EXHIBIT 10.1
PIONEER 1997 DIVESTITURE PACKAGE
PURCHASE AND SALE AGREEMENT
by and between
PIONEER NATURAL RESOURCES USA, INC.
as Seller
and
SHERIDAN ENERGY, INC.
Purchaser
November 13, 1997
TABLE OF CONTENTS
ARTICLE 1. SALE AND PURCHASE............................................. 1
1.1 Effective Time.............................................. 1
1.2 Sale and Purchase........................................... 1
1.3 Excluded Assets............................................. 2
ARTICLE 2. CONSIDERATION................................................. 2
2.1 Consideration............................................... 2
2.2 Manner of Payment........................................... 3
2.3 Like Kind Exchange Option................................... 3
2.4 Deposit..................................................... 3
ARTICLE 3. DEFECTS....................................................... 3
3.1 Definition of Acceptable Title.............................. 3
3.2 Definition of Permitted Emcumbrances........................ 4
3.3 Environmental and Physical Assessment....................... 5
3.4 Identified Claims........................................... 6
3.5 Notice of Defects........................................... 6
3.6 Remedy for Defects.......................................... 7
3.7 Preferential Purchase Rights and Consents to Assign......... 9
ARTICLE 4. SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS............ 9
4.1 Existence................................................... 9
4.2 Power....................................................... 10
4.3 Authorization............................................... 10
4.4 Brokers..................................................... 10
4.5 Foreign Person.............................................. 10
4.6 No Liens.................................................... 10
4.7 Valid Agreements............................................ 10
4.8 No Reservations............................................. 10
4.9 Permits..................................................... 10
4.10 Compliance with Law......................................... 10
4.11 Taxes....................................................... 11
4.12 Access to Records........................................... 11
4.13 Litigation.................................................. 11
4.14 Royalties................................................... 11
4.15 Access...................................................... 11
LIMITATION AND DISCLAIMER OF REPRESENTATIONS AND WARRANTIES......... 11
4.16 Maintenance of Assets....................................... 12
4.17 No Encumbrances............................................. 12
4.18 Operations.................................................. 12
ARTICLE 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER........ 14
5.1 Existence................................................... 14
5.2 Power....................................................... 14
5.3 Authorization............................................... 14
5.4 Brokers..................................................... 14
5.5 Investment Intent........................................... 14
ARTICLE 6. SELLER'S CONDITIONS OF CLOSING................................ 14
6.1 Representations............................................. 15
6.2 Performance................................................. 15
6.3 Officer's Certificate....................................... 15
6.4 Pending Matters............................................. 15
6.5 HSR Act..................................................... 15
ARTICLE 7. PURCHASER'S CONDITIONS OF CLOSING............................. 15
7.1 Representations............................................. 15
7.2 Performance................................................. 15
7.3 Officer's Certificate....................................... 15
7.4 Pending Matters............................................. 15
7.5 HSR Act..................................................... 15
ARTICLE 8. CLOSING....................................................... 15
8.1 Time and Place of Closing................................... 15
8.2 Closing Obligations......................................... 16
ARTICLE 9. POST-CLOSING OBLIGATIONS...................................... 16
9.1 Receipts and Credits; Suspense Funds........................ 16
9.2 Costs and Liabilities; Indemnity............................ 17
9.3 Further Assurances.......................................... 20
9.4 Delivery of Records......................................... 21
9.5 Access to Data.............................................. 21
9.6 Continued Accounting........................................ 21
ARTICLE 10. TERMINATION................................................... 21
10.1 Right of Termination........................................ 21
10.2 Effect of Termination under Section 10.1.................... 22
10.3 Effect of Termination under Section 2.4..................... 22
ARTICLE 11. TAXES......................................................... 22
11.1 Apportionment of Ad Valorem and Property Taxes.............. 22
11.2 Sales Taxes................................................. 23
11.3 Other Taxes................................................. 23
11.4 Cooperation................................................. 23
ARTICLE 12. PHYSICAL CONDITION OF THE ASSETS.............................. 23
12.1 Prior Use of Assets......................................... 23
12.2 Assumption of Assets in Present Condition................... 23
12.3 Casualty Loss............................................... 24
ARTICLE 13. MISCELLANEOUS................................................. 24
13.1 Governing Law............................................... 24
13.2 Entire Agreement............................................ 24
13.3 Waiver...................................................... 25
13.4 Captions.................................................... 25
13.5 Assignability............................................... 25
13.6 Notices..................................................... 25
13.7 DTPA Waiver................................................. 26
13.8 Expenses.................................................... 26
13.9 Severability................................................ 26
13.10 Damages..................................................... 26
13.11 No Third Party Beneficiary.................................. 27
13.12 Survival.................................................... 27
13.13 Counterparts................................................ 27
13.14 Certain Definitions......................................... 27
13.15 Construction of Ambiguity................................... 27
13.16 Waiver of Jury Trial........................................ 27
13.17 Publicity................................................... 28
13.18 Accounting.................................................. 28
13.19 Operatorship................................................ 28
13.20 HSR Act..................................................... 29
13.21 Arbitration Procedures...................................... 29
13.22 Access to Records........................................... 30
Exhibit "A" - Subject Properties
Exhibit "B" - Form of Assignment and Xxxx of Sale
Schedule 4.13 - Retained Litigation
PURCHASE AND SALE AGREEMENT
This PURCHASE AND SALE AGREEMENT (this "Agreement") is made this 13th day
of November, 1997, by and between PIONEER NATURAL RESOURCES USA, INC., a
Delaware corporation ("Seller"), and SHERIDAN ENERGY, INC ("Purchaser").
RECITALS:
WHEREAS, on the terms and conditions provided in this Agreement, Seller has
agreed to sell and Purchaser has agreed to purchase certain of Seller's
interests in certain oil and gas leases, agreements, contracts, real property,
personal property, equipment and related rights hereinafter defined.
NOW, THEREFORE, for good and valuable consideration and for the mutual
covenants contained herein, Seller and Purchaser hereby agree as follows:
ARTICLE 1. SALE AND PURCHASE
1.1 Effective Time. The effective time and date of the purchase and sale
contemplated hereby shall be 7:00 a.m., November 1, 1997, at the site of the
respective Subject Properties (the "Effective Time").
1.2 Sale and Purchase. Subject to the terms and conditions herein
contained, at Closing and as of the Effective Time, Seller shall sell, assign,
transfer and convey to Purchaser, and Purchaser shall purchase and receive, the
following described assets, less and except the Excluded Assets (the "Assets"):
(a) all right, title and interest of Seller as of the Effective Time (the
"Sale Interest") in and to (1) the xxxxx, units, facilities and/or
plants described on Exhibit "A" ("Exhibit A Xxxxx") attached hereto
and incorporated herein, (2) the oil, gas and mineral leasehold
estates and fee estates appurtenant to Exhibit A Xxxxx, upon which
such xxxxx are located or with respect to which such xxxxx are
associated, and (3) all other interests in oil, gas and other minerals
of whatever nature appurtenant to Exhibit A Xxxxx, including, without
limitation, all surface fee estates and working interests, farmout
rights and overriding royalty interests (reference being hereby made
to Seller's records and files located at 000 X. Xxxx, Xxxxx 000,
Xxxxxxx, Xxxxx, for a more complete description of said leases,
leasehold and fee estates and interests), together with all of
Seller's right, title and interest in respect of and in any pooled,
communitized or unitized acreage of which any such leasehold, fee or
other interest is a part and all of the rights incident thereto (the
"Subject Properties");
(b) to the extent attributable or allocable to the Subject Properties,
right, title and interest of Seller (including, without limitation,
leasehold) as of the Effective Time in and to: (1) all xxxxx
(including, but not limited to, the xxxxx described in Exhibit "A" and
all other oil, gas, injection and water xxxxx whether plugged or
unplugged and whether abandoned or not) ("Xxxxx"), equipment, lease
equipment, signage, gathering pipelines, gas facilities, gathering
systems, gathering, storage, distribution, treating, processing and
disposal facilities and tanks, tools, buildings, inventory and all
other real or tangible personal property and fixtures which are
located on or directly and solely related to the Subject Properties,
including, without limitation, items of personal property described
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in Exhibit "A-1", but specifically excluding portable tools, snow
vehicles, equipment and other vehicles not used exclusively on or
exclusively appurtenant to the Subject Properties or the Xxxxx, and
further excluding personal property not solely appurtenant to the
Xxxxx and personal property temporarily located on the Subject
Properties; (2) all oil, gas, mineral and other hydrocarbon substances
produced on or after the Effective Time; (3) to the extent the same
are assignable or transferable by Seller, all orders, contracts, title
opinions and documents, abstracts of title, leases, deeds, unitization
agreements, pooling agreements, operating agreements, division of
interest statements, participation agreements, and all other
agreements and instruments; (4) all surface leasehold and fee estates,
easements, rights-of-way, licenses, authorizations, permits and
similar rights and interests, subject to the rights of third parties;
(5) except as expressly provided otherwise herein, all warranties,
covenants, indemnities and representations from third parties, and all
claims, rights and causes of action against third parties, asserted
and unasserted, known and unknown; (6) to the extent assignable and
subject to the rights of third parties, lease files, land files,
operating files, well files, oil and gas sales contract files, gas
processing files, logs, test data, production histories, division
order files, abstracts, title files and materials, and all other
books, files and records (the "Records"), and all rights thereto,
subject to the rights of third parties; and (7) all other rights,
privileges, benefits and powers conferred upon the owner and holder of
interests in the Subject Properties; and
(c) to the extent necessary for the ownership, use or development of the
Subject Properties and subject to the rights of third parties, the
right of ingress and egress with respect to the fee, fee mineral and
royalty interests and the SF Interests (as defined below in Section
1.3).
1.3 Excluded Assets. Notwithstanding anything in this Agreement to the
contrary, the Assets do not include and Purchaser agrees and acknowledges that
Seller has reserved from the Assets and hereby reserves unto itself any and all
rights, titles and interests in and to (a) fee, fee mineral and royalty
interests, specifically including but not limited to, (1) fee, fee mineral and
royalty interests which were conveyed to Xxxxxx & Xxxxxxx Producing L.P.
("PPPLP"), an affiliate of Seller, by all or any of Santa Fe Energy Resources,
Inc. ("SFER"), Santa Fe Energy Operating Partners, L.P. ("SFEOP") or SFER
Properties-A, Inc. ("SFERP-A") or any of their respective Affiliates, and (2) or
arising under that certain Exploration Agreement dated April 8, 1994, between
SFEOP and PPPLP and all property rights, grants, and interests created, made or
evidenced by such Exploration Agreement (collectively, the "SF Interests"), (b)
the right of ingress and egress for the purpose of mining, drilling, exploring,
operating, holding, producing and developing the fee, fee mineral and royalty
interests, the SF Interests or the Excluded Xxxxx (as hereinafter defined) for
oil, gas, minerals and other hydrocarbon substances,(c) seismic, geologic and
geophysical records and data not specifically described in Section 1.2(b)(6)
above, and (d) any producing well and proration unit attributable to that well
not on Exhibit "A", ("Excluded Xxxxx") notwithstanding the inclusion of leases
or other interests in the Subject Properties that are in such proration unit,
Purchaser shall have no right to own or participate in any production from such
Excluded Well ((a) through (d), collectively, the "Excluded Assets").
ARTICLE 2. CONSIDERATION
2.1 Consideration. As consideration for this Agreement and the transfer
of the Assets, at Closing, Purchaser shall pay to Seller $49,900,000 (the
"Purchase Price"), as may be adjusted pursuant hereto (the "Adjusted Purchase
Price"). The Purchase Price has been allocated by Purchaser as provided on
Exhibit "A".
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2.2 Manner of Payment. At Closing, except as provided in the following
Section 2.3, Purchaser shall pay Seller or Seller's designee the Adjusted
Purchase Price by wire transfer of immediately available funds as follows:
Account: Pioneer Natural Resources USA, Inc.
Account No: 1290288845
NationsBank of Texas, N.A.
ABA Routing No: 000000000
Attention: Xxxxx Xxxxxxx
NationsBank of Texas-Midland
(000) 000-0000
2.3 Like Kind Exchange Option. Seller and Purchaser hereby agree that
Seller, in lieu of the sale of the Assets to Purchaser for the cash
consideration provided herein, shall have the right at any time prior to Closing
to assign all or a portion of its rights under this Agreement to a qualified
intermediary in order to accomplish the transactions contemplated hereby in a
manner that will comply, either in whole or in part, with the requirements of a
like kind exchange pursuant to Section 1031 of the Internal Revenue Code of
1986, as amended ("Code"). In the event Seller assigns its rights under this
Agreement pursuant to this Section 2.3, Pioneer Natural Resources USA, Inc.
shall remain responsible for all obligations and liabilities of Seller under or
arising from this Agreement and agrees to notify Purchaser in writing of such
assignment before Closing. If Seller assigns its rights under this Agreement,
Purchaser agrees to (i) consent to Seller's assignment of its rights in this
Agreement, (ii) deposit the Adjusted Purchase Price with the qualified escrow or
qualified trust account designated by Seller at Closing, and (iii) take such
further actions, at Seller's cost, as are reasonably required to effectuate the
transactions contemplated hereby pursuant to Code Section 1031, but, in so
acting, Purchaser shall have no liability to any party in connection with such
actions. All risks associated with any like kind exchange and compliance
thereof with applicable laws, rules and regulations shall be the sole
responsibility of Seller, and Seller agrees to indemnify and hold Purchaser
harmless from and against all costs, expenses, liabilities and obligations which
arise as a result of Purchaser's agreement contained in this Section 2.3.
2.4 Deposit. Upon the execution hereof, Purchaser shall pay to Seller
$500,000 ("Initial Deposit") and on November 24, 1997, an additional $4,500,000
("Final Deposit")(collectively the Initial Deposit and Final Deposit are the
"Deposit"). If Closing occurs, the Deposit shall be applied to reduce the
Purchase Price. If Purchaser fails to pay Seller the Final Deposit on or before
November 24, 1997, the Initial Deposit shall be retained by Seller and be the
property of Seller, this Agreement shall terminate subject to Section 10.3, and
Seller shall have no obligation or liability to Purchaser thereupon, thereafter,
or hereunder. If Purchaser is unable to secure, on or before December 1, 1997,
a valid and binding commitment for financing (with proof of same being subject
to the reasonable satisfaction of Seller) the Purchase Price at Closing,
Purchaser agrees that the Deposit is non-refundable and non-returnable, this
Agreement shall terminate subject to Section 10.3 and Seller shall have no
liability or obligation to Purchaser thereupon, thereafter or hereunder. If
Closing does not occur, for any other reason, the Deposit shall be applied as
provided in Section 10.2.
ARTICLE 3. DEFECTS
3.1 Definition of Acceptable Title. As used herein, the term "Acceptable
Title" shall mean, such right, title and interest that as to the existing
production from the currently producing intervals in the Exhibit A Xxxxx, (a)
entitles Seller to receive not less than the net revenue interest set forth in
Exhibit "A" of all oil, gas and associated liquid and gaseous hydrocarbons
produced, saved and marketed from the currently producing intervals of the
respective Exhibit A Xxxxx, (b) obligates Seller
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to bear costs and expenses relating to the maintenance, development, and
operation of all Exhibit A Xxxxx relative to intervals with current production
in an amount not greater than the working interest set forth in Exhibit "A",
unless there is a corresponding and proportionate increase in the applicable net
revenue interest, and (c) except for Permitted Encumbrances, is free and clear
of all liens, claims, burdens and encumbrances; provided, however that (i) the
presence of a preferential right to purchase provision shall not be considered
to be a Defect (as defined in Section 3.5 below); and (ii) if Purchaser
demonstrates before or after Closing, subject to Section 13.12 below, that
Seller does not have or cannot convey Acceptable Title to a well described in
Exhibit "A" and, if so demonstrated after Closing, that Purchaser did not
receive at Closing an adjustment to the Purchase Price or other consideration on
account of such matter, and if Seller owns fee mineral interests or other
interests underlying the applicable proration or spacing unit on which such well
is located, Seller shall resolve such matter by, at Seller's option, either (1)
granting a lease (on mutually acceptable terms) on all or part of such
interests, or (2) conveying (which conveyance may be limited in term, similar to
an oil and gas lease) all or part of such interests to Purchaser and, if so
resolved, such matter shall not be considered a Defect for any purpose hereunder
if the interest so conveyed, or leased, will (after considering, in the case of
a lease, the royalty reserved to Seller under the lease) be sufficient so that,
after giving effect thereto, such matter will no longer exist (a "Further
Conveyance"); provided, however, that such Further Conveyance shall be limited
to the rights of Seller in and to all the intervals in the well from which
production is being obtained (from the subject well) at the Effective Time
insofar as such intervals underlie the proration or spacing unit attributable to
such well. Purchaser acknowledges and agrees that any net revenue interests and
working interests reflected on Exhibit "A" are for the convenience of Seller and
Purchaser and included solely for the purpose of determining Acceptable Title
prior to Closing; Seller does not and shall not represent or warrant that the
Sale Interest is equal to any such interests in any respect, but agrees that (i)
for purposes of determining Defects prior to Closing, with respect to those
Subject Properties listed on Exhibit "A" with "0.0000" "APO" interests, the
"APO" interests shall be deemed to be the same as the corresponding "BPO"
interests, and (ii) Purchaser may assert as a Title Defect (as defined in and
pursuant to Section 3.5 below) any matter reasonably expected, as to existing
production, to reduce the net revenue interest assigned to such Subject Property
or well or any matter reasonably expected, as to existing production, to
increase the working interest assigned to such Subject Property and well unless
there is a corresponding and proportionate increase in the applicable net
revenue interest.
3.2 Definition of Permitted Encumbrances. As used herein, the term
"Permitted Encumbrances" shall mean the following items, provided none of the
following items shall operate to increase the working interest of Seller as set
forth in Exhibit "A" for any of the Subject Properties, without a corresponding
increase in the applicable net revenue interest, or decrease the net revenue
interest of Seller set forth in Exhibit "A" for any of the Subject Properties:
(a) lessors' royalties, overriding royalties, production payments,
reversionary interests and similar burdens;
(b) division orders and sales contracts;
(c) preferential rights to purchase not identified in writing to Seller
pursuant to Section 3.7 below, or, if so identified, with respect to
which (1) waivers are obtained from the appropriate parties, (2) the
appropriate time period for asserting such rights has expired without
an exercise of such rights, or (3) appropriate parties have exercised
such rights and the Purchase Price has been adjusted where appropriate
with reference to the value allocated in Exhibit "A" to the affected
Asset ("Preferential Rights");
(d) rights to consent to assignments required by this Agreement held by
Persons other than governmental entities and not identified in writing
to Seller pursuant to Section 3.7
4
below, or, if so identified, with respect to which (1) waivers or
consents are obtained from the appropriate parties, or (2) the
prescribed time period for denying such consent has expired;
(e) materialman's, mechanic's, repairman's, employee's, contractor's,
operator's, tax, and other similar liens or charges arising in the
ordinary course of business for obligations that are not delinquent and
that will be paid and discharged in the ordinary course of business;
(f) rights to consent by, required notices to, filings with, or other
actions by governmental entities in connection with the sale or
conveyance of oil and gas leasehold and fee estates or interests
therein, which consents, notices, filings and/or other actions are
customarily obtained after closing;
(g) easements, rights-of-way, servitudes, permits, surface leases and other
rights in respect of surface operations affecting the Assets;
(h) rights reserved to or vested in any governmental, statutory or public
authority to control or regulate any of the Assets in any manner, and
all applicable laws, rules and orders of any governmental authority
affecting the Assets;
(i) operating agreements, unit agreements, unit operating agreements,
pooling agreements and pooling designations affecting the Subject
Properties which are of public record or contained in the Records or
otherwise available to Purchaser and all actions taken or operations
occurring in the normal course of business pursuant to such
instruments;
(j) Title Defects that Purchaser may have expressly waived in writing or
which are deemed to have been waived pursuant to Section 3.6;
(k) all conveyances, reservations and exceptions of public record or
contained in the Records affecting the Assets which in the aggregate
are not such as to interfere materially with the ownership, operation
or use of any of the Subject Properties or materially reduce the value
thereof; and
(l) all other liens, charges, encumbrances, contracts, agreements,
instruments, obligations, defects and irregularities affecting the
Assets which in the aggregate are not such as to interfere materially
with the ownership, operation or use of the affected Subject Properties
or materially reduce the value thereof.
3.3 Environmental and Physical Assessment. Purchaser shall have the
right to make an environmental and other physical assessment of the Assets
during the period beginning on the date of execution of this Agreement and
ending at 5:00 p.m. on November 30, 1997 ("Examination Period"). During Seller's
normal business hours, Purchaser and its Representatives shall have the right to
enter upon the Assets 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 may be reasonably necessary
or appropriate for the preparation of appropriate environmental and other
reports relating to the Assets, their condition, and the presence of wastes or
contaminants. Seller shall be provided 48 hours prior notice of such
activities and shall have the right to (i) witness all such tests and
investigations, (ii) receive an equal distribution of all samples taken by
Purchaser or its Representatives, and (iii) prohibit such tests and
investigations which it reasonably believes could materially damage its
properties or business interests. Purchaser shall keep any data or information
acquired by all such examinations and the results of all analyses of such data
and information strictly
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confidential and not disclose any of the same to any Person unless otherwise
required by law or regulation and then only after written notice to Seller of
the need for disclosure and the identity of all intended recipients. Seller
hereby grants Purchaser access to the Assets to conduct its environmental and
other physical assessment upon the condition that, in accordance with Section
9.2, PURCHASER HEREBY INDEMNIFIES AND HOLDS SELLER AND ITS AFFILIATES AND THEIR
RESPECTIVE REPRESENTATIVES HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS FOR OR
RELATED TO PERSONAL INJURY OR PROPERTY DAMAGE ARISING OUT OF OR AS A RESULT OF
THE ACTIVITIES OF PURCHASER OR ITS REPRESENTATIVES ON THE ASSETS IN CONDUCTING
SUCH ENVIRONMENTAL AND PHYSICAL ASSESSMENTS. If during the Examination Period,
Purchaser determines in good faith that (i) there is a condition or circumstance
which constitutes a violation of applicable Environmental Law, or imposes an
obligation to remediate all or part of the Assets and requiring commencement of
said remediation on or before the Effective Time (even though the actual
remediation program may extend beyond the Effective Time) under any applicable
Environmental Law, pertaining to the environmental condition of the Assets, or
(ii) there is a claim, demand, filing, investigation, action, suit or other
legal or administrative proceeding asserted or otherwise initiated by a
governmental authority and arising from or related to the Subject Properties or
the ownership or operation of any thereof ("Environmental Defect"), Purchaser
may include notice of such Defect in any Notice of Defects delivered hereunder;
provided, that any such matter not included in a Notice of Defects shall be and
hereby is waived by Purchaser.
3.4 Identified Claims. During the Examination Period and in
accordance with Section 4.12, Seller shall make available to Purchaser for
examination and copying (at Purchaser's cost) any of the Records and Seller's
accounting records relating to the Assets as Purchaser may reasonably request.
Seller shall also permit Purchaser's Representatives to consult with Seller's
employees and Seller's independent contractors who have knowledge concerning the
Assets during normal business hours regarding such records; provided, that such
consultation shall not unreasonably disrupt the performance by such employee or
independent contractor of its duties with Seller. If during the Examination
Period, Purchaser determines in good faith that (I) payments due in respect of
the Assets for obligations, liabilities, costs and expenses arising outside the
normal course of business and relating to periods prior to the Effective Time
have not been paid (except for those amounts in suspense), or (ii) there are
unsatisfied claims, demands, liabilities or obligations in respect of the Assets
based upon omissions, events or occurrences resulting in obligations,
liabilities, costs or expenses arising outside of the normal course of business
and relating to periods prior to the Effective Time (collectively, "Identified
Claims"), Purchaser may include notice of such Identified Claims in any Notice
of Defects delivered hereunder; provided, that any such matter not included in a
Notice of Defects shall be and hereby is waived by Purchaser.
3.5 Notice of Defects. If any matter is discovered by Purchaser that, in
Purchaser's reasonable, good faith opinion, would (a) cause the title to current
production in Exhibit A Xxxxx not be Acceptable Title (a "Title Defect"); (b)
constitute a breach of Seller's representations, warranties and agreements
contained herein (a "Contract Defect"); (c) constitute an Environmental Defect;
or (d) constitute an Identified Claim ((a) through (d) to the extent that each
such matter exceeds a value of $5,000, individually, a "Defect", and
collectively, the "Defects"), then if the total value of all Defects exceeds
$1,500,000, Purchaser may provide written notice (a "Notice of Defects")
thereof actually delivered to Seller not later than noon, December 1, 1997;
provided, however, that any notice concerning an uninsured Casualty Loss
occurring after the close of the Examination Period or Contract Defect not
discoverable from an examination of the Records, public records, Purchaser's
records, the records of any purchaser of production attributable to the Subject
Properties or a physical inspection of the Assets may be delivered to Seller on
or before noon of the business day immediately before the Closing Date, and
that, if so delivered, Purchaser's sole remedy therefor shall be as provided in
Section 3.6, with the procedure therein provided applicable thereto the same as
if such uninsured Casualty Loss or Contract Defect had been included in any
Notice of Defects delivered not later than noon, December
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1, 1997 (i.e., the value of any such uninsured Casualty Loss or Contract Defect
shall be included in the value of any other Defects included in a Notice of
Defects, or, if no Notice of Defects has been provided, then such uninsured
Casualty Loss or Contract Defect only may be included in a Notice of Defects
then given to Seller). A Notice of Defects shall specifically identify the
Defect and include (I) the Purchaser's purported value of each specific Defect
which value, except for Environmental Defects cannot exceed the value of the
affected Assets as set out on Exhibit "A", (ii) an identification of each
affected Asset, (iii) Purchaser's basis for determining the existence and value
of such Defect, together with all associated reports, opinions, data,
valuations, assessments, conclusions and supporting calculations, and (iv)
Purchaser's statement of steps necessary to cure each such Defect to its
satisfaction, all of which shall be kept strictly confidential, except to the
extent required by law, regulation or order of any court or other governmental
authority or as may be necessary to address Defects identified in a Notice of
Defects.
3.6 Remedy for Defects. In the event Purchaser delivers its Notice of
Defects as provided in Section 3.5, Seller and Purchaser may, at Seller's sole
discretion, meet and use their best efforts to agree in good faith on the
validity and value of each asserted Defect. If the dollar value of Purchaser's
asserted Defects exceed $1,500,000 then Seller may submit to arbitration, to be
conducted pursuant to Section 13.21 below, any dispute as to (i) whether an
alleged Defect actually exists, (ii) the actual value of any such alleged
Defect, or (iii) whether such Defect has been cured by Seller; while Purchaser
may submit to arbitration, to be conducted pursuant to Section 13.21 below, only
disputes as to whether such Defects have been cured by Seller. The
determination of the arbitration shall be final and binding for all matters
determined by such arbitrator; provided, however the determination of the
arbitrator shall not preclude further action by Seller pursuant to Seller's
options described in subparagraphs (B) and (C) below. In the event any matter
is submitted to arbitration pursuant hereto, the Closing Date may be extended
until the 4th business day following notification to the parties of the final
determination of the arbitrator. The value of all Defects shall be established
by the agreement of the parties or the findings of the arbitrator ("Defect
Value") and shall not be greater than the lesser of (a) the dollar value
asserted by Purchaser in its notice of Defects, or, (b) the cost to cure. If
any examination by Purchaser results in a finding that the interest of Seller is
greater than that stated in Exhibit "A" and such increase (which such increase
must be identified in any notice to Seller), serves to increase the value of the
Subject Property or component of the Assets, such increase shall also be
considered as part of the determination of the Defect Values.
(A) If the Aggregate Net Amount (as defined below) of Purchase Price
adjustments using the Defect Values total $1,500,000 or less, Seller,
at Seller's option, may elect not to meet with Purchaser to consider
Purchaser's asserted Defects; then, Purchaser shall accept and purchase
the Assets, including any Asset subject to any Defect, as provided
herein.
(B) In the event the Aggregate Net Amount of Purchase Price adjustments
using the Defect Values plus the amount of any uninsured Casualty
Losses and Casualty Losses not fully covered by insurance (to the
extent of such deficiency only), plus the value of any of the Subject
Properties (with reference to the allocated value thereof on Exhibit
"A" as a maximum) taken in condemnation or under the right of eminent
domain prior to the end of the Examination Period, or with respect to
which proceedings for such purposes shall be pending or threatened in
writing at such time, equals or exceeds $1,500,000 Seller shall either
(1) take such steps as are reasonably necessary to cure or minimize any
such Defects, or (2) delete from sale any property affected by an
asserted Defect, and adjust the Purchase Price by the allocated value,
or (3) allow an adjustment to the Purchase Price in the amount equal to
$.50 for each $1.00 by which the total of the Defect Values exceed
$1,500,000 resulting in the Aggregate Net Amount of Purchase Price
adjustments being reduced $1.00 for every $.50 of adjustment to the
Purchase
7
Price allowed by Seller; with the election of options (1), (2) or (3)
to be in Seller's sole discretion.
(C) In the event the Aggregate Net Amount of Purchase Price adjustments
using the Defect Values plus the amount of any uninsured Casualty
Losses and Casualty Losses not fully covered by insurance (to the
extent of such deficiency only), plus the value of any of the Subject
Properties (with reference to the allocated value thereof on Exhibit
"A" as a maximum) taken in condemnation or under the right of eminent
domain prior to the end of the Examination Period, or with respect to
which proceedings for such purposes shall be pending or threatened in
writing at such time, equals or exceeds $2,500,000 ("Seller's
Termination Threshold") in Seller's sole discretion (in addition to all
other actions allowed in 3.6 (B) above) but without obligation, Seller
may terminate this Agreement without liability or further obligation to
Purchaser.
(D) If the Aggregate Net Amount of Purchase Price adjustments using the
Defect Values, plus the amount of any uninsured Casualty Losses and
Casualty Losses not fully covered by insurance (to the extent of such
deficiency only), plus the value of any of the Subject Properties (with
reference to the allocated value thereof on Exhibit "A" as a maximum)
taken in condemnation or under the right of eminent domain prior to the
end of the Examination Period, or with respect to which proceedings for
such purposes shall be pending or threatened in writing at such time,
exceeds $5,000,000 ("Purchaser's Termination Threshold") then Seller or
Purchaser may, upon written notice to the other, terminate this
Agreement, without liability or further obligation to the other party,
subject to Section 10.2.
(E) If the aggregate value of Preferential Rights, for which Seller has
received timely written notification from Purchaser as required by
Section 3.7 below and (1) prior to Closing, Seller has received written
notice from one or more holders of preferential rights of the holder's
intent to exercise the preferential right, or (2) holders of
preferential rights exercise their preferential rights at Closing, or
(3) the time period to exercise such preferential right has not
expired, equals or exceeds 30% of the Purchase Price, then Purchaser or
Seller may, upon written notice to the other, terminate this Agreement,
without liability or further obligation to the other party subject to
Section 10.2.
(F) Seller shall have no obligation hereunder to any Person to sell,
convey, deliver or otherwise transfer all or any part of the Assets if
Purchaser or Seller terminates this Agreement pursuant to the Seller or
Purchaser Termination Thresholds. Purchaser agrees and acknowledges
that except as specifically set forth herein Seller has no obligation
to adjust the Purchase Price with respect to Defects. If Closing
occurs, Purchaser shall be deemed to have waived or assumed any and all
claims, known and unknown, arising from or related to any and all
Defects or title to or other condition of the Assets, including,
without limitation, whether or not identified in a Notice of Defects,
and notwithstanding the fact that Seller may not have cured any such
Defect(s) to Purchaser's satisfaction, and Seller shall have no
obligation with respect thereto. As used in this Agreement, the
"Aggregate Net Amount" of Purchase Price adjustments shall be
determined by subtracting from the Defect Values (x) the value of all
interests by which Seller's actual interests in the Subject Properties
exceeds the net revenue interests set forth on Exhibit "A" hereto, (y)
the Defect Values which are cured or otherwise resolved to Purchaser's
reasonable satisfaction or (z) the amount of any adjustment to the
Purchase Price which seller elects to allow pursuant to
8
subparagraph (B) above. If Purchaser provides Seller with a Notice of
Defects, Purchaser shall provide Seller copies of all pertinent
portions of applicable title opinions, data and curative information
available to it to enable the parties to make a determination on the
validity thereof.
3.7 Preferential Purchase Rights and Consents to Assign. Upon written
notification to Seller by Purchaser identifying Persons (and their addresses)
holding preferential rights to purchase affecting the Subject Properties or the
right to consent with respect to any assignments required hereby, other than
such consents of governmental authorities which are usually obtained in the
normal course of business after Closing, actually received by Seller not later
than the earlier of (i) fifteen (15) days prior to the Closing Date, or (ii)
five (5) business days prior to the latest date prior to Closing permitted by
the subject agreement for such notice to be provided, Seller shall send notice
of this Agreement to all such Persons (y) offering to sell to each such Person
the Subject Properties for which a preferential right is held on and subject to
the terms hereof and for the same allocated value for such Subject Properties
reflected on Exhibit "A", or (z) requesting, where appropriate, consent to any
assignment required in connection herewith. Purchaser shall be entitled to
review and approve the form of all such notices; provided, that such approval
shall not be unreasonably withheld or delayed. If, prior to Closing, any of
such Persons asserting a preferential purchase right notifies Seller that it
intends to consummate the purchase of the Subject Properties to which it holds a
preferential purchase right pursuant to the terms and conditions hereof, then,
subject to clause (ii) of Section 3.6 above, such Subject Properties shall be
excluded from the Assets to be conveyed to Purchaser under this Agreement and
the Purchase Price shall be reduced by the allocated value of such Subject
Properties reflected in Exhibit "A"; provided, however, that if the holder of
such preferential right fails to consummate the purchase of such Subject
Properties on the Closing Date, then Seller shall promptly so notify Purchaser,
and Seller shall sell immediately to Purchaser, and Purchaser shall purchase
from Seller, for a price equal to the allocated value of such Subject Properties
and upon the other terms of this Agreement, the Subject Properties to which the
preferential purchase right was asserted. All Subject Properties for which a
preferential purchase right has not been asserted prior to Closing by the holder
of such right, or with respect to which Closing does not occur on the Closing
Date following the assertion of a preferential purchase right, shall be sold to
Purchaser at Closing pursuant and subject to the provisions of this Agreement.
If one (1) or more of the holders of any preferential purchase rights notifies
Seller subsequent to Closing that it intends to assert its preferential purchase
right, Seller shall give notice thereof to Purchaser, whereupon Purchaser shall
satisfy all such preferential purchase right obligations of Seller to such
holders and shall indemnify and hold Seller harmless from and against any and
all claims, liabilities, losses, costs and expenses (including, without
limitation, court costs and reasonable attorneys' fees) in connection therewith,
and Purchaser shall be entitled to receive (and Seller hereby assigns to
Purchaser all of Seller's rights to) all proceeds received from such holders in
connection with such preferential purchase rights; Purchaser shall indemnify
and hold harmless Seller from and against any and all claims, liabilities,
losses, costs and expenses (including, without limitation, court costs and
reasonable attorneys' fees) asserted or incurred at any time (whether before or
after Closing) with respect to or arising directly or indirectly from the claims
of any Person to a preferential purchase right affecting any of the Assets
transferred to Purchaser hereunder.
ARTICLE 4. SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
Seller represents, warrants to and covenants with Purchaser that:
4.1 Existence. Pioneer Natural Resources USA, Inc. is a Delaware
corporation, duly formed, validly existing and in good standing under the laws
of the State of Delaware.
9
4.2 Power. Seller has the requisite power and authority to enter into and
perform this Agreement and the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by Seller, and the transactions
contemplated hereby, will not (a) violate any provision of Seller's Articles of
Incorporation or other governing documents, (b) conflict with, result in a
breach of, constitute a default (or an event that with the lapse of time or
notice, or both would constitute a default) under any agreement or instrument to
which Seller is a party or by which Seller is bound, (c) to the best knowledge
and belief of Seller, violate any judgment, order, ruling, or decree applicable
to Seller and entered or delivered in a proceeding in which Seller was or is a
named party, or (d) to the best knowledge and belief of Seller, violate any
applicable law, rule or regulation.
4.3 Authorization. The execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly and validly
authorized by all requisite action on the part of Seller. This Agreement has
been duly executed and delivered on behalf of Seller, and at the Closing all
documents and instruments required hereunder to be executed and delivered by
Seller shall be duly executed and delivered. This Agreement and such documents
and instruments shall constitute legal, valid and binding obligations of Seller
enforceable in accordance with their terms subject, however, to the effect of
bankruptcy, insolvency, reorganization, moratorium and similar laws from time to
time in effect relating to the rights and remedies of creditors, as well as to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
4.4 Brokers. Seller has incurred no obligation or liability, contingent
or otherwise, for brokers' or finders' fees in respect of the matters provided
for in this Agreement which will be the responsibility of Purchaser, and any
such obligation or liability that might exist shall be the sole obligation of
Seller.
4.5 Foreign Person. Seller is not a "foreign person" within the meaning
of the Code.
4.6 No Liens. The Assets are not subject to any valid and enforceable
security interests, liens or mortgages.
4.7 Valid Agreements. Oil and gas leases and other material contracts and
agreements constituting a part of the Assets are valid and in full force and
effect, and Seller is not, or with the lapse of time or giving of notice or both
will not be, in material breach or material default, with respect to any of its
obligations thereunder and no party has given or threatened to give Seller
notice of any material default thereunder.
4.8 No Reservations. There are no reservations which affect the Assets
other than those currently of public record.
4.9 Permits. Seller possesses all material licenses, permits,
certificates, orders, approvals and authorizations necessary to own the Assets
and to carry on its business as now being conducted.
4.10 Compliance with Law. Seller is in compliance with all laws,
ordinances, rules, regulations and orders applicable to the Assets, including,
without limitation, all environmental laws, ordinances, rules, regulations and
orders, except to the extent of any non-compliance that is not reasonably
expected to result in a material adverse affect on the Assets; however, Seller
has not received any notice of any claimed noncompliance therewith. Seller is
not aware of any facts, conditions or circumstances in connection with, related
to or associated with the Assets that could reasonably be expected to give rise
to any claim or assertion that Seller, the Assets or the ownership or operation
of any thereof is not in material compliance with any applicable law, rule,
regulation, ordinance, or order of any governmental authority or with any term
or conditions of any applicable permit, license, approval, consent, certificate
or other authorization.
10
4.11 Taxes. All ad valorem, property, production, severance, excise, 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
attributable to the Assets that have become due and payable have been properly
and timely paid, except to the extent of any failure that is not reasonably
expected to result in a material adverse effect on the Assets.
4.12 Access to Records. Upon and after full execution hereof and receipt
of the Initial Deposit, Seller will provide Purchaser through Closing access to
the Records during normal business hours at their place of storage, and, at
Purchaser's cost, will assist Purchaser in obtaining access to and the right to
review and copy Records pertaining to the Subject Properties not in Seller's
possession or control. From and after the date of the execution of this
Agreement through the Closing Date, Seller shall not add to or remove from the
Records any contracts, instruments, documents or other materials except for such
additions and removals as are done in the ordinary course of business with
respect to ongoing operations.
4.13 Litigation. Other than the matters listed on Schedule 4.13
("Retained Litigation"), there is no litigation, investigation or other
proceeding in which Seller (or its direct predecessor in title) is a named party
which adversely affects any of the Assets, and to the best of Seller's knowledge
and belief there is no litigation, investigation or other proceeding, whether
pending or threatened in writing which is based upon omissions, events or
occurrences prior to the date of this Agreement which materially adversely
affects any of the Assets in which Seller in not a named party. Provided that
any litigation brought to the attention of Seller for which Seller is willing to
classify as Retained Litigation shall not be considered a breach of this
representation. Further, there are no lawsuits or claims by third parties,
which seek to prevent this transaction.
Notwithstanding any provision to the contrary, Seller shall retain all benefit,
responsibility, obligation and liability resulting from the Retained Litigation
and shall fully hold harmless and indemnify Purchaser from and against any loss,
cost, claim, damage, expense, demand, penalty or forfeiture arising from and
related to claims asserted, or claims that could have been asserted, in the
Retained Litigation and which occur entirely prior to the Effective Time.
Seller shall keep Purchaser fully informed as to any matters which may adversely
impact the Assets or any portion thereof and will not oppose any motion of
Purchaser to intervene in any of the Retained Litigation to the extent
Purchaser deems such intervention necessary to protect its interest in the
Assets.
4.14 Royalties. All royalties, rentals and other payments due with
respect to the Assets have been properly and timely paid.
4.15 Access. No physical condition exists upon any of the Subject
Properties which is reasonably expected to restrict access thereto.
LIMITATION AND DISCLAIMER OF REPRESENTATIONS AND WARRANTIES
THE EXPRESS REPRESENTATIONS AND WARRANTIES OF SELLER CONTAINED IN THIS AGREEMENT
ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER REPRESENTATIONS AND WARRANTIES,
EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, AND, EXCEPT FOR THE REPRESENTATIONS
AND WARRANTIES CONTAINED IN SECTIONS 4.1 THROUGH 4.5 (WHICH SHALL SURVIVE
CLOSING) THE REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN SHALL TERMINATE IN
ALL RESPECTS UPON CLOSING. ANY ASSIGNMENT AND XXXX OF SALE OR OTHER CONVEYANCE
EXECUTED AND DELIVERED PURSUANT HERETO SHALL BE: (a) WITHOUT ANY WARRANTY OR
REPRESENTATION OF TITLE, EITHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE; (b)
WITHOUT ANY EXPRESS, IMPLIED, STATUTORY OR OTHER WARRANTY OR REPRESENTATION AS
TO THE CONDITION, QUANTITY, QUALITY, FITNESS FOR A PARTICULAR PURPOSE,
CONFORMITY TO MODELS OR
11
SAMPLES OF MATERIALS OR MERCHANTABILITY OF ANY OF THE ASSETS OR THEIR FITNESS
FOR ANY PURPOSE; AND (c) WITHOUT ANY OTHER EXPRESS, IMPLIED, STATUTORY OR OTHER
WARRANTY OR REPRESENTATION WHATSOEVER. AT CLOSING, PURCHASER SHALL HAVE
INSPECTED OR WAIVED ITS RIGHT TO INSPECT THE RECORDS AND THE ASSETS FOR ALL
PURPOSES AND SATISFIED ITSELF AS TO THE PHYSICAL AND ENVIRONMENTAL CONDITION OF
THE ASSETS, BOTH SURFACE AND SUBSURFACE, INCLUDING BUT NOT LIMITED TO CONDITIONS
SPECIFICALLY RELATED TO THE PRESENCE, RELEASE OR DISPOSAL OF HAZARDOUS
SUBSTANCES. PURCHASER IS RELYING SOLELY UPON ITS OWN INSPECTION OF THE ASSETS,
AND, PURCHASER SHALL ACCEPT ALL OF THE SAME IN THEIR "AS IS, WHERE IS"
CONDITION. IN ADDITION, 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 PURCHASER IN CONNECTION WITH THIS
AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY DESCRIPTION OF THE ASSETS, PRICING
ASSUMPTIONS, OR QUALITY OR QUANTITY OF HYDROCARBON RESERVES (IF ANY)
ATTRIBUTABLE TO THE ASSETS OR THE ABILITY OR POTENTIAL OF THE ASSETS TO PRODUCE
HYDROCARBONS OR THE ENVIRONMENTAL CONDITION OF THE ASSETS OR ANY OTHER MATTERS
CONTAINED IN CONFIDENTIAL INFORMATION OR ANY OTHER MATERIALS FURNISHED OR MADE
AVAILABLE TO PURCHASER BY SELLER OR BY SELLER'S AGENTS OR REPRESENTATIVES. ANY
AND ALL SUCH DATA, RECORDS, REPORTS, PROJECTIONS, INFORMATION AND OTHER
MATERIALS FURNISHED BY SELLER OR BY SELLER'S AGENTS OR REPRESENTATIVES OR
OTHERWISE MADE AVAILABLE TO PURCHASER OR PURCHASER'S REPRESENTATIVES ARE
PROVIDED TO OR FOR THE BENEFIT OF PURCHASER AS A CONVENIENCE, AND SHALL NOT
CREATE OR GIVE RISE TO ANY LIABILITY OF OR AGAINST SELLER OR SELLER'S AGENTS OR
REPRESENTATIVES. ANY RELIANCE ON OR USE OF THE SAME SHALL BE AT PURCHASER'S SOLE
RISK. THE ASSIGNMENTS AND BILLS OF SALE OR OTHER CONVEYANCES TO BE DELIVERED BY
SELLER AT CLOSING SHALL EXPRESSLY SET FORTH THE LIMITATIONS AND DISCLAIMERS OF
REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS PARAGRAPH.
Seller covenants and agrees that from and after the execution of this
Agreement and until the Closing Date:
4.16 Maintenance of Assets. Seller will not sell, transfer, assign,
convey or otherwise dispose of any of the Assets subject to Seller's direct
control, other than (a) oil, gas and other hydrocarbons produced, saved and
sold in the ordinary course of business, (b) personal property and equipment
which is replaced with property and equipment of comparable or better value and
utility in the ordinary and routine maintenance and operation of the Subject
Properties, and (c) as required in connection with any exercise of preferential
rights or as otherwise required to satisfy obligations to third parties under
contracts presently existing.
4.17 No Encumbrances. Seller will not create any lien, security interest
or encumbrance on the Sale Interest, the oil or gas attributable to the Assets,
or the proceeds thereof, other than Permitted Encumbrances.
4.18 Operations. With respect to any of the Subject Properties operated
by Seller, Seller will, subject to the rights of affected parties under
applicable agreements:
(a) cause the Subject Properties to be developed, maintained and
operated in compliance with applicable laws, ordinances, rules,
regulations and orders and in a prudent, good and workmanlike
manner, maintain insurance now in force with respect to the
Subject Properties, and pay or cause to be paid all costs and
expenses in connection therewith;
12
(b) not agree to participate in the drilling of any new well on the
Subject Properties or fail to participate in operations on the
Subject Properties proposed by other parties, without the advance
written consent of Purchaser, which consent (which may not be
unreasonably withheld) or non-consent must be given by Purchaser
within two (2) business days of the notice from Seller;
(c) not take any action or fail to take any action which is reasonably
expected to result in any termination of the leases forming a part
of the Subject Properties;
(d) perform and comply with all of its obligations under agreements
relating to or affecting the Subject Properties;
(e) carry on its business with respect to the Subject Properties in
substantially the same manner as it has heretofore, not
introducing any new method of management, operation or accounting
with respect to the Subject Properties except as may be required
by applicable statutes, rules or regulations or by applicable
presently existing contractual obligations;
(f) not enter into or assume any contract, agreement or commitment
which is not in the ordinary course of business as heretofore
conducted or which involves payments, receipts or potential
liabilities with respect to one individual Subject Property of
more than $25,000, excluding emergency expenditures; and
(g) not resign or otherwise voluntarily relinquish its rights as
operator of any Subject Property for which it serves as operator
on the date hereof.
(h) not grant any preferential right to purchase or similar right or
agree to require the consent of any party to the transfer and
assignment of the Assets to Purchaser, subject to existing
contractual obligations;
(i) not enter into any gas sales contract or crude oil sales or supply
contract with respect to the Subject Properties which is not
terminable without penalty upon notice of thirty (30) days or
less;
(j) not enter into any transaction the effect of which, considered as
a whole, would be to cause Seller's ownership interest in any of
the Subject Properties to be altered from its ownership interest
as of the date hereof;
(k) not enter into any settlement of or relinquish any outstanding
receivables which are a part of the Assets (including, without
limitations, the right to receive any retroactive price
adjustments, take-or-pay monies, FERC mandated refunds, accounting
adjustments, tax adjustments, and Minerals Management Service
refunds);
(l) if any approval or consent by any federal, state or local
governmental authority is required to vest Acceptable Title to any
of the Sale Interest in Purchaser at Closing, exercise its best
efforts, as reasonably requested in writing by Purchaser, to
obtain all such required approvals or consents at Purchaser's
expense;
(m) through Closing, give prompt written notice to Purchaser of any
notice of default (or written threat of default, whether disputed
or denied) received or
13
given by Seller under any instrument or agreement affecting the
Subject Properties to which Seller is a party or by which it or
any of the Subject Properties is bound.
ARTICLE 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER
Purchaser represents and warrants to and covenants with Seller that:
5.1 Existence. Sheridan Energy Corporation is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
5.2 Power. Purchaser has the requisite power and authority to enter into
and perform this Agreement and the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by Purchaser, and the
transactions contemplated hereby, will not (a) violate any provision of any
Purchaser's certificate or articles of incorporation or organization, as the
case may be, bylaws, regulations or other governing documents; (b) to the best
knowledge and belief of Purchaser, conflict with, result in a breach of,
constitute a default (or an event that with the lapse of time or notice, or both
would constitute a default) under any agreement or instrument to which Purchaser
is a party or by which Purchaser is bound, (c) to the best knowledge and belief
of Purchaser, violate any judgment, order, ruling, or decree applicable to
Purchaser and entered or delivered in a proceeding in which Purchaser was or is
a named party; or (d) to the best knowledge and belief of Purchaser, violate any
applicable law, rule or regulation.
5.3 Authorization. The execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly and validly
authorized by all requisite action on the part of Purchaser. This Agreement has
been duly executed and delivered on behalf of Purchaser, and at the Closing all
documents and instruments required hereunder to be executed and delivered by
Purchaser shall have been duly executed and delivered. This Agreement and such
documents and instruments shall constitute legal, valid and binding obligations
of Purchaser enforceable in accordance with their terms, subject, however, to
the effect of bankruptcy, insolvency, reorganization, moratorium and similar
laws from time to time in effect relating to the rights and remedies of
creditors, as well as to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
5.4 Brokers. Purchaser has not incurred any obligation or liability,
contingent or otherwise, for brokers' or finders' fees in respect of the matters
provided for in this Agreement which will be the responsibility of Seller, and
any such obligation or liability that might exist shall be the sole obligation
of Purchaser.
5.5 Investment Intent. Purchaser is acquiring the Assets for Purchaser's
own account for investment, and not with a view to, or for resale in connection
with, any distribution thereof within the meaning of the Securities Act of 1933,
and shall not resell any or all of the Assets except in compliance with all
applicable securities laws.
ARTICLE 6. SELLER'S CONDITIONS OF CLOSING
Seller's obligation to consummate the transactions provided for herein is
subject only to the satisfaction or waiver by Seller on or before the Closing
Date of the following conditions:
14
6.1 Representations. The representations and warranties of Purchaser
contained in Article 5 shall be true and correct in all material respects on the
Closing Date as though made on and as of that date.
6.2 Performance. Purchaser shall have performed in all material respects
the obligations, covenants and agreements hereunder to be performed by it at or
prior to the Closing.
6.3 Officer's Certificate. Each Purchaser shall have delivered to Seller
a certificate of an executive officer dated the Closing Date, certifying on
behalf of such Purchaser that the conditions set forth in Sections 6.1 and 6.2
have been fulfilled.
6.4 Pending Matters. No suit, action or other proceeding by a third party
or a governmental authority shall be pending or threatened which seeks
substantial damages from Seller in connection with, or seeks to restrain, enjoin
or otherwise prohibit, the consummation of the transactions contemplated by this
Agreement.
6.5 HSR Act. The waiting period required by the HSR Act (as defined in
Section 13.20 below) shall have expired or been terminated, if applicable.
ARTICLE 7. PURCHASER'S CONDITIONS OF CLOSING
Purchaser's obligation to consummate the transactions provided for herein
is subject only to the satisfaction or waiver by Purchaser on or before the
Closing Date of the following conditions:
7.1 Representations. The representations and warranties of Seller
contained in Article 4 shall be true and correct in all material respects on the
Closing Date as though made on and as of that date.
7.2 Performance. Seller shall have performed in all material respects the
obligations, covenants and agreements hereunder to be performed by it at or
prior to the Closing.
7.3 Officer's Certificate. Seller shall have delivered to Purchaser
certificates of executive officers of Seller's respective general partners,
dated the Closing Date, certifying on behalf of such Seller that the conditions
set forth in Sections 7.1 and 7.2 have been fulfilled.
7.4 Pending Matters. No suit, action or other proceeding by a third
party or a governmental authority shall be pending or threatened which seeks
substantial damages from Purchaser in connection with or, seeks to restrain,
enjoin or otherwise prohibit, the consummation of the transactions contemplated
by this Agreement.
7.5 HSR Act. The waiting period required by the HSR Act (as defined in
Section 13.20 below) shall have expired or been terminated, if applicable.
ARTICLE 8. CLOSING
8.1 Time and Place of Closing. If the conditions to Closing have been
satisfied or expressly waived by the party entitled to the benefits thereof, the
consummation of the transactions contemplated hereby ("Closing") shall take
place at one of Seller's offices on or before December 15, 1997, at 9:00 a.m, or
at such other place and time or in such other manner agreed upon by Seller and
Purchaser ("Closing Date"); provided, that Seller shall have the right to extend
Closing for up to fifteen
15
(15) days to respond to any Notice of Defects provided by Purchaser and that any
extension by Seller shall not serve to provide Purchaser rights not otherwise
expressly provided herein, nor to extend any rights of Purchaser contained
herein, including, without limitation, those contained in Section 3.5.
8.2 Closing Obligations. At the Closing,
(a) Seller shall execute, acknowledge and deliver to Purchaser an
Assignment and Xxxx of Sale in substantially the form attached hereto
as Exhibit "B", conveying the Assets to Purchaser as provided hereby;
(b ) Seller and Purchaser shall execute, acknowledge and deliver transfer
orders or letters in lieu thereof directing all purchasers of
production to make payment to Purchaser of proceeds attributable to
the Sale Interest;
(c) Purchaser shall deliver the Adjusted Purchase Price as provided in
Article 2;
(d ) Purchaser and Seller shall execute and deliver a settlement statement
(the "Preliminary Settlement Statement") prepared by Seller and
setting forth the Purchase Price and all adjustments thereto agreed
upon by the parties, using the best information available, subject to
Section 13.18; an d
(e) Purchaser and Seller shall execute such other instruments and take
such other action as may be necessary to carry out their respective
obligations under this Agreement.
ARTICLE 9. POST-CLOSING OBLIGATIONS
9.1 Receipts and Credits; Suspense Funds. Subject to the terms hereof,
all monies, refunds, proceeds, receipts, credits, receivables, accounts and
income attributable to the purchased Assets (a) for all periods of time from and
after the Effective Time shall be the sole property and entitlement of the
Purchaser, and, to the extent received by Seller, Seller shall fully disclose
and account therefor to Purchaser promptly, and (b) for all periods of time
prior to the Effective Time shall be the sole property and entitlement of Seller
to the extent received by Purchaser or Seller prior to the Final Accounting Date
or allocated to Seller in the Final Accounting, and if received by Purchaser,
Purchaser shall fully disclose and account therefore to Seller promptly.
Purchaser shall pay Seller for Seller's share of hydrocarbons attributable to
the purchased Assets in storage above the pipeline connection or in transit on
the Effective Time at the relevant contract price. Until the Final Accounting
Date, Seller shall remain liable for all obligations, liabilities, costs and
expenses arising in the normal course of business directly related to activities
conducted prior to the Effective Date and which are discovered prior to the
Final Accounting Date, ("Seller's Expenses"). Seller and Purchaser recognize
that as of the Effective Time there may be over or under imbalances with respect
to gas production, gathering, transportation or processing attributable to the
Subject Properties ("Imbalances") all of which have been accounted for in the
Purchase Price. The parties hereby agree that (i) Imbalances shall not be
included in any Identified Claims asserted hereunder, and (ii) the Subject
Properties will be conveyed specifically subject to Imbalances which exist as of
the Effective Time, without any adjustment to the Purchase Price and with
Purchaser, as of Closing, bearing and assuming all obligations with respect to
any overproduction account or liability and receiving the benefit of and being
credited with any underproduction account or credit. At Closing, Seller shall
deliver to Purchaser all amounts in Seller's possession due third party owners
of interests in the Subject Properties, and Purchaser agrees that it shall be
solely responsible for the disposition of such funds, the payment thereof to the
rightful owners and the payment, if any, of royalty thereon (the "Suspense
Funds").
16
9.2 Costs and Liabilities; Indemnity.
(a) As used in this Agreement, "claims" shall include costs, expenses,
obligations, claims, demands, causes of action, liabilities,
damages, fines, penalties and judgments of any kind or character,
whether matured or unmatured, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated, known or unknown, and all
costs and fees (including, without limitation, interest,
attorneys' fees, costs of experts, court costs and costs of
investigation) incurred in connection therewith, including, but
not limited to claims arising from or directly or indirectly
related to royalty, operating, suspense and capital obligations
attributable to the Assets. As used in this Section 9.2, "Assets"
shall include the Suspense Funds.
(b) NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IT IS
THE EXPRESS INTENT AND AGREEMENT OF SELLER AND PURCHASER THAT, IF
CLOSING OCCURS, PURCHASER SHALL ACCEPT THE ASSETS IN THEIR "AS IS,
WHERE IS" CONDITION, SUBJECT TO ANY AND ALL DEFECTS, DEFICIENCIES,
IRREGULARITIES AND CLAIMS RELATED OR ATTRIBUTABLE IN ANY MANNER
THERETO, INCLUDING, WITHOUT LIMITATION, TITLE DEFECTS, CONTRACT
DEFECTS, ENVIRONMENTAL DEFECTS, IDENTIFIED CLAIMS OR ANY OTHER
MATTER AFFECTING IN ANY RESPECT THE TITLE OR PHYSICAL CONDITION
OF, OR THE RIGHT TO OWN, USE, OPERATE, DEVELOP OR ENJOY, THE
ASSETS, WHETHER KNOWN OR UNKNOWN, LIQUIDATED OR UNLIQUIDATED,
FIXED OR CONTINGENT, DIRECT OR INDIRECT.
(c) AT CLOSING AND WITHOUT FURTHER ACTION OR DOCUMENTATION, PURCHASER
(1) SHALL ASSUME, BE RESPONSIBLE FOR AND COMPLY WITH ALL DUTIES
AND OBLIGATIONS, EXPRESS OR IMPLIED, ARISING AT ANY TIME WITH
RESPECT TO THE ASSETS, INCLUDING, WITHOUT LIMITATION (I) THOSE
ARISING UNDER OR BY VIRTUE OF ANY LEASE, CONTRACT, AGREEMENT,
DOCUMENT, PERMIT, LAW, STATUTE, RULE, REGULATION OR ORDER OF ANY
GOVERNMENTAL AUTHORITY OR COURT (SPECIFICALLY INCLUDING, WITHOUT
LIMITATION, ANY GOVERNMENTAL REQUEST OR OTHER REQUIREMENT TO PLUG,
RE-PLUG OR ABANDON ANY WELL OF WHATSOEVER TYPE, STATUS OR
CLASSIFICATION, OR TAKE ANY CLEAN-UP, REMEDIAL OR OTHER ACTION
WITH RESPECT TO THE ASSETS), (II) PREFERENTIAL RIGHTS TO PURCHASE
AND (III) THIRD PARTY CONSENTS; (2) SHALL ASSUME, BE RESPONSIBLE
FOR AND PAY ALL CLAIMS AFFECTING OR ARISING, DIRECTLY OR
INDIRECTLY, AT ANY TIME IN CONNECTION WITH THE ASSETS, INCLUDING,
WITHOUT LIMITATION, CLAIMS FOR PERSONAL OR PROPERTY INJURY OR
DAMAGE, ENVIRONMENTAL CLEANUP, REMEDIATION, OR COMPLIANCE, OR FOR
ANY OTHER RELIEF, ARISING DIRECTLY OR INDIRECTLY FROM OR INCIDENT
TO, THE USE, OCCUPATION, OPERATION, MAINTENANCE OR ABANDONMENT OF
OR PRODUCTION FROM THE PURCHASED ASSETS, OR CONDITION OF THE
ASSETS, WHETHER LATENT OR PATENT, INCLUDING, WITHOUT LIMITATION,
CONTAMINATION OF PROPERTY OR PREMISES WITH NATURALLY OCCURRING
RADIOACTIVE MATERIALS ("NORM"), AND WHETHER OR NOT ARISING SOLELY
FROM OR CONTRIBUTED TO BY THE NEGLIGENCE IN ANY FORM, WHETHER
ACTIVE OR PASSIVE, OR OF ANY KIND OR NATURE, OF SELLER OR ITS
PREDECESSORS IN TITLE OR THEIR RESPECTIVE AGENTS, EMPLOYEES OR
CONTRACTORS; AND (3) SHALL DEFEND, INDEMNIFY AND HOLD SELLER
HARMLESS FROM ANY AND ALL CLAIMS ARISING, ASSERTED OR DUE AT ANY
TIME IN CONNECTION WITH THE FOREGOING.
(d) From and after Closing, any claim for indemnity hereunder shall be
made by written notice, together with a written description of any
claims asserted stating the nature and basis of such claim and, if
ascertainable, the amount thereof. Purchaser shall have a period
of twenty (20) days after receipt of such notice within which to
respond thereto or, in the case of a claim which requires
17
a shorter time for response, then within such shorter period as
specified by Seller in such notice (the "Notice Period"). If
Purchaser denies liability hereunder or fails to provide the
defense for any claim, Seller may defend or compromise the claim
as it deems appropriate without prejudice to any of Seller's
rights hereunder, with no right of Purchaser to approve or
disapprove any actions taken in connection therewith by Seller. If
Purchaser accepts liability and responsibility for the defense of
any claim, it shall so notify Seller as soon as is practicable
prior to the expiration of the Notice Period and undertake the
defense or compromise of such claim with counsel selected by
Purchaser and reasonably acceptable to Seller. If Purchaser
undertakes the defense or compromise of such claim, Seller shall
be entitled, at its own expense, to participate in such defense.
No compromise or settlement of any claim shall be made without
reasonable notice to Seller, and without the prior written
approval of Seller, unless such compromise or settlement includes
a general and complete release of Seller, its Affiliates and their
respective Representatives in respect of the matter, with
prejudice, and with no express or written admission of liability
on the part of Seller, its Affiliates and their respective
Representatives, and no constraints on the future conduct of its
or their respective businesses.
(e) Seller shall have the right at all times to participate, at its
sole cost, in the preparation for any hearing or trial related to
the indemnities set forth in this Agreement, as well as the right
to appear on its own behalf or to retain separate counsel to
represent it at any such hearing or trial.
(f) THE INDEMNITIES PROVIDED IN THIS AGREEMENT SHALL EXTEND TO SELLER
AND ITS AFFILIATES AND ANY PERSON WHO AT ANY TIME HAS SERVED OR IS
SERVING AS A DIRECTOR, OFFICER, EMPLOYEE, CONSULTANT, INVITEE OR
AGENT THEREOF (EACH A "REPRESENTATIVE"), AND EACH OF THEIR
RESPECTIVE HEIRS, EXECUTORS, SUCCESSORS AND ASSIGNS, AND SHALL
APPLY TO ALL CLAIMS SUBJECT TO INDEMNITY HEREUNDER, INCLUDING
THOSE BASED ON NEGLIGENCE OF ANY NATURE, INCLUDING SOLE
NEGLIGENCE, SIMPLE NEGLIGENCE, CONCURRENT NEGLIGENCE, ACTIVE
NEGLIGENCE, PASSIVE NEGLIGENCE, STRICT LIABILITY OR FAULT OF
SELLER (OR ANY OTHER INDEMNIFIED PARTY) OR ANY OTHER THEORY OF
LIABILITY OR FAULT, WHETHER OF LAW (WHETHER COMMON OR STATUTORY)
OR IN EQUITY; PROVIDED, HOWEVER, PURCHASER SHALL NOT BE LIABLE FOR
OR INDEMNIFY SELLER FOR ANY CLAIM ASSERTED BY PURCHASER AND
ARISING FROM A BREACH BY SELLER OF THIS AGREEMENT. THE
INDEMNIFICATION PROVISIONS OF THIS SECTION 9.2 SHALL BE IN
ADDITION TO ANY OTHER INDEMNITY PROVISIONS CONTAINED IN THIS
AGREEMENT, AND IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT THE
TERMS OF THIS SECTION 9.2 SHALL CONTROL OVER ANY CONFLICTING OR
CONTRADICTING TERMS OR PROVISIONS CONTAINED IN THIS AGREEMENT, AND
SHALL SURVIVE CLOSING.
(g) To the extent, but only to the extent, Purchaser provides Seller
specific written notice of said claims within twelve (12) months
after the Closing Date, Seller shall retain liability for any and
all claims asserted by unaffiliated third parties and pertaining
to the Assets (1) to the extent and only to the extent the
adjudicated liability specifically excluding Defense Costs, as
hereinafter defined,
18
for such claims exceeds $1,500,000 and is based on a breach of
Environmental Laws by Seller (including Mesa Operating Company and
Xxxxxx & Xxxxxxx Development L.P.) prior to the Effective Time and
pertains to that period of time of Seller's (including Mesa Operating
Company and Xxxxxx & Parsley Development L.P.) ownership or operation
of the Assets prior to the Effective Time ("9.2(g)(1) Environmental
Liability") or (2) to the extent and only to the extent the
adjudicated liability for such claims, specifically excluding Defense
Costs, exceed $1,500,000 and are based on the non-payment,
underpayment, or mispayment of royalties properly due from Seller
(including Mesa Operating Company and Xxxxxx & Xxxxxxx Development
L.P.) prior to the Effective Time and pertains to that period of time
of Seller's (including Mesa Operating Company and Xxxxxx & Parsley
Development L.P.) ownership or operation of the Assets prior to the
Effective Time ("9.2(g)(2) Royalty Liability") (it being acknowledged
and agreed that Purchaser shall be solely responsible for any and all
claims for which a Claim Notice is not given within twelve(12) months
after the Closing Date and for 9.2(g)(1) Environmental Liability
claims up to $1,500,000 or 9.2(g)(2) Royalty Liability claims up to
$1,500,000). The provisions of this subsection (g) shall not relieve
Purchaser of any obligation or liability of Purchaser under Section
3.3 arising from breaches of its obligation of confidentiality or its
indemnification obligations thereunder.
For the purposes of this Agreement, Environmental Laws shall mean any
and all ("Laws"), as hereinafter defined, that relate to: (i) the
prevention of pollution or environmental damage, (ii) the remediation
of pollution or environmental damage, and/or (iii) the protection of
the environment generally; including without limitation, the Clean Air
Act, as amended, the Clean Water Act, as amended, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, the Federal Water Pollution Control Act, as amended, the
Resource Conservation and Recovery Act of 1976, as amended, the Safe
Drinking Water Act, as amended, the Toxic Substance and Control Act,
as amended, the Superfund Amendments and Reauthorization Act of 1986,
as amended, the Hazardous and the Solid Waste Amendments Act of 1984,
as amended, and Oil Pollution Act of 1990, as amended and Laws shall
mean laws, statutes, ordinances, permits, decrees, orders, judgments,
rules or regulations (including without limitation Environmental Laws)
which have been promulgated, issued or enacted by a governmental
entity or tribal authority having appropriate jurisdiction and are in
existence as of the Effective Time.
If a claim is asserted against a Purchaser for which the Seller may
have retained liability, it shall be a condition precedent to the
Seller's obligation under this Section 9.2 (g) that the Purchaser give
Seller written notice of such claim setting forth full particulars of
the claim (including a copy of the written claim, if any) as then
known by the Purchaser "Claim Notice". Purchaser shall make
19
a good faith effort to notify the Seller within one (1) month of
receipt of a claim and shall in all events effect notice within such
time as will allow the Seller a reasonable period of time in which to
evaluate and timely respond to said claim.
Seller may at any time assume the defense of said claim with counsel
selected by the Seller and reasonably satisfactory to the Purchaser.
Purchaser shall cooperate in all reasonable respects in such defense.
Purchaser shall promptly send written notice to Seller (and Seller
written notice to Purchaser where Seller has assumed the defense of
the claim) of any proposed settlement of a claim for which this
Section 9.2.(g) may be applicable. The parties shall endeavor to
cooperate to promptly determine the acceptability of said settlement
offer(s).
Purchaser shall solely bear all the costs of defense and investigation
and all other related costs and expenses pertaining to each claim to
the extent such claim does not exceed $1,500,000 in actual adjudicated
liability under 9.2(g)(1) or each claim does not exceed $1,500,000 in
actual adjudicated liability under 9.2(g)(2). In the event that actual
adjudicated liability for a claim, for which a Claim Notice was timely
delivered to Seller by Purchaser under 9.2(g)(1) above exceeds
$1,500,000 or under 9.2(g)(2) above exceeds $1,500,000 and all other
requirements under this Section 9(g) have been met (except as
otherwise provided in the second to the last sentence of this
paragraph) AND Purchaser has expended $500,000 in the defense of said
claim, limited to incurred reasonable out-of-pocket costs of defense
and investigation of said claim, including but not limited to fees of
outside counsel, court costs and outside consultants and contractors
but excluding Purchaser's overhead or personnel and all other in-house
costs and expenses and specifically excluding amounts for which
Purchaser is entitled to reimbursement by third parties such as
insurers, working interest owners or joint venturers ("Defense
Costs"), then after Defense Costs exceed said $500,000 for each said
claim Seller will share 50% of the Defense Costs in excess of said
$500,000 for each said claim. Notwithstanding the previous sentence,
Seller shall have no obligation to share in the Defense Costs where
Seller has assumed the defense of said claim as provided in this
Section 9.2(g). Purchaser shall provide regular accounts (at least
every 30 days for said claim) to Seller of its Defense Costs of claims
and Seller shall have the right to audit Purchaser's records regarding
such expenditures upon reasonable request.
9.3 Further Assurances. After Closing, Seller and Purchaser agree to take
such further actions and to execute, acknowledge and deliver all such further
documents that are necessary or useful in carrying out the purposes of this
Agreement or of any document delivered pursuant hereto.
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9.4 Delivery of Records. As soon as reasonably possible but no later than
thirty (30) days after the Closing Date, Seller shall deliver originals (or
copies where originals are not available) of the Records to Purchaser; provided,
that Seller (i) shall exercise its best efforts to provide Purchaser at Closing
or as soon thereafter as is practicable with all Records necessary to assume and
conduct operations of the Assets, and (ii) shall have the right to retain, as
its own, original Records that pertain to the Excluded Assets along with copies
of the other Records Seller wishes to retain to be made at Seller's cost.
9.5 Access to Data. Subject to the rights of third parties and Seller's
proprietary rights, Seller shall provide Purchaser with reasonable access to
Seller's books and records after Closing as necessary for Purchaser to prepare
its financial statements. For a period of two (2) years after Closing, Seller
will permit Purchaser or its Representatives to review, from time to time in
Seller's offices during normal business hours, Seismic data, which exists or to
which Seller has rights at the Effective Time and which directly pertains to the
Assets and which Seller owns or for which Seller has a license (but only to the
extent such review by Purchaser or its Representative is not prohibited by the
terms of the license that is applicable to the data that Purchaser desires to
review ). In order to schedule any such review, Purchaser shall contact
Seller's Vice President of Exploration - Domestic Exploration at Seller's
notice address indicated in Section 13.6.
9.6 Continued Accounting. Upon written request by Purchaser on or before
Closing, Seller shall continue to perform normal accounting for all Assets for a
period ending one month after the month of Closing, but in no event beyond
January 31, 1998.
ARTICLE 10. TERMINATION
10.1 Right of Termination. This Agreement and the transactions
contemplated hereby may be terminated at any time at or prior to the Closing:
(a) By Seller if Closing does not occur on or before December 31,
1997;
(b) By mutual consent of the parties;
(c) By Purchaser or Seller in accordance with Section 3.6;
(d) By Purchaser by notice delivered to Seller on or before Closing if
all conditions described in Article 7 shall not have been met and
such noncompliance shall not have been caused or waived by the
actions or inactions of Purchaser; provided that Purchaser may
exercise its right to terminate under this Section 10.1 (d), in
the event Seller fails to meet the conditions of Closing as stated
in Section 7.1, regardless of whether Purchaser has previously
included such breach in a Notice of Defects, whether such breach
would constitute a Defect or whether Purchaser would be entitled
to relief under Section 3.6 as a result thereof.
21
(e) By Seller by notice delivered to Purchaser on or before Closing if
(1) all conditions described in Article 6 shall not have been met
and such noncompliance shall not have been caused or waived by the
actions or inactions of Seller, or (2) Purchaser has not made the
filings and requests required of it by the first sentence of
Section 13.20 prior to October 15, 1997.
10.2 Effect of Termination under Section 10.1. If this Agreement is
terminated pursuant to Section 10.1, this Agreement shall become void and of no
further force or effect (except for the provisions of Sections 3.3, 4.4, 5.4,
13.1 through 13.11 and 13.14 through 13.17, each of which shall survive such
termination and continue in full force and effect); provided, however, (I) that
if either party is in material default of its obligations under this Agreement
at the time this Agreement is so terminated, such defaulting party shall
continue to be liable to the other party for damages and other remedies
available at law or in equity (including, without limitation, for specific
performance) in respect of such default and such liability shall not be affected
by such termination; and (ii) if this Agreement is so terminated by Purchaser,
in the absence of a material default hereunder by Purchaser, the Deposit shall
be returned to Purchaser, or if so terminated by Seller, as the result of a
default hereunder by Purchaser, the Seller may, in its sole discretion, elect to
retain the Deposit as liquidated damages (it being agreed by the parties that
damages in said event would be extremely difficult to determine, and that the
Deposit represents a fair and reasonable estimate of such damages under the
circumstances, and does not constitute a penalty). Notwithstanding anything to
the contrary contained in this Agreement, upon any termination of this Agreement
pursuant to Section 10.1 by Seller, in the absence of a material default
hereunder by Seller, Seller shall be free immediately to enjoy all rights of
ownership of the Assets and may sell, transfer, encumber or otherwise dispose of
the Assets to any party without any restriction under this Agreement and without
any impairment of its rights hereunder to seek and recover damages from
Purchaser arising from any default hereunder by Purchaser; provided, that
Seller's right to seek specific performance of Purchaser's obligations hereunder
shall be waived upon any such disposition of the Assets and that its right to
seek or recover any other damages shall be waived upon its express election to
retain the Deposit in lieu of any other remedy against Purchaser, including
specific performance hereunder.
10.3 Effect of Termination under Section 2.4. If this Agreement is
terminated pursuant to Section 2.4, this Agreement shall become void and of no
further force or effect (except for the provisions of Sections 3.3, 4.4, 5.4,
13.1 through 13.11 and 13.14 through 13.17, each of which shall survive such
termination and continue in full force and effect); provided, however, the
Deposit, or any part thereof, shall not be returnable or refundable.
ARTICLE 11. TAXES
11.1 Apportionment of Ad Valorem and Property Taxes. All ad valorem
taxes, real property taxes, personal property taxes, and similar obligations
concerning the Assets with respect to the tax period in which the Effective Time
occurs ("Property Taxes") shall be apportioned as of the Effective Time between
Seller and Purchaser. Seller shall file or cause to be filed all required
reports and returns incident to the Property Taxes and shall pay or cause to be
paid to the taxing authorities all Property
22
Taxes relating to the tax period in which the Effective Time occurs. Purchaser
shall pay to Seller Purchaser's pro rata portion of Property Taxes within thirty
(30) days after receipt of Seller's invoice therefor.
11.2 Sales Taxes. The Purchase Price excludes any sales taxes or other
taxes required to be paid in connection with the sale of property pursuant to
this Agreement. Purchaser shall be liable for all sales, use and other taxes,
conveyance, transfer and recording fees and real estate transfer stamps or taxes
that may be imposed on any transfer of property pursuant to this Agreement.
These taxes shall be collected and remitted under applicable law. Purchaser
shall indemnify and hold Seller harmless with respect to the payment of any of
these taxes including any interest or penalties assessed thereon.
11.3 Other Taxes. All taxes (other than income taxes) which are imposed
on or with respect to the production of oil, natural gas or other hydrocarbons
or minerals or the receipt of proceeds therefrom (including but not limited to
severance, production, and excise taxes) shall be apportioned between the
parties based upon the respective shares of production taken by the parties.
From and after Closing, Purchaser shall be responsible for paying or withholding
or causing to be paid or withheld all such taxes and for filing all statements,
returns, and documents incident thereto.
11.4 Cooperation. Each party to this Agreement shall provide the other
party with reasonable access to all relevant documents, data and other
information which may be required by the other party for the purpose of
preparing tax returns and responding to any audit by any taxing jurisdiction.
Each party to this Agreement shall cooperate with all reasonable requests of the
other party made in connection with contesting the imposition of taxes.
Notwithstanding anything to the contrary in this Agreement, neither party to
this Agreement shall be required at any time to disclose to the other party any
tax return or other confidential tax information.
ARTICLE 12. PHYSICAL CONDITION OF THE ASSETS
12.1 Prior Use of Assets. THE ASSETS HAVE BEEN USED FOR OIL AND GAS
DRILLING AND PRODUCING OPERATIONS AND RELATED OIL FIELD OPERATIONS. PHYSICAL
CHANGES IN THE LAND MAY HAVE OCCURRED AS A RESULT OF SUCH USES. THE ASSETS ALSO
MAY INCLUDE BURIED PIPELINES AND OTHER EQUIPMENT, WHETHER OR NOT OF A SIMILAR
NATURE, THE LOCATIONS OF WHICH MAY NOT NOW BE KNOWN BY SELLER OR READILY
APPARENT BY A PHYSICAL INSPECTION OF THE PROPERTY. PURCHASER UNDERSTANDS THAT
SELLER DOES NOT HAVE THE REQUISITE INFORMATION WITH WHICH TO DETERMINE THE EXACT
NATURE OR CONDITION OF THE ASSETS OR THE AFFECT ANY SUCH USE HAS HAD ON THE
PHYSICAL CONDITION OF THE LANDS BURDENED BY THE ASSETS.
12.2 Assumption of Assets in Present Condition. PURCHASER ACKNOWLEDGES
THAT (I) THE CONSUMMATION OF THIS AGREEMENT BY PURCHASER SHALL BE ON THE BASIS
OF ITS OWN INVESTIGATION OF THE PHYSICAL CONDITION OF THE ASSETS, INCLUDING,
WITHOUT
23
LIMITATIONS, SUBSURFACE CONDITION; (ii) THE ASSETS HAVE BEEN USED IN THE MANNER
AND FOR THE PURPOSES SET FORTH ABOVE AND THAT PHYSICAL CHANGES TO THE ASSETS AND
THE LANDS BURDENED THEREBY MAY HAVE OCCURRED AS A RESULT OF SUCH USE; AND (iii)
NORM AND MAN-MADE MATERIAL FIBERS ("MMMF") MAY BE PRESENT AT SOME LOCATIONS.
PURCHASER ACKNOWLEDGES THAT NORM IS A NATURAL PHENOMENON ASSOCIATED WITH MANY
OIL FIELDS IN THE UNITED STATES AND THROUGHOUT THE WORLD. PURCHASER SHALL MAKE
ITS OWN DETERMINATION OF THIS PHENOMENON AND OTHER CONDITIONS. SELLER DISCLAIMS
ANY LIABILITY ARISING OUT OF OR IN CONNECTION WITH ANY PRESENCE OF NORM OR MMMF
ON OR AFFECTING THE ASSETS. IN ACCORDANCE WITH SECTION 9.2 AND AT CLOSING,
PURCHASER SHALL ASSUME THE RISK THAT THE ASSETS MAY CONTAIN WASTES OR
CONTAMINANTS AND ADVERSE PHYSICAL CONDITIONS, INCLUDING THE PRESENCE OF
PIPELINES, EQUIPMENT AND OTHER ITEMS OF PERSONAL PROPERTY, AND WASTES OR
CONTAMINANTS WHICH MAY NOT HAVE BEEN REVEALED BY PURCHASER'S INVESTIGATION. IN
ACCORDANCE WITH SECTION 9.2 AND AT CLOSING, ALL RESPONSIBILITY AND LIABILITY
RELATED TO DISPOSALS, SPILLS, WASTES, OR CONTAMINATION, OR OTHER ADVERSE
PHYSICAL CONDITIONS ON, BELOW, OR RELATED TO OR AFFECTING THE ASSETS SHALL BE
ASSUMED BY PURCHASER AND PURCHASER SHALL, NOTWITHSTANDING WHEN THE BASIS FOR ANY
CLAIM, ACTION, SUIT, JUDGMENT (INCLUDING, WITHOUT LIMITATION, THOSE FOR DEATH,
PERSONAL INJURY OR PROPERTY DAMAGE) SHALL HAVE OCCURRED, INDEMNIFY, DEFEND AND
HOLD SELLER HARMLESS THEREFROM PURSUANT TO SECTION 9.2.
12.3 Casualty Loss. In the event of any material damage by fire or other
casualty to any of the Assets prior to the Closing ("Casualty Loss"), this
Agreement shall remain in full force and effect, and as to each affected Asset,
Seller shall at its election either collect (and when collected pay over to
Purchaser) or assign to Purchaser any and all insurance claims related to such
damage, and Purchaser shall take title to the affected Asset without reduction
in the Purchase Price.
ARTICLE 13. MISCELLANEOUS
13.1 Governing Law. This Agreement and all instruments executed in
accordance herewith shall be governed by and interpreted in accordance with the
laws of the State of Texas, without regard to conflict of law rules that would
direct application of the laws of another jurisdiction, except to the extent
that it is mandatory that the law of the jurisdiction wherein the Assets are
located shall apply. In the event of any litigation or other proceeding in
connection with this Agreement, the venue for any such proceeding shall be in a
court of competent jurisdiction located in Texas, and the prevailing party
shall be entitled to recover its reasonable attorney's fees and costs incurred
therein from the other party, in addition to any damages awarded.
13.2 Entire Agreement. This Agreement, all agreements and instruments
executed in connection herewith and the Confidentiality Agreement dated on or
about September 25, 1997, between Sheridan Energy, Inc. and Pioneer Natural
Resources USA, Inc. (the "Confidentiality Agreement") and that letter agreement
("Letter Agreement") by and between Sheridan Energy, Inc. and Pioneer Natural
Resources USA, Inc. dated October 28, 1997 (and said Letter Agreement remains in
24
full force and effective) constitute the entire agreement between the parties
and supersede all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties. No supplement, amendment,
alteration, modification, waiver or termination of this Agreement shall be
binding unless executed in writing by the parties hereto.
13.3 Waiver. No waiver of any of the provisions of this Agreement shall
be deemed or shall constitute a waiver of any other provisions hereof (whether
or not similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
13.4 Captions. The captions in this Agreement are for convenience only
and shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.
13.5 Assignability. Except pursuant to a like kind exchange pursuant to
Section 2.3, neither party hereto shall assign (whether before, at or after
Closing) this Agreement or any of its rights or obligations hereunder without
the prior written consent of the other party, which may be withheld for any or
no reason. Any assignment made without such consent shall be void. Except as
otherwise provided herein, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective permitted successors and
assigns.
13.6 Notices. Any notice provided or permitted to be given under this
Agreement shall be in writing, and may be served by personal delivery or by
registered or certified U.S. mail, addressed to the party to be notified,
postage prepaid, return receipt requested. Notice deposited in the mail in the
manner hereinabove described shall be deemed to have been given and received on
the date of the delivery as shown on the return receipt. Notice served in any
other manner (including by facsimile delivery) shall be deemed to have been
given and received only if and when actually received by the addressee. For
purposes of notice, the addresses of the parties shall be as follows:
SELLER:
-------
Pioneer Natural Resources USA, Inc.
Attn: Xxx Xxxx and X.X. Xxxxxx
0000 Xxxxxxxx Xxxxxx Xxxx
0000 Xxxxx X'Xxxxxx Xxxx.
Xxxxxx, Xxxxx 00000-0000
Telephone: 972/000-0000
Fax: 972/402/7057
WITH COPY TO: Xxxx Xxxxxxx
000 X. Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
PURCHASER:
---------
25
Sheridan Energy, Inc,
0000 Xxxxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Telephone: 713/000-0000
Fax: 713/651/3056
Attn: Xxxx Xxxxxxxx/Xxx Xxxxxx
Each party shall have the right, upon giving three (3) days prior notice to the
other in the manner hereinabove provided, to change its address for purposes of
notice to any other appropriate street address.
13.7 DTPA Waiver. TO THE EXTENT APPLICABLE TO THE ASSETS OR ANY PORTION
THEREOF, PURCHASER HEREBY VOLUNTARILY 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), TEX. BUS. &
COM. CODE., A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. IN ORDER
TO EVIDENCE ITS ABILITY TO GRANT SUCH WAIVER, PURCHASER HEREBY REPRESENTS AND
WARRANTS TO SELLER THAT IT (I) IS IN THE BUSINESS OF SEEKING OR ACQUIRING, BY
PURCHASE OR LEASE, GOODS OR SERVICES FOR COMMERCIAL OR BUSINESS USE; (II) HAS
CONSULTED WITH AN ATTORNEY OF PURCHASER'S OWN CHOOSING; (III) HAS KNOWLEDGE AND
EXPERIENCE IN FINANCIAL, BUSINESS AND OIL AND GAS MATTERS THAT ENABLE IT TO
EVALUATE THE MERITS AND RISKS OF THE TRANSACTIONS CONTEMPLATED HEREBY; (IV) IS
NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION; AND (V) THAT THIS WAIVER
IS A MATERIAL AND INTEGRAL PART OF THIS AGREEMENT AND THE CONSIDERATION THEREOF.
13.8 Expenses. Each party shall be solely responsible for all expenses
incurred by it in connection with this transaction (including, without
limitation, fees and expenses of its own legal counsel and accountants).
13.9 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced under any rule of law, 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 a materially adverse manner with respect
to either party.
13.10 Damages. The parties waive any rights to punitive and
incidental or consequential damages resulting from a breach of this Agreement.
13.11 No Third Party Beneficiary. This Agreement is not intended to
create, nor shall it be construed to create, any rights in any third party under
doctrines concerning third party beneficiaries.
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13.12 Survival. The representations and warranties of the parties
under this Agreement shall not survive, but shall terminate upon and be
extinguished by, Closing; provided, however, that (i) all representations,
waivers, covenants, agreements and indemnities contained entirely within
Sections 1.2, 3.6, 3.7, 4.1 through 4.5 and 5.1 through 5.6, and Articles 9, 11,
12 and 13 of this Agreement shall survive the Closing, and (ii) Seller's
obligation with respect to Further Conveyances (as defined in Section 3.1 above)
shall expire on the first anniversary of the Closing Date with respect to
matters not asserted prior to such anniversary date with the specificity
required of Notice of Defects given hereunder; further provided, that,
notwithstanding anything herein to the contrary, Purchaser expressly agrees and
acknowledges that it shall have no remedy or recourse against Seller or its
Affiliates or any of their respective Representatives with respect to the
condition of the Assets or any representation or warranty made in connection
with this Agreement, except as expressly provided by Section 3.6.
13.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.14 Certain Definitions. As used in this Agreement, (a) the term
"Affiliate" means, as to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person; (b) the term
"Person" means an individual, corporation, partnership, association, joint stock
company, trust or trustee thereof, estate or executor thereof, unincorporated
organization or joint venture, court or other governmental unit or any agency or
subdivision thereof, or any other legally recognizable entity; and (c) the terms
"to [Seller's or Purchaser's, as the case may be] knowledge" or "known to" and
other terms of similar import shall mean, with respect to the referenced party,
only the then existing actual non-privileged knowledge of any president or vice
president of such party or of such party's general or managing partner or agent,
as the case may be, and are not intended to imply that such party in fact has
actual knowledge of the subject matter to which such terms apply.
13.15 Construction of Ambiguity. In the event of any ambiguity in any
of the terms or conditions of this Agreement, including any exhibits hereto and
whether or not placed of record, such ambiguity shall not be construed for or
against any party hereto on the basis that such party did or did not author the
same.
13.16 Waiver of Jury Trial. SELLER AND PURCHASER DO HEREBY IRREVOCABLY
WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO A TRIAL BY
JURY IN ANY ACTION, SUIT OR OTHER LEGAL PROCEEDING BASED UPON, ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
13.17 Publicity. Seller and Purchaser shall consult with each other
with regard to all publicity and other releases and disclosures to be made prior
to or within 60 days following, at or after Closing concerning this Agreement
and the transactions contemplated hereby, which are not otherwise expressly
permitted by the Confidentiality Agreement, and, except as required by
applicable law or the applicable rules or regulations of any governmental body
or stock exchange, neither party shall make
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any disclosure or issue any publicity or other release without the prior written
consent of the other party, which consent shall not be unreasonably withheld or
delayed.
13.18 Accounting.
A. Seller shall deliver to Purchaser on or before the second
business day prior to Closing the Preliminary Settlement
Statement setting forth any adjustments to the Purchase Price
provided for in or required by this Agreement. The Preliminary
Settlement Statement shall be prepared in accordance with this
Agreement and with standard industry and accounting practices. In
connection with the preparation of the Preliminary Settlement
Statement, the Purchase Price shall be (1) increased by (a) the
costs and expenses that are attributable to the Subject
Properties for the period from the Effective Time to the Closing
Date that are paid incurred or assessed by Seller (including, but
not limited to, Seller's internal cost for administrative
overhead which, if not otherwise established, shall be the XXXXX
rate otherwise applicable for each well operated by Seller), and
(b) other amounts due Seller and contemplated hereby, and (2)
reduced by (a) proceeds received by Seller for hydrocarbons
attributable to the Subject Properties produced after the
Effective Time, (b) Seller's Expenses and (c) other amounts due
Purchaser and contemplated hereby.
B. Within 150 days after the Closing, Seller shall make a good faith
effort to prepare, in accordance with this Agreement and with
standard industry and accounting practices, and deliver to
Purchaser, a final accounting statement showing the proration and
calculation of credits and payment obligations of Purchaser and
Seller hereunder. As soon as reasonably practicable after receipt
thereof, Purchaser shall deliver to Seller a written report
containing any changes that Purchaser proposes to be made to such
statement. The parties shall use their best efforts to reach
agreement (the "Final Accounting") on the final accounting
statement on or before the 180th day after the Closing Date (such
date the "Final Accounting Date", whether or not Seller and
Purchaser have agreed on the Final Accounting). Once the Final
Accounting has been agreed to by Purchaser and Seller, there
shall be no further adjustments to the Purchase Price. At
Closing, except for the payments to and rights of Seller and
Purchaser expressly provided for in Section 9.1, Purchaser shall
assume and acquire all rights, obligations and liabilities
relating to the Assets whether arising before or after the
Effective Time, as provided in Article 9.
13.19 Operatorship. Seller does not represent to Purchaser that
Purchaser will automatically succeed to the operatorship of any given Subject
Property as to which Seller is currently the operator. Purchaser recognizes and
agrees that Purchaser will be required to comply with applicable operating
agreements, unit operating agreements or other similar contracts relating to any
elections or other selection procedures in order to succeed Seller as operator.
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13.20 HSR Act. The parties shall exercise their best efforts to file
(or will cause their ultimate parent entities to file) with the United States
Federal Trade Commission and the United States Department of Justice all
notifications and reports required for the transaction contemplated hereby under
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 ("HSR Act"), if
applicable and shall request early termination of the prescribed waiting period.
Both parties shall use their best efforts to promptly supply any supplemental or
additional information which may be requested in connection therewith pursuant
to the HSR Act and shall comply in all material respects with the requirements
of the HSR Act. Closing of the transaction contemplated hereby shall not occur
unless and until all necessary filings and notifications under the HSR Act have
been made, including the provision of any required additional information or
documents, and the waiting period referred to in such Act shall have expired or
terminated.
13.21 Arbitration Procedures. If either party desires to arbitrate, as
specified in Article 3, such arbitration shall be conducted as set forth below.
(A) Within 3 business days of delivery of the Arbitration Notice the parties
shall jointly select an acceptable person as the sole arbitrator under this
Agreement. If the parties are unable to agree upon the designation of a person
as arbitrator, then either Seller or Purchaser, or both such parties, may in
writing request the American Arbitration Association to appoint a qualified
arbitrator.
(B) Any arbitration hearing shall be held at a place in Dallas Texas acceptable
to the arbitrator.
(C) The arbitrator shall settle disputes regarding whether or not Termination
Threshold has been met and specifically (I) whether an alleged Defect actually
exists, (ii) the actual value of any such alleged Defect, or (iii) whether such
Defect has been cured by Seller. The arbitrator shall do this in accordance with
the Texas General Arbitration Act and the Rules of the American Arbitration
Association, to the extent such rules do not conflict with the terms of such Act
or the terms hereof. Such arbitrator shall hear all arbitration matters arising
under Article 3. The decision of the arbitrator shall be binding upon the
parties, and may be enforced in any court of competent jurisdiction. Seller and
Purchaser, respectively, shall bear their own legal fees and other costs
incurred in presenting their respective cases. The charges and expenses of the
arbitrator shall be shared equally by Seller and Purchaser.
(D) The arbitration shall commence within 5 business days after the arbitrator
is selected as set forth in this Section. In fulfilling his duties hereunder,
the arbitrator shall be bound by the terms of this Agreement. In fulfilling any
of his arbitration duties, the arbitrator may consider such other matters as in
the opinion of the arbitrator are necessary or helpful to make a proper
evaluation. Additionally, the arbitrator may consult with and engage
disinterested third parties, including, without limitation, petroleum engineers,
attorneys and consultants, to advise the arbitrator.
(E) If any arbitrator selected hereunder should die, resign or be unable to
perform his duties hereunder the parties or if the parties are unable to agree,
the American Arbitration Association shall
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select a replacement arbitrator. The aforesaid procedure shall be followed from
time to time as necessary.
13.22 Access to Records. During the Examination Period, at Purchaser's
request Seller will allow Purchaser access to Records which are available in
Seller's Midland Office beginning at 7:00 a.m. and ending at 7:00 p.m. Monday
through Friday (except on November 27 and 28) and on Saturdays (except for
November 29) from 8:00 a.m. to 12:00 noon.
EXECUTED as of the date first set forth above.
SELLER:
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PIONEER NATURAL RESOURCES USA, INC.
By: /s/ A. R. Alameddine
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Name: A. R. Alameddine
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Its: Vice President of Development
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PURCHASER:
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SHERIDAN ENERGY, INC.
By: /s/ X.X. Xxxxxxxx
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Name: X.X. Xxxxxxxx
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Its: President and Chief Executive Officer
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