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EXHIBIT 10.1
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT ("Agreement") is made and entered
into this 22nd of October, 1997, by and between XXXXXX ENERGY, INC., a Texas
corporation ("Seller") and COTTON VALLEY ENERGY CORP., a Nevada corporation
("Buyer").
WHEREAS, Buyer desires to purchase and Seller desires to sell
all of Seller's right, title and interest in and to the oil, gas and mineral
leases, royalty and overriding royalty interests, and associated assets and
contract rights located in the South Neill Field, Xxxxx and Xxxxxx Counties,
Texas; and
WHEREAS, Seller and Buyer desire to set forth herein the terms and
provisions of their agreements and understandings;
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises hereinafter set forth and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
GENERAL TERMS AND CONDITIONS
1.01 Sale of Subject Properties.
1.01.01 Subject to the terms and conditions herein
contained, Seller covenants and agrees to sell to Buyer, and Buyer
covenants and agrees to buy from Seller all of Seller's right,
title and interest in and to the Leases, Pooling Rights, Contracts
and other rights and interests identified hereinbelow, (all of
such interests being collectively referred to herein as the
"Subject Properties"):
(A) The oil, gas and mineral leases and all lands
covered thereby, pooled, unitized or communitized therewith
(the "Leases") and xxxxx located thereon (the "Xxxxx") as
set forth on Exhibits A attached hereto together and all
overriding royalty interests or any other rights to proceeds
from the production of oil, gas or minerals thereunder.
(B) All presently existing and valid oil gas or mineral
unitization, pooling, operating and communitization
agreements, declarations and orders, and the units
created thereby including, without limitation, all units
voluntarily formed or formed under orders, regulations,
rules or other official acts of any federal state or
other governmental authority having jurisdiction, insofar and
only insofar as they relate to the Leases (herein the
"Pooling Rights").
PURCHASE AND SALE AGREEMENT, PAGE 1
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(C) All presently existing and valid oil and gas sales,
purchase, transportation, gathering, exchange and processing
contracts, casinghead gas contracts, operating agreements,
joint venture agreements and other agreements and instruments
(including without limitation, future interests, reversionary
rights and deferred interests and also including rights to
recoup underproduced volumes of gas), insofar and only insofar
as they relate to the Subject Properties (the "Contracts") and
to the extent the transfer thereof is not prohibited by
existing contractual arrangements, together with all
franchises, licenses, permits, approvals, consents,
certificates and other authorizations and other rights granted
by governmental authorities and all certificates of convenience
or necessity, immunities, privileges, grants and other rights,
that relate to the Leases or the ownership or operation of any
thereof (the "Permits"), insofar and only insofar as any of
them relate to such properties and are assignable by Seller.
Notwithstanding the foregoing all existing agreements between
Seller and any affiliate of Seller shall not be considered as
"Contracts" and shall not be assigned to or assumed by Buyer.
(D) All personal property, improvements, lease and well
equipment, easements, permits, servitudes and rights-of-way
(including as applicable, but not limited to, any xxxxx, tanks,
boilers, buildings, platforms, flowlines, fixtures, machinery,
injection facilities, saltwater disposal facilities,
compression facilities and other equipment, gathering systems,
power lines, telephone and telegraph lines, roads and other
appurtenances and easements) owned by Seller and which are now
located on the Subject Properties or if not located on the
Subject Properties which are being used in connection with the
exploration, development, operation, transportation or
marketing of production or maintenance of the Subject
Properties, or any unit or units in which part or parts of the
Subject Properties may be included, or being used in connection
with the production, treating, storing, transportation or
marketing of oil, gas and the minerals, produced from or
allocated to the Subject Properties or such unit or units.
(E) All lease files, land files, well files, gas and oil
sales contract files, gas processing files, division order
files, geological maps and interpretations, abstracts, title
opinions and all other books, files and records, information,
seismic and other geophysical data and other data and all
rights thereto of Seller insofar as the same are directly
related to and necessary to the realization of any value by
Buyer of the Leases and the Xxxxx, to the extent the transfer
thereof is not prohibited by existing contractual obligations
with third parties and subject to the rights, if any, of third
parties.
1.01.02 The Subject Properties shall not include any of the
following (referred to herein as the "Excluded Assets"), except as
otherwise provided herein: (A) those assets described on Exhibit B; (B)
all trade credits and all accounts, instruments and general intangibles
(as such terms are defined in the Texas Uniform Commercial Code)
attributable
PURCHASE AND SALE AGREEMENT, PAGE 2
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to the Subject Properties with respect to any period of time prior to
the Effective Date; (C) 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, (ii) arising under or
with respect to any contract related to the Subject Properties that are
attributable to periods of time prior to the Effective Date (including
claims for adjustments or refunds), or (iii) with respect to any of the
Excluded Assets; (D) all rights and interests of Seller (i) under any
policy or agreement of insurance or indemnity, (ii) under any bond, or
(iii) to any insurance or condemnation proceeds or awards arising, in
each case, from acts, omissions or events, or damage to or destruction
of property, occurring prior to the Effective Date; (E) all oil, gas or
other hydrocarbons produced and sold from the Leases or stored in tanks
with respect to all periods prior to the Effective Date, together with
all proceeds from or of such substances; (F) claims of Seller for
refunds of or loss carry forwards with respect to (i) production or any
other taxes attributable to any period prior to the Effective Date,
(ii) income or franchise taxes, or (iii) any taxes attributable to the
Excluded Assets; (G) all amounts due or payable to Seller as
adjustments to insurance premiums related to the Subject Properties
with respect to any period prior to the Effective Date; (H) all
proceeds, income or revenues (and any security or other deposits)
attributable to (i) the Subject Properties for any period prior to the
Effective Date, or (ii) any Excluded Assets; (1) all of Seller's
proprietary computer software, patents, trade secrets, copyrights,
names, trademarks, logos and other intellectual property; (J) all
documents and instruments of Seller that may be protected by an
attorney-client privilege; and (K) all audit rights with respect to any
period prior to the Effective Date.
1.01.03 The conveyance of the Subject Properties shall be
evidenced by an Assignment of Oil, Gas and Mineral Leases, Contract
Rights and Xxxx of Sale ("Assignment") in the form attached hereto as
Exhibit C-1, and shall be effective as of October 1, 1997, at 7:00 a.m.
Central Time (the "Effective Date"), which shall convey Seller's
interest in the Subject Properties to Buyer subject to all royalties,
overriding royalties, burdens and encumbrances and without warranty of
title, express or implied.
1.02 Consideration. The purchase price to be paid by Buyer for the Subject
Properties shall be: four hundred thousand dollars ($400,000.00, (US) in cash
(herein called the "Base Purchase Price").
The Base Purchase Price shall be payable by wire transfer in immediately
available funds and actually received in Seller's bank account on or before 3:00
p.m., Central Time, on the date on which the closing occurs (the "Closing
Date"). The Base Purchase Price shall be reduced or increased based upon the
adjustments to be made pursuant to Section 1.03 as otherwise provided for in
this Agreement.
1.03 Adjustments to the Base Purchase Price.
1.03.01 Income and Expense Adjustments. Appropriate
adjustments shall be made between Buyer and Seller so that (A) all
expenses (including, without limitation, all drilling costs, all
capital expenditures, and all overhead charges under applicable
operating
PURCHASE AND SALE AGREEMENT, PAGE 3
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agreements, and all other overhead charges actually charged by third
parties) which are incurred in the operation of the Subject Properties
before the Effective Date will be borne by Seller and all proceeds (net
of applicable production, severance, and similar taxes) from sale of
oil, gas and/or other minerals produced therefrom and all other items
income related to the Subject Properties before the Effective Date will
be received by Seller, and (B) all expenses (including, without
limitation, all capital expenditures, all drilling costs, and all
overhead charges under applicable operating agreements, and all other
overhead charges actually charged by third parties) which are incurred
in the operation of the Subject Properties after the Effective Date
will be borne by Buyer and all proceeds (net of applicable production,
severance, and similar taxes) from the sale of oil, gas and/or other
minerals produced therefrom and all other items income related to the
Subject Properties after the Effective Date will be received by Buyer.
1.03.02 Oil In Tanks. No adjustment will be made for oil
which was produced from the Subject Properties and which was, on the
Effective Date, stored in tanks located on the Subject Properties
(or located elsewhere but used by Seller to store oil produced from
the Subject Properties prior to delivery to oil buyer).
1.03.03 Ad Valorem Taxes. Ad valorem taxes assessed with
respect to a period which the Effective Date splits shall be
prorated based on the number of days in such period which fall on
each side of the Effective Date (with the day on which the
Effective Date falls being counted in the period after the Effective
Date).
1.03.04 Additional Adjustments. Notwithstanding the
provisions of this Section 1.03, there may be additional adjustments
as required pursuant to Article VI or as otherwise provided for in
this Agreement.
1.03.05 Closing Statement. Seller shall deliver to Buyer
not less than three (3) business days before the Closing Date a
statement (the "Closing Statement") setting forth Seller's estimate
of the accrued adjustments (excluding, however, any adjustments
proposed to be made pursuant to Article VI hereof) to the Base
Purchase Price provided for in this Section 1.03 and other provisions
of this Agreement. Seller and Buyer shall cooperate in an attempt to
agree to the adjustments to be made to the Base Purchase Price at
Closing; provided that if the parties are unable to agree,
Buyer's estimate shall be used to make the adjustment to the Base
Purchase Price at Closing. On or before 90 days after Closing, Buyer
and Seller shall determine the final amounts of such adjustments,
and Seller shall make such final adjustments by appropriate
payments from Seller to Buyer or by appropriate payments from
Buyer to Seller.
1.04 Equipment Condition. All equipment and other personal property
appurtenant to the Subject Properties shall be transferred subject to normal
wear and tear and without warranties of any kind, whether expressed or implied,
and are sold "AS IS WITH ALL FAULTS AND DEFECTS" and "WITH NO WARRANTY AS TO
MERCHANTABILITY, FITNESS OR SUITABILITY FOR
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ANY PARTICULAR PURPOSE". THIS SALE SHALL BE MADE (a) WITHOUT ANY WARRANTY OR
REPRESENTATION OF TITLE, EITHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE,
EXCEPT AS EXPRESSLY PROVIDED HEREIN, (b) WITHOUT ANY EXPRESS, IMPLIED,
STATUTORY OR OTHER WARRANTY AS TO FITNESS FOR A PARTICULAR PURPOSE,
CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OR MERCHANTABILITY OF ANY OF THE
ASSETS OR THEIR FITNESS FOR ANY PURPOSE; AND (c) WITHOUT ANY OTHER EXPRESS,
IMPLIED, STATUTORY OR OTHER WARRANTY OR REPRESENTATION WHATSOEVER.
1.05 Closing. The completion of the purchase and sale of the Subject
Properties as contemplated by this Agreement, as well as the physical act or
acts of execution and delivery of the documents contemplated hereby and delivery
of consideration as provided above (the "Closing") shall occur at the offices of
Seller in Midland, Texas, at a time and date mutually acceptable to Seller and
Buyer on or before November 1, 1997. Also, at Closing, Seller shall deliver
transfer orders or letters in lieu thereof, evidencing the purchase and sale of
the Subject Properties, in a form reasonably acceptable to Buyer. Immediately
following Closing, Buyer shall furnish to purchasers of production from the
Subject Properties a copy of the transfer orders or letters in lieu thereof
delivered by Seller at Closing, together with a copy of the Assignment, and
shall direct such purchasers to make payments to Buyer of proceeds attributable
to production from the Subject Properties after the Effective Date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.01 Seller represents and warrants to Buyer as follows:
2.01.01 Organization Standing and Power. Seller is a
corporation duly organized, validly existing and in good standing
under the laws of the state of Texas, having all requisite power
and authority to own, lease and operate its properties and to
carry on its business as now being conducted.
2.01.02 Authority and Enforceability. The execution and
delivery by Seller of this Agreement, and the consummation of
the transactions contemplated hereby, have been duly and validly
authorized by all necessary corporate action on the part of Seller.
This Agreement is the valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, limited,
however, by the effects of bankruptcy, insolvency, reorganization,
moratorium and similar laws from time to time in effect relating to
the rights and remedies of creditors, as well as to general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law). Neither the execution and delivery by
Seller of this Agreement nor the consummation of the transactions
contemplated hereby, nor compliance by Seller with any of the
provisions hereof, will
(i) conflict with or result in a breach of any provision
of Seller's articles of incorporation, or bylaws,
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(ii) except with respect to third-party consents,
releases or waivers required in connection with agreements and
properties to be assigned pursuant to this Agreement (it being
understood that Seller will attempt to obtain such required
consents, releases or waivers) result in a material default
(with due notice or lapse or time or both) or give rise to any
right of termination, cancellation or acceleration under any
of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license or agreement to which Seller is a
party or by which Seller or any of Seller's properties or
assets may be bound or,
(iii) violate any order, writ, injunction, judgment,
decree, statute, rule or regulation applicable to Seller, or
Seller's properties or assets, assuming receipt of all routine
governmental consents normally acquired after the consummation
of transactions such as transactions of the nature
contemplated by this Agreement.
2.01.03 Suits and Litigation. Except as disclosed on Schedule
2.01.03, there are no actions, suits, claims, proceedings, agency
enforcement actions or investigations pending or, to the best knowledge
of Seller, threatened against or affecting the Subject Properties, or
against Seller which has affected or could affect Seller's ability to
consummate the transactions contemplated by this Agreement.
2.01.04 Liability for Brokers' Fees. Buyer will not
directly or indirectly incur any liability or expense as a result of
any undertakings or agreements of Seller for brokerage fees, finder's
fees, agent's commissions or other similar forms of compensation in
connection with this Agreement or any agreement or transaction
contemplated hereby.
2.01.05 Royalties. During the period of Seller's ownership
of the Subject Properties, all royalties, overriding royalties,
compensatory royalties and other payments due from or in respect of
production with respect to the Subject Properties for the period prior
to the Closing Date have been or will be properly and correctly paid or
provided for. Seller has not received any unresolved written notice
from any lessor of the Leases which demands compensation or
reimbursement or release as a result of any alleged mispayment by
Seller of any royalties due with respect to the Leases.
2.01.06 Payments. All payments required to be made by
Seller to third parties for labor performed, materials furnished or
other services rendered on the Subject Properties during the ownership
thereof by Seller have been or will be properly and timely paid or
provided for.
2.01.07 No Demands. Seller has received no actual notice of
any claimed defaults, offsets or cancellations from any lessors with
respect to the Leases, and Seller has no actual knowledge of the
existence of any material default existing with respect to any of the
Leases.
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2.01.08 Taxes. All ad valorem, real property, personal
property, production, severance, excise and other taxes applicable
to Seller's ownership and operation of the Subject Properties prior to
the Closing Date and that have become due and payable have been or
will be duly and timely paid.
2.01.09 Governmental Rules. To the best of Seller's
knowledge, Seller is not in default under or in violation of any
law, order, writ, injunction, rule, regulation or degree of any
governmental body, agency or court or of any commission or other
administrative agency, except to the extent of any noncompliance that
is not reasonably expected to result in an adverse effect on the
Subject Properties, taken as a whole.
2.01.10 Environmental Matters. NOTWITHSTANDING ANYTHING
CONTAINED IN THIS AGREEMENT TO THE CONTRARY, IT IS SPECIFICALLY
UNDERSTOOD THAT SELLER HAS NOT MADE AND DOES NOT MAKE ANY
REPRESENTATIONS, EXPRESS OR IMPLIED, WITH RESPECT TO THE
ENVIRONMENTAL CONDITION OF THE SUBJECT PROPERTIES OR COMPLIANCE
WITH ENVIRONMENTAL LAWS AND THAT BUYER HAS NOT RELIED UPON THE
ACCURACY OR COMPLETENESS OF ANY STATEMENTS, SAMPLES, MATERIALS, TEST
RESULTS, OR OTHER INFORMATION SUPPLIED BY, OR RECEIVED FROM, SELLER
IN EVALUATING THE ENVIRONMENTAL CONDITION OF THE SUBJECT PROPERTIES
AND ANY POTENTIAL LIABILITY ARISING FROM OR RELATING TO THE
ASSETS. IT IS FURTHER SPECIFICALLY UNDERSTOOD THAT BUYER'S
ASSESSMENT OF THE ENVIRONMENTAL CONDITION AND ANY POTENTIAL
LIABILITY ARISING FROM OR RELATED TO THE SUBJECT PROPERTIES HAS BEEN
BASED UPON BUYER'S OWN INDEPENDENT EXAMINATION.
2.01.11 Federal Lease. None of the Leases are federal oil and
gas leases.
2.01.12 Non-Foreign Representation. Seller is not a
non-resident alien, foreign corporation, foreign partnership, foreign
trust or foreign estate (as those terms are defined in Internal
Revenue Code and Income Tax Regulations).
2.01.13 Survivability. All representations and warranties
contained in this Section 2 shall survive Closing.
2.02 Buyer represents and warrants to Seller as follows:
2.02.01 Organization Standing and Power. Buyer is a
corporation duly organized, validly existing and in good standing
under the laws of the state of Nevada, having all requisite power
and authority to own, lease and operate its properties and to
carry on its business as now being conducted. Buyer is duly
qualified to carry on its business in the State of Texas.
PURCHASE AND SALE AGREEMENT, PAGE 7
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2.02.02. Authority and Enforceability. The execution and
delivery by Buyer of this Agreement, and the consummation of the
transactions contemplated hereby, have been duly and validly
authorized by all necessary corporate action on the part of Buyer.
This Agreement is the valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, limited,
however, by the effects of bankruptcy, insolvency, reorganization,
moratorium and similar laws from time to time in effect relating to
the rights and remedies of creditors, as well as to general principles
of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). Neither the execution and delivery
by Buyer of this Agreement nor the consummation of the transactions
contemplated hereby, nor compliance by Buyer with any of the
provisions hereof, will
(i) conflict with or result in a breach of any provision
of Buyer's certificate of incorporation or bylaws.
(ii) result in a material default (with due notice or
lapse or time or both) or give rise to any right of
termination, cancellation or acceleration under any of the
terms, conditions or provisions of any note, bond, mortgage,
indenture, license or agreement to which Buyer is a party or
by which Buyer or any of Buyer's properties or assets may be
bound or,
(iii) violate any order, writ, injunction, judgment, decree,
statute, rule or regulation applicable to Buyer, or Buyer's
properties or assets, assuming receipt of all routine
governmental consents normally acquired after the consummation
of transactions such as transactions of the nature contemplated
by this Agreement.
2.02.03 Suits. There is no suit, action, claim, investigation
or inquiry by any person or entity or by any administrative agency or
governmental body and no legal, administrative or arbitration
proceeding pending, or to Buyer's best knowledge, threatened against
Buyer which has affected or could affect Buyer's ability to consummate
the transactions contemplated by this Agreement.
2.02.04 Liability for Brokers' Fees. Seller will not directly
or indirectly incur any liability or expense as a result of any
undertakings or agreements of Buyer for brokerage fees, finder's fees,
agent's commissions or other similar forms of compensation in
connection with this Agreement or any agreement or transaction
contemplated hereby.
2.02.05 Buyer Resources. Buyer has sufficient cash or other
sources of immediately available funds to enable it to make the payment
to Seller contemplated by this Agreement.
2.02.06 Buyer Qualification. Buyer is an experienced and
knowledgeable investor in oil and gas properties and has the
financial and business expertise to evaluate the merits and risks of
the transactions contemplated by this Agreement. In entering into
this Agreement, Buyer has relied solely on the express
representations and covenants of Seller in this Agreement,
its independent investigation of, and judgment with respect to, the
Subject
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Properties and the advice of its own legal, tax, economic,
environmental, engineering, geological and geophysical advisors and not
on any continents or statements of any representatives of, or
consultants or advisors engaged by Seller.
ARTICLE III
ALLOCATION OF INCOME AND EXPENSES
3.01 Allocation. On the Closing Date, ownership of all production
attributable to the Subject Properties conveyed to Buyer shall pass as of the
Effective Date. All costs and expenses incurred by Seller in accordance with the
terms of this Agreement for normal and necessary operation of the Subject
Properties after the Effective Date, shall be borne by Buyer.
ARTICLE IV
COVENANTS PENDING CLOSING
4.01 Access. Seller will give or use its best efforts to cause Buyer and its
attorneys and other representatives, at Buyer's expense, to be given access to
the Subject Properties and, at Seller's office, to any records, documents or
information of Seller pertaining to the ownership and/or operation of the
Subject Properties to the extent in each case that Seller may do so without
violating legal constraints or any legal obligation. Such access shall be at
reasonable times on prior notice. Buyer recognizes and agrees that all materials
made available to it (whether pursuant to this Section or otherwise) in
connection with the transaction contemplated hereby are made available to it as
an accommodation, and without representation or warranty of any kind as to the
accuracy and completeness of such materials. Buyer HEREBY AGREES TO DEFEND,
INDEMNIFY, RELEASE, PROTECT, SAVE AND HOLD HARMLESS SELLER FROM AND AGAINST ANY
AND ALL LOSSES ARISING OUT OF OR RELATING TO ANY CLAIMS RELATING TO ANY PLANT OR
FIELD VISIT, OR OTHER DUE DILIGENCE ACTIVITY, CONDUCTED BY BUYER OR ANY OF ITS
AGENTS, REPRESENTATIVES, AFFILIATES, SUCCESSORS, ASSIGNS, OFFICERS,
REPRESENTATIVES OR DIRECTORS INCLUDING WITHOUT LIMITATION ANY LOSSES RESULTING,
IN WHOLE OR IN PART, FROM THE CONCURRENT OR JOINT NEGLIGENCE OR STRICT LIABILITY
OF SELLER:
4.02 Interim Operations. Seller covenants that from the date hereof to the
Closing Date, except (A) as provided herein, (B) as required by any existing
Contract or (C) otherwise consented to in writing by Buyer, Seller will:
4.02.01 Not (A) operate or in any manner deal with, incur
obligations with respect to, or undertake any transactions relating to,
the Subject Properties other than transactions (i) in the normal usual
and customary manner, (ii) of a nature and in an amount consistent with
prior practice, (iii) in the ordinary and regular course of business of
owning and operating the Subject Properties, and (iv) subject to the
terms and conditions of this Agreement; (B) dispose of, encumber or
relinquish any of the Subject Properties (other than relinquishments
resulting from the expiration of leases that Seller has no right or
option to renew); (C) waive, compromise or settle any right or claim
that would have a material
PURCHASE AND SALE AGREEMENT, PAGE 9
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adverse effect on the ownership, operation or value of any of the
Subject Properties alter the Effective Date; or (D) commit to any
expenditure in excess of $10,000.00 net to the interest of Seller for
capital expenditures on any property.
4.02.02 Promptly notify Buyer of any suit, lessor demand
action, or other proceeding before any court, arbitrator, or
governmental agency and any cause of action which relates to the
Subject Properties or which might result in impairment or loss of any
portion of the Subject Properties or which might hinder or impede the
operation of the Subject Properties.
4.02.03 Make or give all notifications, filings, consents or
approvals from, to or with all governmental authorities, and will
cooperate with Buyer in obtaining the issuance, assignment or transfer,
as the case may be, by each such authority of such Permits as may be
necessary for Buyer to own and operate the Subject Properties following
the consummation of the transactions contemplated in this Agreement;
provided that Seller shall not be required to incur any expense in
connection therewith.
4.02.04 Maintain in effect insurance providing the same type
coverage, in the same amounts with the same deductibles as the
insurance maintained in effect by Seller or its affiliates on the
Effective Date.
4.03 Notice of Breach of Representations or Warranties. Buyer and Seller
will immediately notify the other upon the discovery that any representation or
warranty of either party is, becomes or will be untrue on the Closing Date.
ARTICLE V
CONDITIONS TO CLOSING
5.01 Conditions to Obligations of Seller. The obligations of Seller under
this Agreement are subject to the satisfaction at or prior to Closing, of the
following conditions
5.01.01 All representations and warranties of Buyer contained
in this Agreement shall be true in all material respects at and as of
Closing as if such representations and warranties were made at and as
of Closing.
5.01.02 Buyer will have performed and complied with, or caused
the performance of and compliance with, in all material respects, all
the obligations, terms, conditions, and agreements required by this
Agreement to be performed or complied with by it on or prior to
Closing.
5.01.03 Buyer shall make payment of the Base Purchase Price as
adjusted at the Closing.
5.01.04 As of the Closing, no suit, action or other proceeding
shall be pending or threatened before any court or governmental agency
seeking to restrain Seller or prohibit the
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Closing or seeking damages against Seller as a result of the
consummation of this Agreement.
5.01.05 Buyer shall have delivered to Seller a
certified copy of the resolutions of Buyer's Board of
Directors authorizing the consummation of the transactions
contemplated in this Agreement by Buyer.
5.01.06 Buyer shall have extended to Xxxxxxx Cup
("Cup") an offer of employment for a minimum of one (1) year
from November 1, 1997, at a minimum salary of $4,000.00 per
month; provided, however, if Cup elects not to accept such
offer of employment, then this condition precedent shall be of
no force and effect and the parties shall proceed as provided
in this Agreement.
5.02 Conditions to Obligations of Buyer. The
obligations of Buyer under this Agreement are subject to the
satisfaction, at or prior to Closing, of the following
conditions:
5.02.01 All representations and warranties of Seller
contained in this Agreement shall be true in all material
respects at and as of Closing as if such representations and
warranties were made at and as of Closing.
5.02.02 Seller will have performed and complied with,
or caused the performance and compliance with, in all material
respects, all the obligations, terms, conditions, and
agreements required by this Agreement to be performed or
complied with by Seller on or prior to Closing, and Seller
shall have delivered to Buyer at Closing the Assignment and all
of the other documents and instruments to be delivered by
Seller pursuant hereto.
5.02.03 As of the Closing, no suit, action or other
proceeding shall be pending or threatened before any court or
governmental agency seeking to restrain Buyer or prohibit the
Closing or seeking damages against Buyer as a result of the
consummation of this Agreement.
5.02.04 Seller shall have delivered to Buyer a
certified copy of the resolutions of Seller's Board of
Directors and Shareholders authorizing the consummation of the
transactions contemplated in this Agreement by Seller.
ARTICLE VI
TITLE, ENVIRONMENTAL DEFECTS AND CASUALTY
LOSS
6.01 Definitions. As used in this Article VI, the
following terms shall have the meanings ascribed to them:
PURCHASE AND SALE AGREEMENT, PAGE 11
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6.01.01 Defensible Title. For purposes hereof, "Defensible Title" means
with respect to the Subject Properties such title as (A) will enable
Buyer, as Seller's successor in title, to receive payment for production
from a particular Lease in an amount not less than the "Net Revenue
Interest" for the property as set forth on Exhibit A, without reduction,
suspension or termination throughout the productive fife of xxxxx
located on the property, (except for any reduction, suspension or
termination (i) caused by Buyer, (ii) that arises as a result of
Permitted Encumbrances or (iii) is set forth in the Exhibit A); (B) will
obligate Buyer, as Seller's successor in title, to bear no greater
"Working Interest" than the Working Interest for each of the Leases
identified on the Exhibit A without increase throughout the productive
life of such well (except for any increase (i) caused by Buyer, (ii)
that arises as result of Permitted Encumbrances or (iii) is set forth in
the Exhibit A); and (C) is free and clear of all liens, encumbrances or
security interests except for Permitted Encumbrances.
6.01.02 Title Defect, For purposes hereof a "Title Defect" shall be any
lien, encumbrance, security interest, claim or burden, other than
Permitted Encumbrances, which causes Buyer to receive less than
Defensible Title in the Subject Properties including, without
limitation, the failure of Seller to obtain at or before Closing the
necessary consents to assign interests in the Subject Properties. Such
customary liens, charges, encumbrances, defects and irregularities that
may exist, including, but not limited to, defects in the early
chain of title such as failure to recite marital status in document,
omission of succession or heirship proceedings, lack of survey, defects
that have been cured by possession and failure to record releases of
liens, production payments, leases or mortgages that have expired by
their terms, to the extent such matters are not reasonably expected to
result in claims that will materially and adversely affect Buyer's title
to the Subject Properties, shall not constitute "Title Defects"
hereunder.
6.01.03 Permitted Encumbrances, For purposes hereof "Permitted
Encumbrances" shall mean (A) liens securing payments to mechanics and
materialmen, payments of taxes or claims arising by statute to secure or
protect any other payment obligation that are, in each case, not yet
delinquent or, if delinquent, are being contested in good faith in the
normal course of business and which, if contested, have been disclosed
to Buyer, (B) any obligations or duties to any municipality or public
authority with respect to any franchise, grant, certificate, license or
permit, and all applicable law; (C) Title Defects that Buyer fails to
assert in accordance with the provisions of this Article VI prior to the
Notice Date; (D) consents to assignment by a third party or governmental
authority that are obtained by the Closing Date, or that are
customarily obtained after the consummation of transactions of the
nature contemplated in this Agreement, (E) any easements, right-of-way,
servitudes, permits and other rights in respect of surface operations,
pipelines or the like, and easements for pipelines, power lines and
other similar rights-of-way, and encroachments, on, over or in respect
of any of the Leases that do not unreasonably or materially interfere
with the operation of the Leases for exploration and production of
hydrocarbons or related operations; (F) all royalties, overriding
royalties, net profits interests, production payments, carried
interests, reversionary interests, calls on production and other burdens
on or deductions from the proceeds of production that do not operate to
(i) reduce the Net Revenue Interest ("NRI")
PURCHASE AND SALE AGREEMENT, PAGE 12
13
in a Lease below that set forth in Exhibit A for such Lease or (ii)
increase the Working Interest ("WI") in a Lease above that set forth
in Exhibit A for such Lease without a proportionate increase in the
NRI for such Well; (G) the terms and conditions of the Leases; (H) the
terms and conditions of all production sales contracts, transportation
agreements, pooling agreements, unitization agreements, operating
agreements, processing agreements, and all other contracts, agreements
and instruments related to or utilized in connection with the Subject
Properties, or the production, storage, treatment, transportation,
sale or disposal of oil, gas or other hydrocarbons, mineral or
substances therefrom, to the extent such contracts (i) do not reduce
the NRI in a Lease below that set forth in Exhibit A for such
property, (ii) do not increase the WI in a Lease above that set forth
in Exhibit A for such Lease without a proportionate increase in the
NRI for such Lease or (iii) are of the type normally entered into in
the normal course of business by a reasonable, prudent owner of
similar properties; (I) conventional rights of reassignment prior to
abandonment; (J) any required third party consents to assignment and
similar agreements and obligations with respect to which prior to
Closing (i) waivers or consents have been obtained from the
appropriate person or (H) the applicable period of time for asserting
such rights has expired without any exercise of such rights or (iii)
arrangements have been made by the parties to allow Buyer to receive
substantially the same economic benefits as if all such waivers and
consents had been obtained; and (K) any other liens, charges,
encumbrances, contracts, agreements, instruments, obligations, defects
or irregularities of any kind whatsoever affecting the Subject
Properties that individually or in the aggregate are not such as would
materially adversely affect the ownership, operation, value or use of
the Subject Properties.
6.01.04 Environmental Defect. "Environmental Defect" means the
existence of any hazardous materials; the threatened release of
hazardous materials; the violation, threatened violation of any
Federal State or local statute, rule, regulation or ordinance relating
to protection of the environment; or an environmental condition which
may have a material adverse effect on Buyer's future operation of the
Subject Properties.
6.02 Notice of Title, or Environmental Defects. Buyer shall conduct
such title and environmental investigations and inspections of the
physical premises of the Subject Properties as Buyer in its sole
discretion may deem advisable and at Buyer's expense. Buyer shall, as soon as
possible, but in no event later than seven (7) days prior to Closing (the
"Notice Date"), give written notice to Seller specifying all Title Defects
and Environmental Defects (herein, individually a "Defect" or
collectively, "Defects") and shall describe each alleged Defect with
reasonable particularity. Buyer shall be entitled to a reduction in the Base
Purchase Price in an amount (the "Defect Amount") which Buyer has
determined to be applicable to each such Defect. Failure by Buyer to timely
assert a Title Defect, or Environmental Defect shall be deemed an election
by Buyer to waive such Defect.
6.03 Seller's Election to Cure. Seller shall have the right, but not the
obligation, at any time prior to Closing, to cure any asserted Title Defect,
or Environmental Defect; provided, however, any curing of a Defect shall
be to the reasonable satisfaction of Buyer. The cost of curing any such
Defect shall be at the sole cost of Seller.
PURCHASE AND SALE AGREEMENT, PAGE 13
14
6.04 Casualty Loss. Notwithstanding anything contained herein to the
contrary, if prior to the Closing, a Casualty Loss occurs, Seller may elect (i)
terminate this Agreement; or (ii) proceed with the sale of the Subject
Properties without reduction of the Base Purchase Price, notwithstanding any
such destruction or taking, in which case at Closing, Seller shall pay to Buyer
all sums paid to Seller by third parties by reason of the destruction or taking
of that portion of the Subject Properties that is subject to Casualty Loss and
shall assign, transfer and set over unto Buyer all of the right, title and
interest of Seller in and to any claims, causes of action, unpaid proceeds or
other payments from third parties arising out of such destruction or taking.
Seller shall not voluntarily compromise, settle or adjust any amounts payable by
reason of any Casualty Loss without first obtaining the written consent of Buyer
for the purposes thereof the term "Casualty Loss" means the destruction of all
or any portion of the Subject Properties by fire or other casualty or taking
thereof by condemnation or under the right of eminent domain.
6.05 Threshold Amounts. Notwithstanding anything to the contrary
herein, the parties agree that no adjustments shall be made to the Base
Purchase Price under the terms of this Agreement unless and until the
aggregate Defect Amount is equal to or greater than $4,000.
ARTICLE VII
ASSUMPTION OF LIABILITIES AND INDEMNIFICATION
7.01 Indemnification by Seller. Seller shall assume all liability for and
indemnify Buyer, its directors, officers, employees and representatives, against
all losses, costs, expenses, claims and causes of action ("Claims"), (i) arising
from Seller's breach of any of its representations or warranties; or (ii)
otherwise arising in connection with or relating to the Subject Properties for
all time periods prior to the Effective Date, excluding, however, any claims
associated with, arising out of or attributable to Environmental Defects.
7.02 Assumption of Seller's Obligations by Buyer. Except to the extent
that Seller indemnifies Buyer hereunder, at Closing, Buyer shall assume all
obligations and liabilities of Seller attributable to, relating to or arising in
connection in any way with the Subject Properties, for all periods of time after
the Effective Date (the "Assumed Obligations") including, but without
limitation, the following: (A) the obligation to (i) plug and abandon or remove
and dispose of all xxxxx, platforms, structures, flow lines, pipelines, and the
other equipment now or hereafter located on the Leases, (ii) cap and bury all
flow lines and other pipelines now or hereafter located on the Leases; and (iii)
dispose of naturally occurring radioactive material and all other pollutants,
wastes, contaminates, or hazardous, extremely hazardous, or toxic materials,
substances, chemicals or wastes now or hereafter located on the Subject
Properties;(B) obligations and liabilities arising from or in connection with
any gas production, pipeline, storage, processing or other imbalance
attributable to oil, gas or other hydrocarbon produced from the Subject
Properties both before and after the Effective Date; (C) Seller's obligations
under all permits or contracts affecting the Subject Properties; (D)obligations
arising under any law, rule or regulation which provides with respect to
protection of the environment or the handling, use, disposal or transportation
of hazardous materials applicable to the Subject Properties; and (E) other
costs, obligations and liabilities that arise with respect to or otherwise
relate to the Subject Properties. All such plugging, replugging,
abandonment,
PURCHASE AND SALE AGREEMENT, PAGE 14
15
removal, disposal, and restoration operations shall be in compliance with
applicable laws and regulations and contracts, and shall be conducted in a
good and workmanlike manner.
7.03 Indemnification by Buyer. Buyer shall assume all liability for and
indemnify Seller, its directors, officers, employees and representatives,
against all losses, costs, expenses, claims and causes of action ("Claims"),
(i) arising from Buyer's breach of any of its representations or warranties;
(ii) arising under the Assumed Obligations, or (iii) otherwise arising in
connection with or relating to the Subject Properties for all time periods prior
to, on or after the Effective Date.
7.04 NORM. It is expressly recognized that the land or water bottoms covered
by the Leases listed in Exhibit A with surface facilities and production
equipment located thereon, having been used in connection with oil and gas
production activities, may contain naturally occurring radioactive materials
("NORM") as a result of these operations. Accordingly, lands, water bottoms,
surface facilities, and production equipment transferred herein are transferred
with the restriction that they will be used only in connection with oil and gas
producing activities associated with these properties, and will not be
subsequently transferred for unrestricted use unless and until the
concentrations of NORM associated therewith are below the levels specified as
allowable for unrestricted transfer as set forth in any regulations, and
subsequent amendments thereto. Additionally, Buyer agrees to comply with all
laws and regulations applicable to said water bottoms, surface facilities, and
production equipment relating to NORM and to indemnify and hold harmless Seller
from and against any and all liability, cost or expense arising from the
existence or rededication of NORM.
7.05 Indemnification Procedures.
7.05.01 Within ten (10) business days after Seller or Buyer
becomes aware of facts giving rise to a Claim by it for indemnification
pursuant to this Article VII, and prior to the expenditure or approval
of the expenditure of any funds, Seller or Buyer will provide notice
thereof in writing to the other party (a "Claim Notice") specifying the
nature and specific basis for such Claim and a copy of all papers
served with respect to such Claim (if any). For purpose of this
Section, receipt of written notice of any demand, assertion, claim,
action or proceeding (judicial, administrative or otherwise) by or from
any person or entity other than a party to this Agreement or any
affiliate thereof which gives rise to a Claim on behalf of such party
shall constitute the discovery of facts giving rise to a Claim by it
and shall require prompt notice of the receipt of such matter as
provided in the first sentence of this Section. Each Claim Notice shall
set forth a reasonable description of the Claim as the party claiming
indemnification shall then have and shall contain a statement to the
effect that the party is making a Claim pursuant to and formal demand
for indemnification under, this Article VII. The Claim Notice must set
forth the particular provision in this Article VII and any related
provision in this Agreement pursuant to which such indemnification
Claim is made.
7.05.02 The indemnifications provided by this Agreement are
expressly subject to the following:
PURCHASE AND SALE AGREEMENT, PAGE 15
16
(A) In case any legal proceeding or claim including any
investigatory proceeding, is brought or made against a party in
a manner for which indemnification may be provided under This
Article VII, the party claiming indemnification shall promptly
notify the other party with the delivery of the Claim Notice.
The party receiving such notice shall have the right to control
and assume the defense of any such legal proceeding or claim,
including the employment of counsel satisfactory to the
indemnifying party. If the party to whom notice was given
controls and assumes the defense of any proceeding or claim,
other party shall have the right to employ separate counsel but
the fees and expenses of such counsel shall be at the expense
of the other party unless the representation of both parties by
the same counsel would be inappropriate due to any actual or
potential conflicts of interest. The indemnifying party shall
not be liable for the fees and expenses of more than one
separate firm of attorneys at any one time in connection with
any one legal proceeding or claim or substantially similar
related proceedings and claims.
(B) Notwithstanding anything of the contrary in Section A
above, the indemnified party shall be entitled to reasonable
compensation for costs of defense, including reasonable
attorneys fees, in the event that (i) the employment of
separate counsel has been authorized by indemnifying party,
(ii) indemnifying party has failed to defend diligently any
Claims, or (iii) the parties to such action (including any
impleaded parties) include Seller and Buyer, and indemnified
party has been advised by legal counsel that there may be legal
defenses available to it which are different from, in addition
to or inconsistent with, the legal defenses available to the
indemnifying party, or that the indemnified party's interest
may be adverse in whole or in part to the interest of
indemnifying party. The indemnifying party shall not, in the
defense of any such Claims, except with the prior written
consent of the indemnified party, consent to the entry of any
judgment or enter into any settlement which does not include as
an unconditional term, the release by the claimant or the
plaintiff of the indemnified party from all further liability
in respect to any such Claims.
7.05.03 The indemnification obligations under this Article VII (or
otherwise under this Agreement) shall not apply to any settlements
effected without the consent of an indemnifying party. The
indemnification obligations under this Article VII (or otherwise under
this Agreement) shall not be deemed to create any rights of subrogation
or other rights in any insurer or third party.
7.06 WAIVER OF REPRESENTATIONS. SELLER EXPRESSLY DISCLAIMS AND NEGATES AND
BUYER HEREBY WAIVES, ANY REPRESENTATION OR WARRANTY WITH RESPECT TO (A) THE
QUALITY, QUANTITY OR VOLUME OF THE RESERVES, IF ANY, OF OIL, GAS OR OTHER
HYDROCARBONS IN OR UNDER THE SUBJECT PROPERTIES; (B) THE WORKING INTEREST AND
NET REVENUE INTEREST PERCENTAGES SET FORTH IN EXHIBIT A HERETO; AND (C) THE
SAMPLES, OR
PURCHASE AND SALE AGREEMENT, PAGE 16
17
CONDITION OF ANY OF THE SUBJECT PROPERTIES OR ANY PART THERETO. THE ITEMS OF
PERSONAL PROPERTY, EQUIPMENT, IMPROVEMENTS, FIXTURES AND APPURTENANCES CONVEYED
AS PART OF THE PROPERTIES ARE SOLD, AND BUYER ACCEPTS SUCH ITEMS "AS IS, WITH
ALL FAULTS". THERE ARE NO WARRANTIES THAT EXTEND BEYOND THE FACE OF THIS
AGREEMENT. BUYER ACKNOWLEDGES THAT THIS WAIVER IS CONSPICUOUS.
7.07 Liabilities Retained by Seller. Seller shall remain liable for (i)
damages arising from personal injury or death, (ii) the nonpayment of royalties
which were the responsibility of Seller to pay (not to include, however,
royalties payable out of suspended funds to be transferred to Buyer pursuant to
Section 10.03 hereof) or the incorrect payment of royalties, to the extent and
only to the extent such payment was not made in accordance with terms of the
leases and (iii) any and all actions, claims and causes of action, lease
operating expenses and capital costs to the extent, and only to the extent any
of such damages, expenses or costs arise from acts, circumstances or events
occurring with respect to the ownership of the Subject Properties prior to the
Effective Date.
ARTICLE VIII
LIMITATIONS OF LIABILITY
8.01 Exclusive Remedy. If the Closing occurs, the sole and exclusive remedy
of the Buyer and the Seller with respect to the purchase and sale of the Subject
Properties shall be pursuant to the express provisions of this Agreement. Buyer
and Seller shall be deemed to have waived, to the fullest extent permitted under
applicable law, any rights of contribution and any and all rights, claims and
causes of action which may exist against Seller or Buyer, respectively, arising
under or based on any federal, state or local statute, law, ordinance, rule or
regulation or common law or otherwise, except as specifically set forth in this
Agreement.
8.02 Waiver of Right to Rescind. Seller and Buyer acknowledge that if this
Agreement is not terminated and the transaction contemplated hereby is
closed, the payment of money, as limited by the terms of this Agreement,
shall be adequate compensation for breach of any representation, warranty,
covenant or agreement contained herein or for any other claim arising in
connection with or with respect to the transactions contemplated in this
Agreement. As the payment of money shall be adequate compensation, Buyer
and Seller waive any right to rescind the transactions contemplated by this
Agreement.
8.03 Time Limitation. Notwithstanding any provision hereof to the
contrary, it is understood and agreed that any and all liabilities of Seller
under this Agreement, if any, shall expire and terminate and no longer be
enforceable for all periods on and after two (2) years from the Closing
except as to Liabilities Retained by Seller provided in Section 7.07 above,
for which such period of time shall be three (3) years from the Closing. On
and after two (2) years from the Closing, except as to Liabilities Retained
by Seller provided for in Section 7.07 which time shall be three (3) years
from the Closing, Buyer shall not be entitled to make any claim against
Seller for any cause attributable to any time period under this Agreement
or otherwise, including without limitation, rights of contribution arising
under or based on any federal, state or local statute, law, ordinance, rule
or
PURCHASE AND SALE AGREEMENT, PAGE 17
18
regulation or common law or otherwise. In the event any law, rule or regulation
requires a longer time period before Seller will be exempted from all liability
under this provision, this provision shall be deemed amended, to the extent and
only to the extent required by law and only as to that portion of the Subject
Properties as so required, to extend the limitation period as so required.
8.04 Liability Cap. Seller's liability, if any, under this Agreement
shall never exceed, and Seller shall have no obligation for the payment of any
amount in excess of the Base Purchase Price.
8.05 Damage Limitation. Notwithstanding anything to the contrary
herein, in no event shall any party hereunder be liable to the other for
any exemplary, punitive, special, indirect, consequential, remote or
speculative damages; provided, however, that if Seller is held liable to
a third party for any of such damages and the Buyer is obligated to
indemnity Seller for the matter that gave rise to such damages pursuant to
this Agreement, then the Buyer shall be liable for, and obligated to reimburse
Seller for, such damages.
ARTICLE IX
TERMINATION
9.01 Termination of Agreement. This Agreement and the transactions
contemplated hereby may be terminated upon written notice from the party
electing to terminate this Agreement, in the following instances:
(A) By Seller if the conditions set forth in Section 5.01 are
not satisfied in all material respects or waived as of the Closing.
(B) By Seller or Buyer, if at or before Closing, for any reason
under this Agreement, properties are excluded from the sale and/or
other adjustments to the Base Purchase Price are made or proposed to
be made, which have a cumulative value, in excess of four percent(4%)
of the Base Purchase Price.
(C) By Buyer if the conditions set forth in Section 5.02 are not
satisfied in all material respects or waived as of Closing.
(F) At any time by the mutual written agreement of Buyer and
Seller.
9.02 Liabilities Upon Termination. If this Agreement is terminated prior
to Closing for any reason other than those set forth in Section 9.01 or is
breached (it shall be deemed a breach of this Agreement if the conditions set
forth in Section 5.02 are not satisfied through the fault, neglect or failure to
act of Buyer, or if the conditions set forth in Section 5.01 are not satisfied
through the fault, neglect or failure to act of Seller) nothing contained herein
shall be construed to limit Seller's or Buyer's legal or equitable remedies
including, without limitations damages for the breach or failure of any
representation, warranty, covenant or agreement contained herein and the right
to enforce specific performance of this Agreement.
PURCHASE AND SALE AGREEMENT, PAGE 18
19
ARTICLE X
MISCELLANEOUS
10.01 Files and Records. As soon as practicable, but not more than ten
(10) days after Closing, or such other time frame as is agreed to by the
Parties, Seller shall deliver or cause to be delivered to Buyer all original
records and files, including, without limitation, regulatory files, joint
interest xxxxxxxx, revenue files, division orders, division order files,
Buyer's statements, payout calculations, well logs, well files, land records,
contracts, maps and seismic information (to the extent the same are in
Seller's possession and capable of being legally transferred by Seller
without unreasonable cost or consent) relating to the Subject Properties. In
the event Seller wishes to keep copies of such files and records, Seller may
make and retain copies thereof at its sole expense. The expense of copying
such files shall be borne by Seller. Buyer shall retain all of such files
for four (4) years from Closing and shall make such files available to
Seller for its review at any time during normal business hours.
10.02 Survival of Representation, Warranties and Covenants. Unless
otherwise specified herein, the obligations and liabilities of the
Parties under each of their representations, warranties and covenants
contained in this Agreement shall survive the Closing and the execution and
delivery of the documents to be delivered at Closing and remain in full force
and effect.
10.03 Suspended Funds. All third party funds held by Seller in suspense
will be transferred to Buyer at Closing. Buyer shall indemnity and hold
harmless Seller from and against any claims, loss, cost or expense
whatsoever arising from improper, untimely or other mispayment of such
suspended funds after Closing when caused by Buyer. In the event interest
is owed on suspended funds attributable to periods prior to the Effective
Date, Seller will bear the liability for the payment of such interest and
will indemnify Buyer in the same manner as Buyer indemnifies Seller under
Section 7.05 from and against the payment of such interest.
10.04 Notices. All communication or notices required or permitted to be
given under this Agreement shall be in writing, and any communication or
notice shall be deemed to have been duly made if actually delivered,
including delivery by facsimile transmission, receipt of which has been duly
acknowledged, or if mailed by registered or certified mail, postage prepaid,
and addressed to:
(A) Buyer: Cotton Valley Energy Corp.
0000 X. Xxxxxxx Xxxxxxxxxx
Xxxxx X-0000
Xxxxxx, Xxxxx 00000
Attn: Xx. Xxx Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
PURCHASE AND SALE AGREEMENT, PAGE 19
20
with a copy to:
X. X. Xxxxxxxx, Xx.
00000 Xxxxxxx Xx., Xxxxx 000
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Seller: XXXXXX ENERGY, INC.
Midland, Texas
Attention: Xx. Xxxx Xxxxxx, Vice President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxx, Xxxxxxxx & Xxxxx
000 X. Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxx X. Childress
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
A party may, by written notice so delivered to the other party, change the
address to which communications or written notices shall be made under this
Agreement.
10.05 Further Assurances. Seller and Buyer agree that they will, upon
request, deliver, or will cause to be executed, acknowledged and delivered,
all such documents of further assurance as may be reasonably required for
the assigning, leasing, transferring, granting, conveying and confirming
to Buyer, or reducing to possession by Buyer of, any of the Subject
Properties and do, perform and take such further actions, as may be
necessary or appropriate to carry out the intent of the transactions provided
for in this Agreement. Each party shall bear its own costs in connection with
the preparation or filing of any such documents of further assurance.
10.06 CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO
ANY PRINCIPLES OF CONFLICTS OF LAWS. THE VALIDITY OF THE VARIOUS
CONVEYANCES AFFECTING THE TITLE TO REAL PROPERTY SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE JURISDICTION IN WHICH SUCH
PROPERTY IS SITUATED. THE REPRESENTATIONS AND WARRANTIES CONTAINED IN SUCH
CONVEYANCES AND THE REMEDIES AVAILABLE BECAUSE OF A BREACH OF SUCH
REPRESENTATIONS AND WARRANTIES
PURCHASE AND SALE AGREEMENT, PAGE 20
21
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF TEXAS WITHOUT GIVING EFFECT TO THE PRINCIPLES OR CONFLICTS OF LAWS.
10.07 Assignment. This Agreement shall not be assignable by either party
without the prior written consent of the other party, which consent shall not be
unreasonably withheld.
10.08 Binding Effect. This Agreement contains the entire agreement and
understanding between the parties hereto with respect to the purchase and sale
of the Subject Properties or other transactions contemplated herein. This
Agreement may not be amended or terminated except in writing, signed by the
parties hereto. In the event any term or provision of this Agreement is
determined to be invalid or unenforceable, such invalidity or unenforceability
thereof shall not affect the remaining terms and provisions of this Agreement.
10.09 Counterparts. This Agreement may be executed in any number of
counterparts and each counterpart shall be deemed to be an original instrument,
but all such counterparts shall constitute but one instrument.
10.10 Expenses and Fees. Whether or not the transactions contemplated by this
Agreement are consummated, each of the parties hereto shall be obligated to pay
the fees and expense of its counsel, accountants and other experts incident to
the negotiation and preparation of this Agreement and consummation of the
transactions contemplated hereby. All sales, use or other taxes (other than
taxes on gross income, net income or gross receipts) and duties, levies or other
governmental charges incurred by or imposed with respect to the property
transfers undertaken pursuant to this Agreement and all costs of recording the
Assignment and any other recordable document shall be the responsibility of, and
shall be paid by, Buyer. All other costs shall be borne by the party incurring
such costs. In the event that sales taxes are due on this transaction which must
be remitted by Seller under the laws of the governing jurisdiction, the Buyer
shall provide for the payment of such amounts to Seller by adjustment to the
Base Purchase Price at Closing.
10.11 Confidentiality. Prior to Closing, unless otherwise required by law,
neither party will, without the consent of the other, disclose to any third
party (not including the officers, directors, advisors, agents and
representatives of the parties, on a "need-to-know" basis), or issue a press
release with respect to this Agreement and the transaction contemplated by its
terms and provisions and all notices to third parties and all other publicity
concerning the transactions contemplated by this Agreement shall be jointly
planned and coordinated by and between Buyer and Seller, provided that both
Seller and Buyer shall have final approval authority for its press releases and
securities filings and is hereby authorized to issue such press releases
concerning this Agreement and to make such filings as Seller or Buyer and its
counsel may deem necessary or appropriate under applicable securities laws.
Except as provided in the preceding sentence, neither of the parties shall act
unilaterally in this regard without the prior written approval of the other
party, however, this approval shall not be unreasonably withheld.
PURCHASE AND SALE AGREEMENT, PAGE 21
22
10.12 Exhibits. The Exhibits referred to in this Agreement are hereby
incorporated in this Agreement by this reference and constitute a part of this
Agreement. All references to Exhibit A herein shall be deemed to include
Exhibits X-0, X-0 and A-3 unless the context clearly indicates a contrary
meaning is intended. Each party has received a complete set of Exhibits as of
the execution of this Agreement. If any Exhibit inadvertently fails to list any
information which had been listed on another Exhibit, such information will be
deemed to be included on the appropriate Exhibit. Seller may, from time to time
prior to or at the Closing, with the agreement of Buyer, which shall not be
unreasonably withheld, supplement or amend any such Exhibit in order to correct
any matter which would constitute a breach of any representation, warranty or
covenant contained herein, except that the Seller may not amend Exhibit A by
changing the working or net revenue interests reflected thereon and thereby cure
an asserted Title Defect without making an adjustment to the Base Purchase Price
attributable to such change. All references to any Exhibit hereto which is
supplemented or amended as provided in this section shall for all purposes after
the Closing be deemed to be a reference to such Exhibit as so supplemented or
amended.
10.13 Exchange. Seller or Buyer may desire to structure the conveyance of the
Subject Properties as part of an exchange under Section 1031 of the Internal
Revenue Code. Seller and Buyer agree to execute all documents, conveyances or
other instruments necessary to effectuate an exchange. In order to structure
such a transaction, Seller and Buyer will agree upon an allocation of the
purchase price between real and personal property.
10.14 DTPA Waiver. To the extent applicable to the transactions contemplated
hereby or any port thereof, Buyer waives the provisions of the Texas Deceptive
Trade Practices Act, Chapter 17, Subchapter E, Sections 17.41 through 17.63,
inclusive (other than Section 17.555 which is not waived), Texas Business and
Commerce Code. In connection with such waiver, Buyer hereby represents and
warrants to Seller that Buyer (a) is in the business of seeking or acquiring by
purchase or lease, goods, or services, for commercial or business use; (b) has
assets of $5,000,000 or more, (c) has knowledge and experience in financial and
business matters that enable it to evaluate the merits and risks of the
transaction contemplated hereby and (d) is not in a significantly disparate
bargaining position.
10.15 No Third Party Beneficiary. This Agreement is not intended to create, nor
shall it be construed to create, any rights in any third party under doctrines
concerning third party beneficiaries.
IN WITNESS THEREOF, Buyer and Seller have duly executed this Agreement, as
of the day and year first above written.
SELLER:
XXXXXX ENERGY INC.
/s/ XXX XXXXXX
----------------------------------
Xxx Xxxxxx, President
PURCHASE AND SALE AGREEMENT, PAGE 22
23
Buyer:
COTTON VALLEY ENERGY CORP.
/s/ XXXXX X. XXXXX
---------------------------------
Xxxxx X. Xxxxx, President
PURCHASE AND SALE AGREEMENT, PAGE 23
24
LIST OF EXHIBITS
Exhibit A Leases (including overriding royalties)
Exhibit B Excluded Assets
Exhibit C Form of Assignment and Xxxx of Sale Exhibit
PURCHASE AND SALE AGREEMENT, PAGE 24
