EXECUTION COUNTERPART
MEMBERSHIP INTEREST REDEMPTION AGREEMENT
This MEMBERSHIP INTEREST REDEMPTION AGREEMENT ("Agreement") is executed as
of March 16, 2007, by NEW ALBANY-INDIANA, LLC, a Delaware limited liability
company (the "Company"), and BASELINE OIL & GAS CORP., a Nevada corporation
("Baseline"). The Company and Baseline may each be referred to herein as a
"Party" and may be referred to collectively as the "Parties".
RECITALS
WHEREAS, the Company is a limited liability company organized under the
laws of the State of Delaware and is governed by the terms of the Limited
Liability Company Agreement of New Albany-Indiana, LLC, dated as of November 25,
2005 (as amended, supplemented, and restated from time to time, the "Company LLC
Agreement"; terms defined in the Company LLC Agreement shall have the same
meanings when used in this Agreement, unless expressly provided otherwise); and
WHEREAS, Baseline is a Member of the Company whose Economic Interest
Percentage and Voting Interest Percentage was originally, in each case, fifty
percent (50%); and
WHEREAS, to assist Baseline in obtaining financing for certain of its
projects, Baseline desires to receive from the Company an assignment of an
undivided interest, equal to Baseline's Economic Interest Percentage, in and to
the assets and properties of the Company; and
WHEREAS, the Company is willing to make such an assignment of interest to
Baseline in consideration of the redemption by the Company of the Membership
Interest of Baseline; and
WHEREAS, pursuant to the Extension Agreement dated as of March 12, 2007
(the "Extension Agreement"), the Company agreed to extend the Call Obligation
Deadline for certain Capital Calls made prior to the date thereof until March
16, 2007, and the Parties agreed upon certain procedures regarding the
implementation of the transaction contemplated herein; and
WHEREAS, in accordance with the terms of the Extension Agreement, the
Economic Interest Percentage of Baseline has been reduced from 50% to 40.423%
(the "Adjusted Economic Interest Percentage").
NOW, THEREFORE, for and in consideration of the mutual promises and
undertakings contained in this Agreement, the benefits to be derived by the
Parties hereunder, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. Redemption of Membership Interest. The Company hereby redeems, and
Baseline hereby transfers and assigns to the Company, the full Membership
Interest of Baseline (including, without limitation, its Economic Interest and
Voting Interest) and all rights, privileges, and benefits appurtenant or
relating in any way thereto (hereinafter referred to as the "Baseline Membership
Interest"). The Company and Baseline agree to take such further actions, and to
execute, acknowledge, and deliver all such further documents, as are reasonably
necessary in effectuating the redemption of the Baseline Membership Interest.
Such redemption shall be effective as of March 16, 2007 (the "Effective Date").
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2. Assignment of Interests in Company Assets. Concurrently with the
execution of this Agreement, the Company has conveyed to Baseline, pursuant to
the execution and delivery of sufficient numbers of counterparts of an
Assignment, Xxxx of Sale, and Conveyance substantially in the form attached
hereto as Exhibit A (the "Conveyance") to facilitate recording in all relevant
jurisdictions, an undivided interest equal to the Adjusted Economic Interest
Percentage of Baseline in and to all oil and gas properties, rights, and assets
of the Company, which oil and gas properties, rights, and assets are described
more particularly in the exhibits attached to the Conveyance (collectively, the
"Company Assets"). The undivided interest in and to the Company Assets thus
conveyed by the Company to Baseline shall be referred to as the "Assigned
Interests". The terms of the Conveyance are incorporated into this Agreement by
this reference for all purposes. The Conveyance is made effective as of 7:00
a.m., Eastern Standard Time, on the Effective Date. Baseline shall pay any and
all costs and expenses associated with the recording of the Conveyance in all
relevant jurisdictions.
3. Additional Concurrent Deliveries. In addition to the Conveyance,
concurrently with the execution of this Agreement, the Company has delivered to
Baseline: (a) releases of all Liens (if any) (as defined in the Conveyance)
encumbering the Assigned Interests that do not constitute Permitted Encumbrances
(as defined in the Conveyance); (b) all consents, authorizations, waivers, and
approvals (if any) required under applicable Law to be obtained from any court
or Governmental Authority prior to the conveyance of the Assigned Interests; (c)
all third Person consents to assignment required to be obtained in connection
with such conveyance of the Assigned Interests prior to the conveyance thereof;
and (d) all reports to and filings with any Governmental Authority required to
be made after such conveyance. Baseline shall reimburse the Company for any
reasonable costs and expenses incurred by the Company in order to satisfy the
requirements of this Section 3.
4. Preferential Rights to Purchase. The Company and Baseline understand
and agree that the Company Asset described on Schedule 1 is subject to
contractual provisions that give each owner of an oil and gas leasehold estate
therein a preferential right to purchase, on the terms set forth therein, any
interest in such Company Asset that the Company proposes to sell. With the
authorization and consent of Baseline, prior to the date of this Agreement, the
Company has sent to the holders of such preferential right to purchase written
notice of the transaction contemplated herein and requesting either the
concurrence of such holder(s) with the determination by the Company and Baseline
that the transaction contemplated herein does not trigger the operation of, or
the waiver by such holder(s) of, such preferential right to purchase. As of the
date of this Agreement, the Company and Baseline acknowledge that waivers of
such preferential right to purchase have been obtained from all holders thereof.
5. Transitional Matters; AMI; Tax Issues; Records.
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(a) Concurrently with the execution of this Agreement, and subject to and
in accordance with the terms of the Extension Agreement, Baseline has paid to
the Company, by bank wire transfer of immediately available U.S. funds into the
account designated by the Company in writing, the sum of $300,000.00
representing a portion of the aggregate amount of all Capital Calls made by the
Managing Member to Baseline under Section 3.2 of the Company LLC Agreement as of
the date of execution of this Agreement, leaving an unpaid balance of such
Capital Calls in the amount of $1,921,457.13. Pursuant to the terms of Paragraph
3(c) of the Extension Agreement, the Company has exercised its rights under
Section 3.3(a) of the Company LLC Agreement with respect such unpaid balance of
$1,921,457.13, and consequently, Baseline's Economic Interest Percentage has
been reduced to the Adjusted Economic Percentage set forth in the recitals to
this Agreement. Such payment by Baseline and such reduction of Baseline's
Economic Interest Percentage in accordance with Paragraph 3(c) of the Extension
Agreement constitute the full and complete discharge and satisfaction of all
obligations and Liabilities of Baseline with respect all such Capital Calls. To
the extent that any of such Capital Calls are, as set forth in the documents
evidencing such Capital Calls, intended to cover the share attributable to
Baseline's Membership Interest of the estimated costs and expenses of drilling,
testing, and completing and/or plugging and abandoning xxxxx to be drilled on
the Company Assets after the Effective Date, any portion of such a Capital Call
not expended by the Company in connection with the drilling, testing and
completion or plugging and abandonment of the well to which such portion of the
relevant Capital Call pertains shall be refunded to Baseline. To the extent that
the share attributable to the Assigned Interests of the costs and expenses
actually incurred in connection with the drilling, testing, and completion or
plugging and abandonment of a well identified in the documents evidencing such
Capital Calls exceeds the amount of the Capital Call for such well, Baseline
shall be obligated to pay its share of such excess costs in accordance with the
terms of the applicable joint operating agreement or other applicable Contract.
The Company stipulates that, as of the date of execution of this Agreement,
Baseline is not in default with respect to any other Capital Call made by the
Managing Member, or any other obligation or Liability of any kind or character
in favor of the Company arising under the terms of the Company LLC Agreement or
otherwise. For a period of twelve (12) months after the Effective Date, the
Managing Member shall be entitled to make additional Capital Calls to Baseline
in accordance with Section 3.2 of the Company LLC Agreement to the extent such
Capital Calls relate to costs and expenses actually incurred by the Company
prior to the Effective Date (or actually invoiced by any operator to the Company
under any joint operating agreements or areas of mutual interests to which the
Company is a party with respect to operations prior to the Effective Date,
regardless of whether any such invoice is received before or after the Effective
Date); the Parties acknowledging and agreeing that Baseline shall be responsible
for fifty percent (50%) of such costs and expenses. If (i) at the expiration of
such twelve-month period, there remain any costs and expenses incurred by the
Company prior to the Effective Date for which the Managing Member is otherwise
authorized under Section 3.2 of the Company LLC Agreement to make a Capital Call
to Baseline, but (ii) the Managing Member failed to make such a Capital Call to
Baseline within such twelve-month period, the Company shall be deemed to have
waived, and to have released and forever discharged Baseline from, any and all
Claims that the Company may have with respect to any of such costs and expenses.
(b) Prior to the execution of this Agreement, the Company prepared and
submitted to Baseline a preliminary settlement statement (the "Preliminary
Settlement Statement") that sets forth all other costs and expenses (or, in the
absence of invoiced costs, the Company's estimates thereof) for which Baseline
has agreed to reimburse the Company under the terms of Sections 2 and 3.
Baseline has paid to the Company all such amounts concurrently with the
execution of this Agreement. No later than one-hundred twenty (120) days after
the date of execution hereof, the Company will prepare a final accounting
statement (the "Final Settlement Statement"), subject to verification by
Baseline, that sets forth the final determination of the costs and expenses for
which Baseline agreed to reimburse the Company under the terms of Sections 2 and
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3, all costs and expenses incurred by the Company in performing its obligations
under Sections 5(h) and 5(i), and the amounts of any Capital Calls made by the
Company to Baseline in accordance with Section 5(a) after the Effective Date and
prior to the date of the Final Settlement Statement. No later than fifteen (15)
days after Baseline's receipt of the Final Settlement Statement, Baseline shall
deliver to the Company written notice setting forth any changes to the Final
Settlement Statement proposed by Baseline. On or before fifteen (15) days after
the Company's receipt of Baseline's proposed changes to the Final Settlement
Statement, the Company and Baseline shall agree on the Final Settlement
Statement and, as the case may be, shall pay to the other such sums as may be
found to be due in the final accounting by wire transfer of immediately
available U.S. funds to the account designated in writing by the relevant Party.
(c) Except as otherwise provided for in this Agreement or the Conveyance,
as the result of the redemption by the Company of the Baseline Membership
Interest pursuant to this Agreement, Baseline shall have no obligation or
Liability with respect to any Capital Call made by the Managing Member after the
Effective Date for costs or expenses of the Company attributable to periods on
or after the Effective Date, or any other Liability of the Company incurred or
arising on or after the Effective Date. The Company hereby waives, and releases
and forever discharges Baseline from, any and all Claims that the Company may
have with respect to any of such matters.
(d) The Company represents to Baseline that, as of the date of execution
of this Agreement, no distributions of Net Cash Flows are due the Members under
the terms of the Company LLC Agreement. To the extent that the Company
determines, after the Effective Date, that a distribution of Net Cash Flows is
due the Members for any period prior to the Effective Date, Baseline shall be
entitled to receive its Adjusted Economic Interest Percentage of such
distribution, subject to and in accordance with the terms of the Company LLC
Agreement. As the result of the redemption by the Company of the Baseline
Membership Interest pursuant to this Agreement, Baseline shall not be entitled
to receive any portion of any distribution of Net Cash Flows or other property
made by the Company to the Members pursuant to the Company LLC Agreement, or any
other economic benefit thereunder, to the extent that, in each case, such
distribution or economic benefit is attributable to any period on and after the
Effective Date, and Baseline hereby waives, and releases and forever discharges
the Company from, any and all Claims that Baseline may have with respect
thereto.
(e) The Company and Baseline stipulate and agree that the conveyance by
the Company to Baseline of the Assigned Interests pursuant hereto constitutes a
distribution to Baseline of property having a fair market value sufficient to
reduce the balance of Baseline's Capital Account to zero (0). Baseline hereby
waives, and releases and forever discharges the Company from, any and all Claims
that Baseline may have under the terms of the Company LLC Agreement with respect
to the return of any capital contributed by Baseline to the Company. The Company
hereby waives, and releases and forever discharges the Company from, any and all
Claims that the Company may have against Baseline under Section 3.6 of the
Company LLC Agreement regarding the restoration of any negative balance in the
Capital Account of Baseline, except to the extent that such restoration is
required under applicable Law as contemplated in clause (i) of such Section 3.6.
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(f) From and after the Effective Date, the Company shall have no further
obligation to Baseline, and Baseline shall have no further rights, in each case
arising under Section 3.4 of the Company LLC Agreement in connection with the
"AMI" defined therein. All rights of Baseline with respect such AMI and any
other areas of mutual interest in effect for the Company's Assets shall be
governed by the contracts and agreements creating such areas of mutual interest,
to which the conveyance of the Assigned Interests has expressly been made
subject. Each of the Company and Baseline hereby waives, and releases and
forever discharges the other Party from, any and all Claims that the first Party
may have against the other Party under the terms of Section 3.4 of the Company
LLC Agreement for all periods on and after the Effective Date.
(g) To the extent that Section 736 of the Code applies to any payment or
distribution hereunder, all such payments and distributions shall be deemed made
pursuant to Section 736(b)(1) of the Code. Consistent with the terms of Section
5.1(d) of the Company LLC Agreement, items of Profit, Loss, and credit for
fiscal year 2007 will be allocated for federal income tax purposes to Baseline
in accordance with its Economic Interest using an interim closing of the
Company's books as of the Effective Date. No items of Profit, Loss, or credit
attributable to any period after the Effective Date shall be allocated to
Baseline.
(h) No later than forty-five (45) days after the date of execution of this
Agreement, the Company shall deliver to Baseline copies, in either paper or
electronic form (as reasonably determined by the Company), of all files, records
(including, without limitation, land and title records, plats, surveys,
abstracts of title, title insurance policies, title opinions, and title
curative, lease, contract, division order, marketing, correspondence,
operations, environmental, insurance, production, accounting, property and
production tax, regulatory, and facility and well records and files), and other
information relating to any of the Company Assets that are in the possession of
the Company, and the disclosure and transfer of which is not prohibited by
confidentiality or other contractual arrangements in existence on the date of
execution of this Agreement (collectively, the "Records"). Baseline shall be
responsible for all reasonable costs and expenses incurred by the Company
relating to the copying and delivery of the Records to Baseline pursuant to this
Section 5(h). Upon at least ten (10) Business Days advanced written notice to
the Company, the Company will provide to Baseline reasonable access during
normal business hours to the original Records for purposes of obtaining
information for the preparation of tax returns, financial statements, and other
legitimate business purposes of Baseline.
(i) No later than thirty (30) days after the date of execution of this
Agreement, the Company shall provide to Baseline copies, in either paper or
electronic form (as reasonably determined by the Company), of all of the Data
(as defined in the Conveyance) owned by the Company that the Company is free to
transfer. To the extent that the Company owns Data that is subject to a
confidentiality obligation or a restriction on transferability, the Company
shall use reasonable commercial efforts to obtain the waiver of such
confidentiality obligation or obtain the required consent to transfer or
assignment so that such Data may be provided to Baseline, but the Company shall
not be required to make any payment to obtain such waiver or consent. In like
manner, to the extent that the Company has licensed any Data from a third
Person, the Company shall use reasonable commercial efforts to obtain a
sub-license of such Data to Baseline. Baseline shall be responsible for making
any payment required to obtain such a sub-license. Baseline shall be responsible
for all reasonable costs and expenses incurred by the Company pursuant to this
Section 5(i).
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(j) After the date of execution hereof, the Company and Baseline shall
execute and deliver, or shall cause to be executed and delivered from time to
time, such further instruments of conveyance and transfer, and shall take such
other actions as either Party may reasonably request, to carry out the
transactions contemplated in this Agreement. If, after the date of execution
hereof, either Party receives monies belonging to the other, such amounts shall
be promptly disbursed to the Party entitled to receive them. If an invoice or
other evidence of an obligation is received by a Party, which is either an
obligation assumed by the other Party or partially an obligation of both the
Company and Baseline, the Parties shall consult with each other, and an
adjustment for such amount will be made either on the Final Settlement
Statement, or, if the evidence of the obligation is not received until after the
completion of the final accounting pursuant to Section 5(b), in cash as the
Parties may agree.
6. Representations and Warranties.
(a) The Company hereby represents and warrants to Baseline, and Baseline
hereby represents and warrants to the Company, as follows, in each case as of
the date of execution of this Agreement: (i) such Party is duly organized,
validly existing, and in good standing under the Laws of the jurisdiction of its
formation and is duly qualified to conduct business and is in good standing in
the State of Indiana; (ii) the execution, delivery, and performance of this
Agreement and the Conveyance are within its powers, have been duly authorized by
all necessary action, and do not violate any of the terms or conditions of its
governing documents, any contract to which it is a party, or any applicable Law;
(iii) this Agreement and the Conveyance constitute the legal, valid, and binding
obligations of such Party, enforceable against it in accordance with their
respective terms, subject to the effects of bankruptcy, insolvency,
reorganization, moratorium, and similar Laws, as well as to principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law); (iv) there are no bankruptcy, insolvency, reorganization,
receivership, or other similar proceedings pending or being contemplated by such
Party or, to its knowledge, threatened against it; and (v) there are no suits,
proceedings, judgments, rulings, or orders by or before any court or other
Governmental Authority that could materially adversely affect the ability of
such Party to perform this Agreement or the Conveyance.
(b) In addition to the stipulations and representations of the Company set
forth in Sections 5 and 6(a), the Company hereby represents and warrants to
Baseline as follows, in each case as of the date of execution of this Agreement:
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(i) Except as otherwise reflected in Schedule 2 or otherwise
described, required, established or set forth in any Contract described on
Exhibit D to the Conveyance or any Lease, to the knowledge of the Company,
none of the Assigned Interests is subject to a preferential right to
purchase, third Person consent to assignment requirement, right of first
refusal, right of first offer, or similar right or restriction.
(ii) The Company has furnished to Baseline true and correct copies
of all material contracts and agreements of the Company, which contracts
and agreements are described on Exhibit D to the Conveyance (collectively,
the "Contracts"), and, to the knowledge of the Company, there are no
material contracts, agreements, or instruments affecting the Assigned
Interests other than the Contracts described on Exhibit D to the
Conveyance. With respect to the Contracts: (i) to the knowledge of the
Company, all Contracts are in full force and effect; (ii) to the knowledge
of the Company, the Company is not in material breach or material default,
and, to the knowledge of the Company, there has occurred no event, fact,
or circumstance that, with the lapse of time or the giving of notice, or
both, would constitute such a material breach or material default by the
Company, with respect to the terms of any Contract; (iii) to the knowledge
of the Company, no other party is in material breach or material default
with respect to the terms of any Contract; and (iv) neither the Company
nor, to the Company's knowledge, any other party to any Contract has given
or threatened to give notice of any action to terminate, cancel, rescind,
or procure a judicial reformation of any Contract or any provision
thereof.
(iii) All oil and gas leases and other interests in oil and gas
owned by the Company are described on Exhibit A to the Conveyance
(collectively, the "Leases"), and, to the knowledge of the Company, there
are no oil and gas leases, or interests therein, or other interests in oil
and gas owned by the Company other than the Leases described on Exhibit A
to the Conveyance. With respect to the Leases: (i) to the knowledge of the
Company, all Leases are in full force and effect; (ii) to the knowledge of
the Company, the Company is not in material breach or material default,
and, to the knowledge of the Company, there has occurred no event, fact,
or circumstance that, with the lapse of time or the giving of notice, or
both, would constitute such a material breach or material default by the
Company, with respect to the terms of any Lease; (iii) to the knowledge of
the Company, no other party is in material breach or material default with
respect to the terms of any Lease; and (iv) neither the Company nor, to
the Company's knowledge, any other party to any Lease has given or
threatened to give notice of any action to terminate, cancel, rescind, or
procure a judicial reformation of any Lease or any provision thereof.
(iv) Except as set forth in Schedule 2 or as otherwise described,
required, established, or set forth in any Contract described on Exhibit D
to the Conveyance or any Lease, to the knowledge of the Company, the
Assigned Interests are not subject to any area of mutual interest
arrangement, maintenance of uniform interest arrangement, "before payout"
or "after payout" reversion or conversion, or other provision under which
Baseline may be obligated to make assignments to third Persons of
interests in any Assigned Interest after the Effective Date.
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(v) The xxxxx for oil and gas drilled or being drilled on the Leases
are described on Exhibit B to the Conveyance (collectively, the "Xxxxx").
There have been no sales of hydrocarbons produced from the Xxxxx and
allocable to the Assigned Interests during the period of the Company's
ownership thereof.
For purposes of this Agreement, the term "knowledge" means (y) with respect to
the Company, the actual knowledge of the managers and senior management
personnel (including, without limitation, the General Counsel and the Director
of Land) of the Company and (z) with respect to Baseline, the actual knowledge
of the officers and directors of Baseline.
(c) In addition to the stipulations and representations of Baseline set
forth in Section 6(a), Baseline hereby represents and warrants to the Company as
follows, in each case as of the date of execution of this Agreement:
(i) Baseline is the true and lawful owner of the Baseline Membership
Interest and has the lawful authority to assign and transfer the same to
the Company.
(ii) The Baseline Membership Interest is free and clear of all
Liens, and Baseline will forever warrant and defend the same against the
lawful Claims of all Persons.
7. Indemnities of Baseline. Regardless of the presence or absence of
insurance, Baseline shall indemnify and hold harmless the Company and its
Indemnity Group from and against any and all Claims and Liabilities caused by,
arising out of, resulting from, or relating in any way to, and to pay to the
Company or its Indemnity Group any sum that the Company or its Indemnity Group
pays, or becomes obligated to pay, on account of: (a) any material breach of a
warranty or a materially inaccurate or materially erroneous representation made
by Buyer in this Agreement; (b) all Claims and Liabilities waived, released, and
discharged by Baseline pursuant to the terms of Section 5; (c) all taxes for
which Baseline has agreed to be responsible under the terms of this Agreement
and the Conveyance; and (d) all Claims and Liabilities relating to the Assigned
Interests assumed by Baseline pursuant to Section 3.2 of the Conveyance (the
"Assumed Liabilities").
8. Indemnities of the Company. Regardless of the presence or absence of
insurance, the Company shall indemnify and hold harmless Baseline and its
Indemnity Group from and against any and all Claims and Liabilities caused by,
arising out of, resulting from, or relating in any way to, and to pay Baseline
or its Indemnity Group any sum that Baseline or its Indemnity Group pays or
becomes obligated to pay, on account of: (a) any material breach of a warranty
or a materially inaccurate or materially erroneous representation or stipulation
made by the Company in this Agreement; (b) all Claims and Liabilities waived,
released, and discharged by the Company pursuant to the terms of Section 5; (c)
all taxes for which the Company has agreed to be responsible under the terms of
this Agreement and the Conveyance; and (d) except for the Assumed Liabilities,
all Claims and Liabilities relating to the Company Assets, whether arising
before or after the Effective Date.
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9. Survival. All covenants and agreements of any Party hereunder shall
survive the execution and delivery of this Agreement until fully performed or
discharged. All representations and warranties of the Parties hereunder shall
survive the execution and delivery of this Agreement for a period of one (1)
year after the execution hereof and shall remain effective regardless of any
investigation at any time made by or on behalf of any Party, or of any
information any Party may have with respect thereto. Such survival does not
obligate either Party to make any further representation or warranty after the
date of execution hereof, or to cause any representation or warranty made
hereunder to remain true and correct after the date of execution hereof.
10. ENTIRE AGREEMENT. THIS AGREEMENT AND THE CONVEYANCE CONSTITUTE THE
ENTIRE AGREEMENT AMONG THE PARTIES HERETO PERTAINING TO THE SUBJECT MATTER
HEREOF AND SUPERSEDE ALL PRIOR AGREEMENTS, UNDERSTANDINGS, NEGOTIATIONS, AND
DISCUSSIONS, WHETHER ORAL OR WRITTEN, OF THE PARTIES PERTAINING TO THE SUBJECT
MATTER HEREOF. THERE ARE NO WARRANTIES, REPRESENTATIONS, OR OTHER AGREEMENTS
BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER HEREOF EXCEPT AS SPECIFICALLY
SET FORTH HEREIN AND IN THE CONVEYANCE, AND NO PARTY SHALL BE BOUND BY OR LIABLE
FOR ANY ALLEGED REPRESENTATION, PROMISE, INDUCEMENT, OR STATEMENT OF INTENTION
NOT SO SET FORTH.
11. Parties in Interest. This Agreement shall be binding upon and inure to
the benefit of the Parties hereto. No other Person shall have any right,
benefit, priority, or interest hereunder or as a result hereof or have standing
to require satisfaction of the provisions hereof in accordance with their terms.
12. Amendment. This Agreement may be amended only by an instrument in
writing executed by the Parties against whom enforcement is sought.
13. Notices. All notices and communications required or permitted to be
given hereunder shall be in writing and shall be delivered personally, or sent
by bonded overnight courier, or by facsimile transmission if confirmed by
written confirmation, or by certified U.S. mail, postage prepaid with return
receipt requested, addressed to the appropriate Party at the address for such
Party set forth hereinafter, or at such other address as such Party shall have
theretofore designated in writing hereunder:
If to the Company: If to Baseline:
------------------ ---------------
New Albany - Indiana, LLC Baseline Oil & Gas Corp.
0000 Xxxxxx Xxxx 0 Xxxx Xxxxxx, 00xx Xxxxx
Xxxxx Xxxxxxx, Xxxxxxxxxxxx 00000 Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Xxxxxxx Attention: Xx. Xxxxxxx X. Xxxxx
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Facsimile: (000)000-0000 Facsimile: (000) 000-0000
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Any notice given in accordance herewith shall be deemed to have been given
on the Business Day when delivered to the addressee in person or by facsimile,
bonded overnight courier, or certified U.S. mail; provided, however, that if any
such notice is received after normal business hours, the notice will be deemed
to have been given on the next succeeding Business Day.
14. Waiver; Rights Cumulative. Any of the terms, covenants,
representations, warranties, or conditions hereof may be waived only by a
written instrument executed by or on behalf of the Party waiving compliance. No
oral statement or course of dealing on the part of any Party, or its respective
officers, employees, agents, or representatives, or any failure by any Party to
exercise any of its rights under this Agreement shall operate as a waiver
thereof or affect in any way the right of such Party at a later time to enforce
the performance of such provision. No waiver by any Party of any condition, or
any breach of any term, covenant, representation, or warranty contained in this
Agreement, in any one or more instances, shall be deemed to be or construed as a
further or continuing waiver of any such condition or breach or a waiver of any
other condition or of any breach of any other term, covenant, representation, or
warranty. The rights of the Parties under this Agreement shall be cumulative,
and the exercise or partial exercise of any such right shall not preclude the
exercise of any other right.
15. GOVERNING LAW. THIS AGREEMENT AND THE LEGAL RELATIONS BETWEEN THE
PARTIES SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF DELAWARE, EXCLUDING ANY CONFLICTS OF LAW RULE OR PRINCIPLE THAT MIGHT REFER
CONSTRUCTION OF SUCH PROVISIONS TO THE LAWS OF ANOTHER JURISDICTION.
16. Severability. If any term or other provision of this Agreement is
invalid, illegal, or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any adverse manner to
any party. Upon such determination that any term or other provision is invalid,
illegal, or incapable of being enforced, the Parties shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
17. REVIEW OF AGREEMENT. THIS AGREEMENT WAS REVIEWED BY EACH OF THE
PARTIES, AND EACH PARTY ACKNOWLEDGES AND AGREES THAT SUCH PARTY UNDERSTANDS
FULLY ALL OF THE TERMS OF THIS AGREEMENT AND THE CONSEQUENCES AND IMPLICATIONS
OF ITS EXECUTION AND HAS BEEN AFFORDED AN OPPORTUNITY TO HAVE THIS AGREEMENT
REVIEWED BY AN ATTORNEY AND SUCH OTHER PERSONS OR ENTITIES AS DESIRED AND TO
DISCUSS THE TERMS, CONSEQUENCES, AND IMPLICATIONS OF THIS AGREEMENT WITH SUCH
ATTORNEY AND OTHER PERSONS OR ENTITIES.
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18. Additional Definitions. In addition to the terms defined elsewhere in
this Agreement, for purposes hereof, the following expressions and terms shall
have the meanings set forth in this Section 18, unless expressly stated
otherwise:
"Affiliate" means, with respect to a Party, any Person that directly or
indirectly controls, is controlled by, or is under common control with, the
relevant Party. For purposes of this definition, the term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, contract, voting trust, membership in management or in the
group appointing or electing management, or otherwise through formal or informal
arrangements or business relationships.
"Business Day" means any day other than a Saturday, Sunday, or other day
on which commercial banks in New York, New York, are required or authorized by
Law to be closed.
"Claims", for purposes of this Agreement, means any and all claims,
demands, liens, notices of non-compliance or violation, notices of liability or
potential liability, investigations, actions (whether judicial, administrative,
or arbitrational), causes of action, suits, and controversies.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Governmental Authority" means any governmental or quasi-governmental
federal, state, provincial, county, city, or other political subdivision of the
United States, any foreign country, or any department, bureau, agency,
commission, court, or other statutory or regulatory body or instrumentality
thereof.
"Indemnity Group" means, for either Party, the Affiliates, officers,
directors, managers, members, partners, limited partners, employees, agents, and
representatives of the relevant Party.
"Laws" means all constitutions, laws, statutes, ordinances, rules,
regulations, orders, and decrees of the United States, any foreign country, and
any local, state, provincial, or federal political subdivision or agency
thereof, as well as all judgments, decrees, orders, and decisions of courts
having the effect of law in each such jurisdiction.
"Liabilities" means, for purposes of this Agreement, any and all losses,
judgments, damages, liabilities, injuries, costs, expenses, interest, penalties,
taxes, fines, obligations, and deficiencies. As used herein, the term
"Liabilities" includes, without limitation, reasonable attorneys' fees and other
costs and expenses of any Party receiving indemnification hereunder incident to
the investigation and defense of any Claim that results in litigation, or the
settlement of any Claim, or the enforcement by any Party receiving
indemnification hereunder of the provisions of Sections 7 or 8, as applicable.
"Person" means any individual, corporation, limited liability company,
partnership, trust, unincorporated organization, Governmental Authority, or any
other form of entity.
11
19. Exploration Agreement with Aurora. For purposes of that certain
Exploration Agreement dated January 27, 2006, by and between Aurora Energy, Ltd.
("Aurora"), and the Company (the "Aurora Exploration Agreement"), including,
without limitation, Section 4.01 thereof, Baseline hereby agrees that if Aurora
(or its successors or assigns) elects not to participate in any Well Proposal
Area (as defined in the Aurora Exploration Agreement) in which the Company has
elected to participate, with the result that the Company is eligible to become
the operator of that Well Proposal Area under the terms of the Aurora
Exploration Agreement and the applicable operating agreement, Baseline shall
vote its interests in such Well Proposal Area in favor of the Company in any
election or other selection of operator; provided, however, that nothing
contained in this Section 19 shall obligate Baseline to elect to participate, or
constitute a waiver by Baseline of its right to elect not to participate, in any
Well Proposal Area or other operation proposed under the terms of the Aurora
Exploration Agreement or any operating agreement executed in connection
therewith.
20. Agreement Regarding the Aurora Option. The Parties acknowledge and
agree that as part of the redemption of the Baseline Membership Interest
pursuant to the terms and conditions of this Agreement, the Company will convey
and assign to Baseline an undivided share, equal to Baseline's Adjusted Economic
Interest Percentage, of the Company's right, title and interest in and to that
certain option to purchase which was previously granted to the Company pursuant
to an instrument entitled Grant of Option dated January 27, 2006, between Aurora
Energy, Ltd., and New Albany-Indiana, LLC (the "Aurora Option"). From and after
the Effective Date, each Party agrees that if a Party (the "Non-Exercising
Party") elects not to exercise its right to purchase arising under the Aurora
Option, then, prior to the expiration of the Non-Exercising Party's rights to
exercise the Aurora Option, the Non-Exercising Party will, at the election of
the other Party, assign and convey to the other Party its interests in the
Aurora Option for the consideration of $10.00. In addition, each Party agrees
that no later than ten (10) Business Days prior to the expiration of the Aurora
Option, each Party shall, if the Aurora Option has not by that date already been
exercised by such Party, notify the other Party whether it intends to exercise
the Aurora Option prior to its expiration, and if it does not intend to exercise
the Aurora Option, such Non-Exercising Party shall offer to assign and convey
its right, title and interest in and to the Aurora Option to the other Party
under the terms provided for in this Section 20. From and after the Effective
Date, each Party agrees that it shall not sell, assign, transfer or otherwise
convey its interests (other than the granting of a security interest) in the
Aurora Option to any Person without first offering to sell and convey such
interests to the other Party for the same consideration and on the same terms
and conditions of sale offered or agreed upon by such Person. Each Party hereby
agrees to notify the other Party in writing of its intention to sell, assign,
transfer or otherwise convey its interests in the Aurora Option to any other
Person (which notice shall contain a statement of the consideration to be paid
for the interest in the Aurora Option and a summary of the terms and conditions
of such sale) at least ten (10) Business Days prior to the consummation of any
such proposed sale.
21. References. References in this Agreement to articles, sections,
exhibits, or schedules are to articles, sections, exhibits, or schedules of this
Agreement unless otherwise specified.
12
22. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all of such counterparts shall constitute, for all purposes, one
agreement. At the Parties' election, this Agreement may be executed by the
Parties in different locations and shall become binding upon both Parties upon
the exchange by the Parties of executed signature pages by facsimile. In the
event of such a facsimile execution, the Parties shall execute and deliver each
to the other a fully executed original counterpart of this Agreement within
thirty (30) days after such facsimile execution hereof; provided, however, that
the failure of the Parties to execute such an original counterpart of this
Agreement shall not affect or impair the binding character or enforceability of
this Agreement.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written, to be effective as of the Effective Date.
NEW ALBANY - INDIANA, LLC
By: Xxx Energy Wabash, LLC,
its Managing Member
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
BASELINE OIL & GAS CORP.
By:
------------------------------------
Xxxxxx X. Xxxxxxx
President
13
SCHEDULES
Schedule 1 - Preferential Right Matters
Schedule 2 - Disclosures: Preferential Rights to Purchase and Consents to
Assignment; Areas of Mutual Interest and Similar Matters
EXHIBITS
EXHIBIT A - Form of Assignment, Xxxx of Sale, and Conveyance, with Exhibits
14
SCHEDULE 1
PREFERENTIAL RIGHT MATTERS
1. The following Company Asset is subject to the preferential right to
purchase referred to in Section 4 of this Agreement, which the Company and
Baseline have jointly determined not to be triggered by the transactions
contemplated in this Agreement:
Operating Agreement dated May 1, 2006, between El Paso Production Company,
as Operator, and Pogo Producing Company, Aurora Energy, Ltd., Aurora
Operating, L.L.C., and New Albany - Indiana, LLC, as Non-Operators,
covering the South Xxxxx Prospect Area (Initial Test - Xxxxxx 1-10H),
Xxxxxx County, Indiana, a memorandum of which is recorded in Book 66, Page
840, Instrument Number 200600003777, Public Records of Xxxxxx County,
Indiana. The Company and Baseline have jointly determined that such
preferential right to purchase is not triggered by the transactions
contemplated in this Agreement. Schedule 2-22
Schedule 1-1
SCHEDULE 2
DISCLOSURES
2. Preferential Rights to Purchase, Third Person Consent to Assignment
Requirements, and Similar Matters - Section 6(b)(i)
(a) Preferential Right to Purchase
(i) Preferential right to purchase created under Article VIII.F of
Operating Agreement dated May 1, 2006, between El Paso Production Company,
as Operator, and Pogo Producing Company, Aurora Energy, Ltd., Aurora
Operating, L.L.C., and New Albany - Indiana, LLC, as Non-Operators,
covering the South Xxxxx Prospect Area (Initial Test - Xxxxxx 1-10H),
Xxxxxx County, Indiana, a memorandum of which is recorded in Book 66, Page
840, Instrument Number 200600003777, Public Records of Xxxxxx County,
Indiana. The Company and Baseline have jointly determined that such
preferential right to purchase is not triggered by the transactions
contemplated in this Agreement.
(b) Required Third Person Consents to Assignment.
(i) Any and all consents to assignment required under the terms of
the Exploration Agreement dated April 7, 2006, by and among Source Rock
Resources, Inc., New Albany-Indiana, LLC, and Aurora Energy, Ltd.
(ii) Any and all consents to assignment required under the terms of
the Purchase and Sale Agreement dated March 3, 2006 by and between Source
Rock Resources, Inc. and New Albany-Indiana, LLC.
(iii) Any and all consents to assignment required under the terms of
the Purchase and Sale Agreement dated November 15, 2006 by and between
Aurora Energy, Ltd., and New Albany-Indiana, LLC.
(c) Other matters.
None.
3. Areas of Mutual Interest, Maintenance of Uniform Interests,
Before/After Payout Revisions/Conversions, and Similar Matters - Section
6(b)(iii).
(a) Areas of Mutual Interest.
(i) Area of mutual interest created under Article XV.B of Operating
Agreement dated May 1, 2006, between El Paso Production Company, as
Operator, and Pogo Producing Company, Aurora Energy, Ltd., Aurora
Operating, L.L.C., and New Albany - Indiana, LLC, as Non-Operators,
covering the South Xxxxx Prospect Area (Initial Test - Xxxxxx 1-10H),
Xxxxxx County Indiana, a memorandum of which is recorded in Book 66, Page
840, Instrument Number 200600003777, Public Records of Xxxxxx County,
Indiana.
Schedule 2-1
(ii) Area of mutual interest established in Farmout and
Participation Agreement dated as of July 19, 2005, between Aurora Energy,
Ltd., and Wabash Energy Partners, as Farmors, and JetEx LLC, as Farmee,
covering lands located in Green, Clay, and Xxxxx Counties, Indiana.
(iii) Area of mutual interest established in Exploration Agreement
dated as of November 1, 2005, between Aurora Energy, Ltd., and New Albany
- Indiana, LLC, covering lands located in Greene, Sullivan, Xxxx, and Clay
Counties, Indiana.
(iv) Area of mutual interest established in Exploration Agreement
dated April 7, 2006 by and among Source Rock Resources, Inc., New
Albany-Indiana, LLC, and Aurora Energy, Ltd., covering lands located in
Xxxx and Xxxxxxxx Counties, Indiana.
(b) Maintenance of Uniform Interest.
None.
(c) Before/After Payout Reversions/Conversion.
None.
Schedule 2-2
EXHIBIT A
Form of Assignment, Xxxx of Sale, and Conveyance
See Attached
