PURCHASE AND SALE AGREEMENT
EXHIBIT
10.1
This
Purchase And Sale Agreement (this “Agreement”), dated March 25, 2008, is between
West Texas Gas, Inc., a Texas, corporation (“Purchaser”), and Reef Ventures,
L.P., a Texas limited partnership (“Seller”). (Seller and Purchaser are
sometimes referred to herein individually as a “Party” and collectively as the
“Parties”.)
RECITALS
A. Seller
owns all of the issued and outstanding membership interests in Reef
International, LLC (“Reef International”) and Reef Marketing, LLC (“Reef
Marketing,” and together with Reef International, the “Purchase Entities”) (the
“Membership Interests”);
B. Seller
desires to sell to Purchaser and Purchaser desires to purchase from Seller the
Membership Interests.
AGREEMENT
In
consideration of the premises, respective representations, warranties,
covenants, agreements and conditions contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the Parties, intending to be legally bound, contract and agree as
follows:
1. ACQUISITION
OF THE MEMBERSHIP INTERESTS
1.01 Purchase of Membership Interests. Subject
to the terms and conditions set forth herein, on the Closing Date (as defined in
Section 2.01), Seller shall sell and Purchaser shall purchase, as of the Closing
Date, all of the Membership Interests. Upon the payment at Closing
(as defined in Section 2.01) of the Purchase Price (as hereinafter defined) for
the Membership Interests, Seller will no longer have any interest in the
Purchase Entities.
1.02 Assets. The term
“Assets” as used in this Agreement means all real property interests, personal
property, intangibles, accounts receivable, contract rights and all other
property interests owned by the Seller and/or the Purchase Entities, including,
but not limited to, those assets and property interests generally described on
Exhibit 1.02 (collectively, the “Assets”).
1.03 Purchase Price. The
purchase price for the Membership Interests and the Assets is $2,500,000 to be
paid in cash as set forth herein (the “Purchase Price”).
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(A)
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Adjustments.
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The
Purchase Price shall be adjusted (without duplication of any amounts) by
the net result of the following
adjustments:
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(i)
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upward
for the cash retained by the Purchase Entities on the Closing
Date;
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(ii)
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upward
for all amounts received by the Purchase Entities from the Closing Date
through the earlier of the conclusion of adjustments under Subsection
1.03(C) or 180 days after Closing for accounts receivable and other items
attributable to the ownership and operation of the Assets before the
Closing Date;
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(iii)
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upward
by an amount equal to the prepaid expenses pertaining to the Membership
Interests and the Assets, or any of them, that were actually paid by
Seller, before the Closing Date to the extent such expenses are, in
accordance with GAAP, attributable to the period after the Closing Date,
including, without limitation, (i) prepaid rent, insurance, utilities,
lease, license or right of way payments, (ii) prepaid renewal fees, (iii)
prepaid ad valorem and property taxes, and (iv) prepaid emission
fees;
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(iv)
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downward
by an amount equal to the expenses paid in arrears pertaining to the
Membership Interests and the Assets, or any of them, that were actually
paid by Purchaser after the Closing Date to the extent such expenses are,
in accordance with GAAP, attributable to the period before the Closing
Date, including, without limitation, (i) rent, insurance, utilities,
lease, license or right of way payments paid in arrears, (ii) renewal fees
paid in arrears, (iii) ad valorem and property taxes paid in arrears, and
(iv) emission fees paid in arrears; provided that
no adjustment shall be made pursuant to this Section 1.03(a)(iv) for any
payments of expenses in arrears pertaining to any of the Assets described
following numbers 2 (Carrizo Springs Pipeline System), 3 (Xxxx Creek
Gathering System), or 4 (Xxxxxxx Gas Plant) of Exhibit
3.01(I);
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(v)
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downward
by an amount equal to all unpaid ad valorem and property taxes, based upon
or measured by the ownership of the Assets to the extent such taxes and
assessments are, in accordance with GAAP, attributable to the period
before the Closing Date; provided, if the amount of any such taxes has not
been actually assessed on or before Closing, the amount of such taxes will
be computed based upon such taxes and assessments for the preceding
calendar year (or the current calendar year if such information is
available) or, if such taxes or assessments are assessed on other than a
calendar year basis, for the tax-related year last
ended;
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(vi)
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downward
by $3,440, which is the amount that Purchaser advanced to Tidelands (as
defined in Section 2.02(A)) on behalf of Seller prior to the Closing Date
for the purchase by Seller of a parcel of land from Xxxxx Land &
Cattle Company;
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(vii)
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any
other amount agreed upon by Seller and
Purchaser.
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(B)
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Closing Settlement
Statement. Seller
has prepared and delivered to Purchaser a closing settlement statement
reflecting the Seller’s good faith estimates of the upward and downward
adjustments to the Purchase Price determined in accordance with this
section, itemizing adjustments and the calculation of such adjustments
using the best information available (the “Closing Settlement Statement”).
The Closing Settlement Statement reflects the precise amount of cash
payment estimated by Seller to be made by Purchaser under Section 1.03 at
the Closing.
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(C)
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Adjustment Post
Closing. On
or before 180 days after Closing, Purchaser and Seller shall review any
additional information which may then be available pertaining to the
adjustments provided for in Section 1.03(A), shall determine if any
additional adjustments should be made beyond those made at Closing
(whether the same be made to account for expenses or revenues not
considered in making the adjustments made at Closing, or to correct errors
made in the adjustments made at Closing), and shall make any such
adjustments by appropriate payments from Seller to Purchaser or from
Purchaser to Seller. If Purchaser and Seller are unable to agree as to
whether or not any such additional adjustments should be made or the
amount of those adjustments by 180 days after Closing, that disagreement
will be resolved by submission, as soon as practicable, to a mutually
acceptable firm of independent public accountants. The decision
of that firm as to the question or questions in dispute will be final and
binding on Seller and Purchaser. During the period between
Closing and the point in time when the post closing adjustment has been
agreed to or resolved by the independent public accountant, Purchaser or
Seller shall, on a monthly basis, pay over to Seller or Purchaser (as the
case may be) any revenue received by it with respect to the Assets which
was, under Section 1.03(A), to be received by Seller or
Purchaser.
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(D)
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No Further
Adjustments. Following
the adjustments under Section 1.03(C), no further adjustments will be made
under Section 1.03. Subject to the provisions of Section 6.01,
should any expenses with regard to the Assets be charged to Seller or
Purchaser after the earlier of: (i) the conclusion of such
adjustments under Section 1.03(C); or (ii) 180 days after Closing, the
same shall be borne by Purchaser, regardless of the periods to which the
same relate, and any bills received by Seller will be forwarded to
Purchaser.
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(E)
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Ad Valorem Tax and Emission
Fees Calculation. The
liability of each of the Purchase Entities for ad valorem taxes and
emission fees will be taken into account by the Parties in determining the
Purchase Price under Section 1.03(A), in the Closing Settlement Statement,
and in any additional adjustments under Section 1.03(C). After
the applicable time period stated in Section 1.03(D), no further
adjustments for ad valorem taxes or emission fees will be made to the
Purchase Price.
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2. CLOSING
2.01 Closing Date. The
closing of the purchase and sale of the Membership Interests (the “Closing”),
will be held on March 25, 2008 (the “Closing Date”) at the offices of Bullock,
Scott, Neisig, Morgan, Leeton & Xxxxxxx, P.C., located at 000 Xxxx Xxxxx,
Xxxxx 000, Xxxxxxx, Xxxxx 00000, or at such other place as Purchaser and Seller
mutually agree. The purchase and sale will be effective as of 12:01
a.m. on the Closing Date.
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2.02 Closing Transactions.
At the
Closing, the following will occur, each being a condition precedent to the
others and each being deemed to have occurred simultaneously with the
others:
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(A)
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Seller’s
Deliveries. Seller
shall deliver to Purchaser:(i) assignments from Seller in form
satisfactory to Purchaser conveying to Purchaser good and transferable
title to the Membership Interests free and clear of all liens, security
interests, claims, encumbrances, charges or rights of third parties; (ii)
the Non-Competition Agreement (as defined in Section 4.04); (iii) the
resignations of all officers and directors, if any, of each of the
Purchase Entities; (iv) certified copies of resolutions of Tidelands Oil
& Gas Corporation ("Tidelands") authorizing Arrecefe Management LLC,
as General Partner of Seller, to execute and deliver this Agreement, and
complete the transactions contemplated herein; (v) certified copies of
resolutions of Tidelands approving the Non-Competition Agreement and the
transactions contemplated therein; (vi) releases of the liens and the
guaranty described in Exhibit 3.01(O); and (vii) such other documents as
are set forth in Section 5.01(D) (collectively, the “Seller’s Ancillary
Documents”).
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(B)
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Purchaser’s Deliveries. Purchaser
shall deliver to Seller the: (i) the Purchase Price by wire
transfer of immediately available funds to the bank account designated in
writing by Seller to Purchaser; and (ii) such other documents as are set
forth in Section 5.02(D) (the “Purchaser Ancillary Documents,” together
with the Seller’s Ancillary Documents, referred to herein as the
“Ancillary Documents”).
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(C)
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Closing Settlement
Statement. Seller
and Purchaser shall execute and deliver a Closing Settlement Statement
prepared in accordance with Section
1.03(B).
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3. REPRESENTATIONS
AND WARRANTIES
3.01 Seller’s Representations and
Warranties. All
references herein to “the best of Seller’s knowledge” means only those matters
within the actual knowledge of Mr. Xxxxx Xxxxx, President and CEO of the general
partner of Seller or Xx. Xxxxxx Xxxxxx, Vice President of the general partner of
Seller on or before the Closing Date. Seller represents and warrants
to Purchaser as follows:
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(A)
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Seller’s
Organization. Seller
is a limited partnership which has been duly organized, is validly
existing and is in good standing under the laws of the state of
Texas.
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(B)
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Seller’s
Authority. Seller
has all necessary power and authority to enter into and perform this
Agreement and to consummate the transactions contemplated
hereby. The execution, delivery, and performance by Seller of
this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized and approved by all requisite corporate
action and this Agreement has been duly executed and delivered by
Seller.
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(C)
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Enforceability. This
Agreement constitutes the legal and binding obligation of Seller,
enforceable according to its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the rights of creditors generally and by general equitable
principles (whether or not such enforceability is considered in a
proceeding at law or in equity). The execution and delivery hereof by
Seller does not, and the fulfillment and compliance with the terms and
conditions hereof, and the consummation of the transactions contemplated
hereby, will not, result in the creation or imposition of any lien, charge
or other encumbrance on the Assets or the Membership
Interests.
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(D)
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Effective Easements and
Leases. To
the best of Seller’s knowledge, except as provided in Exhibit 3.01(D), the
easements, rights-of-way, and surface leases owned by each of the Purchase
Entities are in full force and effect, and are valid and
subsisting.
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(E)
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No Litigation or
Bankruptcy. Other
than Claims (as defined in this Section 3.01(E)) that might be asserted in
connection with those pending issues or matters listed on Exhibit 3.01(E),
there are no Claims, actions, suits, demands or proceedings, pending or,
to the best of Seller’s knowledge, threatened, against Seller or each of
the Purchase Entities or the Assets in any court or before any arbitrator
or before any federal, state, county, municipal, or other governmental
authority or judicial regulatory agency, board, body, department, bureau,
commission, instrumentality, court, tribunal, or quasi-governmental
authority having or asserting jurisdiction (in the past, present or
future) over any portion of the Assets or any Party to this Agreement or
any of the transactions or matters contemplated by this Agreement or any
Ancillary Documents (collectively, “Governmental Authority”) or agency
which in any manner raises any material question affecting each of the
Purchase Entities or the Assets or the validity or enforceability of the
this Agreement or any other material agreement or instrument to which
Seller is a party or by which they are bound that is to be used in
connection with, or is contemplated by, this Agreement. There
are no bankruptcy, reorganization or arrangement proceedings pending,
being contemplated by or, to the best of Seller’s knowledge, threatened
against Seller or each of the Purchase Entities. As used in
this Agreement, “Claims” means any and all losses, costs, expenses,
liabilities, claims, demands, causes of action, penalties, fines,
assessments, settlements, damages, and any related expenses of whatever
kind or nature, including, without limitation, reasonable attorneys’ fees,
expert witness fees, accounting, consulting, and investigation expenses
and litigation costs.
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(F)
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No Brokers’
Fees. All
negotiations on behalf of Seller relating to this Agreement and any
transactions contemplated hereby have been carried on by Seller and their
agents directly with Purchaser without the intervention of any other
person or entity in such manner as to give rise to any enforceable claims
against Seller, each of the Purchase Entities or Purchaser for a brokerage
commission, finder’s fee or like payment in connection with the
consummation of the transactions contemplated
herein.
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(G)
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No Violation of Contractual or
Legal Restrictions. Other
than as set forth on Exhibit 3.01(G), the execution, delivery and
performance of this Agreement and the documents necessary to consummate
the transactions contemplated herein, to the best of Seller’s knowledge,
do not conflict with or violate: (i) any material agreement or
instrument to which Seller or any of the Purchase Entities is a party or
by which Seller or any of the Purchase Entities is bound; and (ii) any
law, rule, regulation, ordinance, judgment, decree or order to which
Seller or any of the Purchase Entities is
subject.
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(H)
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Membership Interests. Seller:
(i) owns all of the issued and outstanding membership interests in the
Purchase Entities; and, following the termination of the agreement(s) set
forth in Exhibit 3.01(G), (ii) will have the right and power to sell,
transfer and assign same as contemplated by this Agreement. The Membership
Interests are duly authorized, validly issued and were not issued in
violation of any preemptive rights. There are no other membership or other
ownership interest of the Purchase Entities authorized, issued,
outstanding or reserved for any purpose. Except as set forth in Exhibit
3.01(G), there are no: (i) existing options, warrants, calls, preemptive
rights, subscriptions or other rights, agreements, arrangements or
commitments of any character, relating to the Membership Interests or any
other membership, partnership or ownership interest of the Purchase
Entities, obligating Seller or any of the Purchase Entities to issue,
transfer or sell, or cause to be issued, transferred or sold, any of the
Membership Interests or any other authorized membership, partnership or
ownership interests of the Purchase Entities; (ii) outstanding securities
of Seller or any of the Purchase Entities that are convertible into or
exchangeable or exercisable for any membership, partnership or ownership
interests of the Purchase Entities; or (iii) other than this Agreement,
contracts, agreements or arrangements of any kind relating to the issuance
or sale of any of the Membership
Interests.
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(I)
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Real
Property. All
rights, titles and interests, if any, of each of the Purchase Entities in
real property are described in Exhibit 3.01(I). Except as
described in Exhibit 3.01(I), none of the Purchase Entities has any right,
title or interest in any real property. Except as set forth in
Exhibit 3.01(I)(2), each lease held by the Purchase Entities with respect
to real property is in full force and effect, with all lease payments due
to date on each such lease having been paid, and there exists no event of
default under any such
lease.
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(J)
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Environmental
Representations. For
purposes of this Agreement, the term “Environmental Laws” means any
federal, state or local law, rule, regulation, order, decree, or judicial
or administrative decision of any Governmental Authority relating to,
governing or designed to protect human health, natural resources or the
physical environment, or regulate the generation, production, storage,
transportation, or disposition of hazardous wastes or substances, toxic
wastes or substances, or any other pollutant, including, but not limited
to the Comprehensive Environmental Response Compensation and Liability Act
of 1980, as amended (“CERCLA”), (42 U.S.C. §§9601 et seq.), the
Resource Conservation and Recovery Act of 1976 (“RCRA”) (42
U.S.C. §§6901 et seq.), the Clean Water Act (33
U.S.C. §§466 et seq.), the Safe Drinking Water Act (14
U.S.C. §§1401-1450), the Hazardous Materials Transportation Act
(49 U.S.C. §§1801 et seq.), the Toxic Substance Control Act (15
U.S.C. §§2601-2629), the Clean Air Act (42
U.S.C. §§7401 et seq.) as amended, and the Clean Air Act
Amendments of 1990. To the best of Seller’s knowledge, each of
the Purchase Entities is in full compliance with, and has not been and is
not in material violation of or liable under, any Environmental
Laws. Other than as set forth on Exhibit 3.01(J), there is no
action, suit, demand or proceeding, pending or, to the best of Seller’s
knowledge, threatened, against Seller or either of the Purchase Entities
or the Assets in any court or before any arbitrator or Governmental
Authority with regard to: (i) compliance of the Assets
with any environmental protection, pollution, land use or other laws,
rules, regulations, order or requirement, including, but not limited to,
those pertaining to the handling, generating, treating, storing or
disposing of any hazardous waste or substance; (ii) the environmental
condition of the Assets; or (iii) the existence of any condition or
substance that could cause liability under any environmental
laws.
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(K)
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Formation and Qualification of
the Purchase Entities. Each
of the Purchase Entities is a limited liability company which has been
duly organized, is validly existing and is in good standing under the laws
of the state of Texas. None of the Purchase Entities is: (i)
qualified to do business in any other state of the United States of
America or in the United Mexican States; or (ii) engaged in, or has
engaged in, any activity which would require qualification in any other
state of the United States of America or in the United Mexican
States.
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(L)
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Financial Information; No
Material Change. Seller
has furnished to Purchaser copies of the following financial statements
prepared in accordance with generally accepted accounting principles
applied on a consistent basis in all material respects to those applied in
the preceding period (“GAAP”), all of which reflect the financial
performance of the Assets only: (i) unaudited balance sheets of the Assets
as of December 31, 2004, December 31, 2005, December 31, 2006 and December
31, 2007; (ii) unaudited income statements for the Assets for the years
ended December 31, 2004, December 31, 2005, December 31, 2006 and December
31, 2007. Such financial statements are correct and complete in
all material respects and fairly present the financial condition, assets
and liabilities of the Purchase Entities related to the Assets as of the
dates specified therein and the results of the operations of the Assets
for the periods indicated. Since December 31, 2007, there has
been no material change in the business, properties, assets or financial
condition of the Assets as reflected in the financial
statements. Except as set forth on Exhibit 3.01(L), to Seller’s
knowledge (and Seller has no reasonable ground to know otherwise), there
is no liability, indebtedness, obligation, expense, claim, deficiency,
guaranty or endorsement required by GAAP to be reflected, reserved against
or given effect to in the financial statements, except for liabilities
incurred in the ordinary course of business which, individually or in the
aggregate, would not have a material adverse effect upon any of the
properties that are material to the financial condition or operation of
the Assets.
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(M)
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Tax Returns and
Payments.
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(i)
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All
“Income Tax Returns” and all “Other Tax Returns” (as those terms are
defined in Section 4.02(E)) for the Purchase Entities for all periods
ending on or prior to the Closing Date, required to be filed by or with
respect to the Purchase Entities have been or will be timely filed with
the appropriate governmental agencies in all jurisdictions in which such
returns and reports are required to be filed. Except for “Taxes” (as that
term is defined in Section 4.02(E)) due with respect to Tax Returns that
will be paid by the Seller, all Taxes due from or with respect to the
Purchase Entities ending on or prior to the Closing Date, to the extent
such Taxes would be payable by the Purchase Entities, have been fully paid
or are, in Seller's best estimate, adequately reflected in the financial
statements of the Purchase
Entities.
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(ii)
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Seller
has not received any written notice of nor has knowledge of a claim
against the Purchase Entities for any Taxes, and no assessment, deficiency
or adjustment has been asserted or, to the best of Seller’s knowledge,
proposed, with respect to any Tax Return of or with respect to the
Purchase Entities.
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(N)
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Intellectual Property.
Other
than as may exist at common law, none of the Purchase Entities either own
or have applied for any patents, patent applications, patent licenses,
trademarks, trademark applications or trademark licenses. To
the best of Seller’s knowledge, there are
no: (i) infringements or claimed infringements by any of
the Purchase Entities of any patent rights, trademarks or trademark rights
of others; or (ii) infringements of the patent or patent rights,
trademarks or trademark rights owned by or under license to any of the
Purchase Entities.
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(O)
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Title to Assets. Except
for the liens described in Exhibit 3.01(O) under the heading “Liens to be
Released at Closing” (which liens will be released on the Closing Date),
neither the Membership Interests, nor the Assets is subject to any
mortgage, pledge, lien, security interest, lease charge, or conditional
sale or other title retention agreements, except for imperfections of
title to, or liens, easements, rights-of-way or encumbrances on the Assets
only which do not materially affect the marketability of the Assets
subject thereto and which do not materially impair the present use of the
Assets subject thereto. Except as set forth in Exhibit 3.01(O),
The Purchase Entities have sufficient title to their respective real
property interests included in the Assets to enable them to own and
operate their interests in real property and to receive the material
economic benefit thereof without
interference.
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(P)
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Subsidiaries. Neither
of the Purchase Entities has any direct or indirect ownership interest,
whether by way of stock ownership or otherwise, in any corporation,
partnership, limited liability company, firm, association or other
business enterprise.
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(Q)
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Material Contracts.
Attached
hereto as Exhibit 3.01(Q) is a list of all contracts, agreements and other
documents (the “Material Contracts”) (other than interests in easements,
leases, and real property) to the best of Seller’s knowledge, to which
Seller or any of the Purchase Entities is a party, or by which it is
bound, that are material to the operation of the Assets. Except
as noted on Exhibit 3.01(Q), to the best of Seller's knowledge, each such
contract is in full force and effect and, the parties thereto are neither
in default thereunder nor has any event occurred that could, with notice
or the passage of time or otherwise, be reasonably expected to give rise
to an event of default thereunder by any party thereto. Without
limitation of the foregoing, there are no contracts, agreements or other
documents between Seller or any of its affiliates and any of the Purchase
Entities for which any of the Purchase Entities will have any liabilities
or obligations after the
Closing.
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(R)
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Insurance. The
Assets have been continuously insured against such risks and in such
amounts normally insured against by companies of the same type and in the
same line of business as the Purchase Entities. No notice of
cancellation, nonrenewal or material increase in premiums has been
received by any of the Purchase Entities or Seller with respect to such
policies. To Seller’s knowledge, neither any of the Purchase
Entities nor Seller is in material default with respect to any provision
contained in any such policies or binders. To Seller’s
knowledge there has not been any failure to give notice or to present any
claim relating to the business or the assets of the Purchase Entities
under any such policy or binder in a timely fashion or in the manner or
detail required by the policy or binder. There are no
outstanding unpaid premiums (except premiums not yet due and
payable). To Seller’s knowledge no notice of cancellation or
non-renewal with respect to, or disallowance of any claim under, any such
policy or binder has been received by Seller or any of the Purchase
Entities as of the date
hereof.
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(S)
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Officers and
Employees. All
employees working on the Assets are employed by Seller, an agent of
Seller, or a subsidiary or an affiliate of Seller other than the Purchase
Entities. None of the Purchase Entities has, and since its
respective date of organization has had, any employees or been a party to
any of the matters which are contained in (i), (ii) and (iii) below and
which any of the Purchase Entities would be obligated to
perform: (i) any employment agreement; (ii) any plan, contract
or arrangement providing for bonuses, stock options, deferred
compensation, profit sharing or the like for any officer or employee; or
(iii) any employee retirement, welfare, vacation, or other benefit plans,
agreements, practices, programs, or
arrangements.
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(T)
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Compliance with
Law. Except
for matters related to Environmental Law, which matters are exclusively
dealt with in Exhibit 3.01(J), to the best of Seller’s knowledge, neither
the Purchase Entities, Seller, nor any affiliate thereof, is in violation
of any applicable law relating to or affecting the operation, conduct or
ownership of the Assets, except where such violation is not likely to have
a material adverse effect on the holder of the Assets, its business or its
material assets.
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(U)
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Governmental Approvals; Third
Party Consents. To
the best of Seller’s knowledge, no approval or authorization of any
Governmental Authority or third party consent is required in connection
with the execution and delivery of this Agreement by, or the consummation
of the transactions contemplated in this Agreement by,
Seller.
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(V)
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Permits and
Franchises. To
the best of Seller’s knowledge, each of the Purchase Entities holds such
franchises, certificates of public convenience and necessity, licenses,
permits, consents, authorizations and orders of governmental authorities
as are necessary to own and operate the Assets as they are presently owned
and operated.
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(W)
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Presidential
Permit. Reef
International is in full compliance with all terms and conditions of the
Presidential Permit granted to Reef International under
F.E.R.C. Docket No. CP02-74-000, dated May 30, 2002,
(the “Presidential Permit”). Neither Reef International nor
Seller has received any notice of any violation of the Presidential
Permit, or of any violation of the Presidential Permit, or any past,
present or future events which may interfere with continued compliance
with the Presidential
Permit.
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(X)
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No Mexican Assets. None
of the Purchase Entities owns, or has owned, any real or personal property
located in the United Mexican
States.
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(Y)
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Ad
Valorem
Taxes. All
Ad valorem taxes on the Assets have been paid in full for all years
through 2007.
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3.02 Purchaser’s Representations and
Warranties.
Purchaser
represents and warrants to Seller as follows:
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(A)
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(B)
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Purchaser’s
Authority. Purchaser
has all necessary corporate power and authority to enter into and perform
this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery, and performance by Purchaser
of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized and approved by all requisite corporate
action and this Agreement has been duly executed and delivered by
Purchaser.
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(C)
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Enforceability. This
Agreement constitutes the legal and binding obligation of Purchaser,
enforceable according with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the rights of creditors generally and by general equitable
principles (whether or not such enforceability is considered in a
proceeding at law or in equity). The execution and delivery
hereof by Purchaser does not, and the fulfillment and compliance with the
terms and conditions hereof and the consummation of the transactions
contemplated hereby will not, result in the creation or imposition of any
lien, charge or other encumbrance on the
Assets.
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(D)
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No Violation of Contractual or
Legal Restrictions. The
execution, delivery and performance of this Agreement and the documents
necessary to consummate the transactions contemplated herein do not
conflict with or violate any: (i) agreement or instrument to
which Purchaser or any subsidiary or affiliate thereof is a party or by
which Purchaser or any subsidiary or affiliate thereof is bound; or (ii)
law, rule regulation, ordinance, judgment, decree, or order to which
Purchaser or any subsidiary or affiliate thereof are
subject.
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(E)
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No Litigation or
Bankruptcy. There
is no action, suit, demand or proceeding pending, or to the best of
Purchaser’s knowledge, threatened, against Purchaser, or any affiliate
thereof in any court or before any arbitrator or before any Governmental
Authority or agency which in any manner raises any material question
affecting the validity or enforceability of this Agreement or any other
material agreement or instrument to which such Party is party or by which
it is bound that is to be used in connection with, or contemplated by,
this Agreement. There are no bankruptcy, reorganization, or
arrangement proceedings pending, being contemplated by Purchaser or, to
the best of Purchaser’s knowledge, threatened against
Purchaser.
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(F)
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No Broker’s Fees. All
negotiations on behalf of Purchaser relating to this Agreement and any
transactions contemplated hereby have been carried on by Purchaser and its
agents directly with Seller without the intervention of any person or
entity in such manner as to give rise to any enforceable claims against
Purchaser, the Purchase Entities or Seller for a brokerage commission,
finder’s fee or like payment in connection with the consummation of the
transactions contemplated
herein.
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(G)
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Independent
Evaluation. Purchaser
is an experienced and knowledgeable investor in the business of the
Purchase Entities, including, without limitation, the gas transportation
business, particularly that portion of the business dealing with gas
transportation to Mexico. Purchaser has had access to Seller’s
and each of the Purchase Entities’ books, records, files, physical
facilities and to the Assets, has had a full and fair opportunity to
conduct and has conducted the due diligence with respect to the
transactions contemplated by this Agreement which it deems necessary and
is satisfied with the results of such due diligence. Except for
the representations contained in Section 3.01 hereof, Purchaser has relied
on its own expertise and has engaged, consulted and relied solely upon the
expertise and advice of its own legal, tax, environmental, engineering,
and other professional counsel concerning the transactions contemplated by
this Agreement and involving the Purchase Entities, the Assets, and the
value thereof.
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11
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(H)
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Securities Laws and
Purchaser’s Other Dealings. Purchaser
has complied with all federal and state securities laws applicable to the
purchase of Seller’s interests in the Membership Interests and will comply
with such laws if it subsequently disposes of all or any part of such
interests. Purchaser is acquiring the Membership Interests for
its own account and not with a view to, or for offer of resale in
connection with, a distribution thereof, within the meaning of the
Securities Act of 1933, as amended, and any other applicable state and
federal rules, regulations, and laws pertaining to the distribution of
securities. Purchaser has not sought or solicited, nor is
Purchaser participating with, investors, partners, or other third parties
in order to close this transaction, and all funds used by Purchaser in
connection with the Closing of this transaction are Purchaser’s own
funds.
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4. COVENANTS,
AGREEMENTS AND ACKNOWLEDGEMENTS
4.01 Acknowledgements, Covenants and
Agreements of Parties. Each of
Seller and Purchaser hereby acknowledge, covenant and agree as
follows:
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(A)
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Information About
The Assets and the Purchase
Entities. Except
as otherwise expressly provided in this Agreement or any instruments and
documents executed by Seller in connection herewith, neither Seller nor
the Purchase Entities nor any Seller Indemnified Party has made any
warranty or representation, express, statutory, implied or otherwise, as
to: (i) the accuracy, completeness, or materiality of any data,
information or records furnished or made available to Purchaser (or any
affiliate thereof) in connection with Seller, the Purchase Entities or the
Assets; (ii) regulatory matters; or (iii) the present or future value
of the anticipated income, costs or profits, if any, to be derived from
the Purchase Entities, Seller’s interests therein or the
Assets. Any data, information or other records furnished or
made available by Seller or the Purchase Entities, have been provided to
Purchaser (or any affiliate thereof) only as a convenience and Purchaser’s
reliance on or use of the same is at Purchaser’s sole
risk.
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(B)
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No Reliance On Seller As To
Quality Or Physical Condition Of Assets. Except as otherwise expressly provided herein, Purchaser is not
relying and has not relied on Seller or any other Seller Indemnified Party
as to: (i) the quality, nature, adequacy or physical
condition of the Assets; (ii) the quality, nature, adequacy or physical
condition of the soil or the existence or condition of ground water at the
location of the Assets; (iii) the ad valorem taxes now or hereafter
payable on the Assets or the valuation of the Assets for ad valorem tax
purposes; (iv) the development potential of the Assets, their
merchantability or fitness, suitability or adequacy for any particular
purpose; (v) the zoning or other legal status of the Assets; (vi) the
compliance of the Assets with any applicable codes, laws, regulations,
statutes, ordinances, covenants, conditions or restrictions of any
Governmental Authority, or (vii) the quality of any materials relating in
any manner to the Assets. Except as otherwise provided herein,
to the maximum extent permitted by law, Purchaser is purchasing the
Purchase Entities specifically and expressly without, and Seller hereby
disclaims, any warranties, representations or guaranties of any kind,
statutory, oral or written, express or implied, concerning the
Assets. Specifically, but not by way of limitation, Seller
disclaims any and all implied warranties, including, but not limited to,
any implied warranties of merchantability or fitness for a particular
purpose, which relate to the physical conditions of the
Assets. Purchaser has inspected the Assets and is satisfied as
to the physical and environmental condition (both surface and subsurface)
of the Assets. The Assets are being accepted by Purchaser on an
“as is,” “where is,” and “with all faults” basis, based on the condition
and location of the Assets at the time made available for inspection by
Purchaser or Purchaser’s representatives or agents in connection with
purchaser’s due diligence investigations; subject, however, to
deterioration, obsolescence, and movement in the ordinary course of
business.
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(C)
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No Liens or
Limitations. Nothing
contained in this Agreement or the Ancillary Documents shall be construed
as or be deemed to: (i) grant Seller a lien upon the Membership
Interests or the Assets; or (ii) be a limitation on the rights of
Purchaser to sell, assign, encumber or otherwise dispose of all or any
portion of the Membership Interests or the Assets without the consent of
the Seller; provided, however, Purchaser shall remain liable for all of
its duties, obligations and covenants under this Agreement and the
Ancillary Documents after any such sale, assignment, encumbrance or other
disposition.
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4.02 Preparation of Tax Returns; Tax
Covenants. »
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(A)
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Tax
Returns.
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(i)
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Seller
shall be responsible for preparing and timely filing all federal, state,
local and foreign Tax Returns of the Purchase Entities, if any, that are
due on or before the Closing Date, or which relate to Tax periods ending
on or before the Closing Date, but which are due after that
date. In order for Seller to fulfill its obligations under this
paragraph, Purchaser shall provide Seller with all access to the Purchase
Entities’ books and records after the Closing Date upon reasonable request
by Seller.
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(ii)
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Upon
the request of Purchaser, Seller shall, without charge, provide to
Purchaser the federal Income Tax basis of the Assets, as adjusted, through
the Closing Date and before any adjustments to be made by Purchaser under
Section 754 of the Code.
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(B)
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Audits and
Inquiries. Purchaser
shall provide Seller with prompt written notice of any inquiries, audits,
examinations or proposed adjustments by the Internal Revenue Service
(“IRS”) or any other income tax authorities, which relate to the Purchase
Entities for any income tax period ending on or before the Closing
Date. Unless any such inquiry, audit, examination or proposed
adjustment would involve a Liability Issue as described in Section 4.02(C)
(iv), Purchaser has the sole right, at its sole cost and expense, to
represent the interests of the Purchase Entities in any Income Tax audit
or administrative proceeding relating to any Income Tax period beginning
after the Closing Date, to employ counsel of its choice at its cost and
expense, and to settle any issues and to take any other actions in
connection with such proceedings relating to such Income Tax periods;
provided, that Purchaser shall inform Seller of the status of any such
proceedings, shall provide Seller (at Purchaser’s cost and expense) with
copies of any pleadings, correspondence, and other documents as Seller may
reasonably request, and shall consult with Seller and obtain the written
consent of Seller, such consent not to be unreasonably withheld, prior to
the settlement of any such
proceedings.
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12
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(C)
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Liability Issues and
Proceedings.
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(i)
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Except
as provided in Section 1.03(E), Purchaser has no liability for, and Seller
shall be solely responsible for and shall pay, all Taxes, including but
not limited to accrued and unpaid Taxes, (and any costs or expenses
connected therewith) relating to the business or operations of the
Purchase Entities and the Assets for all Tax periods ending on or before
the Closing Date, and shall indemnify and hold harmless Purchaser and the
Purchase Entities with respect
thereto.
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(ii)
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Seller
has no liability for, and Purchaser shall be solely responsible for and
shall pay, all Taxes (and any costs or expenses connected therewith)
relating to the business or operations of the Purchase Entities and the
Assets for all Tax periods ending after the Closing Date, and shall
indemnify and hold harmless Seller with respect
thereto.
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(iii)
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Except
as otherwise set forth in this Agreement, to the extent any refunds or
credits with respect to Taxes paid by the Purchase Entities or any of
their affiliates are attributable to Tax periods ending on or before the
Closing Date, such refunds or credits shall be for the account of
Seller. Any refunds or credits with respect to Taxes paid by
the Purchase Entities for any Tax period ending after the Closing Date,
shall be for the account of Purchaser. Purchaser shall cause
the Purchase Entities to forward to Seller or to reimburse Seller for any
such refunds or credits for the account of Seller within 10 business days
from receipt or application thereof by Purchaser or the Purchase
Entities. Seller shall forward to Purchaser or reimburse
Purchaser for any refunds or credits for the account of Purchaser within
10 business days from receipt or application thereof by
Seller. Any refunds or reimbursements not made within the 10
business day period specified above shall bear interest from the date
received or applied by the refunding or reimbursing party at the prime
rate as published in the Money Rates section of the Wall Street Journal on
the first business day of each
month.
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(iv)
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Purchaser
shall provide Seller with prompt notice of any inquiries, audits,
examinations or proposed adjustments by the IRS or any Tax authorities,
which relate to Taxes which could give rise to a liability of Seller to
Purchaser under this Agreement (a “Liability
Issue”).
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(D)
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Preparation and Filing of
1099s. Seller
will be responsible for the preparation and filing of all 1099 federal tax
reporting through the Closing Date. Purchaser will be
responsible for the preparation and filing of all 1099 federal Tax
reporting after the Closing
Date.
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(E)
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Tax Matters
Definitions. As
used in this Agreement: (i) “Taxes” (or “Tax”) means all
federal, state, county, local, foreign, territorial, and other taxes,
imposts, charges, fees, levies, and duties (including, without limitation,
income, profits, premium, estimated, excise, tollgate, sales, use,
license, occupancy, gross receipts, franchise/margin (including but not
limited to, any franchise or margin taxes imposed on the Purchase Entities
under Chapter 171 of the Texas Tax Code), ad valorem, severance, capital
levy, production, transfer, gain, withholding, employment and payroll
related, and property taxes, import duties, and other governmental charges
and assessments), whether attributable to statutory or non-statutory rules
and whether or not measured in whole or in part by net income, and
including interest, additions to tax or interest, and assessments and
penalties with respect thereto, and including expenses associated with
contesting any proposed adjustment relating to any of the foregoing; (ii)
“Income Taxes” (or “Income Tax”) means all Taxes based upon, measured by,
assessed or imposed upon gross or net income; (iii) “Other Taxes” means
any Taxes other than Income Taxes; (iv) “Tax Return” means any and all
reports, returns, declarations, schedules, information returns,
statements, or other information required to be supplied to a taxing or
Governmental Authority respect to any Tax or Taxes, including without
limitation any individual, combined or consolidated return; (v) “Income
Tax Return” means any Tax Return relating to Income Taxes; and (vi) “Other
Tax Returns” means all Tax Returns other than Income Tax
Returns.
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(F)
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Sales Taxes. Both
parties believe this transaction is exempt from sales tax. If,
however, any sales tax results from the sale of the Membership Interests,
Purchaser shall be responsible for those
taxes.
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4.03 Preservation of Books and
Records. For a
period of five years after the Closing Date, each Party shall provide the other
(and its officers, employees and representatives) with access to its books and
records that pertain to each of the Purchase Entities and the Assets, upon
reasonable advance notice and at reasonable times during regular business hours,
at the requesting Party’s sole cost and expense.
4.04 Non-Competition Agreement. In order
to induce Purchaser to enter into this Agreement and to pay the Purchase Price,
effective as of the Closing Date, Seller agrees to execute and deliver a
Non-Competition Agreement in the form of Exhibit 4.04 (the “Non-Competition
Agreement”).
13
5. CONDITIONS
TO CLOSING
5.01 Conditions to the Obligations of
Purchaser. The
obligations of Purchaser to proceed with the Closing are subject to the
satisfaction on or prior to the Closing Date of all of the following conditions,
any one or more of which may be waived in writing, in whole or in part, by
Purchaser:
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(A)
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Compliance. (i)
Seller has performed, satisfied and complied with its covenants and
agreements contained herein; (ii) each of Seller’s representations and
warranties contained in Section 3.01 must be true and correct in all
material respects on and as of, the Closing Date; and (iii) each of
the conditions specified in this Section 5.01 has been satisfied or
waived.
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(B)
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No Orders. The
Closing will not violate any order or decree of any court or any
Governmental Authority having jurisdiction over the transactions
contemplated by this
Agreement.
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(C)
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Absence of
Litigation. No
material action, suit, proceeding or investigation pertaining to the
transactions contemplated by this Agreement or to their consummation, has
been instituted or threatened by any third
party.
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(D)
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Third Party
Consents. All
necessary agreements, consents and approvals of any persons or entities to
the consummation by Purchaser of the transactions contemplated by this
Agreement, or otherwise pertaining to the matters covered by this
Agreement, have been received and shall be in a form and substance
reasonably satisfactory to
Purchaser.
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(E)
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Performance by
Seller. Seller
has: (i) performed its obligations under Section 2.02 of this Agreement;
and (ii) provided Purchaser with all additional documentation as Purchaser
reasonably deems necessary to evidence Seller’s compliance with this
section.
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5.02 Conditions to the Obligations of the
Seller. The
obligations of Seller to proceed with the Closing are subject to the
satisfaction on or prior to the Closing Date of all of the following conditions,
any one or more of which may be waived in writing by Seller:
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(A)
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Compliance. (i)
Purchaser has performed, satisfied and complied with its covenants and
agreements contained herein; (ii) each of Purchaser’s representations and
warranties contained in Section 3.02 must be true and correct in all
material respect on and as of, the Closing Date; and (iii) each of
the conditions specified in this Section 5.02 hereof has been satisfied or
waived.
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(B)
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No Orders. The
Closing will not violate any order or decree of any court or governmental
body having competent jurisdiction over the transactions contemplated by
this Agreement.
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(C)
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Absence of
Litigation. No
material action, suit, proceeding or investigation pertaining to the
transactions contemplated by the Agreement has been initiated or
threatened on or before the Closing Date by any third
party.
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(D)
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Third Party
Consents. All
necessary agreements, consents and approvals of any persons or entities to
the consummation by Seller of the transactions contemplated by this
Agreement, or otherwise pertaining to the matters covered by this
Agreement, have been received and are in form and substance reasonably
satisfactory to Seller.
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(E)
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Performance by
Purchaser. Purchaser
has performed its: (i) obligations under Section 2.02 of this
Agreement; and (ii) provided Seller with all additional documentation as
Seller reasonably deems necessary to evidence Purchaser’s compliance with
this section.
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14
6. SURVIVAL
AND INDEMNIFICATION
6.01 Indemnification of
Purchaser. Subject
to Section 6.02, Seller agrees to indemnify Purchaser and Purchaser’s affiliates
and the representatives, officers, directors, employees and agents, of such
entities (collectively, the “Purchaser Indemnified Parties”) against, any Claims
sustained or incurred by any of the Purchaser Indemnified Parties arising out of
or resulting from any inaccuracy or breach of any of the representations,
warranties or covenants made by Seller herein; provided that in no event shall
Seller be liable for an amount in excess of the amount actually received by it
pursuant to Section 1.03.
6.02 Indemnification of
Seller. Subject
to Section 6.01, Purchaser agrees to indemnify Seller, Seller’s affiliates, and
the benefit plans of Seller and Seller’s affiliates and the representatives,
officers, directors, employees and agents of such entities and plans
(collectively, the “Seller Indemnified Parties”) against, any Claims sustained
or incurred by any of the Seller Indemnified Parties arising out of or resulting
from: (i) any inaccuracy or breach of any of the representations,
warranties or covenants made by Purchaser herein; or (ii) any act or occurrence
relating to the ownership and operation of the Assets, or operation of the
Purchase Entities, on or after the Closing Date, except to the extent that any
such act or occurrence pertains to a breach by Seller of a representation,
warranty or covenant set forth in this Agreement. Except as expressly
provided otherwise herein, each obligation of indemnification and defense
undertaken by Purchaser under this Agreement or any Ancillary Document will
survive Closing and will survive any disposition or sale by Purchaser of any or
all of the Assets or the Membership Interests and will further survive any
dissolution, merger, liquidation or winding up of the Purchase Entities or
Purchaser. The rights and entitlements of the Seller Indemnified
Parties derived under this Agreement are cumulative and not alternative to any
other rights and remedies under other provisions of this Agreement or otherwise
existing at law or in equity. If Purchaser disposes, transfers,
assigns or sells all or any portion of the Assets or the Membership Interests,
Purchaser will remain liable under this Agreement and the Ancillary Documents to
the Seller Indemnified Parties.
6.03 Indemnification
Procedures. The
indemnification obligations of Seller and Purchaser under this Agreement arising
from liability asserted by a third party (“Third Party Claim”) will be asserted
and resolved as follows:
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(A)
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Indemnity
Definitions. A
Party claiming indemnification under this Agreement (an “Indemnified
Party”) shall promptly notify in writing the other Party (the
“Indemnifying Party”) of the Third Party Claim which has given rise to a
right of indemnification under this Agreement, describing in detail the
nature of the Third Party Claim and the agreement, representation or
warranty with respect to which the Third Party Claim is made, the facts
giving rise to the Third Party Claim and the amount (to the extent then
determinable) of liability for which indemnity is asserted (the “Claim
Notice”). The Indemnifying Party shall promptly after receipt
of the Claim Notice: (i) at the sole cost and expense of the
Indemnifying Party, defend the Indemnified Party against such Claim;
or (ii) if the Indemnifying Party denies responsibility,
promptly so notify the party claiming
indemnification.
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(B)
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Indemnifying Party
Defends. The
Indemnifying Party will have the right and obligation to diligently
defend, at its sole cost and expense, the Third Party
Claim. The Indemnifying Party will have full control of such
defense and proceedings, including any compromise or settlement
thereof. If requested by the Indemnifying Party, the
Indemnified Party agrees to cooperate in contesting any Third Party Claim
which the Indemnifying Party elects to contest and to provide witness and
other support at the sole cost and expense of the Indemnifying
Party. At its expense, the Indemnified Party may participate
in, but not control, any defense or settlement of any Third Party Claim
controlled by the Indemnifying Party pursuant to this section, and may not
consent to the entry of any judgment or enter into any settlement with
respect to a Third Party Claim without the prior written consent of the
Indemnifying Party, which shall not be unreasonably
withheld. Subject to the foregoing provisions, no Party will,
without the other Party’s written consent, settle, compromise, confess
judgment or permit judgment by default in any action, suit or proceeding
if such action would create liability for, or attach liability or
obligation to, the other
Party.
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(C)
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Indemnified Party
Defends. If
the Indemnifying Party wrongfully fails to diligently defend or settle the
Third Party Claim, or in the event that counsel to the Indemnified Party
determines that there exists a conflict of interest that requires the
Indemnified Party to obtain separate counsel, then the Indemnified Party
will have the right to assume or participate in the defense of such Third
Party Claim at the sole cost and expense of the Indemnifying Party, unless
it is ultimately determined that such Indemnified Party was not entitled
to indemnification pursuant to this Agreement. However, an
Indemnifying Party will never have the obligation to pay the costs and
expenses of more than one other law firm (in addition to counsel of the
Indemnifying Party) with respect to the Indemnified Party in connection
with a particular Third Party
Claim.
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6.04 Survival.
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(A)
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Representations and
Warranties. The
representations and warranties of Seller and Purchaser contained in
Sections 3.01 and 3.02, respectively, will survive the Closing for a
period of two years after the Closing
Date.
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(B)
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Covenants. Unless
a specified period is set forth in this Agreement (in which event such
specified period will control), the covenants in this Agreement and any
Ancillary Document, including, but not limited to those in Section 4.04,
Article 6 and Article 7, will survive the Closing and remain in
effect. Notwithstanding anything to the contrary in this
Agreement, the terms and conditions of Sections 7.06, 7.13 and 7.16 will
survive termination of this
Agreement.
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15
7. MISCELLANEOUS
7.01
Expenses. Except as
may be otherwise specifically provided in this Agreement, all fees, costs and
expenses incurred by Purchaser or Seller in negotiating this Agreement or in
consummating the transactions contemplated by this Agreement shall be paid by
the Party incurring the same, including, without limitation, attorneys’ fees and
legal, accounting and environmental consulting fees, costs and
expenses.
7.02 Notices. All
notices and other communications hereunder shall be in writing and shall be
deemed given when delivered personally or when received if sent by registered or
certified mail, return receipt requested, by reputable overnight delivery
service, or by facsimile (with the transmission confirmed), to the Parties at
the following addresses (or at such other address as a Party may specify by like
notice):
| (A) If to Seller: |
Reef
Ventures, L. P.
|
|
c/o
Tidelands Oil & Gas Corporation
|
|
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0000
X. Xxxxxxx, Xxxx. 0
|
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Xxx
Xxxxxxx, Xxxxx 00000
|
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|
Attention:
Xxxxx X. Xxxxx
|
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Fax:
(000) 000-0000
|
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with
a copy (which shall not constitute notice)
to:
|
Xxxxx
X. Xxxxxxx
|
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Xxxxxxxxxxx
& Price, LLP
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000
Xxxxxxx Xxxxxx, Xxxxx 000
|
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Xxx
Xxxxxxx, Xxxxx 00000-0000
|
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Fax:
(000) 000-0000
|
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| (B) If to Purchaser: |
West
Texas Gas, Inc.
|
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000
Xxxxx Xxxxxxxx
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Xxxxxxx,
Xxxxx 00000-0000
|
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Attention:
X.X. Xxxxx
|
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|
Fax:
(000) 000-0000
|
|
|
|
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with
a copy (which shall not constitute notice)
to:
|
Xxxxxxx
X. Xxxxxx
|
|
Bullock,
Scott, Neisig, Morgan,
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|
Leeton
& Xxxxxxx, P.C.
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|
|
000
Xxxx Xxxxx, Xxxxx 000
|
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Xxxxxxx,
Xxxxx 00000-0000
|
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Fax:
(000) 000-0000
|
16
7.03 Amendment.
This
Agreement may not be amended, nor may any rights hereunder be waived except by
an instrument in writing signed by the Party to be charged with such amendment
or waiver. No waiver of any term, provision or condition of this Agreement, in
any one or more instances, shall be deemed to be, or construed as, a further
continuing waiver of any such term, provision or condition or as a waiver of any
other term, provision or condition of this Agreement.
7.04 Headings.
The
headings of the articles and sections of this Agreement are for guidance and
convenience of reference only and do not limit or otherwise affect any of the
terms or provisions of this Agreement.
7.05 Usage.
References
made in this Agreement, including use of a pronoun, shall be deemed to include,
where applicable, masculine, feminine or neuter, singular or plural,
individuals, partnerships or corporations. Unless otherwise
indicated, the terms “herein,” “hereunder” and “hereof” used in this
Agreement refer to this Agreement and not to a particular section of this
Agreement.
7.06 Venue and Governing Law.
This
Agreement and the transactions contemplated hereby will be construed in
accordance with, and governed by, the laws of the state of Texas, regardless of
such state’s choice of law principles. The venue for any action,
litigation or lawsuit involving this agreement and the transactions contemplated
hereby will be in the courts of the state of Texas situated in Midland County,
Texas, or if federal jurisdiction exists and the party bringing the action so
chooses, then in the United States District Court for the Midland-Odessa
Division of the Western District of Texas.
7.07 Entirety.
This
Agreement (including the exhibits hereto) and the Ancillary Documents, when read
together, constitute the entire understanding between the parties with respect
to the subject matter hereof and supersedes all negotiations, prior discussions
and prior agreements and understandings relating to such subject
matter. In the event of a conflict or inconsistency between this
Agreement, on the one hand, and any Ancillary Document, on the other hand, the
terms and conditions of this Agreement controls. No material
representation, warranty, covenant, agreement, promise, inducement or statement,
whether oral or written, has been made by Seller or Purchaser and relied upon by
the other that is not set forth in this Agreement or in the instruments referred
to herein. Neither Seller nor Purchaser will be bound by or liable
for any alleged representation, warranty, covenant, agreement, promise,
inducement or statement not so set forth.
7.08 Assignment. This
Agreement shall be binding on and shall inure to the benefit of the Parties
hereto and their respective successors and assigns. Neither Party may
assign all or any portion of its respective rights, or delegate any portion of
its duties hereunder, without the prior written consent of the other, such
consent not to be unreasonably withheld.
7.09 Subsequent Notification. Purchaser
agrees that it shall timely notify Seller in writing of their receipt, after the
Closing Date, of any instrument, notification or other document affecting the
Assets while owned, directly or indirectly, by Seller. Seller agrees
that it shall timely notify Purchaser in writing of its receipt, after the
Closing Date, of any instrument, notification or other document affecting the
Assets while owned, directly or indirectly, by Purchaser.
7.10 Subsequent Filings. Effective
on the Closing Date, Purchaser shall file, at its own expense, with all
applicable regulatory agencies or authorities any such notices or certificates
as are necessary to reflect the sale to Purchaser.
7.11 Severability. If any
term or other provision of this Agreement is invalid, illegal or incapable of
being enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any material adverse manner to any
Party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the Parties shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the fullest extent
possible.
7.12 Further Assurances. The
Parties agree to deliver or cause to be delivered to each other on the Closing
Date and at such other times thereafter as shall be reasonably agreed any such
additional instrument as either of them may reasonably request for the purpose
of carrying out the transactions contemplated by this Agreement.
7.13 Expenses of Litigation. If any
proceeding is brought by any Party, or its successors or assigns, for the
enforcement of this Agreement, or as a result of any alleged dispute, breach,
default or misrepresentation by any Party of any of the provisions of this
Agreement, the successful or prevailing Party will be entitled to recover its
reasonable attorneys’ fees and other costs incurred in pursuing such proceeding,
in addition to such other relief to which it may be entitled.
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7.14 Public Announcements. Purchaser
and Seller agree that prior to making any public announcement or statement with
respect to the transactions contemplated by this Agreement, the Party desiring
to make such public announcement or statement shall consult with the other Party
and obtain prior written approval of the other Party of the text of a public
announcement or statement to be made. Nothing contained in this
section will be construed to require either Party to obtain approval of the
other Party hereto to disclose information with respect to the transaction
contemplated by this Agreement to any state or federal Governmental Authority or
agency to the extent required by applicable law or by any applicable rules,
regulations or orders of any Governmental Authority or agency having
jurisdiction or necessary to comply with disclosure requirements of the New York
Stock Exchange, NASDAQ or any applicable securities laws.
7.15 No Third Party
Beneficiaries. Except
for the Seller Indemnified Parties and the Buyer Indemnified Parties, who are
express third-party beneficiaries of the indemnification provisions of this
Agreement, there are no third-party beneficiaries of any of the rights and
obligations of either Seller or Purchaser under this Agreement.
7.16 Waiver of Punitive
Damages. To the
maximum extent permitted by law, each of the parties knowingly, voluntarily and
intentionally waives any right it may have to claim or recover any special,
exemplary, punitive or consequential damages, arising out of or in connection
with this agreement or the transaction contemplated by this
agreement. But, to the extent that a person is indemnified under this
agreement from liability to third parties, such person will be indemnified from
any liability to such third party for special, exemplary, punitive or
consequential damages.
7.17 Exhibits Incorporated. Each of
the exhibits attached to this Agreement are incorporated into and made a part of
this Agreement.
7.18 Counterpart Execution. This
Agreement may be executed by Purchaser and Seller in any number of counterparts,
no one of which need be executed by all parties. Each of such
counterparts is an original instrument, and all counterparts together constitute
but one and the same instrument. This agreement will become operative
when each Party has executed at least one counterpart.
Agreed
to and Accepted:
PURCHASER:
West Texas Gas, Inc.
By: /s/ X.X.
Xxxxx
Name:
X.X.
Xxxxx
Title: President
SELLER:
Reef
Ventures, L.P.
By: Arrecefe
Management, LLC, its general partner
By: /s/ Xxxxx X.
Xxxxx
Name:
Xxxxx X.
Xxxxx
Title: Manager
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