Exhibit 10.148
PURCHASE AND SALE AGREEMENT
between
DELTA PETROLEUM CORPORATION,
AS SELLER
and
CASTLE EXPLORATION COMPANY, INC.
as BUYER
Purchase and Sale Agreement
Exhibit A - Interests Conveyed
Exhibit B - Allocation of Purchase Price
Schedule A - February 25, 2004 Reserve Report of Delta
Petroleum Corporation (excerpt)
Exhibit B-1- Tax Allocation of Purchase Price
Exhibit C - Outstanding AFE's
Exhibit D - Litigation
Exhibit E - Environmental Disclosures
Exhibit F - Form of Conveyance, Assignment, and Xxxx of Sale
Exhibit G - Well Operations Management Contract
Attachment A - Purchase and Sale Agreement between Delta
and CECI
Attachment B - May 31, 2002 Letter Agreement Between Delta
and PCEC
Attachment C - The Xxxxx
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PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (this "Agreement") dated as of the
30th day of March, 2004, is between DELTA PETROLEUM CORPORATION, a corporation
organized and existing under the laws of Colorado ("Seller") and CASTLE
EXPLORATION COMPANY, INC., a corporation organized and existing under the laws
of Pennsylvania ("Buyer"). Seller and Buyer are referred to herein individually
as a "Party" and collectively as the "Parties."
In consideration of the mutual promises contained herein, the benefits
to be derived by each Party hereunder and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller
agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1 Purchase and Sale. Subject to the terms and conditions of this
Agreement, Seller agrees to sell and convey and Buyer agrees to purchase and pay
for all of Seller's right, title and interest in and to the Interests.
1.2 Interests. All of the following shall be referred to in this
Agreement collectively as the "Interests" and individually as an "Interest":
(a) The oil, gas and mineral leases in the states and counties
described on Exhibit "A" attached hereto (collectively, the "Leases"),
including, without limitation, working interests, overriding royalty interests,
royalty interests and any other interests of a similar nature affecting the
lands covered by the Leases (collectively, the "Lands").
(b) The oil and gas xxxxx described on Exhibit "A"
(individually, a "Well," and collectively, the "Xxxxx"), together with all oil,
natural gas, casinghead gas, drip gasoline, natural gas liquids, condensate and
other minerals produced from such Xxxxx.
(c) All unitization, communitization, pooling, agreements,
working interest units created by operating agreements, partnership agreements
and orders covering the Leases and Lands, or any portion thereof, and the units
and pooled or communitized areas created thereby (collectively, the "Units").
(d) The tangible personal property, tools, machinery,
materials, pipelines, plants, gathering systems, equipment, platforms and
facilities, vehicles (to the extent owned by Seller), fixtures and improvements,
which are directly incident or attributable to or underlie the Leases, Lands,
Xxxxx or Units with the production, transportation, treatment, sale or disposal
of hydrocarbons or water produced therefrom or attributable thereto,
(collectively, the "Equipment").
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(e) The licenses, permits, contracts, agreements and other
instruments owned by Seller (other than bonds posted by Seller) which concern
and relate to any of the Leases, Lands, Xxxxx, Units and/or Equipment, INSOFAR
AND ONLY INSOFAR as same concern or relate to the Leases, Lands, Xxxxx, Units
and/or Equipment, or the operation thereof; including, without limitation, oil,
gas and condensate purchase and sale contracts; permits; rights-of-way;
easements; licenses; servitudes; estates; surface leases; farmin and farmout
agreements; division orders and transfer orders; bottomhole agreements; dry hole
agreements; area-of-mutual interest agreements; salt water disposal agreements;
acreage contribution agreements; operating agreements; balancing agreements and
unit agreements; pooling agreements; pooling orders; communitization agreements;
processing, gathering, compression and transportation agreements; facilities or
equipment leases relating thereto or used or held for use in connection with the
ownership or operation thereof or with the production, treatment, sale or
disposal of hydrocarbons; and all other contracts and agreements related to the
Leases, Lands, Xxxxx and/or Equipment.
(f) Subject to Section 1.3 below, originals or copies of all
computer tapes and discs, files, records, information or data relating to the
Interests in the possession of Seller, including, without limitation, title
records (including abstracts of title, title opinions, certificate of title and
title curative documents), production records and files, contracts,
correspondence, production records, electric logs, core data, pressure data,
decline curves, graphical production curves, drilling reports, well completion
reports, drill stem test charts and reports, regulatory reports, and all related
materials, INSOFAR AND ONLY INSOFAR as the foregoing items constitute materials
that may be lawfully conveyed to Buyer (i.e., the materials are not subject to a
proprietary agreement precluding their transfer to Buyer), and, to the extent
transferable, all other contract rights, intangible rights (excluding Seller's
trademarks and service marks), inchoate rights, choses in action, rights under
warranties made by prior owners, manufacturers, vendors or other third parties,
and rights accruing under applicable statutes of limitation or prescription,
attributable to the Interests.
(g) All payments, and all rights to receive payments, with
respect to the ownership of the production of hydrocarbons from or the conduct
of operations on the Interests accruing after the Effective Time.
1.3 Reserved Interests. Notwithstanding any provision of this Agreement
to the contrary, Seller reserves and retains (i) Seller's corporate, financial,
tax and legal records and other business records; (ii) cash, bank accounts,
letters of credit, travel letter accounts and prepaid insurance; (iii) the
management information systems, accounting software and other intellectual
property rights of Seller used by Seller in the management and administration of
their businesses; (iv) all claims that Seller may have under any policy of
insurance, indemnity or bond maintained by Seller other than claims relating to
property damage or casualty loss affecting the Interests occurring between the
Effective Time and Closing (which claims shall be included in the Interests);
(v) all accounts receivable, trade credits or notes receivable relating to
transactions processed by Seller prior to Closing; (vi) any files or records
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that Seller are contractually or otherwise obligated not to disclose to Buyer;
(vii) all claims and causes of action arising from acts, omissions or events, or
damage or destruction of property occurring prior to the Effective Time; (viii)
engineering studies or reserve reports relating to the Interests; and (ix) all
interests and rights not included in the definition of the Interests (the
"Reserved Interests").
1.4 Effective Time. The purchase and sale of the Interests shall be
effective as of January 1, 2004, at 7:00 a.m., eastern standard time (herein
called the "Effective Time").
1.5 Closing Date. The purchase and sale of the Interests pursuant to
this Agreement ("Closing") shall be at 7:00 a.m. Eastern Standard Time on April
1, 2004 ("Closing Date") unless another date is agreed to in writing by all
Parties. Seller and Buyer shall use their respective and collective best efforts
to cause Closing to occur as quickly as possible on or before April 1, 2004, and
to obtain all consents necessary therefor.
1.6 Ownership of the Interests. Subject to Section 12.1 and the other
provisions of this Agreement, should Closing occur, Seller shall be entitled to
all of the rights of ownership (including, without limitation, the right to all
production, proceeds of production and other proceeds), and shall be subject to
the duties and obligations of such ownership attributable to the Interests for
the period of time prior to the Effective Time and Buyer shall be entitled to
all of the rights of ownership (including, without limitation, the right to all
production, proceeds of production and other proceeds) and shall be subject to
the duties and obligation of such ownership attributable to the Interests for
the period of time from and after the Effective Time. All expenses and costs,
including, without limitation, all ad valorem, property, production, severance,
and similar taxes and assessments based upon or measured by the ownership of the
Interests, the production of hydrocarbons, or the receipt of proceeds therefrom)
attributable to the Interests, shall be: (i) allocated to Seller if incurred or
accruing with respect to operations conducted prior to the Effective Time; or
(ii) allocated to Buyer if incurred or accruing with respect to operations
conducted after the Effective Time. All hydrocarbons in storage facilities above
or upstream from the pipeline connection to each storage facility, or downstream
of delivery point sales meters on gas pipelines, as of the Effective Time, shall
belong to Seller. All of the hydrocarbons placed in such storage facilities or
upstream of the aforesaid meters on pipelines after the Effective Time shall
accrue to the benefit of Buyer and shall become a part of the Interests. In
order to accomplish the foregoing allocation of production, the parties shall
rely upon the records maintained by the operator of the relevant Interest,
unless such records are demonstrated to be inaccurate.
1.7 Risk of Loss. Buyer shall assume all risk of loss with respect to
the Interests from and after the Effective Time to Closing and thereafter should
Closing occur.
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ARTICLE 2
PURCHASE PRICE
2.1 Purchase Price. The purchase price for the Interests shall be Eight
Million Dollars ($8,000,000) (the "Purchase Price"). At Closing, the Purchase
Price shall be adjusted as set forth in Section 2.2 below.
2.2 Adjustments to Purchase Price. At least five (5) "Business Days"
(which term shall mean any day except a Saturday, Sunday or other day on which
commercial banks in Denver, Colorado are required or authorized by law to be
closed) prior to the Closing Date, Buyer and Seller shall agree in good faith
upon an estimate of the adjustments contemplated by this Section 2.2 below. At
Closing, the Purchase Price shall be adjusted as follows and the resulting
amount shall be referred to herein as the "Estimated Adjusted Purchase Price":
(a) The Purchase Price shall be reduced by the gross proceeds
received by Seller, net of applicable severance and production taxes,
compression and transportation charges and lease operating expenses, and derived
from the sale of hydrocarbons attributable to the Interests to the extent owned
by Buyer between the Effective Time and the Closing Date;
(b) The Purchase Price shall be reduced by the suspended
revenues at the Closing Date for which Buyer shall thereafter be liable pursuant
to Section 9.1 below;
(c) The Purchase Price shall be reduced by estimated ad
valorem taxes accruing between the Effective Date and the Closing Date which
will be payable by after the Closing Date;
(d) The Purchase Price shall be reduced due to Title Failures
in accordance with the provisions of Section 5 below; and
(e) The Purchase Price shall be increased by the Operations
Fee and Allocable Overhead Fee attributable to each of the three calendar months
beginning with the Effective Time through and including the Closing Date as
such, which fees are defined in the Well Operations Management Agreement
attached hereto as Exhibit G pursuant to Section 9.5 below.
2.3 Closing Payment. At Closing, Buyer shall pay to Seller by wire
transfer or immediately available funds an amount equal to the Estimated
Adjusted Purchase Price (the "Closing Payment").
2.4 Final Adjusted Purchase Price. As promptly as practicable after
Closing, and not later than June 30, 2004 in any event, the Buyer and Seller
shall agree in good faith upon the final calculation of the Adjusted Purchase
Price (the "Final Adjusted Purchase Price"). Buyer shall pay to Seller by wire
transfer of immediately available funds an amount equal to the excess, if any,
of the Final Adjusted Purchase Price over the Closing Payment. Seller shall pay
to Buyer by wire transfer of immediately available funds an amount equal to the
excess, if any, of the Closing Payment over the Final Adjusted Purchase Price.
Any payment pursuant to this Section shall be made within two (2) business days
after agreement between Buyer and Seller on the Final Adjusted Purchase Price.
Until paid, all past due amounts under this Article 2 shall bear interest at the
lesser of prime plus two percent, as established by Bank of Texas, N.A.,
Houston, Texas (based on a 360 day year) or the maximum lawful rate permitted by
applicable law.
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2.5 Disputed Amounts. In the event any portion of the Estimated
Adjusted Purchase Price is not agreed upon prior to Closing, the Estimated
Adjusted Purchase Price for purposes of Closing shall be calculated based on
Seller's and Buyer's agreed upon estimated adjustments and Seller's good faith
estimation of any disputed amounts, which estimate shall be subject to
adjustment in the calculation of the Final Adjusted Purchase Price. Should the
Parties not reach agreement as to any portion of the Final Adjusted Purchase
Price, the disputed items shall be submitted to KPMG LLP ("KPMG") for
resolution. The decision of KPMG shall be considered final as between the
Parties. Cost for KPMG and resolution of the dispute will be apportioned between
Seller and Buyer in proportion to the award by KPMG.
2.6 Purchase Price Allocation. The Purchase Price shall be allocated
among the Interests as set forth in Exhibit "B" attached hereto (the "Allocated
Values").
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Seller. Seller represents and
warrants to Buyer the following:
(a) Seller is a corporation, duly organized, validly existing
and in good standing under the laws of the State of Colorado. Seller is duly
qualified to conduct business in the State or States in which the Interests are
located.
(b) Seller has all requisite power and authority to carry on
its business as presently conducted, to enter into this Agreement, and to sell
the Interests on the terms described in this Agreement and perform its other
obligations under this Agreement.
(c) The execution, delivery and performance of this Agreement
and the transactions contemplated hereby have been duly and validly authorized.
(d) This Agreement has been duly executed and delivered by or
on behalf of Seller; all documents and instruments required hereunder to be
executed and delivered by Seller at or prior to Closing shall have been duly
executed and delivered; and this Agreement does, and such documents and
instruments shall, constitute legal, valid and binding obligations of Seller
enforceable in accordance with their terms.
(e) Other than as set forth in Exhibit "C" attached hereto and
made a part hereof, there are no outstanding authorizations for expenditures
("AFEs") in excess of $25,000 each that (i) require the drilling of xxxxx or
other material development operations in order to earn or to continue to hold
all or any portion of the Interests, or (ii) obligate Seller to make payments of
any amounts in connection with drilling of xxxxx or other material capital
expenditures affecting the Interests.
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(f) Seller's execution, delivery, and performance of this
Agreement and the transactions contemplated hereby will not: (i) violate or
conflict with any provision of its articles of incorporation, bylaws, or other
governing documents; (ii) result in the breach of any material term or condition
of, or constitute a default or cause the acceleration of any material obligation
under any agreement or instrument to which it is a party or by which it is
bound; or (iii) violate or conflict with any applicable judgment, decree, order,
permit, law, rule, or regulation.
(g) There are no consents required of any other party required
to consummate the transactions contemplated hereby other than preferential
rights or consents to assignment from other owners in the Interests or
purchasers of production therefrom of the type typically found in the oil and
gas industry.
(h) Seller is not obligated to deliver hydrocarbons produced
from the Interests at some future time without then or thereafter receiving full
payment for the production attributable to Seller's ownership in and to the
Interests by virtue of: (i) a prepayment arrangement under any contract for the
sale of hydrocarbons and containing a "take or pay," or similar provisions, (ii)
a production payment, or (iii) any other arrangement.
(i) Except for those taxes and assessments for which a
Purchase Price adjustment is made under Section 2.2(c), during the period of
Seller's ownership of the Interests, Seller has properly paid all ad valorem,
property, production, severance, excise and similar taxes and assessments based
on or measured by the ownership of property or the production of hydrocarbons or
the receipt of proceeds therefrom on the Interests that have become due and
payable before the Effective Time.
(j) Seller has incurred no liability, contingent or otherwise,
for broker's or finder's fees or commissions relating to the transactions
contemplated by this Agreement for which Buyer shall have any responsibility
whatsoever.
(k) Other than as set forth in Exhibit "D" attached hereto and
made a part hereof, no suit, action, claim, or other proceeding is pending or,
to the best of Seller's knowledge, threatened before any court, arbitration
panel or governmental agency which relates to the Interests and which might
result in a material loss of Seller's title to any portion of the Interests, or
a material diminution of the value of any of the Interests, or that might
materially hinder or impede the operation of the Leases.
(l) As used in this Agreement, the term, "Existing Documents"
shall mean all of the oil, gas and other mineral leases, assignments or other
instruments or agreements that comprise the Interests, and all contractually
binding arrangements to which the Interests may be subject and which will be
binding on the Interests or Buyer after Closing (including, without limitation,
oil, gas and other mineral leases, overriding royalty assignments, farm-out and
farm-in agreements, option agreements, forced pooling orders, assignments of
production payments, partnership agreements, including unit agreements, unit
operating agreements, joint operating agreements, balancing agreements, unit
operating agreements, production contracts, processing contracts, gas sales
contracts, marketing and transportation contracts and division orders). To the
best of Seller's knowledge, (i) all material Existing Documents are in full
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force and effect and are the valid and legally binding obligations of the
parties thereto and are enforceable in accordance with their respective terms
(subject to the effects of bankruptcy, insolvency, reorganization, moratorium
and similar laws); (ii) Seller is not in material breach or default with respect
to any of its obligations pursuant to any such Existing Documents; and (iii) all
payments (including, without limitation, royalties, delay rentals, shut-in
royalties and valid calls under unit or operating agreements) due thereunder
have been timely paid and Seller has received no notice of default under any of
the Existing Documents.
(m) To the best of Seller's knowledge, all of the Equipment
Seller requires to operate its interests has been maintained in a state of
repair so as to be adequate for normal operations.
(n) To the best of Seller's knowledge, all of the Xxxxx that
have been drilled and completed have been so drilled and completed within the
boundaries and limits permitted by contract, pooling or unit agreement, and by
law; and all drilling, completion, and other operations on or affecting the
Leases have been conducted in compliance with all applicable laws, ordinances,
rules, regulations and permits, and judgments, orders and decrees of any court
or governmental body or agency. No Well is subject to penalties or allowables
after the date hereof because of any over-production or any other violation of
applicable laws, rules, regulations or permits or judgments, orders of decrees
of any court or governmental body or agency.
(o) Except as set forth on Exhibit "E" attached hereto:
(i) Seller's operations and activities with
respect to the Interests comply in all
material respects with all applicable
governmental laws, including, without
limitation, health and safety statutes and
regulations and all Environmental Laws,
including any provisions requiring notice to
government agencies under Environmental
Laws.
(ii) There is no civil, criminal or
administrative action, suit, demand, claim,
hearing, notice of violation, investigation,
proceeding, notice or demand letter
("Environmental Proceeding") known to Seller
pending or, to the best of Seller's
knowledge, threatened against Seller or any
of the Interests relating in any way to the
Environmental Laws.
(iii) Neither Seller nor, to the best of Seller's
knowledge, any other person have released,
placed, stored, buried or dumped any
Hazardous Substances, Oil, Pollutants or
Contaminants or any other wastes on,
beneath, or adjacent to the Leases operated
by Seller, except for inventories of such
substances to be used in the ordinary course
of business of Seller (which inventories and
wastes, if any, were and are stored or
disposed of in accordance with applicable
laws and regulations).
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(iv) To the best of Seller's knowledge, Seller
has not received any notice or order from
any governmental or other public agency
advising it that Seller is responsible for
or potentially responsible for Cleanup or
paying for the cost of Cleanup of any
Hazardous Substances, Oils, Pollutants, or
Contaminants or any other waste or substance
affecting the Interests. Seller is not aware
of any facts which might reasonably give
rise to any such notice or order.
(v) The term "Cleanup" shall mean all actions
required to: (1) cleanup, remove, treat or
remediate Hazardous Substances, Oils,
Pollutants or Contaminants; (2) prevent the
Release of Hazardous Substances, Oils,
Pollutants or Contaminants so that they do
not migrate, endanger or threaten to
endanger public health or welfare or the
environment; (3) perform pre-remedial
studies and investigations and post-remedial
monitoring and care; or (4) respond to any
government requests for information or
documents in any way relating to cleanup,
removal, treatment or remediation or
potential cleanup, removal, treatment or
remediation of Hazardous Substances, Oils,
Pollutants or Contaminants in the indoor or
outdoor environment.
(vi) The term "Environmental Laws" shall mean all
foreign, Federal, state and local laws,
regulations, rules and ordinances relating
to polluting or protection of the
environment, including, without limitation,
laws relating to Releases or threatened
Releases of Hazardous Substances, Oil,
Pollutants or Contaminants into the indoor
or outdoor environment (including, without
limitation, ambient air, surface water,
groundwater, land, surface and subsurface
strata) or otherwise relating to the
manufacture, processing, distribution, use,
treatment, storage, Release, transport or
handling of Hazardous Substances, Oil,
Pollutants or Contaminants, and all laws and
regulations with regard to record keeping,
notification, disclosure and reporting
requirements respecting Hazardous
Substances, Oils, Pollutants or
Contaminants.
(vii) The term "Hazardous Substances, Oils,
Pollutants or Contaminants" shall mean all
substances defined as such in the National
Oil and Hazardous Substances Pollution
Contingency Plan, or defined as such by, or
regulated as such under, any Environmental
Law.
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(viii) The term "Release" or "Releases" means any
release, spill, emission, discharge,
leaking, pumping, injection, deposit,
disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor
environmental (including, without
limitation, ambient air, surface water,
groundwater, and surface or subsurface
strata) or into or out of any property,
including the movement of Hazardous
Substances, Oils, Pollutants or Contaminants
through or in the air, soil, surface water,
groundwater or property.
3.2 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller the following:
(a) Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Pennsylvania. Buyer is duly
qualified to conduct business in the State or States in which the Interests are
located.
(b) Buyer has all requisite power and authority to carry on
its business as presently conducted, to enter into this Agreement, to purchase
the Interests on the terms described in this Agreement and to perform its
obligations hereunder.
(c) The execution, delivery and performance of this Agreement
and the transactions contemplated herein have been duly and validly authorized
by Buyer.
(d) This Agreement has been duly executed and delivered on
behalf of Buyer, and all documents and instruments required hereunder to be
executed and delivered by Buyer at or prior to Closing shall have been duly
executed and delivered. This Agreement does, and such documents and instruments
shall, constitute legal, valid and binding obligations of Buyer enforceable in
accordance with their terms.
(e) Buyer has incurred no liability, contingent or otherwise,
for broker's or finder's fees or commissions relating to the transactions
contemplated by this Agreement for which Seller shall have any responsibility
whatsoever.
(f) Prior to Closing, Buyer will have inspected the Interests,
the public records and Seller's files for all purposes, including, but not
limited to, detecting the presence and concentration of naturally-occurring
radioactive materials and satisfying themselves as to the physical condition and
environmental condition of the Interests, both surface and subsurface. In
entering into this Agreement, Buyer has relied solely on its independent
investigation of, and judgment with respect to, the Interests and the advice of
its own legal, tax, economic, environmental, engineering, geological and
geophysical advisors, and not on any comments or statements of any
representatives of, or consultants or advisors engaged by Seller.
(g) Within ninety (90) days following Closing, Buyer will meet
the bonding and other requirements required by all governmental authorities in
respect to the Interests (and Seller agrees to provide Buyer, prior to Closing,
with a list of such requirements) and, after Closing, Buyer anticipates that it
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will continue to be able to meet such bonding requirements. Buyer is, and after
the Closing is expected to continue to be, otherwise qualified to own the
Interests. The consummation of the transactions contemplated hereby will not
cause Buyer to be disqualified to be an owner of oil, gas, and mineral leases or
to exceed any acreage limitation imposed by law, statute, rule or regulation.
Buyer is not aware of any fact that could reasonably be expected to cause the
appropriate governmental authorities to fail to unconditionally approve the
assignment of the Interests to Buyer. Seller will cooperate and will assist
Buyer relating to the preparation and presentation of documents relating to
changes in ownership and/or operatorship of the Interests.
(h) Buyer is an experienced and knowledgeable investor and
operator in the oil and gas business. Buyer is acquiring the Interests for its
own account and not with a view to, or for offer of resale in connection with, a
distribution thereof, within the meaning of the Securities Act of 1933, as
amended, or any other rules, regulations, and laws pertaining to the
distribution of securities.
(i) Buyer has arranged or will have arranged to have available
by the Closing Date sufficient funds to enable the payment to Seller, by wire
transfer, of the Closing Payment in accordance with Section 2.3 and to otherwise
perform Buyer's obligations under this Agreement.
ARTICLE 4
CERTAIN AGREEMENTS OF SELLER
4.1 Agreements Between Execution of Agreement and Closing. During the
period between the execution of this Agreement and the Closing Date, Seller
shall not, without the prior written consent of Buyer, (i) sell, convey, assign,
transfer or encumber any of the Interests except that Buyer may vote for the
Castle Associates 1983 Limited Partnership to sell its interests for $447,643
effective January 1, 2004 pursuant to a proxy vote of that partnership; (ii)
make or agree to make any expenditure in excess of $25,000.00, net to Seller's
interest, except for obligations under existing contracts, expenditures
necessary to maintain the Interests, or in the event of any emergency as to
which Seller have notified Buyer; (iii) sell oil, gas or other minerals from the
Interests except sales made in the ordinary course of business; (iv) enter into
any agreement amending, modifying or terminating any of the Leases; or (v) take
any other action with respect to any of the Interests that would cause a
material diminution in the value thereof or that would materially and adversely
affect the use and enjoyment thereof.
4.2 Access to Records. Following the execution of this Agreement by the
Parties, Seller shall afford to Buyer and its authorized representatives, during
normal business hours, reasonable access to well and land files, title, contract
and legal materials and operating data and information in Seller's possession or
to which it has access affecting the Interests.
4.3 Notification of Additional Proceedings. Seller shall promptly
notify Buyer of any new suits, actions, claims or other proceedings threatened
or pending before, or required to be filed with, any court, arbitrator or
governmental agency which relate to the Interests.
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4.4 Consents. Seller shall use its best efforts to obtain any consents
necessary to transfer the Interests to Buyer.
4.5 Insurance. Seller shall maintain general liability, excess
liability and operator's extra expense insurance with respect to the Interests
until Closing.
ARTICLE 5
CERTAIN AGREEMENTS OF BUYER
5.1 Cooperation. Buyer shall cooperate with Seller to assist Seller in
carrying out the agreements of Seller hereunder.
5.2 Change of Operations. Buyer will diligently pursue the filing and
other requirements to assume operations, where applicable, and ownership of the
Interests, including without limitation, well testing, bonding and other
requirements from all governmental authorities with respect to the Interests
such that Seller can withdraw as operator of the Interests, where applicable, as
soon as possible after Closing. Buyer acknowledges that Seller has not
guaranteed that Buyer will, in every case, succeed Seller as operator.
ARTICLE 6
BUYER'S CONDITIONS TO CLOSING
The obligations of Buyer to consummate the transactions provided for
herein are subject, at the option of Buyer, to the fulfillment on or prior to
Closing of each of the following conditions:
6.1 Representations. The representations and warranties by Seller set
forth in Section 3.1 above shall be true and correct in all material respects as
of the date of this Agreement and as of the Closing Date, except as modified
with the written consent of Buyer.
6.2 Changes. There shall have been no material adverse change in the
physical condition of the Interests, except depletion through normal production
within authorized allowables and rates of production, depreciation of equipment
through ordinary wear and tear, and other transactions permitted under this
Agreement or approved in writing by Buyer.
6.3 Performance. Seller shall have performed and complied in all
material respects with all agreements and covenants required by this Agreement.
6.4 No Legal Proceedings. No suit, action or other proceeding shall be
pending or threatened before any court, arbitration panel or governmental agency
seeking to restrain, prohibit or declare illegal, or seeking substantial damages
in connection with the purchase and sale contemplated by this Agreement, or
which might result in a material loss of any portion of the Interests, a
material diminution in the value of any of the Interests, or materially
interfere with the use or enjoyment of the Interests, except (i) matters that
are disclosed on Exhibit "D" or (ii) any suit or proceeding affecting only a
portion of the Interests, which portion could be treated as subject to a Title
Defect in accordance with Article 10.
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ARTICLE 7
SELLER'S CONDITIONS TO CLOSING
The obligations of Seller to consummate the transactions provided for
herein are subject, at the option of Seller, to the fulfillment on or prior to
Closing of each of the following conditions:
7.1 Representations. The representations and warranties by Buyer set
forth in Section 3.2 above shall be true and correct in all material respects as
of the date of this Agreement and as of the Closing Date except as modified with
the written consent of Seller.
7.2 Performance. Buyer shall have timely performed and complied in all
material respects with all agreements and covenants required by this Agreement.
7.3 No Legal Proceedings. No suit or other proceeding shall be pending
before any court or governmental agency seeking to restrain prohibit or declare
illegal, or seeking substantial damages in connection with, the sale
contemplated by this Agreement, except (i) matters with respect to which Seller
has been adequately indemnified by Buyer or (ii) any suit or other proceeding
affecting only a portion of the Interests, which portion could be treated as
subject to a Title Defect in accordance with Article 10.
ARTICLE 8
CLOSING
8.1 Closing Date. Subject to the conditions stated in this Agreement,
Closing shall occur on the date set forth in Section 1.5 or on such other date
and time as Buyer and Seller may agree (the "Closing Date").
8.2 Place of Closing. The Closing shall be held at the offices of
Seller as set forth hereinabove; provided, however, the Parties may agree to
close via facsimile or overnight mail.
8.3 Closing Obligations. At the Closing, the following documents shall
be delivered and the following events shall occur, each event being a condition
precedent to the others and each being deemed to have occurred simultaneously
with the others:
(a) Seller shall execute and deliver: (1) an Assignment, Xxxx
of Sale and Conveyance in the form attached hereto and made a part hereof as
Exhibit "F" (the "Assignment") (in sufficient counterparts to facilitate
recording) conveying the Interests, subject to the Permitted Encumbrances; and
(2) such other instruments as may be required to convey the Interests to Buyer
and otherwise effectuate the transactions contemplated by this Agreement.
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(b) Seller and Buyer shall execute and deliver a Preliminary
Settlement Statement.
(c) Buyer shall deliver the Closing Payment by direct bank or
wire transfer to Seller's account (at such place as may be designated by Seller
in a written notice, such notice to be delivered to Buyer not less than two (2)
Business Days prior to the Closing Date).
(d) Seller shall deliver on forms supplied by Buyer transfer
orders or letters in lieu thereof, directing the operator or purchaser to make
payment of proceeds attributable to production from the Interests after the
Effective Time to Buyer.
8.4 Records. In addition to the obligations set forth under Sections
4.2 and 8.3 above, within sixty (60) days after Closing, Seller shall deliver to
Buyer all original well and land files in its possession or to which it has
access. Buyer shall be entitled to all original records affecting the Interests
assigned to Buyer pursuant to the terms of this Agreement. Seller shall be
entitled to keep a copy of such records for its files. Buyer agree to preserve
and maintain such records for at least five (5) years after the Closing Date and
to provide Seller access to such records during normal business hours during
such period.
ARTICLE 9
POST-CLOSING MATTERS
9.1 Unpaid Third Party Funds. At such time as Buyer and Seller agree on
a Final Adjusted Purchase Price, Seller will transfer to Buyer all funds held by
Seller in suspense for a third party owner of royalty, overriding royalty,
working interests, mineral interest or other similar interests, attributable to
the Interests, all records in Seller's possession, including a schedule of such
funds listing the owners thereof, which may be used to determine proper
disbursement. Buyer shall thereafter be responsible for determining the proper
payment of such amounts and shall indemnify and hold harmless Seller from and
against any and all cost, loss or expense of whatever kind, including attorneys'
fees, arising from or in connection with the claim or any person, up to the
amount listed on the schedule provided by Seller with respect thereto, with
respect to the funds transferred to Buyer pursuant to this Section 9.1. The
transfer of such suspended funds to Buyer shall be treated as a reduction to the
Purchase Price pursuant to Section 2.
9.2 Further Assurances. After Closing Seller, and Buyer shall execute,
acknowledge and deliver or cause to be executed, acknowledged and delivered such
instruments and take such other action as may be necessary or advisable to carry
out their obligations under this Agreement and under any Exhibit, document,
certificate or other instrument delivered pursuant hereto.
9.3 Survival. All representations and warranties set forth in this
Agreement in Sections 3.1 (a) - (j) and 3.2 (a) - (g) shall survive the Closing
for a period of ten (10) months, but no other representations and warranties
shall survive the Closing.
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9.4 Tax Allocation. The Parties agree that the Purchase Price shall be
allocated as set forth on Exhibit B-1 for Federal Income Tax purposes. Each
party shall use such allocations in filing Form 8594 (Asset Acquisition
Statement) with the IRS.
9.5 Management Contract. The Parties will execute an operations
management contract at Closing incorporating the terms set forth in Exhibit "G"
hereto.
9.6 Right of First Refusal. At Closing, Buyer will execute a right of
first refusal in favor of Seller which will arise in the event of a future sale
of the Interests by Buyer.
ARTICLE 10
TITLE MATTERS
10.1 Access to Title and Other Documents.
(a) After the date hereof, Seller will make available to Buyer
and to their representatives (such representatives to include employees,
consultants, independent contractors, attorneys and other advisors of Buyer) for
Buyer's copying and/or inspection (at Buyer's cost and expense), at Seller's
offices during normal business hours the following documents in Seller's
possession or under its control:
(i) All abstracts of title, title opinions,
title curative materials, ownership reports,
division orders, bills of sale, other
documents evidencing transfers of title, tax
receipts, and licenses and registrations
pertaining to the Interests.
(ii) All of the lease records, lease files,
leases, conveyances and assignments of
interest in the Leases; unitization, unit,
pooling and operating agreements; division
orders; contracts; transfer orders; orders
of the applicable regulatory authorities or
administrative agencies; mortgages, deeds of
trust, security agreements, and financing
statements; and all other contracts,
agreements and documents affecting the
Interests.
(iii) Instruments and documents concerning proper
payment of all general and special
assessments, ad valorem and property taxes,
and production, severance and similar taxes
and assessments based on or measured by the
ownership of the Interests, the production
of hydrocarbons, or the receipt of proceeds
therefrom for 2004 and years prior for which
the applicable statute of limitations has
not expired.
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(iv) All geological maps, geophysical surveys,
ownership maps, seismic surveys, logs, core
studies, and surveys relating to the
Interests.
(v) All production records; transportation
agreements; contracts for the purchase of
gas, oil, casinghead gas, distillate, gas
condensate or other hydrocarbons; processing
agreements; all correspondence relating to
the Interests; and data sheets relating to
the Interests and to bonuses, rentals and
royalties payable with respect thereto.
(vi) All agreements relating to the purchase,
sale, processing, and transportation of
production from the Xxxxx.
(vii) All bonds, leases, permits, easements,
licenses, orders, saltwater disposal
agreements, agreements with pumpers and
other agreements in any way relating to the
Interests or the operation thereof.
Reliance on such information shall be at the sole risk of the Buyer, and Seller
makes no guaranty or representation as to the accuracy or completeness of such
data, except as otherwise provided in this Agreement.
Seller shall authorize Buyer and their representatives to
consult with attorneys, abstract companies and other consultants or independent
contractors of Seller (whether utilized in the past or present) concerning title
related matters. Reliance on such information of such third parties shall be at
the sole risk of the Buyer, and Seller makes no guaranty or representation as to
the accuracy or completeness of such data.
10.2 No Warranty or Representation. At the Closing, Seller shall convey
to Buyer all the Interests. Such conveyance shall be subject to the Permitted
Encumbrances and WITHOUT ANY WARRANTY OF TITLE, EITHER EXPRESS OR IMPLIED, AND
WHETHER BY COMMON LAW, STATUTE OR OTHERWISE, except for the warranty of title as
to persons claiming by, through and under Seller contained in the Assignment.
Without limiting Buyer's right to reduce the Purchase Price in the manner
provided in this Article 10, Seller makes no warranty or representation, express
or implied, with respect to the accuracy or completeness of any information,
records or data now, heretofore, or hereafter made available to Buyer in
connection with this Agreement, including, without limitation, any description
of the Interests, pricing assumptions, potential for production of hydrocarbons
from the Interests, or any other matters contained in any material furnished by
Seller to Buyer or its officers, directors, employees, agents, advisors or
representatives.
10.3 Disclaimer. ALL PERSONAL PROPERTY, MACHINERY, FIXTURES, EQUIPMENT
AND MATERIALS CONVEYED HEREBY ARE SOLD AND ASSIGNED AND ACCEPTED BY Buyer IN
THEIR "WHERE IS, AS IS" CONDITION, WITHOUT ANY WARRANTIES, EXPRESS OR IMPLIED OR
STATUTORY, OF MARKETABILITY, QUALITY, CONDITION, MERCHANTABILITY AND/OR FITNESS
FOR A PARTICULAR PURPOSE OR USE, ALL OF WHICH ARE EXPRESSLY DISCLAIMED.
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10.4 Permitted Encumbrances. As used in this Agreement, the term
"Permitted Encumbrances" shall mean the following, provided that the same shall
not operate to reduce the net revenue interest or increase the gross working
interest of a Well beyond that shown on Exhibit "A":
(a) Lessors' royalties, non-participating royalties,
overriding royalties, division orders, reversionary interests, and similar
burdens.
(b) Preferential rights to purchase and required third party
consents to assignments and similar agreements, with respect to which, prior to
Closing (i) waivers or consents are obtained from the appropriate parties, (ii)
the appropriate time period for asserting such rights has expired without an
exercise of such rights, or (iii) arrangements acceptable to Buyer can be made
by Buyer and Seller to allow Buyer to receive substantially the same economic
benefits as if all such waivers and consents to assign have been obtained.
(c) Liens for taxes or assessments not yet due or delinquent
or, if delinquent, that are being contested in good faith in the normal course
of business.
(d) All rights to consent by, required notices to, filing
with, or other actions by governmental entities in connection with the sale or
conveyance of oil and gas leases or interests therein, if the same are
customarily obtained subsequent to such sale or conveyance and neither Seller
nor Buyer has no reason to believe they cannot be obtained.
(e) Such Title Defects as Buyer may have waived in writing as
well as such Title Defects which were in existence at the time of Seller's
previous sale of the Interests to Buyer pursuant to that certain Purchase and
Sale Agreement dated as of December 31, 2001, between Castle Energy Corporation
and Buyer, as "Sellers" therein and Seller, as "Buyer" therein.
(f) Rights reserved to or vested in any governmental
authority.
(g) Rights of a common owner of any Interest in rights-of-way
or easements currently held by Seller and such common owner as tenants in common
or through common ownership.
(h) Easements, conditions, covenants, restrictions,
servitudes, permits, rights-of-way, surface leases and other rights in the
Interests for the purpose of surface operations, roads, alleys, highways,
railways, pipelines, transmission lines, transportation lines, distribution
lines, power lines, telephone lines, and removal of timber, grazing, logging
operations, canals, ditches, reservoirs and other like purposes, or for the
joint or common use of real estate, rights-of-way, facilities and equipment
which do not materially impair the rights held by Buyer or the use and enjoyment
of the Interests.
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(i) Defects, irregularities and deficiencies in title to any
rights-of-way, easements, surface lease or other rights which in the aggregate
do not materially impair the use of such right-of-way, easements, surface leases
or other rights for the purpose of which such rights will be held by Buyer.
(j) Zoning, planning and environmental laws and ordinances and
municipal regulations.
(k) Vendors, carriers, warehousemen, repairmen, mechanics,
workmen, materialmen, construction or other like liens arising by operation of
law in the ordinary course of business or incident to the construction or
improvement of any property in respect of obligations which are not yet due, or
which are being contested in good faith by appropriate proceedings by or on
behalf of Seller.
(l) Liens created under operating agreements in respect of
obligations that are not yet due or that are being contested in good faith by
appropriate proceedings by or on behalf of Seller.
(m) The terms and provisions of the Existing Documents.
10.5 Good and Defensible Title. For the purposes of this Article 10,
the term "Good and Defensible Title" shall mean, with respect to each of the
Xxxxx or Units described on Exhibit "A", that title of Seller which, subject to
and except for Permitted Encumbrances:
(a) Entitles Seller, throughout the lifetime of the relevant
Well or if the duration of the interest in a Unit, to receive from such Well or
Unit (free and clear of all royalties, overriding royalties, non-participating
royalties, net profits interests, or other burdens on or measured by production
of hydrocarbons) not less than the interest shown as the net revenue interest on
Exhibit "A" in all hydrocarbons produced, saved and marketed from the Well or
Unit and in the case of a Well, of all hydrocarbons produced, saved, and
marketed from any unit of which the Well is a part and which is allocated to
such Well; all without reduction, suspension, or termination of the interest in
such Well or Unit.
(b) Obligates Seller to bear the percentage of the costs and
expenses relating to the maintenance and development of, and operations relating
to, the Well or Unit not greater than the gross working interest shown on
Exhibit "A" without increase throughout the lifetime of the relevant Well or of
the duration of the interest in a Unit.
(c) Is free and clear of liens, encumbrances and defects.
(d) All irregularities of title that would not reasonably be
expected to result in claims that would materially and adversely affect Seller's
title to the underlying Interest shall not be considered a Title Defect,
including but not limited to (i) defects in the chain of title consisting of
failure to recite marital status or the omission of succession or heirship
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proceedings; (ii) defects or irregularities arising out of prior oil and gas
leases which, on their face, expired more than three (3) years prior to the
Effective Time, and which have not been released of record; (iii) defects or
irregularities arising out of acknowledgments, questions of identity, trusts or
trustees, executors and personal representatives, and the manner in which they
executed documents or were identified thereon; (iv) defects or irregularities
arising out of mortgages or deeds of trust which, by their terms, matured more
than six (6) years prior to the Effective Time but which remain unreleased of
record; (v) defects or irregularities arising out of the lack of survey of
specific land or lease description; (vi) defects or irregularities arising out
of the lack of recorded powers of attorneys from corporations, banks, trusts or
personal representatives to execute and deliver documents on their behalf or on
behalf of others; (vii) defects or irregularities cured by possession under
applicable statutes of limitation and statutes relating to prescription.
10.6 Notice of Title Defect. Except for Permitted Encumbrances, any
defect in title, lien, encumbrance, or defect that would cause Seller's title to
any Interest underlying a Well or Unit described on Exhibit "A" not to be Good
and Defensible Title shall be a title defect ("Title Defect"). Not later than
five (5) days before the Closing Date (the "Warranty Claim Date"), Buyer must
notify Seller in writing of any matter that Buyer considers to be a Title Defect
("Notice of Title Defect"), which notice shall include, (i) a specific
description of the matter Buyer asserts as a Title Defect, (ii) a specific
description of the Well or Unit or the portion of the Interest underlying the
Well or Unit that is affected by the Title Defect, (iii) Buyer's calculation of
the amount ("Title Defect Amount") that the value of the Well or Unit should be
reduced because of the Title Defect based on the Allocated Value shown on
Exhibit "B," and (iv) appropriate supporting documentation.
Notwithstanding anything to the contrary in this Agreement, Buyer shall
be deemed to have waived any Title Defect which the Buyer has not specifically
asserted in its Notice of Title Defect presented before the Warranty Claim Date.
10.7 Title Failure. Any item that Seller acknowledges is a Title Defect
but that Seller is unwilling to cure shall be deemed a title failure ("Title
Failure") and, subject to Section 10.9 below, the Purchase Price shall be
reduced for such Title Defect pursuant to Section 2.2 unless, in Seller's
reasonable judgment, it is unlikely that material losses, costs, expenses and
liabilities will be experienced with respect to such Title Defect and Seller
agrees to indemnify Buyer with respect thereto.
10.8 Defect Notice; Seller's Opportunity to Cure. To the extent that
Seller disputes that any item described in the Notice of Title Defect actually
constitutes a Title Defect or disputes the Title Defect Amount assigned by Buyer
to any such Title Defect ("Contested Defect"), Seller shall deliver to Buyer a
notice so stating ("Defect Notice"). Subject to the provisions of 10.9 below,
the portion of the Purchase Price attributable to Title Defects which Seller is
willing to cure but which are uncured at Closing, or which are not waived by
Buyer at Closing (including Contested Defects), shall be deposited into an
escrow account pursuant to an escrow agreement agreed to by the Parties and the
Assignment will be revised to delete all of that portion of the Interests
affected by such Title Defects (including Contested Defects). If Seller fails to
cure a Title Defect within ninety (90) days after Closing, it shall be deemed a
Title Failure and the funds attributable to such Title Defect shall be released
from escrow to Buyer and the property on which such Title Defect exists shall
not be conveyed to Buyer.
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10.9 Title Purchase Price Adjustments. Notwithstanding any provision
hereof to the contrary, there shall be no reduction in the Purchase Price for
Title Failures and no escrow for Title Defects or Contested Defects unless and
until the aggregate amount of such Title Defects (including Title Failures and
Contested Defects) exceeds two percent (2%) of the Purchase Price and only for
the amount in excess of such amount. For purposes of computing Title Defect
Purchase Price adjustments, the Purchase Price at the Effective Time shall be
the total Purchase Price as reflected in Exhibit B.
10.10 Termination Amount. Notwithstanding any provision hereof to the
contrary, in the event the aggregate adjustments for Title Defects pursuant to
this Article 10 and for Environmental Defects pursuant to Article 11 amount to
ten percent (10%) or more of the Adjusted Purchase Price (the "Termination
Amount"), either Party shall have the option to terminate this Agreement,
without any liability, upon written notice to the other Party.
10.11 Preferential Rights and Consents to Assign. Some Interests
underlying Xxxxx or Units may be subject to existing preferential rights to
purchase the Interests or consents may be required in order to assign the
Interests. On or before Closing, Seller shall provide Buyer with a list, and
shall make a good faith effort to obtain consent and waivers of any preferential
rights which Seller knows must be obtained prior to Closing and are not
ordinarily obtained after Closing. Buyer shall notify Seller of any additional
consent requirement or preferential right to purchase it discovers prior to
Closing. If a preferential right is exercised or a consent is denied prior to
Closing, the Purchase Price shall be adjusted downward in an amount equal to the
price paid to Seller for the Xxxxx or Units with respect to which the
preferential right has been exercised or the consent has been denied and such
Interest shall be deleted from this Agreement. In the case of a preferential
right to purchase, Seller shall be entitled to all proceeds paid by the third
party exercising its preferential right to purchase. If a third party
preferential purchase right burdening any Well or Unit has not been exercised or
waived by Closing, Buyer shall pay for and accept an assignment covering such
Well or Unit and, if the preferential right is exercised after Closing, Buyer
shall be entitled to all proceeds paid for such Well or Unit by the third party
exercising such preferential purchase right. Buyer shall be responsible for
conveying title to the Interest underlying the Well or Unit affected by said
preferential right to the party exercising the same and shall indemnify and hold
Seller harmless from and against any claim or liability for Buyer's failure to
make such conveyance.
ARTICLE 11
ENVIRONMENTAL
11.1 Inspection; Indemnity. Buyer and its authorized representatives,
at Buyer's sole risk and expense, shall have the right to enter upon and inspect
the real and personal properties comprising the Interests, and to conduct such
well, environmental and other tests and assessments as Buyer shall deem
appropriate, subject to the approval of the operator in the case of non-operated
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properties. Buyer shall repair any damages to the Interests resulting from its
inspection and shall defend and hold Seller harmless from and against any and
all losses, damages, claims, obligations, liabilities, expenses (including court
costs and attorneys' fees) or causes of action directly resulting from Buyer's
inspection of the Interests.
11.2 Environmental Assessment. As part of their inspection of the
Interests, Buyer and its authorized representatives shall have the right to
conduct soil and water tests and borings, and generally to conduct such tests,
examinations, investigations and studies as may be necessary or appropriate in
Buyer's sole judgment to make an environmental assessment of the Interests.
Buyer shall keep any data or information acquired through such examination and
the results of all analyses of such data and information strictly confidential
and shall not disclose the same to any person or agency without the prior
written approval of Seller unless such disclosure is required by law. Buyer
shall take all steps necessary to ensure that Buyer's authorized representatives
comply with the provisions of this Article 11. If Buyer have discovered in their
environmental assessment circumstances which require remediation, control or
other response under environmental laws, rules or regulations then in effect (an
"Environmental Defect"), Buyer shall notify Seller of such circumstances as soon
as practicable, but in no event less than thirty (30) days prior to Closing.
11.3 Environmental Defects If Buyer properly notify Seller of an
Environmental Defect related to an Interest, Buyer may (i) waive the
Environmental Defect and Close, or (ii) request Seller to cure the Environmental
Defect. If Buyer asks Seller to cure an Environmental Defect, and if the
aggregate amount of all such Environmental Defects exceeds four percent (4%) of
the Purchase Price, Seller have the option (i) to cure the Environmental Defect,
or (ii) to exclude the Interest affected by the Environmental Defect from this
Agreement. If Seller elects to cure the Environmental Defect, but the cure has
not been completed by Closing, the Interest affected by the Environmental Defect
shall not be conveyed to Buyer at Closing, the Purchase Price shall be reduced
by the amount allocated to such Interest and such amount shall be deposited into
the escrow account referred to in Section 10.7. If the Environmental Defect is
cured within ninety (90) days after Closing, within five (5) days after the
Environmental Defect is cured, Seller will convey to Buyer the Interest affected
by the Environmental Defect and the applicable amount shall be released from
escrow to Seller. If Seller elects to exclude the Interest affected by the
Environmental Defect from this Agreement, subject to Section 11.4 below, the
Purchase Price will be reduced by the allocated value of the Interest affected
per Exhibit B.
11.4 Environmental Purchase Price Adjustment. Notwithstanding any
provision hereof to the contrary, there shall be no reduction in the Purchase
Price for uncured Environmental Defects unless, and only to the extent that, the
aggregate amount of such uncured Environmental Defects exceeds two percent (2%)
of the Purchase Price and then only for the amount in excess of such two percent
(2%) amount.
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ARTICLE 12
TERMINATION, DEFAULT AND REMEDIES
12.1 Right of Termination. This Agreement and the transactions
contemplated herein may be terminated in writing at any time at or prior to
Closing:
(a) By the written agreement of all of the Parties hereto
whereupon no Party hereto shall be liable to any other Party hereto for damages
of any kind.
(b) By either of Buyer or Seller in the event that the
adjustments to the Purchase Price exceed the Termination Amount, as provided for
in Section 10.10 whereupon no Party hereto shall be liable to any other Party
hereto for damages of any kind.
(c) Other than as set forth in Subsections 12.1 (a) or (b)
above, by either of Buyer or Seller, provided that the terminating Party shall
within sixty (60) days reimburse the other Party for all legal costs incurred by
such other Party in connection with this transaction.
12.2 Return of Documentation. Upon termination of this Agreement,
within thirty (30) days, Buyer shall return to Seller all title, geological
data, reports, contracts, and maps and other information furnished by Seller to
Buyer and all copies thereof.
12.3 Survival of Confidentiality. Upon termination of this Agreement
for any reason, the Parties agree that the confidentiality provisions of Section
15.14 shall survive.
ARTICLE 13
DISPUTE RESOLUTION
13.1 Dispute Resolution. If the Parties disagree as to any matter under
this Agreement, including without limitation any dispute as to the termination,
construction, validity, interpretation, enforceability or breach of the
Agreement, they will first attempt to resolve such disagreement through a
meeting, to be held within ten (10) days of such termination, of senior
executives of each Party.
13.2 Arbitration If such meeting of senior executives of each Party
fails to resolve the matter within thirty (30) days of the date of such meeting,
then thereafter any such dispute, controversy or claim arising out of or in
relation to or in connection with the Agreement or the operations carried out
under this Agreement shall be exclusively and finally settled by arbitration in
accordance with this Section 13.2. Any Party may submit such dispute,
controversy or claim to arbitration by notice to the other Parties.
(a) The arbitration shall be heard and determined by three (3)
arbitrators. Each side shall appoint an arbitrator of its choice within thirty
(30) Days of the submission of a notice of arbitration. The Party-appointed
arbitrators shall in turn appoint a presiding arbitrator of the tribunal within
thirty (30) Days following the appointment of both Party-appointed arbitrators.
If the Party-appointed arbitrators cannot reach agreement on a presiding
arbitrator of the tribunal and/or one Party refuses to appoint its
Party-appointed arbitrator within said thirty (30) Day period, the appointing
authority for the implementation of such procedure shall be the Presiding
District Judge in Xxxxxx County, Texas, who shall appoint an independent
arbitrator who does not have any financial interest in the dispute, controversy
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or claim. If the Presiding District judge in Xxxxxx County, Texas refuses or
fails to act as the appointing authority within ninety (90) Days after being
requested to do so, then the appointing authority shall be the Presiding Judge
of any other District in the State of Texas mutually agreed upon by the Parties
who shall appoint an independent arbitrator who does not have any financial
interest in the dispute, controversy or claim. All decisions and awards by the
arbitration tribunal shall be made by majority vote.
(b) Unless otherwise expressly agreed in writing by the
Parties to the arbitration proceedings:
(i) The arbitration proceedings shall be held in
Houston, Texas;
(ii) The arbitrator(s) shall be and remain at all
times wholly independent and impartial;
(iii) The arbitration proceedings shall be
conducted in accordance with the Texas
General Arbitration Act (Xxxxxx'x Xxx. Civ.
Stat. Arts. 224 to 238.6), in effect at the
Effective Time; as amended from time to
time;
(iv) Any procedural issues not determined under
the arbitral rules selected pursuant to (b)
(iii) above shall be determined by the
arbitration act and any other applicable
laws of Texas, other than those laws which
would refer the matter to another
jurisdiction;
(v) The costs of the arbitration proceedings
(including attorneys' fees and costs) shall
be borne in the manner determined by the
arbitrator(s);
(vi) The decision of the sole arbitrator or a
majority of the arbitrators, as the case may
be, shall be reduced to writing; final and
binding without the right of appeal; the
sole and exclusive remedy regarding any
claims, counterclaims, issues or accountings
presented to the arbitrator; made and
promptly paid in U.S. dollars free of any
deduction or offset or the common shares of
Seller or Castle Energy Corporation, as
decided by the arbitrators; and any costs or
fees incident to enforcing the award, shall
to the maximum extent permitted by law be
charged against the Party resisting such
enforcement;
(vii) Consequential, punitive or other similar
damages shall not be allowed except those
payable to third parties for which liability
is allocated among the Parties by the
arbitral award;
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(viii) The award shall include interest from the
date of any breach or violation of this
Agreement, as determined by the arbitral
award, and from the date of the award until
paid in full, at the Interest Rate; and
(ix) Judgment upon the award may be entered in
any court having jurisdiction over the
person or the assets of the Party owing the
judgment or application may be made to such
court for a judicial acceptance of the award
and an order of enforcement, as the case may
be.
(x) The arbitration shall proceed in the absence
of a Party who, after due notice, fails to
answer or appear. An Award shall not be made
solely on the default of a Party, but the
arbitrator(s) shall require the Party who is
present to submit such evidence as the
arbitrator(s) may determine is reasonably
required to make an award.
(xi) If an arbitrator should die, withdraw or
otherwise become incapable of serving, or
refuse to serve, a successor arbitrator
shall be selected and appointed in the same
manner as the original arbitrator.
ARTICLE 14
ASSUMPTION OF OBLIGATIONS
14.1 Assumption of Obligations. At Closing, Buyer shall assume (a) the
obligation to (i) plug and abandon or remove and dispose of all Xxxxx (whether
then producing or temporarily or permanently abandoned), platforms, structures,
flow lines, pipelines, and the other equipment now or hereafter located on the
Interests; (ii) cap and bury all flow lines and (iii) dispose of other pipelines
now or hereafter located on the Interests, and all other pollutants, wastes,
contaminants, or hazardous, extremely hazardous, or toxic materials, substances,
chemicals or wastes now or hereafter located on the Interests; (b) all
obligations and liabilities arising from or in connection with any gas
production, pipeline, storage, processing or other imbalance attributable to
substances produced from the Interests on or after the Effective Time; and (c)
all other costs, obligations and liabilities that relate to the Interests and,
in each case, arise from or relate to events occurring on or after the Effective
Time. All such plugging, replugging, abandonment, removal, disposal, and
restoration operations shall be in compliance with applicable laws and
regulations and contracts, and shall be conducted in a good and workmanlike
manner.
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ARTICLE 15
MISCELLANEOUS
15.1 Fees and Taxes. Except as otherwise specifically provided, all
fees, costs and expense incurred by Buyer or Seller in negotiating this
Agreement or in consummating the transactions contemplated by this Agreement
shall be paid by the Party incurring the same, including, without limitation,
legal and accounting fees, costs and expenses. All required documentary, filing
and recording fees for the assignments, conveyance or other instruments required
to convey title to the Interests to Buyer shall be borne by Buyer. In addition,
the liability for any sales, use, transfer or similar tax associated with the
sale and/or transfer of the Interests shall be the liability of, and for the
account of, the Buyer and such liability shall not be subject to pro-ration as
provided in Section 2.2.
15.2 Notices. All notices and communications required or permitted
under this Agreement shall be in writing and shall be deemed to have been duly
made when actually delivered, including delivery by courier, facsimile,
telecopy, or other electronic medium, or if mailed by registered to certified
mail, postage prepaid, addressed as follows:
Seller:
DELTA PETROLEUM CORPORATION
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxxx
Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Buyer:
CASTLE EXPLORATION COMPANY, INC.
000 Xxxxx Xxxxx Xxxx,
Xxxxx 000
Xxxx xx Xxxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxxx
Chief Financial Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Either Party may, by written notice so delivered to the other, change
the address to which delivery shall thereafter be made.
15.3 Amendments. This Agreement may not be amended except by an
instrument in writing signed by Buyer and Seller.
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15.4 Preparation of Agreement. Both Seller and Buyer and their
respective counsel participated in the preparation of this Agreement. In the
event of any ambiguity in this Agreement, no presumption shall arise based on
the identity of the draftsman of this Agreement.
15.5 Headings. The headings of the articles and sections of this
Agreement are for guidance and convenience of reference only and shall not limit
or otherwise affect any of the terms or provisions of this Agreement.
15.6 Counterparts. This Agreement may be executed by Buyer and Seller
in any number of counterparts, each of which shall be deemed an original
instrument, but all of which together shall constitute but one and the same
instrument.
15.7 References. References made in this Agreement, including use of a
pronoun, shall be deemed to include, where applicable, masculine, feminine,
singular or plural, individuals or corporations. As used in this Agreement,
"person" shall mean any natural person, corporation, partnership, trust, estate
or other entity.
15.8 Governing Law. This Agreement and the transactions contemplated
hereby shall be construed in accordance with, and governed by, the laws of the
State of Pennsylvania without giving effect to the conflicts of law rules
thereof. Any disputes concerning this Agreement or the subject matter hereof
shall be brought in a court of competent jurisdiction of the State of
Pennsylvania.
15.9 Entire Agreement. This Agreement (including the Exhibits hereto)
constitutes the entire understanding between the Parties with respect to the
subject matter hereof, superseding all negotiations, prior discussions and prior
agreements and understanding relating to such subject matter.
15.10 Assignment; Parties in Interest. No Party shall assign this
Agreement without the other Party's prior written consent; provided, however,
that this requirement shall not apply to a subsidiary or other affiliate of the
assigning Party so long as the assigning Party remains responsible for its
assignee's obligations hereunder. Subject to the foregoing, this Agreement shall
be binding upon, and shall inure to the benefit of, the Parties and their
respective successors and assigns.
15.11 Further Cooperation. After the Closing, Buyer and Seller shall
execute and deliver, or shall caused to be executed and delivered from time to
time, such further instruments of conveyance and transfer and shall take such
other action as any Party may reasonably request to convey and deliver the
Interests to Buyer, to accomplish the orderly transfer of the Interests to
Buyer, or to otherwise effectuate the transactions contemplated by this
Agreement. If either Party hereto receives monies belonging to the other, such
amount shall immediately be paid over to the proper Party. If an invoice or
other evidence of an obligation is received by a Party, which is partially an
obligation of both Seller and Buyer, then the Parties shall consult with each
other and each shall promptly pay its portion of such obligation to the obligee.
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15.12 Press Release. No Party shall make any press release or other
announcement in connection with the execution of this Agreement or the Closing
without first consulting with the other Party. Following such consultation and
good faith attempt to make reasonable accommodations, any Party may make any
announcement or press release that it believes is either required by applicable
law or the rules of any stock exchange, or is advisable in connection with such
Party's obligation to provide public disclosure regarding its activities. This
provision shall not apply to any filing with any governmental body or stock
exchange required by law, rule or regulation.
15.13 Subrogation. Buyer shall be subrogated to all rights, actions and
warranties that Seller may have with respect to Seller's
predecessors-in-interest as to the Interests.
15.14 Confidentiality. Seller and Buyer agree that they will keep
confidential and will not, except with the other's prior written consent or as
required by applicable law, regulation or legal process, disclose (i) the
existence or terms of this letter or the discussions hereunder; or (ii) any
information which they obtain about the other during due diligence
investigations and the negotiation of the transaction, and will not use any of
such information for any reason or purpose other than to evaluate the
transaction; provided, however, that each of Seller and Buyer may reveal such
information to its respective accounting, legal and other representatives, and
to Buyer's potential sources of financing for the transaction, who need to know
such information for the purpose of evaluating the transaction and who agree to
keep such information confidential. In the event any Party is requested pursuant
to or required by applicable law, regulation or legal process to disclose any
information required to be kept confidential hereunder, the Party requested or
required to make such disclosure shall promptly notify the other Party so that
such Party may seek a protective order or other appropriate remedy. In addition,
if either Seller or Buyer determine not to proceed with the transaction, each
will promptly return to the other all written information in such party and such
party's representatives' possession, including without limitation all internal
notes and analyses prepared in connection with the transaction, provided
information was provided in connection with this transaction, or promptly
destroy all such information and confirm such destruction to the other in
writing. Information to be returned shall not include information concerning
Seller that Buyer possesses or shall possess in the future in its capacity as a
shareholder of Seller. Notwithstanding anything in this paragraph to the
contrary, neither Seller nor Buyer will be required to keep confidential any
information which (a) is available to the public at the time of its disclosure
to the other party or becomes publicly available after such disclosure other
than by a breach of this letter, (b) becomes available to the party receiving
the information on a non-confidential basis from a source which is not under any
obligation to maintain its confidential basis or (c) is known by the party
receiving the information prior to its disclosure and such knowledge can be
demonstrated by written evidence.
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EXECUTED as of the date first above stated, but made effective as of
the Effective Time.
Seller: DELTA PETROLEUM CORPORATION
By /s/XXXXX X. XXXXXX
-------------------------------------
Xxxxx X. Xxxxxx
President and Chief Executive Officer
Buyer: CASTLE EXPLORATION COMPANY, INC.
By /s/XXXXXXX X. XXXXXXX, III
-------------------------------------
Xxxxxxx X. Xxxxxxx, III
Vice President and General Counsel
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