EXHIBIT 10.57
PURCHASE AND SALE AGREEMENT
This PURCHASE AND SALE AGREEMENT (as amended, supplemented, restated or
otherwise modified from time to time in accordance with applicable provisions
hereof, this "Agreement") dated July 3, 2002, is between DDD ENERGY, INC., a
Delaware corporation ("Seller"), the address for which is 50 Briar Hollow Lane,
Seventh Floor West, Houston, Texas 77027, and RISING STAR ENERGY, L.L.C., a
Texas limited liability company ("Purchaser"), the address of which is 0000 Xxxx
Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000.
In consideration of the mutual agreements set forth herein, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Seller and Purchaser hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
Purchase and Sale. In accordance with the terms of this Agreement, Seller
agrees to sell all of the Seller's oil and gas properties and related assets
including without limitation all of the interests, rights, and property
(collectively, the "Acquired Assets") described in Section 1.01, excluding,
however, the Excluded Assets as defined below in Section 1.02 to Purchaser and
Purchaser agrees to purchase the Acquired Assets from Seller. As used herein,
the term "Working Interest" means, as to a Lease (as defined in Section 1.01),
the right to exploit, produce and operate the mineral rights covered by such
Lease and the obligation to bear the expense and cost associated with such
exploitation, production and operation, whether or not such rights or
obligations are derived from Record Title (as defined below in Section 1.01) or
Operating Rights (as defined below in Section 1.01). As used herein, the term
"Net Revenue Interest" means:
(a) as to a Lease, the ownership percentage of all Substances (as
defined in Section 1.01) produced from the Lease to which it applies; and
(b) as to a Well (as defined in Section 3.01(h)), the ownership
percentage of all Substances produced from the Well to which it applies.
The Net Revenue Interest attributable to a Lease or Well that is pooled or
unitized shall be the percentage of Substances produced from the pool or unit
and allocated to the Lease or Well in question. Each Net Revenue Interest shall
be the relevant ownership percentage net of all royalties, overriding royalties,
production payments and other burdens measured by or payable out of Substances
produced from or attributable the relevant Lease, Well, pool or unit. The Net
Revenue Interest shall include overriding royalty interests owned by Seller
measured by or payable out of Substances produced from or attributable the
relevant Lease, Well, pool or unit. As used herein, the term "Record Title"
means the record title ownership of a Lease. As used herein, the term "Operating
Rights" means the interest created out of the record title ownership of a Lease
authorizing the holder of that right to enter upon the lands covered by the
Lease to conduct drilling and related operations, including production of oil or
gas from such lands, in accordance with the terms of the Lease, and the
obligation to bear the expense and cost associated with such operations.
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1.01 Acquired Assets. The following interests, rights, and property
comprise the Acquired Assets:
(a) the interests set forth in the attached Schedule 1-A in the oil
and gas leases and lands described in such Schedule 1-A, including
Operating Rights and Record Title, working, leasehold, mineral, royalty,
overriding royalty, net revenue, net profits or reversionary interests,
other mineral rights, and any other interests of a similar nature
expressed, as a percentage, in such Schedule 1-A (collectively, the
"Leases");
(b) all right, title, and interest of Seller in all Xxxxx (including
the interest of Seller in the Xxxxx specifically described in Schedule
1-A), equipment, fixtures, platforms, personal property and improvements
(including materials, plants, pipelines, gathering and processing systems
and salt water disposal systems) which are, as of the date of this
Agreement, as of the Effective Time (as defined in Section 1.03) or as of
the Closing Date (as defined in Section 7.01), as the case may be, located
on, appurtenant to or used in connection with the Leases (the "Equipment");
(c) all right, title, and interest of Seller in all contracts,
escrowed funds for the abandonment of the Acquired Assets, partnerships,
joint ventures, limited liability companies and other entities, agreements,
instruments, payout balances, commitments, licenses, permits, easements,
rights-of-way, and other rights of Seller relating to the items described
above in this Section 1.01, together with all rights, claims, and causes of
action of Seller under such items existing or arising at or after the
Effective Time, and the contracts specifically described in Schedule 1-B
(all of the foregoing in this clause (c), collectively, the "Contracts");
(d) all right, title, and interest of Seller in oil, gas, condensate,
related hydrocarbons, and other minerals produced from the Leases on or
after the Effective Time, including all oil in storage as described in
clause (i) of Section 2.04, ("Substances");
(e) all accounts, including the share of Seller in any gas imbalance,
makeup obligation, abandonment escrow account, instrument, general
intangible, lien, and security interest arising from the sale or other
disposition of the items described in this Section 1.01 on or after the
Effective Time ("Accounts"); and
(f) to the extent available and assignable pursuant to the terms of
applicable law and third party agreements (without the payment of any funds
or other consideration by Purchaser), all information, books, records,
files, muniments of title, reports, documents and materials of Seller that
are related to the portion of the Acquired Assets described in clauses
(a)-(e) of this Section 1.01, including (i) all reservoir, land, lease,
prospect, well, operation and production files, drilling reports,
engineering reports and data and environmental reports, (ii) all seismic
records, field notes, interpretations and programs, and all seismic records
and data and other geological and geophysical information and libraries,
together with all computers and other hardware and software used to
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interpret and analyze geological and geophysical data and all other
proprietary information relating to the Acquired Assets ("Seismic Data"),
(iii) maps, logs, core analyses, and formation tests; (iv) production
records; and (v) title and contract files (collectively, with the Seismic
Data, the "Records").
Notwithstanding the foregoing, the transfer of the Acquired Assets pursuant to
this Agreement shall not include the assumption of any obligations related to
the Acquired Assets unless Purchaser expressly assumes that obligation pursuant
to Section 9.06.
1.02 Excluded Assets. The assets of Seller specified in Schedule 1.02
(collectively, the "Excluded Assets") are excluded from the Acquired Assets and
shall remain the property of Seller after the closing, subject to the exercise
by Purchaser of the Purchase Option (as defined in Section 1.03 below).
1.03 Option to Acquire the Excluded Assets. For a period of thirty (30)
days following the Closing, Seller grants to Purchaser, with respect to items
(a), (b) and (c) set forth in Schedule 1.03 and Endeavor grants to Purchaser
with respect to items (d) and (e) set forth in Schedule 1.03 (as used in this
Section 1.03, Seller and Endeavor are each referred to, individually or
collectively, as applicable, as "Optionor"), the right and option ("Purchase
Option") (i) to purchase any or all of such Excluded Assets at the Option Price
set forth in Section 2.02 or (ii) to enter into a joint venture arrangement with
Optionor (the "Joint Venture") pursuant to which all of the Excluded Assets will
be conveyed to Purchaser in accordance with the mutual agreement of the parties.
This Purchase Option is exercisable by Purchaser, in its sole discretion, at any
time during the thirty (30) day period following the Closing by delivering
written notice to Optionor which shall identify the Excluded Assets to be
purchased or require the parties to enter into the Joint Venture arrangement. If
Purchaser exercises the Purchase Option to enter into such an arrangement, the
Joint Venture may provide for the following, subject to the mutual agreement of
the parties:
(a) contribution by Optionor of all or a portion (or if made into a
Joint Venture, all) of the Excluded Assets at Optionor's basis in, or other
agreed value of, the Excluded Assets with the right of Purchaser to
contribute certain other capital from time to time, resulting in adjustment
of the capital accounts and sharing ratios associated with the Joint
Venture; and
(b) a process requiring Purchaser to present an offer to Optionor to
(i) purchase Optionor's interest in the Joint Venture for a per-unit price
nominated by Purchaser or (ii) sell Purchaser's interest in the Joint
Venture to Optionor for an amount equal to the exact same per-unit price
specified in clause (i) of this Section 1.03(b). The consummation of the
transactions contemplated by such sale or purchase, as determined by
Optionor under this Section 1.03(b), shall occur at the offices of Xxxxxxx
Xxxxxx L.L.P. no later than December 31, 2002.
1.04 Effective Time. The purchase and sale of the Acquired Assets shall be
effective for all purposes as of June 1, 2002, at 12:01 a.m., local time (the
"Effective Time").
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ARTICLE II
PURCHASE PRICE
2.01 Purchase Price. The purchase price for the Acquired Assets (the
"Purchase Price") is Twenty-Five Million AND 00/100 DOLLARS ($25,000,000.00). In
accordance with Section 2.05 and Section 9.01 the Purchase Price, as adjusted
pursuant to the terms of this Agreement shall be paid to Seller.
2.02 Option Price. Upon the exercise of the Purchase Option as described in
Section 1.03 above, Purchaser may purchase any or all of the Excluded Assets for
the purchase prices specified below (each a "Option Price"):
(a) The Option Price for the Xxxxxx Field Asset shall be Nine Million
Five Hundred Fifty Thousand Dollars ($9,550,000.00).
(b) The Option Price for the Norphlet Project Asset shall be One
Million Dollars ($1,000,000.00).
(c) The Option Price for the West AA Prospect shall be One Million
Dollars ($1,000,000.00).
(d) The Option Price for the Garfield and Magilla Prospects shall be
One Million Two Hundred Thousand Dollars ($1,200,000.00).
(e) The Option Price for the Xxx-Xxxxxxx Xxxxx shall be One Million
Nine Hundred Thousand Dollars ($1,900,000.00).
(f) The Option Price for the Xxxxxxx-Xxxx Well shall be Three Hundred
Fifty Thousand ($350,000.00).
2.03 Escrow Deposit. Upon receipt of the Board Resolutions and Lender
Approval referred to in Section 8.01(f), Purchaser shall simultaneously deliver
One Million Eight Hundred and Seventy-Five Thousand and 00/100 ($1,875,000.00)
(the "Escrow Deposit") to XX Xxxxxx Xxxxx Bank (the "Escrow Agent"). The Escrow
Deposit shall be kept in an interest bearing escrow account in accordance with
the Escrow Agreement (the "Escrow Agreement") in the form attached hereto as
Schedule 2.03, and, disbursed pursuant to the Escrow Agreement Among Purchaser
or Seller. In accordance with the Escrow Agreement, the Escrow Deposit shall
either (i) be applied toward the payment of the Purchase Price, if the Closing
occurs, (ii) paid to Seller, if this Agreement is terminated as provided in
Section 8.02(a), or (iii) otherwise returned to Purchaser with interest, after
receipt of Purchaser's demand, if this Agreement is terminated or canceled or
the transaction is not consummated for any other reason whatsoever.
2.04 Adjustments to Purchase Price. The Purchase Price shall be adjusted as
provided in this Section 2.04 and the resulting amount shall be referred to as
the "Adjusted Purchase Price." Not less than five (5) days prior to the Closing
Date, Seller shall deliver to Purchaser a preliminary closing statement (the
"Preliminary Closing Statement"), substantially in the form attached hereto as
Schedule 2.04, setting forth adjustments to the Purchase Price using the best
information then available and prepared in accordance with customary accounting
principles used in the oil and gas industry.
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(a) The Purchase Price shall be increased by the following:
(i) an amount equal to the quantity of merchantable oil
produced from the Leases and in storage at the Effective Time, and not
sold or disposed of prior to Closing (as defined in Section 7.01),
multiplied by the market price (market price shall be deemed to be the
amount the Seller would receive if the oil were marketed by the
operator of the Lease) for such oil at the Effective Time, net of all
taxes and gravity adjustments and transportation expenses necessary to
market such production;
(ii) the amount of (A) the direct capital expenses for
operations approved in accordance with Section 4.01 or otherwise made
in accordance with applicable provisions of this Agreement, direct
lease operating expenses charged under applicable operating
agreements, and general and administrative charges, if any, payable to
any third-party operator under applicable operating agreements, and
(B) in respect of Leases for which Seller serves as operator, the
direct capital expenses for operations approved in accordance with
Section 4.01 or otherwise made in accordance with applicable
provisions of this Agreement and direct lease operating expenses, in
each instance that are: (1) attributable to the Acquired Assets during
the period between the Effective Time and Closing, and (2) incurred
and paid by Seller (whether before or after Closing);
(iii) the amount of premiums under insurance policies
(including, as applicable, business interruption insurance)
attributable to the Acquired Assets and the production therefrom for
the period extending from the Effective Time to Closing;
(iv) an amount equal to the average daily market price of
natural gas per mcf, (mmbtu adjusted) for delivery at the Houston Ship
Channel for the month of May 31, 2002, as published in Inside FERC,
representing the agreed value of the net undertaken Imbalances (as
defined in Section 3.01(n)) as of the Effective Time, as such term is
defined hereinafter; and
(b) The Purchase Price shall be decreased by the following:
(i) the amount of net proceeds or other value received by Seller
for the sale or disposition of Substances, including net proceeds from
the sale of liquids and other constituents removed in gas plants or
other processing facilities, produced after the Effective Time;
(ii) the amount of proceeds or other value received by Seller for
the sale or disposition, after the Effective Time, of any portion of
the Acquired Assets;
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(iii) an amount equal to the aggregate of all Title Defect
Amounts (as hereinafter defined) with respect to all uncured Title
Defects as determined pursuant to the provisions of Section 5.08(a);
(iv) the amount of any downward adjustment to the Purchase
Price on account of any Casualty Loss (as defined in Section 5.07)
pursuant to the provisions of Section 5.07;
(v) the amount of any downward adjustment to the Purchase
Price on account of any Environmental Laws (as defined in Section
3.01(p) pursuant to the provisions of Section 5.09(b); and
(vi) the amount of any downward adjustment to the Purchase
Price as a result of the exercise of any preferential rights by the
holders thereof, as provided in Section 5.09(c).
2.05 Payment of Adjusted Purchase Price. At Closing, Purchaser shall pay
Seller a cash amount, in immediately available funds, equal to the Adjusted
Purchase Price, as determined on the basis of the Preliminary Closing Statement,
less any amounts payable pursuant to the Escrow Agreement.
2.05 Allocation of Purchase Price.
(a) The Purchase Price shall be allocated among tangibles and
intangibles comprising the Acquired Assets as follows: (i) ninety percent
(90%) of the Purchase Price shall be attributed to the Leases and
associated Contracts; and (ii) ten (10%) of the Purchase Price shall be
attributed to Equipment and other personal property. Purchaser and Seller
agree: (i) to be bound by the allocation of the Purchase Price among
tangibles and intangibles set forth herein for all purposes; (ii) to
consistently report such allocations for all federal, state and local
income tax purposes; and (iii) to file timely all reports required by the
Internal Revenue Code of 1986, as amended (the "Code"), including Form 8594
(Asset Acquisition Statement Under Section 1060), pursuant to the
requirements of Section 1060 of the Code, concerning the Purchase Price
allocation.
(b) A portion of the Purchase Price has been allocated to the various
Acquired Assets in the manner and in accordance with the respective values
set forth in Schedule 1-A. If any adjustment is made to the Purchase Price
pursuant to Section 2.04, a corresponding adjustment shall be made to the
portion of the Purchase Price allocated to the affected Acquired Asset in
Schedule 1-A. In no event shall any negative adjustment with respect to any
Acquired Asset exceed the portion of the Purchase Price allocated to such
Acquired Asset as provided in Schedule 2.06(b).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01 Representations and Warranties by Seller. Seller represents and
warrants to Purchaser (which representations and warranties shall survive
Closing and the execution and
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delivery of the documentation to be executed and delivered at Closing, to the
extent provided in Section 10.15) that:
(a) Seller is a corporation duly organized, existing and in good
standing under the laws of the State of Delaware and is qualified to do
business in, and is in good standing under the laws of, the State of Texas
and each jurisdiction in which the failure to so qualify would have a
material adverse effect on the Seller. Seller is qualified under applicable
laws and regulations to own the Acquired Assets. All prior assignments of
interests in any of the Leases or other Acquired Assets that are pending
approval by the United States of America, Department of Interior, Bureau of
Land Management (the "BLM") are in proper form for approval by the BLM in
accordance with the laws, rules, regulations and practices applicable
thereto.
(b) Seller has the full legal power, right and authority to carry on
its business as presently conducted, to enter into this Agreement and to
perform its obligations under this Agreement.
(c) Subject to Section 6.01(g), the execution, delivery and
performance by Seller of this Agreement and the documentation to be
executed and delivered at Closing have been authorized by all necessary
action, corporate and otherwise, on the part of Seller. Execution, delivery
and performance by Seller of this Agreement do not and execution, delivery
and performance by Seller of the documentation to be executed and delivered
at Closing will not, and the consummation of the transactions contemplated
by this Agreement will not, violate or be in conflict with any (i)
agreement, instrument, judgment, order, decree, law or regulation
applicable to Seller or the Acquired Assets or (ii) any provision of the
articles of incorporation or bylaws of Seller.
(d) Subject to laws and equitable principles affecting the rights of
creditors, this Agreement is and the documentation to be executed and
delivered at Closing will be, upon execution and delivery thereof, legal,
valid and binding obligations of Seller enforceable according to their
respective terms.
(e) Except as set forth in Schedule 3.01(e), no suit, arbitration,
inquiry, proceeding, audit, claim, demand or investigation is pending or,
to the knowledge of Seller, threatened that might result in impairment or
loss or diminution of the title of Seller to the Acquired Assets or
otherwise adversely affect any of the Acquired Assets in any material
respect. There are no bankruptcy or reorganization proceedings pending or,
to the knowledge of Seller, threatened against Seller or any Affiliate of
Seller.
(f) Schedule 1-B sets forth a list of the following contracts,
agreements or commitments to which the Acquired Assets are subject or by
which Seller is bound with respect to the Acquired assets:
(i) any written contract or agreement with Seller or any Affiliate
of Seller relating to the provision of goods or services which will
survive the Closing;
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(ii) any contract, agreement or commitment that commits Seller
and its assigns to aggregate expenditures with respect to the Acquired
Assets of more than $100,000 in any calendar year, excluding (x) the
Leases and any contracts or agreements creating interests or rights in
the Acquired Assets, (y) joint operating agreements, and (z)
unitization or pooling agreements;
(iii) any contract, agreement or commitment that commits Seller
and its assigns to sell, process, transport or market any Substances
excluding (x) any such contract, agreement or commitment which expires
within six months or can be terminated by Seller and its assigns upon
not more than six months' notice without penalty, (y) joint operating
agreements and (z) unitization or pooling agreements;
(iv) any contract, agreement or commitment that restricts Seller
and its assigns, as owners of any of the Acquired Assets, from
competing with any third party in any geographic region or line of
business; and
(v) any contract, agreement or commitment that warrants the
volume of production of Substances to be delivered by Seller and its
assigns from the Acquired Assets.
(g) To the extent Seller is responsible for payment thereof and
otherwise to the knowledge of Seller, all rentals, royalties, shut-in
royalties, overriding royalties, taxes and other payments due pursuant to
or with respect to the Leases or the production of Substances therefrom or
attributable thereto or revenue attributable to such production have been
properly paid.
(h) To the knowledge of Seller, the Leases have been drilled,
completed, operated, developed and produced in material compliance with all
applicable judgments, orders, laws, rules and regulations. Except as set
forth in Schedule 3.01(h), (i) all necessary certificates, consents,
permits, licenses and other governmental authorizations affecting the
Acquired Assets have been obtained and are in force, (ii) there are no
outstanding violations of any applicable regulations, rules or orders of
the Federal Energy Regulatory Commission, the BLM, or any other regulatory
agency with respect to the Acquired Assets, (iii) the production status of
each oil, gas, injection or disposal well included in the Acquired Assets
(each a "Well") identified in Schedule 1-A as of the Effective Time and, to
the best knowledge of Seller, as of the date of execution of this
Agreement, is correctly reflected on such Schedule, and (iv) there are no
xxxxx included in the Acquired Assets or located on the Leases that (A)
Seller is obligated, by applicable judgments, orders, laws, rules,
regulations or contract, to currently plug and abandon or (B) are subject
to exceptions to a requirement to plug and abandon issued by a governmental
authority.
(i) Seller is not obligated, under a take-or-pay or similar
arrangement, or by virtue of an election to non-consent or not participate
in a past or current operation on the Leases pursuant to applicable
operating agreements, to produce Substances, or allow Substances to be
produced, without receiving full payment at
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the time of delivery in an amount that corresponds to the Net Revenue
Interest described in Schedule 1-A.
(j) Seller is timely receiving its share of proceeds from the sale of
Substances produced from or allocable to the Leases without suspense,
counterclaim or set-off. There has been no production of Substances from or
allocable to the Leases in excess of the allowable production established
pursuant to applicable state or federal law or regulation that would result
in a restriction on production of Substances from or allocable to the
Leases subsequent to the Effective Time.
(k) Except for Casualty Losses after the date of execution of this
Agreement, which are covered by the provisions of Section 5.07, since
January 1, 2002 no event has occurred and no condition exists which has, or
could reasonably be expected to, materially adversely affected the value of
the Acquired Assets or the ability of Purchaser to own, hold, develop and
operate the Acquired Assets, except for depletion through normal production
changes in rates of production that occur in the ordinary course of
operation, depreciation of the Equipment through ordinary wear and tear,
and changes in general economic conditions and product pricing generally
affecting the oil and gas industry
(l) Seller has incurred no liability for brokers' or finders' fees
related to the transactions contemplated by this Agreement for which
Purchaser shall be liable.
(m) Except as set forth in Schedule 3.01(m), there are no outstanding
authorities for expenditures or any oral or written commitments or
proposals to conduct operations on the Leases which are required to be
approved by non-operators under the terms of the applicable joint operating
agreement.
(n) Except as set forth in Schedule 3.01(n), as of the Effective Time,
no portion of the Acquired Assets is over produced, under produced, or
otherwise subject to an imbalance or make-up obligation (collectively,
"Imbalances") with respect to Substances produced from or allocated to the
Acquired Assets, regardless of whether such Imbalances arise at the
platform, wellhead, pipeline, gathering system or other level and
regardless of whether such Imbalances arise under Contract or otherwise.
(o) No consents or approvals of any third persons are required in
connection with the transfer of the Acquired Assets from Seller to
Purchaser other than the approval of the BLM and the consents listed in
Schedule 3.01(o). Except as set forth in Schedule 3.01(o) there are no
preference rights applicable to the sale of the Acquired Assets by Seller
to Purchaser pursuant to this Agreement.
(p) Seller has obtained all permits, licenses and other authorizations
(collectively, "Environmental Permits") which are required under any law,
ordinance, statute, code, rule, regulation, agreement, judgment, order, or
decree of any federal, state or local governmental authority, applicable to
the Acquired Assets, relating to pollution, the protection or regulation of
human health, natural
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resources, or the environment, or the emission, discharge, release or
threatened release of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or waste into the environment, including
ambient air, surface water, ground water or land or soil (collectively,
"Environmental Laws"), and all of such Environmental Permits are in full
force and effect and all fees and charges relating thereto have been paid.
Seller is in compliance with all Environmental Laws and Environmental
Permits applicable to the Acquired Assets, and the Acquired Assets are not
subject to any material unfulfilled remedial obligations pursuant to
Environmental Laws. Seller has not received notice of any violation or
alleged violation that is continuing (or of any fact or circumstance which
with notice or the passage of time or both would constitute a violation) of
any Environmental Laws or Environmental Permits relating to the Acquired
Assets or any investigation relating thereto.
(q) Seller is not a nonresident alien of the United States.
(r) Except as set forth on the Disclosure Schedule, (i) Seller owns or
has the right to use without any limitations or restrictions (including
without limitation restrictions related to transfers to, or use by, any
individual, corporation, limited liability company, business trust,
association, company, partnership, joint venture, governmental authority or
other entity (each, a "Person")), the Seismic Data; (ii) the consummation
of the transactions contemplated by this Agreement will not alter or impair
any such rights or breach any agreements with third-party vendors or
require payments of any additional sums to such Persons; and (iii) the
manner in which Seller has actually used or copied such Seismic Data does
not and has not infringed on the rights of any Person.
(s) All books, records and files of Seller pertaining to the Acquired
Assets, to Seller's knowledge, fairly and accurately reflect the ownership,
use, enjoyment and operation by Seller of its assets.
(t) The transfer of the Acquired Assets to the Purchaser is not being
made with the actual intent to hinder, delay or defraud any creditor of
Seller. The Purchase Price constitutes reasonably equivalent value in
exchange for the sale of the Acquired Assets as such value has been
determined on or prior to the Closing, will be determined by an
independent, third party appraiser, selected by Seller prior to the Closing
and Seller is not insolvent now and will not become insolvent on the
Closing Date.
(u) Seller has delivered to Purchaser a copy of the report prepared by
Garb, Xxxxx & Xxxxxx dated December 31, 2001. To the knowledge of Seller,
the factual information furnished by Seller to Garb, Xxxxx & Xxxxxx for
purposes of such report (including, without limitation, production,
volumes, decline curves, sales prices for production, reserve reports,
contractual pricing provisions under oil or gas sales or marketing
contracts under hedging arrangements, costs of operations and development,
lease operating expenses, and working interest and net revenue information
relating to Seller's ownership interests in properties) was true and
correct in all material respects on the date of such reserve report;
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provided, however (i) the reserves included in such report are estimates
only and should not be construed as exact quantities, (ii) such reserves
may or may not be recovered and, if recovered, the revenues therefrom and
the costs related thereto could be more or less than the estimated amounts,
(iii) the sales rates, prices received for the reserves, and costs incurred
in recovering such reserves may vary from assumptions included in such
report due to governmental policies and uncertainties of supply and demand,
and (iv) estimates of such reserves may increase or decrease as a result of
future operations.
(v) Seller has no knowledge of the breach of any representation,
warranty, covenant or agreement hereunder by Purchaser or of the failure of
Purchaser to perform an obligation hereunder, other than such as have been
disclosed in writing to Purchaser.
3.02 Representations and Warranties by Purchaser. Purchaser represents and
warrants to Seller (which representations and warranties shall survive Closing
and the execution and delivery of the documentation to be executed and delivered
at Closing) that:
(a) Purchaser is a limited liability company organized, existing and
in good standing under the laws of the State of Texas and is qualified to
do business in, and is in good standing under the laws of the State of
Texas, and as of the Closing will be qualified to do business in each
jurisdiction in which the failure to so qualify would have a material
adverse affect on the Purchaser.
(b) Purchaser has the full legal power, right and authority to carry
on its business as presently conducted, to enter into this Agreement and to
perform its obligations under this Agreement. On or before the Closing,
Purchaser will be qualified in accordance with applicable law, to own the
Acquired Assets as a non-operator of such assets and will have complied
with all necessary governmental bonding requirements required for its
ownership of the Acquired Assets.
(c) The execution, delivery and performance by Purchaser of this
Agreement and the documentation to be executed and delivered at Closing
have been authorized by all necessary action, corporate and otherwise, on
the part of Purchaser. Execution, delivery and performance by Purchaser of
this Agreement do not and execution, delivery and performance by Purchaser
of the documentation to be executed and delivered at Closing will not, and
the consummation of the transactions contemplated by this Agreement will
not, violate or be in conflict with any (i) agreement, instrument,
judgment, order, decree, law or regulation applicable to Purchaser or (ii)
any provision of the articles or certificate of incorporation or bylaws of
Purchaser.
(d) Subject to laws and equitable principles affecting the rights of
creditors, this Agreement is and the documentation to be executed and
delivered by Purchaser at Closing will be, upon execution and delivery
thereof, legal, valid and binding obligations of Purchaser enforceable
according to their terms. There are no bankruptcy or reorganization
proceedings pending or, to the knowledge of Purchaser, threatened against
Purchaser.
Page 15 of 50
(e) Purchaser has incurred no liability for brokers' or finders' fees
related to the transactions contemplated by this Agreement for which Seller
shall be liable.
(f) There are no pending suits, actions or other proceedings to which
Purchaser is a party (or, to the knowledge of Purchaser, which have been
threatened to be instituted against Purchaser) which affect the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby. There are no bankruptcy or reorganization proceedings
pending or to the knowledge of Purchaser threatened against Purchaser or
any Affiliate of Purchaser.
(g) Purchaser is a knowledgeable purchaser, owner and operator of oil
and gas properties, has the ability to evaluate the Acquired Assets for
purchase, and is acquiring the Acquired Assets for its own account and not
with the intent to make a distribution in violation of the Securities Act
of 1933 or any applicable state securities law.
(h) Purchaser has no knowledge of the breach of any representation,
warranty, covenant or agreement hereunder by Seller or of the failure of
Seller to perform an obligation hereunder, other than such as have been
disclosed in writing to Seller.
(i) Purchaser has sufficient funds to purchase the Acquired Assets,
close the subject transaction and pay the Purchase Price and all related
fees and expenses of Purchaser, all in accordance with the terms of this
Agreement.
ARTICLE IV
COVENANTS
4.01 Covenants of Seller. Seller covenants and agrees with Purchaser as
follows:
(a) Following execution of this Agreement and until Closing, Seller
shall (i) continue to operate the Acquired Assets or cause the Acquired
Assets to be operated, in a good and workmanlike manner; (ii) maintain or
cause to be maintained the insurance now in force with respect to the
Acquired Assets; (iii) notify Purchaser of any suit, arbitration, inquiry,
proceeding, audit, claim, demand or investigation known to Seller which
might adversely affect any of the Acquired Assets; (iv) pay or cause to be
paid, in the ordinary course of business and consistent with past
practices, all costs, taxes and expenses which Seller is obligated to pay
in connection with the Acquired Assets as they become due; (v) pay or cause
to be paid all rentals, capital contributions and other payments necessary
to maintain the Leases and the Contracts in force according to their terms
and comply with all express and implied covenants contained in the Leases
or the Contracts or cause such to be complied with; (vi) exercise due
diligence in safeguarding the Acquired Assets and maintaining the
confidentiality of all data and other confidential or proprietary materials
relating to the Acquired Assets; (vii) promptly notify Purchaser of all
significant operations which are proposed with respect to the Acquired
Assets and of any Casualty Loss; and (viii) use
Page 16 of 50
efforts, consistent with the standards expected of a reasonably prudent
operator but without any obligation to pay money, to obtain any consents,
waivers (including waiver of preferential purchase rights), and approvals
required of third persons, governmental authorities or other entities in
connection with consummation of the transactions contemplated by this
Agreement.
(b) Following execution of this Agreement, Seller shall not, without
the consent of Purchaser (i) abandon any Well capable of commercial
production or any platform, pipeline or other facility; (ii) release all or
a portion of a Lease; (iii) commence or consent to an operation estimated
to cost an amount in excess of the amount an operator is entitled to expend
without non-operator approval under the applicable operating agreement(s)
(excluding emergency operations and operations undertaken to avoid a
penalty or forfeiture provision of any applicable agreement or order); (iv)
create a lien, security interest or other encumbrance on any of the
Acquired Assets; (v) sell or dispose of any of the Acquired Assets, other
than Substances sold, consumed or produced or Equipment replaced, in either
case the ordinary course of business; (vi) amend or waive a material right
under a Lease or a Contract, compromise an Account or enter into new
contracts affecting the Acquired Assets, other than those entered into in
the ordinary course of business with a term of not more than 90 days; (vii)
waive, compromise or settle any claim that diminishes or adversely burdens
any Acquired Asset; or (viii) voluntarily relinquish the position of Seller
as operator of any of the Acquired Assets.
(c) Following the execution of this Agreement and until Closing,
Seller shall provide Purchaser and its attorneys, employees, accountants,
engineers, consultants and agents (collectively "representatives") access,
during business hours, to (and the right to copy, at the expense of
Purchaser) the Contracts and other records of Seller pertaining to the
ownership and/or operation of the Acquired Assets (including title files,
lease files, prospect files, division order files, production, severance
and ad valorem tax records, and financial, accounting, engineering,
geological and geophysical records), insofar as any of such are in the
possession or control of Seller or insofar as Seller has access thereto,
and to the extent, in each case, that Seller may do so without violating
legal constraints or any legal obligation or waiving any attorney-client or
attorney work product privilege, for the purpose of the conducting, by or
at the direction of Purchaser, of due diligence reviews of the Acquired
Assets. Subsequent to Closing, Seller shall not be obligated to furnish any
updated abstracts, title opinions or additional title information which are
not in the possession of Seller or title counsel to Seller, but shall
cooperate with Purchaser in any efforts by Purchaser to obtain (at the
expense of Purchaser) such additional title information as Purchaser may
reasonably require.
(d) Seller shall use its reasonable efforts to obtain before Closing
all of the consents listed in Schedule 3.01(o) on terms reasonably
satisfactory to Purchaser and, with respect to the transfer to Purchaser of
engineering, geological and geophysical data included in the Records for
which any third-party consents are conditioned upon payment of transfer
fees, to obtain all such consents for the
Page 17 of 50
lowest applicable transfer fees reasonably possible, which transfer fees shall
be payable by Purchaser.
(e) Seller shall take or cause to be taken all reasonable actions within
its control as may be necessary or advisable to consummate and make effective
the purchase of the Acquired Assets and the transactions contemplated by this
Agreement and to assure that, as of the Closing Date, it will not be under any
material corporate, legal or contractual restriction that would prohibit or
delay the timely consummation of such transactions.
(f) Seller shall take or cause to be taken all reasonable actions to cause
all the representations and warranties of Seller contained in this Agreement to
be true and correct on and as of the Closing Date, other than those as are made
as of a specific date. To the extent the conditions precedent to the obligations
of Purchaser are within the control of Seller, Seller shall cause such
conditions to be satisfied on or prior to the Closing Date and, to the extent
the conditions precedent to the obligations of Purchaser are not within the
control of Seller, Seller shall take or cause to be taken all such commercially
reasonable actions as may be necessary to cause such conditions to be satisfied
on or prior to the Closing Date.
(g) Seller shall notify Purchaser promptly (i) upon learning of any change
in fact or circumstance that causes any representation or warranty of Seller
contained in this Agreement to no longer be accurate and complete or (ii) if
Seller fails to perform or comply with any covenant or agreement contained in
this Agreement or it is reasonably anticipated that Seller will be unable to
perform or comply with any covenant or agreement contained in this Agreement.
(h) Not later than 5:00 p.m. CDT, July 15, 2002, Seller shall submit to
Purchaser revisions and supplements to the Disclosure Schedules (which amended
schedules shall replace for all purposes the Disclosures Schedules originally
delivered at the time of execution of this Agreement) and Purchaser shall have
until 5:00 p.m. CDT July 19, 2002 to object to any such revisions and
supplements to such Disclosure Schedules, subject however, to the provisions of
Section 8.01(c).
4.02 Covenants of Purchaser. Purchaser agrees with Seller as follows:
(a) Until Closing, pursuant to the confidentiality agreement (the
"Confidentiality Agreement") contained in Paragraph 4 of Section II of the
Letter of Intent dated June 29, 2002, between Purchaser and Seller and
pertaining, collectively, to the Acquired Assets and certain other properties of
Seller, except as otherwise permitted in this Section 4.02(a), Purchaser shall
keep, and shall cause its representatives to keep, confidential all terms and
provisions of this Agreement, the transaction contemplated by this Agreement,
and all information and data concerning the Acquired Assets and certain other
properties of Seller or the business, financial condition, operations,
strategies and prospects of Seller; provided that after Closing nothing
contained in this Agreement or the Confidentiality Agreement shall restrict the
right of Purchaser, as between
Page 18 of 50
Purchaser and Seller, to use or disclose information regarding the Acquired
Assets. Notwithstanding anything contained in this Section 4.02(a)) to the
contrary and insofar as it relates to the Acquired Assets, Purchaser may
disclose any of the information subject to the preceding sentence of this
Section 4.02(a) or covered by the Confidentiality Agreement to the extent (i)
necessary to enforce, or seek redress for breach of, this Agreement, (ii)
required by applicable law or the rules of a national securities exchange, (iii)
necessary for financing, reserve engineering or accounting purposes, (iv) to
comply with any law or legal process, or (v) otherwise previously made public or
independently received from a third party having a legitimate right to disclose
such information (without breach of the preceding sentence of this Section
4.02(a) or of the Confidentiality Agreement). In addition, Purchaser
acknowledges and agrees that without the prior written approval of Seller,
Purchaser shall not issue any press releases or make other public statements
with respect to this Agreement or the transactions contemplated by this
Agreement.
(b) Purchaser shall qualify under applicable law and regulations to own and
operate the Acquired Assets and, in particular, Purchaser shall qualify pursuant
to the rules and regulations of the BLM to own and operate federal oil and gas
leases on land subject to the jurisdiction of the BLM and shall be, as of
Closing, in good standing with, and authorized and qualified by, all
governmental agencies with jurisdiction or cognizance over such land, to the
extent Purchaser is required by such agencies to so qualify and maintain good
standing for purposes of ownership and operation of the Acquired Assets.
(c) Except as otherwise provided in this Agreement, Purchaser shall take or
cause to be taken all reasonable actions within its control as may be necessary
or advisable to consummate and make effective the purchase of the Acquired
Assets and the transactions contemplated by this Agreement and to assure that,
as of the Closing Date, it will not be under any material corporate, legal or
contractual restriction that would prohibit or delay the timely consummation of
such transactions.
(d) Purchaser shall take or cause to be taken all reasonable actions to
cause all the representations and warranties of Purchaser contained in this
Agreement to be true and correct on and as of the Closing Date, other than such
as are made as of a specific date. To the extent the conditions precedent to the
obligations of Seller are within the control of Purchaser, Purchaser shall cause
such conditions to be satisfied on or prior to the Closing Date and, to the
extent the conditions precedent to the obligations of Seller are not within the
control of Purchaser, Purchaser shall take or cause to be taken all such
commercially reasonable actions as may be necessary to cause such conditions to
be satisfied on or prior to the Closing Date.
(e) Purchaser shall notify Seller promptly (i) upon learning of any change
in fact or circumstance that causes any representation or warranty of Purchaser
contained in this Agreement to no longer be accurate and complete or (ii) if
Purchaser fails to perform or comply with any covenant or agreement contained in
this Agreement or it is reasonably anticipated that Purchaser will be
Page 19 of 50
unable to perform or comply with any covenant or agreement contained in
this Agreement.
(f) Upon learning of same, in accordance with the provisions of Section
5.01, Purchaser agrees to notify Seller promptly of any Title Defect (as
defined in Section 5.05).
4.03 Employees of Seller. Purchaser is not obligated to hire any employees
employed by Seller on the Closing Date.
ARTICLE V
REVIEW BY PURCHASER AND TITLE AND ENVIRONMENTAL MATTERS
5.01 Due Diligence. 1. Following execution of this Agreement and until the
Closing, Purchaser may conduct at its cost, further examinations and
investigations in respect of the Acquired Assets, including without limitation,
review of accounting, legal, corporate, engineering, reserve, title,
environmental and other data and information pertaining to the Acquired Assets.
If Purchaser undertakes an environmental assessment of the Acquired Assets, both
the consultant (if a consultant is employed) and the scope of the proposed
assessment, including testing protocols, must be acceptable to Seller before the
work may begin, such acceptance not to be unreasonably withheld or delayed by
Seller.
(b) Title Defects. Should, as a result of examinations and
investigations or otherwise, one or more matters come to the attention of
Purchaser which constitute a Title Defect that Purchaser desires to assert
as a basis to seek an adjustment of the Purchase Price and/or as a basis
not to proceed with the Closing, Purchaser shall notify Seller in writing
of such Title Defects no later than 5:00 p.m. CDT, July 23, 2002. Such
notification (a "Title Defect Notice") shall include for each asserted
Title Defect (i) a description of the Title Defect and the Acquired Asset
to which it applies, (ii) an explanation of the basis for the claim of a
Title Defect (including reasonable supporting documentation) and (iii) the
Title Defect Amount (as defined in Section 5.09) claimed by Purchaser with
respect thereto. Any matter, regardless of whether asserted in a Title
Defect Notice, that could constitute a Title Defect shall be deemed to have
been waived by Purchaser, for purposes of adjustments to the Purchase Price
(but not for purposes of the special warranty of title made by Seller in
the conveyance instruments or in any of the documents to be executed and
delivered at Closing), in the event that Purchaser proceeds with Closing
without such matter having been cured and without any adjustment to the
Purchase Price as a result of such matter.
(c) Environmental Defects. Purchaser shall deliver to Seller, within
seven days of receipt of any of such by Purchaser and at the cost of
Purchaser, copies of all final reports, results, data, and analyses of site
visits, inspections, and assessments. If required by applicable law, Seller
may disclose such reports, results, data, and analyses of site visits,
inspections, and assessments delivered to Seller by Purchaser. Should, as a
result of examinations and investigations or otherwise, one or more matters
come to the attention of Purchaser which constitute an Environmental Defect
that Purchaser desires to assert as a basis to
Page 20 of 50
seek an adjustment of the Purchase Price and/or as a basis not to proceed
with the Closing, Purchaser shall notify Seller in writing of such
Environmental Defect no later than the close of business of the fifth
Business Day immediately preceding the Closing Date. Such notification (an
"Environmental Defect Notice") shall include for each asserted
Environmental Defect (i) a description of the Environmental Defect and the
Acquired Asset to which it applies, (ii) an explanation of the basis for
the claim of an Environmental Defect (including reasonable supporting
documentation) and (iii) the Environmental Defect Amount (as defined in
Section 5.09(b)) claimed by Purchaser with respect thereto. Any matter
regardless of whether asserted in an Environmental Defect Notice, that
could constitute an Environmental Defect shall be deemed to have been
waived by Purchaser, for purposes of adjustments to the Purchase Price (but
not for purposes of the representations of Seller made by Seller in Section
3.01(p) or any of the provisions of Section Error! Reference source not
found., in the event that Purchaser proceeds with Closing without such
matter having been cured and without any adjustment to the Purchase Price
as a result of such matter.
5.02 Access to Acquired Assets. Following the execution of this Agreement
and until Closing, Seller shall provide Purchaser and its representatives access
to the Acquired Assets and the right to observe operations and inspect any and
all of the Acquired Assets, the Equipment and improvements and fixtures included
in the Acquired Assets, to the extent that Seller has the legal right to grant
such access and right. All visits by Purchaser or by others on behalf of
Purchaser to any facilities associated with any of the Leases shall be scheduled
by mutual consent of Purchaser and Seller, subject to Purchaser providing to
Seller reasonable advance notice of the locations that Purchaser wishes to visit
and the proposed times. Seller may accompany Purchaser and its representatives
during their site visits. Entry onto any Acquired Asset will (i) be subject to
valid third-party restrictions, if any, existing under the terms of the
Contracts, and to industrial safety, hygiene, and drug and alcohol requirements
of Seller or the relevant operator and (ii) be at the sole risk and expense of
Purchaser. Seller shall use reasonable efforts to arrange for Purchaser access
to, and the right to observe operations on and inspect, any Acquired Assets
requested by Purchaser with respect to which Seller alone does not have the
right to grant such access and rights. Seller shall use reasonable efforts to
identify for Purchaser, upon request, any third-party restrictions to which
Purchaser may be subject in exercising its rights to enter upon any of the
Acquired Assets. Purchaser agrees to protect, indemnify, defend and hold
harmless Seller and its co-owners, farmers and contractors, its and their
respective subcontractors, and its and their respective directors, managers,
officers, employees, agents, representatives and invitees from and against any
and all losses, claims and demands in connection with personal injuries,
including death, and property damage arising out of or relating to the access of
Purchaser and its representatives to the Acquired Assets, the Equipment and
improvements and fixtures included in the Acquired Assets.
5.03 Environmental Defects. "Environmental Defect" means any irregularity
or defect existing or related to or arising or connection with an Acquired Asset
which, alone or in combination with other irregularities or defects, gives rise
to an Environmental Liability (as defined in Section 9.06 below) or causes the
Seller or such Acquired Asset to be in violation of Environmental Laws and with
respect to which the Environmental Defect Amount (as defined in Section 5.09(b))
is more than $10,000. Any dispute arising after the Closing with respect to any
unwaived Environmental Defect shall be resolved in accordance with the
provisions of Section 10.16.
Page 21 of 50
5.04 Imbalances. Upon the occurrence of Closing, but effective as of the
Effective Time, Purchaser shall succeed to and assume the position of Seller
with respect to all Imbalances related to the Acquired Assets and described in
Section 3.01(n). As a result of such succession, Purchaser shall be (i) entitled
to receive any and all benefits which Seller would have been entitled to receive
by virtue of such position (including rights to produce and receive volumes of
production in excess of volumes which it would otherwise be entitled to produce
and receive by virtue of ownership of the Acquired Assets and rights to receive
cash balancing payments), (ii) obligated to suffer any detriments which Seller
would have been obligated to suffer by virtue of such position (including the
obligation to deliver to others production volumes which would have otherwise
been attributable to its ownership of the Acquired Assets, to deliver production
to purchasers hereof without receiving full payment therefor, or to make cash
balancing payments or to repay take or pay payments) and (iii) responsible for
any and all royalty obligations with respect to such Imbalances (including any
of such arising out of royalties having been paid on an "entitlements" basis
rather than a "receipts" basis). Seller shall protect, defend indemnify and hold
Purchaser harmless from and against any obligations, losses or liabilities
arising out of any Imbalances that exist on the Effective Time, other than those
described in Section3.01(n).
5.05 Title Defects. "Title Defect" means any encumbrance, irregularity or
defect in the title of Seller to an Acquired Asset which, alone or in
combination with other defects, causes the title of Seller to such Acquired
Asset to be less than Defensible Title and with respect to which the Title
Defect Amount (as defined in Section 5.09(a) below) is more than $10,000. A
Title Defect shall not include any of the following: (i) defects arising out of
lack of survey; (ii) defects arising out of lack of corporate authorization,
unless Purchaser provides affirmative evidence that such corporate action was
not authorized and results in another Person's superior claim of title to the
relevant interest or portion thereof; (iii) defects that have been cured by
applicable statutes of limitations or statutes of prescription; and (iv) defects
in the early chain of title consisting of the failure to recite marital status
in documents or omissions of heirship proceedings. Any dispute arising after the
Closing with respect to any unwaived Title Defect shall be resolved in
accordance with the provisions of Section 10.16.
5.06 Defensible Title.
(a) "Defensible Title" means such right, title and interest of Seller
that, in each case (x) will entitle Purchaser, as the successor to Seller,
to receive and retain without suspension, reduction or termination, not
less than the relevant Net Revenue Interest described in Schedule 1-A of
Substances produced under the terms of the Leases (or other property
denominated in Schedule 1-A) through plugging, abandonment and salvage of
all Xxxxx comprising or included in such Acquired Assets and all Xxxxx now
or hereafter producing from or attributable to such Acquired Assets; (y)
will obligate Purchaser, as the successor to Seller to bear a percentage of
costs and expenses related to the maintenance, operation and development of
the Leases (or other property denominated in Schedule 1-A) not greater than
the relevant Working Interest shown in Schedule 1-A, through plugging,
abandonment and salvage of all xxxxx comprising or included in such
Acquired Assets and all xxxxx now or hereafter producing from or
attributable to such Acquired Assets, unless the circumstances causing the
Working Interest to be greater will cause the corresponding Net Revenue
Interest to increase in the same proportion; and (z) is free of all claims,
liens, security interests,
Page 22 of 50
encumbrances, irregularities and defects, except for Permitted Encumbrances (as
defined below in this Section 5.06).
(b) "Permitted Encumbrances" are:
(i) lessor's royalties, overriding royalties, production payments,
net profits interests, reversionary interests and similar burdens measured
by or payable out of production of Substances or proceeds from the sale
thereof that do not, and will not, reduce the relevant Net Revenue Interest
of Purchaser, as the successor in title to Seller, below the relevant Net
Revenue Interest shown in Schedule 1-A or increase Working Interest, as
Seller's successor in title, above the relevant Working Interest of
Purchaser shown in Schedule 1-A (unless the circumstance causing such
Working Interest to increase will cause the corresponding Net Revenue
Interest to increase at least in the same proportion);
(ii) preferential rights to purchase and third-party consents with
respect to which, prior to Closing, (i) waivers or consents are obtained
from the appropriate persons or entities or (ii) the time for asserting
such rights has expired without exercise;
(iii) mechanics', materialmen's, operator's and non-operators', tax
and similar liens or charges arising in the ordinary course of business
related to an Acquired Asset, if such liens or charges secure payments not
yet due;
(iv) all consents from, notices to, approvals by or other actions by
any governmental authority in connection with the sale or transfer of the
Acquired Assets by Seller to Purchaser pursuant to this Agreement if such
matters are customarily and appropriately obtained after the sale or
transfer;
(v) liens, security interests or other encumbrances that are
released at or prior to Closing pursuant to the terms of releases and other
instruments in form and substance reasonably satisfactory to Purchaser and
executed, delivered and acknowledged by the owner and holder thereof;
(vi) rights of a governmental entity to control or regulate the
Acquired Assets, together with all applicable laws, rules and regulations;
(vii) easements, rights-of-way, surface leases and other surface use
restrictions if such restrictions will not materially adversely affect the
use, value or operation of the Acquired Assets; and
(viii) title matters waived or deemed to be waived by Purchaser
pursuant to the provisions of Section 5.01;
(ix) liens for taxes not yet due and payable;
Page 23 of 50
(x) liens reserved in oil and gas leases, joint operating
agreements and other similar documents and agreements which secure
payments not yet due; and
(xi) the title matter described on Schedule 5.06(b)(xi)
relating to the assignment of a production payment.
5.07 Casualty Loss. If, subsequent to the execution of this Agreement but
prior to Closing, all or any portion of an Acquired Asset is damaged or
destroyed (each such instance a "Casualty Loss"), this Agreement shall remain in
full force and effect notwithstanding any such damage or destruction, except as
provided below in this Section 5.07. Either Purchaser or Seller shall have the
right to elect to terminate this Agreement on or before the Closing Date if the
value of all Acquired Assets affected by one or more Casualty Losses exceeds
$2,500,000, in the aggregate. Unless this Agreement is terminated by Purchaser
or Seller as provided in the preceding sentence, then Purchaser shall have the
option to (a) treat the Casualty Loss as a Title Defect and receive a downward
adjustment of the Purchase Price, if the damaged Acquired Assets are not
repaired, restored or replaced by Seller (in which case Seller shall be entitled
to receive and retain all insurance proceeds with respect to the relevant
Casualty Loss), or (b) to the extent insurance proceeds are not committed, used
or applied by Seller prior to the Closing Date to repair, restore or replace
such damaged Acquired Assets, require Seller, at the Closing, to (i) assign to
Purchaser the right of Seller to receive all insurance proceeds owed to Seller
by reason of such Casualty Loss, less any reasonable costs and expenses incurred
by Seller in collecting such proceeds and (ii) pay to Purchaser all insurance
proceeds theretofore paid to Seller by reason of such destruction, less any
reasonable costs and expenses incurred by Seller in collecting such proceeds.
Notwithstanding the foregoing, any insurance proceeds (or any rights thereto) by
reason of any Casualty loss which are held by or owed to Seller for the account
or benefit of any third party joint interest owners shall not be paid or
assigned by Seller to Purchaser pursuant to this Section 5.07 and shall instead
be transferred to the successor operator or other party responsible therefor
pursuant to the terms of the applicable operating or other agreement. Seller
shall not compromise or settle a Casualty Loss without the consent of Purchaser.
5.08 Disposition of Title Defects and Environmental Defects. (a) In the
event that Purchaser gives Seller any Title Defect Notice:
(i) Seller may (but shall not be obligated to) attempt to
cure such Title Defect at its cost and expense until two Business Days
prior to Closing; and
(ii) if Seller within such time fails to cure any Title
Defects of which Purchaser has given timely written notice as required
above and Purchaser does not execute a written waiver of the same on
or before two Business Days prior to the Closing Date, the Acquired
Asset or portion thereof affected by such uncured and unwaived Title
Defect shall be a "Title Defect Property".
(b) In the event that Purchaser gives Seller any Environmental
Defect Notice:
Page 24 of 50
(i) Seller may (but shall not be obligated to) attempt to cure
such Environmental Defect at its cost and expense until two Business
Days prior to Closing; and
(ii) If Seller within such time fails to cure any Environmental
Defects of which Purchaser has given timely written notice as
required above and Purchaser does not execute a written waiver of the
same on or before two Business Days prior to the Closing Date, the
Acquired Asset or portion thereof affected by such uncured and
unwaived Environmental Defect shall be an "Environmental Defect
Property".
5.09 Purchase Price Adjustments.
(a) Title Defects. Purchaser shall be entitled to reduce the Purchase
Price by the aggregate amount of Title Defect Amounts with respect to all
Title Defect Properties; provided, however, Purchaser or Seller shall have
the right to elect to terminate this Agreement if the sum of all Title
Defect Amounts (including any Casualty Loss to be treated as a Title Defect
pursuant to the provisions of Section 5.07) proposed by Purchaser in good
faith in Title Defect Notices delivered by Purchaser to Seller pursuant to
the provisions of Section 5.01(b), when added to Environmental Defect
Amounts, exceed $2,500,000. "Title Defect Amount" shall mean, with respect
to a Title Defect Property, the amount by which the value of such Title
Defect Property is impaired as a result of the existence of one or more
Title Defects, which amount shall be determined as follows:
(i) If the Title Defect results from Seller having a lesser Net
Revenue Interest in such Title Defect Property than the Net Revenue
Interest specified therefor in Schedule 1-A, the Title Defect Amount
shall be equal to the product obtained by multiplying the portion of
the Purchase Price allocated to such Title Defect Property in
Schedule 1-A by a fraction, the numerator of which is the reduction
in the Net Revenue Interest and the denominator of which is the Net
Revenue Interest specified for such Title Defect Property in Schedule
1-A.
(ii) If the Title Defect results from Seller having a greater
Working Interest in a Title Defect Property than the Working Interest
specified therefor in Schedule 1-A, the Title Defect Amount shall be
equal to the present value (discounted at 10% compounded annually) of
the increase in the costs and expenses reasonably forecasted as set
forth in the Reserve Report prepared by Garb, Xxxxxx & Xxxxxx dated
December 31, 2001, with respect to such Title Defect Property for the
period from and after the Effective Time which is attributable to
such increase in the Working Interest of Seller.
(iii) If the Title Defect results from the existence of a lien,
the Title Defect Amount shall be an amount sufficient to discharge
such lien.
Page 25 of 50
(iv) If the Title Defect results from any matter not described
in paragraphs (i), (ii) or (iii) above, the Title Defect Amount shall
be an amount equal to the difference between the value of the Title
Defect Property affected by such Title Defect with such Title Defect
and the value of such Title Defect Property without such Title Defect
(taking into account the portion of the Purchase Price allocated in
Schedule 1-A to such Title Defect Property).
(v) If a Title Defect is not effective or does not affect a
Title Defect Property throughout the entire productive life of such
Title Defect Property, such fact shall be taken into account in
determining the Title Defect Amount.
(vi) The Title Defect Amount with respect to a Title Defect
Property shall be determined without duplication of any costs or
losses included in another Title Defect Amount hereunder and actually
used to reduce the Purchase Price. For example, but without
limitation, if a lien affects more than one Title Defect Property,
the amount necessary to discharge such lien shall only be included in
the Title Defect Amount for one Title Defect Property and only once
in such Title Defect Amount, except that if such lien affects another
Title Defect Property for which the Title Defect Amount, but for the
application of paragraph (viii) below, would exceed the portion of
the Purchase Price allocated to such other Title Defect Property,
then the amount necessary to discharge such lien up to such excess
may be included in another Title Defect Amount.
(vii) If a Title Defect affects only a portion of an Acquired
Asset (as contrasted with an undivided interest in the entirety of
such Acquired Asset) and a portion of the Purchase Price has not been
allocated specifically to such portion of such Acquired Asset in
Schedule 1-A, then for purposes of computing the Title Defect Amount,
the portion of the Purchase Price allocated to such Acquired Asset
shall be further allocated among the portions of such Acquired Asset
in the proportion that the portion of such Acquired Asset affected by
such Title Defect bears to the entire Acquired Asset.
(viii) Except to the extent Purchaser could incur any liability
therefor as a result of the transaction contemplated by this
Agreement or the value of another part of the Acquired Assets could
be impaired by such Title Defect, the Title Defect Amount
attributable to a Title Defect Property or any portion thereof shall
not exceed the portion of the Purchase Price allocated to such Title
Defect Property or such portion in Schedule 1-A and giving effect to
the provisions of paragraph (vii) above in this Section 5.09. For
example, but without limitation, if Seller does not own 50% of the
Net Revenue Interest specified in Schedule 1-A for a Title Defect
Property and such unowned 50% interest is also burdened by a lien for
which Purchaser will not incur any liability as a result of the
transaction which is the subject of this Agreement, the Title Defect
Amount for such Title Defect Property shall not exceed the portion of
the
Page 26 of 50
Purchase Price allocable to such 50% interest notwithstanding that it
may be affected by multiple Title Defects; however, if such lien
affects another Title Defect Property the amount necessary to
discharge such lien may be included in the Title Defect Amount for
such other Title Defect Property as contemplated by paragraph (vi)
above in this Section 5.09.
(ix) No Title Defect Amount shall be allowed on account of and to
the extent that an increase in the Working Interest of Seller in an
Acquired Asset has the effect of increasing proportionately the Net
Revenue Interest of Seller in such Acquired Asset.
(b) Environmental Defects. Purchaser shall be entitled to reduce the
Purchase Price by the aggregate amount of Environmental Defect Amounts
with respect to all Environmental Defect Properties; provided, however,
Purchaser or Seller shall have the right to elect to terminate this
Agreement if the sum of all Environmental Defect Amounts proposed by
Purchaser in good faith in Environmental Defect Notices delivered by
Purchaser to Seller pursuant to the provisions of Section 5.01(c), when
added to Title Defect Amounts, exceed $2,500,000. "Environmental Defect
Amount" shall mean, with respect to an Environmental Defect Property, the
amount by which the value of such Environmental Defect Property is
impaired as a result of the existence of one or more Environmental
Defects, which amount shall be determined as follows:
The Environmental Defect Amount shall be an amount sufficient to cure
and remediate such Environmental Liability to the standards necessary
to comply with Environmental Laws as of the time of such Title Defect
Notice, utilizing remediation methodologies reasonably required to
remediate such Environmental Defect at the minimum cost necessary to
comply with Environmental Laws as determined by taking the average
estimate of two independent, nationally recognized environmental
consulting firms, one of which has been selected by each of the
parties.
(c) Preference Rights. If a third party, who has been offered a
property which constitutes a portion of the Acquired Assets with respect
to which a portion of the Purchase Price is to be allocated and which is
subject to preference rights in favor of such third party (a "Preference
Property"), elects prior to Closing to purchase such Preference Property
in accordance with the terms of such preference right, and Seller and
Purchaser receive written notice of such election prior to the Closing,
such Preference Property will be eliminated from the Acquired Assets and
the Purchase Price shall be reduced by the portion of the Purchase Price
allocated to such Preference Property. If a third party who has been
offered a Preference Property or who has been requested to waive its
preference right with respect to any Preference Property does not elect to
purchase such Preference Property or waive such Preference Right with
respect to the transactions contemplated by this Agreement prior to the
Closing, such Preference Property shall be conveyed to Purchaser at
Closing subject to such preference right, unless such Preference Property
has been otherwise eliminated from the Acquired Asserts in accordance with
other provisions of this Agreement. If a third party elects to purchase a
Preference Property subject to a preference right
Page 27 of 50
and Closing has already occurred with respect to such Preference Property,
Buyer shall be obligated to convey said Preference Property to such third
party and shall be entitled to the consideration for the sale of such
Preference Property. Purchaser acknowledges that Seller desires to sell
all of the Acquired Assets and would not have entered into this Agreement
but for Purchaser's agreement to purchase all of the Acquired Assets as
herein provided. Accordingly, it is expressly understood and agreed that
Seller does not desire to sell any Preference Property unless the sale of
all of the Acquired Assets is consummated at the Closing in accordance
with the terms of this Agreement. In furtherance of the foregoing,
Seller's obligation hereunder to sell the Preference Proprieties to
Purchaser is expressly conditioned upon the consummation at the Closing of
the sale of all of the Acquired Assets in accordance with the terms of
this Agreement, either by conveyance to Purchaser or conveyance pursuant
to an applicable preference right; provided that, nothing herein is
intended or shall operate to extend or apply any preference right to any
portion of the Acquired Assets which is not otherwise burdened thereby.
Time is of the essence with respect to the parties agreement to consummate
the sale of the Acquired Assets at the time of the Closing.
5.10 Deferred Claims and Disputes. In the event that Purchaser and Seller
have not agreed upon one or more adjustments to the Purchase Price claimed by
Purchaser for Title Defects or Environmental Defects pursuant to and in
accordance with the requirements of this Article V, any such claim (a "Deferred
Adjustment Claim") shall be settled pursuant to the provisions of this Section
5.10 and, except as otherwise provided in Sections 5.09(a) and 5.09(b), shall
not prevent or delay Closing. With respect to each potential Deferred Adjustment
Claim, Purchaser and Seller shall deliver to the other a written notice
describing each such potential Deferred Adjustment Claim, the amount in dispute
and a statement setting forth the facts and circumstances that support the
position of the party hereto delivering such written notice with respect to such
Deferred Adjustment Claim. Subject to the right of Purchaser to withhold Title
Defect Amounts, or Environmental Defect Amounts as provided below in this
Section 5.10, until a Deferred Adjustment Claim is resolved in accordance with
the provisions of this Section 5.10, the Purchase Price shall not be adjusted
and no other adjustments shall be made on account of such Deferred Adjustment
Claim and no effect shall be given to such Deferred Adjustment Claim. At
Closing, Purchaser shall deposit with the Escrow Agent that part of the
aggregate amount of Title Defect Amounts, or the Environmental Defect Amounts,
as applicable, claimed by Purchaser with respect to unresolved Deferred
Adjustment Claims (the "Withheld Amount"), and in such event the portion of the
Purchase Price which would otherwise be paid in cash by Purchaser to Seller at
Closing shall be held in escrow by the Escrow Agent in accordance with the terms
of the Escrow Agreement. On or prior to the 30/th/ day following the Closing
Date (the "Deferred Matters Date"), Seller and Purchaser shall attempt in good
faith to reach agreement on the Deferred Adjustment Claims and, ultimately, to
resolve by written agreement all disputes regarding the Deferred Adjustment
Claims. Any Deferred Adjustment Claims which are not so resolved on or before
the Deferred Matters Date shall be submitted to final and binding arbitration in
accordance with the provisions of Section 10.16. The amount of the Purchase
Price to which Purchaser becomes entitled under the final and binding written
decision of the board of arbitrators or the written agreement of Purchaser and
Seller shall be promptly paid by Escrow Agent to Purchaser. Any Withheld Amount
of the Purchase Price to which Seller becomes entitled under the final and
binding written decision of the board of arbitrators or the written agreement of
Purchaser and Seller shall be promptly paid by Escrow Agent to Seller.
Page 28 of 50
5.11 No Warranty of Merchantability or Fitness. Except as otherwise
specifically set forth in this Agreement, Seller makes no warranties, express or
implied, including the warranty of merchantability and the implied warranty of
fitness for a particular purpose, regarding the Acquired Assets and other like
personal property located on or included in the Acquired Assets and such are to
be sold on an "as is, where is", basis and condition.
5.12 Waiver of Consumer Rights. PURCHASER WAIVES ITS RIGHTS UNDER THE
TEXAS DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT, SECTION 17.41 ET SEQ.,
TEXAS BUSINESS & COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND
PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY SELECTED BY PURCHASER,
PURCHASER VOLUNTARILY CONSENTS TO THIS WAIVER. IN ORDER TO EVIDENCE ITS ABILITY
TO GRANT SUCH WAIVER, PURCHASER HEREBY REPRESENTS AND WARRANTS TO SELLER THAT
PURCHASER (I) IS IN THE BUSINESS OF SEEKING OR ACQUIRING, BY PURCHASE OR LEASE,
GOODS OR SERVICES FOR COMMERCIAL OR BUSINESS USE, (II) HAS KNOWLEDGE AND
EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT ENABLE IT TO EVALUATE THE
MERITS AND RISKS OF THE TRANSACTION CONTEMPLATED HEREBY AND (III) IS NOT IN A
SIGNIFICANTLY DISPARATE BARGAINING POSITION.
ARTICLE VI
CONDITIONS TO CLOSING
6.01 Conditions to Obligations of Seller. The obligations of Seller at
Closing are subject to the satisfaction, at or prior to Closing, of the
following conditions, which shall be deemed satisfied upon the occurrence of
Closing:
(a) the representations and warranties of Purchaser set forth in this
Agreement that are qualified as to materiality shall be true and correct
and those that are not so qualified shall be true and correct in all
material respects, in each case, as of the date hereof and (except to the
extent such representations and warranties speak as of an earlier date) as
of Closing as though made at and as of Closing;
(b) Purchaser shall have performed in all material respects the
covenants and agreements which Purchaser was required to perform or satisfy
at or prior to Closing;
(c) except for matters not customarily and appropriately obtained
prior to Closing, Seller shall have received evidence, in form reasonably
satisfactory to Seller and its counsel, that all permits, consents,
approvals, licenses, qualifications and favorable orders required by
governmental authorities or by the terms of the Acquired Assets to be
obtained prior to Closing to consummate this Agreement have been obtained
or waived, including the waiver or exercise of all preferential rights and
similar rights of any joint venture partners that may arise in connection
with the transactions contemplated by this Agreement;
Page 29 of 50
(d) neither Purchaser nor Seller shall have elected to terminate this
Agreement pursuant to the provisions of either Section 5.07 or Section
5.09;
(e) no action or proceeding (excluding any such matter initiated by
Seller or any of its Affiliates) shall be pending or threatened before a
court, arbitrator or governmental authority seeking to restrain or prohibit
the consummation of the transactions contemplated by this Agreement or to
obtain substantial damages from Seller related to this Agreement and no
effective injunction, writ, or temporary restraining order or any other
order of any nature has been issued by a court or governmental agency of
competent jurisdiction directing that the transactions contemplated by this
Agreement not be consummated;
(f) Purchaser shall have caused an opinion of Xxxxxxx Xxxxxx L.L.P.
to be delivered to Seller, dated the Closing Date, in the form attached
hereto as Exhibit 6.01(f); and
(g) Seller shall have received (i) resolutions (the "Board
Resolutions") of the Board of Directors of Seitel, Inc. ("Seitel"), which
is the Seller's parent, approving the terms and provisions of this
Agreement and (ii) a letter (the "Lender Approval") from Seitel's
noteholders addressed to Seitel and Seller approving the sale of the
Acquired Assets in accordance with the terms of this Agreement
6.02 Conditions to Obligations of Purchaser. The obligations of Purchaser
at Closing are subject to the satisfaction, at or prior to Closing, of the
following conditions, which shall be deemed satisfied upon the occurrence of
Closing:
(a) the representations and warranties of Seller set forth in this
Agreement that are qualified as to materiality shall be true and correct
and those that are not so qualified shall be true and correct in all
material respects, in each case, as of the date hereof and (except to the
extent such representations and warranties speak as of an earlier date) as
of Closing as though made at and as of Closing;
(b) Seller shall have performed in all material respects the
covenants and agreements which Seller was required to perform or satisfy at
or prior to Closing;
(c) except for matters not customarily and appropriately obtained
prior to Closing, Purchaser shall have received evidence, in form
reasonably satisfactory to Purchaser and its counsel, that all permits,
consents, approvals, licenses, qualifications and favorable orders required
by governmental authorities or by the terms of the Acquired Assets to be
obtained prior to Closing to consummate this Agreement have been obtained
or waived, including the waiver or exercise of all preferential rights and
similar rights of any joint venture partners that may arise in connection
with the transactions contemplated by this Agreement;
Page 30 of 50
(d) neither Purchaser nor Seller shall have elected to terminate this
Agreement pursuant to the provisions of either Section Section 5.07 or
Section 5.09;
(e) there shall be no action or proceeding (excluding any such matter
initiated by Purchaser or any of its Affiliates) pending or threatened
before a court, arbitrator or governmental authority seeking to restrain or
prohibit the consummation of the transactions contemplated by this
Agreement, to obtain substantial damages from Purchaser related to this
Agreement and there shall be no effective injunction, writ, or temporary
restraining order or any other order of any nature has been issued by a
court or governmental agency of competent jurisdiction directing that the
transactions contemplated by this Agreement not be consummated;
(f) except for Casualty Losses covered by the provisions of Section
5.07, since the date of this Agreement no event shall have occurred and no
condition shall exist which has, or could reasonably be expected to,
materially adversely affected the value of the Acquired Assets or the
ability of Purchaser to own, hold, develop and operate the Acquired Assets,
except for depletion through normal production, changes in rates of
production that occur in the ordinary course of operation, depreciation of
the Equipment through ordinary wear and tear, and changes in general
economic conditions and product pricing generally affecting the oil and gas
industry
(g) All consents and waivers necessary in order to permit Purchaser
to use the Seismic Data without limitation and without additional payment
by Purchaser and all other consents listed in Schedule 3.01(o) shall have
been obtained on terms reasonably satisfactory to Purchaser;
(h) As a result of examinations, assessments, investigations, and
other due diligence conducted by Purchaser (i) material adverse facts come
to the attention of Purchaser which constitute a Material Discovery; (ii)
Purchaser delivers a Material Discovery Notice to Seller; and (iii) Seller
fails to satisfy, in the reasonable determination of Purchaser, Purchaser's
concerns over such Material Discovery. For purposes of this Section
6.02(h), the term "Material Discovery" means a discovery of facts or
conditions which are discovered by Purchaser during the course of its due
diligence other than those which constitute Title Defects, or Environmental
Defects and which are not the subject of the representations and warranties
of Seller set forth in Section 3.01 of this Agreement and which after the
Closing would have or would be likely to have a material adverse impact on
Purchaser in an amount of at least $250,000; the term "Material Discovery
Notice" means a written notice from Purchaser delivered to Seller no later
than July 11, 2002 setting forth the Material Discovery and including in
such notice (i) a description of the Material Defect and Acquired Asset to
which it applies, or if it is of a more general concern, so stating
therein; (ii) an explanation of the basis for Purchaser's concerns; and
(iii) the dollar amount by which Purchaser believes the Material Discovery
would adversely affect the Purchaser.
Page 31 of 50
(i) Seller shall have caused an opinion of Seller's (or Seitel's)
in-house counsel to be delivered to Purchaser, dated the Closing Date, in
the form attached hereto as Schedule 6.02(i).
ARTICLE VII
CLOSING
7.01 Closing Date. Subject to applicable provisions of this Agreement, the
consummation of the transactions contemplated by this Agreement ("Closing")
shall occur at the office of Seller listed above (or at such other place and
time as the parties hereto may agree) on July 31, 2002 at 10:00 a.m. (any such
date being the "Closing Date").
7.02 Closing Obligations. At Closing, the following shall occur, each being
a condition precedent to the others and each being deemed to have occurred
simultaneously:
(a) Seller shall execute and deliver to Purchaser assignments
conveying the Acquired Assets to Purchaser in the forms attached to this
Agreement as Exhibit B-1, Exhibit B-2 and/or Exhibit B-3. Seller shall also
execute and deliver such other assignments on appropriate forms as may be
required by governmental authorities, subject to the terms of the
assignment forms attached as Exhibit B-1, Exhibit B-2 and/or Exhibit B-3
and such other licenses, deeds, bills of sale and other conveyance
instruments as shall be required to consummate the transactions
contemplated by this Agreement; provided that the special warranty to be
granted by the Seller in connection therewith shall be limited to a period
of one (1) year from the date of granting thereof. The individual forms of
assignment prepared by Seller, where relevant and appropriate, shall
contain provisions regarding assumption of obligations required by the
Contracts in the relevant chain of title.
(b) Seller and Purchaser shall execute and deliver to each other the
Preliminary Closing Statement.
(c) Purchaser shall deliver the Adjusted Purchase Price to Seller by
direct wire transfer, as directed by Seller by notice in writing to
Purchaser delivered not less than two Business Days prior to the Closing
Date.
(d) Seller shall transfer and deliver to Purchaser possession of the
Acquired Assets.
(e) Seller shall execute transfer orders or letters-in-lieu on forms
prepared by Purchaser, and reasonably satisfactory to Seller, directing
purchasers of Substances produced on or after the Effective Time to make
payment to Purchaser for such Substances as contemplated by this Agreement.
(f) Seller shall furnish Purchaser an affidavit stating the United
States taxpayer identification number of Seller and that Seller is not a
foreign person, pursuant to Section 1445(b)(2) of the Code.
(g) Seller shall deliver to Purchaser a certificate of the Secretary
of Seller, dated the Closing Date, certifying (i) that a true and correct
copy of the
Page 32 of 50
resolutions of the board of directors of Seller authorizing this Agreement
and the transactions contemplated hereby are attached thereto and have been
duly adopted and are in full force and effect and (ii) as to the incumbency
and authorization of the officers of Seller executing, on behalf of Seller,
this Agreement and the other documents to be executed and delivered by
Seller at Closing.
(h) Purchaser shall deliver to Seller a certificate of the Secretary
of Purchaser, dated the Closing Date, certifying (i) that a true and
correct copy of the resolutions of the board of directors of Purchaser
authorizing this Agreement and the transactions contemplated hereby are
attached thereto and have been duly adopted and are in full force and
effect and (ii) as to the incumbency and authorization of the officers of
Purchaser executing, on behalf of Purchaser, this Agreement and the other
documents to be executed and delivered by Purchaser at Closing.
(i) Seller shall execute and deliver to Purchaser designation of
operator forms, as applicable, executed by Seller and, to the extent Seller
has been able to arrange for such execution prior to Closing, each of the
other owners of interests in the Leases from which such designations are
required designating Purchaser as operator of the Leases.
(j) Seller and Purchaser shall each execute and deliver such other
instruments and take such other actions as may be necessary to carry out or
to evidence their obligations under this Agreement.
7.03 Operatorship. Upon Closing, transfer of operatorship of each such
Lease shall occur and Purchaser shall assume full responsibility for the
completion of all such operations applicable to such Lease and all risk of loss
of or damage to any portion of the Acquired Assets attributable to ownership,
use or operation by Purchaser, including any Casualty Loss, shall pass to
Purchaser as of the Closing Date and all losses, costs, claims, suits,
judgments, awards or damages on account of bodily injury, illness, death or
property damage or loss suffered by any persons or entities other than Purchaser
arising out of or related to the performance of such operations on or after the
Closing Date shall pass to and be assumed by Purchaser as of the Closing Date.
Notwithstanding anything herein to the contrary, Seller does not represent to
Purchaser that Purchaser will succeed to operatorship of any of the Acquired
Assets other than those Leases owned solely by Seller. Purchaser acknowledges
and agrees that the parties hereto will be required to comply with the terms of
any applicable Contract relating to any elections or other selection procedures
in order for Purchaser to succeed Seller as operator thereunder. If all owners
of interests in any Lease have not executed and delivered, prior to the Closing,
all instruments necessary to designate Purchaser as operator of any Lease and
Purchaser elects to waive such condition to Closing, to the extent it is a
condition to Closing, Seller shall have no liability arising out of the failure
to obtain such instruments provided that Seller complies with its obligations
under Section 9.05.
ARTICLE VIII
TERMINATION
8.01 Termination. This Agreement and the transactions contemplated by this
Agreement may be terminated prior to Closing in the following situations:
Page 33 of 50
(a) by Seller or Purchaser, if Closing does not occur on or before
August 31, 2002; provided, however, that neither party hereto shall be
entitled to so terminate if it is in breach of any provision of this
Agreement;
(b) by Seller, if the conditions contained in Section 6.01 are not
satisfied or waived as of the Closing Date;
(c) by Purchaser, (i) if the conditions contained in Section 6.02 are
not satisfied or waived as of the Closing Date or (ii) within three
business days following Seller's delivery of the revised or supplemented
Disclosure Schedules delivered pursuant to Section 4.01(h), if Purchaser in
its sole reasonable discretion determines that any of the information set
forth thereon that was not included in the original Disclosure Schedules
makes it inadvisable to proceed with the proposed acquisition contemplated
herein;
(d) by Seller, if Purchaser has provided notice to Seller of any
circumstance that would give rise to indemnification by Seller under any
applicable provision of this Agreement;
(e) by Seller and Purchaser pursuant to written agreement;
(f) by Purchaser, if Seller has not delivered to Purchaser, on or
before 5:00 p.m. CDT, July 10, 2002 (i) the Board Resolutions approving the
terms and provisions of this Agreement and (ii) the Lender Approval from
Seitel's noteholders addressed to Seitel and Seller approving the sale of
the Acquired Assets in accordance with the terms of this Agreement; and
(g) by Purchaser if Seller, Seitel or any of their Affiliates enters
into any bankruptcy or insolvency proceedings of any kind, voluntary or
involuntary.
8.02 Liabilities Upon Termination.
(a) In the event Purchaser breaches this Agreement by failing or
refusing to close the transaction contemplated hereby on the Closing Date
and each of the conditions contained in Section 6.02 has been either
fulfilled or waived, Seller, at its sole option, may (i) enforce specific
performance of this Agreement or (ii) terminate this Agreement and the
Escrow Deposit, including interest, shall be paid to the Seller in
accordance with the terms and provisions of the Escrow Agreement. The
Parties hereby acknowledge that the extent of damages to the Seller and its
shareholder occasioned by such failure or refusal by Purchaser would be
impossible or extremely impractical to ascertain and that the amount of the
Escrow Deposit is a fair and reasonable estimate of the damages under the
circumstances and the payment of the Escrow Deposit shall be Seller and its
shareholder's sole and exclusive remedy in such event, all other remedies
being expressly waived by Seller.
(b) In the event the Closing does not occur and the Escrow Deposit is
not paid to the Seller pursuant to Section 8.02(a), the Escrow Deposit,
including interest, shall be returned to Purchaser in accordance with the
terms and provisions of the Escrow Agreement.
Page 34 of 50
(c) Notwithstanding anything provided to the contrary in this
Agreement, upon any failure of Seller to fulfill any undertaking or
commitment provided for herein on the part of Seller that is required to be
fulfilled on or prior to the Closing Date, Purchaser, at its sole option,
may (i) enforce specific performance of this Agreement or (ii) terminate
this Agreement and have the Escrow Deposit returned.
(d) NOTWITHSTANDING ANYTHING CONTAINED TO THE CONTRARY IN ANY OTHER
PROVISION OF THIS AGREEMENT, SELLER AND PURCHASER AGREE THAT THE RECOVERY
BY EITHER PARTY HERETO OF ANY DAMAGES SUFFERED OR INCURRED BY IT AS A
RESULT OF ANY BREACH BY THE OTHER PARTY OF ANY OF ITS REPRESENTATIONS,
WARRANTIES OR OBLIGATIONS UNDER THIS AGREEMENT SHALL BE LIMITED TO THE
ACTUAL DAMAGES SUFFERED OR INCURRED BY THE NON-BREACHING PARTY AS A RESULT
OF THE BREACH BY THE BREACHING PARTY OF ITS REPRESENTATIONS, WARRANTIES OR
OBLIGATIONS HEREUNDER, AND IN NO EVENT SHALL THE BREACHING PARTY BE LIABLE
TO THE NON-BREACHING PARTY FOR ANY INDIRECT, CONSEQUENTIAL, EXEMPLARY OR
PUNITIVE DAMAGES SUFFERED OR INCURRED BY THE NON-BREACHING PARTY AS A
RESULT OF THE BREACH BY THE BREACHING PARTY OF ANY OF ITS REPRESENTATIONS,
WARRANTIES OR OBLIGATIONS HEREUNDER.
ARTICLE IX
OBLIGATIONS AFTER CLOSING
9.01 Post-Closing Adjustments. Seller and Purchaser acknowledge that the
amount of all adjustments to the Purchase Price under Section 2.04 may not be
available prior to Closing. As soon as practicable after Closing, but in any
event within 90 days after Closing, Seller shall prepare and submit to Purchaser
a statement containing adjustments to the Purchase Price contemplated by the
provisions of Section 2.04 that were not finally determined as of Closing (the
"Final Settlement Statement") and such supporting documentation as is reasonably
necessary to support the adjustments shown therein. Purchaser shall give
representatives of Seller reasonable access to its premises and to its books and
records for purposes of preparing the Final Settlement Statement and shall cause
appropriate personnel of Purchaser to assist Seller and representatives of
Seller, at no cost to Seller, in the preparation of the Final Settlement
Statement. Seller shall give representatives of Purchaser reasonable access to
its premises and to its books and records for purposes of reviewing the
calculation of any such adjustments and will cause appropriate personnel of
Seller to assist Purchaser and representatives of Purchaser, at no cost to
Purchaser, in verification of such calculations. The Final Settlement Statement
shall become final and binding on Seller and Purchaser as to the calculation of
the Adjusted Purchase Price 90 days following the date the Final Settlement
Statement is received by Purchaser, except to the extent that, prior to the
expiration of such 90 day period, Purchaser shall deliver to Seller notice, as
hereinafter required, of its disagreement with the contents of the Final
Settlement Statement. Such notice shall be in writing and set forth all
disagreements of Purchaser with respect to any portion of the Final Settlement
Statement, together with any changes thereto proposed by Purchaser, and shall
include an explanation in reasonable detail of, and such
Page 35 of 50
supporting documentation as is reasonably necessary to support, such changes. If
Purchaser has timely delivered such a notice of disagreement to Seller, then,
upon written agreement between Purchaser and Seller resolving all disagreements
of Purchaser set forth in such notice, the Final Settlement Statement shall
become final and binding upon Purchaser and Seller as to the calculation of the
Adjusted Purchase Price. If the Final Settlement Statement has not become final
and binding by the 120th day following its receipt by Purchaser, then Purchaser
or Seller may submit to an independent public accounting firm mutually
satisfactory to Seller and Purchaser for resolution any unresolved disagreements
of Purchaser set forth in the notice from Purchaser to Seller. The fees and
expenses of such accounting firm in making such determination shall be shared
equally by Purchaser and Seller. Upon resolution of such unresolved
disagreements of Purchaser, the Final Settlement Statement (including any
revisions thereto as are so resolved or agreed) shall be conclusive, final and
binding upon Purchaser and Seller as to the calculation of the Adjusted Purchase
Price. Payment of any net amount due to Seller or Purchaser, as the case may be,
on the basis thereof shall be made within five days after the Final Settlement
Statement (as so resolved or agreed) becomes final and binding on the parties
hereto (the "Final Settlement Date").
9.02 Subsequent Adjustments. Seller and Purchaser recognize that either
may receive funds or pay expenses after the Final Settlement Date which are
properly the property or obligation of the other. Upon receipt of net proceeds
or payment of net expenses due to or payable by the other party hereto,
whichever occurs first, Seller or Purchaser, as the case may be, shall submit a
statement to the other party hereto showing the relevant items of income and
expense. Payment of any net amount due by Seller or Purchaser, as the case may
be, on the basis thereof shall be made within ten days of receipt of the
statement.
9.03 Reservation of Claims. Except as provided in this Agreement, Seller
is entitled to all claims related to the Acquired Assets prior to the Effective
Time regardless of when payment is made. Except as provided in this Agreement,
Purchaser is entitled to all claims related to the Acquired Assets which arise
after the Effective Time.
9.04 Files and Records. Upon Closing, subject to the provisions of
Section 1.01(f), Seller shall permit Purchaser, at the expense of Purchaser, to
take possession of originals, or with respect to accounting records relating to
periods prior to the Closing Date, copies, of all Records in the possession or
control of Seller and relating to the Acquired Assets. Seller shall have the
right to copy (at the expense of Seller) and retain a copy of all such files,
records and data. Insofar as Seller reasonably believes such Records may be
needed or useful in connection with federal, state or local regulatory or tax
matters or resolution of existing disputes or contract compliance issues with
third parties or for any other appropriate purposes, Seller shall have the right
to make, at the expense of Seller, and retain copies of Records subsequent to
the delivery of such Records to Purchaser; provided, however, any such copies of
Records retained by Seller shall be confidential and proprietary to Purchaser to
the extent the relevant Records were theretofore maintained as such by Seller,
and to such extent and except as provided herein to the contrary, Seller may not
divulge any matters contained therein or any other information provided by
Purchaser to Seller pursuant to the terms of this Agreement, without the prior
express written consent of Purchaser, except (a) as required by Law, (b) as
required by order of any court, (c) to the extent otherwise previously made
public (other than by disclosure in breach of this Agreement) or (d) as is
necessary to enforce, or seek redress for breach of, this Agreement. Except as
may be otherwise required by any of the Contracts or applicable law, Purchaser
shall be obligated to maintain the Records for a period of seven years following
the Closing Date;
Page 36 of 50
provided, however, Purchaser shall not be obligated to maintain any Records that
relate in all material respects to any of the Acquired Assets that cease to be
owned by Purchaser if Purchaser has obligated its successors and assigns of such
Records to maintain and allow access to such Records for the remainder of such
seven-year period; and provided further, however, Purchaser shall not be
required to retain any Records that it has offered to deliver to Seller.
9.05 Further Assurances; Cooperation. After Closing, Seller, Endeavor and
Purchaser agree to execute and deliver such instruments and take such other
actions as may be necessary or advisable to carry out their obligations under
this Agreement or any other document delivered pursuant hereto. In particular,
Seller and Purchaser agree to execute and deliver such instruments and take such
other actions as may be necessary and advisable to (a) make all filings,
registrations, and recordings which must be made with respect to the Leases in
the records of all appropriate counties, parishes, and state and federal
agencies and offices in order that the records maintained by the appropriate
state and federal agencies and the appropriate records of the relevant parishes
and counties shall accurately reflect the transfer of the Acquired Assets to
Purchaser; (b) enable Seller to take promptly all actions over which Seller has
control to allow Purchaser to be designated as the operator with respect to
those Acquired Assets as to which Seller is the operator as of the Effective
Time; and (c) obtain prompt and unconditional approvals of transfers of the
Leases as applicable. To the extent required, Purchaser agrees to take promptly
any and all actions necessary to post any supplemental bonds and provide any and
all documentation that may be required to evidence the financial responsibility
of Purchaser under applicable federal regulations policies.
9.06 Assumption and Indemnity.
(a) Upon Closing, Purchaser hereby assumes responsibility for and
agrees to pay, perform and discharge the obligations as set forth below
(the "Assumed Obligations"):
(i) the prompt and complete payment, performance and discharge
of all obligations and liabilities of Seller attributable to or
arising out of any of the Leases and any of the Contracts listed on
Schedule 1-B (the "Assumed Contracts") for the period from and after
the Closing, to the extent such liabilities and obligations are (A)
attributable to or arise out of the ownership, use or operation of
the Acquired Assets; (B) attributable to the period of time on or
after the Effective Time, and (C) are not the result of any default
of or failure to perform by Seller under any of the Assumed
Contracts as to any point in time prior to Closing (collectively,
the "Assumed Contractual Obligations");
(ii) all costs, expenses, liabilities, claims and obligations
arising out of or in connection with the ownership or operation of
the Acquired Assets after the Closing Date, including all
obligations regarding site clearance, plugging, abandoning, and
removing all existing Xxxxx, platforms, facilities and pipelines
located on or used in connection with the Acquired Assets in
accordance with the requirements of all applicable governmental
authorities and the terms of all applicable Leases and Contracts
(such obligations being the "Abandonment and Clean Up Obligations")
and all Environmental Liabilities arising out of or in
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connection with the ownership or operation of the Acquired Assets after
the Closing Date.
provided, however, notwithstanding anything contained in clause (i) of
this Section 0 to the contrary, Purchaser shall not assume and shall have
no liability (contingent or otherwise) whatsoever with respect to the
Retained Obligations or any matter with respect to which Seller has
indemnified Purchaser pursuant to clause (ii) of Section 9.06(c).
(b) Seller shall retain responsibility for and agrees to pay, perform and
discharge, all of the following (collectively, the "Retained Obligations"),
including all indebtedness, liabilities or other obligations not expressly
assumed by the Purchaser pursuant to Section 9.06(a) above:
(i) the prompt and complete payment, performance and discharge of
all obligations and liabilities of Seller attributable to or arising out
of any of the Leases and any of the Assumed Contracts for the period prior
to the Closing;
(ii) all costs, expenses, liabilities, claims and obligations
arising out of or in connection with the ownership or operation of the
Acquired Assets prior to the Closing Date, including all Abandonment and
Clean-Up Obligations and all Environmental Liabilities arising out of or
in connection with the ownership or operation of the Acquired Assets prior
to the Closing Date and the proper accounting or payment to third parties
for their interests therein insofar as such claims relate to periods of
time prior to the Closing Date.
The term "Environmental Liabilities," as used herein, shall mean all
costs, expenses, liabilities, and obligations attributable to the Acquired
Assets and arising out of or in connection with any violation of
Environmental Laws or any Environmental Non-Violation of Laws Matters (as
defined below in this Section 9.06(b). The term "Environmental
Non-Violation of Laws Matters," as used herein, shall mean any cost,
expense, liability or obligation with respect to the Acquired Assets (x)
resulting from or attributable to actual, threatened, or alleged
emissions, discharges, or releases of Hazardous Substances (as defined
below in this Section 9.06(b) into ambient air, surface water, groundwater
or land; (y) resulting from or attributable to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of Hazardous Substances; or (z) otherwise arising under or
related to Environmental Laws. The term "Hazardous Substances" shall have
the meaning given such term in the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980.
(c) In the event that Closing occurs, except as to matters waived in
writing by the party hereto against which the waiver is sought to be enforced,
(i) Purchaser shall protect, defend, release, indemnify and hold harmless Seller
and the shareholders, directors, officers, employees, and agents of Seller and
the
Page 38 of 50
heirs, personal representatives, successors, and assigns of any of the
foregoing (each a "Seller Indemnified Party") from and against any and all
damages, claims, losses, demands, fines, penalties, judgments (including
interest), costs, expenses, environmental liabilities, and other
liabilities, direct, contingent, or otherwise, including consultant and
attorneys' fees and costs of court ("Damages") which may be alleged against
any Seller Indemnified Party, arising or accruing with respect to (A) any
representation or warranty made by Purchaser in or pursuant to this
Agreement being untrue or incorrect in any material respect; (B) any
failure by Purchaser to perform any covenant or agreement set forth in this
Agreement or any other agreement or document executed by it in connection
with the transactions contemplated hereby; or (C) the Assumed Obligations
and (ii) Seller shall protect, defend, release, indemnify and hold harmless
Purchaser and the shareholders, directors, officers, employees, and agents
of Purchaser and the heirs, personal representatives, successors, and
assigns of any of the foregoing (each a "Purchaser Indemnified Party") from
any Damages not to exceed the amount of the Purchase Price which may be
alleged against any Purchaser Indemnified Party, arising or accruing with
respect to (A) any representation or warranty made by Seller in or pursuant
to this Agreement being untrue or incorrect in any material respect; (B)
any failure by Seller to perform any covenant or agreement set forth in
this Agreement or any other agreement or document executed by it in
connection with the transactions contemplated hereby; or (C) the Retained
Obligations or any other indebtedness, liabilities or obligations of Seller
not expressly assumed by Purchaser as an Assumed Obligation pursuant to
Section 9.06. The term "Damages," as used in this Section 9.06, shall not
include (x) any amount which was taken into account as an adjustment to the
Purchase Price pursuant to any applicable provision of this Agreement; or
(y) costs and expenses of either party hereto as described in Section
10.02.
(d) Neither Party shall be entitled to indemnification under this
Section 9.06 unless the aggregate of all amounts for which indemnity would
otherwise be due to Seller Indemnified Parties or Purchaser Indemnified
Parties, as the case may be, exceeds $250,000 in the aggregate, in which
case Seller Indemnified Parties or Purchaser Indemnified Parties, as the
case may be, shall be entitled to recover in full with respect to all such
amounts. This threshold does not apply to (and shall not be satisfied by)
Title Defect Amounts or Environmental Defects or defaults related to the
payment of money or other liquidated amounts. NOTWITHSTANDING ANYTHING IN
THIS AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL PURCHASER OR SELLER BE
LIABLE TO THE OTHER PARTY FOR ANY EXEMPLARY, PUNITIVE, SPECIAL, INDIRECT,
CONSEQUEN-TIAL, INCIDENTAL, STATUTORY, REMOTE OR SPECULATIVE DAMAGES.
9.07 Conspicuousness/Express Negligence. The defense, indemnification and
hold harmless provisions provided for in this Agreement shall be applicable
whether or not the Damages in question arose solely or in part from the active,
passive or concurrent negligence, or other fault (including strict liability),
of any Seller Indemnified Party or Purchaser Indemnified
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Party. Purchaser and Seller acknowledge that this statement complies with the
express negligence rule and is conspicuous.
9.08 Indemnification Procedure. All claims for indemnification under the
provisions of Section 9.06 shall be asserted and resolved pursuant to the
provisions of this Section 9.08. Any person or entity claiming indemnification
hereunder is hereinafter referred to as the "Indemnified Party" and any person
or entity against whom such claims are asserted hereunder is hereinafter
referred to as the "Indemnifying Party." In the event that any Damages are
asserted against or sought to be collected from an Indemnified Party by a third
party, such Indemnified Party shall, with reasonable promptness, provide to the
Indemnifying Party a written notice of claim specifying, in reasonable detail,
the specific nature of and specific basis of the Damages and the estimated
amount of such Damages and including a copy of all papers served with respect to
such claim (if any) and the basis of such claim for indemnification under the
provisions of Section 9.06 (each a "Claim Notice"). Notwithstanding the
preceding sentence, failure of an Indemnified Party to give notice hereunder
shall not release the Indemnifying Party from its obligations under the
provisions of Section 9.06, except to the extent the Indemnifying Party is
actually prejudiced by such failure to give notice; provided, that, the
Indemnifying Party shall not be obligated to defend, indemnify or otherwise hold
harmless an Indemnified Party with respect to a third party claim until a Claim
Notice meeting the foregoing requirements is furnished to the Indemnifying Party
by the party seeking indemnity hereunder. The Indemnifying Party shall have 30
days from the personal delivery or receipt of any Claim Notice (the "Notice
Period") in which to notify the Indemnified Party (a) whether or not it disputes
the liability of the Indemnifying Party to the Indemnified Party hereunder with
respect to such Damages; and/or (b) whether or not it desires, at the sole cost
and expense of the Indemnifying Party, to defend the Indemnified Party against
such Damages; provided, however, that any Indemnified Party is hereby authorized
prior to and during the Notice Period to file any motion, answer or other
pleading that it shall deem necessary or appropriate to protect its interests or
those of the Indemnifying Party (and of which it shall have given notice and
opportunity to comment to the Indemnifying Party) and not prejudicial to the
Indemnifying Party. If the Indemnifying Party fails to so notify the Indemnified
Party during the Notice Period, the Indemnifying Party shall be deemed to have
elected to dispute such liability and not to defend against such third party
claim. In the event that the Indemnifying Party notifies the Indemnified Party
within the Notice Period that it (x) does not dispute its liability to indemnify
the Indemnified Party under the provisions of Section 9.06 (or reserves the
right to dispute whether such claim is an indemnified claim under the provisions
of Section 9.06; and (y) elects to defend the Indemnified Party against such
Damages, the Indemnifying Party shall have the right to defend, at its sole cost
and expense, such third party claim by all appropriate proceedings, and with
counsel of its own choosing, which proceedings shall be promptly settled or
prosecuted by them to a final conclusion. If the Indemnified Party desires to
participate in, but not control, any such defense or settlement, it may do so at
its sole cost and expense. If requested by the Indemnifying Party, the
Indemnified Party agrees to cooperate with the Indemnifying Party and its
counsel in contesting any Damages that the Indemnifying Party elects to contest.
No claim may be settled or otherwise compromised without the prior written
consent of the Indemnifying Party. If the Indemnifying Party elects not to
assume the defense of a third party claim, or elects to assume the defense of a
third party claim, but reserves the right to dispute whether such claim is an
indemnified claim under the provisions of Section 9.06, the determination of
whether the Indemnified Party is entitled to indemnification under the
provisions of Section 9.06 shall be resolved pursuant to arbitration as provided
in Section 10.16.
Page 40 of 50
9.09 Allocation of Proceeds. Seller shall receive all proceeds from the
sale of Substances physically produced or allocable to the Acquired Assets prior
to the Effective Time. Purchaser shall receive all proceeds from the sale of
Substances physically produced or allocable to the Acquired Assets on or after
the Effective Time.
9.10 Termination of Confidentiality Agreements. Effective on Closing, the
obligations of Purchaser under the Confidentiality Agreements, insofar and only
insofar as they relate to the Acquired Assets, are terminated.
ARTICLE X
MISCELLANEOUS
10.01 Notices. All notices required or permitted under this Agreement shall
be effective upon receipt if personally delivered, if mailed by registered or
certified mail, postage prepaid, or if delivered by telegram, telecopy or
facsimile if directed to the relevant party hereto as follows:
TO SELLER: TO PURCHASER:
DDD Energy, Inc. Rising Star Energy, L.L.C.
00 Xxxxx Xxxxxx Xxxx, Xxxxxxx Xxxxx 0000 Xxxx Xxxxxx, Xxxxx 000
Xxxx, Xxxxxxx, Xxxxx 00000 Xxxxxx, Xxxxx 00000
Tel.: (000) 000-0000 Tel.: (000) 000-0000
Fax: (000) 000-0000 Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxx Attn: Xxxx X. Xxxxx
With copy to: With copy to:
Fulbright & Xxxxxxxx L.L.P. Xxxxxxx Xxxxxx L.L.P.
1301 McKinney, Suite 5100 1100 Louisiana, Suite 4200
Houston, Texas 77010-3095 Xxxxxxx, Xxxxx 00000
Tel.: (000) 000-0000 Tel.: 713/000-0000
Fax: (000) 000-0000 Fax: 713/000-0000
Attn: Xxxxxxx X. Xxxxx Attn: Xxxxxxx X. Xxxxxxxx
Either party hereto may give written notice to the other, in the aforesaid
manner, of a change in the address or individual to whom delivery shall be made.
10.02 Expenses. Except as otherwise provided in this Agreement, all fees,
costs and expenses incurred by either party hereto in negotiating this Agreement
or in consummating the transactions contemplated by this Agreement shall be paid
by the party hereto incurring them.
10.03 Amendment. This Agreement may not be altered or amended, nor any
rights waived, except by a written instrument executed by the party hereto to be
charged with the amendment or waiver. No waiver of any provision of this
Agreement shall be construed as a continuing waiver of the same provision or of
any other provision of this Agreement.
10.04 Assignment. Except as provided in the following sentence of this
Section 10.04, neither party hereto may assign or delegate any of its rights or
duties hereunder without the prior written consent of the other party hereto.
Purchaser shall have the right, without obtaining the
Page 41 of 50
prior written consent of Seller, to assign the rights of Purchaser hereunder to
an Affiliate (as defined below in this Section 10.04) of Purchaser; provided
that no such assignment shall relieve Purchaser of its obligations or
liabilities under this Agreement. The term "Affiliate" as used herein shall
mean, as to the person or entity specified, any person or entity controlling,
controlled by or under common control with such specified person or entity. The
concept of control, controlling or controlled by as used in the aforesaid
context means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of another, whether through
the ownership of voting securities, by contract or otherwise. No person or
entity shall be deemed an Affiliate of any person or entity by reason of the
exercise or existence of rights, interests or remedies under this Agreement.
10.05 Conditions. The inclusion in this Agreement of conditions to the
obligations of Seller or Purchaser at Closing shall not, in and of itself, be a
covenant of either party hereto to satisfy the conditions to the obligations of
the other party hereto at Closing.
10.06 References. References in this Agreement to Schedule, Exhibit,
Article, or Section numbers shall be to Schedules, Exhibits, Articles, or
Sections of this Agreement, unless expressly stated to the contrary. References
in this Agreement to "hereby," "herein," "hereinafter," "hereinabove,"
"hereinbelow," "hereof," "hereunder" and words of similar import shall be to
this Agreement in its entirety and not only to the particular Schedule, Exhibit,
Article, or Section in which such reference appears. References in this
Agreement to "includes" or "including" shall mean "includes, without
limitation," or "including, without limitation," as the case may be. Except as
otherwise indicated, references in this Agreement to statutes, sections, or
regulations are to be construed as including all statutory or regulatory
provisions consolidating, amending, replacing, succeeding, or supplementing the
statute, section, or regulation referred to. References in this Agreement to
"writing" include printing, typing, lithography, facsimile reproduction, and
other means of reproducing words in a tangible visible form. References in this
Agreement to agreements and other contractual instruments shall be deemed to
include all exhibits and appendices attached thereto and all subsequent
amendments and other modifications to such instruments, but only to the extent
such amendments and other modifications are not prohibited by the terms of this
Agreement. References in this Agreement to persons or entities include their
respective successors and permitted assigns.
10.07 Articles and Sections. This Agreement, for convenience only, has been
divided into Articles and Sections; and it is understood that the rights and
other legal relations of the parties hereto shall be determined from this
instrument as an entirety and without regard to the aforesaid division into
Articles and Sections and without regard to headings prefixed to such Articles
or Sections.
10.08 Number and Gender. Whenever the context requires, reference herein
made to the single number shall be understood to include the plural; and
likewise, the plural shall be understood to include the singular. Definitions of
terms defined in the singular or plural shall be equally applicable to the
plural or singular, as the case may be, unless otherwise indicated. Words
denoting sex shall be construed to include the masculine, feminine and neuter,
when such construction is appropriate; and specific enumeration shall not
exclude the general but shall be construed as cumulative.
Page 42 of 50
10.09 Incorporation of Schedules and Exhibits. The Schedules and Exhibits
attached to this Agreement are incorporated herein and shall be considered a
part of this Agreement for all purposes.
10.10 Counterparts. This Agreement may be executed in counterparts, each of
which shall be an original and which, taken together, shall constitute the same
instrument.
10.11 Governing Law. Except to the extent the laws of another jurisdiction
mandatorily govern any aspect of the transactions contemplated by this
Agreement, this Agreement and the transactions contemplated by this Agreement
shall be governed and construed in accordance with the internal laws of the
State of Texas, without giving effect to any principles of conflict of laws.
10.12 Integration. This Agreement and the documentation to be executed and
delivered at Closing constitute the entire understanding between Seller and
Purchaser concerning the subject matter of this Agreement and supersede all
negotiations, discussions, representations, prior agreements and understandings,
whether oral or written, except the Confidentiality Agreement.
10.13 Parties in Interest. Except as otherwise expressly provided herein,
this Agreement is binding upon and shall inure to the benefit of Seller and
Purchaser and their respective successors, representatives, and permitted
assigns. Except as otherwise expressly provided herein, no other person or
entity is intended to have any benefits, rights or remedies under this Agreement
nor shall any person or entity other than Purchaser and Seller be entitled to
any claim, cause of action, remedy, or right of any kind under this Agreement.
10.14 Severability. If any provision of this Agreement is found to be
illegal or unenforceable, the other terms of this Agreement shall remain in
effect and this Agreement shall be construed as if the illegal or unenforceable
provision had not been included.
10.15 Survival. The covenants, agreements, representations, warranties and
indemnities contained in this Agreement shall survive Closing of the
transactions contemplated hereby; provided, however, except as to the
representations and warranties made by Seller in Sections 3.01(a) (other than
the last sentence thereof), (b), (c), (d), and (e) and by Purchaser in Section
3.02, the representations and warranties made by Seller and Purchaser in this
Agreement and indemnities by Seller and Purchaser associated therewith shall
survive Closing for eighteen months only.
10.16 Arbitration.
(a) Any and all claims, counterclaims, demands, cause of action,
disputes, controversies, and other matters in question arising out of or
relating to this Agreement, any provision hereof, the alleged breach of any
such provision, or in any way relating to the subject matter of this
Agreement or the relationship between the parties hereto created by this
Agreement, involving the parties hereto and/or their respective
representatives (all of which are referred to herein as "Claims"), even
though some or all of such Claims allegedly are extra-contractual in
nature, whether such Claims sound in contract, tort, or otherwise, at law
or in equity, under state or federal law, whether provided by statute or
the common law, for damages or any other relief, shall be resolved by
binding arbitration.
Page 43 of 50
(b) The arbitration shall be conducted pursuant to the Federal
Arbitration Act, as such Act is modified by this Agreement. The validity,
construction, and interpretation of this Agreement to arbitrate, and all
procedural aspects of the arbitration conducted pursuant to this agreement
to arbitrate, including the determination of the issues that are subject to
arbitration (i.e., arbitrability), the scope of the arbitrable issues,
allegations of "fraud in the inducement" to enter into this Agreement or
this arbitration provision, allegations of waiver, laches, delay or other
defenses to arbitrability, and the rules governing the conduct of the
arbitration (including the time for filing an answer, the time for the
filing of counterclaims, the times for amending the pleadings, the
specificity of the pleadings, the extent and scope of discovery, the
issuance of subpoenas, the times for the designation of experts, whether
the arbitration is to be stayed pending resolution of related litigation
involving third parties not bound by this Agreement, the receipt of
evidence, and the like), shall be decided by the arbitrators. Failing
agreement upon the rules governing the conduct of the arbitration within 30
days after appointment of the third arbitrator (as provided below in this
Section 10.16), the arbitrators shall adopt the Commercial Arbitration
Rules of the American Arbitration Association, but the arbitration shall
not be under the supervision of, and no fee shall be paid to, the American
Arbitration Association. In deciding the substance of any Claims in
arbitration, except to the extent that it is mandatory that the law of some
other jurisdiction wherein the Acquired Assets are located shall apply, the
arbitrators shall refer to the substantive laws of the State of Texas for
guidance (excluding choice-of-law principles of such laws that might call
for the application of the law of some other state). Notwithstanding any
other provision in this Section 10.16 to the contrary, the parties hereto
expressly agree that the arbitrators shall have absolutely no authority to
award consequential, statutory, treble, exemplary or punitive damages of
any type under any circumstances, regardless of whether such damages may be
available under the law of the State of Texas, the law of any other state,
or federal law, or under the Federal Arbitration Act, or under the
Commercial Arbitration Rules of the American Arbitration Association, the
parties hereto hereby waiving their right, if any, to recover
consequential, statutory, treble, exemplary or punitive damages in
connection with any such Claims.
(c) The arbitration proceeding shall be conducted in Houston, Texas.
Within 30 days of the notice of initiation of the arbitration procedure,
Seller shall select one arbitrator and Purchaser shall select one
arbitrator. Each arbitrator shall be experienced in those aspects of the
oil and gas industry relevant to the transactions contemplated by this
Agreement. The two arbitrators shall select a third arbitrator, failing
agreement on which within 90 days of the original notice, the parties
hereto (or either of them) shall apply to any United States District Judge
for the Southern District of Texas, Houston Division, who shall appoint the
third arbitrator. While the third arbitrator shall be neutral, the two
arbitrators appointed by the parties hereto are not required to be neutral
and it shall not be grounds for removal of either of such arbitrators or
for vacating the award of the arbitrators that either of such arbitrators
has past or present minimal relationships with the party hereto that
appointed such arbitrator.
Page 44 of 50
(d) Each party hereto shall pay the fees of the arbitrator appointed
by it and all fees of the third arbitrator shall be borne equally by the
parties hereto.
(e) To the fullest extent permitted by law, the arbitration proceeding
and the award of the arbitrators shall be maintained in confidence by the
parties hereto.
(f) The award of the arbitrators shall be final and binding on the
parties of the arbitrators, and judgment thereon may be entered in a court
of competent jurisdiction.
10.17 Endeavor Exploration, LLC. Endeavor Exploration, LLC ("Endeavor") has
executed this Agreement solely to evidence the granting of the Purchase Option
as provided in Section 1.03. Reference source not found.. Endeavor agrees to
execute and deliver any and all instruments and take such other actions as may
be necessary or advisable to carry out its obligations under this Agreement or
any other document delivered pursuant hereto.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, Purchaser and Seller have executed and delivered this
Agreement as of the date first set forth above.
SELLER:
DDD ENERGY, INC.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxx
---------------------------------------
Title: President
-------------------------------------
PURCHASER:
RISING STAR ENERGY, L.L.C.
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxx
---------------------------------------
Its: President
----------------------------------------
ENDEAVOR EXPLORATION, LLC
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxx
---------------------------------------
Title: President
--------------------------------------
Page 46 of 50
