DEFINED IN
SECTION 10.01), CALCULATED BASED ON THE NUMBER OF CALENDAR DAYS AND SIMPLE
INTEREST OF 5% USING A 365 DAY YEAR ("COMPUTED INTEREST"). THE ADJUSTED PURCHASE
PRICE SHALL BE PAID TO SELLERS (OR THEIR DESIGNEES) AT CLOSING (AS DEFINED IN
SECTION 10.01) BY MEANS OF A COMPLETED FEDERAL FUNDS TRANSFER TO AN ACCOUNT
DESIGNATED IN WRITING BY SELLERS.
SECTION 2.02
DEPOSIT. CONCURRENTLY WITH THE EXECUTION OF THIS
AGREEMENT BY BUYER AND SELLERS, BUYER SHALL DELIVER TO SELLERS A PERFORMANCE
GUARANTEE DEPOSIT IN THE AMOUNT OF FIVE PERCENT (5%) OF THE PURCHASE PRICE (THE
"DEPOSIT"). THE DEPOSIT SHALL BE PAID BY BUYER TO SELLERS BY MEANS OF A
COMPLETED FEDERAL FUNDS TRANSFER TO THE ACCOUNT OF WESTHOFF RANCH, LP ON BEHALF
OF SELLERS, ACCOUNT NO. 0200025666, AT COPPERMARK BANK, ABA ROUTING NUMBER
111024467. THE DEPOSIT SHALL BEAR INTEREST AT THE COMPUTED INTEREST RATE AND
SHALL BE SUBJECT TO THE TERMS OF THIS AGREEMENT.
SECTION 2.03
ALLOCATED VALUES. THE PURCHASE PRICE IS ALLOCATED AMONG
THE ASSETS AS SET FORTH IN EXHIBIT C ATTACHED HERETO (THE "ALLOCATED VALUES").
SELLERS AND BUYER AGREE THAT THE ALLOCATED VALUES SHALL BE USED TO COMPUTE ANY
ADJUSTMENTS TO THE PURCHASE PRICE PURSUANT TO THE
3
PROVISIONS OF ARTICLE III AND ARTICLE IV. IN REGARDS TO ASSETS HAVING UPSIDE
POTENTIAL, EXHIBIT C SHOULD BE AS SPECIFIC AS POSSIBLE REGARDING TARGET RESERVE
FORMATION AND LOCATION.
SECTION 2.04
EFFECTIVE TIME. IF THE TRANSACTIONS CONTEMPLATED HEREBY
ARE CONSUMMATED IN ACCORDANCE WITH THE TERMS AND PROVISIONS HEREOF, THE
OWNERSHIP OF THE ASSETS SHALL BE TRANSFERRED FROM SELLERS TO BUYER ON THE
CLOSING DATE, AND EFFECTIVE AS OF 7:00 A.M. LOCAL TIME WHERE THE ASSETS ARE
LOCATED ON FEBRUARY 1, 2006 (THE "EFFECTIVE TIME").
ARTICLE III
TITLE MATTERS
SECTION 3.01
EXAMINATION PERIOD. FOLLOWING THE EXECUTION DATE OF THIS
AGREEMENT UNTIL 5:00 P.M., LOCAL TIME IN HOUSTON, TEXAS ON THE DATE TWENTY (20)
BUSINESS DAYS AFTER THE EXECUTION OF THIS AGREEMENT (THE "EXAMINATION PERIOD"),
SELLERS SHALL PERMIT BUYER AND/OR ITS REPRESENTATIVES TO EXAMINE, AT ALL
REASONABLE TIMES, IN THE OFFICE OF ENCON SERVICES, INC. IN ABILENE, TEXAS, ALL
ABSTRACTS OF TITLE, TITLE OPINIONS, TITLE FILES, OWNERSHIP MAPS, LEASE FILES,
CONTRACT FILES, ASSIGNMENTS, DIVISION ORDERS, OPERATING AND ACCOUNTING RECORDS
AND AGREEMENTS PERTAINING TO THE ASSETS INSOFAR AS SAME MAY NOW BE IN EXISTENCE
AND IN THE POSSESSION OF SELLERS, SUBJECT TO SUCH RESTRICTIONS ON DISCLOSURE AS
MAY EXIST UNDER CONFIDENTIALITY AGREEMENTS OR OTHER AGREEMENTS BINDING ON
SELLERS OR SUCH DATA. "BUSINESS DAYS" MEANS ALL CALENDAR DAYS EXCLUDING
SATURDAYS, SUNDAYS AND U.S. LEGAL HOLIDAYS.
SECTION 3.02
DEFENSIBLE TITLE AND PERMITTED ENCUMBRANCES. FOR PURPOSES
OF THIS AGREEMENT, THE TERM "DEFENSIBLE TITLE" MEANS, WITH RESPECT TO A GIVEN
ASSET, SUCH CUMULATIVE OWNERSHIP BY SELLERS IN SUCH ASSET THAT, SUBJECT TO AND
EXCEPT FOR THE PERMITTED ENCUMBRANCES (AS DEFINED IN SUBSECTION (D) OF THIS
SECTION 3.02):
(A)
ENTITLES SELLERS TO RECEIVE NOT LESS THAN THE PERCENTAGE SET FORTH
IN EXHIBIT B AS SELLERS' "NET REVENUE INTEREST" OF ALL HYDROCARBONS PRODUCED,
SAVED AND MARKETED FROM EACH WELL OR