EXHIBIT 10.12
PURCHASE SALE AND PARTICIPATION AGREEMENT
REGARDING
CERTAIN PROPERTIES IN LOUISIANA AND TEXAS
BETWEEN 5 JAB, INC.
AS OPERATOR AND SELLER
AND
THREE FORKS, INC.
AS PARTICIPANT AND BUYER
DATED AS OF FEBRUARY 27, 0000
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XXXXXXXX AND PARTICIPATION AGREEMENT
FOR
SELECT PROPERTIES IN LOUISIANA AND TEXAS
This Agreement (the "Agreemento) is made and entered into as of the 27th day of
February, 2013 by and between the following named Parties (the "Partieso) whose
addresses, telephone, and facsimile numbers are set forth with their respective
names, to-wit:
Five X.X.X.Xxx. ('Operator") or ("Seller)"
00000 Xxxxxx Xx,
Xxxxxxxx, XX 00000
Attention:
Xxxxx ("Bubba") Xxxxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
and
THREE FORKS, INC. ("Participant") or ("Buyer")
000 Xxxxxxxx Xxxx., Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxxx, CEO
Telephone: (000)000-0000
Fax:
W I T N E S S E T H:
Precis. Five J.A.B., Inc. ("Operator") of Magnolia, Texas, is the owner and
operator of certain oil and gas xxxxx and leases (the opropertieso) described in
Exhibit "A", attached hereto and made a part hereof. The Participant has
reviewed geological, engineering, and production data pertaining to the
Properties and has made the determination to purchase an interest in the
Properties. The precise working interest and net revenue interest percentages
(the "Interests") to be purchased by the Participant are Identified in Exhibit
"A". In addition, the Participant has determined, in concurrence with the
Operator, that the production from the Properties can be enhanced by the
application of a ten (10) well workover and development program (the
"Development Program"), described below. This Agreement sets forth the terms and
conditions upon which (i) the Participant agrees to purchase the Interests from
the Operator and (ii) the parties describe the proposed Development Program to
develop the Properties.
1. THE PROPERTIES. The Properties are comprised of the oil and gas xxxxx and
leases described in the attached Exhibit "A". The Properties were acquired and
are currently operated by the Operator.
2. AGREEMENT TO PURCHASE THE INTERESTS. The Operator hereby agrees to sell,
transfer and assign seventy-five percent (75.0%) all of the Seller's right title
and interest to the following (such interests are collectively herein called the
"Assets"):
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a. the oil and gas leases, mineral executive interests, contractual
rights, rights to explore, produce and develop, rights to drain,
wellbore interests and/or properties listed and described in any
manner on Exhibit A (including any renewals, extensions, ratifications
and amendments to such interests whether or not such renewals,
extensions, ratifications or amendments are described on Exhibit A)
(any such rights or interests individually referred to as a "Lease" or
collectively, the "Leases");
b. all oil and gas xxxxx, salt water disposal xxxxx, Injection xxxxx and
other xxxxx located on, or pooled or unitized with, any of the Leases,
as listed on Exhibit A (collectively the "Xxxxx");
c. all structures, facilities, foundations, wellheads, tanks, pumps,
compressors, separators, heater treaters, valves, fittings, equipment,
machinery, fixtures, flowlines, pipelines, platforms, tubular goods,
materials, tools, supplies, improvements, and any other real,
personal, immovable and mixed property located on, used in the
operation of, or relating to the production, treatment, non-regulated
transportation, gathering, marketing, sale, processing, handling or
disposal of hydrocarbons, water, and associated substances produced or
drained from the Leases (the "Facilities"), but excluding all of
Operator's vehicles, equipment, supplies, tools and other personal
property not used solely to operate the Properties or used in
Operator's general business operations;
d. all natural gas, casing head gas, drip gasoline, natural gasoline,
natural gas liquids, condensate, products, crude oil and other
hydrocarbons, whether gaseous or liquid, produced or drained from or
allocable to the Assets (as defined above) on and after the Effective
Date (the "Hydrocarbons");
e. to the extent transferable, all contracts, permits, rights-of-way,
easements, licenses, servitudes, transportation agreements, pooling
agreements, operating agreements, gas balancing agreements,
participation and processing agreements, confidentiality agreements,
side letter agreements and any other agreement, document or instrument
listed on Exhibit A INSOFAR ONLY as they directly relate and are
attributable to the Leases, Xxxxx, Hydrocarbons, or Facilities or the
contractual and wellbore rights thereon or therein or the ownership or
operation thereof, or the production, treatment, non- regulated
transportation, gathering, marketing, sale, processing, handling
disposal, storage or transportation of hydrocarbons, water, or
substances associated therewith {the "Assumed Contracts"); and
f. copies of records relating to the Leases, Xxxxx, Hydrocarbons, Assumed
Contracts and Facilities in the possession of Seller (the "Recordso)
and including as follows: all (i) lease, mineral interest, land, and
division order files (including any abstracts of title, title
opinions, certificates of title, title curative documents, and
division orders contained therein), (ii) the Assumed Contracts; (iii)
all well, facility, operational, environmental, regulatory, compliance
and historic production files and (iv) all geological and geophysical
files relating to the Leases (the "Geologic Data"), but not including
any records which (i) Seller is prohibited from transferring to Buyer
by law or existing contractual relationship (including Geologic Data
that is not transferable without payment of a fee or other penalty to
any third party which Buyer has not separately agreed in writing to
pay). Operator's general accounting, legal, corporate and financial
records shall be excluded from the Records. Such records listed in
this Paragraph 2 (f) shall be stored and maintained at the offices of
the Seller and made available to the Buyer upon reasonable advance
notice, during non-business hours, for the purposes of perusal or
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duplication at Buyer's expense.
2.1 RESERVED.
2.2 CONVEYANCING INSTRUMENTS. The Assets to be conveyed by Seller to Buyer
shall be conveyed "AS IS, WHERE IS" with the express conditions and
limitations contained in this Agreement, and they shall be transferred
pursuant to a Conveyance, Assignment and Xxxx of Sale in substantially the
form of Exhibit B (the oAssignment) which shall contain a special warranty
of title. Such Special Warranty will limit the Seller's covenants of
warranty to encumbrances and defects caused by the Seller and will require
the Seller to warrant and defend title for claims by, through or under
Seller, but against none other.
2.3 PURCHASE PRICE. As partial consideration for the sale of the Assets, Buyer
shall pay to Seller or its respective designee, three million seven hundred
fifty thousand US dollars ($3,750,000.00) (the opurchase Priceo), as set
forth below. The Purchase Price as adjusted in accordance with Section 2.5
shall be referred to as the "Adjusted Purchase Price". The Adjusted
Purchase Price shall be paid at Closing by Buyer by completed wire
transfer, In Immediately available funds, as directed in writing by Seller.
2.4 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated for
consent, defect and casualty loss adjustments as set forth in Schedule 2.4.
Within 30 days after Closing, Buyer and Seller shall agree in writing as to
the allocation of the Purchase Price among the Assets for tax purposes
under the methodology required by Section 1060 of the Internal Revenue Code
of 1986, as amended (the "code") and the Treasury Regulations promulgated
thereunder. Such allocation may be revised, from time to time, by a mutual
written consent of Buyer and Seller, so as to reflect any matters that need
updating (Including Purchase Price adjustments, if any). Buyer and Seller
agree to be bound by such allocation of the Purchase Price for all tax
purposes; to consistently report such allocations for all federal, state
and local Income tax purposes (including for purposes of Internal Revenue
Service Form 8594); and to timely file all reports required by the Code
concerning the Purchase.
2.5 ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price shall be adjusted in
accordance with this Section 2.5.
(a). The Purchase Price shall be increased by the following amounts
(without duplication}:
(i) The amount of all expenses relating to the Assets incurred by
Seller and attributable to the period after the Effective Date,
including, without limitation, (a) all operating expenditures,
(b) all capital expenditures, royalty disbursements, and
severance and production tax payments, (c) all prepaid expenses
paid by Seller and attributable to the period after the Effective
Date (other than delay rentals due prior to the Effective Date),
and (d) all other expenses under applicable operating agreements
(including overhead chargeable thereunder), participation,
production handling, production processing, exploration and
development agreements and other similar types of agreements
which cover or relate to any of the Assets between Seller and
Buyer or any other unaffiliated third party (to the extent not
reimbursed by other parties and to the extent not related solely
to the negotiations and consummation of this Agreement);
(ii) An amount equal to the value of all hydrocarbons In storage above
the pipeline connection on the Effective Date that are produced
from, attributable to, or otherwise credited to the Assets,
priced at the closing spot price for Louisiana Light Sweet Crude
three (3) days prior to the Closing;
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(iii)The amount of any property or ad valorem taxes assessed against
or related to the Assets that were paid by Seller prior to the
Effective Date but allocable to the period of time from and after
the Effective Date;
(b). The Purchase Price shall be decreased by the following amounts:
(i) If the average gross oil production attributable to the entire
8/8ths or 100% WI ownership position in the Leases at the end of
the 15-day period immediately prior to the Effective Date is less
than 100 Barrels of 011 Equivalent Per Day "BOEPD"), the Purchase
Price payable to Seller shall be reduced by $31,250.00 per barrel
per barrel of oil equivalent deficiency as follows: the Purchase
Price issued hereunder shall be adjusted by a reduction in
Purchase Price of $31,250.00 per barrel of oil equivalent times
the difference between 100 BOEPD and the actual average daily
production. However, in no event shall the Purchase Price be
reduced below $3,750,000.00. For the purposes hereof, 33 MMBTU of
gas production per day shall equal 1 barrel of oil production per
day. Buyer's and Operator's closing obligations are each
contingent upon average daily production of 100 BOEPD for at
least 15 days prior to closing; provided, however, that Buyer and
Operator each reserve the right to waive their respective
conditions to Close set forth in this Section 2.5(b);
(ii) An amount equal to the gross proceeds received by Seller from the
sale of Hydrocarbons produced from, attributable to, or otherwise
credited to the Assets after the Effective Date;
(iii)The amount of any property or ad valorem taxes assessed against
or related to the Assets that will be paid by Buyer after the
Effective Date but allocable to the period of time prior to the
Effective Date;
(iv) Any other amount agreed upon by Seller and Buyer in writing.
2.6 CLOSING STATEMENT. Seller shall prepare and deliver to Buyer an accounting
statement to be executed at Closing (the closing Statement) no later than
two (2) business days prior to Closing that shall set forth the adjustments
to the Purchase Price made in accordance with this Agreement, it being
understood and agreed that the Closing Statement shall contain reasonable
estimates where actual amounts are not known at the Closing and that as
actual costs and revenues are known, these amounts will be taken into
account in the Final Accounting Statement. The Closing Statement shall be
prepared in accordance with generally accepted accounting principles used
in the oil and gas industry.
2.7 EFFECTIVE DATE OF SALE. The effective date of the sale of the Properties
described in Section 1.1, hereof, shall be May 1, 2013 (the oeffective
Date").
2.8 CLOSING. The closing of this transaction (the closingo) shall be on or
before May 1, 2013, at the offices of the Operator, or such other time and
place as the Parties may agree or as adjusted pursuant to this Agreement.
Participant may elect, by written notice delivered to Operator not later
than 5:00 p.m. CST on April 24, 2013, to extend the day of Closing until
May 15, 2013. If the Closing Date is extended under this (or any other )
Section, the Effective Date shall also be extended and the new Effective
Date shall be the date on which Closing actually occurs (the "Closing
Dateo). At the Closing, Participant shall deliver to Operator in good funds
the Adjusted Purchase Price, together with an executed counterpart of the
Operating Agreement provided for in Section 6, below, and Operator shall
execute and deliver to Participant the Assignment of Participant's interest
in the Properties. At the closing, Participant agrees to indicate its
acceptance of the Development Program by providing the signature of its
appropriate officer on the signatory line on the last page of each Stage of
the
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Development Program. Within ninety (90) days after the date of Closing,
Seller shall prepare a final accounting statement for the adjustments to
the Purchase Price provided for in Section 2 and any other adjustments
arising pursuant to this Agreement. Seller shall submit the Final
Accounting Statement to Buyer, along with copies of third party vendor
invoices in excess of $10,000.00, or other evidence of expenses agreed to
by Seller and Buyer and Buyer shall have ten (1O) days to review same and
confirm accuracy thereof (failure to deliver a written objection within
such 10-day period shall be deemed agreement with the Final Accounting
Statement). Upon agreement by Seller and Buyer or upon the expiration of
said ten (10) day period Seller or Buyer, whichever the case maybe shall
promptly pay to the other such sum as may be found due, after making
adjustments for any payments made at Closing In accordance with the Closing
Statement.
2.9 POST-CLOSING ACTIONS FOR DEVELOPMENT PROGRAM. The Development Program
consists of the working over of, replacement of pumps in, or recompletion
of ten (10) xxxxx, each of which is included in the Properties and has been
determined by the Operator to possess enhanced production potential.
Operator may determine and propose the operations relating to the
Development Program in accordance with the JOA. It is anticipated that the
initiation of the Development Program shall commence on or before May 21,
2013. However, the description of the Development Program, and the
timeframe for the operations contemplated by the Development Program, set
forth herein, are a present expression of intent only and shall not be
binding on the parties. A binding commitment to participate in any
operations within the Development Program shall only arise pursuant to the
JOA and proposals made thereunder.
3. OPERATING AGREEMENT. There is attached to this Agreement as Exhibit 11co a
form of Joint Operating Agreement (the "JOA") naming Operator as "operator". The
JOA shall be deemed effective by and between Operator and Participant at
Closing. All operations associated with the Properties shall be governed by the
provisions of the JOA. In the event of a conflict between the provisions
contained in this Agreement and the JOA, or any other Annex attached hereto, the
provisions of the JOA shall prevail.
4. ASSUMPTION OF OBLIGATIONS OF OPERATOR BY PARTICIPANT; MUTUAL INDEMNITIES.
(a). As a result of its purchase of the Assets, the Participant shall own
an undivided working interest in the Properties, thereby becoming
obligated to bear its pro rata share of the cost and expense of all of
the duties, liabilities and burdens otherwise borne by Operator under
the terms and provisions of the Leases and any other related documents
burdening the title, as it was acquired by Operator. If the Closing
occurs, then from and after the Closing, except for matters for which
Seller indemnifies Buyer hereunder, Buyer shall indemnify and hold
harmless Seller (and its partners, affiliates, directors, officers,
officers and agents) from and against any Claims, damages,
liabilities, losses, costs and expenses (including, without
limitation, attorneys' fees) of any kind arising from or relating to
(i) the ownership or operation of the Assets, whether arising before
or after the Closing, (ii) the breach of any representation or
warranty of Buyer, and (iii) the breach of any of Buyer's covenants
hereunder. THE FOREGOIING ASSUMPTIONS AND INDEMNIFICATIONS SHALL APPLY
WHETHER OR NOT SUCH DUTIES, OBLIGATIONS OR LIABILITIES, OR SUCH
CLAIMS, ACTIONS, CAUSES OF ACTION, LIABILITIES, DAMAGES, LOSSES, COSTS
OR EXPENSES ARISE OUT OF (I) NEGLIGENCE (INCLUDING SOLE NEGLIGENCE,
SIMPLE NEGLIGENCE, CONCURRENT NEGLIGENCE, ACTIVE OR PASSIVE
NEGLIGENCE, BUT EXPRESSLY NOT INCLUDING GROSS NEGLIGENCE) OF ANY
INDEMNIFIED PARTY, OR (II) STRICT LIABILITY.
(b). If the Closing occurs, then from and after the Closing, Seller shall
indemnify and hold harmless Buyer (and its partners, affiliates,
directors, officers, officers and agents) from and against any Claims,
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damages, liabilities, losses, costs and expenses (including, without
limitation, attorneys' fees) arising from or related to (i) the breach
of Seller's representations and warranties hereunder (limited to the
survival period of such representations and warranties), and (ii} the
breach of Seller's covenants hereunder. The sole and exclusive remedy
of Buyer with respect to the Assets shall be pursuant to the express
provisions of this Agreement (and the special warranty of title
contained in the Assignment). Without limitation of the foregoing, the
sole and exclusive remedy of Buyer for any and all {a) claims relating
to any representations, warranties, covenants and agreements contained
In this Agreement, (b) other claims pursuant to or in connection with
this Agreement and (c) other claims relating to the Assets and the
purchase and sale thereof shall be any right to indemnification from
such claims that is expressly provided in this Agreement, and if no
such right of indemnification Is expressly provided, then such claims
are hereby waived to the fullest extent permitted by law (except
claims arising under the special warranty of title in the Assignment).
Notwithstanding anything in this Agreement to the contrary, Seller
shall never have any liability to Buyer under this Agreement, for
breaches of Seller's representations or warranties, in excess of ten
percent {10%) of the unadjusted Purchase Price, and Seller's
indemnification obligations, for breaches of representations and/or
warranties, shall be capped at such maximum amount.
5. WELL INFORMATION. With respect to each Stage of the Development Program,
Operator shall:
a. furnish Participant with all information, including daily reports, as
such information becomes available from the undertaking of Program
activities;
b. permit Participant, Its agents and representatives, access to the well
sites associated with the Development Program at all times: and
c. notify Participant in time for its representatives to be present when
Operator plans to perform any test on any Program-related well.
6. RELATIONSHIP OF THE PARTIES. It is not the intention or purpose of the
Parties to create hereunder any partnership, mining or otherwise, joint venture
or association relationship or the relationship of agency or employer and
employee, and neither this Agreement nor any of the operations hereunder shall
be construed as creating any such relationship. The Parties expressly agree that
no Party shall be responsible for the obligations of the other Party, each Party
being severally responsible only for its obligations arising hereunder and
liable only for its proportionate share of the costs and expenses incurred
hereunder.
7. POWER AND AUTHORITY. Each Party represents hereby that it has all necessary
and appropriate authority to execute, deliver, and fulfill the requirements
imposed by this Agreement.
8. PENDING LITIGATION. Operator represents that there are no pending suits,
actions, notices of violations, or other governmental proceedings (collectively,
"Claims" or to Operator's knowledge, any such threatened Claims in which (i)
Operator is or may be a party that relate to the Properties or (ii) that affect
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
9. BASIC DOCUMENTS. The Operator represents and warrants that, to the best of
its knowledge, the following documents are in full force and effect and
constitute valid and binding obligations of the parties thereto:
a. the oil, gas and/or mineral leases which are included as part of the
Oil and Gas Properties;
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b. all contracts and agreements, licenses, permits and easements,
rights-of-way and other rights-of-surface use comprising any part of
or otherwise relating to the Properties; and
c. all contracts and agreements that are reasonably necessary to own,
operate, develop, or maintain the Properties In accordance with the
prudent practices of the oil and gas industry.
10.1 NO NOTICE OF VIOLATION. Operator represents and warrants that it has
received no written notice of violation from any person, (Including, without
limitation, federal or state governmental agencies or owners of the surface of
the lands covered by any Lease) alleging or claiming that any of the Assets, or
any of Operator's operations with respect to the Assets, Is In material
violation of any laws, orders or regulations pertaining to human health and the
environment, waste materials or hazardous substances ("Environmental Laws").
10.2 OTHER COMPLIANCE WITH LAWS. The Operator represents and warrants:
a. that the ownership and operation of the Properties by Operator has
been and remains in conformity, in all material respects, with all
applicable laws, rules, regulations guidelines and orders of all
governmental agencies having jurisdiction, relating to the Properties,
other than Environmental Laws (which are addressed solely by Section
10.1 above); and
b. that all xxxxx operated by Operator on the Properties that are shut In
or temporarily inactive are In material compliance with all applicable
regulations, laws or rules other than Environmental Laws (which are
addressed solely by Section 10.1 above).
11. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents and warrants, as of
the date of this Agreement and as of the Closing, that:
a. Buyer is acquiring the Assets for its own account and not with the
Intent to make a distribution in violation of the Securities Act of
1933 as amended (and the rules and regulations pertaining thereto) or
In violation of any other applicable securities laws, rules or
regulations.
b. Buyer has (and had prior to negotiations regarding the Assets) such
knowledge and experience in financial and business matters as to be
able to evaluate the merits and risks of an investment in the Assets.
Buyer Is able to bear the risks of an investment in the Assets and
understands the risks of, and other considerations relating to, a
purchase of the Assets. Buyer is an "Accredited Investor" as that term
is defined by Rule 501 of Regulation D of the Securities and Exchange
Commission, and understands the risks Involved in an Investment in the
Assets, including that there may be no market for Buyer to sell the
Assets after Closing and that revenue therefrom Is contingent and
dependent upon many factors which cannot be predicted with certainty.
BUYER UNDERSTANDS THAT THESE ASSETS HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION, THE TEXAS SECURITIES BOARD, OR
WITH THE SECURITIES COMMISSION OF ANY OTHER STATE AND MAY NOT BE RE-
OFFERED FOR SALE OR RESOLD UNLESS IT IS REGISTERED UNDER SUCH ACTS OR
IN A TRANSACTI ON EXEMPT UNDER SUCH ACTS.NEITHER THE SECURITIES
EXCHANGE COMMISSION NOR THE TEXAS SECURITIES COMMISSIONER (NOR THE
APPLICABLE AUTHORITY OF ANY OTHER STATE)
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RECOMMENDS NOR ENDORSES THE PURCHASE OF THE ASSETS.
12. BUYER'S DUE DILIGENCE; TITLE AND ENVIRONMENTAL DEFECTS.
a. Participant may, to the extent it deems appropriate, conduct, at its
sole cost, such title examination or other investigation as it may
choose to conduct with respect to the Properties. To facilitate such
review, Operator shall, promptly after the execution of this
Agreement, grant Buyer access to Operator's title opinions, abstracts,
runsheets, and other title documentation relating to the Assets.
Should, as a result of such examination and investigation, or
otherwise, matters come to Participant's attention which would
constitute "Defects" (as defined below) Participant shall notify
Operator in writing of such Defects at least ten (10) business days
prior to the Closing. Such Defects of which Participant so provides
notice are herein called "Asserted Defects". To be effective, the
notice must describe the Asserted Defect(s) with reasonable detail.
b. "Defects" shall mean any of the following:
(i) Seller's ownership of the working interest in a Lease or Well is
clearly less than that set forth on Exhibit A.
(ii) Liens. Seller's ownership of a Lease or Well ls subject to a lien
other than (A) a lien for taxes which are not yet delinquent or
(B) a mechanic's or materialmen's lien (or other similar lien),
or a lien under an operating agreement or similar agreement, to
the extent the same relates to expenses incurred which are not
yet delinquent or (C) liens which will be released at or before
Closing.
(iii)Environmental Matters. Except as disclosed on any Exhibit
hereto, an Asset is in material violation of Environmental Laws.
Defects shall not include (i) defects or irregularities that have been
cured by the passage of time, including, without limitation,
applicable statutes of limitation or statutes for prescription; (ii)
minor defects relating to capacity, authority, or marital status,
(iii) defects or irregularities in title that have not delayed or
prevented Seller (or Seller's predecessor) within the last 5 years,
from receiving its share of the proceeds of production from any unit
or Well; or (iv) the presence or absence in Seller's files of title
opinions, abstracts, records, documents, or other information, it
being acknowledged and agreed that Buyer shall be responsible for
obtaining any title or other information it deems necessary for a
complete evaluation of the Assets.
c. In the event that Participant notifies Operator of Asserted Defects,
Operator shall have the right (but not the obligation} to attempt to
cure such Asserted Defects to the reasonable satisfaction of
Participant, and for the purpose of curing such Asserted Defects,
Operator may on written notice to Participant elect to delay Closing
as to the Asset(s) directly affected by the Asserted Defects, for a
period not to exceed 30 days, in which event the Purchase Price at
Closing shall be adjusted downward by the value allocated on Schedule
2.4 to the Asset(s) as to which Closing is delayed. If Operator cures
an Asserted Defect to the reasonable satisfaction of Participant
within such time, the Parties shall hold a supplemental closing as to
the applicable cured Asset(s).
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d. If Operator cannot or chooses not to cure any Asserted Defect, the
Parties shall attempt in good faith to agree upon an appropriate
adjustment for the Asserted Defects. If the Parties are unable to
agree upon such adjustment amount, Operator may elect to exclude the
affected Asset(s) from this transaction, in which event the Purchase
Price shall be reduced by the value allocated thereto on Schedule 2.4,
provided however that Operator may elect to designate as an
appropriate adjustment (which shall be deemed agreed to):
(1) for defects described in Section 12(b)(i), the deficiency in
working interest, multiplied by the allocated value of the
affected Asset(s);
(2) for defects described In Section 12(b)(ll), the lesser of the
amount required to remove the applicable lien or the allocated
value of the affected Asset(s);
(3) for defects described in Section 12(iii), the amount reasonably
required to bring the affected Asset(s) into material compliance
with Environmental Law.
Notwithstanding the foregoing, there shall be no adjustment for any
uncured Asserted Defect except to the extent the amount of such
adjustment exceeds $30,000.
13. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES TO CLOSE. The
obligations of the Parties, respectively, to consummate the transactions
contemplated in this Agreement at Closing are subject to the following
conditions:
a. Each and every representation and warranty of the other Party under
this Agreement shall be true and accurate in all material respects as
of the date when made and, for the purposes of serving as a condition
to Close, shall be true and accurate in all material respects at and
as of the time of Closing, as if It had been made again at and as of
the time of Closing.
b. The other Party shall have complied In all material respects with its
covenants under this Agreement.
c. The downward adjustments to the Purchase Price under Section 12 shall
not exceed ten percent (10%) of the unadjusted Purchase Price.
d. There has been average daily production of 100 BOEPD from the Assets
for at least 15 days prior to Closing.
If Buyer's conditions to close are unmet on the Closing Date, or if
the Closing does not occur on the Closing Date and Buyer is not in
material breach of this Agreement, Buyer may terminate this Agreement.
If Seller's conditions to close are unmet on the Closing Date, or if
the Closing does not occur on the Closing Date and Seller is not In
material breach of this Agreement, Seller may terminate this
Agreement. If either Party proceeds to Closing with knowledge that any
of its conditions to closing are not met, such Party shall be deemed
to have waived all claims related to such condition(s).
14. DISCLAIMERS.
THE EXPRESS REPRESENTATIONS AND WARRANTI ES OF SELLER CONTAINED IN THIS
AGREEMENT, AND THE SPECIAL WARRANTY OF TITLE IN THE ASSIGNMENT, ARE EXCLUSIVE
AND ARE IN LIEU OF ALL OTHER REPRESENTATI ONS AND WARRANTIES, EXPRESS, IMPLIED,
STATUTORY OR OTHERWISE, AND SELLER EXPRESSLY DISCLAIMS ANY AND ALL SUCH OTHER
REPRESENTATIONS AND WARRANTI ES, INCLUDING, WITHOUT LIMITATION AS THE CONDITION,
QUANTITY, QUALITY, FITNESS FOR A PARTICULAR PURPOSE
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CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OR MERCHANTABILITY OF EQUIPMENT OR
ITS FITNESS FOR ANY PURPOSE, AND, WITHOUT ANY EXPRESS, IMPLIED OR OTHER WARRANTY
OR REPRESENTATION AS TO THE QUALITY OR QUANTITY OF HYDROCARBONS ATTRIBUTABLE TO
THE ASSETS OR THE ABILITY OF THE ASSETS TO PRODUCE HYDROCARBONS. WITHOUT
LIMITATION OF BUYER'S RIGHTS TO ASSERT DEFECTS AS PROVIDED HEREIN, BUYER SHALL
HAVE INSPECTED, OR WAIVED (AND UPON CLOSING SHALL BE DEEMED TO HAVE WAIVED) ITS
RIGHT TO INSPECT THE PROPERTIES FOR ALL PURPOSES AND SATISFIED ITSELF AS TO
THEIR PHYSICAL AND ENVIRONMENTAL CONDITION, BOTH SURFACE AND SUBSURFACINCLUDING
BUT NOT LIMITED TO CONDITIONS SPECIFICALLY RELATED TO THE PRESENCE, RELEASE OR
DISPOSAL OF HAZARDOUS SUBSTANCES, SOLID WASTES, ASBESTOS AND OTHER MAN MADE
FIBERS, OR NATURALLY OCCURRING RADIOACTIVE MATERIALS. BUYER IS RELYING SOLELY
UPON ITS OWN INSPECTION OF THE PROPERTIES, AND BUYER SHALL ACCEPT ALL OF THE
SAME IN THEIR "AS IS", "WHERE IS", CONDITION. ALL DATA, RECORDS, REPORTS,
PROJECTIONS, INFORMATION AND OTHER MATERIALS (WRITTEN OR ORAL) FURNISHED BY
SELLER OR OTHERWISE MADE AVAILABLE OR DISCLOSED TO BUYER ARE PROVIDED BUYER AS A
CONVENIENCE, AND SELLER MAKES NO REPRESENTATION OR WARRANTY AS TO THE ACCURACY
OF SUCH INFORMATION, WHICH SHALL NOT CREATE OR GIVE RISE TO ANY LIABILITY OF OR
AGAINST SELLER.
15. MISCELLANEOUS.
a. This document contains the entire understanding of the Parties
relative to the purchase of the Assets, and there is no other
agreement, either oral or written, between them governing the subject
matter hereof (other than the JOA referred to above}. This Agreement
may be amended by the consent of both of the parties to a written
document setting forth the amendment. No rights of either of the
parties may be waived without a written waiver signed by the Party
sought to be charged with the waiver.
b. Any notice required to be given pursuant to this Agreement shall be in
writing and shall be delivered in person, or by private courier
service, with written receipt of acceptance returned to the sender, or
via registered mail, return receipt requested, postage prepaid, or by
telecopier {with confirmation of receipt by telecopier sent within one
hour of completion of transmission, with the result that, if there is
no such confirmation of receipt by telecopy, the original notice sent
by telecopier shall not be deemed effective notice} to each of the
Parties at the address, or at the telecopier number, set forth in the
opening paragraph of this Agreement. The agent for receipt of any
notice shall be the individual who has executed this Agreement on
behalf of each of the Parties. The agent and/or address for each of
the Parties may be unilaterally altered by either Party upon providing
written notice thereof to the other Party. Notice shall be deemed
delivered when received at each of the addresses set forth in the
opening paragraph of this Agreement, except with respect to
telecopies, which shall be deemed received as provided above in this
section.
c. The failure of any party to seek redress for any violation or to
insist upon the strict performance, of any provision of this Agreement
shall not prevent any party from seeking redress for any subsequent
act, or failure to act, or to insist upon the strict performance of
this Agreement. No single or partial exercise by a Party of any right
or remedy hereunder shall preclude other, or further exercise thereof,
or the exercise of any other right or remedy.
d. This Agreement shall be governed by the laws of the State of Texas,
and venue for any litigation arising to resolve dispute arising
hereunder shall lie in Xxxxxx County, Texas.
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e. This Agreement shall be binding upon and shall inure to the benefit of
each of the Parties and their respective, heirs, successors or
assigns.
f. Time is of the essence of this agreement.
g. The representations and warranties made herein by the Parties shall
terminate six (6) months after the Closing (provided that the special
warranty of title in the Assignment shall survive forever).
h. This Agreement may not be assigned, in whole or in part, by either
Party without the express written consent of the other Party (which
may be withheld in such Party's sole discretion), and any assignment
that is made without such consent shall be void.
i. NOTWITHSTANDING ANYTHI NG HEREIN TO THE CONTRARY NEITHER PARTY SHALL
HAVE ANY LIABILITY UNDER THIS AGREEMENT, OR OTHERWISE IN CONNECTION
HEREWITH, FOR ANY SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES.
Signature page follows
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IN WITNESS WHEREOF, this Agreement Is executed effective as of the date first
set forth above, (but the transfer of the Assets shall be effective as of the
Effective Date, as provided above}.
OPERATOR: PARTICIPANT:
SELLER BUYER
Five J.A.B., Inc. Three Forks, Inc.
By: /s/ Xxxxx X. Xxxxxxxx, Xx. By: /s/ W. Xxxxxx Xxxxxxx
------------------------------- ----------------------------
Xxxxx X. Xxxxxxxx, Xx. Xxxxxx Xxxxxxx
President Chairman and Counsel
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EXHIBIT A
DESCRIPTION OF THE PROPERTIES, INTEREST AND XXXXX
(omitted)
EXHIBIT B
FORM OF CONVEYANCE, ASSIGNMENT AND XXXX OF SALE
(omitted)
EXHIBIT C
OPERATING AGREEMENT
(omitted)
