EXHIBIT 99(i)
SALE AND PURCHASE AGREEMENT
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THIS SALE AND PURCHASE AGREEMENT (this "Agreement") is made and entered as
of the 11th day of December, 1996, by and between NORSE EXPLORATION, INC., AND
NORSE PIPELINE, INC., both Delaware Corporations, ("Seller"), and GOTHIC ENERGY
CORPORATION, an Oklahoma corporation ("Buyer").
WITNESSETH THAT:
WHEREAS, Norse Exploration, Inc. is the owner of the Properties, as
hereinafter defined; and
WHEREAS, Norse Pipeline, Inc. is the owner of the general partnership
interest in the Sycamore Gas System, as hereinafter defined; and
WHEREAS, Norse Exploration desires to sell its Properties and all of its
shares in Norse Pipeline, Inc. to Buyer with the understanding between the
parties that Buyer can assign its right to purchase the shares of Norse Pipeline
to a wholly owned subsidiary,
NOW THEREFORE, in consideration of the premises and of the mutual covenants
of the parties hereinafter expressed, it is hereby agreed as follows:
ARTICLE 1
INTERESTS
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1.1 INTERESTS. Seller Norse Exploration, Inc., is the non-operator owner
of (i) undivided interests in and under oil and gas leases covering lands upon
which the ▇▇▇▇▇ described in Exhibit A is attributed by reason of inclusion in a
statutory or voluntary unit, together with undivided interests attributable to
said leases in the ▇▇▇▇▇, personal property, fixtures and equipment located on
the lands covered by said leases or units, or used or obtained in connection
with the agreements, licenses, permits, easements, orders of regulatory agencies
and other rights and interests relating thereto, but specifically excluding any
royalty, overriding royalty or other interests in or under the leases,
hereinafter referred to collectively as the "Properties", and (ii) Seller, Norse
Pipeline, Inc. is a 40.09 % general partnership interest in Sycamore Gas System,
an Oklahoma general gathering system, processing plant and storage facilities
described in Exhibit B (together with all real property, easements, rights of
way, surface use agreements and other interests in real property related or
appurtenant thereto, all personal property, fixtures and equipment comprising or
used in connection therewith, and all contracts and agreements of every
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nature whatsoever relating thereto, hereinafter referred to as the "Sycamore
System". Seller's interests in the Properties, its ownership of all the issued
and outstanding shares of Norse Pipeline, Inc. being sold herein, which includes
the ownership of Norse Pipeline, Inc. in the general partnership interest in
Sycamore are hereinafter referred to collectively as the "Interests".
1.2 EXCLUSION: RESERVATION. To the extent Seller owns a mineral, royalty,
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overriding royalty, production payment, net profits or other non-cost bearing
interest in any of the Properties or the production therefrom, such interest is
not intended to be included in the Interests and is specifically reserved to
Seller.
ARTICLE 2
SALE AND PURCHASE OF THE INTERESTS
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2.1 AGREEMENT FOR SALE AND PURCHASE: EFFECTIVE TIME. Seller hereby agrees
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to sell to Buyer and Buyer hereby agrees to purchase from Seller on the Closing
Date (as hereinafter defined) the Interests. The effective time of the sale and
purchase of the Interests shall be 7:00 a.m. Central Daylight Time on January 1,
1997 (the "Effective Time").
2.2 PURCHASE PRICE. The purchase price for the Interests (the "Purchase
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Price") shall be the sum of (i) Ten Million Seven Hundred Fifty Thousand and
No/100 Dollars $10,750,000.00 (the "Base Price") plus Two Hundred Thousand
(200,000) warrants as further described in Article 2.6 below, less (ii) the Net
Adjustment (as hereinafter defined) all subject to the Maximum Adjustment set
out in Article 3.7 below. The Purchase Price shall be paid by Buyer in
immediately available funds at the Closing (as hereinafter defined).
2.3 NET ADJUSTMENT. The Net Adjustment (as limited by Article 3.7) shall
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be the sum of the adjustment amounts described in Sections 3.4 (Title Defects),
Section 7.4 (Gas Imbalances), Section 7.5 (Disapproved Operations), Section 7.6
(Preferential Rights), Section 7.7 (Operations Subsequent to the Effective Time)
and Section 8.5 (Environmental Defects).
2.4 DEPOSIT. Contemporaneously with the execution of this Agreement,
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Buyer Buyer is delivering to Seller, immediately available funds in accordance
with wire instructions furnished by Buyer, the sum of One Million Seventy-Five
Thousand and No/100 Dollars $1,075,000.00 [10% of the Base Price] as a deposit
toward the Purchase Price (the "Deposit"). In the event that Buyer shall fail to
close the transaction contemplated hereby in accordance with the terms of this
Agreement, and provided that the conditions precedent to the obligations of
Buyer as set forth in Article 9 hereof have been fulfilled or Seller is ready,
willing and able to comply with all such conditions precedent, Seller shall be
entitled to retain as its sole remedy the Deposit as liquidated damages pursuant
to Section 11.2.
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2.5 AGREED VALUES. The Base Price has been allocated by the parties among
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the Properties and Seller's interest in Sycamore as set out in Exhibit D. The
amounts so allocated and are referred to herein as the "Agreed Values" of such
items of the Interests.
2.6 WARRANTS OF BUYER. The warrants being issued to purchase Two Hundred
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Thousand (200,000) shares of Buyer shall be exercisable at the sole election of
the Buyer at any time during the two (2) year period from the date of closing.
Such warrants shall be exercisable at a price of $2.50 per share, and in the
event of any change in the capitalization of the company after the issuance of
the warrants, then in such event, the number of warrants to purchase shares of
Buyer shall be proportionately increased to reflect such change in
capitalization. Buyer shall piggyback the registration of any shares of Seller
from the exercise of the warrants with any registration after the date of this
Agreement. In the event the Board of Directors of Buyer authorizes a
registration of shares at any time during the 2 year period after the date of
this Agreement, then within ten (10) days after such authorization, Buyer shall
notify Seller in order for Seller to exercise the warrants and participate in
the registration of shares.
ARTICLE 3
TITLE EXAMINATION: ADJUSTMENTS
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3.1 TITLE MATERIALS. From the date hereof to the Closing Date, Seller
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shall provide Buyer full opportunity to examine the books, records and files of
Seller insofar as they pertain to the Interests. Seller makes no warranty or
representation, express or implied, with respect to the accuracy or completeness
of any title information, records or other data made available to Buyer in
connection with this Agreement.
3.2 TITLE DEFECTS; DEFENSIBLE TITLE.
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(a) Adjustments to the Base Price for failure of title may be made
with respect to the Properties and the Sycamore System (insofar as any
title failure affects the value of Seller's interest in Sycamore). The
Properties and the Sycamore System are hereinafter referred to collectively
as the "Examined Interests". As used herein, the term "Title Defect" shall
mean any lien, claim, defect, encumbrance, security interest, burden of
deficiency such that (i) Seller does not have Defensible Title (hereinafter
defined), as distinguished from technically marketable title, to any of the
Properties, or (ii) to the extent of Seller's interest in Sycamore,
Sycamore does not have Defensible Title to the assets and properties
comprising the Sycamore System; provided, no Permitted Encumbrances
(hereinafter defined) shall constitute a Title Defect.
(b) As used herein, the term "Defensible Title" (i) with respect to
the Sycamore System means clear, unencumbered and uncontested title in
Sycamore to the real and personal property comprising the Sycamore System,
and (ii) with respect to the
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Properties means clear, unencumbered and uncontested title in Seller to the
Properties such that (A) after giving effect to existing spacing orders,
operating agreements, unit agreements, unitization orders and pooling
designations, and subject to the limitations, if any, described in Exhibit
A, and after taking into account all royalty interests, overriding royalty
interests, net profit interests, production payments and other burdens on
production, Seller is entitled to a share (expressed as a decimal) of all
oil, gas and other minerals produced from each well described in Exhibit A
which is not less than the Net Revenue Interest set out in Exhibit A in
connection with the description of such well, (B) Seller owns an undivided
interest (expressed as a decimal) equal to the Working Interest set out in
Exhibit A in connection with the description of each such well in and to
all property and rights incident thereto, including all rights in, to and
under all agreements, leases, permits, easements, licenses and orders in
any way relating thereto, and in and to all ▇▇▇▇▇, personal property,
fixtures and improvements thereon, appurtenant thereto or used or obtained
in connection therewith or with the production or treatment or sale or
disposal of hydrocarbons or water produced therefrom or attributable
thereto, (C) Seller is obligated for a fraction of the costs relating to
the exploration, development and operation of such well no greater than the
Working Interest set out in Exhibit A in connection with the description of
such well, and (D) except as shown in Exhibit A, Seller's interests in such
▇▇▇▇▇ and the production therefrom are not subject to being reduced by
virtue or reversionary interests owned by third parties.
(c) As used herein, the term "Permitted Encumbrances" means (i)
matters described without material omission in any of the Exhibits or
Schedules attached hereto, (ii) royalties, overriding royalties, net
profits interests, production payments and other burdens on production
which do not reduce Seller's Net Revenue Interest in any of the Properties
to less than that described in Exhibit A, (iii) mortgage liens to be
discharged at Closing, liens for taxes, assessments, labor and materials
where payment is not due, (iv) operating agreements, unit agreements,
farmout agreements, letter agreements, easements, rights-of-way,
unitization and pooling designations and declarations, gathering and
transportation agreements, processing agreements, gas, similar agreements
which are not required by the terms of this Agreement to be disclosed on
any Schedule hereto, provided (A) all amounts due and payable by Seller
thereunder have been paid, and (B) Seller is not in default thereunder, (v)
regulatory authority of governmental agencies not presently or previously
violated, easements, surface leases and rights, plat restrictions and
similar encumbrances, provided that they do not detract from the value, and
can increase the cost of operation of any of the Properties or the Sycamore
System or otherwise adversely affect the operation thereof, and (vi) liens,
charges, encumbrances and irregularities in the chain of title which,
because of statutory cure periods or marketable title acts have and cannot
affect adversely or interrupt, the claimed ownership of Seller or its
predecessors in or the receipt of production revenues from the Properties
affected thereby.
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3.3 TITLE EXAMINATION; NOTICE OF DEFECTS.
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(a) Promptly after execution of this Agreement, Buyer shall, at
Buyer's sole cost and expense, commence and pursue such examination of
title to the Examined Interests as Buyer deems necessary or proper. Buyer
will conclude its title review and give notice to Sellers of any asserted
Title Defects affecting the Examined Interests not later than fifteen (15)
days prior to the date scheduled for the Closing in Section 12.1 hereof
(the "Title Notice Date"). Each such notice shall include a brief
description of each Title Defect of which notice is being given, the action
required to cure such Title Defect and the proposed adjustment to the Base
Price by reason of the existence of such Title Defect. Buyer shall be
deemed to have waived any Title Defects existing with respect to the
Examined Interests except to the extent such Title Defects are set out in a
notice given on or prior to the Title Notice Date.
(b) Seller shall have a period of twelve (12) days after the Title
Notice Date to cure all or any portion of the Title Defects described in
any notice(s) of Title Defects affecting Examined Interests properly given
by Buyer prior to such date. In the event Seller is unable or unwilling to
cure any of the asserted Title Defects prior to the expiration of each cure
period, and exceed ten percent (10%) of the interests set out in Exhibit A,
Seller shall have the right to terminate this Agreement, or if Seller
elects not to terminate, the parties shall proceed in accordance with
Section 3.4.
3.4 ADJUSTMENTS.
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(a) If any uncured Title Defect is based on Buyer's substantiated
notice in reasonable detail that Seller owns a Net Revenue Interest less
than that shown on Exhibit A with respect to a particular Property, then
the Agreed Value of such Property shall be reduced in the same proportion
that the actual Net Revenue Interest bears to the Net Revenue Interest
shown therefor on Exhibit A and the amount of such reduction shall
constitute the approved adjustment amount with respect to such Title
Defect, and as a result of such reduction, Seller shall only be obligated
to convey the exact amount of the interest computed based on the actual Net
Revenue Interest and Seller shall retain all amounts in excess thereof.
(b) If any uncured Title Defect involves a substantiated claim
against or uncertainty with respect to Seller's title to a particular
Property or Sycamore's title to the Sycamore System, the parties shall
attempt to negotiate a mutually acceptable reduction in the Agreed Value of
the affected item of the Interests by reason of such defect. In the event
the parties agree on an appropriate reduction in the Agreed Value, such
amount shall constitute the principal amount of Buyer's approved claim with
respect to such Title Defect. If the parties are unable to agree on an
appropriate reduction and Buyer elects not to waive the Title Defect, then
Seller shall have the option of (i) proceeding to Closing but reducing the
Base Price by the Agreed Value of such item, or (ii) excluding the
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affected item from the Interests being sold and reducing the Base Price by
the Agreed Value of such item. Option (i) and (ii) of this subparagraph
3.4(b) shall not be applicable with respect to unresolved Title Defects
affecting the Sycamore System. In the event of any reduction in the Agreed
Value as a result of uncured Title Defects, Seller shall only be obligated
to convey the exact amount of the interest agreed upon, and Seller shall
retain all disputed amounts and revenues related thereto.
(c) Notwithstanding the provisions of subsections (a) and (b) above,
Buyer shall not be entitled to any adjustment of the Purchase Price at the
Closing by reason of asserted Title Defects unless the sum of all such
claims approved pursuant to Section 3.4(a), agreed to by Seller pursuant to
Section 3.4(b), or treated by Sellers as a reduction of the Base Price
pursuant to Section 3.4(b), exceeds the sum of $20,000 and it is agreed
adjustments shall be in excess of such amount.
3.5 DELETED.
3.6 DELETED.
3.7 MAXIMUM ADJUSTMENT. In the event of any adjustments in the Purchase
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Price pursuant to Sections 3.4, 7.4, 7.5, 7.6 and 8.5, the Purchaser shall be
responsible for all such adjustments up to $500,000. Seller shall be
responsible for all adjustments between $500,000 and $1,000,000. In the event
adjustments exceed $1,000,000, then in such event, Seller can elect in its sole
discretion to either cure the defects or cancel the transaction and return the
Deposit to Buyer.
ARTICLE 4
REPRESENTATIONS AND WARRANTEES OF SELLER
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Seller hereby represents and warrants to Buyer as of the date hereof as
follows:
4.1 ORGANIZATION. Seller, Norse Exploration, Inc., and Norse Pipeline,
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Inc., are Delaware Corporations duly organized and validly existing. Seller has
the power and authority to own and use it properties and to transact the
business in which it is engaged, and holds all franchises, licenses and permits
necessary and required therefor.
4.2 AGREEMENT AUTHORIZED. This Agreement has been duly authorized,
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executed and delivered by Seller and all requisite corporate action has been
taken to authorize the execution hereof, the transactions contemplated hereby
and all things necessary or desirable in order to accomplish the sale of the
Interests, and Seller has all necessary authority and otherwise has good right
and lawful authority to consummate the same.
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4.3 VALID AGREEMENT. This Agreement constitutes the valid and binding
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agreement of Seller enforceable against Seller in accordance with its terms, and
all instruments required hereunder to be executed and delivered by Seller at the
Closing will constitute valid and binding agreements of Seller enforceable
against Seller in accordance with their terms.
4.4 BROKERS AND FINDERS. Seller has incurred no liability, contingent or
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otherwise, for brokers' or finders' fees in respect of this transaction for
which Buyer shall have any responsibility whatsoever.
4.5 COMPLIANCE WITH AGREEMENTS AND LAWS. No default exists under any of
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the terms and provisions, express or implied, of the leases or any agreement,
contract or commitment to which Seller is a party or to which any part of the
Interests is subject, and Seller has no received any notice of any claim of such
default. To the knowledge of Seller as non operator, all ▇▇▇▇▇ included in the
Interests have been drilled, completed and operated, and all production thereto,
and the Properties and the Sycamore System have been operated, in substantial
compliance with all applicable Federal, state and local laws and applicable
rules and regulations of the Federal, state and local regulatory authorities
having jurisdiction thereof. Seller relies on notices from the operators of the
Properties to advise them of any noncompliance with applicable laws where such
is in the control of the operators.
4.6 SALE OF PRODUCTION. Except as disclosed in Schedule 4.6, neither
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Seller nor Sycamore is obligated by virtue of any prepayment made under any
production sales contract or any other contract containing a take-or-pay clause,
or under any similar arrangement, to deliver oil, gas or other minerals produced
from or allocated to any of the Properties or the Sycamore System at any time
after January 1, 1997, without receiving full payment therefor at the time of
delivery. To the knowledge of Seller, except for routine suspense on new ▇▇▇▇▇,
proceeds from the sale of oil and gas from the Properties are being received by
Seller in a timely manner and are not being held in suspense for any reason.
Seller has described in Schedule 4.6 and made extending beyond January 1, 1997
(other than agreements terminable upon less than sixty (60) days' notice)
pursuant to which hydrocarbons produced from the Properties are sold,
transported, processed or otherwise disposed of or marketed.
4.7 PRODUCTION AND AD VALOREM TAXES. All ad valorem, property,
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production, severance and similar taxes based on or measured by the ownership of
property or the production or removal of hydrocarbons or the receipt of proceeds
therefrom have been timely paid and all required returns and reports related
thereto filed.
4.8 MATERIAL EXECUTORY CONTRACTS RELATING TO THE INTERESTS. Unless
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specifically provided otherwise in this Agreement, the sale of the Interests
will be subject to all oil, gas and mineral leases, assignments, subleases,
farmout agreements, joint operating agreements, partnership agreements, pooling
agreements, letter agreements, easements, rights-of-way, gathering and
transportation agreements, sales agreements, and all other agreements with
respect to or pertaining to the Interests ("Related Agreements"), to the extent
that they are binding on
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Seller. Buyer will assume all of Seller's obligations and liabilities under the
Related Agreements as of the Closing Date, and the parties will execute all
documents necessary for Buyer to assume the Related Agreements. Buyer's
obligation applies to all Related Agreements, whether recorded or not.
4.9 CLAIMS OR LITIGATION. There is neither any suit, action or other
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proceeding pending before any court or governmental agency nor, to the knowledge
of Seller, any claim, dispute, suit, action or other proceeding threatened
against Seller or any of the Interests or any third party which might result in
the impairment or loss of Seller's title to any of the Interests or the value
thereof, or increase the cost of operation thereof.
4.10 ASSIGNMENTS PRIOR TO CLOSING. Seller has not since the Effective Time
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made any assignment, conveyance or encumbrance of the Interests.
4.11 OPERATIONS. No operations of the types prohibited by Section 6.2
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hereof have been conducted since the Effective Time or are now being conducted.
4.12 CONSUMMATION OF TRANSACTIONS. The consummation of the transactions
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contemplated hereby will not constitute a violation or breach of, or an event of
default under, any contract or agreement affecting the Interests or constitute
the happening of a condition upon which any other party to such a contract may
exercise any right or option which will adversely affect any of the Interests.
4.13 SYCAMORE EXISTENCE AND QUALIFICATION: CONSENT TO ASSIGN. Sycamore is
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a partnership duly organized, validly existing and in good standing under the
laws of the State of Oklahoma. Sycamore has the power and authority under its
partnership agreement and applicable law to own and use its properties and to
transact the business in which it is engaged, and holds all franchises, licenses
and permits necessary and required therefor. Seller has made available to Buyer
true and correct copies of the organizational documents of Sycamore. At or
prior to closing, Seller shall obtain all necessary consents to assign its
partnership interest in Sycamore to Buyer.
ARTICLE 5
REPRESENTATIONS AND WARRANTEES OF BUYER
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Buyer represents and warrants to Seller as follows:
5.1 ORGANIZATION. Buyer is a corporation duly organized and validly
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existing under the laws of the State of Oklahoma.
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5.2 AGREEMENT AUTHORIZED. This Agreement has been duly authorized,
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executed and delivered by Buyer and all requisite corporate action has been
taken to authorize the execution hereof, the transactions contemplated hereby
and all things necessary or desirable in order to accomplish the purchase of the
Interests, and Buyer has all necessary authority under its charter, bylaws and
other governing documents and otherwise has good right and lawful authority to
consummate the same.
5.3 VALID AGREEMENT. This Agreement constitutes the valid and binding
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agreement of Buyer enforceable against Buyer in accordance with its terms, and
all instruments required hereunder to be executed and delivered by Buyer at the
Closing will constitute valid and binding agreements of Buyer enforceable
against Buyer in accordance with their terms.
5.4 BROKERS AND FINDERS. Buyer has incurred no liability, contingent or
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otherwise, for brokers' or finders' fees in respect of this transaction for
which Seller shall have any responsibility whatsoever.
5.5 SECURITIES LAWS. (a) Buyer intends to acquire the Interests for its
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own benefit and account and is not acquiring the Interests with the intent of
distributing fractional undivided interests in them or otherwise selling them in
a manner that would be subject to regulation by federal or state securities
laws. If Buyer sell, transfer, or otherwise dispose of the Interests or
fractional undivided interests in them in the future, it will do so in
compliance with applicable federal and state laws. (b) Buyer represents that at
no time has it been presented with or solicited by or through any public
promotion or other form of advertising in connection with this transaction.
5.6 BASIS OF BUYER'S DECISION. Buyer represents as follows:
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(a) It has reviewed the Interests to its satisfaction to enable it to
evaluate the Interests in order to enter into this Agreement.
(b) It is knowledgeable and experienced in the evaluation,
acquisition, and operation of oil and gas properties.
(c) Buyer has performed sufficient review and investigation to
evaluate the Interests to its satisfaction and to enable it to make an
informed decision, as a prudent and knowledgeable purchaser, to acquire the
Interests.
(d) It has evaluated the merits and risks of purchasing the Interests
and has formed an opinion based solely upon its knowledge and experience
and not upon any statements or actions of Seller.
(e) It will acquire the Interests "as is, where is".
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ARTICLE 6
COVENANTS OF SELLER PENDING CLOSING
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Seller covenants and agrees with Buyer that from and after the date of this
Agreement and until the Closing, Seller will conduct its business, and will use
its best efforts to cause Sycamore to conduct its business, subject to the
following provisions and limitations:
6.1 ORDINARY COURSE. To the extent the Seller has the right, the
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Properties and the Sycamore System will be maintained and operated in a good and
workmanlike manner consistent with historical practices, and Seller will timely
pay or cause to be paid all costs and expenses incurred in connection therewith.
6.2 RESTRICTIONS ON OPERATIONS. Subject to the provisions of Section 7.5
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hereof, except with Buyer's prior written consent no operations will be
conducted for the drilling of any new well, the reworking or redrilling of any
existing well or the making of any other capital expenditure on the Properties
or the Sycamore System requiring an expenditure by Seller. Insofar as any of
the following described actions would affect the Interests, neither Seller nor
Sycamore will waive any rights or enter into any new agreements or commitments
other than in the ordinary course of business, abandon any well capable of
commercial production (based upon prevailing economic conditions), release or
abandon any Properties, or encumber, sell or otherwise dispose of any of the
Properties other than personal property thereon which is replaced by equivalent
property or consumed in the operation of such Properties in the ordinary course
of business.
6.3 MAINTENANCE OF FILES. Seller will exercise reasonable diligence in
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safeguarding and maintaining secure all files, books and records currently
maintained.
6.4 ACCESS OF BUYER. Buyer shall have access to the employees, offices,
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properties, records, files, geological and geophysical data, engineering reports
and evaluations, books of account, and all other information of the Seller
pertaining to the Interests; provided, however, that such investigation shall be
conducted during normal business hours and in a manner that does not
unreasonably interfere with Seller's normal operations. During such
investigation, Buyer shall have the right, at Buyer's sole cost and expense, to
make copies of such records, files and other materials as Buyer may deem
advisable.
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ARTICLE 7
ADDITIONAL AGREEMENTS OF THE PARTIES
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7.1 RETURN OF INFORMATIONAL MATERIAL. If this Agreement is not
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consummated, Buyer shall return to Seller all of the items of information which
Seller has delivered to Buyer hereunder, including all copies of same made by
Buyer.
7.2 CONFIDENTIALITY OF INFORMATION. If the purchase and sale of the
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Interests as contemplated by this Agreement is not completed, Buyer (i) will
keep the information furnished to Buyer hereunder or in contemplation hereof
strictly confidential, except to the extent such information (a) becomes public
other than as a result of dissemination by Buyer, (b) was already known to Buyer
other than as a result of a breach of a confidentiality restriction, or (c) is
furnished to Buyer by a third party independently of Buyer's investigation
pursuant to this Agreement, and (ii) will not use any of such information to
Buyer's fumcial advantage or in competition with Seller or Sycamore.
Notwithstanding the provisions of Section 14.6 hereof, this provision shall not
be construed as superseding or limiting the provisions of any confidentiality
agreement heretofore executed by and between Buyer and Seller.
7.3 COMPLIANCE WITH CONDITIONS. Buyer and Seller, respectively, will
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proceed diligently using all reasonable efforts to cause all of the conditions
to the obligations of Seller and Buyer, respectively, to be timely satisfied.
7.4 GAS IMBALANCES. Seller and Buyer acknowledge, but Seller does not
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represent or warrant, that certain gas imbalances existed at the Effective Time
with respect to production from or attributable to certain of the Properties.
The best information concerning such imbalances available to Seller as of the
date of this Agreement is set forth on Schedule 7.4 and such imbalances have
been taken into account by Buyer in determining the Purchase Price. If, prior
to the Title Notice Date, Buyer determines that the net gas imbalance (that is,
the difference between aggregate overproduction attributable to Seller's
interest in the Properties and the aggregate underproduction attributable to
such interest) at the Effective Time was different than that set forth on
Schedule 7.4, Buyer shall so notify Seller. If such difference is confirmed,
the Base Price shall be adjusted at the Closing by an amount equal to $1.00 per
Mcf for the difference from that shown in Schedule 7.4; provided, however, that
no adjustment shall be made unless the difference exceeds 20,000 Mcf.
7.5 CAPITAL EXPENDITURES. During the period from the execution of this
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Agreement to the Closing Date, Seller will consult with Buyer from time to time
with respect to any operation proposed to be conducted on the Properties or the
Sycamore System and reasonably expected to require an expenditure by Seller for
any single project, and will provide Buyer with all information reasonably
available to Seller with respect thereto. Buyer shall, within ten (10) days
after receipt of Seller's recommendation for conducting or participating in any
such project, or within such lesser period as may be required by the terms of
any applicable agreement,
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approve or disapprove such project. Failure of Buyer to respond within the time
required will be deemed to constitute disapproval by Buyer of the project. In
the event Buyer approves such project, Seller shall conduct, propose or elect to
participate in such project and shall incur and pay as they become due the
expenditures associated therewith. In the event the project or operation is a
well proposed by an unrelated third party and Seller must, by operation of an
applicable agreement or order of a regulatory agency, elect either to
participate in such well or lose the right to participate in such well and/or
other rights in the unit in which such well is proposed (for example, but not by
way of limitation, a non-consent penalty under a joint operating agreement,
requirement to accept consideration in lieu of participation under a pooling or
forfeiture of the right to participate in future development under an area of
mutual interest agreement), and Buyer disapproves or is deemed to have
disapproved participation by Seller in such well, then, five (5) days written
notice to Buyer (during which time Buyer may reverse its decision and approve
participation by Seller), Seller, at its sole option, may elect to exclude from
the Interests and the sale hereunder the Property on which such operation is to
be conducted and reduce the Base Price by the Agreed Value of such Property, or
terminate this Agreement without further obligation to Buyer.
7.6 CONSENTS; PREFERENTIAL RIGHTS TO PURCHASE. Promptly after execution
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hereof, Seller will proceed diligently to solicit any consents to the transfers
contemplated hereby which are required to be obtained from third parties and
will give all notices required by existing contracts with respect to
preferential rights to purchase on the part of third parties and to obtain
waivers of such preferential rights. Any item of the Interests which requires
the consent of a third party for transfer where such consent cannot be obtained
prior to the Closing Date (other than routine consents required in connection
with federal, state and Indian leases), or which is subject to a preferential
right to purchase which has not expired and has been waived prior to the Closing
Date, may, at Buyer's option, be excluded from the Interests and the sale
hereunder and the Base Price reduced by the Agreed Value of such Property.
7.7 ADJUSTMENTS FOR OPERATIONS SUBSEQUENT TO THE EFFECTIVE TIME. The
------------------------------------------------------------
following adjustments shall be made to the Base Price for operations conducted
subsequent to the Effective Time to the extent the following described items of
revenue and expense relate to the Interests:
(a) The Base Price shall be adjusted upward by all amounts actually
paid by Seller in respect of (i) actual direct operating expenses and
capital expenditures (other than those prohibited by the terms hereof),
(ii) overhead or indirect expenses required to be paid by the terms of
existing operating agreements, and (iii) ad valorem, property, production,
severance and similar taxes and assessments based upon or measured by the
ownership of property, the production of removal of hydrocarbons or the
receipt of proceeds therefrom; to the extent such expenditures relate to
the period between the Effective Time and the Closing Date on the accrual
method of accounting. Ad valorem taxes shall be prorated on the basis of
time, and if the taxes cannot be determined for the current taxable year,
then the amount thereof for the taxable year most recently ended shall be
used in determining ad valorem taxes attributable to a particular period of
time.
12
(b) The Base Price shall be adjusted downward by all proceeds
actually received by Seller (including proceeds from sale or salvage of any
personal property forming a part of the Interests as well as the
hydrocarbons produced therefrom and attributable thereto) to the extent
such proceeds relate to the period from the Effective Time to the Closing
Date on the accrual method of accounting. Proceeds received by Seller after
the Effective Time for the sale of production in storage at the Effective
Time shall remain the property of Seller and shall not give rise to an
adjustment.
ARTICLE 8
ENVIRONMENTAL MATTERS
---------------------
8.1 PHYSICAL CONDITION OF THE PROPERTIES. The Properties (solely for
------------------------------------
purposes of this Article, the term "Properties" shall include the Sycamore
System) have been used for oil and gas drilling, production, gathering and
processing operations, and related oil field operations. Physical changes in or
under the Properties or adjacent lands may have occurred as a result of such
uses. The Properties also may contain buried pipelines and other equipment,
whether or not of a similar nature, the locations of which may not be known to
Seller or be readily apparent by a physical inspection of the Properties. Third
parties may have used the Properties or the surface rights thereon for other
purposes as well. Buyer understands that Seller does not have the requisite
information with which to determine the exact nature or condition of the
Properties nor the effect any such use has had on the physical condition of the
Properties. Buyer is hereby notified that detectable amounts of regulated and
unregulated chemicals and other substances which may pose a threat to health or
to plants or wildlife, or which are known to cause illnesses, diseases, cancer,
birth defects and other reproductive harm, may be found in, on or around the
Properties. Adverse physical conditions, including the presence of such
chemicals and other substances, may not be revealed by Buyer's investigation.
In addition, Buyer acknowledges that some oil field production equipment may
contain various contaminants or hazardous substances, including without
limitation, asbestos and/or naturally-occurring radioactive material ("NORM").
In this regard, Buyer expressly understands that NORM may affix or attach itself
to the inside of ▇▇▇▇▇, materials, pipes and equipment as scale or in other
forms, and that ▇▇▇▇▇, materials, pipes and equipment located on the Properties
may contain NORM and that NORM-containing materials may be buried or have been
otherwise disposed of on the Properties. Buyer also expressly understands that
special procedures may be required for the removal and disposal of various
contaminants or hazardous substances, including without limitation, asbestos and
NORM, from the Properties where it may be found. The statements in this Section
8.1 are intended as disclosures and acknowledgments of possible conditions
existing on the Properties. Seller hereby advises that it has not been notified
of any noncompliance up to the date of closing.
8.2 ENVIRONMENTAL ASSESSMENT. Buyer shall have the right, at Buyer's sole
-------------------------
cost, risk, and expense, to undertake an environmental assessment of the
Properties during the period ending on the Title Notice Date (the "Inspection
Period"). Buyer and its agents shall have the
13
same right as Seller to enter upon the Properties, inspect the same, conduct
soil and water sampling, analysis and monitoring, including soil borings (and,
after notice and consultation with Seller, drilling groundwater monitoring
▇▇▇▇▇), and generally conduct such tests, examinations, investigations and
studies as Buyer deems necessary or appropriate for preparing appropriate
engineering and other reports and making judgments relating to the Properties,
their condition, and the presence of chemicals and other substances. Seller
shall cooperate with any efforts of Buyer and its agents to obtain third party
consents for access to those parcels of land within the Properties to which
Seller may not presently have access. Buyer and its agents shall have reasonable
access to Seller's agents and employees in the course of conducting Buyer's
environmental assessment. Buyer agrees to provide to Seller a copy of all facts
discovered in the course of conducting Buyer's environmental assessment,
including all direct observations (if in writing or other tangible or
transferable medium), data and summaries thereof. Buyer shall keep any data or
information acquired in the course of such examinations and the results of all
analyses of such data and information strictly confidential and not disclose
same to any person or agency without the prior written approval of Seller,
except that Buyer may disclose to authorities having jurisdiction such
information as is required by law or by court order at the same time that Buyer
provides such information to Seller. If Buyer determines that conditions on a
Property do not satisfy the environmental standards set forth in Section 8.4
below in a material respect, then Buyer may notify Seller of such condition by
providing Seller, on or prior to the Title Notice Date, a written "Notice of
Environmental Defect" setting forth in detail the facts giving rise to the
claimed defect, the environmental standard which Buyer claims is not satisfied,
any Applicable Environmental Law (hereinafter defined) which Buyer contends has
been breached or violated and, if the claimed defect arises from information
contained in a document, a copy of such document or the relevant parts thereof.
Buyer shall be deemed to have accepted without objection (i) the environmental
conditions described in Schedule 8.4, and (ii) any Property which does not meet
the environmental standards or which is subject to an environmental defect
unless a Notice of Environmental Defect is given with respect to such Property
on or prior to the First Title Notice Date.
8.3 ACCESS; INDEMNIFICATION. Access to the Properties to conduct Buyer's
------------------------
environmental assessment shall be subject to the following conditions: Buyer
waives and releases all claims against Seller and its successors, assigns,
directors, officers, contractors, affiliates, partners, employees and agents,
for injury to or death of persons or damage to property arising in any way from
the exercise of rights granted to Buyer hereby or the activities of Buyer or its
employees, agents or contractors on the Properties, provided that Buyer does not
hereby assume the risk of damage, injury or death attributable to the willful
misconduct or gross negligence of Seller. Buyer shall indemnify Seller, its
partners, employees, and agents, and shall hold each and all of said indemnities
harmless from and against any and all loss whatsoever arising out of (i) any and
all statutory or common-law liens or other encumbrances for labor or materials
furnished in connection with such tests, samplings, studies or surveys as Buyer
may conduct with respect to the Properties, and (ii) any injury to or death of
persons or damage to property occurring in, on or about the Properties as a
result of such exercise or activities (except for any such injuries or damages
caused by the gross negligence or willful misconduct of any
14
said indemnities). Notwithstanding any provision of this Agreement to the
contrary, the foregoing obligation of indemnity shall survive the Closing or the
termination of this Agreement without Closing.
8.4 ENVIRONMENTAL STANDARDS. This section sets out the environmental
------------------------
standards applicable to the Properties for purposes of this Agreement and do not
constitute covenants, representations or warranties of Seller. Seller disclaims
all warranties and representations regarding and makes no covenants with respect
to environmental conditions on the Properties.
(a) The Properties shall not have been used for the generation,
treatment, storage or disposal of a Hazardous Substance (as defined below)
in a manner or to an extent that would subject Seller to a material
liability for violation of any Applicable Environmental Laws (as defined
below). Except as disclosed in Schedule 8.4, there shall not have been any
release or discharge of a Hazardous Substance from the Properties in a
manner or to an extent that would subject Seller to a material liability
for violation of any Applicable Environmental Laws. "Hazardous Substance"
shall mean any hazardous substance, pollutant, contaminant, solid or
hazardous waste, hazardous waste constituents, hazardous material or toxic
substance subject to regulation or liability under Applicable Environmental
Laws in force as of the date hereof, including asbestos, radioactive
substances, and any other substance or material that would constitute or
cause a health, safety or environmental hazard on or at the Properties
under Applicable Environmental Laws. "Applicable Environmental Laws" shall
mean (i) all federal statutes regulating or prescribing restrictions
regarding the use of the Properties or other activities affecting the
environmental (air, water, land, animal and plant life), including but not
limited to the following: the Clean Air Act, Clean Water Act, Comprehensive
Environmental Response, Compensation and Liability Act, Emergency Planning
and Community Right-to-Know Act, Endangered Species Act, Hazardous
Materials Transportation Act, Migratory Bird Treaty Act, National
Environmental Policy Act, Occupational Safety and Health Act, Oil Pollution
Act of 1990, Resource Conservation and Recovery Act, Safe Drinking Water
Act, and Toxic Substances Control Act; (ii) any regulations promulgated
under such federal statutes; (iii) any state law counterparts of such
federal statutes and the regulations promulgated thereunder; (iv) any other
state or local statutes, rules regulations or ordinances regulating the use
of or affecting the environmental; and (v) all common law rights, duties
and obligations regarding the use of or matters affecting the environment.
(b) Except as disclosed in Schedule 8.4, there are no agreements,
consent or administrative orders, injunctions, decrees, judgments, license
or permit conditions, or other directives of governmental authorities based
on any Applicable Environmental Laws that require any material change in
the present condition of the Properties, and Seller has not received any
notice from any government authority or private or public entity advising
Seller that it is or is potentially responsible for response costs under an
15
Applicable Environmental Law as a result of Seller's ownership or
activities in connection with the Properties.
(c) Except as disclosed in Schedule 8.4, no conditions or
circumstances exist on the Properties that would subject Seller to any
material damages, penalties, injunctive relief or clean-up or closure costs
under any Applicable Environmental Laws or that would require clean-up,
removal, remedial or corrective action or other response involving a
material expenditure by Seller pursuant to Applicable Environmental Laws.
8.5 PROPERTIES SUBJECT TO ENVIRONMENTAL DEFECT. Seller shall have a
-------------------------------------------
period of twelve (12) days after the title Notice Date to cure or remediate the
environmental defect(s) set out in any Notice of Environmental Defect timely and
properly given by Buyer. In the event Seller is unable or unwilling to cure or
remediate any such defect prior to Closing, one of the following shall occur:
(a) The parties shall agree upon an adjustment to the Purchase Price
to compensate Buyer (i) for the defect and all future liability associated
therewith or resulting therefrom, and (ii) for agreeing to indemnify,
defend and hold harmless Seller from and against any and all loss, cost,
liability or expense associated therewith or resulting therefrom.
(b) Deleted.
(c) Notwithstanding the provisions of (a) above, Purchaser shall not
be entitled to an adjustment of the Base Price pursuant to the provisions
of this Section 8.5 unless the amount of the adjustment for each occurrence
exceeds $25,000 to the interest of Seller. Buyer shall be responsible for
all adjustments up to $25,000, and Seller shall be responsible for amounts
in excess of $25,000. In the event there is an adjustment in excess of
$50,000 to the interest of Seller for each occurrence, then in such event,
Seller at its sole election can remove such property from the transaction,
close and agree to adjust the purchase price.
8.6 INDEMNIFICATION OF SELLER. All liabilities attributable to conditions
--------------------------
existing and operations conducted on the Properties assigned to Buyer, under
Applicable Environmental Laws and under all future environmental laws, shall be
liabilities of Buyer, and Buyer shall indemnify, defend, and hold harmless
Sellers from and against all loss, cost, liability or expense attributable
thereto or resulting therefrom.
8.7 MATERIALITY DEFINED. For purposes of this Article VIII, material and
--------------------
materiality is hereby defined as any matter in excess of $25,000.00 chargeable
to the interests of Seller per occurrence.
16
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF BUYER
----------------------------------
The obligation of Buyer to consummate the transactions provided for in this
Agreement shall be subject to the satisfaction of each of the following
conditions on or before the Closing Date, subject to the right of Buyer to waive
any one or more of such conditions:
9.1 REPRESENTATIONS AND WARRANTIES OF SELLER. At and as of the Closing
----------------------------------------
Date, the representations and warranties of Seller contained in Article 4 hereof
shall be true and correct in all material aspects as though made on such date.
9.2 PERFORMANCE OF THIS AGREEMENT. Seller shall have duly performed or
-----------------------------
complied in all material respects with all of the obligations to be performed or
complied with by Seller under the terms of this Agreement on or prior to the
Closing Date.
9.3 EFFECT OF CLOSING. In the event Buyer proceeds to Closing
-----------------
in the absence of satisfaction or affirmative waiver of any of the foregoing
conditions, Buyer shall be deemed to have waived its right not to close by
reason thereof.
ARTICLE 10
CONDITIONS TO OBLIGATIONS OF SELLER
-----------------------------------
The obligations of Seller to consummate the transactions provided for in
this Agreement shall be subject to the satisfaction of each of the following
conditions on or before the Closing Date, subject to the right of Seller to
waive any one or more of such conditions:
10.1 REPRESENTATIONS AND WARRANTIES OF BUYER. The representations and
---------------------------------------
warranties of Buyer contained in Article 5 hereof shall be true and correct in
all material respects at and as of the Closing Date.
10.2 PERFORMANCE OF THIS AGREEMENT. Buyer shall have duly performed or
-----------------------------
complied in all material respects with all of the obligations to be or complied
with by Buyer under the terms of this Agreement on or prior to the Closing Date.
10.3 EFFECT OF CLOSING. In the event Seller proceeds to Closing in the
-----------------
absence of satisfaction or affirmative waiver of any of the foregoing
conditions, Seller shall be deemed to have waived its right not to close by
reason thereof.
17
ARTICLE 11
TERMINATION
-----------
11.1 NONCOMPLIANCE BY SELLER. Buyer may terminate this Agreement by
-----------------------
written notice to Seller if the conditions to Buyer's obligations under this
Agreement, as set forth in Article 9 hereof, shall not have been complied with
or performed in all material respects (and Seller shall not be prepared to
comply with or perform the same) by the date on which the Closing is to occur
(as set forth in Section 12. 1), and such non-compliance or non-performance
shall not have been waived in writing by Buyer. Under such circumstances, Buyer
shall be entitled to a return of the Deposit, which shall be Buyer's sole remedy
hereunder unless such termination is a result or Seller's failure or refusal to
close the transaction contemplated hereby under circumstances in which all
conditions precedent to Seller's obligations as set forth in Article 10 have
been performed or satisfied in all respects, in which event Buyer shall be
entitled to pursue any remedies existing at law or in equity.
11.2 NONCOMPLIANCE BY BUYER. Seller may terminate this Agreement by
-----------------------
written notice to Buyer if the conditions to Seller's obligations under this
Agreement, as set forth in Article 10 hereof, shall not have been complied with
or performed in all material respects (and Buyer shall not be prepared to comply
with or perform the same) by the date on which the Closing is to occur (as set
forth in Section 12. 1), and such non-compliance or non-performance shall not
have been waived in writing by Seller. In such event, Seller shall retain the
Deposit as liquidated damages for Buyer's failure to purchase the Interests at
the time specified herein. The parties hereto agree that time is of the essence
for the consummation of the transactions contemplated hereby, that the amount of
damages caused by Buyer's breach would be very difficult to calculate exactly,
and that the provision for liquidated damages contained in this Section 11.2
shall not be construed as a penalty provision. Such right to liquidated damages
shall be Seller's sole remedy hereunder.
11.3 COOPERATION BY BUYER. In the event of termination of this Agreement,
---------------------
Seller shall be free to sell the Interests to any third party without any
limitation under or by reason of this Agreement. Buyer shall cooperate with
Seller in effectuating any such sale by promptly executing any instrument
reasonable requested by Seller evidencing the termination of this Agreement or
Buyer's right to acquire the Interests.
11.4 ARBITRATION. Unless otherwise specified in this Agreement, any
------------
controversy arising under this Agreement which the parties are unable to resolve
by mutual agreement, shall be submitted to binding arbitration in Dallas, Texas
in accordance with the then current rules of The Judicial Arbitration &
Mediation Services, Inc. (hereinafter referred to as the "JAMS"). Either party
may give to the other written notice of its desire to have a matter arbitrated,
in which event a hearing thereon shall commence within a reasonable time (not to
exceed fifteen (15) days thereafter. Any decision of the arbitrators shall be
conclusive as to the matters submitted to them, shall be final and binding upon
the parties hereto, and may be enforced in any court of
18
competent jurisdiction. Notwithstanding anything herein to the contrary, the
parties agree that any decision or award resulting from arbitration which
exceeds the sum of $ 1,000,000 shall be subject to appeal and judicial review
upon petition of either party.
ARTICLE 12
CLOSING
-------
12.1 DATE AND PLACE. The Closing shall be held on or before at 10 a.m. on
--------------
February 15, 1997 (the date on which the Closing actually occurs is referred to
herein as the "Closing Date"). The Closing shall take place in the offices of
the Seller, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, or such other
place as mutually agreed between the parties.
12.2 SATISFACTION OF CONDITIONS. Not later than two (2) business days
--------------------------
prior to the Closing Date, each party shall provide the other party such
evidence of satisfaction of conditions under Section 9.2 and 10.2 hereof as the
other party shall have reasonably and timely requested.
12.3 ASSIGNMENTS. At the Closing, Seller shall deliver to Buyer (i) a
-----------
fully executed and acknowledged Assignment, Conveyance and ▇▇▇▇ of Sale, in the
form attached hereto as Exhibit F, assigning to Buyer Seller's interest in the
Properties, and (ii) a fully executed and acknowledged Assignment of General
Partnership Interest, in the form attached hereto as Exhibit G, assigning to
Buyer Seller's general partnership interest in Sycamore.
12.4 DETERMINATION AND PAYMENT OF PURCHASE PRICE. On the day that is two
-------------------------------------------
(2) business days prior to the Closing Date, Seller shall furnish to Buyer (i) a
summary of the Base Price adjustments to be effected at the Closing pursuant to
Section 3.4, 7.4, 7.5, 7.6, 7.7 and 8.5 hereof, and subject to the provisions of
Section 3.7, and (ii) based upon the information at (i), a calculation of the
Purchase Price. Buyer and Seller shall work together diligently and in good
faith prior to the Closing in an effort to agree upon the amount of the
adjustments necessary to determine the Purchase Price, and if they do so agree,
the agreed amount shall be paid by Buyer to Seller by wire transfer of
immediately available funds at the Closing (less any amount deposited in escrow
by Buyer pursuant to Section 3.5) If the parties cannot agree on the adjustment
amounts necessary to determine the Purchase Price, the Closing shall occur as
scheduled based on Seller's reasonable, good faith estimate of the Purchase
Price ("Seller's Estimate") and the difference between Seller's Estimate and
Buyer's calculation of the Purchase Price (less any amount deposited in escrow
by Buyer pursuant to Section 3.5) shall be deposited in escrow with the Escrow
Agent pending a determination of the final Purchase Price. In such event the
final Purchase Price shall be determined either (i) by subsequent agreement of
the parties, or (ii) by binding arbitration pursuant to an arbitration
proceeding initiated and conducted substantially in accordance with the
procedures set out in Section 11.4 hereof. In the event arbitration is
necessary to determine the Purchase Price, prior to initiating the arbitration,
each party shall furnish to the other a statement of such party's calculation of
the Purchase Price. All
19
fees and expenses of the arbitration, including attorneys' fees, expert witness
fees and all other out-of-pocket expenses of both parties, shall be paid by the
party whose calculation of the Purchase Price bears the greatest difference from
the Purchase Price determined by the arbitrator. The award of the arbitrator
shall not be subject to appeal or judicial review of any nature and shall be
promptly furnished to the Escrow Agent who shall make distribution of the
escrowed funds in a manner consistent with such award.
12.5 LETTERS IN LIEU. Seller shall execute and deliver to Buyer at the
----------------
Closing, on forms prepared by Buyer in the form set out in Exhibit H, transfer
orders or letter in lieu thereof directing all purchasers of production to make
payment to Buyer of proceeds attributable to production from the Interests.
12.6 BUYER'S CERTIFICATE. Buyer shall execute and deliver to Seller at
--------------------
Closing, Buyer's certificate that all its representations and warranties under
this Agreement are true and correct as of the Closing Date.
ARTICLE 13
POST-CLOSING MATTERS
--------------------
13.1 SALES TAXES. It is understood that the Purchase Price does not
------------
include sales taxes imposed on account of the transactions contemplated hereby.
Buyer will be responsible for all such taxes, and Buyer hereby agrees to hold
harmless Seller and will hold Seller harmless with respect thereto, including
any penalties, costs, attorneys fees or interest assessed for late payment.
13.2 RECEIPTS AND DISBURSEMENTS. If, after the Closing, Buyer receives any
---------------------------
funds relating to operations on or production from the Interests prior to the
Effective Time, or Seller receives any funds relating to operations on or
production from the Interests after the Effective Time, then the party receiving
such funds shall account therefor and pay the same to the other party promptly
after receipt thereof. Likewise, if Buyer shall be required to pay any amount
relating to items of the Interests which accrued to the owner of the Interests
before the Effective Time, or if Seller shall be required to pay any amount (not
otherwise prohibited by the ten-ns of this Agreement) relating to items of the
Interests which accrued to the owner of the Interests after the Effective Time,
then the party making such payment shall invoice the other party for the amount
of such payment and the party receiving such invoice promptly shall pay the
same. Notwithstanding the foregoing, there shall be no accounting for amounts
received or paid which have already been taken into account in calculating the
Purchase Price. In determining the amount paid by a party accruing during a
period of time in respect of ad valorem taxes, the taxes shall be prorated as
provided in Section 7.7.
20
13.3 ALLOCATION OF LIABILITY. Seller shall, except as otherwise provided
-----------------------
in clause (ii) of Section 13.4 hereof, remain liable and responsible for all
costs and expenses attributable to the ownership or operation of the Interests
prior to the Effective Time. Buyer shall cause Seller to remain on policies of
insurance until any unknown claims are barred by statute of limitations. Buyer
shall be liable and responsible for all costs and expenses attributable to the
ownership or operation of the Interests after the Effective Time, together with
those additional liabilities and obligations assumed by Buyer pursuant to clause
(ii) of Section 13.4 hereof.
13.4 ASSUMPTION. By acceptance of the Assignment, Conveyance and ▇▇▇▇ of
----------
Sale at the Closing, Buyer shall be deemed to have accepted and assumed
responsibility for all obligations and liabilities of Seller (i) accruing from
and after the Effective Time under the terms of the leases included in the
Interests, under all prior assignments in the chain of title to said leases, and
under all joint operating agreements and other similar agreements to which said
leases are subject or pursuant to which operations are conducted on the Land,
(ii) relating to the environmental condition of and other conditions on and
under the Land, whether existing as of the Effective Time or thereafter arising,
and whether created by statute, regulation, rule, order, common law or contract,
including, without limitation, any obligation to plug, replug or repair any
well, or to restore, clean up or remediate the surface of the Land, and (iii)
all obligations attributable to the Interests relating to gas overproduction,
including balancing rights of third parties and any cash balancing obligations
determined by contract, common law, settlement or court order or judgment. By
acceptance of the Assignment of General Partnership Interest at the Closing,
Buyer shall be deemed to have accepted and assumed responsibility for all
obligations and liabilities of Seller as a general partner in Sycamore arising
from and after the Effective Time.
13.5 BOOKS AND RECORDS. Seller shall deliver to Buyer, as soon as
-----------------
practicable after the Closing Date (but in no event more than thirty (30) days
after the Closing Date), all books, files, records and other information of
Seller (including, without limitation, land, geological, geophysical and
accounting files, records and other material) relating to the Interests. For a
period of five (5) years after the delivery of such files and records, Buyer
shall permit Seller reasonable access to such files and records, bust such right
of access shall not constitute an obligation of Buyer to maintain such files in
the same form as maintained by Seller prior to delivery thereof.
ARTICLE 14
MISCELLANEOUS
-------------
14.1 NOTICES. All communications required or permitted to be given under
--------
this Agreement shall be in writing and delivered, mailed or transmitted to the
parties at the addresses set out below. Notices shall be deemed given when
received except that notices given by
21
facsimile transmission on weekends, holidays or after 5:00 p.m. Central Time,
shall be deemed received on the next business day. If delivered by commercial
delivery service or mailed by registered or certified mail, the delivery receipt
shall be evidence of the date of receipt. Either party may, by written notice so
delivered to the other, change the address to which delivery shall thereafter be
made.
(a) Notices to Buyer:
Gothic Energy Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇. ▇▇▇▇ ▇▇▇▇▇
With copy to:
Pray, Walker, Jackman, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ - ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ Facsimile
Attn: ▇▇. ▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
(b) Notices to Seller:
Norse Exploration, Inc.
Norse Pipeline, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ Facsimile
Attn: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
With copy to:
▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ Facsimile
Attn: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
14.2 BINDING, EFFECT. This Agreement shall be binding upon and shall
----------------
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that Buyer may not assign this Agreement or any of
its rights or obligations hereunder without the prior written consent of Seller,
which consent may be withheld in Seller's sole discretion.
22
14.3 COUNTERPARTS. This Agreement may be executed in any number of
-------------
counterparts which taken together shall constitute one and the same instrument
and each of which shall be considered an original for all purposes.
14.4 EXPENSES. Each party hereto will bear and pay its own expenses of
---------
negotiating and consummating the transactions contemplated hereby.
14.5 SECTION HEADINGS. The section headings contained in this Agreement
----------------
are for convenient reference only and shall not in any way affect the meaning or
interpretation of this Agreement.
14.6 SUPERSEDING, EFFECT. This Agreement supersedes any prior agreement or
---------------------
understanding between the parties with respect to the subject matter hereof
14.7 GOVERNING LAW; ENFORCEMENT. This Agreement shall be governed by,
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construed and enforced in accordance with the laws of the state of Oklahoma
applicable to contracts made and to be performed entirely therein. The
prevailing party in any litigation initiated to enforce rights under or collect
damages for breach of this Agreement shall be entitled to reimbursement from the
non-prevailing party of all costs and expenses, including attorneys' fees,
incurred by the prevailing party in connection with such litigation.
14.8 EXHIBITS AND SCHEDULES. The Exhibits and Schedules referred to herein
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are attached hereto and by this reference made a part hereof.
14.9 ANNOUNCEMENTS. Seller and Buyer shall consult with each other with
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regards to all press releases and other announcements issued by either party
concerning this Agreement or the transaction contemplated hereby and, except as
may be required by applicable laws or the applicable rules and regulations of
any governmental agency or stock exchange, neither Buyer nor Seller shall issue
any such press release or other publicity without the prior written consent of
the other party.
14.10 SURVIVAL. The representations and warranties of Seller set in
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Article 4 hereof shall expire at, and be of no further force or effect after,
the Closing, and Buyer shall have no claim against Seller for inaccuracy of any
such representation or breach of any such warranty from and after the Closing.
Buyer's only recourse for discovery of the inaccuracy of any representation or
the breach of any warranty set out in Section 4 hereof shall be excused
performance of Buyer's obligation to close pursuant to Section 9. 1 hereof. The
representations and warranties of Buyer as set out in Article 5 hereof shall
survive the Closing. The covenants of the parties under this Agreement shall
survive the Closing (for this purpose, nothing contained in Article 4 hereof
shall be deemed to be a covenant).
14.11 FURTHER ASSURANCES. After the Closing, the parties shall, at the
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sole cost and expense of the requesting party if more than an immaterial expense
is involved, (i) furnish such
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additional information, (ii) execute and deliver such additional documents, and
(iii) perform such additional acts, as may be necessary and reasonably requested
by the other party or parties to effect the transaction contemplated by this
Agreement.
14.12 WAIVER. The rights and remedies of the parties to this Agreement
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are cumulative and not alternative. Neither the failure nor any delay by any
party exercising any right, power or privilege under this Agreement or the
documents referred to herein will operate as a waiver of such right, power or
privilege, and no single or partial exercise of any such right, power or
privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. Except as
otherwise provided in this Agreement, to the maximum extent permitted by
applicable law, (i) no waiver of any claim or right under this Agreement will be
valid unless evidenced by a writing signed by the waiving party, (ii) no waiver
given by a party will be applicable except in the specific instance for which it
is given, and (iii) no notice to or demand on a party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to herein.
ARTICLE 15
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ ANTITRUST IMPROVEMENTS ACT OF 1976
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The parties have determined that the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Act of
1976 does not apply to this transaction.
ARTICLE 16
DISCLAIMERS OF WARRANTIES
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Seller has not made, and will not make, any warranty or representation,
express, implied, or statutory, whatsoever in connection with this Agreement or
the transaction contemplated by it, including the accuracy or completeness of
data, information, or materials furnished at any time to Buyer in connection
with the Interests, or the quality or quantity of hydrocarbons reserves (if any)
attributable to the Properties, or the ability of the Properties to produce
hydrocarbons. None of Seller's Associated Parties is authorized to make any
warranty or representation on Seller's behalf. All data, information, and other
materials furnished by Seller are provided to Buyer as a convenience, and
reliance on or use of them is at Buyer's sole risk.
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Executed as of the date first above written.
SELLERS:
NORSE EXPLORATION, INC.,
A DELAWARE CORPORATION
BY:
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇, VICE PRESIDENT LAND
* EXECUTED SUBJECT TO THE RECEIPT OF DEPOSIT IN
THE AMOUNT OF $1,075,000 PER ARTICLE 2.4.
AND
NORSE PIPELINE, INC.,
A DELAWARE CORPORATION
BY:
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇, VICE PRESIDENT LAND
* EXECUTED SUBJECT TO THE RECEIPT OF DEPOSIT IN
THE AMOUNT OF $1,075,000 PER ARTICLE 2.4.
AND
BUYER:
GOTHIC ENERGY CORPORATION
AN OKLAHOMA CORPORATION
BY:
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▇▇▇▇▇▇▇ ▇▇▇▇▇, PRESIDENT
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