PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
REDFISH BAY DEVELOPMENT CORPORATION AND
PI ENERGY CORPORATION
BUYER
AND
MIDLAND RESOURCES, INC. AND
SUMMIT PETROLEUM CORPORATION
SELLER
DATED EFFECTIVE FEBRUARY 1, 1997
TABLE OF CONTENTS
--------------------------------------------------------------------------------
ARTICLE 1: SUBJECT MATTER, DEFINITIONS AND RULES OF CONSTRUCTION
1.01 Subject Matter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Definitions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02.01 "Affiliate". . . . . . . . . . . . . . . . . . . . . . . . 1
1.02.02 "Agreed Rate". . . . . . . . . . . . . . . . . . . . . . . 1
1.02.03 "Agreement". . . . . . . . . . . . . . . . . . . . . . . . 1
1.02.04 "Assets" . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.02.05 "Assumed Liabilities". . . . . . . . . . . . . . . . . . . 3
1.02.06 "Business Day" . . . . . . . . . . . . . . . . . . . . . . 3
1.02.07 "Closing". . . . . . . . . . . . . . . . . . . . . . . . . 3
1.02.08 "Closing Date" . . . . . . . . . . . . . . . . . . . . . . 3
1.02.09 "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.02.10 "Contracts". . . . . . . . . . . . . . . . . . . . . . . . 4
1.02.11 "Corporate Documents" . . . . . . . . . . . . . . . . . . 4
1.02.12 "Easements". . . . . . . . . . . . . . . . . . . . . . . . 4
1.02.13 "Effective Date" . . . . . . . . . . . . . . . . . . . . . 4
1.02.14 "Excluded Assets" . . . . . . . . . . . . . . . . . . . . 4
1.02.15 "Excluded Facilities". . . . . . . . . . . . . . . . . . . 4
1.02.16 "Facilities" . . . . . . . . . . . . . . . . . . . . . . . 4
1.02.17 "Governmental Body". . . . . . . . . . . . . . . . . . . . 4
1.02.18 "Hydrocarbon Inventory". . . . . . . . . . . . . . . . . . 5
1.02.19 "Hydrocarbons" . . . . . . . . . . . . . . . . . . . . . . 5
1.02.20 "Identification Date". . . . . . . . . . . . . . . . . . . 5
1.02.21 "Included Facilities". . . . . . . . . . . . . . . . . . . 5
1.02.22 "Knowledge". . . . . . . . . . . . . . . . . . . . . . . . 5
1.02.23 "Leases" . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.02.24 "Line Fill". . . . . . . . . . . . . . . . . . . . . . . . 5
1.02.25 "Losses" . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.02.26 "Material Contracts" . . . . . . . . . . . . . . . . . . . 5
1.02.27 "Other Contracts". . . . . . . . . . . . . . . . . . . . . 6
1.02.28 "Other Property" . . . . . . . . . . . . . . . . . . . . . 6
1.02.29 "Party". . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.02.30 "Person" . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.02.31 "Plugging and Abandonment" . . . . . . . . . . . . . . . . 7
1.02.32 "Property" . . . . . . . . . . . . . . . . . . . . . . . . 7
1.02.33 "Tax" . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.02.34 "Third Person" . . . . . . . . . . . . . . . . . . . . . . 7
1.03 Other Definitions in this Agreement. . . . . . . . . . . . . . . . . . . 7
1.04 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-i-
1.04.01 General. . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.04.02 Articles.. . . . . . . . . . . . . . . . . . . . . . . . . 9
1.04.03 Exhibits and Schedules.. . . . . . . . . . . . . . . . . . 9
1.04.04 Other Agreements.. . . . . . . . . . . . . . . . . . . . . 9
1.05 Pi Energy Corporation.. . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 2: SALE AND PURCHASE
2.01 Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.02 Purchase Price and Payment. . . . . . . . . . . . . . . . . . . . . . . . 9
2.03 Adjustments to the Purchase Price.. . . . . . . . . . . . . . . . . . . . 9
2.03.01 Upward Adjustments.. . . . . . . . . . . . . . . . . . . . 9
2.03.02 Downward Adjustments.. . . . . . . . . . . . . . . . . . .10
2.04 Allocation of Purchase Price. . . . . . . . . . . . . . . . . . . . . . .11
2.05 Transfer of the Assets, Etc.. . . . . . . . . . . . . . . . . . . . . . .11
2.06 Method of Payment.. . . . . . . . . . . . . . . . . . . . . . . . . . . .11
ARTICLE 3: REPRESENTATIONS AND WARRANTIES
3.01 Seller. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
3.01.01 Organization and Standing. . . . . . . . . . . . . . . . .11
3.01.02 Authority. . . . . . . . . . . . . . . . . . . . . . . . .12
3.01.03 Validity of Agreement. . . . . . . . . . . . . . . . . . .12
3.01.04 No Violation. . . . . . . . . . . . . . . . . . . . . . .12
3.01.05 Legal Proceedings. . . . . . . . . . . . . . . . . . . . .12
3.01.06 Compliance with Applicable Laws. . . . . . . . . . . . . .12
3.01.07 Contracts. . . . . . . . . . . . . . . . . . . . . . . . .12
3.01.08 Assets . . . . . . . . . . . . . . . . . . . . . . . . . .13
3.01.09 Authorizations for Expenditures. . . . . . . . . . . . . .13
3.01.10 Equipment. . . . . . . . . . . . . . . . . . . . . . . . .13
3.01.11 Xxxxx. . . . . . . . . . . . . . . . . . . . . . . . . . .14
3.01.12 Exchange of Equipment. . . . . . . . . . . . . . . . . . .14
3.01.13 Payout Balances. . . . . . . . . . . . . . . . . . . . . .14
3.01.14 No Preferential Rights . . . . . . . . . . . . . . . . . .14
3.01.15 No Consents Required . . . . . . . . . . . . . . . . . . .14
3.01.16 Prepayment.. . . . . . . . . . . . . . . . . . . . . . . .14
3.01.17 Payments. . . . . . . . . . . . . . . . . . . . . . . . .14
3.01.18 Conduct of Business. . . . . . . . . . . . . . . . . . . .15
3.01.19 Xxxxx Agreement. . . . . . . . . . . . . . . . . . . . . .15
3.01.20 Losses.. . . . . . . . . . . . . . . . . . . . . . . . . .15
3.01.21 Changes. . . . . . . . . . . . . . . . . . . . . . . . . .15
3.01.22 Imbalances . . . . . . . . . . . . . . . . . . . . . . . .15
3.02 Buyer.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
3.02.01 Organization and Standing. . . . . . . . . . . . . . . . .16
3.02.02 Authority. . . . . . . . . . . . . . . . . . . . . . . . .16
3.02.03 Validity of Agreement. . . . . . . . . . . . . . . . . . .16
-ii-
3.02.04 No Violation.. . . . . . . . . . . . . . . . . . . . . . .16
3.02.05 No Consents Required.. . . . . . . . . . . . . . . . . . .16
3.02.06 Securities Representation. . . . . . . . . . . . . . . . .16
3.03 Disclaimer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
ARTICLE 4: COVENANTS
4.01 Covenants of Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . .19
4.01.01 Performance Bonds, Guaranties, Etc. . . . . . . . . . . .19
4.01.02 Assumption of Assumed Liabilities. . . . . . . . . . . . .19
4.02 Covenants of Seller and Buyer.. . . . . . . . . . . . . . . . . . . . . .19
4.02.01 Recording. . . . . . . . . . . . . . . . . . . . . . . . .19
4.02.02 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . .19
4.02.03 Certain Filings, Consents and Permits. . . . . . . . . . .19
4.02.04 Post-Closing Access. . . . . . . . . . . . . . . . . . . .20
4.02.05 Employee Matters.. . . . . . . . . . . . . . . . . . . . .20
4.02.06 Final Recapitulation Settlement; Subsequent Audits and
Settlements. . . . . . . . . . . . . . . . . . . . . . . .20
4.02.07 Further Assurances.. . . . . . . . . . . . . . . . . . . .21
4.02.08 Files Transfer.. . . . . . . . . . . . . . . . . . . . . .21
4.02.09 Plugging and Abandonment.. . . . . . . . . . . . . . . . .22
ARTICLE 5: TAXES
5.01 Payment and Apportionment of Real Property Taxes and Personal Property
Taxes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
5.01.01 Real and Personal Property Taxes.. . . . . . . . . . . . .22
5.01.02 Liability and Right to Pursue Claims.. . . . . . . . . . .22
5.02 Other Taxes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
5.03 Sales Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
5.04 Tax Proceedings.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
5.05 Purchase Price Allocation.. . . . . . . . . . . . . . . . . . . . . . . .23
ARTICLE 6: ENVIRONMENTAL MATTERS
6.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
6.02 Seller Representations. . . . . . . . . . . . . . . . . . . . . . . . . .24
6.02.01 Disclosure . . . . . . . . . . . . . . . . . . . . . . . .24
6.02.02 Past Use of Property Interest. . . . . . . . . . . . . . .24
6.03 Seller's Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . .24
6.04 Limitations.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
6.05 Buyer's Responsibilities. . . . . . . . . . . . . . . . . . . . . . . . .25
6.06 Exclusive Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . .25
ARTICLE 7: INDEMNITY
7.01 General Indemnification.. . . . . . . . . . . . . . . . . . . . . . . . .26
7.01.01 Seller.. . . . . . . . . . . . . . . . . . . . . . . . . .26
7.01.02 Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . .26
-iii-
7.02 Method of Asserting Claims, Etc.. . . . . . . . . . . . . . . . . . . . .27
7.02.01 Third Person Claims. . . . . . . . . . . . . . . . . . . .27
7.02.02 Other Claims.. . . . . . . . . . . . . . . . . . . . . . .28
7.03 Payment.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
7.03.01 Payment of Undisputed Amount.. . . . . . . . . . . . . . .28
7.03.02 Interest. . . . . . . . . . . . . . . . . . . . . . . . .28
7.03.03 Disputed Claims. . . . . . . . . . . . . . . . . . . . . .28
ARTICLE 8: CONDITIONS PRECEDENT
8.01 Conditions Precedent of Buyer.. . . . . . . . . . . . . . . . . . . . . .28
8.01.01 Representations and Warranties True at Closing.. . . . . .29
8.01.02 Compliance with Agreement. . . . . . . . . . . . . . . . .29
8.01.03 Certified Resolutions and Officers' Certificate. . . . . .29
8.01.04 Injunction.. . . . . . . . . . . . . . . . . . . . . . . .29
8.01.05 Conveyance.. . . . . . . . . . . . . . . . . . . . . . . .29
8.01.06 Letters in Lieu. . . . . . . . . . . . . . . . . . . . . .29
8.01.07 No Material Adverse Change.. . . . . . . . . . . . . . . .29
8.02 Conditions Precedent of Seller. . . . . . . . . . . . . . . . . . . . . .30
8.02.01 Representations and Warranties True at Closing.. . . . . .30
8.02.02 Compliance with Agreement. . . . . . . . . . . . . . . . .30
8.02.03 Certified Resolutions and Officers' Certificate. . . . . .30
8.02.04 Injunction.. . . . . . . . . . . . . . . . . . . . . . . .30
8.02.05 Conveyance.. . . . . . . . . . . . . . . . . . . . . . . .30
8.02.06 Letters in Lieu. . . . . . . . . . . . . . . . . . . . . .30
ARTICLE 9: MISCELLANEOUS
9.01 Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
9.02 Modification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
9.03 Governing Law.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
9.04 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
9.05 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
9.06 Invalidity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
9.07 Entire Agreement and Construction.. . . . . . . . . . . . . . . . . . . .32
9.08 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
9.09 Waivers and Amendments. . . . . . . . . . . . . . . . . . . . . . . . . .32
9.10 Survival of Warranties, Representations and Covenants. . . . . . . . . .33
9.11 Article Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
9.12 Dispute Resolution. . . . . . . . . . . . . . . . . . . . . . . . . . . .33
9.12.01 Selection of Arbitrator. . . . . . . . . . . . . . . . . .33
9.12.02 Qualifications of Arbitrator.. . . . . . . . . . . . . . .33
9.12.03 Suit Prohibited. . . . . . . . . . . . . . . . . . . . . .34
9.12.04 Damages. . . . . . . . . . . . . . . . . . . . . . . . . .34
9.12.05 Decision. . . . . . . . . . . . . . . . . . . . . . . . .34
9.12.06 AAA Rules. . . . . . . . . . . . . . . . . . . . . . . . .34
-iv-
EXHIBITS AND SCHEDULES
--------------------------------------------------------------------------------
Exhibits and Schedules are described on the pages noted below.
EXHIBITS
Exhibit A (Assignment) . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Exhibit B (Xxxx of Sale) . . . . . . . . . . . . . . . . . . . . . . . . . . .11
SCHEDULES
Schedule 3.01.05 (Legal Proceedings) . . . . . . . . . . . . . . . . . . . . .12
Schedule 3.01.06 (Non-Compliance With Laws). . . . . . . . . . . . . . . . . .12
Schedule 3.01.07 (Certain Contracts) . . . . . . . . . . . . . . . . . . . . .12
Schedule 3.01.08 (Breaches of Material Contracts). . . . . . . . . . . . . . .13
Schedule 3.01.09 (Pending AFE Items) . . . . . . . . . . . . . . . . . . . . .13
Schedule 3.01.11A (Allowables) . . . . . . . . . . . . . . . . . . . . . . . .14
Schedule 3.01.11B (P&A Obligations). . . . . . . . . . . . . . . . . . . . . .14
Schedule 3.01.12 (Exchange/Removal of Equipment) . . . . . . . . . . . . . . .14
Schedule 3.01.13 (Payout Balances) . . . . . . . . . . . . . . . . . . . . . .14
Schedule 3.01.15 (Consents). . . . . . . . . . . . . . . . . . . . . . . . . .14
Schedule 3.01.18 (Non-Standard Operations) . . . . . . . . . . . . . . . . . .15
Schedule 3.01.19 (Xxxxx Contract Balance). . . . . . . . . . . . . . . . . . .15
Schedule 4.02.02 (Brokers and Finders) . . . . . . . . . . . . . . . . . . . .19
Schedule A (Leases). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Schedule B (Easements) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Schedule C (Excluded Facilities) . . . . . . . . . . . . . . . . . . . . . . . 4
Schedule D (Material Contracts). . . . . . . . . . . . . . . . . . . . . . . . 5
Schedule E (Marine Equipment). . . . . . . . . . . . . . . . . . . . . . . . . 6
Schedule F (Excluded Yard Inventory/Equipment) . . . . . . . . . . . . . . . . 6
Schedule G (Property, Accounting Unit, Allocated Value). . . . . . . . . . . . 7
-v-
PURCHASE AND SALE AGREEMENT
This Agreement dated effective as of February 1, 1997, is made and entered
into by and between REDFISH BAY DEVELOPMENT CORPORATION, a Texas corporation,
and PI ENERGY CORPORATION, a Texas corporation, both having offices at 000 Xxxx
Xxxxxx, Xxxxx 0000, Xxxxxxx, XX 00000 (collectively, jointly and severally,
"Buyer") and MIDLAND RESOURCES, INC., a Texas corporation, and SUMMIT PETROLEUM
CORPORATION, a Colorado corporation, both having offices at 00000 Xxxxxx Xxxxx
Xxxx Xxxxx, #000, Xxxxxxx, Xxxxx 00000 (collectively, jointly and severally,
"Seller").
ARTICLE 1
SUBJECT MATTER, DEFINITIONS AND RULES OF CONSTRUCTION
1.01 SUBJECT MATTER. The subject matter of this Agreement is the sale,
assignment, transfer and conveyance of Seller's and Seller's Affiliates'
interest in the Assets, the purchase of the Assets and the assumption of the
Assumed Liabilities by Buyer, and the terms and conditions upon which the sale
shall take place.
1.02 DEFINITIONS. For purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, the terms defined in this
Article have the meanings herein assigned to them and the capitalized terms
defined elsewhere in this Agreement, by inclusion in quotation marks and
parentheses, shall have the meanings so ascribed to them.
1.02.01 "AFFILIATE" means, with respect to any specified Person, any
other Person directly or indirectly controlling or controlled by or
under direct or indirect common control with such specified Person. For
the purposes of this definition, "control" means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative
to the foregoing, it being understood and agreed that with respect to a
corporation, control shall mean a direct or indirect ownership of more
than 50 percent of the voting stock.
1.02.02 "AGREED RATE" means a rate per annum calculated on a 360-day
basis which is equal to the lesser of :
(a) a rate which is two percent above the prime rate of interest as
published by the WALL STREET JOURNAL under the heading "Money Rates"
or another similar heading in its first issue of each calendar month
(adjusted each month to reflect any changes in the rate), or
(b) the maximum rate from time to time permitted by applicable Law.
1.02.03 "AGREEMENT" means this Purchase and Sale Agreement, including the
Schedules and Exhibits.
-1-
1.02.04 "ASSETS" means the Leases, Other Property, Easements, and
Contracts, but not including the following (the "Excluded Assets"):
(a) all trade credits, accounts receivable, notes receivables and
other receivables attributable to Seller's interest in the Assets with
respect to any period of time prior to the Effective Date;
(b) all deposits, cash, checks in process of collection, cash
equivalents and funds attributable to Seller's interest in the Assets
with respect to any period of time prior to the Effective Date; and
(c) all funds attributable to Third Persons for production prior to
the Effective Date but suspended or impounded by Seller;
(d) all claims and causes of action of Seller
(i) arising from acts, omissions or events, or damage to or
destruction of property, occurring prior to the Effective Date,
or
(ii) affecting any of the Excluded Assets;
(e) except as set forth in Article 4.03.06, all rights, titles,
claims and interests of Seller
(i) under any policy or agreement of insurance or indemnity;
(ii) under any bond; or
(iii) to any insurance or condemnation proceeds or awards;
(f) the claims of Seller for refunds of or loss carry forwards with
respect to
(i) Taxes attributable to any period prior to the Effective
Date; or
(ii) Taxes attributable to any of the Excluded Assets;
(g) all amounts due or payable to Seller as adjustments or refunds
under any Contracts affecting the Assets, with respect to any period
prior to the Effective Date, specifically including, without
limitation, amounts recoverable from audits under operating
agreements;
(h) all amounts due or payable to Seller as adjustments to insurance
premiums related to the Assets with respect to any period prior to the
Effective Date;
-2-
(i) all proceeds, benefits, income or revenues accruing (and any
security or other deposits made) with respect to
(i) the Assets prior to the Effective Date; and
(ii) any of the Excluded Assets;
(j) any pipelines, easements, fixtures, tanks or equipment located on
the Assets which belong to Third Persons;
(k) records and documents subject to confidentiality provisions,
claims of privilege, or other restrictions on access, except as
otherwise expressly provided herein;
(l) all corporate, financial, legal and tax records of Seller, except
as otherwise expressly provided herein; and
(m) the Excluded Facilities.
1.02.05 "ASSUMED LIABILITIES" means:
(a) all liabilities, duties, and obligations that arise from
ownership or operation of the Assets on and after the Effective Date
or otherwise expressly assumed under this Agreement;
(b) liabilities and obligations with respect to Plugging and
Abandonment;
(c) all duties, liabilities and obligations that arise under the
Contracts (including the Xxxxx Agreement defined below) on and after
the Effective Date.
1.02.06 "BUSINESS DAY" means any day when commercial banks are generally
open for regular business in the states of New York and Texas.
1.02.07 "CLOSING" means the closing of the transactions contemplated by
this Agreement at 10:00 a.m., local time, at Seller's offices in Houston,
Texas, on the Closing Date or at such other time or place as the Parties
may mutually agree upon in writing.
1.02.08 "CLOSING DATE" means February 28, 1997, subject to extension as
provided herein, or such other date as the Parties may mutually agree upon
in writing.
1.02.09 "CODE" means the United States Internal Revenue Code of 1986, as
amended.
1.02.10 "CONTRACTS" means the Material Contracts and the Other Contracts.
-3-
1.02.11 "CORPORATE DOCUMENTS" means a corporation's articles of
incorporation (or certificate of incorporation) and by-laws or the
equivalent documents.
1.02.12 "EASEMENTS" means Seller's non-exclusive rights to the use and
occupancy of the surface (including the surface of submerged lands),
including, without limitation, tenements, appurtenances, surface leases,
easements, permits, licenses, servitudes and rights-of-way in any way
appertaining, belonging, affixed or incidental to or used in connection
with the ownership or operation of the Leases including, without
limitation, those set forth on Schedule B.
1.02.13 "EFFECTIVE DATE" shall mean 7:00 a.m. on February 1, 1997, at the
location of the Assets.
1.02.14 "EXCLUDED ASSETS" means the assets excluded from the
definition of Assets as stated in Article 1.02.04.
1.02.15 "EXCLUDED FACILITIES" means Facilities that are:
(a) neither located on nor used in connection with the Leases;
(b) not located on the Leases or Easements and that are used in
connection with the Leases or Easements, and Seller's retained
properties; or
(c) identified on Schedule C.
1.02.16 "FACILITIES" means facilities and equipment that are customarily
used directly in the production of Hydrocarbons, including, but not limited
to injection facilities, disposal facilities, field separators, liquid
extractors, compressors, gathering systems, lines, LACT units, plants,
platforms, tanks and the like.
1.02.17 "GOVERNMENTAL BODY" means any federal, state, county, municipal,
or other federal, state or local governmental authority or judicial or
regulatory agency, board, body, department, bureau, commission,
instrumentality, court, tribunal or quasi-governmental authority in any
jurisdiction (domestic or foreign) having jurisdiction over any Asset or
Party to this transaction, or any of the transactions or matters
contemplated by this Agreement.
1.02.18 "HYDROCARBON INVENTORY" means all processed merchantable oil,
condensate and natural gas liquids inventories in storage or existing in
oil stock tanks above the outlet flange delivery point and credited to the
Assets as of the Effective Date.
1.02.19 "HYDROCARBONS" means crude oil, natural gas, casinghead gas,
condensate, sulphur, natural gas liquids, plant products and other liquid
or gaseous hydrocarbons (of whatever
-4-
nature and kind, including coalbed gas), all other gases (including
CO(2)), and all other minerals and gases of every kind and character
which may be covered by or included in the Assets.
1.02.20 "IDENTIFICATION DATE" means January 1, 1997.
1.02.21 "INCLUDED FACILITIES" means the Facilities that are
(a) located on or off of, but used solely in connection with the
Leases; or
(b) located entirely on and used in connection with the Leases;
except for the Excluded Facilities.
1.02.22 "KNOWLEDGE" means the actual knowledge of a Party's corporate
officers after reasonable inquiry.
1.02.23 "LEASES" means the interests in the oil, gas or mineral leases
and other interests set forth on Schedule A.
1.02.24 "LINE FILL" means all Hydrocarbons in lines, gathering
systems, plant equipment, treating and separation equipment and
gunbarrels located on or allocable to the Assets and occurring prior to
the delivery point or outlet flange for liquids or prior to the gas
sales meter for gases.
1.02.25 "LOSSES" means any and all losses, costs, expenses,
liabilities, claims, demands, penalties, fines, assessments,
settlements, damages and any related expenses of whatever kind or
nature, or otherwise including, without limitation, legal, accounting,
consulting and investigation expenses and litigation costs, but
excluding consequential damages of a Party other than losses directly
attributable to a cessation or reduction of the production of
Hydrocarbons.
1.02.26 "MATERIAL CONTRACTS" means the contracts of Seller material to
the Leases and Other Property, and material to the transportation,
marketing and processing of Hydrocarbons produced therefrom, listed on
Schedule D, insofar and only insofar as they specifically relate to the
Leases and Other Property, but specifically excluding Easements and
Leases.
1.02.27 "OTHER CONTRACTS" means any contracts, agreements or
arrangements of Seller affecting the Leases and Other Property other
than the Material Contracts, insofar and only insofar as they
specifically relate to the Leases and Other Property, but specifically
excluding the Easements and the Leases.
1.02.28 "OTHER PROPERTY" means all of Seller's or its Affiliates'
right, title and interest in and to the following, but specifically
excluding the Excluded Facilities:
-5-
(a) all xxxxx, equipment, fixtures and personal property of any kind
located on the Leases, Easements, or the lands subject to the
Contracts as of the Identification Date, or used solely in connection
with the production, separation, storage, treatment, gathering or
transportation of Hydrocarbons therefrom, including, but not limited
to, tubing, casing, wellheads, pumping units, production units,
compressors, valves, meters, pipelines, gathering lines, flowlines,
tanks, heaters, separators, dehydrators, pumps, injection units, gates
and fences, pulling machines, warehouse stocks, and microwave
equipment;
(b) the boats, barges, and marine equipment described on Schedule E;
(c) except as set forth on Schedule F, yard inventory and yard
equipment that is charged to or is reasonably chargeable to the
Leases, or Easements, and which have been used primarily in connection
with the Leases, Easements, and Contracts;
(d) subject to required Third Person consents, all licenses,
authorizations, permits, variances and similar rights and interests
related to the Leases, Easements, Contracts, and the property defined
in (a) through (d) above;
(e) subject to Article 4.02.08, the applicable general operating
records, lease operating statements, well files (including applicable
well logs and production data), production records, logs, information
and engineering data relating to the Assets, lease files, land files,
regulatory reports and certificates, abstracts and title work
pertaining to the Leases, Easements, Contracts, and property defined
in (a) through (d) above, but excluding: environmental compliance
files (other than the portions of such files which pertain to the
Assets), legal files not pertaining to Assumed Liabilities,
attorney-client communications or attorney work product materials and
other similar documents covered by privilege, interpretations of
technical data, records and documents subject to confidentiality
provisions, and auditor's reports;
(f) Hydrocarbon Inventory and Line Fill;
(g) all rights, interests and benefits to gas imbalances with respect
to the Properties;
(h) the Included Facilities;
(i) all other rights, privileges, benefits and powers conferred upon
the owner and holder of the Leases, Easements, and Contracts, and
property defined in (a) through (h) above.
1.02.29 "PARTY" means either Buyer or Seller.
1.02.30 "PERSON" means any individual, corporation, partnership, limited
liability company,
-6-
joint venture, association, joint stock company, trust, estate,
unincorporated organization, other business entity or any Governmental
Body.
1.02.31 "PLUGGING AND ABANDONMENT" means all plugging and abandonment
of xxxxx, and associated removal of Other Property, the removal, capping
or burying of all associated flowlines, the restoration of the surface,
site clearance, and any disposal of related waste materials, including
naturally occurring radioactive material (NORM) and asbestos on the
Other Property removed. Plugging and Abandonment does not cover cleanup
of polluted lands, air or water other than routine surface cleanup of
the drillsite area normally associated with plugging and abandonment.
1.02.32 "PROPERTY" means an accounting unit or property designation as
set forth on Schedule G which is utilized by Seller for allocation of
revenues and expenses from the associated Leases.
1.02.33 "TAX" means any and all fees (including, without limitation,
documentation, license, recording, filing and registration fees), taxes
(including without limitation, production, gross receipts, ad valorem,
value added, windfall profit tax, environmental tax, turnover, sales,
use, property (tangible and intangible), stamp, leasing, lease, user,
leasing use, excise, franchise, transfer, heating value, fuel, excess
profits, occupational, interest equalization, lifting, oil, gas, or
mineral production or severance, and other taxes), levies, imposts,
duties, charges or withholdings of any nature whatsoever, imposed by any
Governmental Body or taxing authority thereof, domestic or foreign,
together with any and all penalties, fines, additions to Tax and
interest thereon, whether or not such Tax shall be existing or hereafter
adopted.
1.02.34 "THIRD PERSON" means a Person other than a Party or an
Affiliate of a Party.
1.03 OTHER DEFINITIONS IN THIS AGREEMENT. The following terms shall
have the respective meanings ascribed to them in the Articles in which
they are defined, as found on the following pages of this Agreement:
TERM PAGE
---- ----
Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Allocated Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Claim Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Deeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Disputed Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Environmental Claims. . . . . . . . . . . . . . . . . . . . . . . . . . .23
Environmental Condition . . . . . . . . . . . . . . . . . . . . . . . . .23
Environmental Law . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Environmental Matter. . . . . . . . . . . . . . . . . . . . . . . . . . .24
-7-
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Final Recap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Final Recap Statement . . . . . . . . . . . . . . . . . . . . . . . . . .20
Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Indemnifying Party. . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Xxxxx Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Notice Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Property Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Real and Personal Property Taxes. . . . . . . . . . . . . . . . . . . . .22
Remediation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Remediation Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
1.04 RULES OF CONSTRUCTION. For purposes of this Agreement:
1.04.01 GENERAL. Unless the context otherwise requires
(a) "or" is not exclusive;
(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with accounting principles that are generally
accepted in the United States of America;
(c) words in the singular include the plural and words in the plural
include the singular;
(d) words in the masculine include the feminine and words in the
feminine include the masculine;
(e) any date specified for any action that is not a Business Day
shall be deemed to mean the first Business Day after such date; and
(f) a reference to a Person includes its successors and assigns.
1.04.02 ARTICLES. References to Articles are, unless otherwise
specified, to Articles of this Agreement. Neither the captions to Articles
nor the Table of Contents shall be deemed to be a part of this Agreement.
1.04.03 EXHIBITS AND SCHEDULES. The Exhibits and Schedules form part of
this Agreement and shall have the same force and effect as if set out in
the body of this Agreement.
1.04.04 OTHER AGREEMENTS. References herein to any agreement or other
instrument shall,
-8-
unless the context otherwise requires (or the definition thereof
otherwise specifies), be deemed references to that agreement or
instrument as it may from time to time be changed, amended or extended.
There is no incorporation by reference unless stated.
1.05 PI ENERGY CORPORATION. Pi Energy Corporation joins in this Agreement as
Seller only for assuring and guaranteeing to Seller the performance of all of
Buyer's covenants, agreements, and obligations under this Agreement; Pi Energy
Corporation shall not have any right, title, or interest in the Assets.
ARTICLE 2
SALE AND PURCHASE
2.01 ASSETS. At the Closing, Seller shall and shall cause its Affiliates to
sell, assign, transfer and convey to Redfish Bay Development Corporation the
Assets and Buyer shall purchase and pay for the Assets and assume the Assumed
Liabilities.
2.02 PURCHASE PRICE AND PAYMENT. The purchase price shall be $1,725,000.00,
adjusted pursuant to Article 2.03 ("Purchase Price").
2.03 ADJUSTMENTS TO THE PURCHASE PRICE. The Purchase Price shall be adjusted as
follows:
2.03.01 UPWARD ADJUSTMENTS. The Purchase Price shall be adjusted upward
by the following:
(a) the amount of all direct costs and expenditures chargeable to
Seller's interest incurred and paid by or on behalf of Seller
(including prepayments of expenditures) that are attributable to
(i) the drilling, completion, recompletion, reworking,
operation and maintenance of the Assets on and after the
Effective Date,
(ii) bonuses, lease rentals and shut-in payments due after (and
expressly excluding those due before) the Effective Date,
(iii) ad valorem, property and other Taxes that are allocated
to the Buyer pursuant to Article 5, and
(iv) amounts relating to obligations arising under the Contracts
with respect to operations or production after the Effective
Date;
(b) the value (based on the average December 1996 sales price from
the Properties) of the Hydrocarbon Inventory net of all Taxes and
Burdens, and less an appropriate deduction based on industry practice
for basic sediment, water and other
-9-
non-merchantable liquids;
(c) the payments received by Seller from Third Persons for overhead
under operating agreements for operations conducted during the period
after the Effective Date;
(d) any other amount agreed upon by Seller and Buyer.
2.03.02 DOWNWARD ADJUSTMENTS. The Purchase Price shall be adjusted
downward by the following:
(a) the amount of all proceeds received by Seller that are
attributable to the ownership and operation of the Assets on or after
the Effective Date, including, without limitation gross proceeds (net
of Burdens) for Hydrocarbons sold; and
(b) the amount of
(i) all direct unrelated Third Person costs and expenditures
chargeable to Seller's interest and not paid by Seller that are
attributable to the drilling, completion, recompletion,
reworking, operation and maintenance of the Assets prior to the
Effective Date,
(ii) all bonuses, lease rentals and shut-in payments due prior
to the Effective Date and not paid by Seller, and
(iii) amounts relating to obligations arising under the
Contracts, and XXXXX charges all with respect to operations and
production prior to the Effective Date and not paid by Seller and
paid or assumed by Buyer;
(c) the amount of the Phase One Development Fund that remains unspent
under the terms of the Xxxxx Agreement (defined below), as stated on
Schedule 3.01.19; and
(d) any other amount agreed upon by Seller and Buyer.
2.03.03 NO ADJUSTMENT. The Purchase Price shall not be adjusted with
respect to the failure to install storm chokes as disclosed in Schedule
3.01.06.
2.04 ALLOCATION OF PURCHASE PRICE. Schedule G sets forth an allocation of the
Purchase Price among Properties and other designated items that comprise the
Assets, which allocation was prepared by Buyer (the "Allocated Value"). The
allocation has been provided for the purpose of establishing a basis for certain
Taxes, and for making adjustments under this Agreement. If necessary to
determine the Allocated Value of a portion of any Property for which an
Allocated Value is set forth on Schedule G, Seller's engineering performed prior
to the execution of this Agreement and used to
-10-
establish the Allocated Value for the entire Property (if any) shall govern
the allocation to such portion, and if no such engineering was performed,
such allocation shall be determined on a reasonable engineering basis
consistent with the evaluation implicit in the Allocated Value shown on
Schedule G.
2.05 TRANSFER OF THE ASSETS, ETC. At the Closing, Seller and Buyer shall
execute and acknowledge, and Seller shall deliver, an assignment in the form of
Exhibit A (the "Assignment"), the xxxx of sale which is contained in Exhibit B
(the "Xxxx of Sale"), as well as such certificates or other documents as are
required to effect the transfer of the Assets, or the subsequent operation
thereof. Buyer and Seller shall also execute and deliver such change of
operator forms as are required by applicable Governmental Bodies to transfer
operatorship of the Assets to Buyer.
2.06 METHOD OF PAYMENT. Any amount payable under this Agreement shall be
payable in immediately available funds by means of a wire transfer, if to
Seller, to Seller's account at First Union National Bank, ABA # 000-000-000, for
the benefit of Midland Resources, Inc., account number 2000000482590 (with
immediate telephone notice to Xx. Xxx Xxxxxx, telephone number (000) 000-0000,
or if to Buyer, to Buyer's account as may be designated by Buyer.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.01 SELLER. Seller represents and warrants to Buyer that:
3.01.01 ORGANIZATION AND STANDING. Seller has been duly organized,
validly existing in good standing under the laws of the State of Texas and
is in good standing as a foreign corporation in all jurisdictions where the
nature of its properties or business requires it.
3.01.02 AUTHORITY. Seller has the corporate power and authority to enter
into and perform this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by Seller of
this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all requisite corporate action and this
Agreement has been duly executed and delivered by Seller.
3.01.03 VALIDITY OF AGREEMENT. This Agreement is a legal, valid and
binding obligation of Seller enforceable against Seller in accordance with
the terms of this Agreement, except as enforcement may be limited by
bankruptcy, insolvency or other similar Laws affecting the enforcement of
creditors' rights in general. The enforceability of Seller's obligations
under this Agreement is subject to general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or
at law).
3.01.04 NO VIOLATION. The execution and delivery of this Agreement and
the performance by the Seller of the terms of this Agreement do not
conflict with or result in a violation of the Corporate Documents of Seller
or any agreement, instrument, order, writ, judgment or decree
-11-
to which Seller is a party or is subject.
3.01.05 LEGAL PROCEEDINGS. Except as set forth on Schedule 3.01.05, as of
the date of this Agreement, there are no pending suits, actions,
arbitrations, mediations or proceedings as to which Seller has been served
process or received notice before any court or Governmental Body which
would adversely affect the Assets, or hinder, impede or prevent Seller from
consummating the transactions contemplated by this Agreement. To Seller's
Knowledge, there are no pending suits, actions, arbitrations, mediations or
proceedings as to which Seller has not been served process or received
notice, or that are threatened before any court or Governmental Body which
would adversely affect the Assets, or hinder, impede or prevent Seller from
consummating the transactions contemplated by this Agreement.
3.01.06 COMPLIANCE WITH APPLICABLE LAWS. Except as set forth on Schedule
3.01.06, Seller, in the operation of those Assets that Seller operates and,
to Seller's Knowledge, the operator in the case of those Assets Seller does
not operate, is in compliance with any applicable laws, orders, rules,
regulations, judgments or decrees of any Governmental Bodies, including the
common or civil law, including but not limited to those relating to
occupational safety and health, consumer product safety, employee benefits,
environmental laws, zoning laws or regulations or other applicable laws or
regulations ("Laws").
3.01.07 CONTRACTS. Except as set forth on Schedule 3.01.07, the Assets
are not subject to:
(a) any instrument or agreement evidencing or related to indebtedness
for borrowed money, whether directly or indirectly; or
(b) any agreement not entered into in the ordinary course of
business.
3.01.08 ASSETS. With respect to the Assets,
(a) all Material Contracts are to Seller's Knowledge 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;
(b) Seller is not in material breach or default with respect to any
of its obligations pursuant to any such Material Contract;
(c) all payments (including, without limitation, valid calls for
advance payment under unit or operating agreements) due by Seller
thereunder have been made by Seller;
(d) to Seller's Knowledge, and except to the extent stated in
Schedule 3.01.08, no other party to any Material Contract relating to
any Asset is in material breach or default with respect to any of its
obligations thereunder to the extent such breach or
-12-
default would have a material adverse impact on Seller or any of the
Assets; and
(e) neither Seller nor, to Seller's Knowledge, any other party to any
Material Contract has given notice of any action to terminate, cancel,
rescind, or procure a judicial reformation of a Material Contract or
any provision thereof.
3.01.09 AUTHORIZATIONS FOR EXPENDITURES. Except as set forth on
Schedule 3.01.09,
(a) there are no outstanding calls under Authorizations for
Expenditures for payments which are due or which Seller has committed
to make which have not been made;
(b) there are no material operations with respect to which Seller has
become a non-consenting party where the effect of such non-consent is
not disclosed on Schedule G, and
(c) there are no commitments for the expenditure of funds for
drilling or other capital projects other than projects with respect to
which the operator is not required under the applicable operating
agreement to seek consent.
3.01.10 EQUIPMENT. All equipment and machinery used by Seller to operate
the Assets has been maintained in accordance with good oil field practices
and past practices in the field and to Seller's Knowledge all other
equipment and machinery used by Third Persons to operate the Assets has
been so maintained.
3.01.11 XXXXX. Except to the extent set forth on Schedule 3.01.11A, to
Seller's Knowledge, no well included in the Assets is subject to penalties
on allowables because of any overproduction or any other violation of
applicable Laws. Since the Identification Date, Seller has not, except in
the reasonable and fair conduct of operations, increased the rate of
production from the Properties from prior average rates, or depleted the
Line Fill. Except for the xxxxx listed in Schedule 3.01.11B, there are
no xxxxx located on the Leases that Seller or operator is currently
obligated by order of any Governmental Body to plug and abandon within a
time certain.
3.01.12 EXCHANGE OF EQUIPMENT. Except as set forth in Schedule 3.01.12,
since the Identification Date with respect to each of the Assets,
(a) Seller has not exchanged any Other Property for property of
lesser value, and
(b) Seller has not removed any idle or other equipment or inventory
from the Assets.
3.01.13 PAYOUT BALANCES. The payout balances (or expenditure balances)
with respect to
-13-
any of the Contracts or any of the Assets that are subject to future
change on account of reversionary interests, non-consent penalties or
similar agreements or arrangements are set forth on Schedule 3.01.13 and
are correct as of the dates shown on such statements.
3.01.14 NO PREFERENTIAL RIGHTS. The Assets are free of any preferential
rights to purchase, rights of first refusal, required consents to assign,
maintenance of uniform interest clause, or similar restrictions,
conditions, or requirements for an effective and unrestricted transfer of
the Assets to Buyer.
3.01.15 NO CONSENTS REQUIRED. Except as set forth on Schedule 3.01.15 and
except for consents and filings required from Governmental Bodies as part
of an ordinary course transfer, no consents, approvals or other action by,
or filing with any Person or Governmental Body is required in connection
with the execution, delivery and performance by Seller of this Agreement.
3.01.16 PREPAYMENT. Seller has not received any payments by virtue of a
prepayment arrangement under any Contract (or entered into a prepayment
arrangement) for the sale of Hydrocarbons, of a production payment or of
any other arrangement (other than gas balancing arrangements), which would
obligate Seller to deliver Hydrocarbons produced from the Assets at some
future time without receiving full payment therefor.
3.01.17 PAYMENTS. To Seller's Knowledge, all payments of any kind
required to be made by Seller to Third Persons or an Affiliate of Seller
under any Contract or otherwise with respect to the Assets have been
properly and timely paid, except for any such payments which are being
contested in good faith.
3.01.18 CONDUCT OF BUSINESS. Except as set forth on Schedule 3.01.18,
limited to Seller's knowledge as to Assets relating to Leases of which
Seller is not the operator and not so limited as to the remainder of the
Assets, since the Identification Date the Assets have been operated in
accordance with good oilfield practices consistent with past practices and
in the ordinary course of business.
3.01.19 XXXXX AGREEMENT. That certain Purchase and Sale Agreement,
Stipulation of Interest and Development Agreement between Midland
Resources, Inc. and Xxxxx Energy, Inc. et al. dated February 14, 1995 (the
"Xxxxx Agreement"), remains in force and effect and, to the Knowledge of
Seller, neither Assignee nor Assignors (as identified in the Xxxxx
Agreement) are in material default of any of its covenants, conditions,
representations or warranties. None of the Assignors has asserted any
breach of the Xxxxx Agreement by Assignee. Assignee has properly spent the
Phase One Development Fund (as defined in the Xxxxx Agreement) under the
terms of the Xxxxx Agreement and in accordance with the Phase One
Development Plan (as defined in the Xxxxx Agreement), except to the extent
of the outstanding balance identified on Schedule 3.01.19 attached to this
Agreement. Buyer has the right to assume the Xxxxx Agreement without
condition. The Effective Date of the Xxxxx Agreement is April 10,
-14-
1995, and Buyer, as assignee of the Xxxxx Agreement, has until 7:00 a.m.
on April 10, 1997, to complete expenditure of the Phase One Development
Fund.
3.1.20 LOSSES. Since the Effective Date, no material portion of any
Asset has been destroyed by fire or other casualty, taken in condemnation
or under the right of eminent domain, and no proceedings for such purposes
are pending or threatened.
3.1.21 CHANGES. Since the Effective Date Seller has not: waived or
compromised any rights or claims in excess of $10,000 with respect to the
Assets; incurred any material obligations or liabilities with respect to
the Assets; entered into any new material agreements or commitments with
respect to the Assets; abandoned any property which includes Leases and is
capable of producing Hydrocarbons in paying quantities; modified in any
material respect any of the Leases or the Material Contracts; encumbered,
sold or otherwise disposed of an of the Assets, other than Other Property
which is replaced by equivalent property or which is consumed in normal
operations; made or obligated itself to make any single expenditure for
Seller's interest on any well in excess of $10,000 other than expenditures
that are permitted under existing applicable operating agreements;
accelerated the rate of production from the Leases other than in the
ordinary course of business and consistent with standard oilfield
practices; or diminished the Hydrocarbons used for Line Fill from the
quantities present at the time the assets were identified for sale or
thereafter otherwise than in the ordinary course of business and consistent
with standard oilfield practices.
3.1.22 IMBALANCES. There is no imbalance in the production, delivery, and
sale of Hydrocarbons from the Leases, whether at the wellhead, at a plant,
at a pipeline interconnect, or otherwise. Seller is entitled to share
according to its interest of record in the production, delivery, and sale
of all Hydrocarbons produced from the Leases.
3.2 BUYER. Buyer represents and warrants to Seller that:
3.2.1 ORGANIZATION AND STANDING. Buyer has been duly organized, validly
existing in good standing under the laws of the State of Texas and is in
good standing as a foreign corporation in all jurisdictions where the
nature of its properties or business requires it and is duly qualified to
own Texas State leases, or will so qualify in the course of accepting the
Assignment.
3.2.2 AUTHORITY. Buyer has the corporate power and authority to enter
into and perform this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by Buyer of
this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all requisite corporate action and this
Agreement has been duly executed and delivered.
3.2.3 VALIDITY OF AGREEMENT. This Agreement is a legal, valid and
binding obligation of Buyer enforceable against Buyer in accordance with
the terms of this Agreement, except as
-15-
enforcement may be limited by bankruptcy, insolvency or other similar
Laws affecting the enforcement of creditors' rights in general. The
enforceability of Buyer's obligations under this Agreement is subject
to general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
3.2.4 NO VIOLATION. The execution and delivery of this Agreement and the
performance by Buyer of the terms of this Agreement do not conflict with or
result in a violation of the Corporate Documents of Buyer or of any
agreement, instrument, order, writ, judgment or decree to which Buyer is a
party or is subject.
3.2.5 NO CONSENTS REQUIRED. No consents, approvals or other action by,
or filing with any Person or Governmental Body is required in connection
with the execution, delivery and performance by Buyer of this Agreement.
3.2.6 SECURITIES REPRESENTATION. Buyer is an experienced and
knowledgeable investor and operator in the oil and gas business and is
acquiring the Assets for Buyer's own account 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.
3.3 DISCLAIMER. THERE ARE NO WARRANTIES, REPRESENTATIONS OR IMPLIED COVENANTS
BETWEEN THE PARTIES EXCEPT THE MATTERS EXPRESSLY PROVIDED FOR IN THIS AGREEMENT
AND THE EXHIBITS AND SCHEDULES ATTACHED HERETO AND THE DOCUMENTS, CONVEYANCES
AND INSTRUMENTS TO BE DELIVERED BY THE PARTIES AT AND AFTER CLOSING. THE
PARTIES RESPECTIVELY DISCLAIM ANY OTHER WARRANTIES OR REPRESENTATIONS INCLUDING,
WITHOUT LIMITATION, ANY WARRANTIES AND REPRESENTATIONS IMPLIED UNDER ANY STATUTE
OR LAW. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT:
3.3.1 ALL THE INFORMATION, STATISTICS, SUMMARIES, AND FACSIMILES
FURNISHED BY OR ON BEHALF OF SELLER HEREWITH, HEREUNDER, OR PRIOR TO THE
EXECUTION OF THIS AGREEMENT ARE FURNISHED OR WILL BE FURNISHED FOR BUYER'S
USE AT BUYER'S SOLE RISK. ALL SUCH INFORMATION HAS BEEN COMPILED OR
PREPARED BY SELLER BASED UPON ITS FILES AND RECORDS AND SUCH INFORMATION IS
BELIEVED TO BE CORRECT, BUT SELLER MAKES NO REPRESENTATION, EXPRESS OR
IMPLIED, AS TO THE ACCURACY, CORRECTNESS, COMPLETENESS, OR THE ADEQUACY OF
SAME AND DOES NOT WARRANT OR GUARANTEE SUCH INFORMATION IN ANY WAY. SELLER
HAS MADE NO STATEMENTS OR REPRESENTATIONS CONCERNING THE PRESENT OR FUTURE
VALUE OF THE ANTICIPATED INCOME, COSTS, OR PROFITS, IF ANY, TO BE DERIVED
FROM THE PROPERTIES. BUYER IS RESPONSIBLE FOR MAKING SUCH INDEPENDENT
INVESTIGATION AND EVALUATION OF THE PROPERTIES AS BUYER SHALL DEEM
APPROPRIATE, REALIZING THAT SELLER DOES NOT ASSUME AND SHALL
-16-
HAVE NO LIABILITY TO BUYER OR ANY OTHER PARTY FOR ANY RELIANCE WHICH MAY
BE PLACED ON THE INFORMATION, STATISTICS, SUMMARIES, OR FACSIMILES
FURNISHED HEREWITH OR HEREUNDER OR ANY STATEMENTS MADE HEREIN.
SPECIFICALLY, BUT WITHOUT LIMITING THE GENERALITY OF THE FOREGOING:
(a) THE DESCRIPTION OF LEASES INCLUDED IN THE PROPERTIES, THE ACREAGE
PURPORTED TO BE COVERED THEREBY, DEPTH LIMITATIONS (IF ANY), ROYALTY
AND OTHER BURDENS AFFECTING SAME, AND QUANTUM OF INTEREST HAVE BEEN
DERIVED STRICTLY FROM SELLER'S RECORDS AND SELLER HAS NOT UNDERTAKEN
ANY EXAMINATION OF TITLE TO VERIFY SAME, SELLER WARRANTS TITLE TO THE
PROPERTIES ONLY AS TO ANY CLAIMS BROUGHT BY, THROUGH, OR UNDER SELLER,
BUT NOT OTHERWISE, AND BUYER SHOULD THEREFORE UNDERTAKE SUCH TITLE
EXAMINATION AS IT DEEMS APPROPRIATE PRIOR TO CLOSING; AND
(b) ANY DESCRIPTION OF XXXXX AND EQUIPMENT INCLUDED IN THE PROPERTIES
HAS BEEN COMPILED STRICTLY FROM SELLER'S RECORDS, RATHER THAN FROM AN
ON-THE-GROUND INVENTORY. PRIOR TO CLOSING, BUYER SHOULD UNDERTAKE SUCH
INSPECTION OR INVENTORY AS IT DEEMS APPROPRIATE TO DETERMINE WHETHER
THE EQUIPMENT SO DESCRIBED IS IN FACT IN PLACE.
3.3.2 SELLER MAKES NO WARRANTY OR REPRESENTATION WHATSOEVER AS TO THE
REGULATORY STATUS OF THE PROPERTIES, AND BUYER SHOULD SATISFY ITSELF AS TO
SUCH MATTERS PRIOR TO CLOSING.
3.3.3 CONVEYANCE OF THE PROPERTIES WILL BE MADE WITHOUT WARRANTIES,
EXPRESS OR IMPLIED IN FACT OR IN LAW, AS TO MERCHANTABILITY, DURABILITY,
USE, OPERATION, FITNESS FOR ANY PARTICULAR PURPOSE, CONDITION, OR SAFETY OF
THE PROPERTIES, COMPLIANCE WITH REGULATORY AND ENVIRONMENTAL REQUIREMENTS
OR OTHERWISE.
3.3.4 BUYER HEREBY AGREES THAT IT HAS INSPECTED OR BEEN GIVEN THE
OPPORTUNITY TO INSPECT THE PROPERTIES, INCLUDING, WITHOUT LIMITATION, THE
LEASES AND THE CONTRACTS, XXXXX, PERSONAL PROPERTY, AND EQUIPMENT ASSIGNED
AND CONVEYED HEREIN AND THAT IT ACCEPTS THE SAME "AS IS" AND "WITH ALL
FAULTS." BUYER RELEASES SELLER FROM LOSSES (AS DEFINED HEREIN) WITH RESPECT
TO THE PROPERTIES, WHETHER OR NOT CAUSED BY OR ATTRIBUTABLE TO SELLER'S
NEGLIGENCE AND WHETHER OR NOT ARISING FROM OR IN CONNECTION
-17-
WITH OR DURING THE PERIOD OF SELLER'S OWNERSHIP, OPERATION, OR USE OF
THE PROPERTIES. WITHOUT LIMITING THE ABOVE, BUYER WAIVES ITS RIGHT TO
RECOVER FROM SELLER AND FOREVER RELEASES AND DISCHARGES SELLER FROM ANY
AND ALL LOSSES, PENALTIES, FINES, LIENS, JUDGMENTS, COSTS AND EXPENSES
WHATSOEVER (INCLUDING, WITHOUT LIMITATION, ATTORNEY FEES AND COSTS),
WHETHER DIRECT OR INDIRECT, KNOWN OR UNKNOWN, FORESEEN OR UNFORESEEN,
THAT MAY ARISE ON ACCOUNT OF OR IN ANY WAY BE CONNECTED WITH THE
PHYSICAL CONDITION OF THE PROPERTIES OR ANY LAW OR REGULATION
APPLICABLE THERETO, INCLUDING, WITHOUT LIMITATION, THE COMPREHENSIVE
ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT OF 1980, AS
AMENDED (42 U.S.C. 9601 ET. SEQ.), THE RESOURCE CONVERSATION AND
RECOVERY ACT OF 1976 (42 U.S.C. 6901 ET. SEQ)., THE CLEAN WATER ACT (33
U.S.C. 466 ET. SEQ.), THE SAFE DRINKING WATER ACT (14 U.S.C. 1401-1450),
THE HAZARDOUS MATERIALS TRANSPORTATION ACT (49 U.S.C. 1801 ET. SEQ.), THE
TOXIC SUBSTANCE CONTROL ACT (16 U.S.C. 2601-2629) AND ALL APPLICABLE STATE
OR LOCAL LAWS.
3.3.5 BUYER AND SELLER WAIVE ANY RIGHT, CLAIM, LOSS, OR DAMAGE UNDER THE
TEXAS DECEPTIVE TRADE PRACTICES ACT RELATING TO THIS AGREEMENT OR ITS
NEGOTIATION, EXECUTION, OR PERFORMANCE.
ARTICLE 4
COVENANTS
4.1 COVENANTS OF BUYER. Buyer covenants with Seller as follows:
4.1.1 PERFORMANCE BONDS, GUARANTIES, ETC. With respect to any surety
bonds, performance bonds, guarantees or financial assurances relating to
the Assets, on which Seller or its Affiliates are principals or guarantors,
Buyer shall cause such surety bonds, performance bonds, guarantees or
financial assurances to be replaced or otherwise released within 90 days
after the Closing Date. Buyer shall reimburse Seller for any amounts paid
by Seller with respect to such surety bonds, performance bonds, guarantees
or financial assurances related to periods on and after the Closing Date
until replaced by Buyer's instruments.
4.1.2 ASSUMPTION OF ASSUMED LIABILITIES. At the Closing, with effect as
of the Effective Date, Buyer shall assume the Assumed Liabilities.
4.2 COVENANTS OF SELLER AND BUYER. Seller and Buyer covenant to each other as
follows:
4.2.1 RECORDING. Buyer shall be solely responsible for promptly
recording the Assignments, Deeds, and any other documents related to the
conveyance of the Assets, at Buyer's expense, and shall promptly furnish
Seller with the recording information. Seller shall
-18-
cooperate fully in the preparation and execution of, and Buyer shall be
responsible for preparing and making, all filings with state and
federal agencies for change of operator, and shall promptly provide
Buyer with the original approved copies of all such filings, or
confirmation thereof. All governmental office recording and filing
fees shall be paid by Buyer.
4.2.2 BROKERS. The Parties represent to each other, that no broker,
finder, financial advisor or similar person has been retained by a Party
except as set forth in Schedule 4.02.02.
4.2.3 CERTAIN FILINGS, CONSENTS AND PERMITS. Buyer and Seller shall
cooperate with one another in:
(a) determining whether any filings are required to be made or
consents, approvals, permits or authorizations are required to be
obtained under any Laws; and
(b) making any such filings, furnishing information required in
connection therewith and seeking timely to obtain any such consents,
permits, authorizations, approvals or waivers.
4.2.4 POST-CLOSING ACCESS. Except as otherwise expressly provided
herein, from and after the Closing Date, Buyer and Seller shall reasonably
cooperate and afford each other or cause to be afforded to their respective
officers, employees, accountants and other representatives access, upon
reasonable notice, during business hours, to review and copy the books,
documents, databases or other records relating to the Assets, not including
the Excluded Assets, (and the Parties shall cooperate and assist one
another in identifying and locating such books, documents, databases,
records, or employees files or other information the Parties), interview,
depose or seek testimony of employees, provide assistance in proceedings
with employees as witnesses or advisors, investigate the physical premises,
take photographs or videotapes, identify employees and contractors with
knowledge of any matter which is the subject of a claim for which a Party
has responsibility and make such employees available to such Party and
provide reasonable office space to do any of the foregoing in connection
with any matter affecting or alleged to affect the Party requesting such
access.
4.2.5 EMPLOYEE MATTERS. Buyer shall have the right to solicit the field
employees of Seller who work directly on or in connection with the Assets
("Employees"), and shall have the right to offer employment to and hire any
such Employees.
4.2.6 FINAL RECAPITULATION SETTLEMENT; SUBSEQUENT AUDITS AND SETTLEMENTS.
With respect to final recapitulation and audits;
(a) During the 60 days following the Closing Date, Seller and Buyer
shall each have the right, during normal business hours, to audit,
inspect, and copy the books and records of the other relating to the
Assets and production and sale of Hydrocarbons from the Assets.
-19-
(b) Within 60 days after the Closing Date, Seller shall provide to
Buyer, for Buyer's review, a proposed final recapitulation settlement
in the form of the Preliminary Settlement Statement (the "Final Recap
Statement") to account for all adjustments to the Purchase Price known
as of such date pursuant to Article 2.03 (the "Final Recap"). Buyer
shall have the right, within 30 days after receipt of the Final Recap
Statement, to audit the Final Recap Statement. If Buyer disagrees
with the Final Recap Statement, Buyer and Seller shall use best
efforts to reach agreement within 15 days following Buyer's audit of
the Final Recap Statement.
(c) Should the Parties be unable to resolve any disagreements, such
disagreement shall, at the earliest practicable date, be referred, by
either or both of the Parties, to a mutually acceptable accounting
firm (the "Accounting Firm"), along with all audit reports, work
papers, schedules and calculations related to the matter in dispute.
Within 25 days after such submission, the Accounting Firm shall issue
a letter report determining the Final Recap, which shall be final and
binding. Any fees and expenses incurred in resolving disputes shall
be borne equally by the Parties.
(d) Payment of any amounts owed under the Final Recap is due 30 days
from the date Seller and Buyer agree on the Final Recap Statement, or
ten days from the determination of the Final Recap by the Accounting
Firm, whichever is later. Interest will be applied at the Agreed Rate
to any amounts if not paid when due.
(e) Following the Closing
(i) revenue received by either Party that belongs to the other
Party shall be remitted to the other Party at least monthly, and
(ii) invoices received by a Party that are the obligation of the
other Party shall be forwarded to the other Party within ten days
of receipt of the invoice.
4.2.7 FURTHER ASSURANCES. Each Party shall, from time to time at the
request of the other, and without further consideration, execute and
deliver such other instruments of sale, transfer, conveyance, assignment,
clarification and termination and take such other action as the Party
making the request may reasonably require to effect the intentions of the
Parties, including those required to sell, transfer, convey and assign to,
and vest in Buyer, and to place Buyer in possession of the Assets and to
transfer, assign or convey the Excluded Assets to Seller. Seller intends
to convey the Assets at Closing; however, in the event it is determined
after Closing that:
(a) any part of the Assets was not in fact conveyed to Buyer, and
that the title to any part of the Assets is incorrectly in the name of
Seller; or
-20-
(b) any Excluded Asset is conveyed to Buyer and that the title to
such Excluded Asset is incorrectly in the name of Buyer;
then each Party shall take all such action reasonably necessary to
correctly convey any part of Assets to Buyer, or any part of the Excluded
Assets to Seller.
4.2.8 FILES TRANSFER. Seller shall deliver, at Seller's premises within
15 days after the Closing Date, the originals of all the files and records
described in item (e) set forth in the definition of Other Property except
where such original files also relate to a property retained by Seller, in
which case Seller shall deliver copies of such files and shall provide
Buyer with access to the original files as reasonably requested by Buyer
(but Buyer shall always receive the originals of well logs for the xxxxx
completed or attempted to be completed within depths included within the
Assets). In the event Seller has delivered originals of files to Buyer,
Seller shall have the right to make copies of all originals. Seller and
Buyer shall be equally responsible for the cost of copying these materials.
BUYER SHALL ACCEPT ALL FILES AND RECORDS DESCRIBED IN ITEM (e) OF THE
DEFINITION OF OTHER PROPERTY WITHOUT ANY WARRANTY OR REPRESENTATION
REGARDING ACCURACY OR CORRECTNESS THEREOF.
4.2.9 PLUGGING AND ABANDONMENT. Upon Closing, Buyer shall assume all of
Seller's Plugging and Abandonment obligations associated with the Assets as
of the Effective Date and shall conduct such Plugging and Abandonment
operations in compliance with applicable Laws and in a good and workmanlike
manner.
ARTICLE 5
TAXES
5.1 PAYMENT AND APPORTIONMENT OF REAL PROPERTY TAXES AND PERSONAL PROPERTY
TAXES. With respect to Taxes:
5.1.1 REAL AND PERSONAL PROPERTY TAXES. All ad valorem taxes, real
property taxes and personal property taxes ("Real and Personal Property
Taxes") for the year in which the Effective Date occurs shall be
apportioned as of the Effective Date between Seller and Buyer. Seller
shall be liable for the portion of such Real and Personal Property Taxes
based upon the number of days in the year occurring prior to the Effective
Date, and Buyer shall be liable for the portion of such taxes based upon
the number of days in the year occurring on and after the Effective Date.
For any year in which an apportionment is required, Buyer shall file all
required reports and returns incident to these taxes and shall remit to the
appropriate taxing authorities all such taxes assessed for the year in
which the Effective Date occurs. Seller shall pay to Buyer, at the time of
Buyer's remittance, Seller's share of such taxes.
5.1.2 LIABILITY AND RIGHT TO PURSUE CLAIMS. Seller shall retain
liability for all adjustments, examinations or claims relating to Taxes
that are paid by Seller and that are allocated to Seller
-21-
pursuant to this Article 5.01. Seller shall administer and defend any
examination, claim or adjustments arising in connection with Taxes
which are allocated to Seller pursuant to this Article 5.01.
5.2 OTHER TAXES. All excise, severance, windfall profit and other Taxes
relating to production of Hydrocarbons attributable to the Assets prior to the
Effective Date shall be allocated to Seller, and all such Taxes relating to
production on or after the Effective Date shall be apportioned to Buyer. Buyer
shall file any reports or returns not filed as of the Closing, and shall remit
to the proper taxing authorities any such Taxes allocated to Seller, but not
paid as of the Closing. Seller shall pay Seller's share of such Taxes at the
time Buyer remits such Taxes.
5.3 SALES TAXES. The Purchase Price does not include any sales Taxes or other
transfer Taxes imposed in connection with the sale of the Assets. Buyer shall
pay any sales Tax or other transfer Tax, as well as any applicable conveyance,
transfer and recording fee, and real estate transfer stamps or taxes imposed on
the transfer of the Assets pursuant to this Agreement. If Buyer is of the
opinion that it is exempt from the payment of any such sales Tax or other
transfer Tax, Buyer shall furnish to Seller the appropriate tax exemption
certificate.
5.4 TAX PROCEEDINGS. In the event Buyer or any of Buyer's Affiliates receives
notice of any examination, claim, adjustment or other proceeding relating to the
liability for Taxes of or with respect to Seller for any period Seller is or may
be liable under Article 5.01.02, Buyer shall notify Seller in writing within 20
days of receiving notice thereof. As to any such Taxes for which Seller is or
may be liable under Article 5.01.02, Seller shall, at Seller's expense, control
or settle the contest of such examination, claim, adjustment or other
proceeding, and shall indemnify Buyer against all Losses in connection
therewith. The Parties shall cooperate with each other and with their
respective Affiliates in the negotiations and settlement of any proceeding
described in this Article 5.04. Buyer shall provide, or cause to be provided,
to Seller necessary authorizations, including powers of attorney, to control any
proceeding which Seller is entitled to control pursuant to Article 5.
5.5 PURCHASE PRICE ALLOCATION. The allocation of Purchase Price provided for
in Article 2.04 is intended to comply with the allocation method required by
Section 1060 of the Code. Buyer and Seller shall cooperate to comply with all
substantive and procedural requirements of Section 1060 and regulations
thereunder, including without limitation the filing by Buyer and Seller of an
IRS Form 8594 with their federal income tax returns for the taxable year in
which the Closing occurs. .
ARTICLE 6
ENVIRONMENTAL MATTERS
6.1 DEFINITIONS. For the purposes of this Agreement, the following terms have
the following meanings:
6.1.1 "Environmental Claims" means actions, claims, or proceedings by
Third Persons associated with the Property Interests and based on
Environmental Conditions or
-22-
Environmental Law in connection with any chemical substance on or
originating from a Property Interest prior to the Effective Date,
except for the portion of any such claim associated with Remediation.
6.1.2 "Environmental Condition" means a condition that exists prior to
the Effective Date, and only to the extent in existence on the Effective
Date, with respect to the air, land, soil, surface, subsurface strata,
surface water, ground water, or sediments which causes a Property Interest
to be subject to Remediation under, or not in compliance with, an
Environmental Law or a lease or agreement, excluding Plugging and
Abandonment.
6.1.3 "Environmental Law" means any Law relating to pollution, the
protection of the environment, or the release or disposal of waste
materials, but shall not include any Law associated with Plugging and
Abandonment.
6.1.4 "Environmental Matter" means an Environmental Condition or an
Environmental Claim.
6.1.5 "Expenses" means the actual amounts expended under a Remediation
Plan to remedy an Environmental Condition, and amounts expended to
determine the extent of the Environmental Condition and to determine the
appropriate means of Remediation, but not Buyer's investigation expenses
(including costs of surveys, audits or analyses) prior to Buyer notifying
Seller of the potential Environmental Condition.
6.1.6 "Property Interest" means any single Lease or Easement.
6.1.7 "Remediation" means actions taken to correct an Environmental
Condition and implement the terms of a Remediation Plan.
6.1.8 "Remediation Plan" means the written plan, and any amendments
thereof, that sets forth the actions to be taken to effect any necessary
Remediation of a single Environmental Condition or a group of related and
reasonably proximate Environmental Conditions, and necessary to bring a
Property Interest or Property Interests into compliance with Environmental
Law, or a lease or agreement and, if appropriate, approved by any
applicable Governmental Body.
6.2 SELLER REPRESENTATIONS. Seller represents and warrants to Buyer that:
6.2.1 DISCLOSURE. Seller has no Knowledge of any facts or circumstances
that are likely to result in Losses to Seller or Buyer under this Agreement
for any single Environmental Matter in excess of $25,000.00.
6.2.2 PAST USE OF PROPERTY INTEREST. To the Seller's Knowledge, at no
time have the Property Interests been used by Seller or others as a
landfill or for waste disposal, other than
-23-
such activities associated with normal oil field operations.
6.2.3 OFFSITE DISPOSAL. To the Seller's Knowledge, at no time have
hazardous waste or hazardous substances from the Property Interests been
disposed of otherwise than in accordance with applicable law.
6.3 SELLER'S INDEMNITY. Except as set forth in Article 6.04, Seller shall
indemnify, defend, and hold Buyer harmless from any and all:
6.3.1 Expenses;
6.3.2 Losses associated with Environmental Claims;
6.3.3 breaches of any representation, warranty, covenant, or agreement of
Seller in Article 6.02.
6.4 LIMITATIONS. With regard to Article 6.03:
6.4.1 Seller shall be liable for all Expenses or Losses under Article
6.03 except as follows:
(a) Seller shall not be liable for Expenses or Losses less than a
cumulative total of $25,000;
(b) Seller shall not be liable for Expenses or Losses in excess of a
cumulative total of $125,000; and
(c) Seller shall be responsible only for Expenses and Losses under
Article 6.03 with respect to which Buyer gives Seller written notice
prior to 45 days from the Effective Date.
6.4.2 If Buyer timely claims Expenses and Losses in excess of $125,000,
then either Buyer or Seller may elect within 60 days after the Closing Date
to rescind the transaction called for by this Agreement, and Buyer shall
promptly reconvey the Assets to Seller. In the event of such a
reconveyance, Buyer shall indemnify and hold harmless Seller from all
Losses and Expenses (of any kind) relating to the Assets during the period
of time between the Closing Date and the date of reconveyance, and Seller
shall indemnify and hold harmless Buyer from all Losses and Expenses (of
any kind) relating to the Assets during all other periods of time. In the
event of reconveyance, Buyer shall be entitled to recovery, only from
production of Hydrocarbons from the Leases after the Effective Date and
before reconveyance, of its expenses incurred in the operation and
development of the Assets during its period of ownership of the Assets, and
Seller shall be entitled to all other income from the Assets.
-24-
6.05 BUYER'S RESPONSIBILITIES. Except in the event of reconveyance as provided
in Article 6.04, Buyer shall indemnify, defend, and hold Seller harmless from
any and all Expenses or Losses resulting from Environmental Matters arising with
respect to the Property Interests on or after the Effective Date.
6.06 EXCLUSIVE REMEDIES. The rights and remedies granted each Party in Article
6 are exclusive rights and remedies against the other Party related to any
defined Environmental Condition and to any Environmental Claims asserted in
writing after the Closing.
ARTICLE 7
INDEMNITY
7.01 GENERAL INDEMNIFICATION.
7.1.1 SELLER. For the period set forth in Article 7.01.03, and except
with respect to Taxes (which are covered by Article 5), and Environmental
Matters (which are covered by Article 6), Seller shall indemnify, defend
and hold harmless Buyer from and against all Losses based upon, arising out
of, in connection with, or relating to:
(a) any breach of any covenant or agreement of Seller contained in
this Agreement;
(b) any breach of any representation or warranty of Seller contained
in this Agreement;
(c) any matter arising in connection with the ownership or operation
of or production of Hydrocarbons from the Assets on or after April 10,
1995, and prior to the Effective Date;
(d) all actions, proceedings, claims, litigation, arbitration,
mediation or other dispute resolution procedure pending as of the
Effective Date relating to or affecting the Assets; and
(e) the matters set forth on Schedules 3.01.05.
7.01.02 BUYER. For the period set forth in Article 7.01.03, and except
with respect to Taxes (which are covered in Article 5) and Environmental
Matters (which are covered by Article 6), Buyer shall indemnify, defend and
hold harmless Seller from and against all Losses based upon, arising out
of, in connection with, or relating to:
(a) any breach of any covenant or agreement of Buyer contained in
this Agreement;
-25-
(b) any breach of any representation or warranty of Buyer contained
in this Agreement;
(c) if the Closing occurs, any matter arising in connection with the
ownership or operation of or production of Hydrocarbons from the
Assets from and after the Effective Date; and
(d) the Assumed Liabilities.
7.01.03 DURATION. The indemnities set forth in Articles 7.01.01(a), (c),
and (d), and in Article 7.01.02, shall apply only to Losses as to which
claims are asserted under Article 7.02 on or before three years after the
Closing Date. The indemnity set forth in Article 7.01.01(e) shall survive
without limit. The indemnities set forth in Articles 7.01.01(b) and
7.01.02(b) shall survive for a period of one year after the Closing Date.
7.02 METHOD OF ASSERTING CLAIMS, ETC. Except for claims under Article 5
(Taxes) and claims for reimbursement for Remediation under Article 6
(Environmental), all claims for indemnification under this Agreement shall be
asserted and resolved as provided in this Article 7.02. The provisions of
Articles 7.02.01 and 7.02.02 shall be covenants and not conditions to the
defense and indemnity obligations to which they apply.
7.02.01 THIRD PERSON CLAIMS. In the event that any claim for which a
Party providing indemnification (the "Indemnifying Party") would be
liable to a Party or any of its officers, directors, employees, agents
or representatives entitled to indemnification hereunder (the
"Indemnified Party") is asserted against or sought to be collected by a
Third Person, the Indemnified Party shall promptly notify the
Indemnifying Party of such claim, specifying the nature of such claim
and the amount or the estimated amount thereof to the extent then
feasible (which estimate shall not be conclusive of the final amount of
such claim) (the "Claim Notice"). The Indemnifying Party shall have 30
days from its receipt of the Claim Notice (the "Notice Period") to
notify the Indemnified Party
(a) whether or not it disputes its liability to the Indemnified Party
hereunder with respect to such claim, and
(b) if it does not dispute such liability, whether or not it desires,
at its sole cost and expense, to defend the Indemnified Party against
such claim; provided, however, that the Indemnified Party is hereby
authorized prior to and during the Notice Period to file any motion,
answer or other pleading, submission or document which it shall deem
necessary or appropriate to protect its interests.
In the event that the Indemnifying Party notifies the Indemnified Party
within the Notice Period that it does not dispute such liability and
desires to defend against such claim or demand, then, except as hereinafter
provided, the Indemnifying Party shall have the right to
-26-
defend such claim or demand by appropriate proceedings, which
proceedings shall be promptly settled or prosecuted to a final
conclusion, in such a manner as to avoid any risk of the Indemnified
Party becoming subject to liability. If the Indemnified Party desires
to participate in, but not control, any such defense or settlement, it
may do so at its own cost and expense. If the Indemnifying Party
disputes its liability with respect to such claim, or elects not to
defend against such claim, whether by not giving timely notice as
provided above or otherwise, the Indemnified Party shall have the right
but not the obligation to defend against such claim, and the amount of
any such claim, or if the same be contested by the Indemnifying Party or
by the Indemnified Party, then that portion thereof as to which such
defense is unsuccessful, shall be conclusively deemed to be a liability of
the Indemnifying Party hereunder (subject, if it has timely disputed
liability, to a determination in accordance with Article 7.03.03 that the
disputed liability is covered by this Article 7.)
7.02.02 OTHER CLAIMS. In the event that the Indemnified Party shall
have a claim against the Indemnifying Party hereunder which does not
involve a claim or demand being asserted against or sought to be
collected from it by a Third Person, the Indemnified Party shall
promptly send a Claim Notice with respect to such claim to the
Indemnifying Party. If the Indemnifying Party does not notify the
Indemnified Party within the Notice Period that it disputes such claim,
the amount of such claim shall be conclusively deemed a liability of the
Indemnifying Party hereunder.
7.03 PAYMENT. Payments for claims asserted under Article 7.02 shall be made as
follows:
7.03.01 PAYMENT OF UNDISPUTED AMOUNT. In the event that the Indemnifying
Party is required to make any payment, the Indemnifying Party shall
promptly pay the Indemnified Party the amount so determined. If there
should be a dispute as to the amount or manner of determination of any
indemnity obligation owed, the Indemnifying Party shall nevertheless pay
when due such portion, if any, of the obligation as shall not be subject to
dispute. The difference, if any, between the amount of the obligation
ultimately determined as properly payable and the portion, if any
theretofore paid, shall bear interest at the Agreed Rate. Upon the payment
in full of any claim, the Indemnifying Party shall be subrogated to the
rights of the Indemnified Party against any Person or other entity with
respect to the subject matter of such claim.
7.03.02 INTEREST. If all or part of any indemnification obligation under
this Agreement is not paid when due upon resolution of the claim, then the
Indemnifying Party shall pay on demand to the Indemnified Party interest at
the Agreed Rate on the unpaid amount of the obligation for each day from
the date the amount became due until payment in full.
7.03.03 DISPUTED CLAIMS. If the Indemnifying Party shall notify the
Indemnified Party during the Notice Period that it disputes any claim
asserted under Article 8.02 (the "Disputed Claim"), the Disputed Claim
shall be subject to arbitration as provided in this Agreement.
-27-
ARTICLE 8
CONDITIONS PRECEDENT
8.01 CONDITIONS PRECEDENT OF BUYER. The obligations of Buyer to consummate the
transactions contemplated by this Agreement are subject to the following
conditions:
8.01.01 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
representations and warranties of Seller contained in this Agreement or in
any certificate or document delivered pursuant to the provisions hereof, or
in connection with the transactions contemplated hereby, were true and
complete when made, and shall be true and complete on and as of the Closing
Date as though such representations and warranties were made at and as of
such date except as otherwise expressly provided herein.
8.01.02 COMPLIANCE WITH AGREEMENT. On and as of the Closing Date, Seller
shall have performed and complied with all agreements, covenants, and
conditions required by this Agreement to be performed and complied with
prior to or on the Closing Date.
8.01.03 CERTIFIED RESOLUTIONS AND OFFICERS' CERTIFICATE. Seller shall
have delivered to Buyer
(a) a certificate dated the Closing Date signed by the Secretary or
an Assistant Secretary of Seller with respect to the action of
Seller's Board of Directors authorizing the transactions contemplated
by this Agreement, and
(b) a certificate, dated the Closing Date and signed by the President
or a Vice President of Seller certifying in such detail as Buyer may
reasonably request to the fulfillment of the conditions specified in
Articles 8.02.01 and 8.02.02.
8.01.04 INJUNCTION. On the Closing Date, there shall be no injunction,
writ, or preliminary restraining order or any order of any nature issued by
a court or other Governmental Body of competent jurisdiction directing that
the transaction provided for herein or any of them not be consummated as
herein provided or imposing any conditions on the consummation of the
transactions contemplated hereby and no material proceeding or lawsuit
shall have been commenced or threatened by any Governmental Body or other
Person with respect to any of the transactions contemplated by this
Agreement.
8.01.05 CONVEYANCE. Seller shall execute, acknowledge and deliver to
Buyer the Assignment and Xxxx of Sale, as well as change of operator forms
required by applicable Laws and such other documents as may be necessary to
carry out the purpose of this Agreement.
8.01.06 LETTERS IN LIEU. Buyer and Seller shall execute, acknowledge and
deliver all Letters in Lieu.
8.01.07 NO MATERIAL ADVERSE CHANGE. Since the Effective Date, there
shall not have occurred with respect to the Assets as a whole any
material adverse change in the condition
-28-
or value thereof other than changes in the ordinary course of business,
changes occurring on account of normal declines in production, changes
in the value of such properties other than changes resulting from events
or circumstances that affect the oil and gas industry generally.
8.02 CONDITIONS PRECEDENT OF SELLER. The obligations of Seller to consummate
the transactions contemplated by this Agreement are subject to the following
conditions:
8.02.01 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The
representations and warranties of Buyer contained in this Agreement or in
any certificate or document delivered pursuant to the provisions hereof, or
in connection with the transactions contemplated hereby, were true and
complete when made, and shall be true and complete on and as of the Closing
Date as though such representations and warranties were made at and as of
such date except as otherwise expressly provided herein.
8.02.02 COMPLIANCE WITH AGREEMENT. On and as of the Closing Date, Buyer
shall have performed and complied with all agreements, covenants, and
conditions required by this Agreement to be performed and complied with
prior to or on the Closing Date.
8.02.03 CERTIFIED RESOLUTIONS AND OFFICERS' CERTIFICATE. Buyer shall
have delivered to Seller
(a) a certificate dated the Closing Date signed by the Secretary or
an Assistant Secretary of Buyer with respect to the action of Buyer's
Board of Directors authorizing the transactions contemplated by this
Agreement, and
(b) a certificate dated the Closing Date and signed by the President
or a Vice President of Buyer certifying in such detail as Seller may
reasonably request to the fulfillment of the conditions specified in
Articles 8.01.01 and 8.01.02
8.02.04 INJUNCTION. On the Closing Date, there shall be no injunction,
writ, or preliminary restraining order or any order of any nature issued by
a court or other Governmental Body of competent jurisdiction directing that
the transactions provided for herein or any of them not be consummated as
herein provided or imposing any conditions on the consummation of the
transactions contemplated hereby and no material proceeding or lawsuit
shall have been commenced or threatened by any Governmental Body or other
Person with respect to any of the transactions contemplated by this
Agreement.
8.02.05 CONVEYANCE. Buyer shall execute, acknowledge and deliver to
Seller such documents as may be necessary to carry out the purposes of
this Agreement.
8.02.06 LETTERS IN LIEU. Buyer and Seller shall execute, acknowledge and
deliver the Letters in Lieu.
ARTICLE 9
MISCELLANEOUS
-29-
9.01 NOTICES. All notices, consents, requests, demands, and other
communications hereunder shall be in writing and shall be deemed to have been
duly given or delivered if
9.01.01 delivered by hand,
9.01.02 delivered by a recognized overnight commercial courier (receipt
requested), or
9.01.03 sent by telecopier (with receipt confirmed), provided that a copy
is promptly thereafter mailed in the United States by first-class postage
prepaid mail,
to the Party as follows (or to such other address as any Party shall have last
designated by 15 days' notice to the other Parties).
If to Buyer:
Redfish Bay Development Corporation
Pi Energy Corporation
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Fax: (000) 000-0000
If to Seller:
Midland Resources, Inc. and
Summit Petroleum Corporation
00000 Xxxxxx Xxxxx Xxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Fax: (000) 000-0000
A notice shall also be deemed given if an original, photocopy or facsimile is
actually received by the Persons designated to receive notice, regardless of the
manner of transmission.
9.02 MODIFICATION. This Agreement, including the Exhibits and Schedules, shall
not be modified except by an instrument in writing signed by the Parties.
9.03 GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the Laws of the State of Texas, except those laws
and principles governing conflicts of law.
9.04 ASSIGNMENT. This Agreement and the rights and obligations created
hereunder shall not be assigned prior to Closing by either Party except that
Buyer may assign its rights to a single subsidiary of Buyer provided Buyer
remains primarily liable for the performance of all obligations hereunder.
-30-
Subsequent to Closing either Party may assign their obligations hereunder
provided the Party remains primarily liable for the performance of the Party's
obligations hereunder. Subsequent to Closing neither Party may assign its
rights or interests under this Agreement except in connection with a sale of all
or substantially all of the Assets of the Party or in connection with a merger
or similar transaction. Seller's obligations under this Agreement shall not be
expanded in any manner by a transfer of Assets by Buyer, and Buyer's rights
hereunder shall not be limited in any manner by a transfer of Assets.
9.05 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
9.06 INVALIDITY. If any of the provisions of this Agreement including the
Schedules is held invalid or unenforceable, such invalidity or unenforceability
shall not affect in any way the validity or enforceability of any other
provision of this Agreement. In the event any provision is held invalid or
unenforceable, the Parties shall attempt to agree on a valid or enforceable
provision which shall be a reasonable substitute for such invalid or
unenforceable provision in light of the tenor of this Agreement and, on so
agreeing, shall incorporate such substitute provision in this Agreement.
9.07 ENTIRE AGREEMENT AND CONSTRUCTION. This Agreement contains the entire
agreement between the Parties with respect to the transactions contemplated
hereby and all prior understandings and agreements shall merge herein. There
are no additional terms, whether consistent or inconsistent, oral or written,
which are intended to be part of the Parties' understandings which have not been
incorporated into this Agreement and the Schedules and Exhibits. The Parties
agree that they have jointly participated in the drafting and preparation of
this Agreement and that the language of this Agreement shall be construed as a
whole according to its fair meaning and not strictly for or against any of the
Parties hereto.
9.08 EXPENSES. Except as otherwise expressly provided herein, each Party shall
bear its fees, costs and expenses in connection with the transactions
contemplated herein, including, without limitation, all legal and accounting
fees and disbursements and fees and expenses of other advisors retained by such
Party.
9.09 WAIVERS AND AMENDMENTS. All amendments and other modifications hereof
shall be in writing and signed by each of the Parties. Either Party may by
written instrument
9.09.01 waive any inaccuracies in any of the representations or
warranties made to it by any other Party contained in this Agreement or
in any instruments and documents delivered to it pursuant to this
Agreement, or
9.09.02 waive compliance or performance by the other Party with or of any
of the covenants or agreements made to it by the other Party contained in
this Agreement.
The delay or failure on the part of a Party hereto to insist, in any one
instance or more, upon strict
-31-
performance of any of the terms or conditions of this Agreement, or to
exercise any right or privilege herein conferred shall not be construed as a
waiver or any such terms, conditions, rights or privileges but the same shall
continue and remain in full force and effect. All rights and remedies are
cumulative. The waiver of a condition to Closing by a Party regarding a
warranty, representation or covenant shall not constitute a waiver of a
breach of such warranty, representation or covenant; provided, however, that
the Parties shall attempt in good faith to agree prior to Closing upon the
resolution of a breach of a representation or warranty that arises after the
date of this Agreement which could result in liability to the breaching Party
and of which the other Party has actual Knowledge, and if the Parties cannot
agree upon a resolution, the breach shall be deemed waived if the Closing
occurs.
9.10 SURVIVAL OF WARRANTIES, REPRESENTATIONS AND COVENANTS. All representations
and warranties contained in this Agreement shall survive the Closing and
continue with respect to claims made on or before one year following the Closing
Date. The covenants, indemnities and agreements contained in this Agreement
shall survive the Closing and continue in accordance with their respective
terms.
9.11 ARTICLE HEADINGS. The Article headings in this Agreement are for
convenience of reference only and shall not be deemed to alter or affect the
interpretation of any provision thereof.
9.12 DISPUTE RESOLUTION. Except as expressly provided to the contrary in this
Agreement, the parties shall submit every dispute relating to this Agreement to
binding arbitration as follows:
9.12.01 SELECTION OF ARBITRATOR. The parties shall use reasonable
efforts to select a mutually acceptable arbitrator. If the parties fail
to agree on an arbitrator within 15 days, either party may request the
judge of the United States District Court for the Southern District of
Texas having greatest tenure, but not yet on retired or senior status,
to appoint an arbitrator. If that judge fails to do so within 30 days,
either party may request the judge of that court next senior to name the
arbitrator, and if that judge fails to do so after ten days, either
party may make the request of the judge of that court next senior, and
so on, until the arbitrator is appointed.
9.12.02 QUALIFICATIONS OF ARBITRATOR. Each arbitrator shall be
knowledgeable about matters affecting the issue(s) for which such
arbitrator is appointed (and where applicable, shall be a professional in
the matter in dispute) or shall be a former member of the Texas or federal
judiciary, and shall be required to meet the qualification requirements of
the Commercial Arbitration Rules of the American Arbitration Association
(the "AAA Rules"). If prior to rendering a decision an arbitrator resigns
or becomes unable to serve, the arbitrator will be replaced using the
mechanism set forth herein.
9.12.03 SUIT PROHIBITED. No party will commence or prosecute any suit or
action against another party other than as may be necessary to compel
arbitration or to enforce the award of an arbitrator.
-32-
9.12.04 DAMAGES. The arbitrator shall not have any authority to award
consequential, exemplary or punitive damages. The sole forum for the
arbitration shall be Xxxxxx County, Texas and all hearings shall be
conducted in Xxxxxx County, Texas.
9.12.05 DECISION. The decision of the arbitrator shall be rendered in
writing and shall be final and binding upon the parties. Any party shall
have the right to entry of judgment, by any court of competent
jurisdiction, upon the decision of the arbitrator. Unless declared
otherwise by the arbitrator:
(a) The expenses of arbitration, including compensation to the
arbitrator, shall be borne equally by the parties;
(b) each party shall bear the compensation and expenses of its own
counsel, witnesses and employees; and
(c) if the testimony of a witness is obtained by both parties, the
costs associated with obtaining such testimony shall be borne equally
between the parties.
9.12.06 AAA RULES. Matters not specifically provided for herein shall be
governed by the AAA Rules.
IN WITNESS WHEREOF, the Parties hereto have entered into this Agreement as of
the date first herein above written.
PI DEVELOPMENT CORPORATION
By:
------------------------------------
Xxx X. Xxxxxxx,
Vice President and General Counsel
REDFISH BAY DEVELOPMENT CORPORATION
By:
------------------------------------
Xxx X. Xxxxxxx, President
MIDLAND RESOURCES, INC.
-33-
By:
------------------------------------
Xxxx X. Xxxxxx, President
SUMMIT PETROLEUM CORPORATION
By:
------------------------------------
Xxxx X. Xxxxxx, President
-34-
