7
FINAL EXECUTION COPY
ASSET PURCHASE AGREEMENT
By and Between
NorAm Energy, LLC
Provins Family, LLC
And
O.I.L. ENERGY CORP.
(Collectively "Seller")
and
XXXXXX XXXXXX NORTH, L.L.C.
("Purchaser")
Dated as of January 10, 2006
TABLE OF CONTENTS
ARTICLE 1. Definitions
Section 1.01. Definitions
ARTICLE 2. Purchase and Sale
Section 2.01. Purchase and Sale Section 2.02. Liabilities
ARTICLE 3. Purchase Price
Section 3.01. Payments of Purchase Price
Section 3.02. Purchase Price Adjustments
Section 3.03. Post-Closing Adjustments of Purchase Price
ARTICLE 4. Representations and Warranties
Section 4.01. Representations and Warranties of Seller
Section 4.02. Representations and Warranties of Buyer
Section 4.03. As Is Where Is
Section 4.04. Actual Knowledge
ARTICLE 5. Covenants
Section 5.01. Covenants and Agreements of Seller
Section 5.02. Covenant and Agreement of Buyer.
Section 5.03. Covenant and Agreement of Seller and Buyer:
Price Allocation
ARTICLE 6. Title Matters
Section 6.01. Additional Title Opinions
ARTICLE 7. Conditions to Closing
Section 7.01. Conditions to Obligations of Seller.
Section 7.02. Conditions to Obligations of Buyer.
Section 7.03. Conditions to Obligations of Seller and Buyer.
ARTICLE 8. Closing
Section 8.01. Date of Closing
Section 8.02. Place for Closing
Section 8.03. Closing Obligations
ARTICLE 9. Obligations after Closing
Section 9.01. Operation of Properties
Section 9.02. Sales Taxes; Recording Fees & Audit Fees
Section 9.03. Indemnifications
Section 9.04. Further Assurances
Section 9.05. Survival of Representations, Warranties and
Indemnification Obligations
Section 9.06. Access to Information
Section 9.07. Limitation of Action
Section 9.08. Post-Closing Audits and Disputes.
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ARTICLE 10. Dispute Resolution
Section 10.01. Resolution of Disputes
ARTICLE 11. Miscellaneous
Section 11.01. Exhibits and Schedules.
Section 11.02. Expenses
Section 11.03. Notices
Section 11.04. Amendment
Section 11.05. Assignment
Section 11.06. Headings
Section 11.07. Counterparts
Section 11.08. Governing Law
Section 11,09. Entire Agreement
Section11.10. Parties in Interest
Section 11.11. Severability
Section11.12. Conflict Between Agreement and Other Operative Documents
Section 11.13. Public Announcements
EXHIBITS
Exhibit A: AMI
Exhibit B: Assignment
Exhibit C: Base Purchase Price
Exhibit D: Xxxx of Sale
Exhibit E: Assignment of Leasehold Interest
Exhibit F: Excluded Properties
Exhibit G: Pipeline Easement Assignment
Exhibit H: Xxxxxxxxxx Opinion
Exhibit I: Xxxxxx Opinion
Exhibit J: Certificate of Non-Foreign Status
Exhibit K: Transfers of Well Permits
SCHEDULES
Schedule 2.01-1: Identification of Properties
Schedule 2.02: Assumed Liabilities
Schedule 3.02(a)(iii): Pending Leases
Schedule 4.01(h)(ii): Consents to Assignments
Schedule 4.01(i): Absence of Changes
Schedule 4.010): Tax Audit
Schedule 4.01(I): Sellers Encumbrances
Schedule 4.01(n): Contractual Breaches
Schedule 401(o): Additional Drilling Obligations
Schedule 4.01(p): Take or Pay Obligations
Schedule 4.01(q): Sales Contracts
Schedule 4.01(s): Legal Proceedings
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Schedule 4.01(w): Water Discharge Permits
Schedule 4.01 (bb): Insurance Policies
Schedule 4.01(dd): Preferential Rights
Schedule 4.01(ff): Partnerships
Schedule 4.01(gg): Application of Purchase Consideration
Schedule 5.01(e): Environmental Issues
Schedule 5.03: Allocation of Purchase Price
Schedule 6.01(a): Division Order Opinions to be prepared
Schedule 9.01: Operating Fees
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT ("Agreement') dated this ________ day of
_____________________ 2006, is by and between NorArn Energy, LLC, a Michigan
limited liability company, Provins Family, LLC, a Michigan limited liability
company, and O.I.L. Energy Corp., a Michigan corporation (collectively
"Seller"), and Xxxxxx Xxxxxx North, LLC, a Michigan limited liability company (
"Buyer").
In consideration of the mutual promises contained herein, the benefits to
be derived by each party and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Buyer and Seller agree as
follows:
ARTICLE 1.
Definitions
Section 1.01. Definitions. Unless defined elsewhere in this Agreement, all
capitalized terms used herein shall have the following meanings:
Affiliate: As to the party specified, (i) any Person controlling,
controlled by or under common control with such party, (ii) the officers,
directors, members or partners of such party, (iii) any relative (by blood,
adoption or marriage) within the second degree of any such party or of any
Person described in (i) or (ii) above, and (iv) any Entity controlled by any
relative described in (iii) above. The term "control" as used in the preceding
sentence means with respect to any Person, the possession directly or
indirectly, of the power to direct or cause the direction of the management of
such Person, whether through the ownership of voting securities, or by contract
or agency or otherwise.
AMIs: Areas of mutual interest formed by exploration agreements or
participation agreements, as amended, between Buyer and Seller as described on
Exhibit A.
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Antrim Formation: The formations and strata from the surface of the Earth
down to and including the base of the Antrim Shale formation, together with
formations and strata below the base of the Antrim Shale formation to the extent
that such formations and strata are used for the Xxxxx for operational purposes
for disposal of effluent produced from such Xxxxx.
Assignment: The form of Assignment is attached hereto as Exhibit B.
Base Purchase Price: Twenty-Six Million Eight Hundred Fifty Thousand and
NO/100 ($26,850,000.00) Dollars, plus (1) $150.00 per net leasehold acre for the
Boyne Valley Twp. leasehold and (2) $75.00 per net leasehold acre for the
Xxxxxxxx Twp. and the Xxxxxx XX leasehold; as calculated and agreed by the
Parties and as detailed on Exhibit C hereto.
Xxxx of Sale: The form of Xxxx of Sale of Personal Property and Equipment
is attached hereto as Exhibit D.
Closing: The consummation of the transactions contemplated by this
Agreement.
Closing Date: The date of the Closing, as set forth in Section 8.01.
Closing Payment: The Base Purchase Price adjusted to reflect known or
estimated Section 3.03 Post-Closing Adjustments.
Code: The Internal Revenue Code of 1986, as amended and as in effect on
the Closing Date.
Contracts: All Hydrocarbon sales, purchase, exchange and processing
contracts and agreements, transportation and charter agreements, utility
agreements, production payment agreements, tax credit agreements, farm-in and
farm-out agreements, joint operating agreements, equipment leases, and all other
contracts or agreements of whatever kind or character, other than the Leases,
affecting the Information, Interests, Pipelines and Personal Property and
Equipment or any part thereof.
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Conveyance: The form of Assignment of Leasehold is attached hereto as
Exhibit E.
Deep Formations: All formations and strata below the base of the Antrim
Shale formation, except to the extent that such formations and strata are
included in the definition of Antrim Formation.
Effective Time: 12:00 a.m., Eastern Standard Time on October 1, 2005.
Encumbrance: Any financing mortgage, lien, security interest or pledge.
Entity: A corporation, partnership, joint venture, limited liability
company, trust or incorporated organization or association, Governmental
Authority or other entity.
Excluded Properties: All rights, titles and interests of Seller in, to and
under or derived from the lands, fee interests, royalties, overriding royalties,
oil, gas and/or mineral leases, licenses, agreements and other documents
described in Exhibit F to this Agreement.
Governmental Authority: The United States of America, any state,
commonwealth, territory or possession thereof and any political subdivision of
any of the foregoing, including, but not limited to, courts, departments,
commission, boards, bureaus, agencies or other instrumentalities.
Good and Marketable Title: As to each of the Properties, the title that:
(1) as to the Interests, constitutes no less than the Net Revenue Interest in
each Unit described on Schedule 2.01-1; (2) as to the Interests, constitutes no
more than the Working Interests in each Unit described on Schedule 2.01-1; and
(3) as to all Properties, constitutes all of Seller's right, title and interest
therein, free and clear of all Encumbrances, except for Permitted Encumbrances.
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Hazardous Substances: All hazardous or toxic, radioactive, or explosive
substances, wastes or materials, pollutants or contaminants (including, without
limitation, asbestos, petroleum, polychlorinated biphenyls and urea
formaldehyde), or other similar substances or materials which are regulated by
any Law pertaining to environmental regulation, contamination or clean-up,
including, but not limited to, the Comprehensive Environmental Response,
Compensation, and Liability Act, the Resource Conservation and Recovery Act, or
state lien or state superfund or environmental clean-up statutes and all other
Laws pertaining to pollution, the environment, or the generation, treatment,
storage, processing, disposal or discharge of hazardous substances.
Hydrocarbons: Oil, gas, other liquid or gaseous hydrocarbons, and other
minerals, or any of them or any combination thereof.
Information: All of Seller's technical information relating to the
Interests, Pipelines and Personal Property and Equipment, including, but not
limited to: (1) all geological, geochemical and geophysical information,
geographic and structural geological maps, well logs and related analyses and
correlations, paleontological data, stratigraphic studies and data pertaining to
permeability or porosity, seismic and gravitational data and production records,
engineering and geological data, consultants studies or reports regarding any of
the foregoing and any and all interpretative analyses of the foregoing that
pertain to the Properties, (2) copies of all of Seller's files, documents,
accounting records, Leases, deeds and Contracts that pertain to the Properties
and Seller's operation thereof, and (3) all title information (including but not
limited to title opinions, abstracts, evidence that rentals, royalties and other
payments due under the Leases and Contracts have been paid, evidence that Taxes
have been paid, maps and surveys, lease records and data sheets) as maintained
by Seller, that pertain to the Properties and (4) all plans for exploration and
development, applications, inspection reports, environmental impact statements,
assessments and studies, permits, licenses, orders. Consents, notices,
correspondence and other statements and Instruments pertaining to environmental
matters and requirements of any Governmental Authority that pertain to the
Properties and Seller's operation thereof.
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Interests: (a) All of Seller's Working Interests and the Net Revenue
Interests associated therewith (including reversionary Working Interests, if
any) (i) in, to and under the Leases insofar as the Leases cover the Antrim
Formation in the Land, (ii) in the Xxxxx drilled on said Land and jointly owned
by the Parties, and (iii) in the Units communitized for the drilling of such
Xxxxx, all as more fully described on Schedule 2.01-1; excepting that Seller is
retaining its interest to and under the Leases insofar as the Leases cover Deep
Formations in the Land and (iv) Seller's membership interest in Xxxxxx Pipeline
& Processing Co., LLC.
Land: The land within the AMIs that is covered by the Leases.
Law: Any law, statute, ordinance, decree, requirement, order, judgment,
rule or regulation of, including, but not limited to, the terms of any license
or permit issued by, any Governmental Authority.
Leases: All oil, gas and/or mineral leases described in Schedule 2.01-1.
The Parties' intentions are that Schedule 2.01-1 shall list all oil, gas and/or
mineral leases in which Seller owns an interest, covering land within the AMIs,
except leases that may be described on Exhibit F as Excluded Properties. Any
such oil and gas lease that is inadvertently omitted shall be subsequently added
as a Lease by amendment of the schedule and shall be assigned as provided herein
in the same manner as if it were on the Schedule as originally prepared.
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Net Revenue Interest: The Interests, (expressed as a decimal interest) on
either a Unit by Unit or Lease by Lease basis of Seller, in and to Hydrocarbons
produced from or allocated to the Interests after deducting all applicable
Production Burdens.
Operative Documents: This Agreement, the Assignment, the Xxxx of Sale, the
Pipeline Easement Assignment and the Conveyance.
Parties: Collectively Seller and Buyer.
Pending Leases: Any lease not included on Schedule 2.01-1 for which a
draft for payment has been issued or for which payment has been tendered prior
to the Closing Date and identified on Schedule 3.02(a)(iii) for Boyne Valley,
Xxxxxxxx and Xxxxxx Townships, Charlevoix County. Seller will be responsible for
its proportionate share of the lease acquisition cost for any such lease which
is included in the Purchase Price or as a Post-Closing Adjustment.
Permitted Encumbrances: Any or all of the following;
(i) Encumbrances that arise under Contracts to secure payment of
amounts not yet delinquent but that have been taken into consideration in
adjusting the Purchase Price, and of a type and nature customary in the oil and
gas industry in Northern Michigan;
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(ii) Encumbrances securing payments to mechanics and materialmen and
Encumbrances securing payment of taxes or assessments that are, in either case,
not yet delinquent but that have been taken into consideration in adjusting the
Purchase Price;
(iii) Production Burdens in amounts that do not operate to reduce
the Net Revenue Interest of Seller in any Unit to less than that indicated on
Schedule 2.01-1;
(iv) operating agreements, gas sales contracts, unitization,
pooling, communitization and spacing agreements described in Schedule 2.01-1;
(v) orders of Governmental Authorities containing terms and
conditions customary in the oil and gas industry in Northern Michigan and that
do not operate to reduce the Net Revenue Interest of Seller in any Unit to less
than that indicated on Schedule 2.01-1;
(vi) any title defect which did not arise by, through or under
Seller's actions or inactions; and
(vii) other reasonable and customary Encumbrances that have been
taken into consideration in adjusting the Purchase Price.
Person: Any natural person or Entity.
Personal Property and Equipment: All equipment, pipe, and other personal
property, fixtures and improvements in which Seller has interests, situated upon
the Land or used or held for use in connection with the exploration, development
or operation of the Interests or the production, treatment, storage,
compression, sale, marketing or transportation of Hydrocarbons from the
Interests or the disposal of brine produced in connection therewith, including
the salt water disposal xxxxx identified on Schedule 2.01-1 and the associated
equipment, and also including leased equipment and leased personal property (the
leases of which will be assigned to and assumed by Buyer at Closing).
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Pipelines: The gas and water pipelines and gathering systems and water
disposal systems of Seller, whether in Seller's name or in the name of another
but held for the benefit of Seller, relating to the Interests, together with all
machinery, equipment, appliances, material, supplies, buildings, structures,
improvements and fixtures used in connection therewith and all rights of way,
easements, surface leases, deeds, grants, servitudes and permits appertaining or
relating thereto.
Pipeline Easement Assignment: The assignment of pipeline easements
attached hereto as Exhibit G.
Production Burdens: All royalty interests, overriding royalty interests,
production payments, net profit interests or other similar non-operating
interests that constitute a burden on, and are measured by or are payable out
of, the production of Hydrocarbons or the proceeds realized from the sale or
other disposition thereof, other than Taxes and assessments of Governmental
Authorities; which interests in the aggregate equals twenty (20%) percent of the
Hydrocarbons.
Properties: The Interests and the following assets:
(i) All of Seller's right, title and interest in, to and under, or
derived from the Units and all unitization, communitization and pooling
agreements and orders creating same;
(ii) all of Seller's right in the easements, rights of way, permits,
licenses, servitudes and other interests appertaining to the Interests;
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(iii) all Hydrocarbon production attributable to the Interests and
proceeds from the sale of such Hydrocarbon production accruing after the
Effective Time, and all inventories of Hydrocarbons and accounts receivable in
connection with the sale of Hydrocarbons from the Interests in existence at the
Effective Time; (iv) (v) the Information, Pipelines, Personal Property and
Equipment, and Contracts; (vi)
(v) all Seller's membership interest in Xxxxxx Pipeline & Processing
Co., LLC; and
(vi) all property and rights incident or attributable to any of the
foregoing and necessary to continue operation of the Leases and Lands in
substantially the same manner as they have been operated by Seller, including,
but not limited to, leases acquired by Xxxxxx covering lands to be used as
locations for Personal Property and Equipment described on Schedule 2.01-1. The
Properties shall not include the Excluded Properties described on Exhibit F.
Purchase Price: The consideration paid by Buyer to Seller for the transfer
of the Properties, which is equal to the Base Purchase Price with the
adjustments provided for in Article 3.
Taxes: All taxes, assessments. duties, fees, levies or other governmental
charges which are based upon, measured by or imposed with respect to the
Properties, the production of Hydrocarbons therefrom or the receipt of proceeds
therefrom, together with any interest thereon, any penalties, additions to tax
or additional amounts with respect thereto and any interest in respect to such
penalties, additions or additional amounts, including, without limitation,
applicable franchise taxes, federal and state income taxes, state and municipal
sales and use taxes, stamp, excise and excess profit taxes, federal unemployment
and old age insurance taxes, property taxes, ad valorem taxes, production taxes
and severance taxes.
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Units: All pooled and communitized areas including any of the Leases or
any portion thereof as described on Schedule 2.01-1. covering or relating to the
Antrim Formation. Xxxxx: As the context suggests, all xxxxx (or the undivided
interest therein) located on the Units that produce or are capable of producing
Hydrocarbons. Xxxxx are listed on Schedule 2.01-1.
Working Interest: The interest of Seller (expressed as a percentage) on a
Unit by Unit basis before giving effect to any applicable Production Burdens,
which percentage is the percentage of all costs and expenses associated with the
exploration, development and operation of the Properties which are required to
be borne by the Seller.
ARTICLE 2.
Purchase and Sale
Section 2.01. Purchase and Sale. Subject to the terms of this Agreement
and effective as of the Effective Time, Seller agrees to sell and convey the
Properties to Buyer, and Buyer agrees to purchase the Properties for the
Purchase Price. Notwithstanding the sale and purchase being effective as of the
Effective Time, the transfer of the Properties shall not occur until the Closing
Date.
Section 2.02. Liabilities. Buyer is not assuming, and upon Closing will
not assume or be responsible for, any liabilities, obligations or duties of
Seller, whether in existence at Closing or arising thereafter, excepting: (i)
the liabilities, obligations and duties described on Schedule 2.02; (ii)
liabilities accounted for on Exhibit C as costs and expenses incurred on or
before October 1, 2005, or accounted for in making the Post-Closing Adjustments
under Section 3.03 below; and (iii) all liabilities, obligations and duties
relating to the Properties which accrue or relate to periods of time after
Closing.
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ARTICLE 3.
Purchase Price
Section 3.01. Payments of Purchase Price. The Purchase Price for the
Properties shall be payable as follows: (a) Simultaneous with the execution of
this Agreement, Buyer shall pay to Seller the sum of One Million and NO/100
Dollars ($1,000,000.00). Said sum shall be applied to the Purchase Price at
Closing. On February 1, 2006, if Closing has not yet occurred, Buyer shall pay
Seller an additional Five Hundred Thousand and NO/100 Dollars ($500,000.00). On
February 17, 2006, if Closing has not yet occurred, Buyer shall pay Seller an
additional Five Hundred Thousand and NO/100 Dollars ($500,000.00). All such
additional payments to Seller from Buyer shall be applied to the Purchase Price
at Closing. In the event the transactions contemplated herein fail to close by
February 28, 2006, said amounts paid by Buyer to Seller as described within this
paragraph above shall not be refundable and shall be in full settlement of any
and all claims Seller may have against Buyer for failure to close; Seller, at
its option, may terminate this Agreement and the AMI shall remain effective.
However, in the event Buyer fails to close due to a material breach by Seller of
any provision contained in the Agreement, said sum shall be refunded to Buyer. A
material breach shall be any breach(s) that reduces the value of the Properties
by a total of ten percent (10%) or more of the Purchase Price; (b) the Closing
Payment shall be payable on the Closing Date; and (c) the post-closing
adjustments shall be paid by the owing party as provided in Section 3.03, below.
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Section 3.02. Purchase Price Adjustments. The Purchase Price to be paid by
Buyer to Seller for the Properties shall be the Base Purchase Price adjusted as
follows:
(a) Upward Adjustments. The Base Purchase Price shall be adjusted
upward by (i) the amount of all capital expenditures and lease operating
expenses paid by Seller relating to the Properties for the period between
October 1, 2005 and Closing, however in the event Closing takes place after
January 31, 2006, lease operating expenses for October 2005 relating to the
Properties shall not be included as an Upward Adjustment (ii) prepaid plugging
and abandonment deposits held by Buyer relating to Seller's Interests; (iii)
Pending Leases that have been executed and received prior to the final
accounting for the Post-Closing Adjustments and (iv) any outstanding accounts
receivable balances due Seller from Buyer; (v) interest expense on Seller's
outstanding debt with Xxxxx Fargo Energy Capital for the period between January
17, 2006 and Closing.
(b) Downward Adjustments. The Base Purchase Price shall be adjusted
downward by the amount of (i) all net production revenues received by Seller
attributable to Seller's Interests in the Properties for periods between October
1, 2005 and Closing, however in the event Closing takes place after January 31,
2006, the adjustment period shall be for periods between November 1, 2005 and
Closing; (ii) any outstanding accounts receivable balances due Buyer from
Seller; (iii) any agreed upon reduction in the Purchase Price resulting from
good faith negotiations between Buyer and Seller of defect in Good and
Marketable Title as to the Properties which had been identified by Buyer on or
before December 15, 2005 and (iv) any cash advance, if any, by Buyer to Seller
to cover Buyers pre-Closing share of capital expenditures and lease operating
expenses relating to projects and properties in which Buyer has interests
pursuant to its exploration and participation agreements with Seller, that has
not been applied, or is not to be applied at the Closing, by Seller to the
payment of such share of capital expenditures and lease operating expenses,
including prepaid plugging and abandonment charges held by Seller not relating
to Seller's Interests.
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(c) Buyer and Seller recognize that Xxxxxx Pipeline & Processing
Co., LLC ("HPPC"), of which Buyer and Seller's ownership constitute a majority
interest, is the owner of the Aspen and Birch pipelines and certain processing
equipment located at the Xxxxxx 34 processing facility, collectively the "HPPC
Facility." HPPC has identified certain repairs and corrections needed with
respect to the HPPC Facility as of October 1, 2005, for which there will be a
reduction of the Purchase Price in the amount of Ten Thousand and NO/100 Dollars
($10,000.00), which amount shall represent the Parties' agreement as to Seller's
total and final proportionate share of such repairs and corrections.
(d) Buyer and Seller recognize that HPPC and Buyer and Seller have
been constructing the Chestnut, Dogwood, Elm and Fig pipelines. Buyer agrees to
reimburse Seller for expenditures paid by Seller, without regard to when said
expenditures were paid by Seller, whether paid; (i) directly by Seller, (ii)
through HPPC or (iii) directly to Buyer, in connection with said pipelines; this
would include any agreed upon adjustments in connection with xxxxxxxx associated
with the Dogwood pipeline. Seller shall then relinquish to Buyer, at Closing,
all of its interest in HPPC and said pipelines.
(e) At Closing, Buyer shall also receive a credit against the
Purchase Price for the payment to Seller made pursuant to Article 3.01 (a)
above.
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Section 3.03. Post-Closing Adjustments of Purchase Price. Sixty (60) days
after Closing, Seller shall prepare and submit to Buyer a proposed accounting
showing all adjustments to the Purchase Price, calculated in accord with Section
3.02 and consistent with past practice, for post-October 1, 2005 production
revenues, capital expenditures and lease operating expenses relating to Seller's
Interests ("Post-Closing Adjustments") not made at Closing of which it is then
aware. The accounting of the Post-Closing Adjustments will be reviewed by Buyer
and Buyer shall notice Seller if it is taking any exception to the any of the
Post-Closing Adjustments calculated by Seller within ten (10) days of receiving
the accounting. Unless Seller is otherwise notified by Buyer within the 10 day
notice period, the Post Closing Adjustments will be final. Payments of each of
the Post-Closing Adjustments shall be made by the owing party in immediately
available funds within five (5) days after the adjustment has become final. If
the Parties cannot reach agreement with regard to any accounting required by
this paragraph, the accounting adjustment shall become final as to undisputed
matters and the disputed matters shall be submitted for resolution to
arbitration under Article 10 of this Agreement.
ARTICLE 4.
Representations and Warranties
Section 4.01. Representations and Warranties of Seller. Subject to
Articles 4.03 and 4.04, Seller represents and warrants to Buyer that, as of the
Effective Time and as of the Closing Date:
(a) Organization and Good Standing. NorAm Energy, LLC, is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Michigan.
(b) This Paragraph Intentionally Omitted.
(c) This Paragraph Intentionally Omitted.
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(d) Organization and Good Standing. Provins Family, LLC, is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of Michigan.
(e) Organization and Good Standing. O.I.L. Energy Corp., is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Michigan.
(f) Organization and Good Standing. Xxxxxx Pipeline & Processing
Co., LLC, is a limited liability company duly organized, validly existing and in
good standing under the laws of the State of Michigan.
(g) Authority and Authorization. Seller has all requisite corporate
power and authority to carry on its business as presently conducted, to execute
and deliver the Operative Documents, to consummate the transactions contemplated
hereby and to perform its obligations under the Operative Documents. The
execution and delivery of the Operative Documents and the performance of the
obligations of the Seller contemplated thereby have been duly authorized by the
Seller. All documents and instruments required hereunder to he executed and
delivered by the Seller on or before the Closing Date have been duly executed
and delivered. The Operative Documents to which it is a party and such other
documents and instruments constitute legal, valid and binding obligations of
Seller enforceable against it in accordance with their terms, except as such
enforceability may be limited by bankruptcy, insolvency or other laws relating
to or affecting the enforcement of creditors rights generally and general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). No further corporate, partnership or
individual action is necessary on the part of Seller to authorize the execution
and delivery of the Operative Documents or the performance by Seller of its
obligations as contemplated by the Operative Documents.
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(h) No Violations. The Operative Documents to which it is a party
and the execution and delivery thereof by Seller do not, and the fulfillment and
compliance with the terms and conditions thereof and the consummation of the
transactions contemplated thereby will not:
(i) conflict with, or require the consent of any Person under
any of the terms, conditions or provisions of, the certificates of
incorporation, organization, operating agreements or bylaws of Seller or other
governing documents of Seller;
(ii) violate, conflict with or cause a default or breach with
respect to any provision of, or, except as set forth on Schedule 4.01(h)(ii),
require any filing, consent, authorization or approval under, any agreement
relating to the Properties to which Seller is party or by which Seller is bound
or under any Law applicable to or binding upon Seller or the Properties
(assuming receipt of all routine governmental consents typically received after
consummation of transactions of the nature contemplated by this Agreement); or
(iii) result in the creation or imposition of any Encumbrance
on the Properties other than a Permitted Encumbrance.
(i) Absence of Certain Changes. Except as described on Schedule
4.01(i) since the Effective Time, none of the following has occurred, nor has
Seller agreed or committed to do any of the following:
(i) any damage, destruction or loss to or of the Properties
whether or not covered by insurance, that has had, or would reasonably be
expected to have, a material adverse effect upon the value or operations of the
Properties;
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(ii) any sale, lease or other disposition of Properties other
than sales of Hydrocarbons in the ordinary course in business;
(iii) creation of any Encumbrance other than Permitted
Encumbrances pertaining to any of the Properties;
(iv) any amendment, waiver, or termination of any material
provision of any Contract, or any execution of a material new Contract;
(v) except as disclosed to the Buyer prior to the Closing and
included in the calculation of the Purchase Price, any agreement to expend more
than $25,000 with respect to the Properties.
(j) Payment of Taxes. Seller has paid in full all Taxes that have
become due through the Closing Date relating to the Properties. All tax or
information returns, statements and reports required to be filed by Seller as to
the Properties by applicable Law have been timely filed, and to the actual
knowledge of Seller such returns and reports are true, correct and complete and
present accurately the information required to be shown therein. There are no
assessed tax deficiencies against Seller as to the Properties, and there are no
proposed or threatened deficiencies or assessments with respect to Seller as to
the Properties. Except as disclosed on Schedule 4.010), there are no audits of
Seller as to the Properties by any Governmental Authority in progress or no tax
liens on or with respect to the Properties.
(k) Information. Taken as a whole, all Information supplied to Buyer
by Seller or its representatives (i) is complete and accurate, including,
without limitation, as to production history, Working Interests, Net Revenue
Interests, geological and engineering information, and prices received for
Hydrocarbon production dedicated to existing Gas Purchase Agreements, if any,
and (ii) does not contain any untrue statement of a material fact or does not
omit to state a material fact necessary to make the statements contained therein
not misleading.
17
(l) Seller's Encumbrances. Schedule 4.01(1) describes all such
Encumbrances.
(m) Title to Properties. Seller has, and upon consummation of the
transactions contemplated hereby, Buyer will have Good and Marketable Title to
the Properties.
(n) Validity of Leases and Contracts. Schedule 2.01-1 lists all
Leases and all Contracts. All royalties, rentals and other payments due under
the Leases and the Contracts have been paid or appropriately suspended and all
such Leases (with respect to royalties, rentals and other payments) and
Contracts are in full force and effect. Except as disclosed on Schedule 4.01(n),
Seller has not been advised by any lessor under any Lease or by any other party
to a Contract, of a breach or default by Seller under any such Lease or
Contract, which claim of breach or default has not been resolved. Except for
executory obligations under Leases or Contracts, to the actual knowledge of
Seller's no event has occurred which constitutes, or which with the giving of
notice or the passage of time or both would constitute, an event of default,
violation or breach under any Lease or Contract. Seller has paid all bonus,
rentals, shut-in royalties, minimum royalties and other payments that are
necessary to maintain in force its rights in and to the Interests, and have
timely paid all costs and expenses incurred by it in connection with the
Interests.
(o) Additional Drilling Obligations. Except as disclosed on Schedule
4.01(o) with respect to the Interests, Seller is not obligated to drill
additional xxxxx or conduct other material development operations in order to
earn or to continue to hold all or any portion of the Interests, and Seller has
not been advised by a lessor of any requirements or demands to drill additional
xxxxx on any of the Land, which requirements and demands have not been resolved.
18
(p) Prepayment for Production and Excess Production. Except as
disclosed on Schedule 4.01(p), Seller is not obligated by virtue of a prepayment
arrangement, a take or pay arrangement, a production payment or any other
arrangement to deliver Hydrocarbons produced from the Interests at some future
time without then or thereafter receiving full payment therefore, Except as
reflected on Exhibit "C", Seller had not, as of the Effective Time, produced
pursuant to a gas balancing agreement or the gas balancing provisions of any
Contracts, more gas than the gas actually attributable to the Interests.
(q) Rights to Production. No Interests is subject to a sales
contract and no person has any call upon, or option to purchase or similar
rights with respect to the Properties or to the production therefrom except; (i)
as disclosed on Schedule 4.01(q); (ii) the sales contract with CIMA Energy and
(iii) the Treating and Dedication Agreements with DTE Pipeline & Processing for
C02 treating for a portion of the Properties.
(r) Broker's Fee. Seller has not incurred any liability, contingent
or otherwise, for brokers or finders fees relating to the transactions
contemplated by this Agreement for which Buyer has or shall have any
responsibility whatsoever.
(s) Legal Proceedings. Except as set forth on Schedule 4.01(s),
there is no suit, action or other proceeding pending or threatened against
Seller or the Properties that would adversely affect the Properties. Except as
set forth on Schedule 4.01(s), Seller is not a party or subject to any
injunction, judgment, order, notice of violation or decree, whether or not still
subject to appeal, of any Governmental Authority that would adversely affect the
Properties.
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(t) Seller's Receipt of Payments for Production. Seller is currently
receiving from all first purchasers of production from the Units not less than
the net revenues described in Schedule 2.01-1 without suspense or any indemnity
other than; (i) related to its financing with Xxxxx Fargo Energy Capital and
(ii) the normal division order warranty of title. Seller is not delinquent with
respect to its obligation to bear costs and expenses relating to the development
of and operations on the Interests.
(u) Compliance with Law. Seller is in compliance with all applicable
Laws with respect to the ownership, development and operation of the Properties
by Seller. Seller has obtained, or applied for all consents, approvals,
franchises, certificates, licenses, permits and other authorizations of
Governmental Authorities required to own, develop or operate the Properties, and
the Properties have been operated in compliance with all such consents,
approvals, franchises, certificates, licenses, permits and other authorizations.
(v) Environmental Compliance. As of the Closing Date, (i) except as
set forth in Schedule 5.01(e) the Properties are not in violation of any Law
pertaining to the environment, and Seller has not been notified and is not aware
of any existing, pending, or threatened investigation or inquiry by any
Governmental Authority pursuant to any Law pertaining to the environment, and is
not subject to any remedial obligations under Law pertaining to the environment;
(ii) the Properties are not subject to any private or governmental lien, and
Seller has not received and is not aware of any judicial or administrative
notice or action, in each case relating to Hazardous Substances or environmental
liabilities or the violation of any Laws pertaining to the environment; (iii)
except as set forth in Schedule 5.01(e) underground storage tanks are not and
have not been located on or under the Land; (iv) except as set forth in Schedule
5.01(e), no Hazardous Substances are located on or have been generated, treated,
stored, processed, or disposed of on or released or discharged from (including
discharges, whether direct, indirect, purposeful dumps or accidental spills,
into surface or subsurface waters and including any ground water contamination)
the Properties contrary to Law pertaining to the environment which would have,
individually or in the aggregate, an adverse effect on the value, ownership, or
operation of the Properties; (v) Seller's current use of the Properties complies
with all applicable Laws pertaining to the environment; and (vi) Seller has
obtained all permits or other authorizations required by any Governmental
Authority to use, occupy or operate the Properties by reason of any applicable
Law pertaining to the environment.
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(w) No Permits Required For Water Discharge. Except for the
injection well permits described on Schedule 4.01(w), no permits are required to
be obtained by Seller to discharge water with respect to the operation of the
Properties.
(x) Pipelines. Seller has acquired all easements, rights of way,
licenses, approvals, and consents from appropriate property owners and all
permits, licenses, approvals, and consents from appropriate Governmental
Authorities necessary to construct, operate, maintain and repair the Pipelines
in compliance with all applicable Laws, and Seller is in compliance with all
such easements, rights of way, permits, licenses, approvals, consents and Laws.
(y) Suitability of Personal Property and Equipment. All Personal
Property and Equipment material to the operation of the Properties is
transferred to the Buyer as is, where is, as of the Closing Date.
(z) Operating Agreements. All operating agreements related to the
operation of the Interests are listed on Schedule 2.01-1.
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(aa) Plugging and Abandonment of Xxxxx. There are no Xxxxx operated
by Seller and located on the Land that (i) Seller is obligated by Law or
contract to plug and abandon at this time; or (ii) have been plugged and
abandoned but have not been plugged in accordance with all applicable
requirements of each Governmental Authority having jurisdiction over the
Interests.
(bb) Insurance. Schedule 4.01 (bb) hereto sets forth a list of all
material insurance policies, other than directors and officers liability
policies, or programs of self-insurance maintained by Seller, by which any of
the Properties are covered against present losses, all of which are now in full
force and effect. To the extent that any such policy is owned or held by or
provides coverage for Seller, such policy or coverage may be terminated by
Seller at any time after the Closing; provided, however, Seller agrees to
maintain such policies (or policies substantially similar) in full force and
effect at all times while Seller continues to operate the Properties and Buyer
agrees to fully reimburse Seller for the cost associated with maintaining said
insurance for all periods of time subsequent to the Effective Date through the
date Buyer commences operation of the properties.
(cc) Employment Liability. Buyer will not incur any liability to any
or all of the employees of Seller as a result of transactions contemplated by
this Agreement.
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(dd) Preferential Purchase Rights and Consents. All preferential
purchase rights and consents to assignment encumbering the Interests are
identified on Schedule 4.01(dd).
(ee) Absence of Undisclosed Liabilities. Except for Permitted
Encumbrances and the liabilities set forth on Schedules 4.01(s) and 4.01(dd),
there are no liabilities or non-executory obligations of any nature, whether
accrued, absolute, contingent or otherwise, adversely affecting the Properties
or the execution, delivery or performance of this Agreement by Seller.
(ff) Partnership Property. Other than disclosed on Schedule 4.01
(ff), none of the Properties constitutes either an interest in, or property of,
an unincorporated organization or association that is subject to taxation under
the provisions of subchapter K of chapter 1 of Subtitle A of the Code.
(gg) Application of Purchase Consideration. Seller represents to
Buyer that the Closing Payment paid by Buyer pursuant to this Agreement will be
applied to the extent necessary to pay Sellers outstanding indebtedness as shown
on Schedule 4,01(gg).
Section 4.02. Representations and Warranties of Buyer. Subject to Articles
4.03 and 4.04, Buyer represents and warranties to Seller that:
(a) Organization and Good Standing. Buyer is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Michigan.
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(b) Authority and Authorization. Buyer has all requisite power and
authority to carry on its business as presently conducted, to execute and
deliver the Operative Documents to which it is a party, to consummate the
transactions contemplated thereby, and to perform its obligations under the
Operative Documents to which it is a party. The execution and delivery of the
Operative Documents to which it is a party and the performance of the
obligations of Buyer contemplated thereby have been duly authorized by Buyer.
All documents and instruments required hereunder to be executed and delivered by
Buyer on or before the Closing Date have been duly executed and delivered. The
Operative Documents to which it is a party and such other documents and
instruments constitute legal, valid and binding obligations of Buyer enforceable
against Buyer in accordance with their terms, except as such enforceability may
be limited by bankruptcy, insolvency or other laws relating to or affecting the
enforcement of creditors' rights generally and general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). No further corporate action is necessary on the part of Buyer
to authorize the performance by Buyer of its obligations as contemplated by the
Operative Documents to which it is a party.
(c) No Violations. The Operative Documents to which it is a party,
and the execution and delivery thereof by the Buyer does not, and the
fulfillment and compliance with the terms and conditions thereof and the
consummation of the transactions contemplated thereby will not:
(i) conflict with, or require the consent of any Person under,
any of the terms, conditions or provisions of Buyer's articles of organization,
operating agreement, or other governing documents; or
(ii) violate, conflict with or cause a default or breach with
respect to any provision of, or require any filing, consent, authorization or
approval under, any agreement to which Buyer is a party or by which Buyer is
bound or under any Law applicable to or binding upon Buyer (assuming receipt of
all routine governmental consents typically received after consummation of
transactions of the nature contemplated by this Agreement).
24
(d) Brokers' Fees. Buyer has incurred no liability, contingent or
otherwise, for brokers or finders fees relating to the transactions contemplated
by this Agreement for which Seller has or shall have any responsibility
whatsoever.
Section 4.03. As is/Where is. Seller and buyer have jointly owned,
developed and operated the Properties and as such Buyer and Seller agree that
they are equally familiar with the Properties and therefore Buyer is acquiring
the Properties "as is and where is."
Section 4.04. Actual Knowledge. All representations and warranties of the
Seller and Buyer are based solely on actual knowledge of either parry hereto.
ARTICLE 5.
Covenants
Section 5.01. Covenants and Agreements of Seller. Seller hereby covenants
and agrees with Buyer that:
(a) Title Information. At or before the Closing, Seller shall
deliver to Buyer copies of any and all existing title opinions and other title
information available to Seller and not previously disclosed to Seller relating
to the Properties. Seller shall use reasonable efforts to obtain any other title
information from third parties as may reasonably be requested by Buyer.
(b) Confidentiality. The Parties shall exercise reasonable efforts
in safeguarding and keeping confidential all Information except as required by
Law or as to records already a part of the public domain.
25
(c) Consents. As soon as practicable after execution of this
Agreement, Seller shall obtain all required consents and waivers of all
preferential purchase rights as set forth in Schedules 4.01 (h)(ii) and
4.01(dd). Until such consent or waiver is obtained, Seller shall hold any such
Lease or Contract in trust for Buyer and shall otherwise take such actions as
are required to give to the Buyer the economic benefits of the ownership of such
Lease or Contract. Seller shall cooperate with Buyer in implementing any
arrangement which Buyer shall consider reasonably designed to provide Buyer such
economic benefits. In the event any such consent or waiver is not obtained prior
to 45 days after the Closing Date, the parties will attempt in good faith to
structure and agree upon a conveyance of such economic benefits to Buyer
notwithstanding the failure of such consent or waiver. If the Parties cannot
agree upon the form of such conveyance within such time period, the dispute
shall be submitted to arbitration under Article 10 hereof and the arbitrator
shall select the more reasonable of the competing proposals of the Parties.
(d) Operation of Properties. Seller shall take such steps as would a
reasonably prudent operator to, (i) continue the routine operation of the
Properties in the ordinary course of business; (ii) operate the Properties in
conformity, in all material respects, with all applicable laws, and all
applicable rules, regulations and orders of all governmental agencies having
jurisdiction, and in conformity with all oil, gas and/or mineral leases and in
conformity, in all material respects, with all contracts; (iii) fulfill all
obligations under such Leases and contracts, including without limitation all
obligations to make payments thereunder, and all obligations under such laws,
rules, regulations and orders; and (iv) maintain the machinery, improvements,
equipment and other personal property and fixtures forming a part of the
Properties in at least as good condition as it is on the date of this Agreement,
ordinary wear and tear excepted. Except as otherwise provided in this section,
Seller shall not expend any funds, or make any commitments to expend funds
(including, without limitation, entering into new agreements which would
obligate Buyer to expend funds), or otherwise incur any other obligations or
liabilities, in connection with the ownership or operation of the Properties,
other than routine expenses incurred in the normal operation of the existing
Xxxxx on the Properties and excepting expending funds pursuant to AFEs approved
by Buyer. Seller shall not, without the prior written consent of Buyer, abandon,
or consent to the abandonment of, any Xxxxx, or take any other steps which
represent a substantial departure from the current operational status of the
Properties. Specifically; in connection with (but not in limitation of) the
foregoing, Seller shall not propose the drilling of any additional xxxxx, or
propose the deepening, plugging back or reworking of any existing xxxxx, or
propose the conducting of any other operations which require consent under the
applicable operating agreement, or propose the conducting of any other
operations other than the normal operation of the Xxxxx, or propose the
abandonment of any Xxxxx; Seller shall advise Buyer by giving written notice
(the "3rd Party Proposal Notice") of any such proposals made by third parties
(and will respond to each such proposal made by a third party in the manner
requested in writing by Buyer within twenty (20) days of Buyer's receipt of such
3rd Party Proposal Notice). If Buyer does not so timely inform Seller of Buyer's
response to any such proposal, Seller may respond to such proposal in the same
manner as Seller would respond if such action were solely for its own account.
Seller shall not sell, transfer or abandon any portion of the Properties, other
than items of materials, supplies, machinery, equipment, improvements or other
personal property or fixtures forming a part of the Properties, and then only if
the same are replaced with items of equal suitability and value free of liens
and security interests, which replacement item will then, for the purposes of
this Agreement, become part of the Properties. Seller shall not, without Buyer's
consent, release, permit to terminate, or modify or reduce its rights under, any
oil, gas and/or mineral lease forming a part of the Properties, or any other
contract, or enter into any new agreements that have any impact on the
Properties. Seller will advise Buyer of any requests or proposals for any such
modifications, or any such new agreements, which Seller will not agree to
without Buyer's consent. Seller will cause all expenses (including, without
limitation, all bills for labor, materials and supplies used or furnished for
use in connection with the Property and all severance, production and similar
taxes) and liabilities relating to the ownership or operation of the Properties,
prior to the date of Closing to be promptly paid and discharged.
26
(e) Environmental. The cost and expense of curative actions set
forth on Schedule 5.01(e), not borne by third parties, are to be paid by Buyer.
Section 5.02. Covenant and Agreement of Buyer. Buyer covenants and agrees
with Seller that Buyer shall exercise all due diligence in such manner as shall
result in safeguarding and maintaining the confidentiality of all financial
information pertaining to Seller made available to, reviewed by or in the
possession of Buyer, and Buyer shall not disclose such confidential financial
information to any third party without Seller's prior written consent except as
required by law and except to the extent such financial information may already
be in the public domain.
Section 5.03. Covenant and Agreement of Seller and Buyer: Price
Allocation. Attached hereto as Schedule 5.03 is an allocation statement, agreed
between Buyer and Seller, setting forth an allocation of the Purchase Price
among each category of the assets comprising the Properties. In the event that
(i) the Parties allocate the Purchase Price among categories of assets
comprising the Properties or (ii) the Purchase Price is adjusted following the
Closing Date, Seller and Buyer shall adjust the allocations reflected in
Schedule 5.03 to reflect such allocations of Purchase Price respecting each
category of asset as Buyer and Seller shall agree to reflect the Purchase Price
adjustments. The allocations described in this Section 5.03 will be used by
Seller and Buyer as the basis for reporting asset values and other items for
purposes of all required tax or information returns and reports, including
Federal Form 8594. Except with respect to those allocations that are subject to
a pending dispute, Seller and Buyer agree not to assert, in connection with any
tax reporting or tax audit, any asset values or other items inconsistent with
either (i) the allocations set forth on Schedule 5.03, as adjusted, or (ii) the
decision of the arbitrators made in accordance with Article 10. If Seller and
Buyer have not agreed upon allocations for each asset category on or before the
Closing Date, the allocations that remain in dispute shall be submitted for
review and resolution in accordance with Article 10.
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ARTICLE 6.
Title Matters
Section 6.01. Additional Title Opinions. In addition to the Information to
be conveyed and delivered to Buyer upon execution of this Agreement and as
promptly as practical thereafter as provided in Section 5.01 (a) above, Seller
shall after the Closing Date cooperate with Buyer to cause division order title
opinions covering the Units included in the Properties and identified in
Schedule 6.01(a) to be prepared and delivered to Buyer at Buyer's sole cost and
expense.
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ARTICLE 7.
Conditions to Closing
Section 7.01. Conditions to Obligations of Seller. The obligation of
Seller to consummate the transactions contemplated by this Agreement are
subject, at the option of Seller, to the satisfaction or waiver of the following
conditions:
(a) Validity of Representations. All representations and warranties
of Buyer contained in this Agreement shall be true and correct as of the Closing
Date, and Buyer shall have performed and satisfied all covenants and agreements
required by this Agreement to be performed and satisfied by Buyer on or prior to
the Closing Date.
(b) Opinion of Counsel. Seller shall have received an opinion, dated
as of the Closing Date, from Buyer's counsel, in form and substance as
substantially set forth in Exhibit H hereto.
(c) Delivery of Documents. Buyer shall have duly executed and
delivered to Seller at the Closing, this Agreement and such other documents as
are contemplated to be delivered by Buyer to Seller at the Closing pursuant to
this Agreement.
(d) Payment. Buyer shall have delivered the Closing Payment at the
Closing, as provided in Section 8.03(b), below.
Section 7.02. Conditions to Obligations of Buyer. The obligations of Buyer
to consummate the transactions contemplated by this Agreement are subject at the
option of Buyer, to the satisfaction or waiver of the following conditions:
(a) Validity of Representations. All representations and warranties
of Seller contained in this Agreement shall be true and correct, and Seller
shall have performed and satisfied in all material respects all covenants and
agreements required by this Agreement to be performed and satisfied by Seller on
or prior to the Closing Date.
29
(b) Opinion of Counsel. Buyer shall have received an opinion dated
as of the Closing Date from Seller's counsel, in form and substance as set forth
in Exhibit I hereto.
(c) Encumbrances. Buyer shall have received evidence satisfactory
that all Seller's Encumbrances, except Permitted Encumbrances, have been
released and that, except as described in Schedule 4.01(s), the Properties are
not subject to, or involved in any lawsuits, disputes or controversies that
would have a reasonable possibility of having an adverse effect on their
ownership or value.
(d) Delivery of Documents. Seller has duly executed and delivered to
Buyer at Closing, this Agreement, the Conveyance, the Assignment, the Xxxx of
Sale, the Pipeline Easement Assignment and such other documents as are
contemplated to be delivered by Seller to Buyer at the Closing pursuant to this
Agreement.
Section 7.03. Conditions to Obligations of Seller and Buyer. The
obligations of Seller and Buyer to consummate the transactions contemplated by
this Agreement are subject, at the option of each party, to the satisfaction or
waiver by each party of the following conditions:
(a) Prohibition of Transactions. No law or similar action shall
exist or shall have been adopted or taken, and no judicial or administrative
decision shall have been entered (whether on a preliminary or final basis), that
would prohibit, restrict or delay the consummation of the transactions
contemplated by this Agreement or make illegal the payments due hereunder.
30
(b) Consents of Third Parties. Except as set forth on Schedules 4.01
(h)(ii) and 4.01(dd), all necessary consents, permissions, novations and
approvals by third parties or governmental authorities in connection with the
sale and transfer of the Interests and in connection with the transfer of all
permits and licenses necessary for the operation of the Interests and all
necessary waivers of preferential and similar rights and third parties to
purchase any portion of the Interests shall have been obtained on or prior to
the Closing Date (other than routine governmental consents typically received
after consummation of transactions of the nature contemplated by this
Agreement). As indicated on Schedule 4.01(dd), the State of Michigan must
consent to any assignment of oil and gas leases of which it is the lessor. The
assignment of State leases must be made using an approved State lease assignment
form. The State of Michigan leases to be acquired by Buyer from Seller are
identified on Schedule 2.01-1 and by Exhibit A to the Assignment. Seller shall
prepare assignments of such leases to Buyer covering all of Seller's rights in
and to the Antrim Formation with Seller retaining its interest in and to the
Deep Formations, using the required State lease assignment form.
(c) With respect to State of Michigan oil and gas leases, the
necessary MDNR forms will be executed to constitute Buyer as the "responsible
lessee" under all State of Michigan leases originally taken in the name of
Seller, or in which Seller is otherwise listed on the MDNR's records as
"responsible lessee."
ARTICLE 8.
Closing
Section 8.01. Date of Closing. Subject to the conditions stated in this
Agreement, the Closing shall be held on or before February 28, 2006, or at such
other later time as Buyer and Seller may agree upon. The date Closing actually
occurs is herein called the "Closing Date".
31
Section 8.02. Place for Closing. The Closing shall take place at the
offices of Brandt, Fisher, Xxxxxx & Xxx, P.C., attorneys at law, located in
Traverse City, Michigan.
Section 8.03. Closing Obligations. At the Closing, the following events
shall occur, each being a condition precedent to the others and each being
deemed to have occurred simultaneously with the others.
(a) Execution and Delivery of Documents. Seller, and Buyer as
indicated, shall, as appropriate, execute, acknowledge and/or deliver the
following:
(i) The Assignment in form and substance as set forth in
Exhibit B hereto (in sufficient counterparts to facilitate recording) conveying
the Interests to Buyer (or to such Persons, and in such percentages. as Buyer
may direct.)
(ii) A Xxxx of Sale in form and substance as set forth in
Exhibit D hereto, conveying the Personal Property and Equipment, Information,
and Contracts to Buyer.
(iii) A Conveyance in form and substance as set forth in
Exhibit E, hereto, conveying the fee title interests included in the Properties
to Buyer.
(iv) A Pipeline Easement Assignment as set forth in Exhibit G,
conveying all existing easements for the Pipeline from Seller to Buyer.
(v) Evidence of the discharge of all Seller's Encumbrances,
all consents required with respect to the transfer of the Properties other than
routine governmental consents typically received after consummation of
transactions of the nature contemplated by this Agreement and waivers of
preferential purchase rights other than as set forth on Schedules 4.01(h)(ii)
and 4.01(dd).
32
(vi) Certificate of Non-foreign Status executed by each Seller
in the form set forth in Exhibit J.
(b) Delivery of Closing Payment. Buyer shall deliver the Closing
Payment by wire transfer of immediately available funds as directed by Seller,
pursuant to disbursement instructions to be provided to Buyer not less than 24
hours prior to Closing.
(c) Possession of Interests. Seller shall deliver to Buyer
possession of the Properties; provided however, Seller may continue to operate
the Properties on an interim basis as provided in Section 9.01 below.
(d) Files. Seller shall deliver to Buyer all Information relating to
the Properties not previously delivered to Buyer.
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ARTICLE 9.
Obligations after Closing
Section 9.01. Operation of Properties. In lieu of negotiating a contract
operating arrangement between Seller, as operator of record, and Buyer, Seller
shall continue until February 28, 2006 or until MDEQ and EPA transfer of
operator approvals have been received, whichever is later, to act as operator of
the Properties as provided in Section 5.01(d) above, under the terms of the
operating agreements and other agreements relating thereto under which it has
been assigned that responsibility in exchange for the fees described on Schedule
9.01. Seller agrees to cooperate fully in order to facilitate an orderly and
expeditious transfer of operations and disbursement responsibilities with
respect to the Properties. Specifically in connection with, but not in
limitation of, the foregoing, Seller shall, as soon as practicable after the
execution of this Agreement, begin efforts to obtain (prior to Closing, if
possible) consent from all non-operators for the Buyer or its designee to become
the operator of each Property if and when (or as soon as practicable after)
Closing occurs and shall continue to collect proceeds of production during the
interim period and shall be responsible for making disbursements, in accordance
with its normal procedures (and at normal times) of such proceeds of production
so collected to the parties entitled to same, with any proceeds of production
thereafter collected by Seller to be promptly forwarded to Buyer, who shall
thereafter account for same to the parties entitled thereto. Seller shall
deliver to Buyer (i) as promptly as possible after Seller is in receipt of a
copy of all approved transfer of operator notices from MDEQ and EPA, its Files
for each Property (which shall include the name, social security number and
applicable share of proceeds of production for each party to whom Seller is
disbursing proceeds of production with respect to such property), (ii) as
promptly as possible thereafter, its Files and suspense fund monies for all
parties for whom it is holding proceeds of production in suspense, and all
supporting material. Revenues have been or will be disbursed by Seller following
its customary procedure relating to all production from the Units through the
December 2005 production, which will be paid on or before the last week of
February 2006. As to the gas sales receipts for production commencing for months
after November 2005, at the request of Buyer, Seller shall authorize the first
purchaser thereof to pay Buyer directly for Buyer's net revenue interest share
of the proceeds with the remainder to be paid to Seller for disbursement
following its customary procedures to the parties to whom payments are owed. As
used herein, the term "Buyer's share" shall mean 100% of the proceeds of
production for its Interests less (i) severance taxes and privilege fees, (ii)
transportation, treating and marketing expenses, and (iii) applicable lease
burdens for landowner's royalties, overriding royalties and any other expense
free interests. The first purchaser shall advise Seller of the amount of the
proceeds available for disbursement and Seller shall calculate and advise first
purchaser of the amount of Buyer's share. Buyer shall assume responsibility for
revenue distribution of the proceeds from the sale of January 2006 production
and thereafter, with the first payments made with Buyer's normal revenue
distribution processing for January production scheduled during March 2006.
Seller represents and warrants that, except as to parties for whom funds are
held in suspense, it has not received any claim or demand which would indicate
that such information is inaccurate. Seller will process joint interest billing
(JIB) statements for costs and expenses incurred by Seller to be reimbursed by
Buyer for the Properties through February 15, 2006 In addition, Seller may
submit a March 2006 JIB for payment by Buyer covering that part of February
during which it continued to act as operator of the Properties. Buyer agrees to
pay such xxxxxxxx within 5 business days of receipt thereof, except that Seller
will be responsible for any such costs and expenses incurred prior to the
Effective Date for its Interests in the Properties. In the event the MDEQ and
EPA transfers of operator approvals have not been received by February 28, 2006,
Seller will continue to operate and each month identified above shall be
adjusted forward a full month until the month in which the transfer of operator
approvals are received.
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Section 9.02. Sales Taxes; Recording & Audit Fees. Buyer shall pay all
sales and use taxes occasioned by the sale of the Properties. Buyer shall pay
all transfer and audit fees occasioned or required by the purchase of the
Properties and Buyer shall also pay all filing and recording fees required in
connection with the filing and recording of the Operative Documents described in
Section 8.03(a), above.
Section 9.03. Indemnifications. Subsequent to Closing:
(a) Buyer's Indemnity. Buyer shall, and hereby does, defend,
indemnify and save and hold harmless Seller from and against any and all claims,
costs, judgments, expenses, requests for compensation, contribution,
remediation, liability, asserted by any private individual, including a Lessor
or any Governmental Authority (including, without limitation, reasonable
attorneys' fees) (collectively a "Seller Indemnified Loss") of any type or
nature whatsoever other than consequential damages which may be incurred by
Seller from or after the Closing Date that are attributable to or result from:
(i) failure or breach of any representation or warranty made
by Buyer in Article 4 hereof or in any document or instrument made and delivered
by Buyer in connection herewith; provided, however, that except with respect to
losses, costs and expenses resulting from claims or demands by parties other
than Seller, this indemnity shall be limited to failures or breaches that are
occasioned by intentional misrepresentation or fraud of Buyer; and
(ii) any Seller Indemnified loss arising from or relating to
ownership or operation of the Properties, Leases and Xxxxx from and after the
Closing Date except as a result of Seller's gross negligence in performing or
failing to perform its duties under Section 9.01 above; including, if applicable
but not limited to, liabilities or obligations arising from or related to
Buyer's use of Sellers well permits to operate the Properties acquired hereunder
pending approval by the Michigan DEQ and EPA of the transfer of such permits to
Buyer.
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(b) Seller's Indemnity. Seller shall and hereby does defend,
indemnify and save and hold harmless Buyer from and against any and all claims,
costs, judgments, expenses, requests for compensation, contribution,
remediation, liability, asserted by any private individual, including a Lessor
or any Governmental Authority and liabilities resulting in loss or damage
actually sustained by Buyer (including without limitation, reasonable attorneys'
fees) (collectively, a "Buyer Indemnified Loss") of any type or nature
whatsoever other than consequential damages which may be incurred by Buyer from
or after the Effective Date that are attributable to or result from:
(i) failure or breach of any representation or warranty made
by Seller in Article 4 hereof or in any document or instrument made and
delivered by Seller in connection herewith; provided, however, this indemnity
shall be limited to failures or breaches that are occasioned by intentional
misrepresentation or fraud of Seller. For the purposes of this subparagraph (i),
an assignee of all or part of Buyer's interest in the Properties shall not be
treated as a third party and shall have only the same rights to Seller's
Indemnity as does Buyer; and
(ii) any liability or obligation arising as a result of
Seller's gross negligence in performing or failing to perform its duties under
Section 9.01 above.
(c) Neither party shall be entitled to indemnification from the
other party under this Section 9.03 unless and until the aggregate amount of the
indemnified losses suffered by that party exceeds One Hundred Thousand and
No/100 Dollars ($100,000.00) (the "Indemnity Threshold"), in which ease the
indemnified party shall be entitled to the entire amount of such claims from the
other party, including the Indemnity Threshold; provided, however, that the
Indemnity Threshold shall not apply to claims for indemnification by Seller
relating to liabilities or obligations arising from or related to Buyer's use of
Seller's well permits to operate the Properties pending approval of the transfer
of such permits by the Michigan DEQ or Federal EPA.
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(d) Seller's indemnification relating to liabilities or obligations
arising from or relating to ownership or operations of the Properties by Seller
or its agents prior to Closing shall be limited to the percentage share of that
liability that Seller would have been required to bear if the assignments and
transfers contemplated by this Agreement had not occurred.
Section 9.04. Further Assurances. After the Closing Date, each party at
the request of the other and without additional consideration, shall execute and
deliver or shall cause to be executed and delivered from time to time such
further instruments of conveyance and transfer and shall take such other action
as the other party may reasonably require to convey and deliver the Properties
to Buyer, to perfect Buyer's title thereto, and to accomplish the orderly
transfer of the Properties to Buyer in the manner contemplated by this
Agreement.
Section 9.05. Survival of Representations, Warranties and Indemnification
Obligations. The indemnification obligations contained in Section 9 shall
survive the Closing and expire six (6) months following the Closing Date;
provided, however, that if at the stated expiration of any indemnification
obligation there shall be pending any indemnification claim by a party, such
party shall continue to have the right to seek indemnification with respect to
such claim notwithstanding such expiration.
37
Section 9.06. Access to Information. From and after the Closing Date, upon
Seller's reasonable request, Buyer shall provide Seller access during reasonable
business hours to the files and records delivered to Buyer pursuant to Section
8.03(d) of this Agreement and files and records generated after Closing
concerning pre-Closing periods in connection with any claim asserted by a third
party against Seller relating to the Properties, including, without limitation,
tax claims and legal proceedings.
Section 9.07. Limitation of Action. Other than indemnification under
Section 9.03 or Post-Closing Adjustments of the Purchase Price under Section
3.03, neither Seller nor Buyer shall have any cause, claim or action, of
whatsoever nature or kind, against the other relating to or arising out of
negotiation or consummation of this Agreement.
Section 9.08. Post-Closing Audits and Disputes. Prior to Closing, the
Properties in which Seller owned Interests that are being conveyed to Buyer
pursuant to this Agreement were co-owned by Seller and Buyer and operated at
their joint expense by either Seller or Buyer. Buyer and Seller have certain
rights pursuant to their previous agreements relating to such properties to
audit the records relating to such activities. The Parties agree that both Buyer
and Seller shall release and do hereby release all additional audit rights that
either party may have pursuant to their prior agreements as to all periods
through Closing. The Parties agree that all joint billing disputes between them
relating to all such periods prior to Closing are settled as an element of this
Agreement.
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ARTICLE 10.
Dispute Resolution
Section 10.01. Resolution of Disputes. Any disagreement between Buyer and
Seller hereunder or under the transactions contemplated hereby shall be
submitted and settled by arbitration in Traverse City, Michigan, pursuant to the
then-prevailing rules of the American Arbitration Association. The arbitrators
shall consist of one person selected by Buyer, one person selected by Seller and
one person selected by the two arbitrators so selected. At least one of the
arbitrators shall be a lawyer having at least ten years of experience in the oil
and gas industry. The Chief Arbitrator shall be a lawyer. In the event that the
arbitrators selected by Buyer and Seller are unable jointly to select a third
arbitrator, Buyer and Seller (or the arbitrators selected by them) shall request
that the American Arbitration Association designate such third person. The
decision of arbitrators pursuant to this Article 10 shall be final and binding
upon Buyer and Seller, and judgment upon any such decision may be entered in any
court that would ordinarily have jurisdiction over Seller or Buyer, as the case
may be, and the subject matter of such arbitration. The fees and expenses of the
arbitrators incurred in connection with the review and determination of any
disputed matter and the aggregate fees and expenses incurred by Seller and Buyer
in connection with such arbitration shall be borne equally between the Seller
and the Buyer unless otherwise directed by the arbitrators. Buyer and Seller
waive all rights to claim or seek punitive damages as a result of any
disagreement between or among them arising hereunder or under the transactions
contemplated hereby.
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ARTICLE 11.
Miscellaneous
Section 11.01. Exhibits and Schedules. The Exhibits and Schedules are
hereby incorporated in this Agreement by reference and constitute a part of this
Agreement. Each party to this Agreement and its counsel has received a complete
set of Exhibits and Schedules prior to and as of the execution of this
Agreement.
Section 11.02. Expenses. Except as otherwise specifically provided in this
Agreement, all fees, costs and expenses incurred by Buyer and Seller in
negotiating this Agreement or in consummating the transactions contemplated by
this Agreement shall be paid by the party incurring the same, including, but
without limitation, legal and accounting fees, costs and expenses.
Section 11.03. Notices. All notices hereunder shall be by personal
delivery, nationally recognized overnight courier, or by certified mail return
receipt requested. Notice shall be deemed to have been made upon delivery to the
address shown below. The telefax numbers set forth below are for convenience
only and the delivery of telefaxes (or the receipt thereof) shall not be deemed
sufficient for purposes of giving notice hereunder.
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If to Buyer Xxxxxx Xxxxxx North, LLC
0000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx Xxxx, XX 00000
ATTN: Xxxxxxx X. Xxxxxx
Telefax No.: (000) 000-0000
With copy to: Xxxxx X. Xxxxxxxxxx
Xxxxxxxxxx, Boos & Associates, P.C.
0000 Xxxxxxx Xxxx Xxxxx
Xxxxxxxx Xxxx, XX 00000
Telefax No.: (000) 000-0000
It to Seller: O.I.L. Energy Corp.
000 Xxxxxxxx Xxxx Xxxxx, Xxxxx 0
Xxxxxxxx Xxxx, XX 00000
ATTN: Xxxxxxx X. Xxx
Telefax No.: (000) 000-0000
With copy to: Xxxxxx X. Xxxxxx
Brandt, Fisher, Xxxxxx & Xxx, P.C.
0000 Xxxx Xxxxxx Xxxxxx, P. O. Xxx 0000
Xxxxxxxx Xxxx, XX 00000-0000
Telefax No.: (000) 000-0000
Either party may, by written notice so delivered to the other, change the
address to which delivery shall thereafter be made.
41
Section 11.04. Amendment. This Agreement may not be altered or amended, or
any rights hereunder waived, except by an instrument in writing executed by the
party or parties to be charged with such amendment or waiver. No waiver of any
term, provision or condition of this Agreement, in any one or more instances,
shall he deemed to be, or construed as, a further or continuing waiver of any
such term, provision or condition or as a waiver of any other term, provision or
condition of this Agreement.
Section 11.05. Assignment. Neither Buyer nor Seller may assign its rights
or delegate its duties or obligations under the terms of this Agreement without
the prior written consent of the other party.
Section 11.06. 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.
Section 11.07. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original instrument, but all of
which together shall constitute but one and the same instrument.
Section 11.08. Governing Law. This Agreement and the transactions
contemplated hereby shall be construed in accordance with, and governed by, the
laws of the State of Michigan without regard to principles of conflict of laws.
42
Section 11.09. Entire Agreement. This Agreement and the documents executed
pursuant hereto (including the Exhibits and Schedules hereto and thereto)
constitute the entire understanding between the parties with respect to the
subject matter hereof, superseding and merging herein all disputes, claims,
causes, negotiations, prior discussions and prior agreements and understandings
relating to such subject matter including all operations of the Properties by
Seller prior to the Closing. Seller and Buyer have not made any representations
to each other except as specifically set forth in this Agreement (including the
Exhibits and Schedules hereto) and none will be deemed to have been made unless
made in writing.
Section 11.10. Parties In Interest. This Agreement shall be binding upon,
and shall inure to the benefit of the Parties and, except as otherwise
prohibited, their respective successors and assigns, and nothing contained in
this Agreement, express or implied, is intended to confer upon any other person
or entity any benefits, rights or remedies.
Section 11.11. Severability. In case any provision or obligation in or
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions, or of such provisions or obligations in any other jurisdiction,
shall not in any way be affected or impaired thereby.
Section 11.12. Conflict Between Agreement and Other Operative Documents.
In the event of a conflict between the provisions of this Agreement and the
provisions of any of the other Operative Documents, the provisions of this
Agreement shall control.
Section 11.13. Public Announcements. Each party hereto shall obtain the
written consent of the other Party hereto prior to any public announcement by
such party regarding the existence of this Agreement, the contents hereof or the
transactions contemplated hereby; provided however, the foregoing shall not
restrict disclosures by any party in compliance with applicable securities or
other laws or in compliance with existing loan or other agreements binding such
party (or its Affiliates) in such party's discretion.
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IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement as of
the date first above mentioned.
SELLER:
NORAM ENERGY, L.L.C., a Michigan
limited liability company
By: Provins Family, LLC, a Michigan
limited liability company
By:
------------------------------------
T. Xxxxx Xxxxxxx, Trustee of the
X.X. Xxxxxxx Trust UAD 11/9/94
Its: Member
By:
-----------------------------------
Xxxxxxx X. Xxx
Its: Member
PROVINS FAMILY, L.L.C., a Michigan
limited liability company
By:
----------------------------------------
T. Xxxxx Xxxxxxx, Trustee of the
X.X. Xxxxxxx Trust UAD 11/9/94
Its: Member
O.I.L. ENERGY CORP., a Michigan corporation
By:
----------------------------------------
Xxxxxxx X. Xxx
Its: Member
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BUYER:
XXXXXX XXXXXX NORTH, L.L.C., a Michigan
limited liability company
By: Aurora Energy, Ltd.
Its: Manager
By:
----------------------------------------
Xxxxxxx X. Xxxxxx
Its: President
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