EXHIBIT 10.1
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement ("Agreement") dated as of the 5th day of
June, 2003, is between JAED PRODUCTION COMPANY, INC a privately-held
Subchapter S corporation organized and existing under the laws of Kansas
("Seller"), and DELTA PETROLEUM CORPORATION, a publicly-held corporation
organized and existing under the laws of Colorado ("Buyer"). Seller and Buyer
are referred to herein individually as a "Party" and collectively as the
"Parties."
In consideration of the mutual promises contained herein, the benefits to
be derived by each Party hereunder and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller
agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1 Purchase and Sale. Subject to the terms and conditions of this
Agreement, Seller agrees to sell and convey and Buyer agrees to purchase and
pay for all of Seller's right, title and interest in and to the Interests.
1.2 Interests. All of the following shall be referred to in this
Agreement collectively as the "Interests" and individually as an "Interest:"
(a) The oil, gas and mineral leases in the counties described on
Exhibit "A" attached hereto (collectively, the "Leases"), including, without
limitation, working interests, overriding royalty interests, royalty interests
and any other interests of a similar nature affecting the lands covered by the
Leases (collectively, the "Lands").
(b) The oil and gas xxxxx described on Exhibit "A"
(individually, a "Well," and collectively, the "Xxxxx"), together with all
oil, natural gas, casinghead gas, drip gasoline, natural gas liquids,
condensate and other minerals produced from such Xxxxx.
(c) All unitization, communitization, pooling, agreements,
working interest units created by operating agreements, partnership agreements
and orders covering the Leases and Lands, or any portion thereof, and the
units and pooled or communitized areas created thereby (collectively, the
"Units").
(d) The tangible personal property, tools, machinery, materials,
pipelines, plants, gathering systems, equipment, platforms and facilities,
fixtures and improvements, which are directly incident or attributable to or
underlie the Leases, Lands, Xxxxx or Units with the production,
transportation, treatment, sale or disposal of hydrocarbons or water produced
therefrom or attributable thereto, (collectively, the "Equipment").
(e) The licenses, permits, contracts, agreements and other
instruments owned by Seller (other than bonds posted by Seller) which concern
and relate to any of the Leases, Lands, Xxxxx, Units and/or Equipment, INSOFAR
AND ONLY INSOFAR as same concern or relate to the Leases, Lands, Xxxxx, Units
and/or Equipment, or the operation thereof; including, without limitation,
oil, gas and condensate purchase and sale contracts; permits; rights-of-way;
easements; licenses; servitudes; estates; surface leases; farmin and farmout
agreements; division orders and transfer orders; bottomhole agreements; dry
hole agreements; area-of-mutual interest agreements; salt water disposal
agreements; acreage contribution agreements; operating agreements; balancing
agreements and unit agreements; pooling agreements; pooling orders;
communitization agreements; processing, gathering, compression and
transportation agreements; facilities or equipment leases relating thereto or
used or held for use in connection with the ownership or operation thereof or
with the production, treatment, sale or disposal of hydrocarbons; and all
other contracts and agreements related to the Leases, Lands, Xxxxx, Units
and/or Equipment.
(f) Subject to Section 1.3 below, originals or copies of all
computer tapes and discs, files, records, information or data relating to the
Interests in the possession of Seller, including, without limitation, title
records (including abstracts of title, title opinions, certificates of title
and title curative documents), production records and files, contracts,
correspondence, production records, electric logs, core data, pressure data,
decline curves, graphical production curves, drilling reports, well completion
reports, drill stem test charts and reports, regulatory reports, and all
related materials, INSOFAR AND ONLY INSOFAR as the foregoing items constitute
materials that may be lawfully conveyed to Buyer (i.e., the materials are not
subject to a proprietary agreement precluding their transfer to Buyer), and,
to the extent transferable, all other contract rights, intangible rights
(excluding Seller's trademarks and service marks), inchoate rights, choses in
action, rights under warranties made by prior owners, manufacturers, vendors
or other third parties, and rights accruing under applicable statutes of
limitation or prescription, attributable to the Interests.
(g) All payments, and all rights to receive payments, with
respect to the ownership of the production of hydrocarbons from or the conduct
of operations on the Interests accruing after the Effective Time.
1.3 Reserved Interests. Notwithstanding any provision of this
Agreement to the contrary, Seller reserves and retains (i) Seller's corporate,
financial, tax and legal records and other business records; (ii) cash, bank
accounts, letters of credit, travel letter accounts and prepaid insurance;
(iii) the management information systems, accounting software and other
intellectual property rights of Seller used by Seller in the management and
administration of its business; (iv) all claims that Seller may have under any
policy of insurance, indemnity or bond maintained by Seller other than claims
relating to property damage or casualty loss affecting the Interests occurring
between the Effective Time and Closing (which claims shall be included in the
Interests); (v) all accounts receivable, trade credits or notes receivable
relating to transactions processed by Seller prior to the Effective Time; (vi)
any files or records that Seller is contractually or otherwise obligated not
to disclose to Buyer; (vii) all claims and causes of action arising from acts,
omissions or events, or damage or destruction of property occurring prior to
the Effective Time; (viii) engineering studies or reserve reports relating to
the Interests; and (ix) all interests and rights not included in the
definition of the Interests (the "Reserved Interests").
1.4 Effective Time. The purchase and sale of the Interests shall be
effective as of June 1, 2003, at 12:01 a.m., Central Daylight Time (herein
called the "Effective Time").
1.5 Closing Date. The purchase and sale of the Interests pursuant to
this Agreement ("Closing") shall be at 10:00 a.m. Mountain Daylight Time on
June 23, 2003 ("Closing Date") unless a different date is agreed to in writing
by both Parties.
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1.6 Ownership of the Interests. Upon Closing, Seller shall be
entitled to all of the rights of ownership (including, without limitation, the
right to all production, proceeds of production and other proceeds), and shall
be subject to the duties and obligations of such ownership attributable to the
Interests for the period of time prior to the Effective Time and Buyer shall
be entitled to all of the rights of ownership (including, without limitation,
the right to all production, proceeds of production and other proceeds) and
shall be subject to the duties and obligations of such ownership attributable
to the Interests for the period of time from and after the Effective Time.
All expenses and costs, including, without limitation, all ad valorem,
property, production, severance, and similar taxes and assessments based upon
or measured by the ownership of the Interests, the production of hydrocarbons,
or the receipt of proceeds therefrom) attributable to the Interests, shall be:
(i) allocated to Seller if incurred or accruing with respect to operations
conducted prior to the Effective Time; or (ii) allocated to Buyer if incurred
or accruing with respect to operations conducted after the Effective Time.
All hydrocarbons in storage facilities above or upstream from the pipeline
connection to each storage facility, or downstream of delivery point sales
meters on gas pipelines, as of the Effective Time, shall belong to Seller.
All of the hydrocarbons placed in such storage facilities or upstream of the
aforesaid meters on pipelines after the Effective Time shall accrue to the
benefit of Buyer and shall become a part of the Interests. In order to
accomplish the foregoing allocation of production, the Parties shall rely upon
the records maintained by the operator of the relevant Interest, unless such
records are demonstrated to be inaccurate.
1.7 Risk of Loss. Buyer shall assume all risk of loss with respect
to the Interests from and after the Effective Time to Closing and thereafter
should Closing occur. Except as specifically set forth in Section 11.1 with
respect to any damages caused by Buyer's environmental inspection of the
Interests, Seller shall retain all risk of loss with respect to the Interests
at all times should Closing not occur.
ARTICLE 2
PURCHASE PRICE
2.1 Purchase Price. The purchase price for the Interests shall be
comprised of Nine Million Dollars ($9,000,000) paid by wire transfer or other
immediately available funds (the "Money Payment") and Two Hundred Thousand
(200,000) shares of Buyer's Common Stock (the "Stock Payment"). The Money
Payment and the Stock Payment shall collectively be herein called the
"Purchase Price." At Closing, the Money Payment of the Purchase Price shall
be adjusted as set forth in Section 2.3 below.
2.2 Xxxxxxx Money Deposit. At the time of execution of that certain
letter of intent between the Parties dated May 13, 2003 that relates to this
Agreement, Buyer delivered to Seller an xxxxxxx money deposit in the amount of
$50,000 (the "Deposit"), which Deposit shall become the property of Seller and
non-refundable to Buyer upon the due execution of this Agreement by both
Parties except as specifically set forth herein to the contrary. If this
Agreement is not executed by both parties on or before June 5, 2003, the
Deposit shall be refunded to Buyer without any deduction therefrom or interest
thereon. If Closing fails to occur after execution of this Agreement through
no fault of either Party or as a result of Buyer's breach of any of its
obligations, representations or warranties set forth in this Agreement, the
Deposit shall be retained by the Seller. If Closing fails to occur after
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execution of this Agreement as a result of Seller's failure to perform,
Seller's voluntary termination of this Agreement or Seller's breach of any of
its obligations, representations or warranties set forth in this Agreement,
the Seller shall refund the full amount of the Deposit to the Buyer within
three days after Buyer's written demand for such refund. If Closing occurs,
the Deposit shall be applied to the Adjusted Purchase Price.
2.3 Adjustments to Purchase Price. At Closing, the Purchase Price
shall be adjusted as follows and the resulting amount shall be referred to
herein as the "Adjusted Purchase Price":
(a) The Purchase Price shall be adjusted upward by the
following:
(i) The amount of all actual operating or capital
expenditures or prepaid expenses attributable to the
Interests paid by or on behalf of Seller in connection
with the operation of the Interests and which are,
according to generally accepted accounting principles,
attributable to the period of time between the
Effective Time and Closing Date. Such expenditures
and expenses shall include, without limitation,
royalties, rentals and other charges; ad valorem,
property, excise, and any other taxes based upon or
measured by the ownership of the Interests, the
production of hydrocarbons or the receipt of proceeds
therefrom; and expenses payable to a third person
under applicable joint operating agreements,
including, without limitation, overhead charges at
normal company overhead labor rates and royalty
disbursement fees payable to operator, or similar
payments to third party operators, or, in the absence
of any joint operating agreement, those items
customarily billed under such an agreement.
(ii) The value, less taxes (other than taxes on net
income), of all hydrocarbons in storage facilities
above or upstream from the pipeline connection in each
storage facility, or downstream of delivery point,
sales meters on gas pipelines, as of the Effective
Time, at the prevailing market value at the time of
sale in the area, adjusted for grade and gravity.
(iii) Insurance premiums of $200 per month from the
effective date to Closing, for general liability,
excess liability and operator's extra expense (which
benefits accrue to Buyer pursuant to paragraph 1.3).
(iv) General corporate overhead of $5,000 per month from
the Effective Time to the Closing Date to reimburse
Seller for the cost to produce Council of Petroleum
Accountants Societies ("XXXXX") overhead revenues that
accrue to Buyer. In the event that the parties
determine it is necessary or convenient for Seller to
continue as the operator of any of the Interests after
the Closing Date (but until no later than July 31,
2003), then, as reimbursement for any overhead costs
incurred by Seller in operating such Interests after
the Closing Date, Buyer shall pay to Seller an
additional amount of $5,000 on August 1, 2003.
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(v) Any other amounts agreed upon by Seller and Buyer.
(b) The Purchase Price shall be adjusted downward by the
following:
(i) Reductions due to Title Failures as provided in
Section 10.7.
(ii) For uncured Title Defects and Contested Defects
pursuant to Section 10.8
(iii) Reductions due to Environmental Defects as provided
in Section 11.3.
(iv) The gross proceeds received by Seller, net of
applicable severance and production taxes and
compression and transportation charges, and derived
from the sale of hydrocarbons attributable to the
Interests to the extent owned by Buyer between the
Effective Time and the Closing Date, pursuant to the
provisions of Section 1.6 above.
(v) XXXXX revenues received by Seller between Effective
Time and Closing Date.
(vi) Any other amounts agreed upon by Seller and Buyer.
(c) Upward and downward adjustments to the Purchase Price
pursuant to Section 2.3 shall be made only to the Money Payment.
2.4 Purchase Price Allocation. The Purchase Price shall be allocated
among the Interests as set forth in Exhibit "B" attached hereto (the
"Allocated Values").
2.5 Preliminary Settlement Statement. Seller shall prepare and
deliver to Buyer at least five (5) "Business Days" (which term shall mean any
day except a Saturday, Sunday or other day on which commercial banks in
Denver, Colorado are required or authorized by law to be closed) prior to the
Closing Date, Seller's estimate of the Adjusted Purchase Price to be paid at
Closing, together with a statement setting forth Seller's estimate of the
amount of each adjustment to the Purchase Price to be made pursuant to Section
2.2 (the "Preliminary Settlement Statement"). The parties shall negotiate in
good faith and attempt to agree on such estimated adjustments prior to
Closing. In the event any estimated adjustment amounts are not agreed upon
prior to Closing, the Adjusted Purchase Price for purposes of Closing shall be
calculated based on Seller's and Buyer's agreed upon estimated adjustments and
Seller's good faith estimation of any disputed amounts, which estimate shall
be subject to adjustment in the Final Settlement Statement pursuant to Section
9.1.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Seller. Seller represents and
warrants to Buyer the following:
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(a) Seller is a privately-held corporation that is duly
organized, validly existing and in good standing under the laws of the State
of Kansas, and Kansas is the only state in which any of the Interests are
located.
(b) Seller has all requisite power and authority to carry on its
business as presently conducted and to enter into this Agreement and to
perform its obligations hereunder.
(c) The execution, delivery and performance of this Agreement
and the transactions contemplated herein have been duly and validly authorized
by Seller. The sole shareholders of Seller are Xxxxxx X. Xxxxxxx and Xxx X.
Xxxxxx.
(d) This Agreement has been duly executed and delivered on
behalf of Seller, and all documents and instruments required hereunder to be
executed and delivered by Seller at or prior to Closing shall have been duly
executed and delivered. This Agreement does, and such documents and
instruments shall, constitute legal, valid and binding obligations of Seller
enforceable in accordance with their terms.
(e) Other than as set forth in Exhibit "C" attached hereto and
made a part hereof, there are no outstanding authorizations for expenditures
("AFEs") in excess of $25,000 each that (i) require the drilling of xxxxx or
other material development operations in order to earn or to continue to hold
all or any portion of the Interests, or (ii) obligate Seller to make payments
of any amounts in connection with drilling of xxxxx or other material capital
expenditures affecting the Interests.
(f) Seller's execution, delivery, and performance of this
Agreement and the transactions contemplated hereby will not: (i) violate or
conflict with any provision of its articles of incorporation, bylaws, or other
governing documents; (ii) result in the breach of any material term or
condition of, or constitute a default or cause the acceleration of any
material obligation under any agreement or instrument to which it is a party
or by which it is bound; or (iii) violate or conflict with any applicable
judgment, decree, order, permit, law, rule, or regulation.
(g) There are no consents required of any other party required
to consummate the transactions contemplated hereby. After Closing, Buyer and
Seller will be required to jointly file a notification of change of operator
with the Kansas Corporations Commission, but no approval of such notification
is required by Kansas law.
(h) Seller is not party to any forward sales, hedging or other
similar agreement relating to the sale of oil, gas or other minerals from the
Interests and is not otherwise obligated to deliver hydrocarbons produced from
the Interests at some future time without then or thereafter receiving full
payment for the production attributable to Seller's ownership in and to the
Interests by virtue of: (i) a prepayment arrangement under any contract for
the sale of hydrocarbons and containing a "take or pay," or similar
provisions, (ii) a production payment, or (iii) any other arrangement.
(i) Except for those taxes and assessments for which a Purchase
Price adjustment is made under Section 2.3(b)(v), during the period of
Seller's ownership of the Interests, Seller has properly paid all ad valorem,
property, production, severance, excise and similar taxes and assessments
based on or measured by the ownership of property or the production of
hydrocarbons or the receipt of proceeds therefrom on the Interests that have
become due and payable before the Effective Time.
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(j) Seller has incurred no liability, contingent or otherwise,
for broker's or finder's fees or commissions relating to the transactions
contemplated by this Agreement for which Buyer shall have any responsibility
whatsoever.
(k) No suit, action, claim, or other proceeding is pending or,
to the best of Seller's knowledge, threatened before any court, arbitration
panel or governmental agency which relates to the Interests and which might
result in a material loss of Seller's title to any portion of the Interests,
or a material diminution of the value of any of the Interests, or that might
materially hinder or impede the operation of the Leases.
(l) As used in this Agreement, the term, "Existing Documents"
shall mean all of the oil, gas and other mineral leases, assignments or other
instruments or agreements that comprise the Interests, and all contractually
binding arrangements to which the Interests may be subject and which will be
binding on the Interests or Buyer after Closing (including, without
limitation, oil, gas and other mineral leases, overriding royalty assignments,
farm-out and farm-in agreements, option agreements, forced pooling orders,
assignments of production payments, partnership agreements, unit agreements,
unit operating agreements, joint operating agreements, balancing agreements,
unit operating agreements, production contracts, processing contracts, gas
sales contracts, marketing and transportation contracts and division orders).
To the best of Seller's knowledge, (i) all material Existing Documents are in
full force and effect and are the valid and legally binding obligations of the
parties thereto and are enforceable in accordance with their respective terms
(subject to the effects of bankruptcy, insolvency, reorganization, moratorium
and similar laws); (ii) Seller is not in material breach or default with
respect to any of its obligations pursuant to any such Existing Documents; and
(iii) all payments (including, without limitation, royalties, delay rentals,
shut-in royalties and valid calls under unit or operating agreements) due
thereunder have been timely paid and Seller has received no notice of default
under any of the Existing Documents.
(m) To the best of Seller's knowledge, all of the Equipment
Seller requires to operate its interests has been maintained in a state of
repair so as to be adequate for normal operations.
(n) To the best of Seller's knowledge, all of the Xxxxx that
have been drilled and completed have been so drilled and completed within the
boundaries and limits permitted by contract, pooling or unit agreement, and by
law; and all drilling, completion, and other operations on or affecting the
Leases have been conducted in compliance with all applicable laws, ordinances,
rules, regulations and permits, and judgments, orders and decrees of any court
or governmental body or agency. No Well is subject to penalties or allowables
after the date hereof because of any over-production or any other violation of
applicable laws, rules, regulations or permits or judgments, orders or decrees
of any court or governmental body or agency.
(o) Except as set forth on Exhibit "D" attached hereto:
(i) Seller's operations and activities with respect to the
Interests comply in all material respects with all
applicable governmental laws, including, without
limitation, health and safety statutes and regulations
and all Environmental Laws, including any provisions
requiring notice to government agencies under
Environmental Laws.
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(ii) There is no civil, criminal or administrative action,
suit, demand, claim, hearing, notice of violation,
investigation, proceeding, notice or demand letter
("Environmental Proceeding") known to Seller pending
or, to the best of Seller' knowledge, threatened
against Seller or any of the Interests relating in any
way to the Environmental Laws.
(iii) Neither Seller nor, to the best of Seller's knowledge,
any other person has released, placed, stored, buried
or dumped any Hazardous Substances, Oil, Pollutants or
Contaminants or any other wastes on, beneath, or
adjacent to the Leases operated by Seller, except for
inventories of such substances to be used in the
ordinary course of business of Seller (which
inventories and wastes, if any, were and are stored or
disposed of in accordance with applicable laws and
regulations).
(iv) To the best of Seller's knowledge, Seller has not
received any notice or order from any governmental or
other public agency advising it that Seller is
responsible for or potentially responsible for Cleanup
or paying for the cost of Cleanup of any Hazardous
Substances, Oils, Pollutants, or Contaminants or any
other waste or substance affecting the Interests.
Seller is not aware of any facts which might
reasonably give rise to any such notice or order.
(v) The term "Cleanup" shall mean all actions required to:
(1) cleanup, remove, treat or remediate Hazardous
Substances, Oils, Pollutants or Contaminants; (2)
prevent the Release of Hazardous Substances, Oils,
Pollutants or Contaminants so that they do not
migrate, endanger or threaten to endanger public
health or welfare or the environment; (3) perform
pre-remedial studies and investigations and
post-remedial monitoring and care; or (4) respond to
any government requests for information or documents
in any way relating to cleanup, removal, treatment or
remediation or potential cleanup, removal, treatment
or remediation of Hazardous Substances, Oils,
Pollutants or Contaminants in the indoor or outdoor
environment.
(vi) The term "Environmental Laws" shall mean all foreign,
Federal, state and local laws, regulations, rules and
ordinances relating to polluting or protection of the
environment, including, without limitation, laws
relating to Releases or threatened Releases of
Hazardous Substances, Oil, Pollutants or Contaminants
into the indoor or outdoor environment (including,
without limitation, ambient air, surface water,
groundwater, land, surface and subsurface strata) or
otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, Release,
transport or handling of Hazardous Substances, Oil,
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Pollutants or Contaminants, and all laws and
regulations with regard to record keeping,
notification, disclosure and reporting requirements
respecting Hazardous Substances, Oils, Pollutants or
Contaminants.
(vii) The term "Hazardous Substances, Oils, Pollutants or
Contaminants" shall mean all substances defined as
such in the National Oil and Hazardous Substances
Pollution Contingency Plan, or defined as such by, or
regulated as such under, any Environmental Law.
(viii) The term "Release" or "Releases" means any release,
spill, emission, discharge, leaking, pumping,
injection, deposit, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor
environment (including, without limitation, ambient
air, surface water, groundwater, and surface or
subsurface strata) or into or out of any property,
including the movement of Hazardous Substances, Oils,
Pollutants or Contaminants through or in the air,
soil, surface water, groundwater or property.
(p) Seller is an "Accredited Investor" as that term is defined
in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933,
as amended. Seller is an experienced and knowledgeable investor in the equity
securities of oil and gas companies and is familiar with the risks and
uncertainties involved. An investment in the Buyer's Common stock is a
suitable investment for Seller. Seller has received copies of, has reviewed
and understands Buyer's Annual Report on Form 10-K for its fiscal year ended
June 30, 2002, Buyer's proxy materials for its annual meeting of shareholders
held on December 17, 2002, Buyer's Quarterly Reports on Form 10-Q for its
quarters ended September 30, 2002, December 31, 2002 and March 31, 2003,
Buyer's Current Report on Form 8-K dated May 12, 2003 and such other
information as Seller has deemed to be necessary to make an informed
investment decision with respect to its investment in the Buyer's Common
Stock. Seller is acquiring the Stock Payment for its own account and not with
a view to, or for offer of resale in connection with, a distribution thereof,
within the meaning of the Securities Act of 1933, as amended, or any other
rules, regulations, or laws pertaining to the distribution of securities.
3.2 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller the following:
(a) Buyer is a corporation, duly organized, validly existing and
in good standing under the laws of the State of Colorado. Buyer is or will be
prior to Closing duly qualified to conduct business in the State of Kansas.
(b) Buyer has all requisite power and authority to carry on its
business as presently conducted, to enter into this Agreement, and to purchase
the Interests on the terms described in this Agreement and perform its other
obligations under this Agreement.
(c) The execution, delivery and performance of this Agreement
and the transactions contemplated hereby have been duly and validly
authorized.
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(d) This Agreement has been duly executed and delivered by or on
behalf of Buyer; all documents and instruments required hereunder to be
executed and delivered by Buyer at or prior to Closing shall have been duly
executed and delivered; and this Agreement does, and such documents and
instruments shall, constitute legal, valid and binding obligations of Buyer
enforceable in accordance with their terms.
(e) All shares of the Common Stock of Buyer issued to Seller
pursuant to this Agreement shall be duly authorized and when issued shall be
fully paid, non-assessable shares of the Common Stock of Buyer and shall carry
all of the same rights and privileges as all other issues of the Common Stock
of Buyer, provided, however that the Parties acknowledge that such shares will
not be registered stock until such shares are registered pursuant to Section
9.5.
(f) The execution, delivery and performance of this Agreement
and the transactions contemplated hereby have been duly and validly
authorized.
(g) Buyer has incurred no liability, contingent or otherwise,
for broker's or finder's fees or commissions relating to the transactions
contemplated by this Agreement for which Seller shall has any responsibility
whatsoever.
(h) Prior to Closing, Buyer will have inspected the Interests,
the public records and Seller's files for all purposes, including, but not
limited to, detecting the presence and concentration of naturally-occurring
radioactive materials and satisfying itself as to the physical condition and
environmental condition of the Interests, both surface and subsurface. In
entering into this Agreement, Buyer has relied solely on its independent
investigation of, and judgment with respect to, the Interests and the advice
of its own legal, tax, economic, environmental, engineering, geological and
geophysical advisors, and not on any comments or statements of any
representatives of, or consultants or advisors engaged by Seller.
(i) At Closing, Buyer will meet the bonding and other
requirements required by all governmental authorities with respect to the
Interests (and Seller agrees to provide Buyer, prior to Closing, with a list
of such requirements) and, after Closing, Buyer anticipates that it will
continue to be able to meet such bonding requirements. Buyer is, and after
the Closing is expected to continue to be, otherwise qualified to own the
Interests. The consummation of the transactions contemplated hereby will not
cause Buyer to be disqualified to be an owner of oil, gas, and mineral leases
or to exceed any acreage limitation imposed by law, statute, rule or
regulation. Buyer is not aware of any fact that could reasonably be expected
to cause the appropriate governmental authorities to fail to unconditionally
approve the assignment of the Interests to Buyer. Seller will cooperate and
will assist Buyer relating to the preparation and presentation of documents
relating to changes in ownership and/or operatorship of the Interests.
(j) Buyer is an experienced and knowledgeable investor and
operator in the oil and gas business. Buyer is acquiring the Interests for
its own account and not with a view to, or for offer of resale in connection
with, a distribution thereof, within the meaning of the Securities Act of
1933, as amended, or any other rules, regulations, or laws pertaining to the
distribution of securities.
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(k) Buyer has arranged or will have arranged to have available
by the Closing Date sufficient funds to enable the payment to Seller, by wire
transfer, of the Adjusted Purchase Price in accordance with Section 2.3 and to
otherwise perform Buyer's obligations under this Agreement.
ARTICLE 4
CERTAIN AGREEMENTS OF SELLER
4.1 Agreements Between Execution of Agreement and Closing. During
the period between the execution of this Agreement and the Closing Date,
Seller shall not, without the prior written consent of Buyer, (i) sell,
convey, assign, transfer or encumber any of the Interests; (ii) make or agree
to make any expenditure in excess of $25,000.00, net to Seller's interest,
except for obligations under existing contracts, expenditures necessary to
maintain the Interests, or in the event of any emergency as to which Seller
has notified Buyer; (iii) sell oil, gas or other minerals from the Interests
except sales made in the ordinary course of business; (iv) enter into any
forward sales, hedging or similar agreements relating to the sale of oil, gas
or other minerals from the Interests; (v) enter into any agreement amending,
modifying or terminating any of the Leases; or (vi) take any other action with
respect to any of the Interests that would cause a material diminution in the
value thereof or that would materially and adversely affect the use and
enjoyment thereof.
4.2 Access to Records. Following the execution of this Agreement by
the Parties, Seller shall afford to Buyer and its authorized representatives,
during normal business hours, reasonable access to well and land files, title,
contract and legal materials and operating data and information in Seller's
possession or to which it has access affecting the Interests.
4.3 Notification of Additional Proceedings. Seller shall promptly
notify Buyer of any new suits, actions, claims or other proceedings threatened
or pending before, or required to be filed with, any court, arbitrator or
governmental agency which relate to the Interests.
4.4 Consents. Seller shall use its best efforts to obtain any
consents necessary to transfer the Interests to Buyer.
4.5 Trading in Buyer's Stock. Neither the Seller nor its affiliates,
insiders, agents and brokers shall be permitted to buy or sell shares,
options, etc., in the common stock of Buyer until after Closing.
4.6 Insurance. Seller shall maintain the general liability, excess
liability and operator's extra expense insurance referenced in Subsection 2.3
(a) (iii) until Closing.
ARTICLE 5
CERTAIN AGREEMENTS OF BUYER
5.1 Cooperation. Buyer shall cooperate with Seller to assist Seller
in carrying out the agreements of Seller hereunder.
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5.2 Change of Operations. Buyer will diligently pursue the filing
and other requirements to assume operations, where applicable, and ownership
of the Interests, including without limitation, well testing, bonding and
other requirements from all governmental authorities with respect to the
Interests such that Seller can withdraw as operator of the Interests, where
applicable, as soon as possible after Closing.
ARTICLE 6
BUYER'S CONDITIONS TO CLOSING
The obligations of Buyer to consummate the transactions provided for
herein are subject, at the option of Buyer, to the fulfillment on or prior to
Closing of each of the following conditions:
6.1 Representations. The representations and warranties by Seller
set forth in Section 3.1 above shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date, except
as modified with the written consent of Buyer.
6.2 Changes. There shall have been no material adverse change in the
physical condition of the Interests, except depletion through normal
production within authorized allowables and rates of production, depreciation
of equipment through ordinary wear and tear, and other transactions permitted
under this Agreement or approved in writing by Buyer.
6.3 Performance. Seller shall have performed and complied in all
material respects with all agreements and covenants required by this
Agreement.
6.4 No Legal Proceedings. No suit, action or other proceeding shall
be pending or threatened before any court, arbitration panel 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, or which might result in a material loss of any portion of the
Interests, a material diminution in the value of any of the Interests, or
materially interfere with the use or enjoyment of the Interests, except (i)
matters that are disclosed on Exhibit "E" or (ii) any suit or proceeding
affecting only a portion of the Interests, which portion could be treated as
subject to a Title Defect in accordance with Article 10.
ARTICLE 7
SELLER'S CONDITIONS TO CLOSING
The obligations of Seller to consummate the transactions provided for
herein are subject, at the option of Seller, to the fulfillment on or prior to
Closing of each of the following conditions:
7.1 Representations. The representations and warranties by Buyer
set forth in Section 3.2 above shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date except as
modified with the written consent of Seller.
7.2 Performance. Buyer shall have timely performed and complied in
all material respects with all agreements and covenants required by this
Agreement.
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7.3 No Legal Proceedings. 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
sale contemplated by this Agreement, except (i) matters with respect to which
Seller has been adequately indemnified by Buyer or (ii) any suit or other
proceeding affecting only a portion of the Interests, which portion could be
treated as subject to a Title Defect in accordance with Article 10.
ARTICLE 8
CLOSING
8.1 Closing Date. Subject to the conditions stated in this
Agreement, Closing shall occur on the date set forth in Section 1.5 or on such
other date and time as Buyer and Seller may agree (the "Closing Date").
8.2 Place of Closing. The Closing shall be held at the offices of
Buyer as set forth in Section 15.2; provided, however, the Parties may agree
to close via facsimile or overnight mail.
8.3 Closing Obligations. At the Closing, the following documents
shall be delivered and the following events shall occur, each event being a
condition precedent to the others and each being deemed to have occurred
simultaneously with the others:
(a) Seller shall execute and deliver: (1) an Assignment, Xxxx
of Sale and Conveyance in the form attached hereto and made a part hereof as
Exhibit "F" (the "Assignment") (in sufficient counterparts to facilitate
recording) conveying the Interests, subject to the Permitted Encumbrances; and
(2) such other instruments as may be required to convey the Interests to Buyer
and otherwise effectuate the transactions contemplated by this Agreement;
including, but not limited to, appropriate change of operator forms.
(b) Seller and Buyer shall execute and deliver the Preliminary
Settlement Statement.
(c) Buyer shall deliver by direct bank or wire transfer to
Seller or to Seller's account on behalf of Seller (at such place as may be
designated by Seller in a written notice, such notice to be delivered to Buyer
not less than two (2) Business Days prior to the Closing Date) the Money
Payment of the Adjusted Purchase Price and shall deliver to Seller the Stock
Payment of the Adjusted Purchase Price (less the amount of the Deposit).
(d) Seller shall deliver on forms supplied by Buyer transfer
orders or letters in lieu thereof, directing the operator or purchaser to make
payment of proceeds attributable to production from the Interests after the
Effective Time to Buyer.
(e) Buyer and Seller shall execute and deliver the Registration
Rights Agreement, as defined in Section 9.5 below.
8.4 Records. In addition to the obligations set forth under
Sections 4.2 and 8.3 above, within sixty (60) days after Closing, Seller shall
deliver to Buyer all original well and land files in its possession or to
which it has access. Buyer shall be entitled to all original records
affecting the Interests assigned to Buyer pursuant to the terms of this
Agreement. Seller shall be entitled to keep a copy of such records for its
files. Buyer agrees
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to preserve and maintain such records for at least five (5) years after the
Closing Date and to provide Seller access to such records during normal
business hours during such period.
ARTICLE 9
POST-CLOSING MATTERS
9.1 Final Settlement Statement.
(a) As soon as practicable after the Closing, but in no event
later than ninety (90) days after Closing, Seller shall prepare and deliver to
Buyer, in accordance with this Agreement and generally accepted accounting
principles, a statement ("Final Settlement Statement") setting forth each
adjustment (other than adjustments for Title Defects) finally determined as of
Closing and showing the calculation of such adjustments. Within thirty (30)
days after receipt of the Final Settlement Statement, Buyer shall deliver to
Seller a written report containing any changes that Buyer proposes be made in
good faith to resolve any questions with respect to the amounts due pursuant
to such Final Settlement Statement no later than one hundred twenty (120) days
after the Closing. The Parties shall employ that degree of effort as would
prudent business persons engaged in ongoing business relationships to reach
agreement as to the amounts due pursuant to such Final Settlement Statement no
later than thirty (30) days after the submission to Seller of proposed changes
to the Final Settlement Statement.
(b) Should the Parties not reach agreement as to the amounts
due pursuant to such Final Settlement Statement, the disputed items shall be
submitted to KPMG, LLP for resolution. The decision of KPMG, LLP shall be
considered final as between the Parties. Cost for KPMG, LLP and resolution of
the dispute will be apportioned between Seller and Buyer in proportion to the
award by KPMG.
(c) The date upon which such agreement or resolution is reached
shall be called the "Settlement Date." On the Settlement Date, should one
party be obligated to the other by reason of the Final Settlement Statement,
the indebted party shall pay to the other party, in immediately available
funds, those monies determined to be due under the Final Settlement Statement.
Until paid, all past due amounts hereunder shall bear interest at the lesser
of prime plus two percent, as established by Bank of Oklahoma, N.A., in
Oklahoma City, Oklahoma (computed based on a 360 day year) or the maximum
lawful rate permitted by applicable law (the "Interest Rate").
9.2 Unpaid Third Party Funds. At such time as Buyer and Seller agree
on a Final Settlement Statement, Seller will transfer to Buyer all funds held
by Seller in suspense for any third party owners of royalty, overriding
royalty, working interests, mineral interests or other similar interests,
attributable to the Interests, and will deliver all records in Seller's
possession, including a schedule of such funds listing the owners thereof,
which may be used to determine proper disbursement. Buyer shall thereafter be
responsible for determining the proper payment of such amounts and shall
indemnify and hold harmless Seller from and against any and all cost, loss or
expense of whatever kind, including attorneys' fees, arising from or in
connection with the claim of any person, up to the amount listed on the
schedule provided by Seller with respect thereto, with respect to the funds
transferred to Buyer pursuant to this Section 9.2.
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9.3 Further Assurances. After Closing, Seller and Buyer shall
execute, acknowledge and deliver or cause to be executed, acknowledged and
delivered such instruments and take such other action as may be necessary or
advisable to carry out their obligations under this Agreement and under any
Exhibit, document, certificate or other instrument delivered pursuant hereto.
9.4 Survival. All representations and warranties set forth in this
Agreement in Sections 3.1 and 3.2 shall survive the Closing for a period of
three years, but no other representations and warranties shall survive the
Closing.
9.5 Buyer's Stock. Buyer shall agree to file a registration
statement registering all shares of Buyer common stock to be issued to Seller
hereunder within thirty (30) days of Closing under terms more specifically set
out in the Registration Rights Agreement attached here to and made a part
hereof as Exhibit "G" (the "Registration Rights Agreement").
9.6 Tax Allocation. The parties agree that the Purchase Price shall
be allocated as set forth on Exhibit B for Federal Income Tax purposes. Each
party shall use such allocations in filing Form 8594 (Asset Acquisition
Statement) with the IRS.
9.7 Access to Records. Seller shall provide Buyer and Buyer's agents
and accountants full and complete access to all of Seller's records that are
reasonably necessary or convenient for Buyer to cause an audit of Seller's
operation of the Interests to be conducted to the extent necessary to enable
Buyer to fully comply with its public disclosure obligations under applicable
securities laws and regulations, including, without limitation, Buyer's
disclosure obligations under Section 13(d) of the Securities Exchange Act of
1934 and Regulation S-X promulgated thereunder.
ARTICLE 10
TITLE MATTERS
10.1 Access to Title and Other Documents.
(a) After the date hereof, Seller will make available to Buyer
and to its representatives (such representatives to include employees,
consultants, independent contractors, attorneys and other advisors of Buyer)
for Buyer's copying and/or inspection (at Buyer's cost and expense), at
Seller's offices during normal business hours the following documents in
Seller's possession or under its control:
(i) All abstracts of title, title opinions, title curative
materials, ownership reports, division orders, bills
of sale, other documents evidencing transfers of
title, tax receipts, and licenses and registrations
pertaining to the Interests.
(ii) All of the lease records, lease files, leases,
conveyances and assignments of interest in the Leases;
unitization, unit, pooling and operating agreements;
division orders; contracts; transfer orders; orders of
the applicable regulatory authorities or
administrative agencies; mortgages, deeds of trust,
security agreements, and financing statements; and all
other contracts, agreements and documents affecting
the Interests.
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(iii) Instruments and documents concerning proper payment of
all general and special assessments, ad valorem and
property taxes, and production, severance and similar
taxes and assessments based on or measured by the
ownership of the Interests, the production of
hydrocarbons, or the receipt of proceeds therefrom for
2002 and years prior for which the applicable statute
of limitations has not expired.
(iv) All geological maps, geophysical surveys, ownership
maps, seismic surveys, logs, core studies, and surveys
relating to the Interests.
(v) All production records; transportation agreements;
contracts for the purchase of gas, oil, casinghead
gas, distillate, gas condensate or other hydrocarbons;
processing agreements; all correspondence relating to
the Interests; and data sheets relating to the
Interests and to bonuses, rentals and royalties
payable with respect thereto.
(vi) All agreements relating to the purchase, sale,
processing, and transportation of production from the
Xxxxx.
(vii) All bonds, leases, permits, easements, licenses,
orders, saltwater disposal agreements, agreements with
pumpers and other agreements in any way relating to
the Interests or the operation thereof.
Reliance on such information shall be at the sole risk of the Buyer, and
Seller make no guaranty or representation as to the accuracy or completeness
of such data, except as otherwise provided in this Agreement.
Seller shall authorize Buyer and its representatives to consult with
attorneys, abstract companies and other consultants or independent contractors
of Seller (whether utilized in the past or present) concerning title related
matters. Reliance on such information of such third parties shall be at the
sole risk of the Buyer, and Seller makes no guaranty or representation as to
the accuracy or completeness of such data.
10.2 Permitted Encumbrances. As used in this Agreement, the term
"Permitted Encumbrances" shall mean the following, provided that the same
shall not operate to reduce the net revenue interest or increase the gross
working interest of a Well beyond that shown on Exhibit "A":
(a) Lessors' royalties, non-participating royalties, overriding
royalties, division orders, reversionary interests, and similar burdens.
(b) Liens for taxes or assessments not yet due or delinquent or,
if delinquent, that are being contested in good faith in the normal course of
business.
(c) All rights to consent by, required notices to, filing 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 and neither Seller
nor Buyer has no reason to believe they cannot be obtained.
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(d) Such Title Defects as Buyer may have waived in writing.
(e) Rights reserved to or vested in any governmental authority.
(f) Rights of a common owner of any Interest in rights-of-way or
easements currently held by Seller and such common owner as tenants in common
or through common ownership.
(g) Easements, conditions, covenants, restrictions, servitudes,
permits, rights-of-way, surface leases and other rights in the Interests for
the purpose of surface operations, roads, alleys, highways, railways,
pipelines, transmission lines, transportation lines, distribution lines, power
lines, telephone lines, and removal of timber, grazing, logging operations,
canals, ditches, reservoirs and other like purposes, or for the joint or
common use of real estate, rights-of-way, facilities and equipment which do
not materially impair the rights held by Buyer or the use and enjoyment of the
Interests.
(h) Defects, irregularities and deficiencies in title to any
rights-of-way, easements, surface leases or other rights which in the
aggregate do not materially impair the use of such right-of-way, easements,
surface leases or other rights for the purpose of which such rights will be
held by Buyer.
(i) Zoning, planning and environmental laws and ordinances and
municipal regulations.
(j) Vendors, carriers, warehousemen, repairmen, mechanics,
workmen, materialmen, construction or other like liens arising by operation of
law in the ordinary course of business or incident to the construction or
improvement of any property in respect of obligations which are not yet due,
or which are being contested in good faith by appropriate proceedings by or on
behalf of Seller.
(k) Liens created under operating agreements in respect of
obligations that are not yet due or that are being contested in good faith by
appropriate proceedings by or on behalf of Seller.
(l) The terms and provisions of the Existing Documents.
10.3 Good and Defensible Title. For the purposes of this Article 10,
the term "Good and Defensible Title" shall mean, with respect to each of the
Xxxxx or Units described on Exhibit "A," that title of Seller which, subject
to and except for Permitted Encumbrances:
(a) Entitles Seller, throughout the lifetime of the relevant
Well or if the duration of the interest in a Unit, to receive from such Well
or Unit (free and clear of all royalties, overriding royalties,
non-participating royalties, net profits interests, or other burdens on or
measured by production of hydrocarbons) not less than the interest shown as
the net revenue interest on Exhibit "A" in all hydrocarbons produced, saved
and marketed from the Well or Unit and in the case of a Well, of all
hydrocarbons produced, saved, and marketed from any unit of which the Well is
a part and which is allocated to such Well; all without reduction, suspension,
or termination of the interest in such Well or Unit.
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(b) Obligates Seller to bear the percentage of the costs and
expenses relating to the maintenance and development of, and operations
relating to, the Well or Unit not greater than the gross working interest
shown on Exhibit "A" without increase throughout the lifetime of the relevant
Well or of the duration of the interest in a Unit.
(c) Is free and clear of liens, encumbrances and defects.
(d) All irregularities of title that would not reasonably be
expected to result in claims that would materially and adversely affect
Seller's title to the underlying Interest shall not be considered a Title
Defect, including but not limited to (i) defects in the chain of title
consisting of failure to recite marital status or the omission of succession
or heirship proceedings; (ii) defects or irregularities arising out of prior
oil and gas leases which, on their face, expired more than three (3) years
prior to the Effective Time, and which have not been released of record; (iii)
defects or irregularities arising out of acknowledgments, questions of
identity, trusts or trustees, executors and personal representatives, and the
manner in which they executed documents or were identified thereon; (iv)
defects or irregularities arising out of mortgages or deeds of trust which, by
their terms, matured more than six (6) years prior to the Effective Time but
which remain unreleased of record; (v) defects or irregularities arising out
of the lack of survey of specific land or lease description; (vi) defects or
irregularities arising out of the lack of recorded powers of attorneys from
corporations, banks, trusts or personal representatives to execute and deliver
documents on their behalf or on behalf of others; and (vii) defects or
irregularities cured by possession under applicable statutes of limitation and
statutes relating to prescription.
10.4 Notice of Title Defect. Except for Permitted Encumbrances, any
defect in title, lien, encumbrance, or defect that would cause Seller's title
to any Interest underlying a Well or Unit described on Exhibit "A" not to be
Good and Defensible Title shall be a title defect ("Title Defect"). Not later
than five (5) days before the Closing Date (the "Warranty Claim Date"), Buyer
must notify Seller in writing of any matter that Buyer considers to be a Title
Defect ("Notice of Title Defect"), which notice shall include (i) a specific
description of the matter Buyer asserts as a Title Defect, (ii) a specific
description of the Well or Unit or the portion of the Interest underlying the
Well or Unit that is affected by the Title Defect, (iii) Buyer's calculation
of the amount ("Title Defect Amount") that the value of the Well or Unit
should be reduced because of the Title Defect based on the Allocated Value
shown on Exhibit "B," and (iv) appropriate supporting documentation.
Notwithstanding anything to the contrary in this Agreement, the
Buyer shall be deemed to have waived any Title Defect which the Buyer has not
specifically asserted in its Notice of Title Defect presented before the
Warranty Claim Date.
10.5 Title Failure. Any item that Seller acknowledges is a Title
Defect but that Seller is unwilling to cure shall be deemed a title failure
("Title Failure") and, subject to Section 10.7 below, the Purchase Price shall
be reduced for such Title Defect pursuant to Section 2.3 unless, in Seller's
reasonable judgment, it is unlikely that material losses, costs, expenses and
liabilities will be experienced with respect to such Title Defect and Seller
agrees to indemnify Buyer with respect thereto.
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10.6 Defect Notice; Seller's Opportunity to Cure. To the extent that
Seller disputes that any item described in the Notice of Title Defect actually
constitutes a Title Defect or disputes the Title Defect Amount assigned by
Buyer to any such Title Defect ("Contested Defect"), Seller shall deliver to
Buyer a notice so stating ("Defect Notice"). Subject to the provisions of
10.7 below, the portion of the Purchase Price attributable to Title Defects
which Seller is willing to cure but which are uncured at Closing, or which are
not waived by Buyer at Closing (including Contested Defects), shall be
deposited into an escrow account pursuant to an escrow agreement agreed to by
the Parties and the Assignment will be revised to delete all of that portion
of the Interests affected by such Title Defects (including Contested Defects).
If Seller fails to cure a Title Defect within ninety (90) days after Closing,
it shall be deemed a Title Failure and the funds attributable to such Title
Defect shall be released from escrow to Buyer and the property on which such
Title Defect exists shall not be conveyed to Buyer.
10.7 Title Purchase Price Adjustments. Notwithstanding any provision
hereof to the contrary, there shall be no reduction in the Purchase Price for
Title Failures and no escrow for Title Defects or Contested Defects unless and
until the aggregate amount of such Title Defects (including Title Failures and
Contested Defects) exceeds $50,000 and only for the amount in excess of such
amount.
10.8 Termination Amount. Notwithstanding any provision hereof to the
contrary, in the event the aggregate adjustments for Title Defects pursuant to
this Article 10 and for Environmental Defects pursuant to Article 11 amount to
five percent (5%) or more of the Adjusted Purchase Price (the "Termination
Amount"), either Party shall have the option to terminate this Agreement,
without any liability, upon written notice to the other Party; provided,
however, that Seller shall refund the full amount of the Deposit to Buyer
under such circumstances. For purposes of computing Title Defect Purchase
Price adjustments, the Purchase Price at the Effective Time shall be the total
Purchase Price as reflected in Exhibit B.
ARTICLE 11
ENVIRONMENTAL
11.1 Inspection; Indemnity. Buyer and its authorized
representatives, at Buyer's sole risk and expense, shall have the right to
enter upon and inspect the real and personal properties comprising the
Interests, and to conduct such well, environmental and other tests and
assessments as Buyer shall deem appropriate, subject to the approval of the
operator in the case of non-operated properties. Buyer shall repair any
damages to the Interests resulting from its inspection and shall defend and
hold Seller harmless from and against any and all losses, damages, claims,
obligations, liabilities, expenses (including court costs and attorneys' fees)
or causes of action directly resulting from damages caused by Buyer's
inspection of the Interests.
11.2 Environmental Assessment. As part of its inspection of the
Interests, Buyer and its authorized representatives shall have the right to
conduct soil and water tests and borings, and generally to conduct such tests,
examinations, investigations and studies as may be necessary or appropriate in
Buyer's sole judgment to make an environmental assessment of the Interests.
Buyer shall keep any data or information acquired through such examination and
the results of all analyses of such data and information strictly confidential
and shall not disclose the same to any person or agency without the prior
written approval of Seller unless such disclosure is required by law. Buyer
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shall take all steps necessary to ensure that Buyer's authorized
representatives comply with the provisions of this Article 11. If Buyer has
discovered in its environmental assessment circumstances which require
remediation, control or other response under environmental laws, rules or
regulations then in effect (an "Environmental Defect"), Buyer shall notify
Seller of such circumstances as soon as practicable, but in no event less than
thirty (30) days prior to Closing.
11.3 Environmental Defects. If Buyer properly notifies Seller of an
Environmental Defect related to an Interest, Buyer may (i) waive the
Environmental Defect and Close, or (ii) request Seller to cure the
Environmental Defect. If Buyer asks Seller to cure an Environmental Defect,
and if the aggregate amount of all such Environmental Defects exceeds five
percent (5%) of the Adjusted Purchase Price, Seller shall have the option (i)
to cure the Environmental Defect, or (ii) to exclude the Interest affected by
the Environmental Defect from this Agreement. If Seller elects to cure the
Environmental Defect, but the cure has not been completed by Closing, the
Interest affected by the Environmental Defect shall not be conveyed to Buyer
at Closing, the Purchase Price shall be reduced by the amount allocated to
such Interest and such amount shall be deposited into the escrow account
referred to in Section 10.6. If the Environmental Defect is cured within
ninety (90) days after Closing, within five (5) days after the Environmental
Defect is cured, Seller will convey to Buyer the Interest affected by the
Environmental Defect and the applicable amount shall be released from escrow
to Seller. If Seller elects to exclude the Interest affected by the
Environmental Defect from this Agreement, the Purchase Price will be reduced
by the allocated value of the Interest affected per Exhibit B.
ARTICLE 12
TERMINATION, DEFAULT AND REMEDIES
12.1 Right of Termination. This Agreement and the transactions
contemplated herein may be terminated in writing at any time at or prior to
Closing:
(a) By the written agreement of both Parties whereupon neither
Party hereto shall be liable to the other for damages of any kind.
(b) By either of Buyer or Seller in the event that the
adjustments to the Purchase Price exceed the Termination Amount, as provided
for in Section 10.8 whereupon neither Party hereto shall be liable to the
other for damages of any kind, but Seller shall refund the full amount of the
Deposit to Buyer under such circumstances.
12.2 Termination by Buyer. This Agreement may be unilaterally
terminated by Buyer without any liability of any kind to Seller in the event
that Closing does not occur by July 1, 2003, regardless of the reason
therefor.
12.3 Return of Documentation. Upon termination of this Agreement,
within thirty (30) days Buyer shall return to Seller all title, geological
data, reports, contracts, and maps and other information furnished by Seller
to Buyer and all copies thereof.
12.4 Survival of Confidentiality. Upon termination of this Agreement
for any reason, the Parties agree that the confidentiality provisions of
Section 15.14 shall survive.
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ARTICLE 13
DISPUTE RESOLUTION
13.1 Dispute Resolution. If the Parties disagree as to any matter
under this Agreement, including without limitation any dispute as to the
termination, construction, validity, interpretation, enforceability or breach
of the Agreement, they will first attempt to resolve such disagreement through
a meeting, to be held within ten (10) days of such termination, of senior
executives of each Party.
13.2 Arbitration. If such meeting of senior executives of each Party
fails to resolve the matter within thirty (30) days of the date of such
meeting, then thereafter any such dispute, controversy or claim arising out of
or in relation to or in connection with the Agreement or the operations
carried out under this Agreement shall be exclusively and finally settled by
arbitration in accordance with this Section 13.2. Either Party may submit
such dispute, controversy or claim to arbitration by notice to the other
Party.
(a) The arbitration shall be heard and determined by three (3)
arbitrators. Each side shall appoint an arbitrator of its choice within
thirty (30) Days of the submission of a notice of arbitration. The
Party-appointed arbitrators shall in turn appoint a presiding arbitrator of
the tribunal within thirty (30) days following the appointment of both
Party-appointed arbitrators. If the Party-appointed arbitrators cannot reach
agreement on a presiding arbitrator of the tribunal and/or one Party refuses
to appoint its Party-appointed arbitrator within said thirty (30) day period,
the appointing authority for the implementation of such procedure shall be the
Denver District Court in the City and County of Denver, Colorado, who shall
appoint an independent arbitrator who does not have any financial interest in
the dispute, controversy or claim. If the Denver District Court refuses or
fails to act as the appointing authority within ninety (90) Days after being
requested to do so, then the appointing authority shall be the Presiding Judge
of any other District in the State of Colorado mutually agreed upon by the
Parties who shall appoint an independent arbitrator who does not have any
financial interest in the dispute, controversy or claim. All decisions and
awards by the arbitration tribunal shall be made by majority vote.
(b) Unless otherwise expressly agreed in writing by the Parties
to the arbitration proceedings:
(i) The arbitration proceedings shall be held in Denver,
Colorado;
(ii) The arbitrator(s) shall be and remain at all times
wholly independent and impartial;
(iii) Any procedural issues shall be determined by the
applicable laws of the State of Colorado, other than
those laws which would refer the matter to another
jurisdiction;
(iv) The costs of the arbitration proceedings (including
attorneys' fees and costs) shall be borne in the
manner determined by the arbitrator(s);
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(v) The decision of the sole arbitrator or a majority of
the arbitrators, as the case may be, shall be reduced
to writing; final and binding without the right of
appeal; the sole and exclusive remedy regarding any
claims, counterclaims, issues or accountings presented
to the arbitrator; made and promptly paid in U.S.
dollars free of any deduction or offset, as decided by
the arbitrators; and any costs or fees incident to
enforcing the award, shall to the maximum extent
permitted by law be charged against the Party
resisting such enforcement;
(vi) Consequential, punitive or other similar damages shall
not be allowed except those payable to third parties
for which liability is allocated among the Parties by
the arbitral award;
(vii) The award shall include interest from the date of any
breach or violation of this Agreement, as determined
by the arbitral award, and from the date of the award
until paid in full, at the Interest Rate;
(viii) Judgement upon the award may be entered in any court
having jurisdiction over the person or the assets of
the Party owing the judgement or application may be
made to such court for a judicial acceptance of the
award and an order of enforcement, as the case may be;
(ix) The arbitration shall proceed in the absence of a
Party who, after due notice, fails to answer or
appear. An Award shall not be made solely on the
default of a Party, but the arbitrator(s) shall
require the Party who is present to submit such
evidence as the arbitrator(s) may determine is
reasonably required to make an award; and
(xi) If an arbitrator should die, withdraw or otherwise
become incapable of serving, or refuse to serve, a
successor arbitrator shall be selected and appointed
in the same manner as the original arbitrator.
ARTICLE 14
ASSUMPTION OF OBLIGATIONS
14.1 Assumption of Obligations. At Closing, Buyer shall assume (a)
the obligation to (i) plug and abandon or remove and dispose of all Xxxxx
(whether then producing or temporarily or permanently abandoned), platforms,
structures, flow lines, pipelines, and the other equipment now or hereafter
located on the Interests; (ii) cap and bury all flow lines and (iii) dispose
of other pipelines now or hereafter located on the Interests, and all other
pollutants, wastes, contaminants, or hazardous, extremely hazardous, or toxic
materials, substances, chemicals or wastes now or hereafter located on the
Interests; (b) all obligations and liabilities arising from or in connection
with any gas production, pipeline, storage, processing or other imbalance
attributable to substances produced from the Interests on or after the
Effective Time; and (c) all other costs, obligations and liabilities that
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relate to the Interests and, in each case, arise from or relate to events
occurring on or after the Effective Time. All such plugging, replugging,
abandonment, removal, disposal, and restoration operations shall be in
compliance with applicable laws and regulations and contracts, and shall be
conducted in a good and workmanlike manner.
ARTICLE 15
MISCELLANEOUS
15.1 Fees and Taxes. 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. All required documentary,
filing and recording fees for the assignments, conveyance or other instruments
required to convey title to the Interests to Buyer shall be borne by Buyer.
In addition, the liability for any sales, use, transfer or similar tax
associated with the sale and/or transfer of the Interests shall be the
liability of, and for the account of, the Buyer and such liability shall not
be subject to proration as provided in Section 2.3.
15.2 Notices. All notices and communications required or permitted
under this Agreement shall be in writing and shall be deemed to have been duly
made when actually delivered, including delivery by courier, facsimile,
telecopy, or other electronic medium, or if mailed by registered or certified
mail, postage prepaid, addressed as follows:
SELLER:
JAED PRODUCTION COMPANY, INC.
000 Xxxx Xxxxxxx
Xxxxxxxx Xxxx, Xxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a Copy to:
Law Offices of Xxxxxx & Xxxxxx
000 Xxxxx X Xxxxxx
P. O. Xxx 000
Xxxxxxxx Xxxx, XX 00000-0000
Attn: Xxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
BUYER:
DELTA PETROLEUM CORPORATION
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx, Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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With a Copy To:
Xxxx Xxxxx, P.C.
000 00xx Xxxxxx, Xxxxx 0000, Xxxxx Xxxxx
Xxxxxx, Xxxxxxxx 00000
Att: Xxxxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Either Party may, by written notice so delivered to the other, change the
address to which delivery shall thereafter be made.
15.3 Amendments. This Agreement may not be amended except by an
instrument in writing signed by Buyer and Seller.
15.4 Preparation of Agreement. Both Seller and Buyer and their
respective counsel participated in the preparation of this Agreement. In the
event of any ambiguity in this Agreement, no presumption shall arise based on
the identity of the draftsman of this Agreement.
15.5 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.
15.6 Counterparts. This Agreement may be executed by Buyer and
Seller in counterparts, each of which shall be deemed an original instrument,
but both of which together shall constitute but one and the same instrument.
15.7 References. References made in this Agreement, including use of
a pronoun, shall be deemed to include, where applicable, masculine, feminine,
singular or plural, individuals or corporations. As used in this Agreement,
"person" shall mean any natural person, corporation, partnership, trust,
estate or other entity.
15.8 Governing Law. This Agreement and the transactions contemplated
hereby shall be construed in accordance with, and governed by, the laws of the
State of Colorado without giving effect to the conflicts of law rules thereof.
Any disputes concerning this Agreement or the subject matter hereof shall be
brought in a court of competent jurisdiction of the State of Colorado.
15.9 Entire Agreement. This Agreement (including the Exhibits
hereto) constitutes the entire understanding between the Parties with respect
to the subject matter hereof, superseding all negotiations, prior discussions
and prior agreements and understandings relating to such subject matter.
15.10 Assignment; Parties in Interest. Neither Party shall assign
this Agreement without the other Party's prior written consent; provided,
however, that this requirement shall not apply to a subsidiary or other
affiliate of the assigning Party so long as the assigning Party remains
responsible for its assignee's obligations hereunder. Subject to the
foregoing, this Agreement shall be binding upon, and shall inure to the
benefit of, the Parties and their respective successors and assigns.
15.11 Further Cooperation. After the Closing, Buyer and Seller shall
execute and deliver, or shall caused to be executed and delivered from time to
time, such further instruments of conveyance and transfer and shall take such
other action as any Party may reasonably request to convey and deliver the
Interests to Buyer, to accomplish the orderly transfer of the Interests to
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Buyer, or to otherwise effectuate the transactions contemplated by this
Agreement. If either Party hereto receives monies belonging to the other,
such amount shall immediately be paid over to the proper Party. If an invoice
or other evidence of an obligation is received by a Party, which is partially
an obligation of both Seller and Buyer, then the Parties shall consult with
each other and each shall promptly pay its portion of such obligation to the
obligee.
15.12 Press Release. Neither Party shall make any press release or
other announcement in connection with the execution of this Agreement or the
Closing without first consulting with the other Party. Following such
consultation and good faith attempt to make reasonable accommodations, either
Party may make any announcement or press release that it believes is either
required by applicable law or the rules of any stock exchange, or is advisable
in connection with such Party's obligation to provide public disclosure
regarding its activities. This provision shall not apply to any filing with
any governmental body or stock exchange required by law, rule or regulation.
15.13 Subrogation. Buyer shall be subrogated to all rights, actions
and warranties that Seller may have with respect to Seller's
predecessors-in-interest as to the Interests.
15.14 Confidentiality. Seller and Buyer agree that they will keep
confidential and will not, except with the other's prior written consent or as
required by applicable law, regulation or legal process, disclose (i) the
existence or terms of this Agreement or the discussions hereunder; or (ii) any
information which they obtain about the other during due diligence
investigations and the negotiation of the transaction, and will not use any of
such information for any reason or purpose other than to evaluate the
transaction; provided, however, that each of Seller and Buyer may reveal such
information to its respective accounting, legal and other representatives, and
to Buyer's potential sources of financing for the transaction, who need to
know such information for the purpose of evaluating the transaction and who
agree to keep such information confidential. In the event either Party is
requested pursuant to or required by applicable law, regulation or legal
process to disclose any information required to be kept confidential
hereunder, the Party requested or required to make such disclosure shall
promptly notify the other Party so that such other Party may seek a
protective order or other appropriate remedy. In addition, if either Seller
or Buyer determines not to proceed with the transaction, each will promptly
return to the other all written information in such Party and such Party's
representatives' possession, including without limitation all internal notes
and analyses prepared in connection with the transaction, provided information
was provided in connection with this transaction, or promptly destroy all such
information and confirm such destruction to the other in writing. Information
to be returned shall not include information concerning Buyer that Seller
possesses or shall possess in the future in its capacity as a shareholder of
Buyer. Notwithstanding anything in this paragraph to the contrary, neither
Seller nor Buyer will be required to keep confidential any information which
(a) is available to the public at the time of its disclosure to the other
party or becomes publicly available after such disclosure other than by a
breach of this letter, (b) becomes available to the party receiving the
information on a non-confidential basis from a source which is not under
any obligation to maintain its confidential basis or (c) is known by the party
receiving the information prior to its disclosure and such knowledge can be
demonstrated by written evidence.
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EXECUTED as of the date first above stated, but made effective as of the
Effective Time.
SELLER:
JAED PRODUCTION COMPANY, INC
By /s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
President
BUYER:
DELTA PETROLEUM CORPORATION
By /s/ Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx
President and Chief Executive Officer
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