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EXHIBIT 10.21
PURCHASE AND SALE AGREEMENT
WITNESSETH THIS PURCHASE AND SALE AGREEMENT, made as of this 12th
day of July, 1996 ("Agreement"), between MOBIL PRODUCING TEXAS & NEW MEXICO
INC., a Delaware corporation ("Seller"), with a place of business at ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, and TITAN RESOURCES, L.P., a Texas
Limited Partnership by and through its General Partner, Titan Resources I,
Inc., a Texas corporation ("Purchaser"), with a place of business at ▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
WHEREAS, Seller desires to sell to Purchaser, and Purchaser
desires to purchase from Seller, on the terms and conditions set forth in this
Agreement, certain interests and operating rights in certain oil and gas
leases, agreements, contracts, real property personal property, and equipment;
and
WHEREAS, at Purchaser's request or otherwise, and in the interest
of full disclosure without any representation as to its meaning or validity,
Seller may desire to provide Purchaser and/or has heretofore provided Purchaser
with proprietary, subjective, confidential, or interpretative data, reports,
information or projections concerning the past or present production of
hydrocarbons or the quality and quantity, if any, of the hydrocarbon reserves
or the environmental condition of the Interests defined in Article 2
(collectively, referred to as "PROPRIETARY DATA"); and
WHEREAS, Seller disclaims all responsibility for the accuracy or
completeness of the Proprietary Data; and
WHEREAS, Purchaser specifically acknowledges and agrees that the
Proprietary Data is proprietary, subjective, confidential and interpretative;
that any reliance by Purchaser on the Proprietary Data for any purpose
whatsoever, including but not limited to the calculation of its own projections
concerning the quality and quantity, if any, of hydrocarbon reserves contained
in the Interests or its decision to purchase the Interests shall be at
Purchaser's sole risk AND PURCHASER SHALL NOT USE THE PROPRIETARY DATA AS THE
BASIS OF ANY CLAIM, DEMAND, LIABILITY OR CAUSE OF ACTION FOR MISREPRESENTATION,
BREACH OF WARRANTY, BREACH OF CONTRACT OR OTHERWISE.
NOW, THEREFORE, for good and valuable consideration and for the
mutual covenants herein contained, Seller and Purchaser agree as follows:
ARTICLE 1. EFFECTIVE TIME
The "EFFECTIVE TIME" of the sale and purchase provided for in this
Agreement shall be September 1, 1996, as of 7:00 a.m., local time.
ARTICLE 2. PURCHASE AND SALE
2.01 THE INTERESTS: Subject to the terms, conditions, reservations, and
exceptions specified in this Agreement, including Seller's receipt of
the requisite management approval as specified below, Seller shall sell
and Purchaser shall purchase as of the Effective Time all of Seller's
right, title and interest in and to the assets described in Subsections
2.01(a) through 2.01(f) (collectively called the "INTERESTS"):
(a) The oil, gas and other mineral leasehold interests described in
Exhibit "A", attached hereto and made a part hereof, the
leasehold estates or other interests in oil and gas
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created thereby including working interests, net profits interest
and similar interests and all rights and privileges appurtenant
thereto or that may arise by operation of law or otherwise
insofar as such cover and affect the lands and depths described
in Exhibit "A" (hereinafter called the "REAL PROPERTY"), together
with Seller's interest in any pooled, communitized, or unitized
acreage, derived by virtue of Seller's ownership of the Real
Property. It being Seller's intent to sell and convey to
Purchaser all of Seller's right, title and interest therein
unless specifically excluded hereunder;
(b) The ▇▇▇▇▇, equipment and facilities located on the Real Property
and used directly and exclusively in the operation of the Real
Property (collectively called the "EQUIPMENT"), including, but
not limited to, pumps, platforms, well equipment (surface and
subsurface), saltwater disposal ▇▇▇▇▇, injection ▇▇▇▇▇, water
▇▇▇▇▇, lines and facilities, sulfur recovery facilities,
compressors, compressor stations, dehydration facilities,
treating facilities, pipeline gathering lines, flow lines and
transportation lines (to the extent they are not owned and/or
operated by any affiliate of Seller), valves, meters, separators,
tanks, tank batteries, buildings and other fixtures, including
items in inventory for the benefit of any joint account for
Interests subject to joint operating agreements;
(c) Oil, condensate, natural gas and natural gas liquids produced
after the Effective Time, including "line fill" and inventory
below the pipeline connector in tanks, attributable to the
Interests;
(d) To the extent transferable, all contracts and agreements
concerning the Interests, including, but not limited to, unit
agreements, pooling agreements, transportation agreements, gas
contracts, areas of mutual interest, farmout agreements, farmin
agreements, saltwater disposal agreements, water injection
agreements, line well injection agreements, road use agreements,
operating agreements and gas balancing agreements;
(e) To the extent transferable and except as reserved by Seller in
Section 2.03, all surface use agreements, easements,
rights-of-way, licenses, authorizations, permits, and similar
rights and interests applicable to, or used or useful in
connector with, any or all of the Interests and Seller will use
reasonable efforts to keep same in force and effect from the
execution of this Agreement until the Closing; and
(f) All interest of Seller in ▇▇▇▇▇▇▇▇▇▇ Ltd. and any surface estate
owned by such entity.
2.02 EXCLUDED ASSETS: The following are expressly excluded from the
Agreement (collectively, the "EXCLUDED ASSETS"):
(a) All mineral fee, overriding royalty and royalty interests in, on
and under the Real Property, that are expressly described in
Exhibit "A" as being excluded, provided such Excluded Asset does
not decrease the net revenue interest shown for a property on
Exhibit "B" hereto;
(b) Tools, vehicles or other rolling stock, boats, communication
equipment, leased equipment, office equipment, computer equipment
and software;
(c) Spot sales contracts, storage or warehouse agreements, supplier
contracts, service contracts, insurance contracts and constructor
agreements; and
(d) All pipelines, equipment and rights-of-way owned and operated by
any affiliate of Seller as of the date of this Agreement.
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2.03 RESERVATION OF RIGHTS: If Seller reserves any interests, including the
deep rights in any Interests conveyed pursuant to this Agreement where
not prohibited, Seller shall also retain the right to use any and all
applicable easements, rights-of-way, licenses, authorizations, permits,
contracts or other rights relating to the reserved interests provided
such use by Seller does not unreasonably interfere with or impede
Purchaser's right to use or dispose of the same. Seller agrees that it
will pay its proportionate share of maintenance costs on any easements,
right-of-way or other facilities, based on Seller's actual use of same.
2.04 MANAGEMENT/BOARD APPROVAL: THE PARTIES UNDERSTAND AND AGREE THAT THIS
AGREEMENT MAY REQUIRE THE APPROVAL OF SEVERAL MEMBERS OF SELLER'S
MANAGEMENT AND ITS BOARD OF DIRECTORS OR EXECUTIVE Committee. IF ANY
MEMBER OF SELLER'S MANAGEMENT FAILS TO APPROVE THIS AGREEMENT, SELLER
SHALL HAVE NO OBLIGATION TO SUBMIT THIS AGREEMENT TO ANY OTHER MEMBER OF
ITS MANAGEMENT, ITS BOARD OF DIRECTORS OR EXECUTIVE COMMITTEE. SELLER'S
MANAGEMENT DECISION OR ITS BOARD OF DIRECTORS' OR EXECUTIVE COMMITTEE'S
DECISION WHETHER OR NOT TO APPROVE THIS AGREEMENT SHALL BE IN THE SOLE
AND ABSOLUTE DISCRETION OF THE APPLICABLE MANAGER, BOARD OF DIRECTORS OR
EXECUTIVE COMMITTEE, NONE OF WHICH SHALL HAVE ANY OBLIGATION TO BE
REASONABLE OR NOT BE ARBITRARY. SELLER'S FAILURE TO SECURE THE REQUISITE
MANAGEMENT APPROVAL BY SEPTEMBER 1,1996 SHALL ENTITLE PURCHASER TO
TERMINATE THIS AGREEMENT BY WRITTEN NOTICE TO SELLER WHEREUPON
PURCHASER'S PERFORMANCE DEPOSIT (AS HEREINAFTER DEFINED) SHALL BE
PROMPTLY REFUNDED TO PURCHASER.
2.05 EXCLUDED DATA AND INTERPRETATIONS: EXCEPT AS OTHERWISE PROVIDED HEREIN,
ANY AND ALL GEOPHYSICAL, SEISMIC AND OTHER TECHNICAL DATA AND
INTERPRETATIONS THEREOF AND ANY CONFIDENTIAL OR PROPRIETARY DATA SHALL
BE EXCLUDED FROM THIS PURCHASE AND SALE TRANSACTION.
2.06 EXCLUSION OF PRIOR EXISTING RIGHTS OR CLAIMS: THERE IS ALSO SPECIFICALLY
EXCEPTED, EXCLUDED AND RESERVED FROM THE TRANSACTION CONTEMPLATED
HEREBY, ALL RIGHTS AND CLAIMS ARISING, OCCURRING, OR EXISTING IN SELLER
PRIOR TO THE EFFECTIVE TIME INCLUDING, BUT NOT LIMITED TO, ANY AND ALL
CONTRACT RIGHTS, CLAIMS, PENALTIES, RECEIVABLES, REVENUES, RECOUPMENT
RIGHTS, RECOVERY RIGHTS (EXCEPTING GAS IMBALANCES), ACCOUNTING
ADJUSTMENTS, MISPAYMENTS, ERRONEOUS PAYMENTS OR OTHER CLAIMS OF ANY
NATURE RELATING TO ANY TIME PERIOD PRIOR TO THE EFFECTIVE TIME, EXCEPT
FOR ANY WARRANTY CLAIMS FOR MATERIALS OR WORKMANSHIP OR ENVIRONMENTAL
CLAIMS SELLER MAY HAVE AGAINST THIRD PARTIES WHICH SELLER SHALL
SUBROGATE TO PURCHASER.
ARTICLE 3. SALE PRICE
3.01 MANNER OF PAYMENT: The sale price for the Interests shall be ONE HUNDRED
SIXTY-NINE MILLION EIGHT HUNDRED SEVEN THOUSAND AND NINE HUNDRED SEVENTY
SIX DOLLARS ($169,807,976.00), hereinafter called the "SALE PRICE," and
shall be paid as follows:
(a) Upon the execution of this Agreement, Purchaser shall pay or
cause to be paid into escrow the sum of EIGHT MILLION FOUR
HUNDRED NINETY THOUSAND THREE HUNDRED NINETY NINE DOLLARS
($8,490,399.00), as a performance deposit, hereinafter, together
with any interest earned thereon through the date of transfer of
same out of escrow into Seller's account called the "PERFORMANCE
DEPOSIT". The Performance Deposit shall be held by an escrow
agent until such time as it is transferred to Seller's account
pursuant to the provisions of the Escrow Agreement attached
hereto as Exhibit "C".
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(b) At the Closing (as defined in Article 4), Purchaser shall pay
Seller or Seller's designee the Sale Price less the Performance
Deposit, plus or minus any adjustments as hereinafter provided
in this Agreement (the "ADJUSTED SALE PRICE"). The Adjusted Sale
Price will reflect adjustments for the following:
(i) Casualty Defects as provided in Section 6.06
(ii) Preferential Rights as provided in Article 7.
(iii) Consents to Assign as provided in Article 7.
(iv) Title Defects as provided in Section 6.05.
(v) Adjustments for Adverse Environmental Conditions as
provided in Article 20.
(vi) Other adjustments required under the terms of this
Agreement or otherwise agreed to by Purchaser and Seller.
(vii) Lease Maintenance Conditions as provided in Article 23.
If the total dollar amount of the adjustments to the Sale Price
provided in 3.01 (b)(i)(iv) and (v) above aggregates to
$5,000,000, or more, then Seller may elect to terminate this
Agreement by written notice to Purchaser.
If the total dollar amount of the adjustments to the Sale Price
provided in 3.01 (b)(i), (iv) and (v) above aggregates to
$10,000,000, or more, then Purchaser may elect to terminate this
Agreement by written notice to Seller. Notwithstanding anything
contained herein to the contrary, if the total dollar amount of
adjustments to the Sale Price of any individual property listed
on Exhibit "D" exceeds 30% of the dollar amount allocated
thereto, then Purchaser may elect to terminate this Agreement by
written notice to Purchaser.
(c) Except as provided in Subsection 3.01(A) and Article 8, Seller
shall not be obligated to segregate the Performance Deposit in a
separate account, but may commingle the Performance Deposit with
other funds in Seller's accounts, and the Performance Deposit
shall not accrue interest for the benefit of Purchaser after the
same is transferred out of escrow into Seller's account.
Likewise, if the Performance Deposit is refunded to Purchaser
pursuant to this Agreement, Purchaser shall not be entitled to
any interest earned on the Performance Deposit after it is
transferred to Seller's account.
(d) The Adjusted Sale Price shall be paid to Seller by wire transfer
of immediately available funds to Seller's account at Citibank,
N.A. ▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇ ▇▇▇▇, ▇.▇., ▇▇▇ #▇▇▇▇▇▇▇▇▇, Mobil Oil
Corporation, Acct. #4064-0942, unless Seller shall give written
notice to Purchaser not less than two (2) business days prior to
the Closing that it prefers payment of the Adjusted Sale Price
to be made by another method or to another account or payee in
which cases such payment shall be made in that manner.
3.02 ALLOCATION OF SALE PRICE: Purchaser shall allocate the Sale Price among
the interests and operating rights in the Interests. Said allocation
shall be incorporated in this Agreement as Exhibit "B". References
herein to a "property" or "properties" refer to the ▇▇▇▇▇, units and
other subdivisions of the Real Property listed on Exhibit "A" which
have an allocation of the Sale Price. Notwithstanding the foregoing,
the Purchaser shall reallocate the Sale Price among the properties and
the equipment and other personal property being purchased by Purchaser
hereunder prior to Closing and attach the reallocated Sale Price as
amended Exhibit "B" to this Agreement. However, any adjustment in the
Sale Price for Title Defects, Adverse Environmental Conditions, or Lease
Maintenance Conditions shall be based on the original allocation of the
Sale Price, unless the Seller and Purchaser agree otherwise. No
adjustments may be made by Purchaser in the allocation of the Sale
Price to properties subject to
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preferential rights to purchase after notice has been forwarded to the
holder of such preferential rights, without the consent of Seller.
ARTICLE 4. THE CLOSING
The sale and purchase described in Article 2 shall take place at a
Closing (the "CLOSING"), at which the Purchaser shall pay or cause to
be paid to Seller the Adjusted Sale Price and any applicable closing
charges and Seller shall deliver, or cause to be delivered, the
conveyancing instruments referred to in Article 13 to Purchaser. The
Closing shall occur at Seller's office located at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ at 10:00 a.m., local time on the later
of (a) August 30, 1996, (b) September 30, 1996 if either Seller or
Purchaser elects to postpone Closing to such date (c) October 31, 1996
if Purchaser elects to postpone Closing to such date for purposes of
completing its due diligence review or (d) such other time and place to
which the parties may agree in writing (the "CLOSING DATE").
ARTICLE 5. TERMINATION
5.01 PURCHASER'S BREACH OR DEFAULT: IF THE PURCHASE AND SALE OF THE
INTERESTS IS NOT COMPLETED AS CONTEMPLATED HEREIN BY REASON OF ANY
BREACH OR DEFAULT BY PURCHASER, THEN SELLER SHALL, IN CONSIDERATION OF
HAVING HELD THE INTERESTS OFF THE MARKET AND HAVING REFRAINED FROM
DEALING WITH OTHERS CONCERNING THE INTERESTS AND AS LIQUIDATED DAMAGES
IN LIEU OF ALL OTHER DAMAGES (AND AS SELLER'S SOLE REMEDY), RETAIN THE
PERFORMANCE DEPOSIT. THE PARTIES HEREBY ACKNOWLEDGE THAT THE EXTENT OF
DAMAGES TO SELLER OCCASIONED BY SUCH BREACH OR DEFAULT BY PURCHASER
WOULD BE IMPOSSIBLE OR EXTREMELY DIFFICULT TO ASCERTAIN AND THAT THE
AMOUNT OF THE PERFORMANCE DEPOSIT IS A FAIR AND REASONABLE ESTIMATE OF
SUCH DAMAGES UNDER THE CIRCUMSTANCES.
5.02 Other Termination: IF THE PURCHASE AND SALE OF THE INTERESTS IS NOT
COMPLETED BECAUSE OF A DEFAULT OR BREACH BY SELLER OR BECAUSE SELLER
FAILED TO OBTAIN THE REQUISITE MANAGEMENT APPROVAL AS REQUIRED IN
SECTION 2.04 ABOVE, OR IF THE PURCHASE AND SALE OF THE INTERESTS IS NOT
COMPLETED BECAUSE OF ANY TERMINATION ELECTION AS PROVIDED IN THIS
AGREEMENT, PURCHASER SHALL BE ENTITLED TO THE PROMPT RETURN OF THE
PERFORMANCE DEPOSIT (WITHOUT INTEREST EARNED AFTER THE PERFORMANCE
DEPOSIT IS TRANSFERRED TO SELLER'S ACCOUNT), THE RECOVERY OF WHICH SHALL
BE PURCHASER'S SOLE REMEDY AGAINST SELLER.
ARTICLE 6. DUE DILIGENCE AND TITLE AND CASUALTY DEFECTS
6.01 ACCESS TO SELLER'S PROPRIETARY AND NON-PROPRIETARY INFORMATION: Subject
to Purchaser's confidentiality obligations described in Section 27.15
below and in addition to the Proprietary Data which Seller may provide
to Purchaser as described in the recitals above, Seller shall make
available to Purchaser during normal business hours at Seller's offices
all material non-proprietary accounting records, gas balancing records,
payout status records, files, records, documents and non-interpretive
geophysical, seismic and technical data in Seller's possession or under
its control relating to the Interests, including but not limited to,
lease, land, title and division order files (including any available
abstracts of title, title opinions and title curative documents),
contracts, correspondence, permitting files, contract files, regulatory
files, maps, engineering, production and well files and well logs.
Seller shall not be obligated to perform any additional title work and
Seller shall not be obligated to make any existing abstracts and title
opinions current. NO WARRANTY OF ANY KIND IS MADE BY SELLER AS TO THE
INFORMATION SO SUPPLIED OR WITH RESPECT TO INTERESTS TO WHICH
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THE INFORMATION RELATES, AND PURCHASER EXPRESSLY AGREES THAT ANY
CONCLUSIONS DRAWN THEREFROM SHALL BE THE RESULT OF ITS OWN INDEPENDENT
REVIEW AND JUDGMENT.
6.02 Access to Seller's Property: Seller shall make a good faith effort to
give Purchaser or Purchaser's authorized representatives, at any
reasonable time(s) before the Closing and upon adequate notice to
Seller, physical access to the Real Property and Equipment included in
the Interests, for the purpose of inspecting same. Such access shall be
at Purchaser's sole risk, cost and expense and Purchaser shall
indemnify, defend, save, discharge, release and hold harmless Seller
from, and pay or reimburse Seller on a current basis for, any and all
losses, liabilities, liens or encumbrances for labor or materials,
claims and causes of action arising out of or in any way connected with
or related to any personal injury to or death of any persons or damage
to property occurring to or on the Interests as a result of Purchaser's
exercise of its rights under this Section 6.02, whether latent or patent
or whether or not such personal injury, death or property damage is
caused by SELLER'S (OR ITS AGENTS, EMPLOYEES OR CONTRACTORS) (I) ACTIVE
NEGLIGENCE, PASSIVE NEGLIGENCE, JOINT NEGLIGENCE, CONCURRENT NEGLIGENCE
OR GROSS NEGLIGENCE; OR (II) STRICT LIABILITY; BUT NOT SELLER'S WILLFUL
MISCONDUCT. Purchaser agrees to comply fully with the rules, regulations
and instructions issued by Seller regarding the actions of Purchaser
while upon, entering or leaving the Interests. Seller shall have the
right at all times to participate in the preparation for and conducting
of any hearing or trial related to the indemnity set forth in this
Section, as well as the right to appear on its own behalf or to retain
separate counsel to represent it at any such hearing or trial.
6.03 TITLE DEFECT: For the purpose of this Agreement, the
non-transferability requirement in any license, permit, right-of-way,
pipeline franchise or easement affecting the Interests or a requirement
that it be renegotiated upon a transfer of ownership, shall not
constitute a Title Defect. A "TITLE DEFECT" shall mean an encumbrance,
encroachment, irregularity, defect in or objection to Seller's title to
a property that alone or in conjunction with other Title Defects renders
Seller's title to the Interests unacceptable to Purchaser, including
specifically one or more of the following:
(a) Seller's title at the Effective Time, as to one or more of the
Interests, is subject to an outstanding mortgage, deed of trust,
lien or encumbrance or other adverse claim not shown on
Exhibit"A";
(b) Seller's net revenue interest in any of the properties is less
than the net revenue interest which is set forth in Exhibit "B"
for such property, or Seller's working interest in any of the
properties is greater than the working interest shown in Exhibit
"B" for such property without a corresponding increase in the net
revenue interest for such property;
(c) Seller is in default under some material provision of a lease,
agreement or other contract affecting the Interests; or
(d) Seller's rights and interests are subject to being reduced by
virtue of the exercise by a third party of a reversionary,
back-in or similar right not reflected in Exhibit "B".
6.04 NOTICE OF TITLE DEFECT: Purchaser shall notify Seller in writing of the
nature of any Title Defect discovered by Purchaser and furnish Seller
Purchaser's basis for the assertion of such Title Defect and data in
support thereof as soon as practical after such discovery. Seller may
request an increase in the Sale Price by delivery to Purchaser of
written notice that the net revenue interest actually owned by Seller in
any of the Interests is greater than that shown on Exhibit "B". Any
Title Defect which is not disclosed to Seller within ten (10) business
days prior to the Closing shall conclusively be deemed waived by
Purchaser for all purposes, provided,
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however, such waiver shall not be deemed to lessen Seller's obligations
under its Special Warranty of Title to the properties conveyed to
Purchaser pursuant hereto.
6.05 REMEDIES FOR TITLE DEFECTS: Upon timely delivery of notice, either by
Purchaser of a Title Defect or by Seller of an increase in net revenue
interest, Purchaser and Seller shall meet and use their best efforts to
agree on the validity of the claim and the amount of any required
adjustment to the Sale Price, provided that in no event shall any Sale
Price reduction for an affected property exceed the amount allocated to
the affected property on Exhibit "B". If Purchaser and Seller cannot
agree on the amount of such a Sale Price adjustment, said amount shall
be determined in accordance with the following guidelines:
(a) If the Title Defect is based upon Purchaser's notice that Seller
owns a lesser net revenue interest, or the notice is from Seller
to the effect that Seller owns a greater net revenue interest
than that shown on Exhibit "B", then the portion of the Sale
Price allocated on Exhibit "B" to the affected property shall be
reduced or increased (as the case may be) in the same proportion
that the actual net revenue interest bears to the net revenue
interest shown on Exhibit "B" for such property.
(b) If the Title Defect is a lien, encumbrance or other charge upon a
property which is liquidated in amount, then the adjustment shall
be the sum necessary to be paid to the obligee to remove the
Title Defect from the affected properly. If the Title Defect
represents an obligation or burden upon the affected property for
which the economic detriment to Seller is not liquidated but can
be estimated with reasonable certainty as agreed to by the
parties, the adjustment shall be the sum necessary to compensate
Purchaser at the Closing for the adverse economic effect which
the Title Defect will have on the affected property.
(c) Subject to Subsection 6.05(e), if the Title Defect cannot be
accommodated pursuant to Subsections 6.05(a) or 6.05(b) and the
parties cannot otherwise agree on the amount of such an
adjustment to the Sale Price or Seller cannot cure the Title
Defect to the reasonable satisfaction of Purchaser prior to the
Closing, the property affected by the Title Defect shall be
excluded from the Interests conveyed to Purchaser at the Closing
and the Sale Price shall be reduced by the amount allocated by
Purchaser to the affected property on Exhibit "B".
(d) Purchaser may only adjust the Sale Price for Title Defects at the
Closing if the cumulative amount of such adjustments in its favor
exceeds $250,000.00. Similarly, Seller may only adjust the Sale
Price by reason of it owning a greater net revenue interest at
the Closing if the cumulative amount of such adjustments in its
favor exceeds $250,000.00.
(e) If Purchaser shall receive an adjustment at the Closing on
account of a Title Defect, Seller shall have until a date that is
ninety (90) days after the Closing Date to cure the Title Defect
at its cost. If by such date Seller can demonstrate to
Purchaser's reasonable satisfaction the Title Defect has been
cured, then Seller shall be entitled to reimbursement by
Purchaser for the amount of the adjustment received by Purchaser
at the Closing as a result of the Title Defect and the property
shall be conveyed to Purchaser (if not conveyed at Closing).
Purchaser shall pay such amount to Seller within ten (10)
business days from the date that the parties agree the Title
Defect has been cured.
6.06 CASUALTY DEFECT: If prior to the Closing any of the Interests are
substantially damaged or destroyed by fire or other casualty ("CASUALTY
DEFECT"), Seller shall notify Purchaser promptly after Seller learns of
such event. Seller shall have the right, but not the obligation, to cure
the
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Casualty Defect by repairing such damage or, in the case of personal
property or fixtures, replacing them with equivalent items, no later
than the Closing Date, all to Purchaser's reasonable satisfaction. If
any uncured Casualty Defects exist at the Closing, Purchaser shall
proceed to purchase the Interests affected thereby, and the Sale Price
shall be reduced by the aggregate reduction in the value of the
Interests on account of such Casualty Defects, as determined by the
mutual agreement of the parties. If the parties fail for any reason to
agree prior to the Closing on the amount of any Sale Price adjustments
on account of Casualty Defects, Purchaser shall accept the affected
Interests and the Sale Price shall be reduced by an amount determined by
a mutually acceptable independent appraiser, to be equal to the value of
all Casualty Defects not accounted for at the Closing.
ARTICLE 7. THIRD PARTY RIGHTS AND CONSENTS
It is understood by Purchaser that certain of the Interests are or may
be subject to (1) preferential purchase rights, rights of first refusal and
similar option rights in third parties to purchase a part of the Interests
(collectively, "Preferential Rights') or (2) lessors' approvals or other
consents to transfer any part of the Interests (other then governmental
approvals and other consents routinely acquired after a transfer) including the
non-transferability requirement of any license, permit, right-of-way, pipeline
franchise or easement, or a requirement for renegotiation upon transfer of
ownership (collectively, "Consents to Assigns"). This Agreement shall be
subject to the terms and conditions of such Preferential Rights and Consents to
Assign. Seller shall use its best efforts to notify the holders of such
Preferential Rights of the proposed transfer of the affected properties and the
amount of the Sale Price allocated to such properties. if any third party
exercises a valid Preferential Right, the affected properties shall be excluded
from the Interests and the Sale Price reduced by the amount allocated to the
affected properties. Seller shall promptly notify Purchaser of the exercise of
any Preferenffal Right and of the lapse of any applicable period of time within
which a Preferential Right must be exercised. Seller shall attempt to satisfy
all Consents to Assign prior to the Closing Date. If a Consent to Assign is not
obtained (and Purchaser does not waive the obligation to secure such consent),
then the affected properties shall be excluded from the Interests and the Sale
Price reduced by (i) the amount allocated to the affected properties, if the
Consent to Assign prohibits the transfer of an oil and gas lease, interest in a
unit, or other property, or (ii) in any other case, an amount mutually agreed
to by Purchaser and Seller required to replace any material part of the
Interests necessary for the continued production and sale of hydrocarbons from
the Interests, or in the event the parties cannot agree to such amount, then
the affected properties shall be excluded from the Interests and the Sale Price
reduced by the amount allocated to the affected properties.
ARTICLE 8. TAX-DEFERRED EXCHANGE ELECTION
Seller may, at or before the Closing, designate in writing one or more
properties which Purchaser will acquire and trade to Seller for the Interests
(herein collectively called the "Exchange Property"). If Seller has not found a
suitable Exchange Property prior to the Closing, Seller may elect, by notice to
Purchaser delivered on or before the Closing Date, to have the Adjusted Sale
Price paid to a trustee until Seller has designated the Exchange Property. The
Exchange Property shall be designated by Seller and acquired by the trustee
within the time periods prescribed in Section 1031 (a)(3) of the Internal
Revenue Code of 1986, as amended (the "Code"), and shall thereupon be conveyed
to Seller. If Seller fails to designate and the agent or trustee fails to
acquire the Exchange Property within such time periods, the agency or trust
shall terminate and the proceeds then held by the trustee shall be paid
immediately to Seller. The rights and responsibilities of Seller, Purchaser and
the trustee shall be documented with such agreements containing such terms and
provisions as shall be determined by Seller to be necessary to accomplish a tax
free exchange under Section 1031 of the Code, subject, however, to the
limitations on costs and liabilities of Purchaser set forth hereinafter. If
Seller makes a tax deferred exchange election, Purchaser shall not be obligated
to pay any additional costs or incur any additional obligations in the
acquisition of the Interests and Seller shall indemnify, save, discharge,
release and hold Purchaser and its affiliates harmless from and against all
claims,
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expense (including reasonable attorneys' fees), loss and liability resulting
from Purchaser's participation in such an exchange.
ARTICLE 9. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ ACT
This Agreement is subject in all respects to and conditioned upon
compliance by the parties with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, and rules and regulations promulgated pursuant thereto, to the extent
that said Act, rules and regulations are applicable to the transactions
contemplated by this Agreement. The parties shall make such filings with and
provide such information to the Federal Trade Commission as are required in
connection with the Act as soon as practicable after the date hereof, and the
Closing shall take place as soon as practicable after the expiration of any
applicable waiting period under the Act.
ARTICLE 10. REPRESENTATIONS
10.01 EXCLUSIVITY OF REPRESENTATIONS: THE EXPRESS REPRESENTATIONS OF SELLER
CONTAINED IN THIS ARTICLE 10 OR OTHERWISE STATED IN THIS AGREEMENT ARE
EXCLUSIVE AND ARE IN LIEU OF ALL OTHER REPRESENTATIONS, EXPRESS,
IMPLIED, STATUTORY, OR OTHERWISE. FURTHERMORE, THE REPRESENTATIONS
CONTAINED IN SECTIONS 10.01, 10.02 AND 10.03 SHALL SURVIVE THE CLOSING,
BUT ALL OTHER REPRESENTATIONS IN THIS AGREEMENT SHALL TERMINATE AT, AND
SHALL NOT SURVIVE, THE CLOSING.
10.02 MUTUAL REPRESENTATIONS: Each party represents to the other that:
(a) it is a corporation (or limited partnership in the case of
Purchaser) duly organized, validly existing and in good standing
under the laws of the State of its incorporation or formation,
and is duly qualified to do business in the States in which the
Interests are located;
(b) it has all authority necessary to enter into this Agreement and
to perform all its obligations hereunder;
(c) its execution, delivery and performance of this Agreement and the
transactions contemplated hereby will not: (1) violate or
conflict with any provision of its Certificate of Incorporation,
ByLaws, limited partnership agreement or other governing
documents; (ii) result in the breach of any term or condition of,
or constitute a default or cause the acceleration of any
obligation under, any agreement or instrument to which it is a
party or by which it is bound; or (iii) violate or conflict with
any applicable judgment, decree, order, permit, law, rule or
regulation;
(d) this Agreement has been duly executed and delivered on its
behalf, and at the Closing all documents and instruments required
hereunder will have been duly executed and delivered. This
Agreement, and all such documents and instruments shall
constitute legal, valid and binding obligations enforceable in
accordance with their respective terms, except to the extent
enforceability may be affected by bankruptcy, reorganization,
insolvency or similar laws affecting creditors' rights generally;
and
(e) it has been represented by legal counsel of its own selection who
has reviewed this Agreement.
10.03 BROKERS: Neither party has incurred any obligation or liability,
contingent or otherwise, for brokers' or finders' fees in connection
with this Agreement in respect of which the other party
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may have any responsibility; and any such obligation or liability that
might exist shall be the sole obligation of the party whose action gave
rise thereto.
10.04 FURTHER DISTRIBUTION: Purchaser is acquiring the Interests for its own
account and not with the intent to make a distribution thereof within
the meaning of the Securities Act of 1933, as amended, and the rules and
regulations thereunder or distribution thereof in violation of any other
applicable securities laws.
10.05 SELLER'S REPRESENTATIONS: For the purpose of this Agreement, references
to the "best of its knowledge and belief" of Seller means the actual and
current knowledge of Seller's officers and employees, without any duty
of investigation by such officers and employees. Except as expressly
disclaimed in Article 11 hereof, Seller represents the following:
(a) Seller owns the Interests and has the full power and right to
sell and convey the same, subject to any Preferential Rights or
Consents to Assign that may exist with respect thereto; and
(b) To the best of its knowledge and belief, Seller has complied in
all material respects with the provisions and requirements of all
orders, regulations and rules issued or promulgated by
governmental authorities having jurisdiction with respect to the
Interests operated by Seller and has filed for and obtained all
governmental certificates, permits and other authorizations
necessary for Seller's current operation of the Interests other
than permits, consents and authorizations required for the sale
and transfer of the Interests to Purchaser which shall be the
responsibility of Purchaser.
(c) To the best of its knowledge and belief, Seller has not defaulted
or violated any agreement to which Seller is a party or any
obligation to which Seller is bound affecting or pertaining to
the Interests other than as disclosed hereunder or on any Exhibit
attached hereto.
(d) There are no liens or security interests on the properties
subject hereto except for liens for taxes not yet due or
delinquent or liens relating to obligations not yet due or
pursuant to which Seller is not delinquent.
(e) There are no suits, actions, claims, investigations or any legal,
administrative or arbitration proceedings pending or to the best
of Seller's knowledge and belief asserted against Seller which,
affect or pertain to the Interests, other than as disclosed
hereunder or on any Exhibit attached hereto.
(f) The oil and gas leases included within the Interests are in full
force and effect.
(g) Without affecting Seller's disclaimers of certain warranties and
representations under Article 11 hereof, and to the best of
Seller's knowledge and belief, between the date hereof and until
Closing, Seller will make a good faith effort to disclose to
Purchaser all information requested by Purchaser in Seller's
possession regarding any and all material matters affecting the
property which a reasonable and prudent operator would want to
know.
(h) Seller has not and from the date of this Agreement and prior to
Closing unless this Agreement is terminated sooner, shall not
sell, encumber or agree to sell or encumber any portion of the
Interests to any party other than the Purchaser.
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ARTICLE 11. DISCLAIMER OF REPRESENTATIONS AND WARRANTIES
11.01 NO WARRANTY OR REPRESENTATION BY SELLER: SELLER SHALL WARRANT AND
DEFEND TITLE TO THE PROPERTY BY, THROUGH AND UNDER SELLER, BUT NOT
OTHERWISE. EXCEPT FOR THE FOREGOING. THE TRANSACTION CONTEMPLATED HEREBY
SHALL BE WITHOUT ANY WARRANTY OR REPRESENTATION OF TITLE, EITHER
EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, WITHOUT ANY EXPRESS, IMPLIED,
STATUTORY OR OTHER WARRANTY OR REPRESENTATION AS TO THE CONDITION,
QUANTITY, QUALITY, FITNESS FOR A PARTICULAR PURPOSE, FREEDOM FROM
REDHIBITORY VICES OR DEFECTS, CONFORMITY TO MODELS OR SAMPLES OF
MATERIALS OR MERCHANTABILITY OF ANY OF THE EQUIPMENT OR ITS FITNESS FOR
ANY PURPOSE AND WITHOUT ANY OTHER EXPRESS, IMPLIED, STATUTORY OR OTHER
WARRANTY OR REPRESENTATION WHATSOEVER. PURCHASER SHALL HAVE INSPECTED
OR WAIVED ITS RIGHT TO INSPECT THE INTERESTS FOR ALL PURPOSES AND
SATISFIED ITSELF AS TO THEIR PHYSICAL AND ENVIRONMENTAL CONDITION, BOTH
SURFACE AND SUBSURFACE, INCLUDING BUT NOT LIMITED TO CONDITIONS
SPECIFICALLY RELATED TO THE PRESENCE, RELEASE OR DISPOSAL OF HAZARDOUS
SUBSTANCES, AND THE CONDITION OF ANY WELL CASING, TUBING OR DOWNHOLE
EQUIPMENT. PURCHASER IS RELYING SOLELY UPON ITS OWN INSPECTION OF THE
INTERESTS, AND PURCHASER SHALL ACCEPT ALL OF THE SAME IN THEIR "AS IS,
WHERE IS" CONDITION. THERE ARE NO WARRANTIES THAT EXTEND BEYOND THE FACE
OF THIS AGREEMENT. IN ADDITION, SELLER MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AS TO THE
ACCURACY OR COMPLETENESS OF ANY DATA, REPORTS, RECORDS, PROJECTIONS,
INFORMATION OR MATERIALS NOW, HERETOFORE OR HEREAFTER FURNISHED OR MADE
AVAILABLE TO PURCHASER IN CONNECTION WITH THIS AGREEMENT INCLUDING,
WITHOUT LIMITATION, ANY DESCRIPTION OF THE INTERESTS, PRICING
ASSUMPTIONS, OR QUALITY OR QUANTITY OF HYDROCARBON RESERVES (IF ANY)
ATTRIBUTABLE TO THE INTERESTS OR THE ABILITY OR POTENTIAL OF THE
INTERESTS TO PRODUCE HYDROCARBONS OR THE ENVIRONMENTAL CONDITION OF THE
INTERESTS OR ANY OTHER MATTERS CONTAINED IN THE PROPRIETARY DATA OR ANY
OTHER MATERIALS FURNISHED OR MADE AVAILABLE TO PURCHASER BY SELLER OR BY
SELLER'S AGENTS OR REPRESENTATIVES. ANY AND ALL SUCH DATA, RECORDS,
REPORTS, PROJECTIONS, INFORMATION AND OTHER MATERIALS FURNISHED BY
SELLER OR OTHERWISE MADE AVAILABLE TO PURCHASER ARE PROVIDED PURCHASER
AS A CONVENIENCE AND SHALL NOT CREATE OR GIVE RISE TO ANY LIABILITY OF
OR AGAINST SELLER. ANY RELIANCE ON OR USE OF THE SAME SHALL BE AT
PURCHASER'S SOLE RISK TO THE MAXIMUM EXTENT PERMITTED BY LAW.
11.02 EXPRESS DISCLAIMERS OF REPRESENTATIONS AND WARRANTIES: THE ASSIGNMENTS
AND BILLS OF SALE, LEASES, DEEDS OR OTHER CONVEYANCES TO BE DELIVERED BY
SELLER AT CLOSING SHALL EXPRESSLY SET FORTH THE DISCLAIMERS OF
REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS ARTICLE 11. ALSO, ALL
SUCH ASSIGNMENTS, LEASES, DEEDS AND OTHER CONVEYANCE DOCUMENTS SHALL
EXPRESSLY STATE THAT THE INTERESTS HAVE BEEN USED FOR OIL AND GAS
DRILLING AND PRODUCING OPERATIONS, RELATED OIL FIELD OPERATIONS, AND THE
STORAGE OF OIL, GAS AND OTHER HAZARDOUS SUBSTANCES.
ARTICLE 12. CONDITIONS OF CLOSING
Each party's obligation to consummate the transaction provided for
herein is subject to the satisfaction or waiver by the other party of the
following conditions:
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12.01 REPRESENTATIONS: The representations contained in Article 10 and
Article 12 hereof shall be true and correct in all material respects on
the Closing Date as though made on and as of the Closing Date.
12.02 PERFORMANCE: Each party shall have performed in all material respects
the obligations, covenants and agreements hereunder to be performed by
it at or prior to the Closing Date.
12.03 PENDING MATTERS: Except as provided in Exhibit "A", no suit, action or
other proceeding by a third party or a governmental authority shall be
pending which seeks substantial damages, fines or other penalties from
either party in connection with the Interests, or seeks to restrain,
enjoin or otherwise prohibit the consummation of the transactions
contemplated by this Agreement.
12.04 GOVERNMENTAL BONDS: Upon written request by Seller, Purchaser shall
deliver or cause to be delivered to Seller proof of bonds, in form and
substance and issued by corporate sureties satisfactory to Seller,
covering the Interests required under any laws, rules or regulations of
any federal, Indian tribe, state or local government agencies having
jurisdiction over the Interests, or a commitment by a surety company,
satisfactory to Seller, to issue such bonds upon Closing.
12.05 FINANCIAL CONDITION: No material adverse change has occurred in the
financial condition of either party.
12.06 EXPIRATION OF HSR WAITING PERIOD: The parties shall have filed
Notification and Report Forms to the extent required under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976 and received all
necessary waivers and approvals, and there shall be no legal impediment
under such Act to the Closing.
12.07 MANAGEMENT APPROVAL: Seller shall have obtained management approval of
this Agreement and the transactions contemplated hereby as required by
Section 2.04 herein and shall have notified the Purchaser in writing
that the appropriate level of management approval has been obtained.
ARTICLE 13. TRANSACTIONS ON AND AFTER CLOSING
At the Closing, the following shall occur:
13.01 ASSIGNMENT AND ▇▇▇▇ OF SALE: Seller shall execute, acknowledge and
deliver an Assignment and ▇▇▇▇ of Sale and other necessary conveyance
instruments in a form that is mutually acceptable to the parties in
accordance with the obligations outlined in this Agreement, covering all
of the Interests to be sold pursuant hereto.
13.02 OIL AND GAS LEASE: Any unleased mineral interests of Seller included in
this transaction shall not be conveyed to Purchaser but shall, upon and
subject to the provisions hereof, be leased to Purchaser by oil and gas
lease.
13.03 ADJUSTED SALE PRICE: Purchaser shall deliver to Seller or Seller's
designee the Adjusted Sale Price and any applicable closing charges.
13.04 REGULATORY FILINGS: Purchaser shall deliver to Seller evidence of
filing showing compliance with the appropriate regulatory authority
dealing with plugging of any dry or inactive well(s) included in the
Interests, along with evidence of the appropriate bond, surety letter or
letter of credit in a form acceptable to such authority.
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13.05 CHANGE OF OPERATOR: Seller shall provide Purchaser with executed change
of operator forms on all ▇▇▇▇▇ (active or inactive) operated by Seller,
as required by the applicable state regulatory body, to effect a change
of operator for the Interests, subject to any applicable operating
agreement, but only to the extent allowed or permitted by such operating
agreement.
13.06 POSSESSION OF THE INTERESTS: Seller shall (subject to the terms of
applicable operating agreements and other provisions hereof) deliver to
Purchaser exclusive possession of the Interests upon the Closing.
13.07 NOTICE OF SALE: Immediately after the Closing, Purchaser shall notify
all operators, non-operators, oil and gas purchasers, government
agencies and royalty owners that it has purchased the Interests.
13.08 COPIES OF RECORDS AND DOCUMENTS: Seller shall, at or as promptly as
reasonably possible after the Closing, provide Purchaser (by electronic
transfer where practical), with copies or originals of records and
documents in Seller's possession relating to the Interests, including,
but not limited to nonproprietary financial information relating to the
interests, land and lease files, division of interest computer
printouts, contract files, well files and well logs. SELLER MAY RETAIN
COPIES OR ORIGINAL FILES AS DEEMED APPROPRIATE AND SHALL HAVE NO
OBLIGATION TO FURNISH PURCHASER ANY DATA OR INFORMATION WHICH SELLER
CONSIDERS PROPRIETARY OR CONFIDENTIAL OR WHICH SELLER CANNOT PROVIDE
PURCHASER BECAUSE OF THIRD PARTY RESTRICTIONS ON SELLER. NOTWITHSTANDING
THE FOREGOING, SELLER SHALL DELIVER TO PURCHASER THE ORIGINAL OF ITS
FILES LOCATED IN MIDLAND, TEXAS AND IN ITS FIELD OFFICES WHICH RELATE TO
THE INTERESTS, AND COPIES OF LOGS SELLER HAS ON FILM.
ARTICLE 14. ALLOCATION OF PRODUCTION AND PROCEEDS
All production of oil, gas and other minerals from the Interests prior
to the Effective Time, and all proceeds from the sale of such production, shall
be the property of Seller. Ail such production upon and after the Effective
Time, and all proceeds from the sale thereof, shall be the property of
Purchaser. Production shall be allocated to the parties based upon the most
reliable measurement method or allocation calculation information available and
mutually acceptable to the parties. Purchaser shall pay Seller for oil in
inventory above pipeline connection at Mobil Oil Corporation's posted field
price for oil of like grade and gravity in the field at the Effective Time.
Purchaser shall assume all rights and/or liabilities of Seller arising from any
gas imbalances affecting the Interests as of the Effective Time and thereafter.
Purchaser shall indemnify, defend, save, discharge, release and hold Seller
harmless from any claims for gas imbalances which have accrued prior to the
Effective Time.
Further, as part of the final accounting provided in Article 19, Seller
shall revise the gas imbalances indicated in Exhibit "F" to reflect the actual
imbalance volumes as of the Effective Time. The difference between the gas
imbalances indicated on Exhibit "D" and the actual gas imbalances as of the
Effective Time shall be multiplied by $1.50 per MCF and the aggregate
adjustment amount shall be appropriately accounted for in the final settlement.
ARTICLE 15. RESPONSIBILITY FOR PAYMENTS AND OBLIGATIONS
Seller shall be responsible for (i) all lease rentals,
shut-in-royalties, minimum royalties, payments in lieu of production,
production royalties (including royalties paid in kind), overriding royalties,
production payments and net profits payments, and (ii) all operating costs,
vendor and contractor invoices and other liquidated monetary obligations of
Seller that in each case accrued prior to the Effective Time and are
attributable to the ownership, operation, use or maintenance of or otherwise
relate to the Interests. Purchaser shall be responsible for all of the
above-described
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payments and obligations that have accrued or may accrue on and after the
Effective Time, and shall reimburse Seller for any such payments or obligations
paid by Seller on or after the Effective Time.
Additionally, Seller shall be responsible for the settlement of all
joint billing audits which relate to accounting periods prior to the Effective
Time. Purchaser shall be responsible for the settlement of all joint billing
audits which relate to accounting periods on and after the Effective Time. Any
credits received by Purchaser after the Effective Time attributable to expenses
paid prior to the Effective Time shall be paid to Seller by Purchaser within
fifteen (15) days of Purchaser's receipt thereof.
ARTICLE 16. TAXES AND PREPAID ITEMS
16.01 APPORTIONMENT OF AD VALOREM AND PROPERTY TAXES: All ad valorem taxes,
real property taxes, personal property taxes and similar obligations
with respect to the Interests for the tax period in which the Effective
Time occurs shall be apportioned as of the Effective Time between Seller
and Purchaser. The portion of such apportioned tax liability which is
attributable to Seller shall be credited to Purchaser's account.
Purchaser shall file or cause to be filed all required reports and
returns incident to such taxes and shall pay or cause to be paid to the
taxing authorities all such taxes relating to the tax period in which
the Effective Time occurs. Purchaser shall supply Seller with copies of
the filed reports and proof of payment promptly after filing and paying
same.
16.02 PRORATION OF TAXES, ETC.: All taxes, including, but not limited to,
excise taxes, state severance taxes, ad valorem taxes, and any other
local, state, and/or federal taxes or assessments attributable to the
Interests or any part thereof prior to the Effective Time, remain
Seller's responsibility and all deductions, credits and refunds
pertaining to the aforementioned taxes, attributable to the Interests or
any part thereof prior to the Effective Time (no matter when received),
belong to Seller. All such taxes attributable to the Interests or any
part thereof on and after the Effective Time are Purchaser's
responsibility, and Purchaser shall reimburse Seller for any such taxes
previously paid by Seller, and all deductions, credits, and refunds
pertaining thereto on and after the Effective Time (no matter when
received) belong to Purchaser.
16.03 APPORTIONMENT OF PREPAID: Unearned insurance premiums (if any), paid
utility charges applicable to periods following the Effective Time,
prepaid rentals, prepaid joint interest stock accounts and any other
prepaid or accrued payables, if any, attributable to the Interests shall
be prorated as of the Effective Time and amounts owing from such
proration shall be settled with a final accounting, which shall be made
at such time as complete records are available.
ARTICLE 17. OPERATIONS
Seller, as to the portion of the Interests to be conveyed which it now
operates, shall from the date of execution of this Agreement, continue to
operate the Interests in accordance with all applicable local, state and
Federal laws, rules and regulations including all Environmental Laws and to
operate the same in a good and workmanlike manner until the Closing, when such
operations shall be turned over to and become the responsibility of Purchaser,
unless an applicable unit, pooling, communitization or operating agreement
requires otherwise or Purchaser otherwise requests that Seller continue such
operations, in which case (unless Purchaser and Seller otherwise agree) Seller
shall continue the physical operation of such portion of the Interests pursuant
to and under the terms of such applicable agreement, until such time after the
Closing as such applicable agreement may require or Purchaser assumes such
operations; provided, however, that Seller shall have no liability as operator
to Purchaser for losses or damages sustained, or liabilities incurred, WHETHER
OR NOT THE LOSSES, COSTS, EXPENSES AND DAMAGES IN QUESTION AROSE SOLELY OR IN
PART FROM THE ACTIVE, PASSIVE, CONCURRENT, SIMPLE OR SOLE NEGLIGENCE, OR STRICT
LIABILITY OR OTHER FAULT OF SELLER OR ANY OTHER THEORY OF LIABILITY OR FAULT,
WHETHER IN
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LAW (WHETHER COMMON OR STATUTORY) OR EQUITY, except as may result directly from
Seller's gross negligence or willful misconduct. Any operations from and after
the Effective Time shall be conducted by Seller for and on behalf of Purchaser,
and Seller shall make appropriate charges to the Purchaser for such services as
operator of the Interests (or any portions thereof) performed by Seller from
and after the Effective Time. If any of the properties that Seller continues to
operate on behalf of the Purchaser are subject to an operating agreement,
Seller shall make appropriate charges to the Purchaser in accordance with such
operating agreement which will include overhead charges attributable to
Seller's gross working interest. Purchaser shall reimburse Seller for all
reasonable and necessary expenses incurred by Seller in such operation, or in
the protection or maintenance of the Interests. Any such charges and expenses
shall be recovered by Seller as part of the final accounting described in
Article 19. Seller will market the oil and gas produced from the Interest and
disburse royalties for up to sixty (60) days after Closing, if necessary and
will remit any net proceeds of funds received from the marketing of such oil
and gas in accordance with Seller's standard practices for purchasing and/or
marketing third party oil and gas.
ARTICLE 18. SUBSEQUENT DRILLING OPERATIONS
After full execution of this Agreement and prior to delivery of
possession of the Interests to Purchaser under the applicable provisions of
this Agreement, Seller shall not, without Purchaser's prior written consent,
propose or conduct any operation for the drilling, testing, completing,
reworking, re-completing, sidetracking, deepening, plugging back or plugging
and abandoning a well with respect to the Interests (a "Drilling Operation")
under the terms of any operating agreement or other contract (except repairs or
operations made necessary by emergency conditions, after which Seller shall
promptly give Purchaser notice with full details of the work done and the costs
thereof). If any present party (other than Seller) to an operating agreement or
compulsory pooling order proposes a Drilling Operation prior to such delivery
of possession of the Interests involving an expenditure of more than
$10,000.00, Seller shall promptly notify Purchaser of such proposal and will
promptly provide Purchaser with all information, data or other material in
Seller's possession that may be relevant to a decision whether or not to
participate in such Drilling Operation. Seller shall accept or reject
participation in the proposed Drilling Operation based upon Purchaser's
election with respect thereto given in writing by Purchaser to Seller within
the period allowed in such proposal. Failure by Purchaser to make an election
within such period shall be deemed an election by Purchaser not to participate.
Any election by Purchaser hereunder, regardless of whether actually made or
deemed to be made, shall not result in any adjustment in the amount allocated
to the property affected thereby; however, all costs and expenses on account of
Purchaser's decision to participate in any such Drilling Operation where Seller
has elected not to participate shall be borne by Purchaser, notwithstanding any
termination of this Agreement or anything else herein to the contrary.
ARTICLE 19. FINAL ACCOUNTING
If a final settlement statement subsequent to the Closing is necessary,
Seller will include in its review, without limitation, all revenue received
along with royalties paid, and any operating expenses, taxes, and overhead as
provided for in Articles 14, 15, 16, 17 and 18 herein. Seller shall issue the
final settlement statement for the Interests conveyed within one hundred twenty
(120) days or such earlier date as is practicable under the circumstances after
the Closing. This statement will net revenues received against royalties,
operating expenses, taxes, and overhead (if applicable). Purchaser shall
respond with objections and proposed corrections within thirty (30) days of the
issuance of the final settlement statement. If Purchaser does not respond to
the final settlement statement by signing or objecting within thirty (30) days
of the issuance of the final settlement statement, said statement shall be
deemed approved by Purchaser. After approval by both parties, the final
settlement statement for the Interests conveyed will be summarized and a net
check or invoice will be sent to the Purchaser. Purchaser agrees to promptly
pay any such invoice within thirty (30) days after receipt by Purchaser and
shall not offset such amounts against any other obligation or claim made by
Purchaser against Seller or its affiliates. Seller will accept only written
inquiries regarding the final settlement statement.
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ARTICLE 20. ADVERSE ENVIRONMENTAL CONDITIONS
20.01 OPERATED INTERESTS: Purchaser shall advise Seller of any Adverse
Environmental Condition (as defined herein) related to the Interests
which are operated by Seller and provide evidence thereof not later than
ten (10) days prior to the Closing. If Purchaser in conducting its
environmental due diligence discovers a condition which indicates that
an Adverse Environmental Condition might exist on a property, Purchaser
shall have the option to delay the Closing for the affected property for
30 days to allow Purchaser additional time to fully substantiate the
existence of an Adverse Environmental Condition. Such extension shall
not delay the Closing for other properties in accordance with the terms
of this Agreement. Except as provided below, Seller, after the Closing,
at its sole cost, shall remedy such Adverse Environmental Condition(s),
individually or in the aggregate, to the reasonable satisfaction of
Purchaser and Seller and in accordance with applicable Environmental
Laws (as defined herein) in effect as of the Effective Time unless
Seller and Purchaser otherwise agree to either (a) adjust the Sale Price
by an amount agreed upon by Seller and Purchaser to be the value of such
Adverse Environmental Condition in which case the Interest subject to
the Adverse Environmental Condition shall be conveyed to the Purchaser
and Purchaser shall assume all liabilities associated with the Adverse
Environmental Condition asserted against such interest or (b) exclude
the Interest subject to the Adverse Environmental Condition from the
sale and reduce the Sale Price by the amount allocated to such interest
in Exhibit "B". If the Parties are unable to agree to a course of action
with respect to such Adverse Environmental Condition(s) then the
Interests subject to such Adverse Environmental Condition(s) shall be
excluded from the Sale pursuant to 20.01(b) above. As for Interests
containing Adverse Environmental Condition(s) that are conveyed to and
accepted by Purchaser that Seller undertakes to remedy, Seller shall
indemnify, save, discharge, release and hold Purchaser harmless against
all penalties, fines, cleanup or remediation liabilities, claims,
demands and causes of action, resulting from the remediation of, or the
failure to, fully and completely perform the remediation of the Adverse
Environmental Condition(s) in accordance with applicable Environmental
Laws. Seller agrees that it will exercise all reasonable efforts and
diligence to complete any required environmental cleanup and remediation
within two (2) years of the Closing; however, any failure to complete
such efforts by such time shall not relieve Seller of its duty to fully
and completely satisfy its obligations hereunder. Purchaser shall grant
Seller and its representatives such access to the Interests as may be
reasonably necessary to satisfy its obligations under this Article,
provided such access does not unreasonably interfere with Purchaser's
operations. Such access shall be at Seller's sole risk, cost and expense
and Seller shall indemnify, defend, save, discharge, release and hold
harmless Purchaser from, and pay or reimburse Purchaser on a current
basis for, any and all losses, liabilities, liens or encumbrances for
labor or materials, claims and causes of action arising out of or in any
way connected with or related to any personal injury to or death of any
persons or damage to property occurring to or on the Interests as a
result of Seller's exercise of its rights under this Section 20.01
whether latent or patent or whether or not such personal injury, death
or property damage is caused by PURCHASER'S (OR ITS AGENTS, EMPLOYEES OR
CONTRACTORS) (i) ACTIVE NEGLIGENCE, PASSIVE NEGLIGENCE, JOINT
NEGLIGENCE, CONCURRENT NEGLIGENCE OR GROSS NEGLIGENCE; OR (ii) STRICT
LIABILITY; BUT NOT PURCHASER'S WILLFUL MISCONDUCT.
20.02 NON-OPERATED INTERESTS: Purchaser shall advise Seller of any Adverse
Environmental Condition(s) (as defined herein) on the Interests which
are not operated by Seller and provide evidence thereof not later than
ten (10) days prior to the Closing. After receipt of such notice, Seller
and Purchaser shall agree, not later than five (5) days prior to the
Closing, to adjust the Sale Price in an amount mutually agreeable to the
parties. If the parties cannot agree to an adjustment amount, Purchaser
and Seller 14 shall exclude the affected Interests from the sale and
adjust the Sale Price by the value allocated thereto in Exhibit "B".
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As used herein, "Adverse Environmental Conditions" shall mean any
contamination or condition that is the result of any discharge, release,
disposal, production, storage or treatment on, in or below the Interests
or migration to or from the Interests to any other land or body of
water, wherever located, prior to the Effective Time, of any wastes,
pollutants, contaminants, hazardous materials or other materials or
substances for which and to the extent that remediation is required or
if discovered by the appropriate governmental authority, would
reasonably be required by any laws, rules, orders, regulations, permits
or judgments in effect as of the Effective Time relating to the
protector of the environment ("Environmental Laws").
ARTICLE 21. INDEMNIFICATIONS
21.01 INDEMNIFICATION: As used in this Article 21 and the Sections and
Subsections hereunder, "Claims" shall include claims, demands, causes of
action, liabilities, damages, fines, penalties and judgments of any kind
or character, whether matured or unmatured, absolute or contingent,
accrued or unaccrued, liquidated or unliquidated or known or unknown,
and whether or not resulting from third party claims, and all costs and
fees (including, without limitation, interest, reasonable attorneys'
fees, reasonable costs of experts, court costs and reasonable costs of
investigation, including those incurred in enforcing the indemnification
provisions contained in this Agreement) in connection therewith. Also,
as used in Subsection 21.01(d) herein, "Retained Environmental
Liabilities" shall mean any contamination or condition that is the
result of any disposal by Seller prior to the Effective Time of any
wastes, pollutants, contaminants, hazardous materials or other materials
or substances on, in or below any properties not included in the
Interests, wherever located, for which and to the extent that
remediation is required by any Environmental Laws.
In addition to any other indemnification or reservation provision
contained in this Agreement:
(a) Purchaser shall (i) as of the Effective Time assume, be
responsible for and comply with all duties and obligations of
Seller (except liquidated monetary obligations of Seller that
accrued prior to the Effective Time as described in Article 15),
express or implied, with respect to the Interests, including,
without limitation, those arising under or by virtue of any
lease, contract, agreement, document, permit, applicable law,
statute or rule, regulation or order of any governmental
authority (specifically including, without limitation, any
governmental request or requirement to plug, re-plug or abandon
any well of whatsoever type, status or classification, or take
any clean-up, remedial or other action with respect to the
Interests) and (ii) defend, indemnify, save, discharge, release
and hold Seller harmless from and pay or reimburse Seller on a
current basis for any and all Claims in connection therewith,
except (a) to the extent any such Claim has been asserted against
Seller prior to the Effective Time, (b) as otherwise set forth in
this Agreement, (c) any Claim expressly retained by Seller
pursuant to Section 20.01 of this Agreement, and (d) any brokers'
or finders' fees or commissions arising with respect to brokers
or finders retained or engaged by Seller and resulting from or
relating to the transactions contemplated in this Agreement. With
respect to any Claim for cleanup or remediation of the Interests,
such Claim shall be deemed asserted against Seller at the time
the Order requiring cleanup or remediation has been issued by the
appropriate regulatory agency.
(b) Except as provided for in Section 6.02, Seller shall defend,
indemnify, save, discharge, release and hold Purchaser harmless
from any and all Claims for personal injury, death or damage to
personal property arising directly or indirectly from or incident
to, the use, occupation, operation, maintenance, condition
(whether latent or patent) or abandonment of any of the Interests
prior to the Effective Time, and asserted against Purchaser
and/or Seller within two (2) years of the Closing.
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(c) Except as provided in Subsection 21.01(b), Purchaser shall
defend, indemnify, save, discharge, release and hold Seller
harmless from and pay or reimburse Seller on a current basis for
any and all Claims for personal injury, death or damage to
personal property arising directly or indirectly from or incident
to, the use, occupation, operation, maintenance, condition
(whether latent or patent) or abandonment of any of the
Interests, prior to, on or after the Effective Time.
(d) Except as provided in Article 20 and except for Retained
Environmental Liabilities, Purchaser shall defend, indemnify,
save, discharge, release and hold Seller harmless from and pay or
reimburse Seller on a current basis for any and all Claims for
damage to the environment, environmental cleanup, remediation, or
compliance, or for any other relief, arising directly or
indirectly from or incident to, the use, occupation, operation,
maintenance, condition (whether latent or patent) or abandonment
of any of the Interests, including without limitation,
contamination of the property or premises with Naturally
Occurring Radioactive Materials (NORM), whether or not any such
Claims result from conditions, actions or inactions present or
existing on or before the Closing.
(e) Except as provided in Subsections 21.01 (c) and 21.01 (d) above,
Seller shall (i) be responsible for any and all Claims arising
out of the production or sale of hydrocarbons from the Interests
(except gas imbalances) or the proper accounting or payment to
parties for their interests therein, insofar as such Claims
relate to periods of time prior to the Effective Time and (ii)
defend, indemnify, save, discharge, release and hold Purchaser
harmless from any and all such Claims. These Claims include but
are not limited to any and all valid overriding royalty, royalty
or net profit interest payments. Purchaser shall be responsible
for all Claims of these types insofar as they relate to periods
of time from and after the Effective Time and Purchaser shall
defend, indemnify, save, discharge, release and hold Seller
harmless therefrom.
(f) Any claim for indemnity under Subsections 21.01 (a) through 21.01
(e) above or under any other provision of this Agreement shall be
made by written notice from the party seeking indemnification
(the "Indemnified Party") to the party required to provide same
(the "Indemnifying Party'), together with a written description
of any third-party Claim against the Indemnified Party, stating
the nature and basis of such Claim and, if ascertainable, the
amount thereof. The Indemnifying Party shall have a period of
thirty (30) days after receipt of such notice within which to
respond thereto or, in the case of a third-party Claim which
requires a shorter time for response, then within such shorter
period as specified by the Indemnified Party in such notice (the
"Notice Period'). If the Indemnifying Party denies liability or
fails to respond to the notice within the Notice Period, the
Indemnified Party may defend or compromise the Claim as it deems
appropriate without prejudice to any of the Indemnified Party's
rights hereunder, with no further obligation to inform the
Indemnifying Party of the status of the Claim and no right of the
Indemnifying Party to approve or disapprove any actions taken in
connector therewith by the Indemnified Party. If the Indemnifying
Party accepts liability, it shall so notify the Indemnified Party
within the Notice Period and elect either (a) to undertake the
defense or compromise of such third-party Claim with counsel
selected by the Indemnifying Party and reasonably approved by the
Indemnified Party or (b) to instruct the Indemnified Party to
defend or compromise such Claim. If the Indemnifying Party
undertakes the defense or compromise of such third-party Claim,
the Indemnified Party shall be entitled, at its own expense, to
participate in such defense. No compromise or settlement of any
third party Claim shall be made without reasonable notice to the
Indemnified Party and, unless such compromise or settlement
includes a general release of the Indemnified Party in respect of
the matter with no admission of liability on the part of the
Indemnified Party and no constraints on the future conduct of its
business, without the prior written approval of the Indemnified
Party.
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21.02 EXTENSION AND APPLICATION OF INDEMNITIES: Each party's indemnity
obligations in this Agreement shall extend to the other and to the
other's parent, subsidiaries and affiliates and their present and former
directors, officers, employees, contractors and agents, and to each of
their heirs, executors, successors and assigns.
21.03 LIMITATION OF SELLER'S INDEMNITY: Seller shall not be required to
indemnify Purchaser or pay any other amount in connection with or with
respect to the transactions contemplated in this Agreement in any amount
exceeding, in the aggregate, the Sale Price.
21.04 SOLE AND EXCLUSIVE REMEDY: If the Closing occurs, the sole and
exclusive remedy of each of the Indemnified Parties with respect to the
purchase and sale of the Interests shall be pursuant to the express
provisions of this Agreement. If the Closing occurs, each of Purchaser
and Seller shall be deemed to have waived, to the fullest extent
permitted under applicable law, any right of contribution against Seller
or any of its affiliates or Purchaser or any of its affiliates,
respectively, and any and all rights, claims and causes of action it may
have against Seller or any of its affiliates or Purchaser or any of its
affiliates, respectively, arising under or based on any federal, state
or local statue, law, ordinance, rule or regulation or common law or
otherwise.
21.05 EXPRESS NEGLIGENCE APPLICABILITY: THE INDEMNIFICATION, RELEASE AND
ASSUMPTION PROVISIONS PROVIDED FOR IN THIS AGREEMENT SHALL BE APPLICABLE
WHETHER OR NOT THE LOSSES, COSTS, EXPENSES AND DAMAGES IN QUESTION AROSE
SOLELY OR IN PART FROM THE GROSS, ACTIVE, PASSIVE, CONCURRENT, SIMPLE OR
SOLE NEGLIGENCE, OR STRICT LIABILITY OR OTHER FAULT OF ANY INDEMNIFIED
PARTY OR ANY OTHER THEORY OF LIABILITY OR FAULT, WHETHER IN LAW (WHETHER
COMMON OR STATUTORY) OR EQUITY, (BUT NOT INCLUDING WILLFUL MISCONDUCT)
OF THE PARTY'S AGENTS, EMPLOYEES OR CONTRACTORS. PURCHASER AND SELLER
ACKNOWLEDGE THAT THIS STATEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE
RULE AND IS CONSPICUOUS.
21.06 NO LIABILITY FOR KNOWN BREACHES AND FACTS: Neither Seller nor Purchaser
shall have any obligation or liability under this Agreement or in
connection with or with respect to the transactions contemplated in this
Agreement for (i) any breach, misrepresentation or noncompliance with
respect to any representation, warranty, covenant or obligation, if such
breach, misrepresentation or noncompliance shall have been known by the
other party at or before the Closing, or (ii) any misrepresentation or
breach of warranty if such other party had knowledge of the relevant
facts at or before the Closing.
ARTICLE 22. PHYSICAL CONDITION OF THE INTERESTS:
22.01 USE OF THE INTERESTS: THE INTERESTS HAVE BEEN USED FOR OIL AND GAS
DRILLING AND PRODUCING OPERATIONS, RELATED OIL FIELD OPERATIONS AND
POSSIBLY FOR THE STORAGE AND DISPOSAL OF WASTE MATERIALS OR HAZARDOUS
SUBSTANCES. PHYSICAL CHANGES IN THE LAND MAY HAVE OCCURRED AS A RESULT
OF SUCH USES. THE INTERESTS ALSO MAY CONTAIN BURIED PIPELINES AND OTHER
EQUIPMENT, WHETHER OR NOT OF A SIMILAR NATURE, THE LOCATIONS OF WHICH
MAY NOT NOW BE KNOWN BY SELLER OR BE READILY APPARENT BY A PHYSICAL
INSPECTION OF THE PROPERTY. PURCHASER UNDERSTANDS THAT SELLER DOES NOT
HAVE THE REQUISITE INFORMATION WITH WHICH TO DETERMINE THE EXACT NATURE
OR CONDITION OF THE INTERESTS OR THE EFFECT ANY SUCH USE HAS HAD ON THE
PHYSICAL CONDITION OF THE INTERESTS.
22.02 PURCHASER'S INVESTIGATION AND LIABILITY: IN ACCORDANCE WITH SECTION 6.01
AND 6.02 OF THIS AGREEMENT, PURCHASER AGREES THAT PRIOR TO CLOSING THAT
IT WILL
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HAVE EITHER WAIVED THE OPPORTUNITY TO, OR WILL HAVE (A) EXAMINED THE
PROPERTIES AND SUCH MATERIALS AS IT HAS REQUESTED TO BE PROVIDED TO IT
BY SELLER, (B) DISCUSSED WITH REPRESENTATIVES OF SELLER SUCH MATERIALS
AND THE NATURE AND OPERATION OF THE INTERESTS AND (C) INVESTIGATED THE
CONDITION, INCLUDING SUBSURFACE CONDITION, OF THE REAL PROPERTY AND THE
CONDITION OF THE EQUIPMENT. PURCHASER WILL PROCEED TO CLOSING UNDER THIS
AGREEMENT ON THE BASIS OF ITS OWN INVESTIGATION OF THE PHYSICAL
CONDITION OF THE INTERESTS INCLUDING SUBSURFACE CONDITION AND PURCHASER
SHALL ACKNOWLEDGE THAT THE INTERESTS HAVE BEEN USED IN THE MANNER AND
FOR THE PURPOSES SET FORTH ABOVE AND THAT PHYSICAL CHANGES TO THE
INTERESTS MAY HAVE OCCURRED AS A RESULT OF SUCH USE AND IN PROCEEDING TO
CLOSING UNDER THIS AGREEMENT, PURCHASER SHALL HAVE RELIED SOLELY ON THE
EXPRESS REPRESENTATIONS (SOME OF WHICH REPRESENTATIONS TERMINATE AT THE
CLOSING) AND COVENANTS OF SELLER IN THIS AGREEMENT, ITS INDEPENDENT
INVESTIGATION OF, AND JUDGMENT WITH RESPECT TO, THE EQUIPMENT AND THE
OTHER INTERESTS AND THE ADVICE OF ITS OWN LEGAL, TAX, ECONOMIC,
ENVIRONMENTAL, ENGINEERING, GEOLOGICAL AND GEOPHYSICAL ADVISORS AND NOT
ON ANY COMMENTS OR STATEMENTS OF ANY REPRESENTATIVES OF, OR CONSULTANTS
OR ADVISORS ENGAGED BY SELLER AND (v) LOW LEVELS OF NATURALLY OCCURRING
RADIOACTIVE MATERIAL (NORM) AND MAN-MADE MATERIAL FIBERS (MMMF) MAY BE
PRESENT AT SOME LOCATIONS. PURCHASER ACKNOWLEDGES THAT NORM IS A NATURAL
PHENOMENON ASSOCIATED WITH MANY OIL FIELDS IN THE U.S. AND THROUGHOUT
THE WORLD. PURCHASER SHOULD MAKE ITS OWN DETERMINATION OF THIS
PHENOMENON AND OTHER CONDITIONS. SELLER DISCLAIMS ANY LIABILITY ARISING
OUT OF OR IN CONNECTION WITH ANY PRESENCE OF NORM OR MMMF ON THE
PROPERTY AND ON THE CLOSING DATE, EXCEPT AS OTHERWISE PROVIDED
HEREUNDER, PURCHASER SHALL ASSUME THE RISK THAT THE INTERESTS MAY
CONTAIN WASTES OR CONTAMINANTS AND THAT ADVERSE PHYSICAL CONDITIONS,
INCLUDING THE PRESENCE OF WASTES OR CONTAMINANTS, MAY NOT HAVE BEEN
REVEALED BY PURCHASER'S INVESTIGATION. ON THE CLOSING DATE, ALL
RESPONSIBILITY AND LIABILITY RELATED TO DISPOSAL, SPILLS, WASTE, OR
CONTAMINATION ON AND BELOW THE INTERESTS SHALL BE TRANSFERRED FROM
SELLER TO PURCHASER AND, EXCEPT AS PROVIDED IN ARTICLES 20 AND 21,
PURCHASER SHALL INDEMNIFY, DEFEND, SAVE, DISCHARGE, RELEASE AND HOLD
SELLER HARMLESS THEREFROM. SELLER AND PURCHASER AGREE THAT THE
PROVISIONS OF THIS ARTICLE 22 SHALL SURVIVE THE CLOSING.
ARTICLE 23. LEASE MAINTENANCE CONDITIONS
Purchaser and Seller acknowledge that certain conditions may exist on the
Interests that do not fall under the definition of Adverse Environmental
Conditions, but that could be reasonably determined to require an expenditure
to correct the condition (hereinafter "Lease Maintenance Conditions").
Purchaser shall advise Seller in writing of any Lease Maintenance Conditions on
the Interests which in the aggregate exceed $250,000 and provide evidence
thereof not later than fifteen (15) days prior to the Closing. After receipt of
such notice, Seller and Purchaser shall agree (not later than seven (7) days
prior to the Closing) to adjust the Sale Price in an amount mutually agreeable
to the parties, provided, however, such adjustment shall not exceed $1,700,000
in the aggregate. If the parties cannot agree to an adjustment amount for a
property, the affected property shall be excluded from the sale and the Sale
Price adjusted by the value allocated thereto in Exhibit "B".
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ARTICLE 24. FURTHER ASSURANCES:
24.01 PERFORMANCE OF OBLIGATIONS: Seller and Purchaser shall use all
reasonable efforts to take, or cause to be taken, all action and to do,
or cause to be done, all things necessary, proper or advisable to carry
out all of their respective obligations under this Agreement and to
consummate and make effective the purchase and sale of the Interests
pursuant to this Agreement.
24.02 FURTHER CONVEYANCES AND ASSUMPTIONS: After the Closing Date, Seller and
Purchaser shall execute, acknowledge and deliver all such further
conveyances, transfer orders, notices, assumptions and releases and such
other instruments, and shall take such further actors, as may be
necessary or appropriate to assure fully to Purchaser and its successors
or assigns all of the Interests and to assure fully to Seller and its
successors and assigns the assumptions of liabilities and obligations of
Purchaser.
ARTICLE 25. NOTICES
All notices and consents to be given hereunder shall be in writing and
shall be deemed to have been duly given if delivered personally; faxed (i.e.,
sent by facsimile) with receipt acknowledged; mailed by certified or registered
mail, return receipt requested, postage prepaid; or delivered by a recognized
commercial courier to the party at the address set forth below or such other
address as any party shall have designated for itself by ten (10) days' prior
notice to the other party.
Notice is deemed to have been duly received on the day personally
delivered; on the day after it is sent by fax, four (4) days after mailing by
certified or registered mail and the day after it is received from a recognized
commercial courier.
Seller:
Mobil Exploration & Producing U.S. Inc.
Attn: ▇. ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
FAX No. (▇▇▇) ▇▇▇-▇▇▇▇
Purchaser:
Titan Resources, L.P.
Attn: ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
FAX No. (▇▇▇) ▇▇▇-▇▇▇▇
ARTICLE 26. WAIVER OF DTPA
26.01 WAIVER OF TEXAS DTPA: SELLER AND PURCHASER CERTIFY THAT THEY ARE NOT
"CONSUMERS" WITHIN THE MEANING OF THE TEXAS DECEPTIVE TRADE PRACTICES
CONSUMER PROTECTION ACT, SUBCHAPTER E OF CHAPTER 17, SECTIONS 17.41, ET
SEQ., OF VERNON'S TEXAS CODE ANNOTATED, BUSINESS AND COMMERCE CODE, AS
AMENDED (THE "DTPA"), IF THE INTERESTS ARE LOCATED IN TEXAS. PURCHASER
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HEREBY WAIVES ITS RIGHTS UNDER THE DTPA, A LAW THAT GIVES CONSUMERS
SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN -ATTORNEY OF
ITS OWN SELECTION, PURCHASER VOLUNTARILY CONSENTS TO THIS WAIVER. TO
EVIDENCE ITS ABILITY TO GRANT SUCH WAIVER, PURCHASER REPRESENTS TO
SELLER THAT (I) IT IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING
POSITION; (II) IT IS REPRESENTED BY LEGAL COUNSEL IN ENTERING INTO THIS
AGREEMENT; AND (111) SUCH LEGAL COUNSEL WAS NOT DIRECTLY OR INDIRECTLY
IDENTIFIED, SUGGESTED, OR SELECTED BY SELLER OR AN AGENT OF SELLER.
26.02 WAIVER OF COMPARABLE RIGHTS: PURCHASER WAIVES ANY COMPARABLE PROVISION
OF THE LAW OF THE STATE WHERE THE INTERESTS ARE LOCATED.
26.03 PURCHASER'S ACKNOWLEDGMENT: PURCHASER ACKNOWLEDGES THAT THE WAIVERS IN
THIS ARTICLE 26 ARE CONSPICUOUS.
ARTICLE 27. MISCELLANEOUS
27.01 ENTIRE AGREEMENT: This Agreement, together with any confidentiality
agreements relating to the Interests previously executed by Purchaser,
constitute the entire agreement between the parties and supersede all
prior agreements, understandings, negotiations and discussions, whether
oral or written, of the parties. No supplement, amendment, alteration,
modification, waiver or termination of this Agreement shall be binding
unless executed in writing by the parties hereto after the execution of
this Agreement. The provisions of Section 6.02 and Articles 18, 26 and
this Article 27 shall survive any termination of this Agreement.
27.02 SEVERABILITY: If any covenant, condition, or provision contained herein
is held to be invalid by a court of competent jurisdiction, the
invalidity of any such covenant, condition or provision shall in no way
affect any other covenant, condition or provision contained herein;
provided, however, that any such invalidity does not materially
prejudice either Purchaser or Seller in its respective rights and
obligations contained in the valid covenants, conditions, and provisions
of this Agreement.
27.03 WAIVER: No waiver of any of the provisions of this Agreement shall
constitute a waiver of any other provisions hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
27.04 CONSTRUCTION OF AMBIGUITY: In the event of any ambiguity in any of the
terms or conditions of this Agreement, including any exhibits thereto
and whether or not placed of record, such ambiguity shall not be
construed for or against any party hereto on the basis that such party
did or did not author the same.
27.05 CAPTIONS: The captions in this Agreement are for convenience only and
shall not be considered a part of or affect the construction or
interpretation of any provisions of this Agreement.
27.06 GOVERNING LAW: This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Texas, without reference to the
conflict of laws or principles applied by the courts of the State of
Texas. All assignments and instruments of conveyance executed in
accordance with this Agreement shall be governed by and interpreted and
enforced in accordance with the laws of the state where the Interests
conveyed thereby are located.
27.07 WAIVER OF JURY TRIAL: SELLER AND PURCHASER DO HEREBY IRREVOCABLY WAIVE.
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO A TRIAL BY
JURY IN ANY ACTION, SUIT OR OTHER LEGAL PROCEEDING BASED UPON, ARISING
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OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
27.08 LIMITATION OF LIABILITY: Seller and Purchaser do hereby covenant and
agree that the recovery by either party hereto of any damages suffered
or incurred by it as a result of any breach by the other party of any
provision of this Agreement shall be limited to the actual damages
suffered or incurred by the non-breaching party as a result of the
breach by the breaching party and in no event shall the breaching party
be liable to the non-breaching party for any indirect, consequential,
exemplary or punitive damages suffered or incurred by the non-breaching
party as a result of the breach by the breaching party. This Section
shall not limit Seller's right to retain the Performance Deposit as
liquidated damages under Section 5.01.
27.09 PUBLICITY: Seller and Purchaser shall consult with each other with
regard to all publicity and other releases at or prior to the Closing
concerning this Agreement and the transactions contemplated hereby and,
except as required by applicable law or the applicable rules or
regulations of any governmental body or stock exchange, neither party
shall issue any publicity or other release without the prior written
consent of the other party.
27.10 USE OF SELLER'S NAME: As soon as practicable after the Closing,
Purchaser shall remove or cause to be removed the names and marks used
by Seller and all variations and derivations thereof and logos relating
thereto from the Interests and shall not thereafter make any use
whatsoever of those names, marks and logos.
27.11 COUNTERPARTS: This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
27.12 ASSIGNMENT: This Agreement may not be assigned by Purchaser without the
prior written consent of Seller, which consent may be withheld in its
sole discretion. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective permitted successors
and assigns. All future conveyances of all or any portion of the
Interests shall expressly recognize and perpetuate the rights and
obligations set out in this Agreement.
27.13 COSTS AND EXPENSES: Except as otherwise expressly provided herein, each
party shall bear and pay its own costs and expenses, including, but not
limited to attorneys fees, incurred in connection with this transaction.
27.14 JOINT VENTURE, PARTNERSHIP AND AGENCY: Nothing contained in this
Agreement shall be deemed to create a joint venture, partnership, tax
partnership or agency relationship between the parties.
27.15 CONFIDENTIALITY: Prior to the Closing, Seller and Purchaser to the
extent permitted by law, shall keep confidential all information
received from the other unless such information is readily ascertainable
from public or published information or trade sources or is received
from a third-party having no obligation of confidentiality with respect
to such information. In the event of the termination of this Agreement,
Seller and Purchaser shall return to the other or destroy all
information received from the other and, to the extent permitted by law,
keep confidential and not use any confidential information obtained
pursuant to this Agreement.
27.16 SALE OF INTERESTS LOCATED ON INDIAN OR FEDERAL LANDS: If the Interests
are located on Indian or Federal Lands, Purchaser agrees to obtain
approval from the appropriate federal and/or state agencies as soon as
practicable after the Closing and to provide Seller with a copy thereof.
Purchaser shall indemnify, defend, save, discharge, release and hold
Seller harmless from and against any liability resulting from
Purchaser's failure to abide by this provision.
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27.17 MEDIATION: If a dispute arises out of or relates to this Agreement, or
the breach thereof, and if the dispute cannot be settled through
negotiation, the parties agree first to try in good faith to settle the
dispute by mediation administered by the American Arbitration
Association under its Commercial Mediation Rules (or such other form of
mediation as is reasonably acceptable to both parties) before resorting
to arbitration, litigation, or some other dispute resolution procedure.
The mediator selected to resolve any dispute hereunder shall be
acceptable to both parties. If the parties cannot agree on a mediator,
then they shall make application to the Administrative Judge of the
State District Courts of Dallas County, Texas for appointment of a
mediator. Each parry shall bear its own attorneys' fees in connection
with any mediation and the cost of the mediation shall be shared equally
by both parties.
27.18 ARBITRATION: If a dispute arises out of or relates to this Agreement,
or the breach thereof, and if the dispute cannot be settled by
mediation, then the parties agree that the dispute shall be settled by
binding arbitration before one (1) mutually acceptable arbitrator having
experience in the oil and gas industry with minimal depositions,
expedited discovery,~and in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, and judgment upon the
award rendered by the arbitrator may be entered in any court having
jurisdiction. The costs of the arbitration shall be shared equally by
both parties, and each party shall pay its own attorneys' fees.
27.19 SUSPENDED FUNDS: As soon as practicable after the Closing, Seller shall
provide to Purchaser a listing showing all proceeds from production
attributable to the Interests that are held in suspense and shall
transfer to Purchaser all such suspended proceeds (without reduction to
any amounts owed or claimed to be owed to Seller). Purchaser shall be
responsible for the proper distribution of all suspended proceeds to the
parties lawfully entitled to them, and Purchaser hereby agrees to
indemnify, defend, and hold harmless Seller from and against any and all
claims, liabilities, losses, costs and expenses (including, without
limitation, court cost and reasonable attorney fees) arising out of or
relating to Purchaser's erroneous distribution of such suspended
proceeds.
27.20 DISCLOSURE OF INFORMATION: Seller agrees (i) to provide Purchaser with
Disclosure Information (as defined below) for a 36-month period ending
no later than November 30,1996 and (ii) to reasonably cooperate with and
assist Purchaser in an audit of the Interests which audit shall be
performed at no cost to Seller. As used herein, "Disclosure Information"
means, as to the Interests, the net revenues, direct operating expenses
(including production and property taxes), exploratory and development
costs and production volume disclosures required under Statement of
Financial Accounting Standards No. 69 and balance sheet and other income
statement data in Seller's possession that Purchaser reasonably believes
are required to be included in any report filed by Purchaser with the
Securities and Exchange Commission. Purchaser shall complete the audit
no later than December 31,1996.
27.21 SEISMIC DATA: SELLER, though its Broker, shall license to Purchaser the
right to use seismic data as described on Exhibit "E", (subject to any
third-party restrictions) for the allocated amount as shown on Exhibit
"B". Purchaser will be furnished paper copies of 2-D seismic lines at no
reproduction expense to Purchaser; however, Purchaser will be required
to pay any other reproduction expense or reprocessing charges directly
to Seller's Broker.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above set forth.
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SELLER:
ATTEST: MOBIL PRODUCING TEXAS & NEW MEXICO INC.
By: /s/ ▇.▇. ▇▇▇▇▇▇▇▇▇ By: /s/ ▇.▇. ▇▇▇▇▇▇
------------------------------- ----------------------------------------
Assistant Secretary Attorney-in-fact
By: /s/ ▇.▇. ▇▇▇▇▇▇▇▇
----------------------------------------
Attorney-in-fact
PURCHASER:
TITAN RESOURCES, L.P. by and through the
General Partner TITAN RESOURCES I, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------------------
Title: PRESIDENT
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