EXHIBIT 10.1
PURCHASE AND SALE AGREEMENT BY AND BETWEEN
CONTINENTAL INDUSTRIES, LC AND DAR, LLC AND
GALAXY ENERGY CORPORATION DATED JANUARY 14, 2004
PURCHASE AND SALE AGREEMENT
by and between
DAR LLC, as SELLER
and
GALAXY ENERGY CORPORATION, as BUYER
January 14, 2004
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (this "Agreement"), dated January 14,
2004, is by and between DAR, LLC, a Wyoming limited liability company ("Seller")
and Galaxy Energy Corporation, a Colorado corporation ("Buyer"). Buyer and
Seller are collectively referred to herein as the "Parties" and sometimes are
individually referred to as a "Party."
RECITALS
A. Seller owns an interest in the Assets.
B. This Agreement contemplates a transaction in which Buyer will
purchase from Seller, and Seller will sell to Buyer, all of
Seller's right, title and interest in the Assets.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual promises
herein made, and in consideration of the representations, warranties, covenants
and indemnities herein contained, the parties agree as follows:
Article 1
CERTAIN DEFINITIONS
Section 1.1 CERTAIN DEFINED TERMS. Unless the context otherwise
requires, the respective terms defined in Appendix A attached hereto and
incorporated herein shall, when used herein, have the respective meanings
therein specified, with each such definition to be equally applicable both to
the singular and plural forms of the term so defined.
Article 2
SALE AND PURCHASE OF ASSETS
Section 2.1 SALE AND PURCHASE. On and subject to the terms and
conditions of this Agreement, Seller agrees to sell and convey to Buyer, and
Buyer agrees to purchase from Seller, the Assets, effective as of the Effective
Date.
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Article 3
PURCHASE PRICE
Section 3.1 AGGREGATE PURCHASE PRICE. The total purchase price for the
sale and conveyance to Buyer of the Assets is Two Million Seven Hundred
Sixty-three Thousand Six Hundred Fifty-five and 22/100 Dollars ($2,763,655.22)
cash (the "Closing Payment"), payable as described in Section 3.2 below, and
3,000,000 restricted shares of Buyer's common stock (the "Buyer Shares")
(collectively the "Purchase Price"), subject to adjustment in accordance with
the terms of this Agreement.
Section 3.2 CLOSING PAYMENT. At the Closing, Buyer shall pay Seller One
Hundred Sixty-three Thousand Six Hundred Fifty-five and 22/100 Dollars
($163,655.22) (the "Closing Payment"), via wire transfer in immediately
available funds to the account specified by Seller by written notice delivered
to Buyer not less than two (2) Business Days prior to Closing, and shall deliver
to Seller stock certificates evidencing the Buyer Shares and a promissory note
(the "Note"), in the form of note set forth on Exhibit "B" attached hereto, in
the principal amount of Two Million Six Hundred Thousand Dollars ($2,600,000),
payable as follows: (i) $1,000,000 on or before January 14, 2005 (the "Initial
Payment") and (ii) $1,600,000 on or before June 24, 2005 (the "Final Payment").
The amount of the Initial Payment shall be subject to adjustment as provided in
this Agreement. The Note shall bear interest at the rate of six percent (6%) per
annum and shall be secured by a Mortgage covering the Assets in the form set
forth on Exhibit "F" (the "Mortgage").
Section 3.3 ADJUSTMENT TO INITIAL PAYMENT. At Closing, the Purchase
Price shall be adjusted, and the amount of the Initial Payment shall be adjusted
accordingly, as follows and the resulting amount shall be referred to herein as
the "Adjusted Purchase Price."
(a) The Purchase Price shall be adjusted upward by the
following:
(i) The amount of all actual operating or capital
expenditures or prepaid expenses attributable to the Assets
paid by or on behalf of Seller in connection with the
operation of the Assets and which are, according to GAAP,
attributable to the period of time between the Effective Date
and the Closing Date. Such expenditures and expenses shall
include, without limitation, royalties, rentals and other
charges; ad valorem, property, excise and any other taxes
based upon or measured by the ownership of the Assets, the
production of Hydrocarbons or the receipt of proceeds
therefrom; and expenses payable to a third person under
applicable joint operating agreements, including, without
limitation, overhead charges and royalty disbursement fees
payable to operator, or similar payments to third party
operators, or, in the absence of any joint operating
agreement, those items customarily billed under such an
agreement.
(ii) The value, less taxes (other than taxes on net
income), of all marketable Hydrocarbons attributable to the
Assets in storage facilities above or upstream from the
pipeline connection in each storage facility, or downstream of
delivery point, sales meters on gas pipelines, as of the
Effective Date, at the prevailing market value at the time of
sale in the area, adjusted for grade and gravity.
(iii) An amount equal to the value (determined by Buyer
and Seller prior to the Closing Date) of the underproduction
as of the Effective Date of Hydrocarbons produced from the
Assets under any operating agreement, gas balancing and
storage agreement, gas processing or dehydration agreement or
similar agreement.
(iv) Expenditures incurred by Seller and not described
above that are directly associated or connected with owning,
developing, exploring, operating or maintaining the Assets or
producing, transporting and marketing the Hydrocarbons
therefrom for all periods on and after the Effective Date.
(v) Any other amounts agreed upon by Seller and Buyer.
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(b) The Purchase Price shall be adjusted downward by the
following:
(i) An amount equal to the value (determined by Buyer
and Seller prior to the Closing Date) of the overproduction as
of the Effective Date of Hydrocarbons produced from the Assets
under any operating agreement, gas balancing and storage
agreement, gas processing or dehydration agreement or similar
agreement.
(ii) Any Environmental Defects pursuant to Section 7.4.
(iii) Any Title Defects pursuant to Sections 8.2, 8.3
and 8.4.
(iv) The gross proceeds received by Seller, net of
applicable severance and production taxes and compression
charges, from the sale of Hydrocarbons derived from the Assets
attributable to the period of time after the Effective Date.
(v) An amount equal to all expenditures, liabilities and
costs relating to the Assets that are unpaid as of the Closing
Date and are assessed for or attributable to the period of
time prior to the Effective Date.
(vi) An amount equal to all unpaid ad valorem, property,
production, severance and similar taxes and assessments (but
not including income taxes) based upon or measured by the
ownership of the Assets, the production of Hydrocarbons, or
the receipt of proceeds therefrom, which taxes or assessment
become due and payable or accrue (but have not yet become due
and payable) with respect to the Assets prior to the Effective
Date, which amount shall, where possible, be computed based
upon the tax rate and values applicable to the tax period in
question; otherwise, the amount of the adjustment under this
paragraph shall be computed based upon such taxes addressed
against the applicable portion of the Assets for the
immediately preceding tax period just ended.
(vii) Any other amounts agreed upon by Seller and Buyer.
Section 3.4 PAYMENT AND CALCULATION OF ESTIMATED ADJUSTED PURCHASE
PRICE; PAYMENT AT CLOSING. Seller shall prepare and deliver to Buyer, at least
two (2) days prior to the Closing Date, Seller's estimate of the Adjusted
Purchase Price, together with a statement setting forth Seller's estimate of the
amount of each adjustment to the Purchase Price to be made pursuant to Section
3.3. The parties shall negotiate in good faith and attempt to agree on such
estimated adjustments prior to Closing. In the event any estimated adjustment
amounts are not agreed upon prior to Closing, the Adjusted Purchase Price shall
be established based on Seller's and Buyer's agreed upon estimated adjustments
and Seller's good faith estimation of any disputed or undetermined amount and
the amount of the Initial Payment shall be adjusted accordingly.
Article 4
DRILLING PROGRAM AND TAKEOVER
_________Section 4.1. Drilling Program AND TAKEOVER. Seller and Buyer have
delineated certain phases of operation the schedule of which is delineated on
Exhibit "D" (the "Drilling Program"). Buyer shall use reasonable efforts,
subject to customary industry standards, to develop the Assets pursuant to the
Drilling Program. Development of the Assets as provided in the Drilling Program
may be changed by written mutual agreement of the parties.
In the event that Buyer deems it uneconomic to, or Buyer no longer
desires to, continue development of the Assets at any time, Buyer shall give
written notice thereof to Seller, Seller shall then have sixty (60) days in
which to notify Buyer that it desires to take over operation of the Assets which
Buyer no longer wishes to develop. If operations to develop the Assets pursuant
to the Drilling Program are not being conducted by Buyer on any part of the
Assets for a period of one (1) year or more, Seller may, at any time thereafter,
notify Buyer that it desires to take over operation of said Assets. If it so
desires, Seller may take over operations of only part of the Assets. Such Assets
to be taken over by Seller shall be delivered within thirty (30) days after
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notification by Seller pursuant to an Assignment, Conveyance and ▇▇▇▇ of Sale in
the form of Exhibit "E" from Buyer to Seller.
Section 4.2. COSTS. Buyer shall pay all of the costs of each well
drilled under the terms of this Agreement.
Section 4.3. INDEMNIFICATION. Subject to the provisions of the Contract
Operator Agreement, Buyer shall, to the fullest extent permitted by applicable
law, protect, indemnify and hold Seller harmless, free and clear of and from all
liens, claims, actions and causes of action of every kind arising out of or in
connection with operations and activities conducted or caused by Buyer under or
pursuant to this Agreement.
Section 4.4 EXPIRING LEASES. It is the understanding of Buyer that some
of the leases set forth in Exhibit "A" may expire before the Final Payment is
made or the Drilling Program is completed. Buyer shall take, or cause to be
taken, reasonable commercial measures to maintain or renew said leases.
Article 5
RIGHT TO PRODUCTION
Section 5.1 RIGHT TO PRODUCTION. Prior to any default by Buyer under
the Note or Mortgage, Buyer shall be entitled to receive all of the production
from any well produced on the Assets and the proceeds therefrom (after deducting
production taxes, excise taxes, royalty, overriding royalty, including any
overriding royalty interest reserved or owned by Seller, and other similar
interests payable out of production).
Article 6
REPRESENTATIONS AND WARRANTIES
Section 6.1 REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents
and warrants to Buyer as follows:
(a) ORGANIZATION AND QUALIFICATION. It is duly organized,
validly existing, in good standing under the laws of the State of
Wyoming.
(b) POWER AND AUTHORITY. Seller has all requisite power and
authority to enter into this Agreement and to perform its obligations
hereunder. The execution, delivery and performance of this Agreement
and the transactions contemplated hereby have been duly and validly
authorized by all requisite action on the part of Seller.
(c) ENFORCEABILITY. This Agreement constitutes a 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) NO CONFLICT OR VIOLATION. Neither the execution and
delivery of this Agreement nor the consummation of the transactions and
performance of the terms and conditions contemplated hereby by Seller
will (i) conflict with or result in a violation or breach of any
provision of its governing documents, or of any other material
agreement, indenture or other instrument under which Seller is bound,
or (ii) violate or conflict with any law applicable to Seller or the
Assets.
(e) CONSENTS. To the Knowledge of Seller, 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 by Seller, except for such consents,
approvals, authorizations, permits, filings and notifications the
failure of which to obtain or make
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are not reasonably likely to have a material adverse effect on the
ability of Seller to consummate and perform the transactions
contemplated by this Agreement.
(f) MATERIAL CONTRACTS. To the Knowledge of Seller, SCHEDULE
6.1(F) attached hereto sets forth a list of all contracts to which
Seller is a party or by which Seller is bound or subject which are
material to the conduct and operations of the Assets (collectively,
"Material Contracts"). All of the Material Contracts are valid and
binding upon Seller in accordance with their terms, and to the
Knowledge of Seller, neither Seller nor any other Person is in default
in any material way, nor has Seller received or sent notice of default
or of any unresolved claim, under any such Material Contracts.
(g) LITIGATION. To the Knowledge of Seller, except for matters
disclosed on SCHEDULE 6.1(G) attached hereto, there is no action, suit
or proceeding pending, or, to the Knowledge of Seller, threatened
against or affecting the Assets before any Governmental Authority.
(h) LICENSES, PERMITS, ETC. To the Knowledge of Seller, Seller
possesses such valid franchises, certificates of convenience and
necessity, operating rights, rights of way, licenses, permits,
consents, authorizations, exemptions and orders of Governmental
Authorities, as are necessary to operate the Assets.
(i) ENCUMBRANCES. To the Knowledge of Seller, Seller has not
caused nor allowed any mortgage, lien or other encumbrance to be placed
upon or against the Assets that will not be released at or prior to
Closing, other than (i) liens for taxes and assessments which are not
yet delinquent, or, if delinquent, are being protested, (ii) rights
under operating agreements or similar contracts to assert liens against
the Assets (but not including rights which have actually been
asserted), or (iii) Permitted Encumbrances.
(j) COMPLIANCE WITH LAW. To the Knowledge of Seller,
operations on the Assets have been and are being conducted in
accordance with all applicable Laws.
(k) ENVIRONMENTAL MATTERS. Except for matters disclosed on
SCHEDULE 6.1(K) attached hereto, operations conducted by Seller on the
Assets, and, to the Knowledge of Seller, by any Person conducting
operations on the Assets, have been conducted in material compliance
with Environmental Laws. Except for matters disclosed on SCHEDULE
6.1(K), to the Knowledge of Seller, the Assets are not the subject of
any existing, pending or, to the Knowledge of Seller, threatened
Environmental Claim. To the Knowledge of Seller, All material notices,
permits, licenses, and similar authorizations, required to be obtained
or filed in connection with Seller's ownership or operations of the
Assets, and each item of personal property owned, leased or operated by
Seller which is included in the Assets, including, without limitation,
notices, licenses, permits and authorizations required in connection
with treatment, storage, disposal, or release of Hazardous Materials
into the environment, have been duly obtained or filed. To the
Knowledge of Seller, all Hazardous Materials generated at each tract of
real property and by each item of personal property owned, leased or
operated by Seller which are included in the Assets have been
transported, treated, and disposed of only by carriers or facilities
maintaining valid permits under RCRA and all other Environmental Laws
for the conduct of such activities. Except for matters disclosed on
SCHEDULE 6.1(K) attached hereto, to the Knowledge of Seller, there have
been no Hazardous Discharges which were not in compliance with
Environmental Laws. Except for matters disclosed on SCHEDULE 6.1(K), to
the Knowledge of Seller, Seller has no contingent liability in
connection with any Hazardous Discharge from the Assets.
(l) AFE'S. SCHEDULE 6.1(L) attached hereto sets forth the
outstanding authorizations for expenditures ("AFE's") that (i) require
the drilling of ▇▇▇▇▇ or other development operations in order to earn
or to continue to hold all or any portion of the Assets, or (ii)
obligate Seller to make payments of any amounts in connection with the
drilling of ▇▇▇▇▇ or other capital expenditures affecting the Assets.
SCHEDULE 6.1(L) also sets forth all drilling commitments and deadlines
relating to the Assets.
(m) TAXES. To the Knowledge of Seller, all excise, occupation,
franchise, severance, production, sales and other taxes, duties or
charges levied, assessed or
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imposed upon or against the Assets by any Governmental Authority have
been duly paid or adequately provided for or are being timely and
properly contested, as described on SCHEDULE 6.1(M) attached hereto,
and all excise, franchise and other tax reports or other reports
required by law or regulation with respect thereto have been duly filed
or extensions have been duly obtained.
(n) GAS IMBALANCES, PREPAYMENTS. Except as shown on SCHEDULE
6.1(N) attached hereto, there are no gas imbalances affecting the
Assets which would require Buyer to deliver any gas without receiving
full payment therefore, nor has Seller received any prepayments or
other payments which would require Buyer to deliver any oil or gas
without receiving full payment therefore.
(o) WELL STATUS. To the Knowledge of Seller, as of the date of
this Agreement, with respect to Assets for which Seller is the
operator, there are no ▇▇▇▇▇ that (i) Seller is currently obligated by
law or contract to presently plug and abandon, or (ii) to Seller's
Knowledge, have been plugged and abandoned but have not been plugged in
accordance in all material respects with all applicable requirements of
each regulatory authority having jurisdiction over the Assets.
(p) EQUIPMENT. To the Knowledge of Seller, all of the
Equipment has been maintained in a state of repair adequate to maintain
normal operation of the Assets in a manner consistent with Seller's
past practices.
(q) PREFERENTIAL RIGHTS. To the Knowledge of Seller, except as
shown on SCHEDULE 6.1(Q) attached hereto, there are no Preferential
Rights or Transfer Requirements required to be obtained or complied
with prior to the Closing.
(r) EVENTS SUBSEQUENT TO EFFECTIVE DATE. Except in each case
as set forth in SCHEDULE 6.1(R) attached hereto, since the Effective
Date, to Seller's Knowledge, there has not been any:
(i) material destruction, damage to, or loss of any
Assets;
(ii) sale or other disposition of any of the Assets
except (a) in the ordinary course or business, or (b) any item
of personal property or equipment having a value of more than
$10,000; or
(iii) material adverse change in the aggregate
production volumes from the ▇▇▇▇▇.
(s) ROYALTIES. To the Knowledge of Seller, all royalties,
overriding royalties and other similar payments due and payable on
production with respect to a Lease have been timely and fully paid,
except amounts that are being held in suspense which will not result in
grounds for cancellation of Seller's rights in such Lease.
(t) DISCLOSURE. Neither this Agreement nor any Appendix,
Schedule, Exhibit or certificate delivered in accordance with the terms
hereof, or any document or statement in writing which has been supplied
by or on behalf of Seller in connection with the transactions
contemplated hereby, contain any untrue statement of a material fact to
Seller's knowledge. To Seller's knowledge, there is no fact known to
Seller which could cause an adverse effect on the Assets which has not
been set forth in this Agreement or in the Schedules or Exhibits or
certificates or statements in writing furnished in connection with the
transactions contemplated by this Agreement. Seller has provided, and
will continue to provide Buyer to the Closing Date, all information
that Buyer has requested or reasonably requests in connection with the
transactions contemplated by this Agreement.
(u) ADVISORS' AND BROKERS' FEES. Seller has not retained any
advisor or broker in respect of the transactions contemplated by this
Agreement for which Buyer shall incur any liability.
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(v) BANKRUPTCY. There are no bankruptcy or reorganization
proceedings pending against, being contemplated by, or, to the
Knowledge of Seller, threatened against Seller.
Section 6.2 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer agrees,
represents and warrants to Seller as follows:
(a) ORGANIZATION AND QUALIFICATION. Buyer is a corporation,
duly organized, validly existing and in good standing under the laws of
the State of Colorado, and is duly qualified to carry on its business
and is in good standing under the laws of the State of Wyoming.
(b) AUTHORITY. Buyer has all requisite power and authority to
execute and deliver this Agreement and to perform its obligations under
this Agreement. The execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly and
validly authorized by all requisite action on the part of Buyer.
(c) ENFORCEABILITY. This Agreement constitutes 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 (ii) the power of a court to deny enforcement of remedies
generally based upon public policy.
(d) NO CONFLICT OR VIOLATION. Neither the execution and
delivery of this Agreement nor the consummation of the transactions and
performance of the terms and conditions contemplated hereby by Buyer
will (i) conflict with or result in a violation or breach of any
provision of the certificate of incorporation, bylaws or other similar
governing documents of Buyer or any material agreement, indenture or
other instrument under which Buyer is bound, or (ii) violate or
conflict with any law applicable to Buyer or the properties or assets
of Buyer.
(e) CONSENTS. 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,
except for such consents, approvals, authorizations, permits, filings
and notifications the failure of which to obtain or make are not
reasonably likely to have a material adverse effect on the ability of
Buyer to consummate and perform the transactions contemplated by this
Agreement.
(f) ACTIONS. There is no action, suit or proceeding pending
or, to the Knowledge of Buyer, threatened against Buyer, which would be
likely to have a material adverse effect on the ability of Buyer to
consummate and perform the transactions contemplated by this Agreement.
(g) ADVISORS' AND BROKERS' FEES. Buyer has not retained any
advisor or broker in respect of the transactions contemplated by this
Agreement for which Seller shall incur any liability.
(h) INDEPENDENT INVESTIGATION. Buyer has been advised by and
has relied upon its own legal counsel, tax, engineering and other
professional counsel and consultants concerning this Agreement, the
Assets and the value thereof. By reason of Buyer's knowledge and
experience in the evaluation, acquisition, and operation of oil and gas
properties, it has evaluated the merits and risks of purchasing the
Assets from Seller and has formed an opinion based solely on Buyer's
knowledge and experience and not on any representations or warranties
by Seller, other than those representations and warranties expressly
set forth herein. Buyer acknowledges that Seller has made no warranty
or representation, express or implied, statutory or otherwise, as to
the accuracy or completeness of any description of pricing assumptions,
quality or quantity of the Hydrocarbon reserves, if any, attributable
to the Assets, the ability or potential of the Assets to produce
Hydrocarbons, or geologic and/or geophysical data and any
interpretations thereof.
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Article 7
ACCESS TO INFORMATION; ENVIRONMENTAL MATTERS
Section 7.1 GENERAL ACCESS AND SPECIAL INDEMNITY. Through and until the
Closing Date, Seller shall permit Buyer and its representatives to have access
at reasonable times in Seller's offices and, in a manner so as not to interfere
unduly with the business operations of Seller, to Seller's Records, insofar as
the Seller may do so without (i) violating legal constraints or any legal
obligation, or (ii) waiving any attorney/client work product or like privilege,
and (iii) subject to any required consent of any third person. Buyer indemnifies
and agrees to release, defend, indemnify and hold harmless Seller from and
against any and all claims arising from Buyer's inspecting and observing the
Assets, including (a) claims for personal injuries to or death of employees of
the Buyer, its contractors, agents, consultants and representatives, and damage
to the property of Buyer or others acting on behalf of Buyer; and (b) claims,
demands, losses, damages, liabilities, judgments, causes of action, costs or
expenses for personal injuries to or death of employees of Seller or third
parties, and damage to the property of the Seller or third parties. The
foregoing indemnity includes, and the parties intend it to include, an
indemnification of the Seller from and against claims arising out of or
resulting, in whole or part, from the condition of the Assets caused by Buyer's
inspection thereof or by the Seller's sole, joint, comparative, or concurrent
negligence, strict liability or fault.
Section 7.2 CONFIDENTIAL INFORMATION. Buyer agrees to maintain all
information made available to it pursuant to this Agreement confidential and to
cause its officers, employees, representatives, consultants and advisors to
maintain all information made available to them pursuant to this Agreement
confidential if this Agreement terminates for a period of one (1) year following
such termination. Notwithstanding anything to the contrary, any information
pertaining to or relating to the "tax treatment" or "tax structure" (in each
case, within the meaning of Treasury Regulation Sec. 1.6011-4) arising from or
in respect of this Agreement and any related transactions contemplated pursuant
thereto, shall not be subject to the confidentiality obligation imposed
hereunder.
Section 7.3 ENVIRONMENTAL REVIEW AND AUDIT.
(a) ENVIRONMENTAL ACCESS. Until three (3) days prior to
Closing (the "Examination Period"), and subject to the restrictions
contained in this Agreement and any required consent or waiver of any
third person, Seller shall (i) permit Buyer and its representatives to
have reasonable access at reasonable times in Seller's offices, and in
a manner so as not to interfere unduly with the business operations of
Seller, to Seller's environmental files and records relating to the
Assets insofar as Seller may do so without waiving any attorney/client,
work product or like privilege, and (ii) permit Buyer and its
representatives or consultants to have reasonable access to the Assets
for the purpose of allowing Buyer and such representatives or
consultants to inspect and/or audit the Assets for any Environmental
Defects (collectively, "Buyer's Environmental Review"), all at Buyer's
sole risk, cost and expense. Seller or its representatives shall have
the right to be present during any inspection of the Assets and shall
have the right, at their option and expense, to split samples with
Buyer.
(b) BUYER'S RESPONSIBILITY FOR REVIEW. In connection with
Buyer's Environmental Review, Buyer agrees that Buyer and its
representatives or consultants shall comply with all laws and shall
exercise due care with respect to the Assets and their condition,
taking into consideration the characteristics of any wastes or
substances found thereon, and in light of all relevant facts and
circumstances. Promptly after completing Buyer's Environmental Review,
Buyer shall, at its sole cost and expense, restore the Assets to
substantially the same condition the Assets were in at the time of
Buyer's entry thereon, in accordance with good engineering practice, if
changed due to Buyer's Environmental Review. Buyer shall maintain, and
shall cause its representatives or consultant to maintain, all
information obtained by Buyer pursuant to the Buyer's Environmental
Review as confidential and shall not disclose same to any third party
without the prior written consent of Seller, except to the extent
required by law.
Section 7.4 ENVIRONMENTAL DEFECTS.
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(a) BUYER'S ASSERTIONS OF ENVIRONMENTAL DEFECTS. On or prior
to the expiration of the Environmental Examination Period, Buyer shall
notify Seller in writing of any matters which, in Buyer's reasonable
opinion, constitute Environmental Defects; provided, however, Buyer
shall not assert any Environmental Defects until the aggregate
Remediation Amount of all alleged Environmental Defects exceeds 0.5% of
the Purchase Price, and, if not exceeded, such alleged Environmental
Defects will be deemed waived. Buyer's written notice must include: (i)
a specific description of each Asset (or portion thereof) that is
affected by the alleged Environmental Defect, (ii) a description of the
alleged Environmental Defect, and (iii) a calculation of the
Remediation Amount that Buyer asserts is attributable to such
Environmental Defect.
(b) SELLER'S RIGHTS AND ELECTIONS. If Buyer timely notifies
Seller in writing of any Environmental Defect as required by Section
7.4(a), Seller shall have the right to dispute the existence of such
Environmental Defect and/or the alleged Remediation Amount asserted
with respect thereto in accordance with the provisions of Section 8.4
of this Agreement. In addition, Seller, at its option, may elect, at or
prior to the Closing, one of the following options with respect to the
Asset or portion thereof (the "Environmental Defect Property"):
(i) leave such Environmental Defect Property in the
Assets and assume responsibility for the Remediation of such
Environmental Defect; or
(ii) withdraw such Environmental Defect Property from
this Agreement, delete it from the Assets, and retain and not
sell the Environmental Defect Property.
(c) REMEDIATION. If Seller elects the option set forth in
clause (i) above, Seller shall use commercially reasonable efforts to
implement such Remediation in a manner which is consistent with the
requirements of Environmental Laws and the provisions of any applicable
Lease, and Seller shall have access to the Environmental Defect
Property after the Closing Date to implement and complete such
Remediation in accordance with this Section. Seller will be deemed to
have adequately completed the Remediation required in the immediately
preceding paragraph (a) upon receipt of a certificate from a licensed
professional engineer.
(d) REDUCTION AMOUNT. If Seller elects the option set forth in
Section 7.4(b)(ii) with respect to one or more Environmental Defects,
then as Buyer's sole and exclusive remedy with respect to such
Environmental Defects, Buyer shall be entitled to reduce the Initial
Payment by the amount allocated on EXHIBIT C attached hereto, to the
Environmental Defect Property, subject to Section 7.4(a).
Article 8
TITLE ADJUSTMENTS
Section 8.1 TITLE WARRANTY. Seller shall warrant Defensible Title to
the Assets transferred at Closing under the Conveyance, Assignment and ▇▇▇▇ of
Sale from and against all Persons claiming by, through and under Seller, but not
otherwise.
Section 8.2 BUYER'S TITLE REVIEW.
(a) BUYER'S ASSERTION OF TITLE DEFECTS. Until the end of the
Examination Period, Buyer shall have the right to furnish Seller
written notice meeting the requirements of this Section 8.2(a) (the
"Title Defects Notice") setting forth any matters which, in Buyer's
reasonable opinion, constitute Title Defects and which Buyer asserts as
a Title Defect with respect to any Assets pursuant to this Article 8;
provided however Buyer shall not assert any Title Defect until the
aggregate Title Defect Amount of all alleged Title Defects exceeds 0.5%
of the Purchase Price, and if not exceeded, such alleged Title Defects
will be deemed waived. 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 a Title Defect Notice given to Seller on or before
the expiration of the
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Examination Period. To be effective, Buyer's Title Defect Notice of a
Title Defect must include (i) a brief description of the matter
constituting the asserted Title Defect, (ii) the claimed Title Defect
Amount attributable thereto, and (iii) reference to supporting
documents reasonably necessary for Seller to verify the existence of
such asserted Title Defect.
(b) PURCHASE PRICE ALLOCATIONS. The Purchase Price has been
allocated to the Assets in accordance with the respective values set
forth in EXHIBIT "C." If any adjustment is made to the Initial Payment
pursuant to this Section 8.2, a corresponding adjustment shall be made
to the portion of the Purchase Price allocated to the affected Assets
in such EXHIBIT "C."
(c) SELLER'S RIGHTS AND OPPORTUNITY TO CURE. If Buyer timely
gives Seller Title Defect Notice(s) of one or more Title Defects,
Seller shall have the right to then or thereafter dispute the existence
of such Title Defect and/or the alleged Title Defect Amount asserted
with respect thereto in accordance with the provisions of Section 8.4
of this Agreement. In addition, the following terms and conditions
shall apply with respect to any Title Defect asserted by Buyer in a
timely Title Defect Notice:
(i) Seller shall have until the Closing Date, at its
cost and expense, if it so elects but without obligation, to
cure all or a portion of such asserted Title Defects. Any
asserted Title Defects which are waived by Buyer within such
time shall be deemed "Permitted Encumbrances" hereunder.
Subject to Section 8.2(c)(ii) and Seller's right to dispute
the existence of a Title Defect and/or the Title Defect Amount
asserted with respect thereto under Section 8.4, if Seller
within such time fails to cure any Title Defect of which Buyer
has given timely written notice as required above, and Buyer
has not and does not waive same on or before the Closing Date,
each Asset affected by such uncured and unwaived Title Defect
shall be a "Title Defect Property."
(ii) If Buyer furnishes to Seller timely Title Defect
Notice(s) of one or more Title Defects and the same are not
waived or cured as provided in Section 8.2(c)(i), as
applicable, Seller may elect to close the transactions
contemplated hereby and retain the right to cure any such
Title Defects after Closing. In such event, but subject to
Seller's right to dispute the existence of a Title Defect
and/or the Title Defect Amount asserted with respect thereto
under Section 8.4, the Initial Payment shall be subject to
reduction pursuant to Section 8.2(d), taking into account all
Title Defect Amounts attributable to the Title Defect
Properties affected by the Title Defects which Seller may
elect to cure after Closing. Seller shall have ninety (90)
calendar days after the Closing Date in which to attempt to
cure any such Title Defect. If Seller cures any such Title
Defect, then Buyer shall promptly pay Seller the Title Defect
Amount with respect to the Title Defect that is so cured, but
not exceeding the aggregate amount of the reductions in the
Initial Payment as a result of any Title Defects.
(d) BUYER'S TITLE ADJUSTMENTS. As Buyer's sole and exclusive
remedy with respect to Title Defects, Buyer shall be entitled to reduce
the Initial Payment by the amount of the Title Defect Amounts. "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 and subject to the
following conditions:
(i) If the Title Defect results from Seller having a
lesser Net Revenue Interest in such Title Defect Property than
the Net Revenue Interest specified therefore in EXHIBIT "A,"
the Title Defect Amount shall be equal to the product obtained
by multiplying the portion of the Purchase Price allocated to
such Title Defect Property in EXHIBIT "C" by a fraction, the
numerator of which is the reduction in the Net Revenue
Interest and the denominator of which is the Net Revenue
Interest specified for such Title Defect Property in EXHIBIT
"A."
(ii) If the Title Defect results from the existence of a
lien, the Title Defect Amount shall be an amount sufficient to
discharge such lien.
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(iii) If the Title Defect results from any matter not
described in paragraphs (i) or (ii) above, the Title Defect
Amount shall be an amount equal to the difference between the
value of the Title Defect Property affected by such Title
Defect with such Title Defect and the value of such Title
Defect Property without such Title Defect (taking into account
the portion of the Purchase Price allocated in EXHIBIT "C" to
such Title Defect Property); provided, that if such Title
Defect is reasonably susceptible of being cured, the Title
Defect Amount shall be the reasonable cost and expense of
curing such Title Defect, if less.
(iv) The Title Defect Amount attributable to a Title
Defect Property shall not exceed the portion of the Purchase
Price allocated to such Title Defect Property in EXHIBIT "C."
(e) TITLE ADJUSTMENT DEDUCTIBLE. Notwithstanding anything
herein to the contrary, any downward adjustment to the Initial Payment
provided for in 8.2(d) shall be made only to the extent and only as to
that amount by which the aggregate amount of the Title Defect Amounts
exceeds 0.5% of the Purchase Price.
Section 8.3 DETERMINATION OF TITLE DEFECTS. An Asset shall not be
deemed to have a "Title Defect" if the following statements are true in all
material respects with respect to such Asset as of the Closing Date:
(i) Seller has Defensible Title thereto;
(ii) all rentals, ▇▇▇▇ clause payments, shut-in gas
payments and other similar payments (other than royalties,
overriding royalties and other similar payments on production)
due with respect to such Asset have been properly and timely
paid; and
(iii) Seller is not in default under the material terms
of any Leases, farmout agreements or other contracts or
agreements respecting such Asset which could (a) prevent
Seller from receiving the proceeds of production attributable
to Seller's interest therein, or (b) result in cancellation of
Seller's interest therein.
Notwithstanding any other provision in this Agreement to the contrary,
the following matters shall not be asserted as, and shall not constitute, Title
Defects:
(a) defects in the chain of title such as minor name
discrepancies, the mere failure to recite marital status in a document,
or omissions of successions of heirship proceedings, unless Buyer
provides affirmative evidence that such failure or omission results in
another party's superior claim of title to the relevant Asset portion
thereof;
(b) defects arising out of lack of survey;
(c) defects arising out of a lack of corporate authorization,
unless Buyer provides affirmative evidence that such lack of
authorization results in another party's superior claim of title to the
relevant Assets or portion thereof; and
(d) defects that have been cured by possession under the
applicable statutes of limitations or statutes for prescription.
Section 8.4 DEFERRED CLAIMS AND DISPUTES. Seller shall notify Buyer of
any Title Defects or Environmental Defects that it disputes no later than two
(2) days before Closing. Otherwise, Seller shall be deemed to have accepted such
Defects. In the event that Buyer and Seller have not agreed upon (i) the
existence of one or more Title Defects or one or more adjustments, credits or
offsets claimed by Buyer or Seller pursuant to and in accordance with the
requirements of this Article 8, or (ii) the existence of one or more
Environmental Defects, any Remediation, Remediation Amount or plan therefore,
any such dispute or claim (a "Disputed Defect") shall be settled pursuant to
this Section 8.4, and shall not prevent or delay Closing.
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The amount attributable to any Disputed Defects shall be a reduction in
the Initial Payment. Buyer shall place such amount in an escrow account pending
resolution of the dispute as provided for herein. If the parties are unable to
resolve the dispute by informal discussions within thirty (30) days of Closing,
then the arbitration procedure set forth in Section 17.10 shall apply.
Article 9
COVENANTS OF SELLER AND BUYER
Section 9.1 CONDUCT OF BUSINESS PENDING CLOSING. Subject to the
constraints of applicable operating agreements and other existing agreements
with third parties, from the date of this Agreement hereof through the Closing,
except as consented to or approved by Buyer, Seller covenants and agrees that:
(a) LIENS. Seller shall not create any new liens or security
interests on the Assets, except to the extent required or permitted
incident to the exploration, operation or development of the Assets.
(b) OPERATION OF ASSETS. Seller shall:
(i) cause the Assets to be maintained and operated in
the ordinary course of business in accordance with Seller's
past practices (including the repair or replacement of
damaged, destroyed, obsolete, depreciated, non-working or
non-economical items of equipment or other personal property),
maintain insurance now in force with respect to the Assets and
pay or cause to be paid all costs and expenses in connection
therewith promptly when due;
(ii) cause, or, in the event Seller is not the operator,
use reasonable efforts to cause, the Assets to be maintained
and operated in material compliance with all laws;
(iii) (A) not commit to participate in the drilling of
any new well or other new capital expenditure on the Assets,
without Buyer's consent, which consent shall not be
unreasonably withheld, delayed or conditioned, or (B) elect to
become a non-consenting party with respect to any operation or
capital expenditure proposed by a third party;
(iv) maintain and keep the Assets in full force and
effect, except where such failure is due to the failure to pay
a delay rental, royalty, shut in royalty or other payment by
mistake or oversight, unless caused by Seller's willful
misconduct; and
(v) use reasonable diligence to maintain its
relationships with suppliers, customers and others having
material business relations with Seller with respect to the
Assets so that they will be preserved for Buyer on and after
the Closing Date.
(c) CONTRACTS AND AGREEMENTS. Seller shall not:
(i) enter into any Hydrocarbon sales, exchange,
processing or transportation contract with respect to the
Assets having a term in excess of one year which is not
terminable without penalty on notice of thirty (30) days or
less; or
(ii) voluntarily relinquish Seller's position as
operator with respect to any of the Assets.
Section 9.2 NOTICES AND CONSENTS. Each of the Parties will give any
notices to, make any filing with, and use its reasonable best efforts to obtain
any authorizations, consents, and approvals of governments and governmental
agencies in connection with the transactions contemplated by this Agreement.
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Section 9.3 ACTIONS BY PARTIES. Each of the Parties agrees to use
reasonable diligence to satisfy the conditions to Closing set forth in Article
10 and to refrain from taking any action within its control which would cause a
breach by such Party of a representation or warranty set forth herein; provided,
however, that Seller shall not be required to expend any funds or incur any
costs to prevent or cure a breach of the representations and warranties set
forth in Section 6.1.
Section 9.4 CASUALTY LOSS. In the event of a Casualty to an Asset prior
to Closing, this Agreement shall remain in full force and effect, and (unless
Buyer and Seller shall otherwise agree), at Buyer's election, such Asset shall
be treated as if it had a Title Defect associated with it and the procedure
provided for in Section 8.2 shall be applicable thereto.
Section 9.5 THIRD-PARTY SELLERS. Seller acknowledges that Buyer wishes
to purchase additional interests in the Assets from certain third-party owners.
Seller agrees to use its reasonable best efforts to assist Buyer in introducing
Buyer to such third parties and aid in negotiating such purchases on such terms
and conditions that may be acceptable to Buyer, either at or following Closing.
Article 10
CLOSING CONDITIONS
Section 10.1 SELLER'S CLOSING CONDITIONS. The obligation of Seller to
proceed with the Closing contemplated hereby is subject, at the option of
Seller, to the satisfaction on or prior to the Closing Date of all of the
following conditions:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The (i)
representations and warranties of Buyer contained in this Agreement
shall be true and correct in all material respects on and as of the
Closing Date, and (ii) 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.
(b) NO ACTION. On the Closing Date, no suit, action or other
proceeding (excluding any such matter initiated by Seller or an
Affiliate) shall be pending or threatened before any court or
governmental agency or body of competent jurisdiction seeking to enjoin
or restrain the consummation of the Closing or recover damages from
Seller resulting therefrom.
(c) SECURITY. Seller shall have been provided with
instruments, in forms reasonably satisfactory to Seller and its
counsel, securing the obligations under the Note and Mortgage.
(d) CONTRACT OPERATOR AGREEMENT. Buyer and Seller shall have
entered into an agreement, in mutually satisfactory form,
contemporaneously with the Closing, pursuant to which Seller agrees to
operate the Assets for Buyer (the "Contract Operator Agreement").
Section 10.2 BUYER'S CLOSING CONDITIONS. The obligations of Buyer to
proceed with the Closing contemplated hereby is subject, at the option of Buyer,
to the satisfaction on or prior to the Closing Date of all of the following
conditions:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. (i) The
representations and warranties of Seller contained in this Agreement
shall be true and correct on and as of the Closing Date as though made
as of the Closing Date, and (ii) 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.
(b) NO ACTION. On the Closing Date, no suit, action or other
proceeding (excluding any such matter initiated by Buyer) shall be
pending or threatened before any court or governmental agency or body
of competent jurisdiction seeking to enjoin or
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restrain the consummation of the Closing or recover damages from Buyer
or resulting therefrom.
(c) RELEASES. Buyer shall have been provided with copies of
releases in forms reasonably satisfactory to Buyer and its counsel, of
any mortgages, security interests, indebtedness or similar encumbrances
or burdens affecting the Assets.
(d) NO ADVERSE CHANGE. There shall have been no adverse change
in the aggregate volumes of production of Hydrocarbons from the Assets
since the Effective Date.
(e) CONTRACT OPERATOR AGREEMENT. Seller and Buyer shall have
entered into the Contract Operator Agreement.
Section 10.3 REGULATORY APPROVALS. If Buyer or Seller determines that
approval is required to permit Buyer to continue to use any governmental permits
with respect to the Assets after Closing, Buyer and Seller shall, as promptly as
practicable after the date of this Agreement, cooperate in filing the required
applications and notices with the appropriate governmental authorities seeking
authorization to confirm Buyer's continued right to use such permits or to
transfer or assign such permits to Buyer as necessary.
Article 11
CLOSING
Section 11.1 CLOSING. The Closing shall be held at 10:00 a.m., MST, on
January 14, 2004 (the "Closing Date"), at the offices of Seller in Casper,
Wyoming, or at such other time or place as Seller and Buyer may otherwise agree
in writing.
Section 11.2 SELLER'S CLOSING OBLIGATIONS. At Closing Seller shall
further execute and deliver, or cause to be executed and delivered, to Buyer the
following:
(a) a Conveyance, Assignment and ▇▇▇▇ of Sale, substantially
in the form attached hereto as Exhibit "E," for each county in which
the Assets are located and government forms of assignment, if
applicable;
(b) the releases, if any, referred to in Section 10.2(c);
(c) on forms supplied by Buyer, transfer orders or letters in
lieu thereof, directing the operator to make payment of proceeds
attributable to production from the Assets after the Effective Time to
Buyer;
(d) a non-foreign affidavit, as such affidavit is referred to
in Section 1445(b)(2) of the Code, dated as of the Closing Date; and
(e) the Contract Operator Agreement.
Section 11.3 BUYER'S CLOSING OBLIGATIONS. At Closing, Buyer shall
execute and deliver, or cause to be delivered, to Seller the following:
(a) the Closing Payment;
(b) the Note and the instruments securing such Note referred
to in Section 10.1(c);
(c) the Contract Operator Agreement; and
(d) Certificates evidencing the Buyer Shares
Section 11.4 SUSPENSE PROCEEDS. Seller shall remit to Buyer at Closing
all proceeds from production attributable to the Assets which are held in
suspense by Seller as of the Effective Date. Buyer shall be responsible for the
proper distribution of all such suspended
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proceeds and agrees to indemnify, defend and hold harmless Seller from and
against any and all claims, liabilities and losses related to such suspended
proceeds,
Article 12
POST-CLOSING MATTERS
Section 12.1 RECORDS. Within five (5) business days after Closing,
Seller shall deliver to Buyer the Seller Records. Seller shall be entitled to
keep a copy of any such Seller Records for its files. Buyer agrees to maintain
the Seller Records until the seventh (7th) anniversary of the Closing Date (or
for such longer period of time as Seller shall advise Buyer is necessary in
order to have the Seller Records available with respect to open years for tax
audit purposes), or, if any of the Seller Records pertain to any claim or
dispute pending on the seventh (7th) anniversary of the Closing Date, Buyer
shall maintain any of the Seller Records designated by Seller until such claim
or dispute is finally resolved and the time for all appeals has been exhausted.
Buyer shall provide Seller and its representatives reasonable access at
reasonable times to, and the right to copy all or any portion of, the Seller
Records.
Section 12.2 FINAL SETTLEMENT STATEMENT. As soon as practicable after
the Closing, but in no event later than ninety (90) days after Closing, Seller
shall prepare and deliver to Buyer, in accordance with this Agreement and GAAP,
a statement (the "Final Settlement Statement") setting forth each adjustment,
finally determined as of Closing, and showing the calculation of such
adjustments. Within thirty (30) days after receipt of the Final Settlement
Statement, Buyer shall deliver to Seller a written report containing any changes
that Buyer proposes be made in good faith to resolve any questions with respect
to the amounts due pursuant to such Final Settlement Statement. If the parties
reach agreement on such Final Settlement statement, the obligor Party thereunder
shall immediately pay the other Party the amount owed. If the Parties fail to
agree upon such Final Settlement Statement within one hundred fifty (150) days
after the Closing, the matters in dispute shall be submitted to arbitration
pursuant to Section 17.10.
Section 12.3 REMITTANCE OF PROCEEDS BY SELLER. Notwithstanding the
provisions of Section 12.2, if, following Closing, Seller receives after Closing
proceeds attributable to production from the Assets after the Effective Date, it
shall immediately remit such proceeds to Buyer, together with a copy of the
purchaser detail.
Section 12.4 TAXES. Seller and Buyer shall cooperate in the preparation
of Internal Revenue Service Form 8594, including all required amendments
thereto, in accordance with Section 1060 of the Code and the Treasury
Regulations promulgated thereunder, to report the allocation of the Purchase
Price among the Parties.
Section 12.5 FURTHER ASSURANCES. Seller and Buyer agree that, from time
to time after the Closing Date, they will execute and deliver such further
instruments, and take or cause to take, such other action as may be necessary to
carry out the purposes and intents of this Agreement.
Section 12.6 BUYER SHARES. Seller agrees that it shall retain all of
the Buyer Shares for a minimum period of one (1) year following the Closing Date
and at least 2,000,000 Buyer Shares until the expiration of eighteen (18) months
following the Closing Date. Thereafter, Seller shall be free to sell any of the
Buyer Shares it still holds subject to the following: (i) Seller shall not sell
more than 200,000 of the Buyer Shares in any weekly period, however, the
restricted legend regarding this provision shall be removed provided the holding
period requirements of Section k of the Rule 144 under the Securities Act are
satisfied, and (ii) any such sales will be subject to the volume limitations of
Rule 144 under the Securities Act during the holding period required under said
Rule 144.
Seller, within ten (10) business days of receipt of written notice from
Buyer or the holder of the Buyer Shares that it desires to sell any of the Buyer
Shares, shall have removed, or caused to be removed, the restrictive legend on
said Buyer Shares in order to allow the holder of the Buyer Shares to sell them
in compliance with the provisions of this Section 12.6.
None of the foregoing restrictions shall prevent Seller from having the
Buyer Shares registered in the name of a Person other than Seller or from
transferring or assigning any portion
16
of the Buyer Shares to an Affiliate or Wind River Resources, Inc.; but any such
Person's or Affiliate's holdings shall be aggregated with Seller's holdings for
purposes of such restrictions and such Person or Affiliate must agree in
writing to observe the restrictions. (Reference in this Section 12.6 and
in Section 12.7 below shall be deemed to include such Person, Wind River
Resources, Inc. or Affiliate.)
Section 12.7 PIGGYBACK REGISTRATION. Notwithstanding the provisions of
Section 12.6, Buyer agrees that it shall notify Seller in writing at least
thirty (30) days prior to filing any registration statement under the Securities
Act for purposes of effecting a public offering of any of Buyer's common stock
and will afford Seller an opportunity to include in such registration statement
all or any part of the Buyer Shares then held by Seller. Seller shall, within
fifteen (15) days after receipt of such notice from Buyer, inform Buyer in
writing of the number of Buyer Shares Seller wishes to include in such
registration statement. If Seller decides not to include all of the Buyer Shares
in the registration statement to be filed by Buyer, Seller shall nevertheless
continue to have the right to include any Buyer Shares in any subsequent
registration statement or registration statements as may be filed by Buyer with
respect to additional offerings of the Buyer's common stock, all upon the terms
and conditions set forth herein.
(a) UNDERWRITING. If a registration statement for which Buyer
gives notice under this Section 12.7 is for an underwritten offering,
Buyer shall so advise Seller, and, in such event, the right of Seller
to include the Buyer Shares in a registration pursuant to this Section
12.7 shall be conditioned upon Seller's inclusion of such Buyer Shares
in the underwriting to the extent provided herein. If Seller proposes
to distribute the Buyer Shares through such underwriting, it shall
enter into an underwriting agreement in customary form with the
managing underwriter or underwriters selected for such underwriting
(including a market stand-off agreement of up to 180 days if required
by such underwriters). Notwithstanding any other provision of this
Agreement, if the managing underwriter(s) determines(s) in good faith
that marketing factors require a limitation of the number of shares to
be underwritten, then the managing underwriter(s) may exclude shares
from the registration and the underwriting, and the number of shares
that may be included in the registration and the underwriting shall be
allocated, first to Buyer, and second to Seller. If Seller disapproves
of the terms of any such underwriting, Seller may elect to withdraw
therefrom by written notice to Buyer and the underwriter(s), delivered
at least ten (10) business days prior to the effective date of the
registration statement. Any Buyer Shares excluded or withdrawn from
such underwriting shall be excluded and withdrawn from the
registration.
(b) EXPENSES. All expenses incurred in connection with a
registration pursuant to this Section 12.7 (excluding underwriters' and
brokers' discounts and commissions relating to shares sold by Seller),
including, without limitation, all federal and "blue sky" registration,
filing and qualification fees, printers' and accounting fees, and fees
and disbursements of counsel for Buyer, shall be borne by Buyer, except
for fees and disbursements of counsel for Seller.
(c) FURNISH INFORMATION. It shall be a condition precedent to
the obligations of Buyer to take any action pursuant to this Section
12.7, that Seller shall furnish to Buyer such information regarding
itself, the Buyer Shares, and the intended method of disposition of
such securities as shall be required to timely effect the registration
of the Buyer Shares.
Article 13
SURVIVAL
Section 13.1 SURVIVAL. The representations, warranties, indemnities and
the covenants and agreements made herein by the Parties shall survive
indefinitely following the Closing Date.
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Article 14
LIMITATIONS
Section 14.1 DISCLAIMER OF WARRANTIES. IT IS THE EXPLICIT INTENT OF
EACH PARTY HERETO THAT SELLER IS NOT MAKING ANY REPRESENTATION OR WARRANTY
WHATSOEVER, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, BEYOND THOSE
REPRESENTATIONS OR WARRANTIES EXPRESSLY GIVEN IN THIS AGREEMENT, AND IT IS
UNDERSTOOD THAT, SUBJECT TO SUCH EXPRESS REPRESENTATIONS AND WARRANTIES, BUYER
TAKES THE ASSETS "AS IS" AND "WHERE IS." WITHOUT LIMITING THE GENERALITY OF THE
IMMEDIATELY PRECEDING SENTENCE, SELLER HEREBY (i) EXPRESSLY DISCLAIMS, AND
NEGATES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT COMMON LAW, BY
STATUTE OR OTHERWISE, RELATING TO (a) THE CONDITION OF THE ASSETS (INCLUDING,
WITHOUT LIMITATION, ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, OR OF CONFORMITY TO MODELS OR SAMPLES OF
MATERIAL), or (b) ANY INFRINGEMENT BY SELLER OF ANY PATENT OR PROPRIETARY RIGHT
OF ANY THIRD PARTY, and (ii) NEGATES ANY RIGHTS OF BUYER UNDER STATUTES TO CLAIM
DIMINUTION OF CONSIDERATION AND ANY CLAIMS BY BUYER FOR DAMAGES BECAUSE OF
REDHIBITORY VICES OR DEFECTS, WHETHER KNOWN OR UNKNOWN, IT BEING THE INTENTION
OF SELLER AND BUYER THAT THE ASSETS ARE TO BE ACCEPTED BY BUYER IN THEIR PRESENT
CONDITION AND STATE OF REPAIR.
Section 14.2 DAMAGES. NOTWITHSTANDING ANYTHING CONTAINED TO THE
CONTRARY IN ANY OTHER PROVISION OF THIS AGREEMENT, SELLER AND BUYER AGREE THAT
THE RECOVERY OF ANY DAMAGES SUFFERED OR INCURRED AS A RESULT OF ANY BREACH BY
ANY PARTY OF ANY OF ITS REPRESENTATIONS, WARRANTIES OR OBLIGATIONS UNDER THIS
AGREEMENT SHALL BE LIMITED TO THE ACTUAL DAMAGES SUFFERED OR INCURRED (WHICH
SHALL INCLUDE ANY INDIRECT, CONSEQUENTIAL, SPECIAL, EXEMPLARY OR PUNITIVE
DAMAGES AWARDED AGAINST OR PAID BY THE INDEMNIFIED PARTY SEEKING INDEMNITY
HEREUNDER TO ANY THIRD PARTY) AS A RESULT OF THE BREACH BY THE BREACHING PARTY
OF ITS REPRESENTATIONS, WARRANTIES OR OBLIGATIONS HEREUNDER AND IN NO EVENT
SHALL THE BREACHING PARTY BE LIABLE TO THE NON-BREACHING PARTY FOR ANY INDIRECT,
CONSEQUENTIAL, SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES (INCLUDING, WITHOUT
LIMITATION, ANY DAMAGES ON ACCOUNT OF LOST PROFITS OR OPPORTUNITIES OR LOST OR
DELAYED PRODUCTION) SUFFERED OR INCURRED BY THE NON-BREACHING PARTY AS A RESULT
OF THE BREACH BY THE BREACHING PARTY OF ANY OF ITS REPRESENTATIONS, WARRANTIES
OR OBLIGATIONS HEREUNDER.
Article 15
INDEMNIFICATION
Section 15.1 INDEMNIFICATION BY SELLER. Seller shall to the fullest
extent permitted by law, release, defend, indemnify and hold harmless Buyer, its
Affiliates and their respective directors, officers, employees, agents and other
representatives, from and against the following:
(a) All claims, demands, damages, liabilities, judgments,
losses and reasonable costs, expenses and attorneys' fees (individually
a "Loss" and collectively, the "Losses") arising from the breach by
Seller of any representation, warranty or covenant set forth in this
Agreement or the Closing Documents; and
(b) All losses arising from the ownership or operation of the
Assets prior to the Effective Date, including, but not limited to, any
Environmental Claims.
Section 15.2 INDEMNIFICATION BY BUYER. Buyer shall to the fullest
extent permitted by law, release, defend, indemnify and hold harmless, Seller,
its Affiliates and their respective directors, officers, employees, agents and
other representatives from and against the following:
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(a) All Losses arising from the breach by Buyer of any
representation, warranty or covenant set forth in this Agreement; and
(b) All Losses arising from the ownership and operation of the
Assets on and after the Effective Date, subject to the provisions of
the Contract Operator Agreement.
Section 15.3 NOTIFICATION. As soon as reasonably practical after
obtaining knowledge thereof, an indemnified Party shall notify the indemnifying
Party of any claim or demand which the indemnified Party has determined has
given or could give rise to a claim for indemnification under this Article 15.
Such notice shall specify the agreement, representation or warranty with respect
to which the claim is made, the facts giving rise to the claim and the alleged
basis for the claim, and the amount (to the extent then determinable) of
liability for which indemnity is asserted. In the event any action, suit or
proceeding is brought with respect to which a Party may be liable under this
Article 15, the defense of the action, suit or proceeding (including all
settlement negotiations and arbitration, trial, appeal, or other proceeding)
shall be at the discretion of and conducted by the indemnifying Party. If an
indemnified Party shall settle any such action, suit or proceeding without the
written consent of the indemnifying Party (which consent shall not be
unreasonably withheld), the right of the indemnified Party to make any claim
against the indemnifying Party on account of such settlement shall be deemed
conclusively denied. An indemnified Party shall have the right to be represented
by its own counsel at its own expense in any such action, suit or proceeding,
and if an indemnified Party is named as the defendant in any action, suit or
proceeding with respect to itself at its own expense. Subject to the foregoing
provisions of this Article 15, neither Party shall, without the other Party's
written consent, settle, compromise, confess judgment or permit judgment by
default in any action, suit or proceeding if such action would create or attach
any liability or obligation to the other Party. The Parties agree to make
available to each other, and to their respective counsel and accountants, all
information and documents reasonably available to them which relate to any
action, suit or proceedings, and the Parties agree to render to each other such
assistance as they may reasonably require of each other in order to ensure the
proper and adequate defense of any such action, suit or proceeding.
Article 16
TERMINATION; REMEDIES; LIMITATIONS
Section 16.1 TERMINATION.
(a) TERMINATION OF AGREEMENT. This Agreement and the
transactions contemplated hereby may be terminated at any time at or
prior to the Closing:
(i) by mutual written consent of Seller and Buyer;
(ii) by either Seller or Buyer if the combined total of
all Remediation Amounts asserted under Article 7 above and all
Title Defect Amounts asserted under Article 8 above exceed 10%
of the Purchase Price;
(iii) by Seller if any condition specified in Section
10.1 has not been satisfied on or before Closing and shall not
have been waived by Seller; or
(iv) by Buyer if any condition specified in Section 10.2
has not been satisfied on or before Closing and shall not have
been waived by Buyer.
(b) EFFECT OF TERMINATION. In the event of termination of this
Agreement by Seller, on the one hand, or Buyer, on the other hand,
pursuant to SECTION 16.1(a), written notice thereof shall forthwith be
given by the terminating Party to the other Party, and this Agreement
shall thereupon terminate; provided, however, that following such
termination Buyer will continue to be bound by its obligations set
forth in Section 7.2. If this Agreement is terminated as provided
herein, all filing, 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.
19
Section 16.2 REMEDIES.
(a) SELLER'S REMEDIES. Notwithstanding anything herein
provided to the contrary, upon the failure by Buyer to satisfy the
conditions to Closing or the Closing obligations, as the case may be,
on account of breaches of any of the representations and warranties
made by Buyer in this Agreement, or the failure to comply with the
covenants or other obligations of Buyer set forth herein, Seller may
enforce its legal and equitable remedies for such breach or failure
including specific performance of this Agreement.
(b) BUYER'S REMEDIES. Notwithstanding anything herein provided
to the contrary, upon failure of the Seller to satisfy the conditions
to Closing or the Closing obligations, as the case may be, on account
of breaches of any of the representations and warranties made by Seller
in this Agreement, or the failure by Seller to comply with the
covenants or other obligations of Seller set forth herein, Buyer may
enforce its legal and equitable remedies for such breach or failure,
including specific performance of this Agreement.
Article 17
MISCELLANEOUS
Section 17.1 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original instrument, but which
together shall constitute but one and the same instrument. Any counterpart of
this Agreement or any document or other instrument delivered hereunder may be
delivered by facsimile. Any facsimile signature shall be replaced with an
original signature as promptly as practical.
Section 17.2 GOVERNING LAW; JURISDICTION; PROCESS.
(a) THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY
SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF WYOMING WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING
TO CONFLICTS OF LAW RULES THAT WOULD DIRECT THE APPLICATION OF THE LAWS
OF ANOTHER JURISDICTION.
(b) SUBJECT TO THE ARBITRATION AGREEMENT SET FORTH IN SECTION
17.10, BUYER AND SELLER CONSENT TO PERSONAL JURISDICTION IN ANY LEGAL
ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS AGREEMENT IN ANY COURT,
FEDERAL OR STATE, LOCATED IN THE CITY OF CASPER AND COUNTY OF NATRONA,
WYOMING, HAVING SUBJECT MATTER JURISDICTION AND WITH RESPECT TO ANY
SUCH CLAIM, BUYER AND SELLER IRREVOCABLY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY CLAIM, OR ANY OBJECTION THAT BUYER OR SELLER MAY
NOW OR HEREAFTER HAVE, THAT VENUE OR JURISDICTION IS NOT PROPER WITH
RESPECT TO ANY SUCH LEGAL ACTION, SUIT OR PROCEEDING BROUGHT IN SUCH
COURT, INCLUDING ANY CLAIM THAT SUCH LEGAL ACTION, SUIT OR PROCEEDING
BROUGHT IN SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND ANY
CLAIM THAT BUYER OR SELLER ARE NOT SUBJECT TO PERSONAL JURISDICTION OR
SERVICE OF PROCESS IN SUCH FORUM.
Section 17.3 ENTIRE AGREEMENT. This Agreement and the Appendices,
Schedules and Exhibits hereto contain the entire agreement between the Parties
with respect to the subject matter hereof and supersedes all prior written or
oral understandings pertaining to the subject matter hereof. There are no
agreements, understandings, representations or warranties between the Parties
other than those set forth or referred to herein.
Section 17.4 EXPENSES. Buyer shall be responsible for (i) all transfer,
stamp, documentary and similar taxes imposed on the parties hereto with respect
to the purchase and sale of the Assets contemplated pursuant to this Agreement
and, (ii) all recording, filing or registration fees for any assignment or
conveyance delivered to Buyer under or pursuant to this
20
Agreement. Buyer shall be responsible for all sales tax, if any, resulting from
the purchase and sale of the Assets; provided Seller shall join in a sales tax
return, if any, required to be filed. Buyer shall file any required sales tax
return. All other costs and expenses incurred by each Party hereto in connection
with all things required to be done by it hereunder, including attorneys' fees,
accountant fees and the expense of environmental and title examination, shall be
borne by the Party incurring same.
Section 17.5 NOTICES. All notices hereunder shall be sufficiently given
for all purposes hereunder if in writing and delivered personally, sent by
documented overnight delivery service or, to the extent receipt is confirmed, by
United States mail, telecopy, telefax or other electronic transmission service
to the appropriate address or number as set forth below:
TO SELLER:
DAR, LLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇, CEO
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇, Ext. 15
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇@▇▇▇▇▇-▇▇▇.▇▇▇
TO BUYER:
Galaxy Energy Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman and CEO
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
or at such other address and to the attention of such other person as a Party
may designate by written notice to the other Party.
Section 17.6 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of the other Party;
provided, however, that any Party may make any public disclosure it believes in
good faith is required by applicable law or any listing or trading agreement
concerning its or its Affiliates' publicly-traded securities (in which case the
disclosing Party shall use all reasonable efforts to advise the other Party, and
give the other Party an opportunity to comment on the proposed disclosure, prior
to making the disclosure).
Section 17.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the Parties hereto and their respective
successors and permitted assigns. This Agreement may not be assigned by either
Party except with the prior written consent of the other Party, which consent
shall not be unreasonably withheld or delayed, and any such assignment without
such consent shall be void and of no force or effect; provided, however, Buyer
may assign this Agreement to an Affiliate at or prior to Closing without
Seller's consent.
Section 17.8 AMENDMENTS AND WAIVERS. This Agreement may not be modified
or amended except by an instrument or instruments in writing signed by the Party
against whom enforcement of any such modification or amendment is sought. Either
Party hereto may, only by an instrument in writing, waive compliance by the
other Party with any term or provision of this Agreement on the part of such
other Party to be performed or complied with. The waiver by either Party of a
breach of any term or provision of this Agreement shall not be construed as a
waiver of any subsequent breach.
21
Section 17.9 APPENDICES, SCHEDULES AND EXHIBITS. All Appendices,
Schedules and Exhibits hereto which are referred to herein are hereby made a
part hereof and incorporated herein by such reference.
Section 17.10 ARBITRATION. Except as otherwise expressly provided
herein, any dispute, controversy, or claim (a "Dispute") arising out of or in
connection with this Agreement, except for a suit to enforce specific
performance, shall be referred to and determined by a binding arbitration, as
the sole and exclusive remedy of the Parties as to the Dispute, conducted in
accordance with American Arbitration Association ("AAA") arbitration rules for
commercial disputes (the "Rules"), which are deemed to be incorporated by
reference, except that in the event of any conflict between those Rules and the
arbitration provisions set forth below, the provisions set forth below shall
govern and control. The arbitral tribunal ("Tribunal") shall apply the law
referred to in Section 17.2 in resolving the Dispute. The Tribunal shall be
composed of three (3) arbitrators, with Buyer and Seller each appointing one
arbitrator, and the two (2) arbitrators so appointed appointing the third
arbitrator who shall act as a Chairman of the Tribunal. Should any arbitrator
fail to be appointed as aforesaid, then such arbitrator shall be appointed by
the AAA in accordance with the Rules. The arbitration shall be held in Denver,
Colorado, and the proceedings shall be conducted and concluded as soon as
reasonably practicable, based upon the schedule established by the Tribunal, but
in any event the decision of the Tribunal shall be rendered within ninety (90)
days following the selection of the Chairman of the Tribunal. The decision of
the Tribunal shall be final and binding upon the Parties. Judgment upon the
award rendered by the Tribunal may be entered in, and enforced by, any court of
competent jurisdiction.
Section 17.11 ATTORNEYS' FEES. The prevailing Party in any legal
proceeding brought under or to enforce this Agreement shall be additionally
entitled to recover court costs, reasonable costs of arbitration and reasonable
attorneys' fees from the nonprevailing Party.
Section 17.12 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any adverse
manner to any Party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the Parties shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
Section 17.13 TIME IS OF THE ESSENCE. Time is of the essence for this
Agreement and each and every provision herein in which time of performance is a
factor.
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of
each Party as of the day first above written.
BUYER:
GALAXY ENERGY CORPORATION
By:
-----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, COO
SELLER:
DAR, LLC
By:
-----------------------------------------
▇▇▇ ▇▇▇▇▇▇, CEO
22
APPENDIX A
TO
PURCHASE AND SALE AGREEMENT
DEFINITIONS
"Adjusted Purchase Price" shall mean as defined in Section 3.3.
"Affiliate" shall mean, as to the Party specified, any entity controlling,
controlled by or under common control with such specified Party or a partner of
such Party. Control, controlling or controlled as used herein means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of another, whether through the ownership of voting
securities, by contract or otherwise.
"Assets" shall mean all of the Mineral Interests, Equipment and Incidental
Rights, but shall exclude the Excepted Property.
"Buyer Shares" shall mean as defined in Section 3.1.
"Casualty" shall mean volcanic eruptions, acts of God, fire, explosion,
earthquake, windstorm, flood, drought, condemnation, the exercise of any right
of eminent domain, confiscation and seizure. A Casualty does not include
depletion due to normal production and depreciation or failure of equipment or
casing.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Contract Operator Agreement" shall mean as defined in Section 10.1(d)
"Defensible Title" shall mean, respectively as to each Asset, such title held by
Seller that (i) entitles Seller to receive not less than the applicable Net
Revenue Interest specified for such Asset in EXHIBIT "A"; and (ii) except for
Permitted Encumbrances, is free and clear of all liens and encumbrances.
"Drilling Program" shall mean that plan for developing the Assets described on
Exhibit "D."
"Effective Date" shall mean January 14, 2004.
"Environmental Claim" shall mean any action or written notice threatening same
by any third party alleging potential liability of Seller arising out of or
resulting from any actual or alleged violation of, or liability under, or any
remedial obligation under, any Environmental Law as a result of an Environmental
Condition with respect to the Assets or an Offsite Environmental Matter.
"Environmental Condition" shall mean an existing condition or circumstance with
respect to the air, soil, subsurface, surface waters, groundwaters, and/or
sediments that causes (i) an Asset not to be in compliance with any
Environmental Law, including any permits issued thereunder, in all material
respects, or (ii) the Asset to be required to be remediated (or other corrective
action taken with respect to such Asset) under any Environmental Law.
"Environmental Defect" shall mean an Environmental Condition with respect to the
Assets, provided that if, after taking into account any Remediation performed by
or on behalf of Seller, the reasonably anticipated Remediation Amount with
respect to such Environmental Condition (or all Environmental Conditions with
respect to an Asset) is not in excess of $5,000, such Environmental Condition
shall not constitute an Environmental Defect.
"Environmental Laws" shall mean all Laws relating to (a) the control of any
potential pollutant, or protection of the air, water, land, wetlands, natural
resources, wildlife and endangered species, (b) solid, gaseous or liquid waste
generation, handling, treatment, storage, disposal or transportation, and (c)
exposure to hazardous, toxic, radioactive or other substances alleged to be
harmful. "Environmental Laws" shall include, but are not limited to, the Clean
Air Act, the Clean Water Act, the Resource Conservation Recovery Act, the
Superfund Amendments and Reauthorization Act, the Toxic Substances Control Act,
the
Safe Drinking Water Act, and CERCLA and shall also include all state, local and
municipal Laws dealing with the subject matter of the above listed Federal
statutes or promulgated by any governmental or quasigovernmental agency
thereunder in order to carry out the purposes of any Federal, state, local or
municipal Law. The above reference to Laws relating to natural resources is not
intended to include non-environmental Laws relating to the exploration,
development, production, proration, allocation, pooling, unitization or
correlative rights relating to oil, gas and other Hydrocarbons.
"Environmental Liabilities" shall mean any and all costs (including costs of
Remediation), damages, settlements, expenses, penalties, fines, taxes,
prejudgment and post-judgment interest, court costs and attorneys' fees incurred
or imposed (i) pursuant to any order, notice of responsibility, directive
(including requirements embodied in Environmental Laws), injunction, judgment or
similar act (including settlements) by any Governmental Authority to the extent
arising out of or under Environmental Laws or (ii) pursuant to any claim or
cause of action by a Governmental Authority or third party for personal injury,
property damage, damage to natural resources, remediation or response costs to
the extent arising out of or attributable to any violation of, or any remedial
obligation under, any Environmental Law.
"Environmental Matters" shall mean (i) any order, notice of responsibility,
directive (including requirements embodied in Environmental Laws), injunction,
judgment or similar act (including settlements) by any Governmental Authority
arising out of or under any Environmental Laws or (ii) pursuant to any claim or
cause of action by a Governmental Authority or third party for personal injury,
property damage, damage to natural resources, remediation or response costs
arising out of or attributable to any Hazardous Materials or any violation of,
or any remedial obligation under, any Environmental Law.
"Equipment" shall mean all the tangible personal property, tools, machinery,
materials, pipelines, gas plants, gathering systems, equipment, fixtures and
improvements, or interests therein, which are incidental or attributable to the
Assets, or with the production, treatment, sale or disposal of Hydrocarbons or
water produced therefrom or attributable thereto, on the Effective Date.
"Excepted Property" means the following:
(a) (i) all trade credits, accounts receivable, notes receivable
and other receivables attributable to the Assets with respect
to any period of time prior to the Effective Date, and (ii)
all deposits, cash, checks in process of collection, cash
equivalents and funds attributable to the Assets with respect
to any period prior to the Effective Date;
(b) all claims and causes of action of Seller arising from acts,
omissions or events, or damage to or destruction of property,
occurring prior to the Effective Date with respect to any of
the Assets;
(c) all rights, titles, claims and interests of Seller (i) under
any policy or agreement of insurance or indemnity, (ii) under
any bond or (iii) to any insurance or condemnation proceeds or
awards attributable to the Assets with respect to any period
prior to the Effective Date;
(d) all (i) Hydrocarbons produced from or attributable to the
Assets with respect to all periods prior to the Effective
Date, together with all proceeds from or of such Hydrocarbons,
and(ii) Hydrocarbons which, at the Effective Date, are owned
by Seller and are in storage, within processing plants, or in
gathering lines or pipelines;
(e) Seismic data or license agreements, which are subject to
prohibitions on assignment by Seller;
(f) claims of Seller for refund of or credits with respect to
production, severance, ad valorem, or any other taxes
attributable to the Assets with respect to any period prior to
the Effective Date;
(g) all amounts due or payable to Seller as adjustments or refunds
under any contracts or agreements relating to the Assets
(including joint operating agreements) with respect to any
period prior to the Effective Date (excluding adjustments for
gas imbalances for which Purchase Price adjustment has been
made hereunder);
(h) all amounts due or payable to Seller as adjustments to
insurance premiums related to the Assets with respect to any
period prior to the Effective Date; and
(i) all proceeds, benefits, income or revenues accruing (and any
security or other deposits made) with respect to the Assets
prior to the Effective Date.
"Final Payment" shall mean as defined in Section 3.2.
"Final Settlement Statement" shall mean as defined in Section 12.2.
"Governmental Authority" shall mean (i) the United States of America, (ii) any
state, county, municipality or other governmental subdivision within the United
States of America, and (iii) any court or any governmental department,
commission, board, bureau, agency or other instrumentality of the United States
of America or of any state, county, municipality or other governmental
subdivision within the United States of America.
"Hazardous Discharge" means any releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging injecting, escaping, leaching, disposing or
dumping of any Hazardous Materials from or onto the Lands.
"Hazardous Materials" shall mean any explosives, radioactive materials, asbestos
material, urea formaldehyde, hydrocarbon contaminants, underground tanks,
pollutants, contaminants, hazardous, corrosive or toxic substances, special
waste or waste of any kind, including compounds known as chlorobiophenyls and
any material or substance the storage, manufacture, disposal, treatment,
generation, use, transport, mediation or release into the environment of which
is prohibited, controlled, regulated or licensed under Environmental Laws,
including, but not limited to, (i) all "hazardous substances" as that term is
defined in Section 101(14) of the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, and (ii) petroleum and petroleum
products.
"Hydrocarbons" means crude oil, natural gas, casinghead gas, coalbed methane,
condensate, helium, ▇▇▇▇▇▇▇, ▇▇▇, ▇▇▇, natural gas liquids, and other gaseous
and liquid hydrocarbons or any combination thereof.
"Incidental Rights" shall mean all right, title and interest of Seller in and to
or derived from the following: (a) all rights with respect to the use and
occupancy of the surface of and the subsurface depths under the Lands; (b) all
rights with respect to any pooled, communitized or unitized acreage by virtue of
any of the Assets being a part thereof; (c) all agreements and contracts,
easements, rights-of-way, servitudes and other estates related or attributable
to the Assets or Equipment.
"Initial Payment" shall mean as defined in Section 3.2.
"Knowledge" shall mean (a) if a natural person, the actual knowledge of such
natural person of any fact, circumstance or condition, without investigation,
and (b) if a business organization, the actual knowledge of the chief operating
officer of any fact, circumstance or condition, without investigation.
"Lands" shall mean the lands covered by or subject to the Leases.
"Law" or "Laws" shall mean any applicable statute, law (including common law),
ordinance, regulation, rule, ruling, order, writ, injunction, decree or other
official act of or by any Governmental Authority.
"Leases" shall mean the fee mineral interests, leasehold interests, royalty and
overriding royalty interests described on EXHIBIT "A" attached to the Agreement.
"Material Contracts" shall be as defined in Section 6.1(f) and as set forth in
SCHEDULE 6.1(F).
"Mineral Interests" shall mean the rights, estates, titles and interests of
Seller in and to the Leases, ▇▇▇▇▇ and Units.
"Mortgage" shall mean as defined in Section 3.2.
"Net Revenue Interest" shall mean an interest (expressed as a percentage or
decimal fraction) in and to all Hydrocarbons produced and saved from or
attributable to an Asset .
"Note" shall mean as defined in Section 3.2.
"Offsite Environmental Matter" shall mean any Environmental Condition resulting
from Hazardous Materials originating from the Assets that have been transported
for disposal, reclamation or recycling from the Assets prior to the Effective
Date (or prior to the Closing Date as a result of a breach by Seller of Section
81(b)) to properties owned by third parties. "Permitted Encumbrances" shall mean
any of the following matters:
(a) all agreements, instruments, documents, liens,
encumbrances, and other matters which are described in any Schedule or
Exhibit to the Agreement, to the extent that the net cumulative effect
of such matter does not operate to reduce the Net Revenue Interest in
the affected Asset to less than the Net Revenue Interest specified in
EXHIBIT "A" for such Asset;
(b) preferential Rights and required third party consents to
assignment and similar agreements with respect to which waivers or
consents are obtained from the appropriate parties, or the appropriate
time period for asserting any such right has expired without an
exercise of the right;
(c) any liens for taxes not yet delinquent or, if delinquent,
that are being contested in good faith in the ordinary course of
business and which are described on SCHEDULE 6.1(M);
(d) materialman's, mechanic's, repairman's, employee's,
contractor's, operator's and other similar liens or charges arising in
the ordinary course of business for obligations that are not delinquent
or that will be paid and discharged in the ordinary course of business,
or if delinquent, that are being contested in good faith by appropriate
action of which Buyer is notified in writing before Closing;
(e) all Transfer Requirements with respect to which (i)
waivers or consents are obtained from the appropriate parties, or (ii)
the appropriate time period for asserting such rights has expired
without an exercise of such rights;
(f) all rights to consent by, required notices to, filings
with, or other actions by governmental entities in connection with the
sale or conveyance of oil and gas leases or interests therein if they
are routinely obtained subsequent to the sale or conveyance;
(g) any easements, rights-of-way, servitudes, permits,
licenses, surface leases and other rights with respect to surface
operations to the extent such matters do not interfere in any material
respect with Seller's operation of the portion of the Assets burdened
thereby;
(h) all royalties, overriding royalties, net profits
interests, carried interests, reversionary interests and other burdens
to the extent that the net cumulative effect of such burdens, as to a
particular Asset, does not operate to reduce the Net Revenue Interest
of Seller in such Asset as specified in EXHIBIT "A" AND EXHIBIT "A-1";
(i) 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
(j) all other liens, charges, encumbrances, contracts,
agreements, instruments, obligations, defects and irregularities
affecting the Assets that individually or in the aggregate are not such
as to materially interfere with the operation, value or use of any of
the Assets, do not prevent Buyer from receiving the proceeds of
production from any of the ▇▇▇▇▇, do not reduce the interest of Seller
with respect to all Oil and Gas produced from any Well below the Net
Revenue Interest set forth in EXHIBIT "A" for such Asset, and/or do not
materially increase the portion of the costs and expenses relating to
any Asset that Seller is obligated to pay above the Working Interest
set forth in EXHIBIT "A" for such Asset (without a proportionate
increase in Net Revenue Interest).
"Person" means an individual, a corporation, a partnership, an association, a
trust or any other entity or organization, including a Government Authority.
"Preferential Right" shall mean any right or agreement that enables any third
party to purchase or acquire any Asset or any interest therein or portion
thereof as a result of or in connection with the sale, assignment, encumbrance
or other transfer of any Asset or any interest therein or portion thereof.
"Remediation" shall mean, with respect to an Environmental Condition, the
implementation and completion of any actions required under Environmental Laws
to correct or remove such Environmental Condition. "Remediation Amount" shall
mean, with respect to an Environmental Condition, the present value as of the
Closing Date (using an annual discount rate of 10%) of the cost of the most cost
effective Remediation of such Environmental Condition which is reasonable under
the circumstances.
"Reserved Interests" shall mean all of Seller's royalty, overriding royalty and
other non-expense bearing revenue interest of whatever kind or character (a) in
the ▇▇▇▇▇ (including ▇▇▇▇▇ on Units), as same may be recompleted or deepened,
together with the Hydrocarbons produced therefrom, and (b) in the Leases
exclusive of the ▇▇▇▇▇, but subject to an adjustment of overriding royalty
(reduction or increase) for the Leases identified on EXHIBIT "A-1", to achieve a
"per Lease" Net Revenue Interest equal to that set out on EXHIBIT "A-1."
"SECURITIES ACT" SHALL MEAN THE SECURITIES ACT OF 1933, AS AMENDED.
"Seller's Records" shall mean any of the Seller's books, records, contracts,
agreements and files that are directly related to the Assets.
"Transfer Requirement" shall mean any consent, approval, authorization or permit
of, or filing with or notification to, any third party which is required to be
obtained, made or complied with for or in connection with any sale, assignment,
transfer or encumbrance of any Asset or any interest therein other than any such
consent, approval, authorization or permit of, or filing with or notification
to, any third party which is required to be obtained, made or complied with for
or in connection with the sale of the Assets to Buyer as contemplated by the
Agreement.
"Tribunal" shall be the board of arbitrators referred to in Section 17.10.
"Units" means all unitization, communitization, pooling agreements, working
interest units created by operating agreements, and orders covering the Lands or
Leases or any portion thereof, and the units and pooled or communitized areas
created thereby.
"Well" means each oil and gas well, well completion, multiple well completion
and other subdivision of property located on the Leases and Lands, including the
▇▇▇▇▇ set forth on EXHIBIT "A-1" to the Agreement.
"Working Interest" shall mean the percentage of costs and expenses attributable
to the maintenance, development and operation of an Asset.