EXHIBIT 10.15
PURCHASE AND SALE AGREEMENT
BETWEEN
XXXXXX XXXXXX PRODUCTION COMPANY LP
AS SELLER
AND
LEGACY RESERVES OPERATING LP
AS BUYER
DATED JUNE 28, 2006
TABLE OF CONTENTS
Page No.
Article I Assets.........................................................................................1
Section 1.01 Agreement to Sell and Purchase....................................................1
Section 1.02 Assets............................................................................1
Section 1.03 Excluded Assets...................................................................3
Article II Purchase Price.................................................................................4
Section 2.01 Purchase Price....................................................................4
Section 2.02 Deposit...........................................................................5
Section 2.03 Allocated Values..................................................................5
Section 2.04 Effective Time....................................................................5
Article III Title Matters..................................................................................5
Section 3.01 Examination Period................................................................5
Section 3.02 Defensible Title and Permitted Encumbrances.......................................6
Section 3.03 Title Defects.....................................................................8
Section 3.04 Notice of Title Defects...........................................................9
Section 3.05 Remedies for Title Defects.......................................................10
Section 3.06 Special Warranty of Title........................................................11
Section 3.07 Preferential Rights To Purchase..................................................11
Section 3.08 Consents to Assignment...........................................................12
Section 3.09 Remedies for Title Benefits......................................................12
Article IV Environmental Matters.........................................................................13
Section 4.01 Environmental Review.............................................................13
Section 4.02 Environmental Definitions........................................................14
Section 4.03 Notice of Environmental Defects..................................................15
Section 4.04 Remedies for Environmental Defects...............................................16
Article V Representations and Warranties of Seller......................................................16
Section 5.01 Seller's Existence...............................................................17
Section 5.02 Legal Power......................................................................17
Section 5.03 Execution........................................................................17
Section 5.04 Brokers..........................................................................17
Section 5.05 Bankruptcy.......................................................................17
Section 5.06 Suits............................................................................17
Section 5.07 Royalties........................................................................17
Section 5.08 Taxes............................................................................18
TABLE OF CONTENTS
Page No.
Section 5.09 Contracts........................................................................18
Section 5.10 Liens............................................................................18
Article VI Representations and Warranties of Buyer.......................................................18
Section 6.01 Buyer's Existence................................................................18
Section 6.02 Legal Power......................................................................18
Section 6.03 Execution........................................................................18
Section 6.04 Brokers..........................................................................18
Section 6.05 Bankruptcy.......................................................................19
Section 6.06 Suits............................................................................19
Section 6.07 Qualifications...................................................................19
Section 6.08 Investment.......................................................................19
Section 6.09 Funds............................................................................19
Article VII Seller's Conditions to Close..................................................................19
Section 7.01 Representations..................................................................19
Section 7.02 Performance......................................................................19
Section 7.03 Pending Matters..................................................................19
Section 7.04 Purchase Price...................................................................20
Section 7.05 Execution and Delivery of the Closing Documents..................................20
Article VIII Buyer's Conditions to Close...................................................................20
Section 8.01 Representations..................................................................20
Section 8.02 Performance......................................................................20
Section 8.03 Pending Matters..................................................................20
Section 8.04 Execution and Delivery of the Closing Documents..................................20
Article IX Tax Matters...................................................................................20
Section 9.01 Transfer Taxes...................................................................20
Section 9.02 Ad Valorem and Similar Taxes.....................................................20
Section 9.03 Tax Deferred Exchange............................................................20
Article X The Closing...................................................................................22
Section 10.01 Time and Place of the Closing....................................................22
Section 10.02 Adjustments to Purchase Price at the Closing.....................................22
Section 10.03 Closing Statement................................................................23
Section 10.04 Actions of Seller at the Closing.................................................23
Section 10.05 Actions of Buyer at the Closing..................................................23
TABLE OF CONTENTS
Page No.
Article XI Termination...................................................................................24
Section 11.01 Right of Termination.............................................................24
Section 11.02 Effect of Termination............................................................25
Section 11.03 Termination Damages..............................................................25
Section 11.04 Attorneys' Fees, Etc.............................................................25
Article XII Post Closing Obligations......................................................................26
Section 12.01 Allocation of Expense and Revenues...............................................26
Section 12.02 Gas Imbalances...................................................................27
Section 12.03 Final Accounting Statement.......................................................27
Section 12.04 Further Cooperation..............................................................28
Article XIII Operation of the Assets.......................................................................28
Section 13.01 Operations after Effective Time..................................................28
Section 13.02 Limitations on the Operational Obligations and Liabilities of Seller.............29
Section 13.03 Operation of the Assets After the Closing........................................30
Section 13.04 Casualty Loss....................................................................30
Section 13.05 Operatorship.....................................................................31
Article XIV Obligations and Indemnification...............................................................31
Section 14.01 Retained Obligations.............................................................31
Section 14.02 Assumed Obligations..............................................................31
Section 14.03 Buyer's Indemnification..........................................................32
Section 14.04 Seller's Indemnification.........................................................32
Section 14.05 Notices and Defense of Indemnified Matters.......................................33
Section 14.06 Sole Remedy......................................................................33
Section 14.07 Insurance and Tax Benefits.......................................................33
Section 14.08 Express Negligence...............................................................33
Article XV Limitations on Representations and Warranties.................................................34
Section 15.01 Disclaimers of Representations and Warranties....................................34
Section 15.02 Independent Investigation........................................................35
Section 15.03 Survival.........................................................................35
Section 15.04 Mitigation.......................................................................35
Section 15.05 Effect of Waiver.................................................................35
Section 15.06 Waiver of Consumer Rights........................................................35
TABLE OF CONTENTS
Page No.
Article XVI Dispute Resolution............................................................................36
Section 16.01 General..........................................................................36
Section 16.02 Senior Management................................................................36
Section 16.03 Dispute by Independent Expert....................................................36
Section 16.04 Limitation on Arbitration........................................................37
Article XVII Miscellaneous.................................................................................37
Section 17.01 Names............................................................................37
Section 17.02 Expenses.........................................................................37
Section 17.03 Document Retention...............................................................37
Section 17.04 Entire Agreement.................................................................38
Section 17.05 Waiver...........................................................................38
Section 17.06 Publicity........................................................................38
Section 17.07 Construction.....................................................................38
Section 17.08 No Third Party Beneficiaries.....................................................38
Section 17.09 Assignment.......................................................................38
Section 17.10 Buyer's Obligation Independent of Financing......................................38
Section 17.11 Governing Law....................................................................38
Section 17.12 Notices..........................................................................39
Section 17.13 Severability.....................................................................39
Section 17.14 Time of the Essence..............................................................39
Section 17.15 Counterpart Execution............................................................39
EXHIBITS AND SCHEDULES
Exhibit A - Subject Interests (Listing of Leases)
Exhibit B - Xxxxx, Leases, Units and Interests
Exhibit C - Allocated Values
Exhibit D - Assignment and Xxxx of Sale
Schedule 3.07 - Values allocated to Assets subject to Preferential Rights to
Purchase Schedule 3.08 - Consents to Assign
Schedule 12.02 - Gas Imbalances
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (this "Agreement") is made and entered
into this 28th day of June, 2006, by and between Xxxxxx Xxxxxx Production
Company LP, a Delaware Limited Partnership (the "Seller"), and Legacy Reserves
Operating LP, a Delaware limited partnership (the "Buyer"). Buyer and Seller are
collectively referred to herein as the "Parties", and are sometimes referred to
individually as a "Party."
W I T N E S S E T H:
WHEREAS, Seller is willing to sell to Buyer, and Buyer is willing to
purchase from Seller, the Assets (as defined in Section 1.02 hereof), all upon
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual benefits derived and to
be derived from this Agreement by each Party, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Seller and Buyer hereby agree as follows:
ARTICLE I
ASSETS
Section 1.01 Agreement to Sell and Purchase. Subject to and in
accordance with the terms and conditions of this Agreement and as of the
Effective Time (as defined in Section 2.04), Buyer agrees to purchase the Assets
from Seller, and Seller agrees to sell the Assets to Buyer.
Section 1.02 Assets. Subject to Section 1.03, the term "Assets" shall
mean all of Seller's right, title and interest in and to:
(a) the leasehold estates in and to the oil, gas and
mineral leases described or referred to in Exhibit A
attached hereto (the "Leases"), whether or not all
lands covered by the Leases are described in Exhibit
A, and any overriding royalty interests, fee mineral
interests, royalty interests or other interests in
and to the lands covered by the Leases, assignments
and other documents of title described or referred to
in Exhibit A, all as more specifically described in
Exhibit A (collectively, the "Subject Interests," or
singularly, a "Subject Interest");
(b) all rights incident to the Subject Interests,
including, without limitation, (i) all rights with
respect to the use and occupation of the surface of
and the subsurface depths under the Subject
Interests; (ii) all rights with respect to any
pooled, communitized or unitized acreage by virtue of
any Subject Interest being a part thereof, including
all Hydrocarbon (as defined in Subsection (d) of this
Section 1.02) production after the Effective Time (as
defined in Section 2.04) attributable to the Subject
Interests or any such pool or unit allocated to any
such Subject Interest;
(c) to the extent assignable or transferable, all
easements, rights-of-way, surface leases, surface
estates, servitudes, and other estates or similar
rights and privileges directly related to or used
solely in connection with the Subject Interests (the
"Easements"), including, without limitation, the
Easements described or referred to in Exhibit A;
(d) to the extent assignable or transferable, all
personal property, equipment, fixtures, inventory and
improvements located on or used in connection with
the Subject Interests and the Easements or with the
production, treatment, sale, or disposal of oil, gas
or other hydrocarbons (collectively, "Hydrocarbons"),
byproducts or waste produced therefrom or
attributable thereto, including, without limitation,
all xxxxx located on the lands covered by the Subject
Interests or on lands with which the Subject
Interests may have been pooled, communitized or
unitized (whether producing, shut in or abandoned,
and whether for production, injection or disposal),
including, without limitation, all xxxxx described on
Exhibit B attached hereto, and all wellhead
equipment, pumps, pumping units, flowlines, gathering
systems, piping, tanks, buildings, treatment
facilities, injection facilities, disposal
facilities, compression facilities, and other
materials, supplies, equipment, facilities and
machinery (collectively, "Personal Property");
(e) to the extent assignable or transferable, all
contracts, agreements and other arrangements that
directly relate to the Subject Interests, the Leases
or the Easements, including, without limitation,
production sales contracts, farmout agreements,
operating agreements, service agreements and similar
arrangements (collectively, the "Contracts");
(f) to the extent assignable or transferable, all books,
records, files, muniments of title, reports and
similar documents and materials, including, without
limitation, lease records, well records, and division
order records, well files, title records (including
abstracts of title, title opinions and memoranda, and
title curative documents related to the Assets),
contracts and contract files, correspondence, that
relate to the foregoing interests in the possession
of, and maintained by, Seller (collectively, the
"Records") subject to Seller's right to retain copies
of the same; and
(g) all geological and geophysical data relating to the
Subject Interests, other than such data that is
interpretive in nature or which cannot be transferred
without the consent of, or payment to, any Third
Party. For purposes of this Agreement, "Third Party"
means any person or entity, governmental or
otherwise, other than Seller or Buyer, and their
respective affiliates; the term includes, but is not
limited to, working interest owners, royalty owners,
lease operators, landowners, service contractors and
governmental agencies.
(h) all franchises, licenses, permits, approvals,
consents, certificates, and other authorizations and
rights granted by governmental authorities and all
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certificates of convenience or necessity, immunities,
privileges, grants and other rights that relate to
the Assets or the ownership or operation of any
thereof.
Section 1.03 Excluded Assets. Notwithstanding the foregoing, the Assets
shall not include, and there is excepted, reserved and excluded from the sale
contemplated hereby (collectively, the "Excluded Assets"):
(a) all credits and refunds and all accounts,
instruments, trade credits, and general intangibles
(as such terms are defined in the Texas Uniform
Commercial Code) attributable to the Assets accruing
prior to the Effective Time;
(b) all claims of Seller for refunds of or loss carry
forwards with respect to (i) ad valorem, severance,
production or any other taxes attributable to any
period prior to the Effective Time, (ii) income or
franchise taxes, or (iii) any taxes attributable to
the other Excluded Assets, and such other refunds,
and rights thereto, for amounts paid in connection
with the Assets and attributable to the period prior
to the Effective Time, including refunds of amounts
paid under any gas gathering or transportation
agreement;
(c) all proceeds, income, revenues or hydrocarbon
production (and any security or other deposits made)
attributable to (i) the Assets for any period prior
to the Effective Time, or (ii) any other Excluded
Assets;
(d) all personal computers and associated peripherals and
all radio and telephone equipment and all of Seller's
proprietary computer software, technology, patents,
trade secrets, copyrights, names, trademarks, logos
and other intellectual property;
(e) all of Seller's rights and interests in geological
and geophysical data that is interpretive in nature
or which cannot be transferred without the consent
of, or payment to, any Third Party;
(f) all documents and instruments of Seller that may be
protected by an attorney-client privilege;
(g) data and other information that cannot be disclosed
or assigned to Buyer as a result of confidentiality
or similar arrangements under agreements with persons
unaffiliated with Seller;
(h) all audit rights arising under any of the Contracts
or otherwise with respect to any period prior to the
Effective Time or to any of the other Excluded
Assets;
(i) all corporate, partnership, income tax records, and
documents subject to legal privilege (other than
title);
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(j) all claims and causes of action of Seller (i) arising
from acts, omissions, or events, or damage to or
destruction of property, occurring prior to the
Effective Time, (ii) arising under or with respect to
any of the Contracts that are attributable to periods
of time prior to the Effective time (including claims
for adjustments or refunds), or (iii) with respect to
any of the Excluded Assets;
(k) all rights and interests of Seller (i) under any
policy or agreement of insurance or indemnity, (ii)
under any bond, or (iii) to any insurance or
condemnation proceeds or awards arising, in each
case, from acts, omissions, or events, or damage to
or destruction of property, occurring prior to the
Effective Time;
(l) any amounts due or payable to Seller as adjustments
to insurance premiums related to the Assets with
respect to any period prior to the Effective Time;
(m) all (i) agreements and correspondence between Seller
and Tristone Capital, LP (the "Advisor") relating to
the transactions contemplated in this Agreement, (ii)
lists of prospective purchasers for such transactions
compiled by either Seller or the Advisor, (iii) bids
submitted by other prospective purchasers of the
Assets, (iv) analyses by Seller or the Advisor of any
bids submitted by any prospective purchaser, (v)
correspondence between or among Seller or Advisor, or
either of their respective representatives, and any
prospective purchaser other than Buyer, (vi)
correspondence between Seller or Advisor or any of
their respective representatives with respect to any
of the bids, the prospective purchasers, the
engagement or activities of the Advisor, or the
transactions contemplated in this Agreement and (vii)
the Xxxxxx Xxxxxx 2006 Permian Basin Divestiture --
Transaction Process Memorandum dated May 2006,
prepared by the Advisor and circulated to prospective
purchasers; and
(n) all cash, checks, funds, accounts receivable,
accounts payable, promissory notes or general
intangibles (as such terms are defined by the Uniform
Commercial Code) attributable to Sellers' interests
in the Assets with respect to any period prior to the
Effective Date.
ARTICLE II
PURCHASE PRICE
Section 2.01 Purchase Price. The purchase price for the purchase, sale
and conveyance of the Assets to Buyer is Buyer's payment to Seller of the sum of
$20,000,000.00 (the "Purchase Price"), as adjusted in accordance with the
provisions of this Agreement. The Purchase Price, as adjusted in accordance with
the terms of this Agreement, including, without limitation, Section 10.02, shall
be paid to Seller (or its designee) at Closing (as defined in Section 10.01) by
means of a completed federal funds transfer to an account designated in writing
by Seller.
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Section 2.02 Deposit. Concurrently with the execution of this Agreement
by Buyer and Seller, Buyer shall deliver to Seller a performance guarantee
deposit in the amount of ten percent (10%) of the Purchase Price (the
"Deposit"). The Deposit shall be paid by Buyer to Seller by means of a completed
federal funds transfer to the account of Xxxxxx Xxxxxx CO2 Company, L.P. on
behalf of Seller, Account No. 4121049415, at Xxxxx Fargo, ABA Routing Number
000000000. The refund of the Deposit as provided for in Section 11.03 and shall
be subject to the terms of this Agreement. Without duplication, if the
transactions contemplated by this Agreement are consummated, the Deposit shall
be retained by Seller and shall be considered as prepayment of a portion of the
Purchase Price, and the amount payable by Buyer at the Closing shall be reduced
by the amount of the Deposit.
Section 2.03 Allocated Values.
(a) Buyer and Seller agree to allocate the Purchase Price
(as adjusted pursuant to this Agreement) among the
Assets as set forth in Exhibit C attached hereto (the
"Allocated Values"). Seller and Buyer agree that the
Allocated Values shall be used to compute any
adjustments to the Purchase Price pursuant to the
provisions of Article III and Article IV.
(b) The Allocated Values shall be completed in the manner
required by Section 1060 of the Internal Revenue Code
of 1986, as amended (the "Code"). Buyer and Seller
further agree to comply with all filing, notice and
reporting requirements described in Section 1060 of
the Code and the Treasury Regulations promulgated
thereunder, including the timely preparation and
filing of Form 8594 based on the Allocated Values.
The Buyer and the Sellers hereby agree that they will
report the federal, state, foreign and other tax
consequences of the transactions contemplated by this
Agreement in a manner consistent with the Allocated
Values.
Section 2.04 Effective Time. If the transactions contemplated hereby
are consummated in accordance with the terms and provisions hereof, the
ownership of the Assets shall be transferred from Seller to Buyer on the Closing
Date, and effective as of 7:00 a.m. local time where the Assets are located on
July 1, 2006 (the "Effective Time").
ARTICLE III
TITLE MATTERS
Section 3.01 Examination Period. Following the execution date of this
Agreement until 9:00 a.m., local time in Houston, Texas on July 28, 2006 (the
"Examination Period"), Seller shall permit Buyer and/or its representatives to
examine, at all reasonable times, in Seller's offices, all abstracts of title,
title opinions, title files, ownership maps, lease files, contract files,
assignments, division orders, operating and accounting records and agreements
pertaining to the Assets insofar as same may now be in existence and in the
possession of Seller, subject to such restrictions on disclosure as may exist
under confidentiality agreements or other agreements binding on Seller or such
data. "Business Days" means all calendar days excluding Saturdays, Sundays and
U.S. legal holidays.
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Section 3.02 Defensible Title and Permitted Encumbrances. For purposes
of this Agreement, the term "Defensible Title" means, with respect to a given
Asset, such ownership by Seller in such Asset that, subject to and except for
the Permitted Encumbrances (as defined in Subsection (d) of this Section 3.02):
(a) entitles Seller to receive not less than the
percentage set forth in Exhibit B as Seller's "Net
Revenue Interest" of all Hydrocarbons produced, saved
and marketed from each well, lease or unit as set
forth in Exhibit B, all without reduction, suspension
or termination of such interest throughout the
productive life of such well, except as specifically
set forth in Exhibit B;
(b) obligates Seller to bear not greater than the
percentage set forth in Exhibit B as Seller's
"Working Interest" of the costs and expenses relating
to the maintenance, development and operation of each
well, lease or unit as set forth in Exhibit B, all
without increase throughout the productive life of
such well, except as specifically set forth in
Exhibit B; and
(c) is free and clear of all liens, encumbrances and
defects in title.
(d) The term "Permitted Encumbrances" shall mean any of
the following matters to the extent the same are
valid and subsisting and affect the Assets:
(i) the Leases and Contracts to the extent the
same do not operate to reduce the Net
Revenue Interests of Seller below those set
forth in Exhibit B or increase the Working
Interests of Seller above those set forth in
Exhibit B without a corresponding increase
in the Net Revenue Interests or otherwise
interfere materially with the operation,
value or use of the Assets;
(ii) any (A) undetermined or inchoate liens or
charges constituting or securing the payment
of expenses that were incurred incidental to
the maintenance, development, production or
operation of the Assets or for the purpose
of developing, producing or processing
Hydrocarbons therefrom or therein, and (B)
materialman's, mechanics', repairman's,
employees', contractors', operators' liens
or other similar liens or charges for
expenses incurred which are not yet
delinquent;
(iii) any liens for taxes and assessments not yet
delinquent or, if delinquent, that are being
contested in good faith in the ordinary
course of business and for which any Seller
has agreed to pay pursuant to the terms
hereof or which have been prorated pursuant
to the terms hereof;
(iv) the terms, conditions, restrictions,
exceptions, reservations, limitations and
other matters contained in (including any
liens or
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security interests created by law or
reserved in oil and gas leases for royalty,
bonus or rental, or created to secure
compliance with the terms of) the
agreements, instruments and documents that
create or reserve to Seller its interest in
the Assets to the extent the same do not
operate to reduce the Net Revenue Interests
of Seller below those set forth in Exhibit B
or increase the Working Interests of Seller
above those set forth in Exhibit B without a
corresponding increase in the Net Revenue
Interests or otherwise interfere materially
with the operation, value or use of the
Assets;
(v) any obligations or duties affecting the
Assets to any municipality or public
authority with respect to any franchise,
grant, license or permit and all applicable
laws, rules, regulations and orders of any
Governmental Authority (as defined in
Section 4.02(b));
(vi) any (A) easements, rights-of-way,
servitudes, permits, surface leases and
other rights in respect of surface
operations, pipelines, grazing, hunting,
lodging, canals, ditches, reservoirs or the
like, and (B) easements for streets, alleys,
highways, pipelines, telephone lines, power
lines, railways and other similar
rights-of-way on, over or in respect of
property owned or leased by Seller or over
which Seller owns rights-of-way, easements,
permits or licenses, to the extent that same
do not materially interfere with the oil and
gas operations to be conducted on the
Assets;
(vii) all lessors' royalties, overriding
royalties, net profits interests, carried
interests, production payments, reversionary
interests and other burdens on or deductions
from the proceeds of production created or
in existence as of the Effective Time,
whether recorded or unrecorded, provided
that such matters do not operate to reduce
the Net Revenue Interests of Seller below
those set forth in Exhibit B or increase the
Working Interests of Seller above those set
forth in Exhibit B without a corresponding
increase in the Net Revenue Interests;
(viii) preferential rights to purchase or similar
agreements subject to the Provisions of
Section 3.07;
(ix) required Third Party consents to assignments
or similar agreements subject to the
provisions of Section 3.08;
(x) all rights to consent by, required notices
to, filings with, or other actions by
Governmental Authorities in connection with
the sale or conveyance of oil and gas leases
or interests therein that are customarily
obtained subsequent to such sale or
conveyance;
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(xi) production sales contracts; division orders;
contracts for sale, purchase, exchange,
refining or processing of Hydrocarbons;
unitization and pooling designations,
declarations, orders and agreements;
operating agreements; agreements of
development; area of mutual interest
agreements; gas balancing or deferred
production agreements; processing
agreements; plant agreements; pipeline,
gathering and transportation agreements;
injection, repressuring and recycling
agreements; carbon dioxide purchase or sale
agreements; salt water or other disposal
agreements; seismic or geophysical permits
or agreements; and any and all other
agreements that have terms that are ordinary
and customary to the oil, gas, sulphur and
other mineral exploration, development,
processing or extraction business or in the
business of processing of gas and gas
condensate production for the extraction of
products therefrom, to the extent the same
do not reduce the Net Revenue Interests of
Seller below those set forth in Exhibit B or
increase the Working Interests of Seller
above those set forth in Exhibit B without a
corresponding increase in the Net Revenue
Interest;
(xii) rights reserved to or vested in any
Governmental Authority to control or
regulate any of the Assets and the
applicable laws, rules, and regulations of
such Governmental Authorities; and
(xiii) all defects and irregularities affecting the
Assets which individually or in the
aggregate (A) do not operate to (1) reduce
the Net Revenue Interest of Seller, (2)
increase the proportionate share of costs
and expenses of leasehold operations
attributable to or to be borne by the
Working Interests of Seller, or (3)
otherwise interfere materially with the
operation, value or use of the Assets, or
(4) that would not be considered material
when applying general industry standards; or
(B) operate to increase the proportionate
share of costs and expenses of leasehold
operations attributable to or to be borne by
the Working Interest of Seller, so long as
there is a proportionate increase in
Seller's Net Revenue Interest.
Section 3.03 Title Defects.
(a) The term "Title Defect," as used in this Agreement,
shall mean: (a) any encumbrance, encroachment,
irregularity, defect in or objection to Seller's
ownership of any Asset (expressly excluding Permitted
Encumbrances) that causes Seller not to have
Defensible Title to such Asset or (b) any default by
Seller under a lease, farmout agreement or other
contract or agreement that would (i) have a material
adverse affect on the operation, value or use of such
Asset, (ii) prevent Seller from receiving the
proceeds of production attributable to Seller's
interest therein or (iii) result in cancellation of
Seller's interest therein.
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(b) The value attributable to each Title Defect (the
"Title Defect Value") that is asserted by Buyer in
the Title Defect notices shall be determined based
upon the criteria set forth below:
(i) If the Title Defect is a lien upon any
Asset, the Title Defect Value is the amount
necessary to be paid to remove the lien from
the affected Asset.
(ii) If the Title Defect asserted is that the Net
Revenue Interest attributable to any well,
lease or unit is less than that stated in
Exhibit B or the Working Interest
attributable to any well, lease or unit is
greater than that stated in Exhibit B, then
the Title Defect Value shall take into
account the relative change in the interest
from Exhibit B and the appropriate Allocated
Value attributed to such Asset.
(iii) If the Title Defect represents an
obligation, encumbrance, burden or charge
upon the affected Asset (including any
increase in Working Interest for which there
is not a proportionate increase in Net
Revenue Interest) for which the economic
detriment to Buyer is unliquidated, the
amount of the Title Defect Value shall be
determined by taking into account the
Allocated Value of the affected Asset, the
portion of the Asset affected by the Title
Defect, the legal effect of the Title
Defect, the potential discounted economic
effect of the Title Defect over the life of
the affected Asset, and the Title Defect
Values placed upon the Title Defect by Buyer
and Seller.
(iv) If a Title Defect is not in effect or does
not adversely affect an Asset throughout the
entire productive life of such Asset, such
fact shall be taken into account in
determining the Title Defect Value.
(v) The Title Defect Value of a Title Defect
shall be determined without duplication of
any costs or losses included in another
Title Defect Value hereunder.
(vi) Notwithstanding anything herein to the
contrary, in no event shall a Title Defect
Value exceed the Allocated Value of the
xxxxx, units or other Assets affected
thereby.
(vii) Such other factors as are reasonably
necessary to make a proper evaluation.
Section 3.04 Notice of Title Defects.
(a) If Buyer discovers any Title Defect affecting any
Asset, Buyer shall notify Seller as promptly as
possible but no later than the expiration of the
Examination Period of such alleged Title Defect. To
be effective, such
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notice must (i) be in writing, (ii) be received by
Seller prior to the expiration of the Examination
Period, (iii) describe the Title Defect in
sufficient, specific detail (including any alleged
variance in the Net Revenue Interest), (iv) identify
the specific Asset or Assets affected by such Title
Defect, and (v) include the value of such Title
Defect as determined by Buyer. Subject to the special
warranty contained in the Assignment, any matters
that may otherwise constitute Title Defects, but of
which Seller has not been specifically notified by
Buyer in accordance with the foregoing, shall be
deemed to have been waived by Buyer for all purposes
and shall constitute Permitted Encumbrances.
(b) An individual matter that would otherwise be
considered a Title Defect under Section 3.03(a) shall
not be considered to be a Title Defect unless the
Title Defect Value of such matter is greater than
$25,000, as determined by Section 3.03(b) ("Title
Defect Threshold"). Buyer shall not be entitled to
allege Title Defects until the aggregate of all Title
Defects which exceed the Title Defect Threshold
exceeds three per cent (3%) of the Purchase Price
prior to any adjustments thereto (the "Defect
Deductible").
Section 3.05 Remedies for Title Defects.
(a) Upon the receipt of effective notice of a Title
Defect from Buyer (as provided by Section 3.04),
Seller may:
(i) attempt to cure such Title Defect at any
time prior to Closing;
(ii) exclude the affected Asset from the sale and
reduce the Purchase Price by the Allocated
Value of such affected Asset; or
(iii) not take any action with respect to the
alleged Title Defect and reduce the Purchase
Price as agreed pursuant to Sections 3.05(b)
and (c) in accordance with Section 10.02(b)
(which shall cause such alleged Title Defect
to become an Assumed Obligation, as that
term is defined in Section 14.02 hereof).
(b) Except as otherwise provided in this Section 3.05,
with respect to each Title Defect that is not cured
on or before the Closing and for which the Seller has
not agreed to exclude the affected Asset from the
Closing under Section 3.05(a)(ii), the Purchase Price
shall be reduced by an amount equal to the Title
Defect Value agreed upon in writing by Buyer and
Seller, but only to the extent such amount exceeds
the Defect Deductible. In the event that there is
more than one affected Asset with a Title Defect, and
the aggregate of all Title Defects is greater than
the Defect Deductible, the amount by which the
aggregate of all Title Defects exceeds the Defect
Deductible shall be applied pro-rata to the Allocated
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Value of each affected Asset in determining the
amount to adjust the Purchase Price.
(c) If prior to Closing, the Parties have not agreed upon
the validity of any asserted Title Defect or have not
agreed on the Title Defect Value attributable
thereto, either Party shall have the right to elect
to have the validity of such Title Defect and/or such
Title Defect Value determined by an Independent
Expert pursuant to Section 16.03. If the validity of
any asserted Title Defect, or the Title Defect Value
attributable thereto, is not determined before
Closing, the Purchase Price paid at Closing shall not
be reduced by virtue of such disputed Title Defect or
Title Defect Value, and, upon the final resolution of
such dispute, the Title Defect Value, if any, found
to be attributable to such Title Defect, which
exceeds the Defect Deductible, shall, subject to this
Section, be promptly refunded by Seller to Buyer.
Section 3.06 Special Warranty of Title. Seller hereby agrees to warrant
and defend title to the Assets unto Buyer and its successors and assigns against
every person whomsoever lawfully claiming or to claim the same or any part
thereof, by, through or under Seller, but not otherwise; subject, however, to
the Permitted Encumbrances and the other matters set forth herein.
Section 3.07 Preferential Rights To Purchase. Buyer's good faith
allocation of values as set forth in Exhibit C shall be used to prepare an
allocation of the Purchase Price to Assets that are, subject to Seller's
Knowledge (as such term is defined below), subject to preferential rights to
purchase and will be set forth in Schedule 3.07. Seller will use reasonable
efforts to send out the applicable preferential right to purchase notices within
five (5) Business Days after the date this Agreement is executed. Seller shall
provide to Buyer for Buyer's reasonable approval the form of all preferential
right notices. As used herein, the terms "Seller's Knowledge" and "to the
knowledge of Seller" shall construed to mean the actual knowledge of a matter
(without investigation) of an executive officer of Seller or its general
partner, or Xxxxxxx X. Xxxxxx, Land Manager.
Seller shall use its reasonable efforts to comply with all preferential right to
purchase provisions relative to any Asset prior to the Closing. If, prior to
Closing, a holder of a preferential purchase right notifies Seller that it
intends to exercise it rights with respect to an Asset to which its preferential
purchase right applies (as determined in accordance with the agreement in which
the preferential purchase right arises), the Asset covered by said preferential
purchase right shall be excluded from the Assets to be conveyed to Buyer, and
the Purchase Price shall be reduced by the Allocated Value of said Asset. Buyer
acknowledges and agrees that Seller shall attempt to determine (in its good
faith judgment) the extent of the preferential purchase rights encumbering the
Assets, and said determination shall be used by Seller to provide the
preferential purchase right notifications. If the holder of the preferential
purchase right fails to consummate the purchase of the Asset subject to the
preferential purchase right or fails to respond to the notice by Closing, Seller
and Buyer shall proceed with Closing and the sale of the Asset to Buyer, it
being expressly understood and agreed hereby that in such case, Buyer shall
purchase such Asset(s) subject to the effects of such preferential purchase
right, and such preferential purchase right and
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any and all liability arising therefrom shall be deemed to be an Assumed
Obligation (as such term is defined in Section 14.02 hereof).
Section 3.08 Consents to Assignment. Seller shall use reasonable
efforts to obtain all necessary consents from Third Parties to assign the Assets
prior to Closing (other than governmental approvals that are customarily
obtained after Closing), subject to Seller's Knowledge of the existence of such
consents to assign. Buyer shall assist Seller with such efforts. To the extent
such consents are not obtained prior to Closing and would render the assignment
of some or all of the Assets void or voidable, would give rise to a claim for
damages or could cause a termination of the Lease or other Asset to be assigned,
Buyer may either waive the defect and proceed with Closing or exclude the Asset
as to that portion of the Assets affected thereby. If Buyer excludes an affected
Asset the Purchase Price shall be reduced by the Allocated Value of the affected
Asset. In all other cases, such unobtained consents shall not constitute Title
Defects. If Buyer elects to waive the defect and proceed with Closing under the
provisions of this Section 3.08, Buyer shall purchase such Asset(s) subject to
the effects of such consent to assign, and such consent to assign and any and
all liability arising therefrom shall be deemed to be an Assumed Obligation.
Section 3.09 Remedies for Title Benefits.
(a) If either Party discovers any Title Benefit during
the Examination Period affecting the Assets, it shall
promptly notify the other Party in writing thereof on
or before the expiration of the Examination Period.
Subject to Section 3.05, Seller shall be entitled to
an upward adjustment to the Purchase Price pursuant
to Section 10.02(a)(i) with respect to all Title
Benefits, in an amount mutually agreed upon by the
Parties. For purposes of this Agreement, the term
"Title Benefit" shall mean Seller's interest in any
Subject Interest that is greater than or in addition
to that set forth in Exhibit B (including, without
limitation, a Net Revenue Interest that is greater
than that set forth in Exhibit B) or Seller's Working
Interest in any Subject Interest that is less than
the Working Interest set forth in Exhibit B (without
a corresponding decrease in the Net Revenue
Interest). Any matters that may otherwise constitute
Title Benefits, but of which Buyer has not been
specifically notified by Seller in accordance with
the foregoing, shall be deemed to have been waived by
Seller for all purposes.
(b) If, with respect to a Title Benefit, the Parties are
not deemed to have agreed on the amount of the upward
Purchase Price adjustment or have not otherwise
agreed on such amount on or before the Closing Date,
Seller or Buyer shall have the right to elect to have
such Purchase Price adjustment determined by an
Independent Expert pursuant to Section 16.03. If the
amount of such adjustment is not determined pursuant
to this Agreement by the Closing, the undisputed
portion of the Purchase Price with respect to the
Asset affected by such Title Benefit shall be paid by
Buyer at the Closing and, upon determination of the
amount of such adjustment, any unpaid portion thereof
shall be paid by Buyer to Seller.
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ARTICLE IV
ENVIRONMENTAL MATTERS
Section 4.01 Environmental Review.
(a) Buyer shall have the right to conduct or cause a
consultant ("Buyer's Environmental Consultant") to
conduct an environmental review of the Assets prior
to the expiration of the Examination Period ("Buyer's
Environmental Review"). The cost and expense of
Buyer's Environmental Review, if any, shall be borne
solely by Buyer. The scope of work comprising Buyer's
Environmental Review shall be limited to that
mutually agreed by Buyer and Seller prior to
commencement thereof and shall not include any
intrusive test, Phase II type examination or other
similar procedure without the prior consent of
Seller. Buyer shall (and shall cause Buyer's
Environmental Consultant to): (i) consult with Seller
before conducting any work comprising Buyer's
Environmental Review, (ii) perform all such work in a
safe and workmanlike manner and so as to not
unreasonably interfere with Seller's operations, and
(iii) comply with all applicable laws, rules, and
regulations. Buyer shall be solely responsible for
obtaining any Third Party consents that are required
in order to perform any work comprising Buyer's
Environmental Review, and Buyer shall consult with
Seller prior to requesting each such Third Party
consent. Seller shall have the right to have a
representative or representatives accompany Buyer and
Buyer's Environmental Consultant at all times during
Buyer's Environmental Review. With respect to any
samples taken in connection with Buyer's
Environmental Review, Buyer shall take split samples,
providing one of each such sample, properly labeled
and identified, to Seller. Buyer hereby agrees to
release, defend, indemnify and hold harmless Seller
from and against all claims, losses, damages, costs,
expenses, causes of action and judgments of any kind
or character (INCLUDING THOSE RESULTING FROM SELLER'S
SOLE, JOINT, COMPARATIVE OR CONCURRENT NEGLIGENCE OR
STRICT LIABILITY, BUT EXCLUDING THOSE CAUSED BY
SELLER'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT)
arising out of or relating to Buyer's Environmental
Review.
(b) Unless otherwise required by applicable law, Buyer
shall (and shall cause Buyer's Environmental
Consultant to) treat confidentially any matters
revealed by Buyer's Environmental Review and any
reports or data generated from such review (the
"Environmental Information"), and Buyer shall not
(and shall cause Buyer's Environmental Consultant to
not) disclose any Environmental Information to any
Governmental Authority or other Third Party without
the prior written consent of Seller. Unless otherwise
required by law, Buyer may use the Environmental
Information only in connection with the transactions
contemplated by this Agreement. If Buyer, Buyer's
Environmental Consultant, or any Third Party to whom
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Buyer has provided any Environmental Information
become legally compelled to disclose any of the
Environmental Information, Buyer shall provide Seller
with prompt notice sufficiently prior to any such
disclosure so as to allow Seller to file any
protective order, or seek any other remedy, as it
deems appropriate under the circumstances. If this
Agreement is terminated prior to the Closing, Buyer
shall deliver the Environmental Information to
Seller, which Environmental Information shall become
the sole property of Seller. Buyer shall provide
copies of the Environmental Information to Seller
without charge.
Section 4.02 Environmental Definitions.
(a) Environmental Defects. For purposes of this
Agreement, the term "Environmental Defect" shall
mean, with respect to any given Asset, an individual
environmental condition that constitutes a material
violation of Environmental Laws in effect as of the
date of this Agreement in the jurisdiction in which
such Asset is located.
(b) Governmental Authority. For purposes of this
Agreement, the term "Governmental Authority" shall
mean, as to any given Asset, the United States and
the state, county, parish, city and political
subdivisions in which such Asset is located and that
exercises jurisdiction over such Asset, and any
agency, department, board or other instrumentality
thereof that exercises jurisdiction over such Asset.
(c) Environmental Laws. For purposes of this Agreement,
the term "Environmental Laws" shall mean all laws,
statutes, ordinances, court decisions, rules and
regulations of any Governmental Authority pertaining
to health or the environment as may be interpreted by
applicable court decisions or administrative orders,
including, without limitation, the Clean Air Act, as
amended, the Comprehensive Environmental Response,
Compensation and Liability Act, as amended
("CERCLA"), the Federal Water Pollution Control Act,
as amended, the Occupational Safety and Health Act,
as amended, the Resources Conservation and Recovery
Act, as amended, the Safe Drinking Water Act, as
amended, the Toxic Substances Control Act, as
amended, the Superfund Amendment and Reauthorization
Act of 1986, as amended, the Hazardous Materials
Transportation Act, as amended, and comparable state
and local laws.
(d) Environmental Defect Value. For purposes of this
Agreement, the term "Environmental Defect Value"
shall mean, with respect to any Environmental Defect,
the value, as of the Closing Date, of the estimated
costs and expenses to correct such Environmental
Defect in the most cost-effective manner reasonably
available, consistent with Environmental Laws, taking
into account that non-permanent remedies (such as
mechanisms to contain or stabilize hazardous
materials, including monitoring site conditions,
natural attenuation, risk-based corrective
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action, institutional controls or other appropriate
restrictions on the use of property, caps, dikes,
encapsulation, leachate collection systems, etc.) may
be the most cost-effective manner reasonably
available.
Section 4.03 Notice of Environmental Defects.
(a) If Buyer discovers any Environmental Defect affecting
the Assets, Buyer shall notify Seller prior to the
expiration of the Examination Period of such alleged
Environmental Defect. To be effective, such notice
must: (i) be in writing; (ii) be received by Seller
prior to the expiration of the Examination Period;
(iii) describe the Environmental Defect in
sufficient, specific detail, including, without
limitation, (A) the written conclusion of Buyer's
Environmental Consultants that an Environmental
Defect exists, which conclusion shall be reasonably
substantiated by the factual data gathered in Buyer's
Environmental Review, and (B) a citation of the
provisions of Environmental Laws alleged to be
violated and the related facts that substantiate such
violation; (iv) identify the specific Assets affected
by such Environmental Defect, including, without
limitation, a site plan showing the location of all
sampling events, boring logs and other field notes
describing the sampling methods utilized and the
field conditions observed, chain-of-custody
documentation and laboratory reports; (v) identify
the procedures recommended to correct the
Environmental Defect, together with any related
recommendations from Buyer's Environmental
Consultant; and (vi) state Buyer's estimate of the
Environmental Defect Value, including the basis for
such estimate, for which Buyer would agree to adjust
the Purchase Price in order to accept such
Environmental Defect if Seller elected Section
4.04(a)(iv) as the remedy therefor.
(b) An individual matter that would otherwise be
considered an Environmental Defect under Section
4.02(a) shall not be considered to be an
Environmental Defect unless the value of such matter
is greater than $25,000, as determined by Section
4.02(d) (the "Environmental Defect Threshold"). Buyer
shall not be entitled to allege Environmental Defects
until the aggregate of all Environmental Defects
which exceed the Environmental Defect Threshold
exceeds three per cent (3%) of the Purchase Price
prior to any adjustments thereto (the "Environmental
Defect Deductible").
(c) Any matters that may otherwise constitute
Environmental Defects, but of which Seller has not
been specifically notified by Buyer in accordance
with the foregoing, together with any environmental
matter that does not constitute an Environmental
Defect, shall be deemed to have been waived by Buyer
for all purposes and constitute an Assumed Obligation
(as defined in Section 14.02).
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Section 4.04 Remedies for Environmental Defects.
(a) Upon the receipt of effective notice of an
Environmental Defect from Buyer (as provided by
Section 4.03), Seller may:
(i) attempt to cure such Environmental Defect at
any time prior to Closing;
(ii) exclude the affected Asset from the sale and
reduce the Purchase Price by the Allocated
Value of such affected Asset;
(iii) subject to the approval of Buyer (such
approval not to be unreasonably withheld),
not take any action with respect to the
alleged Environmental Defect and indemnify
Buyer pursuant to Section 14.05 against all
losses and costs which Buyer may incur in
connection with the same (which shall cause
such alleged Environmental Defect to become
a Retained Obligation, as that term is
defined in Section 14.01 hereof); or
(iv) not take any action with respect to the
alleged Environmental Defect and reduce the
Purchase Price in accordance with Section
10.02(b) (which shall cause such alleged
Environmental Defect to become an Assumed
Obligation as that term is defined in
Section 14.02 hereof).
(b) If Buyer and Seller have not agreed as to the
validity of any asserted Environmental Defect, or if
the Parties have not agreed on the Environmental
Defect Value therefor, then on or before three (3)
Business Days prior to the Closing Date either Party
shall have the right to elect to have validity of the
asserted Environmental Defect, and/or the
Environmental Defect Value for such Environmental
Defect, determined by an Independent Expert pursuant
to Section 16.03. If the validity of any such
asserted Environmental Defect or the amount of the
Environmental Defect Value attributable thereto is
not determined by the Closing, the Purchase Price
paid at Closing shall not be reduced by virtue of
such disputed Environmental Defect or the
Environmental Defect Value, and, upon the final
resolution of such dispute, the Environmental Defect
Value, if any, found to be attributable to such
Environmental Defect, which exceeds the Environmental
Defect Deductible shall, subject to this Section, be
promptly refunded by Seller to Buyer. Notwithstanding
the foregoing, the Seller shall have unilateral right
to exclude an Asset from the sale if the
Environmental Defect Value exceeds the Allocated
Value of the Asset(s) affected thereby.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer that:
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Section 5.01 Seller's Existence. Seller is a limited partnership, duly
organized and validly existing under the laws of the State of Delaware and is
qualified to conduct business in the States of Texas and New Mexico. Seller has
full legal power, right and authority to carry on its business as such is now
being conducted and as contemplated to be conducted.
Section 5.02 Legal Power. Seller has the legal power and right to enter
into and perform this Agreement and the transactions contemplated hereby. The
consummation of the transactions contemplated by this Agreement will not
violate, nor be in conflict with:
(a) any provision of Seller's governing documents;
(b) except for any preferential purchase rights and
consents to assignment, any material agreement or
instrument to which Seller is a party or by which
Seller is bound; or
(c) any judgment, order, ruling or decree applicable to
Seller as a party in interest or any law, rule or
regulation applicable to Seller.
Section 5.03 Execution. The execution, delivery and performance of this
Agreement and the transactions contemplated hereby are duly and validly
authorized by all requisite partnership action on the part of Seller. This
Agreement constitutes the legal, valid and binding obligation of Seller
enforceable in accordance with its terms except as (x) the enforceability hereof
may be limited by bankruptcy, insolvency, moratorium or other similar laws
affecting the enforcement of creditors' rights generally, and (y) the
availability of equitable remedies may be limited by equitable principles of
general applicability.
Section 5.04 Brokers. Tristone Capital LP has acted for or on behalf of
Seller or any affiliate of Seller in connection with this Agreement and the
transactions contemplated by this Agreement. No broker or finder is entitled to
any brokerage or finder's fee, or to any commission, based in any way on
agreements, arrangements or understandings made by or on behalf of Seller or any
affiliate of Seller for which Buyer has or will have any liabilities or
obligations (contingent or otherwise).
Section 5.05 Bankruptcy. There are no bankruptcy, reorganization or
arrangement proceedings pending, being contemplated by or to the knowledge of
Seller threatened against Seller.
Section 5.06 Suits. Seller has not received notice of any suit, action,
claim, investigation or inquiry by any person or entity or by any administrative
agency or Governmental Authority and no legal, administrative or arbitration
proceeding is pending or, to Seller's Knowledge, threatened against Seller or
the Assets that has materially affected or will materially affect Seller's
ability to consummate the transactions contemplated herein or materially affect
the title to or value of the Assets.
Section 5.07 Royalties. During the period of time from March 1, 2006 at
7 o'clock a.m. local time at the locations of the Assets until the Effective
Time (the "Seller Ownership Period"), all rentals, royalties and other payments
due under the Subject Interests described in Exhibit A have been paid in all
material respects, except those amounts properly held in suspense.
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Section 5.08 Taxes. During the Seller Ownership Period, all ad valorem,
property, production, severance, excise and similar taxes and assessments based
on or measured by the ownership of the Assets or the production of Hydrocarbons
or the receipt of proceeds therefrom that have become due and payable have been
paid in all material respects.
Section 5.09 Contracts. All material Contracts are in full force and
effect, and Seller is not in default with respect to any of its material
obligations thereunder.
Section 5.10 Liens. Except for Permitted Encumbrances, the Assets will
be conveyed free and clear of all liens, mortgages and encumbrances.
Section 5.11 No Violation of Laws. To Seller's Knowledge, and during
the Seller Ownership Period, neither Seller nor Journey Operating (defined
below) has violated in any material respect any applicable law, rule,
regulation, ordinance, writ, decree or judgment of any Government Authority
(excluding Environmental Laws which are handled exclusively under Article IV of
this Agreement) with respect to the ownership or operation of the Assets which
could materially affect Seller's ability to consummate the transactions
contemplated herein or materially affect the ownership, value or operation of
any of the Assets.
Section 5.12 No Prepayments. To Seller's Knowledge, there have been no
advanced, take or pay or other prepayments with respect to the Assets that would
obligate Seller or Buyer to deliver Hydrocarbon production from the Assets after
the Effective Time without receiving full payment therefor.
Section 5.13 Production Sale Contracts. To Seller's Knowledge, there
are no production sales contracts pertaining to the Assets that cannot be
cancelled at any time upon 90 days (or less) prior notice.
Section 5.14 Calls on Production. To Seller's Knowledge, none of the
Assets are subject to any calls on production.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that:
Section 6.01 Buyer's Existence. Buyer is a limited partnership, duly
organized and validly existing under the laws of the State of Delaware and is
qualified to conduct business in the State of Texas. Buyer has full legal power,
right and authority to carry on its business as such is now being conducted and
as contemplated to be conducted. Buyer's headquarters and principal offices are
all located in the State of Texas.
Section 6.02 Legal Power. Buyer has the legal power and right to enter
into and perform this Agreement and the transactions contemplated hereby. The
consummation of the transactions contemplated by this Agreement will not
violate, nor be in conflict with:
(a) any provision of Buyer's agreement of limited
partnership or other governing documents;
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(b) any material agreement or instrument to which Buyer
is a party or by which Buyer is bound; or
(c) any judgment, order, ruling or decree applicable to
Buyer as a party in interest or any law, rule or
regulation applicable to Buyer.
Section 6.03 Execution. The execution, delivery and performance of this
Agreement and the transactions contemplated hereby are duly and validly
authorized by all requisite partnership action on the part of Buyer. This
Agreement constitutes the legal, valid and binding obligation of Buyer
enforceable in accordance with its terms except as (x) the enforceability hereof
may be limited by bankruptcy, insolvency, moratorium or other similar laws
affecting the enforcement of creditors' rights generally, and (y) the
availability of equitable remedies may be limited by equitable principles of
general applicability.
Section 6.04 Brokers. No broker or finder has acted for or on behalf of
Buyer or any affiliate of Buyer in connection with this Agreement or the
transactions contemplated by this Agreement. No broker or finder is entitled to
any brokerage or finder's fee, or to any commission, based in any way on
agreements, arrangements or understandings made by or on behalf of Buyer or any
affiliate of Buyer for which Seller has or will have any liabilities or
obligations (contingent or otherwise).
Section 6.05 Bankruptcy. There are no bankruptcy, reorganization or
arrangement proceedings pending, being contemplated by or to the knowledge of
Buyer threatened against Buyer or any affiliate of Buyer.
Section 6.06 Suits. There is no suit, action, claim, investigation or
inquiry by any person or entity or by any administrative agency or Governmental
Authority and no legal, administrative or arbitration proceeding pending or, to
Buyer's knowledge, threatened against Buyer or any affiliate of Buyer that has
materially affected or will materially affect Buyer's ability to consummate the
transactions contemplated herein.
Section 6.07 Qualifications. Buyer is now, and after the Closing shall
continue to be, qualified with all applicable Governmental Authorities to own
and operate the Assets and has, and shall maintain, all necessary bonds to own
and operate the Assets.
Section 6.08 Investment. Prior to entering into this Agreement, Buyer
was advised by and has relied solely on its own legal, tax and other
professional counsel concerning this Agreement, the Assets and the value
thereof. Buyer is acquiring the Assets for its own account and not for
distribution or resale in any manner that would violate any state or federal
securities law, rule, regulation or order. Buyer understands and acknowledges
that if any of the Assets were held to be securities, they would be restricted
securities and could not be transferred without registration under applicable
state and federal securities laws or the availability of an exemption from such
registration.
Section 6.09 Funds. Buyer has arranged to have available by the Closing
Date sufficient funds to enable Buyer to pay in full the Purchase Price as
herein provided and otherwise to perform its obligations under this Agreement.
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ARTICLE VII
SELLER'S CONDITIONS TO CLOSE
The obligations of Seller to consummate the transaction provided for
herein are subject, at the option of Seller, to the fulfillment on or prior to
the Closing Date of each of the following conditions:
Section 7.01 Representations. The representations and warranties of
Buyer herein contained shall be true and correct in all material respects on the
Closing Date as though made on and as of such date (except to the extent such
representations are qualified by materiality in which case such representations
shall be true and correct in all respects).
Section 7.02 Performance. Buyer shall have performed all material
obligations, covenants and agreements contained in this Agreement to be
performed or complied with by it at or prior to the Closing.
Section 7.03 Pending Matters. No suit, action or other proceeding shall
be pending or threatened that seeks to restrain, enjoin or otherwise prohibit
the consummation of the transactions contemplated by this Agreement.
Section 7.04 Purchase Price. Buyer shall have delivered to Seller the
Purchase Price, as the same may be adjusted hereunder, in accordance with the
provisions of Article II.
Section 7.05 Execution and Delivery of the Closing Documents. Buyer
shall have executed, acknowledged and delivered, as appropriate, to Seller all
closing documents described in Section 10.05.
ARTICLE VIII
BUYER'S CONDITIONS TO CLOSE
The obligations of Buyer to consummate the transaction provided for
herein are subject, at the option of Buyer, to the fulfillment on or prior to
the Closing Date of each of the following conditions:
Section 8.01 Representations. The representations and warranties of
Seller herein contained shall be true and correct in all material respects on
the Closing Date as though made on and as of such date (except to the extent
such representations are qualified by materiality in which case such
representations shall be true and correct in all respects).
Section 8.02 Performance. Seller shall have performed all material
obligations, covenants and agreements contained in this Agreement to be
performed or complied with by it at or prior to the Closing.
Section 8.03 Pending Matters. No suit, action or other proceeding shall
be pending or threatened that seeks to restrain, enjoin, or otherwise prohibit
the consummation of the transactions contemplated by this Agreement.
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Section 8.04 Execution and Delivery of the Closing Documents. Seller
shall have executed, acknowledged and delivered, as appropriate, to Buyer all
closing documents described in Section 10.04.
ARTICLE IX
TAX MATTERS
Section 9.01 Transfer Taxes. All sales, use or other taxes (other than
taxes on gross income, net income or gross receipts) and duties, levies,
recording fees or other governmental charges incurred by or imposed with respect
to the property transfers undertaken pursuant to this Agreement shall be the
responsibility of, and shall be paid by, Buyer.
Section 9.02 Ad Valorem and Similar Taxes. Ad valorem, property,
severance and similar taxes and assessments based upon or measured by the value
of the Assets shall be divided or prorated between Seller and Buyer as of the
Effective Time. Seller shall retain responsibility for such taxes attributable
to the period of time prior to the Effective Time and Buyer shall assume
responsibility for the period of time from and after the Effective Time.
Section 9.03 Tax Deferred Exchange. Either or both Buyer and/or Seller
may, at or before the Closing, elect to affect a tax-deferred exchange of the
Assets for other qualifying properties (hereinafter collectively called the
"Exchange Property") in accordance with the following:
(a) In the event Seller makes such an election prior to
the Closing, Seller may elect, by notice to Buyer
delivered on or before the Closing Date, to have the
Purchase Price paid to a qualified intermediary until
Seller has designated the Exchange Property. The
Exchange Property shall be designated by Seller and
acquired by the qualified intermediary within the
time periods prescribed in Section 1031(a)(3) of the
Internal Revenue Code, and shall thereupon be
conveyed to Seller. In the event Seller fails to
designate and the qualified intermediary fails to
acquire the Exchange Property within such time
periods, the agency or trust shall terminate and the
proceeds then held by the qualified intermediary
shall be paid immediately to Seller.
(b) In the event Buyer makes such an election prior to
the Closing, Buyer may elect, by notice to Seller
delivered on or before the Closing Date, to have the
Assets conveyed to a qualified intermediary or an
exchange accommodation titleholder (as that term is
defined in Rev. Proc. 2000-37 issued effective
September 15, 2000).
(c) The rights and responsibilities of Seller, Buyer and
the qualified intermediary or exchange accommodation
titleholder shall be documented with such agreements
containing such terms and provisions as shall be
determined by Seller and Buyer, each in their sole
discretion, to be necessary to accomplish a tax
deferred exchange under Section 1031 of the Internal
Revenue Code, subject, however, to the limitations on
costs
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and liabilities of Buyer and Seller set forth below.
If Seller makes a tax deferred exchange election,
Buyer shall not be obligated to pay any additional
costs or incur any additional obligations in the
acquisition of the Assets. If Buyer makes a tax
deferred exchange election, Seller shall not be
obligated to pay any additional costs or incur any
additional obligations in the consummation of the
transactions contemplated in this Agreement and Buyer
shall not be relieved of any obligation hereunder.
Any such tax deferred exchange election by either
Party shall not affect the duties, rights or
obligations of the Parties except as expressly set
forth in this Section 9.03.
Should either Seller or Buyer make such an election and should the tax
deferred exchange fail or be disallowed by the Internal Revenue Service
for any reason, the non-electing party's sole responsibility and
liability to the electing party shall be to take such actions as are
required by subsections (a), (b) or (c) above and such non-electing
party shall have no other responsibility or liability whatsoever to the
electing party; and the electing party shall release, indemnify, defend
and hold harmless the non-electing party from any responsibility or
liability related to such election except for such actions as may be
required by subsections (a), (b) or (c) above.
ARTICLE X
THE CLOSING
Section 10.01 Time and Place of the Closing. If the conditions referred
to in Articles VII and VIII of this Agreement have been satisfied or waived in
writing, the transactions contemplated by this Agreement (the "Closing") shall
take place at the offices of Bracewell & Xxxxxxxx LLP whose address is Pennzoil
Place, 000 Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000 on July 31, 2006,
(the "Closing Date").
Section 10.02 Adjustments to Purchase Price at the Closing.
(a) At the Closing, the Purchase Price shall be increased
by the following amounts:
(i) all upward Purchase Price adjustments for
Title Benefits determined in accordance with
Article III;
(ii) any other amount provided for in this
Agreement or agreed upon by Buyer and
Seller;
(iii) an estimate of any and all transfer, sales,
gross receipts, compensating use or similar
taxes, or assessments resulting from the
transaction;
(iv) an amount equal to the costs and expenses
that are (i) attributable to the Assets for
the period of time from the Effective Time
to the Closing Date (the "Closing Period"),
whether paid before or after the Effective
Time, and (ii) paid by the Seller,
including, without
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limitation, bond and insurance premiums paid by or on behalf
of Seller attributable to coverage during the Closing
Period;
(v) an amount equal to the interest of Seller in the quantity of
merchantable Hydrocarbon substances produced from the Assets
in storage above the outlet connection and/or upstream of
the applicable sales meter at the Effective Time multiplied
by the contract price therefor at the Effective Time; and
(vi) an amount equal to $500 per operated producing well per
month (prorated for any partial month or months) from the
Effective Time to the Closing Date in lieu of any indirect
overhead charges.
(b) At the Closing, the Purchase Price shall be decreased by the
following amounts:
(i) the Allocated Value of any Subject Interest sold prior to
the Closing to the holder of a preferential right pursuant
to Section 3.07;
(ii) any revenue attributable to post-Effective Time production
and received by Seller;
(iii) all downward Purchase Price Adjustment for Title Defects
and Environmental Defects determined in accordance with
Article III and Article IV hereof; and
(iv) any other amount provided for in this Agreement or agreed
upon by Buyer and Seller.
(c) The adjustments described in Sections 10.02(a) and (b) are
hereinafter referred to as the "Purchase Price Adjustments."
Section 10.03 Closing Statement. Not later than three (3) Business Days
prior to the Closing Date, Seller shall prepare and deliver to Buyer a statement
of the estimated Purchase Price Adjustments taking into account the foregoing
principles (the "Statement"). At the Closing, Buyer shall pay the Purchase
Price, as adjusted by the estimated Purchase Price Adjustments reflected on the
Statement.
Section 10.04 Actions of Seller at the Closing.
At the Closing, Seller shall:
(a) execute, acknowledge and deliver to Buyer the Assignment in the
form of Exhibit D attached hereto in a sufficient number of
counterparts for filing in each county where the Assets are
located (the "Assignment");
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(b) execute, acknowledge and deliver to Buyer letters in lieu of
transfer or division orders directing all purchasers of
production from the Subject Interests to make payment of proceeds
attributable to such production to Buyer from and after the
Effective Time as reasonably requested by Buyer prior to the
Closing Date;
(c) deliver to Buyer possession of the Assets;
(d) execute and deliver to Buyer an affidavit attesting to its
non-foreign status;
(e) deliver to Buyer appropriate change of operator forms on those
Assets operated by Seller;
(f) execute and deliver to Buyer assignments of all state and federal
Leases on the prescribed forms; and
(g) execute, acknowledge and deliver any other agreements provided
for herein or necessary or desirable to effectuate the
transactions contemplated hereby.
Section 10.05 Actions of Buyer at the Closing.
At the Closing, Buyer shall:
(a) deliver to Seller the Purchase Price (as adjusted pursuant to the
provisions hereof and net of the Deposit) by wire transfer to an
account designated in writing by Seller;
(b) take possession of the Assets; and
(c) execute, acknowledge and deliver the Assignment and any other
agreements provided for herein or necessary or desirable to
effectuate the transactions contemplated hereby.
ARTICLE XI
TERMINATION
Section 11.01 Right of Termination. This Agreement may be terminated at any
time at or prior to the Closing:
(a) by mutual written consent of the Parties;
(b) by Seller on the Closing Date if the conditions set forth in
Article VII have not been satisfied in all material respects by
Buyer or waived by Seller in writing by the Closing Date;
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(c) by Buyer on the Closing Date if the conditions set forth in
Article VIII have not been satisfied in all material respects by
Seller or waived by Buyer in writing by the Closing Date;
(d) by Seller if the Closing shall not have occurred on or before
August 31, 2006;
(e) by either Party if any Governmental Authority shall have issued
an order, judgment or decree or taken any other action
challenging, delaying, restraining, enjoining, prohibiting or
invalidating the consummation of any of the transactions
contemplated herein;
(f) by either Party if (i) the aggregate amount of the Purchase Price
Adjustments agreed by the Parties or otherwise finally determined
pursuant to this Agreement with respect to all uncured Title
Defects (net of the aggregate amount of the Purchase Price
Adjustments for all Title Benefits agreed by the Parties) plus
(ii) the aggregate amount of the Environmental Defect Values
agreed by the Parties or otherwise finally determined pursuant to
this Agreement with respect to all Environmental Defects, exceeds
ten percent (10%) percent of the Purchase Price;
(g) by Buyer in accordance with Section 13.04(c); or
(h) as otherwise provided herein;
provided, however, that no Party shall have the right to terminate this
Agreement pursuant to clause (b), (c), or (d) above if such Party is at such
time in material breach of any provision of this Agreement.
Section 11.02 Effect of Termination. In the event that the Closing does not
occur as a result of any Party exercising its right to terminate pursuant to
Section 11.01, then except as set forth in Section 11.03, this Agreement shall
be null and void and no Party shall have any further rights or obligations under
this Agreement, except that nothing herein shall relieve any Party from any
liability for any breach hereof or any liability that has accrued prior to the
date of such termination.
Section 11.03 Termination Damages.
(a) If all conditions precedent to the obligations of Buyer set forth
in Article VIII have been met and the transactions contemplated
by this Agreement are not consummated on or before the Closing
Date because of the failure of Buyer to perform any of its
material obligations hereunder or the breach of any material
representation herein by Buyer, then in such event and as
Seller's sole remedy, Seller shall have the right to terminate
this Agreement, in which case Seller shall retain the Deposit as
liquidated damages on account of Buyer's failure to perform its
obligations under this Agreement or Buyer's breach of any
material representation under this Agreement, which remedy shall
be the sole and exclusive remedy
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available to Seller for Buyer's failure to perform or breach.
Buyer and Seller acknowledge and agree that (i) Seller's actual
damages upon the event of such a termination are difficult to
ascertain with any certainty, (ii) that the Deposit is a
reasonable estimate of such actual damages and (iii) such
liquidated damages do not constitute a penalty.
(b) If this Agreement is terminated by the mutual written agreement
of Buyer and Seller, or if the Closing does not occur on or
before the Closing Date for any reason other than as set forth in
Section 11.01(b), then Seller shall return the Deposit to Buyer
in immediately available funds within three (3) Business Days
after the event giving rise to such payment to Buyer. Buyer and
Seller shall thereupon have the rights and obligations set forth
elsewhere herein.
(c) If all conditions to the obligations of Seller set forth in
Article VII have been met and the transactions contemplated by
this Agreement are not consummated on or before the Closing Date
because of the failure of Seller to perform any of its material
obligations hereunder or the breach of any material
representation herein by Seller and Seller fails to cure same
within ten (10) Business Days after receipt of written notice of
such breach from Buyer, then Buyer shall have the right to pursue
specific performance.
Section 11.04 Attorneys' Fees, Etc. If either Party to this Agreement
resorts to legal proceedings to enforce this Agreement, 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. Notwithstanding anything to the contrary in this
Agreement, in no event shall either Party be entitled to receive any punitive,
indirect or consequential damages unless same are a part of a Third Party claim
for which a Party is seeking indemnification hereunder, REGARDLESS OF WHETHER
CAUSED OR CONTRIBUTED TO BY THE SOLE, JOINT, COMPARATIVE OR CONCURRENT
NEGLIGENCE OR STRICT LIABILITY OF THE OTHER PARTY.
ARTICLE XII
POST CLOSING OBLIGATIONS
Section 12.01 Allocation of Expense and Revenues.
(a) Provided that the Closing occurs, appropriate adjustments shall
be made between Buyer and Seller so that (i) Buyer will receive
all proceeds from sales of Hydrocarbons that are produced and
saved from and after the Effective Time and any other revenues
arising out of the ownership or operation of the Assets from and
after the Effective Time, net of all applicable production,
severance, and similar taxes, and net of all costs and expenses
that are incurred in the ownership or operation of the Assets
from and after the Effective Time, including, without limitation,
all drilling costs, all capital expenditures, all overhead
charges under
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applicable operating or other agreements (regardless of whether
Seller or an affiliate of Seller serves as operator prior to the
Closing), and (ii) Seller will receive all proceeds from sales of
Hydrocarbons that are produced and saved prior to the Effective
Time and any other revenues arising out of the ownership or
operation of the Assets prior to the Effective Time, net of all
applicable production, severance, and similar taxes, and net of
all costs and expenses that are incurred in the ownership or
operation of the Assets prior to the Effective Time.
(b) In addition to the foregoing, and without duplication of any
Purchase Price Adjustments, the Seller will be paid (i) the
amount as of the Effective Time of all prepaid ad valorem,
property or similar taxes and assessments based upon or measured
by ownership of the Assets and any prepaid costs, including
rentals and insurance premiums, insofar as such prepaid costs
relate to periods of time after the Effective Time, and (ii) the
value of all merchantable Hydrocarbons produced prior to the
Effective Time but in storage above the inlet connection or
upstream of the applicable sales meter on the Closing Date.
(c) In addition to the foregoing, and without duplication of any
Purchase Price Adjustments, the Buyer will be paid (i) an amount
equal to all unpaid ad valorem, property, production, severance
and similar taxes and assessments based upon or measured by the
ownership of the Assets that are attributable to periods of time
prior to the Effective Time, which amounts shall, to the extent
not actually assessed, be computed based on the 2006 tax
statements received by Seller, or to the extent not received,
then based on such taxes and assessments for the preceding tax
year (such amount to be prorated for the period of Seller's and
Buyer's ownership before and after the Effective Time), and (ii)
an amount equal to all cash in, or attributable to, suspense
accounts relative to the Assets for which Buyer has assumed
responsibility under Section 14.02.
(d) To the extent that the same are not known as of the Closing Date
or settled as Purchase Price Adjustments pursuant to Section
10.02, all amounts due under this Section 12.01 will be settled
in accordance with the Final Statement under Section 12.03.
Section 12.02 Gas Imbalances. Buyer and Seller agree that the net gas
imbalance attributable to the Assets as of the Effective Time is believed to be
that which is set forth on Schedule 12.02 (the "Agreed Imbalance"),
notwithstanding that the actual imbalance may be less or greater. Buyer and
Seller shall verify the actual net gas imbalance in the post-closing accounting
and any imbalance shall be accounted for between the parties at the price of
$6.00 per Mcf but only as to those volumes which exceed or are less than the
Agreed Imbalance. Such settlement shall be final and neither party thereafter
shall make claim upon the other concerning the gas imbalances of the Assets.
BUYER ASSUMES ALL RIGHTS AND LIABILITIES RELATING TO GAS IMBALANCES DISCOVERED
AFTER THE POST-CLOSING SETTLEMENT INCLUDING ANY REVENUE ADJUSTMENT CAUSED BY
SUCH
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SUBSEQUENTLY DISCOVERED IMBALANCE AND AGREES TO DEFEND AND INDEMNIFY SELLER FROM
AND AGAINST ANY CLAIM, BY ANYONE, ARISING OUT OF SUCH GAS IMBALANCES REGARDLESS
OF SELLER'S NEGLIGENCE OR FAULT (INCLUDING STRICT LIABILITY).
Section 12.03 Final Accounting Statement.
(a) On or before ninety (90) days after the Closing Date, Seller
shall prepare and deliver to Buyer a post-closing statement
setting forth a detailed calculation of all post-Closing
adjustments applicable to the period for time between the
Effective Time and Closing ("Accounting Statement"). The
Accounting Statement shall include any adjustment or payment
which was not finally determined as of the Closing Date and the
allocation of revenues and expenses as determined in accordance
with Section 12.01. To the extent reasonably required by Seller,
Buyer shall assist in the preparation of the Accounting
Statement. Seller shall provide Buyer such data and information
as Buyer may reasonably request supporting the amounts reflected
on the Accounting Statement in order to permit Buyer to perform
or cause to be performed an audit. The Accounting Statement shall
become final and binding upon the parties on the thirtieth (30th)
day following receipt thereof by Buyer (the "Final Settlement
Date") unless Buyer gives written notice of its disagreement (a
"Notice of Disagreement") to Seller prior to such date. Any
Notice of Disagreement shall specify in detail the dollar amount,
nature and basis of any disagreement so asserted. If a Notice of
Disagreement is received by Seller in a timely manner, then the
Parties shall resolve the Dispute (as defined in Section 16.01)
evidenced by the Notice of Disagreement in accordance with
Article XVI.
(b) Within five (5) Business Days after the Final Settlement Date,
Seller shall pay to Buyer or Buyer shall pay to Seller, as
applicable, in immediately available funds the net amount due.
For purposes of this Agreement, the term "Final Statement" shall
mean (i) the revised Statement becoming final pursuant to this
Section, or (ii) upon resolution of any Dispute regarding a
Notice of Disagreement, the revised Statement reflecting such
resolutions, which the Parties shall issue, or cause the
Independent Expert or arbitrators to issue, as applicable,
following such resolution.
Section 12.04 Further Cooperation. Seller shall make the Records available
to be picked up by Buyer at the offices of Seller during normal business hours
within five (5) Business Days after the Closing to the extent the Records are in
the possession of Seller and are not subject to contractual restrictions on
transferability. Seller shall have the right to retain copies of any of the
Records and the rights granted under Section 17.03.
After the Closing Date, each Party, at the request of the other and without
additional consideration, 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 action as the
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other Party may reasonably request to convey and deliver the Assets to Buyer and
to accomplish the orderly transfer of the Assets to Buyer in the manner
contemplated by this Agreement. After the Closing, the Parties will cooperate to
have all proceeds received attributable to the Assets be paid to the proper
Party hereunder and to have all expenditures to be made with respect to the
Assets be made by the proper Party hereunder.
ARTICLE XIII
OPERATION OF THE ASSETS
Section 13.01 Operations after Effective Time. Pursuant to that certain
Transition Services Agreement dated April 1, 2006 by and between Seller and
Journey Operating L.L.C. ("Journey Operating") (the "Journey Transition Services
Agreement"), Journey Operating is operating certain of the Assets on which
Seller is the operator of record and shall continue to do so until such time as
the Journey Transition Services Agreement terminates pursuant to the terms
thereof.
Seller agrees, from and after the date hereof until Closing, except as expressly
contemplated by this Agreement or the Journey Transition Services Agreement, or
as expressly consented to in writing by Buyer, or in situations wherein
emergency action is taken in the face of risk to life, property or the
environment, to use commercially reasonable efforts to, or cause Journey
Operating to:
(a) Operate, or cause to be operated, the Assets in a good and
workmanlike manner and in the usual, regular and ordinary manner
consistent with past practice;
(b) maintain the books of account and records relating to the Assets
in the usual, regular and ordinary manner, in accordance with the
usual accounting practices of each such person;
(c) not enter into a material contract, or materially amend or change
the terms of any such contract that would involve individual
commitments of more than $50,000;
(d) not plug or abandon any well located on the Assets without
Buyer's prior written consent;
(e) not transfer, sell, mortgage, pledge or dispose of any material
portion of the Assets other than the sale and/or disposal of
hydrocarbons in the ordinary course of business and sales of
equipment that is no longer necessary in the operation of the
Assets or for which replacement equipment has been obtained;
(f) preserve in full force and effect all oil and gas leases,
operating agreements, easements, rights-of-way, permits,
licenses, insurance (to the extent maintained by Seller) and
agreements that relate to the Assets;
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(g) submit to Buyer for prior written approval, all requests for
operating or capital expenditures relating to the Assets that
involve individual commitments of more than $50,000; and
(h) obtain Buyer's written approval prior to voting under any
operating, joint venture, partnership or similar agreement or
electing to non-consent any operation under an operating
agreement.
In order to reimburse the Seller for administrative overhead expenses incurred
in order to operate the properties in accordance with this Section from the
Effective Time to the Closing Date, Buyer shall pay the Seller a fee as provided
in Section 10.02(a)(vi).
Section 13.02 Limitations on the Operational Obligations and Liabilities of
Seller
(a) From and after the date of execution of this Agreement and until
the Closing, and subject to the provisions of applicable
operating and other agreements, Seller shall use commercially
reasonable efforts to cause Journey Operating to operate the
Assets and use commercially reasonable efforts to cause any other
operators to operate and administer the Assets in a manner
consistent with its past practices, and shall carry on its
business with respect to the Assets in substantially the same
manner as before execution of this Agreement.
Buyer acknowledges that Seller owns undivided interests in some
or all of the Assets, and Buyer agrees that the acts or omissions
of the other working interest owners shall not constitute a
violation of the provisions of this Article XIII, nor shall any
action required by a vote of working interest owners constitute
such a violation so long as Seller has voted its interests in a
manner that complies with the provisions of this Article XIII. To
the extent that Seller is not the operator of any of the Assets,
the obligations of Seller in this Article XIII shall be construed
to require that Seller use reasonable efforts (without being
obligated to incur any expense or institute any cause of action)
to cause the operator of such Assets to take such actions or
render such performance within the constraints of the applicable
operating agreements and other applicable agreements.
(b) Notwithstanding anything to the contrary in this Article XIII,
and pursuant to Section 14.03 hereof, Seller shall have no
liability to Buyer for, and Buyer hereby agrees to release,
defend, indemnify and hold harmless Seller from, the incorrect
payment of delay rentals, royalties, shut-in royalties or similar
payments or for any failure to pay any such payments through
mistake or oversight (INCLUDING THOSE RESULTING FROM SELLER'S
SOLE, JOINT, COMPARATIVE OR CONCURRENT NEGLIGENCE OR STRICT
LIABILITY, BUT EXCLUDING THOSE RESULTING FROM SELLER'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT) provided that such payments
relate to production months after the Effective Time. In no
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event shall Buyer's remedy for any breach by Seller of its
obligations under this Article XIII exceed the Allocated Value of
the Subject Interest affected by such breach.
Section 13.03 Operation of the Assets After the Closing. Following the
Closing, Seller shall not be obligated to continue operating any of the Assets,
and Buyer hereby agrees to assume full responsibility for operating (or causing
the operation of) all Assets. Seller shall make its personnel available to Buyer
prior to the Closing as may be reasonably necessary to assist in the transition
if Buyer becomes the operator. Without implying any obligation on Seller's part
to continue operating any Assets after the Closing, if Seller elects to operate
any Assets following the Closing at the request of Buyer or any Third Party
working interest owner, due to constraints of applicable joint operating
agreement(s), or failure of a successor operator to take over operations or
other reasonable cause, such continued operation by Seller shall be for the
account of Buyer, at the sole risk, cost and expense of Buyer. Seller, as a part
of the Assumed Obligations, is hereby released and indemnified by Buyer from all
claims, losses, damages, costs, expenses, causes of action and judgments of any
kind or character (INCLUDING THOSE RESULTING FROM SELLER'S SOLE, JOINT,
COMPARATIVE OR CONCURRENT NEGLIGENCE OR STRICT LIABILITY) with respect to (a)
such continued operations by Seller, (b) Buyer's assumption of operations, and
(c) compliance with the terms of any applicable joint operating agreement
related to the election of a successor operator. Buyer shall conduct or cause to
be conducted all operations on the Assets after Closing in a good and
workmanlike manner and in compliance with all applicable laws, rules,
regulations and agreements. Notwithstanding anything to the contrary contained
herein, at Closing, Seller will resign as operator of any xxxxx within the
Assets that Seller currently operates.
Section 13.04 Casualty Loss.
(a) Buyer shall assume all risk of loss with respect to, and any
change in the condition of, the Assets from Effective Time until
the Closing, including with respect to the depletion of
Hydrocarbons, the watering-out of any well, the collapse of
casing, sand infiltration of xxxxx, and the depreciation of
personal property.
(b) If after the date of this Agreement and prior to the Closing any
part of the Assets shall be damaged or destroyed by fire or other
casualty or if any part of the Assets shall be taken in
condemnation or under the right of eminent domain or if
proceedings for such purposes shall be pending or threatened,
this Agreement shall remain in full force and effect
notwithstanding any such destruction, taking or proceeding, or
the threat thereof and the Parties shall proceed with the
transactions contemplated by this Agreement notwithstanding such
destruction or taking without reduction of the Purchase Price,
but subject to Section 13.04(c).
(c) Notwithstanding Section 13.04(a), in the event of any loss
described in Section 13.04(b), at the Closing, Seller shall pay
to Buyer all sums paid to Seller by Third Parties by reason of
the destruction or taking of such Assets (up to the Allocated
Value thereof), including any sums paid
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pursuant to any policy or agreement of insurance or indemnity,
and shall assign, transfer and set over unto Buyer all of the
rights, title and interest of Seller in and to any claims, causes
of action, unpaid proceeds or other payments from Third Parties,
including any policy or agreement of insurance or indemnity,
arising out of such destruction or taking (up to the Allocated
Value thereof). Notwithstanding anything to the contrary in this
Section 13.04, except as provided in Section 13.01 Seller shall
not be obligated to carry or maintain, and shall have no
obligation or liability to Buyer for its failure to carry or
maintain, any insurance coverage with respect to any of the
Assets. Notwithstanding anything to the contrary contained in
this Section 13.04, should the uncompensated loss exceed fifteen
(15%) percent of the Purchase Price, Buyer shall have the option
to terminate this Agreement in which event Seller shall return
the Deposit and to Buyer within three (3) Business Days after
such termination.
Section 13.05 Operatorship. At or before Closing, Seller will send out
notifications of its resignation as operator for all xxxxx Seller currently
operates and is selling to Buyer pursuant to this Agreement. Seller makes no
representation and/or warranty to Seller as to the transferability or
assignability of operatorship of such xxxxx. Buyer acknowledges that the rights
and obligations associated with such xxxxx are governed by applicable agreements
and that operatorship will be determined by the terms of those agreements.
ARTICLE XIV
OBLIGATIONS AND INDEMNIFICATION
Section 14.01 Retained Obligations. Provided that the Closing occurs,
Seller shall retain the following, to the extent that Buyer has provided Seller
with written notice claiming indemnification within six (6) months of the
Closing pursuant to the provisions of Section 14.04, and not thereafter,: (a)
all obligations and liabilities for the payment of royalties and rentals under
the Leases relating to the Subject Interests accruing during the Seller
Ownership Period; (b) all obligations of Seller under the Contracts for payment
of trade payables that accrue during the Seller Ownership Period; (c) any
obligation for which Seller expressly elects to indemnify Buyer pursuant to
Section 4.04(a)(iii); (d) all obligations and liabilities for payment of ad
valorem, property, and severance taxes attributable to the Assets arising during
the Seller Ownership Period; (e) all obligations and liabilities of Seller to
Third Parties for personal injury or death to the extent occurring prior to the
Effective Time as a result of the operation of the Assets by Seller, Journey
Operating or their respective affiliates; and (f) all obligations and
liabilities relating to any contamination or condition that is the result of any
offsite disposal by Seller, Journey Operating or their respective affiliates of
any wastes, pollutants, contaminants, hazardous material or other material or
substances on, in or below any properties not included in the Assets prior to
the Effective Time ("Offsite Disposal Claims") (collectively, the "Retained
Obligations").
Section 14.02 Assumed Obligations. Provided that the Closing occurs, Buyer
hereby assumes all duties, obligations and liabilities of every kind and
character with respect to the Assets and the ownership or operation thereof
(other than the Retained Obligations), whether attributable to periods before or
after the Effective Time, including, without limitation, those
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arising out of (a) the terms of the Easements, Contracts, Leases, Personal
Property or Subject Interests comprising part of the Assets, (b) Gas Imbalances,
(c) suspense accounts, (d) ad valorem, property, severance and other similar
taxes or assessments based upon or measured by the ownership of the Assets or
the production therefrom, (e) the condition of the Subject Interests, regardless
of whether such condition arose before or after the Effective Time, (f)
obligations to properly plug and abandon or re-plug or re-abandon or remove
xxxxx, flowlines, gathering lines or other facilities, equipment or other
personal property or fixtures comprising part of the Assets, (g) obligations to
restore the surface of the Subject Interests and obligations to remediate or
bring the Subject Interests into compliance with applicable Environmental Laws
(including conducting any remediation activities that may be required on or
otherwise in connection with activities on the Subject Interests), regardless of
whether such obligations or conditions or events giving rise to such
obligations, arose, occurred or accrued before or after the Effective Time, and
(h) any other duty, obligation, event, condition or liability assumed by Buyer
under the terms of this Agreement (collectively, the "Assumed Obligations").
Section 14.03 Buyer's Indemnification.
(a) Provided that the Closing occurs, Buyer shall release, defend,
indemnify and hold harmless Seller, its partners, and their
respective officers, directors, employees, agents, partners,
representatives, members, shareholders, affiliates, subsidiaries,
successors and assigns (collectively, the "Seller Indemnitees")
from and against any and all claims, damages, liabilities,
losses, causes of action, costs and expenses (including, without
limitation, those involving theories of negligence or strict
liability and including court costs and attorneys' fees)
(collectively, the "Losses") as a result of, arising out of, or
related to the Assumed Obligations, REGARDLESS OF WHETHER CAUSED
OR CONTRIBUTED TO BY THE SOLE, JOINT, COMPARATIVE OR CONCURRENT
NEGLIGENCE OR STRICT LIABILITY OF ANY OF THE SELLER INDEMNITEES.
(b) Without limiting the foregoing, provided that the Closing occurs,
Buyer shall release, defend, indemnify and hold harmless Seller
Indemnitees from and against any and all Losses which Seller
Indemnitees may sustain or incur by reason of or in connection
with environmental claims (excluding Offsite Disposal Claims
which constitute Retained Obligations, subject to other
limitations set forth in this Article XIV) relating to or arising
from the Assets REGARDLESS OF WHETHER CAUSED OR CONTRIBUTED TO BY
THE SOLE, JOINT, COMPARATIVE OR CONCURRENT NEGLIGENCE OR STRICT
LIABILITY OF ANY OF THE SELLER INDEMNITEES. BUYER HEREBY
EXPRESSLY WAIVES BUYER'S RIGHT TO CONTRIBUTION UNDER CERCLA.
Section 14.04 Seller's Indemnification. Provided that the Closing occurs,
subject to the limitations set forth in this paragraph and Section 15.03 Seller
shall release, defend, indemnify and hold harmless Buyer, its partners, and
their respective officers, directors, employees, agents, representatives,
members, shareholders, affiliates and subsidiaries (collectively, the "Buyer
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Indemnitees") from and against any and all Losses resulting from Seller's breach
of its representations and warranties and the Retained Obligations REGARDLESS OF
WHETHER CAUSED OR CONTRIBUTED TO BY THE SOLE, JOINT, COMPARATIVE OR CONCURRENT
NEGLIGENCE OR STRICT LIABILITY OF ANY OF THE BUYER INDEMNITEES. Notwithstanding
anything to the contrary contained herein, Seller's indemnification obligation
under this Section 14.04 shall only apply if (a) Buyer has provided Seller with
written notice claiming indemnification within six (6) months of the Closing,
and (b) Buyer shall bear sole responsibility for the aggregate costs associated
with all Losses relating to Buyer Indemnitees up to a deductible percentage of
three percent (3%) of the Purchase Price. By the prior sentence, it is the
intent that the Seller only be obligated to the extent of the excess of the
claims for Losses exceeds the deductible percentage of three percent (3%). In no
event shall Seller be required to indemnify the Buyer Indemnitees (or any single
Buyer Indemnitee) or pay any other amount in connection with or with respect to
the transactions contemplated in this Agreement any amount exceeding in the
aggregate twenty percent (20%) of the Purchase Price (as increased or decreased
under the terms of this Agreement).
Section 14.05 Notices and Defense of Indemnified Matters. Each Party shall
promptly notify the other Party of any matter of which it becomes aware and for
which it is entitled to indemnification from the other Party under this
Agreement. The indemnifying Party shall be obligated to defend, at the
indemnifying Party's sole expense, any litigation or other administrative or
adversarial proceeding against the indemnified Party relating to any matter for
which the indemnifying Party has agreed to indemnify and hold the indemnified
Party harmless under this Agreement. However, the indemnified Party shall have
the right to participate with the indemnifying Party in the defense of any such
matter at its own expense.
Section 14.06 Sole Remedy. If the Closing occurs, the sole and exclusive
remedy of each of the Buyer Indemnitees and the Seller Indemnitees with respect
to the Assets, including this purchase and sale, shall be pursuant to the
express provisions of this Agreement. With respect to the Buyer Indemnitees, any
and all (i) claims relating to the representations, warranties, covenants, and
agreements contained in this Agreement, (ii) other claims pursuant to, or in
connection with, this Agreement, or (iii) other claims relating to the Assets
and the purchase and sale thereof shall be subject to the provisions set forth
in Section 14.04. With respect to the Seller Indemnitees, any and all (i) claims
relating to the representations, warranties, covenants, and agreements contained
in this Agreement, (ii) other claims pursuant to, or in connection with, this
Agreement, or (iii) other claims relating to the Assets and the purchase and
sale thereof shall be subject to the provisions set forth in this Article XIV.
If the Closing occurs, Buyer on behalf of each of the Buyer Indemnitees and
Seller on behalf of each of the Seller Indemnitees shall be deemed to have
waived, to the fullest extent permitted under applicable law, any right to
contribution against Seller or any of its affiliates and any and all other
rights, claims, and causes of action it may have against Seller or any of its
affiliates, or Buyer or any of its affiliates, respectively, arising under or on
any federal, state, or local statute, law ordinance, rule or regulation, common
law or otherwise.
Section 14.07 Insurance and Tax Benefits. The amount for which any of the
Buyer Indemnitees or the Seller Indemnitees are entitled to indemnification or
other compensation under this Agreement or in connection with or with respect to
the transactions contemplated in this Agreement shall be reduced by any
corresponding (i) tax benefit created or generated or (ii)
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insurance proceeds realized or that could reasonably be expected to be realized
by such party if a claim were properly pursued under the relevant insurance
arrangements.
Section 14.08 Express Negligence. EXCEPT AS SPECIFICALLY PROVIDED OTHERWISE
IN THIS AGREEMENT, THE INDEMNIFICATION, RELEASE AND ASSUMPTION PROVISIONS
PROVIDED FOR IN THIS AGREEMENT SHALL BE APPLICABLE WHETHER OR NOT THE LOSSES,
COSTS, EXPENSES, AND DAMAGES IN QUESTION AROSE SOLELY OR IN PART FROM (i) THE
EXPRESS, GROSS, ACTIVE, PASSIVE, OR CONCURRENT NEGLIGENCE, OR OTHER FAULT OF ANY
BUYER INDEMNITEE OR SELLER INDEMNITEE OR (II) ANY ACTION THAT SUBJECTS THE BUYER
INDEMNITEE OR SELLER INDEMNITEE TO CLAIMS PREMISED IN WHOLE OR IN PART ON STRICT
LIABILITY. BUYER AND SELLER ACKNOWLEDGE THAT THIS STATEMENT COMPLIES WITH THE
EXPRESS NEGLIGENCE RULE AND IS CONSPICUOUS.
ARTICLE XV
LIMITATIONS ON REPRESENTATIONS AND WARRANTIES
Section 15.01 Disclaimers of Representations and Warranties. The express
representations and warranties of Seller contained in this Agreement and in the
Assignment are exclusive and are in lieu of all other representations and
warranties, express, implied or statutory. EXCEPT FOR THE EXPRESS
REPRESENTATIONS OF SELLER IN THIS AGREEMENT, BUYER ACKNOWLEDGES THAT SELLER HAS
NOT MADE, AND SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES, AND BUYER HEREBY
EXPRESSLY WAIVES, ANY REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT COMMON
LAW, BY STATUTE OR OTHERWISE RELATING TO (a) PRODUCTION RATES, RECOMPLETION
OPPORTUNITIES, DECLINE RATES, GAS BALANCING INFORMATION OR THE QUALITY, QUANTITY
OR VOLUME OF THE RESERVES OF HYDROCARBONS, IF ANY, ATTRIBUTABLE TO THE ASSETS,
(b) THE ACCURACY, COMPLETENESS OR MATERIALITY OF ANY INFORMATION, DATA OR OTHER
MATERIALS (WRITTEN OR ORAL) NOW, HERETOFORE OR HEREAFTER FURNISHED TO BUYER BY
OR ON BEHALF OF SELLER, AND (c) THE ENVIRONMENTAL CONDITION OF THE ASSETS.
EXCEPT FOR THE EXPRESS REPRESENTATIONS OF SELLER IN THIS AGREEMENT, SELLER
EXPRESSLY DISCLAIMS AND NEGATES, AND BUYER HEREBY WAIVES, AS TO PERSONAL
PROPERTY, EQUIPMENT, INVENTORY, MACHINERY AND FIXTURES CONSTITUTING A PART OF
THE ASSETS (i) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (II) ANY
IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (III) ANY
IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS,
(IV) ANY RIGHTS OF PURCHASERS UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF
CONSIDERATION OR RETURN OF THE PURCHASE PRICE, (v) ANY IMPLIED OR EXPRESS
WARRANTY OF FREEDOM FROM DEFECTS, WHETHER KNOWN OR UNKNOWN, (VI) ANY AND ALL
IMPLIED WARRANTIES EXISTING UNDER APPLICABLE LAW, AND (VII) ANY IMPLIED OR
EXPRESS WARRANTY REGARDING ENVIRONMENTAL LAWS, THE RELEASE OF MATERIALS INTO THE
ENVIRONMENT, OR PROTECTION OF THE
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ENVIRONMENT OR HEALTH, IT BEING THE EXPRESS INTENTION OF BUYER AND SELLER THAT
THE PERSONAL PROPERTY, EQUIPMENT, INVENTORY, MACHINERY AND FIXTURES INCLUDED IN
THE ASSETS SHALL BE CONVEYED TO BUYER, AND BUYER SHALL ACCEPT SAME, AS IS, WHERE
IS, WITH ALL FAULTS AND IN THEIR PRESENT CONDITION AND STATE OF REPAIR AND BUYER
REPRESENTS TO SELLER THAT BUYER WILL MAKE OR CAUSE TO BE MADE SUCH INSPECTIONS
WITH RESPECT TO SUCH PERSONAL PROPERTY, EQUIPMENT, INVENTORY, MACHINERY AND
FIXTURES AS BUYER DEEMS APPROPRIATE. SELLER AND BUYER AGREE THAT, TO THE EXTENT
REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE DISCLAIMERS OF CERTAIN
WARRANTIES CONTAINED IN THIS SECTION ARE "CONSPICUOUS" DISCLAIMERS FOR THE
PURPOSES OF ANY APPLICABLE LAW, RULE OR ORDER.
Section 15.02 Independent Investigation. Buyer represents and acknowledges
that it is knowledgeable of the oil and gas business and of the usual and
customary practices of producers such as Seller and that it has had (or will
have prior to the Closing if Seller complies with its obligations under this
Agreement) access to the Assets, the officers and employees of Seller, and the
books, records and files of Seller relating to the Assets, and in making the
decision to enter into this Agreement and consummate the transactions
contemplated hereby, Buyer has relied solely on the basis of its own independent
due diligence investigation of the Assets and upon the representations and
warranties made in Article V, and not on any other representations or warranties
of Seller or any other person or entity.
Section 15.03 Survival. The representations and warranties set forth in
Sections 5.07 through 5.14 and the covenants and agreements of Seller and Buyer
to be performed prior to or at the Closing shall terminate upon the Closing and
be of no further force and effect. All other representations, warranties,
covenants and obligations of Buyer under this Agreement shall indefinitely
survive the Closing. The representations, warranties, covenants and obligations
of Seller under Sections 5.01, 5.02, 5.03, 5.04, 5.05, and 5.06 of this
Agreement shall survive the Closing for a period of six months from the Closing.
The provisions of Section 11.04, 13.03, and 13.04(a) and Articles XII, XV, XVI
and XVII shall survive indefinitely. Article 14 shall survive the Closing
indefinitely, provided, however, nothing herein shall extend the six (6) month
period after Closing in which Buyer may send written notice claiming the right
to indemnification either under Sections 14.01 or 14.04 and Buyer expressly
waives all other rights to make any claim against Seller Indemnitees in
accordance with Sections 14.06 and 15.05.
Section 15.04 Mitigation. Each person and entity entitled to
indemnification hereunder or otherwise to damages in connection with the
transactions contemplated in this Agreement shall take all reasonable steps to
mitigate all losses, costs, expenses and damages after becoming aware of any
event which could reasonably be expected to give rise to any losses, costs,
expenses and damages that are indemnifiable or recoverable hereunder or in
connection herewith.
Section 15.05 Effect of Waiver. Neither Seller not Buyer shall have any
obligation or liability under this Agreement or in connection with or with
respect to the transactions contemplated in this Agreement for any breach,
misrepresentation, or noncompliance with
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respect to any representation, warranty, covenant, or obligation if such breach,
misrepresentation or noncompliance shall have been waived by the other party.
Section 15.06 Waiver of Consumer Rights. BUYER HEREBY WAIVES THE PROVISIONS
OF THE TEXAS DECEPTIVE TRADE PRACTICES ACT (THE "DTPA"), CHAPTER 17, SUBCHAPTER
E, SECTIONS 17.41 THROUGH 17.63, INCLUSIVE (OTHER THAN SECTION 17.555, WHICH IS
NOT WAIVED) OF THE TEXAS BUSINESS AND COMMERCE CODE, A LAW THAT GIVES CONSUMERS
SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF ITS OWN
SELECTION, BUYER VOLUNTARILY CONSENTS TO THIS WAIVER. TO EVIDENCE ITS ABILITY TO
GRANT SUCH WAIVER, BUYER REPRESENTS TO SELLER THAT IT (i) IS IN THIS BUSINESS OF
SEEKING OR ACQUIRING, BY PURCHASE OR LEASE, GOODS OR SERVICES FOR COMMERCIAL OR
BUSINESS USE, (II) HAS ASSETS OF $5 MILLION OR MORE ACCORDING TO ITS MOST RECENT
FINANCIAL STATEMENT PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES, (III) HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS
THAT ENABLE IT TO EVALUATE THE MERITS AND RISKS OF THE TRANSACTION CONTEMPLATED
HEREBY, AND (IV) IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION.
ARTICLE XVI
DISPUTE RESOLUTION
Section 16.01 General. Any and all claims, disputes, controversies or other
matters in question arising out of or relating to title issues pursuant to
Section 3.05(c), environmental issues pursuant to Section 4.04(b), or
calculation of the Accounting Statement or revisions thereto pursuant to Section
12.03(a) (all of which are referred to herein as "Disputes" which term shall not
include any other disputes claims, disputes, controversies or other matters in
question arising under this Agreement) shall be resolved in the manner
prescribed by this Article XVI.
Section 16.02 Senior Management. If a Dispute occurs that the senior
representatives of the Parties responsible for the transaction contemplated by
this Agreement have been unable to settle or agree upon within a period of
fifteen (15) days after such Dispute arose, Seller shall nominate and commit one
of the senior officers of its general partner, and Buyer shall nominate and
commit one of its senior officers, to meet at a mutually agreed time and place
not later than thirty (30) days after the Dispute has arisen to attempt to
resolve same. If such senior management have been unable to resolve such Dispute
within a period of fifteen (15) days after such meeting, or if such meeting has
not occurred within forty-five (45) days following such Dispute arising, then
either Party shall have the right, by written notice to the other, to resolve
the Dispute through the relevant Independent Expert pursuant to Section 16.03.
Section 16.03 Dispute by Independent Expert.
(a) Each Party shall have the right to submit Disputes regarding
title issues, environmental issues, or calculation of the
Statement or revisions thereto, to an independent expert
appointed in accordance with this Section 16.03
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(each, an "Independent Expert"), who shall serve as sole
arbitrator. The Independent Expert shall be appointed by mutual
agreement of the Parties from among candidates with experience
and expertise in the area that is the subject of such Dispute,
and failing such agreement, such Independent Expert for such
Dispute shall be selected in accordance with the Rules (as
defined in Subsection (b) of this Section 16.03).
(b) Disputes to be resolved by an Independent Expert shall be
resolved in accordance with mutually agreed procedures and rules
and failing such agreement, in accordance with the rules and
procedures of the Texas Arbitration Act and the Rules of the
American Arbitration Association to the extent such Rules do not
conflict with such Texas Arbitration Act or the provisions of
this Agreement The Independent Expert shall be instructed by the
Parties to resolve such Dispute as soon as reasonably practicable
in light of the circumstances. The decision and award of the
Independent Expert shall be binding upon the Parties as an award
under the Texas Arbitration Act and final and nonappealable to
the maximum extent permitted by law, and judgment thereon may be
entered in a court of competent jurisdiction and enforced by any
Party as a final judgment of such court.
(c) The charges and expenses of the arbitrator shall be shared
equally by Seller and Buyer.
(d) Any arbitration hearing held pursuant to Section 16.03 shall be
held in Houston, Texas
Section 16.04 Limitation on Arbitration. ALL OTHER DISAGREEMENTS,
DIFFERENCES, OR DISPUTES ARISING BETWEEN SELLER AND BUYER UNDER THE TERMS OF
THIS AGREEMENT (AND NOT COVERED BY SECTION 16.03) SHALL NOT BE SUBJECT TO
ARBITRATION AND SHALL BE DETERMINED BY A COURT OF COMPETENT JURISDICTION, UNLESS
THE PARTIES OTHERWISE MUTUALLY AGREE.
ARTICLE XVII
MISCELLANEOUS
Section 17.01 Names. As soon as reasonably possible after the Closing, but
in no event later than 45 days after the Closing, Buyer shall remove the names
of Seller and its affiliates, and all variations thereof, from all of the Assets
and make the requisite filings with, and provide the requisite notices to, the
appropriate federal, state or local agencies to place the title or other indicia
of ownership, including operation of the Assets, in a name other than the name
of the Seller or any of its affiliates, or any variations thereof.
Section 17.02 Expenses. Each Party shall be solely responsible for all
expenses, including due diligence expenses, incurred by it in connection with
this transaction, and neither Party shall be entitled to any reimbursement for
such expenses from the other Party.
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Section 17.03 Document Retention. As used in this Section 17.03, the term
"Documents" shall mean all files, documents, books, records and other data
delivered to Buyer by Seller pursuant to the provisions of this Agreement (other
than those that Seller has retained either the original or a copy of),
including, but not limited to: financial and tax accounting records; land, title
and division of interest files; contracts; engineering and well files; and books
and records related to the operation of the Assets prior to the Closing Date.
Buyer shall retain and preserve the Documents for a period of no less than four
(4) years following the Closing Date (or for such longer period as may be
required by law or governmental regulation), and shall allow Seller or its
representatives to inspect the Documents at reasonable times and upon reasonable
notice during regular business hours during such time period. Seller shall have
the right during such period to make copies of the Documents at its expense.
Section 17.04 Entire Agreement. This Agreement, the documents to be
executed hereunder, and the exhibits attached hereto constitute the entire
agreement between 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.
No supplement, amendment, alteration, modification or waiver of this Agreement
shall be binding unless executed in writing by the Parties and specifically
referencing this Agreement.
Section 17.05 Waiver. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.
Section 17.06 Publicity. Neither Seller nor Buyer will issue any public
announcement or press release concerning this transaction without prior
consultation of the other Party (except as required by law or the applicable
rules or regulations of any Governmental Authority or stock exchange, and in
such case with prior written agreement between the Parties on the wording of the
announcement or press release).
Section 17.07 Construction. The captions in this Agreement are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement. The Parties
acknowledge that they have participated jointly in the negotiation and drafting
of this Agreement and as such the Parties agree that if an ambiguity or question
of intent or interpretation arises hereunder, this Agreement shall not be
construed more strictly against one Party than another on the grounds of
authorship.
Section 17.08 No Third Party Beneficiaries. Except as may be specifically
provided for in the terms of this Agreement, nothing in this Agreement shall
provide any benefit to any Third Party or entitle any Third Party to any claim,
cause of action, remedy or right of any kind, it being the intent of the Parties
that this Agreement shall otherwise not be construed as a Third Party
beneficiary contract.
Section 17.09 Assignment. Neither Party may assign or delegate any of its
rights or duties hereunder without the prior written consent of the other Party,
and any assignment made without such consent shall be void. Notwithstanding the
foregoing, Seller may assign its rights and delegate its duties hereunder
without the consent of Buyer to any entity (i) that is controlled
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by Seller; (ii) that controls Seller, or (iii) that is under common control with
Seller; provided however, that no such assignment of rights or delegation of
duties shall relieve Seller of any of its obligations under this Agreement.
Except as otherwise provided herein, this Agreement shall be binding upon and
inure to the benefit of the Parties hereto and their respective permitted
successors, assigns and legal representatives.
Section 17.10 Buyer's Obligation Independent of Financing. Notwithstanding
anything to the contrary in this Agreement, the rights and obligations of Buyer
under this Agreement (including, without limitation, Buyer's due diligence
rights under Articles III and IV hereof) are independent of Buyer's ability to
obtain financing.
Section 17.11 Governing Law. This Agreement, other documents delivered
pursuant hereto and the legal relations between the Parties shall be governed
and construed in accordance with the laws of the State of Texas, without giving
effect to principles of conflicts of laws that would result in the application
of the laws of another jurisdiction. The Parties agree to venue in Xxxxxx
County, Texas.
Section 17.12 Notices. Any notice, communication, request, instruction or
other document required or permitted hereunder shall be given in writing and
delivered in person or sent by U.S. Mail postage prepaid, return receipt
requested, overnight courier or facsimile to the addresses of Seller and Buyer
set forth below. Any such notice shall be effective only upon receipt.
Seller: Xxxxxx Xxxxxx Production Company LP
000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: President
Facsimile No.: 000-000-0000
Buyer: Legacy Reserves Operating LP
000 Xxxx Xxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Xxxx X. XxXxxx
Facsimile No.: 000-000-0000
Either Party may, by written notice so delivered to the other Party, change its
address for notice purposes hereunder.
Section 17.13 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 and the Parties shall negotiate in
good faith to modify this Agreement so as to effect their original intent as
closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
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Section 17.14 Time of the Essence. Time shall be of the essence with
respect to all time periods and notice periods set forth in this Agreement.
Section 17.15 Counterpart Execution. This Agreement may be executed in any
number of counterparts, and each counterpart hereof shall be effective as to
each party that executes the same whether or not all of such parties execute the
same counterpart. If counterparts of this Agreement are executed, the signature
pages from various counterparts may be combined into one composite instrument
for all purposes. All counterparts together shall constitute only one Agreement,
but each counterpart shall be considered an original.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Seller and Buyer have executed and delivered this
Agreement as of the date first set forth above.
SELLER:
XXXXXX XXXXXX PRODUCTION COMPANY LP
By: KM Production Company GP LLC,
Its General Partner
By:
--------------------------------------------
Name:
---------------------------------
Title:
--------------------------------
BUYER:
LEGACY RESERVES OPERATING LP
By: Legacy Reserves Operating GP LLC,
Its General Partner
By:
--------------------------------------------
Name:
---------------------------------
Title:
--------------------------------
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EXHIBIT D
ASSIGNMENT AND XXXX OF SALE
THIS ASSIGNMENT AND XXXX OF SALE (this "Assignment"), effective as of 7:00
a.m. on July 1, 2006 (the "Effective Time"), is made by Xxxxxx Xxxxxx Production
Company LP, a Delaware Limited Partnership (the "Assignor"), whose address is
000 Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000, to Legacy Reserves Operating LP, a
Delaware Limited Partnership (the "Assignee"), whose address is 000 Xxxx Xxxx,
Xxxxx 0000, Xxxxxxx, Xxxxx 00000.
ARTICLE I
GRANTING AND HABENDUM
For Ten Dollars ($10.00) and other good and valuable consideration, the
receipt, and sufficiency of which are hereby acknowledged, Assignor does hereby
grant, bargain, sell, transfer, convey, set over, assign and deliver unto
Assignee, its successors and assigns, effective for all purposes as of the
Effective Time and subject to the matters set forth herein, the Assets. The term
"Assets" shall mean all of Assignor's right, title and interest in and to the
following:
(a) the leasehold estates in and to the oil, gas and mineral leases
described or referred to in Exhibit A attached hereto (the
"Leases"), whether or not all lands covered by the Leases are
described in Exhibit A, and any overriding royalty interests, fee
mineral interests, royalty interests or other interests in and to
the lands covered by the Leases, assignments and other documents
of title described or referred to in Exhibit A, all as more
specifically described in Exhibit A (collectively, the "Subject
Interests," or singularly, a "Subject Interest");
(b) all rights incident to the Subject Interests, including, without
limitation, (i) all rights with respect to the use and occupation
of the surface of and the subsurface depths under the Subject
Interests; (ii) all rights with respect to any pooled,
communitized or unitized acreage by virtue of any Subject
Interest being a part thereof, including all Hydrocarbon (as
defined in Subsection (d) of this Article I) production after the
Effective Time attributable to the Subject Interests or any such
pool or unit allocated to any such Subject Interest;
(c) to the extent assignable or transferable, all easements,
rights-of-way, surface leases, surface estates, servitudes, and
other estates or similar rights and privileges directly related
to or used solely in connection with the Subject Interests (the
"Easements"), including, without limitation, the Easements
described or referred to in Exhibit A;
(d) to the extent assignable or transferable, all personal property,
equipment, fixtures, inventory and improvements located on or
used in connection with the Subject Interests and the Easements
or with the production,
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treatment, sale, or disposal of oil, gas or other hydrocarbons
(collectively, "Hydrocarbons"), byproducts or waste produced
therefrom or attributable thereto, including, without limitation,
all xxxxx located on the lands covered by the Subject Interests
or on lands with which the Subject Interests may have been
pooled, communitized or unitized (whether producing, shut in or
abandoned, and whether for production, injection or disposal),
including, without limitation, all xxxxx described on Exhibit B
attached hereto, and all wellhead equipment, pumps, pumping
units, flowlines, gathering systems, piping, tanks, buildings,
treatment facilities, injection facilities, disposal facilities,
compression facilities, and other materials, supplies, equipment,
facilities and machinery (collectively, "Personal Property");
(e) to the extent assignable or transferable, all contracts,
agreements and other arrangements that directly relate to the
Subject Interests, the Leases or the Easements, including,
without limitation, production sales contracts, farmout
agreements, operating agreements, service agreements and similar
arrangements (collectively, the "Contracts");
(f) to the extent assignable or transferable, all books, records,
files, muniments of title, reports and similar documents and
materials, including, without limitation, lease records, well
records, and division order records, well files, title records
(including abstracts of title, title opinions and memoranda, and
title curative documents related to the Assets), contracts and
contract files, correspondence, that relate to the foregoing
interests in the possession of, and maintained by, Assignor
(collectively, the "Records") subject to Assignor's right to
retain copies of the same; and
(g) all geological and geophysical data relating to the Subject
Interests, other than such data that is interpretive in nature or
which cannot be transferred without the consent of, or payment
to, any Third Party. For purposes of this Agreement, "Third
Party" means any person or entity, governmental or otherwise,
other than Assignor or Assignee, and their respective affiliates;
the term includes, but is not limited to, working interest
owners, royalty owners, lease operators, landowners, service
contractors and governmental agencies.
(h) all franchises, licenses, permits, approvals, consents,
certificates, and other authorizations and rights granted by
governmental authorities and all certificates of convenience or
necessity, immunities, privileges, grants and other rights that
related to the Assets or the ownership or operation of any
thereof.
NOTWITHSTANDING THE FOREGOING, the Assets shall not include, and there is
excepted, reserved and excluded from the assignment contemplated hereby
(collectively, the "Excluded Assets"):
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(a) all credits and refunds and all accounts, instruments, trade
credits, and general intangibles (as such terms are defined in
the Texas Uniform Commercial Code) attributable to the Assets
accruing prior to the Effective Time;
(b) all claims of Assignor for refunds of or loss carry forwards with
respect to (i) ad valorem, severance, production or any other
taxes attributable to any period prior to the Effective Time,
(ii) income or franchise taxes, or (iii) any taxes attributable
to the other Excluded Assets, and such other refunds, and rights
thereto, for amounts paid in connection with the Assets and
attributable to the period prior to the Effective Time, including
refunds of amounts paid under any gas gathering or transportation
agreement;
(c) all proceeds, income, revenues or hydrocarbon production (and any
security or other deposits made) attributable to (i) the Assets
for any period prior to the Effective Time, or (ii) any other
Excluded Assets;
(d) all personal computers and associated peripherals and all radio
and telephone equipment and all of Assignor's proprietary
computer software, technology, patents, trade secrets,
copyrights, names, trademarks, logos and other intellectual
property;
(e) all of Assignor's rights and interests in geological and
geophysical data that is interpretive in nature or which cannot
be transferred without the consent of, or payment to, any Third
Party;
(f) all documents and instruments of Assignor that may be protected
by an attorney-client privilege;
(g) data and other information that cannot be disclosed or assigned
to Assignee as a result of confidentiality or similar
arrangements under agreements with persons unaffiliated with
Assignor;
(h) all audit rights arising under any of the Contracts or otherwise
with respect to any period prior to the Effective Time or to any
of the other Excluded Assets;
(i) all corporate, partnership, income tax records, and documents
subject to legal privilege (other than title);
(j) all claims and causes of action of Assignor (i) arising from
acts, omissions, or events, or damage to or destruction of
property, occurring prior to the Effective Time, (ii) arising
under or with respect to any of the Contracts that are
attributable to periods of time prior to the Effective time
(including claims for adjustments or refunds), or (iii) with
respect to any of the Excluded Assets;
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(k) all rights and interests of Assignor (i) under any policy or
agreement of insurance or indemnity, (ii) under any bond, or
(iii) to any insurance or condemnation proceeds or awards
arising, in each case, from acts, omissions, or events, or damage
to or destruction of property, occurring prior to the Effective
Time;
(l) any amounts due or payable to Assignor as adjustments to
insurance premiums related to the Assets with respect to any
period prior to the Effective Time; and
(m) all cash, checks, funds, accounts receivable, accounts payable,
promissory notes or general intangibles (as such terms are
defined by the Uniform Commercial Code) attributable to
Assignor's interests in the Assets with respect to any period
prior to the Effective Time.
TO HAVE AND TO HOLD the Assets, together with all and singular the rights,
privileges, contracts and appurtenances, in any way appertaining or belonging
thereto, unto Assignee, its successors and assigns, forever, subject to the
matters set forth herein.
ARTICLE II
SPECIAL WARRANTY OF TITLE AND DISCLAIMERS
Section 2.01 Special Warranty of Title. Assignor hereby agrees to warrant
and defend title to the Assets unto Assignee, its successors and assigns,
against every person whomsoever lawfully claiming or to claim the same or any
part thereof, by, through, or under Assignor, but not otherwise; subject,
however, to the Permitted Encumbrances (as such term is defined in the Purchase
Agreement described below) and the other matters set forth herein. The interests
set forth on Exhibit B are included for warranty purposes only and shall not
limit the interests herein conveyed, it being the intent of Assignor to convey
to Assignee all of its undivided interest in the Assets. Assignor also grants
and transfers to Assignee and its successors and assigns, to the extent so
transferable, the benefit of and the right to enforce all title and other
covenants and warranties, if any, which Assignor may enforce with respect to the
Assets against Assignor's predecessors-in-title to the Assets.
Section 2.02 Disclaimer. ASSIGNEE ACKNOWLEDGES THAT ASSIGNOR HAS NOT MADE,
AND ASSIGNOR HEREBY EXPRESSLY DISCLAIMS AND NEGATES, AND ASSIGNEE HEREBY
EXPRESSLY WAIVES, ANY REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT COMMON
LAW, BY STATUTE OR OTHERWISE RELATING TO (a) PRODUCTION RATES, RECOMPLETION
OPPORTUNITIES, DECLINE RATES, GAS BALANCING INFORMATION OR THE QUALITY, QUANTITY
OR VOLUME OF THE RESERVES OF HYDROCARBONS, IF ANY, ATTRIBUTABLE TO THE ASSETS;
(b) THE ACCURACY, COMPLETENESS OR MATERIALITY OF ANY INFORMATION, DATA OR OTHER
MATERIALS (WRITTEN OR ORAL) NOW, HERETOFORE OR HEREAFTER FURNISHED TO ASSIGNEE
BY OR ON BEHALF OF ASSIGNOR; AND (c) THE ENVIRONMENTAL CONDITION OF THE ASSETS.
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS ASSIGNMENT, ASSIGNOR EXPRESSLY
DISCLAIMS AND NEGATES, AND ASSIGNEE HEREBY WAIVES, AS TO PERSONAL
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PROPERTY, EQUIPMENT, INVENTORY, MACHINERY AND FIXTURES CONSTITUTING A PART OF
THE ASSETS (i) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (ii) ANY
IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (iii) ANY
IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS,
(iv) ANY RIGHTS OF PURCHASERS UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF
CONSIDERATION OR RETURN OF THE PURCHASE PRICE, (v) ANY IMPLIED OR EXPRESS
WARRANTY OF FREEDOM FROM DEFECTS, WHETHER KNOWN OR UNKNOWN, (vi) ANY AND ALL
IMPLIED WARRANTIES EXISTING UNDER APPLICABLE LAW, AND (vii) ANY IMPLIED OR
EXPRESS WARRANTY REGARDING ENVIRONMENTAL LAWS, THE RELEASE OF MATERIALS INTO THE
ENVIRONMENT, OR PROTECTION OF THE ENVIRONMENT OR HEALTH, IT BEING THE EXPRESS
INTENTION OF ASSIGNEE AND ASSIGNOR THAT THE PERSONAL PROPERTY, EQUIPMENT,
INVENTORY, MACHINERY AND FIXTURES INCLUDED IN THE ASSETS SHALL BE CONVEYED TO
ASSIGNEE, AND ASSIGNEE SHALL ACCEPT SAME, AS IS, WHERE IS, WITH ALL FAULTS AND
IN THEIR PRESENT CONDITION AND STATE OF REPAIR AND ASSIGNEE REPRESENTS TO
ASSIGNOR THAT ASSIGNEE HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS WITH
RESPECT TO SUCH PERSONAL PROPERTY, EQUIPMENT, INVENTORY, MACHINERY AND FIXTURES
AS ASSIGNEE DEEMS APPROPRIATE. ASSIGNOR AND ASSIGNEE AGREE THAT, TO THE EXTENT
REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE DISCLAIMERS OF CERTAIN
WARRANTIES CONTAINED IN THIS SECTION ARE "CONSPICUOUS" DISCLAIMERS FOR THE
PURPOSES OF ANY APPLICABLE LAW, RULE OR ORDER.
ARTICLE III
MISCELLANEOUS
Section 3.01 Construction. The captions in this Assignment are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Assignment. Assignor and
Assignee acknowledge that they have participated jointly in the negotiation and
drafting of this Assignment and as such they agree that if an ambiguity or
question of intent or interpretation arises hereunder, this Assignment shall not
be construed more strictly against one party than another on the grounds of
authorship.
Section 3.02 No Third Party Beneficiaries. Nothing in this Assignment shall
provide any benefit to any Third Party or entitle any Third Party to any claim,
cause of action, remedy or right of any kind, it being the intent of the parties
hereto that this Assignment shall otherwise not be construed as a Third Party
beneficiary contract.
Section 3.03 Assignment. This Assignment shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns.
Section 3.04 Governing Law. This Assignment, other documents delivered
pursuant hereto and the legal relations between the parties hereto shall be
governed and construed in accordance with the laws of the State of Texas,
without giving effect to principles of conflicts of laws that would result in
the application of the laws of another jurisdiction.
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Section 3.05 Counterpart Execution. This Assignment may be executed in any
number of counterparts, and each counterpart hereof shall be effective as to
each party that executes the same whether or not all of such parties execute the
same counterpart. If counterparts of this Assignment are executed, the signature
pages from various counterparts may be combined into one composite instrument
for all purposes. All counterparts together shall constitute only one
Assignment, but each counterpart shall be considered an original.
Section 3.06 Recording. To facilitate the recording or filing of this
Assignment, the counterpart to be recorded in a given county may contain only
that portion of the exhibits that describes Assets located in that county. In
addition to filing this Assignment, the parties hereto shall execute and file
with the appropriate authorities, whether federal, state or local, all forms or
instruments required by applicable law to effectuate the conveyance contemplated
hereby. Said instruments shall be deemed to contain all of the exceptions,
reservations, rights, titles and privileges set forth herein as fully as though
the same were set forth in each such instrument. The interests conveyed by such
separate assignments are the same, and not in addition to the Assets conveyed
herein.
Section 3.07 Purchase and Sale Agreement. This Assignment is subject to all
of the terms and conditions of the Purchase and Sale Agreement dated June 28,
2006 by and between Assignor and Assignee (the "Agreement").
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, this Assignment is executed by the parties on the date
of their respective acknowledgments below, but shall be effective for all
purposes as of the Effective Time.
ASSIGNOR:
XXXXXX XXXXXX PRODUCTION COMPANY LP
By: KM Production Company GP LLC,
Its General Partner
By:
----------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
ASSIGNEE:
LEGACY RESERVES OPERATING LP
By: Legacy Reserves Operating GP LLC,
Its General Partner
By:
----------------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
STATE OF TEXAS SS
SS
COUNTY OF ______________ SS
This instrument was acknowledged before me on _________, ____, 2006 by
______________, the _____________ of KM Production Company GP LLC, as general
partner of Xxxxxx Xxxxxx Production Company LP, a Delaware limited partnership
on behalf of such limited partnership.
------------------------------------------
Notary Public in and for
The State of Texas
Name:
-------------------------------------
My Commission Expires:
-------------
STATE OF TEXAS SS
SS
COUNTY OF ______________ SS
This instrument was acknowledged before me on _________, ____, 2006 by
______________, the _____________ of Legacy Reserves Operating GP LLC, as
general partner of Legacy Reserves Operating LP, a Delaware limited partnership
on behalf of such limited partnership.
------------------------------------------
Notary Public in and for
The State of Texas
Name:
-------------------------------------
My Commission Expires:
--------------------
SCHEDULE 12.02
GAS IMBALANCES
[NONE]
