-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TcRqj6ojehgC3jmdnyxpGbHOzV+5fQHyRK9sj6iMEqpIkGZUvW9m/6lpvUFYIbc4 QfxrQXEjwkJxhHiJJ01Vhg== 0000914760-96-000214.txt : 19961016 0000914760-96-000214.hdr.sgml : 19961016 ACCESSION NUMBER: 0000914760-96-000214 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19961015 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961015 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAYNARD OIL CO CENTRAL INDEX KEY: 0000063528 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 751362284 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-05704 FILM NUMBER: 96643563 BUSINESS ADDRESS: STREET 1: 8080 N CENTRAL EXPWY STE 660 CITY: DALLAS STATE: TX ZIP: 75206 BUSINESS PHONE: 2148918880 MAIL ADDRESS: STREET 1: 8080 N CENTRAL EXPWY STE 660 CITY: DALLAS STATE: TX ZIP: 75206 FORMER COMPANY: FORMER CONFORMED NAME: HOMA OIL & GAS CO DATE OF NAME CHANGE: 19710902 8-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report October 15, 1996 ------------------------------------------------------- MAYNARD OIL COMPANY - ---------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 0-5704 75-1362284 - ---------------------------------------------------------------------- (State or other (Commission (IRS Employer jurisdiction of File Number) Identification No.) incorporation) 8080 N. Central Expressway, Suite 660, Dallas, Texas 75206 - ---------------------------------------------------------------------- Registrant's telephone number, including area code: (214) 891-8880 ----------------- INFORMATION TO BE INCLUDED IN THE REPORT Item 2. Acquisition or Disposition of Assets Pursuant to seven purchase and sale agreements between the Registrant and various oil and gas companies("Purchasers"), dated from March 6, 1996 through September 12, 1996, Registrant has sold interests in approximately 130 producing wells located in Texas and Oklahoma for cash consideration of $8,043,657. The first divestiture was closed on May 31, 1996 between ROC Energy, Byrd Operating Company and the Registrant for cash of $1,380,000 representing properties located in Crockett County, Texas. Three additional property sales closed in August, 1996 between BMC, Ltd., Chatham Oil Company, Javelina Energy, and the Registrant for total cash consideration of $934,439. Properties involved in these three sales included working interests in wells located in Grayson County, Texas and Carter County, Oklahoma and overriding royalty interests in Texas and Oklahoma. The last three property dispositions closed on September 30, 1996 between Enron Oil and Gas and the Registrant for total cash of $5,729,218 covering oil and gas properties located in Ellis, Roger Mills, Stephens, and Woodward Counties Oklahoma. There is no material relationship between the Purchasers and Registrant or any of its affiliates, or with any directors, officers, or associate of any director or officer of the Registrant. Item 7. Pro Forma Financial Information and Exhibits. Effective May 1, 1996 and August 1, 1996, the Company sold its interests in approximately 130 producing wells in Texas and Oklahoma for cash totaling $8,043,657 to six different entities. The unaudited pro forma condensed consolidated balance sheet of Maynard Oil Company and Subsidiaries has been prepared as if the disposition of these assets occurred on June 30, 1996. The unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 1996 and for the year ended December 31, 1995 have been prepared as if the acquisition occurred at the beginning of the respective periods. The condensed consolidated pro forma information should be read in conjunction with the notes thereto. Such pro forma information is not necessarily indicative of the results which would have actually occurred had the transactions been in effect on the dates or the periods indicated or which may occur in the future. (b) Pro Forma Financial Information. INDEX TO PRO FORMA FINANCIAL INFORMATION Pro Forma Condensed Consolidated Balance Sheet (Unaudited) June 30, 1996 Pro Forma Condensed Consolidated Statement of Operations (Unaudited) for the Year Ended December 31, 1995 Pro Forma Condensed Consolidated Statement of Operations (Unaudited) for the Six Months Ended June 30, 1996 Notes to Pro Forma Condensed Consolidated Financial Statements (unaudited) Exhibits. 2(a) Purchase and Sale Agreement with ROC Energy, Inc. dated March 6, 1996 together with certain Exhibits and Schedules. 2(b) Partial Assignment of Purchase and Sale Agreement and Consent to Partial Assignment of Purchase and Sale Agreement with ROC Energy, Inc. and Byrd Operating Company dated May 8, 1996 together with certain Exhibits and Schedules. 2(c) Purchase and Sale Agreement with Javelina Energy, Inc. Dated August 6, 1996 together with certain Exhibits and Schedules. 2(d) Purchase and Sale Agreement with Chatham Oil Company dated August 12, 1996 together with certain Exhibits and Schedules. 2(e) Purchase and Sale Agreement with BMC, Ltd. dated August 14, 1996 together with certain Exhibits and Schedules. 2(f) Purchase and Sale Agreement with Enron Oil & Gas Inc. Dated September 12, 1996 together with certain Exhibits and Schedules. 2(g) Purchase and Sale Agreement with Enron Oil & Gas Inc. Dated September 12, 1996 together with certain Exhibits and Schedules. 2(h) Purchase and Sale Agreement with Enron Oil & Gas Inc. Dated September 12, 1996 together with certain Exhibits and Schedules. The Registrant Agrees to provide copies of any Exhibits and Schedules upon request.
MAYNARD OIL COMPANY Pro Forma Condensed Consolidated Balance Sheets June 30, 1996 (Unaudited) Historical Pro Forma Pro Forma Amounts Adjustments(a) Amounts ---------- -------------- --------- (Thousands of Dollars) ASSETS Current assets: Cash and cash equivalents $ 11,421 $ 6,664 $18,085 Accounts receivable, and other current assets 4,898 -- 4,898 Total current assets 16,319 6,664 22,983 Property and equipment, at cost: Oil and gas properties 111,160 (8,065) 103,095 Other property and equipment 514 -- 514 111,674 (8,065) 103,609 Less accumulated depreciation and amortization (53,400) 6,721 (46,679) Net property and equipment 58,274 (1,344) 56,930 $74,593 $ 5,320 $79,913 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion, long-term debt $ 5,000 $ -- $ 5,000 Accounts payable, accrued expenses and other current liabilities 6,766 -- 6,766 Total current liabilities 11,766 -- 11,766 Deferred income taxes 2,012 -- 2,012 Long-term debt 18,750 -- 18,750 Shareholders' equity: Common stock 489 -- 489 Additional paid-in capital 18,831 -- 18,831 Retained earnings 22,745 5,320 28,065 Total shareholders' equity 42,065 5,320 47,385 $74,593 $ 5,320 $79,913 See accompanying Notes to Pro Forma Condensed Consolidated Financial Statements.
MAYNARD OIL COMPANY Pro Forma Condensed Consolidated Statement of Operations For the Twelve Months Ended December 31, 1995 (Unaudited) Property Historical Divestiture Pro Forma Amounts Adjustments Amounts ---------- ----------- --------- (Thousands of Dollars Except Per Share Amounts) Revenues: Oil and gas sales $20,540 $(1,630)(b) $18,910 Interest and other 672 419 (c) 1,091 Gain (loss) on sale of assets 992 5,758 (d) 6,750 22,204 4,547 26,751 Costs and expenses: Operating expenses 8,444 (875)(b) 7,569 Exploration, dry holes and abandonments 609 -- 609 General and administrative 926 -- 926 Depreciation and amortization 6,880 (415)(b) 6,465 Interest and other 992 -- 992 17,851 (1,290) 16,561 Income before income taxes 4,353 5,837 10,190 Income tax expense 1,330 1,985 (g) 3,315 Net income $ 3,023 $ 3,852 $ 6,875 Weighted average number of common shares outstanding 4,890,708 4,890,708 Net income per common share $ .62 $1.41 See accompanying Notes to Pro Forma Condensed Consolidated Financial Statements.
MAYNARD OIL COMPANY Pro Forma Condensed Consolidated Statement of Operations For the Six Months Ended June 30, 1996 (Unaudited) Property Historical Divesture Pro Forma Amounts * Adjustments Amounts ---------- ----------- -------- (Thousands of Dollars Except Per Share Amounts) Revenues: Oil and gas sales $14,876 $(1,032)(e) $13,844 Interest and other 232 173 (f) 405 Gain (loss) on sale of assets 1 -- 1 15,109 (859) 14,250 Costs and expenses: Operating expenses 5,027 (347)(e) 4,680 Exploration, dry holes and abandonments 186 -- 186 General and administrative 521 -- 521 Depreciation and amortization 4,728 (205)(e) 4,523 Interest and other 914 -- 914 11,376 (552) 10,824 Income (loss) before income taxes 3,733 (307) 3,426 Income tax expense 1,087 (104)(g) 983 Net income $ 2,646 $ (203) $ 2,443 Weighted average number of common shares outstanding 4,889,851 4,889,851 Net income (loss) per common share $ .54 $ .50 * Maynard's Historical Statement of Operations for the Six Months ended June 30, 1996 has been adjusted from those amounts disclosed in the 1996 Form 10-Q to exclude the gain from oil and gas properties sold during May, 1996 and also to exclude the tax expense associated with this May, 1996 disposition. The effects of this property disposition have already been included on the Pro Forma Consolidated Statement of Operations for the twelve months ended December 31, 1995 which is reflected on the Pro Forma Statement of Operations for the Twelve Months ended December 31, 1995.
MAYNARD OIL COMPANY NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (a) Record cash from the sale of oil and gas properties received in August and September, 1996 and remove the related property asset balances from the accounts. Thus, the June 30, 1996 Pro Forma Balance Sheet is computed as if all the sales transactions were consummated at June 30, 1996. (b) Reduce oil and gas revenues, lease operating expenses, and depreciation and amortization expense for the twelve months ended December 31, 1995 by the amounts related to the properties sold in 1996. (c) Recognize additional interest income at an annual rate of 5.75 percent as if the property divestitures had occurred on January 1, 1995 and the proceeds generated by the sales were available at that date. (d) Recognize the gain generated from the disposition of all the property groups as if the sale occurred at January 1, 1995. (e) Reduce oil and gas revenues, lease operating expenses, and depreciation and amortization expense for the six months ended June 30, 1996 by the amounts related to the properties sold. (f) Recognize additional interest income at an annual rate of 5.2 percent as if all the property divestitures had occurred January 1, 1995 and the proceeds generated by the sales were available at that date. (g) Record the tax effect, at 34 percent for US Federal income taxes, of the pro forma adjustments relating to the property divestitures for the respective periods. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MAYNARD OIL COMPANY By: /s/ Kenneth W. Hatcher ---------------------------- Kenneth W. Hatcher Vice President of Finance Dated: October 15, 1996 EX-2 2 EXHIBIT 2(a) PURCHASE AND SALE AGREEMENT This Agreement, when accepted and agreed to in the manner provided below shall constitute the terms and provisions of an agreement under which Maynard Oil Company, a Delaware corporation, with offices at 8080 North Central Expressway, Suite 660, Dallas, Texas 75206, hereinafter referred to as "Seller, agrees to sell and ROC Energy, Inc., a Texas corporation, with offices at 3300 North A Street, Building Two, Suite 218A, Midland, Texas 79705, hereinafter referred to as "Buyer," agrees to purchase all of Seller's right, title and interest in and to certain oil and gas properties owned by Seller and located in Crockett County, Texas, hereinafter sometimes referred to as the "Property." 1. PROPERTY BEING SOLD. At Closing, as hereinafter defined, Seller shall convey to Buyer the Property identified on Exhibit "A", attached hereto and made a part hereof, including: (a) All of Seller's right, title and interest in and to the leasehold estates described in Exhibit "A", such leases being hereinafter called "said leases," represented to be no less than the working and net revenue interests set forth therein; (b) All of Seller's right, title and interest in and to all permits, franchises, licenses, servitudes, easements, surface leases and rights-of-way of every character relating to said leases; (c) All of Seller's right, title and interest in and to any contracts or agreements including, but not limited to, rights and interest in or derived from unit agreements, gas processing agreements, joint operating agreements, gas contracts, gas gathering agreements, gas balancing agreements, boundary or well line agreements, assignments of operating rights, working interest and subleases affecting said leases. (d) All of Seller's right, title and interest in and to producing, non- producing and shut-in oil and gas wells, salt water disposal wells and water wells; and (e) All of Seller's right, title and interest in and to all surface and down-hole equipment, fixtures, related inventory and other personal property used in connection with the Property described in paragraphs (a) through (d) above, excluding, however, all automobiles, trucks and communications equipment. 2. PERFORMANCE DEPOSIT. On or before 4:00 o'clock p.m., local time, March 29, 1996, Buyer shall tender to Seller, by wire transfer, a performance deposit in the amount of One Hundred Thirty Eight Thousand and 00/100 Dollars ($138,000.00). The performance deposit is received solely to assure the performance of Buyer pursuant to the terms and conditions hereof. The performance deposit will be returned to Buyer at Closing upon consummation of the transaction, or at Buyer's election, may be credited to the Purchase Price. No interest shall be paid or credited to the performance deposit. If Buyer fails, refuses, or is unable to close the sale in accordance with the terms herein, Seller, except as otherwise herein specifically provided, may, at its option, retain the performance deposit as agreed liquidated damages and not as a penalty. If Seller, through no fault of Buyer, refuses to close the sale in accordance with the terms herein, the performance deposit shall be returned to Buyer. 3. PURCHASE PRICE. The total sum which Buyer agrees to deliver to Seller for the property is One Million Three Hundred Eighty Thousand and 00/100 ($1,380,000.00). 4. CLOSING. The closing shall take place on or before May 31, 1996, at 10:00 a.m. local time at Seller's offices in Dallas, Texas, unless the parties mutually agree upon a later date, or, at Buyer's election, such closing may be handled by overnight mail upon confirmation of funds received by Seller. The following shall occur at closing: (a) Purchase Price. Buyer will make payment of the Purchase Price pursuant to paragraph numbered 3 above, and adjusted by Sections 2, 9, 10, 12, 16 and 20, if applicable, by wire transfer to an acc"B". 5. CONVEYANCE EFFECTIVE DATE. The conveyance from Seller to Buyer shall be effective as of March 1, 1996, at 7:00 a.m. local time, herein called the "Effective Date." Buyer shall assume the risk of any change in the condition of the Property from the date of this Agreement to the date of Closing. 6. FILES AND RECORDS. Prior to Closing, Seller will make available for examination by Buyer such title information and abstract coverage as may be available in Seller's files. Existing abstracts and title opinions will not be brought down to date by Seller. Seller's files will be made available to Buyer for examination at Seller's offices in Dallas, Texas, during normal working hours. Buyer will be permitted, to make copies of pertinent instruments or documents contained in Seller's files. No economic analyses, interpretive geological or geophysical data considered proprietary by Seller shall be copied by Buyer. As soon as practicable after Closing, Seller shall deliver all of the original files to Buyer, at Buyer's expense 7. LIMITED WARRANTY. Conveyance of the property shall be WITHOUT WARRANTY OF TITLE EITHER EXPRESS OR IMPLIED, EXCEPT BY, THROUGH AND UNDER ASSIGNOR, BUT NOT OTHERWISE with the right of full substitution and subrogation in and to all rights and actions of warranty which Seller has or may have against any and all preceding owners or vendors of the Property. 8. INDEPENDENT EVALUATION. Buyer has made an independent evaluation of the Property and acknowledges that Seller has made no statements or representation concerning the present or future value of the anticipated income, costs, or profits, if any, to be derived from the Property and that Seller DOES NOT WARRANT TITLE, DESCRIPTION, VALUE, QUALITY, CONDITION, MERCHANTABILITY, OR FITNESS FOR PURPOSE of any of the wells, equipment, or other pr in executing this Agreement it has relied solely upon its independent examination of the premisterm "significant title defect" shall include any defect which results in a loss of title in Seller such that Buyer's net revenue interest in the affected Property is reduced or Seller's right to use the Property as an owner, lessee, licensee, or permittee, as applicable, is extinguished or severely restricted. On or before April 19, 1996, Buyer shall give written notice to Seller of interests in the Property which have significant title defects. Buyer shall be deemed to have waived all title defects and any other defect of which Seller has not been given notice by April 19, 1996, unless it is a significant title defect which did not exist on or before that date. Interests which have significant title defects shall be excluded from the Property to be conveyed and the Purchase Price shall be reduced by the purchase price indicated for such property on the Property Schedule attached hereto unless: (i) prior to closing, the basis for the significant title defect has been removed, or (ii) Buyer agrees to accept the interest notwithstanding the defect. Loss of any lease acreage between the Effective Date and Closing due to expiration of the lease term will not constitute a significant title defect. 10. OPERATIONS AND PRODUCTION AFTER EFFECTIVE DATE. Since the Closing will occur subsequent to the Effective Date, Buyer will continue to operate the Property, or cause the Property to be operated, as appropriate for the account of Seller until Closing. Seller shall be responsible for payments of all expenses incurred against operation of the Property prior to the Effective Data. All production from oil and gas wells, and all proceeds from the sale thereof, including proceeds from any imbalance and oil in storage above the pipeline connection, attributable to All production and proceeds attributable to production after the Effective Date shall be the property of Buyer. At Closing, a settlement shall be made between Buyer and Seller of all production proceedand taxes paid by Seller for the time period between the Effective Date and Closing. The net settlement balance shall be deducted from or added to the Purchase Price. Applicable costs and expenses will include, without limitation, royalties, rentals, any and all taxes related to said production, and expenses of the type customarily billed under an operating agreement with overhead on a Fixed Rate Basis not to exceed Four Hundred Forty and 00/100 Dollars ($440.00) per producing well located on said Property. Buyer will reimburse Seller for all workover costs, plugging, abandoning and reabandoning costs and other major costs that Seller incurs after the Effective Date, on an actual cost basis. Seller shall not undertake any single project reasonably estimated to require an expenditure in excess of $15,000.00, without the prior written consent of Buyer; however, Seller may take such steps and incur such expenses as in its opinion are required to deal with an emergency or to safeguard life and property. Within one hundred twenty (120) days after the Closing, Seller and Buyer shall make a post-closing settlement to account for all production proceeds received and all operating expenses and taxes paid by Seller after the Effective Date. After the post-closing settlement, additional proceeds received by or expenses paid by either Buyer or Seller on behalf of the other shall be settled by invoicing the other party for expenses paid or remitting to the other party any proceeds received. Seller shall comply with all applicable laws, ordinances, rules, and regulations, orders, terms of permits and authorizations, of any governmental body which may have jurisdiction over the Property and shall promptly obtain and maintain all permits and bonds required by public authorities in connection with the Property. As of the Effective Date, Buyer shall assume and agrees to perform all obligations and implied covenants of Seller relating to the Property. Buyer shall assume the risk of any change in the condition of the Property from the Effective Date to the Closing, except to the extent any change of condition is attributable to the negligence or willful misconduct of Seller. 11. SUSPENDED FUNDS. As soon as practicable after the Closing, Seller shall provide to Buyer a listing showing all net proceeds from production attributable to the royalty and overriding royalty interests which are currently held in suspense because of lack of identity or address of owners, change of ownership or similar reasons, and shall transfer to Buyer all those suspended proceeds. Buyer shall be responsible for proper distribution of all the suspended proceeds to the parties lawfully entitled to them. 12. TAXES. Buyer shall be responsible for payment of all taxes relating to its interests in the Property from and after the Effective Date. Seller shall be responsible for payment of all taxes relating to its interest in the Property prior to the Effective Date. Property and ad valorem taxes payable on an annual basis shall be prorated between Seller and Buyer as of the Effective Date. Buyer shall be liable for any sales tax or other transfer tax. 13. EXISTING CONTRACTS. This sale will be made ch the Property is subject. 14. NOTICES. All notices and communications required or permitted under this Agreement shall be in writing, deliver to or sent by U. S. Mail or Express Delivery, postage prepaid, or by facsimile transmission, addressed as follows: Maynard Oil Company Attention Mrs. Cassondra Foster 8080 North Central Expressway, Suite 660 Dallas, TX 75206 Phone: (214) 891-8461 Fax: (214) 891-8827 Roc Energy, Inc. Attention Mr. Richard C. Bott 3300 North A Street, Building Two, Suite 218A Midland, TX 79705 Phone: (915) 686-8120 Fax: (915) 15. PARTIES IN INTEREST. This Agreement shall inure to the benefit of and be binding upon Seller and Buyer, their respective successors and assigns. All references contained in the Agreement shall be deemed to include Seller and Buyer's respective successors and assigns. No assignment by any party shall relieve any party of any duties or obligations under this Agreement. 16. PREFERENTIAL RIGHTS TO PURCHASE. Should any of the Property offered be subject to a preferential right to purchase or consent to assign, then the proposed sale of the Property affected thereby will be subject to Seller's obtaining any such waiver or consent. Seller shall not be liable to Buyer by reason of inability or failure to obtain any such waiver or consent; however, in the event of any such waiver or consent, the parties shall reduce the purchase price by the purchase price mutually agreed upon for such property. 17. INDEMNITY. Buyer shall assume full responsibility for the Property purchased as of the Effective Date and shall defend and indemnify Seller, its employees, officers and agents, against any and all losses, claims, suits, liabilities, and expenses arising out of, in connection with or resulting from Buyer's ownership or operation of the Property purchased, including, but not limited to the plugging and abandonment of all existing wells. Buyer shall comply with all covenants in the instruments in the chain of title of the Property purchased or the instruments to which the Property is subject. Seller shall defend and indemnify Buyer, its employees, officers and agents, against any and all losses, claims, suits, liabilities, and expenses arising out of, in connection with or resulting from Seller's ownership or operation of the Property purchased prior to the effective date. 18. REGULATORY FORMS. At Closing, Seller shall deliver to Buyer signed forms to be filed with appropt as provided herein, Buyer is granted the right to conduct reasonable tests on each of the wells located on the Property for the purpose of confirming their individual producing capacities. Such tests will be performed prior to Closing and in the presence of Seller's agents, representatives or employees, who shall be authorized to terminate or prohibit any test which, in their judgment, could constitute a threat to the continued productivity of the well to be tested. Seller's Engineering Manager, Jerry Keen, Dallas, Texas (214) 891-8457 should be contacted prior to conducting such tests to apprise Buyer the name and telephone number of Seller's agent, representative or employee, who shall be authorized to witness same. 20. NORM, RCRA AND CERLA Buyer has inspected the Assets for all purposes, including without limitation, for the purpose of detecting the presence or concentration of naturally occurring radium, thorium or other such materials (hereinafter referred to as "NORM") and satisfied itself as to their physical and environmental condition, both surface and subsurface, and that Buyer accepts all of the same in their "AS IS, WHERE IS" condition. Seller disclaims all liability arising in connection with the presence of environmental conditions such as, but not limited to, NORM on the Property, and if any tests have been conducted by Buyer for the presence of such conditions, Buyer disclaims any warranty respecting the accuracy of such tests for such presence on the Property or the results of those tests and disclaims any liability in connection with the tests or results. Buyer certifies and acknowledges that it has all the necessary licenses under applicable state and federal law to accept assignment of the Property. Subject to the other provisions of this section, at Closing Buyer shall assume and be responsible for and comply with all duties and obligations of Seller, express or implied arising on or after the Effective Date with respect to the properties, including, without limitation, those arising under or by virtue of any lease, contract, agreement, document, permit, applicable statute or rule, regulation or order of any governmental authority specifically including, without limitation, any governmental request or requirement to plug, re-plug and/or abandon any well of whatsoever type, status or classification or take any clean-up or other action with respect to the Property or premises, including hazardous waste cleanup costs under the Resource and Recovery Act ("RCRA") and the Comprehensive Environmental Response, Compensation and Liability Act ("CERLA"), or similar laws, rules or regulations and defend, indemnify and hold Seller harmless from any and all claims arising out of or in connection therewith. If Buyer discovers a material environmental condition which would adversely affect the value of the Property by $25,000.00 or more per defect net to Seller's interest in the affected property and Seller is not in compliance with environmental laws, rules and regulations with respect to such property ("Environmental Defect") Buyer shall give Seller written notice thereof not later than ten (10) business days prior to Closing together with the basis for such assertion and data in support thereof, and shall furnish Seller with any proposed reduction in the Sales Price attributable to each such matter. Seller may remove the defective property from the sale, attempt to cure the defect at Seller's sole cost and expense within one hundred twenty (120) days after the notice, agree to a mutually acceptable purchase price reduction or terminate this Agreement without liability to Buyer except for return of the Performance Deposit. If Seller is unable to cure the defect, the allocated value shall be refunded to Buyer and the defective property reassigned to Seller effective as of the Effective Date. 21. COMPLETE AGREEMENT; SAVINGS CLAUSE. When executed by Seller and Buyer, this Agreement shall constitute the complete agreement between the parties regarding the purchase and sale of the Property. Where applicable, the terms of this Agreement shall survive the Closing. 22. GOVERNING LAW AND VENUE. This Agreement and all of its terms and provisions shall be governed by the laws of the State of Texas. The parties agree that venue for any dispute between l court costs and reasonable attorneys' fees incurred. 23. FURTHER ASSURANCES. Seller agrees that, at any time and from time to time after the date hereof, it will, upon request of buyer, execute, acknowledge and deliver or cause to be executed, acknowledged and delivered all further documents or instruments as may be required in connection with the assignment and conveyance of the Property to Buyer; and Seller shall perform and take such actions as may be necessary or appropriate in connection with the performance by Seller of the transactions contemplated by this Agreement. 24. MISCELLANEOUS PROVISIONS. (a) Captions have been inserted for reference purposes only and shall not define or limit the terms of this Agreement; (b) If any provision of this Agreement is held invalid, such invalidity shall not affect the remaining provisions; (c) This Agreement cannot be modified or amended except by a written instrument duly executed by Seller and Buyer; and (d) Neither Seller nor Buyer, without the prior written consent of the other party shall assign any right or obligations under this Agreement prior to the Closing, or attempt to delegate any duty to be performed under this Agreement. Consent to assign shall not be unreasonably withheld by either party. TIME IS OF THE ESSENCE HEREOF. If the foregoing sets forth your understanding of our agreement, please so indicate by dating, signing and returning one copy hereof on or before March 18, 1996. Failure to do so shall result in cancellation of this agreement at Seller's option. EXECUTED this 6th day of March, 1996. MAYNARD OIL COMPANY By: /s/ L. B. Carruth ------------------------------ L. B. Carruth Vice President ROC ENERGY, INC. By: /s/ Richard C. Bott ------------------------------ Richard C. Bott EXHIBIT "A" Attached to and made a part of Purchase and Sale Agreement dated March 6, 1996, by and between Maynard Oil Company, Seller, and Roc Energy, Inc., Buyer PN 611007 FOSTER A-1 EXPENSE INTEREST 0.0000000 REVENUE INTEREST 0.0136719 PN 611008 FOSTER NO. 1 EXPENSE INTEREST 0.0000000 REVENUE INTEREST 0.0136719 Mineral Deed dated September 30, 1992, by and between Chevron U.S.A. Inc., Grantor and Chevron PBC, Inc., as Grantee, recorded in Volume 483, Page 286 of the Official Public Records of Crockett County, Texas, covering all of Section 33, LESS AND EXCEPT, a tract BEGINNING at a point on the northwest boundary of said Section 33 which is 1,320' Southwest of the Northwest (correctly called the Northeast corner in that certain Assignment and Bill of Sale dated July 25, 1990, between Chevron USA Inc. and Tom Schneider recorded in Volume 455, page 332 of the Official Public Records of Crockett County, Texas) corner of said Section 33; THENCE Southwesterly along the Northwest boundary of Section 33 1,320'; THENCE Southeasterly and parallel with the Northeast boundary of Section 33, 2,640' to a point on the Southeast boundary of Section 33; THENCE Northeasterly along the Southeast boundary of Section 33, 1,320'; THENCE Northwesterly 2,640' to the POINT OF BEGINNING, containing 560.00 acres, more or less, all in Block 31, H&TC RR Company Survey, Crockett County, Texas. (MOC LF-05731-AA & AA-01) Subject to Mineral Deed dated September 21, 1965, by and between Limpia Royalties, Grantor, to Kewanee Oil Company, Grantee, recorded in Volume 221, page 595 of the Official Public Records of Crockett County, Texas. PN 611002 TIPPETT J H "E" EXPENSE INTEREST 1.0000000 REVENUE INTEREST 0.8750000 Oil and Gas Lease dated May 26, 1944, by and between J. H. Tippett, as Lessor, and Gulf Oil Corporation, as Lessee, recorded in Volume 81, Page 57 of the Official Public Records of Crockett County, Texas, INSOFAR AND ONLY INSOFAR as said lease covers the Northeasterly 1/2 of Section 36, Block 31, Abstract 5209, Certificate 38/4264, H&TC RR Company Survey, being that half of said section not fronting on the Pecos River, and being bounded on the south by a line drawn parallel to the northeasterly line of said section and containing 332.6 acres, more or less, Crockett County, Texas. (MOC LF-05734-00) Subject to Water Disposal Agreement between Pennzoil Petroleum Company and Memorial Exploration Company dated August 26, 1993; Waiver of Surface Rights from Gulf Oil Corporation to Shell Oil Company dated August 6, 1962 and Waiver of Surface Rights from Gulf Oil Corporation to Shell Oil Company dated January 11, 1971. PN 611003 TIPPETT J H "E" NCT B EXPENSE INTEREST 1.0000000 REVENUE INTEREST 0.8750000 Oil and Gas Lease dated May 26, 1944, by and between J. H. Tippett, as Lessor, and Gulf Oil Corporation, as Lessee, recorded in Volume 81, Page 57, of the Official Public Records of Crockett County, Texas, INSOFAR AND ONLY INSOFAR as said lease covers the Southwesterly 1/2 of Section 38, Block 31, Abstract 5210, Certificate 38/4265, H&TC RR Company Survey, being that part of said section fronting on the Pecos River and being bounded on the north by a line drawn parallel to the northeasterly line of said Section, and containing 327.8 acres, more or less, Crockett County, Texas. (MOC LF-05734-00) Subject to Water Disposal Agreement between Pennzoil Petroleum Company and Memorial Exploration Company dated August 26, 1993; Waiver of Surface Rights from Gulf Oil Corporation to Shell Oil Company dated August 6, 1962 and Waiver of Surface Rights from Gulf Oil Corporation to Shell Oil Company dated January 11, 1971. PN 611004 TIPPETT J H "E" NCT C EXPENSE INTEREST 1.0000000 REVENUE INTEREST 0.8750000 Oil and Gas Lease dated May 26, 1944, by and between J. H. Tippett, as Lessor, and Gulf Oil Corporation, as Lessee, recorded in Volume 81, Page 57, of the Official Public Records of Crockett County, Texas, INSOFAR AND ONLY INSOFAR as said lease covers the Southwesterly 1/2 of Section 34, Block 31, H&TC RR Company Survey, Abstract 5205, Certificate 38/4263, being that part of said section fronting on the Pecos River and being bounded on the north by a line parallel to the northeasterly line of said section and containing 329.0 acre, more or less, Crockett County, Texas. (MOC LF-05734-00) Subject to Water Disposal Agreement between Pennzoil Petroleum Company and Memorial Exploration Company dated August 26, 1993; Waiver of Surface Rights from Gulf Oil Corporation to Shell Oil Company dated August 6, 1962; and Waiver of Surface Rights from Gulf Oil Corporation to Shell Oil Company dated January 11, 1971. PN 611005 TIPPETT J H "G" (SWD) EXPENSE INTEREST 1.0000000 REVENUE INTEREST 0.8750000 Oil and Gas Lease dated May 26, 1944, by and between J. H. Tippett, as Lessor, and Gulf Oil Corporation, as Lessee, recorded in Volume 81, page 66 of the Official Public Records of Crockett County, Texas, INSOFAR AND ONLY INSOFAR as said lease covers the Northeasterly 1/2 of Section 40, Block 31, H&TC RR Company Survey, Certificate 38/4266, Abstract 5208, and being the half of said Section 40 not fronting on the Pecos River and being bounded on the south by a line drawn parallel to the northeasterly line of said Section 40, and containing 325.7 acres, more or less, Crockett County, Texas. (MOC LF-05730-00) Subject to Right-of-Way Agreement dated September 28, 1966, from Velma Amacker and Robert P. Amacker to Gulf Oil Corporation, recorded in Volume 230, page 55 of the Official Public Records of Crockett County, Texas, and Salt Water Disposal Agreement dated June 29, 1967, from Velma Amacker and Robert P. Amacker to Gulf Oil Corporation, recorded in Volume 234, page 195 of the Conveyance Records of Crockett County, Texas. PN 611006 TIPPETT J H "G" NCT B EXPENSE INTEREST 1.0000000 REVENUE INTEREST 0.8750000 Oil and Gas Lease dated May 26, 1944, by and between J. H. Tippett, as Lessor, and Gulf Oil Corporation, as Lessee, recorded in Volume 81, page 66 of the Official Public Records of Crockett County, Texas, INSOFAR AND ONLY INSOFAR as said lease covers the Southwesterly 1/2 of Section 42, Block 31, H&TC RR Company Survey, Certificate 38/4267, Abstract 5207, and being that part of said Section 42 fronting on the Pecos River and being bounded on the north by a line drawn parallel to the northeasterly line of said Section 42, and containing 332.6 acres, more or less, Crockett County, Texas. (MOC LF-05730-00) Subject to Right-of-Way Agreement dated September 28, 1966, from Velma Amacker and Robert P. Amacker to Gulf Oil Corporation, recorded in Volume 230, page 55 of the Official Public Records of Crockett County, Texas, and Salt Water Disposal Agreement dated June 29, 1967, from Velma Amacker and Robert P. Amacker to Gulf Oil Corporation, recorded in Volume 234, page 195 of the Conveyance Records of Crockett County, Texas. TIPPETT J H (UNDEVELOPED ACRES) EXPENSE INTEREST 1.0000000 REVENUE INTEREST 0.8750000 Oil and Gas Lease dated May 26, 1944, by and between J. H. Tippett, as Lessor, and Gulf Oil Corporation, as Lessee, recorded in Volume 81, page 66 of the Official Public Records of Crockett County, Texas, and amended by instrument dated November 14, 1945, recorded in Volume 85, page 218 of the Records of Crockett County, Texas, INSOFAR AND ONLY INSOFAR as said lease covers the Northeasterly 1/2 of Section 44, Block 31, H&TC RR Company Survey, Certificate 38/4268, Abstract 4983, and being that half of said Section 44 not fronting on the Pecos River, and being bounded on the south by a line drawn parallel to the northeasterly line of said Section 44, containing 324.1 acres, more or less; the Southwesterly 1/2 of Section 46, Block 31, H&TC RR Company Survey, Certificate 38/4269, Abstract 4986, being that part of said Section 46 fronting on the Pecos River and being bounded on the north by a line drawn parallel to the northeasterly line of Section 46, containing 323.5 acres, more or less; Being the Northeast 1/4 of Section 2, Block B, GC&SF RR Company Survey, and containing 160.465 acres, more or less; and Section 8, Block PP, T&C R Company Survey, beginning at the southeast corner of Section 8, Thence North along the east line of said Section 1,595 varas to the point for the northeast corner of this tract; Thence West 486 varas to a point in the west line of said section; Thence South along the West line 627 varas to an Ell corner of said Section; Thence West along with most southerly north line of said Section 143 varas to its most westerly northwest corner; thence South along the West line of said Section 968 varas to its Southwest corner; Thence East along the south line of said section 629 varas to the Place of Beginning, and containing 161.86 acres, more or less, Crockett County, Texas (MOC LF- 05730-00) Subject to Right-of-Way Agreement dated September 28, 1966, from Velma Amacker and Robert P. Amacker to Gulf Oil Corporation, recorded in Volume 230, page 55 of the Official Public Records of Crockett County, Texas, and Salt Water Disposal Agreement dated June 29, 1967, from Velma Amacker and Robert P. Amacker to Gulf Oil Corporation, recorded in Volume 234, page 195 of the Conveyance Records of Crockett County, Texas. Oil and Gas Lease dated May 26, 1944, by and between J. H. Tippett, as Lessor, and Gulf Oil Corporation, as Lessee, recorded in Volume 81, Page 57, of the Official Public Records of Crockett County, Texas, INSOFAR AND ONLY INSOFAR as said lease covers the Northeasterly 1/2 of Section 32, Block 31, H&TC RR Company Survey, Abstract 5206, Certificate 38/4262, and being that 1/2 of said section not fronting on the Pecos River and being bounded on the south by a line drawn parallel to the northeasterly line of said section, containing 302.2 acres, more or less, Crockett County, Texas (MOC LF-05734-00) Subject to Water Disposal Agreement between Pennzoil Petroleum Company and Memorial Exploration Company dated August 26, 1993; Waiver of Surface Rights from Gulf Oil Corporation to Shell Oil Company dated August 6, 1962; and Waiver of Surface Rights from Gulf Oil Corporation to Shell Oil Company dated January 11, 1971. PN 611001 STATE SCHOOL BOARD MF EXPENSE INTEREST 1.0000000 REVENUE INTEREST 0.8333333 Oil and Gas Lease dated April 4, 1967, by and between the Commissioner of the General Land Office, bearing serial number M-60644, as Lessor, and Gulf Oil Corporation, as Lessee, recorded in Volume 232, page 221 of the Official Public Records of Crockett County, Texas, and in Volume 352, page 472 of the Official Public Records of Pecos County, Texas, and amended by instrument dated February 13, 1987, recorded in Volume 526, page 616 of the Official Public Records of Crockett County, Texas, and being State Tract 7, Pecos River, Block 31, H&TC Railroad Company Survey, containing 80.00 acres, more or less, bounded on the West by a northerly extension of the East line of Section 13, Block 12, H&GN Railroad Co. Survey, Pecos County, Texas, and bounded on the East by a southwesterly extension of the southeast line of Section 36, Crockett County, Texas. (MOC LF-05733-00) Subject to Right-of-Way Agreement dated July 10, 1986, between Velma Amacker and Robert P. Amacker and Gulf Oil Corporation, recorded in Volume 240, page 297, Official Public Records of Crockett County, Texas and Right-of-Way Agreement dated May 29, 1987, between Robert Kent Amacker, et al and Chevron USA Inc., recorded in Volume 422, page 447 of the Official Public Records of Crockett County, Texas. EXHIBIT "B" Attached to and made a part of Purchase and Sale Agreement dated March 6, 1996, by and between Maynard Oil Company, Seller, and Roc Energy, Inc., Buyer ASSIGNMENT AND BILL OF SALE FROM MAYNARD OIL COMPANY TO ROC ENERGY, INC. THE STATE OF TEXAS ) ) KNOW ALL MEN BY THESE PRESENTS: COUNTY OF CROCKETT ) THAT, the undersigned, MAYNARD OIL COMPANY, a Delaware corporation, with offices at 8080 North Central Expressway, Suite 660, Dallas, Texas 75206 (hereinafter called "Assignor"), for and in consideration of Ten Dollars ($10.00) and other valuable consideration to it in hand paid by ROC ENERGY, INC., a Texas corporation, with offices at 3300 North A Street, Building Two, Suite 218A, Midland, Texas 79705 (hereinafter called "Assignee"), does hereby TRANSFER, ASSIGN and CONVEY unto Assignee, WITHOUT WARRANTY OF TITLE EITHER EXPRESS OR IMPLIED, EXCEPT BY, THROUGH AND UNDER ASSIGNOR, BUT NOT OTHERWISE, with the right of full substitution and subrogation in and to all rights and actions of warranty which Assignor has or may have against any and all preceding owners of the said leases, subject to the terms and conditions contained herein, the following: (a) All of Assignor's right, title and interest in and to the leasehold estates described in Exhibit "A", such leases being hereinafter called "said leases," represented to be no less than the working and net revenue interests set forth therein, subject to all burdens, encumbrances, contracts and agreements, which are of record and/or listed in Exhibit "A" affecting said leases to the extent that same are in force and effect; (b) all of Assignor's right, title and interest in and to all permits, franchises, licenses, servitudes, easements, surface leases and rights-of-way of every character relating to said lease; (c) all of Assignor's right, title and interest in and to any contracts or agreements including, but not limited to, rights and interest in or derived from unit agreements, gas processing agreements, joint operating agreements, gas contracts, gas gathering agreements, gas balancing agreements, boundary or well line agreements, assignments of operating rights, working interest and subleases affecting said leases. For the same consideration, Assignor does hereby BARGAIN, SELL and DELIVER unto Assignee all of its right, title and interest in and to the wells located on said leases described in said Exhibit "A"; and Assignor does hereby further BARGAIN, SELL and DELIVER unto Assignee all of its right, title and interest in and to all personal property and well equipment located in, on and used in connection with the said leases, such well, personal property and the well equipment being hereinafter collectively called "said wells". ASSIGNOR EXPRESSLY DISCLAIMS AND NEGATES (a) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (b) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, and (c) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS. ASSIGNEE EXPRESSLY WAIVES THE PROVISIONS OF CHAPTER XVII, SUBCHAPTER E, SECTIONS 17.41 THROUGH 17.63, INCLUSIVE (OTHER THAN SECTION 17.555, WHICH IS NOT WAIVED), VERNON'S TEXAS CODE ANNOTATED, BUSINESS AND COMMERCIAL CODE. This Assignment and Bill of Sale is executed and delivered as part of the consummation of the transaction contemplated by that certain Purchase and Sale Agreement between Assignor, as Seller, and Assignee, as Buyer, dated March 6, 1996 (hereinafter referred to as "Sale Agreement"). The warranties, representations, indemnities and covenants contained in the Sale Agreement shall survive the delivery of this Assignment in accordance with the provisions of the Sale Agreement and the delivery of this Assigenants made in the Sale Agreement and the terms and conditions set forth therein; provided, however, any third parties transacting with Assignee with respect to any of the Interests may rely on this Assignment as vesting Assignee with all of Assignor's right, title and interest in the said leases and wells. This Assignment and Bill of Sale shall extend to, be binding upon and inure to the benefit of Assignor and Assignee, their respective successors and assigns and shall be deemed covenants running with the herein described lands and leasehold estates. Assignee expressly assumes, as of the Effective Date, all of Assignor's obligations relating to the said leases, including, but not limited to, the obligation of plugging and abandoning any well on the said leases, at Assignee's sole cost, risk and expense. This assignment shall be effective, for all purposes as of 7:00 o'clock a.m. March 1, 1996. EXECUTED by Assignor and Assignee in Duplicate Originals on this ____ day of _______________, 1996, but to be effective as stated above. MAYNARD OIL COMPANY By: ___________________________ L. B. Carruth Vice President ROC ENERGY, INC. By: ___________________________ Richard C. Bott President THE STATE OF TEXAS ) ) COUNTY OF DALLAS ) This instrument was acknowledged before me on __________, 1996, by Richard C. Bott, President of Roc Energy, Inc., a Texas corporation, on behalf of said corporation. EX-2 3 EXHIBIT 2(b) PARTIAL ASSIGNMENT OF PURCHASE AND SALE AGREEMENT AND CONSENT TO PARTIAL ASSIGNMENT OF PURCHASE AND SALE AGREEMENT This Partial Assignment of Purchase and Sale Agreement and Consent to Partial Assignment of Purchase and Sale Agreement (this "Assignment") is made and entered into this 8th day of May, 1996, by and among MAYNARD OIL COMPANY, a Delaware corporation ("Maynard"), ROC ENERGY, INC., a Texas corporation ("ROC") and BYRD OPERATING COMPANY, a Texas corporation ("Byrd"). WHEREAS, Maynard, as Seller, and ROC, as Buyer, have entered into a Purchase and Sale Agreement dated March 6, 1996, pursuant to which ROC has the right to purchase from Maynard certain oil and gas properties located in Crockett County, Texas (the "Property"), on the terms and conditions contained in said Agreement; WHEREAS, ROC desires to assign to Byrd all of ROC's rights and obligations in and under the Maynard Agreement, INSOFAR AND ONLY INSOFAR as the Maynard Agreement covers or relates to the properties described on Exhibit "A" attached hereto, and all associated personal property, equipment, permits, licenses, easements, surface leases, contracts, agreements and wells (the "Subject Property"), and Byrd desires to acquire ROC's rights and obligations under the Maynard Agreement, INSOFAR AND ONLY INSOFAR as the Maynard Agreement covers or relates to the Subject Property; and WHEREAS, Maynard desires to consent to such partial assignment and assumption pursuant hereto. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the parties hereto, Maynard, ROC and Byrd agree as follows: 1. ROC hereby assigns and conveys to Byrd all of its rights and obligations under the Maynard Agreement, INSOFAR AND ONLY INSOFAR as said Agreement covers or relates to the Subject Property. 2. Byrd hereby assumes and agrees to perform all the duties and obligations of ROC pursuant to the terms of the Maynard Agreement, INSOFAR AND ONLY INSOFAR as such duties and obligations relate to the Subject Property. 3. ROC hereby agrees to perform all the duties and obligations of ROC pursuant to the Maynard Agreement, INSOFAR AND ONLY INSOFAR as such duties and obligations relate to the Property, save and except the Subject Property. 4. Maynard hereby consents to the foregoing partial assignment of the Maynard Agreement from ROC to Byrd. EXECUTED as of the date first above written MAYNARD OIL COMPANY ROC ENERGY, INC. By: /s/ L. B. Carruth By: /s/ Richard C. Bott ------------------------------ ------------------------------ L. B. Carruth Richard C. Bott Vice President President BYRD OPERATING COMPANY By: /s/ Jack L. Byrd ----------------------------- Jack L. Byrd, President THE STATE OF_____________________ COUNTY OF________________________ This instrument was acknowledged before me on the 13th day of May, 1996, by L. B. Carruth, Vice President of MAYNARD OIL COMPANY, a Delaware corporation, on behalf of said corporation. ______________________________ NOTARY PUBLIC - State of Texas Print Name:___________________ My Commission Expires: THE STATE OF_____________________ COUNTY OF________________________ This instrument was acknowledged before me on the 8th day of May, 1996, by Richard C. Bott, President of ROC ENERGY, INC., a Texas corporation, on behalf of said corporation. ______________________________ NOTARY PUBLIC - State of Texas Print Name:___________________ My Commission Expires: THE STATE OF_____________________ COUNTY OF________________________ This instrument was acknowledged before me on the 8th day of May, 1996, by Jack L. Byrd, President of BYRD OPERATING COMPANY, a Texas corporation, on behalf of said corporation. ______________________________ NOTARY PUBLIC - State of Texas Print Name:___________________ My Commission Expires: EX-2 4 EXHIBIT 2(c) PURCHASE AND SALE AGREEMENT This Agreement, when accepted and agreed to in the manner provided below shall constitute the terms and provisions of an agreement under which MAYNARD OIL COMPANY, a Delaware corporation, with offices at 8080 North Central Expressway, Suite 660, Dallas, Texas 75206, hereinafter referred to as "SELLER", agrees to sell or exchange and JAVELINA ENERGY, INC., a Texas corporation, whose post office address is P. O. Box 1237, Kingsville, Texas 78364, hereinafter referred to as "BUYER", agrees to purchase or exchange all of SELLER'S right, title and interest in and those certain oil and gas properties owned by SELLER and described in Exhibit "A", Property Schedule attached hereto and made a part hereof, hereinafter sometimes referred to as the "PROPERTY". 1. PROPERTY BEING SOLD OR EXCHANGED. At Closing, as hereinafter defined, SELLER shall convey to BUYER the PROPERTY identified on Exhibit "A", including: (a) All of SELLER'S interest whether present, contingent, reversionary or other type of interest, in and to the leasehold estates created under the oil, gas and mineral leases described in Exhibit "A", INSOFAR AS TO THE LANDS DESCRIBED IN EXHIBIT "A" AND INSOFAR AND ONLY INSOFAR AS TO THOSE DEPTHS SPECIFIED IN EXHIBIT "A" WHERE A DEPTH LIMITATION IS PROVIDED, (such leases being hereinafter called "said leases"), which interest in said Leases and the wells situated thereon, and in any pooled units pertaining thereto, SELLER represents to be no less than the working and net revenue interests set forth on such Exhibit "A"; (b) All of SELLER'S fee interests, royalties, overriding royalties, production payments, rights to take royalties in kind, or other interests in production of oil, gas or other minerals in the lands described in Exhibit "A", INSOFAR AND ONLY INSOFAR AS TO THOSE DEPTHS SPECIFIED IN EXHIBIT "A" WHERE A DEPTH LIMITATION IS PROVIDED, whether created under the leases, deeds, assignments or other instruments described in Exhibit of oil, gas or other minerals in said lands SELLER represents to be no less than the net revenue interest set forth on such Exhibit "A"; (c) All of SELLER'S right, title and interest in and to all permits, franchises, licenses, servitudes, easements, surface leases and rights-of- way of every character relating to said leases; (d) All of SELLER'S right, title and interest in and to any contracts or agreements including, but not limited to, rights and interest in or derived from unit agreements, gas processing agreements, joint operating agreements, gas contracts, gas gathering agreements, gas balancing agreements, boundary or well line agreements, assignments of operating rights, working interest and subleases affecting said leases. (e) All of SELLER'S right, title and interest in and to producing, non-producing and shut-in oil and gas wells, salt water disposal wells, injection wells and water wells on said leases or lands pooled, unitized or communitized therewith; and (f) All of SELLER'S right, title and interest in and to all surface and down-hole equipment, fixtures, related inventory and other personal property used in connection with the PROPERTY described in paragraphs (a) through (e) above, excluding, however, all automobiles, trucks and communications equipment. 2. PERFORMANCE DEPOSIT. On or before 4:00 o'clock p.m., local time, August 15, 1996, BUYER shall tender to Bank One, Texas, N.A. ("Escrow Agent", as provided for in Exhibit "C" hereto), by wire transfer, a performance deposit in the amount of Fifteen Thousand and 00/100 Dollars ($15,000.00). The performance deposit is received solely to assure the performance of BUYER pursuant to the terms and conditions hereof. The performance deposit will be returned to BUYER at Closing upon consummation of the transaction, or at BUYER'S election, may be credited to the Purchase Price. No interest shall be paid or credited to the performance deposit. If BUYER fails, refuses, or is unable to close the sale in accordance with the terms herein, SELLER, except as otherwise herein specifically provided, may, at its option, retain the performance deposit as agreed liquidated damages and not as a penalty. If SELLER, through no fault of BUYER, refuses to close the sale in accordance with the terms herein, the performance deposit shall be returned to BUYER. 3. PURCHASE PRICE. The total sum which BUYER agrees to deliver to Escrow Agent for the PROPERTY, is One Hundred Fifty Thousand and 00/100 Dollars ($150,000.00) 4. CLOSING. The closing shall take place on or before August 29, 1996, at 10:00 a.m. local time at SELLER'S offices in Dallas, Texas, unless the parties mutually agree upon a later date, or, at BUYER'S election, such closing may be handled by overnight mail upon confirmation of funds received by the Escrow Agent. The following shall occur at closing: (a) Purchase Price. BUYER will make payment of the Purchase Price pursuant to paragraph numbered 3 above, and adjusted by Sections 2,d (b) Conveyance. SELLER will convey the PROPERTY to BUYER by executing and delivering Conveyances, Assignments and Bills of Sale, a form of which is attached hereto as Exhibit "B". 5. CONVEYANCE EFFECTIVE DATE. The conveyance from SELLER to BUYER shall be effective as of August 1, 1996, at 7:00 a.m. local time, herein called the "Effective Date". BUYER shall assume the risk of any change in the condition of the PROPERTY from the date of this Agreement to the date of Closing. 6. FILES AND RECORDS. Prior to Closing, SELLER will make available for examination by BUYER such title information and abstract coverage as may be available in SELLER'S files. Existing abstracts and title opinions will not be brought down to date by SELLER. SELLER'S files will be made available to BUYER for examination at SELLER'S offices in Dallas, Texas, during normal working hours. BUYER will be permitted, to make copies of pertinent instruments or documents contained in SELLER'S files. No economic analyses, interpretive geological or geophysical data considered proprietary by SELLER shall be copied by BUYER. As soon as practicable after Closing, SELLER shall deliver all of the original files or copies thereof to BUYER, at BUYER'S expense. 7. LIMITED WARRANTY. Conveyance of the PROPERTY shall be WITHOUT WARRANTY OF TITLE EITHER EXPRESS OR IMPLIED, EXCEPT BY, THROUGH AND UNDER ASSIGNOR, BUT NOT OTHERWISE with the right of full substitution and subrogation in and to all rights and actions of warranty which SELLER has or may have against any and all preceding owners or vendors of the PROPERTY. 8. INDEPENDENT EVALUATION. BUYER has made an independent evaluation of the PROPERTY and acknowledges that SELLER has made no statements or representation concerning the present or future value of the anticipated income, costs, or profits, if any, to be derived from the PROPERTY and that SELLER DOES NOT WARRANT TITLpment, or other property located thereon or used in connection therewith. BUYER further acknowledges that in executing this Agreement it has relied solely upon its independent examination of the premises and public records. 9. SIGNIFICANT TITLE DEFECT. As used in this Agreement, the term "significant title defect" shall include any defect which results in a loss of title in SELLER such that BUYER'S net revenue interest in the affected PROPERTY is reduced or SELLER'S right to use the PROPERTY as an owner, lessee, licensee, or permittee, as applicable, is extinguished or severely restricted. On or before ten (10) days prior to Closing, BUYER shall give written notice to SELLER of interests in the PROPERTY which have significant title defects. BUYER shall be deemed to have waived all title defects and any other defect of which SELLER has not been given notice by ten (10) business days prior to Closing, unless it is a significant title defect which did not exist on or before that date. Interests which have significant title defects shall be excluded from the PROPERTY to be conveyed and the Purchase Price shall be reduced by the price allocated by Buyer for such PROPERTY on Exhibit "A", Property Schedule, attached hereto unless: (i) prior to closing, the basis for the significant title defect has been removed, or (ii) BUYER agrees to accept the interest notwithstanding the defect. Loss of any lease acreage between the Effective Date and Closing due to expiration of the lease term will not constitute a significant title defect. 10. PRODUCTION PROCEEDS AND EXPENSES AFTER EFFECTIVE DATE. All production from oil and gas wells, and all proceeds from the sale thereof attributable to production prior to the Effective Date shall be the property of SELLER. All production and proceeds attributable to production after the Effective Date shall be the property of BUYER. At Closing, a settlement shall be made between BUYER and SELLER of all s paid by SELLER for the time period between the Effective Date and Closing. The net settlement balance shall be deducted from or added to the Purchase Price. Applicable costs and expenses will include, without limitation, any and all taxes related to said production. Within one hundred twenty (120) days after the Closing, SELLER and BUYER shall, if necessary, make a post-closing settlement to account for all production proceeds received and all expenses, costs and taxes paid by SELLER after the Effective Date. After the post-closing settlement, additional proceeds received by or expenses paid by either BUYER or SELLER on behalf of the other shall be settled by invoicing the other party for expenses paid or remitting to the other party any proceeds received. 11. TAXES. BUYER shall be responsible for payment of all taxes relating to its interests in the PROPERTY from and after the Effective Date. SELLER shall be responsible for payment of all taxes relating to its interests in the PROPERTY prior to the Effective Date. Property and ad valorem taxes payable on an annual basis shall be prorated between SELLER and BUYER as of the Effective Date. BUYER shall be liable for any sales tax or other transfer tax. 12. EXISTING CONTRACTS. This sale will be made subject to any and all existing operating agreements, unit agreements and interim assignments, as well as any and all other agreements or contracts of any nature to which the PROPERTY is subject. 13. NOTICES. All notices and communications required or permitted under this Agreement shall be in writing, deliver to or sent by U. S. Mail or Express Delivery, postage prepaid, or by facsimile transmission, addressed as follows: Maynard Oil Company Attention Cassondra Foster 8080 North Central Expressway, Suite 660 Dallas, TX 75206 Phone: (214) 891-8461 Fax: (214) 891-8827 Javelina Energy, Inc. Attention Mr. Ken Perkins Highway 141 West Armstrong Ranch Kingsville, TX 78364 Phone: (512) 592-6000 Fax: (512) 592-2689 14. PARTIES IN INTEREST. This Agreement shall inure to the benefit of and be binding upon SELLER and BUYER, their respective successors and assigns. All references contained in the Agreement shall be deemed to include SELLER and BUYER'S respective successors and assigns. No assignment by any party shall relieve any party of any duties or obligations under this Agreement. 15. PREFERENTIAL RIGHTS TO PURCHASE. Should any of the PROPERTY offered be subject to a preferential right to purchase or consent to assign, then the proposed sale of the PROPERTY affected thereby will be subject to SELLER'S obtaining any such waiver or consent. SELLER shall not be liable to BUYER by reason of inability or failure to obtain any such waiver or consent. In the event any third party exercises its preferential right to purchase, the price shall be the value indicated by SELLER on the Property Schedule and the parties shall reduce the Purchase Price by the value assigned. At Closing, if SELLER has been unable to obtain a required waiver or consent (or the appropriate time period for asserting such rights has not expired), the Purchase Price shall be reduced by an amount equal to the value assigned to the interest affected by such waiver or consent. This paragraph shall not be applicable to oil and gas leases requiring consent by, filings with, or other actions by governmental entities in connection with the sale or conveyance of oil and gas leases or interests therein, if the same are customarily obtained subsequent to such sale or conveyance. 16. INDEMNITY. BUYER shall assume full responsibility for the PROPERTY purchased as of the Effective Date and shall defend and indemnify SELLER, its employees, officers and agents, against any and all losses, claims, suits, liabilities, and expenses arising out of, in connection with or resulting from BUYER'S ownership of the PROPERTY purchased. BUYER shall comply with all covenants in the insto which the PROPERTY is subject. SELLER shall defend and indemnify BUYER, its employees, officers and agents, against any and all losses, claims, suits, liabilities, and expenses arising out of, in connection with or resulting from SELLER'S ownership of the PROPERTY purchased prior to the effective date. 17. ALLOCATED VALUES. BUYER AND SELLER herein agree upon the allocation of the Purchase Price among the properties. Such Allocated Values are shown on Exhibit "A", Property Schedule which is attached hereto. In the event the net amount of the Purchase Price adjustments downward provided for in paragraphs numbered 9, and 15 exceeds fifteen percent (15%) of the Purchase Price, then SELLER or BUYER may, upon written notice to the other, cancel this Agreement and the same shall be of no further force and effect and in such event, SELLER shall promptly refund to BUYER the Performance Deposit. 18. COMPLETE AGREEMENT; SAVINGS CLAUSE. When executed by SELLER and BUYER, this Agreement shall constitute the complete agreement between the parties regarding the purchase and sale of the PROPERTY. Where applicable, the terms of this Agreement shall survive the Closing. 19. GOVERNING LAW AND VENUE. This Agreement and all of its terms and provisions shall be governed by the laws of the State of Texas. The parties agree that venue for any dispute between the parties pertaining to this Agreement shall be in Dallas County, Texas. In any such dispute, the prevailing party shall be entitled to reimbursement of all court costs and reasonable attorneys' fees incurred. 20. FURTHER ASSURANCES. SELLER agrees that, at any time and from time to time after the date hereof, it will, upon request of BUYER, execute, acknowledge and deliver or cause to be executed, acknowledged and delivered all further documents or instruments as may be required in connection with the assignment and conveyance of the PROPEth the performance by SELLER of the transactions contemplated by this Agreement. SELLER agrees that promptly after Closing they will prepare and send out letters-in-lieu to all operators and remittors of proceeds from the sale of oil and gas from said leases and said wells, notifying them of the transfer of SELLER'S interest to BUYER. 21. TAX-FREE EXCHANGE. SELLER has elected to effect a like-kind exchange pursuant to Section 1031 of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder, with respect to the PROPERTY (a "Like-Kind Exchange"). In order to effect a Like-Kind Exchange, BUYER shall cooperate and do all acts as may be reasonably required or requested by SELLER with regard to effecting the Like-Kind Exchange, including, but not limited to, executing an Exchange Escrow Agreement, a form of which is attached hereto as Exhibit "C", in accordance with Treasury Regulation Section 1.1031(k)-1(g)(3); provided, however, BUYER SHALL INCUR NO EXPENSE IN CONNECTION WITH SUCH LIKE-KIND EXCHANGE AND BUYER SHALL NOT BE REQUIRED TO TAKE TITLE TO ANY PROPERTY OTHER THAN THE PROPERTY IN CONNECTION WITH THE LIKE-KIND EXCHANGE, AND BUYER'S POSSESSION OF THE PROPERTY WILL NOT BE DELAYED BY REASON OF ANY SUCH LIKE-KIND EXCHANGE. 22. MISCELLANEOUS PROVISIONS. (a) Captions have been inserted for reference purposes only and shall not define or limit the terms of this Agreement; (b) If any provision of this Agreement is held invalid, such invalidity shall not affect the remaining provisions; (c) This Agreement cannot be modified or amended except by a written instrument duly executed by SELLER and BUYER; and (d) Neither SELLER nor BUYER, without the prior written consent of the other party shall assign any right or obligations under this Agreement prior to the Closing, or attempt to delegate any duty to be performed under this Agreement. Consent to assign shall not be unreasonably withheld by either party. TIME IS OF THE ESSENCE HEREOF. If the foregoing sets forth your understanding of our agreement, please so indicate by dating, signing and returning one copy hereof on or before August 12, 1996. Failure to do so shall result in cancellation of this agreement at SELLER'S option. EXECUTED this 6th day of August, 1996. MAYNARD OIL COMPANY By: /s/ L. B. Carruth ___________________________ L. B. Carruth Vice President 75-1362284 Tax Identification Number JAVELINA ENERGY, INC. By: /s/ Ken Perkins ___________________________ Ken Perkins President ________________________________ Tax Identification Number EXHIBIT "A" PROPERTY SCHEDULE Attached to and made a part of PURCHASE AND SALE AGREEMENT dated August 6, 1996, by and between Maynard Oil Company, SELLER, and Javelina Energy, Inc., BUYER NOTE: Any reference made in this Exhibit "A" to a property name, a lease name, a well name, a unit name, or a PN or property number is intended for the use of Maynard Oil Company only, and is not intended to be, nor shall it be construed as, a part of the description of the property herein contained or in any way affecting the property or property interest to be conveyed to Javelina Energy, Inc. POWDER RIVER COUNTY, MONTANA PN 015506 ALLOCATED VALUE $22,189.00 BELL CREEK CONSOLIDATED (MUDDY) UNIT EXPENSE INTEREST 0.0000000 REVENUE INTEREST 0.0033578 Mineral Deed dated May 6, 1969, by and between John A. Love, Jr., et ux, as Grantors, and Echo Oil Corporation (predecessor in title by merger to Maynard Oil Company), as Grantee, recorded in Book 34, page 267 of the Deed Records of Powder River County, Montana, INSOFAR AND ONLY INSOFAR as said Deed covers the S/2 and the SW/4 NW/4 Section 28, N/2 SE/4, SE/4 SE/4 Section 29, E/2 Section 32, NW/4 and the S/2 Section 33, Township 8 South, Range 54 East, AND INSOFAR AND ONLY INSOFAR as said Deed covers the unitized formation of the Bell Creek Consolidated (Muddy) Unit Powder River County, Montana (LF-60110-AA) Mineral Deed dated May 6, 1969, by and between John A. Love, Jr., et ux, as Grantors, and Echo Oil Corporation (predecessor in title by merger to Maynard Oil Company), as Grantee, recorded in Book 34, page 269 of the Deed Records of Powder River County, Montana, INSOFAR AND ONLY INSOFAR as said Deed covers the N/2 NE/4, SW/4 NE/4, SE/4 NW/4, NW/4 SE/4, N/2 SW/4, SE/4 SW/4 Section 27, Township 9 South, Range 53 East, AND INSOFAR AND ONLY INSOFAR as said Deed covers the unitized formation of the Bell Creek Consolidated (Muddy) Unit Powder River County, Montana (LF-60111-AA) CARTER COUNTY, OKLAHOMA PN 600350 ALLOCATED VALUE $648.00 MITCHELL EXPENSE INTEREST 0.0000000 REVENUE INTEREST 0.0041667 Royalty interest conveyed by instrument titled Assignment and Bill of Sale effective November 1, 1994, by and between Rosewood Resources, Inc., as Assignor, and Maynard Oil Company, as Assignee, recorded in Volume 1950, page 32 of the Records of Carter County, Oklahoma, covering 60.00 acres, more or less, being the NW/4 SE/4 SE/4 and the S/2 SE/4 SE/4 Section 24, Township 1 South, Range 3 West, Carter County, Oklahoma, LIMITED to rights from the surface to 2,000 feet below the surface (base of the Permian formation), Carter County, Oklahoma. (LF-05701-AA) PN 443302 ALLOCATED VALUE $1,592.00 PICKENS NO. 1-28 BEFORE PAYOUT EXPENSE INTEREST 0.0000000 BEFORE PAYOUT REVENUE INTEREST 0.0047007 AFTER PAYOUT EXPENSE INTEREST 0.0112816 AFTER PAYOUT REVENUE INTEREST 0.0091663 Oil and Gas Lease dated December 18, 1989, by and between Bessie Gillaspy, as Lessor, and Wager & Associates, Inc., as Lessee, recorded in Book 1613, page 7 of the Records of Carter County, Oklahoma (LF-05083-AA) Oil and Gas Lease dated December 6, 1989, by and between Robert Dean Morgan, as Lessor, and Wager & Associates, Inc., as Lessee, recorded in Book 1612, page 248 of the Records of Carter County, Oklahoma (LF-05083-AB) Oil and Gas Lease dated December 8, 1989, by and between Michael Henry Beall, as Lessor, and Wager & Associates, Inc., as Lessee, recorded in Book 1612, page 323 of the Records of Carter County, Oklahoma (LF-05083-AC) Oil and Gas Lease dated December 7, 1989, by and between Alvin D. Morgan, as Lessor, and Wager & Associates, Inc., as Lessee, recorded in Book 1612, page 325 of the Records of Carter County, Oklahoma (LF-05083-AD) Oil and Gas Lease dated December 6, 1989, by and between Edith E. Morgan, et al, as Lessor, and Wager & Associates, Inc., as Lessee, recorded in Book 1611, page 237 of the Records of Carter County, Oklahoma (LF-05083-AE) Oil and Gas Lease dated December 8, 1989, by and between Storm Associates, as Lessor, and Wager & Associates, Inc., as Lessee, recorded in Book 1612, page 327 of the Records of Carter County, Oklahoma (LF-05083-AF) Oil and Gas Lease dated December 8, 1989, by and between Benjamin Roland Beall, II, as Lessor, and Wager & Associates, Inc., as Lessee, recorded in Book 1613, page 243 of the Records of Carter County, Oklahoma (LF-05083-AG) Oil and Gas Lease dated December 5, 1989, by and between Maurine Massad 1980 Trust, as Lessor, and Wager & Associates, Inc., as Lessee, recorded in Book 1613, page 238 of the Records of Carter County, Oklahoma (LF-05083-AH) Oil and Gas Lease dated December 18, 1989, by and between Terry Gillaspy, as Lessor, and Wager & Associates, Inc., as Lessee, recorded in Book 1613, page 245 of the Records of Carter County, Oklahoma (LF-05083-AI) Oil and Gas Lease dated December 8, 1989, by and between Rose Sharon Neall Ondracek, as Lessor, and Wager & Associates, Inc., as Lessee, recorded in Book 1612, page 549 of the Records of Carter County, Oklahoma (LF-05083- AJ) Oil and Gas Lease dated December 18, 1989, by and between Randy Gillaspy, as Lessor, and Wager & Associates, Inc., as Lessee, recorded in Book 1615, page 201 of the Records of Carter County, Oklahoma (LF-05083-AK) Oil and Gas Lease dated December 07, 1989, by and between Kennith G. Morgan, as Lessor, and Wager & Associates, Inc., as Lessee, recorded in Book 1623, page 299 of the Records of Carter County, Oklahoma (LF-05083-AL) covering 40.00 acres, more or less, being the SE/4 NW/4 of Section 28, Township 1 South, Range 3 West, LIMITED to rights from the surface to the base of the Woodford formation as found in the Pickens 1-28 well in the SE/4 NW/4 of Section 28, Township 1 South, Range 3 West, Carter County, Oklahoma The hereinabove referenced lease is subject to Farmout Agreement dated February 11, 1991, from Maynard Oil Company to Chesapeake Operating, Inc. and Operating Agreement dated February 11, 1991, by and between Chesapeake Operating, Inc., as Operator, and Maynard Oil Company, et al, as Non- Operator. GRADY COUNTY, OKLAHOMA PN 438709 ALLOCATED VALUE $7,463.00 SARAH BURKES "B" EXPENSE INTEREST 0.0000000 REVENUE INTEREST 0.0156250 (ORI) Oil and Gas Lease dated November 3, 1922, by and between Mrs. Sarah P. Burkes, Guardian of Lelah Morine Burkes, as Lessor, and Walter M. Young, as Lessee, recorded in Volume 199, page 15 of the Records of Grady County, Oklahoma, INSOFAR AND ONLY INSOFAR as said lease covers the SW/4 SW/4 NW/4, W/2 NW/4 SW/4 of Section 16, Township 3 North, Range 5 West, Grady County, Oklahoma, LIMITED to rights from the surface down to a depth of 4,000 feet below the surface, excluding wells numbered 2, 3, 4 and 5. (LF-04714-00) The hereinabove referenced lease is subject to Purchase and Sale Agreement by and between Shell Western and Maynard Oil Company dated December 3, 1984; Assignment, Conveyance and Bill of Sale by and between Shell Western E&P Inc. and Maynard Oil Company effective November 1, 1984, recorded in Volume 1477, page 187 of the Records of Grady County, Oklahoma and in Volume 1585, page 704 of the Records of Stephens County, Oklahoma. PN 438701 (UT-377) ALLOCATED VALUE $24,918.00 GAGE ORDOVICIAN UNIT EXPENSE INTEREST 0.0000000 REVENUE INTEREST 0.0072632 (ORI) Oil and Gas Lease dated January 3, 1966, by and between James H. Belvin, et ux, as Lessor, and John W. Baker, as Lessee, recorded in Volume 709, page 348 of the Records of Grady County, Oklahoma, covering the W/2 SW/4, W/2 NE/4 SW/4 of Section 27, Township 5 North, Range 6 West, Grady County, Oklahoma. (LF-04713-AA) The hereinabove referenced lease is subject to Agreement dated March 7, 1961, by and between Shell Oil Company and Socony Mobil Oil Company, Inc.; Assignment dated April 28, 1961, effective March 7, 1961, from Shell Oil Company to Socony Mobil Oil Company, Inc., recorded in Volume 715, page 582; Purchase and Sale Agreement by and between Shell Western and Maynard Oil Company dated December 3, 1984; Assignment, Conveyance and Bill of Sale by and between Shell Western E&P Inc. and Maynard Oil Company effective November 1, 1984, recorded in Volume 1477, page 187 of the Records of Grady County, Oklahoma and in Volume 1585, page 704 of the Records of Stephens County, Oklahoma. PN 438710 ALLOCATED VALUE $1,608.00 W. E. WOODS "A" EXPENSE INTEREST 0.0000000 REVENUE INTEREST 0.0078125 (ORI) Oil and Gas Lease dated April 6, 1926, by and between W. E. Woods, et ux, as Lessor, and Joe Ray, as Lessee, recorded in Volume 224, page 370, of the Records of Grady County, Oklahoma, INSOFAR AND ONLY INSOFAR as said lease covers the NE/4 SE/4 NE/4 of Section 17, Township 3 North, Range 5 West, Grady County, Oklahoma, being a sliding scale 1/32 overriding royalty LIMITED to rights from the surface to 4,000 feet, excluding well numbered 3. (LF-04715-00) The hereinabove referenced lease is subject to Operating Agreement dated February 18, 1944, by and between T. H. McCasland, as Operator, and Wirt Franklin Petroleum Corporation, as Non-Operator; Operating Agreement dated January 9, 1948, by and between Ohio Oil Company, as Operator, and T. H. McCasland, as Non-Operator; Gas Processing Agreement - Knox Plant dated May 27, 1959, by and between Gulf Oil Corporation, as Operator, and Shell Oil Company, et al, as Non-Operators; Operating Agreement dated August 18, 1960, by and between British American Oil Company, as Operator, and Shell Oil Company, as Non-Operator; Purchase and Sale Agreement by and between Shell Western and Maynard Oil Company dated December 3, 1984; Assignment, Conveyance and Bill of Sale by and between Shell Western E&P Inc. and Maynard Oil Company effective November 1, 1984, recorded in Volume 1477, page 187 of the Records of Grady County, Oklahoma and in Volume 1585, page 704 of the Records of Stephens County, Oklahoma. ANDREWS COUNTY, TEXAS PN 610003 ALLOCATED VALUE $11,734.00 UNIVERSITY EXPENSE INTEREST BEFORE PAYOUT 0.0000000 REVENUE INTEREST BEFORE PAYOUT 0.0937500 REVENUE INTEREST (SECONDARY RECOVERY) 0.2187500 PN 610004 ALLOCATED VALUE $5,390 UNIVERSITY 11 EXPENSE INTEREST 0.0000000 REVENUE INTEREST 0.0546880 Oil and Gas Lease dated December 14, 1946, by and between The State of Texas, bearing serial number M-30514 and Gulf Oil Corporation, as Lessee, recorded in Volume 78, Page 373, of the Conveyance Records of Andrews County, Texas, covering the SW/4 of Section 11, Block 14, University Lands, Andrews County, Texas. (LF-05722-00) Said lease is subject to an Assignment of Oil and Gas Lease dated October 1, 1959, by and between Gulf Oil Corporation to Inca Drilling Company, recorded in Volume 245, page 275 of the Deed Records of Andrews County, Texas and Assignment of Oil and Gas Lease dated April 16, 1957, by and between Gulf Oil Corporation to Garland A. Smith, recorded in Volume 196, page 508 of the Deed Records of Andrews County, Texas; Purchase and Sale Agreement effective January 1, 1995, by and between Pennzoil Exploration and Production Company and Maynard Oil Company and Assignment and Bill of Sale effective January 1, 1995, by and between Pennzoil Exploration and Production Company and Maynard Oil Company recorded in Volume 679, page 889 of the Deed Records of Andrews County, Texas. COLEMAN COUNTY, TEXAS PN 035808 ALLOCATED VALUE $4,461.00 HERRING NO. 1 RLTY EXPENSE INTEREST 0.0000000 REVENUE INTEREST 0.0625000 Oil and Gas Lease dated March 20, 1961, by and between Edgar Herring, et ux, as Lessor, to Haynes B. Ownby Drilling Company, as Lessee, recorded in Volume 396, page 542 of the Deed Records of Coleman County, Texas, covering 280 acres, more or less, being out of the D. McLean Survey No. 757, Abstract 493, the H. M. Childress Survey No. 73 and the J. R. Merrill Survey No. 10, more particularly described in said lease, less and except 40 acres, more or less, around the Herring D-1 well, said 40 acres being more particularly described in assignment from Maynard Oil Company to Oil Management Corporation effective March 1, 1989, recorded in Volume _____, page _____ of the Deed Records of Coleman County, Texas, such lands being located in Coleman County, Texas (LF-00286-00) The hereinabove referenced lease is subject to Farmout Agreement dated November 25, 1980, as amended, from Maynard Oil Company to Delray Oil, Inc. FREESTONE COUNTY, TEXAS PN 010109 ALLOCATED VALUE $322.00 LAYTON NO. 1 (UT-121) EXPENSE INTEREST 0.0000000 REVENUE INTEREST 0.0127945 Oil and Gas Lease dated August 10, 1967, by and between the Estate of B. G. Byars, et al, as Lessor, and Equitable Petroleum Management, as Lessee, recorded in Volume 372, page 143 of the Records of Freestone County, Texas, covering 123.48 acres of land, more or less, being out of the Jeremiah Lee Survey and the Juan Mata Survey, more particularly described in said lease, LIMITED to a depth of 13,369' below the surface, more particularly described in said lease, Freestone County, Texas (LF-00532-AA) Oil and Gas Lease dated August 21, 1967, by and between R. L. Peveto, as Lessor, and Equitable Petroleum Management Corporation, as Lessee, recorded in Volume 372, page 371 of the Records of Freestone County, Texas, covering 123.48 acres of land, more or less, being out of the Jeremiah Lee Survey and the Juan Mata Survey, more particularly described in said lease, LIMITED to a depth of 13,369' below the surface, more particularly described in said lease, Freestone County, Texas (LF-00532-AB) Oil and Gas Lease dated July 7, 1966, by and between J. H. Day, et al, as Lessor, and Hal Newman, as Lessee, recorded in Volume 363, page 791 of the Records of Freestone County, Texas, covering 89.5 acres, more or less, being out of the Jessie A. Weaver Survey, Abstract 656 and the J. Wilson Survey, Abstract 657, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, more particularly described in said lease, Freestone County, Texas (LF-00533-AA) Oil and Gas Lease dated March 6, 1968, by and between Allen Robinson, et ux, as Lessor, and John MacDonald, as Lessee, recorded in Volume 377, page 70 of the Records of Freestone County, Texas, covering 52.181 acres, more or less, being out of the J. Wilson Survey, Abstract 657, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00533- AB) Oil and Gas Lease dated March 6, 1968, by and between Robert E. Lee, et al, as Lessor, and John MacDonald, as Lessee, recorded in Volume 377, page 75 of the Records of Freestone County, Texas, covering 52.181 acres, more or less, being out of the J. Wilson Survey, Abstract 657, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00533-AC) Oil and Gas Lease dated March 7, 1968, by and between Geneva Prowell Baker, as Lessor, and John MacDonald, as Lessee, recorded in Volume 377, page 73 of the Records of Freestone County, Texas, covering 52.181 acres, more or less, being out of the J. Wilson Survey, Abstract 657, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00533-AD) Oil and Gas Lease dated March 8, 1968, by and between Myrtle Cain, et al, as Lessor, and John MacDonald, as Lessee, recorded in Volume 377, page 329 of the Records of Freestone County, Texas, covering 52.181 acres, more or less, being out of the J. Wilson Survey, Abstract 657, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00533-AE) Oil and Gas Lease dated March 8, 1968, by and between Frankie Vickers Kucera, et al, as Lessor, and John MacDonald, as Lessee, recorded in Volume 377, page 375 of the Records of Freestone County, Texas, covering 52.181 acres, more or less, being out of the J. Wilson Survey, Abstract 657, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00533-AF) Oil and Gas Lease dated March 8, 1968, by and between Louetta Graves Freeman, et al, as Lessor, and John MacDonald, as Lessee, recorded in Volume 377, page 67 of the Records of Freestone County, Texas, covering 52.181 acres, more or less, being out of the J. Wilson Survey, Abstract 657, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00533-AG) Oil and Gas Lease dated March 8, 1968, by and between Millie Robinson, et al, as Lessor, and John MacDonald, as Lessee, recorded in Volume 377, page 210 of the Records of Freestone County, Texas, covering 52.181 acres, more or less, being out of the J. Wilson Survey, Abstract 657, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00533-AH) Oil and Gas Lease dated March 8, 1968, by and between Walker C. Harris, et al, as Lessor, and John MacDonald, as Lessee, recorded in Volume 377, page 126 of the Records of Freestone County, Texas, covering 52.181 acres, more or less, being out of the J. Wilson Survey, Abstract 657, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00533-AI) Oil and Gas Lease dated March 8, 1968, by and between Samuel T. Harris, as Lessor, and John MacDonald, as Lessee, recorded in Volume 377, page 204 of the Records of Freestone County, Texas, covering 52.181 acres, more or less, being out of the J. Wilson Survey, Abstract 657, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00533-AJ) Oil and Gas Lease dated March 8, 1968, by and between A. W. Vickers, as Lessor, and John MacDonald, as Lessee, recorded in Volume 377, page 494 of the Records of Freestone County, Texas, covering 52.181 acres, more or less, being out of the J. Wilson Survey, Abstract 657, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00533-AK) Oil and Gas Lease dated March 8, 1968, by and between Eloise McClintock, et vir, as Lessor, and John MacDonald, as Lessee, recorded in Volume 377, page 491 of the Records of Freestone County, Texas, covering 52.181 acres, more or less, being out of the J. Wilson Survey, Abstract 657, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00533-AL) Oil and Gas Lease dated March 8, 1968, by and between Billie Jayne Parish, et al, as Lessor, and John MacDonald, as Lessee, recorded in Volume 377, page 471 of the Records of Freestone County, Texas, covering 52.181 acres, more or less, being out of the J. Wilson Survey, Abstract 657, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00533-AM) Oil and Gas Lease dated March 18, 1968, by and between John Mitchell Prowell, Jr., as Lessor, and John MacDonald, as Lessee, recorded in Volume 377, page 478 of the Records of Freestone County, Texas, covering 52.181 acres, more or less, being out of the J. Wilson Survey, Abstract 657, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00533-AN) Oil and Gas Lease dated March 18, 1968, by and between Elizabeth C. Elliott, et al, as Lessor, and John MacDonald, as Lessee, recorded in Volume 377, page 623 of the Records of Freestone County, Texas, covering 52.181 acres, more or less, being out of the J. Wilson Survey, Abstract 657, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00533-AO) Oil and Gas Lease dated March 8, 1968, by and between Frances Vickers Medlin, et al, as Lessor, and John MacDonald, as Lessee, recorded in Volume 377, page 670 of the Records of Freestone County, Texas, covering 52.181 acres, more or less, being out of the J. Wilson Survey, Abstract 657, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00533-AP) Oil and Gas Lease dated March 8, 1968, by and between Ross E. Prowell, as Lessor, and John MacDonald, as Lessee, recorded in Volume 378, page 50 of the Records of Freestone County, Texas, covering 52.181 acres, more or less, being out of the J. Wilson Survey, Abstract 657, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00533-AQ) Oil and Gas Lease dated March 8, 1968, by and between Mary Scarbrough French, et vir, as Lessor, and John MacDonald, as Lessee, recorded in Volume 378, page 163 of the Records of Freestone County, Texas, covering 52.181 acres, more or less, being out of the J. Wilson Survey, Abstract 657, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00533-AR) Oil and Gas Lease dated March 8, 1968, by and between B. C. Prowell, as Lessor, and John MacDonald, as Lessee, recorded in Volume 378, page 166 of the Records of Freestone County, Texas, covering 52.181 acres, more or less, being out of the J. Wilson Survey, Abstract 657, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00533-AS) Oil and Gas Lease dated March 8, 1968, by and between Dollie Thompson, et vir, as Lessor, and John MacDonald, as Lessee, recorded in Volume 377, page 633 of the Records of Freestone County, Texas, covering 52.181 acres, more or less, being out of the J. Wilson Survey, Abstract 657, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00533-AT) Oil and Gas Lease dated March 8, 1968, by and between Calvin D. Prowell, as Lessor, and John MacDonald, as Lessee, recorded in Volume 377, page 673 of the Records of Freestone County, Texas, covering 52.181 acres, more or less, being out of the J. Wilson Survey, Abstract 657, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00533-AU) Oil and Gas Lease dated July 11, 1966, by and between Audie A. Davidson, et ux, as Lessor, and Hal Newman, as Lessee, recorded in Volume 361, page 754 of the Records of Freestone County, Texas, covering 46.2 acres, more or less, being out of the Graham Jackson Survey, Abstract 341, and the Jesse A. Weaver Survey, Abstract 656, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00534-00) Oil and Gas Lease dated July 8, 1966, by and between John P. Neece, Jr., et al, as Lessor, and Hal Newman, as Lessee, recorded in Volume 361, page 717 of the Records of Freestone County, Texas, covering 35.0 acres, more or less, being out of the Graham Jackson Survey, Abstract 341, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00535-00) Oil and Gas Lease dated July 22, 1966, by and between Dee Garrett Lively, et vir, as Lessor, and H. R. Lively, as Lessee, recorded in Volume 361, page 739 of the Records of Freestone County, Texas, covering 17.52 acres, more or less, being out of the Graham Jackson Survey, Abstract 341, and the A. White Survey, Abstract 648, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00536-AA) Oil and Gas Lease dated July 22, 1966, by and between W. L. Garrett, as Lessor, and Hal Newman, as Lessee, recorded in Volume 361, page 742 of the Records of Freestone County, Texas, covering 17.52 acres, more or less, being out of the Graham Jackson Survey, Abstract 341, and the A. White Survey, Abstract 648, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00536- AB) Oil and Gas Lease dated July 25, 1966, by and between Fred Garrett, as Lessor, and Hal Newman, as Lessee, recorded in Volume 362, page 407 of the Records of Freestone County, Texas, covering 17.52 acres, more or less, being out of the Graham Jackson Survey, Abstract 341, and the A. White Survey, Abstract 648, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00536- AC) Oil and Gas Lease dated July 25, 1966, by and between C. R. Ragsdale, as Lessor, and Hal Newman, as Lessee, recorded in Volume 362, page 410 of the Records of Freestone County, Texas, covering 17.52 acres, more or less, being out of the Graham Jackson Survey, Abstract 341, and the A. White Survey, Abstract 648, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00536- AD) Oil and Gas Lease dated July 18, 1968, by and between Emmie H. Creecy, et vir, as Lessor, and John MacDonald, as Lessee, recorded in Volume 377, page 372 of the Records of Freestone County, Texas, covering 45.00 acres, more or less, being out of the Graham Jackson Survey, Abstract 341, and the A. White Survey, Abstract 648, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00536-AE) Oil and Gas Lease dated March 8, 1968, by and between W. Edward Garrett, et ux, as Lessor, and John MacDonald, as Lessee, recorded in Volume 377, page 207 of the Records of Freestone County, Texas, covering 45.00 acres, more or less, being out of the Graham Jackson Survey, Abstract 341, and the A. White Survey, Abstract 648, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00536-AF) Oil and Gas Lease dated February 24, 1968, by and between Olevia Lowney, et vir, as Lessor, and L. R. Mabry, as Lessee, recorded in Volume 377, page 285 of the Records of Freestone County, Texas, covering 45.00 acres, more or less, being out of the Graham Jackson Survey, Abstract 341, and the A. White Survey, Abstract 648, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00536-AG) Oil and Gas Lease dated March 11, 1968, by and between Boyd E. Garrett, as Lessor, and L. R. Mabry, as Lessee, recorded in Volume 377, page 747 of the Records of Freestone County, Texas, covering 45.00 acres, more or less, being out of the Graham Jackson Survey, Abstract 341, and the A. White Survey, Abstract 648, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00536- AH) Oil and Gas Lease dated February 27, 1968, by and between Katherine Mitchell, as Lessor, and L. R. Mabry, as Lessee, recorded in Volume 377, page 236 of the Records of Freestone County, Texas, covering 45.00 acres, more or less, being out of the Graham Jackson Survey, Abstract 341, and the A. White Survey, Abstract 648, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00536-AI) Oil and Gas Lease dated February 27, 1968, by and between Thelma Thompson, et vir, as Lessor, and L. R. Mabry, as Lessee, recorded in Volume 377, page 63 of the Records of Freestone County, Texas, covering 45.00 acres, more or less, being out of the Graham Jackson Survey, Abstract 341, and the A. White Survey, Abstract 648, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00536-AJ) Oil and Gas Lease dated June 18, 1966, by and between H. D. Wynne, et ux, as Lessor, and Richard Clouse, as Lessee, recorded in Volume 361, page 751 of the Records of Freestone County, Texas, covering 50.00 acres, more or less, being out of the J. Wilson Survey, Abstract 657, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00537-00) Oil and Gas Lease dated November 21, 1967, by and between Audie Kay Richardson, et al, as Lessor, and L. R. Mabry, as Lessee, recorded in Volume 374, page 327 of the Records of Freestone County, Texas, covering 74.229 acres, more or less, being out of the Jeremiah Lee Survey, Abstract 388, more particularly described in said lease, LIMITED to a depth of 13,369 feet below the surface, Freestone County, Texas (LF-00538-AA) MARTIN COUNTY, TEXAS PN 010103 ALLOCATED VALUE $6,254.00 ALLAR 925 NO. 1 EXPENSE INTEREST 0.0000000 REVENUE INTEREST 0.0625000 Oil and Gas Lease dated July 26, 1966, by and between The Allar Company, as Lessor, and The Murmanill Corporation, as Lessee, recorded in Volume 43, page 333 of the Oil and Gas Lease Records of Martin County, Texas, covering 160.00 acres, more or less, being the NE/4 of Section 11, Block 35, T-1-N, T&P RR Co. Survey, Martin County, Texas (LF-00467-00) MOORE COUNTY, TEXAS PN 414920 ALLOCATED VALUE $15,595.00 BAKER 39 EXPENSE INTEREST 0.0000000 REVENUE INTEREST 0.0200000 Oil and Gas Lease dated October 25, 1934, from Nettie L. Baker, as Lessor, and Amarillo Oil Company, as Lessee, recorded in Volume 52, page 530 of the Records of Moore County, Texas, INSOFAR AND ONLY INSOFAR as said lease covers 160 acres of land, more or less, described as follows: Beginning at the southeast corner of said Section 39, Block O-18, D&P Survey, go N 00'20'32"E along the east line of Section 39, 2,640 feet to a point; thence N 89'38'35"W 2,640 feet to a point; thence S 00'20'32"W 2,650 feet to a point on the south line of Section 39; thence S 89'38'35"E along the south line of Section 39, 2,640 feet to the Point of Beginning, and LIMITED to rights from the surface of the ground to a depth of 2,439 feet below the surface, Moore County, Texas. (LF-05709-00) WISE COUNTY, TEXAS PN 010203 ALLOCATED VALUE $6,689.00 J. S. FOX UNIT NO. 1 (UT-156) (WELL NO. 3) EXPENSE INTEREST 0.0000000 REVENUE INTEREST 0.0273438 (ORI) Oil and Gas Lease dated February 6, 1962, by and between Jeff S. Fox, et ux, as Lessor, and Frank M. Tye, Jr., as Lessee, recorded in Volume 135, page 1 of the Records of Wise County, Texas, covering 437.9 acres, more or less, being out of the Joseph Humphries Survey Abstract 357, the Margaret Swift Survey and the Ed Wray Survey, Abstract 873, more particularly described in said lease, Wise County, Texas. (LF-00501-00) The hereinabove referenced leases are subject to Letter Agreement dated January 10, 1967, by and between Maynard Oil Company and Mitchell & Mitchell Properties; Gas Processing Agreement dated July 12, 1965, as amended, by and between G M & M Gas Products Plant, Inc., and Maynard Oil Company; and Declaration of Pool for the Jeff S. Fox Gas Unit No. 1 dated September 19, 1973, recorded in Volume 191, page 373 of the Records of Wise County, Texas. PN 010302 (UT-112) ALLOCATED VALUE $12,783.00 ZINA FOX NO. 1, 2 AND WELL NO. 3 EXPENSE INTEREST 0.0000000 REVENUE INTEREST 0.0273438 Oil and Gas Lease dated February 6, 1962, by and between Jeff S. Fox, et ux, as Lessor, and Frank M. Tye, Jr., as Lessee, recorded in Volume 135, page 1 of the Records of Wise County, Texas, covering 437.9 acres, more or less, being out of the Joseph Humphries Survey, the Margaret Swift Survey and the Ed Wray Survey, more particularly described in said lease, Wise County, Texas. (LF-00501-00) Oil and Gas Lease dated February 6, 1962, by and between Joe Lee Fox, et ux, as Lessor, and Frank M. Tye, Jr., as Lessee, recorded in Volume 135, page 5 of the Records of Wise County, Texas, covering 276.5 acres, more or less, being out of the E. Whitson Survey, the Ed Wray Survey, and the John Hicks Survey, more particularly described in said lease, Wise County, Texas. (LF-00502-00) Oil and Gas Lease dated February 6, 1962, by and between Zina Fox, as Lessor, and Frank M. Tye, Jr., as Lessee, recorded in Volume 135, page 53 of the Records of Wise County, Texas, covering 467 acres, more or less, being out of the Joseph Humphries Survey, Abstract 357, the John Frederick Survey, Abstract 309, the E. Wray Survey, Abstract 873, and the John Hicks Survey, Abstract 999, more particularly described in said lease, Wise County, Texas. (LF-00503-00) The hereinabove referenced leases are subject to Letter Agreement dated January 10, 1967, by and between Maynard Oil Company and Mitchell & Mitchell Properties; Gas Processing Agreement dated July 12, 1965, as amended, by and between G M & M Gas Products Plant, Inc., and Maynard Oil Company and the Zina Fox Gas Unit No. 1 Declaration of Pool dated February 1, 1967, recorded in Volume 171, page 539 of the Records of Wise County, Texas; the Zina Fox Gas Unit No. 2 Declaration of Pool dated July 8, 1974, recorded in Volume 194, page 529 of the Records of Wise County, Texas. PN 010205 ALLOCATED VALUE $3,042.00 M. E. PRUETT NO. 1 EXPENSE INTEREST 0.0000000 REVENUE INTEREST 0.0546875 (GAS) REVENUE INTEREST 0.0273438 (OIL) PN 094804 (UT-279) ALLOCATED VALUE $5,562.00 J. R. WITT WELL NO. 1, 2, 3, 4 AND 5 EXPENSE INTEREST 0.0000000 REVENUE INTEREST 0.0273437 (OIL) REVENUE INTEREST 0.0288973 (GAS) Oil and Gas Lease dated February 10, 1962, by and between Margaret S. Rasco, et vir, as Lessor, and Frank M. Tye, Jr., as Lessee, recorded in Volume 135, page 349 of the Records of Wise County, Texas, covering 413.65 acres, more or less, being out of the E. Witson Survey, Abstract 881, and the Joseph Humphries Survey, Abstract 357, more particularly described in said lease, Wise County, Texas. (LF-00504-00) Oil and Gas Lease dated February 9, 1962, by and between Jewell Ray Witt, et vir, as Lessor, and Frank M. Tye, Jr., as Lessee, recorded in Volume 135, page 285 of the Records of Wise County, Texas, covering 430.62 acres, more or less, being out of the Margaret Swift Survey, Abstract 740, more particularly described in said lease, Wise County, Texas. (LF-00505- 00) Oil and Gas Lease dated April 24, 1962, by and between M. E. Pruett, et ux, as Lessor, and Frank M. Tye, Jr., as Lessee, recorded in Volume 136, page 535 of the Records of Wise County, Texas, covering 917 acres, more or less, being out of the Eli M. Thomasson Survey, Abstract 801, more particularly described in said lease, Wise County, Texas. (LF-01066-AA) Oil and Gas Lease dated April 16, 1965, by and between Aetna Life Insurance Company, as Lessor, and Mack Natural Gas Company, as Lessee, recorded in Volume 160, page 404 of the Records of Wise County, Texas, covering 312.00 acres, more or less, being out of the Eli M. Thomasson Survey, A-801, more particularly described in said lease, Wise County, Texas (LF-01066-AB) The above referenced leases are subject to Letter Agreement dated January 10, 1967, by and between Maynard Oil Company and Mitchell & Mitchell Properties; Gas Processing Agreement dated July 12, 1965, as amended, by and between G M & M Gas Products Plant, Inc., and Maynard Oil Company; Declaration of Pool for the Jewell Ray Witt Gas Unit No. 1 dated February 18, 1981, recorded in Volume 235, page 299 of the Records of Wise County, Texas and the Declaration of Pool for the M. E. Pruett Gas Unit dated February 1, 1967, recorded in Volume 171, page 553 of the Records of Wise County, Texas. YOUNG COUNTY, TEXAS PN 009706 ALLOCATED VALUE $19,750.00 ALLAR UNIT OHC EXPENSE INTEREST 0.0000000 REVENUE INTEREST 0.0625000 Oil and Gas Lease dated March 11, 1938, by and between E. S. Graham, et ux, and The Allar Company, as Lessor, and M. G. Cheney, as Lessee, recorded in Volume 175, page 578 of the Deed Records of Young County, Texas; Oil and Gas Lease dated February 7, 1938, by and between E. S. Graham, et ux, as Lessor, and M. G. Cheney, as Lessee, recorded in Volume 175, page 580 of the Deed Records of Young County, Texas; Oil and Gas Lease dated June 12, 1937, by and between E. S. Graham, et ux, as Lessor, and M. G. Cheney, as Lessee, recorded in Volume 174, page 105 of the Deed Records of Young County, Texas; Oil and Gas Lease dated February 19, 1934, by and between E. S. Graham, et ux, and the Allar Company, as lessor, and James P. Nash, as Lessee, recorded in Volume 157, page 363 of the Deed Records of Young County, Texas; Oil and Gas Lease dated June 12, 1937, by and between E. S. Graham, et ux, as Lessor, and M. G. Cheney, as Lessee, recorded in Volume 174, page 104 of the Deed Records of Young County, Texas, merged into one lease by Contract of Agreement dated January 30, 1942, recorded in Volume 193, page 239 of the Deed Records of Young County, Texas, as amended and ratified by instrument dated March 23, 1948, recorded in Volume 242, page 587 of the Deed Records of Young County, Texas, INSOFAR AND ONLY INSOFAR as said lease covers 20.00 acres, more or less, being described as follows: Beginning at a point on the most westerly northwest corner of the Allen Hines Survey, Abstract 135; Thence south 2,434.4 feet; Thence east 551 feet to the Point of Beginning; Thence east 1,320 feet; Thence south 600 feet; Thence west 1,320 feet; Thence north 660 feet to the Point of Beginning, LIMITED to rights from the surface to the Base of the Mississippian formation and 20.00 acres, more or less described as follows: Beginning at a point in the east line of the Allen Hines Survey, Abstract 135, being south 0'42'27" west, 564.15 feet from its northeast corner to point for corner; Thence south 0'42'27" ng and with the east boundary line of said survey to point for corner; Thence north 89'17'33" west at 357.6 feet to point for corner; Thence north 0'42'27" east 2,436.92 feet to point for corner; Thence south 89'27'33" east 357.5 feet to the Point of Beginning, LIMITED to rights from the surface to the Base of the Mississippian formation, but excluding rights in the Conglomerate zone or formation, which formation is found below the Base of the Caddo formation and above the top of the Marble Falls formation, Young County, Texas. (LF- 00460-00-01) The hereinabove referenced lease is subject to Gas Purchase Contract dated August 26, 1980, by and between J. H. Taylor Gas Company, as Buyer, and Maynard Oil Company, as Seller; Farmout Agreement dated November 7, 1985, as amended, by and between Maynard Oil Company, as Farmor, and Maverick Properties, Inc., as Farmee; Unit Agreement dated August 26, 1987; Unit Agreement dated September 15, 1987. EXHIBIT "B" CONVEYANCE, ASSIGNMENT AND BILL OF SALE FROM MAYNARD OIL COMPANY TO JAVELINA ENERGY, INC. Attached to and made a part of PURCHASE AND SALE AGREEMENT dated August 6, 1996, by and between Maynard Oil Company, SELLER, and Javelina Energy, Inc., BUYER. THE STATE OF ) ) KNOW ALL MEN BY THESE PRESENTS: COUNTY OF ) THAT, the undersigned, MAYNARD OIL COMPANY, a Delaware corporation, with offices at 8080 North Central Expressway, Suite 660, Dallas, Texas 75206 (hereinafter called "Assignor"), for and in consideration of Ten Dollars ($10.00) and other valuable consideration to it in hand paid by JAVELINA ENERGY, INC., a Texas corporation, whose post office address is Box 1237, Kingsville, Texas 78364 (hereinafter called "Assignee"), does hereby TRANSFER, ASSIGN and CONVEY unto Assignee, WITHOUT WARRANTY OF TITLE EITHER EXPRESS OR IMPLIED, EXCEPT BY, THROUGH AND UNDER ASSIGNOR, BUT NOT OTHERWISE, with the right of full substitution and subrogation in and to all rights and actions of warranty which Assignor has or may have against any and all preceding owners or vendors, subject to the terms and conditions contained herein, the following (collectively, the "Property"): (a) All of Assignor's interest, whether present, contingent, reversionary or other type of interest, in and to the leasehold estates created under the oil, gas and mineral leases described in Exhibit "A", (such leases being hereinafter called "said Leases"), which interest in said Leases and the wells situated thereon, and in any pooled units pertaining thereto, Assignor represents to be no less than the working and net revenue interests set forth on such Exhibit "A", subject to all burdens, encumbrances, contracts and agreements, which are of record and/or listed in such Exhibit "A" affecting said Leases to the extent that same are in force and effect; (b) All of Assignor's royalties, overriding royalties, production payments, rights to take royalties in kind, and other interests in production of oil, gas or other minerals in the lands described in Exhibit "A" attached hereto, whether created under the leases, deeds, assignmicenses, servitudes, easements, surface leases and rights-of-way of every character relating to said lease; (d) all of Assignor's right, title and interest in and to any contracts or agreements including, but not limited to, rights and interest in or derived from unit agreements, gas processing agreements, joint operating agreements, gas contracts, gas gathering agreements, gas balancing agreements, boundary or well line agreements, assignments of operating rights, working interest and subleases affecting said leases. For the same consideration, Assignor does hereby BARGAIN, SELL and DELIVER unto Assignee all of its right, title and interest in and to producing, non-producing and shut-in oil wells and gas wells, salt water disposal wells, injection wells and water wells located on said leases described in said Exhibit "A" or on lands pooled, unitized or communitized therewith; and Assignor does hereby further BARGAIN, SELL and DELIVER unto Assignee all of its right, title and interest in and to all surface and down-hole equipment, fixtures, related inventory and other personal property and well equipment located in, on and used in connection with the property described directly hereinabove and in paragraphs (a) through (d) above, excluding. however, all automobiles, trucks and communications equipment, such equipment being hereinafter collectively called "said wells". ASSIGNOR EXPRESSLY DISCLAIMS AND NEGATES (a) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (b) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, and (c) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS. ASSIGNEE EXPRESSLY WAIVES THE PROVISIONS OF CHAPTER XVII, SUBCHAPTER E, SECTIONS 17.41 THROUGH 17.63, INCLUSIVE (OTHER THAN SECTION 17.555, WHICH IS NOT WAIVED), VERNON'S TEXAS CODE ANNOTATED, BUSINESS AND COMMERCIAL CODE. This Conveyance, Assignment and Bill of Sale is executed and delivered as part of the consummation of the transaction contemplated by that certain Purchase and Sale Agreement between Assignor, as SELLER, and Assignee, as BUYER, dated August 6, 1996 (hereinafter referred to as "Sale Agreement"). The warranties, representations, indemnities and covenants contained in the Sale Agreement shall survive the delivery of this Conveyance, Assignment and Bill of Sale in accordance with the provisions of the Sale Agreement and the delivery of this Conveyance, Assignment and Bill of Sale shall not affect, expand, diminish, or otherwise impair any of the warranties, representations, indemnities or covenants made in the Sale Agreement and the terms and conditions set forth therein; provided, however, any third parties transacting with Assignee with respect to any of the Property may rely on this Conveyance, Assignment and Bill of Sale as vesting Assignee with all of Assignor's right, title and interest in said leases, said wells, and all of the other Property. This Conveyance, Assignment and Bill of Sale shall extend to, be binding upon and inure to the respective successors and assigns, and shall be deemed covenants running with the herein described lands and leasehold estates. Assignee expressly assumes, as of the Effective Date, all of Assignor's obligations relating to the said leases, including, but not limited to, the obligation of plugging and abandoning any well on the said leases, at Assignee's sole cost, risk and expense. This conveyance, assignment and bill of sale shall be effective, for all purposes as of 7:00 o'clock a.m. August 1, 1996. EXECUTED by Assignor and Assignee in Duplicate Originals on this ____ day of _______________, 1996, but to be effective as stated above. ATTEST: MAYNARD OIL COMPANY __________________________ By: ___________________________ Cassondra Foster L. B. Carruth Assistant Secretary Vice President SEAL ATTEST: JAVELINA ENERGY, INC. __________________________ By: ___________________________ Ken Perkins President SEAL THE STATE OF TEXAS ) ) COUNTY OF DALLAS ) This instrument was acknowledged before me on __________, 1996, by L. B. Carruth, Vice President of Maynard Oil Company, a Delaware corporation, on behalf of said corporation. MY COMMISSION EXPIRES: ___________________________ Kathryn Shaffer, Notary Public in an THE STATE OF TEXAS ) ) COUNTY OF ) This instrument was acknowledged before me on __________, 1996, by Ken Perkins, President of Javelina Energy, Inc., a Texas corporation, on behalf of said corporation. MY COMMISSION EXPIRES: ___________________________ Notary Public in and for the _____________________ EXHIBIT "C" EXCHANGE ESCROW AGREEMENT Attached to and made a part of PURCHASE AND SALE AGREEMENT dated August 6, 1996, AND SHALL BE EFFECTIVE August 15, 1996, by and between Maynard Oil Company, SELLER, and Javelina Energy, Inc., BUYER This Agreement is dated the 6th day of August, 1996, AND SHALL BE EFFECTIVE August 15, 1996, between MAYNARD OIL COMPANY, a Delaware corporation, with offices at 8080 North Central Expressway, Suite 660, Dallas, Texas 75206 (hereinafter referred to as "Seller") and Javelina Energy, Inc., a Texas corporation, whose post office address is P. O. Box 1237, Kingsville, Texas 78364, (hereinafter referred to as "Purchaser") and BANK ONE TEXAS, N.A., a national banking association (hereinafter referred to as "Escrow Agent"). W I T N E S S E T H WHEREAS, Seller and Purchaser have entered into that certain Purchase and Sale Agreement dated August 6, 1996 (the "Contract), for the sale and purchase of certain properties more particularly described in the Exhibit "A" attached ("Seller's Property"). WHEREAS, Purchaser has agreed to accommodate Seller in effecting a tax deferred exchange under Section 1031 of the Internal Revenue Code of 1986 (the "Code") by acquiring for the benefit of Seller and exchanging for Seller's Property one or more like properties (collectively, "Exchange Property"), to be designated by Seller and thereafter acquired and transferred to Seller; WHEREAS, unless notified otherwise by Seller and Purchaser jointly, Escrow Agent may rely upon the date of this agreement, as set forth above, being the date on which Seller's property was transferred to Purchaser; and WHEREAS, this Exchange Escrow Agreement is referred to as the "Agreement." NOW THEREFORE, the parties agree as follows: 1. Creation of Escrow. Purchaser agrees to deposit with and deliver to Escrow Agent, the net closing proceeds of the Seller's Property, which net closing proceeds shall consist of cash in the amount of One Hundred Fifty Thousand and 00/100 Dollars ($150,000.00) plus or minus any adjustments allowed under Paragraph 4(a) of the Contract and less costs of closing, fees, taxes, and other reductions contemplated by the Contract, said net closing proceeds being hereinafter referred to as the "Escrow Fund." Escrow Agent shall have no responsibility to ascertain whether the funds deposited with it as the Escrow Funds are equal to the net closing proceeds described in the immediately preceding sentence. Each deposit to the Escrow Fund, whether initially made as contemplated above, or made subsequently for whatever reason, shall be in cash, and shall be accompanied by notice to Escrow Agent setting forth the time and method of delivery of such cash, the amount thereof, and directions to Agent shall invest the Escrow Fund at the written request of the parties hereto. Said request shall be by notice, which shall specify the type of investment to be made, the maturity date, and the principal amount to be invested. The Escrow Agent shall not be liable for losses on any investments made by it pursuant to and in compliance with such instructions; and Escrow Agent shall not be responsible or liable for any penalty or loss incurred as a result of the settlement or liquidation of any such investment prior to this maturity to enable Escrow Agent to make any disbursement required hereunder. The Escrow Fund will remain uninvested until such notice of investment instructions is received. All interest earned on the Escrow Fund shall be added to and shall become a part of the Escrow Fund, subject to the same restrictions on distribution as contained herein for the Escrow Fund. No assignment, transfer, conveyance or hypothecation of any right, title or interest in and to the subject matter of this Escrow shall be binding upon Escrow Agent unless notice thereof shall be served upon Escrow Agent and all fees, costs and expenses incident thereto shall have been paid and then only upon Escrow Agent's assent thereto in writing. Escrow Agent shall be under no duty or obligation to ascertain the identity, authority or rights of the parties executing, delivering or purporting to execute or deliver these instructions or any documents, paper, or payments deposited or called for hereunder, and assumes no responsibility or liability for the validity or sufficiency of these instructions or any documents, papers or payments deposited or called for hereunder. 2. Interests in Escrow Fund. Purchaser declares that the purpose of the Escrow Fund is to secure to Seller the timely and faithful performance of Purchaser's obligations under the Contract. Under no circumstances shall the Escrow fund be disbursed, except pursuant to the terms of this Agreement. 3. Escrow Fepon execution hereof fees as outlined on Exhibit "B" for services rendered by it pursuant to the provisions of this Agreement, and will reimburse Escrow Agent for its reasonable expenses, including attorney's fees, incurred in connection with the performance of such services as such expenses are incurred. Escrow Agent's expenses, including reasonable attorney's fees for review, revision and approval of this Agreement shall be paid by Seller to Escrow Agent upon execution of this Agreement. Notwithstanding anything to the contrary contained in any other provision of this Agreement or any instructions to the contrary from either Purchaser or Seller, Escrow Agent shall be entitled to retain from any disbursements requested hereunder any outstanding fees and/or expense due to it hereunder. Escrow Agent shall be entitled to consult with counsel as it deems necessary from time to time, and reasonable fees therefore shall be an expense reimbursable to Escrow Agent as provided hereunder. Escrow Agent is hereby granted a lien on the Escrow Fund for all indebtedness that may become owing to Escrow Agent pursuant to this Agreement, which may be enforced by Escrow Agent by appropriate foreclosure proceedings. 4. Identification and Acquisition of Exchange Property. Seller shall identify and negotiate the terms of acquisition of one or more Exchange Property or Exchange Properties. Upon Notice to Escrow Agent from Seller as to the need for monies in the Escrow Fund to acquire an Exchange Property, which notice shall provide a description of the Exchange Property, the general terms of its acquisition and instructions for the disbursement of Escrow Funds to accomplish acquisition of the Exchange Property, the Escrow Agent shall disburse funds in accordance with the instructions in the notification; provided that (i) such notice shall be given to Escrow Agent at least three business days prior to any needed disbursement; (ii) once disbursed, Escrow Agent shall have no further responsibility and (iii) Escrow Agent shall never have any responsibility to supply funds needed by Seller from its own assets. The Escrow Agent may rely conclusively upon the information contained in the notification. 5. Termination; Disbursement to Seller. This Agreement shall terminate automatically, without notice to any party, as follows: (a) in the event Seller fails to give notice to Escrow Agent that it has designated Exchange Property by the forty-fifth (45th) day following the date of this Agreement at the close of business of such day, or (b) otherwise, on the one hundred eightieth (180th) day following the date of this Agreement provided, that if Seller designates Exchange Property and all property so designated has been successfully acquired and transferred to Seller prior to the one hundred eightieth (180th) day following the date of this Agreement, then Seller shall so notify Escrow Agent, and this Agreement shall instead terminate on the day following Escrow Agent's receipt of such notice. Upon termination of this Agreement, the Escrow Fund as then constituted shall become the property of Seller and shall promptly be paid over and delivered to Seller subject to Escrow Agent's right to offset and deduct all unpaid fees of Escrow Agent and all reasonable expenses, including attorney's fees, and authorized disbursements. Under no circumstances shall any party of the Escrow Fund be disbursed to Seller except upon termination of this Agreement pursuant to this paragraph. Seller shall have no right to receive, pledge, borrow, or otherwise obtain the benefits of the Escrow Fund prior to termination of this Agreement pursuant to this paragraph. 6. Security Interest of Seller. Purchaser agrees the Escrow Fund is hereby impressed with and made subject to a security interest in favor of Seller securing Purchaser's performance to obtain and transfer title to the Exchange Property as set forth above. 7. Successor Escrow Agent. Escrow Agent may at any time resign hereunder by giving notice of its resignation to Seller and Purchaser at least 10 days prior to the date specified for such resignation to take effect. If Escrow Agent has so resigned, Seller and Purchaser shall appoint a successor escrow agent within such notice period. Further, if Escrow Agent has not previously given notice of resignation, Seller and Purchaser may remove Escrow Agent by mutually naming a successor hereunder to Escrow Agent, which shall be done by submitting notice to Escrow Agent of such removal and appointment of the successor escrow agent at least ten (10) days prior to the date specified for such removal to take place. Such successor escrow agent, regardless of why appointed, shall have all the duties and powers assumed and conferred in this Agreement upon Escrow Agent. Upon the date on which the resignation or removal of Escrow Agent is specified to take effect, the Escrow fund shall be delivered to the successor escrow agent so named by Seller and Purchaser above in this paragraph, whereupon all Escrow Agent's obligations hereunder shall cease. If no successor escrow agent is so designated by such effective date, all obligations of Escrow Agent hereunder, nevertheless, shall cease and terminate. Escrow Agent's sole responsibility thereafter shall be to keep safely the Escrow Fund and to deliver the same to a person designated by Seller and Purchaser or in accordance with the directions of a final order or judgment of a court of competent jurisdiction. 8. Escrow Agent Release. Escrow Agent shall have no liability under, or duty to inquire into the terms and provisions of this Agreement or the transactiot its duties hereunder are purely ministerial in nature, and Escrow Agent shall incur no liability whatsoever except for its willful misconduct or gross negligence so long as it has acted in good faith. Escrow Agent shall not be bound by any modification, amendment, termination, cancellation, rescission or revision of this Escrow Agreement unless the same shall be in writing and signed by Seller and Purchaser, and if its duties hereunder are affected thereby, unless it shall have given prior written consent thereto. Escrow Agent shall have no liability for the acts of any of its agents unless it has been grossly negligent or engaged in wilful misconduct in the selection of such agent. Escrow Agent shall be obligated only for the performance of such duties as are specifically set forth in this Agreement and may rely upon and shall be protected in acting or refraining from acting on any instrument in good faith believed by it to be genuine and to have been signed or presented by the property party or parties. Escrow Agent shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized hereby, nor for any action taken or omitted by it in accordance with the advice of its counsel. Escrow Agent may, without further investigation, assume: (a) the accuracy and truth of any written instrument, notice, certificate or opinion given to it and (b) the authenticity of any signatures thereon. 9. Indemnity. In consideration of acceptance of this escrow by Escrow Agent, Seller agrees for executors, personal representatives, successors and assigns, to indemnify, defend, and hold Escrow Agent (in every capacity, including its corporate capacity) harmless from and against any and all claims, losses, damages, taxes, liabilities, and expenses (collectively "Claims") that may be incurred by Escrow Agent arising out of or in connection with its appointment, acceptance, service or performance hereunder, including the legal costs and expenses of defendinin connection with such expenses of defending itself against any Claims in connection with such matters. "Claims" specifically includes Claims arising out of the alleged or actual negligence of Escrow Agent, but this agreement to indemnify, defend and hold harmless shall not extend to Claims which are determined to be the result of gross negligence or willful misconduct of Escrow Agent in bad faith. This agreement by Seller to indemnify, defend and hold harmless is not limited to the amount of funds held in escrow hereunder, and shall survive both the termination of the Agreement and any resignation or removal of Escrow Agent. To further secure the performance of Seller under this agreement to indemnify, defend and hold harmless, Seller and Purchaser agree that Escrow Agent shall have a first and prior lien upon all deposits made hereunder to secure the performance of said agreement. 10. Interpleader. Should any controversy arise between the undersigned with respect to this Agreement or with respect to the right to receive the Escrow Fund, Escrow Agent shall have the right to institute a bill of interpleader in any court of competent jurisdiction to determine the rights of the parties. Should a bill of interpleader be instituted, or should Escrow Agent become involved in litigation in any manner whatsoever on account of this Agreement or the Escrow Fund, Seller and Purchaser hereby bind themselves, their successors and assigns, to pay Escrow Agent, in addition to any charge made for acting as Escrow Agent hereunder and expenses incurred in connection therewith, reasonable attorney's fees incurred by Escrow Agent and any other disbursements, expenses, losses, costs and damages in connection with or resulting from such litigation. 11. Notices. Any notice required or permitted hereunder, to be effective, must be in writing and shall be deemed given, except as provided in the penultimate sentence of this paragraph 11 when personally delivered to any party or matified mail, return receipt requested, to the following addresses: If to Purchaser: Javelina Energy, Inc. Attention Mr. Ken Perkins Highway 141 West Armstrong Ranch Kingsville, TX 78364 Phone: (512) 592-6000 Fax: (512) 592-2689 If to Seller: Maynard Oil Company 8080 North Central Expressway, Suite 660 Dallas, Texas 75206 Attention Cassondra Foster Telephone: (214) 891-8461 Facsimile: (214) 891-8827 With Copy to: Maynard Oil Company 8080 North Central Expressway, Suite 660 Dallas, Texas 75206 Attention Kenneth Hatcher Telephone: (214) 891-8471 Facsimile: (214) 891-8827 If to Escrow Agent: Bank One, Texas, N.A. Attention Kay Lowrance 8111 Preston Road, 2nd Floor Dallas, TX 75225 Telephone: (214) 360-3978 Facsimile: (214) 360-3980 Provided further, and in addition to the requirements set forth above, any notice required or permitted to be given to Escrow Agent hereunder shall be effective only when actually received in writing by Kay Lowrance, on behalf of Escrow Agent, and not prior thereto. Any party may, by proper notice, change its address for notice hereunder. 12. Amendment. This Agreement is irrevocable, and may not be amended, modified or supplemented except by written instrument signed by Purchaser and Seller and approved in writing by Escrow Agent. 13. Successors and Assigns. This Agreement shall inure to the benefit of the parties, their respective heirs, executors, personal representatives, successors and assigns. 14. Counterparts. This Agreement may be executed in several counterparts, and the several signed counterparts shall be deemed a single, integrated instrument. 15. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. The venue for any action arising hereunder or in connection herewith shall be in Dallas County, Texas. 16. Time of Essence. Time is expressly declared to be of the essence of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement in triplicate as of the day and year first above written. SELLER MAYNARD OIL COMPANY By: ___________________________ L. B. Carruth Vice President PURCHASER JAVELINA ENERGY, INC. By: ___________________________ Ken Perkins President ESCROW AGENT BANK ONE, TEXAS, N.A. By: ___________________________ Kay Lowrence Assistant Vice President EX-2 5 EXHIBIT 2(d) PURCHASE AND SALE AGREEMENT This Agreement, when accepted and agreed to in the manner provided below shall constitute the terms and provisions of an agreement under which MAYNARD OIL COMPANY, a Delaware corporation, with offices at 8080 North Central Expressway, Suite 660, Dallas, Texas 75206, hereinafter referred to as "SELLER", agrees to sell and JIMMY R. CHATHAM, an individual doing business as CHATHAM OIL COMPANY, whose address is in care of the First National Bank & Trust Company, P. O. Box 69, Ardmore, Oklahoma 73402, hereinafter referred to as "BUYER", agrees to purchase all of SELLER'S rights, titles and interests in and to those certain oil and gas properties owned by SELLER and described in Exhibit "A", Property Schedule attached hereto and made a part hereof, hereinafter sometimes referred to as the "PROPERTY". 1. PROPERTY BEING SOLD. At Closing, as hereinafter defined, SELLER shall convey to BUYER the PROPERTY identified on Exhibit "A", including: (a) All of SELLER'S rights, titles and interests in and to the leasehold estates described in Exhibit "A", such leases being hereinafter called "said leases", represented to be no less than the working and net revenue interests set forth on such exhibit; (b) All of SELLER'S fee interests, royalties, overriding royalties, production payments, rights to take royalties in kind, or other interests in production of oil, gas or other minerals in the lands described in Exhibit "A"; (c) All of SELLER'S rights, titles and interests in and to all permits, franchises, licenses, servitudes, easements, surface leases and rights-of-way of every character relating to said leases; (d) All of SELLER'S rights, titles and interests in and to any contracts or agreements including, but not limited to, rights and interests in or derived from unit agreements, gas processing agreements, joint operating agreements, gas contracts, gas gathering agreements, gas balancing agreements, boundary or well line agreements, assignments of operating rights, working interests and subleases affecting said leases. (e) All of SELLER'S rights, titles and interests in and to producing, non-producing and shut-in oil and gas wells, salt water disposal wells, injection wells and water wells on said leases or lands pooled, unitized or communitized therewith; and (f) All of SELLER'S rights, titles and interests in and to all surface and down-hole equipment, fixtures, related inventory and other personal property used in connection with the PROPERTY described in paragraphs (a) through (e) above, excluding, however, all automobiles, trucks and communications equipment. 2. PERFORMANCE DEPOSIT. On or before 4:00 o'clock p.m., local time, August 20, 1996, BUYER shall tender to SELLER, by wire transfer, a performance deposit in the amount of Forty Four Thousand Four Hundred Forty Four and 40/100 Dollars ($44,444.40). The performance deposit is received solely to assure the performance of BUYER pursuant to the terms and conditions hereof. The performance deposit will be returned to BUYER at Closing upon consummation of the transaction, or at BUYER'S election, may be credited to the Purchase Price. No interest shall be paid or credited to the performance deposit. If BUYER fails, refuses, or is unable to close the sale in accordance with the terms herein, SELLER, except as otherwise herein specifically provided, may, at its option, retain the performance deposit as agreed liquidated damages and not as a penalty. If SELLER, through no fault of BUYER, refuses to close the sale in accordance with the terms herein, the performance deposit shall be returned to BUYER. 3. PURCHASE PRICE. The total sum which BUYER agrees to deliver to SELLER for the PROPERTY, is Four Hundred Forty Four Thousand, Four Hundred Forty Four and 00/100 Dollars ($444,444.00). 4. CLOSING. The closing shall take place on September 30, 1996, at 10:00 a.m. local time at SELLER'S offices in Dallas, Texas, unless the parties mutually agree upon a later date, or, at BUYER'S election, such closing may be handled by overnight mail upon confirmation of funds received by SELLER. The following shall occur at closing: (a) Purchase Price. BUYER will make payment of the Purchase Price pursuant to paragraph numbered 3 above, and adjusted by Sections 2, 9, 10, 12, 15, 18 and 20, if applicable, by wire transfer to an account designated by SELLER; and (b) Conveyance. SELLER will convey the PROPERTY to BUYER by executing and delivering Assignments and Bills of Sale, a form of which is attaches of August 1, 1996, at 7:00 a.m. local time, herein called the "Effective Date". BUYER shall assume the risk of any change in the condition of the PROPERTY from the date of this Agreement to the date of Closing. 6. FILES AND RECORDS. Prior to Closing, SELLER will make available for examination by BUYER such title information and abstract coverage as may be available in SELLER'S files. Existing abstracts and title opinions will not be brought down to date by SELLER. SELLER'S files will be made available to BUYER for examination at SELLER'S offices in Dallas, Texas, during normal working hours. BUYER will be permitted, to make copies of pertinent instruments or documents contained in SELLER'S files. No economic analyses, interpretive geological or geophysical data considered proprietary by SELLER shall be copied by BUYER. As soon as practicable after Closing, SELLER shall deliver all of the original files or copies thereof to BUYER, at BUYER'S expense. 7. LIMITED WARRANTY. Conveyance of the PROPERTY shall be WITHOUT WARRANTY OF TITLE EITHER EXPRESS OR IMPLIED, EXCEPT BY, THROUGH AND UNDER ASSIGNOR, BUT NOT OTHERWISE with the right of full substitution and subrogation in and to all rights and actions of warranty which SELLER has or may have against any and all preceding owners or vendors of the PROPERTY. 8. INDEPENDENT EVALUATION. BUYER has made an independent evaluation of the PROPERTY and acknowledges that SELLER has made no statements or representation concerning the present or future value of the anticipated income, costs, or profits, if any, to be derived from the PROPERTY and that SELLER DOES NOT WARRANT TITLE, DESCRIPTION, VALUE, QUALITY, CONDITION, MERCHANTABILITY, OR FITNESS FOR PURPOSE of any of the wells, equipment, or other property located thereon or used in connection therewith. BUYER further acknowledges that in executing this Agreement it has relied solely upon its independent examination of the premises and peement, the term "significant title defect" shall include any defect which results in a loss of title in SELLER such that BUYER'S net revenue interest in the affected PROPERTY is reduced or SELLER'S rights to use the PROPERTY as an owner, lessee, licensee, or permittee, as applicable, is extinguished or severely restricted. On or before ten (10) business days prior to Closing, BUYER shall give written notice to SELLER of interests in the PROPERTY which have significant title defects. BUYER shall be deemed to have waived all title defects and any other defect of which SELLER has not been given notice by ten (10) business days prior to Closing, unless it is a significant title defect which did not exist on or before that date. Interests which have significant title defects shall be excluded from the PROPERTY to be conveyed and the Purchase Price shall be reduced by the price allocated by Buyer for such PROPERTY on Exhibit "A", Property Schedule, attached hereto unless: (i) prior to closing, the basis for the significant title defect has been removed, or (ii) BUYER agrees to accept the interest notwithstanding the defect. Loss of any lease acreage between the Effective Date and Closing due to expiration of the lease term will not constitute a significant title defect. 10. OPERATIONS AND PRODUCTION AFTER EFFECTIVE DATE. Since the Closing will occur subsequent to the Effective Date, SELLER will continue to operate the PROPERTY, or cause the PROPERTY to be operated, as appropriate for the account of SELLER until Closing. SELLER shall be responsible for payments of all expenses incurred against operation of the PROPERTY prior to the Effective Date. All production from oil and gas wells, and all proceeds from the sale thereof, including proceeds from any imbalance and oil in storage above the pipeline connection, attributable to production prior to the Effective Date shall be the property of SELLER. All production and proceeds attributable to production aER. At Closing, a settlement shall be made between BUYER and SELLER of all production proceeds received by SELLER and all operating expenditures and taxes paid by SELLER for the time period between the Effective Date and Closing. The net settlement balance shall be deducted from or added to the Purchase Price. Applicable costs and expenses will include, without limitation, royalties, rentals, any and all taxes related to said production, and expenses of the type customarily billed under an operating agreement. As to those properties not subject to an operating agreement, SELLER will charge BUYER the appropriate Mean Fixed-Rate Overhead per producing, injection or disposal well located on the PROPERTY as provided in the 1995 ERNST & YOUNG LLP'S, "FIXED RATE OVERHEAD SURVEY". BUYER will reimburse SELLER for all workover costs, plugging, abandoning and reabandoning costs and other major costs that SELLER incurs after the Effective Date, on an actual cost basis. SELLER shall not undertake any single project reasonably estimated to require an expenditure in excess of $3,000.00 without the prior written consent of BUYER; however, SELLER may take such steps and incur such expenses as in its opinion are required to deal with an emergency or to safeguard life and property. If timing allows, a Chatham pulling unit will be utilized for any well servicing work prior to Closing. BUYER shall assume SELLER'S position under any gas balancing arrangements. The interest to be conveyed BUYER shall be burdened with any liability attributable to SELLER'S interest for overproduction from the PROPERTY and BUYER shall own and be entitled to any make-up production attributable to SELLER'S interest for underproduction from the PROPERTY. Within one hundred twenty (120) days after the Closing, SELLER and BUYER shall make a post-closing settlement to account for all production proceeds received and all operating expenses and taxes paid by SELLER after the Effective Date. After the post-closing settlement, additional proceeds received by or expenses paid by either BUYER or SELLER on behalf of the other shall be settled by invoicing the other party for expenses paid or remitting to the other party any proceeds received. SELLER shall comply with all applicable laws, ordinances, rules, and regulations, orders, terms of permits and authorizations, of any governmental body which may have jurisdiction over the PROPERTY and shall promptly obtain and maintain all permits and bonds required by public authorities in connection with the PROPERTY. As of the Effective Date, BUYER shall assume and agrees to perform all obligations and implied covenants of SELLER relating to the PROPERTY. BUYER shall assume the risk of any change in the condition of the PROPERTY from the Effective Date to the Closing, except to the extent any change of condition is attributable to the negligence or willful misconduct of SELLER. 11. SUSPENDED FUNDS. As soon as practicable after the Closing, SELLER shall provide to BUYER a listing showing all net proceeds from production attributable to the royalty and overriding royalty interests which are currently held in suspense because of lack of identity or address of owners, change of ownership or similar reasons, and shall transfer to BUYER all those suspended proceeds. BUYER shall be responsible for proper distribution of all the suspended proceeds to the parties lawfully entitled to them. 12. TAXES. BUYER shall be responsible for payment of all taxes relating to its interests in the PROPERTY from and after the Effective Date. SELLER shall be responsible for payment of all taxes relating to its interest in the PROPERTY prior to the Effective Date. Property and ad valorem taxes payable on an annual basis shall be prorated between SELLER and BUYER as of the Effective Date. BUYER shall be liable for any sales tax or other transfer tax. 13. EXISTING CONTRACTS. This sale will be made signments, as well as any and all other agreements or contracts of any nature to which the PROPERTY is subject. 14. NOTICES. All notices and communications required or permitted under this Agreement shall be in writing, deliver to or sent by U. S. Mail or Express Delivery, postage prepaid, or by facsimile transmission, addressed as follows: Maynard Oil Company Attention Cassondra Foster 8080 North Central Expressway, Suite 660 Dallas, TX 75206 Phone: (214) 891-8461 Fax: (214) 891-8827 Chatham Oil Company Attention Mr. Jimmy R. Chatham P. O. Box 878 Healdton, OK 73438 Phone: (405) 229-1267 Fax: (405) 229-0971 15. PARTIES IN INTEREST. This Agreement shall inure to the benefit of and be binding upon SELLER and BUYER, their respective successors and assigns. All references contained in the Agreement shall be deemed to include SELLER and BUYER'S respective successors and assigns. No assignment by any party shall relieve any party of any duties or obligations under this Agreement. 16. PREFERENTIAL RIGHTS TO PURCHASE. Should any of the PROPERTY offered be subject to a preferential right to purchase or consent to assign, then the proposed sale of the PROPERTY affected thereby will be subject to SELLER'S obtaining any such waiver or consent. SELLER shall not be liable to BUYER by reason of inability or failure to obtain any such waiver or consent. In the event any third party exercises its preferential right to purchase, the price shall be the value indicated by SELLER on the Property Schedule and the parties shall reduce the Purchase Price by the value assigned. At Closing, if SELLER has been unable to obtain a required waiver or consent (or the appropriate time period for asserting such rights has not expired), the Purchase Price shall be reduced by an amount equal to the Allocated Value assigned to the interest affected by such waiver or consent. This paragraph shall not be applicable to oil and gas leases requiring consent by, filings with, or other actions by governmental entities in connection with the sale or conveyance of oil and gas leases or interests therein, if the same are customarily obtained subsequent to such sale or conveyance. 17. INDEMNITY. BUYER shall assume full responsibility for the PROPERTY purchased as of the Effective Date and shall defend and indemnify SELLER, its employees, officers and agents, against any and all losses, claims, suits, liabilities, and expenses arising out of, in connection with or resulting from BUYER'S ownership or operation of the PROPERTY purchased, including, but not limited tth all covenants in the instruments in the chain of title of the PROPERTY purchased or the instruments to which the PROPERTY is subject. SELLER shall defend and indemnify BUYER, its employees, officers and agents, against any and all losses, claims, suits, liabilities, and expenses arising out of, in connection with or resulting from SELLER'S ownership or operation of the PROPERTY purchased prior to the effective date. 18. REGULATORY FORMS. At Closing, SELLER shall deliver to BUYER signed forms to be filed with appropriate governmental agencies, including, but not limited to Change of Operator Forms. BUYER agrees to promptly file such forms with the appropriate governmental agencies. 19. WELL TESTS. Upon acceptance of this Agreement as provided herein, BUYER is granted the right to conduct reasonable tests on each of the wells OPERATED by SELLER located on the PROPERTY for the purpose of confirming their individual producing capacities. Such tests will be performed prior to Closing and in the presence of SELLER'S agents, representatives or employees, who shall be authorized to terminate or prohibit any test which, in their judgment, could constitute a threat to the continued productivity of the well to be tested. SELLER'S Engineering Manager, Tom Waller, Dallas, Texas, (214) 891-8472 should be contacted prior to conducting such tests to apprise BUYER the name and telephone number of SELLER'S agent, representative or employee, who shall be authorized to witness same. BUYER shall give SELLER written notice of an unsatisfactory well test not later than ten (10) business days prior to Closing, together with the basis for such assertion and data in support thereof, and shall furnish SELLER with any proposed reduction in the Sales Price attributable to each such matter. SELLER may remove the defective PROPERTY from the sale, attempt to cure the defect at SELLER'S sole cost and expense, agree to a mutually acceptable Purchase Price reduction or terminate this Agreement without liability to BUYER except for return of the Performance Deposit. 20. NORM, RCRA AND CERLA After the execution of this agreement, BUYER and its authorized representatives shall have physical access to the PROPERTY, at BUYER'S sole cost, risk and expense for the purpose of inspecting the PROPERTY, conducting such tests, examination, investigations and assessments as may be reasonable and necessary or appropriate to evaluate environmental conditions of the PROPERTY, including without limitation, for the purpose of detecting the presence or concentration of naturally occurring radium, thorium or other such materials (hereinafter referred to as "NORM"). Buyer shall obtain permission from the operators to conduct such inspections. BUYER shall defend and indemnify SELLER from any and all liability, claims, causes of action, injury to agents or contractors or to BUYER'S property and/or injury to SELLER'S property, employees, agents or contractors which may arise out of BUYER'S inspections, but only to the extent of BUYER'S negligence. BUYER should satisfy itself as to the physical and environmental condition, both surface and subsurface, of the PROPERTY. SELLER disclaims all liability arising in connection with the presence of environmental conditions such as, but not limite and acknowledges that it has all the necessary licenses under applicable state and federal law to accept assignment of the PROPERTY. Subject to the other provisions of this section, at Closing, BUYER shall assume and be responsible for and comply with all duties and obligations of SELLER, express or implied, arising on or after the Effective Date with respect to the PROPERTY, including, without limitation, those arising under or by virtue of any lease, contract, agreement, document, permit, applicable statute or rule, regulation or order of any governmental authority specifically including, without limitation, any governmental request or requirement to plug, re-plug and/or abandon any well of whatsoever type, status or classification or take any clean-up or other action with respect to the PROPERTY or premises, including hazardous waste cleanup costs under the Resource and Recovery Act ("RCRA") and the Comprehensive Environmental Response, Compensation and Liability Act ("CERLA"), or similar laws, rules or regulations and defend, indemnify and hold SELLER harmless from any and all claims arising out of or in connection therewith. If BUYER discovers a material environmental condition which would adversely affect the value of the PROPERTY by fifteen percent (15%) or more per defect net to SELLER'S interest in the affected PROPERTY and SELLER is not in compliance with environmental laws, rules and regulations with respect to such PROPERTY ("Environmental Defect") BUYER shall give SELLER written notice thereof not later than ten (10) business days prior to Closing, together with the basis for such assertion and data in support thereof, and shall furnish SELLER with any proposed reduction in the Sales Price attributable to each such matter. SELLER may remove the defective PROPERTY from the sale, attempt to cure the defect at SELLER'S sole cost and expense within one hundred twenty (120) days after the notice, agree to a mutually acceptable purchase price reduction or terminate this Agreement without liability to BUYER except for return of the Performance Deposit. If SELLER is unable to cure the defect, the allocated value shall be refunded to BUYER and the defective PROPERTY reassigned to SELLER effective as of the Effective Date. 21. ALLOCATED VALUES. BUYER AND SELLER herein agree upon the allocation of the Purchase Price among the properties. Such Allocated Values are shown on Exhibit "A", Property Schedule which is attached hereto. In the event the net amount of the Purchase Price adjustments downward provided for in paragraphs numbered 9, 16, 19, and 20 exceeds thirty percent (30%) of the Purchase Price, then SELLER or BUYER may, upon written notice to the other, cancel this Agreement and the same shall be of no fevent, SELLER shall promptly refund to BUYER the Performance Deposit. 22. COMPLETE AGREEMENT; SAVINGS CLAUSE. When executed by SELLER and BUYER, this Agreement shall constitute the complete agreement between the parties regarding the purchase and sale of the PROPERTY. Where applicable, the terms of this Agreement shall survive the Closing. 23. GOVERNING LAW AND VENUE. This Agreement and all of its terms and provisions shall be governed by the laws of the State of Texas. The parties agree that venue for any dispute between the parties pertaining to this Agreement shall be in Dallas County, Texas. In any such dispute, the prevailing party shall be entitled to reimbursement of all court costs and reasonable attorneys' fees incurred. 24. FURTHER ASSURANCES. SELLER agrees that, at any time and from time to time after the date hereof, it will, upon request of BUYER, execute, acknowledge and deliver or cause to be executed, acknowledged and delivered all further documents or instruments as may be required in connection with the assignment and conveyance of the PROPERTY to BUYER; and SELLER shall perform and take such actions as may be necessary or appropriate in connection with the performance by SELLER of the transactions contemplated by this Agreement. 25. MISCELLANEOUS PROVISIONS. (a) Captions have been inserted for reference purposes only and shall not define or limit the terms of this Agreement; (b) If any provision of this Agreement is held invalid, such invalidity shall not affect the remaining provisions; (c) This Agreement cannot be modified or amended except by a written instrument duly executed by SELLER and BUYER; and (d) Neither SELLER nor BUYER, without the prior written consent of the other party shall assign any right or obligations under this Agreement prior to the Closing, or attempt to delegaour understanding of our agreement, please so indicate by dating, signing and returning one copy hereof on or before August 19, 1996. Failure to do so shall result in cancellation of this agreement at SELLER'S option. EXECUTED this 12th day of August, 1996. MAYNARD OIL COMPANY By: /s/ L. B. Carruth ___________________________ L. B. Carruth Vice President 75-1362284 Tax Identification Number CHATHAM OIL COMPANY By: /s/ Jimmy R. Chatham ___________________________ Jimmy R. Chatham, Owner ###-##-#### Tax Identification Number 14490 Producer's OTC Reporting Number EXHIBIT "A" PROPERTY SCHEDULE Attached to and made a part of PURCHASE AND SALE AGREEMENT dated August 12, 1996, by and between Maynard Oil Company, SELLER, and Chatham Oil Company, BUYER CARTER COUNTY, OKLAHOMA PN 440104, 440105 AND 440106 ALLOCATED VALUE $390,000.00 DEXTER-GREGG-HALE EXPENSE INTEREST 1.0000000 REVENUE INTEREST 0.7656250 Oil and Gas Lease dated March 5, 1920, by and between Joseph H. Jennings and Estella Jennings, as Lessor, and C. C. Lynch, as Lessee, recorded in Volume 43, page 398 of the Records of Carter County, Oklahoma, covering the NE/4 SW/4 SE/4, SE/4 NW/4 SE/4, W/2 SE/4 SE/4, SW/4 NE/4 SE/4 and the E/2 SE/4 SE/4 of Section 28, Township 1 South, Range 3 West, Carter County, Oklahoma, LIMITED to rights from the surface down to 3,800 feet below the surface. (LF-04842-00) The hereinabove referenced lease is subject to Casinghead Gas Contract dated August 25, 1956, by and between Signal Oil and Gas Company, as Buyer, and J. E. Jackson, et al, as Seller; Operating Agreement dated February 18, 1965, by and between Shell Oil Company, as Operator, and Loyd Benefield, et al, as Non- Operators; Purchase and Sale Agreement dated December 19, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective December 1, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company recorded in Volume 1226, page 250 of the Records of Carter County, Oklahoma. PN 440125 (UT-474) ALLOCATED VALUE $30,000.00 A. K. FRENCH NO. 1 BEFORE PAYOUT EXPENSE INTEREST 0.5000000 BEFORE PAYOUT REVENUE INTEREST 0.3750000 AFTER PAYOUT EXPENSE INTEREST 0.3750000 AFTER PAYOUT REVENUE INTEREST 0.3281250 Oil and Gas Lease dated February 26, 1926, by and between C. F. Adams, et al, as Lessor, and Marguerite Noble, as Lessee, recorded in Volume 75, page 417 of the Miscellaneous Records of Carter County, Oklahoma, INSOFAR AND ONLY INSOFAR as said lease covers the SE/4 SE/4 of Section 3, Township 2 South, Range 3 West, Carter County, Oklahoma, AND INSOFAR AND ONLY INSOFAR as said lease covers rights from the top of the Sycamore Formation down to the stratigraphic equivalent of 9,210 feet, as identified in the A. K. French No. 1 well, located in the SE/4 SE/4 of Section 3, Township 2 South, Range 3 West, Carter County, Oklahoma. (LF-05512-00) The lease hereinabove referenced lease is subject to Farmout Agreement D-271-89 dated June 20, 1989, by and between Mobil Exploration & Producing U.S. Inc., as Farmor, and Maynard Oil Company, as Farmee, by Letter Agreement dated September 19, 1989, as amended, by and between Maynard Oil Company and Mobil Exploration & Producing U.S. Inc.; Letter Agreement dated July 19, 1989, by and between Maynard Oil Company and Chesapeake Production Company; and Operating Agreement dated September 8, 1989, as amended, by and between Maynard Oil Company, as Operator, and Atlantic Richfield Company, et al, as Non-Operators, by Letters of Agreement dated September 20, 1989, by and between Maynard Oil Company and Atlantic Richfield Company, et al; Oklahoma Corporation Commission Spacing Order No. 98237 (C.D. 36732) for the Sycamore Common Source of Supply; Oklahoma Corporation Commission Spacing Order No. 344506 (C.D. 152117) for the Woodford Common Source of Supply. PN 440123 (UT-472) ALLOCATED VALUE $24,444.00 H. W. WILLIAMSON AKA WILLIAMS NO. 1 EXPENSE INTEREST 0.5000000 REVENUE INTEREST 0.3750000 Oil and Gas Lease dated February 26, l926, by and between C. F. Adams, et al, as Lessor, and Marguerite Noble, Lessee, recorded in Book 75, page 417 of the Miscellaneous Records of Carter County, Oklahoma, INSOFAR AND ONLY INSOFAR as said lease covers the NE/4 SE/4 of Section 3, Township 2 South, Range 3 West, Carter County, Oklahoma, LIMITED in depth from the top of the Sycamore formation down to the stratigraphic equivalent of 8,688 feet, as identified in the H. W. Williamson No. 1 well, located in the SW/4 NW/4 SE/4 of Section 3, Township 2 South, Range 3 West, Carter County, Oklahoma. (LF-05512-00) The hereinabove referenced lease is subject to Oklahoma Corporation Commission Spacing Order No. 98237 (C.D. 36732) for the Sycamore Common Source of Supply; Oklahoma Corporation Commission Spacing Order No. 344506 (C.D. 152117) for the Woodford Common Source of Supply; Farmout Agreement D-271-89 dated June 20, 1989, by and between Mobil Exploration & Producing U.S. Inc., as Farmor, and Maynard Oil Company, as Farmee, and Operating Agreement dated August 2, 1989 (effective July 19, 1989), by and between Maynard Oil Company, as Operator, and Atlantic Richfield Company, as Non-Operator; and Letter Agreement dated August 9, 1989, by and between Maynard Oil Company and Mobil Exploration & Producing U.S. Inc. EXHIBIT "B" ASSIGNMENT AND BILL OF SALE FROM MAYNARD OIL COMPANY TO CHATHAM OIL COMPANY Attached to and made a part of PURCHASE AND SALE AGREEMENT dated August 12, 1996, by and between Maynard Oil Company, SELLER, and Chatham Oil Company, BUYER THE STATE OF ) ) KNOW ALL MEN BY THESE PRESENTS: COUNTY OF ) THAT, the undersigned, MAYNARD OIL COMPANY, a Delaware corporation, with offices at 8080 North Central Expressway, Suite 660, Dallas, Texas 75206, hereinafter called "Assignor", for and in consideration of Ten Dollars ($10.00) and other valuable consideration to it in hand paid by JIMMY R. CHATHAM, an individual doing business as CHATHAM OIL COMPANY, whose address is in care of the First National Bank & Trust Company, P. O. Box 69, Ardmore, Oklahoma 63402, hereinafter called "Assignee", does hereby TRANSFER, ASSIGN and CONVEY unto Assignee, WITHOUT WARRANTY OF TITLE EITHER EXPRESS OR IMPLIED, EXCEPT BY, THROUGH AND UNDER ASSIGNOR, BUT NOT OTHERWISE, with the right of full substitution and subrogation in and to all rights and actions of warranty which Assignor has or may have against any and all preceding owners of the said leases, subject to the terms and conditions contained herein, the following: (a) All of Assignor's rights, titles and interests in and to the leasehold estates described in Exhibit "A", such leases being hereinafter called "said leases", represented to be no less than the working and net revenue interests set forth therein, subject to all burdens, encumbrances, contracts and agreements, which are of record and/or listed in Exhibit "A" affecting said leases to the extent that same are in force and effect; (b) All of SELLER'S royalties, overriding royalties, production payments, rights to take royalties in kind, or other interests in production of oil, gas or other minerals; (c) All of Assignor's rights, titles and interests in and to all permits, franchises, licenses, servitudes, easements, surface leases and rights-of-way of every character relating to said lease; (d) All of Assignor's rights, titles and interests in and to any contracts or agreements including, but not limited to, rights and interests in or derived from unit agreements, gas processing agreements, joint operating agreements, gas contracts, gas gathering agreements, gas balancing agreements, boundary or well line agreements, assignments of operating rights, working interests and subleases affecting said leases. For the same consideration, Assignor does hereby BARGAIN, SELL and DELIVER unto Assignee all of its rights, titles and interests in and to the wells located on said leases described in said Exhibit "A"; and Assignor does hereby further BARGAIN, SELL and DELIVER unto Assignee all of its rights, titles and interests in and to all personal property and well equipment located in, on and used in connection with the said leases, such well, personal property and the well equipment being hereinafter collectively called "said wells". ASSIGNOR EXPRESSLY DISCLAIMS AND NEGATES (a) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (b) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, and (c) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS. ASSIGNEE EXPRESSLY WAIVES THE PROVISIONS OF CHAPTER XVII, SUBCHAPTER E, SECTIONS 17.41 THROUGH 17.63, INCLUSIVE (OTHER THAN SECTION 17.555, WHICH IS NOT WAIVED), VERNON'S TEXAS CODE ANNOTATED, BUSINESS AND COMMERCIAL CODE. This Assignment and Bill of Sale is executed and delivered as part of the consummation of the transaction contemplated by that certain Purchase and Sale Agreement between Assignor, as SELLER, and Assignee, as BUYER, dated August 12, 1996, hereinafter referred to as "Sale Agreement". The warranties, representations, indemnities and covenants contained in the Sale Agreement shall survive the delivery of this Assignment in accordance with the provisions of the Sale Agreement and the delivery of this Asswise impair any of the warranties, representations, indemnities or covenants made in the Sale Agreement and the terms and conditions set forth therein; provided, however, any third parties transacting with Assignee with respect to any of the Interests may rely on this Assignment as vesting Assignee with all of Assignor's rights, titles and interests in the said leases and wells. This Assignment and Bill of Sale shall extend to, be binding upon and inure to the benefit of Assignor and Assignee, their respective successors and assigns and shall be deemed covenants running with the herein described lands and leasehold estates. Assignee expressly assumes, as of the Effective Date, all of Assignor's obligations relating to the said leases, including, but not limited to, the obligation of plugging and abandoning any well on the said leases, at Assignee's sole cost, risk and expense. This assignment shall be effective, for all purposes as of 7:00 o'clock a.m. August 1, 1996. EXECUTED by Assignor and Assignee in Duplicate Originals on this ____ day of _______________, 1996, but to be effective as stated above. MAYNARD OIL COMPANY By: ___________________________ Glenn R. Moore President CHATHAM OIL COMPANY By: ___________________________ Jimmy R. Chatham, Owner THE STATE OF TEXAS ) ) COUNTY OF DALLAS ) This instrument was acknowledged before me on __________, 1996, by Jimmy R. Chatham, Owner. EX-2 6 EXHIBIT 2(e) PURCHASE AND SALE AGREEMENT This Agreement, when accepted and agreed to in the manner provided below shall constitute the terms and provisions of an agreement under which MAYNARD OIL COMPANY, a Delaware corporation, with offices at 8080 North Central Expressway, Suite 660, Dallas, Texas 75206, hereinafter referred to as "SELLER", agrees to sell and BMC, LTD., a California Limited Partnership, with offices at 217 State Street, Suite 300, Santa Barbara, California 93101, hereinafter referred to as "BUYER", agrees to purchase all of SELLER'S rights, title and interest in and to that certain oil and gas property owned by SELLER and described in Exhibit "A", Property Schedule attached hereto and made a part hereof, hereinafter sometimes referred to as the "PROPERTY". 1. PROPERTY BEING SOLD. At Closing, as hereinafter defined, SELLER shall convey to BUYER the PROPERTY identified on Exhibit "A", including: (a) All of SELLER'S rights, title and interest in and to the leasehold estate described in Exhibit "A", such lease being hereinafter called "said lease", represented to be no less than the working and net revenue interests set forth on such exhibit; (b) All of SELLER'S fee interests, royalties, overriding royalties, production payments, rights to take royalties in kind, or other interests in production of oil, gas or other minerals in the lands described in Exhibit "A"; (c) All of SELLER'S rights, title and interest in and to all permits, franchises, licenses, servitudes, easements, surface leases and rights-of- way of every character relating to said lease; (d) All of SELLER'S rights, title and interest in and to any contracts or agreements including, but not limited to, rights and interests in or derived from unit agreements, gas processing agreements, joint operating agreements, gas contracts, gas gathering agreements, gas balancing agreements, boundary or well line agreements, assignments of operating rights, working interest and subleases affecting said lease. (e) All of SELLER'S rights, title and interest in and to producing, non-producing and shut-in oil and gas wells, salt water disposal wells, injection wells and water wells on said lease or lands pooled, unitized or communitized therewith; and (f) All of SELLER'S rights, title and interest in and to all surface and down-hole equipment, fixtures, related inventory and other personal property used in connection with the PROPERTY described in paragraphs (a) through (e) above, excluding, however, all automobiles, trucks and communications equipment. 2. PERFORMANCE DEPOSIT. On or before 4:00 o'clock p.m., local time, August 23, 1996, BUYER shall tender to SELLER, by wire transfer, a performance deposit in the amount of Twenty Thousand and 00/100 Dollars ($20,000.00). The performance deposit is received solely to assure the performance of BUYER pursuant to the terms and conditions hereof. The performance deposit will be returned to BUYER at Closing upon consummation of the transaction, or at BUYER'S election, may be credited to the Purchase Price. No interest shall be paid or credited to the performance deposit. If BUYER fails, refuses, or is unable to close the sale in accordance with the terms herein, by October 1, 1996, SELLER, except as otherwise herein specifically provided, shall retain Five Thousand and 00/100 Dollars ($5,000.00) of the performance deposit as agreed liquidated damages and not as a penalty. If SELLER, through no fault of BUYER, refuses to close the sale in accordance with the terms herein, the balance of the performance deposit shall be returned to BUYER. 3. PURCHASE PRICE. The total sum which BUYER agrees to deliver to SELLER for the PROPERTY, is Three Hundred Forty Thousand and 00/100 Dollars ($340,000.00). 4. CLOSING. The closing shall take place on October 1, 1996, at 10:00 a.m. local time at SELLER'S offices in Dallas, Texas, or the next business day after the closing of BMC, Ltd. and Shell Western E&P Inc., whichever is the later. At BUYER'S election, such closing may be handled by overnight mail upon confirmation of funds received by SELLER. Unless the parties mutually agree upon a later date, the closing shall not be delayed beyond October 1, 1996. The following shall occur at closing: (a) Purchase Price. BUYER will make payment of the Purchase Price pursuant to paragraph numbered 3 above, and adjusted by Sections 2, 9, 10, 12, and 16, if applicable, by wire transfer to an account designated by SELLER; and (b) Conveyance. SELLER will convey the PROPERTY to BUYER by executing and de CONVEYANCE EFFECTIVE DATE. The conveyance from SELLER to BUYER shall be effective as of August 1, 1996, at 7:00 a.m. local time, herein called the "Effective Date". BUYER shall assume the risk of any change in the condition of the PROPERTY from the date of this Agreement to the date of Closing. 6. FILES AND RECORDS. Prior to Closing, SELLER will make available for examination by BUYER such title information and abstract coverage as may be available in SELLER'S files. Existing abstracts and title opinions will not be brought down to date by SELLER. SELLER'S files will be made available to BUYER for examination at SELLER'S offices in Dallas, Texas, during normal working hours. BUYER will be permitted, to make copies of pertinent instruments or documents contained in SELLER'S files. No economic analyses, interpretive geological or geophysical data considered proprietary by SELLER shall be copied by BUYER. As soon as practicable after Closing, SELLER shall deliver all of the original files or copies thereof to BUYER, at BUYER'S expense. 7. LIMITED WARRANTY. Conveyance of the PROPERTY shall be WITHOUT WARRANTY OF TITLE EITHER EXPRESS OR IMPLIED, EXCEPT BY, THROUGH AND UNDER SELLER, BUT NOT OTHERWISE with the right of full substitution and subrogation in and to all rights and actions of warranty which SELLER has or may have against any and all preceding owners or vendors of the PROPERTY. 8. INDEPENDENT EVALUATION. BUYER has made an independent evaluation of the PROPERTY and acknowledges that SELLER has made no statements or representation concerning the present or future value of the anticipated income, costs, or profits, if any, to be derived from the PROPERTY and that SELLER DOES NOT WARRANT TITLE, DESCRIPTION, VALUE, QUALITY, CONDITION, MERCHANTABILITY, OR FITNESS FOR PURPOSE of any of the wells, equipment, or other property located thereon or used in connection therewith. BUYER further acknowledges that in exehe premises and public records. 9. SIGNIFICANT TITLE DEFECT. As used in this Agreement, the term "significant title defect" shall include any defect which results in a loss of title in SELLER such that BUYER'S net revenue interest in the affected PROPERTY is reduced or SELLER'S right to use the PROPERTY as an owner, lessee, licensee, or permittee, as applicable, is extinguished or severely restricted. On or before September 15, 1996, BUYER shall give written notice to SELLER of interests in the PROPERTY which have significant title defects. BUYER shall be deemed to have waived all title defects and any other defect of which SELLER has not been given notice by September 15, 1996, unless it is a significant title defect which did not exist on or before that date. Interests which have significant title defects shall be excluded from the PROPERTY to be conveyed and the Purchase Price shall be reduced by the price allocated by Buyer for such PROPERTY on Exhibit "A", Property Schedule, attached hereto unless: (i) prior to closing, the basis for the significant title defect has been removed, or (ii) BUYER agrees to accept the interest notwithstanding the defect. Loss of any lease acreage between the Effective Date and Closing due to expiration of the lease term will not constitute a significant title defect. 10. OPERATIONS AND PRODUCTION AFTER EFFECTIVE DATE. Since the Closing will occur subsequent to the Effective Date, SELLER will continue to operate the PROPERTY, or cause the PROPERTY to be operated, as appropriate for the account of SELLER until Closing. SELLER shall be responsible for payments of all expenses incurred against operation of the PROPERTY prior to the Effective Date. All production from oil and gas wells, and all proceeds from the sale thereof, including proceeds from any imbalance and oil in storage above the pipeline connection, attributable to production prior to the Effective Date shall be the property of SEEffective Date shall be the property of BUYER. At Closing, a settlement shall be made between BUYER and SELLER of all production proceeds received by SELLER and all operating expenditures and taxes paid by SELLER for the time period between the Effective Date and Closing. The net settlement balance shall be deducted from or added to the Purchase Price. Applicable costs and expenses will include, without limitation, royalties, rentals, any and all taxes related to said production, and expenses of the type customarily billed under an operating agreement. BUYER will reimburse SELLER for all workover costs, plugging, abandoning and reabandoning costs and other major costs that SELLER incurs after the Effective Date, on an actual cost basis. SELLER shall not undertake any single project reasonably estimated to require an expenditure in excess of $15,000.00 without the prior written consent of BUYER; however, SELLER may take such steps and incur such expenses as in its opinion are required to deal with an emergency or to safeguard life and property. BUYER shall assume SELLER'S position under any gas balancing arrangements. The interest to be conveyed BUYER shall be burdened with any liability attributable to SELLER'S interest for overproduction from the PROPERTY and BUYER shall own and be entitled to any make-up production attributable to SELLER'S interest for underproduction from the PROPERTY. Within one hundred twenty (120) days after the Closing, SELLER and BUYER shall make a post-closing settlement to account for all production proceeds received and all operating expenses and taxes paid by SELLER after the Effective Date. After the post-closing settlement, additional proceeds received by or expenses paid by either BUYER or SELLER on behalf of the other shall be settled by invoicing the other party for expenses paid or remitting to the other party any proceeds received. SELLER shall comply with all applicable laws, ordinances, rules, and regulations, orders, terms of permits and authorizations, of any governmental body which may have jurisdiction over the PROPERTY and shall promptly obtain and maintain all permits and bonds required by public authorities in connection with the PROPERTY. As of the Effective Date, BUYER shall assume and agrees to perform all obligations and implied covenants of SELLER relating to the PROPERTY. BUYER shall assume the risk of any change in the condition of the PROPERTY from the Effective Date to the Closing, except to the extent any change of condition is attributable to the negligence or willful misconduct of SELLER. 11. SUSPENDED FUNDS. As soon as practicable after the Closing, SELLER shall provide to BUYER a listing showing all net proceeds from production attributable to the royalty and overriding royalty interests which are currently held in suspense because of lack of identity or address of owners, change of ownership or similar reasons, and shall transfer to BUYER all those suspended proceeds. BUYER shall be responsible for proper distribution of all the suspended proceeds to the parties lawfully entitled to them. 12. TAXES. BUYER shall be responsible for payment of all taxes relating to its interests in the PROPERTY from and after the Effective Date. SELLER shall be responsible for payment of all taxes relating to its interest in the PROPERTY prior to the Effective Date. Property and ad valorem taxes payable on an annual basis shall be prorated between SELLER and BUYER as of the Effective Date. BUYER shall be liable for any sales tax or other transfer tax. 13. EXISTING CONTRACTS. This sale will be made signments, as well as any and all other agreements or contracts of any nature to which the PROPERTY is subject. 14. NOTICES. All notices and communications required or permitted under this Agreement shall be in writing, delivered to or sent by U. S. Mail or Express Delivery, postage prepaid, or by facsimile transmission, addressed as follows: Maynard Oil Company Attention Cassondra Foster 8080 North Central Expressway, Suite 660 Dallas, TX 75206 Phone: (214) 891-8461 Fax: (214) 891-8827 BMC, Ltd. Attention Mr. Michael G. Edwards 217 State Street, Suite 300 Santa Barbara, CA 93101 Phone: (805) 966-6596 Fax: (805) 966-1425 15. PARTIES IN INTEREST. This Agreement shall inure to the benefit of and be binding upon SELLER and BUYER, their respective successors and assigns. All references contained in the Agreement shall be deemed to include SELLER and BUYER'S respective successors and assigns. No assignment by any party shall relieve any party of any duties or obligations under this Agreement. 16. PREFERENTIAL RIGHTS TO PURCHASE. Should any of the PROPERTY offered be subject to a preferential right to purchase or consent to assign, then the proposed sale of the PROPERTY affected thereby will be subject to SELLER'S obtaining any such waiver or consent. SELLER shall not be liable to BUYER by reason of inability or failure to obtain any such waiver or consent. In the event any third party exercises its preferential right to purchase, the price shall be the value indicated by SELLER on the Property Schedule and the parties shall reduce the Purchase Price by the value assigned. At Closing, if SELLER has been unable to obtain a required waiver or consent (or the appropriate time period for asserting such rights has not expired), the Purchase Price shall be reduced by an amount equal to the value assigned to the interest affected by such waiver or consent. This paragraph shall not be applicable to an oil and gas lease requiring consent by, filings with, or other actions by governmental entities in connection with the sale or conveyance of the oil and gas lease or interests therein, if the same are customarily obtained subsequent to such sale or conveyance. 17. INDEMNITY. BUYER shall assume full responsibility for the PROPERTY purchased as of the Effective Date and shall defend and indemnify SELLER, its employees, officers and agents, against any and all losses, claims, suits, liabilities, and expenses arising out of, in connection with or resulting from BUYER'S ownership or operation of the PROPERTY purchased, including, but not limited to thll covenants in the instruments in the chain of title of the PROPERTY purchased or the instruments to which the PROPERTY is subject. SELLER shall defend and indemnify BUYER, its employees, officers and agents, against any and all losses, claims, suits, liabilities, and expenses arising out of, in connection with or resulting from SELLER'S ownership or operation of the PROPERTY purchased prior to the effective date. 18. REGULATORY FORMS. At Closing, SELLER shall deliver to BUYER signed forms to be filed with appropriate governmental agencies, including, but not limited to Change of Operator Forms. BUYER agrees to promptly file such forms with the appropriate governmental agencies. 19. NORM, RCRA AND CERLA After the execution of this agreement, BUYER and its authorized representatives shall have physical access to the PROPERTY, at BUYER'S sole cost, risk and expense for the purpose of inspecting the PROPERTY, conducting such tests, examination, investigations and assessments as may be reasonable and necessary or appropriate to evaluate the environmental conditions of the PROPERTY, including without limitation, for the purpose of detecting the presence or concentration of naturally occurring radium, thorium or other such materials (hereinafter referred to as "NORM"). Buyer shall obtain permission from the operator to conduct such inspections. BUYER shall defend and indemnify SELLER from any and all liability, claims, causes of action, injury to agents or contractors or to BUYER'S property and/or injury to SELLER'S property, employees, agents or contractors which may arise out of BUYER'S inspections, but only to the extent of BUYER'S negligence. BUYER should satisfy itself as to the physical and environmental condition, both surface and subsurface, of the PROPERTY. SELLER disclaims all liability arising in connection with the presence of environmental conditions such as, but not limited to, NORM on the PROPERTY. BUYER certifies and acle state and federal law to accept assignment of the PROPERTY. Subject to the other provisions of this section, at Closing, BUYER shall assume and be responsible for and comply with all duties and obligations of SELLER, express or implied, arising on or after the Effective Date with respect to the PROPERTY, including, without limitation, those arising under or by virtue of any lease, contract, agreement, document, permit, applicable statute or rule, regulation or order of any governmental authority specifically including, without limitation, any governmental request or requirement to plug, re-plug and/or abandon any well of whatsoever type, status or classification or take any clean-up or other action with respect to the PROPERTY or premises, including hazardous waste cleanup costs under the Resource and Recovery Act ("RCRA") and the Comprehensive Environmental Response, Compensation and Liability Act ("CERLA"), or similar laws, rules or regulations and defend, indemnify and hold SELLER harmless from any and all claims arising out of or in connection therewith. 20. ALLOCATED VALUES. BUYER AND SELLER herein agree upon the allocation of the Purchase Price among the properties. Such Allocated Values are shown on Exhibit "A", Property Schedule which is attached hereto. In the event the net amount of the Purchase Price adjustments downward provided for in paragraphs numbered 9 and 16 exceeds twenty-five percent (25%) of the purchase price, then SELLER or BUYER may, upon written notice to the other, cancel this Agreement and the same shall be of no further force and effect and in such event, SELLER shall promptly refund to BUYER the Performance Deposit. 21. COMPLETE AGREEMENT; SAVINGS CLAUSE. When executed by SELLER and BUYER, this Agreement shall constitute the complete agreement between the parties regarding the purchase and sale of the PROPERTY. Where applicable, the terms of this Agreement shall survive the Closing. 22. GOVERNING LAW AND VENUE. This Agreement and all of its terms and provisions shall be governed by the laws of the State of Texas. The parties agree that venue for any dispute between the parties pertaining to this Agreement shall be in Dallas County, Texas. In any such dispute, the prevailing party shall be entitled to reimbursement of all court costs and reasonable attorneys' fees incurred. 23. FURTHER ASSURANCES. SELLER agrees that, at any time and from time to time after the date hereof, it will, upon request of BUYER, execute, acknowledge and deliver or cause to be executed, acknowledged and delivered all further documents or instruments as may be required in connection with the assignment and conveyance of the PROPERTY to BUYER; and SELLER shall perform and take such actions as may be necessary or appropriate in connection with the performance by SELLER of the transactions contemplated by this Agreement. 24. MISCELLANEOUS PROVISIONS. (a) Captions have been inserted for reference purposes only and shall not define or limit the terms of this Agreement; (b) If any provision of this Agreement is held invalid, such invalidity shall not affect the remaining provisions; (c) This Agreement cannot be modified or amended except by a written instrument duly executed by SELLER and BUYER; and (ddelegate any duty to be performed under this Agreement. Consent to assign shall not be unreasonably withheld by either party. TIME IS OF THE ESSENCE HEREOF. If the foregoing sets forth your understanding of our agreement, please so indicate by dating, signing and returning one copy hereof on or before August 19, 1996. Failure to do so shall result in cancellation of this agreement at SELLER'S option. EXECUTED this 14th day of August, 1996. MAYNARD OIL COMPANY By: /s/ L. B. Carruth ___________________________ L. B. Carruth Vice President 75-1362284 Tax Identification Number BMC, LTD. By: Venoco, Inc., a California corporation, the general partner By: /s/ Timothy Marquez ___________________________ Timothy Marquez President ________________________________ Tax Identification Number EXHIBIT "A" PROPERTY SCHEDULE Attached to and made a part of PURCHASE AND SALE AGREEMENT dated August 14, 1996, by and between Maynard Oil Company, SELLER, and BMC, Ltd., BUYER GRAYSON COUNTY, TEXAS PN 444103 ALLOCATED VALUE $43,046.00 BIG MINERAL CREEK BARNES UNIT (UT-484) EXPENSE INTEREST 0.0701800 REVENUE INTEREST 0.0614075 PN 444101 ALLOCATED VALUE $107,315.00 BIG MINERAL CREEK S SAND UNIT (UT-482) EXPENSE INTEREST 0.0338493 REVENUE INTEREST 0.0296182 PN 444102 ALLOCATED VALUE $175,475.00 BIG MINERAL CREEK STRAWN I UNIT (UT-483) EXPENSE INTEREST 0.0664260 REVENUE INTEREST 0.0581236 PN 444105 ALLOCATED VALUE $14,164.00 BIG MINERAL CREEK UV UNIT (UT-499) EXPENSE INTEREST 0.0408344 REVENUE INTEREST 0.0357300 Oil and Gas Lease dated January 12, 1951, effective March 26, 1951, by and between Carlton Barnes, et al, as Lessor, and Sinclair Oil & Gas Company, as Lessee, recorded in Volume 640, page 410 of the Deed Records of Grayson County, Texas, covering 80.00 acres, more or less, being out of the Wm. Allen Survey, Abstract 15, Grayson County, Texas (LF-05302-00) The hereinabove referenced lease is subject to Casinghead Gas Contract dated September 30, 1974, between Union Texas Petroleum, Buyer, and Atlantic Richfield Company, Seller; Unit Agreement and Unit Operating Agreement for the Big Mineral Creek (S Sand) Unit dated May 1, 1965, between Shell Oil Company, Operator and Sinclair Oil and Gas Company, et al, Non-Operators recorded in Volume 1042, page 83, Deed Records of Grayson County, Texas; Unit Agreement and Unit Operating Agreement for the Big Mineral Creek (Strawn I) Unit dated August 20, 1979, between Shell Oil Company, Operator and Sinclair Oil and Gas Company, et al, Non-Operators; Unit Agreement and Unit Operating Agreement for the Big Mineral Creek (Strawn I) Unit dated August 20, 1979, between Shell Oil Company, Operator and Atlantic Richfield Company, et al, Non-Operators; Unit Agreement and Unit Operating Agreement for the Big Mineral Creek (UV Sand) Unit dated January 1, 1993, between Shell Oil Company, Operator and Maynard Oil Company, et al, Non-Operators; Big Mineral Creek Water Supply Facility letter agreement dated September 19, 1973; and Purchase and Sale Agreement dated February 21, 1990, between Atlantic Richfield Company, as Seller and Maynard Oil Company, as Purchaser. EXHIBIT "B" ASSIGNMENT AND BILL OF SALE FROM MAYNARD OIL COMPANY TO BMC, LTD. Attached to and made a part of PURCHASE AND SALE AGREEMENT dated August 14, 1996, by and between Maynard Oil Company, SELLER, and BMC, Ltd., BUYER THE STATE OF TEXAS ) ) KNOW ALL MEN BY THESE PRESENTS: COUNTY OF GRAYSON ) THAT, the undersigned, MAYNARD OIL COMPANY, a Delaware corporation, with offices at 8080 North Central Expressway, Suite 660, Dallas, Texas 75206, hereinafter called "Assignor", for and in consideration of Ten Dollars ($10.00) and other valuable consideration to it in hand paid by BMC, LTD., a California limited partnership, with offices at 217 State Street, Suite 300, Santa Barbara, California 93101, hereinafter called "Assignee", does hereby TRANSFER, ASSIGN and CONVEY unto Assignee, WITHOUT WARRANTY OF TITLE EITHER EXPRESS OR IMPLIED, EXCEPT BY, THROUGH AND UNDER ASSIGNOR, BUT NOT OTHERWISE, with the right of full substitution and subrogation in and to all rights and actions of warranty which Assignor has or may have against any and all preceding owners of the said lease, subject to the terms and conditions contained herein, the following: (a) All of Assignor's rights, title and interest in and to the leasehold estate described in Exhibit "A", such lease being hereinafter called "said lease", represented to be no less than the working and net revenue interests set forth therein, subject to all burdens, encumbrances, contracts and agreements, which are of record and/or listed in Exhibit "A" affecting said lease to the extent that same are in force and effect; (b) All of SELLER'S royalties, overriding royalties, production payments, rights to take royalties in kind, or other interests in production of oil, gas or other minerals; (c) All of Assignor's rights, title and interest in and to all permits, franchises, licenses, servitudes, easements, surface leases and rights-of-way of every character relating to said lease; (d) All of Assignor's rights, title and interest in and to any contracts or agreements including, but not limited to, rights and interest in or derived from unit agreements, gas processing agreements, joint operating agreements, gas contracts, gas gathering agreements, gas balancing agreements, boundary or well line agreements, assignments of operating rights, working interest and subleases affecting said lease. For the same consideration, Assignor does hereby BARGAIN, SELL and DELIVER unto Assignee all of its rights, title and interest in and to the wells located on said lease described in said Exhibit "A"; and Assignor does hereby further BARGAIN, SELL and DELIVER unto Assignee all of its rights, title and interest in and to all personal property and well equipment located in, on and used in connection with the said lease, such wells, personal property and the well equipment being hereinafter collectively called "said wells". ASSIGNOR EXPRESSLY DISCLAIMS AND NEGATES (a) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (b) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, and (c) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS. ASSIGNEE EXPRESSLY WAIVES THE PROVISIONS OF CHAPTER XVII, SUBCHAPTER E, SECTIONS 17.41 THROUGH 17.63, INCLUSIVE (OTHER THAN SECTION 17.555, WHICH IS NOT WAIVED), VERNON'S TEXAS CODE ANNOTATED, BUSINESS AND COMMERCIAL CODE. This Assignment and Bill of Sale is executed and delivered as part of the consummation of the transaction contemplated by that certain Purchase and Sale Agreement between Assignor, as SELLER, and Assignee, as BUYER, dated August 14, 1996, hereinafter referred to as "Sale Agreement". The warranties, representations, indemnities and covenants contained in the Sale Agreement shall survive the delivery of this Assignment in accordance with the provisions of the Sale Agreement and the delivery of this Assignment air any of the warranties, representations, indemnities or covenants made in the Sale Agreement and the terms and conditions set forth therein; provided, however, any third parties transacting with Assignee with respect to any of the Interests may rely on this Assignment as vesting Assignee with all of Assignor's rights, title and interest in the said lease and wells. This Assignment and Bill of Sale shall extend to, be binding upon and inure to the benefit of Assignor and Assignee, their respective successors and assigns and shall be deemed covenants running with the herein described lands and leasehold estates. Assignee expressly assumes, as of the Effective Date, all of Assignor's obligations relating to the said lease, including, but not limited to, the obligation of plugging and abandoning any well on the said lease, at Assignee's sole cost, risk and expense. This assignment shall be effective, for all purposes as of 7:00 o'clock a.m. August 1, 1996. EXECUTED by Assignor and Assignee in Duplicate Originals on this ____ day of _______________, 1996, but to be effective as stated above. MAYNARD OIL COMPANY By: ___________________________ Glenn R. Moore President BMC, LTD. By: Venoco, Inc., a California corporation, the general partner By: _________________________ Timothy Marquez President MY COMMISSION EXPIRES: ___________________________ Notary Public in and for the __________ EX-2 7 EXHIBIT 2(f) PURCHASE AND SALE AGREEMENT THIS PURCHASE AND SALE AGREEMENT (this "AGREEMENT") is made and entered into this 12th day of September, 1996, by and between MAYNARD OIL COMPANY, a Delaware corporation, having its principal office at 8080 North Central Expressway, Suite 660, Dallas, Texas 75206 ("SELLER") and ENRON OIL & GAS COMPANY, a Delaware corporation, having its principal office at 1400 Smith Street, Houston, Texas 77002 ("BUYER"). In consideration of the mutual promises contained herein, the benefits to be derived by each party hereunder and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller agree as follows: ARTICLE I PURCHASE AND SALE 1.01 Purchase and Sale. Seller agrees to sell and convey and Buyer agrees to purchase and pay for the interests (as defined in Section 1.02) owned by Seller, subject to the terms and conditions of this Agreement. 1.02 Interests. All of the following shall herein be called the "INTERESTS": (a) All of Seller's right, title and interest in and to the leasehold estate and mineral rights created by the leases described in Exhibit A (the "LEASES") together with any and all interest of Seller in and to such property and in and to any agreements, leases, rights-of-way, easements, licenses and permits incident thereto; (b) All of Seller's right, title and interest in and to the wells, and production therefrom, located on the Leases or lands pooled therewith, including but not limited to the wells described in Exhibit A together with any and all buildings or other improvements constructed thereon (collectively the "WELLS", together with any and all interest of Seller in and to such property and in and to any agreements, including, without limitation, gas purchase agreements, farmin and farmout agreements, operating agreements and pooling agreements, leases, rights-of-way, easements, licenses and permits incident thereto); (c) All of Seller's right, title and interest in and to the real and personal property, fixtures, improvements and buildings now or as of the Effective Time (as defined in Section 1.03) located on the lands burdened by the Leases or lands pooled therewith (the LANDS"), and all contract rights, rights of substitution and subrogation in and to any rights and actions of warranty which Seller has or may have with respect to the Interests; (d) All of the files, records and data related to the items described in Subsections (a), (b) and (c) above, and all the seismic and geophysical data of Seller appurtenant to or crossing the Leases, Wells and Lands; and (e) Any and all other assets of Seller appurtenant or related to or used in connection with the Leases and Wells. 1.03 Effective Time. The purchase and sale of the Interests shall be effective as of August 1, 1996, at 7:00 A.M., local time (herein called the "EFFECTIVE TIME ) in the county in which the Lands are located. ARTICLE II PURCHASE PRICE 2.01 Purchase Price. The purchase price for the Interests shall be Nine Hundred Eighty Nine Thousand Four Hundred Thirty Four DOLLARS ($989,434.00) (herein called the "PRELIMINARY PURCHASE PRICE"), subject to adjustment as set forth in Section 2.02 and Section 2.03 below. 2.02 Performance Deposit. On or before 4:00 o'clock p.m., local time, September 13, 1996, Buyer shall tender to Bank One, Texas, N.A. ("ESCROW AGENT", as provided for in Exhibit D hereto), by wire transfer, a performance deposit in the amount of Ninety Eight Thousand Nine Hundred Forty Three DOLLARS ($98,943.00). The performance deposit is received solely to assure the performance of Buyer pursuant to the terms and conditions hereof. The performance deposit will be returned to Buyer at Closing, upon consummation of the transaction, or at Buyer's election, may be credited to the Preliminary Purchase Price. No interest shall be paid or credited to the performance deposit. If Buyer fails, refuses, or is unable to close the sale in accordance with the terms herein, Seller, except as otherwise herein specifically provided, may, at its option, retain the performance deposit as agreed liquidated damages and not as a penalty. If Seller, through no fault of Buyer, refuses to close the sale in accordance with the terms herein, the performance deposit shall be returned to Buyer. 2.03 Adjustments to Purchase Price. The Preliminary Purchase Price shall be adjusted as follows and the resulting amount shall be herein called the "FINAL PURCHASE PRICE". (a) The Preliminary Purchase Price shall be increased by the following: (1) The value of all merchantable, allowable oil attributable to the Leases, in storage above the pipeline connection at the Effective Time, and not previously sold by Seller, that is credited to the Interests, such value to be the net price realized by Seller; (2) The amount of all reasonable expenditures, including, without limitation, royalties, rentals and other charges, ad valorem, property, production, excise, severance, windfall profit and other taxes based upon or measured by proceeds therefrom but not including income or gross receipts taxes, expenses billed under applicable operating agreements and, as compensation to Seller for its general and administrative expenses as operator of interests operated by it, in lieu of any other overhead charges in connection with such particular Interests: (i) that amount attributable to the Interests under any existing joint operating agreement, or (ii) in the absence of a joint operating agreement with respect thereto, the applicable rate recommended in the 1995 Ernst & Young, L.L.P. s Fixed Rate Overhead Survey in connection with the operation of the Interests from the Effective Time to the Closing Date (as defined in Section 9.01), as well as any expenditures approved by Buyer; (3) An amount equal to all prepaid expenses attributable to the interests that are paid by or on behalf of Seller prior to the Closing Date and that are, in accordance with generally accepted accounting principles, attributable to the period after the Effective Time including, without limitation, prepaid insurance, prepaid ad valorem, property, production, severance and similar taxes (but not including income taxes) based upon or measured by the ownership of property or the production of hydrocarbons or the receipt of proceeds therefrom; (4) An amount equal to seventy-five cents per mcf for a net underproduced gas imbalance; and (5) Any other amount agreed upon by Seller and Buyer. (b) The Preliminary Purchase Price shall be decreased by the following: (1) An amount equal to all proceeds of production received by Seller prior to the Closing Date that are attributable to the Interests and that are, in accordance with generally accepted accounting principles, attributable to the period of time from the Effective Time to the Closing Date; (2) An amount equal to all unpaid ad valorem, property, production, severance and similar taxes and assessments (but not including income or gross receipts taxes) based upon or measured by the ownership of property or the production of hydrocarbons or the receipt of proceeds therefrom accruing with respect to the Interests prior to the Effective Time, which amount shall be computed based upon such taxes assessed against the applicable portion of the Interests for the current tax fiscal year, or if the assessments for the current tax fiscal year are unavailable, for the preceding such year; (3) An amount equal to the sum of all Defect Adjustments and Exclusion Adjustments (as those terms are defined in Section 7.03); and (4) Any environmental adjustment pursuant to ARTICLE V.(e); (5) An amount equal to seventy-five cents ($0.75) per mcf for a net overproduced gas imbalance; and (6) Any other amount agreed upon by Seller and Buyer. 2.04 Actual Figures. When available, actual figures will be used for adjustments at Closing. To the extent actual figures are not available, estimates will be used subject to final adjustments as provided in Section 10.01 hereof. ARTICLE III REPRESENTATIONS AND WARRANTIES 3.01 Representations and Warranties of Seller. Seller represents and warrants to Buyer with respect to itself and, where applicable, with respect to the Interests, that: (a) Seller is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation, and has all requisite power and authority to own and lease the properties and assets it currently owns and leases and to carry on its business as such business is currently conducted. Seller is duly licensed or qualified to transact business and is in good standing in all jurisdictions where the character of the properties and assets now owned or leased by it or the nature of the business now conducted by it require it to be so licensed or qualified if the failure to qualify might reasonably be expected to have a material adverse effect on the business or financial prospects of Seller. Seller is also duly licensed or qualified to do business and is in good standing in each jurisdiction where the Interests are located; (b) Seller has all requisite power and authority to execute and deliver this agreement, to consummate the transactions contemplated hereby, and to perform the terms and conditions hereof to be performed by it. This Agreement constitutes, and each of the documents required to be delivered by Seller hereunder, shall constitute Seller's legal, valid and binding obligation, enforceable against Seller in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, or other laws relating to or affecting generally the enforcement of creditors' rights and general principles of equity, regardless of whether considered in proceeding in equity or at law; (c) This Agreement and its execution and delivery by Seller do not, and the fulfillment and compliance by Seller with the terms and conditions of this Agreement, and the consummation by Seller of the transactions contemplated hereby, will not (i) require any filing, consent, authorization, or approval under, any law or administrative regulation or any judicial, administrative, or arbitration order, aware, judgment, writ, injunction, or decrees applicable to or binding upon Seller (assuming the receipt of all routine governmental consents typically received after consummation of transactions of the nature contemplated by this Agreement); and (ii) conflict with, result in a breach of, constitute a default under (without regard to any requirements of notice or the lapse of time), accelerate, or permit the acceleration of the performance required by, any mortgage, indenture, loan or credit agreement or other agreement or instrument evidencing indebtedness for borrowed money to which such Seller is a party or by which it is bound or to which any of the Interests are subject; (d) As of the execution date hereof, there are no currently outstanding and effective authorities for expenditure or third party proposals for subsequent operations with respect to the Interests other than as set forth in Exhibit B; (e) As of the execution date hereof (i) no action, suit, or proceeding is pending or, has been threatened against Seller before any court, administrative agency, or arbitral tribunal, which involves or may involve the Interests, the production of oil and gas therefrom, or the use of and enjoyment thereof, or any operation or activity being conducted therein or thereon or which challenges Seller's rights to enter into this Agreement or materially adversely affects its ability to perform its obligations under this Agreement; (ii) Seller has not received written notice of nor been charged with any violation of, any provision of any law or regulation relating to the Interests, and to Seller's best knowledge, no third party has been charged with any violation of any provision of any law or regulation relating to the Interests; (f) As of the execution date hereof Seller has not received written notice that it is in default under (i) any applicable contract affecting the Interests; (ii) any order, judgment, or decree of any federal or state court or governmental authority relating to the Interests; or (iii) any other agreement, contract, lease, license, or other instrument; (g) Exhibit A contains a complete list of the Interests wherein Seller's interest is currently subject to reversionary interests or non-consent operations. In each case, such Exhibit reflects the interest of Seller before and after adjustment for such reversionary interests or non-consent operations for each Well effected. Exhibit A- 1 reflects the remaining amount to be recouped, or account status as appropriate, as of the date reflected thereon with respect to each such well; (h) As of the Effective Time, to the best of Seller s knowledge, except as set forth in Exhibit A-1 hereto, there were no production imbalances or transportation and processing imbalances affecting the Interests; (i) All of the written and electronic data (including, without limitation, information relating to gathering, processing, transportation and sale of hydrocarbons from the Interests and other matters) at the time furnished or to be furnished by Seller to Buyer in conjunction with Buyer's evaluation of the Interests was contained in or derived from Seller's records kept in the ordinary course of business; and no representation or warranty is made with respect to the accuracy or correctness of any estimates, analysis, or projections or any assumptions or other matters stated therein; (j) No broker or finder is entitled to any brokerage or finder's fee, or to any commission, based in any way on agreements, arrangements or understandings made by or on behalf of Seller for which Buyer has any liability or obligation (whether contingent or otherwise); (k) Seller is not a foreign person, foreign corporation, foreign partnership, foreign trust or foreign estate (as those terms are defined in the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder); (l) From the Effective Time to the execution date hereof there has not been: (i) any material adverse change in the condition of the Interests, other than changes caused by the sale, production, or disposition of production and changes resulting from reservoir conditions other than fire, blowout, or act of God (provided that any change or revision in existing laws, regulations, or governmental policies applicable to the Interests or the sale, production, or disposition of production therefrom and the imposition of any new laws, regulations or governmental policies with respect to the Interests or the sale, production, or disposition of production therefrom shall be deemed not to be an adverse change in the condition of the Interests), (ii) any sale, lease, or other disposition of the Interests, (iii) any condemnation or taking by eminent domain of any portion of any of the Interests, or (iv) any contract or commitment to do any of the foregoing; (m) Seller or the Operator of any Interest has obtained or applied for all governmental licenses, permits, certificates, approvals, consents, authorizations and orders required for it to own or lease the Interests and develop, construct, maintain, and operate them, and to market the production therefrom, and no proceeding is pending or threatened involving revocation of any such licenses, permits, certificates, consents, authorizations or orders, provided that this representation is limited to Seller's best knowledge; (n) There are no taxes due or tax liens on any of the Interests; (o) To the best of Seller's knowledge, Seller is not a party to any joint venture, partnership, limited liability company, farmin, farmout, joint operating agreement, or other arrangement or contract with respect to any of the Interests that is reported as a partnership for federal or state income tax purposes; (p) As of the execution date hereof all of the wells and all of the equipment used in the drilling, completion and operation of any such wells, or in the production, treatment, storage, gathering and transportation of hydrocarbons from such wells, is in good operating condition, ordinary wear and tear excepted, provided that this representation is limited to Seller's best knowledge with respect to such matters which are the responsibility of the operator of any interest not operated by seller; (q) From the Effective Time to the execution date hereof, no personal injuries or deaths have occurred in connection with any of the Interests which should have been reported by Seller in accident or incident reports in accordance with applicable law or in accordance with Seller's usual operating procedures and policies; (r) To the best of Seller's knowledge, all royalties (including without limitation royalties with respect to take-or-pay payments or settlements), minimum royalties, rentals, shut-in gas payments and other payments due with respect to the Interests have been properly and timely paid in full, except for payments held in suspense for title or other reasons that are customary in the industry or which are being contested in an appropriate forum. There are no amounts claimed to be due to Seller in respect of the Interests that are being held in suspense because of a dispute as to title to the Interests or for any other reason, and Seller is entitled to be paid, and is being paid, with respect to production from the Interests, its net revenue interest without indemnity or guarantee other than those customarily found in division orders and other similar agreements and documents; (s) Except as detailed on Exhibit A-2, this Agreement and its execution and delivery by Seller does not, and the fulfillment and compliance by Seller with the terms and conditions of this Agreement and the consummation by Seller of the transactions contemplated hereby will not permit the exercise of or give rise to (with the giving of any required notice) any preferential purchase right, option or right of first refusal; (t) To the best of Seller's knowledge, all of the wells in which such Seller has an interest by virtue of its ownership of the Leases have been (i) drilled and completed within the boundaries of such Lease or within the limits otherwise permitted by contract, pooling or unit agreement, and/or by law and (ii) drilled and completed in compliance with all applicable laws, rules and regulations; and (u) Seller has reasonable surface access to each of the Interests for purposes of oil and gas exploration, development and production. 3.02 Representations and Warranties of Buyer. Buyer represents and warrants to Seller that: (a) Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation, and has all requisite power and authority to own and lease the properties and assets it currently owns and leases and to carry on its business as such business is currently conducted. Buyer is duly licensed or qualified to transact business and is in good standing in all jurisdictions where the character of the properties and assets now owned or leased by it or the nature of the business now conducted by it requires it to be so licensed or qualified if the failure to qualify might reasonably be expected to have a material adverse effect on the business or financial prospects of Buyer. Buyer is also duly licensed or qualified to do business and is in good standing in each jurisdiction where the Interests are located; (b) Buyer has all requisite power and authority to execute and deliver this Agreement, to consummate the transactions contemplated hereby, and to perform the terms and conditions hereof to be performed by it. This Agreement constitutes, and each of the documents required to be delivered by Buyer hereunder, shall constitute Buyer's legal, valid, and binding obligation, enforceable against Buyer in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, or other laws relating to or affecting generally the enforcement of creditors' rights and general principles of equity, regardless of whether considered in a proceeding in equity or at law; (c) This Agreement and its execution and delivery by Buyer does not, and the fulfillment of and compliance by Buyer with the terms and conditions of this Agreement, and the consummation by Buyer of the transactions contemplated hereby, will not (i) require any filing, consent, authorization, or approval under, any law or administrative regulation or any judicial, administrative, or arbitration order, award, judgment, writ, injunction or decree applicable to or binding upon Purchaser (assuming the receipt of all routine governmental consents typically received after consummation of transactions of the nature contemplated by this Agreement), (ii) conflict with, result in a breach of, constitute a default under (without regard to any requirements of notice or the lapse of time), accelerate, or permit the acceleration of the performance required by, any mortgage, indenture, loan or credit agreement or other agreement or instrument evidencing indebtedness for borrowed money to which Buyer is a party or by which it is bound; (d) No broker or finder is entitled to any brokerage or finder's fee, or to any commission, based in any way on agreements, arrangements or understandings made by or on behalf of Buyer for which Seller has any liability or obligation (whether contingent or otherwise); (e) Buyer is not a foreign person, foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder); and (f) In making the acquisition of the Interests hereunder, Buyer is acting in the conduct of its own business in the ordinary course. The Interests are not being acquired for distribution or transfer in violation of the securities laws of the United States or of any state thereof. ARTICLE IV COVENANTS OF BUYER AND SELLER 4.01 Covenants of Seller. Seller covenants and agrees with Buyer that: (a) After the execution of this Agreement, Seller will make available to Buyer for examination at Seller's offices in Dallas, Texas, title and other information relating to the Interests insofar as the same are in Seller's possession and, subject to the consent and cooperation of third parties, will cooperate with Buyer in Buyer's efforts to obtain, at Buyer's expense, such additional information relating to the Interests as Buyer may reasonably desire (to the extent that Seller may do so without violating legal constraints or any obligation of confidence or other contractual commitments of Seller to third parties), including without limitation: (1) Title opinions, title status reports and contracts or agreements pertaining to the Interests; (2) Copies of the leases, prior conveyances of Interests created thereby, unitization, pooling and operating agreements, division and transfer orders, mortgages, deeds of trust, security agreements, financing statements, and other encumbrances not discharged and affecting the title to or the value of the Interests; (3) Accounting and other records relating to the payment of rentals, royalties, joint interest billings and other payments due under the Leases or the Wells; (4) Records relating to the payment of ad valorem, property, production, severance, excise and similar taxes and assessments based on or measured by the ownership of property or the production of hydrocarbons or the receipt of proceeds therefrom on the Interests; (5) Ownership maps and surveys relating to the Interests; (6) Copies of purchase, sale, processing and transportation agreements relating to the production of gas from the Interests. Copies of all gas balancing agreements and gas balancing statements; (7) Copies of agreements, leases, permits, easements, licenses and orders relating to the Interests; (8) Production records relating to the Interests; (9) Inventories of personal property and fixtures included in the Interests; and (10) Any and all other information contained in Seller's files that relates to the Interests other than matters subject to attorney- client or attorney work privilege or concerning Seller's economic evaluation. Seller shall permit Buyer to inspect and photocopy such information and records at any reasonable time during the term of this Agreement. Seller shall cooperate with Buyer in Buyer's efforts to obtain such additional title information as Buyer may reasonably deem prudent. (b) During the period from the date of this Agreement to the Date of Closing, without the prior written consent of Buyer, Seller will not (i) cause any of its portion of the Leases or other of the Interests to be developed, maintained, or operated in a manner substantially inconsistent with prior operations; (ii) abandon any material part of any of its portion of the Interests; (iii) commence any material operation of any of its portion of the Leases or the Interests anticipated to cost Seller in excess of Fifteen Thousand Dollars ($15,000.00) per operation (except emergency operations, operations required under presently existing contractual obligations, the on-going commitments under the AFE's described in Exhibit B hereto, and operations undertaken to avoid any penalty provisions of any applicable agreement or order), or (iv) convey or dispose of any material part of any of its portion of the Interests (other than oil, gas and other liquid products produced from the Interests in the regular course of business). Buyer acknowledges that Seller owns undivided interests in certain of the Interests and Buyer agrees that the acts or omissions of Seller's co-owners shall not constitute a violation of the provision of this Section 4.01(b) nor shall any action required by a vote of co- owners constitute such a violation so long as Seller has voted its interest with Buyer's prior consent; (c) Seller shall use all reasonable efforts to maintain its corporate status from the date hereof until Closing and to assure that as of the Closing Date it will not be under any corporate, legal or contractual restriction that would prohibit or delay the timely consummation of such transactions; and (d) Seller shall promptly notify Buyer of any suit, action, claim, threatened suit, action or claim, or other proceedings of the type referred to in Section 3.01(e) or (f) that arises prior to the Closing with respect to which Seller receives notice or otherwise obtains knowledge following the execution of this Agreement. 4.02 Covenants of Buyer. Buyer covenants and agrees with Seller that: (a) Buyer shall use all reasonable efforts to maintain its corporate status and to assure that as of the Closing Date it will not be under any corporate, legal or contractual restriction that would prohibit or delay the timely consummation of such transactions; (b) To the extent necessary to facilitate the consummation of the transactions contemplated herein, Buyer agrees to enter into specific agreements of assumption with respect to the obligations of Seller to specific third parties or governmental authorities to the extent such obligations are attributable to the Interests after the Effective Time. Buyer also shall be obligated to obtain consents from all necessary Federal authorities, including the Bureau of Indian Affairs, and State authorities to the assignment of the Leases; (c) For a period of ten (10) years after the Closing Date, Buyer shall provide Seller with reasonable access to the Records so long as Buyer is given reasonable notice prior to Seller's access; and (d) Buyer represents that it has performed, or will perform prior to Closing, sufficient review and due diligence with respect to the Interests which includes reviewing well data, title and other files and performing necessary evaluations, assessments, and other tasks involved in evaluating the Interests, to satisfy its requirements, completely, and enable it to make an informed decision to acquire the Interests under the terms of this Agreement. ARTICLE V ASSUMPTION OF LIABILITIES AND INDEMNITIES As used in this ARTICLE V, and the paragraphs hereunder "CLAIMS" shall include claims, demands, causes of action, liabilities, damages, penalties and judgements of any kind or character and all costs and fees in connection therewith. (a) At the Closing, but effective as of the Effective Time, Buyer shall (i) assume, and be responsible for and comply with all duties and obligations of Seller, express or implied, with respect to the Interests, including, without limitation, those arising under or by virtue of the Seller's leases and contracts listed in Exhibit A, and the permits, the applicable statutes or rules, regulations or orders of any governmental authority (specifically including, without limitation, any governmental request or requirement to plug, replug and/or abandon any well of whatsoever type, status or classification, or to take any clean-up, remediation or other action with respect to the Interests), and (ii) except as otherwise provided herein, to defend, indemnify and hold harmless Seller from any and all claims in connection therewith; (b) Subject to the provisions of Paragraphs (c), (d) and (e) below Seller shall defend, indemnify and hold harmless Buyer from any and all claims, costs, expenses, liabilities or causes of action relating to or arising out of Seller's ownership or operation of Seller's Interests prior to the Effective Time and Buyer shall defend, indemnify and hold harmless Seller from any and all claims, costs, expenses, liabilities or causes of action relating to or arising out of Buyer's ownership and operation of the Interests after the Effective Time. Each indemnified party hereunder agrees that upon its discovery of facts giving rise to a claim for indemnity under the provisions of this Agreement, including receipt by it of any demand, assertion, claim, action or proceeding, judicial or otherwise, by any third party (such third party actions being referred to herein as a "THIRD PARTY CLAIM"), it will give prompt notice thereof in writing to the indemnifying party together with a statement of such information with respect to any of the foregoing as it shall then have. Such notice shall include a formal demand for indemnification under this Agreement. The indemnified party shall afford the indemnifying party a reasonable opportunity to pay, settle, or contest any Third Party Claim at its expense; (c) Seller shall (i) be responsible for any and all claims, including but not limited to claims for payment of royalties, arising out of the production and sale of hydrocarbons by Seller from the Interests, and the proper accounting and payment of expenses for the Interests, insofar as such claims and payments relate to period of time prior to the Effective Time, and (ii) defend, indemnify and hold harmless Buyer from any and all of such claims and payments; (d) Buyer shall (i) be responsible for any and all claims, including but not limited to claims for payment of royalties, arising out of the production and sale of hydrocarbons by Buyer from the Interests, and the proper accounting and payment of expenses for the Interests, insofar as such claims and payments relate to period of time beginning at the Effective Time and thereafter, and (ii) defend, indemnify and hold harmless Seller from any and all of such claims and payments; and (e) After the execution of this Agreement, Buyer, at its option, and its sole cost, risk and expense, may obtain an environmental audit of the Interests at any time prior to September 20, 1996. Seller shall provide the environmental auditors all information available to it which they may reasonably request and shall grant said auditors physical access to the Interests. For those Interests which are not operated by Seller, Buyer shall obtain permission from the operator to conduct such inspections. If the audit reveals any environmental conditions which are not satisfactory to Buyer, Seller shall immediately be provided a copy of the audit information and either party shall have the option to terminate this Agreement as to the affected Interest(s) with a deduction from the Preliminary Purchase Price of the allocated value attributable to that Interest(s), without liability, unless Seller affirms in writing that it will remediate such conditions to the satisfaction of the Buyer prior to Closing. Buyer shall defend and indemnify Seller from any and all liability, claims, causes of action, injury to Buyer's employees, agents or contractors or to Buyer's property and/or injury to Seller's property, employees, agents or contracts which may arise out of Buyer's inspections, but only to the extent of Buyer's negligence. If such deductions exceed ten percent (10%) of the Preliminary Purchase Price and the parties are unable to mutually agree to proceed with closing, then either party shall have the right to terminate this Agreement without liability. After Closing, Buyer shall be deemed to have fully inspected and accepted the Interests "AS IS" in their then current physical and environmental condition. ARTICLE VI DISCLAIMER OF WARRANTIES Buyer acknowledges that in making the decision to enter into this Agreement and consummate the transactions contemplated hereby, Buyer has relied only upon its own independent investigation of the Lands. Accordingly, Buyer acknowledges that Seller has not made and Seller hereby expressly disclaims and negates any representation or warranty express or implied at common law, by statute or otherwise relating to (i) condition of the Lands (including but not limited to any implied or express warranty of merchantability or fitness for a particular purpose or of conformity to models or samples of materials) and (ii) any information, data or other materials (written or oral) furnished to Buyer by or on behalf of Seller (including but not limited to information, data or other materials regarding the existence or extent of oil, gas or other mineral reserves, the recoverability of or the cost of recovering such reserves, the value of such reserves, any producing pricing assumption, present or past production rates, the environmental condition of the Lands, including but not limited to the presence of naturally occurring radioactive material ("NORM"), and the ability to sell oil or gas production after Closing); provided, however, that the foregoing disclaimer and negation of representations and warranties shall not affect or impair the representations and warranties of Seller made in Section 3.01. ARTICLE VII TITLE MATTERS 7.01 Defensible Title. (a) As used herein, the term "DEFENSIBLE TITLE" shall mean, as to each of the Interests, such title which, subject to and except for the Permitted Encumbrances (as defined hereinafter): (i) entitles Seller to receive not less than the "NET REVENUE INTEREST" set forth in Exhibit A of all oil, gas and associated liquid and gaseous hydrocarbons produced, saved and marketed from the presently producing formations in the presently producing wells bottomed in the Lands; and (ii) obligates Seller to bear costs and expenses relating to the maintenance, development and operation of those portions of the presently producing wells bottomed in the Lands in an amount not greater than the "WORKING INTEREST" set forth in Exhibit A; (b) The term "PERMITTED ENCUMBRANCES", as used herein, shall mean: (1) Lessor's royalties, overriding royalties, reversionary interests and similar burdens provided that the net cumulative effect of such burdens does not operate to reduce the Net Revenue Interest of any interest to less than the Net Revenue Interest therefor set forth in Exhibit A; (2) Preferential rights to purchase and required third party consents to assignments and similar agreements with respect to which, prior to Closing; (i) waivers or consents are obtained from the appropriate parties, (ii) the appropriate time period for asserting such rights has expired without an exercise of such rights, or (iii) with respect to consents, such consents which need not be obtained prior to an assignment, or the failure to obtain such consents will not have a material adverse effect on the value of the Interests to Buyer; (3) Liens for taxes or assessments not yet due or not yet delinquent, or if delinquent, that are being contested in good faith in the ordinary course of business; (4) All rights to consent by, required notices to, filings with, or other actions by governmental entities in connection with the sale or conveyance of any of the Interests if the same are customarily obtained subsequent to such sale or conveyance; (5) Rights of reassignment; (6) Easements, rights-of-way, servitudes, permits, surface leases and other rights in respect of surface operations, pipelines, grazing, logging, canals, ditches, reservoir or the like; conditions, covenants or other restrictions; and easements for streets, alleys, highways, pipelines, telephone lines, power lines, railways and other easements and rights-of-way on, over or in respect of any of the Interests; (7) Such Title Defects or other defects as Buyer has waived pursuant to the terms of this Agreement; (8) Liens to be released at Closing; (9) The terms and conditions of all leases, agreements, orders, instruments, documents and other matters described in Exhibit A hereto; and (10) Rights reserved to or vested in any municipality or governmental, statutory or public authority to control or regulate any of the Interests in any manner, and all applicable laws, rules and orders of governmental authority. (c) The term "TITLE DEFECT" as used herein shall mean any encumbrance, encroachment, irregularity, defect in or objection to Seller's title to each Interest (expressly excluding Permitted Encumbrances), that alone or in combination with other defects, renders Seller's title to that Interest less than Defensible Title or which would adversely interfere with the use, possession, ownership or value thereof, or any violation of applicable laws, rules, regulations or orders of any governmental agency having jurisdiction over the Interests which will likely result in an impairment or loss of title to all or a portion of the Interests or diminish the value thereof or likely will hinder or impede the operation of such interest, or any matter constituting a breach of Seller's representation and warranties as set forth in Section 3.01. Materialmen's mechanics', repairmen's, employees', contractors', operators' or other similar liens or charges arising in the ordinary course of business incidental to construction, maintenance or operation of the Interests shall not constitute a Title Defect: (i) if they have not been filed pursuant to law, or (ii) if filed, they have not yet become due and payable or payment is being withheld as provided by law, or (iii) if their validity is being contested in good faith by appropriate action. 7.02. Casualty Loss. If, prior to the Closing, all or any portion of the Interests be destroyed by fire or other casualty, is taken in condemnation or under the right of eminent domain or proceedings for such purpose are pending or threatened, Buyer may elect (i) to treat the Interests affected by such destruction, taking or pending or threatened taking as Defective Interests in accordance with Section 7.03; or (ii) to purchase such Interests notwithstanding any such destruction, taking or pending or threatened taking (without reduction of the Preliminary Purchase Price therefor), in which case, Seller shall, at the Closing, pay to Buyer all sums paid to Seof the destruction or taking of such Interests to be assigned to Buyer (including sums which are in the nature of compensation for any lost or foregone income or production attributable to the time period subsequent to the Effective Time) and shall assign, transfer and set over unto Buyer all of the right, title and interest of Seller in and to any unpaid claims, awards or other payments from third parties arising out of the destruction, taking or pending or threatened taking as to such Interests (including sums which are in the nature of compensation for any lost or foregone income or production attributable to the time period subsequent to the Effective Time). Seller agrees that, prior to Closing, it shall not voluntarily compromise, settle or adjust any amounts payable by reason of any destruction, taking or pending or threatened taking as to such of its portion of the Interests to be assigned to Buyer without first obtaining the written consent of Buyer. 7.03 Defect Adjustments. (a) "DEFECTIVE INTEREST" shall mean that portion of the Interests (as determined in accordance with Section 7.03(c)) affected by a Title Defect or that Buyer is otherwise entitled under Sections 7.02 or 7.04 to treat as a Defective Interest, and of which Seller has been given notice by Buyer prior to September 23, 1996, (the "DEFECT NOTICE DATE"), except as provided hereinafter in this Section 7.03(a). Any notice of any Defective Interest shall be in writing and shall include: (i) a description of the Defective Interest, (ii) the specific basis for the defect that Buyer believes causes such Interest to be a Defective Interest, and (iii) the amount by which Buyer has determined the value of the Defective Interest has been reduced and the computations and information upon which Buyer's determination is based. Buyer shall be deemed to have waived all Title Defects and any other defect to any Interest of which Seller has not been given such notice prior to the Defect Notice Date. If Seller (i) disagrees that a Defect Adjustment or Exclusion Adjustment is warranted; (ii) disagrees that the matter giving rise to such claims is uncured, or (iii) disagrees with the amount of the related Defect Adjustment claimed by Buyer in any notice given in accordance with this Section 7.03(a), then Seller, at its option, may remove the defective property from the sale, attempt to cure the defect at Seller's sole cost and expense, agree to a mutually acceptable purchase price reduction or terminate this Agreement without liability to Buyer except for return of the Performance Deposit, without interest, provided that Seller may not terminate this Agreement unless the aggregate value of Title Defects exceeds twenty percent (20%) of the Preliminary Purchase Price; (b) Defective Interests shall be excluded from the Interests to be purchased by Buyer hereunder and the Preliminary Purchase Price shall be reduced in accordance with Section 2.03 by an amount equal to the value thereof, as agreed to between Buyer and Seller (which reduction shall be called an "EXCLUSION ADJUSTMENT") unless (i) prior to the Closing, the basis for treating an Interest as a Defective Interest has been removed, (ii) Buyer agrees to waive the relevant Title Defect or other defect and purchase the Defective Interest, notwithstanding the defect, (iii) Seller agrees to indemnify, defend and hold Buyer harmless and Buyer agrees to accept such indemnification against all losses, costs, expenses and liabilities with respect to such Defective Interest arising from the defect or basis for such Interest being treated as a Defective Interest, or (iv) Buyer and Seller agree to an amount by which the value of the Defective Interest has been reduced and the Preliminary Purchase Price is reduced by such amount in accordance with Section 2.03 (which reduction shall be called a "DEFECT ADJUSTMENT"), in which event the Interest shall be included in the Interests to be purchased by Buyer hereunder and, except in the case of (iv), no adjustment shall be made to the Preliminary Purchase Price; or (v) Buyer and Seller do not agree, on or before the Scheduled Closing Date, as to the value of the Defective Interest that is to be excluded from the Preliminary Purchase Price and none of Subsections (i) through (iv) of Section 7.03(b) are applicable, in which event Buyer may terminate this Agreement without further liability or obligation, by giving written notice of termination on or before the Scheduled Closing Date. (c) The amount by which the Preliminary Purchase Price is to be reduced in accordance with Section 7.03 as the result of any Interest being treated as a Defective Interest shall be determined as follows: (1) In the event that the cost of remedying any Title Defect exceeds the amount allocated to the affected Interest as set forth in Exhibit A, then such Interest shall be excluded from the transaction contemplated hereby and the Preliminary Purchase Price shall be reduced by the amount allocated to the Interest so excluded as set forth in Exhibit A (which adjustment shall be called an EXCLUSION ADJUSTMENT"); (2) In the event that the net revenue interest of Seller in any Interest is less than that set forth in Exhibit A, that portion of the Preliminary Purchase price allocated on Exhibit A-1 to such particular Interest shall be reduced in the proportion that the net revenue interest actually owned by Seller bears to that set forth in Exhibit A; (3) In the event that the working interest costs payable with respect to a particular Interest is greater than the working interest set forth in Exhibit A, the Preliminary Purchase Price allocated on Exhibit A-1 to such particular Interest shall be reduced in the proportion that the working interest percentage attributable to such interest exceeds that set forth in Exhibit A; (4) In the event that (i) the record title interest of Seller to any Interest is burdened by any lien, encumbrance, mortgage, pledge, or security interest, or (ii) ad valorem, property or other similar taxes and assessments for any years prior to the Effective Time have not been paid, the Preliminary Purchase Price of such interest shall be reduced by the sum necessary to discharge and obtain a full record release of such burden or to pay such taxes; and (5) In the event there exist other Title Defects which would materially adversely affect or interfere with the use, possession, ownership or value of any Interest, Buyer, at its option, may either, (i) exclude the affected Interest from the transaction contemplated hereby and the Preliminary Purchase Price shall be reduced by the amount allocated to the affected Interest as set forth in Exhibit A, or (ii) accept such Interest. (d) In determining which portion of the Interests are Defective Interests, it is the intent of the parties to include all portions of the Interests affected by the defect or basis for such Interests being treated as Defective Interests; and (e) If the deductions in the Preliminary Purchase Price to be made pursuant to this ARTICLE VII exceed twenty percent (20%) of the Preliminary Purchase price, either party may terminate this agreement at any time prior to Closing. 7.04 Identification of Additional Defective Interests. (a) If, prior to the Closing, there has been non-compliance with the laws, rules, regulations, ordinances or orders of any governmental agency or authority having jurisdiction over the affected Interests, resulting in risk of loss of the affected Interests or value thereof, then Buyer may elect to treat such of the affected Interests as are adversely affected by such noncompliance as Defective Interests by giving Seller notice thereof in accordance with Section 7.03(a); (b) If, prior to the Closing, any preferential right to purchase any of the Interests is exercised, Buyer may elect to treat that portion of the Interests affected by the exercise of such preferential right as Defective Interests by giving Seller notice thereof in accordance with Section 7.03(a); (c) If any necessary third party consent to assignment of any of the Interests is not obtained prior to the Closing, Buyer may elect to treat that portion of the Interests subject to such consent requirement as Defective Interests by giving Seller notice thereof in accordance with Section 7.03(a). For purposes hereof "NECESSARY THIRD-PARTY CONSENTS" shall not include: (1) consents customarily obtained subsequent to such assignment including without limitation any consent of the State or the Bureau of Indian Affairs or other Federal agencies or governmental offices; (2) consents contractually permitted to be obtained subsequent to such assignment; or (3) consents that, if not obtained, will not affect the transferability, without penalty, of, the operation of, or the receipt of income from, the Interests subject thereto, or result in termination of the interests subject thereto or a material decrease in the value thereof. (d) If, prior to the Closing, Buyer becomes aware of any suit, action or other proceeding before any court or governmental agency that would result in loss or impairment of Seller's title to any portion of the Interests or a portion of the value thereof, Buyer may elect to treat the portion of the Interests affected thereby as Defective Interests by giving Seller notice thereof in accordance with Section 7.03(a); and (e) If any inaccuracy in Exhibit A results in a loss of value of a portion of the Interests, Buyer may elect to treat that portion of the Interest subject to such reduction in value as Defective Interests by giving Seller notice thereof in accordance with Section 7.03(a). ARTICLE VIII CONDITIONS TO CLOSING 8.01 Seller's Conditions. The obligations of Seller at the Closing are subject, at the option of Seller, to the satisfaction, at or prior to the Closing, of the following conditions: (a) All representations and warranties of Buyer contained in this Agreement shall be true, correct and not misleading in all material respects at and as of the Closing as if such representations and warranties were made at and as of the Closing, and Buyer shall have performed and satisfied all agreements and covenants in all material respects required by this Agreement to be performed and satisfied by Buyer at or prior to the Closing; (b) No suit or other proceeding shall be pending before any court or governmental agency seeking to restrain, prohibit or declare illegal, or seeking substantial damages in connection with, the purchase and sale contemplated by this Agreement, except (i) matters with respect to which Seller has been adequately indemnified by Buyer, or (ii) any suit or proceeding affecting only a portion of the Interests, which portion of the Interests could be treated as a Defective Interest in accordance with Section 7.04(d); (c) The aggregate sum of Defect Adjustments and Exclusion Adjustments shall not exceed thirty percent (30%) of the Preliminary Purchase Price; and (d) All necessary and material permissions, approvals and consents required which are obtainable prior to Closing shall be in full force and effect. 8.02 Buyer's Conditions. The obligations of Buyer at the Closing are subject, at the option of Buyer, to the satisfaction, at or prior to the Closing, of the following conditions: (a) All representations and warranties of Seller contained in this Agreement shall be true, correct and not misleading in all material respects at and as of the Closing as if such representations and warranties were made at and as of the Closing, and Seller shall have performed and satisfied all agreements and covenants in all material respects required by this Agreement to be performed and satisfied by Seller at or prior to the Closing; (b) No suit or other proceeding shall be pending before any court or governmental agency seeking to restrain, prohibit or declare illegal, or seeking substantial damages in connection with, the purchase and sale contemplated by this Agreement, except (i) matters with respect to which Buyer has been adequately indemnified by Seller, or (ii) any suit or proceeding affecting only a portion of the Interests, which portion of the Interests could be treated as a Defective Interest in accordance with Section 7.04(d); (c) The aggregate sum of Defect Adjustments and Exclusion Adjustments shall not exceed thirty percent (30%) of the Preliminary Purchase Price; (d) All necessary and material permissions, approvals and consents required which are obtainable prior to Closing shall be in full force and effect; and (e) The provisions of ARTICLE V.(e) have been satisfied. 8.03 Satisfaction or Waiver. If Seller and Buyer proceed with the Closing as specified in ARTICLE IX, all conditions of Closing shall be deemed to have been satisfied or waived and neither of the parties shall have any liability whatsoever to the other arising out of, resulting from, or attributable to any such condition of Closing, irrespective of whether such conditions of Closing were in fact satisfied or waived. Nothing contained in this Section 8.03 shall be a waiver or release of any breach of a representation or warranty contained in this Agreement. ARTICLE IX CLOSING 9.01 Date of Closing. Unless the parties hereto mutually agree otherwise and subject to the conditions stated in this Agreement, the consummation of the transactions contemplated hereby (herein called the "CLOSING") shall be held on September 30, 1996, at 10:00 A.M. (the "SCHEDULED CLOSING DATE"). The date Closing actually occurs is herein called the "CLOSING DATE". 9.02 Place of Closing. The Closing shall be held at Seller's office in Dallas, Texas, in accordance with the Closing Instructions to be mutually given in writing by Seller and Buyer. 9.03 Closing Obligations. At the Closing the following events shall occur, each being a condition concurrent to the others and each being deemed to have occurred simultaneously with the others: (a) Seller shall execute, acknowledge and deliver to Buyer assignment, bill of sale and conveyance documents (in sufficient counterparts to facilitate recording), in form and substance as set forth in Exhibit C hereto, conveying its portion of the Interests (other than those portions of the Interests excluded under Sections 7.03(b) and 7.04) to Buyer. (b) Seller and Buyer shall execute and deliver a settlement statement (herein called the "PRELIMINARY SETTLEMENT STATEMENT") prepared by Seller and furnished to Buyer no less than seven (7) days prior to the Scheduled Closing Date) that shall set forth the Closing Amount (as hereinafter defined) and each adjustment and the calculation of such adjustments used to determine such amount. The term "CLOSING AMOUNT" shall mean the Preliminary Purchase Price adjusted as provided in Section 2.03, using for such adjustments the best information then available. Seller and Buyer further agree that Seller shall be entitled to receive all proceeds attributable to ownership of the Interests prior to the Effective Time and Buyer shall be entitled to receive all proceeds attributable to the Interests after the Effective Time. (c) Buyer shall deliver the Closing Amount in the form of immediately available U.S. funds, by wire transfer in accordance with instructions to be provided by Seller. (d) Seller shall deliver to Buyer exclusive possession of its portion of the Interests (other than Interests excluded under Section 7.03(b) or Section 7.04) (e) Seller and Buyer shall execute, acknowledge and deliver transfer orders or letters in lieu thereof directing all purchasers of production to make payment to Buyer of proceeds attributable to production after the Effective Time from the Interests assigned to Buyer under Section 9.03(a), but not theretofore paid to Seller. ARTICLE X OBLIGATIONS AFTER CLOSING 10.01 Post-Closing Adjustments. Within one hundred thirty (130) days after the Closing, Seller shall prepare and deliver to Buyer, in accordance with this Agreement and generally accepted accounting principles, a statement (herein called the "POST CLOSING SETTLEMENT STATEMENT") setting forth each adjustment or payment that was not included or correctly included in the Preliminary Settlement Statement and showing the calculation of such adjustments. Within thirty (30) days after receipt of the Post Closing Settlement, Buyer shall deliver to Seller a written report containing any changes that Buyer proposes to be made to the Post Closing Settlement Statement. The parties shall undertake to agree with respect to the amounts due pursuant to such Post Closing adjustment no later than one hundred sixty (160) days after the Closing Date. The date upon which such agreement is reached or upon which the Final Purchase Price is established, shall be herein called the "SETTLEMENT DATE". In the event that (i) the Final Purchase Price is more than the Closing Amount, Buyer shall pay to Seller, in certified U.S. Funds, the amount of such difference (ii) the Final Purchase Price is less than the Closing Amount, Seller shall pay to Buyer, in certified U.S. funds, the amount of such difference. Payment by Buyer or Seller shall be made within ten (10) days of the Final Settlement Date. After the Settlement Date, additional proceeds received by or expenses paid by either Buyer or Seller on behalf of the other shall be settled by invoicing the other party for expenses paid or remitting to the other party any proceeds received. The gas imbalances of the Interests shall be considered final and neither party thereafter shall make claim upon the other concerning same. 10.02 Files and Records. Seller shall have the right to make and retain copies of the Records prior to delivery thereof to Buyer. Within thirty (30) days after the Closing Date, Seller shall deliver to Buyer all original files and Recoronveyed to Buyer. 10.03 Taxes and Recording Fees. Buyer shall pay all sales taxes occasioned by the sale of the Interests, all ad valorem, property, production, excise, severance, windfall profit and other taxes, except income taxes, based upon or measured by the ownership of the property, the production of hydrocarbons or the receipt of proceeds therefrom which apply to or arise from and after the Effective Time together with all documentary, filing and recording fees required in connection with the filing and recording of any assignments or other documents recorded in connection with the sale of the Interests. 10.04 Further Assurances. After Closing, Seller and Buyer shall each execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such instruments, and shall each take such other action, as may be necessary or advisable to carry out their respective obligations under this Agreement and under any document, certificate or other instrument delivered pursuant hereto. 10.05 Survival. The warranties or representations herein made by Seller are conditions to the obligations of Buyer hereunder and no warranty or representation herein made by Seller (other than those contained in 3.01(a), (b), (c), (d), (e), (f), (i), (j), (k), (o) and (q) shall survive the Closing. The agreements set forth in ARTICLE X and the matters set forth in ARTICLES V and VI and Section 13.12 shall survive the Closing for a period of one (1) year from the Closing Date. ARTICLE XI TERMINATION OF AGREEMENT 11.01 Termination. This Agreement and the transactions contemplated hereby may be terminated in the following instances: (a) By Seller if the conditions set forth in Section 8.01(a) through 8.01(d) are not satisfied in all material respects or waived as of the Scheduled Closing Date; (b) By Buyer if the conditions set forth in Section 8.02(a) through 8.02(e) are not satisfied in all material respects or waived as of the Scheduled Closing Date; (c) By Buyer pursuant to Section 7.03(b); (d) Pursuant to Article V.(e); or (e) At any time by the mutual written agreement of Buyer and Seller. 11.02 Liabilities Upon Termination. If this Agreement is breached by either party, nothing contained herein shall be construed to limit Seller's or Buyer's legal or equitable remedies, including, without limitation, damages for the breach or failure of any representation, warranty, covenant or agreement contained herein (whether or not the non-defaulting party has terminated the Agreement) or the right to enforce specific performance of this Agreement; provided, however, that a party terminating this Agreement shall have no right to specific performance thereof, and provided, further, that neither party shall have a right to specific performance thereof if this Agreement is terminated pursuant to Section 11.01 hereof. ARTICLE XII TAX-FREE EXCHANGE 12.0 Tax-Free Exchange. Seller has elected to effect a like-kind exchange pursuant to Section 1031 of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder, with respect to the Interests (a "Like-Kind Exchange"). In order to effect a Like-Kind Exchange, Buyer shall cooperate and do all acts as may be reasonably required or requested by Seller with regard to effecting the Like-Kind Exchange, including, but not limited to, executing an Exchange Escrow Agreement, a form of which is attached hereto as Exhibit D, in accordance with Treasury Regulation Section 1.1031(k)-1(g)(3); provided, however, Buyer shall incur no expense in connection with such Like-Kind Exchange and Buyer shall not be required to take title to any property other than the Interests in connection with the Like-Kind Exchange, and Buyer's possession of the Interests will not be delayed by reason of any such Like-Kind Exchange. ARTICLE XIII MISCELLANEOUS 13.01 Exhibits and Schedules. Exhibits A through D are attached hereto and incorporated herein by this reference. 13.02 Expenses. Except as otherwise specifically provided, all fees, costs and expenses incurred by Buyer or Seller in negotiating this Agreement or in consummating the transactions contemplated by this Agreement shall be paid by the party incurring the same, including, without limitation, legal and accounting fees, costs and expenses. 13.03 Notices. All notices and communications required or permitted under this Agreement shall be in writing, delivered to or sent by U. S. Mail or Express Delivery, postage prepaid, or by facsimile transmission, addressed as follows: Maynard Oil Company Attention Cassondra Foster 8080 North Central Expressway, Suite 660 Dallas, TX 75206 Phone: (214) 891-8461 Fax: (214) 891-8827 Enron Oil & Gas Company Attention Lee McVay, Vice President and General Manager 20 North Broadway, Suite 800 Oklahoma City, OK 73102 Phone: (405) 239-7880 Fax: (405) 239-7858 Any party may, by written notice so delivered to the others, change the address or individual to which delivery shall thereafter be made. 13.04 Amendments. Except as otherwise expressly provided herein, this Agreement may not be amended nor any rights hereunder waived except by an instrument in writing signed by the party to be charged with such amendment or waiver and delivered by such party to the party claiming the benefit of such amendment or waiver. 13.05 Assignment. Neither Seller nor Buyer shall assign all or any portion of its rights or delegate all or any portion of its duties hereunder without the prior written consent of the other to such assignment; provided, however, that Buyer or Seller or both may assign all or part of this Agreement to a qualified intermediary to facilitate a deferred like-kind exchange for federal tax purposes. Subject to the foregoing, this Agreement shall inure to the benefit of and be binding upon Seller, Buyer and their respective successors and assigns. 13.06 Announcements. Seller and Buyer shall consult with each other with regard to all press releases and other announcements issued at or prior to the Closing concerning this Agreement or the transactions contemplated hereby and, except as may be required by applicable laws or the applicable rules, and regulations of any governmental agency or stock exchange, neither Buyer nor Seller shall issue any such press release or other publicity without the prior written consent of the other party. 13.07 Headings. The headings of the articles and sections of this Agreement are for guidance and convenience of reference only and shall not limit or otherwise affect any of the terms or provisions of this Agreement. 13.08 Counterparts. This Agreement, and any document or instrument entered into, given or made pursuant to this Agreement or authorized hereby, and any amendment or supplement thereto, may be executed in any number of counterparts, and, when so executed, each of which shall be deemed an original instrument, and shall have the same force and effect as though all signatures appeared on a single document, and all of which together shall constitute but one and the same instrument. Any signature page of this Agreement or of such an amendment, supplement, document or instrument may be detached from any counterpart thereof and attached to another counterpart without impairing the legal effect of any signatures identical in form thereto but having attached to it one or more additional signature pages. 13.09 References. References made in this Agreement, including the use of a pronoun, shall be deemed to include where applicable, masculine, feminine, singular or plural, individuals, partnerships or corporations. As used in this Agreement, "person" shall mean any natural person, corpate or other entity. 13.10 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas, without regard to its choice of law principles provided, however, that issues in connection with title to the Interests shall be governed by the applicable laws of the State of Oklahoma. 13.11 Entire Agreement. This Agreement (including the Exhibits hereto) constitutes the entire understanding among the parties with respect to the subject matter hereof, superseding all negotiations, prior discussions and prior agreements and understandings relating to such subject matter. 13.12 Securities Laws. Buyer has advised Seller that the interests are not being acquired for distribution or transfer in violation of the securities laws of the United States or of any state thereof. Buyer hereby agrees to protect, indemnify and hold harmless Seller from and against any and all claims, costs (including, without limitation, court costs and reasonable attorney's fees), expenses, damages and liabilities which arise under applicable state or federal securities laws as a result of acts or omissions of Buyer or its affiliates which are contrary to such laws and which are in connection with the transactions contemplated hereby or the sale or other disposition of the Interests by Buyer or its affiliates. Seller hereby agrees to protect, indemnify and hold harmless Buyer from and against any and all claims, costs (including, without limitation, court costs and reasonable attorney's fees), expenses, damages and liabilities which arise under applicable state or federal securities laws as a result of acts or omissions of Seller or its affiliates which are contrary to such laws and which are in connection with the transactions contemplated hereby. Executed as of the date first above written. SELLER MAYNARD OIL COMPANY By: /s/ Glenn R. Moore --------------------------------- Glenn R. Moore President BUYER ENRON OIL & GAS COMPANY By: /s/ Leland J. McVay --------------------------------- Leland J. McVay Vice President EXHIBIT A Attached to and made a part of Purchase and Sale Agreement dated September 12, 1996, by and between Maynard Oil Company, Seller, and Enron Oil & Gas Company, as Buyer ELLIS COUNTY, OKLAHOMA PN 440502 (UT-407) EHRLICH B NO. 1-18 EXPENSE INTEREST 0.2543316 REVENUE INTEREST 0.2225402 PN 440522 EHRLICH B 2-18 EXPENSE INTEREST 0.2543316 REVENUE INTEREST 0.2225402 Oil and Gas Lease dated March 4, 1952, by and between Wesley Ehrlich and Wilma E. Ehrlich, as Lessor, and Henry Clay, as Lessee, recorded in Volume 58, page 10 of the Records of Ellis County, Oklahoma, covering the NE/4 of Section 18, Township 23 North, Range 25 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Morrow formation. (LF-04901-00) The hereinabove referenced lease is subject to Operating Agreement dated March 29, 1961, by and between Amoco Production Company, as Operator, and Phillips Petroleum Company, et al, as Non-Operators; Gas Purchase and Sale Agreement dated December 19, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company; Gas Agreement amending various Gas Purchase Contracts, dated February 5, 1990, by and between Northern Natural Gas Company, a division of Enron Corp., successor in interest to Northern Natural Gas Company, as Buyer, and Maynard Oil Company, as Seller; Assignment, Conveyance and Bill of Sale effective December 1, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma. PN 440506 (UT-417) IRVIN NO. 1-25 EXPENSE INTEREST 0.0000000 REVENUE INTEREST 0.0068359 (ORI) 0.0039063 (ROYALTY) Oil and Gas Lease dated January 5, 1952, by and between Carrie L. O'Hern, as Lessor, and C. V. Richardson, as Lessee, recorded in Volume 58, page 282 of the Records of Ellis County, Oklahoma, INSOFAR AND ONLY INOSFAR as said lease covers the NE/4 NE/4 of Section 25, Township 24 North, Range 25 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Morrow formation. (LF-04923-00) The hereinabove referenced lease is subject to Agreement dated November 27, 1961, by and between Shell Oil Company to Pan American Petroleum Corporation; Partial Assignment dated December 22, 1961, by and between Shell Oil Company to Pan American Petroleum Corporation. An undivided one-half (l/2) interest in the oil, gas and other minerals in and under and that may be produced from the NE/4 NE/4 of Section 25, Township 24 North, Range 25 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Morrow formation, as conveyed in that certain Mineral Deed dated March 13, 1957, by and between James B. Franklin, as Grantor, and Shell Canadian Exploration Company, as Grantee, recorded in Volume 92, page 362 of the Records of Ellis County, Oklahoma. (LF-04923-AA-01) The hereinabove referenced mineral deed is subject to Oil and Gas Lease dated January 5, 1952, from Carrie L. O'Hern to C. V. Richardson; Purchase and Sale Agreement dated December 19, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective December 1, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma. PN 440602 (UT-435) KATTERJOHN NO. 1-2 AKA SHATTUCK OP UNIT EXPENSE INTEREST 0.1174122 REVENUE INTEREST 0.1011284 PN 440601N KATHY NO. 1-14 BEFORE PAYOUT EXPENSE INTEREST 0.0000000 BEFORE PAYOUT REVENUE INTEREST 0.0000000 AFTER PAYOUT EXPENSE INTEREST 0.1174122 AFTER PAYOUT REVENUE INTEREST 0.1027357 Oil and Gas Lease dated November 25, 1955, by and between D. L. Katterjohn, as Lessor, and E. J. Farris, as Lessee, recorded in Volume 78, pages 27-28 of the Records of Ellis County, Oklahoma, covering Lots 1 and 2 and S/2 NE/4 of Section 2, Township 22 North, Range 26 West, together with any rights, titles and interests acquired by Shell Western E&P Inc. in and to the Pan Am Shattuck Operating Unit by virtue of that certain unrecorded Operating Agreement dated November 5, 1958 by and between Pan American Petroleum Company, as Operator, and Shell Oil Company, et al, as Non- Operators. (LF-04929-00) The hereinabove referenced lease is subject to Gas Purchase Contract dated October 1, 1989, as amended, by and between Production Gathering Company, as Buyer, and Maynard Oil Company, as Seller; Operating Agreement dated November 5, 1958, as amended, by and between Pan American Petroleum Corporation, as Operator, and Shell Oil Company, et al, as Non-Operators, May 1, 1959; Purchase and Sale Agreement dated December 19, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective December 1, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma. PN 440508 (UT-442) LUANE NO. 1-28 EXPENSE INTEREST 0.0625000 REVENUE INTEREST 0.0546875 0.0078125 (ORI) An undivided one-fourth (1/4) interest in the oil, gas and other minerals in and under and that may be produced from the SW/4 of Section 28, Township 24 North, Range 25 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Morrow formation, as conveyed in that certain Mineral Deed dated March 13, 1957, by and between James B. Franklin, as Grantor, and Shell Canadian Exploration Company, as Grantee, recorded in Volume 92, page 367 of the Records of Ellis County, Oklahoma and subsequently conveyed to Maynard Oil Company from Shell Western E&P Inc. by instrument entitled "Assignment, Conveyance and Bill of Sale" effective December 1, 1985, recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma. (LF-04893-AA) The hereinabove referenced mineral deed is subject to Gas Purchase Agreement dated October 1, 1989 by and between Production Gathering Company, as Buyer, and Maynard Oil Company, as Seller; Operating Agreement dated January 18, 1979, by and between Amoco Production Company, as Operator, and Mattax Petroleum Corporation, et al, as Non-Operators; Purchase and Sale Agreement dated December 19, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective December 1, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma. PN 440509 (UT-446) MASSEY UNIT NO. 1-22 EXPENSE INTEREST 0.0312500 REVENUE INTEREST 0.0273437 0.0039063 (ROYALTY) An undivided one-fourth (1/4) interest in the oil, gas and other minerals that may be produced from the N/2 NE/4 of Section 22, Township 24 North, Range 25 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Morrow formation, as conveyed in that certain Mineral Deed dated March 30, 1957, by and between James B. Franklin, as Grantor, and Shell Canadian Exploration Company, as Grantee, recorded in Volume 91, page 181 of the Records of Ellis County, Oklahoma and subsequently conveyed to Maynard Oil Company from Shell Western E&P Inc. by instrument entitled "Assignment, Conveyance and Bill of Sale" effective December 1, 1985, recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma. (LF-04895-AA) The hereinabove referenced mineral deed is subject to Gas Purchase Contract dated December 4, l980 between Michigan-Wisconsin Pipeline Company (N/K/A ANR Pipeline Companies), as Buyer, and Shell Oil Company, as Seller; Operating Agreement dated May 11, 1978, by and between Amoco Production Company, as Operator, and Kenneth D. Kirkland, et al, as Non-Operators; Purchase and Sale Agreement dated December 19, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective December 1, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma. PN 440513 (UT-412) PARKER NO. 9-47 EXPENSE INTEREST 0.0000000 REVENUE INTEREST 0.0078125 (ORI) Oil and Gas Lease dated September 9, 1947, by and between Carrie Lee O'Hern, as Lessor, and W. G. Mouser, as Lessee, recorded in Volume 36, page 364 of the Records of Ellis County, Oklahoma, covering S/2 S/2 of Section 29, Township 24 North, Range 25 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Morrow formation. (LF-04896-00- 01) The hereinabove referenced lease is subject to Assignment dated March 14, 1958, from the Texas Company to Shell Oil Company; Oklahoma Corporation Commission CD No. 44469, Order No. 122911 dated July 19, 1976; Purchase and Sale Agreement dated December 19, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective December 1, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma. PN 440516 (UT-403) SELLS UNIT NO. 1-24 AND 2-24 EXPENSE INTEREST 0.0000000 REVENUE INTEREST 0.0078125 (ROYALTY) An undivided one-fourth (1/4) interest in the oil, gas and other minerals in and under and that may be produced from the W/2 W/2 of Section 24, Township 24 North, Range 25 West, Ellis County, Oklahoma, LIMITED to the Morrow Common Source of Supply, and being the same lands as conveyed in that certain Mineral Deed dated March 13, 1957, by and between James B. Franklin, as Grantor, and Shell Canadian Exploration Company, as Grantee, recorded in Volume 92, page 365 of the Records of Ellis County, Oklahoma, and subsequently conveyed to Maynard Oil Company from Shell Western E&P Inc. by instrument entitled "Assignment, Conveyance and Bill of Sale" effective December 1, 1985, recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma. (LF-04918-AA-00) The hereinabove referenced mineral interest is subject to Oil and Gas Lease dated July 5, 1966, by and between Shell Oil Company, as Lessor, and Tidewater Oil Company, as Lessee,; Purchase and Sale Agreement dated December 19, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective December 1, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma. PN 440704 (UT-432) SUTTER D NO. 1-21 EXPENSE INTEREST 0.2500000 REVENUE INTEREST 0.2187500 PN 440704N SUTTER D NO. 2-21 BEFORE PAYOUT EXPENSE INTEREST 0.0000000 BEFORE PAYOUT REVENUE INTEREST 0.0312500 AFTER PAYOUT EXPENSE INTEREST 0.1000000 AFTER PAYOUT REVENUE INTEREST 0.0875000 Oil and Gas Lease dated May 22, 1956, by and between L. T. Sutter and Naomi Sutter, et al, as Lessors, and James B. Franklin, as Lessee, recorded in Volume 81, page 314 of the Records of Ellis County, Oklahoma, covering SW/4 of Section 21, Township 23 North, Range 23 West, Ellis County, Oklahoma. (LF-04885-00) The hereinabove referenced lease is subject to Operating Agreement dated December 3, 1964, by and between Pan American Petroleum Corporation, as Operator, and Shell Oil Company, et al, as Non-Operators; Oklahoma Corporation Commission Cause C.D. No. 14981; Order No. 45804; Purchase and Sale Agreement dated December 19, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective December 1, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma; Limited and Partial Assignment of Oil and Gas dated October 27, 1995, effective July 6, 1994, from Maynard Oil Company, as Assignor, to Amoco Production Company, as Assignee, recorded in _____, page _____ of the Records of Ellis County, Oklahoma. PN 440705 (UT-399) SUTTER STATE NO. 1-17 EXPENSE INTEREST 0.2500000 REVENUE INTEREST 0.2187500 PN 440705-N SUTTER STATE NO. 2-17 BEFORE PAYOUT EXPENSE INTEREST 0.0000000 BEFORE PAYOUT REVENUE INTEREST 0.0000000 AFTER PAYOUT EXPENSE INTEREST 0.2500000 AFTER PAYOUT REVENUE INTEREST 0.2187500 Oil and Gas Lease dated July 28, 1964, by and between State of Oklahoma bearing serial number 23-CS-10081, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 145, page 629 of the Records of Ellis County, Oklahoma, covering SW/4 NE/4, NW/4, NW/4 SE/4, N/2 SW/4 of Section 17, Township 22 North, Range 23 West, Ellis County, Oklahoma. (LF-04882-AA) The hereinabove referenced lease is subject to Operating Agreement dated July 20, 1965, by and between Gulf Oil Corporation, as Operator, and Shell Oil Company, et al, as Non-Operators; Purchase and Sale Agreement dated December 19, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective December 1, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma. PN 439401 DAVID SWENN (UT-414) EXPENSE INTEREST 0.0312500 REVENUE INTEREST 0.0273437 Oil and Gas Lease dated October 17, 1956, by and between L. J. Hamby, et al, as Lessor, and James B. Franklin, as Lessee, recorded in Book 85, page 535 of the Records of Ellis County, Oklahoma, INSOFAR AND ONLY INSOFAR as said lease covers the 80.00 acres, more or less, being the S/2 SE/4 of Section 10, Township 23 North, Range 26 West, LIMITED to rights from the surface to the base of the Morrow formation, Ellis County, Oklahoma (LF- 04905-AA-02) The hereinabove referenced lease is subject to Operating Agreement dated June 13, 1960, by and between Texaco, Inc., as Operator, and Shell Oil Company (predecessor in title to Maynard Oil Company), et al, as Non- Operators. PN 440518 WHITE NO. 1-21 1-C AND 1-T (UT-440) EXPENSE INTEREST 0.1250000 REVENUE INTEREST 0.1093750 0.0156250 (ROYALTY) An undivided one-fourth (1/4) interest in the oil, gas and other minerals in and under and that may be produced from the E/2 of Section 21, Township 24 North, Range 25 West, Ellis County, Oklahoma, as conveyed in that certain Mineral Deed dated March 14, 1957, by and between James B. Franklin, as Grantor, and Shell Canadian Exploration Company, as Grantee, recorded in Volume 92, page 363 of the Records of Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the deepest producing formation and subsequently conveyed to Maynard Oil Company from Shell Western E&P Inc. by instrument entitled "Assignment, Conveyance and Bill of Sale" effective December 1, 1985, recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma. (LF-04892-AA) The hereinabove referenced mineral deed is subject to Gas Purchase Agreement dated October 1, 1989, Production Gathering Company, as Buyer, and Maynard Oil Company, as Seller; Operating Agreement dated June 5, l980, by and between Gibraltar Exploration, Ltd., as Operator and Shell Oil Company, et al, as Non-Operators; Purchase and Sale Agreement dated December 19, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective December 1, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma. STEPHENS COUNTY, OKLAHOMA PN 438901 (UT-371) ALLAMON NO. 15-A EXPENSE INTEREST 0.2441400 REVENUE INTEREST 0.2136231 Oil and Gas Lease dated May 23, 1969, by and between Country Club Land Co., as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 1027, page 275 of the Records of Stephens County, Oklahoma. (LF-04705-AA) Oil and Gas Lease dated May 23, 1969, by and between Helen Kuhn, et al, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 1027, page 273 of the Records of Stephens County, Oklahoma. (LF-04705-AB) The hereinabove referenced leases cover the N/2 NE/4, N/2 SW/4 NE/4 and the SE/4 SW/4 NE/4 of Section 15, Township 1 North, Range 7 West, Stephens County, Oklahoma. Oil and Gas Lease dated June 6, 1969, by and between Edward Clark, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 1028, page 13 of the Records of Stephens County, Oklahoma, covering the NW/4 of Section 15, Township 1 North, Range 7 West, Stephens County, Oklahoma. (LF-04706- AA) Oil and Gas Lease dated May 2, 1969, by and between Frazier Pierce and Zuby Pierce, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 1025, page 235 of the Records of Stephens County, Oklahoma. (LF-04707-AA) Oil and Gas Lease dated June 26, 1969, by and between Georgia Boyd, et al, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 1030, page 283 of the Records of Stephens County, Oklahoma. (LF-04707-AB) The hereinabove referenced leases cover the SW/4 of Section 15, Township 1 North, Range 7 West, Stephens County, Oklahoma. The hereinabove referenced leases are subject to Farmout Agreement and Assignment dated June 5, 1973, from Shell Oil Company to James R. Hazelwood; Farmout Agreement and Assignment dated August 17, 1973, by and between James R. Hazelwood and Tesoro Petroleum Corporation; Farmout Agreement and Assignment dated December 6, 1976, from Shell Oil Company to Tesoro Petroleum Corporation; Operating Agreement dated May 1, 1977, by and between Tesoro Petroleum Corporation, as Operator, and Shell Oil Company, et al, as Non-Operators, covering Section 15, Township 1 North, Range 7 West; Gas Purchase Agreement by and between Tesoro Petroleum Corporation and Arkansas Louisiana Gas Company and Gas Purchase Agreement dated May 7, 1978, by and between Shell and Oklahoma Natural Gas Company; Purchase and Sale Agreement dated December 3, 1984, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale by and between Shell Western E&P Inc. and Maynard Oil Company recorded in Volume 1585, page 704 of the Records of Stephens County, Oklahoma; Farmout Agreement dated September 27, 1989, by and between Maynard Oil Company, as Farmor, and Kaiser-Francis Oil Company, as Farmee; Corporation Commission Order No. 341238. PN 438905 (UT-373) BUMPASS NO. 1-22 EXPENSE INTEREST BEFORE PAYOUT 0.0000000 REVENUE INTEREST BEFORE PAYOUT 0.0151367 EXPENSE INTEREST AFTER PAYOUT 0.0302734 REVENUE INTEREST AFTER PAYOUT 0.0321655 Oil and Gas Lease dated October 16, 1969, by and between David Harris, et al, as Lessor, and L. R. Snyder, as Lessee, recorded in Volume 1042, page 390 of the Records of Stephens County, Oklahoma, covering the E/2 NW/4, SW/4 NW/4, E/2 NW/4 NW/4, SW/4 NW/4 NW/4 and the NW/4 NW/4 SW/4 of Section 22, Township 1 North, Range 7 West, Stephens County, Oklahoma. (LF-04708-00) Oil and Gas Lease dated May 2, 1969, by and between Frances Louise Jackson and Miles Jackson, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 1024, page 428 of the Records of Stephens County, Oklahoma. (LF-04709-AA) Oil and Gas Lease dated May 21, 1969, by and between L. W. Corbett, Executor of the Joseph E. Hanson Estate, deceased, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 1024, page 426 of the Records of Stephens County, Oklahoma. (LF-04709-AB) The hereinabove referenced leases cover the E/2 SW/4, SW/4 SW/4, S/2 NW/4 SW/4 and the NE/4 NW/4 SW/4 of Section 22, Township 1 North, Range 7 West, LIMITED to rights from the surface to 12,590 feet below the surface and LIMITED to the borehole of the Bumpass No. 1-22, Stephens County, Oklahoma. The hereinabove referenced leases are subject to Farmout Agreement and Assignment dated June 5, 1973, from Shell Oil Company to James R. Hazelwood; Assignment dated July 1, 1974, from Shell Oil Company to James R. Hazelwood, recorded in Volume 1171, page 141; Gas Purchase Contract dated May 1, 1974, as amended, by and between Arkansas Louisiana Gas Company, as Buyer, and Tesoro Petroleum Corporation, et al, as Seller; Gas Purchase Contract dated February 8, 1978, as amended, by and between Oklahoma Natural Gas Company, as Buyer, and Shell Oil Company, et al, as Seller; Assignment from L. R. Snyder to Shell Oil Company, recorded in Volume 1042, page 391; Purchase and Sale Agreement dated December 3, 1984, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective November 1, 1984, by and between Shell Western E&P Inc. and Maynard Oil Company, recorded in Volume 1585, page 704 of the Records of Stephens County, Oklahoma; Farmout Agreement dated September 27, 1989, by and between Maynard Oil Company, as Farmor, and Kaiser-Francis Oil Company, as Farmee; Corporation Commission Order No. 341238; Operating Agreement dated October 17, 1973, by and between Tesoro Petroleum Corporation, as Operator, and Montgomery Exploration Company, et al, as Non-Operators; Oklahoma Corporation Commission Order No. 100058 dated September 25, 1973; Farmout Agreement and Assignment dated August 17, 1973, by and between James R. Hazelwood and Tesoro Petroleum Corporation; Limited and Partial Assignment of Oil and Gas Leases dated May 24, 1995, from Maynard Oil Company to Apache Corporation, recorded in Volume _____, page _____ of the Records of Stephens County, Oklahoma. EXHIBIT A-1 Attached to and made a part of Purchase and Sale Agreement dated September 12, 1996, by and between Maynard Oil Company as Seller, and Enron Oil & Gas Company, as Buyer
PRELIMINARY PROJECTED WELLBORE UNIT PURCHASE IMBALANCE PAYOUT VALUE VALUE PRICE VOLUME DATE AMOUNT 440502 EHRLICH B 1-18 $21,588 $32,472 $54,060 10,059 N/APP N/APP 440522 EHRLICH B 2-18 $60,680 $22,892 $83,572 (3,046) N/APP N/APP 440506 IRVIN E 1-25 $1,961 $0 $1,961 0 N/APP N/APP 440601 KATHY 1-14 $0 $0 $0 0 N/APP N/APP 440602 KATTERJOHN 1-2 $13,837 $3,757 $17,594 13,593 N/APP N/APP 440508 LUANE 1-28 $8,679 $2,000 $10,679 2,699 N/APP N/APP 440509 MASSEY 1-22 $4,461 $37,528 $41,989 956 N/APP N/APP 440513 PARKER 9-47 $1,250 $0 $1,250 0 N/APP N/APP 440516 SELLS UNIT 1&2-24 $6,688 $0 $6,688 0 N/APP N/APP 440704 SUTTER D 1-21 $53,493 $8,000 $61,493 5,788 N/APP N/APP 440704 SUTTER D 2-21 $6,148 $0 $6,148 0 N/APP N/APP 440705 SUTTER ST 1-17 $55,590 $482,288 $537,878 (108) N/APP N/APP 440705 SUTTER ST 2-17 $0 $0 $0 0 06/95 $951,797 439401 DAVID SWENN $30,502 $26,226 $56,728 1 N/APP N/APP 440518 WHITE 1-21 1C&1T $10,261 $55,592 $65,853 (5,856) N/APP N/APP 438901 ALLAMON 15A $32,927 $9,816 $42,743 (5,860) KAISER- N/AVA FRANCIS 438905 BUMPASS 1-22 $798 $0 $798 0 N/APP N/APP TOTAL $308,863 $680,571 $989,434 18,226
EXHIBIT A-2 PREFERENTIAL RIGHTS TO PURCHASE Attached to and made a part of Purchase and Sale Agreement dated September 12, 1996, by and between Maynard Oil Company as Seller, and Enron Oil & Gas Company, as Buyer
PRELIMINARY WELLBORE UNIT PURCHASE VALUE VALUE PRICE 440704 SUTTER D 1-21 $53,493 $8,000 $61,493 440704 SUTTER D 2-21 $6,148 $0 $6,148 440705 SUTTER ST 1-17 $55,590 $482,288 $537,878 440705 SUTER ST 2-17 $0 $0 $0 439401 DAVID SWENN $30,502 $26,226 $56,728 $145,733 $516,514 $662,247
EXHIBIT B AUTHORIZATIONS FOR EXPENDITURE Attached to and made a part of Purchase and Sale Agreement dated September 12, 1996, by and between Maynard Oil Company as Seller, and Enron Oil & Gas Company, as Buyer SUTTER STATE 3-17 DRILL & COMPLETE LOWER MORROW TEST $229,025 DRY HOLE COST $437,025 COMPLETION COSTS EXHIBIT C Attached to and made a part of Purchase and Sale Agreement dated September 12, 1996, by and between Maynard Oil Company, as Seller, and Enron Oil & Gas Company, as Buyer. ASSIGNMENT, BILL OF SALE AND CONVEYANCE FROM MAYNARD OIL COMPANY TO ENRON OIL & GAS COMPANY, EFFECTIVE AUGUST 1, 1996 THE STATE OF OKLAHOMA ) ) KNOW ALL MEN BY THESE PRESENTS: COUNTY OF ) THAT, the undersigned, MAYNARD OIL COMPANY, a Delaware corporation, having its principal office at 8080 North Central Expressway, Suite 660, Dallas, Texas 75206 (hereinafter called "ASSIGNOR"), for and in consideration of Ten Dollars ($10.00) and other valuable consideration to it in hand paid by ENRON OIL & GAS COMPANY, a Delaware corporation, having its principal office at 1400 Smith Street, Houston, Texas 77002 (hereinafter called "ASSIGNEE"), does hereby GRANT, BARGAIN, SELL, ASSIGN and CONVEY unto Assignee, subject to the terms and conditions contained herein, the following: (a) All of Assignor's right, title and interest in and to the leasehold estate and mineral rights created by the leases described in Exhibit A, attached hereto and made a part together with any and all interest of Assignor in and to such property and in and to any agreements, leases, rights-of-way, easements, licenses and permits incident thereto, INSOFAR AND ONLY INSOFAR as the said rights cover the lands and depths described in Exhibit A; (b) All of Assignor's right, title and interest in and to the wells, and production therefrom, located on the Leases or lands pooled therewith, including but not limited to the wells described in Exhibit A together with any and all buildings or other improvements constructed thereon , together with any and all interest of Assignor in and to such property and in and to any agreements, including, without limitation, gas purchase agreements, farmin and farmout agreements, operating agreements and pooling agreements, leases, rights-of-way, easements, licenses and permits incident thereto; (c) All of Assignor's right, title and interest in and to the real and personal property, fixtures, improvements and buildings located on the lands burdened by the Leases or lands pooled therewith, and all contract rights, rights of substitution and subrogation in and to any rights and actions of warranty which Assignor has or may have. This Conveyance, Assignment and Bill of Sale is executed and delivered as part of the consummation of the transaction contemplated by that certain Purchase and Sale Agreement between Assignor, as SELLER , and Assignee, as BUYER , dated September 12, 1996, hereinafter referred to as "Sale Agreement". The warranties, representations, indemnities and covenants contained in the Sale Agreement shall survive the delivery of this Assignment in accordance with the provisions of the Sale Agreement and the delivery of this Assignment shall not affect, expand, diminish, or otherwise impair any of the warranties, representations, indemnities or covenants made in the Sale Agreement and the terms and conditions set forth therein; provided, however, any third parties transacting with Assignee with respect to any of the interests may rely on this Assignment as vesting Assignee with all of Assignor's rights, titles and interests in the said leases and wells. Assignor warrants to Assignee title to the leases as described in said Sale Agreement against any claims and demands of all persons whomsoever claim the same or any part thereof by, through and under Assignor, but not otherwise. This Conveyance, Assignment and Bill of Sale shall extend to, be binding upon and inure to the benefit of Assignor and Assignee, their respective successors and assigns and shall be deemed covenants running with the herein described lands and leasehold estates. Assignee expressly assumes, as of the Effective Date, all of Assignor's obligations relating to the said leases, including, but not limited to, the obligation of plugging and aband expense. From and After the Effective Date hereof, Assignee shall be solely responsible for the balancing of or payment for any gas imbalances which may exist. This assignment shall be effective, for all purposes as of 7:00 o'clock a.m. August 1, 1996. This assignment is being executed in several counterparts, all of which are identical, except that, to facilitate recordation, only that portion of Exhibit A which contains specific descriptions of the leases located in the recording jurisdiction in which the particular counterpart is to be recorded are included, and other portions of Exhibit A are included by reference only. All of such counterparts together shall constitute one and the same instrument. Complete copies of the Assignment containing the entire Exhibit A have been retained by Assignor and Assignee. EXECUTED this 30th day of September 1996, but to be effective as stated above. MAYNARD OIL COMPANY By: ___________________________ Glenn R. Moore President ENRON OIL & GAS COMPANY By: ___________________________ Leland J. McVay Vice President THE STATE OF TEXAS ) ) COUNTY OF DALLAS ) This instrument was acknowledged before me on September 30, 1996, by Glenn R. Moore, President of Maynard Oil Company, a Delaware corporation, on behalf of said corporation. MY COMMISSION EXPIRES: ___________________________ Cassondra Foster, Notary Public in and for the State of Texas THE STATE OF OKLAHOMA ) ) COUNTY OF OKLAHOMA ) This instrument was acknowledged before me on , 1996, by Leland J. McVay, Vice President of Enron Oil & Gas Company, a Delaware corporation, on behalf of said corporation. MY COMMISSION EXPIRES: ___________________________ Notary Public in and for the State of Oklahoma EXHIBIT D EXCHANGE ESCROW AGREEMENT Attached to and made a part of Purchase and Sale Agreement dated September 12, 1996, by and between Maynard Oil Company, as Seller, and Enron Oil & Gas, Inc., as Buyer This Agreement is dated the 12th day of September, 1996, BUT EFFECTIVE September 13, 1996, between MAYNARD OIL COMPANY, a Delaware corporation, having its principal office at 8080 North Central Expressway, Suite 660, Dallas, Texas 75206 ("SELLER") and ENRON OIL & GAS, INC., a Delaware corporation, having its principal office at 1400 Smith Street, Houston, Texas 77002 ("BUYER") and BANK ONE TEXAS, N.A., a national banking association, hereinafter referred to as "Escrow Agent". W I T N E S S E T H WHEREAS, Seller and Purchaser have entered into that certain Purchase and Sale Agreement dated September 12, 1996 (the "CONTRACT ), for the sale and purchase of certain properties more particularly described in the Exhibit "A" attached ("SELLER'S PROPERTY"). WHEREAS, Purchaser has agreed to accommodate Seller in effecting a tax deferred exchange under Section 1031 of the Internal Revenue Code of 1986 (the "CODE") by acquiring for the benefit of Seller and exchanging for Seller's Property one or more like properties (collectively, "EXCHANGE PROPERTY"), to be designated by Seller and thereafter acquired and transferred to Seller; WHEREAS, unless notified otherwise by Seller and Buyer jointly, Escrow Agent may rely upon the date of this agreement, as set forth above, being the date on which Seller's property was transferred to Buyer; and WHEREAS, this Exchange Escrow Agreement is referred to as the "AGREEMENT". NOW THEREFORE, the parties agree as follows: 1. Creation of Escrow. Buyer agrees to deposit with and deliver to Escrow Agent, the net closing proceeds of the Seller's Property, which net closing proceeds shall consist of cash in the amount of Four Million Two Hundred Seventy Seven Thousand One Hundred Thirty Eight Dollars ($4,277,138.00) plus or minus any adjustments allowed under ARTICLE II of the Contract and less costs of closing, fees, taxes, and other reductions contemplated by the Contract, said net closing proceeds being hereinafter referred to as the "ESCROW FUND . Escrow Agent shall have no responsibility to ascertain whether the funds deposited with it as the Escrow Funds are equal to the net closing proceeds described in the immediately preceding sentence. Each deposit to the Escrow Fund, whether initially made as contemplated above, or made subsequently for whatever reason, shall be in cash, and shall be accompanied by notice to Escrow Agent setting forth the time and method of delivery of such cash, the amount thereof, and directions to deposit such funds to the escrow account created hereunder. Escrow Agent shall invest the Escrow Fund at the written request of the parties hereto. Said request shall be by notice, which shall specify the type of investment to be made, the maturity date, and the principal amount to be invested. The Escrow Agent shall not be liable for losses on any investments made by it pursuant to and in compliance with such instructions; and Escrow Agent shall not be responsible or liable for any penalty or loss incurred as a result of the settlement or liquidation of any such investment prior to this maturity to enable Escrow Agent to make any disbursement required hereunder. The Escrow Fund will remain uninvested until such notice of investment instructions is received. All interest earned on the Escrow Fund shall be added to and shall become a part of the Escrow Fund, subject to the same restrictions on distribution as contained herein for the Escrow Fund. No assignment, transfer, conveyance or hypothecation of any right, title or interest in and to the subject matter of this Escrow shall be binding upon Escrow Agent unless notice thereof shall be served upon Escrow Agent and all fees, costs and expenses incident thereto shall have been paid and then only upon Escrow Agent's assent thereto in writing. Escrow Agent shall be under no duty or obligation to ascertain the identity, authority or rights of the parties executing, delivering or purporting to execute or deliver these instructions or any documents, paper, or payments deposited or called for hereunder, and assumes no responsibility or liability for the validity or sufficiency of these instructions or any documents, papers or payments deposited or called for hereunder. 2. Interests in Escrow Fund. Buyer declares that the purpose of the Escrow Fund is to secure to Seller ormance of Buyer's obligations under the Contract. Under no circumstances shall the Escrow fund be disbursed, except pursuant to the terms of this Agreement. 3. Escrow Fee; Costs. Seller shall pay to Escrow Agent upon execution hereof fees as outlined on Exhibit "B" for services rendered by it pursuant to the provisions of this Agreement, and will reimburse Escrow Agent for its reasonable expenses, including attorney's fees, incurred in connection with the performance of such services as such expenses are incurred. Escrow Agent's expenses, including reasonable attorney's fees for review, revision and approval of this Agreement shall be paid by Seller to Escrow Agent upon execution of this Agreement. Notwithstanding anything to the contrary contained in any other provision of this Agreement or any instructions to the contrary from either Buyer or Seller, Escrow Agent shall be entitled to retain from any disbursements requested hereunder any outstanding fees and/or expense due to it hereunder. Escrow Agent shall be entitled to consult with counsel as it deems necessary from time to time, and reasonable fees therefore shall be an expense reimbursable to Escrow Agent as provided hereunder. Escrow Agent is hereby granted a lien on the Escrow Fund for all indebtedness that may become owing to Escrow Agent pursuant to this Agreement, which may be enforced by Escrow Agent by appropriate foreclosure proceedings. 4. Identification and Acquisition of Exchange Property. Seller shall identify and negotiate the terms of acquisition of one or more Exchange Property or Exchange Properties. Upon Notice to Escrow Agent from Seller as to the need for monies in the Escrow Fund to acquire an Exchange Property, which notice shall provide a description of the Exchange Property, the general terms of its acquisition and instructions for the disbursement of Escrow Funds to accomplish acquisition of the Exchange Property, the Escrow Agent shall disburse funds in accordance wed that (i) such notice shall be given to Escrow Agent at least three business days prior to any needed disbursement; (ii) once disbursed, Escrow Agent shall have no further responsibility with respect to such funds; and (iii) Escrow Agent shall never have any responsibility to supply funds needed by Seller from its own assets. The Escrow Agent may rely conclusively upon the information contained in the notification. 5. Termination; Disbursement to Seller. This Agreement shall terminate automatically, without notice to any party, as follows: (a) in the event Seller fails to give notice to Escrow Agent that it has designated Exchange Property by the forty-fifth (45th) day following the date of this Agreement at the close of business of such day, or (b) otherwise, on the one hundred eightieth (180th) day following the date of this Agreement provided, that if Seller designates Exchange Property and all property so designated has been successfully acquired and transferred to Seller prior to the one hundred eightieth (180th) day following the date of this Agreement, then Seller shall so notify Escrow Agent, and this Agreement shall instead terminate on the day following Escrow Agent's receipt of such notice. Upon termination of this Agreement, the Escrow Fund as then constituted shall become the property of Seller and shall promptly be paid over and delivered to Seller subject to Escrow Agent's right to offset and deduct all unpaid fees of Escrow Agent and all reasonable expenses, including attorney's fees, and authorized disbursements. Under no circumstances shall any party of the Escrow Fund be disbursed to Seller except upon termination of this Agreement pursuant to this paragraph. Seller shall have no right to receive, pledge, borrow, or otherwise obtain the benefits of the Escrow Fund prior to termination of this Agreement pursuant to this paragraph. 6. Security Interest of Seller. Buyer agrees the Escrow Fund is hereby impressed with and made subject to a security interest in favor of Seller securing Buyer's performance to obtain and transfer title to the Exchange Property as set forth above. 7. Successor Escrow Agent. Escrow Agent may at any time resign hereunder by giving notice of its resignation to Seller and Buyer at least 10 days prior to the date specified for such resignation to take effect. If Escrow Agent has so resigned, Seller and Buyer shall appoint a successor escrow agent within such notice period. Further, if Escrow Agent has not previously given notice of resignation, Seller and Buyer may remove Escrow Agent by mutually naming a successor hereunder to Escrow Agent, which shall be done by s removal and appointment of the Successor Escrow Agent at least ten (10) days prior to the date specified for such removal to take place. Such Successor Escrow Agent, regardless of why appointed, shall have all the duties and powers assumed and conferred in this Agreement upon Escrow Agent. Upon the date on which the resignation or removal of Escrow Agent is specified to take effect, the Escrow fund shall be delivered to the Successor Escrow Agent so named by Seller and Buyer above in this paragraph, whereupon all Escrow Agent's obligations hereunder shall cease. If no Successor Escrow Agent is so designated by such effective date, all obligations of Escrow Agent hereunder, nevertheless, shall cease and terminate. Escrow Agent's sole responsibility thereafter shall be to keep safely the Escrow Fund and to deliver the same to a person designated by Seller and Buyer or in accordance with the directions of a final order or judgment of a court of competent jurisdiction. 8. Escrow Agent Release. Escrow Agent shall have no liability under, or duty to inquire into the terms and provisions of this Agreement or the transaction between Seller and Buyer and it is agreed that its duties hereunder are purely ministerial in nature, and Escrow Agent shall incur no liability whatsoever except for its willful misconduct or gross negligence so long as it has acted in good faith. Escrow Agent shall not be bound by any modification, amendment, termination, cancellation, rescission or revision of this Escrow Agreement unless the same shall be in writing and signed by Seller and Buyer, and if its duties hereunder are affected thereby, unless it shall have given prior written consent thereto. Escrow Agent shall have no liability for the acts of any of its agents unless it has been grossly negligent or engaged in willful misconduct in the selection of such agent. Escrow Agent shall be obligated only for the performance of such duties as are specifically set forth in this Agreement and may rely upon and shall be protected in acting or refraining from acting on any instrument in good faith believed by it to be genuine and to have been signed or presented by the property party or parties. Escrow Agent shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized hereby, nor for any action taken or omitted by it in accordance with the advice of its counsel. Escrow Agent may, without further investigation, assume: (a) the accuracy and truth of any written instrument, notice, certificate or opinion given to it and (b) the authenticity of any signatures thereon. 9. Indemnity. In consideration of acceptance of this escrow by Escrow Agent, Seller agrees for executors, personal representatives, successors and assigns, to indemnify, defend, and hold Escrow Agent (in every capacity, including its corporate capacity) harmless from and against any and all claims, losses, damages, taxes, liabilities, and expene incurred by Escrow Agent arising out of or in connection with its appointment, acceptance, service or performance hereunder, including the legal costs and expenses of defending itself against any Claims in connection with such expenses of defending itself against any Claims in connection with such matters. "CLAIMS" specifically includes Claims arising out of the alleged or actual negligence of Escrow Agent, but this agreement to indemnify, defend and hold harmless shall not extend to Claims which are determined to be the result of gross negligence or willful misconduct of Escrow Agent in bad faith. This agreement by Seller to indemnify, defend and hold harmless is not limited to the amount of funds held in escrow hereunder, and shall survive both the termination of the Agreement and any resignation or removal of Escrow Agent. To further secure the performance of Seller under this agreement to indemnify, defend and hold harmless, Seller and Buyer agree that Escrow Agent shall have a first and prior lien upon all deposits made hereunder to secure the performance of said agreement. 10. Interpleader. Should any controversy arise between the undersigned with respect to this Agreement or with respect to the right to receive the Escrow Fund, Escrow Agent shall have the right to institute a bill of interpleader in any court of competent jurisdiction to determine the rights of the parties. Should a bill of interpleader be instituted, or should Escrow Agent become involved in litigation in any manner whatsoever on account of this Agreement or the Escrow Fund, Seller and Buyer hereby bind themselves, their successors and assigns, to pay Escrow Agent, in addition to any charge made for acting as Escrow Agent hereunder and expenses incurred in connection therewith, reasonable attorney's fees incurred by Escrow Agent and any other disbursements, expenses, losses, costs and damages in connection with or resulting from such litigation. 11. Notices. Any notice required or permitted hereunder, to be effective, must be in writing and shall be deemed given, except as provided in the penultimate sentence of this paragraph 11 when personally delivered to any party or mailed, postage prepaid, registered or certified mail, return receipt requested, to the following addresses: If to Buyer: Enron Oil & Gas Company Attention Mr. Robert W. Kelly, II 20 North Broadway, Suite 830 Oklahoma City, OK 73102 Phone: (405) 239-7800 Fax: (405) 239-7858 If to Seller: Maynard Oil Company 8080 North Central Expressway, Suite 660 Dallas, Texas 75206 Attention Cassondra Foster Telephone: (214) 891-8461 Facsimile: (214) 891-8827 With Copy to: Maynard Oil Company 8080 North Central Expressway, Suite 660 Dallas, Texas 75206 Attention Kenneth Hatcher Telephone: (214) 891-8471 Facsimile: (214) 891-8827 If to Escrow Agent: Bank One, Texas, N.A. Attention Kay Lowrance 8111 Preston Road, 2nd Floor Dallas, TX 75225 Telephone: (214) 360-3978 Facsimile: (214) 360-3980 Provided further, and in addition to the requirements set forth above, any notice required or permitted to be given to Escrow Agent hereunder shall be effective only when actually received in writing by Kay Lowrance, on behalf of Escrow Agent, and not prior thereto. Any party may, by proper notice, change its address for notice hereunder. 12. Amendment. This Agreement is irrevocable, and may not be amended, modified or supplemented except by written instrument signed by Buyer and Seller and approved in writing by Escrow Agent. 13. Successors and Assigns. This Agreement shall inure to the benefit of the parties, their respective heirs, executors, personal representatives, successors and assigns. 14. Counterparts. This Agreement may be executed in several counterparts, and the several signed counterparts shall be deemed a single, integrated instrument. 15. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. The venue for any action arising hereunder or in connection herewith shall be in Dallas County, Texas. 16. Time of Essence. Time is expressly declared to be of the essence of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement in triplicate as of the day and year first above written. SELLER MAYNARD OIL COMPANY By: _______________________________ Glenn R. Moore President BUYER ENRON OIL & GAS, INC. By: _______________________________ Leland J. McVay Vice President ESCROW AGENT BANK ONE, TEXAS, N.A. By: ______________________________ Kay Lowrence Assistant Vice President EX-2 8 EXHIBIT 2(g) PURCHASE AND SALE AGREEMENT THIS PURCHASE AND SALE AGREEMENT (this "AGREEMENT") is made and entered into this 12th day of September, 1996, by and between MAYNARD OIL COMPANY, a Delaware corporation, having its principal office at 8080 North Central Expressway, Suite 660, Dallas, Texas 75206 ("SELLER") and ENRON OIL & GAS COMPANY, a Delaware corporation, having its principal office at 1400 Smith Street, Houston, Texas 77002 ("BUYER"). In consideration of the mutual promises contained herein, the benefits to be derived by each party hereunder and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller agree as follows: ARTICLE I PURCHASE AND SALE 1.01 Purchase and Sale. Seller agrees to sell and convey and Buyer agrees to purchase and pay for the interests (as defined in Section 1.02) owned by Seller, subject to the terms and conditions of this Agreement. 1.02 Interests. All of the following shall herein be called the "INTERESTS": (a) All of Seller's right, title and interest in and to the leasehold estate and mineral rights created by the leases described in Exhibit A (the "LEASES") together with any and all interest of Seller in and to such property and in and to any agreements, leases, rights-of-way, easements, licenses and permits incident thereto; (b) All of Seller's right, title and interest in and to the wells, and production therefrom, located on the Leases or lands pooled therewith, including but not limited to the wells described in Exhibit A together with any and all buildings or other improvements constructed thereon (collectively the "WELLS", together with any and all interest of Seller in and to such property and in and to any agreements, including, without limitation, gas purchase agreements, farmin and farmout agreements, operating agreements and pooling agreements, leases, rights-of-way, easements, licenses and permits incident thereto); (c) All of Seller's right, title and interest in and to the real and personal property, fixtures, improvements and buildings now or as of the Effective Time (as defined in Section 1.03) located on the lands burdened by the Leases or lands pooled therewith (the LANDS"), and all contract rights, rights of substitution and subrogation in and to any rights and actions of warranty which Seller has or may have with respect to the Interests; (d) All of the files, records and data related to the items described in Subsections (a), (b) and (c) above, and all the seismic and geophysical data of Seller appurtenant to or crossing the Leases, Wells and Lands; and (e) Any and all other assets of Seller appurtenant or related to or used in connection with the Leases and Wells. 1.03 Effective Time. The purchase and sale of the Interests shall be effective as of August 1, 1996, at 7:00 A.M., local time (herein called the "EFFECTIVE TIME ) in the county in which the Lands are located. ARTICLE II PURCHASE PRICE 2.01 Purchase Price. The purchase price for the Interests shall be Four Million Two Hundred Seventy Seven Thousand One Hundred Thirty Eight DOLLARS ($4,277,138.00) (herein called the "PRELIMINARY PURCHASE PRICE"), subject to adjustment as set forth in Section 2.02 and Section 2.03 below. 2.02 Performance Deposit. On or before 4:00 o'clock p.m., local time, September 13, 1996, Buyer shall tender to Bank One, Texas, N.A. ("ESCROW AGENT", as provided for in Exhibit D hereto), by wire transfer, a performance deposit in the amount of Four Hundred Twenty Seven Thousand Seven Hundred Fourteen DOLLARS ($427,714.00). The performance deposit is received solely to assure the performance of Buyer pursuant to the terms and conditions hereof. The performance deposit will be returned to Buyer at Closing, upon consummation of the transaction, or at Buyer's election, may be credited to the Preliminary Purchase Price. No interest shall be paid or credited to the performance deposit. If Buyer fails, refuses, or is unable to close the sale in accordance with the terms herein, Seller, except as otherwise herein specifically provided, may, at its option, retain the performance deposit as agreed liquidated damages and not as a penalty. If Seller, through no fault of Buyer, refuses to close the sale in accordance with the terms herein, the performance deposit shall be returned to Buyer. 2.03 Adjustments to Purchase Price. The Preliminary Purchase Price shall be adjusted as follows and the resulting amount shall be herein called the "FINAL PURCHASE PRICE". (a) The Preliminary Purchase Price shall be increased by the following: (1) The value of all merchantable, allowable oil attributable to the Leases, in storage above the pipeline connection at the Effective Time, and not previously sold by Seller, that is credited to the Interests, such value to be the net price realized by Seller; (2) The amount of all reasonable expenditures, including, without limitation, royalties, rentals and other charges, ad valorem, property, production, excise, severance, windfall profit and other taxes based upon or measured by proceeds therefrom but not including income or gross receipts taxes, expenses billed under applicable operating agreements and, as compensation to Seller for its general and administrative expenses as operator of interests operated by it, in lieu of any other overhead charges in connection with such particular Interests: (i) that amount attributable to the Interests under any existing joint operating agreement, or (ii) in the absence of a joint operating agreement with respect thereto, the applicable rate recommended in the 1995 Ernst & Young, L.L.P. s Fixed Rate Overhead Survey in connection with the operation of the Interests from the Effective Time to the Closing Date (as defined in Section 9.01), as well as any expenditures approved by Buyer; (3) An amount equal to all prepaid expenses attributable to the interests that are paid by or on behalf of Seller prior to the Closing Date and that are, in accordance with generally accepted accounting principles, attributable to the period after the Effective Time including, without limitation, prepaid insurance, prepaid ad valorem, property, production, severance and similar taxes (but not including income taxes) based upon or measured by the ownership of property or the production of hydrocarbons or the receipt of proceeds therefrom; (4) An amount equal to seventy-five cents per mcf for a net underproduced gas imbalance; and (5) Any other amount agreed upon by Seller and Buyer. (b) The Preliminary Purchase Price shall be decreased by the following: (1) An amount equal to all proceeds of production received by Seller prior to the Closing Date that are attributable to the Interests and that are, in accordance with generally accepted accounting principles, attributable to the period of time from the Effective Time to the Closing Date; (2) An amount equal to all unpaid ad valorem, property, production, severance and similar taxes and assessments (but not including income or gross receipts taxes) based upon or measured by the ownership of property or the production of hydrocarbons or the receipt of proceeds therefrom accruing with respect to the Interests prior to the Effective Time, which amount shall be computed based upon such taxes assessed against the applicable portion of the Interests for the current tax fiscal year, or if the assessments for the current tax fiscal year are unavailable, for the preceding such year; (3) An amount equal to the sum of all Defect Adjustments and Exclusion Adjustments (as those terms are defined in Section 7.03); and (4) Any environmental adjustment pursuant to ARTICLE V.(e); (5) An amount equal to seventy-five cents ($0.75) per mcf for a net overproduced gas imbalance; and (6) Any other amount agreed upon by Seller and Buyer. 2.04 Actual Figures. When available, actual figures will be used for adjustments at Closing. To the extent actual figures are not available, estimates will be used subject to final adjustments as provided in Section 10.01 hereof. ARTICLE III REPRESENTATIONS AND WARRANTIES 3.01 Representations and Warranties of Seller. Seller represents and warrants to Buyer with respect to itself and, where applicable, with respect to the Interests, that: (a) Seller is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation, and has all requisite power and authority to own and lease the properties and assets it currently owns and leases and to carry on its business as such business is currently conducted. Seller is duly licensed or qualified to transact business and is in good standing in all jurisdictions where the character of the properties and assets now owned or leased by it or the nature of the business now conducted by it require it to be so licensed or qualified if the failure to qualify might reasonably be expected to have a material adverse effect on the business or financial prospects of Seller. Seller is also duly licensed or qualified to do business and is in good standing in each jurisdiction where the Interests are located; (b) Seller has all requisite power and authority to execute and deliver this agreement, to consummate the transactions contemplated hereby, and to perform the terms and conditions hereof to be performed by it. This Agreement constitutes, and each of the documents required to be delivered by Seller hereunder, shall constitute Seller's legal, valid and binding obligation, enforceable against Seller in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, or other laws relating to or affecting generally the enforcement of creditors' rights and general principles of equity, regardless of whether considered in proceeding in equity or at law; (c) This Agreement and its execution and delivery by Seller do not, and the fulfillment and compliance by Seller with the terms and conditions of this Agreement, and the consummation by Seller of the transactions contemplated hereby, will not (i) require any filing, consent, authorization, or approval under, any law or administrative regulation or any judicial, administrative, or arbitration order, aware, judgment, writ, injunction, or decrees applicable to or binding upon Seller (assuming the receipt of all routine governmental consents typically received after consummation of transactions of the nature contemplated by this Agreement); and (ii) conflict with, result in a breach of, constitute a default under (without regard to any requirements of notice or the lapse of time), accelerate, or permit the acceleration of the performance required by, any mortgage, indenture, loan or credit agreement or other agreement or instrument evidencing indebtedness for borrowed money to which such Seller is a party or by which it is bound or to which any of the Interests are subject; (d) As of the execution date hereof, there are no currently outstanding and effective authorities for expenditure or third party proposals for subsequent operations with respect to the Interests other than as set forth in Exhibit B; (e) As of the execution date hereof (i) no action, suit, or proceeding is pending or, has been threatened against Seller before any court, administrative agency, or arbitral tribunal, which involves or may involve the Interests, the production of oil and gas therefrom, or the use of and enjoyment thereof, or any operation or activity being conducted therein or thereon or which challenges Seller's rights to enter into this Agreement or materially adversely affects its ability to perform its obligations under this Agreement; (ii) Seller has not received written notice of nor been charged with any violation of, any provision of any law or regulation relating to the Interests, and to Seller's best knowledge, no third party has been charged with any violation of any provision of any law or regulation relating to the Interests; (f) As of the execution date hereof Seller has not received written notice that it is in default under (i) any applicable contract affecting the Interests; (ii) any order, judgment, or decree of any federal or state court or governmental authority relating to the Interests; or (iii) any other agreement, contract, lease, license, or other instrument; (g) Exhibit A contains a complete list of the Interests wherein Seller's interest is currently subject to reversionary interests or non-consent operations. In each case, such Exhibit reflects the interest of Seller before and after adjustment for such reversionary interests or non-consent operations for each Well effected. Exhibit A-1 reflects the remaining amount to be recouped, or account status as appropriate, as of the date reflected thereon with respect to each such well; (h) As of the Effective Time, to the best of Seller s knowledge, except as set forth in Exhibit A-1 hereto, there were no production imbalances or transportation and processing imbalances affecting the Interests; (i) All of the written and electronic data (including, without limitation, information relating to gathering, processing, transportation and sale of hydrocarbons from the Interests and other matters) at the time furnished or to be furnished by Seller to Buyer in conjunction with Buyer's evaluation of the Interests was contained in or derived from Seller's records kept in the ordinary course of business; and no representation or warranty is made with respect to the accuracy or correctness of any estimates, analysis, or projections or any assumptions or other matters stated therein; (j) No broker or finder is entitled to any brokerage or finder's fee, or to any commission, based in any way on agreements, arrangements or understandings made by or on behalf of Seller for which Buyer has any liability or obligation (whether contingent or otherwise); (k) Seller is not a foreign person, foreign corporation, foreign partnership, foreign trust or foreign estate (as those terms are defined in the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder); (l) From the Effective Time to the execution date hereof there has not been: (i) any material adverse change in the condition of the Interests, other than changes caused by the sale, production, or disposition of production and changes resulting from reservoir conditions other than fire, blowout, or act of God (provided that any change or revision in existing laws, regulations, or governmental policies applicable to the Interests or the sale, production, or disposition of production therefrom and the imposition of any new laws, regulations or governmental policies with respect to the Interests or the sale, production, or disposition of production therefrom shall be deemed not to be an adverse change in the condition of the Interests), (ii) any sale, lease, or other disposition of the Interests, (iii) any condemnation or taking by eminent domain of any portion of any of the Interests, or (iv) any contract or commitment to do any of the foregoing; (m) Seller or the Operator of any Interest has obtained or applied for all governmental licenses, permits, certificates, approvals, consents, authorizations and orders required for it to own or lease the Interests and develop, construct, maintain, and operate them, and to market the production therefrom, and no proceeding is pending or threatened involving revocation of any such licenses, permits, certificates, consents, authorizations or orders, provided that this representation is limited to Seller's best knowledge; (n) There are no taxes due or tax liens on any of the Interests; (o) To the best of Seller's knowledge, Seller is not a party to any joint venture, partnership, limited liability company, farmin, farmout, joint operating agreement, or other arrangement or contract with respect to any of the Interests that is reported as a partnership for federal or state income tax purposes; (p) As of the execution date hereof all of the wells and all of the equipment used in the drilling, completion and operation of any such wells, or in the production, treatment, storage, gathering and transportation of hydrocarbons from such wells, is in good operating condition, ordinary wear and tear excepted, provided that this representation is limited to Seller's best knowledge with respect to such matters which are the responsibility of the operator of any interest not operated by seller; (q) From the Effective Time to the execution date hereof, no personal injuries or deaths have occurred in connection with any of the Interests which should have been reported by Seller in accident or incident reports in accordance with applicable law or in accordance with Seller's usual operating procedures and policies; (r) To the best of Seller's knowledge, all royalties (including without limitation royalties with respect to take-or-pay payments or settlements), minimum royalties, rentals, shut-in gas payments and other payments due with respect to the Interests have been properly and timely paid in full, except for payments held in suspense for title or other reasons that are customary in the industry or which are being contested in an appropriate forum. There are no amounts claimed to be due to Seller in respect of the Interests that are being held in suspense because of a dispute as to title to the Interests or for any other reason, and Seller is entitled to be paid, and is being paid, with respect to production from the Interests, its net revenue interest without indemnity or guarantee other than those customarily found in division orders and other similar agreements and documents; (s) Except as detailed on Exhibit A-2, this Agreement and its execution and delivery by Seller does not, and the fulfillment and compliance by Seller with the terms and conditions of this Agreement and the consummation by Seller of the transactions contemplated hereby will not permit the exercise of or give rise to (with the giving of any required notice) any preferential purchase right, option or right of first refusal; (t) To the best of Seller's knowledge, all of the wells in which such Seller has an interest by virtue of its ownership of the Leases have been (i) drilled and completed within the boundaries of such Lease or within the limits otherwise permitted by contract, pooling or unit agreement, and/or by law and (ii) drilled and completed in compliance with all applicable laws, rules and regulations; and (u) Seller has reasonable surface access to each of the Interests for purposes of oil and gas exploration, development and production. 3.02 Representations and Warranties of Buyer. Buyer represents and warrants to Seller that: (a) Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation, and has all requisite power and authority to own and lease the properties and assets it currently owns and leases and to carry on its business as such business is currently conducted. Buyer is duly licensed or qualified to transact business and is in good standing in all jurisdictions where the character of the properties and assets now owned or leased by it or the nature of the business now conducted by it requires it to be so licensed or qualified if the failure to qualify might reasonably be expected to have a material adverse effect on the business or financial prospects of Buyer. Buyer is also duly licensed or qualified to do business and is in good standing in each jurisdiction where the Interests are located; (b) Buyer has all requisite power and authority to execute and deliver this Agreement, to consummate the transactions contemplated hereby, and to perform the terms and conditions hereof to be performed by it. This Agreement constitutes, and each of the documents required to be delivered by Buyer hereunder, shall constitute Buyer's legal, valid, and binding obligation, enforceable against Buyer in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, or other laws relating to or affecting generally the enforcement of creditors' rights and general principles of equity, regardless of whether considered in a proceeding in equity or at law; (c) This Agreement and its execution and delivery by Buyer does not, and the fulfillment of and compliance by Buyer with the terms and conditions of this Agreement, and the consummation by Buyer of the transactions contemplated hereby, will not (i) require any filing, consent, authorization, or approval under, any law or administrative regulation or any judicial, administrative, or arbitration order, award, judgment, writ, injunction or decree applicable to or binding upon Purchaser (assuming the receipt of all routine governmental consents typically received after consummation of transactions of the nature contemplated by this Agreement), (ii) conflict with, result in a breach of, constitute a default under (without regard to any requirements of notice or the lapse of time), accelerate, or permit the acceleration of the performance required by, any mortgage, indenture, loan or credit agreement or other agreement or instrument evidencing indebtedness for borrowed money to which Buyer is a party or by which it is bound; (d) No broker or finder is entitled to any brokerage or finder's fee, or to any commission, based in any way on agreements, arrangements or understandings made by or on behalf of Buyer for which Seller has any liability or obligation (whether contingent or otherwise); (e) Buyer is not a foreign person, foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder); and (f) In making the acquisition of the Interests hereunder, Buyer is acting in the conduct of its own business in the ordinary course. The Interests are not being acquired for distribution or transfer in violation of the securities laws of the United States or of any state thereof. ARTICLE IV COVENANTS OF BUYER AND SELLER 4.01 Covenants of Seller. Seller covenants and agrees with Buyer that: (a) After the execution of this Agreement, Seller will make available to Buyer for examination at Seller's offices in Dallas, Texas, title and other information relating to the Interests insofar as the same are in Seller's possession and, subject to the consent and cooperation of third parties, will cooperate with Buyer in Buyer's efforts to obtain, at Buyer's expense, such additional information relating to the Interests as Buyer may reasonably desire (to the extent that Seller may do so without violating legal constraints or any obligation of confidence or other contractual commitments of Seller to third parties), including without limitation: (1) Title opinions, title status reports and contracts or agreements pertaining to the Interests; (2) Copies of the leases, prior conveyances of Interests created thereby, unitization, pooling and operating agreements, division and transfer orders, mortgages, deeds of trust, security agreements, financing statements, and other encumbrances not discharged and affecting the title to or the value of the Interests; (3) Accounting and other records relating to the payment of rentals, royalties, joint interest billings and other payments due under the Leases or the Wells; (4) Records relating to the payment of ad valorem, property, production, severance, excise and similar taxes and assessments based on or measured by the ownership of property or the production of hydrocarbons or the receipt of proceeds therefrom on the Interests; (5) Ownership maps and surveys relating to the Interests; (6) Copies of purchase, sale, processing and transportation agreements relating to the production of gas from the Interests. Copies of all gas balancing agreements and gas balancing statements; (7) Copies of agreements, leases, permits, easements, licenses and orders relating to the Interests; (8) Production records relating to the Interests; (9) Inventories of personal property and fixtures included in the Interests; and (10) Any and all other information contained in Seller's files that relates to the Interests other than matters subject to attorney- client or attorney work privilege or concerning Seller's economic evaluation. Seller shall permit Buyer to inspect and photocopy such information and records at any reasonable time during the term of this Agreement. Seller shall cooperate with Buyer in Buyer's efforts to obtain such additional title information as Buyer may reasonably deem prudent. (b) During the period from the date of this Agreement to the Date of Closing, without the prior written consent of Buyer, Seller will not (i) cause any of its portion of the Leases or other of the Interests to be developed, maintained, or operated in a manner substantially inconsistent with prior operations; (ii) abandon any material part of any of its portion of the Interests; (iii) commence any material operation of any of its portion of the Leases or the Interests anticipated to cost Seller in excess of Fifteen Thousand Dollars ($15,000.00) per operation (except emergency operations, operations required under presently existing contractual obligations, the on-going commitments under the AFE's described in Exhibit B hereto, and operations undertaken to avoid any penalty provisions of any applicable agreement or order), or (iv) convey or dispose of any material part of any of its portion of the Interests (other than oil, gas and other liquid products produced from the Interests in the regular course of business). Buyer acknowledges that Seller owns undivided interests in certain of the Interests and Buyer agrees that the acts or omissions of Seller's co-owners shall not constitute a violation of the provision of this Section 4.01(b) nor shall any action required by a vote of co-owners constitute such a violation so long as Seller has voted its interest with Buyer's prior consent; (c) Seller shall use all reasonable efforts to maintain its corporate status from the date hereof until Closing and to assure that as of the Closing Date it will not be under any corporate, legal or contractual restriction that would prohibit or delay the timely consummation of such transactions; and (d) Seller shall promptly notify Buyer of any suit, action, claim, threatened suit, action or claim, or other proceedings of the type referred to in Section 3.01(e) or (f) that arises prior to the Closing with respect to which Seller receives notice or otherwise obtains knowledge following the execution of this Agreement. 4.02 Covenants of Buyer. Buyer covenants and agrees with Seller that: (a) Buyer shall use all reasonable efforts to maintain its corporate status and to assure that as of the Closing Date it will not be under any corporate, legal or contractual restriction that would prohibit or delay the timely consummation of such transactions; (b) To the extent necessary to facilitate the consummation of the transactions contemplated herein, Buyer agrees to enter into specific agreements of assumption with respect to the obligations of Seller to specific third parties or governmental authorities to the extent such obligations are attributable to the Interests after the Effective Time. Buyer also shall be obligated to obtain consents from all necessary Federal authorities, including the Bureau of Indian Affairs, and State authorities to the assignment of the Leases; (c) For a period of ten (10) years after the Closing Date, Buyer shall provide Seller with reasonable access to the Records so long as Buyer is given reasonable notice prior to Seller's access; and (d) Buyer represents that it has performed, or will perform prior to Closing, sufficient review and due diligence with respect to the Interests which includes reviewing well data, title and other files and performing necessary evaluations, assessments, and other tasks involved in evaluating the Interests, to satisfy its requirements, completely, and enable it to make an informed decision to acquire the Interests under the terms of this Agreement. ARTICLE V ASSUMPTION OF LIABILITIES AND INDEMNITIES As used in this ARTICLE V, and the paragraphs hereunder "CLAIMS" shall include claims, demands, causes of action, liabilities, damages, penalties and judgements of any kind or character and all costs and fees in connection therewith. (a) At the Closing, but effective as of the Effective Time, Buyer shall (i) assume, and be responsible for and comply with all duties and obligations of Seller, express or implied, with respect to the Interests, including, without limitation, those arising under or by virtue of the Seller's leases and contracts listed in Exhibit A, and the permits, the applicable statutes or rules, regulations or orders of any governmental authority (specifically including, without limitation, any governmental request or requirement to plug, replug and/or abandon any well of whatsoever type, status or classification, or to take any clean-up, remediation or other action with respect to the Interests), and (ii) except as otherwise provided herein, to defend, indemnify and hold harmless Seller from any and all claims in connection therewith; (b) Subject to the provisions of Paragraphs (c), (d) and (e) below Seller shall defend, indemnify and hold harmless Buyer from any and all claims, costs, expenses, liabilities or causes of action relating to or arising out of Seller's ownership or operation of Seller's Interests prior to the Effective Time and Buyer shall defend, indemnify and hold harmless Seller from any and all claims, costs, expenses, liabilities or causes of action relating to or arising out of Buyer's ownership and operation of the Interests after the Effective Time. Each indemnified party hereunder agrees that upon its discovery of facts giving rise to a claim for indemnity under the provisions of this Agreement, including receipt by it of any demand, assertion, claim, action or proceeding, judicial or otherwise, by any third party (such third party actions being referred to herein as a "THIRD PARTY CLAIM"), it will give prompt notice thereof in writing to the indemnifying party together with a statement of such information with respect to any of the foregoing as it shall then have. Such notice shall include a formal demand for indemnification under this Agreement. The indemnified party shall afford the indemnifying party a reasonable opportunity to pay, settle, or contest any Third Party Claim at its expense; (c) Seller shall (i) be responsible for any and all claims, including but not limited to claims for payment of royalties, arising out of the production and sale of hydrocarbons by Seller from the Interests, and the proper accounting and payment of expenses for the Interests, insofar as such claims and payments relate to period of time prior to the Effective Time, and (ii) defend, indemnify and hold harmless Buyer from any and all of such claims and payments; (d) Buyer shall (i) be responsible for any and all claims, including but not limited to claims for payment of royalties, arising out of the production and sale of hydrocarbons by Buyer from the Interests, and the proper accounting and payment of expenses for the Interests, insofar as such claims and payments relate to period of time beginning at the Effective Time and thereafter, and (ii) defend, indemnify and hold harmless Seller from any and all of such claims and payments; and (e) After the execution of this Agreement, Buyer, at its option, and its sole cost, risk and expense, may obtain an environmental audit of the Interests at any time prior to September 20, 1996. Seller shall provide the environmental auditors all information available to it which they may reasonably request and shall grant said auditors physical access to the Interests. For those Interests which are not operated by Seller, Buyer shall obtain permission from the operator to conduct such inspections. If the audit reveals any environmental conditions which are not satisfactory to Buyer, Seller shall immediately be provided a copy of the audit information and either party shall have the option to terminate this Agreement as to the affected Interest(s) with a deduction from the Preliminary Purchase Price of the allocated value attributable to that Interest(s), without liability, unless Seller affirms in writing that it will remediate such conditions to the satisfaction of the Buyer prior to Closing. Buyer shall defend and indemnify Seller from any and all liability, claims, causes of action, injury to Buyer's employees, agents or contractors or to Buyer's property and/or injury to Seller's property, employees, agents or contracts which may arise out of Buyer's inspections, but only to the extent of Buyer's negligence. If such deductions exceed ten percent (10%) of the Preliminary Purchase Price and the parties are unable to mutually agree to proceed with closing, then either party shall have the right to terminate this Agreement without liability. After Closing, Buyer shall be deemed to have fully inspected and accepted the Interests "AS IS" in their then current physical and environmental condition. ARTICLE VI DISCLAIMER OF WARRANTIES Buyer acknowledges that in making the decision to enter into this Agreement and consummate the transactions contemplated hereby, Buyer has relied only upon its own independent investigation of the Lands. Accordingly, Buyer acknowledges that Seller has not made and Seller hereby expressly disclaims and negates any representation or warranty express or implied at common law, by statute or otherwise relating to (i) condition of the Lands (including but not limited to any implied or express warranty of merchantability or fitness for a particular purpose or of conformity to models or samples of materials) and (ii) any information, data or other materials (written or oral) furnished to Buyer by or on behalf of Seller (including but not limited to information, data or other materials regarding the existence or extent of oil, gas or other mineral reserves, the recoverability of or the cost of recovering such reserves, the value of such reserves, any producing pricing assumption, present or past production rates, the environmental condition of the Lands, including but not limited to the presence of naturally occurring radioactive material ("NORM"), and the ability to sell oil or gas production after Closing); provided, however, that the foregoing disclaimer and negation of representations and warranties shall not affect or impair the representations and warranties of Seller made in Section 3.01. ARTICLE VII TITLE MATTERS 7.01 Defensible Title. (a) As used herein, the term "DEFENSIBLE TITLE" shall mean, as to each of the Interests, such title which, subject to and except for the Permitted Encumbrances (as defined hereinafter): (i) entitles Seller to receive not less than the "NET REVENUE INTEREST" set forth in Exhibit A of all oil, gas and associated liquid and gaseous hydrocarbons produced, saved and marketed from the presently producing formations in the presently producing wells bottomed in the Lands; and (ii) obligates Seller to bear costs and expenses relating to the maintenance, development and operation of those portions of the presently producing wells bottomed in the Lands in an amount not greater than the "WORKING INTEREST" set forth in Exhibit A; (b) The term "PERMITTED ENCUMBRANCES", as used herein, shall mean: (1) Lessor's royalties, overriding royalties, reversionary interests and similar burdens provided that the net cumulative effect of such burdens does not operate to reduce the Net Revenue Interest of any interest to less than the Net Revenue Interest therefor set forth in Exhibit A; (2) Preferential rights to purchase and required third party consents to assignments and similar agreements with respect to which, prior to Closing; (i) waivers or consents are obtained from the appropriate parties, (ii) the appropriate time period for asserting such rights has expired without an exercise of such rights, or (iii) with respect to consents, such consents which need not be obtained prior to an assignment, or the failure to obtain such consents will not have a material adverse effect on the value of the Interests to Buyer; (3) Liens for taxes or assessments not yet due or not yet delinquent, or if delinquent, that are being contested in good faith in the ordinary course of business; (4) All rights to consent by, required notices to, filings with, or other actions by governmental entities in connection with the sale or conveyance of any of the Interests if the same are customarily obtained subsequent to such sale or conveyance; (5) Rights of reassignment; (6) Easements, rights-of-way, servitudes, permits, surface leases and other rights in respect of surface operations, pipelines, grazing, logging, canals, ditches, reservoir or the like; conditions, covenants or other restrictions; and easements for streets, alleys, highways, pipelines, telephone lines, power lines, railways and other easements and rights-of-way on, over or in respect of any of the Interests; (7) Such Title Defects or other defects as Buyer has waived pursuant to the terms of this Agreement; (8) Liens to be released at Closing; (9) The terms and conditions of all leases, agreements, orders, instruments, documents and other matters described in Exhibit A hereto; and (10) Rights reserved to or vested in any municipality or governmental, statutory or public authority to control or regulate any of the Interests in any manner, and all applicable laws, rules and orders of governmental authority. (c) The term "TITLE DEFECT" as used herein shall mean any encumbrance, encroachment, irregularity, defect in or objection to Seller's title to each Interest (expressly excluding Permitted Encumbrances), that alone or in combination with other defects, renders Seller's title to that Interest less than Defensible Title or which would adversely interfere with the use, possession, ownership or value thereof, or any violation of applicable laws, rules, regulations or orders of any governmental agency having jurisdiction over the Interests which will likely result in an impairment or loss of title to all or a portion of the Interests or diminish the value thereof or likely will hinder or impede the operation of such interest, or any matter constituting a breach of Seller's representation and warranties as set forth in Section 3.01. Materialmen's mechanics', repairmen's, employees', contractors', operators' or other similar liens or charges arising in the ordinary course of business incidental to construction, maintenance or operation of the Interests shall not constitute a Title Defect: (i) if they have not been filed pursuant to law, or (ii) if filed, they have not yet become due and payable or payment is being withheld as provided by law, or (iii) if their validity is being contested in good faith by appropriate action. 7.02. Casualty Loss. If, prior to the Closing, all or any portion of the Interests be destroyed by fire or other casualty, is taken in condemnation or under the right of eminent domain or proceedings for such purpose are pending or threatened, Buyer may elect (i) to treat the Interests affected by such destruction, taking or pending or threatened taking as Defective Interests in accordance with Section 7.03; or (ii) to purchase such Interests notwithstanding any such destruction, taking or pending or threatened taking (without reduction of the Preliminary Purchase Price therefor), in which case, Seller shall, at the Closing, pay to Buyer all sums paid to Seller by third parties by reason of the destruction or taking of such Interests to be assigned to Buyer (including sums which are in the nature of compensation for any lost or foregone income or production attributable to the time period subsequent to the Effective Time) and shall assign, transfer and set over unto Buyer all of the right, title and interest of Seller in and to any unpaid claims, awards or other payments from third parties arising out of the destruction, taking or pending or threatened taking as to such Interests (including sums which are in the nature of compensation for any lost or foregone income or production attributable to the time period subsequent to the Effective Time). Seller agrees that, prior to Closing, it shall not voluntarily compromise, settle or adjust any amounts payable by reason of any destruction, taking or pending or threatened taking as to such of its portion of the Interests to be assigned to Buyer without first obtaining the written consent of Buyer. 7.03 Defect Adjustments. (a) "DEFECTIVE INTEREST" shall mean that portion of the Interests (as determined in accordance with Section 7.03(c)) affected by a Title Defect or that Buyer is otherwise entitled under Sections 7.02 or 7.04 to treat as a Defective Interest, and of which Seller has been given notice by Buyer prior to September 23, 1996, (the "DEFECT NOTICE DATE"), except as provided hereinafter in this Section 7.03(a). Any notice of any Defective Interest shall be in writing and shall include: (i) a description of the Defective Interest, (ii) the specific basis for the defect that Buyer believes causes such Interest to be a Defective Interest, and (iii) the amount by which Buyer has determined the value of the Defective Interest has been reduced and the computations and information upon which Buyer's determination is based. Buyer shall be deemed to have waived all Title Defects and any other defect to any Interest of which Seller has not been given such notice prior to the Defect Notice Date. If Seller (i) disagrees that a Defect Adjustment or Exclusion Adjustment is warranted; (ii) disagrees that the matter giving rise to such claims is uncured, or (iii) disagrees with the amount of the related Defect Adjustment claimed by Buyer in any notice given in accordance with this Section 7.03(a), then Seller, at its option, may remove the defective property from the sale, attempt to cure the defect at Seller's sole cost and expense, agree to a mutually acceptable purchase price reduction or terminate this Agreement without liability to Buyer except for return of the Performance Deposit, without interest, provided that Seller may not terminate this Agreement unless the aggregate value of Title Defects exceeds twenty percent (20%) of the Preliminary Purchase Price; (b) Defective Interests shall be excluded from the Interests to be purchased by Buyer hereunder and the Preliminary Purchase Price shall be reduced in accordance with Section 2.03 by an amount equal to the value thereof, as agreed to between Buyer and Seller (which reduction shall be called an "EXCLUSION ADJUSTMENT") unless (i) prior to the Closing, the basis for treating an Interest as a Defective Interest has been removed, (ii) Buyer agrees to waive the relevant Title Defect or other defect and purchase the Defective Interest, notwithstanding the defect, (iii) Seller agrees to indemnify, defend and hold Buyer harmless and Buyer agrees to accept such indemnification against all losses, costs, expenses and liabilities with respect to such Defective Interest arising from the defect or basis for such Interest being treated as a Defective Interest, or (iv) Buyer and Seller agree to an amount by which the value of the Defective Interest has been reduced and the Preliminary Purchase Price is reduced by such amount in accordance with Section 2.03 (which reduction shall be called a "DEFECT ADJUSTMENT"), in which event the Interest shall be included in the Interests to be purchased by Buyer hereunder and, except in the case of (iv), no adjustment shall be made to the Preliminary Purchase Price; or (v) Buyer and Seller do not agree, on or before the Scheduled Closing Date, as to the value of the Defective Interest that is to be excluded from the Preliminary Purchase Price and none of Subsections (i) through (iv) of Section 7.03(b) are applicable, in which event Buyer may terminate this Agreement without further liability or obligation, by giving written notice of termination on or before the Scheduled Closing Date. (c) The amount by which the Preliminary Purchase Price is to be reduced in accordance with Section 7.03 as the result of any Interest being treated as a Defective Interest shall be determined as follows: (1) In the event that the cost of remedying any Title Defect exceeds the amount allocated to the affected Interest as set forth in Exhibit A, then such Interest shall be excluded from the transaction contemplated hereby and the Preliminary Purchase Price shall be reduced by the amount allocated to the Interest so excluded as set forth in Exhibit A (which adjustment shall be called an EXCLUSION ADJUSTMENT"); (2) In the event that the net revenue interest of Seller in any Interest is less than that set forth in Exhibit A, that portion of the Preliminary Purchase price allocated on Exhibit A-1 to such particular Interest shall be reduced in the proportion that the net revenue interest actually owned by Seller bears to that set forth in Exhibit A; (3) In the event that the working interest costs payable with respect to a particular Interest is greater than the working interest set forth in Exhibit A, the Preliminary Purchase Price allocated on Exhibit A-1 to such particular Interest shall be reduced in the proportion that the working interest percentage attributable to such interest exceeds that set forth in Exhibit A; (4) In the event that (i) the record title interest of Seller to any Interest is burdened by any lien, encumbrance, mortgage, pledge, or security interest, or (ii) ad valorem, property or other similar taxes and assessments for any years prior to the Effective Time have not been paid, the Preliminary Purchase Price of such interest shall be reduced by the sum necessary to discharge and obtain a full record release of such burden or to pay such taxes; and (5) In the event there exist other Title Defects which would materially adversely affect or interfere with the use, possession, ownership or value of any Interest, Buyer, at its option, may either, (i) exclude the affected Interest from the transaction contemplated hereby and the Preliminary Purchase Price shall be reduced by the amount allocated to the affected Interest as set forth in Exhibit A, or (ii) accept such Interest. (d) In determining which portion of the Interests are Defective Interests, it is the intent of the parties to include all portions of the Interests affected by the defect or basis for such Interests being treated as Defective Interests; and (e) If the deductions in the Preliminary Purchase Price to be made pursuant to this ARTICLE VII exceed twenty percent (20%) of the Preliminary Purchase price, either party may terminate this agreement at any time prior to Closing. 7.04 Identification of Additional Defective Interests. (a) If, prior to the Closing, there has been non-compliance with the laws, rules, regulations, ordinances or orders of any governmental agency or authority having jurisdiction over the affected Interests, resulting in risk of loss of the affected Interests or value thereof, then Buyer may elect to treat such of the affected Interests as are adversely affected by such noncompliance as Defective Interests by giving Seller notice thereof in accordance with Section 7.03(a); (b) If, prior to the Closing, any preferential right to purchase any of the Interests is exercised, Buyer may elect to treat that portion of the Interests affected by the exercise of such preferential right as Defective Interests by giving Seller notice thereof in accordance with Section 7.03(a); (c) If any necessary third party consent to assignment of any of the Interests is not obtained prior to the Closing, Buyer may elect to treat that portion of the Interests subject to such consent requirement as Defective Interests by giving Seller notice thereof in accordance with Section 7.03(a). For purposes hereof "NECESSARY THIRD-PARTY CONSENTS" shall not include: (1) consents customarily obtained subsequent to such assignment including without limitation any consent of the State or the Bureau of Indian Affairs or other Federal agencies or governmental offices; (2) consents contractually permitted to be obtained subsequent to such assignment; or (3) consents that, if not obtained, will not affect the transferability, without penalty, of, the operation of, or the receipt of income from, the Interests subject thereto, or result in termination of the interests subject thereto or a material decrease in the value thereof. (d) If, prior to the Closing, Buyer becomes aware of any suit, action or other proceeding before any court or governmental agency that would result in loss or impairment of Seller's title to any portion of the Interests or a portion of the value thereof, Buyer may elect to treat the portion of the Interests affected thereby as Defective Interests by giving Seller notice thereof in accordance with Section 7.03(a); and (e) If any inaccuracy in Exhibit A results in a loss of value of a portion of the Interests, Buyer may elect to treat that portion of the Interest subject to such reduction in value as Defective Interests by giving Seller notice thereof in accordance with Section 7.03(a). ARTICLE VIII CONDITIONS TO CLOSING 8.01 Seller's Conditions. The obligations of Seller at the Closing are subject, at the option of Seller, to the satisfaction, at or prior to the Closing, of the following conditions: (a) All representations and warranties of Buyer contained in this Agreement shall be true, correct and not misleading in all material respects at and as of the Closing as if such representations and warranties were made at and as of the Closing, and Buyer shall have performed and satisfied all agreements and covenants in all material respects required by this Agreement to be performed and satisfied by Buyer at or prior to the Closing; (b) No suit or other proceeding shall be pending before any court or governmental agency seeking to restrain, prohibit or declare illegal, or seeking substantial damages in connection with, the purchase and sale contemplated by this Agreement, except (i) matters with respect to which Seller has been adequately indemnified by Buyer, or (ii) any suit or proceeding affecting only a portion of the Interests, which portion of the Interests could be treated as a Defective Interest in accordance with Section 7.04(d); (c) The aggregate sum of Defect Adjustments and Exclusion Adjustments shall not exceed thirty percent (30%) of the Preliminary Purchase Price; and (d) All necessary and material permissions, approvals and consents required which are obtainable prior to Closing shall be in full force and effect. 8.02 Buyer's Conditions. The obligations of Buyer at the Closing are subject, at the option of Buyer, to the satisfaction, at or prior to the Closing, of the following conditions: (a) All representations and warranties of Seller contained in this Agreement shall be true, correct and not misleading in all material respects at and as of the Closing as if such representations and warranties were made at and as of the Closing, and Seller shall have performed and satisfied all agreements and covenants in all material respects required by this Agreement to be performed and satisfied by Seller at or prior to the Closing; (b) No suit or other proceeding shall be pending before any court or governmental agency seeking to restrain, prohibit or declare illegal, or seeking substantial damages in connection with, the purchase and sale contemplated by this Agreement, except (i) matters with respect to which Buyer has been adequately indemnified by Seller, or (ii) any suit or proceeding affecting only a portion of the Interests, which portion of the Interests could be treated as a Defective Interest in accordance with Section 7.04(d); (c) The aggregate sum of Defect Adjustments and Exclusion Adjustments shall not exceed thirty percent (30%) of the Preliminary Purchase Price; (d) All necessary and material permissions, approvals and consents required which are obtainable prior to Closing shall be in full force and effect; and (e) The provisions of ARTICLE V.(e) have been satisfied. 8.03 Satisfaction or Waiver. If Seller and Buyer proceed with the Closing as specified in ARTICLE IX, all conditions of Closing shall be deemed to have been satisfied or waived and neither of the parties shall have any liability whatsoever to the other arising out of, resulting from, or attributable to any such condition of Closing, irrespective of whether such conditions of Closing were in fact satisfied or waived. Nothing contained in this Section 8.03 shall be a waiver or release of any breach of a representation or warranty contained in this Agreement. ARTICLE IX CLOSING 9.01 Date of Closing. Unless the parties hereto mutually agree otherwise and subject to the conditions stated in this Agreement, the consummation of the transactions contemplated hereby (herein called the "CLOSING") shall be held on September 30, 1996, at 10:00 A.M. (the "SCHEDULED CLOSING DATE"). The date Closing actually occurs is herein called the "CLOSING DATE". 9.02 Place of Closing. The Closing shall be held at Seller's office in Dallas, Texas, in accordance with the Closing Instructions to be mutually given in writing by Seller and Buyer. 9.03 Closing Obligations. At the Closing the following events shall occur, each being a condition concurrent to the others and each being deemed to have occurred simultaneously with the others: (a) Seller shall execute, acknowledge and deliver to Buyer assignment, bill of sale and conveyance documents (in sufficient counterparts to facilitate recording), in form and substance as set forth in Exhibit C hereto, conveying its portion of the Interests (other than those portions of the Interests excluded under Sections 7.03(b) and 7.04) to Buyer. (b) Seller and Buyer shall execute and deliver a settlement statement (herein called the "PRELIMINARY SETTLEMENT STATEMENT") prepared by Seller and furnished to Buyer no less than seven (7) days prior to the Scheduled Closing Date) that shall set forth the Closing Amount (as hereinafter defined) and each adjustment and the calculation of such adjustments used to determine such amount. The term "CLOSING AMOUNT" shall mean the Preliminary Purchase Price adjusted as provided in Section 2.03, using for such adjustments the best information then available. Seller and Buyer further agree that Seller shall be entitled to receive all proceeds attributable to ownership of the Interests prior to the Effective Time and Buyer shall be entitled to receive all proceeds attributable to the Interests after the Effective Time. (c) Buyer shall deliver the Closing Amount in the form of immediately available U.S. funds, by wire transfer in accordance with instructions to be provided by Seller. (d) Seller shall deliver to Buyer exclusive possession of its portion of the Interests (other than Interests excluded under Section 7.03(b) or Section 7.04) (e) Seller and Buyer shall execute, acknowledge and deliver transfer orders or letters in lieu thereof directing all purchasers of production to make payment to Buyer of proceeds attributable to production after the Effective Time from the Interests assigned to Buyer under Section 9.03(a), but not theretofore paid to Seller. ARTICLE X OBLIGATIONS AFTER CLOSING 10.01 Post-Closing Adjustments. Within one hundred thirty (130) days after the Closing, Seller shall prepare and deliver to Buyer, in accordance with this Agreement and generally accepted accounting principles, a statement (herein called the "POST CLOSING SETTLEMENT STATEMENT") setting forth each adjustment or payment that was not included or correctly included in the Preliminary Settlement Statement and showing the calculation of such adjustments. Within thirty (30) days after receipt of the Post Closing Settlement, Buyer shall deliver to Seller a written report containing any changes that Buyer proposes to be made to the Post Closing Settlement Statement. The parties shall undertake to agree with respect to the amounts due pursuant to such Post Closing adjustment no later than one hundred sixty (160) days after the Closing Date. The date upon which such agreement is reached or upon which the Final Purchase Price is established, shall be herein called the "SETTLEMENT DATE". In the event that (i) the Final Purchase Price is more than the Closing Amount, Buyer shall pay to Seller, in certified U.S. Funds, the amount of such difference (ii) the Final Purchase Price is less than the Closing Amount, Seller shall pay to Buyer, in certified U.S. funds, the amount of such difference. Payment by Buyer or Seller shall be made within ten (10) days of the Final Settlement Date. After the Settlement Date, additional proceeds received by or expenses paid by either Buyer or Seller on behalf of the other shall be settled by invoicing the other party for expenses paid or remitting to the other party any proceeds received. The gas imbalances of the Interests shall be considered final and neither party thereafter shall make claim upon the other concerning same. 10.02 Files and Records. Seller shall have the right to make and retain copies of the Records prior to delivery thereof to Buyer. Within thirty (30) days after the Closing Date, Seller shall deliver to Buyer all original files and Records relating to the Interests conveyed to Buyer. 10.03 Taxes and Recording Fees. Buyer shall pay all sales taxes occasioned by the sale of the Interests, all ad valorem, property, production, excise, severance, windfall profit and other taxes, except income taxes, based upon or measured by the ownership of the property, the production of hydrocarbons or the receipt of proceeds therefrom which apply to or arise from and after the Effective Time together with all documentary, filing and recording fees required in connection with the filing and recording of any assignments or other documents recorded in connection with the sale of the Interests. 10.04 Further Assurances. After Closing, Seller and Buyer shall each execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such instruments, and shall each take such other action, as may be necessary or advisable to carry out their respective obligations under this Agreement and under any document, certificate or other instrument delivered pursuant hereto. 10.05 Survival. The warranties or representations herein made by Seller are conditions to the obligations of Buyer hereunder and no warranty or representation herein made by Seller (other than those contained in 3.01(a), (b), (c), (d), (e), (f), (i), (j), (k), (o) and (q) shall survive the Closing. The agreements set forth in ARTICLE X and the matters set forth in ARTICLES V and VI and Section 13.12 shall survive the Closing for a period of one (1) year from the Closing Date. ARTICLE XI TERMINATION OF AGREEMENT 11.01 Termination. This Agreement and the transactions contemplated hereby may be terminated in the following instances: (a) By Seller if the conditions set forth in Section 8.01(a) through 8.01(d) are not satisfied in all material respects or waived as of the Scheduled Closing Date; (b) By Buyer if the conditions set forth in Section 8.02(a) through 8.02(e) are not satisfied in all material respects or waived as of the Scheduled Closing Date; (c) By Buyer pursuant to Section 7.03(b); (d) Pursuant to Article V.(e); or (e) At any time by the mutual written agreement of Buyer and Seller. 11.02 Liabilities Upon Termination. If this Agreement is breached by either party, nothing contained herein shall be construed to limit Seller's or Buyer's legal or equitable remedies, including, without limitation, damages for the breach or failure of any representation, warranty, covenant or agreement contained herein (whether or not the non-defaulting party has terminated the Agreement) or the right to enforce specific performance of this Agreement; provided, however, that a party terminating this Agreement shall have no right to specific performance thereof, and provided, further, that neither party shall have a right to specific performance thereof if this Agreement is terminated pursuant to Section 11.01 hereof. ARTICLE XII TAX-FREE EXCHANGE 12.0 Tax-Free Exchange. Seller has elected to effect a like-kind exchange pursuant to Section 1031 of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder, with respect to the Interests (a "Like- Kind Exchange"). In order to effect a Like-Kind Exchange, Buyer shall cooperate and do all acts as may be reasonably required or requested by Seller with regard to effecting the Like-Kind Exchange, including, but not limited to, executing an Exchange Escrow Agreement, a form of which is attached hereto as Exhibit D, in accordance with Treasury Regulation Section 1.1031(k)-1(g)(3); provided, however, Buyer shall incur no expense in connection with such Like- Kind Exchange and Buyer shall not be required to take title to any property other than the Interests in connection with the Like-Kind Exchange, and Buyer's possession of the Interests will not be delayed by reason of any such Like-Kind Exchange. ARTICLE XIII MISCELLANEOUS 13.01 Exhibits and Schedules. Exhibits A through D are attached hereto and incorporated herein by this reference. 13.02 Expenses. Except as otherwise specifically provided, all fees, costs and expenses incurred by Buyer or Seller in negotiating this Agreement or in consummating the transactions contemplated by this Agreement shall be paid by the party incurring the same, including, without limitation, legal and accounting fees, costs and expenses. 13.03 Notices. All notices and communications required or permitted under this Agreement shall be in writing, delivered to or sent by U. S. Mail or Express Delivery, postage prepaid, or by facsimile transmission, addressed as follows: Maynard Oil Company Attention Cassondra Foster 8080 North Central Expressway, Suite 660 Dallas, TX 75206 Phone: (214) 891-8461 Fax: (214) 891-8827 Enron Oil & Gas Company Attention Lee McVay, Vice President and General Manager 20 North Broadway, Suite 800 Oklahoma City, OK 73102 Phone: (405) 239-7880 Fax: (405) 239-7858 Any party may, by written notice so delivered to the others, change the address or individual to which delivery shall thereafter be made. 13.04 Amendments. Except as otherwise expressly provided herein, this Agreement may not be amended nor any rights hereunder waived except by an instrument in writing signed by the party to be charged with such amendment or waiver and delivered by such party to the party claiming the benefit of such amendment or waiver. 13.05 Assignment. Neither Seller nor Buyer shall assign all or any portion of its rights or delegate all or any portion of its duties hereunder without the prior written consent of the other to such assignment; provided, however, that Buyer or Seller or both may assign all or part of this Agreement to a qualified intermediary to facilitate a deferred like-kind exchange for federal tax purposes. Subject to the foregoing, this Agreement shall inure to the benefit of and be binding upon Seller, Buyer and their respective successors and assigns. 13.06 Announcements. Seller and Buyer shall consult with each other with regard to all press releases and other announcements issued at or prior to the Closing concerning this Agreement or the transactions contemplated hereby and, except as may be required by applicable laws or the applicable rules, and regulations of any governmental agency or stock exchange, neither Buyer nor Seller shall issue any such press release or other publicity without the prior written consent of the other party. 13.07 Headings. The headings of the articles and sections of this Agreement are for guidance and convenience of reference only and shall not limit or otherwise affect any of the terms or provisions of this Agreement. 13.08 Counterparts. This Agreement, and any document or instrument entered into, given or made pursuant to this Agreement or authorized hereby, and any amendment or supplement thereto, may be executed in any number of counterparts, and, when so executed, each of which shall be deemed an original instrument, and shall have the same force and effect as though all signatures appeared on a single document, and all of which together shall constitute but one and the same instrument. Any signature page of this Agreement or of such an amendment, supplement, document or instrument may be detached from any counterpart thereof and attached to another counterpart without impairing the legal effect of any signatures identical in form thereto but having attached to it one or more additional signature pages. 13.09 References. References made in this Agreement, including the use of a pronoun, shall be deemed to include where applicable, masculine, feminine, singular or plural, individuals, partnerships or corporations. As used in this Agreement, "person" shall mean any natural person, corporation, partnership, trust, estate or other entity. 13.10 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas, without regard to its choice of law principles provided, however, that issues in connection with title to the Interests shall be governed by the applicable laws of the State of Oklahoma. 13.11 Entire Agreement. This Agreement (including the Exhibits hereto) constitutes the entire understanding among the parties with respect to the subject matter hereof, superseding all negotiations, prior discussions and prior agreements and understandings relating to such subject matter. 13.12 Securities Laws. Buyer has advised Seller that the interests are not being acquired for distribution or transfer in violation of the securities laws of the United States or of any state thereof. Buyer hereby agrees to protect, indemnify and hold harmless Seller from and against any and all claims, costs (including, without limitation, court costs and reasonable attorney's fees), expenses, damages and liabilities which arise under applicable state or federal securities laws as a result of acts or omissions of Buyer or its affiliates which are contrary to such laws and which are in connection with the transactions contemplated hereby or the sale or other disposition of the Interests by Buyer or its affiliates. Seller hereby agrees to protect, indemnify and hold harmless Buyer from and against any and all claims, costs (including, without limitation, court costs and reasonable attorney's fees), expenses, damages and liabilities which arise under applicable state or federal securities laws as a result of acts or omissions of Seller or its affiliates which are contrary to such laws and which are in connection with the transactions contemplated hereby. Executed as of the date first above written. SELLER MAYNARD OIL COMPANY By: /s/ Glenn R. Moore ------------------------------ Glenn R. Moore President BUYER ENRON OIL & GAS COMPANY By: /s/ Leland J. McVay ------------------------------- Leland J. McVay Vice President EXHIBIT "A" Attached to and made a part of Purchase and Sale Agreement dated September 12, 1996, by and between Maynard Oil Company, Seller, and Enron Oil & Gas Company, Buyer ELLIS COUNTY, OKLAHOMA PN 440401 (UT-424) BROWN NO. 1-28 EXPENSE INTEREST 0.6406250 REVENUE INTEREST 0.5600586 Oil and Gas Lease dated August 3, 1956, by and between Elsie Nuttall, as Lessor, and George L. Aycock, as Lessee, recorded in Volume 83, page 321 of the Records of Ellis County, Oklahoma, covering the N/2 N/2 of Section 28, Township 17 North, Range 22 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04954-AA-01) Oil and Gas Lease dated April 12, 1966, by and between James W. McMahan, et al, as Lessor, and L. C. Neeley, as Lessee, recorded in Volume 163, page 163 of the Records of Ellis County, Oklahoma, covering the N/2 NW/4 of Section 28, Township 17 North, Range 22 West, Ellis County, Oklahoma. (LF-04954-AB-01) Oil and Gas Lease dated August 3, 1956, by and between Roy P. Nuttall and Eulah P. Nuttall, as Lessors, and George L. Aycock, as Lessee, recorded in Volume 83, page 323 of the Records of Ellis County, Oklahoma, covering the SW/4 SW/4 of Section 28, Township 17 North, Range 22 West, Ellis County, Oklahoma. (LF-04960-AA-01) Oil and Gas Lease dated June 18, 1962, by and between Arnold W. Brown, et ux, as Lessor, and Mike Rainbolt, as Lessee, recorded in Volume 129, page 464 of the Records of Ellis County, Oklahoma, covering the S/2 NE/4, SE/4 SW/4 and the SE/4 of Section 28, Township 17 North, Range 22 West, Ellis County, Oklahoma (LF-05076-00) Leases numbered 04954-AA&AB-01 and 04960-AA-01 are subject to Operating Agreement dated December 29, 1966, by and between Shell Oil Company, as Operator, and Continental Oil Company, et al, as Non-Operators, Purchase and Sale Agreement dated December 19, 1985, as amended, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective December 1, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma; lease numbered 05076-00 is subject to Purchase and Sale Agreement dated June 1, 1989, and Partial Assignment dated May 31, 1989, by and between Conoco, Inc. and Maynard Oil Company; leases numbered 04954-AB-01 & 04960-AA-01 are subject to Assignment and Bill of Sale effective May 1, 1986, from Sabine Corporation to Maynard Oil Company. PN 440501 (UT-445) DEAL STATE NO. 1-13 EXPENSE INTEREST 0.8515625 REVENUE INTEREST 0.7391357 Oil and Gas Lease dated September 25, 1956, by and between State of Oklahoma bearing serial number 23-EI-980, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 86, page 152 of the Records of Ellis County, Oklahoma, covering the NW/4 of Section 13, Township 24 North, Range 25 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Morrow formation. (LF-04897-00) Oil and Gas Lease dated September 25, 1956, by and between State of Oklahoma bearing serial number 23-EI-981, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 86, page 306 of the Records of Ellis County, Oklahoma, covering the SE/4 of Section 13, Township 24 North, Range 25 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Morrow formation. (LF-04898-00) Oil and Gas Lease dated September 25, 1956, by and between State of Oklahoma bearing serial number 23-EI-982, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 86, page 309 of the Records of Ellis County, Oklahoma, covering the SW/4 of Section 13, Township 24 North, Range 25 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Morrow formation. (LF-04899-00) Oil and Gas Lease dated August 9, 1956, by and between D. L. Berry, as Lessor, and Carter Oil Company, as Lessee, recorded in Volume 83, Page 111 of the Records of Ellis County, Oklahoma. (LF-04900-AA) Oil and Gas Lease dated August 9, 1956, by and between W. W. Warner, as Lessor, and Carter Oil Company, as Lessee, recorded in Volume 83, page 113 of the Records of Ellis County, Oklahoma. (LF-04900-AB) Oil and Gas Lease dated October 10, 1956, by and between Wood Oil Company, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 85, page 116 of the Records of Ellis County, Oklahoma. (LF-04900-AC) Oil and Gas Lease dated October 24, 1956, by and between Charles A. Neal & Company, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 85, page 291 of the Records of Ellis County, Oklahoma. (LF-04900-AD) Oil and Gas Lease dated December 16, 1957, by and between Wilbur J. Holleman, as Lessor, and Keener Oil Company, as Lessee, recorded in Volume 95, page 546 of the Records of Ellis County, Oklahoma. (LF-04900-AE) Oil and Gas Lease dated June 21, 1961, by and between Keener Oil Company, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 124, page 112 of the Records of Ellis County, Oklahoma. (LF-04900-AF) The hereinabove referenced leases cover the NE/4 of Section 13, Township 24 North, Range 25 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Morrow formation, as to all leases numbered AC through AF and from the surface to the base of the Chester formation as to leases numbered AA and AB, Ellis County, Oklahoma. The hereinabove referenced leases are subject to Operating Agreement dated August 15, 1961, by and between Shell Oil Company, as Operator, and Amoco Production Company, as Non-Operator; Purchase and Sale Agreement dated December 19, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective December 1, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma; and Gas Purchase Contract dated January 17, 1996, by and between GPM Gas Contract, as Buyer, and Maynard Oil Company, as Seller. Leases numbered LF-04900-AA and AB are subject to Farmout Agreement dated June 6, 1961, by and between Humble Oil and Refining Company and Shell Oil Company and Assignment dated November 3, 1961 by and between Humble Oil and Refining Company and Shell Oil Company. Lease numbered LF-04900-AE is subject to Farmout Agreement dated June 6, 1961, by and between Keener Oil Company, a co-partnership and Shell Oil Company and Assignment dated October 6, 1961, by and between Keener Oil Company, a co-partnership and Shell Oil Company recorded in Volume 126, page 272 of the Records of Ellis County, Oklahoma. PN 440701 (UT-433) FEERER NO. 1-33 EXPENSE INTEREST 0.7500000 REVENUE INTEREST 0.6289062 Oil and Gas Lease dated March 27, 1956, by and between Leslie Feerer and Edna Feerer, as Lessors, and J. B. Roberts, as Lessee, recorded in Volume 80, page 333, of the Records of Ellis County, Oklahoma, covering SW/4 of Section 33, Township 23 North, Range 23 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the Base of the Chester (Mississippian) formation. (LF- 04886-AA) Oil and Gas Lease dated April 5, l956, by and between Keith Sullivan and Elzalene Sullivan, as Lessors, and Sinclair Oil and Gas Company, as Lessee, recorded in Volume 80, page 319 of the Records of Ellis County, Oklahoma, covering SW/4 of Section 33, Township 23 North, Range 23 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Chester (Mississippian) formation. (LF-04886-AB) The hereinabove referenced leases are subject to Farmout Agreement dated September 13, 1962, by and between Sinclair Oil and Gas Company and Shell Oil Company; Assignment dated January 17, 1963, recorded in Volume 134, page 510 of the Records of Ellis County, Oklahoma, from Sinclair Oil and Gas Company to Shell Oil Company. Oil and Gas Lease dated July 23, 1958, by and between State of Oklahoma bearing serial number 23-PB-277, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 103, page 603 of the Records of Ellis County, Oklahoma, covering NE/4 of Section 33, Township 23 North, Range 23 West, Ellis County, Oklahoma. (LF-04932-00) Oil and Gas Lease dated July 23, l958, by and between State of Oklahoma bearing serial number 23-PB-278, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 103, page 609 of the Records of Ellis County, Oklahoma, covering NW/4 of Section 33, Township 23 North, Range 23 West, Ellis County, Oklahoma. (LF-04933-00) The hereinabove referenced leases are subject to Joint Operating Agreement dated December 6, 1962, by and between Shell Oil Company, as Operator and Gulf Oil Corporation, as Non-Operator; Salt Water Disposal Agreement dated December 18, 1967, by and between Pan American Petroleum Corporation and Shell Oil Company; Purchase and Sale Agreement dated December 19, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective December 1, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma. PN 440510 (UT-416) McCLURE NO. 1-13 EXPENSE INTEREST 1.0000000 REVENUE INTEREST 0.8613281 Oil and Gas Lease dated September 25, 1956, by and between State of Oklahoma bearing serial number 23-EI-983, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 86, Page 318 of the Records of Ellis County, Oklahoma, covering NE/4 of Section 13, Township 24 North, Range 26 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Morrow formation. (LF-04919-00) Oil and Gas Lease dated September 25, 1956, by and between State of Oklahoma bearing serial number 23-EI-984, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 86, page 173 of the Records of Ellis County, Oklahoma, covering SE/4 of Section 13, Township 24 North, Range 26 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Morrow formation. (LF-04920-00) Oil and Gas Lease dated September 25, 1956, by and between State of Oklahoma bearing serial number 23-EI-985, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 86, page 176 of the Records of Ellis County, Oklahoma, covering SW/4 of Section 13, Township 24 North, Range 26 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Morrow formation. (LF-04921-00) Oil and Gas Lease dated April 26, 1955, by and between J. R. McClure and Reba Ruth McClure, as Lessor, and John Briggs, as Lessee, recorded in Volume 74, page 143 of the Records of Ellis County, Oklahoma, covering NW/4 of Section 13, Township 24 North, Range 26 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Chester formation, as to gas rights only. (LF-04922-00) The hereinabove referenced leases are subject to Agreement dated February 12, 1969, by and between Shell Oil Company and Cities Service Oil Company; Gas Purchase Agreement dated October 1, 1989, as amended, by and between Production Gathering Company, as Buyer, and Maynard Oil Company, as Seller; Purchase and Sale Agreement dated December 19, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective December 1, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma. PN 440512 (UT-413) O'HERN NO. 1-32 EXPENSE INTEREST 0.5067300 REVENUE INTEREST 0.4160450 Oil and Gas Lease dated September 9, 1947, by and between Carrie Lee O'Hern, as Lessor, and W. G. Mouser, as Lessee, recorded in Volume 36, page 364 of the Records of Ellis County, Oklahoma, INSOFAR AND ONLY INSOFAR as said lease covers all of Section 32, Township 24 North, Range 25 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Morrow formation. (LF-04896-00) The hereinabove referenced lease is subject to Gas Purchase Agreement dated October 1, 1989, by and between Production Gathering Company, as Buyer, and Maynard Oil Company, as Seller; Assignment dated March 15, 1958, from The Texas Company to Shell Oil Company; Agreement dated October 21, 1969, by and between Shell Oil Company and Cities Service Oil Company; Declaration of Pool dated June 9, 1958; Operating Agreement dated Jaunary 18, 1957, as amended, by and between Shell Oil Company, as Operator, and The Texas Company, as Non-Operator; Purchase and Sale Agreement dated December 19, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective December 1, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma. PN 440514 PEARSON NO. 1-14 AND 2-14 (UT-410) EXPENSE INTEREST 0.6875000 REVENUE INTEREST 0.6015625 Oil and Gas Lease dated October 17, 1956, by and between Lulu Jane Davis Hamby, et al, as Lessor, and James B. Franklin, as Lessee, recorded in Volume 85, page 535 of the Records of Ellis County, Oklahoma, INSOFAR AND ONLY INSOFAR as said lease covers the NW/4, N/2 NE/4, N/2 SW/4 and SE/4 SW/4 of Section 14, Township 23 North, Range 26 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Morrow formation. (LF-04905-AA-01) The hereinabove referenced lease is subject to Purchase and Sale Agreement dated December 19, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective December 1, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma. Oil and Gas Lease dated September 20, 1949, by and between Sid Brown, et ux, as Lessor, and John Briggs, as Lessee, recorded in Volume 43, page 196 of the Records of Ellis County, Oklahoma, INSOFAR AND ONLY INSOFAR as said lease covers the NW/4, N/2 NE/4, N/2 SW/4 and the SE/4 SW/4 of Section 14, Township 23 North, Range 26 West, Ellis County, Oklahoma. (LF-04905-AB) Oil and Gas Lease dated August 24, 1959, by and between Anson J. Woods, et ux, as Lessor, to Robert C. Green, as Lessee, recorded in Volume 113, page 370 of the Records of Ellis County, Oklahoma, covering the NW/4, N/2 NE/4, N/2 SW/4 and the SE/4 SW/4 of Section 14, Township 23 North, Range 26 West, Ellis County, Oklahoma. (LF-04905-AC) Oil and Gas Lease dated January 12, 1952, by and between T. O. Piersall, et ux, as Lessor, and V. B. West, as Lessee, recorded in Volume 57, page 261 of the Records of Ellis County, Oklahoma, INSOFAR AND ONLY INSOFAR as said lease covers the S/2 SE/4 of Section 14, Township 23 North, Range 26 West, Ellis County, Oklahoma (LF-05080-00) The hereinabove referenced leases are subject to Operating Agreement dated March 15, 1961, by and between Sinclair Oil and Gas Company, as Operator, and Shell Oil Company, et al, as Non-Operators. The Pearson 1-14 is subject to Natural Gas Purchase and Sale Contract dated November 16, 1993, October 1, 1989, as amended, by and between Production Gathering Company, as Buyer, and Maynard Oil Company, as Seller. The Pearson 2-14 is subject to Gas Purchase Contract dated January 17, 1996, by and between GPM Gas Corporation, as Buyer and Maynard Oil Company, as Seller. Lease numbered LF-05080-00 is subject to Sales Agreement dated January 4, 1989, by and between Deminex U.S. Oil Company and Maynard Oil Company and Assignment, Bill of Sale and Agreement by and between Deminex U.S. Oil Company and Maynard Oil Company dated January 10, 1989, effective January 1, 1989, recorded in Volume 508, page 258 of the Records of Ellis County, Oklahoma. Leases numbered LF-04905-AB and AC are subject to Purchase and Sale Agreement dated January 28, 1987, by and between Atlantic Richfield Company and Maynard Oil Company, and Assignment dated February 17, 1987, effective January 1, 1987, by and between Atlantic Richfield Company and Maynard Oil Company, recorded in Volume 478, page 711 of the Records of Ellis County, Oklahoma. PN 440517 (UT-415) SHEPHERD NO. 1-12 EXPENSE INTEREST 0.5000000 REVENUE INTEREST 0.4101562 Oil and Gas Lease dated March 12, 1952, by and between Stephen M. Dale and Edna Walton Dale, as Lessors, and Roy W. Reed, as Lessee, recorded in Volume 58, page 355 of the Records of Ellis County, Oklahoma, covering NE/4 of Section 12, Township 23 North, Range 26 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Morrow formation. (LF-04915-00) Oil and Gas Lease dated February 17, 1950, by and between Edith M. Shepherd and Ferman C. Shepherd, as Lessors, and R. T. Bennett, as Lessee, recorded in Volume 47, page 428 of the Records of Ellis County, Oklahoma, covering the NW/4 of Section 12, Township 23 North, Range 26 West, Ellis County, Oklahoma, LIMITED to rights from the surface to a depth of 8,724 feet below the surface, as to gas rights only. (LF-04916-00) Oil and Gas Lease dated March 24, 1959, by and between Anna Ehrlich, as Lessor, and Vaughn S. Bryan, as Lessee, recorded in Volume 109, page 151 of the Records of Ellis County, Oklahoma, covering the SW/4 of Section 12, Township 23 North, Range 26 West, Ellis County, Oklahoma, LIMITED to rights from the surface to a depth of 8,724 feet below the surface, as to gas rights only. (LF-04917-00) The hereinabove referenced leases are subject to Agreement dated February 12, 1969, by and between Shell Oil Company and Cities Service Oil Company; Operating Agreement dated January 8, 1960, by and between Shell Oil Company, as Operator, and Sinclair Oil and Gas Company, et al, as Non-Operators; Farmout Agreement dated March 3, 1960, from Sinclair Oil and Gas Company to Shell Oil Company and Cities Service Oil Company; Natural Gas Purchase Contract dated November 16, 1993, by and between Production Gathering Company, as Buyer, and Maynard Oil Company, as Seller; Purchase and Sale Agreement dated December 19, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective December 1, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma. PN 440519 WHITE NO. 1-31 and NO. 2-31 (UT-406) EXPENSE INTEREST 1.0000000 REVENUE INTEREST 0.8166254 Oil and Gas Lease dated May 1, 1948, by and between Investors Royalty Company, Inc., as Lessor, and D. C. Matthews, as Lessee, recorded in Volume 37, page 388 of the Records of Ellis County, Oklahoma. (LF-04906-AA) Oil and Gas Lease dated May 18, 1948, by and between John M. McFadden and Elizabeth B. McFadden, as Lessor, and D. C. Matthews, as Lessee, recorded in Volume 37, page 488 of the Records of Ellis County, Oklahoma. (LF-04906-AB) Oil and Gas Lease dated April 24, 1957, by and between Frederick William Schuette, as Lessor, and Gene Goff, as Lessee, recorded in Volume 90, page 121 of the Records of Ellis County, Oklahoma. (LF-04906-AC) Oil and Gas Lease dated August 24, 1957, by and between Manon M. White and Charles J. White, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 92, page 143 of the Records of Ellis County, Oklahoma. (LF-04906-AD) The hereinabove referenced leases cover the NE/4 of Section 31, Township 24 North, Range 25 West, LIMITED to rights from the surface to the base of the Morrow formation, Ellis County, Oklahoma. Oil and Gas Lease dated August 26, 1957, by and between Willis E. Case and Martha M. Case, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 92, page 416 of the Records of Ellis County, Oklahoma. (LF-04907-AA) Oil and Gas Lease dated August 24, 1957, by and between Manon M. White and Charles J. White, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 92, page 145 of the Records of Ellis County, Oklahoma. (LF-04907-AB) The hereinabove referenced leases cover Lots 3 and 4, E/2 SW/4 and SE/4 of Section 31, Township 24 North, Range 25 West, LIMITED to rights from the surface to the base of the Morrow formation, Ellis County, Oklahoma. The hereinabove referenced leases are subject to Assignment dated August 19, 1957, by and between Shell Oil Company to Gene Goff; Assignment dated October 22, 1957, by and between Shell Oil Company to James B. Franklin. Oil and Gas Lease dated June 10, 1948, by and between Alberta C. Lloyd, Individually and as Administratrix of the Estate of Lemuel E. Lloyd, deceased, as Lessor, and W. G. Mouser, as Lessee, recorded in Volume 43, page 33 of the Records of Ellis County, Oklahoma, INSOFAR AND ONLY INSOFAR as said lease covers Lots l and 2 and the E/2 NW/4 of Section 31, Township 24 North, Range 25 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Morrow formation. (LF-04908-AA) Oil and Gas Lease dated October 2, 1947, by and between Federal Farm Mortgage Corporation, as Lessor, and W. G. Mouser, as Lessee, recorded in Volume 39, page 137 of the Records of Ellis County, Oklahoma, as amended by instruments entitled Amendment of Oil and Gas Lease dated July 22, 1957 and August 29, 1957, recorded respectively in Volume 91, page 482 and Volume 94, page 199 of the Records of Ellis County, Oklahoma, covering the NW/4 of Section 31, Township 24 North, Range 25 West, Ellis County, Oklahoma, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Morrow formation. (LF-04908-AB) The hereinabove referenced leases are subject to Assignment dated September 13, 1957, from The Texas Company to Shell Oil Company; Agreement dated February 12, 1969, by and between Shell Oil Company and Cities Service Oil & Gas Company; Gas Purchase Agreement dated October 1, 1989, as amended, by and between Production Gathering Company and Maynard Oil Company; Purchase and Sale Agreement dated December 19, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective December 1, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma. PN 440411 WOOD NO. 1-20 (UT-425) EXPENSE INTEREST 0.6903717 REVENUE INTEREST 0.6024768 Oil and Gas Lease dated August 1, 1956, by and between Roy Wood, et al, as Lessor, and Sidna Kruff, as Lessee, recorded in Volume 85, page 310 of the Records of Ellis County, Oklahoma, INSOFAR AND ONLY INSOFAR as said lease covers the NE/4 SE/4 of Section 20, Township 17 North, Range 22 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04875-AA-01) Oil and Gas Lease dated April 20, 1966, by and between Harry Newman Oil Company, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 162, page 645 of the Records of Ellis County, Oklahoma, INSOFAR AND ONLY INSOFAR as said lease covers the NE/4 SE/4 of Section 20, Township 17 North, Range 22 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04875-AB-01) Oil and Gas Lease dated April 21, 1966, by and between Pearl Nolf, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 162, page 653 of the Records of Ellis County, Oklahoma, INSOFAR AND ONLY INSOFAR as said lease covers the NE/4 SE/4 of Section 20, Township 17 North, Range 22 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa Formation. (LF-04875-AC-01) Oil and Gas Lease dated April 19, 1966, by and between Commercial Minerals, Inc., as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 162, page 651 of the Records of Ellis County, Oklahoma, INSOFAR AND ONLY INSOFAR as said lease covers the NE/4 SE/4 of Section 20, Township 17 North, Range 22 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04875-AD-01) Oil and Gas Lease dated April 29, 1966, by and between William Hiatt, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 162, page 657 of the Records of Ellis County, Oklahoma, INSOFAR AND ONLY INSOFAR as said lease covers the NE/4 SE/4 of Section 20, Township 17 North, Range 22 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04875-AE-01) Oil and Gas Lease dated April 29, 1966, by and between J. P. Hannigan, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 162, page 655 of the Records of Ellis County, Oklahoma, INSOFAR AND ONLY INSOFAR as said lease covers the NE/4 SE/4 of Section 20, Township 17 North, Range 22 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04875-AF-01) Oil and Gas Lease dated April 19, 1966, by and between Tulsa Royalties Company, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 162, page 647 of the Records of Ellis County, Oklahoma, covering the NE/4 SE/4 of Section 20, Township 17 North, Range 22 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04875-AG- 01) Oil and Gas Lease dated August 1, 1956, by and between Roy Wood, et al, as Lessor, and Sidna Kruff, as Lessee, recorded in Volume 85, page 313 of the Records of Ellis County, Oklahoma, covering the NE/4 of Section 20, Township 17 North, Range 22 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04876-AA) Oil and Gas Lease dated April 27, 1966, by and between G. L. Gallaspy, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 162, page 641 of the Records of Ellis County, Oklahoma, covering the S/2 NE/4 of Section 20, Township 17 North, Range 22 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04876-AB) Oil and Gas Lease dated April 21, 1966, by and between Farmers United Coop. Pool, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 162, page 635 of the Records of Ellis County, Oklahoma, covering the S/2 NE/4 of Section 20, Township 17 North, Range 22 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF- 04876-AC) Oil and Gas Lease dated April 21, 1966, by and between Texas W. Allen, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 162, page 639 of the Records of Ellis County, Oklahoma, covering the S/2 NE/4 of Section 20, Township 17 North, Range 22 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04876-AD) Oil and Gas Lease dated April 20, 1966, by and between Walter A. Povenz, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 162, page 637 of the Records of Ellis County, Oklahoma, covering the S/2 NE/4 of Section 20, Township 17 North, Range 22 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04876-AE) Oil and Gas Lease dated April 27, 1966, by and between George D. Gallaspy, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 162, page 643 of the Records of Ellis County, Oklahoma, covering the S/2 NE/4 of Section 20, Township 17 North, Range 22 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04876-AF) Oil and Gas Lease dated August 1, 1956, by and between Roy Wood, et al, as Lessor, and Sidna Kruff, as Lessee, recorded in Volume 85, page 440 of the Records of Ellis County, Oklahoma, covering the NW/4 of Section 20, Township 17 North, Range 22 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04955-AA) Oil and Gas Lease dated April 21, 1966, by and between Farmers United Coop. Pool, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 162, page 615 of the Records of Ellis County, Oklahoma, covering the SE/4 NW/4 of Section 20, Township 17 North, Range 22 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF- 04955-AB) Oil and Gas Lease dated April 20, 1966, by and between Walter A. Povenz, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 162, page 617 of the Records of Ellis County, Oklahoma, covering the SE/4 NW/4 of Section 20, Township 17 North, Range 22 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04955-AC) Oil and Gas Lease dated April 21, 1966, by and between Texas W. Allen, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 162, page 619 of the Records of Ellis County, Oklahoma, covering the SE/4 NW/4 of Section 20, Township 17 North, Range 22 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04955-AD) Oil and Gas Lease dated April 27, 1966, by and between G. L. Gallaspy, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 162, page 621 of the Records of Ellis County, Oklahoma, covering the SE/4 NW/4 of Section 20, Township 17 North, Range 22 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04955-AE) Oil and Gas Lease dated April 27, 1966, by and between George D. Gallaspy, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 162, page 623 of the Records of Ellis County, Oklahoma, covering the SE/4 NW/4 of Section 20, Township 17 North, Range 22 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04955-AF) Oil and Gas Lease dated August 1, 1956, by and between Roy Wood, et al, as Lessor, and Sidna Kruff, as Lessee, recorded in Volume 86, page 133 of the Records of Ellis County, Oklahoma, INSOFAR AND ONLY INSOFAR as said lease covers the NW/4 SE/4 of Section 20, Township 17 North, Range 22 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04957-AA-01) Oil and Gas Lease dated April 27, 1966, by and between G. L. Gallaspy, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 162, page 631 of the Records of Ellis County, Oklahoma, covering the NW/4 SE/4 of Section 20, Township 17 North, Range 22 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04957-AB-01) Oil and Gas Lease dated April 27, 1966, by and between George D. Gallaspy, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 162, page 633 of the Records of Ellis County, Oklahoma, covering the NW/4 SE/4 of Section 20, Township 17 North, Range 22 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04957-AC- 01) Oil and Gas Lease dated April 21, 1966, by and between Texas W. Allen, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 162, page 629 of the Records of Ellis County, Oklahoma, covering the NW/4 SE/4 of Section 20, Township 17 North, Range 22 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa Formation. (LF-04957-AD-01) Oil and Gas Lease dated April 21, 1966, by and between Farmers United Coop. Pool, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 162, page 625 of the Records of Ellis County, Oklahoma, covering the NW/4 SE/4 of Section 20, Township 17 North, Range 22 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF- 04957-AE-01) Oil and Gas Lease dated April 20, 1966, by and between Walter A. Povenz, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 162, page 627 of the Records of Ellis County, Oklahoma, covering the NW/4 SE/4 of Section 20, Township 17 North, Range 22 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04957-AF-01) Rights pursuant to Force Pooling Election effective June 7, 1966, from Charles O. Tilghman to Shell Oil Company recorded in Force Pooling Election, Ellis County, Oklahoma, covering the S/2 SE/4 of Section 20, Township 17 North, Range 22 West, Ellis County, Oklahoma, as to the Tonkawa formation, pursuant to Oklahoma Corporation Commission Cause CD No. 24573, Order No. 62735. (LF- 04960-AB-02) The hereinabove referenced leases are subject to Operating Agreement dated July 5, 1966, by and between Shell Oil Company, as Operator, and Amerada Petroleum Corporation, et al, as Non-Operators; Purchase and Sale Agreement dated December 19, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective December 1, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma. Oil and Gas Lease dated August 3, 1956, by and between Roy Nuttall, et ux, as Lessor, and George R. Aycock, as Lessee, recorded in Volume 83, page 323 of the Records of Ellis County, Oklahoma, covering the S/2 SE/4 of Section 20, Township 17 North, Range 22 West, Ellis County, Oklahoma (LF-04960-AA-02) Oil and Gas Lease dated June 20, 1956, by and between Alva T. Mitchell, et ux, as Lessor, and George R. Aycock, as Lessee, recorded in Volume 82, page 522 of the Records of Ellis County, Oklahoma, covering the SW/4 of Section 20, Township 17 North, Range 22 West, Ellis County, Oklahoma (LF-04987-00) The hereinabove referenced leases are subject to Operating Agreement dated July 5, 1966, by and between Shell Oil Company, as Operator, and Amerada Petroleum Corporation, et al, as Non-Operators; Assignment and Bill of Sale effective May 1, 1985, by and between Sabine Corporation and Maynard Oil Company recorded in Volume 466, page 870 of the Records of Ellis County, Oklahoma, and Assignment, of Oil, Gas and Mineral leases dated June 17, 1994 from Kerr McGee Corporation by and between Maynard Oil Company, recorded in Volume 575, page 706 of the Records of Ellis County, Oklahoma. ELLIS AND ROGER MILLS COUNTIES, OKLAHOMA PN 440402 (UT-404) BROWN NO. 1A-27 EXPENSE INTEREST 1.0000000 REVENUE INTEREST 0.8746330 Oil and Gas Lease dated June 18, 1962, by and between Arnold W. Brown and Faye Brown, as Lessors, and Mike Rainbolt, as Lessee, recorded in Volume 129, page 464 of the Records of Ellis County, Oklahoma, covering the SW/4 NW/4 and the NW/4 SW/4 of Section 27, Township 17 North, Range 22 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04949-00) Oil and Gas Lease dated April 1, 1963, by and between the Department of the Interior, Bureau of Land Management, bearing serial number NM-0140971, as Lessor, and Merchants Petroleum Company, as Lessee, covering that portion of Tract 7 as described in said lease, lying within the S/2 of Section 27, Township 17 North, Range 22 West, being a portion of the Canadian River Riparian to Lot 1 of Section 35 and Lot 2 of Section 34, Township 17 North, Range 22 West, Roger Mills County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04950-00-01) Oil and Gas Lease dated February 3, 1966, by and between J. I. Kirbie and Emma F. Kirbie, as Lessor, and El Paso Products Company, as Lessee, recorded in Volume 69, page 424 of the Records of Roger Mills County, Oklahoma, covering a part of the SE/4 of Section 27, being accretions to Lot 5 of Section 26, Township 17 North, Range 22 West, containing 6.89 acres, more or less, as described in Communitization Agreement dated February 10, 1967, covering all of Section 27, Township 17 North, Range 22 West, Roger Mills County, Oklahoma, the afore tract being one and the same as referred to in previous assignments as a tract containing 2.45 acres in the SE/4 of Section 27, Township 17 North, Range 22 West, constituting accretions to Lot 5 of Section 26, Township 17 North, Range 22 West, Roger Mills County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04951-AA) Oil and Gas Lease dated February 3, 1966, by and between Federal Land Bank of Wichita, as Lessor, and El Paso Products Company, as Lessee, recorded in Volume 69, page 428 of the Records of Roger Mills County, Oklahoma, covering a part of the SE/4 of Section 27, being accretions to Lot 5 of Section 26, Township 17 North, Range 22 West, containing 6.89 acres, more or less, as described in Communitization Agreement dated February 10, 1967, covering all of Section 27, Township 17 North, Range 22 West, Roger Mills County, Oklahoma, the afore tract being one and the same as referred to in previous assignments as a tract containing 2.45 acres in the SE/4 of Section 27, Township 17 North, Range 22 West, constituting accretions to Lot 5 of Section 26, Township 17 North, Range 22 West, Roger Mills County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04951-AB) Oil and Gas Lease dated August 8, 1956, by and between Arnold W. Brown and Faye Brown, as Lessor, and George L. Aycock, as Lessee, recorded in Volume 83, page 229 of the Records of Ellis County, Oklahoma, covering Lots 2, 3, 4, 5, 6, 7 and the SE/4 NW/4 of Section 27, Township 17 North, Range 22 West, and accretion and riparian thereto, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04953-AA-01) Oil and Gas Lease dated June 20, 1966, by and between Arthur M. Green and Nellie Jane Green, as Lessors, and Shell Oil Company, as Lessee, recorded in Volume 167, page 163 of the Records of Ellis County, Oklahoma,covering Lots 2, 3, 4, 5, 6, 7 and the SE/4 NW/4 of Section 27, Township 17 North, Range 22 West, and accretion and riparian thereto, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04953-AB-01) Oil and Gas Lease dated June 20, 1966, by and between Bennie Harmon and Jenseni Harmon, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 167, page 165 of the Records of Ellis County, Oklahoma, covering Lots 2, 3, 4, 5, 6, 7 and the SE/4 NW/4 of Section 27, Township 17 North, Range 22 West, and accretion and riparian thereto, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04953-AD-01) Oil and Gas Lease dated May 2, 1966, by and between Ruby M. Steinfelt, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 167, page 161 of the Records of Ellis County, Oklahoma, covering Lots 2, 3, 4, 5, 6, 7 and the SE/4 NW/4 of Section 27, Township 17 North, Range 22 West, and accretion and riparian thereto, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04953-AE-01) Oil and Gas Lease dated June 20, 1966, by and between Raymond Kinaman, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 167, page 167 of the Records of Roger Mills County, Oklahoma, covering Lots 2, 3, 4, 5, 6, 7 and the SE/4 NW/4 of Section 27, Township 17 North, Range 22 West, and accretion and riparian thereto, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04953-AF-01) Oil and Gas Lease dated August 3, 1956, by and between Elsie Nuttall, as Lessor, and George L. Aycock, as Lessee, recorded in Volume 83, page 321 of the Records of Ellis County, Oklahoma, covering Lot 1, NW/4 NE/4 and the N/2 NW/4 of Section 27, Township 17 North, Range 22 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF- 04954-AA-04) The hereinabove referenced leases are subject to Communitization Agreement dated February 10, 1967, by and between Shell Oil Company and Royalty Owners, effective August 1, 1966; Oklahoma Corporation Commission Cause No. 24144, Order No. 62086; Purchase and Sale Agreement dated December 19, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective December 1, 1985, recorded in Volume 782, page 1 of the Records of Roger Mills County, Oklahoma, and in Volume 459, page 381 of the Records of Ellis County, Oklahoma and Natural Gas Purchase and Sale Contract dated November 16, 1993, by and between Production Gathering Company and Maynard Oil Company. ROGER MILLS COUNTY, OKLAHOMA PN 440413 HILL NO. 1-24 (UT-448) EXPENSE INTEREST 0.0000000 REVENUE INTEREST 0.0507813 PN 440410 WILSON NO. 1-24 (UT-423) EXPENSE INTEREST 1.0000000 REVENUE INTEREST 0.8095703 Oil and Gas Lease dated September 13, 1966, by and between Etola Snell, as Lessor, and Humble Oil & Refining Company, as Lessee, recorded in Volume 75, page 9 of the Records of Roger Mills, Oklahoma, covering the SE/4 SW/4 and SW/4 SE/4 AND E/2 SE/4 of Section 24, Township 17 North, Range 22 West, Roger Mills County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04946-AA) Oil and Gas Lease dated September 12, 1966, by and between Jessie Carpenter, as Lessor, and Humble Oil & Refining Company, recorded in Volume 74, page 626, of the Records of Roger Mills County, Oklahoma, covering SE/4 SW/4 and SW/4 SE/4 and E/2 SE/4 of Section 24, Township 17 North, Range 22 West, Roger Mills County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04946-AB) Oil and Gas Lease dated September 12, 1966, by and between Zelma Dukes, a widow, as Lessor, and Humble Oil & Refining Company, as Lessee, recorded in Volume 74, page 624 of the Records of Roger Mills, Oklahoma, covering SE/4 SW/4 and SW/4 SE/4 and E/2 SE/4 of Section 24 ,Township 17 North, Range 22 West, Roger Mills County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04946-AC) Oil and Gas Lease dated September 13, 1966, by and between Willie Bailey, as Lessor, and Humble Oil & Refining Company, as Lessee, recorded in Volume 74, page 622 of the Records of Roger Mills, Oklahoma, covering SE/4 SW/4 and SW/4 SE/4 and E/2 SE/4 of Section 24, Township 17 North, Range 22 West, Roger Mills County, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04946-AD) Oil and Gas Lease dated September 12, 1966, by and between L. B. Barker, a single man, as Lessor, and Humble Oil & Refining Company, as Lessee, recorded in Volume 74, page 599 of the Records of Roger Mills, Oklahoma, covering the SE/4 SW/4 and SW/4 SE/4 and E/2 SE/4 of Section 24, Township 17 North, Range 22 West, Roger Mills, Oklahoma, LIMITED to rights from the surface to the base of the Tonkawa formation. (LF-04946-AE) Oil and Gas Lease dated April 11, 1957, by and between Elton Everett Hill, Trustee for Edward Everett Hill Estate Farms, as Lessor, and J. D. Wesner, as Lessee, recorded in Volume 19, page 94 of the Records of Roger Mills, Oklahoma, covering E/2 NW/4 of Section 24, Township 17 North, Range 22 West, Roger Mills County, Oklahoma. (LF-04947-00) Oil and Gas Lease dated September 2, 1966, by and between R. C. Green, et ux, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 74, page 630 of the Records of Roger Mills County, Oklahoma, covering the NW/4 SE/4, NE/4 SW/4 and the W/2 SW/4 of Section 24, Township 17 North, Range 22 West, Roger Mills County, Oklahoma, LIMITED to rights from the surface to the base of the Cherokee Formation. (LF-04880-AA) Oil and Gas Lease dated September 2, 1966, by and between Jimmy Wilson, et ux, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 74, page 628 of the Records of Rogers Mills County, Oklahoma, covering the NW/4 SE/4, NE/4 SW/4 and the W/2 SW/4 of Section 24, Township 17 North, Range 22 West, Roger Mills County, Oklahoma, LIMITED to rights from the surface to the base of the Cherokee Formation. (LF-04880-AB) Oil and Gas Lease dated September 10, 1966, by and between C. G. Theis, et al, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 75, page 122 of the Records of Rogers Mills County, Oklahoma, covering Lots 5, 6, 7 and 8, and the SE/4 SE/4 Section 23, and 10.59 acres in the bed of the Canadian River in Section 23 riparian to the NW/4 of Section 24 and the W/2 NW/4 of Section 24, Township 17 North, Range 22 West, Roger Mills County, Oklahoma, LIMITED to rights from the surface to the base of the Cherokee Formation in Section 24 only and from the surface to the base of the Tonkawa Formation in the balance of the acreage. (LF-04945-00) Oil and Gas Lease dated April 11, 1957, by and between E. E. Hill, Trustee, as Lessor, and J. D. Wesner, as Lessee, recorded in Volume 19, page 92 of the Records of Roger Mills County, Oklahoma, covering the NE/4 of Section 24, Township 17 North, Range 22 West, Roger Mills County, Oklahoma, LIMITED to rights from the surface to the base of the Cherokee Formation. (LF-04948-AA) Oil and Gas Lease dated May 25, 1966, by and between M. H. Fariss, as Lessor, and J. Cooper West, as Lessee, recorded in Volume 73, page 163 of the Records of Roger Mills County, Oklahoma, covering the NE/4 of Section 24, Township 17 North, Range 22 West, Roger Mills County, Oklahoma, LIMITED to rights from the surface to the base of the Cherokee Formation. (LF-04948-AB) Oil and Gas Lease dated June 14, 1966, by and between R. W. Slemaker, et ux, as Lessor, and J. Cooper West, as Lessee, recorded in Volume 73, page 203 of the Records of Roger Mills County, Oklahoma, covering the NE/4 of Section 24, Township 17 North, Range 22 West, Roger Mills County, Oklahoma, LIMITED to rights from the surface to the base of the Cherokee Formation. (LF-04948-AC) Oil and Gas Lease dated June 14, 1966, by and between L. D. Chilton, as Lessor, and J. Cooper West, as Lessee, recorded in Volume 73, page 205 of the Records of Roger Mills County, Oklahoma, covering the NE/4 of Section 24, Township 17 North, Range 22 West, Roger Mills County, Oklahoma, LIMITED to rights from the surface to the base of the Cherokee Formation. (LF-04948-AD) Oil and Gas Lease dated September 2, 1966, by and between Floyd Blaine, et ux, as Lessor, and J. Cooper West, as Lessee, recorded in Volume 75, page 271 of the Records of Roger Mills County, Oklahoma, covering the NE/4 of Section 24, Township 17 North, Range 22 West, Roger Mills County, Oklahoma, LIMITED to rights from the surface to the base of the Cherokee Formation. (LF- 04948-AE) Oil and Gas Lease dated July 14, 1966, by and between Earl Sneed, as Lessor, and J. Cooper West, as Lessee, recorded in Volume 74, page 35 of the Records of Roger Mills County, Oklahoma, covering the NE/4 of Section 24, Township 17 North, Range 22 West, Roger Mills County, Oklahoma, LIMITED to rights from the surface to the base of the Cherokee Formation. (LF-04948-AF) Oil and Gas Lease dated June 9, 1966, by and between W. E. Spaid, et ux, as Lessor, and J. Cooper West, as Lessee, recorded in Volume 73, page 161 of the Records of Roger Mills County, Oklahoma, covering the NE/4 of Section 24, Township 17 North, Range 22 West, Roger Mills County, Oklahoma, LIMITED to rights from the surface to the base of the Cherokee Formation. (LF-04948-AG) The hereinabove referenced leases are subject to Purchase and Sale Agreement and Assignment, Conveyance and Bill of Sale effective December 1, 1985, by and between Shell Western E&P Inc., and Maynard Oil Company. EX-2 9 EXHIBIT 2(h) PURCHASE AND SALE AGREEMENT THIS PURCHASE AND SALE AGREEMENT (this "AGREEMENT") is made and entered into this 12th day of September, 1996, by and between MAYNARD OIL COMPANY, a Delaware corporation, having its principal office at 8080 North Central Expressway, Suite 660, Dallas, Texas 75206 ("SELLER") and ENRON OIL & GAS COMPANY, a Delaware corporation, having its principal office at 1400 Smith Street, Houston, Texas 77002 ("BUYER"). In consideration of the mutual promises contained herein, the benefits to be derived by each party hereunder and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller agree as follows: ARTICLE I PURCHASE AND SALE 1.01 Purchase and Sale. Seller agrees to sell and convey and Buyer agrees to purchase and pay for the interests (as defined in Section 1.02) owned by Seller, subject to the terms and conditions of this Agreement. 1.02 Interests. All of the following shall herein be called the "INTERESTS": (a) All of Seller's right, title and interest in and to the leasehold estate and mineral rights created by the leases described in Exhibit A (the "LEASES") together with any and all interest of Seller in and to such property and in and to any agreements, leases, rights-of-way, easements, licenses and permits incident thereto; (b) All of Seller's right, title and interest in and to the wells, and production therefrom, located on the Leases or lands pooled therewith, including but not limited to the wells described in Exhibit A together with any and all buildings or other improvements constructed thereon (collectively the "WELLS", together with any and all interest of Seller in and to such property and in and to any agreements, including, without limitation, gas purchase agreements, farmin and farmout agreements, operating agreements and pooling agreements, leases, rights-of-way, easements, licenses and permits incident thereto); (c) All of Seller's right, title and interest in and to the real and personal property, fixtures, improvements and buildings now or as of the Effective Time (as defined in Section 1.03) located on the lands burdened by the Leases or lands pooled therewith (the LANDS"), and all contract rights, rights of substitution and subrogation in and to any rights and actions of warranty which Seller has or may have with respect to the Interests; (d) All of the files, records and data related to the items described in Subsections (a), (b) and (c) above, and all the seismic and geophysical data of Seller appurtenant to or crossing the Leases, Wells and Lands; and (e) Any and all other assets of Seller appurtenant or related to or used in connection with the Leases and Wells. 1.03 Effective Time. The purchase and sale of the Interests shall be effective as of August 1, 1996, at 7:00 A.M., local time (herein called the "EFFECTIVE TIME ) in the county in which the Lands are located. ARTICLE II PURCHASE PRICE 2.01 Purchase Price. The purchase price for the Interests shall be Five Hundred Sixty Thousand Nine Hundred Sixty Four DOLLARS ($560,964.00) (herein called the "PRELIMINARY PURCHASE PRICE"), subject to adjustment as set forth in Section 2.02 and Section 2.03 below. 2.02 Performance Deposit. On or before 4:00 o'clock p.m., local time, September 13, 1996, Buyer shall tender to Seller, by wire transfer, a performance deposit in the amount of Fifty Six Thousand Ninety Six DOLLARS ($56,096.00). The performance deposit is received solely to assure the performance of Buyer pursuant to the terms and conditions hereof. The performance deposit will be returned to Buyer at Closing, upon consummation of the transaction, or at Buyer's election, may be credited to the Preliminary Purchase Price. No interest shall be paid or credited to the performance deposit. If Buyer fails, refuses, or is unable to close the sale in accordance with the terms herein, Seller, except as otherwise herein specifically provided, may, at its option, retain the performance deposit as agreed liquidated damages and not as a penalty. If Seller, through no fault of Buyer, refuses to close the sale in accordance with the terms herein, the performance deposit shall be returned to Buyer. 2.03 Adjustments to Purchase Price. The Preliminary Purchase Price shall be adjusted as follows and the resulting amount shall be herein called the "FINAL PURCHASE PRICE". (a) The Preliminary Purchase Price shall be increased by the following: (1) The value of all merchantable, allowable oil attributable to the Leases, in storage above the pipeline connection at the Effective Time, and not previously sold by Seller, that is credited to the Interests, such value to be the net price realized by Seller; (2) The amount of all reasonable expenditures, including, without limitation, royalties, rentals and other charges, ad valorem, property, production, excise, severance, windfall profit and other taxes based upon or measured by proceeds therefrom but not including income or gross receipts taxes, expenses billed under applicable operating agreements and, as compensation to Seller for its general and administrative expenses as operator of interests operated by it, in lieu of any other overhead charges in connection with such particular Interests: (i) that amount attributable to the Interests under any existing joint operating agreement, or (ii) in the absence of a joint operating agreement with respect thereto, the applicable rate recommended in the 1995 Ernst & Young, L.L.P. s Fixed Rate Overhead Survey in connection with the operation of the Interests from the Effective Time to the Closing Date (as defined in Section 9.01), as well as any expenditures approved by Buyer; (3) An amount equal to all prepaid expenses attributable to the interests that are paid by or on behalf of Seller prior to the Closing Date and that are, in accordance with generally accepted accounting principles, attributable to the period after the Effective Time including, without limitation, prepaid insurance, prepaid ad valorem, property, production, severance and similar taxes (but not including income taxes) based upon or measured by the ownership of property or the production of hydrocarbons or the receipt of proceeds therefrom; (4) An amount equal to seventy-five cents per mcf for a net underproduced gas imbalance; and (5) Any other amount agreed upon by Seller and Buyer. (b) The Preliminary Purchase Price shall be decreased by the following: (1) An amount equal to all proceeds of production received by Seller prior to the Closing Date that are attributable to the Interests and that are, in accordance with generally accepted accounting principles, attributable to the period of time from the Effective Time to the Closing Date; (2) An amount equal to all unpaid ad valorem, property, production, severance and similar taxes and assessments (but not including income or gross receipts taxes) based upon or measured by the ownership of property or the production of hydrocarbons or the receipt of proceeds therefrom accruing with respect to the Interests prior to the Effective Time, which amount shall be computed based upon such taxes assessed against the applicable portion of the Interests for the current tax fiscal year, or if the assessments for the current tax fiscal year are unavailable, for the preceding such year; (3) An amount equal to the sum of all Defect Adjustments and Exclusion Adjustments (as those terms are defined in Section 7.03); and (4) Any environmental adjustment pursuant to ARTICLE V.(e); (5) An amount equal to seventy-five cents ($0.75) per mcf for a net overproduced gas imbalance; and (6) Any other amount agreed upon by Seller and Buyer. 2.04 Actual Figures. When available, actual figures will be used for adjustments at Closing. To the extent actual figures are not available, estimates will be used subject to final adjustments as provided in Section 10.01 hereof. ARTICLE III REPRESENTATIONS AND WARRANTIES 3.01 Representations and Warranties of Seller. Seller represents and warrants to Buyer with respect to itself and, where applicable, with respect to the Interests, that: (a) Seller is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation, and has all requisite power and authority to own and lease the properties and assets it currently owns and leases and to carry on its business as such business is currently conducted. Seller is duly licensed or qualified to transact business and is in good standing in all jurisdictions where the character of the properties and assets now owned or leased by it or the nature of the business now conducted by it require it to be so licensed or qualified if the failure to qualify might reasonably be expected to have a material adverse effect on the business or financial prospects of Seller. Seller is also duly licensed or qualified to do business and is in good standing in each jurisdiction where the Interests are located; (b) Seller has all requisite power and authority to execute and deliver this agreement, to consummate the transactions contemplated hereby, and to perform the terms and conditions hereof to be performed by it. This Agreement constitutes, and each of the documents required to be delivered by Seller hereunder, shall constitute Seller's legal, valid and binding obligation, enforceable against Seller in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, or other laws relating to or affecting generally the enforcement of creditors' rights and general principles of equity, regardless of whether considered in proceeding in equity or at law; (c) This Agreement and its execution and delivery by Seller do not, and the fulfillment and compliance by Seller with the terms and conditions of this Agreement, and the consummation by Seller of the transactions contemplated hereby, will not (i) require any filing, consent, authorization, or approval under, any law or administrative regulation or any judicial, administrative, or arbitration order, aware, judgment, writ, injunction, or decrees applicable to or binding upon Seller (assuming the receipt of all routine governmental consents typically received after consummation of transactions of the nature contemplated by this Agreement); and (ii) conflict with, result in a breach of, constitute a default under (without regard to any requirements of notice or the lapse of time), accelerate, or permit the acceleration of the performance required by, any mortgage, indenture, loan or credit agreement or other agreement or instrument evidencing indebtedness for borrowed money to which such Seller is a party or by which it is bound or to which any of the Interests are subject; (d) As of the execution date hereof, there are no currently outstanding and effective authorities for expenditure or third party proposals for subsequent operations with respect to the Interests other than as set forth in Exhibit B; (e) As of the execution date hereof (i) no action, suit, or proceeding is pending or, has been threatened against Seller before any court, administrative agency, or arbitral tribunal, which involves or may involve the Interests, the production of oil and gas therefrom, or the use of and enjoyment thereof, or any operation or activity being conducted therein or thereon or which challenges Seller's rights to enter into this Agreement or materially adversely affects its ability to perform its obligations under this Agreement; (ii) Seller has not received written notice of nor been charged with any violation of, any provision of any law or regulation relating to the Interests, and to Seller's best knowledge, no third party has been charged with any violation of any provision of any law or regulation relating to the Interests; (f) As of the execution date hereof Seller has not received written notice that it is in default under (i) any applicable contract affecting the Interests; (ii) any order, judgment, or decree of any federal or state court or governmental authority relating to the Interests; or (iii) any other agreement, contract, lease, license, or other instrument; (g) Exhibit A contains a complete list of the Interests wherein Seller's interest is currently subject to reversionary interests or non-consent operations. In each case, such Exhibit reflects the interest of Seller before and after adjustment for such reversionary interests or non-consent operations for each Well effected. Exhibit A- 1 reflects the remaining amount to be recouped, or account status as appropriate, as of the date reflected thereon with respect to each such well; (h) As of the Effective Time, to the best of Seller s knowledge, except as set forth in Exhibit A-1 hereto, there were no production imbalances or transportation and processing imbalances affecting the Interests; (i) All of the written and electronic data (including, without limitation, information relating to gathering, processing, transportation and sale of hydrocarbons from the Interests and other matters) at the time furnished or to be furnished by Seller to Buyer in conjunction with Buyer's evaluation of the Interests was contained in or derived from Seller's records kept in the ordinary course of business; and no representation or warranty is made with respect to the accuracy or correctness of any estimates, analysis, or projections or any assumptions or other matters stated therein; (j) No broker or finder is entitled to any brokerage or finder's fee, or to any commission, based in any way on agreements, arrangements or understandings made by or on behalf of Seller for which Buyer has any liability or obligation (whether contingent or otherwise); (k) Seller is not a foreign person, foreign corporation, foreign partnership, foreign trust or foreign estate (as those terms are defined in the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder); (l) From the Effective Time to the execution date hereof there has not been: (i) any material adverse change in the condition of the Interests, other than changes caused by the sale, production, or disposition of production and changes resulting from reservoir conditions other than fire, blowout, or act of God (provided that any change or revision in existing laws, regulations, or governmental policies applicable to the Interests or the sale, production, or disposition of production therefrom and the imposition of any new laws, regulations or governmental policies with respect to the Interests or the sale, production, or disposition of production therefrom shall be deemed not to be an adverse change in the condition of the Interests), (ii) any sale, lease, or other disposition of the Interests, (iii) any condemnation or taking by eminent domain of any portion of any of the Interests, or (iv) any contract or commitment to do any of the foregoing; (m) Seller or the Operator of any Interest has obtained or applied for all governmental licenses, permits, certificates, approvals, consents, authorizations and orders required for it to own or lease the Interests and develop, construct, maintain, and operate them, and to market the production therefrom, and no proceeding is pending or threatened involving revocation of any such licenses, permits, certificates, consents, authorizations or orders, provided that this representation is limited to Seller's best knowledge; (n) There are no taxes due or tax liens on any of the Interests; (o) To the best of Seller's knowledge, Seller is not a party to any joint venture, partnership, limited liability company, farmin, farmout, joint operating agreement, or other arrangement or contract with respect to any of the Interests that is reported as a partnership for federal or state income tax purposes; (p) As of the execution date hereof all of the wells and all of the equipment used in the drilling, completion and operation of any such wells, or in the production, treatment, storage, gathering and transportation of hydrocarbons from such wells, is in good operating condition, ordinary wear and tear excepted, provided that this representation is limited to Seller's best knowledge with respect to such matters which are the responsibility of the operator of any interest not operated by seller; (q) From the Effective Time to the execution date hereof, no personal injuries or deaths have occurred in connection with any of the Interests which should have been reported by Seller in accident or incident reports in accordance with applicable law or in accordance with Seller's usual operating procedures and policies; (r) To the best of Seller's knowledge, all royalties (including without limitation royalties with respect to take-or-pay payments or settlements), minimum royalties, rentals, shut-in gas payments and other payments due with respect to the Interests have been properly and timely paid in full, except for payments held in suspense for title or other reasons that are customary in the industry or which are being contested in an appropriate forum. There are no amounts claimed to be due to Seller in respect of the Interests that are being held in suspense because of a dispute as to title to the Interests or for any other reason, and Seller is entitled to be paid, and is being paid, with respect to production from the Interests, its net revenue interest without indemnity or guarantee other than those customarily found in division orders and other similar agreements and documents; (s) Except as detailed on Exhibit A-2, this Agreement and its execution and delivery by Seller does not, and the fulfillment and compliance by Seller with the terms and conditions of this Agreement and the consummation by Seller of the transactions contemplated hereby will not permit the exercise of or give rise to (with the giving of any required notice) any preferential purchase right, option or right of first refusal; (t) To the best of Seller's knowledge, all of the wells in which such Seller has an interest by virtue of its ownership of the Leases have been (i) drilled and completed within the boundaries of such Lease or within the limits otherwise permitted by contract, pooling or unit agreement, and/or by law and (ii) drilled and completed in compliance with all applicable laws, rules and regulations; and (u) Seller has reasonable surface access to each of the Interests for purposes of oil and gas exploration, development and production. 3.02 Representations and Warranties of Buyer. Buyer represents and warrants to Seller that: (a) Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation, and has all requisite power and authority to own and lease the properties and assets it currently owns and leases and to carry on its business as such business is currently conducted. Buyer is duly licensed or qualified to transact business and is in good standing in all jurisdictions where the character of the properties and assets now owned or leased by it or the nature of the business now conducted by it requires it to be so licensed or qualified if the failure to qualify might reasonably be expected to have a material adverse effect on the business or financial prospects of Buyer. Buyer is also duly licensed or qualified to do business and is in good standing in each jurisdiction where the Interests are located; (b) Buyer has all requisite power and authority to execute and deliver this Agreement, to consummate the transactions contemplated hereby, and to perform the terms and conditions hereof to be performed by it. This Agreement constitutes, and each of the documents required to be delivered by Buyer hereunder, shall constitute Buyer's legal, valid, and binding obligation, enforceable against Buyer in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, or other laws relating to or affecting generally the enforcement of creditors' rights and general principles of equity, regardless of whether considered in a proceeding in equity or at law; (c) This Agreement and its execution and delivery by Buyer does not, and the fulfillment of and compliance by Buyer with the terms and conditions of this Agreement, and the consummation by Buyer of the transactions contemplated hereby, will not (i) require any filing, consent, authorization, or approval under, any law or administrative regulation or any judicial, administrative, or arbitration order, award, judgment, writ, injunction or decree applicable to or binding upon Purchaser (assuming the receipt of all routine governmental consents typically received after consummation of transactions of the nature contemplated by this Agreement), (ii) conflict with, result in a breach of, constitute a default under (without regard to any requirements of notice or the lapse of time), accelerate, or permit the acceleration of the performance required by, any mortgage, indenture, loan or credit agreement or other agreement or instrument evidencing indebtedness for borrowed money to which Buyer is a party or by which it is bound; (d) No broker or finder is entitled to any brokerage or finder's fee, or to any commission, based in any way on agreements, arrangements or understandings made by or on behalf of Buyer for which Seller has any liability or obligation (whether contingent or otherwise); (e) Buyer is not a foreign person, foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder); and (f) In making the acquisition of the Interests hereunder, Buyer is acting in the conduct of its own business in the ordinary course. The Interests are not being acquired for distribution or transfer in violation of the securities laws of the United States or of any state thereof. ARTICLE IV COVENANTS OF BUYER AND SELLER 4.01 Covenants of Seller. Seller covenants and agrees with Buyer that: (a) After the execution of this Agreement, Seller will make available to Buyer for examination at Seller's offices in Dallas, Texas, title and other information relating to the Interests insofar as the same are in Seller's possession and, subject to the consent and cooperation of third parties, will cooperate with Buyer in Buyer's efforts to obtain, at Buyer's expense, such additional information relating to the Interests as Buyer may reasonably desire (to the extent that Seller may do so without violating legal constraints or any obligation of confidence or other contractual commitments of Seller to third parties), including without limitation: (1) Title opinions, title status reports and contracts or agreements pertaining to the Interests; (2) Copies of the leases, prior conveyances of Interests created thereby, unitization, pooling and operating agreements, division and transfer orders, mortgages, deeds of trust, security agreements, financing statements, and other encumbrances not discharged and affecting the title to or the value of the Interests; (3) Accounting and other records relating to the payment of rentals, royalties, joint interest billings and other payments due under the Leases or the Wells; (4) Records relating to the payment of ad valorem, property, production, severance, excise and similar taxes and assessments based on or measured by the ownership of property or the production of hydrocarbons or the receipt of proceeds therefrom on the Interests; (5) Ownership maps and surveys relating to the Interests; (6) Copies of purchase, sale, processing and transportation agreements relating to the production of gas from the Interests. Copies of all gas balancing agreements and gas balancing statements; (7) Copies of agreements, leases, permits, easements, licenses and orders relating to the Interests; (8) Production records relating to the Interests; (9) Inventories of personal property and fixtures included in the Interests; and (10) Any and all other information contained in Seller's files that relates to the Interests other than matters subject to attorney- client or attorney work privilege or concerning Seller's economic evaluation. Seller shall permit Buyer to inspect and photocopy such information and records at any reasonable time during the term of this Agreement. Seller shall cooperate with Buyer in Buyer's efforts to obtain such additional title information as Buyer may reasonably deem prudent. (b) During the period from the date of this Agreement to the Date of Closing, without the prior written consent of Buyer, Seller will not (i) cause any of its portion of the Leases or other of the Interests to be developed, maintained, or operated in a manner substantially inconsistent with prior operations; (ii) abandon any material part of any of its portion of the Interests; (iii) commence any material operation of any of its portion of the Leases or the Interests anticipated to cost Seller in excess of Fifteen Thousand Dollars ($15,000.00) per operation (except emergency operations, operations required under presently existing contractual obligations, the on-going commitments under the AFE's described in Exhibit B hereto, and operations undertaken to avoid any penalty provisions of any applicable agreement or order), or (iv) convey or dispose of any material part of any of its portion of the Interests (other than oil, gas and other liquid products produced from the Interests in the regular course of business). Buyer acknowledges that Seller owns undivided interests in certain of the Interests and Buyer agrees that the acts or omissions of Seller's co-owners shall not constitute a violation of the provision of this Section 4.01(b) nor shall any action required by a vote of co- owners constitute such a violation so long as Seller has voted its interest with Buyer's prior consent; (c) Seller shall use all reasonable efforts to maintain its corporate status from the date hereof until Closing and to assure that as of the Closing Date it will not be under any corporate, legal or contractual restriction that would prohibit or delay the timely consummation of such transactions; and (d) Seller shall promptly notify Buyer of any suit, action, claim, threatened suit, action or claim, or other proceedings of the type referred to in Section 3.01(e) or (f) that arises prior to the Closing with respect to which Seller receives notice or otherwise obtains knowledge following the execution of this Agreement. 4.02 Covenants of Buyer. Buyer covenants and agrees with Seller that: (a) Buyer shall use all reasonable efforts to maintain its corporate status and to assure that as of the Closing Date it will not be under any corporate, legal or contractual restriction that would prohibit or delay the timely consummation of such transactions; (b) To the extent necessary to facilitate the consummation of the transactions contemplated herein, Buyer agrees to enter into specific agreements of assumption with respect to the obligations of Seller to specific third parties or governmental authorities to the extent such obligations are attributable to the Interests after the Effective Time. Buyer also shall be obligated to obtain consents from all necessary Federal authorities, including the Bureau of Indian Affairs, and State authorities to the assignment of the Leases; (c) For a period of ten (10) years after the Closing Date, Buyer shall provide Seller with reasonable access to the Records so long as Buyer is given reasonable notice prior to Seller's access; and (d) Buyer represents that it has performed, or will perform prior to Closing, sufficient review and due diligence with respect to the Interests which includes reviewing well data, title and other files and performing necessary evaluations, assessments, and other tasks involved in evaluating the Interests, to satisfy its requirements, completely, and enable it to make an informed decision to acquire the Interests under the terms of this Agreement. ARTICLE V ASSUMPTION OF LIABILITIES AND INDEMNITIES As used in this ARTICLE V, and the paragraphs hereunder "CLAIMS" shall include claims, demands, causes of action, liabilities, damages, penalties and judgements of any kind or character and all costs and fees in connection therewith. (a) At the Closing, but effective as of the Effective Time, Buyer shall (i) assume, and be responsible for and comply with all duties and obligations of Seller, express or implied, with respect to the Interests, including, without limitation, those arising under or by virtue of the Seller's leases and contracts listed in Exhibit A, and the permits, the applicable statutes or rules, regulations or orders of any governmental authority (specifically including, without limitation, any governmental request or requirement to plug, replug and/or abandon any well of whatsoever type, status or classification, or to take any clean-up, remediation or other action with respect to the Interests), and (ii) except as otherwise provided herein, to defend, indemnify and hold harmless Seller from any and all claims in connection therewith; (b) Subject to the provisions of Paragraphs (c), (d) and (e) below Seller shall defend, indemnify and hold harmless Buyer from any and all claims, costs, expenses, liabilities or causes of action relating to or arising out of Seller's ownership or operation of Seller's Interests prior to the Effective Time and Buyer shall defend, indemnify and hold harmless Seller from any and all claims, costs, expenses, liabilities or causes of action relating to or arising out of Buyer's ownership and operation of the Interests after the Effective Time. Each indemnified party hereunder agrees that upon its discovery of facts giving rise to a claim for indemnity under the provisions of this Agreement, including receipt by it of any demand, assertion, claim, action or proceeding, judicial or otherwise, by any third party (such third party actions being referred to herein as a "THIRD PARTY CLAIM"), it will give prompt notice thereof in writing to the indemnifying party together with a statement of such information with respect to any of the foregoing as it shall then have. Such notice shall include a formal demand for indemnification under this Agreement. The indemnified party shall afford the indemnifying party a reasonable opportunity to pay, settle, or contest any Third Party Claim at its expense; (c) Seller shall (i) be responsible for any and all claims, including but not limited to claims for payment of royalties, arising out of the production and sale of hydrocarbons by Seller from the Interests, and the proper accounting and payment of expenses for the Interests, insofar as such claims and payments relate to period of time prior to the Effective Time, and (ii) defend, indemnify and hold harmless Buyer from any and all of such claims and payments; (d) Buyer shall (i) be responsible for any and all claims, including but not limited to claims for payment of royalties, arising out of the production and sale of hydrocarbons by Buyer from the Interests, and the proper accounting and payment of expenses for the Interests, insofar as such claims and payments relate to period of time beginning at the Effective Time and thereafter, and (ii) defend, indemnify and hold harmless Seller from any and all of such claims and payments; and (e) After the execution of this Agreement, Buyer, at its option, and its sole cost, risk and expense, may obtain an environmental audit of the Interests at any time prior to September 20, 1996. Seller shall provide the environmental auditors all information available to it which they may reasonably request and shall grant said auditors physical access to the Interests. For those Interests which are not operated by Seller, Buyer shall obtain permission from the operator to conduct such inspections. If the audit reveals any environmental conditions which are not satisfactory to Buyer, Seller shall immediately be provided a copy of the audit information and either party shall have the option to terminate this Agreement as to the affected Interest(s) with a deduction from the Preliminary Purchase Price of the allocated value attributable to that Interest(s), without liability, unless Seller affirms in writing that it will remediate such conditions to the satisfaction of the Buyer prior to Closing. Buyer shall defend and indemnify Seller from any and all liability, claims, causes of action, injury to Buyer's employees, agents or contractors or to Buyer's property and/or injury to Seller's property, employees, agents or contracts which may arise out of Buyer's inspections, but only to the extent of Buyer's negligence. If such deductions exceed ten percent (10%) of the Preliminary Purchase Price and the parties are unable to mutually agree to proceed with closing, then either party shall have the right to terminate this Agreement without liability. After Closing, Buyer shall be deemed to have fully inspected and accepted the Interests "AS IS" in their then current physical and environmental condition. ARTICLE VI DISCLAIMER OF WARRANTIES Buyer acknowledges that in making the decision to enter into this Agreement and consummate the transactions contemplated hereby, Buyer has relied only upon its own independent investigation of the Lands. Accordingly, Buyer acknowledges that Seller has not made and Seller hereby expressly disclaims and negates any representation or warranty express or implied at common law, by statute or otherwise relating to (i) condition of the Lands (including but not limited to any implied or express warranty of merchantability or fitness for a particular purpose or of conformity to models or samples of materials) and (ii) any information, data or other materials (written or oral) furnished to Buyer by or on behalf of Seller (including but not limited to information, data or other materials regarding the existence or extent of oil, gas or other mineral reserves, the recoverability of or the cost of recovering such reserves, the value of such reserves, any producing pricing assumption, present or past production rates, the environmental condition of the Lands, including but not limited to the presence of naturally occurring radioactive material ("NORM"), and the ability to sell oil or gas production after Closing); provided, however, that the foregoing disclaimer and negation of representations and warranties shall not affect or impair the representations and warranties of Seller made in Section 3.01. ARTICLE VII TITLE MATTERS 7.01 Defensible Title. (a) As used herein, the term "DEFENSIBLE TITLE" shall mean, as to each of the Interests, such title which, subject to and except for the Permitted Encumbrances (as defined hereinafter): (i) entitles Seller to receive not less than the "NET REVENUE INTEREST" set forth in Exhibit A of all oil, gas and associated liquid and gaseous hydrocarbons produced, saved and marketed from the presently producing formations in the presently producing wells bottomed in the Lands; and (ii) obligates Seller to bear costs and expenses relating to the maintenance, development and operation of those portions of the presently producing wells bottomed in the Lands in an amount not greater than the "WORKING INTEREST" set forth in Exhibit A; (b) The term "PERMITTED ENCUMBRANCES", as used herein, shall mean: (1) Lessor's royalties, overriding royalties, reversionary interests and similar burdens provided that the net cumulative effect of such burdens does not operate to reduce the Net Revenue Interest of any interest to less than the Net Revenue Interest therefor set forth in Exhibit A; (2) Preferential rights to purchase and required third party consents to assignments and similar agreements with respect to which, prior to Closing; (i) waivers or consents are obtained from the appropriate parties, (ii) the appropriate time period for asserting such rights has expired without an exercise of such rights, or (iii) with respect to consents, such consents which need not be obtained prior to an assignment, or the failure to obtain such consents will not have a material adverse effect on the value of the Interests to Buyer; (3) Liens for taxes or assessments not yet due or not yet delinquent, or if delinquent, that are being contested in good faith in the ordinary course of business; (4) All rights to consent by, required notices to, filings with, or other actions by governmental entities in connection with the sale or conveyance of any of the Interests if the same are customarily obtained subsequent to such sale or conveyance; (5) Rights of reassignment; (6) Easements, rights-of-way, servitudes, permits, surface leases and other rights in respect of surface operations, pipelines, grazing, logging, canals, ditches, reservoir or the like; conditions, covenants or other restrictions; and easements for streets, alleys, highways, pipelines, telephone lines, power lines, railways and other easements and rights-of-way on, over or in respect of any of the Interests; (7) Such Title Defects or other defects as Buyer has waived pursuant to the terms of this Agreement; (8) Liens to be released at Closing; (9) The terms and conditions of all leases, agreements, orders, instruments, documents and other matters described in Exhibit A hereto; and (10) Rights reserved to or vested in any municipality or governmental, statutory or public authority to control or regulate any of the Interests in any manner, and all applicable laws, rules and orders of governmental authority. (c) The term "TITLE DEFECT" as used herein shall mean any encumbrance, encroachment, irregularity, defect in or objection to Seller's title to each Interest (expressly excluding Permitted Encumbrances), that alone or in combination with other defects, renders Seller's title to that Interest less than Defensible Title or which would adversely interfere with the use, possession, ownership or value thereof, or any violation of applicable laws, rules, regulations or orders of any governmental agency having jurisdiction over the Interests which will likely result in an impairment or loss of title to all or a portion of the Interests or diminish the value thereof or likely will hinder or impede the operation of such interest, or any matter constituting a breach of Seller's representation and warranties as set forth in Section 3.01. Materialmen's mechanics', repairmen's, employees', contractors', operators' or other similar liens or charges arising in the ordinary course of business incidental to construction, maintenance or operation of the Interests shall not constitute a Title Defect: (i) if they have not been filed pursuant to law, or (ii) if filed, they have not yet become due and payable or payment is being withheld as provided by law, or (iii) if their validity is being contested in good faith by appropriate action. 7.02. Casualty Loss. If, prior to the Closing, all or any portion of the Interests be destroyed by fire or other casualty, is taken in condemnation or under the right of eminent domain or proceedings for such purpose are pending or threatened, Buyer may elect (i) to treat the Interests affected by such destruction, taking or pending or threatened taking as Defective Interests in accordance with Section 7.03; or (ii) to purchase such Interests notwithstanding any such destruction, taking or pending or threatened taking (without reduction of the Preliminary Purchase Price therefor), in which case, Seller shall, at the Closing, pay to Buyer all sums paid to Seor any lost or foregone income or production attributable to the time period subsequent to the Effective Time) and shall assign, transfer and set over unto Buyer all of the right, title and interest of Seller in and to any unpaid claims, awards or other payments from third parties arising out of the destruction, taking or pending or threatened taking as to such Interests (including sums which are in the nature of compensation for any lost or foregone income or production attributable to the time period subsequent to the Effective Time). Seller agrees that, prior to Closing, it shall not voluntarily compromise, settle or adjust any amounts payable by reason of any destruction, taking or pending or threatened taking as to such of its portion of the Interests to be assigned to Buyer without first obtaining the written consent of Buyer. 7.03 Defect Adjustments. (a) "DEFECTIVE INTEREST" shall mean that portion of the Interests (as determined in accordance with Section 7.03(c)) affected by a Title Defect or that Buyer is otherwise entitled under Sections 7.02 or 7.04 to treat as a Defective Interest, and of which Seller has been given notice by Buyer prior to September 23, 1996, (the "DEFECT NOTICE DATE"), except as provided hereinafter in this Section 7.03(a). Any notice of any Defective Interest shall be in writing and shall include: (i) a description of the Defective Interest, (ii) the specific basis for the defect that Buyer believes causes such Interest to be a Defective Interest, and (iii) the amount by which Buyer has determined the value of the Defective Interest has been reduced and the computations and information upon which Buyer's determination is based. Buyer shall be deemed to have waived all Title Defects and any other defect to any Interest of which Seller has not been given such notice prior to the Defect Notice Date. If Seller (i) disagrees that a Defect Adjustment or Exclusion Adjustment is warranted; (ii) disagrees that the matter giving rise to such claims is uncured, or (iii) disagrees with the amount of the related Defect Adjustment claimed by Buyer in any notice given in accordance with this Section 7.03(a), then Seller, at its option, may remove the defective property from the sale, attempt to cure the defect at Seller's sole cost and expense, agree to a mutually acceptable purchase price reduction or terminate this Agreement without liability to Buyer except for return of the Performance Deposit, without interest, provided that Seller may not terminate this Agreement unless the aggregate value of Title Defects exceeds twenty percent (20%) of the Preliminary Purchase Price; (b) Defective Interests shall be excluded from the Interests to be purchased by Buyer hereunder and the Preliminary Purchase Price shall be reduced in accordance with Section 2.03 by an amount equal to the value thereof, as agreed to between Buyer and Seller (which reduction shall be called an "EXCLUSION ADJUSTMENT") unless (i) prior to the Closing, the basis for treating an Interest as a Defective Interest has been removed, (ii) Buyer agrees to waive the relevant Title Defect or other defect and purchase the Defective Interest, notwithstanding the defect, (iii) Seller agrees to indemnify, defend and hold Buyer harmless and Buyer agrees to accept such indemnification against all losses, costs, expenses and liabilities with respect to such Defective Interest arising from the defect or basis for such Interest being treated as a Defective Interest, or (iv) Buyer and Seller agree to an amount by which the value of the Defective Interest has been reduced and the Preliminary Purchase Price is reduced by such amount in accordance with Section 2.03 (which reduction shall be called a "DEFECT ADJUSTMENT"), in which event the Interest shall be included in the Interests to be purchased by Buyer hereunder and, except in the case of (iv), no adjustment shall be made to the Preliminary Purchase Price; or (v) Buyer and Seller do not agree, on or before the Scheduled Closing Date, as to the value of the Defective Interest that is to be excluded from the Preliminary Purchase Price and none of Subsections (i) through (iv) of Section 7.03(b) are applicable, in which event Buyer may terminate this Agreement without further liability or obligation, by giving written notice of termination on or before the Scheduled Closing Date. (c) The amount by which the Preliminary Purchase Price is to be reduced in accordance with Section 7.03 as the result of any Interest being treated as a Defective Interest shall be determined as follows: (1) In the event that the cost of remedying any Title Defect exceeds the amount allocated to the affected Interest as set forth in Exhibit A, then such Interest shall be excluded from the transaction contemplated hereby and the Preliminary Purchase Price shall be reduced by the amount allocated to the Interest so excluded as set forth in Exhibit A (which adjustment shall be called an EXCLUSION ADJUSTMENT"); (2) In the event that the net revenue interest of Seller in any Interest is less than that set forth in Exhibit A, that portion of the Preliminary Purchase price allocated on Exhibit A-1 to such particular Interest shall be reduced in the proportion that the net revenue interest actually owned by Seller bears to that set forth in Exhibit A; (3) In the event that the working interest costs payable with respect to a particular Interest is greater than the working interest set forth in Exhibit A, the Preliminary Purchase Price allocated on Exhibit A-1 to such particular Interest shall be reduced in the proportion that the working interest percentage attributable to such interest exceeds that set forth in Exhibit A; (4) In the event that (i) the record title interest of Seller to any Interest is burdened by any lien, encumbrance, mortgage, pledge, or security interest, or (ii) ad valorem, property or other similar taxes and assessments for any years prior to the Effective Time have not been paid, the Preliminary Purchase Price of such interest shall be reduced by the sum necessary to discharge and obtain a full record release of such burden or to pay such taxes; and (5) In the event there exist other Title Defects which would materially adversely affect or interfere with the use, possession, ownership or value of any Interest, Buyer, at its option, may either, (i) exclude the affected Interest from the transaction contemplated hereby and the Preliminary Purchase Price shall be reduced by the amount allocated to the affected Interest as set forth in Exhibit A, or (ii) accept such Interest. (d) In determining which portion of the Interests are Defective Interests, it is the intent of the parties to include all portions of the Interests affected by the defect or basis for such Interests being treated as Defective Interests; and (e) If the deductions in the Preliminary Purchase Price to be made pursuant to this ARTICLE VII exceed twenty percent (20%) of the Preliminary Purchase price, either party may terminate this agreement at any time prior to Closing. 7.04 Identification of Additional Defective Interests. (a) If, prior to the Closing, there has been non-compliance with the laws, rules, regulations, ordinances or orders of any governmental agency or authority having jurisdiction over the affected Interests, resulting in risk of loss of the affected Interests or value thereof, then Buyer may elect to treat such of the affected Interests as are adversely affected by such noncompliance as Defective Interests by giving Seller notice thereof in accordance with Section 7.03(a); (b) If, prior to the Closing, any preferential right to purchase any of the Interests is exercised, Buyer may elect to treat that portion of the Interests affected by the exercise of such preferential right as Defective Interests by giving Seller notice thereof in accordance with Section 7.03(a); (c) If any necessary third party consent to assignment of any of the Interests is not obtained prior to the Closing, Buyer may elect to treat that portion of the Interests subject to such consent requirement as Defective Interests by giving Seller notice thereof in accordance with Section 7.03(a). For purposes hereof "NECESSARY THIRD-PARTY CONSENTS" shall not include: (1) consents customarily obtained subsequent to such assignment including without limitation any consent of the State or the Bureau of Indian Affairs or other Federal agencies or governmental offices; (2) consents contractually permitted to be obtained subsequent to such assignment; or (3) consents that, if not obtained, will not affect the transferability, without penalty, of, the operation of, or the receipt of income from, the Interests subject thereto, or result in termination of the interests subject thereto or a material decrease in the value thereof. (d) If, prior to the Closing, Buyer becomes aware of any suit, action or other proceeding before any court or governmental agency that would result in loss or impairment of Seller's title to any portion of the Interests or a portion of the value thereof, Buyer may elect to treat the portion of the Interests affected thereby as Defective Interests by giving Seller notice thereof in accordance with Section 7.03(a); and (e) If any inaccuracy in Exhibit A results in a loss of value of a portion of the Interests, Buyer may elect to treat that portion of the Interest subject to such reduction in value as Defective Interests by giving Seller notice thereof in accordance with Section 7.03(a). ARTICLE VIII CONDITIONS TO CLOSING 8.01 Seller's Conditions. The obligations of Seller at the Closing are subject, at the option of Seller, to the satisfaction, at or prior to the Closing, of the following conditions: (a) All representations and warranties of Buyer contained in this Agreement shall be true, correct and not misleading in all material respects at and as of the Closing as if such representations and warranties were made at and as of the Closing, and Buyer shall have performed and satisfied all agreements and covenants in all material respects required by this Agreement to be performed and satisfied by Buyer at or prior to the Closing; (b) No suit or other proceeding shall be pending before any court or governmental agency seeking to restrain, prohibit or declare illegal, or seeking substantial damages in connection with, the purchase and sale contemplated by this Agreement, except (i) matters with respect to which Seller has been adequately indemnified by Buyer, or (ii) any suit or proceeding affecting only a portion of the Interests, which portion of the Interests could be treated as a Defective Interest in accordance with Section 7.04(d); (c) The aggregate sum of Defect Adjustments and Exclusion Adjustments shall not exceed thirty percent (30%) of the Preliminary Purchase Price; and (d) All necessary and material permissions, approvals and consents required which are obtainable prior to Closing shall be in full force and effect. 8.02 Buyer's Conditions. The obligations of Buyer at the Closing are subject, at the option of Buyer, to the satisfaction, at or prior to the Closing, of the following conditions: (a) All representations and warranties of Seller contained in this Agreement shall be true, correct and not misleading in all material respects at and as of the Closing as if such representations and warranties were made at and as of the Closing, and Seller shall have performed and satisfied all agreements and covenants in all material respects required by this Agreement to be performed and satisfied by Seller at or prior to the Closing; (b) No suit or other proceeding shall be pending before any court or governmental agency seeking to restrain, prohibit or declare illegal, or seeking substantial damages in connection with, the purchase and sale contemplated by this Agreement, except (i) matters with respect to which Buyer has been adequately indemnified by Seller, or (ii) any suit or proceeding affecting only a portion of the Interests, which portion of the Interests could be treated as a Defective Interest in accordance with Section 7.04(d); (c) The aggregate sum of Defect Adjustments and Exclusion Adjustments shall not exceed thirty percent (30%) of the Preliminary Purchase Price; (d) All necessary and material permissions, approvals and consents required which are obtainable prior to Closing shall be in full force and effect; and (e) The provisions of ARTICLE V.(e) have been satisfied. 8.03 Satisfaction or Waiver. If Seller and Buyer proceed with the Closing as specified in ARTICLE IX, all conditions of Closing shall be deemed to have been satisfied or waived and neither of the parties shall have any liability whatsoever to the other arising out of, resulting from, or attributable to any such condition of Closing, irrespective of whether such conditions of Closing were in fact satisfied or waived. Nothing contained in this Section 8.03 shall be a waiver or release of any breach of a representation or warranty contained in this Agreement. ARTICLE IX CLOSING 9.01 Date of Closing. Unless the parties hereto mutually agree otherwise and subject to the conditions stated in this Agreement, the consummation of the transactions contemplated hereby (herein called the "CLOSING") shall be held on September 30, 1996, at 10:00 A.M. (the "SCHEDULED CLOSING DATE"). The date Closing actually occurs is herein called the "CLOSING DATE". 9.02 Place of Closing. The Closing shall be held at Seller's office in Dallas, Texas, in accordance with the Closing Instructions to be mutually given in writing by Seller and Buyer. 9.03 Closing Obligations. At the Closing the following events shall occur, each being a condition concurrent to the others and each being deemed to have occurred simultaneously with the others: (a) Seller shall execute, acknowledge and deliver to Buyer assignment, bill of sale and conveyance documents (in sufficient counterparts to facilitate recording), in form and substance as set forth in Exhibit C hereto, conveying its portion of the Interests (other than those portions of the Interests excluded under Sections 7.03(b) and 7.04) to Buyer. (b) Seller and Buyer shall execute and deliver a settlement statement (herein called the "PRELIMINARY SETTLEMENT STATEMENT") prepared by Seller and furnished to Buyer no less than seven (7) days prior to the Scheduled Closing Date) that shall set forth the Closing Amount (as hereinafter defined) and each adjustment and the calculation of such adjustments used to determine such amount. The term "CLOSING AMOUNT" shall mean the Preliminary Purchase Price adjusted as provided in Section 2.03, using for such adjustments the best information then available. Seller and Buyer further agree that Seller shall be entitled to receive all proceeds attributable to ownership of the Interests prior to the Effective Time and Buyer shall be entitled to receive all proceeds attributable to the Interests after the Effective Time. (c) Buyer shall deliver the Closing Amount in the form of immediately available U.S. funds, by wire transfer in accordance with instructions to be provided by Seller. (d) Seller shall deliver to Buyer exclusive possession of its portion of the Interests (other than Interests excluded under Section 7.03(b) or Section 7.04) (e) Seller and Buyer shall execute, acknowledge and deliver transfer orders or letters in lieu thereof directing all purchasers of production to make payment to Buyer of proceeds attributable to production after the Effective Time from the Interests assigned to Buyer under Section 9.03(a), but not theretofore paid to Seller. ARTICLE X OBLIGATIONS AFTER CLOSING 10.01 Post-Closing Adjustments. Within one hundred thirty (130) days after the Closing, Seller shall prepare and deliver to Buyer, in accordance with this Agreement and generally accepted accounting principles, a statement (herein called the "POST CLOSING SETTLEMENT STATEMENT") setting forth each adjustment or payment that was not included or correctly included in the Preliminary Settlement Statement and showing the calculation of such adjustments. Within thirty (30) days after receipt of the Post Closing Settlement, Buyer shall deliver to Seller a written report containing any changes that Buyer proposes to be made to the Post Closing Settlement Statement. The parties shall undertake to agree with respect to the amounts due pursuant to such Post Closing adjustment no later than one hundred sixty (160) days after the Closing Date. The date upon which such agreement is reached or upon which the Final Purchase Price is established, shall be herein called the "SETTLEMENT DATE". In the event that (i) the Final Purchase Price is more than the Closing Amount, Buyer shall pay to Seller, in certified U.S. Funds, the amount of such difference (ii) the Final Purchase Price is less than the Closing Amount, Seller shall pay to Buyer, in certified U.S. funds, the amount of such difference. Payment by Buyer or Seller shall be made within ten (10) days of the Final Settlement Date. After the Settlement Date, additional proceeds received by or expenses paid by either Buyer or Seller on behalf of the other shall be settled by invoicing the other party for expenses paid or remitting to the other party any proceeds received. The gas imbalances of the Interests shall be considered final and neither party thereafter shall make claim upon the other concerning same. 10.02 Files and Records. Seller shall have the right to make and retain copies of the Records prior to delivery thereof to Buyer. Within thirty (30) days after the Closing Date, Seller shall deliver to Buyer all original files and Recorrests, all ad valorem, property, production, excise, severance, windfall profit and other taxes, except income taxes, based upon or measured by the ownership of the property, the production of hydrocarbons or the receipt of proceeds therefrom which apply to or arise from and after the Effective Time together with all documentary, filing and recording fees required in connection with the filing and recording of any assignments or other documents recorded in connection with the sale of the Interests. 10.04 Further Assurances. After Closing, Seller and Buyer shall each execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such instruments, and shall each take such other action, as may be necessary or advisable to carry out their respective obligations under this Agreement and under any document, certificate or other instrument delivered pursuant hereto. 10.05 Survival. The warranties or representations herein made by Seller are conditions to the obligations of Buyer hereunder and no warranty or representation herein made by Seller (other than those contained in 3.01(a), (b), (c), (d), (e), (f), (i), (j), (k), (o) and (q) shall survive the Closing. The agreements set forth in ARTICLE X and the matters set forth in ARTICLES V and VI and Section 12.12 shall survive the Closing for a period of one (1) year from the Closing Date. ARTICLE XI TERMINATION OF AGREEMENT 11.01 Termination. This Agreement and the transactions contemplated hereby may be terminated in the following instances: (a) By Seller if the conditions set forth in Section 8.01(a) through 8.01(d) are not satisfied in all material respects or waived as of the Scheduled Closing Date; (b) By Buyer if the conditions set forth in Section 8.02(a) through 8.02(e) are not satisfied in all material respects or waived as of the Scheduled Closing Date; (c) By Buyer pursuant to Section 7.03(b); (d) Pursuant to Article V.(e); or (e) At any time by the mutual written agreement of Buyer and Seller. 11.02 Liabilities Upon Termination. If this Agreement is breached by either party, nothing contained herein shall be construed to limit Seller's or Buyer's legal or equitable remedies, including, without limitation, damages for the breach or failure of any representation, warranty, covenant or agreement contained herein (whether or not the non-defaulting party has terminated the Agreement) or the right to enforce specific performance of this Agreement; provided, however, that a party terminating this Agreement shall have no right to specific performance thereof, and provided, further, that neither party shall have a right to specific performance thereof if this Agreement is terminated pursuant to Section 11.01 hereof. ARTICLE XII MISCELLANEOUS 12.01 Exhibits and Schedules. Exhibits A through C are attached hereto and incorporated herein by this reference. 12.02 Expenses. Except as otherwise specifically provided, all fees, costs and expenses incurred by Buyer or Seller in negotiating this Agreement or in consummating the transactions contemplated by this Agreement shall be paid by the party incurring the same, including, without limitation, legal and accounting fees, costs and expenses. 12.03 Notices. All notices and communications required or permitted under this Agreement shall be in writing, delivered to or sent by U. S. Mail or Express Delivery, postage prepaid, or by facsimile transmission, addressed as follows: Maynard Oil Company Attention Cassondra Foster 8080 North Central Expressway, Suite 660 Dallas, TX 75206 Phone: (214) 891-8461 Fax: (214) 891-8827 Enron Oil & Gas Company Attention Lee McVay, Vice President and General Manager 20 North Broadway, Suite 800 Oklahoma City, OK 73102 Phone: (405) 239-7880 Fax: (405) 239-7858 Any party may, by written notice so delivered to the others, change the address or individual to which delivery shall thereafter be made. 12.04 Amendments. Except as otherwise expressly provided herein, this Agreement may not be amended nor any rights hereunder waived except by an instrument in writing signed by the party to be charged with such amendment or waiver and delivered by such party to the party claiming the benefit of such amendment or waiver. 12.05 Assignment. Neither Seller nor Buyer shall assign all or any portion of its rights or delegate all or any portion of its duties hereunder without the prior written consent of the other to such assignment; provided, however, that Buyer or Seller or both may assign all or part of this Agreement to a qualified intermediary to facilitate a deferred like-kind exchange for federal tax purposes. Subject to the foregoing, this Agreement shall inure to the benefit of and be binding upon Seller, Buyer and their respective successors and assigns. 12.06 Announcements. Seller and Buyer shall consult with each other with regard to all press releases and other announcements issued at or prior to the Closing concerning this Agreement or the transactions contemplated hereby and, except as may be required by applicable laws or the applicable rules, and regulations of any governmental agency or stock exchange, neither Buyer nor Seller shall issue any such press release or other publicity without the prior written consent of the other party. 12.07 Headings. The headings of the articles and sections of this Agreement are for guidance and convenience of reference only and shall not limit or otherwise affect any of the terms or provisions of this Agreement. 12.08 Counterparts. This Agreement, and any document or instrument entered into, given or made pursuant to this Agreement or authorized hereby, and any amendment or supplement thereto, may be executed in any number of counterparts, and, when so executed, each of which shall be deemed an original instrument, and shall have the same force and effect as though all signatures appeared on a single document, and all of which together shall constitute but one and the same instrument. Any signature page of this Agreement or of such an amendment, supplement, document or instrument may be detached from any counterpart thereof and attached to another counterpart without impairing the legal effect of any signatures identical in form thereto but having attached to it one or more additional signature pages. 12.09 References. References made in this Agreement, including the use of a pronoun, shall be deemed to include where applicable, masculine, feminine, singular or plural, individuals, partnerships or corporations. As used in this Agreement, "person" shall mean any natural person, corpll be governed by, and construed in accordance with, the laws of the State of Texas, without regard to its choice of law principles provided, however, that issues in connection with title to the Interests shall be governed by the applicable laws of the State of Oklahoma. 12.11 Entire Agreement. This Agreement (including the Exhibits hereto) constitutes the entire understanding among the parties with respect to the subject matter hereof, superseding all negotiations, prior discussions and prior agreements and understandings relating to such subject matter. 12.12 Securities Laws. Buyer has advised Seller that the interests are not being acquired for distribution or transfer in violation of the securities laws of the United States or of any state thereof. Buyer hereby agrees to protect, indemnify and hold harmless Seller from and against any and all claims, costs (including, without limitation,and liabilities which arise under applicable state or federal securities laws as a result of acts or omissions of Buyer or its affiliates which are contrary to such laws and which are in connection with the transactions contemplated hereby or the sale or other disposition of the Interests by Buyer or its affiliates. Seller hereby agrees to protect, indemnify and hold harmless Buyer from and against any and all claims, costs (including, without limitation, court costs and reasonable attorney's fees), expenses, damages and liabilities which arise under applicable state or federal securities laws as a result of acts or omissions of Seller or its affiliates which are contrary to such laws and which are in connection with the transactions contemplated hereby. Executed as of the date first above written. SELLER MAYNARD OIL COMPANY By: /s/ Glenn R. Moore ---------------------------- Glenn R. Moore President BUYER ENRON OIL & GAS COMPANY By: /s/ Leland J. McVay -------------------------------- Leland J. McVay Vice President EXHIBIT "A" Attached to and made a part of Purchase and Sale Agreement dated September 12, 1996, by and between Maynard Oil Company, as Seller, and Enron Oil & Gas Company, as Buyer BLAINE COUNTY, OKLAHOMA PN 490005 (UT-459) NIPPERT NO. 1-12 EXPENSE INTEREST 0.4375000 REVENUE INTEREST 0.3750000 Oil and Gas Lease dated July 29, 1963, by and between George E. Nippert, et ux, as Lessor, and Tom R. Gray, Jr., as Lessee, recorded in Volume 92, page 428 of the Records of Blaine County, Oklahoma, covering the SE/4 of Section 12, Township 18 North, Range 13 West, Blaine County, Oklahoma. (LF-05044-00) Oil and Gas Lease dated May 1, 1957, by and between Ne sta ne (1882), successor of Bob Tail Bear, Cheyenne-Arapaho No. 2184, approved by the Bureau of Indian Affairs under serial number 14-20-205-854, as Lessor, and Sun Oil Company, as Lessee, recorded in Book 41, page 205 of the Records of Blaine County, Oklahoma, covering the NW/4 of Section 12, Township 18 North, Range 13 West, Blaine County, Oklahoma, LIMITED to rights from the surface to a depth of 8,660 feet below the surface and LIMITED to the borehole of the Nippert No. 1-12 wellbore. (LF-05604-00) Oil and Gas Lease dated May 1, 1957, by and between Bobtail Bear (Andrew Mouse Trail) (1880), and Ruth May Mouse Trail (1906), successors of Standing Calf, Cheyenne-Arapaho No. 2185, approved by the Bureau of Indian Affairs under serial number 14-20-205-853, as Lessor, and Sun Oil Company, as Lessee, recorded in Book 41, page 367 of the Records of Blaine County, Oklahoma, covering the NE/4 of Section 12, Township 18 North, Range 13 West, Blaine County, Oklahoma, LIMITED to rights from the surface to a depth of 8,660 feet below the surface and LIMITED to the borehole of the Nippert No. 1-12 wellbore.(LF-05605-00) Oil and Gas Lease dated November 21, 1966, by and between M. W. Bahan, et al, as Lessor, and Sun Oil Company, as Lessee, recorded in Book 125, page 11 of the Records of Blaine County, Oklahoma, covering the SW/4 of Section 12, Township 18 North, Range 13 West, Blaine County, Oklahoma, LIMITED to rights from the surface to a depth of 8,660 feet below the surface and LIMITED to the borehole of the Nippert No. 1-12 wellbore. (LF-05606-00) The hereinabove referenced leases are subject to Communitization Agreement dated June 12, 1967, by and between Sun Oil Company and Superior Oil Company; Operating Agreement dated March 22, 1967, as amended by and between Sun Oil Company and Superior Oil Company; Oklahoma Commission Order No. 63129 creating a 640 acre drilling and spacing unit for the Morrow Sand Formation in Section 12, Township 18 North, Range 13 West, as amended. Lease numbered LF-05044-00 is subject to Assignment and Bill of Sale effective August 1, 1988, by and between Mobil Oil Corporation and Mobil Exploration and Producing North America Inc. and Maynard Oil Company recorded in Volume 557, page 696 of the Records of Blaine County, Oklahoma and Limited Partial Assignment and Bill of Sale by and between Maynard Oil Company and Coastal Oils, Inc. dated March 21, 1989, effective February 1, 1989, recorded in Volume 571, page 126 of the Records of Blaine County, Oklahoma, conveying a wellbore interest only in the Bahan No. 1 Well located in the SW/4 of Section 12, Township 18 North, Range 13 West, Blaine County, Oklahoma. Leases numbered LF-05604-00, LF-05605-00 and LF-05606-00 are subject to Farmout Letter Agreement by and between Sun Exploration and Production Company and H&L Operating Company dated October 18, 1982; Assignment of Operating Rights in Oil, Gas and Mineral Leases and Stipulation dated December 17, 1985, effective November 1, 1985, by and between Sun Exploration and Production Company and H&L Operating Company, recorded in Volume 503, page 411 of the Records of Blaine County, Oklahoma, and Assignment and Bill of Sale dated November 5, 1992, by and between Sun Operating Limited Partnership and Maynard Oil Company recorded in Volume 647, page 261 of the Records of Blaine County, Oklahoma. CADDO COUNTY, OKLAHOMA PN 442001 (UT-476) SCOTT B NO. 1 EXPENSE INTEREST 0.0585937 REVENUE INTEREST 0.0476074 Oil and Gas Lease dated October 18, 1982, by and between Mobil Oil Corporation, as Lessor, and Avanti Energy Corporation, as Lessee, recorded in Volume 972, page 512 of the Records of Caddo County, Oklahoma, covering the SE/4 of Section 15, Township 9 North, Range 11 West, Caddo County, Oklahoma, LIMITED to rights from surface of the ground to a depth of 16,250 feet. (LF-05078-AA) The hereinabove referenced lease is subject to Operating Agreement dated April 2, 1982, Cotton Petroleum Corp. (now APC Operating Partnership L. P.), as Operator and Towner Petroleum et al, as Non-Operator; Communitization Agreement dated August 1, 1982 approved by the Department of the Interior on January 28, 1983 creating a 640 acre drilling and spacing unit for Section 15, Township 11 North, Range 10 West. CANADIAN COUNTY, OKLAHOMA PN 490008 STOVER UNIT NO. 1(UT-462) EXPENSE INTEREST 0.1241856 REVENUE INTEREST 0.1086624 Oil and Gas Lease dated February 12, 1960, by and between John Stringer, et al, as Lessor, and Vader W. Coontz, as Lessee, as recorded in Volume 327, page 358 of the Records of Canadian County, Oklahoma, covering Lot 2 and the SW/4 NE/4 (also described as the W/2 NE/4) of Section 3, Township 14 North, Range 10 West, Canadian County, Oklahoma. (LF-05047-00) The hereinabove referenced lease is subject to Gas Purchase Agreement dated September 1, 1988, as amended, by and between Transok Pipe Line Company, as Seller, and Mobil Oil Corporation, as Seller, Oklahoma Corporation Commission dated January 25, 1966, Order No. 61449 creating a 640 acre drilling and spacing unit in Section 26, Township 11 North, Range 10 West; Communitization Agreement dated October 3, 1966, executed by Pan American Petroleum Corp. et al and Oklahoma Corporation Commission Order No. 61449, as amended, creating a 640 acre drilling and spacing unit cover all of Section 26, Township 11 North, Range 10 West; Operating Agreement dated February 10, 1966, as amended, by and between Pan American Petroleum Corporation, as Operator and Union Oil Company of California et al, as Non- Operator; Assignment and Bill of Sale effective August 1, 1988, by and between Mobil Oil Corporation and Mobil Exploration and Producing North America Inc., as Grantor, and Maynard Oil Company, as Grantee, recorded in Volume 1541, page 290 of the Records of Canadian County, Oklahoma. PN 490009 (UT-463) WILLARD "A-1" UNIT EXPENSE INTEREST 0.0880609 REVENUE INTEREST 0.0770533 PN 490010 (UT-463) WILLARD "A-2" UNIT BEFORE PAYOUT EXPENSE INTEREST 0.0000000 BEFORE PAYOUT REVENUE INTEREST 0.0000000 AFTER PAYOUT EXPENSE INTEREST 0.0880609 AFTER PAYOUT REVENUE INTEREST 0.0770533 Oil and Gas Lease dated August 14, 1970, by and between Marvin E. Majors, et ux, as Lessor, and James W. Pitts, as Lessee, as recorded in Volume 468, page 454 of the Records of Canadian County, Oklahoma, covering Lots 3 and 4 of Section 31, Township 11 North, Range 9 West, Canadian County, Oklahoma. (LF-05048-AA) Oil and Gas Lease dated August 18, 1970, by and between Chickasha Royalty Trust, as Lessor, and James W. Pitts, as Lessee, as recorded in Volume 468, page 458 of the Records of Canadian County, Oklahoma, covering Lots 3 and 4 of Section 31, Township 11 North, Range 9 West, Canadian County, Oklahoma, as amended. (LF-05048-AB) The hereinabove referenced leases are subject to Gas Purchase Contract dated September 1, 1988, as amended, by and between Enogex Services Corporation, as Buyer, and Maynard Oil Company, as Seller; Operating Agreement dated March 29, 1975, as amended, by and between Amoco Production Company, as Operator and Mobil Oil Corporation, et al, as Non-Operator; Assignment and Bill of Sale effective August 1, 1988, by and between Mobil Oil Corporation and Mobil Exploration and Producing North America Inc., as Grantor, and Maynard Oil Company, as Grantee, recorded in Volume 1541, page 290 of the Records of Canadian County, Oklahoma. PN 490012 (UT-464) JOHN WILLIAMS NO. 1-26 EXPENSE INTEREST 0.3125000 REVENUE INTEREST 0.2604167 Oil and Gas Lease dated March 18, 1970, by and between Frederick E. Parton, (1925) successor to Ben Parton, Caddo Allotte No. 801, approved by the Bureau of Indian Affairs under serial number 14-20-206-26169, as Lessor, and Mobil Oil Corporation, as Lessee, recorded in Volume 464, page 677 of the Records of Canadian County, Oklahoma, covering the NE/4 of Section 26, Township 11 North, Range 10 West, Canadian County, Oklahoma, LIMITED to rights from the surface of the ground to a depth of 12,894 feet. (LF-05049- AA-00) Oil and Gas Lease dated March 18, 1970, by and between Successors to Alice Johnson, Caddo Allottee No. 800, approved by the Bureau of Indian Affairs under serial number 14-20-206-26170, as Lessor, and Mobil Oil Corporation, as Lessee, recorded in Volume 464, page 681, of the Records of Canadian County, Oklahoma, covering the NW/4 Section 26, Township 11 North, Range 10 West, Canadian County, Oklahoma, LIMITED to rights from the surface of the ground to a depth of 12,894 feet below the surface. (LF-05050-00) Oil and Gas Lease dated March 18, 1970, by and between Successor to Annie Johnson, Caddo Allottee No. 778, approved by the Bureau of Indian Affairs under serial number 14-20-206-26171, as Lessor, and Mobil Oil Corporation, as lessee, recorded in Volume 464, page 689, of the Records of Canadian County, Oklahoma, covering the SE/4 Section 26, Township 11 North, Range 10 West, Canadian County, Oklahoma, LIMITED to rights from the surface of the ground to a depth of 12,894 feet below the surface. (LF-05051-00) The hereinabove referenced leases are subject to Gas Purchase Agreement dated January 1, 1977, as amended, by and between Transok Pipe Line Company, as Buyer, and Mobil Oil Corporation, as Seller; Operating Agreement dated June 5, 1974, as amended, by and between Samedan Oil Corporation, as Operator, and Woods Petroleum Corp. et al, as Non-Operator; Communitization Agreement dated July 10, 1974, creating a 640 acre unit covering all of Section 26, Township 11 North, Range 10 West; Assignment and Bill of Sale effective August 1, 1988, by and between Mobil Oil Corporation and Mobil Exploration and Producing North America Inc., as Grantor, and Maynard Oil Company, as Grantee, recorded in Volume 1541, page 290 of the Records of Canadian County, Oklahoma. PN 440504 (UT-405) HAYES UNIT NO. 1-27 & 2-27 EXPENSE INTEREST 0.0000000 REVENUE INTEREST 0.0154321 (ORI) 0.0154321 (ROYALTY) An undivided one-half (1/2) interest in the oil, gas and other minerals in and under and that may be produced from the SW/4 Section 27, Township 24 North, Range 25 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Morrow formation, as conveyed in that certain Mineral Deed dated March 13, 1957, by and between James B. Franklin, as Grantor, and Shell Canadian Exploration Company, as Grantee, recorded in Volume 92, page 366 of the Records of Ellis County, Oklahoma and subsequently conveyed to Maynard Oil Company from Shell Western E&P Inc. by instrument entitled "Assignment, Conveyance and Bill of Sale" effective December 1, 1985, recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma. (LF-04894-AA) The hereinabove referenced mineral deed is subject to Oil and Gas Lease dated December 21, 1973, from Shell Oil Company to Amoco Production; Purchase and Sale Agreement dated December 19, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective December 1, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma. PN 440601 (UT-435) HEBNER (AKA HERBER) NO. 1-14 EXPENSE INTEREST 0.1174122 REVENUE INTEREST 0.1027357 Oil and Gas Lease dated November 25, 1955, by and between D. L. Katterjohn, as Lessor, and E. J. Farris, as Lessee, recorded in Volume 78, pages 27-28 of the Records of Ellis County, Oklahoma, covering Lots 1 and 2 and S/2 NE/4 of Section 2, Township 22 North, Range 26 West, together with any rights, titles and interests acquired by Shell Western E&P Inc. in and to the Pan Am Shattuck Operating Unit by virtue of that certain unrecorded Operating Agreement dated November 5, 1958 by and between Pan American Petroleum Company, as Operator, and Shell Oil Company, et al, as Non- Operators, INSOFAR AND ONLY INSOFAR as said Operating Agreement pertains to the spacing units established by the Oklahoma Corporation Commission and the Hebner 1-14 well located in Section 14, Township 22 North, Range 26 West, Ellis County, Oklahoma. (LF-04929-00) The hereinabove referenced lease is subject to Gas Purchase Contract dated October 1, 1989, as amended, by and between Production Gathering Company, as Buyer, and Maynard Oil Company, as Seller; Operating Agreement dated November 5, 1958, as amended, by and between Pan American Petroleum Corporation, as Operator, and Shell Oil Company, et al, as Non-Operators, May 1, 1959; Purchase and Sale Agreement dated December 19, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective December 1, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma. PN 440505 (UT-443) INGLE NO. 1-17 EXPENSE INTEREST 0.2500000 REVENUE INTEREST 0.2187500 PN 440505-N INGLE NO. 2-17 BEFORE PAYOUT EXPENSE INTEREST 0.0000000 BEFORE PAYOUT REVENUE INTEREST 0.0000000 AFTER PAYOUT EXPENSE INTEREST 0.2500000 AFTER PAYOUT REVENUE INTEREST 0.2187500 Oil and Gas Lease dated December 4, 1956, by and between Mary L. Babcock, et al, as Lessor, and James B. Franklin, as Lessee, recorded in Volume 87, Page 393 of the Records of Ellis County, Oklahoma, covering the SW/4 of Section 17, Township 23 North, Range 25 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Morrow formation. (LF-04902-00) The hereinabove referenced lease is subject to Operating Agreement dated May 29, 1962, by and between Phillips Petroleum Company, as Operator, and Shell Oil Company, et al, as Non-Operators; Gas Agreement amending various Gas Purchase Contracts, dated February 5, 1990, by and between Northern Natural Gas Company, a division of Enron Corp., successor in interest to Northern Natural Gas Company, as Buyer, and Maynard Oil Company, as Seller; Purchase and Sale Agreement dated December 19, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective December 1, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma. PN 440507 (UT-411) IRVIN C NO. 1-6 AND C2 EXPENSE INTEREST 0.0642323 REVENUE INTEREST 0.0562033 Oil and Gas Lease dated August 12, 1959, by and between Mearl R. Snyder and Edith J. Snyder, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 112, page 390 of the Records of Ellis County, Oklahoma, INSOFAR AND ONLY INSOFAR as said lease covers the SE/4 SW/4 of Section 6, Township 23 North, Range 24 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Morrow formation. (LF-04910-00) The hereinabove referenced lease is subject to Letter Agreement dated December 21, 1989, and Agreement Amending Various Gas Purchase Contracts dated February 5, 1990, as amended, by and between Northern Natural Gas Company, a Division of Enron Corporation, successor in interest to Northern Natural Gas Company, as Buyer, and Maynard Oil Company, as Seller; Operating Agreement dated February 16, 1961, by and between Amoco Production Company, as Operator, and Gulf Oil Corporation, et al, as Non-Operators; Purchase and Sale Agreement dated December 19, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective December 1, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma. PN 440702 (UT-430) LYTLE NO. C 1-21 EXPENSE INTEREST 0.2500000 REVENUE INTEREST 0.2187500 PN 440706 LYTLE NO. C 2-21 BEFORE PAYOUT EXPENSE INTEREST 0.0000000 BEFORE PAYOUT REVENUE INTEREST 0.0312500 AFTER PAYOUT EXPENSE INTEREST 0.0875000 AFTER PAYOUT REVENUE INTEREST 0.0765625 Oil and Gas Lease dated July 7, 1956, by and between Loyd I. Haymaker and Evangeline M. Hamaker, as Lessors, and George McDaniel, as Lessee, recorded in Volume 82, page 273 of the Records of Ellis County, Oklahoma, covering NW/4 of Section 21, Township 21 North, Range 23 West, Ellis County, Oklahoma, LESS AND EXCEPT the interest assigned to Amoco Production Company by instrument titled Limited and Partial Assignment of Oil and Gas Lease dated October 17, 1995, effective September 6, 1994, from Maynard Oil Company, and recorded in Volume _____, page _____ of the Records of Ellis County, Oklahoma, in and to the borehole of the Lytle Well No. 2-21 located 1,320 feet from the south line and 1,320 feet from the west line of the NW/4 of Section 21, Township 21 North, Range 23 West, Ellis County, Oklahoma. (LF-04833-00) The hereinabove referenced lease is subject to Operating Agreement dated April 1, 1965, by and between Pan American Petroleum Corporation, as Operator, and Shell Oil Company, et al, as Non-Operators; Purchase and Sale Agreement dated December 19, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective December 1, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma. PN 440511 MOYER NO. 1-19 (UT-441) EXPENSE INTEREST 0.2571800 REVENUE INTEREST 0.2099609 Oil and Gas Lease dated January 16, 1948, by and between Ruth Moyer, et al, as Lessor, and W. G. Mouser, as Lessee, recorded in Volume 36, page 495 of the Records of Ellis County, Oklahoma, covering the SE/4 of Section 19, Township 24 North, Range 25 West, Ellis County, Oklahoma, LIMITED to rights from the surface to the base of the Morrow formation. (LF-04904-00) The hereinabove referenced lease is subject to Agreement dated February 12, 1969, between Shell Oil Company and Cities Service Oil and Gas Company; Operating Agreement dated December 23, 1957, by and between Pan American Petroleum Corporation (now Amoco Production Company), as Operator, and Gulf Oil Corporation, et al, as Non-Operators; Gas Purchase Agreement dated October 1, 1989, as amended, by and between Production Gathering Company, as Buyer, and Maynard Oil Company, as Seller; Purchase and Sale Agreement dated December 19, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective December 1, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company recorded in Volume 459, page 381 of the Records of Ellis County, Oklahoma. STEPHENS COUNTY, OKLAHOMA PN 438903 (UT-373) CALDWELL NO. 22-A EXPENSE INTEREST 0.1210937 REVENUE INTEREST 0.1059570 Oil and Gas Lease dated October 16, 1969, by and between David Harris, et al, as Lessor, and L. R. Snyder, as Lessee, recorded in Volume 1042, page 390 of the Records of Stephens County, Oklahoma, covering the E/2 NW/4, SW/4 NW/4, E/2 NW/4 NW/4, SW/4 NW/4 NW/4 and the NW/4 NW/4 SW/4 of Section 22, Township 1 North, Range 7 West, LESS AND EXCEPT rights limited to the borehole of the Bumpass 1-22 Well located 1,320 feet from the south line and 1,320 feet from the east line of said Section and further limited to rights from the surface to 12,590 feet from the surface, Stephens County, Oklahoma. (LF-04708-00) Oil and Gas Lease dated May 2, 1969, by and between Frances Louise Jackson and Miles Jackson, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 1024, page 428 of the Records of Stephens County, Oklahoma. (LF-04709-AA) Oil and Gas Lease dated May 21, 1969, by and between L. W. Corbett, Executor of the Joseph E. Hanson Estate, deceased, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 1024, page 426 of the Records of Stephens County, Oklahoma. (LF-04709-AB) The hereinabove referenced leases cover the E/2 SW/4, SW/4 SW/4, S/2 NW/4 SW/4 and the NE/4 NW/4 SW/4 of Section 22, Township 1 North, Range 7 West, LESS AND EXCEPT rights limited to the borehole of the Bumpass 1-22 Well located 1,320 feet from the south line and 1,320 feet from the east line of said Section and further limited to rights from the surface to 12,590 feet from the surface, Stephens County, Oklahoma. The hereinabove referenced leases are subject to Farmout Agreement and Assignment dated June 5, 1973, from Shell Oil Company to James R. Hazelwood; Assignment dated July 1, 1974, from Shell Oil Company to James R. Hazelwood, recorded in Volume 1171, page 141; Gas Purchase Contract dated May 1, 1974, as amended, by and between Arkansas Louisiana Gas Company, as Buyer, and Tesoro Petroleum Corporation, et al, as Seller; Gas Purchase Contract dated February 8, 1978, as amended, by and between Oklahoma Natural Gas Company, as Buyer, and Shell Oil Company, et al, as Seller; Assignment from L. R. Snyder to Shell Oil Company, recorded in Volume 1042, page 391; Purchase and Sale Agreement dated December 3, 1984, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective November 1, 1984, by and between Shell Western E&P Inc. and Maynard Oil Company, recorded in Volume 1585, page 704 of the Records of Stephens County, Oklahoma; Farmout Agreement dated September 27, 1989, by and between Maynard Oil Company, as Farmor, and Kaiser-Francis Oil Company, as Farmee; Corporation Commission Order No. 341238; Operating Agreement dated October 17, 1973, by and between Tesoro Petroleum Corporation, as Operator, and Montgomery Exploration Company, et al, as Non-Operators; Oklahoma Corporation Commission Order No. 100058 dated September 25, 1973; Farmout Agreement and Assignment dated August 17, 1973, by and between James R. Hazelwood and Tesoro Petroleum Corporation; Limited and Partial Assignment of Oil and Gas Leases dated May 24, 1995, from Maynard Oil Company to Apache Corporation, recorded in Volume _____, page _____ of the Records of Stephens County, Oklahoma. WOODS COUNTY, OKLAHOMA PN 429601 FORREST REX BAIRD NO. 1 EXPENSE INTEREST 0.2500000 REVENUE INTEREST 0.2187110 PN 429604 FORREST REX BAIRD NO. 2 EXPENSE INTEREST 0.2500000 REVENUE INTEREST 0.2187110 PN 429605 FORREST REX BAIRD NO. 3 EXPENSE INTEREST 0.2500000 REVENUE INTEREST 0.2187110 Oil and Gas Lease dated June 8, 1978, by and between Forrest Rex Baird, et al, as Lessor, and Enserch Exploration Inc., as Lessee, recorded in Volume 398, page 229 of the Records of Woods County, Oklahoma, covering Lots 1, 2, 3, 4, and 5, NW/4 NE/4, E/2 NE/4 and all accretion and riparian rights thereto and covering situated and located in Section 16, Township 23 North, Range 15 West, Woods County, Oklahoma. (LF-03228-00) Oil and Gas Lease dated February 5, 1975, by and between Bess L. Baird, et vir, as Lessor, and Deason & Vance, as Lessee, recorded in Volume 336, page 604 of the Records of Woods County, Oklahoma, INSOFAR AND ONLY INSOFAR as said lease covers the accretion and riparian rights to Lot 1 of Section 15 which fall in Section 16, Township 23 North, Range 15 West, Woods County, Oklahoma. (LF-03233-00) The hereinabove referenced leases are subject to Operating Agreement dated January 21, 1981, as amended, by and between Enserch Exploration, Inc., as Operator an Moore McCormack Oil & Gas Corporation, et al, as Non-Operator; Oklahoma Corporation Commission Order No. 46673 (CD 15628) dated October 3, 1961 and Order No. 46674 (CD 15629) dated October 3, 1961, creating a 640 acre drilling and spacing unit for all of Section 16, Township 23 North, Range 15 West, Woods County, Oklahoma. WOODWARD COUNTY, OKLAHOMA PN 440803 (UT-394) HOHWEILER NO. 1-18 EXPENSE INTEREST 0.1945150 REVENUE INTEREST 0.1702006 Oil and Gas Lease dated March 7, 1966, by and between F. A. Morehart, et ux, as Lessor, and L. D. Sargent, as Lessee, recorded in Volume 240, page 400 of the Records of Woodward County, Oklahoma, covering Lot 3, NE/4 SW/4 and South 20 acres of the S/2 NW/4 of Section 18, Township 22 North, Range 22 West, Woodward County, Oklahoma. (LF-04891-00) Oil and Gas Lease dated December 14, 1961, by and between F. A. Morehart and Gladys Morehart, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 184, page 438 of the Records of Woodward County, Oklahoma. (LF-04936-AB) Oil and Gas Lease dated September 10, 1965, by and between A. E. Goerke and Frances Goerke, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 233, page 266 of the Records of Woodward County, Oklahoma. (LF-04936-AD) Oil and Gas Lease dated September 10, 1965, by and between Kenneth C. Scott, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 233, page 268 of the Records of Woodward County, Oklahoma. (LF-04936-AE) Oil and Gas Lease dated September 10, l965, by and between Clarence Keller, Jr. and Laverne Keller, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 233, page 270 of the Records of Woodward County, Oklahoma. (LF-04936-AF) Oil and Gas Lease dated September 20, 1965, by and between Clella C. Short, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 233, page 272 of the Records of Woodward County, Oklahoma. (LF-04936-AG) Oil and Gas Lease dated September 10, 1965, by and between Mary R. Washta, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 233, page 274 of the Records of Woodward County, Oklahoma. (LF-04936-AH) Oil and Gas Lease dated September 20, 1965, by and between Thomas Howenstine and Jeanne E. Howenstine, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 233, page 276 of the Records of Woodward County, Oklahoma. (LF-04936-AI) Oil and Gas Lease dated September 10, l965, by and between Charles S. Wilson and Betty Ann Wilson, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 233, page 278 of the Records of Woodward County, Oklahoma. (LF-04936-AJ) Oil and Gas Lease dated September 10, 1965, by and between Nadine Wilson Stanford and Bobby Gene Stanford, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 233, page 280 of the Records of Woodward County, Oklahoma. (LF-04936-AK) Oil and Gas Lease dated September 29, 1965, by and between L. J. Barrett, Jr. and Marion E. Barrett, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 233, page 282 of the Records of Woodward County, Oklahoma. (LF-04936-AL) Oil and Gas Lease dated September 10, l965, by and between Woodrow A. Wilson and Eleanor Faye Wilson, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 233, page 284 of the Records of Woodward County, Oklahoma. (LF-04936-AM) Oil and Gas Lease dated September 10, 1965, by and between James L. Wilson and Wanda Joyce Wilson, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 233, page 286 of the Records of Woodward County, Oklahoma. (LF-04936-AN) Oil and Gas Lease dated September 10, 1965, by and between Rosella L. Scott, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 233, page 288 of the Records of Woodward County, Oklahoma. (LF-04936-AO) Oil and Gas Lease dated September 10, 1965, by and between J. C. Park, Jr., and Blanche Park, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 233, page 290 of the Records of Woodward County, Oklahoma. (LF- 04936-AP) Oil and Gas Lease dated October 22, 1965, by and between Mary Washta, Guardian of the Estate of George Washta, Incompetent, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 234, page 268 of the Records of Woodward County, Oklahoma. (LF-04936-AQ) Oil and Gas Lease dated September 10, l965, by and between Alice Marie Teis and Donald R. Teis, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 234, page 432 of the Records of Woodward County, Oklahoma. (LF-04936-AR) Oil and Gas Lease dated September 10, 1965, by and between Stacy L. Wilson, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 234, page 434 of the Records of Woodward County, Oklahoma. (LF-04936-AS) Oil and Gas Lease dated September 30, 1965, by and between Zollie E. Larrabee, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 234, page 436 of the Records of Woodward County, Oklahoma. (LF-04936-AT) Oil and Gas Lease dated September 10, 1965, by and between Willis Buchanan Morter and Marion Callery Morter, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 234, page 438 of the Records of Woodward County, Oklahoma. (LF-04936-AU) Oil and Gas Lease dated September 10, l965, by and between W. A. Morter, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 234, page 440 of the Records of Woodward County, Oklahoma. (LF-04936-AV) Oil and Gas Lease dated October 25, 1965, by and between Everett G. King and Marjorie P. King, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 235, page 227 of the Records of Woodward County, Oklahoma. (LF-04936-AW) Oil and Gas Lease dated September 10, l965, by and between Ethel Wilson Moran, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 235, page 412 of the Records of Woodward County, Oklahoma. (LF- 04936-AX) Oil and Gas Lease dated September 10, 1965, by and between Ruth Alene Wheatley and C. D. Wheatley, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 235, page 414 of the Records of Woodward County, Oklahoma. (LF-04936-AY) Oil and Gas Lease dated September 10, 1965, by and between Susan McCabe, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 241, page 33 of the Records of Woodward County, Oklahoma. (LF-04936-AZ) Oil and Gas Lease dated September 10, 1965, by and between Gertrude H. Camm, as Lessor, and Shell Oil Company, as Lessee, recorded in Volume 242, page 319 of the Records of Woodward County, Oklahoma. (LF-04936-BA) The hereinabove referenced leases cover Lot 1, Section 18, Township 22 North, Range 22 West, Woodward County, Oklahoma. The hereinabove referenced leases are subject to Operating Agreement dated April 25, 1966, by and between Sun Oil Company, as Operator, and Shell Oil Company, et al, as Non-Operators; Purchase and Sale Agreement dated December 19, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company; Assignment, Conveyance and Bill of Sale effective December 1, 1985, by and between Shell Western E&P Inc. and Maynard Oil Company recorded in Volume 966, page 165 of the Records of Woodward County, Oklahoma. EXHIBIT A-1 Attached to and made a part of Purchase and Sale Agreement dated September 12, 1996, by and between Maynard Oil Company, as Seller, and Enron Oil & Gas Company, as Buyer
WELLBORE UNIT PRELIMINARY IMBALANCE PAYOUT VALUE VALUE PURCHASE VOLUME DATE AMOUNT 490005 NIPPERT 1-12 $85,666 $14,000 $99,666 0 442001 SCOT B-1 $46,764 $1,875 $48,639 1,328 490008 STOVER #1 $13,050 $3,974 $17,024 (115,829) 490009 WILLARD A-1 $5,867 $2,818 $8,685 (16,578) 490010 WILLARD A-2 $0 $0 $0 0 490012 JOHN WILLIAMS 1-26 $218,659 $10,000 $228,659 18,344 440504 HAYES UNIT 1-27 $3,875 $0 $3,875 0 440504 HAYES UNIT 2-27 $1,488 $0 $1,488 0 440601 HEBNER 1-14 $2,466 $3,749 $6,215 3,379 440505 INGLE 1-17 $24,139 $8,000 $32,139 9,269 440505 INGLE 2-17 $0 $0 $0 0 440507 IRVIN C $13,618 $2,056 $15,674 (794) 440702 LYTLE C 1-21 $6,976 $8,000 $14,976 12,970 440706 LYTLE C 2-21 $11,306 $0 $11,306 0 440511 MOYER 1-19 $231 $2,246 $2,477 (2,920) 438903 CALDWELL 22A $12,411 $3,875 $16,286 0 429601 FORREST REX BAIRD #1 $0 $0 $0 6,127 429604 FORREST REX BAIRD #2 $751 $0 $751 1,926 429605 FORREST REX BAIRD #3 $18,889 $8,000 $26,889 8,140 440803 HOHWEILER 1-18 $19,978 $6,237 $26,215 26,994 $486,134 $74,830 $560,964 (47,644)
EXHIBIT A-1 PREFERENTIAL RIGHTS TO PURCHASE Attached to and made a part of Purchase and Sale Agreement dated September 12, 1996, by and between Maynard Oil Company, as Seller, and Enron Oil & Gas Company, as Buyer
PRELIMINARY WELLBORE UNIT PURCHASE VALUE VALUE PRICE 440507 IRVIN C $13,618 $2,056 $15,674 440702 LYTLE C 1-21 $6,976 $8,000 $14,976 440706 LYTLE C 2-21 $11,306 $0 $11,306 440511 MOYER 1-19 $231 $2,246 $2,477 TOTAL $32,131 $12,302 $44,433
EXHIBIT B Attached to and made a part of Purchase and Sale Agreement dated September 12, 1996, by and between Maynard Oil Company, SELLER, and Enron Oil & Gas Company, BUYER THERE ARE NO OPEN AUTHORIZATIONS FOR EXPENDITURES EXHIBIT C Attached to and made a part of Purchase and Sale Agreement dated September 12, 1996, by and between Maynard Oil Company, as Seller, and Enron Oil & Gas Company, as Buyer ASSIGNMENT, BILL OF SALE AND CONVEYANCE FROM MAYNARD OIL COMPANY TO ENRON OIL & GAS COMPANY, EFFECTIVE AUGUST 1, 1996 THE STATE OF OKLAHOMA ) ) KNOW ALL MEN BY THESE PRESENTS: COUNTY OF ) THAT, the undersigned, MAYNARD OIL COMPANY, a Delaware corporation, having its principal office at 8080 North Central Expressway, Suite 660, Dallas, Texas 75206 (hereinafter called "ASSIGNOR"), for and in consideration of Ten Dollars ($10.00) and other valuable consideration to it in hand paid by ENRON OIL & GAS COMPANY, a Delaware corporation, having its principal office at 1400 Smith Street, Houston, Texas 77002 (hereinafter called "ASSIGNEE"), does hereby GRANT, BARGAIN, SELL, ASSIGN and CONVEY unto Assignee, subject to the terms and conditions contained herein, the following: (a) All of Assignor's right, title and interest in and to the leasehold estate and mineral rights created by the leases described in Exhibit A, attached hereto and made a part together with any and all interest of Assignor in and to such property and in and to any agreements, leases, rights-of-way, easements, licenses and permits incident thereto, INSOFAR AND ONLY INSOFAR as the said rights cover the lands and depths described in Exhibit A; (b) All of Assignor's right, title and interest in and to the wells, and production therefrom, located on the Leases or lands pooled therewith, including but not limited to the wells described in Exhibit A together with any and all buildings or other improvements constructed thereon , together with any and all interest of Assignor in and to such property and in and to any agreements, including, without limitation, gas purchase agreements, farmin and farmout agreements, operating agreements and pooling agreements, leases, rights-of-way, easements, licenses and permits incident thereto; (c) All of Assignor's right, title and interest in and to the real and personal property, fixtures, improvements and buildings located on the lands burdened by the Leases or lands pooled therewith, and all contract rights, rights of substitution and subrogation in and to any rights and actions of warranty which Assignor has or may have. This Conveyance, Assignment and Bill of Sale is executed and delivered as part of the consummation of the transaction contemplated by that certain Purchase and Sale Agreement between Assignor, as SELLER , and Assignee, as BUYER , dated September 12, 1996, hereinafter referred to as "Sale Agreement". The warranties, representations, indemnities and covenants contained in the Sale Agreement shall survive the delivery of this Assignment in accordance with the provisions of the Sale Agreement and the delivery of this Assignment shall not affect, expand, diminish, or otherwise impair any of the warranties, representations, indemnities or covenants made in the Sale Agreement and the terms and conditions set forth therein; provided, however, any third parties transacting with Assignee with respect to any of the interests may rely on this Assignment as vesting Assignee with all of Assignor's rights, titles and interests in the said leases and wells. Assignor warrants to Assignee title to the leases as described in said Sale Agreement against any claims and demands of all persons whomsoever claim the same or any part thereof by, through and under Assignor, but not otherwise. This Conveyance, Assignment and Bill of Sale shall extend to, be binding upon and inure to the benefit of Assignor and Assignee, their respective successors and assigns and shall be deemed covenants running with the herein described lands and leasehold estates. Assignee expressly assumes, as of the Effective Date, all of Assignor's obligations relating to the said leases, including, but not limited to, the obligation of plugging and abar all purposes as of 7:00 o'clock a.m. August 1, 1996. Thisntical, except that, to facilitate recordation, only that portion of Exhibit A which contains specific descriptions of the leases located in the recording jurisdiction in which the particular counterpart is to be recorded are included, and other portions of Exhibit A are included by reference only. All of such counterparts together shall constitute one and the same instrument. Complete copies of the Assignment containing the entire Exhibit A have been retained by Assignor and Assignee. EXECUTED this 30th day of September 1996, but to be effective as stated above. MAYNARD OIL COMPANY By: ___________________________ Glenn R. Moore President ENRON OIL & GAS COMPANY By: ___________________________ Leland J. McVay Vice President THE STATE OF TEXAS ) ) COUNTY OF DALLAS ) This instrument was acknowledged before me on September 30, 1996, by Glenn R. Moore, President of Maynard Oil Company, a Delaware corporation, on behalf of said corporation. MY COMMISSION EXPIRES: ___________________________ Cassondra Foster, Notary Public in and for the State of Texas THE STATE OF OKLAHOMA ) ) COUNTY OF ) This instrument was acknowledged before me on _________, 1996, by Leland J. McVay, Vice President of Enron Oil & Gas Company, a Delaware corporation, on behalf of said corporation. MY COMMISSION EXPIRES: _________________________________ Notary Public in and for the State of ________ -----END PRIVACY-ENHANCED MESSAGE-----