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PURCHASE AND SALE AGREEMENT
BETWEEN
UNION OIL COMPANY OF CALIFORNIA
AND
TOM BROWN, INC.
DATED
JUNE 8, 1999
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TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1
DEFINITIONS...........................................................1
1.1 Defined Terms................................................1
1.2 Undefined Financial Accounting Terms.........................9
1.3 References...................................................9
1.4 Construction.................................................9
SECTION 2
PURCHASE AND SALE....................................................10
2.1 Assets......................................................10
2.2 Excluded Assets.............................................11
2.3 Purchase Price..............................................13
2.4 Payment Procedures..........................................13
2.5 Adjusted Cash Purchase Price................................13
2.6 Cash Settlement.............................................13
2.7 Assumption Agreement........................................14
SECTION 3
TITLE EXAMINATION....................................................14
3.1 Access to Title Information.................................14
3.2 Title Defects...............................................15
3.3 Notice of Title Defect......................................15
3.4 Claim Value.................................................15
3.5 Defect Value................................................15
3.6 Remedies for Title Defects..................................16
3.7 Purchase Price Adjustments Threshold........................17
3.8 Preferential Purchase Rights................................17
3.9 Preferential Purchase Right Disputes........................18
SECTION 4
ENVIRONMENTAL MATTERS................................................18
4.1 No Admission Against Interest...............................18
4.2 Physical Condition of the Assets............................19
4.3 Endangered Species, Critical Habitat, Wetlands,
Geologic Hazards and Flooding...............................19
</TABLE>
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<TABLE>
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4.4 Environmental Assessments and Completion of
Environmental Due Diligence.................................20
4.5 Buyer's Access to Assets; Indemnification; Insurance........21
4.6 Assumption of Environmental Liabilities.....................22
4.7 Qualified Claim Cost Sharing................................23
4.8 Limitation..................................................24
4.9 Termination Due to Material Environmental Deficiencies......24
4.10 Determination of Value......................................24
SECTION 5
OPERATIONS AND CASUALTY LOSS.........................................25
5.1 Operations..................................................25
5.2 Casualty Loss...............................................26
5.3 Successor Operator..........................................26
5.4 Restrictions on Operations..................................26
5.5 Permit Transfers............................................26
SECTION 6
REPRESENTATIONS AND WARRANTIES OF UNOCAL.............................27
6.1 Organization................................................27
6.2 Authority to do Business....................................28
6.3 Authority; Enforceability...................................28
6.4 Litigation, Suits or Claims.................................28
6.5 Disclaimer of Warranties....................................28
6.6 Gas Entitlements and Imbalances.............................29
6.7 No Breach...................................................29
6.8 Environmental Condition of Assets...........................29
6.9 Compliance with Laws and Agreements.........................30
6.10 Taxes.......................................................30
6.11 No Distribution.............................................30
6.12 Current Commitments.........................................30
6.13 Brokers.....................................................30
6.14 Ownership of Common Stock...................................31
6.15 Royalties...................................................31
SECTION 7
REPRESENTATIONS AND WARRANTIES OF BUYER..............................31
7.1 Organization................................................31
</TABLE>
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<TABLE>
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7.2 Authority; Enforceability...................................31
7.3 Consents....................................................32
7.4 Litigation, Suits or Claims.................................32
7.5 No Breach...................................................32
7.6 Compliance with Laws and Agreements.........................32
7.7 Investigations of Assets....................................32
7.8 No Distribution.............................................33
7.9 Federal Leases..............................................33
7.10 Capitalization of Buyer; Title to the Shares................33
7.11 SEC Filings.................................................33
7.12 Financial Statements........................................34
7.13 Absence of Certain Changes..................................34
7.14 Regulatory Authority........................................36
7.15 Environmental Matters.......................................36
7.16 Brokers.....................................................36
SECTION 8
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF UNOCAL....................36
8.1 Purchase Price..............................................36
8.2 Buyer's Representations and Warranties True and Correct.....36
8.3 Officer's Certificate.......................................36
8.4 Opinion of Counsel..........................................37
8.5 Pre-Closing Performance.....................................37
8.6 Authorization...............................................37
8.7 Absence of Litigation.......................................38
8.8 Bonds.......................................................38
8.9 Hart-Scott-Rodino Act.......................................38
8.10 Stock Ownership and Registration Rights Agreement...........38
8.11 Certificates of Insurance...................................38
8.12 Permits, Consents and Preferential Purchase Rights..........38
8.13 Satisfactory Results of Unocal's Diligence..................38
SECTION 9
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER.....................38
9.1 Delivery of Cash Settlement.................................39
9.2 Delivery of Instruments of Transfer.........................39
9.3 Unocal's Representations and Warranties True and Correct....39
9.4 Officer's Certificate.......................................39
9.5 Opinion of Counsel..........................................39
</TABLE>
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<TABLE>
<S> <C>
9.6 Pre-Closing Performance.....................................40
9.7 Authorization...............................................40
9.8 Absence of Litigation.......................................40
9.9 Hart-Scott Rodino Act.......................................40
9.10 Stock Ownership and Registration Rights Agreement...........40
9.11 Consents....................................................40
9.12 Satisfactory Results of Buyer's Diligence...................40
9.13 No Material Changes.........................................40
SECTION 10
COVENANTS............................................................41
10.1 Investigation and Decision..................................41
10.2 Access to Information.......................................42
10.3 Gas Imbalances and Pipeline Imbalances......................43
10.4 Hart-Scott-Rodino Act.......................................44
10.5 Third-Party Consents........................................44
10.6 Completion of Due Diligence.................................45
10.7 Additional Agreements.......................................45
10.8 Payment of Certain Expenses Due and Payable After the
Closing Date................................................45
10.9 Notification of Certain Matters.............................45
10.10 Announcements...............................................46
10.11 Termination of Guarantees and Other Commitments.............46
10.12 Access to Geologic and Geophysical Information..............46
10.13 Collection of Certain Insurance Proceeds....................47
SECTION 11
EMPLOYEE MATTERS.....................................................47
11.1 Offer to Employees..........................................47
11.2 Recognition of Service Time.................................47
11.3 Hired Employee List.........................................47
11.4 Terminated Employees........................................47
11.5 Employment Restriction......................................47
SECTION 12
TAXES................................................................48
12.1 Apportionment of Ad Valorem and Property Taxes..............48
12.2 Sales Taxes, Filing Fees, Etc...............................48
12.3 Other Taxes.................................................48
</TABLE>
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<TABLE>
<S> <C>
SECTION 13
TERMINATION..........................................................48
13.1 Termination.................................................49
13.2 Effect of Termination.......................................49
13.3 Specific Performance........................................49
SECTION 14
SURVIVAL AND INDEMNIFICATION.........................................49
14.1 Survival....................................................49
14.2 Indemnification.............................................50
14.3 Third Party Claims..........................................51
14.4 Method of Asserting Claims..................................51
14.5 Right to Cure...............................................54
14.6 Exclusive Remedy............................................54
14.7 RELEASE, INDEMNITY AND WAIVER...............................54
SECTION 15
CLOSING..............................................................55
15.1 Time of Essence.............................................55
15.2 Place and Date..............................................55
15.3 Unocal's Actions at Closing.................................55
15.4 Buyer's Actions at Closing..................................57
15.5 Closing Statement...........................................57
15.6 Notices.....................................................57
SECTION 16 ACTIONS AFTER CLOSING..............................................58
16.1 Final Accounting............................................58
16.2 Receipts and Credits........................................58
16.3 Suspended Funds.............................................59
16.4 Further Assurances..........................................59
16.5 Recording...................................................59
16.6 Books and Records...........................................59
16.7 Post Closing Access to Properties and Records by Unocal.....60
SECTION 17
MISCELLANEOUS........................................................60
</TABLE>
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<TABLE>
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17.1 Governing Law...............................................60
17.2 Assignment..................................................60
17.3 Written Notices.............................................61
17.4 Expenses....................................................62
17.5 Waiver of Compliance with Bulk Transfer Laws................62
17.6 WAIVER OF CONSUMER RIGHTS...................................62
17.7 Waiver of Jury Trial........................................63
17.8 WAIVER OF PUNITIVE AND CONSEQUENTIAL DAMAGES................63
17.9 No Admissions...............................................63
17.10 Use of Unocal's Name........................................63
17.11 Entire Agreement, Etc.......................................63
17.12 Parties in Interest.........................................64
17.13 Severability................................................64
17.14 Consents....................................................64
</TABLE>
vi
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SCHEDULE OF SCHEDULES AND EXHIBITS
<TABLE>
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Schedule 2.1(i) - LEASEHOLD INTERESTS
Schedule 2.1(ii) - OIL & GAS PROPERTIES
Schedule 2.1(iii) - LISBON PLANT
Schedule 2.1(vi) - PERSONAL PROPERTY, WAREHOUSE STOCK AND IDLE EQUIPMENT
Schedule 2.1(ix) - PIPELINE ASSETS
Schedule 2.1(xii) - VEHICLES
Schedule 2.2(ii) - EXCLUDED INTERESTS
Schedule 3.8 - PREFERENTIAL RIGHTS
Schedule 4.7 - QUALIFIED CLAIM COST SHARING ALLOCATION
Schedule 6.6 - GAS AND PIPELINE BALANCING SCHEDULE
Schedule 6.8 - ENVIRONMENTAL DISCLOSURE SCHEDULE
Schedule 6.12 - CURRENT COMMITMENTS
Schedule 9.11 - CONSENTS
Schedule 11.1 - LISBON PLANT-BASED EMPLOYEES
</TABLE>
EXHIBITS
<TABLE>
<S> <C> <C>
Exhibit "A" - CLAIM VALUE FORMULA AND ALLOCATED VALUES SCHEDULE
Exhibit "B" - ARBITRATION PROCEDURES
Exhibit "C" - ENVIRONMENTAL ASSESSMENTS
Exhibit "D" - UNOCAL DISCLOSURE SCHEDULE
Exhibit "E-1" - GEOPHYSICAL DATA LICENSING AGREEMENT
Exhibit "E-2" - GEOPHYSICAL DATA
Exhibit "F-1" - ASSIGNMENT OF LEASES, BILL OF SALE AND ASSIGNMENT OF INTANGIBLE
CONTRACTUAL RIGHTS AND OTHER INTANGIBLE PROPERTY
Exhibit "F-2" - RIGHT-OF-WAY ASSIGNMENT AND BILL OF SALE
Exhibit "F-3" - TERM ROYALTY DEED ROYALTIES
Exhibit "G" - ASSUMPTION AGREEMENT
Exhibit "H-1" - BUYER'S SATISFACTORY COMPLETION OF DUE DILIGENCE
Exhibit "H-2" - UNOCAL'S SATISFACTORY COMPLETION OF DUE DILIGENCE
Exhibit "I" - LEASE AGREEMENT
Exhibit "J" - STOCK OWNERSHIP AND REGISTRATION RIGHTS AGREEMENT
</TABLE>
vii
<PAGE> 9
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT is entered into as of the 8th day of
June, 1999, by and between Union Oil Company of California, a California
corporation, with an office at 14141 Southwest Freeway, Sugar Land, Texas 77478
(hereinafter referred to as "Unocal"), and Tom Brown, Inc., a Delaware
corporation, whose address is 508 West Wall, Suite 500, Midland, Texas 79702
(referred to herein as "Buyer" or "TBI").
RECITALS
WHEREAS, Unocal and its subsidiary Unocal Pipeline Co. ("Pipeline")
are the holders of certain assets which include certain oil and gas interests
and properties in the states of Colorado, Wyoming, North Dakota and Utah, a gas
processing and treatment plant in San Juan County, Utah and an approximate 66
mile, 10 inch pipeline from such plant to Aneth, Utah; and
WHEREAS, Unocal desires to sell assets, as hereinafter described, to
Buyer and Buyer desires to purchase such assets from Unocal, upon the terms and
subject to the conditions set forth in this Agreement; and
WHEREAS, as full consideration for the Assets, TBI (i) will issue to
Unocal 5.8 million shares of fully paid, non-assessable common stock of TBI,
par value of $0.10 per share (the "Common Stock") and (ii) pay Unocal five
million dollars ($5,000,000) in cash subject to adjustments as described
herein;
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein, Unocal and Buyer agree as follows:
SECTION 1
DEFINITIONS
1.1 DEFINED TERMS: The following terms, when capitalized in this
Agreement, shall have the meanings defined either in this Section or
elsewhere in this Agreement.
"ADJUSTED CASH PURCHASE PRICE" shall have the meaning specified in Section 2.5.
"ACCRUING" or "ACCRUED" means, with respect to any obligation, duty, loss,
liability, claim, fine, expense, damage, cost or penalty, the occurring or
happening of any event which causes such obligation, duty, loss, liability,
claim, fine, expense, damage, cost or penalty to become demandable, requirable,
assertible, enforceable, due and owing, or being incurred or occurring, as the
case may be.
1
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"AFFILIATE" means, with respect to any specified Person, any other Person
directly or indirectly controlling, controlled by, or under common control
with, such Person. For purposes of this definition, "control" shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or otherwise.
"AGREEMENT" means this Purchase and Sale Agreement, including all Schedules and
Exhibits.
"ALLOCATED VALUE(S)" means the value of certain of the Assets as set forth in
Exhibit A.
"ASSETS" shall have the meaning specified in Section 2.1.
"ASSUMED LIABILITIES" means all Environmental Liabilities, General Liabilities,
Plugging and Abandonment Obligations and other liabilities expressly assumed by
Buyer under the terms of this Agreement.
"CASH SETTLEMENT" shall have the meaning specified in Section 2.6.
"CASUALTY LOSS" means a loss of personalty, excluding oil, gas and other
minerals in place, that is caused by a sudden, unexpected and unusual event.
"CLAIM NOTICE" means notification by an Indemnified Party to an Indemnifying
Party of any claim or demand for which the Indemnifying Party would be liable
hereunder, and providing information which specifies the nature and basis of
the claim or demand and the amount or the estimated amount of the claim or
demand.
"CLAIM VALUE" shall have the meaning specified in Section 3.4.
"CLAIM VALUE FORMULA" shall have the meaning specified in Exhibit "A," or if
none is provided therein, the claim value formula mutually agreed to by the
parties in writing.
"CLOSING" means the consummation of the transactions contemplated in this
Agreement other than any transactions specifically scheduled for a time after
Closing by the terms hereof.
"CLOSING DATE" means the date specified in Section 15.2, or such other date as
the parties may mutually agree upon in writing.
"CONFIDENTIALITY AGREEMENT" means those Confidentiality Agreements between the
Parties dated June 16, 1998, and any amendments thereto, executed prior to and
in conjunction with and for the purposes of this Agreement.
2
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"CONTRACT RIGHTS" means the Assets described in Section 2.1(vii).
"DEFECT VALUE" shall have the meaning specified in Section 3.5.
"DEFENSIBLE TITLE" means title which is determinable of record, and is free of
liens, claims, defects, encumbrances or deficiencies other than Permitted
Encumbrances.
"DELETERIOUS SUBSTANCE" means (i) any substance, product, waste or other
material of any nature whatsoever which is or becomes listed as a hazardous
substance, hazardous waste, hazardous material or pollutant under any
Environmental Laws; (ii) any substance, product, waste or other material of any
nature whatsoever which may give rise to liability under any Environmental
Laws; (iii) petroleum and its fractions, crude oil and other petroleum
products; and (iv) radioactive materials including but not limited to naturally
occurring radioactive materials.
"DUE DILIGENCE PERIOD" means the time period between the date hereof and seven
(7) calendar days prior to the Closing Date.
"EFFECTIVE DATE" means 8:00 a.m. Central Standard Time, on January 1, 1999.
"EMPLOYEE RELATED LIABILITIES" means obligations, duties and liabilities for
claims made by, or relating to, Unocal employees or consultants which Accrued
and are attributable to periods, prior to the Closing Date.
"ENVIRONMENTAL ASSESSMENTS" shall have the meaning specified in Exhibit "C" or
in Section 4.4.
"ENVIRONMENTAL DISCLOSURE SCHEDULE" means Schedule 6.8 to this Agreement.
"ENVIRONMENTAL LAWS" means any applicable laws, orders, rules, regulations,
judgments or decrees of any federal, state, tribal, county or municipal
governing authority having jurisdiction over any Asset or Party which relate to
pollution, the protection or cleanup of the environment, or the release or
disposal of Deleterious Substances into the environment, including but not
limited to ambient air, surface water, groundwater, land surface or subsurface
strata; including all such laws, orders, rules, regulations, judgments or
decrees as they may be amended, varied or modified in the future.
"ENVIRONMENTAL LIABILITIES" means all obligations, duties, losses, liabilities,
claims, fines, expenses, damages, costs (including attorney's fees and
expenses) or penalties created by, related to, or arising out of any
Environmental Law, whether Accruing before or after the Effective Date;
excluding all Plugging and Abandonment Obligations.
"EXCLUDED ASSETS" shall have the meaning specified in Section 2.2.
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"EXECUTION DATE" means the date on which this Agreement has been fully executed
by Unocal and TBI.
"FACILITIES" shall have the meaning specified in Section 2.1(iv).
"FINAL ACCOUNTING" shall have the meaning specified in Section 16.1.
"GAS IMBALANCE" means the difference between the volume of produced gas that
Unocal took from an Asset(s) and the volume of Unocal's gas entitlement for
such Asset(s).
"GENERAL LIABILITIES" means all obligations, duties, losses, liabilities,
claims, fines, expenses, damages, costs (including attorneys fees and expenses)
or penalties created by, related to, or arising out of ownership or operation
of the Assets, any Contract Rights, or compliance with any applicable law,
order, rule, regulation, judgment or decree of any federal, state, tribal,
county or municipal governing authority having jurisdiction over the Assets or
the Parties, whether Accruing before or after the Effective Date.
Notwithstanding the above, the term "General Liabilities" shall not include:
(a) Plugging and Abandonment Obligations (which are
addressed elsewhere herein);
(b) Environmental Liabilities (which are addressed
elsewhere herein);
(c) Pre-Effective Date Royalties and Tax Payments;
(d) Employee Related Liabilities;
(e) All items of threatened or pending litigation and
proceedings set forth in Paragraph A of Exhibit D attached
hereto to the extent attributable to monetary damages relating
to Pre-Effective Date periods; and
(f) General Liabilities (exclusive of items (a) through (e)
above) which Accrued prior to the Effective Date which are in
excess of $200,000 in the aggregate and are asserted pursuant to
written claims made by third parties to Unocal or Buyer within
five (5) years after the Closing Date.
For purposes of clarification, (i) Buyer acknowledges that Buyer shall have
responsibility for (x) the initial $200,000 in the aggregate of General
Liabilities which Accrued prior to the Effective Date and are asserted within
five (5) years after the Closing Date, (y) any General Liabilities which
Accrued prior to the Effective Date which are not asserted in writing by third
parties against Unocal or Buyer within five (5) years after the Closing Date;
and (z) any General Liabilities which Accrue after the Effective Date and (ii)
Unocal acknowledges that Unocal shall have responsibility for (x)
4
<PAGE> 13
liabilities pertaining to Excluded Assets, (y) liabilities referenced in
subsections (c), (d), (e) and (f) above and (z) liabilities with respect to a
portion of the Qualified Claims to the extent expressly provided in Section 4
hereof.
"GEOPHYSICAL DATA LICENSING AGREEMENT" means the agreement attached hereto and
designated as Exhibit "E-1."
"GEOPHYSICAL SEISMIC LICENSING PRICE" means the initial fee of $1.00, together
with all other fees and charges described in the Geophysical Data Licensing
Agreement, which TBI will pay to Unocal to license the Geophysical Data
described in the Geophysical Data Licensing Agreement.
"GOVERNMENTAL APPROVALS" means consents, approvals, authorizations or orders
required to be obtained from any court or tribunal in any jurisdiction or any
public, or governmental or regulatory body, agency, department, commission,
board, bureau or other authority or instrumentality.
"GOVERNMENTAL LESSOR APPROVALS" means consents, approvals, authorizations or
orders required to be obtained from any court or tribunal in any jurisdiction
or any public, or governmental or regulatory body, agency, department,
commission, board, bureau or other authority or instrumentality which is a
lessor under any of the Leasehold Interests other than consents, approvals,
authorizations or orders of a nature customarily obtained following the closing
of a transaction.
"HART-SCOTT-RODINO ACT" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder.
"HYDROCARBONS" shall mean all severed crude oil, natural gas, casinghead gas,
drip gasoline, natural gasoline, petroleum, natural gas liquids, plant
products, condensate, and other liquid and gaseous hydrocarbons and minerals of
every kind and description.
"INDEMNIFIED PARTY" and "INDEMNIFYING PARTY" shall have the meaning specified
in Section 14.4.
"KNOWLEDGE" means the actual knowledge of the applicable Party's officers and
salaried employees directly, immediately and materially involved in the
transactions which are the subject matter of this Agreement, and that are equal
to or above the level of asset manager in the applicable Party's management
structure.
"LEASE AGREEMENT" means the oil, gas and mineral lease from Unocal to Buyer
with respect to Parachute Creek, Colorado, in the form of Exhibit "I" attached
hereto.
"LEASEHOLD INTERESTS" means the Assets described in Section 2.1(i).
5
<PAGE> 14
"LIENS" means any and all liens, mortgages, charges, pledges, security
interests, or other similar type encumbrances, including, but not limited to,
such as may arise under any contracts or judgments.
"LISBON PLANT" shall have the meaning specified in Section 2.1(iii).
"MATERIAL ENVIRONMENTAL DEFICIENCY" means a deficiency or deficiencies in the
Assets arising out of the Environmental Liabilities for which the cumulative
estimated Remediation Cost will create a liability for which Buyer will be
responsible in an amount in excess of $3,500,000 and which requires remediation
or cleanup under currently applicable Environmental Laws which remediation and
cleanup obligations are not (i) merely speculative, contingent obligations
which could arise in the future and are currently uncertain or (ii) remediation
and cleanup obligations which could be anticipated to arise upon plugging and
abandonment of the applicable assets.
"MINIMAL ENVIRONMENTAL LIABILITIES" shall have the meaning specified in Section
4.7(a)(i).
"NEGATIVE PIPELINE IMBALANCE" shall mean the (a) total quantity of Hydrocarbons
(expressed in MMBtus) by which the cumulative total receipts of Hydrocarbons
from a shipper on the Pipeline Assets exceeds the cumulative total deliveries
of Hydrocarbons to the shipper on the Pipeline Assets, determined as of the
Effective Date, and (b) the total quantity of Hydrocarbons (expressed in
MMBtus) by which the total cumulative nominated and confirmed deliveries of
Hydrocarbons to an interconnected third party pipeline on the Pipeline Assets
exceeds the total cumulative actual deliveries of Hydrocarbons to the
interconnected third party pipeline on the Pipeline Assets, as of the Effective
Date.
"NORM" means naturally occurring radioactive material.
"OIL AND GAS PROPERTIES" means the Assets described in Section 2.1(ii).
"PARTY" or "PARTIES" means Unocal or TBI, or Unocal and TBI respectively.
"PARTY ADVERSE EFFECT" shall mean an event, taking into account all facts and
circumstances, on the business, properties, condition (financial or otherwise)
or operations of a Party, which has had or could reasonably be expected to have
a material adverse effect on the ability of such Party to perform its
obligations under this Agreement.
"PERMITS" means any and all permits, including temporary permits to construct
or operate, authorizations, approvals, registrations, rights of way, orders,
waivers, variances or other licenses issued or granted by any federal, state,
tribal or local administrative or governmental authority, bureau or agency.
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<PAGE> 15
"PERMITTED ENCUMBRANCES" means (i) liens for taxes, assessments or other
governmental charges or levies not yet delinquent; (ii) liens in connection
with workers' compensation, unemployment insurance or other social security,
old-age pension or public liability obligations which are not yet due or
delinquent; (iii) liens in favor of vendors, carriers, warehousemen, repairmen,
mechanics, workmen, materialmen, construction or similar liens arising by
operation of law in the ordinary course of business as to obligations which are
not yet delinquent or which have not been filed pursuant to law; (iv) rights to
consent by, required notices to, filing with, or other actions by governmental
entities in connection with the sale or conveyance of the applicable property
if the same are customarily obtained subsequent to such sale or conveyance; (v)
easements, rights of way, restrictions, encroachments and other similar
encumbrances, and minor defects in the chain of title which do not materially
interfere with the continued current use of the applicable property or
materially detract from the value of such property; (vi) rights of utility
companies to lay, maintain and repair pipelines, conduits, cable boxes and
other installations on, under, and across the applicable property; (vii) rights
reserved to or vested in any municipality or governmental, statutory or public
authority to control or regulate any interest in any manner, and all applicable
laws, rules and orders of such authority; (viii) any Lien or encumbrance in the
form of a judgment secured by a supersedeas bond or other security approved by
a court of competent jurisdiction; and (ix) all matters disclosed in the Unocal
Disclosure Schedule or Environmental Disclosure Schedule which affect the
quality or quantity of title.
"PERSON" means any individual, partnership, joint venture, firm, corporation,
association, trust, limited liability company, estate, unincorporated
organization or other entity, and their successors and assigns; or any
governmental or political subdivision, including any agency, department or
instrumentality thereof.
"PIPELINE ASSETS" shall have the meaning specified in Section 2.1(ix).
"PIPELINE IMBALANCE" shall mean the net pipeline imbalance position of the
Company (expressed in MMBtus) taking into consideration the Positive Pipeline
Imbalance and the Negative Pipeline Imbalance.
"PLUGGING AND ABANDONMENT OBLIGATIONS" means all usual and normal prudent
operations for the plugging, abandonment, surface restoration, site clearance,
and disposal of related waste materials, including NORM and asbestos, of all
oil, gas injection, water or other wells, sumps, pits, ponds, tanks,
impoundments, foundations, pipelines, structures and equipment of any kind or
description on the Assets, in compliance with all applicable contractual
obligations and applicable rules and regulations of governmental bodies having
jurisdiction over the Assets. Plugging and Abandonment Obligations do not
include cleanup of polluted lands, air or water other than routine cleanup
normally associated with plugging and abandonment, such cleanup obligations
which are other than routine being included within the definition of
Environmental Liabilities.
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<PAGE> 16
"POSITIVE PIPELINE IMBALANCE" shall mean (a) the total quantity of Hydrocarbons
(expressed in MMBtus) by which the cumulative total deliveries of Hydrocarbons
to a shipper on the Pipeline Assets exceeds the total cumulative receipts of
Hydrocarbons from the shipper on the Pipeline Assets, determined as of the
Effective Date and (b) the total quantity of Hydrocarbons (expressed in MMBtus)
by which the total cumulative actual deliveries of Hydrocarbons to an
interconnected third party pipeline on the Pipeline Assets exceeds the total
cumulative nominated and confirmed deliveries of Hydrocarbons to the
interconnected third party pipeline on the Pipeline Assets, determined as of
the Effective Date.
"PRE-EFFECTIVE DATE ROYALTIES AND TAX PAYMENTS" means all obligations, duties
or liabilities for the payment of royalties and taxes in respect of oil and gas
production from the Assets (including penalties and interest relating thereto)
which Accrued and are attributable to periods prior to the Effective Date.
"PURCHASE PRICE" shall have the meaning specified in Section 2.3.
"QUALIFIED CLAIM" means an unknown Environmental Liability which Accrued prior
to the Effective Date, and which is the subject of a specific written claim
asserting Unocal's or TBI's responsibility made and asserted during the twelve
(12) month period following the Closing Date either by a governmental entity or
by a third party that is not an Affiliate of TBI with a Claim Notice provided
by TBI to Unocal at once but in no case later than thirty (30) days after TBI's
receipt of such claim; provided, however, Environmental Law for purposes of
determining Environmental Liabilities that can be Qualified Claims shall not
include Environmental Laws as they may be amended, varied or modified in the
future, but shall be limited to Environmental Laws in effect and applicable to
the Assets as of the Effective Date.
"QUALIFIED CLAIM COST SHARING ALLOCATION" shall have the meaning specified in
Section 4.7(a).
"REMEDIATION COST" means the cost to remedy or satisfy any Environmental
Liability using the most cost effective methods and manner that satisfy
applicable Environmental Laws, and which are consistent with the continued use
of the affected Assets in the same capacity and for the same purposes as they
were being used on the Effective Date.
"SHARES" shall have the meaning specified in Section 2.3.
"STOCK OWNERSHIP AND REGISTRATION RIGHTS AGREEMENT" shall mean Exhibit "J" to
this Agreement
"SURFACE ACCESS AGREEMENTS" means the Assets described in Section 2.1(viii).
"TBI" means Tom Brown, Inc.
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"TBI BALANCE SHEET" means the consolidated balance sheet of TBI as of December
31, 1998 set forth in the TBI annual report on Form 10-K for the year ended
December 31, 1998.
"TBI BALANCE SHEET DATE" means December 31, 1998.
"TITLE DEFECT" shall have the meaning specified in Section 3.2.
"UNOCAL" means Union Oil Company of California.
"UNOCAL DISCLOSURE SCHEDULE" means Exhibit "D" to this Agreement.
"WELLS" means all oil, condensate or natural gas wells located on the Leasehold
Interests and the Oil and Gas Properties, whether producing, shut-in or
temporarily abandoned.
1.2 UNDEFINED FINANCIAL ACCOUNTING TERMS: Undefined financial accounting
terms used in this Agreement shall be defined according to generally
accepted accounting principles.
1.3 REFERENCES: References in this Agreement to Sections or Exhibits shall
be to the entirety of the Sections or Exhibits of this Agreement which
are referred to unless expressly limited to a sub-Section in the
reference. References, if any, in this Agreement to "hereby",
"herein", "hereinabove", "hereinafter", "hereinbelow", "hereof",
"hereunder", and words of similar import shall be to this Agreement in
its entirety and not only to the particular Section or Exhibit in
which such reference appears unless expressly stated to the contrary.
1.4 CONSTRUCTION: Unless the context otherwise requires: (i) "or" is not
exclusive; (ii) words used in the singular include the plural and
words used in the plural include the singular; (iii) words used in the
masculine include the feminine and words used in the feminine include
the masculine; (iv) any date specified for any action that is not a
business day as such term is generally defined in the United States of
America shall be deemed to mean the first business day after such
date; (v) neither the captions to Sections or paragraphs hereof nor
the Table of Contents shall be deemed to be a part of the Agreement;
(vi) the Exhibits form a part of the Agreement and shall have the same
force and effect as if set out in the body of the Agreement; and (vii)
references herein to any other agreement or instrument shall, unless
the context otherwise requires or specifies, be deemed references to
that agreement or instrument as it may from time to time be changed,
amended or extended, but shall not be an incorporation by reference
unless specifically so provided.
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SECTION 2
PURCHASE AND SALE
2.1 ASSETS: Subject to the terms and conditions of this Agreement, Unocal
shall sell and shall cause Pipeline (as applicable) to sell and TBI
shall purchase on the Closing Date, effective as of the Effective
Date, without warranty of title, either express or implied, all of
Unocal's and Pipeline's right, title and interest in the following
assets (collectively, the "Assets"):
(i) the units, prospects and fields together with the oil, gas and
other mineral leases described in Schedule 2.1(i) insofar as
same cover and affect the lands described in Schedule 2.1(i),
including, but not limited to, working interests, overriding
royalty interests, royalty interests, reversionary interests,
net profit interests, net revenue interests, fee mineral estate
interests and any other interests of a similar nature with
respect to the oil, gas and other mineral leases referenced on
Schedule 2.1(i) (it being the intent of the parties that TBI
receive all of Unocal's ownership in such leasehold interests
even though Unocal's interest in such units, prospects and
fields and oil and gas and other mineral leases may be
incorrectly described on or inadvertently omitted from Schedule
2.1(i)) (the "Leasehold Interests");
(ii) producing and non-producing wells, saltwater disposal wells,
other wells or other oil and gas properties located on or
attributable to the Leasehold Interests, including, but not
limited to, those described on Schedule 2.1(ii) ("Oil and Gas
Properties");
(iii) the Lisbon gas processing and treatment plant and the related
lands, as described on Schedule 2.1(iii) (the "Lisbon Plant");
(iv) the equipment and facilities permanently located on the lands
described in Sections 2.1(i) and 2.1(ii) or lands pooled or
unitized therewith including, but not limited to, pumps, surface
and subsurface well equipment, gas plants, lines and facilities,
sulfur recovery facilities, compressors, compressor stations,
dehydration facilities, treating facilities, gathering lines,
flow lines, valves, meters, separators, tanks, tank batteries,
and other fixtures (which along with the Lisbon Plant are
collectively referred to as the "Facilities");
(v) the gas, oil, condensate and natural gas liquids produced after
the Effective Date, including line fill below the pipeline
connections as of the Effective Date attributable to the
Leasehold Interests and the Oil and Gas Properties;
(vi) all equipment, personal property, warehouse stock and idle
equipment used solely or held for use in connection with or
charged to any of the Leasehold Interests or Oil
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and Gas Properties, including, without limitation, the items and
equipment described in Schedule 2.1(vi) ;
(vii) all contracts and agreements concerning the properties
described in Sections 2.1(i), 2.1(ii), 2.1(iii), 2.1(iv) and
2.1(vi), including, but not limited to, unit agreements, pooling
agreements, areas of mutual interest agreements, farmout
agreements, farmin agreements, saltwater disposal agreements,
water injection agreements, line well injection agreements, road
use agreements, drilling contracts, operating agreements, well
service contracts, production sales contracts, gas contracts,
gas balancing agreements, storage or warehouse agreements,
supplier contracts, service contracts, construction agreements,
division orders and transfer orders, insofar as and only insofar
as they relate to the interests and properties described in
Sections 2.1(i), 2.1(ii), 2.1(iii), 2.1(iv) and 2.1(vi)
("Contract Rights");
(viii) all surface use agreements, easements, rights of way,
licenses, authorizations, Permits, and similar rights and
interests applicable to, or used in connection with, any or all
of the interests and properties described in Sections 2.1(i),
2.1(ii), 2.1(iii) and 2.1(iv), including, without limitation,
those items listed on Schedule 2.1(i) ("Surface Access
Agreements");
(ix) that certain pipeline known as the Aneth Line consisting of
approximately 66 miles of ten-inch diameter pipe, including
certain pipelines, tanks, facilities and equipment as described
in Schedule 2.1(ix), together with easements, rights of way and
interests directly attributable thereto (collectively, "Pipeline
Assets");
(x) the Lease Agreement;
(xi) the net cash proceeds, if any, actually received by Unocal (with
respect to any claim respecting an event which occurred between
the Effective Date and the Closing Date) under any policy or
agreement of insurance or indemnity in favor of Unocal covering
such claim;
(xii) the vehicles and rolling stock described on Schedule 2.1(xii);
and
(xiii) those certain term royalties respecting certain Parachute
Creek properties as described on Exhibit F-3 which will be in a
form to be mutually agreed by the parties.
2.2 EXCLUDED ASSETS: It is specifically agreed that Unocal is not selling and
Buyer is not purchasing the following assets ("Excluded Assets"):
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(i) all rights and interests of any kind in leases and lands other
than the Leasehold Interests and Oil and Gas Properties;
(ii) any and all interests in the Assets Unocal is legally or
contractually restricted from selling which are listed on
Schedule 2.2(ii);
(iii) all materials and equipment leased (other than contractual
lease rights pursuant to any lease included in the Contract
Rights) or temporarily located on the Leasehold Interests, and
any materials, equipment, pipelines, facilities or interests in
the land owned by a purchaser and/or transporter of oil and/or
gas therefrom, a lessor, or a third Person;
(iv) all interests in pipelines, facilities, contract rights and
surface access agreements owned by Unocal that are not used in
connection with the Assets or which cover lands described in the
Leasehold Interests and Oil and Gas Properties, but which are
used solely in connection with properties that are not being
sold under the terms of this Agreement;
(v) any right to use the "Unocal" name, marks, trade dress or
insignia, or to use the name of any other subsidiary of Unocal
Corporation; and all of Unocal's and its Affiliates'
intellectual property, including, but not limited to patents,
trade secrets and copyrights other than intellectual property
included in the Assets;
(vi) all amounts due or payable to Unocal or its Affiliates as
adjustments or refunds under any contracts affecting the Assets
and Accruing for all periods of time prior to the Effective
Date, specifically including, without limitation, amounts
recoverable from audits under operating agreements;
(vii) all rights, titles, claims and interests of Unocal and its
Affiliates Accruing prior to the Effective Date to or under any
policy or agreement of insurance or indemnity, any bond, or to
any insurance proceeds or awards; and any employment,
consulting, office lease or accounting service contracts;
(viii) all claims and choses in action of Unocal and its Affiliates
arising from acts, omissions or events, or damages to or
destruction of property related to the ownership or operation of
the Assets and Accruing prior to the Effective Date;
(ix) all proceeds, benefits, income or revenue Accruing to the Assets
prior to the Effective Date, and any claims of Unocal and its
Affiliates for refunds of or losses carried forwarded with
respect to taxes attributable to the Assets for any period prior
to the Effective Date; and
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(x) all geophysical, geological and seismic data, surveys, analysis
and similar data or information, and all rights therein other
than as specifically licensed under the Geophysical Data
Licensing Agreement.
2.3 PURCHASE PRICE: The Purchase Price ("Purchase Price") for the Assets
shall be (i) 5,800,000 shares (the "Shares") of Common Stock as
increased to reflect any stock dividend or other adjustment in the
Common Stock and (ii) the cash amount of $5,000,000, which is subject
to adjustment as set forth in Sections 2.5 and 2.6.
2.4 PAYMENT PROCEDURES: Payment shall be made as follows:
(i) at Closing, TBI shall pay to Unocal an amount equal to the
Adjusted Cash Purchase Price, plus or minus any Cash
Settlement (to the extent same is a positive number) by wire
transfer of immediately available funds as specified by
Unocal;
(ii) at Closing, Unocal shall pay to TBI an amount equal to the
Adjusted Cash Purchase Price, plus or minus any Cash
Settlement (to the extent same is a negative number) by wire
transfer of immediately available funds as specified by TBI;
and
(iii) at Closing, TBI will deliver to Unocal a stock certificate
representing the Shares with all taxes, direct or indirect,
attributable to the transfer of such Shares paid or provided
for.
2.5 ADJUSTED CASH PURCHASE PRICE: The cash portion of the Purchase Price
shall be adjusted as follows and the resulting amount shall be called
the "Adjusted Cash Purchase Price":
(i) plus or minus any adjustments for Title Defects; minus
(ii) the Allocated Value of any part of the Assets sold to a third
Person pursuant to the exercise of a preferential purchase
right; plus
(iii) the Geophysical Seismic Licensing Price; plus or minus
(iv) the value of the Gas Imbalance and Pipeline Imbalance shown
on Schedule 6.6, as calculated pursuant to Section 10.3
hereof.
2.6 CASH SETTLEMENT: The sum ("Cash Settlement") due to settle accounts
until the Final Accounting shall be determined by Unocal for Closing
purposes by adding or subtracting from the Adjusted Cash Purchase
Price as follows (and to the extent that such adjustments involve
estimates or unliquidated amounts, then such estimates and
unliquidated amounts shall be mutually agreed to by the parties not
less than three (3) days prior to the Closing):
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(i) add the amount of expenditures (or estimated expenditures as
agreed) made by Unocal that are attributable to the Assets
for the period between the Effective Date and Closing Date
including, without limitation, royalties, taxes, rentals and
similar charges and expenses, including those billed under
applicable operating agreements, and all prepaid expenses;
(ii) subtract the amount of revenues (or estimated revenues as
agreed) received by Unocal in connection with sales of
Hydrocarbons and associated products from the Assets,
together with any other income from the Assets, Accruing
after the Effective Date, excluding revenues (or estimated
revenues as agreed) from the sale of liquid Hydrocarbons in
storage tanks above the pipeline connection on the Effective
Date valued at market or contract prices in effect as of the
Effective Date after deducting royalty and tax obligations;
(iii) add the sum of $15,000 per month for each month or portion
thereof from the Effective Date to the Closing Date as
compensation or reimbursement to Unocal for its
administrative costs incurred in issuing royalty and rental
checks and continuing to perform accounting obligations for
the Assets; and
(iv) add the sum of $7,260 per month for each month or portion
thereof from the Effective Date to the Closing Date as
compensation or reimbursement to Unocal for assuming the risk
of Casualty Loss in respect of the Assets until the Closing
Date.
2.7 ASSUMPTION AGREEMENT: At the Closing, Buyer shall be deemed to have
assumed the Assumed Liabilities and shall enter into an Assumption
Agreement to acknowledge its assumption of the Assumed Liabilities.
SECTION 3
TITLE EXAMINATION
3.1 ACCESS TO TITLE INFORMATION: After the date of this Agreement and
until the end of the Due Diligence Period, Unocal shall make all of
its land records that are not privileged or confidential available to
Buyer at Unocal's offices located at 14141 Southwest Freeway, Sugar
Land, Texas 77478, or such other place as deemed appropriate by
Unocal, during normal business hours for examination by Buyer. Unocal
shall not be obligated to perform any title work and no abstracts or
title opinions will be made current by Unocal. NO WARRANTY OF ANY KIND
IS MADE BY UNOCAL AS TO THE INFORMATION SO SUPPLIED, AND BUYER AGREES
THAT ANY CONCLUSIONS DRAWN THEREFROM SHALL BE THE RESULT OF ITS OWN
INDEPENDENT REVIEW AND JUDGMENT. SUBJECT TO THE OTHER PROVISIONS OF
THIS AGREEMENT,
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BUYER ASSUMES THE RISK OF ANY TITLE DEFECTS AND/OR CONFLICTING ADVERSE
RIGHT(S), TITLE(S) AND/OR INTEREST(S) WHICH A RECORD TITLE CHECK
AND/OR PHYSICAL INSPECTION REVEALS OR WOULD HAVE REVEALED.
3.2 TITLE DEFECTS: For purposes of this Agreement, a defect in title
("Title Defect") shall mean a defect (other than a Permitted
Encumbrance) in one or more of the following respects only:
(i) Unocal's interest in any one or more of the properties
comprising the Assets described in Schedules 2.1(i), 2.1(ii)
and 2.1(iii) is more or less than the interest for such
property(ies) reflected in Schedules 2.1(i), 2.1(ii) and
2.1(iii);
(ii) Unocal's rights and interests in one or more of the
properties comprising the Assets described in Schedules
2.1(i) and 2.1(ii) are subject to being reduced by virtue of
the exercise by a third party of a reversionary, back-in or
similar right not reflected in Schedules 2.1(i) and 2.1(ii)
nor disclosed to TBI in the Unocal Disclosure Schedule;
(iii) Unocal's title to one or more of the Leasehold Interests and
Oil and Gas Properties is such that Unocal does not have
Defensible Title;
(iv) Consents to transfer or other similar approvals, other than
consents or approvals which are obtained prior to Closing or
of a type customarily obtained following the Closing; or
(v) Under the Lease Agreement, Unocal is leasing to TBI less than
29,000 net acres.
3.3 NOTICE OF TITLE DEFECT: Upon discovery of a Title Defect, the Party
discovering same shall as soon as reasonably possible thereafter
notify the other Party of the Title Defect. The notice shall include
with reasonable specificity the property or properties described in
Schedule 2.1(i), Schedule 2.1(ii) or Schedule 2.1(iii) which are
affected, the particular Title Defect claimed, and the notifying
Party's good faith estimate of the Claim Value or Defect Value. Any
Title Defect which is not asserted by Unocal or Buyer prior to the end
of the Due Diligence Period shall conclusively be deemed waived by
both Parties for all purposes.
3.4 CLAIM VALUE: If a claim of Title Defect is made pursuant to Section
3.2(i) or (ii), the value of the claim ("Claim Value") shall be
calculated using the Claim Value Formula and Allocated Values set out
in Exhibit "A."
3.5 DEFECT VALUE: If a claim of Title Defect is made pursuant to Section
3.2(iii) for a matter not covered by Sections 3.2 (i) or (ii), the
value of the defect ("Defect Value") for a defect that is a liquidated
or certain amount shall be such liquidated or certain amount, and as
to
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unliquidated or uncertain amounts it shall be an amount necessary to
compensate Buyer for the adverse economic effect of such Title Defect
on the value of the property(ies) affected, taking into consideration
all relevant factors, including the practical and legal effect of the
Title Defect. In no instance shall a Defect Value be an amount in
excess of the Allocated Value of an affected property.
3.6 REMEDIES FOR TITLE DEFECTS:
(i) Prior to the Closing Date, Unocal may elect to cure any or all
Title Defects; provided, however, if Unocal elects to cure a
Title Defect, but has not been able to do so by the Closing
Date, the Parties shall proceed with the Closing, with the Claim
Value or Defect Value, as applicable, being an adjustment to the
Purchase Price. Unocal shall retain the right to cure any such
Title Defect for a period of time not to exceed one hundred
eighty (180) days after the Closing Date. Within thirty (30)
days of Buyer's receipt of curative documents which eliminate
the Title Defect, Buyer shall tender to Unocal the applicable
Claim Value or Defect Value withheld at Closing. Unocal's option
to cure Sections 3.2 (i) or (ii) Title Defects shall include the
option to partially cure any such Title Defect or Title Defects
so as to reduce the Claim Value of the Title Defect or Title
Defects.
(ii) If the Claim Value or Defect Value of a Title Defect is equal to
twenty-five percent (25%) or more of the Allocated Value of a
property described in Schedule 2.1(i) or 2.1(ii), Unocal may in
its sole discretion elect to retain the affected property and
delete it from the Assets. In such instance, the Adjusted Cash
Purchase Price shall be adjusted downward in an amount equal to
the Allocated Value of the retained property(ies).
(iii) If a Title Defect is a Section 3.2(i) or (ii) Title Defect
which increases or decreases Unocal's interest in the Assets,
and Unocal does not elect to cure the Title Defect, the Adjusted
Cash Purchase Price shall be adjusted up or down by the Claim
Value of the Title Defect.
(iv) If Unocal contests the existence of a Title Defect or Buyer's
good faith estimate of the Claim Value or Defect Value of the
Title Defect, the Parties shall meet and use their best efforts
to agree on the validity and/or value of the Title Defect. If
the Parties cannot agree on the validity and/or value of a Title
Defect, and neither Party elects to waive its claim, the dispute
shall be submitted to arbitration in accordance with the
arbitration procedures set forth in Exhibit "B."
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(v) If Unocal agrees, or is required, to pay the Claim Value of the
Title Defect, it shall pay the Claim Value of the Title Defect
by an adjustment to the Adjusted Cash Purchase Price by the
Claim Value of the Title Defect.
3.7 PURCHASE PRICE ADJUSTMENTS THRESHOLD: Notwithstanding any other
provision herein, the Purchase Price shall not be adjusted due to or
for a Title Defect, and neither Party shall notify the other Party of
a Title Defect unless or until the Claim Value or Defect Value of the
Title Defect exceeds a minimum threshold of $25,000. This $25,000
Title Defect threshold shall be applied separately to each property
described in Schedules 2.1(i) or 2.1(ii) that has been assigned a
separate Allocated Value, but Title Defects shall be calculated on a
cumulative basis if a separate property is subject to more than one
Title Defect. If the aggregate total of Title Defects exceeds
$7,000,000, then Buyer may terminate this Agreement pursuant to
Section 13.1(ii).
3.8 PREFERENTIAL PURCHASE RIGHTS: (a) Preferential purchase rights shall
not be considered Title Defects hereunder regardless of whether or not
they are reflected in the Unocal Disclosure Schedule. As to any and
all preferential purchase rights known to Unocal prior to the Closing
affecting Unocal's or its Affiliates' interest in all or part of the
Assets, in accordance with the provisions of the agreement which
created the rights, Unocal shall send, as soon as practicable after
execution of this Agreement, to the owner or owners of such rights a
notice offering to sell to such owner or owners, those Assets covered
by such rights for the Allocated Value assigned to the affected
Assets. If the owner or owners of the rights exercise such rights
prior to Closing, the affected portion of the Assets shall be deleted
from the transaction, and the Adjusted Cash Purchase Price shall be
reduced in an amount equal to the Allocated Value of the deleted
Assets; provided, however, that Buyer, at its sole expense, shall have
the right to challenge the asserted preferential rights (and shall
indemnify, defend, and hold harmless Unocal from claims, damages and
liabilities arising therefrom or relating thereto). If the specific
Assets affected do not have a separate Allocated Value, the value
shall be the Claim Value of the deleted Assets. The Assets which are
known by Unocal to be subject to preferential purchase rights are
listed on Schedule 3.8. By listing Assets on Schedule 3.8, Unocal does
not admit, warrant or represent that any of such Assets are subject to
preferential purchase rights which have not been waived or that such
listing is an exhaustive list of all preferential purchase rights
affecting the Assets. To the extent and in the manner required under
applicable agreements, Unocal shall either comply with each
preferential purchase right listed on Schedule 3.8 or obtain a waiver
thereof. Unocal may seek and obtain waivers of any applicable or
purported preferential purchase right, in a commercially reasonable
manner discharging the obligations required of Unocal.
(b) If the holder of a preferential purchase right fails to consummate
the purchase of the Assets covered by such right after notice of
exercise, then Unocal shall so notify Buyer, and
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Buyer shall purchase from Unocal, for a price equal to the Allocated
Values and upon the other terms of this Agreement, the Assets to which
the preferential purchase right applied. All Assets for which a
preferential purchase right has not been asserted prior to Closing
shall be sold to Buyer at Closing pursuant to the provisions of this
Agreement. If one or more of the holders of such preferential purchase
rights notifies Unocal subsequent to Closing that it intends to assert
its preferential purchase right, Unocal shall give notice thereof to
Buyer, whereupon Buyer may elect to: (i) at its sole expense, satisfy
such preferential purchase right obligations of Unocal to such holders
and Buyer shall be entitled to receive and Unocal hereby assigns to
Buyer, all of Unocal's right to all proceeds received from such
holders in connection with such preferential purchase rights or (ii)
convey the Assets subject to the preferential purchase right to Unocal
and Unocal shall remit to Buyer an amount equal to the Allocated Value
of Assets. If Buyer elects to satisfy the preferential purchase right
obligations of Unocal pursuant to subsection (i) above, then Buyer
shall indemnify, defend and hold harmless Unocal from claims, damages
and liabilities arising therefrom or relating thereto. If Buyer elects
to convey Assets to Unocal pursuant to subsection (ii) above, then
Buyer agrees to make such decision and conveyance promptly following
Buyer's becoming aware of the preferential purchase right (and in no
case more than ten (10) days following notice to Buyer that such
preferential right is being asserted) so that Unocal will have
adequate reasonable opportunity and time to challenge or satisfy the
preferential purchase rights subject to such notification.
3.9 PREFERENTIAL PURCHASE RIGHT DISPUTES: (i) If an owner of a preferential
purchase right obtains judicial relief which permanently enjoins the
consummation of the transactions contemplated under this Agreement or
enjoins the transfer of Assets representing in excess of 20% of the
Purchase Price, such enjoinder shall be deemed a termination of this
Agreement by mutual consent of the Parties.
(ii) If, following the Closing, an owner of a preferential purchase
right (including any Preferential Right which was not listed on Schedule 3.8)
seeks judicial relief, which may include injunctive relief, and Buyer elects
not to re-convey the affected Assets under Section 3.8(b) above or the time
period to re-convey the affected Assets under Section 3.8(b) above has
otherwise expired, then Buyer shall indemnify, defend and hold Unocal harmless
from any and all claims, causes of action, costs and expenses arising out of or
relating to such dispute.
SECTION 4
ENVIRONMENTAL MATTERS
4.1 NO ADMISSION AGAINST INTEREST: Nothing contained in this Section 4, or
elsewhere in this Agreement, shall be construed to be an admission
against interest as to Unocal or TBI. Unocal and TBI have not included
Environmental Liability related provisions herein due to
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any perceived liability and specifically disclaim the existence of any
such liability to third parties (including governmental entities)
based on contract, tort, statute or otherwise.
4.2 PHYSICAL CONDITION OF THE ASSETS: Buyer acknowledges that the Assets
have been used for oil and gas drilling and production operations, gas
processing operations, related oil field operations and possibly for
the storage and disposal of Deleterious Substances, and the Assets may
be contaminated with such materials. Physical changes in or under the
Leasehold Interests, Oil and Gas Properties or adjacent lands may have
occurred as a result of such uses. The Assets may contain wells,
sumps, landfills, pits, ponds, tanks, impoundments, foundations,
pipelines and other equipment, whether or not of a similar nature, any
of which may be buried and contain Deleterious Substances, and the
locations of which may not be known to Unocal or be readily apparent
by a physical inspection of the property. Further, spills, leaks,
blowouts and routine operations may have led to contamination of the
Assets with Deleterious Substances, the locations of which may not be
known to Unocal or be readily apparent by a physical inspection of the
property. Buyer understands that Unocal does not have the requisite
information with which to determine the exact nature or condition of
the Assets nor the effect any use has had on the physical condition of
the Assets. In addition Buyer acknowledges that some oil field
production equipment may contain asbestos and/or NORM. In this regard,
Buyer expressly understands that NORM may affix or attach itself to
the inside of wells, materials and equipment as scale or in other
forms, and that wells, materials and equipment located on the Assets
described herein may contain asbestos and NORM, and that NORM in the
form of scale or in other forms may have become dislodged from the
inside of wells, materials and equipment and be located on the Assets
and that asbestos and NORM containing materials may be buried or have
been otherwise disposed of on the Assets. Buyer also expressly
understands that special procedures may be required for the removal
and disposal of asbestos, NORM, and other Deleterious Substances from
the Assets where they may be found.
4.3 ENDANGERED SPECIES, CRITICAL HABITAT, WETLANDS, GEOLOGIC HAZARDS AND
FLOODING: "Endangered Species" as used herein shall have the same
meaning as "endangered species" is defined pursuant to 16 U.S.C.
1532(6) or the laws of the state in which the Leasehold Interest is
located; as "threatened species" is defined pursuant to 16 U.S.C.
1533(30) or the laws of the state in which the Leasehold Interest is
located; and/or, as a candidate species for such listing under federal
or state law. "Critical Habitat" as used herein shall have the meaning
as defined pursuant to 16 U.S.C. 1532(5). "Wetland" as used herein
shall have the meaning as defined in 40 Code of Federal Regulations
ss.230.3(a), or under the laws of the state in which the Leasehold
Interest is located. "Geologic Hazards" as used herein shall include
seismic hazard and any earth slides or other earth movement.
"Flooding" as used herein shall include the risks associated with a
flood plain, flood way or restriction zone and/or any diminution in
the value of the Property or restriction of its use by reason of the
risk of water entering or remaining thereon. WITHOUT IN ANY WAY
LIMITING ANY
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OTHER DISCLAIMERS OF WARRANTY HEREIN AND NOTWITHSTANDING ANY
DISCLOSURES MADE BY UNOCAL TO BUYER, UNOCAL AND ITS AFFILIATES
DISCLAIM ANY EXPRESS OR IMPLIED WARRANTY OR REPRESENTATION AS OF THE
DATE OF THIS AGREEMENT AND/OR AS OF THE CLOSING OF THE COMPLETENESS OF
ANY SUCH DISCLOSURE OR THAT THE ASSETS ARE FREE FROM ANY ENDANGERED
SPECIES OR THAT ALL OR ANY PART OF THE ASSETS ARE NOT A CRITICAL
HABITAT OR A WETLAND, OR THAT ANY PART OF THE ASSETS DOES NOT INCLUDE
A GEOLOGIC HAZARD, OR THAT ANY PART OF THE ASSETS ARE NOT SUBJECT TO
FLOODING. Notwithstanding any
knowledge that could be imputed to Unocal or its Affiliates, Buyer has
the obligation to ascertain the presence of and extent of any
Endangered Species, Critical Habitat, Wetland, Geologic Hazards and
the risk of Flooding on the Assets.
4.4 ENVIRONMENTAL ASSESSMENTS AND COMPLETION OF ENVIRONMENTAL DUE
DILIGENCE: From the date of this Agreement, Unocal will provide TBI
(or its contractor) with reasonable access to certain employees of
Unocal, certain records of Unocal and the Assets operated by Unocal
for the Due Diligence Period, during which TBI will, as part of TBI's
due diligence, conduct, at its sole risk and expense, Phase I
environmental site assessments as provided below and such additional
environmental site assessments as are commercially reasonable under
the circumstances and as TBI and Unocal determine is appropriate
(collectively, the "Environmental Assessments"). In the event the
Parties (acting in good faith) cannot agree to the terms of the
preceding sentence, this Agreement shall terminate under Section
13.1(i) of this Agreement. TBI may conduct a Phase I environmental
site assessment (pursuant to American Society for Testing and
Materials standards) on each of the fields operated by Unocal set
forth in Exhibit "C" to be conducted by an unrelated third party
qualified to conduct such Phase I environmental site assessments. TBI
agrees to immediately provide to Unocal a copy of the Environmental
Assessments, including all reports, data and conclusions, and, in any
event, TBI shall provide Unocal a copy of all of the foregoing no
later than 15 days prior to Closing and if the Closing occurs, and the
Assets are sold and assigned to Buyer, Unocal shall keep all such
information strictly confidential. Buyer shall keep any data or
information acquired by all such examinations and the results of all
analyses of such data and information strictly confidential and,
unless required by law, will not disclose same to any person or agency
without the prior written approval of Unocal except to the extent such
disclosure is (i) required by applicable law or (ii) to financial
institutions, environmental consultants, legal counsel or other
parties to whom disclosure is appropriate and desirable to consummate
this transaction, but subject to the prior agreement of any such party
to maintain the confidentiality of the information. Buyer shall
complete its environmental due diligence within the Due Diligence
Period.
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4.5 BUYER'S ACCESS TO ASSETS; INDEMNIFICATION; INSURANCE:
(i) Buyer shall have reasonable access to the Assets to conduct its
environmental due diligence including but not limited to the
Environmental Assessments. Buyer shall not perform any act or
permit the performance of any act that would injure the Assets
(other than soil sampling which is approved by Unocal in
writing) or unreasonably disrupt Unocal's or its Affiliates'
activities thereon or the surface owner's or the surface
tenant's activities thereon. If the consent of the surface owner
or the surface tenant or any other third party is required in
connection with Buyer's access to the Assets, Buyer agrees to
obtain such consent, with the assistance and cooperation of
Unocal (at no cost to Unocal), before entering onto the Assets
affected thereby.
(ii) BUYER RELEASES AND AGREES TO INDEMNIFY, DEFEND AND HOLD HARMLESS
Unocal, its Affiliates, its or their directors, officers,
employees and agents against all claims for injury to, or death
of, persons or damage to property arising in any way from the
exercise of access rights granted to Buyer for environmental due
diligence or due diligence for any other purpose, or from the
activities of Buyer or its employees, agents or contractors on
the Assets. Buyer shall indemnify Unocal, its Affiliates, its or
their directors, officers, employees and agents against and hold
each and all of said indemnitees harmless from any and all loss,
cost, damage, expense or liability, including attorney's fees,
arising out of (i) any and all third party statutory or
common-law Liens or other encumbrances for labor or materials
furnished in connection with such tests, samplings, studies or
surveys as Buyer may conduct with respect to the Assets; and
(ii) any injury to or death of persons or damage to property
occurring in, on or about the Assets as the result of Buyer's
due diligence activities REGARDLESS OF THE SOLE, JOINT OR
CONCURRENT NEGLIGENCE, STRICT LIABILITY, PREMISES LIABILITY,
BREACH OF CONTRACT, OR OTHER FAULT OR RESPONSIBILITY OF UNOCAL
OR ANY PARTY OR PERSON (except for any such injuries or damages
caused solely by the gross negligence or willful misconduct of
any said indemnitees). The foregoing obligation of indemnity
shall survive Closing or termination of this Agreement without
Closing.
(iii) Buyer shall obtain and maintain or shall cause its outside
environmental consultants, if such consultants are engaged in
activities on the Assets, to obtain and maintain insurance
acceptable to Unocal which is primary as to any insurance or
self-insurance available to Unocal and which names Unocal and
its Affiliates as additional insureds with respect to liability
arising out of Buyer's or its agents' activities on the Assets,
including a severability of interest clause (cross liability),
which additional insured endorsement shall not exclude coverage
based upon the alleged or actual negligence of the additional
insured. Such insurance shall include:
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(a) commercial general liability insurance occurrence
form or the equivalent with the amendment-aggregate
limits of insurance covering contractual liability,
subcontractor's liability, blanket contractual
liability, and, unless waived in writing by Unocal,
liability arising from explosion, collapse, or
underground property damage, all with a minimum
combined single limit of $1,000,000.00 each
occurrence, $2,000,000.00 aggregate, for bodily
injury, death, property damage, business
interruption and personal injury;
(b) comprehensive automobile liability insurance or
business auto policy on an occurrence basis covering
all owned, hired or otherwise operated non-owned
vehicles with a minimum combined single limit of
$1,000,000.00 each occurrence for bodily injury,
death and property damage;
(c) workers' compensation insurance as required by law;
and
(d) employers' liability insurance with a minimum limit
of $1,000,000.00 each occurrence.
Such insurance shall be written by a carrier with a Best's rating of A IX or
above. Before the entry by Buyer upon the Assets, Buyer shall provide Unocal
with policies or certificates of the aforesaid insurance acceptable in form and
substance to Unocal which shall provide that coverage shall not be canceled or
materially changed prior to thirty (30) days' written notice to Unocal.
Subrogation against Unocal and its Affiliates shall be waived with respect to
all of the insurance policies set forth above (including without limitation,
policies of any consultant). The insurance required by this provision in no way
limits Buyer's obligations under any other Section of this Agreement. Further,
the insurance to be carried shall in no way be limited by any limitation
expressed elsewhere in this Agreement, or any limitation placed on the
indemnity herein given or as a matter of law.
4.6 ASSUMPTION OF ENVIRONMENTAL LIABILITIES: Buyer shall assume and
discharge any and all Environmental Liabilities relating to or arising
from the Assets, whether relating to or arising from ownership or
operations before or after the Effective Date, except as follows:
(i) Buyer assumes no Environmental Liabilities unless and until
Closing occurs; and
(ii) Based on the Qualified Claim Cost Sharing Allocation, Unocal
shall be responsible only for a portion of the Remediation
Costs for Qualified Claims.
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4.7 QUALIFIED CLAIM COST SHARING:
(a) Any Remediation Costs incurred by Buyer or Unocal or its
Affiliates in satisfying a Qualified Claim shall be allocated
and satisfied by the Parties as follows ("Qualified Claim
Cost Sharing Allocation"):
(i) each separate and distinct Qualified Claim for which
the Remediation Cost is $10,000 or less ("Minimal
Environmental Liabilities") shall be allocated to
and satisfied by Buyer;
(ii) Subject to Section 4.7(a)(i) above, cumulative
Remediation Costs for all Qualified Claims, except
Minimal Environmental Liabilities, up to an
aggregate amount equal to $50,000 are allocated to
and shall be satisfied by Unocal and Buyer as
follows: Buyer shall satisfy the first $10,000 of
each separate and distinct Qualified Claim for which
the Remediation Cost is greater than $10,000 and
Unocal satisfying the balance of the claim up to an
aggregate amount for all Qualified Claims of
$50,000;
(iii) Subject to Sections 4.7(a)(i) and (ii) above,
cumulative Remediation Costs for all Qualified
Claims, except Minimal Environmental Liabilities,
which exceed an aggregate amount equal to $50,000
(with such aggregate $50,000 for all Qualified Claims
being allocated and satisfied in the manner described
in Section 4.7(a)(ii) above) and up to an aggregate
amount equal to 26.2% of the Purchase Price (which,
for purposes of this Section 4.7(a)(iii) is deemed
to be $20 million based upon a Purchase Price of
$76.4 million) are allocated to and shall
be satisfied one-half by Buyer and one-half by
Unocal.
(iv) Subject to Sections 4.7(a)(i) - (iii) above,
cumulative Remediation Costs for all Qualified
Claims, except Minimal Environmental Liabilities,
which exceed an aggregate amount equal to 26.2% of
the Purchase Price (which, for purposes of this
Section 4.7(a)(iv) is deemed to be $20 million based
upon a Purchase Price of $76.4 million) are
allocated to and shall be satisfied
solely by Buyer.
(b) An example of the application of the Qualified Claim Cost
Sharing Allocation is set forth on Schedule 4.7 hereto.
(c) NOTWITHSTANDING ANYTHING STATED HEREIN TO THE CONTRARY, THE
LIMITATIONS ON UNOCAL'S LIABILITY, AND THE ASSUMPTION OF ALL
LIABILITIES ABOVE SUCH LIMITATIONS BY BUYER, UNDER THIS
SECTION 4 AND ELSEWHERE IN THIS AGREEMENT SHALL APPLY
REGARDLESS OF WHETHER SUCH LIABILITIES ARE KNOWN OR UNKNOWN,
RELATE TO ACTIONS,
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EVENTS OR CONDITIONS EXISTING OR OCCURRING PRIOR TO THE
EFFECTIVE DATE, WHETHER ATTRIBUTABLE (IN WHOLE OR IN PART) TO
THE ACTIONS, SOLE, JOINT OR CONCURRENT NEGLIGENCE, STRICT
LIABILITY, BREACH OF CONTRACT, PRODUCTS LIABILITY,
ENVIRONMENTAL LIABILITY, OR OTHER FAULT, LIABILITY OR
RESPONSIBILITY OF UNOCAL OR ANY OTHER PERSON OR PARTY, AND
REGARDLESS OF WHETHER ASSERTED UNDER ANY THEORY OF LIABILITY.
4.8 LIMITATION: No obligations allocated to or assumed by Unocal under
this Agreement shall include any obligation to remediate any
Environmental Liability in or upon land or any water course or body of
water including ground water beyond the lawful requirements of the
government agency or agencies with jurisdiction over the Assets or a
court of competent jurisdiction, nor shall such obligations include
any action, cost or expense other than actions, costs, or expenses
required by law. Between the Parties, Unocal shall have the right but
not the obligation to direct and control any work required to remedy
Environmental Liabilities if it may be responsible for more than fifty
percent (50%) of the costs and expenses of such work attributable to
the interest of the Parties; provided, however, if the Parties have
control, regardless of which Party directs and controls any required
work to remedy Environmental Liabilities, all such actions shall be
the most cost efficient possible to comply with applicable
Environmental Laws and which are consistent with continued use of the
Assets for the same purposes they were being used on the Effective
Date, and shall be based on mutually acceptable actions after
consultation with the other Party.
4.9 TERMINATION DUE TO MATERIAL ENVIRONMENTAL DEFICIENCIES: If it is
determined during the Due Diligence Period that a Material
Environmental Deficiency exists, either Buyer or Unocal may elect to
terminate this Agreement, unless Buyer and Unocal mutually agree in
writing to delete all or part of the affected Assets from this
Agreement, and adjust the Adjusted Cash Purchase Price accordingly,
such that the total Environmental Liabilities remaining do not
constitute a Material Environmental Deficiency.
4.10 DETERMINATION OF VALUE:
(i) Upon delivery of notice by Buyer to Unocal of a Material
Environmental Deficiency, Buyer and Unocal shall meet and use
their best efforts to agree on whether such a Material
Environmental Deficiency exists. The value of Environmental
Liabilities shall be based on the estimated Remediation Cost.
(ii) If, during the Due Diligence Period, Buyer determines there
is a Material Environmental Deficiency and desires to
terminate this Agreement, it shall immediately so notify
Unocal. Unocal shall respond on the earlier of the Closing
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Date or seven (7) days from the date of notice whether it
concurs in Buyer's determination that the estimated
Remediation Cost of the applicable Environmental Liabilities
is sufficient to constitute a Material Environmental
Deficiency. In the event Unocal concurs in Buyer's
determination, the termination of this Agreement shall be
treated as a termination by mutual consent of the Parties.
(iii) If Unocal timely notifies Buyer that it does not concur with
the Buyer's determination of the estimated Remediation Costs,
Buyer may still elect to terminate this Agreement and request
a determination of the value of the Environmental Liabilities
by the following procedure: the Parties will submit the issue
of the existence of a Material Environmental Deficiency to
arbitration in accordance with the arbitration procedures set
forth in Exhibit "B." If the arbitrators determine that a
Material Environmental Deficiency does not exist, Buyer will
pay the arbitration costs. If the arbitrators find that a
Material Environmental Deficiency does exist, Unocal will pay
the arbitration costs. If Buyer does not elect to terminate
this Agreement prior to the commencement of arbitration in
connection with this Section, then Buyer shall be deemed to
have waived its right to terminate this Agreement under this
Section unless and until the arbitrators determined that a
Material Environmental Deficiency exists, and if such
arbitrators determine that no Material Environmental
Deficiency exists, then Buyer shall pay all arbitration costs
and proceed to Closing, subject to the other terms and
conditions of this Agreement.
(iv) Any and all disagreements between Buyer and Unocal regarding
the value of Environmental Liabilities shall be submitted to
arbitration in accordance with the arbitration procedures set
forth in Exhibit "B."
SECTION 5
OPERATIONS AND CASUALTY LOSS
5.1 OPERATIONS: Between the Effective Date and Closing, as to the portion
of the Assets to be conveyed which Unocal now operates, it shall
operate the same in a good and workmanlike manner. At Closing, such
operations shall be turned over to and become the responsibility of
Buyer, unless an applicable unit, pooling, communitization or
operating agreement requires otherwise, in which case (unless Buyer
and Unocal otherwise agree) Unocal shall continue the physical
operation of such portion of the Assets, pursuant to and under the
terms of such applicable agreement, until such time after Closing as
such applicable agreement may require. However, Unocal shall have no
liability as operator to Buyer, for any operations by Unocal, for loss
or damages sustained, or liabilities incurred, REGARDLESS OF THE SOLE,
JOINT OR CONCURRENT NEGLIGENCE, STRICT LIABILITY, BREACH OF CONTRACT
OR OTHER FAULT OR RESPONSIBILITY OF
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UNOCAL OR ANY OTHER PERSON OR PARTY, except as may result directly from
Unocal's gross negligence or willful misconduct. Such operations from
and after the Closing shall be conducted by Unocal for and on behalf
of Buyer, and Unocal shall make appropriate charges to Buyer pursuant
to any applicable operating agreement pursuant to Sections 2.6(i),
(iii) and (iv). In the absence of any applicable operating agreement,
for any such services performed by Unocal as operator of the Assets
(or portions thereof) from and after the Effective Date, Buyer shall
pay to Unocal the applicable Asset's working interest percentage of an
overhead operating charge of $660 per month per active well operated
by Unocal; plus Buyer shall reimburse all reasonable and necessary
expenses incurred by Unocal in such operation, protection or
maintenance of the Assets as are not normally included within the
operating charge in standard form accounting procedures but are paid
as direct charges thereunder. Any such charges and expenses shall be
recovered by Unocal as part of the Closing or Final Accounting
adjustments as appropriate.
5.2 CASUALTY LOSS: Upon the Closing, the risk of Casualty Loss relating to
the Assets shall pass from Unocal to Buyer, effective as of the
Effective Date.
5.3 SUCCESSOR OPERATOR: Buyer acknowledges and agrees that Unocal cannot
and does not covenant or warrant that Buyer shall become successor
operator of all or any portion of the Assets, since the Assets or
portions thereof may be subject to unit, pooling, communitization,
operating or other agreements which control the appointment of a
successor operator. Unocal agrees, however, that as to the Assets it
operates, where it will facilitate the appointment of a successor
operator, Unocal will use its reasonable efforts to recommend TBI as
successor operator and will resign as operator when a successor
operator assumes operations.
5.4 RESTRICTIONS ON OPERATIONS: Between the Execution Date and Closing,
except as necessary in Unocal's opinion in emergency situations,
Unocal shall not, without Buyer's consent, voluntarily incur any
liability or enter into any commitment with respect to the Assets
which will cost in excess of $50,000 net to Unocal with respect to an
individual project; cancel any contract associated with the Assets
except in the ordinary course of business; or enter into any hedging,
forward sales or similar agreements with respect to production from
the Assets.
5.5 PERMIT TRANSFERS: Buyer acknowledges and agrees to the following
regarding the transfer of Permits:
(a) Unocal and Buyer agree that, as of the Closing Date, Buyer
shall be responsible for compliance with the Permits, whether
or not Unocal or Buyer is the permit holder or operator under
the Permits. After the Closing Date, Buyer agrees to maintain
all Permits in full force and effect in compliance with the
laws applicable to such Permits.
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(b) Buyer acknowledges that certain of the Permits, by their
terms, cannot be transferred. Buyer agrees to promptly apply
for and diligently pursue new Permits in all cases where a
Permit cannot be transferred to Buyer and Buyer and Unocal
agree to diligently pursue the transfer of Permits which are
transferable.
(c) Certain of the Pipeline Assets owned by Unocal are currently
FERC common carriage and will require FERC approval and
possibly other regulatory approval prior to transfer of
such Pipeline Assets to Buyer. Unocal and Buyer shall
commence promptly and thereafter diligently pursue the
appropriate process necessary to gain FERC approval and
other regulatory approvals to transfer such Pipeline Assets
to Buyer. Since the FERC and regulatory approval process
may extend beyond Closing, Unocal shall (to the extent
permissable under applicable licenses, permits and
regulations and in accordance with a management agreement
to be mutually agreed upon by the parties) retain
operations and ownership of such Pipeline Assets until FERC
approval or other regulatory approvals required by Unocal
to transfer such Pipeline Assets to Buyer are obtained.
(d) After Closing and to the extent agreed in writing by Unocal,
Unocal will continue as permit holder on behalf of Buyer
under those Permits that have yet to be assigned or issued to
Buyer until such time as all Permits necessary to the
operation of the Assets and Pipeline Assets have been
assigned or issued to Buyer. After Closing and for as long as
Unocal or Unocal's name remains on a Permit, Buyer shall
indemnify and hold Unocal and its Affiliates harmless from
and against any and all claims in respect of Environmental
Liabilities arising out of, resulting from or relating to the
Permits.
(e) For as long as Unocal or Unocal's name remains on any Permit,
Buyer agrees not to sell any Assets related thereto or
transfer such related Permit without Unocal's prior written
consent, which may be given or withheld in its sole
discretion.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF UNOCAL
Unocal hereby represents and warrants to Buyer as follows:
6.1 ORGANIZATION: Unocal is a corporation duly organized, validly existing
and in good standing under the laws of the state of California, and is
qualified to do business and is in good standing as a foreign
corporation in every other jurisdiction where the failure to so
qualify would have a Party Adverse Effect on Unocal.
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6.2 AUTHORITY TO DO BUSINESS: Unocal has all requisite power and authority
to own, lease or operate the Assets and to carry on the business as
now conducted.
6.3 AUTHORITY; ENFORCEABILITY:
(i) Unocal has all requisite corporate power and authority to
enter into and perform its obligations under this Agreement
and to carry out the transactions contemplated hereby.
(ii) All corporate acts and other proceedings required to be taken
by Unocal to authorize the execution, delivery and
performance by Unocal of this Agreement have been duly and
properly taken.
(iii) This Agreement has been duly executed and delivered by Unocal
and constitutes the legal, valid and binding obligation of
Unocal, enforceable against Unocal in accordance with its
terms.
(iv) The execution, delivery and performance by Unocal of this
Agreement does not and will not conflict with, or result in
any violation of or default under any provision of the
Articles of Incorporation or By-laws of Unocal or any law,
ordinance, rule, regulation, judgment, order, decree,
agreement, instrument or license applicable to Unocal or to
the Assets.
6.4 LITIGATION, SUITS OR CLAIMS: Except as disclosed in the Unocal
Disclosure Schedule, (a) there are no actions, suits or proceedings
pending or, to Unocal's Knowledge, threatened in writing against
Unocal which if decided unfavorably to Unocal could have a material
adverse effect on any of the Assets (other than actions, suits,
proceedings, asserted or threatened, relating to Title Defects or
Environmental Liabilities or disclosed in any of the exhibits or
schedules to this Agreement) and (b) to Unocal's Knowledge, no written
notice from any governmental authority or person has been received by
Unocal claiming any violation or repudiation of the Oil and Gas
Properties or any violation of any law, rule, regulation, ordinance,
order, decision or decree of any governmental authority (including,
without limitation, any such law, rule, regulation, ordinance, order,
decision or decree concerning the conservation of natural resources)
relating to the Oil and Gas Properties.
6.5 DISCLAIMER OF WARRANTIES: EXCEPT AS HEREIN PROVIDED, SUBJECT TO
SECTIONS 6.8 AND 6.9 HEREOF, THE ASSETS ARE SOLD "AS IS," "WHERE IS"
AND "WITH ALL FAULTS AS TO ALL MATTERS," AND UNOCAL AND ITS AFFILIATES
EXPRESSLY DISCLAIM AND NEGATE ANY REPRESENTATION OR WARRANTY, EXPRESS,
IMPLIED, AT COMMON LAW, BY STATUTE, OR OTHERWISE RELATING TO (a) THE
CONDITIONS OF THE ASSETS (INCLUDING,
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WITHOUT LIMITATION, ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY, OF FITNESS FOR A PARTICULAR PURPOSE, OR OF CONFORMITY
TO MODELS OR SAMPLES OF MATERIALS), (b) ANY INFRINGEMENT BY UNOCAL OF
ANY PATENT OR PROPRIETARY RIGHT OF ANY THIRD PARTY, (c) ANY
INFORMATION, DATA OR OTHER MATERIALS (WRITTEN OR ORAL) FURNISHED TO
BUYER BY OR ON BEHALF OF UNOCAL (INCLUDING WITHOUT LIMITATION, IN
RESPECT OF GEOLOGICAL AND ENGINEERING DATA, THE EXISTENCE OR EXTENT OF
OIL, GAS OR OTHER MINERAL RESERVES, THE RECOVERABILITY OF OR THE COST
OF RECOVERING ANY SUCH RESERVES, THE VALUE OF SUCH RESERVES, ANY
PRODUCT PRICING ASSUMPTIONS, AND THE ABILITY TO SELL OIL OR GAS
PRODUCTION AFTER CLOSING), (d) THE ENVIRONMENTAL CONDITION AND OTHER
CONDITION OF THE ASSETS AND ANY POTENTIAL LIABILITY ARISING FROM OR
RELATED TO THE ASSETS, AND (e) THE FAILURE OF ANY COMPUTER,
ELECTRONICS, SOFTWARE, OR COMPONENTS TO BE FREE OF ANY BUGS OR ERRORS,
INCLUDING, BUT NOT LIMITED TO, ANY DEFICIENCIES RELATING TO THE
INABILITY TO PROPERLY FUNCTION BEYOND DECEMBER 31, 1999.
6.6 GAS ENTITLEMENTS AND IMBALANCES: To Unocal's Knowledge, except as
described in Schedule 6.6 or in any other part of this Agreement,
Unocal is not obligated by virtue of any prepayment made under any
production sales contract or any other contract containing a
take-or-pay clause, or under any similar arrangement, to deliver oil,
gas or other minerals produced from or allocated to any of the Assets
at any time after the Effective Date without receiving payment
therefor.
6.7 NO BREACH: To Unocal's Knowledge, except as otherwise disclosed in
this Agreement, Unocal is not party to, or subject to, or bound by any
provision of any judgment, order, writ, injunction or decree of any
court, or governmental body, or any statute, rule or regulation
applicable to Unocal which prohibits or would be violated by, or which
allows for the termination or modification of this Agreement due to
Unocal entering into, executing, delivering or consummating same.
6.8 ENVIRONMENTAL CONDITION OF ASSETS: To Unocal's Knowledge, all material
environmental problems affecting the Assets are referred to in
documents which have been, or prior to Closing, will be provided or
made available to Buyer, or are otherwise referred to in the Unocal
Disclosure Schedule or described in Schedule 6.8 ("Environmental
Disclosure Schedule"). Unocal and TBI acknowledge that (i) there are
certain environmental conditions referenced on Schedule 6.8 which have
not yet become specific and identifiable third party claims and that
the inclusion of such conditions shall not preclude claims which arise
after the Closing Date from being categorized as and treated hereunder
as Qualified Claims even
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though such claims relate to such generally described environmental
conditions (to the extent that such claims otherwise meet the criteria
of Qualified Claims, as defined herein), and (ii) that the
environmental matters described on Schedule 6.8 which constitute
specific and identifiable third party claims shall be the
responsibility of TBI and shall not be eligible to become Qualified
Claims after the Closing.
6.9 COMPLIANCE WITH LAWS AND AGREEMENTS: To Unocal's Knowledge, Unocal is
in compliance with all permits, contracts and agreements relating to
the Assets, and in compliance with all laws, rules and regulations of
federal, state or local entities which have jurisdiction over Unocal
or the Assets such that any failure of compliance will not have an
adverse effect on the value of the Assets.
6.10 TAXES: To Unocal's Knowledge, all ad valorem, property, production,
severance and similar taxes and assessments based on or measured by
the ownership of property or the production or removal of Hydrocarbons
or the receipt of proceeds therefrom and relating to the Assets, to
the extent such taxes and assessments have become due and payable,
have been timely paid and all applicable tax returns required to be
filed have been filed and there are no claims by any applicable taxing
authority pending against Unocal applicable to the Assets.
6.11 NO DISTRIBUTION: Unocal is acquiring the Shares for its own account
for investment purposes and not with a view to or for sale in
connection with any distributions thereof within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), and the
rules and regulations thereunder and any applicable state securities
laws. Unocal understands that the Common Stock will not have been
registered pursuant to the Securities Act or any applicable state
securities or Blue Sky law, that such securities will be characterized
as "restricted securities" under the federal securities laws and that
under such laws and applicable regulations such securities cannot be
sold or otherwise disposed of without registration under the
Securities Act or an exemption therefrom. In this connection, Unocal
represents that it is familiar with Rule 144, as currently in effect,
and understands the resale limitations imposed thereby and by the
Securities Act.
6.12 CURRENT COMMITMENTS: To Unocal's Knowledge, Schedule 6.12 contains a
true and complete list as of the date of this Agreement of all
authorities for expenditures ("AFEs") to drill or rework Wells, or for
other capital expenditures, involving amounts in excess of $250,000
pursuant to any of the contracts being assumed by Buyer for which all
of the activities anticipated in such AFEs or commitments have not
been completed by the date of this Agreement.
6.13 BROKERS: Unocal has not incurred any obligation or liability,
contingent or otherwise, for any fee payable to a broker or finder
with respect to the matters provided for in this Agreement which could
be attributable to or charged to Buyer.
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6.14 OWNERSHIP OF COMMON STOCK: As of the date of this Agreement, neither
Unocal nor its Affiliates own shares of Common Stock or other
securities convertible into shares of Common Stock and are not a party
to any agreements to acquire any such securities other than this
Agreement.
6.15 ROYALTIES: To Unocal's knowledge, except as set forth in Exhibit "D,"
all royalties and similar assessments based on or measured by the
ownership of property or the production or removal of Hydrocarbons or
the receipt of proceeds therefrom and relating to the Assets, to the
extent such royalties have become due and payable, have been timely
paid; provided, however, that notwithstanding anything to the
contrary, Unocal does not make, and expressly disclaims, any
representations or warranties regarding the manner or method of
calculation of any such royalties.
SECTION 7
REPRESENTATIONS AND WARRANTIES OF BUYER
TBI hereby represents and warrants to Unocal as follows:
7.1 ORGANIZATION:
(i) Buyer is a corporation duly organized, validly existing and
in good standing under the laws of the state of Delaware, and
is qualified to do business and is in good standing as a
foreign corporation in every other jurisdiction where the
failure to so qualify would have a Party Adverse Effect on
Buyer.
(ii) Buyer has all requisite power and authority to own, lease or
operate its properties, assets and to carry on its business
as now conducted. Buyer is authorized to do business in the
states of Colorado, Wyoming, North Dakota and Utah.
(iii) Prior to the date of this Agreement, Buyer has delivered to
Unocal true, correct and complete copies of Buyer's
Certificate of Incorporation and Bylaws, as currently in
effect.
(iv) The respective headquarters and principal offices of Buyer
are located in the State of Texas.
7.2 AUTHORITY; ENFORCEABILITY:
(i) Buyer has all requisite corporate power and authority to
enter into and perform its obligations under this Agreement
and to carry out the transactions contemplated hereby.
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(ii) All corporate acts and other proceedings required to be taken
by Buyer to authorize the execution, delivery and performance
by Buyer of this Agreement have been duly and properly taken.
(iii) This Agreement has been duly executed and delivered by Buyer
and constitutes the legal, valid and binding obligation of
Buyer, enforceable against Buyer in accordance with its
terms.
(iv) The execution, delivery and performance of this Agreement by
Buyer do not and will not conflict with, or result in any
violation of or default under any provision of the
Certificate of Incorporation or Bylaws of Buyer, or any law,
ordinance, rule, regulation, judgment, order, decree,
agreement, instrument or license applicable to Buyer or to
its properties or assets.
7.3 CONSENTS: Other than compliance with the Hart-Scott-Rodino Act,
approval of the Buyer's board of directors, approval by Buyer's
principal lenders and satisfaction of the covenants and conditions of
this Agreement, no consent, approval, authorization, notice, filing,
registration or qualification is required to be obtained or effected
by Buyer for the execution, delivery or performance by Buyer of this
Agreement.
7.4 LITIGATION, SUITS OR CLAIMS: To Buyer's Knowledge and except as
reflected in Buyer's SEC Filings, there are no actions, suits or
proceedings pending or threatened in writing against Buyer which if
decided unfavorably to Buyer could have a Party Adverse Effect on
Buyer.
7.5 NO BREACH: To Buyer's Knowledge, Buyer is not party to, or subject to,
or bound by any provision of any judgment, order, writ, injunction or
decree of any court, or governmental body, or any statute, rule or
regulation applicable to Buyer which prohibits or would be violated
by, or which allows for the termination or modification of this
Agreement due to Buyer entering into, executing, delivering or
consummating same.
7.6 COMPLIANCE WITH LAWS AND AGREEMENTS: To Buyer's Knowledge, Buyer is in
substantial compliance with all Permits, contracts and agreements
relating to its properties, assets and business and in substantial
compliance with all laws, rules and regulations of federal, state or
local entities which have jurisdiction over Buyer or its properties,
assets or business such that any failure of compliance will not have a
Party Adverse Effect on Buyer.
7.7 INVESTIGATIONS OF ASSETS: In accordance with the provisions of this
Agreement, Buyer has made, or will make or arrange for others to make,
such inspection of the Assets as it deems
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appropriate, and, except as otherwise provided herein, Buyer will
accept the Assets "AS IS," "WHERE IS" AND "WITH ALL FAULTS AS TO ALL
MATTERS."
7.8 NO DISTRIBUTION: Buyer is acquiring the Assets for its own account for
investment purposes and not with a view to or for sale in connection
with any distribution thereof within the meaning of the Securities Act
of 1933, as amended, and the rules and regulations thereunder and any
applicable state securities laws.
7.9 FEDERAL LEASES: If the Assets include any federal leases, Buyer is
qualified to own such federal leases or will be so qualified at
Closing.
7.10 CAPITALIZATION OF BUYER; TITLE TO THE SHARES: (a) The authorized
capital stock of Buyer consists of (i) 55,000,000 shares of common
stock, par value $0.10 per share, of which 29,259,989 shares are
issued and outstanding and (ii) 2,500,000 shares of preferred stock,
par value $0.10 per share, of which 1,000,000 shares are issued and
outstanding; provided that the number of issued and outstanding shares
of common stock is subject to increase pursuant to the exercise of
previously granted options in the ordinary course. Except for this
Agreement, or as otherwise disclosed in writing to Unocal by Buyer,
and as set forth in the Buyer's SEC Filings, there are no outstanding
options, warrants, agreements, conversion rights, preemptive rights or
other rights to subscribe for, purchase or otherwise acquire any of
the unissued or treasury shares of capital stock of Buyer.
(b) Upon issuance and delivery to Unocal, the Shares shall be duly
authorized, validly issued and fully paid and nonassessable, and no
personal liability shall attach to the ownership thereof. Upon
transfer of the Shares, from TBI at the Closing, Unocal will have
valid and marketable title to all the Shares, free and clear of any
Liens, other than any Liens arising by, through or under Unocal and
the Stock Ownership and Registration Rights Agreement.
7.11 SEC FILINGS: (a) Buyer has filed with the Securities and Exchange
Commission ("SEC"), and has heretofore made available to Unocal true
and complete copies of, each form, registration statement, report,
schedule, proxy or information statement and other document
(including, without limitation, exhibits and amendments thereto),
including, without limitation, its Annual Reports to stockholders
incorporated by reference in certain of such reports, required to be
filed by it or its predecessors with the SEC since January 1, 1998,
under the Securities Exchange Act of 1934 (the "Exchange Act") or the
Securities Act (collectively, the "SEC Filings").
(b) As of its respective filing date (or, if any SEC Filing was
amended, as of the date such amendment was filed), each SEC Filing,
including, without limitation, any financial
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statements or schedules included therein, complied as to form in all
material respects with the applicable requirements of the Securities
Act and the Exchange Act.
(c) As of its filing date (or, if any SEC Filing was amended, as of
the date such amendment was filed), each SEC Filing filed pursuant to
the Exchange Act did not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which
they were made, not misleading.
(d) Each such registration statement, as amended or supplemented, if
applicable, filed by TBI pursuant to the Securities Act and
constituting a SEC Filing did not, as of the date such statement or
amendment became effective, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading.
(e) There are no liabilities of TBI or any of its subsidiaries of any
kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, and there is no existing condition,
situation or set of circumstances which could reasonably be expected
to result in such a liability, other than: (i) liabilities or
obligations disclosed in the SEC Filings made prior to the date hereof
or provided for in the TBI Balance Sheet or disclosed in the notes
thereto; (ii) liabilities or obligations which would not, individually
or in the aggregate, have a Party Adverse Effect on TBI; and (iii)
liabilities or obligations under this Agreement.
7.12 FINANCIAL STATEMENTS: The audited consolidated financial statements
and unaudited consolidated interim financial statements of TBI
included in the SEC Filings fairly present, in conformity with
generally accepted accounting practices applied on a consistent basis
(except as may be indicated in the notes thereto), the consolidated
financial position of TBI and its subsidiaries as of the dates thereof
and their consolidated results of operations and cash flows for the
periods then ended (subject to normal year-end adjustments and the
absence of financial footnotes in the case of any unaudited interim
financial statements).
7.13 ABSENCE OF CERTAIN CHANGES: Except as disclosed in the SEC Filings
made prior to the date hereof or as contemplated by this Agreement or
with respect to any of the actions referred to in any of clauses (b)
through (g) below to which Unocal has given its consent, since the TBI
Balance Sheet Date, the business of TBI and its subsidiaries has been
conducted in all material respects in the ordinary course consistent
with past practices and there has not been:
a) any event, occurrence, development or set of circumstances or
facts which has had, individually or in the aggregate, a
Party Adverse Effect on TBI;
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b) any declaration, setting aside or payment of any dividend