Exhibit 2.2
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CONTRIBUTION AGREEMENT
by and among
PURE RESOURCES, L.P.
a Texas limited partnership,
PURE RESOURCES I, INC.
a Delaware corporation,
PK I, L.P.
a Delaware limited partnership,
XX XX, L.P.
a Delaware limited partnership,
PK III, L.P.
a Delaware limited partnership,
XX XX, L.P.
a Delaware limited partnership,
IP PETROLEUM COMPANY, INC.
a Delaware corporation,
INTERNATIONAL PAPER REALTY CORPORATION,
a Delaware corporation,
TRANSTATES PROPERTIES INCORPORATED,
a Delaware corporation,
SOUTHLAND ENERGY COMPANY
a Texas corporation,
and
PURE PARTNERS, L.P.
a Delaware limited partnership
Dated as of January 29, 2001
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Exhibit 2.2
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND OTHER TERMS........................................................................... 2
SECTION 1.01 Definitions..................................................................................... 2
SECTION 1.02 Certain References.............................................................................. 9
SECTION 1.03 Interpretation.................................................................................. 9
ARTICLE II CONTRIBUTION TRANSACTIONS............................................................................ 9
SECTION 2.01 The Partnership Agreement and Capital Contributions............................................. 9
SECTION 2.02 Assets.......................................................................................... 10
SECTION 2.03 Excluded Assets................................................................................. 10
SECTION 2.04 Transfer of Geophysical Data.................................................................... 11
SECTION 2.05 Allocated Value................................................................................. 11
ARTICLE III EFFECTIVE TIME...................................................................................... 12
Section 3.01 Ownership of Assets............................................................................. 12
ARTICLE IV TITLE MATTERS........................................................................................ 12
SECTION 4.01 Access.......................................................................................... 12
SECTION 4.02 Certain Title Definitions....................................................................... 12
SECTION 4.03 Title Defect Notices............................................................................ 15
SECTION 4.04 Remedies for Title Defects...................................................................... 16
SECTION 4.05 No Warranty of Title............................................................................ 16
SECTION 4.06 Limitation of Remedies for Title Defects........................................................ 16
SECTION 4.07 Preferential Rights to Purchase................................................................. 17
SECTION 4.08 Consents to Assign.............................................................................. 17
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE IPP PARTIES..................................................... 18
SECTION 5.01 Existence....................................................................................... 18
SECTION 5.02 Legal Power..................................................................................... 18
SECTION 5.03 Execution....................................................................................... 18
SECTION 5.04 Brokers......................................................................................... 18
SECTION 5.05 Bankruptcy...................................................................................... 18
SECTION 5.06 Suits........................................................................................... 19
SECTION 5.07 Royalties....................................................................................... 19
SECTION 5.08 Taxes........................................................................................... 19
SECTION 5.09 Title........................................................................................... 19
SECTION 5.10 Investment...................................................................................... 19
SECTION 5.11 Compliance with Laws............................................................................ 19
SECTION 5.12 Records......................................................................................... 19
SECTION 5.13 Basic Documents................................................................................. 20
SECTION 5.14 Commitments..................................................................................... 20
SECTION 5.15 Production Sales Contracts; Calls of Production................................................. 20
SECTION 5.16 Reserve Report Information...................................................................... 21
SECTION 5.17 Area of Mutual Interest Agreements.............................................................. 21
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Exhibit 2.2
SECTION 5.18 No Oral Contracts............................................................................... 21
SECTION 5.19 Exempt Assets................................................................................... 21
SECTION 5.20 Plugging Obligations............................................................................ 21
SECTION 5.21 Operations after Effective Time................................................................. 21
SECTION 5.22 Gas Balancing, Take or Pay, Allowables.......................................................... 21
SECTION 5.23 Tax Partnerships................................................................................ 22
SECTION 5.24 Payment of Expenses............................................................................. 22
SECTION 5.25 No Environmental Defects........................................................................ 22
SECTION 5.26 Preferential Purchase Rights.................................................................... 22
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE PURE PARTIES................................................... 22
SECTION 6.01 Existence....................................................................................... 22
SECTION 6.02 Legal Power..................................................................................... 23
SECTION 6.03 Execution....................................................................................... 23
SECTION 6.04 Brokers......................................................................................... 23
SECTION 6.05 Bankruptcy...................................................................................... 23
SECTION 6.06 Suits........................................................................................... 23
SECTION 6.07 Qualifications.................................................................................. 23
SECTION 6.08 Funds........................................................................................... 24
SECTION 6.09 Xxxx-Xxxxx-Xxxxxx............................................................................... 24
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE PURE PARTIES AND THE PARTNERSHIP.............................. 24
SECTION 7.01 Existence....................................................................................... 24
SECTION 7.02 Legal Power..................................................................................... 24
SECTION 7.03 Execution....................................................................................... 24
ARTICLE VIII OPERATION OF THE ASSETS............................................................................ 25
SECTION 8.01 Operation of the Assets Prior to Closing........................................................ 25
SECTION 8.02 Operation of the Assets After Closing........................................................... 26
SECTION 8.03 Correction of Exhibits.......................................................................... 26
ARTICLE IX CONDITIONS TO OBLIGATIONS OF THE IPP PARTIES......................................................... 26
SECTION 9.01 Representations................................................................................. 26
SECTION 9.02 Performance..................................................................................... 26
SECTION 9.03 Pending Matters................................................................................. 27
SECTION 9.04 Capital Contributions........................................................................... 27
SECTION 9.05 Execution and Delivery of Closing Documents..................................................... 27
SECTION 9.06 Closing Under Purchase Agreement................................................................ 27
SECTION 9.07 Xxxx Ranch Field Consent........................................................................ 27
ARTICLE X CONDITIONS TO OBLIGATIONS OF THE PURE PARTIES......................................................... 27
SECTION 10.01 Performance..................................................................................... 27
SECTION 10.02 Pending Matters................................................................................. 28
SECTION 10.03 Execution and Delivery of Closing Documents..................................................... 28
SECTION 10.04 Closing Under Purchase Agreement................................................................ 28
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Exhibit 2.2
SECTION 10.05 Material Adverse Change in Value................................................................ 28
SECTION 10.06 Xxxx Ranch Field Consent........................................................................ 28
SECTION 10.07 Capital Contributions........................................................................... 28
SECTION 10.08 IP Guaranty..................................................................................... 28
ARTICLE XI CLOSING.............................................................................................. 29
SECTION 11.01 Time and Place of Closing....................................................................... 29
SECTION 11.02 Intentionally Omitted........................................................................... 29
SECTION 11.03 Adjustments to Contribution Value at Closing.................................................... 29
SECTION 11.04 Pre-Closing Allocations/Statement............................................................... 30
SECTION 11.05 Post-Closing Adjustments to Contribution Value.................................................. 31
SECTION 11.06 Ad Valorem and Similar Taxes.................................................................... 32
SECTION 11.07 Actions of the IPP Parties at Closing........................................................... 32
SECTION 11.08 Actions of the Pure Parties and Pure at Closing................................................. 33
SECTION 11.09 Actions of Partnership at Closing............................................................... 33
SECTION 11.10 Further Cooperation............................................................................. 34
SECTION 11.11 Confidentiality Agreement....................................................................... 35
SECTION 11.12 Employee Matters................................................................................ 35
ARTICLE XII TERMINATION......................................................................................... 38
SECTION 12.01 Right of Termination............................................................................ 38
SECTION 12.02 Effect of Termination........................................................................... 38
SECTION 12.03 Attorney Fees, Etc.............................................................................. 38
ARTICLE XIII ASSUMPTION AND INDEMNIFICATION..................................................................... 39
SECTION 13.01 Retained Obligations............................................................................ 39
SECTION 13.02 Assumption...................................................................................... 40
SECTION 13.03 Pure Parties' Indemnification................................................................... 40
SECTION 13.04 IPP Parties' Indemnification.................................................................... 41
SECTION 13.05 Indemnification Procedure....................................................................... 41
SECTION 13.06 Survival........................................................................................ 43
SECTION 13.07 Limitations on Liabilities...................................................................... 43
SECTION 13.08 Exclusive Remedy................................................................................ 44
SECTION 13.09 No Punitives.................................................................................... 44
ARTICLE XIV LIMITATIONS ON REPRESENTATIONS AND WARRANTIES....................................................... 45
SECTION 14.01 Disclaimers of Representations and Warranties................................................... 45
SECTION 14.02 Casualty Loss................................................................................... 46
ARTICLE XV DISPUTE RESOLUTION................................................................................... 46
SECTION 15.01 General......................................................................................... 46
SECTION 15.02 Senior Management............................................................................... 47
SECTION 15.03 Independent Expert.............................................................................. 47
SECTION 15.04 Binding Arbitration............................................................................. 48
ARTICLE XVI MISCELLANEOUS....................................................................................... 49
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Exhibit 2.2
SECTION 16.01 Names........................................................................................... 49
SECTION 16.02 Taxes and Expenses.............................................................................. 49
SECTION 16.03 Independent Investigation....................................................................... 49
SECTION 16.04 Document Retention.............................................................................. 50
SECTION 16.05 Entire Agreement................................................................................ 50
SECTION 16.06 Waiver.......................................................................................... 50
SECTION 16.07 Publicity....................................................................................... 50
SECTION 16.08 Construction.................................................................................... 50
SECTION 16.09 No Third Party Beneficiaries.................................................................... 51
SECTION 16.10 Assignment...................................................................................... 51
SECTION 16.11 Governing Law................................................................................... 51
SECTION 16.12 Obligations of Pure............................................................................. 51
SECTION 16.13 Joint and Several Obligations of the Partnership and the Pure Parties........................... 51
SECTION 16.14 Notices......................................................................................... 51
SECTION 16.15 Severability.................................................................................... 52
SECTION 16.16 Time of the Essence............................................................................. 52
SECTION 16.17 Authority of IPP................................................................................ 52
SECTION 16.18 Counterpart Execution........................................................................... 52
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Exhibit 2.2
LIST OF ANNEXES, EXHIBITS AND SCHEDULES
ANNEXES
Annex I - Amended and Restated Agreement of Limited Partnership
Annex II - Senior Note Agreement
Annex III - Purchase and Sale Agreement
EXHIBITS
Exhibit A - Properties
Exhibit B - Allocated Values
Exhibit C - Assignment, Conveyance and Xxxx of Sale
Exhibit D - Transition Services Agreement
Exhibit E - Severance Plan
Exhibit F - Excluded Properties
SCHEDULES
Schedule 1.01(i) - IPP Parties Personnel
Schedule 1.01(ii) - Pure Parties Personnel
Schedule 2.04 - List of Geophysical Data
Schedule 4.08 - Consents
Schedule 5.06 - Litigation
Schedule 5.13 - Basic Documents
Schedule 5.14 - Commitments
Schedule 5.15 - Scheduled Production Sales Contracts
Schedule 5.17 - Area of Mutual Interest Agreements
Schedule 5.18 - Oral Contracts
Schedule 5.20 - Plugging Obligations
Schedule 5.21 - Operations After Effective Time
Schedule 5.22 - Gas Balancing, Take or Pay Allowable
Schedule 5.23 - Tax Partnerships
Schedule 5.24 - Payment of Expenses
Schedule 5.26 - Preferential Rights
Schedule 11.03(a)(ii) - Overhead Expense Categories
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Contribution Agreement
This Contribution Agreement, dated as of January 29, 2001 (this
"Agreement"), is by and among IP Petroleum Company, Inc., a Delaware corporation
("IPP"), International Paper Realty Corporation, a Delaware corporation
("IPRC"), Transtates Properties Incorporated, a Delaware corporation
("Transtates"), Southland Energy Company, a Texas corporation ("Southland" and
together with IPP, IPRC and Transtates, the "IPP Parties"), Pure Resources,
L.P., a Texas limited partnership ("Pure"), Pure Resources I, Inc., a Delaware
corporation (individually and in its capacity as general partner of the
Partnership (as defined below) "Pure GP"), PK I, L.P., a Delaware limited
partnership ("Pure LP1") XX XX, L.P., a Delaware limited partnership ("Pure
LP2"), PK III, L.P., a Delaware limited partnership ("Pure LP3"), XX XX, L.P., a
Delaware limited partnership ("Pure LP4" and together with Pure GP, Pure LP1,
Pure LP2 and Pure LP3, the "Pure Parties"), and PURE PARTNERS, L.P., a Delaware
limited partnership (the "Partnership").
P R E L I M I N A R Y S T A T E M E N T S
WHEREAS, the Partnership was formed on January 18, 2001 pursuant to the
Delaware Act upon the filing of a certificate of limited partnership with the
office of the Secretary of State of Delaware. Pure GP is the sole general
partner of the Partnership. Pure LP1, Pure LP2, Pure LP3 and Pure LP4 are
currently the sole limited partners of the Partnership;
WHEREAS, IPP, IPRC, Transtates and Southland will contribute the IPP
Capital Contribution, the IPRC Capital Contribution, the Transtates Capital
Contribution and the Southland Capital Contribution, respectively, to the
capital of the Partnership in consideration for the issuance by the Partnership
to IPP, IPRC, Transtates and Southland of Limited Partner Interests (as
hereinafter defined) as provided in the Partnership Agreement (as hereinafter
defined), Pure GP will contribute the Pure GP Capital Contribution (as
hereinafter defined), Pure LP1, Pure LP2 and Pure LP3 (collectively, the "Pure
Triad") will contribute the Pure Triad Capital Contribution (as hereinafter
defined) and Pure LP4 will contribute the Pure LP4 Capital Contribution (as
hereinafter defined) to the capital of the Partnership in consideration for the
issuance by the Partnership to Pure GP of the General Partner Interest (as
hereinafter defined) as provided in the Partnership Agreement and Pure LP1, Pure
LP2, Pure LP3 and Pure LP4 of Limited Partner Interests as provided in the
Partnership Agreement. In connection with these capital contributions and to
admit IPP, IPRC, Transtates and Southland as limited partners of the
Partnership, the original limited partnership agreement of the Partnership will
be amended and restated in substantially the form attached hereto as Annex I
(the "Partnership Agreement"); and
WHEREAS, each of the Parties (as hereinafter defined) hereto desires to
enter into this Agreement to evidence the terms and conditions on which such
Party will make such capital contributions to the Partnership;
AGREEMENT
NOW, THEREFORE, in consideration of the mutual agreements herein contained,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Parties agree as follows:
Exhibit 2.2
ARTICLE I
DEFINITIONS AND OTHER TERMS
Section 1.01 Definitions.
(a) All defined terms used but not defined herein shall have the
respective meanings given to such terms in the Partnership Agreement.
(b) In addition, as used in this Agreement, the following terms shall have
the following meanings:
"Affiliate" means an "affiliate" or "associate" as those terms are defined
in Rule 12b-2 promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended.
"Agreement" is defined in the preamble of this Agreement.
"Allocated Values" is defined in Section 2.05.
"AMI Agreement" is defined in Section 5.17.
"Assets" is defined in Section 2.02.
"Assumed Obligations" is defined in Section 13.02.
"Audited Financial Statements" is defined in Section 11.10(c).
"Basic Documents" is defined in Section 5.13.
"Cause" is defined in Section 11.12(d).
"Claim Notice" is defined in Section 13.05(b).
"Closing" is defined in Section 11.01.
"Closing Date" is defined in Section 11.01.
"Confidentiality Agreement" is defined in Section 11.11.
"Contracts" is defined in Section 2.02(e).
"Contribution Value" is defined in Section 2.05.
"Contribution Value Adjustments" is defined in Section 11.03(c).
"Conveyance" is defined in Section 4.05.
2
"Customary Post Closing Consents" is defined in Section 4.08.
"Defensible Title" is defined in Section 4.02.
"Delaware Act" means the Delaware Revised Uniform Limited Partnership Act,
as amended from time to time, and the corresponding provisions of any succeeding
law.
"Designated Representatives" is defined in Section 4.01.
"Direct Claim" is defined in Section 13.05(b).
"Disputes" is defined in Section 15.01.
"Documents" is defined in Section 16.04.
"Dollars" and "$" mean such currency of the United States of America that,
at the time of payment or determination, is legal tender therein for the payment
of public and private debts.
"Easements" is defined in Section 2.02(c).
"Effective Time" is defined in Section 3.01.
"Employees" is defined in Section 11.12(a).
"Employment Commencement Date" is defined in Section 11.12(a).
"Environmental Defect," subject to the immediately following sentence,
means and is limited to, with respect to any given Asset: (A) a material
violation of Environmental Laws in effect as of the Effective Time in the
jurisdiction in which such Asset is located; provided, however, that the term
Environmental Defect shall not include violations related solely to the presence
or existence of encapsulated asbestos-containing materials or lead-based paints
being used for their intended purpose and in a manner consistent with typical
industry operations; (B) any investigation, remediation, or monitoring required
by applicable Environmental Law in effect as of the Effective Time in the
jurisdiction in which such Asset is located in response to a finding of any
Hazardous Materials in, on, under or migrating from any such Asset; and (C) any
final, non-appealable legal judgment issued by an applicable court of law with
proper jurisdiction over the Asset that is the subject matter of the dispute and
pertaining specifically to a release of Hazardous Materials in, on, under or
migrating from any such Asset; provided, however, that the term "Environmental
Defect" shall not include those matters that are disclosed in the following
reports in sufficient detail such that a knowledgeable buyer who reads the
reports would be put on notice that such matters constitute an Environmental
Defect, but any such matters that would otherwise constitute an Environmental
Defect shall not be excluded from the definition of the term "Environmental
Defect" if such matters are materially different than described in such reports:
Highlander Environmental Corp. Environmental Site Assessment of IP Petroleum
Company, Inc. Operated Properties Located in Texas and Oklahoma dated August 9,
2000, Xxxx
3
Environmental Group, Inc. Phase I Environmental Assessment of the Xxxxxx
Brothers lease in the Bowie Creek Field in Xxxxxxxxx County, Mississippi dated
June 2000, and COMM Engineering Due Diligence Site Assessment of the Galveston
Block 394-A Platform and other properties dated August, 2000.
"Environmental Laws" means all applicable federal, state, and local laws,
statutes, ordinances, court decisions, rules, regulations or orders pertaining
to health or the environment as may be interpreted by applicable court decisions
or administrative orders.
"Exchange Act" is defined in Section 11.10(c).
"Excluded Assets" is defined in Section 2.03.
"Exempt Assets" means (a) reserves of oil, natural gas, shale or tar sands,
(b) rights to reserves of oil, natural gas, shale or tar sands, or (c)
associated exploration or production assets, each within the meaning of the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and the
related rules, regulations and published interpretations thereunder.
"Final Settlement Date" is defined in Section 11.05(a).
"Final Statement" is defined in Section 11.05(b).
"General Partner" means Pure GP in its capacity as the general partner of
the Partnership.
"General Partner Interest" means the interest of the General Partner under
the Partnership Agreement.
"Governmental Authority" means, as to any given Asset, the United States
and the state, county, city and political subdivisions in which such Asset is
located and that exercises jurisdiction over such Asset, and any agency,
department, board or other instrumentality thereof that exercises jurisdiction
over such Asset.
"Gulf Coast Properties" means those Assets identified as the "Gulf Coast
Properties" on Exhibit A.
"Gulf of Mexico Properties" means those Assets identified as the "Gulf of
Mexico Properties" on Exhibit A.
"Hazardous Materials" means all hazardous substances or solid wastes that
are regulated under or pursuant to any applicable Environmental Laws.
"Hire Date" is defined in Section 11.12(a).
"Hiring Party" is defined in Section 11.12(a)(iii).
4
"Holdback Value" is defined in Section 4.08.
"Hydrocarbons" is defined in Section 2.02(d).
"Indemnified Party" is defined in Section 13.05(a).
"Indemnifying Party" is defined in Section 13.05(a).
"Indemnity Agreement" is defined in the Partnership Agreement.
"Independent Expert" is defined in Section 15.03(a).
"Interest Rate" is defined in Section 11.05(b).
"IP Guaranty" is defined in the Partnership Agreement.
"IPP" is defined in the preamble of this Agreement.
"IPP Affiliate Borrower" means The Branigar Organization, Inc.
"IPP Capital Contribution" means the capital contribution of IPP to the
Partnership of all of the Assets, except those Assets contributed by Southland,
as set forth on Exhibit A, in consideration for the issuance by the Partnership
to IPP of a Limited Partner Interest as provided in the Partnership Agreement.
"IPP Indemnitees" is defined in Section 13.03.
"IPP Parties" is defined in the preamble of this Agreement.
"IPRC" is defined in the preamble of this Agreement.
"IPRC Capital Contribution" means the capital contribution of IPRC to the
Partnership of Dollars in an amount equal to $5,000,000.00 in consideration for
the issuance by the Partnership to IPRC of a Limited Partner Interest as
provided in the Partnership Agreement.
"Knowledge" means (i) in the case of any of the IPP Parties, the actual
knowledge of any of the individuals listed on Schedule 1.01(i) hereto without
independent investigation or inquiry and (ii) in the case of the Pure Parties or
the Partnership, the actual knowledge of any of the individuals listed on
Schedule 1.01(ii) hereto without independent investigation or inquiry.
"Leases" is defined in Section 2.02(a).
"Limited Partner" means IPP, IPRC, Transtates, Southland, Pure LP1, Pure
LP2, Pure LP3 and Pure LP4 in their capacity as the limited partners of the
Partnership and "Limited Partners" means all of such Parties in such capacity.
5
"Limited Partner Interests" means the interests of the Limited Partners
under the Partnership Agreement.
"Losses" is defined in Section 13.03.
"Master Offset Agreement" is defined in the Partnership Agreement.
"Note" is defined in the Senior Note Agreement.
"Notice of Disagreement" is defined in Section 11.05(a).
"Offshore Confidentiality Agreement" is defined in Section 16.05.
"Partnership" is defined in the preamble of this Agreement.
"Partnership Agreement" means that certain Amended and Restated Agreement
of Limited Partnership of Pure Partners, L.P., a Delaware limited partnership,
substantially in the form attached hereto as Annex I, to be entered into by and
among IPP, IPRC, Transtates, Southland, Pure GP, Pure LP1, Pure LP2, Pure LP3
and Pure LP4.
"Party" means each, individually, and "Parties" means all, collectively, of
IPP, IPRC, Transtates, Southland, Pure, Pure GP, Pure LP1, Pure LP2, Pure LP3,
Pure LP4 and the Partnership.
"Permitted Encumbrances" is defined in Section 4.02.
"Person" means an individual, partnership, limited partnership, corporation
(including a business trust), limited liability company, joint stock company,
trust, unincorporated association, joint venture or other entity, or a
government or any political subdivision or agency thereof.
"Plan" is defined in Section 13.01(d).
"Post Closing Adjustment" is defined in Section 11.05(b).
"Post Closing Consent Period" is defined in Section 4.08.
"Property" and "Properties" are defined in Section 2.02(a).
"Purchase Agreement" is defined in Section 9.06.
"Pure" is defined in the preamble of this Agreement.
"Pure GP" is defined in the preamble of this Agreement.
"Pure GP Capital Contribution" means the capital contribution of Pure GP to
the Partnership of Dollars in an amount equal to $2,725,000.00 in consideration
for the issuance by
6
the Partnership to Pure GP of a General Partner Interest as provided in the
Partnership Agreement.
"Pure Guaranty" is defined the Partnership Agreement.
"Pure LP1" is defined in the preamble of this Agreement.
"Pure LP2" is defined in the preamble of this Agreement.
"Pure LP3" is defined in the preamble of this Agreement.
"Pure LP4" is defined in the preamble of this Agreement.
"Pure LP4 Capital Contribution" means the capital contribution of Pure LP4
to the Partnership of Dollars in an amount equal to $1.00 in consideration for
the issuance by the Partnership to Pure LP4 of a Limited Partner Interest as
provided in the Partnership Agreement.
"Pure Parent" is defined in Section 11.10(d).
"Pure Parties" is defined in the preamble of this Agreement.
"Pure Triad" is defined in the preamble of this Agreement.
"Pure Triad Capital Contribution" means the capital contributions of the
Pure Triad to the Partnership of Dollars in an amount equal to the Contribution
Value in consideration for the issuance by the Partnership to the Pure Triad of
Limited Partner Interests as provided in the Partnership Agreement.
"Pure's Benefit Plans" is defined in Section 11.12(c).
"Records" is defined in Section 2.02(f).
"Required Financial Statements" is defined in Section 11.10(c).
"Retained Obligations" is defined in Section 13.01.
"Rules" is defined in Section 15.04(a).
"Scheduled Production Sales Contracts" is defined in Section 5.15.
"SEC" is defined in Section 11.10(c).
"Securities Act" is defined in Section 11.10(c).
"Senior Loan" means the loan to be made by the Partnership to the IPP
Affiliate Borrower pursuant to the Senior Note Agreement.
7
"Senior Note Agreement" is defined in the Partnership Agreement.
"Southland" is defined in the preamble of this Agreement.
"Southland Capital Contribution" means the capital contribution of
Southland to the Partnership of all of the Assets, except those Assets
contributed by IPP, as set forth on Exhibit A, in consideration for the issuance
by the Partnership to Southland of a Limited Partner Interest as provided in the
Partnership Agreement.
"Statement" is defined in Section 11.04.
"Xxxx Ranch Field" is the field defined by the Railroad Commission of Texas
in Order No. 8-90,635, effective September 28, 1987, as amended, for the "Xxxx
Ranch (Canyon) Field."
"Surface Use Restrictions Agreement" is defined in the Purchase Agreement.
"Survival Period" is defined in Section 4.03.
"Third Party Claim" is defined in Section 13.05(b).
"Title Defect" is defined in Section 4.02.
"Title Defect Amount" is defined in Section 4.02.
"Title Defect Notice" is defined in Section 4.03.
"Transferred Employees" is defined in Section 11.12(a).
"Transition Services Agreement" is defined in Section 11.07(a).
"Transtates" is defined in the preamble of this Agreement.
"Transtates Capital Contribution" means the capital contribution of
Transtates to the Partnership of Dollars in an amount equal to $1.00 in
consideration for the issuance by the Partnership to Transtates of a Limited
Partner Interest as provided in the Partnership Agreement.
"Uncapped Obligations" is defined in Section 13.07(b).
"Unocal" means the Union Oil Company of California and its direct and
indirect subsidiaries other than Pure Resources, Inc. and its direct and
indirect subsidiaries.
"West Texas Properties" means those Assets identified as the "West Texas
Properties" on Exhibit A.
8
Section 1.02 Certain References. Unless otherwise indicated references in this
Agreement to articles, sections, paragraphs, clauses, recitals and schedules are
to the same contained in or attached to this Agreement.
Section 1.03 Interpretation.
(a) In this Agreement, unless a clear contrary intention appears:
(i) the singular number includes the plural number and vice
versa;
(ii) reference to either gender includes the other gender;
(iii) the words "herein," "hereof," "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.
(b) The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.
ARTICLE II
CONTRIBUTION TRANSACTIONS
SECTION 2.01 The Partnership Agreement and Capital Contributions. Subject to the
terms and conditions of this Agreement, in accordance with the terms of Article
XI hereof, at the Closing the following will occur: (i) the Pure Parties and the
IPP Parties shall enter into the Partnership Agreement; (ii) Pure GP shall make
the Pure GP Capital Contribution to the Partnership in consideration for the
issuance by the Partnership of the General Partner Interest as provided in the
Partnership Agreement; (iii) the Pure Triad shall make the Pure Triad Capital
Contribution to the Partnership in consideration for the issuance by the
Partnership of Limited Partner Interests as provided in the Partnership
Agreement; (iv) Pure LP4 shall make the Pure LP4 Capital Contribution to the
Partnership in consideration for the issuance by the Partnership of a Limited
Partner Interest as provided in the Partnership Agreement; (v) IPP shall
contribute the IPP Capital Contribution to the Partnership in consideration for
the issuance by the Partnership of a Limited Partner Interest as provided in the
Partnership Agreement; (vi) IPRC shall contribute the IPRC Capital Contribution
to the Partnership in consideration for the issuance by the Partnership of a
Limited Partner Interest as provided in the Partnership Agreement; (vii)
Transtates shall contribute the Transtates Capital Contribution to the
Partnership in consideration for the issuance by the Partnership of a Limited
Partner Interest as provided in the Partnership Agreement; and (viii) Southland
shall contribute the Southland Capital Contribution to the Partnership in
consideration for the issuance by the Partnership of a Limited Partner Interest
as provided in the Partnership Agreement. The Parties will finalize Schedule A
of the Partnership Agreement in order to reflect the amount of capital
contributions made by each Party at the Closing.
9
Section 2.02 Assets. Subject to Section 2.03, the term "Assets" shall mean all
of the right, title and interest of the IPP Parties in and to:
(a) the oil, gas and mineral leases and the leasehold estates created
thereby described in Part I of Exhibit A (the "Leases") and all overriding
royalty interests, the net profits interests, the payments out of production and
other rights described in Exhibit A and all additional interests of the IPP
Parties in and to the Leases (collectively, the "Properties," or singularly, a
"Property");
(b) all rights incident to the Properties, including without limitation,
(i) all rights under the Leases comprising the Properties with respect to the
use and occupation of the surface of and the subsurface depths under the
Properties and (ii) all rights with respect to any pooled, communitized or
unitized acreage by virtue of any Property being a part thereof, including all
production from such pool or unit allocated to any such Property;
(c) all easements, rights-of-way, servitudes, permits, licenses,
franchises and other estates or similar rights and privileges related to or used
solely in connection with the Properties ("Easements");
(d) all personal property, fixtures, inventory and improvements located on
or used in connection with the Properties and the Easements or with the
production, treatment, sale, or disposal of oil, gas or other hydrocarbons
(collectively "Hydrocarbons"), byproducts or waste produced therefrom or
attributable thereto, including without limitation all rolling stock, vehicles,
xxxxx (whether producing, shut in or abandoned, and whether for production,
injection or disposal), wellhead equipment, pumps, pumping units, flowlines,
gathering systems, piping, tanks, buildings, treatment facilities, injection
facilities, disposal facilities, compression facilities, and other materials,
supplies, equipment, facilities and machinery, any software (or software
license) that may be transferred without consent of, or payment to, any third
party and that is used in the administration of the Assets or any accounting
function in connection with the Assets, and any furniture, office equipment,
computers or other personal property used in the administration of the Assets;
(e) all rights, titles and interests in, to or derived from contracts,
agreements, assignments, leases and other arrangements that relate to the
Properties and Easements, including without limitation production sales
contracts, operating agreements, service agreements and, to the extent
assignable, licenses relating to geophysical data or the rights to acquire such
licenses or data, and the contracts, agreements, leases and other arrangements
described in Part II of Exhibit A (the "Contracts"); and
(f) all contract and accounting files, books, records, files, well files,
muniments of title, reports and similar documents and materials of IPP that
relate to the foregoing interests (the "Records").
Section 2.03 Excluded Assets. Notwithstanding the foregoing, the Assets shall
not include, and there is excepted, reserved and excluded from the contribution
contemplated hereby (collectively, the "Excluded Assets"):
10
(a) all corporate, financial (but not accounting), tax, and legal records
of the IPP Parties relating to the Assets (other than legal records relating to
title and contract matters pertaining to the Assets and other than any such
records of the IPP Parties that the Parties reasonably agree are necessary to
own, operate and enjoy the Assets);
(b) all non-proprietary or jointly owned geophysical data licensed to the
IPP Parties that cannot be transferred without the consent of, or payment
(unless the Partnership agrees to obtain such consent or make such payment) to,
any third party;
(c) all personal property of the IPP Parties and/or their Affiliates
located at the corporate headquarters of IPP;
(d) any and all net proceeds (excluding any underproduced imbalance
position at the Effective Time comprising part of the Assets that is shown in
Schedule 5.22) payable to the IPP Parties under the Contracts including, without
limitation, from the settlement of contract disputes with purchasers or
transporters of Hydrocarbons or byproducts produced from the Properties,
including without limitation, settlement of take-or-pay disputes, insofar as
said proceeds are attributable to periods of time prior to the Effective Time;
(e) all mineral fee interests, royalty interests and nonproducing
leasehold interests of the IPP Parties described in the Purchase Agreement, it
being understood that any interests owned by the IPP Parties as described in
this clause (e) are being sold and conveyed by the IPP Parties pursuant to the
Purchase Agreement;
(f) any refund of costs, taxes or other expenses borne by any of the IPP
Parties or their predecessors in title attributable to the period prior to the
Effective Time;
(g) the properties described on Exhibit F (including all rights and
interests in Hydrocarbons owned or claimed by the IPP Parties in or to such
properties); and
(h) any net underproduction relative to the Properties that is
attributable to the time period prior to the Effective Time to the extent not
shown in Schedule 5.22.
Section 2.04 Transfer of Geophysical Data. To Knowledge of the IPP Parties,
Schedule 2.04 contains a list of agreements relating to the geophysical data
excluded under Section 2.03(b), that restrict the transfer of such data to the
Partnership. The IPP Parties agree to hold all such data in their possession for
a period of one year. If during such one-year period the Partnership obtains
written consent for the transfer of any such data (and it pays any required
third party licensing, consent or transfer fees in connection with such
transfer), then the IPP Parties shall transfer such data affected thereby to the
Partnership. If the Partnership fails to obtain the necessary written consent
for the transfer of any such data during the one year period or if the
Partnership fails to pay such required fees during such one year period, then
the Partnership shall have no further rights or interest in such data affected
thereby under this Agreement or otherwise.
Section 2.05 Allocated Value. The fair market value of the Assets to be
contributed by the IPP Parties to the Partnership (the "Contribution Value") is
Two Hundred Seventy Million Dollars ($270,000,000.00) and is allocated among the
Assets as set forth in Exhibit B (the "Allocated
11
Values"), subject to adjustment pursuant to the terms of this Agreement. The
Parties agree that the Allocated Values shall be used solely to compute any
adjustments to the value pursuant to the provisions of Article IV and for
purposes of determining if the condition in Section 10.05 to the Pure Parties'
obligation to consummate the transactions contemplated by this Agreement has
been fulfilled.
ARTICLE III
EFFECTIVE TIME
Section 3.01 Ownership of Assets. If the transactions contemplated hereby are
consummated in accordance with the terms and provisions hereof, the ownership of
the Assets shall be transferred from the IPP Parties to the Partnership at the
Closing Date but effective as of 7:00 a.m. local time on October 1, 2000 (the
"Effective Time").
ARTICLE IV
TITLE MATTERS
Section 4.01 Access. From the date of this Agreement through the Closing, the
IPP Parties shall afford to the Pure Parties and their representatives
reasonable access to the offices and personnel of the IPP Parties (including the
IPP Parties' contractors), and to the Assets and the books and records of the
IPP Parties relating to the Assets during normal business hours, in order that
Pure may have a full opportunity to make such investigations as it desires with
respect to the Assets; provided, however, that such investigation shall be upon
reasonable notice and shall not unreasonably disrupt the personnel and
operations of the IPP Parties or impede the efforts of the IPP Parties to comply
with their other obligations under this Agreement and the Purchase Agreement.
Such books and records shall include all abstracts of title, title opinions,
title files, ownership maps, lease files, assignments, division orders,
operating records and agreements, well files, financial and accounting records,
geological, geophysical and engineering records, in each case pertaining to the
Assets insofar as same may now be in existence and in the possession of the IPP
Parties or their Affiliates, excluding, however, any information that the IPP
Parties or their Affiliates are prohibited from disclosing by third party
confidentiality restrictions. All requests for access to the IPP Parties'
employees, contractors, offices, properties, books and records relating to the
Assets shall be made to such representatives designated in writing by IPP (the
"Designated Representatives"), which Designated Representatives shall be solely
responsible for coordinating all such requests and all access permitted
hereunder. The Pure Parties shall not contact any of the customers or suppliers
of the IPP Parties or their working interest co-owners or operators, in
connection with the transactions contemplated by this Agreement, whether in
person or by telephone, mail or other means of communication, without the
specific prior authorization of IPP's Designated Representatives, which consent
shall not be unreasonably withheld.
SECTION 4.02 Certain Title Definitions. As used in this Agreement, the following
terms shall have the respective meanings set forth below:
"Defensible Title" means, as of the Effective Time, with respect to a
given Asset, such ownership by the IPP Parties in such Asset that, subject
to and except for the Permitted Encumbrances:
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(a) entitles the IPP Parties to receive not less than the
percentage set forth in Exhibit B as the IPP Parties' "Net Revenue
Interest" of all Hydrocarbons produced, saved and marketed from each
well or unit comprising such Asset as set forth in Exhibit B, all
without reduction, suspension or termination of such interest
throughout the productive life of each well or unit comprising such
Asset, except as specifically set forth in Exhibit B and except for
changes or adjustments that result from the establishment of units,
changes in existing units (or the participating areas therein), or the
entry into of pooling or unitization agreements after the date hereof
unless made in breach of the provisions of Section 8.01;
(b) obligates the IPP Parties to bear not greater than the
percentage set forth in Exhibit B as the IPP Parties' "Working
Interest" of the costs and expenses relating to the maintenance,
development and operation of each well or unit comprising such Asset
as set forth in Exhibit B, all without increase throughout the
productive life of each well or unit comprising such Asset, except as
specifically set forth in Exhibit B and except for changes or
adjustments that result from the establishment of units, changes in
existing units (or the participating areas therein), or the entry into
of pooling or unitization agreements after the date hereof unless made
in breach of the provisions of Section 8.01; and
(c) is free and clear of all liens, encumbrances and defects in
title.
In evaluating the significance of any fact, circumstance, or condition for
purposes of determining Defensible Title, due consideration shall be given to
the length of time that the particular Property has been producing Hydrocarbons
and whether such fact, circumstance, or condition is of the type expected to be
encountered in the area involved and is usual and customarily acceptable to
reasonable and prudent operators, interest owners, and/or purchasers engaged in
the business of the ownership, development, and operation of oil and gas
properties with knowledge of such facts and appreciation of their legal
significance.
"Permitted Encumbrances" shall mean any of the following matters to the
extent the same are valid and subsisting and affect the Assets:
(a) the leases, contracts, agreements, instruments and other matters set
forth in Exhibit A;
(b) any (i) undetermined or inchoate liens or charges constituting or
securing the payment of expenses that were incurred incidental to the
maintenance, development, production or operation of the Assets or for the
purpose of developing, producing or processing Hydrocarbons therefrom or therein
and (ii) materialmen's, mechanics', repairman's, contractors', operators' liens
or other similar liens or charges for liquidated amounts arising in the ordinary
course of business in each case (with respect to all of the matters described in
this clause (b)) (A) that the IPP Parties have agreed to assume or pay pursuant
to the terms hereof or (B) for which the IPP Parties are responsible for paying
or releasing at Closing;
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(c) any liens for taxes and assessments not yet delinquent or, if
delinquent, that are being contested in good faith in the ordinary course of
business and for which the IPP Parties have agreed to pay pursuant to the terms
hereof or which have been prorated pursuant to the terms hereof;
(d) the terms, conditions, restrictions, exceptions, reservations,
limitations and other matters contained in the IPP Parties' chain of title
(including any liens or security interests created by law or reserved in oil and
gas leases for royalty, bonus or rental, or created to secure compliance with
the terms of the agreements, instruments and documents that create or reserve to
the IPP Parties their interests in the Assets), to the extent the same do not
operate to reduce the Net Revenue Interests of the IPP Parties as set forth on
Exhibit B or increase the Working Interests of the IPP Parties as set forth in
Exhibit B without a corresponding increase in the Net Revenue Interests of the
IPP Parties, and, in each case, that do not interfere materially with the
operation, value or use of the Assets;
(e) any obligations or duties affecting the Assets to any municipality or
public authority with respect to any franchise, grant, license or permit and all
applicable laws, rules, regulations and orders of any Governmental Authority;
(f) any (i) easements, rights-of-way, servitudes, permits, surface leases
and other rights in respect of surface operations, pipelines, grazing, hunting,
logging, canals, ditches, reservoirs or the like and (ii) easements for streets,
alleys, highways, pipelines, telephone lines, power lines, railways and other
similar rights-of-way on, over or in respect of property owned or leased by the
IPP Parties or over which the IPP Parties own rights-of-way, easements, permits
or licenses, in each case that do not interfere materially with the operation,
value or use of the Assets;
(g) all lessors' royalties, overriding royalties, net profits interests,
carried interests, production payments, reversionary interests and other burdens
on or deductions from the proceeds of production created or in existence as of
the Effective Time that do not operate to reduce the Net Revenue Interests of
the IPP Parties or increase the Working Interests of the IPP Parties without a
corresponding increase in the Net Revenue Interests of the IPP Parties;
(h) preferential rights to purchase or similar agreements;
(i) third party consents to assignments or similar agreements;
(j) all rights to consent by, required notices to, filings with, or other
actions by Governmental Authorities in connection with the sale or conveyance of
oil and gas leases or interests therein that are customarily obtained subsequent
to such sale or conveyance;
(k) production sales contracts; division orders; contracts for sale,
purchase, exchange, refining or processing of Hydrocarbons; unitization and
pooling designations, declarations, orders and agreements; operating agreements;
agreements of development; area of mutual interest agreements; gas balancing or
deferred production agreements; processing agreements; plant agreements;
pipeline, gathering and transportation agreements; injection, repressuring and
14
recycling agreements; carbon dioxide purchase or sale agreements; salt water or
other disposal agreements; seismic or geophysical permits or agreements;
confidentiality agreements; and any and all other agreements that are ordinary
and customary to the oil, gas, sulphur and other mineral exploration,
development, processing or extraction business or in the business of processing
of gas and gas condensate production for the extraction of products therefrom,
to the extent the same do not operate to reduce the Net Revenue Interests of the
IPP Parties as set forth on Exhibit B or increase the Working Interests of the
IPP Parties as set forth in Exhibit B without a corresponding increase in the
Net Revenue Interests of the IPP Parties, in each case that do not interfere
materially with the operation, value or use of the Assets;
(l) all defects and irregularities affecting the Assets, which
individually or in the aggregate do not operate to reduce the Net Revenue
Interests of the IPP Parties, increase the proportionate share of costs and
expenses of leasehold operations attributable to or to be borne by the Working
Interests of the IPP Parties without a corresponding increase in the Net Revenue
Interests of the IPP Parties, or otherwise interfere materially with the
operation, value or use of the Assets;
(m) any depth limitations in the IPP Parties' ownership; and
(n) the Surface Use Restrictions Agreement.
"Title Defect" shall mean, subject to Section 4.03: (a) any encumbrance,
encroachment, irregularity, defect in or objection to or failure of the IPP
Parties' ownership of any Asset (expressly excluding the Permitted Encumbrances)
that causes the IPP Parties not to have Defensible Title to such Asset; or (b)
any default by the IPP Parties under a lease or other contract or agreement that
would (i) have a material adverse effect on the operation, value or use of such
Asset, (ii) prevent the IPP Parties from receiving the proceeds of production
attributable to the IPP Parties' interest therein, or (iii) result in
cancellation of the IPP Parties' interest therein.
"Title Defect Amount" shall mean the amount by which the Allocated Value of
an Asset shall be reduced as a result of the Title Defect that is identified in
a Title Defect Notice given by the Partnership to IPP pursuant to Section 4.03
and that remains uncured. In the determination of the Title Defect Amount, the
following factors shall be taken into account: the Allocated Value assigned to
such Asset, the considerations used in arriving at such Allocated Value, the
portion of the Asset affected by such Title Defect, the legal effect of the
Title Defect, and the potential economic effect of the Title Defect over the
life of such Asset.
SECTION 4.03 Title Defect Notices. If Closing occurs and the Partnership
thereafter discovers any Title Defect affecting any Asset, the Partnership shall
notify IPP of such alleged Title Defect during the survival period stated in the
first sentence of Section 13.06 ("Survival Period"). Such notice ("Title Defect
Notice") must (i) be in writing, (ii) be received by IPP prior to the expiration
of the Survival Period, (iii) describe the Title Defect in reasonable detail
(including where calculable any alleged variance in the Net Revenue Interest or
Working Interest), (iv) identify the specific Asset or Assets affected by such
Title Defect, and (v) include the value of such Title Defect as determined by
the Partnership. Any matters that may otherwise constitute
15
Title Defects, but of which IPP has not been specifically notified by the
Partnership in accordance with the foregoing sentence within the Survival
Period, shall be deemed to have been waived by Pure, Pure GP and the Partnership
for all purposes. The Partnership's notice shall be deemed to have complied with
the requirements for a Title Defect Notice set forth in the second sentence of
this Section 4.03 unless IPP notifies the Partnership of any objection and the
reasons therefore to the form of such notice within 30 days after IPP's receipt
thereof. The failure to give an adequate Title Defect Notice does not prevent
the Partnership from subsequently giving an adequate Title Defect Notice within
the Survival Period.
SECTION 4.04 Remedies for Title Defects. With respect to any Title Defect
identified by the Partnership to IPP during the Survival Period, IPP shall have
a period of time terminating ninety days after the date upon which IPP receives
the Title Defect Notice, during which to cure such Title Defect. The Partnership
shall allow IPP and its representatives such access to the Assets during normal
business hours as is necessary or reasonable for such curative efforts. If IPP
contests the validity of the alleged Title Defect or the adequacy of such Title
Defect Notice or if IPP has not cured such Title Defect during such period and
the Partnership does not waive such Title Defect, then the Parties shall
negotiate in good faith to reach agreement with respect to the adequacy of such
Title Defect Notice, the existence of the Title Defect and the Title Defect
Amount (if any) for such Title Defect. If the Parties agree on the adequacy of
such Title Defect Notice, the existence of the Title Defect and the Title Defect
Amount, then subject to the limitations contained in Section 4.06, the Capital
Accounts (as defined in the Partnership Agreement) of the Parties shall be
adjusted in accordance with Section 3.1(c)(iii) of the Partnership Agreement.
If, by the date ten days after the end of the ninety day curative period
referenced above, the Parties have failed to reach agreement, then either IPP or
the Partnership shall have the right to elect to have the adequacy of such Title
Defect Notice, the validity of such Title Defect and/or such Title Defect Amount
determined by an Independent Expert pursuant to Section 15.03.
SECTION 4.05 No Warranty of Title. The documents to be executed and delivered by
the IPP Parties to the Partnership, transferring title to the Assets as required
hereby, including the Assignment, Conveyance and Xxxx of Sale attached hereto as
Exhibit C (the "Conveyance"), shall be subject to the Permitted Encumbrances and
without warranty of title of any kind whatsoever, express, implied or statutory.
The provisions of this Agreement, including the Partnership's rights with
respect to Title Defects hereunder, shall not be merged into or extinguished
upon Closing and the delivery by the IPP Parties to the Partnership of the
Conveyance. The Conveyance is a conveyance without warranty except as provided
herein and is not intended to be a quitclaim.
SECTION 4.06 Limitation of Remedies for Title Defects. Notwithstanding anything
in this Agreement to the contrary, (a) the IPP Parties shall have no obligations
or liability under this Agreement with respect to a Title Defect not identified
by the Partnership in a Title Defect Notice delivered to IPP during the Survival
Period, (b) the IPP Parties' liability with respect to all Title Defects to any
Asset shall in no event exceed the Allocated Value of such Asset, and (c) the
IPP Parties' liability shall be subject to the limitations stated in Section
13.07.
16
SECTION 4.07 Preferential Rights to Purchase. The assignment of the Assets at
the Closing shall be subject to all preferential purchase rights. Prior to
Closing, the IPP Parties shall use commercially reasonably efforts to comply
with the preferential purchase rights identified on Schedule 5.26. If a third
party who has been offered an interest in any Asset pursuant to a preferential
purchase right identified on Schedule 5.26 elects prior to Closing to purchase
all or part of such Asset pursuant to the aforesaid offer, the interest or part
thereof so affected will be eliminated from the Assets and will be deemed an
Excluded Asset hereunder, and the Contribution Value shall be reduced by the
Allocated Value of such Asset. Otherwise, the interest offered as aforesaid
shall be assigned to the Partnership at Closing subject to such preferential
purchase rights for which notice has been given in accordance with the foregoing
but the time period for response by the holder of such preferential purchase
right extends beyond Closing. After the Closing, the Partnership shall comply
with all preferential purchase right provisions relating to any Asset, including
(without limitation) the preferential purchase rights identified on Schedule
5.26. The Partnership shall indemnify the IPP Parties against any and all Losses
arising out of or in connection with any claims asserted by the holder of a
preferential purchase right arising out of the transactions contemplated by this
Agreement. If any third party elects to purchase all or a part of an interest in
any Asset subject to a preferential purchase right after the Closing Date, the
Partnership shall be obligated to assign said interest to such third party and
shall be entitled to the consideration from the sale of such interest or part
thereof.
SECTION 4.08 Consents to Assign. Schedule 4.08 sets forth those consents to
assignment or other similar restrictions on assignability that, to the Knowledge
of the IPP Parties, are applicable to the transactions contemplated hereby,
excluding, however, the Xxxx Ranch Field Consent and those consents and
approvals from Governmental Authorities that are customarily obtained after
closing in connection with a transfer of assets similar to the Assets
("Customary Post Closing Consents"). The Pure Parties and the IPP Parties shall
use commercially reasonable efforts to obtain or remove all consents to
assignment or other similar restrictions on assignability listed on Schedule
4.08, in order to assign the Assets affected thereby to the Partnership at
Closing. If, at Closing, any such Asset, other than Xxxx Ranch Field, is subject
to an un-obtained consent to assignment or other similar restriction on
assignability (other than Customary Post Closing Consents), then (i) such Asset
shall not be transferred at Closing and such Asset shall be deemed an Excluded
Asset hereunder, (ii) the Contribution Value shall be reduced at the Closing by
the value set forth on Schedule 4.08 with respect to the consent affecting such
Asset (with respect to each such Asset, the "Holdback Value"), and (iii) the
Pure Parties and the IPP Parties shall use commercially reasonable efforts to
obtain such consent, including any Customary Post Closing Consents, and remove
any such restriction within ninety (90) days after the Closing ("Post Closing
Consent Period"). If the IPP Parties have not obtained such consent or removed
such restriction by the end of the Post Closing Consent Period, then the IPP
Parties shall retain the affected Asset. If the IPP Parties obtain such consent
or remove such restriction by the end of the Post Closing Consent Period, then
(i) subject to the Partnership's obligation pursuant to subsection (ii) below,
the IPP Parties shall assign the Asset affected thereby to the Partnership by an
assignment in the form of the Conveyance within ten (10) days after such consent
has been obtained or restriction is removed, (ii) the Contribution Value shall
be increased by the Holdback Value with respect to such Asset, as adjusted
pursuant to the provisions of Section 11.03 hereof through the date of the
contribution of such Asset to the Partnership and (iii) the Pure Triad shall
17
contribute to the capital of the Partnership cash in an amount equal to the
amount by which the Contribution Value is increased as provided in (ii) of this
sentence.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE IPP PARTIES
The IPP Parties jointly and severally represent and warrant to the Pure
Parties and the Partnership that:
SECTION 5.01 Existence. Each of the IPP Parties is a corporation, duly
organized, validly existing and in good standing under the laws of the State in
which such corporation was organized. Each of the IPP Parties has full legal
power, right and authority to carry on its business as such is now being
conducted and as contemplated to be conducted.
SECTION 5.02 Legal Power. Each of the IPP Parties has the legal power and right
to enter into and perform this Agreement, the Partnership Agreement and the
transactions contemplated hereby and thereby. The consummation of the
transactions contemplated by this Agreement and the Partnership Agreement will
not violate, nor be in conflict with:
(a) any provision of such IPP Party's certificate of incorporation or
by-laws or similar charter document;
(b) except for any preferential purchase rights and consents to
assignment, any material agreement or instrument to which such IPP Party is a
party or by which such IPP Party is bound; or
(c) any judgment, order, ruling or decree applicable to such IPP Party as
a party in interest or any law, rule or regulation applicable to such IPP Party.
SECTION 5.03 Execution. The execution, delivery and performance of this
Agreement and the Partnership Agreement and the transactions contemplated hereby
and thereby are duly and validly authorized by all requisite corporate action on
the part of the IPP Parties. This Agreement and the Partnership Agreement
constitute legal, valid and binding obligations of each of the IPP Parties
enforceable against the IPP Parties in accordance with their terms.
SECTION 5.04 Brokers. Except for Xxxxxx, Xxxxxxx & Co., no broker or finder has
acted for or on behalf of an IPP Party or any Affiliate of an IPP Party in
connection with this Agreement or the transactions contemplated by this
Agreement. No broker or finder is entitled to any brokerage or finder's fee, or
to any commission, based in any way on agreements, arrangements or
understandings made by or on behalf of an IPP Party or any of their Affiliates
for which Pure has or will have any liabilities or obligations (contingent or
otherwise).
SECTION 5.05 Bankruptcy. There are no bankruptcy, reorganization or arrangement
proceedings pending, being contemplated by or to the Knowledge of the IPP
Parties threatened against the IPP Parties or any Affiliate of the IPP Parties.
18
SECTION 5.06 Suits. Except as set forth in Schedule 5.06, there is no suit,
action, claim, investigation or inquiry by any person or entity or by any
administrative agency or Governmental Authority and no legal, administrative or
arbitration proceeding pending or, to the Knowledge of the IPP Parties,
threatened against the IPP Parties or any Affiliate of the IPP Parties or the
Assets that has materially affected or could reasonably be expected to
materially affect the IPP Parties' ability to consummate the transactions
contemplated herein or materially affect the title to or value of the Assets.
SECTION 5.07 Royalties. To the Knowledge of the IPP Parties, all rentals,
royalties and other payments due under the Leases described in Exhibit A have
been paid in all material respects, except those amounts in suspense.
SECTION 5.08 Taxes. To the Knowledge of the IPP Parties, all ad valorem,
property, production, severance, excise and similar taxes and assessments based
on or measured by the ownership of Property or the production of Hydrocarbons or
the receipt of proceeds therefrom on the Assets that have become due and payable
have been paid in all material respects.
SECTION 5.09 Title. The IPP Parties own Defensible Title to the Assets.
SECTION 5.10 Investment. Prior to entering into this Agreement, the IPP Parties
were advised by and have relied solely on their own legal, tax and other
professional counsel concerning this Agreement, the Assets and the value
thereof. The IPP Parties are acquiring their respective Limited Partner
Interests for their own account and not for distribution or resale in any manner
that would violate any state or federal securities law, rule, regulation or
order. The IPP Parties understand and acknowledge that the Limited Partner
Interests are restricted securities and may not be transferred without
registration under applicable state and federal securities laws or the
availability of an exemption from such registration.
SECTION 5.11 Compliance with Laws. To the Knowledge of the IPP Parties, the
ownership and operation of the Assets have been, and the Assets are in
conformity, in all material respects, with all applicable laws, and all
applicable rules, regulations and orders of all Governmental Authorities having
jurisdiction, including without limitation any laws, rules, regulations or
orders pertaining to health, the environment, wastes or Hazardous Materials. To
the Knowledge of the IPP Parties, all oil and gas xxxxx comprising a part of the
Properties that are operated by the IPP Parties have been drilled and completed
within the boundaries of the applicable leases or within limits otherwise
permitted by a valid and enforceable pooling, unit, or other agreement or
contract or by applicable law.
SECTION 5.12 Records. The records furnished (including, without limitation, all
gas balance information furnished to Pure in the data room) by the IPP Parties
to Pure for evaluation of the Assets in connection with the purchase thereof
pursuant to this Agreement were gathered from the business books and records of
the IPP Parties and, to the Knowledge of the IPP Parties, were true, correct and
complete in all material respects for the purposes for which such records were
prepared at the time so prepared. This representation shall not cover any title
records or records relating to any matter that would constitute a Title Defect
as such records and title matters
19
(including Title Defects) are exclusively addressed in Article IV and Section
5.09 of this Agreement.
SECTION 5.13 Basic Documents. To the Knowledge of the IPP Parties, the oil, gas
and/or mineral leases, the IPP Parties' interests in which comprise parts of the
Assets, and all other material contracts and agreements, licenses, permits and
easements, rights-of-way and other rights of surface use comprising any part of
or otherwise relating to the Assets (such leases and such material contracts,
agreements, licenses, permits, easements, rights-of-way and other rights of
surface use being herein called the "Basic Documents"), are in full force and
effect and constitute valid and binding obligations of the parties thereto. All
material agreements encumbering the Leases to which the IPP Parties are a party
or by which the IPP Parties are bound are disclosed on Part II of Exhibit A or
Schedule 5.15 (other than agreements for the sale of production described in
clauses (b) and (c) of Section 5.15). Except as set forth on Schedule 5.13, to
IPP Parties' Knowledge, none of the IPP Parties is in breach or default (and no
situation exists which with the passing of time or giving of notice would create
a breach or default) of its obligations under the Basic Documents and, to the
Knowledge of the IPP Parties, no breach or default by any third party (or
situation which with the passage of time or giving of notice would create a
breach or default) exists, to the extent such breach or default (whether by an
IPP Party or such a third party) could reasonably be expected to materially
adversely affect the ownership, operation, value or use of any Assets after the
Effective Time. Except as set forth on Schedule 5.13, to the Knowledge of the
IPP Parties, all payments (including all delay rentals, royalties, shut-in
royalties and valid calls for payment or prepayment under operating agreements)
owing under the Basic Documents have been made (timely, and before the same
became delinquent) by the IPP Parties in all material respects (and, where the
non-payment of same by a third party could materially adversely affect the
ownership, operation, value or use of a Property after the Effective Time, have
been made, to the Knowledge of the IPP Parties, by such third parties). For the
purposes of the representations contained in this Section 5.13 (and without
limitation of such representations), the non-payment of an amount or
non-performance of an obligation, where such non-payment or non-performance
could result in the forfeiture or termination of rights of the IPP Parties under
a Basic Document, shall be considered material.
SECTION 5.14 Commitments. To the Knowledge of the IPP Parties, the presently
approved face amount of any currently outstanding and effective authorities for
expenditure with respect to the Properties as of the date of this Agreement
would not require the Partnership to incur after the Effective Time capital
expenditures with respect to any one Property in excess of $100,000.00, other
than as set forth in Schedule 5.14.
SECTION 5.15 Production Sales Contracts; Calls of Production. To the Knowledge
of the IPP Parties, there exist no agreements for the sale of production from
the Properties other than (a) production sales contracts (the "Scheduled
Production Sales Contracts") disclosed in Schedule 5.15, (b) agreements or
arrangements which are cancelable on 90 days notice or less without penalty or
detriment or (c) agreements or arrangements for the sale of production by the
operator of Properties not operated by the IPP Parties for a term not greater
than one year and which provide for sales at market prices or the best price in
the area. To the Knowledge of the IPP Parties, IPP is presently receiving a
price for all production from (or attributable to) each Property covered by a
Scheduled Production Sales Contract as computed in accordance with the
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terms of such contract, and is not having deliveries of gas from any Property
subject to a Scheduled Production Sale Contract curtailed substantially below
such Property's delivery capacity. To the Knowledge of the IPP Parties, except
as disclosed on Schedule 5.15, there exist no calls to purchase production or
other similar rights or options to purchase production from the Properties which
affect, individually or in the aggregate, in excess of 500 barrels of oil
equivalents (converting gas to oil at 6 MMBtu/barrel) of production as of the
date of this Agreement (net to an IPP Party's interest) per day.
SECTION 5.16 Reserve Report Information. To the Knowledge of the IPP Parties,
all historic production and cost information furnished by IPP, or its
representatives, to Pure or to Xxxxx Xxxxx Company in connection with the
preparation of the reserve report with respect to the Properties dated as of
July 1, 2000, was true and correct in all material respects at the time so
furnished.
SECTION 5.17 Area of Mutual Interest Agreements. To the Knowledge of the IPP
Parties, no Property is subject to (or has related to it) any area of mutual
interest agreement ("AMI Agreement"), except (i) an AMI Agreement that is part
of a joint operating agreement, which AMI Agreement covers the properties
jointly owned by an IPP Party and the other parties thereto and an area
extending not more than one mile beyond the boundaries of the properties owned
(or formerly owned) jointly by such parties under such joint operating
agreement, or (ii) as disclosed in Schedule 5.17.
SECTION 5.18 No Oral Contracts. Except as set forth in Schedule 5.18, to the
Knowledge of the IPP Parties, no oral contracts for drilling or completion
operations, leasing, sales of Assets or individual expenditures in excess of
$50,000.00 are currently in force and effect as of the date of this Agreement
that relate to any of the Assets.
SECTION 5.19 Exempt Assets. To the Knowledge of the IPP Parties, the aggregate
fair market value of the Assets, excluding the Properties, Easements and
Contracts, does not exceed $15,000,000.00.
SECTION 5.20 Plugging Obligations. Except for xxxxx listed on Schedule 5.20, to
the Knowledge of the IPP Parties, there are no dry holes or xxxxx incapable of
producing in commercial quantities that are located on the Properties or on
lands pooled or unitized therewith (including, without limitation any xxxxx
which would, if located in Texas, require compliance with the Texas Railroad
Commission Rule 14(b)(2)), except for xxxxx that have been properly plugged and
abandoned, and except for xxxxx drilled to depths not included within the
Properties or within units in which the Properties participate.
SECTION 5.21 Operations after Effective Time. Except as set forth in Schedule
5.21, from the Effective Time to the date of this Agreement, the IPP Parties
have conducted their business with respect to the Assets in the ordinary course,
consistent, in all material respects, with past practices.
SECTION 5.22 Gas Balancing, Take or Pay, Allowables. Schedule 5.22 sets forth to
the Knowledge of the IPP Parties, all production imbalances as of the date set
forth on said
21
schedules with respect to the Properties. To the Knowledge of the IPP Parties,
the overproduced and underproduced positions disclosed on Schedule 5.22 are, in
each case, accurate in all material respects as of the dates shown on such
schedule. To the Knowledge of the IPP Parties, no IPP Party, nor any other
party, has received prepayments (including, but not limited to, payments for gas
not taken pursuant to "take-or-pay" arrangements) for any of the IPP Parties'
share of the Hydrocarbons produced from the Properties (or other properties) as
a result of which the obligation exists to deliver Hydrocarbons produced from
the Properties after the Effective Time without then or thereafter receiving
payment (or without then or thereafter receiving full payment) therefore. To the
Knowledge of the IPP Parties and except as may occur upon any change in
applicable law, no well on the Properties is subject to having allowable
production after the date hereof reduced below the full and regular allowable
(including the maximum permissible tolerance) because of any over production
prior to the date hereof (and no such reduction has occurred with respect to any
well on the Properties since the Effective Time).
SECTION 5.23 Tax Partnerships. To the Knowledge of the IPP Parties, only the
Properties listed on Schedule 5.23 are subject to (or have related to them) any
tax partnerships. Schedule 5.23 sets forth, for each Property listed on Schedule
5.23, the tax managing partner of the tax partnership.
SECTION 5.24 Payment of Expenses. Except as set forth on Schedule 5.24, to the
Knowledge of the IPP Parties, all expenses for labor, materials and supplies
used or furnished for use in connection with the Assets operated by the IPP
Parties and all joint interest xxxxxxxx received by the IPP Parties on
non-operated Assets, have been paid (timely, and before the same become
delinquent) by the IPP Parties, except such expenses and taxes as are disputed
in good faith by the IPP Parties and for which an adequate accounting reserve
has been established and for which sufficient funds have been retained by the
IPP Parties to pay such expenses.
SECTION 5.25 No Environmental Defects. To the Knowledge of the IPP Parties,
there are no Environmental Defects.
SECTION 5.26 Preferential Purchase Rights. Schedule 5.26 sets forth those
preferential purchase rights that, to the Knowledge of the IPP Parties, are
applicable to any Asset in connection with the transactions contemplated hereby
to be assigned to the Partnership at the Closing.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURE PARTIES
The Pure Parties jointly and severally represent and warrant to the IPP
Parties and the Partnership that:
SECTION 6.01 Existence. Each of the Pure Parties is a corporation or limited
partnership duly organized, validly existing and in good standing under the laws
of the State in which such corporation or limited partnership was organized.
Each of the Pure Parties has full legal power, right and authority to carry on
its business as such is now being conducted and as contemplated to be conducted.
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SECTION 6.02 Legal Power. Each of the Pure Parties has the legal power and right
to enter into and perform this Agreement, the Partnership Agreement and the
transactions contemplated hereby and thereby. The consummation of the
transactions contemplated by this Agreement and the Partnership Agreement will
not violate, nor be in conflict with:
(a) any provision of such Pure Party's articles or certificate of
incorporation, by-laws, or certificate of limited partnership;
(b) any material agreement or instrument to which such Pure Party is a
party or by which such Pure Party is bound; or
(c) any judgment, order, ruling or decree applicable to such Pure Party as
a party in interest or any law, rule or regulation applicable to such Pure
Party.
SECTION 6.03 Execution. The execution, delivery and performance of this
Agreement and the Partnership Agreement and the transactions contemplated hereby
and thereby are duly and validly authorized by all requisite corporate or
partnership action on the part of each of the Pure Parties. This Agreement and
the Partnership Agreement constitute legal, valid and binding obligations of
each of the Pure Parties enforceable in accordance with their terms.
SECTION 6.04 Brokers. Except for Credit Suisse First Boston, no broker or finder
has acted for or on behalf of any of the Pure Parties or any Affiliate of a Pure
Party in connection with this Agreement or the transactions contemplated by this
Agreement. No broker or finder is entitled to any brokerage or finder's fee, or
to any commission, based in any way on agreements, arrangements or
understandings made by or on behalf of a Pure Party or any Affiliate of a Pure
Party for which an IPP Party or the Partnership has or will have any liabilities
or obligations (contingent or otherwise).
SECTION 6.05 Bankruptcy. There are no bankruptcy, reorganization or arrangement
proceedings pending, being contemplated by or to the Knowledge of any Pure Party
threatened against any Pure Party or any Affiliate of a Pure Party.
SECTION 6.06 Suits. There is no suit, action, claim, investigation or inquiry by
any person or entity or by any administrative agency or Governmental Authority
and no legal, administrative or arbitration proceeding pending or, to any Pure
Party's Knowledge, threatened against a Pure Party or any Affiliate of a Pure
Party that has materially affected or could reasonably be expected to materially
affect a Pure Party's ability to consummate the transactions contemplated
herein.
SECTION 6.07 Qualifications. At the Closing, Pure GP and the Partnership shall
be qualified with all applicable Governmental Authorities to the extent
necessary to manage and operate the Assets, except for qualifications to operate
the Assets that are customarily obtained after the Closing, and qualifications
which, if not obtained, would not, individually or in the aggregate, have a
material adverse effect on the IPP Parties or the Partnership or the operation
of the Assets as a whole.
23
SECTION 6.08 Funds. The Pure Parties have or will have immediately prior to and
at Closing sufficient funds to enable the Pure Parties to pay in full the Pure
GP Capital Contribution, the Pure Triad Capital Contribution and the Pure LP4
Capital Contribution as herein provided and otherwise to perform the obligations
of the Pure Parties under this Agreement.
SECTION 6.09 Xxxx-Xxxxx-Xxxxxx. Based on the truth and accuracy of the
representations and warranties of the IPP Parties in Section 5.19 (without
limitation to the Knowledge of the IPP Parties) the aggregate fair market value
of the Assets that (a) do not constitute Exempt Assets does not exceed
$15,000,000.00; and (b) do constitute Exempt Assets does not exceed
$500,000,000.00.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF THE PURE PARTIES AND THE PARTNERSHIP
The Pure Parties and the Partnership jointly and severally represent and
warrant to the IPP Parties that:
SECTION 7.01 Existence. The Partnership is a limited partnership, duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Partnership has full legal power, right and authority to carry on
its business as such is now being conducted and as contemplated to be conducted.
SECTION 7.02 Legal Power. The Partnership has the legal power and right to enter
into and perform this Agreement and the transactions contemplated hereby. The
consummation of the transactions contemplated by this Agreement and the
Partnership Agreement will not violate, nor be in conflict with:
(a) any provision of the Partnership's certificate of formation or limited
partnership agreement;
(b) any material agreement or instrument to which the Partnership is a
party or by which the Partnership is bound; or
(c) any judgment, order, ruling or decree applicable to the Partnership as
a party in interest or any law, rule or regulation applicable to the
Partnership.
SECTION 7.03 Execution. The execution, delivery and performance of this
Agreement and the transactions contemplated hereby and thereby are duly and
validly authorized by all requisite partnership action on the part of the
Partnership. This Agreement constitutes legal, valid and binding obligations of
the Partnership enforceable in accordance with their terms.
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Exhibit 2.2
ARTICLE VIII
OPERATION OF THE ASSETS
Section 8.01 Operation of the Assets Prior to Closing.
(a) From and after the date of the execution of this Agreement and until
Closing, and subject to the provisions of applicable operating and other
agreements, the IPP Parties shall, and shall use commercially reasonable efforts
to cause other operators to, operate and administer the Assets in a good and
workmanlike manner consistent with their past practices, and shall carry on
their business with respect to the Assets in substantially the same manner as
before execution of this Agreement. The IPP Parties shall use commercially
reasonable efforts to preserve in full force and effect all oil and gas leases,
operating agreements, easements, rights-of-way, permits, licenses and agreements
that relate to the Assets.
(b) Without the prior written consent of the Partnership (which will
not unreasonably be withheld), from the date of the execution of this Agreement
until Closing, the IPP Parties shall not:
(i) consent to the drilling of an exploratory well or the drilling,
deepening, sidetracking, completing or plugging back of any development
well with an estimated cost of $500,000.00 or more net to the interest of
the IPP Parties or of one or more xxxxx with an aggregate estimated cost of
$3,000,000.00 or more net to the interest of the IPP Parties in any one
month; provided, however, if the Partnership reasonably withholds its
consent to any of the foregoing operations and in the reasonable judgment
of the IPP Parties such operation should be undertaken and the Asset
affected thereby would otherwise be temporarily or permanently forfeited if
it non-consented to such operation, then the IPP Parties shall have the
right to undertake such operation and the Asset affected thereby, together
with any other Asset, the IPP Parties' interest in which would be
temporarily or permanently forfeited if it non-consented to such operation,
shall be excluded from this Agreement and shall be "Excluded Assets"
hereunder;
(ii) encumber, sell, transfer, assign, convey, or otherwise dispose
of any of the Assets other than the sale of production in the ordinary
course of business and other personal property which is replaced by
equivalent property or consumed in the operation of the Assets; or
(iii) knowingly modify in any material respect or terminate any
Contract or enter into any new material contracts or agreements relating to
any Asset, other than periodic production purchase and sale agreements
terminable on not more than 90 days notice.
(c) Each of the Pure Parties and the Partnership acknowledges that the IPP
Parties own undivided interests in the Assets, and each of the Pure Parties and
the Partnership agrees that the acts or omissions of the other working interests
owners shall not constitute a violation of the provisions of this Article VIII,
nor shall any action required by a vote of working interest owners constitute
such a violation so long as the IPP Parties have voted their interests in a
25
manner that complies with the provisions of this Article VIII. To the extent
that the IPP Parties are not the operator of any of the Assets, the obligations
of the IPP Parties in this Article VIII shall be construed to require that the
IPP Parties use commercially reasonable efforts to cause the operator of such
Assets to take such actions or render such performance within the constraints of
the applicable operating agreements and other applicable agreements.
Section 8.02 Operation of the Assets After Closing. It is expressly understood
and agreed that the IPP Parties shall not be obligated to continue operating any
of the Assets following the Closing and the Partnership hereby assumes full
responsibility for operating (or causing the operation of) all Assets following
the Closing. The IPP Parties shall make their personnel available to the
Partnership prior to Closing as may be reasonably necessary to assist in the
transition if the Partnership or Pure GP becomes the operator. The IPP Parties
do not warrant or guarantee that the Partnership or Pure GP will become the
operator of the Assets or any portion thereof, as such matter will be controlled
by the applicable joint operating agreement(s). In order to assist the
Partnership in its ownership and operation of the Assets during the 60-day
period following the Closing, IPP, the Partnership and Pure will enter into the
Transition Services Agreement in substantially the form attached hereto as
Exhibit D.
Section 8.03 Correction of Exhibits. It is the intent of the IPP Parties to
convey, grant and assign, and the Partnership to receive all the Assets, except
for the Excluded Assets, without any warranty of title by the IPP Parties
(express, implied or statutory) but subject to the Partnership's remedies for
Title Defects as expressly provided in Article IV. If the Partnership or the IPP
Parties discover at any time prior to Closing that any Assets are not described
on Exhibit A, or not sufficiently described on such Exhibit in order to transfer
legal title to the Partnership and the other Parties hereto agree, then the
Parties shall amend such Exhibit to include a sufficient description to assign
title to such Assets to the Partnership and such Exhibit, as so amended, shall
be the Exhibit used to describe the Assets to be assigned to the Partnership.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF THE IPP PARTIES
The obligations of each of the IPP Parties to consummate the transactions
provided for herein are subject, at the option of the IPP Parties, to the
fulfillment on or prior to the Closing Date of each of the following conditions:
Section 9.01 Representations. The representations and warranties of each of the
Pure Parties and the Partnership herein contained shall be true and correct in
all material respects on the Closing Date as though made on and as of such date.
Section 9.02 Performance. Each of the Pure Parties, Pure and the Partnership
shall have performed, in all material respects, all material obligations,
covenants and agreements contained in this Agreement to be performed or complied
with by it at or prior to the Closing. The matters set forth in Section 9.01 and
this Section 9.02 shall be certified by each of the Pure Parties and the
Partnership by officer's certificates delivered by an officer of each of the
Pure Parties and the Partnership at the Closing.
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Section 9.03 Pending Matters. No suit, action or other proceeding shall be
pending or threatened that seeks to restrain, enjoin or otherwise prohibit the
consummation of the transactions contemplated by this Agreement.
Section 9.04 Capital Contributions.
(a) Pure GP shall have made to the Partnership the Pure GP Capital
Contribution, as the same may be adjusted hereunder.
(b) the Pure Triad shall have made to the Partnership the Pure Triad
Capital Contribution, as the same may be adjusted hereunder.
(c) Pure LP4 shall have made to the Partnership the Pure LP4 Capital
Contribution, as the same may be adjusted hereunder.
Section 9.05 Execution and Delivery of Closing Documents.
(a) Each of the Pure Parties and Pure shall have executed, acknowledged
and delivered, as appropriate, to IPP all closing documents described in Section
11.08.
(b) The Partnership shall have executed, acknowledged and delivered, as
appropriate, to IPP all closing documents described in Section 11.09.
Section 9.06 Closing Under Purchase Agreement. The transactions contemplated by
that certain Agreement for Purchase and Sale by and among IPP, Pure and the
other parties listed therein, dated of even date herewith and attached hereto as
Annex III ("Purchase Agreement") shall have been consummated at a closing
contemporaneous with the Closing.
Section 9.07 Xxxx Ranch Field Consent. Any consent to assignment or other
transfer or other similar restriction on assignability or transfer relating to
the leases or operations on the Xxxx Ranch Field shall have been obtained.
ARTICLE X
CONDITIONS TO OBLIGATIONS OF THE PURE PARTIES
The obligations of each of the Pure Parties to consummate the transactions
provided for herein are subject, at the option of the Pure Parties, to the
fulfillment on or prior to the Closing Date of each of the following conditions:
Section 10.01 Performance. Each of the IPP Parties shall have performed in all
material respects all material obligations, covenants and agreements contained
in this Agreement to be performed or complied with by it at or prior to the
Closing. The matters in this Section 10.01 and Section 10.05(i) (with inclusion
of existing knowledge and materiality qualifiers) shall be certified by each of
the IPP Parties by an officer's certificate delivered by an officer of each of
the IPP Parties at the Closing.
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Section 10.02 Pending Matters. No suit, action or other proceeding shall be
pending or threatened that seeks to restrain, enjoin, or otherwise prohibit the
consummation of the transactions contemplated by this Agreement.
Section 10.03 Execution and Delivery of Closing Documents. Each of the IPP
Parties shall have executed, acknowledged and delivered, as appropriate, to the
Pure Parties and Pure all closing documents described in Section 11.07.
Section 10.04 Closing Under Purchase Agreement. The transactions contemplated by
the Purchase Agreement shall have been consummated at a closing contemporaneous
with the Closing.
Section 10.05 Material Adverse Change in Value. The value, as of the Closing
Date, of the Assets (as defined in this Agreement) and the value of the Assets
(as defined in the Purchase Agreement), collectively, shall not have diminished
by Fifteen Million Dollars ($15,000,000.00) or more in the aggregate from the
value that would otherwise be the case on the Closing Date but for the
occurrence of one or more of the following: (i) the failure of any of the IPP
Parties' representations or warranties (without regard to any knowledge or
materiality qualifier as to any such representation or warranty) to be true and
correct on the Closing Date as though made on and as of such date, (ii) an
Environmental Defect pertaining to such Assets or (iii) a Title Defect
pertaining to such Assets. The right of the Pure Parties to claim that there has
been a material adverse change in value of such Assets shall be strictly
construed and an adverse change in the price for Hydrocarbons or other condition
generally affecting the oil and gas industry as a whole or the United States'
economy shall not be considered in determining a diminution in value of such
Assets.
Section 10.06 Xxxx Ranch Field Consent. Any consent to assignment or other
transfer or other similar restriction on assignability or transfer relating to
the leases or operations on the Xxxx Ranch Field shall have been obtained.
Section 10.07 Capital Contributions.
(a) IPP shall have made to the Partnership the IPP Capital Contribution,
as the same may be adjusted hereunder.
(b) Southland shall have made to the Partnership the Southland Capital
Contribution, as the same may be adjusted hereunder.
(c) IPRC shall have made to the Partnership the IPRC Capital Contribution,
as the same may be hereunder.
(d) Transtates shall have made to the Partnership the Transtates Capital
Contribution, as the same may be adjusted hereunder.
Section 10.08 IP Guaranty. International Paper Company shall have executed,
acknowledged and delivered to the Partnership the IP Guaranty.
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ARTICLE XI
CLOSING
Section 11.01 Time and Place of Closing. If the conditions referred to in
Articles IX and X of this Agreement have been satisfied or waived in writing,
the transactions contemplated by this Agreement (the "Closing") shall take place
at the offices of Xxxxxx & Xxxxxx L.L.P., 0000 Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxx 00000, on January 31, 2001 (the "Closing Date").
Section 11.02 Intentionally Omitted.
Section 11.03 Adjustments to Contribution Value at Closing.
(a) At Closing, the Contribution Value shall be increased by the following
amounts:
(i) the amount as of the Effective Time of all prepaid ad valorem,
property or similar taxes and assessments based upon or measured by
ownership of the Assets, insofar as such prepaid taxes relate to periods of
time after the Effective Time;
(ii) (A) all direct costs and expenses (excluding costs and expenses
attributable to the categories of expenses described in Schedule
11.03(a)(ii) and any costs or expenses of employee severance or termination
benefits or similar costs and expenses) incurred or accrued by IPP
including, but not limited to, rentals, royalties, production and severance
taxes, capital expenditures, and lease operating expenses and (B) 90% of
the actual costs incurred or accrued by IPP in connection with the
categories of expenses described in Schedule 11.03(a)(ii) (excluding any
costs or expenses of employee severance or termination benefits or similar
costs and expenses), in each case, that are attributable to the Assets
(excluding, however, any costs incurred by IPP in connection with the
transactions contemplated hereby), to the extent, in each case, that such
costs and expenses are attributable to the period of time from the
Effective Time to the Closing Date;
(iii) the value of all Hydrocarbons produced prior to the Effective
Time but in storage above the pipeline connection or upstream of the
applicable sales meter at the Effective Time; and
(iv) any other amount provided for in this Agreement or agreed upon
by Pure and IPP.
(b) At Closing, the Contribution Value shall be decreased by the following
amounts:
(i) an amount equal to all unpaid ad valorem, property, production,
severance and similar taxes and assessments based upon or measured by the
ownership of the Assets that are attributable to periods of time prior to
the Effective Time, which amounts shall, to the extent not actually
assessed, be computed based on such taxes and
29
assessments for the preceding tax year (such amount to be prorated for the
period of the IPP Parties' and the Partnership's ownership before and after
the Effective Time);
(ii) an amount equal to all gross revenues (including XXXXX overhead
collected from third parties) accruing to IPP with respect to the Assets
and attributable to the period of time after the Effective Time, and the
net effect of the reduction from the Effective Time to the Closing of the
gas overproduction imbalance with respect to the Assets existing as of the
Effective Time set forth in Schedule 5.22;
(iii) the Allocated Value of any Asset elected to be purchased by a
third party prior to the Closing pursuant to a preferential purchase right
as provided in Section 4.07;
(iv) any Holdback Value resulting from any failure to receive a
consent to assign as provided in Section 4.08; and
(v) any other amount provided for in this Agreement or agreed upon
by Pure and IPP.
(c) The adjustments described in Sections 11.03(a) and (b) are hereinafter
referred to as the "Contribution Value Adjustments."
(d) Provided that the Closing occurs, appropriate adjustments shall be
made between the Partnership and IPP so that (i) the Partnership will receive
all proceeds from sales of Hydrocarbons that are produced and saved from and
after the Effective Time and any other revenues arising out of the ownership or
operation of the Assets from and after the Effective Time, net of all applicable
production, severance, and similar taxes, and net of all costs and expenses that
are incurred in the ownership or operation of the Assets from and after the
Effective Time, including, without limitation, all drilling costs, all capital
expenditures, all overhead charges paid to unrelated third parties under
applicable operating or other agreements and (ii) subject to Article XIII, IPP
will receive all proceeds from sales of Hydrocarbons that are produced and saved
prior to the Effective Time and any other revenues arising out of the ownership
or operation of the Assets prior to the Effective Time, net of all applicable
production, severance, and similar taxes, and net of all costs and expenses that
are incurred in the ownership or operation of the Assets prior to the Effective
Time, provided, in each case, that such proceeds have not been accounted for as
a Contribution Value Adjustment.
(e) No adjustments to the Contribution Value shall be made for the value
of the aggregate net gas imbalances relative to the Properties existing as of
the Effective Time.
Section 11.04 Pre-Closing Allocations/Statement. Not later than two business
days prior to the Closing Date, IPP shall prepare and deliver to Pure and the
Partnership a statement of the estimated Contribution Value Adjustments taking
into account the foregoing principles (the "Statement").
30
Section 11.05 Post-Closing Adjustments to Contribution Value.
(a) On or before 90 business days after the Closing Date, IPP shall
prepare and deliver to the Partnership a revised Statement setting forth the
actual Contribution Value Adjustments. To the extent reasonably required by IPP,
the Partnership shall assist in the preparation of the revised Statement. IPP
shall provide the Partnership such data and information as the Partnership may
reasonably request supporting the amounts reflected on the revised Statement in
order to permit the Partnership to perform or cause to be performed an audit.
The revised Statement shall become final and binding upon the parties on the
30th business day following receipt thereof by the Partnership (the "Final
Settlement Date") unless the Partnership gives written notice of its
disagreement (a "Notice of Disagreement") to IPP prior to such date. Any Notice
of Disagreement shall specify in detail the dollar amount, nature and basis of
any disagreement so asserted. If a Notice of Disagreement is received by IPP in
a timely manner, then the Parties shall resolve the Dispute evidenced by the
Notice of Disagreement in accordance with Article XV.
(b) If the amount of the Contribution Value as set forth on the Final
Statement exceeds the amount of the estimated Contribution Value at Closing,
then (i) the Contribution Value shall be increased by the amount by which the
Contribution Value as set forth on the Final Statement exceeds the amount of the
estimated Contribution Value at Closing within five business days after the
Final Settlement Date or, if applicable, the date such amount is determined
pursuant to Article XV, together with interest at the Interest Rate as accrued
from the Closing Date until the date of the increase and (ii) the Pure Triad
shall contribute to the capital of the Partnership cash in an amount equal to
the increase in the Contribution Value as provided in (i) of this sentence. If
the amount of the Contribution Value as set forth on the Final Statement is less
than the amount of the estimated Contribution Value at Closing, then the
Contribution Value shall be decreased by the amount by which the Contribution
Value as set forth on the Final Statement is less than the amount of the
estimated Contribution Value at Closing within five business days after the
Final Settlement Date or, if applicable, the date such amount is determined
pursuant to Article XV, together with interest at the Interest Rate as accrued
from the Closing Date until the date of the decrease. For purposes of this
Agreement, (i) the term "Final Statement" shall mean (A) if the revised
Statement becomes final pursuant to Section 11.05(a), such revised Statement or
(B) upon resolution of any Dispute regarding a Notice of Disagreement, the
revised Statement reflecting such resolutions, which the Parties shall issue, or
cause the Independent Expert or arbitrators to issue, as applicable, following
such resolution, (ii) the term "Interest Rate" shall mean an annual rate of
interest of 6 1/2%, and (iii) the term "Post Closing Adjustment" shall mean the
difference between the Contribution Value as set forth on the Final Statement
and the estimated Contribution Value, as adjusted by Contribution Value
Adjustments, at Closing, whether positive or negative.
31
Section 11.06 Ad Valorem and Similar Taxes. Ad valorem, property and similar
taxes and assessments based upon or measured by the value of the Assets shall be
divided or prorated between the IPP Parties, on the one hand, and the
Partnership, on the other, as of the Effective Time. The IPP Parties shall
assume responsibility for such taxes attributable to the period of time prior to
the Effective Time and the Partnership shall assume responsibility for the
periods of time from and after the Effective Time.
Section 11.07 Actions of the IPP Parties at Closing. At the Closing, the IPP
Parties shall:
(a) execute, acknowledge and deliver to the Partnership (i) the
Conveyance and such other conveyances, assignments, transfers, bills of sale and
other instruments (in form and substance mutually agreed upon by Pure and the
IPP Parties) as may be necessary or desirable to contribute the Assets to the
Partnership, (ii) the Transition Services Agreement in the form attached as
Exhibit D (the "Transition Services Agreement"), and (iii) the Master Offset
Agreement;
(b) execute, acknowledge and deliver to the Partnership letters in lieu
of transfer or division orders directing all purchasers of production from the
Properties to make payment of proceeds attributable to such production to the
Partnership from and after the Effective Time as reasonably requested by Pure GP
prior to the Closing Date;
(c) deliver to the Partnership possession of the Assets;
(d) execute and deliver to the Partnership affidavits attesting to their
non-foreign status;
(e) execute and deliver any document necessary to effect a change of
operator in any state or any offshore area over which the United States of
America or any state asserts jurisdiction where an IPP Party is the operator as
of the Closing;
(f) deliver to the Pure Parties and the Partnership a copy of the
Partnership Agreement duly executed by IPP, IPRC, Transtates and Southland;
(g) deliver to the Partnership, the IPRC Capital Contribution and the
Transtates Capital Contribution by means of a completed federal funds transfer
of same day funds to the account of the Partnership;
(h) consummate, or cause to be consummated, the transactions contemplated
by the Purchase Agreement;
(i) execute, acknowledge and deliver any other agreements provided for
herein or necessary or desirable to effectuate the transactions contemplated
hereby;
(j) cause IPP Affiliate Borrower to execute and deliver a copy of the
Senior Note Agreement and, upon receipt of the Senior Loan, the Note; and
32
(k) pay the Partnership, in immediately available funds, an amount equal
to all cash in, or attributable to, suspense amounts lawfully owed by the owner
of a Lease to a third party relative to the Assets and retained by the IPP
Parties.
Section 11.08 Actions of the Pure Parties and Pure at Closing. (a) At the
Closing, Pure GP, Pure LP1, Pure LP2, Pure LP3 or Pure LP4, as the case may be,
shall:
(i) deliver or cause to be delivered to the Partnership the Pure GP
Capital Contribution, the Pure Triad Capital Contribution and the Pure LP4
Capital Contribution by means of a completed federal funds transfer of same day
funds to the account of the Partnership;
(ii) deliver or cause to be delivered to the Partnership a copy of
the Partnership Agreement duly executed by each of Pure GP, Pure LP1, Pure LP2,
Pure LP3 and Pure LP4;
(iii) consummate, or cause to be consummated, the transactions
contemplated by the Purchase Agreement;
(iv) execute and deliver to the IPP Parties the Indemnity Agreement;
and
(v) execute, acknowledge and deliver the documents described in
Section 11.07(a) and any other agreements provided for herein or necessary or
desirable to effectuate the transactions contemplated hereby.
(b) At the Closing, Pure shall:
(i) execute and deliver to the IPP Parties the Pure Guaranty;
(ii) execute and deliver to the IPP Parties the Transition Services
Agreement; and
(iii) execute, acknowledge and deliver any other agreements provided
for herein or necessary or desirable to effectuate the transactions contemplated
hereby.
Section 11.09 Actions of Partnership at Closing. At Closing, the Partnership
shall:
(a) issue and deliver the General Partner Interest to Pure GP as provided
in the Partnership Agreement;
(b) issue and deliver Limited Partner Interests to the IPP Parties, Pure
LP1, Pure LP2, Pure LP3 and Pure LP4 as provided in the Partnership Agreement;
(c) execute and deliver a copy of the Senior Note Agreement and fund the
Senior Loan;
(d) execute and deliver a copy of the Indemnity Agreement;
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(e) execute and deliver a copy of the Master Offset Agreement; and
(f) execute, acknowledge and deliver any other agreements provided for
herein or necessary or desirable to effectuate the transactions contemplated
hereby.
Section 11.10 Further Cooperation.
(a) Except as necessary for IPP to perform under the Transition Services
Agreement, the IPP Parties shall make the Records available to be picked up by
the Partnership at the offices of IPP during normal business hours within five
days after the Closing. The IPP Parties shall have the right to retain copies of
any of the Records.
(b) It is the intent of the IPP Parties to contribute and assign to the
Partnership pursuant to the terms of this Agreement all of their right, title
and interest in and to all oil, gas and mineral leases that they currently own
as of the date hereof in the areas described in Exhibit A attached hereto,
except to the extent that any such oil, gas and mineral leases are sold and
conveyed to the Buyer (as defined in the Purchase Agreement) under the Purchase
Agreement or any such oil, gas and mineral leases are specifically described as
Excluded Assets hereunder or under the Purchase Agreement. After the Closing,
the IPP Parties agree that, at the request of the Partnership, the IPP Parties,
without additional consideration, shall execute and deliver or cause to be
executed and delivered from time to time to the Partnership a Conveyance
covering any such oil, gas and mineral leases to the extent such oil, gas and
mineral leases (i) were not previously assigned to the Partnership pursuant to
the terms of this Agreement, (ii) were not sold and conveyed to the Buyer under
the terms of the Purchase Agreement, and (iii) were not specifically described
as Excluded Assets hereunder or under the terms of the Purchase Agreement.
(c) After the Closing Date, each Party at the request of another and
without additional consideration, shall execute and deliver, or shall cause to
be executed and delivered from time to time such further instruments of
conveyance and transfer and shall take such other action as the other Party may
reasonably request to convey and deliver the Assets to the Partnership and to
accomplish the orderly transfer of the Assets to the Partnership in the manner
contemplated by this Agreement. To effect the foregoing with respect to
corrections of the descriptions of the Assets to be sold and conveyed hereby,
the Partnership shall provide the IPP Parties with a written request for a
corrective instrument together with the Partnership's available title
information and a form of Conveyance with the corrected description. The IPP
Parties shall use their commercially reasonable efforts to execute and return
such Conveyance within ninety (90) days of receipt of the Partnership's written
request; provided that if the Partnership requests the return of the Conveyance
within forty-five (45) days of receipt of the Partnership's written request,
then the Partnership shall pay the IPP Parties' reasonable third-party costs and
expenses therewith. After the Closing, the Parties will cooperate to have all
proceeds received attributable to the Assets to be paid to the proper Party
hereunder and to have all expenditures to be made with respect to the Assets to
be made by the proper Party hereunder.
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(d) Prior to the execution of this Agreement, Pure Resources, Inc.
("Pure Parent") has consulted with the U.S. Securities and Exchange Commission
(the "SEC") to determine the type of financial statements ("Required Financial
Statements") pertaining to the Assets that will be required of Pure Parent in
connection with reports, registration statements and other filings to be made by
Pure Parent related to the transactions contemplated by this Agreement and the
Purchase Agreement with the SEC pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). IPP shall use its best efforts to prepare, at the
sole cost and expense of the Pure Parties, the Required Financial Statements in
such form that the Required Financial Statements can be audited. If the Required
Financial Statements consist only of statements of revenues and direct expenses
related to the Assets, such Required Financial Statements shall be audited by
KPMG, LLP, the independent certified public accountants of Pure Parent. If,
however, the Required Financial Statements consist of full audited financial
statements of IPP and statements of revenues and direct expenses of the Assets
acquired from the other IPP Party, the Required Financial Statements shall be
audited by Xxxxxx Xxxxxxxx LLP, IPP's independent certified public accountants,
and IPP shall use its best efforts to cause Xxxxxx Xxxxxxxx LLP to (1) issue to
IPP an unqualified opinion with respect to the Required Financial Statements
(the Required Financial Statements and related opinions being hereinafter
referred to as the "Audited Financial Statements") and (2) provide its written
consent for the use of its audit reports of the Audited Financial Statements to
prepare and file reports under the Exchange Act and the Securities Act, as
needed. IPP shall complete the Required Financial Statements as soon as
reasonably practicable and if required to deliver the Audited Financial
Statements to Pure Parent, IPP shall complete and deliver the Audited Financial
Statements not later than ten days prior to the date that such Audited Financial
Statements would be required to be filed by Pure Parent with a report on Form
8-K under the Exchange Act. In the event that Xxxxxx Xxxxxxxx LLP conducts the
audit of the Required Financial Statements, Pure may, at its option and expense,
engage KPMG, LLP to monitor and review the progress of the production of the
Audited Financial Statements. The Pure Parties shall bear all reasonable and
customary costs and expenses involved in the preparation and audit of any
financial statements required pursuant to this subsection and shall be entitled
to review and copy any work papers or other records used by Xxxxxx Xxxxxxxx LLP
or necessary for Pure Parent to prepare pro forma financial statements.
Section 11.11 Confidentiality Agreement. If the Closing occurs, the
confidentiality agreement dated September 18, 2000 executed by Xxxxxx Xxxxxxx &
Co., on behalf of IPP, and Pure (the "Confidentiality Agreement") shall
terminate and be of no further force or effect insofar as the Confidentiality
Agreement relates to the Assets.
Section 11.12 Employee Matters.
(a) Employees. The IPP Parties have furnished the Pure Parties with a
list identifying by name, location and position the employees of IPP Parties or
their Affiliates who are assigned to the operation of the Assets, as such term
is defined in this Agreement and also as defined in the Purchase Agreement (the
"Employees"). Within sixty (60) days after Closing ("Hire Date"), Pure GP or one
of its Affiliates shall offer employment to such Employees as Pure GP, in its
sole discretion may choose. The terms, conditions and
35
benefits relating to all such offers of employment shall be substantially
comparable with the terms, conditions and benefits Pure Parent and its
Affiliates (other than Unocal) provide to similarly situated employees of Pure
Parent and its Affiliates (other than Unocal). Employment under such offers
shall commence on the later of the Hire Date, or the date such Employee, if not
actively at work on the Hire Date for any reason, excluding vacation, sick
leave, jury duty or similar approved absence or regularly scheduled days off,
begins full-time active employment with Pure GP or one of its Affiliates (the
"Employment Commencement Date"), provided such Employee begins such employment
within 90 days of the Hire Date. The Employees who accept and actually commence
employment with Pure GP or one of its Affiliates as provided above are
hereinafter collectively referred to as "Transferred Employees." Pure GP shall
notify IPP Parties in writing not less than seven days prior to the Hire Date of
the Employees to whom it has offered employment. IPP Parties shall be
responsible for all obligations and liabilities, if any, under the Worker
Adjustment and Retraining Notification Act and any comparable state laws with
respect to the Employees who do not become Transferred Employees.
(b) No Solicitation of Employees.
(i) Without the prior written consent of Pure GP, IPP Parties shall
refrain and shall cause their Affiliates to refrain for a period of one year
from the Hire Date, from soliciting directly or indirectly, the employment of or
otherwise seeking to engage the services of any Transferred Employee.
(ii) Without the prior written consent of IPP Parties, Pure GP shall
refrain, and shall cause its Affiliates to refrain, for a period of one year
from the Hire Date, from soliciting, directly or indirectly, the employment of
or otherwise seeking to engage the services of any employee of IPP Parties or
any of their Affiliates, other than the Transferred Employees.
(iii) Notwithstanding paragraphs (i) and (ii) of this Section
11.12(b), nothing herein shall prevent a party hereto (the "Hiring Party") from
hiring any employee of another party hereto if such person responds to a general
advertisement of employment that is not directed to such individual specifically
or was otherwise not directly or indirectly solicited by the Hiring Party.
(iv) If an Employee who does not become a Transferred Employee is
terminated by IPP Parties or an Affiliate of IPP Parties on or after the Closing
Date and is employed by Pure GP or an Affiliate of Pure GP (other than Unocal)
within six months of the Closing Date, Pure GP shall promptly notify IPP Parties
thereof and shall pay to IPP Parties an amount equal to the product of (x) the
amount, if any, paid to such Employee by IPP Parties or an Affiliate of the IPP
Parties pursuant to IPP Parties' Severance Plan, and (y) a fraction, the
numerator of which is 365 less the number of days that have elapsed from the
Closing Date to such Employee's employment date with Pure GP or an Affiliate of
Pure GP (other than Unocal), and the denominator of which is 365.
(c) Pure Employee Benefit Plans. Effective as of their Employment
Commencement Dates, Pure GP shall provide, or cause to be provided, to the
Transferred Employees employee benefit plans and programs, including vacation
policies, ("Pure's Benefit Plans") on substantially the same basis that such
plans and programs are provided to similarly
36
situated employees of Pure Parent and its Affiliates (other than Unocal). Pure
GP shall grant, or shall cause its Affiliates to grant, each Transferred
Employee credit under Pure's Benefit Plans for his service with IPP Parties
and/or their Affiliates as of his Employment Commencement Date for all purposes
(other than the accrual of benefits under a defined benefit pension plan and not
to exceed thirty (30) days accrued vacation time) for which such service was
recognized by IPP Parties or their Affiliates under a similar plan or program.
With respect to Pure's Benefit Plans that provide group health, life or
disability benefits, Pure GP and its Affiliates shall cause each such plan to
(i) waive any exclusions, restrictions or limitations with respect to pre-
existing conditions or waiting periods thereunder to the extent that the same
were waived or satisfied by the Transferred Employee on the Employment
Commencement Date under such analogous plan of IPP Parties or their Affiliates
and (ii) credit any health expenses paid by a Transferred Employee or his or her
covered dependents during the year in which his Employment Commencement Date
commences for purposes of satisfying any applicable deductible, coinsurance and
maximum out-of-pocket provisions under such Pure's Benefit Plan. Pure's Benefit
Plan shall be responsible for all benefit claims for group health by Transferred
Employees and their dependents for covered services rendered on and after the
date their participation in Pure's Benefit Plan commences, to the extent covered
by Pure's Benefit Plan, and IPP Parties' group health plans shall be responsible
for all benefit claims by Transferred Employees and their dependents for covered
services rendered before their participation in Pure's Benefit Plan commences,
to the extent covered by IPP Parties' plan.
(d) Severance. For a period of not less than 12 months following the
Hire Date, Pure GP agrees to provide, or to cause an Affiliate of Pure GP to
provide, the Transferred Employees with severance pay and benefits upon any
termination of such Transferred Employee's employment by Pure GP or an Affiliate
of Pure GP, other than for Cause or disability, that are not less than the
severance pay and benefits provided under IPP Parties' Severance Plan, as
attached hereto as Exhibit E; provided, however, if the termination of a
Transferred Employee's employment by Pure GP or an Affiliate of Pure GP, other
than for Cause or disability, occurs within the first six months following the
Hire Date, IPP Parties will reimburse Pure GP for one-half of the costs of such
severance pay and benefits up to a maximum of one-half of the severance pay and
benefits that would have been provided under IPP Parties' Severance Plan. For
purposes of this Agreement, "Cause" means a material violation of the policies
and procedures of Pure GP and its Affiliates, willful misconduct, gross
negligence, engagement in conduct which is injurious (monetarily or otherwise)
to Pure GP and its Affiliates, fraud, theft, or the commission of a felony or a
misdemeanor involving moral turpitude. Following such 12 month period, Pure GP
shall provide to the Transferred Employees then employed by Pure GP or one of
its Affiliates, severance pay and benefits on substantially the same basis that
such severance pay and benefits are provided to similarly situated employees of
Pure GP and its Affiliates (other than Unocal).
(e) 401(k) Plan Rollovers. As soon as administratively feasible after
the Closing Date, Pure shall cause the trustee of Pure's 401(k) plan trust to
accept direct rollovers from IPP Parties' 401(k) plan trust for each Transferred
Employee electing the same with respect to his or her vested account thereunder.
Such direct rollovers shall be made in cash and participant promissory notes for
any outstanding loans of such Transferred Employees under Pure's 401(k) plan.
37
ARTICLE XII
TERMINATION
Section 12.01 Right of Termination. This Agreement may be terminated at any
time at or prior to Closing:
(a) by mutual written consent of the Parties;
(b) by the IPP Parties on the Closing Date if by the Closing Date (i)
the conditions set forth in Sections 9.01, 9.02, 9.04, 9.06 or 9.07 have not
been fully satisfied by the applicable Pure Party or waived by the IPP Parties
in writing or (ii) any of the other conditions in Article IX have not been
satisfied in all material respects by the Pure Parties, Pure and the
Partnership, as applicable, or waived by the IPP Parties in writing;
(c) by the Pure Parties on the Closing Date if by the Closing Date (i)
the conditions set forth in Sections 10.01, 10.04, 10.05, 10.06 or 10.07 have
not been fully satisfied by the IPP Parties or waived by the Pure Parties in
writing or (ii) any of the other conditions set forth in Article X have not been
satisfied in all material respects by the applicable IPP Party or waived by the
Pure Parties in writing;
(d) by any Party if the Closing shall not have occurred on or before
January 31, 2001;
(e) by any Party if any Governmental Authority shall have issued an
order, judgment or decree or taken any other action challenging, restraining,
enjoining, prohibiting or invalidating the consummation of any of the
transactions contemplated herein; or
(f) as otherwise provided herein;
provided, however, that no Party shall have the right to terminate this
Agreement pursuant to clause (b), (c) or (d) above if such Party or its
Affiliates are at such time in material breach of any provision of this
Agreement or the Purchase Agreement.
Section 12.02 Effect of Termination. In the event that Closing does not occur as
a result of any Party exercising its right to terminate pursuant to Section
12.01, this Agreement shall be null and void and no Party shall have any further
rights or obligations under this Agreement, except that nothing herein shall
relieve any Party from any liability for any breach hereof or any liability that
has accrued prior to the date of such termination.
Section 12.03 Attorney Fees, Etc. If a Party to this Agreement resorts to legal
proceedings to enforce this Agreement, the prevailing Party in such proceedings
shall be entitled to recover all costs incurred by such Party including
reasonable attorney's fees, in addition to any other relief to which such Party
may be entitled.
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ARTICLE XIII
ASSUMPTION AND INDEMNIFICATION
Section 13.01 Retained Obligations. Provided that the Closing occurs, the IPP
Parties hereby retain all obligations and liabilities for the following
(collectively the "Retained Obligations"):
(a) the payment of any tax owed by the IPP Parties attributable to
the ownership or operation of the Assets prior to the Effective Time,
including (i) the IPP Parties' pro rata share of ad valorem taxes under
Section 11.03, but in any event only to the extent attributable to the
taxable periods or portions thereof ending before the Effective Time, (ii)
severance or production taxes relating to Hydrocarbons produced from the
Assets prior to the Effective Time and (iii) the federal and state income
tax obligations of the IPP Parties;
(b) any suit or action, against the IPP Parties pending by or before
any Governmental Authority, on or before the Effective Time, including
without limitation those described in Schedule 5.06;
(c) any liability for criminal penalties attributable to the
ownership or operation of the Assets occurring prior to the Effective Time;
(d) subject to the obligations of Pure GP to make payments pursuant
to Sections 11.12(b)(iv) and 11.12(d), any liability for claims asserted by
any employees of the IPP Parties or for claims arising out of or related in
any way to (A) the employment, termination of employment or terms or
conditions of employment of employees or applicants of the IPP Parties or
their affiliates (or employees or applicants otherwise relating to the
operation of the Assets) or (B) the failure by the IPP Parties or their
affiliates to comply with any law, order, decree, or ordinance relating to
employment, in each of (A) and (B) to the extent arising or occurring on or
before the Closing Date, and (ii) without limiting the generality of the
foregoing, any liability arising under (1) any employee benefit plan,
program, arrangement or agreement (each, a "Plan") of the IPP Parties or
their affiliates, (2) any Plan for the benefit of or that benefits the
employees of the IPP Parties or their affiliates, or (3) the Employee
Retirement Income Security Act of 1974, as amended, or the Internal Revenue
Code of 1986, as amended, based upon any such Plans (where an "affiliate"
of the IPP Parties means any Person which, together with the IPP Parties,
would be treated as a single employer under Section 414 of such Internal
Revenue Code);
(e) the payment, non-payment, mispayment of royalties with respect to
the Assets for production prior to the Effective Time including without
limitation any penalties associated therewith, and any liability by virtue
of any failure to properly account, pay or report any royalties including
any that have escheated to the state; provided, however, that to the extent
(i) any royalties have been suspended and (ii) the Partnership has received
monies (designated in a payment deck by well or unit) therefor (the
"Suspended Funds"), any liability with respect to the proper payment of
such
39
Suspended Funds after the Closing Date and only with respect to the
Suspended Funds, shall not be a Retained Obligation;
(f) all costs and expenses (including without limitation capital
expenditures) for labor, materials, equipment and supplies used or
furnished for use in connection with the Assets prior to the Effective
Time; and
(g) any liability for an aggregate net gas overproduction relative to
the Properties existing as of the Effective Time in excess of 50,000 Mcf.
Section 13.02 Assumption. Provided that the Closing occurs, but excluding the
Retained Obligations, the Partnership shall assume all duties, obligations and
liabilities of every kind and character with respect to the Assets or the
ownership or operation thereof, whether or not attributable to periods before or
after the Effective Time, including, without limitation, those arising out of
(a) the terms of the Easements, Contracts or Leases comprising the Assets, (b)
any aggregate net overproduction relative to the Properties existing as of the
Effective Time that is less than 50,000 Mcf and any and all gas imbalances,
relative to the Properties accruing from and after the Effective Time, (c) those
obligations with respect to the Suspended Funds not retained by the IPP Parties
pursuant to Section 13.01(e), (d) ad valorem, property, production, severance
and other similar taxes or assessments based upon or measured by the ownership
of the Assets or the production therefrom insofar, and only insofar as such
taxes relate to periods from and after the Effective Time, (e) the condition of
the Properties on the Closing Date, (f) obligations to properly plug and abandon
or re-plug or re-abandon xxxxx located on the Properties, and (g) obligations to
restore the surface of the Properties and obligations to bring the Properties
into compliance with applicable Environmental Laws (including, without
limitation, conducting any investigation, remediation or monitoring activities
that may be required on or otherwise in connection with activities on the
Properties), regardless of whether such obligations or conditions or events
giving rise to such obligations, arose, occurred or accrued before or after the
Closing Date; provided, however, that the Partnership does not assume liability
for Retained Obligations. The duties, obligations and liabilities assumed by the
Partnership under this Section 13.02 are herein called the "Assumed
Obligations."
Section 13.03 Pure Parties' Indemnification. Provided that the Closing occurs,
the Pure Parties and the Partnership, jointly and severally, shall release,
defend, indemnify and hold harmless each of the IPP Parties and their respective
stockholders, officers, directors, employees, agents, representatives,
Affiliates, subsidiaries, successors and assigns (collectively, the "IPP
Indemnitees") from and against any and all claims, liabilities, losses, damages,
causes of actions, penalties, judgments, settlements, costs and expenses
(including, without limitation, involving theories of negligence or strict
liability and including court costs and attorneys' fees) ("Losses") as a result
of, arising out of, or related to the breach of any of the representations,
warranties, covenants or agreements of any of the Pure Parties or the
Partnership contained in this Agreement, or as a result of, arising out of, or
relating to the Assumed Obligations, REGARDLESS OF WHETHER CAUSED OR CONTRIBUTED
TO BY THE JOINT OR CONCURRENT NEGLIGENCE (IN ANY DEGREE, ACTIVE OR PASSIVE) OR
STRICT LIABILITY OF ANY OF THE IPP INDEMNITEES.
40
Section 13.04 IPP Parties' Indemnification. Provided that the Closing occurs,
the IPP Parties shall release, defend, indemnify and hold harmless the Pure
Parties and their shareholders, officers, directors, employees, agents,
representatives, Affiliates, subsidiaries, successors and assigns (collectively,
the "Pure Indemnitees") from and against any and all Losses as a result of,
arising out of, or related to the following:
(a) the Retained Obligations,
(b) Environmental Defects resulting from the IPP Parties or their
Affiliates ownership or operations on the surface, including
operations by the IPP Parties or their Affiliates at any surface
facilities or any activities by the IPP Parties their Affiliates on
any tract (other than activities related to the production of
Hydrocarbons or any substance produced in association therewith) prior
to the Effective Time (for purposes of this Section 13.04(b), the term
"Assets" as used in the definition of Environmental Defects means all
the assets or properties of the IPP Parties or their Affiliates), or
(c) the breach of any of the representations, warranties, covenants or
agreements of the IPP Parties contained in this Agreement,
IN EACH CASE REGARDLESS OF WHETHER CAUSED OR CONTRIBUTED TO BY THE JOINT OR
CONCURRENT NEGLIGENCE (IN ANY DEGREE, ACTIVE OR PASSIVE) OR STRICT LIABILITY OF
ANY OF THE PURE INDEMNITEES.
Section 13.05 Indemnification Procedure.
(a) All claims for indemnification under this Agreement shall be asserted
and resolved pursuant to this Section 13.05 and Article XV. Any person or entity
claiming indemnification hereunder is hereinafter referred to as the
"Indemnified Party" and any person or entity against whom such claims are
asserted hereunder is hereinafter referred to as the "Indemnifying Party."
(b) In the event that (i) any claim, demand or proceeding is asserted or
instituted in writing by any Person other than the parties to this Agreement or
their Affiliates which could give rise to Losses for which an Indemnifying Party
could be liable to an Indemnified Party under this Agreement (such claim, demand
or proceeding, a "Third Party Claim") or (ii) any Indemnified Party shall have a
claim to be indemnified by any Indemnifying Party under this Agreement which
does not involve a Third Party Claim (such claim, a "Direct Claim"), the
Indemnified Party shall promptly send to the Indemnifying Party a written notice
specifying the nature of such claim, together with information reasonably
available to the Indemnified Party with respect to such claim (a "Claim
Notice"), provided that a delay in notifying the Indemnifying Party shall not
relieve the Indemnifying Party of its obligations under this Agreement except to
the extent that such failure shall have caused actual prejudice to the
Indemnifying Party.
41
(c) In the event of a Third Party Claim, the Indemnifying Party shall have
30 days after receipt of the Claim Notice relating to such Third Party Claim to
elect to undertake, conduct and control, through counsel of its own choosing
(provided that such counsel is reasonably acceptable to the Indemnified Party)
and at its own expense, the settlement or defense of such Third Party Claim (in
which case the Indemnifying Party shall not thereafter be responsible for the
fees and expenses of any separate counsel retained by any Indemnified Party
except as set forth below). If the Indemnifying Party elects to undertake such
defense, it shall promptly assume and hold such Indemnified Party harmless from
and against the full amount of any Damages resulting from such Third Party Claim
to the extent provided herein. Notwithstanding an Indemnifying Party's election
to undertake, conduct and control such Third Party Claim, the Indemnified Party
shall have the right to employ separate counsel at its cost, and the
Indemnifying Party shall not bear the fees, costs and expenses of such separate
counsel. If the Indemnifying Party elects to undertake such defense, (i) the
Indemnified Party agrees to cooperate with the Indemnifying Party and its
counsel in contesting such Third Party Claim, and, if appropriate and related to
such Third Party Claim, the parties will reasonably cooperate with each other in
connection with making any counterclaim against the person asserting the Third
Party Claim, or any cross-complaint against any Person, (ii) such Third Party
Claim may not be settled or compromised by the Indemnified Party without the
prior written consent of the Indemnifying Party; provided that in the event any
Indemnified Party settles or compromises or consents to the entry of any
judgment with respect to any Third Party Claim without the prior written consent
of the Indemnifying Party, such Indemnified Party shall be deemed to have waived
all rights against the Indemnifying Party for indemnification under this Article
XIII, and (iii) the Indemnifying Party shall not, except with the consent of the
Indemnified Party, enter into any settlement that does not include as an
unconditional term thereof the giving by the third party asserting such claim to
all Indemnified Parties of (A) unconditional release from all liability with
respect to such Third Party Claim or (B) consent to entry of any judgment. If
the Indemnifying Party does not notify the Indemnified Party of its election to
undertake the defense of such Third Party Claim within 30 days after receipt of
the Claim Notice relating to such Third Party Claim, the Indemnified Party shall
have the right to contest, settle, compromise or consent to the entry of any
judgment with respect to such Third Party Claim and in doing so shall not
thereby waive any right to indemnity therefor pursuant to this Article XIII,
provided that at any time thereafter the Indemnifying Party may assume the
defense of such Third Party Claim.
(d) In the event of a Direct Claim, the Indemnifying Party shall notify
the Indemnified Party within 30 days of receipt of a Claim Notice whether or not
the Indemnifying Party disputes such claim.
(e) From and after the delivery of a Claim Notice under this Agreement, at
the reasonable request of the Indemnifying Party the Indemnified Party shall
grant the Indemnifying Party and its representatives all reasonable access to
the books, records and properties of such Indemnified Party to the extent
reasonably related to the matters to which the Claim Notice relates. All such
access shall be granted during normal business hours and shall be granted under
conditions, which will not unreasonably interfere with the business and
operations of such Indemnified Party. The Indemnifying Party will not, and shall
cause its representatives not to, use (except in connection with such Claim
Notice) or disclose to any third Person other than the Indemnifying Party's
representatives (except as may be required by applicable law) any
42
information obtained pursuant to this Section 13.05, which is designated as
confidential by the Indemnified Party.
Section 13.06 Survival. The representations and warranties of the Parties
contained in this Agreement and in the officer's certificates delivered by the
Parties pursuant to Sections 9.02 and 10.01 shall survive the Closing and remain
enforceable for 36 months from the Closing Date. No claim for indemnity under
this Article XIII for any breach of a representation or warranty may be brought
unless the appropriate Claim Notice shall have been delivered to the
Indemnifying Party prior to expiration of the survival period. Except as
otherwise provided in this Agreement, the covenants contained in this Agreement
shall terminate at the Closing; provided, however, there shall be no termination
of the covenant in Section 13.04(c) with respect to any bona fide claim that is
made in a Claim Notice given prior to the expiration of the survival period with
respect to the representation, warranty, covenant or agreement giving rise to
such bona fide claim and there shall be no termination of the covenants in
Section 4.04 with respect to any Title Defect that is described in a Title
Defect Notice given prior to the expiration of the Survival Period. The
following covenants contained in this Agreement shall survive the Closing for
the following periods after the Closing Date: (i) for all covenants in Article
IV, 36 months, (ii) for the covenants in Sections 8.02, 11.10, 11.12, 13.02,
13.03, 13.04(a), 13.04(b) and Article XV, no time limit, (iii) for the covenants
in Sections 2.04, 11.05, 11.06, 16.01, 16.02, 16.04 and 16.07, the time period
in which such covenants are to be performed, and (iv) for the covenants in
Section 8.01, one year. All provisions regarding any limitation of (x) any
Party's liability or (y) any Party's remedies for any breach of or otherwise
under this Agreement or in connection with the transactions contemplated hereby,
shall survive the Closing without time limit.
Section 13.07 Limitations on Liabilities. Notwithstanding anything to the
contrary in this Agreement, the liability of the IPP Parties, the Partnership or
the Pure Parties (as applicable) under this Agreement and any documents
delivered in connection herewith or contemplated hereby shall be limited as
follows:
(a) IN NO EVENT SHALL THE IPP PARTIES BE LIABLE IN ANY WAY WHATSOEVER TO
THE PURE PARTIES OR THE PARTNERSHIP WITH RESPECT TO A BREACH OF THE WARRANTY OF
TITLE GIVEN IN SECTION 5.09 WITH RESPECT TO ANY PROPERTY IN EXCESS OF THE
ALLOCATED VALUE OF SUCH PROPERTY, AND THE PARTIES AGREE THAT THE REMEDIES STATED
IN SECTION 4.04 ARE THE EXCLUSIVE REMEDIES FOR SUCH BREACH.
(b) THE AGGREGATE AMOUNT OF ALL LOSSES (INCLUDING, WITHOUT LIMITATION,
TITLE DEFECTS) FOR WHICH THE IPP PARTIES ARE LIABLE TO THE PURE PARTIES OR THE
PARTNERSHIP UNDER THIS AGREEMENT WHEN AGGREGATED WITH ANY "LOSSES," INCLUDING,
WITHOUT LIMITATION, "TITLE DEFECTS" BUT EXCLUDING THE "UNCAPPED OBLIGATIONS" (IN
THIS CASE, AS THE TERMS "LOSSES," "TITLE DEFECTS" AND "UNCAPPED OBLIGATIONS" ARE
DEFINED UNDER THE PURCHASE AGREEMENT) FOR WHICH THE IPP PARTIES OR THEIR
AFFILIATES ARE RESPONSIBLE UNDER THE TERMS OF THE PURCHASE AGREEMENT SHALL NOT
EXCEED $5,000,000.00. EXCEPT AS PROVIDED IN THE FOLLOWING
43
SENTENCE, ANY PAYMENTS TO BE MADE BY THE IPP PARTIES TO THE PURE PARTIES OR THE
PARTNERSHIP FOR LOSSES FOR WHICH THE IPP PARTIES ARE LIABLE TO THE PURE PARTIES
OR THE PARTNERSHIP UNDER THIS AGREEMENT SHALL BE MADE BY ADJUSTING THE CAPITAL
ACCOUNTS OF THE IPP PARTIES IN ACCORDANCE WITH THE TERMS OF THE PARTNERSHIP
AGREEMENT. ANY PAYMENTS BY THE IPP PARTIES IN RESPECT OF THEIR OBLIGATIONS IN
SECTIONS 13.01 AND 13.04(A) AND (B) SHALL BE MADE BY CASH PAYMENT DIRECTLY BY
THE IPP PARTIES TO THE APPLICABLE INDEMNIFIED PARTY. THE LIMITATION CONTAINED IN
THIS SECTION 13.07(B) SHALL NOT APPLY TO THE IPP PARTIES' OBLIGATIONS IN
SECTIONS 11.05, 13.01 AND 13.04(A) AND (B) HEREOF (COLLECTIVELY, THE "UNCAPPED
OBLIGATIONS").
(c) THE AGGREGATE AMOUNT OF ALL LOSSES FOR WHICH THE PURE PARTIES
AND/OR THE PARTNERSHIP ARE LIABLE TO THE IPP PARTIES UNDER THIS AGREEMENT AND
THE PURCHASE AGREEMENT BY VIRTUE OF ANY BREACH OF THE PURE PARTIES' AND/OR THE
PARTNERSHIP'S OBLIGATION TO CLOSE SHALL NOT EXCEED $30,000,000.00, WHICH SUM
INCLUDES THE DEPOSIT UNDER THE PURCHASE AGREEMENT, PLUS ANY INTEREST ACCRUED
THEREON.
(d) FOR THE FIRST 33 MONTHS FROM THE CLOSING DATE, NO TITLE DEFECT
NOTICE OR CLAIM NOTICE SHALL BE GIVEN BY THE PURE PARTIES OR THE PARTNERSHIP TO
THE IPP PARTIES UNTIL THE AGGREGATE OF SUCH CLAIMS (OR LOSSES ALLEGED IN SUCH
CLAIMS) AT SUCH TIME EXCEED $50,000.00.
Section 13.08 Exclusive Remedy. EXCEPT AS SET FORTH IN THE PARTNERSHIP
AGREEMENT, THE TRANSITION SERVICES AGREEMENT AND THE SENIOR NOTE AGREEMENT, EACH
OF THE PARTIES ACKNOWLEDGES AND AGREES THAT ITS SOLE AND EXCLUSIVE REMEDY WITH
RESPECT TO ANY AND ALL LOSSES PURSUANT TO OR IN CONNECTION WITH THIS AGREEMENT
OR ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE LIMITED (I) TO
THE INDEMNIFICATION PROVISIONS SET FORTH IN THIS AGREEMENT, (II) IN THE EVENT
THAT CLOSING DOES NOT OCCUR ON ACCOUNT OF THE IPP PARTIES' BREACH OF THIS
AGREEMENT, TO THE RIGHT OF THE PURE PARTIES AND THE PARTNERSHIP TO SEEK SPECIFIC
PERFORMANCE OF THE TRANSFER OF THE ASSETS AS PROVIDED UNDER THIS AGREEMENT AND
(III) IN THE EVENT THAT CLOSING DOES NOT OCCUR ON ACCOUNT OF A BREACH BY A PURE
PARTY, PURE OR THE PARTNERSHIP, THE RIGHT OF THE IPP PARTIES TO SEEK DAMAGES FOR
SUCH BREACH.
Section 13.09 No Punitives. Notwithstanding anything to the contrary in
this Agreement, in no event shall either Party be entitled to receive any
consequential, incidental, special, treble, exemplary or punitive damages unless
such damages are a part of a third party
44
claim for which a Party is seeking indemnification hereunder, REGARDLESS OF
WHETHER CAUSED OR CONTRIBUTED TO BY THE SOLE, JOINT OR CONCURRENT NEGLIGENCE (IN
ANY DEGREE) OR STRICT LIABILITY OF THE OTHER PARTY.
ARTICLE XIV
LIMITATIONS ON REPRESENTATIONS AND WARRANTIES
Section 14.01 Disclaimers of Representations and Warranties. The express
representations and warranties of the IPP Parties contained in this Agreement
are exclusive and are in lieu of all other representations and warranties,
express, implied or statutory. EXCEPT FOR THE EXPRESS REPRESENTATIONS AND
WARRANTIES OF THE IPP PARTIES MADE IN THIS AGREEMENT, EACH OF THE PURE PARTIES
AND THE PARTNERSHIP ACKNOWLEDGES THAT THE IPP PARTIES HAVE NOT MADE, AND EACH OF
THE IPP PARTIES HEREBY EXPRESSLY DISCLAIMS AND NEGATES, AND EACH OF THE PURE
PARTIES AND THE PARTNERSHIP HEREBY EXPRESSLY WAIVES, ANY REPRESENTATION OR
WARRANTY, EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE OR OTHERWISE RELATING TO
(a) PRODUCTION RATES, RECOMPLETION OPPORTUNITIES, DECLINE RATES, GAS BALANCING
INFORMATION OR THE QUALITY, QUANTITY OR VOLUME OF THE RESERVES OF HYDROCARBONS,
IF ANY, ATTRIBUTABLE TO THE ASSETS, (b) THE ACCURACY, COMPLETENESS OR
MATERIALITY OF ANY INFORMATION, DATA OR OTHER MATERIALS (WRITTEN OR ORAL) NOW,
HERETOFORE OR HEREAFTER FURNISHED TO ANY PURE PARTY OR THE PARTNERSHIP BY OR ON
BEHALF OF AN IPP PARTY, EXCEPT AS SPECIFICALLY REPRESENTED BY THE IPP PARTIES IN
ARTICLE V, AND (c) THE ENVIRONMENTAL CONDITION OF THE ASSETS. Except for the
express representations and warranties of the IPP Parties made in this
Agreement, THE IPP PARTIES EXPRESSLY DISCLAIM AND NEGATE, AND EACH OF THE PURE
PARTIES AND THE PARTNERSHIP HEREBY WAIVES, AS TO PERSONAL PROPERTY, EQUIPMENT,
INVENTORY, MACHINERY AND FIXTURES CONSTITUTING A PART OF THE ASSETS (i) ANY
IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (ii) ANY IMPLIED OR EXPRESS
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (iii) ANY IMPLIED OR EXPRESS
WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, (iv) ANY RIGHTS OF
PURCHASERS UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF CONSIDERATION OR
RETURN OF THE PURCHASE PRICE OR OTHER CONSIDERATION, (v) ANY IMPLIED OR EXPRESS
WARRANTY OF FREEDOM FROM DEFECTS, WHETHER KNOWN OR UNKNOWN, (vi) ANY AND ALL
IMPLIED WARRANTIES EXISTING UNDER APPLICABLE LAW, AND (vii) ANY IMPLIED OR
EXPRESS WARRANTY REGARDING ENVIRONMENTAL LAWS, THE RELEASE OF MATERIALS INTO THE
ENVIRONMENT, OR PROTECTION OF THE ENVIRONMENT OR HEALTH, IT BEING THE EXPRESS
INTENTION OF THE PARTNERSHIP AND THE PURE PARTIES AND THE IPP PARTIES THAT THE
PERSONAL PROPERTY, EQUIPMENT, INVENTORY, MACHINERY AND FIXTURES INCLUDED IN THE
ASSETS SHALL BE CONVEYED TO THE PARTNERSHIP, AND THE PARTNERSHIP
45
Exhibit 2.2
SHALL ACCEPT SAME, AS IS, WHERE IS, WITH ALL FAULTS AND IN THEIR PRESENT
CONDITION AND STATE OF REPAIR AND THE PARTNERSHIP AND EACH OF THE PURE PARTIES
REPRESENTS TO THE IPP PARTIES THAT THE PARTNERSHIP AND THE PURE PARTIES HAVE
MADE OR CAUSED TO BE MADE SUCH INSPECTIONS WITH RESPECT TO SUCH PERSONAL
PROPERTY, EQUIPMENT, INVENTORY, MACHINERY AND FIXTURES AS EACH OF THE PURE
PARTIES DEEMS APPROPRIATE. THE IPP PARTIES, THE PARTNERSHIP AND THE PURE PARTIES
AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE
DISCLAIMERS OF CERTAIN WARRANTIES CONTAINED IN THIS SECTION ARE "CONSPICUOUS"
DISCLAIMERS FOR THE PURPOSES OF ANY APPLICABLE LAW, RULE OR ORDER.
Section 14.02 Casualty Loss.
(a) The Partnership shall assume all risk of loss with respect to, and any
change in the condition of, the Assets from the Effective Time until Closing,
including with respect to the depletion of Hydrocarbons, the watering-out of any
well, the collapse of casing, sand infiltration of xxxxx, and the depreciation
of personal property.
(b) If after the Effective Time and prior to the Closing any part of the
Assets shall be damaged or destroyed by fire or other casualty or if any part of
the Assets shall be taken in condemnation or under the right of eminent domain
or if proceedings for such purposes shall be pending or threatened, this
Agreement shall remain in full force and effect notwithstanding any such
destruction, taking or proceeding, or the threat thereof and the Parties shall
proceed with the transactions contemplated by this Agreement notwithstanding
such destruction or taking (without reduction of the Contribution Value).
(c) Notwithstanding Section 14.02(a), in the event of any loss described
in Section 14.02(b), at the Closing the IPP Parties shall pay to the Partnership
all sums paid to the IPP Parties by third parties by reason of the destruction
or taking of such Assets (up to the Allocated Value thereof) and shall assign,
transfer and set over unto the Partnership all of the rights, title and interest
of the IPP Parties in and to any claims, causes of action, unpaid proceeds or
other payments from third parties arising out of such destruction or taking (up
to the Allocated Value thereof). From the date of this Agreement until the
Closing, the IPP Parties shall use commercially reasonable efforts to maintain
in force insurance coverage with respect to the Assets in amounts and scope of
coverage substantially similar to the amounts and scope of coverage currently in
force with respect to the Assets.
ARTICLE XV
DISPUTE RESOLUTION
Section 15.01 General. Any and all claims, counterclaims, demands, causes of
action, disputes, controversies or other matters in question arising out of or
relating to this Agreement, any provision hereof, the alleged breach of any such
provision, or in any way relating to the subject matter of this Agreement or the
relationship among the Parties created by this
46
Exhibit 2.2
Agreement, involving the Parties, their Affiliates and/or their respective
representatives (all of which are referred to herein as "Disputes"), even though
some or all of such Disputes allegedly are extra-contractual in nature, whether
such Disputes sound in contract, tort, or otherwise, at law or in equity, under
state or federal law, whether provided by statute or the common law, for damages
or any other relief, shall be resolved solely in accordance with this Article
XV.
Section 15.02 Senior Management. If a Dispute occurs that the senior
representatives of the Parties responsible for the transactions contemplated by
this Agreement have been unable to settle or agree upon within a period of 15
days after such Dispute arose, IPP shall nominate and commit one of its senior
officers, and Pure GP shall nominate and commit one of its senior officers, to
meet at a mutually agreed time and place not later than 30 days after the
Dispute has arisen to attempt to resolve same. If such senior management have
been unable to resolve such Dispute within a period of 15 days after such
meeting, or if such meeting has not occurred within 45 days following such
Dispute arising, then any Party shall have the right, by written notice to the
other, to resolve the Dispute (i) through the relevant Independent Expert
pursuant to Section 15.03, or (ii) by arbitration in accordance with the
provisions of Section 15.04.
Section 15.03 Independent Expert.
(a) Each of Pure GP and IPP shall have the right to submit Disputes
regarding title issues or calculation of the Statement or revisions thereto, to
an independent expert appointed in accordance with this Section 15.03 (each, an
"Independent Expert"), who shall serve as sole arbitrator. With respect to
Disputes regarding title issues, including without limitation Disputes regarding
Title Defects or Title Defect Amounts, Pure GP and IPP hereby appoint Xxxx
Xxxxxxxx as the Independent Expert; provided that, if Xxxx Xxxxxxxx is not
available then the Parties hereby appoint Xxxxxx Xxxxx as the Independent
Expert; provided further that, if Xxxxxx Xxxxx is not available then the Parties
appoint Xxxx Xxxx as the Independent Expert. With respect to Disputes regarding
calculation of the Statement or revisions thereto, Pure GP and IPP will appoint
a mutually agreeable nationally renowned accounting firm as the Independent
Expert. If the foregoing listed Independent Expert fails or refuses to serve in
such capacity then the Independent Expert shall be appointed by mutual agreement
of Pure GP and IPP from among candidates with experience and expertise in the
area that is the subject of such Dispute, and failing such agreement, such
Independent Expert for such Dispute shall be selected in accordance with the
Rules.
(b) Disputes to be resolved by an Independent Expert shall be resolved in
accordance with mutually agreed procedures and rules and failing such agreement,
in accordance with the rules and procedures for arbitration provided in Section
15.04. The Independent Expert shall be instructed by Pure GP and IPP to resolve
such Dispute as soon as reasonably practicable in light of the circumstances.
The decision and award of the Independent Expert shall be binding upon the
Parties as an award under the Federal Arbitration Act and final and
nonappealable to the maximum extent permitted by law, and judgment thereon may
be entered in a court of competent jurisdiction and enforced by either of Pure
GP or IPP as a final judgment of such court.
47
Exhibit 2.2
Section 15.04 Binding Arbitration. Any Dispute that is not resolved pursuant to
the foregoing Sections of this Article XV, shall be settled exclusively and
finally by arbitration in accordance with this Section 15.04.
(a) Rules and Procedures. Such arbitration shall be governed by and
conducted pursuant to the Federal Arbitration Act (including case law), except
as expressly provided otherwise in this Agreement. The making, validity,
construction, and interpretation of this Section 15.04, and all procedural
aspects of the arbitration conducted pursuant hereto, shall be decided by the
arbitrators. Except as modified by this Agreement, the arbitration shall be
conducted in accordance with the rules of arbitration of the Federal Arbitration
Act and, to the extent an issue is not addressed by the federal law of
arbitration, by the Commercial Arbitration Rules of the American Arbitration
Association (collectively, the "Rules")
(b) Discovery. The arbitrators shall permit discovery and rule on matters
of confidentiality as they determine is appropriate in the circumstances.
(c) Venue. All arbitration proceedings hereunder shall be conducted in
Houston, Texas or such other location as the Parties shall mutually agree.
(d) Arbitrators. All arbitration proceedings hereunder shall be before a
panel of three arbitrators consisting of persons having at least 10 years of
experience in or relating to the oil and gas industry (which can include
lawyers). Within 30 days of the notice of initiation of the arbitration
procedure, IPP shall select one arbitrator and Pure GP shall select one
arbitrator. If IPP or Pure GP shall fail to select its arbitrator within the
required time, the other party shall select two arbitrators. The two arbitrators
so selected shall select a third arbitrator, failing agreement on which within
60 days of the original notice, IPP and Pure GP (or either of them) shall apply
to any United States District Judge for the Southern District of Texas, Houston
Division, who shall appoint the third arbitrator.
(e) Substantive Law. In deciding the substance of the Dispute, the
arbitrators shall refer to the substantive laws of the State of Texas for
guidance (excluding Texas choice-of-law principles that might call for the
application of the laws of another jurisdiction).
(f) Timing. The arbitrators shall conduct a hearing as soon as reasonably
practicable but in no event later than 30 days after appointment of the third
arbitrator, and render a final decision completely disposing of the Dispute that
is the subject of such proceedings as soon as reasonably practicable but in no
event later than 15 days after the final hearing.
(g) Waiver of Certain Damages. Notwithstanding any other provision in this
Agreement to the contrary, the Parties expressly agree that the arbitrators
shall have absolutely no authority to award consequential, incidental, special,
treble, exemplary or punitive damages of any type under any circumstances
regardless of whether such damages may be available under Texas law, or any
other laws, or under the Federal Arbitration Act or the Rules, unless such
damages are a part of a third party claim for which a Party is entitled to
indemnification hereunder.
48
Exhibit 2.2
(h) Transcripts and Decisions. The Parties agree that there shall be no
transcript of any hearing before the arbitrators. Pure GP and IPP shall request
that final decision of the arbitrators be in writing, be as brief as possible,
set forth the reasons for such final decision, and if the arbitrators award
monetary damages to any Party, contain a certification by the arbitrators that,
except as permitted by Section 15.04(g), they have not included any
consequential, incidental, special, treble, exemplary or punitive damages. To
the fullest extent permitted by law, the arbitration proceeding and the
arbitrators' decision and award shall be maintained in confidence by the Parties
and Pure GP and IPP shall instruct the arbitrators to likewise maintain such
matters in confidence.
(i) Fees and Awards. The fees and expenses of the arbitrators shall be
borne equally by Pure GP and IPP, but the decision of the arbitrators may
include such award of the arbitrators' fees and expenses and of other costs and
attorneys' fees as the arbitrators determine to be appropriate.
(j) Binding Nature. The decision and award of the arbitrators shall be
binding upon the Parties and final and nonappealable to the maximum extent
permitted by law, and judgment thereon may be entered in a court of competent
jurisdiction and enforced by Pure GP or IPP as a final judgment of such court.
ARTICLE XVI
MISCELLANEOUS
Section 16.01 Names. As soon as reasonably possible after Closing, but in no
event later than 60 days after Closing, the Partnership shall remove the name of
IPP and its Affiliates, and all variations thereof, from all of the Assets and
make the requisite filings with, and provide the requisite notices to, the
appropriate federal, state or local agencies to place the title or other indicia
of ownership, including operation of the Assets, in a name other than any name
of IPP or any of its Affiliates, or any variations thereof.
Section 16.02 Taxes and Expenses. The Partnership shall be liable for all sales,
use, documentary, recording, stamp, transfer or similar taxes, assessments or
fees arising from the transactions contemplated by this Agreement. Each Party
shall be solely responsible for all expenses and taxes, including but not
limited to federal, state and local income taxes and due diligence expenses,
incurred by it in connection with this transaction, and no Party shall be
entitled to any reimbursement for such expenses from the other Party.
Section 16.03 Independent Investigation. Each of the Pure Parties and the
Partnership represents and acknowledges that it is knowledgeable of the oil and
gas business and of the usual and customary practices of producers such as the
IPP Parties and that it has had or will be given access to the Assets, the
officers and employees of the IPP Parties, and the books, records and files of
the IPP Parties relating to the Assets, and in making the decision to enter into
this Agreement and consummate the transactions contemplated hereby, the Pure
Parties and the Partnership have relied solely on their own independent due
diligence investigation of the Assets and upon the representations and
warranties made in Article V, and not on any other representations or warranties
of the IPP Parties.
49
Exhibit 2.2
Section 16.04 Document Retention. As used in this Section 16.04, the term
"Documents" shall mean all files, documents, books, records and other data
delivered to the Partnership by the IPP Parties pursuant to the provisions of
this Agreement (other than those that the IPP Parties have retained either the
original or a copy of), including, but not limited to: financial and tax
accounting records; land, title and division of interest files; contracts;
engineering and well files; and books and records related to the operation of
the Assets prior to the Closing Date. The Partnership shall retain and preserve
the Documents for a period of no less than seven years following the Closing
Date (or for such longer period as may be required by law or governmental
regulation), and shall allow the IPP Parties or their representatives to inspect
the Documents at reasonable times and upon reasonable notice during regular
business hours during such time period. The IPP Parties shall have the right
during such period to make copies of the Documents at their expense.
Section 16.05 Entire Agreement. This Agreement, the Confidentiality Agreement,
the Confidentiality Agreement between Pure and IPP dated December 15, 2000
relating to IPP's offshore Assets (the "Offshore Confidentiality Agreement"),
the documents to be executed hereunder, and the exhibits attached hereto
constitute the entire agreement between the Parties hereto pertaining to the
subject matter hereof and supersede all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the Parties pertaining
to the subject matter hereof; provided, however, that this Agreement does not
supersede the Confidentiality Agreement (except as provided in Section 11.11) or
the Offshore Confidentiality Agreement. No supplement, amendment, alteration,
modification, waiver or termination of this Agreement shall be binding unless
executed in writing by the Parties hereto and specifically referencing this
Agreement.
Section 16.06 Waiver. No waiver of any of the provisions of this Agreement shall
be deemed or shall constitute a waiver of any other provisions hereof (whether
or not similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
Section 16.07 Publicity. During the period commencing on the date of this
Agreement and ending ninety days after Closing, the Parties shall consult with
each other with regard to all publicity and other releases concerning this
Agreement and the transactions contemplated hereby and, except as required by
applicable law or the applicable rules or regulations of any Governmental
Authority or by obligations pursuant to any listing or other agreement with any
national securities exchange, during such ninety day period, no Party shall
issue any such publicity or other release without the prior written consent of
the other Parties hereto, which consents shall not be unreasonably withheld. Any
press release required by law or by any such listing or other agreement shall
only be made after reasonable notice to the other Party. Pure Parent may attach
this Agreement to any necessary SEC filing.
Section 16.08 Construction. The captions in this Agreement are for convenience
only and shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement. The Parties acknowledge that
they have participated jointly in the negotiation and drafting of this Agreement
and as such the Parties agree that if an ambiguity or question of intent
50
Exhibit 2.2
or interpretation arises hereunder, this Agreement shall not be construed more
strictly against one Party than another on the grounds of authorship.
Section 16.09 No Third Party Beneficiaries. Except as provided in Section 12.02,
nothing in this Agreement shall provide any benefit to any third party, other
than the Partnership, or entitle any third party to any claim, cause of action,
remedy or right of any kind, it being the intent of the Parties that this
Agreement shall otherwise not be construed as a third party beneficiary
contract.
Section 16.10 Assignment. No Party may assign or delegate any of its rights or
duties under this Agreement, without the prior written consent of the other
Parties and any such assignment made without such consent shall be void. Except
as otherwise provided herein, this Agreement shall be binding upon and inure to
the benefit of the Parties hereto and their respective permitted successors,
assigns and legal representatives.
Section 16.11 Governing Law. This Agreement, other documents delivered pursuant
hereto and the legal relations between the Parties shall be governed and
construed in accordance with the laws of the State of Texas, without giving
effect to principles of conflicts of laws that would result in the application
of the laws of another jurisdiction.
Section 16.12 Obligations of Pure. Notwithstanding anything to the contrary in
this Agreement, Pure shall have no liability under this Agreement except that
Pure shall be liable to the IPP Parties for the aggregate amount of all Losses
suffered by the IPP Parties under this Agreement in the event that Closing does
not occur on account of a breach by Pure, a Pure Party or the Partnership of
this Agreement or the Purchase Agreement, subject to the limitations of such
liability provided in Section 13.07(c).
Section 16.13 Joint and Several Obligations of the Partnership and the Pure
Parties. The obligations of the Partnership and any of the Pure Parties under
this Agreement shall be joint and several.
Section 16.14 Notices. Any notice, communication, request, instruction or other
document required or permitted hereunder shall be given in writing and delivered
in person or sent by U.S. Mail postage prepaid, return receipt requested or
facsimile to the addresses of the IPP Parties, Pure, the Pure Parties and the
Partnership set forth below. Any such notice shall be effective only upon
receipt.
The IPP Parties: c/o International Paper Company
(Forest Resources Group)
X.X. Xxx 0000
Xxxxxxxx, Xxxxxxx 00000
Attention: Mineral Resources Administrator
Fax No.: (000) 000-0000
51
Exhibit 2.2
With copy to: International Paper Company
0000 XXX Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Legal Department
Fax No.: (000) 000-0000
Pure, The Pure Parties
and The Partnership: Pure Resources, L.P.
000 Xxxx Xxxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Vice President of Land
Fax No.: (000) 000-0000
Any Party may, by written notice so delivered, change its address for notice
purposes hereunder.
Section 16.15 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect and the Parties shall negotiate in good faith to
modify this Agreement so as to effect their original intent as closely as
possible in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the extent possible.
Section 16.16 Time of the Essence. Time shall be of the essence with respect to
all time periods and notice periods set forth in this Agreement.
Section 16.17 Authority of IPP. Each IPP Party hereby authorizes IPP to make and
receive payments hereunder on behalf of such IPP Party, to give and receive
notices on behalf of such IPP Party hereunder, to agree upon any adjustments to
the Contribution Value hereunder on behalf of such IPP Party, to agree on any
extensions to the Closing Date on behalf of such IPP Party, to agree to and make
minor amendments and modifications to this Agreement and its exhibits as IPP
shall deem to be in the best interests of the IPP Parties, and to take any and
all action as may be necessary or appropriate to enforce the terms of this
Agreement and to defend the rights of each IPP Party hereunder. The Pure Parties
may rely upon any instrument executed or other action taken by IPP on behalf of
any IPP Party pursuant to this Section 16.17 to the same extent as if such
instrument had been executed or action had been taken by such IPP Party.
SECTION 16.18 Counterpart Execution. This Agreement may be executed in any
number of counterparts, and each counterpart hereof shall be effective as to
each Party that executes the same whether or not all of such Parties execute the
same counterpart. If counterparts of this Agreement are executed, the signature
pages from various counterparts may be combined into one composite instrument
for all purposes. All counterparts together shall constitute only one Agreement,
but each counterpart shall be considered an original.
52
Exhibit 2.2
IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement
as of the date first set forth above.
IPP PARTIES:
-----------
IP PETROLEUM COMPANY, INC.,
INTERNATIONAL PAPER REALTY
CORPORATION,
TRANSTATES PROPERTIES INCORPORATED,
SOUTHLAND ENERGY COMPANY
By: /s/ XXXXX X. XXXXXXXX
-------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Agent and Attorney-in-Fact
PURE:
----
PURE RESOURCES, L.P., by its General Partner
PURE RESOURCES I, INC.
By: /s/ XXXX XXXXXXXXX
-------------------------------------
Name: Xxxx Xxxxxxxxx
Title: President
PURE GP:
-------
Pure Resources I, Inc.
By: /s/ XXXX XXXXXXXXX
-------------------------------------
Name: Xxxx Xxxxxxxxx
Title: President
PURE LP1:
--------
PK I, L.P., by its General Partner PURE
RESOURCES I, INC.
By: /s/ XXXX XXXXXXXXX
-------------------------------------
Name: Xxxx Xxxxxxxxx
Title: President
53
Exhibit 2.2
PURE LP2:
--------
XX XX, L.P., by its General Partner
PURE RESOURCES I, INC.
By: /s/ XXXX XXXXXXXXX
--------------------------------------
Name: Xxxx Xxxxxxxxx
Title: President
PURE LP3:
--------
PK III, L.P., by its General Partner,
PURE RESOURCES I, INC.
By: /s/ XXXX XXXXXXXXX
--------------------------------------
Name: Xxxx Xxxxxxxxx
Title: President
PURE LP4:
--------
XX XX, L.P., by its General Partner,
PURE RESOURCES I, INC.
By: /s/ XXXX XXXXXXXXX
--------------------------------------
Name: Xxxx Xxxxxxxxx
Title: President
THE PARTNERSHIP:
---------------
PURE PARTNERS, L.P., by its General Partner,
PURE RESOURCES I, INC.
By: /s/ XXXX XXXXXXXXX
-------------------------------------
Name: Xxxx Xxxxxxxxx
Title: President
54
