PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (this "Agreement") dated as of the
31st day of December 2001, is between and among CASTLE ENERGY CORPORATION, a
corporation organized and existing under the laws of Delaware ("Castle"), CASTLE
EXPLORATION COMPANY, INC., a corporation organized and existing under the laws
of Pennsylvania ("CECI"), CEC, INC., a corporation organized and existing under
the laws of Delaware ("CEC") and CASTLE PIPELINE COMPANY, a corporation
organized and existing under the laws of Texas ("CPC") (collectively, the
"Sellers") and DELTA PETROLEUM CORPORATION, a corporation organized and existing
under the laws of Colorado ("Delta") and DELTA EXPLORATION COMPANY, INC., a
corporation organized and existing under the laws of Colorado ("DECI")
(collectively, the "Buyers"). Sellers and Buyers are referred to herein
individually as a "Party" and collectively as the "Parties."
In consideration of the mutual promises contained herein, the benefits
to be derived by each Party hereunder and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Buyers and Sellers
agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1 Purchase and Sale. Subject to the terms and conditions of this
Agreement, Sellers agree to sell and convey and Buyers agree to purchase and pay
for all of Sellers' right, title and interest in and to the Interests.
1.2 Interests. All of the following shall be referred to in this
Agreement collectively as the "Interests" and individually as an "Interest":
(a) The oil, gas and mineral leases in the states and counties
described on Exhibit "A" attached hereto (collectively, the "Leases"),
including, without limitation, working interests, overriding royalty interests,
royalty interests and any other interests of a similar nature affecting the
lands covered by the Leases (collectively, the "Lands").
(b) The oil and gas xxxxx described on Exhibit "A"
(individually, a "Well," and collectively, the "Xxxxx"), together with all oil,
natural gas, casinghead gas, drip gasoline, natural gas liquids, condensate and
other minerals produced from such Xxxxx.
-1-
(c) All unitization, communitization, pooling, agreements,
working interest units created by operating agreements, partnership agreements
and orders covering the Leases and Lands,
or any portion thereof, and the units and pooled or communitized areas created
thereby (collectively, the "Units").
(d) The tangible personal property, tools, machinery,
materials, pipelines, plants, gathering systems, equipment, platforms and
facilities, fixtures and improvements, which are directly incident or
attributable to or underlie the Leases, Lands, Xxxxx or Units with the
production, transportation, treatment, sale or disposal of hydrocarbons or water
produced therefrom or attributable thereto, (collectively, the "Equipment").
(e) The general and limited partnership interests in Castle
Texas Exploration Limited Partnership ("CTELP") and Castle Texas Oil and Gas
Limited Partnership ("CTOGLP") (collectively the "Limited Partnerships")
described on Exhibit "A" attached hereto, including, without limitation, all
Leases, Lands, Xxxxx (together with all oil, natural gas, casinghead gas, drip
gasoline, natural gas liquids, condensate and other minerals produced from such
Xxxxx), Units, and/or Equipment owned by the Limited Partnerships.
(f) The licenses, permits, contracts, agreements and other
instruments owned by Sellers (other than bonds posted by Sellers) which concern
and relate to any of the Leases, Lands, Xxxxx, Units and/or Equipment, INSOFAR
AND ONLY INSOFAR as same concern or relate to the Leases, Lands, Xxxxx, Units
and/or Equipment, or the operation thereof; including, without limitation, oil,
gas and condensate purchase and sale contracts; permits; rights-of-way;
easements; licenses; servitudes; estates; surface leases; farmin and farmout
agreements; division orders and transfer orders; bottomhole agreements; dry hole
agreements; area-of-mutual interest agreements; salt water disposal agreements;
acreage contribution agreements; operating agreements; balancing agreements and
unit agreements; pooling agreements; pooling orders; communitization agreements;
processing, gathering, compression and transportation agreements; facilities or
equipment leases relating thereto or used or held for use in connection with the
ownership or operation thereof or with the production, treatment, sale or
disposal of hydrocarbons; and all other contracts and agreements related to the
Leases, Lands, Xxxxx and/or Equipment.
(g) Subject to Section 1.3 below, originals or copies of all
computer tapes and discs, files, records, information or data relating to the
Interests in the possession of Sellers, including, without limitation, title
records (including abstracts of title, title opinions, certificate of title and
title curative documents), production records and files, contracts,
correspondence, production records, electric logs, core data, pressure data,
decline curves, graphical production curves, drilling reports, well completion
reports, drill stem test charts and reports, regulatory reports, and all related
materials, INSOFAR AND ONLY INSOFAR as the foregoing items constitute materials
that may be lawfully conveyed to Buyers (i.e., the materials are not subject to
a proprietary agreement precluding their transfer to Buyers), and, to the extent
transferable, all other contract
-2-
rights, intangible rights (excluding Sellers' trademarks and service marks),
inchoate rights, choses in action, rights under warranties made by prior owners,
manufacturers, vendors or other third parties, and rights accruing under
applicable statutes of limitation or prescription, attributable to the
Interests.
(h) All payments, and all rights to receive payments, with
respect to the ownership of the production of hydrocarbons from or the conduct
of operations on the Interests accruing after the Effective Time.
1.3 Reserved Interests. Notwithstanding any provision of this Agreement
to the contrary, Sellers reserve and retain (i) Sellers' corporate, financial,
tax and legal records and other business records; (ii) cash, bank accounts,
letters of credit, travel letter accounts and prepaid insurance; (iii) the
management information systems, accounting software and other intellectual
property rights of Sellers used by Sellers in the management and administration
of their businesses; (iv) all claims that Sellers may have under any policy of
insurance, indemnity or bond maintained by Sellers other than claims relating to
property damage or casualty loss affecting the Interests occurring between the
Effective Time and Closing (which claims shall be included in the Interests);
(v) all accounts receivable, trade credits or notes receivable relating to
transactions processed by Seller prior to Closing; (vi) any files or records
that Sellers are contractually or otherwise obligated not to disclose to Buyers;
(vii) all claims and causes of action arising from acts, omissions or events, or
damage or destruction of property occurring prior to the Effective Time; (viii)
engineering studies or reserve reports relating to the Interests; (ix) all
interests and rights not included in the definition of the Interests (the
"Reserved Interests").
1.4 Effective Time. The purchase and sale of the Interests shall be
effective as of October 1, 2001, at 7:00 a.m., central standard time (herein
called the "Effective Time").
1.5 Closing Date. The purchase and sale of the Interests pursuant to
this Agreement ("Closing") shall be at 7:00 a.m. Eastern Standard Time on April
1, 2002 ("Closing Date") unless the Closing Date is modified by the terms of
this Section 1.5, or unless any other date is agreed to in writing by all
Parties.
(a) If for any reason Closing shall not have occurred on or
before April 1, 2002 and Sellers have not elected to terminate this Agreement
pursuant to Subsection 1.5 (b) below, then Closing shall be automatically
extended until the earlier of 7:00 a.m. Eastern Standard Time on (i) the date
that occurs 60 days after the date on which the Securities and Exchange
Commission ("SEC") informs Delta that it has no further comments on Delta's
proxy materials for the transaction or (ii) June 30, 2002.
(b) Notwithstanding the above,
-3-
(i) if Closing does not occur on or before April
1, 2002, for any reason, Sellers may notify
Buyers in writing on April 1, 2002, that
Sellers do not consent to such extension and
Sellers may thereby terminate this Agreement
with impunity pursuant to Section 12.1 (c);
(ii) provided further that if Closing has been
extended beyond April 1, 2002, by this
subsection, but Closing does not occur on or
before April 30, 2002, for any reason,
Sellers may notify Buyers in writing on
April 30, 2002, that Sellers do not consent
to further extension and Sellers may thereby
terminate this Agreement with impunity
pursuant to Section 12.1 (c); and
(iii) provided further that if Closing has been
extended beyond April 30, 2002, by this
subsection, but Closing has not occurred by
May 31, 2002, for any reason, Sellers may
notify Buyers in writing on May 31, 2002,
that Sellers do not consent to further
extension and Sellers may thereby terminate
this Agreement with impunity pursuant to
Section 12.1 (c).
(c) Delta shall notify Sellers within twenty four hours of the
time that it receives oral or written notice or information from the SEC that
the SEC has no further comments on Delta's proxy materials for the transactions
contemplated by this Agreement.
(d) Sellers and Buyers shall use their respective and
collective best efforts to cause Closing to occur as quickly as possible on or
after April 1, 2002, and to obtain all quorums and consents necessary therefor.
These efforts shall include the obligation on the part of all Parties to timely
provide all of the information necessary for Delta to file preliminary proxy
materials regarding the transaction with the SEC no later than January 25, 2002.
Buyers and Sellers will cooperate with each other since the information required
for Delta's preliminary proxy is Delta's responsibility but may include audits
of revenues and expenses related to Seller's oil and gas properties. To the
extent that requisite information on Castle is not provided by Castle (following
reasonable advance notice by Delta and allowance for normal preparation time for
such information) and approved by Castle's independent auditors (if such
approval is required) for filing by January 25, 2002 and the filing of the
preliminary proxy materials with the SEC is delayed as a result, the dates
contained in this Section 1.5 shall be adjusted accordingly subject to the
rights granted to Buyers and Sellers in Article 12 below.
1.6 Ownership of the Interests. Subject to Section 12.1 and the other
provisions of this Agreement, should Closing occur, Sellers shall be entitled to
all of the rights of ownership (including, without limitation, the right to all
production, proceeds of production and other proceeds), and shall be subject to
the duties and obligations of such ownership attributable to the Interests for
the period of time prior to the Effective Time and Buyers shall be entitled to
all of the
-4-
rights of ownership (including, without limitation, the right to all production,
proceeds of production and other proceeds) and shall be subject to the duties
and obligation of such ownership attributable to the Interests for the period of
time from and after the Effective Time. All expenses and costs, including,
without limitation, all ad valorem, property, production, severance, and similar
taxes and assessments based upon or measured by the ownership of the Interests,
the production of hydrocarbons, or the receipt of proceeds therefrom)
attributable to the Interests, shall be: (i) allocated to Sellers if incurred or
accruing with respect to operations conducted prior to the Effective Time; or
(ii) allocated to Buyers if incurred or accruing with respect to operations
conducted after the Effective Time. All hydrocarbons in storage facilities above
or upstream from the pipeline connection to each storage facility, or downstream
of delivery point sales meters on gas pipelines, as of the Effective Time, shall
belong to Sellers. All of the hydrocarbons placed in such storage facilities or
upstream of the aforesaid meters on pipelines after the Effective Time shall
accrue to the benefit of Buyers and shall become a part of the Interests. In
order to accomplish the foregoing allocation of production, the parties shall
rely upon the records maintained by the operator of the relevant Interest,
unless such records are demonstrated to be inaccurate.
1.7 Risk of Loss. Buyers shall assume all risk of loss with respect to
the Interests from and after the Effective Time to Closing and thereafter should
Closing occur.
1.8 Sellers' Agent. Castle shall act as agent on behalf of Sellers for
purposes of receiving payments of money or shares of Delta's Common Stock under
this Agreement.
ARTICLE 2
PURCHASE PRICE
2.1 Purchase Price. The purchase price for the Interests shall be
comprised of Twenty Million Dollars ($20,000,000) paid by wire transfer or other
immediately available funds, or in part by the Bridge Note, as defined and set
forth in Section 2.6 below (the "Money Payment") and Nine Million Five Hundred
Sixty Six Thousand (9,566,000) shares of Delta's Common Stock (the "Stock
Payment"). The Money Payment and the Stock Payment shall collectively be herein
called the "Purchase Price". At Closing, the Money Payment of the Purchase Price
shall be adjusted as set forth in Section 2.3 below.
2.2 Exclusivity Deposit. Following Buyers' execution of this Agreement,
to assure Buyers' performance of its obligations under this Agreement, Delta on
behalf of Buyers shall place in escrow with Xxxxxx X. Xxxxx, Esquire, a solo
practitioner (the " Escrow Agent"), Seven Hundred Thousand (700,000) shares of
Delta common stock (the "Exclusivity Deposit") from its currently authorized but
unissued shares pursuant to the Escrow Agreement attached hereto and made a part
hereof as Exhibit C. (the "Escrow Agreement"). If Closing occurs, the
Exclusivity Deposit will be applied to the Adjusted Purchase Price. If Closing
fails to occur, the Exclusivity Deposit shall be disbursed pursuant to the terms
of Section 12.1.
2.3 Adjustments to Purchase Price. At Closing, the Purchase Price shall
be adjusted as follows and the resulting amount shall be referred to herein as
the "Adjusted Purchase Price":
(a) The Purchase Price shall be adjusted upward by the
following:
(i) The amount of all actual operating or
capital expenditures or prepaid expenses
attributable to the Interests paid by or on
behalf of Sellers in connection with the
operation of the Interests and which are,
according to generally accepted accounting
principles, attributable to the period of
time between the Effective Time and Closing
Date. Such expenditures and expenses shall
include, without limitation, royalties,
rentals and other charges; ad valorem,
property, excise, and any other taxes based
upon or measured by the ownership of the
Interests, the production of hydrocarbons or
the receipt of proceeds therefrom; and
expenses payable to a third person under
applicable joint operating agreements,
including, without limitation, overhead
charges at normal company overhead labor
rates and royalty disbursement fees payable
to operator, or similar payments to third
party operators, or, in the absence of any
joint operating agreement, those items
customarily billed under such an agreement.
(ii) The value, less taxes (other than taxes on
net income), of all hydrocarbons in storage
facilities above or upstream from the
pipeline connection in each storage
facility, or downstream of delivery point,
sales meters on gas pipelines, as of the
Effective Time, at the prevailing market
value at the time of sale in the area,
adjusted for grade and gravity.
(iii) Insurance premiums of $7,500 per month from
the effective date to Closing, for general
liability, excess liability and operator's
extra expense (which benefits accrue to
Buyers pursuant to paragraph 1.3).
(iv) General corporate overhead of $20,000 per
month from the effective date to the Closing
date to reimburse Seller for cost to produce
XXXXX overhead revenues that accrue to
Buyers.
(v) Any other amounts agreed upon by Sellers and
Buyers.
(b) The Purchase Price shall be adjusted downward by the
following:
(i) Reductions due to Title Failures as provided
in Sections 10.7.
-6-
(ii) For uncured Title Defects and Contested
Defects pursuant to Section 10.8
(iii) Reductions due to Environmental Defects as
provided in Section 11.3.
(iv) The gross proceeds received by Sellers, net
of applicable severance and production taxes
and compression and transportation charges,
and derived from the sale of hydrocarbons
attributable to the Interests to the extent
owned by Buyers between the Effective Time
and the Closing Date, pursuant to the
provisions of Section 1.6 above.
(v) Reductions due to receipt by Sellers of
denials to consent and of exercises of
preferential rights as provided in
Section 10.11.
(vi) XXXXX revenues received by Seller between
Effective Time and Closing Date.
(vii) Any other amounts agreed upon by Sellers
and Buyers.
(c) Upward and downward adjustments to the Purchase Price
pursuant to Section 2.3 shall be made only to the Money Payment.
2.4 Purchase Price Allocation. The Purchase Price shall be allocated
among the Interests as set forth in Exhibit "B" attached hereto (the "Allocated
Values").
2.5 Preliminary Settlement Statement. Sellers shall prepare and deliver
to Buyers at least five (5) "Business Days" (which term shall mean any day
except a Saturday, Sunday or other day on which commercial banks in Denver,
Colorado are required or authorized by law to be closed) prior to the Closing
Date, Sellers' estimate of the Adjusted Purchase Price to be paid at Closing,
together with a statement setting forth Sellers' estimate of the amount of each
adjustment to the Purchase Price to be made pursuant to Section 2.2 (the
"Preliminary Settlement Statement"). The parties shall negotiate in good faith
and attempt to agree on such estimated adjustments prior to Closing. In the
event any estimated adjustment amounts are not agreed upon prior to Closing, the
Adjusted Purchase Price for purposes of Closing shall be calculated based on
Sellers' and Buyers' agreed upon estimated adjustments and Sellers' good faith
estimation of any disputed amounts, which estimate shall be subject to
adjustment in the Final Settlement Statement pursuant to Section 9.1.
2.6 Bridge Note. It is the expectation of the Parties that Buyers will
obtain bank financing from the Bank of Oklahoma, N.A. ("BOK") that will allow
them to pay to Sellers the entire Money Payment of the Adjusted Purchase Price
at Closing. Notwithstanding the above,
-7-
should the BOK loan amount to Buyers be less than the entire amount of the Money
Payment of the Adjusted Purchase Price (such difference being referred to as the
"Lending Shortfall"), by written notice to Sellers not less than fifteen (15)
days prior to Closing, Buyers may elect to issue to Sellers a promissory note in
the amount of the Lending Shortfall in the form attached and made a part hereof
as Exhibit M (the "Bridge Note"). The Bridge Note shall be payable to Sellers on
or before two hundred seventy (270) days following Closing, accruing interest at
eight percent (8%) per annum, payable in either cash or shares of the common
stock of Delta, at the option of Buyers, the value of such stock being fixed at
Three Dollars ($3.00) per share. If Buyer has neither paid all principal and
accrued interest on the Bridge Note nor made a written election to pay the
Bridge Note in either cash or shares by close of business on its maturity date
of the Bridge Note, Sellers shall have the option to either present the note for
payment in cash or shares.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Castle. Castle represents and
warrants to Buyers the following:
(a) Castle is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Castle is duly
qualified to carry on its business in the State or States in which the Interests
are located and in each State where failure to so qualify would have a material
adverse effect upon its business or the Interests.
(b) Castle has all requisite power and authority to carry on
its business as presently conducted and to enter into this Agreement and to
perform its obligations hereunder.
(c) The execution, delivery and performance of this Agreement
and the transactions contemplated herein have been duly and validly authorized
by Castle.
(d) This Agreement has been duly executed and delivered on
behalf of Castle, and all documents and instruments required hereunder to be
executed and delivered by Castle at or prior to Closing shall have been duly
executed and delivered. This Agreement does, and such documents and instruments
shall, constitute legal, valid and binding obligations of Castle enforceable in
accordance with their terms.
3.2 Representations and Warranties of CECI. CECI represents and
warrants to Buyers the following:
(a) CECI is a corporation duly organized, validly existing and
in good standing under the laws of the State of Pennsylvania. CECI is duly
qualified to carry on its business in the State or States in which the Interests
are located and in each State where failure to so qualify would have a material
adverse effect upon its business or the Interests.
-8-
(b) CECI has all requisite power and authority to carry on its
business as presently conducted and to enter into this Agreement and to perform
its obligations hereunder.
(c) The execution, delivery and performance of this Agreement
and the transactions contemplated herein have been duly and validly authorized
by CECI.
(d) This Agreement has been duly executed and delivered on
behalf of CECI, and all documents and instruments required hereunder to be
executed and delivered by CECI at or prior to Closing shall have been duly
executed and delivered. This Agreement does, and such documents and instruments
shall, constitute legal, valid and binding obligations of CECI enforceable in
accordance with their terms.
3.3 Representations and Warranties of CEC. CEC represents and warrants
to Buyers the following:
(a) CEC is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. CEC is duly qualified
to carry on its business in the State or States in which the Interests are
located and in each State where failure to so qualify would have a material
adverse effect upon its business or the Interests.
(b) CEC has all requisite power and authority to carry on its
business as presently conducted and to enter into this Agreement and to perform
its obligations hereunder.
(c) The execution, delivery and performance of this Agreement
and the transactions contemplated herein have been duly and validly authorized
by CEC.
(d) This Agreement has been duly executed and delivered on
behalf of CEC, and all documents and instruments required hereunder to be
executed and delivered by CEC at or prior to Closing shall have been duly
executed and delivered. This Agreement does, and such documents and instruments
shall, constitute legal, valid and binding obligations of CEC enforceable in
accordance with their terms.
3.4 Representations and Warranties of CPC. CPC represents and warrants
to Buyers the following:
(a) CPC is a corporation duly organized, validly existing and
in good standing under the laws of the State of Texas. CPC is duly qualified to
carry on its business in the State or States in which the Interests are located
and in each State where failure to so qualify would have a material adverse
effect upon its business or the Interests.
(b) CPC has all requisite power and authority to carry on its
business as presently conducted and to enter into this Agreement and to perform
its obligations hereunder.
-9-
(c) The execution, delivery and performance of this Agreement
and the transactions contemplated herein have been duly and validly authorized
by CPC.
(d) This Agreement has been duly executed and delivered on
behalf of CPC, and all documents and instruments required hereunder to be
executed and delivered by CPC at or prior to Closing shall have been duly
executed and delivered. This Agreement does, and such documents and instruments
shall, constitute legal, valid and binding obligations of CPC enforceable in
accordance with their terms.
3.5 Representations and Warranties of Sellers. Each of Sellers
separately represents and warrants to Buyers the following:
(a) Other than as set forth in Exhibit "D" attached hereto and
made a part hereof, there are no outstanding authorizations for expenditures
("AFEs") in excess of $25,000 each that (i) require the drilling of xxxxx or
other material development operations in order to earn or to continue to hold
all or any portion of the Interests, or (ii) obligate Sellers to make payments
of any amounts in connection with drilling of xxxxx or other material capital
expenditures affecting the Interests.
(b) Sellers' execution, delivery, and performance of this
Agreement and the transactions contemplated hereby will not: (i) violate or
conflict with any provision of their respective articles of incorporation,
bylaws, or other governing documents; (ii) result in the breach of any material
term or condition of, or constitute a default or cause the acceleration of any
material obligation under any agreement or instrument to which they are a party
or by which they are bound; or (iii) violate or conflict with any applicable
judgment, decree, order, permit, law, rule, or regulation.
(c) There are no consents required of any other party required
to consummate the transactions contemplated hereby other than preferential
rights or consents to assignment from other owners in the Interests or
purchasers of production therefrom of the type typically found in the oil and
gas industry.
(d) Sellers are not obligated to deliver hydrocarbons produced
from the Interests at some future time without then or thereafter receiving full
payment for the production attributable to Sellers' ownership in and to the
Interests by virtue of: (i) a prepayment arrangement under any contract for the
sale of hydrocarbons and containing a "take or pay," or similar provisions, (ii)
a production payment, or (iii) any other arrangement.
(e) Except for those taxes and assessments for which a
Purchase Price adjustment is made under Section 2.3(b)(v), during the period of
Sellers' ownership of the Interests, Sellers have properly paid all ad valorem,
property, production, severance, excise and similar taxes and assessments based
on or measured by the ownership of property or the production of hydrocarbons
-10-
or the receipt of proceeds therefrom on the Interests that have become due and
payable before the Effective Time.
(f) Sellers have incurred no liability, contingent or
otherwise, for broker's or finder's fees or commissions relating to the
transactions contemplated by this Agreement for which Buyers shall have any
responsibility whatsoever.
(g) Other than as set forth in Exhibit "E" attached hereto and
made a part hereof, no suit, action, claim, or other proceeding is pending or,
to the best of Sellers' knowledge, threatened before any court, arbitration
panel or governmental agency which relates to the Interests and which might
result in a material loss of Sellers' title to any portion of the Interests, or
a material diminution of the value of any of the Interests, or that might
materially hinder or impede the operation of the Leases.
(h) As used in this Agreement, the term, "Existing Documents"
shall mean all of the oil, gas and other mineral leases, assignments or other
instruments or agreements that comprise the Interests, and all contractually
binding arrangements to which the Interests may be subject and which will be
binding on the Interests or Buyers after Closing (including, without limitation,
oil, gas and other mineral leases, overriding royalty assignments, farm-out and
farm-in agreements, option agreements, forced pooling orders, assignments of
production payments, partnership agreements, including the Limited Partnership
Agreements, unit agreements, unit operating agreements, joint operating
agreements, balancing agreements, unit operating agreements, production
contracts, processing contracts, gas sales contracts, marketing and
transportation contracts and division orders). To the best of Sellers'
knowledge, (i) all material Existing Documents are in full force and effect and
are the valid and legally binding obligations of the parties thereto and are
enforceable in accordance with their respective terms (subject to the effects of
bankruptcy, insolvency, reorganization, moratorium and similar laws); (ii)
Sellers are not in material breach or default with respect to any of its
obligations pursuant to any such Existing Documents; and (iii) all payments
(including, without limitation, royalties, delay rentals, shut-in royalties and
valid calls under unit or operating agreements) due thereunder have been timely
paid and Sellers have received no notice of default under any of the Existing
Documents.
(i) To the best of Sellers' knowledge, all of the Equipment
Sellers require to operate their interests has been maintained in a state of
repair so as to be adequate for normal operations.
(j) To the best of Sellers' knowledge, all of the Xxxxx that
have been drilled and completed have been so drilled and completed within the
boundaries and limits permitted by contract, pooling or unit agreement, and by
law; and all drilling, completion, and other operations on or affecting the
Leases have been conducted in compliance with all applicable laws, ordinances,
rules, regulations and permits, and judgments, orders and decrees of any court
or governmental body or agency. No Well is subject to penalties or allowables
after the date hereof because of any over- production or any other violation of
applicable laws, rules, regulations or permits or judgments, orders of decrees
of any court or governmental body or agency.
-11-
(k) Except as set forth on Exhibit "F" attached hereto:
(i) Sellers' operations and activities with
respect to the Interests comply in all
material respects with all applicable
governmental laws, including, without
limitation, health and safety statutes and
regulations and all Environmental Laws,
including any provisions requiring notice to
government agencies under Environmental
Laws.
(ii) There is no civil, criminal or
administrative action, suit, demand, claim,
hearing, notice of violation, investigation,
proceeding, notice or demand letter
("Environmental Proceeding") known to
Sellers pending or, to the best of Sellers'
knowledge, threatened against Sellers or any
of the Interests relating in any way to the
Environmental Laws.
(iii) Neither Sellers nor, to the best of Sellers'
knowledge, any other person have released,
placed, stored, buried or dumped any
Hazardous Substances, Oil, Pollutants or
Contaminants or any other wastes on,
beneath, or adjacent to the Leases operated
by Sellers, except for inventories of such
substances to be used in the ordinary course
of business of Sellers (which inventories
and wastes, if any, were and are stored or
disposed of in accordance with applicable
laws and regulations).
(iv) To the best of Sellers' knowledge, Sellers
have not received any notice or order from
any governmental or other public agency
advising it that Sellers are responsible for
or potentially responsible for Cleanup or
paying for the cost of Cleanup of any
Hazardous Substances, Oils, Pollutants, or
Contaminants or any other waste or substance
affecting the Interests. Sellers are not
aware of any facts which might reasonably
give rise to any such notice or order.
(v) The term "Cleanup" shall mean all actions
required to: (1) cleanup, remove, treat or
remediate Hazardous Substances, Oils,
Pollutants or Contaminants; (2) prevent the
Release of Hazardous Substances, Oils,
Pollutants or Contaminants so that they do
not migrate, endanger or threaten to
endanger public health or welfare or the
environment; (3) perform pre-remedial
studies and investigations and post-remedial
monitoring and care; or (4) respond to any
government requests for
-12-
information or documents in any way relating
to cleanup, removal, treatment or
remediation or potential cleanup, removal,
treatment or remediation of Hazardous
Substances, Oils, Pollutants or Contaminants
in the indoor or outdoor environment.
(vi) The term "Environmental Laws" shall mean all
foreign, Federal, state and local laws,
regulations, rules and ordinances relating
to polluting or protection of the
environment, including, without limitation,
laws relating to Releases or threatened
Releases of Hazardous Substances, Oil,
Pollutants or Contaminants into the indoor
or outdoor environment (including, without
limitation, ambient air, surface water,
groundwater, land, surface and subsurface
strata) or otherwise relating to the
manufacture, processing, distribution, use,
treatment, storage, Release, transport or
handling of Hazardous Substances, Oil,
Pollutants or Contaminants, and all laws and
regulations with regard to record keeping,
notification, disclosure and reporting
requirements respecting Hazardous
Substances, Oils, Pollutants or
Contaminants.
(vii) The term "Hazardous Substances, Oils,
Pollutants or Contaminants" shall mean all
substances defined as such in the National
Oil and Hazardous Substances Pollution
Contingency Plan, or defined as such by, or
regulated as such under, any Environmental
Law.
(viii) The term "Release" or "Releases" means any
release, spill, emission, discharge,
leaking, pumping, injection, deposit,
disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor
environmental (including, without
limitation, ambient air, surface water,
groundwater, and surface or subsurface
strata) or into or out of any property,
including the movement of Hazardous
Substances, Oils, Pollutants or Contaminants
through or in the air, soil, surface water,
groundwater or property.
3.6 Representations and Warranties of Delta. Delta represents and
warrants to Sellers the following:
(a) Delta is a corporation, duly organized, validly existing
and in good standing under the laws of the State of Colorado. Delta is or will
be prior to Closing duly qualified to conduct business in the State or States in
which the Interests are located.
(b) Delta has all requisite power and authority to carry on
its business as presently conducted, to enter into this Agreement, and to
purchase the Interests on the terms described in this Agreement and perform its
other obligations under this Agreement.
-13-
(c) The execution, delivery and performance of this Agreement
and the transactions contemplated hereby have been duly and validly authorized.
(d) This Agreement has been duly executed and delivered by or
on behalf of Delta; all documents and instruments required hereunder to be
executed and delivered by Delta at or prior to Closing shall have been duly
executed and delivered; and this Agreement does, and such documents and
instruments shall, constitute legal, valid and binding obligations of Delta
enforceable in accordance with their terms.
(e) All shares of the Common Stock of Delta issued to Sellers
pursuant to this Agreement shall be duly authorized and when issued shall be
fully paid, non-assessable shares of the Common Stock of Delta and shall carry
all of the same rights and privileges as all other issues of the Common Stock of
Delta, provided, however that the Parties acknowledge that such shares will not
be registered stock until such shares are registered pursuant to Section 9.6.
3.7 Representations and Warranties of DECI. DECI represents and
warrants to Sellers the following:
(a) DECI is a corporation, duly organized, validly existing
and in good standing under the laws of the State of Colorado. DECI is or will be
prior to Closing duly qualified to conduct business in State or States in which
the Interests being purchased by DECI are located.
(b) DECI has all requisite power and authority to carry on its
business as presently conducted, to enter into this Agreement, and to purchase
the Interests on the terms described in this Agreement and perform its other
obligations under this Agreement.
(c) The execution, delivery and performance of this Agreement
and the transactions contemplated hereby have been duly and validly authorized.
(d) This Agreement has been duly executed and delivered by or
on behalf of DECI all documents and instruments required hereunder to be
executed and delivered by DECI at or prior to Closing shall have been duly
executed and delivered; and this Agreement does, and such documents and
instruments shall, constitute legal, valid and binding obligations of DECI
enforceable in accordance with their terms.
3.8 Representations and Warranties of Buyers. Buyers represent and
warrant to Sellers the following:
(a) Buyers have incurred no liability, contingent or
otherwise, for broker's or finder's fees or commissions relating to the
transactions contemplated by this Agreement for which Sellers shall have any
responsibility whatsoever. Specifically, but not by way of limitation, broker's
or finder's fees or commissions, if any, of BWAB Limited Liability Company, a
limited liability
-14-
company organized and existing under the laws of Colorado ("BWAB"), its
principals and affiliates, shall be borne exclusively by Buyers.
(b) Prior to Closing, Buyers will have inspected the
Interests, the public records and Sellers' files for all purposes, including,
but not limited to, detecting the presence and concentration of
naturally-occurring radioactive materials and satisfying themselves as to the
physical condition and environmental condition of the Interests, both surface
and subsurface. In entering into this Agreement, Buyers have relied solely on
their independent investigation of, and judgment with respect to, the Interests
and the advice of their own legal, tax, economic, environmental, engineering,
geological and geophysical advisors, and not on any comments or statements of
any representatives of, or consultants or advisors engaged by Sellers.
(c) At Closing, Buyers will meet the bonding and other
requirements required by all governmental authorities in respect to the
Interests (and Sellers agree to provide Buyers, prior to Closing, with a list of
such requirements) and, after Closing, Buyers anticipate that they will continue
to be able to meet such bonding requirements. Buyers are, and after the Closing
are expected to continue to be, otherwise qualified to own the Interests. The
consummation of the transactions contemplated hereby will not cause Buyers to be
disqualified to be an owner of oil, gas, and mineral leases or to exceed any
acreage limitation imposed by law, statute, rule or regulation. Buyers are not
aware of any fact that could reasonably be expected to cause the appropriate
governmental authorities to fail to unconditionally approve the assignment of
the Interests to Buyers. Sellers will cooperate and will assist Buyers relating
to the preparation and presentation of documents relating to changes in
ownership and/or operatorship of the Interests.
(d) Buyers are experienced and knowledgeable investors and
operators in the oil and gas business. Buyers are acquiring the Interests for
their own accounts and not with a view to, or for offer of resale in connection
with, a distribution thereof, within the meaning of the Securities Act of 1933,
as amended, or any other rules, regulations, and laws pertaining to the
distribution of securities.
(e) Buyers have arranged or will have arranged to have
available by the Closing Date sufficient funds to enable the payment to Sellers,
by wire transfer, of the Adjusted Purchase Price in accordance with Section 2.3
and to otherwise perform Buyers' obligations under this Agreement, subject to
Buyers' rights under the provisions of Section 2.6 to provide a Bridge Note.
ARTICLE 4
CERTAIN AGREEMENTS OF SELLERS
4.1 Agreements Between Execution of Agreement and Closing. During the
period between the execution of this Agreement and the Closing Date, Sellers
shall not, without the prior
-15-
written consent of Buyers, (i) sell, convey, assign, transfer or encumber any of
the Interests; (ii) make or agree to make any expenditure in excess of
$25,000.00, net to Sellers' interest, except for obligations under existing
contracts, expenditures necessary to maintain the Interests, or in the event of
any emergency as to which Sellers have notified Buyers; (iii) sell oil, gas or
other minerals from the Interests except sales made in the ordinary course of
business; (iv) enter into any agreement amending, modifying or terminating any
of the Leases; or (v) take any other action with respect to any of the Interests
that would cause a material diminution in the value thereof or that would
materially and adversely affect the use and enjoyment thereof.
4.2 Access to Records. Following the execution of this Agreement by the
Parties, Sellers shall afford to Buyers and their authorized representatives,
during normal business hours, reasonable access to well and land files, title,
contract and legal materials and operating data and information in Sellers'
possession or to which they have access affecting the Interests.
4.3 Notification of Additional Proceedings. Sellers shall promptly
notify Buyers of any new suits, actions, claims or other proceedings threatened
or pending before, or required to be filed with, any court, arbitrator or
governmental agency which relate to the Interests.
4.4 Consents. Sellers shall use their best efforts to obtain any
consents necessary to transfer the Interests to Buyers.
4.5 Trading in Delta Stock. None of the Sellers nor their respective
affiliates, insiders, agents and brokers shall be permitted to buy or sell
shares, options, etc., in the common stock of Delta until after Closing.
4.6 Software License. Sellers will, at no cost to Sellers, cooperate
with Buyers, if Buyers attempt to have Sellers' Excalibur software licenses
transferred to Buyers.
4.7 Insurance. Sellers shall maintain the general liability, excess
liability and operator's extra expense insurance referenced in Subsection 2.3
(a) (iii) until Closing.
ARTICLE 5
CERTAIN AGREEMENTS OF BUYERS
5.1 Cooperation. Buyers shall cooperate with Sellers to assist Sellers
in carrying out the agreements of Sellers hereunder.
5.2 Change of Operations. Buyers will diligently pursue the filing and
other requirements to assume operations, where applicable, and ownership of the
Interests, including without limitation, well testing, bonding and other
requirements from all governmental authorities with respect to the Interests
such that Sellers can withdraw as operators of the Interests, where
-16-
applicable, as soon as possible after Closing. Buyers acknowledge that Sellers
have not guaranteed that Buyers will, in every case, succeed Sellers as
operator.
5.3 Trading in Castle Stock. Neither of the Buyers nor their respective
affiliates, insiders, agents, brokers, etc. shall be permitted to buy or sell
shares, options, etc., in the common stock of Castle until after Closing. Buyers
will obtain a written agreement from BWAB that it and its respective affiliates,
insiders, agents, brokers shall are bound by the provisions of this Section 5.3.
5.4 Issuance of Delta Stock. Should Delta issue or contract to issue
Delta common stock prior to Closing in excess of three percent (3%) of the
currently outstanding stock of Delta without the prior written consent of
Sellers, excluding the issuance of up to 1,431,000 shares of Delta common stock
to Piper Petroleum Company, Seller shall have the option at its sole discretion
to terminate this Agreement pursuant to Section 12.1 (c).
5.5 Delta Directors. Delta will not increase the number of directors on
its Board of Directors prior to the Closing Date.
5.6 Transitional Accounting. Buyers will provide transitional
accounting personnel at their own expense; for at least two (2) months before
they assume accounting (revenue and joint in interest) duties for the Interests.
ARTICLE 6
BUYERS' CONDITIONS TO CLOSING
The obligations of Buyers to consummate the transactions provided for
herein are subject, at the option of Buyers, to the fulfillment on or prior to
Closing of each of the following conditions:
6.1 Representations. The representations and warranties by Castle set
forth in Section 3.1, by CECI set forth in Section 3.2, by CEC set forth in
Section 3.3, by CPL set forth in Section 3.4 and by Sellers set forth in Section
3.5 above shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date, except as modified with the written
consent of Buyers.
6.2 Changes. There shall have been no material adverse change in the
physical condition of the Interests, except depletion through normal production
within authorized allowables and rates of production, depreciation of equipment
through ordinary wear and tear, and other transactions permitted under this
Agreement or approved in writing by Buyers.
6.3 Performance. Sellers shall have performed and complied in all
material respects with all agreements and covenants required by this Agreement.
-17-
6.4 No Legal Proceedings. No suit, action or other proceeding shall be
pending or threatened before any court, arbitration panel or governmental agency
seeking to restrain, prohibit or declare illegal, or seeking substantial damages
in connection with the purchase and sale contemplated by this Agreement, or
which might result in a material loss of any portion of the Interests, a
material diminution in the value of any of the Interests, or materially
interfere with the use or enjoyment of the Interests, except (i) matters that
are disclosed on Exhibit "E" or (ii) any suit or proceeding affecting only a
portion of the Interests, which portion could be treated as subject to a Title
Defect in accordance with Article 10.
ARTICLE 7
SELLERS' CONDITIONS TO CLOSING
The obligations of Sellers to consummate the transactions provided for
herein are subject, at the option of Sellers, to the fulfillment on or prior to
Closing of each of the following conditions:
7.1 Representations. The representations and warranties by Delta set
forth in Section 3.6, by DECI set forth in Section 3.7, and by Buyers set forth
in Section 3.8 above shall be true and correct in all material respects as of
the date of this Agreement and as of the Closing Date except as modified with
the written consent of Sellers.
7.2 Performance. Buyers shall have timely performed and complied in all
material respects with all agreements and covenants required by this Agreement.
7.3 No Legal Proceedings. No suit or other proceeding shall be pending
before any court or governmental agency seeking to restrain prohibit or declare
illegal, or seeking substantial damages in connection with, the sale
contemplated by this Agreement, except (i) matters with respect to which Sellers
have been adequately indemnified by Buyers or (ii) any suit or other proceeding
affecting only a portion of the Interests, which portion could be treated as
subject to a Title Defect in accordance with Article 10.
7.4 Delta Proxy. Delta's filing of a proxy concerning this proposed
transaction with the SEC not later than January 25, 2002 or to a subsequent date
as adjusted pursuant to Subsection 1.5 (d) above.
7.5 Delta Shareholders. Approval of this transaction by Delta
shareholders not later than the Closing Date as determined in Section 1.5.
7.6 Issuance of Delta Stock. Delta has not issued or contracted to
issue Delta common stock prior to Closing in excess of ten percent (10%) of the
currently outstanding stock of Delta without the prior written consent of
Sellers, excluding the issuance of up to 1,431,000 shares of Delta common stock
to Piper Petroleum Company.
-18-
ARTICLE 8
CLOSING
8.1 Closing Date. Subject to the conditions stated in this Agreement,
Closing shall occur on the date set forth in Section 1.5 or on such other date
and time as Buyers and Sellers may agree (the "Closing Date").
8.2 Place of Closing. The Closing shall be held at the offices of
Sellers as set forth hereinabove; provided, however, the Parties may agree to
close via facsimile or overnight mail.
8.3 Closing Obligations. At the Closing, the following documents shall
be delivered and the following events shall occur, each event being a condition
precedent to the others and each being deemed to have occurred simultaneously
with the others:
(a) Sellers shall execute and deliver: (1) an Assignment, Xxxx
of Sale and Conveyance in the form attached hereto and made a part hereof as
Exhibit "G" (the "Assignment") (in sufficient counterparts to facilitate
recording) conveying the Interests, subject to the Permitted Encumbrances; (2)
Assignments of General and Limited Partnership Interest in Limited Partnerships
in the forms of assignment attached hereto and made a part hereof as Exhibits
"H", "I", "J" and "K"; and (3) such other instruments as may be required to
convey the Interests to Buyers and otherwise effectuate the transactions
contemplated by this Agreement.
(b) Sellers and Buyers shall execute and deliver the
Preliminary Settlement Statement.
(c) Buyers shall deliver by direct bank or wire transfer to
Castle or to Castle's account on behalf of Sellers (at such place as may be
designated by Sellers in a written notice, such notice to be delivered to Buyers
not less than two (2) Business Days prior to the Closing Date) the Money Payment
of the Adjusted Purchase Price (less the amount to be secured by the Bridge
Note, if any) and shall deliver to Seller the Stock Payment of the Adjusted
Purchase Price (less the amount of the Exclusivity Deposit).
(d) Sellers shall deliver on forms supplied by Buyers transfer
orders or letters in lieu thereof, directing the operator or purchaser to make
payment of proceeds attributable to production from the Interests after the
Effective Time to Buyers.
(e) Buyers and Sellers shall execute and deliver the
Registration Rights Agreement, as defined in Section 9.6 below.
-19-
(f) Buyers and Sellers shall execute and deliver instructions
to the Escrow Agent to release the Exclusivity Deposit to Sellers.
(g) Should Buyers have notified Sellers of a Lending Shortfall
pursuant to Section 2.6, Buyers shall execute and deliver the Bridge Note to
Sellers.
8.4 Records. In addition to the obligations set forth under Sections
4.2 and 8.3 above, within sixty (60) days after Closing, Sellers shall deliver
to Buyers all original well and land files in its possession or to which it has
access. Buyers shall be entitled to all original records affecting the Interests
assigned to Buyers pursuant to the terms of this Agreement. Sellers shall be
entitled to keep a copy of such records for its files. Buyers agree to preserve
and maintain such records for at least five (5) years after the Closing Date and
to provide Sellers access to such records during normal business hours during
such period.
ARTICLE 9
POST-CLOSING MATTERS
9.1 Final Settlement Statement.
(a) As soon as practicable after the Closing, but in no event
later than ninety (90) days after Closing, Sellers shall prepare and deliver to
Buyers, in accordance with this Agreement and generally accepted accounting
principles, a statement ("Final Settlement Statement") setting forth each
adjustment (other than adjustments for Title Defects) finally determined as of
Closing and showing the calculation of such adjustments. Within thirty (30) days
after receipt of the Final Settlement Statement, Buyers shall deliver to Sellers
a written report containing any changes that Buyers propose be made in good
faith to resolve any questions with respect to the amounts due pursuant to such
Final Settlement Statement no later than one hundred twenty (120) days after the
Closing. The Parties shall employ that degree of effort as would prudent
business persons engaged in on going business relationships to reach agreement
as to the amounts due pursuant to such Final Settlement Statement no later than
thirty (30) days after the submission to Sellers of proposed changes to the
Final Settlement Statement.
(b) Should the Parties not reach agreement as to the amounts
due pursuant to such Final Settlement Statement, the disputed items shall be
submitted to KPMG, LLP for resolution The decision of KPMG, LLP shall be
considered final as between the Parties. Cost for KPMG, LLP and resolution of
the dispute will be apportioned between Sellers and Buyers in proportion to the
award by KPMG.
(c) The date upon which such agreement or resolution is
reached shall be called the "Settlement Date". On the Settlement Date, should
one party be obligated to the other by reason of the Final Settlement Statement,
the indebted party shall pay to the other party, in immediately
-20-
available funds, those monies determined to be due under the Final Settlement
Statement. Until paid, all past due amounts hereunder shall bear interest at the
lesser of prime plus two percent, as established by Bank of Texas, N.A.,
Houston, Texas (computed based on a 360 day year) or the maximum lawful rate
permitted by applicable law (the "Interest Rate").
9.2 Unpaid Third Party Funds. At such time as Buyers and Sellers agree
on a Final Settlement Statement, Sellers will transfer to Buyers all funds held
by Sellers in suspense for a third party owner of royalty, overriding royalty,
working interests, mineral interest or other similar interests, attributable to
the Interests, and will deliver all records in Sellers' possession, including a
schedule of such funds listing the owners thereof, which may be used to
determine proper disbursement. Buyers shall thereafter be responsible for
determining the proper payment of such amounts and shall indemnify and hold
harmless Sellers from and against any and all cost, loss or expense of whatever
kind, including attorneys' fees, arising from or in connection with the claim or
any person, up to the amount listed on the schedule provided by Sellers with
respect thereto, with respect to the funds transferred to Buyers pursuant to
this Section 9.2.
9.3 Further Assurances. After Closing Sellers, and Buyers shall
execute, acknowledge and deliver or cause to be executed, acknowledged and
delivered such instruments and take such other action as may be necessary or
advisable to carry out their obligations under this Agreement and under any
Exhibit, document, certificate or other instrument delivered pursuant hereto.
9.4 Survival. All representations and warranties set forth in this
Agreement in Sections 3.1 (a) - (d), 3.2 (a) - (d), 3.3 (a) - (d), 3.4 (a) -
(d), 3.5 (a) - (f), 3.6 (a) - (e), 3.7 (a) - (d) and 3.8 (a) - (c) shall survive
the Closing for a period of ten (10) months, but no other representations and
warranties shall survive the Closing.
9.5 Appointment of Directors. Delta agrees to appoint three directors,
selected by Sellers, to its Board of Directors effective immediately following
Closing.
9.6 Delta's Stock. Delta shall agree to file a registration statement
registering all shares of Delta common stock to be issued to Sellers hereunder,
if any, within thirty (30) days of closing under terms more specifically set out
in the Registration Rights Agreement attached here to and made a part hereof as
Exhibit "L" (the "Registration Rights Agreement"). Delta shall be able to call
up to 3,188,667 shares of its common stock for $4.50/share from Castle for a
period of one year after closing. Castle, in turn, agrees to maintain and to not
distribute to its shareholders at least 3,188,667 shares of Delta common stock
during this period.
9.7 Voting of Delta Shares. During the period that Castle holds any
Delta shares issued to it pursuant to the transaction, Castle will not attempt
to take any further control of Delta in any manner that is not specifically
endorsed in writing by Delta's board of directors, it will not demand that any
special meeting of Delta's shareholders be held, it will not submit any matter
to be voted upon by the shareholders of Delta that has not been previously
recommended by Delta's board of directors, it will vote in favor of all nominees
for directors, it will vote the Delta shares issued to it
-21-
pursuant to this transaction in favor of any matters recommended by Delta's
board of directors relating to the settlement of any and all disputes concerning
Delta's offshore California properties (to the extent required) and it will
generally endeavor to support actions recommended to Delta's shareholders by
Delta's board of directors. Notwithstanding the foregoing, Castle shall have the
right in its sole and absolute discretion to vote in any manner that it may
choose with respect to any transaction, merger or sale of assets that requires a
vote of Delta's shareholders under Colorado law.
9.8 Tax Allocation. The parties agree that the Purchase Price shall be
allocated as set forth on Exhibit B1 for Federal Income Tax purposes. Each party
shall use such allocations in filing Form 8594 (Asset Acquisition Statement)
with the IRS.
ARTICLE 10
TITLE MATTERS
10.1 Access to Title and Other Documents.
(a) After the date hereof, Sellers will make available to
Buyers and to their representatives (such representatives to include employees,
consultants, independent contractors, attorneys and other advisors of Buyers)
for Buyers' copying and/or inspection (at Buyers' cost and expense), at Sellers'
offices during normal business hours the following documents in Sellers'
possession or under its control:
(i) All abstracts of title, title opinions,
title curative materials, ownership reports,
division orders, bills of sale, other
documents evidencing transfers of title, tax
receipts, and licenses and registrations
pertaining to the Interests.
(ii) All of the lease records, lease files,
leases, conveyances and assignments of
interest in the Leases; unitization, unit,
pooling and operating agreements; division
orders; contracts; transfer orders; orders
of the applicable regulatory authorities or
administrative agencies; mortgages, deeds of
trust, security agreements, and financing
statements; and all other contracts,
agreements and documents affecting the
Interests.
(iii) Instruments and documents concerning proper
payment of all general and special
assessments, ad valorem and property taxes,
and production, severance and similar taxes
and assessments based on or measured by the
ownership of the Interests, the production
of hydrocarbons, or the receipt of proceeds
therefrom for 2000 and years prior for which
the applicable statute of limitations has
not expired.
-22-
(iv) All geological maps, geophysical surveys,
ownership maps, seismic surveys, logs, core
studies, and surveys relating to the
Interests.
(v) All production records; transportation
agreements; contracts for the purchase of
gas, oil, casinghead gas, distillate, gas
condensate or other hydrocarbons; processing
agreements; all correspondence relating to
the Interests; and data sheets relating to
the Interests and to bonuses, rentals and
royalties payable with respect thereto.
(vi) All agreements relating to the purchase,
sale, processing, and transportation of
production from the Xxxxx.
(vii) All bonds, leases, permits, easements,
licenses, orders, saltwater disposal
agreements, agreements with pumpers and
other agreements in any way relating to the
Interests or the operation thereof.
Reliance on such information shall be at the sole risk of the Buyers, and
Sellers make no guaranty or representation as to the accuracy or completeness of
such data, except as otherwise provided in this Agreement.
Sellers shall authorize Buyers and their representatives to
consult with attorneys, abstract companies and other consultants or independent
contractors of Sellers (whether utilized in the past or present) concerning
title related matters. Reliance on such information of such third parties shall
be at the sole risk of the Buyers, and Sellers make no guaranty or
representation as to the accuracy or completeness of such data.
10.2 No Warranty or Representation. At the Closing, Sellers shall
convey to Buyers all the Interests. Such conveyance shall be subject to the
Permitted Encumbrances and WITHOUT ANY WARRANTY OF TITLE, EITHER EXPRESS OR
IMPLIED, AND WHETHER BY COMMON LAW, STATUTE OR OTHERWISE, except for the
warranty of title as to persons claiming by, through and under Sellers contained
in the Assignment. Without limiting Buyers' right to reduce the Purchase Price
in the manner provided in this Article 10, Sellers make no warranty or
representation, express or implied, with respect to the accuracy or completeness
of any information, records or data now, heretofore, or hereafter made available
to Buyers in connection with this Agreement, including, without limitation, any
description of the Interests, pricing assumptions, potential for production of
hydrocarbons from the Interests, or any other matters contained in any material
furnished by Sellers to Buyers or its officers, directors, employees, agents,
advisors or representatives.
10.3 Disclaimer. ALL PERSONAL PROPERTY, MACHINERY, FIXTURES,
EQUIPMENT AND MATERIALS CONVEYED HEREBY ARE SOLD AND ASSIGNED AND
-23-
ACCEPTED BY Buyers IN THEIR "WHERE IS, AS IS" CONDITION, WITHOUT ANY WARRANTIES,
EXPRESS OR IMPLIED OR STATUTORY, OF MARKETABILITY, QUALITY, CONDITION,
MERCHANTABILITY AND/OR FITNESS FOR A PARTICULAR PURPOSE OR USE, ALL OF WHICH ARE
EXPRESSLY DISCLAIMED.
10.4 Permitted Encumbrances. As used in this Agreement, the term
"Permitted Encumbrances" shall mean the following, provided that the same shall
not operate to reduce the net revenue interest or increase the gross working
interest of a Well beyond that shown on Exhibit "A":
(a) Lessors' royalties, non-participating royalties,
overriding royalties, division orders, reversionary interests, and similar
burdens.
(b) Preferential rights to purchase and required third party
consents to assignments and similar agreements, with respect to which, prior to
Closing (i) waivers or consents are obtained from the appropriate parties, (ii)
the appropriate time period for asserting such rights has expired without an
exercise of such rights, or (iii) arrangements acceptable to Buyers can be made
by Buyers and Sellers to allow Buyers to receive substantially the same economic
benefits as if all such waivers and consents to assign have been obtained.
(c) Liens for taxes or assessments not yet due or delinquent
or, if delinquent, that are being contested in good faith in the normal course
of business.
(d) All rights to consent by, required notices to, filing
with, or other actions by governmental entities in connection with the sale or
conveyance of oil and gas leases or interests therein, if the same are
customarily obtained subsequent to such sale or conveyance and neither Sellers
nor Buyers has no reason to believe they cannot be obtained.
(e) Such Title Defects as Buyers may have waived in writing.
(f) Rights reserved to or vested in any governmental
authority.
(g) Rights of a common owner of any Interest in rights-of-way
or easements currently held by Sellers and such common owner as tenants in
common or through common ownership.
(h) Easements, conditions, covenants, restrictions,
servitudes, permits, rights-of- way, surface leases and other rights in the
Interests for the purpose of surface operations, roads, alleys, highways,
railways, pipelines, transmission lines, transportation lines, distribution
lines, power lines, telephone lines, and removal of timber, grazing, logging
operations, canals, ditches, reservoirs and other like purposes, or for the
joint or common use of real estate, rights-of-way, facilities and equipment
which do not materially impair the rights held by Buyers or the use and
enjoyment of the Interests.
-24-
(i) Defects, irregularities and deficiencies in title to any
rights-of-way, easements, surface lease or other rights which in the aggregate
do not materially impair the use of such right-of- way, easements, surface
leases or other rights for the purpose of which such rights will be held by
Buyers.
(j) Zoning, planning and environmental laws and ordinances and
municipal regulations.
(k) Vendors, carriers, warehousemen, repairmen, mechanics,
workmen, materialmen, construction or other like liens arising by operation of
law in the ordinary course of business or incident to the construction or
improvement of any property in respect of obligations which are not yet due, or
which are being contested in good faith by appropriate proceedings by or on
behalf of Sellers.
(l) Liens created under operating agreements in respect of
obligations that are not yet due or that are being contested in good faith by
appropriate proceedings by or on behalf of Sellers.
(m) The terms and provisions of the Existing Documents.
10.5 Good and Defensible Title. For the purposes of this Article 10,
the term "Good and Defensible Title" shall mean, with respect to each of the
Xxxxx or Units described on Exhibit "A", that title of Sellers which, subject to
and except for Permitted Encumbrances:
(a) Entitles Sellers, throughout the lifetime of the relevant
Well or if the duration of the interest in a Unit, to receive from such Well or
Unit (free and clear of all royalties, overriding royalties, non-participating
royalties, net profits interests, or other burdens on or measured by production
of hydrocarbons) not less than the interest shown as the net revenue interest on
Exhibit "A" in all hydrocarbons produced, saved and marketed from the Well or
Unit and in the case of a Well, of all hydrocarbons produced, saved, and
marketed from any unit of which the Well is a part and which is allocated to
such Well; all without reduction, suspension, or termination of the interest in
such Well or Unit.
(b) Obligates Sellers to bear the percentage of the costs and
expenses relating to the maintenance and development of, and operations relating
to, the Well or Unit not greater than the gross working interest shown on
Exhibit "A" without increase throughout the lifetime of the relevant Well or of
the duration of the interest in a Unit.
(c) Is free and clear of liens, encumbrances and defects.
-25-
(d) All irregularities of title that would not reasonably be
expected to result in claims that would materially and adversely affect Sellers'
title to the underlying Interest shall not be considered a Title Defect,
including but not limited to (i) defects in the chain of title consisting of
failure to recite marital status or the omission of succession or heirship
proceedings; (ii) defects or irregularities arising out of prior oil and gas
leases which, on their face, expired more than three (3) years prior to the
Effective Time, and which have not been released of record; (iii) defects or
irregularities arising out of acknowledgments, questions of identity, trusts or
trustees, executors and personal representatives, and the manner in which they
executed documents or were identified thereon; (iv) defects or irregularities
arising out of mortgages or deeds of trust which, by their terms, matured more
than six (6) years prior to the Effective Time but which remain unreleased of
record; (v) defects or irregularities arising out of the lack of survey of
specific land or lease description; (vi) defects or irregularities arising out
of the lack of recorded powers of attorneys from corporations, banks, trusts or
personal representatives to execute and deliver documents on their behalf or on
behalf of others; (vii) defects or irregularities cured by possession under
applicable statutes of limitation and statutes relating to prescription.
10.6 Notice of Title Defect. Except for Permitted Encumbrances, any
defect in title, lien, encumbrance, or defect that would cause Sellers' title to
any Interest underlying a Well or Unit described on Exhibit "A" not to be Good
and Defensible Title shall be a title defect ("Title Defect"). Not later than
five (5) days before the Closing Date (the "Warranty Claim Date"), Buyers must
notify Sellers in writing of any matter that Buyers considers to be a Title
Defect ("Notice of Title Defect"), which notice shall include, (i) a specific
description of the matter Buyers asserts as a Title Defect, (ii) a specific
description of the Well or Unit or the portion of the Interest underlying the
Well or Unit that is affected by the Title Defect, (iii) Buyers' calculation of
the amount ("Title Defect Amount") that the value of the Well or Unit should be
reduced because of the Title Defect based on the Allocated Value shown on
Exhibit "B," and (iv) appropriate supporting documentation.
Notwithstanding anything to the contrary in this Agreement, the Buyers
shall be deemed to have waived any Title Defect which the Buyers have not
specifically asserted in their Notice of Title Defect presented before the
Warranty Claim Date.
10.7 Title Failure. Any item that Sellers acknowledges is a Title
Defect but that Sellers are unwilling to cure shall be deemed a title failure
("Title Failure") and, subject to Section 10.9 below, the Purchase Price shall
be reduced for such Title Defect pursuant to Section 2.3 unless, in Sellers'
reasonable judgment, it is unlikely that material losses, costs, expenses and
liabilities will be experienced with respect to such Title Defect and Sellers
agree to indemnify Buyers with respect thereto.
10.8 Defect Notice; Sellers' Opportunity to Cure. To the extent that
Sellers dispute that any item described in the Notice of Title Defect actually
constitutes a Title Defect or disputes the Title Defect Amount assigned by
Buyers to any such Title Defect ("Contested Defect"), Sellers shall deliver to
Buyers a notice so stating ("Defect Notice"). Subject to the provisions of 10.9
below, the
-26-
portion of the Purchase Price attributable to Title Defects which Sellers are
willing to cure but which are uncured at Closing, or which are not waived by
Buyers at Closing (including Contested Defects), shall be deposited into an
escrow account pursuant to an escrow agreement agreed to by the Parties and the
Assignment will be revised to delete all of that portion of the Interests
affected by such Title Defects (including Contested Defects). If Sellers fail to
cure a Title Defect within ninety (90) days after Closing, it shall be deemed a
Title Failure and the funds attributable to such Title Defect shall be released
from escrow to Buyers and the property on which such Title Defect exists shall
not be conveyed to Buyers.
10.9 Title Purchase Price Adjustments. Notwithstanding any provision
hereof to the contrary, there shall be no reduction in the Purchase Price for
Title Failures and no escrow for Title Defects or Contested Defects unless and
until the aggregate amount of such Title Defects (including Title Failures and
Contested Defects) exceeds four percent (4%) of the Purchase Price and only for
the amount in excess of such amount. For purposes of computing Title Defect
Purchase Price adjustments, the Purchase Price at the Effective Time shall be
the total Purchase Price as reflected in Exhibit B.
10.10 Termination Amount. Notwithstanding any provision hereof to the
contrary, in the event the aggregate adjustments for Title Defects pursuant to
this Article 10 and for Environmental Defects pursuant to Article 11 amount to
fifteen percent (15%) or more of the Adjusted Purchase Price (the "Termination
Amount"), either Party shall have the option to terminate this Agreement,
without any liability, upon written notice to the other Party.
10.11 Preferential Rights and Consents to Assign. Some Interests
underlying Xxxxx or Units may be subject to existing preferential rights to
purchase the Interests or consents may be required in order to assign the
Interests. On or before March 15, 2002, Sellers shall provide Buyers with a
list, and shall make a good faith effort to obtain consent and waivers of any
preferential rights which Sellers know must be obtained prior to Closing and are
not ordinarily obtained after Closing. Buyers shall notify Sellers of any
additional consent requirement or preferential right to purchase it discovers
prior to Closing. If a preferential right is exercised or a consent is denied
prior to Closing, the Purchase Price shall be adjusted downward in an amount
equal to the price paid to Sellers for the Xxxxx or Units with respect to which
the preferential right has been exercised or the consent has been denied and
such Interest shall be deleted from this Agreement. In the case of a
preferential right to purchase, Sellers shall be entitled to all proceeds paid
by the third party exercising its preferential right to purchase. If a third
party preferential purchase right burdening any Well or Unit has not been
exercised or waived by Closing, Buyers shall pay for and accept an assignment
covering such Well or Unit and, if the preferential right is exercised after
Closing, Buyers shall be entitled to all proceeds paid for such Well or Unit by
the third party exercising such preferential purchase right. Buyers shall be
responsible for conveying title to the Interest underlying the Well or Unit
affected by said preferential right to the party exercising the same and shall
indemnify and hold Sellers harmless from and against any claim or liability for
Buyers' failure to make such conveyance.
-27
ARTICLE 11
ENVIRONMENTAL
11.1 Inspection; Indemnity. Buyers and their authorized
representatives, at Buyers' sole risk and expense, shall have the right to enter
upon and inspect the real and personal properties comprising the Interests, and
to conduct such well, environmental and other tests and assessments as Buyers
shall deem appropriate, subject to the approval of the operator in the case of
non-operated properties. Buyers shall repair any damages to the Interests
resulting from its inspection and shall defend and hold Sellers harmless from
and against any and all losses, damages, claims, obligations, liabilities,
expenses (including court costs and attorneys' fees) or causes of action
directly resulting from Buyers' inspection of the Interests.
11.2 Environmental Assessment. As part of their inspection of the
Interests, Buyers and its authorized representatives shall have the right to
conduct soil and water tests and borings, and generally to conduct such tests,
examinations, investigations and studies as may be necessary or appropriate in
Buyers' sole judgment to make an environmental assessment of the Interests.
Buyers shall keep any data or information acquired through such examination and
the results of all analyses of such data and information strictly confidential
and shall not disclose the same to any person or agency without the prior
written approval of Sellers unless such disclosure is required by law. Buyers
shall take all steps necessary to ensure that Buyers' authorized representatives
comply with the provisions of this Article 11. If Buyers have discovered in
their environmental assessment circumstances which require remediation, control
or other response under environmental laws, rules or regulations then in effect
(an "Environmental Defect"), Buyers shall notify Sellers of such circumstances
as soon as practicable, but in no event less than thirty (30) days prior to
Closing.
11.3 Environmental Defects If Buyers properly notify Sellers of an
Environmental Defect related to an Interest, Buyers may (i) waive the
Environmental Defect and Close, or (ii) request Sellers to cure the
Environmental Defect. If Buyers asks Sellers to cure an Environmental Defect,
and if the aggregate amount of all such Environmental Defects exceeds four
percent (4%) of the Purchase Price, Sellers have the option (i) to cure the
Environmental Defect, or (ii) to exclude the Interest affected by the
Environmental Defect from this Agreement. If Sellers elect to cure the
Environmental Defect, but the cure has not been completed by Closing, the
Interest affected by the Environmental Defect shall not be conveyed to Buyers at
Closing, the Purchase Price shall be reduced by the amount allocated to such
Interest and such amount shall be deposited into the escrow account referred to
in Section 10.7. If the Environmental Defect is cured within ninety (90) days
after Closing, within five (5) days after the Environmental Defect is cured,
Sellers will convey to Buyers the Interest affected by the Environmental Defect
and the applicable amount shall be released from escrow to Sellers. If Sellers
elect to exclude the Interest affected by the Environmental Defect from this
Agreement, subject to Section 11.4 below, the Purchase Price will be reduced by
the allocated value of the Interest affected per Exhibit B.
-28-
11.4 Environmental Purchase Price Adjustment. Notwithstanding any
provision hereof to the contrary, there shall be no reduction in the Purchase
Price for uncured Environmental Defects unless, and only to the extent that, the
aggregate amount of such uncured Environmental Defects exceeds four percent (4%)
of the Purchase Price and then only for the amount in excess of such amount.
ARTICLE 12
TERMINATION, DEFAULT AND REMEDIES
12.1 Right of Termination. This Agreement and the transactions
contemplated herein may be terminated in writing at any time at or prior to
Closing:
(a) By the written agreement of all of the Parties hereto
whereupon no Party hereto shall be liable to any other Party hereto for damages
of any kind and the Escrow Agent shall return the Exclusivity Deposit to Buyer.
(b) By either of Buyers or Sellers in the event that the
adjustments to the Purchase Price exceed the Termination Amount, as provided for
in Section 10.10 whereupon no Party hereto shall be liable to any other Party
hereto for damages of any kind and the Escrow Agent shall return the Exclusivity
Deposit to Buyer.
(c) By Sellers pursuant to Subsection 1.5 (b) or Section 5.4
whereupon no Party hereto shall be liable to any other Party hereto for damages
of any kind and the Escrow Agent shall return the Exclusivity Deposit to Buyer.
(d) By Sellers with impunity, if
(i) This Agreement has not been terminated
pursuant to Subsections 12.1 (a), (b) or
(c) above,
(ii) Buyers' Conditions to Closing set forth in
Article 6 have been materially satisfied,
(iii) Sellers are not otherwise in default of
their obligations hereunder, and
(iv) Closing does not occur within sixty (60)
days after the date on which the SEC informs
Delta that it has no further comments on
Delta's proxy materials for the transaction
due solely to Delta's failure to obtain a
quorum for the shareholders' meeting
necessary to approve the transaction under
applicable NASDAQ rules,
-29-
whereupon Buyers shall pay liquidated damages to Sellers by causing the Escrow
Agent to deliver to Castle the Exclusivity Deposit.
(e) By Sellers with impunity, if
(i) This Agreement has not been terminated
pursuant to Subsections 12.1 (a), (b) (c)
or (d) above,
(ii) Buyers' Conditions to Closing set forth in
Article 6 have been met,
(iii) Sellers are not otherwise in default of
their obligations hereunder, and
(iv) Buyers either
(A) fail to close the transaction
by June 30, 2002 due to
(1) A failure by Delta to
timely respond to SEC
comments on Delta's proxy
materials for any reason
other than Castle's failure
to provide Delta with all
of the information
necessary for Delta to be
able to adequately respond
to comments in sufficient
time for the SEC to notify
Delta no later than April
30, 2002 that the SEC has
no further comments,
(2) A unilateral
determination by Delta that
it no longer wishes to
proceed with the
transaction after the PSA
is executed by all
necessary parties, or
(3) Any other delay or
failure by Buyers,
including their failure to
materially satisfy Sellers'
Conditions to Closing as
set forth in Article 7
other than Delta's failure
to obtain a quorum for the
shareholders' meeting
necessary to approve the
transaction under
applicable NASDAQ rules,
whereupon Buyers shall pay liquidated damages to Sellers by causing the escrow
agent to deliver to Castle the Exclusivity Deposit and by delivering to Castle
an additional Seven Hundred Thousand (700,000) shares of the common stock of
Delta.
(f) By Buyers with impunity if
-30-
(i) This Agreement has not been
terminated pursuant to Subsections
12.1 (a), (b) (c), (d) or (e) above,
(ii) Sellers' Conditions to Closing set
forth in Article 7 have been
materially satisfied,
(iii) Buyers are not otherwise in default
of their obligations hereunder, and
(iv) Sellers either
(A) fail to close the
transaction within
10 days after the
date on which
Delta timely
obtains the
affirmative vote
of a majority of
Delta's shares
present at a
shareholders'
meeting called to
approve the
transaction, or
(B) fails to materially
satisfy Buyer's
Conditions to
Closing as set
forth in Article 6,
whereupon the Escrow Agent shall return the Exclusivity Deposit to Buyer and
Castle on behalf of Sellers shall pay to Delta as liquidated damages Seven
Hundred Thousand (700,000) shares of the common stock of Castle or at Castle's
sole option the equivalent value in cash, unless such failure to close is due
solely to judicial restraint caused by ChevronTexaco Inc. or its
agents/affiliates, in which case Sellers shall not be liable for the payment of
any damages to Buyers.
12.2 Return of Documentation. Upon termination of this Agreement,
within thirty (30) days Buyers shall return to Sellers all title, geological
data, reports, contracts, and maps and other information furnished by Sellers to
Buyers and all copies thereof.
12.3 Survival of Confidentiality. Upon termination of this Agreement
for any reason, the Parties agree that the confidentiality provisions of Section
15.14 shall survive.
ARTICLE 13
DISPUTE RESOLUTION
13.1 Dispute Resolution. If the Parties disagree as to any matter under
this Agreement, including without limitation any dispute as to the termination,
construction, validity, interpretation, enforceability or breach of the
Agreement, they will first attempt to resolve such disagreement through a
meeting, to be held within ten (10) days of such termination, of senior
executives of each Party.
-31-
13.2 Arbitration If such meeting of senior executives of each Party
fails to resolve the matter within thirty (30) days of the date of such meeting,
then thereafter any such dispute, controversy or claim arising out of or in
relation to or in connection with the Agreement or the operations carried out
under this Agreement shall be exclusively and finally settled by arbitration in
accordance with this Section 13.2. Any Party may submit such dispute,
controversy or claim to arbitration by notice to the other Parties.
(a) The arbitration shall be heard and determined by three
(3) arbitrators. Each side shall appoint an arbitrator of its choice within
thirty (30) Days of the submission of a notice of arbitration. The
Party-appointed arbitrators shall in turn appoint a presiding arbitrator of the
tribunal within thirty (30) Days following the appointment of both
Party-appointed arbitrators. If the Party-appointed arbitrators cannot reach
agreement on a presiding arbitrator of the tribunal and/or one Party refuses to
appoint its Party-appointed arbitrator within said thirty (30) Day period, the
appointing authority for the implementation of such procedure shall be the
Presiding District Judge in Xxxxxx County, Texas, who shall appoint an
independent arbitrator who does not have any financial interest in the dispute,
controversy or claim. If the Presiding District judge in Xxxxxx County, Texas
refuses or fails to act as the appointing authority within ninety (90) Days
after being requested to do so, then the appointing authority shall be the
Presiding Judge of any other District in the State of Texas mutually agreed upon
by the Parties who shall appoint an independent arbitrator who does not have any
financial interest in the dispute, controversy or claim. All decisions and
awards by the arbitration tribunal shall be made by majority vote.
(b) Unless otherwise expressly agreed in writing by the
Parties to the arbitration proceedings:
(i) The arbitration proceedings shall be held
in Houston, Texas;
(ii) The arbitrator(s) shall be and remain at
all times wholly independent and impartial;
(iii) The arbitration proceedings shall be
conducted in accordance with the Texas
General Arbitration Act (Xxxxxx'x Xxx. Civ.
Stat. Arts. 224 to 238.6), in effect at the
Effective Time; as amended from time to
time;
(iv) Any procedural issues not determined under
the arbitral rules selected pursuant to
(b)(iii) above shall be determined by the
arbitration act and any other applicable
laws of Texas, other than those laws which
would refer the matter to another
jurisdiction;
(v) The costs of the arbitration proceedings
(including attorneys' fees and costs) shall
be borne in the manner determined by the
arbitrator(s);
-32-
(vi) The decision of the sole arbitrator or a
majority of the arbitrators, as the case may
be, shall be reduced to writing; final and
binding without the right of appeal; the
sole and exclusive remedy regarding any
claims, counterclaims, issues or accountings
presented to the arbitrator; made and
promptly paid in U.S. dollars free of any
deduction or offset or the common shares of
Delta or Castle, as decided by the
arbitrators; and any costs or fees incident
to enforcing the award, shall to the maximum
extent permitted by law be charged against
the Party resisting such enforcement;
(vii) Consequential, punitive or other similar
damages shall not be allowed except those
payable to third parties for which liability
is allocated among the Parties by the
arbitral award;
(viii) The award shall include interest from the
date of any breach or violation of this
Agreement, as determined by the arbitral
award, and from the date of the award until
paid in full, at the Interest Rate; and
(ix) Judgement upon the award may be entered in
any court having jurisdiction over the
person or the assets of the Party owing the
judgement or application may be made to such
court for a judicial acceptance of the award
and an order of enforcement, as the case may
be.
(x) The arbitration shall proceed in the absence
of a Party who, after due notice, fails to
answer or appear. An Award shall not be made
solely on the default of a Party, but the
arbitrator(s) shall require the Party who is
present to submit such evidence as the
arbitrator(s) may determine is reasonably
required to make an award.
(xi) If an arbitrator should die, withdraw or
otherwise become incapable of serving, or
refuse to serve, a successor arbitrator
shall be selected and appointed in the same
manner as the original arbitrator.
ARTICLE 14
ASSUMPTION OF OBLIGATIONS
14.1 Assumption of Obligations. At Closing, Buyers shall assume (a) the
obligation to (i) plug and abandon or remove and dispose of all Xxxxx (whether
then producing or temporarily or permanently abandoned), platforms, structures,
flow lines, pipelines, and the other equipment now or hereafter located on the
Interests; (ii) cap and bury all flow lines and (iii) dispose of other
-33-
pipelines now or hereafter located on the Interests, and all other pollutants,
wastes, contaminants, or hazardous, extremely hazardous, or toxic materials,
substances, chemicals or wastes now or hereafter located on the Interests; (b)
all obligations and liabilities arising from or in connection with any gas
production, pipeline, storage, processing or other imbalance attributable to
substances produced from the Interests on or after the Effective Time; and (c)
all other costs, obligations and liabilities that relate to the Interests and,
in each case, arise from or relate to events occurring on or after the Effective
Time. All such plugging, replugging, abandonment, removal, disposal, and
restoration operations shall be in compliance with applicable laws and
regulations and contracts, and shall be conducted in a good and workmanlike
manner.
ARTICLE 15
MISCELLANEOUS
15.1 Fees and Taxes. Except as otherwise specifically provided, all
fees, costs and expense incurred by Buyers or Sellers in negotiating this
Agreement or in consummating the transactions contemplated by this Agreement
shall be paid by the Party incurring the same, including, without limitation,
legal and accounting fees, costs and expenses. All required documentary, filing
and recording fees for the assignments, conveyance or other instruments required
to convey title to the Interests to Buyers shall be borne by Buyers. In
addition, the liability for any sales, use, transfer or similar tax associated
with the sale and/or transfer of the Interests shall be the liability of, and
for the account of, the Buyers and such liability shall not be subject to
proration as provided in Section 2.3.
15.2 Notices. All notices and communications required or permitted
under this Agreement shall be in writing and shall be deemed to have been duly
made when actually delivered, including delivery by courier, facsimile,
telecopy, or other electronic medium, or if mailed by registered to certified
mail, postage prepaid, addressed as follows:
SELLERS:
CASTLE ENERGY CORPORATION
CASTLE EXPLORATION COMPANY, INC.
CASTLE PIPELINE COMPANY
One Radnor Corporate Center, Xxxxx 000
000 Xxxxxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxxx
Chief Financial Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
-34-
CEC, INC.
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx XX
President
Telephone: (000) 000-0000
Facsimile: (000) 0000000
Buyers:
DELTA PETROLEUM CORPORATION
DELTA EXPLORATION COMPANY, INC.
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxxx
Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Either Party may, by written notice so delivered to the other, change
the address to which delivery shall thereafter be made.
15.3 Amendments. This Agreement may not be amended except by an
instrument in writing signed by Buyers and Sellers.
15.4 Preparation of Agreement. Both Sellers and Buyers and their
respective counsel participated in the preparation of this Agreement. In the
event of any ambiguity in this Agreement, no presumption shall arise based on
the identity of the draftsman of this Agreement.
15.5 Headings. The headings of the articles and sections of this
Agreement are for guidance and convenience of reference only and shall not limit
or otherwise affect any of the terms or provisions of this Agreement.
15.6 Counterparts. This Agreement may be executed by Buyers and Sellers
in any number of counterparts, each of which shall be deemed an original
instrument, but all of which together shall constitute but one and the same
instrument.
15.7 References. References made in this Agreement, including use of a
pronoun, shall be deemed to include, where applicable, masculine, feminine,
singular or plural, individuals or corporations. As used in this Agreement,
"person" shall mean any natural person, corporation, partnership, trust, estate
or other entity.
-35-
15.8 Governing Law. This Agreement and the transactions contemplated
hereby shall be construed in accordance with, and governed by, the laws of the
State of Texas without giving effect to the conflicts of law rules thereof. Any
disputes concerning this Agreement or the subject matter hereof shall be brought
in a court of competent jurisdiction of the State of Texas.
15.9 Entire Agreement. This Agreement (including the Exhibits hereto)
constitutes the entire understanding between the Parties with respect to the
subject matter hereof, superseding all negotiations, prior discussions and prior
agreements and understanding relating to such subject matter.
15.10 Assignment; Parties in Interest. No Party shall assign this
Agreement without the other Parties' prior written consent; provided, however,
that this requirement shall not apply to a subsidiary or other affiliate of the
assigning Party so long as the assigning Party remains responsible for its
assignee's obligations hereunder. Subject to the foregoing, this Agreement shall
be binding upon, and shall inure to the benefit of, the Parties and their
respective successors and assigns.
15.11 Further Cooperation. After the Closing, Buyers and Sellers shall
execute and deliver, or shall caused to be executed and delivered from time to
time, such further instruments of conveyance and transfer and shall take such
other action as any Party may reasonably request to convey and deliver the
Interests to Buyers, to accomplish the orderly transfer of the Interests to
Buyers, or to otherwise effectuate the transactions contemplated by this
Agreement. If either Party hereto receives monies belonging to the other, such
amount shall immediately be paid over to the proper Party. If an invoice or
other evidence of an obligation is received by a Party, which is partially an
obligation of both Sellers and Buyers, then the Parties shall consult with each
other and each shall promptly pay its portion of such obligation to the obligee.
15.12 Press Release. No Party shall make any press release or other
announcement in connection with the execution of this Agreement or the Closing
without first consulting with the other Parties. Following such consultation and
good faith attempt to make reasonable accommodations, any Party may make any
announcement or press release that it believes is either required by applicable
law or the rules of any stock exchange, or is advisable in connection with such
Party's obligation to provide public disclosure regarding its activities. This
provision shall not apply to any filing with any governmental body or stock
exchange required by law, rule or regulation.
15.13 Subrogation. Buyers shall be subrogated to all rights, actions
and warranties that Sellers may have with respect to Sellers'
predecessors-in-interest as to the Interests.
15.14 Confidentiality. Sellers and Buyers agree that they will keep
confidential and will not, except with the other's prior written consent or as
required by applicable law, regulation or legal process, disclose (i) the
existence or terms of this letter or the discussions hereunder; or (ii) any
information which they obtain about the other during due diligence
investigations and the
-36-
negotiation of the transaction, and will not use any of such information for any
reason or purpose other than to evaluate the transaction; provided, however,
that each of Sellers and Buyers may reveal such information to its respective
accounting, legal and other representatives, and to Buyers' potential sources of
financing for the transaction, who need to know such information for the purpose
of evaluating the transaction and who agree to keep such information
confidential. In the event any Party is requested pursuant to or required by
applicable law, regulation or legal process to disclose any information required
to be kept confidential hereunder, the Party requested or required to make such
disclosure shall promptly notify the other Parties so that such Parties may seek
a protective order or other appropriate remedy. In addition, if either Sellers
or Buyers determine not to proceed with the transaction, each will promptly
return to the other all written information in such party and such party's
representatives' possession, including without limitation all internal notes and
analyses prepared in connection with the transaction, provided information was
provided in connection with this transaction, or promptly destroy all such
information and confirm such destruction to the other in writing. Information to
be returned shall not include information concerning Buyers that Sellers
possesses or shall possess in the future in its capacity as a shareholder of
Buyers. Notwithstanding anything in this paragraph to the contrary, neither
Sellers nor Buyers will be required to keep confidential any information which
(a) is available to the public at the time of its disclosure to the other party
or becomes publicly available after such disclosure other than by a breach of
this letter, (b) becomes available to the party receiving the information on a
non-confidential basis from a source which is not under any obligation to
maintain its confidential basis or (c) is known by the party receiving the
information prior to its disclosure and such knowledge can be demonstrated by
written evidence.
EXECUTED as of the date first above stated, but made effective as of
the Effective Time.
SELLERS:
CASTLE ENERGY CORPORATION
By
----------------------------------------
Xxxxxxx X. Xxxxxxx, III
Vice President and General Counsel
CASTLE EXPLORATION COMPANY, INC.
By
----------------------------------------
Xxxxxxx X. Xxxxxxx, III
Vice President and General Counsel
-37-
CEC, INC.
By
------------------------------------------
Xxxxxxx X. Xxxxxxx, III
Vice President and General Counsel
CASTLE PIPELINE COMPANY
By
------------------------------------------
Xxxxxxx X. Xxxxxxx, III
Vice President and General Counsel
BUYERS:
DELTA PETROLEUM CORPORATION
By
------------------------------------------
Xxxxx X. Xxxxxx
President and Chief Executive Officer
DELTA EXPLORATION COMPANY, INC.
By
------------------------------------------
Xxxxx X. Xxxxxx
President and Chief Executive Officer
-38-
