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EXHIBIT 10.5
PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
CONOCO INC.
AND
▇▇▇▇▇▇▇ PETROLEUM CORPORATION
SOUTH ▇▇▇▇▇▇▇▇▇ RANCH AREA
▇▇▇▇ COUNTY, TEXAS
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PURCHASE AND SALE AGREEMENT
TABLE OF CONTENTS
INDEX OF DEFINED TERMS ............................................... - iii -
LIST OF EXHIBITS ..................................................... - iv -
1. PROPERTY ......................................................... - 1 -
2. EXCLUSIONS FROM THE PROPERTY ..................................... - 2 -
3. CONSIDERATION .................................................... - 3 -
4. ▇▇▇▇▇▇▇ PRE-ACQUISITION REVIEW ................................... - 3 -
5. TITLE DEFECTS IN CONOCO PROPERTY ................................. - 4 -
6. REMEDIES FOR TITLE DEFECTS ....................................... - 5 -
7. GAS IMBALANCES FOR CONOCO PROPERTY ............................... - 5 -
8. REPRESENTATIONS BY CONOCO ......................................... - 6 -
9. REPRESENTATIONS BY ▇▇▇▇▇▇▇ ....................................... - 6 -
10. CLOSING CONDITIONS ............................................... - 7 -
11. CLOSING .......................................................... - 8 -
12. FURTHER ASSURANCES ............................................... - 9 -
13. EFFECTIVE TIME ................................................... - 9 -
14. RESERVATIONS AND EXCEPTIONS, ..................................... - 9 -
15. ASSUMPTION OF LIABILITIES AND INDEMNITIES FOR CONOCO PROPERTY..... - 10 -
16. OWNERSHIP OF PRODUCTION AND HYDROCARBON INVENTORIES .............. - 11 -
17. CLOSING ADJUSTMENTS TO THE PURCHASE PRICE ........................ - 11 -
18. POST-CLOSING ACCOUNTING ON CONOCO PROPERTY ....................... - 12 -
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19. TAXES AND EXPENSES .......................................... - 13 -
20. CASUALTY LOSS ON CONOCO PROPERTY ............................ - 15 -
21. NOTICES ..................................................... - 15 -
22. DISCLAIMERS/ACKNOWLEDGMENTS FOR CONOCO PROPERTY.............. - 16 -
23. INDEPENDENT EVALUATION ...................................... - 17 -
24. ENVIRONMENTAL ASSESSMENT AND INDEMNIFICATION ................ - 17 -
25. WAIVER OF CONSEQUENTIAL AND PUNITIVE DAMAGES................. - 19 -
26. PRESS RELEASE ............................................... - 20 -
27. SURVIVAL .................................................... - 20 -
28. INTERPRETATION .............................................. - 20 -
29. GOVERNING LAW ............................................... - 21 -
30. DISPUTE RESOLUTION .......................................... - 21 -
31. ENTIRE AGREEMENT; AMENDMENT ................................. - 24 -
32. BINDING EFFECT; ASSIGNMENT .................................. - 24 -
33. COMPLIANCE AND ENFORCEMENT WAIVERS .......................... - 24 -
34. THIRD-PARTY BENEFICIARIES ................................... - 24 -
35. SUCCESSORS AND ASSIGNS ...................................... - 24 -
36. SEVERABILITY ................................................ - 24 -
37. COUNTERPARTS ................................................ - 24 -
38. EXHIBITS .................................................... - 25 -
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PURCHASE AND SALE AGREEMENT
INDEX OF DEFINED TERMS
Adverse Environmental Conditions....................... - 17 -
Agreement ............................................. - 1 -
Assumed Obligations ................................... - 10 -
Business Day .......................................... - 12 -
Casualty Defect........................................ - 15 -
Claims ................................................ - 10 -
Closing................................................ - 8 -
Closing Date .......................................... - 8 -
Code .................................................. - 3 -
Conoco ................................................ - 1 -
Conoco Property........................................ - 1 -
Effective Time ........................................ - 9 -
Environmental Laws .................................... - 17 -
Excluded Property ..................................... - 2 -
FAA ................................................... - 22 -
Final Purchase Price .................................. - 13 -
Final Settlement Date ................................. - 13 -
Final Settlement Statement ............................ - 13 -
Intermediate Settlement Statement ..................... - 12 -
Leases ................................................ - 1 -
▇▇▇▇▇▇▇ ............................................... - 1 -
NGL's ................................................. - 11 -
NORM .................................................. - 16 -
Parties ............................................... - 1 -
Party ................................................. - 1 -
Preliminary Settlement Statement ...................... - 11 -
Property Taxes ........................................ - 14 -
Purchase Price ........................................ - 3 -
Retained Obligations .................................. - 10 -
South ▇▇▇▇▇▇▇▇▇ Ranch Lands ........................... - 1 -
South ▇▇▇▇▇▇▇▇▇ Ranch Lease ........................... - 1 -
Stock Tank Oil ........................................ - 11 -
Title Defect .......................................... - 4 -
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PURCHASE AND SALE AGREEMENT
LIST OF EXHIBITS
EXHIBIT A-1 Oil and Gas Leases
EXHIBIT A-2 Ownership Interests
EXHIBIT A-3 Purchase Price Allocation
EXHIBIT B Plat of South ▇▇▇▇▇▇▇▇▇ Ranch Lands
EXHIBIT C-1 Assignment and ▇▇▇▇ of Sale
EXHIBIT C-2 South ▇▇▇▇▇▇▇▇▇ Ranch Lease
EXHIBIT D Contracts
EXHIBIT E Pending Litigation
EXHIBIT F Seller's Assignment Notice (Section 1031 Exchange)
EXHIBIT G Nonforeign Affidavit
EXHIBIT H AMI Letter Agreement
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PURCHASE AND SALE AGREEMENT
THIS AGREEMENT (this "Agreement"), dated February 20, 1998, is by and
between CONOCO INC., a Delaware corporation ("Conoco"), and ▇▇▇▇▇▇▇ PETROLEUM
CORPORATION, a Texas corporation ("▇▇▇▇▇▇▇"), and is in consideration of
Conoco's agreement to sell, and Michael's agreement to buy, certain property
described in this Agreement, all pursuant to the terms and conditions of this
Agreement. Conoco and ▇▇▇▇▇▇▇ ▇▇▇ also be referred to herein individually as a
"Party" or, collectively, as the "Parties."
1. PROPERTY. Subject to the terms and conditions set forth hereinafter, and
except for the "Excluded Property" as defined in Section 2 below, Conoco agrees
to grant or convey to ▇▇▇▇▇▇▇ (whichever is applicable as provided for below)
the Conoco Property (as defined hereinafter) and ▇▇▇▇▇▇▇ agrees to accept the
Conoco Property, and tender consideration therefor, in the manner and of the
type and amount as hereinafter required. For purposes of this Agreement, "Conoco
Property" shall mean, collectively:
(a) all of Conoco's right, title and interest in, to and under or derived
from the oil and gas leases, surface estate, and other interests therein
referred to in Exhibit A-1, attached hereto and made a part hereof for all
purposes (the "Leases"), insofar and only insofar as the Leases apply to the
lands, depths, formations, wellbore rights and/or other rights specified on
Exhibit A-1 together with identical interests in and to all property and rights
incident thereto, including, without limitation, all ▇▇▇▇▇ (whether producing,
non-producing or abandoned), water source, water injection and other injection
or disposal ▇▇▇▇▇ and systems, gathering systems, materials, equipment, personal
property, fixtures and facilities located on the Leases or used in connection
with the Leases and all of Conoco's rights in, to and under all agreements,
unitization agreements, operating agreements, processing agreements,
transportation agreements, production sale agreements, leases, permits,
rights-of-way, easements, licenses, options and orders identified in Exhibit D,
insofar as they pertain to the interests in the Leases transferred to ▇▇▇▇▇▇▇
hereunder; and
(b) a leasehold interest in all of Conoco's right, title and interest in,
to and under or derived from the lands depicted on the plat attached hereto as
Exhibit B (the "South ▇▇▇▇▇▇▇▇▇ Ranch Lands"), insofar and only insofar as the
South ▇▇▇▇▇▇▇▇▇ Ranch Lands cover the interval from the surface of the ground
down to 100 feet below the stratigraphic equivalent of the base of the Lobo 6
sand, together with all of Conoco's right, title and interest in and to all
▇▇▇▇▇ (whether producing, non-producing or abandoned), water source, water
injection and other injection or disposal ▇▇▇▇▇ and systems, gathering systems,
materials, equipment, personal property, fixtures and facilities located on the
South ▇▇▇▇▇▇▇▇▇ Ranch Lands and used in connection with hydrocarbon production
from such lands and the above-described depths and all agreements, unitization
agreements, operating agreements, processing agreements, transportation
agreements, production sale agreements, leases, permits, rights-of-way,
easements, licenses, options and orders relating to such lands and
above-described depths and identified in Exhibit D, all pursuant to an Oil and
Gas Lease from Conoco to ▇▇▇▇▇▇▇ in substantially the form of lease attached
hereto as Exhibit C-2 (the "South ▇▇▇▇▇▇▇▇▇ Ranch Lease").
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2. EXCLUSIONS FROM THE PROPERTY. The Conoco Property to be conveyed and
assigned under this Agreement does not include the following property
(collectively, the "Excluded Property"):
(a) unless the parties otherwise agree in writing and enter into a separate
data license agreement, (i) seismic, geological, geochemical, or geophysical
data (including cores and other physical samples or materials from ▇▇▇▇▇ or
tests) belonging to Conoco or licensed from third parties, and (ii)
interpretations of seismic, geological, geochemical or geophysical data
belonging to Conoco or licensed from third parties;
(b) Conoco's right, title and interest in any agreements, unitization
agreements, operating agreements, processing agreements, transportation
agreements, production sale agreements, leases, permits, rights-of-way,
easements, licenses, options and orders related to the Conoco Property, to the
extent (i) they are attributable and allocable to rights and interests retained
by Conoco, (ii) they are non-transferrable, or (iii) they are listed as excluded
from the Conoco Property in Exhibit D;
(c) Conoco's corporate, financial and tax records, legal files and any
other records or information that Conoco considers proprietary or confidential,
except that Conoco will provide ▇▇▇▇▇▇▇ with copies of any tax records that are
necessary for Michael's ownership, administration or operation of the Conoco
Property after the Effective Time;
(d) claims of Conoco for refund of or loss carry forwards with respect to
(i) production, windfall profit, severance, ad valorem or any other taxes
attributable to any period prior to the Effective Time, (ii) income or franchise
taxes, or (iii) any taxes attributable to the excluded items described in this
Section 2;
(e) all proceeds (including proceeds held in suspense or escrow), benefits,
income or revenues attributable to (i) the sale of hydrocarbon production from
the Conoco Property prior to the Effective Time, (ii) the sale of natural gas
liquids extracted from hydrocarbons produced and saved from the Conoco Property
prior to the Effective Time, or (iii) the other excluded items described in
this Section 2;
(f) claims and causes of action arising from acts, omissions or events, or
damage or destruction of the Conoco Property before the Effective Time, and all
rights, titles, claims and interests of Conoco (i) under any policy or agreement
of insurance or indemnity, (ii) under any bond or letter of credit, or (iii) to
any insurance or condemnation proceeds or awards;
(g) all rights, obligations, benefits, awards, judgments, and settlements,
if any, applicable to the pending and potential litigation, claims and
proceedings listed in Exhibit E for which Conoco retains responsibility after
Closing; and
(h) any pipelines, facilities and equipment located on the Leases or South
▇▇▇▇▇▇▇▇▇ Ranch Lands that are not used or held for use in connection with the
development or operation of the Conoco Property or the production of
hydrocarbons from the Conoco Property.
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3. CONSIDERATION.
(a) Purchase Price. As consideration for the Conoco Property, ▇▇▇▇▇▇▇ shall
pay to Conoco at Closing (as defined hereinafter), the cash sum of TWENTY-THREE
MILLION THREE HUNDRED THOUSAND AND NO/100 DOLLARS ($23,300,000) (the "Purchase
Price"). The Purchase Price will be subject to the upward and downward
adjustments hereafter provided in this Agreement. The Purchase Price will be
allocated among the various portions of the Conoco Property and among
depreciable assets and nondepreciable assets as provided in Exhibit A-3.
(b) Reporting Value. Neither Party will take any position in preparing
financial statements, tax returns, reports to shareholders or governmental
authorities, or otherwise, that is inconsistent with the value assigned to each
portion of the Conoco Property in Exhibit A-3, unless the Parties otherwise
agree in writing.
(c) Section 1031 Exchange. Conoco and ▇▇▇▇▇▇▇ hereby agree that Conoco will
have the right at any time prior to Closing to assign all or a portion of its
rights under this Agreement to a Qualified Intermediary (as that term is defined
in Section 1.1031(k)- 1(g)(4)(v) of the Treasury Regulations) in order to
accomplish the transaction in a manner that will comply, either in whole or in
part, with the requirements of a like-kind exchange pursuant to Section 1031 of
the Internal Revenue Code of 1986, as amended, (the "Code"). If Conoco assigns
all or part of its rights under this Agreement pursuant to this Section 3(c),
Conoco will notify ▇▇▇▇▇▇▇ in writing of such assignment at or before Closing,
and ▇▇▇▇▇▇▇ agrees to (i) consent to Conoco's assignment of its rights in this
Agreement in form attached hereto as Exhibit F, and (ii) pay the Purchase Price
into a qualified escrow or qualified trust account at Closing as directed in
writing. Conoco and ▇▇▇▇▇▇▇ acknowledge and agree that any assignment of this
Agreement to a Qualified Intermediary shall not release Conoco from any of
Conoco's liabilities and obligations to ▇▇▇▇▇▇▇ under this Agreement.
4. ▇▇▇▇▇▇▇ PRE-ACQUISITION REVIEW. Conoco shall make a good-faith effort to
give ▇▇▇▇▇▇▇ and Michael's authorized representatives, at any reasonable time(s)
before Closing, (a) physical access to the ▇▇▇▇▇ and other equipment included in
the Conoco Property, at Michael's sole risk, cost and expense, for the purpose
of inspecting the same, and conducting witnessed tests of production from the
▇▇▇▇▇ thereon, (b) access to all production, engineering and other technical
data and records, and to all contract, land and lease records, to the extent
such data and records are in Conoco's possession and relate to the Conoco
Property, and (c) access to all Conoco accounting records pertaining to the
Conoco Property for the past three (3) years such that ▇▇▇▇▇▇▇ can perform an
audit of such records for such three (3) year period prior to the Closing Date;
provided, however, Conoco shall have no obligation to provide ▇▇▇▇▇▇▇ ▇▇▇▇
access to any data or information which Conoco considers proprietary or
confidential, which is not in Conoco's possession, or which access Conoco cannot
legally provide ▇▇▇▇▇▇▇ because of third-party restrictions.
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5. TITLE DEFECTS IN CONOCO PROPERTY.
(a) Definition of Title Defect. As used in this Agreement, the term "Title
Defect" shall mean a material deficiency in one (or more) of the following
respects:
(i) Conoco's title, as of the Effective Time (as defined hereinafter),
as to all or any portion of the Conoco Property, is subject to an outstanding
mortgage, deed of trust, lien or encumbrance or other adverse claim which would
interfere materially with the ownership, operation, use or value of the Conoco
Property;
(ii) Conoco owns less than the net revenue interest described on
Exhibit A-2 or more than the working interest described on Exhibit A-2 without a
corresponding increase in net revenue interest;
(iii) Conoco's rights and interests are subject to being reduced by
virtue of the exercise by a third party of any preferential right, reversionary,
back-in or other similar right not reflected on Exhibit A-2; and
(iv) Conoco is in material default under some material provision of a
lease, farmout agreement, operating agreement, or other agreement affecting the
Conoco Property.
(b) Notice of Title Defects. ▇▇▇▇▇▇▇ shall give Conoco written notice of
each Title Defect on or before five (5) days prior to the Closing Date, together
with full particulars relating thereto. ▇▇▇▇▇▇▇ SHALL BE DEEMED TO HAVE WAIVED
ALL TITLE DEFECTS OF WHICH CONOCO HAS NOT BEEN GIVEN TIMELY WRITTEN NOTICE AS
PROVIDED IN THIS SECTION 5, SAVE AND EXCEPT CLAIMS BASED UPON A BREACH OF THE
LIMITED WARRANTY OF TITLE PROVIDED IN THE ASSIGNMENT AND ▇▇▇▇ OF SALE ATTACHED
HERETO AS EXHIBIT C-1 AND THE SOUTH ▇▇▇▇▇▇▇▇▇ RANCH LEASE ATTACHED HERETO AS
EXHIBIT C-2. HOWEVER, SUCH LIMITED WARRANTY OF TITLE WILL EXTEND ONLY TO TITLE
DEFECTS THAT BECOME KNOWN TO ▇▇▇▇▇▇▇ AFTER THE CLOSING DATE.
(c) Interest Additions. Conoco may, by delivery of written notice to
▇▇▇▇▇▇▇ on or before five (5) days prior to Closing, request an increase in the
Purchase Price for the value of any net revenue interest owned by Conoco in the
Conoco Property that is greater than that shown on Exhibit A-2. Any such notice
by Conoco shall include all appropriate evidence to substantiate its position.
If Conoco and ▇▇▇▇▇▇▇ are unable to agree on the amount of the Purchase Price
increase for any such increase in Conoco's net revenue interest in the Conoco
Property, Conoco at its sole option may either (i) waive any Purchase Price
increase for the additional interest, or (ii) terminate this Agreement by giving
written notice to ▇▇▇▇▇▇▇ ▇▇▇▇▇ to the Closing Date, in which event this
Agreement shall be of no further force and effect and neither Party shall have
any further liability or obligation to the other Party under this Agreement. If
any such notice is not timely delivered, Conoco shall have no right to request a
Purchase Price increase in connection with the additional interest claimed in
the notice.
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6. REMEDIES FOR TITLE DEFECTS.
(a) Remedies of Title Defects. Upon timely delivery of a notice by ▇▇▇▇▇▇▇
of a Title Defect in the Conoco Property under Section 5, ▇▇▇▇▇▇▇ and Conoco
shall meet, within the period between the date of receipt of such notice and the
Closing Date, and may mutually agree to one of the following remedies with
respect to the Title Defect: (i) that Conoco shall cure or agree to cure such
Title Defect, to the extent agreed upon prior to Closing (provided, however,
Conoco shall have no obligation to perform such cure), (ii) that ▇▇▇▇▇▇▇ shall
accept the interest subject to the Title Defect "AS IS," and release Conoco from
all claims related to such Title Defect, (iii) that Conoco shall indemnify
▇▇▇▇▇▇▇ against all losses, costs, expenses and liabilities with respect to such
Title Defect, or (iv) that Conoco and ▇▇▇▇▇▇▇ shall adjust the Purchase Price by
an amount equal to the value of such Title Defect, as agreed by Conoco and
▇▇▇▇▇▇▇.
(b) Termination Rights. Either Party, by written notice to the other Party
prior to the Closing Date, shall have the right to terminate this Agreement upon
the occurrence of one or more of the following events: (i) if Conoco and ▇▇▇▇▇▇▇
are unable to agree prior to the Closing Date on the remedy (including the
amount of any Purchase Price adjustment) for any Title Defect of which Conoco
has been properly notified as provided in Section 5, or (ii) if the net amount
of the Purchase Price adjustments hereunder for Title Defects exceeds ten
percent (10%) of the Purchase Price. If either Party exercises its right to
terminate this Agreement due to one of the foregoing events, this Agreement will
be of no further force and effect and neither Party will have any further
liability or obligation to the other Party under this Agreement.
(c) Post-Closing Reimbursement of Purchase Price Adjustments. If ▇▇▇▇▇▇▇
receives a Purchase Price adjustment at Closing on account of a Title Defect,
Conoco shall have until June 30, 1998 to cure such Title Defect at Conoco's
cost. If by such date Conoco can demonstrate to Michael's reasonable
satisfaction that such Title Defect has been cured, then Conoco shall be
entitled to reimbursement from ▇▇▇▇▇▇▇ for the amount of the Purchase Price
adjustment for such Title Defect. ▇▇▇▇▇▇▇ shall pay such amount to Conoco within
fifteen (15) Business Days of the date Conoco demonstrates to Michael's
reasonable satisfaction that such Title Defect has been cured.
(d) Exclusive Remedy. The remedies set forth in this Section 6 are the
exclusive remedies under this Agreement for all Title Defect matters known to
▇▇▇▇▇▇▇ on or before the Closing Date, and, except as provided in this Section
6, Conoco shall have no liability to ▇▇▇▇▇▇▇ with respect to such Title Defects
in the Conoco Property. Conoco's limited warranty of title in the conveyance
instruments for the Conoco Property will be the exclusive remedy for any Title
Defects in the Conoco Property that become known to ▇▇▇▇▇▇▇ after the Closing
Date.
7. GAS IMBALANCES FOR CONOCO PROPERTY. ▇▇▇▇▇▇▇ shall assume all gas
imbalances that may exist with respect to production from the Conoco Property,
regardless of whether any such gas imbalances are attributable to production
from the Conoco Property before or after the Effective Time. There will be no
increase or decrease in the Purchase Price for any
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such gas imbalances. On and after Closing, all rights and obligations with
respect to all such gas imbalances will be an Assumed Obligation of ▇▇▇▇▇▇▇.
8. REPRESENTATIONS BY CONOCO. Conoco represents to ▇▇▇▇▇▇▇, each of which
representations shall survive Closing, that as of the date of this Agreement and
as of Closing:
(a) Due Organization. Conoco is a corporation duly organized, validly
existing, and in good standing under the laws of the state of Delaware and is
duly qualified to do business in the State of Texas and has satisfied all state
bonding requirements, if any.
(b) Corporate Power. Conoco has all requisite corporate power and authority
to carry on its business as presently conducted, to enter into this Agreement,
and to perform its obligations under this Agreement. The consummation of the
transactions contemplated by this Agreement will not violate, nor be in conflict
with, (i) any provision of its charter or bylaws or (ii) any agreement or
instrument to which it is a party or is bound (except for preferential rights to
purchase, maintenance of uniform interests, and required third party consents to
assignment, if any).
(c) Duly Executed. This Agreement has been duly executed and delivered on
behalf of Conoco, and at Closing all documents and instruments required
hereunder to be executed and delivered by it shall have been duly executed and
delivered and the transactions contemplated hereby shall have been duly and
validly authorized by all requisite corporate action.
(d) No Restraining Litigation. There are no pending or, to the best of
Conoco's knowledge without further investigation, threatened claims, lawsuits,
administrative proceedings, or governmental investigations or inquiries
involving Conoco's right to consummate the sale contemplated hereunder.
(e) Broker's Fees. Conoco has incurred no liability, contingent or
otherwise, for broker's or finder's fees in respect of this Agreement or the
transactions contemplated hereby for which ▇▇▇▇▇▇▇ shall have any responsibility
whatsoever.
9. REPRESENTATIONS BY ▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇ represents to Conoco, each of which
representations shall survive Closing, that as of the date of this Agreement and
as of Closing:
(a) Due Organization. ▇▇▇▇▇▇▇ is a corporation duly organized, validly
existing, and in good standing under the laws of the state of Texas and is duly
qualified to do business in the State of Texas and has satisfied all state
bonding requirements, if any.
(b) Corporate Power. ▇▇▇▇▇▇▇ has all requisite corporate power and
authority to carry on its business as presently conducted, to enter into this
Agreement, and to perform its obligations under this Agreement. The consummation
of the transactions contemplated by this
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Agreement will not violate, nor be in conflict with, (i) any provision of its
charter or bylaws or (ii) any agreement or instrument to which it is a party or
is bound.
(c) Duly Executed. This Agreement has been duly executed and delivered on
behalf of ▇▇▇▇▇▇▇, and at Closing, all documents and instruments required
hereunder to be executed and delivered by it shall have been duly executed and
delivered and the transactions contemplated hereby shall have been duly and
validly authorized by all requisite corporate action.
(d) No Restraining Litigation. There are no pending or, to the best of
Michael's knowledge without further investigation, threatened claims, lawsuits,
administrative proceedings, or governmental investigations or inquiries
involving Michael's right to consummate the sale contemplated hereunder.
(e) Broker's Fees. ▇▇▇▇▇▇▇ has incurred no liability, contingent or
otherwise, for broker's or finder's fees in respect of this Agreement or the
transactions contemplated hereby for which Conoco shall have any responsibility
whatsoever.
(f) Securities Laws and Other Dealings. ▇▇▇▇▇▇▇ has complied with all
federal and state securities laws applicable to the sale of the Conoco Property
and will comply with such laws if it subsequently disposes of all or any part of
the Conoco Property. ▇▇▇▇▇▇▇ is acquiring the Conoco Property for its own
account and not with a view to, or for offer of resale in connection with, a
distribution thereof, within the meaning of the Securities Act of 1933, 15
U.S.C. Section 77a et seq., and any other rules, regulations, and laws
pertaining to the distribution of securities. Except for traditional mortgage
financing from reputable financial institutions or corporate debt securities
offerings, ▇▇▇▇▇▇▇ has not sought or solicited, nor is ▇▇▇▇▇▇▇ participating
with, investors, partners or other third parties in order to fund the Purchase
Price and to close this transaction, and all funds used by ▇▇▇▇▇▇▇ in
connection with this transaction are Michael's own funds.
10. CLOSING CONDITIONS. Conoco and ▇▇▇▇▇▇▇ will not be obligated to close the
transaction described in this Agreement, and will each have the right to
terminate this Agreement, unless each of the conditions to its performance set
forth in this Section 10 is satisfied as of the Closing Date, or it waives in
whole or part any such condition to its performance that is unsatisfied as of
the Closing Date. If a Party elects to terminate this Agreement because a
condition to its performance is not satisfied, the terminating Party must give
the other Party written notice of termination on or before the Closing Date,
after which this Agreement will be of no further force and effect and neither
Party will have any further obligation to conclude the transfer of the Conoco
Property under this Agreement. The inclusion in this Agreement of conditions to
Conoco's and Michael's obligations at Closing shall not, in and of itself,
constitute a covenant of either Conoco or ▇▇▇▇▇▇▇ to satisfy the conditions to
the other Party's obligations at Closing.
(a) Representations and Warranties. Prior to Closing, Conoco and ▇▇▇▇▇▇▇
will each give the other prompt written notice of any matter known to them that
materially affects
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any of the representations or warranties under this Agreement, or renders any
such warranty or representation untrue or inaccurate. Conoco will not be
obligated to close if, as of the Closing Date, any matter represented or
warranted in this Agreement by ▇▇▇▇▇▇▇ is untrue, inaccurate or is misleading
in any material respect. ▇▇▇▇▇▇▇ will not be obligated to close if, as of the
Closing Date, any matter represented or warranted in this Agreement by Conoco
is untrue, inaccurate or is misleading in any material respect.
(b) Performance of Obligations. Conoco will not be obligated to close if,
as of the Closing Date, ▇▇▇▇▇▇▇ has not performed all obligations under this
Agreement that ▇▇▇▇▇▇▇ is required to perform on or before Closing. ▇▇▇▇▇▇▇ will
not be obligated to close if, as of the Closing Date, Conoco has not performed
all obligations under this Agreement that Conoco is required to perform on or
before Closing.
(c) Legal Proceedings. Neither Party will be obligated to close if, as of
the Closing Date, any suit or other proceeding is pending or threatened before
any court or governmental agency seeking substantial damages in connection with
or seeking to restrain, materially impair or prohibit, the transaction that is
the subject of this Agreement.
(d) Termination of Agreement. Neither Party will be obligated to close if,
as of the Closing Date, either Party has exercised a right to terminate this
Agreement under any provision of this Agreement.
11. CLOSING. Closing shall occur on or before March 31, 1998, or at such
other date as may be agreed by the Parties or as provided by this Agreement (the
"Closing Date"), at the offices of Conoco in Houston, Texas, or at such other
place as ▇▇▇▇▇▇▇ and Conoco may agree. "Closing" shall mean (a) the granting or
conveyance of the Conoco Property to ▇▇▇▇▇▇▇; (b) the complete satisfaction by
the Parties of the obligations of consideration under Section 3 above, and (c)
the transfer of the possession of the Conoco Property to ▇▇▇▇▇▇▇. At Closing,
the following will occur:
(a) Consideration. ▇▇▇▇▇▇▇ shall make payment of the Purchase Price, as
adjusted, by wire transfer in immediately available funds to an account or
accounts to be designated by Conoco. Prior to Closing, Conoco will notify
▇▇▇▇▇▇▇ of the amounts to be deposited in each designated account.
(b) Grant or Conveyance. Conoco will grant or convey, as the case may be,
the Conoco Property to ▇▇▇▇▇▇▇ by executing and delivering the Assignment and
▇▇▇▇ of Sale in substantially the form attached hereto as Exhibit C-1 and the
South ▇▇▇▇▇▇▇▇▇ Ranch Lease in substantially the form attached hereto as Exhibit
C-2.
(c) Non-foreign Affidavits. Conoco shall execute and deliver to ▇▇▇▇▇▇▇ a
Non-Foreign Affidavit, in substantially the form attached hereto as ▇▇▇▇▇▇▇ ▇.
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▇▇
(▇) ▇▇▇▇▇▇▇▇▇▇. Conoco shall (subject to the terms of any applicable
agreements and to the other provisions hereof) deliver to ▇▇▇▇▇▇▇ exclusive
possession of the Conoco Property, effective as of the Effective Time.
(e) Records of Conoco Property. Originals (or copies with respect to the
South ▇▇▇▇▇▇▇▇▇ Ranch Lands) of all books, records and files in the possession
of Conoco pertaining to the Conoco Property, including, without limitation, all
well files, correspondence, geological and engineering information (other than
those constituting part of the Excluded Property), shall be made available for
delivery to ▇▇▇▇▇▇▇ at Conoco's offices where currently maintained, within
thirty (30) days after the Closing. Conoco shall have the right to retain
copies (or originals with respect to the South ▇▇▇▇▇▇▇▇▇ Ranch Lands) of any or
all of such books, records and files. Conoco reserves the right to later
examine the records and information delivered to ▇▇▇▇▇▇▇ pursuant to this
Section 11(e) to the extent such examination is necessary for any relevant
business purpose. All information and data shall be furnished as a matter of
convenience only to ▇▇▇▇▇▇▇ and Michael's reliance on same shall be at
Michael's sole risk.
(f) Other Documents and Actions. Conoco and ▇▇▇▇▇▇▇ shall execute and
deliver to each other the letter agreement attached hereto as Exhibit H. In
addition, Conoco and ▇▇▇▇▇▇▇ shall execute and deliver such other instruments
and take such other actions as may be required pursuant to the terms of this
Agreement.
12. FURTHER ASSURANCES. After the Closing, each of the Parties shall execute,
acknowledge and deliver to the other such further instruments, and take such
other actions as may be reasonably necessary to carry out the provisions of this
Agreement, including, without limitation, all division orders, transfer orders
and all other documents necessary to fully vest in the Parties the rights,
obligations and benefits acquired pursuant to this Agreement. To the extent that
Conoco's production sale contracts are transferrable, ▇▇▇▇▇▇▇ shall assume all
responsibility for notifying the purchasers of oil and gas production, and such
other designated persons who may be responsible for disbursing payments for the
purchase of such production, of the transfer of ownership of the Conoco
Property. In connection therewith, Conoco shall provide ▇▇▇▇▇▇▇ with a complete
list of all purchasers of oil, gas and condensate production from the Conoco
Property no later than five (5) days prior to the Closing. ▇▇▇▇▇▇▇ shall take
all actions necessary to effectuate the transfer of such payments to ▇▇▇▇▇▇▇ as
of the Effective Time.
13. EFFECTIVE TIME. The grant and conveyance of the Conoco Property from
Conoco to ▇▇▇▇▇▇▇ shall be effective as of January 1, 1998, at 7:00 a.m. Central
Standard Time (the "Effective Time").
14. RESERVATIONS AND EXCEPTIONS. Conoco and ▇▇▇▇▇▇▇ each agree that the
transfer of the Conoco Property is made subject to all reservations, exceptions,
limitations, contracts and other burdens or instruments which are of record or
of which the Parties had actual or constructive notice affecting such
properties, including any matter included or referenced in the materials made
available by each Party to the other.
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15. ASSUMPTION OF LIABILITIES AND INDEMNITIES FOR CONOCO PROPERTY. As used
in this Section 15 and the other provisions of this Agreement, "Claims" shall
mean claims, demands, causes of action, liabilities, damages, penalties and
judgments of any kind or character and all costs and fees (including reasonable
attorneys' fees) paid or incurred in connection therewith.
(A) ON AND AFTER CLOSING, ▇▇▇▇▇▇▇ SHALL (I) ASSUME, AND BE RESPONSIBLE FOR
AND COMPLY WITH, ALL DUTIES AND OBLIGATIONS OF CONOCO, EXPRESS OR IMPLIED, WITH
RESPECT TO THE CONOCO PROPERTY ARISING ON OR AFTER THE EFFECTIVE TIME,
INCLUDING, WITHOUT LIMITATION, THOSE ARISING UNDER OR BY VIRTUE OF ANY LEASE,
CONTRACT, AGREEMENT, DOCUMENT, PERMIT, APPLICABLE STATUTE OR RULE, REGULATION OR
ORDER OF ANY GOVERNMENTAL AUTHORITY (SPECIFICALLY INCLUDING, WITHOUT LIMITATION,
ANY GOVERNMENTAL REQUEST OR REQUIREMENT TO PLUG, RE-PLUG AND/OR ABANDON ANY WELL
OF WHATSOEVER TYPE, STATUS OR CLASSIFICATION, WHETHER NOW EXISTING OR HEREAFTER
ARISING OR ACCRUING AND WHETHER SUCH ▇▇▇▇▇ ARE ACTIVE, INACTIVE, IDLE, OR HAVE
BEEN PREVIOUSLY ABANDONED AS OF THE EFFECTIVE TIME, AND/OR TAKE ANY CLEAN-UP OR
OTHER ACTION WITH RESPECT TO THE CONOCO PROPERTY), (II) PAY AND DISCHARGE ALL
COSTS, EXPENSES AND OBLIGATIONS RELATING TO THE CONOCO PROPERTY THAT ACCRUE ON
AND AFTER THE EFFECTIVE TIME, SUBJECT TO THE POST-CLOSING ADJUSTMENTS PROVIDED
FOR IN SECTIONS 17 AND 18 HEREOF, (III) BE RESPONSIBLE FOR ANY AND ALL CLAIMS
ARISING OUT OF THE PRODUCTION OR SALE OF HYDROCARBONS FROM THE CONOCO PROPERTY
(INCLUDING WITHOUT LIMITATION THE PROPER ACCOUNTING AND PAYMENT TO PARTIES FOR
THEIR INTERESTS THEREIN), INSOFAR AS SUCH CLAIMS RELATE TO PERIODS OF TIME AFTER
THE EFFECTIVE TIME, (IV) ASSUME THE LIABILITIES AND OBLIGATIONS WITH RESPECT TO
THE OWNERSHIP OR OPERATION OF THE CONOCO PROPERTIES PRIOR TO THE EFFECTIVE TIME
SPECIFICALLY SET FORTH IN SECTIONS 22 AND 24 OF THIS AGREEMENT OR ANY OTHER
PROVISION OF THIS AGREEMENT AS BEING ASSUMED BY ▇▇▇▇▇▇▇ (THE MATTERS IN
SUBSECTIONS (I) THROUGH (IV) COLLECTIVELY BEING THE "ASSUMED OBLIGATIONS").
▇▇▇▇▇▇▇ SHALL DEFEND, INDEMNIFY AND HOLD CONOCO AND ITS PREDECESSORS IN INTEREST
HARMLESS FROM ANY AND ALL CLAIMS TO OR BY THIRD PARTIES RELATING TO OR ARISING
OUT OF MICHAEL's "ASSUMED OBLIGATIONS" UNDER THIS AGREEMENT.
(B) ON AND AFTER CLOSING, CONOCO SHALL CONTINUE TO BE RESPONSIBLE FOR ALL
DUTIES, OBLIGATIONS, COSTS, AND EXPENSES RELATING TO CONOCO'S OWNERSHIP OF THE
CONOCO PROPERTY PRIOR TO THE EFFECTIVE TIME (INCLUDING WITHOUT LIMITATION THE
MATTERS DESCRIBED IN SUBSECTIONS (A)(I) THROUGH (A)(III) ABOVE INSOFAR AS THEY
RELATE TO PERIODS PRIOR To THE EFFECTIVE TIME), TO THE EXTENT THEY ARE NOT
EXPRESSLY ASSUMED BY ▇▇▇▇▇▇▇ UNDER SUBSECTION (A)(IV) ABOVE (THE "RETAINED
OBLIGATIONS"). CONOCO SHALL DEFEND, INDEMNIFY AND HOLD HARMLESS ▇▇▇▇▇▇▇ FROM ANY
AND ALL CLAIMS TO OR BY THIRD PARTIES RELATING TO OR ARISING OUT OF CONOCO'S
"RETAINED OBLIGATIONS" UNDER THIS AGREEMENT.
(C) UNLESS THIS AGREEMENT EXPRESSLY PROVIDES TO THE CONTRARY, THE
INDEMNITIES SET FORTH IN THIS AGREEMENT APPLY REGARDLESS OF WHETHER: (I) THE
INDEMNIFIED PARTY (OR ANY EMPLOYEE, AGENT, CONTRACTOR, SUCCESSOR OR ASSIGN OF
THE
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INDEMNIFIED PARTY) CAUSES, IN WHOLE OR PART, AN INDEMNIFIED CLAIM; (II) AN
INDEMNIFIED CLAIM ARISES OUT OF OR RESULTS FROM THE INDEMNIFIED PARTY'S (OR AN
EMPLOYEE'S, AGENT'S, CONTRACTOR'S, SUCCESSOR'S OR ASSIGN'S) SOLE OR CONCURRENT
NEGLIGENCE; (III) THE INDEMNIFIED PARTY (OR ANY EMPLOYEE, AGENT, CONTRACTOR,
SUCCESSOR OR ASSIGN OF THE INDEMNIFIED PARTY) IS DEEMED TO BE STRICTLY LIABLE,
IN WHOLE OR PART, FOR AN INDEMNIFIED CLAIM; OR (IV) ANY PART OF AN INDEMNIFIED
CLAIM IS THE RESULT OF THE IMPOSITION OF PUNITIVE DAMAGES. ALL INDEMNITIES SET
FORTH IN THIS AGREEMENT EXTEND TO THE OFFICERS, DIRECTORS, EMPLOYEES AND
AFFILIATES OF THE PARTY INDEMNIFIED, AND COVER THE ACTS AND OMISSIONS OF THE
OFFICERS, DIRECTORS, EMPLOYEES, CONTRACTORS, SUCCESSORS AND ASSIGNS OF THE
INDEMNIFYING PARTY.
(D) EACH INDEMNIFIED PARTY HEREUNDER AGREES THAT UPON ITS DISCOVERY OF
FACTS GIVING RISE TO A CLAIM FOR INDEMNITY UNDER THE PROVISIONS OF THIS
AGREEMENT, INCLUDING RECEIPT BY IT OF ANY CLAIM, JUDICIAL OR OTHERWISE, BY ANY
THIRD PARTY WITH RESPECT TO ANY MATTER AS TO WHICH IT IS ENTITLED TO INDEMNITY
UNDER THE PROVISIONS OF THIS AGREEMENT, IT WILL GIVE PROMPT NOTICE THEREOF IN
WRITING TO THE INDEMNIFYING PARTY, TOGETHER WITH A STATEMENT OF SUCH INFORMATION
RESPECTING ANY OF THE FOREGOING AS IT SHALL THEN HAVE. SUCH NOTICE SHALL INCLUDE
A FORMAL DEMAND FOR INDEMNIFICATION UNDER THIS AGREEMENT. THE INDEMNIFIED PARTY
SHALL AFFORD THE INDEMNIFYING PARTY A REASONABLE OPPORTUNITY TO PAY, SETTLE OR
CONTEST THE CLAIM AT THE INDEMNIFYING PARTY'S EXPENSE. HOWEVER, IF THE
INDEMNIFYING PARTY FAILS TO PROMPTLY ASSUME THE DEFENSE OF THE CLAIM AFTER
RECEIVING NOTICE OF THE CLAIM FROM THE INDEMNIFIED PARTY, THE INDEMNIFIED PARTY
SHALL BE ENTITLED TO PAY, SETTLE OR CONTEST THE CLAIM WITHOUT WAIVING ITS RIGHT
TO INDEMNIFICATION UNDER THIS AGREEMENT.
16. OWNERSHIP OF PRODUCTION AND HYDROCARBON INVENTORIES. All proceeds
(including proceeds held in suspense or escrow) from the sale of production
actually sold and delivered by Conoco prior to the Effective Time and
attributable to the Conoco Property shall belong to Conoco, and all proceeds
from the sale of production actually sold and delivered after the Effective Time
and attributable to the Conoco Property shall belong to ▇▇▇▇▇▇▇. In addition,
all unsold oil, condensate or liquid hydrocarbons (collectively, the "Stock Tank
Oil") in storage on the Conoco Property at the Effective Time shall belong to
▇▇▇▇▇▇▇, and there shall be no increase in the Purchase Price for the value of
the Stock Tank Oil. Proceeds from the sale of natural gas liquids ("NGL's")
extracted from production from the Conoco Property before the Effective Time
will belong to Conoco, and proceeds from the sale of NGL's extracted from
production from the Conoco Property after the Effective Time will belong to
▇▇▇▇▇▇▇.
17. CLOSING ADJUSTMENTS TO THE PURCHASE PRICE
(a) Preliminary Settlement Statement. At Closing, the Purchase Price will
be adjusted as set forth in this Section 17. No later than three (3) Business
Days prior to Closing, Conoco will provide ▇▇▇▇▇▇▇ a preliminary settlement
statement identifying all adjustments to the Purchase Price to be made at
Closing (the "Preliminary Settlement Statement "). Conoco and
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▇▇▇▇▇▇▇ acknowledge that some items in the Preliminary Settlement Statement may
be estimates or otherwise subject to change in the final settlement statement
for the Property to be prepared pursuant to Section 18. The term "Business Day"
means any day which is not a Saturday, Sunday or legal holiday recognized by
banking institutions in the State of Texas.
(b) Upward Adjustments. The Purchase Price will be increased by the
following expenses and revenues related to the Conoco Property:
(i) to the extent paid or incurred by Conoco, all actual production
expenses, operating expenses, overhead charges under applicable operating
agreements, capital expenditures, and other costs and expenses relating to the
ownership or operation of the Conoco Property (including royalties, minimum
royalties, rentals, and prepaid charges), to the extent they are attributable to
the period from and after the Effective Time;
(ii) any proceeds from the sale of hydrocarbon production and other
income from the Conoco Property received by ▇▇▇▇▇▇▇, to the extent attributable
to the period before the Effective Time;
(iii) any other increases in the Purchase Price specified in this
Agreement or otherwise agreed in writing between Conoco and ▇▇▇▇▇▇▇ ▇▇▇▇▇ to or
at Closing.
(c) Downward Adjustments. The Purchase Price will be decreased by the
following expenses and revenues related to the Conoco Property:
(i) to the extent paid or incurred by ▇▇▇▇▇▇▇, all actual production
expenses, operating expenses, overhead charges under applicable operating
agreements, capital expenditures, and other costs and expenses relating to the
ownership or operation of the Conoco Property (including royalties, minimum
royalties, rentals, and prepaid charges), to the extent they are attributable to
the period before the Effective Time; provided, that, ▇▇▇▇▇▇▇ shall not pay any
such costs exceeding $5,000 without Conoco's prior written consent;
(ii) any proceeds from the sale of hydrocarbon production (before
deduction of any royalties under the applicable pricing provisions on any oil,
gas and gas plant liquids sales and processing agreements) and other income
received by Conoco, to the extent attributable to the Conoco Property and the
period from and after the Effective Time;
(iii) any other decreases in the Purchase Price specified in this
Agreement or otherwise agreed in writing between Conoco and ▇▇▇▇▇▇▇ ▇▇▇▇▇ to or
at Closing.
18. POST-CLOSING ACCOUNTING ON CONOCO PROPERTY.
(a) Determination of Final Purchase Price. As soon as practicable after the
Closing, Conoco shall prepare and deliver to ▇▇▇▇▇▇▇, in accordance with this
Agreement and generally accepted accounting principles, a statement (the
"Intermediate Settlement Statement") setting forth for the Conoco Property each
adjustment or payment that was not finally determined
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as of the Closing in connection with the Conoco Property and showing the
calculation of such adjustments to the Purchase Price. As soon as practicable
after receipt of the Intermediate Settlement Statement, ▇▇▇▇▇▇▇ shall deliver to
Conoco a written report containing any changes that ▇▇▇▇▇▇▇ proposes be made to
such Intermediate Settlement Statement. The Parties undertake to agree with
respect to such Intermediate Settlement Statement no later than 90 days after
the Closing Date, such agreement constituting and to be embodied in a "Final
Settlement Statement" and to establish the "Final Purchase Price," and the date
upon which the Final Purchase Price is established to be the "Final Settlement
Date." In the event ▇▇▇▇▇▇▇ and Conoco are unable to mutually agree upon the
amount of the Final Settlement Statement in connection with the Conoco Property,
an audit shall be conducted by a mutually agreed upon accounting firm. ▇▇▇▇▇▇▇
and Conoco agree to be bound by the findings of such audit, insofar as the Final
Settlement Statement amount is concerned, and each shall bear one half of all
expenses associated with such audit. In the event that (a) the Final Purchase
Price is more than the amount paid at Closing, ▇▇▇▇▇▇▇ shall pay to Conoco the
amount of such difference, or (b) the Final Purchase Price is less than the
amount paid at Closing, Conoco shall pay to ▇▇▇▇▇▇▇ the amount of such
difference, in either event by wire transfer in immediately available funds, or,
if the amount of such difference is less than $25,000, by corporate check,
within 10 Business Days after the amount due is finally determined.
(b) Post-Closing Joint Interest Audit Adjustments. In connection with the
Conoco Property, Conoco shall be responsible for the settlement of all joint
billing audits which relate to accounting periods prior to the Effective Time
and ▇▇▇▇▇▇▇ shall be responsible for the settlement of all joint billing audits
which relate to accounting periods after the Effective Time. Any credits
received by ▇▇▇▇▇▇▇ after the Effective Time attributable to expenses paid by
Conoco for periods prior to the Effective Time on behalf of the Conoco Property
shall be promptly reimbursed to Conoco by ▇▇▇▇▇▇▇. Any credits received by
Conoco after the Effective Time attributable to expenses paid by ▇▇▇▇▇▇▇ for
periods after the Effective Time on behalf of the Conoco Property shall be
promptly reimbursed to ▇▇▇▇▇▇▇ by Conoco.
(c) Other Post-Closing Revenues and Expenses. After the determination of
the Final Purchase Price under this Section 18, (i) if either Party receives
revenues that belong to the other Party under this Agreement, the Party
receiving the revenues agrees to promptly remit those revenues to the other
Party, and (ii) if either Party pays expenses that are the responsibility of the
other Party under this Agreement, the Party on whose behalf the expenses were
paid agrees to promptly reimburse the other Party for the expenses paid on its
behalf upon receiving satisfactory evidence of such payment. However, neither
Party will be obligated to reimburse the other Party for any such expense in
excess of $5,000 unless it has been consulted about that expense prior to
payment and has authorized such payment, unless that payment was required by a
government agency or other government entity.
19. TAXES AND EXPENSES.
(a) Recording Expenses. ▇▇▇▇▇▇▇ shall pay for all recording, filing and
transfer fees, stamps and taxes in connection with the recording of the
conveyance documents and the transfer of the Conoco Property pursuant to this
Agreement, all other state and federal transfer
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documents, and any other instruments that must be filed to effectuate the
transfer of the Property.
(b) Ad Valorem, Real Property and Personal Property Taxes. All Ad Valorem
Taxes, Real Property Taxes, Personal Property Taxes, and similar obligations
("Property Taxes") on the Conoco Property are Conoco's obligation for periods
before the Effective Time and Michael's obligation for periods after the
Effective Time. If Property Taxes for the current tax year have not been
assessed and paid as of the Closing Date, ▇▇▇▇▇▇▇ shall file all required
reports and returns incident to the Property Taxes and pay the Property Taxes
for the current tax year and subsequent periods. Conoco will reimburse ▇▇▇▇▇▇▇
promptly for Conoco's proportionate share of these taxes, prorated as of the
Effective Time, upon receipt of evidence of Michael's payment of the taxes. If
Property Taxes for the current tax year have been assessed and paid as of the
Closing Date, ▇▇▇▇▇▇▇ will reimburse Conoco for its proportionate share of these
taxes, prorated as of the Effective Time, as a closing adjustment to the
Purchase Price, as provided in Section 17 of this Agreement.
(c) Severance Taxes. Conoco shall bear and pay all severance, production,
excise or other taxes measured by hydrocarbon production from the Conoco
Property, or the receipt of proceeds therefrom, to the extent attributable to
production from the Conoco Property before the Effective Time. ▇▇▇▇▇▇▇ shall
bear and pay all such taxes on production from the Conoco Property on and after
the Effective Time. Conoco shall withhold and pay on behalf of ▇▇▇▇▇▇▇ all such
taxes on production from the Conoco Property between the Effective Time and the
Closing Date, and the amount of any such payment shall be reimbursed to Conoco
as a closing adjustment to the Purchase Price pursuant to Section 17. If either
Party pays taxes owed by the other Party, upon receipt of evidence of payment
the non-paying Party will reimburse the paying Party promptly for its
proportionate share of such taxes.
(d) Tax and Financial Reporting.
(i) IRS Form 8594. If the parties mutually agree that a filing of Form
8594 is required, the parties will confer and cooperate in the preparation and
filing of their respective forms to reflect a consistent reporting of the agreed
upon allocation of the value of the Conoco Property.
(ii) Financial Reporting. Conoco and ▇▇▇▇▇▇▇ agree to furnish to each
other at Closing or as soon thereafter as practicable any and all information
and documents reasonably required to comply with tax and financial reporting
requirements and audits.
(iii) Intangible Drilling Cost Recapture. Conoco and ▇▇▇▇▇▇▇ agree to
furnish to each other, at Closing or as soon as practicable thereafter, data
relative to deductions claimed, pursuant to Section 263(c) of the Internal
Revenue Code of 1986, for intangible drilling costs related to the Conoco
Property, and any other relevant data to allow each Party to calculate the
carryover intangible drilling costs associated with the Conoco Property that is
subject to potential recapture under Section 1254(a) of the Internal Revenue
Code of 1986.
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(e) Sales and Use Taxes. The Purchase Price excludes any sales taxes or
other taxes in connection with the sale of the Conoco Property. ▇▇▇▇▇▇▇ shall be
responsible for and pay all federal, state, or local sales, transfer, gross
proceeds, use and similar taxes incident or applicable to or caused by the
transfer of the Conoco Property to ▇▇▇▇▇▇▇ under this Agreement. If Conoco is
required to pay such sales, use or similar taxes on behalf of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
will reimburse Conoco at Closing for all sales and use taxes due and payable on
the transfer of the Conoco Property to ▇▇▇▇▇▇▇.
(f) Income Taxes. Each Party shall be responsible for its own state and
federal income taxes, if any, as may result from this transaction.
(g) Incidental Expenses. Each party shall bear its own respective expenses
incurred in connection with the negotiation and Closing of this transaction,
including its own consultants' fees, attorneys' fees, accountants' fees, and
other similar costs and expenses.
20. CASUALTY LOSS ON CONOCO PROPERTY. If prior to the Closing all or any
portion of the Conoco Property is substantially damaged or destroyed by fire or
other casualty ("Casualty Defect"), Conoco shall notify ▇▇▇▇▇▇▇ promptly after
Conoco learns of such event. Conoco shall have the right, but not the
obligation, to cure the Casualty Defect by repairing such damage or, in the case
of personal property or fixtures, replacing them with equivalent items, no later
than Closing, all to Michael's reasonable satisfaction. If any uncured Casualty
Defect exists at the Closing, the Purchase Price shall be reduced by the
aggregate reduction in the value of the Conoco Property on account of such
uncured Casualty Defect as determined by the mutual agreement of the Parties. If
(i) the Parties fail for any reason to agree prior to the Closing as to the
amount of any Purchase Price adjustment on account of any uncured Casualty
Defects, or (ii) the amount of such downward adjustment of the Purchase Price at
Closing exceeds twenty percent (20%) of the Purchase Price, then either Party
upon written notice to the other Party shall have the right to terminate this
Agreement, in which event this Agreement shall be of no further force and effect
and neither Party shall have any further liability or obligation to the other
Party under this Agreement.
21. NOTICES. All communications required or permitted under this Agreement
shall be in writing and any communication or delivery hereunder shall be deemed
to have been fully made if actually delivered, or if mailed by registered or
certified mail, postage prepaid, or if sent by telecopy to the address as set
forth below:
CONOCO ▇▇▇▇▇▇▇
------ -------
Conoco Inc. ▇▇▇▇▇▇▇ Petroleum Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Freeway
▇.▇. ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇▇ Attn: ▇▇▇▇▇ ▇. ▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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Any Party, by written notice to the other, may change the address or the
individual to which or to whom notices are to be sent under this Agreement.
22. DISCLAIMERS/ACKNOWLEDGMENTS FOR CONOCO PROPERTY.
(a) NO WARRANTY, EXPRESS OR IMPLIED. CONVEYANCE OF THE CONOCO PROPERTY
SHALL BE WITHOUT WARRANTY OF TITLE OF ANY KIND, EXPRESS OR IMPLIED, EXCEPT BY,
THROUGH OR UNDER CONOCO, BUT NOT OTHERWISE. CONVEYANCE OF THE CONOCO PROPERTY
SHALL BE WITHOUT WARRANTY WHATSOEVER, EXPRESS, STATUTORY, OR IMPLIED, AS TO
DESCRIPTION, PHYSICAL CONDITION OF THE CONOCO PROPERTY (INCLUDING, WITHOUT
LIMITATION, THE ENVIRONMENTAL CONDITION OF THE CONOCO PROPERTY), QUALITY, VALUE,
FITNESS FOR PURPOSE, MERCHANTABILITY, OR OTHERWISE. ▇▇▇▇▇▇▇ shall satisfy
itself, prior to the Closing, as to the type, condition, quality and extent of
the property and property interests which comprise the Conoco Property they are
receiving pursuant to this Agreement and under this sale. ▇▇▇▇▇▇▇ shall have the
right of full substitution and subrogation to any and all rights and actions of
which Conoco has or may have against any and all preceding owners or vendors of
the Conoco Property other than affiliates of Conoco.
(b) Acknowledgments of ▇▇▇▇▇▇▇ at Closing. By closing on the transaction
provided for in this Agreement, ▇▇▇▇▇▇▇ shall be deemed to have acknowledged and
does hereby acknowledge and admit that: (i) ▇▇▇▇▇▇▇ has been given the
opportunity to adequately inspect the Conoco Property for all purposes prior to
Closing; (ii) ▇▇▇▇▇▇▇ is aware that the Conoco Property has been used for the
exploration, development, production, treating and transporting of oil, gas and
other hydrocarbon products and that physical changes may have occurred as a
result of such use and that Conoco has disclosed, and ▇▇▇▇▇▇▇ is further aware,
that there exists the possibility that there could exist on the Conoco Property
as a result of such use or uses one or more detrimental environmental conditions
(including without limitation naturally occurring radioactive material or
"NORM"), or that there could have occurred from such use or uses one or more
releases of hazardous substances (as defined in CERCLA or RCRA) or releases of
chemical substances into, or other pollution or contamination of or into, the
ambient air, surface water, ground water, or land surface and subsurface strata
of any real property included in the Conoco Property and of contiguous, or a
series of contiguous, real properties not associated with the Conoco Property;
(iii) ▇▇▇▇▇▇▇ has entered into this Agreement on the basis of its own
investigation of the physical condition of the Conoco Property and the land
related thereto (including the environmental condition of the Conoco Property);
and (iv) ▇▇▇▇▇▇▇, WITH FULL KNOWLEDGE OF THE FOREGOING AFTER CONDUCTING THE
ABOVE DESCRIBED INVESTIGATION AND EVALUATION, IS ACQUIRING THE CONOCO PROPERTY
ON A "WHERE IS" AND "AS IS" BASIS; AND ▇▇▇▇▇▇▇, BY ACQUIRING THE CONOCO PROPERTY
ON A "WHERE IS" AND "AS IS" BASIS WAIVES ANY CLAIMS OR OTHER RIGHTS OF
INDEMNIFICATION, CONTRIBUTION OR RECOURSE IT MAY HAVE AGAINST OR FROM CONOCO
WITH RESPECT TO THE CONDITION OF THE CONOCO PROPERTY, INCLUDING, WITHOUT
LIMITATION, THE ENVIRONMENTAL CONDITION OF THE CONOCO PROPERTY AND DAMAGE TO
NATURAL RESOURCES ASSOCIATED WITH THE CONOCO PROPERTY (INCLUDING ANY LIABILITY
UNDER CERCLA OR OTHER ENVIRONMENTAL LAWS), WHETHER CONTRACT, TORT OR STATUTORY
IN
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NATURE, REGARDLESS OF THE NEGLIGENCE, FAULT OR STRICT (STATUTORY) LIABILITY OF
CONOCO.
23. INDEPENDENT EVALUATION. ▇▇▇▇▇▇▇ represents that it has made an
independent evaluation of the Conoco Property, and acknowledges that Conoco has
made no statements or representations concerning the present or future value of
the anticipated income, costs, or profits, if any, to be derived from such
property, the physical or environmental condition of such property, the quantity
and quality of any oil and gas or other minerals that may be produced from such
property, or any other matter with respect to such property and THAT CONOCO
NEITHER IMPLIEDLY NOR EXPRESSLY WARRANTS THE DESCRIPTION, TITLE, VALUE, QUALITY,
PHYSICAL CONDITION OF SUCH PROPERTY (INCLUDING, WITHOUT LIMITATION, THE
ENVIRONMENTAL CONDITION OF SUCH PROPERTY), MERCHANTABILITY, OR FITNESS FOR
PURPOSE OF ANY OF SUCH PROPERTIES OR THE ▇▇▇▇▇, EQUIPMENT, PIPELINE FACILITIES,
OR OTHER PROPERTY LOCATED THEREON OR USED IN CONNECTION THEREWITH. ▇▇▇▇▇▇▇
further acknowledges that, in entering into this Agreement, they have relied
solely upon its independent examination of the Conoco Property and public
records relating to such property and its independent estimates, computations,
evaluations, reports and studies based thereon and has not relied on any
representation or statement made by Conoco. All information and data furnished
to ▇▇▇▇▇▇▇ is believed by Conoco to be accurate and correct to the best of its
knowledge without investigation; however, CONOCO MAKES NO WARRANTY OR
REPRESENTATION AS TO THE ACCURACY, COMPLETENESS, MATERIALITY OR CORRECTNESS OF
ANY INFORMATION FURNISHED TO ▇▇▇▇▇▇▇. ANY RELIANCE BY ▇▇▇▇▇▇▇ ON SUCH
INFORMATION IS AT MICHAEL'S SOLE RISK AND CONOCO SHALL HAVE NO LIABILITY
WHATSOEVER TO ▇▇▇▇▇▇▇ IN CONNECTION THEREWITH.
24. ENVIRONMENTAL ASSESSMENT AND INDEMNIFICATION.
(a) Definition of Adverse Environmental Condition. "Adverse Environmental
Conditions" shall mean any individual contamination or condition that would
require $50,000 or more of out-of-pocket costs and expenses to remedy and that
is in violation of the Environmental Laws (as hereafter defined), resulting from
any discharge, release, disposal, production, storage, treatment, or any other
activities on, in or from the Conoco Property, or the migration or
transportation from other lands to the Conoco Property, prior to the Closing
Date, of any wastes, pollutants, contaminants, hazardous materials or other
materials or substances that are subject to regulation under any laws, rules or
regulations relating to the protection of health or the environment, including,
without limitation, the Clean Air Act, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Federal Water Pollution Control Act,
the Safe Drinking Water Act, the Toxic Substance Control Act, the Hazardous and
Solid Waste Amendments Act of 1984, the Superfund Amendments and Reauthorization
Act of 1986, the Hazardous Materials Transportation Act, the Clean Water Act,
the National Environmental Policy Act, the Endangered Species Act, the Fish and
Wildlife Coordination Act, the National Historic Preservation Act and the Oil
Pollution Act of 1990, as well as any state and local regulation or law
governing the same, similar or related matters, all as may have been or be
amended from time to time (collectively, "Environmental Laws"). The term
"Adverse Environmental Conditions" also shall include any such individual
contamination
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or condition Of the Conoco Property that would require $50,000 or more of
out-of-pocket costs and expenses to remedy that is only temporarily authorized
by law, permit, fee agreement or other arrangement.
(b) Pre-Closing Remedies. ▇▇▇▇▇▇▇ shall promptly notify Conoco in writing
of any Adverse Environmental Condition that becomes known to ▇▇▇▇▇▇▇ ▇▇▇▇▇ to
Closing as a result of Michael's investigation of the Conoco Property and the
estimated costs for remediating any such conditions which are located on the
Conoco Property. ▇▇▇▇▇▇▇ will be deemed to have waived any claim against Conoco
with respect to any Adverse Environmental Condition known to ▇▇▇▇▇▇▇ ▇▇▇▇▇ to
Closing and about which ▇▇▇▇▇▇▇ fails to notify Conoco in writing prior to
Closing. ▇▇▇▇▇▇▇ shall provide such information regarding any such Adverse
Environmental Conditions as Conoco may reasonably request. If Conoco receives
notice from ▇▇▇▇▇▇▇ ▇▇▇▇▇ to Closing of any Adverse Environmental Condition,
▇▇▇▇▇▇▇ shall have the right to request a reduction in the Purchase Price equal
to the cost and expense of remediating the Adverse Environmental Condition to
Michael's reasonable satisfaction, the amount of which shall be mutually agreed
to by Conoco and ▇▇▇▇▇▇▇. If Conoco and ▇▇▇▇▇▇▇ agree on the amount of a
Purchase Price reduction for an Adverse Environmental Condition, such reduction
shall be made at Closing. Any Adverse Environmental Condition for which ▇▇▇▇▇▇▇
receives a Purchase Price reduction shall become an Assumed Obligation of
▇▇▇▇▇▇▇ at Closing and Conoco shall have no further liability or obligation in
connection with such Adverse Environmental Condition. However, if (i) the
Parties are unable to agree on a Purchase Price reduction for any such Adverse
Environmental Condition, or (ii) the agreed cost of remedying all such Adverse
Environmental Conditions exceeds 3% of the Purchase Price, either Conoco or
▇▇▇▇▇▇▇ shall have the right to terminate this Agreement, in which event this
Agreement shall be of no further force and effect and neither Party shall have
any further liability or obligation to the other Party under this Agreement.
(c) Post-Closing Remedies. If ▇▇▇▇▇▇▇ notifies Conoco after Closing but on
or before one hundred and eighty (180) days following the Closing Date regarding
any Adverse Environmental Condition that became known to ▇▇▇▇▇▇▇ after Closing,
Conoco shall reimburse ▇▇▇▇▇▇▇ for all costs and expenses incurred by ▇▇▇▇▇▇▇ in
remediating Such Adverse Environmental Condition, the amount of which shall be
mutually agreed to by Conoco and ▇▇▇▇▇▇▇. Upon receiving the agreed payment from
Conoco in connection with any such Adverse Environmental Condition, such Adverse
Environmental Condition shall become an Assumed Obligation of ▇▇▇▇▇▇▇ and Conoco
shall have no further liability or obligation to ▇▇▇▇▇▇▇ in connection with such
Adverse Environmental Condition. If Conoco and ▇▇▇▇▇▇▇ are unable to agree on
the extent of any such Adverse Environmental Condition or on the remediation
costs associated with any such Adverse Environmental Condition, then the extent
of such Adverse Environmental Condition (if disputed) and/or the remediation
costs and expenses for which Conoco shall be responsible shall be determined by
binding arbitration in accordance with Section 30 of this Agreement. Conoco
shall have no liability or obligation to ▇▇▇▇▇▇▇ under this Agreement (i) for
any Adverse Environmental Condition regarding which Conoco does not receive
timely written notice on or before one hundred and eighty (180) days following
the Closing Date (and all such Adverse Environmental Conditions shall become
Assumed Obligations of ▇▇▇▇▇▇▇), or (ii) for any costs and expenses of
remediating Adverse
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Environmental Conditions of which Conoco has been properly notified pursuant to
this Section 24(c) in excess of $1,000,000.
(d) Indemnity. Except for any costs or expenses for which ▇▇▇▇▇▇▇ is
entitled to a Purchase Price reduction under Sections 24(b) or for which ▇▇▇▇▇▇▇
is entitled to reimbursement under Section 24(c), if the Closing hereunder
occurs, ▇▇▇▇▇▇▇ shall indemnify, defend and hold Conoco harmless from and
against any and all Claims arising out of or relating to any discharge, release,
disposal, production, storage, treatment or any other activities on, in or from
the Conoco Property, or the migration or transportation from any other lands to
the Conoco Property, whether before or after the Effective Time, of any wastes,
pollutants, contaminants, hazardous materials, or materials or substances that
are presently, or become in the future, subject to regulation under
Environmental Laws, whether such Environmental Laws are presently existing or
are hereafter enacted, INCLUDING, WITHOUT LIMITATION, ANY SUCH CLAIMS ARISING IN
WHOLE OR IN PART FROM THE SOLE OR CONCURRENT NEGLIGENCE OR GROSS NEGLIGENCE OR
STRICT LIABILITY OF CONOCO. The foregoing indemnity shall not be applicable to
Claims arising out of or relating to activities on the South ▇▇▇▇▇▇▇▇▇ Ranch
Lands after the date such lands have reverted back to Conoco pursuant to the
South ▇▇▇▇▇▇▇▇▇ Ranch Lease.
(e) Exclusive Remedy. The remedies set forth in this Section 24 are the
exclusive remedies between the Parties with respect to the environmental
condition of the Conoco Property, and Conoco will have no liability or
obligation to ▇▇▇▇▇▇▇ with respect to the environmental condition of the Conoco
Property except as set forth in this Section 24.
(f) Proportionate Reduction. If Conoco is the owner of less than 100% of
the mineral interest or working interest in any portion of the Conoco Property
that may be subject to an Adverse Environmental Condition for which a Purchase
Price reduction or cost and expense reimbursement is due under this Agreement,
the Parties shall proportionately reduce the amount due under this Agreement in
connection with any such Adverse Environmental Condition to reflect Conoco's
proportionate ownership interest in the affected property.
25. WAIVER OF CONSEQUENTIAL AND PUNITIVE DAMAGES. NEITHER ▇▇▇▇▇▇▇ NOR
CONOCO SHALL BE ENTITLED TO RECOVER FROM THE OTHER, RESPECTIVELY, AND EACH PARTY
RELEASES THE OTHER PARTY FROM, ANY LOSSES, COSTS, EXPENSES, OR DAMAGES ARISING
UNDER THIS AGREEMENT OR IN CONNECTION WITH OR WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED IN THIS AGREEMENT ANY AMOUNT IN EXCESS OF THE ACTUAL COMPENSATORY
DAMAGES SUFFERED BY SUCH PARTY. ▇▇▇▇▇▇▇ AND CONOCO BOTH WAIVE, AND RELEASE THE
OTHER FROM ANY RIGHT TO RECOVER PUNITIVE, SPECIAL, EXEMPLARY AND CONSEQUENTIAL
DAMAGES ARISING IN CONNECTION WITH OR WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED IN THIS AGREEMENT; PROVIDED, HOWEVER, ANY SUCH DAMAGES RECOVERED BY
A THIRD PARTY (OTHER THAN SUBSIDIARIES, AFFILIATES OR PARENTS OR A PARTY) FOR
WHICH A PARTY OWES THE OTHER PARTY AN INDEMNITY UNDER THIS AGREEMENT SHALL NOT
BE WAIVED.
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26. PRESS RELEASE. There shall be no press release or public communication
concerning this purchase and sale by either Party except with the written
consent of the Party not originating said release or communication, with the
exception being those reports reasonably required by applicable state or federal
law or regulations.
27. SURVIVAL. The representations, warranties and agreements contained in
this Agreement and in any certificate or other instrument delivered by or on
behalf of either Party pursuant to this Agreement shall survive the Closing and
shall be unaffected by any investigation made by the other Party. All
representations and warranties contained in this Agreement (including without
limitation those in Sections 8 and 9) are exclusive, and are given in lieu of
all other representations and warranties, express, implied, or statutory.
28. INTERPRETATION. The Parties stipulate and agree that this Agreement
shall be deemed and considered for all purposes to have been jointly prepared by
the Parties, and shall not be construed against any one Party (nor shall any
inference or presumption be made) on the basis of who drafted this Agreement or
any particular provision hereof, who supplied the form of Agreement, or any
other event of the negotiation, drafting or execution of this Agreement. Each
Party agrees that this Agreement has been purposefully drawn and correctly
reflects its understanding of the transaction that it contemplates. In
construing this Agreement, the following principles will apply.
(a) Examples shall not be construed to limit, expressly or by implication,
the matter they illustrate.
(b) The word "includes" and its derivatives means "includes, but is not
limited to" and corresponding derivative expressions.
(c) Defined terms in this Agreement are denoted by quotation marks and
underlining. A defined term has its defined meaning throughout this Agreement
and each Appendix, Exhibit and Schedule to this Agreement, regardless of whether
it appears before or after the place where it is defined.
(d) If there is any conflict or inconsistency between the provisions of the
main body of this Agreement and the provisions of any Appendix, Exhibit,
Schedule or executed conveyance document, the provisions of this Agreement shall
take precedence. If there is any conflict between the provisions of any pro
forma conveyance document or other transaction documents attached to this
Agreement as an Appendix, Exhibit or Schedule and the provisions of any
conveyance documents and other transaction documents actually executed by the
parties, the provisions of the executed conveyance documents and other executed
transaction documents shall take precedence.
(e) The omission of certain provisions of this Agreement from the
conveyance documents does not constitute a conflict or inconsistency between
this Agreement and the conveyance documents, and will not effect a merger of the
omitted provisions. To the fullest
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extent permitted by law, all provisions of this Agreement are hereby deemed
incorporated into the conveyance documents by reference.
(f) Unless otherwise indicated, all references to Sections or Exhibits in
this Agreement refer to the Sections and Exhibits of this Agreement. The
headings and titles in this Agreement are for convenience only and shall have no
significance in interpreting or otherwise affect the meaning of this Agreement.
(g) The plural shall be deemed to include the singular, and vice versa.
29. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HERETO SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS, EXCLUDING ANY CONFLICTS-OF-LAW RULE THAT MIGHT
APPLY THE LAW OF ANOTHER JURISDICTION. TO THE EXTENT APPLICABLE, THE PARTIES
WAIVE THE PROVISIONS OF THE "TEXAS DECEPTIVE PRACTICES ACT," OTHER THAN SECTION
17.555 THEREOF WHICH MAY NOT BE WAIVED.
30. DISPUTE RESOLUTION.
(a) CONOCO AND ▇▇▇▇▇▇▇ SHALL ATTEMPT IN GOOD FAITH TO RESOLVE ANY
CONTROVERSY OR DISPUTE ARISING OUT OF OR RELATING TO THIS AGREEMENT PROMPTLY BY
NEGOTIATIONS BETWEEN THEMSELVES. THE NEGOTIATION PROCESS MAY BE STARTED BY THE
GIVING OF WRITTEN NOTICE BY EITHER PARTY TO THE OTHER PARTY IN ACCORDANCE WITH
THE TERMS OF SECTION 21 HEREOF. IN THE EVENT THAT EITHER PARTY DESIRES THE
INVOLVEMENT OF A MEDIATOR TO FACILITATE THE NEGOTIATIONS, THEN IT SHALL GIVE
WRITTEN NOTICE THEREOF, AND THE PARTIES AGREE, ADDITIONALLY, TO NEGOTIATE IN
GOOD FAITH TO SELECT AN INDEPENDENT MEDIATOR TO FACILITATE THE NEGOTIATIONS AND
TO CONDUCT UP TO EIGHT CONSECUTIVE HOURS OF NON-BINDING MEDIATED NEGOTIATIONS IN
HOUSTON, TEXAS WITHIN 30 DAYS AFTER THE NOTICE REQUESTING INVOLVEMENT OF A
MEDIATOR IS FIRST SENT. IF, WITHIN 10 DAYS AFTER THE NOTICE REQUESTING A
MEDIATOR, THE PARTIES ARE NOT ABLE TO AGREE UPON A MEDIATOR, THEN EITHER PARTY
MAY SEEK THE APPOINTMENT OF A MEDIATOR UNDER SUB-PARAGRAPH 30(D).
(b) NO ARBITRATION MAY BE COMMENCED BY EITHER PARTY UNLESS AND UNTIL A GOOD
FAITH EFFORT HAS BEEN MADE TO CONDUCT NEGOTIATIONS AND, IF REQUESTED BY A PARTY,
A MEDIATION IN COMPLIANCE WITH THE FOREGOING PARAGRAPH. IF A CONTROVERSY OR
DISPUTE IS NOT RESOLVED AFTER GOOD FAITH EFFORTS TO CONDUCT THE NEGOTIATION AND
MEDIATION PROCESS DESCRIBED ABOVE, THEN, UPON NOTICE BY EITHER PARTY TO THE
OTHER PARTY (AN "ARBITRATION NOTICE"), THE CONTROVERSY OR DISPUTE SHALL BE
SUBMITTED TO FINAL, BINDING ARBITRATION UNDER THE FOLLOWING PROVISIONS.
(c) AN ARBITRATION NOTICE SHALL DESCRIBE THE CONTROVERSY OR DISPUTE TO BE
SUBMITTED TO ARBITRATION AND SHALL NAME ONE ARBITRATOR. WITHIN THIRTY (30) DAYS
AFTER THE RECEIPT OF SUCH NOTICE, THE OTHER PARTY SHALL BY WRITTEN RESPONSE
DESCRIBE ANY ADDITIONAL CONTROVERSY OR DISPUTE TO BE SUBMITTED AND SHALL NAME A
SECOND ARBITRATOR. IF SUCH PARTY FAILS TO TIMELY NAME A SECOND ARBITRATOR, THE
PARTY FIRST GIVING THE ARBITRATION NOTICE MAY BY FURTHER WRITTEN NOTICE NAME THE
SECOND. THE TWO ARBITRATORS SO APPOINTED SHALL NAME
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A THIRD ARBITRATOR, WHO SHALL BE INDEPENDENT AND IMPARTIAL AND WHO, LIKE THE
TWO ARBITRATORS SO APPOINTED, SHALL BE QUALIFIED, BY KNOWLEDGE AND EXPERIENCE
(WITH EACH HAVING A MINIMUM OF 10 YEARS OIL AND GAS EXPERIENCE), TO DETERMINE
THE CONTROVERSY OR DISPUTE SUBMITTED. IF THE TWO APPOINTED ARBITRATORS FAIL TO
TIMELY NAME A THIRD ARBITRATOR, THEN EITHER PARTY MAY SEEK THE APPOINTMENT OF A
THIRD UNDER SUB-PARAGRAPH 30(D).
(d) IF THE PARTIES ARE UNABLE TO AGREE UPON A MEDIATOR OR THE PARTIES'
APPOINTED ARBITRATORS ARE UNABLE TO SELECT A THIRD ARBITRATOR, THEN EITHER PARTY
MAY SEEK THE APPOINTMENT OF A MEDIATOR OR A THIRD ARBITRATOR AS FOLLOWS. EITHER
PARTY MAY REQUEST THE JUDGE OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF TEXAS, HOUSTON DIVISION, HAVING GREATEST TENURE BUT NOT ON SENIOR
STATUS TO APPOINT A MEDIATOR OR THIRD ARBITRATOR, WHO SHALL BE INDEPENDENT AND
IMPARTIAL AND QUALIFIED TO DETERMINE THE MATTERS SUBMITTED IN THAT JUDGE'S SOLE
OPINION. IF THAT JUDGE FAILS, WITHIN THIRTY (30) DAYS OF SUBMISSION OF THE
REQUEST, TO APPOINT A MEDIATOR OR THIRD ARBITRATOR, THEN EITHER PARTY MAY MAKE
THE SAME REQUEST TO THE JUDGE OF THAT COURT WITH THE NEXT GREATEST TENURE, AND
SO ON, UNTIL THE MEDIATOR IS APPOINTED AND THE PANEL OF ARBITRATORS IS
CONSTITUTED. IF, PRIOR TO RENDERING A DECISION, AN ARBITRATOR RESIGNS OR BECOMES
UNABLE TO SERVE, HE SHALL BE REPLACED AS FOLLOWS. IF HE WAS ONE OF THE TWO
ARBITRATORS APPOINTED BY THE PARTIES, THE PARTY THAT NAMED HIM SHALL NAME HIS
REPLACEMENT; PROVIDED, HOWEVER, THAT IF HIS REPLACEMENT IS NOT NAMED WITHIN
FIFTEEN (15) DAYS, THE OTHER PARTY SHALL NAME HIS REPLACEMENT. IF HE WAS THE
THIRD ARBITRATOR SELECTED BY THE TWO ARBITRATORS NAMED BY THE PARTIES, THOSE TWO
ARBITRATORS SHALL NAME HIS REPLACEMENT; PROVIDED, HOWEVER, THAT IF THEY FALL TO
AGREE ON HIS REPLACEMENT WITHIN FIFTEEN (15) DAYS, EITHER PARTY MAY FOLLOW THE
PROCEDURE SPECIFIED IN THIS SUBPARAGRAPH (d).
(e) THE ARBITRATION SHALL OCCUR IN HOUSTON, TEXAS AND SHALL BE CONDUCTED IN
ACCORDANCE WITH THE AMERICAN ARBITRATION ASSOCIATION'S COMMERCIAL ARBITRATION
RULES IN EFFECT AT THE TIME OF THE ARBITRATION NOTICE (THE "RULES"). THE PARTIES
AGREE THAT THEY WILL FAITHFULLY OBSERVE THIS AGREEMENT AND THE RULES AND THAT
THEY WILL ABIDE BY AND PERFORM ANY FINAL AWARD RENDERED BY THE ARBITRATORS.
ADDITIONALLY, THE ARBITRATION SHALL BE CONDUCTED IN A MANNER CONSISTENT WITH THE
FEDERAL ARBITRATION ACT, 9 U.S.C. SECTIONS 1 ET SEQ. (THE "FAA") OR CONSISTENT
WITH THE SAME PRINCIPLES ENUNCIATED IN THE FAA IN THE EVENT IT MAY NOT BE
TECHNICALLY APPLICABLE; PROVIDED, HOWEVER, THAT RULES ESTABLISHED UNDER THE FAA
THAT THE PARTIES CANNOT ELECT AS APPLICABLE IF THE FAA IS NOT TECHNICALLY
APPLICABLE, SUCH AS PROCEDURAL RULES CONCERNING ENFORCEMENT OF AWARDS, ACCESS TO
THE COURTS, PROCEDURES FOR REVIEW, AND MATTERS CONCERNING SUBJECT MATTER
JURISDICTION, SHALL NOT BE BINDING IF THE FAA IS NOT TECHNICALLY APPLICABLE. THE
CONTROVERSY OR DISPUTE SUBMITTED SHALL BE RESOLVED BY THE DECISION OF A MAJORITY
OF THE PANEL OF ARBITRATORS. THE AWARD OR JUDGMENT OF THE PANEL SHALL BE FINAL
AND BINDING ON THE PARTIES AND JUDGMENT UPON THE AWARD OR JUDGMENT OF THE PANEL
MAY BE ENTERED AND ENFORCED IN ANY COURT HAVING JURISDICTION. NO LITIGATION OR
OTHER JUDICIAL PROCEEDING MAY EVER BE INITIATED AT ANY TIME IN ANY COURT FOR THE
PURPOSE OF ADJUDICATING, INTERPRETING, OR ENFORCING THE RIGHTS OR OBLIGATIONS OF
THE PARTIES TO THIS AGREEMENT, OR TO DETERMINE THE VALIDITY OF OR ADJUDICATE A
CLAIM OF BREACH OF THIS AGREEMENT; PROVIDED, HOWEVER, THAT THIS PROHIBITION
SHALL NOT APPLY TO LITIGATION OR OTHER JUDICIAL PROCEEDINGS UNDERTAKEN TO SEEK
ENFORCEMENT OF THE PARTIES' AGREEMENT TO ARBITRATE
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OR TO ENFORCE ANY ARBITRATION AWARD OR SEEK REVIEW OR ANY ARBITRATION AWARD.
REVIEW OF SUCH ARBITRATION AWARD SHALL BE PERMITTED ONLY ON GROUNDS THAT (i)
THE AWARD WAS PROCURED BY CORRUPTION, FRAUD, OR UNDUE MEANS; (ii) THERE WAS
EVIDENT PARTIALITY OR CORRUPTION IN THE THIRD APPOINTED ARBITRATOR; (iii) THE
PANEL WAS GUILTY OF MISCONDUCT IN REFUSING TO HEAR EVIDENCE PERTINENT AND
MATERIAL TO THE CONTROVERSY; (iv) THE PANEL EXCEEDED THEIR POWERS; OR (v) THERE
WAS NO AGREEMENT TO ARBITRATE THE MATTER SUBMITTED AND RULED UPON AND THE PARTY
AFFECTED DID NOT PARTICIPATE IN THE ARBITRATION HEARING WITHOUT RAISING THE
OBJECTION. THE PARTIES EXPRESSLY AGREE THAT AN AWARD SHALL IN NO OTHER RESPECT
BE APPEALABLE OR SUBJECT TO REVIEW. IF EITHER PARTY BECOMES THE SUBJECT OF A
BANKRUPTCY, RECEIVERSHIP OR OTHER SIMILAR PROCEEDING UNDER THE LAWS OF THE
UNITED STATES OF AMERICA, ANY STATE OR COMMONWEALTH OR ANY OTHER NATION OR
POLITICAL SUBDIVISION THEREOF, THEN, TO THE EXTENT PERMITTED OR NOT PROHIBITED
BY APPLICABLE LAW, ANY FACTUAL OR SUBSTANTIVE LEGAL ISSUES ARISING IN OR DURING
THE PENDENCY OF ANY SUCH PROCEEDING SHALL BE SUBJECT TO ALL OF THE FOREGOING
MEDIATION AND ARBITRATION PROVISIONS AND SHALL BE RESOLVED, TO THE EXTENT
PERMITTED, IN ACCORDANCE THEREWITH. THE AGREEMENTS CONTAINED HEREIN HAVE BEEN
GIVEN FOR VALUABLE CONSIDERATION, ARE COUPLED WITH AN INTEREST AND ARE NOT
INTENDED TO BE EXECUTORY CONTRACTS. THE FEES AND EXPENSES OF THE MEDIATOR WILL
BE SHARED EQUALLY BY THE PARTIES AND THE FEES AND EXPENSES OF THE THIRD
ARBITRATOR WILL BE SHARED BY THE PARTIES ON A BASIS DETERMINED TO BE FAIR AND
EQUITABLE BY THE PANEL, TAKING INTO ACCOUNT THE RELATIVE FAULT OF EACH PARTY,
THE RELATIVE CREDIBILITY AND MERIT OF ALL CLAIMS AND DEFENSES MADE BY EACH
PARTY AND THE COOPERATION, SPEED AND EFFICIENCY OF EACH PARTY IN CONDUCTING THE
ARBITRATION PROCEEDINGS AND COMPLYING WITH THE RULES AND WITH THE ORDERS AND
REQUESTS OF THE PANEL.
(f) WITHIN 10 DAYS AFTER THE SELECTION OF THE THIRD ARBITRATOR, THE PARTIES
AND THEIR COUNSEL WILL APPEAR BEFORE THE PANEL AT A PLACE AND TIME IN HOUSTON,
TEXAS AS MAY BE DESIGNATED BY THE PANEL FOR THE PURPOSE OF EACH PARTY MAKING A
ONE HOUR OR LESS PRESENTATION AND SUMMARY OF THE CASE. THEREAFTER, THE PANEL
WILL SET DATES AND TIMES FOR ADDITIONAL HEARINGS UNTIL THE PROCEEDING IS
CONCLUDED. THE DESIRE AND GOAL OF THE PARTIES IS, AND THE PANEL WILL BE ADVISED
THAT THEIR GOAL SHOULD BE, TO CONDUCT AND CONCLUDE THE ARBITRATION PROCEEDING AS
EXPEDITIOUSLY AS POSSIBLE. IF ANY PARTY OR HIS COUNSEL FAILS, WITHOUT GOOD
CAUSE, TO APPEAR AT ANY HEARING, THE PANEL SHALL BE ENTITLED TO REACH A DECISION
BASED ON THE EVIDENCE WHICH HAS BEEN PRESENTED TO HIM BY THE OTHER PARTY WHO DID
APPEAR.
(g) ANY ARBITRAL AWARD MAY BE ENFORCED IN THE COURTS OF THE STATE OF TEXAS
OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PARTIES HEREBY ACCEPT FOR
THEMSELVES AND IN RESPECT OF THEIR PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS FOR SAID PURPOSE AND THE
PARTIES HEREBY IRREVOCABLY WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH THEY MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS.
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(h) THE PANEL WILL HAVE NO AUTHORITY TO AWARD PUNITIVE OR OTHER DAMAGES NOT
MEASURED BY THE PREVAILING PARTY'S ACTUAL DAMAGES.
31. ENTIRE AGREEMENT, AMENDMENT. This Agreement constitutes the entire
agreement between the Parties with respect to the subject hereof and shall
supersede any prior agreement between the parties, whether written or oral,
relating to the subject hereof. This Agreement may be supplemented, altered,
amended, modified or revoked by writing only, signed by both Parties.
32. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties and their respective successors and assigns.
Except as provided in Section 3(c), prior to the Closing Date neither Party may
assign its rights or obligations under this Agreement without the prior written
consent of the other Party, which may be withheld for any reason including
convenience.
33. COMPLIANCE AND ENFORCEMENT WAIVERS. Any of the terms, provisions,
covenants, representations, warranties or conditions hereof may be waived only
by a written instrument executed by the Party waiving compliance. Except as
otherwise expressly provided in this Agreement, the failure of any Party at any
time or times to require performance of any provision hereof shall in no manner
affect such Party's right to enforce the same. No waiver by any Party of any
condition, or of the breach of any term, provision, covenant, representation or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or breach or a waiver of any other
condition or of the breach of any other term, provision, covenant,
representation or warranty.
34. THIRD-PARTY BENEFICIARIES. It is understood and agreed that there shall
be no third-party beneficiary of this Agreement, and that the provisions hereof
do not impart enforceable rights, benefits, or remedies in anyone who is not a
Party or a successor or assignee of a Party hereto.
35. SUCCESSORS AND ASSIGNS. This Agreement binds and inures to the benefit
of the Parties hereto their respective permitted successors and assigns, and all
the terms, provisions, covenants, obligations, indemnities, representations,
warranties and conditions of this Agreement shall be enforceable by the Parties
hereto and their respective permitted successors and assigns.
36. SEVERABILITY. If any provision of this Agreement is found by a court of
competent jurisdiction to be invalid or unenforceable, that provision will be
deemed modified to the extent necessary to make it valid and enforceable and if
it cannot be so modified, it shall be deemed deleted and the remainder of the
Agreement shall continue and remain in full force and effect.
37. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall constitute an original and all of which shall constitute one
document.
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30
38. EXHIBITS. The Appendices, Exhibits and Schedules attached to this
Agreement are incorporated into and made a part of this Agreement.
IN WITNESS WHEREOF, the authorized representatives of Conoco and ▇▇▇▇▇▇▇
execute this Agreement on the dates stated below.
CONOCO INC.
By: /s/ S. ▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------
S. ▇▇▇ ▇▇▇▇▇▇▇▇
Attorney-in-Fact
▇▇▇▇▇▇▇ PETROLEUM CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇
Chief Executive ▇▇▇▇▇▇▇
-▇▇-
▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇ )
)
COUNTY OF ▇▇▇▇▇▇ )
The foregoing instrument was acknowledged before me this 20th day of
February, 1998, by S. ▇▇▇ ▇▇▇▇▇▇▇▇, Attorney-in-Fact of CONOCO INC., a Delaware
corporation, on behalf of said corporation.
My commission expires: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
4-22-2000 --------------------------------
---------------------- Notary Public
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
MY COMMISSION EXPIRES
[SEAL] April 22, ▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇ )
)
COUNTY OF ▇▇▇▇▇▇ )
The foregoing instrument was acknowledged before me this 20th day of
February, 1998, by ▇▇▇▇▇ ▇. ▇▇▇▇, Chief Executive Officer of ▇▇▇▇▇▇▇ PETROLEUM
CORPORATION, a Texas corporation, on behalf of said corporation.
MY COMMISSION
EXPIRES
My commission expires: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
4-22-2000 --------------------------------
---------------------- Notary Public
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
MY COMMISSION EXPIRES
[SEAL] April 22, 2000
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