PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
BASS ENTERPRISES PRODUCTION CO., ET AL
AS SELLERS
AND
CONTINENTAL RESOURCES, INC.
AS BUYER
DATED MARCH 28, 1998
TABLE OF CONTENTS PAGE
1. Property to be Sold and Purchased . . . . . . . . . . . . 1
2. Purchase Price. . . . . . . . . . . . . . . . . . . . . . 2
3. Deposit . . . . . . . . . . . . . . . . . . . . . . . . . 2
4. Allocation of Base Purchase Price . . . . . . . . . . . . 2
5. Seller's Representations . . . . . . . . . . . . . . . . 2
6. Buyer's Representations . . . . . . . . . . . . . . . . . 3
7. Covenants of Seller and Buyer Pending Closing . . . . . . 4
8. Due Diligence Reviews . . . . . . . . . . . . . . . . . . 6
9. Adverse Environmental Conditions. . . . . . . . . . . . . 8
10. Disposal of Materials, Substances, and Wastes;
Compliance with Law . . . . . . . . . . . . . . . . . . 10
11. Certain Price Adjustments to the Base Purchase Price . . 11
12. Conditions Precedent to Buyer's Obligations . . . . . . . 12
13. Conditions Precedent to Seller's Obligations . . . . . . 13
14. The Closing . . . . . . . . . . . . . . . . . . . . . . . 13
15. After Closing . . . . . . . . . . . . . . . . . . . . . . 15
16. Certain Accounting Adjustments to the Purchase Price . . 16
17. Assumption and Indemnification. . . . . . . . . . . . . . 18
18. Environmental Assessment and Indemnification by Buyer . . 19
19. Disclaimer of Warranties. . . . . . . . . . . . . . . . . 19
20. Buyer's Covenant Not to Sue Seller Group . . . . . . . . 20
21. Commissions . . . . . . . . . . . . . . . . . . . . . . . 20
22. Casualty Loss . . . . . . . . . . . . . . . . . . . . . . 20
23. Notices . . . . . . . . . . . . . . . . . . . . . . . . . 20
24. Survival of Provisions. . . . . . . . . . . . . . . . . . 20
25. Miscellaneous Matters . . . . . . . . . . . . . . . . . . 21
Exhibit A - Oil and Gas Leases
Exhibit B - Wells
Exhibit C - Assignment and Bill of Sale
Exhibit D - Suits, Actions, or other Legal Proceedings Pending
Exhibit E - Allocation of Values
PURCHASE AND SALE AGREEMENT
This Agreement, dated March 28, 1998, is made by and between the
signatory parties shown below under "Sellers" whose address is 201 Main
Street, Fort Worth, Texas 76102 (hereinafter collectively called "Seller")
and Continental Resources, Inc., whose address is P.O. Box 1032, Enid,
Oklahoma 73702 (hereinafter called Buyer");
W I T N E S S E T H:
WHEREAS, Buyer desires to purchase the Properties, as defined below,
from Seller, and Seller desires to sell the same Properties to Buyer, subject
to the terms and conditions of this Agreement.
WHEREAS, It is the parties' intent that Buyer assume all responsibility
and liability as provided herein for all matters relating to the Properties
to be assigned.
NOW, THEREFORE, In consideration of the mutual promises made herein and
the benefits to be derived hereunder, and other good and valuable
consideration, the sufficiency of which is hereby acknowledged, Seller and
Buyer agree as follows:
1. PROPERTY TO BE SOLD AND PURCHASED. Seller agrees to sell, and
Buyer agrees to purchase, for the consideration herein set forth, and subject
to the terms and provisions herein contained, the following described
Properties, rights, and interests:
(a) All rights, titles, and interests of Seller in and to: 1) the
oil, gas, and mineral leases described in Exhibit A hereto; and 2) the
wells described in Exhibit B hereto;
(b) All rights, titles, and interests of Seller in and to, or
otherwise derived from, all presently existing and valid oil, gas, and
mineral unitization, pooling, and communitization agreements,
declarations, and orders (including, without limitation, all units
formed under orders, rules, regulations, or other official acts of any
federal, state, or other authority having jurisdiction, and voluntary
unitization agreements, designations, and declarations) relating to
the properties described in subsection 1.(a) to the extent such
rights, titles, and interests are attributable to the properties
described in subsection 1.(a);
(c) All rights, titles, and interests of Seller in and to all
presently existing and valid production sales contracts, operating
agreements, and other agreements and contracts that relate to any of
the properties described in subsections 1.a. and 1.b., to the extent
such rights, titles, and interests are assignable and attributable to
the properties described in subsections 1.(a) and 1.(b);
(d) All rights, titles, and interests of Seller in and to all
rights-of-way, easements, surface leases, permits, and licenses
appurtenant to the properties described in subsections 1.(a) and
1.(b); and
(e) All rights, titles, and interests of Seller in and to all
materials, supplies, machinery, equipment, improvements, and other
personal property and fixtures (including, but not limited to,
wellhead equipment, pumping units, flowlines, tanks, buildings,
injection facilities, saltwater disposal facilities, compression
facilities, gathering systems, and other equipment) located on the
properties described in subsections 1.(a) and 1.(b) and used in
connection with the exploration, development, operation, or
maintenance thereof.
The properties and interests specified in subsections 1.(a), 1.(b), 1.(c),
1.(d) and 1.(e) are herein sometimes collectively called the "Properties".
The defined term "Properties" shall include seismic data, geological or
geophysical data, including interpretations, environmental studies, or other
similar data, or any interpretations thereof or other data or records related
thereto. Seller shall provide Buyer with such data Seller has in its files,
excluding any interpretations, engineering
1
reports and evaluations, Seller financial information and all data which
Seller considers proprietary or confidential or that Seller cannot provide to
Buyer without breaching, or risking a breach of, an agreement with a third
party.
2. PURCHASE PRICE. The unadjusted purchase price for the Properties
shall be Eighty Six Million Five Hundred Thousand Dollars ($86,500,000.00),
payable in United States dollars, (herein called the "Base Purchase Price").
The Base Purchase Price may be adjusted, as provided in Sections 7.(c), 11.
and 16. hereof. The Base Purchase Price, as so adjusted and as otherwise
adjusted by mutual agreement of the parties herein, shall be called the
"Purchase Price."
3. DEPOSIT. Upon entering into this Agreement, as evidence of good
faith, Buyer shall pay to Seller Eight Million Six Hundred Fifty Thousand
Dollars ($8,650,000.00) hereinafter called the "Deposit". If Buyer and
Seller consummate the transaction contemplated hereby in accordance with the
terms hereof, the Deposit shall be applied to the Base Purchase Price. If
Buyer and Seller do not consummate the transaction contemplated hereby
because of a material default by Seller, in the absence of a default by
Buyer, Seller shall return the Deposit to Buyer and shall, in addition, pay
to Buyer the sum of Two Million Five Hundred Thousand Dollars ($2,500,000.00)
as liquidated damages and not as a penalty. Except as provided in Section
12., if Buyer fails or refuses to consummate the transaction contemplated
hereby, Seller shall retain the Deposit as liquidated damages and not as a
penalty. Buyer stipulates that Seller's damages in the event of Buyer's
wrongful failure to close would be uncertain and that the amount of
liquidated damages provided herein is reasonable. Forfeiture of the Deposit
as liquidated damages as provided herein shall be Seller's sole remedy at law
or in equity for Buyer's failure to close as provided in this Agreement. In
no event shall the Deposit accrue interest.
4. ALLOCATION OF BASE PURCHASE PRICE. Buyer has allocated the Base
Purchase Price to the Properties by various categories. These categories and
the allocations thereto are shown on Exhibit E and have been made in good
faith by Buyer and may be relied upon by Seller for all purposes of this
Agreement.
5. SELLER'S REPRESENTATIONS. Each of the individuals and entities
comprising Seller represent to Buyer that:
(a) Each (other than natural persons) is a legal entity duly
organized and legally existing under the laws of the State of Texas.
Each corporation and limited partnership is qualified to do business
in Wyoming and is in good standing, or will be at Closing.
(b) Each has full power to enter into this Agreement and perform its
obligations hereunder and has taken all necessary action to enter into
this Agreement and perform its obligations hereunder.
(c) Execution and delivery of this Agreement, the consummation of the
transaction contemplated hereby, and compliance with the terms hereof,
will not result in any default under any agreement or instrument to
which Seller, or any individual party thereof, is a party or by which
the Properties are bound that would be material to this transaction.
Execution and delivery of this Agreement will not violate any
contractual provision, order, writ, injunction, decree, statute, rule,
or regulation applicable to Seller, or any individual party thereof,
or to the Properties that would be material to this transaction,
except the following:
(i) Any waivers of preferential rights to purchase that must be
obtained from third parties;
(ii) Compliance with the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 (the "HSR Act"); and,
2
(iii) Any approvals that must be obtained from governmental entities
who are lessors under leases included in the Properties (or who
administer such leases for such lessors) and that are customarily
obtained post-closing.
(d) This Agreement and the Assignment and Bill of Sale provided for
in Section 14.(a)(i) hereof and any other documentation provided for
herein to be executed by Seller, will, when executed and delivered,
constitute the legal, valid, and binding obligations of Seller,
enforceable according to their terms, except as limited by bankruptcy
or other laws applicable generally to creditor's rights and as limited
by general, equitable principles.
(e) Except as disclosed on Exhibit D, there are no pending suits,
actions, or other proceedings in which Seller is a party that
materially affect the Properties (including, without limitation, any
actions challenging or pertaining to Seller's title to any of the
Properties) or affect the execution and delivery of this Agreement or
the consummation of the transaction contemplated hereby.
6. BUYER'S REPRESENTATIONS. Buyer represents to Seller that:
(a) Buyer is a corporation duly organized and legally existing under
the laws of its state of organization. Buyer is qualified to do
business in Wyoming and is in good standing, or will be at Closing.
(b) Buyer has full power and ability to enter into and perform its
obligations under this Agreement (including, but not limited to the
payment of the Purchase Price at Closing) and has taken all necessary
action to enter into this Agreement and perform its obligations
hereunder.
(c) Buyer's execution and delivery of this Agreement, the
consummation of the transaction contemplated hereby, and Buyer's
compliance with the terms hereof, will not result in any default under
any agreement or instrument to which Buyer is a party or by which the
Properties are bound that would be material to this transaction.
Buyer's execution and delivery of this Agreement will not violate any
contractual provision, order, writ, injunction, decree, statute, rule,
or regulation applicable to Buyer or to the Properties that would be
material to this transaction, except the following:
(i) Any waivers of preferential rights to purchase that must be
obtained from third parties;
(ii) Compliance with the "HSR Act;" and,
(iii) Any approvals that must be obtained from governmental
entities who are lessors under leases included in the Properties
(or who administer such leases for such lessors) and that are
customarily obtained post-closing.
(d) This Agreement and the Assignment and Bill of Sale provided for
in Section 14.(a)(i) hereof and any other documentation provided for
herein to be executed by Buyer, will, when executed and delivered,
constitute, the legal, valid, and binding obligations of Buyer,
enforceable according to their terms, except as limited by bankruptcy
or other laws applicable generally to creditor's rights and as limited
by general, equitable principles.
(e) There are no pending suits, actions, or other proceedings in
which Buyer is a party that materially affect the execution and
delivery of this Agreement or the consummation of the transaction
contemplated hereby.
(f) Buyer is a knowledgeable purchaser, owner, and operator of oil
and gas
3
properties, has the ability to evaluate, and has evaluated, the
Properties for purchase, and is acquiring the Properties for its
own account and not with the intent to make a distribution within the
meaning of the Securities Act of 1933, as amended (and the rules and
regulations pertaining thereto), or a distribution thereof in
violation of any other applicable securities laws, rules, or
regulations.
(g) Buyer wishes to replace Seller as operator in every well
described on Exhibit B which Seller presently operates. Accordingly,
Buyer is, or will become, qualified to operate such Properties under
the applicable laws, rules, and regulations of the jurisdiction in
which such Properties are located.
7. COVENANTS OF SELLER AND BUYER PENDING CLOSING. Between the date of
this Agreement and the Closing Date:
(a) Seller shall permit Buyer access as follows:
(i) Seller shall give Buyer and its attorneys and other
representatives, who have a legitimate need to know, access at
all reasonable times during normal business hours to the
Properties and, at Seller's office, to Seller's records
(including, without limitation, title files, division order
files, well files, production records, equipment inventories, and
production severance, and ad valorem tax records) pertaining to
the ownership and operation of the Properties, to conduct due
diligence reviews as contemplated by Section 8. below. Buyer may
make copies of such records at its expense but shall, if Seller
so requests, return all copies so made if the Closing does not
occur. Seller shall not be obligated to provide Buyer with access
to any records or data that Seller considers to be proprietary or
confidential or that Seller cannot provide to Buyer without
breaching, or risking a breach of, confidentiality agreements
with other parties. Until Closing, all records and data provided
shall be subject to the previously executed Confidentiality
Agreement between Buyer and Seller. SELLER MAKES NO WARRANTY, AND
EXPRESSLY DISCLAIMS ALL WARRANTIES, AS TO THE ACCURACY OR
COMPLETENESS OF THE FILES AND OTHER INFORMATION THAT IT MAY
PROVIDE TO BUYER OR THAT MAY BE PROVIDED BY OTHERS.
(ii) Seller shall make a good faith effort to give Buyer, or
Buyer's authorized representatives, who have a legitimate need to
know, at reasonable times and upon adequate notice to Seller,
physical access to the Properties for the purpose of inspecting
same. Buyer recognizes that some of the Properties are operated
by third parties and that Seller's ability to obtain access to
such Properties, and the manner and extent of such access, is
subject to the consent of such third parties. Buyer agrees to
comply fully with the rules, regulations, and any instructions
issued by Seller or third party (where a Property is operated by
such third party) regarding the actions of Buyer while upon,
entering, or leaving the Properties.
(iii) If Buyer exercises rights of access under this Section or
otherwise, or conducts examinations or inspections under this
Section or otherwise, then (a) Buyer will be accompanied by
Seller's representative at all times; (b) such access,
examination, and inspection shall be at Buyer's sole risk, cost,
and expense, and Buyer waives and releases all claims against
Seller (its affiliates and their respective directors, officers,
employees,attorneys, contractors, and agents) arising in any way
therefrom or in any way connected therewith or arising in
connection with the conduct of its directors, officers,
employees, attorneys, contractors, and agents in connection
therewith; and (c) BUYER SHALL RELEASE, INDEMNIFY, DEFEND, AND
HOLD HARMLESS SELLER (AND
4
ITS PARENT, SUBSIDIARY COMPANIES, AND OTHER AFFILIATES
AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
ATTORNEYS, CONTRACTORS, AND AGENTS) (HEREINAFTER COLLECTIVELY
REFERRED TO AS "SELLER GROUP") FROM ANY AND ALL CLAIMS,
ACTIONS, CAUSES OF ACTION, LIABILITIES, DAMAGES, LOSSES,COSTS,
OR EXPENSES (INCLUDING, WITHOUT LIMITATION, COURT COSTS AND
ATTORNEYS' FEES), OR LIENS OR ENCUMBRANCES FOR LABOR OR
MATERIALS, ARISING OUT OF OR IN ANY WAY CONNECTED WITH SUCH
ACCESS, EXAMINATION, AND INSPECTION. THE FOREGOING RELEASE AND
INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH CLAIMS, ACTIONS,
CAUSES OF ACTION, LIABILITIES, DAMAGES, LOSSES, COSTS, OR
EXPENSES ARISE OUT OF (i) NEGLIGENCE (INCLUDING SOLE NEGLIGENCE,
SIMPLE NEGLIGENCE, CONCURRENT NEGLIGENCE, ACTIVE OR PASSIVE
NEGLIGENCE, OR OTHERWISE, BUT EXPRESSLY NOT INCLUDING GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT) OF SELLER OR ANY OTHER
INDEMNIFIED PARTY, OR (ii) STRICT LIABILITY.
(b) Seller shall continue to conduct its business in its ordinary
course, and in accordance with all applicable ordinances, statutes,
rules, and regulations of all local, state, and federal governments.
Seller shall not enter into or assume any contract or commitment which
is not in the ordinary course of business as heretofore conducted in
association with the Properties and shall carry on its business and
operate the Properties as a reasonably prudent operator. Subject to
existing contractual obligations, Seller shall not conduct, or commit
to participate in, on behalf of Buyer, any operation on the
Properties, or lands pooled or unitized therewith and shall not enter
into a contract for the sale of crude oil from the Properties
continuing in effect past the Effective Date without Buyer's prior
written consent. However, Seller may take such steps and incur such
expenses as it deems necessary in its sole opinion to deal with an
emergency to safeguard any part of the Property without first
consulting with Buyer. As soon as possible after the emergency,
Seller shall advise Buyer of such emergency action. Except as set
forth in this Agreement, Seller shall not sell, assign, transfer,
mortgage, farmout, or otherwise dispose of, abandon, or encumber any
material portion of the Properties.
(c) Seller shall use reasonable efforts, consistent with industry
practices in transactions of this type, to identify, with respect to
each material portion of the Properties, (i) all preferential rights
to purchase that would apply to the transaction contemplated hereby
and (ii) the parties holding such rights. In attempting to identify
the same, Seller shall not be obligated to go beyond its own records.
Seller shall request from the parties so identified, and in accordance
with the documents creating such rights, waivers of the preferential
rights to purchase. Seller shall have no obligation hereunder other
than to attempt to identify such preferential rights and to request
such waivers. Seller shall not be obligated to assure that such
waivers are obtained. Seller may tender to any party refusing to
waive such a preferential right the interest covered by such right at
a value as mutually agreed to by Buyer and Seller which shall be made
in good faith, but in no event shall the value of a well exceed the
value assigned to it by Ryder-Scott Company, an independent petroleum
reservoir engineering company, in its recent Reserve Report dated
January 14, 1998, prepared on behalf of Seller (hereinafter referred
to as the "Ryder-Scott Report") using the present value (future net
income before income taxes discounted at ten percent (10%)) of the
total proved reserves. If Buyer and Seller are unable to agree on a
value, the value for a well shall be determined as provided in Section
11.(a)(ii) using the V/T = PVW/PVC equation for Properties falling in
Categories A and B as shown on Exhibit E. This value shall be used in
determining the value of any
5
interest in a well covered by a preferential right to purchase.
The value shall be determined using the formula as provided in
Section 11.(a)(iii) for Properties falling in Category C where
F=Seller's net acres subject to a preferential right to purchase.
To the extent that such an interest is actually sold to a party
exercising such a preferential right, it shall be excluded from
the transaction contemplated hereby, and the Base Purchase Price
shall be reduced by the amount such party paid to Seller for such
interest unless the parties hereto agree otherwise.
(d) If applicable, as soon as practicable after the execution hereof,
Buyer shall prepare and submit any necessary filings in connection
with the transaction contemplated by this Agreement under the HSR Act.
Buyer shall pay all filing fees in connection with such filing, shall
request expedited treatment of such filing by the Federal Trade
Commission ("FTC"), shall promptly make any appropriate or necessary
subsequent or supplemental filings, and shall furnish to Seller copies
of all filings made under the HSR Act at the same time they are filed
with the FTC. Seller shall cooperate with Buyer as to all filings
required by the HSR Act.
(e) After both parties have executed this Agreement, Seller shall
deliver to Buyer a copy of its "pay list" for each well listed on
Exhibit B (which pay list shall include the name, address, social
security number, and applicable share of proceeds of production, to
the extent such information is contained in Seller's records, for each
party to whom Seller is disbursing proceeds of production with respect
to such property); and, a list of all parties for whom it is holding
in suspense proceeds of production. Seller does not represent or
warrant to Buyer the accuracy of the "pay lists" so delivered.
(f) At such time that all Asserted Defects (as hereinafter defined)
have been fully resolved to the satisfaction of both Parties or if no
Defects have been asserted by Buyer as of the Defect Notice Date (as
hereinafter defined)upon Seller's receipt of Buyer's written
confirmation and assurance that all Defects, if any, have been
resolved and Buyer is prepared to close the transaction subject only
to Seller's performance of its closing obligations as set forth in
Section 14(a), Seller shall give Buyer and its accountants access to
any and all accounting information in Seller's possession reasonably
requested by Buyer for the preparation by Buyer, at its sole expense
and risk, of pro-forma financial statements reflecting the financial
performance of the Properties for the most recent three (3) calendar
year(s). Buyer agrees that none of the information compiled for the
purpose of this limited audit shall be used for the purpose of due
diligence by Buyer or otherwise to assert any claim against Seller.
Seller shall have no responsibility whatever for the financial
statements so prepared by Buyer.
8. DUE DILIGENCE REVIEWS.
(a) The term "Defect" as used in this Section shall mean any of the
following:
(i) As of the Effective Date, Seller's ownership of a well
listed on Exhibit B hereto either, (A) entitles Seller to receive
a share of the oil, gas, and other hydrocarbons produced from, or
allocated to, such well that is less than the share set forth on
Exhibit B for such well in the columns headed "Net Revenue
Interest (NRI)" and "Overriding Royalty Interest (ORI)",
excepting any decreases caused by an increase in the landowner's
royalty payable to the Federal and State Governments or pursuant
to contractual obligations, including, without limitation,
sliding scale overriding royalties, which are tied to amount of
production, or as mandated by Federal and State statutes or as
promulgated in the respective Federal and State Rules and
Regulations; or, (B) causes Seller to bear a share of the cost of
operating such well greater than the share set forth on Exhibit B
for such well in the column headed "Working Interest (WI)"
(without a proportionate increase in the share of
6
production to which Seller is entitled from such well);
(ii) Seller's ownership of a Property is subject to a lien other
than (A) a lien that will be released at or before Closing, (B) a
lien for taxes not yet delinquent, or (C) a lien under an
operating agreement or similar agreement, to the extent the same
relates to expenses incurred that are not yet due;
(iii) Seller's ownership of a Property is subject to a
preferential right to purchase, unless a waiver of such right has
been obtained with respect to the transaction contemplated hereby
or an appropriate tender of the applicable interest has been made
to the party holding such right and the period of time required
for such party to exercise such right has expired without such
party exercising such right;
(iv) Seller's ownership of a Property is subject to an
imperfection in title that, if asserted, would cause a Defect, as
defined in clause (i) above, to exist, and such imperfection in
title normally would not be waived by reasonable and prudent
persons engaged in the oil and gas business with knowledge of all
the facts and their legal bearing and would materially impair or
prevent Buyer from receiving payment from the purchasers of
production, and would prevent the economic benefit Buyer could
reasonably expect by acquiring the Properties;
(v) Seller's ownership of a non-producing Property is subject to
an imperfection in title that, if asserted, would cause Seller's
ownership as shown on Exhibit A to be less; and such imperfection
in title normally would not be waived by reasonable and prudent
persons engaged in the oil and gas business with knowledge of all
the facts and their legal bearing and would materially prevent
the economic benefit Buyer could reasonably expect by acquiring
such Property.
(b) Buyer may conduct, to the extent it deems appropriate and at its
sole risk and cost, such examinations and investigations as it may
choose with respect to the Properties in order to determine whether
"Defects" exist. Unless waived, Buyer shall notify Seller in writing
of such Defects as soon as they are identified, but no later than ten
(10) days prior to the date upon which Closing is scheduled to occur
pursuant to Section 14. [and not as extended pursuant to 14.(i) or
14.(ii)] (hereinafter "Defect Notice Date"). Those Defects identified
in such notice to Seller are herein called "Asserted Defects". Such
notification shall include a description of the Asserted Defect, the
lease(s) described on Exhibit A affected by such Asserted Defect, the
well(s) listed on Exhibit B to which the Asserted Defect relates, and
all supporting documentation reasonably necessary fully to describe in
detail the basis for the Asserted Defect; and, for each property,
lease and applicable well, the size of any variance from "Net Revenue
Interest (NRI)", "Overriding Royalty Interest (ORI)", or "Working
Interest (WI)" set forth in Exhibit B that does or could result from
such Asserted Defect. Buyer hereby waives all Defects that it fails
to identify to Seller as Asserted Defects on or before the Defect
Notice Date. If Buyer timely notifies Seller of Asserted Defects,
Seller (i) shall have the right (but not the obligation) to attempt to
cure such Asserted Defects prior to Closing, and (ii) shall also have
the right (which may be exercised at any time before the Closing Date)
to postpone the Closing by designating a new Closing Date not later
than thirty (30) days after the Closing Date then existing, if Seller
desires additional time to attempt to cure (including determining if
it will attempt to cure) one or more Asserted Defects. In lieu of
curing or attempting to cure an Asserted Defect, Seller may elect, at
any time prior to Closing with respect to any Asserted Defect, to
indemnify and hold Buyer harmless from and against any actual damages
or loss (but specifically excluding consequential damages, special
damages, or similar damages) Buyer may suffer as a result of a third
party claim based on such Asserted Defect; provided,
7
unless Buyer consents, Seller may not so elect to indemnify Buyer
in lieu of curing such Asserted Defect(s) if the amount attributable
to such Asserted Defect(s) exceeds One Million Dollars($1,000,000.00).
If Seller elects to indemnify Buyer as to an Asserted Defect, such
Asserted Defect will be treated under this Agreement as cured and, as
to such indemnified Asserted Defect, SELLER SHALL RELEASE, INDEMNIFY,
DEFEND, AND HOLD HARMLESS BUYER FROM AND AGAINST ANY AND ALL LOSS,
COST, DAMAGE, EXPENSE, OR LIABILITY WHATSOEVER, INCLUDING ATTORNEYS'
FEES, ARISING OUT OF THE ASSERTED DEFECT SELLER HAS ELECTED TO
INDEMNIFY (EXCEPT ANY CAUSED SOLELY BY THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF BUYER).
(c) Buyer shall have the right to make an environmental assessment of
the Properties during the period beginning on the date of execution of
this Agreement and ending on the Defect Notice Date. Subject to the
provisions regarding Buyer's rights to access under Section 7 hereof,
Buyer and its agents shall have the right to enter upon the Properties
and all buildings and improvements thereon, inspect the same, conduct
soil and water tests and borings, and generally conduct such tests,
examinations, investigations, and studies as Buyer may deem necessary
or appropriate for the preparation of appropriate engineering and
other reports in relation to the Properties and their physical and
environmental condition. If Buyer proposes to undertake an
environmental assessment, Buyer's proposed plan, the consultants to be
used, and testing protocol must be approved by Seller before the work
may begin. Buyer agrees promptly to provide to Seller a copy of the
environmental assessment, including any reports, data, and
conclusions. Buyer shall keep all data and information acquired by
such examinations and the results of all analyses of such data and
information strictly confidential and shall not disclose same to any
person or agency without the prior written approval of Seller. BUYER
SHALL RELEASE, INDEMNIFY, DEFEND, AND HOLD HARMLESS THE SELLER GROUP
FROM AND AGAINST ANY AND ALL LOSS, COST, DAMAGE, EXPENSE, OR LIABILITY
WHATSOEVER, INCLUDING ATTORNEYS' FEES, ARISING OUT OF ANY
ENVIRONMENTAL ASSESSMENT INCLUDING, BUT NOT LIMITED TO, INJURY TO OR
DEATH OF PERSONS OR DAMAGE TO PROPERTY OCCURRING IN, ON, OR ABOUT THE
PROPERTIES AS A RESULT OF SUCH ACTIVITIES (EXCEPT ANY SUCH INJURIES OR
DAMAGES CAUSED SOLELY BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
ANY MEMBER OF THE SELLER GROUP).
(d) After the Defect Notice Date, Buyer shall be deemed to have
inspected the Properties or waived its right to inspect the Properties
for all purposes and satisfied itself as to their physical and
environmental condition, both surface and subsurface.
9. ADVERSE ENVIRONMENTAL CONDITIONS.
Seller represents to Buyer that to the best of its knowledge there are
no environmental conditions, as hereinafter defined, existing as of
the date hereof which Seller has not disclosed to Buyer. Seller will
advise Buyer of any Condition that Seller becomes aware of from the
date hereof to the Closing Date.
(a) Buyer shall have until the Defect Notice Date to notify Seller of
any material adverse environmental condition of the Properties which
Buyer deems unacceptable and provide evidence of the condition to
Seller. An environmental condition is a material adverse
environmental condition ("Condition") only if the following criteria
are met:
(i) The environmental condition would have been required to be
remediated on the Effective Date under the Environmental Laws;
and,
8
(ii) The total cost to remediate all environmental conditions
identified by Buyer affecting the Properties to the state
required by the Environmental Laws is reasonably estimated to be
at least $100,000.00.
(b) "Environmental Law" shall mean any federal, state, or local law,
rule, regulation, order, or ordinance in effect as of the Effective
Date of this Agreement pertaining to protecting the public health,
welfare, and the environment.
(c) At Closing, Seller may elect any of the following provided a
Condition exists:
(i) Decrease the Purchase Price by a mutually acceptable amount
reflecting Seller's proportionate share, based on its working
interest, of the cost reasonably estimated to remediate a
Condition affecting the Properties to such a state as required by
the Environmental Laws;
(ii) Remove the affected Properties from this Agreement and
adjust the Base Purchase Price by an amount mutually agreed to by
Seller and Buyer. If Buyer and Seller are unable to agree on an
amount, the value of Properties falling in Categories A and B
shall be determined as provided in Section 11.(a)(ii) using the
V/T = PVW/PVC equation and an appropriate adjustment will be made
using this value. The value of all affected Properties falling in
Category C shall be determined using the formula in Section
11.(a)(iii) where F=Seller's net acres affected by the Condition.
(iii) Remedy, or, if applicable, agree to indemnify, Buyer in
accordance with Section 8(b); the Condition, as provided below.
(d) If option (c)(i) above is chosen, Buyer shall be responsible for
any remediation and if the actual cost to remediate a Condition
exceeds the amount of the estimate, Buyer shall pay the additional
costs to remediate the Condition as required by applicable law.
(e) If option (c.)(iii). above is chosen, the following shall govern
the remediation:
(i) Seller shall be responsible for all negotiations and
contacts with federal, state, and local agencies and authorities
with regard to the Condition or remediation. Buyer shall not make
any independent contacts with any agency, authority, or other
third party with respect to the Condition or remediation and will
keep all information regarding the Condition and remediation
confidential, except in each instance to the extent required by
applicable law.
(ii) Seller shall remediate the Condition to the state agreed
upon by Seller and Buyer, but in no event will Seller be required
to remediate the Condition beyond the state required by the
Environmental Laws.
(iii) Buyer will grant and warrant access to the affected
Properties after Closing to Seller and third parties conducting
assessments or remediation, to the extent and as long as
necessary to conduct and complete the assessment or remediation
work, to remove equipment and facilities, and to perform any
other activities reasonably necessary in connection with
assessment or remediation.
(iv) Buyer will use its best efforts not to interfere with
Seller's ingress and egress or assessment or remediation
activities. Seller shall make reasonable
9
efforts to perform the work so as to minimize disruption to
Buyer's business activities and to the Properties.
(v) Seller shall continue remediation of the Condition until the
first of the following occurs:
(1) The appropriate governmental authorities provide
written notice to Seller or Buyer that no further
remediation of the Condition is required;
(2) The parties agree that the Condition has been
remediated to the state required by the Environmental Laws
or as agreed by the parties.
Upon the occurrence of either (1) or (2) above, Seller shall
notify Buyer that remediation of the Condition is complete
and provide a copy of the notification described in (1)
above, if applicable. Upon delivery of Seller's notice,
Seller shall be released from all liability and have no
further obligations under any provisions of this Agreement
in connection with a Condition.
(vi) Until Seller completes remediation of a Condition, Seller
and Buyer will each notify the other of any pending or threatened
claim, action, or proceeding by any authority or private party
that relates to or would affect the environmental condition, the
assessment, or the remediation of the affected Properties.
(vii) After Buyer takes over as operator, and before Seller has
completed remediation of a Condition, if a leak, spill, or
discharge of any material or substance ("Occurrence") occurs on
the affected Properties, or any part of them, Buyer will promptly
notify Seller and act promptly to minimize the effects of the
Occurrence. If a spill, leak, or discharge occurs and Seller
determines that it may affect the area where Seller is conducting
remediation or assessment, Buyer will hire a consultant (who must
be acceptable to Seller) to assess the effect of the Occurrence
on the environmental condition of the affected Properties, and
the cost of Seller's remediation work and the cost of the
additional work required as the result of the Occurrence. Unless
the Occurrence was caused solely by Seller, Buyer will be
responsible for the incremental cost of remediating the impact of
the Occurrence. If Seller's remediation is expanded to
incorporate remediation of the Occurrence, Buyer will promptly
pay its share of costs and expenses to Seller as the work is
performed, within thirty (30) days of receipt of invoices for the
work (with supporting documentation). Payments not made timely
will bear interest at a rate of twelve percent (12%) per annum or
the maximum lawful rate, whichever is less, compounded daily from
the date of Buyer's receipt of the invoice until paid.
If the cost of the additional work equals or exceeds the cost to
complete the remediation which would have been incurred but for
the Occurrence, Seller will pay Buyer the cost that would have
been incurred by Seller to complete the remediation but for the
Occurrence. As consideration for this payment, Buyer will accept
the environmental condition of the affected Properties as they
exist on the date of the payment, assume full responsibility for
remediating the affected Properties and related off-site
contamination in accordance with this Agreement, and agrees to
release, not to sue, indemnify, hold harmless, and defend Seller
as to claims and liabilities arising from the Occurrence to the
same extent as described in Sections 17., 18., and 20.
10
(viii) If Seller undertakes remediation as to any Properties in
which Seller's ownership was less than 100%, and provided that
the expense(s) incurred by Seller in such remediation are fair
and reasonable, Buyer will bill the other working interest owners
for their share of the remediation expenses. Regardless of
whether Buyer recoups any amount from the other working interest
owners, Buyer will refund to Seller, within sixty (60) days of
each Seller invoice, with documentation, any amounts expended by
Seller over the amount attributable to Seller's former working
interest share.
(ix) If Seller will assess or remediate the affected Properties
after Closing, the Assignment and Bill of Sale or other
recordable instrument will restate the rights and obligations of
this section.
10. DISPOSAL OF MATERIALS, SUBSTANCES, AND WASTES; COMPLIANCE WITH LAW.
Buyer will store, handle, transport, and dispose of or discharge all
materials, substances, and wastes from the Properties (including produced
water, drilling fluids, NORM, and other wastes), whether present before or
after the Effective Date, in accordance with applicable local, state, and
federal laws and regulations. Buyer will keep records of the types, amounts,
and location of materials, substances, and wastes that are stored,
transported, handled, discharged, released, or disposed of onsite and
offsite. When any lease terminates, an interest in which has been assigned
under this Agreement, Buyer will undertake additional testing, assessment,
closure, reporting, or remedial action with respect to the Properties
affected by the termination as is necessary to satisfy all local, state, or
federal requirements in effect at that time and necessary to restore the
Properties. Buyer shall assume full responsibility for the operations
conducted pursuant to this Section 10. and agrees to release, not to sue,
indemnify, hold harmless, and defend Seller as to all claims and liabilities
arising therefrom to the same extent as described in Sections 17., 18., and
20.
11. CERTAIN PRICE ADJUSTMENTS TO THE BASE PURCHASE PRICE.
(a) If Buyer presents Asserted Defects to Seller as a part of the due
diligence reviews provided for in Section 8. above, and if Seller is
unable or unwilling to cure such Asserted Defects prior to Closing, or
if Buyer has elected to treat a Property affected by a casualty loss
pursuant to Section 22. as if it were a Property affected by an
Asserted Defect, then an appropriate adjustment to the Base Purchase
Price to account for such Asserted Defects shall be made as follows:
(i) Buyer and Seller shall attempt to agree upon an appropriate
adjustment to the Base Purchase Price to account for an Asserted
Defect which Seller either is unable or unwilling to cure prior
to Closing, and those Properties, or any part thereof, associated
with the Asserted Defect shall be excluded from this Agreement
and any rights of Buyer hereunder to such Properties shall
terminate.
(ii) If Buyer and Seller are unable to agree upon an appropriate
adjustment with respect to an Asserted Defect which affects
Seller's interest in any Property falling in either Category A or
B as shown on Exhibit E, adjustments shall be made as follows:
Determine the value of all wells contained in the Unit in which
the Property affected by the Asserted Defect falls by using the
following equation and solve for V. "Unit" as used herein shall
mean a drilling and spacing unit as determined by order or rule
of the Wyoming Oil & Gas Conservation Commission or as otherwise
permitted by law, or the Participating Area affected by the
Asserted Defect.
V/T = PVW/PVC
T = Total amount ($) allocated to category containing Unit
as shown
11
on Exhibit E.
PVW = BFIT PV @ 10% (Future net income before income taxes
discounted at ten percent (10%)) of total proved reserves in all
wells in Unit as contained in the Ryder-Scott Report.
PVC = BFIT PV @ 10% (Future net income before income taxes
discounted at ten percent (10%)) of total proved reserves in all
wells in Category as contained in the Ryder-Scott Report.
The Base Purchase Price shall be adjusted by the absolute value
of an amount using the following formula:
Adjustment = V X (1-[B/C])
V = Value of wells as determined above.
B = Correct net revenue interest for all wells in Unit
including any overriding royalty interest.
C = Net revenue interest, including any overriding royalty
interest, as shown on Exhibit B in all wells in Unit.
(iii) If an Asserted Defect affects Seller's interest in any
Property falling in Category C and Buyer and Seller cannot
mutually agree on an appropriate adjustment to the Base Purchase
Price, adjustments shall be made using the following formula:
Adjustment = T X F/25,000
T = Total amount ($) allocated to Category C as shown on
Exhibit E.
F = Seller's net acres affected by uncured Asserted Defect.
(b) If it is determined that Seller's interest in a well listed on
Exhibit B is greater or lesser than the interest shown for such well
under the columns headed "Net Revenue Interest (NRI)" and "Overriding
Royalty Interest (ORI)" on Exhibit B, then Seller or Buyer may propose
an increase or decrease, as applicable, in the Base Purchase Price, in
which case such increase or decrease shall be handled in the same
manner as provided above with respect to adjustments for Asserted
Defects; provided that the party making such determination shall
notify the other party of such adjustment on or before the Defect
Notice Date. Buyer shall have an affirmative obligation to disclose
to Seller circumstances discovered by Buyer in its due diligence
review that could result in an increase in the Base Purchase Price
hereunder. No increase in the Base Purchase Price will result from
any royalty reduction resulting under the Federal Royalty Reduction
Program.
(c) Notwithstanding the adjustments to be made pursuant to
subsections 11.(a) and 11.(b) above, if such adjustments do not exceed
$250,000 in the aggregate, no such adjustments shall be made and none
of the Properties that would otherwise have been excluded pursuant to
subsection 11.(a) above shall be excluded. If the adjustments to be
made pursuant to subsections 11.(a) and 11.(b) above, do exceed
$250,000.00, the Base Purchase Price shall be adjusted according
thereto.
12. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. Buyer's obligations at
Closing under this Agreement are subject to each of the following conditions:
(a) Seller's representations under this Agreement shall be true and
accurate in all
12
material respects as of the date when made and at Closing, except
as to changes specifically contemplated by this Agreement or consented
to by Buyer in writing.
(b) Seller shall have performed and complied in all material respects
with every covenant, agreement, and condition required by it under
this Agreement prior to or at the Closing unless performance or
compliance therewith shall have been waived by Buyer in writing.
(c) If applicable, Buyer and Seller shall have received approval from
the FTC under the HSR Act of the transaction contemplated by this
Agreement, or shall have received notification that the waiting period
under such act has been terminated, or the waiting period under such
act shall have expired.
(d) The Base Purchase Price increase or decrease resulting from the
adjustments to be made pursuant to subsections 11.(a) and 11.(b) does
not exceed twenty percent (20%) of the Base Purchase Price.
(e) On the Closing Date, no material suit, action, or other
proceeding against Buyer shall be pending before any court or
governmental agency seeking to restrain, prohibit, or obtain damages
or other relief in connection with the consummation of the transaction
contemplated by this Agreement.
If any such condition precedent to the obligations of Buyer under this Agreement
is not met as of the Closing Date, and if Buyer is not in material breach of its
obligations hereunder, this Agreement may be terminated at the option of Buyer.
If Buyer thus terminates this Agreement, the Deposit shall be returned to Buyer
and the parties shall have no further obligations to one another hereunder
(other than the indemnifications contained in Sections 7.(a)(iii), 8.(c), and
21. hereof, which shall survive such termination). Notwithstanding the
foregoing, if a condition set forth above, other than condition 12.(c) or
12.(d), is not met (and is asserted by Buyer as a failure of one of its
conditions of Closing), and if the reasons such condition is not met relate only
to some, but not all, of the Properties, failure of such condition to be met
may, at the option of either Buyer or Seller, be treated as an uncured Asserted
Defect and handled in accordance with the process set forth in Section 11.
above.
13. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS. Seller's obligations at
Closing under this Agreement are subject to each of the following conditions:
(a) Buyer's representations under this Agreement shall be true and
accurate in all material respects as of the date when made and at
Closing, except as to changes specifically contemplated by this
Agreement or consented to by Seller.
(b) Buyer shall have performed and complied in all material respects
with every covenant, agreement, and condition required by it under
this Agreement prior to or at the Closing unless compliance therewith
shall have been waived by Seller.
(c) If applicable, Buyer and Seller shall have received approval from
the FTC under the HSR Act of the transaction contemplated by this
Agreement, or shall have received notification that the waiting period
under such act has been terminated, or the waiting period under such
act shall have expired.
(d) The Base Purchase Price reduction or increase resulting from the
adjustments to be made pursuant to subsections 11.(a) and 11.(b) does
not exceed twenty percent (20%) of the Base Purchase Price.
(e) On the Closing Date, no material suit, action, or other
proceeding against Seller shall be pending before any court or
governmental agency seeking to restrain, prohibit, or obtain damages
or other relief in connection with the consummation of the transaction
contemplated by this Agreement.
13
If any such condition precedent to the obligations of Seller under this
Agreement is not met as of the Closing Date, this Agreement may be terminated
at the option of Seller. If Seller terminates this Agreement because of
Buyer's failure to fulfill condition 13.(a) or 13.(b), the Deposit shall not
be returned to Buyer. If Seller terminates this Agreement because of
conditions 13.(c), 13.(d), or 13.(e), and Buyer is not in material default
under this Agreement, the Deposit shall be returned to Buyer. Thereafter,
Seller and Buyer shall have no further obligations to one another hereunder
(other than the indemnifications contained in Section 7.(a)(iii), 8.(c), and
21. hereof, which shall survive such termination).
14. THE CLOSING. If the conditions referred to in Section 12. of this
Agreement (the "Conditions Precedent to Buyer's Obligations") and Section 13.
of this Agreement (the "Conditions Precedent to Sellers Obligations") have
been satisfied or waived, the consummation of the transaction contemplated
hereby ("Closing") shall take place in the offices of Seller, at 201 Main
Street, Fort Worth, Texas 76102, on May 14, 1998, at 10:00 a.m. Central
Standard Time, or at such other date and time (i) as the Buyer and Seller may
agree or, (ii) to which Seller may postpone the Closing pursuant to Section
8.(b) hereof (such date and time herein called the "Closing Date"). It is
provided however, that Seller shall not be permitted to extend the Closing
Date pursuant to Section 8(b) beyond July 14, 1998, unless Buyer consents.
At the Closing:
(a) Seller shall:
(i) Execute, acknowledge, and deliver to Buyer a conveyance of
the Properties (the "Assignment and Bill of Sale"), which shall
include a warranty of title as against claims arising by through
or under Seller, and not otherwise, and in the form attached
hereto as Exhibit C (with Exhibits A and B attached thereto),
effective as of seven o'clock a.m., (7:00 a.m.) Mountain Standard
Time on June 1, 1998, (herein called the "Effective Date");
(ii) Execute (and, where required, acknowledge) and deliver to
Buyer forms of conveyance or assignment as required by the
applicable authorities for transfers of interests in state or
federal leases included in the Properties;
(iii) Execute and deliver to Buyer letters in lieu of transfer
orders (or similar documentation), in form acceptable to both
parties;
(iv) If Buyer requests, deliver to Buyer an affidavit or other
certification (as permitted by the Internal Revenue Code of 1986,
as amended) that Seller is not a "foreign person" within the
meaning of Section 1445 (or similar provisions) of such code
(i.e., Seller is not a non-resident alien, foreign corporation,
foreign partnership, foreign trust, or foreign estate, as those
terms are defined in such code and regulations promulgated
thereunder);
(v) With respect to Properties operated by Seller and to the
extent available, deliver to Buyer all requisite consents of
non-operators under any operating agreement naming Buyer as
successor operator; and copies of such requests for consent which
were sent but not obtained prior to Closing;
(vi) Deliver to Buyer resignations of operator and/or Changes of
Operator/Owner Forms properly executed on behalf of Seller for
all Seller-operated wells acquired by Buyer; and, any other forms
required by governmental authorities having jurisdiction which
must be initiated by Seller to change the operator from Seller to
Buyer as of the Effective Date; and,
(vii) Certificates in form and substance satisfactory to Seller,
effective as of the Closing Date and executed by Seller's duly
authorized officer, partner, or owner, as appropriate, to the
effect that (1) Seller has all requisite corporate,
14
partnership, or other power and authority to sell the
Properties on the terms of this Agreement and to perform its
other obligations under this Agreement and has fulfilled all
corporate, partnership, or other prerequisites to closing
this transaction, and (2) each individual executing the
closing documents has the authority to act on behalf of
Seller.
(viii) Deliver possession of the Properties to Buyer as of the
Effective Date.
(b) Buyer shall:
(i) Deliver to Seller, by wire transfer to an account designated
by Seller in a bank located in the United States, an amount
payable in United States dollars equal to the amount as set forth
on the Closing Settlement Statement as provided for in Section
16.(c) below;
(ii) Deliver to Seller, except to the extent waived by Seller:
(A) Evidence of compliance with the requirements of all laws, rules,
and regulations relating to the transfer of operatorship from Seller
to Buyer;
(B) Evidence of Buyer's bond coverage as required by all laws, rules,
and regulations, or that a cash deposit, certificate of deposit,
letter of credit, or some other permitted financial security has been
accepted by the proper regulatory agency for each well requiring such
coverage;
(C) Evidence of compliance with the requirements of all laws, rules,
and regulations that Buyer is qualified to succeed to Seller's
interest in the Properties; and,
(D) Certificates in form and substance satisfactory to Seller,
effective as of the Closing Date and executed by Buyer's duly
authorized officer, partner, or owner, as appropriate, to the effect
that (1) Buyer has all requisite corporate, partnership, or other
power and authority to purchase the Properties on the terms of this
Agreement and to perform its other obligations under this Agreement
and has fulfilled all corporate, partnership, or other prerequisites
to closing this transaction, and (2) each individual executing the
closing documents has the authority to act on behalf of Buyer.
(iii) Execute such forms and take such other steps as Seller may
reasonably require to (A) succeed Seller with respect to the
Properties under the rules and regulations of applicable authorities
and (B) assume any and all liabilities of Seller with respect to the
wells described on Exhibit B; and,
(iv) Take possession of the Properties.
15. AFTER CLOSING. Within thirty (30) days after Closing, Seller shall
make available for delivery to Buyer at Seller's offices all of Seller's lease
files, abstracts and title opinions, division order files, production records,
well files, copies of accounting records (but not including general financial
accounting or tax accounting records), and other similar files and records that
directly relate to the Properties. Notwithstanding the foregoing, Seller shall
not be required to deliver to Buyer materials that Seller considers proprietary
or confidential or that Seller legally cannot provide to Buyer without
breaching, or risking a breach of, confidentiality agreements with other
parties. It is expressly understood that Buyer is not entitled to acquire any
records except as expressly provided in Section 1. hereof. Seller may retain
such files, or copies thereof, or such information as it deems necessary for all
purposes, including but not limited to, preparing a Final Settlement Statement
as provided in Section 16., or for purposes of filing tax returns covering the
Properties. Any files or materials retained by Seller after Closing pursuant
hereto, shall be sent to Buyer as soon as reasonably practicable after final
payment is made in accordance with the Final
15
Settlement Statement. Seller may, at its own expense, have access to and
make copies of all, or any part thereof, of the files and records provided
Buyer hereunder at reasonable times and upon reasonable notice during regular
business hours for as long as the Properties remain in effect.
As to those wells which Seller is disbursing proceeds of production, Seller
shall continue to collect proceeds of production as long as it remains
operator and shall be responsible for making disbursements, in accordance
with its normal procedures (and at normal times), of such proceeds of
production so collected to the parties entitled to same, with any proceeds of
production thereafter collected by Seller to be forwarded promptly to its
successor as operator.
Provided Buyer succeeds Seller as operator, Buyer shall become responsible
for all disbursements of proceeds of production and such disbursement
activities shall be included in the matters that Buyer assumes and with
respect to which Buyer indemnifies Seller under Section 17 below.
SELLER GIVES NO ASSURANCE HEREUNDER THAT BUYER SHALL SUCCEED SELLER AS
OPERATOR OF ANY PROPERTY WHERE PARTIES OTHER THAN SELLER OWN INTERESTS IN
SUCH PROPERTY. It is understood that in most (if not all) of the operating
agreements affecting the Properties, Seller does not have the right to
transfer operations of the leasehold interests subject thereto to Buyer.
However, Seller shall use its best efforts to secure consent from all
non-operators naming Buyer as Operator under such operating agreements prior
to Closing, to be effective on the Closing Date and provided Closing takes
place. After Closing, Buyer shall use its best efforts to comply with the
terms of any operating agreements to name a successor operator thereunder for
which Seller was unable to obtain prior to Closing. Upon obtaining consent
from non-operators naming Buyer as successor operator, Seller and Buyer
promptly shall file all forms required by any governmental agency having
authority, to change the operator from Seller to Buyer.
Seller shall operate the Seller-operated Properties until the Effective Date
and thereafter, if necessary, until such time as provided under the
applicable operating agreement, plan of unitization, or law requires. As
soon as practicable thereafter, operations shall be turned over to, and
become the responsibility of, Seller's successor as Operator To the extent
Seller so operates any Property after the Effective Date, its obligations to
Buyer with respect to such operations shall be no greater than those that it
would have to a non-operator under the applicable operating agreement. In
the absence of an operating agreement, those terms and provisions contained
in the AAPL 610 (1382 Revision) form Operating Agreement shall apply. THE
PARTIES RECOGNIZE THAT, UNDER SUCH AGREEMENTS AND SUCH FORM OF AGREEMENT, THE
OPERATOR IS NOT RESPONSIBLE TO THE OTHER PARTIES THERETO FOR ITS OWN
NEGLIGENCE AND HAS NO RESPONSIBILITY TO SUCH OTHER PARTIES OTHER THAN FOR
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
As to all wells acquired by Buyer hereunder which Seller continues to operate
on behalf of Buyer and for Buyer's account after the Effective Date because a
successor operator has not been approved by the requisite governmental
authority, or consent of non-operators has not been obtained, by mutual
agreement or otherwise, Seller will be paid the producing well overhead rates
shown in the operating agreement applicable to such wells and if there is no
such established rate, Buyer shall pay Seller for its proportionate share
thereof based upon the rate of five hundred dollars ($500.00) per month, or
any part thereof, for each well.
16. CERTAIN ACCOUNTING ADJUSTMENTS TO THE PURCHASE PRICE.
(a) Appropriate adjustments to the Purchase Price shall be made
between Buyer and Seller to reflect the following:
(i) All rights to proceeds, receipts, reimbursements, credits,
and income attributable to the Properties and accruing before the
Effective Time, as defined below, shall be the property of
Seller. All proceeds, receipts, credits, income, and charges
attributable to the Properties acquired by Buyer hereunder and
accruing on and after the Effective Time shall be the property
16
of Buyer. As to Properties operated by Seller and purchased by
Buyer hereunder and concerning accounts held in suspense, Seller
will pay in full the royalty accounts that were suspended because
the amount due is less than the statutory or contractual minimum
for payment. As to all other suspended accounts, if any, Seller
shall transfer to its successor as operator all monies held in a
suspended account which were received for production produced
from or allocated to the Properties on and after the Effective
Time. As to proceeds received for production produced from or
allocated to the Properties before the Effective Time and held in
a suspense account at Buyer's option, Seller may either: 1)
Retain the suspended amounts after Closing and, upon proof
satisfactory to Seller, release the money to the proper party;
or, 2) Transfer the suspended amounts to Buyer for future
disbursement. Once suspended amounts have been transferred to
Buyer for future disbursement, Buyer agrees to be responsible for
disbursing the suspended monies to the proper parties and shall
release, indemnify, defend, and hold harmless the Seller Group
from any and all claims, actions, causes of action, liabilities,
damages, losses, costs, or expenses (including, without
limitation, court costs and attorneys' fees), arising out of or
in any way connected with making such disbursements, or failure
to make a disbursement.
(ii) Seller shall be responsible for and pay (A) all charges and
invoices for costs and expenses (including, without limitation,
lease maintenance payments, drilling and operating expenses,
capital expenditures, and overhead charges) accruing before the
Effective Time and attributable to the Properties and (B)
necessary royalty disbursements of proceeds realized from the
sale of production produced from and allocated to the Properties
before the Effective Time. Buyer shall be responsible for
payment of (C) all charges and invoices for costs and expenses
(including, without limitation, lease maintenance payments,
drilling and operating expenses, capital expenditures, and
overhead charges) accruing on and after the Effective Time and
attributable to the Properties acquired hereunder and (D)
necessary royalty disbursements of proceeds realized from the
sale of production produced from and allocated to the Properties
acquired hereunder on and after the Effective Time. All payments
made by Seller for items under (C) above for which Buyer is
responsible shall be reimbursed by Buyer. Seller shall reimburse
Buyer for all monies received by Seller from non-operators as
payment of Seller's invoices for the operations of the wells
described on Exhibit B for periods on and after the Effective
Time.
(iii) Seller will be credited with an amount equal to the simple
interest accrued on the Adjusted Purchase Price for the period
beginning with the Closing Date and continuing through the
Effective Date at seven percent (7%) simple annual interest
calculated as follows:
INTEREST = Adjusted Purchase Price x number of days from
closing to Effective Date x 7% divided by 365;
The amount of interest credited to the Buyer will not exceed
$250,000.00 regardless of the above calculation, and further
such credit shall be only be applied if Closing occurs before
the Effective Date.
(b) In making such adjustments, the Parties agree that:
(i) Seller will cause such oil storage facilities which store oil
produced from the Properties to be gauged or strapped as of 7:00
a.m. Mountain Standard Time on the Effective Date, herein also
referred to as the Effective Time. Seller also has caused the
gas production meter charts (or if such do not exist, the sales
meter charts) on the pipelines transporting gas production
17
from the Properties to be read as of the Effective Time. The
results of such gauging, strapping, or chart reading are
conclusive and shall be made available to Buyer. The
production in such storage facilities or through such meters
on the gas pipelines as of the Effective Time shall be owned
by Seller; and, thereafter, production placed in such oil
storage facilities and gas production passing through the
aforesaid meters on the pipelines shall be owned by Buyer,
insofar as to the interests subject hereto as of Closing.
(ii) All ad valorem, severance, production and similar taxes
applicable to the Properties shall be prorated between Seller and
Buyer as of the Effective Date. Therefore, all such taxes for
1997 and prior years and for the portion of 1998 prior to the
Effective Date levied against the Properties shall be borne and
paid by Seller; and, all ad valorem and similar taxes for the
remainder of 1998 and thereafter levied against the Properties
shall be borne and paid by Buyer, irrespective if the amount
levied is based on the previous year's production or any other
basis.
(iii) Where Seller owns one-hundred percent (100%) of the
working interest under a well and there is no overhead charge for
determining the overhead expense to be charged to Buyer on and
after the Effective Date, the overhead charge shall be deemed to
be five hundred dollars ($500.00) per month, or any part thereof,
per well.
(iv) Each party shall be responsible for its own income taxes.
(c) With respect to matters that can be determined as of Closing,
Seller shall prepare, in accordance with the provisions of this
Agreement and with generally accepted accounting principles, a
statement (the "Closing Settlement Statement") setting forth each
adjustment to the Base Purchase Price to the best of Seller's
knowledge, whether upward or downward, as may be required in
accordance herewith. Seller shall submit to Buyer the Closing
Settlement Statement no later than five (5) days prior to the Closing
Date and shall afford Buyer access to Seller's records pertaining to
the computation of the Closing Settlement Statement. Prior to the
Closing, Buyer and Seller will agree upon the adjustments stated
therein to be made to the Purchase Price, or will specify the
adjustments to which there are differences and the adjustments to be
omitted therefrom. Only the agreed upon adjustments shall be taken
into account in computing the adjustments to be made to the Purchase
Price at Closing. Final adjustments to the Purchase Price to be made
hereunder shall be made within one hundred-twenty (120) days after the
Closing Date for all matters other than Asserted Defects according to
(d) hereinbelow as follows:
(d) As soon as practicable after the Closing, and in no event later
than sixty (60) days following the Closing Date, Seller shall deliver
to Buyer, in accordance with the provisions of this Agreement and with
generally accepted accounting principles, a statement ("Final
Settlement Statement") setting forth each adjustment under this
Agreement which was not determined as of the Closing. Within sixty
(60) days after Buyer's receiving the Final Settlement Statement, the
Parties shall agree upon the adjustments and payments stated in such
Final Settlement Statement, and the net of such adjustments and
payments shall be paid in cash to the appropriate Party by the other
Party within five (5) days following agreement as to the Final
Settlement Statement. If the Parties fail to reach agreement as to
all adjustment within said sixty (60) day period, the net amount of
all undisputed adjustments shall be paid and any remaining disputed
items shall be submitted for determination by a nationally recognized
firm of public accountants selected by the parties, whose decision
shall be final and binding. The parties shall share equally the costs
of such determination.
17. ASSUMPTION AND INDEMNIFICATION. UPON DELIVERY TO AND
18
ACCEPTANCE BY BUYER OF THE ASSIGNMENT AND BILL OF SALE, BUYER SHALL BE DEEMED
TO HAVE ASSUMED, TO PAY AND PERFORM TIMELY, ALL DUTIES, EXPENSES,
OBLIGATIONS, LOSSES, HAZARDS AND LIABILITIES RELATING TO THE OWNERSHIP OR
OPERATION OF THE PROPERTIES ARISING ON AND AFTER THE EFFECTIVE DATE
(INCLUDING, WITHOUT LIMITATION, THOSE ARISING UNDER OR BY VIRTUE OF ANY
LEASE, CONTRACT, AGREEMENTS, DOCUMENT, PERMIT OR RULE, OR DELAY IN OBTAINING
APPROVAL OF FEDERAL OR STATE ASSIGNMENTS); AND, TO RELEASE, INDEMNIFY,
DEFEND, AND HOLD HARMLESS THE SELLER GROUP FROM AND AGAINST ANY AND ALL
CLAIMS, ACTIONS, LIABILITIES, LOSSES, DAMAGES, COSTS, OR EXPENSES (INCLUDING
COURT COSTS AND ATTORNEYS' FEES) OF ANY KIND OR CHARACTER ARISING OUT OF OR
OTHERWISE RELATING TO THE OWNERSHIP OR OPERATION OF THE PROPERTIES ON AND
AFTER THE EFFECTIVE DATE. IN CONNECTION WITH (BUT NOT IN LIMITATION OF) THE
FOREGOING, IT IS SPECIFICALLY UNDERSTOOD AND AGREED THAT MATTERS ARISING OUT
OF OR OTHERWISE RELATING TO THE OWNERSHIP OR OPERATION OF THE PROPERTIES ON
AND AFTER THE EFFECTIVE DATE SHALL BE DEEMED TO INCLUDE ALL MATTERS ARISING
OUT OF THE STATUS AND THE CONDITION OF THE PROPERTIES ON THE EFFECTIVE DATE
INCLUDING, WITHOUT LIMITATION, ALL OBLIGATIONS TO PROPERLY PLUG AND ABANDON
WELLS LOCATED ON THE PROPERTIES, TO RESTORE THE SURFACE OF THE PROPERTIES TO
AS NEAR ITS ORIGINAL CONDITION AS PRACTICABLE AND TO COMPLY WITH, OR BRING
THE PROPERTIES INTO COMPLIANCE WITH, APPLICABLE ENVIRONMENTAL LAWS AND
REGULATIONS, INCLUDING ALL LIABILITY AND EXPENSE FOR ANY RESTORATION,
REMEDIATION, CLEAN-UP, DISPOSAL OF WASTE, OR REMOVAL THAT MAY BE INCURRED AS
A RESULT OF THE EXISTENCE OR DISCOVERY OF NATURALLY OCCURRING RADIOACTIVE
MATERIALS, OR OTHER HAZARDOUS OR DELETERIOUS SUBSTANCES IN, ON, UNDER OR
ASSOCIATED WITH THE PROPERTIES, REGARDLESS OF WHEN THE EVENTS OCCURRED THAT
GIVE RISE TO SUCH CONDITION, AND THE ABOVE PROVIDED FOR ASSUMPTIONS AND
INDEMNIFICATIONS BY BUYER SHALL EXPRESSLY COVER AND INCLUDE SUCH MATTERS. THE
FOREGOING ASSUMPTIONS AND INDEMNIFICATIONS SHALL APPLY WHETHER OR NOT SUCH
DUTIES, OBLIGATIONS, OR LIABILITIES, OR SUCH CLAIMS, ACTIONS, CAUSES OF
ACTION, LIABILITIES, DAMAGES, LOSSES, COSTS, OR EXPENSES ARISE OUT OF (i)
NEGLIGENCE (INCLUDING SOLE NEGLIGENCE, SIMPLE NEGLIGENCE, CONCURRENT
NEGLIGENCE, ACTIVE OR PASSIVE NEGLIGENCE, OR OTHERWISE, BUT EXPRESSLY NOT
INCLUDING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) OF SELLER GROUP OR ANY
OTHER INDEMNIFIED PARTY, OR (ii) STRICT LIABILITY.
18. ENVIRONMENTAL ASSESSMENT AND INDEMNIFICATION BY BUYER. BUYER
EXPRESSLY ACKNOWLEDGES THAT IT HAS MADE AN ENVIRONMENTAL ASSESSMENT OF THE
PROPERTIES, OR WILL BE GIVEN THE OPPORTUNITY TO DO SO SUBJECT TO THE TERMS OF
THIS AGREEMENT. BUYER HEREBY AGREES TO ASSUME THE RISKS THAT THE PROPERTIES
MAY CONTAIN WASTE MATERIALS OR HAZARDOUS SUBSTANCES, AND THAT ADVERSE
PHYSICAL CONDITIONS, INCLUDING BUT NOT LIMITED TO THE PRESENCE OF WASTE
MATERIALS OR HAZARDOUS SUBSTANCES OR THE PRESENCE OF UNKNOWN ABANDONED OIL
AND GAS WELLS, WATER WELLS, SUMPS AND PIPELINES, MAY EXIST IN, ON, OR UNDER
THE PROPERTIES AS OF THE EFFECTIVE DATE, ALL RESPONSIBILITY AND LIABILITY
RELATED TO ALL SUCH CONDITIONS, WHETHER KNOWN OR UNKNOWN, WILL BE TRANSFERRED
FROM SELLER TO BUYER. BUYER ASSUMES FULL RESPONSIBILITY FOR, AND AGREES TO
INDEMNIFY, HOLD HARMLESS AND DEFEND SELLER FROM AND AGAINST ALL LOSS,
LIABILITY, CLAIMS, FINES, EXPENSES, COSTS (INCLUDING ATTORNEYS' FEES AND
EXPENSES) AND CAUSES OF ACTION CAUSED BY OR ARISING OUT OF ANY FEDERAL, STATE
OR LOCAL LAWS, RULES, ORDERS AND REGULATIONS
19
APPLICABLE TO ANY NATURALLY OCCURRING RADIOACTIVE MATERIALS, WASTE MATERIAL
OR HAZARDOUS SUBSTANCES ON OR ASSOCIATED WITH THE PROPERTIES OR THE PRESENCE,
DISPOSAL, RELEASE OR THREATENED RELEASE OF ALL NATURALLY OCCURRING
RADIOACTIVE MATERIALS, WASTE MATERIAL OR HAZARDOUS SUBSTANCES FROM THE
PROPERTIES INTO THE ATMOSPHERE OR INTO OR UPON LAND OR ANY WATER COURSE OR
BODY OF WATER, INCLUDING GROUND WATER, WHETHER OR NOT ATTRIBUTABLE TO
SELLER'S ACTIVITIES OR THE ACTIVITIES OF THIRD PARTIES (REGARDLESS OF WHETHER
OR NOT SELLER WAS OR IS AWARE OF SUCH ACTIVITIES) PRIOR TO, DURING OR AFTER
THE PERIOD OF SELLER'S OWNERSHIP OF THE PROPERTIES. THIS INDEMNIFICATION AND
ASSUMPTION SHALL ALSO APPLY TO LIABILITY FOR VOLUNTARY ENVIRONMENTAL RESPONSE
ACTIONS UNDERTAKEN PURSUANT TO THE COMPREHENSIVE ENVIRONMENTAL RESPONSE
COMPENSATION AND LIABILITY ACT (CERCLA) OR ANY OTHER FEDERAL, STATE OR LOCAL
LAW.
19. DISCLAIMER OF WARRANTIES. THE PROPERTIES SHALL BE CONVEYED
PURSUANT HERETO WITHOUT ANY WARRANTY OR REPRESENTATION WHATSOEVER, WHETHER
EXPRESS, IMPLIED OR STATUTORY AS TO, DESCRIPTION, QUANTITY, QUALITY, FITNESS
FOR A PARTICULAR PURPOSE, CONFORMITY TO THE MODELS OR SAMPLES OF MATERIALS,
OR MERCHANTABILITY OF ANY EQUIPMENT OR ITS FITNESS FOR ANY PURPOSE, OR
OTHERWISE. BUYER SHALL HAVE INSPECTED, OR WAIVED (AND AS OF THE DEFECT NOTICE
DATE SHALL BE DEEMED TO HAVE WAIVED) ITS RIGHT TO INSPECT, THE PROPERTIES FOR
ALL PURPOSES AND SATISFIED ITSELF AS TO THEIR PHYSICAL AND ENVIRONMENTAL
CONDITION, BOTH SURFACE AND SUBSURFACE, INCLUDING, BUT NOT LIMITED TO,
CONDITIONS SPECIFICALLY RELATED TO THE PRESENCE, RELEASE, OR DISPOSAL OF
HAZARDOUS SUBSTANCES, SOLID WASTES, ASBESTOS, OR OTHER MANMADE FIBERS OR
NATURALLY OCCURRING RADIOACTIVE MATERIALS ("NORM") IN, ON, OR UNDER THE
PROPERTIES. BUYER IS RELYING SOLELY UPON ITS OWN INSPECTION OF THE
PROPERTIES, AND BUYER SHALL, EXCEPT AS PROVIDED OTHERWISE HEREIN, ACCEPT ALL
OF THE SAME "AS IS, WHERE IS". WITHOUT LIMITATION OF THE FOREGOING, SELLER
MAKES NO WARRANTY OR REPRESENTATION, EXPRESS, IMPLIED, STATUTORY, OR
OTHERWISE, AS TO THE ACCURACY OR COMPLETENESS OF ANY DATA, REPORTS, RECORDS,
PROJECTIONS, INFORMATION, OR MATERIALS NOW, HERETOFORE, OR HEREAFTER
FURNISHED OR MADE AVAILABLE TO BUYER IN CONNECTION WITH THIS AGREEMENT,
INCLUDING, WITHOUT LIMITATION, PRICING ASSUMPTIONS OR QUALITY OR QUANTITY OF
HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE TO THE PROPERTIES OR THE ABILITY
OR POTENTIAL OF THE PROPERTIES TO PRODUCE HYDROCARBONS OR THE ENVIRONMENTAL
CONDITION OF THE PROPERTIES OR ANY OTHER MATTERS CONTAINED IN THE
PROPRIETARY DATA OR ANY OTHER MATERIALS FURNISHED OR MADE AVAILABLE TO BUYER
BY SELLER OR BY SELLER'S AGENTS OR REPRESENTATIVES. ANY AND ALL SUCH DATA,
RECORDS, REPORTS, PROJECTIONS, INFORMATION, AND OTHER MATERIALS (WRITTEN OR
ORAL) FURNISHED BY SELLER OR OTHERWISE MADE AVAILABLE OR DISCLOSED TO BUYER
ARE PROVIDED TO BUYER AS A CONVENIENCE AND SHALL NOT CREATE NOR GIVE RISE TO
ANY LIABILITY OF OR AGAINST SELLER, AND ANY RELIANCE ON OR USE OF THE SAME
SHALL BE AT BUYER'S SOLE RISK TO THE MAXIMUM EXTENT PERMITTED BY LAW.
20. BUYER'S COVENANT NOT TO SUE SELLER GROUP. Except to enforce the
provisions of this Agreement or the responsibilities and liabilities of
Seller for claims, costs and expenses with respect to the Properties prior to
the Effective Date according to Section 17., Buyer covenants not to sue
Seller Group with regard to any claim or liability relating to the
Properties, or this transaction, regardless of when or how the claim or
liability arose or arises or whether the claim or liability was
20
foreseeable or unforeseeable. BUYER'S COVENANT NOT TO SUE SELLER GROUP
INCLUDES CLAIMS AND LIABILITIES RESULTING IN ANY WAY FROM THE NEGLIGENCE OR
STRICT LIABILITY OF SELLER GROUP, WHETHER THE NEGLIGENCE OR STRICT LIABILITY
IS ACTIVE, PASSIVE, JOINT, CONCURRENT OR SOLE.
21. COMMISSIONS. Seller agrees to indemnify and hold harmless Buyer,
its parent and subsidiary companies and other affiliates, and their
directors, officers, employees, and agents from and against any and all
claims, obligations, actions, liabilities, losses, damages, costs, or
expenses (including court costs and attorneys' fees) of any kind or character
arising out of or resulting from any agreement, arrangement, or understanding
by, or on behalf of, Seller with any broker or finder in connection with this
Agreement or the transaction contemplated hereby. Buyer agrees to indemnify
and hold harmless Seller Group from and against any and all claims,
obligations, actions, liabilities, losses, damages, costs, or expenses
(including court costs and attorneys' fees) of any kind or character arising
out of or resulting from any agreement, arrangement, or understanding by, or
on behalf of, Buyer with any broker or finder in connection with this
Agreement or the transaction contemplated hereby.
22. CASUALTY LOSS. If the Properties are damaged by fire or other
casualty prior to the Closing, this Agreement shall remain in full force and
effect, and (unless Buyer and Seller shall otherwise agree) in such event as
to each such damaged Property that Seller, in its sole discretion, elects not
to repair, Buyer either may treat such Property as if it had an Asserted
Defect or elect not to adjust the Purchase Price therefor. If Buyer elects
hereunder to treat the damaged Property as if it had an Asserted Defect, the
procedure provided for in Section 11. shall apply to such Property, and all
rights to insurance proceeds and claims against third parties related thereto
shall belong to Seller. If Buyer elects hereunder not to adjust the Purchase
Price for such damaged Property, and if Seller is entitled to any claims
under an insurance policy with respect to such damage, Seller shall either
collect and pay over, or assign, such insurance claims to Buyer. Buyer shall
then take title to such Property without reduction of the Purchase Price. If
Seller elects to repair a damaged Property, all rights to insurance proceeds
and claims against third parties related thereto shall belong to Seller.
23. NOTICES. All notices and other communications required or
permitted under this Agreement shall be in writing, unless otherwise
specifically provided herein, and shall be delivered by recognized commercial
courier or delivery service (which provides a receipt), by facsimile (with
receipt acknowledged), or by registered or certified mail (postage prepaid),
at the following addresses:
If to Buyer: Continental Resources, Inc.
P.O. Box 1032
Enid, Oklahoma 73702
Attn: Land Manager
Fax No. (405) 548-5182
If to Seller: Bass Enterprises Production Co.
210 Main Street
Fort Worth, Texas 76102
Attn: W. Frank McCreight
Fax No. (817) 390-8893
All such notices and communications shall be considered delivered on the date
of receipt. Buyer or Seller may specify as its proper address any other
address within the continental United States by giving notice to the other
party, in the manner provided in this Section.
24. SURVIVAL OF PROVISIONS. All representations, warranties, and
indemnifications made herein, except as to any warranty of title by Seller,
shall survive the Closing and the delivery of the Assignment and Bill of
Sale. All obligations hereunder not satisfied at Closing shall survive
Closing and delivery of the Assignment and Bill of Sale to the extent the
Parties intend for such
21
obligations to be satisfied after Closing. Buyer shall have until the Defect
Notice Date in which to satisfy itself as! to the quantity and quality of
Seller's title to the Properties.
25. MISCELLANEOUS MATTERS.
(a) FURTHER ASSURANCES. After the Closing, Seller and Buyer shall
execute and deliver, and shall otherwise cause to be executed and
delivered, from time to time, such further instruments, notices,
division orders, transfer orders, and other documents, and do such
other and further acts and things as may be reasonably necessary more
fully and effectively to grant, convey, and assign the Properties to
Buyer.
(b) ASSIGNABILITY. Except as provided below, neither party shall
have the right to assign its rights under this Agreement without the
prior written consent of the other party, and any such assignment in
violation of this provision shall be void.
(c) GAS BALANCES. Seller represents that there are no gas imbalances
or make-up obligations affecting or relating to any of the properties.
(d) WAIVER AND REPRESENTATION: TO THE EXTENT APPLICABLE TO THE
TRANSACTION CONTEMPLATED HEREBY, OR ANY PORTION THEREOF, BUYER WAIVES
THE PROVISIONS OF THE TEXAS DECEPTIVE TRADE PRACTICES ACT, CHAPTER 17,
SUBCHAPTER E, SECTIONS 17.41 THROUGH 17.63, INCLUSIVE (OTHER THAN
SECTION 17.555 WHICH IS NOT WAIVED), TEXAS BUSINESS AND COMMERCE CODE.
In connection with such waiver, Buyer hereby represents and warrants
to Seller that Buyer (a) is in the business of seeking or acquiring by
purchase or lease, goods or services for commercial or business use,
(b) has assets of Twenty Five Million Dollars ($25,000,000.00) or more
according to its most recent financial statement, (c) has knowledge
and experience in financial and business matters that enable it to
evaluate the merits and risks of the transaction contemplated hereby,
and (d) is not in a significantly disparate bargaining position.
(e) CONFIDENTIALITY AGREEMENT. Until Closing, any Confidentiality
Agreement executed by Buyer and Seller in connection with the
transaction contemplated hereby remains in full force and effect and
is not superseded or modified by this Agreement.
(f) PRIOR ENTIRE UNDERSTANDING/HEADINGS/GENDER. This Agreement
contains the entire understanding of the parties hereto with respect
to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations, and discussions among the parties with
respect to such subject matter, except as provided above with respect
to any Confidentiality Agreement. The headings contained in this
Agreement are for convenience only and shall not control or affect the
meaning or construction of any provision of this Agreement. Within
this Agreement, words of any gender shall be held and construed to
cover any other gender, and words in the singular shall be held and
construed to cover the plural, unless the context otherwise requires.
Time is of the essence in this Agreement.
(g) AMENDMENTS. This Agreement may be amended, modified,
supplemented, restated, or discharged (and provisions hereof may be
waived) only by an instrument executed by both Parties.
(h) ASSOCIATED EXPENSES. Each party shall bear and pay all expenses
it incurred and that are associated with the transaction contemplated
by this Agreement. Payment of recording fees, filing fees,
documentary stamp taxes, all sales taxes (if any, plus penalty and
interest) and any other fees and taxes imposed on the Properties on
and after the Effective Date, excluding Seller's income taxes, shall
be
22
paid by Buyer.
(i) SUCCESSORS AND ASSIGNS. This Agreement shall be binding on the
parties hereto and their respective heirs, successors,
representatives, and assigns.
(j) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of
which shall constitute one (1) and the same instrument. It shall not
be necessary for both parties to sign the same counterpart.
(k) ENFORCEABILITY. WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW, THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE AND BY THE LAWS OF
THE UNITED STATES OF AMERICA, EXCEPT THAT, TO THE EXTENT THE LAW OF A
STATE IN WHICH THE PROPERTIES ARE LOCATED NECESSARILY GOVERNS, THE LAW
OF SUCH STATE SHALL, TO SUCH EXTENT, APPLY TO THE PROPERTIES.
(l) PUBLICITY. Prior to Closing, Buyer shall not issue any publicity
or press release concerning this Agreement or the transaction
contemplated hereby without the prior written consent of Seller
unless, in the written opinion of legal counsel acceptable to Seller,
such disclosure is required by applicable law or other applicable
rules or regulations of any governmental authority or stock exchange
and such publicity or press release contains no more than the minimum
information necessary to comply therewith.
(m) USE OF SELLER'S NAME. Buyer agrees that, as soon as practicable
after the Closing, it shall remove or cause to be removed the names
and signs used by Seller, and all variations and derivatives thereof
and logos relating thereto from the Properties and shall not
thereafter make any use whatsoever of such names, signs, and logos.
After Closing and as to those Properties Buyer has taken over as
operator, Seller reserves the right of access to confirm that Buyer
has removed Seller's name, signs, and logos. If Seller is forced to
remove its name, signs, and logos because Buyer has failed to do so,
Seller shall charge its costs to Buyer and Buyer shall pay Seller's
invoice within fifteen (15) days of receipt.
(n) SEVERABILITY. If any term or provision of this Agreement is
determined to be invalid, illegal, or incapable of being enforced by
any rule of law or public policy, all other conditions and provisions
of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any material fashion to either
Buyer or Seller. Upon such determination that any term or other
provision is invalid, illegal, or incapable of being enforced, Buyer
and Seller shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the Parties as closely as possible
in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the extent possible.
(o) RESERVATION OF CLAIMS. Seller reserves all rights to claims,
demands, cause of action, and lawsuits concerning the Properties
against third parties that accrued before the Effective Date, whether
discovered before or after the Effective Date, excluding any rights or
claims associated with gas imbalances.
(p) DUTY TO DEFEND. Where a party ("indemnitor") has agreed to
indemnify, defend, and hold the other party ("indemnitee") harmless
under this Agreement the indemnitee, at its sole option if it is the
sole defendant, may elect to (a) manage its
23
own defense, in which event the indemnitor will reimburse the
indemnitee for all attorney's fees, court, and other costs
reasonably incurred in defending a claim, upon delivery to the
indemnitor of invoices for such expenses; or (b) allow the
indemnitor to be responsible for all aspects of defense. If both
parties are defendants in a claim, they shall reasonably endeavor
to arrange for joint defense to minimize defense costs, but
failure to reach such agreement shall in no event eliminate or
limit any indemnity obligations hereunder.
(q) EXHIBITS. All exhibits referenced herein and attached hereto are
by reference incorporated into this Agreement.
IN WITNESS WHEREOF, this Agreement is executed by the parties hereto on the
date set forth above, but effective as of the Effective Date.
SELLERS
BASS ENTERPRISES PRODUCTION CO.
By: /s/ W. FRANK MCCREIGHT
-----------------------------------
W. Frank McCreight
Vice President
PERRY R. BASS, INC.,
SID R. BASS, INC.,
LEE M. BASS, INC.,
KEYSTONE, INC.,
THRU LINE INC.
By: /s/ W. FRANK MCCREIGHT
-----------------------------------
W. Frank McCreight
Vice President of all named corporations
GOLIAD PARTNERS, L.P.
By its Managing Partners
PRB-GP, Inc.
LMB-GP, Inc.
WPH-GP, Inc.
By: /s/ W. FRANK MCCREIGHT
-----------------------------------
W. Frank McCreight
Vice President of all named corporations
THE BASS MANAGEMENT TRUST
By: /s/ PERRY R. BASS
-----------------------------------
Perry R. Bass, Trustee
SID R. BASS, MANAGEMENT TRUST
By: /s/ SID R. BASS
-----------------------------------
Sid R. Bass, Trustee
24
By: /s/ LEE M. BASS
-----------------------------------
Lee M. Bass
D W GENPAR, INC.
By: /s/ W. FRANK MCCREIGHT
-----------------------------------
W. Frank McCreight
Vice President
W D. PARTNERS, L. P.
By DW Genpar, Inc., General Partner
By: /s/ W. FRANK MCCREIGHT
-----------------------------------
W. Frank McCreight
Vice President
WPH-GP, INC.
By: /s/ W. FRANK MCCREIGHT
-----------------------------------
W. Frank McCreight
Vice President
WORLAND ASSOCIATES, Texas General Partnership
By: Sid R. Bass, Inc. Managing Partner
By: /s/ W. FRANK MCCREIGHT
-----------------------------------
W. Frank McCreight
Vice President
WORLAND ASSOCIATES II
By: Sid R. Bass, Inc. Managing Partner
By: /s/ W. FRANK MCCREIGHT
-----------------------------------
W. Frank McCreight
Vice President
BUYER
CONTINENTAL RESOURCES, INC.
By: /s/ HAROLD HAMM
-----------------------------------
Harold Hamm
President
25