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EXHIBIT 10.43
EXCHANGE AGREEMENT
THIS AGREEMENT ("Agreement") is entered into this _____ day of August,
1999 between HS RESOURCES, INC., a Delaware Corporation ("HSR"), with offices at
0000 Xxxxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000, and PATINA OIL & GAS
CORPORATION, a Delaware corporation, ("Patina") with offices at 0000 Xxxxxxxx,
Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000. "Assignor" shall mean the party hereto which
is to assign its rights in the Properties as of the Effective Time: namely, HSR
is the Assignor with regard to Patina Purchase Properties and Patina is the
Assignor with regard to the HSR Purchase Properties. "Assignee" shall mean the
party hereto which is to own the Properties after the Effective Time: namely,
HSR is the Assignee with regard to HSR Purchase Properties, and Patina is the
Assignee with regard to Patina Purchase Properties. The term "Properties" shall
be used throughout this Agreement and shall generally refer to either the HSR
Purchase Properties or the Patina Purchase Properties, as the context requires.
1. HSR Purchase Properties. "HSR Purchase Properties" shall mean those
properties that HSR is to receive from Patina as follows:
(a) All of Patina's interest in the Xxxxx described on Exhibit "A-1"
to this Agreement and all of Patina's right, title and interest in
and to the leasehold estate as to all depths associated with the
spacing unit for each Well as described on Exhibit "A-1
Leasehold"; excluding, however, the wellbore of all existing
producing xxxxx located in the same spacing unit that are not
described on Exhibit "A-1";
(b) All of Patina's interest in the Xxxxx described on Exhibit "A-2"
to this Agreement and all of Patina's right, title and interest in
and to the leasehold estate (limited to depths from the surface of
the Earth to the base of the J Sand) associated with the spacing
unit for each Well as described on Exhibit "A-2 Leasehold"
excluding, however, the wellbore of all existing producing xxxxx
located in the same spacing unit that are not described on Exhibit
"A-2"; (collectively, the Xxxxx described on Exhibits "A-1" and
"A-2" and described in subparagraphs (a) and (b) immediately above
shall be referred to as the "HSR Purchase Xxxxx" and the Leases
described on Exhibits "A-1 Leasehold" and "A-2 Leasehold" shall be
referred to as the "HSR Purchase Leases");
(c) Certain personal property and fixtures used in connection with the
operation of the HSR Purchase Xxxxx, including, but not limited
to, all lease equipment, xxxxx, tanks and all other equipment;
(d) The rights and obligations existing under certain contracts and
agreements that benefit or burden the HSR Purchase Xxxxx and HSR
Purchase Leases, including, but not limited to, operating
agreements, marketing agreements, pooling agreements, unit
agreements, segregation agreements, farmout agreements, rights of
way, easements,
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surface agreements, assignments, purchase and sale agreements, gas
sale contracts, or gas processing contracts;
(e) The oil, gas, casinghead gas, condensate, distillate, liquid
hydrocarbons, gaseous hydrocarbons, products refined and
manufactured therefrom, other minerals, and the accounts and
proceeds from the sale of all of the foregoing to the extent such
production is produced from the HSR Purchase Xxxxx and HSR
Purchase Leases after the Effective Time and is attributable to
Patina; and
(f) Copies of the files, records, data, and other documentary
information, excluding any seismic, geological or geophysical
information and data that are interpretive in nature, ("Data")
maintained by Patina pertaining to the HSR Purchase Xxxxx
described in sub-paragraph 1(a) above.
2. Patina Purchase Properties. "Patina Purchase Properties," shall mean those
properties that Patina is to receive from HSR as follows:
(a) All of HSR's interest in the Xxxxx described on Exhibit "B-1" to
this Agreement and all of HSR's right, title and interest in and
to the leasehold estate (limited from the surface of the Earth to
the base of the J Sand; except for the Xxx Xxxxxxx #1 well and the
Xxxxx Xxxxxxxx well which shall include a wellbore interest in the
Dakota formation) associated with 160 acre governmental quarter
section surrounding each J Sand Well listed on the Exhibit "B-1",
which leasehold includes the 15 Xxxxx listed on Exhibit "B-1" and
shown as producing from the Codell formation, all as described on
Exhibit "B-1 Leasehold". In addition, Exhibit "B-1 Leasehold"
includes leases covering interests from the surface of the Earth
to the base of the J Sand Formation for five 160 acres parcels on
which no producing J Sand xxxxx are identified on Exhibit "B-1".
These five parcels are the XX/0 xx Xxxxxxx 00, X0X, X00X; the XX/0
xx Xxxxxxx 00, X0X, X00X; the XX/0 xx Xxxxxxx 00, X0X, X00X; the
XX/0 xx Xxxxxxx 0, X0X, X00X; and the XX/0 xx Xxxxxxx 00, X0X,
X00X. As to the J Sand formation in the Strong Gas Unit #1 Well
(this well for purposes of this Agreement is considered as a J
Sand well on Exhibit "B-1"), the working interest and net revenue
interest of HSR in such formation is at least equal to the working
interest and net revenue interest set forth in Exhibit "B-1" for
the Codell/Niobrara formations;
(b) All of HSR's interest in the Xxxxx described on Exhibit "B-2" to
this Agreement and all of HSR's right, title and interest in and
to the leasehold estate (limited from the surface of the Earth to
the base of the Codell formation) associated with the spacing unit
for each Well as described on Exhibit "B-2 Leasehold", such
interest to specifically exclude any xxxxx not listed on Exhibit
"B-2" that are located on the same lands and leases but that
produce from the J Sand;
(c) All of HSR's interest in the Xxxxx described on Exhibit "B-3" to
this Agreement and all of HSR's right, title and interest in and
to the leasehold estate (limited to those formations, as described
on Exhibti "B-3 Leasehold", from the surface to the base of
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the J Sand in which HSR's only working interest ownership is a 1%
working interest acquired from Amoco) associated with the spacing
unit for each Well as described on Exhibit "B-3 Leasehold"
(collectively, the Xxxxx described on Exhibits "B-1", "B-2", and
"B-3" and described immediately above in subparagraphs (a), (b),
and (c) shall be referred to as the "Patina Purchase Xxxxx" and
the Leases described on Exhibits "B-1 Leasehold", "B-2 Leasehold",
and "B-3 Leasehold" and described immediately above in
subparagraphs (a), (b), and (c) shall be referred to as the
"Patina Purchase Leases");
(d) Certain personal property and fixtures used in connection with the
operation of the Patina Purchase Xxxxx, including, but not limited
to, all lease equipment, xxxxx, tanks and all other equipment;
(e) The rights and obligations existing under certain contracts and
agreements that benefit or burden the Patina Purchase Xxxxx and
the Patina Purchase Leases, including, but not limited to,
operating agreements, marketing agreements, pooling agreements,
unit agreements, segregation agreements, farmout agreements,
rights of way, easements, surface agreements, assignments,
purchase and sale agreements, gas sale contracts, or gas
processing contracts;
(f) The oil, gas, casinghead gas, condensate, distillate, liquid
hydrocarbons, gaseous hydrocarbons, products refined and
manufactured therefrom, other minerals, and the accounts and
proceeds from the sale of all of the foregoing to the extent such
production is produced after the Effective Time from the Patina
Purchase Xxxxx under the Patina Purchase Leases and is
attributable to HSR; and
(g) Copies of the Data maintained by HSR pertaining to the Patina
Purchase Xxxxx described in sub-paragraph 2(a) above.
3. Exchange of Properties. In consideration of the covenants and
conditions contained in this Agreement and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged:
(a) Subject to the provisions of this Agreement, on the Closing
Date HSR shall exchange with and assign to Patina the Patina
Purchase Properties as of the Effective Time;
(b) Subject to the provisions of this Agreement, on the Closing
Date Patina shall exchange with and assign to HSR the HSR
Purchase Properties as of the Effective Time; and
(c) The parties recognize that certain formations included in
certain of the Properties are subject to tax credit agreements
relating to production from such formations and, although
these tax credit agreements will be terminated prior to
Closing, the interests that were subject to the tax credit
agreements may not be utilized in a
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like kind exchange. To the extent necessary, the portion of
the Properties that were subject to tax credit agreements
shall be deemed to be exchanged in a separate agreement
identical to this Agreement, in order that the remaining
Properties and formations are exchanged under section 1031 of
the Internal Revenue Code of 1986, as amended. It is the
parties intent that these remaining interests be exchanged on
accordance with section 1031 of the Code.
4. Reserved Interests. Assignor shall reserve and except from the
exchange of the Properties in favor of itself, its successors and
assigns all accounts receivable attributable to the Properties
being assigned that are, in accordance with generally accepted
accounting principles, attributable to the period prior to the
Effective Time.
5. Adjustments on Closing Date. The parties have agreed for purposes
of making certain adjustments that the Xxxxx shall be allocated a
value of $10,000,000 (but Patina may also include in its
allocation a value for the five 160 acre parcels described above
in subparagraph 2(a) relating to the Patina Purchase Xxxxx) for
the interests that the Assignee will be receiving in the exchange.
The allocated values shall be used solely for the adjustments that
may be necessary for title and environmental matters, and other
matters for which adjustment is typically made as set forth
herein, that are discovered by the parties prior to Closing. The
allocated values shall have no other purpose and each party is
otherwise free to value the properties for its own internal
purposes or tax purposes in any manner it so chooses. For sales
tax purposes, the parties have each allocated a value of $30,000
to the personal property that is part of the Properties being
exchanged. The allocated value of the HSR Purchase Properties, as
allocated by HSR, is set forth on a Property-by-Property basis on
Xxxxxxx X- 0 and A-2 ("HSR Allocated Value"). The Allocated Value
of the Patina Purchase Properties, as allocated by Patina, is set
forth on a Property-by-Property basis on Exhibit B-1, B-2, and B-3
("Patina Allocated Value"; as the context requires, the HSR
Allocated Value and the Patina Allocated Value may for a
particular Property be referred to as simply the "Allocated Value"
for that Property).
6. Preliminary Settlement Statement. At Closing, HSR and Patina shall
execute and deliver a settlement statement, prepared in accordance
with this Agreement and generally accepted accounting principles
(the "Preliminary Settlement Statement") that shall set forth the
payments to be made to each other as set forth in this Agreement
and the calculation used to determine such amount. Assignor shall
provide Assignee with the Preliminary Settlement Statement for the
Properties being assigned three days prior to Closing for
Assignee's review and approval.
7. Adjustments. The Preliminary Settlement Statement shall include a
credit adjustment for the Assignor for expenses attributable to
its Properties since the Effective Time which have been paid by
Assignor prior to the Closing Date. The Preliminary Settlement
Statement shall include a debit adjustment for the Assignor for
all revenues from production from its Properties since the
Effective Time which have been received by the Assignor prior to
the Closing Date.
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8. Conveyance. Subject to the conditions set forth below, in HSR's
Denver office, Assignor shall convey to Assignee all of Assignor's
right, title, and interest in the appropriate Properties by
delivering on August 31, 1999 (the "Closing Date") an executed,
acknowledged, and recordable blanket Assignment, Xxxx of Sale and
Conveyance, substantially in the form attached hereto as Exhibit
"E" (for the HSR Purchase Properties) and Exhibit "F" (for the
Patina Purchase Properties). If necessary, certain Xxxxx may be
exchanged on separate assignment forms in order to include
specific reservations or exceptions to the conveyances resulting
from the need to execute segregation agreements pertaining to that
Well and existing xxxxx in the same spacing unit. Title to certain
of the HSR Purchase Properties is held in SOCO Wattenberg
Corporation, a wholly owned subsidiary of Patina. SOCO Wattenberg
will be made a party to the conveyance document for these
interests.
9. Delivery of Data. Assignor shall deliver copies of the Data to
Assignee within fourteen (14) days after the Closing Date. The
Data provided to Assignee shall not include any confidential
correspondence, and shall not include any information which, if
disclosed, would cause Assignor to breach any contract or
agreement. Assignor shall retain originals of the Data. Assignor
makes no representations or warranties as to the accuracy or
completeness of the Data. Assignor shall not allow Assignee access
to geophysical or seismic records if by so doing it would be in
breach of any contract or agreement. If Assignee, in its
reasonable opinion, desires to review or copy information
maintained by Assignor for a Property that is not described in
sub-paragraphs 1(a) or 2(a) above, excluding any seismic or
geological or geophysical information and data that is
interpretive in nature, and Assignor is not precluded under
obligations of confidence from disclosing such information, upon
request to Assignor and reasonable advance notice, Assignee may
review such information in the office of Assignor during normal
business hours or make a copy of such information at the consent
of Assignor.
10. Effective Time. The ownership of the Properties shall be
transferred from Assignor to Assignee on the Closing Date,
effective as of 7:00 a.m. at the location of the Properties on
July 1, 1999 (the "Effective Time"), except for tax credits on
production for which the Effective Time shall be deemed to be
September 1, 1999 at 7:00 a.m. Assignor shall be entitled to all
amounts realized from, and accruing to, the Properties prior to
the Effective Time, including the right to all production in
storage, processing and inventory, and shall be responsible for
all expenses for the development and operation of the Properties
prior to the Effective Time. Assignee shall be entitled to any
amounts realized from, and accruing to, the Properties subsequent
to the Effective Time and shall be responsible for all expenses
for the development and operation of the Properties subsequent to
the Effective Time. The Preliminary Settlement Statement and the
Final Settlement Statement shall include payments between the
parties as appropriate consistent with the above allocation of
expenses and revenues.
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11. Covenants and Agreements of Assignor. During the period from the
date of this Agreement to the Closing Date, Assignor agrees,
unless specifically waived by Assignee in writing, as follows:
(1) Subject to the provisions of applicable operating and
other agreements, Assignor shall continue to operate and
administer the Properties to be assigned by Assignor in a good
and workmanlike manner consistent with its past practices, and
shall carry on its business with respect to such Properties in
substantially the same manner as before execution of this
Agreement.
(2) Assignor shall, except for emergency action taken in the
face of risk to life, property or the environment, submit to
Assignee for prior written approval, all requests for
operating or capital expenditures and all proposed contracts
and agreements relating to the Properties to be assigned by
Assignor that involve individual commitments of more than
$10,000 net to Assignor's interest.
(3) Assignor shall nominate on behalf of Assignee natural gas
production for the month of September, 1999 consistent with
its current practices.
12. Covenants and Agreements of Assignee. Assignee shall, subject to
the applicable terms of existing operating agreements, take over
operations as of 7:00 a.m. local time at the wellsites on the day
after Closing Date, with respect to Assignor-operated Xxxxx
included in the Properties assigned to Assignee at the Closing.
Assignor shall use its best efforts (without expending money or
extraordinary amounts to time) to recommend to the other working
interest owners that Assignee succeed Assignor as operator, but
Assignor has no obligation to assure that Assignee will succeed
Assignor as operator. Upon taking over operations, Assignee will
post all necessary state, federal and local bonds and shall assist
Assignor in having Assignor's existing bonds released, or in the
alternative, having the xxxxx operated by Assignee released from
Assignor's existing bond.
13. Assumption of Liabilities and Indemnity. If Closing occurs, and
except for title matters which are governed exclusively under
paragraphs 18 and 19 and gas balancing matters which are covered
under paragraph 23:
(A) AS TO PROPERTIES BEING ASSIGNED TO ASSIGNEE FOR WHICH
ASSIGNEE IS THE OPERATOR PRIOR TO CLOSING,
ASSIGNEE SHALL BE RESPONSIBLE FOR AND SHALL PAY AND BEAR
ALL COSTS, RISKS, LIABILITIES, AND OBLIGATIONS ATTRIBUTABLE
TO SUCH PROPERTIES THAT ARISE BEFORE OR AFTER THE EFFECTIVE
TIME, EXCEPT TO THE EXTENT ALLOCATED TO ASSIGNOR UNDER THIS
AGREEMENT (THE "ASSIGNEE OBLIGATIONS"). ASSIGNEE SHALL
DEFEND, INDEMNIFY AND SAVE AND HOLD HARMLESS ASSIGNOR, ITS
OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS AGAINST ALL
LOSSES, DAMAGES, CLAIMS, DEMANDS, SUITS, COSTS, EXPENSES,
LIABILITIES AND SANCTIONS OF EVERY KIND AND CHARACTER,
INCLUDING
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WITHOUT LIMITATION REASONABLE ATTORNEYS' FEES, COURT COSTS
AND COSTS OF INVESTIGATION, WHICH ARISE FROM OR IN
CONNECTION WITH ANY ASSIGNEE OBLIGATIONS.
(B) AS TO PROPERTIES BEING ASSIGNED TO ASSIGNEE FOR WHICH
ASSIGNEE IS NOT THE OPERATOR PRIOR TO CLOSING,
ASSIGNOR SHALL DEFEND, INDEMNIFY AND SAVE AND HOLD HARMLESS
ASSIGNEE, ITS OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS,
AGAINST ALL LOSSES, DAMAGES, CLAIMS, DEMANDS, SUITS, COSTS,
EXPENSES, LIABILITIES AND SANCTIONS OF EVERY KIND AND
CHARACTER, INCLUDING WITHOUT LIMITATION REASONABLE
ATTORNEYS' FEES, COURT COSTS AND COSTS OF INVESTIGATION,
WHICH ARISE FROM OR IN CONNECTION WITH ANY CLAIMS (I) THAT
HAVE BEEN ASSERTED BY A THIRD PARTY IN WRITING TO ASSIGNOR
ON OR BEFORE THE CLOSING DATE OR (II) THAT ARE ASSERTED BY
A THIRD PARTY ARISING FROM OR IN CONNECTION WITH THE
OWNERSHIP OF SUCH PROPERTIES BY ASSIGNOR PRIOR TO THE
EFFECTIVE TIME IF SUCH CLAIMS ARE ASSERTED IN WRITING TO
EITHER ASSIGNOR OR ASSIGNEE WITHIN ONE YEAR FROM THE
CLOSING DATE AND ONLY TO THE EXTENT THAT THE AGGREGATE OF
ALL LOSSES, DAMAGES, COSTS, LIABILITIES, OBLIGATIONS AND
EXPENSES SUFFERED BY ASSIGNEE AS A RESULT OF SUCH CLAIMS
EXCEEDS A DEDUCTIBLE OF $150,000. Regarding environmental
matters, the indemnity set forth above shall apply to and
cover third party claims only to the extent that the
aggregate of all losses, damages, costs, liabilities,
obligations and expenses suffered by Assignee as a result
of each such claim exceeds $5,000 and only if, when taken
in conjunction with any qualifying environmental defects
for which Assignee notified Assignor pursuant to paragraph
18 below, the aggregate of all losses, damages, costs,
liabilities, obligations and expenses suffered by Assignee
as a result thereof exceed a deductible of $150,000. If
such aggregate amount exceeds the $150,000 deductible,
Assignee shall be entitled to indemnification from Assignor
for all such excess amounts.
(C) Patina entered into a Letter Agreement with Damson
Investment Group, Inc. dated March 5, 1999 covering some of
the HSR Purchase Xxxxx. In addition to the indemnities set
forth above, Patina shall defend, indemnify and save and
hold harmless HSR and its officers, directors, employees
and agents, against all losses, damages, claims, demands,
suits, costs, expenses, liabilities, and sanctions of every
kind and character, including without limitation reasonable
attorney's fees, court costs and costs of investigation,
which arise from or in connection with the transaction with
Damson covered by the above referenced Letter Agreement. If
HSR receives a claim for which it is entitled to
indemnification under this paragraph C, HSR shall promptly
forward such claim to Patina and Patina shall assume the
defense thereof. In such event, Patina shall have the sole
and exclusive authority to settle such claim, as long
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as the settlement does not effect the ownership of the
affected property now held by HSR.
(D) The indemnities set forth in paragraphs (A) and (B)
above do not cover claims for improper payment of
production proceeds where the party seeking indemnification
was distirbuted such proceeds (from the indemnifying party)
and has improperly further disbursed such proceeds to third
parties and such third parties assert a claim regarding the
improper disbursement. Such claims will be the
responsibility of the party that improperly distributed the
proceeds to third parties.
14. Contracts. Assignee shall assume and agree to perform under the
contracts and agreements that benefit and burden the Properties as
of the Effective Time.
15. Warranties. The assignment from Assignor to Assignee shall be made
without warranty of title to the Properties, either express or
implied, except that the Properties shall be conveyed to Assignee
free and clear of all liens and encumbrances created by, through,
and under Assignor. Assignee assumes the risk of condition of the
Properties, including compliance with all laws, rules, orders and
regulations affecting the environment, whether existing before or
after the Closing Date, except as otherwise set forth in this
Agreement. The Assignment and Xxxx of Sale from Assignor to
Assignee shall disclaim any warranty of merchantability or fitness
for particular purpose as to the Equipment, and Assignee shall
accept the Equipment "As Is," in its present location and
condition.
16. Representation of Assignor. There is no action, suit, or
proceeding (including, without limitation, takings under
condemnation or eminent domain) pending, or to the knowledge of
Assignor threatened, against the Properties. There is no claim or
demand (including, without limitation, takings under condemnation
or eminent domain) pending, or to the knowledge of Seller
threatened, against the Properties which would have a material
adverse affect on the value, operation or Assignor's ownership of
the affected Property (measured individually and in the
aggregate).
17. Representation of Assignee. Assignee is experienced and
knowledgeable in the oil and gas business and is aware of its
risks. It acknowledges that Assignor has made no representations
or warranties whatever, express or implied, as to the reserves
attributable to the Properties or the value thereof, as to the
condition or state of repair of any of the Properties or as to the
legal, tax or other consequences of the transaction contemplated
by this Agreement. In entering into this Agreement, Assignee has
relied solely upon its independent investigation of, and judgment
with respect to, such matters. It acknowledges and accepts the
risks and absence of liquidity inherent in ownership of the
Properties.
18. Review Period. Upon execution of this Agreement, Assignee shall
have the right, at reasonable times during normal business hours,
to conduct its investigation into the status of the title and
environmental condition of the Properties. All information
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regarding the Properties furnished by Assignor to Assignee is
furnished to Assignee solely as a courtesy, and Assignor makes no
representation or warranties concerning its accuracy or
completeness, and assumes no liability for any use by Assignee
whatsoever. Assignee agrees that any inspection it makes of the
Properties is at its sole cost and risk and agrees to hold
harmless and indemnify Assignor for any damages or injury of any
kind incurred by any party as the result of such inspection. If,
in the course of conducting such investigation, Assignee discovers
environmental or title defects materially affecting the
Properties, Assignee may, no later than 5 days prior to the
Closing Date, notify Assignor in writing specifying such defects,
the Properties affected thereby, and Assignee's estimate of the
net reduction in Allocated Value of the Properties affected by
such defects. If Assignee fails to notify Assignor no later than 5
days prior to the Closing Date of any such defects, the defects
will be deemed waived. Assignor shall be released from any
liability therefor, the parties shall proceed with closing,
Assignor shall be under no obligation to correct the defects, and
Assignee shall assume the risks, liability and obligations
associated with such defects. No adjustment for title or
environmental defects shall be made unless and until, and only to
the extent that the individual value of each title or
environmental defect exceeds $5,000 per Well and the aggregate
value of all such defects exceeds a deductible of $150,000. No
adjustments shall be made for the first $150,000 of such defects.
19. Defect Remedies. Subject to the limitations contained in
Paragraph 18, for each Well for which Assignee provided written
notice to Assignor of a title or environmental defect as provided
in paragraph 18, prior to the Closing Date Assignor and Assignee
shall agree that (i) the title or environmental defect has been
removed by Assignor, (ii) Assignee agrees to waive the relevant
title or environmental defect and purchase the affected Lease
notwithstanding the defect, (iii) Assignor agrees to indemnify
Assignee against all losses, costs, expenses and liabilities with
respect to such title or environmental defect, provided that
Assignee agrees to such indemnification, which will not be
unreasonably withheld, (iv) Assignee and Assignor agree to an
amount by which the Allocated Value of the affected Well has been
reduced and such amount shall be included in the Preliminary
Settlement Statement. Assignee shall have no remedy for any title
or environmental defect after the Closing Date, except as to third
party claims covered under paragraph 13 regarding environmental
claims.
20. Casualty Loss. If subsequent to the date of this Agreement and,
prior to the Closing, all or any material portion of the
Properties to be conveyed to Assignee at the Closing is destroyed
by fire or other casualty, is taken in condemnation or under the
right of eminent domain or proceedings for such purposes are
pending or threatened, Assignee shall receive such interest
notwithstanding any such destruction, taking or pending or
threatened taking. Assignor shall, at the Closing, pay to Assignee
all sums paid to Assignor by third parties by reason of the
destruction or taking of such Properties to be assigned to
Assignee, and shall assign, transfer and set over unto Assignee
all of the right, title and interest of Assignor in and to any
unpaid awards or other payment from third parties arising out of
the destruction, taking or pending or threatened
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taking as to such interest to be conveyed to Assignee. In
addition, Assignor shall pay to Assignee the amount of Assignor's
deductible under the applicable insurance policy or policies.
Assignor shall not voluntarily compromise, settle or adjust any
material amount payable by reason of any material destruction,
taking or pending or threatened taking as to the interest to be
conveyed to Assignee without first obtaining the written consent
of Assignee.
21. Taxes. Severance, conservation and other production taxes
attributable to the production from the Properties shall be the
obligation of the party entitled to such production. Each party
will be responsible for the filing and collection of any severance
tax refunds attributable to the production for which they were
entitled.
Ad valorem and personal property taxes attributable to the
Properties shall be prorated between Assignee and Assignor as of
the Effective Time as described below. Both parties understand and
agree that the payment of ad valorem and personal property taxes
is generally the obligation of the operator. The operator
typically withholds or collects such taxes from other interest
owners and remits full payment to the proper taxing authority.
Based on this understanding, (i) Patina will be responsible for
the payment of ad valorem taxes attributable to the Properties
described on Exhibits X-0, X-0 and B-3 for the 1999 tax assessment
year, which are based on the value of 1998 production and payable
in 2000, (ii) Patina will be responsible for the payment of ad
valorem taxes attributable to the Properties described on exhibits
B-1, B-2 and B-3 for the 2000 tax assessment year, which are based
on the value of 1999 production and payable in 2001, (iii) Patina
will receive credit on the Preliminary Settlement Statement for
estimated ad valorem taxes attributable to the Properties
described on Exhibit B-1 for the portion of the 2000 tax
assessment year related to production from January 1, 1999 through
June 30, 1999, (iv) HSR will be responsible for the payment of ad
valorem taxes attributable to the Properties described on Exhibits
A-2 and B-1 for the 1999 tax assessment year, which are based on
the value of 1998 production and payable in 2000, (v) HSR will be
responsible for the payment of ad valorem taxes attributable to
the Properties described on Exhibit A-1 and A-2 for the 2000 tax
assessment year, which are based on the value of 1999 production
and payable in 2001, and (vi) HSR will receive credit on the
Preliminary Settlement Statement for estimated ad valorem taxes
attributable to the Properties described on Exhibit A-1 for the
portion of the 2000 tax assessment year related to production from
January 1, 1999 through June 30, 1999. The estimated ad valorem
taxes described in (iii) and (vi) above will be based on the value
of production attributable to the Properties for such period and
the most recent published mill levies available for the applicable
counties. These estimates will be adjusted, if necessary on the
Final Settlement Statement at which time they will be final with
no further adjustments being made for actual ad valorem taxes
paid. Notwithstanding the foregoing, Patina and HSR agree that if
certain third party purchasers of oil and gas have remitted ad
valorem tax withholding to either Patina or HSR as non-operator of
the Properties, Patina or HSR will remit the funds to the operator
through the Preliminary Settlement Statement.
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Personal property taxes have not yet been assessed for 1999 and
thus have not been billed to non-operated working interests.
Personal property taxes assessed against the personal property and
fixtures associated with the HSR Purchase Xxxxx for the 1999 tax
assessment year will be paid by HSR, and such taxes assessed
against the personal property and fixtures associated with the
Patina Purchase Xxxxx for the 1999 tax assessment year will be
paid by Patina. On the Preliminary Settlement Statement, HSR will
be entitled to receive a credit for 50% of the estimated personal
property taxes attributable to the HSR Purchase Xxxxx and Patina
will be entitled to receive a credit for 50% of the estimated
personal property taxes attributable to the Patina Purchase Xxxxx.
Both parties using the best valuation and mill levy data available
will estimate the amount of such taxes. The estimates will be
included in the Preliminary Settlement Statement at Closing. These
estimates will be adjusted, if necessary, on the Final Settlement
Statement at which time they will be final with no further
adjustments being made for actual personal property taxes paid.
22. Post Closing Accounting. An accounting shall be held no later than
90 days after the Closing Date. At that time Assignor shall
furnish to Assignee a complete account as to all invoices paid and
all revenues received attributable to all operations on, and
production from, the Properties assigned to Assignee during the
period from the Effective Time to the Closing Date. Such account
shall be settled between the parties by the payment of cash, as
appropriate, pursuant to a Final Settlement Statement, to be
prepared by Assignor and approved by both parties. Assignor shall
not charge the Assignee XXXXX or other general and administrative
overhead for the Properties being assigned to Assignee for the
period between the Effective Time and the Closing Date.
23. Gas Balancing. The estimated volume of such underproduction or
overproduction attributable to the HSR Purchase Properties is set
forth on a Property-by-Property basis on Exhibit C hereto. The
estimated volume of such underproduction or overproduction
attributable to the Patina Purchase Properties is set forth on a
Property-by-Property basis on Exhibit D hereto. Prior to the
completion of the Final Settlement Statement, the Parties will use
their best efforts to update (to the Effective Time) the volume
amounts listed on Exhibits C and D. The Final Settlement Statement
shall include an adjustment for the value of the underproduction
or overproduction of gas attributable to the Assignor's interest
in the Properties as of the Effective Time, such adjustment to be
based on a value of $1.00 per MCF. If Assignor and a third party
operator (other than Assignee) disagree as to the amount of any
imbalance, Assignee and Assignor shall mutually agree to an amount
for purposes of this paragraph. After the completion of the Final
Settlement Statement, there shall be no further adjustment made as
to gas imbalance on any of the Properties and the Assignee shall
be responsible for and administer all gas imbalance matters
affecting the Properties received in the exchange by Assignee.
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24. Xxxxxxx Well. HSR and Patina agree that the gas imbalance account
for the Xxxxxxx 1-15 well located in the NW/4 of Section 15, T1S,
R69W as of the Effective Time shall be considered to be in balance
(ie the gas imbalance for the well shall be reduced to zero).
25. Operations Liability. Upon Closing Assignee will comply with all
laws and governmental regulations with respect to all operations
associated with the Xxxxx assigned to it hereunder, including
abandonment of xxxxx, the compliance with laws or rules regarding
the environment, and regarding inactive or unplugged xxxxx,
including bonding requirements, and surface work as specified in
the applicable oil and gas leases or applicable law or regulation.
26. Post Closing Administrative Accounting Responsibilities. To the
extent Assignor is presently involved in the administration of the
Properties, Assignor shall retain the obligation and
responsibility for the administration of the Properties for the
period ending on the Closing Date. However, Assignor and Assignee
recognize that Assignee's obligation to immediately assume
administrative accounting responsibilities for the Properties upon
Closing may be impractical and will present certain difficulties
for both Assignor and Assignee in regards to transfer of such
administrative responsibilities, timely and proper revenue
distributions, payment of expenses, joint interest xxxxxxxx and
the rendition of post-closing settlement statements.
Therefore, to facilitate a convenient and proper transfer of the
administrative accounting responsibilities relating to the
Properties, Assignor and Assignee agree the administrative duties
will be transferred from the Assignor to the Assignee in the
following manner:
(a) Revenue Distributions:
(1) Assignor shall retain the responsibility for
distribution of revenues attributable to production through
the end of the month of Closing. Such distribution shall be
conducted by Assignor for revenues received through Assignor's
sales cut-off during the second month following the month of
Closing.
(2) In the event Assignor should receive revenues
subsequent to the Assignor's cutoff for its last revenue
distribution, as described above, unless such revenues are for
production prior to the Effective Time, Assignor shall remit
such revenues to Assignee within five (5) business days, and
Assignee shall be responsible for distributing all such
amounts, including distributions to royalty owners.
(3) In the event Assignee should receive revenues for
production from the Properties for the production period prior
to Effective Time, Assignee shall remit such revenues, net of
severance taxes and royalties, to Assignor within five (5)
business days.
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(4) It is understood that Assignor will not undertake
to change its distribution master files for purposes of the
above discussed revenue distributions subsequent to the
Closing Date, and any information on the Properties received
by Assignor related to master file changes subsequent to the
Closing Date will be remitted to the Assignee as soon as is
practical.
(b) Payment of Expenses and Joint Interest Xxxxxxxx:
(1) Assignor shall retain, subject to the terms
hereof, the responsibility for the payment of all invoices,
expenses and joint interest xxxxxxxx for such expenses, for
invoices received and vouchered attributable to production
through the end of the month of Closing, excepting XXXXX or
other general and administrative expenses that the Assignor
has agreed hereunder shall not be charged to Assignee.
(2) In the event Assignor should receive invoices,
expenses and joint interest xxxxxxxx subsequent to the Closing
Date that are not administered under sub-paragraph (1)
immediately above, unless such matters are for periods prior
to the Effective Time (which shall be paid by Assignor),
Assignor shall remit such invoices, expenses and joint
interest xxxxxxxx to Assignee within five (5) business days,
and Assignee shall be responsible for payment thereof.
(3) Assignor acknowledges and agrees that it shall
retain the responsibility for paying and shall pay invoices,
expenses and joint interest xxxxxxxx attributable to the
period prior to the Effective Time, except to the extent such
expenses pertain to claims made by third parties that are
covered by the Assignee indemnity set forth in paragraph 13.
In the event Assignee should receive such invoices, expenses
and joint interest xxxxxxxx attributable to the period prior
to Effective Time, Assignee shall remit such invoices,
expenses and joint interest xxxxxxxx to Assignor within five
(5) business days and Assignor shall be responsible for
payment thereof.
28. LIABILITY AND JURY WAIVERS.
(a) LIMITATION ON LIABILITY. NO PARTY SHALL BE REQUIRED TO PAY OR
BE LIABLE FOR INCIDENTAL, CONSEQUENTIAL, EXEMPLARY, PUNITIVE, OR
INDIRECT DAMAGES (WHETHER OR NOT ARISING FROM ITS NEGLIGENCE) TO
ANY OTHER PARTY REGARDING ANY DISPUTE ARISING OUT OF THIS
AGREEMENT OR A CLAIM OF BREACH HEREOF. THIS PROVISION SHALL NOT
DIMINISH OR AFFECT IN ANY WAY THE PARTIES' RIGHTS OR OBLIGATIONS
UNDER ANY INDEMNITIES PROVIDED FOR IN THIS AGREEMENT.
(b) WAIVER OF JURY TRIAL. EACH PARTY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
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TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT.
29. Termination Period. If the closing has not occurred on or before
the Closing Date, this Agreement shall automatically terminate
unless HSR and Patina agree in writing to an extension.
30. Further Assurances. After Closing, HSR and Patina shall execute,
acknowledge and deliver or cause to be executed, acknowledged and
delivered such instruments, and shall take such other action as
may be necessary or advisable to carry out their obligations under
this Agreement and under any document, certificate or other
instrument delivered pursuant hereto. Certain of the Properties
may be subject to the terms of a Farmout Agreement dated March 18,
1992, as amended, between Amoco Production Company and SOCO
Wattenberg Corporation ("SOCO Wattenberg"). In general, if the
Farmout is in effect and if SOCO Wattenberg conducts operations in
compliance with the terms of the Farmout, SOCO Wattenberg has the
right to earn a 99% working interest in certain formations and
lands with HSR retaining a 1% working interest. If it is
determined after Closing that the Farmout remains in effect and
SOCO Wattenberg conducts operations such that it may earn a 99%
interest in a formation under the Farmout, HSR agrees to assign to
SOCO Wattenberg its retained 1% interest in that formation as to
the lands earned pursuant to the Farmout.
31. Tax Credits. The parties agree to cooperate with one another and
coordinate the unwinding or transfer prior to Closing of the
monetization of section 29 tax credits pertaining to the
Properties being assigned by Assignor hereunder. As set forth in
paragraph 10 above, the Effective Time for such tax credits shall
be deemed to be September 1, 1999 at 7:00 a.m.
32. Correction Assignment. HSR previously assigned to Patina certain
1% working interests held by HSR in numerous properties, some of
which are included in the exchange contemplated by this Agreement.
The parties have disagreed as to the interpretation of that
assignment as it relates to certain formations in the leases
assigned. HSR and Patina agree prior to Closing that a corrective
assignment will be made and recorded as part of the closing
documents hereunder which clarifies that the Dakota formation and
other formations in some instances were not intended to be covered
by the original assignment and that any rights held by HSR in
these formation are reconveyed to HSR. The original assignment was
intended to convey a wellbore interest in the described xxxxx in
certain formations in which HSR's working interest was limited to
a 1% working interest acquired from Amoco. The corrective
assignment shall correct the original assignment to reflect this
intent. To the extent that HSR after Closing would still own a 1%
working interest in the leasehold associated with the xxxxx
included in either the original or corrective assignments and such
leasehold is not included in the exchange contemplated by this
Agreement, HSR will promptly and in good faith assign and convey
to Patina all of HSR's right, title and interest in and to the oil
and gas leases covered and included in the original
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assignment covering the formations in which HSR owns only a 1%
working interest as of the Closing Date.
33. TCW Interest. TCW DR II Royalty Partnership, a California limited
partnership, holds an overriding royalty interest in certain of
the Patina Purchase Xxxxx. An assignment of this interest as to
some of such Properties is not recorded in the county records.
Prior to Closing, HSR will execute and record a corrective
assignment that properly evidences of record the interest of TCW
in the Patina Purchase Properties. The interest conveyed to TCW
will not reduce or diminish the net revenue interest of Patina in
the affected Patina Purchase Well as such interest is set forth on
Exhibits B-1, B-2, or B-3, as appropriate.
34. Amendment. This Agreement may be amended only by written
instrument executed by both HSR and Patina.
35. Brokers. Each party hereto indemnifies the other against any
liability or expense for brokerage fees, finder's fees, agent's
commissions or other similar forms of compensation incurred by the
indemnifying party in connection with this Agreement or any
transaction contemplated hereby.
36. Expenses. Each party shall be solely responsible for expenses
incurred in connection with this Agreement and shall not be
entitled to reimbursement by the other party.
37. Survival. The terms of this Agreement shall survive closing and
will not merge with any conveyance. The covenants, conditions, and
other provisions of those paragraphs shall endure and, as to the
Xxxxx, shall run with the Land. They shall not be extinguished by
the doctrine of merger by deed or any similar doctrine and no
waiver, release, or forbearance of the application of the
provisions of those paragraphs in any given circumstance shall
operate as a waiver, release, or forbearance of the provisions of
the paragraphs as to any other circumstance.
38. Notices. All notices which are required or may be given pursuant
to this Agreement shall be given in writing and delivered
personally or by registered or certified mail, postage prepaid to
the addresses of the parties first set forth above. All notices
shall be deemed to have been given as of the date of receipt.
39. Entire Agreement. This Agreement constitutes the entire Agreement
between the parties hereto and supersedes all prior agreements,
negotiations, and understandings.
40. Governing Law. This Agreement shall be interpreted in accordance
with the laws of the state of Colorado.
41. Press Release. Prior to Closing and for a period of thirty (30)
days following Closing, neither party shall make any press
release or other announcement in connection with this Agreement
without first consulting with the other party. Following such
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consultation and good faith attempt to make reasonable
accommodations, for press releases or other announcements made
after Closing, if the parties are unable in good faith to agree on
the content of the press release or announcement, either party may
make any announcement or press release that it so desires. This
provision shall not apply to any filing with any governmental body
or stock exchange required by law, rule or regulation.
HS RESOURCES, INC.
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Xxxx X. Xxxxxxxx
Vice President
PATINA OIL & GAS CORPORATION
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Xxxxx X. Xxxx
Executive Vice President
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