EXHIBIT
2.6
PURCHASE
AND SALE AGREEMENT
BETWEEN
ST.
MARY LAND & EXPLORATION COMPANY
AS
SELLER
AND
SEQUEL
ENERGY PARTNERS, LP
AND
BAKKEN
ENERGY PARTNERS, LLC
AND
THREE
FORKS ENERGY PARTNERS, LLC
AS BUYER
DATED:
JANUARY 7, 2010
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 |
Section
2.04
|
Section
1031 Like-Kind Exchange
|
6 |
|
|
|
ARTICLE
3 EFFECTIVE TIME
|
7 |
Section
3.01
|
Ownership
of Assets
|
7 |
Section
3.02
|
Production
Imbalances
|
7 |
|
|
|
ARTICLE
4 TITLE AND ENVIRONMENTAL MATTERS
|
8 |
Section
4.01
|
Examination
Period
|
8 |
Section
4.02
|
Title
Defects
|
8 |
Section
4.03
|
Notice
of Title Defects
|
9 |
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
|
Remedies
for Title Benefits
|
14 |
Section
4.09
|
Environmental
Review
|
15 |
Section
4.10
|
Definitions
Used in Article 4 and in this Agreement
|
17 |
Section
4.11
|
Notice
of Environmental Defects
|
18 |
Section
4.12
|
Remedies
for Environmental Defects
|
19 |
Section
4.13
|
Independent
Experts
|
20 |
Section
4.14
|
Limitation
of Remedies For Title Benefits, Title Defects and Environmental
Defects
|
21 |
Section
4.15
|
DISCLAIMER
AND WAIVER
|
22 |
|
|
|
ARTICLE
5 REPRESENTATIONS AND WARRANTIES OF SELLER
|
22 |
Section
5.01
|
Existence
|
22 |
Section
5.02
|
Legal
Power
|
22 |
Section
5.03
|
Execution
|
23 |
Section
5.04
|
Brokers
|
23 |
Section
5.05
|
Bankruptcy
|
23 |
Section
5.06
|
Suits
and Claims
|
23 |
i
Section
5.07
|
Taxes
|
23 |
Section
5.08
|
AFEs
|
23 |
Section
5.09
|
Compliance
with Laws
|
23 |
Section
5.10
|
Contracts
|
24 |
Section
5.11
|
Production
Imbalances
|
24 |
Section
5.12
|
Royalties;
Payments for Production
|
24 |
Section
5.13
|
Insurance
|
24 |
Section
5.14
|
Plugging
Obligations
|
25 |
Section
5.15
|
Personal
Property and Equipment
|
25 |
Section
5.16
|
No
Alienation
|
25 |
Section
5.17
|
Hydrocarbon
Sales Contracts
|
25 |
Section
5.18
|
Area
of Mutual Interest and Other Agreements
|
25 |
Section
5.19
|
Leases
|
25 |
Section
5.20
|
Property
Expenses
|
26 |
Section
5.21
|
Governmental
Permits
|
26 |
Section
5.22
|
No
Adverse Change
|
26 |
Section
5.23
|
No
Oral Contracts
|
26 |
Section
5.24
|
Information
|
26 |
Section
5.25
|
Preferential
Rights to Purchase and Consents to Assignment
|
27 |
Section
5.26
|
Representations
and Warranties Exclusive
|
27 |
|
|
|
ARTICLE
6 REPRESENTATIONS AND WARRANTIES OF BUYER
|
27 |
Section
6.01
|
Existence
|
27 |
Section
6.02
|
Legal
Power
|
27 |
Section
6.03
|
Execution
|
27 |
Section
6.04
|
Brokers
|
27 |
Section
6.05
|
Bankruptcy
|
28 |
Section
6.06
|
Suits
and Claims
|
28 |
Section
6.07
|
Independent
Evaluation
|
28 |
Section
6.08
|
Qualification
|
28 |
Section
6.09
|
Securities
Laws
|
28 |
Section
6.10
|
No
Investment Company
|
28 |
Section
6.11
|
Funds
|
29 |
Section
6.12
|
Notice
of Changes
|
29 |
Section
6.13
|
Representations
and Warranties Exclusive
|
29 |
|
|
|
ARTICLE
7 OPERATIONS OF THE ASSETS
|
29 |
Section
7.01
|
Operation
of the Assets
|
29 |
Section
7.02
|
Buyer’s
Qualification
|
30 |
Section
7.03
|
Operation
of the Assets after the Closing
|
30 |
Section
7.04
|
Post
Closing Accounting by Seller
|
31 |
Section
7.05
|
Limitations
on Liability of Operator
|
31 |
Section
7.06
|
Public
Announcements
|
32 |
ii
ARTICLE
8 CONDITIONS TO OBLIGATIONS OF SELLER
|
32 |
Section
8.01
|
Representations
|
32 |
Section
8.02
|
Performance
|
32 |
Section
8.03
|
Pending
Matters
|
32 |
|
|
|
ARTICLE
9 CONDITIONS TO OBLIGATIONS OF BUYER
|
32 |
Section
9.01
|
Representations
|
33 |
Section
9.02
|
Performance
|
33 |
Section
9.03
|
Pending
Matters
|
33 |
Section
9.04
|
Wachovia
Liens
|
33 |
|
|
|
ARTICLE
10 THE CLOSING
|
33 |
Section
10.01
|
Time
and Place of the Closing
|
33 |
Section
10.02
|
Allocation
of Costs and Expenses and Adjustments to Purchase Price at the
Closing
|
33 |
Section
10.03
|
Closing
Adjustments and Allocations Statement
|
35 |
Section
10.04
|
Post-Closing
Allocations and Adjustments to Purchase Price
|
35 |
Section
10.05
|
Transfer
Taxes
|
36 |
Section
10.06
|
Ad
Valorem and Similar Taxes
|
37 |
Section
10.07
|
Actions
of Seller at the Closing
|
37 |
Section
10.08
|
Actions
of Buyer at the Closing
|
38 |
Section
10.09
|
Recordation;
Further Assurances
|
38 |
|
|
|
ARTICLE
11 TERMINATION
|
39 |
Section
11.01
|
Right
of Termination
|
39 |
Section
11.02
|
Effect
of Termination
|
39 |
Section
11.03
|
Attorneys’
Fees, Etc
|
40 |
|
|
|
ARTICLE
12 ASSUMPTION AND INDEMNIFICATION
|
40 |
Section
12.01
|
Buyer’s
Obligations after Closing
|
40 |
Section
12.02
|
Seller’s
Obligations after Closing
|
41 |
Section
12.03
|
Plugging
and Abandonment Obligations
|
41 |
Section
12.04
|
Environmental
Obligations
|
42 |
Section
12.05
|
Definition
of Claims
|
44 |
Section
12.06
|
Application
of Indemnities
|
44 |
Section
12.07
|
Buyer’s
Indemnity
|
45 |
Section
12.08
|
Seller’s
Indemnity
|
46 |
Section
12.09
|
Notices
and Defense of Indemnified Claims
|
46 |
Section
12.10
|
Survival
|
46 |
Section
12.11
|
Exclusive
Remedy
|
47 |
Section
12.12
|
Defenses
and Counterclaims
|
47 |
Section
12.13
|
Anti-Indemnity
Statute
|
47 |
iii
ARTICLE
13 DISCLAIMERS; CASUALTY LOSS AND CONDEMNATION
|
47 |
Section
13.01
|
Disclaimers
of Representations and Warranties
|
47 |
Section
13.02
|
NORM
|
48 |
Section
13.03
|
Casualty
Loss; Condemnation
|
49 |
|
|
|
ARTICLE
14 MISCELLANEOUS
|
49 |
Section
14.01
|
Names
|
49 |
Section
14.02
|
Expenses
|
49 |
Section
14.03
|
Document
Retention
|
49 |
Section
14.04
|
Entire
Agreement
|
50 |
Section
14.05
|
Waiver
|
50 |
Section
14.06
|
Construction
|
50 |
Section
14.07
|
No
Third Party Beneficiaries
|
50 |
Section
14.08
|
Assignment
|
50 |
Section
14.09
|
Governing
Law; Venue
|
50 |
Section
14.10
|
Notices
|
51 |
Section
14.11
|
Severability
|
51 |
Section
14.12
|
Interpretation
|
51 |
Section
14.13
|
Time
of the Essence
|
53 |
Section
14.14
|
Counterpart
Execution
|
53 |
Section
14.15
|
Buyer’s
Obligations Several Not Joint
|
54 |
iv
EXHIBITS
AND SCHEDULES
Exhibit
A Subject
Interests and Surface Agreements
Exhibit
B Wells
Exhibit
C Excluded
Assets
Exhibit
D Allocated
Values
Exhibit
E Form of
Assignment and Bill of Sale
Exhibit F Form of Transition Services
Agreement
Exhibit G Marcellus Leasehold subject to
Option
Schedule
1.02(g) Production
Imbalances
Schedule
4.06 Rights of
Preferential Purchase
Schedule
4.07 Consents
to Assignment
Schedule
5.06
Litigation
Schedule
5.08
Authorizations for Expenditures
Schedule
5.10 Plugging
Obligations
Schedule
5.14 Inactive
Wells
Schedule
5.17 Production
Sales Agreements
Schedule
5.21
Non-Transferable Permits
v
Table
of Defined Terms
|
|
|
|
|
|
|
Agreement
|
1 |
|
Lease
and Leases
|
1 |
Allocated
Values
|
6 |
|
Marketable
Title
|
8 |
Assets
|
1 |
|
material
|
49 |
Assignment
|
11 |
|
Material
Adverse Effect
|
49 |
Assumed
Obligations
|
40 |
|
Material
Adverse Interference
|
8 |
Bank
|
5 |
|
NORM
|
45 |
Breach
|
50 |
|
Notice
of Disagreement
|
35 |
Buyer
|
1 |
|
OPA
|
17 |
Buyer’s
Environmental Review
|
15 |
|
Parties
|
1 |
Casualty
Loss
|
46 |
|
Party
|
1 |
CERCLA
|
17 |
|
PDNP
|
6 |
Claims
|
41 |
|
Permits
|
2 |
Closing
|
33 |
|
Permitted
Encumbrances
|
11 |
Closing
Date
|
33 |
|
Plugging and
Abandonment
|
|
Contracts
|
2 |
|
Obligations
|
40 |
Deposit
|
5 |
|
Post-Closing
Production Month
|
31 |
Documents
|
46 |
|
Probable
and/or Possible Locations
|
6 |
Effective
Time
|
7 |
|
Production
Imbalances
|
7 |
Environmental
Defect
|
17 |
|
PUD
Locations
|
6 |
Environmental
Defect Value
|
17 |
|
Purchase
Price
|
5 |
Environmental
Examination Period
|
15 |
|
Purchase Price Allocations and
|
|
Environmental
Information
|
16 |
|
Adjustments
|
35 |
Environmental
Laws
|
17 |
|
RCRA
|
17 |
Environmental
Obligations
|
41 |
|
Records
|
3 |
Equipment
|
2 |
|
Representatives
|
41 |
Examination
Period
|
8 |
|
Retained
Obligations
|
40 |
Excluded
Assets
|
3 |
|
Seller
|
1 |
Expiration
Date
|
43 |
|
SELLER’S
REPRESENTATIONS
|
21 |
Facilities
|
2 |
|
Statement
|
35 |
Final
Settlement Date
|
35 |
|
Subject
Interests
|
2 |
Final
Settlement Statement
|
35 |
|
Surface
Agreements
|
2 |
Governmental
Authority
|
17 |
|
Tax
|
50 |
Hydrocarbons
|
1 |
|
Title Benefit
|
14 |
includes
and including
|
49 |
|
Title
Benefit Value
|
14 |
Independent
Expert
|
19 |
|
Title
Claim Date
|
9 |
Information
|
26 |
|
Title
Defect
|
8 |
Interim
Operating Expenses
|
34 |
|
Title
Defect Value
|
9 |
knowledge
or knowingly
|
49 |
|
Wachovia
Liens
|
13 |
Lands
|
1 |
|
Wells
|
2 |
Laws
|
12 |
|
|
|
vi
PURCHASE
AND SALE AGREEMENT
This
Purchase and Sale Agreement (this “Agreement”) is made
and entered into this 7th day of January, 2010, by and between ST. MARY LAND
& EXPLORATION COMPANY, a Delaware corporation (“Seller”), and SEQUEL
ENERGY PARTNERS, LP, a Delaware limited partnership, BAKKEN ENERGY PARTNERS,
LLC, a Delaware limited liability company, and THREE FORKS ENERGY PARTNERS, LLC,
a Delaware limited liability company (collectively, “Buyer” and
individually, a “Party
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, in
the respective undivided percentage of ownership as set forth in Exhibit E, 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, non-working or carried
interests, mineral fee interests, operating rights, 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 excluded depths, intervals, or lands
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 unit for any
of the Wells (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 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,
associated liquids, and other hydrocarbons (collectively “Hydrocarbons”) after
the Effective Time from the Leases and the Lands, and from any such pooled,
communitized, or unitized interest and allocated to any of the Leases or 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,
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, including those set forth on Exhibit
A;
(c) to the
extent assignable or transferable, all permits, 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, 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 produced from or
attributable to the Subject Interests or any water, byproducts, or waste
produced from the Subject Interests or in association with or incident to the
production of Hydrocarbons, or otherwise attributable thereto (collectively the
“Equipment”);
all wells located on the Leases or the Lands or on lands pooled, communitized,
or unitized therewith , whether such wells are producing, shut in, or abandoned,
and whether for production, produced water injection or disposal, or otherwise,
and including those specifically described in Exhibit B
(collectively, the “Wells”) together with
all of Seller’s interests within the spacing, producing, proration, federal
exploratory, enhanced recovery, or governmentally prescribed or voluntary unit
attendant to the Wells, including the wellhead equipment, pumps, pumping units,
flowlines, gathering systems, pipe, tanks, treatment facilities, injection
facilities, disposal facilities, compression facilities, and other materials,
supplies, buildings, trailers, and offices 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 contracts, agreements,
drilling contracts, equipment leases, production sales and marketing contracts,
farm-out and farm-in agreements, operating agreements, service 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, and
(ii) equipment leases and rental contracts, service agreements, supply
agreements, 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) and (ii) above being
collectively, the “Contracts”);
(f) all
files, records, and data, whether electronic or hard copy, 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, HSE
incident reports, material safety data sheets, copies of tax and accounting
records (but excluding Federal and state income tax returns and records) and
files, maps, core data, hydrocarbon analysis, well logs, mud logs, field studies
together with other files, contracts, and other records and data including all
geologic and 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 Seller, Buyer
agrees to rely on such interpretations at its sole risk and without any duty on
the part of Seller regarding such interpretations; and
(g) all
Production Imbalances, including those set forth on Schedule 1.02(g) as
of the Effective Time.
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) those
assets, interests, rights, and properties described in Exhibit C;
(b) 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;
(c) except
for those Claims or rights against a third party for which Buyer has agreed to
indemnify Seller pursuant to the terms of this Agreement, all Claims of
Seller,
(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;
(d) 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;
(e) all
Hydrocarbons produced from or otherwise attributable to the Subject Interests
with respect to all periods prior to the Effective Time, excluding those
Hydrocarbons referenced in
Section 1.02(g) together with all proceeds from the sale
of such Hydrocarbons, and all Tax credits attributable thereto;
(f) 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;
(g) 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;
(h) 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;
(i) 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;
(j) all
documents and instruments of Seller that may be protected by an attorney-client
or other privilege;
(k) data,
information, and other property, rights, or interests that cannot be disclosed
or assigned to Buyer as a result of confidentiality or similar
arrangements;
(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 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;
(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 cash 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 One Hundred Thirty Seven Million Dollars ($137,000,000.00) (the “Purchase Price”), as
adjusted in accordance with the provisions of this Agreement. As
further consideration for this transaction, if Closing occurs, Three Forks
Energy Partners, LLC will grant to Seller the option to purchase various leases
located in Pennsylvania, all as described in Section
14.17.
Section
2.02
Deposit.
(a) Concurrently
with the execution of this Agreement by Buyer and Seller, Buyer shall deliver to
Seller in immediately available funds a performance guarantee deposit in an
amount equal to $6,850,000.00 (the “Deposit”) in
accordance with wire transfer instructions provided by Seller to
Buyer.
(b) Subject
to the proviso set forth in
Section 11.01, if this
Agreement is terminated by Seller pursuant to
Section 11.01(b) 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,
which remedy shall be the sole and exclusive remedy available to Seller for
Buyer’s failure to perform its obligations under this Agreement. 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) [which
election to terminate by Buyer shall not be abrogated due merely to Seller
having previously terminated this Agreement pursuant to Section 11.01(b); provided Buyer is otherwise entitled to
assert such right to terminate this Agreement] and Buyer does not waive the
non-satisfaction of any conditions to Closing set forth in
Article 9, (ii) by
Buyer pursuant to
Section 11.01(g), or (iii) by
Buyer or Seller pursuant to
Section 11.01(a),
Section 11.01(d),
Section 11.01(e),
Section 11.01(f), or
Section 13.03(b), then
Seller shall promptly return to Buyer in immediately available funds within
three (3) business days after the event giving rise to such return obligation
pursuant to wire transfer instructions to be provided timely by Buyer to Seller.
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
Breaches this Agreement in any respect prior to Closing so as to cause Closing
not to occur, and Buyer is ready and otherwise able to close, Buyer shall have
the
right at
its sole election, to either (i) within three (3) business days after the
determination that the Closing will not occur, have the Deposit paid to Buyer
and Seller shall pay Buyer an additional amount equal to the Deposit as
liquidated damages or (ii) Buyer shall have the right to pursue specific
performance of this Agreement and will not be required to post a bond in
connection therewith, provided that Buyer must file an action for specific
performance within 30 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
30 days of Seller’s Breach, Buyer shall be deemed to have waived all legal and
equitable remedies and its sole remedy for Seller’s Breach of this Agreement
that caused Closing not to occur shall be limited to the return of the Deposit,
the liquidated damages described above in this subsection (d), and the
termination of this Agreement. Buyer and Seller acknowledge and agree that if
Closing does not occur as a consequence of Seller’s Breach of this Agreement,
(i) Buyer’s actual damages upon the event of a termination are difficult to
ascertain with any certainty, (ii) an amount equal to the Deposit is a
reasonable estimate of such actual damages, and (iii) such liquidated
damages do not constitute a penalty.
Section
2.03
Allocated
Values. The
Purchase Price is allocated among the Assets (including the Wells, PUD
Locations, PDNP, and Probable and/or Possible Locations) as set forth in Exhibit D (the “Allocated Values”).
In no event shall the aggregate of the Allocated Values of the Wells, PUD
Locations, PDNP, Probable and/or Possible Locations, and any other item
specified on Exhibit
D (such as undeveloped leasehold) exceed the unadjusted Purchase Price.
The term “PUD
Locations” means those Proved Undeveloped potential well locations
specifically identified in Exhibit D. The
term “PDNP”
means Proved Developed Not Producing intervals as specifically identified on
Exhibit D. The
term “Probable and/or
Possible Locations” means those locations specifically identified and
designated as such on Exhibit
D. 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. For tax purposes, the Parties agree
that they shall allocate the Purchase Price, as adjusted hereunder, among the
Assets in a manner consistent with Section 1060 of the Code and the Treasury
Regulations promulgated thereunder based upon the fair market values for the
Assets. The Purchase Price allocation shall be agreed upon before the
earliest due date of the Tax returns of Seller and Buyer for the year in which
the Closing Date occurs. Seller and Buyer agree to file all
information reports and Tax returns (including IRS Form 8594 and any amended Tax
returns or claims for refund) in a manner consistent with the Purchase Price
allocation agreed upon under this Section
2.03.
Section
2.04
Section 1031
Like-Kind Exchange. Seller
and Buyer hereby agree that Seller shall have the right at any time prior to
completion of all the transactions that are to occur at Closing to assign all or
a portion of its rights under this Agreement to a Qualified Intermediary (as
that term is defined in Section 1.1031(k)-1(g)(4)(v) of the Treasury
Regulations) in order to accomplish the transaction in a manner that will
comply, either in whole or in part, with the requirements of a like-kind
exchange pursuant to Section 1031 of the Internal Revenue Code of 1986, as
amended. Likewise, Buyer shall have the right at any time prior to completion of
all the transactions that are to occur at Closing to assign all or a portion of
its rights under this Agreement to a Qualified Intermediary for the same
purpose. If Seller assigns all or any of its rights under this Agreement for
this purpose, Buyer agrees to (a) consent to Seller’s assignment
of its
rights in this Agreement, which assignment shall be in a form reasonably
acceptable to Buyer, and (b) pay the Purchase Price (or a designated portion
thereof as specified by Seller) into a qualified escrow or qualified trust
account at Closing as directed in writing. If Buyer assigns all or any of its
rights under this Agreement for this purpose, Seller agrees to (i) consent to
Buyer’s assignment of its rights in this Agreement, which assignment shall be in
a form reasonably acceptable to Seller, (ii) accept the Purchase Price from the
qualified escrow or qualified trust account at Closing, and (iii) at Closing,
convey and assign directly to Buyer the Assets (or any portion thereof) as
directed by Buyer. Seller and Buyer acknowledge and agree that any assignment of
this Agreement (or any rights hereunder) to a Qualified Intermediary
shall not release any Party from any of its respective liabilities and
obligations hereunder, and that neither Party represents to the other Party that
any particular tax treatment will be given to any Party as a result
thereof. The Party electing to assign all or any of its rights under
this Agreement pursuant to this
Section 2.04 shall defend, indemnify, and hold harmless
the other Party and its Affiliates from all Claims arising from or relating to
such election.
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 November 1, 2009 (the
“Effective
Time”).
Section
3.02
Production
Imbalances.
(a) Assumption of Production
Imbalances Upon Closing. On the Closing Date (and upon the
delivery to Buyer of the Assignment), Buyer shall assume the positions of Seller
with respect to all gas imbalances and make-up obligations related to the Assets
regardless of whether such imbalances or make-up obligations arise before or
after the Effective Time, at the wellhead, pipeline, gathering system, or other
location, and regardless of whether the same arise under contract or otherwise
(the “Production
Imbalances”). As a result of such assumption, Buyer shall (a) be entitled
to receive any and all benefits which Seller would have been entitled to receive
by virtue of its position, including rights to produce and receive volumes of
production in excess of volumes which it would otherwise have been entitled to
produce and to receive cash gas balancing by virtue of ownership of the Assets,
(b) be obligated to suffer any detriments or losses which Seller would have been
obligated to suffer by virtue of such position, including the obligation to
deliver to others production volumes which would have otherwise been
attributable to its ownership of the Assets, to deliver production to purchasers
thereof without Buyer receiving full payment therefor, or to make cash balancing
payments or to repay any take or pay payments, and (c) be responsible for any
and all royalty obligations and other burdens with respect to such Production
Imbalances; provided however, nothing in this subsection (a) of
Section 3.02 shall relieve Seller from any royalty
obligation affecting production Seller has actually received for production
occurring prior to the Effective Time.
(b) Purchase
Price Adjustment for Production Imbalances. To the extent that
at and as of Closing there exist any Production Imbalances different from those
set forth on Schedule
1.02(g), such shall be a credit for the benefit of Seller if an
underproduced volume and a debit to Seller if an overproduced
volume. The value of such credit or debit shall be determined by the
mutual agreement of Seller and Buyer taking into consideration the value of the
benefit or the obligation that will impact Buyer from and after Closing related
to such difference in the Production Imbalances and shall consider the timing
and pricing elements of the make-up obligation or recoupment right impacting
Buyer from and after Closing. If the Parties are unable to reach a mutual
agreement on the value of such variations within thirty (30) days of Closing,
such shall be determined in accordance with the provisions of Section
4.13.
ARTICLE
4
TITLE
AND ENVIRONMENTAL MATTERS
Section
4.01
Examination
Period. Until
5:00 p.m. MST 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
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.
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 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 D or (b) any
default by Seller under a lease, farm-out agreement, or other contract or
agreement that would (i) result in a Material Adverse Interference with 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. For purposes of this
Article 4, and
as otherwise expressly used in this Agreement, the term “Material Adverse
Interference” means any event, violation, inaccuracy, circumstance, or
other matter that reasonably could be expected to result in an increase of
costs, or a reduction of revenues, in any month by an amount in excess of
$10,000. The term “Marketable Title”
means such ownership by Seller in the Assets that:
(a) entitles
Seller to receive not less than the percentage set forth in Exhibit D as 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 (or with respect to a PUD location,
PDNP, or Probable and/or Possible Location, the productive life of any Well, or
completion thereon), except as specifically set forth in such
exhibit;
(b) obligates
Seller to bear not greater than the percentage set forth in Exhibit D as
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 such exhibit; and
(c) is free
and clear of all liens, encumbrances, and defects in title, which shall include
any law, rule, order, or regulation that prohibits development on the Leases or
Lands.
Section
4.03
Notice of Title
Defects. Buyer
shall provide Seller notice of all Title Defects no later than 5:00 p.m. MST on
the date which is seven (7) days prior to the Closing Date (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 (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 identified by Buyer during the Examination Period 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 D, 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
D.
(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 Value 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 Wells, 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 governmental consents customarily obtained
after Closing) shall be determined 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 those matters deemed not to impair marketability
in accordance with the applicable title standards for the state in which the
affected Asset(s) is located.
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 Bill of Sale the
form of which (subject to modification to meet state recording statute
requirements) is attached hereto as Exhibit E (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. 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) liens of
materialmen, mechanics, repairman, employees, contractors, or operators, 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 oil and gas leases for royalty, bonus or rental, or created
to secure compliance with the terms of) the Contracts, Surface Agreements, and
Leases, 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 below that
reflected in Exhibit D, 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 D,
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, guidance, 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, that do not result in a Material Adverse
Interference with the operation, value or use of the Assets as they are
currently being used by Seller, and (ii) easements for streets, alleys,
highways, pipelines, telephone lines, power lines, railways, and other similar
rights-of-way that do not result in a Material Adverse Interference with the
operation, value or use of the Assets as they are currently being used by Seller
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 to less than that shown in Exhibit D, 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 to more than
that shown in Exhibit
D, 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,
refining, 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 D 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 D,
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 Wells 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 D,
(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 D 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) all deeds
of trust and other security interests burdening the Assets granted by Seller in
connection with its credit facilities under which Wachovia Bank serves as
administrative agent (the “Wachovia Liens”), it
being understood that the release of the Wachovia Liens is a condition to the
Closing as provided in
Section 9.04.
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 Asset, and the closing of such transaction occurs on or before the
Closing Date, then the Asset or part thereof so affected will be eliminated from
the Assets and the Purchase Price shall be reduced by the Allocated Value of
such Asset. If (i) 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 or (ii) 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 the Closing, Buyer may elect, at any time prior to
three business days before Closing, to exclude the Asset affected by such
preferential right and to reduce the Purchase Price by the Allocated Value of
the affected Asset. If Buyer excludes the Asset affected by such
preferential right, and the holder of the preferential right fails to exercise
such right or exercises such right but fails to close within ninety (90) days
after the Closing, Seller shall promptly notify Buyer of such failure and Buyer
shall within thirty (30) days after its receipt of such notice require that
Seller tender such Asset to Buyer for purchase pursuant to the terms hereof at
the Allocated Value of the affected Assets and the Buyer shall purchase such
Asset on all such terms.
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, then if such consent is not obtained prior to the Closing, Buyer may
elect at any time prior to three (3) business days before Closing to exclude the
Asset affected by the consent requirement and to reduce the Purchase Price by
the Allocated Value of the Asset affected by the failure to obtain
consent. If Buyer excludes the Asset affected by such consent
requirement and Seller obtains the consent after Closing within ninety (90) days
after the Closing, Seller shall promptly notify Buyer that Seller has obtained
such consent and Buyer shall within thirty (30) days after its receipt of such
notice require that Seller tender the Asset to Buyer for purchase pursuant to
the terms hereof at the Allocated Value of the affected Asset and the Buyer
shall purchase the Asset on all such terms.
Section
4.08
Remedies for Title
Benefits.
(a) If Buyer
discovers any Title Benefit affecting the Assets, it shall promptly notify
Seller in writing thereof. Subject to
Section 4.14, Seller shall
be entitled to an upward adjustment to the Purchase Price with respect to all
Title Benefits in an amount (the “Title Benefit Value”) determined in accordance with the
formula provided for in this
Section 4.08(a). The term “Title Benefit” shall mean
Seller’s Net Revenue Interest in
any Well,
PUD Location, PDNP, or Probable and/or Possible Locations that is greater than
or in addition to the Net Revenue Interest set forth in Exhibit D, or
Seller’s Working Interest in any Well, PUD Location, PDNP, or Probable and/or
Possible Locations that is less than the Working Interest set forth in Exhibit D
(without a proportionate decrease in the Net Revenue Interest). The Title
Benefit Value shall be the absolute value of the number determined by the
following formula:
Title
Benefit Value = [A x (B/C)] - A
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
D.
(b) If the
Title Benefit represents a decrease in Working Interest for which there is not a
proportionate decrease in Net Revenue Interest, the amount of the Title Benefit
Value shall be determined by taking into account the Allocated Value of the
affected Asset, the portion of the Asset affected by the Title Benefit, the
legal effect of the Title Benefit, the potential discounted economic effect of
the Title Benefit over the post Effective Time life of the affected Asset, and
the Title Benefit Values placed upon the Title Benefit by Buyer and
Seller.
(c) If the
Parties have not agreed on the amount of the Title Benefit Value of a Title
Benefit by the expiration of thirty (30) days after Closing, Seller or Buyer
shall have the right to elect to have such Title Benefit Value determined by an
Independent Expert pursuant to
Section 4.13. If the Title Benefit Value is not
determined pursuant to this Agreement by the Closing, the Purchase Price paid at
Closing shall be increased, subject to
Section 4.14, by the Title Benefit Value determined by
Seller, acting reasonably and in good faith, and, subject to
Section 4.14. Upon
the final determination of Title Benefit Value either by mutual agreement of the
Parties or by the Independent Expert, (i) Seller shall refund to Buyer the
amount, if any, by which the amount so paid by Buyer
at Closing exceeds such Title Benefit Value, or (ii) Buyer shall pay to
Seller the amount, if any, by which such Title Benefit Value exceeds the amount
so paid by Buyer at Closing.
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 assessment 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 (including any Environmental Information as defined in Section 4.09(b))
Seller has in its possession subject to the same terms of confidentiality
subsequently set forth;
(i) The cost
and expense of Buyer’s Environmental Review shall be borne solely by
Buyer;
(ii) Prior to
the Closing, 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 Buyer, its employees, agents,
and other representatives at Buyer’s expense;
(iv) Prior to
the Closing, 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;
(v) Buyer
shall provide Seller a copy of any final Phase I environmental assessment report
affecting the Assets promptly after Buyer’s receipt of the same;
(vi) Buyer
shall give Seller prompt written notice [and obtain Seller’s prior written
consent (not to be unreasonably withheld)] if Buyer desires to conduct a Phase
II (as that term is defined by the American Society for Testing and Materials)
study prior to the expiration of the Examination Period based on the
recommendations of Buyer’s independent environmental consultant (acting
reasonably) with respect to the Assets. With respect to any samples
taken in connection with Buyer’s Environmental Review, Buyer shall take split
samples, providing one of each such sample, properly labeled and identified, to
Seller;
(vii) 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;
(viii) 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,
Buyer shall consult with Seller prior to requesting each such third party
consent, and Seller shall use commercially reasonable efforts to assist Buyer in
obtaining such third party consents; and
(ix) 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 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 documents 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 unless Buyer is
required by applicable Law to disclose such Environmental Information to a
Governmental Authority. 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, (i) a violation of or noncompliance
with Environmental Laws in effect as of the Closing in the jurisdiction in which
such Asset is located, or (ii) the presence upon or under an Asset of a
condition that (y) requires, either currently or in the future, remediation
under Environmental Laws in effect as of the Closing (excluding normal plugging
and abandonment, removal of equipment, and surface restoration after
abandonment) or (z) as such condition then exists, it constitutes a current and
existing Breach of an existing Lease or Contract.
(b) Governmental
Authority. The term “Governmental
Authority” shall mean the United States and any state, county, city, and
political subdivisions that exercise jurisdiction, and any agency, department,
board, commission, or other instrumentality thereof.
(c) Environmental Laws.
The term “Environmental Laws”
shall mean any and all laws (including without limitation, the common law),
statutes, ordinances, rules, regulations, or orders of any Governmental
Authority pertaining to environment, health and safety, and natural resources
(including those imposing remedial or restoration obligations, but excluding
laws, orders, rules, and regulations that pertain to the prevention of waste
relating to oil and gas production allowables or the protection of correlative
rights) or 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 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 requirements of
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 substances or 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. Except
as otherwise provided in Section 12.04(g), Buyer shall provide Seller notice of
all Environmental Defects no later than 5:00 p.m. MST on the date which is seven
(7) days prior to the Closing Date. 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, 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. Except as provided in Section 12.04(g), any
matters that may otherwise constitute Environmental Defects, but of which Seller
has not been specifically notified by Buyer in accordance with this Section 4.11 or Section 12.04(g)
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. Subject to each Party’s
rights under Section
4.12 , 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 ninety (90) days after the Closing.
Subject
to each Party’s rights under Section 4.12 , if
Seller should not elect to correct an Environmental Defect, and no aspect of
such defect is in dispute, the Purchase Price shall, subject to
Section 4.14, 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, 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 after 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 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 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 shall 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) Any
disputes regarding Title Defects, Title Benefits, Environmental Defects, Title
Defect Value, Title Benefit 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 fifteen (15) 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 such Title Defect or
Environmental Defect, and shall provide Seller sixty (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 its option may
at any time during the sixty (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 15-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 shall be
final and nonappealable 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 Denver,
Colorado.
Section
4.14
Limitation of Remedies For
Title Benefits, 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, or the Title Benefit Value of a
given Title Benefit, in each case as determined pursuant to this
Article 4 does not exceed Ten Thousand Dollars ($10,000),
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, Title Benefit, or Environmental Defect shall not qualify for
either a Purchase Price adjustment, cure, or correction of such defect, nor
shall it be included in the calculation of subparagraphs (b), (c), (d), or (e)
below;
(b) if the
aggregate net value of all Title Defects and Title Benefits does not exceed Two
Hundred Fifty Thousand Dollars ($250,000) (prior to any adjustments thereto),
then no adjustment of the Purchase Price shall be made therefor;
(c) if the
aggregate net value of all Title Defects and Title Benefits exceeds Two Hundred
Fifty Thousand Dollars ($250,000) (prior to any adjustments thereto), then the
Purchase Price shall be adjusted by the entire amount of such aggregate net
value, it being understood that this amount is a threshold and not a
deductible;
(d) if the
aggregate value of all Environmental Defects does not exceed Two Hundred Fifty
Thousand Dollars ($250,000) (prior to any adjustments thereto), then no
adjustment of the Purchase Price shall be made therefor; and
(e) if the
aggregate value of all Environmental Defects exceeds Two Hundred Fifty Thousand
Dollars ($250,000) (prior to any adjustments thereto), then the Purchase Price
shall be adjusted by the entire amount of such aggregate value, it being
understood that this amount is a threshold and not a deductible.
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 AND THE SPECIAL WARRANTIES IN THE ASSIGNMENT TO BE
DELIVERED AT CLOSING (COLLECTIVELY, “SELLER’S
REPRESENTATIONS”), SELLER DOES NOT MAKE ANY, AND EXPRESSLY DISCLAIMS ALL
REPRESENTATIONS OR WARRANTIES, AND BUYER EXPRESSLY DISCLAIMS 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. All of the disclaimers of representations,
warranties, or other matters in this Agreement are not meant to constitute a
waiver or limitation of any claim against Seller by Buyer for fraud or
misrepresentation if Seller knows of matters which could make any material or
information in Seller’s files false or misleading.
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 Delaware. Seller has full legal power, right, and is
authorized to do business and is in good standing in, the State or States in
which the Assets are located. Seller is not a non-resident alien,
foreign corporation, foreign partnership, foreign trust or foreign estate (as
those terms are defined in the Internal Revenue Code of 1986, as amended from
time to time, and in the regulations promulgated pursuant thereto).
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 (i) affect the execution or delivery of this
Agreement, (ii) impede Seller’s ability to consummate the transactions
contemplated herein, or (iii) would have a Material Adverse Effect on the
Assets.
Section
5.07
Taxes. Seller
has caused to be timely filed all Tax returns relating to the Assets that Seller
is required to file. 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. Seller is not subject to any pending Claim against
Seller from any applicable taxing authority for assessment of Taxes with respect
to the Assets. There are no 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, there are no tax
liens on or with respect to the Assets. Seller is not a nonresident
alien or foreign corporation (as those terms are defined in the
Code). None of the Assets are subject to a tax partnership as defined
in Section 761 of the Code.
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.
(a) Seller’s
ownership and operation (i.e., where Seller is
operator of record) of the Assets has been in compliance in all material
respects with Laws and there have been no material releases or spills of
hazardous substances, wastes, or materials or Hydrocarbons that have not been
remediated or otherwise cleaned up in accordance with
applicable
Laws. To Seller’s knowledge, the operation of the Assets where
Seller is not the operator of record has been in compliance in all material
respects with Laws and there have been no material releases or spills of
hazardous substances, wastes, or materials or Hydrocarbons that have not been
remediated or otherwise cleaned up in accordance with applicable
Laws.
(b) Without
limitation of the foregoing, as to all Assets, to Seller’s Knowledge, there are
no underground storage tanks, polychlorinated biphenyls, products containing
polychlorinated biphenyls, radioactive materials, asbestos or asbestos
containing materials.
(c) To
Seller’s knowledge, all oil and gas wells comprising a part of the Properties
have been drilled and completed within the boundaries of the applicable leases
or within limits otherwise permitted by a valid and enforceable pooling, unit,
or other agreement or contract or by applicable law.
(d) To
Seller’s knowledge, no well comprising a part of the Assets is or was subject to
any penalty on allowables after the Effective Time because of any
over-production (or any other judgments, orders or decrees of any court or
governmental authority or agency) which would (or did) prevent such well from
being entitled to its full legal and regular allowable (as prescribed by any
court or governmental body or agency) from and after the Effective
Time.
Section
5.10
Contracts. When
combined with the Surface Agreements listed on Exhibit A,
Schedule 5.10 is a complete list of all material Contracts, and
there are no other like agreements to which Buyer will become subject to with
respect to the Assets upon Closing. Seller is not in Breach of any of
the Contracts and the Contracts are in full force and effect in accordance with
their terms, and, to the knowledge of Seller, no other party to any of the
Contracts is in Breach thereof.
Section
5.11
Production
Imbalances. Except
as set forth in Schedule 1.02(g) and
subject to the provisions of Section 3.02(b), to
Seller’s knowledge, there are no Production Imbalances as of the Effective Time
as to any of the Subject Interests.
Section
5.12
Royalties; Payments for
Production. Seller
has not been and is not in Breach of any payment obligations under any of the
Leases. 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 D), 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 or price called for by an applicable
production sales agreement, 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
Insurance. Seller
maintains, and through the Closing will maintain, with respect to the Assets,
the insurance coverage pertaining to the Assets as it currently
maintains. This
includes
traditional third party liability and operator’s extra expense
coverage. Buyer understands and accepts the fact that Seller does not
carry property damage insurance pertaining to the Assets.
Section
5.14
Plugging
Obligations. Except
for wells listed in Schedule 5.14, there
are no dry holes, shut in, or otherwise inactive wells, located on the Assets or
lands pooled, communitized, or unitized therewith that Seller has either the
obligation to plug and abandon in accordance with an applicable operating
agreement or Law or as to Wells for which Seller is not the operator, received a
written proposal to plug and abandon. All wells that are shut in or temporarily
inactive are in compliance with all applicable Laws for which Seller plans to
use such well in the future.
Section
5.15
Personal Property and
Equipment. Seller
is the owner of the Equipment free and clear of all liens and encumbrances other
than those to be released at Closing. Other than in connection with
normal and customary prudent operations, Seller has not removed any personal
property, equipment, or fixtures from the Wells, unless it has been replaced
with personal property, equipment, or fixtures of similar grade and
utility. Unless removed, repaired, or replaced (a) with personal
property, equipment, and fixtures of similar grade and utility or (b) in
connection with normal and customary prudent operations, the personal property,
equipment, and fixtures currently attendant to the Wells was the equipment
historically used by Seller on the Wells to produce the Hydrocarbons prior to
the execution of this Agreement. To Seller’s Knowledge, the equipment
constituting part of the Assets is adequate for the operation of the Assets
consistent with past practices.
Section
5.16
No
Alienation. Within
120 days of the date hereof, Seller has not voluntarily or involuntarily sold,
assigned, conveyed, or transferred or contracted to sell, assign, convey, or
transfer any right or title to, or interest in, the Assets other than (i)
production sold in the ordinary course of Seller’s business and (ii) equipment
which was worthless, obsolete, or replaced by equipment of equal suitability and
value.
Section
5.17
Hydrocarbon Sales
Contracts. Except
for the Hydrocarbon Sales Contracts listed in Schedule 5.17, 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
5.18
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 Wells listed on Exhibit B as having
an after payout NRI.
Section
5.19
Leases. 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 shall be the Title
Defect mechanism set forth in Article
4.
Section
5.20
Property
Expenses. In
the ordinary course of business, Seller has paid all property expenses
attributable to the period of time prior to the Effective Time as such property
expenses become due, and such property expenses are being paid in a timely
manner before the same become delinquent, except such property expenses as are
disputed in good faith by Seller in a timely manner and for which Seller shall
retain responsibility.
Section
5.21
Governmental
Permits. Except
as set forth on Schedule 5.21-Part A,
Seller has 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. The Permits are not subject to any appeal and, except for
those Permits listed in Schedule 5.21-Part B,
are transferable to Buyer. The Assets have been operated in accordance with the
terms of any applicable Permit in all material respects. Seller has
not received written notice of any violations or noncompliance in respect of any
of the Permits that remain uncured.
Section
5.22
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,
during the six consecutive month period immediately prior to Closing, 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
5.23
No Oral
Contracts. Seller
has not entered into any material oral contract with respect to the Assets which
is still in force and effect.
Section
5.24
Information. The
information pertaining to revenue and expenses attributable to the Assets that
Seller has furnished to Buyer (the “Information”) is (a) accurate in all
material respects to the extent relating to the period of Seller’s ownership of
the Assets and (b) to the knowledge of Seller, accurate in all material respects
to the extent relating to any period of ownership of the Assets prior to the
time owned by Seller reflected in the Information. Seller has no data
in its possession that it has failed to furnish that would cause the Information
to be materially inaccurate. Except as specifically set forth in this
Section 5.24,
Seller makes no representations regarding the accuracy of any of the Records;
provided, however, Seller does represent that (i) all of the Records are files,
or copies thereof, that Seller has used in the ordinary course of operating and
owning the Assets, (ii) Seller has not intentionally withheld any material
information from the Records, and (iii) Seller has not knowingly misrepresented
any material information in the Records. Except as set forth in this
Section 5.24, no representation or warranty of any kind
is made by Seller as to the Information or with respect to the Assets to which
the Information relates and Buyer expressly agrees that any conclusions drawn
therefrom shall be the result of its own independent review and
judgment. The representations and warranties contained in this
paragraph shall apply only to matters of fact, and shall not apply to any
information, data, printouts, extrapolations, projections, documentation, maps,
graphs, charts, or tables which reflect, depict, present, portray, or represent,
or which are based upon or derived from, in whole or in part, interpretation of
the Information including, but not limited to, matters of geological,
geophysical, engineering, or scientific interpretation.
Section
5.25
Preferential Rights to
Purchase and Consents to Assignment. To Seller’s knowledge,
Schedules 4.06
and 4.07 are
complete and accurate lists of all preferential rights to purchase in favor of
third parties and nsents to assignment held by third parties, respectively, that
affect the Assets.
Section
5.26
Representations and
Warranties Exclusive. All
representations and warranties contained in this
Article 5 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. Sequel
Energy Partners, LP is a Delaware limited partnership, duly formed, validly
existing, and in good standing under the laws of the state of
Delaware. Bakken Energy Partners, LLC and Three Forks Energy
Partners, LLC, are each a Delaware limited liability company, duly formed,
validly existing, and in good standing under the laws of the state of
Delaware. 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 limited partnership
or limited liability company, as applicable, and in good standing in the State
or 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 Claim by any person or entity or by any administrative agency or
Governmental Authority and no legal, administrative, or arbitration proceeding
pending 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, Title
Benefits, and Environmental Defects.
Section
6.08
Qualification. As
of the Closing, the Buyer or one of its affiliates 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.
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. § 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 arranged to have available by the Closing Date immediately available funds
to enable Buyer to pay in full the Purchase Price as herein provided and
otherwise to perform its obligations under this Agreement.
Section
6.12
Notice of
Changes. Prior
to Closing, Buyer shall provide to Seller written notice of any matter it has
identified as having a material effect on any of Seller’s representations or
warranties under this Agreement, or rendering any such warranty or
representation untrue or inaccurate. The Parties shall meet weekly
during the Examination Period to discuss the status of any matter pertaining to
possible Title Defects, Title Benefits, Environmental Defects or matters having
a material effect on any representations or covenants made herein by either
Seller or Buyer.
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 its
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) not, without Buyer’s express written consent, 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 Seller’s interest for each proposed operation, or terminate,
amend, or extend any Contracts affecting the Assets, or enter into or commit to
enter into any new contract or agreement relating to the Assets, or settle,
compromise, or waive any right relating to the Assets, (iv) maintain
insurance coverage on the Assets in the amounts and of the types presently in
force, (v) 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,
(vi) maintain all Permits, (vii) not transfer, sell, hypothecate,
encumber, or otherwise dispose of any Assets except for sales and dispositions
of Hydrocarbons made in the ordinary course of business consistent with Seller’s
past practices, (viii) not grant or create any preferential right to
purchase, right of first opportunity, or other transfer restriction or
requirement with respect to the Assets, (ix) not elect to become a
nonconsenting party in any operation proposed by any other Person with respect
to the Assets unless requested to do so in writing by Buyer, (x) maintain
the Equipment in at least as good a condition as it is on the date hereof,
ordinary wear and tear excepted, (xi) not make any change in any method of
accounting
or
accounting practice or policy with respect to the Assets, and (xii) 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 in some or all of the Assets,
and Buyer agrees that the acts or omissions of the other working interests
owners shall not constitute a violation of the provisions of this
Article 7, nor
shall any action required by a vote of working interest owners 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.
(c) 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 Adverse Interference on or that constitutes a Breach of Seller’s
representations or warranties under this Agreement.
Section
7.02
Buyer’s
Qualification. At
Closing, Buyer or one of its affiliates 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.
Section
7.03
Operation of the Assets
after the Closing.
(a) Seller
shall not be obligated to continue operating any of the Assets following the
Closing, and, subject to Seller’s retention of the Retained Obligations, Buyer
hereby assumes full responsibility for operating (or causing the operation of)
all Assets following the Closing for which Seller is the operator prior to the
Closing Date. 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 or one of its affiliates 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). Without implying any obligation
on Seller’s part to continue operating any Assets after the Closing, if Seller
elects, at its sole option, to continue to operate any Assets following the
Closing at the request of Buyer, or by any third party working interest owner
due to constraints of applicable joint operating agreement(s) and other
applicable agreement(s), failure of a successor operator to take over
operations, or for other reasonable cause, such continued operation by Seller
shall be for the account of Buyer, and at the sole risk, cost, and expense of
Buyer. Buyer agrees to release and defend, indemnify and hold Seller and its
Representatives harmless from Claims, including any Claims of Buyer or its
affiliates or successors and assigns relating in any manner directly or
indirectly to the operation of the Assets after Closing (INCLUDING THOSE CLAIMS RESULTING
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).
(b) Any
conduct of operations of the Assets by Seller on behalf of Buyer after Closing
shall be conducted pursuant to the Transition Services Agreement substantially
in the form of the agreement attached hereto as Exhibit
F.
Section
7.04
Post Closing Accounting by
Seller. In
the event Seller agrees to operate the Assets after Closing, and unless
otherwise agreed to by the Parties, Seller shall perform the following
accounting tasks subject to the limitations provide for herein:
(a) Seller
will continue to pay royalties and severance, production, and similar Taxes for
sales through the production month following the month in which Closing occurs
(“Post-Closing
Production Month”). If any revenue is received by Seller for any period
after the Effective Time, it will be credited to Buyer in the Final Settlement
Statement; provided however, Seller shall not be obligated to and will not pay
any royalties and severance, production, and similar Taxes, if applicable, with
respect to Hydrocarbons produced after the Post-Closing Production
Month.
(b) Seller
will continue to pay or bill joint interest owners for expenses through the
Post-Closing Production Month. All later expenses will be either accumulated or
charged to Buyer in the Final Settlement Statement, or the invoices will be
returned to the vendor for rebilling to Buyer. Seller will continue
to pay to the operator of any Assets not operated by Seller the joint billings
for the billing month after the month in which Closing occurs. All
subsequent bills will either be returned to the applicable operator for
rebilling to Buyer or forwarded to Buyer for payment, or if already paid by
Seller, will be charged against Buyer in the Final Settlement
Statement. Seller will continue to prepare all regulatory and other
monthly production reports through the Post-Closing Production Month. Copies of
such reports attributable to the period after the Effective Time will be
provided to Buyer, along with the final ending inventory balance.
(c) Seller
will continue to pay all shut-in royalties, minimum royalties, delay rentals,
and other lease payment obligations through the Post-Closing Production
Month.
(d) Seller
shall market and nominate all Hydrocarbons in the same manner as Seller has been
marketing and nominating Hydrocarbons.
Section
7.05
Limitations on Liability of
Operator. Notwithstanding
anything herein to the contrary, in the event Seller or an affiliate of Seller
should assume any accounting functions on behalf of Buyer from and after
Closing, Seller shall have no liability to Buyer for, and Buyer hereby agrees to
release and defend, indemnify and hold Seller and Seller’s Representatives
harmless from, the incorrect payment of expenses, Taxes, billings, delay
rentals, royalties, minimum royalties, payments required by any of the Leases,
shut-in royalties, or similar payments, or for any failure to pay any such
payments through mistake or oversight (INCLUDING THOSE RESULTING 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) from and after the
Effective Time, except to the extent of any amounts included in the upward
Purchase Price Allocations and Adjustment made pursuant to
Section 10.02. In no event shall Buyer’s remedy for Breach of
obligations by Seller (or any of its Representatives) under this
Article 7 exceed the Allocated Value of the portion of the
Subject Interests affected by such Breach.
Section
7.06
Public
Announcements. Prior to the Closing,
neither Party shall make any press release or other public announcement
regarding the existence of this Agreement, the contents hereof or the
transactions contemplated hereby without the express written consent of the
other Party; provided, however, the foregoing shall not restrict disclosures by
Buyer or Seller which are required by applicable securities or other Laws or the
applicable rules of any stock exchange having jurisdiction over the disclosing
Party or its Affiliates. Following Closing, the Parties shall issue a
Press Release in form and substance to be agreed upon by the Parties prior to
the Closing, but again, the foregoing shall not restrict disclosures by Buyer or
Seller which are required by applicable securities or other Laws or the
applicable rules of any stock exchange having jurisdiction over the disclosing
Party or its Affiliates.
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. The
representations and warranties of Seller shall be true and correct in all
material respects on the Closing Date as though made on and as of such date to
the effect that there shall not exist any unwaived or uncured Breach thereof
which individually or in the aggregate would have a Material Adverse Effect on
the value of the Assets taken as a whole;
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;
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; and
Section
9.04
Wachovia
Liens. Seller
shall have delivered to Buyer releases of all Wachovia Liens and any other
liens, charges, or encumbrances on the Assets other than Permitted Encumbrances
in form suitable for recording or filing (as applicable) and such releases shall
be reasonably satisfactory to Buyer.
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 offices of Seller at 9:00 a.m. MST on March 12, 2010, or such other
day and time to which the Parties mutually agree (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 by the following
amounts:
(i) the
amount of all 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;
(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 to the extent such are incurred on or after the Effective Time shall be
the responsibility of Buyer;
(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 (COPAS) 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 (the costs and
expenses for which Seller shall receive an upward adjustment to the Purchase
Price pursuant to clauses (i) through (iv) inclusive, shall be referred to as
the “Interim Operating
Expenses”);
(v) all
upward Purchase Price adjustments for Title Benefits determined in accordance
with
Article 4;
(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; provided that the value of
oil in the production tanks shall be calculated to include only the oil stored
above the load lines as of the Effective Time (i.e. Buyer is not responsible for
paying Seller “tank bottoms”) and the 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 sold, or to be sold, and prices obtained, or to be obtained, are not
known at Closing, and (B) for purposes of the Final Settlement Statement,
to be based upon actual amounts sold and prices obtained; 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 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 together with the value of any uncured or unwaived Breach by Seller of
any of its representations or covenants as contained in Article 5 and Article 7
respectively. Such value shall be determined by the mutual agreement
of Seller and Buyer acting reasonably and taking into consideration the timing,
consequence, probability of loss, and any other commercially relevant factor
when determining the impact of such Breach. If no agreement can be
reached by the Parties within thirty (30) days after Closing, such shall be
resolved in accordance with the provisions of Section
4.13. If the value of the Breach as contemplated by this
paragraph is not material as defined in Section 14.12(h), such shall not
constitute a Breach for which an adjustment to the Purchase Price shall be
made.
(c) The
allocations of costs and expenses and/or adjustments 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 three (3) business 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 150 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, 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, 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 which Buyer is responsible (being those
incurred 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.
(f) 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. 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 state of North Dakota
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 E, 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 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;
(c) deliver
to Buyer possession of the Assets (excluding the Records);
(d) execute
and deliver to Buyer an affidavit attesting to its non-foreign
status;
(e) execute
and deliver to Buyer the Transition Services Agreement in the form of Exhibit
F;
(f) execute,
acknowledge, and deliver any other agreements provided for 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
and deliver to Seller the Transition Services Agreement; and
(d) execute,
acknowledge, and deliver the Assignment and any other agreements provided for
herein or necessary or desirable to effect the transactions contemplated
hereby.
Section
10.09 Recordation; Further
Assurances.
(a) Promptly
following the Closing, Buyer shall cause the documents identified in
Section 9.04 and
Section 10.07(a) to be 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 five business 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.
Without limitation of the foregoing, Seller agrees to deliver such assignments
of its interest in any contracts, agreements, instruments, and arrangements
relating to the Assets as Buyer may reasonably request from time to
time. 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 either
Buyer or Seller if the Closing shall not have occurred by March 31,
2010;
(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, and
that have not been cured to Buyer’s reasonable satisfaction prior to the Closing
Date (net of the aggregate amount of the Purchase Price Adjustments for all
Title Benefits) plus
(ii) the aggregate amount of the Environmental Defect Values with respect to all
Environmental Defects asserted by Buyer reasonably and in good faith, and that
have not been cured to Buyer’s reasonable satisfaction prior to the Closing Date
plus (iii) the
aggregate amount of all Casualty Losses exceeds ten percent (10%) of the
unadjusted Purchase Price; or
(g) by Buyer
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 Sections
11.01(b), 11.01(c), or 11.01(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.
ARTICLE
12
ASSUMPTION
AND INDEMNIFICATION
Section
12.01 Buyer’s Obligations after
Closing. Upon
and after Closing, except to the extent reflected in 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 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.
Seller shall remain responsible for the payment of any statutory interest and
penalties which may have accrued prior to the Effective Time with respect to
such suspense amounts, whether payable to the interest owner or to any state
agency in connection with unclaimed property laws, to the extent such interest
and penalties are not included in the amount deducted from the Purchase Price
pursuant to
Section 10.02(b);
(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 all obligations with respect to Production Imbalances attributable to the
Assets, whether attributable to periods before or after the Effective
Time.
Section
12.02 Seller’s Obligations after
Closing. After
Closing, 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, (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 of Seller in
connection with the transactions contemplated by this Agreement, (d) the
obligations, liabilities, and duties of Seller that are owed to any third party
relating or with respect to the ownership and/or operation of the Assets that
are attributable to periods prior to the Effective Time other than the Plugging
and Abandonment Obligations and the Environmental Obligations and also excluding
any matter that would otherwise constitute a Title Defect or Environmental
Defect that has been resolved by and between the Parties in accordance with the
terms of this Agreement or deemed waived by the terms hereof, (e) any liability
of Seller for the personal injury or death of an individual or property damage
that arises from operations related to the Assets during Seller’s period of
ownership prior to the Closing Date, but excluding any liability for property
damage resulting from an event that otherwise constitutes an Environmental Claim
as defined in Section
12.04(g) or a Plugging and Abandonment Obligation, and (f) Seller’s
proportionate share of any third party Claims with respect to payments of lease
royalties in respect of the Leases that are attributable to periods prior to the
Effective Time (collectively the “Retained
Obligations”).
Section
12.03 Plugging and Abandonment
Obligations.
(a) Buyer’s
Obligations. Provided Closing occurs and to the extent not
otherwise addressed by the express provisions of this Agreement, 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 wells 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 or Section 12.04(g), 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.
Section
12.04 Environmental
Obligations. Provided
Closing occurs and to the extent not otherwise addressed by the express
provisions of this Agreement, Buyer assumes full responsibility and liability
for the following occurrences, events, conditions, and activities on, or related
to, or attributable to Seller’s ownership or operation of 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
Closing Date, 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) Notwithstanding
the other provisions of this Agreement, if after the Closing, but in no event
later than July 31, 2010, any third party or Buyer asserts an Environmental
Claim pertaining to the Assets or any portion thereof that arises from an act,
omission, condition, or other event which (i) occurred prior to the Closing Date
and (ii) the out-of-pocket costs of resolving such Environmental Claim,
including the cost to remediate in accordance with applicable Environmental
Laws, or damages incurred with respect thereto, exceeds Thirty
Five Thousand Dollars ($35,000.00) net to Seller's interest (individually a
"Retained
Environmental Liability" and collectively the "Retained Environmental
Liabilities"), Buyer may notify Seller in writing to assume such
Environmental Claim relating to such Retained Environmental Liabilities in
accordance with the terms of this Section 12.04(g).
For purposes of this Section 12.04(g),
“Environmental Claim” shall mean any Claim asserted by any Governmental
Authority or any person, corporation, or other entity, including Buyer, that
constitutes an Environmental Defect as such term is defined in Section 4.10(a)
hereof. Such written notice shall describe the details known to Buyer
of the Environmental Claim relating to such Retained Environmental Liability,
and Buyer shall concurrently furnish to Seller all information available to
Buyer relating to such Environmental Claim. If Buyer timely notifies
Seller of such Environmental Claim relating to a Retained Environmental
Liability on or before July 31, 2010, Seller shall retain the risk, cost,
expense, and liability related to such Retained Environmental
Liability. It is agreed that Seller and Buyer will cooperate with
each other in connection with the disposition of any Retained Environmental
Liability, which disposition may require either remediation or such other
disposition as Seller and Buyer shall mutually agree. However, for
Assets which were operated by Seller prior to the Closing Date, if Seller and
Buyer are unable to agree upon the disposition of the Retained Environmental
Liability, Seller shall be required to either have the affected Asset reassigned
to Seller and refund the Allocated Value of such affected Asset to Buyer net of
its revenues and expenses, or remediate or otherwise resolve same, in either
event, at its sole risk, cost, expense, and liability in accordance with
applicable Environmental Law and to Buyer’s reasonable satisfaction, and for
non-operated Assets, Seller shall either have the affected Asset reassigned to
Seller and refund the Allocated Value of such affected Asset to Buyer net of its
revenues and expenses, or pay to Buyer the share of costs required to remediate
or otherwise resolve the Retained Environmental Liability, in either event, at
its sole risk, cost, expense, and liability in accordance with applicable
Environmental Law and to Buyer’s reasonable satisfaction. As to
either operated or non-operated Assets affected by a Retained Environmental
Liability and to which Seller and Buyer are unable to agree as to the manner of
remediation or other resolution, Seller may elect to submit such issue to
arbitration in
accordance
with the provisions of Section 4.13 and upon
the decision by the arbitrator, Seller shall either perform such decided
remediation or other resolution or pay Buyer in accordance with such decision,
or have the affected Asset(s) reassigned to Seller and refund the Allocated
Value of such affected Asset to Buyer net of its revenues and expenses, with
whichever course is decided to be at Seller’s sole risk, cost, expense, and
liability. 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 any of the Assets reassigned to Seller pursuant
to this Section
12.04(g). Notwithstanding the provisions of this Section 12.04(g),
Seller shall have no obligation under this Section 12.04(g)
unless the aggregate value of all Retained Environmental Liabilities exceeds Two
Hundred Fifty Thousand Dollars ($250,000.00), which amount is a threshold, not a
deductible, and if such threshold is exceeded, the obligations provided in this
Section 12.04(g)
shall be from the first dollar. The provisions of this Section 12.04(g)
shall have no applicability to the Plugging and Abandonment Obligations
addressed in Section
12.03, but this Section 12.04(g)
shall not absolve Seller from any of its Retained Obligations.
Section
12.05 Definition of
Claims. Except
as expressly provided in
Section 4.09(a)(viii) and
Section 7.03(a) that
specifically operate to include Buyer, 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, choate 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, GROSS NEGLIGENCE,
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,
RESPECTIVELY, AND EACH PARTY RELEASES THE OTHER PARTY 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) any inaccuracy 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,
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 the Breach of any representation or
warranty of Seller set forth in Sections 5.01 to
5.06,
inclusive, or Section
5.10 or Section
5.18 of this Agreement.
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 otherwise specifically provided in this Agreement, 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; provided that the representations and warranties set out in (i) Sections 5.01 to
5.06,
inclusive, and Sections
6.01 to 6.04, inclusive,
shall survive the Closing for the period of the applicable statute of
limitations and (ii) Section 5.10 and
Section 5.18
shall survive until July 31, 2010. Buyer and Seller each covenant not to sue the
other based upon any alleged Breach of any such representations or warranties
that do not survive the Closing and as to representations that survive the
Closing, the provisions of Section 12.06 shall
apply. The indemnity of Seller as provided in
Section 12.08 shall survive only for a period of
twenty-four (24) months after the Closing, except that (i) the indemnity for any
Breach of the representations contained in Section 5.10 or Section 5.18 shall
survive only until July 31, 2010, and (ii) the indemnity for any Breach of the
representations contained in Sections 5.01 to
5.06,
inclusive, shall survive for the applicable statute of limitations (in each
case, the “Survival
Period”). 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 end of the
applicable Survival Period. Anything in this Agreement to the
contrary notwithstanding, after the respective Survival Periods have passed, all
of the Retained Liabilities 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 that (a) Buyer has notified Seller of on or before the end of the
respective Survival Period in accordance with this Agreement, which Claims shall
remain subject to Seller’s obligations as created by operation of Section 12.08, or (b)
are caused by, result from, or are incidental to (i) any fraud or willful
misconduct by Seller, (ii) Claims made by any employee of Seller to
the extent solely against Seller , or (iii) the Excluded Assets. The
indemnification obligations of Buyer and Seller set forth in Section 12.07 and
Section 12.08,
respectively, or elsewhere in this Agreement, shall not, as to either Party,
exceed the Purchase Price.
Section
12.11 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 12.11 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
12.12 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
12.13 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.
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 wells,
and the depreciation of personal property.
(b) In the
event of damage by fire or other casualty (or casualties occur) to the Assets
after the Effective Time and prior to the Closing, that result in a reduction in
the value of the Assets in excess of ten percent (10%) 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, (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.
(c) 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 45
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 where applicable, 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 six (6) 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 October 20, 2009, by and between the Seller and
Buyer, which agreement shall not survive the Closing. Nor does this
Agreement supersede that certain Confidentiality Agreement dated November 9,
2009, by and between Typhoon Energy and Seller, which agreement shall remain in
effect in accordance with its terms. 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, no 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. 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.
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 Colorado. Any
litigation arising out of this Agreement shall only be brought before the
Federal or state courts sitting in the City
and County of Denver, Colorado, 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:
|
ST.
MARY LAND & EXPLORATION COMPANY
777
N. Eldridge Parkway, Suite 1000
Houston,
TX 77079
Attention: Kenneth
Knott
Fax
No.: 281-677-2810
Tel.
No.: 281-677-2791
Email:
kknott@stmaryland.com
|
With
a copy which shall not constitute notice to:
|
ST.
MARY LAND & EXPLORATION COMPANY
1776
Lincoln Street, Suite 700
Denver,
CO 80203
Attention: Milam
Randolph Pharo
Fax
No.: 303-861-0934
Tel.
No.: 303-863-4313
Email:
rpharo@stmaryland.com
|
Buyer:
|
SEQUEL
ENERGY, LLC
1600
Stout Street, Suite 1900
Denver,
CO 80202
Attn:
Douglas W. York
Phone
303-468-2106
Fax
303-446-0698
Email
dyork@sequelenergy.com
|
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, shall mean the actual knowledge of a Party’s
employees who, as of Closing are in a supervisory capacity responsible for the
ownership and operation of the Assets and any material facts relating thereto,
after a due and diligent inquiry.
(h) The
adjective, “material”, whether or
not capitalized, shall mean a situation, circumstance, consequence, or concept
that could reasonably be expected to diminish the value, use, operations, or
development of the Assets by more than $10,000.
(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 diminishes the value, use, operations or development of the Assets by
more than $1,000,000.00. 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 in
addition thereto.
(l) The
plural shall be deemed to include the singular, and vice versa.
Section
14.13 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
14.14 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 E which
contain only that portion of the Assets that are located in a particular county,
and all such assignments shall constitute a single conveyance
Section
14.15 Buyer’s Obligations Several
Not Joint. Anything
to the contrary notwithstanding, the obligations and liability of each Party
Buyer, arising under and in connection with this Agreement shall be several and
not joint. Any representations, warranties, or covenants relating to the
organization, existence, power, and authority of “Buyer” and the execution and
delivery of this Agreement by “Buyer”, are made individually by each Party Buyer
only as to its organization, existence, power, and authority and its execution
and delivery of this Agreement.
Section
14.16 No
Solicitation. Without the prior written consent of Seller,
neither Buyer nor any of its or their affiliated entities (“affiliates”) will
for a period of six (6) months from the date of this Agreement directly or
indirectly solicit for employment any person who is now employed by Seller
except that Buyer and its or their affiliates shall not be precluded from hiring
any such employee or other person who (1) initiates discussions regarding such
employment without any direct or indirect solicitation by Buyer or any of its or
their affiliates; (2) responds to any advertisement placed by Buyer or any of
its or their affiliates to the public or the industry generally; or (3) has been
terminated (and not rehired) by Seller prior to commencement of employment
discussions between Buyer or any of its or their affiliates and such employee or
other person.
Section
14.17 Seller’s Option to Purchase
Leasehold. Provided Closing occurs, an affiliate of Three
Forks Energy Partners, LLC, a Party Buyer to this Agreement, (the affiliate
hereby designated “Optionor”), hereby
grants to Seller the option to purchase all of its leases and the leases that
result from the exercise of any option to lease, all as are within the outline
on Exhibit G
(“Option
Leases”) for the price of One Thousand Dollars ($1000.00) per net mineral
acre covered by such leases (“Option”). Optionor
shall set forth the terms of the Option in a separate agreement (“Option Agreement”)
and present it to Seller no later than five business days after the execution of
this Agreement, which once executed shall solely supersede the terms of this
Section 14.17
and no other section of this Agreement. The Option Agreement shall
contain the following general terms. Optionor shall deliver to Seller
a schedule of lands under lease or under an option to lease, which Optionor
shall exercise and convert to leasehold if Seller exercises the
Option. Seller shall have fourteen (14) days after Closing to elect
to exercise the Option. Optionor shall deliver no less than an eighty
percent (80%) net revenue interest in the Option Leases. Seller shall
have no less than sixty (60) days from the date of its election to perform title
review of the Option Leases. Seller shall be entitled to assert and
resolve Title Defects according to the terms Article 4 of this
Agreement, without consideration of Section
4.14. Seller shall not be required to take Option Leases with
uncured or unwaived Title Defects. With the exception of Optionor,
Seller shall have no recourse for any term of this Section 14.17 against
Buyer.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
54
IN
WITNESS WHEREOF, Seller and Buyer have executed and delivered this Agreement as
of the date first set forth above.
SELLER:
ST.
MARY LAND & EXPLORATION COMPANY
By: /s/ MILAM RANDOLPH PHARO
Name:
Milam Randolph Pharo
Title: Senior
Vice President and General Counsel
BUYERS:
SEQUEL
ENERGY PARTNERS, LP
By:
Sequel Operating I, LLC, its General Partner
By:
Sopris Resources, LLC, its Manager
/s/
DOUGLAS W. YORK
Douglas
W. York
Manager
BAKKEN
ENERGY PARTNERS, LLC
BY:
Sopris Resources, LLC, its Manager
/s/
DOUGLAS W. YORK
Douglas
W. York
Manager
THREE
FORKS ENERGY PARTNERS, LLC
BY:
Sopris Resources, LLC, its
Manager
/s/
DOUGLAS W. YORK
Douglas
W. York
Manager
The following
is a list of schedules and exhibits to the Purchase and Sale Agreement that were
omitted from Exhibit 2.6 pursuant to the provisions of Item 601(b)(2) of
Regulation S-K. St. Mary Land & Exploration company agrees to furnish
supplementally a copy of any omitted schedule or exhibit to the Securities and
Exchange commission upon request.
1.
Exhibit A Subject Interests and Surface
Agreements
2.
Exhibit B Wells
3.
Exhibit C Excluded Assets
4. Exhibit D Allocated Values
5.
Exhibit E Form of Assignment and Bill of
Sale
6. Exhibit F Form of Transition Services
Agreement
7. Exhibit G Marcellus Leasehold Subject to
Option
8.
Schedule 1.02(g) Production
Imbalances
9.
Schedule 4.06 Rights of
Preferential Purchase
10. Schedule
4.07 Consents to
Assignment
11. Schedule
5.06
Litigation
12.
Schedule 5.08 Authorizations
for Expenditures
13. Schedule 5.10 Plugging
Obligations
14.
Schedule 5.14 Inactive
Wells
15.
Schedule 5.17 Production Sales
Agreements
16.
Schedule 5.21 Non-Transferable
Permits