EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of the 18th day of August,
2004 by and between STONE MOUNTAIN ENERGY, L.C., a Virginia limited liability
company ("SME"), and XXXXXXXXX PETROLEUM, INC., a Kentucky corporation ("DPI").
RECITALS
WHEREAS, SME owns certain assets in Xxxxxx, Xxxx and Xxxxxx Counties,
Kentucky and Xxx County, Virginia (the "Purchased Assets") which it desires to
sell and assign and DPI desires to purchase the Purchased Assets and assume
certain of SME's obligations related to the Purchased Assets; and
NOW, THEREFORE, in consideration of the mutual covenants, conditions
and agreements set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Parties hereby
agree as follows:
ARTICLE I
DEFINITIONS
Unless otherwise expressly provided herein, all references to Recitals,
Sections, Schedules or Exhibits refer to recitals, sections, schedules or
Exhibits to this Agreement (the "Agreement"). The Recitals, Schedules and
Exhibits are hereby incorporated in and made a part of this Agreement as if set
forth in full herein. References to this Agreement include the Schedules and
Exhibits, in each case as the same may be amended from time to time in
accordance with the terms hereof. All capitalized terms used in the Schedules
and not otherwise defined shall have the respective meanings ascribed to them in
this Agreement. When used in this Agreement or the Schedules, the following
terms shall have the meanings specified below.
1.1 "Affiliate" shall mean, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.
"Control" shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
1.2 "Assignment and Assumption Agreement" shall mean one or more
assignment and assumption agreements substantially in the form of Exhibit A.
1.3 "Assumed Liabilities" shall mean all liabilities and obligations of
SME specified on Schedule 1.3.
1.4 "Xxxx of Sale" shall mean one or more bills of sale, each
substantially in the form of Exhibit B.
1.5 "Books and Records" shall mean the original or true and complete
copies of all of the books and records of SME pertaining to the Purchased Assets
and the Assumed Liabilities, including but not limited to, all leases,
agreements, contracts, accounting records, orders and invoices, sales orders and
sales order log books, credit and collection records, correspondence and
miscellaneous records with respect to customers and supply sources, lessors and
lessees, records, correspondence and documents relating to the Permits and
compliance with Laws, and all other general correspondence, records, books and
files of SME pertaining to the Purchased Assets and the Assumed Liabilities, but
excluding any and all Tax Returns and organizational records of SME.
1.6 "Closing" shall mean the closing of the transactions contemplated
by this Agreement to be held on the Closing Date at a mutually agreed location.
1.7 "Closing Certificate" shall mean (a) the certificate of DPI in
substantially in the form of Exhibit C or (b) the certificate of SME in
substantially in the form of Exhibit D.
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1.8 "Closing Date" shall mean a date within 60 days after the date of
this Agreement when the conditions to the Closing set forth herein (other than
those that by their terms are to be satisfied at the Closing) are satisfied, or
such other date as the Parties may mutually agree in writing.
1.9 "Code" shall mean the Internal Revenue Code of 1986, as amended,
and, where appropriate, any predecessor or successor provisions of Law, and all
regulations thereunder.
1.10 "Contracts" shall mean the contracts, agreements, personal
property leases, relationships and commitments, written or oral, of SME or its
Affiliates pertaining to the Personal Property included in the Purchased Assets,
a complete list of which is set forth on Schedule 1.10.
1.11 "Deed" shall mean the deed substantially in the form of Exhibit E.
1.12 "Environmental Laws" shall mean all federal, state and local
statutes, regulations and ordinances as well as all permits, orders, standards
and policies issued or enforced thereunder, pertaining to: (a) protection of air
and water quality, natural resources, historic and archeological resources,
flora and fauna (including endangered and threatened species) and human health;
(b) prevention or control of the discharge of any substance into air or water
(including groundwater) or into, onto or beneath the soil; (c) removal or
remediation of any substance that has been discharged, released, spilled or
disposed of; (d) construction, operation, closure and post-closure care of any
facility that treats, stores, receives, disposes or discharges any substance
regulated under any Environmental Law; (e) requirements for recordkeeping and
reporting of activities regulated under any Environmental Law; and (f)
construction, operation and maintenance of facilities, dredging, and other
activities in waters (including wetlands) or on lands that are subject to the
jurisdiction of any Governmental Authority.
1.13 "Excluded Assets" shall include the properties conveyed to SME in
the following instruments: (a) deed dated November 9, 1998, recorded in the
Xxxxxx County Court Clerk's Office in Deed Book 339, Page 386; (b) deed dated
September 14, 2000, recorded in the Xxx County Circuit Court Clerk's Office in
Deed Book 513, Page 642; (c) deed dated September 14, 2000, recorded in the Xxx
County Circuit Court Clerk's Office in Deed Book 513, Page 645; and, (d) deed
dated September 14, 2000, recorded in the Xxx County Circuit Court Clerk's
Office in Deed Book 513, Page 647.
1.14 "GAAP" means accounting principles generally accepted in the
United States of America, consistently applied.
1.15 "Gas" shall mean all gas, whether hydrocarbon or non-hydrocarbon
or any combination or mixture thereof, including Hydrocarbons, hydrogen,
sulfide, helium, carbon dioxide, nitrogen, hydrogen and casinghead gas.
1.16 "Gathering Systems" shall mean the gathering and transportation
systems owned or leased by SME and all material plants, equipment, fixtures,
improvements and other Personal Property owned or leased by SME that directly
relates to those systems.
1.17 "Governmental Authority" shall mean any governmental, judicial,
legislative, executive, administrative or regulatory authority of the United
States, or of any state, county or local government or any subdivision, agency,
commission, office, authority or bureau thereof.
1.18 "Hydrocarbon Leases" shall mean the leases, subleases, and
farm-out agreements for Hydrocarbons held by SME and listed on Schedule 1.18.
1.19 "Hydrocarbons" shall mean oil, gas, coalbed methane, coalseam gas,
coalbed gas, methane gas, gob gas, occulated gas and other naturally occurring
gases contained in or associated with any coal seam and gas originating in or
produced from any coal seam, and other liquid or gaseous hydrocarbons and all
components of any of them or produced in connection therewith.
1.20 "Income Tax" or "Income Taxes" shall mean any Tax based on or
measured by net income, and "IRS" shall mean the United States Internal Revenue
Service.
1.21 "Knowledge of SME" shall mean the actual knowledge of the
individuals listed on Schedule 1.21.
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1.22 "Law" shall mean any federal, state, local or other law or
governmental requirement of any kind, and the rules, regulations and orders
promulgated thereunder.
1.23 "Lien" shall mean any lien, encumbrance, mortgage, charge, claim,
restriction, pledge, security interest or imposition of any kind.
1.24 "Material Adverse Effect" shall mean any material adverse effect
on the Purchased Assets, taken as a whole. For purposes of this definition,
"Material" means an amount equal to five percent (5%) or more of the Purchase
Price.
1.25 "Materialmen's Claims" shall mean any trade payables or claims
arising from operations of the Purchased Assets prior to the Closing Date, to
the extent secured by materialmen's, mechanic's or other statutory Liens having
priority over the Liens securing SME's indebtedness to Duke Capital Partners.
1.26 "Oil" shall mean all oil, natural crude oil or petroleum and other
hydrocarbons regardless of gravity, produced at the well in liquid form by
ordinary production methods.
1.27 "Party" shall mean SME, DPI or their respective successors or
permitted assigns.
1.28 "Permits" shall mean the written permits, licenses, registrations
and approvals held by SME listed on Schedule 1.28.
1.29 "Permitted Liens" shall mean: (a) Liens for property Taxes not due
and payable; (b) Liens disclosed by or excepted in a document in the
chain-of-title of the Real Property of record in the county in which the Real
Property is located (excluding any mortgage or deed of trust); (c) a right of
way, utility easement, reservation or other right of use existing in or held by
a third party not an Affiliate of SME that is created by an instrument of record
or easements that arise by operation of law by prescription or previous use; and
(d) Liens affecting the Purchased Assets that are listed on Schedule 1.29.
1.30 "Person" shall mean any individual, corporation, general or
limited partnership, limited liability company, joint venture, estate, trust,
association, organization, labor union or other entity or
1.31 "Personal Property" shall mean the Suspense Funds and all Xxxxx,
fixtures and other items of personal property (including without limitation,
wellhead equipment, pumping units and other artificial lift equipment, field
separators, liquid extractors, pipe, casing and tubing, physical gathering
systems and equipment, production and associated flowlines and equipment, oil
loadout equipment and facilities, tanks, machines, vehicles, tools, dies and
associated equipment, vessels and other facilities) that SME owns or leases,
including but not limited to those listed on Schedule 1.31, other than the
Excluded Assets.
1.32 "Post-Closing Period" shall mean any taxable period beginning
after the Closing Date.
1.33 "Pre-Closing Period" shall mean any taxable period ending on or
before the Closing Date.
1.34 "Purchase Price" shall mean Twenty-Seven Million Dollars
($27,000,000.00), payable as provided in Section 2.1.
1.35 "Purchased Assets" shall mean the Books and Records, Real
Property, Personal Property, and the rights of SME and its Affiliates under the
Contracts and Permits.
1.36 "Real Property" shall mean: (a) the Hydrocarbon Leases; (b) the
surface leases, drilling and production rights, easements, rights-of-way, access
rights, and other rights or interests in real property and improvements thereon,
or with respect to the drilling, production or transportation of the oil and gas
therein and thereunder, as well as underground voids leased to SME and listed on
Schedule 1.36(b); and the tracts of land described on Schedule 1.36(c).
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1.37 "SME Annual Audited Financial Statement" shall mean the audited
balance sheet of SME as of December 31, 2002 and related statement of operations
and cash flows for the fiscal year ended December 31, 2002.
1.38 "SME Unaudited Financial Statements" means unaudited balance
sheets of SME as of December 31, 2003 and as of June 30, 2004 and related
unaudited statements of operations and cash flows for the fiscal year ended
December 31, 2003 and the six months ended June 30, 2004.
1.39 "Straddle Period" shall mean any taxable period covering days
before and after the Closing Date.
1.40 "Suspense Funds" shall mean the amount of funds, as of Closing,
related to rental or royalty payments due to third parties that SME has been
unable to pay, and certain plugging obligations, a listing of which as of the
date hereof, is identified by SME on Schedule 1.3.
1.41 "Tax" or "Taxes" shall mean any federal, state, county, local or
foreign taxes, charges, levies, imposts, duties, other assessments or similar
charges of any kind whatsoever, including, interest, penalties and additions
imposed thereon or with respect thereto, of whatever nature and regardless of
how denominated.
1.42 "Tax Return" shall mean any original or amended report, return,
document, schedule or other information supplied or required to be supplied to a
Governmental Authority with respect to Taxes, including any return of an
affiliated, combined or unitary group.
1.43 "Transfer Period" shall have the meaning set forth in Section
5.6(d).
1.44 "Xxxxx" shall mean all Hydrocarbon xxxxx in Xxx County, Virginia,
and Xxxx and Xxxxxx Counties, Kentucky, in which SME owns any interest or has
any obligations with respect to future expenditures or other liability.
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Transfer of Assets.
(a) On the Closing Date, SME shall sell, convey, transfer,
assign and deliver or cause to be sold, conveyed, transferred, assigned and
delivered to DPI, and DPI shall acquire, all of SME's right, title and interest
in and to all of the Purchased Assets. At the Closing, subject to the terms and
conditions of this Agreement, SME shall (i) cause the Purchased Assets to be
transferred and delivered to DPI and (ii) perform its obligations under this
Agreement to be performed at the Closing.
(b) On the Closing Date, in full consideration for the
Purchased Assets, DPI shall (i) assume the Assumed Liabilities, (ii) pay the
Purchase Price to or for the account of SME as set forth below and (iii) perform
its obligations under this Agreement to be performed at the Closing. DPI shall
not assume any obligation of SME or any other liability related to the Purchased
Assets except the Assumed Liabilities.
(c) The Purchase Price shall be payable by DPI at the Closing
as follows:
(i) first, by check (A) to the holders of any
Materialmen's Claims asserted prior to the Closing Date, in the respective
amounts thereof, and (B) $250,000 for deposit in an escrow account to be
maintained by DPI in accordance with Section 2.4(b) to satisfy any Materialmen's
Claims asserted after the Closing Date;
(ii) second, by wire transfer of immediately
available funds to Duke Capital Partners in the full amount of SME's outstanding
indebtedness to Duke Capital Partners as of the Closing Date;
(iii) third, by wire transfer of immediately
available funds to Wachovia Bank in an amount equal to the Purchase Price less
amounts paid pursuant to Sections 2.1(c)(i) and (ii).
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2.2 Bills of Sale; Assignment and Assumption Agreement. At the Closing,
SME shall execute and deliver to DPI Bills of Sale and the Assignment and
Assumption Agreement and perform its other obligations under this Agreement to
be performed at the Closing.
2.3 Assumption of Liabilities. At the Closing, DPI shall execute and
deliver to SME the Assignment and Assumption Agreement and such other documents
and instruments, in form and substance acceptable to both parties, as may be
necessary for it to assume the Assumed Liabilities.
2.4 Proration of Liabilities; Payment Reimbursement.
(a) SME and DPI shall cooperate to provide each other with
information on the status of the Assumed Liabilities. With the exception of the
Assumed Liabilities, following the Closing Date, SME shall remain responsible
for payment of all liabilities and obligations of any kind and nature arising
from the ownership of the Purchased Assets prior to the Closing Date. All
monthly royalties, charges and fees payable on account of the operation of the
Purchased Assets for the month in which the Closing occurs shall be apportioned
between SME and DPI on a per diem basis as of the Closing Date. SME will pay all
such retained liabilities, accounts payable and other obligations related to the
Purchased Assets in a timely fashion.
(b) Upon receipt of a Materialmen's Claim following the
Closing Date, DPI shall provide SME with notice of same. SME shall have a
reasonable opportunity to contest and resolve same. Subject to such procedures,
funds deposited in the escrow account contemplated by Section 2.1(c)(i) shall be
paid by DPI to the holders of any Materialmen's Claims asserted after the
Closing Date, in the respective amounts thereof. DPI shall remit any funds
remaining in the escrow account to SME or its designees upon: (i) termination of
the applicable statutory periods for filing Materialmen's Claims; and (ii)
resolution of any Materialmen's Claim filed within the applicable statutory time
periods.
(c) All revenues from operations of the Purchased Assets for
the month in which the Closing occurs shall be apportioned between SME and DPI
on a per diem basis as of the Closing Date. If DPI or any of its Affiliates
receives any payment in any form attributable the operations of the Purchased
Assets for periods prior to the Closing Date, it will forward such payment to
SME within five business days of its receipt. If SME or any of its Affiliates
receives any payment in any form attributable to the operations of the Purchased
Assets for periods following the Closing Date, its will forward or cause such
Affiliate to forward such payment to DPI within five business days of its
receipt.
2.5 Additional Closing Documents. At the Closing, the Parties shall
execute and deliver all such other documents or instruments, in form and
substance reasonably acceptable to them, to the extent any documents or
instruments not specifically provided for herein are necessary to implement the
transactions contemplated by this Article II.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SME
SME hereby represents and warrants to DPI that:
3.1 Incorporation SME is a limited liability company duly organized,
validly existing and in good standing under the Laws of the Commonwealth of
Virginia and is duly qualified to do business in the Commonwealth of Kentucky.
3.2 Execution, Delivery and Performance. The execution, delivery and
performance by SME of this Agreement and of each other agreement or instrument
to which it is a party executed in connection herewith or delivered pursuant
hereto and the consummation of the transactions contemplated herein and therein
will not, with or without the giving of notice or the passage of time, or both,
(a) conflict with, or result in a violation or breach of, or a default, right to
accelerate or loss of rights under, or result in the creation of any Lien (other
than Permitted Liens) under or pursuant to, any provision of its Articles of
Organization or Operating Agreement or, to the Knowledge of SME of any material
franchise, mortgage, deed of trust, lease, license, instrument, agreement,
consent, approval, waiver or understanding to which it is a party or is bound,
any Law or any order, judgment, writ, injunction or decree to which it is a
party or by which it or its assets may be bound or affected, or (b) to the
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Knowledge of SME, require the approval, consent of, prior notice to, or filing
or registration with any Governmental Authority; provided that this Section 3.2
shall not apply to any requirement of SME or DPI to obtain any consent of the
applicable Governmental Authority to transfer or modify the Permits.
3.3 Authorization.
(a) SME has full power and authority to enter into and deliver
this Agreement and each other agreement or instrument to be executed and
delivered by it hereunder and to perform its obligations hereunder and
thereunder. SME's execution, delivery and performance of this Agreement and all
such other agreements and instruments and its consummation of the transactions
contemplated hereby and thereby have been duly authorized by all requisite
company action on the its part. This Agreement and all such other agreements or
instruments have been or upon delivery shall be duly executed and delivered by
SME, and this Agreement and all such other agreements and instruments constitute
or upon delivery shall constitute the legal, valid and binding obligation of
SME, enforceable in accordance with their respective terms (subject to any
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
Laws affecting generally the enforcement of creditors' rights).
3.4 Real Property.
(a) SME has made available to DPI all deeds, leases, bills of
sale, documents of title, abstracts, surveys, plats, maps and other Book and
Records in the possession of SME or its Affiliates that relate to the Real
Property.
(b) Schedules 1.36(b) and 1.36(c) list all of the Real
Property other than the Hydrocarbon Leases.
(c) Schedule 1.18 lists all of the Hydrocarbon Leases. SME
holds the lessees' interests under the Hydrocarbon Leases, and the interests
held by SME for its own account in the Hydrocarbon Leases are free and clear of
any Liens (other than Permitted Liens). Except as listed on Schedule 3.4(c), (i)
SME is in compliance in all material respects with each of the leases and
subleases to which it is a party that is included in the Real Property,
including each Hydrocarbon Lease, (ii) each of such leases and subleases is in
full force and effect, enforceable in accordance with its terms against the
respective lessee, sublessee, lessor or sublessor thereunder (subject to any
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
Laws affecting generally the enforcement of creditors' rights), (iii) there is
no existing default by SME or, to the Knowledge of SME, by any other party under
any such lease or sublease, including any Hydrocarbon Lease, which would result
in a Material Adverse Effect, and (iv) there is not any event or condition
which, after the passage of time or the giving of notice, or both, would
constitute an event of default thereunder by SME or, to the Knowledge of SME, by
any other party thereunder, which would result in a Material Adverse Effect
(d) Except as listed on Schedule 3.4(d) or Schedule 3.9, there
is not any pending or, to the Knowledge of SME, any threatened third party
adverse claim to any of the Real Property, other than Permitted Liens and, to
the Knowledge of SME, there are no conditions or events that with the passage of
time or the giving of notice, or both, would constitute the basis for any such
third party adverse claim.
(e) With respect to the Hydrocarbon Leases, all rentals and
other payments due in respect of the leasehold interests have been timely paid,
and SME has fully performed all other conditions necessary to keep such
interests in full force and effect during their primary term and thereafter if
commercial production has been established thereon or on lands pooled therewith,
or if xxxxx have been shut-in.
(f) SME has made available to DPI all lease files, land files,
well files, production files and abstracts, title opinions, accounting records,
seismic records and surveys, shot points, field notes, gravity maps, electric
logs, geological and geophysical prospect maps, geological base maps, and other
geological or geophysical data and records or other documents, including
interpretations of geologic and geophysical data of every kind and description
in the possession of SME or any of its Affiliates and relating to the Real
Property. All of the foregoing documents, instruments and records are included
in the Books and Records to be delivered to DPI at the Closing as part of the
Purchased Assets.
(g) NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE
CONTRARY, (i) DPI ACCEPTS THE HYDROCARBON RESERVES AS IS, WHERE IS, FREE OF ANY
WARRANTY
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(EXPRESS OR IMPLIED) WITH REGARD TO THE RECOVERABILITY OF OR THE COST OF
RECOVERING ANY OF SUCH RESERVES, THE VALUE OF SUCH RESERVES, PRICES (OR
ANTICIPATED PRICES) AT WHICH PRODUCTION WILL BE SOLD AND THE ABILITY TO SELL
HYDROCARBON PRODUCTION; AND (II) SME EXPRESSLY DISCLAIMS ANY WARRANTY AS TO THE
ACCURACY OR COMPLETENESS OF GEOLOGICAL AND/OR GEOPHYSICAL INFORMATION OR RESERVE
ESTIMATES CONTAINED IN ANY OIL AND GAS DATA MADE AVAILABLE TO DPI, THE SAME
BEING PREDICTIONS TO FUTURE EVENTS WHICH ARE INHERENTLY SUBJECT TO
INCOMPLETENESS AND INACCURACY.
(h) Schedule 3.4(h) sets forth the consents required to be
obtained pursuant to the Hydrocarbon Leases or otherwise with respect to the
Real Property as a result of the sale and assignment of the Purchased Assets and
other transactions contemplated by this Agreement.
3.5 Personal Property.
(a) Schedule 1.31 contains (i) a list of all of the Personal
Property owned by SME with an initial purchase price of $25,000 or more and (ii)
a summary description of the Personal Property owned by SME with an initial
purchase price of less than $25,000.
(b) SME has marketable title to all of the Personal Property,
free and clear of all Liens, except for Permitted Liens. SME does not lease any
Personal Property.
(c) All Personal Property currently in use and material to the
operation of the Purchased Assets has been maintained in accordance with normal
industry practice, is in good operating condition and repair (subject to normal
wear and tear), and is suitable for the purposes for which it presently is used.
3.6 Permits and Environmental Compliance.
(a) SME has made available to DPI true and complete copies of
the Permits. To the Knowledge of SME, the Permits include all material permits,
licenses, franchises and other authorizations necessary for operations of the
Purchased Assets on the Real Property and pursuant to the Contracts as currently
operated, and SME is in material compliance with all such Permits. No such
Permit is subject of any proceeding by or before any Governmental Authority that
might affect its validity, and no such proceeding is pending or, to the
Knowledge of SME, threatened. The Permits are currently held by an Affiliate of
SME and shall be transferred to SME prior to the Closing Date. No such transfer
shall adversely affect the status of the Permits.
(b) Except as set forth in Schedule 3.6(b), and to the
Knowledge of SME, SME is in compliance with all Environmental Laws. Except as
listed on Schedule 3.6(b) or Schedule 3.9: (i) to the Knowledge of SME, no
written notices of violation, correction orders, cessation orders, notices of
penalty, notices of proposed assessment or other written notices (which remains
outstanding or unabated) have been issued by any Governmental Authority or third
party that any operations under the Permits are not in compliance with any
Environmental Law; (ii) SME has not entered into or agreed to any court decree
or order and is not subject to any judgment, decree or order relating to
compliance with any Environmental Law or to investigation or cleanup of
hazardous materials under any Environmental Law; (iii) to the Knowledge of SME,
SME has no contingent liabilities for operations of the Purchased Assets in
connection with any hazardous materials that would have a Material Adverse
Effect. Except as set forth in Schedule 3.6(b), there are no aboveground or
underground storage tanks on any Purchased Assets, and all former underground
storage tanks have been closed or removed in accordance with all Environmental
Laws. Except as set forth in Schedule 3.6(b), no hazardous material has been
handled, generated or disposed of at, on, under or from any property or facility
currently or formerly owned, operated or leased by SME in a manner that could
reasonably be anticipated to lead to liability under Environmental Law.
3.7 Reclamation Bonds. Schedule 3.7 lists all bonds, guaranties,
indemnities, letters of credit and other forms of surety posted by or for the
benefit of SME to secure the performance of reclamation, plugging or other
obligations relating to the Permits.
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3.8 Contracts.
(a) SME has made available to DPI copies of all of the written
Contracts, including all amendments, modifications, waivers and elections
affecting the Contracts.
(b) Except as listed on Schedule 3.8(b), the Contracts are
valid and binding, enforceable in accordance with their respective terms
(subject to any applicable bankruptcy, insolvency, reorganization, moratorium or
other similar Laws affecting generally the enforcement of creditors' rights),
and are in full force and effect. Except as listed on Schedule 3.8(b), SME or
its Affiliates have performed all material obligations required to be performed
by them to date under the Contracts and they are not (with or without the lapse
of time or the giving of notice, or both) in breach thereof or in default in any
material respect thereunder, nor has any other party to any of the Contracts
notified SME or its Affiliates of its belief that SME or such Affiliate is, or
is likely to become, in breach or default in any material respect under any
Contract or of such party's intention to accelerate, terminate or modify in a
manner adverse to SME or such Affiliate, any of SME's obligations or rights
under any Contract. To the knowledge of SME, no other party to any of the
Contracts is (with or without the lapse of time or the giving of notice, or
both) in default in any material respect thereunder.
(c) Schedule 3.8(c) sets forth the consents required to be
obtained pursuant to the Contracts as a result of the sale and assignment of the
Purchased Assets and the other transactions contemplated by this Agreement.
(d) None of the Contracts for Gas sales, processing or
transportation warrant the amount of the Gas to be delivered or require SME or
its Affiliates to deliver or sell any volume of gas in excess of its Gas
actually produced and sold from Purchased Assets specified therein or subject
thereto.
(e) SME maintains policies of fire and casualty, liability and
other forms of insurance in such amounts, with such deductibles and against such
risks and losses as are, in SME's judgment, reasonable for the Purchased Assets.
True and correct copies of the insurance policies have been provided to DPI. All
such policies are in full force and effect, all premiums due and payable thereon
have been paid (other than retroactive or retrospective premium adjustments that
are not yet, but may be, required to be paid with respect to any period ending
prior to the Closing Date under comprehensive general liability and workmen's
compensation insurance policies), and no notice of cancellation or termination
has been received with respect to any such policy which has not been replaced on
substantially similar terms prior to the date of such cancellation.
3.9 Litigation; Claims.
(a) Except as listed on Schedule 3.9, there is no claim, legal
action, suit, litigation, arbitration, dispute or investigation, judicial or
administrative, or any order, decree or judgment, now pending or in effect or,
to the Knowledge of SME, threatened or contemplated, against SME, or affecting
the Purchased Assets, that would have a Material Adverse Effect.
(b) Except as listed on Schedule 3.9 and to the Knowledge of
SME, there are no existing claims by or disputes with any Persons owning or
occupying lands or realty adjoining or near any of the Real Property relating to
the operations of the Purchased Assets or regarding the location of boundary
lines, encroachments, subsidence, blasting damage, transportation of gas,
nuisance, trespass or any other similar matter that would have a Material
Adverse Effect.
3.10 No Broker. Neither SME nor Evan has had any dealings, negotiations
or communications with or retained any broker or other intermediary in
connection with the transactions contemplated by this Agreement, and neither of
them is committed to or liable for any brokers' or finders' fees or any similar
fees in connection with the transactions contemplated by this Agreement.
3.11 Imbalances. Schedule 3.11 sets forth all Gas imbalances with
respect to any Real Property or Well. There will be no Gas imbalances with
respect to any of the Real Property or Xxxxx as of the Closing.
3.12 Xxxxx. Schedule 3.12 sets forth a complete list of all Xxxxx.
Except as set forth in Schedule 3.12 during any period operated by SME and, to
the Knowledge of SME, during other periods:
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(a) Each of the Xxxxx has been drilled, completed, operated
and, where applicable, plugged and abandoned within the boundaries of the
applicable Real Property or within the limits otherwise permitted by the
applicable Contract, Permit, pooling, unitization agreement or force pooling
order, and in material compliance with applicable Laws, and there are no pending
or threatened orders or complaints by any Governmental Authority for any
material violation in the drilling, completion, operation or plugging and
abandoning of any Well.
(b) There are no Xxxxx that have not been plugged and
abandoned that SME is currently obligated by Law or Contract to plug and
abandon, that SME will be obligated by Law or Contract to plug and abandon with
the lapse of time or giving of notice, or both, because the Well is not
currently capable of producing Hydrocarbons in commercial quantities or that are
subject to exceptions to a requirement to plug and abandon issued by a
regulatory authority having jurisdiction over the Real Property.
(c) The Book and Records pertaining to each of the Xxxxx are
in material compliance with all record-keeping and permit regulations of the
applicable Governmental Authority.
(d) There are no underground storage tanks or unlined pits or
sumps in, on or underlying any of the Xxxxx.
3.13 Gas Prepayment Arrangements; Take-or-Pay. Except for Gas
Imbalances between SME and any third party described on Schedule 3.11, SME is
not obligated by any Gas prepayment arrangement or by any "take-or-pay"
requirement to deliver any Gas at a future time without then or thereafter
receiving full payment therefore.
3.14 Royalties. Except as set forth on Schedule 3.14, all royalties,
overriding royalties, compensatory royalties and other payments due with respect
to the Real Property or, to the Knowledge of SME, any third-party interest under
joint operating agreements and any production therefrom for all periods prior to
the Closing Date have been or, respect to payments not yet due, shall be
properly and timely paid.
3.15 Government Leases. SME has no federal or state Hydrocarbon Leases.
3.16 Gathering Systems. Schedule 3.16 sets forth a description of the
Gathering Systems. Except as set forth in Schedule 3.16, all of the Gathering
Systems (a) are in good operating condition and repair, with no material
defects, (b) have been maintained consistent with good commercial practices, (c)
are suitable for their current uses and, in the case of any plants, buildings
and other structures, are structurally sound. All of the Gathering Systems are
located on easements, surface leases, servitudes, licenses or similar
rights-of-way that were duly and validly granted or otherwise created by the
grantor thereof, are in full force and effect in accordance with their terms and
include all rights necessary for the use, operation and maintenance of the
Gathering Systems.
3.17 SME Unaudited Financial Statements. SME has heretofore delivered
the SME Unaudited Financial Statements to DPI. The SME Unaudited Financial
Statements have been prepared in conformity with GAAP subject (in the case of
the six-month period included therein) to normal year-end adjustments.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF DPI
DPI hereby represents and warrants to SME that:
4.1 Organization. DPI is a duly formed corporation, validly existing
and in good standing under the Laws of the Commonwealth of Kentucky.
4.2 Execution, Delivery and Performance. The execution, delivery and
performance by each of DPI of this Agreement and each other agreement or
instrument to which it is a party executed in connection herewith or delivered
pursuant hereto and the consummation of the transactions contemplated herein and
therein will not, with or without the giving of notice or the passage of time,
or both, (a) conflict with, or result in a violation or breach of, or a default,
right to accelerate or loss of rights under, or result in the creation of any
Lien, under or pursuant to, any provision of its organizational documents or of
any material franchise, mortgage, deed of trust, lease, license, instrument,
agreement, consent, approval, waiver or understanding, any Law, or any finding,
order, judgment, writ,
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injunction or decree to which it is a party or by which it or its assets may be
bound or affected, or (b) require the consent of, or prior notice to, filing
with or registration with, any Governmental Authority or any other Person;
provided that this Section 4.2 shall not apply to any requirement of SME or DPI
to obtain any consent of the applicable Governmental Authority to transfer or
modify the Permits.
4.3 Authorization. DPI has full power and authority to enter into and
deliver this Agreement and each other agreement or instrument to be executed and
delivered by it hereunder and to perform its obligations hereunder and
thereunder. DPI's execution, delivery and performance of this Agreement and all
such other agreements and instruments and its consummation of the transactions
contemplated hereby and thereby have been duly authorized by all requisite
corporate action. This Agreement and all such other agreements or instruments
have been or upon delivery shall be duly executed and delivered by DPI, and this
Agreement and all such other agreements and instruments constitute or upon
delivery shall constitute the legal, valid and binding obligation of DPI,
enforceable in accordance with their respective terms (subject to any applicable
bankruptcy, insolvency, reorganization, moratorium or other similar Laws
affecting generally the enforcement of creditors' rights).
4.4 No Broker. DPI has not had any dealings, negotiations or
communications with or retained any broker or other intermediary in connection
with the transactions contemplated by this Agreement, and neither of them is
committed to or liable for any brokers' or finders' fees or any similar fees in
connection with the transactions contemplated hereby.
4.5 Financing. DPI has, or will have available to it on the Closing
Date, sufficient funds to consummate the transactions contemplated by this
Agreement.
ARTICLE V
CERTAIN MATTERS PENDING AND FOLLOWING CLOSING
5.1 Operation in Ordinary Course. Except as provided in this Agreement,
SME shall, through the Closing Date: (a) carry on its business in the ordinary
course and substantially in the same manner as heretofore carried on and (b) use
its commercially reasonable efforts to preserve the Purchased Assets intact.
5.2 Compliance with Law. SME shall comply in all material respects with
all applicable Laws and with all orders of any Governmental Authority pertaining
to the Purchased Assets.
5.3 Cooperation. Subject to the terms and conditions herein provided,
each of the Parties shall use its commercially reasonable efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper and advisable under applicable Law, to consummate the
transactions contemplated by this Agreement, including participation by DPI in
negotiations involved in SME's satisfaction of the condition precedent under
Section 6.2(g), upon mutual agreement of the Parties. In case at any time after
the Closing Date any further action is necessary or desirable to carry out the
purposes of this Agreement, the Parties will execute any additional instruments,
in form and substance acceptable to them, reasonably necessary to fully
effectuate the transactions contemplated hereby.
5.4 Consents. Each of the Parties will use its commercially reasonable
efforts to obtain consents of all Governmental Authorities and other third
parties necessary to the consummation of the transactions contemplated by this
Agreement. On or before the Closing Date, SME shall obtain, or cause to be
obtained, each of the consents listed on Schedule 3.4(h) and Schedule 3.8(c).
5.5 Publicity. All general notices, releases, statements and
communications to any suppliers, distributors and customers of SME and to the
general public and the press relating to the transactions contemplated by this
Agreement shall be made only at such times and in such manner as may be mutually
agreed upon by the Parties; provided, however, that each Party shall be entitled
to make a public announcement of the foregoing if, in the opinion of its legal
counsel, such announcement is required to comply with Law or any listing
agreement with any national securities exchange or inter-dealer quotation system
and if it gives twenty-four hours notice to the other Parties of its intention
to make such public announcement and a reasonable opportunity to review and
comment thereon.
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5.6 Permits; Replacement Bonds.
(a) At or prior to the Closing Date, DPI shall (i) secure, in
accordance with applicable Law, irrevocable commitments to issue replacement
bonds and replacement sureties and guarantees or other financial security, if
applicable, for all Permits sufficient to meet the requirements of the
applicable Governmental Authority for transfer of the Permits to DPI in
accordance with Law and (ii) deliver to SME either (A) copies of such
commitments or (B) other form of financial security required or permitted for
that purpose by applicable Law.
(b) At or prior to the Closing Date, DPI shall deliver copies
to SME of all Permit transfer filings, each in a form that satisfies all
requirements of the applicable Governmental Authority and that are necessary to
transfer the Permits to DPI in accordance with Law.
(c) Following the Closing Date, through the application of
best efforts, DPI shall make all filings with the appropriate Governmental
Authorities necessary for completing the Permit transfer procedures and shall,
upon transfer of such Permits, post replacement bonds necessary under applicable
Laws to transfer the Permits to DPI.
(d) Following the Closing Date, SME will cause each of the
Permits that is issued in its name or in the name of an Affiliate to be retained
in its name or in the name of such Affiliate, as appropriate, until the
applicable Governmental Authority transfers the Permits to DPI (the "Transfer
Period"). DPI may rely on any related bonds held or guaranteed by SME or an
Affiliate of SME during the Transfer Period; provided that DPI reimburses SME
for bond premiums, security, amounts required to be paid to correct, and to pay
fines or assessments or reasonable legal costs incurred, with respect to any
violation by DPI occurring after the Closing Date and any other costs incurred
by SME or its Affiliates in connection with the maintenance of such Permits or
the related bonds during the Transfer Period. DPI shall use its best efforts to
accomplish such Permit transfers as soon as possible after the Closing.
(e) To the extent permitted by applicable Law, SME shall grant
DPI the right during the Transfer Period to conduct operations on the properties
that are subject to Permits for which transfer procedures are pending; provided
that if the appropriate Governmental Authority has not transferred any Permit
within six (6) months of the Closing Date, DPI will deposit in escrow cash or a
letter of credit from a bank reasonably acceptable to SME in an amount equal to
the face amount of any related outstanding surety bonds maintained by SME or its
Affiliate on behalf of DPI until such Permits have been transferred.
(f) If SME receives a notice of violation or order under a
Permit following the Closing Date but before the transfer of the Permit, SME
will give DPI prompt notice thereof. If SME reasonably determines that DPI will
not cause such violation to be cured in a timely fashion, SME shall have the
right to cure, or cause to be cured, such violation itself and be reimbursed by
DPI for the costs incurred in curing such violation, including reasonable legal
fees and costs, if the violation or order relates to operations or events
occurring after the Closing Date.
(g) At or prior to the Closing Date, DPI shall have (i) in
addition to Permit transfer matters, secured replacement bonds, replacement
sureties, guarantees or other financial security, if applicable, sufficient to
allow SME and its Affiliates to be relieved or released as of the Closing from
all financial commitments, guarantees, collateral agreements or similar
undertakings listed on Schedule 5.6(g) and (ii) delivered copies of all related
documents to SME.
5.7 Tax Allocation of Purchase Price and Assumed Liabilities.
(a) The Purchase Price and the Assumed Liabilities (to the
extent they constitute part of the amount recognized for federal Income Tax
purposes) shall be allocated among the Purchased Assets as set forth in a
schedule to be agreed upon by DPI and SME prior to the Closing Date in
accordance with Section 1060 of the Code. DPI shall prepare its Code Section
1060 allocation schedule and deliver it to SME within 30 days after the date of
this Agreement. SME shall be deemed to agree with that allocation schedule
unless, within 20 days after the date of its receipt, SME notifies DPI in
writing of (i) each allocation with which it disagrees, (ii) the basis for its
disagreement and (iii) for each contested item, the amount that SME proposes to
allocate. If SME provides that notice to DPI within the 20-day notice period,
the Parties will proceed in good faith to resolve the contested allocations
within 5 days after DPI receives SME's notice.
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(b) On or before the Closing Date, NGAS will complete IRS
Form(s) 8594 in accordance with the allocations determined under Section 5.7(a).
The Parties shall thereafter take all actions necessary to comply with all
substantive and procedural requirements of Section 1060 of the Code, and neither
NGAS nor SME will take or permit any Affiliate to take any position for Federal
Income Tax purposes inconsistent with such allocation, although the parties
acknowledge that (i) the cost incurred by DPI for the Purchased Assets may
differ from the total amount allocated hereunder to reflect the inclusion of
items such as capitalized acquisition costs that are not included in the total
amount so allocated, and (ii) the amount realized by SME may differ from the
total amount allocated hereunder to reflect its transaction costs that reduce
the amount realized for federal Income Tax purposes.
5.8 Updated Financials.
(a) As soon as practicable, but not later than 45 days after
the end of each month from the date of this Agreement through the Closing Date,
SME will deliver to DPI an unaudited balance sheet of SME as of the end of such
month and related unaudited statements of operations and cash flows for that
month, prepared in conformity with GAAP subject to normal year-end adjustments.
(b) As soon as practicable, but not later than Closing, SME
will deliver to DPI the SME Annual Audited Financial Statement.
5.9 Access. The Parties contemplate that potential providers of the
financing to DPI (the "Financing Sources") will undertake an independent due
diligence review of the Purchased Assets and that the independent U.S. auditors
for DPI (the "Auditors") will conduct an audit of the SME Unaudited Financial
Statements. Upon request, SME will (a) provide DPI, the Financing Sources, the
Auditors and their respective representatives, employees, consultants and
counsel (the "Representatives") access to all personnel, properties, offices and
the Books and Records of SME, (b) permit the Representatives to make inspections
and perform tests, including tests relating to environmental matters, (c)
promptly furnish the Representatives with financial and operating data and other
information and assistance with respect to the Purchased Assets, (d) cooperate
with the Auditors in performing their audit of the SME Unaudited Financial
Statements and (e) permit the Auditors to discuss the procedures and review the
work papers used by SME and its auditors in the preparation of financial
statements of SME since December 31, 2000.
5.10 Supplemental Disclosure. SME shall (a) have the continuing
obligation until the Closing to supplement or amend the disclosure schedules
hereto with respect to any matter hereafter arising or discovered that, if
existing or known at the date of this Agreement, would have been required to be
set forth or described in those schedules, and (b) promptly provide notice to
DPI and furnish it any information it may reasonably request with respect to the
occurrence of any event or condition or the existence of any fact that would
jeopardize the fulfillment of any condition to the obligation of DPI to
consummate the purchase and sale of the Purchased Assets hereunder.
5.11 Further Assurances. It is the intent of the Parties for DPI to
acquire all of the assets owned or controlled by SME in the operation of its
business in Xxx County, Virginia, and Xxxx and Xxxxxx Counties, Kentucky,
together with any other Purchased Assets scheduled hereunder. Each of the
Parties shall use its reasonable effects to cause the Closing to occur within 60
days after the date hereof. To that end, the Parties shall (a) cooperate
reasonably with each other and with their respective representatives to
facilitate the fulfillment of the respective obligations under this Agreement,
(b) promptly furnish requested information and (c) take such other actions
reasonably requested for the purpose of carrying out the intent of this
Agreement and implementing the transactions contemplated hereby.
5.12 Continuity. For a period of at least one year following the
Closing Date, SME shall take all steps necessary to preserve and continue its
existence as a limited liability company and franchises.
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ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1 Conditions Precedent to Each Party's Obligations. The respective
obligations of the Parties to consummate the transactions contemplated by this
Agreement are subject to the satisfaction at or prior to the Closing Date of the
following conditions precedent:
(a) No order, decree or injunction shall have been entered or
enforced by any Governmental Authority that remains in force and that prohibits
the consummation of the transactions contemplated by this Agreement; provided,
however, that the Parties shall use their commercially reasonable efforts to
have any such order, decree or injunction vacated or reversed.
(b) The Parties and their Affiliates shall have executed and
delivered all documents or instruments, in form and substance reasonably
satisfactory to them, necessary or appropriate to effect the transactions
contemplated by this Agreement.
6.2 Conditions Precedent to Obligations of DPI. The obligations of DPI
to consummate the transactions contemplated by this Agreement are subject to the
satisfaction or waiver at or prior to the Closing Date of the following
conditions precedent:
(a) Each of the representations and warranties of SME set
forth in this Agreement qualified by materiality shall be true and correct and
those not so qualified shall be true and correct in all material respects, in
each case as of the date hereof and as of the time of the Closing as though made
as of such time, except to the extent such representations and warranties
expressly relate to an earlier date (in which case such representations and
warranties qualified as to materiality shall be true and correct, and those not
so qualified shall be true and correct in all material respects, on and as of
such earlier date).
(b) SME shall have performed or complied in all material
respects with all obligations and covenants required by this Agreement to be
performed or complied with by it on or before the Closing Date, and the holders
of all Permitted Liens identified on Schedule 1.29 shall have provided the
instruments necessary to release the Permitted Liens identified on Schedule 1.29
as of Closing upon the Xxxx xxxxxx'x receipt of the funds identified in Section
2.1.
(c) All proceedings, corporate or other, to be taken by SME in
connection with the transactions contemplated by this Agreement, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to DPI. The Parties shall have mutually agreed on the allocation
schedule contemplated by Section 5.7.
(d) SME shall have executed and delivered the Bills of Sale,
the Assignment and Assumption Agreement, the Deed and any other documents or
instruments necessary to convey to DPI all right, title and interest in and to
the Purchased Assets.
(e) DPI shall have received an executed copy of a Closing
Certificate executed by SME.
(f) SME shall have obtained, or caused to have been obtained,
all of the consents listed in Schedule 3.4 and Schedule 3.9(c), as well as any
other consents required to implement the sale and assignment of the Purchased
Assets, and copies of those consents or other instruments shall have been
delivered to DPI.
(g) SME shall have obtained (i) Hydrocarbon Lease(s) covering
the Dulcimer properties, and (ii) any necessary consent(s) to the transfer of
those Hydrocarbon Lease(s) to DPI or its designated Affiliate.
6.3 Conditions Precedent to Obligations of SME. The obligation of SME
to consummate and cause the consummation of the transactions contemplated by
this Agreement are subject to the satisfaction or waiver at or prior to the
Closing Date of the following conditions precedent:
(a) Each of the representations and warranties of DPI set
forth in this Agreement qualified by materiality shall be true and correct and
those not so qualified shall be true and correct in all material respects, in
each case as of the date of this Agreement and at the time of the Closing Date
as though made at such time, except to
13
the extent such representations and warranties expressly relate to an earlier
date, in which case as of such earlier date.
(b) DPI shall have performed or complied in all material
respects with all obligations and covenants required by this Agreement to be
performed or complied with by it on or before the Closing Date.
(c) All proceedings, corporate or other, to be taken by DPI in
connection with the transactions contemplated by this Agreement, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to SME.
(d) The Purchase Price shall have been paid in accordance with
Section 2.1;
(e) DPI shall have executed and delivered the Assignment and
Assumption Agreement and any other documents or instruments necessary for DPI to
assume all of the Assumed Liabilities.
(f) SME shall have received an executed copy of a Closing
Certificate executed by DPI .
(g) DPI shall have delivered to SME satisfactory evidence of
compliance with Section 5.6(g).
ARTICLE VII
CERTAIN TAX MATTERS
7.1 Property Taxes. Property Taxes of SME with respect to the Purchased
Assets, including those payable as a tenant or lessee under any lease, sublease
or agreement, will be pro-rated as of the Closing Date and, notwithstanding any
other provision of this Agreement, the economic burden thereof will be borne by
(a) SME for all Pre-Closing Periods and the portion of any Straddle Period
through the Closing Date and (b) by DPI for all Post-Closing Periods and the
portion of any Straddle Period after the Closing Date. Accordingly,
notwithstanding any other provision of this Agreement, (i) if SME pays such a
property Tax with respect to a Post-Closing Period or the portion of Straddle
Period after the Closing Date, DPI will reimburse SME within 15 days after
receiving from SME a written demand for the amount of such property Tax,
accompanied by documentation of the Tax computation and payment, and (ii) if DPI
pays such a property Tax with respect to a Pre-Closing Period or the portion of
a Straddle Period through the Closing Date, SME will reimburse DPI within 15
days after receiving from DPI a written demand for the amount of such property
Tax, accompanied by documentation of the Tax computation and payment,. For
purposes of pro-rating property Taxes, the amount of any property Tax
attributable to the portion of a Straddle Period through the Closing Date shall
be deemed to be the amount of such property Taxes for the entire Straddle Period
multiplied by a fraction, the numerator of which is the number of days in the
Straddle Period through the Closing Date and the denominator of which is the
number of days in the entire Straddle Period. In determining the Straddle Period
for property Taxes, the Tax period as reflected on the statement of Taxes due,
property Tax xxxx, property "tax ticket," or any other request for payment from
a Governmental Authority will determine the taxable period.
7.2 Sales and Use Taxes. Any sales and use tax due as a result of the
sale of the Purchased Assets shall be borne by SME.
7.3 Transfer Taxes. All transfer, recording and similar Taxes arising
in connection with the transactions contemplated hereunder shall be borne by
DPI.
7.4 Cooperation. The Parties shall cooperate to provide any information
required for the preparation of any Tax Returns relating to DPI's acquisition of
the Purchased Assets.
ARTICLE VIII
TERMINATION
8.1 Termination. This Agreement may be terminated on or prior to the
Closing Date only as follows:
(a) by mutual written consent of the Parties;
14
(b) by SME or DPI, if the Closing shall not have occurred on
September 30, 2004 or such later date as the Parties may agree in writing,
provided that neither SME nor DPI may rely on the failure of any condition set
forth in Section 6.2 or Section 6.3, respectively, to be satisfied if such
failure was caused by such Party's failure to act in good faith or to use
reasonable efforts to cause the Closing to occur on or before the Closing Date.
(c) by SME or DPI, if any court of competent jurisdiction in
the United States or other Governmental Authority shall have issued an order,
decree or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the transactions contemplated hereby and such order, decree, ruling
or other action shall have become final and nonappealable.
8.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 8.1, all further obligations of the Parties hereunder shall terminate
without further liability of any Party to another. Nothing contained in this
Section 8.2 shall relieve any Party from liability for any material breach of
this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 Entire Agreement. This Agreement, including the Schedules and
Exhibits and the confidentiality provisions of the letter of intent dated July
8, 2004 (which shall continue in force through Closing) between SME and NGAS
Resources, Inc., the parent company of DPI constitute the entire agreement among
the Parties pertaining to the subject matter hereof, and supersede all prior and
contemporaneous agreements, understandings, negotiations and discussions of the
Parties, whether oral or written, and there are no warranties, representations
or other agreements among the Parties pertaining to the subject matter hereof,
except as specifically set forth herein or therein.
9.2 Amendment. This Agreement may not be amended except by an
instrument in writing signed by all of the Parties.
9.3 Extension; Waiver. At any time prior to the Closing Date, the
Parties may (a) extend the time for the performance of any of the obligations
hereunder, (b) waive any inaccuracies in the representations and warranties
contained herein or in any Schedule, document, certificate or other writing
delivered pursuant hereto or (c) waive compliance with any of the agreements or
conditions contained herein, other than the condition contained in Section
6.1(a). Any agreement on the part of any Party to any such extension or waiver
shall be valid only if set forth in an instrument in writing executed and
delivered by that Party.
9.4 Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, and except as otherwise specifically provided herein,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the Party incurring such costs
or expenses.
9.5 Bulk Sales Acknowledgement. The Parties acknowledge that no bulk
sales Laws apply to the transactions contemplated by this Agreement.
9.6 Governing Law. The venue of any civil action or arbitration related
to this Agreement brought by SME against DPI shall be Lexington, Kentucky. The
venue of any civil action or arbitration related to this Agreement brought by
DPI against SME shall be Richmond, Virginia. The parties agree that this
Agreement shall be governed by and construed in accordance with the laws of the
state where such civil action or arbitration proceeding is brought.
9.7 Assignment. Neither this Agreement nor any Party's rights or
obligations hereunder may be assigned at any time except as expressly set forth
herein without the prior written consent of the other Party, except that SME may
assign its rights hereunder to any of its Affiliates of SME without the consent
of DPI upon written notice to DPI.
9.8 Notices. All communications, notices and disclosures required or
permitted by this Agreement shall be in writing and shall be deemed to have been
given when delivered personally or by messenger or by overnight delivery
service, or within five days of being mailed by registered or certified United
States mail, postage prepaid, return receipt requested, in all cases addressed
to the person for whom it is intended at his address set forth below or
15
to such other address as a party shall have designated by notice in writing to
the other party in the manner provided by this Section 9.8:
If to SME: Stone Mountain Energy, L.C.
0 Xxxxx 0xx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
And a copy to: Xxxx, Xxxxxx & Xxxxxxxx
X.X. Xxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxx
And: Xxxxxxx X. Xxxxxx, III, Esq.
000 Xxxxx 00xx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
If to DPI: Xxxxxxxxx Petroleum, Inc.
000 Xxxxxxxxxx Xxxxx - Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxx III
With a copy to: Xxxx X. Xxxxx, Esq.
Xxxxxxxxx Tower West - Suite 1020
0000 Xxxxxx Xxxx
Xxxxxxxxxx, XX 00000
9.9 Headings. The Table of Contents and the Article and Section
headings in this Agreement are inserted for convenience of reference only and
shall not constitute a part hereof.
9.10 Interpretation; Construction. This Agreement and all agreements
executed and delivered in connection herewith have been fully negotiated by the
Parties at arm's length and shall not be construed against any Party as the
drafting party.
9.11 Severability. If any provision of this Agreement (or any portion
thereof) or the application of any such provision (or portion thereof) to any
Person or circumstance shall be held invalid, illegal or unenforceable in any
respect by a court of competent jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision hereof (or the remaining
portion thereof) or the application of such provision to any other Persons or
circumstances.
9.12 No Reliance. No third party is entitled to rely on any of the
representations, warranties and agreements contained in this Agreement, and the
Parties assume no liability to any third party because of any reliance on those
representations, warranties and agreements, which are intended to be solely for
the benefit of the Persons expressly covered thereby and may be enforced only by
such Persons.
9.13 Retention of and Access to Records. DPI shall retain the Book and
Records for a period after the Closing consistent with its record retention
policies and practices. DPI shall provide to SME and its Affiliates reasonable
access to the Book and Records during normal business hours and on at least
three days' prior written notice, to enable them to prepare financial statements
or Tax Returns or deal with Tax audits or litigation. At least 30 days written
prior to any destruction or other disposal of any Books and records, DPI will
give SME written notice thereof. SME and its Affiliates may take delivery of any
Books and Records that DPI intends to destroy or otherwise dispose of and may
copy any Books and Records that DPI intends to keep, in each case at their the
expense of SME or such Affiliate.
9.14 Survival of Representations. The representations and warranties in
this Agreement and any certificate or instrument delivered pursuant to this
Agreement shall survive the Closing for a period of one year.
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9.15 Indemnification. Each Party shall indemnify and hold harmless the
other Party and its Affiliates from and against any and all judgments,
penalties, fines and amounts paid in settlement, including any interest
assessments or other charges payable in connection therewith, and all reasonable
expenses, including attorneys' fees, retainers and disbursements, court costs,
experts' fees and travel expenses, incurred by the indemnified Party in
connection with any threatened, pending or completed action, claim, suit,
investigation, hearing or other proceeding, whether civil, criminal,
administrative, arbitrative or investigative, any appeal therein or any inquiry
or investigation that could lead thereto, to which an indemnified Party is, was
or at any time becomes a party, arising from the breach of any representation or
warranty of the indemnifying Party hereunder which results in a Material Adverse
Effect. A Party seeking indemnification hereunder will promptly notify the
indemnifying Party of the existence of any third-party claim, demand or other
matter to which their indemnification obligations hereunder would apply. The
indemnifying Party shall be entitled, at their expense and with counsel
reasonably acceptable to the other Party, to assume and conduct the defense of
the claim. If the indemnifying Party does not undertake the defense of the
claim, or if they have a conflict of interest with respect to the claim, the
indemnified Party may retain separate counsel reasonably acceptable to the
indemnifying Party to conduct the defense of the claim, subject to the
indemnification obligations of the indemnifying Party hereunder.
9.16 Execution of Agreement. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement. The exchange of copies of this Agreement and of
signature pages hereto by facsimile transmission shall constitute effective
execution and delivery of this Agreement by the Parties and may be used in lieu
of the original Agreement for all purposes. Signatures of the Parties
transmitted by facsimile shall be deemed to be their original signatures for all
purposes.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
STONE MOUNTAIN ENERGY, L.C.
By /s/ Xxxxx X. Few
-------------------------------
Xxxxx X. Few,
Vice President
XXXXXXXXX PETROLEUM, INC.
By /s/ Xxxxxxx X. Xxxx III
-------------------------------
Xxxxxxx X. Xxxx III,
Vice President
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