PURCHASE AND SALE AGREEMENT
between
XXXXXXXX PRODUCTION RMT COMPANY,
as Seller,
and
XXXXX PETROLEUM COMPANY
as Buyer
Duchesne County, Utah
Dated April 23, 2003
Effective April 1, 2003
ARTICLE 1 PURCHASE AND SALE 1
1.1 Purchase and Sale 1
1.2 Assets 1
1.3 Effective Time 2
ARTICLE 2 PURCHASE PRICE 2
2.1 Purchase Price 2
2.2 Deposit 2
2.3 Adjustments to Purchase Price 2
2.4 Allocated Values 5
ARTICLE 3 DUE DILIGENCE INSPECTION 5
3.1 Access to Records 5
3.2 No Representation or Warranty 5
3.3 Access to the Assets and Indemnity 5
ARTICLE 4 TITLE MATTERS 5
4.1 Defensible Title 5
4.2 Permitted Encumbrances 5
4.3 Title Defect 6
4.4 Notice of Title Defects 7
4.5 Seller's Right to Cure 7
4.6 Remedies for Title Defects 7
4.7 Title Thresholds 7
4.8 Title Dispute Resolution 8
4.9 Depletion and Depreciation of Personal Property 8
4.10 Consents 8
4.11 Preferential Purchase Rights 9
4.12 Casualty Loss 9
ARTICLE 5 ENVIRONMENTAL MATTERS 9
5.1 Definitions 9
5.2 Spills and NORM 10
5.3 Environmental Assessment 10
5.4 Notice of Environmental Defects 11
5.5 Remedies for Environmental Defects 11
5.6 Environmental Thresholds 11
5.7 Environmental Dispute Resolution 12
5.8 "As Is, Where Is" Purchase 12
5.9 Disposal of Materials, Substances and Wastes 12
5.10 Buyer's Indemnity 13
ARTICLE 6 SELLER'S REPRESENTATIONS AND WARRANTIES 13
6.1 Existence 13
6.2 Power 13
6.3 Authorization 14
6.4 Execution and Delivery 14
6.5 Liabilities for Brokers' Fees 14
6.6 Liens 14
6.7 Taxes 14
6.8 Litigation 14
ARTICLE 7 BUYER'S REPRESENTATIONS AND WARRANTIES 14
7.1 Existence 14
7.2 Power and Authority 14
7.3 Authorization 15
7.4 Execution and Delivery 15
7.5 Liabilities for Brokers' Fees 15
7.6 Litigation 15
7.7 Independent Evaluation 15
7.8 Qualification 15
7.9 Funds 15
ARTICLE 8 COVENANTS AND AGREEMENTS 15
8.1 Covenants and Agreements 15
ARTICLE 9 CONDITIONS TO CLOSING 17
9.1 Seller's Conditions 17
9.2 Buyer's Conditions 17
ARTICLE 10 RIGHT OF TERMINATION AND ABANDONMENT 18
10.1 Termination 18
10.2 Liabilities Upon Termination 18
ARTICLE 11 CLOSING 19
11.1 Date of Closing 19
11.2 Closing Obligations 19
ARTICLE 12 POST-CLOSING OBLIGATIONS 20
12.1 Post-Closing Adjustments 20
12.2 Suspense Accounts 20
12.3 Dispute Resolution 20
12.4 Records 20
12.5 Seller's Employees 20
12.6 Further Assurances 20
12.7 Disclaimers of Representations and Warranties 20
ARTICLE 13 TAXES 21
13.1 Apportionment of Ad Valorem and Property Taxes 21
13.2 Transfer Taxes and Recording Fees 21
13.3 Other Taxes 22
13.4 Tax Reports and Returns 22
ARTICLE 14
ASSUMPTION AND RETENTION OF OBLIGATIONS; INDEMNIFICATION 22
14.1 Buyer's Assumption of Liabilities and Obligations 22
14.2 Seller's Retention of Liabilities and Obligations 22
14.3 Buyer's Plugging and Abandonment Obligations 22
14.4 Indemnification 23
14.5 Procedure 24
14.6 No Insurance; Subrogation 25
14.7 Reservation as to Non-Parties 25
ARTICLE 15 MISCELLANEOUS 25
15.1 Exhibits 25
15.2 Expenses 25
15.3 Notices 25
15.4 Amendments 26
15.5 Assignment 26
15.6 Confidentiality 26
15.7 Press Releases 26
15.8 Headings 26
15.9 Counterparts 26
15.10 References 26
15.11 Governing Law 27
15.12 Removal of Signs 27
15.13 Binding Effect 27
15.14 Survival 27
15.15 No Third-Party Beneficiaries 27
15.16 Limitation on Damages 27
15.17 Severability 27
15.18 Knowledge 27
EXHIBITS
Section
Exhibit Description Where
Defined
A-1 Leases and Lands 1.2.a
A-2 Xxxxx 1.2.b
A-3 Rights-of-Way and Surface Leases 1.2.d
A-4 Equipment and Facilities 1.2.e
B Material Agreements 1.2.d
C Well Imbalances 2.3.c
D Allocated Values 2.4
E Form of Assignment and Xxxx of Sale 11.2.a
F Form of Assumption Agreement 11.2.a
G Seller's Officer's Certificate 11.2.g
H Buyer's Officer's Certificate 11.2.h
I Non-Foreign Affidavit 11.2i
J Suspense Accounts 12.2
K Seller's Employee Severance Policy 12.5
L Retained Litigation 14.2
PURCHASE AND SALE AGREEMENT
This PURCHASE AND SALE AGREEMENT ("Agreement"), dated April
23, 2003, is by and between Xxxxxxxx Production RMT Company, a
Delaware corporation, whose address is 0000 Xxxxxxxx Xxxxxx,
Tower Three, Suite 1000, Xxxxxx, Xxxxxxxx 00000 ("Seller") and
Xxxxx Petroleum Company, a Delaware corporation, whose address is
0000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxxx, Xxxxxxxxxx 00000-
0640 ("Buyer").
RECITALS
A. Seller owns and desires to sell certain real and
personal property interests located in Duchesne County, Utah, as
more fully described in Section 1.2 below (the "Assets").
B. Buyer desires to purchase the Assets upon the terms and
conditions set forth in this Agreement.
AGREEMENT
In consideration of the mutual promises contained herein and
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller and Buyer
agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1 Purchase and Sale. Seller agrees to sell and convey to
Buyer, and Buyer agrees to purchase and receive from Seller, all
of Seller's right, title and interest in the Assets, pursuant to
the terms and conditions of this Agreement.
1.2 Assets. The "Assets" are all of Seller's right, title,
and interest in and to the following real and personal property
interests located in Duchesne County, Utah:
a. The oil and gas leases and exploration and development
agreements described on Exhibit A-1 (the "Leases"), insofar and
only insofar as the Leases cover the lands described on Exhibit X-
0 (the "Lands"); the oil, gas and all other hydrocarbons
("Hydrocarbons"), in, on or under or that may be produced from
the Lands.
b. The oil and gas xxxxx located on the Leases and Lands,
or lands pooled or unitized therewith, including without limitation
the oil and gas xxxxx described on Exhibit A-2 (the "Xxxxx"), all
injection and disposal xxxxx on the Leases and Lands, and all
personal property and equipment associated with the Xxxxx as of
the Closing Date.
c. The rights, to the extent transferable, in and to all
existing and effective unitization, pooling and communitization
agreements, declarations and orders, to the extent that they
relate to or affect any of the interests described in
Sections 1.2.a. and 1.2.b. or the post-Effective Time production
of Hydrocarbons from the Leases and Lands.
d. The rights, to the extent transferable, in and to
Hydrocarbon sales, purchase, gathering and processing contracts,
operating agreements, balancing agreements, joint venture
agreements, partnership agreements, farmout agreements and other
contracts, agreements and instruments relating to the interests
described in Sections 1.2.a., 1.2.b. and 1.2.c, including without
limitation the agreements described on Exhibit B (the "Material
Agreements").
e. All of the personal property, fixtures, improvements,
permits, licenses, approvals, servitudes, rights-of-way,
easements, surface leases (including without limitation the
rights-of-way easements and surface leases described on
Exhibit A-3) and other surface rights, tanks, boilers, buildings,
improvements, office equipment, injection facilities, saltwater
disposal facilities, the NJNR-Ute Tribe Joint Venture Pipeline
and Xxxxxxxx Canyon Field compression facilities and gathering
systems, other appurtenances and facilities (including without
limitation the equipment, facilities and Roosevelt Office and
Yard Lease described on Exhibit A-4) located on and used in
connection with or otherwise related to the exploration for or
production, gathering, treatment, processing, storing, sale or
disposal of Hydrocarbons or water produced from the Assets
described in Sections 1.2.a. through 1.2.d.
f. Seller's files, records, data and information relating
to the Assets described in Sections 1.2.a. through 1.2.e., provided,
however, the foregoing shall not include any files, records, data
or information which is attorney work product or subject to
attorney client privilege or any files, data or information which
by agreement Seller is required to keep confidential except and
to the extent a waiver in writing is obtained of any such
confidential requirements (the "Records").
1.3 Effective Time. The purchase and sale of the Assets shall
be effective as of April 1, 2003 at 7:00 a.m., local time where
the Assets are located (the "Effective Time").
ARTICLE 2
PURCHASE PRICE
2.1 Purchase Price. The purchase price for the Assets shall
be Forty-eight Million Six Hundred Thousand Dollars ($48,600,000.00)
(the "Purchase Price"). At Closing, Buyer shall pay Seller the
Purchase Price as adjusted pursuant to Sections 2.2 and 2.3 below
by wire transfer of immediately available funds to Bank One,
Chicago, Illinois, ABA # 000000000, Xxxxxxxx Production RMT
Company, Account 0000000, referencing "Xxxxxxxx Canyon Sale."
2.2 Deposit. Buyer will deliver by wire transfer of immediately
available funds, on or before three (3) business days following
execution of this Agreement by Seller and Buyer, ten percent
(10%) of the Purchase Price with Seller as a deposit (the
"Deposit"), to be held by Seller and, subject to the terms of
Article 10 of this Agreement, either (i) applied against the
Purchase Price (without interest) in the event the Closing is
consummated, (ii) returned to Buyer with interest at the rate of
the average of the daily commercial paper overnight repurchase
rate as published in The Wall Street Journal for the period from
the time the Deposit is paid to Seller until it is returned to
Buyer ("Interest") if Seller refuses to close after all
conditions specified in Section 9.1 have been satisfied (or
waived by Seller) and Buyer certifies to Seller in writing that
it is ready, willing and able to perform under Article 11 or
if the conditions specified in Section 9.2 have not been
satisfied (or waived by Buyer), or (iii) retained by Seller if
all conditions specified in Section 9.2 have been satisfied and
Seller certifies to Buyer in writing that Seller is ready,
willing and able to perform under Article 11.
2.3 Adjustments to Purchase Price. The Purchase Price shall be
adjusted according to this Section without duplication. For all
adjustments known as of Closing, the Purchase Price shall be
adjusted at Closing pursuant to a "Preliminary Settlement
Statement" approved by Seller and Buyer on or before Closing. A
draft of the Preliminary Settlement Statement will be prepared by
Seller and provided to Buyer two (2) business days prior to
Closing. The Preliminary Settlement Statement shall set forth
the Purchase Price as adjusted as provided in this Section using
the best information available at the Closing Date which amount
shall be paid at Closing and is referred to as the "Closing
Amount." The Closing Amount shall be paid at Closing by wire
transfer of immediately available funds in accordance with the
wiring instructions set forth in Section 2.1. After Closing,
final adjustments to the Purchase Price shall be made pursuant to
the Final Settlement Statement to be delivered pursuant to
Section 12.1. For the purposes of this Agreement, the term
"Property Expenses" shall mean all capital expenses, joint
interest xxxxxxxx, lease operating expenses, lease rental and
maintenance costs, royalties, overriding royalties, Taxes (as
defined and apportioned as of the Effective Time pursuant to
Article 13), drilling expenses, workover expenses, geological,
geophysical and any other exploration or development expenditures
chargeable under applicable operating agreements or other
agreements consistent with the standards established by the
Council of Petroleum Accountant Societies of North America that
are attributable to the maintenance and operation of the Assets
during the period in question. Seller and Buyer agree that the
Purchase Price reflects the gas imbalance volumes attributable to
the Xxxxx that are set forth on Exhibit C. If the actual
imbalance volumes as of the Effective Time are different than
those set forth on Exhibit C, the Purchase Price will be
adjusted in accordance with Sections 2.3.a.(vi) and 2.3.b.(v), as
applicable and will be subject to adjustment and confirmation in
connection with preparation of the Final Settlement Statement.
a. Upward Adjustments. The Purchase Price shall be adjusted
upward by the following:
(i) An amount equal to all Property Expenses, including
prepaid expenses, attributable to the Assets after the Effective Time
that were paid by Seller (all to be apportioned as of the
Effective Time except as otherwise provided), including without
limitation, prepaid utility charges, prepaid rentals and
royalties, including lease rentals, and prepaid drilling and
completion costs (to be apportioned as of the Effective Time
based on drilling days).
(ii) The proceeds of production attributable to the Assets
occurring before the Effective Time and received by Buyer, net of
royalties and taxes measured by production.
(iii) An amount equal to production from the Assets that
occurred before the Effective Time but, because such production
is in pipelines or in processing, had not been sold as of the
Effective Time times the price for which production from the
Assets was sold immediately prior to the Effective Time;
(iv) To the extent that there are any pipelines imbalances, if
the net of such imbalances is an overdelivery imbalance (that is, at the
Effective Time, Seller has delivered more gas to the
pipeline than the pipeline has redelivered for Seller), the
Purchase Price shall be adjusted upward by the product of the
price received by Seller times the net overdelivery imbalance in
MMbtus.
(v) An amount equal to the value actually received
by Buyer for Seller's share of any oil or condensate in tanks or
storage facilities produced from or credited to the Leases and Lands
prior to the Effective Time based upon the quantities in oil or
condensate tanks or storage facilities as measured by and
reflected in Seller's records; and (vi) To the extent that the gas
imbalance volumes attributable to the Xxxxx set forth on Exhibit C,
in the aggregate, reflect less than the actual volume of gas in MMbtus
which Seller is entitled to take in excess of its fractional interest
in the Xxxxx xxx result of underproduction by Seller from the Xxxxx
as of the EffectiveTime (such additional volume of underproduced
gas being the "AdditionalUnderproduced Gas"), the Purchase Price
shall be adjusted upward by an amount equal to the product of Two
Dollars ($2.00) times the Additional Underproduced Gas.
(vii) Any other amount provided in this Agreement or agreed
upon
by Seller and Buyer.
b. Downward Adjustments. The Purchase Price shall be adjusted
downward by the following:
(i) An amount equal to the sum of all Title Purchase Price
Adjustments as defined in Section 4.7;
(ii) An amount equal to Environmental Purchase Price
Adjustment,
as defined in Section 5.6;
(iii)The proceeds of production attributable to the Assets
occurring on or after the Effective Time and received by Seller,
net of royalties and taxes measured by production;
(iv) To the extent that there are any pipelines imbalances, if
the net of such imbalances is an underdelivery imbalance (that is, at the
Effective Time, Seller has delivered less gas to the
pipeline than the pipeline has redelivered for Seller), the
Purchase Price shall be adjusted downward by the product of the
price received by Seller times the net underdelivery balance in
MMbtus.
(v) To the extent that the gas imbalance volumes attributable
to the Xxxxx set forth on Exhibit C, in the aggregate, reflect less than the
actual volume of gas in MMbtus which Seller is obligated to deliver in excess
of its fractional interest in the xxxxx as a result of overproduction by Seller
from the Xxxxx as of the Effective Time (such additional volume of overproduced
gas being the "Additional Overproduced Gas"), the Purchase Price shall be
adjusted downward by an amount equal to the product of Two
Dollars ($2.00) times the Additional Overproduced Gas;
(vi) An amount equal to the Seller Property Tax, as defined in
Section 13.1;
(vii) An amount equal to the Suspense Accounts, as defined in
Section 12.2; and
(viii) Any other amount provided in this Agreement or agreed
upon by Seller and Buyer.
2.4 Allocated Values. Seller and Buyer agree to allocate the
Purchase Price among the Assets as set forth in Exhibit D.
ARTICLE 3
DUE DILIGENCE INSPECTION
3.1 Access to Records. Subject to the provisions of the
Confidentiality Agreement dated February 11, 2003 between Seller
and Buyer, Seller will disclose and make available to Buyer and
its representatives at Seller's or Seller's agent's office and
during Seller's normal business hours, all Records in Seller's
possession or control relating to the Assets for the purpose of
permitting Buyer to perform its due diligence review including,
but not limited to, all well, leasehold, unit and title files and
title opinions. Seller agrees to cooperate with Buyer in Buyer's
efforts to obtain, at Buyer's sole expense, such additional
information relating to the Assets as Buyer may reasonably
desire. Buyer may inspect the Records only to the extent it may
so do without violating any obligation, confidence or contractual
commitment of Seller to a third party. Seller shall use
reasonable efforts to obtain the necessary consents to allow
Buyer's examination of any confidential information that is
material to this transaction.
3.2 No Representation or Warranty. Seller makes no
representation or warranty as to the accuracy or completeness of
the Records maintained by Seller and made available to Buyer.
Buyer agrees that any conclusions drawn from such Records shall
be the result of its own independent review and judgment.
3.3 Access to the Assets and Indemnity. Prior to Closing,
Seller shall permit Buyer, and the officers, employees, agents
and advisors of Buyer, to have reasonable access to the Assets
pursuant to the terms of a Temporary Access Agreement dated March
17, 2003 between Seller and Buyer (the "Temporary Access
Agreement").
ARTICLE 4
TITLE MATTERS
4.1 Defensible Title. The term "Defensible Title" means such
title of Seller in and to the Assets that, subject to and except
for the Permitted Encumbrances: (i) entitles Seller to receive
not less than the net revenue interest described on Exhibit A-2
("NRI"); (ii) obligates Seller to bear costs and expenses
relating to the Assets in an amount not greater than the working
interest described on Exhibit A-2 ("WI"); and (iii) is free and
clear of material liens, taxes, encumbrances, mortgages, claims
and production payments and any defects that would create a
material impairment of use and enjoyment of or loss of interest
in the affected Asset.
4.2 Permitted Encumbrances. The term "Permitted Encumbrances"
shall mean:
a. Lessors' royalties, overriding royalties net profits
interests, production payments, reversionary interests and
similar burdens if the net cumulative effect of such burdens does
not operate to reduce the NRIs below those set forth on Exhibit A-
2;
b. Any required governmental or third-party consents to
assignment of the Assets and preferential purchase rights which
are handled exclusively under Sections 4.10, 4.11 and 9.2d below;
c. Liens for taxes or assessments not yet due or not yet
delinquent or, if delinquent, that are being contested in good
faith in the normal course of business, provided, however, that
Seller shall be responsible for the prompt payment of all taxes
attributable to the Assets for all pre-Effective Time periods.
This Section 4.2c does not change the apportionment of taxes
under Article 13 of this Agreement;
d. Rights of reassignment, to the extent any exist as of the date
of this Agreement, upon the surrender or expiration of any
lease;
e. Easements, rights-of-way, servitudes, permits, surface
leases and other rights with respect to surface operations, on,
over or in respect of any of the properties or any restriction on
access thereto and that do not materially interfere with the
operation of the affected property;
f. 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 Assets (i) if they
have not been filed pursuant to law and the time for filing them
has expired, (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. Provided, however, that it shall be Seller's
responsibility to promptly discharge and remove all such liens or
charges at Seller's sole expense;
g. Rights reserved to or vested in any municipality or
governmental, statutory, public or tribal authority to control or
regulate any of the Assets in any manner; and all applicable
laws, rules, regulations and orders of general applicability in
the area;
h. Liens for post-Effective Time operations arising under
operating agreements, unitization and pooling agreements and
production sales contracts securing amounts not yet accrued or
due or;
i. The terms of the Material Agreements and any and all other
agreements that are ordinary and customary in the oil, gas,
sulfur and other mineral exploration, development or extraction
business, or in the business of processing of gas and gas
condensate for the extraction of products therefrom; and
Mortgage, Deed of Trust, Security Agreement, Assignment of
Production and Financing Statement from Xxxxxxxx Production
RMT Company to Xxxxxx Commercial Paper, Inc., as
Administrative Agent, dated July 30, 2002, as supplemented
and amended, which will, as to the Assets, be released as a
condition to Closing under Section 9.2c.
4.3 Title Defect. The term "Title Defect" means any
encumbrance, encroachment, irregularity, defect in or objection
to real property title, excluding Permitted Encumbrances, that
alone or in combination with other defects:
a. Renders title to an Asset less than Defensible Title;
b. Reduces, impairs or prevents Buyer from receiving payment from
the purchasers of production from an Asset; and/or
c. Restricts or extinguishes Buyer's right to use an Asset as
owner, lessee, licensee or permittee, as applicable.
4.4 Notice of Title Defects. Buyer shall deliver to Seller a
written "Notice of Title Defects" on or before May 21, 2003,
5:00 p.m., Mountain Time. The Notice of Title Defects shall
(i) describe the Title Defect, (ii) describe the basis of the
Title Defect and (iii) describe Buyer's good faith estimate of
the reduction in the Asset's Allocated Value caused by the Title
Defect ("Title Defect Value") and all calculations and
documentation substantiating the existence of the Title Defect.
Buyer will be deemed to have conclusively waived any Title Defect
about which it fails to so notify Seller in writing prior to May
21, 2003 at 5:00 p.m. Mountain Time. Seller may contest the
Title Defect or the Title Defect Value by so notifying Buyer.
The agreement of Seller and Buyer as to the Title Defect Value
shall result in the "Actual Title Defect Value".
4.5 Seller's Right to Cure. Seller shall have the option, but
not the obligation, to attempt to cure any Title Defects. Seller
shall notify Buyer prior to Closing of its election to cure any
Title Defect, and shall thereafter provide to Buyer as soon as
practicable prior to Closing evidence that any such Title Defect
is cured.
4.6 Remedies for Title Defects. In the event that any Title
Defect is not cured on or before Closing, Seller shall, at its
sole election, elect one of the following by so notifying Buyer
not later than two (2) business days prior to Closing:
a. Subject to the specific limitations set forth in
Section 4.7, indemnify Buyer against all liability, loss, cost
and expense resulting from such Title Defect, but in an amount
not to exceed the Allocated Value of the Asset that is subject to
such Title Defect, in which event the parties shall proceed to
Closing and the Asset that is subject to such Title Defect shall
be conveyed by Seller to Buyer subject to such Title Defect, with
no payment or settlement at Closing as a result of such Title
Defect and no reduction or adjustment to the Purchase Price;
b. Subject to the specific limitations set forth in Section
4.7, credit Buyer with the amount of the Actual Title Defect
Value for an Asset (the "Title Defect Adjustment"), in which
event the parties shall proceed to Closing and the Asset that is
subject to such Title Defect shall be conveyed by Seller to Buyer
subject to such Title Defect and Buyer shall pay to Seller the
Purchase Price as so adjusted;
c. Retain the Asset subject to such Title Defect and reduce the
Purchase Price by an amount equal to the Allocated Value of such
Asset, in which event the parties shall proceed to Closing and
the Asset that is subject to such Title Defect shall be retained
by Seller and Buyer shall pay to Seller the Purchase Price as so
adjusted.
4.7 Title Thresholds. Seller shall have no obligation under
Section 4.6 and there shall be no indemnification by Seller of
Buyer under Section 4.6.a or reduction to the Purchase Price
under Sections 4.6.b or 4.6.c unless Seller's share of a proposed
indemnity amount or reduction to the Purchase Price as to any
single incident exceeds One Hundred Thousand Dollars ($100,000)
(the "Single Title Incident Threshold Amount"). For the purposes
of application of the foregoing threshold, "single incident"
shall be applicable as follows: (i) on a lease-by-lease basis for
all oil and gas leasehold interests, provided that Waterflood
Unit, Bureau of Indian Affairs Contract No. 14-20-H62-4919, shall
be treated as a single lease, (ii) on an exploration and
development agreement-by-exploration and development agreement
basis for Lands for which an oil and gas lease has not been
earned (as identified on Exhibit D), and (iii) on a field-wide
system basis for the NJNR-Ute Tribe Joint Venture Pipeline,
Xxxxxxxx Canyon Field compression and gas gathering. In
addition, if Seller's share of the proposed indemnity amount
under Section 4.6.a or reduction to the Purchase Price under
Sections 4.6.b or 4.6.c as to any single incident exceeds One
Hundred Thousand Dollars ($100,000), there shall be no
indemnification by Seller of Buyer under Sections 4.6.a, or
reduction to the Purchase Price under Sections 4.6.b and 4.6.c
until such time as the total of these excess amounts (over
$100,000) exceeds five percent (5%) of the Purchase Price (the
"Title Threshold Amount"). If the Title Threshold Amount is
exceeded, the Purchase Price reduction shall include the Single
Title Incident Threshold Amount for those title Defects that
exceed such threshold and are conveyed to Buyer under Section
4.6.b and shall include the Allocated Value of those Assets with
an Allocated Value in excess of $100,000 that are retained by
Seller under Section 4.6.c. The total of the Purchase Price
reductions under Sections 4.6.b and 4.6.c is the "Title Purchase
Price Adjustment."
4.8 Title Dispute Resolution. Seller and Buyer agree to resolve
disputes concerning the following matters pursuant to this
Section: (i) the existence and scope of a Title Defect, (ii) the
Defect Value of that portion of the Asset affected by a
Title Defect, (iii) , the adequacy of Seller's Title Defect
curative materials (the "Disputed Title Matters"). The parties
agree to attempt to initially resolve all Disputed Title Matters
through good faith negotiations. If the parties cannot resolve
such disputes within fourteen (14) days prior to Closing, the
Disputed Title Matters shall be finally determined by a mutually
agreeable accounting, petroleum engineering, or law firm or
consultant (the "Title Arbiter"), taking into account the factors
set forth in this Agreement. On or before ten (10) days prior to
Closing, Buyer and Seller shall present their respective
positions in writing to the Title Arbiter, together with such
evidence as each party deems appropriate. The Arbiter shall be
instructed to resolve the dispute through a final decision within
five (5) days after submission of the parties' respective
positions to the Title Arbiter. The costs incurred in employing
the Arbiter shall be borne equally by Seller and Buyer. The
Title Arbiter's final decision may be filed with a court of
competent jurisdiction and entered as a judgment which shall be
binding on the parties.
4.9 Depletion and Depreciation of Personal Property. Buyer
shall assume all risk of loss with respect to, and any change in
the condition of, the Assets from the Effective Time until
Closing for production of oil, gas and/or other hydrocarbons
through depletion (including the watering-out of any well,
collapsed casing or sand infiltration of any well) and the
depreciation of personal property due to ordinary wear and tear.
4.10 Consents. Seller shall use reasonable efforts to obtain all
required consents to assignment of leases and contracts. If
Buyer discovers properties for which consents to assign are
applicable during the course of Buyer's due diligence activities,
Buyer shall notify Seller immediately and Seller shall use
reasonable efforts to obtain such consents prior to Closing.
Except for consents and approvals which are customarily obtained
post-Closing (including without limitation federal, state, or
other non-tribal governmental approvals) and those consents which
would not invalidate the conveyance of the Assets, if a necessary
consent (with the exception of consents required from the Ute
Tribe of the Uintah and Ouray Reservation and the Ute
Distribution Corporation (together, the "Tribe") which are
handled as a condition to Closing under Section 9.2.d) to assign
any Asset has not been obtained as of the Closing, then (i) the
portion of the Assets for which such consent has not been
obtained shall be included with the Assets at the Closing, and
the Purchase Price for that Asset shall be included in the
Preliminary Settlement Statement, (ii) Seller shall employ
reasonable efforts to obtain such consent as promptly as possible
following Closing, and (iii) if such consent has not been
obtained as of the Final Settlement Date (unless Seller and Buyer
otherwise mutually agree in writing), the Allocated Value of the
Asset shall be a downward adjustment to the Purchase Price on the
Final Settlement Statement and Buyer shall reassign such Asset to
Seller, effective as of the Effective Time. Buyer shall
reasonably cooperate with Seller in obtaining any required
consent including providing assurances of reasonable financial
conditions, plans of development or any other information
reasonably requested by the party whose consent is required.
4.11 Preferential Purchase Rights. Seller shall send notice of
this Agreement to all persons holding preferential purchase
rights in any portion of the Assets (i) offering to sell to each
such person that portion of the Assets for which such a
preferential right is held for an amount equal to the Allocated
Values of such Assets and subject to all other applicable terms
and conditions of this Agreement. If, prior to Closing, any
person asserting a preferential purchase right notifies Seller
that it intends to consummate the purchase of that portion of the
Assets to which it holds a preferential purchase right pursuant
to the terms and conditions of such notice and this Agreement,
then such Assets shall be excluded from the Assets identified in
this Agreement and the Purchase Price shall be reduced by the
Allocated Values of such Assets; provided, however, that, at
Seller's option, if the holder of such preferential right fails
to purchase such Assets prior to the Closing Date, then Seller
shall promptly so notify Buyer, and Seller shall sell to Buyer,
and Buyer shall purchase from Seller, the Assets to which the
preferential purchase right was asserted for the Allocated Values
of such Assets. All Assets for which a preferential purchase
right has not been asserted prior to Closing shall also be sold
to Buyer at Closing pursuant to the provisions of this Agreement.
If one or more of the holders of any preferential purchase right
notifies Seller subsequent to Closing that it intends to assert
its preferential purchase right, Seller shall give notice thereof
to Buyer, whereupon Buyer shall perform all valid preferential
purchase right obligations of Seller to such holders and Buyer
shall be entitled to receive (and Seller hereby assigns to Buyer
all of Seller's rights to) all proceeds received from such
holders in connection with such preferential purchase rights.
Buyer assumes all risk, liability and obligations, and shall
defend, indemnify, and hold harmless Buyer from and against all
Losses (as defined in Section 14.4), which arise from or in
connection with any preferential purchase right obligations
transferred to Buyer at Closing pursuant to this Section.
4.12 Casualty Loss. Prior to Closing, if any of the Assets is
destroyed by fire or other casualty or any of the Assets is taken
or threatened to be taken in condemnation or under the right of
eminent domain ("Casualty Loss"), Seller shall promptly provide
notice of the Casualty Loss to Buyer. Buyer shall not be
obligated to purchase an Asset that is the subject of a Casualty
Loss if Buyer provides written notice to Seller prior to Closing
of Buyer's election not to purchase such Asset. If Buyer so
elects not to purchase such Asset, the Purchase Price shall be
adjusted as agreed to by Buyer and Seller. If Buyer elects to
purchase such Asset, the Purchase Price shall be reduced by the
estimated cost to repair such Asset (with equipment of similar
utility) as agreed to by Buyer and Seller (the reduction being
the "Net Casualty Loss"). The Net Casualty Loss shall not,
however, exceed the Allocated Value of such Asset. Seller, at
its sole option, may elect to cure such Casualty Loss. If Seller
elects to cure such Casualty Loss, Seller may replace any
personal property that is the subject of a Casualty Loss with
equipment of similar grade and utility, or replace any real
property with real property of similar nature and kind if such
property is acceptable to Buyer. If Seller elects to cure the
Casualty Loss to the satisfaction of Buyer, the Asset subject to
such Casualty Loss shall be purchased by Buyer and there shall be
no adjustment to the Purchase Price.
ARTICLE 5
ENVIRONMENTAL MATTERS
5.1 Definitions. For the purposes of the Agreement, the
following terms shall have the following meanings:
"Environmental Defect" means a condition in, on or under the
Assets (including, without limitation, air, land, soil, surface
and subsurface strata, surface water, ground water, or sediments)
that causes an Asset to be in material violation of an
Environmental Law or a condition that can reasonably be expected
to give rise to costs or liability under applicable Environmental
Laws. NORM (defined in Section 5.2) contaminated pipe, meters,
tubing and wellheads shall not be an Environmental Defect.
"Environmental Defect Value" means the cost to Remediate an
Environmental Defect. The Environmental Defect Value shall be
limited to the net present value before federal income taxes,
calculated using a ten percent discount rate (PV10), of the most
cost effective means to achieve the Remediation required by
applicable federal, state or local law or other governmental or
judicial directive and not for any other cost.
"Environmental Law" means any statute, rule, regulation,
code or order, issued by any federal, state, or local
governmental entity in effect on or before the Effective Time
(collectively, "Laws") relating to the protection of the
environment or the release or disposal of waste materials.
"Remediation" or "Remediate" means actions taken to correct
an Environmental Defect and "Remediation Costs" means the actual,
or good faith estimates of the costs to conduct such Remediation.
5.2 Spills and NORM. Buyer acknowledges that in the past there
may have been spills of wastes, crude oil, condensate, produced
water, or other materials (including, without limitation, any
toxic, hazardous or extremely hazardous substances) onto the
Lands. In addition, some production equipment may contain
asbestos and/or Naturally Occurring Radioactive Material
("NORM"). In this regard Buyer expressly understands that NORM
may affix or attach itself to the inside of xxxxx, materials and
equipment as scale or in other forms, that said xxxxx, materials
and equipment located on the Lands or included in the Assets
described herein may contain NORM and that NORM-containing
material may have been buried or otherwise disposed of on the
Lands. Buyer also expressly understands that special procedures
may be required for the Remediation, removal, transportation and
disposal of asbestos or NORM from the Assets and Lands where such
material may be found and that Buyer assumes all liability for or
in connection with the assessment, containment, removal,
Remediation, transportation and disposal of any such materials,
in accordance with all past, present or future applicable laws,
rules, regulations and other requirements of any governmental or
judicial entities having jurisdiction and also with the terms and
conditions of all applicable leases and other contracts.
5.3 Environmental Assessment. Prior to Closing, Buyer may
conduct an on-site inspection, environmental assessment and
compliance audit of the Assets (an "Environmental Assessment") at
Buyer's cost and expense. Such Environmental Assessment shall be
conducted in accordance with the Temporary Access Agreement.
Seller shall provide Buyer with access to the Assets and to all
information in Seller's possession or control pertaining to the
environmental condition of the Assets, including, but not limited
to, status or any environmental reports, permits, records and
assessments in Seller's possession or control, and shall make
available to Buyer all present personnel who would reasonably be
expected to have knowledge or information regarding the
environmental status or condition of the Assets. Seller makes no
representation or warranty as to the accuracy or completeness of
the records maintained by Seller and made available to Buyer.
Buyer shall provide Seller five (5) days prior written notice of
any environmental inspections and tests, including the scope of
same, and Buyer shall give Seller the opportunity to participate
in all such inspections and tests. Buyer shall promptly provide
Seller, at no cost to Seller, all reports of environmental
inspections and tests, provided that all such reports shall be
deemed to be confidential between the parties and subject to the
Confidentiality Agreement dated February 11, 2003 between Seller
and Buyer and the Temporary Access Agreement. Buyer agrees to
release, indemnify, defend, and hold harmless Seller against all
Losses (as defined in Section 14.4) arising from or related to
the activities of Buyer, its employees, agents, contractors and
other representatives in connection with Buyer's Environmental
Assessment regardless of the negligence or strict liability of
Seller.
5.4 Notice of Environmental Defects. Buyer shall deliver to
Seller a written "Notice of Environmental Defects" on or before
May 21, 2003, 5:00 p.m., Mountain Time. The Notice of
Environmental Defects shall (i) describe the Environmental
Defect, (ii) provide evidence of the Environmental Defect and the
documentation in Buyer's possession pertaining to such
Environmental Defect, and, (iii) describe Buyer's good faith
estimate of the Remediation Costs associated with the
Environmental Defect. Buyer will be deemed to have conclusively
waived any Environmental Defect for which it fails to provide
Seller a Notice of Environmental Defect prior to May 21, 2003 at
5:00 p.m., Mountain Time. Seller may contest the existence and
scope of the Environmental Defect or Environmental Defect Value
by so notifying Buyer. The agreement of Seller and Buyer as to
the Environmental Defect Value shall result in the "Actual
Environmental Defect Value".
5.5 Remedies for Environmental Defects. Upon the receipt by
Seller of notice from Buyer pursuant to Section 5.4 of any
Environmental Defect, Seller shall have the option, but not the
obligation, to attempt to Remediate any Environmental Defect. In
the event that any such Environmental Defect has not been
Remediated by Seller such that the applicable Asset(s) will not
be brought into compliance with the applicable Environmental Laws
on or before Closing, Seller shall, at its sole election, elect
one of the following by so notifying Buyer not later than two (2)
business days prior to Closing.
a. Subject to the specific limitations set forth in Section
5.6, indemnify Buyer against all liability, loss, cost and
expense resulting from such Environmental Defect in which event
the parties shall proceed to Closing and the Asset that is
subject to such Environmental Defect shall be conveyed by Seller
to Buyer subject to such Environmental Defect, with no payment by
Seller or other settlement at Closing as a result of such
Environmental Defect and no reduction or adjustment to the
Purchase Price;
b. Subject to the specific limitations set forth in Section
5.6, credit Buyer with the amount of the Actual Environmental
Defect Value (the "Environmental Defect Adjustment"), in which
event the parties shall proceed to Closing and the Asset that is
subject to such Environmental Defect shall be conveyed by Seller
to Buyer subject to such Environmental Defect and Buyer shall pay
to Seller the Purchase Price as so adjusted; or
c. Retain the Asset subject to such Environmental Defect and
reduce
the Purchase Price by an amount equal to the Allocated
Value of such Asset, in which event the parties shall proceed to
Closing and the Asset that is subject to such Environmental
Defect shall be retained by Seller and Buyer shall pay to Seller
the Purchase Price as so adjusted.
5.6 Environmental Thresholds. Seller shall have no obligation
under Section 5.5 and there shall be no indemnification by Seller
of Buyer under Section 5.5.a or reduction to the Purchase Price
under Sections 5.5.b or 5.5.c unless Seller's share of a proposed
indemnity amount or reduction to the Purchase Price as to any
single incident exceeds Twenty Thousand Dollars ($20,000) (the
"Single Environmental Incident Threshold Amount"). For the
purposes of application of the foregoing threshold, "single
incident" shall be applicable on a well by well or property by
property basis. In addition, if Seller's share of the proposed
indemnity amount under Section 5.5.a or reduction to the Purchase
Price under Sections 5.5.b or 5.5.c as to any single incident
exceeds Twenty Thousand Dollars ($20,000), there shall be no
indemnification by Seller of Buyer under Section 5.5.a or
reduction to the Purchase Price under Sections 5.5.b or 5.5.c
until such time as the total of these excess amounts (over
$20,000) exceeds five percent (5%) of the Purchase Price (the
"Environmental Threshold Amount"). If the Environmental
Threshold Amount is exceeded, the Purchase Price reduction shall
include the Single Environmental Incident Threshold Amount for
those Environmental Defects that exceed such threshold and are
conveyed to Buyer under Section 5.5.b and shall include the
Allocated Value of those Assets with an Allocated Value in excess
of Twenty Thousand Dollars ($20,000) that are retained by Seller
under Section 5.5.c. The total of the Purchase Price reductions
under Sections 5.5.b and 5.5.c is the "Environmental Purchase
Price Adjustment").
5.7 Environmental Dispute Resolution. The parties agree to
resolve disputes concerning the following matters pursuant to
this Section: (i) the existence and scope of an Environmental
Defect, (ii) Buyer's estimate of Remediation Costs of an
Environmental Defect and (iii) the effectiveness of Seller's
Remediation (the "Disputed Environmental Matters"). The parties
agree to attempt to initially resolve all Disputed Environmental
Matters through good faith negotiations. If the parties cannot
resolve such disputes within fourteen (14) days prior to Closing,
the Disputed Environmental Matters shall be finally determined by
a mutually agreeable environmental consulting firm (the
"Environmental Arbiter"), taking into account the factors set
forth in this Agreement. On or before ten (10) days prior to
Closing, Buyer and Seller shall present their respective
positions in writing to the Environmental Arbiter, together with
such evidence as each party deems appropriate. The Environmental
Arbiter, shall be instructed to resolve the dispute through a
final decision within five (5) days after submission of the
parties' respective positions to the Environmental Arbiter. The
costs incurred in employing the Environmental Arbiter shall be
borne equally by Seller and Buyer. The Environmental Arbiter's
final decision may be filed with a court of competent
jurisdiction and entered as a judgment which shall be binding
upon the parties.
5.8 "As Is, Where Is" Purchase. Buyer shall acquire the Assets
(including Assets for which a notice was given under Section 5.4
above) in an "AS IS, WHERE IS" condition and shall assume all
risks that the Assets may contain waste materials (whether toxic,
hazardous, extremely hazardous or otherwise) or other adverse
physical conditions, including, but not limited to, the presence
of unknown abandoned oil and gas xxxxx, water xxxxx, sumps, pits,
pipelines or other waste or spill sites which may not have been
revealed by Buyer's investigation. With the exception of matters
for which Seller indemnifies Buyer under Section 5.5.a, on and
after the Effective Time, all responsibility and liability
related to all such conditions, whether known or unknown, fixed
or contingent, will be transferred from Seller to Buyer.
5.9 Disposal of Materials, Substances and Wastes. Buyer shall
properly handle, remove, transport and dispose of any material,
substance or waste (whether toxic, hazardous, extremely hazardous
or otherwise) from the Assets or Lands (including, but not
limited to, produced water, drilling fluids and other associated
wastes), whether present before or after the Effective Time, in
accordance with applicable local, state and federal laws and
regulations. Buyer shall keep records of the types, amounts and
location of materials, substances and wastes which are
transported, handled, discharged, released or disposed onsite and
offsite. When and if any Lease is terminated, Buyer shall take
whatever additional testing, assessment, closure, reporting or
remedial action with respect to the Assets or Lands as is
necessary to meet any local, state, federal or tribal
requirements directed at protecting human health or the
environment in effect at that time.
5.10 Buyer's Indemnity.
a. With the exception of matters for which Seller indemnifies
Buyer under Section 5.5.a, Buyer shall indemnify, hold harmless,
release and defend Seller from and against all damages, losses,
claims, demands, causes of action, judgments and other costs
(including but not limited to any civil fines, penalties, costs
of assessment, clean-up, removal and Remediation of pollution or
contamination, and expenses for the modification, repair or
replacement of facilities on the Lands) brought by any and all
persons and any agency or other body of federal, state, local, or
tribal government, on account of any personal injury, illness or
death, any damage to, destruction or loss of property, and any
contamination or pollution of natural resources (including soil,
air, surface water or groundwater) to the extent any of the
foregoing directly or indirectly is caused by or otherwise
involves any environmental condition of the Assets or Lands,
whether created or existing before, on or after the Closing,
including, but not limited to, the presence, disposal or release
of any material (whether hazardous, extremely hazardous, toxic or
otherwise) of any kind in, on or under the Assets or the Lands.
b. With the exception of matters for which Seller indemnifies
Buyer under Section 5.5.a, Buyer's indemnification obligations
shall extend to and include, but not be limited to (i) the
negligence or other fault of Seller, Buyer and third parties,
whether such negligence is active or passive, gross, joint, sole
or concurrent, (ii) Seller's or Buyer's strict liability, and
(iii) Seller's or Buyer's liabilities or obligations under the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended (42 U.S.C. 9601 et seq.), the Resource
Conservation and Recovery Act of 1976 (42 U.S.C. 6901 et
seq.), the Clean Water Act (33 U.S.C. 466 et seq.), the Safe
Drinking Water Act (14 U.S.C. 1401-1450), the Hazardous
Materials Transportation Act (49 U.S.C. 1801 et seq.), the
Toxic Substances Control Act (15 U.S.C. 2601-2629), the Clean
Air Act (42 U.S.C. 7401 et seq.) as amended, the Clean Air Act
Amendments of 1990 and all state and local laws and any
replacement or successor legislation or regulation thereto. This
indemnification shall be in addition to any other indemnity
provisions contained in this Agreement, and it is expressly
understood and agreed that any terms of this Section shall
control over any conflicting or contradicting terms or provisions
contained in this Agreement.
ARTICLE 6
SELLER'S REPRESENTATIONS AND WARRANTIES
Seller makes the following representations and warranties as
of the date of this Agreement:
6.1 Existence. Seller is a corporation duly organized and
validly existing under the laws of the State of Delaware.
6.2 Power. Seller has all requisite power and authority to
carry on its business as presently conducted, to enter into this
Agreement and each of the documents contemplated to be executed
by Seller at Closing, and to perform its obligations under this
Agreement and under such documents. To Seller's knowledge,
(except for any consents which are the subject of Section 4.10 or
which are customarily obtained after Closing) the consummation of
the transaction contemplated by this Agreement and each of the
documents contemplated to be executed by Seller at Closing will
not violate, nor be in conflict with, (i) any provision of
Seller's organizational or governing documents, (ii) any
agreement or instrument to which Seller is a party or is bound,
or (iii) any judgment, decree, order, statute, rule or regulation
applicable to Seller.
6.3 Authorization. The execution, delivery and performance of
this Agreement and each of the documents contemplated to be
executed by Seller at Closing and the contemplated transaction
has been duly and validly authorized by all requisite corporate
and shareholder action on the part of Seller.
6.4 Execution and Delivery. This Agreement has been duly
executed and delivered on behalf of Seller, and at the Closing
all documents and instruments required hereunder to be executed
and delivered by Seller will be 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, subject to
(i) applicable bankruptcy, insolvency, reorganization, moratorium
and other similar laws of general application with respect to
creditors, (ii) general principles of equity and (iii) the power
of a court to deny enforcement of remedies generally based upon
public policy.
6.5 Liabilities for Brokers' Fees. Seller has incurred no
liability, contingent or otherwise, for brokers' or finders' fees
relating to the transaction contemplated by this Agreement for
which Buyer shall have any responsibility whatsoever.
6.6 Liens. To Seller's knowledge, except for the liens created
by or arising under joint operating agreements covering the
Assets or applicable state statutes, the Assets are free and
clear of all liens.
6.7 Taxes. To Seller's knowledge, all taxes and assessments
pertaining to the Assets based on or measured by the ownership of
property for all taxable periods prior to the taxable period in
which this Agreement is executed have been properly paid. All
income taxes and obligations relating thereto that could result
in a lien or other claim against any of the Assets have been
properly paid, unless contested in good-faith by appropriate
proceeding.
6.8 Litigation. To Seller's knowledge, there is no action,
suit, proceeding, claim or investigation by any person, entity,
administrative agency or governmental body with the exception of
the Tribe, pending or, to Seller's knowledge, threatened, against
Seller before any governmental authority that impedes or is
likely to impede Seller's ability to consummate the transaction
contemplated by this Agreement and to assume the abilities to be
assumed by Seller under this Agreement."
ARTICLE 7
BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer makes the following representations and warranties as
of the date of this Agreement:
7.1 Existence. Buyer is a corporation, duly organized, validly
existing and formed under the laws of the State of Delaware, and
Buyer by Closing will be duly qualified and in good standing in
the State of Utah.
7.2 Power and Authority. Buyer has all requisite power and
authority to carry on its business as presently conducted, to
enter into this Agreement and each of the documents contemplated
to be executed by Buyer at Closing, and to perform its
obligations under this Agreement and under such documents. The
consummation of the transaction contemplated by this Agreement
and each of the documents contemplated to be executed by Buyer at
Closing will not violate, nor be in conflict with, (i) any
provision of Buyer's organizational or governing documents,
(ii) any agreement or instrument to which Buyer is a party or is
bound, or (iii) any judgment, decree, order, statute, rule or
regulation applicable to Buyer.
7.3 Authorization. The execution, delivery and performance of
this Agreement and each of the documents contemplated to be
executed by Buyer at Closing and the contemplated transaction has
been duly and validly authorized by all requisite action on the
part of Buyer.
7.4 Execution and Delivery. This Agreement has been duly
executed and delivered on behalf of Buyer, and at the Closing all
documents and instruments required hereunder to be executed and
delivered by Buyer will be duly executed and delivered. This
Agreement does, and such documents and instruments shall,
constitute legal, valid and binding obligations of Buyer
enforceable in accordance with their terms, subject to
(i) applicable bankruptcy, insolvency, reorganization, moratorium
and other similar laws of general application with respect to
creditors, (ii) general principles of equity and (iii) the power
of a court to deny enforcement of remedies generally based upon
public policy.
7.5 Liabilities for Brokers' Fees. Buyer has incurred no
liability, contingent or otherwise, for brokers' or finders' fees
relating to the transaction contemplated by this Agreement for
which Seller shall have any responsibility whatsoever.
7.6 Litigation. There is no action, suit, proceeding, claim or
investigation by any person, entity, administrative agency or
governmental body pending or, to Buyer's knowledge, threatened in
writing, against Buyer before any governmental authority that
impedes or is likely to impede Buyer's ability to consummate the
transactions contemplated by this Agreement and to assume the
liabilities to be assumed by Buyer under this Agreement.
7.7 Independent Evaluation. Buyer is an experienced and
knowledgeable investor in the oil and gas business. Buyer has
been advised by and has relied solely upon its own expertise in
legal, tax, reservoir engineering and other professional counsel
concerning this transaction, the Assets and the value thereof.
7.8 Qualification. Buyer is now or at closing will be and
thereafter will continue to be qualified to own and operate any
federal, state or Indian oil and gas lease that constitutes part
of the Assets, including meeting all bonding requirements.
Completing the transactions set out in this Agreement will not
cause Buyer to be disqualified or to exceed any acreage
limitation imposed by law, statute or regulation.
7.9 Funds. Buyer has arranged to have available by the Closing
Date sufficient funds to enable Buyer to pay in full the Purchase
Price and otherwise perform its obligations under this Agreement.
ARTICLE 8
COVENANTS AND AGREEMENTS
8.1 Covenants and Agreements. As to the period of time from the
execution hereof until Closing, Seller and Buyer as follows:
a. Operation Prior to Closing. Except as otherwise consented to
in
writing by Buyer or provided in this Agreement, from the date of execution
hereof to the Closing, Seller shall use
Seller's commercially reasonable efforts to ensure that the
Assets are maintained and operated in a good and workmanlike
manner. Subject to the provisions of Section 2.3, Seller shall
pay or cause to be paid its proportionate share of all costs and
expenses incurred in connection with such operations. To the
extent Seller receives written AFEs or actual notice of such,
Seller shall notify Buyer of ongoing activities and major capital
expenditures in excess of Twenty-five Thousand Dollars
($25,000.00) per activity net to Seller's interest conducted on
the Assets and shall consult with Buyer regarding all such
matters and operations.
b. Restriction on Operations. Subject to Section 8.1.a.,
unless Seller obtains the prior written consent of Buyer to act
otherwise, Seller will use good-faith efforts within the
constraints of the applicable operating agreements and other
applicable agreements not to (i) abandon any part of the Assets
(except in the ordinary course of business or the abandonment of
leases upon the expiration of their respective primary terms or
if not capable of production in paying quantities), (ii) except
for capital projects which are deemed to be approved, approve any
operations on the Assets anticipated in any instance to cost the
owner of the Assets more than Twenty-five Thousand Dollars
($25,000.00) per activity net to Seller's interest (excepting
emergency operations, operations required under presently
existing contractual obligations, ongoing commitments under
existing AFEs and operations undertaken to avoid a monetary
penalty or forfeiture provision of any applicable agreement or
order), (iii) convey or dispose of any material part of the
Assets (other than replacement of equipment or sale of oil, gas,
and other liquid products produced from the Assets in the regular
course of business) or enter into any farmout, farmin or other
similar contract affecting the Assets (iv) let lapse any
insurance now in force with respect to the Assets, or
(v) materially modify or terminate any contract material to the
operation of the Assets.
c. Marketing. Unless Seller obtains the prior written consent of
Buyer to act otherwise, Seller will not alter any existing
marketing contracts related to the Assets currently in existence,
or enter into any new marketing contracts or agreements related
to the Assets providing for the sale of Hydrocarbons for a term
in excess of one (1) month.
d. Legal Status. Seller and Buyer shall use all reasonable
efforts to maintain their respective legal statuses from the date
hereof until the Final Settlement Date and to assure that as of
the Closing Date they will not be under any material corporate,
legal or contractual restriction that would prohibit or delay the
timely consummation of the transaction contemplated hereby.
e. Notices of Claims. Seller shall promptly notify Buyer and
Buyer shall promptly notify Seller, if, between the date hereof
and the Closing Date, Seller or Buyer, as the case may be,
receives notice of any claim, suit, action or other proceeding of
the type referred to in Sections 6.8 and 7.6.
f. Compliance with Laws. During the period from the date of this
Agreement to the Closing Date, Seller shall attempt in good
faith to comply in all material respects with all applicable
statutes, ordinances, rules, regulations and orders relating to
the ownership and operation of the Assets.
g. Government Reviews and Filings. Before and after the
Closing, Buyer and Seller shall cooperate to provide requested
information, make required filings with, prepare applications to
and conduct negotiations with each governmental agency as
required to consummate the transaction contemplated hereby. Each
party shall make any governmental filings occasioned by its
ownership or structure. Buyer shall make all filings after the
Closing at its expense with governmental agencies necessary to
transfer title to the Assets or to comply with laws and shall
indemnify and hold harmless Seller from and against all claims,
costs, expenses, liabilities and actions arising out of Buyer's
holding of such title after the Closing and prior to the securing
of any necessary governmental approvals of the transfer.
h. Confidentiality. Confidentiality is governed by the terms of
the Confidentiality Agreement dated February 11, 2003 between
Seller and Buyer and Section 15.6 of this Agreement. The terms
of the Confidentiality Agreement dated February 11, 2003 between
Seller and Buyer shall survive termination of this Agreement for
the term set forth in the Confidentiality Agreement.
ARTICLE 9
CONDITIONS TO CLOSING
9.1 Seller's Conditions. The obligations of Seller at the
Closing are subject, at the option of Seller, to the satisfaction
at or prior to Closing of the following conditions precedent:
a. Representations, Warranties and Covenants. All
representations and warranties of Buyer contained in Article 7 of
this Agreement shall be true and correct in all material respects
on and as of the Closing, and Buyer shall have performed and
satisfied all covenants and agreements required by this Agreement
to be performed and satisfied by Buyer at or prior to the Closing
in all material respects;
b. Closing Documents. Buyer shall have executed and delivered
the documents which are contemplated to be executed and delivered by
it pursuant to Article 11 of this Agreement prior to or on the Closing Date;
c. No Action. No order shall have been entered by any court or
governmental agency having jurisdiction over the parties or the subject
matter of this Agreement that restrains or prohibits the
purchase and sale contemplated by this Agreement and which
remains in effect at the time of Closing or seeks to recover
damages from Seller resulting therefrom.
9.2 Buyer's Conditions. The obligations of Buyer at the Closing
are subject, at the option of Buyer, to the satisfaction on or
prior to the Closing of the following conditions precedent:
a. Representations, Warranties and Covenants. The
representations and warranties of Seller contained in Article 6
of this Agreement shall be true and correct in all material
respects on and as of the Closing Date, and Seller shall have
performed and satisfied all covenants and agreements required by
this Agreement to be performed and satisfied by Buyer at or prior
to the Closing in all material respects;
b. Closing Documents. Seller shall have executed and delivered
the documents which are contemplated to be executed and delivered by
it pursuant to Article 11 of this Agreement prior to or on the Closing
Date;
c. Release of Mortgage. Xxxxxx Commercial Paper, Inc., as
Administrative Agent, shall have executed, as to the Assets, a
recordable release of Mortgage, Deed of Trust, Security
Agreement, Assignment of Production and Financing Statement from
Xxxxxxxx Production RMT Company to Xxxxxx Commercial Paper, Inc.,
as Administrative Agent, dated July 30, 2002, as supplemented and
amended.
d. Tribal Consents. The Tribe shall have given all consents
necessary to transfer the Assets to Buyer.
e. Assignment of Transportation Contracts. Seller shall
deliver to Buyer assignments by Xxxxxxxx Energy marketing &
Trading Company of (i) Gas Transportation Agreement dated April
1, 1996 between Xxxxxxx Resources Corporation, as shipper, and
Questar Pipeline Company, as transporter, and, (ii) Gas
Transportation Agreement dated February 1, 1997 between Xxxxxxx
Resources Corporation, as shipper, and Questar Pipeline Company
as transporter.
f. No Action. No order shall have been entered by any court or
governmental agency having jurisdiction over the parties or the subject
matter of this Agreement that restrains or prohibits the
purchase and sale contemplated by this Agreement and which
remains in effect at the time of Closing or seeks to recover
damages from Buyer resulting therefrom.
ARTICLE 10
RIGHT OF TERMINATION AND ABANDONMENT
10.1 Termination. This Agreement may be terminated in accordance
with the following provisions:
a. by Seller if the conditions set forth in Section 9.1 are not
satisfied, through no fault of Seller, or waived by Seller in
writing, as of the Closing Date; or
b. by Buyer if the conditions set forth in Section 9.2 are not
satisfied, through no fault of Buyer, or waived by Buyer in
writing, as of the Closing Date.
c. by Seller or Buyer if the aggregate of Title Defect
Adjustments and Environmental Defect Adjustments exceeds ten 10%
of the Purchase Price.
d. by Buyer if Closing does not occur on or before August 1,
2003.
e. by Seller or Buyer if Closing does not occur on or before
October
23, 2003.
10.2 Liabilities Upon Termination.
a. Buyer's Default. If the transactions contemplated by this
Agreement are not consummated on or before the date specified in
Section 11.1 by reason of Buyer's wrongful failure to tender
performance at Closing, and if Seller is not in material default
under the terms of this Agreement and is ready, willing and able
to Close, and Seller terminates this Agreement, Seller shall be
entitled, at Seller's election, to (i) specific performance or
(ii) retention of the Deposit, and any accrued interest, as
liquidated damages. If Seller does not elect specific
performance of this Agreement, Seller and Buyer agree that
Seller's damages in the event Buyer fails to close are difficult
to measure and both Seller and Buyer agree that the amount of the
Deposit bears a reasonable relationship to and is a reasonable
estimation of such damages.
b. Seller's Default. If the transactions contemplated by this
Agreement are not consummated on or before the date specified in
Section 11.1 by reason of Seller's wrongful failure to tender
performance at Closing and if Buyer is not in material default
under this Agreement and is ready, willing and able to Close, and
Buyer terminates this Agreement, Buyer shall be entitled to a
prompt refund of the Deposit with Interest as Buyer's sole and
exclusive remedy.
c. Other Termination. If Seller and Buyer agree to terminate
this Agreement, or if either party terminates the Agreement
under Sections 10.1.c pr 10.1e, or if Buyer terminates under
Section 10.1.d, then each party shall release the other party
from any and all liability for termination of this Agreement, and
Seller shall promptly refund the Deposit with Interest.
ARTICLE 11
CLOSING
11.1 Date of Closing. Subject to Seller's and Buyer's
rights to terminate in Article 10, the closing of the
transaction contemplated by this Agreement ("Closing" or "Closing
Date") shall be held on or before the later of June 12, 2003 or
five (5) business days after Buyer's condition to Closing set
forth in Section 9.2.d is satisfied or waived by Buyer, at
Seller's office in Denver, Colorado, at 8:30 a.m. or at such
other time and place as the parties may agree in writing.
11.2 Closing Obligations. At Closing, the following events shall
occur, each being a condition precedent to the others and each
being deemed to have occurred simultaneously with the others:
a. Assignment of Assets. Seller and Buyer shall execute,
acknowledge and deliver to Buyer an Assignment and Xxxx of Sale
of the Assets effective as of the Effective Time (in sufficient
counterparts to facilitate filing and recording)
(i) substantially in the form of Exhibit E with a special
warranty of title by, through and under Seller but not otherwise;
with no warranties, express or implied, as to the personal
property, fixtures or condition of the Assets which are conveyed
"as is, where is;" (ii) such other assignments, bills of sale, or
deeds necessary to transfer the Assets to Buyer, including
without limitation any conveyances on official forms and related
documentation necessary to transfer the Assets to Buyer in
accordance with requirements of state and federal governmental
regulations; and (iii) an Assignment and Assumption Agreement in
the form of Exhibit F under which Seller assigns various
contractual interests included in the Assets and under which
Buyer assumes the obligations thereunder in accordance with the
terms of this Agreement.
b. Assignment of Transportation Contracts. Seller shall
deliver to Buyer assignments of Xxxxxxxx Energy Marketing &
Trading Company of (i) Gas Transportation Agreement dated April
1, 1996 between Xxxxxxx Resources Corporation, as shipper, and
Questar Pipeline Company, as transporter, and, (ii) Gas
Transportation Agreement dated February 1, 1997 between Xxxxxxx
Resources Corporation, as shipper, and Questar Pipeline Company,
as transporter.
c. Release of Xxxxxx Mortgage. Seller shall deliver to Buyer a
recordable release, as to the Assets, by Xxxxxx Commercial Paper, Inc., as
Administrative Agent, of Mortgage, Deed of Trust, Security Agreement,
Assignment of Production and Financing Statement from Xxxxxxxx
Production RMT Company to Xxxxxx Commercial Paper, Inc., as
Administrative
Agent, dated July 30, 2002, as supplemented and amended.
d. Preliminary Settlement Statement. Seller shall deliver to
Buyer and Seller and Buyer shall execute and deliver the
Preliminary Settlement Statement.
e. Purchase Price. Buyer shall deliver to Seller the Closing
Amount by wire transfer of immediately available funds.
f. Letters in Lieu. Seller and Buyer shall execute and deliver
all necessary letters in lieu of transfer orders directing all
purchasers of production to pay Buyer the proceeds attributable
to production from the Assets from and after the Effective Time.
g. Seller's Officer's Certificate. Seller shall execute and
deliver to Buyer an officer's certificate in form and substance
similar to Exhibit G, stating that all conditions precedent to
Closing have been satisfied.
h. Buyer's Officer's Certificate. Buyer shall execute and
deliver to Seller an officer's certificate in form and substance
similar to Exhibit H, stating that all conditions precedent to
Closing have been satisfied.
i. Non-Foreign Affidavit. In compliance with Section 1445 of the
United States Internal Revenue Code, Seller shall execute and
deliver to Buyer a Non-Foreign Affidavit in the form of Exhibit
I.
ARTICLE 12
POST-CLOSING OBLIGATIONS
12.1 Post-Closing Adjustments. As soon as practicable after the
Closing, but on or before one hundred twenty (120) days after
Closing, Seller, with the assistance of Buyer's staff and with
access to such records as necessary, shall prepare and deliver to
Buyer a final settlement statement (the "Final Settlement
Statement") setting forth each adjustment or payment that was not
finally determined as of the Closing and showing the calculation
of such adjustment and the resulting final purchase price (the
"Final Purchase Price"). As soon as practicable after receipt of
Seller's proposed Final Settlement Statement, but on or before
fifteen (15) days after receipt of Seller's proposed Final
Settlement Statement, Buyer shall deliver to Seller a written
report containing any changes that Buyer proposes to make to the
Final Settlement Statement. Buyer's failure to deliver to Seller
a written report detailing changes to the proposed Final
Settlement Statement by that date shall be deemed an acceptance
by Buyer of the Final Settlement Statement as submitted by
Seller. The parties shall endeavor to agree with respect to the
changes proposed by Buyer, if any, no later than fifteen (15)
days after receipt by Seller of Buyer's comments to the proposed
Final Settlement Statement. The date upon which such agreement
is reached or upon which the Final Purchase Price is established
for the transaction shall be called the "Final Settlement Date."
If the Final Purchase Price is more than the Closing Amount,
Buyer shall pay Seller the amount of such difference. If the
Final Purchase Price is less than the Closing Amount, Seller
shall pay to Buyer the amount of such difference. Any payment by
Buyer or Seller shall be by wire transfer in immediately
available funds. Any such payment shall be within five (5) days
of the Final Settlement Date.
12.2 Suspense Accounts. Seller currently maintains suspense
accounts pertaining to oil and gas heretofore produced comprising
monies payable to royalty owners, mineral owners and other
persons with an interest in production that Seller has been
unable to pay because of title defects (the "Suspense Accounts").
A preliminary listing of the Suspense Accounts is set forth in
Exhibit J. At Closing, a downward adjustment to the Purchase
Price will be made to convey the Suspense Accounts to Buyer and
the Suspense Accounts will be included in the Preliminary
Settlement Statement, with an adjustment made in the Final
Settlement Statement, if necessary. Buyer will assume full and
complete responsibility and liability for proper payment of the
funds comprising the Suspense Accounts as set forth on the "Final
Suspense Account Statement," which shall be provided by Seller to
Buyer with the Final Settlement Statement required in Section
12.1 (including any liability under any unclaimed property law or
escheat statute). Buyer agrees to indemnify, defend and hold
Seller, its parent, subsidiary and affiliated entities, together
with their respective officers, directors, employees, agents and
their respective successors and assigns, harmless from and
against any and all liability, claims, demands, penalties and
expenses (including attorneys' fees) arising out of or pertaining
to the proper payment and administration of the Suspense
Accounts, limited, however to the total amount of the Suspense
Accounts.
12.3 Dispute Resolution. If the parties are unable to resolve
disputes concerning the Final Settlement Statement or Final
Purchase Price on or before thirty (30) days after the Final
Settlement Statement is received by Buyer, such disputes shall be
resolved in accordance with Section 14.5.d.
12.4 Records. Seller shall make the Records available for pick
up by Buyer at a mutually agreeable time. Seller may retain
copies of the Records. Buyer shall make the Records available to
Seller for review and copying during normal business hours.
Buyer agrees not to destroy or otherwise dispose of the Records
for a period of six years after the Closing without giving Seller
reasonable notice and an opportunity to copy the Records.
12.5 Seller's Employees. For all of Seller's employees hired by
Buyer in connection with Buyer's acquisition, ownership and
operation of the Assets, if Buyer terminates any such employee(s)
within two (2) years of Closing under circumstances that would
have entitled such employee(s) to a severance benefit under
Seller's employee severance policy in effect for such employee(s)
on the Effective Date, a copy of which is attached as Exhibit K
to this Agreement ("Seller's Employee Severance Policy"), Buyer
shall pay such employee(s) severance based on such Seller's
employee severance policy based upon years of employment by
Seller (and its affiliates) and Buyer. Nothing in this Section
12.5 is intended to nor does bind Buyer to offer employment to
any of Seller's employees which shall be a decision solely within
Buyer's discretion. With the exception of Buyer's assumption of
Seller's obligations under Seller's Employee Severance Policy in
the event Buyer hires Seller's employees, Buyer does not hereby
assume any liability of Seller as to Seller's employees.
12.6 Further Assurances. From time to time after Closing, Seller
and Buyer shall each execute, acknowledge and deliver to the
other such further instruments and take such other action as may
be reasonably requested in order more effectively to assure to
the other the full beneficial use and enjoyment of the Assets in
accordance with the provisions of this Agreement and otherwise to
accomplish the purposes of the transaction contemplated by this
Agreement.
12.7 Disclaimers of Representations and Warranties. The express
representations and warranties of Seller contained in this
Agreement are exclusive and are in lieu of all other
representations and warranties, express, implied or statutory.
BUYER ACKNOWLEDGES THAT SELLER HAS NOT MADE, AND SELLER HEREBY
EXPRESSLY DISCLAIMS AND NEGATES, AND BUYER HEREBY EXPRESSLY
WAIVES, ANY REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT
COMMON LAW, BY STATUTE OR OTHERWISE RELATING TO (A) PRODUCTION
RATES, RECOMPLETION OPPORTUNITIES, DECLINE RATES, GAS BALANCING
INFORMATION OR THE QUALITY, QUANTITY OR VOLUME OF THE RESERVES OF
HYDROCARBONS, IF ANY, ATTRIBUTABLE TO THE ASSETS, (B) THE
ACCURACY, COMPLETENESS OR MATERIALITY OF ANY INFORMATION, DATA OR
OTHER MATERIALS (WRITTEN OR ORAL) NOW, HERETOFORE OR HEREAFTER
FURNISHED TO BUYER BY OR ON BEHALF OF SELLER, (C) THE
ENVIRONMENTAL CONDITION OF THE ASSETS, THEIR COMPLIANCE WITH
ENVIRONMENTAL LAWS, AND THE PRESENCE OR ABSENCE OF HAZARDOUS
SUBSTANCES OR NATURALLY OCCURRING RADIOACTIVE MATERIALS, (D) ANY
IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (E) ANY IMPLIED
OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (F) ANY
IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF
MATERIALS, (G) ANY RIGHTS OF PURCHASERS UNDER APPROPRIATE
STATUTES TO CLAIM DIMINUTION OF CONSIDERATION, (H) ANY CLAIMS BY
BUYER FOR DAMAGES BECAUSE OF DEFECTS, WHETHER KNOWN OR UNKNOWN AS
OF THE EFFECTIVE TIME OR THE CLOSING DATE, AND (I) ANY AND ALL
IMPLIED WARRANTIES EXISTING UNDER APPLICABLE LAW, IT BEING THE
EXPRESS INTENTION OF BOTH BUYER AND SELLER THAT THE ASSETS WILL
BE CONVEYED TO BUYER IN THEIR PRESENT CONDITION AND STATE OF
REPAIR, "AS IS" AND "WHERE IS" WITH ALL FAULTS AND THAT BUYER HAS
MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS BUYER DEEMS
APPROPRIATE. THE PARTIES AGREE THAT THIS SECTION 12.5
CONSTITUTES A CONSPICUOUS LEGEND.
ARTICLE 13
TAXES
13.1 Apportionment of Ad Valorem and Property Taxes. All ad
valorem taxes, real property taxes, personal property taxes and
similar obligations (the "Property Taxes") attributable to the
Assets with respect to the tax period in which the Effective Time
occurs shall be apportioned as of the Effective Time between
Seller and Buyer. Prior to Closing, Seller shall determine an
estimate of the portion of the Property Taxes (based on the
latest information then available), for the period in which the
Effective Time occurs attributable to the period prior to the
Effective Time (the "Seller Property Tax"). Seller shall credit
to Buyer, through a downward adjustment to the Purchase Price,
the amount of the Seller Property Tax. Buyer shall file or cause
to be filed all required reports and returns incident to the
Property Taxes and shall pay or cause to be paid to the taxing
authorities all Property Taxes relating to the tax period in
which the Effective Time occurs. If the Property Taxes used in
determining the Seller Property Tax are not the actual Property
Taxes for the tax period in which the Effective Time occurs, then
upon the determination of the actual Property Taxes for such
period, the Seller Property Tax shall be recalculated based upon
such actual Property Taxes (the "Revised Seller Property Tax")
and (i) if the Revised Seller Property Tax is greater than the
Seller Property Tax, Seller shall promptly pay the difference
between such amounts or (ii) if the Revised Seller Property Tax
is less than the Seller Property Tax, Buyer shall promptly pay
Seller the difference between such amounts.
13.2 Transfer Taxes and Recording Fees. The Purchase Price
excludes, and Buyer shall be liable for, any Transfer Taxes (as
defined below) required to be paid in connection with the sale or
transfer of the Assets pursuant to this Agreement. "Transfer
Taxes" mean any sales, use, stock, stamp, documentary, transfer,
filing, licensing, processing, recording authorization and
similar taxes, fees and charges.
13.3 Other Taxes. All severance, production, excise,
conservation and similar taxes attributable to the Assets that
are based upon or measured by the production of Hydrocarbons
(excluding Property Taxes which are addressed in Section 13.1)
shall be apportioned between the Seller and Buyer as of the
Effective Time. All such taxes that have accrued with respect to
the period prior to the Effective Time have been or will be
properly paid or withheld by Seller, and all statements, returns,
and documents pertinent thereto have been or will be properly
filed. Buyer shall be responsible for paying or withholding or
causing to be paid or withheld all such taxes that have accrued
after the Effective Time and for filing all statements, returns,
and documents incident thereto.
13.4 Tax Reports and Returns. For tax periods in which the
Effective Time occurs, Seller agrees to immediately forward to
Buyer copies of any tax reports and returns received by Seller
after Closing and provide Buyer with any information Seller has
that is necessary for Buyer to file any required tax reports and
returns related to the Assets. Buyer agrees to file all tax
returns and reports applicable to the Assets that Buyer is
required to file after the Closing.
ARTICLE 14
ASSUMPTION AND RETENTION OF
OBLIGATIONS; INDEMNIFICATION
14.1 Buyer's Assumption of Liabilities and Obligations. Upon
Closing, Buyer shall assume and pay, perform, fulfill and
discharge all claims, costs, expenses, liabilities and
obligations ("Obligations") accruing or relating to (i) the
owning, developing, exploring, operating or maintaining of the
Assets or the producing, transporting and marketing of
Hydrocarbons from the Assets from and after the Effective Time,
including, without limitation, the payment of Property Expenses,
the obligation to plug and abandon all xxxxx located on the Lands
and reclaim all well sites located on the Lands regardless of
when the plugging, abandonment and reclamation obligations arose,
the make-up and balancing obligations for overproduction of gas
from the Xxxxx, all liability for royalty and overriding royalty
payments made and Taxes paid with respect to the Assets, (ii) the
environmental condition of the Assets except for any condition
for which Buyer is indemnified by Seller under Section 5.5.a, and
(iii) all Obligations accruing or relating to the ownership or
operation of the Assets before the Effective Time for which
Seller is not liable pursuant to the provisions of Section 14.2
(collectively, the "Assumed Liabilities").
14.2 Seller's Retention of Liabilities and Obligations. Upon
Closing, Seller shall retain and pay (i) all Property Expenses of
Seller relating to the ownership and operation of the Assets and
the producing, transporting and marketing of Hydrocarbons from
the Assets prior to the Effective Time, but only as to Claims
asserted before one year after the Closing Date, (ii) all
liability for royalty and overriding royalty payments made and
Taxes paid prior to the Effective Time with respect to the
Assets, and (iii) the Retained Litigation described in Exhibit L
(collectively, the "Retained Liabilities").
14.3 Buyer's Plugging and Abandonment Obligations. In addition
to the Assumed Liabilities, upon Closing Buyer assumes full
responsibility and liability for the following plugging and
abandonment obligations related to the Assets ("Buyer's Plugging
and Abandonment Obligations"), regardless of whether they are
attributable to the ownership or operation of the Assets before
or after the Effective Time. All operations by Buyer under this
Section shall be conducted in a good and workmanlike manner and
in compliance with all applicable laws and regulations.
a. The necessary and proper plugging, replugging and
abandonment of all xxxxx on the Assets;
b. The necessary and proper removal, abandonment and disposal of
all structures, pipelines, equipment, abandoned property,
trash, refuse and junk located on or comprising part of the
Assets;
c. The necessary and proper capping and burying of all
associated flow lines located on or comprising part of the
Assets;
d. The necessary and proper restoration of the surface used for
operation of the Assets and subsurface to the condition required
by applicable laws, regulations or contract;
e. All obligations relating to the items described in Section
14.3.a. through Section 14.3.d. arising from contractual
requirements and demands made by courts, authorized regulatory
bodies or parties claiming a vested interest in the Assets; and
f. Obtaining and maintaining all bonds, or supplemental or
additional bonds, that may be required contractually or by
governmental authorities.
14.4 Indemnification. "Losses" shall mean any actual losses,
costs, expenses (including court costs, reasonable fees and
expenses of attorneys, technical experts and expert witnesses and
the costs of investigation), liabilities, damages, demands,
suits, claims, and sanctions of every kind and character
(including civil fines) arising from, related to or reasonably
incident to matters indemnified against; excluding however any
special, consequential, punitive or exemplary damages, diminution
of value of an Asset, loss of profits incurred by a party hereto
or Loss incurred as a result of the indemnified party
indemnifying a third party.
After the Closing, Buyer and Seller shall indemnify each
other as follows:
a. Seller's Indemnification of Buyer. Seller assumes all risk,
liability, obligation and Losses in connection with, and shall
defend, indemnify, and save and hold harmless Buyer, its
officers, directors, employees and agents, from and against all
Losses which arise from or in connection with (i) the Retained
Liabilities, (ii) any material breach of any representation or
warranty made by Seller, (iii) any matter for which Seller has
agreed to indemnify Buyer under this Agreement, and (iv) any
material breach by Seller of this Agreement.
b. Buyer's Indemnification of Seller. Buyer assumes all risk,
liability, obligation and Losses in connection with, and shall
defend, indemnify, and save and hold harmless Seller, Seller's
officers, directors, employees and agents, from and against all
Losses which arise from or in connection with (i) the Assumed
Liabilities, (ii) any material breach of any representation or
warranty made by Buyer, (iii) any matter for which Buyer has
agreed to indemnify Seller under this Agreement, and (iv) any
material breach by Buyer of this Agreement.
14.5 Procedure. The indemnifications contained in Section 14.4
shall be implemented as follows:
a. Coverage. Such indemnity shall extend to all Losses
suffered or incurred by the Indemnified Party, as defined below.
b. Claim Notice. The party seeking indemnification under the
terms of this Agreement ("Indemnified Party") shall submit a
written "Claim Notice" to the other party ("Indemnifying Party")
which, to be effective, must state: (i) the amount of each
payment claimed by an Indemnified Party to be owing, (ii) the
basis for such claim, with supporting documentation, and (iii) a
list identifying to the extent reasonably possible each separate
item of Loss for which payment is so claimed. The amount claimed
shall be paid by the Indemnifying Party to the extent required
herein within ten (10) days after receipt of the Claim Notice, or
after the amount of such payment has been finally established,
whichever last occurs.
c. Information. Within twenty (20) days after the Indemnified
Party receives notice of a claim or legal action that may result in a Loss for
which indemnification may be sought under this
Article 14 ("Claim"), the Indemnified Party shall give a Claim
Notice to the Indemnifying Party. If the Indemnifying Party or
its counsel so requests, the Indemnified Party shall furnish the
Indemnifying Party with copies of all pleadings and other
information with respect to such Claim. At the election of the
Indemnifying Party made within sixty (60) days after receipt of
the Claim Notice, the Indemnified Party shall permit the
Indemnifying Party to assume control of such Claim (to the extent
only that such Claim, legal action or other matter relates to a
Loss for which the Indemnifying Party is liable), including the
determination of all appropriate actions, the negotiation of
settlements on behalf of the Indemnified Party, and the conduct
of litigation through attorneys of the Indemnifying Party's
choice; provided, however, that no such settlement can result in
any liability or cost to the Indemnified Party for which it is
entitled to be indemnified hereunder without its consent. If the
Indemnifying Party elects to assume control, (i) any expense
incurred by the Indemnified Party thereafter for investigation or
defense of the matter shall be borne by the Indemnified Party,
and (ii) the Indemnified Party shall give all reasonable
information and assistance, other than pecuniary, that the
Indemnifying Party shall deem necessary to the proper defense of
such Claim, legal action, or other matter. In the absence of
such an election, the Indemnified Party will use its best efforts
to defend, at the Indemnifying Party's expense, any claim, legal
action or other matter to which such other party's
indemnification under this Article 14 applies until the
Indemnifying Party assumes such defense, and, if the Indemnifying
Party fails to assume such defense within the time period
provided above, settle the same in the Indemnified Party's
reasonable discretion at the Indemnifying Party's expense. If
such a Claim requires immediate action, both the Indemnified
Party and the Indemnifying Party will cooperate in good faith to
take appropriate action so as not to jeopardize defense of such
Claim or either party's position with respect to such Claim.
d. Dispute Resolution. If the existence of a valid Claim or
amount to be paid by an Indemnifying Party is in dispute, the
parties agree to submit determination of the existence of a valid
Claim or the amount to be paid pursuant to the Claim Notice to
binding arbitration. The arbitration shall be before a three
person panel of neutral arbitrators, consisting of one person
each to be selected by Seller and Buyer, and the third to be
selected by the arbitrators selected by Seller and Buyer. The
arbitrators shall conduct a hearing no later than sixty (60) days
after submission of the matter to arbitration, and a written
decision shall be rendered by the arbitrators within thirty
(30) days of the hearing. Any payment due pursuant to the
arbitration shall be made within fifteen (15) days of the
arbitrators' decision. This Section excludes those matters
addressed in Sections 4.8 and 5.7 of this Agreement.
14.6 No Insurance; Subrogation. The indemnifications provided in
this Article 14 shall not be construed as a form of insurance.
Seller and Buyer waive for themselves, their successors or
assigns, including without limitation, any insurers, any rights
to subrogation for Losses for which each of them is respectively
liable or against which each respectively indemnifies the other,
and, if required by applicable policies, Seller and Buyer shall
obtain waiver of such subrogation from their respective insurers.
14.7 Reservation as to Non-Parties. Nothing in this Agreement is
intended to limit or otherwise waive any recourse Seller or Buyer
may have against any non-party for any obligations or liabilities
that may be incurred with respect to the Assets.
ARTICLE 15
MISCELLANEOUS
15.1 Exhibits. The Exhibits referred to in this Agreement are
hereby incorporated in this Agreement by reference and constitute
a part of this Agreement.
15.2 Expenses. Except as otherwise specifically provided, all
fees, costs and expenses incurred by Seller or Buyer in
negotiating this Agreement or in consummating the transaction
contemplated by this Agreement shall be paid by the party
incurring same, including, without limitation, legal and
accounting fees, costs and expenses.
15.3 Notices. All notices and communications required or
permitted under this Agreement shall be in writing and addressed
as follows:
If to Seller: Xxxxxxxx Production RMT Company
Xxx Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxx, Xxxxxxxx 00000
Attention: Xxx Xxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and
Xxxxxxxx Production RMT Company
Xxx Xxxxxxxx Xxxxxx, XX00-0
Xxxxx, Xxxxxxxx 00000
Attention: Exploration and Production
Legal Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Buyer: Xxxxx Petroleum Company
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxxxx 00000
Attention: Manager Land Department
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and
Xxxxx X. XxXxxx, Esq.
Xxxxxxx, XxXxxxx & Xxxxxxxxxxx
0000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Any communication or delivery hereunder shall be deemed to have
been duly made and the receiving party charged with notice (i) if
personally delivered, when received, (ii) if faxed, when received
if receipt is confirmed by telephone by the sender, (iii) if
mailed, certified mail, return receipt requested, on the date set
forth on the return receipt or (iv) if sent by overnight courier,
one day after sending. Any party may, by written notice so
delivered to the other party, change the address or individual to
which delivery shall thereafter be made.
15.4 Amendments. Except for waivers specifically provided for in
this Agreement, 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.
15.5 Assignment. Prior to Closing, neither party shall assign
all or any portion of its respective rights or delegate all or
any portion of its respective duties hereunder without the prior
written consent of the other party.
15.6 Confidentiality. Seller and Buyer agree the provisions of
this Agreement shall be kept confidential except as disclosure
may be required by applicable law, rules and regulations of
governmental agencies or stock exchanges. Buyer shall inform
Seller of all such disclosures by Buyer.
15.7 Press Releases. Seller and Buyer agree that prior to making
any press releases or other public announcements concerning this
Agreement and the transactions contemplated hereby, the party
desiring to make such public announcement shall obtain the
consent of the other party with such consent not to be
unreasonably withheld. Seller retains the right to edit and/or
reject any press release submitted by Buyer. Nothing herein
shall preclude Buyer from making such disclosures deemed
necessary by Buyer's counsel under any federal securities laws or
New York Stock Exchange rule.
15.8 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.
15.9 Counterparts. This Agreement may be executed by Seller and
Buyer in any number of counterparts, each of which shall be
deemed an original instrument, but all of which together shall
constitute one and the same instrument. Execution can be
evidenced by fax signatures with original signature pages to
follow in due course.
15.10 References. References made in this Agreement,
including 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,
court, agency, government, board, commission, trust, estate or
other entity or authority.
15.11 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 regard to
principles of conflicts of law. The validity of the various
conveyances affecting the title to real property Assets shall be
governed by and construed in accordance with the laws of the
State of Utah.
15.12 Removal of Signs. Buyer shall remove all of Seller's
well and lease signs within thirty (30) days of the Closing Date.
15.13 Binding Effect. This Agreement shall be binding upon,
and shall inure to the benefit of, the parties hereto, and their
respective successors and assigns.
15.14 Survival. The following shall survive Closing:
(i) all post-closing obligations and indemnities of Seller and
Buyer subject to the limitations set forth herein, (ii) Seller's
representations and warranties in Article 6 and, (iii) Buyer's
representations and warranties in Article 7.
15.15 No Third-Party Beneficiaries. This Agreement is
intended only to benefit the parties hereto and their respective
permitted successors and assigns.
15.16 Limitation on Damages. Consistent with Article 14, the
parties hereto expressly waive any and all rights to
consequential, special, incidental, punitive or exemplary
damages, or loss of profits resulting from breach of this
Agreement.
15.17 Severability. It is the intent of the parties that the
provisions contained in this Agreement shall be severable.
Should any provisions, in whole or in part, be held invalid as a
matter of law, such holding shall not affect the other portions
of this Agreement, and such portions that are not invalid shall
be given effect without the invalid portion.
15.18 Knowledge. As used throughout this Agreement, the term
"knowledge" or "best knowledge" or "best of Seller's knowledge,"
whether or not such term is written in lower or upper case, means
the actual knowledge by the officers, employees, or agents of
Seller involved at a supervisory or higher level of any fact,
circumstance, or condition.
Executed on the dates set forth in the acknowledgments
below.
Seller:
XXXXXXXX PRODUCTION RMT COMPANY
/s/Xxxxx X. Xxxx
Xxxxx X. Xxxx
Senior Vice President
Buyer:
XXXXX PETROLEUM COMPANY, a
Delaware corporation
By:
/s/ Xxxxx X. Xxxxxxx
Xxxxx X. Xxxxxxx
Chairman, President and
Chief Executive Officer
STATE OF OKLAHOMA )
CITY AND ) ss.
COUNTY OF TULSA )
The foregoing instrument was acknowledged before me this
23rd day of April, 2003 by Xxxxx X. Xxxx, as Senior Vice
President for Xxxxxxxx Production RMT Company, a Delaware
corporation.
Witness my hand and official seal.
My commission expires:
Notary Public
STATE OF COLORADO )
CITY AND )
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this
23rd day of April, 2003 by Xxxxx X. Xxxxxxx, as Chairman,
President and Chief Executive Officer of Xxxxx Petroleum Company,
a Delaware corporation.
Witness my hand and official seal.
My commission expires:
Notary Public
