EXHIBIT 10.1
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (the "Agreement") is made and entered
into as of this 1st day of February, 2002, by and between DELTA PETROLEUM
CORPORATION, a Colorado corporation, having an address of 000 00xx Xxxxxx,
Xxxxx 0000, Xxxxxx, Xxxxxxxx, 00000 (hereinafter referred to as "Seller") and
SOVEREIGN HOLDINGS, LLC, a Colorado limited liability company, having an
address of 000 00xx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx, 00000 and certain
other individuals and entities as set forth on Exhibit "A" attached hereto and
by this reference made a part hereof (collectively referred to hereinafter as
"Purchaser"). Seller and Purchaser are sometimes collectively referred to
hereinafter as the "Parties" (or individually as a "Party").
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller and Purchaser hereby
agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 Purchase and Sale. Purchaser hereby agrees to purchase from Seller
and Seller hereby agrees to sell, transfer, assign and convey to Purchaser all
of Seller's interest in the following properties, rights and assets (the
"Interests"):
(a) The undivided interests of Seller in the properties described on
Exhibit "B" attached hereto and by this reference made a part
hereof whether Seller's interests are working interests,
overriding royalty interests, royalty interests or any other type
of oil and gas interest;
(b) The undivided interests of Seller in the leasehold estates created
by the leases, licenses, permits and other agreements described on
Exhibit "B" (the "Leases") insofar as the Leases cover and relate
to the land described on Exhibit "B" (the "Land");
(c) The undivided interests of Seller in the fixtures, personal
property and equipment located on the Land or used in the
operation thereof including without limitation the xxxxx, well
equipment, casing, tanks, boilers, buildings, tubing, pumping
units, motors, pipelines, gathering lines, power lines, processing
plants and dehydration facilities and all other machinery,
equipment, ancillary facilities and improvements used in the
operation of the properties (all of the foregoing are collectively
referred to as the "Related Assets");
(d) Seller's rights and obligations arising after the Effective Time
(including without limitation, any calls or other preferential
rights to purchase production) under any contracts, permits,
licenses, servitudes, easements, rights-of-way, orders, gas
purchase and sales agreements, crude oil purchase and sales
agreements, surface leases, farmin and farmout agreements, bottom
hole agreements, acreage contribution agreements, operating
agreements, unit agreements, processing agreements, options and
leases of equipment or facilities which are appurtenant to or used
in connection with the ownership or operation of the Land and
Related Assets or with the production, treatment, sale or disposal
of water, hydrocarbons or associated substances from the Land and
Related Assets; and
(e) Copies of all files, records and data owned by or in the
possession or control of Seller or any affiliate of Seller and
directly relating to or associated with the Leases, Land or
Related Assets including but not limited to all land, lease, well,
division and transfer orders, prospect and title files and
records, geological data, pressure data, decline curves and other
related matters to the extent that the transfer thereof is not
prohibited by existing contractual obligations with third parties.
1.2 Effective Time. The effective time and date of the transfer of the
Interests shall be 7:00 AM, local time at the location of the affected real
property, January 1, 2002.
ARTICLE II
PURCHASE PRICE
2.1 Purchase Price. The purchase for the Interests shall be two million
seven hundred and fifty thousand dollars ($2,750,000) hereinafter referred to
as the "Purchase Price" subject to adjustment pursuant to Section 2.2 below.
2.2 Adjustments to Purchase Price.
(a) The Purchase Price shall be adjusted upward by the following:
(1) The value, less taxes, of all merchantable hydrocarbons in
storage above or upstream from the pipeline connection at
the Effective Time that is credited to the Interests.
(2) The amount of all expenditures (including without
limitation, royalties, overriding royalties, rentals and
other charges and burdens upon production and ordinary
operating expenses and XXXXX overhead charges billed under
applicable operating agreements), if any, that are, in
accordance with generally accepted accounting principles,
attributable to Seller's ownership in the Interests for
times after the Effective Time and are paid by Seller in
connection with the operation of the Interests; and
(3) Any other amount agreed upon by Seller and Purchaser.
(b) The Purchase Price shall be adjusted downward by the following:
(1) The amount of proceeds, if any, received by Seller
attributable to the Interests that are, in accordance with
general accepted accounting principles, attributable to
production occurring during the period of time after the
Effective Time;
(2) An amount equal to all unpaid expenses, burdens and
obligations (including without limitation, royalties,
overriding royalties, rentals and other charges and burdens
upon production and ordinary operating expenses and XXXXX
overhead charges billed under applicable operating
agreements), if any, that are, in accordance with generally
accepted accounting principles, accrue or are attributable
to the Interests prior to the Effective Time;
(3) Any other amount agreed upon by Seller and Purchaser.
(c) All ad valorem, property and similar taxes based on or measured by
the value of the Interests shall be prorated between Seller and
Purchaser as of the Effective Time, such proration to be based
upon calculations using the 2001 valuation of the Interests and
the tax levy applicable for 2001 but if the tax levy for 2001 is
not available on or before Closing, based on the tax levy for the
2000 tax year, and any adjustment for 2001 taxes shall be a Post
Closing Adjustment.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Seller. Seller represents and
warrants to Purchaser that:
(a) Seller is a corporation duly organized and validly existing under
the laws of Colorado and is qualified to carry on its business in
North Dakota.
(b) Seller will have obtained approval of its board of directors to
consummate the transactions described herein prior to Closing and
the transactions described herein have been duly and validly
authorized by all requisite corporate action on Seller's part and
this Agreement constitutes a legal, valid and binding obligation
of Seller.
(c) The consummation of the transactions contemplated by this
Agreement will not violate, or be in conflict with (i) any
provision of its Articles of Incorporation or Bylaws, and (ii) any
provision of any agreement or instrument to which it is a party or
by which it is bound, noncompliance with which would have a
material adverse effect upon Purchaser's ownership of the
Interests, or upon any of the transactions contemplated by this
Agreement.
(d) Seller has no knowledge of any suit, action, claim, investigation,
arbitration, administrative proceeding or inquiry by any person,
administrative agency or governmental body pending or threatened
against Seller which has or may have a material and adverse effect
on its ability to consummate the transactions contemplated hereby.
(e) Seller has not entered into any contract or other agreement to
deliver oil or gas produced from the Interests at some future time
including any contract for the sale of oil or gas, any hedging
agreements for oil and/or gas, any contract containing a "take or
pay" or similar provision or any contract providing for a
production payment except those shown on Exhibit "C".
(f) Seller has paid all ad valorem, property, production, severance,
excise and similar taxes and assessments based or measured by the
ownership of the Interests or the production of hydrocarbons or
the receipt of proceeds therefrom which have become due and
payable prior to the date hereof.
(g) Seller has no knowledge of any proposals which are currently
outstanding under any operating agreement, and no commitments
exist to make expenditures that would obligate Seller or Purchaser
to make expenditures after the Effective Time other than the
expenses incurred in the normal operation of the properties except
those shown on Exhibit "D". Purchaser acknowledges that normal
operation of the properties includes the drilling and completion
or plugging and abandonment of xxxxx.
(h) To Seller's knowledge, there are no preferential rights to
purchase or consents to assign affecting the Interests other than
the governmental consents customarily obtained after conveyance
except those shown on Exhibit "E".
(i) Seller has not incurred any obligation or liability, contingent or
otherwise for broker's fees or finder's fees in connection with
this Agreement for which Purchaser may have any responsibility.
(j) Seller is not a non-resident alien, foreign corporation, foreign
partnership, foreign trust or foreign estate alien as those terms
are defined in the Internal Revenue Code of 1986, as amended (the
"Code"), and the rules and regulations of the Internal Revenue
Service thereunder.
(k) Seller has not caused nor allowed any mortgage, lien or other
encumbrance to be placed upon or against the Interests that will
not be released at or prior to Closing, other than (i) liens for
taxes and assessments which are not yet delinquent or (ii) rights
under operating agreements or similar contracts to assert liens
against the Interests (but not including rights which have
actually been asserted).
(l) Seller is not obligated to deliver from the Interests any make-up
or other volumes of oil, gas or other hydrocarbons on account of
any gas balancing or similar obligations without then or
thereafter being entitled to full payment therefor. Any
production imbalances are set forth on Exhibit "F".
(m) To Seller's knowledge (i) all of the Leases are in full force and
effect (ii) Seller is not in any material breach or default with
respect to any of its material obligations pursuant to any of the
Leases, and (iii) all payments due thereunder by Seller have been
timely paid and Seller has no notice of default thereunder.
(n) Except as set forth herein or in the assignment to be executed at
Closing, Seller expressly denies all warranties of title with
respect to the Interests either express, implied or statutory
except by, through and under Seller, but not otherwise. All title
review matters and remedies are governed by Section 5.4 hereof.
(o) PURCHASER ACKNOWLEDGES THAT SELLER HAS NOT MADE, AND SELLER HEREBY
EXPRESSLY DISCLAIMS AND NEGATES, ANY REPRESENTATION OR WARRANTY.
EXPRESS OR IMPLIED, RELATING TO THE CONDITION OF ANY REAL OR
IMMOVABLE PROPERTY, PERSONAL OR MOVABLE PROPERTY, EQUIPMENT,
INVENTORY, MACHINERY AND FIXTURES CONSTITUTING, OR WHICH MAY
CONSTITUTE, PART OF THE INTERESTS INCLUDING, WITHOUT LIMITATION,
(i) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (ii) ANY
IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE,
(iii) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR
SAMPLES OF MATERIALS.
(p) Seller makes no representation or warranty regarding the
environmental condition of Interests except that Seller agrees to
indemnify Purchaser from any Environmental Liabilities which have
occurred during the period of time that Seller has owned the
Interests. Environmental Liabilities as used herein shall mean
any liabilities, claims, expenses, penalties, fines or other
obligations, including reasonable fees of attorneys, consultants,
engineers, accountants and other advisors, for environmental
conditions arising directly or indirectly under the Environmental
Laws (as they exist and are in effect as of the Effective Time)
from the production, use, transportation, handling, storage,
treatment, disposal, emission, discharge, spill, leak, injection,
escape, dumping, release or threatened release in any work place
or in the air, land, surface waters, groundwaters or other medium,
on or offsite, of any Hazardous Substance as defined in the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended and/or superceded.
3.2 Representations and Warranties of Purchaser. Purchaser
(collectively as set forth on Exhibit "A") represents and warrants to Seller
that:
(a) Purchaser (as the case may be), is duly organized and in good
standing under the laws of Colorado and is, or will be by the
Closing, duly qualified to carry on its business in North Dakota.
(b) The execution, delivery and performance of this Agreement and the
transactions described herein will have been duly and validly
authorized by all the requisite action on Purchaser's part and
this Agreement constitutes a legal, valid and binding obligation
of Purchaser.
(c) The consummation of the transactions contemplated by this
Agreement will not violate, or be in conflict with (i) any
provision of its Articles of Incorporation, Operating Agreement or
Bylaws, and (ii) any provision of any agreement or instrument to
which it is a party or by which it is bound, noncompliance with
which would have a material adverse effect upon the purchase and
sale of the Interests, or upon any of the transactions
contemplated by this Agreement.
(d) Purchaser has no knowledge of any suit, action, claim,
investigation, arbitration, administrative proceeding or inquiry
by any person, administrative agency or governmental body pending
or threatened against Purchaser which has or may have a material
and adverse effect on its ability to consummate the transactions
contemplated hereby.
(e) Purchaser has not incurred any obligation or liability, contingent
or otherwise for broker's fees or finder's fees in connection with
this Agreement in respect of which Seller may have any
responsibility.
(f) Purchaser is acquiring the Interests for its own account and not
with the intent to make a distribution thereof within the meaning
of the Securities Act of 1933 and the rules and regulations
thereunder or distribution thereof in violation of any other
applicable securities laws.
(g) Purchaser acknowledges that, notwithstanding anything to the
contrary contained in this Agreement, it (i) is a sophisticated
purchaser with respect to the Interests, (ii) has independently
and without reliance upon Seller or any of its employees, agents
or representatives and based upon such information as it has
deemed appropriate in its independent judgement made its own
analysis and decision to enter into this Agreement and to
consummate the transactions contemplated herein, except that it
has relied upon the representations, warranties, covenants and
other agreements of Seller contained in this Agreement, and (iii)
has not received and is not relying upon any representation or
warranty, express or implied, by operation of law or otherwise, as
to the accuracy or completeness of any information regarding
Seller, or the Interests furnished or made available to Purchaser
or its representatives, except as expressly set forth in this
Agreement.
3.3 Knowledge. As used herein, "to Seller's knowledge" or "to
Purchaser's knowledge" shall mean Seller's or Purchaser's actual knowledge
without independent investigation.
ARTICLE IV
COVENANTS
4.1 Covenants of Seller. From the date hereof until the earlier of the
Closing or the termination date, Seller covenants and agrees with Purchaser as
follows:
(a) Upon execution of this Agreement, Seller, to the extent such items
exist and Seller shall have such items in its possession and
subject to any contractual prohibitions, will make available to
Purchaser for examination at a location designated by Seller,
title information, production information, cash flow and other
information relating to the Interests, including, without
limitation, accounting files, production files, land files, lease
files, well files, division order files, contract files and
marketing files, and, subject to the consent and cooperation of
operators and those third parties will cooperate with Purchaser in
its reasonable efforts to obtain, at Purchaser's sole expense,
such additional information relating to the Interests as Purchaser
may desire, provided that Seller may do so without violating legal
constraints or any obligation of confidence or other contractual
commitment of Seller to a third party.
(b) Seller shall carry on the business of Seller with respect to the
Interests in substantially the same manner as Seller has
heretofore.
(c) Seller shall use its best efforts to cause all the representations
and warranties of Seller contained in this Agreement to be true
and correct on and as of Closing.
(d) Seller shall use its best efforts to take all such actions as may
be necessary or advisable to consummate and make effective the
sale of the Interests and the transactions contemplated by this
Agreement and to assure that as of the Closing it will not be
under any material company, legal or contractual restriction that
would prohibit or delay the timely consummation of such
transactions.
4.2 Covenants of Purchaser. Purchaser covenants and agrees with Seller as
follows:
(a) Purchaser shall use its best efforts to cause all the
representations and warranties of Purchaser contained in this
Agreement to be true and correct on and as of Closing.
(b) Purchaser shall use its best efforts to take all such actions as
may be necessary or advisable to consummate and make effective the
sale of the Interests and the transactions contemplated by this
Agreement and to assure that as of the Closing it will not be
under any material company, legal or contractual restriction that
would prohibit or delay the timely consummation of such
transactions.
(c) Purchaser shall exercise all due diligence in safeguarding and
maintaining secure all Seller's non-public and confidential data
relating to the Interests which are in its possession.
ARTICLE V
TITLE
5.1 Purchaser's Title Review.
(a) As used herein, "Title Defect" shall mean any material
encumbrance, encroachment, irregularity, defect or objection to
Seller's title to the Interests, other than Permitted
Encumbrances, that would cause Seller not to have Defensible Title
to an Interest. In evaluating whether an encumbrance,
encroachment, irregularity, defect in or objection to title is
"material", due consideration shall be given to whether such
defect is of the type expected to be encountered in the area
involved and is customarily acceptable to prudent operators and
interest owners.
(b) As used herein the term "Defensible Title" shall mean, as to the
Interests, such title that, subject to and except for the
Permitted Encumbrances: (1) entitles Seller to receive not less
than the "Net revenue Interest" set forth in Exhibit "B" of all
the oil, gas and associated hydrocarbons produced, saved and
marketed from the presently producing formations in the presently
producing xxxxx located on the Interests; (2) obligates Seller to
bear costs and expenses relating to the maintenance, development
and operation of the presently producing xxxxx located on the
Interests in an amount not greater than the "Working Interest" set
forth on Exhibit "B"; and (3) is free and clear of material
encumbrances, liens and defects.
(c) As used herein, the term "Permitted Encumbrances" shall mean:
(1) Lessors' royalties, overriding royalties, reversionary
interests and similar burdens if the net cumulative effect
of such burdens does not operate to reduce the net Revenue
Interest to less than that shown on Exhibit "B".
(2) Preferential rights to purchase and required third party
consents to assignments and similar agreements with respect
to which (i) waivers or consents are obtained from the
appropriate parties (ii) the appropriate time period for
asserting such rights has expired without an exercise of
such rights, or (iii) failure to obtain such consents or
waivers will not have a material effect on the value of any
specific Interest.
(3) Liens for taxes and assessments not yet due or not yet
delinquent or, if delinquent, that are being contested in
good faith in the normal course of business;
(4) Materialmen's, mechanic's, employee's or other similar types
of liens or charges arising in the ordinary course of
business incidental to operation of the Interests if (i)
they have not been filed pursuant to law, (ii) if filed,
they have not yet become due and payable or payment is being
withheld as provided by law or (iii) their validity is being
contested in good faith by appropriate action;
(5) All other liens, charges, encumbrances, contracts,
agreements, defects and irregularities affecting the
Interests that are not such as to interfere materially with
the operation, value or use of any of the Interests;
(6) All rights to consent by, required notices to, filings with,
or other actions by governmental or tribal entities in
connection with the sale or conveyance of oil and gas leases
or interests therein if the same are customarily obtained
subsequent to sale or conveyance;
(7) Rights of reassignment upon abandonment or release of the
leases;
(8) Easements, rights-of-way, servitudes, permits, surface
leases and other rights in respect of surface operations,
pipelines, grazing, logging, canals, ditches, reservoirs or
the like; conditions, covenants or other restrictions; and
easements for streets, alleys, highways, pipelines,
telephone lines, power lines, railways and other easements
on, over or in respect of any of the Interests;
(9) The terms and conditions of all Leases and all agreements,
orders, instruments, documents and other matters affecting
the Interests (including without limitation production sales
contracts, division orders, contracts for sale, purchase,
exchange, refining, or processing of hydrocarbons,
unitization and pooling designations, declarations, orders
and agreements, operating agreements, agreements for
development, area of mutual interest agreements, gas
balancing or deferred production agreements, processing
agreements, plant agreements, pipeline, gathering and
transportation agreements, injection, repressuring and
recycling agreements, carbon dioxide purchase or sale
agreements, salt water or other disposal agreements, seismic
or geophysical permits or agreements which are customary in
oil, gas and mineral exploration, development or extraction
business providing that the foregoing do not operate to
reduce the Net Revenue Interest, nor increase the Working
Interest, of Seller as represented on Exhibit "B" (unless,
in the case of an increased Working Interest, Seller's Net
Revenue Interest is proportionately increased); and
(10) Rights reserved to or vested in any municipality or other
governmental authority to control or regulate the Interests
in any manner, and all applicable laws, rules and orders of
any governmental authority.
(d) Purchaser may, no later than thirty (30) days after Closing,
notify Seller of any Title Defect with respect to the Interests;
provided, however, that Purchaser shall not give such notice
unless the aggregate value of all Title Defects contained in such
notice and calculated in accordance with this Article IV equals or
exceeds fifty thousand dollars ($50,000), the "Minimum Amount".
Such notice must set forth in reasonable detail each Lease, tract
or portion thereof with respect to which a Title Defect is
claimed, the nature of each Title Defect and Purchaser's
calculation of the value of each Title Defect. In the event that
the aggregate value of such Title Defects is in excess of five
percent (5%) of the unadjusted Purchase Price, then either
Purchaser or Seller shall have the option to terminate this
Agreement by giving notice of such termination within five
business days after Seller's receipt of Purchaser's notice of
Title Defects. Seller shall have the option within thirty (30)
days, but not the obligation, to take reasonable actions to cure
the Title Defects to Purchaser's reasonable satisfaction.
(e) Subject to Seller's right to cure set forth above, if the
aggregate value of the Title Defects exceeds the Minimum Amount,
then Purchaser may (i) elect to accept any Defective Interest and
waive the Title Defect thereto or (ii) receive credit on the Post
Closing Adjustments by an amount equal to the aggregate amount of
the uncured Title Defects.
(f) The value of a Title Defect shall be determined as follows:
(1) If the defect is in the actual Net Revenue Interest or
Working Interest of Seller, the value of the defect shall be
an amount equal to the proportionate dollar amount of the
decrease in percentage of Net Revenue Interest or increase
in Working Interest without a proportionate increase in Net
Revenue Interest.
(2) If the defect results from a lien or other encumbrance
involving a liquidated amount of money, the adjustment for
such Interest shall be the cost of removing or curing the
lien or encumbrance including court costs and attorney's
fees.
(3) If the defect represents an obligation or burden which is
not liquidated, the amount shall be the sum reasonably
necessary to compensate the Purchaser and acceptable by both
the Seller and Purchaser.
5.2 Casualty Loss. The risk due to casualty loss or condemnation shall be
with the Seller at all times prior to the Effective Time and shall be with the
Purchaser thereafter. If after the Effective Time and prior to Closing, all
or any material portion of the Interests shall be damaged or destroyed and the
value of the Interests so damaged, condemned or destroyed is less than twenty
percent (20%) of the Purchase Price, Purchaser shall accept the Interests and
shall be entitled to the Interests' share of all insurance proceeds or
condemnation awards. If the value of the destroyed, condemned or damaged
Interests is greater than twenty percent (20%) of the Purchase Price,
Purchaser shall have option to terminate this Agreement by delivering a
written notice of termination to Seller within thirty (30) days after Closing.
5.3 Preferential Rights and Consents. Purchaser understands that the
Interests may be subject to preferential rights and/or consents and in the
event that a preferential right is exercised by a third party or if any
consent to assign is withheld, Purchaser shall be obligated to purchase the
remainder of the Interests and shall be reimbursed at the Post-Closing
Adjustment by an amount equal to the greater of the amount Seller actually
received from the third party or the value of the Interest calculated as a
Title Defect in Section 5.1 above.
ARTICLE VI
CONDITIONS TO CLOSING
6.1 Conditions to Obligations of Purchaser. Purchaser's obligation to
consummate the transactions contemplated hereby shall be subject to the
satisfaction or waiver on or prior to Closing of each of the following
conditions:
(a) Representations, Warranties and Covenants of Seller. The (i)
representations and warranties of Seller contained in Article III
of this Agreement shall be true and correct in all material
respects on and as of the date of this Agreement and as of the
Closing date; and (ii) covenants and agreements of Seller
contained in Article IV of this Agreement and any related
agreements to be performed on or before Closing in accordance with
this Agreement shall have been duly performed in all material
respects.
6.2 Conditions of Seller's obligation to Close. Seller's obligation to
consummate the transactions contemplated hereby is subject to the satisfaction
or waiver on or prior to Closing of all of the following conditions:
(a) Representations, Warranties and Covenants of Purchaser. The (i)
representations and warranties of Purchaser contained in Article
III of this Agreement shall be true and correct in all material
respects on and as of the date of this Agreement and as of the
Closing date; and (ii) covenants and agreements of Purchaser
contained in this Agreement and any related agreements to be
performed on or before Closing in accordance with this Agreement
shall have been duly performed in all material respects.
6.3 Conditions to Obligations of Both Parties. The obligations of
Purchaser and Seller to consummate the transactions contemplated by this
Agreement are subject, at the option of each Party, to the satisfaction or
waiver by both Parties of the following conditions:
(a) No Injunction. On the Closing Date there shall exist no
injunction, restraining order or decree of any nature from any
court or governmental agency or body of competent jurisdiction
that is in effect and which restrains or prohibits the
consummation of the transaction contemplated hereby.
(b) No prohibition. No state or federal statute, rule, regulation or
action shall exist or shall have been adopted or taken and no
judicial or administrative decision shall have been entered
(whether on a preliminary or final basis) that would prohibit,
restrict or delay the consummation of the transactions
contemplated by this Agreement or make illegal the payments due
hereunder.
ARTICLE VII
CLOSING
7.1 Closing. Subject to the provisions and conditions of this Agreement,
the closing of the transactions contemplated by this Agreement (the "Closing")
will take place on Friday, February 1, 2002 (the Closing Date").
7.2 Place of Closing. The Closing shall be held at Seller's office, or
at such other place as the Parties may agree upon in writing.
7.3 Closing Obligations. At Closing, the following documents shall be
delivered and the following events shall occur, all of which shall be deemed
to have occurred simultaneously:
(a) Seller and Purchaser shall execute a "Preliminary Settlement
Statement" prepared by Seller and approved by Purchaser that sets
forth the Purchase Price and all adjustments thereto, based on the
best information then available to the Parties.
(b) Purchaser shall deliver the Purchase Price to Seller by wire
transfer of funds to a bank and bank account designated by Seller
in a written notice delivered to Purchaser not less than two (2)
business days prior to Closing.
(c) Seller shall execute and deliver to Purchaser the "Assignment,
Xxxx Of Sale & Conveyance" set forth as Exhibit "G" attached
hereto, conveying to Purchaser, the Interests.
(d) Seller shall execute and deliver to Purchaser all necessary state,
federal, Indian or other governmental agency forms of assignments
necessary to convey the Interests to Purchaser.
(e) Seller and Purchaser shall execute, and deliver "Letters In Lieu
Of Transfer Orders" directing the purchasers of production to make
payment to Purchaser of the proceeds attributable to the
Interests.
7.4 Further Assurances. After the Closing, each Party at the request of
the other Party and without any additional consideration, shall execute and
deliver or cause to be delivered from time to time such further instruments of
conveyance and transfer and shall take such other actions other parties may
require to convey the Interests to Purchaser or to fully vest the privileges,
rights and powers incident to the ownership thereof in Purchaser.
ARTICLE VIII
POST-CLOSING OBLIGATIONS
8.1 Post-Closing Adjustments.
(a) Sixty (60) days after the Closing, Seller shall prepare and
deliver to Purchaser, in accordance with this Agreement and
generally accepted accounting principles, a statement setting
forth each adjustment or payment that was not finally determined
as of the Closing and showing the calculation of such adjustments.
The amount of all uncured Title Defects including exercised
preferential rights and withheld consents to assign shall also be
incorporated in this settlement statement. The Parties shall
undertake to agree with respect to the amounts due pursuant to
such Post-Closing adjustment no later than ninety (90) days after
the Closing (the "Final Settlement Date"). If the Purchase Price
as finally adjusted pursuant to this Section 8.1 is more than the
amount paid by Purchaser at the Closing, Purchaser shall pay to
Seller in immediately available funds the amount of such
difference. If the Purchase Price as so adjusted is less than
the amount paid by Purchaser at the Closing, Seller shall pay to
Purchaser in immediately available funds the amount of such
difference. Payment by shall be made within five (5) days after
the date agreement is reached with respect to all amounts due
pursuant to the Post-Closing adjustment.
(b) The proration of ad valorem taxes, if any, made at the Closing
pursuant to Section 2.2(c) shall be adjusted between the Parties
in the Post-Closing statement to accurately reflect the proper
amount due.
(c) Any revenues received or costs and expenses paid by Purchaser
after the Final Settlement Date which are attributable to the
Interests prior to the Effective Time shall be billed or
reimbursed to Seller as appropriate. Any revenues received or
costs and expenses paid by Seller after the Final Settlement Date
which are attributable to the Interests after the Effective Time,
and not expressly reserved by Seller, shall be billed or
reimbursed to Purchaser as appropriate.
8.2 Files and records. As soon as practical, but no later than thirty
(30) days after the date of Closing, Seller shall deliver to Purchaser, at
Seller's expense, Seller's original files and records relative to the
Interests. If Seller desires to retain any copies, it shall be responsible
for the cost of such copying.
8.3 Sales taxes and Recording Fees. Purchaser shall pay all sales taxes
incurred by the sale of the Interests, and all documentary, filing and
recording fees required in connection with the filing and recording of the
assignments delivered at Closing.
8.4 Assumption of Obligations. After the Closing, Purchaser shall own
the Interests and all rights relating thereto accruing from and after the
Effective Time and shall assume and pay, perform, fulfill and discharge all
duties, obligations and liabilities accruing with respect to the Interests
from and after the Effective Time.
8.5 Abandonment of Producing Properties. Purchaser shall, at such time
as any portion of the Land or any well thereon is abandoned, assume its
proportionate share of the obligations to properly plug said well or xxxxx,
and upon completion of the salvaging of the property and equipment, shall
restore the condition of the premises in accordance with the then current
standards required by the rules and laws of all federal, state and local
agencies having jurisdiction over the Leases assigned herein. Purchaser
further agrees to inde4mnify and hold Seller harmless for the Interests' share
of any claims arising in favor of any person or entity by reason of any
failure of Purchaser to fully comply with the undertakings herein expressed
from and after the Effective Time.
8.6 Indemnification.
(a) Indemnities of Purchaser. Purchaser shall, to the fullest extent
permitted by law, defend, indemnify, save and hold Seller, and all
of its affiliates, successors and assigns and their respective
members, directors, officers, employees, agents, shareholders and
representatives (collectively, the "Seller Indemnified Parties")
harmless from and against all damages, expenses, liabilities,
losses, expenses (including attorneys' fees) and the costs arising
out of or resulting from any inaccuracy in or breach of any
representation or warranty made by the Purchaser. The Seller
Indemnified Parties shall give to Purchaser prompt notice in
writing of any claims to which this Section applies and afford
Purchaser the reasonable opportunity to pay, settle or contest
such claim at its expense.
(b) Indemnities of Seller. Seller shall, to the fullest extent
permitted by law, defend, indemnify, save and hold Purchaser, and
all of its affiliates, successors and assigns and their respective
members, directors, officers, employees, agents, shareholders and
representatives (collectively, the "Purchaser Indemnified
Parties") harmless from and against all damages, expenses,
liabilities, losses, expenses (including attorneys' fees) and the
costs arising out of or resulting from any inaccuracy in or breach
of any representation or warranty made by the Seller. The
Purchaser Indemnified Parties shall give to Seller prompt notice
in writing of any claims to which this Section applies and afford
Seller the reasonable opportunity to pay, settle or contest such
claim at its expense.
ARTICLE IX
TERMINATION OF AGREEMENT
9.1 Events of termination. This Agreement may be terminated as follows:
(a) By the mutual written consent of Purchaser and Seller.
(b) By Seller if (i) Purchaser fails to pay Seller the Purchase Price;
(ii) Purchaser shall fail to perform in any material respect its
covenants contained herein required to be performed by it on or
prior to Closing; (iii) any of Purchaser's representations
contained herein shall be incorrect in any material respect on the
Closing Date; (iv) the conditions to Seller's obligations to Close
have not been satisfied in all material respects as of the Closing
date;
(c) By Purchaser if (i) Seller shall fail to perform in any material
respect its covenants contained herein required to be performed by
it on or prior to Closing; (ii) any of Seller's representations
contained herein shall be incorrect in any material respect on the
Closing Date; (iii) the conditions to Purchaser's obligations to
Close have not been satisfied in all material respects as of the
Closing date;
(d) By Purchaser or Seller if the aggregate of all Title Defects
amounts or preferential right and consent to assign adjustments
exceed five percent (5%) of the Purchase Price; provided, however,
that Seller shall not have the right to terminate this Agreement
in the event that Purchaser elects, in its sole discretion, not to
adjust the Purchase Price and to bear the cost of curing the Title
Defects which otherwise would result in adjustments to the
Purchase Price that exceed five percent (5%) of the Purchase
Price; or
(e) By Purchaser if the Interests suffer casualty loss or
condemnation during the period between the Effective Time and the
Closing in the aggregate that exceeds twenty percent (20%) of the
Purchase Price.
ARTICLE X
MISCELLANEOUS
10.1 Survival of Representations and Warranties. All representations and
warranties of the Parties contained in this Agreement or in any Exhibit
hereto, or in any certificate, document or other instrument delivered in
connection herewith shall survive the Closing for a period of one hundred and
eighty (180) days and shall be binding upon and inure to the benefit of the
Parties hereto and their respective successors, assigns and legal
representatives for such period. Notwithstanding the foregoing, the
representations and warranties contained in Sections 3.1(a), (b), (c) and (p)
and 3.2(a), (b) and (c) shall continue in full force and effect without
limitation.
10.2 Entire Agreement. This Agreement, together with the Exhibits
hereto, constitute all the promises, covenants, agreements, conditions and
undertakings between the Parties hereto with respect to the subject matter
hereof and superceded any and all prior and contemporaneous agreements,
undertakings, inducements or conditions either express or implied, oral or
written, including but not limited to those contained in any letter of intent.
All of the terms and conditions of this Agreement shall be binding upon and
inure to the benefit of the Parties hereto and their respective successors and
assigns.
10.3 Waiver. No waiver of any of the provisions of this Agreement shall
be deemed or shall constitute a waiver of any other provisions hereof (whether
or not similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
10.4 Captions. The captions in this Agreement are for convenience only
and shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.
10.5 Governing Law. This Agreement, other documents delivered pursuant
hereto or in connection herewith, and the legal relations between the Parties
shall be governed and construed in accordance with the laws of Colorado. 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 the property is situated.
10.6 Notices. Any notice, communication, request, instruction or other
document required or permitted hereunder shall be given in writing by either
hand delivery, certified mail or facsimile transmission, addressed as follows:
If to Seller:
Delta Petroleum Corporation
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: Xx. Xxxxx X. Xxxxxx, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If To Purchaser:
Sovereign Holdings, LLC
000 00xx Xxxxxx, Xxx. 0000
Xxxxxx XX 00000
Attn: Xx. Xxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 00000000
Notices shall be effective (i) upon delivery in the case of hand delivery;
(ii) three days after mailing by certified mail; and (iii) on the day of
transmission in the case of facsimile transmission, unless received after
business hours in which event notice is deemed received on the next business
day, provided in either event that a copy of the notice is also mailed by
certified mail to the Party to whom notices being given on the day the
facsimile is transmitted. Either Party shall have the right to change its
address for notices hereunder by giving written notice of such change to the
other party at the above address.
10.7 Assignment. Purchaser shall not have the right to assign any portion
of its rights hereunder to any person or persons without the prior written
consent of the Seller, which shall not be unreasonably withheld.
10.8 Execution in Counterparts. This Agreement may be executed in any
number of counterparts and each counterpart shall be deemed to be an original
but all such counterparts together shall constitute for all purposes only one
document. Any counterpart may be delivered by facsimile. Any facsimile shall
be replaced with an original as soon as practical.
10.9 Expenses. Except as otherwise provided herein, each party shall be
solely responsible for all expenses incurred by it in connection with this
transaction (including without limitation fees and expenses of its own counsel
and other contract professionals) and shall not be entitled to any
reimbursement therefore from the other Party hereto.
10.10 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby does not affect any Party
adversely. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the Parties shall negotiate
in good faith to modify this Agreement so as to effect the original intent of
the Parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled.
10.11 Generality of Provisions. The specificity of any representations,
warranty, covenant, agreement or indemnity included or provided in this
Agreement, or in any Exhibit, document, certificate or other instrument
delivered pursuant hereto shall in no way limit the generality of any
representation, warranty, covenant, agreement or indemnity included or
provided in this Agreement, or in any Exhibit, document, certificate or other
instrument delivered pursuant hereto.
10.12 References. References made in this Agreement, including use of a
pronoun, shall be deemed to include where applicable, masculine, feminine,
singular or plural, individuals, partnerships or corporations. As used in
this Agreement, "person" shall mean any natural person, partnership,
corporation, trust, estate or other entity. As used in this Agreement,
"affiliate" of a person shall mean any partnership, joint venture, corporation
or other entity in which such person has an interest equal to or greater than
fifty percent (50%) or which controls, is controlled by or is under common
control of such person.
10.13 Announcements. Seller and Purchaser shall consult with each other
with regard to all press releases and other announcements concerning this
Agreement or the transactions contemplated hereby and, except as may be
required by applicable laws or the applicable rules and regulations of any
governmental agency or stock exchange, neither Seller nor Purchaser shall
issue any press release or make any other announcement without the prior
written consent of the other Party. This provision shall survive Closing and
shall continue in full force and effect without limitation.
10.14 1031 Exchange. Seller may desire to structure this transaction so
that it may be accomplished in a manner that will comply with the requirements
of a like-kind exchange ("Like-Kind Exchange") pursuant to Section 1031 of the
Code. Seller reserves the right, at or prior to Closing, to assign its rights
under this Agreement with respect to all or a portion of the Purchase Price,
and that portion of the Interests associated therewith ("1031 Assets"), to a
Qualified Intermediary (as that term is defined in Section 1.1031(k)-
1(g)(4)(iii) of the Treasury Regulations) to accomplish part of this
transaction in a manner that will comply, either in whole or in part, with the
requirements of a Like-Kind Exchange. Pursuant to this Section 10.14 and a
1031 Exchange Agreement to be executed contemporaneously herewith, Seller may
assign its rights to the 1031 Assets under this Agreement to a qualified
intermediary. Purchaser hereby (i) consents to Seller's assignment of its
rights in this Agreement with respect to the 1031 Assets, and (ii) if such an
assignment is made, agrees to pay all or a portion of the Purchase Price into
the qualified trust account at Closing as set forth in the 1031 Exchange
Agreement. The Parties acknowledge and agree that a partial assignment of
this Agreement to a Qualified Intermediary shall not release either Party from
any of their respective liabilities and obligations to each other or expand
any such respective liabilities or obligations under this Agreement, and that
neither Party represents to the other that any particular tax treatment will
be given to either Party as a result thereof. Purchaser shall not be
obligated to pay any additional costs or incur any additional obligations as a
result of the Like-Kind Exchange, and Seller shall indemnify and hold
Purchaser harmless from and against all claims, losses and liabilities, if ay
result from such a Like-Kind Exchange.
10.15 Confidentiality Agreement. Until Closing, each Party, its
affiliates and their directors, officers, employees, agents, representatives,
consultants, investors and lenders agree to keep the terms and conditions of
this Agreement, including without limitation the Purchase Price and all
economic terms, confidential, and not to disclose such terms and conditions
without the prior written consent of the other Party, which consent may be
withheld at either Party's sole discretion. The foregoing restriction shall
not apply to disclosures and information which (i) are required to comply with
applicable statutes and regulations, including stock exchange requirements;
(ii) are required to enforce this Agreement; (iii) are required to obtain
waivers of preferential rights or consents required to be obtained under this
Agreement; (iv) are required to obtain financing related to the transactions
contemplated hereby or the Interests acquired by Purchaser hereunder; or (v)
enter the public domain through a third party who does not thereby breach an
obligation of confidentiality.
IN WITNESS WHEREOF, Purchaser and Seller have executed this Agreement as
of the date first above written.
SELLER:
DELTA PETROLEUM CORPORATION
By:__________________________________
Xxxxx X. Xxxxxx, President
PURCHASER:
SOVEREIGN HOLDINGS, LLC
By Fairway Asset Management, LLC,
Manager
By:__________________________________
Xxxxxx X. Xxxxxxx, Manager
GOLDLINE CREEK, LLC
By:_________________________________
Xxxxx X. Xxxxxxxxxxx, Manager
DAKOTA VENTURES, LLC
By:_________________________________
Xxxxxx X. Xxxxxx, Manager
