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EXHIBIT 2.1
ASSET PURCHASE AND SALE AGREEMENT
This Asset Purchase and Sale Agreement ("Agreement") is entered into
as of April 9 , 1998, by and between UNION PACIFIC RESOURCES COMPANY, a
Delaware corporation ( "Seller"), and UNITED STATES EXPLORATION, INC., a
Colorado corporation ("Buyer"). Buyer and Seller are referred to individually
herein as a "Party" and collectively herein as the "Parties."
WITNESSETH:
WHEREAS, Seller desires to sell to Buyer certain producing,
nonproducing and undeveloped oil and gas properties and other related assets
and Buyer desires to purchase such properties and assets upon and subject to
the terms and conditions hereinafter provided.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
Capitalized terms used in this Agreement shall have the meanings
defined either in this Article 1 or elsewhere in this Agreement.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934.
"Agreed Rate" means a per annum interest rate equal to the lesser of
(I) the Prime Rate of interest as quoted daily (or at such other interval of
one week or less) in The Wall Street Journal or (ii) the maximum amount of
interest allowed by law. If The Wall Street Journal ceases to quote the Prime
Rate of interest at least weekly, the referenced rate of interest in (I) above
shall be the rate of interest from time to time announced as its prime
commercial lending rate by the bank which at the most recent point in time held
all or the largest portion of Buyer's bank debt.
"Arbitrator" means the individual selected pursuant to Article
6.02(I).
"Assets" means Seller's right, title and interest in and to the
following (except to the extent constituting Excluded Assets):
(i) All of the Xxxxx listed in Exhibit "A" hereto;
ASSET PURCHASE AND SALE AGREEMENT PAGE 1
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(ii) All of the Leases;
(iii) All of the Upside Locations listed in Exhibit "B"
hereto;
(iv) All of the Units;
(v) All of the Equipment;
(vi) All of the licenses, permits, contracts, agreements
and other instruments owned by Seller (other than
bonds posted by Seller) which concern and relate to
any of the Xxxxx, Leases, Units, Lands, Upside
Locations and/or Equipment, INSOFAR AND ONLY INSOFAR
as same concern or relate to the Xxxxx, Leases,
Units, Lands, Upside Locations and/or Equipment, or
the operation thereof, including, without limitation,
oil, gas and condensate purchase and sale contracts;
permits; rights-of-way; easements; licenses;
servitudes; estates; surface leases; farmin and
farmout agreements; division orders and transfer
orders; bottomhole agreements; dry hole agree- ments;
area-of-mutual-interest agreements; salt water
disposal agreements; acreage contribution agreements;
operating agreements; balancing agreements; unit
agreements; pooling agreements; pooling orders;
communitization agreements; processing, gathering,
compression and transportation agreements; facilities
or equipment leases relating thereto or used or held
for use in connection with the ownership or operation
thereof or with the production, treatment, sale or
disposal of Hydrocarbons; and all other contracts and
agreements related to the Xxxxx, Leases, Units,
Lands, Upside Locations and/or Equipment;
(vii) All Records and, to the extent transferable, all
other contract rights, intangible rights (excluding
Seller's trademarks and service marks), inchoate
rights, choses in action, rights under warranties
made by prior owners, manufacturers, vendors or other
third parties, and rights accruing under applicable
statutes of limitation or prescription, relating to
the Assets; and
(viii) All payments, and all rights to receive payments,
with respect to the ownership of the production of
Hydrocarbons from or the conduct of operations on the
Assets and the interest to be conveyed to Buyer
hereunder accruing after the Effective Date.
"Assumed Liabilities" means any Losses and any Environmental
Liabilities resulting from, arising out of or attributable to the ownership or
operation of the Assets, whether before or after the Effective Date (including,
without limitation, Offsite Environmental Liabilities that arise from, arise
out of, or are attributable to Materials of Environmental Concern that have
been transported for disposal, reclamation or recycling from the Assets) but,
in each case, only to the extent such Losses and Environmental Liabilities
relate to or are attributable to the Assets; provided, however, that Assumed
Liabilities shall not include any Losses or Environmental Liabilities (a) which
Seller has agreed to assume or pay pursuant to any
ASSET PURCHASE AND SALE AGREEMENT PAGE 2
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express terms of this Agreement or (b) as to which Buyer is entitled to
indemnification from Seller pursuant to any express terms of this Agreement.
"Available Deductible Amount" has the meaning set forth in Article
11.03.
"Buyer" has the meaning set forth in the preface to this Agreement.
"Buyer's Projected Costs" means the costs and expenses associated with
the operation and abandonment of a Well, assuming that the Well continues to
produce Hydrocarbons for the time period necessary for Buyer to realize the
value allocated to such Well in Exhibit "C" hereto based upon the costs,
pricing and production assumptions used by Buyer in calculating the amounts set
forth in Exhibit "C".
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act, as amended.
"Closing" has the meaning set forth in Article 3.03.
"Closing Date" has the meaning set forth in Article 3.03.
"Closing Payment" means the payment to be made by Buyer to Seller at
the Closing pursuant to Article 3.04, which shall be in an amount equal to the
Preliminary Purchase Price, as may be adjusted pursuant to this Agreement and
reduced by the Xxxxxxx Money Deposit, including any interest earned thereon.
"Code" means the Internal Revenue Code of 1986, as amended.
"Conveyance Documents" means that certain Assignment, Xxxx of Sale and
Conveyance in the form attached hereto as Exhibit "D-1" and oil and gas leases,
in the form attached as Exhibit "D-2", together with those other forms of
assignments, bills of sale, deeds and other instruments as Buyer may
reasonably request to convey title to the Assets from Seller to Buyer.
"Cure Period" means that period of time from 5:00 p.m. Mountain Time,
on the date the last Title Defect Notice was given until 5:00 p.m. Mountain
Time, on the ninetieth (90th) day following the date such Title Defect Notice
was given.
"Defect Amount" means the amount attributable to each Title Defect.
"Delivered NRI" means, for any Well or Upside Location, the NRI shown
for such Well or Upside Location in Exhibit "A" or Exhibit "B", as
applicable.
"Delivered WI" means, for any Well or Upside Location, the WI shown
for such Well or Upside Location in Exhibit "A" or Exhibit "B", as
applicable.
"Xxxxxxx Money Deposit" has the meaning set forth in Article 3.02.
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"Effective Date" means 7:00 a.m. Mountain Time, January 1, 1998.
"Environmental Laws" means all federal, state, and local laws,
regulations, ordinances, rules, orders and permits existing and in effect on
the Closing Date relating to the control of any pollutant or protection of the
environment, including, without limitation, laws, regulations, ordinances,
rules, orders, and permits relating to the emission, discharge, disposal,
treatment, recycling, reclamation, permitting, manufacture, processing,
distribution, generation, storage, transportation, release or threatened
release of, or exposure of persons or property to, Materials of Environment
Concern.
"Environmental Liabilities" means any and all costs (including
remedial, removal, response, abatement, cleanup, investigative, and/or
monitoring costs), damages, settlements, expenses (including charges and
assessments, and expenses and costs of investigating, preparing or defending
any action or proceeding), liens, penalties, fines, taxes, pre- judgment and
post-judgment interest, court costs and attorneys' fees incurred or imposed (i)
pursuant to any agreement, order, notice of responsibility, directive
(including requirements embodied in Environmental Laws), injunction, judgment
or similar documents (including settlements) attributable to or arising out of
or under Environmental Laws, (ii) pursuant to any claim by a government
authority or other entity or person for death or personal injury, property
damage, damage to natural resources, remediation or response costs arising out
of or associated with any Environmental Matter, or (iii) pursuant to
requirements as of the Closing Date embodied in Environmental Laws.
Environmental Liabilities do not include (i) liabilities imposed under statutes
enacted after the Closing Date (including the elimination of the exclusion of
petroleum from the definition of "hazardous substance" under CERCLA and/or the
elimination of the exclusion of oil and gas exploration, development and
production wastes from the definition of "hazardous wastes" under RCRA) or (ii)
liabilities imposed under regulations promulgated or amended after the Closing
Date which implement new requirements.
"Environmental Matters" means matters resulting from or attributable
to actual, threatened or alleged emissions, discharges or releases of Materials
of Environmental Concern into ambient air, surface water, groundwater, or land,
or otherwise resulting from or attributable to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern.
"Equipment" means all the tangible personal property, tools,
machinery, materials, pipelines, gathering systems, equipment, fixtures and
improvements, which are incident or attributable to the Xxxxx, Leases, Lands
and/or Units, or with the production, treatment, sale or disposal of
Hydrocarbons or water produced therefrom or attributable thereto, on the
Effective Date, plus or minus any Equipment acquired or disposed of pursuant to
Article 4.01(g)(ii).
"Excluded Assets" has the meaning set forth in Article 2.01(b).
"Exploration Agreement" means that certain Exploration Agreement, by
and between Seller and Buyer.
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"Final Settlement Date" has the meaning set forth in Article 14(h).
"Final Settlement Statement" has the meaning set forth in Article
14(h).
"Good and Defensible Title" means, with respect to ownership of Leases
attributable to a Well or Unit, record title that, except for Permitted
Encumbrances:
(i) entitles Seller to receive, throughout the life of a Well, at
least the NRI for such Well shown in Exhibit "A", except for
decreases in connection with operations conducted by Buyer,
or with Buyer's consent or non-consent, after Closing and
decreases resulting from those Xxxxx where Seller is obligated
to allow others to make up past underproduction (to the extent
such underproduction is taken into account under Article 14(f)
and except for horizontal/vertical Xxxx clauses and
continuous development clauses in the Leases or related
agreements;
(ii) obligates Seller to bear, throughout the life of a Well (and
the plugging, abandonment and salvage thereof), no greater WI
for such Well than the WI shown therefor in Exhibit "A",
except increases in such WI that result in at least a
proportionate increase in Seller's NRI for such Well
(including, without limitation, increases resulting from
co-owner non-consents) and increases that result from
contribution requirements with respect to defaulting
co-owners; and
(iii) is free and clear of all liens, security interests, collateral
assignments, encumbrances, irregularities and defects.
"Good and Defensible Title" means, with respect to any other Asset,
record title that:
(i) is free from reasonable doubt as to all matters of
law and fact such that a reasonably prudent person,
engaged in the ownership, development and operation
of oil and gas properties or assets, with knowledge
of all the facts and appreciation of their legal
significance, would be willing to accept title to
such property without a reduction in the portion of
the Purchase Price allocated to such property in
Exhibit "C"; and
(ii) is free and clear of all liens, security interests,
collateral assignments, encumbrances, clouds on
title, irregularities and defects.
"Hydrocarbons" means crude oil, natural gas, casinghead gas, coalbed
methane, condensate, helium, xxxxxxx, X0, X00, natural gas liquids and other
gaseous and liquid hydrocarbons or any combination thereof.
"Indemnified Party" has the meaning set forth in Article 11.05.
"Indemnifying Party" has the meaning set forth in Article 11.05.
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"Knowledge" means, with respect to a Party hereto, the actual
knowledge of any officer or manager of such Party in charge of a discrete
business area or function having responsibility for the referenced matter after
due inquiry by such officer or manager of the person or persons in charge of
such matter.
"Lands" means the lands covered by the Leases.
"Leases" means the oil and gas leases, oil, gas, and mineral leases
and fee mineral interests shown in Exhibit "A-1" and Exhibit "A-2".
"Litigation" has the meaning set forth in Article 4.01(e).
"Loss" or "Losses" means all damages, including, without limitation,
actual, punitive, exemplary and consequential damages, payments, penalties,
fines, assessments, costs, amounts paid in respect of judgements or
settlements, obligations, taxes, reductions in the value of Assets,
liabilities, expenses and fees incurred, including court costs and attorneys'
fees and expenses and costs of investigating, preparing or defending any claim,
action or proceeding.
"Materials of Environmental Concern" means any chemical pollutants,
contaminants, waste, petroleum waste, used oil, toxic substances, hazardous
substances and any other substances that are regulated by any governmental
entity under any Environmental Law.
"Nonrevenue Defect" means a Title Defect which does not result in a
decrease in Seller's NRI for a Well below the NRI for such Well shown in
Exhibit "A".
"NRI" means a fractional or percentage interest in and to all
Hydrocarbons produced from or allocated to a Well after deduction of all
lessor's royalties, overriding royalties, and other burdens and payments out of
production that burden such fractional or percentage interest in such Well.
"Offsite Environmental Liability" means an Environmental Liability
arising from or attributable to Materials of Environmental Concern that have
been transported for disposal, storage treatment, reclamation or recycling
from the Assets to properties owned by third parties.
"Party" or "Parties" have the meanings set forth in the preface to this
Agreement.
"Permitted Encumbrances" means, with respect to the Assets, the
following:
(i) liens for taxes not yet due or, if due, being challenged in
good faith by appropriate proceedings;
(ii) materialmen's, mechanics' and other similar liens or charges
arising in the ordinary course of business for obligations
that are not delinquent and that
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will be paid or discharged in the ordinary course of business
or, if delinquent, that are being contested in good faith in
the ordinary course of business;
(iii) easements, rights-of-way, servitudes, permits, surface leases,
and other rights granted to or reserved for third parties in
respect of surface operations that do not materially interfere
with operation of the portion of the Assets burdened thereby;
(iv) rights reserved to or vested in any governmental authority to
control or regulate any of the Xxxxx, Leases or Units and all
applicable laws, rules, regulations and orders of such
authorities so long as the same
(a) do not decrease Seller's NRI below the Delivered NRI
for the Well or Upside Location, or increase Seller's
WI above the Delivered WI for the Well or Upside
Location, without at least a proportionate increase
in Seller's NRI, or
(b) do not create any liens in respect of such Xxxxx or
Units.
(v) any Title Defects that Buyer may have expressly waived in
writing or which are deemed to have been waived under Article
6.02(b);
(vi) liens arising under operating agreements, unitization and
pooling agreements, orders and statutes and production sales
contracts securing amounts not yet due or, if due, being
contested in good faith in the ordinary course of business;
(vii) the terms and conditions of all contracts and agreements
relating to the Xxxxx, Leases and Units, including, without
limitation, exploration agreements, gas sales contracts,
processing agreements, farmins, farmouts, operating
agreements, and right-of-way agreements, to the extent such
terms and conditions
(a) do not decrease Seller's NRI below the Delivered NRI
shown for a Well or Upside Location, or increase
Seller's WI above the WI shown for such Well or
Upside Location, without at least a proportionate
increase in Seller's NRI:
(b) are normal and customary in the oil and gas industry,
and
(c) would not conflict with any other portion of this
definition of Permitted Encumbrances;
(viii) royalties, overriding royalties, net profits interests,
production payments, reversionary interests, and similar
interests that do not decrease Seller's NRI below the NRI
shown for a Well in Exhibit "A", or increase Seller's WI
above the WI shown for such Well in Exhibit "A", without at
least a proportionate increase in Seller's NRI;
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(ix) rights of reassignment requiring notice to the holders of the
rights prior to surrendering or releasing a leasehold
interest;
(x) calls on production exercisable only at prices substantially
equivalent to then-current fair market value;
(xi) Transfer Requirements and Preference Rights other than any
such Transfer Requirements or Preference Rights which were
applicable to a previous transaction involving the transfer of
all or any portion of the Assets but were not complied with at
the time of the consummation of such transaction; and
(xii) those matters listed in Schedule 4.01.
"Phase I Environmental Audit" means an assessment of Seller's
compliance with Environmental Laws relative to the Assets consisting of
examination of Seller's files and public documents, interviews of personnel of
Seller and of other appropriate persons and visual inspection of the Assets.
The foregoing definition shall not include or authorize any soil borings or
laboratory analysis of soil or groundwater samples on or from the Assets.
"Preference Rights" means all rights or agreements that enable or may
enable any third party to purchase or acquire any Asset or any interest therein
or portion thereof as a result of or in connection with (i) the transactions
contemplated by this Agreement or (ii) the execution or delivery of this
Agreement or the consummation or performance of the terms and conditions
contemplated by this Agreement.
"Preliminary Purchase Price" has the meaning set forth in Article
3.01.
"Purchase Price" means the Preliminary Purchase Price, as may be
adjusted pursuant to Articles 6, 7, 14, 17, and 18 hereof.
"RCRA" means the Resource Conservation and Recovery Act, as amended.
"Records" means (except to the extent constituting Excluded Assets)
all originals, copies, computer tapes and discs, files, records, information or
data relating to the Assets in the possession of Seller, including, without
limitation, title records (including abstracts of title, title opinions,
certificates of title and title curative documents), accounting records and
files, contracts, correspondence, production records, electric logs, core data,
pressure data, decline curves, graphical production curves, drilling reports,
well completion reports, drill stem test charts and reports, engineering
reports, regulatory reports, and all related materials, INSOFAR AND ONLY
INSOFAR as the foregoing items constitute materials that may be lawfully
conveyed to Buyer (i.e. the materials are not subject to a proprietary
agreement precluding their transfer to Buyer) or do not constitute records
subject to legal privilege.
"Response Notice" has the meaning set forth in Article 6.02(c).
"Seller" has the meaning set forth in the preface to this Agreement.
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"Survival Period" has the meaning set forth in Article 11.01.
"Third Party Claim" has the meaning set forth in Article 11.05.
"Title Defect" means any lien, security interest, collateral
assignment, charge, obligation, encumbrance, irregularity or imperfection of
title or other condition that causes Seller's title to one or more of the
Assets (or any portions thereof) to be less than Good and Defensible Title.
Notwithstanding the foregoing, no Title Defect will exist as to any Asset
unless the individual amount of such defect exceeds $10,000. If a Title Defect
exists pursuant to the preceding sentence, the Defect Amount for such Title
Defect shall include the entirety of such Defect Amount, whether below or above
such threshold amount.
"Title Defect Adjustment" means an amount of money equal to the sum of
the Defect Amounts for all Title Defects asserted by Buyer under this Agreement
as finally determined, whether by agreement or arbitration award, subject to
the credit and deductible provided in Article 6.02(k).
"Title Defect Notice" has the meaning set forth in Article 6.02(b).
"Title Examination Period" has the meaning set forth in Article
6.02(b).
"Transition Agreement" shall have the meaning given that term in
Article 3.04.
"Transfer Requirements" means all consents, approvals, authorizations
or permits of, or filings with or notifications to, any third party which must
be obtained, made or complied with for or in connection with the transactions
contemplated by this Agreement in order (a) for such transactions to be
effective, (b) to prevent any termination, cancellation, default, acceleration
or change in terms (or any right thereof from arising) under any terms,
conditions or provisions of any Asset (or of any agreement, instrument or
obligation relating to or burdening any Asset or any interest therein or
portion thereof) as a result of such transactions, or (c) to prevent the
creation or imposition of any lien, charge, penalty, restriction, security
interest or encumbrance on or with respect to any Asset or any interest therein
or portion thereof (or any right thereof from arising) as a result of such
transactions.
"Units" means all unitization, communitization, pooling agreements,
working interest units created by operating agreements, and orders covering the
Lands and/or lands pooled or unitized therewith or any portion thereof, and the
units and pooled or communitized areas created thereby.
"Upside Locations" means the tracts shown on Exhibit "B" attached
hereto.
"Xxxxx" means the xxxxx for the production of Hydrocarbons or disposal
xxxxx which are listed in Exhibit "A" .
"WI" means a fraction or percentage of the costs and expenses
associated with the maintenance, exploration, development, operation and
abandonment of a Well
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ARTICLE 2
SALE AND PURCHASE
2.01 SALE AND PURCHASE.
(a) INCLUDED ASSETS. Subject to the terms and conditions of this
Agreement and in consideration of Buyer's payment to Seller of
the Purchase Price as herein provided, Buyer agrees to
purchase from Seller, and Seller agrees to sell and convey to
Buyer, the Assets.
(b) EXCLUDED ASSETS. Notwithstanding anything herein provided to
the contrary, the term "Assets" as used in this Agreement
shall not include, and there is excepted, reserved and
excluded from the sale contemplated hereby (i) all cash,
deposits, checks, funds, accounts receivable, notes
receivable, or similar items attributable to the Assets with
respect to any period of time prior to the Effective Date,
except for those funds in suspense accounts to be delivered to
Buyer pursuant to Article 13.01(b) hereof; (ii) all
Hydrocarbon production from or attributable to the Assets with
respect to all periods prior to the Effective Date and all
proceeds attributable thereto, and all Hydrocarbons that, at
the Effective Date, are owned by Seller and are above pipeline
connection and in storage or otherwise held in inventory and
all proceeds attributable thereto; (iii) all fee mineral
interests and fee royalty interests owned by Seller, provided,
however, if all or any portion of Seller's NRI in a Well
listed in Exhibit "A" or an Upside Location listed in Exhibit
"B" is attributable to a fee mineral interest or fee royalty
interest, Seller shall convey to Buyer at the Closing an oil,
gas and mineral lease, in the form and containing the terms
and conditions set forth in Exhibit "D-2" hereto, covering
said fee mineral interest or fee royalty interest for such
Well shown in Exhibit "A"; (iv) Assets conveyed to third
parties pursuant to Preference Rights as provided in Article
18.01 or retained by Seller because of the failure to obtain,
comply with or otherwise satisfy a Transfer Requirement as
provided in Article 18.02; and (v) all geophysical, seismic
and other technical data and interpretations specifically
related to the Assets, provided, however, that Seller agrees
to provide Buyer with a seismic license of any such data that
Seller is lawfully permitted to license at Closing. Buyer
agrees to pay Seller's costs to reproduce the data covered
thereby.
(c) WELD COUNTY PARTNERSHIP. Seller agrees to assign to Buyer its
partnership interest in the Weld County Partnership Agreement
entered into December 31, 1982, between Xxxxxxxx Petroleum
Company and True Oil Company (the "Weld County Partnership")
on and effective such date, if ever, that Seller's allocated
share of partnership income and costs is 91%. Upon such
assignment to Buyer, the Weld County Partnership shall be
deemed to be an Asset under this Agreement and Buyer shall be
subject to all leases, joint operating agreements and other
agreements with respect thereto. Seller's obligations under
this Article 2.01 (c) shall be subject to any Transfer
Requirements now in effect.
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ARTICLE 3
PURCHASE PRICE
3.01 PRELIMINARY PURCHASE PRICE; CLOSING PAYMENT. In consideration for
the sale and conveyance to Buyer of the Assets, Buyer agrees to pay to
Seller $41,000,000.00 (the "Preliminary Purchase Price"), subject to
adjustment as provided in this Agreement. On a date not less than
five (5) business days prior to the Closing Date, based upon
information available to Seller at such time, Seller shall determine
the Closing Payment, notify Buyer of the amount thereof and provide
Buyer a copy of Seller's computation of such amount. Buyer may
recommend adjustments to Seller's computation and Seller shall make
such adjustments it does not disagree with in the a good faith
exercise of its discretion.
3.02 XXXXXXX MONEY DEPOSIT. At the time of its execution of this
Agreement, Buyer shall pay or cause to be paid to Seller, by wire
transfer or other immediately available funds, an amount equal to Ten
Percent (10.00%) of the Preliminary Purchase Price as an xxxxxxx money
deposit (the "Xxxxxxx Money Deposit"). Such Xxxxxxx Money Deposit
shall bear interest at the Agreed Rate from the date of its deposit
with Seller. Application of the Xxxxxxx Money Deposit shall be
governed by the following procedures:
(a) If Closing occurs in accordance with the Agreement, the
Xxxxxxx Money Deposit, together with the interest accrued
thereon to the Closing Date, shall be credited against the
Preliminary Purchase Price in calculating the Closing Payment.
(b) If (i) Closing does not occur, (ii) the Agreement is
terminated by Seller or Buyer pursuant to Article 12.01, and
(iii) the conditions to Buyer's obligation to consummate the
transaction set forth in Article 10.02 have not been met,
Seller shall remit the Xxxxxxx Money Deposit, together with
accrued interest to Buyer.
(c) If Closing does not occur for any reason except as provided in
(b), above, Seller shall retain the Xxxxxxx Money Deposit,
together with accrued interest, as liquidated damages in lieu
of all other damages and as Seller's sole remedy.
3.03 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Seller,
000 Xxxxxx Xxxxxx, Xxxx Xxxxx, Xxxxx, 00000, commencing at 9:00 a.m.
local time on April 30, 1998 ; or in the event all conditions to
Closing have not been satisfied as of such date and the Parties have
not terminated this Agreement pursuant to Article 12 hereof, on the
fifth business day following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than actions the respective
Parties will take at the Closing itself); or at such other place, date
and time as Buyer and Seller may mutually determine (the "Closing
Date").
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3.04 DELIVERIES AT THE CLOSING. At the Closing, (i) Seller will deliver
the documents referred to in Article 16.01 below, (ii) Buyer will
deliver to Seller the documents referred to in Article 10.01(e),
(iii) Buyer will deliver to Seller the Closing Payment by wire
transfer or delivery of other immediately available funds; and Seller
and Buyer shall each execute and deliver to the other a Transition
Agreement substantially in the form attached hereto as Exhibit "E"
("Transition Agreement").
3.05 PURCHASE PRICE ALLOCATIONS. The Preliminary Purchase Price shall be
allocated among the Assets in accordance with the schedule of values
set forth in Exhibit "C". Buyer represents that this is a proper
allocation of the Preliminary Purchase Price and agrees that the
Purchase Price shall be reallocated to the Assets after accounting for
any adjustments pursuant to Articles 6, 7, 14, 17 and 18 hereof; and
Seller and Buyer each agree that for all income and franchise tax
purposes (and, where applicable, financial accounting purposes) they
will report consistently with such allocation.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.01 REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and
warrants to Buyer that the statements contained in this Article 4.01
are true and correct as of the date of this Agreement:
(a) ORGANIZATION OF SELLER. Seller is a corporation duly
organized, validly existing and in good standing under the
laws of the State of Delaware.
(b) AUTHORIZATION OF TRANSACTION. Seller has full power and
authority to execute and deliver this Agreement and to perform
its obligations hereunder, and this Agreement constitutes the
valid and legally binding obligation of Seller, enforceable
against Seller in accordance with its terms and conditions
except as such enforceability may be limited by or subject to
(a) any bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to creditors' rights generally and
(b) general principles of equity (regardless of whether such
enforceability is considered in a pro- ceeding in equity or at
law). Except for (i) consents of or filings with the United
States Department of Interior or other governmental agency or
the applicable state or Indian agencies or authorities in
connection with the assignment of any federal, state, or
Indian leases or any interest therein, and (ii) other Transfer
Requirements and Preference Rights which are applicable to the
transactions contemplated by this Agreement, Seller need not
give any notice to, make any filing with, or obtain any
authorization, consent or approval of, any government or
governmental agency or any other person or entity in order to
consummate the transactions contemplated by this Agreement.
(c) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation by Seller of the
transactions contemplated hereby, will
ASSET PURCHASE AND SALE AGREEMENT PAGE 12
13
violate any statute, regulation, rule, injunction, judgment,
order, decree, or ruling of any government, governmental
agency, or court to which Seller is subject, or any provision
of its charter or by-laws or any agreement or instrument to
which Seller is a party, other than such violations of
agreements or instruments as will not have a material adverse
effect .
(d) BROKER'S FEES. Seller has incurred no liability, contingent
or otherwise, for broker's or finder's fees with respect to
the transactions contemplated by this Agreement for which
Buyer shall have any responsibility whatsoever.
(e) LITIGATION AND CLAIMS. Except as shown on Schedule 4.01,
there are no pending, or, to the Seller's Knowledge,
threatened lawsuits, orders, decrees, injunctions or
administrative, arbitration or other proceedings against
Seller related to the Assets. The term "Litigation" shall
mean the matters shown on Schedule 4.01 under "Litigation and
Claims" and further shall include lawsuits, not shown in
Schedule 4.01, brought as class actions (but not certified as
such by final court order) which, if certified, could relate
to the Assets.
(f) ENVIRONMENTAL MATTERS. Except as shown on Schedule 4.01, (i)
Seller is in compliance with all applicable Environmental
Laws with respect to the Assets, except where noncompliance
would not have a material adverse effect , and (ii) Seller
has not received any notice, other than a notice that has
been fully and finally resolved, that alleges that Seller is
not now, or in the past has not been, in compliance with all
applicable Environmental Laws with respect to the Assets.
Except as listed on Schedule 4.01, to the Knowledge of Seller,
Seller has not released, as such term is defined in CERCLA,
Materials of Environmental Concern on, in, or about the Assets
other than as allowed by Environmental Laws and no conditions
exist on, in, or about the Assets as the result of
Environmental Matters that give rise to liabilities or Third
Party Claims under Environmental Laws. Except as shown on
Schedule 4.01, to the Knowledge of Seller, Seller has not
caused or allowed Materials of Environmental Concern to
migrate from the Assets upon or beneath other properties,
except as permitted by Environmental Laws. Except as shown on
Schedule 4.01, there are no underground storage tanks on the
Assets . Except as shown on Schedule 4.01, Seller has not
transported, disposed, or arranged for disposal, reclamation,
recycling, or sale of Materials of Environmental Concern from
the Assets to other properties, other than as allowed by
Environmental Laws, and to the Knowledge of Seller, Seller has
not transported, disposed, stored offsite, or arranged for
disposal, reclamation, recycling, or sale of Materials of
Environmental Concern from the Assets that give rise to
liabilities or Third Party Claims under Environmental Laws.
(g) NORMAL BUSINESS. Since the Effective Date and from the date
hereof to the Closing Date, Seller (i) has caused and will
cause the Assets to be maintained and operated in a good and
workmanlike manner, consistent with prior operations and (ii)
has not and will not transfer or sell any Assets other than
ASSET PURCHASE AND SALE AGREEMENT PAGE 13
14
(1) Hydrocarbons produced, saved, and sold from the Assets in
the ordinary course of business, (2) personal property and
equipment which is replaced with personal property and
equipment of comparable or better value and utility in the
ordinary and routine maintenance and operation of the Assets,
and (3) transfers or disposal of items of personal property
having a value of less than $10,000 individually or $50,000
in the aggregate.
(h) TAXES. Seller has paid or caused to be paid all federal,
state, and local taxes, rates and like assessments for periods
prior to the Closing Date that have become due and payable
which, if not so paid, could result in a lien or encumbrance
upon the Assets, including excise, property, ad valorem,
franchise, severance and production taxes; but not including
(i) taxes, rates and like assessments which are being
contested in good faith, as shown on Schedule 4.01, (ii) taxes
not yet due and payable, and (iii) taxes, if any, which are
the responsibility of Buyer under the express terms of this
Agreement.
(i) NO VIOLATIONS. Except as shown on Schedule 4.01, Seller has
not violated or received notice of any alleged violation of
any regulations, rules or orders promulgated by any federal,
state or local regulatory agency or governmental authority
which, if adversely decided, would have a material adverse
effect
(j) MATERIAL CONTRACTS. Exhibit "G" lists all material
contracts relating to the Assets and, with respect to each
such contract, neither Seller nor, to Seller's Knowledge, any
other party thereto is in default thereunder or in breach
thereof, except where default or breach would not have a
material adverse effect .
(k) TAKE-OR-PAY. Seller has not made and will not make from the
date hereof to the Closing Date, any agreement relating to the
Assets which would require Buyer, following Closing, to (i)
deliver gas paid for, but not taken from production, prior to
Closing, or (ii) make a cash payment to a buyer of gas for
reimbursement or recoupment of prior take-or-pay payments.
(l) PERMITS AND LICENSES. Except for those items referred to in
Article 4.01(b) above, to the Knowledge of Seller, Seller has
obtained and currently holds all permits, licenses, approvals
and authorizations which are required under federal, state or
local law, rules and regulations in order to own and operate
the Assets and, except for those items referred to in Article
4.01(b), no such permit, license, approval or authorization
restricts Seller from selling or otherwise transferring to
Buyer Seller's interest in the Assets.
4.02 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Seller that the statements contained in this Article 4.02
are true and correct as of the date of this Agreement:
(a) ORGANIZATION OF BUYER. Buyer is a corporation duly
organized, validly existing and in good standing under the
laws of the State of Colorado.
ASSET PURCHASE AND SALE AGREEMENT PAGE 14
15
(b) AUTHORIZATION OF TRANSACTION. Buyer has full power and
authority to execute and deliver this Agreement and to perform
its obligations hereunder, and this Agreement constitutes the
valid and legally binding obligation of Buyer, enforceable
against Buyer in accordance with its terms and conditions
except as such enforceability may be limited by or subject to
(a) any bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to creditors' rights generally and
(b) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law). Except for (i) consents of or filings with the United
States Department of Interior or other governmental agency or
the applicable state or Indian agencies or authorities in
connection with the assignment of any federal, state, or
Indian leases or any interest therein, and (ii) other Transfer
Requirements which are applicable to the transactions
contemplated by this Agreement, Buyer need not give any notice
to, make any filing with, or obtain any authorization, consent
or approval of, any government or governmental agency or any
other person or entity in order to consummate the transactions
contemplated by this Agreement.
(c) NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation by Buyer of the
transactions contemplated hereby, will in any material respect
violate any statute, regulation, rule, injunction, judgment,
order, decree, or ruling of any government, governmental
agency, or court to which Buyer is subject, or any provision
of any agreement or instrument to which Buyer is a party.
(d) BUYER'S COMPLIANCE WITH LAWS AND AGREEMENTS. Prior to
Closing, Buyer will have met all of the requirements under
applicable local, state and federal law to accept assignment
of the Assets. These requirements include, but are not
limited to, the acquisition of bonds, letters of credit or
other evidence of financial security or any other requisite of
all appropriate regulatory agencies and any leases, operating
agreements or other contractual requirements.
(e) FURTHER DISTRIBUTION. Buyer is acquiring the Assets for its
own account and not with the intent to make a distribution
thereof within the meaning of the Securities Act of 1933, as
amended, and the rules and regulations pertaining to it or
distribution thereof in violation of any applicable securities
laws.
(f) BROKER'S FEES. Buyer has incurred no liability, contingent
or otherwise, for broker's or finder's fees with respect to
the transactions contemplated by this Agreement for which
Seller shall have any responsibility whatsoever.
(g) FINANCIAL ABILITY. Buyer will have at the Closing Date
sufficient funds and credit arrangements or other arrangements
to tender the Purchase Price at the Closing and to take such
other actions as may be required by it to consummate the
transactions contemplated hereby. There are no bankruptcy,
reorganization or arrangement proceedings pending against,
being contemplated by or, to the Knowledge of Buyer,
threatened against Buyer.
ASSET PURCHASE AND SALE AGREEMENT PAGE 15
16
No lawsuit or other proceeding is pending or, to the Knowledge
of Buyer, is threatened, to which Buyer is a party and which
may hinder or impede the ability of Buyer to perform its
obligations hereunder. There is no judgment or outstanding
order, injunction, decree or award rendered by any court or
other governmental agency or arbitrator by which Buyer is
bound and which relates to the transactions contemplated in
this Agreement.
ARTICLE 5
PRE-CLOSING COVENANTS
The Parties respectively covenant and agree as follows with respect to
the period commencing on the date of this Agreement and ending on the Closing
Date:
5.01 ACCESS. Seller will permit representatives of Buyer, at such
representatives' own risk and expense, to have access at all
reasonable times, and in a manner so as not to unduly interfere with
the business operations of Seller, to the Assets and Seller's
premises, personnel, books, and Records, to the extent the same relate
to the Assets. Buyer agrees to release, indemnify and hold harmless
Seller from any claims for death, personal injury, damages to persons
or property or any other Loss caused by the activities of Buyer or
its representatives, agents, consultants, contractors or
subcontractors in respect of access to the Assets.
5.02 ACTIONS BY THE PARTIES. Each of the Parties agrees to use its
reasonable best efforts to satisfy the conditions to Closing set forth
in Article 10 hereof and to refrain from taking any action within its
control which would cause a breach of a representation or warranty set
forth herein; provided, however, that neither Seller nor Buyer shall
be required to expend any funds or incur any costs to prevent or cure
a breach of the representations and warranties set forth in Article 4.
ARTICLE 6
TITLE MATTERS
6.01 NO WARRANTY OR REPRESENTATION. At the Closing, Seller shall convey
to Buyer all the Assets. Such conveyance shall be subject to the
Permitted Encumbrances and WITHOUT ANY WARRANTY OF TITLE, EITHER
EXPRESS OR IMPLIED, AND WHETHER BY COMMON LAW, STATUTE OR OTHERWISE,
except for the warranty provided in Article 4.01(h) of this Agreement
and except for the warranty of title as to persons claiming by,
through and under Seller contained in the Conveyance Documents
delivered pursuant to Article 16.01. Without limiting Buyer's right
to reduce the Purchase Price in the manner provided in this Article 6,
Seller makes no warranty or representation, express or implied, with
respect to the accuracy or completeness of any information, Records or
data now, heretofore, or hereafter made available to Buyer in
connection with this Agreement, including, without limitation, pricing
assumptions, potential for production of Hydrocarbons from the Assets,
or any other matters contained in any material furnished by Seller to
Buyer or its officers, directors, employees, agents, advisors or
representatives. Nothing in this Article 6
ASSET PURCHASE AND SALE AGREEMENT PAGE 16
17
shall operate to expand or increase or limit Seller's representations
and warranties contained in other parts of this Agreement or to limit
the provisions of Article 19.13.
6.02 TITLE DEFECT. The procedures to be followed with respect to Buyer's
assertion of Title Defects concerning the Assets and adjustment or
refund of the Purchase Price attributable to such Title Defects shall
be as follows:
(a) ACCESS TO RECORDS. Promptly after execution of this
Agreement, Seller will provide Buyer and its consultants and
advisors access at all reasonable times to Seller's
accounting, land, production, engineering, and other Records
regarding the Assets for the purpose of reviewing title to the
Assets and reasonable office space in Seller's offices for
such review. To the extent that Seller cannot provide such
information without violating legal constraints or any
obligation of confidence or other contractual commitment or to
the extent any such information is in possession of a
co-working interest owner, partner or third party and Seller
has the right of access thereto, Seller will use its
reasonable efforts (without being obligated to incur expense)
to provide Buyer access to such information or obtain copies
thereof for Buyer's review.
(b) NOTICE OF ASSERTED TITLE DEFECTS. Prior to the expiration of
the period commencing on the execution of this Agreement and
ending five (5) days prior to the Closing Date (the "Title
Examination Period"), Buyer shall furnish to Seller written
notice specifying in reasonable detail each matter which, in
Buyer's opinion, constitutes a Title Defect and which Buyer
wishes to assert as a Title Defect hereunder, together with
the Defect Amount estimated by Buyer for each such asserted
Title Defect (each such notice being called a "Title Defect
Notice"). The Title Defect Notice shall include all
documents in support of Buyer's assertion of a Title Defect.
Any Title Defects not asserted on or before the expiration of
the Title Examination Period with respect to the Assets, shall
be deemed conclusively to be Permitted Encumbrances.
Failure by Buyer to identify all Assets (or to identify all
portions of an Asset) which are subject to a particular Title
Defect in a Title Defect Notice shall not prevent Buyer from
asserting such Title Defect in separate or subsequent Title
Defect Notices, subject to otherwise timely asserting such
Title Defect prior to the expiration of the Title Examination
Period.
(c) NOTICE IN RESPONSE TO BUYER'S NOTICE. On or before 5:00 p.m.
on the 15th day following Seller's receipt of a Title Defect
Notice from Buyer, Seller shall give written notice to Buyer
for each Title Defect asserted in a Title Defect Notice
("Response Notice") as to whether it (a) admits the existence
of such Title Defect and accepts Buyer's estimate of the
Defect Amount, (b) intends to cure the asserted Title Defect,
(c) disagrees with Buyer's assertion that the Title Defect
exists, (d) disagrees with the Defect Amount estimated by
Buyer for such Title Defect, (e) takes any combination of the
foregoing positions, or (f) in the case of a Nonrevenue
Defect, elects to indemnify Buyer pursuant to Article 6.02(g)
or elects to retain the Asset pursuant to Article 6.02 (e).
If Seller
ASSET PURCHASE AND SALE AGREEMENT PAGE 17
18
disagrees with Buyer's assertion of the existence of a Title
Defect or the Defect Amount with respect thereto, Seller's
Response Notice shall also specify in reasonable detail
Seller's grounds for such disagreement, the Defect Amount
estimated by Seller therefor, or both, as the case may be.
Seller's failure to include in its Response Notice a Title
Defect asserted in a Title Defect Notice shall be deemed to be
an admission of the existence of such Title Defect,
acceptance of Buyer's estimate of the Defect Amount with
respect thereto and a waiver of Seller's rights to cure such
Title Defect.
(d) METHOD OF DETERMINING TITLE DEFECT AMOUNTS. Without limiting
Seller's right to dispute the existence of a Title Defect,
Defect Amounts for each asserted Title Defect shall be
determined as follows:
(i) If the Title Defect relates to failure of title to
the entirety of Seller's title to an Asset, the
Defect Amount shall be the amount set forth as the
value for that Asset in Exhibit "C".
(ii) If the Title Defect results from a lien, security
interest, pledge or collateral assignment upon one or
more Assets (or a portion thereof) which is
liquidated in amount, then the Defect Amount shall be
the amount necessary to remove such lien, security
interest, pledge or collateral assignment from
Seller's title to such one or more Assets (or portion
thereof).
(iii) If the Title Defect results from Seller having a
lesser NRI in a Well than the Delivered NRI specified
for the Well, the Defect Amount shall be equal to
the product obtained by multiplying the value for
that Well in Exhibit "C" by a fraction, the numerator
of which is the reduction in the NRI and the
denominator of which is the Delivered NRI for such
Well.
(iv) If the Title Defect results from Seller having a
greater WI in a Well than the Delivered WI specified
for the Well, without at least a proportionate
increase in Seller's NRI for such Well, the Defect
Amount shall be equal to the present value
(discounted at 10% compounded annually) of the
increase in Buyer's Projected Costs with respect to
such Well for the period from and after the Effective
Date which is attributable to such increase in the
WI.
(v) If the Title Defect results from any matter not
described in paragraphs (i), (ii), (iii), or (iv)
above, then the Defect Amount shall be a portion of
the value set forth for that Asset in Exhibit "C",
said portion to be equal to the difference between
the value of Seller's title to such Asset without
such Title Defect and with such Title Defect
(assuming the value without such Title Defect to be
the value set forth in Exhibit "C").
ASSET PURCHASE AND SALE AGREEMENT PAGE 18
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(vi) If a Title Defect is not effective or does not affect
Seller's title to an Asset throughout the entire
productive life of such Asset, such fact shall be
taken into account in determining the Defect Amount.
(vii) If a Title Defect affects only a portion of an Asset
(as contrasted with an undivided interest in the
entirety of such Asset) and a portion of the Purchase
Price has not been allocated specifically to such
portion of that Asset in Exhibit "C", then for
purposes of computing the Defect Amount, the Purchase
Price allocated to such Asset shall be further
allocated among the portions of such Asset in a fair
and reasonable manner taking into account the value
set forth in Exhibit "C".
Notwithstanding anything herein to the contrary, the aggregate
Defect Amounts attributable to Title Defects relating to an
Asset for which Buyer receives an adjustment in the Purchase
Price shall never exceed the value of that Asset as set forth
in Exhibit "C".
(e) SELLER'S OPTION TO RETAIN ASSET. If Buyer asserts one or
more Title Defects with respect to an Asset and the aggregate
amount of Buyer's estimated Defect Amounts with respect to
such asserted Title Defects exceeds 25% of the value of such
Asset as set forth in Exhibit "C", and Seller has accepted
Buyer's estimate of such Defect Amounts with respect thereto ,
then Seller may, at its sole option, elect to retain such
Asset, provided that Seller must make such election prior to
Closing. Seller shall notify Buyer in its Response Notice
pursuant to Article 6.02(c) hereof of its election to retain
such Asset, and, if Seller gives such notice, the Purchase
Price shall be reduced by the value for such Asset as set
forth in Exhibit "C".
(f) PRE-CLOSING ADJUSTMENT FOR UNCURED TITLE DEFECTS. If, on or
before five (5) days prior to the Closing Date, any Title
Defect and the Defect Amount as asserted by Buyer are agreed
(or deemed agreed) to by Seller and Seller elects not to
attempt (or waives its right) to cure such Title Defect, then,
subject to Article 6.02(k) hereof, the sum of Defect Amounts
attributable to those Assets (or portions thereof) for which
Seller and Buyer are in agreement (or deemed to be in
agreement) as to both the existence of a Title Defect and the
Defect Amount, but excluding Assets retained by Seller
pursuant to Article 6.02 (e) hereof, shall be applied to
reduce the Preliminary Purchase Price.
(g) OPTION TO INDEMNIFY FOR NONREVENUE DEFECTS. Should Buyer
assert in a Title Defect Notice one or more Nonrevenue Defects
and should Seller agree that the Nonrevenue Defect asserted
constitutes a Title Defect and agrees with the Defect Amount,
then Seller, at its option and subject to the credit and
deductible provided in Article 6.02(k), may in its Response
Notice to such Title Defect Notice pursuant to Article
6.02(c), elect to (I) cure the Nonrevenue Defect, (ii) reduce
the Preliminary Purchase Price or the Purchase Price pursuant
to Article 6.02(f) or Article 6.02(j), as the case may be, by
the Defect
ASSET PURCHASE AND SALE AGREEMENT PAGE 19
20
Amount, or (iii) indemnify Buyer and its Affiliates,
successors and assigns from and against Losses incurred as a
result of such Nonrevenue Defect up the Defect Amount.
(h) CURE OF TITLE DEFECTS. If Seller elects to cure a Title
Defect in accordance with Article 6.02(C) hereof, then Seller
shall use reasonable efforts to cure such defect during the
Cure Period. On or before expiration of the Cure Period,
Seller shall give Buyer written evidence of any curative
actions which in Seller's determination cure or reduce the
Defect Amount of a Title Defect asserted by Buyer, including
an explanation in reasonable detail of any claimed reduction
in the Defect Amount. On or before the expiration of thirty
(30) days after the end of the Cure Period, Buyer shall
provide to Seller in writing a list of those Title Defects
asserted by Buyer which Seller claims to have cured pursuant
to this Article 6.02(h), and which Buyer determines have not
been cured, together with the revisions, if any, in Buyer's
estimates to the Defect Amounts attributable to such Title
Defects after giving effect, if any, to Seller's curative
efforts. For a period of thirty (30) days after Seller's
receipt of Buyer's written list of such uncured Title Defects
and revised Defect Amounts, Seller and Buyer shall attempt to
resolve disputes as to such items. During the Cure Period
and thereafter until all disputes regarding such Title Defect
and the Defect Amount in respect thereof have been fully
resolved by agreement or arbitration, Buyer shall afford
Seller and its representatives and agents access at all
reasonable times to files, Records and documents formerly in
Seller's possession relating to title to the one or more
Assets that are the subject of such disputed Title Defect or
Defect Amount.
Such access shall be subject to confidentiality restrictions
reasonably imposed by Buyer.
(I) ARBITRATION.
(i) In the event the Parties are unable to resolve all
disputes as to the existence of Title Defects or
Defect Amounts within thirty (30) days after the
expiration of the Title Examination Period or, in the
case of a Title Defect that Seller has elected to
cure pursuant to Article 6.02(h), sixty (60) days
after expiration of the Cure Period, then all
remaining disputes regarding Title Defects and Defect
Amounts shall be submitted to binding arbitration.
Within a further fifteen (15) day period, Seller and
Buyer agree to jointly select an arbitrator
experienced in the U.S. oil and gas business, who
shall be the sole arbitrator (the "Arbitrator") to
hear and decide all remaining disputes regarding
asserted Title Defects and Defect Amounts. The
Arbitrator chosen shall be impartial and independent
of the Parties and shall be experienced and
knowledgeable about the subject matter (generally and
not as to the express facts concerning the Assets) of
the remaining disputes. If the Parties are unable
to agree upon the designation of a person as
Arbitrator, the Parties shall request the American
Arbitration Association to appoint
ASSET PURCHASE AND SALE AGREEMENT PAGE 20
21
the Arbitrator and such Arbitrator shall hear all
matters submitted to arbitration under this Article
6.02(I).
(ii) Any arbitration hearing shall be held at a place
selected by the Arbitrator. The arbitration shall
be conducted in accordance with the United States
Arbitration Act (9 U.S.C.A. Sections 1-16) and the
Commercial Arbitration Rules of the American
Arbitration Association to the extent such rules do
not conflict with the terms of such Act and the terms
hereof, provided, however, nothing herein shall
require that the arbitration be submitted to the
American Arbitration Association except as to the
appointment of an Arbitrator. The decision of the
Arbitrator with respect to such remaining disputed
matters shall be reduced to writing and binding on
the parties. Judgment upon the award(s) rendered by
the Arbitrator may be entered and execution had in
any court of competent jurisdiction or application
may be made to such court for a judicial acceptance
of the award and an order of enforcement. Seller
and Buyer, respectively, shall bear their own legal
fees and other costs incurred in presenting their
respective cases. The charges and expenses of the
Arbitrator shall be shared equally by Seller and
Buyer.
(iii) The arbitration shall commence within thirty (30)
days after the Arbitrator is selected in accordance
with the provisions of this Article 6.02(I). In
fulfilling his or her duties with respect to
determining the amount of a Defect Amount, the
Arbitrator may consider such matters as, in the
opinion of the Arbitrator, are necessary or helpful
to make a proper valuation; however, the Arbitrator
shall be bound by those factors set forth in Article
6.02(d) above, including the last sentence thereof.
Furthermore, the Arbitrator may consult with and
engage disinterested third parties to advise the
Arbitrator including, without limitation, geologists,
geophysicists, petroleum engineers, title lawyers,
accountants and consultants, and the fees and
expenses of such third parties shall be considered to
be charges and expenses of the Arbitrator. The sole
remedy in any arbitration award shall be resolution
of alleged Title Defects and Defect Amounts which
shall then be applied as provided in Article 6.02(j)
and the Arbitrator shall not award any other remedy,
including, without limitation, equitable relief,
actual damages, consequential, exemplary or punitive
damages, attorneys' fees and interest reflecting the
time value of money. The Arbitrator shall not add
any interest factor reflecting the time value of
money to any Defect Amount.
(iv) If the Arbitrator selected hereunder should die,
resign or be unable to perform his or her duties
hereunder, the Parties or the American Arbitration
Association shall select a replacement Arbitrator.
The procedure set forth in this Article 6.02(I) for
selecting the Arbitrator shall be followed from time
to time as necessary.
ASSET PURCHASE AND SALE AGREEMENT PAGE 21
22
(v) As to any determination of amounts owing under the
terms of this Article, no lawsuit based on such
claimed amounts owing shall be instituted by any
party hereto, other than to compel arbitration
proceedings or enforce the award of the Arbitrator.
(vi) All privileges under Texas and federal law, including
attorney-client and work-product privileges, shall be
preserved and protected to the same extent that such
privileges would be protected in a federal court
proceeding applying Texas law.
(j) ADJUSTMENT FOR UNCURED TITLE DEFECTS. When the last of all
Title Defects asserted by Buyer pursuant to Article 6.02(b)
above and the Defect Amounts, if any, with respect thereto
have been finally resolved, whether by agreement or
arbitration award, subject to Seller's option to indemnify
Buyer for Nonrevenue Defects provided in Article 6.02(g) and
the credit and deductible provided in Article 6.02(k), the
Purchase Price shall be reduced by the amount, if any, of the
Title Defect Adjustment and by the value of any Assets
retained by Seller pursuant to Article 6.02(e) hereof. The
amount of any reduction in the Purchase Price pursuant to this
Article 6.02(j) shall bear interest at the Agreed Rate from
the Closing Date until paid. Any reduction in the Purchase
Price, together with any interest accruing thereon pursuant to
this Article 6.02(j), shall be due and payable by Seller to
Buyer in immediately available funds within ten (10) days
after the date of the final resolution of the last of all
Title Defects asserted by Buyer and the Defect Amounts, if
any, with respect thereto as aforesaid. Seller's sole
responsibility and Buyer's sole and exclusive remedy for the
reduction in value of Seller's title to an Asset resulting
from the existence of a Title Defect shall be as provided in
this Article 6 and Seller shall not be liable for any Losses
in respect of Title Defects and Defect Amounts, except to the
extent that Seller would have liability therefor under other
Articles of this Agreement.
(k) CREDIT AND DEDUCTIBLE FOR TITLE DEFECTS. The Preliminary
Purchase Price and the Purchase Price shall be reduced for
Title Defects if, and only to the extent that, the cumulative
aggregate of all Defect Amounts exceeds (i) an amount equal
to the aggregate increase in the value of Seller's title to
the Xxxxx over the values set forth in Exhibit "C" as a result
of an increase in the NRI for any such Xxxxx over the NRI
shown in Exhibit "A" plus (ii) the Available Deductible
Amount specified in Article 11.03(a).
ARTICLE 7
ENVIRONMENTAL
7.01 AVAILABILITY OF DATA TO BUYER; PHASE I ENVIRONMENTAL AUDIT. After
the execution of this Agreement, Seller shall make available to Buyer
information which is in the possession or control of Seller or to
which Seller has access (other than publicly available information to
which Buyer has equal access) and which relates to the
ASSET PURCHASE AND SALE AGREEMENT PAGE 22
23
environmental condition of the Assets or the disposition of Materials
of Environmental Concern related to the Assets, which information may
include, but shall not be limited to, information regarding crude oil
and produced water that may have been spilled or disposed of on-site
and the locations thereof; on-site pits and pit closures; on-site
burial; land farming; land spreading; underground injection; on-site
solid waste disposal sites; and offsite storage, treatment or
disposal sites. Buyer also shall have the right, prior to the
Closing Date, at its own risk and expense, to conduct or have
conducted a Phase I Environmental Audit of the Assets. To enable
Buyer to conduct the Phase I Environmental Audit, Seller will provide
Buyer (and its representatives) with reasonable access to the Assets,
subject to any third party restrictions on Seller with respect to
access to the Assets, to Seller's books, records, and files relating
to the Assets, and to current employees of Seller. In conducting the
Phase I Environmental Audit, Buyer shall treat, and will cause all of
its representatives, agents, consultants, contractors, or
subcontractors to treat, all information obtained by Buyer pursuant to
the Audit as strictly confidential (except to the extent such
information is otherwise available to the general public) and will not
disclose the results without the prior written consent of Seller,
except to the extent that such results are legally required to be
disclosed by Buyer (in which case, Buyer shall provide Seller with
reasonable notice prior to making such disclosure). Seller shall
have the right to have a representative present during any inspection
of the Assets and during any interviews of Seller's employees,
conducted as a part of the Phase I Environmental Audit, and Buyer
shall coordinate these activities with Seller so as to allow Seller to
have a representative present if it so desires. Buyer shall provide
Seller with copies of any Phase I Environmental Audit report, whether
completed prior to or after the Closing Date, not less than five (5)
days after Buyer's receipt of same. Buyer agrees to release,
indemnify, defend, and hold Seller harmless from any claims for
death, personal injury, damage to persons or property or any other
Loss caused by the activities of Buyer or its representatives,
agents, consultants, contractors or subcontractors in conducting a
Phase I Environmental Audit.
7.02 ENVIRONMENTAL DEFECTS. If Buyer has Knowledge of the actual (as
opposed to the threatened or alleged) existence of an Environmental
Matter discovered in the course of the Phase I Environmental Audit or
Buyer's other environmental due diligence in connection with this
transaction and Buyer has concluded that such Environmental Matter
constitutes a breach by Seller of any of Seller's representations and
warranties set forth in Article 4.01(f) hereof (as though such
representations and warranties were not qualified by Seller's
Knowledge thereof), then Buyer, shall advise Seller in writing of such
Environmental Matter on or before five (5) days prior to the Closing
Date. Such written notification shall contain a reasonable
description of the facts used by Buyer in making its determination
that a breach exists and its good faith estimate of the cost to
remediate such Environmental Matter. The notice shall also include
all documents and reports relied upon by Buyer in providing such
notice. Buyer agrees that such written notification to Seller shall
be sent to Seller by telecopy or personal delivery as well as by
registered or certified mail, return receipt requested and postage
prepaid. Prior to Closing, Buyer and its employees, contractors and
consultants shall treat all information regarding any Environmental
Matter as confidential and shall not
ASSET PURCHASE AND SALE AGREEMENT PAGE 23
24
disclose such information to any governmental authority or other third
party without Seller's written consent, unless disclosure is required
by applicable law (in which case, Buyer shall provide Seller with
reasonable notice prior to making such disclosure). Within three (3)
days after Seller's receipt of a notice with respect to each
Environmental Matter constituting a breach of Seller's representations
and warranties set forth in Article 4.01(f) hereof (as though such
representations and warranties were not qualified by Seller's
Knowledge thereof), Seller or Buyer (if Buyer reasonably believes that
the cost to remediate each such Environmental Matter will exceed
$100,000) may have the Asset affected thereby removed from the Assets
and adjust the Preliminary Purchase Price by the value of such Asset
set forth in Exhibit "C". Such adjustment shall be Buyer's sole and
exclusive remedy with respect to any Environmental Matter subject to
this Article 7.02 and Seller shall not be liable for any Losses with
respect thereto.
ARTICLE 8
PRE-CLOSING BREACHES
If, on or before five (5) days prior to the Closing Date, Buyer has Knowledge
of any matter which Buyer has concluded constitutes a breach by Seller of any
of Seller's representations and warranties set forth in Article 4.01 (other
than Article 4.01(g)) hereof, then Buyer shall notify Seller in writing of
such matter on or before five (5) days prior to the Closing Date. Buyer
agrees that such written notification to Seller shall be sent to Seller by
telecopy or personal delivery as well as by registered or certified mail,
return receipt requested and postage prepaid.
ARTICLE 9
INTERIM COVENANTS
9.01 OPERATION OF THE ASSETS PRIOR TO CLOSING. From the date hereof until
the Closing Date, except as otherwise consented to by Buyer in
writing, Seller shall (i) not mortgage, pledge or subject to any
security interest any of the Assets; (ii) not enter into any
termination or amendment of any material agreement affecting the
Assets except in the ordinary course of business; (iii) not enter into
any settlement of any Litigation in excess of $50,000 involving any of
the Assets or cause a surrender of the Assets; (iv) not consent to
the entry of any decree or order by a governmental body or pay any
fine having an adverse effect of more than $5,000 to the Assets; (v)
not enter into any agreement affecting the Assets with a term in
excess of thirty (30) days, unless such transaction is in the ordinary
course of business and is terminable without penalty on notice of
ninety (90) days or less; (vi) use its best efforts to take all action
necessary to comply with any Preference Right or Transfer Requirement
affecting the Assets; and (vii) use its best efforts not to subject to
any lien, claim or encumbrance any of the Assets.
9.02 OPERATION OF THE ASSETS AFTER CLOSING. At Closing, operation of
those Assets Seller now operates shall be
turned over to and become the responsibility of Buyer, unless
ASSET PURCHASE AND SALE AGREEMENT PAGE 24
25
an applicable unit, pooling, communitization or operating agreement
requires otherwise. However, Seller shall have no liability for any
operations by Seller under this Article 9.02 for Losses incurred by
Buyer, except as may result directly from Seller's gross negligence or
willful misconduct. If, at Closing or thereafter, Buyer directs
Seller to turn over to Buyer operations of the Assets (or portions
thereof) prior to the time permitted by an applicable agreement, Buyer
agrees to indemnify Seller from and against any Losses incurred by
Seller as a result thereof.
9.03 ACCOUNTING RESPONSIBILITIES.
(a) PRE-CLOSING. From the Effective Date to the Closing Date,
Seller shall (i) process and pay all invoices relating to
operating expenses and capital expenditures, (ii) pay all
severance taxes assessed on production from the Xxxxx, and
(iii) market the Hydrocarbons produced pursuant to existing
market contracts and arrangements for the sale of such
Hydrocarbons and in accordance with pipeline nomination
schedules. All data processing and revenue accounting
responsibilities associated with production operations, such
as gas allocations, gas and liquid revenue disbursement,
royalty disbursement, maintenance of gas balances, and
regulatory filings shall be the responsibility of Seller
through the Closing Date production month.
(b) TRANSITION AGREEMENT ELECTION. Unless Buyer elects
otherwise, Seller shall continue to perform accounting
services with respect to the Assets for a period of up to two
(2) months after the Closing Date production month pursuant to
the terms of the Transition Agreement. Buyer may elect to
not enter into the Transition Agreement provided it notifies
Seller of such election no later than five (5) days prior to
Closing Date.
9.04 FEES FOR SELLER'S SERVICES. Seller shall operate the Assets on
behalf of Buyer after the Effective Date until they are turned over to
Buyer at Closing or thereafter pursuant to Article 9.02. Seller
shall make appropriate charges to Buyer pursuant to any applicable
operating agreement for these services and for the accounting services
referred to in Article 9.03. In the absence of any applicable
operating agreement, for any such services performed from and after
the Effective Date, Buyer shall pay Seller all reasonable necessary
expenses (excluding Seller's internal overhead) incurred by Seller in
the operation of or the accounting for the Assets (or portions
thereof). Any such charges and expenses shall be recovered by Seller
as part of the Final Settlement Statement pursuant to Article 14(h).
ARTICLE 10
CONDITIONS TO OBLIGATION TO CLOSE
10.01 CONDITIONS TO OBLIGATION OF SELLER. The obligation of Seller to
consummate the transactions to be performed by it in connection with
the Closing is subject, at the
ASSET PURCHASE AND SALE AGREEMENT PAGE 25
26
option of Seller, to satisfaction on or prior to the Closing Date of
the following conditions:
(a) the representations and warranties set forth in Article 4.02
above shall be true and correct in all material respects at
and as of the Closing Date as though made as of such date and
Seller shall receive a certificate at Closing, executed by a
duly-authorized officer of Buyer, in his capacity as such, to
the effect that, to such officer's Knowledge, the conditions
set forth in this Article 10.01(a) have been satisfied;
provided, however, for the purposes of this Article 10.01(a),
in determining whether this condition has been satisfied, any
such representation or warranty which is qualified by
materiality shall be read and interpreted as if such
qualification was not included therein (it being the intent to
the parties not to apply a double materiality threshold in
determining the satisfaction of this condition);
(b) Buyer shall have performed or complied with all of its
covenants and agreements hereunder in all material respects
through Closing;
(c) there shall not be any injunction, judgment, order, decree,
ruling or charge in effect preventing consummation of any of
the transactions contemplated by this Agreement;
(d) all actions to be taken by Buyer in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will
be reasonably satisfactory in form and substance to Seller;
(e) Buyer shall have delivered to Seller a copy of Buyer's
existing blanket plugging or performance bond, or evidence of
Buyer's compliance with applicable state or federal rules and
regulations, if any, filed with the applicable conservation or
regulatory agency; and
(f) Buyer and Seller shall have executed the Exploration
Agreement.
10.02 CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer to
consummate the transactions to be performed by it in connection with
the Closing is subject, at the option of Buyer, to satisfaction on or
prior to the Closing Date of the following conditions:
(a) the representations and warranties set forth in Article 4.01
shall be true and correct in all material respects at and as
of the Closing Date as though made as of such date. Buyer
shall receive a certificate at Closing, executed by a
duly-authorized officer of Seller, in his capacity as such, to
the effect that, to such officer's Knowledge, the conditions
set forth in this Article 10.02(a) have been satisfied;
provided, however, for the purposes of this Article 10.02(a),
in determining whether this condition has been satisfied, any
such
ASSET PURCHASE AND SALE AGREEMENT PAGE 26
27
representation or warranty which is qualified by materiality
shall be read and interpreted as if such qualification was not
included therein (it being the intent to the parties not to
apply a double materiality threshold in determining the
satisfaction of this condition);
(b) Seller shall have performed or complied with all of its
covenants and agreements hereunder in all material respects
through the Closing;
(c) there shall not be any injunction, judgment, order, decree,
ruling, or charge in effect preventing consummation of any of
the transactions contemplated by this Agreement;
(d) all actions to be taken by Seller in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will
be reasonably satisfactory in form and substance to Buyer; and
(e) Buyer and Seller shall have executed the Exploration
Agreement.
ARTICLE 11
REMEDIES FOR BREACHES OF ARTICLE 4 AND ENVIRONMENTAL INDEMNIFICATION
11.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller contained in Article 4.01 (except for Article
4.01(f) and Article 4.01(g)(i), as limited by Article 7.02) hereof
and of Buyer contained in Article 4.02 hereof shall survive the
Closing for a period of one (1) year from the Closing Date (the
"Survival Period"). The representations and warranties of Seller
contained in the last sentence of Article 4.01(f) shall survive the
Closing for a period of one (1) year from the Closing Date (also the
" Survival Period"). The representations and warranties of Seller
contained in Article 4.01(g)(i), and all but the last sentence of
Article 4.01(f) shall not survive the Closing. Following Closing,
for purposes of indemnity hereunder, (i) Seller's certificate
delivered pursuant to Article 10.02(a) as to representations and
warranties in Article 4.01 shall be deemed to constitute a
confirmation that the representations and warranties under Article
4.01 are true and correct as of the Closing Date, and (ii) Buyer's
certificate delivered pursuant to Article 10.01(a) as to
representations and warranties in Article 4.02 shall be deemed to
constitute a confirmation that the representations and warranties
under Article 4.02 are true and correct.
11.02 INDEMNIFICATION PROVISIONS FOR THE BENEFIT OF BUYER. In the event of
a breach by Seller of any of its representations and warranties in
Article 4.01 which survive the Closing, then Seller agrees, subject to
Article 11.03 hereof, to indemnify and hold harmless Buyer and Buyer's
Affiliates, and each of their respective current, former, and future
directors, officers, employees and agents, and each of the successors,
heirs and executors of any of the foregoing, from and against the
entirety of any Losses
ASSET PURCHASE AND SALE AGREEMENT PAGE 27
28
resulting from or attributable to the breach which Buyer (or any such
other indemnified person in such person's capacity set forth above)
shall suffer, provided that notice of any claim for indemnification is
given in accordance with the terms of this Agreement within the
Survival Period . Notwithstanding anything herein provided to the
contrary, with respect to any breach by Seller of the representations
and warranties contained in the last sentence of Article 4.01(f) and
except as limited by Article 11.03, Seller's sole responsibility for
any such breach shall be to indemnify Buyer for the Losses
attributable to such breach; provided, however, that "Losses", as used
in this sentence, shall not include, and Seller shall not be
responsible or liable for, any death, personal injury or
consequential, exemplary or punitive damages in respect of such
breach.
11.03 LIMITATION ON SELLER'S LIABILITY.
(a) With respect to a breach by Seller of any of its
representations and warranties in Article 4.01 (except the
last sentence of Article 4.01(f)) which survive the Closing
and adjustments to the Preliminary Purchase Price or
reductions to the Purchase Price for Defect Amounts, Seller
shall not be required to pay any
Losses pursuant to the indemnifications set forth in Article
11.02 and Article 11.05 hereof and Buyer shall not be entitled
to adjust the Preliminary Purchase Price or reduce the
Purchase Price on account of any Defect Amount pursuant to
Article 6.02 until the Available Deductible Amount has been
reduced to, but not below, zero. "Available Deductible
Amount" means $250,000, as reduced, but not below zero, by
Defect Amounts finally established under Article 6.02(j) and
such Losses otherwise payable under Article 11.02 and
Article 11.05.
(b) With respect to a breach by Seller of its representation and
warranty in the last sentence of Article 4.01(f), Seller shall
not be required to pay any Losses or any Environmental
Liabilities pursuant to the indemnifications set forth in
Article 11.02 and Article 11.06 hereof until the Available
Deductible Amount with respect to such Losses or
Environmental Liabilities has been reduced to, but not below,
zero. Buyer shall not be entitled to indemnity for any such
Losses or Environmental Liabilities to the extent the same are
actually applied to reduce the Available Deductible Amount.
"Available Deductible Amount" means $250,000 as reduced, but
not below zero, by the total amount of such Losses or
Environmental Liabilities incurred or paid by Buyer which are
subject to indemnification by Seller under Article 11.02 or
Article 11.06 hereof.
11.04 INDEMNIFICATION PROVISIONS FOR BENEFIT OF SELLER. In the event of a
breach by Buyer of any of its representations and warranties
contained in Article 4.02 hereof, and subject to the provisions of
Article 3.02(c), then Buyer agrees to indemnify and hold harmless
Seller, Seller's Affiliates, and each of their respective current,
former, and future directors, officers, employees and agents, and each
of the successors, assigns, heirs, and executors of any of the
foregoing, from and against the entirety of any Losses resulting from
or related or attributable to the breach which Seller, or any such
ASSET PURCHASE AND SALE AGREEMENT PAGE 28
29
Affiliate (or any such other indemnified person in such person's
capacity set forth above) shall suffer, provided such claim for
indemnification is brought within the Survival Period; and further
provided that "Losses", as used in this sentence, shall not include,
and Buyer shall not be responsible or liable for, any death, personal
injury, or consequential, exemplary or punitive damages in respect of
such breach.
11.05 MATTERS INVOLVING THIRD PARTIES.
(a) If any third party, which shall include any person, entity,
governmental or regulatory authority, shall notify either
Party (the "Indemnified Party") with respect to any matter
which gives rise to a claim for indemnification against the
other Party (the "Indemnifying Party") under this Article 11;
then the Indemnified Party shall promptly (and in any event
within ten (10) business days after receiving service of
process in a lawsuit, administrative proceeding or arbitration
proceeding with respect to the Third Party Claim) notify the
Indemnifying Party thereof in writing. Each of the matters
described in this Article 11.05(a) shall be referred to in
this Agreement as a "Third Party Claim".
(b) Except as provided in Article 11.06(c) hereof, any
Indemnifying Party will have the right to assume and
thereafter conduct the defense of the Third Party Claim with
counsel of its choice reasonably satisfactory to the
Indemnified Party; provided, however, that the Indemnifying
Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party
(not to be withheld unreasonably) unless the judgment or
proposed settlement involves only the payment of money damages
and does not impose an injunction or other equitable relief
upon (or constitute an admission of guilt, liability, fault or
responsibility for) the Indemnified Party. The Indemnified
Party shall have the right to employ separate counsel in any
such action and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of
the Indemnified Party unless (i) the employment thereof has
been specifically authorized in writing by the Indemnifying
Party ,(ii) the Indemnifying Party failed to assume the
defense and employ counsel or (iii) the Indemnifying Party is
also a party to the litigation, counsel chosen by the
Indemnifying Party to represent the Indemnified Party also
represents the Indemnifying Party and the Indemnified Party is
advised by counsel to the Indemnifying Party that a conflict
of interest exists between the Indemnifying Party and the
Indemnified Party, but only to the extent necessary to remove
the conflict.
(c) Unless and until an Indemnifying Party assumes the defense of
the Third Party Claim as provided in Article 11.05(b) above,
however, the Indemnified Party may defend against the Third
Party Claim in any manner it reasonably may deem appropriate
and shall be entitled to be indemnified against the cost of
such defense.
ASSET PURCHASE AND SALE AGREEMENT PAGE 29
30
(d) In no event will the Indemnified Party consent to the entry of
any judgment or enter into any settlement with respect to
the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), unless
the Indemnified Party waives indemnification with respect to
the Third Party Claim so settled and adjudicated.
(e) The indemnification obligations of Seller under this Agreement
(including Articles 11 and 13) and the indemnification
obligations of Buyer under this Agreement (including Articles
11 and 13) shall include court costs and attorney's fees and
expenses and costs of investigating, preparing or defending
any action or proceeding with respect to any Third Party Claim
to the extent such Third Party Claim may give rise to a claim
for indemnification under such indemnification obligations of
Seller or Buyer, as the case may be.
11.06 SELLER'S ENVIRONMENTAL INDEMNIFICATION.
(a) Seller agrees, subject to the limitations set forth in Article
11.03 and this Article 11.06, to indemnify, defend, and hold
harmless Buyer and Buyer's Affiliates, and each of their
respective current, former and future directors, officers,
employees, and agents, and each of the successors, heirs and
executors of any of the foregoing, from and against and in
respect of any and all Offsite Environmental Liabilities that
may be imposed upon, asserted against, or incurred by Buyer
(or any such other indemnified person in such person's
capacity set forth above) after the Closing Date, arising out
of or in connection with any matters occurring on or prior to
the Closing Date relating to the Assets, including, without
limitation, those matters described in Schedule 4.01 under
"Environmental Liabilities"; provided, however, that in the
event that the acts or omissions of any person after the
Closing Date caused or contributed to a pre-existing
circumstance or condition, then Seller's obligation to
indemnify, defend and hold Buyer harmless shall be reduced by
the Offsite Environmental Liabilities attributable to such
Post-Closing Date acts or omissions to the extent resulting
from such acts or omissions.
(b) As a limitation on Seller's indemnification obligations under
this Article 11.06, Seller shall be responsible for
Environmental Liabilities only to the extent that Buyer,
within the Survival Period, provides Seller notice of (i) the
specific facts and circumstances giving rise to such
Environmental Liabilities as a result of actions or claims
that Buyer reasonably believes have a basis of assertion ; or
(ii) a Third Party Claim giving rise to such Environmental
Liabilities (however, notice of a lawsuit or administrative
proceeding filed against Buyer prior to the end of such
Survival Period shall always be timely if Buyer gives Seller
notice thereof within ten (10) business days after being
served therewith).
(c) With respect to any Environmental Liability for which Seller
may be responsible, whether or not the Available Deductible
Amount has been reduced to zero, and which requires
corrective, remedial, or other actions necessary
ASSET PURCHASE AND SALE AGREEMENT PAGE 30
31
to respond to, remove, or otherwise address any conditions
that cause, contribute to, or are associated with such
Environmental Liability, Buyer will implement and complete or
cause to be implemented and completed all such corrective,
remedial, or other actions in a reasonable and professional
manner and will use its commercially reasonable efforts to
do so in a timely and cost-effective manner. Seller shall
have the right to participate in the planning and design of
any such corrective, remedial, or other actions by reviewing
and commenting on a draft of any study, plan or report
associated with such actions before the study, plan or report
is submitted to the governmental authority. Seller shall re-
view and comment on any draft study plan or report promptly.
In planning and designing any such study, plan or report and
in considering Seller's comments, suggestions and requests
with respect thereto, Buyer shall give due consideration to
the multiple goals of minimizing Environmental Liabilities
(including the selection of remedies which reflect customary
industry practices, are cost effective and consider all
related business and time requirements), avoiding
Environmental Liabilities and fully complying with all
Environmental Laws. Buyer shall in good faith carefully
consider each comment, suggestion or request made by Seller
with respect to the draft study, plan or report and will
cooperate with Seller by meeting periodically, at the request
of Seller, to discuss any such study, plan or report. Seller
shall maintain in confidence all information provided by Buyer
at any such meeting except to the extent such information is
otherwise available to the general public or is information
Seller is legally required to disclose, in which event Seller
shall give Buyer notice of such requirement and discuss same
with Buyer. In addition, Buyer shall provide Seller copies
of all reports, plans and correspondence submitted to any
governmental authority with respect to such actions. Further,
Buyer shall provide Seller three (3) days' notice (or shall
provide Seller notice as soon as practical if three (3) days
notice is not practical) of any formal meetings with, hearings
before, or other formal sessions with any governmental
authority which are expected to result in decisions regarding
actions to be required by the governmental authority that
concern Environmental Liabilities for which Seller may be
responsible and will not object to Seller's participation in
such meetings or hearings. Buyer shall have final authority
to make all decisions concerning any actions taken in
connection with an Environmental Liability and no action taken
by Buyer in the exercise of its good faith business judgement
shall limit the obligations of Seller under this Section
11.06.
(d) Buyer agrees that its sole remedy for Environmental
Liabilities that result from, arise out of, or are
attributable to the Assets will be pursuant to this Section
11.06, and Buyer hereby releases, waives, and disclaims any
and all rights of contribution, indemnification, or other
means of recovery from Seller under Environmental Laws,
including, without limitation, CERCLA.
11.07 DETERMINATION OF LOSSES. A claim for a loss or Environmental
Liability will be recoverable only to the extent of Losses and
Environmental Liabilities actually incurred
ASSET PURCHASE AND SALE AGREEMENT PAGE 31
32
or paid by the Indemnified Party. Without limiting the foregoing,
the Parties shall make appropriate adjustments for insurance
recoveries actually received (net of all costs and expenses incurred
in connection with such recoveries) and tax benefits or obligations
realized from non-Affiliates in determining Losses and Environmental
Liabilities for purposes of this Article 11 or Article 13. All
indemnification payments under this Article 11 shall be deemed
adjustments to the Purchase Price; provided, however, such
indemnification payments shall not be limited to the amount of the
Purchase Price.
11.08 EFFECT OF INDEMNIFICATION PROVISIONS. The Parties acknowledge and
agree that the foregoing indemnification provisions in this Article 11
and in Article 13 shall, following the Closing hereof, be the
exclusive remedy of either Party for any breach of the representations
and warranties in Article 4 hereof; provided that, the foregoing shall
not limit the Parties' obligations for any breach of a covenant or
agreement contained in any Article other than Article 4. If a claim
for payment of a liquidated amount covered by a Party's
indemnification obligations under this Agreement is made in accordance
with the terms of this Agreement and is not paid within sixty (60)
days after such claim is received by the Party responsible for paying
the same, the liquidated amount of such claim shall bear interest at
the Agreed Rate from the date such claim was received until paid.
11.09 NEGLIGENCE, ETC. IT IS EXPRESSLY AGREED THAT SELLER'S AND BUYER'S
RESPECTIVE INDEMNIFICATION OBLIGATIONS UNDER THIS ARTICLE 11, ARTICLE
13, OR UNDER ANY OTHER ARTICLE OF THIS AGREEMENT INCLUDE, WITHOUT
LIMITATION, LOSSES AND ENVIRONMENTAL LIABILITIES, IF ANY, BASED ON
NEGLIGENCE, ALLEGED NEGLIGENCE, GROSS NEGLIGENCE OR ALLEGED GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SELLER OR BUYER, AND THEIR
RESPECTIVE AFFILIATES, AND EACH OF THE RESPECTIVE CURRENT OR FORMER
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, STOCKHOLDERS AND CONTROLLING
PERSONS OF ANY OF THE FOREGOING.
ARTICLE 12
TERMINATION
12.01 TERMINATION OF AGREEMENT. The Parties may terminate this Agreement
at any time prior to the Closing as provided below:
(a) by mutual written consent; or
(b) in the event the Closing shall not occur on or before May 31,
1998, either Buyer or Seller may terminate this Agreement by
giving written notice thereof to the other Party on or after
May 31, 1998, and prior to Closing (unless the failure to
close results primarily from the Party that elects to
terminate itself breaching any covenant, representation or
warranty).
ASSET PURCHASE AND SALE AGREEMENT PAGE 32
33
12.02 EFFECT OF TERMINATION. If a Party terminates this Agreement
pursuant to Article 12.01 above, subject to Article 3.02, such
termination shall be the exclusive remedy for the breach by
the other Party of any representations or warranties hereunder
and all rights and obligations of the Parties hereunder shall
terminate without any liability or responsibility of a Party
to the other Party (except for application of the Xxxxxxx
Money Deposit pursuant to Article 3.02 and any liability of a
Seller for breach of its covenants or agreements hereunder);
provided, however, that the provisions of Article 15 shall
survive termination.
ARTICLE 13
POST CLOSING COVENANTS
The Parties agree as follows with respect to the period following the Closing:
13.01 SELLER'S OBLIGATIONS.
(a) RECORDS. As soon as practicable after Closing or, if
applicable, the termination of the Transition Agreement,
Seller shall deliver to Buyer, at Buyer's offices in Denver,
Colorado, all Records. Seller shall be entitled to retain,
or to obtain from Buyer at Seller's cost, one copy of all such
information for its records as may be reasonably necessary for
Seller to address matters relative to ownership and operation
of the Assets, including, without limitation, the preparation
of accounting and financial information, the filing of tax
returns and the pursuing or defending of litigation.
(b) SUSPENSE FUNDS. Also as soon as practicable after Closing,
Seller shall provide Buyer with a list showing all proceeds
from production attributable to the Assets which are currently
held in suspense and transfer to Buyer all such proceeds.
Buyer shall be responsible for distribution of such proceeds
to the parties lawfully entitled thereto, and agrees to
indemnify, defend and hold harmless Seller from and against
any and all claims, liabilities and Losses, arising out of or
relating to such proceeds.
(c) RESPONSIBILITY FOR LITIGATION. FROM AND AFTER THE EFFECTIVE
DATE, BUYER AGREES TO ASSUME AND TO INDEMNIFY AND HOLD
HARMLESS SELLER, SELLER'S AFFILIATES, EACH OF THE RESPECTIVE
CURRENT, FORMER, AND FUTURE DIRECTORS, OFFICERS, EMPLOYEES,
AND AGENTS OF ANY OF THE FOREGOING, AND EACH OF THE
SUCCESSORS, ASSIGNS, HEIRS, AND EXECUTORS OF ANY OF THE
FOREGOING FROM AND AGAINST THE ENTIRETY OF ANY LOSSES
RESULTING FROM, ARISING OUT OF, OR ATTRIBUTABLE TO THE
LITIGATION INSOFAR AS THE LITIGATION RELATES TO OR AFFECTS
THE ASSETS (OTHER THAN SELLER'S ATTORNEYS' FEES AND EXPENSES
AND COST OF INVESTIGATING, PREPARING OR DEFENDING THE
LITIGATION).
ASSET PURCHASE AND SALE AGREEMENT PAGE 33
34
13.02 BUYER'S OBLIGATIONS.
(a) RECORDING. Within thirty (30) days following Closing, Buyer
shall record those Conveyance Documents necessary to evidence
on the public record that Buyer has acquired the Assets and
within a reasonable time thereafter, Buyer shall supply Seller
with a true and accurate photocopy of the recorded and filed
Conveyance Documents. In the event Buyer fails to record any
such Conveyance Document within such time period, Seller may,
but shall not be obligated to, record such Conveyance Document
on Buyer's behalf and at Buyer's cost (for which Buyer shall
immediately reimburse Seller upon demand).
(b) REMOVAL OF NAMES. As soon as reasonably practicable after the
Closing, Buyer shall cause to be removed the names and marks
of Seller and any variations and derivations thereof and logos
relating thereto from all of the Assets, and will not
thereafter make any use whatsoever of such names, marks, and
logos; provided, however, that Buyer shall have no obligation
to remove such names or marks from any lease site or well
until such time as such names or marks are removed in the
ordinary course of Buyer's business. Buyer shall indemnify
Seller for any Losses it suffers as a result of Buyer's
non-removal of such names or marks after the Closing.
(c) RIGHT TO USE RECORDS. Seller reserves the right to use any of
the Records transferred to Buyer hereunder and Buyer agrees to
cooperate with Seller in granting reasonable access to such
Records, subject to Seller entering into a reasonable
confidentiality agreement.
(d) RESPONSIBILITY FOR ASSUMED LIABILITIES. FROM AND AFTER THE
CLOSING DATE, BUYER AGREES TO ASSUME ALL RESPONSIBILITY AND
LIABILITY FOR AND TO INDEMNIFY AND HOLD HARMLESS SELLER,
SELLER'S AFFILIATES, EACH OF THE RESPECTIVE CURRENT, FORMER,
AND FUTURE DIRECTORS, OFFICERS, EMPLOYEES, AND AGENTS OF ANY
OF THE FOREGOING, AND EACH OF THE SUCCESSORS, ASSIGNS, HEIRS,
AND EXECUTORS OF ANY OF THE FOREGOING FROM AND AGAINST THE
ASSUMED LIABILITIES. WITHOUT LIMITING ARTICLE 13.01(c) OR
BUYER'S RESPONSIBILITY FOR THE ASSUMED LIABILITIES, NOTHING
HEREIN SHALL GIVE BUYER ANY RIGHTS OR OBLIGATIONS IN RESPECT
OF THE DEFENSE OF THE LITIGATION, IT BEING EXPRESSLY
UNDERSTOOD THAT SELLER SHALL BE RESPONSIBLE FOR SUCH DEFENSE
IN THE EXERCISE OF ITS SOLE DISCRETION.
(e) RIGHTS TO THIRD PARTY CLAIMS.
Effective as of the Closing Date, Seller hereby assigns to
Buyer all claims of Seller for any (i) overcharges or improper
charges by any third party prior to the Effective Date
relating to the Assets; (ii) misappropriation or conversion by
any third party prior to the Effective Date of any oil, gas or
other hydrocarbons produced from or equipment or other
personal property relating
ASSET PURCHASE AND SALE AGREEMENT PAGE 34
35
to the Assets; (iii) underpayments by any third party prior to
the Effective Date of amounts due to Seller in respect of the
Assets; (iv) errors or omissions of any third party prior to
the Effective Date in respect of the Assets; and (v) gas
imbalances, being both over and under production relating to
the Xxxxx, including, without limitation, the imbalances
reflected on Exhibit "F", attached hereto. Seller's
assignment of claims will not include (i) outstanding accounts
receivable which are not overdue by more than six (6) months
as of the Effective Date; (ii) any claims pertaining to
Seller's fee mineral title or royalty interests; (iii) claims
for amounts which offset amounts owed by Seller in respect of
the same matter; (iv) claims arising from or attributable to
the Litigation; and (v) claims relating to taxes. Buyer
agrees to indemnify and hold harmless Seller, Seller's
affiliates, each of the respective current, former, and future
directors, officers, employees, and agents of any of the
foregoing, and each of the successors, assigns, heirs, and
executors of the foregoing from any and all Losses resulting
from or attributable to Buyer's exercise of the assigned
rights. Seller shall execute such further documents as Buyer
may request and which are reasonably necessary to confirm
Seller's assignment of rights to Buyer.
ARTICLE 14
EFFECT OF CLOSING
The following terms, provisions and prorations shall be effective at the
Closing:
(a) REVENUES. All proceeds from production, accounts
receivables, notes receivables, income, revenues, monies and
other items attributable to the Assets with respect to any
period of time prior to the Effective Date shall belong to and
be retained by or paid over to Seller. Except as provided in
Article 13.02(e), all proceeds from production, accounts
receivables, notes receivables, income, revenues, monies and
other items attributable to the Assets with respect to any
period of time from and after the Effective Date shall belong
to and be retained by or paid over to Buyer, except for
Hydrocarbons that, at the Effective Date, are attributable to
the Assets and are in storage or are otherwise held in
inventory and all proceeds attributable thereto.
(b) EXPENSES. All costs, expenses, accounts payable and accrued
liabilities attributable to the Assets with respect to any
period of time prior to the Effective Date, shall be the
obligation of and paid by Seller, and all necessary reports
with respect to such costs and expenses shall be filed by
Seller. All costs, expenses, accounts payable and accrued
liabilities attributable to the Assets with respect to any
period of time from and after the Effective Date shall be the
obligation of and be paid by Buyer.
(c) AD VALOREM AND PROPERTY TAXES. All ad valorem taxes, real
property taxes, personal property taxes and similar
obligations shall be apportioned as of the
ASSET PURCHASE AND SALE AGREEMENT PAGE 35
36
Effective Date between Buyer and Seller. All such taxes
allocable to the period prior to the Effective Date shall be
paid by Seller, and all such taxes allocable to the period
after the Effective Date and after shall be paid by Buyer.
Any refunds of taxes allocable to periods prior to the
Effective Date shall be the property of Seller. Seller shall
pay ad valorem taxes for 1998 based on 1997 production. Buyer
shall file or cause to be filed all required reports and
returns incident to such taxes which relate to any period
ending after the Effective Date, and shall pay or cause to be
paid to the taxing authorities all such taxes reflected on
such reports and returns, subject to Buyer's right to require
Seller to pay any portion thereof relating to a period prior
to the Effective Date under Article 14(g).
(d) SALES TAXES, FILING FEES, ETC. Buyer shall be liable for any
sales taxes or other transfer taxes, as well as any applicable
conveyance, transfer and recording fees, and real estate
transfer stamp or taxes imposed upon the sale of the Assets.
If Seller is required by applicable state law to report and
pay these taxes or fees, Buyer shall promptly deliver a check
to Seller in full payment thereof.
(e) OTHER TAXES. All production, severance or excise taxes,
conservation fees and other similar such taxes or fees (other
than income taxes) relating to production attributable to the
Assets prior to the Effective Date shall be paid by Seller and
all such taxes and fees relating to such production
attributable to the Assets on and after the Effective Date
shall be paid by Buyer.
(f) DELIBERATELY OMITTED.
(g) PAYMENTS; SHARED OBLIGATIONS. If amounts are received by
either Party hereto which, under the terms of this Article 14
belong to the other Party, such amount shall immediately be
paid over to the proper Party. If an invoice or other
evidence of an obligation is received which under the terms of
this Article 14 is partially the obligation of Seller and
partially the obligation of Buyer, then the Parties shall
consult each other and each shall promptly pay its portion of
such obligation to the obligee.
(h) POST-CLOSING ADJUSTMENTS. As soon as practicable after
Closing (and in no event more than ninety (90) days
thereafter), Seller shall prepare and deliver to Buyer, in
accordance with this Agreement and generally accepted
accounting principles, a statement (herein called the "Final
Settlement Statement"), setting forth each adjustment or
payment that was not finally determined as of the Closing or
in accordance with Article 14(g), above, and showing the
calculation of such adjustments. As soon as practicable
after receipt of the Final Settlement Statement, Buyer shall
deliver to Seller a written report containing any changes that
Buyer proposes be made to the Final Settlement Statement.
The Parties shall undertake to agree with respect to the
amounts due pursuant to such post-Closing adjustment no later
than ninety (90) days after Buyer's
ASSET PURCHASE AND SALE AGREEMENT PAGE 36
37
receipt of the Final Settlement Statement. The date upon
which such agreement is reached or upon which the Purchase
Price is finally established, shall be herein called the
"Final Settlement Date." In the event that the Purchase Price
as finally established (i) is more than the Closing Payment,
Buyer shall pay Seller or to Seller's account (as designated
by Seller) in immediately available federal funds the amount
of such difference; or (ii) is less than the Closing Payment,
Seller shall pay Buyer or to Buyer's account (as designated by
Buyer) in immediately available federal funds the amount of
such difference. Payment by Buyer or Seller shall be made
within five days after the Final Settlement Date. In the
event that the Seller and Buyer are unable to agree upon the
Final Settlement Statement within ninety (90) days after
Buyer's receipt of same, Buyer shall select one of Coopers &
Xxxxxxx, Deloitte and Touche or Price Waterhouse to audit the
Seller's Final Settlement Statement and determine the final
Purchase Price. If the accounting firm so selected is
unwilling or unable to serve for any reason, then Buyer shall
select one of the other above-listed accounting firms to
conduct such audit. The decision of the independent
accounting firm that conducts the audit shall be binding on
Buyer and Seller, and the fees and expenses of such
independent accounting firm shall be borne one-half each by
Buyer and Seller. Within five (5) days after the decision of
the independent accounting firm, Buyer or Seller, as the case
may be, shall promptly make a cash payment to the other equal
to the amount, if any, found due by the independent
accounting firm.
(i) PROCESS SAFETY MANAGEMENT. Buyer recognizes and acknowledges
that Process Safety Management of Highly Hazardous Chemicals;
Explosives and Blasting Agents (i.e., 29 CFR 1910)
(collectively "Process Safety Management") with respect to the
Assets is an ongoing process. Consistent herewith, Buyer
agrees to assume any and all obligations (including the
identification, evaluation and remediation) associated with
Process Safety Management as of the Closing Date and shall not
be entitled to claim the fact that Process Safety Management
is not complete or that additional cost will be required to
complete the Process Safety Management process as an Alleged
Title Defect, breach of Seller's representations and
warranties or breach of Seller's indemnity obligation under
this Agreement.
(j) PERMITTED ENCUMBRANCE. The fact that a debt or obligation is
secured by a Permitted Encumbrance shall not affect the
respective obligations of the Parties under this Agreement to
pay or perform such debt or obligation.
ARTICLE 15
CONFIDENTIALITY AGREEMENT
Each Party, its Affiliates and its and their directors, officers, employees,
agents, representatives, consultants, investors and lenders, agree to keep the
terms and conditions of this Agreement and all proprietary and confidential
information exchanged between Buyer and Seller in connection with this
Agreement, confidential, and to not disclose the existence
ASSET PURCHASE AND SALE AGREEMENT PAGE 37
38
of this Agreement for a period not to exceed one year from the Closing Date,
without the prior written consent of the other Party, which consent may be
withheld at either Party's sole discretion. The foregoing restriction shall
not apply to disclosures and information which (i) are required to comply with
applicable statutes and regulations; (ii) are required to enforce this
Agreement; (iii) are required to satisfy Transfer Requirements or Preference
Rights; (iv) are required to obtain financing related to the transactions
contemplated hereby; (v) enter the public domain through a third party who does
not thereby breach an obligation of confidentiality; or (vi) are made in
association with press releases issued in accordance with Article 19.01 hereof.
ARTICLE 16
CLOSING
16.01 SELLER'S CLOSING OBLIGATIONS. At Closing, Seller shall deliver or
cause to be delivered to Buyer the Conveyance Documents.
16.02 BUYER'S CLOSING OBLIGATIONS. At Closing, Buyer shall tender to
Seller the Closing Payment by wire transfer in immediately available
funds.
ARTICLE 17
CASUALTY LOSS AND CONDEMNATION
If, prior to the Closing Date, all or any portion of the Assets are destroyed
by fire or other casualty or are taken in condemnation or under right of
eminent domain or proceedings for such purpose are pending or threatened in
writing, Buyer may elect (i) to treat such destruction, taking or pending or
threatened taking as a Title Defect pursuant to Article 6 hereof, in which case
Seller shall retain any amounts that have been or will be paid to it by third
parties (including insurers) by reason of such destruction or taking; or (ii)
to purchase such Assets or portions thereof notwithstanding any such
destruction, taking or pending or threatened taking (without reduction in the
Preliminary Pur- chase Price with respect thereto), in which case Seller shall,
at the Closing, pay to Buyer all sums paid to Seller by third parties
(including insurers) by reason of the destruction or taking of such Assets, and
shall assign, transfer and set over unto Buyer all of Seller's right, title and
interest in and to any unpaid awards or other amounts due from third parties
(including insurers) arising out of the destruction, taking or pending or
threatened taking of such Assets or portions thereof. Prior to Closing,
Seller shall not voluntarily compromise, settle or adjust any amounts payable
by reason of any destruction, taking or pending or threatened taking as to the
Assets or portions thereof without first obtaining the written consent of
Buyer.
ARTICLE 18
PURCHASE RIGHTS AND CONSENTS
18.01 PURCHASE RIGHTS. Following execution of this Agreement by the
Parties, Seller shall send to each third party holding a Preference
Right, a notice offering to sell to such holders, in accordance with
the provisions of the agreement applicable to such Preference Right,
the Asset covered by such Preference Right on substantially the
ASSET PURCHASE AND SALE AGREEMENT PAGE 38
39
same terms hereof and for the value allocated by Buyer to such an
Asset on Exhibit "C". If a third party who has been offered an
interest in an Asset pursuant to a Preference Right makes a timely
election prior to Closing to purchase all or part of such Asset
pursuant to the aforesaid offer and Seller receives written notice of
such election at least two days prior to the Closing Date, the Asset
or part thereof so affected will be eliminated from the Assets and (i)
if all of such Asset is affected by the Preference Right, then the
Preliminary Purchase Price shall be reduced by the value of such Asset
set forth on Exhibit "C", or (ii) if only an interest in such Asset is
affected by the Preference Right, then the Preliminary Purchase Price
shall be reduced by the value of such interest determined in
accordance with the method set forth in Article 6.02(d) as if such
interest failed on account of a Title Defect. If such third party
has not made its election prior to Closing and the time to make such
election has not yet expired, the Asset or interest therein affected
shall be retained by Seller and the Preliminary Purchase Price shall
be reduced by (i) the value of such Asset set forth on Exhibit "C" if
all of such Asset is affected by such Preferential Right or, (ii) if
only an interest in the Asset is so affected, by the value of such
interest determined in accordance with the method set forth in Article
6.02(d). If the third party elects to purchase such Asset or
interest therein in accordance with its Preference Right following
Closing, Seller shall convey such Asset or interest therein to such
third party and shall retain the proceeds from such sale and
thereafter such Asset shall be deemed to be an Excluded Asset for
purposes of this Agreement; if the third party elects to waive its
right to purchase or the time to make such election expires, Seller
shall convey such Asset or portion thereof to Buyer and Buyer shall
pay Seller the amount of the reduction in the Preliminary Purchase
Price with respect thereto. Buyer agrees to indemnify and hold
Seller free and harmless from and against all Losses arising out of or
related to the value of an Asset or the Assets set forth in Exhibit
"C" with respect to a Preference Right.
18.02 CONSENTS. Seller will notify third parties that have Transfer
Requirements in order to comply with or attempt to obtain waivers of
such Transfer Requirements, except with respect to any Transfer
Requirements described in Article 18.03. If any Transfer Requirement
is not obtained, complied with or otherwise satisfied prior to the
Closing Date, any Asset or interest therein affected by such Transfer
Requirement shall, at the option of Buyer, be retained by Seller and
the Preliminary Purchase Price shall be reduced by (i) the value of
the Asset set forth on Exhibit "C" if all of such Asset is affected by
such Transfer Requirement or, (ii) if only an interest in the Asset is
so affected, by the value of such interest determined in accordance
with the method set forth in Article 6.02(d). If such Transfer
Requirement is obtained, complied with or otherwise satisfied
following Closing, Seller shall convey such Asset or portion thereof
to Buyer and Buyer shall pay Seller the amount of the reduction in the
Preliminary Purchase Price with respect thereto; otherwise, such Asset
shall be deemed to be an Excluded Asset for purposes of this
Agreement.
18.03 GOVERNMENTAL CONSENTS. At the Closing, Seller shall execute and
deliver to Buyer such assignment of federal, state and Indian leases
as require consent to assignment, on the forms required by the
governmental or tribal agency having jurisdiction thereof.
ASSET PURCHASE AND SALE AGREEMENT PAGE 39
40
Buyer shall promptly file for and obtain the necessary approvals for
such assignments. Until such approvals are obtained, Seller shall
continue to hold governmental title to such leases as nominee for
Buyer.
ARTICLE 19
MISCELLANEOUS
19.01 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. Neither Party shall issue
any press release or make any public an- nouncement relating to the
subject matter of this Agreement prior to the Closing without the
prior approval of the other Party, which approval shall not be
unreasonably withheld; provided, however, that either Party may make
any public disclosure it believes in good faith is required by
applicable law or any listing or trading agreement concerning its
publicly traded securities (in which case the disclosing Party will
use its reasonable best efforts to advise the other Party prior to
making the disclosure).
19.02 ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by
or between the Parties, written or oral, to the extent they have
related in any way to the subject matter hereof.
19.03 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties and their respective successors
and permitted assigns. Neither Party may assign either this
Agreement or any of its rights, interests, or obligations hereunder,
prior to Closing, without the prior written approval of the other
Party. If either Party assigns all or part of its rights or
delegates all or part of its obligations under this Agreement to one
or more third parties, it shall nevertheless remain responsible for
the implementation and enforcement of the remedies provided herein and
for the discharge and performance of the obligations provided herein.
19.04 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
19.05 HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
19.06 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Texas without giving
effect to any choice or conflict of law provision or rule (whether of
the State of Texas or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of
Texas.
ASSET PURCHASE AND SALE AGREEMENT PAGE 40
41
19.07 LEGAL FEES. The prevailing party in any legal proceeding brought
under or to enforce this Agreement shall be additionally entitled to
recover court costs and reasonable attorney's fees from the
nonprevailing party.
19.08 EXHIBITS. All exhibits and schedules hereto which are referred to
herein are hereby made a part hereof and incorporated herein by such
reference.
19.09 WAIVER. Any of the terms, provisions, covenants, representations,
warranties or conditions hereof may be waived only by written
instrument executed by the Party waiving the compliance. The failure
of either Party at any time or times to require performance of any
provisions hereof shall in no manner affect such Party's right to
enforce the same. No waiver by either Party of any condition or of
the breach of any term, provision, covenant, representation or
warranty contained in this Agreement, whether by conduct or otherwise,
in any one or more instances, shall be deemed to be construed as a
further or continuing waiver of any such condition or breach, or a
waiver of any other condition or of the breach of any other term,
provision, covenant, representation or warranty.
19.10 FURTHER ASSURANCES. After the Closing, each of the Parties will
execute, acknowledge, and deliver to the other such further
instruments, and take such other actions, as may be reasonably
requested in order to more effectively assure to said Party all of the
respective properties, rights, titles, interests, estates, and
privileges intended to be assigned, delivered, or inuring to the
benefit of such Party in consummation of the transactions contemplated
hereby.
19.11 RESIGNATION AS OPERATOR, ETC. Within a reasonable period of time
following the Closing, Seller shall execute and deliver to Buyer
appropriate letters resigning as the Operator of any of the Assets
that Seller is operating and other appropriate documents concerning
transfer of operations. Buyer acknowledges and agrees that Seller
cannot and does not covenant or warrant that Buyer shall become
successor operator of all or any portion of the Assets, since the
Assets or portions thereof may be subject to unit, pooling,
communitization, operating or other agreements which control the
appointment of a successor operator; provided, however, that Seller
agrees to use its reasonable best efforts to assist Buyer in becoming
successor operator.
19.12 NOTICES. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice given by fax
transmittal shall be deemed given upon confirmation of transmission of
the fax, provided that any attachments referenced in the notice are
also sent via fax at the same time; however, a party giving notice by
fax transmittal shall also send a hard copy of the notice, and any
attachments referenced therein, promptly by regular mail unless a
different type of mailing is required by this Agreement. Any notice,
request, demand, claim or other communication hereunder shall be
deemed duly given if (and then two business days after) it is sent by
registered or certified mail, return receipt requested, postage
prepaid, and addressed to the intended recipient as set forth below:
ASSET PURCHASE AND SALE AGREEMENT PAGE 41
42
IF TO SELLER: IF TO BUYER:
Union Pacific Oil & Gas Company United States Exploration, Inc.
000 Xxxxxx Xxxxxx 0000 Xxxxxxxx, Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000 Xxxxxx, Xxxxxxxx 00000
Attention: X. X. Xxxxxxx Attention: Xxxxx X. Xxxxxx
Manager, Divestitures Chairman, CEO, President
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Fax: (000) 000-0000 Fax: (000) 000-0000
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set
forth above using any other means (including personal delivery,
expedited courier, messenger service, telex, ordinary mail, or
electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until
it actually is received by the intended recipient. Any Party may
change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other
Party notice in the manner herein set forth.
19.13 DISCLAIMER OF REPRESENTATIONS AND WARRANTIES. Except as expressly
set forth in this Agreement and in Conveyance Documents delivered
pursuant to Article 16.01, the Parties hereto make no, and disclaim
any, representation or warranty whatsoever, whether express or
implied. Each Party hereto disclaims all liability and
responsibility for any other representation, warranty, statement, or
communication (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 officer, stockholder, director, employee, agent, consultant,
representative, engineer, engineering firm or contractor of such
disclaiming Party or its Affiliates, wherever and however made).
Without limiting the generality of the foregoing, Seller makes no
representation or warranty as to (a) the amount, value, quality, or
deliverability of petroleum, natural gas, or other reserves
attributable to the Assets or any portion thereof, or (b) any
geological, engineering, or other interpretations or economic
evaluations. EXCEPT AS EXPRESSLY PROVIDED IN ARTICLE 4.01(g), ALL
TANGIBLE PERSONAL PROPERTY, EQUIPMENT, FIXTURES AND APPURTENANCES
CONSTITUTING A PART OF THE ASSETS ARE SOLD AS IS, WHERE IS, 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 PUR- POSE,
(iii) CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, AND/OR (iv)
CONDITION. The Parties agree that the preceding disclaimers of
warranty are "conspicuous" disclaimers for purposes of any applicable
law, rule, or order.
19.14 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation and in any jurisdiction
shall not affect the validity or enforceability of
ASSET PURCHASE AND SALE AGREEMENT PAGE 42
43
the remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
19.15 TEXAS DECEPTIVE TRADE PRACTICES ACT WAIVER. Buyer (a) represents and
warrants to Seller that it (i) is acquiring the Assets for commercial
or business use, (ii) has assets in excess of $500,000, (iii) has
knowledge and experience in financial and business matters such that
enable it to evaluate the merits and risks of the transactions
contemplated by this Agreement and is not in a significantly disparate
bargaining position with respect to Seller, and (iv) is represented by
legal counsel in this transaction; and (b) hereby unconditionally and
irrevocably waives any and all rights or remedies it may have under
the Deceptive Trade Practices - Consumer Protection Act of the State
of Texas, Tex. Bus. & Com. Code Section 17.41 et seq., other than
any of the provisions of Section 17.555 of such Act, if such Act
would for any reason be deemed applicable to the transactions
contemplated hereby.
19.16 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns, and other persons given
rights of indemnification hereunder.
19.17 CONSTRUCTION. The Parties have participated jointly in the
negotiating and drafting of this Agreement. In the event ambiguity
or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the Parties and no presumption
or burden of proof shall arise favoring or disfavoring either Party by
virtue of the authorship of any of the provisions of this Agreement.
Any reference to any federal, state, local or foreign statute or law
shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the contexts requires otherwise. The word
"including" shall mean including, without limitation. If the date
specified in this Agreement for giving any notice or taking any action
is not a business day (or if the period during which any notices
required to be given or any action taken expires on a date which is
not a business day) then the date for giving such notice or taking
such action (and the expiration date for such period during which
notice is required to be given or action taken) shall be the next day
which is a business day.
ARTICLE 20
LIKE KIND EXCHANGE
20. LIKE KIND EXCHANGE. The Parties shall each have the option to
complete all or a portion of the transactions contemplated by this
Agreement as part of a like kind deferred exchange under Section 1031
of the Internal Revue Code of 1986, as amended (like kind exchange).
The Parties agree to cooperate in documenting and completing such
exchange, including, without limitation, consenting to an assignment
of all or a portion of a Party's rights, title, interest, duties or
obligations under this Agreement to a third party accommodator or a
qualified intermediary; provided, however, that neither party shall
incur any additional costs, obligations, or liability of any kind by
reason of the other Party's exercise of this option.
ASSET PURCHASE AND SALE AGREEMENT PAGE 43
44
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
SELLER'S SELLER:
TAX ID NO. 00-0000000
UNION PACIFIC RESOURCES COMPANY
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------
Xxxxxx X. Xxxxxxx
Attorney-in-Fact
BUYER'S BUYER:
XXX XX XX. 00-0000000
XXXXXX XXXXXX EXPLORATION, INC.
By: /s/ Xxxxx X. Xxxxxx
----------------------------
Xxxxx X. Xxxxxx
Chairman, CEO, President
ASSET PURCHASE AND SALE AGREEMENT PAGE 44
45
EXHIBITS
"A" Schedule of Xxxxx
"A-1" Leases to be Assigned
"A-2" Leases to be Issued
"B" Schedule of Upside Locations
"C" Purchase Price Allocation
"D-1" Assignment, Xxxx of Sale and Conveyance
"D-2" Oil and Gas Lease
"E" Transition Agreement
"F" Gas Imbalances
"G" Pertinent Contracts
46
EXHIBIT "A"
Schedule of Xxxxx
[List of xxxxx to be acquired]
47
EXHIBIT "A-1"
Leases to be Assigned
[List of existing leases in which Seller is lessee to be assigned to Buyer]
48
EXHIBIT "A-2"
Leases to be Issued
[List of fee mineral interests owned by Seller on which leases are to be issued
to Buyer]
49
EXHIBIT "B"
Schedule of Upside Locations
[List of upside locations to be acquired by Buyer]
50
EXHIBIT "C"
Purchase Price Allocation
[Allocation of purchase price among xxxxx acquired]
51
EXHIBIT "D-1"
Attached to and made a part of Asset Purchase Agreement,
dated April 9, 1998, by and between
UNION PACIFIC RESOURCES COMPANY, as Seller, and
UNITED STATES EXPLORATION, INC., as Buyer.
ASSIGNMENT, XXXX OF SALE AND CONVEYANCE
THIS ASSIGNMENT, XXXX OF SALE AND CONVEYANCE (the "Assignment") is
executed by UNION PACIFIC RESOURCES COMPANY, a Delaware corporation, whose
address is P. O. Xxx 0, Xxxx Xxxxx, Xxxxx 00000-0000 (hereinafter called
"Assignor"), to UNITED STATES EXPLORATION, INC., a Colorado corporation, whose
address is 0000 Xxxxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000 (hereinafter called
"Assignee"), dated effective at 7:00 a.m., local time, on January 1, 1998
(hereinafter called the "Effective Date"). Assignor and Assignee are sometimes
referred to collectively as the "Parties" or each individually as a "Party".
Capitalized terms used but not otherwise defined herein shall have the meanings
set forth in that certain Asset Purchase and Sale Agreement, dated April 9,
1998, (the "Agreement"), by and between Assignor and Assignee.
ARTICLE I
CONVEYANCE OF PROPERTIES
Assignor, for Ten and No/00 Dollars ($10.00) and other good and
valuable consideration in hand paid by Assignee, the receipt and sufficiency of
which is hereby acknowledged and confessed, by these presents does hereby GRANT,
BARGAIN, SELL, CONVEY, ASSIGN, TRANSFER, SET OVER AND DELIVER unto Assignee all
of Assignor's right, title and interest in and to the following described
properties (except to the extent constituting Excluded Assets, as herein
defined):
(I) The xxxxx for the production of crude oil, natural gas,
casinghead gas, coalbed methane, condensate, helium, xxxxxxx,
XX0, XX0, natural gas liquids and other gaseous and liquid
hydrocarbons or any combination thereof (all such substances
are collectively referred to as"Hydrocarbons"), which are
listed in Exhibit "A" hereto (the "Xxxxx");
(ii) The oil and gas leases or oil, gas and mineral leases
described on Exhibit "A-1" hereto (the "Leases") and all of
the lands covered by the Leases (the "Lands");
(iii) All unitization, communitization, pooling agreements, working
interest units created by operating agreements, and orders
covering the Lands, and/or lands pooled or unitized therewith,
or any portion thereof, and the units and pooled or
communitized areas created thereby (the "Units");
52
(iv) all of the tangible personal property, tools, machinery,
materials, pipelines, gas plants, gathering systems,
equipment, fixtures and improvements, which are incident or
attributable to the Xxxxx, Leases, Lands and/or Units, or with
the production, treatment, sale or disposal of Hydrocarbon or
water produced therefrom or attributable thereto, on the
Effective Date, less any Equipment sold in the ordinary course
of business since that date and replaced with equipment of
comparable or better value and utility, and plus such
replacement equipment (the "Equipment");
(v) All of the licenses, permits, contracts, agreements and other
instruments owned by Assignor (other than bonds posted by
Assignor) which concern and relate to any of the Xxxxx,
Leases, Lands, and/or Equipment, INSOFAR AND ONLY INSOFAR as
same concern or relate to the Xxxxx, Leases, Lands, and/or
Equipment, or the operation thereof; including, without
limitation, oil, gas and condensate purchase and sale
contracts; permits; rights of way; easements; licenses;
servitudes; estates; surface leases; farmin and farmout
agreements; division orders and transfer orders; bottomhole
agreements; dry hole agreements; area-of-mutual-interest
agreements; salt water disposal agreements; acreage
contribution agreements; operating agreements; balancing
agreements; unit agreements; pooling agreements; pooling
orders; communitization agreements; processing, gathering,
compression and transportation agreements; facilities or
equipment leases relating thereto or used or held for use in
connection with the ownership or operation thereof or with the
production, treatment, sale or disposal of Hydrocarbons; and
all other contracts and agreements related to the Xxxxx,
Leases, Lands, and/or Equipment;
(vi) All Records, and to the extent transferable, all other
contract rights, intangible rights (excluding Assignor's
trademarks and service marks), inchoate rights, chooses in
action, rights under warranties made by prior owners,
manufacturers, vendors or other third parties, and rights
accruing under applicable statutes of limitation or
prescription, attributable to the Assets; and
(vii) All payments, and rights to receive payments, with respect to
the ownership of the production of Hydrocarbons from or the
conduct of operations on the Assets and the interest to be
conveyed to Assignee hereunder accruing after the Effective
Date.
Assignor hereby EXCEPTS and RESERVES from this Assignment in favor of
itself, its successors and assigns, forever, the following rights, titles and
interests (collectively, the "Excluded Assets"), unless otherwise provided for
in the Agreement:
(I) All cash, deposits, checks, funds, accounts receivable, notes
receivable, or similar items attributable to the Assets with
respect to any period of time prior
53
to the Effective Date, except for those funds in suspense
accounts to be delivered to Assignee pursuant to the
Agreement;
(ii) All Hydrocarbon production from or attributable to the Assets
with respect to all periods prior to the Effective Date and
all proceeds attributable thereto, and all Hydrocarbons that,
at the Effective Date, are owned by Assignor and are above
pipeline connection and in storage or otherwise held in
inventory and all proceeds attributable thereto;
(iii) All fee mineral interests and fee royalty interests owned by
Assignor;
(iv) Assets conveyed to third parties pursuant to Preference Rights
or retained by Seller because of the failure to obtain, comply
with or otherwise satisfy a Transfer Requirement;
(v) For each Lease assigned hereunder, there is reserved to
Assignor an overriding royalty equal to the excess, if any, of
17.5% of 8/8ths of production from such Lease over the
aggregate burdens of record. In no event shall any overriding
royalty reserved by Assignor herein cause the net revenue
interest under a lease to be less than 82.5%. The overriding
royalty reserved hereby:
a. Shall be free and clear of all costs of production,
but shall bear its share of taxes applicable to said
interest and the production therefrom;
b. Shall be payable out of and only out of the oil and
gas produced, saved and marketed, pursuant to the
terms and provisions of the leases described in
Exhibit "A-1";
c. Shall not, in any event, be paid or accrued upon any
oil, gas, casinghead gas, and associated hydrocarbons
used for operating, development, or production
purposes benefitting the lands described on Exhibit
"A-1", or unavoidably lost; and no overriding royalty
shall be paid upon gas or casinghead gas used for
repressuring or recycling operations or pressure
maintenance operations benefitting said lands until
such gas or casinghead gas is sold;
d. Shall bear its proportionate share of actual incurred
arm's length transportation, separation, dehydration,
compression, gathering, treating, third party
marketing, processing costs and any other such costs
required to make the oil, gas, casinghead gas, and
associated hydrocarbons marketable; and
54
e. Shall be reduced proportionately if any oil and gas
lease described on Exhibit "A-1" covers less than the
full mineral estate and if Assignor conveys less than
the entire leasehold interest therein; and
(vi) All geophysical, seismic and other technical data and
interpretations.
The rights, titles and interests granted, bargained, sold, conveyed,
assigned, transferred, set over and delivered pursuant to this Article I are
herein collectively called the "Assets".
TO HAVE AND TO HOLD the Assets unto Assignee, its successors and
assigns, forever.
ARTICLE II
DISCLAIMER OF REPRESENTATIONS AND WARRANTIES;
PERMITTED ENCUMBRANCES
EXCEPT AS EXPRESSLY SET FORTH IN THE AGREEMENT, THE ASSETS ARE ASSIGNED AND
CONVEYED TO ASSIGNEE WITHOUT ANY WARRANTY OF TITLE, EITHER EXPRESS OR IMPLIED,
AND WHETHER BY COMMON LAW, STATUTE OR OTHERWISE, EXCEPT THAT ASSIGNOR HEREBY
WARRANTS GOOD AND DEFENSIBLE TITLE (AS DEFINED IN THE AGREEMENT) TO THE ASSETS
AGAINST ANY PERSONS OR PARTIES CLAIMING TITLE BY, THROUGH OR UNDER ASSIGNOR;
PROVIDED, HOWEVER, THIS ASSIGNMENT IS MADE WITH FULL SUBSTITUTION AND
SUBROGATION OF THE ASSIGNEE, AND ALL PERSONS CLAIMING BY, THROUGH AND UNDER
ASSIGNEE, IN AND TO ALL COVENANTS AND WARRANTIES BY THE ASSIGNOR'S PREDECESSORS
IN TITLE, AND WITH FULL SUBROGATION OF ALL RIGHTS ACCRUING UNDER THE STATUTES OF
LIMITATION OR PRESCRIPTION UNDER THE LAWS OF THE STATE IN WHICH THE ASSETS ARE
LOCATED. EXCEPT AS EXPRESSLY SET FORTH IN THE AGREEMENT, ALL PERSONAL PROPERTY,
EQUIPMENT, FIXTURES, AND APPURTENANCES CONSTITUTING A PORTION OF THE ASSETS ARE
ASSIGNED TO ASSIGNEE "AS IS, WHERE IS". WITHOUT LIMITATION OF THE GENERALITY OF
THE IMMEDIATELY PRECEDING SENTENCE, ASSIGNOR EXPRESSLY DISCLAIMS AND NEGATES ANY
REPRESENTATION OR WARRANTY, WHETHER EXPRESS OR IMPLIED, AND WHETHER BY COMMON
LAW, STATUTE, OR OTHERWISE, AS TO (A) MERCHANTABILITY, (B) FITNESS FOR A
PARTICULAR PURPOSE, (C) CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, AND/OR (D)
CONDITION, EXCEPT AS EXPRESSLY SET FORTH IN THE AGREEMENT.
ARTICLE II
MISCELLANEOUS
Section 3.01. Successors and Assigns. All of the provisions hereof
shall inure to the benefit of and be binding upon the respective successors and
assigns of Assignor
55
and Assignee. All references herein to either Assignor or Assignee shall include
their respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment to
be executed to be effective as of the Effective Date.
Assignor:
UNION PACIFIC RESOURCES COMPANY
By:
------------------------------------
Xxxxxx X. Xxxxxxx
Attorney-in-Fact
Assignee:
UNITED STATES EXPLORATION, INC.
By:
------------------------------------
Xxxxx X. Xxxxxx
Chairman, CEO, President
56
STATE OF TEXAS )
)
COUNTY OF TARRANT )
The foregoing instrument was acknowledged before me this 15th day of
May, 1998, by Xxxxxx X. Xxxxxxx, Attorney-in-Fact of UNION PACIFIC RESOURCES
COMPANY, a Delaware corporation, on behalf of the corporation.
Witness my hand and official seal.
---------------------------------
Signature
SEAL
---------------------------------
Name (Print)
My commission expires
------------
STATE OF )
----------- )
COUNTY OF )
-----------
The foregoing instrument was acknowledged before me this 15th day of
May, 1998, by Xxxxx X. Xxxxxx, Chairman, CEO and President of UNITED STATES
EXPLORATION, INC., a Colorado corporation, on behalf of the corporation.
Witness my hand and official seal.
---------------------------------
Signature
SEAL
---------------------------------
Name (Print)
My commission expires
------------
57
EXHIBIT "D-2"
ATTACHED TO AND MADE A PART OF ASSET PURCHASE AND SALE AGREEMENT, DATED APRIL 9,
1998, BY AND BETWEEN UNION PACIFIC RESOURCES COMPANY, AS SELLER, AND UNITED
STATES EXPLORATION, INC., AS BUYER.
OIL AND GAS LEASE
THIS LEASE made as of April 30, 1998, between UNION PACIFIC LAND
RESOURCES CORPORATION, a corporation, whose address is P. O. Xxx 0, Xxxx Xxxxx,
Xxxxx 00000-0000, as Lessor, and UNITED STATES EXPLORATION, INC., a corporation,
whose address is 0000 Xxxxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000, as Lessee.
W I T N E S S E T H :
(1) Lessor, for good and valuable consideration, receipt of which is hereby
acknowledged, and in consideration of the royalties herein provided and of the
agreement of Lessee herein contained and subject to the limitations herein
provided, grants, leases and lets unto Lessee for the purposes of investigating,
exploring, prospecting, drilling and mining for and producing oil and gas
[including, without limitation, nitrogen, carbon dioxide, hydrogen sulphide,
helium, and other gaseous substances (except steam) and products associated
therewith] and associated liquid hydrocarbons, and laying pipelines, building
tanks, power stations, telephone lines and other structures thereon to produce,
save, take care of, treat, refine, process, store, transport, own, sell and
dispose of said oil, gas and associated liquid hydrocarbons, ONE HUNDRED PERCENT
(100%) of Lessor's right, title and interest in and to the oil and gas in and
under the leased premises described as follows:
INSERT LEGAL DESCRIPTION
For shut-in royalty payment purposes, the land included in this lease shall be
deemed to contain __________________ acres, whether it actually comprises more
or less.
(2) This is a paid-up lease and there shall be no requirement for Lessee to
pay delay rentals.
(3) Subject to the other provisions herein contained, this lease shall be
for a primary term which expires at twelve o'clock (12:00) noon, Central Time,
on April 30, 2001, which term shall hereinafter be referred to as "the primary
term", and as long thereafter as oil, gas, or associated liquid hydrocarbons or
any of them are produced from the leased premises in paying quantities
hereunder, or drilling or reworking operations are conducted thereon under the
terms hereof.
(4) Subject to the right of election reserved to Lessor below to take its
share of production in kind, the royalties to be paid by Lessee are SEVENTEEN
AND ONE-HALF PERCENT (17.50%) of eight-eighths (8/8ths) of: (a) the greater of
the market value at the well or the amount realized from the sale of oil and
liquid petroleum products recovered at the well and (b) the market value at the
well of gas sold, used off the leased premises or delivered to Lessee at the
tailgate of the plant to which the gas is delivered, plus the market value of
the products recovered when such gas is processed; provided that on gas sold at
the well by Lessee in an arm's length transaction, the royalty shall be the same
percentage of the amount realized from such sale. For avoidance of doubt,
royalty is to be paid on all payments received by Lessee under or as a result of
a gas purchase contract, including, but not limited to reservation charges and,
subject to credit to Lessee when gas for which payment has been made earlier is
eventually produced, take-or-pay or contract settlement proceeds and amounts
paid for gas not
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58
taken. Lessee shall have free use of oil and gas from said land for operations
on the leased premises, and the royalty on oil and gas shall be computed after
deducting any production so used.
The royalties payable under this lease shall be free and clear of costs
or deductions for exploration, drilling, development, and production, including
but not limited to, costs of marketing, dehydration, storage, compression,
separation by mechanical means and stabilization of the hydrocarbons, but shall
include gathering and transportation costs required to transport the gas to the
plant. If Lessee treats and/or processes its gas in a natural gas plant (either
on or off the leased premises), whether in Lessee's plant or in the plant of and
under contract with a third party, Lessee shall treat and/or process or cause
Lessor's gas to be treated and/or processed. In the event of any such treating
and/or processing, Lessee shall be entitled to deduct from the value of the
products recovered by the treating and/or processing of the gas, or if Lessor is
taking its production in kind to charge Lessor for, the actual costs incurred by
Lessee for such treating and/or processing, which costs shall include gathering
or transportation costs required to transport the gas to the plant.
If there is a gas well on the leased premises or on land pooled
therewith capable of produc ing in paying quantities, but from which gas is not
being sold, and in the absence of oil or other production from the leased
premises or on land pooled therewith sufficient to maintain this lease in full
force and effect, this lease shall be extended for a period of ninety (90) days
from the date such well is or was shut-in, whereupon this lease shall terminate
unless Lessee shall pay to Lessor as royalty, a sum equal to One Dollar ($1.00)
per net acre covered by this lease, which payment shall be made to Lessor at
X.X. Xxx 0, Xxxx Xxxxx, Xxxxx 00000-0000, ATTN: Manager, Land Administration, on
or before the ninetieth (90th) day from and after the date on which such well is
or was shut-in, and annually thereafter a similar payment may be made on or
before the anniversary date on which such well was shut-in. If such payment, or
payments, are timely made, it shall be considered that gas is being produced in
paying quantities from the leased premises under all the terms and provisions of
this lease (but only for so long as the well continues to be capable of
producing in paying quantities); however, this lease may not be maintained by
shut-in payments more than three (3) (cumulative) years during any five (5) year
period.
Lessee shall be obligated to use diligence to market gas capable of
being produced in paying quantities from a shut-in well, but shall be under no
obligation to market same under terms, conditions or circumstances which are
unreasonable.
(5) Lessee may at any time execute and place of record a release or releases
covering any portion or portions of the above described leased premises,
furnishing a copy thereof to Lessor, and thereby surrender this lease as to such
portion or portions and be relieved as to the acreage surrendered of all
obligations not arising from activities of Lessee prior to said release. Upon
the expiration of any portion of this lease, Lessee shall promptly record an
appropriate, legally effective release or releases of said expired portion and
provide Lessor a copy of the recorded instrument within ninety (90) days of said
expiration.
(6) If Lessee is drilling a new well or reworking an old well at the
expiration of the primary term, this lease shall continue in force as long as
such drilling or reworking operations are prosecuted with no cessation of more
than ninety (90) days, and if such drilling or reworking operations result in
production of oil or gas or associated liquid hydrocarbons in paying quantities,
then for so long thereafter as such production in paying quantities continues or
this lease is otherwise maintained in full force and effect under the provisions
hereof. If production on this lease ceases after the expiration of the primary
term, this lease shall continue in force if drilling or reworking operations are
commenced within sixty (60) days after such cessation of production; and if
production is restored or new production is discovered as a result of any such
drilling or reworking operations, conducted without cessation of more than
ninety (90) days, this lease shall continue so long thereafter as production in
paying quantities, or additional drilling
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59
or reworking operations are had without cessation of such production, drilling
or reworking operations for more than ninety (90) consecutive days.
(7) At the expiration of the primary term, this lease shall terminate as to
all land which is not located in a drillsite spacing unit (as hereinafter
defined) in which there is a well on the leased premises or on land pooled
therewith, producing oil or gas in paying quantities, or a shut-in gas well, and
in any such producing drillsite spacing unit or units, this lease shall
terminate as to those depths lying below the stratigraphic equivalent of the
deepest producing horizon in each drillsite spacing unit of land. For purposes
hereof, drillsite spacing unit is defined as the minimum amount of land included
in the drilling and production unit established under then-existing rules
established by the state or federal regulatory authority having jurisdiction for
the then-productive formation of the well; if no unit or spacing rule exists,
then drillsite spacing unit shall be defined as the eighty (80) acre tract
surrounding an oil well or three hundred twenty (320) acre tract surrounding a
gas well. If Lessee is engaged in actual drilling or reworking operations on the
leased premises or land pooled therewith at the expiration of the primary term,
this provision shall be suspended for so long as Lessee continues such drilling
or reworking operations on the leased premises or land pooled therewith with no
cessation of more than ninety (90) consecutive days between the completion or
abandonment of such drilling or reworking operations on one (1) well, and the
commencement of actual drilling or reworking operations on the next well;
provided, further, that irrespective of any such continuous drilling or
reworking operations, the termination of this lease as to non-producing land and
depths shall not be suspended for more than five (5) years from the expiration
of the primary term hereof. If the leased premises are included in a Federal
Unit then for the purposes of this provision the references to land pooled with
the leased premises shall include only that land which is included in an
approved participating area.
(8) Lessee, at its option, is hereby given the right and power to pool or
combine the leased premises or any portion thereof, as to oil and gas, or either
of them, with any other land, lease or leases, when in Lessee's judgment it is
necessary or advisable to do so in order to properly develop and operate the
leased premises. Any such pooling shall be into a well unit or units not
exceeding eighty (80) acres, plus an acreage tolerance of ten percent (10%), for
oil, and not exceeding three hundred twenty (320) acres, plus an acreage
tolerance of ten percent (10%), for gas, except that larger units may be created
to conform to any spacing or well unit pattern that may be prescribed by state
governmental authorities having jurisdiction. Lessee may pool or combine acreage
covered by this lease, or any portion thereof, as above provided, as to oil or
gas in any one or more strata, and oil units need not conform as to area with
gas units. The pooling in one (1) or more instances shall not exhaust the right
of the Lessee hereunder to pool this lease or portions thereof into other units.
Lessee shall execute in writing and place of record an instrument or instruments
identifying and describing the pooled acreage. In order to be effective, Lessee
shall promptly furnish to Lessor a copy of the document pooling the acreage. The
entire acreage so pooled into a unit shall be treated for all purposes, except
the payment of royalties, as if it were included in this lease, and drilling and
reworking operations thereon, and production of oil and gas therefrom, or the
completion thereon of a well as a shut-in gas well, shall be considered for all
purposes, except the payment of royalties, as if such operations were on, or
such production were from, or such completion were on the leased premises,
whether or not the well or xxxxx be located on the leased premises. In lieu of
the royalties elsewhere herein provided, Lessor shall receive from a unit so
formed, only such portion of the royalty stipulated herein as the amount of its
net mineral acres placed in the unit bears to the total acreage so pooled in the
particular unit involved. Should any unit as originally created hereunder
contain less than the maximum number of acres hereinabove specified, then Lessee
may at any time thereafter, whether before or after production is obtained on
the unit, enlarge such unit by adding additional acreage thereto, but the
enlarged unit shall in no event exceed the acreage content hereinabove
specified. In the event an existing unit is so enlarged, Lessee shall execute
and place of record a supplemental declaration of pooling identifying and
describing the land added to the existing unit; provided, that if such
supplemental declaration of pooling is not filed until after
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60
production is obtained on the unit as originally created, then and in such event
the supplemental declaration of pooling shall not become effective until the
first day of the calendar month next following the filing thereof and the
furnishing to Lessor of a copy of such supplemental declaration. In the absence
of production, Lessee may terminate the unitized area by filing with Lessor and
of record a notice of termination.
(9) Insofar as Lessor may grant such right, Lessee shall have the right at
any time during the term of this lease or within six (6) months after the
expiration of this lease to remove all property and fixtures placed by Lessee on
the leased premises, including the right to draw and remove all casing.
(10) The rights of Lessor may be assigned in whole or in part. This lease may
not be assigned by Lessee in whole or in part, without the prior written consent
of Lessor, which consent shall not be unreasonably withheld, taking into account
such factors as the credit-worthiness and technical competence of the assignee
and/or the proposed number of assignees. Consent shall also be deemed reasonably
denied if Lessee refuses to accept responsibility for the performance of any of
its successors in interest. Notwithstanding the foregoing, Lessee may pledge
this Lease pursuant to a mortgage, credit agreement or other security document,
and any pledgee of this Lease may acquire this Lease upon foreclosure or by sale
or assignment in lieu of foreclosure, provided, however, that any assignment of
this Lease by the pledgee following such acquisition shall be subject to the
consent requirement set forth in this Section 10. Lessor shall have ten (10)
days from receipt of Lessee's request for consent to assign pursuant hereto to
respond. Lessor's failure to respond within such ten (10) days shall be deemed
consent to assign as requested by Lessee. Any attempted assignment by Lessee of
the rights arising under this lease without such consent shall be void and of no
effect. No change in the ownership of the land, or any interest therein, shall
be binding on Lessee or any purchaser of production hereunder, until Lessee
shall be furnished with a certified copy of all recorded instruments, all court
proceedings, and all other necessary evidence of any transfer, inheritance, or
sale of said rights. Unless provided otherwise in Lessor's approval of an
assignment to be made by Lessee, Lessee shall continue to be responsible to
Lessor for all unpaid sums then due to Lessor and obligations under Section 16
below with respect to the assigned portion or portions having to do with
activities conducted prior to the date of assignment. In addition, the
assignment of this lease, in whole or in part, shall not be valid as to Lessor
until Lessor shall have been furnished a true and correct certified copy of such
assignment. No change or division in ownership of the land, shut-in payments, or
royalties, however accomplished, shall operate to enlarge the obligations or
diminish the rights of Lessee.
(11) All express or implied covenants of this lease shall be subject to all
applicable laws, orders, rules or regulations, and this lease shall not
terminate, in whole or in part, nor shall Lessee be held liable in damages for
failure to comply therewith, if compliance is prevented by, or if failure is the
result of any applicable law, order, rule or regulation, or if prevented by an
act of God, of the public enemy, or labor strikes.
(12) Lessee at its option may discharge any tax, mortgage, or other lien upon
the leased premises, either in whole or in part, and in the event Lessee does
so, it shall be subrogated to any lawful and enforceable rights of the prior
creditor with the right to enforce same and apply shut-in payments and royalties
accruing hereunder towards satisfying same. Except as provided in the
immediately preceding sentence, Lessee shall not acquire or attempt to acquire,
directly or indirectly, from any person other than Lessor, any rights or
interests in the oil and gas estate in the leased premises or take any action
inconsistent with or adverse to the ownership and quiet enjoyment by Lessor of
its oil and gas estate in the leased premises. If Lessor owns an interest in the
leased premises less than the entire fee simple estate, or if this lease covers
less than Lessor's entire interest in the leased premises, then the shut-in
payments and royalties to be paid Lessor shall be reduced proportionately. If
any portion of the leased
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61
premises is included in a pooled unit, the amount of the shut-in royalty
applicable to the Lessor's interest therein shall be based upon the amount of
Lessor's net mineral acres included in any such pooled unit upon which such gas
well is situated.
(13) The rights granted under this lease are granted WITHOUT WARRANTY,
EXPRESS OR IMPLIED, and without covenants of title, including, without
limitation, covenants to give possession or for quiet enjoyment.
(14) Without the prior written consent of the owner thereof, Lessee shall not
make any entry upon or under any portion of any railroad right-of-way or station
grounds for any of the purposes of this lease, and shall not drill any well or
maintain any structures or facilities within two hundred feet (200') (by surface
or subsurface measurement) of: (a) any railroad tracks or buildings on such
right-of-way, or station grounds, or (b) any buildings upon the leased premises.
(15) Lessee shall be responsible for injury to or loss or destruction of
property, and for injury to or death or illness of any person, arising out of or
in connection with operations hereunder. Lessee expressly agrees to and shall
assume all obligations and responsibility with respect to being in,
establishing, achieving, documenting, or reporting full compliance with any and
all applicable laws, orders, rules, regulations, and standards with respect to
pollution, the continued operation and eventual plugging, replugging, and
abandonment obligations of any unplugged or improperly plugged xxxxx on the
leased premises or land pooled therewith.
(16) Without limiting the generality of Section 15, Lessee shall pay either
the tenant or the surface owner (whichever is appropriate) for any and all
damages to land, structures, roads, fences, gates, cattleguards, trees, growing
crops, irrigation facilities, equipment, and livestock caused by con struction,
operations, or maintenance of facilities, shall bury all pipelines below plow
depth where they cross cultivated land, shall construct gates where necessary
for crossing fenced lands and keep the gates in repair and closed. Lessee shall
not permit any lien or other encumbrance to be filed or to remain against the
leased premises as a result of operations hereunder. Irrespective of whether
Lessor has consented to an assignment, farmout or other arrangement whereby
Lessee consents to drilling or other operations on the leased premises by a
third party, Lessee shall be responsible for any and all claims, demands,
actions and causes of action or liens arising out of such operations, whether
arising in law, at equity or administratively.
(17) In the event of Lessee's breach of this lease, Lessor shall notify
Lessee by certified mail of such breach, and Lessee shall have thirty (30)
working days from the receipt thereof to comply with this lease. If Lessee fails
to remedy a material breach within the period above provided, and provided such
notice patently mentioned the termination rights next described, Lessor may, at
its option, promptly following such period terminate this lease and be relieved
from any obligation hereunder. If the parties are unable to agree upon whether
or not a breach is material, such determination shall be made by arbi tration.
If either party invokes its right to arbitration, then the parties shall attempt
to arbitrate the matter by selecting one arbitrator who is acceptable to both
parties. However, if the parties are unable to select one arbitrator who is
acceptable to both of them, then each party shall select one arbitrator, and the
two arbitrators so selected shall select a third arbitrator. If the arbitration
is handled by a single arbitrator, the parties shall each pay one-half (l/2) of
the fees of the arbitrator, as well as one-half (l/2) of the costs and expenses
of the arbitration, excluding the costs and expenses of either party's
representatives, witnesses and attorneys. If three arbitrators are selected,
each party shall bear the costs and expenses of the fees of the arbitrator it
selects, and the two parties shall each pay one-half (1/2) of the fees of the
third arbitrator, as well as one-half (1/2) of the costs and expenses of the
arbitration, excluding the costs and expenses of either party's representatives,
witnesses and attorneys. Unless otherwise specifically agreed by both parties in
writing, the rules and procedures set forth in the
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62
arbitration laws of the state in which the leased premises are located shall
govern the arbitration proceeding as fully as if all of such laws were set forth
in full herein. Irrespective of whether Lessor elects to terminate this lease or
exercise any other right or remedy under this lease or at law, Lessor shall be
entitled to other available remedies, including specific performance to require
Lessee to (a) abandon any well and/or restore the surface of the leased premises
to its condition existing prior to entry thereon by Lessee, (b) furnish any
reports required hereunder or information required hereunder from operations on
the leased premises or land pooled therewith, and/or (C) make any payment due
hereunder. Except as otherwise expressly provided in this lease, any notices or
other communications required or permitted hereunder shall be in writing and
shall be deemed given only when received by the party to whom the same is
directed at the address shown at the top of page 1 of this lease or to such
other address as is provided to the other party with proper notice. As to any
breach of this lease by Lessee or, except to the extent caused by the negligence
of Lessor, any claim or suit of a third party resulting from Lessee's activities
hereunder, Lessee shall indemnify and hold Lessor harmless against any expense,
including attorneys' fees and costs of court, preparation and investigation,
that Lessor would incur in enforcing its rights under this lease or defending
said third party claims.
(18) Subject to Section 10, all the provisions of this lease shall inure to
the benefit of and be binding upon the parties hereto, their successors and
assigns.
(19) This lease is subject to the exceptions and reservations set forth in:
(a) Quitclaim Deed(s), as applicable, dated as of April 1, 1971, from
Union Pacific Railroad Company to Union Pacific Land Resources
Corporation, filed for record April _____, 1971, and appearing in
Book_____, at Page _____, in the office of the County Clerk and
Register of Deeds of ________ County, _______________ (REC. No.
_______________) and
(b) Mineral Deed dated ____________________. 19___, from Union Pacific
Land Resources Cor poration to Lessor.
Lessee recognizes that among the exceptions and reservations set forth
in the above deeds are the rights of Lessor's predecessors in interest to use
such portions of the leased premises as may not be required for the proper
conduct of oil and gas operations for all purposes not inconsistent with such
operations and without liability for compensation or damages. Lessee shall so
conduct its operations so as not to interfere unreasonably with such reserved
use; provided, nevertheless, that such other use of the leased premises shall
not unreasonably interfere with the operations of the Lessee. UNLESS THE
REQUIREMENT IS WAIVED IN WRITING BY LESSOR AT ITS DISCRETION, NO ENTRY SHALL BE
MADE FOR DRILLING OPERATIONS AND NO FACILITY SHALL BE INSTALLED UPON ANY OF THE
LEASED PREMISES IN WHICH LESSOR OWNS THE MINERAL RIGHTS ONLY, UNTIL A WRITTEN
AGREEMENT WITH THE SURFACE OWNER HAS BEEN SECURED BY LESSOR, OR AT LESSOR'S
REQUEST, BY LESSEE, IN A FORM SATISFACTORY TO LESSOR. LESSEE SHALL REQUEST
LESSOR TO OBTAIN SUCH AGREEMENT OR TO WAIVE THE REQUIREMENT THEREFOR AT LEAST
THIRTY (30) DAYS PRIOR TO THE DATE LESSEE INTENDS TO COMMENCE SUCH OPERATIONS.
Payments out of or measured by production which the Lessor elects to pay to the
surface owners shall be paid by Lessor out of its royalty.
(20) Production in Kind: Lessor expressly reserves the right, at any time and
from time to time, to take in kind or separately dispose of its proportionate
share of all oil, gas, and related hydrocarbons produced from the leased
premises, or lands and leases unitized therewith. If Lessor elects, Lessee shall
deliver to Lessor in kind Lessor's royalty share of oil and other liquid
hydrocarbons saved at the well, into storage tanks on the leased premises;
products recovered in a processing plant, into storage tanks or onto storage
sites at the plant; and gas, at the tailgate of the plant, if processed, or at
the well if the gas is sold at the well. In the event of such election, Lessor
shall give to Lessee not less than sixty (60) days notice of its election and
shall take said royalty share in kind for a period of not less than six (6)
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63
months following the termination of said sixty (60) day period. Any deliveries
of production are to be made from Lessee's facilities at times and amounts which
equitably adjust deliveries between the parties.
(21) Oil Production: In addition to the rights reserved by Lessor in the
immediately preceding paragraph, Lessor and Lessee agree that Lessor shall have
the right, at any time and from time to time, upon not less than 30 days'
advance written notice to Lessee, to purchase all or any part of the oil (which
term as herein used shall include crude oil, distillate, condensate, and other
liquid hydrocarbons) produced and saved from or attributable to the leased
premises, on Lessor's standard division order terms. The price payable for the
oil contained in a delivery pursuant hereto shall not be less than the market
price in the field at the time of delivery for oil of like grade and gravity
produced in the same field in which the well is located. In the event oil is
found on the leased premises or on lands pooled therewith, Lessee shall
immediately notify Lessor in writing at Union Pacific Resources Company, ATTN:
Crude Oil Sales, P. O. Xxx 0, Xxxx Xxxxx, Xxxxx 00000-0000.
(22) Gas Production: Lessor and Lessee further expressly agree that in the
event gas is produced from or attributable to the leased premises, Lessor shall
have a right of first refusal to purchase any or all of such gas which is
attributable to the leased premises which Lessee is not selling under contracts
of a month's duration or less. Under such right of first refusal, Lessee shall
notify Lessor in writing of any bona fide offer for the purchase of its gas for
a term greater than a month which it is willing to accept, furnishing the terms
thereof, and Lessor shall have the right within 30 days of the receipt of such
notice and information to elect to purchase the gas on the same terms and
conditions as those contained in the bona fide offer. In the event Lessor elects
not to exercise its right to purchase under its right of first refusal, then
Lessee may, within 60 days thereafter, enter into a contract to sell the gas to
such purchaser in accordance with said bona fide offer. If, however, Lessee does
not timely enter into such contract with such purchaser (or if, for any reason,
a sale of gas pursuant to such contract is discontinued) then this right of
first refusal to purchase gas shall be reinstated subject to the terms and
conditions set forth herein. For purposes hereof, an offer shall not be
considered as a bona fide offer when the offer is made by an affiliated company
of Lessee.
In the event that after a reasonable time (not exceeding 30 days)
following the completion of a well capable of producing gas there is no bona
fide offer to purchase the gas which is to be produced from or attributable to
the leased premises, then Lessee shall notify Lessor in writing of that fact,
and Lessor shall have the right, but not the obligation, to purchase such gas at
the Market Price. As used herein the term "Market Price" shall mean the
arithmetic average of the prices reported in the first issue of the month of
delivery for the price references included in the Market Price Index applicable
to a point of delivery, to be designated by Lessee, less the transportation,
compression, gathering and other costs, if applicable, to deliver gas from such
point of delivery to the mainline transmission point or points where such Market
Price Index is established. As used herein, the term "Market Price Index" for a
particular point of delivery shall mean the published price references, to be
designated by Lessee, which reflect the price paid for gas sold under spot
contracts between unaffiliated third parties into one or more mainline
transmission systems which represent a market for the gas purchased by Lessee at
such point of delivery. If the parties disagree on which price references should
be included in the Market Price Index for a particular point of delivery, then
the determination of the proper price references for the Market Price Index
shall be submitted to arbitration. If Lessor does not make an offer to purchase
the gas, or does not elect to purchase the gas at the Market Price, then
Lessor's right of first refusal shall be reinstated with respect to any bona
fide offer subsequently received by Lessee. In the event gas is found on the
leased premises or on lands pooled therewith, Lessee shall immediately notify
Lessor in writing at Union Pacific Resources Company, ATTN: Natural Gas Sales,
P. O. Xxx 0, Xxxx Xxxxx, Xxxxx 00000-0000.
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64
If either party invokes its right to arbitration, then the parties shall
arbitrate the matter by selecting one arbitrator who is acceptable to both
parties. However, if the parties are unable to select one arbitrator who is
acceptable to both of them, then each party shall select one arbitrator, and the
two arbitrators so selected shall select a third arbitrator. If the arbitration
is handled by a single arbitrator, the parties shall each pay one-half (l/2) of
the fees of the arbitrator, as well as one-half (l/2) of the costs and expenses
of the arbitration. If three arbitrators are selected, each party shall bear the
expense of the fees of the arbitrator it selects, and the two parties shall each
pay one-half (1/2) of the fees of the third arbitrator, as well as one-half
(1/2) of the costs and expenses of the arbitration. The jurisdiction of the
arbitrators will be limited to determining which published price references are
consistent with the parties intent that the Market Price Index will reflect the
prices paid for gas sold under spot contracts between unaffiliated third parties
into mainline transmission systems which represent a market for the gas
purchased by Lessor at the point of delivery. Unless otherwise specifically
agreed to by both parties in writing, the rules and procedures set forth in the
Arbitration Laws of the State of Colorado shall govern the arbitration
proceeding as fully as if all of such laws were set forth in full herein.
(23) If Lessor fails to take its production in kind and Lessee sells such
production for the account of Lessor, Lessee shall use its best efforts to pay
Lessee within 45 days of its receipt of an executed division order. In the event
Lessee does not receive payment within 45 days after Lessee's receipt of the
executed division order, Lessor may elect to receive interest on the unpaid
proceeds in the amount provided under Colorado Revised Statutes Vol. 14, Sec.
34-60-118.5. Lessor reserves the right, but not the obligation, to collect from
the purchaser the proceeds from any sale of production from the leased premises
in order to insure the proper division thereof; after deducting the portion of
such proceeds to which Lessor and any other party may be entitled, Lessor shall
remit to Lessee its portion of the proceeds thus collected.
(24) Lessor reserves the right, but not the obligation, to collect from the
purchaser thereof the proceeds of production attributable to Lessor's interest
in the leased premises from any sale of production therefrom.
(25) Lessor shall be given fifteen (15) days notice prior to commencement of
all drilling operations. Lessor's representative (as appointed by Lessor) shall
have the right, at Lessor's risk, to have access to the xxxxxxx floor and to
observe all operations on all xxxxx drilled on the leased premises or land
pooled therewith. Lessee shall promptly furnish Lessor's representative with not
less than one copy of all applications and reports pertaining to the leased
premises, of each daily drilling report, and of each well log, core analysis or
other data taken from xxxxx located on the leased premises. Lessee agrees, at
Lessor's request, to furnish Lessor's representative true and correct
information pertaining to each well, the production therefrom [including true
and complete copies of all contracts or agreements (and all amendments and
modifications thereof) for sale, processing or other disposition of any product
produced from the leased premises] and such technical information as Lessee may
acquire with respect to sands and formations encountered. Lessor's
representative shall have the right to be present when xxxxx are tested and/or
tanks are gauged and shall have the right to examine all run tickets and to have
full information as to production and runs, including copies of all run tickets
upon request. In the event Lessee notifies Lessor in writing that Lessee
considers any such information or data to be confidential, Lessor agrees, until
the termination of this lease or for a period not to exceed the period that a
particular matter is held confidential by the state agency, whichever is the
shorter period of time, not to disclose such information or data to any
third-party unless such information or data previously has been available to or
examined by the third-party or otherwise generally available to the public or
any governmental authority or agency other than the state agency. This shall not
be interpreted to require Lessee to furnish Lessor or Lessor's representative
with any interpretive information or data; or any information or data which
Lessee is obligated to keep confidential.
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65
(26) All operations on the leased premises shall be conducted so as not to
damage any water supply. However, in the event Lessee's operations shall result
in damage or destruction of any water supply, Lessee promptly shall repair,
restore or replace any well, tank, surface pond or other water facility or any
water supply so damaged or destroyed as a result of Lessee's operations. Lessee
shall provide to Lessor and/or surface tenant emergency water and water
facilities for use in either's operations until
such damage or destruction is repaired, restored and replaced. The words
"damage" and "destroy" shall also be construed to include contamination.
Contamination is defined to mean the addition of substances to any water supply
used for human or animal consumption to a degree which renders the water supply
unfit for consumption by humans or animals, either during Lessee's operations or
after such operations have ceased. Without limitation of the general
requirements stated above, Lessee agrees, with reference to each well drilled on
the leased premises, either to (a) set and circulate cement around sufficient
surface casing to penetrate and adequately protect all fresh water sands; or (b)
set and circulate cement around surface casing in a manner and to a depth
acceptable to the state agency and, in the event a second string of casing
(either intermediate or production casing) is set in such well, circulate cement
around such second string of casing with cement circulated either to the surface
or into the surface casing previously set in such well; or (c) utilize such
other technique as may be acceptable to the state agency and in conformance with
accepted practices in the industry to assure the protection of the fresh water
sands by placing cement in the annulus between the fresh water sands and the
casing.
(27) In the event a well producing oil or gas in paying quantities is
completed on lands in which Lessor does not own all of the oil and gas mineral
estate within six hundred and sixty (660) feet of or draining the leased
premises, Lessee shall, unless Lessee has already drilled or is drilling a well
to the same zone or zones as are producing in the draining well and which a
prudent operator would consider to have previously satisfied or to soon satisfy
this offset obligation, within ninety (90) days after the commencement of
production from such draining well, commence the drilling or recompletion of an
offset well on the leased premises and shall make a good faith effort to
establish commercial production in the sands or formations from which the
draining well is producing. If at the time such offset obligation accrues,
Lessee shall be engaged in the drilling of another well on the leased premises,
then Lessee shall have not more than thirty (30) days after the date of
completion or abandonment of such other well drilled by Lessee within which to
commence the actual drilling of such offset well. If Lessee fails to timely
drill a required offset well, it shall promptly surrender this lease except as
to existing wellbores and reasonable use of the surface for ingress and egress,
operations in the immediate vicinity of the surface location of the xxxxx, and
necessary telephone, pipeline, and utility easements.
(28) In the event that Lessee, during the term of this lease, should conduct
geophysical activities upon the leased premises, Lessee shall promptly furnish
Lessor for the entirety of each survey, shot point plats and elevations,
observer's notes, surveyor's notes, copies of all field tapes, reproducible copy
and one print of each final stacked section for each line and copies of any
other processed or unprocessed data made available to Lessee.
(29) Lessee shall carry the following insurance in the indicated amounts:
(a) Comprehensive General Liability Insurance, including contractual
liability, with a combined single limit per occurrence of not less
than $1,000,000.00 for bodily injury and property damage.
(b) Comprehensive Automobile Insurance, including hired and non-owned
vehicles, with a combined single limit per occurrence of not less
than $1,000,000.00 for bodily injury and property damage.
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66
(c) Liability Umbrella (excess of underlying insurance coverage
mentioned above) with a combined limit per occurrence coverage of
not less than $10,000,000.
(d) Well Control Insurance including underground blowout, seepage and
pollution, with a minimum limit of $5,000,000.
Lessee shall require each independent contractor and subcontractor to
carry and maintain insurance at its own expense in amounts deemed necessary to
cover the risks inherent to the work or services to be performed by the
contractor or subcontractor. Every such insurance policy shall contain a waiver
on the part of the insurance carrier of all rights, by subrogation or otherwise,
against Lessor.
Lessor shall also be named as additional insured in each such policy.
(30) Lessor may, at any time, require Lessee to provide a bond(s) to ensure
timely and proper performance of Lessee's obligations hereunder and/or at law
for abandonment of well(s) and restoration of the leased premises and/or to
provide Lessor letter(s) of credit (which shall allow reduction as work is
performed) to ensure payment of contractors performing drilling or other
operations hereunder.
(31) If the leased premises are hereafter owned in severalty or in separate
tracts, the leased premises, nevertheless, shall be developed and operated as an
entirety, and royalties shall be paid to each separate owner in the proportion
that the acreage owned by said owner bears to the entire leased premises.
(32) Without the prior written consent of Lessor, Lessee shall not abandon
any well or (except when a replacement is made) remove from the wellbore any
well casing, tubing, piping, fittings, tanks, pipe lines or other material and
equipment which are necessary for the recovery and handling of production
capable of being recovered from said well upon the leased premises. If Lessor
takes over the well, Lessor shall promptly reimburse Lessee for the salvage
value of all material and equipment in the well or used or acquired in
connection with the well which Lessor elects to retain for its operations, less
the estimated costs of salvaging and less the estimated costs of plugging and
abandoning the well, and Lessee shall promptly deliver a xxxx of sale to Lessor
for such material and equipment. If Lessor takes over the well, then Lessee
shall be deemed to have relinquished and transferred back to Lessor, free of any
burdens created by Lessee, all of the right, title and interest of Lessee in the
wellbore, such material and equipment and the production therefrom. If the well
taken over by Lessor is the only well serving to perpetuate this lease, Lessee
shall release this lease to Lessor.
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67
IN WITNESS WHEREOF, this lease is executed on the date of the respective
acknowledgments hereinbelow, but shall be effective from the date first
hereinabove written.
UNION PACIFIC RESOURCES COMPANY
By:
-------------------------------------
Xxxxxx X. Xxxxxxx
Its: Attorney-in-Fact
UNITED STATES EXPLORATION, INC.
By:
-------------------------------------
Xxxxxxx X. Xxxxx
Its: Attorney-in-Fact
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68
STATE OF TEXAS )
)
COUNTY OF TARRANT )
The foregoing instrument was acknowledged before me this 30th day of April,
1998, Xxxxxx X. Xxxxxxx, Attorney-in-Fact of UNION PACIFIC RESOURCES COMPANY, a
Delaware corporation, on behalf of the corporation.
Witness my hand and official seal.
-------------------------------------
Signature
SEAL Name: XXXX XXXXXX
My commission expires: SEPTEMBER 21, 0000
XXXXX XX XXXXX )
)
COUNTY OF TARRANT )
The foregoing instrument was acknowledged before me this 30th day of April,
1998, by Xxxxxxx X. Xxxxx, Attorney-in-Fact of UNITED STATES EXPLORATION, INC.,
a Colorado corporation, on behalf of the corporation.
Witness my hand and official seal.
--------------------------------------
Notary Public
SEAL Name: XXXX XXXXXX
My commission expires: SEPTEMBER 21, 1998
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69
EXHIBIT "E"
Transition Agreement
[Ommitted]
70
EXHIBIT "F"
Gas Imbalances
[Listed positive and negative gas imbalances for xxxxx acquired]
71
EXHIBIT "G"
Pertinent Contracts
[List of contracts relating to oil and gas interests acquired]
