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ACQUISITION AGREEMENT
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HS RESOURCES INC.
and
TCW PORTFOLIO NO. 1555 DR V SUB-CUSTODY PARTNERSHIP, L.P.
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$90,000,000
August 30, 1996
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TABLE OF CONTENTS
Page
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Article I - Definitions and References . . . . . . . . . . . . . 1
Section 1.1. Defined Terms and References. . . . . . . . . 1
Section 1.2. References and Titles . . . . . . . . . . . . 9
Article II - Purchase and Sale . . . . . . . . . . . . . . . . . 10
Section 2.1. Agreement of Purchase and Sale. . . . . . . . 10
Section 2.2. Purchase Price Installment Request. . . . . . 10
Section 2.3. PPIR Response . . . . . . . . . . . . . . . . 11
Section 2.4. Initial Closing Date. . . . . . . . . . . . . 11
Section 2.5. Subsequent Closing Dates
Scheduled Xxxxx. . . . . . . . . . . . . . . . . . . . 11
Section 2.6. Payments to Seller. . . . . . . . . . . . . . 12
Section 2.7. Payments to Buyer . . . . . . . . . . . . . . 12
Article III - Closing Dates and Closings . . . . . . . . . . . . 12
Section 3.1. Time and Place of Initial Closing . . . . . . 12
Section 3.2. Conditions to Closings by Seller. . . . . . . 12
Section 3.3. Conditions to Initial Closing by Buyer. . . . 13
Section 3.4. Conditions to Each Closing by Buyer . . . . . 14
Section 3.5. Funding Fee . . . . . . . . . . . . . . . . . 16
Article IV - Representations, Covenants, and Indemnities . . . . 16
Section 4.1. Representations and Warranties
of Seller. . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.2. Covenants of Seller . . . . . . . . . . . . . 21
Section 4.3. Specified Hydrocarbons. . . . . . . . . . . . 25
Section 4.4. Default; Remedies . . . . . . . . . . . . . . 25
Article V - Purchase Option; Periodic Offer; Right of First
Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.1. Option to Purchase XXX Rights in Acquisition
Properties . . . . . . . . . . . . . . . . . . . . . 26
Section 5.2. Periodic Offers to Operator; Preferential
Right to Purchase . . . . . . . . . . . . . . . . . . 29
Article VI - Miscellaneous . . . . . . . . . . . . . . . . . . 31
Section 6.1. Waivers and Amendments . . . . . . . . . . . 31
Section 6.2. Survival of Agreements; Cumulative
Nature . . . . . . . . . . . . . . . . . . . . . . . 32
Section 6.3. Notices . . . . . . . . . . . . . . . . . . 32
Section 6.4. Parties in Interest . . . . . . . . . . . . 33
Section 6.5. Governing Law . . . . . . . . . . . . . . . 34
Section 6.6. Limitation on Interest . . . . . . . . . . . 34
Section 6.7. Termination; Limited Survival . . . . . . . 34
Section 6.8. Severability . . . . . . . . . . . . . . . . 35
Section 6.9. Limitation on Liability; Setoff . . . . . . . 35
Section 6.10. Counterparts . . . . . . . . . . . . . . . 36
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SCHEDULE 1 - Discount Factors for 12% IRR Calculation
SCHEDULE 2 - Discount Factors for 13% IRR Calculation
SCHEDULE 3 - Initial Production Unit Groups, Volumes and Percentages
SCHEDULE 4 - Disclosure Schedule
SCHEDULE 5 - Calculation of Scheduled Total NPV12 Volume - Oil
SCHEDULE 6 - Calculation of Scheduled Total NPV12 Volume - Gas
SCHEDULE 7 - Calculation of Scheduled Total NPV12 Volume - Liquids
SCHEDULE 8 - Examples of 12% and 13% IRR Calculation
EXHIBIT A-1 - Initial Legal Opinion
EXHIBIT A-2 - Supplemental Legal Opinion
EXHIBIT B - Conveyance
EXHIBIT C - Conveyance Supplement
EXHIBIT D - Intentionally Omitted
EXHIBIT E - Intentionally Omitted
EXHIBIT F - Form of Letter Agreement Re Purchase of Production
through December 31, 1998
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ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT dated as of the 30th day of August, 1996
(herein called this "AGREEMENT") is made by HS Resources, Inc., a Delaware
corporation (herein called "SELLER"), and TCW Portfolio No. 1555 Sub-Custody
Partnership, L.P., a California limited partnership (herein called "BUYER").
RECITALS
WHEREAS, Seller is and will be the owner of interests in certain oil and
gas leases located in Yuma County, Colorado, Sweetwater County, Wyoming, and
other counties in other states and desires to sell and assign to Buyer, upon
the terms and conditions herein set forth, an overriding royalty under a
Conveyance of Overriding Royalty to be made by Seller to Buyer in the form
attached hereto as Exhibit B;
WHEREAS, Seller intends to purchase from third party sellers ("3P
GRANTORS") additional interests in oil and gas leases located in various states
and desires that Buyer also acquire from such 3P Grantors, upon the terms and
conditions herein set forth, an overriding royalty under a Conveyance of
Overriding Royalty substantially similar to the form attached hereto as Exhibit
B; and
WHEREAS, Buyer desires to purchase such overriding royalty upon the terms
and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, intending to be legally bound hereby, Seller
and Buyer do hereby agree as follows:
Article I - Definitions and References
Section 1.1. Defined Terms and References. For purposes of this
Agreement, unless the context otherwise requires:
"Acquisition Property" has the meaning given it in Section 2.2.
"Adjusted XXX Value" has the meaning given it in the Conveyance.
"Affiliate" has the meaning given it in the Conveyance.
"Aggregate Termination Volume" has the meaning given it in the Conveyance.
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"Aggregation Price" has the meaning given it in the Conveyance.
"Agreed Rate" has the meaning given it in the Conveyance.
"Annual XXX Volume" has the meaning given it in the Conveyance.
"Annual Scheduled Volumes" has the meaning given it in the Conveyance.
"Applicable Environmental Laws" has the meaning given it in the
Conveyance.
"Application Date" and "Application Period" have the meanings given such
terms in the Conveyance.
"Associated Property" has the meaning given it in the Conveyance.
"ASV Percentage" has the meaning given it in the Conveyance.
"Bankruptcy Code" means Title 11 of the United States Code.
"Barrel" has the meaning given it in the Conveyance.
"BTU" or "British Thermal Unit" has the meaning given it in the
Conveyance.
"Business Day" has the meaning given it in the Conveyance.
"Buyer" is defined in the first paragraph of this Agreement.
"Buyer Marketing Contracts" has the meaning given it in Section 4.3.
"Calendar Month" means any of the twelve months comprising a Calendar
Year.
"Calendar Quarter" means a three calendar month period ending on March 31,
June 30, September 30 or December 31 of any year.
"Calendar Year" has the meaning given it in the Conveyance.
"Closing" means the Initial Closing or any Subsequent Closing.
"Closing Date" means the Initial Closing Date or any Subsequent Closing
Date.
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"Commitment" means the aggregate amount of $90,000,000 committed by Buyer
for the purpose of purchasing the Overriding Royalty from Seller hereunder
subject to the terms and conditions set forth herein and in the Conveyance.
"Conveyance" means the Conveyance of Overriding Royalty made by Seller as
Grantors, to Buyer, as Grantee, in the form of Exhibit B to this Agreement
(appropriately completed), as from time to time amended and supplemented.
"Conveyance Supplement" means a Supplemental Conveyance of Overriding
Royalty made by Seller and Buyer, in the form of Exhibit C to this Agreement
(appropriately numbered and completed).
"Delivered XXX Volumes" has the meaning given it in the Conveyance.
"Designated Event" has the meaning given it in the Conveyance.
"Discharge Time" has the meaning given it in the Conveyance.
"Effective Date" has the meaning given it in the Conveyance.
"Eligible Proved Producing Xxxxx" means those Production Units that a)
have been assigned a cash flow value under an Engineering Report, b) have value
satisfactory to Buyer, and c) are free and clear of all Liens other than
Permitted Liens.
"EMDS Volume" has the meaning given it in the Conveyance.
"Engineering Report" means (i) with respect to the Engineering Reports
required to be delivered by Seller to Buyer in connection with any PPIR, an
engineering report that (A) is prepared by Seller and audited by Xxxxxxxxxx
Petroleum Consultants, Inc. or such other nationally or regionally recognized
independent petroleum engineers, reasonably acceptable to Buyer in its sole
discretion, concerning all of the proposed Production Unit Groups, and prepared
at Seller's expense; (B) separately reports on Proved Developed Producing
Reserves, Proved Developed Non-Producing Reserves and Proved Undeveloped
Reserves of the Proposed Production Unit Groups, with separate calculations of
the projected Production Volumes and Annual XXX Volume prepared by Seller based
on production figures audited by Xxxxxxxxxx Petroleum Consultants, Inc.; (C)
uses pricing consistent with the definition of XXX Market Value in the
Conveyance or as otherwise approved by Buyer; (D) takes into account any "over-
produced" status under gas balancing arrangements; (E) contains information and
analysis comparable in
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scope to that contained in that certain engineering report prepared by
Xxxxxxxxxx Petroleum Consultants, Inc. and dated February 13, 1996 previously
delivered to Buyer; and (F) is otherwise in form and substance satisfactory to
Buyer; and (ii) with respect to all other Engineering Reports required to be
delivered by Seller to Buyer pursuant to the terms of any Overriding Royalty
Document, an engineering report that complies with the provisions of Section
7.2 of the Conveyance.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
"ERISA Plan" means any pension benefit plan subject to Title IV of ERISA
maintained by any Person thereof with respect to which Seller has any fixed or
contingent liability.
"Financial Statements" has the meaning set forth in Section 4.1(i).
"Funding Expiry Date" means, as to any Production Unit Group, the earliest
to occur of:
(a) September 27, 1996;
(b) the occurrence of a Designated Event; or
(c) HSR's delivery of a Termination Notice.
"GAAP" means those generally accepted accounting principles and practices
which are recognized as such by the Financial Accounting Standards Board (or
any generally recognized successor) in the United States.
"Gas" means natural gas and all other gaseous Hydrocarbons, including
casing head gas, whether or not such natural gas and other gaseous hydrocarbons
are Processed but excluding therefrom Liquids.
"Hazardous Materials" means any substance regulated under any Applicable
Environmental Law, whether as pollutants, contaminants or chemicals, or as
industrial, toxic or hazardous substances or wastes, or otherwise.
"Hydrocarbons" means Oil, Gas and Liquids.
"Initial Closing" and "Initial Closing Date" have the meanings given them
in Section 3.1.
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"Inventory Property" has the meaning given it in Section 2.2.
"Lien" means, with respect to any property or assets, any right or
interest therein of a creditor to secure debt owed to him or any other
arrangement with such creditor which provides for the payment of such debt out
of such property or assets or which allows him to have such debt satisfied out
of such property or assets prior to the general creditors of any owner thereof,
including any lien, mortgage, security interest, pledge, deposit, production
payment, rights of a vendor under any title retention or conditional sale
agreement or lease substantially equivalent thereto, tax lien, mechanic's or
materialman's lien, or any other charge or encumbrance for security purposes,
whether arising by law or otherwise, but excluding any right of offset which
arises without agreement in the ordinary course of business. "Lien" also means
any filed financing statement, any registration of a pledge (such as with an
issuer of unregistered securities), or any other arrangement or action which
would serve to perfect a Lien described in the preceding sentence, regardless
of whether such financing statement is filed, such registration is made, or
such arrangement or action is undertaken before or after such Lien exists.
"Liquids" has the meaning given it in the Conveyance.
"Mcf" has the meaning given it in the Conveyance.
"MMBTU" has the meaning given it in the Conveyance.
"Net XXX Proceeds" means all cash proceeds received by Buyer after the
Effective Date as Adjusted XXX Value of the XXX Hydrocarbons (including any DRH
Payments), less any and all costs and expenses incurred by Buyer in connection
with the XXX Hydrocarbons, including, without limitation, any costs of selling,
delivering, transporting, marketing or hedging of the XXX Hydrocarbons, any
pipeline penalties or other fees or penalties, any amounts deducted in the
calculation of Adjusted XXX Value including without limitation the DT
Percentage and other amounts relating to Direct Taxes or other taxes paid by
Seller and any transaction or enforcement costs with respect to the Overriding
Royalty Documents not reimbursed by Grantor or any other party. Net XXX
Proceeds shall not include any interest received by Buyer from Seller for
delinquent payments or other transaction or enforcement costs with respect to
the Overriding Royalty Documents reimbursed by Grantor or any other party.
"Oil" has the meaning given it in the Conveyance.
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"XXX Hydrocarbons" has the meaning given it in the Conveyance.
"XXX Market Value" has the meaning given it in the Conveyance.
"XXX Percentage" has the meaning given it in the Conveyance.
"XXX Rights" means the rights acquired or to be acquired by Buyer under
the Conveyance.
"Overriding Royalty" has the meaning given it in the Conveyance.
"Overriding Royalty Documents" has the meaning given it in the Conveyance.
"Permitted Encumbrances" has the meaning given it in the Conveyance.
"Person" means an individual, corporation, partnership, association, joint
stock company, trust or trustee thereof, estate or executor thereof,
unincorporated organization or joint venture, court or governmental unit or any
agency or subdivision thereof, or any other legally recognizable entity.
"Pref. Right" has the meaning given it in Section 5.3.
"Preferential Right" has the meaning given it in Section 4.2(h).
"PPIR" or "Purchase Price Installment Request" shall have the meaning set
forth in Section 2.2.
"Processed" has the meaning given it in the Conveyance.
"Production Unit" has the meaning given it in the Conveyance.
"Production Unit Group" has the meaning given it in the Conveyance.
"Proposed Production Unit Group" means a group of proposed Production
Units identified in a PPIR.
"Proved Developed Non-Producing Reserves" are Proved Reserves that include
Shut-in and Behind-pipe Reserves. "Shut-in Reserves" are those expected to be
recovered from completion intervals open at the time of the estimate, but which
had not started producing, or were shut in for market conditions or
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pipeline connections, or were not capable of production for mechanical reasons
(including the requirement for installation or restaging of compression), and
the time when sales will start is uncertain. "Behind-pipe Reserves" are those
expected to be recovered from zones behind casing in existing xxxxx, which will
require additional completion work or a future completion prior to the start of
production.
"Proved Developed Producing Reserves" means Proved Reserves that are
expected to be recovered from completion intervals open and producing at the
time of the estimate.
"Proved Reserves" means those reserves which are "proved oil and gas
reserves" within the meaning of Rule 4-10 of Regulation S-X, 17 C.F.R. #
210.4-10 of the Securities and Exchange Commission where the commercial
producibility of the reservoir is supported by actual production or formation
tests based on the estimated volume of reserves and not just the productivity
of the well or reservoir. In certain instances, Proved Reserves may be assigned
on the basis of electrical and other well logs or core analysis that indicates
the subject reservoir is Hydrocarbon bearing and is analogous to reservoirs in
the same area which are producing, or have demonstrated the ability to produce
on a formation test. The area of a reservoir considered proved includes (a) the
area delineated by drilling and defined by fluid contacts, if any, and (b) the
undrilled areas that can be reasonably judged as commercially productive on the
basis of available geologic and engineering data. In the absence of data on
fluid contacts, the lowest known structural occurrence of Hydrocarbons controls
the proved limit unless otherwise indicated by definitive engineering or
performance data. In addition, Proved Reserves must have facilities to process
and transport those reserves to market which are operational at the time of the
estimate, or there is a commitment or reasonable expectation to install such
facilities in the future.
"Proved Undeveloped Reserves" means Proved Reserves that are assigned to
undrilled locations which satisfy the following conditions: (i) the locations
are direct offsets to xxxxx which have indicated commercial production in the
objective formation, (ii) it is reasonably certain that the locations are
within the known proved productive limits of the objective formation, (iii) the
locations conform to existing well spacing regulations, if any, and (iv) it is
reasonably certain that the locations will be developed. Reserves for other
undrilled locations are classified as Proved Undeveloped Reserves only in those
cases where interpretations of data from xxxxx indicate that the objective
formation is laterally continuous and contains commercially recoverable
hydrocarbons at locations beyond direct offsets.
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"Purchase Option" has the meaning given it in Section 5.1(a).
"Purchase Price" means the aggregate amount paid hereunder by Buyer to
obtain the XXX Rights.
"Purchase Price Installment" means an installment of the Purchase Price
paid under Section 2.4, 2.5 or 2.6. Each Purchase Price Installment must be in
an amount that is equal to or greater than $9,000,000 and in integral multiples
of $100,000.
"Qualified Acreage" means acreage (a) in which Seller owns good and
marketable title to an interest in and to the oil, gas, and all other liquid
and gaseous hydrocarbons in all or specified depths, and (b) which is located
within the lands of a Production Unit described on Schedule B to the Conveyance
or any Conveyance Supplement.
"Qualified Well" means a well described on Schedule B to the Conveyance or
any Conveyance Supplement which has: (a) been drilled on Qualified Acreage for
such well to its target horizon, (b) completed (with casing, tubing, and
fracturing), (c) a continuous production history of not less than thirty (30)
days and (d) has been categorized as Proved Developed Producing Reserves in an
Engineering Report. Any well which cannot be properly operated due to
mechanical failure cannot be a Qualified Well.
"Right of First Offer" has the meaning given it in Section 5.2.
"Scheduled Total NPV12 Volume" means with respect to any Production Unit
Group, the volume of Oil, Gas and Liquids set forth on Schedules 5, 6 and 7,
respectively, hereto as the Scheduled Total NPV12 Volume for the Calendar Month
of the date of determination, such amount to be calculated to equal the sum of
the 12% net present values as of the Initial Closing Date of the Annual
Scheduled Volumes of the Calendar Months after the Effective Date through and
including the date of determination.
"Seller" is defined in the first paragraph of this Agreement.
"Seller Marketing Contracts" has the meaning given in Section 4.3.
"Specified Hydrocarbons" means XXX Hydrocarbons which have been designated
as such pursuant to Section 4.3.
"Subject Interests" has the meaning given it in the Conveyance.
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"Subject Properties" means the Production Units which are or are intended
to be subject to the Conveyance or any Conveyance Supplement.
"Subject Well" has the meaning given it in the Conveyance.
"Subsequent Closing" means the delivery of an executed Conveyance
Supplement by Seller to Buyer and the payment of the associated Purchase Price
Installment by Buyer to Seller.
"Subsequent Closing Date" means the date on which a Subsequent Closing
occurs.
"TCW" means TCW Asset Management Company, as Investment Manager for Buyer.
"Termination Notice" has the meaning given in Section 6.7.
"Termination Volume Adjustment Factor" has the meaning given it in the
Conveyance.
"12% IRR" means a twelve percent realized cash-on-cash internal rate of
return to Buyer on the Purchase Price (or portion of the Purchase Price paid
for XXX Rights with respect to a particular Production Unit Group) from Net XXX
Proceeds, calculated over the period from the Initial Closing Date (or
Subsequent Closing Date if applicable to a specific Production Unit Group) to a
given date. The present value discount factors to be used in calculating such
internal rate of return are set forth in Schedule 1 and the methods to be used
for calculating such internal rate of return are set forth in Schedule 8.
"13% IRR" means a thirteen percent realized cash-on-cash internal rate of
return to Buyer on the Purchase Price (or portion of the Purchase Price paid
for XXX Rights with respect to a particular Production Unit Group) from Net XXX
Proceeds, calculated over the period from the Initial Closing Date (or
Subsequent Closing Date if applicable to a specific Production Unit Group) to a
given date. The present value discount factors to be used in calculating such
internal rate of return are set forth in Schedule 2 and the methods to be used
for calculating such internal rate of return are set forth in Schedule 8.
"Well Assignee" has the meaning given in Section 4.2(h).
Section 1.2. References and Titles. All references in this Agreement to
articles, sections, subsections and other subdivisions refer to corresponding
articles, sections, subsections and other subdivisions of this Agreement unless
expressly provided otherwise. Titles appearing at the beginning
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of any of such subdivisions are for convenience only and shall not constitute
part of such subdivisions and shall be disregarded in construing the language
contained in such subdivisions. The words "this Agreement, "this instrument",
"herein", "hereof", "hereby", "hereunder" and words of similar import refer to
this Agreement as a whole and not to any particular subdivision unless
expressly so limited. The word "or" is not exclusive, and the word "including"
(in its various forms) means "including without limitation". Words in the
singular form shall be construed to include the plural and vice versa, and
words in one gender shall be construed to include the other genders and vice
versa, unless the context otherwise requires. All references in this Agreement
to exhibits and schedules refer to the exhibits and schedules to this Agreement
unless expressly provided otherwise, and all such exhibits and schedules are
hereby incorporated herein by reference and made a part hereof for all
purposes.
Article II - Purchase and Sale; Acquisition Proposals
Section 2.1. Agreement of Purchase and Sale. Upon the terms and
conditions of this Agreement, Seller agrees to sell the XXX Rights to Buyer and
Buyer agrees to purchase the XXX Rights from Seller.
Section 2.2. Purchase Price Installment Request. From and after the date
hereof until the Funding Expiry Date, Seller may deliver to Buyer in writing a
Purchase Price Installment Request ("PPIR") with respect to any Oil and Gas
property ("ACQUISITION PROPERTY") acquisition by Seller or any Affiliate of
Seller which is contemplated to close on or before the Funding Expiry Date.
Each such PPIR shall be delivered at least twenty (20) Business Days prior to
the scheduled closing date of such acquisition and shall contain the following
information:
(a) legal descriptions (which must be reasonably acceptable to Buyer in
form and substance) to the Proposed Production Unit Groups which Seller will
make subject to the Conveyance on such Closing Date; which legal descriptions
shall identify each Production Unit and Subject Well then located on such
Proposed Production Unit Groups, shall (unless otherwise agreed by Buyer and
Seller) set out as the "Operating Interest" and "Net Revenue Interest" for each
such Proposed Production Unit Groups the working interest ("WI") and net
revenue interest ("NI") for each such Production Unit and Subject Well, and
shall otherwise conform to the Conveyance;
(b) an Engineering Report concerning such Proposed Production Unit Group;
and
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(c) the terms of the acquisition of such Proposed Production Unit Group
and such other information as Buyer may reasonably request.
In addition, from and after the date hereof until the Funding Expiry Date,
Seller shall have the right and option to deliver to Buyer one or more PPIR's
with respect to any Oil and Gas properties ("INVENTORY PROPERTY") presently
owned by Seller or any Affiliate of Seller which Seller identifies as a
Proposed Production Unit Group.
Section 2.3. PPIR Response.
(a) Upon Buyer's receipt of a PPIR, Buyer shall determine, in its sole
and absolute discretion, whether or not to accept and fund such PPIR. Buyer
shall base its decision, in part, upon a funding ratio of up to 100% of the
present value of net cash flow of the Eligible Proved Producing Xxxxx then
located on the Proposed Production Unit Group. If a Designated Event has
occurred and is outstanding, then Buyer shall not be obligated to consider any
PPIR delivered to Buyer by Seller.
(b) Should Buyer elect to accept a PPIR, Buyer shall notify Seller thereof
in writing by delivering to Seller a response to the PPIR (the "PPIR RESPONSE")
which shall include the following: (i) the dollar denominated amount of the
Purchase Price Installment calculated for such acquisition and proposed by
Buyer; (ii) Buyer's conversion of such Purchase Price Installment into the
Annual Scheduled Volumes; and (iii) Aggregate Termination Volume, Scheduled
Total NPV12 Volume, EMDS Volumes, Annual Scheduled Volume, XXX Percentage(s),
and ASV Percentage(s) proposed by Buyer for the Proposed Production Unit Group.
If Buyer shall fail to deliver a PPIR Response to Seller within fifteen (15)
Business Days after Buyer's receipt of a complete PPIR, Buyer shall be deemed
to have rejected such PPIR. Within five (5) Business Days of Seller's receipt
of the PPIR Response, Seller shall notify Buyer of its acceptance or rejection
(in Seller's sole and absolute discretion) of such PPIR Response.
Section 2.4. Initial Closing Date Buyer and Seller have hereby agreed to
(a) the initial Production Unit Groups as set forth in Schedule 3 hereto and
the Purchase Price Installment amount of $9,400,000 for the XXX Rights therein
(with $7,600,000 allocated to Blue Forest and $1,800,000 allocated in the
aggregate to Yuma) and (b) the Termination Volumes, Scheduled Total NPV12
Volumes, EMDS Volumes, Annual Scheduled Volume, ASV Percentages and XXX
Percentages related to the initial Production Unit Group, all as set forth on
Exhibits 2, 3 and 4 to the Conveyance. On the Initial Closing Date, subject to
the conditions of Seller and Buyer set forth herein, Seller will
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execute and deliver the Conveyance to Buyer using the descriptions and other
information set forth on said exhibits, and Buyer shall pay to Seller such
Purchase Price Installment.
Section 2.5. Subsequent Closing Dates - Scheduled Xxxxx. Upon (a)
Seller's acceptance of a PPIR Response from Buyer or (b) Seller and Buyer
otherwise reaching an agreement as to the matters described in a PPIR Response,
Seller shall specify the contemplated Subsequent Closing Date for the Proposed
Production Unit Groups to be made subject to the Conveyance; provided that the
contemplated Subsequent Closing Date for any Production Unit Groups must be a
Business Day prior to the Funding Expiry Date not less than twenty (20)
Business Days after the date of such notice. In addition, there must be an
interval of at least thirty (30) days between Closing Dates. On such
Subsequent Closing Date, subject to the conditions of Seller and Buyer set
forth herein, Seller will execute and deliver to Buyer a Conveyance Supplement
in form and substance satisfactory to Buyer which will, inter alia, amend the
definitions of Aggregate Termination Volume, Annual Scheduled Volumes and EMDS
Volumes under the Conveyance to add the amounts of such volumes for the
Proposed Production Unit Group to the amounts of such volumes theretofore in
effect under the Conveyance and Buyer shall pay to Seller the Purchase Price
Installment for such Production Unit Group specified in the PPIR (or otherwise
agreed to by Buyer and Seller).
Section 2.6. Payments to Seller and 3P Grantor. Buyer will pay each
Purchase Price Installment to Seller by wire transfer of same day funds to
Seller in care of Bank of America, San Francisco - Main, ABA #000000000, Re:
TCW Sale/Financing, Account No. 14996-01919 or to such other account as Seller
shall from time to time specify and, with respect to a purchase from a 3P
Grantor, such account as 3P Grantor shall specify. Seller may at its option
direct Buyer to apply a designated portion of any Purchase Price Installment to
the direct payment of any costs and expenses which Seller has agreed to pay
under Section 4.2(d) and to remit the remainder to Seller by such wire
transfer.
Section 2.7. Payments to Buyer. Seller will pay each amount owing to
Buyer under the Overriding Royalty Documents by wire transfer of same day funds
to Buyer in care of Boston Safe Deposit, ABA #000000000, Real Estate Wiring
#039624, Cost Center #3137, Re: Mellon Bank/Xxxxxx Xxxxxxx/Fund V, Account No.
CPFF 863-36302, or to such other account as Buyer shall from time to time
specify in accordance with Section 6.3.
Section 2.8.Purchase from 3P Grantor. In connection with Buyer's purchase
of an Overriding Royalty in an Acquisition Property concurrent with Seller's
acquisition of the Retained
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Interest in such Acquisition Property, Buyer shall receive a Conveyance of
Overriding Royalty (substantially in the form of Exhibit B) from 3P Grantor
("3P Conveyance"). Upon Buyer's and Seller's purchase of their respective
interests in the Acquisition Property, Seller will assume all of the
obligations of 3P Grantor under the 3P Conveyance pursuant to an assumption in
form acceptable to Buyer, and Buyer will release 3P Grantor from all such
obligations.
Article III - Closing Dates and Closings
Section 3.1. Time and Place of Initial Closing. The closing for the
consummation of the sale and purchase of the first component of the XXX Rights
(herein called the "INITIAL CLOSING") shall, unless another date, time or place
is agreed to in writing by Seller and Buyer, take place at the offices of
Milbank, Tweed, Xxxxxx & XxXxxx in Los Angeles, California on a date (herein
called the "INITIAL CLOSING DATE") which is on or about the date of this
Agreement.
Section 3.2. Conditions to Closings by Seller. The obligation of Seller
to deliver the Conveyance and each Conveyance Supplement, on the relevant
Closing Date for each, is subject to the following conditions:
(a) Seller shall concurrently receive the Purchase Price Installment
provided in Article II which is to be paid in connection with such Conveyance
or Conveyance Supplement.
(b) All representations and warranties made by Buyer in any Overriding
Royalty Document then or previously delivered shall be true and correct as of
such Closing Date in all respects which Seller, in the reasonable exercise of
its discretion, considers material to the value of its rights under the
Overriding Royalty Documents, to the extent such representations and warranties
apply to the properties covered by the Conveyance Supplement.
(c) Buyer shall have performed in all material respects all material
agreements, covenants, and conditions which Buyer is required by any Overriding
Royalty Document to perform on or prior to such Closing Date.
(d) The consummation of such Closing shall not be prohibited by any law
or any regulation or order of any court or governmental agency or authority
applicable to Seller and shall not subject Seller to any penalty under or
pursuant to any such law, regulation or order.
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(e) If the Subject Properties covered by the Conveyance or Conveyance
Supplement to be delivered by Seller shall have been encumbered to the agent
for Seller's lenders, The Chase Manhattan Bank ("Agent"), Seller shall have
received the written consent of the Agent to the transaction and the release of
the liens, if any, thereon in favor of the Agent or such lenders.
Section 3.3. Conditions to Initial Closing by Buyer. The obligation of
Buyer to pay the first Purchase Price Installments in the amount of $9,400,000
is subject to Buyer's receipt of each of the following, in form, substance, and
date satisfactory to Buyer in the reasonable exercise of its discretion:
(a) A certificate of the Secretary or Assistant Secretary of Seller,
which shall contain the names and signatures of the officers authorized to
execute and deliver the Overriding Royalty Documents on behalf of and as the
act of Seller and which shall certify to their authority to do so.
(b) A certificate (or certificates) of the due formation, valid existence
and good standing of Seller in its state of incorporation, issued by the
appropriate authorities of such state, and certificates of Seller's good
standing and due qualification to do business in Colorado.
(c) The Conveyance, duly executed and delivered by Seller in such number
of counterparts as Buyer shall have reasonably requested.
(d) Any title opinions reasonably requested by Buyer prior to the Initial
Closing Date concerning the XXX Rights (and the recording and filing of the
Conveyance) prepared by reputable oil and gas title counsel satisfactory to
Buyer and other title information concerning the XXX Rights and Subject
Interests in form and substance satisfactory to Buyer (it being understood that
no title deficiencies learned of by Buyer shall in any way be deemed to qualify
any of Seller's warranties of title or indemnities with respect to title in any
of the Overriding Royalty Documents).
(e) The favorable opinion of Xxxxx, Xxxxxx & Xxxxxx, as counsel to
Seller, dated the Initial Closing Date and substantially in the form of Exhibit
A-1 hereto.
(f) The agreement between Seller and Buyer with respect to Seller's
purchase of Buyer's XXX Hydrocarbons produced on or before December 31, 1998,
substantially in the form of Exhibit F hereto.
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Section 3.4. Conditions to Each Closing by Buyer. The obligation of
Buyer to pay any Purchase Price Installment (including the first) on any
Closing Date is subject to the satisfaction (or waiver by Buyer) on such
Closing Date of the following conditions precedent:
(a) Such Purchase Price Installment (i) is in an amount equal to or
greater than $9,000,000, (ii) is an integral multiple of $100,000, and (iii)
does not cause the total Purchase Price to exceed $90,000,000.
(b) All representations and warranties made by Seller or any Affiliate of
Seller in any Overriding Royalty Document then or previously delivered, and all
representations and warranties made by a 3P Grantor in its 3P Conveyance, shall
be true and correct as of such Closing Date in all material respects.
(c) Seller shall have executed, delivered and performed all agreements,
covenants, and conditions which Seller is required to perform under any
Overriding Royalty Document to perform on or prior to such Closing Date and
Seller shall have concurrently paid (or made arrangements satisfactory to Buyer
for the payment within one Business Day after such Closing Date of) any amounts
owed by Seller under Section 4.2(d) which are due and payable on or before such
Closing Date.
(d) No Designated Event shall have occurred and be continuing on such
Closing Date.
(e) No material adverse change shall have occurred to Seller's
consolidated financial condition since the date of this Agreement.
(f) Buyer shall have received a "Compliance Certificate" of Seller, dated
as of such Closing Date, in which Seller represents and warrants that the
conditions set out in subsections (b), (c), (d), and (e) of this section have
been satisfied.
(g) No material adverse change shall have occurred with respect to the
Proposed Production Unit Group(s) (including without limitation changes in
general economic or market conditions which could affect the value of the XXX
Rights) since the date of Buyer's agreement to the proposed XXX terms relating
to such Proposed Production Unit Group(s).
(h) Buyer shall have received and approved an Engineering Report covering
the Subject Interests.
(i) The consummation of such Closing shall not be prohibited by any law
or any regulation or order of any court or
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governmental agency or authority applicable to Seller or Buyer and shall not
subject either of them to any penalty under or pursuant to any such law,
regulation or order.
(j) In the case of each Subsequent Closing, Buyer shall have received (i)
a Conveyance Supplement or a 3P Conveyance, duly executed and delivered by
Seller or 3P Grantor, respectively, in such number of counterparts as Buyer
shall have reasonably requested, (ii) evidence of Seller's purchase of the
Retained Interest in the Acquisition Property, (iii) evidence of Seller's
assumption of 3P Grantor's obligations under the 3P Conveyance in form
acceptable to Buyer and (iv) any evidence of title reasonably requested by
Buyer at least three Business Days prior to such Closing concerning the XXX
Rights.
(k) In the case of each Subsequent Closing, Buyer shall have received a
supplemental legal opinion substantially in the form of Exhibit A-2 hereto,
addressing the Conveyance Supplement then being delivered. Seller shall have
delivered such other information as Buyer may reasonably require, including
evidence satisfactory to Buyer that all conditions precedent to closing set
forth in this Section and to any disbursement to be made at Closing have been
satisfied.
(l) The Investment Committee of TCW shall have approved the funding of
the Purchase Price Installment.
(m) Buyer shall have received an environmental site assessment in form
and substance satisfactory to Buyer in its sole and absolute discretion;
provided that, if such environmental site assessment is prepared by Seller's
internal environmental staff, Buyer has the right to have an independent
environmental consultant review any matters which Buyer reasonably believes may
pose an environmental hazard.
Section 3.5. Funding Fee. Concurrently with the funding of any Purchase
Price Installment, Seller shall pay to Buyer a fee in an amount equal to one
percent (1%) of the amount of such Purchase Price Installment.
Article IV - Representations, Covenants and Indemnities
Section 4.1. Representations and Warranties of Seller. To induce Buyer
to enter into this Agreement and to pay the Purchase Price, Seller hereby
represents and warrants to Buyer, as of the date of this Agreement and as of
each Closing Date on which the following representations and warranties are
remade, that:
(a) No Designated Event has occurred and is continuing.
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(b) Seller is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware, is duly qualified to do
business and is in good standing as a foreign corporation in the States of
Colorado and California and all other States in which Producing Units are
located, and has all requisite power and authority, corporate or otherwise, to
own the Subject Properties and to execute and deliver, and perform all of its
obligations under, the Overriding Royalty Documents.
(c) The execution, delivery and performance by Seller of the Overriding
Royalty Documents and the consummation by Seller of the transactions
contemplated herein and therein have been duly authorized by all necessary
corporate action and do not and will not (i) violate any provision of any law,
rule, regulation, order, writ, judgment, decree, determination or award
presently in effect having applicability to Seller or of the Articles of
Incorporation or Bylaws of Seller, (ii) result in a breach of, or constitute a
default under, any contract, indenture, instrument, or agreement to which
Seller is a party or by which it or its property may be presently bound or
affected (including the leases under which Seller holds the Proposed Production
Unit Groups or the Production Unit Groups), or result in or require the
creation or imposition of any lien or encumbrance under any such contract,
indenture, instrument, or agreement, or (iii) otherwise give any Person other
than Buyer any right to damages from Seller or Buyer. On or before each
Closing Date, Seller will have obtained all consents, authorizations and
waivers (including without limitation waivers of preferential rights, if any
then exist and are applicable, to purchase any of the XXX Rights, but excluding
any consents, authorizations, or waivers which are customarily obtained after
closing with respect to state or federal leases) necessary under any such
contract, indenture, instrument or agreement or under any such provision of
law, rule, regulation, order, writ, judgment, decree, determination or award in
order to permit the valid execution, delivery and performance by Seller of the
Overriding Royalty Documents.
(d) The Overriding Royalty Documents have been duly executed and
delivered by Seller. The Conveyance, as from time to time amended by the
Conveyance Supplements, constitutes an effective conveyance of the property
interests described therein. The Overriding Royalty Documents (including the
Conveyance and the Conveyance Supplements insofar as they contain contractual
obligations of Seller) constitute the legal, valid and binding obligations of
Seller, enforceable against Seller in accordance with their respective terms
except that: (i) enforcement of such obligations may be limited by bankruptcy,
insolvency, moratorium, or similar laws affecting creditors' rights generally,
and (ii) the remedies of specific performance and injunctive relief
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(as well as other equitable remedies) are subject to certain equitable defenses
and to the discretion of the court before which any proceedings therefor may be
brought.
(e) There are no suits, actions, claims, investigations, inquiries,
proceedings or demands pending or, to the knowledge of Seller, threatened
against Seller or involving any Subject Properties or Associated Property
(including any which challenge or otherwise pertain to Seller's title thereto
or operations thereon) which would, if determined adversely to Seller, have a
material adverse effect on Seller's financial condition, the value of the XXX
Rights, or the ability of Seller to convey the XXX Rights pursuant to the
Overriding Royalty Documents.
(f) Except as disclosed in the Disclosure Schedule, operations on the
Subject Properties and Associated Property are being conducted in compliance
with all applicable federal, state or local laws (including Applicable
Environmental Laws), the noncompliance with which would have a material adverse
effect on Buyer or the value of the XXX Rights.
(i) Seller is conducting its businesses in material compliance with
all applicable federal, state or local laws, including Applicable
Environmental Laws, has been and is in material compliance with all
licenses and permits required under Applicable Environmental Laws, and has
been and is in compliance in all material respects with all licenses and
permits required under any such other laws;
(ii) to the best of Seller s knowledge, none of the operations on
the Subject Properties or the Associated Properties are the subject of any
material federal, state or local investigations relating to any release of
any Hazardous Materials into the environment or the improper storage or
disposal (including storage or disposal at offsite locations) of any
Hazardous Materials;
(iii) To the best knowledge of Seller, no Person has filed or
threatened to file any notice under any federal, state or local law
indicating that Seller is responsible for the release into the
environment, or the improper storage or disposal, of any material amount
of any Hazardous Materials or that any Hazardous Materials have been
released, or are improperly stored or disposed of, upon any Subject
Property or Associated Property of Seller;
(iv) Neither Seller nor, to the best of Seller's knowledge, any
predecessor-in-interest in any Subject Property or Associated Property has
transported or arranged for the transportation of any Hazardous Material
from the
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Subject Properties or Associated Properties to any location which (A) is
listed on the National Priorities List under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, listed for possible inclusion on such National Priorities List by
the Environmental Protection Agency in its Comprehensive Environmental
Response, Compensation and Liability Information System List, or listed on
any similar state list or (B) is the subject of federal, state or local
enforcement actions or, to the best of Seller's knowledge, other
investigations which may lead to claims against Seller or any Affiliate
for clean-up costs, remedial work, damages to natural resources or for
personal injury claims (whether under Applicable Environmental Laws or
otherwise); and
(v) Seller has no known material contingent liability under any
Applicable Environmental Laws or in connection with the release into the
environment, or the storage or disposal, of any Hazardous Materials
relating to any Subject Property or Associated Property.
(g) Seller has incurred no obligation or liability, contingent or
otherwise, for broker's or finder's fees in respect of the matters provided for
in this Agreement.
(h) Except as disclosed in the Disclosure Schedule, no Production Unit
is, at the time it is made subject to the Conveyance, subject to a gas
imbalance with respect to which imbalance Seller is in an overproduced status
and is required to (i) permit one or more third parties to take a portion of
the production attributable to any Production Unit without payment (or without
full payment) therefor or (ii) make payment in cash in order to correct such
imbalance. No Subject Interest is subject to any Preferential Right.
(i) Seller has delivered its most recent audited financial statements,
its most recent unaudited financial statements and the pro forma financial
statements contained in the prospectus dated May 16, 1996 (the "FINANCIAL
STATEMENTS") to Buyer, and the Financial Statements were prepared in accordance
with GAAP and fairly present Seller's financial position or pro forma financial
position at the statements' date and the results of Seller's operations and
Seller's cash flows for the statements' periods. Since the statements' date, no
material adverse effect has occurred with respect to Seller s financial
condition or businesses.
(j) Seller has no outstanding debt of any kind (including contingent
obligations, tax assessments, and unusual forward or long-term commitments)
which is, in the aggregate, (i) material
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to Seller or material with respect to Seller s consolidated financial condition
and (ii) not shown in the Financial Statements or disclosed in the Disclosure
Schedule. Except as shown in the Financial Statements, Seller is not subject
to or restricted by any franchise, contract, deed, charter restriction, or
other instrument or restriction which is materially likely in the foreseeable
future to materially and adversely affect the businesses, properties,
prospects, operations, or financial condition of Seller.
(k) No certificate, written statement or other written information
delivered herewith or heretofore by Seller to Buyer in connection with the
negotiation of this Agreement or in connection with any transaction
contemplated hereby contains any untrue statement of a material fact or omits
to state any material fact known to Seller (other than industry-wide risks
normally associated with the types of businesses conducted by Seller) necessary
to make the statements contained herein or therein not misleading as of the
date made or deemed made. There is no fact known to Seller (other than
industry-wide risks normally associated with the types of businesses conducted
by Seller) that has not been disclosed to Buyer in writing which has a material
probability of causing a material adverse effect upon Seller s or any of its
properties, businesses, prospects or condition (financial or otherwise).
(l) To the knowledge of Seller, all data and information provided by
Seller in connection with any environmental assessment or Engineering Report
was true and correct and did not fail to include any information known to or
reasonably available to Seller which was required in order to keep the
information which was provided from being materially misleading. Seller has
heretofore delivered to Buyer true, correct and complete copies of the
Financial Statements and the Engineering Reports.
(m) Except as disclosed in the Financial Statements or in the Disclosure
Schedule: (i) there are no actions, suits or legal, equitable, arbitrative or
administrative proceedings pending, or to the knowledge of Seller threatened,
against Seller before any federal, state, municipal or other court, department,
commission, body, board, bureau, agency, or instrumentality, domestic or
foreign, which could reasonably be expected to have a material and adverse
effect on Seller or its ownership or use of any of its assets or properties,
its businesses or financial condition or prospects, or the right or ability of
Seller to enter into the Overriding Royalty Documents to which it is a party or
to consummate the transactions contemplated thereby or to perform its
obligations thereunder and (ii) there are no outstanding judgments,
injunctions, writs, rulings or orders by any such governmental entity against
Seller or its stockholders,
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partners, directors or officers which have a material probability of causing
any such effect.
(n) There are no currently existing ERISA Plans, except as may be
disclosed in the Disclosure Schedule. Except as disclosed in the Financial
Statements or in the Disclosure Schedule, and Seller is in compliance with
ERISA in all material respects. Seller is not required to contribute to, or
has any other absolute or contingent liability in respect of, any
"multiemployer plan" as defined in Section 4001 of ERISA. Except as set forth
in the Disclosure Schedule, (i) no "accumulated funding deficiency" (as defined
in Section 412(a) of the Internal Revenue Code of 1986, as amended) exists with
respect to any ERISA Plan, whether or not waived by the Secretary of the
Treasury or his delegate, and (ii) the current value of each ERISA Plan s
benefits does not exceed the current value of its assets available for the
payment of such benefits by more than $100,000.
(o) Seller has not, during the preceding five years, had, been known by,
or used any other partnership, trade, or fictitious name, except as disclosed
in the Disclosure Schedule. The chief executive office and principal place of
business of Seller are located (and have been for the preceding five years
located) at the address for Seller set out herein or the Disclosure Schedule.
(p) Except as disclosed in the Disclosure Schedule, Seller has no
subsidiary, owns no stock in any other corporation or association, and is not a
member of any general or limited partnership, joint venture or association of
any kind.
(q) Seller is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing
or carrying "margin stock" (as defined in Regulations G, U and X of the Board
of Governors of the Federal Reserve System).
(r) Seller has not entered into any agreement or incurred any obligation
which might result in the obligation to pay a brokerage commission or finder s
fee with respect to the transactions contemplated by the Overriding Royalty
Documents.
(s) Seller (i) is not an "investment company," or a company "controlled"
by an "investment company," within the meaning of the Investment Company Act of
1940; (ii) is not a "holding company," an "affiliate" of a "holding company" or
a "subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935; and (iii) is not subject to
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any other law, rule or regulation restricting its ability to incur debt or to
grant Liens.
(t) Except as disclosed in the Disclosure Schedule, no Person has any
claim to acquire an interest in any Subject Property. Seller hereby agrees to
indemnify and hold Buyer harmless from any claim, demand, loss, liability, cost
or expense (including reasonable fees of attorneys, accountants, experts and
advisors) incurred by reason of any claim to any interest in Seller or in any
Subject Property.
Section 4.2. Covenants of Seller. To induce Buyer to enter into this
Agreement and to pay the Purchase Price, Seller warrants, covenants and agrees
that until the full and final delivery of the Aggregate Termination Volume due
under the Overriding Royalty Documents and the termination of this Agreement,
unless Buyer has previously agreed otherwise:
(a) Compliance with Overriding Royalty Documents. Seller will perform
all of its covenants and obligations under the Overriding Royalty Documents,
all as fully as if they were set out in full herein.
(b) Reporting and Information. In addition to the other reports and
information required under the Conveyance and this Agreement, Seller will give
Buyer prompt written notice after learning of the occurrence of any Designated
Event or of the making of any claim by any Person which allegedly affects the
rights of Seller or Buyer in and to the properties subject to or expected to be
subject to the Conveyance and Seller will give to Buyer any information (in the
format in which such information is maintained by Seller) which Buyer may from
time to time reasonably request concerning Seller's compliance with any
covenant, provision or condition of the Overriding Royalty Documents or
concerning the geology of, production from, or accounting for the properties
subject to or expected to be subject to the Conveyance.
(c) Documentation Expenses. If the transactions contemplated by this
Agreement are consummated, or if Seller unilaterally withdraws from the
transaction contemplated hereby, Seller will promptly (and in any event, within
30 days after receipt of any invoice or other statement or notice in reasonable
detail) pay all reasonable costs and expenses for legal services incurred by or
on behalf of Buyer (excluding services of inside attorneys or engineers who are
the employees of Buyer or its affiliates) in connection with (i) the
negotiation, preparation, execution and delivery of the Overriding Royalty
Documents, and any and all consents, waivers or other documents or instruments
relating to any of the foregoing, and (ii) the filing, recording,
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refiling and re-recording of any such documents or of any instruments or
further assurances required to be filed or recorded or refiled or re-recorded
by the terms of any such documents; provided, however, that the legal fees of
Buyer (excluding out-of-pocket costs, expenses and disbursements) for which
Seller shall be liable under this subsection (d) in connection with the
preparation of the Overriding Royalty Documents delivered on the Initial
Closing Date shall be fixed at $60,000. If the transactions contemplated
hereby with respect to the Initial Production Unit Group are not consummated,
Seller shall only be obligated to bear fifty percent (50%) of the costs and
expenses (excluding out-of-pocket costs, expenses and disbursements), incurred
by Buyer for legal services in connection herewith. Seller and Buyer shall
agree as to the additional amounts of legal fees (excluding out-of-pocket
costs, expenses and disbursements to be borne by Seller in connection with the
preparation of the Overriding Royalty Documents for additional acquisitions by
Buyer to be consummated on Subsequent Closing Dates prior to the funding of
such additional acquisitions.
(d) Interest. Except to the extent otherwise expressly provided in any
Overriding Royalty Document, Seller will pay interest on any amounts owing by
Seller to Buyer under any Overriding Royalty Document which are not paid within
three (3) business days after the same become due and payable. Each such past
due amount shall bear interest at the Agreed Rate from the date it becomes due
and payable until the date it is paid.
(e) Allowables. Seller, to the maximum extent it is able to do so, will
produce, or cause to be produced, each Subject Well at least ratably with all
other xxxxx in the field and will assign allowables to each Subject Well as
needed to accomplish this result.
(f) Bonding and Insurance. Seller will at all times maintain all bonds
and insurance as specified in Section 3.7 of the Conveyance and on Schedule C
attached thereto, as such Schedule may be amended from time to time by Buyer in
its reasonable discretion.
(g) Payment of Taxes. Seller will:
(i) timely file all required tax returns;
(ii) timely pay all taxes, assessments, and other governmental
charges or levies imposed upon it or upon its income, profits or property,
except as the same is being contested diligently and in good faith by
appropriate action; and
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(iii) maintain appropriate accruals for all of the foregoing taxes
in accordance with GAAP.
(h) Title Matters.
(i) If any Person ever challenges or attacks (i) the validity or
priority of any Overriding Royalty Document or of any rights, titles, or
interests created or evidenced thereby or (ii) the title of Seller to any
Subject Interest or of Buyer to any part of the Overriding Royalty, then
upon learning thereof Seller will give prompt written notice thereof to
Buyer and at Seller's own cost and expense will diligently endeavor to
defeat such challenge or attack and to cure any defect that may be
developed or claimed, and Seller will take all necessary and proper steps
for the defense of any legal proceedings with respect thereto, including
the employment of counsel to represent Seller, the prosecution or defense
of litigation, and the release or discharge of all adverse claims. If, in
Buyer's reasonable discretion, Seller fails to take all necessary and
proper steps to defend against such suit, then Buyer (whether or not named
as a party to legal proceedings with respect thereto) is hereby authorized
and empowered to take such additional steps as in its reasonable judgment
and discretion may be necessary or proper for the defense of any such
legal proceedings or the protection of the validity or priority of the
Overriding Royalty Documents and the rights, titles, and interests created
or evidenced thereby, including the employment of independent counsel to
represent Buyer, the prosecution or defense of litigation, the compromise
or discharge of any adverse claims made with respect to the Subject
Interests, the purchase of any tax title and the removal of prior liens or
security interests, and all expenditures so made of every kind and
character shall be a Reimbursable Expense (which obligation Seller hereby
expressly promises to pay on demand) owing by Seller to Buyer and shall
bear interest from the date demanded until paid at the Agreed Rate.
(ii) Seller will, on request of Buyer, (i) promptly correct any
defect, error or omission which may be discovered in the contents,
execution or acknowledgment of any Overriding Royalty Document, (ii)
execute, acknowledge, deliver and record or file such further instruments
and do such further acts as may be necessary, desirable or proper to carry
out more effectively the purposes of the Overriding Royalty Documents and
to more fully identify and make subject to the Conveyance any property
intended to be covered thereby, including any renewals, additions,
substitutions, replacements, or appurtenances to the Subject
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Interests; and (iii) execute, acknowledge, deliver, and file or record any
document or instrument desired by Buyer to protect its rights, title and
interests under the Overriding Royalty Documents against the rights or
interests of third Persons. Seller shall pay all costs connected with any
of the foregoing.
(iii) Without limitation of Buyer's remedies for breach of the
representations or warranties contained in Section 4.1(h), if a third
party properly exercises a preferential right to purchase (a "PREFERENTIAL
RIGHT") after the Closing, Buyer will, in its sole and absolute
discretion, either (i) join in any required conveyance of the affected
Subject Interest to such third party, or (ii) make a conveyance of the
affected Subject Interest to Seller in order that Seller may make the
necessary conveyance to such third party. Upon making a conveyance in
accordance with (i) or (ii), above, Buyer shall be entitled to receive --
either from the exercising third party, assuming that Buyer exercised
option (i), or from Seller, assuming that Buyer exercised option (ii) --
the entire amount of consideration attributable to Buyer's interest in the
particular Subject Interest covered by such Preferential Right. Buyer
shall not incur any liabilities with respect to any such reconveyance of
properties that may be required in accordance with this subsection or
otherwise with respect to any exercise of a Preferential Right, and Seller
shall indemnify and hold harmless Buyer from any liabilities (including
reasonable attorneys' fees) with respect thereto.
(iv) Seller will provide to Buyer any assurances of title which
Buyer may from time to time reasonably request concerning the Overriding
Royalty, including the recording and filing of the Conveyance and the
updating of any specified title opinions through such recording (it being
understood that no title deficiencies learned of by Seller shall in any
way be deemed to qualify any of Seller's warranties of title or
indemnities with respect to title in any of the Overriding Royalty
Documents).
Section 4.3. Specified Hydrocarbons. Subject to the rights of Buyer set
forth in Section 2.6 of the Conveyance, Seller has been given the power, and is
obligated, to arrange for the marketing and sale of XXX Hydrocarbons as
provided in, and subject to, Section 2.5 of the Conveyance by entering into
contracts or other arrangements which may be with Seller or its Affiliates or
third parties ("SELLER MARKETING CONTRACTS"). Under the terms of Section 2.6
of the Conveyance, Buyer has the power to arrange for the marketing and sale of
XXX Hydrocarbons by entering into certain contracts or other arrangements all
as
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specified in Section 2.6 of the Conveyance ("BUYER MARKETING CONTRACTS").
Buyer and Seller shall deem the following "SPECIFIED HYDROCARBONS" for all
purposes under the Overriding Royalty Documents: (a) all XXX Hydrocarbons sold
under Seller Marketing Contracts approved by Buyer in its sole and absolute
discretion; (b) all XXX Hydrocarbons sold under Buyer Marketing Contracts; (c)
all XXX Hydrocarbons that are the subject of hedge contracts entered into by
Seller or any Affiliate of Seller at Buyer's request pursuant to Section 2.5(b)
of the Conveyance, provided, that (i) Buyer has approved the terms of such
hedge contract and (ii) the hedge price shall be deemed to be the price at
which the XXX Hydrocarbons covered by such hedge contract are sold for purposes
of calculating XXX Market Value notwithstanding that Seller actually receives a
different price therefor from the actual purchaser of such XXX Hydrocarbons.
Section 4.4. Default; Remedies. If any Designated Event occurs and is
not cured within the time specified in Section 5.2 of the Conveyance, Buyer
shall have all of the rights and remedies specified in such Section 5.2 of the
Conveyance.
Section 4.5. Representations and Warranties of Buyer. To induce Seller
to enter into this Agreement and to convey the Overriding Royalty, Buyer hereby
represents and warrants to Seller, as of the date of this Agreement and as of
each Closing Date on which the following representations and warranties are
remade, that:
(a) Buyer will acquire its interests in the XXX Rights for its own
account and not with a view to any further disposition thereof to any Person
(other than to TCW or an Affiliate of TCW); however, the disposition of Buyer's
property shall at all times be and remain within its control subject to Section
6.4.
(b) Buyer is a partnership duly formed and validly existing under the
laws of the State of California, Buyer is duly qualified to do business in
Colorado and Wyoming, and Buyer has all requisite partnership power and
authority to own the XXX Rights and to execute and deliver, and perform all of
its obligations under, the Overriding Royalty Documents.
(c) The execution, delivery and performance by Buyer of the Overriding
Royalty Documents and the consummation of the transactions contemplated herein
and therein have been duly authorized by all necessary partnership action and
do not and will not (i) violate any provision of any law, rule, regulation,
order, writ, judgment, decree, determination or award presently in effect
having applicability to Buyer or any partnership agreement of Buyer, (ii)
result in a breach of, or constitute a default under, any contract, indenture,
instrument, or agreement
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to which Buyer is a party or by which it or its property may be presently bound
or affected, or (iii) otherwise give any Person other than Seller any right to
damages from Seller or Buyer.
(d) Buyer has incurred no obligation or liability, contingent or
otherwise, for broker's or finder's fees in respect of the matters provided for
in this Agreement.
Article V - Purchase Option; Periodic Offer;
Right of First Refusal
Section 5.1. Option to Purchase XXX Rights in Acquisition Properties.
(a) Seller will have an option, subject to the terms and conditions set
forth in this Section 5.1, to acquire Buyer's XXX Rights in Acquisition
Properties (the "PURCHASE OPTION") for a price equal to FMV (as hereinafter
defined) or such greater amount as necessary to satisfy the condition set forth
in this Section 5.1. "FMV" of the XXX Rights shall be determined in the
following manner: (i) Seller and Buyer, acting in good faith, and using the
FMV Formula described below and Seller's internal engineering reports, shall
attempt to calculate and agree on FMV; (ii) If Seller and Buyer cannot agree
upon the FMV, the FMV shall be determined by an independent engineer to be
mutually agreed upon by Seller and Buyer and utilizing the FMV Formula and
Seller's internal engineering reports as audited by such independent engineer.
The FMV Formula is as follows:
[Op + (Gp/C] x P + [On + (Gn/C)] x N +
[Ou + Gu/C)] x U} x A x B, where
O = the amount of proved Oil reserves attributable to the Overriding
Royalty and calculated by reserve category as specified in the Engineering
Report which had been used to determine the Purchase Price Installments
reduced by Delivered XXX Volumes of Oil between the Initial Closing Date
and the date of repurchase,
G = the amount of proved Gas reserves attributable to the Overriding
Royalty and calculated by reserve category as specified in the Engineering
Report which had been used to determine the Purchase Price Installments,
reduced by Delivered XXX Volumes of Gas between the Closing Date and the
date of repurchase,
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P = 80%, N = 70%, U = 50%,
p = Proved Developed Producing Reserves,
n = Proved Developed Non-Producing, Reserves,
u = Proved Undeveloped Reserves.
C = the conversion factor used by Buyer in calculating the Purchase Price
Installment of the subject Production Unit Group or such other conversion
factor approved by Buyer and Seller.
A = the average price per BOE (at a conversion ratio equal to C) paid for
Oil and Gas reserves in place for domestic onshore reserves, as reported
by Xxxxxxx, Xxxxxx and Company, Houston, Texas (or its successor, or by
another equivalent index as agreed to by the parties if the foregoing
index is not available) for the four Calendar Quarters immediately
preceding the determination. If the conversion ratio C does not directly
relate to the data published by Xxxxxxx, Xxxxxx and Company, such data
shall be adjusted appropriately by Buyer to relate to such conversion
ratio.
B = the number (not to exceed 1.0) that equals the ratio of (a) the
average per BOE amount funded by Buyer with respect to any Production Unit
Group as to which a Purchase Price Installment is made (determined by
dividing such Purchase Price Installment by the BOE amount of the
Aggregate Termination Volume for such Production Unit Group), divided by
(b) the average price per BOE (at a conversion ratio of C) paid for Oil
and Gas reserves in place for domestic onshore reserves during the four
Calendar Quarters immediately preceding the funding, as reported by
Xxxxxxx, Xxxxxx and Company and as such data may be required to be
adjusted by Buyer to directly relate to conversion ratio C.
(b) If Subsequent Closing Dates occur, Seller will have a Purchase
Option(s) on the XXX Interests for any Production Unit Group that is an
Acquisition Property beginning two years after the Closing Date related to such
Production Unit Group subject to the following conditions: (i) no unresolved,
good faith dispute exists between the Seller and Buyer as to any material
matter relating to the Overriding Royalty Documents; (ii) the remaining
Production Unit Groups as a whole must have delivered not less than their
Scheduled Total NPV12 Volumes as of the date of the exercise of any Purchase
Option; and (iii) the most recent Engineering Report indicates that the
Termination Volumes and Aggregate Termination Volume for the remaining Subject
Properties shall be met using the ASV Percentage for each such Production Unit
Group.
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(c) Notwithstanding any of the foregoing, no Purchase Option may be
exercised with respect to any Production Unit Group (i) within 24 months of the
Closing Date; (ii) if a Designated Event is outstanding; (iii) unless Seller
assumes and agrees to perform any obligations of Buyer under (a) any forward
sales, hedging or other long-term delivery commitments entered into by Buyer in
accordance with provisions herein with respect to production attributable to
the repurchased Overriding Royalty for the period from the date of exercise of
the Option Repurchase through but not later than one year thereafter and (b)
any forward sales, hedging or other long-term delivery commitments approved by
Seller and entered into by Buyer with respect to production attributable to the
repurchased Overriding Royalty; and (iv) unless payment of the Purchase Option
purchase price with respect to any Production Unit Group plus all previous
amounts received by Buyer as Net XXX Proceeds from that Production Unit Group
provides Buyer, as of the date of payment of such Purchase Option purchase
price, a 13% IRR if the Purchase Option is exercised more than 24 months and
less than 49 months after the Closing Date with respect to that Production Unit
Group, and 12% IRR if the Purchase Option is exercised at any time thereafter.
(d) The exercise of any Purchase Option must be made (i) by Seller
delivering written notice to Buyer no later than thirty (30) days prior to the
date which Seller wishes to exercise such Purchase Option, which notice shall
set forth Seller's intended exercise date and which shall contain a
representation and warranty by Seller with respect to the conditions and
matters set forth in Sections 5.1(b) and (c) above in form reasonably
satisfactory to Seller, and (ii) in cash or, at Buyer's option, 80% in cash and
20% in the form of a perpetual (i.e., no Aggregate Termination Volume)
overriding royalty (a "Perpetual XXX") in the Production Unit Group(s) which
shall be retained by Buyer and conveyed by Seller (or such other appropriate
party) having a value (equal to 20% of the Purchase Option purchase price)
established based on the most recent Engineering Report on the Subject
Properties with future product prices based on NYMEX (or such other public
market index as agreed to by Buyer at the time of each exercise of a Purchase
Option) as adjusted on a monthly basis for the differential between the prices
actually expected to be received for production from such properties for sales
to be made therefrom and prices reflected on the NYMEX (or other price index)
for such future periods based on (A) a public differential market index agreed
to at the time of each exercise of a Purchase Option or (B) if such
differential cannot be determined pursuant to clause (A), the average
difference between the prices actually received for production from such
properties for sales made therefrom during the preceding twenty-four months
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and prices reflected on the NYMEX (or other price index) for such months.
The closing of any Purchase Option under this Section 5.1 (or Right
of First Offer under Section 5.2 or Pref. Right under Section 5.3) which
includes Buyer's receipt of a Perpetual XXX shall be conditioned upon the
delivery to Buyer of conveyances or other documents in form reasonably
acceptable to Buyer sufficient to vest such Perpetual XXX in Buyer free and
clear of any liens, security interests, encumbrances or other matters except
Permitted Encumbrances, together with title assurances and opinions of counsel
acceptable to Buyer which shall be equivalent to the title assurances and
opinions of counsel received by Buyer with respect to the XXX Rights.
Section 5.2. Right of First Offer. Subject to the terms and conditions
hereinafter set forth, after the second anniversary of the Effective Date of
the acquisition by Buyer of XXX Rights with respect to each Production Unit
Group that is an Inventory Property, Seller shall have a continuing first right
to offer ("Right of First Offer") to repurchase from Buyer or its successors
and assigns such XXX Rights in accordance with the following:
(a) The offer shall be made in writing containing a representation
and warranty by Seller that the conditions and requirements set forth in
Sections 5.1(b) and 5.1(c)(ii) and (iii) (as described in subsection
5.2(f) below) have been satisfied or met.
(b) The proposed purchase price shall be the greater of (i) the FMV
as determined in accordance with Section 5.1(a) or (ii) that amount
required to be received by Buyer which, when added to all net amounts
previously received by Buyer as Net XXX Proceeds from the particular
Production Unit Group, provides Buyer the Applicable IRR (assuming the
payment of such amount on the sixtieth day after the date of the offer),
and which shall be paid in cash, or cash and a retained perpetual
overriding royalty in accordance with Section 5.1(d)(ii). The "Applicable
IRR" shall be a 13% IRR if the effective date of the proposed sale would
be on or after the second and before the fourth anniversary of the
Effective Date of the acquisition by Buyer of XXX Rights with respect to
the relevant Production Unit Group, and a 12% IRR if the effective date of
the proposed sale would be on or after the fourth anniversary of the
Effective Date of the acquisition by Buyer of such XXX Rights. The
effective date of the sale, if the offer is accepted, shall be the first
day of the month during which the offer is made.
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(c) The offer shall remain open for a period of not less than thirty
(30) days and may be accepted by Seller's delivery of written acceptance
within such period. A failure on the part of Buyer or its successors and
assigns to respond to the offer within such time period shall be deemed an
acceptance of the offer.
(d) If the offer is accepted, or deemed to be accepted, the closing
of the purchase and sale shall occur within thirty (30) days following
acceptance or deemed acceptance by Buyer but in no event later than the
sixtieth day after the date of the offer.
(e) If the offer is not accepted, the following amendments shall
apply to the Overriding Royalty and the Overriding Royalty Documents, but
only with respect to the particular Production Unit Group(s) which
comprised the Inventory Property which was the subject of the offer
delivered by Seller (and not with respect to any other Production Unit
Group), effective as of the first day of the month during which the offer
was made. Buyer and Seller shall cooperate to effect such amendments and
to execute and deliver, within thirty (30) days following such rejection,
the documents that may be necessary or desirable in the opinion of either
Buyer or Seller to evidence and place of public record notice of such
amendments:
(i) The applicable XXX Percentage shall be reduced to a
percentage which is equal to the then-applicable ASV Percentage;
(ii) The applicable Annual Scheduled Volume and EMDS Volume
shall each be reduced to an amount which is equal to three-quarters
of the then-applicable Annual Scheduled Volume and EMDS Volume; and
(iii) The following provisions of the applicable Conveyance or
Conveyance Supplement shall be deleted and the obligations thereunder
terminated: the proviso in Section (a)(i) of the definition of XXX
Market Value in Section 1.1, Sections 2.5 and 2.6, and Articles III,
IV and V;
provided, however, that if Buyer has a reasonable, good faith belief that
the requirements and conditions set forth in Section 5.1(b) and 5.1
(c)(ii) and (iii) have not been satisfied, then the above amendments shall
not be effective until after the determination by a court of competent
jurisdiction or, if agreed to by Seller and Buyer, an arbitrator that the
conditions and requirements had been and
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continue to be satisfied and Buyer subsequently rejects the offer, but any
such effectiveness shall be as of the date specified in Section 5.2(b).
(f) Seller's rights under this Section 5.2 shall not apply if, at
the time of the Right of First Offer, or at any time until the applicable
closing, any of the conditions set forth in Sections 5.1(b)(i), (ii) and
(iii) and 5.1(c)(ii) and (iii) are not satisfied.
(g) The rights of Seller in this Article V may be enforced by means
of specific performance.
Section 5.3. Preferential Right to Purchase. Seller shall have a
preferential right to purchase (the "Pref. Right") any XXX Rights contemplated
to be sold, transferred or otherwise disposed of by Buyer in accordance with
the following:
(a) If Buyer intends to sell, transfer or otherwise dispose of any
XXX Rights or any interest therein or portion thereof to any Person other
than an Affiliate of Buyer, it shall give notice of the proposed sale,
transfer or other transaction (which may be putting such interests on the
market in the future to sell for a specified price) to Seller. Such
notice shall be in writing and shall contain all of the material terms of
the proposed transaction and all documents, if any, and information
relevant thereto or reasonably requested by Seller. Seller shall have a
period of thirty (30) days from receipt of such material terms within
which to notify Buyer in writing of its intent to exercise its Pref.
Right. The Pref. Right shall apply to any proposed transaction or series
of transactions the result of which would be that the XXX Rights or
portions thereof would come to be held by a party that is not an Affiliate
of Buyer at the time the transfer is proposed.
(b) The Pref. Right shall entitle Seller to purchase the XXX Rights
offered or intended to be offered by Buyer at the same price and on the
same terms as are offered or intended to be offered to third parties.
(c) If Seller exercises its Pref. Right, the closing of the purchase
by Seller shall take place at Buyer's office no later than thirty (30)
days from the date that Buyer receives notice of Seller's intent to
exercise the Pref. Right.
(d) If Seller does not exercise its Pref. Right, Buyer may transfer
the XXX Rights that were the subject of the notice to Seller on the
proposed terms or terms less
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favorable to a third-party purchaser, provided that if a closing of the
sale to a third-party purchaser is not consummated within six (6) months
from the date Seller receives notice of the proposed sale, the Pref. Right
shall again apply and Seller shall be given notice and an opportunity to
exercise the Pref. Right as provided above prior to any subsequent sale or
other disposition of such XXX Rights.
Article VI - Miscellaneous
Section 6.1. Waivers and Amendments. Except for failures and delays
which extend past specified time limits or events, no failure or delay (whether
by course of conduct or otherwise) by Buyer or Seller in exercising any right,
power or remedy which such party may have under any of the Overriding Royalty
Documents shall operate as a waiver thereof or of any other right, power or
remedy. No single or partial exercise by Buyer or Seller of any right, power
or remedy under any of the Overriding Royalty Documents shall preclude any
other or further exercise thereof or of any other right, power or remedy. No
waiver of any provision of any Overriding Royalty Document and no consent to
any departure therefrom shall ever be effective unless it is in writing and
signed by the party giving such waiver or consent, and then such waiver or
consent shall be effective only in the specific instances and for the purposes
for which given and to the extent specified in such writing. No notice to or
demand on Seller shall in any case of itself entitle Seller to any other or
further notice or demand in similar or other circumstances. This Agreement and
the other Overriding Royalty Documents set forth the entire understanding and
agreement of the parties hereto and thereto with respect to the transactions
contemplated herein and therein and supersede all prior discussions and
understandings with respect to the subject matter hereof and thereof, and
except as stated in a Overriding Royalty Document neither Seller nor Buyer is
making any representation or warranty of any kind to the other. No
modification or amendment of or supplement to this Agreement or the other
Overriding Royalty Documents shall be valid or effective unless the same is in
writing and signed by the party against whom it is sought to be enforced.
Section 6.2. Survival of Agreements; Cumulative Nature. All of Seller's
and Buyer's various representations, warranties, covenants and agreements in
the Overriding Royalty Documents shall survive the execution and delivery of
this Agreement and the other Overriding Royalty Documents and the performance
hereof and thereof, including the granting of the XXX Rights and the delivery
of the Conveyance.
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Section 6.3. Notices. All notices, requests, consents, demands and other
communications (in this section, collectively called "notices") which are
required or permitted under any Overriding Royalty Document shall be in
writing, unless otherwise specifically provided in such Overriding Royalty
Document, and shall be deemed sufficiently given if delivered by personal
delivery, by facsimile transmission, by delivery service with proof of
delivery, or by registered or certified United States mail, postage prepaid, to
Seller at its address specified on the signature pages hereto and to Buyer at
its address specified on the signature pages hereto. Any such notice shall be
deemed to have been given (a) in the case of personal delivery, delivery
service, or facsimile transmission, upon receipt, or (b) in the case of
registered or certified United States mail, five days after deposit in the
mail. (Seller and Buyer may change their respective addresses from time to
time by sending notices of the new address, in the manner provided for in this
section, to the others.)
Buyer's address: TCW Portfolio No. 1555 DR V Sub-Custody
Partnership, L.P.
c/o Trust Company of the West
000 Xxxxx Xxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to: Milbank, Tweed, Xxxxxx & XxXxxx
000 X. Xxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Seller's Address: HS Resources, Inc.
Xxx Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxxxxxx Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to: HS Resources, Inc.
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
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Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Section 6.4. Parties in Interest. All grants, covenants and agreements
contained in the Overriding Royalty Documents shall bind and inure to the
benefit of the parties thereto and their respective successors and assigns;
provided, however, that:
(a) Seller may not assign or transfer any of its rights or delegate any
of its duties or obligations under any Overriding Royalty Document without the
prior consent of Buyer, except to the extent expressly provided in Section 6.1
of the Conveyance (provided that nothing in the Overriding Royalty Documents
shall be deemed to prevent Seller from retaining independent service providers
in the ordinary course of business to assist it in the performance of its
duties).
(b) Buyer may not assign its funding obligations under this Agreement to
any Person other than TCW or TCW's Affiliates without the prior consent of
Seller.
Section 6.5. Governing Law. Except to the extent that the law of another
jurisdiction is expressly elected in a Overriding Royalty Document, the
Overriding Royalty Documents shall be deemed contracts and instruments made
under the laws of the State of Colorado (including the statute of limitations)
and shall be construed and enforced in accordance with and governed by the laws
of the State of Colorado and the laws of the United States of America, without
regard to principles of choice of law.
Section 6.6. Limitation on Interest. Although the Overriding Royalty
Documents provide for the sale and purchase of a real property interest and not
a loan (except under federal income tax law), there are certain provisions of
the Overriding Royalty Documents which provide for the charging and payment of
interest. Buyer and Seller intend to contract in strict compliance with
applicable usury law from time to time in effect. In furtherance thereof they
hereby stipulate and agree that none of the terms and provisions contained in
the Overriding Royalty Documents shall ever be construed to create a contract
to pay, for the use, forbearance or detention of money, interest in excess of
the maximum amount of interest permitted to be charged by applicable law from
time to time in effect. No party to any Overriding Royalty Document shall ever
be liable for unearned interest or shall ever be required to pay interest in
excess of the maximum amount that may be lawfully charged under applicable law
from time to time in effect, and the provisions of this section shall control
over all other provisions of the Overriding Royalty Documents which may be in
conflict or apparent conflict herewith. In determining whether or not the
interest paid or
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payable, under any specific circumstance, exceeds the maximum amount permitted
under applicable law, the parties to the Overriding Royalty Documents shall to
the greatest extent permitted under applicable law: (a) exclude voluntary
prepayments and the effects thereof, and (b) amortize, prorate, allocate, and
spread the total amount of interest throughout the entire contemplated term of
the interest bearing obligation in accordance with the amounts thereof
outstanding from time to time and the maximum legal rate of interest from time
to time in effect under applicable law in order to lawfully charge the maximum
amount of interest permitted under applicable law.
Section 6.7. Termination; Limited Survival. As provided in the
Conveyance, Seller may elect at any time after the Discharge Time to deliver to
Buyer a notice to terminate the Conveyance ("TERMINATION NOTICE"). Upon
receipt by Buyer of such a notice, if no unpaid obligations are then owing
under this Agreement or any other Overriding Royalty Document, then all of the
Overriding Royalty Documents shall thereupon be terminated and the parties
thereto released from all prospective obligations thereunder. Notwithstanding
the foregoing or anything herein to the contrary other than Section 5.2(e): (a)
any waivers, acknowledgments, or admissions made by Seller or Buyer in any
Overriding Royalty Documents, (b) Seller's obligations under Section 4.4, and
(c) any other obligations which any Person may have to indemnify or compensate
Buyer shall survive any termination of this Agreement or any other Overriding
Royalty Document. At the request of Seller, Buyer shall prepare and execute
all necessary instruments to reflect and effect such termination and limited
survival of the Overriding Royalty Documents, such instruments to be reasonably
satisfactory to Seller in form and substance.
Section 6.8. Severability. If any term or provision of any Overriding
Royalty Document shall be determined to be illegal or unenforceable all other
terms and provisions of the Overriding Royalty Documents shall nevertheless
remain effective and shall be enforced to the fullest extent permitted by
applicable law.
Section 6.9. Limitation on Liability; Setoff.
(a) No Personal Liability. Notwithstanding anything else to the contrary
herein, no Sub-Custody Person shall be personally liable for any money judgment
against any Sub-Custody Person in connection with any action brought under this
Agreement or any other Overriding Royalty Document, nor shall Seller enforce,
or seek to enforce, any judgment against any assets of any Sub-Custody Person
other than such Sub-Custody Person's interest in the XXX Rights and other
rights under the Overriding Royalty Documents. As used in this subsection,
"SUB-CUSTODY PERSON" means TCW Portfolio No. 1555 DR V Sub-Custody
Partnership, L.P.,
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a California limited partnership, the partners in such limited partnership, and
the respective officers, directors, shareholders, affiliates and partners of
such partnership or any such partner.
(b) Setoff. In the event that Seller ever has a claim for damages
against Buyer, Seller will provide Buyer with notice of such claim, and the
parties agree to meet in good faith within thirty (30) days of Buyer's receipt
of such notice to resolve such claim. If the parties fail to resolve Seller's
claim, Seller will have the right to deposit any amounts payable to Buyer under
the Overriding Royalty Documents, up to the disputed amount, into an
interest-bearing, third party escrow account or to interplead such amount into
a court registry.
To the extent that Seller ever obtains a final judgment for damages
against Buyer (including any successor owner of the XXX Rights), then Seller
shall be entitled to setoff such damages against any amounts payable under the
Overriding Royalty Documents by Seller to Buyer (or to any such successor
owner) until Seller shall have recovered such damages (with interest thereon at
the Agreed Rate) in full. Except as otherwise expressly provided in any
Overriding Royalty Document, Seller shall not have any right to setoff or
suspend payments under the Overriding Royalty Documents prior to any such final
judgment. Seller's rights under this subsection shall be superior to, and may
be enforced by Seller notwithstanding, any mortgage, deed of trust, financing
statement, or other lien upon any of the XXX Rights.
Section 6.10. Counterparts. This Agreement may be separately executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Agreement. This Agreement shall not be recorded by either party
in the real estate records.
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IN WITNESS WHEREOF, this Agreement is executed as of the date first
written above.
Seller: HS RESOURCES, INC.,
a Delaware corporation
By:
----------------------------------------
Name:
Title:
Buyer: TCW PORTFOLIO NO. 1555 DR V SUB-CUSTODY
PARTNERSHIP, L.P.,
a California limited partnership
By: TCW Royalty Company V,
a California Corporation,
its Managing General Partner
By:
--------------------------------------
Xxxxxx X. Xxxxxxx
Managing Director
By:
--------------------------------------
Xxxxxx X. Xxxxxxxx
Senior Vice President
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