12/75 HBP
Sec 12: S/2SW/4
Sec 13: E/2W/2
Sec 24: E/2NW/4
Ruth Mayes Guardian F.S. Di Grappa T4S-R102W 8/1/75 HBP
Sec 12: S/2SW/4
Sec 13: E/2W/2
Sec 24: E/2NW/4
The Superior Oil Co Cities Service Oil Co T4S-R102W 4/15/64 HBP 320.000
Sec 1: SE/4SW/4
Sec 12: E1/2NW1/4, SW1/4NE1/4, NE1/4SW1/4, N1/2SE1/4
T4S-R101W
Sec 7: NW1/4SW1/4
From the surface to 100' below the base of the Entrada.
Frances M Spence J.R. Williams T4S-R102W 9/10/56 HBP 40.000
Sec 12: SW/4SW/4
Lillian D. McCowan J.R. Williams T4S-R102W 9/10/56 HBP
Sec 12: SW/4SW/4
M.J. Mayes Cities Service Oil Co T4S-R102W 2/5/62 HBP
Sec 12: SW/4SW/4
T.H. Hammett Cities Service Oil Co T4S-R102W 2/23/62 HBP
Sec 12: SW/4SW/4
First National Bank Cities Service Oil Co T4S-R102W 2/23/62 HBP
Sec 12: SW/4SW/4
Robert M. Allan III Cities Service Oil Co T4S-R102W 2/5/62 HBP
Sec 12: SW/4SW/4
Lynn Allan Barr Cities Service Oil Co T4S-R102W 2/5/62 HBP
Sec 12: SW/4SW/4
Virginia M. Colvin Cities Service Oil Co T4S-R102W 4/12/62 HBP
Sec 12: SW/4SW/4
Lou L. Powell Cities Service Oil Co T4S-R102W 3/20/63 HBP
Sec 12: SW/4SW/4
Lorraine L. Winterer Cities Service Oil Co T4S-R102W 3/21/63 HBP
Sec 12: SW/4SW/4
Ralph E. Smith Cities Service Oil Co T4S-R102W 3/22/63 HBP
Sec 12: SW/4SW/4
Ray E. Jensen Cities Service Oil Co T4S-R102W 3/22/63 HBP
Sec 12: SW/4SW/4
Albert C. Kirby C.B. Exploration Co T4S-R102W 7/8/71 HBP 320.000
Sec 12: S/2SW/4
Sec 13: E/2W/2
Sec 24: E/2NW/4
R.W. Pendleton Tst F.S. Di Grappa T4S-R102W 12/8/75 HBP
Sec 12: S/2SW/4
Sec 13: E/2W/2
Sec 24: E/2NW/4
Virginia M. Colvin F.S. Di Grappa T4S-R102W 8/1/75 HBP
Sec 12: S/2SW/4
Sec 13: E/2W/2
Sec 24: E/2NW/4
Edward Juhan et al F.S. Di Grappa T4S-R102W 8/1/75 HBP
Sec 12: S/2SW/4
Sec 13: E/2W/2
Sec 24: E/2NW/4
Lorraine L. Winterer F.S. Di Grappa T4S-R102W 8/1/75 HBP
Sec 12: S/2SW/4
Sec 13: E/2W/2
Sec 24: E/2NW/4
Ray E. Jensen F.S. Di Grappa T4S-R102W 8/13/75 HBP
Sec 12: S/2SW/4
Sec 13: E/2W/2
Sec 24: E/2NW/4
Ralph E. Smith F.S. Di Grappa T4S-R102W 8/1/75 HBP
Sec 12: S/2SW/4
Sec 13: E/2W/2
Sec 24: E/2NW/4
John R. Anderson F.S. Di Grappa T4S-R102W 8/12/75 HBP 320.000
Resurvey Tract 37
comprising parts of Sections 2, 3, 10 & 11
Albert G. Kirby Cities Service Oil Co T4S-R102W 3/22/75 HBP
Resurvey Tract 37
comprising parts of Sections 2, 3, 10 & 11
David D. Robinson Cities Service Oil Co T4S-R102W 3/22/75 HBP
Resurvey Tract 37
comprising parts of Sections 2, 3, 10 & 11
Max B. Lewis Cities Service Oil Co T4S-R102W 8/12/75 HBP
Resurvey Tract 37
comprising parts of Sections 2, 3, 10 & 11
First Congregational Cities Service Oil Co T4S-R102W 3/10/74 HBP
Church of Grand Resurvey Tract 37
Junction comprising parts of Sections 2, 3, 10 & 11
Marguerite B. Smith Lawrence Barker T4S-R102W 1/1/78 HBP 200.000
Sec 12: SE/4SW/4
Sec 13: E1/2W1/2
Sec 24: E/2NW/4
C-03997 Cascade Land T4S-101W 6/1/68 HBP 640.000
Leasing Co Sec 3: N/2
Sec 4: S/2
C-03638 Cascade Land T4S-R101
Leasing Co Sec 9: SW/4, NE/4SE/4, W/2SE/4 5/1/68 HBP 280.000
C-0121361 Walter Duncan T3S-R102W 5/1/64 HBP 2,240.000
Sec 27: ALL
Sec 28: ALL
Sec 33: ALL
Sec 34: N/2
C-2864 Robert L. Milkulich T3S-R101W 12/1/67 HBP 640.000
Sec 32: ALL
C-03961 J. Pelham Johnston T4S-R102W 4/1/52 HBP 1,403.780
Sec 1: Lots 5-8, S/2N/2, SE/4, N/2SW/4, SW/4SW/4
Sec 2: Lots 5-10, S/2N/2, N/2S/2, S/2SE/4
Sec 3: Lots 5,6,9, S/2NE/4, N/2SE/4
C-03286 Preston Oil Co T4S-R101W 9/1/51 HBP 280.000
Sec 11: NW/4SE/4, E/2SE/4
Sec 11: NE/4
C-03955 Cities Service Oil Co T4S-R102W 4/1/52 HBP 1,800.000
Sec 12: SE/4NE/4, NW/4SW/4, S/2SE/4, N1/2NE1/4
Sec 13: E/2, W1/2W1/2
Sec 14: ALL
Sec 15: N/2, N/2SE/4, SE/4SE/4
C-12755 Cascade Land T4S-R101W 6/1/71 HBP 1,044.190
Leasing Co Sec 5: W/2SE/4
Sec 7: S1/2SW1/4, NE1/4SW1/4, SE1/4
Sec 8: Lots 1,2, W/2NE/4, NW/4
Sec 17: Lots 1,2, W/2NE/4, NW1/4
C-03967 Carol Miller T4S-R101W 4/1/52 HBP 1,160.520
Sec 5: Lots 5-10, SW/4NE/4, S/2NW/4, SW/4
Sec 6: Lots 8-11, S/2N/2, S/2 (ALL)
C-03286-B Preston Oil Co T4S-R101W 9/1/51 HBP 40.000
Sec 11: SW/4SE/4
C-25358 John H. Brunel T4S-R101W 6/1/77 HBP 200.000
Sec 9: SE/4SE/4
Sec 16: W/2NE/4, E/2SE/4
C-03963 J. Pelham Johnston T4S-R102W 4/1/52 HBP 754.100
Sec 10: Lots 1-6, 8, 9, N1/2NW1/4, SW1/4NW1/4, SE1/4SE1/4
Sec 11: Lots 1,2,3, SE/4NW/4, SW/4
Sec 12: W/2NW/4
C-12754 Raymond Chorney T4S-R101W 4/15/64 HBP 160.000
Sec 7: NW1/4
Twin Buttes Land Teton Energy Co. T4S-R102W
Company Sec 10: SE1/4NW1/4
Sec 13: NE1/4SW1/4
Surface Access Agreement
Chaparral Resources, T4S-R102W
Inc. Sec 12: S1/2SW/4
Sec 13: E1/2W1/2
Sec 24: E1/2NW1/4
2/100ths mineral interest
TOTALS 12,162.590
Rio Blanco County, Colorado Related Contracts
Effective Date Contract Description
7/8/63 Operating Agreement South Douglas Creek Unit and Unit Operating
Agreement
11/20/75 Operating Agreement Cities Service Agreement
6/1/76 Operating Agreement Mountain Fuel Agreement
11/3/76 Operating Agreement Tipperary Agreement
9/1/77 Operating Agreement Superior Agreement
4/18/84 Operating Agreement Joint Operating Agreement (individual well)
6/21/84 Operating Agreement Joint Operating Agreement (individual well)
11/1/75 Farmout Farmout Agreement between Cities Service and Frank
DiGrappa
6/1/76 Letter Agreement Letter Agreement between Mountain Fuel and Frank
DiGrappa
7/19/76 Agreement Agreement between Norris Oil Co. and Frank DiGrappa
9/23/76 Farmout Farmout Agreement between Teton and Tipperary
6/3/77 Farmout Superior - Teton Farmout Agreement
1/1/95 Marketing Marketing Agreement between Conoco Inc. and Chaparral
Resources, et al
11/1/96 Marketing Marketing Agreement between Wasatch Oil & Gas and
Chaparral Res., et al
EXHIBIT C
FORM OF NONFOREIGN AFFIDAVIT
Exemption from Withholding of Tax
For
Dispositions of U.S. Real Property Interests
Section 1445 of the Internal Revenue Code provides that a transferee of a U.S.
real property interest must withhold tax if the transferor is a foreign person.
To inform Conoco Inc. that withholding of tax is not required upon the
disposition of a U.S. real property interest by -------------------------, the
undersigned hereby certifies the following:
1. ---------------------- is not a nonresident alien, foreign corporation,
foreign partnership, foreign trust, or foreign estate for purposes of U.S.
income taxation.
2. ------------------------ taxpayer identifying number is ------------------.
3. --------------------------- office address is --------------.
- ----------------- understands that this certification may be disclosed to the
Internal Revenue Service by ------------------ and that any false statement
contained herein could be punished by fine, imprisonment, or both.
Under penalties of perjury, I declare that I have examined this certification
and, to the best of my knowledge and belief, it is true, correct, and complete,
and I further declare I have authority to sign this document.
By:
--------------------------------
Title:
-----------------------------
SUBSCRIBED AND SWORN TO by the said -------------------------------------
- ------------------------------------, --------------------------------------- of
- ---------------, before me this ---- day of --------, 199-, to certify which
witness my hand and seal of office.
My commission expires on the ----- day of ----------, 19--.
---------------------------------
NOTARY PUBLIC in and for
THE STATE OF ------------------
EXHIBIT E-1
SELLER'S ASSIGNMENT NOTICE
February 28, 1997
Conoco Inc.
10 Desta Drive, Suite 100W
Midland, TX 79705-4500
Re: Notice of Assignment of Purchase and Sale Agreement dated February ---,
1997, Effective January 1, 1997 between Chaparral Resources, Inc. and
Conoco Inc.
Chaparral Resources, Inc. ("Seller") hereby notifies Conoco Inc. ("Buyer") that
Seller has assigned all of its rights under the Purchase and Sale Agreement
dated February ---, 1997, effective January 1, 1997, between Seller and Buyer
("Purchase and Sale Agreement") to ------------------------, a qualified
intermediary (as that term is defined in Section 1.1031(k)- 1(g)(4)(v) of the
Treasury Regulations), as provided in Section 11.1 of the Purchase and Sale
Agreement. The assignment of the Purchase and Sale Agreement is effective
February ---, 1997.
Seller makes this assignment of the Purchase and Sale Agreement solely for the
purpose of completing the transaction contemplated by the Purchase and Sale
Agreement as a like-king exchange of property under Section 1031 of the Internal
Revenue Code of 1986, as amended. Nothing in this letter will be deemed to
evidence and release of either Seller or Buyer from any of their respective
liabilities and obligations to each other under the Purchase and Sale Agreement.
Sincerely Yours,
CHAPARRAL RESOURCES, INC.
- ------------------------------
BUYER'S ACKNOWLEDGEMENT OF NOTIFICATION
Buyer hereby acknowledges receipt of notification to Buyer as required by
Treasury Regulation Section 1.1031(k)-1(g)(4)(v) and Buyer's signature hereon
shall constitute acceptance of such notification. Buyer's acceptance of this
notification shall in no way be deemed to release Seller or Buyer from any of
their agreements, representations, warranties and/or indemnifications set forth
in the Purchase and Sale Agreement, nor shall the assignment of the Purchase and
Sale Agreement be deemed to enlarge the rights, duties or obligations of any
party under the Purchase and Sale Agreement.
CONOCO INC.
- ------------------------------
EXHIBIT E-2
BUYER'S ASSIGNMENT NOTICE
February 28, 1997
Chaparral Resources, Inc.
3400 Bissonnet, Suite 135
Houston, TX 77005
Re: Notice of Assignment of Purchase and Sale Agreement dated February ---,
1997, Effective January 1, 1997 between Conoco Inc. and Chaparral
Resources, Inc.
Conoco Inc. ("Buyer") hereby notifies Chaparral Resources, Inc. ("Seller") that
Buyer has assigned all of its rights under the Purchase and Sale Agreement dated
February ----, 1997, effective January 1, 1997, between Seller and Buyer
("Purchase and Sale Agreement") to Petroleum Strategies, Inc., a qualified
intermediary (as that term is defined in Section 1.1031(k)-1(g)(4)(v) of the
Treasury Regulations), as provided in Section 11.1 of the Purchase and Sale
Agreement. The assignment of the Purchase and Sale Agreement is effective
February ----, 1997.
Buyer makes this assignment of the Purchase and Sale Agreement solely for the
purpose of completing the transaction contemplated by the Purchase and Sale
Agreement as a like-king exchange of property under Section 1031 of the Internal
Revenue Code of 1986, as amended. Nothing in this letter will be deemed to
evidence and release of either Seller or Buyer from any of their respective
liabilities and obligations to each other under the Purchase and Sale Agreement.
Sincerely Yours,
CONOCO INC.
- -------------------------
SELLER'S ACKNOWLEDGEMENT OF NOTIFICATION
Seller hereby acknowledges receipt of notification to Seller as required by
Treasury Regulation Section 1.1031(k)-1(g)(4)(v) and Seller's signature hereon
shall constitute acceptance of such notification. Seller's acceptance of this
notification shall in no way be deemed to release Seller or Buyer from any of
their agreements, representations, warranties and/or indemnifications set forth
in the Purchase and Sale Agreement, nor shall the assignment of the Purchase and
Sale Agreement be deemed to enlarge the rights, duties or obligations of any
party under the Purchase and Sale Agreement.
CHAPARRAL RESOURCES, INC.
- ------------------------------