PURCHASE AND SALE AGREEMENT
BETWEEN
X. X. XXXXX CORPORATION
AS SELLER
AND
HIGH PLAINS GAS, INC.
AS BUYER
DATED:
FEBRUARY 2, 2011
TABLE OF CONTENTS
PAGE
ARTICLE 1 . . ASSETS 1
SECTION 1.01 AGREEMENT TO SELL AND PURCHASE 1
SECTION 1.02 ASSETS 1
SECTION 1.03 EXCLUDED ASSETS 3
ARTICLE 2 PURCHASE PRICE 5
SECTION 2.01 PURCHASE PRICE 5
SECTION 2.02 DEPOSIT 5
SECTION 2.03 ALLOCATED VALUES 6
ARTICLE 3 EFFECTIVE TIME 7
SECTION 3.01 OWNERSHIP OF ASSETS 7
ARTICLE 4 TITLE AND ENVIRONMENTAL MATTERS 7
SECTION 4.01 EXAMINATION PERIOD 7
SECTION 4.02 TITLE DEFECTS 7
SECTION 4.03 NOTICE OF TITLE DEFECTS 8
SECTION 4.04 REMEDIES FOR TITLE DEFECTS 10
SECTION 4.05 SPECIAL WARRANTY OF TITLE 11
SECTION 4.06 PREFERENTIAL RIGHTS TO PURCHASE 13
SECTION 4.07 CONSENTS TO ASSIGNMENT 14
SECTION 4.08 [INTENTIONALLY OMITTED] 15
SECTION 4.09 ENVIRONMENTAL REVIEW 15
SECTION 4.10 DEFINITIONS USED IN ARTICLE 4 AND IN THIS AGREEMENT 16
SECTION 4.11 NOTICE OF ENVIRONMENTAL DEFECTS 17
SECTION 4.12 REMEDIES FOR ENVIRONMENTAL DEFECTS 18
SECTION 4.13 INDEPENDENT EXPERTS 19
SECTION 4.14. LIMITATION OF REMEDIES FOR TITLE DEFECTS AND
ENVIRONMENTAL DEFECTS 20
SECTION 4.15 DISCLAIMER AND WAIVER 21
ARTICLE 5 . . REPRESENTATIONS AND WARRANTIES OF SELLER 21
SECTION 5.01 EXISTENCE 21
SECTION 5.02 LEGAL POWER 21
SECTION 5.03 EXECUTION 22
SECTION 5.04 BROKERS 22
SECTION 5.05 BANKRUPTCY 22
SECTION 5.06 SUITS AND CLAIMS 22
SECTION 5.07 TAXES 22
SECTION 5.08 AFES 22
Section 5.09 Compliance with Laws 23
SECTION 5.10 CONTRACTS 23
SECTION 5.11 PRODUCTION IMBALANCES 23
SECTION 5.12 PAYMENTS FOR PRODUCTION 23
SECTION 5.13 BONDS 23
SECTION 5.14 PERSONAL PROPERTY AND EQUIPMENT 23
SECTION 5.15 TAX PARTNERSHIPS 23
SECTION 5.16 HYDROCARBON SALES CONTRACTS 23
SECTION 5.17 AREA OF MUTUAL INTEREST AND OTHER AGREEMENTS 23
SECTION 5.18 LEASES 24
SECTION 5.19 GOVERNMENTAL PERMITS 24
SECTION 5.20 NO ADVERSE CHANGE 24
SECTION 5.21 UNRECORDED INTERESTS 24
SECTION 5.22 PREFERENTIAL RIGHTS AND CONSENTS 24
SECTION 5.23 DISCLOSURE OF ENVIRONMENTAL INFORMATION 24
SECTION 5.24 NOTICE OF CHANGE 24
SECTION 5.25 REPRESENTATIONS AND WARRANTIES EXCLUSIVE 24
ARTICLE 6 . . REPRESENTATIONS AND WARRANTIES
OF BUYER 25
SECTION 6.01 EXISTENCE 25
SECTION 6.02 LEGAL POWER 25
SECTION 6.03 EXECUTION 25
SECTION 6.04 BROKERS 25
SECTION 6.05 BANKRUPTCY 25
SECTION 6.06 SUITS AND CLAIMS 25
SECTION 6.07 INDEPENDENT EVALUATION 26
SECTION 6.08 QUALIFICATION 26
SECTION 6.09 SECURITIES LAWS 26
SECTION 6.10 NO INVESTMENT COMPANY 26
SECTION 6.11 FUNDS 26
SECTION 6.12 NOTICE OF CHANGES 26
SECTION 6.13 REPRESENTATIONS AND WARRANTIES EXCLUSIVE 27
ARTICLE 7 OPERATION OF THE ASSETS 27
SECTION 7.01 OPERATION OF THE ASSETS 27
SECTION 7.02 BUYER'S QUALIFICATION 28
SECTION 7.03 OPERATION OF THE ASSETS AFTER THE CLOSING 28
SECTION 7.04 PUBLIC ANNOUNCEMENTS 28
ARTICLE 8 CONDITIONS TO OBLIGATIONS OF SELLER 28
SECTION 8.01 REPRESENTATIONS 29
SECTION 8.02 PERFORMANCE 29
SECTION 8.03 PENDING MATTERS 29
Article 9 Conditions to Obligations of Buyer 29
SECTION 9.01 REPRESENTATIONS 29
SECTION 9.02 PERFORMANCE 29
SECTION 9.03 PENDING MATTERS 29
ARTICLE 10 THE CLOSING 29
SECTION 10.01 TIME AND PLACE OF THE CLOSING 29
SECTION 10.02 ALLOCATION OF COSTS AND EXPENSES AND ADJUSTMENTS
TO PURCHASE PRICE AT THE CLOSING 30
SECTION 10.03 CLOSING ADJUSTMENTS AND ALLOCATIONS STATEMENT 31
SECTION 10.04 POST-CLOSING ALLOCATIONS AND ADJUSTMENTS
TO PURCHASE PRICE 31
SECTION 10.05 TRANSFER TAXES 33
SECTION 10.06 AD VALOREM AND SIMILAR TAXES 33
SECTION 10.07 ACTIONS OF SELLER AT THE CLOSING 33
SECTION 10.08 ACTIONS OF BUYER AT THE CLOSING 34
SECTION 10.09 RECORDATION; FURTHER ASSURANCES 34
ARTICLE 11 TERMINATION 35
SECTION 11.01 RIGHT OF TERMINATION 35
SECTION 11.02 EFFECT OF TERMINATION 35
SECTION 11.03 ATTORNEYS' FEES, ETC 36
ARTICLE 12 ASSUMPTION AND INDEMNIFICATION 36
SECTION 12.01 BUYER'S OBLIGATIONS AFTER CLOSING 36
SECTION 12.02 SELLER'S OBLIGATIONS AFTER CLOSING 37
SECTION 12.03 PLUGGING AND ABANDONMENT OBLIGATIONS 37
SECTION 12.04 ENVIRONMENTAL OBLIGATIONS 38
SECTION 12.05 DEFINITION OF CLAIMS 39
SECTION 12.06 APPLICATION OF INDEMNITIES 39
SECTION 12.07 BUYER'S INDEMNITY 40
SECTION 12.08 SELLER'S INDEMNITY 40
SECTION 12.09 NOTICES AND DEFENSE OF INDEMNIFIED CLAIMS 40
SECTION 12.10 SURVIVAL 41
SECTION 12.11 LIMITATION ON SELLER'S INDEMNITY 41
SECTION 12.12 EXCLUSIVE REMEDY 41
SECTION 12.13 DEFENSES AND COUNTERCLAIMS 41
SECTION 12.14 ANTI-INDEMNITY STATUTE 42
ARTICLE 13. DISCLAIMERS; CASUALTY LOSS AND CONDEMNATION 42
SECTION 13.01 DISCLAIMERS OF REPRESENTATIONS AND WARRANTIES 42
SECTION 13.02 NORM 43
SECTION 13.03 CASUALTY LOSS; CONDEMNATION 44
Article 14 Miscellaneous 44
SECTION 14.01 NAMES 44
SECTION 14.02 EXPENSES 44
SECTION 14.03 DOCUMENT RETENTION 45
SECTION 14.04 ENTIRE AGREEMENT 45
SECTION 14.05 WAIVER 45
SECTION 14.06 CONSTRUCTION 45
SECTION 14.07 NO THIRD PARTY BENEFICIARIES 45
SECTION 14.08 ASSIGNMENT 45
SECTION 14.09 GOVERNING LAW; VENUE 46
SECTION 14.10 NOTICES 46
SECTION 14.11 SEVERABILITY 47
SECTION 14.12 INTERPRETATION 47
SECTION 14.13 CONSPICUOUSNESS 49
SECTION 14.14 DECEPTIVE TRADE PRACTICES WAIVER 49
SECTION 14.15 TIME OF THE ESSENCE 49
SECTION 14.16 COUNTERPART EXECUTION 49
EXHIBITS AND SCHEDULES
Exhibit A Subject Interests and Surface Agreements
Exhibit B Xxxxx
Exhibit C Allocated Values
Exhibit D Form of Assignment and Xxxx of Sale
Exhibit E Form of Mineral Quitclaim Deed
Exhibit F Transition Matters
Exhibit G Form of Assignment Agreement
Exhibit H Form of Parent Guarantee
Schedule 1.03(m) Excluded Electronic Equipment
Schedule 4.06 Rights of Preferential Purchase
Schedule 4.07 Consents to Assignment
Schedule 5.06 Litigation
Schedule 5.07 Pending Tax Audits
Schedule 5.08 Authorizations for Expenditures
Schedule 5.13 Bonds
Schedule 5.16 Hydrocarbon Sales Agreements
Schedule 7.01(a)(iv) Pending Contract Matters
TABLE OF DEFINED TERMS
Agreement. . . . . . . . . . 1 Lands 1
Allocated Values . . . . . . 6 Laws 12
Assets . . . . . . . . . . . 1 Lease and Leases 1
Assignment . . . . . . . . . 11 Marketable Title 7
Assignment Agreement . . . . 45 material 48
Assumed Obligations. . . . . 36 Material Adverse Effect 48
Breach . . . . . . . . . . . 48 Mineral Quitclaim Deed 11
Buyer. . . . . . . . . . . . 1 NORM 43
Buyer's Environmental Review 15 Notice of Disagreement 31
Casualty . . . . . . . . . . 44 OPA 17
Casualty Loss. . . . . . . . 44 Parent Guarantee 34
CERCLA . . . . . . . . . . . 16 Party 1
Claims . . . . . . . . . . . 39 PDNP 6
Closing. . . . . . . . . . . 30 Permits 2
Closing Date . . . . . . . . 30 Permitted Encumbrances 11
Contracts. . . . . . . . . . 3 Plugging and Abandonment
Deposit. . . . . . . . . . . 5 Obligations 37
Documents. . . . . . . . . . 45 Probable and/or Possible Locations 6
Effective Time . . . . . . . 7 PUD Locations 6
Environmental Defect . . . . 16 Purchase Price 5
Environmental Defect Value . 17 Purchase Price Allocations and
Environmental Information. . 16 Adjustments 31
Environmental Laws . . . . . 00 XXXX 00
Environmental Obligations. . 38 Records 3
Equipment. . . . . . . . . . 2 Representatives 39
Examination Period . . . . . 7 Retained Obligations 37
Excluded Assets. . . . . . . 3 Seller 1
Expiration Date. . . . . . . 41 Statement 31
Facilities . . . . . . . . . 2 Subject Interest or Subject Interests 2
Final Settlement Date. . . . 31 Surface Agreements 2
Final Settlement Statement . 31 Tax 48
Governmental Authority . . . 16 Title Claim Date 8
Hydrocarbons . . . . . . . . 1 Title Defect 7
includes or including. . . . 48 Title Defect Value 8
Independent Expert . . . . . 19 Xxxxx 2
knowledge or knowingly . . . 48 WYOMING INVENTORY 2
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (this "Agreement") is made and entered into
this 2nd day of February, 2011, by and between X.X. XXXXX CORPORATION, a New
Jersey corporation ("Seller"), and HIGH PLAINS GAS, INC., a Nevada corporation
("Buyer"). Buyer and Seller are collectively referred to herein as the
"Parties," and are sometimes referred to individually as a "Party."
R E C I T A L S:
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, the Assets (as defined below), all upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) cash in hand paid and
of the mutual benefits derived and to be derived from this Agreement by each
Party, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as
follows:
ARTICLE 1
ASSETS
SECTION 1.01 Agreement to Sell and Purchase. Subject to and in accordance
with the terms and conditions of this Agreement, Buyer agrees to purchase the
Assets from Seller, and Seller agrees to sell the Assets to Buyer.
SECTION 1.02 Assets. Subject to Section 1.03, the term "Assets" shall mean
all of Seller's right, title and interest in and to:
(a) The oil, gas and other mineral leases described on Exhibit A
(collectively, the "Leases" and singularly a "Lease") and any overriding royalty
interests, royalty interests, fee mineral interests, non-working or carried
interests, operating rights, record title and other rights and interests
described in Exhibit A, together with the lands covered thereby or pooled,
communitized or unitized therewith (the "Lands"), but excluding any specifically
described depths or intervals set forth in Exhibit A, however including in the
defined terms Leases and Lands the following: (i) all right, title and interest
of Seller in and to any other mineral interests of any nature (A) located in,
on, or under the Lands, or (B) which are attributable to the proration or
spacing unit or designated pooled or communitized unit for any of the Xxxxx (as
hereinafter defined), in each case whether or not described in or omitted from
Exhibit A, (ii) all rights with respect to any pooled, communitized or unitized
interest or contract area under any effective operating agreement by virtue of
any Leases and Lands or the interests described in clause (i) above being a part
thereof, and (iii) all production of oil, gas (including coalbed methane),
associated liquids, other hydrocarbons and other lease substances under the
Leases (collectively "Hydrocarbons") from and after the Effective Time from the
Leases and the
Lands, and from any such pooled, communitized, or unitized interest or affected
contract area and allocated to any such Leases and Lands or the interests
described in clause (i) above (the Leases, the Lands, and the rights described
in clauses (i) and (ii) above, and the Hydrocarbons described in clause (iii)
above, being collectively referred to as the "Subject Interests" or, singularly,
a "Subject Interest");
(b) all easements, rights-of-way, servitudes, surface leases, surface use
agreements, water management or handling agreements, water disposal agreements,
agreements pertaining to water xxxxx and other rights or agreements related to
the use of the surface and subsurface (the "Surface Agreements"), in each case
to the extent used in connection with the operation of the Subject Interests,
recorded or unrecorded, including those Surface Agreements described in Exhibit
A;
(c) to the extent assignable or transferable, all permits (including without
limitation those relating to the production or discharge of water), licenses,
franchises, consents, approvals, and other similar rights and privileges (the
"Permits"), in each case to the extent used in connection with the operation of
the Subject Interests;
(d) all equipment, machinery, fixtures, spare parts, the inventory at
Seller's Xxxxxxxx and Sheridan, Wyoming storage yards (the "Wyoming Inventory"),
other inventory, and other personal property (including Seller's leasehold
interests therein subject to any necessary consents to assignment) used in
connection with the operation of the Subject Interests or in connection with the
production, treatment, compression, gathering, transportation, sale, or disposal
of Hydrocarbons and any water, by-products or waste produced therewith or
otherwise attributable to the Subject Interests (collectively, "Equipment"); all
xxxxx located on the Leases or the Lands or on lands pooled, communitized, or
unitized therewith or on any contract area under an effective operating
agreement that affects the Leases or Lands and whether producing, shut in, or
abandoned, and whether for production, monitoring, produced water injection or
disposal, or otherwise, and including without limitation those Xxxxx described
in Exhibit B (collectively, the "Xxxxx") together with all of Seller's interests
within the spacing, producing, proration, federal exploratory, enhanced
recovery, or governmentally prescribed unit attended to the Xxxxx, wellhead
equipment, telemetry and SCADA equipment, pumps, pumping units, flowlines,
gathering systems, pipe, tanks, treatment facilities, injection facilities,
disposal facilities, compression facilities, and other materials, furniture,
supplies, buildings, vehicles, trailers, and offices located in Houston, Texas,
Sheridan, Wyoming and Denver, Colorado used in connection with the Subject
Interests and the other matters described in this definition of Assets (the
"Facilities");
(e) to the extent assignable or transferable, (i) all Surface Agreements,
contracts, agreements, drilling contracts, equipment leases, production sales
and marketing contracts, farm-out and farm-in agreements, operating agreements,
unit agreements, gas gathering and transportation agreements and other
contracts, agreements, and arrangements, relating to the Subject Interests and
the other matters described in this definition of Assets, and subject to, and in
accordance with, any limitations set forth in such agreements, (ii) equipment
leases and rental contracts, supply agreements, and (iii) the leases covering
the Houston, Texas, Denver, Colorado, and Sheridan, Wyoming
offices, and other contracts, agreements, and arrangements relating to the
Subject Interests and the other matters described in this definition of Assets
(the agreements identified in clauses (i), (ii) and (iii) above being,
collectively, the "Contracts"); and
(f) all files, records, and data relating to the items described in Sections
1.02(a) through (e) maintained by Seller including, without limitation, the
following, if and to the extent that such files exist: all books, records,
reports, manuals, files, title documents (including correspondence), records of
production and maintenance, revenue, sales, expenses, warranties, lease files,
land files, well files, division order files, abstracts, title opinions,
assignments, reports, property records, contract files, operations files, copies
of tax and accounting records (but excluding Federal and state income tax
returns and records) and files, maps, core data, gas content data, coal yield
and thickness data, Hydrocarbon analysis, well logs, mud logs, field studies
together with other files, contracts, and other records and data including all
geologic (but not geophysical) data and maps, but excluding from the foregoing
those files, records, and data subject to written unaffiliated third party
contractual restrictions on disclosure or transfer (the "Records"). To the
extent that any of the Records contain interpretations of, or analyses prepared
by, Seller, Buyer agrees to rely on such interpretations at its sole risk and
without any duty on the part of Seller regarding such interpretations.
SECTION 1.03 Excluded Assets. Notwithstanding the foregoing, the Assets
shall not include, and there is excepted, reserved and excluded from the sale,
transfer and assignment contemplated hereby the following excluded properties,
rights and interests (collectively, the "Excluded Assets"):
(a) all trade credits and all accounts, instruments and general intangibles
attributable to the Assets with respect to any period of time prior to the
Effective Time;
(b) all rights or Claims of Seller against any third party,
(i) arising from acts, omissions or events, or damage to or destruction of
property, occurring prior to the Effective Time,
(ii) arising under or with respect to any of the Contracts that are
attributable to periods of time prior to the Effective Time (including Claims
for adjustments or refunds), or
(iii) with respect to any of the other Excluded Assets;
(c) all rights and interests of Seller,
(i) under any policy or agreement of insurance or indemnity,
(ii) under any bond, or
(iii) to any insurance or condemnation proceeds or awards arising in each
case from acts, omissions or events, or damage to or destruction of property,
occurring prior to the Effective Time;
(d) all Hydrocarbons produced from or otherwise attributable to the Subject
Interests with respect to all periods prior to the Effective Time, together with
all proceeds from the sale of such Hydrocarbons, and all Tax credits
attributable thereto;
(e) all Claims of Seller for refunds of or loss carry forwards with respect
to
(i) ad valorem, severance, production, or any other Taxes attributable to
any period prior to the Effective Time,
(ii) income, gross margin, or franchise Taxes,
(iii) any Taxes attributable to the other Excluded Assets, and such other
refunds, and rights thereto, for amounts paid in connection with the Assets and
attributable to the period prior to the Effective Time, including refunds of
amounts paid under any gas gathering or transportation agreement;
(f) all amounts due or payable to Seller as adjustments to insurance
premiums related to the Assets with respect to any period prior to the Effective
Time;
(g) all proceeds, income, or revenues (and any security or other deposits
made) attributable to the Assets for any period prior to the Effective Time, or
any other Excluded Assets;
(h) subject to Section 1.02(f), all of Seller's proprietary technology and
improvements, computer software, patents, trade secrets, copyrights, names,
trademarks, logos, and other intellectual property;
(i) all documents and instruments of Seller that are protected by an
attorney-client or other privilege, provided that said privilege has not been
waived;
(j) data, information, and other property, rights, or interests that cannot
be disclosed or assigned to Buyer as a result of a license, confidentiality or
similar arrangement;
(k) all proprietary geophysical and seismic data that has been collected or
obtained from any seismic surveys or gravity meter surveys covering any portion
of the Lands, including any processed or reprocessed data.
(l) all audit rights arising under any of the Contracts or otherwise with
respect to any period prior to the Effective Time or to any of the other
Excluded Assets;
(m) all computers, printers, and other electronic equipment listed on
Schedule 1.03(m) located in any buildings, offices or trailers that may belong
to Seller and that may constitute part of the Assets, including, all software
and electronic data
relating in any way to such electronic equipment (but not the telemetry/SCADA
system included in the Assets);
(n) All corporate, income tax, and financial records of Seller not included
in the Records; and
(o) all agreements providing for options, swaps, floors, caps, collars,
forward sales, or forward purchases involving commodities or commodity prices,
or indexes based on any of the foregoing and all other similar agreements and
arrangements.
ARTICLE 2
PURCHASE PRICE
SECTION 2.01 Purchase Price. The total consideration for the purchase,
sale, and conveyance of the Assets to Buyer and Buyer's assumption of the
Assumed Obligations and all other liabilities provided for in this Agreement, is
Buyer's payment to Seller of the sum of Thirty-Five Million Dollars
($35,000,000) (the "Purchase Price"), as adjusted in accordance with the
provisions of this Agreement.
SECTION 2.02 Deposit.
(a) Buyer shall deliver to Seller a performance guarantee deposit in an
amount equal to Two Million Dollars ($2,000,000) (the "Deposit") in accordance
with wire transfer instructions timely provided by Seller to Buyer. The Deposit
shall be delivered as follows:
(i) Concurrently with this Agreement by Buyer and Seller, Buyer shall
deliver to Seller One Million Dollars ($1,000,000.00) in immediately available
funds. If this portion of the Deposit is not timely delivered to Seller, this
Agreement shall automatically terminate, and neither Party shall have rights or
obligations hereunder; and
(ii) On or before the close of business on February 20, 2011, Buyer shall
deliver to Seller in immediately available funds One Million Dollars
($1,000,000.00). If this portion of the Deposit is not timely delivered to
Seller, Seller may retain the initial portion of the Deposit paid pursuant to
Section 2.02(a)(i) as liquidated damages and terminate this Agreement, in which
event neither Party shall have any rights or obligations under this Agreement;
provided, however, Buyer's obligations under Section 4.09(a)(viii) shall survive
such termination.
(b) Subject to the proviso set forth in Section 11.01, if this Agreement is
terminated by Seller pursuant to Section 11.01(b) or Section 11.01(d) and Seller
does not
waive the non-satisfaction of any conditions to Closing set forth in Article 8,
Seller shall retain the Deposit as liquidated damages. Buyer and Seller
acknowledge and agree that (i) Seller's actual damages upon the event of such a
termination are difficult to ascertain with any certainty, (ii) the Deposit is a
reasonable estimate of such actual damages, and (iii) such liquidated damages do
not constitute a penalty.
(c) Subject to the proviso set forth in Section 11.01, if this Agreement is
terminated (i) by Buyer pursuant to Section 11.01(c) and Buyer does not waive
the non-satisfaction of any conditions to Closing set forth in Article 9 or (ii)
by Buyer or Seller pursuant to Section 11.01(a), Section 11.01(e), Section
11.01(f), Section 11.01(g), or Section 13.03(c), then Seller shall promptly
return the Deposit to Buyer in immediately available funds pursuant to wire
transfer instructions to be provided timely by Buyer to Seller within three (3)
business days after the event giving rise to such return obligation. Buyer and
Seller shall thereupon have the rights and obligations set forth elsewhere
herein.
(d) If all conditions precedent to the obligations of Seller set forth in
Article 8 have been met, then notwithstanding any provision in this Section 2.02
to the contrary, if Closing does not occur because Seller wrongfully fails to
tender performance at Closing or otherwise Breach this Agreement in any respect
prior to Closing, and Buyer is ready and otherwise able to close, at Buyer's
sole election, either (i) Seller shall return the Deposit to Buyer within three
(3) business days after the determination that the Closing will not occur, or
(ii) Buyer shall have the right to pursue specific performance of this
Agreement, provided that Buyer must file an action for specific performance
within 21 days of Seller's Breach. If Buyer elects to pursue specific
performance, Buyer must pursue specific performance as its sole and exclusive
remedy in lieu of all other legal and equitable remedies. If such action for
specific performance is not filed within 21 days of Seller's Breach or if Buyer
is unsuccessful for any reason other than a Breach of this Agreement by Buyer,
Buyer shall be deemed to have waived all legal and equitable remedies and its
sole remedy for Seller's Breach of this Agreement shall be limited to the prompt
return of the Deposit.
SECTION 2.03 Allocated Values. The Purchase Price is allocated among the
Assets (including the Xxxxx, PUD Locations, PDNP, and Probable and/or Possible
Locations) as set forth in Exhibit C (the "Allocated Values"). In no event
shall the aggregate of the Allocated Values of any Xxxxx, PUD Locations, PDNP,
and Probable and/or Possible Locations exceed the unadjusted Purchase Price.
The term "PUD Locations" means those Proved Undeveloped potential well locations
specifically identified in Exhibit C. The term "PDNP" means Proved Developed
Not Producing intervals as specifically identified on Exhibit C. The term
"Probable and/or Possible Locations" means those locations specifically
identified and designated as such on Exhibit C. Seller and Buyer agree that the
Allocated Values shall be used to compute any adjustments to the Purchase Price
pursuant to the provisions of Article 4. Any adjustment to the Purchase Price
hereunder shall be reflected in the allocation set forth in Exhibit C consistent
with Treasury Regulation Section 1.1060-IT(f). For tax purposes, the Parties
agree to report the transactions contemplated by this Agreement in a manner
consistent with the terms of this Agreement, including the allocations set forth
above as
of the Closing Date, and that neither Party will take any position inconsistent
therewith, including in any tax return, refund claim, litigation, arbitration or
otherwise. Notwithstanding the foregoing, on Exhibit C there shall be a single
line item for the Allocated Value for the Wyoming Inventory.
ARTICLE 3
EFFECTIVE TIME
SECTION 3.01 Ownership of Assets. If the transactions contemplated hereby
are consummated in accordance with the terms and provisions hereof, the
ownership of the Assets shall be transferred from Seller to Buyer on the Closing
Date, but effective for all purposes as of 7:00 a.m. local time at the location
of the Assets on December 1, 2010 (the "Effective Time").
ARTICLE 4
TITLE AND ENVIRONMENTAL MATTERS
SECTION 4.01 Examination Period. From the date of this Agreement until 5:00
p.m. CST on the date which is seven (7) days prior to the Closing Date (the
"Examination Period"), Seller shall permit Buyer and/or its representatives to
examine, and Seller shall cooperate with and make available to Buyer and its
representatives during normal business days and hours at a location designated
by Seller, all abstracts of title, title opinions, title files, ownership maps,
lease, Well and division order files, assignments, operating, and accounting
records and all Surface Agreements, Permits, Contracts, and other agreements,
data, analyses, and information pertaining to the Assets insofar as same may now
be in existence and in the possession of Seller, subject to such restrictions
upon disclosure as may exist under confidentiality or other agreements binding
upon Seller and relating to such data. If any such items are subject to
restrictions on disclosure to Buyer, then Seller shall use reasonable efforts to
obtain waivers of such restrictions sufficient to permit Buyer to review the
items. If unable to lift such restrictions, Seller shall disclose to Buyer so
much of any such item as it may without violating the restrictions and, to the
extent allowed under the restrictions, describe to Buyer the general nature of
any such restricted disclosure item.
SECTION 4.02 Title Defects. The term "Title Defect" means (a) any
encumbrance on, encroachment on, irregularity in, defect in, or objection to
Seller's ownership of the Assets (excluding Permitted Encumbrances) that causes
Seller not to have Marketable Title to a Well, a PUD Location, a PDNP or a
Probable and/or Possible Location as described in Exhibit C; or (b) any default
by Seller under a lease, farm-out agreement, or other contract or agreement that
would (i) have a material and adverse effect on the operation, value, or use of
such Asset, (ii) prevent Seller from receiving the proceeds of production
attributable to Seller's interest therein, or (iii) result in cancellation of
all or a portion of Seller's interest therein. The term "Marketable Title"
means such ownership by Seller in the Assets that, subject to and except for the
Permitted Encumbrances:
(a) entitles Seller to receive not less than the percentage set forth in
Exhibit C as the Seller's Net Revenue Interest of all Hydrocarbons produced,
saved and marketed from such Well, PUD Location, PDNP, or Probable and/or
Possible Locations described in such exhibit, all without reduction, suspension,
or termination of such interest throughout the productive life of such Well,
except as specifically set forth in such exhibit;
(b) obligates Seller to bear not greater than the percentage set forth in
Exhibit C as the Seller's Working Interest of the costs and expenses relating to
the maintenance, development, and operation of such Well, PUD Location, PDNP, or
Probable and/or Possible Locations, all without increase throughout the
productive life of such Well, except as specifically set forth in either of such
exhibits; and
(c) is free and clear of all liens, encumbrances, and defects in title.
Subject to the limitations of Section 4.14, Breaches of Seller's representations
and warranties contained in Section 5.07 through Section 5.24 (other than those
also constituting Title Defects and Environmental Defects which are addressed
elsewhere in this Agreement) discovered prior to the Closing shall be treated as
Title Defects for purposes of making pre-Closing adjustments to the Purchase
Price.
SECTION 4.03 Notice of Title Defects. In order to exercise its rights under
this Section, Buyer shall provide Seller notice of all Title Defects no later
than 5:00 p.m. CST on March 8, 2011 (the "Title Claim Date"). To be effective,
such notice must (a) be in writing, (b) be received by Seller on or prior to the
Title Claim Date, (c) describe the Title Defect in reasonable detail (including
any alleged variance in the Net Revenue Interest or Working Interest), (d)
identify the specific Asset or Assets affected by such Title Defect, (e) include
the Title Defect Value, as reasonably determined by Buyer in good faith, and (f)
comply with the limitations and Title Defect Value qualifications set forth in
Section 4.14. Any matters that constitute Title Defects, but of which Seller
has not been specifically notified by Buyer in accordance with the foregoing,
shall be deemed to have been waived by Buyer for all purposes and shall
constitute Permitted Encumbrances and Assumed Obligations hereunder. Upon
receipt of notices of Title Defects, the Parties shall meet and determine upon
which of the Title Defects, Title Defect Values, and methods of cure the Parties
have reached agreement. Upon the receipt of such notice from Buyer, Seller
shall have the option, but not the obligation, for a period ending ninety (90)
days after the Closing to cure such defect. If Seller should not elect to cure
a Title Defect, and no aspect of such defect is reasonably in dispute, the
Purchase Price shall be adjusted for such defect by the amount of the Title
Defect Value.
(a) The value attributable to each Title Defect (the "Title Defect Value")
that is asserted by Buyer in the Title Defect notices shall be determined based
upon the criteria set forth below:
(i) If the Title Defect is a lien upon any Asset, the Title Defect Value is
the amount necessary to be paid to remove the lien from the affected Asset;
(ii) If the Title Defect asserted is that the Net Revenue Interest
attributable to any Well, PUD Location, PDNP, or Probable and/or Possible
Locations is less than that stated in Exhibit C, then the Title Defect Value
shall be the absolute value of the number determined by the following formula:
Title Defect Value = A x (1-[B/C])
A = Allocated Value for the affected Asset
B = Correct Net Revenue Interest for the affected Asset
C = Net Revenue Interest for the affected Asset as set forth on
Exhibit C.
(iii) If the Title Defect represents an obligation, encumbrance, burden, or
charge upon the affected Asset (including any increase in Working Interest for
which there is not a proportionate increase in Net Revenue Interest) for which
the economic detriment to Buyer is unliquidated, the amount of the Title Defect
Value shall be determined by taking into account the Allocated Value of the
affected Asset, the portion of the Asset affected by the Title Defect, the legal
effect of the Title Defect, the potential discounted economic effect of the
Title Defect over the life of the affected Asset, and the Title Defect Values
placed upon the Title Defect by Buyer and Seller;
(iv) If a Title Defect is not in effect or does not adversely affect an
Asset throughout the entire post Effective Time productive life of such Asset,
such fact shall be taken into account in determining the Title Defect Value;
(v) The Title Defect Value of a Title Defect shall be determined without
duplication of any costs or losses included in another Title Defect Value
hereunder;
(vi) Notwithstanding anything herein to the contrary, in no event shall a
Title Defect Value exceed the Allocated Value of the Xxxxx, PUD Locations, PDNP,
Probable and/or Possible Locations, or other Assets affected thereby;
(vii) If the Title Defect Value of an Asset is equal to the Allocated Value
of such Asset, the affected Asset shall remain in the purchase and sale
contemplated by this Agreement, but the Purchase Price shall be adjusted
accordingly;
(viii) Notwithstanding the provisions of this Section 4.03 to the contrary,
the Title Defect Value of any Title Defect comprising a required consent not
obtained (other than consents customarily obtained after Closing) shall be
determined subject to any accommodation implemented pursuant to Section 4.07;
and
(ix) Such other factors as are reasonably necessary to make a proper
evaluation.
(b) The term Title Defect shall not include:
(i) Defects based solely on an assertion that Seller's files lack
information, provided that any missing material information can be obtained by
the reasonable efforts of Buyer;
(ii) Defects in the early chain of title consisting of the failure to
recite marital status in a document or omissions of successors of heirship or
estate proceedings, unless Buyer provides a reasonable basis for the assertion
that such failure or omission has resulted in a third party's actual and
superior claim of title to the affected Asset;
(iii) Defects arising out of lack of survey;
(iv) Defects arising out of lack of corporate or other entity authorization
unless Buyer provides a reasonable basis for the assertion that the action was
not authorized and that such lack of authorization has resulted in a third
party's actual and superior claim of title to the affected Asset;
(v) [Intentionally Omitted]
(vi) Defects asserting a change in an applicable Working Interest or Net
Revenue Interest based on a change in drilling and spacing units, tract
allocation or other changes in pooling or unit participation occurring after the
date of this Agreement;
(vii) Those matters that do not impair marketability in accordance with the
applicable title standards for the State in which the affected Asset is located;
(viii) Title requirements customarily considered as advisory or which can
be waived as a matter of prudent business judgment; and
(ix) The lack of title in the name of Seller as to those Assets in which
Seller's rights and interest are created by an operating agreement or any other
instrument by which Seller has rights or interests, or has the right to acquire
other interests.
SECTION 4.04 Remedies for Title Defects.
(a) For any Title Defect noticed pursuant to Section 4.03 that has not been
cured at or prior to Closing, the Purchase Price shall, subject to the
provisions of Section 4.14, be decreased at Closing by either (i) the amount the
Parties acting reasonably and in good faith agree in lieu of a cure of the
asserted Title Defect, or (ii) with respect to any Title Defect for which the
Parties have not yet agreed as to the
validity of the Title Defect, the Title Defect Value, or the manner of cure,
then by the amount of the Title Defect Value asserted by Buyer for such uncured
or unadjusted Title Defect.
(b) Notwithstanding anything to the contrary in this Section 4.04, if any
Title Defect is in the nature of a consent to assignment that is not obtained or
other restriction on assignment, the provisions of Section 4.07 shall apply.
(c) If at the expiration of thirty (30) days after Closing, the Parties have
not agreed upon the validity of any asserted Title Defect, the appropriate cure
of the same, or the Title Defect Value attributable thereto, either Party shall
have the right to elect to have any such dispute determined by an Independent
Expert pursuant to Section 4.13.
(d) Once a Title Defect is cured by Seller at its sole cost and expense to
Buyer's reasonable satisfaction, or the existence or value of the Title Defect
is determined with finality either by agreement between the affected Parties or
in accordance with Section 4.13, Buyer shall promptly pay to Seller (i) in the
case of a Title Defect which is cured, the amount the Purchase Price was
decreased at Closing as a result of this previously uncured Title Defect or (ii)
in the case of an Asset affected by an unresolved Title Defect and for which the
validity of the Title Defect or the Title Defect Value is determined with
finality whether by agreement or in accordance with Section 4.13, the
difference, if any, between the amount the Purchase Price was decreased at
Closing as a consequence of such asserted and unresolved Title Defect and the
amount determined with finality.
SECTION 4.05 Special Warranty of Title. The documents to be executed and
delivered by Seller to Buyer, transferring title to the Assets as required
hereby, including the Assignment and Xxxx of Sale the form of which (subject to
modification to meet state recording statute requirements) is attached hereto as
Exhibit D (the "Assignment"), shall provide for a special warranty of title, by,
through, and under Seller, subject to the Permitted Encumbrances and the terms
of this Agreement; provided, however, certain fee mineral interests located in
the State of Wyoming shall be conveyed by Mineral Quitclaim Deeds in the form of
Exhibit E attached hereto. The term "Permitted Encumbrances" shall mean any of
the following matters to the extent the same are valid and subsisting and affect
the Assets:
(a) any (i) undetermined or inchoate liens or charges constituting or
securing the payment of expenses that were incurred incidental to the
maintenance, development, production, or operation of the Assets or for the
purpose of developing, producing, or processing Hydrocarbons therefrom or
therein, and (ii) materialman's, mechanics', repairman's, employees',
contractors', or operators' liens or other similar liens or charges for
liquidated amounts arising in the ordinary course of business (A) that Seller
has agreed to retain or pay pursuant to the terms hereof, or (B) for which
Seller is responsible for paying or releasing at the Closing;
(b) any liens for Taxes and assessments not yet delinquent or, if
delinquent, that are being contested in good faith in the ordinary course of
business and for which
Seller has agreed to pay pursuant to the terms hereof or which have been
prorated pursuant to the terms hereof;
(c) the terms, conditions, restrictions, exceptions, reservations,
limitations, and other matters contained in (including any liens or security
interests created by Law or reserved in Leases for royalty, bonus or rental, or
created to secure compliance with the terms of) the Contracts, Surface
Agreements, Leases, and any other agreements, instruments, documents, and other
matters described or referred to in any Exhibit or Schedule hereto, or other
terms in such instruments that create or reserve to Seller its interest in the
Assets; provided, that, such matters do not operate to (i) reduce the Net
Revenue Interest of Seller in any Well, PUD Location, PDNP, or Probable and/or
Possible Locations as reflected in Exhibit C, or (ii) increase the proportionate
share of costs and expenses of leasehold operations attributable to or to be
borne by the Working Interest of Seller with respect to any Well, PUD Location,
PDNP, or Probable and/or Possible Locations as reflected in Exhibit C, unless
there is a proportionate increase in Seller's applicable Net Revenue Interest;
(d) any obligations or duties affecting the Assets to any Governmental
Authority with respect to any franchise, grant, license, or permit, and all
applicable federal, state, and local laws, rules, regulations, guidances,
ordinances, decrees, and orders of any Governmental Authority ("Laws");
(e) any (i) easements, rights-of-way, servitudes, permits, surface leases,
and other rights in respect of surface operations, pipelines, grazing, hunting,
lodging, canals, ditches, reservoirs, or the like, and (ii) easements for
streets, alleys, highways, pipelines, telephone lines, power lines, railways,
and other similar rights-of-way on, over, or in respect of property owned or
leased by Seller or over which Seller owns rights-of-way, easements, permits, or
licenses;
(f) all royalties, overriding royalties, net profits interests, carried
interests, production payments, reversionary interests, and other burdens on or
deductions from the proceeds of production created or in existence as of the
Effective Time, whether recorded or unrecorded, that do not (i) reduce the Net
Revenue Interest of Seller in any Well, PUD Location, PDNP, or Probable and/or
Possible Locations and as reflected in Exhibit C, or (ii) increase the
proportionate share of costs and expenses of leasehold operations attributable
to or to be borne by the Working Interest of Seller with respect to any Well,
PUD Location, PDNP, or Probable and/or Possible Locations as reflected in
Exhibit C, unless there is a proportionate increase in Seller's applicable Net
Revenue Interest;
(g) preferential rights to purchase or similar agreements (i) with respect
to which (A) waivers or consents are obtained from the appropriate parties for
the transaction contemplated hereby, or (B) required notices have been given for
the transaction contemplated hereby to the holders of such rights and the
appropriate period for asserting such rights has expired without an exercise of
such rights, or (ii) not exercised prior to Closing, subject to Section 4.06;
(h) required third party consents to assignments or similar agreements with
respect to which (i) waivers or consents have been obtained from the appropriate
parties for the transaction contemplated hereby, or (ii) required notices have
been given for the transaction contemplated hereby to the holders of such rights
and the appropriate period for asserting such rights has expired without an
exercise of such rights;
(i) all rights to consent by, required notices to, filings with, or other
actions by, Governmental Authorities in connection with the sale, transfer, or
conveyance of the Assets that are customarily obtained after such sale or
conveyance;
(j) production sales contracts; division orders; contracts for sale,
purchase, exchange, or processing of Hydrocarbons; unitization and pooling
designations, declarations, orders, and agreements; operating agreements;
agreements of development; area of mutual interest agreements; gas balancing or
deferred production agreements; processing agreements; plant agreements;
pipeline, gathering, and transportation agreements; injection, repressuring, and
recycling agreements; water or other disposal agreements; seismic or geophysical
permits or agreements; and any and all other agreements that are ordinary and
customary to the oil, gas, and other mineral exploration, development,
processing, or extraction business or in the business of processing of gas and
gas condensate production for the extraction of products therefrom; provided,
that, such matters do not (i) reduce the Net Revenue Interest of Seller in any
Well, PUD Location, PDNP, or Probable and/or Possible Locations as reflected in
Exhibit C or (ii) increase the proportionate share of costs and expenses of
leasehold operations attributable to or to be borne by the Working Interest of
Seller with respect to any Well, PUD Location, PDNP, or Probable and/or Possible
Locations as reflected in Exhibit C, unless there is a proportionate increase in
Seller's applicable Net Revenue Interest;
(k) rights reserved to or vested in any Governmental Authority to control or
regulate any of the Xxxxx or units included in the Assets and the applicable
laws, rules, and regulations of such Governmental Authorities;
(l) all defects and irregularities affecting the Assets which individually
or in the aggregate do not (i) reduce the Net Revenue Interest of Seller in any
Well, PUD Location, PDNP, or Probable and/or Possible Locations as reflected in
Exhibit C, (ii) increase the proportionate share of costs and expenses of
leasehold operations attributable to or to be borne by the Working Interests of
Seller with respect to any Well, PUD Location, PDNP, or Probable and/or Possible
Locations as reflected on Exhibit C unless there is a proportionate increase in
Seller's applicable Net Revenue Interest, or (iii) otherwise result in a
material and adverse interference with the operation, value, or use of the
Assets;
(m) conventional rights of reassignment arising upon decision to surrender
or abandon an interest; and
(n) such Title Defects as Buyer has waived pursuant to Section 4.03 or
otherwise waived in writing by Buyer in accordance with any other provision in
this Agreement other than pursuant to Section 4.03.
SECTION 4.06 Preferential Rights to Purchase.
(a) After consultation with Buyer, Seller shall use its reasonable efforts,
but without any obligation to incur anything but reasonable costs and expenses
in connection therewith, to comply with all preferential right to purchase
provisions relative to any Asset prior to the Closing, including those rights of
preferential purchase identified on Schedule 4.06.
(b) Prior to the Closing, Seller shall promptly notify Buyer if any of such
preferential purchase rights are exercised or if the requisite period has
elapsed without such rights having been exercised.
(c) If a third party who has been offered an interest in any Asset pursuant
to a preferential right to purchase elects prior to the Closing to purchase all
or part of such Assets, and the closing of such transaction does occur on or
before the Closing Date, then the interest or part thereof so affected will be
eliminated from the Assets and the Purchase Price shall be reduced by the
Allocated Value of such Assets. If any such third party has elected to purchase
all or a part of an interest in any Asset subject to a preferential right to
purchase, but has failed to close the transaction by the Closing Date, then all
of the Assets will be conveyed to Buyer at Closing, without adjustment to the
Purchase Price, and on the Closing Date Buyer shall, as an Assumed Obligation,
assume all duties, obligations, and liabilities, of any kind or nature, arising
from, out of, or in connection with, any enforceable preferential right to
purchase that is outstanding, and, if exercised, Buyer shall receive the payment
therefor and shall assign the affected portion of the Assets to the holder of
such exercised preferential right to purchase. In addition, in the event an
interest is offered by Seller pursuant to a preferential right to purchase for
which notice has been given but the time period for response by the holder of
such right extends beyond Closing, such interest shall be conveyed to Buyer at
the Closing, without reduction to the Purchase Price, and shall be subject to
such preferential right of purchase.
SECTION 4.07 Consents to Assignment. If any Asset is subject to a Title
Defect as a result of a consent to assignment not having been obtained,
including those consents to assignment set forth on Schedule 4.07, or, of the
existence of other restrictions on assignment or conveyance, the following
provisions shall apply:
(a) Buyer and Seller shall cooperate in any reasonable and lawful
arrangement proposed to provide Buyer with the benefits of ownership of the
affected Asset without breaching the consent requirement or restriction
comprising such Title Defect; and
(b) If such arrangement involves Seller retaining actual title with
beneficial title being assigned to Buyer at the Closing, then:
(i) only such beneficial title shall be assigned to Buyer at the Closing,
without any adjustment to the Purchase Price for such Title Defect; and
(ii) if such consent is obtained or such restriction eliminated following
the Closing, then Seller shall execute and deliver to Buyer an assignment of
Seller's retained title and any related obligations consistent with the terms of
this Agreement.
SECTION 4.08 [Intentionally Omitted].
SECTION 4.09 Environmental Review. Buyer may conduct an environmental
assessment of the Assets prior to the expiration of the Title Claim Date,
subject to the following:
(a) Buyer shall have the right to conduct a Phase I (as that term is defined
by the American Society for Testing and Materials) environmental review of the
Assets prior to the expiration of the Examination Period ("Buyer's Environmental
Review") and Seller shall provide to Buyer a copy of any environmental review
Seller has in its possession subject to the same terms of confidentiality
subsequently set forth herein;
(i) The cost and expense of Buyer's Environmental Review shall be borne
solely by Buyer;
(ii) All inspections must be coordinated through a designated
representative of Seller who may accompany Buyer during the course of Buyer's
inspection of the Assets;
(iii) All environmental assessments shall be conducted by an independent
environmental consultant engaged by Buyer at Buyer's expense;
(iv) Buyer shall give Seller notice not more than seven (7) days and not
less than forty-eight (48) hours before any visits by Buyer and/or its
consultant to the Assets, and Buyer shall seek and obtain Seller's prior consent
(which shall not be unreasonably withheld) before either it or its consultant
enters the Assets;
(v) Buyer shall provide Seller a copy of the Phase I report affecting the
Assets promptly after Buyer's receipt and review of the same;
(vi) Buyer and/or its consultant shall perform all such work in a safe and
workmanlike manner, shall not unreasonably interfere with Seller's operations,
and shall comply with all Laws of applicable Governmental Authorities;
(vii) Buyer shall be solely responsible for obtaining any third party
consents that are required in order to perform any work comprising Buyer's
Environmental Review, and Seller shall cooperate with Buyer in connection with
Buyer's efforts to obtain each such third party consent; and
(viii) Buyer hereby agrees to release and defend, indemnify and hold
harmless Seller and Seller's Representatives from and against all Claims made by
(or attributable to the acts or omissions of) Buyer or Buyer's Representatives
(INCLUDING THOSE RESULTING FROM THE SOLE, JOINT, OR CONCURRENT NEGLIGENCE (BUT
NOT GROSS NEGLIGENCE OR WILLFUL MISCONDUCT), STRICT LIABILITY OR OTHER LEGAL
FAULT OF A SELLER OR ANY OF SELLER'S REPRESENTATIVES) arising out of or relating
to Buyer's Environmental Review. The release and indemnity provisions of this
Section 4.09 shall survive termination or Closing of this Agreement
notwithstanding anything to the contrary provided for in this Agreement.
(b) Unless otherwise required by applicable Laws, Buyer shall treat any
matters revealed by Buyer's Environmental Review and any environmental review
provided by Seller to Buyer, including any analyses, compilations, studies,
documents, reports or data prepared or generated from such review (the
"Environmental Information"), as confidential, and, except as provided below,
Buyer shall not disclose any Environmental Information to any Governmental
Authority or other third party without the prior written consent of Seller.
Buyer may use the Environmental Information only in connection with the
transactions contemplated by this Agreement. The Environmental Information
shall be disclosed by Buyer to only those persons who need to know the
Environmental Information for purposes of evaluating the transaction
contemplated by this Agreement, and who agree to be bound by the terms of this
Section 4.09. If Buyer or any third party to whom Buyer has provided any
Environmental Information is requested, compelled, or required to disclose any
of the Environmental Information, Buyer shall provide Seller with prompt notice
sufficiently prior to any such disclosure so as to allow Seller to file for any
protective order, or seek any other remedy, as it deems appropriate under the
circumstances. If this Agreement is terminated prior to the Closing, upon
Seller's request, Buyer shall deliver the Environmental Information, and all
copies thereof and works based thereon, to Seller, which Environmental
Information shall become the sole property of Seller. Upon request Buyer shall
provide copies of the Environmental Information to Seller without charge. The
terms and provisions of this Section 4.09(b) shall survive any termination of
this Agreement, notwithstanding anything to the contrary.
SECTION 4.10 Definitions Used in Article 4 and in this Agreement.
(a) Environmental Defects. The term "Environmental Defect" shall mean, with
respect to any given Asset, a violation of Environmental Laws in effect as of
the Effective Time in the jurisdiction in which such Asset is located.
(b) Governmental Authority. The term "Governmental Authority" shall mean
the United States and any state, county, city, and political subdivisions that
exercises jurisdiction, and any agency, department, board, commission, or other
instrumentality thereof.
(c) Environmental Laws. The term "Environmental Laws" shall mean any and
all laws, statutes, ordinances, rules, regulations, or orders of any
Governmental Authority pertaining to health and natural resources (but excluding
laws, orders, rules, and regulations that pertain to the prevention of waste or
the protection of correlative rights) and the protection of wildlife or the
environment including, without limitation, the Clean Air Act, as amended, the
Clean Water Act, as amended, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980, as amended ("CERCLA"), the Federal
Water Pollution Control Act, as amended, the Resource Conservation and Recovery
Act of 1976, as amended ("RCRA"), the Safe Drinking Water Act, as amended, the
Toxic Substances Control Act, as amended, the Hazardous & Solid Waste Amendments
Act of 1984, as amended, the Superfund Amendments and Reauthorization Act of
1986, as amended, the Hazardous Materials Transportation Act, as amended, the
Oil Pollution Act of 1990 ("OPA"), any state laws implementing the foregoing
federal laws, and any state laws pertaining to the handling of oil and gas
exploration and production wastes (including water) or the use, maintenance, and
closure of pits and impoundments, and all other environmental conservation or
protection laws in effect as of the date hereof which are applicable to the
Assets. For purposes of this Agreement, the terms "hazardous substance,"
"release," and "disposal" have the meanings specified in the applicable
Environmental Laws as in effect as of the date hereof.
(d) Environmental Defect Value. For purposes of this Agreement, the term
"Environmental Defect Value" shall mean, with respect to any Environmental
Defect, the estimated costs and expenses net to Seller's interest in the
affected portion of the Assets to correct and/or remediate such Environmental
Defect in the most cost effective manner reasonably available, consistent with
Environmental Laws, taking into account that non-permanent remedies (such as, by
way of example but not by limitation or similarity, mechanisms to contain or
stabilize hazardous materials, including monitoring site conditions, natural
attenuation, risk-based corrective action, institutional controls, or other
appropriate restrictions on the use of property, caps, dikes, encapsulation,
leachate collection systems, etc.) may be the most cost effective manner
reasonably available.
SECTION 4.11 Notice of Environmental Defects. Buyer shall provide Seller
notice of all Environmental Defects no later than 5:00 p.m. CST on March 8,
2011. To be effective, such notice must (a) be in writing, (b) be received by
Seller prior to the expiration of the Examination Period, (c) describe the
Environmental Defect in reasonable detail, including the written conclusion of
Buyer that an Environmental Defect exists, which conclusion shall be reasonably
substantiated by the factual data gathered in Buyer's Environmental Review, (d)
identify the specific Assets affected by such Environmental Defect, (e) set
forth the procedures recommended to correct the Environmental Defect, (f) set
forth Buyer's reasonable good faith estimate of the Environmental Defect Value,
including the basis for such estimate, and (g) comply with the Environmental
Defect Value provisions of Section 4.14. Any matters that may otherwise
constitute Environmental Defects, but of which Seller has not been specifically
notified by Buyer in accordance with the foregoing, together with any
environmental matter that does not constitute an Environmental Defect, shall be
deemed to have been waived by Buyer for all purposes and constitute an Assumed
Obligation. Upon receipt of notices of Environmental Defects, the Parties shall
meet and determine upon which of the Environmental Defects, Environmental Defect
Values, and methods of correction the Parties
have reached agreement. Upon the receipt of such effective notice from Buyer,
Seller shall have the option, but not the obligation, to attempt to correct such
Environmental Defect during a period expiring 90 days after Closing. If Seller
should not elect to correct an Environmental Defect, and no aspect of such
defect is in dispute, the Purchase Price shall be adjusted for such defect by
the amount of the Environmental Defect Value.
SECTION 4.12 Remedies for Environmental Defects.
(a) If, as of the Closing Date, the Assets are affected by an uncured or
otherwise unresolved Environmental Defect noticed pursuant to the provisions of
Section 4.11, the affected portion of the Assets shall not be sold, transferred,
or conveyed to Buyer at Closing, and the Purchase Price shall, subject to the
terms of Section 4.14, be decreased by the Allocated Value of the portion of the
Assets so affected. Thereafter, Buyer and Seller shall act reasonably and in
good faith either (i) to agree (y) as to the manner of cure for such
Environmental Defect or (z) the value of such Environmental Defect and adjust
the Final Settlement Statement in the amount thereof net of any Purchase Price
adjustment made at Closing (subject to the terms of Section 4.14), in which
event the affected portion of the Assets shall be conveyed to Buyer; provided,
that if option (y) is agreed to, no assignment of the affected portion of the
Assets shall be made as between Seller and Buyer until such agreed cure is
accomplished to Buyer's reasonable satisfaction whereupon the Allocated Value
previously deducted from the Purchase Price shall be paid to Seller, or (ii)
with respect to any Environmental Defect as to which the Parties are unable to
agree within 30 days of Closing as to the validity of the Environmental Defect,
the Environmental Defect Value, or the manner of correction, submit such matter
to be determined by an Independent Expert pursuant to Section 4.13.
(b) With respect to any Asset which is not sold, transferred, or conveyed to
Buyer at the Closing pursuant to the terms of Section 4.12(a), after the Closing
and at such time as any Environmental Defect Value or the manner of correction
for an Environmental Defect is determined and, in either event, the amount
thereof is determined to be less than the Allocated Value for the affected
portion of the Assets, Seller shall have the right (i) in the case of an
Environmental Defect Value determination, to have the Purchase Price reduced
(subject to the terms of Section 4.14), by only the Environmental Defect Value
as so determined or (ii) in the case of the cure determination, to elect to cure
the Environmental Defect to Buyer's reasonable satisfaction. The consequence of
(i) shall be that Buyer will pay to Seller an amount equal to the Allocated
Value for the affected Assets minus the Environmental Defect Value (subject to
the terms of Section 4.14) and the affected portion of the Assets previously
retained by Seller shall be conveyed to Buyer. The consequence of (ii) shall be
that upon achieving Buyer's written acknowledgement that the Environmental
Defect has been cured to its reasonable satisfaction, the Allocated Value for
such previously retained Asset shall be paid to Seller and the affected portion
of the Assets shall be conveyed to Buyer. If no Environmental Defect is
determined to exist, Buyer shall pay the Allocated Value attributable to the
affected portion of the Assets to Seller, and Seller shall convey the previously
retained portion of the Assets to Buyer. If the Environmental
Defect Value or the cost to cure an Environmental Defect is determined to be
greater than the Allocated Value of the affected portion of the Assets, Seller
may retain the affected portion of the Assets, and the Purchase Price shall be
reduced by the Allocated Value attributable to such portion of the Assets.
SECTION 4.13 Independent Experts.
(a) Without waiving any rights to terminate this Agreement as set forth
herein, any disputes regarding Title Defects, Environmental Defects, Title
Defect Value, Environmental Defect Value, appropriate cure of any Title Defects
or correction of any Environmental Defects, and the calculation of the Statement
or the Final Settlement Statement, or revisions thereto, may, subject to the
provisions of Section 4.04, Section 4.12, and Section 4.14, be submitted by a
Party, with written notice to the other Party, to an independent expert (the
"Independent Expert"), who shall serve as the sole and exclusive arbitrator of
any such dispute. The Independent Expert shall be selected by the Parties
(acting reasonably and in good faith) within five (5) days following the
effective date of said notice. The Independent Expert shall be a person who is
independent, impartial, and knowledgeable in the subject matter and substantive
laws involved. For example, but not by way of limitation, in the case of a
dispute concerning an alleged Environmental Defect, Environmental Defect Value,
or cure of the same, the Independent Expert shall have expertise in both the
applicable Environmental Laws and environmental science relating to the oil and
gas industry.
(b) The Parties shall determine, acting in good faith, the procedures to be
followed to facilitate the decision of the Independent Expert. Such procedures
shall include the following scenario:
(i) If the dispute involves the method or adequacy of cure or correction of
a Title Defect or Environmental Defect, the Independent Expert shall provide in
writing the particulars necessary to cure or correct or to remedy any deficient
cure or correction, and shall provide Seller 60 days (or such additional time as
reasonable and necessary under the circumstances, but not to exceed 90 days
unless specifically agreed to in writing by Seller and Buyer) to effect such
cure or correction; and
(ii) In the event of circumstances described in clause (i) above, Seller at
their option may at any time during the 60-day cure period pursuant to clause
(i) (as such period may be extended pursuant to such clause) decline to cure or
correct the applicable defect.
(c) If the Parties fail to select an Independent Expert within the five-day
period referred to in Section 4.13(a) above, within three (3) days thereafter,
each of Buyer and Seller shall choose an Independent Expert meeting the
qualifications set forth above, and such experts shall promptly choose a third
Independent Expert (meeting the qualifications provided for herein) who alone
shall resolve the disputes between the
Parties. Each Party shall bear its own costs and expenses incurred in
connection with any such proceeding, and one-half (1/2) of the costs and
expenses of the Independent Expert.
(d) Disputes to be resolved by an Independent Expert shall be resolved in
accordance with mutually agreed procedures and rules and failing such agreement,
in accordance with the rules and procedures for non-administered arbitration set
forth in the commercial arbitration rules of the American Arbitration
Association. The Independent Expert shall be instructed by the Parties to
resolve such dispute as soon as reasonably practicable in light of the
circumstances using the terms and provisions of this Agreement with respect to
title and environmental matters. The decision and award of the Independent
Expert shall be binding upon the Parties and final and non-appealable to the
maximum extent permitted by Laws or Environmental Laws, as applicable, and
judgment thereon may be entered in a court of competent jurisdiction and
enforced by any Party as a final judgment of such court.
(e) All proceedings under this Section 4.13 shall be conducted at a mutually
agreed location, or if Buyer and Seller acting reasonably do not mutually agree
upon a location for such proceeding, the proceeding shall be conducted in
Houston, Texas.
SECTION 4.14 Limitation of Remedies For Title Defects and Environmental
Defects. Notwithstanding anything to the contrary contained in this Agreement,
(a) if the Title Defect Value for a given Title Defect, as determined
pursuant to this Article 4 does not exceed Ten Thousand Dollars ($10,000)
figure, or if the Environmental Defect Value for a given Environmental Defect,
as determined pursuant to this Article 4 does not exceed Ten Thousand Dollars
($10,000), such Title Defect, or Environmental Defect shall not qualify for
either a Purchase Price adjustment, cure, or correction of such Defect. It is
understood and agreed that certain Title Defects may affect various aspects of
an individual Lease such as the Xxxxx and the undeveloped locations described in
Exhibit C that are located in such Lease. In any such case, and notwithstanding
the foregoing pertaining to individual Title Defect Values, for purposes of
determining whether the aforementioned Ten Thousand Dollar ($10,000) figure has
been achieved, all Title Defect Values affecting any individual Lease shall be
aggregated on a Lease by Lease basis, provided, however, if it is determined
that a single instrument gives rise to a common Title Defect affecting Xxxxx or
undeveloped locations on more than one Lease, the Title Defect Values relating
thereto shall also be aggregated in determining whether the aforementioned Ten
Thousand Dollar ($10,000) figure has been achieved. Similarly, and to avoid
doubt, if there is a series of minor, discrete Environmental Defects, all
deriving from a common operative problem (as opposed to a generic type of
issue), such discrete Environmental Defects may be aggregated in determining
whether the aforementioned Ten Thousand Dollars ($10,000) figure has been
achieved for Environmental Defects.
(b) if the aggregate value of all Title Defects does not exceed Five Hundred
Thousand Dollars ($500,000), then no adjustment of the Purchase Price shall be
made therefor;
(c) if the aggregate value of all Title Defects equals or exceeds Five
Hundred Thousand Dollars ($500,000), then the Purchase Price shall be adjusted
by only the amount of such aggregate value of such Title Defects in excess of
Five Hundred Thousand Dollars ($500,000), it being understood that this Five
Hundred Thousand Dollar ($500,000) figure is a deductible and not a threshold;
(d) if the aggregate value of all Environmental Defects does not exceed Five
Hundred Thousand Dollars ($500,000), then no adjustment of the Purchase Price
shall be made therefor; and
(e) if the aggregate value of all Environmental Defects equals or exceeds
Five Hundred Thousand Dollars ($500,000), then the Purchase Price shall be
adjusted by only the amount of such aggregate value of the Environmental Defects
in excess of Five Hundred Thousand Dollars ($500,000), it being understood that
this Five Hundred Thousand Dollar ($500,000) figure is a deductible and not a
threshold.
All Title Defects and Environmental Defects asserted by Buyer pursuant to this
Article 4 after being resolved in accordance with this Article 4 shall
thereafter constitute Permitted Encumbrances and Assumed Obligations, whether or
not an adjustment to the Purchase Price is made with respect thereto in
accordance with this Article 4.
SECTION 4.15 DISCLAIMER AND WAIVER. EXCEPT AS SET FORTH IN THIS AGREEMENT,
SELLER DOES NOT MAKE ANY, AND EXPRESSLY DISCLAIMS ALL REPRESENTATIONS OR
WARRANTIES, AND BUYER EXPRESSLY WAIVES ANY SUCH REPRESENTATION OR WARRANTIES, AS
TO THE ACCURACY OR COMPLETENESS OF ANY FILE AND/OR OTHER INFORMATION, INCLUDING,
PRINTOUTS, EXTRAPOLATIONS, PROJECTIONS, DOCUMENTATION, MAPS, GRAPHS, CHARTS, OR
TABLES WHICH REFLECT, DEPICT, PRESENT, PORTRAY, OR WHICH ARE BASED UPON OR
DERIVED FROM ANY SUCH INFORMATION AND/OR FILES, INCLUDING MATTERS OF GEOLOGICAL,
GEOPHYSICAL, ENGINEERING, OR OTHER SCIENTIFIC INFORMATION THAT MAY BE PROVIDED
TO BUYER BY SELLER OR BY OTHERS ON BEHALF OF SELLER. BUYER EXPRESSLY AGREES
THAT ANY CONCLUSIONS DRAWN FROM REVIEW OF SUCH INFORMATION AND/OR FILES SHALL BE
THE RESULT OF ITS OWN INDEPENDENT REVIEW AND JUDGMENT.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer that:
SECTION 5.01 Existence. Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the State of New Jersey. Seller
has full legal power, right, and is authorized to do business, and in good
standing, in the States in which the Assets it owns are located.
SECTION 5.02 Legal Power. Seller has the legal power and right to enter
into and perform this Agreement and the transactions contemplated hereby. The
consummation of the transactions contemplated by this Agreement will not
violate, or be in conflict with:
(a) any provision of Seller's articles of incorporation, bylaws, and other
governing documents;
(b) except for provisions customarily contained in oil and gas agreements
relating to maintenance of uniform interest, preferential purchase rights and
consents to assignment, any material agreement or instrument to which Seller is
a party or by which Seller or the Assets are bound; or
(c) any judgment, order, ruling, or decree applicable to Seller as a party
in interest or any law, rule, or regulation applicable to Seller.
SECTION 5.03 Execution. The execution, delivery, and performance of this
Agreement and the transactions contemplated hereby are duly and validly
authorized by all requisite corporate action on the part of Seller as required
under its formation documents. This Agreement constitutes the legal, valid, and
binding obligation of Seller enforceable in accordance with its terms, except as
the same may be limited by bankruptcy, insolvency, or other laws relating to or
affecting the rights of creditors generally, and by general equitable
principles.
SECTION 5.04 Brokers. No broker or finder is entitled to any brokerage or
finder's fee, or to any commission, based in any way on agreements,
arrangements, or understandings made by or on behalf of Seller or any affiliate
of Seller for which Buyer has or will have any liabilities or obligations
(contingent or otherwise).
SECTION 5.05 Bankruptcy. There are no bankruptcy, reorganization, or
arrangement proceedings pending, being contemplated by, or to the knowledge of,
Seller threatened against Seller. Seller is not "insolvent" as such term is
defined under the Federal Bankruptcy Code or any fraudulent transfer or
fraudulent conveyance statute applicable to the transactions contemplated by
this Agreement.
SECTION 5.06 Suits and Claims. Except as set forth in Schedule 5.06, there
is no litigation or Claims that have been filed by any person or entity or by
any administrative agency or Governmental Authority in any legal,
administrative, or arbitration proceeding or, to Seller's knowledge, threatened
against Seller or the Assets that would impede Seller's ability to consummate
the transactions contemplated herein or would have a Material and Adverse Effect
on the Assets.
SECTION 5.07 Taxes. To Seller's knowledge, (i) during the period of
Seller's ownership of the Assets up to and including the Effective Time, Seller
has caused to be timely filed all material Tax returns relating to the Assets,
and (ii) Seller has paid or caused to be paid all ad valorem, property,
production, severance, mineral documentary, and similar Taxes based upon or
measured by its ownership of or the production of Hydrocarbons from the Assets.
Except as set forth on Schedule 5.07, there are no pending audits of Seller by
any applicable taxing authority with respect to Taxes attributable to the
Assets. Except for statutory liens for property Taxes and ad valorem Taxes,
that are not yet due, there are no tax liens on or with respect to the Assets.
SECTION 5.08 AFEs. Except as set forth on Schedule 5.08, there are no
outstanding authorizations for expenditures or other capital commitments which
are binding on the Assets and which individually would require the owner of the
Assets after the Effective Time to expend monies in excess of Fifty Thousand
Dollars ($50,000).
SECTION 5.09 Compliance with Laws. To Seller's knowledge and except as
reflected on Schedule 5.06, Seller's operation (i.e., where Seller is operator
of record) of the Assets has been in compliance with Laws where noncompliance
with such Laws would have a Material Adverse Effect on the Assets.
SECTION 5.10 Contracts. To Seller's knowledge and except as reflected on
Schedule 5.06, (i) Seller is not in Breach of any of the Contracts, (ii) the
Contracts are in full force and effect in accordance with their terms, and (iii)
no other party to any of the Contracts is in material Breach thereof.
SECTION 5.11 Production Imbalances. To Seller's knowledge, there are no
material production imbalances as of the Effective Time as to any of the Subject
Interests.
SECTION 5.12 Payments for Production. Seller is not obligated by virtue of
a take or pay payment, call, advance payment, production payment, or other
similar payment or obligation (other than royalties, overriding royalties, or
similar arrangements that do not cause Seller's NRI to be less than that set
forth on Exhibit C), to deliver Hydrocarbons, or proceeds from the sale thereof,
attributable to the Leases at some future time without receiving payment
therefor at or after the time of delivery at the then market price, and no take
or pay credits must be provided before natural gas can be transported through
any interstate carrier under FERC Order 500, et al, and there are no obligations
on the Assets under FERC Order 451.
SECTION 5.13 Bonds. Seller maintains, and through the Closing will
maintain, with respect to the Assets, the bonds described on Schedule 5.13.
SECTION 5.14 Personal Property and Equipment. Seller is the owner of the
Equipment free and clear of all liens and encumbrances. Other than in
connection with normal and customary prudent operations, Seller has not removed
any personal property, Equipment, or fixtures from the Xxxxx, unless it has been
replaced with personal property, Equipment, or fixtures of similar grade and
utility or placed in Seller's storage yard or used by it on other Seller Xxxxx.
SECTION 5.15 Tax Partnerships. To Seller's knowledge, none of the Assets
are subject to partnership within the meaning of Subchapter K of Chapter 1 of
Subtitle A of the Internal Revenue Code.
SECTION 5.16 Hydrocarbon Sales Contracts. Except for the Hydrocarbon sales
contracts listed in Schedule 5.16, no Hydrocarbons are subject to a sales
contract (other than division orders or spot sales agreements terminable on no
more than 30 days' notice) and no person has any call upon, option to purchase,
or similar rights with respect to the production from the Assets. Proceeds from
the sale of oil, condensate, and gas from the Assets are being received in all
respects by Seller in a timely manner and are not being held in suspense for any
reason.
SECTION 5.17 Area of Mutual Interest and Other Agreements. To Seller's
knowledge, no Asset is subject to (or has related to it) any area of mutual
interest agreements not disclosed in the Contracts or any farm-out or farm-in
agreement under which any party thereto is entitled to receive assignments not
yet made, or could earn additional assignments after the Effective Time other
than the Xxxxx listed on Exhibit B as having an after payout NRI.
SECTION 5.18 Leases. To Seller's knowledge and except as reflected on
Schedule 5.06, Seller has not received a written notice of termination of any of
the Leases, and Seller is not in Breach or violation of any of the Leases;
provided, however, that Buyer's remedy for Seller's Breach of this
representation and warranty shall be the Title Defect mechanism set forth in
Article 4.
SECTION 5.19 Governmental Permits. To Seller's knowledge, Sellers have all
Permits (including, without limitation, permits, licenses, approval
registrations, notifications, exemptions, and any other authorizations pursuant
to Law) necessary or appropriate to own and operate the Assets as presently
being owned and operated. The Permits are in full force and effect and the
Assets have been operated in accordance with the terms thereof in all material
respects. Seller has not received written notice of any violations in respect
of any of the Permits that remain uncured.
SECTION 5.20 No Adverse Change. With respect to the Assets for which Seller
is the operator and, to Seller's knowledge with respect to the Assets for which
Seller is not the operator, since the time of the information provided in the
Scotia Waterous data room, the Assets have been operated in the ordinary course
of business consistent with past practices and there has been no event or series
of events that have either individually or in combination had a Material Adverse
Effect on the Assets.
SECTION 5.21 Unrecorded Interests. To Seller's knowledge, there are no
unrecorded interests in the Assets created by, through or under Seller.
SECTION 5.22 Preferential Rights and Consents. To Seller's knowledge,
Schedule 4.06 accurately lists all preferential rights to purchase affecting the
Assets, and Schedule 4.07 accurately reflects all Assets subject to a consent to
assignment other than those customarily obtained after Closing.
SECTION 5.23 Disclosure of Environmental Information. Without modifying
Buyer's representation and warranty contained in Section 6.07, to Seller's
knowledge, Seller has not intentionally withheld from Buyer any material
Environmental Information that, if disclosed, would trigger an adjustment to the
Purchase Price under this Agreement due to an Environmental Defect.
SECTION 5.24 Notice of Change. Promptly upon its discovery or
identification of same, but in any event prior to Closing, Seller shall provide
Buyer written notice of any matter Seller identifies that has a material and
adverse effect on or that constitutes a Breach of Seller's representations and
warranties under this Agreement.
SECTION 5.25 Representations and Warranties Exclusive. All representations
and warranties contained in this Article 5 and expressly made in any document
delivered at Closing by Seller pursuant to this Agreement are exclusive, and are
given in lieu of all other representations and warranties, express, implied, or
statutory.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that:
SECTION 6.01 Existence . Buyer is a Nevada corporation duly formed,
organized, validly existing, and in good standing under the laws of the state of
its formation. Buyer has full legal power, right, and authority to carry on its
business as such is now being conducted. As of the Closing Date, Buyer will be
authorized to do business as a foreign corporation and in good standing in the
States in which the Assets are located.
SECTION 6.02 Legal Power. Buyer has the legal power and right to enter into
and perform this Agreement and the transactions contemplated hereby. The
consummation of the transactions contemplated by this Agreement does not and
will not violate, or be in conflict with:
(a) any provision of Buyer's formation documents or other governing
documents;
(b) any material agreement or instrument to which Buyer is a party or by
which Buyer or its assets are bound; or
(c) any judgment, order, ruling, or decree applicable to Buyer as a party in
interest or any law, rule, or regulation applicable to Buyer.
SECTION 6.03 Execution. The execution, delivery, and performance of this
Agreement and the transactions contemplated hereby are duly and validly
authorized by all requisite organizational action on the part of Buyer. This
Agreement constitutes the legal, valid, and binding obligation of Buyer
enforceable in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency or other laws relating to or affecting the rights of
creditors generally, and by general equitable principles.
SECTION 6.04 Brokers. No broker or finder is entitled to any brokerage or
finder's fee, or to any commission, based in any way on agreements,
arrangements, or understandings made by or on behalf of Buyer or any affiliate
of Buyer for which Seller has or will have any liabilities or obligations
(contingent or otherwise).
SECTION 6.05 Bankruptcy. There are no bankruptcy, reorganization, or
arrangement proceedings pending, being contemplated by or to the knowledge of
Buyer threatened against Buyer or any affiliate of Buyer.
SECTION 6.06 Suits and Claims. There is no litigation or Claims that have
been filed by any person or entity or by any administrative agency or
Governmental Authority in any legal, administrative, or arbitration proceeding
or, to Buyer's knowledge, threatened against Buyer or any affiliate of Buyer
that is reasonably likely to have a material effect on Buyer's ability to
consummate the transactions contemplated herein.
SECTION 6.07 Independent Evaluation. Buyer acknowledges that it is an
experienced and knowledgeable investor in the oil and gas business, and the
business of purchasing, owning, developing, and operating oil and gas properties
such as the Assets. If Closing occurs, Buyer represents, warrants, and
acknowledges to Seller that it has had full access to the Assets, the officers
and employees of Seller, and to the books, records, and files of Seller relating
to the Assets. In making the decision to enter into this Agreement and to
consummate the transactions contemplated hereby, Buyer has relied solely upon
the representations, warranties, covenants, and agreements of Buyer and Seller
set forth in this Agreement and Buyer's own independent due diligence and
investigation of the Assets, and has been advised by and has relied solely on
its own expertise and its own legal, tax, operations, environmental, reservoir
engineering, and other professional counsel and advisors concerning this
transaction, the Assets and the value thereof. In addition, Buyer acknowledges
and agrees that Buyer will be or has been advised by and relies solely on its
own expertise, and its legal counsel and any advisors or experts concerning
matters relating to Title Defects, and Environmental Defects.
SECTION 6.08 Qualification. As of the Closing, the Buyer shall be, and
thereafter shall continue to be, qualified with all applicable Governmental
Authorities to own and operate the Assets, including meeting all bonding
requirements. In the event any Governmental Authority, as a condition of its
approval or consent to the assignment or transfer of any Lease, Well or Permit,
requires additional amounts for bonds, Buyer has the ability to provide such
increased bond amounts.
SECTION 6.09 Securities Laws. Buyer is acquiring the Assets for its own
account or that of its affiliates 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, 15 U.S.C. Sec. 77a et seq., and any other rules, regulations, and
laws pertaining to the distribution of securities. Buyer has not sought or
solicited, nor is Buyer participating with, investors, partners, or other third
parties other than its lenders in order to fund the Purchase Price and to close
this transaction, and all funds to be used by Buyer in connection with this
transaction are Buyer's own funds or those borrowed from its lenders.
SECTION 6.10 No Investment Company. Buyer is not (a) an investment company
or a company controlled by an investment company within the meaning of the
Investment Company Act of 1940, as amended, or (b) subject in any respect to the
provisions of that Act.
SECTION 6.11 Funds. Buyer has cash on hand or third-party financing
contractually in place that is not subject to any contingency whatsoever so that
at Closing Buyer shall have immediately available funds that shall enable Buyer
to pay the full Purchase Price as herein provided and otherwise to perform its
obligations under this Agreement.
SECTION 6.12 Notice of Changes. Promptly upon its discovery or
identification of same, but in any event prior to Closing, Buyer shall provide
to Seller written notice of any matter it so identifies that has a material
effect on any of Seller's representations or warranties under this Agreement, or
rendering any such warranty or representation untrue or inaccurate.
SECTION 6.13 Representations and Warranties Exclusive. All representations
and warranties contained in this Agreement and the documents delivered in
connection herewith, are exclusive, and are given in lieu of all other
representations and warranties, express, implied, or statutory.
ARTICLE 7
OPERATION OF THE ASSETS
SECTION 7.01 Operation of the Assets.
(a) From and after the date of execution of this Agreement, and subject to
the provisions of applicable operating and other agreements, Seller shall (i)
use reasonable efforts during the period prior to the Closing, to operate and
administer the Assets in a manner consistent with its past practices, (ii) make
payment of all costs and expenses attributable to the ownership or operation of
the Assets and relating to the period prior to the transfer of operations to
Buyer, and shall carry on its business with respect to the Assets in
substantially the same manner as before execution of this Agreement, (iii)
except in the case of an emergency and as reflected on Schedule 5.08, not,
without Buyer's express written consent (which consent shall not be unreasonably
withheld or delayed), commit to participate in the drilling of any well, or make
or enter into any other commitments reasonably anticipated to require future
capital expenditures by Buyer in excess of $50,000 net to a Seller's interest
for each proposed operation, (iv) not enter into, amend in any material respect,
or terminate any material Contract except in a manner consistent with past
practices; provided, as to those Contracts described on Schedule 7.01(a)(iv)
which are due to expire or expected to be amended prior to the Closing Date, it
is agreed Seller may enter into a replacement, amendment, extension or
restatement thereof in a manner consistent with Seller's past practices and
taking into account prevailing market conditions when any such replacement,
amendment, extension or restatement is executed, (v) maintain insurance coverage
on the Assets in the amounts and of the types presently in force, (vi) maintain
in full force and effect the Leases, the Surface Agreements, and other Assets,
and pay all costs and expenses and perform all material obligations of the owner
of the Assets promptly when due, (vii) maintain all Permits, (viii) not
transfer, sell, remove, hypothecate, encumber, or otherwise dispose of any
Assets except for sales and dispositions of Hydrocarbons made in the ordinary
course of business consistent with a Seller's past practices, (xi) not grant or
create any preferential right to purchase, right of first opportunity, or other
transfer restriction or
requirement with respect to the Assets except in connection with the renewal or
extension of Assets after the Effective Time if granting or creating such right
or requirement is a condition of such renewal or extension and then with prompt
written notice of such action to Buyer, (x) not elect to become a non-consenting
party in any operation proposed by any other Person with respect to the Assets
unless requested to do so in writing by Buyer, (xi) maintain the Equipment in at
least as good a condition as it is on the date hereof, ordinary wear and tear
excepted, (xii) not make any change in any method of accounting or accounting
practice or policy with respect to the Assets, and (xiii) not agree to extend
any statute of limitations with respect to Taxes or any extension of time with
respect to a Tax assessment or deficiency for any Taxes, or make any change in
any Tax elections with respect to the Assets.
(b) Buyer acknowledges that Seller owns undivided interests or contract
rights in some or all of the Assets, and Buyer agrees that the acts or omissions
of the other working interests owners, or parties thereto shall not constitute a
violation of the provisions of this Article 7, nor shall any action required by
a vote of working interest owners or parties thereto constitute such a violation
so long as Seller has voted its interests in a manner that complies with the
provisions of this Article 7. Seller will, without penalty for the failure to
do so except to the extent that the failure to give Buyer such notice has a
Material Adverse Effect, notify Buyer of the occurrence of such event to the
extent of Seller's knowledge.
SECTION 7.02 Buyer's Qualification. At Closing, Buyer shall be qualified
and shall meet all requirements, including bonding requirements, to be
designated operator of that portion of the Assets for which Seller serves as
operator. In the event any Governmental Authority, as a condition of its
approval or consent to the assignment or transfer of any Lease, Well or Permit,
requires additional amounts for bond, Buyer shall promptly furnish such amounts.
SECTION 7.03 Operation of the Assets after the Closing. If requested by
Buyer prior to Closing and without limiting the scope of Buyer's Assumed
Obligations (as such term is defined under Section 12.01) and any of Buyer's
indemnification obligations under this Agreement, following Closing Seller shall
continue to operate the Assets (for which it was the operator prior to the
Closing Date) pursuant to the framework substantially in the form of or
described in Exhibit F, subject to availability of Seller's employees and the
Parties reaching agreement on proper reimbursement to be paid by Buyer to Seller
and other material terms of engagement of Seller's services by Buyer. Seller
shall make its employees and contractors available to Buyer prior to the Closing
as may be reasonably necessary to assist in the transition if Buyer becomes the
operator. Seller does not warrant or guarantee that Buyer will become the
operator of the Assets or any portion thereof, as such matter will be controlled
by the applicable joint operating agreement(s) and other applicable
agreement(s).
SECTION 7.04 Public Announcements. Prior to the Closing, no Party shall
make any press release or other public announcement regarding the existence of
this Agreement without the prior written consent of the other Party,
the contents hereof or the transactions contemplated herein; provided, however,
the foregoing shall not restrict disclosures by Buyer which are required by
applicable securities or other Laws or the applicable rules of any stock
exchange having jurisdiction over Buyer or its Affiliates. Following Closing,
the Parties may issue a press release, in which case such press release shall be
in a form and substance to be agreed upon by the Parties prior to the Closing.
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller to consummate the transactions provided for herein are
subject, at the option of Seller, to the fulfillment on or prior to the Closing
Date of each of the following conditions:
SECTION 8.01 Representations. The representations and warranties of Buyer
herein contained shall be true and correct in all material respects on the
Closing Date as though made on and as of such date;
SECTION 8.02 Performance. Buyer shall have performed all material
obligations, covenants and agreements contained in this Agreement to be
performed or complied with by it at or prior to the Closing and shall have taken
the actions set forth in Section 10.08; and
SECTION 8.03 Pending Matters. No suit, action, or other proceeding shall be
pending or threatened that seeks to, or could reasonably result in a judicial
order, judgment, or decree that would, restrain, enjoin, or otherwise prohibit
the consummation of the transactions contemplated by this Agreement.
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transaction provided for herein are
subject, at the option of Buyer, to the fulfillment on or prior to the Closing
Date of each of the following conditions:
SECTION 9.01 Representations. (a) The representations and warranties of
Seller contained in Section 5.01 through Section 5.06, inclusive, shall be true
and correct in all material respects on the Closing Date as though made on and
as of such date, and (b) the representations and warranties of Seller contained
in Section 5.07 through Section 5.24 shall be true and correct in all material
respects through the expiration of the Title Claim Date and no action or
omission of Seller or event shall have occurred during the period of time
commencing upon the expiration of the Title Claim Date and ending on the
Closing Date which shall have caused any of the representations and warranties
of
Seller contained in Section 5.07 through Section 5.24, inclusive, not to be true
and correct in all material respects on the Closing Date as though made on and
as of such date;
SECTION 9.02 Performance. Seller shall have performed all material
obligations, covenants, and agreements contained in this Agreement to be
performed or complied with by it at or prior to the Closing and shall have taken
the actions set forth in Section 10.07; and
SECTION 9.03 Pending Matters. No suit, action, or other proceeding shall be
pending or threatened that seeks to, or could reasonably result in a judicial
order, judgment, or decree that would, restrain, enjoin, or otherwise prohibit
the consummation of the transactions contemplated by this Agreement.
ARTICLE 10
THE CLOSING
SECTION 10.01 Time and Place of the Closing. If the conditions referred to
in Article 8 and Article 9 have been satisfied or waived in writing, the
transactions contemplated by this Agreement (the "Closing") shall take place at
the Houston, Texas offices of Seller at 9:00 a.m. CST on March 15, 2011 (the
"Closing Date").
SECTION 10.02 Allocation of Costs and Expenses and Adjustments to Purchase
Price at the Closing.
(a) At the Closing, the Purchase Price shall be increased (without
duplication) by the following amounts:
(i) the amount of all (A) paid ad valorem, property, or similar Taxes and
assessments based upon or measured by the ownership of the Assets, insofar as
such Taxes relate to periods of time from and after the Effective Time, and (B)
paid charges, costs, and expenses of any kind or nature that are attributable to
the Assets and the period from and after Effective Time;
(ii) all expenses, including operating and capital expenditures, incurred
and paid by or on behalf of Seller in connection with ownership, operation, and
use of the Assets attributable to the period from and after the Effective Time,
and including the costs incurred in connection with the AFEs described on
Schedule 5.08 which costs shall be the responsibility of Buyer notwithstanding
that they may have been committed to prior to the Effective Time;
(iii) all royalties, rentals, insurance premiums, and other charges
attributable to the Assets for the period of, from, and after the Effective Time
to the extent paid by or on behalf of Seller;
(iv) expenses incurred under applicable operating agreements including any
overhead charges allowable under the applicable operating procedure (XXXXX)
where Seller is non-operator attributable to the Assets for the period of from
and after the Effective Time to the extent paid by or on behalf of Seller;
(v) [Intentionally Omitted];
(vi) the value of all oil, gas, and natural gas liquids in storage or in
the pipelines as of the Effective Time that is credited to the Assets, such
value (A) for purposes of the Statement, to be the actual price received for
such oil, gas, or natural gas liquids upon the first unaffiliated third party
sale thereof, if available, and upon such estimates as are reasonably agreed
upon by the Parties, to the extent actual amounts are not known at Closing, and
(B) for purposes of the Final Settlement Statement, to be based upon actual
amounts; and
(vii) any other amount provided for in this Agreement or agreed upon in
writing by Buyer and Seller.
(b) At the Closing, the Purchase Price shall be decreased (without
duplication) by the following amounts:
(i) the Deposit;
(ii) an amount equal to the sales price paid to Seller by the first
purchaser of the Hydrocarbons produced, saved, and sold from the Subject
Interests from the Effective Time to the Closing Date (without deductions of any
kind or nature, including, but not limited to, royalties and any Taxes based on
production), which shall (A) for purposes of the Statement, be based upon actual
amounts, if available, and upon such estimates as are reasonably agreed upon by
the Parties, to the extent actual amounts are not known at Closing, and (B) for
purposes of the Final Settlement Statement, be based upon actual amounts;
(iii) an amount equal to all cash in, or attributable to, suspense accounts
held by Seller relating to the Assets for which Buyer has assumed responsibility
under Section 12.01;
(iv) the Allocated Value of any Asset sold prior to the Closing to the
holder of a preferential right pursuant to Section 4.06;
(v) the Allocated Value of any Asset excluded from the purchase and sale
contemplated herein pursuant to the provisions of Article 4;
(vi) all downward Purchase Price adjustments for Title Defects and
Environmental Defects determined in accordance with Article 4; and
(vii) any other amount provided for in this Agreement or agreed upon in
writing by Buyer and Seller.
(c) The allocations of costs and expenses and/or adjustments to the Purchase
Price described in Section 10.02(a) and Section 10.02(b) are referred to herein
as the "Purchase Price Allocations and Adjustments."
SECTION 10.03 Closing Adjustments and Allocations Statement. Not later than
seven (7) days prior to the Closing Date, Seller shall prepare and deliver to
Buyer a statement of the estimated Purchase Price Allocations and Adjustments
with appropriate support (the "Statement"), which Statement shall be based upon
the then most currently available data and information in order to make the
adjustments as provided in Section 10.02.
SECTION 10.04 Post-Closing Allocations and Adjustments to Purchase Price.
(a) On or before 90 days after the Closing Date, Seller shall prepare and
deliver to Buyer a revised Statement ("Final Settlement Statement") setting
forth the actual Purchase Price Allocations and Adjustments. Each Party shall
provide the other such data and information as may be reasonably requested to
permit Seller to prepare the Final Settlement Statement or to permit Buyer to
perform or cause to be performed an audit of the Final Settlement Statement.
The Final Settlement Statement shall become final and binding upon the Parties
on the thirtieth (30th) day following receipt thereof by Buyer (the "Final
Settlement Date") unless Buyer gives written notice of its disagreement (a
"Notice of Disagreement") to Seller prior to such date. Any Notice of
Disagreement shall specify in reasonable detail the dollar amount and the nature
and basis of any disagreement so asserted. If a Notice of Disagreement is
received by Seller in a timely manner, then the Parties shall resolve the
dispute evidenced by the Notice of Disagreement by mutual agreement, or
otherwise in accordance with Section 4.13.
(b) If the amount of the adjusted Purchase Price as set forth on the Final
Settlement Statement exceeds the amount of the estimated Purchase Price paid at
the Closing pursuant to the Statement delivered pursuant to Section 10.03, then
Buyer shall pay in immediately available funds to Seller the amount by which the
Purchase Price as set forth on the Final Settlement Statement exceeds the amount
of the estimated Purchase Price paid at the Closing within five (5) business
days after the Final Settlement Date. If the amount of the adjusted Purchase
Price as set forth on the Final Settlement Statement is less than the amount of
the estimated Purchase Price paid at the Closing pursuant to the Statement
delivered pursuant to Section 10.03, then Seller shall pay in immediately
available funds to Buyer the amount by which the Purchase Price as set forth on
the Final Settlement Statement is less than the amount of the estimated Purchase
Price paid at the Closing within five (5) business days after the Final
Settlement Date.
(c) Pursuant to Section 10.02(b), the Purchase Price is to be reduced by the
value of Hydrocarbons produced during the period from the Effective Time to the
Closing Date. If Buyer shall receive any revenues attributable to such
Hydrocarbons for
any reason for which Buyer has received a reduction in the Purchase Price
pursuant to this Section 10.04(c), Buyer shall promptly remit same in
immediately available funds to Seller. Likewise, if Seller shall for any reason
receive any of the proceeds of sale of Hydrocarbons produced and saved from the
Subject Interests and attributable to the period from and after the Closing Date
or any other revenues attributable to the ownership or operation of the Assets
from and after the Effective Time, Seller shall promptly remit same in
immediately available funds to Buyer.
(d) Except as otherwise provided in this Agreement, any costs and expenses,
including Taxes (other than income taxes) relating to the Assets which are not
reflected in the Final Settlement Statement shall be treated as follows:
(i) All costs and expenses relating to the Assets for the period of time
prior to the Effective Time shall be the sole obligation of Seller and Seller
shall promptly pay, or if paid by Buyer, promptly reimburse Buyer in immediately
available funds for and indemnify, defend, and hold Buyer harmless from and
against the same; and
(ii) All costs and expenses relating to the Assets for the period of time
on or after the Effective Time shall be the sole obligation of Buyer and Buyer
shall promptly pay, or if paid by Seller, promptly reimburse Seller in
immediately available funds for and indemnify, defend, and hold Seller harmless
from and against the same.
(e) Purchase Price adjustments, if any, with respect to Title Defects or
Environmental Defects the cure or correction of which or a dispute with respect
to the same remains pending on the Final Settlement Date shall be made on a date
mutually agreed by the Parties, both acting reasonably.
SECTION 10.05 Transfer Taxes. All sales, use, documentary, recording,
stamp, transfer, and other taxes (other than taxes on gross income, net income
or gross receipts) and duties, levies, assessments, fees, or other governmental
charges incurred by or imposed with respect to the property transfers undertaken
pursuant to this Agreement shall be the responsibility of, and shall be paid by,
Buyer. The Parties will reasonably cooperate to eliminate or reduce the
assessment of sales or use taxes to the extent permitted by applicable Law. If
Seller (not Buyer) is required by applicable Law to appeal or protest the
assessment of sales or use taxes, Seller shall protest the assessment of those
taxes if Buyer requests Seller in writing to make such appeal or protest, and,
in such event, Buyer will reimburse Seller all out-of-pocket expenses authorized
by Buyer and incurred by Seller in connection with such appeal or protest.
SECTION 10.06 Ad Valorem and Similar Taxes. All ad valorem, property,
production, severance, and similar Taxes attributable to any period prior to the
Effective Time will be paid by the Seller, including Taxes due on account of an
audit by a taxing authority. All ad valorem, property, production, severance,
and similar Taxes attributable to any period on or after the Effective Time
shall be paid by Buyer. Notwithstanding
anything to the contrary set forth in this Agreement, for all purposes of this
Agreement, Taxes based on or measured by production of Hydrocarbons or the value
thereof shall be deemed attributable to the period during which such production
occurred regardless of the year when such Taxes are assessed. Seller shall
provide written evidence to Buyer that it has paid all Taxes for periods prior
to the Effective Time that are payable after the Effective Time including
production Taxes in the States of Montana and Wyoming, provided such Taxes are
based on production occurring prior to the Effective Time.
SECTION 10.07 Actions of Seller at the Closing. At the Closing, Seller
shall:
(a) execute, acknowledge, and deliver to Buyer the Assignment in the form of
Exhibit D, effective as of the Effective Time, and such other conveyances,
assignments, transfers, bills of sale, and other instruments (in form and
substance mutually agreed upon by Buyer and Seller) as may be necessary or
desirable to convey the Assets to Buyer;
(b) execute, acknowledge, and deliver to Buyer the Mineral Quitclaim Deed in
the form of the attached Exhibit E, effective as of the Effective Time, to
convey certain fee mineral interests located in the State of Wyoming;
(c) execute, acknowledge, and deliver to Buyer such letters in lieu of
transfer or division orders as may be reasonably requested by Buyer no less than
five (5) business days prior to the Closing Date directing all purchasers of
production from the Subject Interests to make payment of proceeds attributable
to such production to Buyer from and after the later of the Closing Date or the
date operations and accounting functions are transferred to Buyer;
(d) deliver to Buyer possession of the Assets (excluding the Records);
(e) execute and deliver to Buyer affidavits attesting to their non-foreign
status;
(f) execute, acknowledge, and deliver any other agreements provided for
herein, including without limitation a transition services agreement agreed upon
by the Parties pursuant to Section 7.03 herein, or necessary or desirable to
effect the transactions contemplated hereby; and
(g) execute and deliver any documents or instruments required by any
Governmental Authority in order to transfer the operatorship of the Assets being
operated by Seller to Buyer.
SECTION 10.08 Actions of Buyer at the Closing. At the Closing, Buyer shall:
(a) pay the Purchase Price (as adjusted pursuant to the provisions hereof)
in immediately available funds pursuant to wire transfer instructions to be
provided by Seller to Buyer;
(b) provide any necessary evidence including proof of proper bonding and
other qualifications to be entitled to take and actually take possession of the
Assets;
(c) execute, acknowledge, and deliver the Assignment and any other
agreements provided for herein, including without limitation a transition
services agreement agreed upon by the Parties pursuant to Section 7.03 herein,
or necessary or desirable to effect the transactions contemplated hereby; and
(d) if required pursuant to Section 14.08, execute and deliver to Seller an
Assignment Agreement in the form of Exhibit G and a Parent Guarantee in the form
of Exhibit H.
SECTION 10.09 Recordation; Further Assurances.
(a) Promptly following the Closing, Buyer shall cause the documents
identified in Section 10.07(a) and Section 10.07(b) to be properly recorded or
filed in the appropriate real property and other applicable records, in the
order reasonably agreed upon by the Parties, and Buyer shall promptly provide
Seller copies of all such recorded or filed instruments.
(b) Subject to such additional period of time that Seller reasonably
requires to use the Records in the conduct of operations after Closing, Seller
shall make the Records available to be picked up by Buyer at the offices of
Seller during normal business hours within 30 days after the Closing, to the
extent the Records are in the possession of Seller and are not subject to
contractual restrictions on transferability. Seller shall have the right at its
sole expense to make and retain copies of any of the Records.
(c) After the Closing Date, each Party, at the request of the other Party
and without additional consideration, shall execute and deliver, or shall cause
to be executed and delivered, from time to time such further instruments of
conveyance and transfer and shall take such other action as the other Party may
reasonably request to convey and deliver the Assets to Buyer and to accomplish
the orderly transfer of the Assets to Buyer in the manner contemplated by this
Agreement. After the Closing, the Parties will cooperate to have all proceeds
received attributable to the Assets to be paid to the proper Party hereunder and
to have all expenditures to be made with respect to the Assets be made by the
proper Party hereunder.
ARTICLE 11
TERMINATION
SECTION 11.01 Right of Termination. This Agreement may be terminated at any
time at or prior to the Closing:
(a) by mutual written consent of the Parties;
(b) by Seller on the Closing Date if the conditions set forth in Article 8
have not been satisfied in all material respects by Buyer or waived by Seller in
writing by the Closing Date;
(c) by Buyer on the Closing Date if the conditions set forth in Article 9
have not been satisfied in all material respects by Seller or waived by Buyer in
writing by the Closing Date;
(d) by Seller if the Closing shall not have occurred by March 16, 2011;
provided, however, if the Parties mutually agree, such date may be extended;
(e) by either Buyer or Seller if any Governmental Authority shall have
issued a final and non-appealable order, judgment or decree or taken any other
final and non-appealable action challenging, restraining, enjoining, prohibiting
or invalidating the consummation of any of the transactions contemplated herein;
(f) by either Buyer or Seller if (i) the aggregate amount of the Title
Defect Values with respect to all Title Defects asserted by Buyer reasonably and
in good faith plus (ii) the aggregate amount of the Environmental Defect Values
with respect to all Environmental Defects asserted by Buyer reasonably and in
good faith plus (iii) the aggregate amount of all Casualty Losses exceeds twenty
percent (20%) of the unadjusted Purchase Price; or
(g) by either Buyer or Seller if between execution of this Agreement and
Closing, an event should occur having a Material Adverse Effect on the
ownership, operation or value of the Assets.
provided, however, that no Party shall have the right to terminate this
Agreement pursuant to clause (b), (c), or (d) above if such Party is at such
time in Breach of any provision of this Agreement, or such Party instigates a
proceeding of the nature described in Section 8.03 or Section 9.03.
SECTION 11.02 Effect of Termination. In the event that the Closing does
not occur as a result of any Party exercising its right to terminate pursuant to
Section 11.01, then except as set forth in Section 2.02, this Agreement shall be
null and void and no Party shall have any further rights or obligations under
this Agreement; provided, that, nothing herein shall relieve any Party from any
liability for any Breach hereof or any liability that has accrued prior to the
date of such termination, which liability, and the applicable terms and
provisions of this Agreement, shall survive such termination.
SECTION 11.03 Attorneys' Fees, Etc. If either Party to this Agreement
resorts to legal proceedings to enforce this Agreement, the prevailing Party in
such proceedings shall be entitled to recover all costs incurred by such Party,
including reasonable attorneys' fees, in addition to any other relief to which
such Party may be entitled. This Section 11.03 shall not apply to any
proceeding under Section 4.13.
ARTICLE 12
ASSUMPTION AND INDEMNIFICATION
SECTION 12.01 Buyer's Obligations after Closing. Upon and after Closing,
except to the extent reflected in an upward Purchase Price Allocations and
Adjustments, Buyer will assume and perform all the obligations, liabilities, and
duties relating or with respect to the ownership and/or operation of the Assets
that are attributable to periods on or after the Effective Time, together with
the matters described on Schedule 5.06, Plugging and Abandonment Obligations,
the Environmental Obligations, and all other obligations assumed by Buyer under
this Agreement (collectively, the "Assumed Obligations"). Without limiting the
generality of the foregoing, the Assumed Obligations shall also specifically
include:
(a) Responsibility for the performance of all express and implied
obligations under the instruments described in Exhibit A, together with all
other instruments in the chain of title to such Assets, the Leases, the
Contracts, the Surface Agreements, the Permits, and all other orders, contracts,
and agreements to which the Assets are subject, including the payment of
royalties and overriding royalties, in each case to the extent attributable to
the periods on or after the Effective Time;
(b) Responsibility for payment of all amounts held in suspense accounts by
Seller as of the Closing Date, and for which the Purchase Price is adjusted
pursuant to Section 10.02(b), without regard to whether such suspense amounts
relate to periods before or after the Effective Time. Seller covenants and
agrees to provide to Buyer with the Records, the owner name, address, and tax
identification number (if known by Seller), the reason such amounts are in
suspense, the amount of suspense funds for each such owner making up the total
of such funds, and all other information with respect thereto required to be
provided to the owner or to the state under the laws, rules, and regulations of
the affected jurisdiction. To the extent practicable, Seller shall provide such
information in the electronic or computer sensible form maintained by Seller;
(c) Responsibility for compliance with all Laws now or hereafter in effect
pertaining to the Assets, and the procurement and maintenance of all permits,
consents, and authorizations of or required by Governmental Authorities in
connection with the Assets, attributable to periods on or after the Effective
Time; and
(d) Responsibility for those royalty and overriding royalty payments placed
by Seller in escrow accounts, which responsibility shall include the
establishment of an escrow account by Buyer to receive such funds placed in
escrow by Seller.
SECTION 12.02 Seller's Obligations after Closing. After Closing and subject
to Section 12.10 and Section 12.11 below, Seller will retain responsibility for
(a) the payment of all operating expenses and capital expenditures related to
the Assets and attributable to Seller's ownership and/or operation of the Assets
prior to the Effective Time, but not including the AFEs set forth in Schedule
5.08, (b) severance, ad valorem, production, property, personal property, and
similar Taxes measured by the value of the Assets or measured by the production
of Hydrocarbons attributable to all periods prior to the Effective Time, (c) the
payment of all broker's and finder's fees in connection with the transactions
contemplated by this Agreement, (d) the obligations, liabilities, and duties of
Seller relating or with respect to the ownership and/or operation of the Assets
prior to the Effective Time other than the matters addressed in Section 12.01(b)
and described on Schedule 5.06, the Plugging and Abandonment Obligations and the
Environmental Obligations, and (e) Seller's proportionate share of any third
party Claims with respect to payments of lease royalties in respect of the
Leases during Seller's period of ownership of such Leases (collectively the
"Retained Obligations").
SECTION 12.03 Plugging and Abandonment Obligations.
(a) Buyer's Obligations. Provided Closing occurs, Buyer assumes full
responsibility and liability for the following plugging and abandonment
obligations related to the Assets (the "Plugging and Abandonment Obligations"),
regardless of whether they are attributable to the ownership or operation of the
Assets before or after the Effective Time:
(i) The necessary and proper plugging, replugging, and abandonment of all
xxxxx on the Assets, whether plugged and abandoned before or after the Effective
Time in compliance with applicable Laws and the terms of the Leases;
(ii) The necessary and proper decommissioning, removal, abandonment, and
disposal of all structures, pipelines, facilities, equipment, abandoned Assets,
junk, and other personal property located on or comprising any part of the
Assets in compliance with applicable Laws and the terms of the Leases;
(iii) The necessary and proper capping and burying of all associated flow
lines located on or comprising any part of the Assets, to the extent required by
applicable Laws, the Leases, the Contracts, or other agreements;
(iv) The necessary and proper restoration of the Assets, both surface and
subsurface, in compliance with any applicable Laws, the Leases, the Surface
Agreements, the Contracts, or any other applicable agreements;
(v) To the extent not addressed by operation of Article 4, any necessary
clean-up or disposal of any part of the Assets contaminated by NORM, asbestos
containing materials, lead based paint, or any other substances or materials
considered to be hazardous under Laws, including Environmental Laws, and Laws
relating to the protection of natural resources;
(vi) All obligations arising from contractual requirements and demands made
by Governmental Authorities or parties claiming a vested interest in any part of
the Assets; and
(vii) Obtaining and maintaining all bonds and securities, including
supplemental or additional bonds or other securities, that may be required by
contract or by Governmental Authorities.
(b) Standard of Operations. Buyer shall conduct all Plugging and
Abandonment Obligations and all other operations with respect to the Assets in a
good and workmanlike manner and in compliance with all Laws, including
Environmental Laws and Laws (now or hereafter in effect) relating to the
protection of natural resources.
SECTION 12.04 Environmental Obligations. Provided Closing occurs, Buyer
assumes full responsibility and liability for the following occurrences, events,
conditions, and activities on, or related to, or attributable to the Assets (the
"Environmental Obligations") regardless of whether arising from Seller's
ownership or operation of, or relating to, the Assets before or after the
Effective Time, AND REGARDLESS OF WHETHER RESULTING FROM ANY ACTS OR OMISSIONS
OF SELLER OR ITS REPRESENTATIVES (INCLUDING THOSE ARISING FROM THE SOLE, JOINT
OR CONCURRENT NEGLIGENCE (BUT NOT GROSS NEGLIGENCE OR WILLFUL MISCONDUCT),
STRICT LIABILITY, OR OTHER LEGAL FAULT OF SELLER OR ANY OF SELLER'S
REPRESENTATIVES) or the condition, including the environmental condition of the
Assets when acquired:
(a) Environmental pollution or contamination, including pollution or
contamination of the soil, groundwater, or air by Hydrocarbons, drilling fluid
and other chemicals, brine, produced water, NORM, asbestos containing materials,
lead based paint, mercury, or any other substance, and any other violation of
Environmental Laws or Laws now or hereafter in effect relating to the protection
of natural resources;
(b) Underground injection activities and waste disposal;
(c) Clean-up responses, and the cost of remediation, control, assessment, or
compliance with respect to surface and subsurface pollution caused by spills,
pits, ponds, lagoons, or storage tanks;
(d) Failure to comply with applicable land use, surface disturbance,
licensing, or notification requirements;
(e) Disposal on the Assets of any hazardous substances, wastes, materials,
and products generated by or used in connection with the ownership, development,
operation, or abandonment of any part of the Assets;
(f) Non-compliance with Environmental Laws (now or hereafter in effect); and
(g) Third-party Claims based on alleged damage to water xxxxx.
SECTION 12.05 Definition of Claims. Except as expressly provided in Section
4.09(a)(viii), the term "Claims" means any and all direct or indirect, demands,
claims, notices of violation, notices of probable violation, filings,
investigations, administrative proceedings, actions, causes of action, suits,
other legal proceedings, judgments, assessments, damages, deficiencies, Taxes,
penalties, fines, obligations, responsibilities, liabilities, payments, charges,
losses, costs, and expenses (including costs and expenses of operating the
Assets) of any kind or character asserted by a third party (whether or not
asserted prior to Closing, and whether known or unknown, fixed or unfixed,
conditional or unconditional, based on negligence, strict liability or
otherwise, xxxxxx or inchoate, liquidated or unliquidated, secured or unsecured,
accrued, absolute, contingent, or other legal theory), including penalties and
interest on any amount payable as a result of any of the foregoing, any legal or
other costs and expenses incurred in connection with investigating or defending
any Claim, and all amounts paid in settlement of Claims. Without limiting the
generality of the foregoing, the term "Claims" specifically includes any and all
Claims arising from, attributable to or incurred in connection with any (a)
breach of contract, (b) loss or damage to property, injury to or death of
persons, and other tortuous injury and (c) violations of applicable Laws,
including Laws relating to the protection of natural resources, Environmental
Laws (each as now or hereafter in effect) and any other legal right or duty
actionable at law or equity.
SECTION 12.06 Application of Indemnities.
(a) All indemnities set forth in this Agreement extend to the officers,
directors, partners, managers, members, shareholders, agents, contractors,
employees, and affiliates of the indemnified party ("Representatives").
(b) UNLESS THIS AGREEMENT EXPRESSLY PROVIDES TO THE CONTRARY, THE INDEMNITY
AND RELEASE, AND WAIVER AND ASSUMPTION PROVISIONS SET FORTH IN THIS AGREEMENT
APPLY, REGARDLESS OF WHETHER THE INDEMNIFIED PARTY (OR ITS REPRESENTATIVES)
CAUSES, IN WHOLE OR PART, AN INDEMNIFIED CLAIM, INCLUDING INDEMNIFIED CLAIMS
ARISING OUT OF OR RESULTING, IN WHOLE OR IN PART, FROM, OUT OF, OR IN CONNECTION
WITH THE CONDITION OF THE ASSETS OR THE SOLE, JOINT, OR CONCURRENT NEGLIGENCE
(BUT NOT SECURITIES FRAUD CLAIMS THAT REQUIRE SCIENTER OR KNOWLEDGE AS ONE
ELEMENT OF THE CAUSE OF ACTION, WILLFUL MISCONDUCT, OR FRAUD BY THE INDEMNIFIED
PARTY), STRICT LIABILITY, OR OTHER LEGAL FAULT OF THE INDEMNIFIED PARTY OR ANY
OF ITS REPRESENTATIVES.
(c) NEITHER BUYER NOR SELLER SHALL BE ENTITLED TO RECOVER FROM THE OTHER
PARTY(IES), RESPECTIVELY, AND EACH PARTY RELEASES THE OTHER PARTY(IES) FROM AND
WAIVES, ANY LOSSES, COSTS, EXPENSES, OR DAMAGES ARISING UNDER THIS AGREEMENT OR
IN CONNECTION WITH OR WITH RESPECT TO THE
TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT ANY AMOUNT IN EXCESS OF THE ACTUAL
COMPENSATORY DAMAGES SUFFERED BY SUCH PARTY EXCEPT THAT IF THE DISPUTE BETWEEN
SELLER AND BUYER IS BASED ON A FAILURE OF THE TRANSACTION CONTEMPLATED HEREBY TO
CLOSE, THE SOLE AND EXCLUSIVE REMEDIES SHALL BE THOSE PROVIDED FOR IN SECTION
2.02. BUYER AND SELLER WAIVE, AND RELEASE EACH OTHER FROM ANY RIGHT TO RECOVER
PUNITIVE, SPECIAL, EXEMPLARY, AND CONSEQUENTIAL DAMAGES ARISING IN CONNECTION
WITH OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT;
PROVIDED, HOWEVER, ANY SUCH DAMAGES RECOVERED BY A THIRD PARTY (OTHER THAN
SUBSIDIARIES, AFFILIATES, OR PARENTS OF A PARTY) FOR WHICH A PARTY OWES THE
OTHER PARTY AN INDEMNITY UNDER THIS AGREEMENT SHALL NOT BE WAIVED. BUYER AND
SELLER ACKNOWLEDGE THAT THIS STATEMENT IS CONSPICUOUS.
(d) The indemnities of the indemnifying Party in this Agreement do not cover
or include any amounts that the indemnified Party may legally recoup from other
third party owners under applicable joint operating agreements or other
agreements, and for which the indemnified Party is reimbursed by any third
party. The indemnifying Party will pay all costs incurred by the indemnified
Party in obtaining reimbursement from third parties. There will be no upward or
downward adjustment in the Purchase Price as a result of any matter for which
Buyer or Seller is indemnified under this Agreement.
SECTION 12.07 Buyer's Indemnity. Subject to Section 12.10, Buyer shall
release and indemnify, defend and hold Seller and its Representatives harmless
from and against any and all Claims caused by, resulting from, or incidental to
the Assumed Obligations, and any Claims caused by, resulting from, or
attributable to (a) the Breach as of the Closing Date of any representation or
warranty of Buyer set forth in this Agreement, or (b) any Breach of, or failure
to perform or satisfy any of the covenants and obligations of Buyer hereunder.
SECTION 12.08 Seller's Indemnity. Subject to Section 12.10 and Section
12.11, Seller shall release and indemnify, defend and hold Buyer and its
Representatives harmless from and against any and all Claims caused by,
resulting from, or incidental to the Retained Obligations, and any Claims caused
by, or resulting from, or attributable to (a) the Breach as of the Title Claim
Date of any representation or warranty of Seller except those matters
constituting a Title Defect or an Environmental Defect that may also constitute
a Breach of the representations and warranties set forth in Sections 5.09, 5.10,
5.17, 5.18, 5.19, 5.21, 5.22, and 5.23 of this Agreement, and (b) any Breach of,
or failure to perform or satisfy, any of the covenants and obligations of Seller
hereunder.
SECTION 12.09 Notices and Defense of Indemnified Claims. Each Party shall
immediately notify the other Party of any Claim of which it becomes aware and
for which it is entitled to indemnification from the other Party under this
Agreement. The indemnifying Party shall be obligated to defend, at the
indemnifying Party's sole expense, any
litigation or other administrative or adversarial proceeding against the
indemnified Party relating to any Claim for which the indemnifying Party has
agreed to release and indemnify and hold the indemnified Party harmless under
this Agreement; provided, however, that the failure to give such notice shall
not relieve the indemnifying Party from its obligations unless such failure to
give notice actually prejudices the indemnifying Party and so long as the notice
is given within the period set forth in Section 12.10. The indemnified Party
shall have the right to participate with the indemnifying Party in the defense
of any such Claim at its own expense.
SECTION 12.10 Survival. Except as specifically provided in Section 12.07
and Section 12.08, the representations, warranties, covenants, and agreements of
the Parties set forth herein shall not survive the Closing, and the consummation
of the transactions contemplated hereby, and Buyer and Seller each covenants not
to xxx the other based upon any alleged Breach of any such representations or
warranties that do not survive the Closing. The indemnity of Seller as provided
in Section 12.08 shall survive only for a period of one (1) year from and after
the Closing Date. Notwithstanding anything to the contrary, Buyer shall not be
entitled to make, and hereby waives the right to assert, any claim for indemnity
pursuant to the provisions of this Article 12 against Seller unless Buyer seeks
indemnification for such claim by a written notice received by Seller on or
before the date that is one (1) year after the Closing Date (the "Expiration
Date"). ANYTHING IN THIS AGREEMENT TO THE CONTRARY NOTWITHSTANDING, AFTER THE
EXPIRATION DATE, ALL OF THE RETAINED OBLIGATIONS AND ALL OF SELLER'S OTHER
LIABILITIES AND OBLIGATIONS WITH RESPECT TO THE ASSETS (AND ALL CLAIMS WITH
RESPECT THERETO) SHALL BE DEEMED AND CONSTITUTE ASSUMED OBLIGATIONS, EXCEPT TO
THE EXTENT OF ANY CLAIMS OF WHICH BUYER NOTIFIES SELLER ON OR BEFORE THE
EXPIRATION DATE IN ACCORDANCE WITH THIS AGREEMENT. NOTWITHSTANDING THE
FOREGOING, SELLER'S OBLIGATIONS WITH RESPECT TO AD VALOREM TAXES SUBJECT TO
SECTION 10.06 SHALL INDEFINITELY SURVIVE.
SECTION 12.11 Limitation on Seller's Indemnity. SELLER'S AGGREGATE
LIABILITY HEREUNDER SHALL NOT EXCEED, AND SHALL BE LIMITED TO, TEN PERCENT (10%)
OF THE UNADJUSTED PURCHASE PRICE. FURTHER NOTWITHSTANDING THE FOREGOING,
SELLER'S OBLIGATIONS AS TO AD VALOREM TAXES SUBJECT TO SECTION 10.06 SHALL BE IN
NO MANNER AFFECTED OR OTHERWISE LIMITED BY THIS SECTION 12.11.
SECTION 12.12 Exclusive Remedy. The terms and provisions of this Article 12
and those provided in Article 2, Article 4, Article 7, Article 8, Article 9,
Article 10, and Article 11 shall be the sole and exclusive remedy of each of the
Parties indemnified hereunder with respect to the representations, warranties,
covenants, and agreements of the Parties set forth in this Agreement and the
other documents executed and
delivered hereunder; provided, however, that the terms of this Section 12.12
shall not be applicable to the extent that a Party has committed fraud,
securities fraud (where one of the elements of the cause of action is scienter
or knowledge), willful misconduct, or gross negligence.
SECTION 12.13 Defenses and Counterclaims. Each Party that is required to
assume any obligation or liability of the other Party pursuant to this Agreement
or that is required to release and defend, indemnify or hold the other Party
harmless hereunder shall, notwithstanding any other provision hereof to the
contrary, be entitled to the use and benefit of all defenses (legal and
equitable) and counterclaims of such other Party in defense of third party
Claims arising out of any such assumption or indemnification.
SECTION 12.14 Anti-Indemnity Statute. Buyer and Seller agree that with
respect to any statutory limitations now or hereafter in effect affecting the
validity or enforceability of the indemnities provided for in this Agreement,
such indemnities shall be deemed amended in order to comply with such
limitations. This provision concerning statutory limitations shall not apply to
indemnities for all liabilities of the indemnifying Party which are covered by
such Party's insurance. The indemnification provisions provided in this Article
12 shall not be construed as a form of insurance. Buyer and Seller hereby waive
for themselves and their successors and assigns, including their insurers, any
subrogation for Claims for which each of them is respectively liable or against
which each respectively indemnifies for the other, and, if required by
applicable policies, Buyer and Seller shall obtain waiver of such subrogation
from their respective insurers.
ARTICLE 13
DISCLAIMERS; CASUALTY LOSS AND CONDEMNATION
SECTION 13.01 Disclaimers of Representations and Warranties. THE EXPRESS
REPRESENTATIONS AND WARRANTIES OF SELLER CONTAINED IN THIS AGREEMENT ARE
EXCLUSIVE AND ARE IN LIEU OF ALL OTHER REPRESENTATIONS AND WARRANTIES, WHETHER
EXPRESS, IMPLIED, AT COMMON LAW, OR STATUTORY. BUYER ACKNOWLEDGES THAT SELLER
HAS NOT MADE, AND SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES, AND BUYER
HEREBY EXPRESSLY WAIVES, ANY REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT
COMMON LAW, BY STATUTE, OR OTHERWISE, RELATING TO (A) PRODUCTION RATES,
RECOMPLETION OPPORTUNITIES, DECLINE RATES, INFORMATION IN RESPECT OF PRODUCTION
IMBALANCES, OR THE QUALITY, QUANTITY, OR VOLUME OF THE RESERVES OF HYDROCARBONS,
IF ANY, ATTRIBUTABLE TO THE ASSETS, (B) THE ACCURACY, COMPLETENESS, OR
MATERIALITY OR SIGNIFICANCE OF ANY INFORMATION, DATA, GEOLOGICAL AND GEOPHYSICAL
DATA (INCLUDING ANY INTERPRETATIONS OR DERIVATIVES BASED THEREON), OR OTHER
MATERIALS (WRITTEN OR ORAL) CONSTITUTING PART OF THE ASSETS, NOW, HERETOFORE OR
HEREAFTER FURNISHED TO BUYER BY OR ON BEHALF OF
SELLER, (c) THE CONDITION, INCLUDING, THE ENVIRONMENTAL CONDITION OF THE ASSETS
AND (d) THE COMPLIANCE OF SELLER'S PAST PRACTICES WITH THE TERMS AND PROVISIONS
OF ANY AGREEMENT IDENTIFIED IN EXHIBIT A, OR ANY SURFACE AGREEMENT, PERMIT,
CONTRACT, OR APPLICABLE LAWS, INCLUDING ENVIRONMENTAL LAWS AND LAWS RELATING TO
THE PROTECTION OF NATURAL RESOURCES, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
ARTICLE 5. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, SELLER
EXPRESSLY DISCLAIMS AND NEGATES, AND BUYER HEREBY WAIVES, AS TO PERSONAL
PROPERTY, EQUIPMENT, INVENTORY, MACHINERY, FIXTURES, BUILDINGS, OFFICES,
TRAILERS, ROLLING STOCK, VEHICLES, AND GEOLOGICAL AND GEOPHYSICAL DATA
(INCLUDING ANY INTERPRETATIONS OR DERIVATIVES BASED THEREON) CONSTITUTING A
PART OF THE ASSETS (i) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (ii)
ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (iii) ANY
IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS,
(iv) ANY IMPLIED OR EXPRESS WARRANTY THAT ANY DATA TRANSFERRED PURSUANT HERETO
IS NONINFRINGING, (v) ANY RIGHTS OF PURCHASERS UNDER APPROPRIATE STATUTES TO
CLAIM DIMINUTION OF CONSIDERATION OR RETURN OF THE PURCHASE PRICE, (vi) ANY
IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM DEFECTS, WHETHER KNOWN OR UNKNOWN,
(vii) ANY AND ALL IMPLIED WARRANTIES EXISTING UNDER APPLICABLE LAWS, AND (viii)
ANY IMPLIED OR EXPRESS WARRANTY REGARDING ENVIRONMENTAL LAWS, OR LAWS RELATING
TO THE PROTECTION OF THE ENVIRONMENT, HEALTH, SAFETY, OR NATURAL RESOURCES OR
RELATING TO THE RELEASE OF MATERIALS INTO THE ENVIRONMENT, INCLUDING ASBESTOS
CONTAINING MATERIAL, LEAD BASED PAINT, MERCURY, OR ANY OTHER HAZARDOUS
SUBSTANCES OR WASTES, IT BEING THE EXPRESS INTENTION OF BUYER AND SELLER THAT
THE ASSETS, INCLUDING ALL PERSONAL PROPERTY, EQUIPMENT, FACILITIES, INVENTORY,
MACHINERY, FIXTURES, BUILDINGS, OFFICES, TRAILERS, VEHICLES, AND ROLLING STOCK
INCLUDED IN THE ASSETS, SHALL BE CONVEYED TO BUYER, AND BUYER SHALL ACCEPT THE
SAME, AS IS, WHERE IS, WITH ALL FAULTS AND IN THEIR PRESENT CONDITION AND STATE
OF REPAIR. BUYER REPRESENTS AND WARRANTS TO SELLER THAT BUYER WILL MAKE, OR
CAUSE TO BE MADE SUCH INSPECTIONS WITH RESPECT TO SUCH ASSETS AS BUYER DEEMS
APPROPRIATE. SELLER AND BUYER AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE
LAWS (INCLUDING ENVIRONMENTAL LAWS AND LAWS RELATING TO THE PROTECTION OF
NATURAL RESOURCES, HEALTH, SAFETY, OR THE ENVIRONMENT) TO BE EFFECTIVE, THE
DISCLAIMERS OF THE WARRANTIES CONTAINED IN THIS SECTION ARE "CONSPICUOUS"
DISCLAIMERS FOR ALL PURPOSES.
SECTION 13.02 NORM. BUYER ACKNOWLEDGES THAT IT HAS BEEN INFORMED THAT OIL
AND GAS PRODUCING FORMATIONS CAN CONTAIN NATURALLY OCCURRING RADIOACTIVE
MATERIAL ("NORM"). SCALE FORMATION OR SLUDGE
DEPOSITS CAN CONCENTRATE LOW LEVELS OF NORM ON EQUIPMENT AND OTHER ASSETS. THE
ASSETS SUBJECT TO THIS AGREEMENT MAY HAVE LEVELS OF NORM ABOVE BACKGROUND
LEVELS, AND A HEALTH HAZARD MAY EXIST IN CONNECTION WITH THE ASSETS BY REASON
THEREOF. THEREFORE, BUYER MAY NEED TO AND SHALL FOLLOW SAFETY PROCEDURES WHEN
HANDLING THE EQUIPMENT AND OTHER ASSETS.
SECTION 13.03 Casualty Loss; Condemnation.
(a) Except as otherwise provided in this Agreement, Buyer shall assume all
risk of loss with respect to, and any change in the condition of, the Assets
from and after the Effective Time, including with respect to the depletion of
Hydrocarbons, the watering-out of any well, the collapse of casing, sand
infiltration of xxxxx, and the depreciation of personal property.
(b) Prior to the Closing, there shall not have been a material adverse
change in the Assets taken as a whole caused by an event of casualty (a
"Casualty"), including but not limited to, volcanic eruptions, acts of God,
fire, explosion, earthquake, wind storm, flood, drought, condemnation, the
exercise of any right of eminent domain, confiscation, or seizure, but excepting
depletion due to normal production and depreciation or failure of equipment or
casing.
(c) If, prior to the Closing, a Casualty occurs (or Casualties occur) which
results in a reduction in the value of the Assets in excess of 20% of the
Purchase Price ("Casualty Loss"), Buyer or Seller may elect to terminate this
Agreement. If this Agreement is not so terminated, then this Agreement shall
remain in full force and effect notwithstanding any such Casualty Loss, and, at
Buyer's sole option, regardless of the value of the Casualty Loss (i) Seller
shall retain such Asset subject to such Casualty and such Asset shall be the
subject of an adjustment to the Purchase Price in the same manner set forth in
Section 4.03 hereof, or (ii) at the Closing, Seller shall pay to Buyer all sums
paid to Seller by reason of such Casualty Loss, provided, however, that the
Purchase Price shall not be adjusted by reason of such payment, and Seller shall
assign, transfer, and set over unto Buyer all of the right, title, and interest
of Seller in and to such Asset and any unpaid awards or other payments arising
out of such Casualty Loss.
(d) For purpose of determining the value of a Casualty Loss, the Parties
shall use the same methodology as applied in determining the value of a Title
Defect as set forth in Section 4.03(a).
ARTICLE 14
MISCELLANEOUS
SECTION 14.01 Names. As soon as reasonably possible after the Closing, but
in no event later than 60 days after the Closing, Buyer shall remove the names
of Seller and its affiliates, and all variations thereof, from all of the Assets
and make the requisite filings with, and provide the
requisite notices to, the appropriate Governmental Authorities to place the
title or other indicia or responsibility of ownership, including operation of
the Assets, in a name other than the name of the Seller or any of its
affiliates, or any variations thereof.
SECTION 14.02 Expenses. Each Party shall be solely responsible for all
expenses, including due diligence expenses, incurred by it in connection with
this transaction, and neither Party shall be entitled to any reimbursement for
any such expenses from the other Party.
SECTION 14.03 Document Retention. As used in this Section 14.03, the term
"Documents shall mean all files, documents, books, records, and other data
delivered to Buyer by Seller pursuant to the provisions of this Agreement (other
than those that Seller has retained either the original or a copy of), including
financial and tax accounting records; land, title and division order files;
contracts; engineering and well files; and books and records related to the
operation of the Assets prior to the Closing Date. Buyer shall retain and
preserve the Documents for a period of no less than seven (7) years following
the Closing Date (or for such longer period as may be required by Laws of any
Governmental Authority), and shall allow Seller or its representatives to
inspect the Documents at reasonable times and upon reasonable notice during
regular business hours during such time period. Seller shall have the right
during such period to make copies of any of the Documents at its expense.
SECTION 14.04 Entire Agreement. This Agreement, the documents to be
executed and delivered hereunder, and the Exhibits, Schedules, and Appendices
attached hereto constitute the entire agreement between the Parties pertaining
to the subject matter hereof and supersede all prior agreements, understandings,
negotiations, and discussions, whether oral or written, of the Parties
pertaining to the subject matter hereof; provided, however, that this Agreement
does not supersede that certain Confidentiality Agreement dated August 19, 2010,
by and between the Seller and Buyer, which agreement shall not survive the
Closing. No supplement, amendment, alteration, modification, or waiver of this
Agreement shall be binding unless executed in writing by each of the Parties and
specifically referencing this Agreement.
SECTION 14.05 Waiver. No waiver of any provision of this Agreement shall be
deemed or shall constitute a waiver of any other provision hereof (whether or
not similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
SECTION 14.06 Construction. The captions in this Agreement are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement.
SECTION 14.07 No Third Party Beneficiaries. Except as provided in Section
12.06(a), nothing in this Agreement shall provide any benefit to any third party
or entitle any third party to any claim, cause of action, remedy, or right of
any kind, it being the intent of the Parties that this Agreement shall not be
construed as a third party beneficiary contract.
SECTION 14.08 Assignment. Except as provided in Section 2.04, neither Party
may assign or delegate any of its rights or duties hereunder to any individual
or entity other than an affiliate of such Party without the prior written
consent of the other Party and any assignment made without such consent shall be
void; provided, however, in the event Buyer assigns this Agreement to an
affiliate, Buyer and its affiliate shall immediately execute and deliver to
Seller an Assignment Agreement in the form of Exhibit G. Except as otherwise
provided herein, this Agreement shall be binding upon and inure to the benefit
of the Parties and their respective permitted successors, assigns, and legal
representatives. Notwithstanding any assignment to an affiliate, Buyer shall
nevertheless remain liable to Seller in accordance with the terms of this
Agreement. To implement the prior sentence, in the event this Agreement is
assigned to an affiliate of Buyer, Buyer shall execute and deliver to Seller a
Parent Guarantee in the form of Exhibit H.
SECTION 14.09 Governing Law; Venue. THIS AGREEMENT, THE OTHER DOCUMENTS
DELIVERED PURSUANT HERETO, AND THE LEGAL RELATIONS BETWEEN THE PARTIES SHALL BE
GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF WYOMING. ANY
LITIGATION ARISING OUT OF THIS AGREEMENT SHALL BE BROUGHT BEFORE THE FEDERAL OR
STATE COURTS SITTING IN WYOMING, AND THE PARTIES IRREVOCABLY WAIVE ANY RIGHT TO
CHOOSE OR REQUEST ANY OTHER VENUE.
SECTION 14.10 Notices. Any notice, communication, request, instruction, or
other document required or permitted hereunder (including notices of Title
Defects and Environmental Defects) shall be given in writing and delivered in
person or sent by U.S. Mail postage prepaid, return receipt requested, overnight
delivery service, electronically, or facsimile to the addresses of Seller and
Buyer set forth below. Any such notice shall be effective and deemed given only
upon receipt.
Seller: X.X. XXXXX CORPORATION
000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx
Vice President, Mergers & Acquisitions
Fax No.: (000) 000-0000
Tel. No.: (000) 000-0000
Email: x.xxxxxxx@xxxxx.xxx
X.X. XXXXX CORPORATION
0000 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention:
Vice President and General Counsel
(effective 1/1/11)
Fax No.: (000) 000-0000
Tel. No.: (000) 000-0000
Email: xxxxx.xxxxxx@xxxxx.xxx
Buyer: HIGH PLAINS GAS, INC.
00000 Xxx Xxxxx Xxxx
Xxxxxxxx, Xxxx 00000
Attention: Xxxxx X. Xxxx
Fax No.: (000) 000-0000
Tel. No.: (000) 000-0000
Email: xxxxx.xxxx@xxxxxxxxxxxxx.xxx
With copy to: HIGH PLAINS GAS, INC.
0000 Xxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
Fax No.: (000) 000-0000
Tel. No.: (000) 000-0000
Email: xxxxx.xxxx@xxxxxxxxxxxxx.xxx
XXXXXXXXX AND XXXXX, LLP
X.X. Xxxxxx 0000
Xxxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxx
Fax No.: (000) 000-0000
Tel. No.: (000) 000-0000
Email: xxxxx@xxxxxxxxx.xxx
Either Party may, by written notice delivered to the other Party, change its
address for notice purposes hereunder.
SECTION 14.11 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 and the Parties shall negotiate in
good faith to modify this Agreement so as to effect their original intent as
closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
SECTION 14.12 Interpretation. This Agreement shall be deemed and considered
for all purposes to have been jointly prepared by the Parties, and shall not be
construed against any one Party (nor shall any inference or presumption be made)
on the basis of who drafted this Agreement or any particular provision hereof,
who supplied the form of Agreement, or any other event of the negotiation,
drafting, or execution of this Agreement. Each Party agrees that this Agreement
has been purposefully drawn and correctly reflects its understanding of the
transaction that it contemplates. In construing this Agreement, the following
principles will apply:
(a) A defined term has its defined meaning throughout this Agreement and
each Exhibit and Schedule to this Agreement, regardless of whether it appears
before or after the place where it is defined.
(b) If there is any conflict or inconsistency between the provisions of the
main body of this Agreement and the provisions of any Exhibit or Schedule
hereto, the provisions of this Agreement shall take precedence. If there is any
conflict between the provisions of any Assignment or other transaction documents
attached to this Agreement as an Exhibit and the provisions of any Assignment
and other transaction documents actually executed by the Parties, the provisions
of the executed Assignment and other executed transaction documents shall take
precedence.
(c) Schedules and Exhibits referred to herein are hereby incorporated and
made a part of this Agreement for all purposes by such reference.
(d) The omission of certain provisions of this Agreement from the Assignment
does not constitute a conflict or inconsistency between this Agreement and the
Assignment, and will not effect a merger of the omitted provisions. To the
fullest extent permitted by Laws, all provisions of this Agreement are hereby
deemed incorporated into the Assignment by reference.
(e) The words "includes" and "including" and their derivatives means
"includes, but not limited to" or "including, but not limited to," and
corresponding derivative meanings.
(f) The Article, Section, Exhibit, and Schedules references in this
Agreement refer to the Articles, Sections, Exhibits, and Schedules of this
Agreement. The headings and titles in this Agreement are for convenience only
and shall have no significance in interpreting or otherwise affect the meaning
of this Agreement.
(g) The terms "knowledge" or "knowingly," whether or not capitalized, with
regard to a Party shall mean the actual knowledge, without duty of inquiry, of
(i) Xxxxxx X. Xxxxxxx, Xxxxx X. Xxxxxxxxx, Xxxxxxx X. Xxxxxx, Xxxxx X. Riddles,
Xxx Xxxx, Xxxxxxx Xxxxxx and Xxx Xxxxx with respect of Seller and (ii) Xxxxx X.
Xxxx, Xxxx X. Xxxxxxxxx, Xxxx X. Xxxxxxx, Xxxxxxx X. Xxxxxxx and H.P. Xxxxxx
with respect of Buyer.
(h) The adjective, "material," whether or not capitalized, shall mean a
situation, circumstance, consequence, or concept whose relevance to the
transactions contemplated by this Agreement as a whole is of significance, and
would not be considered a small or insignificant deviation from the terms of
this Agreement.
(i) The term "Material Adverse Effect" shall mean any defect, condition,
change, or effect (other than with respect to which an adjustment to the
Purchase Price has been made) that when taken together with all other such
defects, conditions, changes, and effects significantly diminishes the value,
use, operations, or development of the Assets, taken as a whole.
Notwithstanding the foregoing, the following shall not be considered in
determining whether a Material Adverse Effect has occurred:
(i) Fluctuations in commodity prices;
(ii) Changes in Laws or Environmental Laws; or
(iii) Changes in the oil and gas industry that do not have a
disproportionate impact on the ownership and operation of the Assets.
(j) "Breach" shall mean any breach of, or any falsity or inaccuracy in, any
representation or warranty or any breach of, or failure to perform or comply
with, any covenant or obligation, in or of this Agreement or any other contract,
agreement, or instrument contemplated by this Agreement or any event which with
the passing of time or the giving or notice, of both, would constitute such a
breach, inaccuracy, or failure; provided that to constitute a Breach, such
breach, inaccuracy, or failure must be material to the subject matter regarding
which the Breach is asserted.
(k) "Tax" means all taxes and any other assessments, duties, fees, levies,
or other charges imposed by a Governmental Authority based on or measured by the
value of the Assets, the production of Hydrocarbons, the receipt of proceeds
with respect to such Assets or Hydrocarbons, or otherwise related in any manner
or attributable to the Assets or the production of Hydrocarbons including any
production tax, windfall profits tax, severance tax, personal property tax, real
property tax, or ad valorem tax, together with any interest, fine, or penalty
thereon, or addition thereto.
(l) The plural shall be deemed to include the singular, and vice versa.
SECTION 14.13 Conspicuousness. THE PARTIES AGREE THAT PROVISIONS IN THIS
AGREEMENT IN "BOLD" TYPE SATISFY ANY REQUIREMENTS OF THE "EXPRESS NEGLIGENCE
RULE" AND OTHER REQUIREMENTS AT LAW OR EQUITY THAT PROVISIONS BE CONSPICUOUSLY
MARKED OR HIGHLIGHTED.
SECTION 14.14 Deceptive Trade Practices Waiver. TO THE EXTENT APPLICABLE TO
THE TRANSACTION CONTEMPLATED HEREBY OR ANY PORTION THEREOF, BUYER WAIVES BUYER'S
RIGHTS
UNDER THE PROVISIONS OF THE TEXAS DECEPTIVE TRADE PRACTICES - CONSUMER
PROTECTION ACT, SECTIONS 17.41 ET. SEQ. OF THE TEXAS BUSINESS AND COMMERCE CODE,
A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS, AND ANY COMPARABLE
ACT IN ANY OTHER STATE IN WHICH THE ASSETS ARE LOCATED; PROVIDED, HOWEVER, BUYER
DOES NOT WAIVE SECTION 17.555 OF SUCH TEXAS STATUTE. BUYER STATES THAT, AFTER
CONSULTATION WITH AN ATTORNEY OF BUYER'S SELECTION, BUYER VOLUNTARILY CONSENTS
TO THIS WAIVER. TO EVIDENCE BUYER'S ABILITY TO GRANT SUCH WAIVER, BUYER
REPRESENTS TO SELLER THAT IT (a) IS IN THE BUSINESS OF SEEKING OR ACQUIRING, BY
PURCHASE OR LEASE, GOODS OR SERVICES FOR COMMERCIAL OR BUSINESS USE, (b) HAS
KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT ENABLE IT TO
EVALUATE THE MERITS AND RISKS OF THE TRANSACTIONS CONTEMPLATED HEREBY, (c) IS
NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION, AND (d) HAS CONSULTED
WITH, AND IS REPRESENTED BY, AN ATTORNEY OF BUYER'S OWN SELECTION IN CONNECTION
WITH THIS TRANSACTION, AND SUCH ATTORNEY WAS NOT DIRECTLY OR INDIRECTLY
IDENTIFIED, SUGGESTED, OR SELECTED BY SELLER OR AN AGENT OF SELLER.
SECTION 14.15 Time of the Essence. Time shall be of the essence with
respect to all time periods and notice periods set forth in this Agreement.
SECTION 14.16 Counterpart Execution. This Agreement may be executed in any
number of counterparts, and each counterpart hereof shall be effective as to
each Party that executes the same whether or not all of such Parties execute the
same counterpart. If counterparts of this Agreement are executed, the signature
pages from various counterparts may be combined into one composite instrument
for all purposes. All counterparts together shall constitute only one
Agreement, but each counterpart shall be considered an original. In the event
that this Agreement is delivered by facsimile transmission or by e-mail delivery
of a ".pdf" format date file, such signature shall create a valid and binding
obligation of the Party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile or ".pdf"
signature page were an original thereof.
To facilitate the execution and recording of the conveyance of the Assets from
Seller to Buyer, the Parties agree that they may execute multiple assignments
substantially in the form attached as Exhibit D which contain only that portion
of the Assets that are located in a particular county, and all such assignments
shall constitute a single conveyance of the Assets from Seller to Buyer.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, Seller and Buyer have executed and delivered this Agreement
as of the date first set forth above.
SELLER:
X.X. XXXXX CORPORATION
By:
Name:
Title:
BUYER:
HIGH PLAINS GAS, INC.
By:
Name:
Title:
