EXHIBIT 10.4
PURCHASE AND SALE AGREEMENT
BETWEEN
WASATCH OIL & GAS, LLC AND
WASATCH GAS GATHERING, LLC
AS SELLER
AND
XXXX XXXXXXX CORPORATION
AS BUYER
DATED EFFECTIVE APRIL 1, 2002
PURCHASE AND SALE AGREEMENT
TABLE OF CONTENTS
Page
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RECITALS.................................................................. 1
ARTICLE 1 PURCHASE AND SALE.................................... 1
1.1 PURCHASE AND SALE............................................. 1
1.2 ASSETS........................................................ 1
1.3 PROPERTY NOT BEING SOLD....................................... 3
1.4 EFFECTIVE TIME................................................ 3
ARTICLE 2 PURCHASE PRICE....................................... 3
2.1 PURCHASE PRICE................................................ 3
2.2 PERFORMANCE GUARANTEE DEPOSIT................................. 3
2.3 ALLOCATION OF THE PURCHASE PRICE.............................. 3
2.4 ADJUSTMENT TO PURCHASE PRICE.................................. 3
ARTICLE 3 BUYER'S INSPECTION................................... 5
3.1 ACCESS TO RECORDS............................................. 5
(a) Access..................................................... 5
(b) No Representation or Warranty.............................. 5
3.2 ACCESS TO PROPERTIES.......................................... 5
(a) Access..................................................... 5
(b) Insurance.................................................. 6
ARTICLE 4 TITLE MATTERS........................................ 6
4.1 DEFENSIBLE TITLE TO THE PROPERTIES............................ 6
(a) Defensible Title........................................... 6
(b) Permitted Encumbrances..................................... 6
(c) Title Defect............................................... 7
(d) Allocated Value............................................ 8
4.2 PURCHASE PRICE ADJUSTMENTS FOR DEFECTIVE INTERESTS............ 8
(a) Defective Interest......................................... 8
(b) Notice of Defective Interest............................... 8
(c) Defect Adjustments and Exclusions.......................... 8
(d) Defect Value............................................... 8
4.3 CASUALTY LOSS................................................. 9
ARTICLE 5 ENVIRONMENTAL MATTERS................................ 9
5.1 ENVIRONMENTAL REPRESENTATION AND STANDARD..................... 9
(a) Environmental Law(s)....................................... 9
5.2 ENVIRONMENTAL NOTICE.......................................... 10
5.3 REMEDY FOR ENVIRONMENTAL BREACH............................... 10
(a) Remedy..................................................... 10
(b) Exclusion of Affected Asset................................ 10
(c) Exhibit F Matters.......................................... 10
5.4 LIMITATIONS ON SELLER'S OBLIGATIONS........................... 11
5.5 ENVIRONMENTAL INDEMNITY....................................... 11
5.6 APPLICABILITY OF OTHER PROVISION.............................. 11
5.7 BUYER'S REPORTS............................................... 11
5.8 EXCLUSIVE REMEDY.............................................. 12
5.9 ENVIRONMENTAL DUE DILIGENCE ACTIVITIES........................ 12
ARTICLE 6 SELLER'S REPRESENTATIONS AND WARRANTIES.............. 12
6.1 ORGANIZATION AND STANDING..................................... 12
6.2 POWER......................................................... 12
6.3 AUTHORIZATION AND ENFORCEABILITY.............................. 12
6.4 LIABILITY FOR BROKERS' FEES................................... 13
6.5 NO BANKRUPTCY................................................. 13
6.6 LITIGATION.................................................... 13
6.7 MATERIAL AGREEMENTS........................................... 13
6.8 TAXES......................................................... 13
6.9 TAX PARTNERSHIPS.............................................. 13
6.10 LEASE MAINTENANCE............................................. 14
6.11 GAS IMBALANCES................................................ 14
6.12 COMPLIANCE WITH LAWS, ETC..................................... 14
6.13 OTHER BURDENS................................................. 14
6.14 CONDITION OF EQUIPMENT........................................ 14
6.15 NO CHANGES.................................................... 14
6.16 STATEMENT OF COUNSEL.......................................... 15
ARTICLE 7 BUYER'S REPRESENTATIONS AND WARRANTIES............... 15
7.1 ORGANIZATION AND STANDING..................................... 15
7.2 POWER......................................................... 15
7.3 AUTHORIZATION AND ENFORCEABILITY.............................. 15
7.4 LIABILITY FOR BROKERS' FEES................................... 15
7.5 LITIGATION.................................................... 15
7.6 SECURITIES LAWS; SOPHISTICATION OF BUYER...................... 15
7.7 HOLDING COMPANY............................................... 16
7.8 FINANCIAL RESOURCES........................................... 16
7.9 INDEPENDENT EVALUATION........................................ 16
ARTICLE 8 COVENANTS AND AGREEMENTS............................. 16
8.1 COVENANTS AND AGREEMENTS OF SELLER............................ 16
(a) Operations Prior to Closing................................ 16
(b) Restriction on Operations.................................. 17
(c) Marketing.................................................. 17
(d) Consents................................................... 17
(e) Status..................................................... 18
(f) Notices of Claims.......................................... 18
(g) Compliance with Laws....................................... 18
(h) Insurance...................................................... 18
(i) Resolution of Retained Matters.................................... 18
8.2 COVENANTS AND AGREEMENTS OF BUYER................................. 18
(a) Status......................................................... 18
(b) Bonding; Insurance............................................. 18
8.3 COVENANTS AND AGREEMENTS OF THE PARTIES........................... 18
(a) Government Reviews and Filings................................. 18
(b) Data and Information........................................... 19
(c) Lavinia Well................................................... 19
ARTICLE 9 TAX MATTERS.............................................. 20
9.1 APPORTIONMENT OF TAX LIABILITY.................................... 20
9.2 CALCULATION OF TAX LIABILITY...................................... 20
9.3 TAX REPORTS AND RETURNS........................................... 20
9.4 SALES AND TRANSFER TAXES.......................................... 20
ARTICLE 10 CONDITIONS TO CLOSING.................................... 21
10.1 SELLER'S CONDITIONS............................................... 21
10.2 BUYER'S CONDITIONS................................................ 21
ARTICLE 11 RIGHT OF TERMINATION AND ABANDONMENT..................... 22
11.1 TERMINATION....................................................... 22
11.2 LIABILITIES UPON TERMINATION...................................... 22
(a) Buyer's Breach................................................. 22
(b) Seller's Breach................................................ 22
(c) Termination Without Further Liability.......................... 22
ARTICLE 12 CLOSING.................................................. 23
12.1 DATE OF CLOSING................................................... 23
12.2 PLACE OF CLOSING.................................................. 23
12.3 CLOSING OBLIGATIONS............................................... 23
ARTICLE 13 POST-CLOSING OBLIGATIONS................................. 24
13.1 POST-CLOSING ADJUSTMENTS.......................................... 24
13.2 RECORDS........................................................... 24
13.3 TRANSFER AND RECORDING FEES....................................... 24
13.4 ADDITIONAL PROCEEDS AND INVOICES.................................. 25
13.5 FURTHER ASSURANCES................................................ 25
13.6 SUSPENSE FUNDS.................................................... 25
ARTICLE 14 ASSUMPTION OF OBLIGATIONS AND INDEMNIFICATION............ 25
14.1 ASSUMPTION OF LIABILITIES AND OBLIGATIONS BY BUYER................ 25
14.2 BUYER'S INDEMNIFICATION OF SELLER................................. 25
14.3 LIABILITIES AND OBLIGATIONS RETAINED BY SELLER.................... 26
14.4 SELLER'S INDEMNIFICATION OF BUYER................................. 26
14.5 SELLER'S ADDITIONAL OBLIGATIONS RELATING TO THE RETAINED MATTERS.. 26
(a) Seller's Retention of Obligations.............................. 26
(b) Seller's Indemnification of Buyer.............................. 26
(c) Settlement of Claims....................................... 27
(d) Escrow Account............................................. 27
(e) No Limitations............................................. 27
(f) Release of Buyer........................................... 27
(g) Survival................................................... 27
14.6 RESERVATION AS TO NON-PARTIES................................. 28
14.7 PARENT GUARANTEE; JOINT AND SEVERAL LIABILITY................. 28
ARTICLE 15 MISCELLANEOUS........................................ 28
15.1 EXHIBITS...................................................... 28
15.2 EXPENSES...................................................... 28
15.3 NOTICES....................................................... 28
15.4 AMENDMENTS.................................................... 29
15.5 ASSIGNMENT.................................................... 29
15.6 ANNOUNCEMENTS................................................. 29
15.7 HEADINGS...................................................... 29
15.8 COUNTERPARTS.................................................. 29
15.9 REFERENCES.................................................... 29
15.10 GOVERNING LAW.............................................. 29
15.11 ENTIRE AGREEMENT........................................... 29
15.12 BINDING EFFECT............................................. 30
15.13 SURVIVAL................................................... 30
15.14 CLOSING CONDITIONS......................................... 30
15.15 NO THIRD-PARTY BENEFICIARIES............................... 30
15.16 LIKE-KIND EXCHANGE......................................... 30
15.17 JOINT AND SEVERAL LIABILITY................................ 30
15.18 INFORMATION PROVIDED BY SELLER............................. 30
15.19 DISCLAIMER OF REPRESENTATIONS AND WARRANTIES............... 31
15.20 DISPUTE RESOLUTION......................................... 32
15.21 LIMITATION OF LIABILITY.................................... 32
EXHIBITS
Section
Exhibit Description where Defined
------- ----------- -------------
A Leases/Assets 1.2
B Xxxxx/Allocated Value 1.2(b)/2.3
C-1 Gas Gathering System Facilities 1.2(c)
C-2 Map of Gas Gathering System 1.2(c)
D Form of Assignment,
Xxxx of Sale and Conveyance 12.3(a)
E FIRPTA Certificate 12.3(i)
F Environmental Matters 5.1
G Litigation 6.6
H Excluded Equipment 1.2(f)
I Material Agreements 1.2(e)
J Sheriff's Deed 14.5(a)
K Escrow Agreement 14.5(d)
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT ("Agreement"), dated April ___,
2002 is by and between Wasatch Oil & Gas LLC, a Utah limited liability company,
and Wasatch Gas Gathering, LLC, a Utah limited liability company, whose address
is X.X. Xxx 000, Xxxxxxxxxx, Xxxx 00000-0000 (jointly "Wasatch" or "Seller") and
Xxxx Xxxxxxx Corporation, a Maryland corporation, whose address 0000 00xx
Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000 ("Buyer").
RECITALS
A. Seller owns and has decided to sell certain of its real and
personal property interests in certain oil and gas properties located in Carbon
and Duchesne Counties, Utah, as described in Section 1.2 below (collectively,
the "Assets").
B. Buyer has conducted an independent investigation of the
nature, extent and potential of the Assets and desires to purchase the Assets
pursuant to the terms of this Agreement.
AGREEMENT
In consideration of the mutual promises contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Buyer and Seller agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1 PURCHASE AND SALE. Seller agrees to sell and Buyer agrees to
purchase the Assets pursuant to the terms of this Agreement.
1.2 ASSETS. The interest in and to the real property and the other
types of property associated therewith as described in this Section 1.2 may be
referred to collectively as the "Assets." The Assets are comprised of the
following:
(a) All of Seller's right, title and interest in and to the
oil and gas leases specifically described in Exhibit A (collectively, the
"Leases"), the royalties, overriding royalties, net profits interests,
production payments and other interests, if any, owned by Seller burdening the
Leases, and any and all right, title and interest in and to the oil, gas and all
other hydrocarbons in, on or under the lands covered by the Leases (the "Lands")
and other hydrocarbons and products, whether liquid or gaseous, produced from
such Leases or Lands ("Hydrocarbons") after the Effective Time and all other
minerals of whatever nature in, on or under the Leases and Lands and lands
pooled or unitized therewith.
(b) The oil and gas xxxxx located on the Leases and Lands,
or lands pooled or unitized therewith, including without limitation, the oil and
gas xxxxx specifically described in Exhibit B, whether producing or
non-producing and whether fully or properly described or not, (the
"Xxxxx"), all injection and disposal xxxxx on the Leases or Lands, and all
personal property and equipment associated with the Xxxxx as of the Effective
Time.
(c) The gas gathering system related to the Leases and the
Lands, as depicted and described on Exhibit C-1 and C-2, including without
limitation all of the equipment and other personal property, fixtures,
improvements, permits, licenses, approvals, servitudes, rights-of-way and
easements used in connection with the system (collectively the "Gas Gathering
System").
(d) The rights, to the extent transferable, in and to all
existing and effective unitization, pooling and communitization agreements,
declarations and orders, and the properties covered and the units created
thereby to the extent that they relate to or affect any of Seller's properties
and interests described in Sections 1.2(a) and (b) or the production of
Hydrocarbons, if any, attributable to said properties and interests after the
Effective Time.
(e) The rights, to the extent transferable, in and to
existing and effective oil, gas, liquids, condensate, casinghead gas and natural
gas sales, purchase, exchange, gathering, transportation and processing
contracts, operating agreements, balancing agreements, joint venture agreements,
partnership agreements, farmout agreements and other contracts, agreements and
instruments, insofar only as they relate to any of Seller's properties and
interests described in Sections 1.2(a), (b) (c) and (d), excluding, however, any
insurance contracts (the "Agreements"). The Agreements that are material to the
ownership and operation of the Assets are referred to herein as the "Material
Agreements" and are set forth in Exhibit I.
(f) With the exception of the equipment listed on Exhibit H,
which is excluded from this Agreement (the "Excluded Equipment"), all of the
personal property, fixtures, improvements, permits, licenses, approvals,
servitudes, rights-of-way and easements, including, without limitation the
rights of way and easements set forth on Exhibit A, surface leases and other
surface rights (including, but not limited to, any xxxxx, tanks, boilers,
buildings, injection facilities, saltwater disposal facilities, compression
facilities, gathering systems, other appurtenances and facilities) located on or
used in connection with or otherwise related to the exploration for or
production, gathering, treatment, processing, storing, sale or disposal of
Hydrocarbons or water produced from the properties and interests described in
Sections 1.2(a) through (e) to the extent that they are located on or used in
the operation of the Assets as of the Effective Time, and all contract rights
(including rights under leases to third parties) related thereto.
(g) The files, records, data and information relating to the
items described in Sections 1.2(a) through (f) maintained by Seller (the
"Records"), including without limitation, accounting files to the extent related
to the Assets, lease files, land files, well files, gas, oil and other
hydrocarbon sales contract files, gas processing files, division order files,
abstracts, title opinions, all electronic files directly related to the Assets,
AFEs, geological and seismic data to the extent such seismic data can be
transferred to Seller, and all other information of every type related
exclusively or primarily to any of the Assets, but excluding the following: (i)
all of Seller's internal appraisals and interpretive data related to the Assets,
(ii) all information and data under contractual restrictions on assignment,
(iii) all privileged information, (iv) Seller's corporate, financial, employee
and general tax records that do not relate exclusively to the Assets and (v) all
accounting files that do not relate to the Assets.
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1.3 PROPERTY NOT BEING SOLD. THE OVERRIDING ROYALTY INTERESTS
PREVIOUSLY CONVEYED TO SELLER BY ASSIGNMENT OF OVERRIDING ROYALTY INTEREST
RECORDED IN BOOK 495 AT PAGES 588 AND 591, CARBON COUNTY, UTAH AND BOOK M297 AT
PAGE 348, DUCHESNE COUNTY, UTAH.
1.4 EFFECTIVE TIME. The purchase and sale of the Assets shall be
effective as of April 1, 2002, at 7:00 a.m. Mountain Standard Time (the
"Effective Time").
ARTICLE 2
PURCHASE PRICE
2.1 PURCHASE PRICE. The purchase price for the Assets shall be
Eight Million Fifty Thousand Dollars ($8,050,000.00) (the "Purchase Price"). At
Closing, Buyer shall pay Seller the Purchase Price, as adjusted pursuant to
Section 2.4.
2.2 PERFORMANCE GUARANTEE DEPOSIT. Upon execution of this
Agreement, Buyer shall deliver to Seller a performance guarantee deposit by wire
transfer of immediately available funds equal to Eight Hundred Five Thousand
Dollars ($805,000.00) (the "Deposit"). The Deposit shall be credited to the
Purchase Price at Closing, or if this Agreement is terminated, shall be
distributed or retained pursuant to Article 11.
2.3 ALLOCATION OF THE PURCHASE PRICE. The Purchase Price shall be
allocated among the Assets as set forth on Exhibit B. The value allocated to an
interest as set forth in Exhibit B may be referred to as the "Allocated Value"
for that interest.
2.4 ADJUSTMENT TO PURCHASE PRICE. All Purchase Price adjustments
shall be made according to the factors described in this Section 2.4. The
Purchase Price shall be adjusted at Closing pursuant to the "Preliminary
Settlement Statement" prepared by Seller and submitted to Buyer five (5) days
prior to Closing for Buyer's comment and review. Buyer and Seller shall mutually
agree on the Preliminary Settlement Statement prior to Closing, with any
disagreements to be handled in the Final Settlement Statement and the dispute
resolution mechanism set forth in Section 13.1(b). The Preliminary Settlement
Statement shall set forth the Closing Amount and all Purchase Price adjustments
and associated calculations. The term "Closing Amount" means the Purchase Price
adjusted at Closing as provided in this Section 2.4, using the best information
available. After Closing, the Purchase Price shall be adjusted pursuant to the
Final Settlement Statement.
For the purposes of this Agreement, the term "Capital/XXX/JIB
Expenses" shall mean all capital expenses, joint interest xxxxxxxx, lease rental
and maintenance costs, royalties, Taxes (as that term is defined in Article 9),
drilling expenses, workover expenses, geological, geophysical and other
exploration expenditures chargeable under applicable operating agreements
consistent with the standards established by the Council of Petroleum
Accountants Societies of North America ("XXXXX") that are attributable to the
maintenance and operation of the Assets during the period in question.
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(a) The Purchase Price shall be adjusted upward by the following:
(1) the value of all of Seller's interest in merchantable
oil and other liquid hydrocarbons in storage tanks above the pipeline
connections at the Effective Time as shown by actual gauging reports that is
credited to the Assets, as applicable, such value to be the actual price
received upon sale, less applicable taxes and gravity adjustments deducted by
the purchaser of such oil or natural gas liquids;
(2) the amount of all actual direct costs and expenses
attributable to the Assets during the period after the Effective Time,
including, without limitation the Capital/XXX/JIB Expenses incurred and paid by
Seller (and approved by Buyer, if such approval is required pursuant to Section
8.1) in accordance with generally accepted accounting principles consistently
applied in the oil and gas industry ("GAAP"); and
(3) to the extent not covered in the preceding paragraph, an
amount equal to all prepaid expenses that are in accordance with GAAP,
attributable to all or any portion of the Assets during the period after the
Effective Time, which were paid by or on behalf of Seller, and which will inure
to the benefit of Buyer, including, without limitation, oil and gas lease and
rights-of-way rentals, applicable insurance costs, prepaid utility charges,
equipment rentals, and prepaid Taxes (such Taxes to be apportioned pursuant to
Article 9).
(b) The Purchase Price shall be adjusted downward by the
following:
(1) proceeds received by Seller (net of applicable taxes and
royalties) after the Effective Time which are attributable, in accordance with
GAAP, to production from the Assets during the period after the Effective Time;
(2) the amount of all Capital/XXX/JIB Expenses that remain
unpaid by Seller or that have been paid by Buyer that are attributable to the
period prior to the Effective Time;
(3) an amount equal to the sum of all Defect Adjustments and
Exclusion Adjustments; and
(4) the amount of the Deposit
(c) The Purchase Price may be adjusted downward or upward for (i)
the amount of all documented pipeline imbalances as of the Effective Time for
the account of Seller and (ii) as appropriate, by an amount equal to $1.50 per
MCF for any gas which Seller may be entitled to take or be obligated to deliver
in excess of its net revenue interest in the Xxxxx as a result of
underproduction or overproduction by Seller from such Xxxxx, such amount to be
determined as of the Effective Time. To the extent there is an upward or
downward adjustment for any pipeline imbalances, the Purchase Price shall be
adjusted upward or downward, as appropriate, based upon the first-of-the month
price of spot gas delivered to pipelines for the Questar system closest the
production, as reported in Inside F.E.R.C.'s Gas Market Report for the month in
which the Effective Time occurs times the net overdelivery imbalance in MMbtus.
In the event such publication shall cease to be published, the parties shall
select a comparable publication.
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ARTICLE 3
BUYER'S INSPECTION
3.1 ACCESS TO RECORDS.
(a) Access. Prior to Closing and subject to Section 8.3(b),
Seller will disclose and make available to Buyer and its representatives at
Seller's offices and during Seller's normal business hours, all Records as may
be reasonably requested by Buyer for the purpose of permitting Buyer to complete
its due diligence review. Seller shall permit Buyer to inspect the Records only
to the extent, in each case, that Seller may do so without violating legal
constraints or any obligation of confidence or other contractual commitment of
Seller to a third party. Subject to the consent and cooperation of third
parties, Seller will cooperate with Buyer in Buyer's reasonable efforts to
obtain, at Buyer's sole expense, such additional information relating to the
Xxxxx and associated drilling and spacing units as Buyer may reasonably desire,
to the extent in each case that Seller may do so without violating legal
constraints or any obligation of confidence or other contractual commitment of
Seller to a third party.
(b) No Representation or Warranty. The Records are files or
copies thereof that Seller has used or generated in its normal course of
business. SELLER MAKES NO WARRANTY OR REPRESENTATION OF ANY KIND, EITHER EXPRESS
OR IMPLIED, WRITTEN OR ORAL, AS TO ANY STATEMENTS, WRITTEN OR ORAL, OTHER THAN
THOSE CONTAINED IN THIS AGREEMENT, MADE REGARDING INTERPRETATION OF OR
CONCLUSIONS TO BE DRAWN FROM THE RECORDS, OR OF BUYER'S RIGHT TO RELY THEREON.
SELLER SHALL NOT HAVE ANY LIABILITY TO ANY PERSON OR ENTITY CLAIMING TO HAVE
RELIED THEREON EXCEPT AS AND TO THE EXTENT SELLER KNOWS THE SAME TO BE
INACCURATE OR INCOMPLETE IN ANY MATERIAL RESPECT. Buyer acknowledges that any
conclusions drawn from the Records are the result of its own independent review
and judgment.
3.2 ACCESS TO PROPERTIES.
(a) Access. After the execution of this Agreement, upon
advance notice, Seller will grant Buyer and/or Buyer's authorized
representatives, agents and employees during reasonable business hours,
reasonable access to the Assets to allow Buyer to conduct, at Buyer's sole risk
and expense, on-site inspections and environmental assessments of the Xxxxx and
Equipment, copies of which, inclusive of supporting data and whether in draft or
final form, shall be provided to Seller at the same time provided to Buyer. In
connection with such on-site inspections, Buyer agrees to not unreasonably
interfere with the normal operation of the Assets. Buyer shall repair, without
delay and at its own cost and expense, and hold Seller harmless from, any damage
to any of the Assets which may be caused by Buyer's inspection of such Assets or
entrance on to any related property of the Seller. In connection with granting
such access, and, except to the extent that such claims are caused by the gross
negligence or willful misconduct of Seller, Buyer waives and releases all claims
against Seller, its directors, officers, employees, agents and representatives
for injury to, or death of persons or damage to property arising in any way from
the access afforded to Buyer hereunder or the activities of Buyer or its
employees on the Xxxxx and Equipment, and Buyer agrees
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to indemnify, defend and hold harmless Seller, its affiliates, directors,
officers, employees, agents and representatives from and against all such
claims.
(b) Insurance. In connection with exercising its rights
under this Section 3.2 of access to any Well or associated drilling and spacing
unit, Buyer represents to Seller that it has in force and effect comprehensive
liability and property damage, automobile and workmen's compensation insurance
with respect to Buyer and its agents, in accordance with standard industry
practice.
ARTICLE 4
TITLE MATTERS
4.1 DEFENSIBLE TITLE TO THE PROPERTIES.
(a) Defensible Title. The term "Defensible Title" to the
Assets means such title of Seller that, subject to and except for the Permitted
Encumbrances: (i) entitles Seller to receive not less than the net revenue
interest ("NRI") for the depths or formations, if any, set forth for each Well
(unit interest or leasehold interest, as applicable) and Lease on Exhibit B;
(ii) obligates Seller to bear costs and expenses relating to the maintenance,
development, operation and the production of Hydrocarbons from each Well (unit
interest or leasehold interest, as applicable) in an amount not greater than the
working interest ("WI") therefore as set forth on Exhibit B; and (iii) is free
and clear of encumbrances, liens and defects that would create a material
impairment of use and enjoyment of or loss of interest in the affected property.
(b) Permitted Encumbrances. The term "Permitted
Encumbrances" shall mean:
(1) lessors' royalties, overriding royalties,
overriding royalties owned by Seller as described in Section 1.3, net
profits interests, production payments, reversionary interests and
similar burdens, if the net cumulative effect of all such burdens does
not operate to reduce the NRI for a particular Asset below that set
forth on Exhibit B;
(2) any preferential rights to purchase and required
third party consents to assignments of contracts and similar agreements
for which written waivers or consents are obtained prior to Closing;
(3) liens for taxes or assessments not yet due or not
yet delinquent or, if delinquent, that are being contested in good
faith in the normal course of business;
(4) all rights to consent by, required notices to,
filings with, or other actions by federal, state or local entities in
connection with the sale or conveyance of the Assets if the same are
customarily obtained subsequent to such sale or conveyance;
(5) rights of reassignment, to the extent any exist as
of the date of this Agreement, upon the surrender or expiration of any
lease;
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(6) easements, rights-of-way, servitudes, permits,
surface leases and other rights with respect to surface operations, on,
over or in respect of any of the properties or any restriction on
access thereto and that do not materially interfere with the operation
of the affected Asset;
(7) such Title Defects as Buyer has waived;
(8) the terms and conditions of the Material
Agreements;
(9) materialmen's, mechanics', repairmen's,
employees', contractors', operators' or other similar liens or charges
arising in the ordinary course of business incidental to construction,
maintenance or operation of the Assets (i) if they have not been filed
pursuant to law and the time for filing them has expired, (ii) if
filed, they have not yet become due and payable or payment is being
withheld as provided by law, or (iii) if their validity is being
contested in good faith by appropriate action;
(10) rights reserved to or vested in any governmental
authority to control or regulate any of the Assets in any manner, and
all applicable laws, rules, regulations and orders of general
applicability in the area; and
(11) liens arising under operating agreements,
unitization and pooling agreements and production sales contracts
securing amounts not yet due or, if due, being contested in good faith
in the ordinary course of business.
(c) Title Defect. The term "Title Defect" means any material
encumbrance, encroachment, irregularity, defect in or objection to real property
title, excluding Permitted Encumbrances, that alone or in combination with other
defects renders Seller's title less than Defensible Title. Notwithstanding the
foregoing, the following shall not be considered Title Defects:
(1) defects based on lack of information in Seller's
files;
(2) defects in the chain of title consisting of the
mere failure to recite marital status in a document or successors of heirship
proceedings in a document, unless Buyer provides affirmative evidence that such
failure or omission has resulted in another party's actual and superior claim of
title to the relevant Asset;
(3) lack of a survey;
(4) defects that have been cured by possession under
applicable statutes of limitation for adverse possession or for prescription;
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(5) defects based on failure to record leases issued by
any state or the United States of America (or any assignments of record title or
operating rights in such leases), in the real property or other county records
of the county in which such Asset is located if such recordation is not
necessary to constitute constructive notice of such leases pursuant to
applicable statutes of limitation for adverse possession or prescription; and
(6) the Retained Matters (as defined in Section 14.5).
(d) Allocated Value. If an Asset has not been given an
Allocated Value, or if the Asset's Allocated Value is zero, Seller shall be
deemed to have Defensible Title to such Asset, without liability or obligation
thereof to Buyer by Seller.
4.2 PURCHASE PRICE ADJUSTMENTS FOR DEFECTIVE INTERESTS. For the
purposes of this Section 4.2, the deductibles set forth below apply to the
aggregate of Seller's interests in the Assets are identified on Exhibit B.
(a) Defective Interest. For the Assets, "Defective
Interests" means such Asset(s) affected by a Title Defect(s) that reduces the
Allocated Value of the affected Asset(s) by more than $25,000.00 in the
aggregate for all affected Assets (such amount to be net to Seller's interest,
and such amount to be called the "Title Deductible"). The amount by which the
Allocated Value(s) of the affected Asset(s) has been reduced by a Title
Defect(s) shall be calculated in accordance with Section 4.2(d) (the "Defect
Value").
(b) Notice of Defective Interest. Buyer shall give Seller
written "Notice of Defective Interests" as soon as possible but no later than on
or before three (3) business days prior to Closing at 5:00 p.m., Mountain Time
(the "Title Defect Notice Date"). Such notice shall be in writing and inclusion
of the following elements shall be a condition precedent to the effectiveness of
the Notice of Defective Interests: (i) a description of the Defective Interests,
including Buyer's basis for such characterization, (ii) the Allocated Value of
the affected Asset, and (iii) the Defect Value and the computations upon which
Buyer's belief is based. If Buyer does not deliver a timely and valid Notice of
Defective Interests for a particular Asset, title to such Assets shall be deemed
to be Defensible Title.
(c) Defect Adjustments and Exclusions. Subject to Sections
4.2(a) and (b), if an Asset is affected by Defective Interests, the Purchase
Price shall be reduced in accordance with Section 2.4 by the Defect Value (which
reduction shall be called a "Defect Adjustment") unless, (i) Buyer agrees to
waive the relevant Title Defect, (ii) the basis for treating such property as a
Defective Interest has been removed by Seller at its sole cost and expense prior
to the Closing Date, or (iii) Seller and Buyer reach a subsequent agreement
regarding cure of the Defective Interest prior to Closing. Provided, however
that, for purposes of Section 2.4, the Purchase Price shall be reduced by the
amount of the total Defect Values in excess of $25,000.00 (which amount is a
deductible, not a threshold).
(d) Defect Value. In determining which portions of the
properties are Defective Interests, it is the intent of the parties to include,
to the extent possible, only that portion of the affected Asset (whether a Well,
unit or leasehold interest, as applicable) materially and adversely affected by
the defect or basis for such property being treated as a Defective Interest. The
Defect Value shall not exceed the Allocated Value of the Asset and shall be
determined by the parties in
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good faith taking into account the Title Deductible per Title Defect and all
relevant factors, including, but not limited to, the following:
(1) The Allocated Value of the affected property;
(2) The potential or actual reduction in the warranted
NRI of the Defective Interest, or the potential or actual increase in
the warranted WI to the extent such increase is not accompanied by a
corresponding increase in NRI;
(3) If the Title Defect represents only a possibility
of title failure, the probability that such failure will occur;
(4) The legal effect of the Title Defect; and
(5) If the Title Defect is a lien or encumbrance on
the property, the cost of removing such lien or encumbrance; provided
however, there shall be no Title Deductible for a Title Defect which is
a lien.
4.3 CASUALTY LOSS. Prior to Closing, if a portion of the Assets is
destroyed by fire or other casualty, is taken or threatened to be taken in
condemnation or under the right of eminent domain (a "Casualty Loss"), Buyer
shall purchase the Asset at Closing for the Allocated Value of the Asset reduced
by the estimated cost to repair such Asset (with equipment of similar utility)
up to the Allocated Value thereof (the reduction being the "Net Casualty Loss")
and Seller shall retain all of Seller's rights to any insurance payments, awards
or other payments from third parties arising out of the Casualty Loss.
ARTICLE 5
ENVIRONMENTAL MATTERS
5.1 ENVIRONMENTAL REPRESENTATION AND STANDARD. Seller represents
that to its best knowledge, and except for all matters listed on Exhibit F: (i)
in conducting operations on the Assets, Wasatch, as operator of the Assets, has
complied in all material respects with Environmental Laws, or if Wasatch is not
the operator of the Assets, the operator of the Assets has complied in all
material respects with Environmental Laws, (ii) there does not exist any
material litigation, binding arbitration, orders or proceedings under any
Environmental Law seeking money damages, injunctive relief, remedial action,
penalties, or cost recovery in connection with operations conducted on the
Assets, and (iii) there does not exist any material condition with respect to
the Assets which could reasonably be the basis for a claim of a violation under
Environmental Laws. The facts stated in the foregoing representation, but
without regard to Seller's knowledge, are referred to herein as the
"Environmental Standard." Seller shall have no liability for the breach of the
foregoing representation, or for the failure of the Environmental Standard to be
true, except to the extent provided in Section 5.3.
(a) Environmental Law(s). "Environmental Law(s)" means
statutes, and the rules and regulations promulgated thereunder, compacts,
treaties, conventions, rules, regulations, codes, plans, requirements, criteria,
standards, orders, decrees, judgments, injunctions, notices or demand letters
issued, promulgated or entered by any federal, state or local governmental
entity
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("Laws") relating to use, storage, emissions, discharges, cleanup, releases or
threatened releases of pollutants, contaminants, naturally occurring radioactive
materials ("NORM"), chemicals or industrial, toxic or hazardous substances
("Pollutants") on or into the environment (including without limitation ambient
air, oceans, waterways, wetlands, surface water, ground water (tributary and
non-tributary), land (surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transportation or handling of Pollutants. Environmental Laws does not include
laws concerning (i) restoration or reclamation that does not involve Pollutants;
(ii) Man Made Material Fibers ("MMMF"); (iii) plugging and abandonment of xxxxx;
or (iv) employee health and safety.
5.2 ENVIRONMENTAL NOTICE. On or before three (3) business days
prior to Closing at 5:00 p.m., Mountain Time, Buyer may give Seller notice (an
"Environmental Notice") of any fact or circumstance that evidences the material
breach of Seller's representation in Section 5.1, or that is materially in
conflict with the Environmental Standard for matters related to operations
(either, an "Environmental Breach"); provided, however, that Buyer hereby waives
its right to give Seller an Environmental Notice pertaining to the Gas Gathering
System, regardless of any such material breach and/or material conflict. An
Environmental Notice shall only be valid and effective, if and only if it
satisfies all of the following conditions precedent:
(a) The Environmental Notice must be substantiated in good
faith by Buyer's environmental experts and supported by reasonable supporting
documentation; and
(b) The Environmental Notice must state Buyer's good faith
estimate of the amount of Loss (as defined in Article 14) potentially to be
incurred by Buyer on account of the Environmental Breach.
5.3 REMEDY FOR ENVIRONMENTAL BREACH. If Buyer gives a valid
Environmental Notice in accordance with Section 5.2, Seller may provide for one
of the remedies in Section 5.3(a) with respect to the Environmental Breach that
is the subject of such Environmental Notice, but each such remedy, and the
aggregate of all remedies shall be limited in accordance with Section 5.4.
(a) Remedy. If Buyer delivers a valid Environmental Notice
to Seller, Seller, at its election, shall have the option of (i) remediating the
Environmental Breach to the satisfaction of Buyer or the appropriate state and
federal agencies having jurisdiction, or (ii) paying Buyer's good faith estimate
of the amount of all Losses associated with the Environmental Breach, and
thereafter, Buyer shall waive and indemnify Seller for all Losses associated
with such Environmental Breach, up to a maximum of the Allocated Value for the
affected Asset(s).
(b) Exclusion of Affected Asset. For Assets affected by a
valid Environmental Notice delivered prior to Closing, if the cost associated
with the Loss which is reasonably expected to be incurred by Buyer under this
Article 5 with respect to an Asset after application of the limitations set
forth in Section 5.4, is greater than 20% of the Allocated Value of the
particular Asset, Seller may, at its option, exclude the Asset from this
Agreement, and the Purchase Price shall be reduced by the Allocated Value of
such Asset (an "Exclusion Adjustment").
(c) Exhibit F Matters. Notwithstanding anything in this
Agreement to the contrary, Buyer's sole remedy and Seller's sole obligation
regarding the matters described on Exhibit F shall be as follows: Seller shall
obtain all necessary permits and/or remediate such matters
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in order to be in compliance with Section 6.12, below, within ninety (90) days
after Closing, at Seller's sole cost and expense. Seller shall provide Buyer
with all permits and other documentation reasonably necessary to evidence such
compliance.
5.4 LIMITATIONS ON SELLER'S OBLIGATIONS. Seller's obligations
under this Article 5 are limited as follows:
(a) For valid Environmental Notices, and subject to the
aggregate limitations in Section 5.4(b), Seller's obligations shall only arise
if the Cleanup or Loss indemnification obligation to Buyer on account of an
Environmental Breach is expected to exceed a deductible of $50,000.00 net to
Seller's account per "Incident" or condition. If the Loss from an Environmental
Breach that is a spill, release, discharge, or emission (a "Release") of the
same substance that occurs or reoccurs in the same general contaminated area on
account of a singular cause or course of conduct, such a Release shall be
considered as a single Incident.
(b) Seller's obligations shall apply only to the amount of
all Losses exceeding the deductible in Section 5.4(a) which also in the
aggregate exceed a deductible amount of $100,000.00 net to Seller's account;
provided, however, that Seller's aggregate liabilities under this Article 5
shall not exceed the aggregate of the Allocated Values of the affected Assets.
5.5 ENVIRONMENTAL INDEMNITY. Except as expressly provided in this
Article 5, upon Closing, Buyer shall assume all risk, liability, obligation and
Loss in connection with, and shall defend, indemnify and save and hold harmless
Seller and its affiliates, officers, directors, shareholders, representatives,
employees, agents, successors, and assigns (collectively, "Indemnified
Parties"), forever from and against all Losses incurred by such Indemnified
Parties in connection with any Environmental Matter. "Environmental Matter"
shall mean the following matters arising in connection with the Assets
regardless of whether incurred with respect to events occurring prior to or
after the Effective Time: (i) the violation of, and compliance with past,
present and future laws relating to environmental matters, including
Environmental Laws (which shall for purposes of this Section 5.5 include common
law); (ii) remediation and restoration of the Assets, including, without
limitation, plugging and abandonment and remediation of Well sites; (iii) NORM;
(iv) MMMF; (v) laws relating to public or employee health and safety; and (vi)
damage to persons or property on account of Pollutants.
Provided, however, and only to the extent the parties have not
agreed otherwise, Seller shall indemnify and save and hold harmless Buyer and
its affiliates, officers, directors, shareholders, representatives, employees,
agents, successors, and assigns from and against all Losses arising out of or
attributable to, in whole or in part, either directly or indirectly, the
condition or operation of the Assets at any time before the Closing Date that is
determined to be the result of or caused in whole or in part by Seller's
violation of, failure to fulfill duties imposed by or incurrence of liability
under, any Environmental Law. Buyer shall identify such Losses in a form similar
to that prescribed for Environmental Notices in Section 5.2.
5.6 APPLICABILITY OF OTHER PROVISION. Section 14.5 (Reservation as
to Non-Parties) shall apply to the obligations and indemnifications provided in
this Article 5.
5.7 BUYER'S REPORTS. Buyer shall provide to Seller, any third
party reports, or sections thereof, addressing the particular alleged
Environmental Breach, commissioned by Buyer
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concerning an alleged Environmental Breach as set forth in a valid Environmental
Notice, such third party environmental report, or part thereof, to be included
with the Environmental Notice, subject to the parties' obligations under Section
3.2.
5.8 EXCLUSIVE REMEDY. Notwithstanding anything else in this
Agreement to the contrary, this Article 5 is the exclusive agreement and only
remedy of Buyer in regard to Environmental Matters even if some other provision
of this Agreement by its terms would otherwise cover Environmental Matters.
5.9 ENVIRONMENTAL DUE DILIGENCE ACTIVITIES. For the purposes of
this Agreement, Buyer has already or will, to the extent it deems appropriate,
conduct all of its environmental due diligence activities with respect to the
Assets prior to the expiration of the period during which Buyer is entitled to
give Seller Environmental Notices (such period being the "Environmental Due
Diligence Period"). Such due diligence activities shall be conducted in
accordance with and subject to the provisions of Section 3.2. During the
Environmental Due Diligence Period, Buyer agrees: (i) to keep any data or
information (including all analysis of such data) relating to Environmental
Matters acquired by Buyer strictly confidential among Buyer and Seller, (ii) to
immediately inform Seller if Buyer discovers a breach of the Environmental
Standard that would result in a material Loss, and thereafter consult with Buyer
to formulate a mutually agreeable course of action to address the Environmental
Matter, including consultations with appropriate governmental personnel.
ARTICLE 6
SELLER'S REPRESENTATIONS AND WARRANTIES
Seller makes the following representations and warranties:
6.1 ORGANIZATION AND STANDING. Wasatch Oil & Gas LLC, is a limited
liability company duly organized, validly existing and in good standing under
the law of the State of Utah and is duly qualified to carry on its business in
the State of Utah. Wasatch Gas Gathering, LLC, is a limited liability company
duly organized, validly existing and in good standing under the law of the State
of Utah and is duly qualified to carry on its business in the State of Utah.
Wasatch Group, LLC, is a limited liability company duly organized, validly
existing and in good standing under the law of the State of Utah and is duly
qualified to carry on its business in the State of Utah.
6.2 POWER. Seller has all requisite corporate power and authority
to carry on its businesses as presently conducted and to enter into this
Agreement. The execution and delivery of this Agreement and the fulfillment of
and compliance with the terms and conditions hereof will not violate, nor be in
conflict with, any material provision of Seller's organizational documents,
bylaws or any material provision of any agreement or instrument to which is a
party or by which it is bound, or, to its knowledge, any judgment, decree,
order, statute, rule or regulation applicable to it. The provisions of this
Section shall specifically include Seller's right to transfer and convey to
Buyer rights of access, rights to operate and other rights associated with the
Assets notwithstanding the pendency of the Retained Matters.
6.3 AUTHORIZATION AND ENFORCEABILITY. The execution, delivery and
performance of this Agreement and the transactions contemplated hereby have been
duly and validly authorized
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by all requisite action on Seller's part. This Agreement constitutes Seller's
legal, valid and binding obligation, enforceable in accordance with its terms,
subject, however, to the effects of bankruptcy, insolvency, reorganization,
moratorium and other laws for the protection of creditors, as well as to general
principles of equity, regardless whether such enforceability is considered in a
proceeding in equity or at law.
6.4 LIABILITY FOR BROKERS' FEES. Seller has not incurred any
liability, contingent or otherwise, for brokers' or finders' fees relating to
the transactions contemplated by this Agreement for which Buyer shall have any
responsibility whatsoever.
6.5 NO BANKRUPTCY. There are no bankruptcy proceedings pending,
being contemplated by, or to the knowledge of Seller, based upon reasonable
inquiry and investigation, threatened against Seller.
6.6 LITIGATION. Except for matters described on Exhibit G, to the
best of Seller's knowledge, Seller has not received written notice of any
pending proceeding, "Notice of Violation," action, suit, claim or investigation
before any federal, state or other governmental court, agency or other
instrumentality involving Seller or the Assets. To the best of Seller's
knowledge there is no action, suit, proceeding, claim or investigation by any
person, entity, administrative agency or governmental body pending or threatened
against Seller before any governmental authority that impedes or is likely to
impede its ability to consummate the transactions contemplated by this
Agreement. Exhibit G sets forth Seller's description of certain matters and its
incorporation into this Agreement is not intended nor shall it be construed as
any agreement by Buyer with Seller's assessment.
6.7 MATERIAL AGREEMENTS. To the best of Seller's knowledge,in
all material respects: (i) all Material Agreements are identified in Exhibit I;
(ii) the Material Agreements are in full force and effect and are the valid and
legally binding obligations of the parties thereto; (iii) Seller is not in
breach or default with respect to any material obligations pursuant to any
Material Agreement or any regulations incorporated therein or governing same;
(iv) all material payments (including, without limitation, royalties, delay
rentals, shut-in royalties and joint interest or other xxxxxxxx under unit or
operating agreements) due thereunder have been made by Seller or will be made by
Seller prior to Closing; (v) no other party of any Material Agreement (or any
successor in interest thereto) is in breach or default with respect to any of
its material obligations thereunder; and (vi) neither Seller nor any other party
to any Material Agreement has given or threatened to give notice of any action
to terminate, cancel, rescind or procure a judicial reformation of any Material
Agreement or the Leases or any provision thereof.
6.8 TAXES. All ad valorem, property, production, severance, net
proceeds, 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 for all taxable periods prior to the taxable period in which
this Agreement is executed have been properly paid, unless contested in good
faith by appropriate proceeding. All income taxes and obligations relating
thereto that could result in a lien or other claim against any of the Assets
have been properly paid, unless contested in good faith by appropriate
proceeding.
6.9 TAX PARTNERSHIPS. To the best of Seller's knowledge, the
Assets are not subject to any tax partnership or other agreement requiring a
partnership income tax return to be
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filed under Subchapter K of Chapter 1 of Subtitle A of the Internal Revenue Code
of 1986, as amended (the "Code").
6.10 LEASE MAINTENANCE. To the best of Seller's knowledge, all
material royalties (other than royalties in suspense), rentals and other
payments due under the Leases have been properly and timely paid, all conditions
necessary to keep the Leases in force have been fully performed, no notices have
been received by Seller of any claim to the contrary and all of the Leases are
in full force and effect.
6.11 GAS IMBALANCES. To the best of Seller's knowledge, (i) Seller
is not obligated by virtue of any prepayment arrangement under any contract for
the sale of hydrocarbons containing a "take or pay" or similar provision or a
production payment or any other arrangement to deliver hydrocarbons produced
from the Assets at some future time without then or thereafter receiving full
payment therefor, (ii) Seller has not produced a share of gas greater than its
ownership percentage and Seller is under no obligation to reduce its share of
production under any gas balancing agreement or similar arrangement to allow
under-produced parties to come back into balance and (iii) as of the Effective
Time, there are no pipeline imbalances, such that the net of such imbalances is
an overdelivery or underdelivery imbalance.
6.12 COMPLIANCE WITH LAWS, ETC. To the best of Seller's knowledge,
(i) all material valid laws, regulations and orders of all governmental agencies
having jurisdiction over the Assets have been and shall continue to be complied
with until the Closing, and (ii) all material necessary permits from and reports
to governmental agencies having jurisdiction in connection with the Assets have
been obtained and have been timely, properly and accurately made and will
continue to be timely, properly and accurately made through Closing, except as
set forth in Exhibit F.
6.13 OTHER BURDENS. To the best of Seller's knowledge, none of the
Assets are subject to any calls on or preferential rights to market or purchase
production.
6.14 CONDITION OF EQUIPMENT. To the best of Seller's knowledge, all
of the Xxxxx, facilities and equipment associated with the Assets are: (a) in
good operating condition, and (b) not in need of maintenance or repairs.
6.15 NO CHANGES. To the best of Seller's knowledge, between the
date first referenced above and Closing, there has not been, without Buyer's
prior written consent:
(a) A waiver of any right relating to the Assets;
(b) A sale, lease or other disposition of the Assets;
(c) A mortgage, pledge or grant of a lien or security
interest in any of the Assets;
(d) A contract for the sale of Hydrocarbons;
(e) A contract between Seller and any of its affiliates; or
(f) A contract or commitment to do any of the foregoing.
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6.16 STATEMENT OF COUNSEL. On or about February 26, 2002, counsel
for the adverse parties in the Retained Matters (described in Section 14.5) made
a written settlement offer to "sell to Wasatch, without warranty or
representation, except that Goal obtained its interest from Regoal or Xx Xxxxx,
its judgment liens against Mission for their outstanding balance due and its
sheriff certificate and/or deed, which judgment liens have an approximate
outstanding balance of approximately $267,685.75."
ARTICLE 7
BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer makes the following representations and warranties:
7.1 ORGANIZATION AND STANDING. Buyer is a corporation, duly
organized, validly existing and in good standing under the law of the State of
Maryland and is duly qualified to carry on its business in the State of Utah.
7.2 POWER. Buyer has all requisite power and authority to carry on
its business as presently conducted and to enter into this Agreement. The
execution and delivery of this Agreement and consummation of the transactions
contemplated hereby and the fulfillment of and compliance with the terms and
conditions hereof will not violate, nor be in conflict with, any material
provision of its partnership agreement or other governing documents or of any
agreement or instrument to which it is a party or by which it is bound, or, to
its knowledge, any judgment, decree, order, statute, rule or regulation
applicable to it.
7.3 AUTHORIZATION AND ENFORCEABILITY. The execution, delivery and
performance of this Agreement have been duly and validly authorized by all
requisite corporate action on its part. This Agreement constitutes the legal,
valid and binding obligation of Buyer, enforceable in accordance with its terms,
subject, however, to the effects of bankruptcy, insolvency, reorganization,
moratorium and similar laws for the protection of creditors, as well as to
general principles of equity, regardless whether such enforceability is
considered in a proceeding in equity or at law.
7.4 LIABILITY FOR BROKERS' FEES. Buyer has not incurred any
liability, contingent or otherwise, for brokers' or finders' fees relating to
the transactions contemplated by this Agreement for which Seller shall have any
responsibility whatsoever.
7.5 LITIGATION. There is no action, suit, proceeding, claim or
investigation by any person, entity, administrative agency or governmental body
pending or, to the best of Buyer's knowledge, threatened against it before any
governmental authority that impedes or is likely to impede its ability to
consummate the transactions contemplated by this Agreement and to assume the
liabilities to be assumed by it under this Agreement (except for any such
action, suit, proceeding, claim or investigation that does not and would not,
individually or in the aggregate, have a material adverse effect on the same).
7.6 SECURITIES LAWS; SOPHISTICATION OF BUYER. The Assets are being
acquired solely for Buyer's own account for the purpose of investment and not
with a view to resale, distribution or granting a participation therein in
violation of any securities laws. Buyer is familiar
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with the oil and gas business and it is a knowledgeable, experienced and
sophisticated investor in securities of companies engaged in the oil and gas
business. Buyer understands and accepts the risks and absence of liquidity
inherent in ownership of the Assets.
7.7 HOLDING COMPANY. Buyer is not a "holding company," or a
"subsidiary company" of a "holding company," or an affiliate of a "holding
company" or of a "subsidiary company" of a "holding company" within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
7.8 FINANCIAL RESOURCES. Buyer has the financial resources
available to close the transaction contemplated by this Agreement without
financing that is subject to any material contingency.
7.9 INDEPENDENT EVALUATION. Buyer is experienced and knowledgeable
in the oil and gas business and is aware of its risks. Buyer has been afforded
the opportunity to examine materials made available to it by Seller in Seller's
offices in Farmington, Utah with respect to the Assets including without
limitation the Records (collectively, the "Background Materials"). The
Background Materials are files, or copies thereof, that Seller has used in its
normal course of business and other information about the Assets that Seller has
compiled or generated. BUYER ACKNOWLEDGES AND AGREES THAT SELLER HAS MADE NO
REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, WRITTEN OR ORAL,
AS TO THE ACCURACY OF THE BACKGROUND MATERIALS OR ANY OTHER INFORMATION RELATING
TO THE ASSETS FURNISHED BY OR ON BEHALF OF SELLER OR TO BE FURNISHED TO BUYER OR
ITS REPRESENTATIVES, INCLUDING WITHOUT LIMITATION ANY INTERNAL APPRAISALS AND/OR
INTERPRETIVE DATA OF SELLER OR OF THE RIGHT OF ANY PERSON OR ENTITY TO RELY
THEREON. Buyer acknowledges and affirms that it has relied and will rely solely
upon its independent analysis, evaluation and investigation of, and judgment
with respect to, the business, economic, legal, tax or other consequences of
this transaction including its own estimate and appraisal of the extent and
value of the petroleum, natural gas and other reserves of the Assets. To the
extent Buyer deemed appropriate, Buyer's representatives visited Seller's
offices and have been given sufficient opportunities to examine the books and
records of Seller relating to the Assets. Neither Seller nor its affiliates,
agents, representatives or employees shall have any liability to Buyer or its
agents, representatives or employees resulting from any use, authorized or
unauthorized, of the Background Materials or other information relating to the
Assets provided by or on behalf of Seller or its agents, representatives or
employees. Provided, however, that the foregoing shall not apply to any analysis
made by Buyer or obligations of Seller in connection with the matters addressed
in Article 6 and Article 14.
ARTICLE 8
COVENANTS AND AGREEMENTS
8.1 COVENANTS AND AGREEMENTS OF SELLER. Seller covenants and
agrees with Buyer as follows:
(a) Operations Prior to Closing. Except as otherwise
consented to in writing by Buyer or provided in this Agreement from the date of
execution hereof to the Closing,
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Seller shall use reasonable efforts to maintain and operate the properties in a
good and workmanlike manner consistent with past practices, but with no
obligation to improve the same from and after the date hereof. Subject to the
provisions of Section 2.4, Seller shall pay or cause to be paid its
proportionate share of all costs and expenses incurred in connection with such
operations. To the extent Seller receives written AFEs or actual notice of such,
Seller shall notify Buyer of ongoing activities and major capital expenditures
in excess of $10,000 per activity net to Seller's interest conducted on the
Assets and shall consult with Buyer regarding all such matters and operations.
(b) Restriction on Operations. Subject to Section 8.1(a),
unless Seller obtains the prior written consent of Buyer to act otherwise
(which, will not be unreasonably withheld, delayed or conditioned), prior to
Closing Seller will use good faith efforts within the constraints of the
applicable operating agreements and other applicable agreements to not (i)
abandon any part of the Assets (except in the ordinary course of business or the
abandonment of leases upon the expiration of their respective primary terms or
if not capable of production in paying quantities), (ii) approve any operations
on the properties anticipated in any instance to cost the owner of the Assets
more than $10,000 per activity net to Seller's interest (excepting emergency
operations, operations required under presently existing contractual
obligations, ongoing commitments under existing AFEs and operations undertaken
to avoid a monetary penalty or forfeiture provision of any applicable agreement
or order), (iii) convey or dispose of any material part of the Assets (other
than replacement of equipment or sale of oil, gas, and other liquid products
produced from the Assets in the regular course of business) or enter into any
farmout, farmin or other similar contract affecting the Assets if the net
expense to Seller's interest will be in excess of $10,000, (iv) let lapse any
insurance now in force with respect to the Assets, or (vi) materially modify or
terminate any of the Material Agreements.
(c) Marketing. Unless Seller obtains the prior written
consent of Buyer to act otherwise, prior to Closing Seller will not alter any
existing marketing contracts currently in existence, or enter into any new
marketing contracts or agreements providing for the sale of Hydrocarbons for a
term in excess of 30 days.
(d) Consents. For the purposes of obtaining the written
consents required in this Section 8.1, this Section 8.1(d) shall control over
Section 15.3, and Buyer designates the following contact person:
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Buyer: Xxxx Xxxxxxx Corporation
0000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Hunt Walker
Telephone: (000) 000-0000
Fax: (000) 000-0000
Such consents may be obtained in writing or fax, or given verbally if confirmed
by writing.
(e) Status. Seller shall maintain its respective
organizational status from the date hereof until the resolution of the Retained
Matters (as defined in Section 14.5) and to assure that as of the Closing Date
it will not be under any material restriction that would prohibit or delay the
timely consummation of the transactions contemplated hereby.
(f) Notices of Claims. Seller shall promptly notify Buyer,
if, prior to the Closing Date, Seller receives written notice of any claim,
suit, action or other proceeding of the type contemplated in Section 6.6.
(g) Compliance with Laws. Prior to the Closing Date, Seller
shall attempt in good faith to comply in all material respects with all
applicable statutes, ordinances, rules, regulations and orders relating to the
ownership and operation of the Assets.
(h) Insurance. Prior to the Closing Date, Seller shall
maintain its insurance as such insurance is now in force with respect to the
Assets.
(i) Resolution of Retained Matters. Seller shall use its
best efforts to attempt to resolve the Retained Matters (as defined in Section
14.5) prior to Closing.
8.2 COVENANTS AND AGREEMENTS OF BUYER. Buyer covenants and agrees
with Seller that:
(a) Status. Buyer shall maintain its legal status from the
date hereof until resolution of the Retained Matters (as defined in Section 14.5
below) . As of the Closing Date, Buyer will not be under any material
restriction that would prohibit or delay the timely consummation of the
transactions contemplated hereby.
(b) Bonding; Insurance. On or before five (5) days prior to
Closing, Buyer shall provide evidence to Seller that Buyer has arranged to have
in place, to be effective at Closing and relating to the ownership of the Assets
after the Closing (i) all necessary state, federal and local bonds, and (ii)
upon Seller's request, insurance as is reasonable and customary in the industry
for properties comparable to the Assets.
8.3 COVENANTS AND AGREEMENTS OF THE PARTIES.
(a) Government Reviews and Filings. Before and after the
Closing, Seller and Buyer shall cooperate to provide requested information, make
required filings with, prepare applications to and conduct negotiations with
each governmental agency as required to consummate the transaction contemplated
hereby. Each party shall make any governmental filings occasioned by
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its ownership or structure. Buyer shall make all filings after the Closing at
its expense with governmental agencies necessary to transfer title to the Assets
or to comply with laws and shall indemnify and hold harmless Seller from and
against all claims, costs, expenses, liabilities and actions arising out of
Seller's holding of such title after the Closing and prior to the securing of
any necessary governmental approvals of the transfer.
(b) Data and Information.
(1) Confidentiality. All data and information obtained
from Seller in connection with the transactions contemplated by this Agreement
whether before or after the execution of this Agreement, and data and
information generated by Buyer in connection with this transaction (collectively
the "Information") is deemed by the parties to be confidential and proprietary
to Seller. Until completion of the Closing (and for a period of two (2) years if
Closing should not occur for any reason), except as required by law, Buyer and
its officers, agents and representatives will hold in strict confidence the
terms of this Agreement and all Information, except any Information which: (i)
at the time of disclosure to Buyer by Seller is in the public domain; (ii) after
disclosure to Buyer by Seller becomes part of the public domain by publication
or otherwise, except by breach of this covenant by Buyer; (iii) Buyer can
establish by competent proof was rightfully in its possession at the time of
disclosure to Buyer by Seller; (iv) Buyer rightfully receives from third parties
free of any obligation of confidence; (v) is disclosed to Buyer's consultants,
investors and lenders who similarly agree to protect the confidentiality of such
Information and agree to use such Information only for their due diligence
evaluation of the Assets; or (vi) is developed independently by Buyer, provided
that the person or persons developing the Information shall not have had access
to the Information.
(2) Return of Information. If the transaction
contemplated by this Agreement does not close on or before the Closing Date,
Buyer shall (i) return to Seller all copies of the Information generated by
Seller or otherwise in the possession of Buyer obtained under the terms of this
Agreement, which Information is at the time of termination required to be held
in confidence pursuant to Section 8.3(b)(1); (ii) not utilize or permit
utilization of the Information to compete with Seller; and (iii) destroy any and
all notes, reports, studies or analyses made or generated by Buyer, based on or
incorporating the Information. The terms of this Section 8.3(b) shall survive
termination of this Agreement.
(3) Buyer agrees that Seller will not have an adequate
remedy at law if Buyer violates any of the terms of this Section 8.3(b). In such
event, Seller will have the right, in addition to any other right it may have,
to obtain injunctive relief to restrain any breach or threatened breach of the
terms of this Section 8.3(b) or to obtain specific enforcement of such terms.
(c) Lavinia Well. If Wasatch acquires the Lavinia 1-32 Well
(the "Lavinia Well") from Xxxxx/Goal, within a period of one year after the
Effective Time, Buyer will gather and transport Seller's share of gas from the
Lavinia Well for a fee comparable to the fee charged other producers on the Gas
Gathering System. Further Buyer's pumper will perform the same services for the
Lavinia Well at rates comparable to the rates charged for similar services on
other xxxxx in the field.
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ARTICLE 9
TAX MATTERS
9.1 APPORTIONMENT OF TAX LIABILITY. "Taxes" shall mean all ad
valorem, property, production, excise, conservation, net proceeds, severance,
and all other taxes and similar obligations assessed against the Assets or based
upon or measured by the ownership of the Assets or the production of
Hydrocarbons or the receipt of proceeds therefrom, other than income taxes. With
respect to the Assets and all personal property associated therewith, all Taxes
shall be prorated between Seller and Buyer as of the Effective Time for all
taxable periods that include the Effective Time based upon the date such Taxes
are assessed.
9.2 CALCULATION OF TAX LIABILITY. Consistent with Section 9.1 and
with respect to the tax liability apportioned in Section 9.1, if any Taxes are
incurred by Seller for a tax period which commences prior to the Effective Time
and extends for a period after the Effective Time, then the respective parties'
liability, if any, for such Taxes for both the period prior to the Effective
Time and the period subsequent to the Effective Time shall be determined by
prorating such Taxes to Seller in the ratio that the number of days in the
assessment period, as appropriate, before the Effective Time bears to the total
number of days in the assessment period, and to the Buyer in the ratio that the
number of days in the assessment period on or after the Effective Time bears to
the total number of days in the assessment period. Based on the best current
information available as of Closing, the proration shall be made between the
parties as an adjustment to the Purchase Price in accordance with Section 2.4.
Taxes for the Tax Year 2002 will be due and payable by Buyer on or about
November 30, 2002, and will include the portion of such 2002 Tax Year during
which Seller owned the Assets (i.e., January 1, 2002 through March 31, 2002).
Therefore, Seller shall provide an estimate of the 2002 taxes no later than five
(5) days prior to the Closing Date, with reasonable and adequate calculations
indicating the basis for such estimate. The parties shall agree to such estimate
as a condition of Closing. Buyer shall receive a downward adjustment to the
Purchase Price for such estimated amount of Taxes for January 1, 2002 through
March 31, 2002. Said estimated amount shall be included in the Preliminary
Settlement Statement. Buyer shall not be required to refund any amount to
Seller, and Seller shall not be required to pay any additional amount to Buyer
in the event the actual 2002 ad valorem taxes are less or greater than such
estimate.
9.3 TAX REPORTS AND RETURNS. For the tax period in which the
Effective Time occurs, Seller agrees to immediately forward to Buyer any such
tax reports and returns received by Seller after Closing and provide Buyer with
appropriate information which is necessary for Buyer to file any required tax
reports and returns. Buyer agrees to file all tax returns and reports applicable
to the Assets that Buyer is required to file after the Closing, and pay all
required Taxes payable with respect to the Assets subject to the provisions of
Section 9.1.
9.4 SALES AND TRANSFER TAXES. Buyer shall be liable for and shall
indemnify Seller for, any sales and use taxes, conveyance, transfer, and real
estate transfer stamps or taxes that may be imposed on any transfer of the
Assets pursuant to this Agreement. If required by applicable law, Buyer shall,
in accordance with applicable law, calculate and remit any sales or similar
taxes that are required to be paid as a result of the transfer of the Assets to
Buyer. If Seller receives notice that any sales and/or use taxes are due, Seller
shall promptly forward such notice to Buyer for handling.
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ARTICLE 10
CONDITIONS TO CLOSING
10.1 SELLER'S CONDITIONS. The obligations of Seller at the Closing
are subject, at the option of Seller, to the satisfaction at or prior to the
Closing of the following conditions precedent:
(a) All Buyer's representations and warranties contained in
Article 7 of this Agreement shall be true in all material respects at and as of
the Closing in accordance with their terms as if such representations and
warranties were remade at and as of the Closing, and Buyer shall have performed
and satisfied all covenants and agreements required by this Agreement to be
performed and satisfied by Buyer at or prior to the Closing in all material
respects;
(b) No order shall have been entered by any court or
governmental agency having jurisdiction over the parties or the subject matter
of this Agreement that restrains or prohibits the purchase and sale contemplated
by this Agreement and which remains in effect at the time of Closing; and
(c) Seller shall have received the evidence of bonding and
insurance as required in Section 8.2(b).
(d) The Total of all Defect Adjustments and Exclusion
Adjustments shall not exceed ten percent (10%) of the Purchase Price.
10.2 BUYER'S CONDITIONS. The obligations of Buyer at the Closing
are subject, at the option of Buyer, to the satisfaction at or prior to the
Closing of the following conditions:
(a) All representations and warranties of Seller contained
in Article 6 of this Agreement shall be true in all material respects at and as
of the Closing in accordance with their terms as if such representations and
warranties were remade at and as of the Closing and Seller shall have performed
and satisfied all covenants and agreements required by this Agreement to be
performed and satisfied by Seller at or prior to the Closing in all material
respects;
(b) No order shall have been entered by any court or
governmental agency having jurisdiction over the parties or the subject matter
of this Agreement that restrains or prohibits the purchase and sale contemplated
by this Agreement and which remains in effect at the time of Closing; and
(c) The Total of all Defect Adjustments and Exclusion
Adjustments, as well as any other downward adjustments under this Agreement
(including, without limitation, for any Net Casualty Loss) shall not exceed ten
percent (10%) of the Purchase Price.
(d) No later than ten (10) days before Closing, Buyer shall
have received adequate financial information regarding Wasatch Group, LLC,
including but not limited to audited financial statements for calendar year
2001, financial statements for the first quarter of calendar year 2002, and such
other supporting documentation as Buyer may request. All such financial
information delivered to Buyer shall be maintained as confidential.
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ARTICLE 11
RIGHT OF TERMINATION AND ABANDONMENT
11.1 TERMINATION . This Agreement may be terminated in accordance
with the following provisions:
(a) by Seller, prior to Closing, if the conditions set forth
in Section 10.1 are not satisfied through no fault of Seller, or waived by
Seller as of the Closing Date;
(b) by Buyer, prior to Closing, if the conditions set forth
in Section 10.2 are not satisfied through no fault of Buyer or waived by Buyer
as of the Closing Date; or
(c) by Seller or Buyer, prior to Closing, if, through no
fault of the other party, the Closing does not occur on or before the date
specified in Section 12.1.
11.2 LIABILITIES UPON TERMINATION OR BREACH .
(a) Buyer's Breach. If the transactions contemplated by this
Agreement are not consummated on or before the date specified in Section 12.1 by
reason of Buyer's failure to tender performance at Closing and Seller is in
compliance with the terms of this Agreement and terminates this Agreement, or if
Seller terminates this Agreement pursuant to Section 11.1(a), Seller shall
retain the Deposit as liquidated damages and Seller shall have no further
obligation to Buyer with respect to the Assets or under this Agreement. The
remedy set forth herein shall be Seller's sole and exclusive remedy for Buyer's
wrongful failure to close hereunder and Seller expressly waives any and all
other remedies, legal and equitable, that it otherwise may have for Buyer's
failure to close.
(b) Seller's Breach. If the transactions contemplated by
this Agreement are not consummated on or before the date specified in Section
12.1 by reason of Seller's failure to tender performance at Closing and Buyer is
in compliance with the terms of this Agreement and terminates this Agreement,
then Buyer shall have the right to demand Seller's specific performance of the
transactions contemplated by this Agreement.
(c) Termination Without Further Liability. If this Agreement
is terminated by the mutual agreement of the parties, if this Agreement is
terminated because the conditions set forth in Section 10.1(d) or 11.1(c) are
not met, or if this Agreement is terminated pursuant to Section 11.1(b), and
Buyer does elect to pursue the remedy set forth in Section 11.2(b), Seller shall
return the Deposit to Buyer, and each party shall release the other party for
any and all liabilities and obligations under the terms of this Agreement.
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ARTICLE 12
CLOSING
12.1 DATE OF CLOSING. Unless otherwise agreed to in writing and
subject to the conditions stated in this Agreement, consummation of the
transactions contemplated hereby (the "Closing") shall be held on or before
April 30, 2002. The date the Closing actually occurs is called the "Closing
Date."
12.2 PLACE OF CLOSING. The Closing shall be held at the offices of
Xxxxxx Xxxxx, 0000 Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx, at 9:00 a.m.
Mountain Standard Time or at such other time and place as Buyer and Seller may
agree in writing.
12.3 CLOSING OBLIGATIONS. At Closing, the following events shall
occur, each being a condition precedent to the others and each being deemed to
have occurred simultaneously with the others:
(a) Seller shall execute, acknowledge and deliver to Buyer
(1) an Assignment, Xxxx of Sale and Conveyance of the Assets, effective as of
the Effective Time to Buyer (in sufficient counterparts to facilitate filing and
recording) substantially in the form of Exhibit D conveying the Assets with a
special warranty of title, but with no other warranties, express or implied, and
in their existing condition "as is, where is"; and (2) such other assignments,
bills of sale, or deeds necessary to transfer the Assets to Buyer, including
without limitation any conveyances on official forms and related documentation
necessary to transfer the Assets to Buyer in accordance with requirements of
governmental regulations (collectively, the "Conveyances");
(b) Seller and Buyer shall execute and deliver the
Preliminary Settlement Statement;
(c) Buyer shall deliver to Seller the Closing Amount by wire
transfer in immediately available funds, or by such other method as may be
agreed to by the parties hereto;
(d) Seller shall deliver to Buyer possession of the Assets;
(e) Seller and Buyer shall execute and deliver letters in
lieu directing all purchasers of production to pay Buyer the proceeds
attributable to production from the Assets from and after the Effective Time;
(f) Buyer shall deliver to Seller evidence of appropriate
federal, state and local bonds relating to ownership of the Assets after the
Closing and certificates of insurance evidencing that Buyer has obtained
appropriate insurance covering the Assets;
(g) Seller shall deliver to Buyer a certificate
substantiating its non-foreign status in accordance with Treasury Regulations
under Section 1445 of the Code, in the form of Exhibit E ("FIRPTA Certificate");
and
(h) Buyer shall prepare and Seller shall execute and deliver
to Buyer all forms reasonably necessary for Buyer to assume operations on the
Assets as agreed to by the parties.
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ARTICLE 13
POST-CLOSING OBLIGATIONS
13.1 POST-CLOSING ADJUSTMENTS.
(a) As soon as practicable after the Closing, but in no
event later than ninety (90) days after Closing, Seller shall prepare and
deliver to Buyer, in accordance with GAAP, a final settlement statement (the
"Final Settlement Statement") setting forth each adjustment or payment that was
not finally determined as of the Closing and showing the calculation of such
adjustment and the resulting final purchase price (the "Final Purchase Price").
As soon as practicable after receipt of the Final Settlement Statement, but in
no event later than on or before thirty (30) days after receipt of Seller's
proposed Final Settlement Statement, Buyer shall deliver to Seller a written
report containing any changes that Buyer proposes to make to the Final
Settlement Statement. Buyer's failure to deliver to Seller a written report
detailing proposed changes to the Final Settlement Statement by that date shall
be deemed an acceptance by Buyer of the Final Settlement Statement as submitted
by Seller. The parties shall agree with respect to the changes proposed by
Buyer, if any, no later than fifteen (15) days after receipt by Seller of
Buyer's comments to the Final Settlement Statement. The date upon which such
agreement is reached or upon which the Final Purchase Price is established for a
transaction shall be herein called the "Final Settlement Date." If (1) the Final
Purchase Price is more than the Closing Amount, Buyer shall pay Seller the
amount of such difference, or (2) the Final Purchase Price applicable to Buyer
is less than the Closing Amount, Seller shall pay to Buyer the amount of such
difference, in either event by wire transfer of immediately available funds.
Payment by Buyer or Seller, as the case may be, shall be within five (5) days of
the Final Settlement Date. The Final Settlement Statement and the Final Purchase
Price paid thereunder shall be a final settlement as between Buyer and Seller
for all adjustments to the Purchase Price.
(b) If Seller does not elect to cure or is unable to cure
such Title Defects to the reasonable satisfaction of Buyer within forty-five
(45) days after Closing, Buyer shall have the option to either accept assignment
of the Asset affected by any such Title Defect, and the Purchase Price shall be
adjusted downward by the Actual Defect Value ("TITLE DEFECT ADJUSTMENT"), as
applicable, or to exclude such Asset from this Agreement (collectively, the
"EXCLUDED ASSETS"). If Buyer elects to exclude such Assets, the Purchase Price
shall be adjusted downward by an amount equal to the Allocated Value of the
Excluded Assets, and reflected in the Final Settlement Statement, and Buyer
shall reassign such Excluded Assets.
13.2 RECORDS. Within two (2) business days following the Closing
Date, Seller shall make the Records available for pick up by Buyer. Seller may
retain copies of the Records and Seller and Seller's predecessors in title shall
have the right to review and copy the Records during business hours upon
reasonable notice to Buyer. Buyer agrees to not destroy or otherwise dispose of
the Records for a period of 6 years after the Closing without giving Seller
reasonable notice and an opportunity to copy such Records.
13.3 TRANSFER AND RECORDING FEES. Buyer shall pay all documentary,
transfer, filing, licensing, and recording fees required in connection with the
processing, filing, licensing or recording of any assignments, titles or bills
of sale.
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13.4 ADDITIONAL PROCEEDS AND INVOICES. From and after the Closing,
promptly after its receipt thereof, but only to the extent that such proceeds or
invoices shall not have been the subject of an adjustment to the Purchase Price,
(i) Seller agrees to pay promptly to Buyer any and all proceeds received by
Seller that are attributable to the post-Effective Time production of
Hydrocarbons from the Assets and to forward all unpaid invoices received by
Seller that are attributable to the production of Hydrocarbons from the Assets
on or after the Effective Time and (ii) Buyer agrees to pay promptly to Seller
any and all proceeds that are attributable to the pre-Effective Time production
of Hydrocarbons from the Assets and to forward all unpaid invoices received by
Buyer that are attributable to the production of Hydrocarbons from the Assets
prior to the Effective Time, including any of such proceeds that were held in
suspense by the purchasers of production.
13.5 FURTHER ASSURANCES. From time to time after Closing, Seller
and Buyer shall each execute, acknowledge and deliver to the other such further
instruments and take such other action as may be reasonably requested in order
more effectively to assure to the other the full beneficial use and enjoyment of
the Assets and otherwise to accomplish the purposes of the transactions
contemplated by this Agreement.
13.6 SUSPENSE FUNDS. With the exception of funds held under legal
suspense, Seller agrees to convey and Buyer agrees to receive all suspense funds
held by Seller, as of the date Buyer assumes the accounting functions relating
to the Assets, for the benefit of royalty, overriding royalty interest (and all
other such non-cost bearing interests) and working interest owners attributable
to the Assets, and Buyer shall assume and defend, indemnify and hold Seller and
its employees harmless from all costs, expenses, claims, demands and causes of
action associated with such funds, but only as to the suspense funds actually
transferred and not as to any liability resulting from Seller's failure to pay
or retain any amounts prior to the Closing Date.
ARTICLE 14
ASSUMPTION OF OBLIGATIONS
AND INDEMNIFICATION
14.1 ASSUMPTION OF LIABILITIES AND OBLIGATIONS BY BUYER. UPON
CLOSING, BUYER SHALL ASSUME AND PAY, PERFORM, FULFILL AND DISCHARGE ALL CLAIMS,
COSTS, EXPENSES, LIABILITIES AND OBLIGATIONS ACCRUING OR RELATING TO (i) THE
OWNING, DEVELOPING, EXPLORING, OPERATING OR MAINTAINING OF THE ASSETS OR THE
PRODUCING, TRANSPORTING AND MARKETING OF HYDROCARBONS FROM THE ASSETS, RELATING
TO PERIODS ON AND AFTER THE EFFECTIVE TIME, INCLUDING WITHOUT LIMITATION, THE
PAYMENT OF CAPITAL/XXX/JIB EXPENSES AND TAXES, THE OBLIGATIONS TO PLUG AND
ABANDON ALL XXXXX AND RECLAIM ALL WELL SITES, THE MAKE-UP AND BALANCING
OBLIGATIONS FOR OVERPRODUCTION OF GAS FROM THE XXXXX, ALL OBLIGATIONS ARISING
UNDER THE MATERIAL AGREEMENTS, AND (II) THE FAILURE OF ANY OF BUYER'S WARRANTIES
AND REPRESENTATIONS HEREUNDER TO BE TRUE (COLLECTIVELY, THE "ASSUMED
LIABILITIES").
14.2 BUYER'S INDEMNIFICATION OF SELLER. AFTER THE CLOSING, BUYER
SHALL ASSUME ALL RISK, LIABILITY, OBLIGATION AND LOSSES IN CONNECTION WITH, AND
SHALL DEFEND, INDEMNIFY AND SAVE AND HOLD HARMLESS SELLER, ITS OFFICERS,
DIRECTORS, SHAREHOLDERS, EMPLOYEES, REPRESENTATIVES, AGENTS, BENEFICIARIES,
PERSONAL REPRESENTATIVES, SUCCESSORS AND ASSIGNS FOREVER FROM AND AGAINST
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ALL LOSSES (OTHER THAN LOSSES ARISING FROM SELLER'S (a) RETAINED LIABILITIES,
AND (b) LIABILITIES FOR ENVIRONMENTAL MATTERS UNDER ARTICLE 5) WHICH ARISE FROM
OR IN CONNECTION WITH (i) THE ASSUMED LIABILITIES, (II) ANY MATTER FOR WHICH
BUYER HAS AGREED TO INDEMNIFY SELLER IN THIS AGREEMENT, OR (III) ANY BREACH BY
BUYER OF THIS AGREEMENT (SUBJECT TO THE LIMITATIONS OF SECTION 11.2). "LOSSES"
SHALL MEAN ANY ACTUAL LOSS, COST, EXPENSE, LIABILITY (INCLUDING, CIVIL FINES),
DAMAGE, DEMANDS, SUITS, SANCTIONS OF EVERY KIND AND CHARACTER INCLUDING
REASONABLE FEES AND EXPENSES OF ATTORNEYS, TECHNICAL EXPERTS AND EXPERT
WITNESSES REASONABLY INCIDENT TO MATTERS INDEMNIFIED AGAINST. BUYER SHALL BE
DEEMED TO HAVE RELEASED SELLER AT THE CLOSING FROM ANY LOSSES FOR WHICH BUYER
HAS AGREED TO INDEMNIFY SELLER HEREUNDER.
14.3 LIABILITIES AND OBLIGATIONS RETAINED BY SELLER. SUBJECT TO
SECTION 13.1, SELLER HEREBY RETAINS AND SHALL PAY, PERFORM, FULFILL AND
DISCHARGE ALL CLAIMS, COSTS, EXPENSES, LIABILITIES AND OBLIGATIONS ACCRUING OR
RELATING TO (i) THE OWNING, DEVELOPING, EXPLORING, OPERATING OR MAINTAINING OF
THE ASSETS OR THE PRODUCING, TRANSPORTING AND MARKETING OF HYDROCARBONS FROM THE
ASSETS, RELATING TO PERIODS BEFORE THE EFFECTIVE TIME, INCLUDING WITHOUT
LIMITATION, THE PAYMENT OF CAPITAL/XXX/JIB EXPENSES AND TAXES AND ALL
OBLIGATIONS ARISING UNDER THE MATERIAL AGREEMENTS, AND (II) THE FAILURE OF ANY
OF SELLER'S WARRANTIES AND REPRESENTATIONS HEREUNDER TO BE TRUE (COLLECTIVELY,
THE "RETAINED LIABILITIES").
14.4 SELLER'S INDEMNIFICATION OF BUYER. AFTER THE CLOSING, SELLER
SHALL DEFEND, INDEMNIFY AND SAVE AND HOLD HARMLESS BUYER, ITS PARTNERS,
EMPLOYEES, REPRESENTATIVES, AGENTS, BENEFICIARIES, PERSONAL REPRESENTATIVES,
SUCCESSORS AND ASSIGNS FOREVER FROM AND AGAINST ALL LOSSES (OTHER THAN LOSSES
ARISING FROM BUYER'S ASSUMED LIABILITIES) WHICH ARISE FROM OR IN CONNECTION WITH
(i) THE RETAINED LIABILITIES, (II) ANY MATTER FOR WHICH SELLER HAS AGREED TO
INDEMNIFY BUYER IN THIS AGREEMENT, OR (III) ANY BREACH BY SELLER OF THIS
AGREEMENT (SUBJECT TO THE LIMITATIONS OF SECTION 11.2). "LOSSES" SHALL HAVE THE
MEANING SET FORTH IN SECTION 14.2. SELLER SHALL BE DEEMED TO HAVE RELEASED BUYER
AT THE CLOSING FROM ANY LOSSES FOR WHICH SELLER HAS AGREED TO INDEMNIFY BUYER
HEREUNDER.
14.5 SELLER'S ADDITIONAL OBLIGATIONS RELATING TO THE RETAINED
MATTERS.
(a) Seller's Retention of Obligations. Notwithstanding
anything to the contrary in this Agreement, Seller shall retain all risk,
liability and obligation associated with the matters described in Exhibit G,
including but not limited to those matters encompassed in or relating to the Key
Energy Judgment, the J-West Judgment, the Xxxxx Judgment, the Quiet Title
Action, the Redeemed Properties, the Motion Properties (as those terms are
defined in Exhibit G), the Sheriff's Deed dated March 6, 2002 (attached as
Exhibit J) or any other claims raised by Key Energy, J-West or Xxxxx
(collectively "the Retained Matters"). Exhibit G sets forth Seller's description
of certain portions of the Retained Matters and its incorporation into this
Agreement is not intended nor shall it be construed as any agreement by Buyer
that Exhibit G is a complete description of all the claims or potential claims
or that Seller's assessment of the validity of the claims at issue.
(b) Seller's Indemnification of Buyer. Notwithstanding
anything to the contrary in this Agreement, Seller shall indemnify, hold
harmless and defend Buyer, its successors, and assigns (collectively, "Buyer")
from and against all claims, liability, liens, loss and damage (collectively,
"Claims") arising out of or directly or indirectly in connection with the
Retained Matters, and including without limitation, any costs, expenses and
attorneys fees arising out of or caused by such Claims whether or not resulting
or alleged to result from the negligence, including
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sole negligence, or fault of Buyer. Buyer shall also have the right, upon notice
to Seller, to assume control of its own defense or other legal representation in
connection with any Claim against Buyer and Seller shall reimburse Buyer for all
reasonable related costs, expenses and attorneys fees.
Claims, within the scope of this Section 14.5, shall
specifically include losses incurred by Buyer if the transfer of any portion of
the Assets to Buyer is invalidated after Closing, which shall specifically
include any increase in the value of the Assets between the Effective Time and
the effective date of Buyer's loss of title to the Asset(s) or any portion
thereof, as well as any capital improvements, investments or other expenditures
made by Buyer in connection with its use of the affected Asset(s).
(c) Settlement of Claims. Seller shall not enter into any
settlement or other voluntary resolution of Claims within the scope of this
Section 14.5 without the prior written approval of Buyer, which shall not be
unreasonably withheld.
(d) Escrow Account. Seller shall deposit the amount of Two
Hundred Sixty-Seven Thousand Six Hundred Eighty-Five Dollars and Seventy-Five
Cents ($267,685.75) into an escrow account (the "Escrow Account"), which shall
be maintained until resolution and termination of the Retained Matters and
governed by the Escrow Agreement attached as Exhibit K. The initial amount of
the Escrow Account is based upon: (i) Seller's representation set forth in
Section 6.16 and (ii) the assumption of obligations set forth in Section 14.7
and the financial information provided to Buyer, pursuant to Section 10.2(d), by
Wasatch Group, LLC.
The Escrow Account will be held by Xxxxxx Xxxxx and interest on the funds in the
Escrow Account will be the property of the party to whom the funds are
ultimately released. Funds in the Escrow Account shall be utilized to pay for
the following: (i) any approved settlements reached or final judgments entered
in the Retained Matters; (ii) defense or other legal costs of Buyer if Seller
fails to reimburse Buyer for costs incurred within 30 days; (iii)
indemnification of Buyer for Claims if Seller. Provided, however, that if Buyer
utilizes funds in the Escrow Account for payment of defense or other legal
costs, then Seller shall be obligated to deposit additional funds into the
account within 15 days or Seller shall be in material breach of this Agreement.
Provided, further, that if Buyer determines, in its reasonable discretion, that
the potential cost of Claims associated with the Retained Matters will exceed
$267,685.75, then Buyer shall notify Seller and Seller shall contribute such
additional funding as Buyer may required to the Escrow Account within 30 days of
such notice.
(e) No Limitations. Notwithstanding anything to the contrary
in this Agreement, Seller's obligations under this Article 14.5 shall not be
subject to any limitations as to types of damages or other limitations of
liability, including but not limited to those set forth in Articles 2, 4, 13 and
other portions of this Article 14.
(f) Release of Buyer. Seller hereby releases Buyer from and
shall indemnify Buyer for any obligation to reimburse or refund income or other
benefit derived by Buyer from any Assets affected by the Retained Matters if the
transfer of such Assets to Buyer is declared void or otherwise ineffective.
(g) Survival The obligations set forth in this Article 14.5
shall survive Closing and/or the termination of this Agreement.
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14.6 RESERVATION AS TO NON-PARTIES. Nothing herein is intended to
limit or otherwise waive any recourse Buyer (or Seller) may have against any
non-party for any obligations or liabilities which may be incurred with respect
to the Assets.
14.7 PARENT GUARANTEE; JOINT AND SEVERAL LIABILITY. By its
execution of this Agreement, Wasatch Group, LLC, the parent corporation of both
Wasatch Oil & Gas, LLC, and Wasatch Gas Gathering, LLC, fully guarantees the
performance of both Wasatch Oil & Gas, LLC, and Wasatch Gas Gathering, LLC,
wholly-owned subsidiaries of Wasatch Group, LLC, pursuant to the terms and
conditions of this Agreement.
ARTICLE 15
MISCELLANEOUS
15.1 EXHIBITS. The Exhibits referred to in this Agreement are
hereby incorporated in this Agreement by reference and constitute a part of this
Agreement.
15.2 EXPENSES. Except as otherwise specifically provided, all fees,
costs and expenses incurred by Buyer or Seller in negotiating this Agreement or
in consummating the transactions contemplated by this Agreement shall be paid by
the party incurring the same, including, without limitation, legal and
accounting fees, costs and expenses.
15.3 NOTICES. Except as provided in Section 8.1(d), all notices and
communications required or permitted under this Agreement shall be in writing
and addressed as set forth below. Any communication or delivery hereunder shall
be deemed to have been duly made and the receiving party charged with notice (i)
if personally delivered, when received, (ii) if sent by certified mail, return
receipt requested, three (3) days after sending, or (iii) if sent by overnight
courier, one day after sending. All notices shall be addressed as follows:
IF TO SELLER:
Wasatch Oil & Gas
X.X. Xxx 000
Xxxxxxxxxx, Xxxx 00000-0000
Attn: Xxxx X. Xxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
IF TO BUYER:
Xxxx Xxxxxxx Corporation
0000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Hunt Walker
Telephone: (000) 000-0000
Fax: (000) 000-0000
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Any party may, by written notice so delivered to the other parties, change the
address or individual to which delivery shall thereafter be made.
15.4 AMENDMENTS. Except for waivers specifically provided for in
this Agreement, this Agreement may not be amended nor any rights hereunder
waived except by an instrument in writing signed by the party to be charged with
such amendment or waiver and delivered by such party to the party claiming the
benefit of such amendment or waiver.
15.5 ASSIGNMENT. Buyer shall not assign all or any portion of its
respective rights or delegate all or any portion of its respective duties
hereunder unless with Seller's advance written consent and except if Buyer
continues to remain liable for the performance of its obligations hereunder;
provided that Buyer may not assign the benefits of Seller's indemnity given
pursuant to Article 5 and any permitted assignment shall not include such
benefits. No such assignment or obligation shall increase the burden on Seller
or impose any duty on Seller to communicate with or report to any transferee,
and Seller may continue to look to Buyer for all purposes under this Agreement.
15.6 ANNOUNCEMENTS. Seller and Buyer shall consult with each other
with regard to all press releases and other announcements issued after the date
of this Agreement and prior to the Closing Date concerning this Agreement or the
transactions contemplated hereby and, except as may be required by applicable
laws or the applicable rules and regulations of any governmental agency or stock
exchange, neither Buyer nor Seller shall issue any such press release or other
publicity without the prior written consent of the other party, which consent
shall not be unreasonably withheld.
15.7 HEADINGS. The headings of the Articles and Sections of this
Agreement are for guidance and convenience of reference only and shall not limit
or otherwise affect any of the terms or provisions of this Agreement.
15.8 COUNTERPARTS. This Agreement may be executed by Buyer and
Seller in any number of counterparts, each of which shall be deemed an original
instrument, but all of which together shall constitute but one and the same
instrument. Execution can be evidenced by fax signatures with original signature
pages to follow in due course.
15.9 REFERENCES. References made in this Agreement, including use
of a pronoun, shall be deemed to include where applicable, masculine, feminine,
singular or plural, individuals, partnerships or corporations. As used in this
Agreement, "person" shall mean any natural person, corporation, partnership,
court, agency, government, board, commission, trust, estate or other entity or
authority.
15.10 GOVERNING LAW. This Agreement and the transactions
contemplated hereby and any litigation, arbitration or dispute resolution
conducted pursuant hereto shall be construed in accordance with, and governed
by, the law of the State of Utah.
15.11 ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding among the parties, their respective partners, shareholders,
officers, directors and employees with respect to the subject matter hereof,
superseding all negotiations, prior discussions and prior agreements and
understandings relating to such subject matter.
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15.12 BINDING EFFECT. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto, and their respective
successors and assigns.
15.13 SURVIVAL. The representations and warranties of the parties
contained in this Agreement shall survive the execution and Closing of this
Agreement for a period of one (1) year following the Closing Date. The
representations and warranties shall terminate after such date and neither Buyer
nor Seller shall have any further liability or obligation except to the extent
notice of breach thereof shall have been given prior to any such termination.
Provided however, that the foregoing shall not apply to Seller's representations
and warranties as they relate to the Retained Matters (as defined in Section
14.5), including but not limited to the representations and warranties set forth
in Section 6.2 and 6.6.
15.14 CLOSING CONDITIONS. If the Closing occurs, all conditions of
Closing shall be deemed to have been satisfied or waived for purposes of
Closing.
15.15 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended only
to benefit the parties hereto and their respective permitted successors and
assigns.
15.16 LIKE-KIND EXCHANGE. Notwithstanding anything contained in this
Agreement to the contrary, Seller and Buyer hereby acknowledge and agree that if
either party desires to complete the purchase of the Subject Property to effect
a qualified like-kind exchange for other property ("Exchange Property") in a
transaction that qualifies as a deferred exchange in accordance with Section
1031 of the Internal Revenue Code and regulations thereunder then each party
agrees to reasonably cooperate with the other in effecting a qualified like-kind
exchange, including the execution of reasonable documents deemed necessary to
qualify the transaction as a deferred exchange; provided, however, it is
specifically agreed that the non-exchanging party shall be an accommodating
party only and shall not incur any liability or expense as a result of such
qualified deferred exchange, and that it shall be the sole responsibility of
exchanging party to locate and identify the exchange property.
15.17 JOINT AND SEVERAL LIABILITY. In the event Buyer asserts a
claim of indemnity or breach of representations or the terms and conditions of
this Agreement and liability is found with respect to such claim, Wasatch Oil &
Gas, LLC and Wasatch Gas Gathering, LLC shall be jointly and severally liable to
Buyer.
15.18 INFORMATION PROVIDED BY SELLER. THE INFORMATION FURNISHED BY
SELLER TO BUYER DOES NOT PURPORT TO CONTAIN ALL OF THE INFORMATION NECESSARY TO
PROPERLY EVALUATE THIS TRANSACTION. BUYER ACKNOWLEDGES AND AGREES THAT IT WILL
CONDUCT ITS OWN INDEPENDENT ANALYSIS OF THE DATA AVAILABLE FROM PUBLIC RECORDS
AND SOURCES. ANY INFORMATION PROVIDED BY SELLER TO BUYER IS PROVIDED AS A
CONVENIENCE ONLY AND ANY RELIANCE OF BUYER ON SUCH INFORMATION SHALL BE AT
BUYER'S SOLE RISK. IN THIS CONNECTION, BUYER REPRESENTS THAT IT IS EXPERIENCED
AND KNOWLEDGEABLE IN THE OIL AND GAS INDUSTRY AND ABLE TO INDEPENDENTLY EVALUATE
THE RISKS AND BENEFITS OF ENGAGING IN THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT. BUYER ACKNOWLEDGES AND UNDERSTANDS THAT THE ACQUISITION AND OPERATION
OF OIL AND GAS PROPERTIES INVOLVES SUBSTANTIAL RISK, INCLUDING, WITHOUT
LIMITATION, THE LOSS OF RESERVES, REDUCED PRODUCTION RATES, LOSS OF REVENUE AND
REDUCED PRODUCT PRICE. BUYER SHALL BEAR THE FULL COST OF ANY AND ALL COSTS
ASSOCIATED WITH THE APPRAISAL, EVALUATION, EXAMINATION OR ASSIGNMENTS OF THE
ASSETS.
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15.19 DISCLAIMER OF REPRESENTATIONS AND WARRANTIES. EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT, THE PARTIES HERETO EACH DISCLAIM ALL
LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, STATEMENTS OR
COMMUNICATIONS (ORALLY OR IN WRITING) TO THE OTHER PARTY (INCLUDING, BUT NOT
LIMITED TO, ANY INFORMATION CONTAINED IN ANY OPINION, INFORMATION OR ADVICE THAT
MAY HAVE BEEN PROVIDED TO ANY SUCH PARTY BY ANY PARTNER, OFFICER, STOCKHOLDER,
DIRECTOR, EMPLOYEE, AGENT, CONSULTANT, REPRESENTATIVE OR CONTRACTOR OF SUCH
DISCLAIMING PARTY OR ITS AFFILIATES OR ANY ENGINEER OR ENGINEERING FIRM, OR
OTHER AGENT, CONSULTANT OR REPRESENTATIVE) WHEREVER AND HOWEVER MADE, INCLUDING,
BUT NOT LIMITED TO, THOSE MADE IN ANY DATA ROOM AND ANY SUPPLEMENTS OR
AMENDMENTS THERETO OR DURING ANY NEGOTIATIONS. WITHOUT LIMITING THE GENERALITY
OF THE FOREGOING, SELLER MAKES NO REPRESENTATION OR WARRANTY AS TO (A) THE
AMOUNT, VALUE, QUALITY, QUANTITY, PRODUCTION OR DELIVERABILITY OF HYDROCARBONS
OR RESERVES ATTRIBUTABLE TO THE ASSETS, (B) THE PRESENT OR FUTURE VALUE OF THE
ANTICIPATED INCOME, COSTS OR PROFITS DERIVED FROM THE ASSETS OR (C) ANY
GEOLOGICAL, ENGINEERING OR OTHER INTERPRETATIONS OR ECONOMIC VALUATIONS. THE
ASSETS ARE SOLD WITHOUT ANY EXPRESS OR IMPLIED WARRANTY OF TITLE EXCEPT AS TO
PERSONS CLAIMING BY, THROUGH OR UNDER SELLER. EXCEPT AS EXPRESSLY PROVIDED IN
THIS AGREEMENT, ALL OF THE ASSETS AND ANY TANGIBLE PERSONAL PROPERTY INCLUDED IN
THE ASSETS ARE SOLD "AS IS, WHERE IS," WITH ALL FAULTS AND SELLER MAKES NO, AND
DISCLAIMS ANY, REPRESENTATION OR WARRANTY, WHETHER EXPRESS OR IMPLIED, AND
WHETHER BY COMMON LAW, STATUTE, OR OTHERWISE, AS TO (I) MERCHANTABILITY, (II)
FITNESS FOR ANY PARTICULAR PURPOSE, (III) CONFORMITY TO MODELS OR SAMPLES OF
MATERIALS OR (IV) CONDITION. THE PARTIES AGREE THAT THE PRECEDING DISCLAIMERS OF
WARRANTY ARE "CONSPICUOUS" DISCLAIMERS FOR PURPOSES OF ANY APPLICABLE LAW, RULE
OR ORDER.
THE BUYER HAS CONDUCTED, OR PRIOR TO THE CLOSING WILL CONDUCT, SUCH
INVESTIGATIONS WITH RESPECT TO THE ASSETS AS THE BUYER DEEMS ADVISABLE, AND HAS
SATISFIED, OR PRIOR TO THE CLOSING WILL SATISFY ITSELF WITH RESPECT TO THE
ASSETS, ANY SELLER PERSONAL PROPERTY AND THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, THE BUYER SHALL AND
HEREBY RELEASES THE SELLER FROM, AND WAIVES ANY CLAIM AGAINST THE SELLER FOR,
ANY LIABILITY OR OBLIGATION REGARDING OR FOR ANY AND ALL ENVIRONMENTAL
CONDITIONS OR HAZARDOUS MATERIALS ON OR ABOUT THE SUBJECT PROPERTY. FURTHER,
NOTWITHSTANDING ANY OTHER TERM OR CONDITION OF THIS AGREEMENT, THE BUYER SHALL
AND HEREBY RELEASES THE SELLER FROM, AND WAIVES ANY CLAIM AGAINST THE SELLER
FOR, ANY LIABILITY OR OBLIGATION REGARDING OR FOR ANY AND ALL ENVIRONMENTAL
CONDITION OR HAZARDOUS MATERIAL ON OR ABOUT THE SUBJECT PROPERTY.
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FOR THE PURPOSES OF THIS AGREEMENT, "ENVIRONMENTAL CONDITION" MEANS (I)
CONTAMINATION OR POLLUTION OF SOIL, AIR, OR SURFACE OR GROUNDWATERS, (II) THE
DISPOSAL, PLACEMENT, EXISTENCE, PRESENCE OR RELEASE OR THREAT OF RELEASE OF A
HAZARDOUS MATERIAL AND THE AFFECT THEREOF, (III) NONCOMPLIANCE WITH OR VIOLATION
OF APPLICABLE LAW INCLUDING, WITHOUT LIMITATION, ANY LACK OR REQUIRED
GOVERNMENTAL PERMITS OR APPROVALS, "HAZARDOUS MATERIAL" MEANS (I) ANY SUBSTANCE,
THE PRESENCE OF WHICH REQUIRES INVESTIGATION, REMEDIATION, OR OTHER RESPONSE OR
CORRECTIVE ACTION UNDER APPLICABLE LAW, OR (II) ANY SUBSTANCE WHICH IS DEFINED
AS A HAZARDOUS WASTE, HAZARDOUS SUBSTANCE, EXTREMELY HAZARDOUS SUBSTANCE,
HAZARDOUS MATERIAL, HAZARDOUS MATTER, HAZARDOUS CHEMICAL, TOXIC SUBSTANCE, TOXIC
CHEMICAL, POLLUTANT OR CONTAMINANT, OR OTHER SIMILAR TERM, IN OR PURSUANT TO
APPLICABLE LAW, OR (III) ANY ASBESTOS OR ASBESTOS-CONTAINING MATERIAL, PCBS OR
EQUIPMENT OR ARTICLES CONTAINING PCBS, PETROLEUM, DIESEL FUEL, GASOLINE OR OTHER
PETROLEUM HYDROCARBONS, AND "APPLICABLE LAW" MEANS ALL EXISTING FEDERAL, STATE
OR LOCAL LAWS, COMMON LAW, STATUTES OR REGULATIONS, INCLUDING, WITHOUT
LIMITATION, THOSE RELATING TO THE PROTECTION OF HUMAN HEALTH AND SAFETY,
PROTECTION OF THE ENVIRONMENT, OR PREVENTION OF POLLUTION.
15.20 DISPUTE RESOLUTION. If the parties are unable to resolve a
dispute as to the any matter arising under this Agreement, then, upon 15 days
notice of either party, the parties shall submit the dispute to binding
arbitration in Sale Lake County, Utah, to be conducted by an arbitrator mutually
agreeable by Seller and Buyer in accordance with the following procedures. If
Seller and Buyer cannot mutually agree on the selection of an arbitrator after
30 days, the arbitrator shall be selected by the American Arbitration
Association. No later than 30 days after initiating the arbitration procedure,
the arbitrator shall conduct a hearing, at which time the parties shall present
such evidence and witnesses as they may choose, with or without counsel.
Adherence to formal rules of evidence shall not be required, but the arbitrator
shall consider any evidence and testimony that it determines to be relevant, in
accordance with procedures that it determines to be appropriate. The arbitrator
shall render its decision specifically addressing and resolving the matter in
dispute within 15 days after the hearing. A decision may be filed in any court
of competent jurisdiction and may be enforced by any party as a final judgment
of such court.
15.21 LIMITATION OF LIABILITY. In no event shall either party be
liable to the other for special, indirect, incidental or consequential damages,
whether arising in contract, tort or otherwise (including negligence, warranty
and strict liability); provided, however, that this limitation shall not apply
to the obligations of the parties under Section 14.
Executed on the dates set forth in the acknowledgments below
but effective as of the Effective Time.
SELLER: BUYER:
WASATCH OIL & GAS, LLC XXXX XXXXXXX CORPORATION
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By /s/ Xxxx X. Xxxxxx By /s/ Xxxxxxxx X. Xxxxxxx
------------------ -----------------------
Xxxx X. Xxxxxx Name: Xxxxxxxx X. Xxxxxxx
President Title: President
WASATCH GAS GATHERING, LLC
By /s/ Xxxx X. Xxxxxx
------------------
Xxxx X. Xxxxxx
President
WASATCH GROUP, LLC
By /s/ Xxxx X. Xxxxxx
------------------
Xxxx X. Xxxxxx
President
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