PURCHASE AND SALE AGREEMENT
AMONG
GULFTEX OPERATING, INC.
and
TD ENERGY SERVICES, INC.
AS SELLERS
AND
WESTSIDE ENERGY CORPORATION
AS BUYER
SEPTEMBER 25, 2007
Table Of Contents
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PAGE
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ARTICLE I. DEFINITIONS AND INTERPRETATION 1
1.1 Defined Terms. 1
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1.2 References. 1
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1.3 Articles and Sections. 1
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1.4 Number and Gender. 2
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ARTICLE II. PURCHASE AND SALE 2
2.1 Purchase and Sale. 2
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2.2 Excluded Assets. 4
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2.3 Consideration. 6
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2.4 Assumption of Obligations. 8
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2.5 Retained Liabilities. 9
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2.6 Possession; Risk of Loss. 10
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2.7 Allocation of Adjusted Consideration. 10
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2.8 Restricted Securities. 11
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ARTICLE III. REPRESENTATIONS AND WARRANTIES 11
3.1 Representations and Warranties of Sellers. 11
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3.2 Restricted Shares. 16
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3.3 Accredited Investor; Purchase Entirely For Own Account. 17
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3.4 Disclosure of Information. 17
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3.5 Investment Experience. 17
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3.6 General Solicitation. 18
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3.7 Reliance. 18
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3.8 Representations and Warranties of Buyer. 18
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3.9 Disclaimers. 20
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3.10 AMEX Application 21
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ARTICLE IV. ACCESS; DUE DILIGENCE 21
4.1 Access to Records. 21
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4.2 Operation and Environmental Assessment. 21
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4.3 Defects, Environmental Conditions and Related Adjustments. 21
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ARTICLE V. OTHER MATTERS PRIOR TO CLOSING 23
5.1 Operations. 23
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5.2 [Intentionally Omitted] 24
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5.3 Imbalances and Other Matters. 24
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5.4 Publicity. 25
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5.5 Compliance with Conditions. 25
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5.6 Maintenance of Existence. 25
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5.7 Mutual Assurances. 25
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5.8 Notification of Certain Matters. 25
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5.9 Designation as Operator. 26
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5.10 Advances. 26
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ARTICLE VI. CONDITIONS; TERMINATION; REMEDIES 26
6.1 Conditions Precedent to Sellers' Obligation to Close. 26
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6.2 Conditions Precedent to Buyer's Obligation to Close. 27
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6.3 Termination. 28
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6.4 Remedies. 28
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6.5 Conveyance of Interests. 29
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ARTICLE VII. CLOSING 29
7.1 Closing. 29
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7.2 Preliminary Settlement Statement. 29
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7.3 Actions at Closing. 29
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7.4 Records. 30
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ARTICLE VIII. POST CLOSING MATTERS 31
8.1 Settlement Statement. 31
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8.2 Further Cooperation. 31
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8.3 Undisbursed Revenues and Payment of Vendor Claims. 31
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8.4 Holdback. 32
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ARTICLE IX. SURVIVAL; INDEMNIFICATION 32
9.1 Survival. 32
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9.2 Indemnity as Sole Remedy. 32
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9.3 Indemnities of Buyer. 32
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9.4 Indemnities of Sellers. 33
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9.5 Assertion of Claims; Notices; Defense; Settlement. 33
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9.6 Limitation on Damages. 34
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9.7 Limitation on Reliance. 34
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ARTICLE X. MISCELLANEOUS 34
10.1 Exhibits. 35
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10.2 Expenses. 35
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10.3 Proration of Taxes. 35
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10.4 Assignment. 35
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10.5 Notices. 36
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10.6 ENTIRE AGREEMENT; CONFLICTS. 37
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10.7 Amendment. 37
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10.8 Waiver; Rights Cumulative. 37
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10.9 GOVERNING LAW; CONSENT TO JURISDICTION. 38
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10.10 Severability. 38
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10.11 Arbitration. 38
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10.12 Counterparts. 39
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SCHEDULES
Schedule 1.1 Defined Terms
Schedule 3.1(d) Claims and Litigation - Sellers
Schedule 3.1(e) Preferential Purchase Rights; Required Third Person
Consents to Assignment
Schedule 3.1(f) Required Governmental Consents - Sellers
Schedule 3.1(g) Leases Excluded From Representation
Schedule 3.1(i) AMIs, "Payout", Reversion/Conversion, and Similar
Provisions; Tax Partnerships
Schedule 3.1(k) Xxxxx to be Plugged and Abandoned
Schedule 3.1(m) Imbalances
Schedule 3.1(n) Commitments for Expenditures
Schedule 3.1(r) Insurance Coverage
Schedule 3.2(g) Required Governmental Consents - Buyer
EXHIBITS
Exhibit A Leases
Exhibit B Xxxxx; Working Interests and Net Revenue Interests;
Allocated Values
Exhibit C Real Property Interests
Exhibit D Personal Property
Exhibit E Contracts
Exhibit F Permits; Transferable Permits
Exhibit G Form of Assignment, Xxxx of Sale, and Conveyance
Exhibit H Contract with Xxxxx Xxxx
Exhibit I Contract with Xxx Xxxxxxxxx
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ASSET PURCHASE AND SALE AGREEMENT
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THIS ASSET PURCHASE AND SALE AGREEMENT ("Agreement") is executed as of this
25th day of September 2007, by GULFTEX OPERATING, INC., a Texas corporation
("Gulftex") and TD Energy Services, Inc., a Texas corporation ("TDE") (Gulftex
and TDE are each a "Seller" and collectively "Sellers") and WESTSIDE ENERGY
CORPORATION, a Nevada corporation, or its designated affiliate ("Buyer").
RECITALS
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WHEREAS, Sellers are the owners of certain oil and gas properties and
assets located in the State of Texas described more particularly herein;
WHEREAS, Sellers desire to sell and convey, and Buyer desires to purchase and
pay for, all of such oil and gas properties and assets on the terms set forth
herein.
NOW, THEREFORE, for and 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, Sellers and Buyer agree as follows:
ARTICLE I.
DEFINITIONS AND INTERPRETATION
1.1 Defined Terms.
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In addition to the terms defined in the introductory paragraph and the
Recitals of this Agreement, for purposes hereof, the capitalized expressions and
terms set forth in Schedule 1.1 shall have the meanings set forth therein,
unless expressly indicated otherwise. Other terms may be defined elsewhere in
this Agreement and shall, for purposes hereof, have the meanings so specified,
unless expressly indicated otherwise.
1.2 References.
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The words "hereby," "herein," "hereinabove,""hereinafter," "hereinbelow,"
"hereof," "hereto," "hereunder," and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
article, section, or provision of this Agreement. References in this Agreement
to articles, sections, exhibits, or schedules are to such articles, sections,
exhibits, or schedules of this Agreement unless otherwise specified.
1.3 Articles and Sections.
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This Agreement, for convenience only, has been divided into articles and
sections. The rights and other legal relations of the parties hereto shall be
determined from this Agreement as an entirety and without regard to the
aforesaid division into articles and sections and without regard to headings
prefixed to such articles and sections.
1.4 Number and Gender.
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Whenever the context requires, reference herein made to a single number shall
be understood to include the plural; and likewise, the plural shall be
understood to include the singular. Words denoting sex shall be construed to
include the masculine, feminine, and neuter, when such construction is
appropriate; and specific enumeration shall not exclude the general but shall be
construed as cumulative. Definitions of terms defined in the singular or plural
shall be equally applicable to the plural or singular, as applicable, unless
otherwise indicated.
ARTICLE II.
PURCHASE AND SALE
1.5 Purchase and Sale.
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Subject to the terms hereof, Sellers agree to sell and convey to Buyer, and
Buyer agrees to purchase from Sellers and pay for, the following properties and
assets (collectively, the "Assets"):
(a) the undivided Working Interests, associated Net Revenue Interests, and
other interests set forth on Exhibit B, together with any and all other rights,
titles, and interests of Sellers (including in each case, without limitation,
fee mineral interests, leasehold interests, royalty interests, overriding
royalty interests, production payments, net profits interests, carried
interests, reversionary interests, possibilities of reverter, and conversion
rights and options) in, to, under, or derived from (i) the oil and gas leases
described more particularly on Exhibit A (which is in two parts, Exhibit A-1 and
A-2) and the leasehold estates created thereby, as to all lands and depths
covered thereby or the applicable part or portion thereof if specifically
limited in depth and/or areal extent, or otherwise, in Exhibit A (collectively,
the "Leases"), (ii) the lands covered by the Leases or otherwise described on
Exhibit A, (iii) all units created by the pooling, unitization, and
communitization agreements in effect with respect to the Leases and the lands
covered thereby or otherwise described on Exhibit A, and (iv) the oil and gas
leases and lands included in any units with which the Leases or the lands
covered thereby or otherwise described on Exhibit A may have been pooled,
unitized, or communitized, and all other rights, interests, privileges,
benefits, and powers of any kind or character conferred upon Sellers as the
owner of any of such interests;
(b) the undivided Working Interests and the associated Net Revenue Interests
set forth in Exhibit B, together with any and all other rights, titles, and
interests of Sellers, in and to the xxxxx for the production of Hydrocarbons
that are located on the Leases or on other leases or lands with which the Leases
or the lands covered thereby or otherwise described on Exhibit A may have been
pooled, unitized, or communitized, also described more particularly on Exhibit_B
(collectively, the "Xxxxx");
(c) all of Sellers' rights, titles, and interests in and to all crude oil,
natural gas, condensate, distillate, natural gasoline, natural gas liquids,
plant products, refined petroleum products, other liquid or gaseous hydrocarbons
(including, without limitation, coalbed methane), sulphur, other gases
(including, without limitation, hydrogen and carbon dioxide), and every other
mineral or substance, or any of them, the right to explore for which, or an
interest in which, are granted pursuant to the Leases or the other interests
described herein ("Hydrocarbons") (i) produced from or allocable to the
interests of a Seller described in clauses (a) and (b) of this Section 2.1 and
existing in pipelines, storage tanks, or other processing or storage facilities
upstream of the delivery points to the relevant purchasers as of the Effective
Time, and (ii) produced from or allocable to such interests of Sellers from and
after the Effective Time;
(d) all of Sellers' rights, titles, and interests in and to all fee surface
interests in land, surface leases, easements, rights-of-way, servitudes,
licenses, franchises, road, railroad, and other surface use permits or
agreements, and similar rights and interests (if any) located on the lands
covered by the Leases or otherwise described on Exhibit A or on any units with
which the Leases or the lands covered thereby or otherwise described on Exhibit
A may have been pooled, unitized, or communitized, that are located on the Lands
or that otherwise relate to, are used in connection with or were obtained
for use in connection with the interests of a Seller described in clauses (a)
and (b) of this Section 2.1, described more particularly on Exhibit C
(collectively, the "Real Property Interests");
(e) all of Sellers' rights, titles, and interests in and to all equipment,
machinery, fixtures, inventory, improvements, and other personal, mixed, or
movable property, located on or off the lands covered by the Leases or otherwise
described on Exhibit A or with which the Leases or the lands covered
thereby or otherwise described on Exhibit A have been pooled, unitized, or
communitized, to the extent used primarily and directly in connection with or
attributable to the interests of a Seller described in clauses (a) and (b) of
this Section 2.1 (except for the Gathering Assets and any such personal property
leased from third Persons), including, without limitation: water xxxxx;
saltwater disposal xxxxx and facilities; injection xxxxx and facilities; well
equipment; casing; rods; tanks and tank batteries; boilers; tubing; pumps;
pumping units and engines; platforms; Christmas trees; derricks; production
facilities (whether surface or sub-sea); compressors and compression equipment;
dehydration units and facilities; heater-treaters; processing, fractionation,
treatment, and separation plants and facilities; testing and sampling equipment;
sulfur recovery units and facilities; valves; gauges; meters; generators;
motors; gun barrels; flow lines; water lines; gas lines; gathering lines,
laterals and trunk lines, and other pipe lines; gas systems (for gathering,
treatment, and compression); chemicals; solutions; water systems (for treatment,
disposal, and injection); power plants; poles; lines; transformers; starters and
controllers; machine shops; tools; storage yards and equipment, materials, and
supplies stored therein, to the extent charged or reasonably chargeable to the
interests of a Seller described in clauses (a) and (b) of this Section 2.1;
vehicles; trailers; buildings and camps; office furnishings and equipment;
telegraph, telephone, remote telemetry, and other communication systems; loading
docks, loading racks, and shipping facilities; spare parts; and any and all
additions or accessions to, substitutions for, and replacements of any of the
foregoing, wherever located, together with all attachments, components, parts,
equipment, and accessories installed thereon or affixed thereto, all as
described more particularly on Exhibit D (collectively, the "Personal
Property");
(f) all fees, rentals, proceeds, payments, revenues, and other rights and
economic benefits of every kind and character accruing or payable to the owners
of the Assets that are attributable to the period from and after the Effective
Time;
(g) all of Sellers' rights, titles, and interests in and to all Contracts,
the transfer of which is not prohibited or restricted by a preferential right to
purchase, required consent to assignment, right of first refusal, right of
first offer, or similar provision or as to which the required waivers or
consents have been obtained, or the appropriate time period for asserting such
rights has expired, in either case as of the Closing Date (collectively, the
"Transferred Contracts");
(h) all Permits that are transferable by Sellers to Buyer, described more
particularly on Exhibit F;
(i) all of Sellers' rights, titles, and interests in and to all intangible
rights, inchoate rights, transferable rights under warranties made by prior
owners, manufacturers, vendors, and third Persons, and rights accruing under
applicable statutes of limitation or prescription, insofar only as the foregoing
rights and interests relate or are attributable to the items listed in this
Section 2.1, and do not constitute Excluded Assets, but including, without
limitation, all Claims of Sellers with respect to underproduction accounts or
credits pertaining to Imbalances in existence as of the Effective Time
(collectively, "Intangible Rights");
(j) all files, records (including, without limitation, land and title
records, plats, surveys, abstracts of title, title insurance policies, title
opinions, and title curative, lease, contract, division order, marketing,
correspondence, operations, environmental, insurance, production, accounting,
regulatory, and facility and well records and files), and other information that
relate in any way to any of the items listed in this Section 2.1, are in the
possession of a Seller, and the disclosure and transfer of which is not
prohibited by confidentiality or other contractual arrangements in existence on
the Closing Date (collectively, the "Records"); and
(k) all of Sellers' rights, titles, and interests in and to all maps, logs,
geological, geophysical, reserve engineering, and other scientific and technical
information, reports, and data (including, without limitation, conventional
and 3-D seismic data) that relate in any way to the items listed in this Section
2.1, are owned by a Seller, do not constitute Excluded Assets, and the
disclosure and transfer of which is not prohibited by confidentiality or other
contractual arrangements in existence on the Closing Date (collectively, the
"Transferable Data"); LESS AND EXCEPT the Excluded Assets. The conveyance
of the Assets shall be effective as of the Effective Time, except for the
assumption by Buyer of certain Liabilities associated with the Assets that
are provided, in Section 2.4, to be assumed as of the Possession Time.
1.6 Excluded Assets.
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Notwithstanding any provision of this Agreement to the contrary, each Seller
excepts, reserves, and retains to itself the following properties and assets
(collectively, the "Excluded Assets"):
(a) all corporate, financial, legal, and tax records of Sellers;
(b) all deposits, cash, checks in process of collection, cash
equivalents, and funds attributable to Sellers' interest in the Assets for the
period prior to the Effective Time;
(c) all Hydrocarbons produced from or allocable to the Assets prior
to the Effective Time, except for those Hydrocarbons described in Section
2.1(c)(i);
(d) all documents and records of Sellers subject to the
attorney/client privilege, confidentiality agreements, claims of privilege,
or other restrictions on access;
(e) all rights, interests, and Claims that a Seller may have
under any policy of insurance or indemnity, surety bond, or any insurance or
condemnation proceeds or recoveries from third Persons relating to
property damage or casualty loss affecting the Assets occurring prior to
the Possession Time;
(f) all Claims, whether in contract, in tort, or arising by
operation of Law, and whether asserted or unasserted as of the Possession Time,
that a Seller may have against any Person arising out of acts, omissions, or
events, or injury to or death of Persons or loss or destruction of or damage to
property, relating in any way to, the Assets that occurred prior to the
Possession Time; provided, however, that no such Claim may be settled,
compromised, or otherwise resolved in a manner that results in an obligation
borne by Buyer or the Assets from and after the Possession Time without the
prior written consent of Buyer;
(g) all exchange traded futures contracts and over-the-counter
derivative contracts of Sellers as to which a Seller has an open position
as of the Effective Time;
(h) any and all rights to use Sellers' names, marks, trade dress
or insignia, or to use the name of any affiliate of a Seller, and all of
Sellers' intellectual property, including, without limitation, proprietary or
licensed computer software; patents; trade secrets; copyrights; economic
analyses; and pricing forecasts;
(i) all amounts due or payable to Sellers as adjustments to
insurance premiums related to the Assets for periods prior to the
Effective Time;
(j) all Claims of a Seller for refunds of or any loss carry-forwards
with respect to Property-Related Taxes and income or franchise taxes relating
to the Assets for periods prior to the Effective Time;
(k) all audit rights and all amounts due or payable to a Seller as
refunds, adjustments, or settlements of disputes arising under the Leases,
the Real Property Interests, the Permits, and the Contracts for periods
prior to the Effective Time;
(l) all trade credits and the proceeds of all accounts receivable,
notes receivable, instruments, general intangibles, and other receivables
due or payable to a Seller relating to the Assets that accrued prior to the
Effective Time;
(m) except as otherwise provided herein, all fees, rentals,
proceeds, payments, revenues, rights, and economic benefits of every kind and
character (and all security or other deposits made) payable to the owners of
the Assets and that are attributable to the period prior to the
Effective Time;
(n) all interests, rights, property, and assets of Sellers not located
on or used in connection with the Assets or otherwise specifically included
in the definition of the Assets;
(o) all of the Gathering Assets;
(p) all of the Office Property;
(q) the Intercompany Obligations; and
(r) all geological and geophysical information and data (including,
without limitation, conventional and 3-D seismic data) licensed from third
Persons, and such Seller's proprietary interpretations thereof, the transfer
of which is prohibited.
1.7 Consideration.
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(a) The purchase price for the Properties shall be (i) $2,000,000, subject to
adjustment as provided in Section 2.3(b) (the "Cash Purchase Price"), and (ii)
904,000 shares of restricted common stock of Buyer (the "Stock Consideration")
(such actual shares being issued to Sellers being referred to as the "Restricted
Stock"). The Cash Purchase Price and the Stock Consideration is referred to in
this Agreement as the "Base Purchase Price" and the Cash Purchase Price, as
adjusted pursuant to Section 2.3(b) and (c), is referred to in this Agreement as
the "Adjusted Cash Purchase Price" and the Base Consideration, as adjusted by
the Adjusted Cash Purchase Price, is referred to in this Agreement as the
"Adjusted Base Consideration." The Purchase Price shall be paid to each Seller
in its respective Seller's Percentage.
(b) The Cash Purchase Price shall be adjusted upward by the following:
(i) any increase required as the result of the proration of Property-Related
Taxes under Section 10.3;
(ii) the amount of the value of any Imbalance as to which a Seller is in an
"under" position as of the Effective Time, as agreed upon by Sellers and Buyer
pursuant to Section 5.4; and
(iii) any other amount provided for elsewhere in this Agreement or otherwise
agreed upon by Sellers and Buyer as being an increase to the Cash Purchase
Price.
(c) The Cash Purchase Price shall be adjusted downward by:
(i) [intentionally left blank];
(ii) the proceeds received by a Seller from the sale of Hydrocarbons
produced from or allocable to the Assets during the period from the Effective
Time through the Closing Date, less amounts payable as royalties, overriding
royalties, and other burdens upon such Hydrocarbons and Property-Related Taxes
deducted by the purchaser of such Hydrocarbons;
(iii) all other fees, rentals, proceeds from any permitted sale, salvage, or
other disposition, and other revenues pertaining to the Assets that are
attributable to, and were received by a Seller during, the period from the
Effective Time through the Closing Date (excluding overhead reimbursements to a
Seller under applicable operating agreements under which a Seller is the
operator);
(iv) the amount of the value of any Imbalance as to which a Seller is in an
"over" position as of the Effective Time, as well as the amount of the value of
any Hydrocarbons produced from or allocable to the Assets that third Persons may
otherwise be entitled to receive out of a Seller's interest in such Assets after
the Effective Time without making full payment therefor at or after the time of
delivery as the result of a "take-or-pay", prepayment, forward sale, production
payment, deferred production, or similar arrangement in existence as of the
Effective Time, such value to be as agreed upon by Sellers and Buyer pursuant to
Section 5.4;
(v) any reduction required as the result of the proration of
Property-Related Taxes under Section 10.3; and
(vi) any other amount provided for elsewhere in this Agreement or otherwise
agreed upon by Sellers and Buyer as being a reduction in the Cash Purchase
Price.
(d) The Cash Purchase Price, as adjusted pursuant to Sections 2.3(b)
and 2.3(c), shall be referred to herein as the "Adjusted Cash Purchase Price".
All adjustments to the Cash Purchase Price provided for in Sections 2.3(b) and
2.3(c) shall be determined without duplication and on an accrual basis, in
accordance with generally accepted accounting principles consistently applied.
No adjustment shall be made to the Cash Purchase Price for any indemnity
obligation hereunder, including any obligation arising as a result of any actual
or alleged breach of any representation or warranty by Seller, except as
specifically provided in Section 8.4, and no adjustment to the Adjusted Cash
Purchase Price shall be made pursuant to Section 8.4 that has also been made
pursuant to any other provision hereof.
1.8 Assumption of Obligations.
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Subject to the terms of this Agreement, upon the Closing, Buyer assumes and
agrees to pay, perform, and discharge the following duties, obligations, and
Liabilities (collectively, the "Assumed Liabilities"), effective as of the
Effective Time or the Possession Time, as applicable, as set forth below:
(a) the performance of the terms, conditions, and covenants of, and the
discharge of a Seller's duties, obligations, and liabilities (other than
obligations or liabilities for the payment of money) arising under the terms of,
the Leases, the Real Property Interests, the Permits, and the Transferred
Contracts for the period from and after the Possession Time;
(b) all obligations and Liabilities of a Seller for the payment of money
with respect to the Assets (including, without limitation, the payment of a
Seller's costs and expenses incurred in connection with the Assets and the
payment of a Seller's royalties, overriding royalties, and other similar burdens
on production, as well as all rentals, shut-in well payments, minimum royalties,
and other lease maintenance payments under the terms of the Leases) for the
period from and after the Effective Time;
(c) all obligations of a Seller regarding the plugging and abandonment of
all Xxxxx and Personal Property and the performance of all related salvage, site
clearance, and surface restoration operations in accordance with applicable Law
and the terms of the Leases and applicable Transferred Contracts;
(d) ALL ASSUMED ENVIRONMENTAL LIABILITIES;
(e) EXCEPT FOR RETAINED LIABILITIES, ALL OTHER CLAIMS AND LIABILITIES FOR
INJURY TO OR DEATH OF ANY PERSON, PERSONS, OR OTHER LIVING THINGS, OR LOSS OR
DESTRUCTION OF OR DAMAGE TO PROPERTY AFFECTING OR RELATING TO THE ASSETS,
REGARDLESS OF WHETHER SUCH CLAIM OR LIABILITY RESULTS, IN WHOLE OR IN PART, FROM
THE NEGLIGENCE OR STRICT LIABILITY OF A SELLER OR ITS AFFILIATES, EMPLOYEES,
AGENTS, OR REPRESENTATIVES, TO THE EXTENT THAT SUCH CLAIM OR LIABILITY, OR THE
ACTS, OMISSIONS, EVENTS, OR CONDITIONS GIVING RISE THERETO, ARISES, OCCURS, OR
EXISTS AT OR AFTER THE POSSESSION TIME;
(f) all obligations of a Seller owed to other Persons with respect to
Imbalances (if any) in existence at or arising after the Effective Time;
(g) all Claims and Liabilities relating to the payment of taxes (including
interest, penalties, and additions to tax) for which Buyer has agreed to be
responsible under the terms hereof;
(h) the responsibility for compliance with applicable Laws relating to the
Assets, and the maintenance and, when necessary, procurement of Permits required
by any Governmental Authority in connection with the Assets, in each case for
the period from and after the Possession Time;
(i) all Claims and Liabilities arising out of, resulting from, or relating
in any way to Environmental Conditions, on or relating to the Assets that become
Assumed Liabilities by operation of Section 4.3;
(j) the obligations and liabilities described on Exhibit J;
(k) all of a Seller's obligations relating to the Advances;
(l) all Claims and Liabilities relating to funds delivered to Buyer pursuant
to Section 8.3; and
(m) all other duties, obligations, Liabilities, and Claims, whether in
contract, in tort, or arising by operation of Law, accruing or resulting from,
arising out of, or otherwise associated with the Assets for the period from and
after the Possession Time.
1.9 Retained Liabilities.
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Subject to the terms of this Agreement, each Seller, severally with respect to
its portion of the Assts and not jointly with the other Seller, hereby expressly
retains and agrees to pay, perform, and discharge the following duties,
obligations, and Liabilities (collectively, the "Retained Liabilities"):
(a) the performance of the terms, conditions, and covenants of, and the
discharge of that Seller's duties, obligations, and Liabilities arising under
the terms of, the Leases, the Real Property Interests, the Transferable Permits,
and the Contracts for the period prior to the Possession Time;
(b) except for Assumed Liabilities, all obligations and Liabilities of
Seller for the payment of money with respect to the Assets (including, without
limitation, the payment of that Seller's costs and expenses incurred in
connection with the Assets and the payment of that Seller's royalties,
overriding royalties, and other similar burdens on production, as well as all
rentals, shut-in well payments, minimum royalties, and other lease maintenance
payments under the Leases) for the period prior to the Effective Time;
(c) all Claims and Liabilities relating to the payment of taxes (including
interest, penalties, and additions to tax) for which that Seller has agreed to
be responsible hereunder;
(d) except for Assumed Liabilities, all Claims and Liabilities, whether in
contract, in tort, or arising by operation of Law, against or suffered by that
Seller that relate in any way to, the Assets (INCLUDING, WITHOUT LIMITATION,
INJURY TO OR DEATH OF ANY PERSON, PERSONS, OR OTHER LIVING THINGS, OR LOSS OR
DESTRUCTION OF OR DAMAGE TO PROPERTY AFFECTING OR RELATING TO THE ASSETS,
REGARDLESS OF WHETHER SUCH CLAIM OR LIABILITY RESULTS, IN WHOLE OR IN PART, FROM
THE NEGLIGENCE OR STRICT LIABILITY OF BUYER OR ITS AFFILIATES, EMPLOYEES,
AGENTS, OR REPRESENTATIVES), to extent that any such Claim or Liability, or the
acts, omissions, events, or conditions giving rise thereto, arose, occurred, or
existed prior to the Possession Time, regardless of whether such Claim or
Liability has been asserted as of the Possession Time;
(e) except for the Assumed Liabilities, all Claims (if any) of third
Persons, whether as the result of audits or otherwise, to refunds, adjustments,
settlements of disputes, or other amounts of any kind due under the terms of the
Leases, the Real Property Interests, the Transferable Permits, or the Contracts
and attributable to the period prior to the Effective Time;
(f) all amounts payable by that Seller under the terms of all exchange
traded futures contracts and over-the-counter derivative contracts to which a
Seller is a party as of the Effective Time, including, without limitation, all
breakage costs (if any) incurred by a Seller under the terms of any such
agreement as the result of the transactions contemplated in this Agreement;
(g) except for the Assumed Liabilities, all indebtedness (if any) of a
Seller, whether or not encumbering all or any portion of the Assets;
(h) ALL RETAINED ENVIRONMENTAL LIABILITIES; and
(i) except for Assumed Liabilities, all other duties, obligations, Claims,
and Liabilities, whether in contract, in tort, or arising by operation of Law,
accruing or resulting from, arising out of, or otherwise associated with (i) the
Assets for the period prior to the Possession Time, and (ii) the Excluded
Assets.
1.10 Possession; Risk of Loss.
---------------------------
As of the Possession Time, Sellers shall deliver to Buyer exclusive possession
and control of the Assets. Sellers agree to cooperate with Buyer to facilitate
the transition of the ownership and (if applicable) operation of the Assets to
Buyer. As between Sellers and Buyer, and subject to the terms of Sections 2.4
and 2.5, each Seller shall, severally according to its respective ownership
interests in the Assets and not jointly, assume and bear all risk of loss
associated with the Assets prior to the Possession Time, and Buyer shall assume
and bear all risk of loss associated with the Assets from and after the
Possession Time.
1.11 Allocation of Adjusted Consideration.
---------------------------------------
Buyer and Sellers shall use commercially reasonable efforts to agree, on or
before the Closing Date, upon an allocation of the Adjusted Base Consideration
among the Assets for financial accounting and tax purposes in accordance with
Section 1060 of the Code. Buyer and Sellers shall each file a Form 8594 (Asset
Acquisition Statement Under Section 1060) on a timely basis, reporting the
allocation of the Adjusted Base Consideration consistent with such allocation.
Buyer and Sellers shall file, on a timely basis, any amendments required to such
Form 8594 as a result of a subsequent increase or decrease of the Adjusted Base
Consideration after the Closing Date. Buyer and Sellers shall not take any
position on their respective income tax returns that is inconsistent with the
allocation of the Adjusted Base Consideration as so agreed, or as adjusted as
the result of any subsequent increase or decrease in the Adjusted Base
Consideration. If Buyer and Sellers are unable to agree on the allocation of
the Adjusted Base Consideration provided for in this Section 2.7 by the Closing
Date, either Buyer or a Seller may initiate arbitration of such dispute pursuant
to the terms of Section 10.11. In that event, the Closing shall be deferred
until such dispute is resolved as provided in Section 10.11.
1.12 Restricted Securities.
----------------------
(a) The parties acknowledge that the shares of Restricted Stock shall not
have been registered and shall be characterized as "restricted securities" under
U.S. federal securities laws, and, under such laws, such shares may be
resold without registration under the Securities Act only in certain limited
circumstances. Each certificate evidencing shares of Restricted Stock to be
issued pursuant to this Agreement shall bear the following legend as well as any
legend contemplated by this Agreement or required by the laws of the State of
Delaware or any other jurisdiction:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). SUCH SHARES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION WITHOUT AN EXEMPTION UNDER THE SECURITIES ACT OR AN
OPINION OF LEGAL COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
THE SALE, TRANSFER OR OTHER DISPOSITION OF THESE SHARES IS SUBJECT TO
RESTRICTIONS AS SET FORTH IN THE PURCHASE AND SALE AGREEMENT BY AND AMONG
__________________________ AND WESTSIDE ENERGY CORPORATION DATED AS OF
_______________, 2007, A COPY OF WHICH IS AVAILABLE AT THE PRINCIPAL OFFICE OF
THE COMPANY."
(b) The holder of shares of Restricted Stock shall be restricted from
selling, transferring or otherwise disposing of any or all of such shares until
the nine month anniversary of the Closing Date. Once the holders are able to
sell shares of Restricted Stock, in any ninety (90) day period, the holder of
shares of Restricted Stock, to the extent permitted by law, may only sell,
transfer or otherwise dispose of a maximum of 25% of the total number of shares
of Restricted Stock the holder received in connection with the transactions
contemplated herein and each certificate representing shares of Restricted Stock
to be issued pursuant to this Agreement shall contain a legend to that
effect.
(c) The shares of Restricted Stock shall be delivered to Sellers within
thirty (30) days after the approval of the application required by Section 3.10.
-------------
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Sellers.
---------------------------------------------
Each Seller represents and warrants, severally and not jointly with the other
Seller, to Buyer as follows:
(a) Each Seller is a corporation duly formed, currently existing, and in
good standing under the Laws of the State of Texas.
(b) Seller has full capacity, power, and authority to enter into and perform
this Agreement and the transactions contemplated herein. The execution,
delivery, and performance by Seller of this Agreement has been duly and validly
authorized and approved by all necessary action on the part of Seller, and this
Agreement and the documents executed in connection herewith are, or upon their
execution and delivery will be, the valid and binding obligations of Seller and
enforceable against Seller in accordance with their terms, subject to the
effects of bankruptcy, insolvency, reorganization, moratorium, and similar Laws,
as well as to principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(c) The execution, delivery, and performance by Seller of this Agreement and
the consummation of the transactions contemplated herein will not (i) conflict
with or result in a breach of any provisions of the organizational documents of
Seller, (ii) result in a default or the creation of any Lien or give rise to any
right of termination, cancellation, or acceleration under any of the terms of
any Lease, Contract, Real Property Interest, Permit, note, bond, mortgage,
indenture, license, or other agreement, document, or instrument to which Seller
is a party or by which Seller or any of the Assets may be bound, or (iii)
violate any order, writ, injunction, judgment, decree, or Law applicable to
Seller or the Assets.
(d) Except as otherwise reflected in Schedule 3.1(d), there is no Claim by
any Person or Governmental Authority (including, without limitation,
expropriation or forfeiture proceedings), and no legal, administrative, or
arbitration proceeding pending or, to Seller's Knowledge, threatened against
Seller or the Assets, or to which Seller is a party, that reasonably may be
expected to (i) impair Seller's title to any of the Assets, (ii) hinder or
impede the operation of all or any portion of the Assets, (iii) subject the
owner or operator of the Assets to liability in favor of any Governmental
Authority or other Person as the result of the alleged violation of, or
non-compliance with, any Environmental Law by Seller or any affiliate of Seller
with respect to the Assets or require the owner or operator of the Assets to
remediate, remove, or respond to an Environmental Condition, or a threatened
Environmental Condition, on or affecting the Assets, or (iv) otherwise adversely
affect the Assets or the ability of Seller to consummate the transactions
contemplated in this Agreement. Further, except as otherwise reflected in
Schedule 3.1(d), there has been no Release or Threatened Release of
Environmental Contaminants at, to, from or about the Assets.
(e) Except as otherwise reflected in Schedule 3.1(e), none of the Leases,
Real Property Interests, or Contracts is subject to a preferential right to
purchase, third Person consent to assignment requirement, right of first
refusal, right of first offer, or similar right or restriction.
(f) Except for approvals by Governmental Authorities customarily obtained
after the Closing, no authorization, consent, approval, exemption, franchise,
permit, or license of, or filing with, any Governmental Authority is required to
authorize, or is otherwise required by any Governmental Authority in connection
with, the valid execution and delivery by Seller of this Agreement, the transfer
of the Assets to Buyer, or the performance by Seller of its other obligations
hereunder.
(g) Except as set forth on Schedule 3.1(g), each Lease is in full force and
effect. Seller has, in all material respects, fulfilled all requirements for
filings, certificates, consents, approvals, disclosures, and similar matters
contained in the Leases and applicable Law, and Seller is fully qualified to
own, operate, and transfer the Leases under the terms thereof and applicable
Law. Seller is not in material breach or material default, and there has
occurred no event, fact, or circumstance that, with the lapse of time or the
giving of notice, or both, would constitute such a material breach or material
default by Seller, with respect to any terms of any Lease, and, to Seller's
Knowledge, no other Person owning an interest in, or serving as operator of, any
Lease is in material breach or material default with respect to any of its
obligations thereunder. No lessor under any Lease has given or, to Seller's
Knowledge, threatened to give notice of any action to terminate, cancel,
rescind, repudiate, or procure a judicial reformation of any Lease or any
provision thereof. The Leases contain no express obligations on the part of the
owner(s) thereof, applicable after the Effective Time, to engage in continuous
or other development operations in order to maintain any Lease. The Leases
contain no provisions that increase the royalty share of the lessor thereunder,
except such increases as are reflected in the Net Revenue Interests for the
Leases and Xxxxx set forth in Exhibit B. Seller has correctly made, or caused
to be correctly made, all payments, including, without limitation, royalties,
rentals, shut-in well payments, and other lease maintenance payments, due in
respect of the Leases thereunder.
(h) Each of the Real Property Interests is in full force and effect. Seller
has, in all material respects, fulfilled all requirements for filings,
certificates, consents, approvals, disclosures, and similar matters contained in
the Real Property Interests and applicable Law, and Seller is fully qualified to
own, operate, and transfer the Real Property Interests under the terms thereof
and applicable Law. Seller is not in material breach or material default, and
there has occurred no event, fact, or circumstance that, with the lapse of time
or the giving of notice, or both, would constitute such a material breach or
material default by Seller, with respect to any of its obligations under any
Real Property Interest, and, to Seller's Knowledge, no other Person owning an
interest in any Real Property Interest or serving as operator of any Property is
in material breach or material default with respect to any of its obligations
thereunder. No grantor, lessor, licensor, or other counterparty under any Real
Property Interest has given or, to Seller's Knowledge, threatened to give notice
of any action to terminate, cancel, rescind, repudiate, or procure a judicial
reformation of any Real Property Interest or any provision thereof. Seller has
correctly made, or caused to be correctly made, all rental and other payments
due in respect of the Real Property Interests thereunder.
(i) Seller has furnished to Buyer true and correct copies of all of the
Contracts described on Exhibit D, and there are no contracts, agreements,
instruments, or documents affecting the Assets other than the Contracts
described on Exhibit D. With respect to the Contracts: (i) all Contracts are in
full force and effect; (ii) Seller is not in material breach or material
default, and there has occurred no event, fact, or circumstance that, with the
lapse of time or the giving of notice, or both, would constitute such a material
breach or material default by Seller, with respect to the terms of any Contract;
(iii) to Seller's Knowledge, no other party is in material breach or material
default with respect to the terms of any Contract; and (iv) Neither Seller nor,
to Seller's Knowledge, any other party to any Contract has given or threatened
to give notice of any action to terminate, cancel, rescind, or procure a
judicial reformation of any Contract or any provision thereof. The Assets are
not subject to any Contract containing an area of mutual interest, maintenance
of uniform interest, "before payout" or "after payout" reversion or conversion,
or other provision under which Seller or Buyer may be obligated to make
assignments to third Persons of interests in any Asset after the Effective Time,
except such assignments of interests as are reflected in Schedule 3.1(i) and are
taken into account in the Working Interests and Net Revenue Interests set forth
for the Leases and Xxxxx in Exhibit B. Except as otherwise shown on Schedule
3.1(i), the Assets are not subject to any tax partnership agreement.
(j) The Permits described on Exhibit E constitute all necessary Permits
affecting or pertaining to the Assets. All Transferable Permits are also
described on Exhibit E. Seller or, to Seller's Knowledge, each operator of the
Assets, as applicable, has complied in all material respects with all Laws and
Permits relating to the Assets, including, without limitation, Environmental
Laws and Laws requiring the provision of surety bonds or other forms of security
or financial assurance with respect to the performance of operations (including,
without limitation, plugging and abandonment operations) on the Assets. Seller
or, to Seller's Knowledge, each operator of the Assets, as applicable, has all
Permits required in connection with the ownership and operation of the Assets
(including those required under Environmental Laws), and has properly made all
filings necessary or appropriate to obtain such Permits. All of such Permits
and filings are in full force and effect and to the extent necessary, Seller has
filed for renewal of any such Permits in a manner so that the expiring Permits
remain in full force and effect during the pendency of the application for
renewal. Neither Seller nor, to Seller's Knowledge, any other Person has
received notice from any Governmental Authority or other Person that any such
applicable Law, Permit, or filing has been violated or not complied with respect
to the Assets by Seller or other Person.
(k) As of the date of this Agreement, the Xxxxx described on Exhibit B are
the only xxxxx for the production of Hydrocarbons currently located on the
Leases. All of such Xxxxx have been drilled, completed, and operated within the
boundaries of the Leases or within the limits otherwise permitted by contract
and by applicable Law and in compliance with the provisions of the applicable
Contracts and all applicable Laws. The production of Hydrocarbons from such
Xxxxx has not been in excess of the allowable production established for each
Well. Except as otherwise provided in Schedule 3.1(k), none of the Xxxxx has
been plugged and abandoned.
(l) There are no calls on production, options to purchase, or similar rights
in effect with respect to any portion of Seller's shares of the Hydrocarbons,
and all Contracts for the sale of Hydrocarbons are terminable without penalty on
no more than thirty (30) days' prior notice. Seller is currently receiving the
prices provided for under such sales Contracts with respect to the Hydrocarbons.
All proceeds from the sale of Hydrocarbons attributable to the interests of
Seller in the Assets have been and are being disbursed to Seller under
appropriate division orders, transfer orders, or similar documents signed by or
otherwise binding on Seller, and no portion of any such proceeds is being held
in suspense, subject to a Claim for refund by the purchaser, used as an offset
or as collateral for other obligations (whether disputed or undisputed), or
otherwise not being paid to Seller as it becomes due in the ordinary course of
business.
(m) Except as shown in Schedule 3.1(m), as of the date of execution of this
Agreement, Seller has no Claim constituting an Asset, or is subject to any
obligation constituting an Assumed Liability, with respect to any Imbalance that
relates to any of the Assets. Except for the Imbalances (if any) shown in
Schedule 3.1(m) as to which Seller is subject to an obligation constituting an
Assumed Liability, Seller is not on the date of execution of this Agreement, nor
will be after the Effective Time, obligated by virtue of any prepayment made
under any sales Contract or other Contract containing a "take-or-pay" clause, or
under any production payment, forward sale, balancing, deferred production, or
similar arrangement, to deliver Hydrocarbons produced from or allocable to any
Asset at some future time without receiving full payment therefor at or after
the time of delivery.
(n) Except as set forth on Schedule 3.1(n), Seller has paid all amounts owed
in connection with the Assets for which Seller has received invoices from the
operator(s) thereof, and there are no outstanding calls or payments due from
Seller under the terms of the Contracts. Schedule 3.1(n) contains a true and
complete list and description, as of the date of execution of this Agreement, of
all authorities for expenditures, plans of exploration and/or development, and
other commitments as to which Seller has become obligated regarding drilling,
reworking, or other operations or other capital expenditures on or relating to
the Assets for which all of the activities or expenditures anticipated in such
AFEs, plans, or commitments have not been completed prior to the date of this
Agreement. Except as set forth in Schedule 3.1(n), neither the Leases nor the
Contracts contain any express contractual obligation to drill additional
Hydrocarbon xxxxx or engage in other operations on the Assets as to which Seller
has become obligated, except for obligations arising under offset well
provisions and obligations arising under Contracts that allow the parties
thereto to elect whether to participate. There are no material operations on
the Leases under any of the Contracts with respect to which Seller or any other
Person has become a non-consenting party, except for those operations set forth
on Schedule 3.1(n), the effects of which are reflected in the Working Interests
and Net Revenue Interests set forth for the Leases and Xxxxx in Exhibit B. The
matters set forth on Schedule 3.1(n) are referred to herein as the "Vendor
Claims."
(o) Except with respect to those Property-Related Taxes prorated between
Seller and Buyer as provided in Section 10.3, during the period of Seller's
ownership of the Assets, all Property-Related Taxes imposed or assessed with
respect to, measured by, charged against, or attributable to the Assets, or the
ownership thereof, or the production, processing, gathering, treatment,
transportation, and marketing of Hydrocarbons therefrom or allocable thereto, in
each case that became due and payable prior to the Effective Time have been
properly paid.
(p) Seller has not engaged any financial advisor, broker, or finder, or
incurred any liability, contingent or otherwise, in favor of any such other
Person relating to the transactions contemplated in this Agreement.
(q) There are no bankruptcy, insolvency, reorganization, or arrangement
proceedings pending, being contemplated by, or to Seller's Knowledge, threatened
against Seller or any affiliate that controls Seller.
(r) Schedule 3.1(r) lists all insurance policies or self-insurance programs
maintained in effect by Seller or its Affiliates with respect to the Assets as
of the date of execution of this Agreement. Seller, or its Affiliates, have
paid all premiums required under, and are otherwise in compliance with, the
terms of all such insurance policies or self-insurance programs, all of which
policies or programs, or renewals thereof, have been during the period of
Seller's ownership of the Assets, and are as of the date of execution of this
Agreement, in full force and effect.
(s) Since February 1, 2007, there has not occurred a Material Adverse
Change.
(t) The information relating to Seller and the Assets which has been made
available to Buyer is not false or misleading with respect to any material fact
and does not omit any material fact necessary in order to make the statements
therein not misleading.
3.2 Restricted Shares.
------------------
The Sellers understand that:
(a) the shares of Restricted Stock comprising the Stock Consideration to be
delivered pursuant to this Agreement are "restricted securities" under the
federal securities laws of the United States inasmuch as they have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
and shall be acquired from Buyer in a transaction exempt from registration under
the Securities Act pursuant to Section 4(2) thereof or Regulation D
promulgated thereunder;
(b) the shares of Restricted Stock must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from registration. In this connection, each Seller represents that it is
familiar with Rule 144 promulgated under the Securities Act, as currently in
effect, and understands the resale limitations imposed thereby and by the
Securities Act;
(c) the shares of Restricted Stock will bear a legend to such effect;
(d) Buyer will cause its transfer agent to make a notation on its transfer
books to such effect; and
(e) Each holder of shares of Restricted Stock shall be restricted from
selling, transferring or otherwise disposing of any or all of such shares until
the ninth month commencing after the Closing Date, and, thereafter, in any
ninety (90) day period, holder of shares of Restricted Stock, to the extent
permitted by law, may only sell, transfer or otherwise dispose of a maximum of
25% of the total number of shares of Restricted Stock such holder received in
connection with the transactions contemplated herein.
3.3 Accredited Investor; Purchase Entirely For Own Account.
------------------------------------------------------------
Seller is an accredited investor as defined in Regulation D under the
Securities Act. Seller is acquiring the shares of Restricted Stock pursuant to
this Agreement for investment only for its own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof and
shall not offer to sell or otherwise dispose of any of the shares of Restricted
Stock so acquired by the Seller in violation of the registration requirements of
the Securities Act or the securities laws of any other jurisdiction applicable
to the transactions contemplated hereby or the Seller. By executing this
Agreement, the Seller further represents that it does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
shares of the Restricted Stock.
3.4 Disclosure of Information.
---------------------------
Seller represents and warrants to Buyer as follows:
(a) Seller has conducted its own independent investigation, review and
analysis of the business, operations, assets, liabilities, results of
operations, financial condition and prospects of Buyer; and
(b) Seller acknowledges that, except as set forth in this Agreement, none of
Buyer nor any of its affiliates, employees, agents, advisors or representatives
(collectively, "Buyer Affiliates") makes or has made any representation or
warranty, either express or implied, as to the accuracy or completeness of any
of the information provided or made available to Seller or any of its
affiliates, employees, agents or representatives (collectively, "Seller
Affiliates"). Seller further agrees that, to the fullest extent permitted by
law, neither Buyer nor any Buyer Affiliate shall have any liability or
responsibility whatsoever to Seller or any Seller Affiliate on any basis
(including in contract or tort, under federal or state securities laws or
otherwise) based upon any information provided or made available, or statements
made, to Seller or Seller Affiliate (or any omissions therefrom), other than (in
the case of Buyer) in respect of the specific representations and warranties set
forth in Section 3.8 of this Agreement.
3.5 Investment Experience.
----------------------
Seller has such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of the investment in the shares
of Restricted Stock. Seller is able to bear the economic risk of its investment
in the shares of Restricted Stock for an indefinite period of time and can
afford a complete loss of his investment in the shares of Restricted Stock.
3.6 General Solicitation.
---------------------
Seller was not offered or sold the shares of Restricted Stock, directly or
indirectly, by means of any form of general solicitation or general
advertisement.
3.7 Reliance.
--------
Seller understands and acknowledges that: (i) the shares of Restricted Stock
are being offered and sold to it without registration under the Securities Act
in a transaction that is exempt from the registration provisions of the
Securities Act and (ii) the availability of such exemption depends in part on,
and Buyer will rely upon the accuracy and truthfulness of, the foregoing
representations and the Seller hereby acknowledges and consents to such
reliance.
3.8 Representations and Warranties of Buyer.
-------------------------------------------
Buyer represents and warrants to Sellers as follows:
(a) Buyer is a corporation duly organized, validly existing, and in good
standing under the Laws of the State of Nevada. Buyer has all requisite power
and authority to own and operate its property and to carry on its business as
now conducted.
(b) Buyer has full capacity, power, and authority to enter into and perform
this Agreement and the transactions contemplated herein. The execution,
delivery, and performance by Buyer of this Agreement have been duly and validly
authorized and approved by all necessary action of Buyer. This Agreement and
the documents executed in connection herewith are, or upon their execution and
delivery will be, the valid and binding obligations of Buyer and enforceable
against Buyer in accordance with their terms, subject to the effects of
bankruptcy, insolvency, reorganization, moratorium, and similar Laws, as well as
to principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law) provided that only the obligations
regarding the Restricted Stock are valid and binding obligations of Buyer. The
Stock Consideration when issued to the Seller pursuant to this Agreement will
constitute duly authorized, validly issued, fully paid and non-accessible shares
of Restricted Stock.
(c) The execution, delivery, and performance by Buyer of this Agreement and
the consummation of the transactions contemplated herein will not (i) conflict
with or result in a breach of any provision of the organizational documents of
Buyer, (ii) result in a default or the creation of any Lien or give rise to any
right of termination, cancellation, or acceleration under any of the terms of
any note, bond, mortgage, indenture, license, or other agreement to which Buyer
is a party or by which Buyer or any of its property may be bound, or (iii)
violate any order, writ, injunction, judgment, decree, or Law applicable to
Buyer or its property.
(d) There is no Claim by any Person or Governmental Authority (including,
without limitation, expropriation or forfeiture proceedings), and no legal,
administrative, or arbitration proceeding pending or, to Buyer's Knowledge,
threatened against Buyer, or to which Buyer is a party, that reasonably may be
expected to have a material adverse effect upon the ability of Buyer to
consummate the transactions contemplated in this Agreement.
(e) Except for approvals by Governmental Authorities customarily obtained
after the Closing, no authorization, consent, approval, exemption, franchise,
permit, or license of, or filing with, any Governmental Authority or any other
Person is required to authorize, or is otherwise required in connection with,
the valid execution and delivery by Buyer of this Agreement, the performance by
Buyer of its obligations hereunder and thereunder or the performance by Buyer of
its limited obligations hereunder and thereunder regarding the Restricted Stock.
(f) Buyer has not engaged any other financial advisor, broker, agent or
finder, or incurred any liability, contingent or otherwise, in favor of any
other such Person relating to the transactions contemplated by this Agreement
for which Seller would be responsible.
(g) There are no bankruptcy, insolvency, reorganization, or arrangement
proceedings pending, being contemplated by, or, to Buyer's Knowledge, threatened
against Buyer or any affiliate that controls Buyer.
(h) Buyer is acquiring the Assets for its own account, for investment, and
not with a view to, or for offer or resale in connection with, a distribution
thereof (including, without limitation, the transfer of fractional undivided
interests therein) within the meaning of the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder, or a distribution thereof
in violation of any applicable securities Law. If, in the future, Buyer sells,
transfers, or otherwise disposes of the Assets, or any portion thereof, or any
fractional undivided interest therein, Buyer will do so in full compliance with
any applicable securities Laws.
(i) Buyer has filed with the SEC, and has heretofore made available to the
Seller true and complete copies of, each quarterly report, annual report,
current report and proxy statement required to be filed with the SEC since
_______________, 2006 under the Securities Exchange Act of 1934 (collectively,
the "SEC Reports"). As of the respective dates such SEC Reports were filed or,
if any such SEC Reports were amended, as of the date such amendment was filed,
each of the SEC Reports, including any financial statements or schedules
included therein, (a) complied in all material respects with all applicable
requirements of the Securities Act of 1933 and the Exchange Act of 1934, as the
case may be, and the applicable rules and regulations promulgated thereunder,
and (b) did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(j) Buyer has such knowledge and experience in the ownership and operation
of oil and gas properties and financial and business matters as to be able to
evaluate the merits and risks of an investment in the Assets. Buyer is able to
bear the risks of an investment in the Assets and understands risks of, and
other considerations relating to, a purchase of the Assets.
(k) Buyer has conducted its own independent investigation, review and
analysis of the business, operations, assets, liabilities, results of
operations, financial condition and prospects of Assets; and
(l) Buyer acknowledges that, except as set forth in this Agreement, none of
any Seller nor any of a Seller's affiliates, employees, agents, advisors or
representatives (collectively, "Seller Affiliates") makes or has made any
representation or warranty, either express or implied, as to the accuracy or
completeness of any of the information provided or made available to the Buyer
or the Buyer Affiliates. Buyer further agrees that, to the fullest extent
permitted by law, neither a Seller nor any Seller Affiliate shall have any
liability or responsibility whatsoever to Buyer or any Buyer Affiliate on any
basis (including in contract or tort, under federal or state securities laws or
otherwise) based upon any information provided or made available, or statements
made, to Buyer or Buyer Affiliate (or any omissions therefrom), other than (in
the case of Seller) in respect of the specific representations and warranties
set forth in Section 3.1 through Section 3.6 of this Agreement.
(m) The information relating to Buyer and the Restricted Stock which has
been made available to Buyer is not false or misleading with respect to any
material fact and does not omit any material fact necessary in order to make the
statements therein not misleading.
3.9 Disclaimers.
-----------
(a) To the extent required by applicable Law to be operative, the
disclaimers of certain warranties contained in this Section 3.9 are "conspicuous
disclaimers" for purposes of any applicable Law. THE EXPRESS
REPRESENTATIONS AND WARRANTIES OF SELLERS CONTAINED IN SECTIONS 3.1 THROUGH 3.8
ABOVE AND THE SPECIAL WARRANTY OF TITLE BY SELLERS IN THE CONVEYANCE
(COLLECTIVELY "SELLER'S WARRANTIES") ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER
REPRESENTATIONS AND WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE.
SELLERS EXPRESSLY DISCLAIMS ANY AND ALL SUCH OTHER REPRESENTATIONS AND
WARRANTIES. WITHOUT LIMITATION OF THE FOREGOING AND EXCEPT FOR SELLER'S
WARRANTIES, THE ASSETS SHALL BE CONVEYED PURSUANT HERETO WITHOUT (A) ANY
WARRANTY OR REPRESENTATION WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE
RELATING TO TITLE TO ANY OF THE ASSETS, THE CONDITION, QUANTITY, QUALITY,
FITNESS FOR A PARTICULAR PURPOSE, CONFORMITY TO THE MODELS OR SAMPLES OF
MATERIALS OR MERCHANTABILITY OF ANY EQUIPMENT OR ITS FITNESS FOR ANY PURPOSE OR
(B) ANY OTHER EXPRESS, IMPLIED, STATUTORY OR OTHER WARRANTY OR REPRESENTATION
WHATSOEVER.
3.10 AMEX Application
-----------------
.. Buyer will use its commercially reasonable efforts to have the Restricted
Stock listed on the American Stock Exchange as promptly as permitted by the
applicable rules of the American Stock Exchange.
ARTICLE IV.
ACCESS; DUE DILIGENCE
4.1 Access to Records.
-------------------
Through the Closing Date, Sellers shall provide to Buyer and its
representatives full access, during normal business hours (and, if reasonably
requested, such other times as Buyer may deem necessary to complete its due
diligence within the time period provided herein and for a period of one hundred
twenty (120) days after the closing date) at either Seller's offices, to all
books, records, documents, and information of every kind and character
(including, without limitation, originals or photocopies, as available, of the
Leases, the Real Property Interests, the Contracts, the Permits, the Records,
and the Transferable Data) in a Seller's possession relating in any way to the
Assets. Sellers shall also cause their employees, counsel, accountants, and
other consultants to cooperate with and assist Buyer in connection with such due
diligence review. Unless prohibited from doing so by confidentiality or other
contractual arrangements between a Seller and third Persons, Buyer shall have
the right to photocopy such books, records, documents, and information, or any
portion thereof, at Buyer's expense. If Buyer requests information not in the
possession of a Seller, Sellers shall use reasonable efforts to obtain the
requested information, at Buyer's expense, from the applicable operators or
other Persons.
4.2 Operation and Environmental Assessment.
-----------------------------------------
Through the Closing Date, Sellers shall afford, or shall use reasonable
efforts to cause relevant operators or other Persons to afford, to Buyer and its
authorized representatives, at reasonable times and at the sole cost, risk, and
expense of Buyer or its representatives, as applicable, reasonable access to and
entry upon all of the Leases, Xxxxx, and Real Property Interests for the
purposes of Buyer's on-site inspections and inventories of the Assets
(including, without limitation, the witnessing of well tests, the examination of
well logs and other geological and geophysical data, and the performance of soil
and water tests and such other tests, inspections, examinations, investigations,
and studies as Buyer deems necessary to permit Buyer to prepare reserve
engineering and other reports relating to, and assess the operational and
environmental condition of, the Assets) and reasonable access to any employees
or contract personnel that have been involved with the operation, maintenance,
or development of the Assets.
4.3 Defects, Environmental Conditions and Related Adjustments.
--------------------------------------------------------------
(a) At any time prior to ninety (90) days following the Closing Date, Buyer
may give to Sellers written notice of any claimed Defect or of any claimed
Environmental Condition discovered by Buyer through Buyer's EPA study performed
by Halff and Associates or otherwise. Each such notice shall set forth (i) a
detailed description of the relevant Defect or Environmental Condition and, as
applicable, the Asset affected thereby, (ii) the Defect Amount or Remediation
Estimate applicable thereto as determined by Buyer, and (iii) the specific
documentation or action that Buyer requests to cure or remedy such Defect or
Environmental Condition. In addition, if a Seller is aware or becomes aware,
between the date of execution of this Agreement and the Closing Date, of any
Environmental Condition affecting any Asset, Sellers shall provide to Buyer
written notice of such fact. Any Environmental Condition thus brought to
Buyer's attention by a Seller shall be deemed to have been asserted by Buyer in
a timely manner as provided in this Section 4.3(a). Defects and Environmental
Conditions discovered by Buyer in its due diligence pertaining to the Assets but
not asserted in a timely manner as provided in this Section 4.3(a) shall be
deemed to have been waived by Buyer, and shall become Assumed Liabilities for
purposes hereof.
(b) Sellers shall have the first right and option, but not the obligation,
to cure or remedy all such Defects or Environmental Conditions at Seller's sole
cost, risk, and expense (and in the case of an Environmental Condition, in
accordance with applicable Environmental Laws) consistent with the current use
of the Asset and in a manner reasonably acceptable to Buyer. If Sellers elect
to cure or remedy a Defect or Environmental Condition, Sellers shall provide to
Buyer written notice of such fact no later than three (3) Business Days after
their receipt of Buyer's notice. The failure of Sellers to give such notice to
Buyer within such three-Business Day period shall constitute an election by
Sellers not to cure or remedy the relevant Defect or Environmental Condition.
(c) If Sellers elect to cure or remedy a Defect or Environmental Condition,
Sellers will commence such curative activities or remediation as soon as
reasonably practicable after their receipt of Buyer's notice and shall promptly
and diligently continue such efforts until such Defect or Environmental
Condition has been fully cured or remediated (in the case of an Environmental
Condition, in accordance with applicable Environmental Laws), but in no event
more than sixty (60) days after Buyer's notice. If Sellers do not complete such
curative activities or remediation prior to the expiration of such sixty-day
period, (i) Buyer may elect to offer Sellers an extension of time within which
to complete such curative or remedial actions; or (ii) in the absence of such an
extension, Sections 4.3(d) and 4.3(e), or Section 4.3(f), as applicable, will
govern.
(d) If Sellers elect, or is deemed to have elected, not to cure a Defect
asserted in a timely manner under Section 4.3(a), or if a Seller is unable to
cure a Defect in a timely manner as provided in Section 4.3(c), then except as
provided hereinafter, Buyer shall have the right to an adjustment to the
Adjusted Cash Consideration, by the Defect Amount for such Defect, which
adjustment shall be accomplished by access to the Holdback, as provided in
Section 8.4 below, except that no downward adjustment of the Adjusted Cash
Purchase Price on account of Defects shall occur unless the aggregate amount of
all Defect Amounts exceeds $25,000 (the "Defect Amount Threshold"), but if the
Defect Amount Threshold is met, the Defect Amount for all Defects shall reduce
the Cash Purchase Price subject to the limits set forth in Section 8.4.
(e) If Buyer purchases at the Closing an Asset burdened by a preferential
right to purchase or similar right that has not been exercised as of the Closing
Date, regardless of whether the time period for the exercise of such right has
expired, no reduction of the Adjusted Consideration paid at the Closing shall be
made with respect thereto. If, for any reason, such preferential right to
purchase or similar right is successfully exercised by the holder thereof after
the Closing, Buyer shall be entitled to retain all proceeds paid for the
affected Asset by the holder of the relevant preferential right to purchase or
similar right, and the Seller who sold the respective Asset shall pay to Buyer,
in cash, an amount equal to the excess (if any) of the Allocated Value of such
Asset (adjusted as provided in Sections 2.3(c)(ii) and 2.3(d)(ii) and net of
applicable Property-Related Taxes) over the proceeds received by Buyer from the
holder of such preferential right to purchase.
(f) If Sellers elect, or is deemed to have elected, not to remedy an
Environmental Condition asserted in a timely manner under Section 4.3(a), or if
Sellers are unable to remedy an Environmental Condition in a timely manner as
provided in Section 4.3(c), then except as provided hereinafter, Buyer shall
receive a reduction in the Cash Purchase Price equal to the actual costs,
including, without limitation, Liabilities to Governmental Authorities and other
Persons (or in the absence of actual costs, the Remediation Estimate agreed to
by Sellers and Buyer or determined by arbitration as provided in Section
4.3(g)), to remedy the relevant Environmental Condition, in which case, such
unremedied Environmental Condition shall become an Assumed Liability for
purposes hereof.
(g) Sellers and Buyer shall endeavor, in good faith, to agree on the
existence of all claimed Defects or Environmental Conditions, the methods of
curing or remedying such Defects or Environmental Conditions, and the Defect
Amounts or Remediation Estimates applicable thereto. In the event of a dispute
concerning any of such matters that is not resolved prior to the Closing, either
Buyer or Sellers may initiate arbitration of such dispute pursuant to the terms
of Section 10.11. Following the issuance of the arbitrator's decision, Sellers
and Buyer shall have the rights and options provided in Section 4.3(d) and
Section 4.3(e), or Section 4.3(f), as applicable.
ARTICLE V.
OTHER MATTERS PRIOR TO CLOSING
5.1 Operations.
----------
Each Seller shall with respect to its Assets, to the extent within its
reasonable control: (a) cause the Assets to be maintained and operated in a good
and workmanlike manner consistent with past practices and in compliance with
applicable Laws; (b) obtain the prior written consent of Buyer as to all
material decisions relating to the Assets (other than decisions required for
safety purposes or by other emergencies), including, without limitation, (i) all
contracts or agreements regarding the sale of Hydrocarbons with terms of ninety
(90) days or more, (ii) proposed expenditures after the date of this Agreement
related to any individual Asset in an amount greater than U.S. $25,000.00, net
to Seller's interests, (iii) all farmout or farmin proposals or agreements, (iv)
all operations as to which a Seller or any other co-owner of an Asset proposes
not to participate, (v) the plugging and abandonment of any Well or Personal
Property included in the Assets, (vi) the amendment, release, or abandonment of
any Lease, or portion thereof, (vii) the waiver, compromise, or settlement of
any right or Claim pertaining to the Assets, (viii) all amendments to, or
waivers of rights under, or termination of any Real Property Interest or
Contract, and (ix) the initiation of any proceeding before any Governmental
Authority pertaining to the Assets; (c) perform all material obligations of a
Seller under the Leases, Real Property Interests, Contracts, and Permits; (d)
promptly notify Buyer of (i) any notice or threatened notice of which a Seller
becomes aware relating to any default, inquiry into any possible default, or
action to alter, terminate, rescind, repudiate, or procure a judicial
reformation of any Lease, Real Property Interest, Contract, or Permit, or any
provision thereof, (ii) any new suit, action, or other proceedings before any
court or Governmental Authority relating to the Assets, and (iii) any other
event, fact, or circumstance of which a Seller becomes aware that may materially
impair the value of the Assets or the ability of a Seller to consummate the
transactions contemplated herein; (f) maintain all permits in full force and
effect (including making application for renewal of Permits if required for such
Permits to remain in full force and effect during the pendency of the
application and make or give all notifications, filings, consents, or approvals
from, to, or with all Governmental Authorities, and take all other actions
reasonably requested by Buyer that are necessary for, and cooperate with Buyer
in obtaining, the issuance, assignment, or transfer, as the case may be, by each
such Governmental Authority of such Permits as may be necessary for Buyer to own
and operate the Assets after the Closing if Buyer chooses to become the operator
of any of the Assets; (g) maintain in effect insurance with respect to the
Assets providing the same type of coverage, in the same amounts, and with the
same deductibles as the insurance maintained in effect by a Seller with respect
to the Assets and described on Schedule 3.1(r); (h) timely pay and discharge
when due all costs and expenses incurred in connection with the Assets, except
to the extent contested in good faith by a Seller utilizing appropriate actions,
and otherwise keep the Assets free of Liens that do not constitute Permitted
Encumbrances; (i) not mortgage, pledge, encumber, dedicate, or sell, or agree to
mortgage, pledge, encumber, dedicate, or sell, any portion of the Assets except
for the disposition of Hydrocarbons in the ordinary course of a Seller's
business pursuant to Contracts in effect on the date hereof; and (j) perform all
of the "Binding Provisions of the Letter of Intent," including without
limitation, Section 2.4(h) thereof.
5.2 [Intentionally Omitted]
5.3 Imbalances and Other Matters.
As soon as reasonably practicable, but in no event later than five (5)
Business Days after the execution of this Agreement, Sellers shall provide to
Buyer written notice setting forth the status and extent of any Imbalances, as
well as any "take-or-pay", prepayment, forward sale, production payment,
deferred production, and similar arrangements, in effect with respect to the
Assets as of the Effective Time. For purposes of the adjustment of the Cash
Purchase Price pursuant to Sections 2.3(b) and 2.3(c), such Imbalances and other
arrangements shall be valued based upon the contract price applicable to the
relevant category of Hydrocarbons (or if there is no contract price, the market
value thereof) as of the Effective Time. In the event of a dispute concerning
the market value of any such Hydrocarbons that is not resolved prior to the
Closing, either Buyer or Sellers may initiate arbitration of such dispute
pursuant to the terms of Section 10.11. In that event, if necessary, the
Closing shall be deferred until three (3) Business Days after the issuance of
the decision of the arbitrators as to such dispute.
5.4 Publicity.
---------
Sellers and Buyer shall consult with each other with regard to all press
releases or other public or private announcements issued or made at or after the
date of execution hereof concerning this Agreement or the transactions
contemplated herein that names the other party, and, except as may be required
by applicable Laws or the applicable rules and regulations of any stock
exchange, neither Buyer nor a Seller shall issue any such press release or other
publicity that names the other party without the prior written consent of the
other party, which shall not be unreasonably withheld.
5.5 Compliance with Conditions.
----------------------------
Promptly following the execution of this Agreement, Sellers shall send to the
holder of each preferential right to purchase, right of first refusal, right of
first offer, or similar right burdening an Asset and each Person whose consent
to an assignment of an Asset is required prior to the Closing such written
notice concerning the transactions contemplated in this Agreement as is required
under the terms of the document or instrument creating such right or requiring
such consent, requesting, as applicable, the waiver of the relevant right or the
granting of the required consent. In addition, each Party will proceed
diligently to cause all of the conditions to the other Party's obligations to
close to be satisfied. If the conditions to a Party's obligations to close have
been satisfied, or expressly waived by such Party, in a timely manner as
provided herein, and such Party refuses to close, the Party refusing to close,
at the option of the other Party or Parties, as applicable, shall be deemed to
have breached this Agreement.
5.6 Maintenance of Existence.
--------------------------
Until the Closing, Buyer and a Seller shall maintain its existence and its
rights and franchises and procure the extension or renewal of any right,
franchise, or privilege expiring as the result of the lapse of time.
5.7 Mutual Assurances.
------------------
Subject to the terms of this Agreement, each Party will use reasonable
commercial efforts to take, or to cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper, or advisable under applicable
Laws to consummate and make effective the transactions contemplated by this
Agreement, including (a) cooperation in determining whether any action,
approval, or waiver by or in respect of, or filing with, any Governmental
Authority is required in connection with the consummation of the transactions
contemplated by this Agreement; (b) cooperation in seeking and obtaining any
such actions, approvals, waivers, or filings; and (c) the execution of any
additional instruments necessary to consummate the transactions contemplated
hereby.
5.8 Notification of Certain Matters.
----------------------------------
Each Party shall give prompt notice to the other Party or Parties, as
applicable, of (a) the occurrence or nonoccurrence of any event that would be
likely to cause any representation or warranty of such Party contained in this
Agreement to be untrue or inaccurate in any material respect at or prior to the
Closing Date and (b) any material failure of such Party to comply with or
satisfy any covenant, condition, or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 5.8 shall not limit or otherwise affect the remedies available
hereunder to the Party or Parties, as applicable, receiving such notice.
5.9 Designation as Operator.
-------------------------
On or after the Closing Date, upon Buyer's request, any a Seller shall resign
as operator of all Assets as to which that a Seller has served as operator prior
to the Closing. Sellers do not warrant or guarantee that, after the Closing,
Buyer will become the operator of any Asset operated by a Seller or prior to the
Closing as to which there are co-owners of the relevant Lease(s). With respect
to each such Asset, upon Buyer's request, Sellers shall support Buyer in Buyer's
efforts to be named replacement operator of such Assets under the terms of the
applicable Contracts effective as of the Possession Time (or as soon thereafter
as is reasonably practicable) and will use reasonable commercial efforts, at
Buyer's cost, to obtain the votes of the other co-owners in the relevant
Lease(s) in favor of such election. Within five (5) Business Days after Buyer
is named or entitled to be replacement operator under the terms of the
applicable Contracts, Sellers and Buyer shall make all necessary filings and
take all other actions necessary to cause the resignation of any Seller as
operator and Buyer's designation as the replacement operator of such Assets to
be recognized and, if required, approved by all relevant Governmental
Authorities. In each case, Sellers shall use reasonable commercial efforts, at
Buyer's expense, to assist Buyer in assuming the timely operation and management
of such Assets.
5.10 Advances.
--------
Pursuant to Section 2.4(i) of the "Binding Provisions of the Letter of Intent,
Buyer has provided to Sellers cash advances ("Advances") to fund certain
completion and drilling operations on the portions of the Leases specified in
Section 2.4(i) of the "Binding Provisions of the Letter of Intent (the "PUD
Operations"). Sellers agree to furnish, or to cause to be furnished, to Buyer
copies of each of the following items for each affected Well:
(a) daily drilling reports;
(b) core analyses;
(c) mud logs;
(d) electrical induction logs and surveys, neutron logs, velocity surveys,
and other logs, surveys, and tests;
(e) well test and completion reports; and
(f) all reports made to any Governmental Authority.
ARTICLE VI.
CONDITIONS; TERMINATION; REMEDIES
6.1 Conditions Precedent to Seller's Obligation to Close.
----------------------------------------------------------
All obligations of a Seller under this Agreement are subject, at that Seller's
option, to the fulfillment, on or prior to the Closing Date, of each of the
following conditions:
(a) each and every representation and warranty of Buyer, under this
Agreement shall be true and accurate in all material respects (and in all
respects, in the case of representations and warranties qualified by
materiality) as of the date when made and shall be deemed to be made again at
and as of the Closing Date and shall then be true and accurate in all material
respects (and in all respects, in the case of representations and warranties
qualified by materiality);
(b) Buyer, shall have performed and complied in all material respects with
each and every covenant, agreement, and condition required by this Agreement to
be performed or complied with, executed and delivered all documents required to
be delivered, and otherwise taken all actions required to be taken, in each case
by Buyer on or prior to the Closing Date;
(c) no suit, action, or other proceeding shall be pending or threatened
before any court or arbitration tribunal or any Governmental Authority seeking
to enjoin, restrain, prohibit, or declare illegal, or seeking substantial
damages in connection with, the transactions contemplated in this Agreement;
(d) Buyer shall have received all consents, authorizations, waivers, and
approvals required to be obtained prior to the Closing by any court or
Governmental Authority under any applicable Law concerning the transactions
contemplated herein;
(e) Buyer shall have delivered to Sellers a certificate, dated and effective
as of the Closing Date, executed by the president or an authorized vice
president of Buyer, certifying to a Seller that on the Closing Date, the
representations and warranties of Buyer contained in this Agreement are true and
correct in all material respects (and in all respects, in the case of
representations and warranties qualified by materiality) and all covenants of
Buyer contained herein have been performed in all material respects provided
that Buyer's certificate shall only relate to the Restricted Stock; and
(f) Buyer shall have completed due diligence reviews satisfactory to Buyer
with respect to the Assets and shall have notified Sellers to that effect in
writing
6.2 Conditions Precedent to Buyer's Obligation to Close.
---------------------------------------------------------
All obligations of Buyer under this Agreement are subject, at Buyer's option,
to the fulfillment, on or prior to the Closing Date, of each of the following
conditions:
(a) each and every representation and warranty of Sellers under this
Agreement shall be true and accurate in all material respects (and in all
respects, in the case of representations and warranties qualified by
materiality) as of the date when made and shall be deemed to be made again at
and as of the Closing Date and shall then be true and accurate in all material
respects (and in all respects, in the case of representations and warranties
qualified by materiality);
(b) Sellers shall have performed and complied in all material respects with
each and every covenant, agreement, and condition required by this Agreement to
be performed or complied with, executed and delivered all documents required to
be delivered, and otherwise taken all actions required to be taken, in each case
by Sellers on or prior to the Closing Date;
(c) no suit, action, or other proceeding shall be pending or threatened
before any court or arbitration tribunal or any Governmental Authority seeking
to restrain, prohibit, or declare illegal, or seeking substantial damages in
connection with, the transactions contemplated in this Agreement;
(d) Sellers shall have received all consents, authorizations, waivers, and
approvals required to be obtained prior to the Closing by any court or
Governmental Authority under any applicable Law concerning the transactions
contemplated herein (including, without limitation, all consents and
authorizations, if any, from Governmental Authorities required to be obtained
with respect to the Transferable Permits prior to the Closing);
(e) Sellers shall have delivered to Buyer all consents to assignment,
waivers of preferential rights to purchase, and other similar matters (if any)
from third Persons required to be obtained prior to the Closing under the terms
of the Leases, the Real Property Interests, and the Contracts, in each case as a
result of the transactions contemplated in this Agreement;
(f) Sellers shall have delivered to Buyer a certificate, dated and effective
as of the Closing Date, executed by the president or an authorized vice
president of a Seller, certifying to Buyer that, on the Closing Date, the
representations and warranties of a Seller contained in this Agreement are true
and correct in all material respects (and in all respects, in the case of
representations and warranties qualified by materiality) and that all covenants
of a Seller contained herein have been performed in all material respects;
(g) Buyer shall have completed due diligence reviews satisfactory to Buyer
with respect to the Assets.
6.3 Termination.
-----------
This Agreement may be terminated, and the transactions contemplated herein may
be abandoned at any time prior to the Closing:
(a) by mutual written consent of Sellers or Buyer;
(b) by Sellers, at Sellers' option, if any of the conditions applicable to
Buyer set forth above in Section 6.1 have not been satisfied as provided therein
on or before the Scheduled Closing Date; and
(c) by Buyer, at Buyer's option, if any of the conditions applicable to
Sellers set forth above in Section 6.2 have not been satisfied as provided
therein on or before the Scheduled Closing Date.
6.4 Remedies.
--------
If this Agreement is terminated by (a) either Sellers or Buyer pursuant to
Section 6.3(a), (b) Sellers pursuant to Section 6.3(b) if the condition in
Section 6.1(c) is not satisfied, (c) Buyer pursuant to Section 6.3(c) if the
condition in Section 6.2(c), Section 6.2(g), Section 6.2(h), or Section 6.2(i)
is not satisfied, no Party shall have any further liability to the other as the
result of such termination. If this Agreement is otherwise terminated pursuant
to either Section 6.3(b) or Section 6.3(c), the terminating Party shall be
entitled to all remedies available at law or in equity, including, without
limitation, the remedy of specific performance, subject to the terms of Section
9.6. If a Party resorts to legal proceedings to enforce this Agreement or any
part thereof, the prevailing Party in such proceedings shall be entitled to
recover all costs incurred by such Party, including reasonable attorneys' fees,
in addition to any other relief to which such Party may be entitled.
6.5 Conveyance of Interests.
-------------------------
If this Agreement is terminated, for any reason, prior to the Closing, Sellers
will repay to Buyer any and all Advances in full, including 10% annualized
interest within 90 days of termination of this Agreement, and if such payment is
not timely made, Sellers shall convey to Buyer the undivided interests specified
on Schedule 6.5. Sellers hereby grant to Buyer a lien in and to all of the
Assets to secure Sellers' obligations under this Section 6.5.
ARTICLE VII.
CLOSING
7.1 Closing.
-------
The Closing shall be held at the offices of Buyer as indicated in Section 10.5
at 10:00 A.M., Central Time, on September 25, 2007 (the "Scheduled Closing
Date"), or on such other date as may be agreed to by the Parties. The date of
the Closing, whenever it occurs as provided herein, is referred to herein as the
"Closing Date."
7.2 Preliminary Settlement Statement.
----------------------------------
No later than three (3) Business Days prior to the Closing Date, Sellers shall
prepare and submit to Buyer a preliminary settlement statement (the "Preliminary
Settlement Statement"), which sets forth Sellers' estimate of the Adjusted
Consideration, reflecting the calculation of the Cash Purchase Price in
accordance with Section 2.3(b) and each adjustment and proration and its method
of calculation made in accordance with this Agreement as of the date of
preparation of such Preliminary Settlement Statement, together with the
designation of each Seller's account for the wire transfer of such estimated
Adjusted Consideration pursuant to Section 7.3. If, for any reason, Buyer
disputes any information contained in the Preliminary Settlement Statement, and
Buyer and Sellers are unable to resolve such dispute prior to the Closing Date,
the Parties shall submit the dispute to arbitration pursuant to Section 10.11,
and the Closing shall be deferred until three (3) Business Days after the
issuance of the decision of the arbitrators as to such dispute.
7.3 Actions at Closing.
--------------------
At the Closing, Sellers and Buyer shall take the following actions:
(a) Sellers and Buyer shall each execute and deliver (i) the Conveyance in
sufficient counterparts to facilitate recording in all relevant jurisdictions
and (ii) the Preliminary Settlement Statement.
(b) Buyer shall deliver to Sellers the estimated Adjusted Consideration
reflected in the Preliminary Settlement Statement, less the Holdback, by bank
wire transfer of immediately available U.S. funds to the account designated in
the Preliminary Settlement Statement.
(c) Sellers shall deliver to Buyer (i) releases of all Liens (if any)
encumbering the Assets that do not constitute Permitted Encumbrances, (ii)
transfer orders or letters in lieu thereof, on forms provided by Buyer,
directing all purchasers of production to make payment to Buyer of proceeds
attributable to Hydrocarbons produced from the Assets after the Effective Time,
(iii) all consents, waivers, and other similar matters pertaining to the Assets
obtained by Sellers prior to the Closing, and (iv) all undisbursed revenues that
Seller is required to deliver to Buyer under Section 8.3.
(d) Sellers shall deliver to Buyer the certificates provided for in Section
6.2(f).
(e) Buyer shall deliver to Sellers the certificate provided for in Section
6.1(e).
(f) Sellers shall deliver to Buyer a statement that satisfies the
requirements of Treas. Reg. 1.1445-2(b)(2), certifying that Seller is not a
"foreign" Person for federal income tax purposes.
(g) Buyer shall have delivered to Sellers copies of instructions to Buyer's
transfer agent directing the transfer agent to issue as soon as possible shares
of Restricted Stock (registered in the name of such Seller in an aggregate
amount equal to the Stock Consideration).
(h) Buyer shall execute and deliver the Employment Agreement between Buyer
and Xxxxx Xxxx attached hereto as Exhibit H.
(i) Buyer shall execute and deliver the Consulting Agreement between Buyer
and Xxx Xxxxxxxxx attached hereto as Exhibit I.
(j) Sellers and Buyer shall execute such other documents and take such other
actions as are provided for elsewhere in this Agreement or as may be necessary
to consummate the transactions contemplated herein.
7.4 Records.
-------
At any time after the Closing, pursuant to Buyer's reasonable instructions,
Sellers shall deliver to Buyer the Records. Buyer shall be entitled to all
original Records affecting all of the Assets. Sellers may make and retain, at
their expense, copies of the Records prior to the delivery thereof to Buyer.
Buyer agrees to maintain all Records until the fifth (5th) anniversary of the
Closing Date (or such longer period of time as Sellers may request for those
Records relevant for tax audit purposes), or, if any of such Records pertain to
a Claim pending at such fifth anniversary date, until such Claim is finally
resolved and the time for all appeals has been exhausted. Buyer will provide to
Sellers reasonable access to the Records for purposes of obtaining information
for the preparation of tax returns, financial statements, and other legitimate
business purposes of Seller.
ARTICLE VIII.
POST CLOSING MATTERS
8.1 Settlement Statement.
---------------------
On or before ninety (90) days after the Closing Date, Buyer will prepare a
final accounting statement, subject to verification by Sellers, which sets forth
the final calculation and amount of the Cash Purchase Price (including all
adjustments thereto) in accordance with Sections 2.3(b) and 2.3(c), the
calculations used to determine such amounts, and the actual proration of all
other amounts required by this Agreement (the "Final Settlement Statement"). No
later than fifteen (15) days after Seller's receipt of the Final Settlement
Statement from Buyer (but no earlier than ninety (90) days after the Closing
Date), Sellers shall deliver to Buyer written notice setting forth any changes
to the Final Settlement Statement proposed by Sellers. On or before fifteen
(15) days after Buyer's receipt of Sellers' proposed changes to the Final
Settlement Statement, Buyer and Sellers shall agree on the Final Settlement
Statement and, as the case may be, shall pay to the other such sums as may be
found to be due in the final accounting. All amounts paid pursuant to this
Section 8.1 shall be delivered by wire transfer of immediately available U.S.
funds to the account specified in writing by the relevant Party. If Buyer and
Sellers are unable to agree on the Final Settlement Statement on or before
fifteen (15) days after Buyer's receipt of Sellers' proposed changes thereto,
then Buyer and Sellers shall submit all unresolved claims and amounts for
arbitration in accordance with the terms of Section 10.11.
8.2 Further Cooperation.
--------------------
After the Closing Date, Buyer and Sellers shall execute and deliver, or shall
cause to be executed and delivered from time to time, such further instruments
of conveyance and transfer, and shall take such other actions as either Party
may reasonably request, to convey and deliver the Assets to Buyer, to perfect
Buyer's title thereto, and to accomplish the orderly transfer of the Assets to
Buyer in the manner contemplated by this Agreement. If, after the Closing Date,
either Sellers or Buyer receives monies belonging to the other, such amounts
shall be promptly disbursed to the Party entitled to receive them. If an
invoice or other evidence of an obligation is received by Sellers or Buyer,
which is either an obligation assumed by the other Party or partially an
obligation of both Sellers and Buyer, the Parties shall consult with each other,
and an adjustment for such amount will be made either on the Final Settlement
Statement, or, if the evidence of the obligation is not received until after the
completion of the final accounting pursuant to Section 8.1, in cash as the
Parties may agree. If Sellers and Buyer are unable to agree on the disposition
of such an obligation, Sellers and Buyer shall submit the matter to binding
arbitration in accordance with the terms of Section 10.11.
8.3 Undisbursed Revenues and Payment of Vendor Claims.
-------------------------------------------------------
No later than the Closing Date, Sellers shall pay or disburse to other Persons
(including amounts held in suspense by Seller) and that, as of the Closing Date,
have not been thus paid or disbursed. On or before thirty (30) days after the
Closing Date, Seller shall pay all of the Vendor Claims and all other claims
that should have been scheduled on Schedule 3.1(n) in order to make the
representations in Section 3.1 true and correct.
8.4 Holdback.
--------
Buyer shall retain One Hundred Fifty Thousand Dollars ($150,000.00) of the
Cash Consideration (the "Holdback") following the Closing Date, and Buyer may
apply the Holdback to satisfy claims of Buyer against either Seller under this
Agreement or under the Conveyance. Notwithstanding any other provision of this
Agreement (including without limitation Section 2.5and Section 9.4), Buyer's
sole recourse after the Closing Date for any claim against Sellers under this
Agreement or the Conveyance, including claims for Defect Values (collectively,
all such claims are "HOLDBACK CLAIMS"), shall be to the Holdback, as the
Holdback amount may exist from time to time under the provisions of this Section
8.4, but such limitation on Buyer's recourse shall not limit Sellers'
obligations under this Article VIII (including the obligation to pay Vendor
Claims). Buyer shall give notice to Seller of any application by Buyer of any
portion of the Holdback, and any dispute regarding such application shall be
submitted for arbitration in accordance with the terms of Section 10.11. Any
portion of the Holdback remaining unapplied after Ninety (90) days following the
Closing Date shall be paid to Sellers. Interim accounting for the Holdback
shall be provided monthly and an accounting for the entire Holdback shall be
included in the Final Settlement Statement.
ARTICLE IX.
SURVIVAL; INDEMNIFICATION
9.1 Survival.
--------
All representations, warranties, covenants, agreements, and indemnities of
Buyer (with regard to the Restricted Stock) and Sellers under this Agreement
shall survive the Closing and the delivery of the Conveyance, shall not be
merged with or into the Conveyance, and shall remain in force and effect as
provided in this Section 9.1, as applicable, regardless of any investigation at
any time made by or on behalf of Buyer or a Seller, or of any information that
Buyer or Sellers may have with respect thereto. Such survival does not obligate
any Party to make any further representation or warranty after the Closing Date,
or to cause any representation or warranty made hereunder to remain true and
correct after the Closing Date.
9.2 Indemnity as Sole Remedy.
---------------------------
Except to the extent otherwise provided in Section 6.4 and Section 8.4, the
indemnity provided by each Party to the other under this Article IX shall
constitute the sole and exclusive remedy for such Party and its Indemnity Group
after the Closing with respect to (a) the inaccuracy or breach of any
representation or warranty made by another Party hereunder and (b) a breach or
default in the performance by such other Party of any covenant or agreement of
such other Party contained in this Agreement. Except as otherwise provided in
Section 6.4, Section 8.4 and this Article IX, each Party hereby waives any Claim
arising under common law, any statute, or otherwise against another Party
arising from or out of the inaccuracy or breach of any representation or
warranty made by the other Party hereunder or the breach or default in the
performance by such other Party of any covenant or agreement of such other Party
contained in this Agreement.
9.3 Indemnities of Buyer.
----------------------
Regardless of any investigation made at any time by or on behalf of any Party
or any information any Party may have, and regardless of the presence or absence
of insurance, Buyer shall indemnify and hold harmless Seller and its Indemnity
Group from and against any and all Claims and Liabilities caused by, arising out
of, resulting from, or relating in any way to, and to pay to Seller or its
Indemnity Group any sum that a Seller or its Indemnity Group pays, or becomes
obligated to pay, on account of: (a) any breach or default in the performance by
Buyer of any covenant or agreement of Buyer contained in this Agreement or any
document executed in connection herewith; (b) any breach of a warranty or an
inaccurate or erroneous representation made by Buyer in this Agreement
(provided, however, that for purposes of this Section 9.3, all qualifications
relating to materiality contained in such representations and warranties shall
be disregarded); and (c) all Assumed Liabilities.
9.4 Indemnities of Sellers.
------------------------
Regardless of any investigation made at any time by or on behalf of any Party
or any information any Party may have, and regardless of the presence or absence
of insurance, each Seller shall indemnify and hold harmless Buyer and its
Indemnity Group from and against any and all Claims and Liabilities caused by,
arising out of, resulting from, or relating in any way to, and to pay Buyer or
its Indemnity Group any sum that Buyer or its Indemnity Group pays or becomes
obligated to pay, on account of: (a) any breach or default in the performance by
that Seller of any covenant or agreement of that Seller contained in this
Agreement or any document executed in connection herewith; (b) any breach of a
warranty or an inaccurate or erroneous representation made by that Seller in
this Agreement (provided, however, that for purposes of this Section 9.4, all
qualifications relating to materiality contained in such representations and
warranties, except for Section 3.1(s), shall be disregarded); and (c) all that
Seller's Retained Liabilities.
9.5 Assertion of Claims; Notices; Defense; Settlement.
-------------------------------------------------------
(a) Upon the discovery by a Party entitled to indemnification under any
provision of this Agreement (the "Indemnified Party") of facts believed to
entitle such Party to indemnification hereunder, including the receipt by any
such Party of notice of a Claim from any third Person, the Indemnified Party
shall give prompt written notice of any such Claim to the Party obligated to
provide the requested indemnification (the "Indemnifying Party"). Each such
notice shall set forth the facts known to the Indemnified Party pertaining to
the relevant Claim and shall specify the manner in which the Indemnified Party
proposes to respond to such Claim.
(b) Within ten (10) days after the receipt by the Indemnifying Party of such
notice, the Indemnifying Party shall state in writing to the Indemnified Party:
(i) whether the Indemnified Party may proceed to respond to the Claim in the
manner set forth in its notice, or (ii) whether the Indemnifying Party shall
assume responsibility for and conduct the negotiation, defense, or settlement of
the Claim, and if so, the specific manner in which the Indemnifying Party
proposes to proceed. If the Indemnifying Party assumes control of the Claim,
the Indemnified Party shall at all times have the right to participate in the
defense thereof and to be represented, at its sole expense, by counsel selected
by it. No such Claim shall be compromised or settled by either the Indemnifying
Party or the Indemnified Party, as applicable, in any manner that admits
liability on the part of the other Party or that might otherwise adversely
affect the interest of such other Party without the prior written consent of
such other Party, which consent will not be unreasonably withheld or delayed.
As a condition precedent to indemnification under this Agreement, the
Indemnified Party shall assign to the Indemnifying Party, and the Indemnifying
Party shall become subrogated to, all rights and Claims, up to the amount of
indemnification, of the Indemnified Party against third Persons arising out of
or pertaining to the matters for which the Indemnifying Party shall provide
indemnification. The amount of the Indemnified Party's Claim for
indemnification shall be reduced by the amount of any insurance reimbursement
paid to the Indemnified Party pertaining to the Claim.
9.6 Limitation on Damages.
-----------------------
For the breach or non-performance by any Party of any representation,
warranty, covenant, or agreement contained in this Agreement, the liability of
the obligor shall be limited to direct actual damages only, except to the extent
that the obligee is entitled to specific performance or injunctive relief. AS
BETWEEN THE PARTIES, NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT,
NO PARTY SHALL BE LIABLE TO ANY OTHER PARTY AS THE RESULT OF A BREACH OR A
VIOLATION OF ANY REPRESENTATION, WARRANTY, COVENANT, AGREEMENT, OR CONDITION
CONTAINED IN THIS AGREEMENT FOR SPECIAL, CONSEQUENTIAL, INCIDENTAL, PUNITIVE,
EXEMPLARY, OR INDIRECT DAMAGES, LOST PROFITS, OR OTHER BUSINESS INTERRUPTION
DAMAGES, IN TORT, IN CONTRACT, UNDER ANY INDEMNITY PROVISION, ARISING BY
OPERATION OF LAW (INCLUDING, WITHOUT LIMITATION, STRICT LIABILITY), OR
OTHERWISE. WITH RESPECT TO CLAIMS BY THIRD PERSONS, A PARTY MAY RECOVER FROM
ANY OTHER PARTY ALL COSTS, EXPENSES, OR DAMAGES (INCLUDING, WITHOUT LIMITATION,
SPECIAL, CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY, OR INDIRECT DAMAGES),
LOST PROFITS, AND OTHER BUSINESS INTERRUPTION DAMAGES IN ADDITION TO ACTUAL
DIRECT DAMAGES PAID OR OWED TO ANY SUCH THIRD PERSON IN SETTLEMENT OR
SATISFACTION OF CLAIMS AS TO WHICH THE RELEVANT PARTY IS ENTITLED TO
INDEMNIFICATION HEREUNDER.
9.7 Limitation on Reliance.
------------------------
WITHOUT LIMITING THE GENERALITY OF SECTION 9.2, EACH OF THE PARTIES RECOGNIZES
AND AGREES THAT IT IS NOT RELYING UPON THE AGENTS OR COUNSEL OF THE OTHER PARTY
FOR LEGAL OR BUSINESS ADVICE OR TO PERFORM DUE DILIGENCE OR MAKE DISCLOSURES
WITH RESPECT TO ANY OF THE ASSETS, THE ASSUMED LIABILITIES OR ANY MATTER
RELATING THERETO, AND THAT NO SUCH AGENT OR COUNSEL SHALL HAVE ANY DUTY OR
OBLIGATION TO ANY PARTY OR WITH RESPECT TO ANY MATTER NOT EXPRESSLY UNDERTAKEN
PURSUANT TO A WRITING DULY EXECUTED THEREBY. THE FOREGOING LIMITS THE
LIABILITIY OF AGENTS OR COUNSEL OF THE PARTIES FROM LIABILITY FOR THEIR OWN
NEGLIGENCE, INCLUDING BUT NOT LIMITED TO NEGLIGENT MISREPRESENTATION.
ARTICLE X.
MISCELLANEOUS
10.1 Exhibits.
--------
All exhibits and schedules referred to in this Agreement are hereby
incorporated into this Agreement by reference and constitute a part of this
Agreement for all purposes. Each Party and its counsel has received a complete
set of exhibits and schedules prior to and as of the date of execution of this
Agreement.
10.2 Expenses.
--------
Except as otherwise specifically provided herein, all fees, costs, and
expenses incurred by Buyer and Sellers in negotiating this Agreement and 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 and expenses in connection with the filing and recording of the
Conveyance and other instruments required to convey title to the Assets to Buyer
shall be borne by Buyer.
10.3 Proration of Taxes.
--------------------
Each Party shall assume responsibility for, and shall bear and pay, all
federal income taxes, state income taxes, franchise taxes, and other similar
taxes (including any applicable interest or penalties) incurred by or imposed
upon such Party with respect to the transactions described in this Agreement.
Seller shall assume responsibility for, and shall bear and pay, all Transfer
Taxes incurred or imposed with respect to the transfer of the Assets. Each
Seller shall assume responsibility for, and shall bear and pay, all
Property-Related Taxes (including any applicable penalties and interest) based
upon or measured by the ownership of that Seller's Assets or the receipt of
proceeds therefrom, but exclusive of income taxes, and assessed against the
Assets by any taxing authority for the period prior to the Effective Time.
Buyer shall be responsible for, and shall bear and pay, all such
Property-Related Taxes assessed against the Assets by any taxing authority for
any period that begins on or after the Effective Time. For purposes of this
Agreement, the foregoing proration of Property-Related Taxes shall be
accomplished as an adjustment to the Cash Purchase Price and, in the case of ad
valorem and other property taxes, shall be based upon the ad valorem and other
property taxes actually assessed against the Assets for 2006. In the event of a
conflict between the terms of this Section 10.3 and any other provision of this
Agreement, the terms of this Section 10.3 shall govern and control.
10.4 Assignment.
----------
No Party shall assign this Agreement, except to a wholly owned subsidiary of
the assigning Party by assignment, transfer of equity, merger, reorganization,
or consolidation, without the prior written consent of the non-assigning
Parties, which shall not be unreasonably withheld or delayed. Any such
assignment of rights shall provide for the assumption by the transferee of the
obligations of the assigning Party under this Agreement. No assignment of any
rights hereunder shall relieve the assigning Party of any obligations or
responsibilities hereunder. Upon the assumption by such a transferee of the
obligations of the assigning Party under this Agreement, such transferee shall
become primarily liable for all such obligations assumed. Notwithstanding any
such assumption, however, if such a transferee fails to perform any of the
obligations thus assumed, the assigning Party shall remain liable for the
performance thereof. Subject to the foregoing, this Agreement shall be binding
upon and inure to the benefit of the Parties and their respective successors and
assigns.
10.5 Notices.
-------
All notices and communications required or permitted to be given hereunder
shall be in writing and shall be delivered personally, or sent by bonded
overnight courier, or by telex or facsimile transmission (provided any such
telegram, telex, or facsimile transmission is confirmed either orally or by
written confirmation), addressed to the appropriate Party at the address for
such Party shown below or at such other address as such Party shall have
theretofore designated by written notice delivered to the Party giving such
notice:
If to Buyer:
-----------
Westside Energy Corporation
0000 Xxxxxx Xxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Manner, CEO
Telephone No: 000.000.0000
Facsimile No: 214.522.4169
If to Gulftex:
-------------
GULFTEX OPERATING, INC.
0000 XXX Xxxxxxx, Xxxxx 0000
Xxxx Xxx 00
Xxxxxx, Xxxxx 00000
Attn: Xxxxx Xxxx
Telephone No: 000.000.0000
Facsimile No: ____________
If to TD Energy Services, Inc.:
------------------------------
TD ENERGY SERVICES, INC.
________________________
0000 XXX Xxxxxxx, Xxxxx 0000
Xxxx Xxx 00
Xxxxxx, Xxxxx 00000
Attn: Xxxxx Xxxx
Telephone No: 000.000.0000
Facsimile No: ____________
Any notice given in accordance herewith shall be deemed to have been given
on the Business Day when delivered to the addressee in person or by telex,
facsimile, or bonded overnight courier; provided, however, that if any such
notice is received after normal business hours, the notice will be deemed to
have been given on the next succeeding Business Day. Any Party may change the
address, telephone number, and facsimile number to which such communications to
such Party are to be addressed by giving written notice to the other Party in
the manner provided in this Section 10.5.
10.6 ENTIRE AGREEMENT; CONFLICTS.
-----------------------------
THIS AGREEMENT, THE EXHIBITS HERETO, THE CONVEYANCE, AND THE "BINDING
PROVISIONS" OF THE LETTER OF INTENT (AS AMENDED AND/OR SUPERSEDED HEREBY),
CONSTITUTE THE ENTIRE AGREEMENT AMONG THE PARTIES PERTAINING TO THE SUBJECT
MATTER HEREOF AND SUPERSEDE ALL PRIOR AGREEMENTS, UNDERSTANDINGS, NEGOTIATIONS,
AND DISCUSSIONS, WHETHER ORAL OR WRITTEN, OF THE PARTIES PERTAINING TO THE
SUBJECT MATTER HEREOF. THERE ARE NO WARRANTIES, REPRESENTATIONS, OR OTHER
AGREEMENTS BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER THEREOF EXCEPT AS
SPECIFICALLY SET FORTH HEREIN OR IN THE CONVEYANCE OR THE "BINDING PROVISIONS"
OF THE LETTER OF INTENT (AS AMENDED AND/OR SUPERSEDED HEREBY), AND NEITHER BUYER
NOR SELLER SHALL BE BOUND BY OR LIABLE FOR ANY ALLEGED REPRESENTATION, PROMISE,
INDUCEMENT, OR STATEMENT OF INTENTION NOT SO SET FORTH. IN THE EVENT OF A
CONFLICT BETWEEN THE TERMS OF THIS AGREEMENT AND THE TERMS OF THE CONVEYANCE OR
THE "BINDING PROVISIONS" OF THE LETTER OF INTENT (AS AMENDED AND/OR SUPERSEDED
HEREBY), THE TERMS OF THIS AGREEMENT SHALL GOVERN AND CONTROL; PROVIDED,
HOWEVER, THAT THE INCLUSION IN THE CONVEYANCE AND THE "BINDING PROVISIONS" OF
THE LETTER OF INTENT OF TERMS NOT ADDRESSED IN THIS AGREEMENT SHALL NOT BE
DEEMED A CONFLICT, AND ALL SUCH ADDITIONAL TERMS SHALL BE GIVEN FULL FORCE AND
EFFECT, SUBJECT TO THE TERMS OF THIS SECTION 10.6.
10.7 Amendment.
---------
This Agreement may be amended only by an instrument in writing executed by the
Parties.
10.8 Waiver; Rights Cumulative.
---------------------------
Any of the terms, covenants, representations, warranties, or conditions hereof
may be waived only by a written instrument executed by or on behalf of the Party
waiving compliance. No course of dealing on the part of Buyer or Sellers, or
their respective officers, employees, agents, or representatives, or any failure
by Buyer or Sellers to exercise any of its rights under this Agreement, shall
operate as a waiver thereof or affect in any way the right of such Party at a
later time to enforce the performance of such provision. No waiver by any Party
of any condition, or any breach of any term, covenant, representation, or
warranty contained in this Agreement, in any one or more instances, shall be
deemed to be or construed as a further or continuing waiver of any such
condition or breach or a waiver of any other condition or of any breach of any
other term, covenant, representation, or warranty. The rights of Buyer and
Sellers under this Agreement shall be cumulative, and the exercise or partial
exercise of any such right shall not preclude the exercise of any other right.
10.9 GOVERNING LAW; CONSENT TO JURISDICTION.
------------------------------------------
THIS AGREEMENT AND THE LEGAL RELATIONS AMONG THE PARTIES SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCLUDING ANY
CONFLICTS OF LAW, RULE OR PRINCIPLE THAT MIGHT REFER CONSTRUCTION OF SUCH
PROVISIONS TO THE LAWS OF ANOTHER JURISDICTION. ALL OF THE PARTIES CONSENT TO
THE EXERCISE OF JURISDICTION IN PERSONAM BY THE COURTS OF THE STATE OF TEXAS FOR
ANY ACTION ARISING OUT OF THIS AGREEMENT. ALL ACTIONS OR PROCEEDINGS WITH
RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED
TO, OR FROM THIS AGREEMENT SHALL BE LITIGATED IN COURTS HAVING SITUS IN DALLAS,
TEXAS.
10.10 Severability.
------------
If any term or other provision of this Agreement is invalid, illegal, or
incapable of being enforced by any rule of Law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any adverse manner to any Party. Upon
such determination that any term or other provision is invalid, illegal, or
incapable of being enforced, the Parties shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the Parties as closely as
possible in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the extent possible.
10.11 Arbitration.
-----------
(a) Any disagreement, difference, or dispute among the Parties provided in
this Agreement to be resolved by arbitration shall be resolved pursuant to
arbitration according to the procedures set forth in this Section 10.11. Any
Party may commence an arbitration proceeding hereunder by giving written notice
to the other Party. No later than five (5) Business Days after the delivery of
the notice commencing the arbitration proceeding, Sellers (or the affected
Seller if the dispute relates to only one of the Sellers) and Buyer shall each
select an arbitrator. Promptly following their selection, the two arbitrators
selected by Sellers and Buyer jointly shall select a third arbitrator. All
arbitrators selected under this Agreement shall have at least eight (8) years of
professional experience in the oil, gas, or accounting industries, as
applicable, and shall not previously have been employed by any of the Parties
and shall not have a direct or indirect interest in any of the Parties or the
subject matter of the arbitration. The arbitration hearing shall commence as
soon as is practical, but in no event later than thirty (30) days after the
selection of the third arbitrator. If any arbitrator selected under this
Section 10.11(a) should die, resign, or otherwise be unable to perform his
duties hereunder, a successor arbitrator shall be selected pursuant to the
procedures set forth in this Section 10.11(a).
(b) The arbitrators shall settle all disputes in accordance with the Federal
Arbitration Act and the Commercial Arbitration Rules of the American Arbitration
Association, to the extent that such Rules do not conflict with the terms of
such Act or the terms of this Agreement. Any arbitration hearing shall be held
in Dallas County, Texas. The decision of the arbitrators shall be final and
binding on the Parties and, if necessary, may be enforced in any court of
competent jurisdiction. The Law governing all such disputes shall be the Laws
of the State of Texas, including, without limitation, the Uniform Commercial
Code as in effect in the State of Texas, as the same may be amended from time to
time, but without regard to conflicts of laws principles. The fees and expenses
of the arbitrators shall be shared one-half by Seller and one-half by Buyer.
Any payment to be made as the result of any dispute resolved by arbitration
hereunder shall be accomplished pursuant to the Final Settlement Statement, with
the final payments due thereunder being deferred until the arbitrators have
rendered their decisions on all matters to be resolved by arbitration hereunder.
10.12 Counterparts.
------------
This Agreement may be executed in any number of counterparts, and each such
counterpart hereof shall be deemed to be an original instrument, but all of such
counterparts shall constitute for all purposes one agreement. This Agreement
may be executed by the Parties in different locations and shall become binding
upon all Parties upon the exchange by the Parties of executed signature pages by
facsimile; provided, however, that no later than five (5) Business Days after
such execution hereof by facsimile, the Parties shall have executed and
delivered each to the other a fully executed original counterpart of this
Agreement.
IN WITNESS WHEREOF, Sellers and Buyer have executed this Agreement on the
date first above written.
SELLERS:
-------
GULFTEX OPERATING, INC.
By:
Name: Xxxxx Xxxx
Title: Executive Vice-President
TD ENERGY SERVICES INC.
By:
Name: Xxxxx Xxxx
Title: President
BUYER:
-----
WESTSIDE ENERGY CORPORATION
By:
Name: _____________________________
Title: _______________________________
SCHEDULE 1.1
DEFINED TERMS
-------------
The following terms and expressions shall have the meanings set forth in the
indicated provisions of this Agreement: "Adjusted Base Consideration" , Section
2.3(a); "Adjusted Cash Purchase Price", Section 2.3(a); "Adjusted
Consideration", Section 2.3(d); "Allocable Acreage", Section 6.5; "Assets",
Section 2.1; "Assumed Liabilities", Section 2.4; "Base Purchase Price" and "Cash
Purchase Price", Section 2.3(a); "Closing Date", Section 7.1; "Final
Settlement Statement", Section 8.1; "Holdback" and "Holdback Claims", Section
8.4 "Hydrocarbons", Section 2.1(c); "Indemnified Party" and "Indemnifying
Party", Section 9.5(a); "Intangible Rights", Section 2.1(i); "Leases", Section
2.1(a); "Restricted Stock" and "Stock Consideration", Section 2.3(a); "Personal
Property", Section 2.1(e); "Preliminary Settlement Statement", Section 7.2;
"Real Property Interests", Section 2.1(d); "Records", Section 2.1(j); "Retained
Liabilities", Section 2.5; "Transferred Contracts", Section 2.1(g); "Vendor
Claims", Section 3.1(n)and "Xxxxx", Section 2.1(b).
In addition, the following terms and expressions shall have the meanings
set forth hereinafter:
"Affiliate" means, with respect to a Party, any Person that directly or
indirectly controls, is controlled by, or is under common control with, the
relevant Party. For purposes of this definition, the term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, contract, voting trust, membership in management or in the
group appointing or electing management, or otherwise through formal or informal
arrangements or business relationships.
"Allocated Value" means, with respect to each Well, Real Property Interest, item
of Personal Property, and other Asset to which value is allocated herein, the
amount set forth on Exhibit B (in two parts, Exhibit B-1 and B-2) under the
column styled "Allocated Value" for such Well, Real Property Interest, item of
Personal Property, or other Asset. For purpose of this Agreement, Seller and
Buyer agree and stipulate that the Allocated Values set forth in Exhibit B have
been established solely for use in calculating adjustments to the Cash Purchase
Price as provided herein, and not for purposes of federal or state income
taxation, such Allocated Values being solely for the convenience of the Parties.
"Assumed Environmental Liabilities" means, collectively, ALL CLAIMS AND
LIABILITIES (INCLUDING, WITHOUT LIMITATION, CLAIMS AND LIABILITIES RELATING TO
ENVIRONMENTAL CONDITIONS THAT BECOME "ASSUMED ENVIRONMENTAL LIABILITIES" BY
OPERATION OF SECTION 4.3, BUT EXCLUDING THE RETAINED ENVIRONMENTAL LIABILITIES)
ARISING OUT OF, RESULTING FROM, OR RELATING IN ANY WAY TO THE EXISTENCE OF AN
ENVIRONMENTAL CONDITION ON OR RELATING TO ONE OR MORE ASSETS (INCLUDING, WITHOUT
LIMITATION, CLAIMS AND LIABILITIES FOR INJURY TO OR DEATH OF ANY PERSON,
PERSONS, OR OTHER LIVING THINGS, OR LOSS OR DESTRUCTION OF OR DAMAGE TO PROPERTY
OCCURRING AS THE RESULT THEREOF), REGARDLESS OF WHETHER SUCH ENVIRONMENTAL
CONDITION IS KNOWN, ANTICIPATED, OR SUSPECTED AS OF THE POSSESSION TIME, OR
RESULTS, IN WHOLE OR IN PART, FROM THE NEGLIGENCE OR STRICT LIABILITY OF ANY
SELLER OR ITS RESPECTIVE AFFILIATES, EMPLOYEES, AGENTS, OR REPRESENTATIVES, AND
REGARDLESS OF WHETHER SUCH ENVIRONMENTAL CONDITION, OR THE ACTS, OMISSIONS,
EVENTS, OR CONDITIONS GIVING RISE THERETO AROSE, OCCURRED, OR EXISTED BEFORE,
AT, OR AFTER THE POSSESSION TIME.
"Business Day" means any day other than a Saturday, Sunday, or other day on
which commercial banks in Dallas, Texas, are required or authorized by Law to be
closed.
"Claims", for purposes of this Agreement, means any and all claims, demands,
Liens, notices of non-compliance or violation, notices of liability or potential
liability, investigations, actions (whether judicial, administrative, or
arbitrational), causes of action, suits, and controversies.
"Closing" means the consummation of the transactions contemplated in this
Agreement.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Contracts" means all seismic or other exploration agreements; farm-in,
farm-out, and participation agreements; dry hole, acreage contribution, and
bottom hole agreements; partnership, joint venture, and similar agreements;
Hydrocarbon purchase, sale, exchaange, gathering, storage, transportation, and
marketing agreements; acquisition agreements; operating agreements; area of
interest agreements; balancing agreements; pooling, communization, and
unitization agreements; processing, fractionation, condensate removal and
handling, dehydration, treatment, and separation agreements; saltwater, water,
and waste injection and disposal agreements; options; service agreements;
communications, facilities, and equipment leases and licenses, to the extent
transferable; and other contracts, agreements, and rights owned by Seller, in
whole or in part, to the extent that they are (i) appurtenant to or affect the
properties and rights comprising the Assets, or (ii) used or held for use in
connection with the use, ownership, or operation thereof, all as described more
particularly on Exhibit E.
"Conveyance" means the Assignment, Xxxx of Sale, and Conveyance substantially in
the form attached hereto as Exhibit G.
"Defect" means any Lien, charge, contract, agreement, obligation, or defect of
title, other than a Permitted Encumbrance, that causes, or could reasonably be
expected (in Buyer's good faith judgment) to cause: (a) a loss of title, in
whole or in part, by a Seller with respect to an Asset; (b) the title to an
Asset not to be good, valid, and indefeasible; (c) an Asset to be subject to a
Lien other than a Permitted Encumbrance; (d) in the case of a Lease or Well, and
without limiting clauses (a), (b), and (c) of this definition, (i) a Seller to
receive a percentage of all Hydrocarbons produced, saved, and marketed from or
allocable to such Lease or Well that is less than the Net Revenue Interest set
forth in Exhibit B for such Lease or Well, without reduction, suspension, or
termination for the productive life of such Lease or Well, or (ii) a Seller to
be obligated to bear a percentage of the costs and expenses of operations on and
the maintenance and development of such Lease or Well that is greater than the
Working Interest set forth for such Lease or Well on Exhibit B without increase
for the productive life of such Lease or Well, unless such greater Working
Interest yields a correspondingly greater Net Revenue Interest; or (e) a
Seller's interest in any Asset otherwise to be extinguished or the operation,
use, possession, ownership, or value of a Seller's interest in any Asset to be
materially affected or interfered with, except for Permitted Encumbrances. The
term "Defect" shall include a preferential right to purchase, right of first
refusal, right of first offer, or similar right affecting any Asset (including,
without limitation, any Contract) that is exercised prior to the Closing, or a
third Person consent to assignment required before an Asset may be assigned and
that is not obtained prior to the Closing.
"Defect Amount" means: (a) if the relevant Defect affects all of Sellers'
interest in an Asset, such that the Defect results in a complete failure of
title with respect thereto, the Defect Amount shall equal the full Allocated
Value for the affected Asset; (b) if the Defect constitutes undischarged taxes,
indebtedness, or Liens encumbering all or any portion of any Asset, the Defect
Amount shall equal the sum necessary to be paid to the obligee to remove the
Defect; (c) if the Defect results from a deficiency in a Seller's actual Net
Revenue Interest relative to that shown for the affected Lease or Well on
Exhibit B and on which the Allocated Value of such Lease or Well is based, the
Defect Amount shall equal the positive difference (if any) obtained by
subtracting (i) the product obtained by multiplying the Allocated Value for the
affected Lease or Well by the ratio of the actual Net Revenue Interest being
conveyed to the Net Revenue Interest set forth for such Lease or Well on Exhibit
B, from (ii) the Allocated Value for such Lease or Well; (d) if the Defect
results from a Seller's actual expense-bearing interest in a Lease or Well being
greater than the Working Interest shown for the affected Lease or Well on
Exhibit B and on which the Allocated Value of such Lease or Well is based, and
such larger expense-bearing interest is not accompanied by a proportionate
increase in a Seller's Net Revenue Interest in such Lease or Well, the Defect
Amount shall equal the positive difference (if any) obtained by subtracting (i)
a recalculated Allocated Value for such Lease or Well using the same production
rates, pricing, costs, tax forecasts, and discount factors used to calculate the
original Allocated Value for such Lease or Well, adjusted to account for the
diminution in the net present value of the future cash flows that results from
the higher expense-bearing interest, from (ii) the Allocated Value for such
Lease or Well set forth on Exhibit B; and (e) if the Defect is one other than
the Defects described above in clauses (a), (b), (c), and (d) of this
definition, the Defect Amount shall equal an amount determined by Sellers and
Buyer by evaluating the portion of the Assets affected by such Defect, the legal
effect of the Defect, and the potential economic effect of the Defect over the
life of the Assets affected.
"Effective Time" means 7:00 a.m., Central Time, on July 1, 2007.
"Environmental Contaminants" means "hazardous substances" and "pollutants
or contaminants", as those terms are defined in Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), petroleum,
including any fraction thereof," and "natural gas, natural liquids, liquefied
natural gas, or synthetic gas usable for fuel" as those terms are used in
Section 101 of CERCLA, any "solid or hazardous waste" as those terms are defined
or used in the Resource Conservation and Recovery Act, and any wastes regulated
by applicable rules of the Railroad Commission of Texas. The term also includes
naturally occurring radioactive material ("NORM") concentrated, disposed of,
released or present on, resulting from, or in association with Hydrocarbon
activities.
"Environmental Condition" means: (a) any event or condition (including, without
limitation, any Release) with respect to air, land, soil, surface, subsurface
strata, surface water, ground water, or sediment that causes the Assets to
become subject to (or their owner or operator to have Liability or be
potentially liable for) any removal, remediation, or response action under, or
not be in compliance with, any Environmental Law or any Permit pursuant to any
Environmental Law; (b) the existence of any written or oral Claim pending or
threatened that reasonably may be expected to subject the Assets or the owner or
the operator of the Assets to liability in favor of any Governmental Authority
as the result of the alleged violation by such owner or operator or any other
Person of any Environmental Law as it pertains to the Assets or the existence of
any event or condition on the Assets described in this definition; (c) the
failure of the Assets to be in compliance, or the owner or operator of the
Assets to comply, in each case in all material respects with all applicable
Environmental Laws with respect to the Assets; (d) the failure of the owner or
operator of the Assets to obtain or maintain in full force and effect any Permit
required under applicable Environmental Laws with respect to the Assets; or (e)
any event or condition described in the preceding clauses (a), (b), (c), and (d)
that results, or could reasonably be expected to result, in Liability to any
Governmental Authority for any removal, remediation, or response action, or any
other Person for injury to or death of any Person, Persons, or other living
thing, or damage, loss, or destruction of property located on the Assets. An
event or circumstance that results in the inaccuracy or breach of the
representations and warranties contained in Section 3.1(d)(iii) or Section
3.1(j) (insofar only as such representation and warranty relates to
environmental matters) shall constitute an Environmental Condition. The term
"Environmental Condition" includes, without limitation, any release, disposal,
spilling, leaking, pouring, emission, emptying, discharge, injection, escape,
transmission, leaching, or dumping (collectively, a "Release"), or any
threatened Release, of any Environmental Contaminants from, or related in any
way to the use, ownership, or operation of, the Assets that has not been
remedied in accordance with all applicable Environmental Laws.
"Environmental Laws" means all applicable Laws (including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act, the Resource Conservation and Recovery Act, and the Oil Pollution
Act of 1990, the Texas Solid Waste Disposal Act, and applicable rules of the
Texas Railroad Commission relating to the management or disposal of oilfield
waste, in each case as amended from time to time) relating to the protection of
the public health, welfare, and environment, worker protection, emergency
planning, and/or a community's right to know, including, without limitation,
those Laws relating to the storage, handling, and use of chemicals and other
hazardous materials, those relating to the Release, generation, processing,
treatment, storage, transportation, disposal, or other management of waste
materials of any kind, those relating to the protection of environmentally
sensitive areas, and employee health and safety.
"Gathering Assets" means the equipment, machinery, fixtures, inventory,
improvements, and other personal, mixed or movable property, compressors and
compression equipment, gas lines, gathering lines and all related equipment,
whether above or below the surface owned or utilized by Gulftex Pipeline, LLC or
Gulftex Gathering, LP in connection with the operation of gas gathering systems
associated with the Xxxxx, the Leases or any of them.
"Governmental Authority" means any governmental or quasi-governmental federal,
state, provincial, county, city, or other political subdivision of the United
States, any foreign country, or any department, bureau, agency, commission,
court, or other statutory or regulatory body or instrumentality thereof.
"Imbalance" means any imbalance between (a) the quantity of Hydrocarbons
produced from any Well and allocated to a Person from time to time and the share
of such production to which such Person is actually entitled by virtue of its
ownership interest in such Well, (b) the quantity of Hydrocarbons produced from
or allocable to the Assets delivered, and the quantity of such Hydrocarbons
received, in each case for gathering, transportation, or storage for the account
of a Person, (c) the quantity of Hydrocarbons produced from or allocable to the
Assets delivered for processing or refining, and the quantity of products or
residue Hydrocarbons redelivered, in each case for the account of a Person, and
(d) other similar types of Hydrocarbon-related imbalances attributable to the
Assets.
"Indemnity Group" means, for any Party, the Affiliates, officers, directors,
managers, members, partners, employees, agents, and representatives of the
relevant Party and for Buyer, Buyer's Indemnity Group.
"Intercompany Obligations" means any loans, advances, subscriptions, obligations
or liabilities owing or due to a Seller or its Affiliates, including amounts
owed and payable to a Seller for past JIB advances which have not been netted
against revenue, from any affiliate of a Seller, including for the purposes of
this definition only, any joint venture, partnership or other business
arrangement to which a Seller is a party.
"Knowledge", when used with reference to any Party, means (a) knowledge of those
matters of which the relevant Party is charged with constructive notice under
applicable Law, and (b) the actual knowledge of the current directors and
officers of such Party.
"Laws" means all constitutions, laws, statutes, ordinances, rules, regulations,
orders, and decrees of the United States, any foreign country, and any local,
state, provincial, or federal political subdivision or agency thereof, as well
as all judgments, decrees, orders, and decisions of courts having the effect of
law in each such jurisdiction, including, without limitation, all Environmental
Laws.
"Letter of Intent" means the letter dated as of ______________, between Gulftex
and Buyer relating to the transactions contemplated herein.
"Liabilities" means, for purposes of this Agreement, any and all losses,
judgments, damages, liabilities, injuries, costs, expenses, interest, penalties,
taxes, fines, obligations, and deficiencies. As used herein, the term
"Liabilities" includes, without limitation, reasonable attorneys' fees and other
costs and expenses of any Party receiving indemnification hereunder incident to
the investigation and defense of any Claim that results in litigation, or the
settlement of any Claim, or the enforcement by any Party receiving
indemnification hereunder of the provisions of Article IX, as applicable.
"Lien" means any mortgage, deed of trust, pledge, security interest,
encumbrance, lien, or charge of any kind (including any agreement to grant any
of the foregoing), any conditional sale or title retention agreement, any lease
in the nature thereof, or the filing of or agreement to give any financing
statement under the Uniform Commercial Code of any jurisdiction.
"Material Adverse Change" means an event, occurrence, development, or condition
that is materially adverse to the Assets taken as a whole, excluding (a) any
general, regional, industry-wide, economic, or political event, occurrence,
development, or condition (including, without limitation, the price of
Hydrocarbons), whether domestic or international, and (b) any change in the
condition of the Assets during the period from the date of this Agreement
through the Possession Time resulting from normal depletion of Hydrocarbon
reserves or the depreciation of the Personal Property through ordinary wear and
tear.
"Net Revenue Interest" means, with respect to each Lease and Well, the interest
in and to all Hydrocarbons produced and saved from or attributable to the
Lease(s) on which such Well is located, after giving effect to all valid
royalties, overriding royalties, production payments, net profits interests,
carried interests, reversionary interests, and other similar interests
constituting burdens upon, measured by, or payable out of Hydrocarbons produced
and saved from or attributable to such Lease(s) and Xxxxx.
"Office Property" means all office furnishings and equipment, telephone and
communications systems, and all other personal property of a Seller, and all
interests in any leases, agreements or other arrangements associated therewith,
relating to the business locations of a Seller other than those located on real
property constituting Real Property Interests, including but not limited to
Sellers' offices at 0000 XXX Xxxxxxx, Xxxxx 0000 xxx Xxxxx 0000, Xxxxxx, Xxxxx.
"Parties" means, collectively, Sellers and Buyer.
"Permits" means the permits, licenses, authorizations, certificates,
registrations, or other approvals (other than permits and licenses constituting
Real Property Interests) granted by any Governmental Authority that pertain or
relate in any way to the Assets, described more particularly on Exhibit F.
"Permitted Encumbrances" means:
(a) preferential rights to purchase any Asset (including, without
limitation, any Contract), required non-governmental, third Person consents to
assignment, and similar agreements with respect to which, prior to the Closing,
(i) waivers or consents are obtained from the appropriate Persons, or (ii) the
appropriate time period for asserting such rights has expired without an
exercise of such right;
(b) required non-governmental, third Person consents to assignment if such
consent is of a type customarily obtained subsequent to a sale or conveyance,
and the failure to obtain such consent would not have a material adverse effect
on the use or value of the Assets;
(c) Liens for taxes or assessments not yet delinquent or, if delinquent,
those taxes or assessments that are being contested in good faith by proceedings
diligently conducted in the normal course of business;
(d) all rights to consent by, required notices to, filings with, or other
actions by Governmental Authorities in connection with the sale or conveyance of
the Assets if the same are customarily obtained, given, or made subsequent to
such sale or conveyance;
(e) the Leases, the Contracts, the Permits, and the Real Property Interests;
(f) all easements, rights-of-way, servitudes, permits, licenses, surface
leases, and other rights to use the surface (in addition to the Real Property
Interests) affecting or pertaining to the Assets, but that are not included in
the Assets and do not interfere materially with the ownership, operation, value,
or use of the Assets;
(g) lessor's royalties, overriding royalties, division orders, production
payments, net profits interests, carried interests, rights to recoupment,
unitization, pooling, proration, and spacing designations, orders, and
agreements, reversionary interests, and similar burdens, if the net cumulative
effect thereof does not operate to cause a Seller to receive less than the Net
Revenue Interest set forth on Exhibit B of all Hydrocarbons produced, saved, and
marketed from any Lease or Well or bear and pay more than the Working Interest
shown on Exhibit B of all costs and expenses of operations in respect of such
Lease or Well without a proportionate increase in the associated Net Revenue
Interest;
(h) any operator's or other inchoate or undetermined Lien or charge, whether
statutory or contractual, constituting or securing the payment of expenses which
were or will be incurred in the ordinary course of business and incidental to
the maintenance, development, production, or operation of any Asset, to the
extent the same secure amounts not yet due and payable or that are being
contested in good faith by proceedings diligently conducted in the normal course
of business;
(i) any Lien created under the terms of any Lease, Real Property Interest,
or Contract to secure the performance of the lessee's obligations thereunder;
(j) conventional rights of reassignment;
(k) the rights reserved to, vested in, or imposed by any Governmental
Authority to control, regulate, or monitor the Assets in any manner, and all
applicable Laws;
(l) Defects and Environmental Conditions waived in writing by Buyer;
(m) any matters set forth in the Schedules to this Agreement; and
(n) all other Liens, charges, encumbrances, contracts, agreements,
instruments, obligations, and irregularities affecting any Asset that in the
aggregate are not such as to (i) interfere materially with the ownership,
operation, value, or use of such Asset for the purposes for which it is held;
(ii) prevent a Seller from receiving any proceeds from the sale of any
Hydrocarbons; or (iii) cause a Seller (A) to receive less than the Net Revenue
Interest set forth on Exhibit B of all Hydrocarbons produced, saved, and
marketed from any Lease or Well, or (B) bear and pay more than the Working
Interest shown on Exhibit B of all costs and expenses of operations in respect
of such Lease or Well without a proportionate increase in the associated Net
Revenue Interest.
"Person" means any individual, corporation, limited liability company,
partnership, trust, unincorporated organization, Governmental Authority, or any
other form of entity.
"Possession Time" means the time on the Closing Date when all of the actions
required under Section 7.3 to be taken by Sellers and Buyer at the Closing have
been taken.
"Property-Related Taxes" means any and all ad valorem, property, severance,
generation, conversion, Btu or gas, transportation, utility, gross receipts,
privilege, consumption, excise, lease, transaction, and other taxes, franchise
fees, governmental charges or fees, licenses, fees, permits, and assessments, or
increases therein, and any interest or penalties thereon, other than Transfer
Taxes and taxes based on or measured by net income or net worth.
"Remediation Estimate" means, with respect to an Environmental Condition, the
estimated cost (inclusive of Liabilities to Governmental Authorities and other
Persons reasonably anticipated to be incurred by a Seller as the result of such
Environmental Condition), determined by Buyer in good faith, to remediate the
relevant Environmental Condition in accordance with applicable Environmental
Laws.
"Retained Environmental Liabilities" means ALL LIABILITIES ARISING OUT OF,
RESULTING FROM, OR RELATING IN ANY WAY TO THE EXISTENCE OF AN ENVIRONMENTAL
CONDITION ON OR RELATING TO ONE OR MORE ASSETS (INCLUDING, WITHOUT LIMITATION,
LIABILITY FOR INJURY TO OR DEATH OF ANY PERSON, PERSONS, OR OTHER LIVING THINGS,
OR LOSS OR DESTRUCTION OF OR DAMAGE TO PROPERTY OCCURRING AS THE RESULT
THEREOF), REGARDLESS OF WHETHER SUCH ENVIRONMENTAL CONDITION IS KNOWN,
ANTICIPATED, OR SUSPECTED AS OF THE POSSESSION TIME, TO THE EXTENT ONLY THAT
SUCH ENVIRONMENTAL CONDITION, OR THE ACTS, OMISSIONS, EVENTS, OR CONDITIONS
GIVING RISE THERETO, AROSE, EXISTED, OR OCCURRED, IN WHOLE OR IN PART, PRIOR TO
THE POSSESSION TIME.
"Sellers' Percentage" means with respect to Gulftex, __%, and with respect to
TDE, __%.
"Transfer Taxes" means any sales, use, stock, stamp, document, filing,
recording, registration, and similar tax or charge, including, without
limitation, any interest or penalties thereon.
"Working Interest" means, with respect to each Lease or Well, the interest of
Sellers that is burdened with the obligation to bear and pay costs of operations
on or in respect of such Lease or Well.
