EXHIBIT 10.1
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT dated this 1st day of October, 2002, is between Burlington
Resources Oil & Gas Company LP, a Delaware limited partnership, and The
Louisiana Land and Exploration Company, a Maryland corporation (collectively
"Seller"), with offices at 5051 Westheimer, Suite 1400, Houston, Texas
77056-2124, and Nance Petroleum Corporation, a Montana corporation ("Buyer"),
with offices at 550 N. 31st St., Suite 500, Billings, Montana 59101.
WHEREAS, Seller desires to sell, and Buyer desires to purchase, upon and subject
to the terms and conditions hereinafter set forth, all of Seller's right, title,
and interest in and to the following assets:
i. The oil and gas leases, leasehold interests, royalty interests, overriding
royalty interests, rights and interests attributable or allocable to the
oil and gas leases or leasehold interests by virtue of pooling,
unitization, communitization, and operating agreements, licenses, permits
and other agreements, and other properties and interests described on
Exhibit "A-1" (limited as to the interests, lands and depths indicated in
the Exhibit) attached hereto (collectively, the "Leases"), together with
Seller's right, title and interest in and to the property and rights
incident thereto, including, but not limited to, as of the Effective Time,
rights in, to, and under leases, permits, rights-of-way, easements,
licenses, farmouts, farmins, options, orders, and other contracts or
agreements of a similar nature in any way relating thereto;
ii. The undivided interests in and to all of the oil and gas wells, saltwater
disposal wells and injection wells (the "Wells") as set forth in Exhibit
"A-2" together with all hydrocarbons produced from the Wells and Leases on
and after the Effective Time and all of the equipment, materials, fixtures
and improvements on the Leases as of the Effective Time, appurtenant
thereto or used or obtained in connection with the Leases or with the
production, treatment, sale or disposal of hydrocarbons or waste produced
therefrom or attributable thereto, and other appurtenances thereunto
belonging (the "Equipment"); provided, however, Equipment shall not include
leased equipment located on the Leases;
iii. The unitization, pooling, communitization and operating agreements, and the
units created thereby which relate to the Leases or interests described in
Exhibit "A-1" or which relate to units or wells located on the Leases,
including the units formed under orders, regulations, rules, and other
official acts of the governmental authority having jurisdiction, together
with any right, title, and interest created thereby in the Leases;
iv. Gas purchase contracts, product purchase and sale agreements, gas gathering
agreements and gas processing agreements related to the Leases (to the
extent the same are assignable); and
v. Equipment leases and rental contracts related to the Leases (to the extent
the same are assignable).
Seller's interests in these assets are herein collectively referred to as the
"Interests"; provided, however, the Interests shall not include, and there is
excepted, reserved and excluded from this Agreement (x) the personal property
set forth in Exhibit "A-3" attached hereto, (y) the proprietary geophysical data
described in the Data License Agreement attached hereto as Exhibit "G", and (z)
all mineral fee interests owned by Seller (collectively the "Excluded
Interests").
NOW, THEREFORE, in consideration of the above recitals and of the covenants and
agreements herein contained, Seller and Buyer agree as follows:
1. Purchase and Sale. Subject to and upon all of the terms and conditions
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herein set forth, Seller shall sell, transfer, assign, convey, and deliver
the Interests to Buyer, and Buyer shall purchase, receive, pay for, and
accept the Interests from Seller, effective July 1, 2002, 7 a.m. local time
at the Leases (the "Effective Time").
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2. Purchase Price and Performance Deposit.
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(a) The purchase price for the Interests shall be SEVENTY-SIX MILLION
THREE HUNDRED FIFTY THOUSAND DOLLARS ($76,350,000) (the "Base Purchase
Price"), subject to any applicable purchase price adjustment as
provided for herein.
(b) Buyer shall, upon execution of this Agreement, deliver to Seller a
performance deposit of SEVEN MILLION SIX HUNDRED THIRTY-FIVE THOUSAND
DOLLARS ($7,635,000) (the "Performance Deposit") to assure Buyer's
performance hereunder. At Closing, the Performance Deposit shall be a
Buyer's credit against the Base Purchase Price. If this Agreement is
terminated without a Closing, then the Performance Deposit shall be
governed by the provisions of Section 26 hereof.
(c) Seller and Buyer agree that the Base Purchase Price shall be allocated
among the Interests (including the specifically described
non-producing intervals and undeveloped locations) as set forth on
Exhibit "B" for the purpose of (i) establishing a basis for certain
taxes, (ii) giving notices of value to the owners of any preferential
rights to purchase the Interests, and (iii) determining the value of a
Title Defect or an Environmental Defect (in accordance with Section 13
(c) below) and handling those instances in which the Base Purchase
Price is to be adjusted.
3. Title Defects. As used herein, the term:
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(a) "Defensible Title" shall mean, as to the Interests (including the
specific non-producing intervals and undeveloped locations identified
in Exhibit "B"), such title held by Seller, that, subject to and
except for Permitted Encumbrances (as hereinafter defined):
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(i) Entitles Seller to receive not less than the "Net Revenue
Interest" as set forth in Exhibit "B" of all oil, gas, and
associated liquid and gaseous hydrocarbons produced, saved, and
marketed from the Interests (including the non-producing
intervals and undeveloped locations specifically identified in
Exhibit "B");
(ii) Obligates Seller to bear costs and expenses relating to the
maintenance, development, and operation of all wells located on
the Interests (including the non-producing intervals and
undeveloped locations specifically identified in Exhibit "B") in
an amount not greater than the "Working Interest" set forth in
Exhibit "B"; and
(iii)Is free and clear of any and all encumbrances, charges and liens.
(b) "Permitted Encumbrances" shall mean:
(i) Lessor's royalties, overriding royalties, production payments,
and reversionary interests if the net cumulative effect of such
burdens does not operate to reduce the Net Revenue Interest of
any Interest (including non-producing interval or undeveloped
locations specifically identified in Exhibit "B") to less than
the Net Revenue Interest set forth in Exhibit "B";
(ii) Sales contracts covering oil, gas or associated liquid or gaseous
hydrocarbons provided such do not violate the representations of
Seller;
(iii)Preferential rights to purchase and required third party consents
to assignments and similar agreements with respect to which (i)
waivers or consents are obtained from the appropriate parties, or
(ii) required notices have been given to the holders of such
rights and the appropriate time period for asserting such rights
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has expired without an exercise of such rights;
(iv) Liens for taxes or assessments not due or not delinquent on the
Closing Date;
(v) All rights to consent by, required notices to, filings with, or
other actions by governmental agencies in connection with the
sale or conveyance of oil and gas leases or interests therein or
sale of production therefrom if the same are customarily obtained
subsequent to such sale or conveyance;
(vi) Easements, rights-of-way, servitudes, permits, surface leases,
and other rights in respect of surface operations on or over any
of the Interests which do not operate to interfere with current
operations on the Interests;
(vii)Liens of operators relating to obligations not yet due or
pursuant to which Seller is not in default, and materialmen's,
mechanics', repairmen's, or other similar liens or charges
arising in the ordinary course of business incidental to
construction, maintenance or operation of the Interests that are
not such as to interfere with the operation, value or use of the
Interests; and
(viii) Any Title Defects waived by Buyer pursuant to the terms of this
Agreement.
(c) The Interests shall be deemed to have a "Title Defect" if Seller has
less than Defensible Title to the Interests (including the
non-producing intervals or undeveloped locations specifically
identified in Exhibit "B").
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4. Purchase Price Adjustments for Title Defects. For purposes of this Section
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4, the term Interests or Interest shall also include any non-producing
interval or undeveloped location specifically identified in Exhibit "B".
(a) Buyer may, by delivery of written notice to Seller of the existence of
an alleged Title Defect, request reduction of the purchase price for
the Interest affected. The Title Defect notice shall clearly indicate
the nature of the Title Defect, the Interest to which it relates, an
explanation of the Title Defect including the supporting legal
theories, the allocated value of the Interest as to which all or some
portion of which is affected by the Title Defect, and the amount by
which Buyer believes the value of the affected Interest has been
reduced because of the Title Defect, with the computation and
information upon which Buyer's belief is based. In determining whether
a portion of an Interest contains a Title Defect, it is the intent of
the parties to include, when possible, only that portion of such
Interest materially and adversely affected. If the value properly
allocated to a Title Defect cannot be determined directly from Exhibit
"B" because the Title Defect is included within, but does not totally
comprise, the Interest to which the allocated value relates, Buyer and
Seller shall attempt, where feasible, to proportionately reduce the
allocated value in Exhibit "B".
(b) The Title Defect notice by Buyer shall be delivered to Seller on or
before November 18, 2002. In the event any such notice is not timely
delivered, all Title Defects shall be deemed waived for all purposes
and Buyer shall thereafter have no right to claim Title Defects; and
in the event the Title Defect notice is timely delivered, all Title
Defects not claimed in such notice shall be deemed waived for all
purposes. Seller shall have the right, but not the obligation, to
attempt to cure any alleged Title Defect prior to Closing. In the
event Seller is unable or unwilling to cure an alleged Title Defect,
Buyer and Seller shall meet and use their reasonable efforts to agree
on the validity of the claim of Title Defect and the amount of any
required purchase price adjustment. In evaluating the significance of
a fact, circumstance or condition for purposes of determining an
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alleged Title Defect, due consideration shall be given to the length
of time that the particular Lease has been producing hydrocarbon
substances and whether such fact, circumstance or condition is of the
type expected to be encountered in the area involved, and is usual and
customarily acceptable to reasonable and prudent persons engaged in
the business of the ownership, development, and operation of oil and
gas properties with knowledge of all of the facts and appreciation of
their legal significance.
(c) In the event the parties cannot mutually agree on a purchase price
adjustment for an alleged Title Defect, Buyer shall have the right to
(i) proceed to Closing and accept the Interest with the alleged Title
Defect with no purchase price adjustment, or (ii) terminate this
Agreement as to the Interest affected by the alleged Title Defect and
receive a purchase price adjustment for such Interest as set forth in
Exhibit "B", or, where feasible, the proportionate allocated value.
(d) There shall be no purchase price adjustment for Title Defects unless
the aggregate total of all purchase price adjustments for Title
Defects exceeds THREE HUNDRED EIGHTY THOUSAND DOLLARS ($380,000)
(which amount is a threshold, not a deductible).
(e) In the event that Buyer shall determine that Seller's net revenue
interests in the Interests are greater than the Net Revenue Interests
set forth on Exhibit "B", Buyer shall notify Seller and Seller shall
be entitled to a mutually agreeable purchase price adjustment;
provided however, there shall be no purchase price adjustment related
to such increase unless the aggregate total of all purchase price
adjustments for the increases to Seller's increased Net Revenue
Interests in the Interests exceeds THREE HUNDRED EIGHTY THOUSAND
DOLLARS ($380,000) (which amount is a threshold, not a deductible).
Any increase to the Base Purchase Price provided for by this Section
4(e) shall be determined independently of any decrease to the Base
Purchase Price due to any Title Defect, and such amounts shall not be
netted one against the other.
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5. Conditions of Closing by Seller. The obligation of Seller to close is
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subject to the satisfaction of the following conditions:
(a) The representations of Buyer contained in Section 8 hereof are true in
all material respects on and as of the Closing Date;
(b) Buyer shall have delivered to Seller a legal opinion rendered by
Buyer's counsel to the effect that (i) Buyer is a corporation validly
existing and in good standing under the laws of the State of Montana
and has all requisite power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby; (ii)
the execution and delivery of, and consummation of the transactions
contemplated by, this Agreement by Buyer have been duly authorized by
all necessary action on the part of the Buyer; and (iii) this
Agreement has been duly executed and delivered by Buyer and
constitutes a legal, valid and binding obligation of Buyer and is
enforceable against Buyer in accordance with its terms, except that
such enforcement may be subject to bankruptcy, insolvency, moratorium
or similar laws affecting creditors' rights; and
(c) Adjustments to the purchase price in accordance with the provisions of
Sections 4, 13 and 15(b) or (d) hereof shall not have exceeded ELEVEN
MILLION FIVE HUNDRED THOUSAND DOLLARS ($11,500,000).
6. Conditions of Closing by Buyer. The obligation of Buyer to close is subject
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to the satisfaction of the following conditions:
(a) The representations of Seller contained in Section 7 shall be true in
all material respects on and as of the Closing Date;
(b) Buyer and Seller shall have adjusted the Base Purchase Price in
accordance with the provisions of Sections 4, 13 and 15 hereof and
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such adjustments shall not have exceeded ELEVEN MILLION FIVE HUNDRED
THOUSAND DOLLARS ($11,500,000); and
(c) Seller shall have delivered to Buyer a legal opinion rendered by
Seller's corporate counsel to the effect that (i) Burlington Resources
Oil & Gas Company LP is a limited partnership validly existing and
in good standing under the laws of the State of Delaware and The
Louisiana Land and Exploration Company is a corporation validly
existing and in good standing under the laws of the State of Maryland,
and each has all requisite power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby;
(ii) the execution and delivery of, and consummation of the
transactions contemplated by, this Agreement by Seller have been duly
authorized by all necessary action on the part of Seller; and (iii)
this Agreement has been duly executed and delivered by Seller and
constitutes a legal, valid and binding obligation of Seller and is
enforceable against Seller in accordance with its terms, except that
such enforcement may be subject to bankruptcy, insolvency, moratorium
or similar laws affecting creditors' rights.
7. Representations of Seller. Seller represents to Buyer that:
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(a) Burlington Resources Oil & Gas Company LP is a limited partnership
validly existing and in good standing under the laws of the State of
Delaware and The Louisiana Land and Exploration Company is a
corporation validly existing and in good standing under the laws of
the State of Maryland, and each is duly qualified to own its
properties and assets and to carry on its business as now being
conducted;
(b) Seller has the requisite power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby,
and the execution and delivery of this Agreement by Seller and the
consummation of the transactions contemplated hereby have been duly
authorized;
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(c) This Agreement has been duly executed and delivered by Seller and
constitutes the valid and binding obligation of Seller, enforceable
against it in accordance with the terms hereof, subject to the effects
of bankruptcy, insolvency, reorganization, moratorium, and similar
laws affecting creditors' rights, and no other act, approval or
proceeding on the part of Seller or any other party is required to
authorize the execution and delivery of this Agreement by Seller or
the consummation of the transactions contemplated hereby;
(d) This Agreement, and the execution and delivery hereof by Seller, does
not and the consummation of the transactions contemplated hereby will
not (i) conflict with or result in a breach of the charter or bylaws
of Seller or any other governing documents of Seller, (ii) violate, or
conflict with, or constitute a default under, or result in the
creation or imposition of any security interest, lien or encumbrance
upon any property or assets of Seller under any mortgage, indenture or
agreement to which it is a party or by which the Interests are bound,
which violation, conflict or default might adversely affect the
ability of Seller to perform its obligation under this Agreement, or
(iii) violate any statute or law or any judgment, decree, order, writ,
injunction, regulation or rule of any court or governmental authority,
which violation might adversely affect the ability of Seller to
perform its obligations under this Agreement;
(e) Seller has incurred no liability, contingent or otherwise, for
brokers' or finders' fees relating to the transactions contemplated by
this Agreement for which Buyer shall have any responsibility
whatsoever;
(f) Seller is not a "foreign person" as defined in Section 1445 of the
Internal Revenue Code of 1986 and in any regulations promulgated
thereunder;
(g) Except as set forth on Exhibit "E" attached hereto, to the best of
Seller's knowledge, there are no claims, actions, suits or proceedings
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(including condemnation or similar proceedings) filed or threatened
against the Interests or any portion thereof that would have a
material adverse affect on the value or operation of the Interests;
(h) None of the Interests are encumbered by take-or-pay or other similar
arrangements with purchasers of oil or gas whereby Seller is obligated
(i) to deliver production without receiving payment therefor, or (ii)
to repay monies received for production paid for but not taken, and
except as set forth in Exhibit "F" and except those that would not
have a material effect on the value of the Interests, there are no
production sales agreements currently in effect that cannot be
terminated with sixty days prior written notice and there are no calls
on production affecting the Interests;
(i) To the best of Seller's knowledge, neither Seller, nor the Operator of
those Interests operated by third parties, have violated any laws,
statutes, regulations or orders applicable to any of the Interests or
the operation thereof which violation (i) would have a material
adverse affect on the value or operation of the affected Interests or
(ii) has not been remedied;
(j) To the best of Seller's knowledge, Seller has all material
governmental licenses and permits and has properly made all material
filings, necessary or appropriate to obtain those licenses and permits
to own and operate the Interests, and such licenses, permits and
filings are in full force and effect, and no material violations exist
in respect of any such licenses, permits or filings, no proceeding is
pending or to the best of Seller's knowledge is threatened looking
toward the challenging, revocation or limitation of any such licenses,
permits or filings;
(k) To the best of Seller's knowledge, (i) the material terms of all
Leases, operating agreements, production sales contracts, farmout
agreements and other material contracts or agreements respecting the
Interests can be found either of record in the counties in which the
Interests are located or are reflected or referenced in Seller's
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files, and (ii) these agreements are currently in full force and
effect in accordance with their applicable terms;
(l) To the best of Seller's knowledge, Seller has received no notice of
termination of any of the Leases;
(m) To the best of Seller's knowledge, information, and belief, there are
no surface use or access agreements currently in force and effect that
would materially and adversely alter the existing oil and gas
operations of Seller on the Leases;
(n) To best of Seller's knowledge, there are no pending AFE's or written
proposals for plugging and abandoning any of the Wells; and
(o) All ad valorem, property, production, severance and similar taxes and
assessments based on or measured by the ownership of property or the
production of hydrocarbons or the receipt of proceeds therefrom with
respect to the Interests for all periods prior to the Effective Time
have been properly paid.
In those instances where Seller's representations are made on the basis of
"the best of Seller's knowledge", such representations are made by Seller
on the basis of the actual knowledge of Seller's personnel at or above the
supervisory level, without any investigation.
8. Representations of Buyer. Buyer represents to Seller that:
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(a) Buyer is a corporation validly existing and in good standing underthe
laws of the State of Montana and is duly qualified to own its
properties and assets and to carry on its business as now being
conducted;
(b) Buyer has the requisite power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Buyer and the
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consummation of the transactions contemplated hereby have been duly
authorized;
(c) This Agreement has been duly executed and delivered by Buyer and
constitutes the valid and binding obligation of Buyer, enforceable
against it in accordance with the terms hereof, subject to the effects
of bankruptcy, insolvency, reorganization, moratorium, and similar
laws affecting creditors' rights. No other act, approval or proceeding
on the part of Buyer or any other party is required to authorize the
execution and delivery of this Agreement by Buyer or the consummation
of the transactions contemplated hereby;
(d) This Agreement, and the execution and delivery hereof by Buyer, does
not and the consummation of the transactions contemplated hereby will
not (i) conflict with or result in a breach of the charter or bylaws
of Buyer or any other governing documents of Buyer, or (ii) violate
any statute or law or any judgment, decree, order, writ, injunction,
regulation or rule of any court or governmental authority, which
violation might adversely affect the ability of Buyer to perform its
obligations under this Agreement;
(e) Buyer possesses all required governmental licenses, permits, bonds,
certificates, orders, and authorizations necessary to own or operate
the Interests;
(f) Buyer has, and will have on the Closing Date and thereafter,
sufficient cash to enable it to make payment in immediately available
funds of the purchase price when due and any other amounts to be paid
by it hereunder;
(g) Buyer is an experienced and knowledgeable investor in the oil and gas
business. Buyer is not acquiring the Interests in connection with a
distribution or resale thereof in violation of federal or state
securities laws and the rules and regulations thereunder; and
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(h) Buyer has incurred no liability, contingent or otherwise, for brokers'
or finders' fees relating to the transactions contemplated by this
Agreement for which Seller shall have any responsibility whatsoever.
9. Claims.
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(a) "Claims" shall mean any and all breaches of the representation in
Section 7 (i), claims, losses, damages, costs, expenses, diminutions
in value, suits, causes of action or judgments of any kind or
character and whether asserted or unasserted by a third party with
respect to any and all liabilities and obligations or alleged or
threatened liabilities and obligations, including, but not limited to,
any interest, penalty, and any attorneys' fees and other costs
(including costs of remediation) and expenses incurred in connection
with investigating or defending any claims or actions, whether or not
resulting in any liability.
(b) "Environmental Law" shall mean any statute, rule, regulation or order
of any governmental agency having jurisdiction over the Interests or
Seller pertaining to health, safety or the environment in effect on
the Effective Time.
(c) An "Environmental Defect" shall mean a Claim (i) attributable to or
arising out of a violation of (i) any Environmental Law applicable to
conditions existing prior to November 18, 2002 (ii) that is known by
or made known to Buyer prior to November 18, 2002, and (iii) to which
prompt remedial or corrective action reasonably estimated to entail
expenditures in excess of TWENTY-FIVE THOUSAND DOLLARS ($25,000)
either is required or would be undertaken by a prudent operator of oil
and gas properties. For the sole purpose of determining if an
Environmental Defect exceeds TWENTY-FIVE THOUSAND DOLLARS ($25,000),
all Claims (whether single or multiple) relating to the violation of
any Environmental Laws with respect to the same individual site or
facility shall be considered a single Environmental Defect.
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(d) An "Environmental Claim" shall mean a Claim applicable to conditions
existing prior to the Closing Date and attributable to or arising out
of a violation of any Environmental Law that is (x) made known to
Buyer after November 18, 2002 and (y) to which prompt remedial or
corrective action reasonably estimated to entail expenditures in
excess of TWENTY-FIVE THOUSAND DOLLARS ($25,000) either is required or
would be undertaken by a prudent operator of oil and gas properties.
For the sole purpose of determining if an Environmental Claim exceeds
TWENTY-FIVE THOUSAND DOLLARS ($25,000), all Claims (whether single or
multiple) relating to the violation of any Environmental Laws with
respect to the same individual site or facility shall be considered a
single Environmental Claim.
10. Indemnities of Seller.
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(a) Seller shall, to the fullest extent permitted by law, protect, defend,
indemnify, and hold Buyer and its affiliates, including its directors,
officers, employees, agents, and representatives of each of them,
harmless from and against any and all Claims attributable to or
arising out of (i) any act or omission by Seller involving or related
to the Interests occurring before the Effective Time, except as
limited in (x), (y) and (z) below, (ii) the matters set forth on
Exhibit "E" hereto, and (iii) the breach by Seller of the
representations contained in Section 7 hereof; provided, however, this
indemnity is limited and shall not cover or include (x) matters
pertaining to title to the Interests, all of which will be governed by
Section 4 hereof, (y) any Claims with respect to any and all gas
balancing liabilities and obligations or alleged or threatened
liabilities and obligations, all of which will be governed by Section
14 hereof, or (z) any Claims with respect to any violation of
Environmental Laws (regardless of the dollar amount in issue) waived
pursuant to Section 13 hereof or by agreement.
(b) After Closing, any assertion by Buyer that Seller is liable under the
terms of the indemnities provided by Section 10(a)(i) or 10(a)(iii)
must be made by Buyer in writing and must be given to Seller on or
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prior to May 31, 2003, except that such time limitation shall not be
applicable to any financial obligation of Seller created by operation
of either the Leases or any contract or other agreement relating to
the Interests and accruing prior to the Effective Time, which
obligation shall remain the responsibility of Seller. Any notice to
Seller shall state the facts known to Buyer that give rise to such
notice in sufficient detail to allow Seller to evaluate the assertion.
All claims by Buyer for a breach of any of Seller's representations in
Section 7 shall be asserted by Buyer under Section 10(a)(iii).
(c) If a Claim arises for which Buyer intends to seek indemnity with
respect thereto under Section 10(a)(i) or 10(a)(iii), Buyer shall
notify Seller of such Claim within thirty (30) days after the date on
which Buyer becomes aware of such Claim. Seller shall have thirty (30)
days after receipt of such notice to undertake, conduct and control,
through counsel of its own choosing and at its own expense, the
settlement or defense thereof, and Buyer shall cooperate with Seller
in connection therewith. So long as Seller has undertaken the defense
of, and responsibility for, any such Claim and is reasonably
contesting any such Claim in good faith, by appropriate proceedings
(including the filing or posting of appeal bonds, supersedeas bonds
and similar bonds), Buyer shall not pay or settle any such Claim.
Buyer shall have the right to pay or settle any such Claim, provided
that in such event it shall waive any right to indemnity by Seller for
such Claim. If Seller does not notify Buyer within thirty (30) days
after the receipt of Buyer's notice of a claim of indemnity hereunder
that it elects to undertake the defense thereof, then Buyer shall have
the right to contest, settle or compromise the Claim, but shall not
thereby waive any right to indemnity therefor pursuant to this Section
10.
(d) In the event of any notice of a Claim which is an Environmental Claim
given by Buyer to Seller pursuant to this Section 10, Seller's total
liability hereunder for any and all such Environmental Claims shall be
limited to SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($7,500,000).
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11. Assumption of Obligations and Indemnities of Buyer.
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(a) At Closing and subject to Seller's indemnity obligations contained in
Section 10 hereof, Buyer agrees to assume and perform any and all of
the liabilities and obligations or alleged or threatened liabilities
and obligations of Seller that arise under the Interests and all
assignments, operating agreements, leases, permits, deeds,
rights-of-way, licenses, easements, options, orders, gas purchase
contracts, product purchase and sale agreements, gas gathering
agreements, gas processing agreements, or any other agreements or
contracts attributable to, affecting, or otherwise relating to the
Interests, including, but not limited to, any and all liabilities and
obligations (i) to pay and deliver royalties, overriding royalties,
non-participating royalties, and other burdens on production, (ii) in
connection with or arising out of balancing of overproduction or
underproduction from the Interests, (iii) necessary to comply with all
laws and governmental regulations with respect to the Interests,
including, but not limited to, the lawful plugging and abandonment of
the Wells and the restoration of the surface of the land, or any
governmental request or other requirement to abandon any pipeline or
facility or take any clean-up, remedial or other action with respect
to the Interests, regardless of when the events occurred that caused
such condition to exist or the obligation to arise, and (iv) that
arise under the agreements relating to the Interests. Without
limitation of the foregoing, but however, subject to the provisions of
Section 10 hereof, Buyer agrees to assume and perform any and all of
the obligations and liabilities or alleged or threatened liabilities
and obligations of Seller for any violation of Environmental Laws with
respect to the Interests, regardless of when the events occurred that
caused such condition to exist or the obligation to arise. Despite
anything to the contrary in this Agreement, Buyer and Seller agree
that Buyer is not assuming or agreeing to perform any and all
liabilities and obligations or alleged or threatened liabilities and
obligations of Seller that relate to or arise out of (x) payment and
delivery of royalties, overriding royalties, non-participating
royalties, and other burdens on production attributable to production
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prior to the Effective Time, (y) taxes due on production prior to the
Effective Time, or (z) audit claims from joint interest partners
attributable to production prior to the Effective Time; provided,
however, subsection (x) of this provision shall survive the Closing
only until November 30, 2007, at which time Buyer shall assume and
agree to perform all such liabilities and obligations of Seller
whether or not such liabilities and obligations are attributable to
periods prior to the Effective Time, and subsections (y) and (z) of
this provision shall survive the Closing only until February 1, 2005,
at which time Buyer shall assume and agree to perform all such
liabilities and obligations of Seller whether or not such liabilities
and obligations are attributable to periods prior to the Effective
Time.
(b) Buyer shall, to the fullest extent permitted by law, protect, defend,
indemnify, and hold Seller and its directors, officers, employees,
agents, and representatives of each of them (the "Seller Parties"),
harmless from and against any and all Claims attributable to or
arising out of the following (but only to the extent Seller has not
agreed to provide Buyer with indemnity pursuant to Section 10 hereof):
(i) Buyer's ownership or operation of the Interests subsequent to the
Effective Time, (ii) Buyer's assumption of any obligation or liability
contained in this Section 11, (iii) the breach by Buyer of the
representations contained in Section 8 hereof, and (iv) the breach by
Buyer of any of the agreements and covenants contained in this
Agreement.
(c) THE INDEMNIFICATION, RELEASE AND ASSUMPTION PROVISIONS PROVIDED FOR IN
THIS AGREEMENT SHALL BE APPLICABLE WHETHER OR NOT THE LOSSES, COSTS,
EXPENSES AND DAMAGES IN QUESTION AROSE SOLELY OR IN PART FROM THE
ACTIVE, PASSIVE, COMPARATIVE, OR CONCURRENT NEGLIGENCE, STRICT
LIABILITY OR OTHER FAULT OF THE SELLER PARTIES.
(d) BUYER ACKNOWLEDGES THAT ITS OBLIGATIONS TO THE SELLER PARTIES
HEREUNDER SHALL INCLUDE LIABILITIES/CLAIMS THAT ARISE FROM OR RELATE
18
TO COMMON LAW PRINCIPLES AND/OR LEGAL REQUIREMENTS AND ORDERS OR OTHER
SIMILAR REQUIREMENTS (INCLUDING, BUT NOT LIMITED TO, THOSE WITH
RESPECT TO ENVIRONMENTAL CONTAMINATION AND ENVIRONMENTAL MATTERS OF
ANY KIND, INCLUDING THE ENVIRONMENTAL LAWS).
12. Due Diligence Review.
---------------------
(a) Prior to Closing, Seller, in Seller's offices, will make available to
Buyer and Buyer's authorized representatives for examination as Buyer
may reasonably request, all physical land files, well files,
regulatory files, engineering well bore schematic books, facility
drawings, logs, product purchase and sale contracts, division order
files, abstracts and drilling and division order title opinions and
revenue and expense records contained in Seller's files relating to
the Interests, and core samples (Buyer shall pay all costs for
obtaining such data or samples from any offsite storage facility or
otherwise) (collectively the "Records"); provided, however, the
Records shall not include (i) any geophysical data or (ii), any
records not specifically related to the Interests, including but not
limited to, prospect files, paleontology, velocity surveys and, except
as stated above, files stored at offsite storage facilities, or (iii)
any information subject to third party confidentiality agreements for
which a consent or waiver cannot be secured by Seller after reasonable
efforts. Prior to Closing, Buyer, at Buyer's sole cost, may copy any
portion of the Records as Buyer may reasonably request. Seller makes
no representation whatsoever that any of the Records noted above
exist.
(b) Seller shall permit Buyer and Buyer's authorized representatives to
consult with Seller's employees during reasonable business hours and
to conduct, at Buyer's sole risk and expense, wellsite inspections and
inventories of the Interests that are Seller-operated. During such
inspections, Buyer shall have the right to review the Interests to
determine the environmental condition of the Equipment and Lease
19
premises. To the extent Buyer desires similar access to Seller's
non-operated Interests, Seller shall assist Buyer in obtaining such
access; provided, however, Buyer shall not contact the Operator of the
non-operated Interests directly. In the event Buyer desires physical
access to any of the Interests, Buyer agrees to protect, defend,
indemnify and hold the Seller Parties harmless from and against any
and all Claims occurring on or to the Interests as a result of Buyer's
actions arising from its entry onto the Interests and its inspection
thereof. Buyer agrees to comply fully with all rules, regulations and
instructions issued by Seller regarding Buyer's actions while upon,
entering or leaving the Interests.
13. Purchase Price Adjustments for Environmental Defects.
-----------------------------------------------------
(a) Buyer may, by delivery of written notice to Seller of the existence of
an alleged Environmental Defect, request reduction of the purchase
price for the Interest affected. The Environmental Defect notice shall
clearly indicate the Interest to which the Environmental Defect
relates, the condition which exists on the Interest, a detailed
description of the Environmental Defect, the Environmental Law
allegedly violated, and the dollar amount which Buyer believes it
would take to rectify or remediate the Environmental Defect.
(b) The Environmental Defect notice by Buyer shall be delivered to Seller
on or before November 18, 2002. Seller shall have the right, but not
the obligation, to attempt to cure any alleged Environmental Defect
prior to Closing. In the event Seller is unable or unwilling to cure
an alleged Environmental Defect, Buyer and Seller shall meet and use
their reasonable efforts to agree on the validity of the claim of the
Environmental Defect and the amount of any required purchase price
adjustment. Any violation of an Environmental Law existing with
respect to the Interests as of November 18, 2002, and known to Buyer
on such date, or any conditions with respect to the Interests that
might reasonably constitute a violation of an Environmental Law
existing as of November 18, 2002, and known to Buyer on such date, but
not included in an Environmental Defect notice delivered by Buyer to
20
Seller on or before such date shall be deemed waived for all purposes,
and no such violation or condition shall be considered an
Environmental Defect or an Environmental Claim.
(c) In the event the parties cannot mutually agree on the purchase price
adjustment for an alleged Environmental Defect, Buyer shall have the
right to (i) proceed to Closing and accept the Interest with the
alleged Environmental Defect with no purchase price adjustment, or
(ii) terminate this Agreement as to the Interest affected by the
alleged Environmental Defect and receive a purchase price adjustment
for such Interest as set forth in Exhibit "B", or, where feasible, the
proportionate allocated value.
(d) There shall be no purchase price adjustment for Environmental Defects
unless the aggregate total of all Environmental Defects exceeds THREE
HUNDRED EIGHTY THOUSAND DOLLARS ($380,000).
14. Gas Imbalances. Seller estimates that there are no existing gas imbalances
---------------
affecting the Interests as of the Effective Time. On or before November 18,
2002, Seller shall provide Buyer with a revised gas imbalance schedule for
all the Interests as of the Effective Time. There shall be a purchase price
adjustment at Closing for the volumetric difference in the estimated and
revised imbalance calculated on Seller's net revenue interest at a price of
$1.00 per MCF. To the extent that there is any difference between Seller's
actual aggregate gas imbalance as of the Effective Time and the imbalance
position settled at Closing, then an adjustment shall be made at the $1.00
per net MCF rate in the Final Closing Statement. There shall be no further
gas imbalance adjustments after the Post-Closing adjustment. In the event
of a Title Defect affecting all or a portion of the Interests, the
aggregate gas imbalance shown above shall be adjusted to take into account
the affected Interest. Any purchase price adjustments for gas imbalances
shall be made only on those Interests purchased by Buyer.
21
15. Other Purchase Price Adjustments.
---------------------------------
(a) As used herein, the term:
"Casualty Loss" shall mean, with respect to all or any portion of the
Interests, any destruction by fire, blowout, storm or other casualty
of all or any portion of the Interests between the Effective Time and
Closing. Seller shall promptly notify Buyer of any Casualty Loss of
which Seller becomes aware.
"Preferential Purchase Right" shall mean any option, right of first
refusal or similar preferential purchase right burdening a Lease.
"Required Consent" shall mean any rights to consent to an assignment
or transfer of a Lease, other than filings with governmental entities
or notices to third parties customarily obtained subsequent to a sale
or transfer, where the failure to receive such consent could
reasonably render the transfer of such Lease to Buyer void or
voidable.
(b) If any Casualty Loss occurs prior to Closing to any of the Interests
and such Casualty Loss may be repaired prior to Closing and, when
repaired, the value of such Interests shall not be materially
diminished, then Seller may repair such Casualty Loss prior to Closing
at Seller's cost and shall notify Buyer of such election. In the event
Seller (i) elects to repair such Casualty Loss and such repair is not
completed prior to Closing or the repair completed by Seller does not
cause the value of such Interests to be substantially the same as such
value prior to the Casualty Loss, or (ii) is unable or unwilling to
repair the Casualty Loss, then Buyer shall have the right to (x)
proceed to Closing and accept the Interest with the Casualty Loss with
no purchase price adjustment, or (y) terminate this Agreement as to
the Interest affected by the Casualty Loss and receive a purchase
price adjustment for such Interest as set forth in Exhibit "B", or
where feasible, the proportionate allocated value.
22
(c) Seller shall promptly give notices to third parties holding any
Preferential Purchase Right known to Seller or identified to Seller by
Buyer prior to Closing. Seller shall use all reasonable efforts, but
without obligation to incur any unreasonable cost or expense, to
obtain waivers of, or to comply with, any such Preferential Purchase
Right prior to Closing. If a Preferential Purchase Right is exercised
prior to Closing, the purchase price shall be reduced by the amount
set forth in Exhibit "B" for the affected Interest, or where
applicable and possible, the proportionate allocated value, and Seller
shall convey the affected Interest to the holder of such right and be
entitled to all amounts paid by such holder. If a Preferential
Purchase Right is exercised after Closing, Buyer shall convey the
affected Interest to the holder of such right and be entitled all
amounts paid by such holder.
(d) Seller shall promptly give notices to all third parties holding any
Required Consents known to Seller or identified to Seller by Buyer
prior to Closing. Seller shall use all reasonable efforts, but without
obligation to incur any unreasonable cost or expense, to obtain such
Required Consents. Unless waived by Buyer, if a Required Consent is
not obtained prior to Closing, the purchase price shall be reduced by
the amount set forth in Exhibit "B" for the affected Interest, or
where applicable and possible, the proportionate allocated value, and
such Interest shall be excluded from the purchase and sale under this
Agreement. Any Required Consent waived by Buyer shall be deemed a
Permitted Encumbrance.
16. Confidentiality. All Records, and all other confidential data provided to
----------------
Buyer, whether before or after the date of this Agreement, and all title
matters and environmental reports prepared by Buyer or Buyer's
representatives relating to the Interests, shall be treated by Buyer as
strictly confidential, and shall not be disclosed to any person, firm or
corporation without the prior written consent of Seller. In the event this
purchase and sale does not close, this covenant shall survive termination
of this Agreement and Buyer shall promptly return all copies of the Records
23
in its possession; and in the event the sale closes, this covenant shall
terminate at Closing.
17. DISCLAIMERS. THE INSTRUMENTS OF CONVEYANCE EXECUTED PURSUANT HERETO SHALL
------------
BE EXECUTED WITHOUT ANY REPRESENTATION, WARRANTY OR COVENANT OF TITLE OF
ANY KIND OR NATURE, EITHER EXPRESS, IMPLIED OR STATUTORY; PROVIDED,
HOWEVER, SELLER SHALL SPECIALLY WARRANT AND AGREE TO DEFEND THE TITLE TO
THE INTERESTS AGAINST THE LAWFUL CLAIMS AND DEMANDS OF ALL PERSONS OR
ENTITIES CLAIMING THE SAME OR ANY PART THEREOF BY, THROUGH OR UNDER SELLER,
BUT NOT OTHERWISE. THE INTERESTS ARE BEING CONVEYED AND ASSIGNED TO AND
ACCEPTED BY BUYER IN THEIR "AS IS, WHERE IS" CONDITION AND STATE OF REPAIR,
AND WITH ALL FAULTS AND DEFECTS, AND EXCEPT AS SPECIFICALLY PROVIDED
HEREIN, WITHOUT ANY REPRESENTATION, WARRANTY OR COVENANT OF ANY KIND OR
NATURE, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, BUT NOT LIMITED TO,
WARRANTIES OF MARKETABILITY, QUALITY, CONDITION, CONFORMITY TO SAMPLES,
MERCHANTABILITY, AND/OR FITNESS FOR A PARTICULAR PURPOSE, ALL OF WHICH ARE
EXPRESSLY DISCLAIMED BY SELLER AND WAIVED BY BUYER. THE INTERESTS HAVE BEEN
USED FOR OIL AND GAS DRILLING, PRODUCTION, PIPELINE, TRANSPORTATION,
STORAGE AND RELATED OPERATIONS. PHYSICAL CHANGES IN THE INTERESTS AND IN
THE LANDS BURDENED THEREBY MAY HAVE OCCURRED AS A RESULT OF SUCH USES. THE
INTERESTS MAY ALSO INCLUDE BURIED PIPELINES AND OTHER EQUIPMENT, THE
LOCATIONS OF WHICH MAY NOT BE KNOWN BY SELLER OR READILY APPARENT BY A
PHYSICAL INSPECTION OF THE INTERESTS. IT IS UNDERSTOOD AND AGREED THAT
BUYER SHALL HAVE INSPECTED PRIOR TO CLOSING (OR SHALL BE DEEMED TO HAVE
WAIVED ITS RIGHT TO INSPECT) THE LEASES, THE EQUIPMENT AND THE ASSOCIATED
PREMISES AND SATISFIED ITSELF AS TO THEIR PHYSICAL AND ENVIRONMENTAL
24
CONDITION, BOTH SURFACE AND SUBSURFACE, AND THAT BUYER, EXCEPT AS
SPECIFICALLY PROVIDED HEREIN, SHALL ACCEPT ALL OF THE SAME IN THEIR "AS IS,
WHERE IS" CONDITION AND STATE OF REPAIR, AND WITH ALL FAULTS AND DEFECTS,
INCLUDING, BUT NOT LIMITED TO, THE PRESENCE OF NATURALLY OCCURRING
RADIOACTIVE MATERIAL (NORM) AND MAN-MADE MATERIAL FIBERS (MMMF). IN
ADDITION, SELLER MAKES NO REPRESENTATION, COVENANT OR WARRANTY, EXPRESS,
IMPLIED OR STATUTORY, AS TO THE ACCURACY OR COMPLETENESS OF ANY DATA OR
RECORDS DELIVERED TO BUYER WITH RESPECT TO THE INTERESTS, OR CONCERNING THE
QUALITY OR QUANTITY OF HYDROCARBON RESERVES, IF ANY, ATTRIBUTABLE TO THE
INTERESTS, OR THE ABILITY OF THE INTERESTS TO PRODUCE HYDROCARBONS, OR THE
PRICES WHICH BUYER IS OR WILL BE ENTITLED TO RECEIVE FOR ANY SUCH
HYDROCARBONS.
18. DTPA Waiver. TO THE EXTENT APPLICABLE TO THE TRANSACTIONS CONTEMPLATE THIS
------------
AGREEMENT, BUYER HEREBY WAIVES ITS RIGHTS UNDER THE PROVISIONS OF THE TEXAS
DECEPTIVE TRADE PRACTICES ACT, CHAPTER 17, SUBCHAPTER E, SECTIONS 17.41
THROUGH 17.63, INCLUSIVE (OTHER THAN SECTION 17.555, WHICH IS NOT WAIVED),
OF THE TEXAS BUSINESS & COMMERCE CODE (A LAW THAT GIVES CONSUMERS
SPECIAL RIGHTS AND PROTECTIONS). AFTER CONSULTATION WITH AN ATTORNEY OF ITS
CHOICE, BUYER VOLUNTARILY CONSENTS TO THIS WAIVER.
19. Closing. The Closing shall be held on or before December 3, 2002, at the
--------
offices of Seller at 5051 Westheimer, Suite 1400, Houston, Texas, or at
such other time and place as Seller and Buyer may mutually agree in writing
(the "Closing" or the "Closing Date").
25
20. Transactions at Closing.
------------------------
(a) Seller shall execute, acknowledge, and deliver to Buyer the
instruments of conveyance in the forms as set forth in Exhibits "C-1"
through "C-3" hereto conveying the Interests;
(b) Seller and Buyer shall execute and deliver a Preliminary Closing
Statement that shall set forth the Base Purchase Price and each
adjustment and the calculation of such adjustments used to determine
such amount (the "Closing Amount") in the form as set forth in Exhibit
"D" hereto;
(c) Seller shall deliver to Buyer the Records (but shall be authorized to
keep a copy of the Records);
(d) Seller and Buyer shall execute, acknowledge and deliver mutually
agreeable transfer orders or letters-in-lieu prepared by the Seller,
directing all purchasers of production to make future payments of
proceeds attributable to production from the Interests to Buyer;
(e) Seller shall deliver to Buyer (i) a certificate stating that the
representations of Seller contained in Section 7 hereof are true as of
the Closing Date, and (ii) a "non-foreign person" affidavit in the
form as set forth in Exhibit "H" hereto;
(f) Seller shall deliver to Buyer the legal opinion referenced in Section
6(c) hereof;
(g) Buyer shall deliver to Seller a certificate stating that the
representations of Buyer contained in Section 8 hereof are true as of
the Closing Date;
(h) Buyer shall deliver to Seller the legal opinion referenced in Section
5(b) hereof;
26
(i) Buyer shall deliver to Seller a complete copy of Buyer's environmental
assessment, including, but not limited to, reports, data, valuation,
assessments and conclusions;
(j) Seller shall deliver to Buyer possession of the Interests, subject to
any applicable operating agreements or other related agreements
affecting the Interests; and
(k) Seller and Buyer shall execute the Data License Agreement in the form
as set forth in Exhibit "G" hereto.
(l) Buyer shall deliver to Seller cash by wire transfer in the amount of
the Closing Amount to the following account:
Bank:Mellon Bank, Pittsburgh, PA.
ABA/Routing Number: 043-000-261
Account: 104-9050
For Credit To: Burlington Resources Service Inc.
21. Further Assurance. Incidental and subsequent to Closing, each of the
-------------------
parties shall execute, acknowledge, and deliver to the other such further
instruments, and take such other actions as may be reasonably necessary to
carry out the provisions of this Agreement.
22. Post-Closing Adjustments. On or before May 31, 2003, the parties shall
--------------------------
undertake to agree with respect to the adjustments or payments that were
not finally determined as of Closing, and the amount due from Buyer or
Seller, as the case may be, pursuant to the Post-Closing adjustment. On or
before April 30, 2003, Seller shall provide Buyer with a Final Closing
Statement setting forth the Post-Closing adjustments. Seller shall provide
Buyer access to such of Seller's records as may be reasonably necessary to
verify the Post-Closing adjustments. Payment by Buyer or Seller shall be
made in immediately available funds within five (5) days of agreement. If
the Final Closing Statement has not been agreed upon on or before the date
27
set forth herein, either party may seek to enforce any rights it claims
pursuant to this Agreement.
23. Proration of Taxes. All ad valorem taxes, real property taxes, and similar
-------------------
obligations with respect to the tax period in which the Effective Time
occurs (the "current tax period") shall be apportioned between Seller and
Buyer as of the Effective Time based on an estimate of the immediately
preceding tax period assessment, and the Base Purchase Price shall be
reduced at Closing by the amount of such estimated taxes owed by Seller for
that portion of the current tax period prior to the Effective Time.
24. Proceeds.
---------
(a) All proceeds, including, but not limited to, proceeds held in suspense
or escrow and proceeds received after the Effective Time for oil
produced and held in storage on the Leases but not sold as of the
Effective Time, attributable to the Interests and accruing to the
period prior to the Effective Time (including outstanding accounts
receivable attributable to the period prior to the Effective Time)
shall belong to Seller. Seller shall retain overhead charges and rates
received by Seller in its capacity as Operator under any operating
agreement or COPAS accounting procedure attributable to the Interests
through the end of November 2002.
(b) All proceeds attributable to the Interests and accruing to the period
on and after the Effective Time shall belong to Buyer. In the event
Seller has received proceeds belonging to Buyer after the Effective
Time, Seller will account to Buyer for such proceeds at the same price
Seller received for the production in accordance with its existing
product purchase and sale contracts. In addition, there is excepted,
reserved and excluded from the Interests any and all rights and claims
for reimbursement, recovery, or recoupment by any lawful means of
payments for any royalties, overriding royalties or other payments
from production arising from or attributable to the Interests prior to
the Effective Time that were tendered by Seller (or any of its
28
affiliated or subsidiary companies) to and accepted by any lessor,
mineral owner or other party (collectively, "Royalty Owners") that are
in excess of the amount of royalties, overriding royalties or other
payments from production, if any, actually due or owing to such
Royalty Owners prior to the Effective Time. In the event Buyer becomes
aware of any such payments, Buyer shall promptly notify Seller and
shall cooperate with Seller in Seller's efforts in respect of such
payments.
25. Hart-Scott-Rodino Filing. This Agreement is subject in all respects to and
--------------------------
conditioned upon compliance by the parties with the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, and rules and regulations promulgated
pursuant thereto (the "Act), to the extent that the Act is applicable to
the transactions contemplated by this Agreement. The parties shall make
such filings within five (5) business days after execution of this
Agreement, and provide such information to the Federal Trade Commission and
their attorneys as is required in connection with the Act as soon as
practicable after a request therefor.
26. Failure to Close. Subject to the other provisions of this Section, if all
-----------------
of the conditions to Closing set forth in Sections 5, 6 and 25 hereof have
not been satisfied or waived by the respective parties on or before January
31, 2003 (or such later date as hereafter may be mutually agreed upon by
the parties in writing), this Agreement shall terminate automatically and
the Performance Deposit shall be handled in accordance with this Section
26, and no party hereto shall have any further obligations or any liability
to the other party pursuant to this Agreement; provided, however, that
nothing herein shall relieve any party from liability for the willful
failure to satisfy any conditions to Closing required to be satisfied by
it. If the conditions to Buyer's obligations to close as set forth in
Section 6 hereof have not been satisfied or waived by such date, or in the
event this transaction is not consummated due to the condition of Closing
contained in Sections 5(c) and 25 hereof, the Performance Deposit shall be
returned to Buyer. If this transaction is not consummated by Buyer on such
date for any other reason, Seller may retain the Performance Deposit, as
agreed liquidated damages and not as a penalty, it being agreed that actual
damages would be difficult to ascertain and that such amount is reasonable.
29
Upon any termination of this Agreement and subject to the terms of Section
45, Seller shall be free immediately to enjoy all rights of ownership of
the Interests and to sell, transfer, encumber or otherwise dispose of the
Interests to any party without any restriction under this Agreement.
27. Use of Seller Names. Buyer agrees that, as soon as practicable after
---------------------
Closing, it will remove or cause to be removed the names and marks
Burlington Resources, Meridian Oil, El Paso Production, Southland Royalty,
or LL&E where and if they exist, and all variations and derivatives
thereof and logos relating thereto from the Interests and will not
thereafter make any use whatsoever of such names, marks, and logos.
28. Operations Pending Closing. Seller shall operate the Seller-operated
-----------------------------
Interests using the same standard of care imposed on the "Operator" under
the applicable joint operating agreements until Closing, or such later time
as any applicable joint operating agreement may require, when such
operation shall be turned over to, and become the responsibility of, Buyer.
During the period from the date of this Agreement to Closing, Seller shall
(i) consult with Buyer with respect to all AFE's over TWENTY-FIVE THOUSAND
DOLLARS ($25,000) net to the interests of Seller which are received by
Seller with respect to any Interest, and consult with Buyer with respect to
all material decisions to be made with respect to the Interests, including,
without limitation, the incurring of costs for discretionary expenditures
for operations in excess of TWENTY-FIVE THOUSAND DOLLARS ($25,000) net to
the interest of Seller for which AFE's are not prepared, (ii) operate the
Interests in accordance with the terms and conditions of all applicable
contracts, laws and regulations, and (iii) not transfer, sell, hypothecate,
encumber, abandon or otherwise dispose of any material portion of the
Interests (other than the sale of production in the ordinary course of
business) or as required in connection with the exercise of third parties
of preferential rights to purchase any of the Interests without the express
written consent of Buyer.
29. Operations. Should Seller presently operate any Interest, Seller makes no
-----------
representation, warranty or covenant that the Buyer will become operator of
any or all of the Interests. Buyer acknowledges that operations will be
30
governed by the applicable operating agreements or other related agreements
affecting the Interests.
30. Occasional Sale. Seller and Buyer believe that this purchase and sale of
-----------------
the Interests constitutes an isolated or occasional sale and is not subject
to sales tax; provided, however, if any sales, transfers, use taxes or
other similar taxes are due or should hereafter become due by reason of
this transaction, Buyer shall timely pay and solely bear all such taxes
(including penalty and interest thereon).
31. Recording Documents. Buyer shall pay all documentary, filing, and recording
--------------------
fees incurred in connection with the filing and recording of the
instruments of conveyance. As soon as practicable after Closing, Buyer
shall provide Seller with recorded copies of all documents conveying the
Interests to Buyer.
32. Notices. All notices hereunder shall be sufficiently given for all purposes
--------
hereunder if in writing and delivered personally, or to the extent receipt
is confirmed by the party charged with notice, sent by documented overnight
delivery service, by United States Mail, telecopy, telefax or other
electronic transmission service to the appropriate address or number as set
forth below. Notices to Seller or Buyer shall be addressed to:
SELLER
Burlington Resources Oil & Gas Company LP
5051 Westheimer
Suite 1400
Houston, Texas 77056-2124
Attn: Manager, Acquisitions and Divestitures
Fax: 713-624-9601
BUYER
Nance Petroleum Corporation
550 N. 31st Street, Suite 500
Billings, Montana 59101
Attn:
Mr. Ron Santi, Vice President - Land
Fax: 406-245-9106
31
With a copy to:
St. Mary Land & Exploration Company
1776 Lincoln Street, Suite 700
Denver, Colorado 80203
Attn: Milam Randolph Pharo, Vice President - Land & Legal
Fax: 303-863-1040
33. Entire Agreement. This instrument states the entire agreement and
-------------------
supersedes all prior agreements (except any prior Confidentiality Agreement
between the Buyer and Seller) between the parties concerning the subject
matter hereof. This Agreement may be supplemented, altered, amended,
modified or revoked by writing only, signed by both parties.
34. Counterpart. This Agreement may be executed by Buyer and Seller in any
------------
number of counterparts, each of which shall be deemed an original
instrument, but all of which together shall constitute one and the same
instrument.
35. Time of Essence. Time is of the essence in this Agreement.
----------------
36. Announcements. Seller and Buyer shall consult with each other prior to the
--------------
release of any press releases and other announcements concerning this
Agreement or the transactions contemplated hereby. Any press release or
other announcements will be at a time and in a form reasonably acceptable
to Seller and Buyer. Nothing in this Section 36 shall prevent either party
from making any announcement or disclosure required of it by any applicable
securities law or stock exchange rules; however, the party required to make
the announcement or disclosure agrees to use reasonable efforts to consult
with the other party in connection with such announcement or disclosure.
37. Waiver. Any of the terms, provisions, covenants, representations,
-------
warranties or conditions hereof may be waived only by a written instrument
executed by the party waiving compliance. The failure of any party at any
time or times to require performance of any provisions hereof shall in no
manner affect such party's right to enforce the same. No waiver of any of
32
the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provisions hereof (whether or not similar), nor shall
such waiver constitute a continuing waiver unless otherwise expressly
provided.
38. Survival of Representations and Covenants. All representations and
-----------------------------------------------
covenants of the parties to the extent not fully performed or waived prior
to Closing shall survive the Closing other than those contained in Sections
4, 5, 6, and 13 hereof. Claims for a breach of a representation or covenant
covered by the provisions of Sections 10 and 11 shall be governed
exclusively by the provisions of such Sections.
39. Reliance. Prior to executing and/or closing this Agreement, Buyer has been
---------
afforded an opportunity to (i) examine the Interests and such materials as
it has requested to be provided to it by Seller, (ii) discuss with
representatives of Seller such materials and the nature and operation of
the Interests and (iii) investigate the condition, including subsurface
condition, of the Interests. In entering into and closing this Agreement,
Buyer has relied solely on the express representations and covenants of
Seller in this Agreement, its independent investigation of, and judgment
with respect to, the Interests, and the advice of its own legal, tax,
economic, environmental, engineering, geological and geophysical advisors,
and not on any comments or statements of Seller or any representatives or
agents of, or consultants or advisors engaged by, Seller.
40. Governing Law. This Agreement and the rights and obligations of the parties
--------------
hereto shall be governed, construed, and enforced in accordance with the
laws of the State of Texas. The parties agree that any litigation relating
directly or indirectly to this Agreement must be brought before and
determined by a court of competent jurisdiction within Harris County, State
of Texas, except as the laws of any other jurisdiction mandatorily apply.
41. Legal Fees. The prevailing party in any legal proceeding brought under or
-----------
to enforce this Agreement shall be additionally entitled to recover court
costs and reasonable attorneys' fees from the non-prevailing party.
33
42. Agreement for the Parties' Benefit Only. This Agreement is not intended to
-----------------------------------------
confer upon any person not a party hereto any rights or remedies hereunder,
and no person other than the parties hereto is entitled to rely on any
representation, covenant, or agreement contained herein.
43. Severability. If any term or other provision of this Agreement is invalid,
-------------
illegal or incapable of being enforced by any rule of law or public policy,
all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance
of the transactions contemplated hereby is not affected in any adverse
manner to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
44. Binding Effect; Assignment. All the terms, provisions, covenants,
------------------------------
representations, and conditions of this Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors; provided, however, this Agreement or any portion
thereof and the rights and obligations hereunder shall not be assignable or
delegable by any party without the express prior written consent of the
non-assigning or non-delegating party.
45. Enforcement. Should Buyer or Seller default in the performance of this
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Agreement, the non-defaulting party shall be entitled to enforce specific
performance of this Agreement, or exercise any other right or remedy it may
have at law or in equity by reason of such default.
46. Preservation of the Records. For a period of three (3) years after the
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Closing Date (unless a written request is made for a longer period), the
party in possession of the originals of the Records will retain such
Records and will make such Records available to the other party upon
reasonable notice for inspection and/or copying at the headquarters of the
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party in possession (or at such other location in the United States as the
party in possession may designate in writing to the other party) at
reasonable times and during regular office hours.
47. Like Kind Exchange - Internal Revenue Code ss.1031. Buyer agrees to
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cooperate with and assist Seller, as reasonably requested, to enable Seller
to comply with the provisions of Section 1031 of the Internal Revenue Code
and provisions related thereto.
EXECUTED as of the date first above mentioned.
SELLER
BURLINGTON RESOURCES OIL & GAS COMPANY LP
By: BROG GP Inc., its sole General Partner
By: /s/ THOMAS B. NUSZ
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Thomas B. Nusz
Vice President
THE LOUISIANA LAND AND EXPLORATION COMPANY
By: /s/ THOMAS B. NUSZ
-------------------------------------------------
Thomas B. Nusz
Vice President
BUYER
NANCE PETROLEUM CORPORATION
By: /s/ RONALD B. SANTI
-------------------------------------------------
Ronald B. Santi
Vice President, Land
35