EXHIBIT 10.1
ASSET PURCHASE AND SALE AGREEMENT
BETWEEN
EACH PARTNERSHIP, each represented by its respective general partner,
OR CORPORATION IDENTIFIED
ON THE SIGNATURE PAGES HEREOF,
collectively as Sellers
and
DELTA PETROLEUM CORPORATION,
as Purchaser
dated
June 10, 2004
TABLE OF CONTENTS
Page
Article I Definitions ............................................ 1
1.1. Specific Terms ........................................... 1
1.2. Other Terms .............................................. 7
Article II Sale and Purchase of the Assets ....................... 8
2.1. The Assets ............................................... 8
2.2. The Excluded Assets ...................................... 8
2.3. Effective Time ........................................... 8
2.4. Sellers' Representative .................................. 9
Article III Purchase Price ....................................... 9
3.1. Base Purchase Price ...................................... 9
3.2. Deposit .................................................. 9
3.3. Adjustments to the Base Purchase Price ................... 9
3.4. Like-Kind Exchange ....................................... 11
Article IV Representations and Warranties ........................ 11
4.1. Representations and Warranties of Sellers ................ 11
4.2. Representations and Warranties of Purchaser .............. 15
4.3. Limitations on Covenants, Representations and
Warranties and other Disclaimers ....................... 16
Article V Title Matters .......................................... 17
5.1. Purchaser's Title Review ................................. 17
5.2. Claims on Special Warranty of Title ...................... 19
5.3. Title Defects ............................................ 19
Article VI Title Adjustments ..................................... 20
6.1. Title Defect Adjustments ................................. 20
6.2. Increased Interests Adjustments .......................... 23
6.3. Casualty Loss ............................................ 24
Article VII Covenants of Sellers ................................. 24
7.1. Access to Records ........................................ 24
7.2. Access to Xxxxx and Lands ................................ 25
7.3. Operations ............................................... 25
7.4. Cooperation .............................................. 26
Article VIII Covenants of Purchaser .............................. 26
8.1. Cooperation .............................................. 26
8.2. Legal Existence .......................................... 27
8.3. Confidentiality .......................................... 27
Article IX Conditions to Obligations of Seller ................... 27
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Article X Conditions to Obligations of Purchaser ................. 28
Article XI Closing ............................................... 28
Article XII Assumption of Obligations, Indemnities ............... 30
12.1. Purchaser Assumed Obligations ............................. 30
12.2. Other Obligations Not Assumed ............................. 30
12.3. Indemnification by Sellers ................................ 30
12.4. Indemnification by Purchaser .............................. 31
12.5. Liability Limitations ..................................... 31
12.6. Indemnification Procedures ................................ 34
Article XIII Environmental Matters ............................... 35
13.1. Environmental Access and Liability ........................ 35
13.2. NORM ...................................................... 36
Article XIV Termination of Agreement ............................. 37
14.1. Termination Events ........................................ 37
14.2. Liabilities Upon Termination .............................. 37
14.3. Application of Deposit Upon Termination ................... 37
Article XV Arbitration ........................................... 38
15.1. Binding Arbitration ....................................... 38
15.2. Governing Rules ........................................... 38
15.3. Arbitrators ............................................... 38
15.4. Conduct of Arbitration .................................... 38
15.5. Costs of Arbitration ...................................... 38
Article XVI Miscellaneous ........................................ 39
16.1. Records .................................................. 39
16.2. Tax Prorations ........................................... 39
16.3. Post Closing Filings And Notifications ................... 39
16.4. No Sales Taxes ........................................... 39
16.5. Suspended Funds .......................................... 39
16.6. Notices .................................................. 40
16.7. Further Assurances ....................................... 41
16.8. Choice of Law ............................................ 41
16.9. Assignment ............................................... 41
16.10. Binding Effect; Amendment; Severability .................. 41
16.11. Counterparts ............................................. 42
16.12. Expenses and Fees ........................................ 42
16.13. Exhibits ................................................. 42
16.14. Exchange ................................................. 42
16.15. Third Party Beneficiaries ................................ 42
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ASSET PURCHASE AND SALE AGREEMENT
THIS ASSET PURCHASE AND SALE AGREEMENT ("Agreement") is made and entered
into this [_____] day of June, 2004, by and between each partnership or
corporation identified on the signature pages hereof, [each partnership
represented by its general partner,] (each such partnership or corporation, a
"Seller" and collectively, "Sellers") and Delta Petroleum Corporation
("Purchaser").
WHEREAS, Purchaser desires to purchase and each Seller desires to sell
certain right, title and interest in and to certain oil, gas and mineral
leases and associated assets and contract rights located in the State of Texas
and Louisiana; and
WHEREAS, each Seller and Purchaser desires to set forth herein the terms
and provisions of their agreements and understandings.
NOW, THEREFORE, in consideration of the foregoing, of the mutual promises
hereinafter set forth and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. Specific Terms. As used throughout this Agreement, including the
exhibits and schedules hereto, the following capitalized terms have the
meanings ascribed below.
"AAA" has the meaning ascribed to such term in Section 15.2.
"Affiliate" means, with respect to a specified Person, any other Person
that, directly or indirectly, controls, is controlled by or is under common
control with such Person; as used in this definition, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through
ownership of voting securities, by contract or otherwise.
"Agreement" has the meaning ascribed to such term in the preamble.
"Alpine" means Alpine Resources, Inc., a Texas corporation.
"Asserted Adjustment Amount" has the meaning ascribed to such term in
Section 5.1(A).
"Assets" means, except for the Excluded Assets, all of the right, title,
interest and estate, real or personal, recorded or unrecorded, movable or
immovable, tangible or intangible, of Sellers in and to the following:
(A) The oil, gas and mineral leases (including all of the estates created
thereby or derived therefrom), all subleases and other leasehold, royalty,
overriding royalty, net profits, mineral fee, carried, and reversionary
interests described on Exhibit A (the "Leases"), and all xxxxx (whether oil,
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gas, water, disposal, or any combination thereof) located on the lands subject
thereto or on lands pooled, unitized or communitized therewith (the "Lands"),
whether producing, shut-in, or abandoned and, whether such xxxxx are described
on Exhibit A or not (the "Xxxxx").
(B) All presently existing and valid Communitization Contracts, insofar
and only insofar as they relate to the Leases.
(C) All presently existing and valid Operating Contracts that relate to
the Assets, together with all Permits that relate to the Leases or the
ownership or operation of any thereof.
(D) All Easements that relate to the Leases.
(E) All Personal Property that relates to the Leases.
(F) All hydrocarbons produced from or attributable to the Leases at and
after the Effective Time and to the extent Sellers receive a Seller's Credit
therefore pursuant to Section 3.3, all oil or condensate in stock tanks and/or
line fill and inventory of plant products as of the Effective Time.
(G) All geological and geophysical data and information relating to the
Leases or Xxxxx that Sellers have the right to transfer; provided, however, if
the transfer of such data requires the payment of a fee or a consent, such
data will only be included if Purchaser elects to pay such fee or acquires
such consent.
(H) That certain pipeline system in the Angleton South Field area
referred to as The Union Petroleum Pipeline (the "Pipeline System").
"Assumed Obligations" has the meaning ascribed to such term in Section
12.1.
"Base Purchase Price" has the meaning ascribed to such term in Section
3.1.
"Claim" has the meaning ascribed to such term in Section 12.6(B).
"Claim Notice" has the meaning ascribed to such term in Section 12.6(B).
"Closing" has the meaning ascribed to such term in Section 11.1.
"Closing Date" has the meaning ascribed to such term in Section 11.1.
"Closing Purchase Price" has the meaning ascribed to such term in Section
11.1(B).
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Communitization Contracts" means oil, gas or mineral unitization,
pooling, operating and communitization agreements, declarations and orders,
and the units created thereby.
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"Confidentiality Agreement" means that certain Confidentiality Agreement
dated [ ], 2004 executed by Purchaser.
"Conveyance" has the meaning ascribed to such term in Section 2.3.
"Decision Notice" has the meaning ascribed to such term in Section
6.1(G).
"Defect Adjustment Amount" has the meaning ascribed to such term in
Section 6.1.
"Defect Expert" has the meaning ascribed to such term in Section 6.1(G).
"Defensible Title" has the meaning ascribed to such term in Section
5.3(B).
"Deposit" has the meaning ascribed to such term in Section 3.2.
"Dispute" has the meaning ascribed to such term in Section 15.1.
"Easements" means rights of way, easements, servitudes and similar
arrangements.
"Effective Time" means June 1, 2004, at 7:00 a.m. Central Time.
"Encumbrance" means any lien, pledge, hypothecation, charge, mortgage,
deed of trust, security interest, encumbrance, equity, trust or other similar
burden.
"Environmental Laws" means all Laws relating to (a) the control of any
pollutant or potential pollutant or protection of the air, water, land or the
environment, (b) solid, gaseous or liquid waste generation, handling,
treatment, storage, disposal or transportation, or (c) exposure to hazardous,
toxic, explosive, corrosive or other substances alleged to be harmful.
"Environmental Laws" shall include, but not be limited to, the following Laws:
(1) Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. SS 9601 et seq., (2) Toxic Substances Control Act, 15 U.S.C. SS 2601 et
seq., (3) Clean Water Act, 33 U.S.C. S 1251 et seq., (4) Safe Drinking Water
Act, 42 U.S.C. SS 300f-300j, (5) Clean Air Act, 42 U.S.C. S 7401 et seq., (6)
Solid Waste Disposal Act, 42 U.S.C. SS 6901 et seq., (7) Oil Pollution Act, 33
U.S.C. S 2701, et seq., (8) Federal Insecticide, Fungicide & Rodenticide Act,
7 U.S.C. S 136-136y, (9) Texas Water Code, Chapter 26, and (10) Texas Health
and Safety Code, Chapters 361, and 382.
"Environmental Matters Notice Date" has the meaning ascribed to such term
in Section 13.2.
"Excluded Assets" has the meaning ascribed to such term in Section 2.2.
"Excluded Records" has the meaning ascribed to such term in Section 2.2.
"Existing Contracts" means those contracts and other instruments of the
following types which are material to the operation or ownership of the
Assets: any and all surface leases, rights-of-way and easements; operating
agreements; consulting agreements; exploration agreements; oil, gas, liquids,
casinghead gas and condensate purchase, sales, processing, gathering,
treatment, compression, transportation and gas balancing agreements; farmout
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and farmin agreements; dry hole, bottom hole, acreage contribution, purchase
and acquisition agreements; area of mutual interest agreements; salt water
disposal agreements; servicing contracts; Communitization Contracts; Operating
Contracts; permits; licenses; servitudes; and all other similar contracts and
agreements and any amendments thereto relating to the Xxxxx or Leases;
provided however, that the contracts and agreements set forth on Schedule
1.1(D) shall not be deemed to be Existing Contracts.
"Final Cure Date" has the meaning ascribed to such term in Section
6.1(E)(ii).
"Final Defect Notice Date" has the meaning ascribed to such term in
Section 5.1(A).
"Final Settlement" has the meaning ascribed to such term in Section
3.3(C).
"Final Settlement Date" has the meaning ascribed to such term in Section
3.3(C).
"Final Settlement Statement" has the meaning ascribed to such term in
Section 3.3(C).
"Hazardous Substances" means any hazardous or toxic substance, material
or waste regulated by any Environmental Law, including without limitation,
whether or not so regulated, petroleum, including crude oil or any fraction
thereof, any radioactive material, radon gas, polychlorinated biophenyls or
any asbestos in any form or condition.
"Increased Interest" has the meaning ascribed to such term in Section
3.3(A)(2).
"Increased Value" has the meaning ascribed to such term in Section 6.2.
"Indemnified Party" has the meaning ascribed to such term in Section
12.6(A).
"Indemnifying Party" has the meaning ascribed to such term in Section
12.6(A).
"Law" means any applicable statute, law, ordinance, regulation, rule,
ruling, order, restriction, requirement, writ, injunction, decree or other
official act of or by any governmental authority in effect on the date hereof.
"Liabilities" means any and all losses, claims, demands, suits, actions,
proceedings, payments, charges, judgments, assessments, liabilities, damages,
penalties, fines, costs and expenses, including legal and other expenses
incurred in connection with any dispute, claim, litigation or arbitration.
"Material Adverse Change" or "Material Adverse Effect" means any material
adverse change in the condition or value of the Assets (other than change in
value based on the price of oil and/or gas) and , with respect to a Seller,
any material adverse change in the condition (financial or otherwise),
business, operations, properties, prospects, securities, assets or liabilities
of such Seller (taken as a whole), other than any change, circumstance or
effect relating to the economy in general, the price of oil or natural gas or
the industries in which such Seller operates.
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"Material Contracts" has the meaning ascribed to such term in Section
4.1(I)(2).
"Material Environmental Matters" has the meaning ascribed to such term in
Section 13.2.
"Negative Imbalance" means, respectively as to each Well or other
property subdivision included in the Assets and without duplication, the
aggregate sum (expressed in MMBtus) of (i) the aggregate make-up, prepaid or
other volumes of oil, gas or other hydrocarbons that Sellers are obligated, as
of the Effective Time, on account of prepayment, advance payment, take-or-pay,
gas balancing or similar obligations, to deliver from the Well or other
property subdivision included in the Assets after the Effective Time without
then or thereafter being entitled to receive full payment therefor and (ii),
to the extent such obligations burden the Assets or Purchaser could incur any
liability therefor as a result of the transaction contemplated hereby and the
same are not covered by clause (i) above, the aggregate pipeline or processing
plant imbalances or overdeliveries for which Sellers are obligated to pay or
deliver oil, gas or other hydrocarbons or cash to any pipeline, gatherer,
transporter, processor, co-owner or purchaser in connection with any other
oil, gas or other hydrocarbons attributable to the Assets; provided, however,
that to the extent that the aggregate sum (expressed in MMBtus under clauses
(i) and (ii) above (less the sum of clauses (i) and (ii) of the definition of
Positive Imbalance) does not exceed 12,500 MMBtus, no Negative Imbalance shall
be deemed to exist.
"Net Revenue Interest" or "NRI" means the share (expressed as a
percentage or decimal fraction) in and to all oil and gas produced and saved
from or attributable to a Property (and the proceeds attributable thereto).
"Non-Waivable Claims" has the meaning ascribed to such term in Section
12.5(I).
"NORM" has the meaning ascribed to such term in Section 12.1.
"Operated Assets" has the meaning ascribed to such term in Section
4.1(H).
"Operating Contracts" means contracts and agreements that relate to the
Assets, including as applicable, but not limited to, all presently existing
oil and gas sales agreements, purchase, transportation, gathering, exchange
and processing contracts, casinghead gas contracts, operating agreements,
joint venture agreements, farmin and farmout agreements, participation
agreements and exploration agreements.
"Party" means any Seller or Purchaser and "Parties" means Sellers and
Purchaser together.
"Permits" means all franchises, licenses, permits, approvals, consents,
certificates and other authorizations and other rights granted by governmental
authorities.
"Permitted Encumbrances" means (A) the terms, conditions, restrictions,
exceptions, reservations, limitations and other matters contained in the
agreements, instruments and other documents which create a Seller's interest
in the Assets, provided that the same (i) do not reduce the NRI below that set
5
forth in the asset schedule of the applicable Seller for the applicable
property or (ii) do not increase the Working Interest above that set forth in
the asset schedule of the applicable Seller for the applicable property
without a proportionate increase in the NRI for such property; (B) statutory
and conventional liens securing payments to operators, mechanics and
materialmen or others, payments of taxes or other claims or payment
obligations that are, in each case, not yet delinquent or, if delinquent, are
being contested in good faith in the normal course of business; (C) any
obligations or duties to any municipality or public authority with respect to
any franchise, grant, certificate, license or permit; including, but not
limited to, those required by Environmental Laws, (D) any easements,
rights-of-way, servitudes, permits and other rights in respect of surface
operations, pipelines or the like, and easements for pipelines, power lines
and other similar rights-of-way, and encroachments, on, over or in respect of
any of the Assets that do not, individually or in the aggregate, unreasonably
or materially interfere with the operation of the Leases or any Xxxxx thereon
for exploration and production of hydrocarbons or related operations; (E) all
royalties, overriding royalties, net profits interests, production payments,
carried interests, reversionary interests, calls on production and other
burdens on or deductions from the proceeds of production that do not operate
to (i) reduce the NRI below that set forth in the asset schedule of the
applicable Seller for the applicable Property, or (ii) increase the Working
Interest above that set forth in the asset schedule of the applicable Seller
for the applicable Property without a proportionate increase in the NRI for
such Property; (F) conventional rights of reassignment prior to abandonment;
(G) the matters set forth on Schedule 1.1(f); and (H) any consents of any
third parties to the transfer or assignment of any Asset that could be
obtained in the ordinary course of business after Closing, or that if not
obtained would not be legal cause to cancel or terminate any Lease or Material
Contract.
"Person" means any individual or entity, including, without limitation,
any corporation, limited liability company, partnership (general or limited),
joint venture, association, joint stock company, trust, unincorporated
organization or government (including any board, agency, political subdivision
or other body thereof).
"Personal Property" means all personal property, improvements, machinery,
fixtures, lease and well equipment and material (including as applicable, but
not limited to, any tanks, boilers, buildings, flowlines, pipelines, fixtures,
machinery, injection facilities, saltwater disposal facilities, compression
facilities and other equipment, gathering systems, power lines, telephone and
telegraph lines, roads and other appurtenances).
"Positive Imbalance" means, respectively as to each Well or other
property subdivision included in the Assets and without duplication, the
aggregate sum (expressed in MMBtus) of (i) the aggregate make-up, prepaid or
other volumes of oil, gas or other hydrocarbons that Sellers are entitled, as
of the Effective Time, on account of prepayment, advance payment, take-or-pay,
gas balancing or similar obligations, to receive from or to be credited to the
Well or other property subdivision included in the Assets after the Effective
Time without then or thereafter being obligated to make any payment therefor
and (ii) to the extent such entitlements run with the Assets and the same are
not covered by clause (i) above, the aggregate pipeline or processing plant
imbalances or underdeliveries for which Sellers are entitled to receive (or
otherwise be credited with) oil, gas or other hydrocarbons or cash from any
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pipeline, gatherer, transporter, processor, co-owner or purchaser in
connection with any oil, gas or other hydrocarbons attributable to the Assets;
provided, however, that to the extent that the aggregate sum (expressed in
MMBtus) under clauses (i) and (ii) above (less the sum of clauses (i) and (ii)
of the definition of Negative Imbalance) does not exceed 12,500 MMBtus, no
Positive Imbalance shall be deemed to occur.
"Preliminary Settlement Statement" has the meaning ascribed to such term
in Section 3.3(C).
"Property" means a Lease or Well or group of Leases or Xxxxx to which a
NRI and WI are attributed in the asset schedules hereto.
"Proportionate Share" means that portion of the Base Purchase Price which
is fairly applicable to a Property based on the Net Revenue Interest and/or
Working Interest for such Property set forth on Exhibit "A" hereto, whether
determined by agreement of the Parties, or pursuant to the provisions of
Section 6.1(G).
"Purchaser" has the meaning ascribed to such term in the preamble.
"Purchaser's Credits" has the meaning ascribed to such term in Section
3.3(B).
"Purchaser Indemnified Parties" has the meaning ascribed to such term in
Section 12.3.
"Qualified Intermediary" has the meaning ascribed to it in the Internal
Revenue Code of 1986, as amended.
"Records" has the meaning ascribed to such term in Section 11.1.
"Seller" and "Sellers" have the meaning ascribed to such terms in the
preamble.
"Sellers Indemnified Parties" has the meaning ascribed to such term in
Section 12.4.
"Sellers' Credits" has the meaning ascribed to such term in Section
3.3(A).
"Threshold Amount" has the meaning ascribed to such term in Section
12.5(D).
"Title Defect" has the meaning ascribed to such term in Section 5.3.
"Title Defect Property" has the meaning ascribed to such term in Section
5.3.
"Working Interest" or "WI" means the share (expressed as a percentage or
decimal fraction) of costs and expenses attributable to the maintenance,
development and operation of a Property.
1.2. Other Terms. Other capitalized terms used in this Agreement and
not defined in Section 1.1 shall have the meanings ascribed to them throughout
this Agreement.
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ARTICLE II
SALE AND PURCHASE OF THE ASSETS
2.1. Assets. Subject to and upon all the terms and conditions
hereinafter set forth, each Seller, severally, covenants and agrees to sell to
Purchaser, and Purchaser covenants and agrees to buy from such Seller the
Assets, except for the Excluded Assets.
2.2. The Excluded Assets. The Assets shall not include any of the
following (referred to herein as the "Excluded Assets"): (A) all overriding
royalty interests, royalty interests and mineral fee interests owned of record
by any Seller to the extent the exclusion of same does not result in any
Seller having a lesser Net Revenue Interest in any Property than the Net
Revenue Interest for such Property set forth in Exhibit A; (B) all trade
credits and all accounts, instruments and general intangibles (as such terms
are defined in the Uniform Commercial Code) attributable to the Assets with
respect to any period of time prior to the Effective Time; (C) all claims and
causes of action of any Sellers (i) arising from acts, omissions or events, or
damage to or destruction of property occurring and attributable to times prior
to the Effective Time, or (ii) arising under or with respect to any Assets
that are attributable to periods of time prior to the Effective Time
(including claims for adjustments or refunds), or (iii) with respect to any of
the Excluded Assets; (D) all rights and interests of any Sellers (i) under any
policy or agreement of insurance or indemnity, (ii) under any bond, or (iii)
to any insurance or condemnation proceeds or awards arising, in each case,
from acts, omissions or events, or damage to or destruction of property
occurring prior to the Effective Time; (E) all oil, gas or other hydrocarbons
produced and sold from the Leases with respect to all periods prior to the
Effective Time, together with all proceeds from or of such substances; (F)
claims of any Seller for refunds of or loss carry forwards with respect to (i)
production or any other taxes attributable to any period prior to the
Effective Time, (ii) income or franchise taxes, or (iii) any taxes
attributable to the Excluded Assets; (G) subject to Section 6.3(B), all
amounts due or payable to any Seller as adjustments to insurance premiums
related to the Assets with respect to any period prior to the Effective Time;
(H) except to the extent Sellers receive an upward adjustment to the Base
Purchase Price for such matters, all proceeds, income or revenues (and any
security or other deposits made) attributable to (i) the Assets and relating
to any period prior to the Effective Time, or (ii) any Excluded Assets; (I)
all of Sellers' proprietary computer software, patents, trade secrets,
copyrights, names, trademarks, logos and other intellectual property; (J) all
documents and instruments (except title opinions pertaining to the Assets) of
Sellers that are protected by an attorney-client privilege; (K) a copy of all
geological or geophysical data or information, but not any proprietary
geophysical information, (L) any geological and geophysical data and
information that Sellers do not have the right to transfer or the transfer of
which requires the payment of a fee or a consent, if Purchaser does not pay
such fee or obtain such consent (the matters referred to in clauses (J), (K)
and (L) are referred to as the "Excluded Records"); and (L) all audit rights
with respect to any period prior to the Effective Time; provided, however,
that the exercise of such audit rights does not impair, infringe, impinge on,
or otherwise adversely affect Purchaser's audit or other acquired rights.
2.3. Effective Time. At Closing, each Seller shall convey its Assets to
Purchaser subject to the Permitted Encumbrances and without any covenant,
representation or warranty of title or otherwise express, implied or
8
statutory, other than those set forth in this Agreement and a special warranty
of title, as provided in the form of Conveyance attached hereto as Exhibit C
(the "Conveyance"), and effective as of the Effective Time.
2.4. Sellers' Representative. Each of the Sellers hereby appoints
Alpine as its representative, with full power and authority to act on its
behalf with respect to any matter under this Agreement, including without
limitation receipt of the Deposit, receipt of the Closing Purchase Price,
Title Defect matters, pre- and post-Closing adjustments to the Base Purchase
Price, and giving and receiving notices.
ARTICLE III
PURCHASE PRICE
3.1. Base Purchase Price. The purchase price to be paid by Purchaser
for the Assets shall be One Hundred Twenty-Two Million Five Hundred Thousand
U.S. DOLLARS ($122,500,000) (the "Base Purchase Price"). The Base Purchase
Price shall be reduced or increased based on the adjustments to be made
pursuant to Section 3.3 and as otherwise provided for in this Agreement.
3.2. Deposit. Contemporaneously with the execution of this Agreement,
Purchaser shall deposit with X.X. Xxxxxx Trust Company an amount equal to ten
percent (10%) of the Base Purchase Price (to be held in an interest bearing
account) (the "Deposit"). If the Closing occurs, the Deposit shall be applied
to the Closing Purchase Price to be paid by Purchaser at the Closing. If the
Closing does not occur, the Deposit shall be applied as provided in Article
XIV.
3.3. Adjustments to the Base Purchase Price. The Base Purchase Price
shall be adjusted as follows:
(A) The Base Purchase Price shall be adjusted upward by the following
("Sellers' Credits"):
(1) the amount of all prepaid expenditures reasonably incurred and
paid by Sellers (including, without limitation, royalties, overriding
royalties, other payment out of production burdening the Leases, rentals and
other charges, ad valorem, property, production, excise, severance, sales or
use, and any other taxes based upon or measured by the ownership of property
or the production of hydrocarbons or the receipt of proceeds therefrom) which
are attributable to the operation of the Leases after the Effective Time;
(2) an amount equal to the Increased Value determined and
permitted in accordance with Section 6.2 for an higher Net Revenue Interest,
lesser Working Interest, or proportionately higher Working Interest and Net
Revenue Interest in the same property to which any Seller owns Defensible
Title, notice of which has been given by such Seller to Purchaser on or before
the Final Defect Notice Date (an "Increased Interest"). To be effective, such
notice of Increased Interest shall be in writing and shall include (i) a
description of the Increased Interest, (ii) the basis for which such Seller
9
believes the ownership interest in such property has increased, and (iii) the
Seller's proposed adjustment to the Base Purchase Price to account for such
Increased Interest;
(3) an amount equal to (i) the Positive Imbalances multiplied by
(ii) $ 3.00 per Mcf;
(4) the value of (i) all merchantable oil or condensate in stock
tanks and/or line fill located on the Lands as of the Effective Time that is
attributable to the Assets, such value to be based upon the price paid by the
purchaser to Sellers for same, if applicable, or, if not, at the price in
effect for each field as of the Effective Time, less severance, sales, or
other similar taxes and transportation fees deducted by the purchaser of such
oil or condensate, such oil to be measured based upon the gauge reports of the
stock tanks located on the Lands at the Effective Time by the operators of
the Xxxxx and (ii) the market value as of the date hereof of all Sellers'
inventory of natural gas and gas plant products attributable to the Lands on
the Effective Time; and
(5) any other amount agreed upon by Sellers and Purchaser.
(B) The Base Purchase Price shall be adjusted downward by the following
("Purchaser's Credits"):
(1) the aggregate of all Defect Adjustment Amounts, calculated in
accordance with Article VI;
(2) an amount equal to (i) the Negative Imbalances multiplied by
(ii) $3.00 per Mcf; and
(3) any other amount agreed upon by Sellers and Purchaser.
(C) No later than three (3) days prior to Closing, Sellers shall furnish
Purchaser with an estimated accounting (the "Preliminary Settlement
Statement") showing the estimated amount of Sellers' Credits and the estimated
amount of Purchaser's Credits, subject to being finally adjusted within one
hundred twenty (120) days after the Closing as hereinafter provided. An
estimated credit due Sellers shall increase the Base Purchase Price by that
amount and an estimated credit due Purchaser shall reduce the Base Purchase
Price by that amount. Within ninety (90) days after Closing, Sellers shall
provide to Purchaser, for Purchaser's concurrence, an accounting (the "Final
Settlement Statement") of the actual amounts of Sellers' Credits and
Purchaser's Credits for the adjustments set out in this Section 3.3.
Purchaser shall have the right for thirty (30) days after receipt of the Final
Settlement Statement to audit and take exception to such adjustments. If
Purchaser and Sellers are unable to agree upon the amount of such post-Closing
adjustments within twenty (20) business days after the end of such 30 day
period, the accounting firm of KPMG LLP shall conduct an audit of the Final
Settlement Statement and determine the post-Closing adjustment amount. The
decision of such independent accounting firm shall be binding upon Sellers and
Purchaser and the fees and expenses of such independent accounting firm shall
be borne one-half by Sellers and one-half by Purchaser. The date upon which
such agreement is reached shall be herein called the "Final Settlement Date".
Within five (5) business days after the Final Settlement Date, those credits
agreed upon by Purchaser and Sellers (or determined by KPMG LLP) shall be
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netted and the final settlement amount shall be paid in cash by the Party
owing same, via wire transfer as directed in writing by the receiving Party
(the "Final Settlement").
3.4. Like-Kind Exchange. Purchaser and Sellers each consent to the
other party's assignment of its rights and obligations under this Agreement to
its Qualified Intermediary in connection with effectuation of a like-kind
exchange. However, Purchaser and Sellers acknowledge and agree that any
assignment of this Agreement to a Qualified Intermediary does not release
either party from any of their respective liabilities and obligations to each
other under this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1. Representations and Warranties of Sellers. Each Seller, severally
as to itself, and severally with respect to the Assets owned by it as
reflected on the exhibits and schedules hereto, represents and warrants to
Purchaser as follows (to the extent any of the representations and warranties
contained in this Section 4.1 are limited by the phrase "to Seller's
knowledge", such phrase shall mean the actual knowledge of any current officer
of Alpine; provided, however, that neither Alpine nor Seller shall be
required to have conducted any investigation in connection with the making of
these representations and warranties):
(A) Organization and Standing. It is a limited partnership or
corporation duly organized validly existing and in good standing under the
Laws of its state of organization and it is duly qualified to conduct its
business in each state in which the Lands relevant to its Assets are located
or where such qualification is required by Law to conduct business or own
property located in such state, except in each case where the failure to so
qualify would not result in a Material Adverse Effect.
(B) Entity Power; No Conflicts. It has all requisite power and
authority to carry on its business as presently conducted, to enter into this
Agreement, and to perform its obligations under this Agreement. The
consummation of the transactions contemplated by this Agreement will not
violate or be in conflict with (a) any provision of such Seller's partnership
agreement, articles of incorporation or other governing documents; (b) except
for any Permitted Encumbrances affecting any Asset or a group of Assets
(rather than a Seller as a whole), any agreement or instrument to which such
Seller is a party or by which it or any of its Assets are bound; or (c) any
judgment, order, ruling or decree applicable to such Seller or any Law
applicable to such Seller.
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(C) Authority. The execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly and validly
authorized by all requisite partnership or corporate action on the part of
such Seller.
(D) Binding Obligation. This Agreement has been duly executed and
delivered on behalf of such Seller, and all documents and instruments required
hereunder to be executed and delivered by such Seller shall have been duly
executed and delivered. This Agreement does, and such documents and
instruments shall, constitute legal, valid and binding obligations of such
Seller enforceable in accordance with their terms, subject to the effects of
bankruptcy, insolvency, reorganization, moratorium and similar laws, as well
as to principles of equity.
(E) Litigation. Schedule 4.1(E) sets forth each instance in which any
Seller (i) is subject to any outstanding claim, demand, judgment, injunction,
order, decree, ruling binding upon or otherwise affecting its interests in the
Assets or (ii) is a party to (or, to Seller's knowledge, its Assets are
affected by) any suit, action or other proceeding pending or, to Seller's
knowledge, threatened, before any court or governmental authority.
(F) Brokers or Finders. Other than Petroleum Place Energy Advisors,
neither such Seller nor any of its Affiliates has employed any broker, finder,
consultant or intermediary in connection with the transactions contemplated by
this Agreement who would be entitled to a broker's, finder's or similar fee or
commission in connection therewith or the consummation thereof or if the
Closing does not occur. Any fees owed to or claimed by Petroleum Place Energy
Advisors shall be the sole responsibility of Seller.
(G) Environmental Matters. Except as identified on Schedule 4.1(G), as
of the date hereof, no actual or written notice, demand or complaint has been
received by such Seller from any governmental authority with respect to any
material violation of any Environmental Law applicable to its Assets, which
have not been remedied to the satisfaction of such governmental authority.
(H) Xxxxx in Suspense. With respect to the Assets operated by Seller
or any Affiliate of Seller (the "Operated Assets") and to Seller's knowledge
with respect to all other Assets, except as set forth on Schedule 4.1(H),
there are no producing Xxxxx comprising part of such Seller's Assets for which
(i) such Seller or its authorized agent is not being paid directly for all
production attributable thereto without the furnishing of indemnity, other
than the customary indemnity contained in division orders, transfer orders or
gas sales contracts or (ii) any portion of proceeds attributable to such
Seller's interest are being held in suspense by a purchaser.
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(I) Contracts and Commitments.
(1) Except as provided on Schedule 4.1(I), (A) there are no
outstanding Authority for Expenditures or other commitments that exist, as of
the date of this Agreement, that will require the payment by Purchaser (if the
Closing occurs) after the Effective Time for any drilling or reworking
operations or obligations related to any of the Assets of $75,000 or more for
any one commitment or $500,000 or more, in the aggregate, for all commitments,
and (B) Sellers have not incurred any prepaid expenses attributable to the
period after the Effective Time exceeding $500,000 in the aggregate relating
to the Assets.
(2) Schedule 4.1(I) contains a complete list of all Material
Contracts related to the Assets to which such Seller is a party or, to
Seller's knowledge, by which any of the Assets are bound. Such Seller is not,
and to its knowledge, no other party to any Material Contract is, in material
default under any such Material Contracts. For purposes of this Agreement,
"Material Contracts" shall mean a contract, agreement or similar arrangement
which:
(a) is with any Seller or any Affiliate of any Seller;
(b) is a contract for the sale, purchase, processing or
transportation of, or creates a purchase option, right of first refusal or
call on, any oil, gas or other hydrocarbons produced from or attributable to
the Assets, except those sales, purchase, processing or transportation
agreements which can be terminated by Sellers and their assigns upon not more
than thirty-one (31) days notice without penalty or detriment to Sellers and
their assigns;
(c) creates any area of mutual interest or an obligation not
to compete with respect to the acquisition by any Seller or its assigns of any
interest in any oil, gas or other hydrocarbons, lands or assets;
(d) is a contract or agreement which involves expenditures or
receipts of $50,000 or more in any calendar year, excluding (i) Leases, (ii)
joint operating agreements, (iii) unitization or pooling agreements, (iv)
participation, joint venture, partnership, farmout, farmin or similar
agreements and (v) contracts for the sale, purchase, processing or
transportation of oil, gas or other hydrocarbons;
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(e) evidences an obligation to pay the deferred purchase
price of property or services, except accounts payable arising in the ordinary
course of business;
(f) evidences a lease or rental of any land, building or
other improvements or portion thereof, excluding (i) the Leases and (ii)
surface leases not material to the ownership, use, maintenance or operation of
the Assets, or any part thereof; or
(g) joint operating agreement, unitization agreement, pooling
agreement, farmout agreement, farmin agreement, participation agreement, joint
venture agreement, partnership agreement or similar agreement.
(3) To such Seller's knowledge, no purchaser of natural gas under
the Existing Contracts related to its Assets (A) is having its take of natural
gas curtailed (other than seasonal curtailment), or (B) has given notice
(either written or verbal) that it desires to amend any of the Existing
Contracts related to its Assets with respect to price or quantity of
deliveries under take-or-pay provisions.
(J) Compliance with Laws. Except as set forth on Schedule 4.1(J) and
except with respect to Environmental Laws, which are addressed exclusively in
Section 4.1(G), Sellers are in compliance in all material respects with all
Laws in any way affecting or relating to the Operated Assets and, to Seller's
knowledge, Sellers are in compliance in all material respects with all Laws in
any way affecting or relating to the Assets which are not Operated Assets.
(K) Imbalances. Except as set forth on Schedule 4.1(K), no Negative
Imbalances or Positive Imbalances exist.
(L) Taxes. Sellers have paid all taxes on or relating to the Assets,
or any production or revenues attributable thereto, which are currently due
and payable as required by Law prior to delinquency, without limiting the
rights and obligations of the Parties under Sections 16.2 and 16.4.
(M) Insurance. Schedule 4.1(M) contains a true and complete list of
all policies of insurance which are maintained by Sellers and which cover or
relate to any of the Assets and which would reasonably be expected to be the
basis for a claim made to an insurer contemplated by Section 6.3(B).
(N) Well Status. Except as set forth in Schedule 4.1(N), there are no
Xxxxx included in the Operated Assets (or, to Seller's knowledge, with respect
to Xxxxx operated by others) that (a) any Seller is obligated by Law or
contract to currently plug and abandon or (b) are subject to exceptions to a
requirement to plug and abandon issued by a governmental authority.
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(O) Status of Sellers. No Seller is a "public-utility company" or a
"holding company," or a "Subsidiary Company" of a "holding company," or an
"affiliate" of a "holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended, or is otherwise subject to regulation
under or the restrictions of such act. No Seller is an "investment company"
or a company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or is otherwise subject to
regulation under the restrictions of such act.
(P) No Tax Partnership. Except as disclosed on Schedule 4.1(P), the
Assets are not subject to any tax partnership agreement or provisions
requiring a partnership income tax return to be filed under Subchapter K of
Chapter 1 of Subtitle A of the Code.
(Q) Bankruptcy. There are no bankruptcy, reorganization or arrangement
proceedings pending against, being contemplated by, or to the knowledge of any
Seller, threatened against any Seller.
4.2. Representations and Warranties of Purchaser. Purchaser represents
and warrants to Sellers as follows:
(A) Organization and Standing. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware and is or prior to Closing will be duly qualified to carry on its
business in the states in which the Assets are located.
(B) Entity Power; No Conflicts. Purchaser has all requisite power and
authority to carry on its business as presently conducted, to enter this
Agreement and the other documents and agreements contemplated hereby, and to
perform its other obligations under this Agreement and the other documents and
agreements contemplated hereby. The consummation of the transactions
contemplated by this Agreement will not violate, or be in conflict with, any
provision of Purchaser's certificate of incorporation or other governing
documents, or any material agreement or instrument to which Purchaser is a
party or by which it is bound or any judgment, decree, order, statute, rule or
regulation applicable to Purchaser.
(C) Authority. The execution, delivery and performance of this
Agreement and the transactions contemplated hereunder have been duly and
validly authorized by all requisite corporate action on the part of Purchaser.
(D) Binding Obligation. This Agreement constitutes, and all documents
and instruments required hereunder to be executed and delivered by Purchaser
at Closing will constitute, legal, valid and binding obligations of Purchaser
in accordance with their respective terms, subject to bankruptcy and other
similar laws of general application with respect to creditors.
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(E) No Bankruptcy Proceedings. There are no bankruptcy, reorganization
or arrangement proceedings pending, being contemplated by, or to the actual
knowledge of the officers of Purchaser, threatened against Purchaser.
(F) Qualification. Purchaser is now, and after Closing shall continue
to be, qualified to own the Assets in all jurisdictions where any Assets to be
purchased by Purchaser hereunder are located, and the consummation of the
transactions contemplated hereby will not cause Purchaser to be disqualified
as such an owner or to exceed any acreage limitation imposed by any law,
statute, rule or regulation.
(G) Availability of Funds. Purchaser has arranged to have available by
the Closing Date sufficient funds to enable Purchaser to pay in full the
Closing Purchase Price, together with all costs and expenses relative thereto,
and otherwise to perform its obligations under this Agreement.
(H) Experienced Investor. Purchaser is an experienced and
knowledgeable investor in oil and gas properties and has the financial and
business expertise to evaluate the merits and risks of the transactions
contemplated by this Agreement. In entering into this Agreement, Purchaser
has relied solely on the express representations, warranties, and covenants of
Sellers in this Agreement, its independent investigation of, and judgment with
respect to, the Assets and the advice of its own legal, tax, economic,
environmental, engineering, geological and geophysical advisors.
(I) Investment Intent. Purchaser is acquiring the Assets for its own
account and not with the intent to make a distribution thereof within the
meaning of the Securities Act of 1933 (and the rules and regulations
pertaining thereto) or a distribution thereof in violation of any other
applicable securities laws.
(J) Brokers or Finders. The Purchaser has not employed any broker,
finder, consultant or intermediary in connection with the transactions
contemplated by this Agreement who would be entitled to a broker's, finder's
or similar fee or commission in connection therewith or the consummation
thereof or if the Closing does not occur for which any Seller will have any
liability.
4.3. LIMITATIONS ON COVENANTS, REPRESENTATIONS AND WARRANTIES AND OTHER
DISCLAIMERS. THERE ARE NO COVENANTS, REPRESENTATIONS OR WARRANTIES THAT
EXTEND BEYOND THE FACE OF THIS AGREEMENT. THE EXPRESS COVENANTS,
REPRESENTATIONS AND WARRANTIES OF SELLERS AND PURCHASER CONTAINED IN THIS
AGREEMENT ARE EXCLUSIVE AND ARE IN LIEU OF, AND SELLERS AND PURCHASER, AS
APPLICABLE, EXPRESSLY DISCLAIM AND NEGATE, AND SELLERS AND PURCHASER, AS
APPLICABLE, HEREBY WAIVE, ALL OTHER COVENANTS, REPRESENTATIONS AND WARRANTIES,
EXPRESS, IMPLIED, STATUTORY OR OTHERWISE. AS EXAMPLES AND FOR THE AVOIDANCE OF
DOUBT, BUT WITHOUT LIMITATION OF THE FOREGOING, EXCEPT AS EXPRESSLY PROVIDED
IN ARTICLE IV OF THIS AGREEMENT AND THE SPECIAL WARRANTY OF TITLE TO THE
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ASSETS CONTAINED IN THE CONVEYANCE, THE ASSETS SHALL BE CONVEYED AND ACCEPTED
PURSUANT HERETO WITHOUT ANY OTHER REPRESENTATION OR WARRANTY, WHETHER EXPRESS,
IMPLIED, STATUTORY OR OTHERWISE, WITH RESPECT TO (A) THE QUANTITY, QUALITY,
CONDITION, SIZE, WEIGHT, SERVICEABILITY, CONFORMITY TO SAMPLES OF MODELS, (B)
ANY OTHER ASPECT OR CONDITION OF THE ASSETS, ALL OF WHICH SHALL BE CONVEYED BY
SELLERS TO PURCHASER AS IS, WHERE IS, AND WITH ALL FAULTS AND DEFECTS AND IN
THEIR PRESENT CONDITION AND STATE OF REPAIR AND WITHOUT ANY COVENANTS,
REPRESENTATIONS OR WARRANTIES, WHATSOEVER OF MERCHANTABILITY OR OF FITNESS FOR
A PARTICULAR PURPOSE, (C) THE ACCURACY OR COMPLETENESS OF ANY DATA, REPORTS,
RECORDS, PROJECTIONS, INFORMATION OR MATERIALS NOW, HERETOFORE OR HEREAFTER
FURNISHED OR MADE AVAILABLE TO PURCHASER BY, ON BEHALF OF OR AT THE DIRECTION
OF SELLERS IN CONNECTION WITH THIS AGREEMENT INCLUDING, WITHOUT LIMITATION,
THAT RELATIVE TO PRICING ASSUMPTIONS, QUALITY, QUANTITY OR VOLUMES OF
HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE TO THE ASSETS OR THE ABILITY OR
POTENTIAL OF THE ASSETS TO PRODUCE HYDROCARBONS, (D) THE PHYSICAL AND
ENVIRONMENTAL CONDITION OF THE ASSETS, BOTH SURFACE AND SUBSURFACE, INCLUDING
BUT NOT LIMITED TO CONDITIONS SPECIFICALLY RELATED TO THE PRESENCE, RELEASE OR
DISPOSAL OF HAZARDOUS SUBSTANCES, SOLID WASTES, ASBESTOS AND OTHER MAN MADE
FIBERS, OR NATURALLY OCCURRING RADIOACTIVE MATERIALS, IT BEING AGREED BY
PURCHASER THAT ANY AND ALL SUCH DATA, RECORDS, REPORTS, PROJECTIONS,
INFORMATION AND OTHER MATERIALS (WRITTEN OR ORAL) FURNISHED OR OTHERWISE MADE
AVAILABLE OR DISCLOSED TO PURCHASER HAVE BEEN AND WILL BE PROVIDED TO
PURCHASER AS A CONVENIENCE AND SHALL NOT CREATE OR GIVE RISE TO ANY LIABILITY
OF OR AGAINST SELLERS AND ANY RELIANCE ON OR USE OF THE SAME SHALL BE AT
PURCHASER'S SOLE RISK TO THE MAXIMUM EXTENT PERMITTED BY LAW, (E) THE
OWNERSHIP OR OPERATION OF THE ASSETS OR ANY PART THEREOF AND (F) THE ACCURACY
OR COMPLETENESS OF ANY REPORT, ASSESSMENT OR OTHER MATERIAL PURPORTING TO
ASSESS OR ALLOCATE PRODUCTION, RESERVES OR VALUE TO ANY ASSETS. SELLERS AND
PURCHASER ACKNOWLEDGE THAT THE WAIVERS AND DISCLAIMERS IN THIS SECTION 4.3 ARE
CONSPICUOUS.
ARTICLE V
TITLE MATTERS
5.1. Purchaser's Title Review.
(A) Purchaser shall have until June 29, 2004 (the "Final Defect
Notice Date") to notify Sellers in writing of any matters which, in
Purchaser's reasonable opinion, constitute Title Defects with respect to
Sellers' title to all or any portion of the Properties. For all purposes of
this Agreement (except, subject to Section 5.1(B), for each Seller's special
warranty of title to be contained in the Conveyance which will continue
17
thereafter and will not be affected thereby), Purchaser shall be deemed to
have waived any Title Defects which Purchaser fails to assert as Title Defects
by written notice given to Sellers on or before the Final Defect Notice Date.
To be effective, Purchaser's written notice of a Title Defect must include (i)
a brief description of the matter constituting the asserted Title Defect; (ii)
its assertion of its Proportionate Share applicable to each affected Property,
and (iii) the claimed reduction in the Base Purchase Price attributable
thereto (the "Asserted Adjustment Amount"). At the request of any Seller,
Purchaser shall also provide such Seller with all supporting documents in
Purchaser's possession reasonably necessary for such Seller (or a title
attorney or examiner hired by such Seller) to verify the existence of such
asserted Title Defect. Without limiting Purchaser's rights to otherwise
assert Title Defects hereunder, Purchaser agrees to make a good faith effort
to give Alpine written notice of all Title Defects discovered by Purchaser as
promptly as reasonably possible after the discovery by Purchaser. All costs
and expenses incurred by Purchaser in conducting its title review shall be the
obligation of Purchaser. In addition, Purchaser shall promptly furnish the
appropriate Seller with written notice of any Increased Interest discovered by
Purchaser.
(B) In addition to the rights of Sellers provided in Section 6.1(E),
Sellers shall have until the Final Cure Date, at their cost and expense, if
they so elect, but without obligation, to cure all or any portion of Title
Defects. If a Title Defect is (i) waived in writing by Purchaser, (ii) cured
(in a manner acceptable to a reasonable purchaser of oil and gas properties)
within such time or (iii) discovered by Purchaser prior to the Final Defect
Notice Date and not timely asserted, it shall be deemed a Permitted
Encumbrance hereunder.
(C) From and after the Final Defect Notice Date and until the Final
Cure Date, Purchaser shall permit any Seller and its representatives at
reasonable times during normal business hours to examine in Purchaser's
offices all such files and title opinions and make copies of any of the
instruments, agreements or other information contained therein related to any
asserted Title Defects.
(D) Notwithstanding anything herein provided to the contrary, if a
Title Defect exists by virtue of the existence of a lien or encumbrance which
is not a Permitted Encumbrance, Seller shall be deemed to have cured such
Title Defect in the event that prior to the Final Cure Date, Seller (i)
discharges such lien or encumbrance or (ii) pays to Purchaser an amount
sufficient to discharge such lien or encumbrance in those circumstances, if
any, in which Seller is unable after diligent effort to determine or locate
the party or parties to whom such payment is owing.
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5.2. Claims on Special Warranty of Title.
(A) If Purchaser receives written notice of any claim covered by the
special warranty of title set forth in the Conveyance, it shall promptly give
Sellers written notice thereof in accordance with Section 16.6.
(B) Sellers' Conveyance to Purchaser covering the Assets shall provide
that recourse for breach of the special warranty to be set forth in the
Conveyance shall be limited to a return of the Proportionate Share of the Base
Purchase Price (as may be adjusted in this Agreement) applicable to such
Properties with respect to which the warranty has been breached, without
interest thereon.
(C) Provided same have not been taken into account as an offset to any
sums required to be paid by Sellers to Purchaser resulting from Title Defects
or in Sellers' Credits (or otherwise utilized as an adjustment to the Purchase
Price), all Increased Interests (less the amount of any Defect Adjustment
Amount not utilized to adjust the Base Purchase Price) shall be taken into
account as an offset to any sums required to be paid by Sellers to Purchaser
resulting from a breach of the special warranty set forth in the Conveyance.
(D) Upon resolution of any claim asserted by Purchaser against any
Seller resulting from a breach of the special warranty set forth in the
Conveyance, Purchaser and Sellers agree to execute and record in the
appropriate records of the jurisdiction in which such Asset is located a
corrective instrument which evidences what Net Revenue Interest and Working
Interest in and to such Asset, if any, was conveyed by such Seller to
Purchaser pursuant to such Conveyance.
(E) Sellers' Conveyance to Purchaser covering the Assets shall provide
that Purchaser shall have no recourse for breach of the special warranty set
forth in the Conveyance with respect to any individual lien, charge,
encumbrance, contract, agreement, instrument, obligation, defect or
irregularity of any kind whatsoever that does not reduce the value of the
Asset affected thereby in the hands of Purchaser by more than $30,000.00.
5.3. Title Defects. For the purpose of this Agreement, a "Title Defect"
shall mean a deficiency in one (or more) of the following with respect to any
Property, other than a Permitted Encumbrance:
(A) The applicable Seller's title to such Property is subject to an
outstanding mortgage, deed of trust, lien or security interest or other
Encumbrance.
(B) The applicable Seller's title to such Property is not Defensible
Title. "Defensible Title" as used herein means with respect to a Property,
such title, that (i) entitles such Seller, throughout the duration of the
estate, to receive not less than the Net Revenue Interest for such Property
set forth in Exhibit A, and (ii) obligates such Seller, through the duration
of the estate, to pay costs and expenses relating to such Property in an
amount not greater than the Working Interest for such Property set forth in
Exhibit A.
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(C) All royalties, rentals, Xxxx clause payments, shut-in gas payments
and other payments due with respect to such Property have not been properly
and timely paid.
(D) The applicable Seller is in default under the material terms of any
Leases, farm-out agreements or other contracts or agreements respecting such
Property which could (1)prevent such Seller from receiving the proceeds of
production attributable to such Seller's interest therein, or (2)result in
cancellation of such Seller's interest therein.
(E) The terms, conditions, restrictions, exceptions, reservations,
limitations and other matters contained in the agreements, instruments and
other documents which create a Seller's interest in the Assets which are not
customary in the industry and materially impair the use, value or operation of
the Asset affected.
Any Property affected by a Title Defect shall be deemed to constitute a "Title
Defect Property."
ARTICLE VI
TITLE ADJUSTMENTS TO THE BASE PURCHASE PRICE
6.1. Title Defect Adjustments. Purchaser and Sellers shall, with
respect to each Title Defect Property, attempt to agree upon an appropriate
adjustment to the Base Purchase Price (the "Defect Adjustment Amount") to
account for such matters, in accordance with the following principles:
(A) If the Title Defect is a mortgage, lien, encumbrance or other
charge which is liquidated in amount, then the adjustment would be the amount
necessary to be paid to remove the Title Defect from the affected Property.
(B) If the Title Defect results from any Seller having a lesser Net
Revenue Interest in a Property than the Net Revenue Interest specified
therefor in Exhibit A, the Defect Adjustment Amount shall be equal to the
product obtained by multiplying the Proportionate Share of such Property by a
fraction, the numerator of which is the reduction in the Net Revenue Interest
and the denominator of which is the Net Revenue Interest specified for such
Property in Exhibit A. If the Title Defect results from any Seller having a
greater Working Interest in a Property than the Working Interest specified
therefor in Exhibit A, the Defect Adjustment Amount shall be equal to the
discounted value of the increase in the costs and expenses forecasted with
respect to such Property for the period from and after the Effective Time
which is attributable to such increase in a Seller's Working Interest. No
Defect Adjustment Amount shall be allowed on account of and to the extent that
an increase in a Seller's Working Interest in a Property has the effect of
proportionately increasing such Seller's Net Revenue Interest in such
Property.
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(C) If the Title Defect represents an obligation, encumbrance, burden,
discrepancy or charge upon or other defect in title to the affected Property
of a type not described in paragraphs (A) or (B) above, the adjustment amount
shall be determined by taking into account the Proportionate Share of the
Property so affected, the portion of the Property affected by the Title
Defect, the legal effect of the Title Defect, the potential economic effect of
the Title Defect over the life of the affected Property and such other factors
as are necessary to make a proper evaluation of the value of the Title Defect.
(D) Notwithstanding any other provision contained herein, the aggregate
adjustment attributable to the effect of all Title Defects related to a given
Property (other than those described in Section 6.1(A)) shall not exceed the
Proportionate Share of such Property.
(E) Should the Parties be unable to agree upon an appropriate
adjustment in light of the factors set forth in this Section 6.1, then Sellers
shall have the right prior to Closing to elect to either (i) refer the matter
for arbitration in accordance with the provisions of Section 6.1(G) below, in
which case, subject to Section 6.1(F), the price to be paid at Closing shall
be reduced by the average of Sellers' and Purchaser's estimates of the
diminution in the value of the Property affected thereby resulting from such
Title Defect (based in part on each Party's assertion of the applicable
Proportionate Share), or (ii) exclude the interest of Sellers in the Property
affected thereby from the transaction contemplated hereby, in which case the
Base Purchase Price will be reduced by the Proportionate Share of the Property
affected thereby asserted by Purchaser and such Property will become an
Excluded Asset. Notwithstanding anything herein provided to the contrary,
Sellers shall have the right on or before 90 days following the Closing Date
(the "Final Cure Date") to cure (in a manner acceptable to a reasonable
purchaser of oil and gas properties) any Title Defect not cured by Sellers on
or before the Closing Date which relate to a Property that was either conveyed
to Purchaser at the Closing or excluded from the sale of Assets pursuant to
Section 5.1(B). If any such Title Defect is so cured by Sellers, Purchaser
agrees to promptly pay to Sellers the amount, if any, by which the Base
Purchase Price was reduced at the Closing on account of such Title Defect, and
contemporaneously with such payment, Sellers and Buyer will execute and
deliver to each other the documents that would have been executed and
delivered in connection with the sale of such Assets at the Closing.
(F) Notwithstanding the foregoing, if the aggregate Base Purchase Price
reduction (less the amount of any adjustment for Increased Value not utilized
to increase the Base Purchase Price) attributable to the interest of all
Sellers which would result from the above provided for procedure (whether
determined at Closing or pursuant to the arbitration pursuant to Section
6.1(G) below) does not exceed 2% of the Base Purchase Price, then the Base
Purchase Price shall not be adjusted, and if pursuant to the provisions above
set forth, a Property or Properties were to be excluded from the transaction,
none of the Properties which would be excluded by such procedure shall be
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excluded. If the Base Purchase Price reduction attributable to the interest
of all Sellers which would result from the above provided for procedure
exceeds 2% of the Base Purchase Price, the Base Purchase Price shall be
adjusted by the amount by which such reduction exceeds 2% of the Base Purchase
Price. The Base Purchase Price shall not be adjusted for a particular Title
Defect unless the value of such Title Defect exceeds $30,000.
(G) If Sellers or Purchaser are unable to agree as to whether a Title
Defect exists, the Proportionate Share allocable to an affected Property or
the value to be attributable to a Title Defect prior to Closing, and Seller
has not elected to exclude the affect that Property pursuant to the provisions
of Section 6.1(E) above, then either Purchaser or Seller may elect to refer
the matter to be resolved by a Defect Expert ("Defect Expert"), to be selected
by Purchaser and Seller. Such Defect Expert shall be an attorney or other
party with not less than 15 years experience in the oil and gas industry such
that he or she is considered an expert in the subject matter pertinent to such
Title Defect. The Defect Expert may enlist the advice of either Xxxxx Xxxxx
Company or Xxxxxxxxxx & Company, Inc. with respect to any valuation issues and
any other experts as such Defect Expect shall deem reasonably necessary.
Within 10 business days after referral of such matter to the Defect Expert,
each of Purchaser and Seller shall deliver to each other and to the Defect
Expert a notice setting forth in adequate detail the issues to be determined
by the Defect Expert and the decision (on a word for word basis) that such
party desires the Defect Expert to make with respect to the issues being
determined (the "Decision Notice"). Within two (2) business days after giving
of the two Decision Notices, the Parties shall attend a meeting with the
Defect Expert at a mutually acceptable time and place to discuss fully the
content of such Decision Notice and based thereon whether either or both wish
to modify their Decision Notices in any way. Any such modifications shall be
discussed, so that when each party finalizes its Decision Notice, it shall do
so with full knowledge of the content of the other parties' final Decision
Notice. The finalization of such Decision Notices and the delivery of same by
each party to the other shall occur at such meeting unless by mutual agreement
they agree to have one or more additional meetings for such purposes. The
Defect Expert shall be required to adopt a decision set forth in either
Decision Notice and shall have no power to reach any other result. Such Defect
Expert shall adopt a decision that in his or her judgment is more fair and
equitable and in conformity with the principles set forth in Sections 6.1(A)
through (D), his or her opinion of the Proportionate Share of the affected
Property, the likelihood of its economic effect on the affected Property and
such other reasonable and customary standards as are applicable to the
situation. The decision, to be made in writing and signed by the Defect Expert
shall determine such dispute. Such decision shall be made, signed and
delivered to the parties at the meeting unless otherwise agreed by the
parties. The expenses of the Defect Expert and any other expert retained by
the Defect Expert shall be borne one-half by Sellers and one-half by Purchaser
except that such party shall pay fees and expenses of its counsel, witnesses
and employees. The determination and award of the Defect Expert shall be final
and binding upon the parties and judgment may be entered thereon in any court
of competent jurisdiction upon the application therefore of either party.
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Within five (5) business days from the execution of such decision, any payment
resulting from the decision shall be made, together with interest on the
amount of such payment at the rate of six percent (6 %) per annum.
(H) Notwithstanding anything to the contrary herein, if the sum of the
Asserted Adjustment Amounts for the matters constituting asserted Title
Defects exceeds ten percent (10%) of the Base Purchase Price, Sellers and
Purchaser shall each have the right to terminate this Agreement upon written
notice to the other Party.
6.2. Increased Interests Adjustments. Seller shall be entitled to an
upward adjustment in the Base Purchase Price for any Increased Interest to the
extent contemplated by the terms of this Section 6.2. The "Increased Value"
for a Property on account of an Increased Interest shall be determined as
follows:
(1) if the Increased Interest results from a Seller having a
greater Net Revenue Interest in a Property than the Net Revenue Interest
specified therefor in the Exhibit A, the Increased Value shall be equal to the
product obtained by multiplying the Proportionate Share of such Property by a
fraction, the numerator of which is the increase in the Net Revenue Interest
and the denominator of which is the Net Revenue Interest specified for such
Property in Exhibit A.
(2) If the Increased Interest results from a Seller having a
lesser Working Interest in a Property than the Working Interest specified
therefor in Exhibit A, the Increased Value shall be equal to the discounted
value of the decrease in the costs and expenses forecasted in the Reserve
Report with respect to such Property for the period from and after the
Effective Time which is attributable to such decrease in a Seller's Working
Interest. No Increased Interest shall be allowed on account of and to the
extent that a decrease in a Seller's Working Interest in a Property has the
effect of proportionately decreasing such Seller's Net Revenue Interest in
such Property.
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If Purchaser agrees with the Increased Value proposed by Sellers in their
notice of Increased Interest as set forth in Section 3.3(A)(3), then subject
to the immediately following sentence, the Base Purchase Price shall be
adjusted by such amount to account for such matter; and (b) if Purchaser
disagrees with the Increased Value proposed by Sellers in their notice of
Increased Interest, the Parties shall engage in good faith negotiations in an
attempt to agree upon an appropriate adjustment to the Base Purchase Price for
such matter; provided that if the Parties are unable to reach agreement upon
an appropriate adjustment after 10 calendar days, then the matter shall be
resolved in accordance with the provisions of Section 6.1(E) and 6.1(G)
(subject to the limitations in Sections 6.1(F)). If the aggregate Base
Purchase Price increase attributable to the interest of all Sellers which
would result from the above provided for procedure (whether determined at
Closing or pursuant to the arbitration pursuant to Section 6.1(G) above) (less
the amount of any Defect Adjustment Amount not utilized to decrease the Base
Purchase Price) does not exceed 2% of the Base Purchase Price, then the Base
Purchase Price shall not be adjusted. If the Base Purchase Price increase
attributable to the interest of all Sellers which would result from the above
provided for procedure exceeds 2% of the Base Purchase Price, the Base
Purchase Price shall be adjusted by the amount by which such increase exceeds
2% of the Base Purchase Price. The Base Purchase Price shall not be adjusted
for a particular Increased Interest unless the value of such Increased
Interest exceeds $30,000.
6.3. Casualty Loss. If prior to Closing, an Asset is damaged or
destroyed by fire or other casualty:
(A) at Sellers' option, such Asset shall be deleted from this Agreement
and shall become an Excluded Asset and Purchaser shall be entitled to a
downward adjustment in the Base Purchase Price equal to the allocated value of
such Asset as determined in the same manner as Defect Adjustment Amounts set
forth in Section 6.1; or
(B) if the Parties agree in writing, such Asset shall not be deleted
from this Agreement, the Base Purchase Price shall not be adjusted, and
Purchaser shall be entitled to all claims under insurance policies or other
claims with respect to such damage or destruction.
ARTICLE VII
COVENANTS OF SELLERS
7.1. Access to Records. Each Seller shall make a good faith effort to
give Purchaser and its attorneys and other authorized representatives at any
reasonable times prior to Closing, at Purchaser's sole cost, risk and expense,
and at such Seller's office, access to the Records to the extent in the
possession of such Seller. No Seller shall have any obligation to provide
Purchaser access to any data or information which such Seller cannot legally
provide because of third party restrictions on such Seller, provided that such
Seller shall exercise reasonable efforts (at no expense to such Seller) to
cause such third parties to waive such restrictions. No Seller shall have any
obligation to obtain any title opinions, abstracts of title or other title
information not in such Seller's possession. Purchaser recognizes and agrees
that all materials made available to it (whether pursuant to this Section 7.1
or otherwise) in connection with the transactions contemplated hereby are made
available to it as an accommodation, and without any representation, warranty
or covenant of any kind as to the accuracy and completeness of such materials,
except as expressly set forth in Article IV.
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7.2. Access to Xxxxx and Lands. From and after execution of this
Agreement, Sellers shall exercise reasonable commercial efforts to provide
Purchaser access to the Xxxxx and Lands to allow Purchaser to conduct such
physical and operational examinations as Purchaser deemed necessary. Such
access shall be coordinated among Sellers and Purchaser, and to the extent a
Property is operated by a third party, with the applicable operator.
Purchaser's access to the Xxxxx and Lands for the purposes of, and the conduct
of environmental due diligence shall be governed by the provisions of Article
XIII. Without in any way limiting the Parties respective rights under Section
13.1, without the prior written consent of Sellers, Purchaser shall not
conduct soil and water tests and borings or other tests.
Upon the occurrence of the Closing, but without in any way limiting any
Seller's liability for any breach by it of any representation or warranty
contained in this Agreement (to the extent same survives the Closing),
Purchaser shall be deemed to have acknowledged that it has been provided
access to all the Assets, including without limitation the Xxxxx and Lands,
and that it has conducted and satisfied itself with respect to any such
physical, environmental and operational examinations.
Purchaser waives and releases all claims against each Seller, its parent
or subsidiary companies or other affiliates, and its and their directors,
officers, employees and agents, for injury to, or death of, persons or for
damage to property arising in any way from the conduct of the investigations
and examinations contemplated by this Section 7.2 (or the exercise of rights
of access under Sections 7.1 and/or 13.1) or the conduct of its employees,
agents or contractors in connection with such investigations and examinations
(or the exercise of such rights of access). Purchaser shall indemnify each
Seller, its parent and subsidiary companies and other affiliates, and its and
their directors, officers, employees and agents from and against any and all
claims, actions, liabilities, losses, damages, costs or expenses (including
court costs and attorney fees for a defense to be provided by Purchaser, but
not otherwise, unless Purchaser fails to provide a timely defense) whatsoever
arising out of the exercise of such rights of investigation and examination
(or exercise of such rights of access), including without limitation, pursuant
to Section 13.1(B). THE FOREGOING RELEASE AND INDEMNIFICATION SHALL APPLY
WHETHER OR NOT SUCH CLAIMS, ACTIONS, CAUSES OF ACTION, LIABILITIES, DAMAGES,
LOSSES, COSTS, OR EXPENSES ARISE OUT OF (i) NEGLIGENCE (INCLUDING SOLE
NEGLIGENCE, SINGLE NEGLIGENCE, CONCURRENT NEGLIGENCE, ACTIVE NEGLIGENCE, OR
PASSIVE NEGLIGENCE, BUT EXPRESSLY NOT INCLUDING GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT) OF SELLER OR ANY OTHER INDEMNIFIED PARTY, OR (ii) STRICT
LIABILITY.
7.3. Operations. During the period from the date of this Agreement
through the Closing, each Seller shall continue to conduct its business in the
ordinary course consistent with past practice. No Seller shall enter into or
assume any contract or commitment that is not in the ordinary course of
business as heretofore conducted, and each Seller shall carry on its business
and operate its assets as a reasonably prudent operator. Notwithstanding the
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foregoing, subject to existing contractual obligations, no Seller shall
conduct, or commit to participate in, any operation on the Assets included
herein and owned, leased or operated by such Seller, or lands pooled or
unitized therewith, without Purchaser's prior written consent, which shall not
be unreasonably withheld. However, any Seller may take such steps and incur
such expenses as (i) are attributable to the period of time prior to the
Effective Time; (ii) do not exceed $50,000 net to Sellers' interest with
respect to any individual operation or $500,000 in the aggregate, (iii) are
necessary to maintain in effect Seller's rights to any Asset or (iv) that such
Seller deems necessary in its sole discretion to deal with an emergency to
safeguard any part of the Assets without first consulting with the Purchaser.
As soon as possible after taking such action contemplated by clauses (iii) or
(iv) above, such Seller shall advise the Purchaser of such action. In
addition to the foregoing, each Seller covenants that from the date hereof to
the Closing Date, except (a) as expressly provided herein, (b) as required by
any Existing Contract or (c) as otherwise consented to in writing by the
Purchaser, such Seller will:
(A)(i) not sell, dispose of, encumber, relinquish or otherwise
alienate any of the Assets (other than relinquishments resulting from the
expiration of leases that such Seller has no right or option to renew or sale
of production in the ordinary course of business); (ii) not waive, compromise
or settle any material right or claim which would otherwise form a part of or
relate to the Assets (for the purpose of this clause the term "material" shall
mean any right or claim which would reasonably be expected to have a value in
excess of $50,000); or (iii) not terminate, materially amend or extend any
Material Contract, or allow any Material Contract to lapse, terminate or
otherwise expire, other than in accordance with its terms;
(B) to the extent reasonably available, maintain in effect
insurance providing insurance coverage substantially similar to the insurance
maintained in effect by such Seller with respect to the Assets owned by such
Seller on the date of this Agreement; and
(C) give prompt written notice to the Purchaser of any notice of
default (or written threat of default) with respect to any Material Contract
related to the Assets owned by such Seller or to the extent received or given
by such Seller.
7.4. Cooperation. Prior to Closing Sellers shall cooperate with
Purchaser to assist Purchaser in carrying out the agreements of Purchaser
hereunder. Sellers shall cooperate with Purchaser to cause to be prepared the
documents listed in Sections 11.1(I) and 11.1(K).
ARTICLE VIII
COVENANTS OF PURCHASER
8.1. Cooperation. Prior to Closing, Purchaser shall cooperate with
Sellers to assist Sellers in carrying out the agreements of Sellers hereunder.
Purchaser shall cause to be prepared the documents listed in Sections 11.1(I)
and 11.1(K).
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8.2. Legal Existence. Purchaser shall maintain its legal status, and
shall assure that as of the Closing Date, it will not be under any material
legal or contractual restriction that would prohibit or delay the timely
consummation of the transactions contemplated herein.
8.3. Confidentiality. Purchaser acknowledges that, pursuant to its
right of access to the Records, Purchaser will become privy to confidential
information of each Seller and that communication of such confidential
information to third parties (unless such communication of information is
authorized in writing by such Seller prior to disclosure) could cause
irreparable injury to such Seller if the transactions contemplated in this
Agreement are not consummated. Notwithstanding the foregoing provisions of
this Section 8.3, Purchaser shall continue to be bound by the Confidentiality
Agreement.
8.4. Non-Solicitation. For a period of one year from the Closing Date,
Purchaser will not, directly or indirectly, without the prior written consent
of Sellers, solicit for employment any employee or consultant of any Seller or
any subsidiaries of any Seller (other than any person working in the field)
with whom Purchaser has had contact or who became known to Purchaser in
connection with Purchaser's consideration of the transaction evidenced by this
Agreement. Notwithstanding the foregoing, so long as Purchaser is not in
breach of the immediately preceding sentence, Purchaser shall be free to hire
any employee or consultant of any Seller or any subsidiary of any Seller.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of each Seller under this Agreement are subject to the
satisfaction at or prior to the Closing Date, of the following conditions:
9.1. The representations and warranties of Purchaser contained in this
Agreement shall be true and correct in all material respects at and as of the
date of the Closing Date.
9.2. Purchaser shall have performed and complied with, or caused the
performance of and compliance with, in all material respects, all the
obligations, terms, conditions, and agreements required by this Agreement to
be performed or complied with by Purchaser on or prior to the Closing Date.
9.3. As of the Closing Date, no suit, action or other proceeding
(excluding any such matter initiated by any Seller or any of its Affiliates)
shall be pending or threatened before any court or governmental agency seeking
to restrain or prohibit the Closing or seeking damages in connection with the
consummation of this Agreement.
9.4. Seller shall have received a certificate dated as of the Closing
Date, executed by a duly authorized officer of Purchaser, to the effect that
to such officer's knowledge, the conditions set forth in Sections 9.1 and 9.2
have been satisfied.
9.5. Purchaser shall have complied with each of its obligations under
Section 11.1.
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ARTICLE X
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser under this Agreement are subject to the
satisfaction, at or prior to the Closing Date, of the following conditions:
10.1. The representations and warranties of each Seller contained in
this Agreement shall be true and correct in all material respects at and as of
the Closing Date.
10.2. Each Seller will have performed and complied with, or caused the
performance and compliance with, in all material respects, all the
obligations, terms, conditions, and agreements required by this Agreement to
be performed or complied with by such Seller on or prior to the Closing Date.
10.3. As of the Closing Date, no suit, action or other proceeding
(excluding any such matter initiated by Purchaser or any of its Affiliates)
shall be pending or threatened before any court or governmental agency seeking
to restrain or prohibit the Closing or seeking damages in connection with the
consummation of this Agreement.
10.4. Purchaser shall have received a certificate from each Seller dated
as of the Closing Date, executed by, in the case of a Seller that is a
partnership, a duly authorized officer of the General Partner of such Seller,
and in the case of a Seller that is a corporation, a duly authorized officer
of such Seller, to the effect that to such officer's knowledge, the conditions
set forth in Sections 10.1 and 10.2 with respect to such Seller have been
satisfied.
10.5. Each Seller shall have complied with each of its obligations under
Section 11.1.
ARTICLE XI
CLOSING
11.1. The closing of the purchase and sale (the "Closing") shall be held
on June 30, 2004 (the "Closing Date") at the offices of Akin, Gump, Strauss,
Xxxxx & Xxxx, LLP in Xxxxxxx, Xxxxx 00000, or at such other place as Sellers
may designate, or at such other time and place as Sellers and Purchaser may
mutually agree in writing. Should Purchaser be prevented from wiring the
Purchase Price funds at Closing by reason of the closing of the Federal
Reserve Bank or interruption to the fed funds wire due to acts or forces
beyond the control of the parties hereto, Purchaser's obligation to Close
shall be extended until the reopening of the affected Federal Reserve Bank or
the fed funds wire. At Closing the following will occur:
(A) Each Seller shall execute, acknowledge and deliver to Purchaser the
Conveyances.
(B) Sellers shall execute and deliver to Purchaser the Preliminary
Settlement Statement which was delivered to Purchaser by Sellers in accordance
with Section 3.3(C) reflecting each adjustment pursuant to Section 3.1 as
applied at the Closing Date, each of which shall be calculated using the best
information available as of the date or dates immediately preceding the
Closing and the resulting Closing Purchase Price (the "Closing Purchase
Price").
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(C) Purchaser shall deliver to Sellers by means of a completed Federal
Funds wire transfer to the account designated by Alpine an amount equal to the
Closing Purchase Price less the Deposit (plus the Return on Deposit earned
thereon as contemplated by Section 3.2).
(D) Sellers shall execute (and, where required, acknowledge) and
deliver to Purchaser forms of conveyance or assignment as required by the
applicable authorities for transfers of interests in state or federal leases
included in the Assets.
(E) Each Seller shall deliver to Purchaser, subject to the terms of the
Leases and Existing Contracts, possession of the Assets effective as of the
Effective Time.
(F) Each Seller shall execute and deliver to Purchaser the certificate
described in Section 10.4.
(G) Purchaser shall execute and deliver to Sellers the certificate
described in Section 9.4.
(H) Each Seller shall execute and deliver to Purchaser an Affidavit of
Non-foreign Status, substantially in the form attached as Exhibit D hereto.
(I) Each Seller shall execute and deliver to Purchaser letters in lieu
of division orders relating to the Assets owned by it in form reasonably
necessary to authorize purchasers of production to pay Purchaser.
(J) Sellers shall execute and deliver to Purchaser such other documents
as may be reasonably necessary to convey the Assets to Purchaser in accordance
with the terms and provisions of this Agreement if requested by Purchaser not
less than 2 days prior to Closing.
(K) Purchaser shall (a) furnish to any Seller such evidence (including,
without limitation, evidence of satisfaction of all applicable bonding
requirements) as such Seller may reasonably require that Purchaser is
qualified with the applicable governmental authorities to succeed such Seller
as the owner and, where applicable, the operator of the Assets; and (b) with
respect to properties where Purchaser becomes operator, execute and deliver to
each Seller appropriate evidence reflecting change of operator as required by
all applicable governmental authorities. If necessary, Purchaser shall
execute and deliver to Sellers such forms as Sellers may reasonably request
for filing with the applicable authorities to reflect Purchaser's assumption
of plugging and abandonment liabilities with respect to the Xxxxx.
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As promptly as reasonably possible following the Closing, Seller shall
make available for delivery to Purchaser at Sellers' offices all lease files
and contracts, land files, well files, gas and oil sales, production and
balancing files, gas processing files, division order files, abstracts, title
opinions, land surveys, geologic and geophysical data and information, logs,
maps, engineering data and reports, excluding the Excluded Records, insofar as
the same are directly related to the ownership or use of the Assets (the
"Records").
Article XII
Assumption of Obligations, Indemnities
12.1. Purchaser Assumed Obligations. At Closing, without limiting
Purchaser's remedies as set forth in Sections 12.2 and 12.3 below, Purchaser
shall assume the following (the "Assumed Obligations"): (a) all environmental
obligations or liabilities of Sellers relating to the Assets that are
attributable to the ownership or operation of the Assets to the extent (i)
occurring prior to or on or after the Effective Time, or (ii) relating to
events occurring or conditions existing prior to or on or after the Effective
Time, including without limitation, (1) the obligations to, in accordance with
all applicable laws and agreements, (i) plug and abandon (and restore the
surface) or remove and dispose of all Xxxxx, platforms, structures, flowlines,
pipelines, and the other equipment and Personal Property now or hereafter
located on the Lands or included in the Assets (regardless of when such well,
platform, structure, flow lines, pipeline and other equipment and Personal
Property was drilled or placed on the Lands), (ii) cap and bury all flow lines
and other pipelines now or hereafter located on the Lands or included in the
Assets and (iii) dispose of naturally occurring radioactive material ("NORM")
and all other substances, chemicals or wastes now or hereafter located on the
Lands; (b) all obligations and liabilities arising from or in connection with
any gas production, pipeline, storage, processing or other imbalance
attributable to substances produced from the Lands on or after the Effective
Time; (c) obligations under all Existing Contracts accruing or attributable to
the period on or after the Effective Time; (d) all obligations and liabilities
relating to the Assets that are attributable to the ownership or operation of
the Assets to the extent occurring after the Effective Time; and (e) the
obligation to account for the net profits interests related to the Assets
accruing after the Effective Time, if any, which are set forth on Schedule
12.1.
12.2. Other Obligations Not Assumed. Except as set forth in Section
12.1, Purchaser does not assume any other obligations relating to the Assets.
12.3. Indemnification by Sellers. Subject to the limitations set forth
in this Agreement, after the Closing, each Seller shall pay on a current
basis, and shall indemnify, save, hold harmless, discharge, defend and release
Purchaser, all of its Affiliates, successors and permitted assigns, and all of
its and their respective partners, shareholders, directors, officers,
employees, agents and representatives (collectively "Purchaser Indemnified
Parties") from and against any and all Liabilities arising from, based upon,
related to or associated with (a) the Excluded Assets, (b) the breach or
inaccuracy of any representation, warranty, covenant or agreement of any
Seller made in this Agreement, to the extent and limited to the time period
during which the same survives the Closing, and (c) the fees of any advisors,
brokers or finders retained or engaged by any Seller in connection with the
transactions contemplated in this Agreement.
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12.4. Indemnification by Purchaser. Subject to the limitations set
forth in this Agreement, after the Closing, Purchaser shall pay on a current
basis, and shall indemnify, save, hold harmless, discharge, defend and release
each Seller, all of its Affiliates, successors and permitted assigns, and all
of its and their respective partners, shareholders, directors, officers,
employees agents and representatives (collectively "Sellers Indemnified
Parties") from and against any and all Liabilities arising from, based upon,
related to or associated with (a) any Assumed Obligation, (b) the breach or
inaccuracy of any representation, warranty, covenant or agreement of Purchaser
made in this Agreement, and (c) the fees of any advisors, brokers or finders
retained or engaged by Purchaser in connection with the transactions
contemplated in this Agreement.
12.5. Liability Limitations.
(A) After Closing, any assertion by Purchaser that any Seller is
liable under the terms of the indemnities provided by Section 12.3(b) must be
made by Purchaser in writing and must be given to such Seller on or prior to
90th day after the Closing Date (except as set forth in paragraph (B) below).
Any notice to such Seller shall state the facts known to Purchaser that give
rise to such notice in sufficient detail to allow such Seller to evaluate the
assertion.
(B) The representations and warranties of the Parties in Article IV
and the covenants and agreements of the Parties in Article VII and Article
VIII, and the corresponding representations and warranties given in any
certificates delivered at the Closing, as applicable, shall survive the
Closing for a period of ninety (90) days, provided, however, that the
representations and warranties set forth in Section 4.1(H), (I) and (N) shall
terminate at and shall not survive the Closing. The remainder of this
Agreement shall survive the Closing without time limit except as may otherwise
be expressly provided herein but subject to the applicable statutes of
limitations and similar Laws. Subject to Section 12.5 (C), representations,
warranties, covenants, and agreements shall be of no further force and effect
after the date of their expiration.
(C) The indemnities in Sections 12.3(b) and 12.4(b) shall terminate as
of the termination date, if any, of each respective representation, warranty,
covenant, or agreement that is subject to indemnification, except in each case
as to matters for which a specific written claim for indemnity has been
delivered to the Indemnifying Party on or before such termination date. The
indemnities in Sections 7.2, 12.3(a) and (c), 12.4 (a) and (c), and 16.4 shall
continue without time limit, but subject to the applicable statutes of
limitations and similar Laws.
(D) None of the Purchaser Indemnified Parties shall be entitled to
assert any right to indemnification hereunder or to otherwise seek any damages
or other remedies for or in connection with (a) the inaccuracy of any
representation or warranty of any Seller contained in or related to this
Agreement or in any other agreement, instrument, document or certificate
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executed or delivered in connection with this Agreement (other than the
special warranty of title set forth in the Conveyance); (b) the breach of, or
failure to perform or satisfy any of the covenants of any Seller set forth in
or related to this Agreement or in any other agreement, instrument, document
or certificate executed or delivered in connection with this Agreement (other
than those set forth in Article XVI hereof); or (c) any liabilities otherwise
arising in connection with or with respect to the transactions contemplated in
this Agreement, except as set forth in Section 14.2; until the aggregate
amount of the Liabilities for such misrepresentations and breaches actually
suffered by Purchaser exceeds Five Million Dollars ($5,000,000) (the
"Threshold Amount"); provided however, once such amount exceeds the Threshold
Amount, the Purchaser Indemnified Parties will be entitled to recover all
amounts to which they are entitled in excess of the Threshold Amount. The Base
Purchase Price shall not be adjusted for a particular claim for indemnity
under this Agreement unless the value of such claim exceeds $30,000.
(E) Notwithstanding anything contained in this Article XII to the
contrary, Sellers' maximum liability for any claims for indemnity under this
Agreement shall be limited to Five Million Dollars ($5,000,000). Sellers shall
have no liability hereunder for breach of any representation or warranty of
any Seller to the extent Purchaser discovers prior to the Closing Date that
such representation or warranty is untrue.
(F) NONE OF THE PURCHASER INDEMNIFIED PARTIES NOR THE SELLERS
INDEMNIFIED PARTIES SHALL BE ENTITLED TO RECOVER FROM SELLERS OR PURCHASER,
RESPECTIVELY, FOR ANY LOSSES, COSTS, EXPENSES, LIABILITIES OR DAMAGES ARISING
UNDER THIS AGREEMENT, OR IN CONNECTION WITH OR RESPECT TO THE TRANSACTIONS
CONTEMPLATED IN THIS AGREEMENT, ANY AMOUNT IN EXCESS OF THE ACTUAL
COMPENSATORY DAMAGES, COURT COSTS AND REASONABLE ATTORNEY FEES, SUFFERED BY
SUCH PARTY. PURCHASER ON BEHALF OF EACH OF THE PURCHASER INDEMNIFIED PARTIES
AND SELLER ON BEHALF OF EACH OF THE SELLERS INDEMNIFIED PARTIES WAIVES ANY
RIGHT TO RECOVER PUNITIVE, SPECIAL, EXEMPLARY AND CONSEQUENTIAL DAMAGES
ARISING IN CONNECTION WITH OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED IN
THIS AGREEMENT. This Section 12.5(F) shall not limit the right of either the
Purchaser Indemnified Parties or the Sellers Indemnified Parties to recover
punitive, special, exemplary and consequential damages paid to a third party
pursuant to a claim that is otherwise indemnifiable under this Agreement.
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(G) Each Person entitled to indemnification hereunder or otherwise to
damages in connection with the transactions contemplated in this Agreement
shall take all reasonable steps to mitigate all losses, costs, expenses and
damages after becoming aware of any event or circumstance that could
reasonably be expected to give rise to any losses, costs, expenses and damages
that are indemnifiable or recoverable hereunder or in connection herewith.
(H) The amount of any Liabilities for which any of the Purchaser
Indemnified Parties or Sellers Indemnified Parties is entitled to
indemnification or other compensation under this agreement or in connection
with or with respect to the transactions contemplated in this Agreement shall
be reduced by any corresponding (a) tax benefit recognized or (b) insurance
proceeds realized by such party under any relevant insurance arrangements.
(I) Except for liabilities based on actual fraud and other remedies
that, in each case, may not be waived by the operation of law to the extent
that such may not be waived or limited ("Non-Waivable Claims"), if the Closing
occurs, the sole and exclusive remedy of the Purchaser Indemnified Parties
with respect to the purchase and sale of the Assets, including without
limitations, the breaches of representations, warranties, covenants and
agreements, and the affirmations of such representations, warranties,
covenants and agreements contained in the certificate delivered pursuant to
Section 10.4, shall be pursuant to the express indemnification provisions of
this Article XII. If the Closing occurs, Purchaser on behalf of each of the
Purchaser Indemnified Parties shall be deemed to have waived or limited to the
fullest extent permitted under applicable Law, any and all rights, claims and
causes of action (other than those relating to Non-Waivable Claims) it may
have against any Seller or any of its Affiliates arising under or based on any
federal, state or local statute, law, ordinance, rule or regulation or common
law (this sentence does not limit claims under the express indemnification
provisions of this Agreement). Except for the remedies contained in Section
12.4 and any other remedies available to Purchaser at law or in equity that
has not been waived herein, Purchaser releases, remises and forever discharges
Sellers Indemnified Parties from any and all suits, legal or administrative
proceedings actions, damages, losses, costs, liabilities, interest, or causes
of action, whatsoever, in law or equity, know or unknown, which Purchaser
might now or subsequently may have, based on, relating to or arising out of
this Agreement, even if caused in whole or in part by the negligence (whether
sole, joint or concurrent), strict liability, or other legal fault of any
released person or entity. For the avoidance of doubt, the foregoing
includes, without limitation, any rights under agreements between any Seller
and any Affiliate of any Seller to the extent such Seller/Affiliate agreements
are disclosed on any Schedule hereto.
(J) WAIVER OF CONSUMER RIGHTS. TO THE EXTENT APPLICABLE TO THE ASSETS
OR ANY PORTION THEREOF, PURCHASER HEREBY WAIVES ITS RIGHTS UNDER THE
PROVISIONS OF THE TEXAS DECEPTIVE TRADE PRACTICES CONSUMER PROTECTION ACT,
CHAPTER 17, SUBCHAPTER E, SECTIONS 17.41 THROUGH 17.63, INCLUSIVE (OTHER THAN
33
SECTION 17.555, WHICH IS NOT WAIVED), OF THE TEXAS BUSINESS & COMMERCIAL CODE
(A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS). AFTER
CONSULTATION WITH AN ATTORNEY OF ITS CHOICE, PURCHASER VOLUNTARILY CONSENTS TO
THIS WAIVER.
12.6. Indemnification Procedures.
(A) For purposes of this Section 12.6, the term "Indemnifying Party"
when used in connection with particular Liabilities shall mean the party or
parties having an obligation to indemnify another party or parties with
respect to such Liabilities pursuant to this Article XII. The term
"Indemnified Party" when used in connection with particular Liabilities shall
mean the party or parties having the right to be indemnified with respect to
such Liabilities by another party or parties pursuant to this Article XII.
(B) To make a claim for indemnification under this Article XII (a
"Claim"), an Indemnified Party shall notify the Indemnifying Party of the
Claim, including the specific details thereof and specific basis therefor (the
"Claim Notice"). In the event that the Claim is based upon a claim by a third
party against the Indemnified Party, the Indemnified Party shall provide its
Claim Notice promptly after the Indemnified Party has actual knowledge of the
Claim and shall enclose a copy of all papers (if any) served with respect to
the Claim; provided that the failure of any Indemnified Party to give notice
of a Claim as provided in this Section 12.6(B) shall not relieve the
Indemnifying Party of its obligations under Section 12.6(B), except to the
extent such failure results in insufficient time being available to permit the
Indemnifying Party to effectively defend against the Claim or otherwise
prejudices the Indemnifying Party's ability to defend against the Claim. In
the event that the Claim is based upon an inaccuracy or breach of a
representation, warranty, covenant or agreement, the Claim Notice shall
specify the representation, warranty, covenant or Agreement that was
inaccurate or breached.
(C) The Indemnifying Party shall have 30 days from its receipt of the
Claim Notice to (i) cure the Liabilities complained of or (ii) assuming that
it has admitted in writing its liability for such Claim, notify the
Indemnified Party whether it elects to initially assume the defense of such
Claim. The Indemnified Party is authorized, prior to Seller's election to
assume such defense, to file any motion, answer or other pleading that it
shall deem necessary or appropriate to protect its interests or those of the
Indemnifying Party and that is not prejudicial to the Indemnifying Party.
Nothing contained herein shall limit an Indemnified Party's right to elect to
terminate such defense after a reasonable time following notice to the
Indemnified Party of such election.
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(D) If the Indemnifying Party elects to assume such defense, it shall
have the right and obligation to diligently defend, at its sole cost and
expense, the Claim. The Indemnifying Party shall have full control of such
defense and proceedings, including any compromise or settlement thereof. The
Indemnified Party may, at its sole cost and expense, participate in, but not
control, any defense or settlement of any Claim controlled by the Indemnifying
Party pursuant to this Section 12.6. An Indemnifying Party shall not, without
the written consent of the Indemnified Party, (i) settle any Claim or consent
to the entry of any judgment with respect thereto which does not include an
unconditional written release of the Indemnified Party from all liability in
respect of such Claim or (ii) settle any Claim or consent to the entry of any
judgment with respect thereto in any manner that may materially and adversely
affect the Indemnified Party (other than as a result of money damages covered
by the indemnity).
(E) If the Indemnifying Party does not elect to assume such defense
(or after having elected to assume such defense, thereafter elects to
terminate such defense or fails to diligently defend same), then the
Indemnified Party shall have the right to defend against the Claim with
counsel of the Indemnified Party's choosing. If, at the time of a proposed
settlement, the Indemnifying Party has not admitted its liability, the
Indemnified Party shall send written notice to the Indemnifying Party of such
proposed settlement and the Indemnifying Party shall for 10 days following
receipt of such notice, have the right to (iii) admit in writing its liability
for the Claim and (iv) if liability is so admitted, reject, in its reasonable
judgment, the proposed settlement.
(F) With respect to a Claim that does not involve a third party claim,
if the Indemnifying Party disputes its responsibility with respect to such
Claim, there shall be deemed to be a dispute which shall be resolved in
accordance with Article XV.
ARTICLE XIII
ENVIRONMENTAL MATTERS
13.1. Environmental Access and Liability.
(A) No Seller makes any warranty or representation, express, implied,
statutory or otherwise, with respect to the environmental condition any of the
Assets, including without limitation the Xxxxx and Lands, other than those set
forth in Section 4.1(G). Purchaser's sole and exclusive remedy with respect
to environmental matters shall be limited to termination of this Agreement as
provided in Section 14.1(D) or termination of this Agreement for a breach of
the representation and warranty set forth in Section 4.1(G) as provided in
Section 14.3(B).
35
(B) Sellers, to the extent they have such rights, shall cause
Purchaser to be provided immediate and uninterrupted access to the Assets for
the purpose of conducting, at Purchaser's option, an environmental assessment
(not to exceed a Phase I environmental assessment) (an "Assessment") of all or
any portion of the Assets to be conducted by any of Purchaser's employees or
contractors of its choosing. The Assessment shall be conducted at the sole
risk, cost and expense of Purchaser and shall be subject to the provisions of
Section 7.2, including the indemnity provisions thereof. Except for the
Assessment, Purchaser shall not conduct any activities related to any
environmental assessment, including without limitation, soil and water tests,
and boring and other tests.
13.2. Termination for Material Environmental Matter. Purchaser shall
have until 5:00 pm Central clock time on June 23, 2004 (the "Environmental
Matters Notice Date") to notify Sellers in writing of any matters which in
Purchaser's reasonable opinion, constitute Material Environmental Matters.
Purchaser's written notice shall include a detailed description of the matters
asserted as Material Environmental Matters.
The term "Material Environmental Matters" shall mean one or more obligations
under any Environmental Laws (i) for which Purchaser shall have aggregate
liability after Closing in excess of two percent (2%) of the Base Purchase
Price and (ii) that arise in connection with any activities or operations (or
their omission) that occurred or were conducted on, or in connection with the
Assets, on or prior to the Environmental Matters Notice Date (including
without limitation, storage, transportation or disposal of Hazardous
substances).
If Purchaser asserts Material Environmental Matters, Sellers shall have the
right to terminate this Agreement in accordance with Article XIV.
Purchaser shall have the right to terminate this Agreement if there exists
Material Environmental Matters, provided, however if Sellers dispute the
existence of Material Environmental Matters, there shall be a Dispute to be
resolved in accordance with the procedure set forth in Article XV. If
Purchaser elects to terminate this Agreement on the basis of Material
Environmental Matters, and it is subsequently determined under Article XV that
Material Environmental Matters did not exist, then such termination by
Purchaser shall constitute a breach of this Agreement.
13.3. NORM. It is expressly recognized that the land covered by the
Leases with surface facilities and production equipment located thereon,
having been used in connection with oil and gas production activities, may
contain NORM as a result of these operations. Accordingly, lands, surface
facilities, and production equipment transferred herein are transferred with
the restriction that they will be used only in connection with oil and gas
producing activities associated with these Leases, and will not be
subsequently transferred for unrestricted use unless and until the
concentrations of NORM associated therewith are below the levels specified as
allowable for unrestricted transfer as set forth in any regulations, and
subsequent amendments thereto. Additionally, Purchaser agrees to comply with
all laws and regulations applicable to said lands, surface facilities, and
production equipment relating to NORM.
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ARTICLE XIV
TERMINATION OF AGREEMENT
14.1. Termination Events. This Agreement and the transactions
contemplated hereby may be terminated upon written notice from the Party
electing to terminate this Agreement, in the following instances and in no
other instances:
(A) By Sellers if the conditions set forth in Article IX are not
satisfied in all materials respects or waived by Sellers as of the Closing
Date.
(B) By Purchaser if the conditions set forth in Article X are not
satisfied in all material respects or waived by Purchaser as of Closing Date.
(C) By Sellers or Purchaser in accordance with Section 6.1(H).
(D) By Sellers if Purchaser asserts Material Environmental Matters or
by Purchaser if there exist Material Environmental Matters, as provided in and
subject to Section 13.2 .
(E) By a non breaching Party pursuant to Section 14.3(B).
14.2. Liabilities Upon Termination. If this Agreement is terminated
pursuant to this Article XIV, subject to Sections 3.2 and 14.3, all
obligations of the Parties under this Agreement will terminate, and no Party
will have any further liability to the other Party, except that, subject to
Section 14.3(B) below, (i) such termination will be without prejudice to any
claim which any Party may have against the other Party for breach of this
Agreement that occurred prior to the date of termination; and (ii) nothing
herein shall relieve any Party from liability for its willful failure to
satisfy any conditions to Closing required to be satisfied by it.
14.3. Application of Deposit Upon Termination.
(A) If this Agreement is terminated as a result of a material breach
by Purchaser of its obligations hereunder, Sellers shall be entitled to all
remedies available at law, and, in addition, to retain the entire Deposit and
shall not be obligated to return any portion thereof to Purchaser, not as a
penalty but as partial compensation for damages, without limiting or waiving
any other damages it may be entitled to at Law. If this Agreement is
terminated for any other reason, Sellers shall return the sum of the Deposit
and an amount equal to the Return on Deposit from the date of the execution of
this Agreement through and including the date on which the Deposit is returned
to Purchaser within 10 days after written notice from the Party electing to
terminate this Agreement is given. The foregoing shall not limit the right of
any Party to seek any equitable remedy available to it to enforce the rights
of such Party under this Agreement.
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(B) Notwithstanding anything contained herein to the contrary, if
this Agreement is terminated as a result of a material breach of a Party's
representations and warranties under Article IV (i) the only remedy available
to the non-breaching Party is termination of this Agreement and (x) retention
of the entire Deposit by Sellers, or (y) prompt return to Purchaser of the
Deposit, as applicable, as such Party's sole and exclusive remedy for such
breach by the other Party, and (ii) all obligations of the Parties under this
Agreement will terminate, with no Party having any further liability to the
other Party.
ARTICLE XV
ARBITRATION
15.1. Binding Arbitration. On the request of any Party, whether made
before or after the institution of any legal proceeding, any action, dispute,
claim or controversy of any kind now existing or hereafter arising between the
Parties in any way arising out of, pertaining to or in connection with this
Agreement (a "Dispute") shall be resolved by binding arbitration in accordance
with the terms hereof. Any Party may, by summary proceedings, bring an action
in court to compel arbitration of any Dispute.
15.2 Governing Rules. Any arbitration shall be administered by the
American Arbitration Association (the "AAA") in accordance with the terms of
this Section 15.2, the Commercial Arbitration Rules of the AAA, and, to the
maximum extent applicable, the Federal Arbitration Act. Judgment on any award
rendered by an arbitrator may be entered in any court having jurisdiction.
15.3. Arbitrators. Any arbitration shall be conducted before one
arbitrator. The arbitrator shall be a disinterested Person who is
knowledgeable in the subject matter of the Dispute selected by agreement
between the Parties. If the Parties cannot agree on an arbitrator within
thirty (30) days after the request for arbitration, then any Party may request
the AAA to select an arbitrator. The arbitrator may engage engineers,
accountants or other consultants that the arbitrator deems necessary to render
a conclusion in the arbitration proceeding.
15.4. Conduct of Arbitration. To the maximum extent practicable,
arbitration proceedings hereunder shall be concluded within one hundred eighty
(180) days of the filing of the Dispute with the AAA. Arbitration proceedings
shall be conducted in Houston, Texas. Arbitrators shall be empowered to impose
sanctions and to take such other actions as the arbitrators deem necessary to
the same extent a judge could impose sanctions or take such other actions
pursuant to the Federal Rules of Civil Procedure and Law. At the conclusion
of any arbitration proceeding, the arbitrator shall make specific written
findings of fact and conclusions of law. The arbitrator shall have the power
to award recovery of all costs and fees to the prevailing Party. Each Party
agrees to keep all Disputes and arbitration proceedings strictly confidential
except for disclosure of information required by Law.
15.5. Costs of Arbitration. All fees of the arbitrator and any
engineer, accountant or other consultant engaged by the arbitrator shall be
paid one-half by Purchaser and one-half by Sellers unless otherwise awarded by
the arbitrator.
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ARTICLE XVI
MISCELLANEOUS
16.1. Records. Purchaser shall retain all of the Records for a period
of at least five (5) years after the Closing and upon request, shall make such
Records available for Sellers to review and photocopy at any time during
normal business hours. The obligations of Purchaser pursuant to the
Confidentiality Agreement shall continue with respect to the confidentiality
and non-disclosure of information that relates to the period prior to the
Closing Date.
16.2. Tax Prorations. Ad valorem, property, production, severance or
similar taxes for the Assets shall be prorated between Purchaser and Seller as
of the Effective Time. If the actual taxes are not known on the Closing Date,
Sellers' share of such taxes shall be determined by using (i) the rates for
the year prior to the year in which the Closing occurs, with appropriate
adjustments for any known and verifiable changes thereto, and (ii) the
assessed values for the year in which Closing occurs.
16.3. Post Closing Filings And Notifications. Promptly after Closing,
Purchaser, at its costs, shall (a) record the Conveyances and other
assignments of the Assets executed at the Closing in all applicable real
property records, (b) send notices to vendors supplying goods and services for
the Assets of the assignment of the Assets to Purchaser and, if applicable,
the designation of Purchaser as the operator thereof (c) seek all consents
required in connection with the transfer of the Assets to Purchaser not
obtained by Closing and give all notices that are necessary under the terms of
the Leases or Existing Contracts in connection with the transfer of the
Assets, (d) prepare, file all appropriate forms required or necessary in
connection with the transfer of the Assets with the Texas Railroad Commission
or other applicable governmental authorities, (e) post all required bonds in
connection with the ownership or operation of the Assets and (f) send all
applicable transfer orders or letters in lieu provided that Purchaser shall
have reviewed and approved same. Purchaser, at its cost, shall provide copies
of the foregoing to the Sellers.
At Closing, each Seller (or such Seller's Affiliate that is the operator)
shall give all required notices under applicable Operating Contracts.
16.4. No Sales Taxes. No sales, transfer or similar tax will be
collected at Closing from Purchaser in connection with this transaction. If,
however, this transaction is later deemed to be subject to sales, transfer or
similar tax, for any reason, Purchaser agrees to be solely responsible, and
shall indemnify and hold Sellers Indemnified Parties harmless, for any and all
sales, transfer or other similar taxes (including related penalty, interest or
legal costs) due by virtue of this transaction or the Assets transferred
pursuant hereto and Purchaser shall remit such taxes at that time. Each
Seller agrees that it will cooperate with Purchaser, and Purchaser agrees to
cooperate with each Seller, in demonstrating that the requirements for
exemptions from such taxes have been met.
16.5. Suspended Funds. All third party funds held by Sellers in
suspense will be retained by Sellers at Closing and Sellers shall remain
responsible for the administration and payment of such suspended funds.
39
16.6. Notices. All notices, requests, demands, claims or other
communications required or permitted to be given under this Agreement shall be
in writing, and any notice, request, demand, claim or other communication
hereunder shall be deemed to have been duly given if delivered by personal
delivery, confirmed facsimile, or registered or certified U.S. mail, postage
prepaid and shall be considered to have been given on the date of receipt.
For purposes of notice, the addresses of the Parties shall, until changed as
hereinafter provided, be as follows:
Purchaser: Delta Petroleum Corporation
000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, President
Telephone: 000-000-0000
Facsimile: 000-000-0000
with a copy (which shall not constitute notice) to:
Xxxx Xxxxx, P.C.
000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxx Xxxxx
Xxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 303-893-2882
Sellers: Alpine Resources, Inc.
0000 Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx Xxxxxxxx
Facsimile: (000) 000-0000
with a copy (which shall not constitute notice) to:
Akin, Gump, Strauss, Xxxxx & Xxxx, LLP
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xx. Xxxx Xxxxxxxx
Facsimile: (000) 000-0000
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth
above using any other means (including expedited courier, messenger service,
ordinary mail, or electronic mail), but no such notice, request, demand,
claim, or other communication will be deemed to have been duly given unless
and until it actually is received by the intended recipient. Any Party may
change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Party written
notice in the manner set forth in this Section 16.6.
40
16.7. Further Assurances. Sellers and Purchaser agree that they will,
upon request, deliver, or will cause to be executed, acknowledged and
delivered, all such documents of further assurance as may be reasonably
required for the assigning, transferring, granting, conveying and confirming
to Purchaser, or reducing to possession by Purchaser of, any of the Assets and
do, perform and take such further actions, as may be necessary or appropriate
to carry out the intent of the transactions provided for in this Agreement.
Each Party shall bear its own costs in connection with the preparation or
filing of any such documents of further assurance. If monies are received by
any Party which, under this Agreement, belong to another Party, the same shall
immediately be paid over to the proper Party. If an invoice or other evidence
of an obligation is received which under the terms of this Agreement is
partially the obligation of a Seller and partially the obligation of
Purchaser, then the Parties shall consult each other and each shall promptly
pay its portion of such obligation to the obligee. Purchaser will assist
Sellers with collection of any accounts receivable accrued prior to the
Closing Date by sending out demand letters on behalf of Sellers as reasonably
requested by Sellers. This provision shall not require any Party to incur
costs and expenses other than minimal costs and expenses.
16.8. Choice of Law. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO ANY
PRINCIPLES OF CONFLICTS OF LAWS WHICH WOULD MAKE THE LAWS OF ANOTHER
JURISDICTION APPLICABLE. THE VALIDITY OF THE VARIOUS CONVEYANCES AFFECTING
THE TITLE TO REAL PROPERTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE JURISDICTION IN WHICH SUCH PROPERTY IS SITUATED. THE
REPRESENTATIONS AND WARRANTIES CONTAINED IN SUCH CONVEYANCES AND THE REMEDIES
AVAILABLE BECAUSE OF A BREACH OF SUCH REPRESENTATIONS AND WARRANTIES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT AND
THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO THE PRINCIPLES OR
CONFLICTS OF LAWS WHICH WOULD MAKE THE LAWS OF ANOTHER JURISDICTION
APPLICABLE.
16.9. Assignment. No Party may assign or otherwise transfer,
voluntarily or involuntarily, any or all of its rights, interest, title or
obligations under this Agreement without the express prior consent of the
other Parties, and any such purported assignment or transfer shall be
ineffective as to the other Parties. Unless otherwise agreed to by all
Parties, if consent to an assignment or transfer is given, the transferring
Party shall remain responsible and primarily liable, and a transferee shall
become responsible and primarily liable, for all obligations, liabilities and
other expenses arising from or related to this Agreement. Notwithstanding
anything to the contrary above, any Seller's rights under this Agreement may
be assigned to a Qualified Intermediary for the purpose of completing a
tax-deferred exchange pursuant to Section 16.14.
16.10. Binding Effect; Amendment; Severability. This Agreement, the
Conveyances, the Ratification Agreement and the other transfer documents
contain the entire agreement and understanding between the Parties with
respect to the purchase and sale of the Assets or other transactions
contemplated herein. This Agreement may not be amended except in writing,
signed by each Party whose rights or obligations would or could reasonable be
expected to be adversely affected by the same. In the event any term or
provision of this Agreement is determined to be invalid or unenforceable, such
invalidity or unenforceability thereof shall not affect the remaining terms
and provisions of this Agreement.
41
16.11. Counterparts. This Agreement may be executed in any number of
counterparts and each counterpart shall be deemed to be an original
instrument, but all such counterparts shall constitute but one instrument.
16.12. Expenses and Fees. Each Party shall be solely responsible to pay
the fees and expense of its own counsel, accountants, finders/brokers and
other experts incident to the negotiation and preparation of this Agreement
and consummation of the transactions contemplated hereby.
16.13. Exhibits. The Exhibits referred to in this Agreement are hereby
incorporated in this Agreement by this reference and constitute a part of this
Agreement. Each Party has received a complete set of Exhibits as of the
execution of this Agreement. All references to any Exhibit hereto which is
supplemented or amended in accordance with Section 16.10 shall for all
purposes after the Closing be deemed to be a reference to such Exhibit as so
supplemented or amended.
16.14. Exchange. Purchaser hereby acknowledges that Sellers may desire
to structure the conveyance of the Assets as part of a tax deferred exchange
under Section 1031 of the Code. Each Seller's rights under this Agreement may
be assigned to a qualified intermediary (as defined in the Code) for the
purpose of completing such an exchange. Purchaser agrees to reasonably
cooperate with each Seller and the qualified intermediary and execute all
documents, conveyances or other instruments necessary to effectuate such an
exchange, and Sellers shall indemnify and hold Purchaser harmless from any
cost or expense incurred by it in complying with this Section 16.14.
16.15. Third Party Beneficiaries. Any agreements herein contained
(express or implied) shall be only for the benefit of the Parties and their
respective legal representatives, successors and assigns and shall not inure
to the benefit of any other entity or individual. It is the intention of the
Parties that no entity or individual shall be deemed a third party beneficiary
of this Agreement except to the extent such third party is expressly given
rights herein.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
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IN WITNESS THEREOF, Purchaser and Sellers have duly executed this
Agreement as of the day and year first above written.
SELLERS:
EMPIRE ENERGY, LTD.
By: Alpine Resources, Inc.,
General Partner
By: /s/ Xxxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxxxx
President
EMPIRE ENERGY III, LTD.
By: Alpine Resources, Inc.,
General Partner
By: /s/ Xxxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxxxx
President
UNION PETROLEUM LTD.
By: Alpine Resources, Inc.,
General Partner
By: /s/ Xxxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxxxx
President
UNION INVESTMENTS, LTD.
By: Alpine Energy Corp.
General Partner
By: /s/ Xxxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxxxx
President
(signatures continued on next page)
1
ALPINE ENERGY CORP.
By: /s/ Xxxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxxxx
President
PURCHASER:
DELTA PETROLEUM CORPORATION
BY: /s/ Xxxxx X. Xxxxxx
NAME: Xxxxx X. Xxxxxx
TITLE: President / CEO
2
LIST OF EXHIBITS AND SCHEDULES
Exhibits
--------
A Assets
C Form of Conveyance
D Form of Affidavit of Non-Foreign Status
Schedules
---------
1.1(d) Existing Contracts
1.1(f) Permitted Encumbrances
4.1(E) Litigation
4.1(G) Environmental Matters
4.1(H) Xxxxx in Suspense
4.1(I) Commitments and Material Contracts
4.1(J) Exceptions to Compliance with Laws
4.1(K) Imbalances
4.1(M) Insurance
4.1(N) Well Status
4.1(O) Current Plugging and Abandonment Obligations
4.1(P) Tax Partnerships
12.1 Net Profits Interests
1
