EXHIBIT 2.1
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (this "Agreement") dated as of the 31st
day of December 2001, is between and among CASTLE ENERGY CORPORATION, a
corporation organized and existing under the laws of Delaware ("Castle"),
CASTLE EXPLORATION COMPANY, INC., a corporation organized and existing under
the laws of Pennsylvania ("CECI"), CEC, INC., a corporation organized and
existing under the laws of Delaware ("CEC") and CASTLE PIPELINE COMPANY, a
corporation organized and existing under the laws of Texas ("CPC")
(collectively, the "Sellers") and DELTA PETROLEUM CORPORATION, a corporation
organized and existing under the laws of Colorado ("Delta") and DELTA
EXPLORATION COMPANY, INC., a corporation organized and existing under the laws
of Colorado ("DECI") (collectively, the "Buyers"). Sellers and Buyers 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, Buyers and
Sellers agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1 Purchase and Sale. Subject to the terms and conditions of this
Agreement, Sellers agree to sell and convey and Buyers agree to purchase and
pay for all of Sellers' 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,
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").
(e) The general and limited partnership interests in Castle
Texas Exploration Limited Partnership ("CTELP") and Castle Texas Oil and Gas
Limited Partnership ("CTOGLP") (collectively the "Limited Partnerships")
described on Exhibit "A" attached hereto, including, without limitation, all
Leases, Lands, Xxxxx (together with all oil, natural gas, casinghead gas, drip
gasoline, natural gas liquids, condensate and other minerals produced from
such Xxxxx), Units, and/or Equipment owned by the Limited Partnerships.
(f) The licenses, permits, contracts, agreements and other
instruments owned by Sellers (other than bonds posted by Sellers) 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.
(g) 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 Sellers, 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 Buyers (i.e., the materials are not
subject to a proprietary agreement precluding their transfer to Buyers), and,
to the extent transferable, all other contract rights, intangible rights
(excluding Sellers' 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.
(h) 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, Sellers reserve and retain (i) Sellers' 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 Sellers used by Sellers in the management and
administration of their businesses; (iv) all claims that Sellers may have
under any policy of insurance, indemnity or bond maintained by Sellers 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 that Sellers are contractually or otherwise
obligated not to disclose to Buyers; (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; (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 October 1, 2001, at 7:00 a.m., central 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, 2002 ("Closing Date") unless the Closing Date is modified by the
terms of this Section 1.5, or unless any other date is agreed to in writing by
all Parties.
(a) If for any reason Closing shall not have occurred on or
before April 1, 2002 and Sellers have not elected to terminate this Agreement
pursuant to Subsection 1.5 (b) below, then Closing shall be automatically
extended until the earlier of 7:00 a.m. Eastern Standard Time on (i) the
date that occurs 60 days after the date on which the Securities and Exchange
Commission ("SEC") informs Delta that it has no further comments on Delta's
proxy materials for the transaction or (ii) June 30, 2002.
(b) Notwithstanding the above,
(i) if Closing does not occur on or before April 1, 2002,
for any reason, Sellers may notify Buyers in writing
on April 1, 2002, that Sellers do not consent to such
extension and Sellers may thereby terminate this
Agreement with impunity pursuant to Section 12.1 (c);
(ii) provided further that if Closing has been extended
beyond April 1, 2002, by this subsection, but Closing
does not occur on or before April 30, 2002, for any
reason, Sellers may notify Buyers in writing on April
30, 2002, that Sellers do not consent to further
extension and Sellers may thereby terminate this
Agreement with impunity pursuant to Section 12.1 (c);
and
(iii) provided further that if Closing has been extended
beyond April 30, 2002, by this subsection, but Closing
has not occurred by May 31, 2002, for any reason,
Sellers may notify Buyers in writing on May 31, 2002,
that Sellers do not consent to further extension and
Sellers may thereby terminate this Agreement with
impunity pursuant to Section 12.1 (c).
(c) Delta shall notify Sellers within twenty four hours of the
time that it receives oral or written notice or information from the SEC that
the SEC has no further comments on Delta's proxy materials for the
transactions contemplated by this Agreement.
(d) Sellers and Buyers shall use their respective and collective
best efforts to cause Closing to occur as quickly as possible on or after
April 1, 2002, and to obtain all quorums and consents necessary therefor.
These efforts shall include the obligation on the part of all Parties to
timely provide all of the information necessary for Delta to file preliminary
proxy materials regarding the transaction with the SEC no later than January
25, 2002. Buyers and Sellers will cooperate with each other since the
information required for Delta's preliminary proxy is Delta's responsibility
but may include audits of revenues and expenses related to Seller's oil and
gas properties. To the extent that requisite information on Castle is not
provided by Castle (following reasonable advance notice by Delta and allowance
for normal preparation time for such information) and approved by Castle's
independent auditors (if such approval is required) for filing by January 25,
2002 and the filing of the preliminary proxy materials with the SEC is delayed
as a result, the dates contained in this Section 1.5 shall be adjusted
accordingly subject to the rights granted to Buyers and Sellers in Article 12
below.
1.6 Ownership of the Interests. Subject to Section 12.1 and the
other provisions of this Agreement, should Closing occur, Sellers 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 Buyers 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 Sellers if incurred or accruing with respect to operations
conducted prior to the Effective Time; or (ii) allocated to Buyers 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 Sellers.
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 Buyers 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. Buyers shall assume all risk of loss with
respect to the Interests from and after the Effective Time to Closing and
thereafter should Closing occur.
1.8 Sellers' Agent. Castle shall act as agent on behalf of Sellers
for purposes of receiving payments of money or shares of Delta's Common Stock
under this Agreement.
ARTICLE 2
PURCHASE PRICE
2.1 Purchase Price. The purchase price for the Interests shall be
comprised of Twenty Million Dollars ($20,000,000) paid by wire transfer or
other immediately available funds, or in part by the Bridge Note, as defined
and set forth in Section 2.6 below (the "Money Payment") and Nine Million Five
Hundred Sixty Six Thousand (9,566,000) shares of Delta's Common Stock (the
"Stock Payment"). The Money Payment and the Stock Payment shall collectively
be herein called the "Purchase Price". At Closing, the Money Payment of the
Purchase Price shall be adjusted as set forth in Section 2.3 below.
2.2 Exclusivity Deposit. Following Buyers' execution of this
Agreement, to assure Buyers' performance of its obligations under this
Agreement, Delta on behalf of Buyers shall place in escrow with Xxxxxx X.
Xxxxx, Esquire, a solo practitioner (the " Escrow Agent"), Seven Hundred
Thousand (700,000) shares of Delta common stock (the "Exclusivity Deposit")
from its currently authorized but unissued shares pursuant to the Escrow
Agreement attached hereto and made a part hereof as Exhibit C. (the "Escrow
Agreement"). If Closing occurs, the Exclusivity Deposit will be applied to
the Adjusted Purchase Price. If Closing fails to occur, the Exclusivity
Deposit shall be disbursed pursuant to the terms of Section 12.1.
2.3 Adjustments to Purchase Price. At Closing, the Purchase Price
shall be adjusted as follows and the resulting amount shall be referred to
herein as the "Adjusted Purchase Price":
(a) The Purchase Price shall be adjusted upward by the following:
(i) The amount of all actual operating or capital
expenditures or prepaid expenses attributable to the
Interests paid by or on behalf of Sellers in
connection with the operation of the Interests and
which are, according to generally accepted accounting
principles, attributable to the period of time between
the Effective Time and Closing Date. Such
expenditures and expenses shall include, without
limitation, royalties, rentals and other charges; ad
valorem, property, excise, and any other taxes based
upon or measured by the ownership of the Interests,
the production of hydrocarbons or the receipt of
proceeds therefrom; and expenses payable to a third
person under applicable joint operating agreements,
including, without limitation, overhead charges at
normal company overhead labor rates and royalty
disbursement fees payable to operator, or similar
payments to third party operators, or, in the absence
of any joint operating agreement, those items
customarily billed under such an agreement.
(ii) The value, less taxes (other than taxes on net
income), of all hydrocarbons in storage facilities
above or upstream from the pipeline connection in each
storage facility, or downstream of delivery point,
sales meters on gas pipelines, as of the Effective
Time, at the prevailing market value at the time of
sale in the area, adjusted for grade and gravity.
(iii) Insurance premiums of $7,500 per month from the
effective date to Closing, for general liability,
excess liability and operator's extra expense (which
benefits accrue to Buyers pursuant to paragraph 1.3).
(iv) General corporate overhead of $20,000 per month from
the effective date to the Closing date to reimburse
Seller for cost to produce XXXXX overhead revenues
that accrue to Buyers.
(v) Any other amounts agreed upon by Sellers and Buyers.
(b) The Purchase Price shall be adjusted downward by the
following:
(i) Reductions due to Title Failures as provided in
Sections 10.7.
(ii) For uncured Title Defects and Contested Defects
pursuant to Section 10.8
(iii) Reductions due to Environmental Defects as provided in
Section 11.3.
(iv) The gross proceeds received by Sellers, net of
applicable severance and production taxes and
compression and transportation charges, and derived
from the sale of hydrocarbons attributable to the
Interests to the extent owned by Buyers between the
Effective Time and the Closing Date, pursuant to the
provisions of Section 1.6 above.
(v) Reductions due to receipt by Sellers of denials to
consent and of exercises of preferential rights as
provided in Section 10.11.
(vi) XXXXX revenues received by Seller between Effective
Time and Closing Date.
(vii) Any other amounts agreed upon by Sellers and
Buyers.
(c) Upward and downward adjustments to the Purchase Price
pursuant to Section 2.3 shall be made only to the Money Payment.
2.4 Purchase Price Allocation. The Purchase Price shall be allocated
among the Interests as set forth in Exhibit "B" attached hereto (the
"Allocated Values").
2.5 Preliminary Settlement Statement. Sellers shall prepare and
deliver to Buyers 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, Sellers' estimate of the Adjusted Purchase Price to be paid at
Closing, together with a statement setting forth Sellers' estimate of the
amount of each adjustment to the Purchase Price to be made pursuant to Section
2.2 (the "Preliminary Settlement Statement"). The parties shall negotiate in
good faith and attempt to agree on such estimated adjustments prior to
Closing. In the event any estimated adjustment amounts are not agreed upon
prior to Closing, the Adjusted Purchase Price for purposes of Closing shall be
calculated based on Sellers' and Buyers' agreed upon estimated adjustments and
Sellers' good faith estimation of any disputed amounts, which estimate shall
be subject to adjustment in the Final Settlement Statement pursuant to Section
9.1.
2.6 Bridge Note. It is the expectation of the Parties that Buyers
will obtain bank financing from the Bank of Oklahoma, N.A. ("BOK") that will
allow them to pay to Sellers the entire Money Payment of the Adjusted Purchase
Price at Closing. Notwithstanding the above, should the BOK loan amount to
Buyers be less than the entire amount of the Money Payment of the Adjusted
Purchase Price (such difference being referred to as the "Lending Shortfall"),
by written notice to Sellers not less than fifteen (15) days prior to Closing,
Buyers may elect to issue to Sellers a promissory note in the amount of the
Lending Shortfall in the form attached and made a part hereof as Exhibit M
(the "Bridge Note"). The Bridge Note shall be payable to Sellers on or before
two hundred seventy (270) days following Closing, accruing interest at eight
percent (8%) per annum, payable in either cash or shares of the common stock
of Delta, at the option of Buyers, the value of such stock being fixed at
Three Dollars ($3.00) per share. If Buyer has neither paid all principal
and accrued interest on the Bridge Note nor made a written election to pay the
Bridge Note in either cash or shares by close of business on its maturity date
of the Bridge Note, Sellers shall have the option to either present the note
for payment in cash or shares.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Castle. Castle represents and
warrants to Buyers the following:
(a) Castle is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Castle is duly
qualified to carry on its business in the State or States in which the
Interests are located and in each State where failure to so qualify would have
a material adverse effect upon its business or the Interests.
(b) Castle has all requisite power and authority to carry on its
business as presently conducted and to enter into 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 Castle.
(d) This Agreement has been duly executed and delivered on
behalf of Castle, and all documents and instruments required hereunder to be
executed and delivered by Castle 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 Castle
enforceable in accordance with their terms.
3.2 Representations and Warranties of CECI. CECI represents and
warrants to Buyers the following:
(a) CECI is a corporation duly organized, validly existing and
in good standing under the laws of the State of Pennsylvania. CECI is duly
qualified to carry on its business in the State or States in which the
Interests are located and in each State where failure to so qualify would have
a material adverse effect upon its business or the Interests.
(b) CECI has all requisite power and authority to carry on its
business as presently conducted and to enter into 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 CECI.
(d) This Agreement has been duly executed and delivered on
behalf of CECI, and all documents and instruments required hereunder to be
executed and delivered by CECI 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 CECI
enforceable in accordance with their terms.
3.3 Representations and Warranties of CEC. CEC represents and
warrants to Buyers the following:
(a) CEC is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. CEC is duly qualified
to carry on its business in the State or States in which the Interests are
located and in each State where failure to so qualify would have a material
adverse effect upon its business or the Interests.
(b) CEC has all requisite power and authority to carry on its
business as presently conducted and to enter into 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 CEC.
(d) This Agreement has been duly executed and delivered on
behalf of CEC, and all documents and instruments required hereunder to be
executed and delivered by CEC 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 CEC
enforceable in accordance with their terms.
3.4 Representations and Warranties of CPC. CPC represents and
warrants to Buyers the following:
(a) CPC is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas. CPC is duly qualified to
carry on its business in the State or States in which the Interests are
located and in each State where failure to so qualify would have a material
adverse effect upon its business or the Interests.
(b) CPC has all requisite power and authority to carry on its
business as presently conducted and to enter into 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 CPC.
(d) This Agreement has been duly executed and delivered on
behalf of CPC, and all documents and instruments required hereunder to be
executed and delivered by CPC 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 CPC
enforceable in accordance with their terms.
3.5 Representations and Warranties of Sellers. Each of Sellers
separately represents and warrants to Buyers the following:
(a) Other than as set forth in Exhibit "D" 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 Sellers to make payments
of any amounts in connection with drilling of xxxxx or other material capital
expenditures affecting the Interests.
(b) Sellers' execution, delivery, and performance of this
Agreement and the transactions contemplated hereby will not: (i) violate or
conflict with any provision of their respective 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 they are a party or by which they are bound; or (iii) violate or
conflict with any applicable judgment, decree, order, permit, law, rule, or
regulation.
(c) 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.
(d) Sellers are 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 Sellers' 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.
(e) Except for those taxes and assessments for which a Purchase
Price adjustment is made under Section 2.3(b)(v), during the period of
Sellers' ownership of the Interests, Sellers have 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.
(f) Sellers have 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 Buyers shall have any responsibility
whatsoever.
(g) Other than as set forth in Exhibit "E" attached hereto and
made a part hereof, no suit, action, claim, or other proceeding is pending or,
to the best of Sellers' knowledge, threatened before any court, arbitration
panel or governmental agency which relates to the Interests and which might
result in a material loss of Sellers' 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.
(h) 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 Buyers 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 the Limited Partnership Agreements, 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
Sellers' knowledge, (i) all material Existing Documents are in full 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) Sellers are 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 Sellers have received no notice of default under any
of the Existing Documents.
(i) To the best of Sellers' knowledge, all of the Equipment
Sellers require to operate their interests has been maintained in a state of
repair so as to be adequate for normal operations.
(j) To the best of Sellers' 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.
(k) Except as set forth on Exhibit "F" attached hereto:
(i) Sellers' 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 Sellers pending or,
to the best of Sellers' knowledge, threatened against
Sellers or any of the Interests relating in any way to
the Environmental Laws.
(iii) Neither Sellers nor, to the best of Sellers'
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 Sellers, except for inventories
of such substances to be used in the ordinary course of
business of Sellers (which inventories and wastes, if any,
were and are stored or disposed of in accordance with
applicable laws and regulations).
(iv) To the best of Sellers' knowledge, Sellers have not
received any notice or order from any governmental or other
public agency advising it that Sellers are 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. Sellers are 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.
(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.
3.6 Representations and Warranties of Delta. Delta represents and
warrants to Sellers the following:
(a) Delta is a corporation, duly organized, validly existing and
in good standing under the laws of the State of Colorado. Delta is or will be
prior to Closing duly qualified to conduct business in the State or States in
which the Interests are located.
(b) Delta has all requisite power and authority to carry on its
business as presently conducted, to enter into this Agreement, and to purchase
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 Delta; all documents and instruments required hereunder to be
executed and delivered by Delta 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 Delta
enforceable in accordance with their terms.
(e) All shares of the Common Stock of Delta issued to
Sellers pursuant to this Agreement shall be duly authorized and when issued
shall be fully paid, non-assessable shares of the Common Stock of Delta and
shall carry all of the same rights and privileges as all other issues of the
Common Stock of Delta, provided, however that the Parties acknowledge that
such shares will not be registered stock until such shares are registered
pursuant to Section 9.6.
3.7 Representations and Warranties of DECI. DECI represents and
warrants to Sellers the following:
(a) DECI is a corporation, duly organized, validly existing and
in good standing under the laws of the State of Colorado. DECI is or will be
prior to Closing duly qualified to conduct business in State or States in
which the Interests being purchased by DECI are located.
(b) DECI has all requisite power and authority to carry on its
business as presently conducted, to enter into this Agreement, and to purchase
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 DECI all documents and instruments required hereunder to be executed
and delivered by DECI 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 DECI enforceable in
accordance with their terms.
3.8 Representations and Warranties of Buyers. Buyers represent and
warrant to Sellers the following:
(a) Buyers have 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 Sellers shall have any responsibility
whatsoever. Specifically, but not by way of limitation, broker's or finder's
fees or commissions, if any, of BWAB Limited Liability Company, a limited
liability company organized and existing under the laws of Colorado ("BWAB"),
its principals and affiliates, shall be borne exclusively by Buyers.
(b) Prior to Closing, Buyers will have inspected the Interests,
the public records and Sellers' 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, Buyers have relied solely on their independent
investigation of, and judgment with respect to, the Interests and the advice
of their 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 Sellers.
(c) At Closing, Buyers will meet the bonding and other
requirements required by all governmental authorities in respect to the
Interests (and Sellers agree to provide Buyers, prior to Closing, with a list
of such requirements) and, after Closing, Buyers anticipate that they will
continue to be able to meet such bonding requirements. Buyers are, and after
the Closing are expected to continue to be, otherwise qualified to own the
Interests. The consummation of the transactions contemplated hereby will not
cause Buyers 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. Buyers are 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 Buyers. Sellers
will cooperate and will assist Buyers relating to the preparation and
presentation of documents relating to changes in ownership and/or operatorship
of the Interests.
(d) Buyers are experienced and knowledgeable investors and
operators in the oil and gas business. Buyers are acquiring the Interests for
their own accounts 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.
(e) Buyers have arranged or will have arranged to have available
by the Closing Date sufficient funds to enable the payment to Sellers, by wire
transfer, of the Adjusted Purchase Price in accordance with Section 2.3 and to
otherwise perform Buyers' obligations under this Agreement, subject to Buyers'
rights under the provisions of Section 2.6 to provide a Bridge Note.
ARTICLE 4
CERTAIN AGREEMENTS OF SELLERS
4.1 Agreements Between Execution of Agreement and Closing. During
the period between the execution of this Agreement and the Closing Date,
Sellers shall not, without the prior written consent of Buyers, (i) sell,
convey, assign, transfer or encumber any of the Interests; (ii) make or agree
to make any expenditure in excess of $25,000.00, net to Sellers' interest,
except for obligations under existing contracts, expenditures necessary to
maintain the Interests, or in the event of any emergency as to which Sellers
have notified Buyers; (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, Sellers shall afford to Buyers and their authorized
representatives, during normal business hours, reasonable access to well and
land files, title, contract and legal materials and operating data and
information in Sellers' possession or to which they have access affecting the
Interests.
4.3 Notification of Additional Proceedings. Sellers shall promptly
notify Buyers 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.
4.4 Consents. Sellers shall use their best efforts to obtain any
consents necessary to transfer the Interests to Buyers.
4.5 Trading in Delta Stock. None of the Sellers nor their respective
affiliates, insiders, agents and brokers shall be permitted to buy or sell
shares, options, etc., in the common stock of Delta until after Closing.
4.6 Software License. Sellers will, at no cost to Sellers, cooperate
with Buyers, if Buyers attempt to have Sellers' Excalibur software licenses
transferred to Buyers.
4.7 Insurance. Sellers shall maintain the general liability, excess
liability and operator's extra expense insurance referenced in Subsection 2.3
(a) (iii) until Closing.
ARTICLE 5
CERTAIN AGREEMENTS OF BUYERS
5.1 Cooperation. Buyers shall cooperate with Sellers to assist
Sellers in carrying out the agreements of Sellers hereunder.
5.2 Change of Operations. Buyers 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 Sellers can withdraw as operators of the Interests, where
applicable, as soon as possible after Closing. Buyers acknowledge that
Sellers have not guaranteed that Buyers will, in every case, succeed Sellers
as operator.
5.3 Trading in Castle Stock. Neither of the Buyers nor their
respective affiliates, insiders, agents, brokers, etc. shall be permitted to
buy or sell shares, options, etc., in the common stock of Castle until after
Closing. Buyers will obtain a written agreement from BWAB that it and its
respective affiliates, insiders, agents, brokers shall are bound by the
provisions of this Section 5.3.
5.4 Issuance of Delta Stock. Should Delta issue or contract to issue
Delta common stock prior to Closing in excess of three percent (3%) of the
currently outstanding stock of Delta without the prior written consent of
Sellers, excluding the issuance of up to 1,431,000 shares of Delta common
stock to Piper Petroleum Company, Seller shall have the option at its sole
discretion to terminate this Agreement pursuant to Section 12.1 (c).
5.5 Delta Directors. Delta will not increase the number of directors
on its Board of Directors prior to the Closing Date.
5.6 Transitional Accounting. Buyers will provide transitional
accounting personnel at their own expense; for at least two (2) months before
they assume accounting (revenue and joint in interest) duties for the
Interests.
ARTICLE 6
BUYERS' CONDITIONS TO CLOSING
The obligations of Buyers to consummate the transactions provided for
herein are subject, at the option of Buyers, to the fulfillment on or prior to
Closing of each of the following conditions:
6.1 Representations. The representations and warranties by Castle
set forth in Section 3.1, by CECI set forth in Section 3.2, by CEC set forth
in Section 3.3, by CPL set forth in Section 3.4 and by Sellers set forth in
Section 3.5 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 Buyers.
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 Buyers.
6.3 Performance. Sellers 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 "E" 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.
ARTICLE 7
SELLERS' CONDITIONS TO CLOSING
The obligations of Sellers to consummate the transactions provided for
herein are subject, at the option of Sellers, to the fulfillment on or prior
to Closing of each of the following conditions:
7.1 Representations. The representations and warranties by Delta
set forth in Section 3.6, by DECI set forth in Section 3.7, and by Buyers set
forth in Section 3.8 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 Sellers.
7.2 Performance. Buyers 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
Sellers have been adequately indemnified by Buyers 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.
7.4 Delta Proxy. Delta's filing of a proxy concerning this proposed
transaction with the SEC not later than January 25, 2002 or to a subsequent
date as adjusted pursuant to Subsection 1.5 (d) above.
7.5 Delta Shareholders. Approval of this transaction by Delta
shareholders not later than the Closing Date as determined in Section 1.5.
7.6 Issuance of Delta Stock. Delta has not issued or contracted to
issue Delta common stock prior to Closing in excess of ten percent (10%) of
the currently outstanding stock of Delta without the prior written consent of
Sellers, excluding the issuance of up to 1,431,000 shares of Delta common
stock to Piper Petroleum Company.
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 Buyers and Sellers may agree (the "Closing Date").
8.2 Place of Closing. The Closing shall be held at the offices of
Sellers 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) Sellers shall execute and deliver: (1) an Assignment, Xxxx
of Sale and Conveyance in the form attached hereto and made a part hereof as
Exhibit "G" (the "Assignment") (in sufficient counterparts to facilitate
recording) conveying the Interests, subject to the Permitted Encumbrances; (2)
Assignments of General and Limited Partnership Interest in Limited
Partnerships in the forms of assignment attached hereto and made a part hereof
as Exhibits "H", "I", "J" and "K"; and (3) such other instruments as may be
required to convey the Interests to Buyers and otherwise effectuate the
transactions contemplated by this Agreement.
(b) Sellers and Buyers shall execute and deliver the Preliminary
Settlement Statement.
(c) Buyers shall deliver by direct bank or wire transfer to
Castle or to Castle's account on behalf of Sellers (at such place as may be
designated by Sellers in a written notice, such notice to be delivered to
Buyers not less than two (2) Business Days prior to the Closing Date) the
Money Payment of the Adjusted Purchase Price (less the amount to be secured by
the Bridge Note, if any) and shall deliver to Seller the Stock Payment of the
Adjusted Purchase Price (less the amount of the Exclusivity Deposit).
(d) Sellers shall deliver on forms supplied by Buyers 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 Buyers.
(e) Buyers and Sellers shall execute and deliver the
Registration Rights Agreement, as defined in Section 9.6 below.
(f) Buyers and Sellers shall execute and deliver instructions to
the Escrow Agent to release the Exclusivity Deposit to Sellers.
(g) Should Buyers have notified Sellers of a Lending Shortfall
pursuant to Section 2.6, Buyers shall execute and deliver the Bridge Note to
Sellers.
8.4 Records. In addition to the obligations set forth under
Sections 4.2 and 8.3 above, within sixty (60) days after Closing, Sellers
shall deliver to Buyers all original well and land files in its possession or
to which it has access. Buyers shall be entitled to all original records
affecting the Interests assigned to Buyers pursuant to the terms of this
Agreement. Sellers shall be entitled to keep a copy of such records for its
files. Buyers agree to preserve and maintain such records for at least five
(5) years after the Closing Date and to provide Sellers access to such records
during normal business hours during such period.
ARTICLE 9
POST-CLOSING MATTERS
9.1 Final Settlement Statement.
(a) As soon as practicable after the Closing, but in no event
later than ninety (90) days after Closing, Sellers shall prepare and deliver
to Buyers, in accordance with this Agreement and generally accepted accounting
principles, a statement ("Final Settlement Statement") setting forth each
adjustment (other than adjustments for Title Defects) finally determined as of
Closing and showing the calculation of such adjustments. Within thirty (30)
days after receipt of the Final Settlement Statement, Buyers shall deliver to
Sellers a written report containing any changes that Buyers propose be made in
good faith to resolve any questions with respect to the amounts due pursuant
to such Final Settlement Statement no later than one hundred twenty (120) days
after the Closing. The Parties shall employ that degree of effort as would
prudent business persons engaged in on going business relationships to reach
agreement as to the amounts due pursuant to such Final Settlement Statement no
later than thirty (30) days after the submission to Sellers of proposed
changes to the Final Settlement Statement.
(b) Should the Parties not reach agreement as to the amounts
due pursuant to such Final Settlement Statement, the disputed items shall be
submitted to KPMG, LLP for resolution The decision of KPMG, LLP shall be
considered final as between the Parties. Cost for KPMG, LLP and resolution of
the dispute will be apportioned between Sellers and Buyers in proportion to
the award by KPMG.
(c) The date upon which such agreement or resolution is reached
shall be called the "Settlement Date". On the Settlement Date, should one
party be obligated to the other by reason of the Final Settlement Statement,
the indebted party shall pay to the other party, in immediately available
funds, those monies determined to be due under the Final Settlement Statement.
Until paid, all past due amounts hereunder shall bear interest at the lesser
of prime plus two percent, as established by Bank of Texas, N.A., Houston,
Texas (computed based on a 360 day year) or the maximum lawful rate permitted
by applicable law (the "Interest Rate").
9.2 Unpaid Third Party Funds. At such time as Buyers and
Sellers agree on a Final Settlement Statement, Sellers will transfer to Buyers
all funds held by Sellers in suspense for a third party owner of royalty,
overriding royalty, working interests, mineral interest or other similar
interests, attributable to the Interests, and will deliver all records in
Sellers' possession, including a schedule of such funds listing the owners
thereof, which may be used to determine proper disbursement. Buyers shall
thereafter be responsible for determining the proper payment of such amounts
and shall indemnify and hold harmless Sellers 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 Sellers with respect thereto, with respect to the
funds transferred to Buyers pursuant to this Section 9.2.
9.3 Further Assurances. After Closing Sellers, and Buyers 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.
9.4 Survival. All representations and warranties set forth in this
Agreement in Sections 3.1 (a) - (d), 3.2 (a) - (d), 3.3 (a) - (d), 3.4 (a) -
(d), 3.5 (a) - (f), 3.6 (a) - (e), 3.7 (a) - (d) and 3.8 (a) - (c) shall
survive the Closing for a period of ten (10) months, but no other
representations and warranties shall survive the Closing.
9.5 Appointment of Directors. Delta agrees to appoint three
directors, selected by Sellers, to its Board of Directors effective
immediately following Closing.
9.6 Delta's Stock. Delta shall agree to file a registration
statement registering all shares of Delta common stock to be issued to Sellers
hereunder, if any, within thirty (30) days of closing under terms more
specifically set out in the Registration Rights Agreement attached here to and
made a part hereof as Exhibit "L" (the "Registration Rights Agreement"). Delta
shall be able to call up to 3,188,667 shares of its common stock for
$4.50/share from Castle for a period of one year after closing. Castle, in
turn, agrees to maintain and to not distribute to its shareholders at least
3,188,667 shares of Delta common stock during this period.
9.7 Voting of Delta Shares. During the period that Castle holds any
Delta shares issued to it pursuant to the transaction, Castle will not attempt
to take any further control of Delta in any manner that is not specifically
endorsed in writing by Delta's board of directors, it will not demand that any
special meeting of Delta's shareholders be held, it will not submit any matter
to be voted upon by the shareholders of Delta that has not been previously
recommended by Delta's board of directors, it will vote in favor of all
nominees for directors, it will vote the Delta shares issued to it pursuant to
this transaction in favor of any matters recommended by Delta's board of
directors relating to the settlement of any and all disputes concerning
Delta's offshore California properties (to the extent required) and it will
generally endeavor to support actions recommended to Delta's shareholders by
Delta's board of directors. Notwithstanding the foregoing, Castle shall have
the right in its sole and absolute discretion to vote in any manner that it
may choose with respect to any transaction, merger or sale of assets that
requires a vote of Delta's shareholders under Colorado law.
9.8 Tax Allocation. The parties agree that the Purchase Price
shall be allocated as set forth on Exhibit B1 for Federal Income Tax purposes.
Each party shall use such allocations in filing Form 8594 (Asset Acquisition
Statement) with the IRS.
ARTICLE 10
TITLE MATTERS
10.1 Access to Title and Other Documents.
(a) After the date hereof, Sellers will make available to Buyers
and to their representatives (such representatives to include employees,
consultants, independent contractors, attorneys and other advisors of Buyers)
for Buyers' copying and/or inspection (at Buyers' cost and expense), at
Sellers' offices during normal business hours the following documents in
Sellers' 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
2000 and years prior for which the applicable statute of
limitations has not expired.
(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 Buyers, and
Sellers make no guaranty or representation as to the accuracy or completeness
of such data, except as otherwise provided in this Agreement.
Sellers shall authorize Buyers and their representatives to consult
with attorneys, abstract companies and other consultants or independent
contractors of Sellers (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 Buyers, and Sellers make no guaranty or
representation as to the accuracy or completeness of such data.
10.2 No Warranty or Representation. At the Closing, Sellers shall
convey to Buyers 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 Sellers
contained in the Assignment. Without limiting Buyers' right to reduce the
Purchase Price in the manner provided in this Article 10, Sellers make 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 Buyers 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 Sellers to Buyers 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 Buyers 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.
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 Buyers can be
made by Buyers and Sellers to allow Buyers 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 Sellers
nor Buyers has no reason to believe they cannot be obtained.
(e) Such Title Defects as Buyers may have waived in writing.
(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 Sellers 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 Buyers or the use and enjoyment of
the Interests.
(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
Buyers.
(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 Sellers.
(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 Sellers.
(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 Sellers which,
subject to and except for Permitted Encumbrances:
(a) Entitles Sellers, 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 Sellers 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
Sellers' 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 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 Sellers' 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"), Buyers
must notify Sellers in writing of any matter that Buyers considers to be a
Title Defect ("Notice of Title Defect"), which notice shall include, (i) a
specific description of the matter Buyers 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)
Buyers' 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, the Buyers
shall be deemed to have waived any Title Defect which the Buyers have not
specifically asserted in their Notice of Title Defect presented before the
Warranty Claim Date.
10.7 Title Failure. Any item that Sellers acknowledges is a Title
Defect but that Sellers are 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 2.3 unless, in Sellers'
reasonable judgment, it is unlikely that material losses, costs, expenses and
liabilities will be experienced with respect to such Title Defect and Sellers
agree to indemnify Buyers with respect thereto.
10.8 Defect Notice; Sellers' Opportunity to Cure. To the extent that
Sellers dispute that any item described in the Notice of Title Defect actually
constitutes a Title Defect or disputes the Title Defect Amount assigned by
Buyers to any such Title Defect ("Contested Defect"), Sellers shall deliver to
Buyers 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 Sellers are willing to cure but which are uncured at Closing, or which
are not waived by Buyers 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 Sellers fail 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 Buyers and the property on which such
Title Defect exists shall not be conveyed to Buyers.
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 four percent (4%) 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 fifteen percent (15%) 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 March 15, 2002, Sellers shall provide Buyers with a
list, and shall make a good faith effort to obtain consent and waivers of any
preferential rights which Sellers know must be obtained prior to Closing and
are not ordinarily obtained after Closing. Buyers shall notify Sellers 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 Sellers 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, Sellers 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, Buyers shall pay for and accept an assignment
covering such Well or Unit and, if the preferential right is exercised after
Closing, Buyers shall be entitled to all proceeds paid for such Well or Unit
by the third party exercising such preferential purchase right. Buyers 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 Sellers harmless from and against any claim or liability
for Buyers' failure to make such conveyance.
ARTICLE 11
ENVIRONMENTAL
11.1 Inspection; Indemnity. Buyers and their authorized
representatives, at Buyers' 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 Buyers shall deem appropriate, subject to the approval of the
operator in the case of non-operated properties. Buyers shall repair any
damages to the Interests resulting from its inspection and shall defend and
hold Sellers 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 Buyers' inspection of the
Interests.
11.2 Environmental Assessment. As part of their inspection of the
Interests, Buyers 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
Buyers' sole judgment to make an environmental assessment of the Interests.
Buyers 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 Sellers unless such disclosure is required by
law. Buyers shall take all steps necessary to ensure that Buyers' authorized
representatives comply with the provisions of this Article 11. If Buyers 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"), Buyers shall notify
Sellers of such circumstances as soon as practicable, but in no event less
than thirty (30) days prior to Closing.
11.3 Environmental Defects If Buyers properly notify Sellers of an
Environmental Defect related to an Interest, Buyers may (i) waive the
Environmental Defect and Close, or (ii) request Sellers to cure the
Environmental Defect. If Buyers asks Sellers to cure an Environmental Defect,
and if the aggregate amount of all such Environmental Defects exceeds four
percent (4%) of the Purchase Price, Sellers have the option (i) to cure the
Environmental Defect, or (ii) to exclude the Interest affected by the
Environmental Defect from this Agreement. If Sellers elect 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 Buyers
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, Sellers will convey to Buyers the Interest affected by the
Environmental Defect and the applicable amount shall be released from escrow
to Sellers. If Sellers elect 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 four
percent (4%) of the Purchase Price and then only for the amount in excess of
such amount.
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 and the Escrow Agent shall return the Exclusivity Deposit
to Buyer.
(b) By either of Buyers or Sellers 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 and the Escrow Agent shall return the
Exclusivity Deposit to Buyer.
(c) By Sellers pursuant to Subsection 1.5 (b) or Section 5.4
whereupon no Party hereto shall be liable to any other Party hereto for
damages of any kind and the Escrow Agent shall return the Exclusivity Deposit
to Buyer.
(d) By Sellers with impunity, if
(i) This Agreement has not been terminated pursuant to
Subsections 12.1 (a), (b) or (c) above,
(ii) Buyers' Conditions to Closing set forth in Article 6
have been materially satisfied,
(iii) Sellers are not otherwise in default of their
obligations hereunder, and
(iv) Closing does not occur within sixty (60) days after
the date on which the SEC informs Delta that it has no
further comments on Delta's proxy materials for the
transaction due solely to Delta's failure to obtain a
quorum for the shareholders' meeting necessary to
approve the transaction under applicable NASDAQ rules,
whereupon Buyers shall pay liquidated damages to Sellers by causing the Escrow
Agent to deliver to Castle the Exclusivity Deposit.
(e) By Sellers with impunity, if
(i) This Agreement has not been terminated pursuant to
Subsections 12.1 (a), (b) (c) or (d) above,
(ii) Buyers' Conditions to Closing set forth in Article 6
have been met,
(iii) Sellers are not otherwise in default of their
obligations hereunder, and
(iv) Buyers either
(A) fail to close the transaction by June 30, 2002
due to
(1) A failure by Delta to timely respond to
SEC comments on Delta's proxy materials for any
reason other than Castle's failure to provide
Delta with all of the information necessary for
Delta to be able to adequately respond to
comments in sufficient time for the SEC to
notify Delta no later than April 30, 2002 that
the SEC has no further comments,
(2) A unilateral determination by Delta that
it no longer wishes to proceed with the
transaction after the PSA is executed by all
necessary parties, or
(3) Any other delay or failure by Buyers,
including their failure to materially satisfy
Sellers' Conditions to Closing as set forth in
Article 7 other than Delta's failure to obtain a
quorum for the shareholders' meeting necessary
to approve the transaction under applicable
NASDAQ rules,
whereupon Buyers shall pay liquidated damages to Sellers by causing the escrow
agent to deliver to Castle the Exclusivity Deposit and by delivering to
Castle an additional Seven Hundred Thousand (700,000) shares of the common
stock of Delta.
(f) By Buyers with impunity if
(i) This Agreement has not been terminated pursuant to
Subsections 12.1 (a), (b) (c), (d) or (e) above,
(ii) Sellers' Conditions to Closing set forth in Article 7
have been materially satisfied,
(iii) Buyers are not otherwise in default of their
obligations hereunder, and
(iv) Sellers either
(A) fail to close the transaction within 10
days after the date on which Delta timely
obtains the affirmative vote of a majority
of Delta's shares present at a
shareholders' meeting called to approve
the transaction, or
(B) fails to materially satisfy Buyer's
Conditions to Closing as set forth in
Article 6,
whereupon the Escrow Agent shall return the Exclusivity Deposit to Buyer and
Castle on behalf of Sellers shall pay to Delta as liquidated damages Seven
Hundred Thousand (700,000) shares of the common stock of Castle or at Castle's
sole option the equivalent value in cash, unless such failure to close is due
solely to judicial restraint caused by ChevronTexaco Inc. or its
agents/affiliates, in which case Sellers shall not be liable for the payment
of any damages to Buyers.
12.2 Return of Documentation. Upon termination of this Agreement,
within thirty (30) days Buyers shall return to Sellers all title, geological
data, reports, contracts, and maps and other information furnished by Sellers
to Buyers 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 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 Delta or
Castle, as decided by the arbitrators; and any costs or
fees incident to enforcing the award, shall to the maximum
extentpermitted 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;
(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) Judgement upon the award may be entered in any court having
jurisdiction over the person or the assets of the Party
owing the judgement 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, Buyers 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.
ARTICLE 15
MISCELLANEOUS
15.1 Fees and Taxes. Except as otherwise specifically provided, all
fees, costs and expense incurred by Buyers or Sellers 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 Buyers shall be borne by Buyers.
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 Buyers and such liability shall not
be subject to proration as provided in Section 2.3.
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:
SELLERS:
CASTLE ENERGY CORPORATION
CASTLE EXPLORATION COMPANY, INC.
CASTLE PIPELINE COMPANY
One Radnor Corporate Center, Xxxxx 000
000 Xxxxxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxxx
Chief Financial Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
CEC, INC.
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx XX
President
Telephone: (000) 000-0000
Facsimile: (000) 0000000
Buyers:
DELTA PETROLEUM CORPORATION
DELTA EXPLORATION COMPANY, INC.
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxxx
Chief Executive 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 Buyers and Sellers.
15.4 Preparation of Agreement. Both Sellers and Buyers 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 Buyers and
Sellers 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 Texas 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 Texas.
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 Parties' 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, Buyers and Sellers
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 Buyers, to accomplish the orderly transfer of the
Interests to Buyers, 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 Sellers and Buyers, then the Parties shall
consult with each other and each shall promptly pay its portion of such
obligation to the obligee.
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 Parties. 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. Buyers shall be subrogated to all rights, actions
and warranties that Sellers may have with respect to Sellers' predecessors-in-
interest as to the Interests.
15.14 Confidentiality. Sellers and Buyers 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 Sellers and Buyers may reveal
such information to its respective accounting, legal and other
representatives, and to Buyers' 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 Parties so that such Parties may
seek a protective order or other appropriate remedy. In addition, if either
Sellers or Buyers 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
Buyers that Sellers possesses or shall possess in the future in its capacity
as a shareholder of Buyers. Notwithstanding anything in this paragraph to the
contrary, neither Sellers nor Buyers 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.
EXECUTED as of the date first above stated, but made effective as of the
Effective Time.
SELLERS:
CASTLE ENERGY CORPORATION
By /s/ Xxxxxxx X. Xxxxxxx, III
Xxxxxxx X. Xxxxxxx, III
Vice President and General Counsel
CASTLE EXPLORATION COMPANY, INC.
By /s/ Xxxxxxx X. Xxxxxxx, III
Xxxxxxx X. Xxxxxxx, III
Vice President and General Counsel
CEC, INC.
By /s/ Xxxxxxx X. Xxxxxxx, III
Xxxxxxx X. Xxxxxxx, III
Vice President and General Counsel
CASTLE PIPELINE COMPANY
By /s/ Xxxxxxx X. Xxxxxxx, III
Xxxxxxx X. Xxxxxxx, III
Vice President and General Counsel
BUYERS:
DELTA PETROLEUM CORPORATION
By /s/ Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx
President and Chief Executive Officer
DELTA EXPLORATION COMPANY, INC.
By /s/ Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx
President and Chief Executive Officer
EXHIBIT "C"
STOCK ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Agreement") is made and entered into effective as
of the December 31, 2001, by and between CASTLE ENERGY CORPORATION, a
corporation organized and existing under the laws of Delaware ("Castle") and
DELTA PETROLEUM CORPORATION, a corporation organized and existing under the
laws of Colorado ("Delta") , and XXXXXX X. XXXXX, ESQ., an individual
licensed and in good standing to practice law in the State of Oklahoma, as
the escrow agent ("Escrow Agent").
RECITALS:
WHEREAS, Castle, Castle Exploration Company, Inc., a corporation
organized and existing under the laws of Pennsylvania, CEC, Inc., a
corporation organized and existing under the laws of Delaware, and Castle
Pipeline Company, a corporation organized and existing under the laws of Texas
(collectively, the "Sellers") and Delta and Delta Exploration Company, Inc., a
corporation organized and existing under the laws of Colorado (collectively,
the "Buyers") have entered into that certain Purchase and Sale Agreement of
even date herewith (the "Purchase and Sale Agreement"); and
WHEREAS, Delta has agreed in the Purchase and Sale Agreement to deposit
into Escrow Seven Hundred Thousand (700,000) shares of the common stock of
Delta; and
WHEREAS, Castle, Delta and the Escrow Agent have entered into this
Agreement pursuant to which the Escrow Agent has agreed to hold the Stock in
escrow.
NOW THEREFORE, for and in consideration of the mutual covenants,
conditions and agreements set forth herein, the parties hereto hereby agree as
follows:
1. The Escrow
(a) Appointment of Escrow Agent. Castle and Delta appoint Escrow
Agent as the escrow agent set forth herein, and Escrow Agent
accepts such appointment.
(b) Escrowed Items Delta shall deliver to Escrow Agent Seven Hundred
Thousand (700,000) restricted shares of the Common Stock of Delta
which are duly authorized, fully paid, and non-assessable and
issued to the order of Castle (the "Escrowed Interest"). The
Escrow Agent shall hold and release the Escrowed Interest pursuant
to the following terms:
A. To Castle upon receipt by Escrow Agent of written
instruction from Delta and Castle that the Purchase and Sale
Agreement has closed.
B. To Castle upon receipt by Escrow Agent of a sworn written
affidavit from Castle that the Purchase and Sale Agreement
was terminated pursuant to Subsection 12.1(d) or (e)
thereof, along with evidence of actual delivery of a copy of
such sworn written affidavit to Delta not less than ten (10)
days prior to its presentation to Escrow Agent.
C. To Delta upon receipt by Escrow Agent of a sworn written
affidavit from Delta that the Purchase and Sale Agreement
has been terminated pursuant to Subsections 12.1 (a), (b),
(c) or (f), along with evidence of actual receipt or
delivery of such sworn written affidavit to Castle not less
than ten (10) days prior to its presentation to Escrow
Agent.
D. Into the registry of the court in accordance with Sections 3
or 5 hereof.
(c) Duties of the Escrow Agent. The Escrowed Interest shall be held by
Escrow Agent in accordance with the terms hereof. Subject to and
in accordance with the terms and conditions hereof, Escrow Agent
agrees that it shall receive, hold and release or distribute the
Escrowed Interest. The Escrow Agent is hereby authorized and
directed to hold the above said property under instructions from
the undersigned, pursuant to the terms, exceptions, provisions and
conditions described herein, which are acceptable to and approved
by the undersigned. Escrow Agent shall give written notification
to both Castle and Delta of all items delivered into or out of
escrow.
(d) Scope of Undertaking. Escrow Agent's duties and responsibilities
shall be purely ministerial and shall be limited to those
expressly set forth in this Agreement. Escrow Agent is not a
principal, participant or beneficiary of any transaction
underlying this Agreement and shall have no duty to inquire beyond
the terms and provisions hereof. Escrow Agent shall have no
responsibility or obligation of any kind in connection with this
Agreement or the Escrowed Interest, and shall not be required to
deliver the same or any part thereof or take any action with
respect to any matters that might arise in connection therewith,
other than to receive, hold, and deliver the Escrow Interest as
herein provided. Without limiting the generality of the
foregoing, it is hereby expressly agreed and stipulated by the
parties hereto that the Escrow Agent shall not be required to
exercise any discretion hereunder and shall have no investment or
management responsibility and, accordingly, shall have no duty to,
or liability for its failure to, provide investment
recommendations or investment advice to the parties or either of
them. Escrow Agent shall not be liable for any error in judgment,
any act or omission, any mistake of law or fact, or for anything
it may do or refrain from doing in connection herewith, except
for, subject to Section 2 below, its own willful misconduct. It
is the intention of the parties hereto that Escrow Agent shall not
be required to use, advance or risk its own funds or otherwise
incur financial liability in the performance of any of its duties
or the exercise of any of its rights and powers hereunder.
2. Reliance; Liability. Escrow Agent shall be responsible for holding and
releasing the Escrow Interest; provided, however, that in no event shall
Escrow Agent be liable for any lost profits, lost savings or other special,
exemplary, consequential or incidental damages and provided, further, that
Escrow Agent shall have no liability for any loss arising from any cause
beyond its control, including, but not limited to, the following: (a) acts of
God, force majeure, including, without limitation, war (whether or not
declared or existing), revolution, insurrection, riot, civil commotion,
accident, fire, explosion, stoppage of labor, strikes and other differences
with employees; (b) any delay, error, omission or default of any mail,
courier, telegraph, cable or wireless agency or operator; or (c) the acts or
edicts of any government or governmental agency or other group or entity
exercising governmental powers. Escrow Agent is not responsible or liable in
any manner whatsoever for the sufficiency, correctness, genuineness or
validity of the subject matter of this Agreement or any part hereof or for the
transaction or transactions requiring or underlying the execution of this
Agreement, the form or execution hereof or for the identity or authority of
any person executing this Agreement or any part hereof or depositing the
Escrowed Interest.
The undersigned agree that the following provisions shall control with
respect to the rights, duties, liabilities, privileges and immunities of the
Escrow Agent:
(a) The Escrow Agent is not a party to, and is not bound by, or
charged with notice of, any agreement out of which this escrow may
arise;
(b) The Escrow Agent acts hereunder as a depository only, and is not
responsible or liable in any manner whatever for the sufficiency,
correctness, genuineness or validity of the subject matter of the
escrow or any person executing or depositing it; and
(c) Castle and Delta do hereby jointly and severally release,
indemnify and save harmless the Escrow Agent from all costs,
charges, claims, demands, damages, losses and expenses resulting
from the compliance in good faith by the Escrow Agent with this
Agreement.
3. Right of Interpleader. Should any controversy arise involving the
parties hereto or any of them or any other person, firm or entity with respect
to this Agreement or the Escrowed Interest, or should a substitute escrow
agent fail to be designated as provided in Section 5 hereof, or if Escrow
Agent should be in doubt as to what action to take, Escrow Agent shall have
the right, but not the obligation, either to (a) withhold delivery of the
Escrowed Interest until the controversy is resolved, the conflicting demands
are withdrawn, or its doubt is resolved, or (b) institute a xxxx of
interpleader in any court of competent jurisdiction to determine the rights of
the parties hereto. Any dispute arising under or relating to this Agreement
shall be referred to binding arbitration in accordance with the terms of the
Purchase and Sale Agreement. Should a xxxx of interpleader be instituted, or
should Escrow Agent be threatened with litigation or become involved in
litigation or binding arbitration in any manner whatsoever in connection with
this Agreement or the Escrowed Interest, the parties agree that Escrow Agent
shall be entitled to receive its attorney's fees and any and all other
disbursements, expenses, losses, costs and damages of Escrow Agent in
connection with or resulting from such threatened or actual litigation or
arbitration prior to any disbursement hereunder.
4. Consultation with Legal Counsel. Escrow Agent may consult with its
counsel or other counsel satisfactory to it concerning any question relating
to its duties or responsibilities hereunder or otherwise in connection
herewith and shall not be liable for any action taken, suffered or omitted by
it in good faith upon the advice of such counsel.
5. Resignation. Escrow Agent may resign hereunder upon 30 days' prior
written notice to Castle and Delta. If the Castle and Delta fail to designate
a substitute escrow agent within 20 days after the giving of such notice,
Escrow Agent may institute a xxxx of interpleader as contemplated by Section 3
hereof. Escrow Agent's sole responsibility after the notice period expires
shall be in accordance with the directions of a final order or judgment of a
court of competent jurisdiction, at which time Escrow Agent's obligations
hereunder shall cease and terminate.
6. Execution of Documents; Further Documentation. Each party hereto
agrees to execute any and all additional documents and/or instruments
necessary to carry out the terms of this Agreement.
7. Conflict With Prior Agreements. If and to the extent that this
Agreement is in conflict with any prior written or oral agreement or
understanding between the parties hereto, the terms of this Agreement shall
prevail. No modification or waiver of the terms of the Agreement shall be
valid unless made in writing signed by all parties.
8. Arbitration. Any dispute arising out of this Agreement, whether for
interpretation or enforcement of its terms, shall be determined and settled by
arbitration in accordance with the Purchase and Sale Agreement.
9. Attorneys' Fees. In the event any of the parties to this Agreement
institutes legal action or arbitration proceedings against any other party to
interpret or enforce this Agreement, or to obtain damages for any alleged
breach hereof, the prevailing party in such action or proceeding shall be
entitled to reasonable attorneys' and experts' fees in addition to all other
recoverable costs and damages.
10. Time. Time is of the essence of this Agreement.
11. Binding. This Agreement shall inure to the benefit of, and shall be
binding upon, the parties hereto, their representatives, successors in
interest and assigns.
12. Assignment. This Agreement shall not be assigned by any party without
the prior written consent of the Castle and Delta, such consent not to be
unreasonably withheld.
13. Severability. Every provision of this Agreement is intended to be
severable. If any term or provision hereof is illegal or invalid for any
reasons whatsoever, such illegality or invalidity shall not affect the
validity or legality of the remainder of this Agreement.
14. Termination. Upon release of all the Escrowed Interest, this
Agreement shall terminate.
15. Notices. All notices required or permitted to be given pursuant to
this Agreement shall be in writing and shall be effective upon personal
delivery or confirmed telefax to the party to whom they are addressed to each
party at the following address:
To Castle:
Castle Energy Corporation
One Radnor Corporate Center, Xxxxx 000
000 Xxxxxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxxx
Chief Financial Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
To Delta:
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
To Escrow Agent:
XXXXXX X. XXXXX, Esq.
0000 Xxxxxxxx
Xxxxxxxx Xxxx, XX 00000
Oklahoma Bar Number 4815
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Any party may change its address for notice by giving notice to the other
party in accordance with this paragraph.
16. No Agency. Castle and Delta mutually agree that Escrow Agent is
acting as an independent principal in the transaction described herein and
shall not be deemed as an agent of Castle or Delta in any capacity.
17. Payment to Escrow Agent. Escrow Agent shall be entitled to a Two
Thousand Dollar ($2,000.00) fee for services rendered hereunder to be paid by
Delta.
18. Choice of Law. This Agreement and the transactions contemplated
hereby shall be construed in accordance with, and governed by, the laws of the
State of Texas 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 Texas.
This Agreement may be executed in multiple counterparts, each of which
will be an original, but all of which will constitute one instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date first above written.
Castle:
CASTLE ENERGY CORPORATION
By /s/ Xxxxxxx X. Xxxxxxx, III
Xxxxxxx X. Xxxxxxx, III
Vice President and General Counsel
Delta:
DELTA PETROLEUM CORPORATION
By /s/ Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx
President and Chief Executive Officer
ESCROW AGENT:
By:
Xxxxxx X. Xxxxx, Esq.
EXHIBIT "L"
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT ("Agreement"), dated as of
______________, 2002, is executed and delivered by and between Delta Petroleum
Corporation, a Colorado corporation (the "Company"), and Castle Energy
Corporation, a Delaware corporation ("Castle").
W I T N E S S E T H:
WHEREAS, pursuant to the terms of the Purchase and Sale Agreement dated
December 31, 2001 between Castle and its subsidiaries, Castle Exploration
Company, Inc., CEC, Inc., and Castle Pipeline Company, as "Sellers", and the
Company and its subsidiary, Delta Exploration Company, Inc., as "Buyers"(the
"Purchase and Sale Agreement"), Castle will acquire shares of the Company's
Common Stock (the "Registrable Securities"); and
WHEREAS, the Registrable Securities are being issued and delivered by the
Company in reliance upon the exemption from the registration provisions of the
United States Securities Act of 1933, as amended (the "Securities Act"), for
non-public offerings pursuant to Sections 4(2) and 4(6) of the Securities Act
and Regulation D under the Securities Act; and
WHEREAS, the terms and conditions of the Purchase and Sale Agreement
provide for the execution and delivery of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereby agree as
follows:
1. Definitions. As used in this Agreement, the capitalized terms set forth
below shall have the following meanings:
"Affiliate" shall mean, as to a specified Person, a Person that
directly, or indirectly through one or more intermediaries, controls or
is controlled by, or is under common control with, the Persons
specified.
"Company" shall have the meaning set forth in the preamble, and shall
also include the Company's successors.
"Exchange Act" shall mean the United States Securities Exchange Act of
1934, as amended.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Persons" shall mean any individual, sole proprietorship, partnership,
corporation, association, joint venture, trust, unincorporated entity or
other entity, or the government of any country or sovereign state, or of
any state, province, municipality or other political subdivision
thereof.
"Prospectus" shall mean the Prospectus included in any Registration
Statement including any preliminary Prospectus, and any such Prospectus
as amended or supplemented by any Prospectus supplement, including
post-effective amendments, in each case including all material
incorporated or deemed to be incorporated by reference therein.
"Registrable Securities" shall have the meaning set forth in the
preamble; provided, however, that any shares of Common Stock shall cease
to be Registrable Securities when they shall have been included in an
effective Registration Statement or sold pursuant to Rule 144.
"Registration Expenses" shall mean any and all expenses incident to the
performance by the Company of its obligations under this Agreement,
including, but not limited to: (i) all SEC and NASD registration and
filing fees; (ii) all fees and expenses incurred in connection with
compliance with state securities or blue sky laws; (iii) all expenses of
printing and distributing any Registration Statement, any Prospectus,
and any amendments or supplement thereto; and (iv) the fees and
disbursements of counsel for the Company and of the independent public
accountants of the Company.
"Registration Statement" means any registration statement of the
Company, which covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including a Prospectus, amendments and
supplements to such registration statement, including post-effective
amendments, all exhibits and all material incorporated by reference or
deemed to be incorporated by reference in such registration statement.
"Rule 144" means Rule 144 of the General Rules and Regulations
promulgated under the Securities Act or any successor rule.
"SEC" shall mean the United States Securities and Exchange Commission.
"Securities Act" shall have the meaning set forth in the preamble.
"Underwriter" shall have the meaning set forth in Section 2(11) of the
Securities Act who signs an underwriting agreement with the Company for
an underwritten offering of any of the Company's equity securities.
2. Registration.
(a) The Company agrees that thirty (30) days following the date of
Closing of the Purchase and Sale Agreement, the Company shall file
a registration statement, and shall cause such Registration
Statement to become effective with respect to such Registrable
Securities in accordance with the registration procedure set forth
in Section 4 hereof.
(b) In the event that the registration is pursuant to a
"firm-commitment" underwriting, Castle shall (together with the
Company and any other holders of Common Stock distributing their
securities through such underwriting) enter into an underwriting
agreement in customary form with underwriter or underwriters
selected for underwriting by the Company.
3. Holdback Agreements. If any of Castle's Registrable Securities are
covered by a Registration Statement filed pursuant to this Agreement, if
requested of all holders of registrable shares of the Common Stock of
the Company covered by such Registration Statement by the managing
underwriters in an underwritten offering (if timely notified in writing
by the Company or the managing underwriters), Castle agrees not to
effect any public sale or distribution of securities of the Company of
any class included in such Registration Statement, including a sale
pursuant to Rule 144 (except as a part of such underwritten offering) to
the same extent as has been requested by such other holders, during the
10-day period prior to, and the 180-day period beginning on, the
effective date of any underwritten offering made pursuant to such
Registration Statement.
4. Expenses and Procedures. This Section 4 shall be applicable to a
registration of Registrable Securities pursuant to this Agreement.
(a) Expenses of Registration. All Registration Expenses (exclusive of
underwriting discounts and commissions) shall be borne by the
Company. Castle shall bear all underwriting discounts, selling
commissions, sales concessions and similar expenses applicable to
any sale of the Registrable Securities sold by Castle.
(b) Registration Procedures. In the case of the registration,
qualification or compliance effected by the Company pursuant to
this Agreement, the Company will keep Castle advised as to the
initiation of registration, qualification and compliance and as to
the completion thereof. At its expense, the Company will furnish
such number of Prospectuses and other documents incident thereto
as Castle or underwriters from time to time may reasonably
request.
(c) Information. The Company may require each seller of Registrable
Securities as to which any registration is being effected to
furnish such information regarding the distribution of such
Registrable Securities as the Company may from time to time
reasonably request.
(d) Delay or Suspension. Notwithstanding anything herein to the
contrary, the Company may, at any time, suspend the effectiveness
of any Registration Statement for a period of up to 30 consecutive
days or 60 days in the aggregate in any calendar year, as
appropriate (a "Suspension Period"), by giving notice to Castle to
be included in the Registration Statement, if the Company shall
have determined, after consultation with its counsel, that the
Company is required to disclose any material corporate development
which the Company determines could reasonably be expected to have
a material effect on the Company. Castle agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from
the Company of a Suspension Period, Castle shall forthwith
discontinue disposition of such Registrable Securities covered by
such Registration Statement or Prospectus until Castle (i) is
advised in writing by the Company that the use of the applicable
Prospectus may be resumed, (ii) has received copies of a
supplemental or amended prospectus, if applicable, and (iii) has
received copies of any additional or supplemental filings which
are incorporated or deemed to be incorporated by reference in such
Prospectus. The Company shall prepare, file and furnish to Castle
immediately upon the expiration of any Suspension Period,
appropriate supplements or amendments, if applicable, to the
Prospectus and appropriate documents, if applicable, incorporated
by reference in the Registration Statement. The Company agrees to
use its best efforts to cause any Suspension Period to be
terminated as promptly as possible.
(e) Blue Sky. The Company will, as expeditiously as possible, use its
best efforts to register or qualify the Registrable Securities
covered by a Registration Statement under the securities or blue
sky laws of such jurisdiction as Castle or, in the case of an
underwritten public offering, the managing underwriter shall
reasonably request, provided that the Company shall not be
required in connection therewith or as a condition thereto to
qualify to do business in any jurisdiction where it is not so
qualified or to take any action which would subject it to taxation
or service of process in any jurisdiction where it is not
otherwise subject to such taxation or service of process.
(f) Notification of Material Events. The Company will, as
expeditiously as possible, immediately notify Castle, at any time
when a prospectus relating thereto is required to be delivered
under the Securities Act, of the happening of any event as a
result of which the prospectus contained in such Registration
Statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing and, as
expeditiously as possible, amend or supplement such prospectus to
eliminate the untrue statement or the omission.
(g) Opinions. The Company will use its best efforts (if the offering
is underwritten) to furnish, at the request of Castle, on the date
that Registrable Securities are delivered to the underwriters for
sale pursuant to such registration: (i) an opinion dated such date
of counsel representing the Company for the purposes of such
registration, addressed to the Underwriter(s), stating that such
Registration Statement has become effective under the Securities
Act and that (A) to the best knowledge of such counsel, no stop
order suspending the effectiveness thereof has been issued and no
proceedings for that purpose have been instituted or are pending
or contemplated under the Securities Act, (B) the Registration
Statement, the related prospectus, and each amendment or
supplement thereof, comply as to form in all material respects
with the requirements of the Securities Act (except that such
counsel need express no opinion as to financial statements and
financial and statistical data contained therein) and (C) to such
other effects as may reasonably be requested by counsel for the
Underwriter(s), and (ii) a letter dated such date from the
independent public accountants retained by the Company, addressed
to the Underwriter(s), stating that they are independent public
accountants within the meaning of the Securities Act and that, in
the opinion of such accountants, the financial statements of the
Company included in the Registration Statement or the Prospectus,
or any amendment or supplement thereof, comply as to form in all
material respects with the applicable accounting requirements of
the Securities Act, and such letter shall additionally cover such
other financial matters (including information as to the period
ending no more than five business days prior to the date of such
letter) with respect to the registration in respect of which such
letter is being given as such underwriters or Castle may
reasonably request.
5. Certification by Selling Shareholders. Castle shall review the
Registration Statement prepared and filed in connection with any such
registration and shall represent and warrant to the Underwriter, if any,
and the Company that Castle does not know of an untrue statement of a
material fact concerning Castle included in the Registration Statement
or the omission from the Registration Statement of any material fact
concerning Castle required to be stated therein or necessary to make the
statements therein not misleading.
6. Indemnification and Contribution.
(a) In connection with any Registration Statement, the Company agrees
to indemnify and hold harmless Castle, each Affiliate of Castle,
the directors, partners, officers, employees and agents of Castle
and each person who controls Castle, if any, within the meaning of
either the Securities Act or the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to which
they or any of them may become subject under the Act, the Exchange
Act or other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement as
originally filed or in any amendment thereof, or in any
preliminary Prospectus or Prospectus, or in any amendment thereof
or supplement thereto, or arise out of or are based upon the
omission or allege omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action;
provided, however, that (i) the Company will not be liable in any
case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of Castle
specifically for inclusion therein, (ii) the Company will not be
liable to any indemnified party under this indemnity agreement
with respect to any Registration Statement or Prospectus to the
extent that any such loss, claim, damage or liability of such
indemnified party results from the use of the Prospectus during a
period when the use of the Prospectus has been suspended in
accordance with Section 4(d) hereof, provided that the indemnified
party received prior notice of such suspension, which notice shall
be deemed to have been received by the indemnified party within 48
hours after the giving thereof; and (iii) the Company shall not be
liable to any indemnified party with respect to any preliminary
Prospectus to the extent that any such loss, claim, damage or
liability of such indemnified party results from the fact that
such indemnified party sold Registrable Securities to a person as
to whom there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the Prospectus or of the
Prospectus as then amended or supplemented in any case where such
delivery is required by the Securities Act, if the loss, claim,
damage or liability of such indemnified party results from an
untrue statement or omission of a material fact contained in the
preliminary Prospectus which was corrected in the Prospectus or in
the Prospectus as then amended or supplemented. This indemnity
agreement will be in addition to any liability which the Company
may otherwise have. The Company also agrees to indemnify and
provide contribution to each person who is an Underwriter and who
signs an underwriting agreement and/or a selected-dealer agreement
with respect to the Registrable Securities, their officers and
directors, and each person who controls each such Underwriter, on
substantially the same basis as that of the indemnification of and
contribution to Castle provided in this Section 6(a).
(b) By its participation in a Registration Statement, Castle shall be
deemed have agreed to indemnify and hold harmless (i) the Company,
(ii) each of its directors, (iii) each of its officers who signs
such Registration Statement and (iv) each person who controls the
Company within the meaning of either the Act or the Exchange Act
to the same extent as the foregoing indemnity from the Company to
each such Holder, but only with respect to written information
relating to Castle furnished to the Company by or on behalf of
Castle specifically for inclusion in the documents referred to in
the foregoing indemnity. Castle shall also be deemed to have
agreed to indemnify and contribute to each Underwriter who signs
an underwriting agreement and/or a selected-dealer agreement in
connection with such Registration Statement, their officers and
directors, and each person who controls each such Underwriter, on
substantially the same basis as that of the indemnification of and
contribution to the Company provided in this Section 6(b).
Anything in this Agreement contained to the contrary
notwithstanding, the liability of Castle for indemnification or
contribution hereunder shall be limited to the amount of proceeds
received by Castle in the offering giving rise to such liability.
(c) Promptly after receipt by an indemnified party under this Section
6 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against
the indemnifying party under this Section 6, notify the
indemnifying party in writing of the commencement thereof; but the
failure so to promptly notify the indemnifying party will not
relieve the indemnifying party from liability under Section 6(a)
or 6(b) hereof unless and to the extent that it is materially
prejudiced thereby. The indemnifying party shall be entitled to
appoint counsel of the indemnifying party's choice at the
indemnifying party's expense to represent the indemnified party in
any action for which indemnification is sought (in which case the
indemnifying party shall not thereafter be responsible for the
fees and expenses of any separate counsel retained by the
indemnified party or parties except as set forth below): provided,
however, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's
election to appoint counsel to represent the indemnified party in
an action, the indemnified party shall have the right to employ
separate counsel (including local counsel), and the indemnifying
party shall bear the reasonable fees, costs and expenses of such
separate counsel (and local counsel) if (i) the use of counsel
chosen by the indemnifying party to represent the indemnified
party would present such counsel with a conflict of interest, (ii)
the actual or potential defendants in, or targets of, any such
action included both the indemnified party and the indemnifying
party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to
those available to the indemnifying party, (iii) the indemnifying
party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a
reasonable time after notice of the institution or such action or
(iv) the indemnifying party shall authorize the indemnified party
to employ separate counsel at the expense of the indemnifying
party. An indemnified party shall not settle or compromise any
action for which it seeks indemnification or contribution
hereunder without the prior written consent of the indemnifying
party, which consent shall not be unreasonably withheld. An
indemnifying party will not, without the prior written consent of
the indemnified parties, settle or compromise or consent to the
entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether
or not the indemnified parties or actual or potential parties to
such claim or action) unless such settlement, compromise or
consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit
or proceeding.
(d) The provisions of this Section 6 shall remain in full force and
effect regardless of any investigation made by or on behalf of
Castle or the Company or any other persons who are entitled to
indemnification pursuant to he provisions of this Section 6, and
shall survive the sale by Castle of Registrable Securities.
7. Rule 144. As long as the Company is subject to the reporting
requirements of Section 13 or 15 of the Exchange Act, the Company shall
use commercially reasonable efforts to promptly file the reports
required to be filed by its pursuant to Section 13(a) or 15(d) of the
Exchange Act and the rules and regulations adopted by the SEC
thereunder. If the Company is at any time not required to the such
reports, it shall promptly make publicly available such information as
is necessary to permit sales pursuant to Rule 144. Upon the request of
Castle, the Company shall deliver to Castle a written statement as to
whether it has complied with such requirements.
8. Amendments. This Agreement may not be amended, modified or
supplemented, and waivers of or consents to departures from the
provisions of this Agreement may not be given, unless it would not have
an adverse effect upon the rights of any of Castle and the Company has
obtained the consent of Castle.
9. Successors and Assigns. This Agreement shall inure to the benefit of,
and be binding upon, the Company, Castle and their respective
successors, assigns and transferees.
10. Third Party Beneficiaries. Castle from time to time shall be a third
party beneficiary of the agreements of the Company contained herein.
11. Headings. The headings which are contained in this Agreement are for
the sole purpose of convenience of reference, and shall not limit or
otherwise affect the interpretation of any of the provisions hereof.
12. Governing Law. This Agreement shall be governed by the laws of the
State of Delaware applicable to contracts made and to be wholly
performed therein.
13. Notices. All notices and other communications hereunder shall be in
writing, and shall be made by hand delivery, registered first-class
mail, telecopier or any courier providing overnight delivery, at the
addresses set forth for notices in the Purchase and Sale Agreement. All
such notices and other communications shall be deemed to have been duly
given upon receipt.
14. Entire Agreement. This Agreement sets forth the entire agreement among
the parties with respect to the subject matter hereof.
15. Severability. In the event that any one or more of the provisions of
this Agreement, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every
other respect and of the remaining provisions of this Agreement shall
not be in any way impaired or affected thereby.
16. Interpretation. As used in this Agreement, unless the context otherwise
requires: words describing the singular number shall include the plural
and vice versa; words denoting any gender shall include all genders;
words denoting natural persons shall include corporations, partnerships
and other entities, and vice versa; and the words "hereof", "herein",
and "hereunder", and words of similar import, shall refer to this
Agreement as a whole, and not to any particular provision of this
Agreement.
17. Waiver. The failure of the Company or Castle to at any time enforce any
of the provisions of this Agreement shall not be deemed or construed to
be a waiver of any such provision, nor to in any way affect the validity
of this Agreement or any provision hereof or the right of the Company or
Castle to thereafter enforce each and every provision of this Agreement.
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this
Agreement as of the date above written:
"Company"
DELTA PETROLEUM CORPORATION
By
Xxxxx X. Xxxxxx
President
"Castle"
CASTLE ENERGY CORPORATION
By
Xxxxxxx X. Xxxxxxx, III
Vice President and General Counsel
EXHIBIT "M"
PROMISSORY NOTE
Date: __________________
Principal Amount: __________________ U S Dollars (US$ ____________.00)
Promise to Pay. For value received, the undersigned Delta Petroleum
Corporation, a Colorado corporation ("Delta"), agrees to the terms of this
Note and on or before Two Hundred Seventy (270) days from the date hereof (the
"Maturity Date") promises to pay to the order of Castle Energy Corporation
(the "Payee") either by wire transfer or other immediately available funds to
the account or accounts designated by the Payees, the Principal Amount of
this Note together with interest at the rate of eight percent (8%), per annum
due according to the payment terms stated in this Note. Interest on this Note
is payable at the Maturity Date, or the date of prepayment, if any, in arrears
and is calculated on the actual number of days elapsed on a basis of a 360 day
year unless otherwise indicated above. For purposes of computing interest and
determining the date principal and interest payments are received, all
payments will be deemed made only when received in collected funds. Payments
are applied first to accrued and unpaid interest and other charges, and then
to unpaid Principal Amount. In this Note, "Delta" includes any party liable
under this Note, including endorsers, co-makers, guarantors and otherwise, and
"Payee" includes all subsequent holders.
Purchase and Sale Agreement. All parties signing below acknowledge receiving a
completed copy of this Note and related documents, including that certain
Purchase and Sale Agreement dated December 31, 2001 between and among Payee,
Castle Exploration Company, Inc., a corporation organized and existing under
the laws of Pennsylvania, CEC, Inc., a corporation organized and existing
under the laws of Delaware, and Castle Pipeline Company, a corporation
organized and existing under the laws of Texas (collectively, the "Sellers")
and Delta and Delta Exploration Company, Inc., a corporation organized and
existing under the laws of Colorado (collectively, the "Buyers") (the
"Purchase and Sale Agreement") which contains the complete and entire
agreement between Payees and any party liable for payment under this Note.
Prepayment. Except as otherwise provided in this Note, Delta shall have the
right to prepay all or any part of principal due under this Note at any time
without penalty.
Acceleration. At option of Payee, the unpaid balance of this Note and all
other obligations of Delta to Payee, whether direct or indirect, absolute or
contingent, now existing or later arising, shall become immediately due and
payable on demand, if a receiver is appointed over all or part of any Delta's
property, or Delta makes an assignment for the benefit of creditors, files for
relief under any bankruptcy or insolvency laws, or becomes subject to an
involuntary proceeding under such laws, or if an interest payment is not made
hereunder and such failure is not cured within 30 days. Any interest amount
not paid when due shall earn interest at twelve percent (12%) per annum on the
full amount of the Loan until paid.
Additional Provisions. No waiver by Payee of any payment or other right under
this Note or any related agreement or documentation shall operate as a waiver
of any other payment or right. Delta waives presentment, notice of
acceleration, notice of dishonor and protest and consent to substitutions,
releases and failure to perfect as to collateral, if any, and to additions or
releases of any debtor. This Note and the obligations evidenced by it are to
be construed and governed by the laws of Texas. No variation, condition,
modification, change or amendment to this Note or related documents shall be
binding unless in writing and signed by all parties. No legal relationship is
created by the execution of this Note and related documents except that of
debtor and creditor or as stated in writing. Delta agrees to pay reasonable
cost of enforcing this Note and to pay reasonable attorney's fees incurred by
Payee in such enforcement.
DELTA:
Delta Petroleum Corporation
By:
Xxxxx X. Xxxxxx
President
