TABLE OF CONTENTS | ||
ARTICLE 1 CERTAIN DEFINITIONS | 1 | |
1.1 | Certain Defined Terms | 1 |
1.2 | References, Gender and Number | 1 |
ARTICLE 2 PURCHASE AND SALE OF MEMBERSHIP INTERESTS; CONSIDERATION AND PAYMENT | 2 | |
2.1 | Purchase and Sale of the Membership Interests | 2 |
2.2 | Consideration | 2 |
2.3 | Escrow | 2 |
2.4 | Payment of Closing Consideration | 2 |
2.5 | Purchase Price Adjustment | 2 |
2.6 | Post Closing Review | 5 |
ARTICLE 3 REPRESENTATIONS AND WARRANTIES | 5 | |
3.1 | Representations and Warranties of Seller Regarding the Subject Assets and the Company | 5 |
3.2 | Representations and Warranties of Seller Regarding Seller | 11 |
3.3 | Representations and Warranties of Buyer | 12 |
ARTICLE 4 INVESTIGATION OF SUBJECT ASSETS; CONFIDENTIALITY | 14 | |
4.1 | Investigation of Subject Assets | 14 |
4.2 | Obligations Under Confidentiality Agreement | 14 |
ARTICLE 5 TITLE ADJUSTMENTS | 15 | |
5.1 | General Disclaimer; No Title Warranty or Representations | 15 |
5.2 | Buyer's Title Review | 15 |
5.3 | Determination of Title Defects | 18 |
5.4 | Seller Title Credit | 18 |
5.5 | Deferred Claims and Disputes | 19 |
5.6 | No Duplication | 20 |
5.7 | Title Defect Deductible | 20 |
ARTICLE 6 ENVIRONMENTAL MATTERS | 21 | |
6.1 | Environmental Defects; Environmental Defect Amount | 21 |
6.2 | Environmental Defect Notice | 21 |
6.3 | Effect of Environmental Defect Notice | 21 |
6.4 | Seller's Right to Cure | 22 |
6.5 | Environmental Defect Adjustments | 22 |
6.6 | Environmental Defect Deductible | 22 |
6.7 | Subject Assets Exclusion | 22 |
6.8 | Deferred Environmental Claims and Disputes | 22 |
6.9 | Sole Remedies | 24 |
6.1 | NORM | 24 |
ARTICLE 7 COVENANTS OF SELLER AND BUYER | 24 | |
7.1 | Conduct of Business | 24 |
7.2 | Certain Restrictions Regarding the Conduct of Business | 25 |
7.3 | Press Releases | 26 |
7.4 | Records | 26 |
7.5 | Further Assurances | 26 |
7.6 | Transfer Requirements | 26 |
7.7 | Casualty and Condemnation | 26 |
7.8 | Seller Marks | 27 |
7.9 | Certain Tax Matters | 27 |
7.1 | Asset and Liability Transfer | 30 |
7.11 | No Shop/No Talk | 31 |
7.12 | Employee Covenant | 31 |
ARTICLE 8 CLOSING CONDITIONS | 33 | |
8.1 | Seller's Closing Conditions | 33 |
8.2 | Buyer's Closing Conditions | 33 |
ARTICLE 9 CLOSING | 35 | |
9.1 | Closing | 35 |
9.2 | Seller's Closing Obligations | 35 |
9.3 | Buyer's Closing Obligations | 35 |
ARTICLE 10 SURVIVAL | 36 | |
10.1 | Survival | 36 |
10.2 | Acknowledgement of Limitation of Recovery | 36 |
ARTICLE 11 LIMITATIONS | 36 | |
11.1 | Disclaimer of Warranties | 36 |
11.2 | Damages | 37 |
ARTICLE 12 INDEMNIFICATION | 38 | |
12.1 | Indemnification By Buyer | 38 |
12.2 | Indemnification By Seller | 38 |
12.3 | Indemnification and Defense Procedures | 38 |
12.4 | Seller's General Liability Limitation | 40 |
12.5 | Exclusive Remedy | 41 |
12.6 | Determination of Damages Related to Breach | 41 |
12.7 | Recovery | 41 |
ARTICLE 13 TERMINATION; REMEDIES | 41 | |
13.1 | Termination | 41 |
13.2 | Remedies | 42 |
ARTICLE 14 MISCELLANEOUS | 44 | |
14.1 | Counterparts | 44 |
14.2 | Notices | 44 |
14.3 | Governing Law; Venue; Jurisdiction. | 45 |
14.4 | Entire Agreement | 45 |
14.5 | Expenses | 46 |
14.6 | Successors and Assigns | 46 |
14.7 | Amendments and Waivers | 46 |
14.8 | Attorneys' Fees | 46 |
14.9 | Severability | 46 |
14.1 | Appendix, Schedules and Exhibits | 46 |
14.11 | Interpretation | 47 |
14.12 | Agreement for the Parties' Benefit Only | 47 |
14.13 | No Recordation | 47 |
14.14 | Time of Essence | 48 |
EXHIBITS AND SCHEDULES | |
Exhibits | |
Exhibit A | |
Part I | Leases |
Part II | Allocated Values |
Part II(A) | Bakken Drillsite Spacing Units and Wells |
Part III | Surface Contracts |
Part IV | Wells |
Part V | Equipment |
Exhibit B | Deposit Escrow Agreement |
Exhibit C | General Conveyance |
Exhibit D | Assumption Agreement |
Exhibit E | Assignment of Membership Interests |
Exhibit F | Certificate of Non-Foreign Status |
Exhibit G | Organizational Documents of the Company |
Exhibit H | Parent Guaranty |
Schedules | |
Schedule 2.5(c) | Newly Acquired Leases |
Schedule 2.5(e)(v) | Special Adjustment to the Purchase Price |
Schedule 3.1(d) | Actions |
Schedule 3.1(e) | Compliance with Laws |
Schedule 3.1(g) | Transfer Requirements |
Schedule 3.1(h)(1) | Material Contracts |
Schedule 3.1(h)(2) | Breaches of Material Contracts |
Schedule 3.1(i) | Tax Matters |
Schedule 3.1(k) | Proposed Operations or Expenditures |
Schedule 3.1(l) | Environmental Matters |
Schedule 3.1(n) | Payments for Production |
Schedule 3.1(p) | Calls on Production |
Schedule 3.1(s) | Non-consent Elections |
Schedule 3.1(u) | Advance Payments |
Schedule 3.1(v) | Payout Balances |
Schedule 3.2(e) | No Conflict |
Schedule 3.2(f) | Seller Consents |
Schedule 5.3(i) | Certain Mergers not of Record |
Schedule 6.1 | Excluded Environmental Defects |
Schedule 7.2 | Certain Operational Covenants |
Schedule 7.9 | Certain Tax Covenants |
Schedule A-1 | Additional Permitted Encumbrances |
1.1 | Certain Defined Terms |
1.2 | References, Gender and Number |
2.1 | Purchase and Sale of the Membership Interests |
2.2 | Consideration |
2.3 | Escrow |
2.4 | Payment of Closing Consideration |
2.5 | Purchase Price Adjustment |
(a) | The Purchase Price shall be adjusted according to this Section 2.5. Seller shall deliver to Buyer not less than three (3) Business Days immediately preceding the Closing Date a statement (the "Preliminary Settlement Statement") setting forth Seller's preliminary good faith determination of the Adjusted Purchase Price, together with reasonably supporting documentation of the same. The Preliminary Settlement Statement shall set forth the Adjusted Purchase Price as provided in this Section 2.5 using the best information available at the date Seller delivers the Preliminary Settlement Statement. In calculating the various adjustments to the Purchase Price pursuant to this Section 2.5, no single item shall be given duplicative effect. After delivery of the Preliminary Settlement Statement by Seller, Buyer will have an opportunity to review such Preliminary Settlement Statement, and Buyer and Seller shall work together in good faith to address any reasonable requests for adjustments to the Preliminary Settlement Statement made by Buyer on or before the Closing Date; provided that if Buyer and Seller are unable to resolve any disagreement regarding the Preliminary |
(b) | For purposes of determining the amounts of the adjustments to the Purchase Price provided for in Section 2.5, the principles set forth in this Section 2.5(b) shall apply. Buyer shall be entitled to all production of hydrocarbons from or attributable to the Subject Assets at and after the Effective Time (and all products and proceeds attributable thereto), and to all other income, proceeds, receipts and credits earned with respect to the Subject Assets at or after the Effective Time, and shall be responsible for (and entitled to any refunds with respect to) all Property Expenses (as defined in Section 2.5(c)) incurred at and after the Effective Time. Seller shall be entitled to all hydrocarbon production from or attributable to Subject Assets prior to the Effective Time (and all products and proceeds attributable thereto), and to all other income, proceeds, receipts and credits earned with respect to the Subject Assets prior to the Effective Time, and shall be responsible for (and entitled to any refunds with respect to) all Property Expenses incurred prior to the Effective Time. "Earned" and "incurred", as used in the Agreement shall be interpreted in accordance with GAAP and Council of Petroleum Accountants Society standards, except as otherwise specified herein. For purposes of allocating production (and proceeds and accounts receivable with respect thereto), under this Section 2.5, (i) liquid hydrocarbons shall be deemed to be "from or attributable to" the Subject Assets when they pass through the pipeline connecting into the storage facilities into which they are run and (ii) gaseous hydrocarbons shall be deemed to be "from or attributable to" the Subject Assets when they pass through the royalty measurement meters, delivery point sales meters or custody transfer meters on the gathering lines or pipelines through which they are transported (whichever meter is closest to the well). Seller shall utilize reasonable interpolative procedures, consistent with industry practice, to arrive at an allocation of production when exact meter readings or gauging and strapping data are not available. As part of the Preliminary Settlement Statement, Seller shall provide to Buyer such data as is reasonably necessary to support any estimated allocation, for purposes of establishing the Adjusted Purchase Price. |
(c) | The term "Property Expenses" means all (i) direct costs and expenses (including capital expenditures and lease operating expenses) of ownership, exploration, maintenance, development, production and operation of the Subject Assets or acquiring new oil and gas leases after the Effective Time but on or before the Execution Date, which are within the Bakken Drillsite Spacing Units and listed on Schedule 2.5(c) (including, for this purpose, prepayments of any such costs or expenses), which costs and expenses shall include (x) Asset Taxes, but exclude any other Taxes and also exclude any costs and expenses of operating the office of Seller in Denver, Colorado, or the costs to the Company or its Affiliates of employees in that office; and (y) with respect to the Subject Assets operated by the Company or its Affiliates, all direct costs and expenses (including capital expenditures, lease operating expenses, facilities and plant expenses, and joint interest billings) chargeable to the joint account under the applicable Contract or in accordance with any Law of any Governmental Authority in connection with the exploration, maintenance, development, production and operation of such Subject Assets, and (ii) all overhead charges paid by the Seller, the Company or any of their Affiliates before the Closing Time to any third-party operator of any of the Subject Assets and incurred with respect to the time period (the "Adjustment Period") beginning at the Effective Time and ending at 7:00 A.M. (local time) on the Closing Date (such time being the "Closing Time"). |
(d) | Upward Adjustments. To calculate the Adjusted Purchase Price, the Purchase Price shall be adjusted upward by the following: |
(i) | Proceeds received by Buyer (less any royalties and other non-Tax burdens and Asset Taxes measured by or payable out of such production to the extent not included in Property Expenses), from the sale of any hydrocarbons or otherwise that were produced from or attributable to the Subject Assets prior to the Effective Time. |
(ii) | An amount equal to all Property Expenses attributable to the Subject Assets during the Adjustment Period that were paid by the Company, Seller or any of their Affiliates. |
(iii) | An amount equal to all amounts paid by Seller or any of its Affiliates as a performance bond or security deposit outstanding at the Closing Date and attributable to the Subject Assets. |
(iv) | An amount equal to, with respect to the Subject Assets operated by the Seller, (i) if there is an existing operating agreement in place for such Subject Assets, the overhead chargeable to the joint account pursuant to each of the existing operating agreements for such Subject Assets and incurred with respect to the Adjustment Period, and (ii) if, during the Adjustment Period, there is no existing operating agreement in place for such Subject Assets, an overhead amount equal to the Seller’s Working Interest portion of $12,000 per Well per month undergoing drilling or completion operations and $1,200 per producing Well per month, and for which, in the case of clause (i) or (ii), neither the Company, the Seller nor any of their Affiliates have received reimbursement before the Closing from the other parties in the case of clause (i) bound by any such operating agreement or in the case of clause (ii) in the unit for such Well. |
(v) | Any other amount provided for in this Agreement as payable by Buyer to Seller or as may otherwise be agreed to by Buyer and Seller. |
(e) | Downward Adjustments. To calculate the Adjusted Purchase Price, the Purchase Price shall be adjusted downward by the following: |
(i) | An amount equal to the Title Defect Adjustment, if any. |
(ii) | An amount equal to the Environmental Defect Adjustment, if any. |
(iii) | An amount equal to the Excluded Environmental Adjustment, if any. |
(iv) | Gross proceeds (less any royalties and other non-Tax burdens and Asset Taxes measured by or payable out of such production to the extent not included in Property Expenses) received by the Seller, the Company or their Affiliates (A) from the sale or disposition of hydrocarbons produced from the Subject Assets during the Adjustment Period, (B) from the rental, sale, salvage, or other disposition of any other Subject Assets on or after the Effective Time or (C) otherwise attributable to the ownership of the Subject Assets during the Adjustment Period (excluding, however, all Property Expenses for which the Company or any of its Affiliates receives reimbursement before the Closing Time from the other parties bound by any such operating agreement). |
(v) | If applicable, the amount provided in Schedule 2.5(e)(v). |
(vi) | Any other amount provided for in this Agreement as payable by Seller to Buyer or as may otherwise be agreed to by Buyer and Seller. |
2.6 | Post Closing Review |
3.1 | Representations and Warranties of Seller Regarding the Subject Assets and the Company |
(a) | Organization and Qualification. At Closing, the Company will be a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware and will have the requisite limited liability company power to carry on its business as it will be conducted at the Closing. The Company will be duly qualified to do business and be in good standing in the State of North Dakota. |
(b) | Membership Interests. At Closing, all of the Membership Interests will be duly authorized and validly issued, fully paid and non-assessable, and will be issued in accordance with the Organizational Documents of the Company. The Membership Interests will constitute 100% of the total issued and outstanding membership interests or other equity interests in the Company. At Closing, there will be no outstanding or authorized options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any character relating to the Membership Interests or obligating the Company to issue or sell any Membership Interests or any other interest in, the Company. There will be no voting trusts, member agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any of the Membership Interests. The Seller will be the sole record and beneficial owner of the Membership Interests or the other equity interests in the Company and, immediately upon consummation of the transactions contemplated by this Agreement, Buyer will own all of the Membership Interests free and clear of all Liens (other than restrictions on transfer of securities arising under applicable federal and state securities Laws). |
(c) | Subsidiaries. From the date of its formation through the Closing, the Company will not own, either directly or indirectly, any equity interest in any Person. |
(d) | Actions. Except as set forth on Schedule 3.1(d), there are no Actions ongoing or, to the Knowledge of Seller, pending or threatened against the Company, Seller or any Affiliate of Seller with respect to the Subject Assets, or which relate to the transactions contemplated by this Agreement, and which, if determined adversely, would affect Seller's ability to consummate the transactions contemplated by this Agreement or have a Material Adverse Effect. Except as set forth on Schedule 3.1(d), there is no outstanding order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority and no unsatisfied judgments, penalties or awards issued by any Governmental Authority against or affecting the Company or any of the Subject Assets. |
(e) | Compliance with Laws; Permits. Except with respect to (i) the matters set forth on Schedule 3.1(d) and Schedule 3.1(e), (ii) compliance with Laws concerning Taxes (as to which representations and warranties are made solely pursuant to Section 3.1(i)) and (iii) compliance with Environmental Laws (as to which representations and warranties are made solely pursuant to Section 3.1(l)), the Subject Assets operated by the Seller, and, to the Knowledge of Seller, the operation of each of the other Subject Assets are, in each case, in material compliance with all applicable Laws. The Seller has all approvals, authorizations, consents, licenses, orders, franchises, rights, registrations and permits of all Governmental Authorities (the "Permits") that are material to the Seller’s operatorship of the Subject Assets as presently operated. Except as would not reasonably be expected to have a Material Adverse Effect, (x) each Permit is in full force and effect and has been duly and validly issued, (y) there are no uncured violations of the terms and provisions of such Permits and (z) except as set forth on Schedule 3.1(e), with respect to each such Permit, the Company has not received written notice from any Governmental Authority of any violation by the Company of such Permit that remains uncured. To the Knowledge of Seller, Seller is not in violation of the terms of the Permits in any material respect. |
(f) | Preference Rights. There are no Preference Rights with respect to the Subject Assets. |
(g) | Transfer Requirements. Except as set forth on Schedule 3.1(g), and to the Knowledge of Seller, there are no agreements containing a Transfer Requirement that is applicable to the transactions contemplated by this Agreement. |
(h) | Material Contracts. Schedule 3.1(h)(1) sets forth a list of all Material Contracts to which the Seller or any of its Affiliates is a party as of the Execution Date. True and complete copies of all Material Contracts, and all amendments thereto, have been provided to Buyer. Each Material Contract is valid and binding on the Seller or its Affiliates, as applicable, in accordance with its terms and is in full force and effect. Except as set forth on Schedule 3.1(h)(2), Seller is not in material breach of, or material default under, and to the Knowledge of Seller, no other Person is in material breach of, or material default under, any Material Contract, and there does not exist under any provision thereof or, to the Knowledge of Seller, any event that, with the giving of notice or the lapse of time or both, would constitute such a material breach or material default by any Person. |
(i) | Tax Matters. |
(i) | Except with respect to items set forth on Schedule 3.1(i), (A) during the period of the Seller’s and the Company's ownership of the Subject Assets, all Asset Taxes and Transfer Taxes (other than Transfer Taxes resulting from the transactions contemplated by this Agreement) that have become due and payable before the Effective Time have been properly paid, whether or not shown on any Tax Return), (B) there are no suits or proceedings ongoing, or to the Knowledge of the Seller, any claims, investigations, audits, inquiries pending or threatened against the Seller or the Company in respect of Taxes of the Company or Asset Taxes related to the Subject Assets, and (C) none of the Subject Assets are subject to any partnership within the meaning of subchapter K of Chapter 1 of Subtitle A of the Code. The Company is, and has been throughout its existence, disregarded as an entity separate from its owner for United States federal Income Tax purposes. |
(ii) | The Company has not been required to file any Tax Returns under applicable law and regulations. No claim has ever been made by an authority in a jurisdiction where the Company does not file Tax Returns that the Company or any of the Subject Assets is or may be subject to taxation by that jurisdiction. There are no Liens for Taxes (other than Taxes not yet due and payable) upon any of the Subject Assets. |
(iii) | The Company has withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, member or other third party. |
(iv) | Neither the Company nor the Seller has received from any federal, state, local or non-US Taxing Authority (including jurisdictions where the Company has not filed Tax Returns) any (i) written notice indicating an intent to open an audit or other review with respect to Taxes of the Company or Asset Taxes or Transfer Taxes that relate to the Subject Assets, (ii) request for information related to Taxes of the Company or Asset Taxes or Transfer Taxes that relate to the Subject Assets, or (iii) notice of deficiency or proposed adjustment for any amount of Tax proposed, asserted, or assessed by any Taxing Authority against the Company. Schedule 3.1(i) lists all Tax Returns filed with respect to Asset Taxes or Transfer Taxes related to the Subject Assets for taxable periods ended on or after December 31, 2011, indicates those Tax Returns that have been audited, and indicates those Tax Returns that currently are the subject of audit. The Seller has delivered to Buyer correct and complete |
(v) | Neither the Company nor the Seller has waived any statute of limitations in respect of Taxes from or attributable to the Company or the Subject Assets or agreed to any extension of time with respect to a Tax assessment or deficiency against the Company or related to the Subject Assets. |
(vi) | The Company is not a party to or bound by any Tax allocation or sharing agreement. The Company does not have any Liability for the Taxes of any Person (other than the Company) under 26 C.F.R. Reg 1.1502-6 (or any similar provision of state, local or non-U.S. law) as a transferee or successor, by contract, or otherwise. |
(j) | Wells. There are no Wells in respect of which Seller or any of its Affiliates have received an unresolved order from any Governmental Authority requiring that such Wells be plugged and abandoned. All plugged and abandoned Wells that have been plugged and abandoned by Seller have been plugged and abandoned in material compliance with applicable Laws. Except for the Wells described on Part IV of Exhibit A, Seller and its Affiliates have no duty to plug any wells located on the Lands. To Seller's Knowledge, all Wells have been drilled and completed within the limits permitted by all applicable Leases and pooling or unit agreements or orders. |
(k) | Proposed Operations or Expenditures. Except as set forth on Schedule 3.1(k), as of the Execution Date, there are no outstanding authorizations for expenditure or other commitments to conduct any operations or expend any amount of money on or with respect to the Subject Assets which are binding on the Seller or the Subject Assets and will be binding on the Company after Closing and which Seller reasonably anticipates will require the expenditure of in excess of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) per item (net to the Seller's interest). |
(l) | Environmental. |
(i) | Except as set forth on Schedule 3.1(l) and except as would not reasonably be expected to have a Material Adverse Effect: |
(A) | the Subject Assets operated by the Seller or any of its Affiliates and all other Subject Assets comprising the Business are currently in compliance with Environmental Laws; |
(B) | all Permits required by Environmental Laws (the "Environmental Permits") with respect to the ownership or operation of the Subject Assets operated by the Seller or any of its Affiliates, and all other Subject Assets comprising the Business, are in full force and effect, and the Subject Assets operated by the Seller or any of its Affiliates and, to the Knowledge of Seller, the Subject Assets operated by any third party are in compliance with the Environmental Permits; |
(C) | there has been no Release or, to the Knowledge of Seller, threatened Release of Hazardous Materials in connection with the Subject Assets operated by the Seller |
(D) | there are no Actions pending or, to the Knowledge of Seller, threatened against the Company or Seller with respect to the Business by or before a Governmental Authority pursuant to any Environmental Laws or relating to an Environmental Permit. |
(ii) | As of the date hereof, neither Seller nor any of its Affiliates have received any unresolved written notice from any Governmental Authority of any release, disposal, event, condition, circumstance, activity, practice or incident concerning any Subject Assets that alleges non-compliance by Seller or its Affiliates with any Environmental Law. |
(m) | Special Warranty. Neither the Seller nor any Person claiming by, through or under the Seller, but not otherwise, has taken any action that would result in the Company failing to own Defensible Title following the Closing. |
(n) | Payments for Production. Except as set forth in Schedule 3.1(n) and except for amounts being held in suspense as permitted pursuant to applicable Law, all rentals, royalties, excess royalty, overriding royalty interests, hydrocarbon production payments and all other payments due and/or payable by Seller or the Company or their Affiliates to overriding royalty holders and other interest owners with respect to the Subject Assets and the hydrocarbons produced therefrom prior to the Effective Time have been properly and timely paid in all material respects. |
(o) | Imbalances. Except for normal immaterial pipeline imbalances that are adjusted by the pipeline each month, as of the date hereof, there are no Imbalances or other imbalances attributable to the Wells which require payment from Buyer to any Person or for which Buyer would otherwise be responsible. |
(p) | Calls on Production. Except as described in Schedule 3.1(p) or Schedule 3.1(h)(1), to Seller's Knowledge, the Subject Assets are not subject to any calls on production. |
(q) | Hedge Agreements. Neither the Subject Assets nor the production therefrom are subject to any Hedge Agreements with respect to which Buyer or the Company will have any obligations. |
(r) | Operatorship. As of the date hereof, (i) neither Seller nor any of its Affiliates have received written notice pursuant to and in accordance with the terms of any operating agreement under which the Seller or any of its Affiliates is currently designated as the operator or, to the Knowledge of Seller, any other notice, with respect to any pending or requested vote to remove the Seller or any of its Affiliates as the named "operator" of any of the Subject Assets for which the Seller or any of its Affiliates is currently designated as "operator", and (ii) the Seller and any of its applicable Affiliates have not failed or refused to carry out, and at all times during the two years prior to the Execution Date have not failed or refused to carry out, their duties as “operator” under the terms of the applicable joint operating agreements that cover the Subject Assets and under which the Seller or any of its |
(s) | Non-consent Elections. Except as set forth in Schedule 3.1(s), as of the date hereof no operations are being conducted or, since the Effective Time, have been conducted on, or with respect to, the Subject Assets with respect to which the Seller has elected to be a non-consenting party under the applicable operating agreement or any forced pooling and with respect to which all of the Seller's rights have not yet reverted to such Person. |
(t) | Bank Accounts; Power of Attorney. The Company will hold no bank accounts or investment accounts. There are no powers of attorney issued by the Company in effect. |
(u) | Advance Payments. Except as set forth on Schedule 3.1(u), the Seller is not obligated by virtue of any take-or-pay payment, advance payment or other similar payment (other than royalties, overriding royalties and similar arrangements reflected with respect to the Net Revenue Interests for the Wells set forth in Part II of Exhibit A and gas balancing arrangements), to deliver hydrocarbons attributable to the Subject Assets, or proceeds from the sale thereof, at some future time without receiving payment therefore at or after the time of delivery. |
(v) | Payout Balances. Schedule 3.1(v) identifies the Seller-operated Wells subject to a reversion or other adjustment at some level of cost recovery or payout (or passage of time or other event other than a termination of a Lease by its terms), and the list of the "payout" balance has been maintained by the Seller in the ordinary course of business of each such Seller-operated Wells, as of the Effective Time. |
(w) | Operations of the Company. The Company will be formed solely for the purpose of engaging in the transactions contemplated hereby. Prior to the Closing, the Company will not undertake any activities other than as contemplated by this Agreement and the Seller will not cause the Company to assume any liabilities other than as provided in the General Conveyance and Assumption Agreement. |
(x) | Employee Matters. At no time has the Company had employees, independent contractors or consultants. At no time has the Company had any pension, benefit, retirement, compensation, employment, consulting, profit-sharing, deferred compensation, incentive, bonus, performance award, phantom equity or other equity, change in control, retention, severance, vacation, paid time off, welfare, fringe-benefit and other similar agreement, plan, policy, program or arrangement, in each case whether or not reduced to writing and whether funded or unfunded. |
(y) | Sufficiency of Subject Assets. The Seller has, and the Subject Assets include, all material surface rights, permits, consents and other assets and rights necessary to access, operate, maintain and repair the Wells and Equipment in the ordinary course of business as currently conducted by Seller. |
(z) | Insurance. All insurance policies of the Seller or any of its Affiliates relating to the Subject Assets are in full force and effect and insure the Subject Assets in reasonably sufficient amounts against normal risks usually insured against by persons operating oil and gas properties in the same area. |
(aa) | No Other Representations. Except for the representations and warranties contained in this Section 3.1 (including the related portions of the disclosure schedules), the Seller makes no express or implied representation or warranty, either written or oral, on behalf of Seller or the Company including any representation or warranty as to the accuracy or completeness of any information regarding the Subject Assets furnished or made available to Buyer and its representatives. Except |
3.2 | Representations and Warranties of Seller Regarding Seller |
(a) | Organization and Qualification. Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Colorado. |
(b) | Authority. Seller has all requisite limited liability company power and authority to execute and deliver this Agreement and each of the agreements required to be executed and delivered by Seller under this Agreement and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and the agreements to be executed and delivered by Seller hereunder and the transactions contemplated hereby and thereby have been duly and validly authorized by all requisite limited liability company action on the part of Seller. |
(c) | Enforceability. This Agreement has been duly executed and delivered by Seller, and (assuming due authorization, execution, and delivery by Buyer) constitutes, and at Closing each of the agreements required to be executed and delivered by Seller hereunder (assuming due authorization, execution, and delivery by Buyer) will constitute, a legal, valid and binding agreement of Seller enforceable against Seller in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws of general application with respect to creditors, (ii) general principles of equity and (iii) the power of a court to deny enforcement of remedies generally based upon public policy. |
(d) | Title to Membership Interests. At Closing, Seller will be the record and beneficial owner of and have good and valid title to the Membership Interests, free and clear of any Liens, except as are imposed by applicable securities Laws or such Liens that will be released in full prior to the Closing. |
(e) | No Conflict. Except as set forth on Schedule 3.2(e), neither the execution and delivery of this Agreement or the agreements required to be executed and delivered by Seller hereunder nor the consummation of the transactions and performance of the terms and conditions contemplated hereby or thereby by Seller will (i) violate, conflict with or constitute a default or an event that, with notice or lapse of time or both, would be a default, breach or violation under any term or provision of the certificate of incorporation, bylaws or other governing documents of Seller or the Company; (ii) materially violate, conflict in any material respect with or constitute a material default or event that, with notice or lapse of time or both, would be a material default, breach or violation under any term or provision of any commitment, license, promissory note, conditional sales contract, indenture, Lien, lease or other agreement, instrument or arrangement to which Seller or the Company is a party or by which Seller or the Company or any of the Subject Assets is bound; (iii) violate, conflict with or constitute a breach of any Law in any material respect applicable to Seller or the Company or by which Seller or the Company or any of the Subject Assets is bound; or (iv) result in the creation or imposition of any adverse material claim or interest, or any Lien, charge, equity or restriction of any material nature whatsoever, on or affecting Seller or the Company or any of the Subject Assets. |
(f) | Consents. Except with respect to (i) any Transfer Requirements set forth on Schedule 3.1(g), (ii) such filings with the SEC as may be required by applicable Law or pursuant to regulation of any applicable securities exchange in the United States of America or Canada, and (iii) such matters set forth on Schedule 3.2(f), no consent, approval, authorization or permit of, or filing with or notification to, any Person is required for or in connection with the execution and delivery of this Agreement by Seller or for or in connection with the consummation of the transactions and performance of the terms and conditions contemplated hereby and thereby by Seller. |
(g) | Actions. There are no Actions ongoing or, to the Knowledge of Seller, pending or threatened against Seller which relate to the transactions contemplated by this Agreement other than Actions which would not if determined adversely, materially affect Seller’s ability to consummate the transactions contemplated by this Agreement or to perform its obligations hereunder. |
(h) | Foreign Person. Seller is not a foreign person (as that term is used in Section 1.1445-2 of the Treasury Regulations). |
(i) | Brokerage Fees and Commissions. Neither Seller nor any Affiliate of Seller has incurred an obligation or entered into any agreement for any investment banking, brokerage or finder's fee or commission in respect of the transactions contemplated by this Agreement for which Buyer or, after the Closing, the Company, shall incur any liability. |
(j) | Bankruptcy. There are no bankruptcy, reorganization, receivership or arrangement proceedings instituted or, to the Knowledge of Seller, pending or threatened in writing against the Seller. The Seller is not insolvent or generally unable to pay its debts as they become due. |
3.3 | Representations and Warranties of Buyer |
(a) | Organization and Qualification. Buyer is a corporation duly formed, validly existing and in good standing under the laws of Delaware and has the requisite corporate power to carry on its business as it is now being conducted. Buyer is duly qualified to do business and is in good standing in each jurisdiction in which the Subject Assets make such qualification necessary. |
(b) | Authority. Buyer has all requisite corporate power and authority to execute and deliver this Agreement and each of the agreements required to be executed and delivered by Buyer under this Agreement and to perform its obligations hereunder and thereunder. The execution, delivery and performance of this Agreement and the agreements to be executed and delivered by Buyer hereunder and the transactions contemplated hereby and thereby have been duly and validly authorized by all requisite corporate action on the part of Buyer. |
(c) | Enforceability. This Agreement has been duly executed and delivered by Buyer, and (assuming due authorization, execution and delivery by Seller) constitutes, and at Closing each of the agreements required to be executed and delivered by Buyer hereunder (assuming due authorization, execution and delivery by the other parties thereto) will constitute, a valid and binding agreement of Buyer enforceable against Buyer in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws of general application with respect to creditors, (ii) general principles of equity and (iii) the power of a court to deny enforcement of remedies generally based upon public policy. |
(d) | No Conflict. Neither the execution and delivery of this Agreement or the agreements required to be executed and delivered by Buyer hereunder nor the consummation of the transactions and performance of the terms and conditions contemplated hereby or thereby by Buyer will (i) violate, conflict with or constitute a default or an event that, with notice or lapse of time or both, would be a default, breach or violation under any term or provision of the Certificate of Incorporation or other governing documents of Buyer, (ii) materially violate, conflict in any material respect with or constitute a material default or event that with notice or lapse of time or both, would be a material default, breach or violation under any term or provision of any commitment, license, promissory note, conditional sales contract, indenture, mortgage, deed of trust, lease or other agreement, instrument or arrangement to which Buyer is a party or by which Buyer is bound; (iii) violate, conflict with or constitute a breach of any Law in any material respect applicable to Buyer or by which Buyer is bound; or (iv) result in the creation or imposition of any adverse material claim or interest, or any Lien, charge, equity or restriction of any material nature whatsoever, on or affecting Buyer. |
(e) | Consents. Except with respect to such filings with the SEC as may be required by applicable Law or pursuant to regulation of any applicable securities exchange in the United States of America, no consent, approval, authorization or permit of, or filing with or notification to, any Person is required for or in connection with the execution and delivery of this Agreement by Buyer or for or in connection with the consummation of the transactions and performance of the terms and conditions contemplated hereby by Buyer. |
(f) | Actions. There are no Actions ongoing or, to the Knowledge of Buyer, pending or threatened against Buyer which relate to the transactions contemplated by this Agreement other than Actions which are not reasonably expected by Buyer to materially impair the ability of Buyer to consummate the transactions contemplated by this Agreement or to perform its obligations hereunder. |
(g) | Brokerage Fees and Commissions. Neither Buyer nor any Affiliate of Buyer has incurred an obligation or entered into any agreement for any investment banking, brokerage or finder's fee or commission in respect of the transactions contemplated by this Agreement for which Seller shall incur any liability. |
(h) | Funds. Buyer has sufficient funds or sufficient capacity to borrow under its existing revolving credit agreement available to enable Buyer to consummate the transactions contemplated hereby and to pay all related fees and expenses of Buyer. |
(i) | Securities Laws. Buyer is an "accredited investor," as such term is defined in Regulation D of the Securities Act and will acquire the Membership Interests for its own account and not with a view to a sale or distribution thereof in violation of the Securities Act and the rules and regulations thereunder, any state blue sky Laws or any other securities Laws. Buyer is acquiring the Membership Interests solely for its own account for investment purposes and not with a view to, or for offer or sale in connection with, any distribution thereof. Buyer acknowledges that the Membership Interests are not registered under the Securities Act or any state securities Laws, and that the Membership Interests may not be transferred or sold except pursuant to the registration provisions of the Securities Act or pursuant to an applicable exemption therefrom and subject to state securities Laws. Buyer is able to bear the economic risk of holding the Membership Interests for an indefinite period (including total loss of its investment), and has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risk of its investment. |
(j) | Independent Evaluation. Buyer is an experienced and knowledgeable investor in the oil and gas business. Prior to entering into this Agreement, Buyer was advised by its legal, Tax, and other professional counsel and such other Persons it has deemed appropriate concerning this Agreement and the transactions contemplated by this Agreement and has relied solely on (i) its own independent valuation of the Company and the Subject Assets including the geologic and geophysical characteristics of the Subject Interests, the estimated reserves recoverable therefrom, and the price and expense assumptions applicable thereto, and (ii) the representations and warranties made by Seller in this Agreement. |
4.1 | Investigation of Subject Assets |
4.2 | Obligations Under Confidentiality Agreement |
(k) | Prior to the Closing, Buyer shall maintain all information made available to it pursuant to the Confidentiality Agreement or Section 4.1 confidential and otherwise to comply in all respects with, and to cause their respective officers, employees, representatives, consultants and advisors to maintain all such information confidential and otherwise to comply in all respects with the provisions |
(l) | Without limiting Seller's right to issue a press release pursuant to Section 7.3, for a period of two (2) years from and after the Closing and except as otherwise required by any requirements of Law, Seller shall maintain all information relating to the Company with respect to the Subject Assets confidential and otherwise to comply in all respects with, and to cause its officers, employees, representatives, consultants and advisors to maintain all information relating to the Subject Assets confidential; provided, however, that the information subject to such confidentiality restrictions shall not include information that is or becomes generally available to the public other than as a result of disclosure by Seller or its Affiliates. |
(m) | Without limiting Buyer's right to issue a press release pursuant to Section 7.3, for a period of two (2) years from and after the Closing and except as otherwise required by any requirements of Law, Buyer shall maintain all information relating to all Subject Assets retained by Seller (or an Affiliate designated by Seller) pursuant to Section 6.7 confidential and otherwise to comply in all respects with, and to cause its officers, employees, representatives, consultants and advisors to maintain all information relating to such assets confidential; provided, however, that the information subject to such confidentiality restrictions shall not include information that is or becomes generally available to the public other than as a result of disclosure by Buyer or its Affiliates. |
5.1 | General Disclaimer; No Title Warranty or Representations |
5.2 | Buyer's Title Review |
(f) | Buyer's Assertion of Title Defects. Prior to 5:00 P.M., Mountain Time, on September 19, 2014 (the "Defect Notice Date"), Buyer shall have the right, but not the obligation, to notify Seller in writing of any matters which, in Buyer's reasonable opinion, constitute Title Defects and which Buyer intends to assert as a Title Defect with respect to any Property Subdivision pursuant to this ARTICLE 5. For all purposes of this Agreement, Buyer shall be deemed to have waived any Title Defect which Buyer fails to assert as a Title Defect by written notice given to Seller on or before 5:00 P.M., Mountain Time, on the Defect Notice Date. To be effective, Buyer's written notice of a Title Defect must by asserted in good faith and include (i) a description of the alleged Title Defect Property, (ii) the Allocated Value of the alleged Title Defect Property, (iii) a brief description of the matter constituting the asserted Title Defect and the basis for such Title Defect, (iv) the Title Defect Amount attributable thereto claimed in good faith by Buyer, (v) the computations for such Title Defect Amount, (vi) to the extent then known by Buyer, the necessary curative for each Title Defect, and |
(g) | Allocation of Consideration. Solely for the purposes of ARTICLE 5 and ARTICLE 6, the allocated value of each Property Subdivision shall be the value specified for such Property Subdivision in Part II of Exhibit A (the "Allocated Value"). |
(h) | Seller's Opportunity to Cure. |
(i) | Seller shall have until one (1) day before the Closing Date, at its sole cost and expense, if it so elects but without obligation, to cure all or a portion of such asserted Title Defects. Subject to Seller's continuing right to dispute the existence of a Title Defect and/or the Title Defect Amount asserted with respect thereto, if Seller within such time fails to cure any Title Defect of which Buyer has given a timely and effective written notice as required above and Buyer has not and does not waive same on or before the day immediately preceding the Closing Date, the Property Subdivision affected by such uncured and unwaived Title Defect shall be a "Title Defect Property". |
(ii) | To the extent that a Title Defect is based on Seller's failure to have Defensible Title to a Bakken Drillsite Spacing Unit, Seller may cure such defect by securing, at its sole cost and expense, in the Seller's name new or renewal leases with reasonable primary terms and royalty rates covering a sufficient number of net mineral acres within the Bakken Drillsite Spacing Unit to elevate Seller's Net Revenue in such unit to an amount not less than set forth on Part II(A) of Exhibit A for such unit. |
(iii) | In addition, Seller may attempt to cure any Title Defect at any time after Closing but prior to the deadline for submitting a Final Settlement Statement under Section 2.6. Upon curing of any such Title Defect, Seller may include in the Final Settlement Statement an amount due Seller arising from such title curative. |
(i) | Buyer's Title Adjustments. Subject to (w) Section 5.5, (x) the special warranty of Defensible Title contained in Section 3.1(m), (y) Buyer's termination right as provided in Section 13.1(a), and (z) Seller's termination right as provided in Section 13.2(b), as Buyer's sole and exclusive remedy with respect to Title Defects, Buyer shall be entitled to reduce the Purchase Price by an amount equal to the amount, if any, by which the aggregate amount of Title Defect Amounts with respect to all Title Defect Properties exceeds the Title Defect Deductible (such amount in excess of the Title Defect Deductible, the "Title Defect Adjustment"). "Title Defect Amount" shall mean, with respect to a Title Defect Property, the amount by which the value of such Title Defect Property is impaired as a result of the existence of one or more uncured and unwaived Title Defects, which amount shall be determined as follows: |
(iii) | If Buyer and Seller agree on the Title Defect Amount, then that amount shall be the Title Defect Amount. |
(iv) | If the Title Defect results from the Seller owning a lesser Net Revenue Interest in such Title Defect Property than the Net Revenue Interest specified therefor in Part II(A) of Exhibit A, and the Working Interest attributable to such Property Subdivision has been reduced proportionately, the Title Defect Amount shall be equal to the product obtained by multiplying the Allocated Value specified on Part II(A) of Exhibit A for such Title Defect Property by a fraction, the numerator of which is the difference, if any, between (A) the Net Revenue Interest for such Title Defect Property in Part II(A) of Exhibit A, minus (B) the actual Net Revenue Interest for such Title Defect Property, and the denominator of which is the Net Revenue Interest specified for such Title Defect Property in Part II(A) of Exhibit A. |
(v) | If the Title Defect results from the existence of a Lien, the Title Defect Amount shall be an amount sufficient to fully discharge such Lien. |
(vi) | If the Title Defect results from any matter not described in paragraphs (i), (ii), or (iii) above, the Title Defect Amount shall be determined by the Parties in good faith, taking into account all relevant factors, including the following: (A) the Allocated Value of the affected Title Defect Property; (B) the portion of the Title Defect Property affected by the Title Defect; (C) the legal effect of the Title Defect; (D) the potential economic effect of the Title Defect over the life of the Title Defect Property; (E) the values placed upon the Title Defect by Buyer and Seller; and (F) such other reasonable factors as are necessary to make a proper evaluation. |
(vii) | If a Title Defect does not affect a Title Defect Property throughout the entire productive life of such Title Defect Property, such fact shall be taken into account in determining the Title Defect Amount. |
(viii) | The Title Defect Amount with respect to a Title Defect Property shall be determined without duplication of any costs or losses included in another Title Defect Amount hereunder. For example, but without limitation, if a Lien affects more than one Title Defect Property or the curative work with respect to one Title Defect results (or is reasonably expected to result) in the curing of any other Title Defect affecting the same or another Title Defect Property, the amount necessary to discharge such Lien or the cost and expense of such curative work shall only be included in the Title Defect Amount for one Title Defect Property and only once in such Title Defect Amount. |
(ix) | The Title Defect Amount attributable to a Title Defect Property shall not exceed the Allocated Value of such Title Defect Property. For example, but without limitation, if the Seller does not own fifty percent (50%) of the Net Revenue Interest specified in Part II(A) of Exhibit A for a Title Defect Property and such unowned fifty percent (50%) interest is also burdened by a Lien, the Title Defect Amount for such Title Defect Property shall not exceed the Allocated Value allocable to such fifty percent (50%) interest notwithstanding that it may be affected by multiple Title Defects. |
(x) | Notwithstanding the foregoing, if the Title Defect Amount determined pursuant to the foregoing with respect to a Title Defect is [***] or less for any Property Subdivision, then the Title Defect Amount with respect to such Title Defect shall be deemed to be zero. |
5.3 | Determination of Title Defects |
5.4 | Seller Title Credit |
(a) | Seller Title Credit. A "Seller Title Credit" shall mean, (x) with respect to each Property Subdivision described in Part II(A) of Exhibit A, the amount by which the value of such Property Subdivision is enhanced by virtue of the Seller owning a greater Net Revenue Interest in such Property Subdivision than the Net Revenue Interest specified therefor in Part II(A) of Exhibit A, or (y) with respect to each Property Subdivision described in Part II(A) of Exhibit A, the amount by which the value of such Property Subdivision is enhanced by virtue of the Seller owning a lesser Working Interest in such Property Subdivision than the Working Interest specified therefor in Part II(A) of Exhibit A, in each case, as of the Closing Date, which amount shall be determined as follows (such amount, the "Seller Title Credit Amount"): |
(i) | If Buyer and Seller agree on the amount of the Seller Title Credit, then that amount shall be the amount of the Seller Title Credit. |
(ii) | If the Seller Title Credit results from Seller owning a greater Net Revenue Interest in such Property Subdivision than the Net Revenue Interest specified therefor in Part II(A) of Exhibit A, and the Working Interest attributable to such Property Subdivision has been increased proportionately, the Seller Title Credit shall be equal to the product obtained by multiplying the Allocated Value specified on Part II(A) of Exhibit A for such Property |
(iii) | If the Seller Title Credit results from any matter not described in paragraphs (i) or (ii) above, the Seller Title Credit shall be determined by the Parties in good faith, taking into account all relevant factors. |
(b) | Notice of Seller Title Credit. On or before September 19, 2014, Seller shall have the right, but not the obligation, to deliver to Buyer a Seller Title Credit Notice. |
(c) | Contents of Seller Title Credit Notice. The Seller Title Credit Notice must be in writing and by asserted in good faith and include (1) a description of the Seller Title Credit, (2) the Property Subdivisions affected by the Seller Title Credit, (3) the Allocated Values of the Property Subdivisions subject to such Seller Title Credit, and (4) the amount by which Seller reasonably believes the Allocated Value of those Property Subdivisions is increased by the Seller Title Credit, and the computations and information upon which Seller's belief is based. Seller shall be deemed to have waived all Seller Title Credits of which it has not given notice on or before the Defect Notice Date. |
(d) | Seller Title Credit Amount. Any Seller Title Credit Amounts shall be offset against the aggregate of all Title Defect Amounts, if any, but shall not result in any upward adjustment to the Purchase Price under Section 2.5. |
5.5 | Deferred Claims and Disputes |
(a) | Deferred Adjustment Claim. In the event that Buyer and Seller have not agreed upon one or more adjustments, credits or offsets claimed by Buyer or Seller pursuant to and in accordance with the requirements of this ARTICLE 5, any such claim (a "Deferred Adjustment Claim") shall be settled pursuant to this Section 5.5 and, except as provided in Section 8.1(e) and Section 8.2(e), shall not prevent or delay Closing; provided, however, if either Party claims that its closing conditions have not been satisfied under Section 8.1(e) or Section 8.2(e), as applicable, and such Party’s claim under such Section relies upon alleged Title Defects and/or Title Defect Amounts that are Deferred Adjustment Claims in order to reach the threshold set forth therein, then the Parties will resolve all such Deferred Adjustment Claims under this Section 5.5 prior to Closing, and until all such Deferred Adjustment Claims are resolved, neither Party will be entitled to rely on the failure of the condition in Section 8.1(e) or Section 8.2(e), as applicable, to terminate this Agreement. With respect to each potential Deferred Adjustment Claim, Buyer and Seller shall deliver to the other a written notice describing each such potential Deferred Adjustment Claim, the amount in dispute and a statement setting forth the facts and circumstances that support such Party's position with respect to such Deferred Adjustment Claim. At Closing, the Purchase Price shall not be adjusted on account of, and, except as provided in Section 8.1(e) and Section 8.2(e), no effect shall be given to, the Deferred Adjustment Claim, except, Buyer shall pay that portion of the Purchase Price related to the Deferred Adjustment Claim into the Escrow Account. On or prior to the thirtieth (30th) consecutive calendar day after the Closing Date (the "Deferred Matters Date"), Seller and Buyer shall attempt in good faith to reach agreement on the Deferred Adjustment Claims and, ultimately, to resolve by written agreement all disputes regarding the Deferred Adjustment Claims. Following any written agreement between Seller and Buyer regarding the Deferred Adjustment Claims, Seller and Buyer shall |
(b) | Disputed Deferred Adjustment Claims. If Buyer and Seller are unable to resolve all Deferred Adjustment Claims or any disputes regarding any post closing cure of any Title Defects by Seller by the Deferred Matters Date, then such claims shall be resolved by a single arbitrator, who shall be an attorney with at least fifteen (15) years’ experience in oil and gas title and transactional matters, as selected by mutual agreement of Buyer and Seller, and if the Parties are not able to mutually agree, then as selected by the Denver office of the Judicial Arbiter Group, Inc. (the "Title Arbitrator"). The arbitration proceeding shall be held in Denver, Colorado, and shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association, to the extent such rules do not conflict with the terms of this Section 5.5. Buyer and Seller shall exercise commercially reasonable efforts to cause the Title Arbitrator to render his or her determination within fifteen (15) Business Days after a disputed matter is submitted to the Title Arbitrator and such determination shall be final and binding upon the Parties, without right of appeal. In making his or her determination, the Title Arbitrator shall be bound by the rules set forth in this ARTICLE 5 and may consider such other matters as in the opinion of the Title Arbitrator are necessary or helpful to make a proper determination. The Title Arbitrator shall act as an expert for the limited purpose of determining the specific disputed Deferred Adjustment Claims submitted by Buyer or Seller and may not award damages, interest or penalties to either Party with respect to any matter. Seller and Buyer shall each bear (i) its own legal fees and other costs of presenting its case and (ii) one-half of the fees, costs and expenses of the Title Arbitrator. Following the receipt of any final and binding written decision of the Title Arbitrator, Seller and Buyer shall promptly (x) jointly instruct the Escrow Agent to release to the entitled party the amount of any reduction or increase in the Purchase Price to which Buyer or Seller, as applicable, is entitled and (y) pay any amounts due to the other party as a result of the Title Arbitrator’s decision. |
(c) | Certain Seller Rights. Notwithstanding anything herein provided to the contrary, including Section 5.2(c), at any time prior to the point in time when a final and binding written decision of the Title Arbitrator is made with respect to any Title Defect which constitutes a Deferred Adjustment Claim in accordance with this Section 5.5, Seller shall be entitled (i) to cure any such Title Defect and (ii) to resolve all disputes relating to the Deferred Adjustment Claims by payment, by joint instruction to the Escrow Agent instructing the release of such funds to Buyer, of the amount by which the Purchase Price would have been reduced at Closing on account of the Title Defects which constitute Deferred Adjustment Claims if same did not constitute Deferred Adjustment Claims. |
5.6 | No Duplication |
5.7 | Title Defect Deductible |
6.1 | Environmental Defects; Environmental Defect Amount |
6.2 | Environmental Defect Notice |
6.3 | Effect of Environmental Defect Notice |
6.4 | Seller's Right to Cure |
6.5 | Environmental Defect Adjustments |
(a) | waive the Environmental Defect that remains uncured and reduce the Purchase Price by the amount, if any, by which the aggregate amount of all undisputed Environmental Defect Amounts exceeds the Environmental Defect Deductible (such amount in excess of the Environmental Defect Deductible, the "Environmental Defect Adjustment"), or |
(b) | exclude the Environmental Defect Properties affected by such Environmental Defect from the Subject Assets. |
6.6 | Environmental Defect Deductible |
6.7 | Subject Assets Exclusion |
6.8 | Deferred Environmental Claims and Disputes |
(a) | Deferred Environmental Adjustment Claim. In the event that Buyer and Seller have not agreed on or prior to the Closing Date as to whether an Environmental Defect exists or, if Buyer and Seller agree that an Environmental Defect exists but disagree as to whether it has been cured or on the amount of the Environmental Defect Amount attributable to such Environmental Defect, any such claim (a "Deferred Environmental Adjustment Claim") shall be settled pursuant to this Section 6.8 and, except as provided in Section 8.1(e) and Section 8.2(e), shall not prevent or delay Closing; provided, however, if either Party claims that its closing conditions have not been satisfied under Section 8.1(e) or Section 8.2(e), as applicable, and such Party’s claim under such Section relies |
(b) | Disputed Deferred Environmental Adjustment Claims. If Buyer and Seller are unable to resolve all Deferred Environmental Adjustment Claims by the Deferred Matters Date, then such matters shall be resolved by a single arbitrator, who shall be an attorney with at least fifteen (15) years experience in oil and gas environmental matters, as selected by mutual agreement of Buyer and Seller, and if the Parties are unable to mutually agree, then as selected by the Denver office of the Judicial Arbiter Group, Inc. (the "Environmental Arbitrator"). The arbitration proceeding shall be held in Denver, Colorado, and shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association, to the extent such rules do not conflict with the terms of this Section 6.8(b). Buyer and Seller shall exercise commercially reasonable efforts to cause the Environmental Arbitrator to render his or her determination within fifteen (15) Business Days after a disputed matter is submitted to the Environmental Arbitrator and such determination shall be final and binding upon the Parties, without right of appeal. In making his or her determination, the Environmental Arbitrator shall be bound by the rules set forth in this ARTICLE 6 and may consider such other matters as in the opinion of the Environmental Arbitrator are necessary or helpful to make a proper determination. The Environmental Arbitrator shall act as an expert for the limited purpose of determining the specific disputed Deferred Environmental Adjustment Claims submitted by either Buyer or Seller and may not award damages, interest or penalties to a Party with respect to any matter. Seller and Buyer shall each bear (i) its own legal fees and other costs of presenting its case and (ii) one-half of the fees, costs and expenses of the Environmental Arbitrator. Following the receipt of any final and binding written decision of the Environmental Arbitrator, Seller and Buyer shall promptly jointly instruct the Escrow Agent to release to the entitled party the amount of escrow funds to which Buyer or Seller, as applicable, is entitled. |
(c) | Certain Seller Rights. Notwithstanding anything herein provided to the contrary, at any time prior to the point in time when a final and binding written decision of the Environmental Arbitrator is made with respect to any Environmental Defect which constitutes a Deferred Environmental Adjustment Claim in accordance with this Section 6.8, Seller shall be entitled, (i) prior to the Closing Date, to cure any such Environmental Defect or (ii) to resolve all disputes relating to a Deferred Environmental Adjustment Claim by payment, by joint instruction to the Escrow Agent instructing |
6.9 | Sole Remedies |
6.10 | NORM |
7.1 | Conduct of Business |
(a) | Except as set forth in Section 6.7, Section 7.2, and Section 7.10, from the Execution Date through the Closing, Seller covenants and agrees that it will, and will cause its Affiliates to, (i) conduct the operations with respect to the Subject Assets in good and workmanlike manner in the ordinary course of business consistent with its past practice and good oilfield practices, (ii) not fail or refuse to carry out its duties as “operator” under the terms of the applicable joint operating agreements covering the Subject Assets for which the Seller or any of its Affiliates is currently designated as "operator" such that there exists cause for removal of Seller or any of its Affiliates as operator, (iii) maintain the books of account and records relating to the Subject Assets in the usual, regular and ordinary manner, in accordance with its usual accounting and recordkeeping practices (iv) use commercially reasonable efforts to defend any action to remove Seller or any of its Affiliates as “operator” under the terms of the joint operating agreements covering the Subject Assets and (iv) maintain all insurance coverage as is currently in effect for the Subject Assets. |
(b) | From the Execution Date through the Closing, Seller or the Company may acquire new oil and gas leases to cure Title Defects under Section 5.2(e)(ii) at Seller’s sole cost and expense. |
(c) | From the Execution Date until the Closing Date, Seller will notify Buyer (i) if written notice with respect to any alleged material breach of any Lease or Material Contract or any pending claim, suit or action is received or delivered by Seller or its Affiliates; (ii) of any material injury to any employee or contractor of Seller or any of its Affiliates related to the Subject Assets; (iii) of any Casualty Loss; or (iv) of the occurrence of any Material Adverse Effect or any event likely to result in a Material Adverse Effect. |
7.2 | Certain Restrictions Regarding the Conduct of Business |
(e) | convey, encumber or otherwise dispose of any part of the Subject Assets, other than the sale of oil, gas or other hydrocarbons produced from the Subject Interests in the ordinary course of business and the replacement or sale of machinery and equipment in the ordinary course of business; |
(f) | modify in any material respect, Willfully Breach or terminate any Material Contract; |
(g) | enter, or agree to enter, into any Contract that, if in existence as of the date hereof, would be a Material Contract; |
(h) | (i) propose or commit to any single operation, or series of related operations, reasonably anticipated to require capital expenditures by the Company with respect to the Subject Assets in excess of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00), (ii) except to the extent required under the terms of an operating agreement with respect to an authority for expenditure issued thereunder as of the date hereof, make any capital expenditures with respect to the Subject Assets and any operation, or series of related operations, relating thereto in excess of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) or (iii) propose or, except to the extent required under the terms of an operating agreement with respect to an authority for expenditure issued thereunder as of the date hereof, make capital expenditures subject to clauses (i) or (ii) in excess of One Million and No/100 Dollars ($1,000,000.00) in the aggregate; |
(i) | enter into any agreement or otherwise settle any Tax claim or assessment relating to the Company; |
(j) | make, revoke or amend any tax election with respect to Taxes, adopt, change or modify any accounting method, enter into any settlement of any material issue with respect to Taxes, file any amended Tax Return, or execute or consent to any waivers extending the statutory period of limitations with respect to the collection of any Taxes, in each case, to the extent such action would bind or otherwise affect Buyer, its Affiliates, or the Company at or after the Effective Time; or |
(k) | authorize or agree, in writing or otherwise, to take any of the actions prohibited by this Section 7.2. |
7.3 | Press Releases |
7.4 | Records |
7.5 | Further Assurances |
7.6 | Transfer Requirements |
7.7 | Casualty and Condemnation |
7.8 | Seller Marks |
7.9 | Certain Tax Matters |
(a) | Intended Tax Treatment. The Parties agree that because the Company is a single-member limited liability company that is wholly-owned by Seller, based on Seller’s representations in Section 3.1(i), the acquisition by Buyer of the Membership Interests is treated as an acquisition by Buyer of the assets of the Company for United States federal Income Tax purposes (collectively, the "Intended Tax Treatment"). Neither Buyer nor Seller shall take any actions which are inconsistent with the Intended Tax Treatment unless required by applicable Law. Neither Buyer nor Seller shall take any position on any Tax Return or other similar document, or take any other Tax reporting position, for United States federal, state and local Income Tax purposes, that is inconsistent with the Intended Tax Treatment. |
(b) | Apportionment of Property Taxes. |
(i) | Property Taxes shall be deemed attributable to the period during which ownership of the applicable Subject Assets gives rise to liability for such Property Taxes, and liability therefor allocated to Seller for all periods ending prior to the Effective Time and to Buyer for all periods beginning on or after the Effective Time. The amount of Property Taxes allocable to the Seller shall be equal to the amount of such Property Taxes for a taxable period beginning before and ending after the Effective Time allocated to the Seller shall be equal to the amount of such Property Taxes for the entire taxable period multiplied by a fraction the numerator of which is the number of days in the taxable period ending on the Closing Date and the denominator of which is the number of days in such taxable period. To the extent the actual amount of Property Tax that is attributable to a period ending prior to the Effective Time (but not due and payable prior to the Closing) is not determinable at the time an adjustment to the Purchase Price is to be made with respect to such Property Tax pursuant to Section 2.5 and/or Section 2.6, as applicable, the Parties shall utilize the most recent information available in estimating the amount of such Property Tax for purposes of such adjustment, and the amount of such Property Tax used for purposes of Section 2.6 shall be considered full and final settlement of such Property Tax without regard to the actual Tax rates or assessments (the "Settled Property Taxes"). |
(ii) | Buyer shall be entitled to all rights to any refunds of (1) Property Taxes allocable to Buyer pursuant to this Section 7.9(b) regardless of when received, and (2) Settled Property Taxes. Seller shall be entitled to all rights to any refunds of Property Taxes allocated to Seller pursuant to this Section 7.9(b) other than refunds of Settled Property Taxes. After Closing, Buyer shall timely file or cause to be filed all Tax Returns for Property Taxes required to be filed after the Closing and shall timely pay or cause to be paid to the taxing authorities all Property Taxes that become due and payable after the Closing. Any penalty, addition to Tax, or interest levied or assessed with respect to any Property Tax shall be allocated to, and shall be payable by, the Party to which the Tax to which such penalty, addition to Tax or interest relates is allocated, regardless of when such penalty, addition to Tax, or interest is levied or assessed; provided, however, that the liability for any penalty, addition to Tax, or interest levied or assessed with respect to any failure of Buyer to comply with the previous sentence shall be allocated to, and shall be payable by, Buyer. |
(c) | Apportionment of Severance Taxes. Severance Taxes shall be deemed attributable to the period during which the production of the hydrocarbons with respect to such Severance Taxes occurred, and liability therefor shall be allocated to Seller for pre-Effective Time Severance Taxes and to Buyer for post-Effective Time Severance Taxes. For the purpose of calculating the Initial Adjustment Amount under Section 2.5(a) and for purposes of the Final Settlement Statement under Section 2.6, Severance Taxes for which the actual liability amount is not known as of such time shall be estimated based on the applicable current Severance Tax rates, with the resulting Adjusted Purchase Price under Section 2.6 to be considered full and final settlement of all such Taxes without regard to the actual Tax rates or assessments; provided that, if the actual amounts of the applicable Severance Tax rates are not known at the time of the Closing, the amounts shall be re-estimated based on the best information available at the time of the Final Settlement Statement, and such estimated amounts shall thereupon become full and final settlement of such Severance Taxes (the "Settled Severance Taxes," and together with the Settled Property Taxes, the "Settled Asset Taxes") for purposes of this Agreement. Buyer shall be entitled to all rights to any refunds of (a) Severance Taxes allocable to Buyer pursuant to this Section 7.9(c) regardless of when received, and (b) Settled Severance Taxes. Seller shall be entitled to all rights to any refunds of Severance Taxes allocated to Seller pursuant to this Section 7.9(c) other than refunds of Settled Severance Taxes. After Closing, Buyer shall timely file or cause to be filed all Tax Returns for Severance Taxes required to be filed after the Closing and shall timely pay or cause to be paid to the taxing authorities all Severance Taxes that become due and payable after the Closing. Any penalty, addition to Tax, or interest levied or assessed with respect to any Severance Tax shall be allocated to, and shall be payable by, the Party to which the Tax to which such penalty, addition to Tax or interest relates is allocated, regardless of when such penalty, addition to Tax, or interest is levied or assessed; provided, however, that the liability for any penalty, addition to Tax, or interest levied or assessed with respect to any failure of Buyer to comply with the previous sentence shall be allocated to, and shall be payable by, Buyer. |
(d) | Income Taxes. Each Party shall be responsible for its own Income Taxes. |
(e) | Transfer Taxes. All Transfer Taxes (including any related interest, penalties or legal costs, but excluding any recordation fees incurred in connection with the transfer of the Subject Assets) that may be imposed on any transfer of the membership interests in the Company (or the Subject Assets) pursuant to this Agreement shall be borne and paid 50% by Buyer and 50% by Seller. The Parties shall cooperate with one another in the preparation of any Tax Returns and other related documentation with respect to such Transfer Taxes (including any exemption certificates and forms as each may request to establish an exemption from (or otherwise reduce) or make a report with |
(f) | Allocations for Federal Income Tax Purposes. Buyer and Seller acknowledge that, under Section 1060 of the Code, Buyer and Seller must report information regarding the allocation of the Purchase Price and any other amounts treated as consideration for federal Income Tax purposes (collectively, the "Allocation Amount") to the United States Secretary of Treasury by attaching Department of Treasury, Internal Revenue Service, Form 8594 to their federal Income Tax returns for the tax period which includes the Closing Date. Buyer and Seller agree that the Allocation Amount shall be allocated among the Subject Assets for Tax purposes in accordance with an allocation schedule substantially consistent with Schedule 7.9(f) (the "Allocation Schedule"). Buyer and Seller shall negotiate in good faith to revise the Allocation Schedule in a manner consistent with Section 1060 of the Code and the Treasury Regulations promulgated thereunder to take into account any adjustments to the Purchase Price pursuant to this Agreement, including any indemnification payments pursuant to ARTICLE 12. Buyer and Seller shall each prepare their respective Forms 8594 in a manner consistent with the Allocation Schedule. The Parties shall not take any Tax position (whether in audits, on Tax Returns, or otherwise) that is inconsistent with such allocation unless required to do so by applicable Law; provided, however, that nothing contained herein shall prevent Buyer or Seller from settling any proposed deficiency or adjustment by any Taxing Authority based upon or arising out of such Allocation Schedule, and neither Buyer nor Seller shall be required to litigate before any court any proposed deficiency or adjustment by any Taxing Authority challenging such allocation. |
(g) | Post-Closing Tax Matters. After the Closing, each of Buyer and Seller shall: |
(i) | reasonably cooperate and assist the other (1) in preparing any Tax Returns relating to any Tax imposed with respect to the Subject Assets or the Company, or the Transaction, and (2) in qualifying for any exemption or reduction in Tax that may be available; |
(ii) | reasonably cooperate in preparing for any audits, examinations or other tax proceedings by, or disputes with, taxing authorities regarding any Tax relating to the Subject Assets, the Company, or the Transaction; |
(iii) | make available to the other, and to any Taxing Authority as reasonably requested, any information, records, and documents relating to a Tax incurred or imposed in connection with the Subject Assets or the Transaction; |
(iv) | provide timely notice to the other in writing of any pending or threatened Tax audit, examination, or assessment that could reasonably be expected to affect the other's Tax liability under applicable Law or this Agreement (a "Tax Controversy"), and to promptly furnish the other with copies of all correspondence with respect to any Tax Controversy; and |
(v) | allow the other to participate, at its own expense, in any Tax Controversy, and not settle any Tax Controversy without the prior written consent of the other, which may not be unreasonably withheld, conditioned, or delayed. |
(h) | Effect of Indemnity. Seller and Buyer shall treat any indemnity payment made pursuant to this Agreement as an adjustment to the Purchase Price for Tax purposes unless otherwise required by Law. |
7.10 | Asset and Liability Transfer |
(a) | Prior to the Closing, the Seller shall undertake the actions contemplated by this Section 7.10, which collectively shall be referred to as the "Asset and Liability Transfer". |
(b) | Prior to the Closing, Seller shall create the Company as a limited liability company under the laws of the State of Delaware with the Organizational Documents, and will cause the Company to issue the Membership Interests to the Seller. The Seller shall not cause or permit the Company to issue any equity interests other than the Membership Interests. |
(c) | Immediately prior to the Closing, Seller shall execute, acknowledge and deliver to the Company, and shall cause the Company to execute, acknowledge and deliver to the Seller, an Assignment, Bill of Sale and Conveyance in the form attached as Exhibit C (the "General Conveyance"), and any applicable forms of any Governmental Authorities, conveying the Subject Assets to the Company as of the Effective Time, with a special warranty of title by, through and under Seller but not otherwise. |
(d) | Immediately prior to the Closing, Seller shall execute, acknowledge and deliver to the Company, and shall cause the Company to execute, acknowledge and deliver to the Seller, an Assignment and Assumption Agreement in the form attached as Exhibit D (the "Assumption Agreement") pursuant to which the Company shall assume and agree to pay, perform, fulfill and discharge the Assumed Liabilities. |
(e) | Any time after the formation of the Company, the Seller shall not, and shall cause the Company not to: |
(i) | amend the Organizational Documents; |
(ii) | split, combine or reclassify any membership interests in the Company; |
(iii) | sell or create any Lien on any membership or other equity interest in the Company; |
(iv) | incur, assume, or guarantee any indebtedness for borrowed money; |
(v) | adopt any plan of merger, consolidation, reorganization, liquidation or dissolution or filing of a petition in bankruptcy under any provisions of federal or state bankruptcy Law or consent to the filing of any bankruptcy petition against it under any similar Law; or |
(vi) | authorize or agree, in writing or otherwise, to take any of the actions prohibited by this Section 7.10(e). |
(f) | The Company shall not undertake any activities other than as contemplated by this Agreement and the Seller shall not cause the Company to assume any liabilities other than as provided in the General Conveyance and Assumption Agreement. |
7.11 | No Shop/No Talk |
7.12 | Employee Covenant |
(a) | Seller waives the restrictions contained in Section 20 of the Confidentiality Agreement with regard to the employees of Seller, other than the officers of Seller (each a “Business Employee” and, collectively, the “Business Employees”). Buyer may, on or after the date hereof, interview any Business Employee and conduct any such standard employee screening and eligibility procedures with regard to such Business Employees as Buyer conducts with respect to candidates for employment in Buyer’s ordinary course of business. Subject to applicable Law and, with the prior written consent of each Business Employee, as applicable, Buyer shall be entitled to review copies of the personnel records maintained by Seller with respect to such Business Employee, and discuss such records and such Business Employee with Seller’s representatives. Buyer’s interviews of the Business Employees as set forth in this Section 7.12 shall be conducted so as not to unreasonably interfere with the Business of Seller prior to the Closing, and Seller shall exercise commercially reasonable efforts to cooperate with Buyer and to facilitate Buyer’s completion of its interview and screening procedures hereunder. |
(b) | After the date hereof, Buyer shall be authorized to communicate with any Business Employee regarding such Business Employee’s potential employment with Buyer and Buyer shall be authorized to communicate any offer of employment to any Business Employees. Buyer shall, not later than 5 days prior to the Closing, deliver to Seller a final written list containing the name of each Business Employee Buyer desires to hire. Each Business Employee that is offered employment with Buyer and that accepts such offer (each a “Continuing Employee” and, collectively, the “Continuing Employees”) shall, as of the Closing be terminated by Seller and become an employee of Buyer. |
(c) | Seller shall be responsible for all compensation and benefits owing to Business Employees up to and including the Closing Date, and Buyer shall be responsible for all compensation and benefits owing to Continuing Employees after the Closing Date under Buyer’s compensation and benefits programs (on and subject to the terms of employment agreed upon between Buyer and such Continuing Employee). Buyer shall have no obligations with respect to any Business Employee that is not hired by Buyer at the Closing. |
(d) | With respect to each Continuing Employee: |
(vi) | In the event that, prior to the 6-month anniversary of the Closing Date, Buyer terminates the employment of any Continuing Employee, other than for cause (as determined pursuant to Buyer’s applicable employment policies), Buyer shall pay to such Continuing Employee, within five (5) days following termination of such Continuing Employee, the Severance Amount. |
(vii) | In accordance with and solely to the extent permitted by and in accordance with Buyer’s current policies and programs (i) Buyer shall grant such Continuing Employee credit for their service with Seller for purposes of eligibility to participate in and vesting credits in Buyer’s service award plans, vacation programs and policies and retirement plans; (ii) for the calendar year during which such coverage begins, Buyer shall credit under any medical, dental or vision benefit plans maintained by Buyer, all Continuing Employees with any deductibles and co-payments already incurred during such year under Seller’s benefit plans, and waive any pre-existing conditions, exclusions or limitations as to coverage, any |
(viii) | To the extent permitted by Buyer’s current 401(k) plan, Buyer shall cause the trustee or administrator of Buyer’s 401(k) plan to accept direct rollovers from Seller’s 401(k) plan trust for each Continuing Employee electing the same with respect to a distribution of his or her vested account thereunder. If any Continuing Employee does not rollover his or her account to Buyer’s 401(k) plan, such Continuing Employee may continue to participate in Seller’s 401(k) plan as a terminated participant in accordance with the terms thereof, and Seller shall retain all responsibility for the management and administration of such Continuing Employee’s account balances under Seller’s 401(k) plan. |
(ix) | Each Continuing Employee shall, on the Closing Date, begin accruing vacation time at the level to which they would be entitled under Buyer’s vacation policies for 2014. Seller will pay to each Business Employee an amount equal to any accrued and unused vacation days at the Closing in accordance with its policies. |
(e) | For the 6 month period following the Closing Date, if Buyer or any of its Affiliates directly or indirectly retains the services of any Business Employee to whom Seller paid the Severance Amount because the employment of such Business Employee was terminated, Buyer shall immediately reimburse Seller for the Severance Amount, except to the extent (a) that such Business Employee applies for employment with Buyer in response to a general solicitation or posting by Buyer of an open position, or (b) such Business Employee was not solicited by Buyer. |
(f) | Notwithstanding anything in this Agreement to the contrary, (i) nothing in this Agreement shall create any obligation on the part of Buyer to continue the employment of any employee for any definite period following the Closing Date, and (ii) nothing in this Agreement shall preclude Buyer from altering, amending, or terminating any of its welfare benefit plans, or the participation of any of its employees in such welfare benefit plans, at any time. |
(g) | No provision in this Agreement shall create any third party beneficiary or other right in any Person (including any beneficiary or dependent thereof) for any reason in respect of continued employment or new employment with Seller, the Company or Buyer or in respect of any benefits that may be provided, directly or indirectly, under any plan or arrangement maintained by Seller, the Company or Buyer. |
8.1 | Seller's Closing Conditions |
(l) | Representations, Warranties, Covenants and Agreements. |
(i) | The representations and warranties of Buyer contained in Section 3.3 shall be true and correct in all material respects (and in all respects, in the case of representations and warranties which are qualified by materiality) on and as of the Closing Date as though made as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be deemed to refer to such earlier date referenced in such representation and warranty); and |
(ii) | The covenants and agreements of Buyer to be performed on or before the Closing Date in accordance with this Agreement shall have been duly performed in all material respects. |
(m) | Officer's Certificate. Seller shall have received a certificate dated as of the Closing Date, executed by a duly authorized officer of Buyer, to the effect that the conditions set forth in Section 8.1(a) have been satisfied. |
(n) | Closing Deliveries. On or prior to the Closing Date, Buyer shall have delivered, or be standing ready to deliver at Closing, all agreements, instruments and other documents or items required to be delivered by Buyer pursuant to Section 9.3. |
(o) | No Action. On the Closing Date, no material Action (excluding any such matter initiated by Seller or any of its Affiliates) shall be pending or threatened before any Governmental Authority of competent jurisdiction seeking to enjoin or restrain the consummation of the Closing or recover damages from Seller resulting therefrom, and no Governmental Authority shall have enacted, issued, promulgated, enforced or entered any order which is in effect and has the effect of making the transactions contemplated by this Agreement illegal, or otherwise restraining or prohibiting consummation of such transactions or causing any of the transactions contemplated hereunder to be rescinded following completion hereof. |
(p) | Adjustments. The sum of the (i) reduction in the Purchase Price on account of the aggregate amount of all undisputed Title Defect Amounts, (ii) aggregate amount of Title Defect Amounts claimed by Buyer with respect to unresolved Deferred Adjustment Claims, (iii) reduction in the Purchase Price on account of the aggregate amount of all undisputed Environmental Defect Amounts pursuant to Section 6.5 and the exclusion of Environmental Defect Properties pursuant to Section 6.7 and (iv) aggregate amount of Environmental Defect Amounts claimed by Buyer with respect to unresolved Deferred Environmental Adjustment Claims, shall not exceed [***] of the Purchase Price. |
8.2 | Buyer's Closing Conditions |
(d) | Representations, Warranties, Covenants and Agreements. |
(i) | The representations and warranties of Seller contained in Section 3.1(a), Section 3.1(b), Section 3.1(c), Section 3.1(w), Section 3.2(a), Section 3.2(b), Section 3.2(c), Section 3.2(d), Section 3.2(h) and Section 3.2(j) (collectively, the “Flat Reps”) shall be true and correct on and as of the Closing Date as though made as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be deemed to refer to such earlier date referenced in such representation and warranty); |
(ii) | The representations and warranties of Seller contained in Section 3.1 and Section 3.2 (other than the Flat Reps) shall be true and correct on and as of the Closing Date as though made as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be deemed to refer to such earlier date referenced in such representation and warranty), except where the failure of such representations and warranties to be true and correct would not have a Material Adverse Effect; and |
(iii) | The covenants and agreements of Seller to be performed on or before the Closing Date in accordance with this Agreement shall have been duly performed in all material respects. |
(e) | Officer's Certificate. Buyer shall have received a certificate dated as of the Closing Date, executed by a duly authorized officer of Seller, to the effect that the conditions set forth in Section 8.2(a) have been satisfied. |
(f) | Closing Deliveries. On or prior to the Closing Date, Seller shall have delivered, or be standing ready to deliver at Closing, all agreements, instruments and other documents or items required to be delivered by Seller pursuant to Section 9.2. |
(g) | No Action. On the Closing Date, no material Action (excluding any such matter initiated by Buyer or any of its Affiliates) shall be pending or threatened before any Governmental Authority of competent jurisdiction seeking to enjoin or restrain the consummation of the Closing or recover damages from Buyer resulting therefrom, and no Governmental Authority shall have enacted, issued, promulgated, enforced or entered any order which is in effect and has the effect of making the transactions contemplated by this Agreement illegal, or otherwise restraining or prohibiting consummation of such transactions or causing any of the transactions contemplated hereunder to be rescinded following completion hereof. |
(h) | Adjustments. The sum of the (i) reduction in the Purchase Price on account of the aggregate amount of all undisputed Title Defect Amounts, (ii) aggregate amount of Title Defect Amounts claimed by Buyer with respect to unresolved Deferred Adjustment Claims, (iii) reduction in the Purchase Price on account of the aggregate amount of all undisputed Environmental Defect Amounts pursuant to Section 6.5 and the exclusion of Environmental Defect Properties pursuant to Section 6.7 and (iv) aggregate amount of Environmental Defect Amounts claimed by Buyer with respect to unresolved Deferred Environmental Adjustment Claims, shall not exceed [***] of the Purchase Price. |
(i) | Asset and Liability Transfer. The Asset and Liability Transfer shall have been completed in the manner set forth in Section 7.10. |
9.1 | Closing |
9.2 | Seller's Closing Obligations |
(c) | execute and deliver the Assignment of Membership Interests in the form of Exhibit E duly executed by Seller, which Membership Interests shall be free and clear of all Liens; |
(d) | execute and deliver a certificate of non-foreign status as described in Treasury Regulations § 1.1445-2(b)(2), substantially in the form attached hereto as Exhibit F; |
(e) | execute and deliver the officer's certificate referred to in Section 8.2(b); |
(f) | deliver copies of all consents and approvals of third parties, including Governmental Authorities, in form and content reasonably acceptable to Buyer, the granting or receipt of which are necessary for the consummation of the transactions contemplated by this Agreement; |
(g) | deliver written resignations and mutual releases of the officers and managers of the Company, effective as of the Closing Date; |
(h) | deliver evidence to the effect that the Company shall have been released as a guarantor under any instrument governing the terms of Seller's or its Affiliates' debt instruments; |
(i) | deliver a recordable release of any trust, mortgages, financing statements, fixture filings and security agreements made by Seller or its Affiliates affecting the Subject Assets; |
(j) | execute and deliver the Parent Guaranty; |
(k) | execute and deliver joint instructions to the Escrow Agent regarding the Cash Deposit as agreed to by Seller and Buyer pursuant to Section 2.4, Section 5.5 and Section 6.8; and |
(l) | execute and deliver any other agreements, instruments and documents which are required by other terms of this Agreement to be executed and/or delivered by Seller to Buyer at the Closing. |
9.3 | Buyer's Closing Obligations |
(a) | pay the Closing Amount by wire transfer of immediately available funds and as otherwise described in ARTICLE 2; |
(b) | execute and deliver, or cause to be executed and delivered, to Seller the officer's certificate of Buyer referred to in Section 8.1(b); |
(c) | execute and deliver joint instructions to the Escrow Agent regarding the Cash Deposit as agreed to by Seller and Buyer pursuant to Section 2.4, Section 5.5 and Section 6.8; and |
(d) | execute and deliver any other agreements, instruments and documents which are required by other terms of this Agreement to be executed and/or delivered by Buyer to Seller at the Closing. |
10.1 | Survival |
10.2 | Acknowledgement of Limitation of Recovery |
11.1 | Disclaimer of Warranties |
11.2 | Damages |
12.1 | Indemnification By Buyer |
12.2 | Indemnification By Seller |
12.3 | Indemnification and Defense Procedures |
(a) | If a third party claim is asserted against an Indemnified Person for which the Indemnified Person desires to seek indemnification from an Indemnifying Party (an "Indemnified Claim"), then the Indemnified Person shall promptly transmit to the Indemnifying Party a written notice ("Claim Notice") (i) notifying such Indemnifying Party of such Indemnified Claim and requesting indemnity, |
(b) | If the Indemnifying Party notifies the Indemnified Person within the Election Period that the Indemnifying Party (i) does not dispute its liability to indemnify the Indemnified Person and (ii) elects to assume the defense of such Indemnified Person with respect to such third party claim, then the Indemnifying Party shall have the right to defend, at its sole cost and expense, such third party claim by all appropriate proceedings, which proceedings shall be prosecuted diligently by the Indemnifying Party to a final conclusion or settled at the discretion of the Indemnifying Party in accordance with this Section 12.3(b). The Indemnifying Party shall have full control of such defense and proceedings, including any compromise or settlement thereof; provided that the Indemnifying Party shall not enter into any settlement agreement (or settle or compromise any such third party claim in a manner) which provides for or results in any payment by or liability of the Indemnified Person of or for any damages or other amount, any Lien on any property of the Indemnified Person, any finding of responsibility or liability on the part of the Indemnified Person or any sanction or restriction upon the conduct of any business by the Indemnified Person without the Indemnified Person's express written consent, which consent shall not be unreasonably withheld. The Indemnified Person is hereby authorized, at the sole cost and expense of the Indemnifying Party (but only if the Indemnified Person is actually entitled to indemnification hereunder), to file, during the Election Period, any motion, answer or other pleadings which the Indemnified Person shall deem necessary or appropriate to protect its interests or those of the Indemnifying Party and not reasonably expected to be prejudicial to the Indemnifying Party. If requested by the Indemnifying Party, the Indemnified Person agrees, at the sole cost and expense of the Indemnifying Party, to cooperate with the Indemnifying Party and its counsel in contesting any such third party claim which the Indemnifying Party elects to contest, including the making of any related counterclaim or cross-complaint against any Person (other than a Buyer Indemnified Party, if the Indemnified Person is a Buyer Indemnified Party, or a Seller Indemnified Party, if the Indemnified Person is a Seller Indemnified Party). The Indemnified Person may participate in, but not control, any defense or settlement of any third party claim controlled by the Indemnifying Party pursuant to this Section 12.3(b), and the Indemnified Person shall bear its own costs and expenses with respect to such participation. The prosecution of the defense of a third party claim with reasonable diligence shall include the taking of such action (including the posting of a bond, deposit or other security) as may be necessary to prevent any action to foreclose a Lien against or attachment of the property of the Indemnified Person for payment of such third party claim. |
(c) | If the Indemnifying Party (i) fails to notify the Indemnified Person within the Election Period that the Indemnifying Party elects to defend the Indemnified Person pursuant to Section 12.3(b) or (ii) elects to defend the Indemnified Person pursuant to Section 12.3(b) but fails to prosecute the defense of (or to settle) the third party claim with reasonable diligence, then the Indemnified Person shall have the right to defend, at the sole cost and expense of the Indemnifying Party (but only if the Indemnified Person is actually entitled to indemnification hereunder), the third party claim by all appropriate proceedings, which proceedings shall be promptly and vigorously prosecuted by the Indemnified Person to a final conclusion or settled. The Indemnified Person shall have full control of such defense and proceedings; provided, however, that the Indemnified Person may not enter into any compromise or settlement of such third party claim, without the Indemnifying Party's express written consent, which shall not be unreasonably withheld or delayed. The Indemnifying Party may participate in, but not control, any defense or settlement controlled by the Indemnified Person pursuant to this Section 12.3(c), and the Indemnifying Party shall bear its own costs and expenses with respect to such participation. |
(d) | If an Indemnified Person desires to seek indemnification from an Indemnifying Party for a claim or other matter which does not involve a third party claim, then the Indemnified Person shall promptly transmit to the Indemnifying Party a written notice describing in reasonable detail the nature of such claim or other matter, the Indemnified Person's reasonable estimate of the amount of damages attributable to such claim or other matter and the basis for the Indemnified Person's entitlement to indemnification. Unless the Indemnifying Party notifies the Party who sent such notice within thirty (30) days from its receipt of such notice that the Indemnifying Party disputes such claim for indemnity, the Indemnifying Party shall be deemed to have accepted and agreed to such claims. |
12.4 | Seller's General Liability Limitation |
(i) | Notwithstanding anything contained to the contrary in this Agreement: |
(i) | Seller shall not be required to indemnify any Person under Section 12.2(b)(ii) with respect to a breach of any representation or warranty made by Seller in this Agreement (other than the representations and warranties set forth in Section 3.1(i) and the Fundamental Representations) unless the amount which would otherwise be payable by Seller thereunder with respect to the breach or series of related breaches of any such representation and warranty exceeds a fifty thousand dollar ($50,000) threshold per event or circumstance. |
(ii) | In no event shall Seller's aggregate liability arising out of or relating to Section 12.2(b)(ii) with respect to a breach by Seller of any representation or warranty made by Seller in this Agreement (other than the representations and warranties set forth in Section 3.1(i) and the Fundamental Representations) exceed an amount equal to [***]. |
(iii) | Seller shall not be required to indemnify any Person under Section 12.2(b)(ii) with respect to a breach of any representation or warranty made by Seller in this Agreement (other than the representations and warranties set forth in Section 3.1(i) and the Fundamental Representations) unless the aggregate amount which would otherwise be payable by Seller thereunder with respect to all breaches of any such representations and warranties exceeds an amount equal to [***] (the "Deductible Amount"), and in such event, Seller shall be responsible for only the amount in excess of the Deductible Amount. |
(j) | The amount to which a Buyer Indemnified Party may become entitled under Section 12.2 shall be net of any actual recovery (whether by way of payment, discount, credit, off‑set or otherwise) |
12.5 | Exclusive Remedy |
12.6 | Determination of Damages Related to Breach |
12.7 | Recovery |
13.1 | Termination |
(d) | Termination of Agreement. This Agreement and the transactions contemplated hereby may be terminated at any time prior to the Closing: |
(iii) | By the mutual written agreement of Seller and Buyer; or |
(iv) | If the Closing has not occurred by 5:00 P.M., Mountain Time, on October 31, 2014 (the "Termination Effective Time"), then (A) by Seller if any condition specified in Section 8.1 has not (1) been satisfied on or before the Termination Effective Time or (2) been |
(v) | By Seller, if on the Scheduled Closing Date (A) Seller is not then in material breach of any provision of this Agreement and (B) Buyer shall have breached its representations, warranties, covenants or agreements contained in this Agreement, which breach results in the failure of a condition set forth in Section 8.1(a), Section 8.1(b) or Section 8.1(c), and (1) such breach cannot by its nature be cured prior to the Termination Effective Time, or (2) Buyer fails to initiate action to cure such breach within 7 days following receipt of written notice from Seller; or |
(vi) | By Buyer, if on the Scheduled Closing Date (A) Buyer is not then in material breach of any provision of this Agreement or the Deposit Escrow Agreement and (B) Seller shall have breached its representations, warranties covenants or agreements contained in this Agreement, which breach results in the failure of a condition set forth in Section 8.2(a), Section 8.2(b), Section 8.2(c) or Section 8.2(f), and (1) such breach cannot by its nature be cured prior to the Termination Effective Time, or (2) Seller fails to initiate action to cure such breach within 7 days following receipt of written notice from Buyer; |
(e) | Effect of Termination. In the event of termination of this Agreement by Seller, on the one hand, or Buyer, on the other hand, written notice thereof shall forthwith be given by the terminating Party to such other Party, and this Agreement shall thereupon terminate; provided, however, that Section 7.3, Section 13.2, ARTICLE 11 and ARTICLE 14 shall survive such termination. If this Agreement is terminated as provided herein, all filings, applications and other submissions made to any Governmental Authority shall, to the extent practicable, be withdrawn from the Governmental Authority to which they were made. |
13.2 | Remedies |
(e) | General. Except as set forth in Section 14.5 or this Section 13.2, all fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the Party or Parties, as applicable, incurring such expenses whether or not the transactions contemplated by this Agreement are consummated. |
(f) | Seller's Remedies. |
(iii) | Notwithstanding anything herein provided to the contrary, if this Agreement is validly terminated by Seller pursuant to (i) Section 13.1(a)(ii)(A) due to the failure of the conditions in Section 8.1(a), Section 8.1(b), or Section 8.1(c) to have been satisfied, or Section 13.1(a)(iii), Buyer and Seller shall promptly, and in any event within two (2) Business Days following such termination, deliver written instructions to the Escrow Agent directing the Escrow Agent to disburse the Cash Deposit, together with all interest earned thereon, to Seller. |
(iv) | In the event that Seller shall receive the Cash Deposit pursuant to Section 13.2(b)(i) then (A) the receipt of the Cash Deposit shall (i) be deemed to be liquidated damages for any |
(g) | Buyer's Remedies. Notwithstanding anything herein provided to the contrary: |
(vii) | If this Agreement is terminated by any Party pursuant to Section 13.1(a), Buyer shall be entitled to receive the Cash Deposit free and clear of any claims by Seller thereto and Buyer and Seller shall promptly, and in any event within two (2) Business Days following such termination, deliver written instructions to the Escrow Agent directing the Escrow Agent to disburse the Cash Deposit to Buyer; provided, however, that if Seller is entitled to receive the Cash Deposit pursuant to Section 13.2(b), then Buyer shall not be entitled to receive the Cash Deposit; and |
(viii) | If Buyer has the right to terminate this Agreement pursuant to (A) Section 13.1(a)(ii)(B) due to the failure of the conditions in Section 8.2(a), Section 8.2(b), Section 8.2(c) or Section 8.2(f) to have been satisfied, or (B) Section 13.1(a)(iv), then Buyer, at its sole option, may either (I) seek to enforce specific performance of this Agreement or (II) pursue compensation in the form of monetary damages provided that there has been a material breach by Seller under this Agreement; provided, however, that any damages payable to Buyer under this Section 13.2(c) will be limited to [***]; provided, further, if Seller breaches Section 7.11 or Willfully Breaches the Agreement in a manner causing a failure of a closing condition in Section 8.2, Buyer’s damages for any and all losses or damages suffered or incurred by Buyer or any of its Affiliates in connection with this Agreement (and the termination hereof), the transactions contemplated hereby (and the abandonment thereof) or any matter forming the basis for such termination shall be limited to [***]. |
14.1 | Counterparts |
14.2 | Notices |
Denver, CO 80202 |
Attention: Tim Morris |
Facsimile: (303) 825-2790 |
SM ENERGY COMPANY |
14.3 | Governing Law; Venue; Jurisdiction. |
(g) | THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW RULES THAT WOULD DIRECT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION. |
(h) | The Parties agree that the appropriate, exclusive and convenient forum for any disputes between the Parties arising out of this Agreement or the transactions contemplated hereby shall be in any state or federal court in Denver, Colorado, and each of the Parties irrevocably submits to the jurisdiction of such courts solely in respect of any legal proceeding arising out of or related to this Agreement. The Parties further agree that the Parties shall not bring suit with respect to any disputes arising out of this Agreement or the transactions contemplated hereby in any court or jurisdiction other than the above-specified courts; provided, however, that the foregoing shall not limit the rights of the Parties to obtain execution of judgment in any other jurisdiction. The Parties further agree, to the extent permitted by Law, that a final and unappealable judgment against a Party in any Action contemplated above shall be conclusive and may be enforced in any other jurisdiction within or outside the United States by suit on the judgment, a certified copy of which shall be conclusive evidence of the fact and amount of such judgment. Except to the extent that a different determination or finding is mandated due to the applicable law being that of a different jurisdiction, the Parties agree that all judicial determinations or findings by a state or federal court in Denver, Colorado, with respect to any matter under this Agreement shall be binding. |
(i) | To the extent that a Party has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, each Party hereby irrevocably (i) waives such immunity in respect of its obligations with respect to this Agreement and (ii) submits to the personal jurisdiction of any court described in Section 14.3(b). |
(j) | EACH PARTY AGREES THAT IT HEREBY IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION TO ENFORCE OR INTERPRET THE PROVISIONS OF THIS AGREEMENT. |
14.4 | Entire Agreement |
14.5 | Expenses |
14.6 | Successors and Assigns |
14.7 | Amendments and Waivers |
14.8 | Attorneys' Fees |
14.9 | Severability |
14.10 | Appendix, Schedules and Exhibits |
14.11 | Interpretation |
(a) | examples shall not be construed to limit, expressly or by implication, the matter they illustrate; |
(b) | the word "includes" and its derivatives means "includes, but is not limited to" and corresponding derivative expressions; |
(c) | a defined term has its defined meaning throughout this Agreement and each Appendix, Exhibit and Schedule to this Agreement, regardless of whether it appears before or after the place where it is defined; |
(d) | each Exhibit and Schedule to this Agreement is a part of this Agreement, but if there is any conflict or inconsistency between the main body of this Agreement (including Appendix A which shall be considered part of the main body of this Agreement) and any Exhibit or Schedule, the provisions of the main body of this Agreement shall prevail; |
(e) | the term "cost" includes expense and the term "expense" includes cost; and |
(f) | all references to "dollars" or "$" shall be deemed references to United States dollars. |
14.12 | Agreement for the Parties' Benefit Only |
14.13 | No Recordation |
14.14 | Time of Essence |
SELLER BAYTEX ENERGY USA LLC | |
By: | |
Name: Timothy R. Morris Title: Vice President |
BUYER SM ENERGY COMPANY | |
By: | |
Name: Javan D. Ottoson Title: President and Chief Operating Officer |
(a) | with respect to each Well and Bakken Drillsite Spacing Unit described on Part II(A) of Exhibit A, entitles the Company to receive not less than the applicable Net Revenue Interest specified for such Property Subdivision in Part II(A) of Exhibit A; |
(b) | with respect to each Well and Bakken Drillsite Spacing Unit described on Part II(A) of Exhibit A, obligates the Company to bear the Working Interest of such Property Subdivision in an amount not greater than the Working Interest specified for such Property Subdivision in Part II(A) of Exhibit A; and |
(c) | with respect to each Property Subdivision, is free and clear of all Liens, except for Permitted Encumbrances. |
(a) | Any contract or agreement with any Affiliate of Seller or the Company; |
(b) | Any contract or agreement for the sale, purchase, exchange, processing, marketing, transportation, or other disposition of oil, gas or other hydrocarbons which is not cancelable without penalty on sixty (60) days or less prior written notice; |
(c) | Any contract or agreement that creates any area of mutual interest or similar provision with respect to the Subject Interests or any other material Subject Asset or contains any restrictions on the ability of the Company or its assigns to compete with any other Person; |
(d) | Any contract or agreement that is binding upon Seller or the Company to sell, lease, farmout or otherwise dispose of any interest in any of the Subject Interests or any other material Subject Asset after the date hereof, other than conventional rights of reassignment arising in connection with the Company's surrender or release of any of the Subject Assets; |
(e) | Any contract or agreement for the lease or rental to the Company of compressors which is not cancellable without penalty on sixty (60) days or less prior written notice; |
(f) | Any drilling contract, joint operating agreement, exploration agreement, fracturing agreement, development agreement, participation agreement or similar agreement to which the Company is a party; |
(g) | Any contract or agreement that is a seismic or other geophysical acquisition agreement or license to which the Company is a party; |
(h) | Any contract or agreement that contains any rights allowing a third party to participate in any sales or purchases of any of the Subject Interests or any other material Subject Asset that are triggered by or applicable to the transactions contemplated by this Agreement; |
(i) | Any contract or agreement that is an indenture, mortgage, loan, credit or sale-leaseback, guaranty of any obligation, bonds, letters of credit or similar financial instrument; and |
(j) | Except for (i) Subject Interests, (ii) operating, unitization, pooling and communitization agreements and (iii) contracts and agreements of the nature described in clauses (a) through (i) above, any contract or agreement that (A) could reasonably be expected to result in aggregate revenues to the Company of more than Two Hundred and Fifty Thousand and No/100 Dollars ($250,000.00) during the current or any subsequent calendar year or (B) obligate the Company to make payments of more than Two Hundred and Fifty Thousand and No/100 Dollars ($250,000.00) during the current or any subsequent calendar year. |
(a) | All agreements, instruments, documents, Liens, and other matters which are described in Schedule A-1; |
(b) | Any (i) undetermined or inchoate Liens constituting or securing the payment of expenses which were incurred incidental to maintenance, development, production or operation of the Subject Assets or for the purpose of developing, producing or processing oil, gas or other hydrocarbons therefrom or therein and (ii) materialman's, mechanics', repairman's, employees', contractors', operators' or other similar Liens for liquidated amounts arising in the ordinary course of business incidental to construction, maintenance, development, production or operation of the Subject Assets or the production or processing of oil, gas or other hydrocarbons therefrom, that are not delinquent and that will be paid in the ordinary course of business or, if delinquent, that are being contested in good faith; |
(c) | Any Liens for Taxes not yet delinquent; |
(d) | Any Liens or security interests created by Law or reserved in oil, gas and/or mineral leases for royalty, bonus or rental or for compliance with the terms of the Subject Interests; |
(e) | Any easements, rights-of-way, servitudes, Permits, licenses, surface leases and other rights with respect to operations to the extent such matters do not interfere in any material respect with the operation of the portion of the Subject Assets burdened thereby; |
(f) | All Liens, contracts, agreements, instruments, obligations, defects, irregularities and other matters affecting any Subject Asset which individually or in the aggregate are not such as to interfere materially with the operation, value or use of such Subject Asset; |
(g) | Any encumbrance, title defect or other matter (whether or not constituting a Title Defect) cured by Seller or waived or deemed waived by Buyer pursuant to ARTICLE 5; |
(h) | All Laws and all rights reserved to or vested in any Governmental Authority (i) to control or regulate any Subject Asset in any manner; (ii) by the terms of any right, power, franchise, grant, license or permit, or by any provision of Law, to terminate such right, power, franchise, grant, license or permit or to purchase, condemn, expropriate or recapture or to designate a purchaser of any of the Subject Assets; (iii) to use any Subject Asset in a manner which does not materially impair the use or value of such property for the purposes for which it is currently owned and operated; or (iv) to enforce any obligations or duties affecting the Subject Assets to any Governmental Authority with respect to any franchise, grant, license or permit; |
(i) | The terms and conditions of the Subject Interests, Surface Contracts, Permits, and Contracts; |
(j) | Other than such rights that have already been triggered, rights of reassignment requiring notice and/or the reassignment (or granting an opportunity to receive a reassignment) of a leasehold interest to the holders of such reassignment rights prior to surrendering or releasing such leasehold interest; and |
(k) | All consents and approvals of or filings with applicable Governmental Authorities in connection with assignments of the Subject Interests or other material Subject Assets. |
(a) | all Hydrocarbon Interests, other properties and interests described in Part I of Exhibit A (the "Leases") and the lands covered by, pooled or unitized with or subject to the Leases (the "Lands"); |
(b) | all oil, gas, water or injection wells located on the Leases and Lands, including those described in Part IV of Exhibit A (the "Wells"); |
(c) | the Bakken Pool for those areas described on Part II(A) of Exhibit A as the "Bakken Drillsite Spacing Units". The Company's working interest as to the Bakken Pool for each Bakken Drillsite Spacing Unit are set forth under the column labeled Working Interest and the Company's Net Revenue interest as to the Bakken Pool are set forth under the column labeled Net Revenue Interest on Part II(A) of Exhibit A. The Working Interest and Net Revenue Interest for a Bakken Drillsite Spacing Unit are as of the Effective Time and shall not apply to Wells identified on Part IV of Exhibit A. The Bakken Drillsite Spacing Unit may or may not have been approved by the North Dakota Industrial Commission; however, the size and shape of the unit is materially consistent with such spacing as has been established and approved in the area; |
(d) | all other Hydrocarbon Interests of the Company in, to or under, derived or subject to the Leases, Lands or Wells, even though such interests of the Company may be incorrectly described or referred to in, or a description thereof may be omitted from Part I of Exhibit A (such interests, together with the Leases, the Lands, the Wells, and the Bakken Drillsite Spacing Units, the "Subject Interests"); |
(e) | all surface leases, rights of way, easements and other rights with respect to the use and occupancy of the surface of and the subsurface depths under the Lands and other lands used in connection with the exploration, development or operation of the Subject Interests or the transportation, marketing or disposition of oil, gas or other hydrocarbons, water or other substance produced therefrom, including those described in Part III of Exhibit A (the "Surface Contracts"); |
(f) | all personal property used or held for use in connection with the exploration, development or operation of the Subject Interests or the transportation, marketing or disposition of hydrocarbons, water or other substance produced therefrom, including all equipment, machinery, vehicles (whether leased or owned) described in Part V of Exhibit A, materials, wellhead equipment, pumping units, flowlines, tanks, buildings, injection facilities, water disposal facilities, processing and separating facilities, compression facilities, gathering systems, casing, rods, tanks, boilers, tubing, pumps, motors, machinery, monitoring equipment, pipe, tubular goods, equipment inventory, fixtures and other tangible personal property and improvements and specifically including those described in Part V of Exhibit A (the "Equipment"); |
(g) | all other real and personal property located upon the Lands or lands covered by the Surface Contracts and used in connection with the exploration, development or operation of the Subject Interests; |
(h) | all sales contracts, purchase contracts, operating agreements, exploration agreements, development agreements, balancing agreements, farmout agreements, drilling contracts, other service agreements, transportation, marketing, processing, treatment or gathering agreements, equipment leases and other contracts, agreements and instruments, in each case, to the extent related to the exploration, development or operation of the Subject Interests or the transportation, marketing or disposition of oil, gas or other hydrocarbons, water or other substance produced therefrom, including, without limitation, the Material Contracts (the "Contracts"); |
(i) | all Permits and Environmental Permits with respect to the exploration, development or operation of the Subject Interests or the transportation, marketing or disposition of oil, gas or other hydrocarbons, water or other substance produced therefrom; |
(j) | except to the extent transfer thereof may not be made without violating confidentiality obligations or waiving any attorney/client privilege, originals or, if an original is not in Seller's possession, all digital or hard copies of any and all of Seller's books, records and files, including all Surface Contract and Contract files, lease files, land files, wells files, well logs and other well data, maps, division order files, abstracts, title files, title opinions, production files, drilling reports, files related to any Asset Tax, technical, engineering and maintenance files, operations, environmental, safety, production records, and other similar information, in each case, (i) relating to the Subject Interests, Equipment, Surface Contracts or Contracts, or the ownership, use, maintenance or operation thereof, or the other properties or interests described in this definition of Subject Assets, and (ii) in Seller's possession or control (the "Records"); |
(k) | all (i) oil, gas and other hydrocarbons produced from and to the extent attributable to the Subject Interests with respect to all periods subsequent to the Effective Time and (ii) proceeds from or of such oil, gas and other hydrocarbons; |
(l) | the Suspense Funds; and |
(m) | all seismic, geological, geophysical, engineering, and other data and interpretations, files and records (in whatever form) related to the Subject Interests. |