PURCHASE AND SALE AGREEMENT between GASTAR EXPLORATION TEXAS, LP, as Seller, and HILLTOP RESORT GS, LLC as Buyer, dated November 16, 2009
Exhibit
10.2
between
GASTAR
EXPLORATION TEXAS, LP,
as
Seller,
and
HILLTOP
RESORT GS, LLC
as
Buyer,
dated
November 16, 2009
TABLE
OF CONTENTS
|
Article
1 Definitions
|
1 | ||
|
Section
1.1.
|
Certain
Defined Terms
|
1 | |
|
Section
1.2.
|
References,
Gender, Number
|
1 | |
|
Article
2 Purchase And Sale
|
1 | ||
|
Section
2.1.
|
Purchase
and Sale
|
1 | |
|
Section
2.2.
|
No
Assumed Liabilities
|
1 | |
|
Section
2.3.
|
Excluded
Liabilities
|
2 | |
|
Article
3 Purchase Price And Payment
|
2 | ||
|
Section
3.1.
|
Purchase
Price
|
2 | |
|
Section
3.2.
|
Closing
Statement and Payment
|
2 | |
|
Section
3.3.
|
Post-Closing
Adjustment to the Purchase Price
|
3 | |
|
Section
3.4.
|
Expense
Adjustment
|
4 | |
|
Section
3.5.
|
Revenue
Adjustment
|
4 | |
|
Article
4 Representations And Warranties
|
4 | ||
|
Section
4.1.
|
Representations
and Warranties of Seller
|
4 | |
|
Section
4.2.
|
Representations
and Warranties of Buyer
|
9 | |
|
Article
5 Access Before Closing
|
10 | ||
|
Article
6 Covenants of Seller and Buyer
|
10 | ||
|
Section
6.1.
|
Conduct
of Business Pending Closing
|
10 | |
|
Section
6.2.
|
Public
Announcements
|
11 | |
|
Section
6.3.
|
Actions
by Parties
|
11 | |
|
Section
6.4.
|
Further
Assurances
|
11 | |
|
Section
6.5.
|
Records
|
11 | |
|
Section
6.6.
|
Certain
Filings
|
12 | |
|
Section
6.7.
|
Regulatory
Approvals
|
12 | |
|
Section
6.8.
|
Expenses
And Revenues
|
12 | |
|
Section
6.9.
|
Conveyance
of Certain Excluded Assets
|
12 | |
|
Section
6.10.
|
Certain
Rights of Way
|
13 | |
|
Section
6.11.
|
Certain
Consents
|
13 | |
|
Article
7 Closing Conditions
|
13 | ||
|
Section
7.1.
|
Seller’s
Closing Conditions
|
13 | |
|
Section
7.2.
|
Buyer’s
Closing Conditions
|
14 | |
|
Article
8 Closing
|
15 | ||
|
Section
8.1.
|
Closing
|
15 | |
|
Section
8.2.
|
Seller’s
Closing Deliverables
|
15 | |
|
Section
8.3.
|
Buyer’s
Closing Deliverables
|
15 | |
|
Article
9 Indemnification
|
15 | ||
|
Section
9.1.
|
Indemnification
by Buyer
|
15 | |
|
Section
9.2.
|
Indemnification
by Seller
|
16 | |
|
Section
9.3.
|
Third
Party Claims
|
16 | |
|
Section
9.4.
|
Survival
|
16 | |
|
Section
9.5.
|
Purchase
Price Adjustment
|
16 | |
|
Section
9.6.
|
Exclusive
Remedy
|
16 | |
i
|
Section
9.7.
|
Disclaimers
|
17 | |
|
Section
9.8.
|
Waiver
|
17 | |
|
Article
10 Termination
|
17 | ||
|
Section
10.1.
|
Termination
of Agreement
|
17 | |
|
Section
10.2.
|
Effect
of Termination
|
18 | |
|
Article
11 Taxes
|
18 | ||
|
Section
11.1.
|
Allocation
of Taxes
|
18 | |
|
Section
11.2.
|
Cooperation
|
19 | |
|
Article
12 Other Provisions
|
19 | ||
|
Section
12.1.
|
Counterparts
|
19 | |
|
Section
12.2.
|
Governing
Law
|
19 | |
|
Section
12.3.
|
Arbitration
|
19 | |
|
Section
12.4.
|
Casualty
Loss Prior to Closing
|
20 | |
|
Section
12.5.
|
Entire
Agreement
|
21 | |
|
Section
12.6.
|
Expenses
|
21 | |
|
Section
12.7.
|
Notices
|
21 | |
|
Section
12.8.
|
Successors
and Assigns
|
21 | |
|
Section
12.9.
|
Amendments
and Waivers
|
21 | |
|
Section
12.10.
|
Appendices,
Schedules and Exhibits
|
21 | |
|
Section
12.11.
|
Interpretation
and Rules of Construction
|
22 | |
|
Section
12.12.
|
Agreement
for the Parties’ Benefit Only
|
22 | |
|
Section
12.13.
|
Severability
|
22 | |
|
Section
12.14.
|
Time
of Essence
|
23 | |
Page
ii
THIS
PURCHASE AND SALE AGREEMENT (this “Agreement”), dated as
of November 16, 2009, is by and between Gastar Exploration Texas, LP, a Delaware
limited partnership (“Seller”), and Hilltop
Resort GS, LLC, a Delaware limited liability company (“Buyer”). Buyer
and Seller are sometimes referred to herein individually as a “Party” and
collectively as the “Parties”.
Recital:
Seller
desires to sell to Buyer, and Buyer desires to purchase from Seller, Seller’s
portion of the Hilltop Resort Gas Gathering System in ▇▇▇▇ and ▇▇▇▇▇▇▇▇▇
Counties, Texas (the “Hilltop Resort Gathering
System”) and all related assets, rights, and interests, as such assets,
rights, and interests are more fully described herein, upon the terms and
subject to the conditions set forth in this Agreement.
NOW,
THEREFORE, in consideration of the mutual covenants and agreements in this
Agreement, and for other good and valuable consideration, Seller and Buyer agree
as follows:
Article
1
Definitions
Section
1.1. Certain Defined Terms
Unless
the context otherwise requires, the terms defined in Appendix A shall,
when used herein, have the meanings therein specified, with each such definition
to be equally applicable both to the singular and the plural forms of the term
so defined.
Section
1.2. References, Gender, Number
All
references in this Agreement to an “Article,” “Section,” or “subsection” shall be
to an Article, Section or subsection of this Agreement, unless the context
requires otherwise. Unless the context requires otherwise, the words
“this
Agreement,” “hereof,” “hereunder,” “herein,” “hereby,” or words of
similar import shall refer to this Agreement as a whole and not to a particular
Article, Section, subsection, clause, or other subdivision
hereof. Whenever the context requires, the words used herein shall
include the masculine, feminine and neuter gender, and the singular and the
plural.
Article
2
Purchase
And Sale
Section
2.1. Purchase and Sale
On and
subject to the terms and conditions of this Agreement, Seller agrees to sell,
transfer, assign, convey, and deliver to Buyer, free and clear of all Liens,
other than the Permitted Encumbrances, and Buyer agrees to purchase or cause to
be purchased from Seller, in consideration of the payment of the Purchase Price
by Buyer, all of Seller’s right, title, and interest in and to the Subject
Assets.
Section
2.2. No Assumed Liabilities
Notwithstanding
anything to the contrary set forth in this Agreement, Buyer is not assuming any
liability or obligation relating to, arising out of, or attributable to the
ownership or operation of the Subject Assets prior to the Closing Date, of
whatever nature, whether presently in existence or arising
hereafter.
Page
1
Section
2.3. Excluded Liabilities
Notwithstanding
anything to the contrary in this Agreement, all liabilities and obligations of
Seller and its Affiliates relating to, arising out of, or attributable to the
ownership or operation of the Subject Assets prior to the Closing Date, whether
presently in existence or arising hereafter, shall be retained by and remain
obligations of Seller and its Affiliates (the “Excluded
Liabilities”). The Excluded Liabilities shall include, without
limitation, the following:
(a) all
liabilities and obligations to the extent relating to or incurred in connection
with the Excluded Assets;
(b) all
liabilities and obligations with respect to Taxes that are the responsibility of
Seller pursuant to Section 11.1;
and
(c) all
liabilities and obligations arising out of or related to the Navasota Proceeding
or the subject matter thereof.
Article
3
Purchase
Price And Payment
Section
3.1. Purchase Price The
purchase price for the sale and conveyance of the Subject Assets to Buyer is
$19,250,000 (the “Purchase Price”),
subject to adjustment under this Agreement. The “Adjusted Purchase
Price” shall be the Purchase Price adjusted as follows:
(i)
adjusted for costs and expenses in accordance with Section
3.4;
(ii)
adjusted for revenues in accordance with Section
3.5;
(iii)
adjusted downward by the amount referred to in Section 12.4 in
connection with any Casualty, if applicable; and
(iv)
adjusted by any other amount specifically provided for in this Agreement
or agreed upon in writing by Buyer and Seller.
Section
3.2. Closing Statement and Payment
Not later
than five (5) Business Days prior to the Closing Date, Seller shall prepare and
deliver to Buyer a reasonably detailed statement (the “Closing Statement”)
of the estimated Purchase Price adjustments and the estimated Adjusted Purchase
Price (the “Estimated
Adjusted Purchase Price”). At the Closing, Buyer shall wire
transfer the Estimated Adjusted Purchase Price in immediately available funds to
an account or accounts specified by Seller to Buyer at least three (3) Business
Days immediately preceding the Closing Date.
Page
2
Section
3.3. Post-Closing Adjustment to the
Purchase Price Revised Closing Statement. On or before the
date that is sixty (60) days after the Closing Date, Seller shall prepare and
deliver to Buyer a revised Closing Statement setting forth the Purchase Price
adjustments and Seller’s calculation of such amount. To the extent
reasonably required by Seller, Buyer shall assist in the preparation of the
revised Closing Statement. Seller shall provide to Buyer such data
and information and access to Seller’s personnel as Buyer may reasonably request
supporting the amounts reflected on the revised Closing Statement to permit
Buyer to perform or cause to be performed an audit at Buyer’s
expense. The revised Closing Statement shall become final and binding
upon the parties on the date (the “Final Settlement
Date”) that is sixty (60) days following receipt thereof by Buyer unless
Buyer gives written notice of its disagreement (“Notice of
Disagreement”) to Seller prior to such date. Any Notice of
Disagreement shall specify in detail the dollar amount, nature, and basis of any
disagreement so asserted. If a Notice of Disagreement is received by
Seller, then the Closing Statement (as revised in accordance with paragraph (b) below)
shall become final and binding on the parties on, and the Final Settlement Date
shall be, the earlier of (i) the date upon which Seller and Buyer agree in
writing with respect to all matters specified in the Notice of Disagreement or
(ii) the date upon which the Arbitrator’s Closing Statement (as hereinafter
defined) is issued by the Closing Statement Arbitrator (as hereinafter
defined).
(b) Final Closing
Statement. During the thirty (30) days following the date upon
which Seller received the Notice of Disagreement, Seller and Buyer shall use
their reasonable best efforts to attempt to resolve in writing any differences
that they may have with respect to all matters specified in the Notice of
Disagreement. If at the end of such thirty (30) day period (or
earlier by mutual agreement to arbitrate), Buyer and Seller have not reached
agreement on such matters, the matters that remain in dispute shall be submitted
to an arbitrator (the “Closing Statement
Arbitrator”) for review and final and binding resolution. The
Closing Statement Arbitrator shall be the accounting firm of KPMG, or if unable
or unwilling to act or if representing Seller or Buyer in another matter, such
other nationally recognized independent public accounting firm as shall be
agreed upon by Buyer and Seller in writing (but if the parties have not so
agreed by the date that is forty-five (45) days after the date upon which Seller
received the Notice of Disagreement, then the Closing Statement Arbitrator shall
be selected, upon the application of Buyer or Seller, by the accounting firm of
KPMG within ten (10) days of its receipt of such application). Buyer
and Seller shall, not later than seven (7) days prior to the hearing date set by
the Closing Statement Arbitrator, each submit a brief to the Closing Statement
Arbitrator with dollar figures for settlement of the disputes as to the amount
of the Adjusted Purchase Price (together with a proposed Closing Statement that
reflects such figures) consistent with their respective calculations delivered
pursuant to this Section
3.3(b). The hearing will be scheduled seven (7) days following
submission of the settlement briefs, or as soon thereafter as is acceptable to
the Closing Statement Arbitrator, and shall be conducted on a confidential
basis. The Closing Statement Arbitrator shall consider only those
items or amounts in the Closing Statement as to which the parties disagreed and
render a decision resolving the matters in dispute (which decision shall include
a written statement of findings and conclusions) promptly after the conclusion
of the hearing, unless the parties reach agreement prior thereto and withdraw
the dispute from arbitration. The Closing Statement Arbitrator shall
provide to the parties explanations in writing of the reasons for its decisions
regarding the Adjusted Purchase Price and shall issue the Final Closing
Statement reflecting such decision. The decision of the Closing
Statement Arbitrator shall be final and binding on the parties. The
cost of any arbitration (including the fees and expenses of the Closing
Statement Arbitrator) under this Section 3.3(b) shall
be borne equally by Buyer and Seller. The fees and disbursements of
Seller’s independent auditors incurred in connection with the services performed
with respect to the Closing Statement shall be borne by Seller and the fees and
disbursements of Buyer’s independent auditors incurred in connection with their
preparation of the Notice of Disagreement shall be borne by Buyer. As
used in this Agreement, the term “Final Closing
Statement” shall mean the revised Closing Statement described in Section 3.3(a), as
prepared by Seller and as may be subsequently adjusted to reflect any subsequent
written agreement between the parties with respect thereto, or if submitted to
the Closing Statement Arbitrator, the Arbitrator’s Closing Statement (“Arbitrator’s Closing
Statement”) as described in this Section
3.3(b).
Page
3
(c) Final
Settlement. If the amount of the Adjusted Purchase Price as
set forth on the Final Closing Statement exceeds the amount of the Estimated
Adjusted Purchase Price, then Buyer shall pay to Seller, within five (5)
Business Days after the Final Settlement Date, the amount by which the Adjusted
Purchase Price as set forth on the Final Closing Statement exceeds the amount of
the Estimated Adjusted Purchase Price, together with interest at the Agreed Rate
on such excess amount from the Closing Date until paid. If the amount
of the Adjusted Purchase Price as set forth on the Final Closing Statement is
less than the amount of the Estimated Adjusted Purchase Price, then Seller shall
pay to Buyer, within five (5) Business Days after the Final Settlement Date, the
amount by which the Adjusted Purchase Price, as set forth on the Final Closing
Statement, is less than the amount of the Estimated Adjusted Purchase Price,
together with interest at the Agreed Rate on such deficiency amount from the
Closing Date until paid. Any post-Closing payment made under this
Section 3.3(c)
shall be made by means of a wire transfer of immediately available funds to a
bank account designated by the party receiving the funds.
(d) Allocation
Statement. Buyer and Seller agree that the Purchase Price
shall be allocated among the Subject Assets in accordance with Section 1060 of
the Code and the Treasury regulations thereunder, as set forth on Schedule
3.3(d) of this Agreement (the “Purchase Price
Allocation”), and any subsequent adjustments to the Purchase Price shall
be made consistent with such allocation. Buyer and Seller shall duly
prepare and timely file such reports and information returns as may be required
under Section 1060 of the Code and any regulations thereunder and any
corresponding provisions of applicable state income tax laws to report the
Purchase Price Allocation. The Purchase Price Allocation shall be
binding on Buyer and Seller for Tax reporting purposes, provided that no Party
shall be unreasonably impeded in its ability and discretion to negotiate,
compromise and/or settle any Tax audit, claim or similar
proceedings.
Section
3.4. Expense Adjustment
The
Purchase Price shall be adjusted (i) upward by an amount equal to all costs and
expenses paid by Seller for any period after November 1, 2009 and attributable
to the ownership or operation of the Subject Assets after November 1, 2009
(other than Buyer’s portion of Property Taxes paid to Seller pursuant to Section 11.1(b)) and
(ii) downward for all costs and expenses paid by Buyer for any period prior to
November 1, 2009 and attributable to the ownership or operation of the Subject
Assets prior to the close of business on November 1, 2009.
Section
3.5. Revenue Adjustment
The
Purchase Price shall be adjusted (a) downward by an amount equal to all
revenues, proceeds, and other monies received by Seller attributable to the
ownership or operation of the Subject Assets after November 1, 2009 and (b)
upward by an amount equal to all revenues, proceeds and other monies received by
Buyer attributable to the ownership or operation of the Subject Assets prior to
the close of business on November 1, 2009.
Article
4
Representations
And Warranties
Section
4.1. Representations and Warranties of
Seller As of the
date of this Agreement and as of the Closing Date, Seller represents and
warrants to Buyer as follows:
(a) Organization and Good
Standing. Each of Seller and its general partner, Gastar
Exploration Texas LLC, (the “General Partner”) is
duly formed, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation or formation.
(b) Qualification of
Seller. Each of Seller and the General Partner has the
requisite corporate or partnership power and authority, as applicable, required
to carry on the business of owning and operating its assets, including the
Subject Assets, as such business is now being conducted. Each of
Seller and the General Partner is qualified to do business and is in good
standing in each jurisdiction where such qualification is necessary, except for
those jurisdictions where failure to be so qualified would not be material to
Seller and the General Partner.
(c) Authority. Seller
has all requisite power and authority to execute and deliver this Agreement and
the Transaction Agreements to which it is a party and to perform its obligations
hereunder and thereunder. The execution, delivery, and performance of
this Agreement and the Transaction Agreements and the transactions contemplated
hereby and thereby have been duly and validly authorized by all requisite action
on the part of Seller and the General Partner.
Page
4
(d) Enforceability. This
Agreement and each of the Transaction Agreements constitutes a valid and binding
obligation of Seller enforceable against it 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.
(e) No Violation or
Breach. Except as shown in Schedule 4.1(e),
neither the execution and delivery of this Agreement or the Transaction
Agreements nor the consummation of the transactions and performance of the terms
and conditions contemplated hereby and thereby shall (i) conflict with or result
in a violation or breach of any provision of the certificate of formation,
regulations, or other similar governing documents of Seller or any material
agreement, indenture, or other instrument under which Seller is bound, or
(ii) assuming the obtaining of all Required Consents, constitute a material
default under or give rise to any right of termination, cancellation, or
acceleration of any material right or obligation of Buyer or to a loss of any
material benefit relating to the ownership or operation of the Subject Assets to
which Seller is entitled under any provision of any agreement or other
instrument binding upon Seller or by which any of the Subject Assets is or may
be bound, (iii) violate in any material respect any Law applicable to Seller or
the Subject Assets, or (iv) result in the creation or imposition of any Lien on
the Subject Assets.
(f) Consents. Except
for the consents, approvals, authorizations, permits filings, or notices
described in Schedule
4.1(f) (“Required Consents”),
no material consent, or filing with, or notification to, any Person is required
for or in connection with the execution and delivery of this Agreement or any
Transaction Agreement by Seller or for or in connection with the consummation of
the transactions and performance of the terms and conditions contemplated hereby
or thereby by Seller.
(g) Actions. Except as
set forth on Schedule
4.1(g), there is no Action pending against, or to the knowledge of
Seller, threatened against or affecting, the operation of the Subject Assets or
which in any manner challenges or seeks to prevent, enjoin, alter or materially
delay the transactions contemplated by this Agreement or the Transaction
Agreements.
(h) Compliance with
Laws. Except as set forth on Schedule 4.1(h),
Seller has operated and maintained its business and the Subject Assets in
compliance with all Laws in all material respects and to the knowledge of Seller
is not under investigation with respect to or has been threatened to be charged
with or given notice of any violation of any Law. Except as set forth
on Schedule
4.1(h), Seller has not received written notice of any violation of any
Laws, or to the knowledge of Seller, is under investigation with respect to and
has not been threatened to be charged with any violation of any Law in respect
of its ownership and operation of the Subject Assets.
(i) Brokerage Fees and
Commissions. Neither Seller nor any of its Affiliates has
incurred any obligation or entered into any agreement for any investment
banking, brokerage or finder’s fee, or commission in respect of the transactions
contemplated by this Agreement for which Buyer shall incur any
liability.
(j) Bankruptcy. There
are no bankruptcy, reorganization, or arrangement proceedings pending against,
being contemplated by, or to the knowledge of Seller, threatened against
Seller.
(k) Material
Contracts. Except for the contracts disclosed in Schedule 4.1(k),
with respect to the ownership or operation of the Subject Assets, Seller is not
a party to or bound by:
(i) any
lease (whether of real or personal property) providing for annual rentals of
$25,000 or more;
(ii) any
agreement or contract for the gathering, treating, transportation, processing,
or storage of natural gas or other hydrocarbons;
Page
5
(iii) any
agreement for the purchase or sale of materials, supplies, goods, services,
equipment or other assets that provides for either expenditures or payments of
$25,000 or more;
(iv) any
partnership, joint venture, or other similar agreement or
arrangement;
(v) any
agreement relating to the acquisition or disposition of any business (whether by
merger, sale of stock, sale of assets, or otherwise);
(vi) any
agreement relating to indebtedness for borrowed money or the deferred purchase
price of property (in either case, whether incurred, assumed, guaranteed or
secured by any asset);
(vii) any
option, license, franchise, or similar agreement;
(viii) any
agency, dealer, sales representative, marketing or other similar
agreement;
(ix) any
agreement that limits the freedom of Seller to compete in any line of business
or with any Person or in any area or to own, operate, sell, transfer, pledge or
otherwise dispose of or encumber any Subject Assets or which would so limit the
freedom of Buyer after the Closing Date;
(x)
any agreement with or for the benefit of any
Affiliate of Seller; or
(xi) any
other agreement, commitment, or arrangement not made in the ordinary course of
business that is material to the operation of the Subject Assets.
(l) Environmental
Matters. Except as set forth in Schedule
4.1(l):
(i) the
Subject Assets are and, during all surviving periods of applicable statutes of
limitation, have been during Seller’s period of ownership or operation in
compliance in all material respects with all Environmental Laws and
Environmental Permits, and to the knowledge of Seller, the Subject Assets are
not under investigation by any Governmental Authority with respect to, and have
not been the subject of any notice issued to Seller that remains pending
regarding violation of any Environmental Law;
(ii) Seller
has obtained or timely applied for all material Environmental Permits that, to
the knowledge of Seller, are necessary for operation of the Subject
Assets as they are currently being operated by Seller and, to the knowledge of
Seller, all such Environmental Permits obtained are valid and in full
force and effect;
(iii) Seller
has not received any written notice of a request for information, order,
complaint, violation, penalty or investigation issued by a Governmental
Authority pursuant to Environmental Law with respect to the Subject Assets that
remains unresolved as of the Closing Date, and there are no lawsuits or
proceedings pending or, to knowledge of Seller, threatened under Environmental
Law by any Person against Seller with respect to the Subject
Assets;
(iv) there
are no material Environmental Liabilities existing in connection with the
Subject Asset and, to the knowledge of Seller, there are no events or conditions
that could reasonably be expected to result in or be the basis for any such
material liability;
(v) no
Hazardous Material has been discharged, disposed of, dumped, injected, pumped,
deposited, spilled, leaked, emitted or released at, on or under any of the real
property included in the Subject Assets by Seller or its Affiliates that is in
violation of Environmental Law or that requires Seller to perform any material
investigatory or remedial, cleanup or similar corrective activities under
Environmental Law; and
Page
6
(vi) Seller
has made available to Buyer copies of all environmental site assessment reports,
studies and analyses on alleged environmental matters including Hazardous
Materials that are in the Seller’s possession and relating to its operation of
the Subject Assets.
Notwithstanding
any other provisions of this Agreement to the contrary, this Section 4.1(l)
contains the sole and exclusive representations and warranties of Seller on
environmental matters, including Environmental Laws, Environmental Permits, and
Hazardous Materials.
(m) Tax
Matters. Except as set forth in Schedule
4.1(m),
(i) all
Tax Returns required to be filed on or before the Closing Date by Seller with
respect to any Taxes payable in respect of the Subject Assets have been or will
be timely filed with the appropriate Governmental Authority in the jurisdictions
in which such Tax Returns are required to be filed, such Tax Returns are or will
be true and correct in all material respects, and all Taxes required to be paid
on or before the Closing Date by the Seller with respect to the Subject Assets
have been or will be paid;
(ii) there
are no claims, assessments, levies, administrative proceedings, or lawsuits
pending, or to the knowledge of Seller, threatened by any taxing authority with
respect to the Subject Assets; and
(iii) no
audit or investigation of any Tax Return of Seller with respect to the Subject
Assets is currently underway, or to the knowledge of Seller,
threatened.
(n) Property
Matters.
(i) Except
as set forth in Schedule 4.1(n),
Seller has good and indefeasible title, or a valid leasehold interest in, or
otherwise has the valid right to use the real property and personal property
included in the Subject Assets, free and clear of all Liens, other than
Permitted Encumbrances.
(ii) Exhibit A correctly
describes all rights of way and easements included in the Subject Assets, which
shall be assigned by Seller to Buyer under special warranty
assignments. Except as set forth in Schedule 4.1(n), (A)
the rights of way and easements disclosed in Exhibit A constitute
all of the easements, servitudes, rights of way, leases, licenses, and similar
agreements held by Seller relating to real property constituting parts of the
Subject Assets; (B) each right of way or easement disclosed in Exhibit A is valid
and binding and in full force and effect; (C) Seller is not in breach of or
default under, and to Seller’s knowledge, no other party to any such right of
way or easement is in breach of or default under, in any material respect, any
of the provisions of any such right of way or easement; (D) all rentals and
other payments due under such rights of way and easement have been paid; (E) the
consummation of the transactions contemplated by this Agreement and the
Transaction Agreements and the performance of the provisions hereof or thereof
will not constitute a default under, or give rise to any right of termination,
cancellation or acceleration of any right or obligation under, or give rise to
any loss of any benefit under, any such right of way; and (F) except as set
forth in Schedule
4.1(n)(ii)(F), such rights of way and easements cover the entire and
continuous length of the Hilltop Resort Gathering System as it exists and is
used today, and there are no spatial gaps in any of such rights of way or
easements and such rights of way and easements grant Seller the right to
construct, operate, maintain the Hilltop Resort Gathering System as it exists
and is used today in, over, and across the real property covered thereby, and to
receive, gather, and redeliver Seller’s gas from lands in the AMI (as such term
is defined in the Gas Gathering Agreement).
(iii) To
Seller’s knowledge, there are no condemnation or similar proceedings pending or
threatened against any of the Subject Assets.
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(iv) Except
as set forth in Schedule 4.1(n), to
the knowledge of Seller, the personal property, fixtures, and improvements
included in the Subject Assets are in good repair, working order and operating
condition in all material respects, ordinary wear and tear
excepted.
(v) To
Seller’s knowledge, no portion of the gathering system included in the Subject
Assets encroaches in any respect on property of others (other than encroachments
that would not materially impair the ownership or operation of the Subject
Assets).
(vi) Except
as set forth in Schedule 4.1(n), no
portion of the Subject Assets is subject to any preferential purchase rights or
purchase options.
(o) Permits. Schedule 4.1(o)
correctly describes each license, franchise, permit, certificate, approval, or
other similar authorization, excluding Environmental Permits of Seller or its
Affiliates, affecting, or relating in any way to, the Subject Assets (the “Permits”) together
with the name of the Governmental Authority issuing such
Permit. Except as set forth on Schedule 4.1(o), (i)
each material Permit is valid and in full force and effect, (ii) Seller is not
in default, and no condition exists that with notice or lapse of time or both
would constitute a default, under any such Permits, (iii) no such Permit will be
terminated or impaired or become terminable, in whole or in part, as a result of
the transactions contemplated hereby or by the Transaction Agreements, and (iv)
to the knowledge of Seller, the Permits constitute all of the licenses,
franchises, permits, certificates, approvals, or other similar authorizations,
excluding Environmental Permits, used or necessary for the ownership and
operation of the Hilltop Resort Gathering System.
(p) Insurance
Coverage. Seller has furnished to Buyer a list of, and true
and complete copies of, all insurance policies and fidelity bonds relating to
the ownership or operation of the Subject Assets. There is no claim
by Seller pending under any of such policies or bonds as to which coverage has
been questioned, denied, or disputed by the underwriters of such policies or
bonds or in respect of which such underwriters have reserved their
rights. All premiums payable under all such policies and bonds have
been timely paid and Seller has otherwise complied fully with the terms and
conditions of all such policies and bonds. Such policies of insurance
and bonds (or other policies and bonds providing substantially similar insurance
coverage) have been in effect since November 1, 2008 and remain in full force
and effect. Such policies and bonds are of the type and in amounts
customarily carried by Persons conducting operations similar to the operation of
the Subject Assets. Seller does not know of any threatened
termination of, premium increase with respect to, or material alteration of
coverage under, any of such policies or bonds. After Closing, Seller
shall continue to have coverage under such policies and bonds with respect to
events occurring prior to the Closing.
(q) Regulatory
Status. No segment of the Subject Assets (i) has been acquired
through the use or threatened use of the power of eminent domain, or (ii) is
subject to regulation by (x) the Texas Railroad Commission as to the rates or
tariffs that can or must be charged or imposed or the services that can or must
be performed or (y) the Federal Energy Regulatory Commission as a natural gas
company under the Natural Gas Act or a Section 311 transporter under the Natural
Gas Policy Act of 1978.
(r) No Fraudulent
Transfer. Neither Seller nor any of its Affiliates is
“insolvent” (and will not become “insolvent” as a result of consummation of the
transactions contemplated under this Agreement), and the Purchase Price
constitutes “reasonable equivalent value” and “fair consideration” for the
Subject Assets, in each case for the purposes of Section 548(a)(1)(B) of
the United States Bankruptcy Code or any other applicable fraudulent conveyance
or similar laws.
(s) Books and
Records. The books and records necessary for the ownership and
operation of the Subject Assets are complete and correct in all material
respects and true, correct, and complete copies of such books and records have
been provided to Buyer.
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(t) Reserve Report and
Production. The factual, non-interpretive production data, and
information (excluding interpretive data, projections, and estimates) supplied
by Seller and its Affiliates to the Reserve Engineers for purposes of preparing
the reserve report, dated June 30, 2009, of the proved natural gas and oil
reserve estimates of Seller and its Affiliates in ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ Counties,
Texas was true and correct in all material respects on the date supplied. Such
factual, non-interpretive production data and information consisted
of: a description of the producing ▇▇▇▇▇ connected to the Hilltop
Resort Gathering System; historical monthly and daily production data for such
▇▇▇▇▇; the net revenue interests and working interests of Seller and its
Affiliates in such ▇▇▇▇▇; and the number of drilling rigs active as of the date
of the report. Schedule 4.1(t) sets
forth the aggregate throughput data for the Hilltop Resort Gathering System
included in the Subject Assets for the month of September 2009.
Section
4.2. Representations and Warranties of
Buyer As of the
date hereof, Buyer represents and warrants to Seller as follows:
(a) Organization and
Qualification. Buyer is a limited liability company, duly
formed, validly existing, and in good standing under the laws of the State of
Delaware and has the requisite power to carry on its business as it is now being
conducted.
(b) Qualification of
Buyer. Buyer has the requisite limited liability company power
and authority required to carry on the business of owning and operating its
assets, as such business is now being conducted. Buyer is qualified
to do business and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to be
so qualified would not be material to Buyer.
(c) 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.
(d) Enforceability. This
Agreement and each of the Transaction Agreements constitutes a valid and binding
obligation of Buyer enforceable against Buyer in accordance with its terms,
subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium,
and other similar Laws of general application with respect to creditors, (ii)
general principles of equity, and (iii) the power of a court to deny enforcement
of remedies generally based upon public policy.
(e) No Conflict or
Violation. Neither the execution and delivery of this
Agreement or the Transaction Agreements nor the consummation of the transactions
and performance of the terms and conditions contemplated hereby or thereby by
Buyer (i) conflict with or result in a violation or breach of any provision of
the certificate of formation, regulations, or other similar governing documents
of Buyer or any 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.
(f) 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 or any Transaction Agreement by Buyer or for or in connection
with the consummation of the transactions and performance of the terms and
conditions contemplated hereby or thereby by Buyer.
(g) Actions. There is
no Action (or any basis therefor) pending against Buyer, or to the knowledge of
Buyer threatened against Buyer, which could reasonably expected to have a
material adverse effect on Buyer or which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay the transactions contemplated by this
Agreement or the Transaction Agreements.
(h) Brokerage Fees and
Commissions. Neither Buyer nor any Affiliate of Buyer has
incurred any obligation or entered into any agreement for any investment
banking, brokerage, or finder’s fee or commission in respect of the transactions
contemplated by this Agreement for which Seller shall incur any
liability.
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Article
5
Access
Before Closing
Promptly
following the execution of this Agreement and until the Closing Date (or earlier
termination of this Agreement), Seller shall permit Buyer and its
representatives (i) to have reasonable access at reasonable times in Seller’s
offices to records relating to the Subject Assets, and (ii) subject to any
required consent of any third Person, to conduct at reasonable times and at
Buyer’s cost and expense, in the presence of representatives of Seller,
reasonable inspections (but excluding any ground water or soil sampling or any
other invasive testing of the Subject Assets including the real property upon
which the Subject Assets are located, unless such sampling or testing is
approved in advance in writing by Seller, which approval may be refused by
Seller in its sole discretion) of the Subject Assets. Buyer shall indemnify the
Seller Indemnified Parties from and against any and all Losses incurred or
suffered by any of the Seller Indemnified Parties as a result of Buyer’s and its
representatives’ access and inspections, except to the extent caused by the
intentional misconduct or gross negligence of the Seller Indemnified
Parties.
Article
6
Covenants
of Seller and Buyer
Section
6.1. Conduct of Business Pending Closing
From the
date hereof through the Closing, except as disclosed in Schedule 6.1 or as
otherwise consented to or approved by Buyer, such consent not to be unreasonably
withheld, delayed or conditioned, Seller covenants and agrees as provided
below.
(a) Changes in
Business. From the date hereof until the Closing Date, Seller
shall operate the Subject Assets in the ordinary course consistent with past
practice and shall use its reasonable best efforts to preserve intact the
business organizations and relationships with third parties (including but not
limited to, suppliers, customers, and Governmental Authorities) and to keep
available the services of the present employees assigned to the operation of the
Subject Assets. Without limiting the generality of the foregoing and
except as otherwise expressly set forth herein, from the date hereof until the
Closing Date, Seller shall not:
(i)
make any material change in the conduct of
the business related to the Subject Assets; and
(ii) sell,
lease, or otherwise dispose of any of the Subject Assets, except (a) any Subject
Assets sold, leased, or otherwise disposed of in the ordinary course of business
consistent with past practice and (b) any Subject Assets having an individual
value not exceeding $20,000 and an aggregate value not exceeding
$100,000.
(b) No Liens. Seller
shall not create any express lien or security interest on any Subject Assets,
except for Permitted Encumbrances created in the ordinary course of
business.
(c) Operation of
Assets. Seller shall:
(i)
cause the Subject 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 and the investigation, monitoring and remediation of the Subject Assets
as required by Environmental Laws), maintain insurance now in force with respect
to the Subject Assets, and pay or cause to be paid all costs and expenses in
connection therewith promptly when due in the ordinary course of business in
accordance with Seller’s past practices;
(ii) duly
and timely file or cause to be filed all reports and returns required to be
filed with a Governmental Authority and timely pay all amounts due in connection
therewith, unless such amounts are being contested by Seller in good faith;
and
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(iii) cause
the value of the spare parts and inventory that are part of the Subject Assets
to be maintained at levels consistent with past practices, if
applicable.
Section
6.2. Public Announcements
Prior to
the Closing Date, without the prior written approval of the other party hereto
(which approval shall not be unreasonably withheld, delayed or conditioned), no
party hereto will issue, or permit any agent, representative, or Affiliate of it
to issue, any press releases or otherwise make, or cause any agent or Affiliate
of it to make, any public statements with respect to this Agreement, its
existence, or the transactions contemplated hereby, except where such release or
statement is deemed in good faith by the releasing party to be required by Law
or under the rules and regulations of any applicable public stock exchange on
which the shares of such party or any of its Affiliates are
listed. In each case to which such exception applies, the releasing
party will use its reasonable efforts to provide a copy of such release or
statement to the other parties prior to releasing or making the
same. After the Closing Date, to the extent permitted by Applicable
Law and under the rules and regulations of any applicable public stock exchange
on which the shares of a party or any of its Affiliates are listed, the parties
will confer with each other in advance regarding the respective initial public
announcements proposed to be made by the parties in connection with the
transactions contemplated hereby.
Section
6.3. Actions by Parties
Each
party agrees to use its reasonable best efforts to satisfy the conditions to
Closing set forth in Article 7 and take,
or cause to be taken, and do, or cause to be done, all things reasonably
necessary, proper, or advisable under applicable Laws to satisfy all of its
obligations hereunder, and to cause the transactions contemplated hereunder to
occur as soon as reasonably practicable, and to refrain from taking, or omit
from taking, any action within its reasonable control which would cause a breach
of a representation or warranty set forth herein.
Section
6.4. Further Assurances
Seller
and Buyer each agree that from time to time after the Closing Date it will
execute and deliver, or cause its respective Affiliates to execute and deliver,
such documents, certificates, instruments and other writings, and take (or cause
its respective Affiliates to take) such other actions, as may be necessary or
desirable to carry out the purposes and intents of this Agreement and to
consummate or implement expeditiously the transactions contemplated by this
Agreement and to vest in Buyer (or Buyer’s Affiliates) good and marketable title
to the Subject Assets.
Section
6.5. Records Buyer
agrees to maintain the Records until the fifth anniversary of the Closing Date,
or if any of the Records pertain to any claim or dispute pending on the fifth
anniversary of the Closing Date, Buyer shall maintain any of the 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 to, and the right to copy the
applicable portion of, the Records for the purposes of:
(i)
preparing and delivering any
accounting Records or reports provided for under this Agreement and adjusting,
prorating, and settling the charges and credits provided for in this
Agreement;
(ii) complying
with any Law affecting the Subject Assets prior to the Closing
Date;
(iii) preparing
any audit of the books and records of any third party relating to Subject Assets
prior to the Closing Date, or responding to any audit prepared by such third
parties;
(iv) preparing
Tax Returns;
(v) responding
to or disputing any Tax audit or otherwise dealing with any Tax matters;
or
(vi)
asserting, defending, or otherwise dealing with any claim, dispute,
or Action under this Agreement or with respect to the Subject
Assets.
In no
event shall Buyer or any of its Affiliates destroy any Records without giving
Seller sixty (60) days’ advance written notice thereof and the opportunity, at
Seller’s expense, to obtain such Records prior to their
destruction.
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Section
6.6. Certain Filings Seller and Buyer shall
cooperate with one another and assist each other:
(i)
in determining whether any action by or in respect of, or
filing with, any Governmental Authority is required, or any actions, consents,
approvals in connection with the consummation of the transactions contemplated
by this Agreement; and
(ii) in
taking such actions or making any such filings, furnishing information required
in connection therewith and seeking timely to obtain any such actions, consents,
approvals or waivers, including giving all notices to third parties and using
its reasonable best efforts to obtain all third party consents necessary,
proper, or advisable to consummate the transactions contemplated
hereunder.
Section
6.7. Regulatory Approvals If Buyer
or Seller decide that approval of a Governmental Authority is required to permit
Seller or Buyer to continue to use any Permits with respect to the Subject
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 Seller’s continued right to use such Permits or to transfer or assign
such Permits to Buyer (the “Regulatory
Approvals”) as necessary. Each party agrees to use its
reasonable best efforts to obtain the Regulatory Approvals and the parties agree
to cooperate fully with each other and with all Governmental Authorities to
obtain the Regulatory Approvals at the earliest practicable date.
Section
6.8. Expenses And Revenues
Expenses. To the extent there are any costs and expenses
attributable to the ownership or operation of the Subject Assets that have not
already been taken into account in determining the Adjusted Purchase
Price, (i) Seller shall be entitled to be reimbursed by Buyer for any costs and
expenses paid by Seller for any period after the Closing Date and attributable
to the ownership or operation of the Subject Assets after the Closing Date;
provided, however, that Seller shall not be entitled to be reimbursed for any
Taxes paid by Seller under Article 11 hereof and
(ii) Buyer shall be entitled to be reimbursed by Seller for any costs and
expenses paid by Buyer for any period prior to the Closing Date and attributable
to the ownership or operation of the Subject Assets prior to the close of
business on the Closing Date. Buyer and Seller agree to reimburse
each other for all such costs and expenses within ten (10) Business Days after
receipt from Buyer or Seller, as appropriate, of a notice of reimbursement
accompanied by written evidence of the underlying payment on account of such
costs and expenses.
(b)
Revenues. To the
extent there are any revenues, proceeds, and monies attributable to the
ownership or the operation of the Subject Assets that have not already been
taken into account in determining the Adjusted Purchase Price, (i) Buyer shall
be entitled to be reimbursed by Seller for any revenues, proceeds, and other
monies received by Seller attributable to the ownership or operation of the
Subject Assets after the Closing Date and (ii) Seller shall be entitled to be
reimbursed by Buyer for any revenues, proceeds, and other monies received by
Buyer attributable to the ownership or operation of the Subject Assets prior to
the close of business on the Closing Date. To the extent that either
Buyer or Seller receives such revenue, proceeds and monies, Buyer and Seller
agree to promptly (within ten (10) Business Days) remit such proceeds to the
designated bank account of Seller or Buyer, as appropriate.
Section
6.9. Conveyance of Certain Excluded Assets
If Buyer obtains a right of way from the surface owner with respect to
the pipeline assets set forth on Exhibit B, Seller shall convey to Buyer all of
its right, title and interest in the relevant pipeline assets set forth on
Exhibit B. In the event that Buyer is unable to obtain any such right of way,
Seller hereby agrees to use commercially reasonable efforts to partially assign
to Buyer Seller’s surface rights under the oil and gas lease relating to such
pipeline assets, provided that (i) any such assignment shall not be a violation
of the oil and gas lease, (ii) any such assignment shall be non-exclusive and
only for the term of the Gas Gathering Agreement, (iii) the use of such surface
rights and pipeline assets shall be only as permitted by the oil and gas lease
and shall be limited to moving oil and gas produced from such lease, (iv) Buyer
shall be responsible for removing such pipeline assets at its sole cost if the
oil and gas lease terminates prior to the Gas Gathering Agreement and (v) Buyer
shall indemnify and hold Seller harmless against any and all Losses incurred by
any Seller Indemnified Party in connection with the granting of such assignment
or the use of such surface rights.
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Section
6.10. Certain Rights of Way
Seller
hereby agrees to acquire, in the name of Buyer, promptly after Closing and
except as set forth in the following sentence at no cost to Buyer, fully
recordable, paid-up, right of way instruments from the appropriate surface
owners to connect the gaps set forth on Schedule
4.1(n)(ii)(F). In the event Seller is not able to recover from
Navasota and/or Presco their share of the costs incurred to satisfy Seller’s
obligation under this Section together with any costs associated with its
obligations under Section 6.11 to obtain certain consents (after the exercise of
its good faith efforts), Buyer shall promptly reimburse Seller for such
unrecovered amounts from Navasota and/or Presco (i.e., up to thirty percent
(30%) of the aggregate paid by Seller) in an aggregate amount not to exceed
$150,000 (the “Reimbursement
Obligation”). If Seller does not obtain fully recordable, paid-up, right
of way instruments from the appropriate surface owners to connect the gaps set
forth on Schedule
4.1(n)(ii)(F) within 90 days after the Closing Date, Buyer may acquire or
obtain such right of way instruments or, if such right of way instruments cannot
be acquired or obtained within forty-five (45) days, may seek other cure of such
defects (including obtaining alternative rights of way and construction of
alternative pipelines; provided that such pipelines are of substantially similar
size, quality and specifications), and, subject to the following sentence, such
cure costs to Buyer shall be deemed Losses subject to indemnification by Seller
pursuant to Section
9.2 in addition to any other Losses covered under Section
9.2. In the event Seller is not able to recover from Navasota
and or/Presco their share of such costs after the exercise of its good faith
efforts, Buyer shall be responsible for the Reimbursement Obligation in respect
of such costs.
Section
6.11. Certain Consents Seller
shall use commercially reasonable efforts to obtain, promptly after Closing and
at no cost to Buyer, the consents set forth on Schedule
4.1(f). In the event Seller does not obtain such consents
within 90 days, Buyer may seek to obtain such consents and, subject to the
following sentence, any costs to Buyer in obtaining such consents shall be
deemed Losses subject to indemnification by Seller pursuant to Section 9.2 in
addition to any other Losses covered under Section 9.2. In the
event Seller is not able to recover from Navasota and or/Presco their share of
such costs after the exercise of its good faith efforts, Buyer shall be
responsible for the Reimbursement Obligation in respect of such costs together
with costs incurred to satisfy Seller's obligation under Section
6.10.
Article
7
Closing
Conditions
Section
7.1. 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. (i) The representations and warranties of Buyer
contained in Section
4.2 of this Agreement and in any certificate or other writing delivered
by Buyer pursuant hereto shall be true and correct in all material respects on
and as of the Closing Date (after excluding the effect of any materiality
qualifications set forth in any such representation or warranty), and (ii) the
covenants and agreements of Buyer to be performed on or before the Closing Date
shall have been duly performed in all material respects in accordance with this
Agreement.
(b) Officer’s
Certificate. Seller shall have received a certificate dated as
of the Closing Date, executed by a duly authorized officer of Buyer, to the
effect that the conditions set forth in Section 7.1(a) have
been satisfied and attaching evidence of the requisite corporate actions of
Buyer authorizing the execution, delivery and performance of this Agreement and
the Transaction Agreements and the transactions contemplated hereby and
thereby.
(c) Closing
Documents. On or prior to the Closing Date, Buyer or its
Affiliates shall have executed and delivered, or be standing ready to execute
and deliver at Closing, all agreements, instruments, and other documents
required to be delivered by Buyer or its Affiliates under Section
8.3.
(d) No Action. No
suit, action, or other proceeding shall be pending or threatened before any
court or Governmental Authority or body of competent jurisdiction seeking to
enjoin or restrain the consummation of the Closing or recover damages from
Seller or its Affiliates resulting therefrom and no written notice shall have
been received from any Governmental Authority indicating an intent to prevent,
materially delay, or restructure the transactions contemplated
hereunder.
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(e) Consents. All
consents, waivers, authorizations, and approvals listed in Schedule 7.1(e) shall
have been obtained or waived on or before the Closing Date, in each case in form
and substance reasonably satisfactory to Seller.
(f) Other Regulatory
Approvals. All actions by or in respect of or filings with any
Governmental Authority required to permit the consummation of the Closing shall
have been taken, made or obtained.
Section
7.2. Buyer’s Closing Conditions
The
obligation 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 in
Section 4.1 of
this Agreement and in any certificate or other writing delivered by Seller
pursuant hereto shall be true and correct in all material respects on and as of
the Closing Date (after excluding the effect of any materiality qualifications
set forth in any such representation or warranty), and (ii) 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 in
accordance with this Agreement.
(b) Officer’s
Certificate. Buyer shall have received a certificate dated as
of the Closing Date, executed by a duly authorized officer of Seller, to the
effect that the conditions set forth in Section 7.2(a) have
been satisfied and attaching evidence of the requisite corporate actions of the
General Partner authorizing the execution, delivery and performance of this
Agreement and the Transaction Agreements and the transactions contemplated
hereby and thereby.
(c) Closing
Documents. On or prior to the Closing Date, Seller shall have
executed and delivered, or be standing ready to execute and deliver at the
Closing, all agreements, instruments, and documents required to be delivered by
Seller under Section
8.2.
(d) No Action. No
suit, action, or other proceeding shall be pending or threatened before any
court or Governmental Authority or body of competent jurisdiction seeking to
enjoin or restrain the consummation of the Closing or recover damages from Buyer
or any Affiliate of Buyer resulting therefrom and no written notice shall have
been received from any Governmental Authority indicating an intent to prevent,
materially delay, or restructure the transactions contemplated
hereunder.
(e) Consents. All
consents, waivers, authorizations, and approvals set forth in Schedule 7.2(e) shall
have been obtained or waived on or before the Closing Date, in each case in form
and substance reasonably satisfactory to Buyer.
(f) Other Regulatory
Approvals. All actions by or in respect of or filings with any
Governmental Authority required to permit the consummation of the Closing shall
have been taken, made or obtained.
(g) Gas Gathering
Agreements. Gastar shall have executed and delivered the Gas
Gathering Agreement and each of Navasota and Presco shall have executed and
delivered a separate gas gathering agreement in a form that is acceptable to
Buyer, and each such gas gathering agreement shall be in full force and
effect.
(h) Conveyances and Purchase and Sale
Agreements. Gastar shall have conveyed a portion of the
Hilltop Resort Gathering System to each of Navasota and Presco, and each of
Navasota and Presco shall have executed and delivered a separate purchase and
sale agreement in a form that is acceptable to Buyer for the purchase and sale
of the portion of the Hilltop Resort Gathering System owned by each such party,
and each such purchase and sale shall be consummated concurrently with the
Closing.
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Article
8
Closing
Section
8.1. Closing The
Closing shall be held on the Closing Date at 10:00 a.m., Houston time, at the
offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇ LLP at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇,
▇▇▇▇▇ or at such other time or place as Seller and Buyer may otherwise agree in
writing.
Section
8.2. Seller’s Closing Deliverables
At
Closing, Seller shall execute and deliver, or cause to be executed and
delivered, to Buyer the following:
(i) the
assignment agreement and ▇▇▇▇ of sale in substantially the form of Exhibit 8.2(i) (the
“Assignment and ▇▇▇▇
of Sale”) and such other conveyance and transfer instruments under which
the Subject Assets will be assigned and transferred to Buyer;
(ii) the
officer’s certificates referred to in Section
7.2(b);
(iii) a
non-foreign affidavit, as such affidavit is referred to in Section 1445(b)(2) of
the IRC, in form attached hereto as Exhibit 8.2(iii),
dated as of the Closing Date; and
(iv) the
Gas Gathering Agreement.
Section
8.3. Buyer’s Closing Deliverables
At
Closing, Buyer shall deliver, or cause to be delivered, the Estimated Adjusted
Purchase Price and the Closing Property Tax Payment to Seller in immediately
available funds to the bank account as provided in Section 3.2, and
Buyer shall execute and deliver, or cause to be executed and delivered, to
Seller the following:
(i) the
Assignment and ▇▇▇▇ of Sale executed by Buyer;
(ii) the
officer’s certificate of Buyer referred to in Section 7.1(b);
and
(iii) the
Gas Gathering Agreement.
Article
9
Indemnification
Section
9.1. Indemnification by Buyer
From and
after the Closing Date, Buyer shall indemnify and hold harmless Seller, its
Affiliates, and its and their directors, officers, employees, representatives,
agents, successors, and permitted assigns (collectively, the “Seller Indemnified
Parties”) from and against any and all Losses incurred or suffered by any
of Seller Indemnified Parties (i) for any breach of Buyer’s representations or
warranties made in this Agreement and (ii) for any breach of the covenants or
obligations made or to be performed by Buyer under this Agreement.
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Section
9.2. Indemnification by Seller
From and after the Closing Date, Seller shall indemnify and hold harmless
Buyer, its Affiliates, and its and their directors, officers, employees,
representatives, agents, successors, and permitted assigns (collectively, the
“Buyer Indemnified
Parties”) from and against any and all Losses incurred or suffered by any
of Buyer Indemnified Parties (i) for any breach of Seller’s representations or
warranties made in this Agreement, (ii) for any breach of the covenants or
obligations made or to be performed by Seller and its Affiliates pursuant to
Section 2.3,
(iii) for any breach of the remaining covenants or obligations made or to be
performed by Seller and its Affiliates under this Agreement, (iv) for the
Excluded Liabilities and (v) relating to connecting the gaps in the pipeline set
forth in Section
4.1(n)(ii)(F) or obtaining the consents set forth on Schedule 4.1(f)
(other than Losses that are subject to the Reimbursement Obligation if
applicable) or the ownership, operation, maintenance or other use of the
applicable Subject Assets prior to the acquisition of right of way instruments
connecting such gaps or obtaining such consents. Notwithstanding
anything in this Agreement to the contrary, Seller shall not be required to
indemnify any Buyer Indemnified Party pursuant to clause 9.2(i) or
(ii) (a) unless
and only to the extent the aggregate of all Losses for which Seller would be
liable under clause
9.2(i) or (ii) exceeds one
percent (1%) of the Purchase Price, and (b) to the extent Losses for which
Seller would be liable under clause 9.2(i) or
(ii) exceed
$3,500,000 in the
aggregate; provided, that, such limitations shall not apply to Losses incurred
or suffered for any breach of the representations and warranties contained in
Section 4.1(c)
(Authority), Section
4.1(d) (Enforceability), Section 4.1(i)
(Brokerage Fees and Commissions), or Section 4.1(m) (Tax
Matters). Notwithstanding anything in this Agreement to the contrary, with
respect to Losses relating to the Hilltop Resort Gathering System (other than
Losses described in Section 9.2(v)), Seller’s liability to Buyer pursuant to
this Agreement shall be limited to a proportionate share of such Losses equal to
the proportionate interest in the Hilltop Resort Gathering System conveyed by
Seller to Buyer.
Section
9.3. Third Party Claims
If a
claim by a third party a (“Third Party Claim”)
is made against a Seller Indemnified Party or a Buyer Indemnified Party (an
“Indemnified
Party”), and if such party intends to seek indemnity with respect thereto
under Section
9.1 or Section
9.2, such Indemnified Party shall promptly furnish written notice to the
indemnifying party (the “Indemnitor”) of such
claims. The Indemnitor shall have thirty (30) days after receipt of
such notice to undertake, conduct, and control (through counsel of its own
choosing and at its own expense) the defense thereof. If the
Indemnitor elects to undertake the defense of any Third Party Claim, the
Indemnified Party shall cooperate with it in connection therewith; provided that
the Indemnitor shall not settle any such Third Party Claim without the prior
written consent of the Indemnified Party (which consent will not be unreasonably
withheld or delayed) unless the relief consists solely of money damages and
includes a provision whereby the plaintiff or claimant in the matter releases
Buyer Indemnified Parties or Seller Indemnified Parties, as applicable, from all
liability with respect thereto. The Indemnitor shall permit the
Indemnified Party to participate in such settlement or defense through counsel
chosen by such Indemnified Party (however, the fees and expenses of such counsel
shall be borne by such Indemnified Party except if (i) the Indemnified Party
shall have determined reasonably and in good faith that an actual or potential
conflict of interest makes representation by the same counsel or the counsel
selected by the Indemnitor inappropriate or (ii) the Indemnitor shall have
authorized the Indemnified Party to employ separate legal counsel at the
Indemnitor’s expense). So long as the Indemnitor, at Indemnitor’s
cost and expense, (i) has undertaken the defense of such claim, (ii) is
reasonably contesting such claim in good faith, by appropriate proceedings, and
(iii) has taken such action (including the posting of a bond, deposit, or other
security) as may be necessary to prevent any action to foreclose a lien against
or attachment of the property of the Indemnified Party for payment of such
claim, the Indemnified Party shall not pay or settle any such
claim. If within thirty (30) days after the receipt of the
Indemnified Party’s notice of a claim of indemnity hereunder, the Indemnitor
does not notify the Indemnified Party that it elects (at Indemnitor’s cost and
expense) to undertake the defense thereof or gives such notice and thereafter
fails to contest such claim in good faith or to prevent action to foreclose a
lien against or attachment of the Indemnified Party’s property as contemplated
above, the Indemnified Party shall have the right to contest but shall not
settle and/or compromise the claim and, to the extent the actions taken by the
Indemnified Party in settling or compromising such claim are reasonable and in
good faith, the Indemnified Party shall not thereby waive any right to indemnity
therefor pursuant to this Agreement.
Section
9.4. Survival The representations
and warranties of the parties in this Agreement or in any certificate or other
writing delivered in connection herewith shall survive until eighteen (18)
months after the Closing; provided, that the representations and warranties
contained in Section
4.1(m) (Tax Matters) shall survive the Closing until thirty (30) days
after the expiration of the applicable statute of limitations (including any
extensions thereof). The covenants and agreements contained herein
shall expire as of the Closing Date; provided that agreements or covenants in
this Agreement that by their terms contemplate performance after Closing shall
survive until performed in full.
Section
9.5. Purchase Price Adjustment Any
amount paid by Seller or Buyer under this Article 9 will be
treated as an adjustment to the Purchase Price.
Section
9.6. Exclusive Remedy Except as
otherwise provided in Article 5, after the
Closing Date, the remedies provided in this Article 9 shall be
the sole and exclusive remedies hereunder for any breach hereof, and shall
preclude assertion by an Indemnified Party of any other rights or the seeking of
any and all other remedies against an Indemnifying Party for claims for breach
hereof, whether arising in contract, tort or otherwise.
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Section
9.7. Disclaimers BUYER
ACKNOWLEDGES AND AGREES THAT BUYER IS EXPERIENCED IN THE OWNERSHIP AND OPERATION
OF PROPERTIES SIMILAR TO THE SUBJECT ASSETS AND THAT BUYER PRIOR TO THE CLOSING
DATE WILL HAVE INSPECTED THE SUBJECT ASSETS TO ITS SATISFACTION AND IS QUALIFIED
TO MAKE SUCH INSPECTION. WITHOUT LIMITING ANY OF SELLER’S
REPRESENTATIONS IN THIS AGREEMENT OR THE OTHER TRANSACTION AGREEMENTS, BUYER
ACKNOWLEDGES THAT IT IS FULLY RELYING ON BUYER’S (OR BUYER’S REPRESENTATIVES’)
INSPECTIONS, EXAMINATIONS AND EVALUATIONS OF THE SUBJECT ASSETS AND NOT UPON ANY
STATEMENTS (ORAL OR WRITTEN) WHICH MAY HAVE BEEN MADE OR MAY BE MADE (OR
PURPORTEDLY MADE) BY SELLER OR ANY OF ITS REPRESENTATIVES. BUYER
ACKNOWLEDGES THAT BUYER HAS (OR BUYER’S REPRESENTATIVES HAVE), OR PRIOR TO THE
CLOSING DATE WILL HAVE, THOROUGHLY INSPECTED AND EXAMINED THE SUBJECT ASSETS TO
THE EXTENT DEEMED NECESSARY BY BUYER IN ORDER TO ENABLE BUYER TO EVALUATE THE
CONDITION OF THE SUBJECT ASSETS AND ALL OTHER ASPECTS OF THE SUBJECT ASSETS
(INCLUDING, BUT NOT LIMITED TO, THE ENVIRONMENTAL CONDITION OF THE SUBJECT
ASSETS), AND BUYER ACKNOWLEDGES THAT BUYER IS RELYING SOLELY UPON ITS OWN (OR
ITS REPRESENTATIVES’) INSPECTION, EXAMINATION AND EVALUATION OF THE SUBJECT
ASSETS (EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT OR THE OTHER TRANSACTION
AGREEMENTS). AS A MATERIAL PART OF THE CONSIDERATION FOR THIS
AGREEMENT AND THE PURCHASE, BUYER HEREBY AGREES TO ACCEPT THE SUBJECT ASSETS ON
THE CLOSING DATE IN ITS AS-IS, WHERE-IS CONDITION, WITH ALL FAULTS AND DEFECTS
(KNOWN OR UNKNOWN, LATENT, DISCOVERABLE OR UNDISCOVERABLE), AND WITHOUT
REPRESENTATIONS AND WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, OR ARISING BY
OPERATION OF LAW, OF MERCHANTABILITY, FREEDOM FROM LATENT VICES OR DEFECTS,
FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS
OF ANY ASSETS, EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT OR THE OTHER
TRANSACTION AGREEMENTS. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE
CONTRARY, THE PROVISIONS OF THIS SECTION 9.7 SHALL
SURVIVE THE CLOSING.
Section
9.8. Waiver EACH PARTY HEREBY
AGREES THAT THE OTHER PARTY SHALL NOT BE LIABLE FOR ANY SPECIAL, DIRECT,
INDIRECT, CONSEQUENTIAL, OR OTHER DAMAGES) RESULTING OR ARISING FROM OR RELATED
TO THE TRANSACTIONS CONTEMPLATED UNDER THIS AGREEMENT OR THE SUBJECT ASSETS OR
THE OWNERSHIP, USE, CONDITION, LOCATION, MAINTENANCE, REPAIR OR OPERATION
THEREOF. EXCEPT ONLY AS MAY BE DIRECTLY AND PROXIMATELY CAUSED BY ANY
BREACH BY SELLER OF ITS REPRESENTATIONS AND WARRANTIES PROVIDED IN THIS
AGREEMENT OR THE OTHER TRANSACTION AGREEMENTS, BUYER EXPRESSLY RELEASES AND
AGREES NOT TO ▇▇▇ ANY OF THE SELLER INDEMNIFIED PARTIES FOR (TO THE EXTENT
ALLOWED BY APPLICABLE LAW) ANY CLAIMS UNDER FEDERAL, STATE OR OTHER LAW
(INCLUDING, BUT NOT LIMITED TO COMMON LAW, WHETHER SOUNDING IN CONTRACT OR TORT,
AND ANY AND ALL ENVIRONMENTAL LAWS) THAT BUYER MIGHT OTHERWISE HAVE OR LATER
ACQUIRE AGAINST SELLER INDEMNIFIED PARTIES RELATING TO THE USE, CHARACTERISTICS
OR CONDITION OF THE SUBJECT ASSETS. NOTWITHSTANDING ANYTHING IN THIS
AGREEMENT TO THE CONTRARY, THE PROVISIONS OF THIS SECTION 9.8 SHALL
SURVIVE THE CLOSING.
Article
10
Termination
Section
10.1. Termination of Agreement
This
Agreement and the transactions contemplated hereby may be terminated at any time
prior to the Closing:
(i) by
Buyer, as provided in Section
12.4;
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(ii) by
the mutual written consent of Seller and Buyer; or
(iii) if
the Closing has not occurred by the close of business on December 1, 2009, then
(a) by Seller if any condition specified in Section 7.1 has not
been satisfied on or before such close of business, and shall not theretofore
have been waived in writing by Seller, or (b) by Buyer if any condition
specified in Section
7.2 has not been satisfied on or before such close of business, and shall
not theretofore have been waived in writing by Buyer; provided, in each case,
that the failure to consummate the transactions contemplated hereby on or before
such date did not result from the failure by the party or parties or its
Affiliates seeking termination of this Agreement to fulfill any undertaking or
commitment provided for herein on the part of such party or parties that is
required to be fulfilled on or prior to Closing.
Section
10.2. Effect of Termination
In the
event of termination of this Agreement by Seller or Buyer under Section 10.1, written
notice thereof shall forthwith be given by the terminating Party to the other
Party, and this Agreement shall thereupon terminate; provided that each Party
shall remain liable for any material breach by such Party of this Agreement
prior to the date of termination. Following such termination, the
provisions of this Section 10.2, Section 12.2, and
Section 12.6
shall survive any termination hereof. If this Agreement is terminated
as provided herein all filings, applications, and other submissions made to any
Governmental Authority shall, to the extent practicable, be withdrawn from the
Governmental Authority to which they were made.
Article
11
Taxes
Section
11.1. Allocation of Taxes Transfer Taxes. Any Transfer Taxes incurred in connection with the
transactions contemplated by this Agreement shall be borne by
Buyer.
(b) Property
Taxes. Property Taxes for any taxable period in which the
Closing Date occurs shall be prorated between Seller and Buyer on a per diem
basis (with Seller liable for the Property Taxes for the portion of the taxable
period prior to November 1, 2009 (the “Pre-Closing Tax
Period”) and Buyer liable for the Property Taxes for the portion of the
taxable period beginning on November 1, 2009 (the “Post-Closing Tax
Period”)). Not later than five (5) days prior to the Closing
Date, Seller shall deliver to Buyer Seller’s calculation of the portion of the
Property Taxes owed to each Governmental Authority for the Post-Closing Tax
Period (in the aggregate, the “Closing Property Tax
Payment”) and any Tax bills or other information supporting such
calculation. At the Closing, Buyer shall pay to Seller the Closing
Property Tax Payment. Seller shall pay or cause to be paid to the appropriate
Governmental Authorities the Property Taxes relating to the tax period in which
the Closing Date occurs. To the extent any Property Taxes imposed on
or with respect to the Subject Assets for a taxable period that contains the
Closing Date are not finally determined as of the Closing Date, the prorated
Property Taxes shall be calculated by multiplying (i) the Property Tax appraised
values for the current taxable period, if determined as of Closing Date, or the
Property Tax appraised values for the immediately preceding taxable period if
such values have not been determined for the current taxable period as of
Closing Date, by (y) the Property Tax rates for the relevant taxing units in
which the Subject Asset are located for the current taxable period if such rates
have been determined or, to the extent such Tax rates have not been determined,
the Tax rates for the immediately preceding taxable period. Upon
receipt of the Property Tax bills for the taxable period that contains the
Closing Date, Seller shall calculate the prorated Property Taxes and shall ▇▇▇▇
Buyer for the amount, if any, by which Buyer’s prorated Property Taxes for the
Post-Closing Tax Period exceed the estimated amount of Buyer’s prorated Property
Taxes for the Post-Closing Tax Period paid at Closing, with Buyer making such
payment within twenty (20) days of receipt of such ▇▇▇▇, or shall refund to
Buyer within twenty (20) days the amount, if any, by which Buyer’s prorated
Property Taxes for the Post-Closing Tax Period are less than the estimated
amount of Buyer’s prorated Property Taxes for the Post-Closing Tax Period paid
at Closing. Buyer shall promptly forward to Seller any Property Tax
bills for the taxable period that contains the Closing Date that are received by
Buyer.
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(c) Allocation of Other
Taxes. Except as set forth in Section 11.1(a) and
(b), Seller
shall be responsible for all Taxes imposed on or with respect to the Subject
Assets that are attributable to any whole or partial taxable period before
November 1, 2009, and Buyer shall be responsible for all Taxes imposed on or
with respect to the Subject Assets that are attributable to any whole or partial
taxable period on or after November 1, 2009.
Section
11.2. Cooperation Buyer and
Seller will cooperate with each other and with each other’s respective agents,
including accounting firms and legal counsel, in connection with the preparation
or audit of any Tax Return or report and any Tax claim or litigation in respect
of the Subject Assets that include whole or partial taxable periods, activities,
operations, or events on or prior to the Closing Date, which cooperation shall
include, but not be limited to, making available during normal business hours
employees, if any, or original documents, or either or both of them, for the
purpose of providing testimony and advice (the cost of which shall be borne by
the requesting party). In the event of a contest with a Tax authority
regarding Taxes relating to the Subject Assets for which Seller is wholly
responsible hereunder, Seller shall have the right to control the contest;
provided, however that Seller shall not settle any such contest in a manner that
would materially adversely affect the Subject Assets or Buyer for any tax period
after the Closing Date. In a contest with a Tax authority regarding
Taxes related to the Subject Assets for which Seller and Buyer are jointly
responsible hereunder, Seller and Buyer shall jointly control the contest in
good faith with each other. Reasonable out-of-pocket expenses with
respect to such contests shall be borne by the parties pro-rata in accordance
with their responsibility for such Taxes as set forth in this
Agreement.
Article
12
Other
Provisions
Section
12.1. Counterparts This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement, and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other party.
Section
12.2. Governing Law This
Agreement and the respective rights and obligations of the parties to this
transaction shall be governed by, interpreted, and enforced in accordance with
the laws of the State of Texas.
Section
12.3. Arbitration Agreement to
Arbitrate. Any claim, counterclaim, demand, cause of action,
dispute, or any other controversy arising out of or relating in any way to this
Agreement, the subject matter of this Agreement, or the relationship between the
Parties created by this Agreement (each a “Dispute”), shall be
resolved by binding arbitration in accordance with the terms of this Section
12.3. A Dispute must be resolved through arbitration
regardless of whether the Dispute involves claims that the Agreement is
unlawful, unenforceable, void, or voidable or involves claims sounding in tort,
contract, statute or common law. The validity, construction and
interpretation of this agreement to arbitrate, and all other procedural aspects
of the arbitration conducted pursuant hereto, shall be decided by the arbitral
tribunal.
(b) Rules and Applicable
Law. Any arbitration of a Dispute shall be administered by the
American Arbitration Association (“AAA”) and conducted
in accordance with the Commercial Arbitration Rules (the “Rules”) of the AAA in
existence at the time of the arbitration. In resolving any Dispute,
the arbitral tribunal shall refer to the governing law as specified in Section 12.2,
provided that legal issues relating to arbitration procedure or the scope or
enforceability of the arbitration agreement shall be governed by the Federal
Arbitration Act. The arbitral tribunal shall not be empowered to
award exemplary, punitive, indirect, consequential, remote, speculative, treble,
multiple or special damages, and the Parties waive any right they may have to
recover such damages from one another.
(c) Location of the
Proceeding. The seat (or legal place) and venue of the
arbitration shall be in Houston, Texas.
(d) Parties. This
Section 12.3
shall apply to any Dispute between the Parties, and it shall also apply to any
(a) Dispute between a Party and any Affiliate of the other Party, (b) Dispute
between a Party and any officer, director, employee, representative, agent,
successor or assign of the other Party or of an Affiliate of such other Party,
(c) Dispute between an Affiliate of one Party and an Affiliate of the other
Party, and (d) Dispute between an Affiliate of a Party and an officer, director,
employee, representative, agent, successor or assign of the other Party or of an
Affiliate of the other Party. With regard to any Dispute, the
Affiliates of the Parties and the officers, directors, employees,
representatives, agents, successors and assigns of the Parties, and their
Affiliates, are intended third party beneficiaries of the agreement to arbitrate
set out in this Section
12.3.
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(e) Selection of the Arbitral
Tribunal. The Dispute shall be decided by a panel of three
neutral arbitrators. The claimant shall nominate an arbitrator at the
time it serves its request for arbitration. The respondent shall
nominate an arbitrator at the time it serves its response to the request for
arbitration. If a Party fails to appoint an arbitrator, then that
arbitrator shall be appointed in accordance with the Rules. The two
arbitrators shall together agree upon a third arbitrator to recommend to the AAA
to chair the arbitration. If the two party-appointed arbitrators are
unable to agree upon an arbitrator within fifteen (15) days of the respondent’s
appointment of an arbitrator, then the chairman shall be chosen according to the
Rules.
(f) Interim Measures and Provisional
Remedies. The arbitral tribunal is authorized to award interim measures,
provisional remedies or injunctive relief, which may be enforced by the arbitral
tribunal or by a court of law. In the event of an emergency or if one
of the arbitrators is unavailable, then the chairman is authorized to award
interim measures or injunctive relief, which may upon the request of a Party be
reviewed by the entire arbitral tribunal.
(g) The Award. The
award shall be final and binding. The award shall be required to be
in writing, stating the award and the reasons therefor.
(h) Enforcement of Award by a
Court. Any arbitration award may be enforced by the courts
sitting in Houston, Texas or any other court of competent subject matter
jurisdiction (including any jurisdiction in which a Party holds or keeps
assets). The Parties further agree that any action to challenge,
vacate or set aside the Award in whole or in part must be brought in the courts
sitting in Houston, Texas. The Parties agree to waive any objections
they may have to personal jurisdiction, venue, or forum non-conveniens for any
action brought to enforce the award in the courts sitting in Houston, Texas or
any other jurisdiction where a Party holds or keeps assets.
(i) Costs and Attorneys
Fees. The arbitral tribunal is authorized to award costs of
the arbitration in its award and to allocate costs between the Parties,
including (a) the fees and expenses of the arbitrators; (b) the costs
of assistance required by the tribunal, including the fees and expenses of its
experts; (c) the fees and expenses of the AAA; (d) the reasonable
costs for legal representation of a successful Party, including attorneys’ fees,
expert witness fees, out of pocket costs and other expenses; and (e) any such
costs incurred in connection with an application for interim or emergency
measures.
(j) Severability. If
any provision of this arbitration provision is found by a court to be
unenforceable or unlawful, then it shall be severed from this Agreement and the
remaining terms shall be enforced as written.
Section
12.4. Casualty Loss Prior to
Closing Non-Material
Casualty. If, prior to Closing, any part of the Subject Assets
is damaged or destroyed by fire, flood, storm, or other casualty, are taken in
condemnation or under the right of eminent domain or proceedings for such
purposes are pending or threatened (a “Casualty”), if in
Buyer’s reasonable good faith estimation the amount of aggregate damage caused
by one or more Casualties does not exceed $1,000,000 (the “Casualty Threshold”),
Buyer shall proceed to purchase the Subject Assets and, at Seller’s election,
either (i) the Purchase Price shall be reduced by the amount of the repair or
replacement cost thereof, as applicable, of the damaged or destroyed Subject
Assets or (ii) Seller shall diligently proceed to make the applicable repairs or
restoration at Seller’s sole cost and expense.
(b) Material
Casualty. If, prior to Closing, any part of the Subject Assets
is damaged or destroyed by a Casualty and the amount of aggregate damage caused
by one or more Casualties exceeds the Casualty Threshold, Seller shall promptly
notify Buyer of such Casualty. Buyer will then have a right to
terminate this Agreement by written notice to Seller. If Buyer does
not elect to so terminate this Agreement, Buyer shall proceed to purchase the
Subject Assets, and the Purchase Price shall be reduced by the repair cost or
replacement cost, as applicable, of such damaged or destroyed Subject
Assets. All repair and replacement costs shall be determined jointly
by Seller and Buyer.
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Section
12.5. Entire Agreement This
Agreement (including the Confidentiality Agreement), the Transaction Agreements
and the Appendices, Schedules, and Exhibits hereto contain the entire agreement
between the parties with respect to the subject matter hereof and there are no
agreements, understandings, representations, or warranties between the parties
other than those set forth or referred to herein.
Section
12.6. Expenses Except as otherwise
provided herein, all other costs and expenses incurred by each party hereto in
connection with all things required to be done by it hereunder, including
attorney’s fees, accountant fees and the expense of environmental and title
examination, shall be borne by the party incurring such costs and
expenses.
Section
12.7. 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. Notices to Seller shall be addressed as
follows:
1331
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
▇▇tention: ▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy
No.: (▇▇▇) ▇▇▇-▇▇▇▇
or at
such other address and to the attention of such other Person as Seller may
designate by written notice to Buyer. Notices to Buyer shall be
addressed to:
Hilltop
Resort GS, LLC
500 North
Capital of Texa▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
#▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
▇▇tention: President
Telecopy
No.: (▇▇▇) ▇▇▇-▇▇▇▇
or at
such other address and to the attention of such other Person as Buyer may
designate by written notice to Seller.
Section
12.8. Successors and Assigns This
Agreement shall be binding upon and inure to the benefit of the Parties and
their successors and permitted assigns. Neither Buyer nor Seller may
assign any of its rights or obligations under this Agreement without the prior
consent of the other; provided that Buyer may assign any or all of its rights
and interests hereunder to one or more of its Affiliates or designate one or
more of its Affiliates; provided further that Buyer shall remain liable for its
obligations hereunder. Seller will execute and deliver such documents
or instruments as may be reasonably requested by Buyer to effectuate any such
assignment. Any such assignment in violation of this Section 12.8 shall be
void and of no force or effect.
Section
12.9. 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. Any party hereto may, only by an instrument
in writing, waive compliance by another party hereto with any term or provision
of this Agreement on the part of such other party hereto to be performed or
complied with. The waiver by any party hereto of a breach of any term
or provision of this Agreement shall not be construed as a waiver of any
subsequent breach.
Section
12.10. 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.
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Section
12.11. Interpretation and Rules of
Construction This Agreement shall not be construed against any party, and
no consideration shall be given or presumption made, on the basis of who drafted
this Agreement or any particular provision hereof or who supplied the form of
Agreement. Each party agrees that this Agreement has been
purposefully drawn and correctly reflects such party’s understanding of the
transaction that it contemplates. In construing this
Agreement:
(i) examples
shall not be construed to limit, expressly or by implication, the matter they
illustrate;
(ii) the
word “includes” and its derivatives means “includes, but is not limited to” and
corresponding derivative expressions;
(iii) a
defined term has its defined meaning throughout this Agreement and each
Appendix, Exhibit, and Schedule to this Agreement, regardless of whether it
appears before or after the place where it is defined;
(iv) each
Exhibit and Schedule to this Agreement is a part of this Agreement, but if there
is any conflict or inconsistency between the main body of this Agreement
(including Appendix
A which shall be considered part of the main body of this Agreement) and
any Exhibit or Schedule, the provisions of the main body of this Agreement shall
prevail; and
(v) the
headings and titles herein are for convenience only and shall have no
significance in the interpretation hereof.
Section
12.12. Agreement for the Parties’ Benefit
Only Except as specified in Article 9, which are
also intended to benefit and to be enforceable by any of the indemnified parties
under Article
9, this Agreement is not intended to confer upon any Person not a party
hereto any rights or remedies hereunder, and no Person, other than the parties
hereto or the indemnified parties is entitled to rely on any representation,
warranty, covenant, or agreement contained herein. In each case, such
third party beneficiary may only bring suit against the defaulting party or
parties.
Section
12.13. 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 hereto 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.
Page
22
Section
12.14. Time of Essence Time is
of the essence in this Agreement. If the date specified in this
Agreement for giving any notice or taking any action is not a Business Day (or
if the period during which any notice is required to be given or any action
taken expires on a date which is not a Business Day), then the date for giving
such notice or taking such action (and the expiration date of such period during
which notice is required to be given or action taken) shall be the next day
which is a Business Day.
[Signature
pages follow.]
Page
23
IN
WITNESS WHEREOF, this Agreement has been signed by or on behalf of Seller and
Buyer as of the day first above written.
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Seller:
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GASTAR
EXPLORATION TEXAS, LP
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BY:
GASTAR EXPLORATION TEXAS LLC, its general partner
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By:
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/s/
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
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| Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |
| Title: Secretary and Treasurer | |
Signature
Page to Purchase and Sale Agreement – Gastar and Hilltop
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Buyer:
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HILLTOP
RESORT GS, LLC
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By:
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/s/ ▇▇▇▇▇▇▇
Burciaga__________________
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Name:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Title:
Chief Executive Officer
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Signature
Page to Purchase and Sale Agreement – Gastar and Hilltop
APPENDIX
A
TO
DEFINITIONS
“AAA” is defined in
Section
12.3(b).
“Action” means any
action, suit, proceeding, investigation, condemnation, or audit by or before any
court or other Governmental Authority or any arbitration
proceeding.
“Adjusted Purchase
Price” is defined in Section
3.1.
“Affiliate” means, as
to the Person specified, any Person controlling, controlled by or under common
control with such specified Person. The concept of control,
controlling or controlled as used in the aforesaid context means the possession,
directly or indirectly, 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. No Person shall be deemed an
Affiliate of any Person by reason of the exercise or existence of rights,
interests or remedies under this Agreement.
“Agreed Rate” means an
annual rate of interest equal to the lesser of (i) the interest rate that is
publicly announced from time to time by JPMorgan Chase Bank, N.A. as its prime
rate and (ii) the maximum rate of interest allowed from time to time by
Law.
“Agreement” is defined
in the preamble.
“Arbitrator’s Closing
Statement” is defined in Section
3.3(b).
“Assets” means all of
Seller’s right, title and interest to:
(i) the
easements, rights of way, servitudes, licenses, permits, other real property
rights and similar instruments owned or held by Seller or its Affiliates in
connection with the Hilltop Resort Gathering System, including but not limited
to the pipeline system and related facilities located thereon, all as more fully
described in Exhibit A;
(ii) all
equipment, personal property, fixtures and other improvements held for use or
used by Seller or its Affiliates in connection with the Hilltop Resort Gathering
System, whether owned or leased, including all pipes, valves, compressors,
meters, machinery, pumps, dehydrators, towers, liquids extractors, storage
tanks, storage sheds, pump houses, instrumentation, and other equipment and
facilities, in each case including those listed on Exhibit
A;
(iii) all
Permits;
(iv)
supplies, inventory, and other spare parts and materials used or
held for use in connection with the Hilltop Resort Gathering
System;
(v)
all existing financial, operating, Tax, environmental, safety, marketing and
other data, files, computer tapes, discs, papers, books and records of Seller to
the extent relating to the Hilltop Resort Gathering System, in Seller’s
possession or control, including deeds, property records, title policies, maps,
charts, surveys, permits, certificates, filings with Governmental Authorities,
reports, process safety management records and records regarding the
construction, maintenance and testing of the Subject Assets, together with
copies of budgets, journals, ledger and customer and supplier lists; provided
that this shall not include any personnel or employment records;
(vi)
all of Seller’s rights, claims, credits, causes of
action, or rights of set-off against third parties relating to the
Assets.
“Assignment and ▇▇▇▇ of
Sale” is defined in Section
8.2(i).
“Business Day” means
any day which is not a Saturday, Sunday, or legal holiday recognized by the
federal government of the United States of America.
“Buyer” is defined in
the preamble.
“Buyer Indemnified
Parties” is defined in Section
9.2.
“Casualty” is defined
in Section
12.4(a).
“Casualty Threshold”
is defined in Section
12.4(a).
“Closing” means the
consummation of the transaction contemplated by Article
8.
“Closing Date” means
the first day of the month following the date on which the conditions to Closing
in Article 8
are either satisfied or waived by the Party entitled to waive such conditions,
or such other date mutually agreed to by Seller and Buyer.
“Closing Property Tax
Payment” is defined in Section
11.1(b).
“Closing Statement” is
defined in Section
3.2.
“Closing Statement
Arbitrator” is defined in Section
3.3(b).
“Code” means the
Internal Revenue Code of 1985, as amended from time to time and the regulations
promulgated thereunder.
“Dispute” is defined
in Section
12.3(a).
“Dedicated Properties”
means the oil and gas leases and other interests described in Exhibit
C.
“Environmental Laws”
means any and all applicable Laws, judgments or legally enforceable directives
of any Governmental Authority with lawful jurisdiction over the Subject Assets
and relating to: (i) pollution, protection of the environment (including air,
water and land), natural resources or human health and safety (but only to the
extent that human health and safety relate to exposure to Hazardous Materials);
and (ii) generation, processing, use, distribution, handling, treatment,
storage, disposal, transportation, or release, of Hazardous
Materials. “Environmental Laws”
shall include the Clean Air Act, 42 U.S.C. § 7401 et seq., the Resource
Conservation Recovery Act, 42 U.S.C. § 6901 et seq., the Federal Water Pollution
Control Act, 33 U.S.C. § 1251 et seq., the Safe Drinking Water Act, 42 U.S.C. §
300f et seq., and the Comprehensive Environmental Response, Compensation, and
Liability Act, as amended by the Superfund Amendments and Reauthorization Act,
42 U.S.C. § 9601 et seq., the Emergency Planning and Community Right to Know
Act, 42 U.S.C. §§11001 et seq., and the Federal Insecticide, Fungicide and
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇ ▇.▇.▇. §§▇▇▇ et seq, each as amended and in effect as of the
Closing Date and all related regulations or legally enforceable formal
governmental interpretations thereof.
“Environmental
Liabilities” means any and all costs (including, but not limited to,
remediation and monitoring costs), damages, liabilities, monetary settlement
amounts, expenses, penalties, fines, prejudgment and post-judgment interest,
court costs and reasonable attorneys’ fees (i) pursuant to any order, notice of
violation, legally enforceable directive, injunction, judgment, or settlement by
any Governmental Authority to the extent arising under Environmental Laws, (ii)
pursuant to any claim, demand or cause of action brought by a Governmental
Authority or other third Person for personal injury, property damage, damage to
natural resources, or remedial obligations pursuant to Environmental Law, or
(iii) otherwise arising out of unlawful disposal, or unauthorized release of any
Hazardous Material.
“Environmental
Permits” means any and all permits, licenses, certificates, approvals and
other similar authorizations of Governmental Authorities required by
Environmental Laws.
“Estimated Adjusted Purchase
Price” is defined in Section
3.2.
“Excluded Assets”
means the properties, assets, rights, and interests described in Exhibit B.
“Excluded Liabilities”
is defined in Section
2.3.
“Final Closing
Statement” is defined in Section
3.3(b).
“Final Settlement
Date” is defined in Section
3.3(a).
“Gas Gathering
Agreement” means the Gas Gathering Agreement attached hereto as Exhibit
7.2.
“General Partner” is
defined in Section
4.1(a).
“Governmental
Authority” means (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 Material”
means any substance, waste, material, chemical, pollutant or contaminant
regulated under any Environmental Law including: (i) any “pollutant”,
“contaminant”, “toxic substance”, “hazardous waste”, “solid waste”, “hazardous
substance” or “hazardous material” as defined under any Environmental Law, and
(ii) any radioactive material, radon, asbestos, asbestos-containing material,
polychlorinated biphenyls and petroleum, its derivatives, products, byproducts
and hydrocarbons.
“Hilltop Resort Gathering
System” is defined in the recital.
“Indemnified Party” is
defined in Section
9.3.
“Indemnitor” is
defined in Section
9.3.
“IRC” means the
Internal Revenue Code of 1986, as amended.
“knowledge of Seller”,
“Seller’s
knowledge” or any phrase of similar import means the actual knowledge of
J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (CEO), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (CFO), ▇▇▇▇▇ ▇▇▇▇▇▇ (VP Land) or
▇▇▇▇▇ ▇▇▇▇▇▇ (VP Completions and Operations).
“knowledge of Buyer”,
“Buyer’s
knowledge” or any phrase of similar import means the actual knowledge of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (CEO), ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (CFO) or ▇▇▇▇▇▇▇ ▇. ▇▇▇
(President).
“Law” means any
applicable statute, law (including common law), ordinance, regulation, rule,
ruling, order, writ, injunction, decree, treaty, permit or other legally
enforceable official act of or by any Governmental Authority.
“Lien” means, with
respect to any property or asset, any mortgage, lien, pledge, charge, security
interest or other encumbrance of any kind in respect of such property or
asset.
“Losses” means all
claims, liabilities, losses, causes of action, judgments, demands, settlements,
taxes, fines, penalties, damages, obligations, litigation, lawsuits,
administrative proceedings, administrative investigations, costs, and expenses,
including reasonable attorneys’ consultants’ and experts’ fees, court costs, and
other costs of suit.
Appendix
A to
Purchase
and Sale Agreement
Page
3
“Material Adverse
Effect” means any change, event, or effect that is or would reasonably
expected to be, individually or in the aggregate, materially adverse to the
business related to, results of operations of or condition (financial or
otherwise) of, or prospects for, the Subject Assets, taken as a whole, excluding
any effect resulting from any change in economic, industry or market conditions
(whether general or regional in nature).
“Navasota” means
Navasota Resources Ltd., LLP.
“Navasota Proceeding”
means Navasota Resources, L.P.
v. First SourceTexas, Inc. et al, Cause No. 0-05-451, in the 12th
Judicial District Court of ▇▇▇▇ County, Texas.
“Notice of
Disagreement” is defined in Section
3.3(a).
“Party” and “Parties” is defined
in the preamble.
“Permits” is defined
in Section
4.1(o).
“Permitted
Encumbrances” means any of the following matters:
(i) any
(a) undetermined or inchoate liens or charges constituting or securing the
payment of expenses which were incurred incidental to maintenance or operation
of the Subject Assets and (b) materialman’s, mechanics’, repairman’s,
employees’, contractors’, operators’ or other similar liens, security interests
or charges for liquidated amounts arising in the ordinary course of business
incidental to construction, maintenance or operation of the Subject Assets that
are not due and payable and that will be paid in the ordinary course of
business, in each case other than with respect to amounts being contested in
good faith;
(ii) any
liens for Taxes, assessments or other government charges that are not yet due
and payable, other than with respect to amounts being contested in good
faith;
(iii) any
easements, rights of way, servitudes, permits, licenses, leases and other rights
with respect to operations to the extent such matters do not interfere in any
material respect with the operation of the portion of the Subject Assets
burdened thereby; and
(iv) rights
reserved to or vested in any Governmental Authority to control or regulate any
of the Subject Assets and all applicable Laws.
“Person” means any
Governmental Authority or any individual, firm, partnership, corporation, joint
venture, trust, unincorporated organization or other entity or
organization.
“Post-Closing Tax
Period” is defined in Section
11.1(b).
“Pre-Closing Tax
Period” is defined in Section
11.1(b).
“Presco” means Presco,
Inc.
“Property Taxes” means all ad valorem,
property (whether real or personal), and similar Taxes with respect to the
Subject Assets.
“Purchase Price” is
defined in Section
3.1.
“Purchase Price
Allocation” is defined in Section
3.3(d).
Appendix
A to
Purchase
and Sale Agreement
Page
4
“Records” means any
and all of the books, records, contracts, agreements, documents, and files of
Seller existing on the Closing Date which are part of the Subject Assets and all
additions thereto after the Closing Date, including computer records and
electronic copies of such information maintained by Buyer or its
Affiliates.
“Regulatory Approvals”
is defined in Section
6.7.
“Reimbursement
Obligation” is defined in Section
6.10.
“Required Consents” is
defined in Section
4.1(f).
“Reserve Engineers”
means Netherland, Sewel and Associates or such other third party engineering
firm that after the date hereof prepares reports of the proved natural gas and
oil reserve estimates of Seller and its Affiliate in connection with disclosure
of such data in Seller’s or any of its Affiliates’ reports to the Securities and
Exchange Commission.
“Rules” is defined in
Section
12.3(b).
“Seller” is defined in
the preamble.
“Seller Indemnified
Parties” is defined in Section
9.1.
“Subject Assets” means
all Assets other than the Excluded Assets.
“Tax” or “Taxes” means all
taxes, however, denominated, including any interest, penalties or other
additions to tax that may become payable in respect thereof, imposed by any
federal, territorial, state, local, parish or foreign government or any agency
or political subdivision of any such government, which taxes shall include,
without limiting the generality of the foregoing, all income or profits taxes
(including federal income taxes and state income taxes), real property gains
taxes, payroll and employee withholding taxes, unemployment insurance taxes,
social security taxes, sales and use taxes, ad valorem taxes, excise taxes,
franchise taxes, gross receipts taxes, business license taxes, occupation taxes,
real and personal property taxes, environmental taxes, Transfer Taxes, workers’
compensation, and other obligations of the same or of a similar nature to any of
the foregoing.
“Tax Return” means all
returns, reports, declarations, statements, bills, schedules, or written
information of or with respect to any Tax which is required to be supplied to
any taxing authority or depository.
“Third Party Claim” is
defined in Section
9.3.
“Transaction
Agreements” means this Agreement, the Gas Gathering Agreement, and the
Assignment and ▇▇▇▇ of Sale.
“Transfer Taxes” means
all transfer Taxes (excluding Taxes measured by net income), including sales,
use, excise stock, stamp, documentary, filing, recording, permit, license,
authorization and similar Taxes, filing fees and similar charges.
“Working Interest
Owner” means any Person that owns or controls a working interest in the
Dedicated Properties.
Appendix
A to
Purchase
and Sale Agreement
Page
5
LIST
OF EXHIBITS AND SCHEDULES
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Exhibit
A
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Description
of Rights of Way and Pipeline System
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Exhibit
B
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-
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Description
of Excluded Assets
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Exhibit
C
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Dedicated
Properties
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Exhibit
7.2
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Gas
Gathering Agreement
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Exhibit
8.2(i)
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Assignment
and ▇▇▇▇ of Sale
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Exhibit
8.2(iii)
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Affidavit
Non-Foreign Status
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Schedules:
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Schedule
4.1(e)
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Violations
or Breaches
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Schedule
4.1(f)
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-
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Consents
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Schedule
4.1(g)
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-
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Pending
Actions
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Schedule
4.1(h)
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Compliance
with Laws
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Schedule
4.1(k)
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-
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Material
Contracts
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Schedule
4.1(l)
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-
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Environmental
Matters
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Schedule
4.1(m)
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-
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Tax
Matters
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Schedule
4.1(n)
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-
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Property
Matters
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Schedule
4.1(n)(ii)(F)
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Spatial
Gaps
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Schedule
4.1(o)
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Permits
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Schedule
4.1(t)
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Throughput
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Schedule
6.1
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Preclosing
Matters
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-
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Seller’s
Required Consents
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Schedule
7.2(e)
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-
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Buyer’s
Required
Consents
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Appendix
A to
Purchase
and Sale Agreement
Page
6