EXHIBIT 10.7
PURCHASE AND SALE AGREEMENT
BURRWOOD AND WEST DELTA 83 FIELDS
BETWEEN
XXXXXXXX PETROLEUM COMPANY, L.L.C. ("SELLER")
AND
XXXXXX OIL AND GAS ACQUISITION COMPANY, L.L.C. ("BUYER")
DATED AS OF MARCH 4, 2002
TABLE OF CONTENTS
ARTICLE 1 PURCHASE AND SALE......................................... 1
ARTICLE 2 PURCHASE PRICE AND ALLOCATION............................. 4
2.1 Purchase Price............................................ 4
2.2 Payment................................................... 4
2.3 Allocation of Purchase Price.............................. 4
2.4 Asset Classification...................................... 5
ARTICLE 3 ACCESS TO ASSETS AND DATA; DISCLAIMERS AND
REPRESENTATIONS........................................... 5
3.1 Access.................................................... 5
3.2 Disclaimer................................................ 6
3.2.1 Title............................................ 6
3.2.2 Other............................................ 7
3.2.3 Data............................................. 7
3.3 Representations of Seller................................. 8
3.3.1 Violations....................................... 8
3.3.2 Payment of Royalties and Taxes................... 8
3.3.3 Plugging Proposals............................... 9
3.3.4 Litigation....................................... 9
3.3.5 Percentage Interests............................. 9
3.3.6 Contracts........................................ 10
3.3.7 No Consents Required............................. 10
3.4 Seller Liabilities........................................ 10
ARTICLE 4 TITLE..................................................... 11
4.1 Title Defects............................................. 11
4.1.1 Adverse Claims................................... 11
4.1.2 Decreased Net Revenue Interest................... 12
4.1.3 Increased Working Interest....................... 12
4.1.4 Reversions....................................... 12
4.1.5 Consents and Preferential Rights................. 12
4.2 Notices................................................... 13
4.3 Remedies for Title Defects................................ 13
4.4 Threshold................................................. 14
ARTICLE 5 CLOSING................................................... 14
5.1 Closing Settlement Statement.............................. 14
5.2 Closing Date and Place.................................... 14
5.3 Closing Activities........................................ 15
5.3.1 Certificates..................................... 15
5.3.2 Assignment....................................... 15
5.3.3 Payment.......................................... 15
5.3.4 Possession....................................... 15
5.3.5 Letters-in-Lieu.................................. 16
5.4 Conditions to Closing..................................... 16
5.4.1 Seller's Conditions to Closing................... 16
5.4.2 Buyer's Conditions to Closing.................... 16
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ARTICLE 6 ADDITIONAL OBLIGATIONS.................................... 17
6.1 Recordation and Filing of Documents....................... 17
6.2 Records................................................... 18
6.3 Final Settlement Statement................................ 18
6.4 Further Assurances........................................ 19
ARTICLE 7 TAXES..................................................... 19
7.1 Property Taxes............................................ 19
7.2 Production Taxes.......................................... 20
7.3 Other Taxes............................................... 21
ARTICLE 8 OWNERSHIP OF PROPERTIES................................... 21
8.1 Distribution of Production................................ 21
8.2 Proration of Income and Expenses.......................... 22
8.3 Notice to Remitters of Proceeds........................... 23
ARTICLE 9 SELLER-OPERATED ASSETS.................................... 23
9.1 Standard of Care.......................................... 23
9.2 Operations................................................ 23
ARTICLE 10 RELATED AGREEMENTS, THIRD-PARTY NOTIFICATIONS
AND APPROVAL.............................................. 25
10.1 Related Agreements........................................ 25
10.2 Third Party Notifications and Approvals................... 26
10.3 Exchange Provision........................................ 26
ARTICLE 11 INDEMNITY................................................. 27
ARTICLE 12 ENVIRONMENTAL............................................. 28
12.1 Material Adverse Environmental Conditions................. 28
12.2 Environmental Indemnification............................. 30
ARTICLE 13 BUYER'S REPRESENTATIONS................................... 30
13.1 Intent of Acquisition..................................... 30
13.2 Information............................................... 31
13.3 Knowledge and Experience.................................. 31
13.4 Closing................................................... 31
ARTICLE 14 GAS IMBALANCES............................................ 31
14.1 Seller's and Buyer's Respective Obligations............... 31
14.2 Adjustment to Purchase Price.............................. 32
ARTICLE 15 CASUALTY LOSS............................................. 33
ARTICLE 16 AREA OF MUTUAL INTEREST................................... 34
ARTICLE 17 BROKER'S AND FINDER'S FEES................................ 35
ARTICLE 18 NOTICES................................................... 35
ARTICLE 19 DEFAULT................................................... 36
ARTICLE 20 TERMINATION............................................... 36
ARTICLE 21 ARBITRATION............................................... 37
21.1 Resolution of Disputes.................................... 37
21.2 Arbitration............................................... 38
21.3 Arbitration Procedures.................................... 39
21.4 Other..................................................... 40
ARTICLE 22 MISCELLANEOUS............................................. 40
22.1 Entire Agreement.......................................... 40
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22.2 Survival.................................................. 40
22.3 Choice of Law............................................. 41
22.4 Assignment................................................ 41
22.5 No Admissions............................................. 41
22.6 Third-Party Beneficiaries................................. 41
22.7 Public Communications..................................... 41
22.8 Headings.................................................. 42
22.9 Waiver.................................................... 42
22.10 Counterparts and Execution................................ 42
LIST OF EXHIBITS
Exhibit A shall include the following information:
(1) Identification of lands subject to this agreement;
(2) Restrictions, if any, as to depths, formations or
substances;
(3) Percentages or fractional interests of Assignors;
(4) Oil and gas leases and/or oil and gas interests subject
to this Agreement
(5) Right-of-Way Agreements
(6) Operating Agreements
(7) Unit Agreements
(8) Miscellaneous
(9) Surface Leases, Easement and Slant Well Permits
Exhibit B - Allocation of Purchase Price
Exhibit C - Xxxxx to be plugged and abandoned
Exhibit D - Lawsuits
Exhibit E - Form of Assignment
Exhibit F - Aggregate gas imbalance
Exhibit G - AMI boundaries
Exhibit H - Proportionate share of Acquired Interests
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PURCHASE AND SALE AGREEMENT
BURWOOD AND WEST DELTA 83 FIELDS
This Purchase and Sale Agreement ("Agreement"), made as of March 4, 2002
("Execution Date") by and between XXXXXXXX PETROLEUM COMPANY, L.L.C., a
Louisiana limited liability company, with a place of business at 000 Xxxxxx,
Xxxxx 0000, Xxxxxxx, Xxxxx 00000 ("Seller") and XXXXXX ENERGY COMPANY, L.L.C., a
Delaware limited liability company, with a place of business at Bay Street on
the Waterfront, Xxx Xxxxxx, Xxx Xxxx 00000 ("Buyer"). (Buyer and Seller are
sometimes referred to below individually as a "party" or collectively as "the
parties"):
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to
sell to Buyer, certain property on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, Buyer and Seller agree as follows:
ARTICLE 1
1. PURCHASE AND SALE
Seller agrees to sell to Buyer and Buyer agrees to buy from Seller,
effective as of 12:00 a.m., local time, where the Assets (as defined below) are
located on January 1, 2002 (the "Effective Time"), for the consideration recited
and subject to the terms and conditions set forth below, the undivided interests
set forth below in and to the following:
a. An undivided thirty percent (30%) interest in the "shallow
rights" (as described in Exhibit A) and an undivided fifteen
percent (15%) interest in the "deep rights" (as described in
Exhibit A), under the leasehold estates
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created by the oil and gas leases described in Exhibit A hereto
(the "Leases") and the lands covered thereby (the "Lands"),
together with all overriding royalty interests, production
payments and other payments out of or measured by the value of
oil and gas production from or attributable to the Leases;
b. An undivided thirty percent (30%) interest in the oil and gas
xxxxx located on the Leases hereto and any other wellbores,
plugged or unplugged, shut in, or permanently or temporarily
abandoned that are located on the Leases (the "Xxxxx");
c. An undivided thirty percent (30%) interest in all of the
personal property, fixtures and improvements appurtenant to the
Xxxxx, or the Leases or used or obtained in connection with the
operation of the Xxxxx, or the Leases or with the production,
treatment, sale or disposal of hydrocarbons or water produced
therefrom or attributable thereto, including without limitation,
salt water disposal xxxxx, pipelines, gathering lines and
systems and compression facilities appurtenant to or located
upon the Leases (the "Personalty");
d. An undivided thirty percent (30%) interest in all oil, gas and
other hydrocarbons produced from or attributable to the "shallow
rights" under the Leases after the Effective Time and proceeds
from the sale thereof and an undivided fifteen percent (15%)
interest in all oil, gas and other hydrocarbons produced from or
attributable to the "deep rights" under the
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Leases after the Effective Time and proceeds from the sale
thereof ("Hydrocarbons");
e. To the extent transferable, an undivided thirty percent (30%)
interest in all agreements, product purchase and sale contracts,
surface leases, gas gathering contracts, salt water disposal
leases, processing agreements, compression agreements, equipment
leases, permits, rights-of-way, easements, licenses, farmouts
and farmins, options, orders, pooling, spacing or consolidation
agreements and operating agreements, including rights of
operatorship thereunder, and all other agreements relating to
the Xxxxx, Leases, Hydrocarbons and Personalty (the
"Contracts");
f. To the extent transferable at no cost or liability to Xxxxxxxx,
an undivided thirty percent (30%) interest in all seismic
licenses, permits and all other rights to geological and/or
geophysical data and information relating to the Xxxxx, Leases,
Hydrocarbons and Personalty (the "Seismic Rights");
g. An undivided thirty percent (30%) interest in that certain
escrow account no. 5149 at Compass Bank, Texas, Houston, Texas,
and a like interest in all proceeds therein, as more fully
described on Exhibit A (the "Escrow Account"); and
h. An undivided thirty percent (30%) interest in all the property,
rights, privileges, benefits and appurtenances in any way
belonging to, incidental to, or appertaining to the property,
interests and rights described above, including the Xxxxx,
Leases, Personalty, Lands, Contracts, Hydrocarbons and Seismic
Rights (the "Benefits").
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Such undivided interests in the Xxxxx, Leases, Lands, Personalty, Contracts,
Hydrocarbons, Seismic Rights, Escrow Account and Benefits are hereinafter
referred to as the "Assets." To the extent any of the Contracts, Seismic Rights
or Benefits relate to the "deep rights" (as described in Exhibit A), the
undivided interest to be transferred to Buyer shall be limited to fifteen
percent (15%). The applicable files, records and data (or copies thereof),
directly relating to the Assets including, without limitation, land and lease
files, well files, title records including abstracts of title, title opinions,
production records, all logs including electric logs, core data, pressure data
and decline curves and graphical production curves and all related materials in
the possession of Seller are hereinafter referred to as the "Records".
ARTICLE 2
2. PURCHASE PRICE AND ALLOCATION
2.1 Purchase Price - Buyer agrees to pay for the Assets the total
sum of Twelve Million Dollars (US $12,000,000) ("Purchase
Price") in cash, subject only to any price adjustments, as set
forth in this Agreement.
2.2 Payment - The Purchase Price shall be paid at Closing, by wire
transfer in immediately available funds, to Xxxxxxxx Petroleum
Company, L.L.C., Account No. 00000000, Compass Bank, Houston,
Texas, ABA #000000000.
2.3 Allocation of Purchase Price - Seller and Buyer agree that the
Purchase Price shall be allocated among the Assets as set forth
on Exhibit B, Parts I and II (the "Allocated Value") for the
purpose of (i) establishing a basis for certain taxes, (ii)
obtaining waivers of any preferential rights to
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purchase the Assets, (iii) determining the value of a Title
Defect, and (iv) handling those instances for which the Purchase
Price is to be adjusted. As used hereinafter, the term
"Property" shall mean and refer to any one of the individual
properties listed on Exhibit B to which an Allocated Value has
been assigned.
2.4 Asset Classification - Seller and Buyer recognize that reporting
requirements as imposed by Section 1060 of the Internal Revenue
Code of 1986 and the regulations thereunder (the "Code") may
apply to the transaction contemplated by this Agreement. Seller
and Buyer mutually agree that the Assets sold by Seller to Buyer
are Class V assets, and such classification shall be used by
Seller and Buyer for the purposes of Section 1060 of the Code.
Seller and Buyer also agree that the Purchase Price allocation
set forth in Exhibit B shall satisfy the requirements of the
Code and shall be used in preparing Internal Revenue Service
Form 8594.
ARTICLE 3
3. ACCESS TO ASSETS AND DATA; DISCLAIMERS AND REPRESENTATIONS
3.1 Access - Notwithstanding Buyer's prior opportunity to inspect
and inventory the Assets and to review information regarding the
Assets, promptly after execution of this Agreement and upon
request of Buyer, Seller shall provide Buyer and Buyer's
authorized representatives, at any reasonable time(s) during the
Due Diligence Period (defined below) (i) physical access to the
Lands, Xxxxx, and Personalty on or associated with the Leases or
other Assets that are Seller-operated, at Buyer's sole risk,
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cost and expense, to inspect and to conduct any Phase I or other
environmental audits of the same and (ii) access to the
Contracts, Seismic Rights and Records, to the extent such items
are in Seller's possession and relate to the Assets; provided,
however, Seller shall have no obligation to provide Buyer access
to any interpretative or predictive data or information which
Seller believes in good faith it cannot lawfully provide Buyer
because of third-party restrictions (to the extent any such data
or information is subject to third-party restrictions, Seller
will use its good-faith efforts to obtain any consents necessary
to allow Buyer to review such data or information). No warranty
or representation of any kind is made by Seller, as to the
information supplied, and Buyer agrees that any conclusions
drawn therefrom shall be the result of its own independent
review and judgment.
3.2 Disclaimer - Buyer specifically understands and acknowledges the
following:
3.2.1 Title - Title to the Assets shall be transferred and
conveyed without representation or warranty of title,
express or implied, except as to claims arising by,
through or under Seller. Upon consummation of the
transactions contemplated by this Agreement, Buyer
assumes the risk of any title defects and/or conflicting
adverse right(s), title(s) and/or interest(s), except
for claims arising by through or under Seller.
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3.2.2 Other - SELLER EXPRESSLY DISCLAIMS ANY WARRANTY,
EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE OR
OTHERWISE, AS TO THE CONDITION OF THE ASSETS INCLUDING
(i) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY
OR OF FITNESS FOR A PARTICULAR PURPOSE OR OF FREEDOM
FROM HIDDEN DEFECTS, (ii) ANY IMPLIED OR EXPRESS
WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF
MATERIALS, AND (iii) ANY IMPLIED OR EXPRESS WARRANTY AS
TO THE ENVIRONMENTAL CONDITION OF THE ASSETS, IT BEING
EXPRESSLY UNDERSTOOD BY BUYER THAT THE ASSETS, INCLUDING
ALL PERSONAL PROPERTY, FIXTURES AND ITEMS ARE BEING
CONVEYED TO BUYER AS IS, WHERE IS, WITH ALL FAULTS, AND
IN THEIR PRESENT CONDITION AND STATE OF REPAIR AND THAT
BUYER HAS BEEN GIVEN THE OPPORTUNITY TO MAKE OR CAUSE TO
BE MADE SUCH INSPECTIONS AS BUYER DEEMS APPROPRIATE.
3.2.3 Data - EXCEPT AS EXPRESSLY PROVIDED IN SECTION 3.3
HEREOF, SELLER MAKES NO WARRANTY OR REPRESENTATION,
EXPRESSED OR IMPLIED, AS TO THE ACCURACY OR COMPLETENESS
OF ANY DATA, INFORMATION, OR MATERIALS HERETOFORE OR
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HEREAFTER FURNISHED TO BUYER IN CONNECTION WITH THE
ASSETS, OR AS TO THE QUALITY OR QUANTITY OF HYDROCARBON
RESERVES (IF ANY) ATTRIBUTABLE TO THE OIL AND GAS
INTERESTS OR THE ABILITY OF THE ASSETS TO PRODUCE
HYDROCARBONS. ANY AND ALL SUCH DATA, INFORMATION, AND
OTHER MATERIALS FURNISHED BY SELLER IS PROVIDED TO BUYER
AS A CONVENIENCE, AND ANY RELIANCE ON OR USE OF THE SAME
SHALL BE AT BUYER'S SOLE RISK.
3.3 Representations of Seller - Seller represents as follows:
3.3.1 Violations - To the best of Seller's knowledge, Seller
and its predecessors in title have complied with all
laws, statutes, regulations or orders applicable to any
of the Xxxxx, Leases, Lands, Personalty, Contracts,
Hydrocarbons, Seismic Rights or Benefits or to the
operation thereof, noncompliance with which might
materially and adversely affect the value of the Assets
or prevent, frustrate, interfere with or hinder the
transactions contemplated by this Agreement.
3.3.2 Payment of Royalties and Taxes - To the best of Seller's
knowledge, all royalties and all ad valorem, property,
production, severance and similar taxes with respect to
the Assets which accrued during the period when Seller
owned the Assets and prior
8
to the Effective Time, have been properly and fully
paid, or are included within the suspense amounts
tendered to Buyer.
3.3.3 Plugging Proposals - To the best of Seller's knowledge,
a complete list of Xxxxx included within the Assets and
the status of each well is shown on Exhibit A. There are
no unplugged xxxxx which are currently required to be
plugged under applicable governmental regulations as of
Closing or for which Seller has received and/or
generated an AFE for plugging.
3.3.4 Litigation - To the best of Seller's knowledge, Exhibit
C contains a list of all pending lawsuits involving the
Assets.
3.3.5 Percentage Interests - Upon consummation of the
transactions contemplated hereby and subject only to the
adjustments expressly provided for herein, Buyer will
own an undivided thirty percent (30%) interest in the
"shallow rights" (defined on Exhibit A attached hereto)
and an undivided fifteen percent (15%) interest in the
"deep rights" (defined on Exhibit A attached hereto) in
the Leases together with an undivided thirty percent
(30%) interest in the Xxxxx. Such interests (i) entitle
Seller to receive not less than the undivided net
revenue interests set forth in Exhibit A under the
heading, "NRI", in hydrocarbons produced, saved and sold
from the Lands under the terms of the Leases; and (ii)
obligate Seller to bear and pay no more of the costs and
expenses of the development
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and operation of the Lands than the undivided working
interests set forth in Exhibit A under the heading,
"WI".
3.3.6 Contracts - To the best of Seller's knowledge, the
exhibits attached to this agreement contain an accurate
and complete listing of all Contracts affecting the
Assets, and all such Contracts are presently valid,
subsisting and in full force and effect in all material
respects.
3.3.7 No Consents Required - To the best of Seller's
knowledge, except as set forth in Exhibit A or consents
required from state, federal or other governmental
authority as part of an ordinary course transfer or
which are customarily obtained after closing, no
preferential rights, consents, approvals or other action
is required in connection with the execution, delivery
and performance by Seller of this Agreement.
3.4 Seller Liabilities - NOTWITHSTANDING ANYTHING HEREIN TO THE
CONTRARY, SELLER SHALL BE RESPONSIBLE FOR ANY AND ALL ROYALTIES
RELATING TO PERIODS OF TIME PRIOR TO THE EFFECTIVE TIME.
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, SELLER SHALL BE
RESPONSIBLE FOR ANY AND ALL PROPERTY, OCCUPATION, SEVERANCE, AD
VALOREM, PERSONAL PROPERTY TAXES, AND SIMILAR CHARGES ON ANY OF
THE ASSETS, INSFOAR AS SAME RELATE TO PERIODS OF TIME PRIOR TO
THE EFFECTIVE TIME.
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ARTICLE 4
4. TITLE
4.1 Title Defects - Buyer shall notify Seller in writing of any
Title Defect affecting any Property as soon as possible after
discovering the Title Defect but, in any event, within fifteen
(15) days after Execution Date (the "Due Diligence Period"). For
the purpose of this Agreement, a "Title Defect" shall mean a
material deficiency which individually per Property diminishes
the value of that Property by at least Five Thousand Dollars (US
$5,000) in one (or more) of the following respects:
4.1.1 Adverse Claims - Seller's title as to all or part of any
Property is subject to (i) an outstanding mortgage deed
of trust, lien or other security interest; (ii) a
pending cause of action in which a competing ownership
interest in any Property is claimed or implied; or (iii)
other adverse claim not disclosed on Exhibit A which, if
brought to the attention of a purchaser of production
from such Property, would be likely to cause such
purchaser of production to suspend payment of proceeds
from such Property. Notwithstanding the above, all
irregularities of title that would not reasonably be
expected to result in claims that would materially and
adversely affect Seller's title to any Property shall
not be considered a Title Defect, including, but not
limited to: (i) defects in the early chain of title
consisting of failure to recite marital status or the
omission of succession or heirship proceedings; (ii)
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defects or irregularities arising out of prior oil and
gas leases which, on their face, expired more than ten
(10) years prior to the Effective Time, and which have
not been released of record; (iii) defects or
irregularities arising out of mortgages or deeds of
trust which, by their terms, matured more than ten (10)
years prior to the Effective Time but which remain
unreleased of record; (iv) defects or irregularities
arising out of the lack of a survey; (v) defects or
irregularities arising out of the lack of recorded
powers of attorney from corporations to execute and
deliver documents on their behalf; and (vi) defects and
irregularities cured by possession under applicable
statutes of limitation and statutes relating to
prescription.
4.1.2 Decreased Net Revenue Interest - Seller owns less than
the net revenue interest shown on Exhibit A for a
particular Property.
4.1.3 Increased Working Interest - Seller owns more than the
working interest shown on Exhibit A for a particular
Property without a proportionate increase in the
corresponding net revenue interest shown on Exhibit A.
4.1.4 Reversions - A Property is subject to reduction by the
exercise by a third party of a reversionary, back-in, or
other similar right not reflected in Exhibit A.
4.1.5 Consents and Preferential Rights - A Property is subject
to a consent to assign which consent has not been
obtained (other than
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consents or approvals from governmental authorities
which are typically obtained after Closing), or is
subject to a preferential right to purchase which right
has been exercised or has not been waived.
4.2 Notices - Upon discovery of a Title Defect, the Buyer shall
immediately notify the Seller in writing of the nature of the
Title Defect. Any defect or deficiency not asserted by Buyer
during the Due Diligence Period shall be deemed waived by Buyer
for all purposes.
4.3 Remedies for Title Defects - Seller may elect to cure any or all
Title Defects; provided, however, if a Title Defect is a lien,
encumbrance or other charge which is liquidated in amount,
Seller reserves the option to retain the obligation of this
Title Defect and to challenge the validity of any such Title
Defect or any portion thereof and to hold Buyer harmless with
regard thereto. In such event, Seller will provide a bond or
other instrument necessary to remove the effect of the lien or
encumbrance from the Properties. Buyer agrees to cooperate with
Seller in such efforts at no risk or expense to Buyer. With
these exceptions, if the Seller is unable or unwilling to cure a
Title Defect, then the parties may agree, (a) to remove that
portion of the Properties affected by the Title Defect from the
Properties being conveyed and reduce the Purchase Price by the
portion of the Allocated Value set forth on Exhibit B
attributable to such affected Properties or (b) for Seller to
provide Buyer an indemnity reasonably acceptable to Buyer, as to
claims arising from the Title Defect.
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4.4 Threshold - Notwithstanding the provisions set forth above, a
Title Defect shall not result in an adjustment in the Purchase
Price unless, and only to the extent that, the aggregate net
value of all Title Defects is greater than Fifty Thousand
Dollars (US $50,000) (the "Threshold Amount"). In the event the
aggregate net value of all Title Defects is greater than Five
Hundred Thousand Dollars (US $500,000), Buyer shall have the
option of terminating the Agreement.
ARTICLE 5
5. CLOSING
5.1 Closing Settlement Statement - At least three (3) business days
prior to Closing, Seller will provide to Buyer a closing
settlement statement covering, but not limited to, ad valorem
taxes, severance taxes, crude oil inventories above the pipeline
connection, purchase price adjustments, gas imbalance
adjustments, state and local sales taxes, suspense amounts
tendered to Buyer, and other applicable adjustments credited to
Seller or Buyer as of the Effective Time. The oil inventory
value at the Effective Time shall be determined as provided for
in Article 8. Where actual information is unavailable, Seller
shall use estimates in the closing settlement statement based on
best available information, and Seller shall incorporate any
corrections to such estimates based on actual information in any
final settlement statement.
5.2 Closing Date and Place - The closing of the transactions
contemplated by this Agreement (the "Closing") shall be held on
or before March 28, 2002,
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at the offices of Seller at 000 Xxxxxx, Xxxxx 0000, Xxxxxxx, XX
00000 or at such other place and date as the parties mutually
agree. The date on which the Closing occurs is referred to
herein as the "Closing Date."
5.3 Closing Activities - The following actions shall take place at
Closing:
5.3.1 Certificates - Each party shall deliver to the other
party a certificate in a form satisfactory to the other
party dated as of the Closing and executed by a duly
authorized officer, partner, member, or owner, as
appropriate, of such party to the effect that the party
has all requisite corporate, partnership or other power
and authority to purchase or sell the Assets, as the
case may be, on the terms described in this Agreement
and to perform its other obligations hereunder and that
all corporate, partnership and/or other prerequisites of
whatsoever nature have been fulfilled.
5.3.2 Assignment - Seller and Buyer shall execute an
assignment substantially in the form as Exhibit D
assigning the Assets to Buyer, as well as applicable
governmental assignment forms (collectively the
"Assignments") and deliver the Assignments to Buyer.
5.3.3 Payment - The Purchase Price as adjusted herein shall be
paid as provided in Article 2.2. hereinabove.
5.3.4 Possession - Seller shall (subject to the terms of any
applicable joint operating agreements and to the other
provisions hereof)
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deliver to Buyer possession of the Assets, to the extent
that actual delivery of the assets is contemplated
hereby.
5.3.5 Letters-in-Lieu - Seller shall prepare and Seller and
Buyer shall execute and deliver to Buyer the
Letters-in-Lieu of Transfer Orders and change of
operator forms provided for in this Agreement covering
the Assets.
5.4 Conditions to Closing
5.4.1 Seller's Conditions to Closing - The obligations of
Seller to proceed with the Closing contemplated hereby
are subject to the satisfaction on or prior to the
Closing of all of the following conditions, any one or
more of which may be waived, in whole or in part, in
writing by Seller:
(a) The representations and warranties made herein by Buyer shall be
correct at and as of the Closing Date as though such
representations and warranties were made at and as of the
Closing Date, and Buyer shall have performed and satisfied the
covenants and agreements required by this Agreement to be
performed by Buyer at or prior to the Closing Date.
5.4.2 Buyer's Conditions to Closing - The obligations of Buyer
to proceed with the Closing contemplated hereby are
subject to the satisfaction on or prior to the Closing
of all of the following conditions, any one or more of
which may be waived, in whole or in part, in writing by
Buyer:
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(a) The representations and warranties made herein by Seller shall
be correct at and as of the Closing Date as though such
representations and warranties were made at and as of the
Closing Date, and the factual matters contained in any
representation and warranty made by Seller "to the best of
Seller's knowledge," or similar language, shall be true and
correct at and as of the Closing Date without regard to Seller's
knowledge of same, and Seller shall have performed and satisfied
all covenants required by this Agreement to be performed by
Seller at or prior to the Closing Date.
(b) The loan agreement and related promissory note and mortgage (the
"Lending Transaction Documents") contemplated by the Letter of
Intent dated January 24, 2001, as amended, between Seller and
Buyer shall have been mutually agreed upon and the Lending
Transaction Documents executed and delivered at the Closing, and
all required third party consents and subordinations (including
Seller's lending institution(s)) in connection with such Lending
Transaction Documents shall be in forms satisfactory to Buyer
and shall have been received by Buyer prior to or at the
Closing.
ARTICLE 6
6. ADDITIONAL OBLIGATIONS
Seller and Buyer agree to the following additional obligations:
6.1 Recordation and Filing of Documents - After the Closing, Buyer
shall file or record the Assignments, in the appropriate parish
and governmental
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records. Buyer shall provide a copy of same, including recording
data, to Seller.
6.2 Records - Within ten (10) days of Buyer's written request (which
request must be delivered to Seller no later than ninety (90)
days after the Closing), Seller will furnish to Buyer, at
Seller's sole cost, copies of any Records so requested. In the
event Buyer fails to request copies of all or any portion of the
Records prior to the expiration of such ninety (90) day period,
Seller shall, for a period of six (6) years after the Closing,
further make available to Buyer (at the location of such Records
in Seller's organization) access to the Records during normal
business hours, upon written request of Buyer, and Buyer shall
have the right to copy at its own expense and retain such copies
of the Records. If, however, Seller elects to destroy any of the
Records prior to the expiration of the six (6) year period,
Seller shall give to Buyer written notice of such intent at
least thirty (30) days prior to such destruction, and Buyer
shall have the option, at its expense, of having such Records
delivered to it.
6.3 Final Settlement Statement - If a final settlement statement
subsequent to Closing is necessary, Seller shall issue such
statement (the "Final Settlement Statement") within ninety (90)
days after Closing. Buyer shall respond with objections and
proposed corrections within thirty (30) days of the issuance of
the Final Settlement Statement. If Buyer does not respond with
objections and the support therefor to the Final Settlement
Statement in writing within thirty (30) days of the issuance of
the Final
18
Settlement Statement, said Statement shall be deemed approved by
Buyer. If Buyer responds with objections to the Final Settlement
Statement within such thirty (30) day period and Buyer and
Seller are unable to agree on a Final Settlement Statement
within twenty (20) days of Buyer's response, such dispute shall
be resolved pursuant to the procedures set forth in Article 21
hereof. Resolution of any dispute pursuant to Article 21,
whether pursuant to negotiation or arbitration, shall include
and provide for a Final Settlement Statement. After approval by
both parties, the net adjustment due pursuant to the Final
Settlement Statement for the Assets conveyed will be summarized
and a net check or invoice will be sent to the Buyer. Buyer
agrees to promptly pay any such invoice within ten (10) days
after receipt by Buyer.
6.4 Further Assurances - Buyer and Seller further agree that each
will, from time to time and upon reasonable request, execute,
acknowledge, and deliver in proper form, any instrument of
conveyance, assignment or transfer necessary to cause title in
the Assets to be transferred to Buyer.
ARTICLE 7
7. TAXES
7.1 Property Taxes - All ad valorem taxes, real property taxes,
personal property taxes and similar obligations ("Real Property
Taxes") applicable to the Assets with respect to the tax period
in which the Effective Time occurs (the "Current Tax Period")
shall be apportioned between Seller and Buyer as of the
Effective Time based on the immediately preceding tax
19
period's assessment, regardless of the taxing agencies' basis
for calculating such assessment, unless the Current Tax Period's
assessment is known, in which case that assessment shall be used
for apportionment. Seller will reimburse Buyer for Seller's
portion for the Current Tax Period at Closing or in connection
with any settlement provided for herein. Buyer shall pay, and
defend and hold Seller harmless with respect to payment of all
Real Property Taxes on the Properties for the Current Tax Period
and thereafter, together with any interest or penalties assessed
thereon. If Seller pays the Real Property Taxes assessed for the
Current Tax Period, Buyer agrees to reimburse Seller for Buyer's
portion of said taxes at Closing or in connection with any
settlement provided for herein.
7.2 Production Taxes - All taxes (other than Real Property Taxes,
income taxes, or similar taxes) imposed on or with respect to
the production of oil, natural gas, or other hydrocarbons or
minerals, or the receipt of proceeds therefrom (including but
not limited to severance, production and excise taxes) shall be
apportioned between the parties based upon the respective shares
of production taken by the parties. Payment or withholding of
all such taxes that have accrued prior to the Effective Time and
filing of all statements, returns and documents pertinent
thereto shall be the responsibility of Seller. Payment or
withholding of all such taxes that have accrued from and after
the Effective Time and the filing of all statements, returns and
documents incident thereto shall be the responsibility of Buyer.
20
7.3 Other Taxes - As may be required by relevant taxing agencies,
Seller shall collect and Buyer shall pay at Closing all
applicable state and local sales tax, use tax, gross receipts
tax, business license tax, and other taxes except taxes imposed
by reason of income to Seller. The tax collected shall be based
upon Buyer's valuation of the applicable Property as provided in
Section 2.3. Any state or local tax specified above, inclusive
of any penalty and interest, assessed at a future date against
Seller with respect to the transaction covered herein shall be
paid by Buyer or, if paid by Seller, Buyer shall promptly
reimburse Seller therefor. Any documentary stamp tax which may
be due shall be paid by Buyer.
ARTICLE 8
8. OWNERSHIP OF PROPERTIES
8.1 Distribution of Production - All oil in storage above the
pipeline connection or gas beyond the meters at the Effective
Time shall be credited to Seller. Seller has gauged the oil in
storage and read all gas meter charts at the Effective Time.
Seller will endeavor to sell and deliver the quantity of such
oil in storage as is credited to Seller prior to closing. For
any such oil not sold as part of the closing settlement
statement, the price for such oil in storage shall be at the
price that Seller has contracted to sell the oil as of the
Closing Date. If there is no such price, the price shall be the
average of the two highest prices that are posted on the Closing
Date (plus any premium) by other purchasing companies in the
field or locality where the Properties are located for oil of
like grade and
21
gravity. Title to the oil in storage as of the Effective Time
that is unsold as of the Closing Date shall pass to Buyer as of
the Closing Date, and an upward adjustment shall be made to the
Purchase Price due at Closing.
8.2 Proration of Income and Expenses - Except as otherwise provided
in this Agreement, all proceeds (including proceeds held in
suspense or escrow), receipts, credits, and income attributable
to the Properties for all periods of time prior to the Effective
Time shall belong to Seller, and all proceeds, receipts,
credits, and income attributable to the Properties for all
periods of time from and after the Effective Time shall belong
to Buyer. Seller shall be responsible for royalties, ad valorem,
property, production, severance and similar taxes, and incurred
operational costs and expenses attributable to the period prior
to the Effective Time. Buyer shall otherwise assume all other
obligations, duties, losses, liabilities, costs and expenses
arising out of ownership or operation of the Assets, whether
attributable to the period of time before or after the Effective
Time, including plugging and abandonment of xxxxx, abandonment
of facilities, and environmental liabilities.
22
8.3 Notice to Remitters of Proceeds - Buyer is responsible for
informing all purchasers of production or other remitters to pay
Buyer and obtaining from the remitter(s) revenues accrued after
the Effective Time. To the extent a remitter pays revenues to
the incorrect party, that party shall promptly remit to the
correct party such revenues. The remitter(s) shall be informed
by Seller and Buyer via Letters-in-Lieu of Transfer Order or
such other reasonable documents which remitter(s) may require.
ARTICLE 9
9. SELLER-OPERATED ASSETS
9.1 Standard of Care - Seller shall operate the Assets using the
same standard of care as a reasonably prudent Operator under the
same or similar circumstances until Closing, or such later time
as any applicable joint operating agreement may require.
9.2 Operations - During the period from the Execution Date to
Closing, Seller shall (i) consult with Buyer with respect to all
AFE's over Five Thousand Dollars (US $5,000) net to the interest
of Seller which are received by Seller with respect to any
Property (but Seller's only duty with respect to such AFE's is
to discuss them with Buyer and consider Buyer's desire with
respect thereto), and with respect to all material decisions to
be made with respect to the Assets, including, without
limitation, settlement of any gas imbalances and incurring of
costs for discretionary expenditures for operations in excess of
Five Thousand Dollars (US $5,000) net to the interest of Seller
for which AFE's are not prepared; (ii) not transfer, sell,
23
hypothecate, encumber, abandon or otherwise dispose of any
material portion of the Assets other than the sale of production
in the ordinary course of business; (iii) not resign or
otherwise voluntarily relinquish its rights as operator of any
of the Assets for which it serves as operator on the date
hereof; (iv) not grant any preferential right to purchase or
similar right to agree to require the consent of any party to
the transfer and assignment of the Assets to Buyer, subject to
existing contractual obligations; (v) not enter into any gas
sales contract or crude oil sales or supply contract with
respect to the Assets which is not terminable without penalty
upon notice of thirty (30) days or less; (vi) not enter into any
transaction the effect of which would be to cause Seller's
ownership interest in any of the Assets to be materially altered
from its ownership interest as of the date hereof; (vii) give
prompt written notice to Buyer of any notice of default (or
written threat of default, whether disputed or denied) received
or given by Seller under any instrument or agreement affecting
the Assets to which Seller is a party or by which it or any of
the Assets are bound; (viii) not propose, elect to participate
or elect not to participate in any operations on the Assets
estimated to exceed In Thousand Dollars (U.S. $10,000) net to
the interest of Seller, without the advance written consent of
Buyer, subject to Buyer receiving Seller's recommendation
discussed below in this Section 10.2; and (ix) until Closing,
maintain in full force and effect any current insurance covering
claims relating to property damage and casualty loss affecting
the Assets
24
occurring prior to Closing. Buyer shall provide its consent or
non-consent within the earlier of three (3) days of the notice
from Seller or such shorter period, if required, by the
applicable operating agreement. Seller agrees to (A) provide
Buyer all relevant information with respect to any such
operations promptly upon receipt of such information, and (B)
inform Buyer in writing of its recommendation to either
participate or not participate in such operations prior to Buyer
providing its consent or non-consent with respect to such
proposed operations. At Closing, Buyer assumes all obligations
with respect to its elections made hereunder.
ARTICLE 10
10. RELATED AGREEMENTS, THIRD-PARTY NOTIFICATIONS AND APPROVAL
10.1 Related Agreements The sale of the Assets is subject to any and
all assignments, subleases, farmout agreements, joint operating
agreements, letter agreements, easements, rights-of-way, and all
other agreements with respect to or pertaining to the Assets to
the extent that they are described in Exhibit A hereto and are
binding on Seller. Except for the liabilities retained by Seller
hereunder, Buyer further agrees to expressly assume the
obligations and liabilities of Seller under such assignments,
subleases, farmout agreements, joint operating agreements,
letter agreements, easements, rights-of-way, and other
agreements insofar as such obligations or liabilities concern or
pertain to the Assets and to execute any documents necessary to
effectuate such agreement.
25
10.2 Third Party Notifications and Approvals - The sale of the Assets
may require the approval or consent of lessors, joint interest
owners, farmors, sublessors, assignors, grantors, parties to
agreements, or governmental bodies having jurisdiction. Seller
assumes full responsibility for obtaining any such consent and
approval, including, as necessary, obtaining waivers of
maintenance of uniform interest provisions from joint interest
owners, and furnishing Buyer with proof of such consent or
approval.
10.3 Exchange Provision - Buyer has been advised, and understands,
that Seller retains the option to effect a tax-free exchange of
property of like kind pursuant to the provisions of Section 1031
of the Internal Revenue Code of 1986 and the Treasury
Regulations promulgated thereunder (the "Regulations"). Buyer
agrees to cooperate with Seller in connection with such exchange
(which may be a deferred exchange permitted under the
Regulations). Buyer's cooperation shall include, but shall not
be limited to, payment of the Purchase Price of the Assets to a
qualified escrow account, a qualified trust or a qualified
intermediary (as defined in the Regulations) and the execution
of such documents as may reasonably be required in connection
therewith. Buyer shall not be required, however, to incur
additional costs or obligations in connection with such
exchange, and Seller shall indemnify and hold harmless Buyer
against, or reimburse Buyer for any claims, damages,
liabilities, costs or expenses (including reasonable attorney's
fees) asserted against or incurred by Buyer in connection with
or arising out of such exchange.
26
ARTICLE 11
11. INDEMNITY
EXCEPT AS OTHERWISE EXPRESSLY RETAINED BY SELLER IN ARTICLE 3.4 AND 8.2,
BUYER SHALL ASSUME ALL OBLIGATIONS AND LIABILITIES TO THE EXTENT
RELATING TO THE ASSETS, [INCLUDING, BUT BY NO MEANS LIMITED TO,
RECLAMATION AND PLUGGING AND ABANDONMENT OF THE XXXXX, WHETHER NOW OR
HEREAFTER LOCATED ON THE LEASES TO BE TRANSFERRED HEREUNDER OR LANDS
POOLED OR UNITIZED THEREWITH. BUYER AGREES TO RELEASE, DEFEND,
INDEMNIFY, AND HOLD SELLER, ITS AFFILIATED, PARENT AND SUBSIDIARY
ENTITIES AND THEIR RESPECTIVE AGENTS, REPRESENTATIVES, SHAREHOLDERS,
OFFICERS, DIRECTORS AND EMPLOYEES (COLLECTIVELY, "SELLER INDEMNITEES"),
HARMLESS FROM ANY DAMAGES, EXPENSES (INCLUDING COURT COSTS AND
ATTORNEYS' FEES), CIVIL FINES, PENALTIES, AND OTHER COSTS AND
LIABILITIES INCURRED AS A RESULT OF CLAIMS, DEMANDS, AND CAUSES OF
ACTION ASSERTED, IN CONNECTION WITH THE ASSETS, [INCLUDING BUT NOT
LIMITED TO ANY COSTS, EXPENSES, AND LIABILITIES WHATSOEVER ARISING OUT
OF, OR IN CONNECTION WITH, THE PLUGGING AND ABANDONING OF ANY XXXXX,
REMOVAL OR MODIFICATION OF FACILITIES (INCLUDING PIPELINES), CLOSURE OF
PITS, AND RESTORATION OF THE SURFACE REGARDLESS OF WHETHER THE
27
OBLIGATION TO PLUG, REMOVE, MODIFY, CLOSE, OR RESTORE AROSE PRIOR TO OR
SUBSEQUENT TO THE EFFECTIVE TIME.] BUYER'S INDEMNIFICATION OF SELLER
INDEMNITEES SHALL EXTEND TO AND INCLUDE, WITHOUT LIMITATION, CLAIMS,
CAUSES OF ACTION AND DEMANDS BASED ON (i) THE NEGLIGENCE OF SELLER,
BUYER, OR THIRD PARTIES, WHETHER SUCH NEGLIGENCE IS ACTIVE OR PASSIVE,
JOINT, CONCURRENT, OR SOLE, OR (ii) SELLER'S OR BUYER'S STRICT
LIABILITY, OR (iii) OTHER FAULT OR RESPONSIBILITY OF SELLER.
NOTWITHSTANDING THE ABOVE PROVISIONS OF ARTICLE 11 OR ANY OTHER
PROVISION OF THIS AGREEMENT, BUYER'S INDEMNIFICATION OF SELLER SHALL NOT
INCLUDE LOSSES SUSTAINED OR LIABILITIES INCURRED AS A RESULT OF GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.
ARTICLE 12
12. ENVIRONMENTAL
12.1 Material Adverse Environmental Conditions - During the Due
Diligence Period, the Buyer shall have the right to make an
environmental assessment of the Assets. If, during the Due
Diligence Period, Buyer discovers a material and adverse
environmental condition which it finds unacceptable ("Material
Condition") Buyer shall immediately notify Seller of same and
provide evidence thereof as soon as possible after discovering
such Material Condition. For the purpose of this Section, a
Material
28
Condition shall not include the reasonable costs of plugging,
abandonment and restoration attributable to the Assets and shall
be "material" and "adverse" only if (1) it involves damages to
the occupant or other persons having rights in the surface or
subsurface of the Assets or adjoining lands, waterways and
aquifers and (2) the cost to remediate said conditions to levels
required by applicable environmental laws or reasonably
compensate the owner for damages to the surface or subsurface
could reasonably be expected to exceed Five Thousand Dollars (US
$5,000) per Property. Buyer and Seller shall treat all
information regarding any conditions as confidential, whether
Material Conditions or not, and shall not make any contact with
any governmental authority or third party regarding same without
written consent from the other party unless so required by
applicable law.
To the extent that the aggregate amount of all Material
Conditions exceeds Fifty Thousand Dollars (US $50,000), Seller
may either (1) remedy the Material Condition(s) to Buyer's
reasonable satisfaction and at Seller's own cost and expense or
(2) agree with Buyer on an adjustment to the Purchase Price,
which adjustment shall reflect the cost to remediate such
Material Condition(s), but only to the extent of remediation
required by applicable federal, state or local law, or (3)
remove that portion of the Properties from the Assets being
conveyed and adjust the Purchase Price accordingly. If the total
of all Purchase Price adjustments due to Material Conditions
exceeds Five Hundred Thousand Dollars (US $500,000), Seller
29
or Buyer may cancel this Agreement and have no further
obligations hereunder.
12.2 Environmental Indemnification - As to the Assets conveyed to
Buyer at Closing, BUYER AGREES TO ACCEPT ALL RESPONSIBILITY AND
LIABILITY FOR THE ENVIRONMENTAL CONDITION OF THE ASSETS,
INCLUDING BUT NOT LIMITED TO, ALL EXISTING AND PROSPECTIVE
CLAIMS, CAUSES OF ACTION, FINES, LOSSES, COSTS AND EXPENSES,
INCLUDING BUT NOT LIMITED TO COSTS TO CLEAN UP OR REMEDIATE, AND
BUYER HEREBY AGREES TO RELEASE THE SELLER INDEMNITEES FROM ANY
AND ALL LIABILITY AND RESPONSIBILITY THEREFOR AND AGREES TO
INDEMNIFY, DEFEND, AND HOLD THE SELLER INDEMNITEES HARMLESS FROM
ANY AND ALL CLAIMS, CAUSES OF ACTION, FINES, INTEREST,
PENALTIES, EXPENSES, COSTS, LOSSES, AND LIABILITIES WHATSOEVER
(INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES AND COSTS) IN
CONNECTION WITH SUCH ENVIRONMENTAL CONDITION.
ARTICLE 13
13. BUYER'S REPRESENTATIONS
13.1 Intent of Acquisition - Buyer hereby represents that if, in the
future, it should sell, transfer or otherwise dispose of the
Assets or fractional undivided interests therein, Buyer will do
so in compliance with any applicable federal and state
securities laws.
30
13.2 Information - Buyer represents that all information requested by
Buyer has been made available, that Buyer has been supplied with
all of the additional information concerning the Assets that
Buyer deemed necessary or appropriate as a prudent and
knowledgeable purchaser to evaluate the Assets purchased and has
satisfied itself as to the correctness of all information
relating to the Assets. Buyer represents that it has performed
due diligence on the Assets and performed all necessary tasks
involved in evaluating the Assets, to the Buyer's complete
satisfaction.
13.3 Knowledge and Experience - Buyer represents that by reason of
Buyer's knowledge and experience in the evaluation, acquisition,
and operation of oil and gas properties. Buyer has evaluated the
merits and risks of purchasing the Assets from Seller and has
formed an opinion based solely upon Buyer's knowledge and
experience.
13.4 Closing - The representations set forth in this Article 13 shall
be deemed to have been made at and as of the Closing.
ARTICLE 14
14. GAS IMBALANCES
14.1 Seller's and Buyer's Respective Obligations - For those
Properties offered for sale which have cumulative gas
imbalances, Seller represents, to the best of its knowledge,
(and Buyer acknowledges) that any such imbalances as detailed in
Exhibit E were based upon either operator statements or Seller
estimates. Buyer has or will have performed its own due
diligence inquiry into the cumulative gas imbalances to Buyer's
own
31
satisfaction, has independently determined the actual cumulative
gas balancing status of the Properties, and has made its
decision to purchase the Assets solely in reliance upon Buyer's
own investigation, subject only to the recourse provided for in
this Article 14. Accordingly, from and after the Effective Time,
any and all benefits, obligations, and liabilities associated
with gas imbalances shall accrue to and be the responsibility of
Buyer, irrespective of any subsequent discovery by either Buyer
or Seller that the actual cumulative gas imbalance(s) relating
to any of the Assets as of the Effective Time was other than
that relied upon by either party in electing to purchase or
sell. Buyer shall assume, indemnify and hold Seller harmless for
Seller's actual overproduced or underproduced position in the
Assets as of the Effective Time.
14.2 Adjustment to Purchase Price - If Seller or Buyer determines on
or before the issuance of the Final Settlement Statement that
the actual aggregate gas imbalance as of the Effective Time is
different than the aggregate gas imbalance reported in Exhibit
E, the Purchase Price shall be adjusted to compensate for the
economic impact of the error or change. For the purposes of this
Section only, the value of such gas imbalance adjustment shall
be calculated at a price of $2.75 per net MCF. The Purchase
price shall be reduced/increased by the adjustments for such gas
imbalance changes at Closing for errors or changes discovered
prior to Closing. Adjustments for errors or changes discovered
after Closing but prior to the expiration of ninety (90) days
after Closing shall be adjusted between the
32
parties in the Final Settlement Statement. Neither party shall
have any recourse other than that provided for in this Article
14 against the other for any changes in gas balancing rights or
obligations as of the Effective Time in respect of the Assets
conveyed herein, whether known or unknown, discoverable or
undiscoverable.
ARTICLE 15
15. CASUALTIES LOSS
If, prior to Closing, any of the Assets are substantially damaged or
destroyed by fire, accident or other casualty ("Casualty Defect"),
Seller shall notify Buyer promptly after Seller learns of such event.
Seller shall have the right, but not the obligation, to cure any such
Casualty Defect by repairing such damage or, in the case of personal
property or fixtures, replacing the damaged Assets with equivalent
items, no later than the Closing. If any Casualty Defect exists at
Closing, at Seller's option Buyer shall proceed to purchase the damaged
interests, and the Purchase Price shall be reduced by the aggregate
reduction in value of all affected Properties on account of such
Casualty Defect. Notwithstanding anything to the contrary contained in
this Article 15, Seller shall be entitled to retain all insurance
proceeds and claims against other parties relating to any such Casualty
Defect. For purposes of this provision, normal wear and tear shall not
be considered a Casualty Defect.
33
ARTICLE 16
16. AREA OF MUTUAL INTEREST
Effective as of the Closing Date, Buyer and Seller establish an area of
mutual interest ("AMI") covering the lands within the AMI boundaries
shown on Exhibit G attached hereto. The term of the AMI ("AMI Term")
shall be for a period expiring six (6) months after the termination of
the last expiring leasehold interest created by the Leases subject to
this Agreement. If during the AMI Term, either Buyer or Seller acquires
any right, title or interest in, to or under any oil and gas lease,
mineral interest, overriding royalty interest, net profits interest,
production payment, royalty interest, or other interest in oil or gas
(including farm-in agreements or similar contractual rights to acquire
such interests) covering lands within the AMI (the "Acquired Interest"),
then within thirty (30) days after such acquisition, the party making
the acquisition (the "Offering Party") shall notify the other party (the
"Responding Party") in writing of the acquisition. Notice of the
acquisition shall include (i) copies of all executed assignments and
agreements relating to the acquisition, (ii) such title information as
the Offering Party has relating to the Acquired Interest, and (iii) an
itemized statement of all lease bonuses, rentals and option payments and
land-related and title review costs and expenses, including xxxxxxx
costs, brokerage fees and commissions, title examination fees and
expenses, filing fees, and other costs and expenses incurred in
connection with the acquisition of the Acquired Interest (the
"Acquisition Costs"). The Responding Party shall have a period of
fifteen (15) days (or, if a rig is on location, forty-eight (48) hours)
after receipt of such notice
34
within which to elect in writing to acquire its proportionate share of
the Acquired Interest and to pay its proportionate share of Acquisition
Costs associated therewith. The Responding Party's failure to timely
respond to the Acquiring Party's notice or to pay its proportionate
share of Acquisition Costs shall be deemed an election not to acquire a
proportionate share of the Acquired Interest. If the Acquired Interest
covers lands that are partially within and partially outside the AMI,
the Responding Party shall have the right to acquire its proportionate
share of the Acquired Interest. If the Acquired Interest covers lands
that are partially within and partially outside the AMI, the Responding
Party shall have the right to acquire its proportionate share of the
Acquired Interest insofar as it covers lands within the AMI, together
with its proportionate share of that portion of the Acquired Interest
covering lands outside the AMI.
ARTICLE 17
17. BROKER'S AND FINDER'S FEES
Buyer and Seller represent and warrant to each other that it has
incurred no liability, contingent or otherwise, for broker's or finder's
fees in respect of this Agreement or the transactions contemplated
hereby for which the other party shall have any responsibility
whatsoever.
ARTICLE 18
18. NOTICES
All communications between Buyer and Seller required or permitted under
this Agreement shall be in writing, and any communication or delivery
hereunder shall be deemed to have been fully made if actually delivered,
by facsimile
35
transmission, or if mailed by registered or certified mail, postage
prepaid, to the address as set forth below:
SELLER BUYER
---------------------------------- -----------------------------------
Xxxxxxxx Petroleum Company, L.L.C. Xxxxxx Energy Company, L.L.C.
000 Xxxxxx, Xxxxx 0000 Xxx Xxxxxx on the Waterfront
Xxxxxxx, XX 00000 Xxx Xxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Xx Attention: Xxxxxxx X. Xxxxxx, III.
Tel: (000) 000-0000 Tel: (000) 000-0000
Fax: (000) 000-0000 Fax: (000) 000-0000
ARTICLE 19
19. DEFAULT
If either party defaults in the performance of its obligations
hereunder, the other party shall be entitled to enforce such obligation
by a decree of specific performance or may pursue any other remedy
permitted by law.
ARTICLE 20
20. TERMINATION
Buyer and Seller acknowledge and agree that, during the period prior to
the Closing, Seller may negotiate, solicit or entertain any inquiries or
proposals, or enter into any binding or non-binding agreement or
understanding with any other party, with respect to any asset sale,
asset transfer, acquisition, sale of equity interests, merger,
consolidation, reorganization or other business combination involving
either Seller or its assets or with respect to any other transaction
which could have the effect of preventing, frustrating or interfering
with the transaction contemplated by this Agreement (any of the above
being a "Competing
36
Transaction"). Seller may, by written notice to Buyer, terminate this
Agreement in order to pursue or consummate a Competing Transaction. In
the event Seller terminates this Agreement in order to pursue or
consummate a Competing Transaction, Seller will pay to Buyer liquidated
damages in an amount equal to the greater of (i) One Million Eighty
Thousand Dollars (US $1,080,000) or (b) nine percent (9%) of the fair
market value of the consideration payable to Seller and/or its
shareholders in connection with the Competing Transaction; provided,
however, in no event shall such liquidated damages exceed One Million
Two Hundred Thousand Dollars (US $1,200,000). Such liquidated damages
shall be payable by Seller to Buyer in cash within five (5) business
days of the termination of this Agreement by Seller. Seller and Buyer
acknowledge and agree that the actual damages resulting from such
termination of this Agreement would be difficult or impracticable to
calculate and that, in light of the circumstances, the foregoing
liquidated damages are not penalties but represent a reasonable
approximation of Buyer's damages and will be Seller's sole liability and
Buyer's exclusive remedy with respect to such termination.
ARTICLE 21
21. ARBITRATION
21.1 Resolution of Disputes - Buyer and Seller agree to resolve any
disputes under this Agreement pursuant to the negotiation and,
if required, arbitration provisions set forth below. Any party
may give the other party written notice of a dispute under this
Agreement, which notice shall summarize the nature of the
dispute and such party's position with respect
37
thereto (a "Dispute Notice"). The parties shall first attempt in
good faith to resolve any dispute promptly by negotiation. If
the dispute has not been resolved within thirty (30) days of the
Dispute Notice, either party may initiate arbitration of the
dispute as provided hereinafter.
21.2 Arbitration - Any dispute not resolved by negotiation shall be
settled by arbitration in accordance with the then current
Commercial Arbitration Rules of the American Arbitration
Association by three independent and impartial arbitrators who
have no financial interest in the dispute, one of whom shall be
selected by Seller, one of whom shall be selected by Buyer, and
the third of whom shall be selected by the arbitrators so chosen
and who shall be the presiding arbitrator (the "Presiding
Arbitrator"). If a party determines to submit a dispute for
arbitration, such party shall furnish the other party with a
dated, written statement (the "Arbitration Notice") indicating
(i) such party's intent to commence arbitration proceedings,
(ii) the nature, with reasonable detail, of the dispute and
(iii) the remedy such party will seek. A copy of the Arbitration
Notice shall be concurrently provided to the American
Arbitration Association, along with a copy of this Agreement.
The parties shall each have fifteen (15) business days following
receipt by the American Arbitration Association of the
Arbitration Notice to select their respective arbitrators. The
arbitrators selected by the parties shall, within thirty (30)
business days of their appointment, select the Presiding
Arbitrator. In the event that they are unable or fail to do so
or if one party fails or refuses to appoint its
38
party-appointed arbitrator, the chief judge of the United States
District Court for the Southern District of Texas shall appoint
an arbitrator satisfying the qualifications set forth above. All
decisions and awards by the arbitration tribunal shall be made
by majority vote.
21.3 Arbitration Procedures - Unless otherwise expressly agreed in
writing by the parties to the arbitration proceedings:
(a) the arbitration proceedings shall be held in Houston,
Texas;
(b) the arbitrators shall be and remain at all times wholly
independent and impartial;
(c) the arbitration proceedings shall be conducted under the
arbitration rules of, but not under the auspices of, the
American Arbitration Association unless such rules are
in conflict with the provisions of this Article 21 in
which case the provisions of this Article 21 shall
control;
(d) any procedure issues not determined under the arbitral
rules selected pursuant to clause (c) above shall be
determined under the laws of the State of Texas, other
than any law that would refer the matter to another
jurisdiction;
(e) the decision of the arbitrators shall be reduced to
writing and shall be final and binding without the right
of appeal; and
(f) judgment on the arbitration award may be entered and
enforced in any court having jurisdiction over the
parties or their assets.
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21.4 Other - It is the intent of the parties that the arbitration
provisions hereof be enforced to the fullest extent permitted by
applicable law. The arbitrators may not award punitive damages,
and the parties hereby irrevocably waive any claims to punitive
damages. Each party shall be responsible for its own attorneys'
fees in connection with the arbitration under this Article 21.
All other costs of the arbitration proceedings shall be borne in
the manner determined by the arbitrators. If an arbitrator
should die, withdraw or otherwise become incapable of serving,
or refuse to serve, a successor arbitrator shall be selected and
appointed in the same manner as such arbitrator was selected
within thirty (30) business days after the death, withdrawal or
incapacity of such arbitrator is known to both parties.
ARTICLE 22
22. MISCELLANEOUS
22.1 Entire Agreement - This Agreement and all Exhibits attached
hereto and incorporated herein constitute the entire agreement
between the parties with respect to the subject matter hereof.
Any previous negotiations or communications between the parties
with respect to the subject matter hereof are merged herein.
22.2 Survival - This Agreement shall be binding upon and shall inure
to the benefit of the undersigned, their permitted successors,
heirs, assigns and corporate successors and may be supplemented,
altered, amended, modified, or revoked by writing only, signed
by both parties. Except as
40
otherwise specifically provided herein, this Agreement and the
covenants, promises, releases, disclaimers, waivers,
indemnities, and continuing obligations shall survive Closing.
22.3 Choice of Law - THIS AGREEMENT AND ITS PERFORMANCE SHALL BE
CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE
STATE OF TEXAS.
22.4 Assignment - This Agreement and the rights and obligations under
this Agreement may not be assigned by any party without the
prior written consent of the other party, and any assignment
made without such consent shall be void.
22.5 No Admissions - Neither this Agreement, nor any part hereof, nor
any performance under this Agreement shall constitute or be
construed as a finding, evidence of, or an admission or
acknowledgment of any liability, fault, or past or present
wrongdoing, or violation of any law, rule, regulation, or
policy, by either Seller or Buyer or by their respective
officers, directors, employees, or agents.
22.6 Third-Party Beneficiaries - Neither this Agreement or any
performances hereunder by Seller or Buyer shall create any
right, claim, cause of action, or remedy on behalf of any person
not a party hereto.
22.7 Public Communications - After Closing, either party may make a
press release or public communication concerning this
transaction; provided, however, any such press release or public
communication is subject to the
41
other party's prior review and approval, which approval will not
be unreasonably withheld.
22.8 Headings - The headings of the Articles and Sections of this
Agreement are for guidance and convenience of reference only and
shall not limit or otherwise affect any of the terms or
provisions of this Agreement.
22.9 Waiver - BUYER EXPRESSLY WAIVES THE PROVISIONS OF THE DECEPTIVE
TRADE PRACTICES-CONSUMER PROTECTION ACT OR ANY SIMILAR ACT UNDER
ANY STATE OR FEDERAL LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND
PROTECTIONS.
22.10 Counterparts and Execution. - This Agreement may be executed in
multiple counterparts, each of which when so executed, shall be
deemed an original, but all of which shall be considered one and
the same Agreement. Facsimile signatures may be treated as
originals.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first written above.
SELLER BUYER
XXXXXXXX PETROLEUM COMANY, L.L.C. XXXXXX ENERGY COMPANY, L.L.C.
By: /s/ Xxxxxx X. Xxxxxxx, Xx. By: /s/ Xxxxxxx X. Xxxxxx, III.
----------------------------- -------------------------
Xxxxxx X. Xxxxxxx, Xx. Xxxxxxx X. Xxxxxx, III.
Chief Operating Officer President
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