PURCHASE AND SALE AGREEMENT BETWEEN ENERVEST ENERGY INSTITUTIONAL FUND IX, L.P. AND ENERVEST ENERGY INSTITUTIONAL FUND IX-WI, L.P. (“Sellers”) AND EV PROPERTIES, L.P. (“Buyer”) EFFECTIVE TIME: January 1, 2007
BETWEEN
ENERVEST
ENERGY INSTITUTIONAL FUND IX, L.P.
AND
ENERVEST
ENERGY INSTITUTIONAL FUND IX-WI, L.P.
(“Sellers”)
AND
EV
PROPERTIES, L.P.
(“Buyer”)
EFFECTIVE
TIME: January 1, 2007
THIS
PURCHASE AND SALE AGREEMENT
(this
“Agreement”),
dated
January 9, 2007, to be effective as of January 1, 2007 is between ENERVEST
ENERGY INSTITUTIONAL FUND IX, L.P. and ENERVEST ENERGY INSTITUTIONAL FUND IX-WI,
L.P.), each Delaware limited partnerships (collectively, the "Sellers"),
with
offices at ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and EV Properties,
L.P.,
a Delaware limited partnership (the “Buyer”)
with
an office c/o EnerVest Management Partners, Ltd., ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇. Sellers and Buyer are sometimes hereinafter collectively
called the “Parties”
and
individually called a “Party.”
WHEREAS,
Sellers own certain oil and gas properties and other related assets located
in
Michigan; and
WHEREAS,
Sellers desire to sell, and Buyer desires to purchase, upon and subject to
the
terms, conditions, reservations and exceptions hereinafter set forth, all of
Sellers’ interest in and to the Interests (as hereinafter defined);
NOW
THEREFORE, for and in consideration of the covenants and agreements herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Sellers and Buyer agree as
follows:
ARTICLE
1
PROPERTY
DESCRIPTION
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1.1
|
Agreement
to Sell and Purchase.
Subject to the terms, conditions, reservations and exceptions set
forth in
this Agreement, Sellers agree to sell, transfer, assign, convey and
deliver unto Buyer, and Buyer agrees to purchase, receive, pay for
and
accept, effective as of 7:00 a.m. local time where the properties
are
located, January 1, 2007 (the “Effective
Time”),
the Interests (as defined below) in the undivided percentages set
forth in
the first paragraph of this
Agreement.
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1.2
|
The
Interests.
The term “Interests”
as used herein shall mean all Seller’s right, title and interest in and to
the following:
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| 1.2.1 |
the
oil and gas leases and oil, gas and mineral leases set forth in
Exhibit
A
attached hereto and made a part hereof for all purposes, together
with all
of Sellers’ other right, title and interest in and to the land covered by
such leases, including without limitation, all mineral, royalty and
overriding royalty interests, and all rights, privileges and obligations
appurtenant to those interests (the “Leases”);
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| 1.2.2 |
all
rights and interests in any unit or pooled area in which the Leases
are
included, to the extent that these rights and interests arise from
and are
associated with the Leases and the ▇▇▇▇▇, as hereinafter defined,
or any
part thereof, including without limitation all rights derived from
any
unitization, pooling, operating, communitization or other agreement
or
from any declaration or order of any governmental
authority;
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| 1.2.3 |
all
oil, gas and condensate ▇▇▇▇▇ (whether producing, not producing or
abandoned), water source, water injection and other injection or
disposal
▇▇▇▇▇ and systems located on the Leases or lands unitized or pooled
with
the Leases, including without limitation, the ▇▇▇▇▇ set forth in
Exhibit
B
attached hereto and made a part hereof for all purposes (the “▇▇▇▇▇”);
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| 1.2.4 |
all
fee mineral and surface interests described in Exhibit
C
attached hereto and made a part hereof for all purposes (the “Fee
Interests”),
including, without limitation, all rights and obligations pertaining
to
the Fee Interests under any of the
Contracts;
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| 1.2.5 |
all
equipment, facilities, pipelines, pipeline laterals, gathering systems,
platforms, well pads, compressors, tank batteries, improvements,
fixtures,
inventory, spare parts, tools, materials and other personal property
on
the Leases or attributable to the ▇▇▇▇▇ or used in developing or
operating
the Leases or producing, treating, storing, compressing, processing
or
transporting hydrocarbons on or from the Leases including, without
limitation, the equipment and other assets listed on Exhibit
D
attached hereto and made a part hereof for all purposes (the “Equipment”);
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| 1.2.6 |
to
the extent assignable or transferable, all easements, rights-of-way,
licenses, permits, servitudes, surface leases, and similar interests
applicable to or used in operating the Leases, the lands unitized
or
pooled with the Leases, ▇▇▇▇▇, or the Equipment including, without
limitation, those easements and other instruments listed on Exhibit
E
attached hereto and made a part hereof for all purposes (the “Easements”);
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| 1.2.7 |
to
the extent assignable or transferable, all contracts and contractual
rights, obligations and interests relating to the Leases or the lands
unitized or pooled with the Leases, ▇▇▇▇▇, or the Equipment, together
with
all unit agreements, farmout agreements, farm-in agreements, operating
agreements, participation agreements, area of mutual interest agreements,
and hydrocarbon sales, purchase, gathering, transportation, treating,
marketing, exchange, processing and fractionating agreements, surface
leases, operating agreements, whether of record or not, and transferable
permits and licenses (the “Contracts”);
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| 1.2.8 |
those
certain “cash-restricted” Plugging and Abandonment Accounts set forth in
Exhibit
F
hereto together with all cash sums, certificates of deposit, bonds
and
other instruments and documents relating thereto (all such items
being
collectively called herein the “P&A
Accounts”);
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| 1.2.9 |
those
certain commodity hedging contracts relating to production from the
Leases
and the ▇▇▇▇▇ as further described in Exhibit
G
attached hereto and made a part hereof for all purposes;
and
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| 1.2.10 |
all
other tangibles, miscellaneous interests or other assets on or used
in
connection with the Leases, ▇▇▇▇▇, Equipment and/or Contracts, including,
without limitation, all lease files, land files, well files, production
records, division order files, abstracts, title opinions, and contract
files, insofar as they are directly related to the items described
in
Sections 1.2.1 through 1.2.9 hereof, including seismic and other
geological and geophysical data, to the extent of the right of Sellers
to
transfer same, and production revenues and expense information;
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2
| 1.2.11 |
excluding,
however, from this Agreement
and the conveyances contemplated hereby and reserved unto
Sellers:
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(a)
all
corporate, financial, tax and legal partnership records of Sellers; provided,
however, that all title and litigation records relating to the Interests
shall
not be excluded from this Agreement and the conveyances contemplated
hereby;
(b)
all
contracts of insurance or indemnity other than the P&A Accounts and any
contracts related thereto;
(c)
any
refund of costs, taxes or expenses borne by Sellers attributable to the
period
prior to the Effective Time;
(d)
all
bonds
together with all certificates of deposits and other instruments and documents
relating thereto attributable in whole or in part to the operation of the
Interests;
(e)
copies
(but not the originals) of all files; and
(f)
to
the
extent not assignable, all computer or communications software or intellectual
property (including tapes, data and program documentation and all tangible
manifestations and technical information relating thereto) owned, licensed
or
used by Seller.
These
assets excluded from this Agreement pursuant to this Section 1.2.11 are
collectively referred to as the “Excluded
Interests.”
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1.3
|
Ownership
of Production and Allocation of Revenues from the Interests Prior
to the
Effective Time.
Sellers shall own all merchantable oil, gas, condensate and distillate
(“Hydrocarbons”)
produced from the Interests before the Effective Time. Sellers shall
receive all proceeds from the sale of Hydrocarbons physically produced
from or allocable to the Interests prior to the Effective Time, and
shall
also reserve all rights and choses in action, arising, occurring
or
existing in favor of Sellers prior to the Effective Time or arising
out of
the operation of or production from the Interests prior to the Effective
Time (including, but not limited to, any and all contract rights,
claims,
receivables, revenues, recoupment rights, recovery rights, accounting
adjustments, mispayments, erroneous payments or other claims of any
nature
in favor of Sellers and relating and accruing to any time period
prior to
the Effective Time).
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1.4
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Ownership
of Production and Allocation of Revenues from the Interests On and
After
the Effective Time.
Buyer shall own all Hydrocarbons produced from the Interests on and
after
the Effective Time. Subject to any continuing sales obligations under
the
Contracts, Buyer may sell Hydrocarbons produced from the Interests
on and
after the Effective Time as Buyer deem appropriate. Buyer shall receive
all proceeds from the sale of Hydrocarbons physically produced from
or
allocable to the Interests on and after the Effective Time and shall
also
receive and hold the right to receive all other revenues, proceeds
and
benefits attributable to the Interests accruing or relating to all
periods
on and after the Effective Time.
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3
ARTICLE
2
PURCHASE
AND SALE
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2.1
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Purchase
and Sale.
At the Closing, Sellers agree to sell, assign and convey to Buyer,
and
Buyer agrees to purchase and pay for the Interests and assume the
Assumed
Obligations as provided in Section
7.1.
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2.2
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Purchase
Price.
Subject to Adjustment pursuant to Section 2.4 hereof, Buyer shall
pay to
Sellers the cash sum of Seventy-One Million Six Hundred Thousand
Dollars
($71,600,000 USD) for the Interests (the “Purchase
Price”).
The Purchase Price shall be paid to Sellers by wire transfer to EnerVest
Energy Institutional Fund IX, L.P. (77.52808 %), ▇▇▇▇▇ Fargo Bank,
ABA
Number ▇▇▇▇▇▇▇▇▇, Account Number ▇▇▇▇▇▇▇▇▇▇, and to EnerVest Energy
Institutional Fund IX-WI, L.P. (22.47192 %), ▇▇▇▇▇ Fargo Bank, ABA
Number
▇▇▇▇▇▇▇▇▇, Account Number
▇▇▇▇▇▇▇▇▇▇.
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2.3
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Allocation
of Purchase Price. Buyer’s
good faith allocation of the Purchase Price among the Interests is
set
forth in Exhibit
B-1.
The term “Allocated
Value”
shall be the value agreed upon by the parties for the Interests as
set
forth in Exhibit
B-1.
Such allocation is provided for the purpose of handling those instances
for which the Purchase Price is adjusted pursuant to Section 2.4.6
hereof.
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| 2.4 |
Adjustments
to Purchase Price.
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| 2.4.1 |
Seller’s
Expenditures.
The Purchase Price shall be increased by the amount of all reasonable
and
necessary actual expenditures paid or prepaid by Sellers that are
incurred
in connection with the Interests which are attributable to periods
on and
after the Effective Time through the Closing
Date.
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2.4.2
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Taxes.
The Purchase Price shall be increased by the total amount of any
Property
Taxes (as hereinafter defined), ad valorem or severance taxes paid
by
Sellers, for their own or other’s accounts, relating to the Interests and
attributable to any period of time on and after the Effective Time.
The
Purchase Price shall be decreased by all accrued but unpaid Property
Taxes, ad valorem or severance taxes relating to the Interests as
of the
Effective Time.
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2.4.3
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Proceeds.
The Purchase Price shall be decreased (or increased, if applicable)
by the
amount of the actual proceeds received by Sellers in the ordinary
course
of business after the Effective Time that are attributable to production
from the Interests on and after the Effective Time (net of any royalties
and of any production, severance (to the extent not taken into account
under Section 2.4.2), sales or other taxes actually paid by or on
behalf
of Seller) together with any other monies or credits attributable
to the
ownership or operation of the Interests from and after the Effective
Time.
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4
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2.4.4
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Defects.
The Purchase Price shall be decreased by the Allocated Value or Defect
Value, as applicable, of any Interests excluded from the transactions
contemplated herein or conveyed to Buyer with a Title Defect pursuant
to
Section 5.1.5(iii) to the extent such amount, in the aggregate, exceeds
the Title Deductible, or an Environmental Defect pursuant to Section
5.3.4(ii) to the extent such amount, in the aggregate, exceeds the
Environmental Deductible.
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ARTICLE
3
REPRESENTATIONS
AND WARRANTIES
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3.1
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Sellers’
Representations.
Each of the Sellers represents and warrants to Buyer with respect
to the
Interests it will convey to Buyer pursuant hereto that the following
statements are true
and accurate as of the Effective Time and as of the Closing
Date.
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3.1.1
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Partnership
Authority.
Each Seller is a duly organized limited partnership validly existing
and
in good standing under the laws of the State of Delaware, is duly
qualified to carry on its business in the state in which the Interests
that it owns are located, and has full power and authority to enter
into
and perform its obligations pursuant to this Agreement according
to its
terms.
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3.1.2
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Requisite
Approvals.
Each Seller’s execution, delivery and performance of this Agreement has
been duly authorized by all necessary partnership or limited liability
company action, as applicable, and will not violate or conflict with
any
agreement, law, rule, regulation, charter or other instrument governing
such Seller’s organization, management or business affairs.
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3.1.3
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Validity
of Obligation.
This Agreement and all other transaction documents executed and delivered
in connection with the transactions contemplated hereby (i) have
been duly
executed by Seller’s authorized representatives; (ii) constitute the valid
and legally binding obligations of Seller, except as limited by bankruptcy
or other laws applicable generally to creditors’ rights, and (iii) are
enforceable against it in accordance with their respective
terms.
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3.1.4
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No
Violation of Contractual Restrictions.
The execution, delivery and performance of this Agreement does not
conflict with or violate any agreement or instrument to which Seller
is a
party or by which it is bound, except any provision contained in
agreements customary in the oil and gas industry relating to (i)
preferential rights to purchase all or any portion of an Interest;
(ii)
required consents to transfer and related provisions; (iii) maintenance
of
uniform interest provisions in joint operating agreements, and (iv)
any
other third party approvals or consents contemplated in this
Agreement.
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3.1.5
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No
Violation of Other Legal Restrictions.
The execution, delivery and performance of this Agreement does not
violate
any law, rule, regulation, ordinance, judgment, decree or order to
which
Seller or the Interests is subject.
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5
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3.1.6
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Bankruptcy.
There are no bankruptcy, reorganization or receivership proceedings
pending, being contemplated by or, to Seller’s actual knowledge,
threatened against Seller.
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3.1.7
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Broker’s
Fees.
Seller has not incurred any liability, contingent or otherwise, for
brokers’ or finders’ fees relating to the transactions contemplated by
this Agreement for which Buyer shall have any responsibility
whatsoever.
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3.1.8
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Lawsuits
and Claims.
Except as otherwise set forth in Schedule
3.1.8,
with respect to the Interests, there is no action, suit, proceeding,
arbitration, or to the knowledge of Seller, any claim or investigation
by
any person, entity, administrative agency or governmental body pending
or
threatened, against Seller or the Interests.
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3.2
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Buyer’s
Representations.
Buyer represents and warrants to Sellers that the following statements
are
true and accurate as of the execution date of the date
hereof.
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3.2.1
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Partnership
Authority.
Buyer is a duly organized limited partnership validly existing and
in good
standing under the laws of the State of Delaware, is (or will be
at the
time of Closing) duly qualified to carry on business in the state
in which
the Interests are located, and has full power and authority to enter
into
and perform pursuant to this Agreement according to its
terms.
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3.2.2
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Requisite
Approvals.
Buyer’s execution, delivery and performance of this Agreement has been
duly authorized by all necessary partnership or limited liability
company
action, as applicable, and will not conflict with or violate any
agreement, law, rule, regulation, ordinance, charter or other instrument
governing Buyer’s organization, management or business
affairs.
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3.2.3
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Validity
of Obligation.
This Agreement and all other transaction documents executed and delivered
in connection with the transactions contemplated hereby (i) have
been duly
executed by Buyer’s authorized representatives; (ii) constitute the valid
and legally binding obligations of Buyer, except as limited by bankruptcy
or other laws applicable generally to creditors’ rights, and (iii) are
enforceable against Buyer in accordance with their respective
terms.
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3.2.4
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No
Violation of Contractual Restrictions.
The execution, delivery and performance of this Agreement does not
conflict with or violate any agreement or instrument to which Buyer
is a
party or by which it is bound.
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3.2.5
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No
Violation of Other Legal Restrictions.
The execution, delivery and performance of this Agreement do not
violate
any law, rule, regulation, ordinance, judgment, decree or order to
which
Buyer is subject.
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3.2.6
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Bankruptcy.
There are no bankruptcy, reorganization or receivership proceedings
pending, being contemplated by, or to Buyer’s actual knowledge, threatened
against Buyer.
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6
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3.2.7
|
Brokers’
Fees.
Buyer has not incurred any liability, contingent or otherwise, for
brokers' or finders' fees relating to the transactions contemplated
by
this Agreement for which Sellers shall have any responsibility whatsoever.
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3.2.8
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Lawsuits
and Claims.
There is no action, suit, proceeding, claim or investigation by any
person, entity, administrative agency or governmental body pending
or, to
the best of Buyer’s knowledge, threatened, against Buyer before any
governmental authority that impedes or is likely to impede Buyer’s ability
to consummate the transactions contemplated by this Agreement and
to
assume the liabilities to be assumed by them under this Agreement.
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3.2.9
|
No
Distribution.
Buyer is acquiring the Interests for their own account and not with
the
intent to make a distribution in violation of the Securities Act
of 1933,
as amended (and the rules and regulations pertaining thereto) or
in
violation of any other applicable securities laws, rules or
regulations.
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3.2.10
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Knowledge
and Experience.
Buyer has (and had prior to negotiations regarding the Interests)
such
knowledge and experience in the ownership and operation of oil and
gas
properties and financial and business matters as to be able to evaluate
the merits and risks of an investment in the Interests. Buyer is
able to
bear the risks of an investment in the Interests and understands
the risks
of, and other considerations relating to, a purchase of the Interests.
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3.2.11
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Opportunity
to Verify Information.
Without limitation of Buyer’s rights under Article 5, Buyer has been
afforded the opportunity to ask questions of the Sellers (or a person
or
persons acting on their behalf) concerning the Interests. Buyer has
made
its own independent investigation of the Interests and the materials,
documents, and other information relating
thereto.
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3.2.12
|
Merits
and Risks of an Investment in the Interests.
Buyer
understands and acknowledges that (i) neither the United States Securities
and Exchange Commission nor any federal, state or foreign agency
has made
any finding or determination as to the fairness of an investment
in the
Interests or the accuracy or adequacy of the disclosures made to
Buyer;
and (ii) except as set forth in this Agreement, Buyer is not entitled
to
cancel, terminate or revoke this
Agreement.
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3.2.13
|
Qualification.
Buyer is, as of the Closing, and thereafter will continue to be,
qualified
to own and operate the ▇▇▇▇▇, including meeting all bonding
requirements.
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3.3
|
Representations
and Warranties Exclusive.
All representations and warranties contained in this Agreement (including,
without limitation, those in Article 3 of this Agreement) are exclusive,
and are given in lieu of all other representations and warranties,
express
or implied.
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7
ARTICLE
4
TITLE
WARRANTY; DISCLAIMER OF OTHER WARRANTIES
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4.1
|
Special
Warranty of Title; Encumbrances.
SELLERS AGREE TO CONVEY THE INTERESTS TO BUYER WITHOUT WARRANTY OF
TITLE,
EXPRESS, STATUTORY, OR IMPLIED, EXCEPT THAT SELLERS SPECIALLY WARRANT
AND
AGREE TO DEFEND TITLE TO THE INTERESTS IT CONVEYS TO BUYER AGAINST
THE
CLAIMS, ENCUMBRANCES AND DEMANDS OF ALL PERSONS CLAIMING TITLE TO
THE
INTERESTS BY, THROUGH, OR UNDER SELLERS BUT NOT OTHERWISE.
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4.2
|
Condition
and Fitness of the Interests.
EXCEPT AS SET FORTH IN SECTION 4.1 OF THIS AGREEMENT, SELLERS CONVEY
THE
INTERESTS TO BUYER WITHOUT ANY EXPRESS, STATUTORY OR IMPLIED WARRANTY
OR
REPRESENTATION OF ANY KIND, INCLUDING, WITHOUT LIMITATION, WARRANTIES
RELATING TO (i) THE CONDITION OR MERCHANTABILITY OF THE INTERESTS,
(ii)
THE FITNESS OF THE INTERESTS FOR A PARTICULAR PURPOSE, (iii) TITLE,
(iv)
ANY IMPLIED OR EXPRESS WARRANTY REGARDING ANY ENVIRONMENTAL LAWS,
THE
RELEASE OF MATERIALS INTO THE ENVIRONMENT, OR PROTECTION OF THE
ENVIRONMENT OR HEALTH, AND (v) ANY RIGHTS OF BUYER UNDER STATUTES
TO CLAIM
DIMINUTION OF VALUE. BUYER HAS INSPECTED THE INTERESTS FOR ALL PURPOSES,
INCLUDING WITHOUT LIMITATION FOR THE PURPOSE OF DETECTING THE PRESENCE
OF
NATURALLY OCCURRING RADIOACTIVE MATERIALS (“NORM”),
SOLID WASTES, ASBESTOS, AND OTHER MANMADE MATERIAL FIBERS ("MMMF")
AND ARE SATISFIED AS TO THEIR PHYSICAL AND ENVIRONMENTAL CONDITION,
INCLUDING BUT NOT LIMITED TO CONDITIONS RELATED TO THE PRESENCE,
RELEASE,
OR DISPOSAL OF HAZARDOUS SUBSTANCES. BUYER IS RELYING SOLELY UPON
THE
RESULTS OF SUCH INSPECTION OF THE INTERESTS AND SHALL ACCEPT ALL
OF THE
SAME IN THEIR "AS IS, WHERE IS" CONDITION AND “WITH ALL FAULTS” AND IN
THEIR PRESENT CONDITION AND STATE OF REPAIR. SELLERS DISCLAIM ALL
LIABILITY ARISING IN CONNECTION WITH THE PRESENCE OF HAZARDOUS SUBSTANCES,
NORM, SOLID WASTES, ASBESTOS OR OTHER MMMF ON THE INTERESTS AND IF
TESTS
HAVE BEEN CONDUCTED BY SELLERS FOR THE PRESENCE OF HAZARDOUS SUBSTANCES,
NORM, SOLID WASTES, ASBESTOS OR OTHER MMMF, SELLERS DISCLAIM ANY
WARRANTY
RESPECTING THE ACCURACY OF SUCH TESTS OR
RESULTS.
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8
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4.3
|
Information
About the Interests.
Except as expressly set forth in this Agreement, each Party disclaims
all
liability and responsibility for any representation, warranty, statement,
or communication (oral or written) to any other Party (including
any
information contained in any opinion, information, or advice that
may have
been provided to any such Party by any employee, officer, director,
agent,
consultant, engineer, or engineering firm, trustee, representative,
partner, member, beneficiary, stockholder, or contractor of such
disclaiming Party or its affiliates) wherever and however made, including
those made in any data room and any supplements or amendments thereto
or
during any negotiations with respect to this Agreement or any
confidentiality agreement previously executed by the Parties with
respect
to the Interests.
WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT
AS SET FORTH IN THIS AGREEMENT AND THE CONVEYANCE AND DEED, NONE
OF THE
SELLERS MAKE ANY WARRANTY OR REPRESENTATION, EXPRESS, STATUTORY OR
IMPLIED, AS TO (i) THE ACCURACY, COMPLETENESS, OR MATERIALITY OF
ANY DATA,
INFORMATION OR RECORDS FURNISHED TO BUYER IN CONNECTION WITH THE
INTERESTS; (ii) THE AMOUNT, VALUE, QUALITY, QUANTITY, VOLUME OR
DELIVERABILITY OF HYDROCARBONS OR HYDROCARBON RESERVES (IF ANY)
ATTRIBUTABLE TO THE INTERESTS; (iii) THE ABILITY OF THE INTERESTS
TO
PRODUCE HYDROCARBONS, INCLUDING WITHOUT LIMITATION, PRODUCTION RATES,
DECLINE RATES AND RECOMPLETION OPPORTUNITIES; (iv) GAS BALANCING
INFORMATION, ALLOWABLES OR OTHER REGULATORY MATTERS; (v) THE PRESENT
OR
FUTURE VALUE OF THE ANTICIPATED INCOME, COSTS OR PROFITS, IF ANY,
TO BE
DERIVED FROM THE INTERESTS, OR (vi) THE PHYSICAL, OPERATING, REGULATORY
COMPLIANCE, SAFETY OR ENVIRONMENTAL CONDITION OF THE INTERESTS, OR
(vii)
THE GEOLOGICAL OR ENGINEERING CONDITION OF THE INTERESTS OR ANY VALUE
THEREOF. ANY DATA, INFORMATION OR OTHER RECORDS FURNISHED BY SELLERS
ARE
PROVIDED TO BUYER AS A CONVENIENCE AND BUYER’S RELIANCE ON OR USE OF THE
SAME IS AT BUYER’S SOLE RISK. BUYER EXPRESSLY WAIVES ANY RIGHTS IT MAY
OTHERWISE HAVE UNDER APPLICABLE STATUTES OR REGULATIONS CONCERNING
EXPRESS
OR IMPLIED WARRANTIES AND/OR DECEPTIVE TRADE PRACTICES; ACKNOWLEDGES
THAT
THE EXPRESS WAIVERS CONTAINED IN THIS SECTION 4.3 SHALL BE CONSIDERED
A
MATERIAL AND INTEGRAL PART OF THIS SALE AND THE CONSIDERATION THEREOF;
AND
ACKNOWLEDGES THAT THESE WAIVERS HAVE BEEN BROUGHT TO THE ATTENTION
OF
BUYER AND EXPLAINED IN DETAIL AND THAT BUYER HAS VOLUNTARILY AND
KNOWINGLY
CONSENTED TO THESE WAIVERS. ALL INSTRUMENTS OF CONVEYANCE TO BE DELIVERED
BY SELLERS AT CLOSING FOR RECORDATION IN THE APPROPRIATE COUNTY SHALL
EXPRESSLY SET FORTH THE DISCLAIMERS OF REPRESENTATIONS AND WARRANTIES
CONTAINED IN THIS PARAGRAPH. NOTWITHSTANDING THE FOREGOING, SELLERS
DO
REPRESENT THAT THEY HAVE NOT INTENTIONALLY WITHHELD FROM BUYER ANY
DATA,
INFORMATION OR RECORDS RELATING TO THE INTERESTS AND, TO THE ACTUAL
KNOWLEDGE OF SELLERS, THE DATA, INFORMATION AND RECORDS SUPPLIED
TO BUYER
ARE MATERIALLY COMPLETE AND
CORRECT.
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4.4
|
Subrogation
of Warranties.
To the extent transferable and transferred pursuant hereto, Sellers
give
and grant to Buyer, its successors and assigns full power and right
of
substitution and subrogation in and to all covenants, indemnities
and
warranties (including warranties of title) by preceding owners, vendors,
or others, given or made with respect to the Interests or any part
thereof
prior to the Effective Time of this
Agreement.
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9
ARTICLE
5
DUE
DILIGENCE REVIEW OF THE INTERESTS
|
5.1
|
Title
Matters.
|
|
5.1.1
|
Due
Diligence.
Upon execution of this Agreement until the Closing, Sellers shall
make the
Records relating to the Interests available to Buyer for examination
and
copying by Buyer, and shall grant Buyer access to the Interests for
inspection. Sellers shall not be obligated to perform any title work
or
provide abstracts other than those presently in Sellers’ possession, nor
will any existing title opinions be made current by Sellers. Sellers
will
use reasonable business efforts to furnish to Buyer all other information
with respect to the Interests as Buyer may from time to time reasonably
request, except to the extent that Sellers determine in good faith
that it
is prohibited by agreement with a third party from disclosing the
information covered thereby; provided, that Sellers shall exercise
reasonable business efforts to obtain all third party consents to
such
disclosure. Buyer agrees to conduct due diligence in a professional
and
orderly manner and at Buyer’s own cost and expense without disruption of
Sellers’ normal and usual operations. EXCEPT
AS OTHERWISE SET FORTH IN SECTION 4.3,
BUYER
RECOGNIZES AND AGREES THAT ALL MATERIALS MADE AVAILABLE TO IT IN
CONNECTION WITH THE TRANSACTION CONTEMPLATED HEREBY, WHETHER MADE
AVAILABLE PURSUANT TO THIS SECTION OR OTHERWISE, ARE MADE AVAILABLE
TO IT
AS AN ACCOMMODATION, AND WITHOUT REPRESENTATION OR WARRANTY OF ANY
KIND AS
TO THE ACCURACY AND COMPLETENESS OF SUCH MATERIALS. NO WARRANTY OF
ANY
KIND IS MADE BY SELLERS AS TO THE INFORMATION SUPPLIED TO BUYER OR
WITH
RESPECT TO INTERESTS TO WHICH THE INFORMATION RELATES, AND BUYER
EXPRESSLY
AGREES THAT ANY CONCLUSIONS DRAWN THEREFROM SHALL BE THE RESULT OF
ITS OWN
INDEPENDENT REVIEW AND
JUDGMENT.
|
If
Buyer
conducts examinations or inspections under this Section or otherwise, then
(a)
such access, examination and inspection shall be at Buyer’s sole risk, cost and
expense and Buyer waives and releases all claims against Sellers (and their
respective partners and their partners respective affiliates and the respective
directors, officers, employees, attorneys, contractors and agents of such
parties (collectively, the “Seller
Indemnified Parties”)
arising in any way therefrom or in any way connected therewith or arising in
connection with the conduct of its directors, officers, employees, attorneys,
contractors and agents in connection therewith and (b) Buyer shall indemnify,
defend and hold harmless the Seller Indemnified Parties from any and all claims,
actions, causes of action liabilities, damages, losses, costs or expenses
(including, without limitation, court costs and attorneys fees), or liens or
encumbrances for labor or materials, arising out of or in any way connected
with
such matters. THE
FOREGOING RELEASE AND INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH CLAIMS,
ACTIONS, CAUSES OF ACTION, LIABILITIES, DAMAGES, LOSSES, COSTS OR EXPENSES
ARISE
OUT OF (i)
NEGLIGENCE
(INCLUDING SOLE NEGLIGENCE, SINGLE NEGLIGENCE, CONCURRENT NEGLIGENCE, ACTIVE
OR
PASSIVE NEGLIGENCE, BUT EXPRESSLY NOT INCLUDING GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT) OF ANY SELLER INDEMNIFIED PARTY, OR
(ii) STRICT
LIABILITY.
10
|
5.1.2
|
Title
Defects.
For the purpose of this Agreement, a "Title
Defect"
shall mean any deficiency in the Interests or Sellers’ title to the
Interests which results or could result in:
|
| (i) |
Sellers'
title, as to one or more Interests, being subject to an outstanding
mortgage, deed of trust, lien, or security interest, other than (A)
a lien
for taxes which are not yet delinquent or (B) a mechanic’s or
materialmen’s lien (or other similar lien), or a lien under an operating
agreement or similar agreement, to the extent the same relates to
expenses
incurred which are not yet delinquent;
or
|
| (ii) |
Sellers
owning less than the net revenue interest shown on Exhibit B hereto
or
being obligated to bear a share of the costs and expenses of operation
greater than the working interest shown on Exhibit B hereto without
a
proportionate increase in net revenue interest;
or
|
| (iii) |
Sellers'
rights and interests being reduced or being subject to reduction
by virtue
of the exercise by a third party reversionary or back-in interest,
farm-out, or other similar right not reflected on Exhibit
B.
|
Notwithstanding
the foregoing, Buyer shall only be entitled for Title Defects Remedies pursuant
to Section 5.1.5 to the extent, and only to the extent that the aggregate
amounts (as hereinafter defined) attributable to all such deficiencies in
Sellers’ title to the Interests exceeds the sum of Seven Hundred Fifty Thousand
Dollars ($750,000.00) (the “Title
Deductible”).
| 5.1.3 |
Notice
of Title Defect.
Buyer
shall, as soon as any Title Defect is identified by Buyer, but in
no event
later than 5:00 p.m. local time in Houston, Texas on Friday, January
19,
2007 (the “Defect
Date”),
notify Sellers in writing of any Title Defect (the “Title
Defect Notice”).
Any such Title Defect Notice shall include (i) a description of the
Title
Defect, (ii) the basis for the Title Defect and all supporting
documentation in Buyer’s possession that describes such basis, (iii) the
Interest or portion thereof affected by the Title Defect, and (iv)
the
amount by which the Buyer reasonably believes the Title Defect has
reduced
the value of the affected Interest (the “Title
Defect Amount”).
After the Defect Date, the Interests shall be deemed to be free of
Title
Defects except for those for which notice has been timely provided
as set
forth herein. Any Title Defect which is not disclosed to Sellers
on or
before the Defect Date shall conclusively be deemed waived by Buyer
for
all purposes, except Sellers’ special warranty of
title.
|
|
5.1.4
|
Sellers’
Right to Cure.
If Buyer notifies Sellers of a Title Defect as provided in Section
5.1.3,
Sellers shall have the right, but not the obligation, to cure the
Title
Defect. If Sellers choose to cure a Title Defect, Sellers must cure
the
Title Defect before Closing, unless the Parties otherwise agree in
writing.
|
11
|
5.1.5
|
Remedies
for Uncured Title Defects.
If Buyer notifies Sellers of any Title Defect as provided in Section
5.1.3, and Sellers refuse or are unable to cure the Title Defect
before
Closing, then Buyer and Sellers will have the following rights and
remedies with respect to the uncured Title Defects, unless the Parties
otherwise agree in writing.
|
|
(i)
|
Buyer
may waive the uncured Title Defect and proceed with
Closing.
|
|
(ii)
|
If
the aggregate of all Title Defect Amounts is less than the Title
Deductible, then the Parties shall be obligated to proceed with Closing
as
to all Interests without curative action by Sellers with respect
to such
Title Defects and without an adjustment of the Purchase
Price.
|
|
(iii)
|
If
the aggregate of the Defect Amounts equals or exceeds the Title
Deductible, and the Parties agree with respect to the existence of
such
Title Defects and the Title Defect Amounts related thereto, the Purchase
Price will be reduced by the positive difference, if any, between
the
aggregate of the Title Defect Amounts and the Title Deductible, and
the
Parties will be obligated to proceed with Closing, subject to the
termination rights of the Parties under Section 5.4
hereof.
|
|
(iv)
|
If
the aggregate of the Title
Defect
Amounts exceeds the Title
Deductible
and the Parties are unable to agree as to the existence of some or
all of
the Title Defects and/or the Title
Defect
Amounts related thereto (the “Disputed
Matters”),
the Sellers shall have the right to exclude the affected Interests
from
the transaction contemplated hereby. If Sellers elect to so exclude
the
affected Interests, the Purchase Price shall be reduced by the Allocated
Values for the affected Interests. In the event the Sellers do not
elect
to exclude the affected Interests from the transaction contemplated
hereby, the Parties shall refer the disputed Title Defects to a mutually
agreed upon third party (or, if the Parties are unable to agree upon
a
third party, to an arbitrator to be selected by the American Arbitration
Association) for resolution. The resolution of the third party (or
arbitrator) of the Disputed Matters shall be binding on the Parties.
In
the event all of the Disputed Matters are not resolved prior to Closing,
the Parties shall nevertheless proceed with Closing. At such a Closing,
the Purchase Price shall be reduced by an amount equal to the aggregate
of
the Allocated Values for affected Interests and such Interests shall
be
removed from the transaction. Upon the resolution of the Disputed
Matters,
(i) Buyer shall pay to Sellers an amount equal to the aggregate of
the
Allocated Values of the affected Interests, adjusted as agreed upon
by the
Parties, and (ii) Sellers shall convey to Buyer the affected Interests.
|
|
5.2
|
Preferential
Rights and Consents to Assign.
|
| 5.2.1 |
Notices
to Holders.
|
12
| (i) |
Promptly
following the execution of this Agreement, Sellers shall use reasonable
efforts to notify the holders of third party preferential purchase
rights,
rights of first refusal, or similar rights (collectively, "Preferential
Rights"),
or third party consents to assign, lessor's approvals or similar
rights
(collectively, "Consents"),
of which Sellers have knowledge, that they intend to transfer the
Interests to Buyer, provide them with any information about the transfer
of the Interests to which they are contractually entitled, and in
the case
of Consents, ask the holders of the Consents to consent to the assignment
of the affected Interests to Buyer. Sellers shall have no obligation
other
than to so identify such Preferential Rights or Consents and to so
request
such execution of Consents and/or waivers of Preferential Rights.
Sellers
shall use reasonable efforts to obtain the Consents and waivers of
the
Preferential Rights.
|
|
(ii)
|
Sellers
shall promptly notify Buyer whether (a) any Preferential Rights are
exercised, waived or deemed waived, (b) any Consents are denied,
or (c)
the requisite time periods have elapsed without any Preferential
Rights
being exercised or Consents being received.
|
| 5.2.2 |
Remedies
Before Closing.
If Sellers are unable before Closing to obtain the required Consents
(other than Consents ordinarily obtained after closing and Consents
on
hydrocarbon sales, purchase, gathering, transportation, treating,
marketing, exchange, processing and fractionating agreements) and
waivers
of all Preferential Rights, then Sellers and Buyer shall proceed
with
Closing as to the Interests affected by the unwaived Preferential
Rights
or unobtained Consents, subject to the further obligations of Sellers
and
Buyer set forth in Section 5.2.3 in the event that such Preferential
Rights are validly exercised or such Consents are ultimately denied
after
Closing.
|
|
5.2.3
|
Remedies
After Closing.
|
|
(i)
|
Preferential
Rights.
After Closing, if (a) any holder of Preferential Rights alleges improper
notice of sale, or (b) Sellers or Buyer discover, or any third party
alleges, the existence of additional Preferential Rights, Buyer will
attempt to obtain waivers of those discovered or alleged Preferential
Rights, and Sellers shall assist Buyer without any obligation to
spend
monies in pursuit thereof. If Buyer is unable to obtain waivers of
such
Preferential Rights, or the third party ultimately establishes and
exercises its rights, and such exercise denies the Interests to Buyer,
then Buyer shall convey the affected Interests under this Agreement
to
such third party and shall be entitled to the Allocated Value, adjusted
as
appropriate, for the sale of such affected
Interests.
|
|
(ii)
|
Consents.
After Closing, if Sellers or Buyer discover, or any third party alleges,
the existence of additional Consents, Buyer will attempt to obtain
waivers
of those discovered or alleged Consents, and Sellers shall assist
Buyer
without any obligation to spend monies in pursuit thereof. If Buyer
is
unable to obtain waivers of such Consents (other than Consents on
hydrocarbon sales, purchase, gathering, transportation, treating,
marketing, exchange, processing and fractionating agreements), and
such
unwaived Consents deny the affected Interests to Buyer, then Sellers
and
Buyer will rescind the assignment of the affected Interests under
this
Agreement, after which Sellers shall pay Buyer an amount equal to
the
Allocated Value of the affected Interests as adjusted at Closing
pursuant
to this Agreement less revenues net of expenses generated from the
affected Interest(s) after the Closing. Buyer shall immediately reassign
the affected Interest(s) to the Sellers free and clear of any and
all
liens, claims and other encumbrances other than those burdening the
affected Interests at the time of Sellers’ conveyance to Buyer, and Buyer
shall have no further obligations under this Agreement relating to
the
affected Interest(s). Rescission of the assignment of the affected
Interests and receipt of the payment described above shall be Buyer's
sole
remedy if undiscovered or alleged Preferential Rights are exercised
or
Consents are denied after Closing.
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13
| 5.3 |
Environmental
Review.
|
|
5.3.1
|
Buyer
shall have the right to conduct or cause a consultant (“Buyer’s
Environmental Consultant”)
to conduct an environmental review of the Interests prior to the
Defect
Date (“Buyer’s
Environmental Review”).
The cost and expense of Buyer’s Environmental Review, if any, shall be
borne solely by Buyer. The scope of work comprising Buyer’s Environmental
Review shall be limited to a Phase I investigation and shall not
include
any intrusive test or procedure. Buyer shall (and shall cause Buyer’s
Environmental Consultant to): (i) consult with Sellers before conducting
any work comprising Buyer’s Environmental Review, (ii) perform all such
work in a safe and workmanlike manner and so as to not unreasonably
interfere with Sellers’ operations, and (iii) comply with all applicable
laws, rules, and regulations. Buyer shall be solely responsible for
obtaining any third party consents that are required in order to
perform
any work comprising Buyer’s Environmental Review, and Buyer shall consult
with Sellers prior to requesting each such third party consent. Sellers
shall have the right to have a representative or representatives
accompany
Buyer and Buyer’s Environmental Consultant at all times during Buyer’s
Environmental Review. With respect to any samples taken in connection
with
Buyer’s Environmental Review, Buyer shall take split samples, providing
one of each such sample, properly labeled and identified, to Sellers.
Buyer hereby agrees to release, defend, indemnify and hold harmless
Sellers and the Seller Indemnified Parties from and against all claims,
losses, damages, costs, expenses, causes of action and judgments
of any
kind or character (INCLUDING THOSE RESULTING FROM SELLERS’ SOLE, JOINT,
COMPARATIVE OR CONCURRENT NEGLIGENCE OR STRICT LIABILITY BUT EXCLUDING
HOWEVER SELLERS’ GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) arising out of or
relating to Buyer’s Environmental
Review.
|
Unless
otherwise required by applicable law, Buyer shall (and shall cause Buyer’s
Environmental Consultant to) treat confidentially any matters revealed by
Buyer’s Environmental Review and any reports or data generated from such review
(the “Environmental Information”), and Buyer shall not (and shall cause Buyer’s
Environmental Consultant to not) disclose any Environmental Information to
any
Governmental Authority or other third party. Unless otherwise required by law,
prior to the Closing Buyer may use the Environmental Information only in
connection with the transactions contemplated by this Agreement. If Buyer,
Buyer’s Environmental Consultant, or any third party to whom Buyer has provided
any Environmental Information become legally compelled to disclose any of the
Environmental Information, Buyer shall provide Sellers with prompt notice
sufficiently prior to any such disclosure so as to allow Sellers to file any
protective order, or seek any other remedy, as it deems appropriate under the
circumstances. If this Agreement is terminated prior to the Closing, Buyer
shall
deliver the Environmental Information to Sellers, which Environmental
Information shall become the sole property of Sellers. Buyer shall provide
copies of the Environmental Information to Sellers without charge
14
| 5.3.2 |
Environmental
Definitions.
|
.
| (i) |
Environmental
Defects.
For purposes of this Agreement, the term “Environmental
Defect”
shall mean, with respect to any given Interest, an individual
environmental condition that constitutes a material violation of
Environmental Laws in effect as of the Effective Time in the jurisdiction
in which such Interest is located. Environmental Defect shall not
be
deemed to include an environmental condition disclosed in writing
to Buyer
prior to the execution of this
Agreement.
|
| (ii) |
Governmental
Authority.
For purposes of this Agreement, the term “Governmental
Authority”
shall mean, as to any given Interest, the United States and the state,
county, parish, city and political subdivisions in which such Interest
is
located and that exercises jurisdiction over such Interest, and any
agency, department, board or other instrumentality thereof that exercises
jurisdiction over such Interest.
|
|
(iii)
|
Environmental
Laws.
For purposes of this Agreement, the term “Environmental
Laws”
shall mean all laws, statutes, ordinances, court decisions, rules
and
regulations of any Governmental Authority pertaining to health or
the
environment as may be interpreted by applicable court decisions or
administrative orders, including, without limitation, the Clean Air
Act,
as amended, the Comprehensive Environmental Response, Compensation
and
Liability Act, as amended (“CERCLA”),
the Federal Water Pollution Control Act, as amended, the Occupational
Safety and Health Act, as amended, the Resources Conservation and
Recovery
Act, as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund Amendment and
Reauthorization Act of 1986, as amended, the Hazardous Materials
Transportation Act, as amended, and comparable state and local
laws.
|
|
(iv)
|
Environmental
Defect Value.
For purposes of this Agreement, the term “Environmental
Defect Value”
shall mean, with respect to any Environmental Defect, the value of
the
estimated costs and expenses to correct such Environmental Defect
in the
most cost-effective manner reasonably available, consistent with
Environmental Laws, taking into account that non-permanent remedies
(such
as mechanisms to contain or stabilize hazardous materials, including
monitoring site conditions, natural attenuation, risk-based corrective
action, institutional controls or other appropriate restrictions
on the
use of property, caps, dikes, encapsulation, leachate collection
systems,
etc.) may be the most cost-effective manner reasonably available,
together
with all fines, penalties, interest and other similar expenses arising
from the Environmental Defect that may have been assessed prior to
the
Closing Date or that are known will be assessed after the Closing
Date and
not previously satisfied. Additionally, Sellers shall indemnify and
hold
harmless Buyer from and against any and all other fines, penalties,
interest and other similar expenses arising from the Environmental
Defect
that may be assessed after the Closing Date, but that are unknown
or
uncertain as of the Closing Date.
|
15
|
5.3.3
|
Notice
of Environmental Defect.
If Buyer discovers any Environmental Defect affecting the Interests,
Buyer
shall notify Sellers of such alleged Environmental Defect on or before
the
Defect Date. To be effective, such notice must: (i) be in writing;
(ii) be
received by Sellers on or before the Defect Date; (iii) describe
the
Environmental Defect in sufficient, specific detail, including, without
limitation, (A) the written conclusion of Buyer’s Environmental
Consultants that an Environmental Defect exists, which conclusion
shall be
reasonably substantiated by the factual data gathered in Buyer’s
Environmental Review, and (B) a separate specific citation of the
provisions of Environmental Laws alleged to be violated and the related
facts that substantiate such violation; (iv) identify the specific
Interests affected by such Environmental Defect including, without
limitation but only to the extent that they are in existence and
in
Buyer’s possession or subject to its control, a site plan showing the
location of all sampling events, boring logs and other field notes
describing the sampling methods utilized and the field conditions
observed, chain-of-custody documentation and laboratory reports;
(v)
identify the procedures recommended to correct the Environmental
Defect,
together with any related recommendations from Buyer’s Environmental
Consultant; and (vi) state Buyer’s estimate of the Environmental Defect
Value, including the basis for such estimate, for which Buyer would
agree
to adjust the Purchase Price in order to accept such Environmental
Defect
if Sellers elected Section 5.3.4(ii) as the remedy therefore. Any
matters
that may otherwise constitute Environmental Defects, but of which
Sellers
have not been specifically notified by Buyer in accordance with the
foregoing, together with any environmental matter that does not constitute
an Environmental Defect, shall be deemed to have been waived by Buyer
for
all purposes and constitute an Assumed Obligation (as defined in
Section
7.1).
|
| 5.3.4 |
Remedies
for Environmental Defects.
|
| (i) |
Upon
the receipt of such effective notice from Buyer, Sellers and Buyer
shall
attempt to mutually agree on a resolution. If the Parties do not
reach
such resolution, (a) Sellers may, at their sole option, attempt to
cure
such Environmental Defect at any time prior to the Closing; or (b)
either
Party may elect to exclude the affected Interest and its associated
rights
from the sale and reduce the Purchase Price by the Allocated Value
of such
affected Interest.
|
16
|
(ii)
|
If
any Environmental Defect described in a notice delivered in accordance
with Section 5.3.3 is not cured on or before the Closing, and neither
Party elects to exclude the affected Property from the transactions
contemplated hereby, then the Purchase Price shall be reduced by
the
Environmental Defect Value (as hereinafter defined) of such Environmental
Defect as agreed by the Parties.
|
|
(iii)
|
If
Buyer and Sellers have not agreed as to the validity of any asserted
Environmental Defect, or if the Parties have not agreed on the
Environmental Defect Value therefore, then on or before three (3)
business
days prior to the Closing Date such matter shall be deemed to be
a
Disputed Matter which shall be resolved pursuant to Section 5.1.5(iv)
hereof. If the validity of any such asserted Environmental Defect
or the
amount of any such Environmental Defect Value is not determined by
the
Closing, the Interest affected by such Disputed Matter shall be excluded
from the Closing, and the Purchase Price paid at Closing shall be
reduced
by the Allocated Value for that Interest. Upon resolution of such
dispute,
the Allocated Value of the affected Interest, less the Environmental
Defect Value, if any, found to be attributable to such Environmental
Defect shall be paid by Buyer to Sellers and the Interest conveyed
to the
Buyer, if that is part of the mutually agreed settlement. Notwithstanding
the foregoing, either Sellers or Buyer shall have the right to exclude
the
affected Interest from the sale.
|
|
(iv)
|
Notwithstanding
anything to the contrary in this Agreement, (a) if the aggregate
amount of
all Environmental Defect Values in accordance with this Agreement
does not
exceed Seven Hundred Fifty Thousand Dollars ($750,000) (the “Environmental
Deductible”)
prior to any adjustments thereto, then no adjustment of the Purchase
Price
shall be made therefore; and (b) if the aggregate amount of all
Environmental Defect Values determined in accordance with this Agreement
does exceed the Environmental Deductible prior to any adjustments
thereto,
then the Purchase Price shall only be adjusted by the amount of such
excess.
|
| 5.4 |
Walk
Rights.
If prior to Closing the aggregate amount of the Allocated Values
of all
Interests removed from the transactions contemplated hereby together
with
the aggregate of all Title Defect Amounts and Environmental Defect
Amounts
exceed twenty-five percent (25%) of the Purchase Price, either Party
may
terminate this Agreement, and neither Party will have any further
obligation to conclude the transfer of the Interests under this Agreement.
However, the right of termination under this Section 5.3 must be
exercised
no later than the Closing, Date after which both parties will be
deemed to
have waived their termination rights under this Section
5.4.
|
17
ARTICLE
6
CLOSING
|
6.1
|
Closing.
The closing of the transactions contemplated herein (the “Closing”)
shall occur on Wednesday, January 31, 2007 or at a later time mutually
designated by the parties (the “Closing
Date”),
but in no event later than February 28, 2007, at the offices of EnerVest
Management Partners, Ltd., at ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇.
|
| 6.2 |
Calculation
of Adjusted Purchase Price.
No later than two (2) business days prior to Closing, Sellers and
Buyer
shall agree, in accordance with this Agreement, on a statement (the
“Closing
Adjustment Statement”)
setting forth each adjustment to the Purchase Price calculated on
actual
revenue received or expenses paid as of the Closing Date.
|
|
6.3
|
Closing
Obligations.
At Closing, the following actions shall
occur:
|
|
6.3.1
|
Delivery
of Assignment.
Sellers shall execute, acknowledge and deliver a Conveyance and a
Deed
substantially in the form and substance of Exhibits
H-1 and H-2
attached hereto and made a part hereof for all purposes together
with such
other state or federal forms of conveyance as may be required or
expedient, covering all of the Interests to be conveyed to Buyer
pursuant
hereto.
|
|
6.3.2
|
Delivery
of Sale Price.
Buyer shall deliver to Sellers by wire transfer the Purchase Price
as
adjusted pursuant to Section 2.3
hereof.
|
|
6.3.3
|
Delivery
of Suspense Funds.
Sellers shall deliver to Buyer the accounts listed on Schedule 6.3.3
hereto, if any, attributable to the Interests held in suspense or
escrow
by Sellers.
|
|
6.3.4
|
Delivery
of Interests and Records.
Sellers shall, subject to the terms of any applicable operating agreements
and to the provisions hereof, deliver to Buyer exclusive possession
of the
Interests. Furthermore, Sellers shall provide to Buyer, at Buyer’s expense
and within 45 days after Closing, any and all original maps, reports
and
other written material relating to the Interests, including without
limitation, lease files, property records, contract files, operations
files, copies of tax and accounting records and files (other than
Sellers’
income tax returns), well files, core analyses and hydrocarbon analyses,
well logs, mud logs, core data, field studies, seismic, geological,
geochemical or geophysical data or interpretations thereof (collectively
the “Records”).
Buyer shall preserve all files so delivered by Sellers for a period
of
three years following Closing and will allow Sellers access (including,
without limitation, the right to make copies at Sellers’ expense) to such
files at all reasonable times.
|
|
6.3.5
|
Delivery
of Letters-in-Lieu.
Sellers shall to deliver to Buyer for delivery to all purchasers
of
production executed letters-in-lieu of transfer orders directing
all
purchasers of production to make payment to Buyer of proceeds attributable
to production of Hydrocarbons from the Interests from and after the
Effective Time.
|
18
|
6.4
|
Post-Closing
Obligations.
Sellers and Buyer shall have the following post-Closing
obligations:
|
|
6.4.1
|
Recording
and Filing.
Buyer, within thirty (30) days after the Closing Date, shall (i)
record
all assignments, conveyances, and other instruments that must be
recorded
to effectuate the transfer of the Interests, (ii) file for approval
with
the applicable governmental agencies all state and federal transfer
and
assignment documents for the Interests, and (iii) file with the applicable
government agencies all applications and other documents required
for the
transfer of permits and operatorship of the Interests. Buyer shall
provide
Sellers a recorded copy of each assignment, conveyance, and other
recorded
instrument, and approved copies of the state and federal transfer
and
assignment documents, if any, as soon as they are
available.
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6.4.2
|
Final
Accounting Statement.
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(i)
|
On
or before ninety (90) days after the Closing Date, Sellers shall
prepare
and deliver to Buyer a post-closing statement setting forth a detailed
calculation of all post-Closing adjustments applicable to the period
for
time between the Effective Time and Closing (“Accounting
Statement”).
The Accounting Statement shall include any adjustment or payment
which was
not finally determined as of the Closing Date and the allocation
of
revenues and expenses as determined in accordance with Section 2.4
and
Section 9.2. To the extent reasonably required by Sellers, Buyer
shall
assist in the preparation of the Accounting Statement. Sellers shall
provide Buyer such data and information as Buyer may reasonably request
supporting the amounts reflected on the Accounting Statement in order
to
permit Buyer to perform or cause to be performed an audit. The Accounting
Statement shall become final and binding upon the parties on the
thirtieth
(30th) day following receipt thereof by Buyer (the “Final
Settlement Date”)
unless Buyer gives written notice of its disagreement (a “Notice
of Disagreement”)
to Sellers 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 Sellers in a
timely
manner, then the Parties shall treat the disagreement as a Disputed
Matter
and shall resolve the Dispute Matter in the manner provided for in
Section
5.1.5(iv).
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(ii)
|
Within
five (5) business days after the Final Settlement Date, Sellers shall
pay
to Buyer or Buyer shall pay to Sellers, as applicable, in immediately
available funds, the net amount due.
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ARTICLE
7
ASSUMED
RIGHTS AND OBLIGATIONS AND INDEMNITIES.
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7.1
|
Assumption
of Obligations.
As
of the Closing Date, Buyer shall assume and be responsible for and
comply
with any and all duties and obligations of Sellers with respect to
the
Interests, express or implied, whether incurred before, on or after
the
Closing Date (the “Assumed
Obligations”).
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19
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7.2
|
Indemnification.
As of the Closing Date, Buyer shall defend, indemnify and hold the
Sellers
and each of the Seller Indemnified Parties harmless from and against
any
and all liabilities, claims, causes of action, actions, damages,
losses,
costs or expenses (including without limitation, court costs and
attorney
fees) of any kind or character arising out of or otherwise relating
to the
Interests, whether incurred before, on or after the Closing Date.
In
connection with (but not in limitation of) Section 7.1 and this section,
it is specifically understood and agreed that (a) such duties,
obligations, and liabilities include all matters arising out of the
condition of the Interests on the date of Closing (including, without
limitation, within such matters all obligations to properly plug
and
abandon, or replug and re-abandon, ▇▇▇▇▇ located on the Interests,
to
restore the surface of the Interests and to comply with, or to bring
the
Interests into compliance with, applicable environmental laws, rules,
regulations and orders, including conducting any remediation activities
which may be required on or otherwise in connection with activities
on the
Interests), regardless of whether such condition or the events giving
rise
to such condition arose or occurred before or after the Closing,
and (b)
the assumptions and indemnifications by Buyer provided for in Section
7.1
and the first sentence of this section shall expressly cover and
include
such matters.
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7.3
|
Successors
and Assigns.
The indemnities of this Article 7 shall inure to the benefit of Sellers,
each of the Seller Indemnified Parties, and their respective affiliates,
partners, members, officers, directors, employees, agents, successors
and
assigns of each of them.
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7.4
|
EXPRESS
NEGLIGENCE RULE. EXCEPT
AS OTHERWISE PROVIDED HEREIN, THE INDEMNIFICATION AND ASSUMPTION
PROVISIONS PROVIDED FOR IN ARTICLE 7 OF THIS AGREEMENT SHALL BE APPLICABLE
WHETHER OR NOT THE CLAIMS IN QUESTION AROSE FROM THE GROSS, SOLE,
CONCURRENT, ACTIVE OR PASSIVE NEGLIGENCE OF THE INDEMNIFIED PARTY
AND ITS
EMPLOYEES AND/OR AGENTS OR ANY THIRD PARTY AND REGARDLESS OF WHO
MAY BE AT
FAULT OR OTHERWISE RESPONSIBLE UNDER ANY OTHER CONTRACT, OR ANY STATUTE,
RULE, OR THEORY OF LAW, INCLUDING, BUT NOT LIMITED TO, THEORIES OF
STRICT
LIABILITY. BUYER AND SELLERS ACKNOWLEDGE THAT THIS STATEMENT COMPLIES
WITH
THE EXPRESS NEGLIGENCE RULE AND IS
CONSPICUOUS.
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ARTICLE
8
TAXES
AND EXPENSES
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8.1
|
Recording
and Transfer Expenses.
Buyer shall pay all costs of recording and filing (i) the assignments
delivered hereunder for the Interests, (ii) all state and federal
transfer
and assignment documents, (iii) all applications and other documents
required for the transfer of permits and operatorship of the Interests,
and (iv) all other instruments.
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8.2
|
Real
Property and Personal Property Taxes.
All ad valorem taxes, real property taxes, personal property taxes
and
similar tax obligations (the "Property
Taxes")
with respect to the Interests for the tax period in which the Effective
Time occurs shall be apportioned, based on the Effective Time, between
Sellers and Buyer and, if already paid by Sellers, an appropriate
increase
in the Purchase Price shall be made pursuant to Section 2.4. If such
Property Taxes are not already paid, but the tax liability is known
or can
be reasonably estimated, an appropriate decrease in the Purchase
Price
shall be made pursuant to Section 2.4. Buyer shall pay or cause to
be paid
to the taxing authorities all Property Taxes not already paid relating
to
the tax period in which the Effective Time occurs and if appropriate
adjustments pursuant to Section 2.4 were not made to the Purchase
Price at
Closing, appropriate adjustments with respect to such shall be made
in
connection with the Post Closing.
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20
| 8.3 |
Tax
and Financial Reporting.
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|
8.3.1
|
IRS
Form 8594.
If the Parties mutually agree that a filing of Form 8594 is required,
the
Parties will confer and cooperate in the preparation and filing of
their
respective forms to reflect a consistent reporting of the Sale
Price.
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8.3.2
|
Financial
Reporting.
Sellers and Buyer agree to furnish to each other at Closing or as
soon
thereafter as practicable any and all information and documents reasonably
required to comply with tax and financial reporting requirements
and
audits.
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8.4
|
Sales
and Use Taxes.
Buyer shall be responsible for all sales, use and similar taxes applicable
to the transfer of the Interests. Buyer shall indemnify Sellers and
hold
Sellers harmless from any liability, including, without limitation,
penalties, interest and attorneys’ fees, arising out of Buyer’s failure to
pay Sellers or any applicable taxing authority the amount equal to
all
state and local sales and use taxes payable by Sellers on the transfer
of
ownership of the Interests, including any tangible personal property
that
is a part of the Interests.
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8.5
|
Income
Taxes.
Each Party shall be responsible for its own state and federal income
taxes, if any, as may result from this
transaction.
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8.6
|
Incidental
Expenses.
Each Party shall bear its own respective expenses incurred in connection
with the negotiation and Closing of this transaction, including its
own
consultants’ fees, broker’s fees, attorneys’ fees, accountants’ fees, and
other similar costs and expenses. EXCEPT
TO THE EXTENT EXPRESSLY SET FORTH IN ANY INDEMNIFICATION CONTAINED
IN THIS
AGREEMENT, NEITHER PARTY SHALL HAVE ANY OBLIGATIONS WITH RESPECT
TO THIS
AGREEMENT, OR OTHERWISE IN CONNECTION HEREWITH, FOR ANY SPECIAL,
CONSEQUENTIAL OR PUNITIVE
DAMAGES.
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ARTICLE
9
MISCELLANEOUS
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9.1
|
Notices.
All communications required or permitted under this Agreement shall
be in
writing and any communications or delivery hereunder shall be deemed
to
have been fully made if actually delivered, or if mailed by registered
or
certified mail, postage prepaid, or by facsimile or electronic
transmission to the address set forth
below:
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21
SELLERS
ENERVEST
ENERGY INSTITUTIONAL FUND IX,L.P.
c/o
EnerVest Management Partners, Ltd.
▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇ ▇▇▇▇▇▇
Fax:
▇▇▇-▇▇▇-▇▇▇▇
email:
▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
ENERVEST
ENERGY INSTITUTIONAL FUND IX-WI, L.P.
c/o
EnerVest Management Partners, Ltd.
▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇ ▇▇▇▇▇▇
Fax:
▇▇▇-▇▇▇-▇▇▇▇
email:
▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
BUYER
EV
Properties, L.P.
c/o
EV
Properties GP,LLC
▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax:
▇▇▇-▇▇▇-▇▇▇▇
email:
▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
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9.2
|
Further
Assurance.
After Closing, each of the Parties shall execute, acknowledge and
deliver
to the other such further instruments, and take such other actions
as may
be reasonably necessary to carry out the provisions of this Agreement.
After Closing, additional proceeds or invoices for expenses received
by
either Buyer or Sellers on behalf of the other Party shall be settled
by
forwarding invoices received by such Party to the other Party for
prompt
payment and endorsing and forwarding any checks or otherwise remitting
any
proceeds received to such other Party promptly upon receipt
thereof.
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9.3
|
Entire
Agreement.
This instrument states the entire agreement between the Parties and
may be
supplemented, altered, amended, modified or revoked by writing only,
signed by all Parties. This, as applicable, Agreement together with
the
Exhibits and Schedules attached hereto and the ancillary agreements
contemplated herein supersedes any prior agreements between the Parties
concerning sale of the Interests thereof The headings are for guidance
only and shall have no significance in the interpretations of this
Agreement.
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9.4
|
Assignability.
This Agreement and the rights and obligations hereunder shall not
be
assignable or delegable by either Party hereto without the prior
written
consent of the other Party.
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22
|
9.5
|
Survival.
The
representations and warranties of or by the Parties hereto shall
not
survive the execution and delivery of the Conveyance and Deed described
in
Section 6.3.1, and, except for the limited warranty of title in Section
4.1, Seller shall have no liability after the Closing with respect
to the
transactions contemplated in this Agreement. The obligations of the
Parties under Section 5.2, Article 7, Article 8, and Article 9 shall
(subject to any limitations set forth therein) survive the Closing
and the
delivery of the Conveyance and
Deed.
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9.6
|
Severability;
Time is of the Essence.
If any provision of this Agreement is found by a court of competent
jurisdiction to be invalid or unenforceable, that provision will
be deemed
modified to the extent necessary to make it valid and enforceable
and if
it cannot be so modified, it shall be deemed deleted and the remainder
of
this Agreement shall continue and remain in full force and effect.
Time is
of the essence in this Agreement.
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|
9.7
|
Counterparts/Binding
Effect.
This Agreement may be executed in multiple counterparts, each of
which
taken together shall constitute an original and all of which shall
constitute one document. All of the terms, provisions, covenants,
obligations, indemnities, representations, warranties and conditions
of
this Agreement shall be binding upon and inure to the benefit of
and be
enforceable by the Parties and their respective successors and
assigns.
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9.8
|
Governing
Law.
This Agreement is governed by and must be construed according to
the laws
of the State of Texas, except that, to the extent that the law of
a state
in which a portion of the Interests is located (or which is otherwise
applicable to a portion of the Interests) necessarily governs, the
law of
such state shall apply as to that portion of the Interests located
in (or
otherwise subject to the laws of ) such
state.
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9.9
|
Exhibits.
In the event of a conflict between the provisions of the Exhibits
attached
to this Agreement and the foregoing provisions of this Agreement,
the
provisions of this Agreement shall take precedence. The omission
of
certain provisions of this Agreement from any conveyance delivered
pursuant hereto does not constitute a conflict between this Agreement
and
said conveyance document and will not effect a merger of the omitted
provisions.
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|
9.10
|
Exclusive
Remedy.
If the Closing occurs, the sole and exclusive remedy of Buyer with
respect
to the Interests shall be pursuant to the express provisions of this
Agreement. Without limitation of the foregoing, the sole and exclusive
remedy of Buyer for any and all (a) claims relating to any
representations, warranties, covenants and agreements contained in
this
Agreement that survive the Closing, (b) other claims pursuant to
or in
connection with this Agreement and (c) other claims relating to the
Interests and the purchase and sale thereof shall be any right to
indemnification from such claims that is expressly provided in this
Agreement, and if no such right of indemnification is expressly provided,
then such claims are hereby waived to the fullest extent permitted
by law.
If the Closing occurs, Buyer shall also be deemed to have waived,
to the
fullest extent permitted under applicable law, any right to contribution
against Seller (including, without limitation, any contribution claim
arising under any applicable environmental law) and any and all other
rights, claims and causes of action it may have against Seller arising
under or based on any federal, state or local statute, law, ordinance,
rule or regulation or common law or otherwise.
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23
EACH
PARTY ACKNOWLEDGES THAT IT HAS READ THIS AGREEMENT IN ITS ENTIRETY, AND THAT
IT
UNDERSTANDS ALL THE PROVISIONS SET FORTH HEREIN, INCLUDING, BUT NOT LIMITED
TO,
THOSE PROVISIONS LOCATED IN ARTICLE 7 WHEREIN BUYER AGREES TO INDEMNIFY SELLER
IN CERTAIN CIRCUMSTANCES EVEN THOUGH THE LOSSES, COSTS, EXPENSES AND/OR DAMAGES
MAY HAVE BEEN CAUSED BY THE GROSS, SOLE, CONCURRENT, ACTIVE OR PASSIVE
NEGLIGENCE OF THE SELLERS, THEIR RESPECTIVE EMPLOYEES, OR ANY THIRD PARTY AND
EVEN THOUGH THE SELLER MAY BE RESPONSIBLE FOR SUCH LOSSES, COSTS, EXPENSES
AND/OR DAMAGES UNDER ANY THEORY OF LAW, INCLUDING BUT NOT LIMITED TO STRICT
LIABILITY BUT EXCLUDING HOWEVER GROSS NEGLIGENCE OR
WILLFULMISCONDUCT.
[SIGNATURE
PAGES TO FOLLOW]
24
EXECUTED
as of the date first above mentioned.
SELLER:
ENERVEST
ENERGY INSTITUTIONAL FUND IX, L.P.
By:
EnerVest
Management Partners, Ltd.
Its
General Partner
By: EnerVest
Management GP, L.C.,
Its
General Partner
By:
▇▇▇▇▇
▇.
▇▇▇▇▇▇▇▇▇▇▇
Executive
Vice President and Chief Financial Officer
ENERVEST
ENERGY INSTITUTIONAL FUND IX-WI, L.P.
By:
EnerVest
Management Partners, Ltd.
Its
General Partner
By:
EnerVest
Management GP, L.C.,
Its
General Partner
By:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Executive
Vice President and Chief Financial Officer
25
BUYER:
EV
PROPERTIES, L.P.
By:
EV
Properties GP, LLC,
Its
general partner
By:
EV
Energy
Partners, L.P.,
Its
sole
member
By:
EV
Energy
GP, L.P.,
Its
general partner
By:
EV
Management, LLC,
Its
general partner
By:
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
Senior
Vice President and Chief Financial Officer
26