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EXHIBIT 10.4
PURCHASE AND SALE AGREEMENT
BETWEEN
▇▇▇▇▇▇▇ PETROLEUM LLC
AND
▇▇▇▇▇▇▇▇ ENERGY, INC.
DATED FEBRUARY 2, 1999
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TABLE OF CONTENTS
ARTICLE 1. PURCHASE AND SALE
1.1 The Properties.........................................................................1
ARTICLE 2. CONSIDERATION
2.1 Consideration..........................................................................3
2.2 Adjustments to Purchase Price..........................................................3
2.3 Manner of Payment......................................................................4
2.4 Like Kind Exchange Option..............................................................4
ARTICLE 3. REPRESENTATIONS OF SELLER
3.1 Existence..............................................................................5
3.2 Authorization..........................................................................5
3.3 Power..................................................................................5
3.4 Brokers................................................................................5
3.5 Foreign Person.........................................................................5
3.6 Litigation.............................................................................5
3.7 Liens..................................................................................6
3.8 Third-Party Rights.....................................................................6
3.9 Permits................................................................................6
3.10 Compliance with Law....................................................................6
3.11 Operator Payments......................................................................6
ARTICLE 4. REPRESENTATIONS OF BUYER
4.1 Existence..............................................................................6
4.2 Authorization..........................................................................7
4.3 Power..................................................................................7
4.4 Brokers................................................................................7
4.5 Further Distribution...................................................................7
ARTICLE 5. DISCLAIMER OF CERTAIN WARRANTIES
5.1 Limitation and Disclaimer of Representations and Warranties............................7
ARTICLE 6. CONSENTS; PREFERENTIAL RIGHTS AND RISK OF LOSS
6.1 Consents; Preferential Rights..........................................................8
6.2 Risk of Loss...........................................................................9
ARTICLE 7. COVENANTS OF SELLER
7.1 Access to Records......................................................................9
7.2 Operations.............................................................................9
7.3 Permissions...........................................................................10
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ARTICLE 8. COVENANTS OF BUYER
8.1 Return of Data........................................................................10
ARTICLE 9. SELLER'S CONDITIONS OF CLOSING
9.1 Representations.......................................................................11
9.2 Performance...........................................................................11
9.3 Pending Matters.......................................................................11
9.4 Resolution............................................................................11
9.5 Consent and Release of Liens..........................................................11
9.6 Officer's Certificate.................................................................11
9.7 Board Approval........................................................................11
ARTICLE 10. BUYER'S CONDITIONS OF CLOSING
10.1 Representations.......................................................................11
10.2 Performance...........................................................................12
10.3 Pending Matters.......................................................................12
10.4 Resolution............................................................................12
10.5 Officer's Certificate.................................................................12
ARTICLE 11. CLOSING
11.1 Time and Place of Closing.............................................................12
11.2 Closing Obligations...................................................................12
11.3 Further Assurances....................................................................13
ARTICLE 12. ADDITIONAL AGREEMENTS
12.1 Calculation of Adjusted Purchase Price................................................14
12.2 Receipts and Credits..................................................................14
12.3 Records...............................................................................15
12.4 Notices...............................................................................15
12.5 Recording Documents...................................................................16
12.6 Right of Termination..................................................................16
12.7 Sales Taxes...........................................................................16
12.8 Taxes.................................................................................16
ARTICLE 13. ASSUMPTION OF OBLIGATIONS; INDEMNIFICATION
13.1 Definitions...........................................................................16
13.2 Assumption of Contracts...............................................................16
13.3 Imbalances............................................................................17
13.4 Seller's General Indemnity............................................................17
13.5 Buyer's General Indemnity.............................................................17
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ARTICLE 14. ARBITRATION
14.1 Selection of Arbitrators..............................................................18
14.2 Determination.........................................................................18
14.3 Decision Binding......................................................................18
ARTICLE 15. PHYSICAL CONDITION OF THE PROPERTIES
15.1 Prior Use of Properties...............................................................18
15.2 Assumption of Properties in Present Condition.........................................19
ARTICLE 16. MISCELLANEOUS
16.1 Amendment.............................................................................19
16.2 Gender................................................................................19
16.3 Entire Agreement......................................................................20
16.4 Successors and Assigns................................................................20
16.5 Survivability.........................................................................20
16.6 Severability..........................................................................20
16.7 Governing Law.........................................................................20
16.8 Assignability.........................................................................20
16.9 Counterparts..........................................................................20
16.10 DPTA Waiver-Waiver of Consumer Rights.................................................20
16.11 Termination...........................................................................21
16.12 Press Release.........................................................................21
16.13 Amended Exhibits......................................................................21
Exhibit "A" - Schedule of Leases
Exhibit "A-1" - Schedule of ▇▇▇▇▇
Exhibit "A-1A" - Allocated Values
Exhibit "A-1B" - Candy Draw Field
Exhibit "B" - Assignment and ▇▇▇▇ of Sale
Exhibit "C" - Deed
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PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement ("Agreement") dated as of February 2,
1999, is between ▇▇▇▇▇▇▇ PETROLEUM LLC, a Montana limited liability company,
whose address is ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("Buyer"), and
▇▇▇▇▇▇▇▇ Energy, Inc., a Delaware corporation, whose address is ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ("Seller").
WHEREAS, Buyer sold, assigned, transferred and conveyed certain interests to
Seller in consummating the transaction contemplated by a Purchase and Sale
Agreement dated July 2, 1997 by and between the parties ("1997 PSA");
WHEREAS, Buyer desires to enter into an agreement to acquire those interests
and have those interests reassigned to itself, as well as interests Seller
acquired by the terms of the Acquisition and Exploration Agreement effective
July 1, 1997 by and between the parties ("A&E Agreement");
WHEREAS, Seller desires to sell and reassign all those interests it acquired in
consummating the transaction contemplated by the 1997 PSA, together with all
those interests it acquired through the A&E Agreement, except for Seller's
interest in the Candy Draw Field in ▇▇▇▇▇▇▇▇ County Wyoming ("Candy Draw"), and
Seller further desires to acquire all of Buyer's interest in Candy Draw; and
WHEREAS, Buyer agrees to exchange, transfer and convey its interest in Candy
Draw to Seller.
In consideration of the mutual covenants and agreements contained herein, the
benefits to be derived by each party hereunder, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Seller and Buyer agree as follows:
ARTICLE 1. PURCHASE AND SALE
1.1 The Properties. Subject to the terms and conditions of this
Agreement, Seller agrees to sell and convey to Buyer, and Buyer agrees to
purchase from Seller, but effective as of 11:59 p.m. December 31, 1998, at the
location of the respective Properties (the "Effective Time") all of Seller's
right, title, and interest in and to the following, less and except the Excluded
Property (defined below):
(a) All oil, gas and/or other mineral properties, rights and estates
of every kind and nature and wherever located, including, without limitation,
all oil, gas and/or other mineral leases and estates, leasehold estates and
interests, all mineral, royalty, overriding royalty, production payment,
reversionary, net profits, contractual leasehold and other similar rights,
estates and interests described on Exhibit "A" attached hereto (the "Leases")
covering the lands described on Exhibit "A" attached hereto (together with all
other lands covered by the Leases in which Seller owns an interest, the
"Lands"), together with all the property and rights incident thereto,
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including all rights in any pooled, unitized or communitized acreage by virtue
of the Properties being a part thereof, all production from the pool or unit
allocated to any such Properties, and all interests in any ▇▇▇▇▇ within the pool
or unit associated with the Properties;
(b) All producing, nonproducing, shut-in and abandoned oil and gas
▇▇▇▇▇, salt water disposal ▇▇▇▇▇, injection ▇▇▇▇▇, and water ▇▇▇▇▇ located on
the Leases or lands pooled or unitized therewith, including, without limitation,
the ▇▇▇▇▇ described on Exhibit "A-1" attached hereto, and all personal property,
equipment, fixtures, compressors, pipelines, gathering, disposal,
transportation, storage and treating facilities and other improvements located
on, related to, appurtenant to or used or useful in connection with the Leases
and Lands;
(c) To the extent transferable by Seller, all contracts and
contractual rights and interests, including, without limitation, all farmout and
farmin agreements, operating agreements, production sales and purchase
contracts, saltwater disposal agreements, surface leases, division and transfer
orders, licenses and other contracts or agreements covering or affecting any or
all of the interests described or referred to above (the "Contracts");
(d) To the extent transferable, all easements, rights-of-way, surface
leases, fee estates, licenses, authorizations, permits, and similar rights and
interests applicable to, or used or useful in connection with, any or all of the
above-described interests;
(e) All proprietary data, including without limitation, all
geophysical, seismic, geologic and other technical data and interpretations
thereof, and to the extent transferable, all non-proprietary data and
information covering, relating to or used or useful in connection with any or
all of the above-described interests; provided that Buyer shall grant to Seller
and Seller shall retain and be entitled to a license to possess and use (but not
sell) all of the seismic data attributable to the Properties acquired by through
and under the A&E Agreement or which existed on the date of the 1997 PSA, which
license shall be upon the following additional terms:
(i) the license shall be nonexclusive;
(ii) Seller may use the data for all purposes, including
showing such data to third parties for any reason (other than sale) upon the
terms set forth in clause (vi) below, without Buyer's consent;
(iii) Buyer makes no representation or warranty whatsoever
with respect to the data and any reliance on interpretations derived from such
data shall be at the sole risk of Seller;
(iv) Buyer retains full ownership of the data;
(v) If Seller requires copies of the data, such copies
shall be made at Seller's sole expense; and
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(vi) Seller agrees that the data, and copies thereof, shall
be for Seller's own internal use only, and that such data shall not be sold,
treated or otherwise made available to other parties except on the following
conditions: (A) the data may be made available to a consultant for the purpose
of performing an interpretation for the Seller only, and upon completion of the
interpretation, all data must be returned to the Seller, and (B) Seller shall
have the right to reveal the data and any interpretations thereof to third
parties in an effort to make a bona fide contract with the third party relating
to exploration or drilling operations, but in no case shall the third party be
allowed to copy the data or have it in its possession outside of Seller's office
except for purposes of having the data reprocessed so long as the company
reprocessing the data agrees to keep same confidential.
(f) All oil, condensate, natural gas, natural gas liquids, other gases
(including "CO2") and other minerals produced after the Effective Time
attributable to the Properties;
(g) The Records as defined in Section 12.3; and
(h) All other property of every kind and description, real, personal
or mixed, which Seller acquired as the result of or pursuant to either the 1997
PSA or the A&E Agreement.
Seller specifically excludes from this transaction all of Seller's
interest in the Candy Draw Field described in Exhibit A-1B and the seismic
license(s) described in paragraph (e) above ("Excluded Property").
All of the above real and personal properties, rights, titles, and
interests described in subparagraphs (a) through (h) above, subject to the
limitations and terms expressly set forth herein, but excluding the Excluded
Property, are hereinafter collectively called the "Properties" or, individually,
a "Property".
ARTICLE 2. CONSIDERATION
2.1 Consideration. As consideration for this Agreement and the
transfer of the Properties at Closing Buyer shall (1) assign, transfer and
convey to Seller all of Buyer's interest of every kind and nature in the
Properties described on Exhibit "A-1B;" being Candy Draw Field, (2) except as
otherwise provided in this Agreement, forgo enforcement or collection of any
accrued obligation of Seller to Buyer under the (i) 1997 PSA,(ii) the A&E
Agreement, or (iii) attributable to the Properties, and (3) Buyer shall pay to
Seller at Closing the sum of $14,150,000 (the "Purchase Price"), as may be
adjusted pursuant to this Agreement (the "Adjusted Purchase Price"). Buyer has
allocated the Purchase Price as shown on Exhibit "A-1A".
2.2 Adjustments to Purchase Price. The Purchase Price shall be
adjusted by the following:
(a) The Purchase Price shall be increased by (i) the contract value of
the Seller's
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interest in the oil, gas and other minerals in storage in tanks (above the
pipeline connection if applicable), net of applicable taxes, at the Effective
Time; (ii) any amounts required under this Agreement and (iii) as otherwise
agreed upon by the Seller and Buyer.
(b) The Purchase Price shall be decreased by an amount equal to the
sum of the following amounts (determined without duplication and on an accrual
basis in accordance with generally accepted accounting principles consistently
applied):
(i) The amount of all proceeds received by Seller prior to the
Closing Date attributable to the Properties and that are attributable to the
time after the Effective Time;
(ii) An amount equal to all unpaid, ad valorem, property,
production, severance, and similar taxes and assessments (but not including
income taxes) based upon or measured by the ownership of property or the
production of hydrocarbons or the receipt of proceeds therefrom accruing to the
Seller's interest in the Properties after the effective time of the 1997 PSA and
prior to the Effective Time, which to the extent not actually assessed shall be
computed based upon such taxes assessed against the Seller's interest in the
Properties for the preceding calendar year or, if such taxes are assessed on
other than a calendar year basis, for the tax-related year last ended;
(iii) Any other amounts required under this Agreement and as
otherwise agreed upon by Seller and Buyer.
2.3 Manner of Payment. At Closing, except as provided in the following
Section 2.4, Buyer shall pay Seller or Seller's designee the Adjusted Purchase
Price by wire transfer of immediately available funds as follows:
Account: ▇▇▇▇▇▇▇▇ Energy, Inc.
Account No. ▇▇-▇▇▇-▇▇▇
Banker Trust Company
ABA Routing No: ▇▇▇▇▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
2.4. Like Kind Exchange Option. Seller and Buyer hereby agree that
Seller, in lieu of the sale of the Properties to Buyer for the cash
consideration provided herein, shall have the right at any time prior to Closing
to assign all or a portion of its rights under this Agreement to a qualified
intermediary in order to accomplish the transactions contemplated hereby in a
manner that will comply, either in whole or in part, with the requirements of a
like kind exchange pursuant to Section 1031 of the Internal Revenue Code of
1986, as amended ("Code"). In the event Seller assigns its rights under this
Agreement pursuant to this Section 2.4, Seller agrees to notify Buyer in writing
of such assignment before Closing. If Seller assigns its rights under this
Agreement, Buyer agrees to (i) consent to Seller's assignment of its rights in
this Agreement, (ii) deposit the Adjusted Purchase Price with the qualified
escrow or qualified trust account
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designated by Seller at Closing, and (iii) take such further actions, at
Seller's cost, as are reasonably required to effectuate the transactions
contemplated hereby pursuant to Code Section 1031, but in so acting Buyer shall
have no liability to any party in connection with such actions. All risks and
costs associated with any like kind exchange and compliance thereof with
applicable laws, rules and regulations shall be the sole responsibility of
Seller, and Seller agrees to indemnify and hold Buyer harmless from and against
all costs, expenses, liabilities and obligations which arise as a result of
Buyer's agreement contained in this Section 2.4.
ARTICLE 3. REPRESENTATIONS OF SELLER
Seller represents and warrants to Buyer as follows:
3.1 Existence. Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware, and is
duly qualified to do business in each State where its business operations
require such qualification.
3.2 Authorization. Subject to and conditioned upon approval by
Seller's Board of Directors as provided in Section 9.7, Seller has all authority
necessary to enter into this Agreement and to perform all its obligations
hereunder. This Agreement has been duly executed and delivered on Seller's
behalf, and at the Closing all documents and instruments required hereunder to
be executed and delivered by Seller will have been duly executed and delivered.
This Agreement, and all such documents and instruments shall constitute legal,
valid, and binding obligations of Seller enforceable in accordance with their
respective terms.
3.3 Power. Subject to preferential rights and restrictions on
assignment of the type typically found in the oil and gas industry, and to
rights to consent by, required notices to, and filings with or other actions by
governmental entities, Seller's execution, delivery, and performance of this
Agreement and the transactions contemplated hereby will not: (i) violate or
conflict with any provision of its articles of incorporation, bylaws,
regulations, or other governing documents; (ii) to the best of Seller's
knowledge, 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) to the best
of Seller's knowledge, violate or conflict with any applicable judgment, decree,
order, permit, law, rule, or regulation.
3.4 Brokers. Seller has incurred no liability, contingent or
otherwise, for broker's or finder's fees in respect of this transaction, for
which Buyer shall have any responsibility, whatsoever.
3.5 Foreign Person. Seller is not a "foreign person" within the
meaning of Sections 1445 and 7701 of the Internal Revenue Code of 1986, as
amended (the "Code") (i.e. Seller is not a nonresident alien, foreign
corporation, foreign partnership, foreign trust, or foreign estate as those
terms are defined in the Code and any regulations promulgated thereunder).
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3.6 Litigation. There is no suit, claim, action, or other proceeding,
pending or, to Seller's best knowledge, threatened, before any court or
governmental agency as of the date of this Agreement that relates to the
Properties. Seller shall promptly notify Buyer of any such proceeding arising
prior to Closing.
3.7 Liens. Except as disclosed on Schedule 3.7 attached hereto,
Seller's interest in the Properties is not subject to any liens, security
interests or mortgage of any kind or nature.
3.8 Third Party Rights. Except as reflected on Exhibit "A-1" attached
hereto, there are no (i) reversionary interests, conversion rights, back-in
interests, royalties, overriding royalties, production payments, claims or other
burdens on or against the Properties' production held by third parties which
were created by Seller without the knowledge of Buyer and outside the scope of
the 1997 PSA and the A&E Agreement and which affect Seller's interests in the
Properties, or (ii) preferential rights of purchase, consent rights or other
rights in third person created by Seller without the knowledge of Buyer and
outside the scope of the 1997 PSA and the A&E Agreement which affect Seller's
interest in the Properties.
3.9 Permits. To the best of Seller's knowledge and belief, Seller
possesses all material licenses, permits, certificates, order, approvals and
authorizations necessary or appropriate to own its interest in the Properties
and to carry on its business as now conducted.
3.10 Compliance with Law. To the best of Seller's knowledge and
belief, Seller is in material compliance with all laws, ordinances, rules,
regulations and orders applicable to its interest in the Properties, including,
without limitation, all ordinances, rules, regulations and orders, and Seller
has not received any notice of any claimed noncompliance therewith. To the best
of Seller's knowledge and belief, Seller is not aware of any facts, conditions
or circumstances in connection with, related to or associated with the
Properties that could reasonably be expected to give rise to any claim or
assertion that Seller, the Properties or the ownership or operation of any
thereof is not in material compliance with any applicable law, rule, regulation,
ordinance, or order of any governmental authority or with any term or conditions
of any applicable permit, license, approval, consent, certificate or other
authorization.
3.11 Operator Payments. Seller has paid all its accrued obligations
and complied with all of its other obligations with respect to those portions of
the Properties operated by operators other than the Seller, or Buyer.
ARTICLE 4. REPRESENTATIONS OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 Existence. Buyer is a limited liability company duly organized,
validly existing, and in good standing under the laws of the State of Montana
and is duly qualified to do business in each State where its business operations
require such qualification.
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4.2 Authorization. Buyer has all authority necessary to enter into
this Agreement and to perform all its obligations hereunder. This Agreement has
been duly executed and delivered on Buyer's behalf, and at the Closing all
documents and instruments required hereunder to be executed and delivered by
Buyer will have been duly executed and delivered. This Agreement and all such
documents and instruments shall constitute legal, valid, and binding obligations
of Buyer enforceable in accordance with their respective terms.
4.3 Power. Buyer's execution, delivery, and performance of this
Agreement and the transactions contemplated hereby will not: (i) violate or
conflict with any provision of its articles of organization, operating
agreement, or other governing documents; (ii) to the best of Buyer's knowledge,
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) to the best of Buyer's
knowledge, violate or conflict with any applicable judgment, decree, order,
permit, law, rule, or regulation.
4.4 Brokers. Buyer has incurred no liability, contingent or otherwise,
for broker's or finder's fees in respect of this transaction, for which Seller
shall have any responsibility whatsoever.
4.5 Further Distribution. Buyer (i) is acquiring an interest in the
Properties for its own account and without a view to the distribution thereof,
within the meaning of the Securities Act of 1933, as amended; and (ii) has such
knowledge and experience in business, financial, and oil and gas matters that it
is capable of evaluation of the merits and risks of entering into and of
carrying out its obligations in connection with the acquisition of an interest
in the Properties in the manner contemplated herein.
ARTICLE 5. DISCLAIMER OF CERTAIN WARRANTIES
5.1 Limitation and Disclaimer of Representations and Warranties. THE
EXPRESS REPRESENTATIONS AND WARRANTIES OF SELLER CONTAINED IN THIS AGREEMENT ARE
EXCLUSIVE AND ARE IN LIEU OF ALL OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS,
IMPLIED, STATUTORY, OR OTHERWISE. THE REPRESENTATIONS AND WARRANTIES CONTAINED
HEREIN SHALL TERMINATE IN ALL RESPECTS AT CLOSING, EXCEPT FOR ARTICLES 3.11,
13.4, 13.5 AND AS OTHERWISE SET FORTH IN THE ASSIGNMENT AND ▇▇▇▇ OF SALE AND ANY
DEED DELIVERED AT CLOSING. ANY ASSIGNMENT AND ▇▇▇▇ OF SALE OR OTHER CONVEYANCE
EXECUTED AND DELIVERED PURSUANT HERETO SHALL BE: (a) WITHOUT ANY WARRANTY OR
REPRESENTATION OF TITLE, EITHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, EXCEPT
THAT SELLER WARRANTS TITLE TO THE PROPERTIES AS TO ANY CLAIMS BROUGHT BY,
THROUGH OR UNDER SELLER BUT NOT OTHERWISE; (b) WITHOUT ANY EXPRESS,
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IMPLIED, STATUTORY OR OTHER WARRANTY OR REPRESENTATION AS TO THE CONDITION,
QUANTITY, QUALITY, FITNESS FOR A PARTICULAR PURPOSE, CONFORMITY TO MODELS OR
SAMPLES OF MATERIALS OR MERCHANTABILITY OF ANY OF THE PROPERTIES OR THEIR
FITNESS FOR ANY PURPOSE; AND (c) WITHOUT ANY OTHER EXPRESS, IMPLIED, STATUTORY
OR OTHER WARRANTY OR REPRESENTATION WHATSOEVER. BY CLOSING BUYER SHALL HAVE
INSPECTED OR WAIVED ITS RIGHT TO INSPECT THE RECORDS AND THE PROPERTIES FOR ALL
PURPOSES AND SATISFIED ITSELF AS TO THE PHYSICAL AND ENVIRONMENTAL CONDITION OF
THE PROPERTIES, BOTH SURFACE AND SUBSURFACE, INCLUDING BUT NOT LIMITED TO
CONDITIONS SPECIFICALLY RELATED TO THE PRESENCE, RELEASE OR DISPOSAL OF
HAZARDOUS SUBSTANCES. BUYER IS RELYING SOLELY UPON ITS OWN INSPECTION OF THE
PROPERTIES, AND, BUYER SHALL ACCEPT ALL OF THE SAME IN THEIR AS IS, WHERE IS
CONDITION. 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 BUYER IN CONNECTION WITH THIS
AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY DESCRIPTION OF THE PROPERTIES
PRICING ASSUMPTIONS, OR QUALITY OR QUANTITY OF HYDROCARBON RESERVES (IF ANY)
ATTRIBUTABLE TO THE PROPERTIES OR THE ABILITY OR POTENTIAL OF THE PROPERTIES TO
PRODUCE HYDROCARBONS OR THE ENVIRONMENTAL CONDITION OF THE PROPERTIES OR ANY
OTHER MATTERS CONTAINED IN CONFIDENTIAL INFORMATION OR ANY OTHER MATERIALS
FURNISHED OR MADE AVAILABLE TO BUYER BY SELLER OR BY SELLER'S EMPLOYEES, AGENTS
OR REPRESENTATIVES; ANY AND ALL SUCH DATA, RECORDS, REPORTS, PROJECTIONS,
INFORMATION AND OTHER MATERIALS FURNISHED BY SELLER OR BY SELLER'S EMPLOYEES,
AGENTS OR REPRESENTATIVES OR MADE AVAILABLE TO BUYER ARE PROVIDED TO BUYER AS A
CONVENIENCE, AND SHALL NOT CREATE OR GIVE RISE TO ANY LIABILITY OF OR AGAINST
SELLER; AND ANY RELIANCE ON OR USE OF THE SAME SHALL BE AT BUYER'S SOLE RISK.
THE ASSIGNMENTS AND BILLS OF SALE OR OTHER CONVEYANCES TO BE DELIVERED BY SELLER
AT CLOSING SHALL EXPRESSLY SET FORTH THE LIMITATIONS AND DISCLAIMERS OF
REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS PARAGRAPH.
ARTICLE 6. CONSENTS, PREFERENTIAL RIGHTS AND RISK OF LOSS
6.1 Consents; Preferential Rights. Buyer shall notify Seller of the
Leases or Contracts which require a consent to assignment of any of the
Properties, Seller shall make a good faith effort to obtain such consent, or a
waiver of such consent, other than consents of governmental authorities which
are usually obtained in the normal course of business after Closing. Seller
shall not be obligated to incur any expenses to obtain such consent or waiver
and shall not be liable to
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Buyer by reason of any inability or failure to obtain any such waiver or
consent. If there is an inability or failure to obtain any waiver or consent
prior to the Closing, Buyer may either (i) exclude the affected Properties from
the purchase and sale with a reduction in the Purchase Price for such
Properties' allocated value, or (ii) complete the purchase and sale of the
affected Properties without any reduction in the Purchase Price. Notification of
a consent requirement or of a preferential right to purchase may be given by
Buyer to Seller at any time prior to Closing. In this regard, Buyer shall
prepare for Seller, at Buyer's expense, the typewritten notices (along with an
electronic copy of same), in form and content acceptable to Seller, of all
Preferential Rights to Purchase and/or Consents to Assign. If any of the
Properties are subject to a preferential right to purchase and, prior to
Closing, any holder of a preferential right to purchase notifies Seller That it
intends to consummate the purchase of Seller's interest the in the Property to
which its preferential right applies, the affected Properties shall be excluded
from the sale to Buyer under this Agreement, and the Purchase Price shall be
reduced by the Allocated Value of the such Property. If the preferential right
has been waived or if the time for the exercise of such right has not expired
the affected Property shall be conveyed to Buyer at Closing. Thereafter, if the
holder of the preferential right timely and properly exercises its right to
purchase, Buyer shall be obligated to convey the such Property to such third
party and shall receive the purchase price therefor.
6.2 Risk of Loss. If, after the Effective Time and prior to the
Closing, any part of the Properties shall be destroyed or harmed by fire or any
other casualty or cause or shall be taken by condemnation or the exercise of
eminent domain, Buyer shall be entitled to any applicable insurance proceeds (to
the extent actually received by Seller) or condemnation awards.
ARTICLE 7. COVENANTS OF SELLER
Seller covenants and agrees with Buyer as follows:
7.1 Access to Records. Prior to the Closing Date, Seller shall grant
Buyer reasonable access to the Records for the review and copying thereof, at
Buyer's expense, during Seller's normal business hours upon reasonable prior
notification. The Records shall be made available at their present location
together with suitable office facilities for review and copying purposes. Buyer
will use its best efforts to conduct such operations in a manner that will not
disrupt Seller's normal business activities. From and after the date of the
execution of this Agreement through the Closing Date, Seller shall not add to or
remove from the Records any contracts, instruments, documents or other materials
except for such additions and removals as are done in the ordinary course of
business with respect to ongoing operations. Any contracts, instruments,
documents or other materials removed from the Records by Seller during such
period of time will be replaced in the Records by Seller after their use, and
Seller shall advise Buyer of which Records have been removed.
7.2 Operations. From the date of this Agreement until Closing, except
as otherwise approved by Buyer, Seller:
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(a) shall not transfer, sell, hypothecate, encumber, or otherwise
dispose of any of the Properties (other than sale of production in the ordinary
course of business or as required in connection with the exercise of
preferential rights to purchase any of the Properties), or substantially modify
or terminate any Contract or other material agreement;
(b) shall not enter into any production sale, processing, treating or
other agreements affecting the Properties not terminable on no more than thirty
(30) days' notice;
(c) shall promptly notify Buyer of any notice received by Seller
relating to any claims or lawsuits relating to the Properties;
(d) shall not grant any preferential right to purchase or similar
right or agree to require the consent of any party to the transfer and
assignment of Seller's interest in the Properties to Buyer;
(e) shall not enter into any transaction the effect of which,
considered as a whole, would be to cause Seller's ownership interests in any of
the Properties to be altered from its ownership interest as of the Effective
Time;
(f) shall not enter into any settlement of or relinquish any
outstanding receivables which are a part of the Properties (including, without
limitation, the right to receive any retroactive price adjustments, take-or-pay
monies, FERC mandated refunds, accounting adjustments, tax adjustments, and
Minerals Management Service refunds); and
(g) shall give Buyer prompt written notice of any notice of default
(or written threat of default, whether disputed or denied) received or given by
Seller under any instrument or agreement affecting the Properties to which
Seller is a party or which it or any of the Properties is bound.
7.3 Permissions. Until Closing, Seller will use reasonable efforts to
obtain all permissions, approvals, and consents of federal, state, and local
governmental authorities and other third parties as may be required to
consummate the sale contemplated hereunder (excluding governmental permissions,
approvals, and consents which are customarily obtained after the consummation of
transactions of the type contemplated hereunder).
ARTICLE 8. COVENANTS OF BUYER
8.1 Return of Data. Buyer agrees that if this Agreement is terminated
for any reason whatsoever, Buyer shall, at Seller's request, promptly return to
Seller all information and data furnished by or on behalf of Seller to Buyer,
its officers, employees, and representatives in connection with this Agreement,
and Buyer shall deliver to Seller all copies, extracts, or excerpts of such
information and data.
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ARTICLE 9. SELLER'S CONDITIONS OF CLOSING
The obligation of Seller to close this transaction shall be subject to
and conditioned upon the following, any one or more of which may be waived by
Seller, in whole or in part:
9.1 Representations. The representations of Buyer under Article 4 of
this Agreement shall be true and accurate in all material respects as of the
date when made and shall be deemed to be made again at and as of the time of the
Closing and shall then be true and accurate in all material respects.
9.2 Performance. Buyer shall have performed and complied with each
covenant, agreement, and condition required by this Agreement to be performed or
complied with by it prior to or at Closing.
9.3 Pending Matters. At Closing, no litigation, proceeding,
investigation, or inquiry shall be pending or threatened to enjoin or prevent
the consummation of the transactions contemplated by this Agreement.
9.4 Resolution. Buyer shall have furnished Seller a certified copy of
resolutions of the board of directors of its manager authorizing the execution
and delivery of this Agreement and delivery of all documents contemplated
herein.
9.5 Consent and Release of Liens. Seller shall have received the
consent of its lenders under that certain Amended and Restated Credit Agreement
dated August 28, 1997 between Seller, Bankers Trust Company, as Agent, and Union
Bank of California, N.A., as Co-Agent, as amended, for the sale of the
Properties and shall have obtained releases of all liens and security interests
held by such lenders burdening the Properties.
9.6 Officer's Certificate. Buyer shall have delivered to Seller a
certificate of an executive officer of Buyer's manager dated the Closing Date,
certifying on behalf of Buyer that the conditions set forth in Section 9.1, 9.2
and 9.3 have been fulfilled.
9.7 Board Approval. On or before Closing, Seller shall have received
approval of its Board of Directors granting their consent to enter into and
consummate this transaction.
ARTICLE 10. BUYER'S CONDITIONS OF CLOSING
The obligation of Buyer to close this transaction shall be subject to
and conditioned upon the following, any one or more of which may be waived by
Buyer, in whole or in part:
10.1 Representations. The representations of Seller under Article 3 of
this Agreement shall be true and accurate in all material respects as of the
date when made and shall be deemed
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to be made again at and as of the time of the Closing and shall then be true and
accurate in all material respects.
10.2 Performance. Seller shall have performed and complied with each
covenant, agreement, and condition required by this Agreement to be performed or
complied with by it prior to or at Closing.
10.3 Pending Matters. At Closing, no suit or action shall have been
instituted or threatened that questions or reasonably appears to portend
subsequent questioning of the validity or legality of this Agreement or the
transactions contemplated by this Agreement.
10.4 Resolution. Seller shall have furnished Buyer a certified copy of
Resolutions of the board of directors of the Seller, dated on or before Closing,
authorizing the execution and delivery of this Agreement and delivery of all
documents contemplated herein.
10.5 Officer's Certificate. Seller shall deliver to Buyer a
certificate of executive officer of Seller, dated the Closing Date, certifying
on behalf of Seller that the conditions set forth in Sections 10.1, 10.2 and
10.3 have been fulfilled.
ARTICLE 11. CLOSING
11.1 Time and Place of Closing. Subject to the conditions stated in
this Agreement, the consummation of the transactions contemplated hereby (the
"Closing") shall occur on or before March 4, 1999 or such other date that the
parties may mutually agree upon and designate in writing (the "Closing Date");
provided, however, that if all of the conditions to Closing set forth in
Articles 9 and 10 have not been satisfied or waived by such date or any extended
date for Closing, the party whose obligations are subject to the conditions that
have not been satisfied or waived shall have the right to extend the date of
Closing for successive periods of up to seven days each until such conditions
shall have been satisfied or waived. The Closing shall be held at Seller's
office in Midland, Texas, or at such other location as may be mutually agreed
upon by Seller and Buyer.
11.2 Closing Obligations.
(a) At Closing, Seller shall deliver to Buyer the following:
(i) Executed Assignments, Bills of Sale and Conveyances of the
Sale interest in the Properties, in the form attached hereto as Exhibit "B" and
executed deeds covering Seller's fee mineral and surface interests in any of the
Properties, in the form attached hereto as Exhibit C; and in sufficient
counterparts for recording in each appropriate filing jurisdiction;
(ii) An initial settlement statement reflecting adjustments to
the Purchase Price as provided in Article 2 above (Seller shall provide Buyer a
copy of the statement at least 3 business days before the Closing Date);
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(iii) Executed releases of the Deeds of Trust, Mortgages and
other security documents listed on Schedule 3.7 hereof and all related financing
statements (the "Releases").
(iv) Letters-in-lieu of transfer orders, directing that all
proceeds of production from the Seller's interest in the Properties which have
theretofore been paid to Seller shall be paid to the account of Buyer as of and
after Effective Time;
(v) Resolutions of the board of directors of the Seller in
compliance with Section 10.4 hereof;
(vi) Possession of the Properties;
(vii) Appropriate executed state and federal lease assignments
on the prescribed form;
(viii) An affidavit that it is not a foreign person; and
(ix) Evidence, in form and substance reasonably satisfactory
to the Buyer, that it has satisfied its representation and warranty contained in
Section 3.11.
(b) At Closing, Buyer shall:
(i) Deliver to Seller the Adjusted Purchase Price by wire
transfer to Seller's account as provided in Section 2.3.
(ii) Execute the Assignments, Bills of Sale and Conveyances
and Deeds delivered by Seller to Buyer at Closing, evidencing Buyer's acceptance
of same;
(iii) Deliver to Seller Resolutions of the Board of Directors
of the manager of Buyer in compliance with Section 9.4 hereof; and
(iv) Deliver to Seller an Assignment and ▇▇▇▇ of Sale, in the
form of the Assignment and ▇▇▇▇ of Sale attached to this Agreement as Exhibit B,
conveying all of Buyer's right, title and interest in the Candy Draw Field to
Seller.
11.3 Further Assurances. At and after Closing, the parties shall
execute, acknowledge, and deliver any other documents and shall take such other
actions as may be necessary or useful to carry out their obligations under this
Agreement.
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ARTICLE 12. ADDITIONAL AGREEMENTS
12.1 Calculation of Adjusted Purchase Price. Within 90 days after the
Closing, Seller shall prepare, in accordance with this Agreement and with
generally accepted accounting principles consistently applied, and deliver to
Buyer a statement setting forth each adjustment to the Purchase Price required
pursuant to Section 2.2 and showing the calculation of each such adjustment.
Within 30 days after receipt of such statement from Seller, Buyer shall deliver
to Seller a written report containing all changes with explanations and
documentation therefor that Buyer proposes be made to such statement, it being
agreed that Buyer's failure to deliver such report to Seller within such time
period shall constitute acceptance by Buyer of Seller's statement. From and
after the expiration of such 30-day period, no additional changes to the
statement provided by Seller shall be considered by the parties. If Buyer has
timely delivered such written report, the parties shall then undertake to agree
on the items in dispute and the final Adjusted Purchase Price no later than 15
days after the receipt by Seller of Buyer's statement of proposed changes (it
being agreed that any disputes as to adjustments relating to Defects shall be
resolved prior to such time pursuant to the provisions of Article 3). Following
the final determination of the Adjusted Purchase Price pursuant to this Section
13.1, Seller or Buyer, as the case may be, shall make the payment required
within five business days after such final determination. Seller and Buyer will
provide any information reasonably requested by the other in order to prepare
such statement or verify Seller's statement or written report.
12.2 Receipts and Credits.
(a) Subject to the terms hereof and except to the extent same have
already been taken into account as an adjustment to the Purchase Price or except
to the extent same constitutes part of the Properties, all monies, proceeds,
receipts, credits, and income attributable to the Seller's interest in the
Properties:
(i) for the period subsequent to the Effective Time, shall be
the sole property and entitlement of Buyer, and, to the extent received by
Seller, Seller shall fully disclose, account for, and transmit same to Buyer
promptly; and
(ii) for the period prior to the Effective Time, to the extent
not paid to Seller, shall be the sole property and entitlement of Buyer,
provided however, to the extent paid to and received by Seller, shall remain the
property and entitlement of Seller.
(b) Subject to the terms of this Agreement, and subject to the
obligations of Seller under Article 2.2 (b) (ii), and subject the representation
of Seller under Article 3.11, and except to the extent same have already been
taken into account as an adjustment to the Purchase Price or except to the
extent Buyer has forgone enforcement and collection of Seller's accrued
obligations to Buyer as part of the consideration for this Agreement pursuant to
Section 2.1, all costs, expenses, disbursements, obligations, and liabilities
attributable to the Seller's interest in the Properties (EXCEPT FOR PERSONAL
INJURY CLAIMS, UNDERPAYMENTS OF ROYALTIES AND UNDERPAYMENT OF SEVERANCE TAXES
FOR WHICH SELLER IS INDEMNIFYING BUYER IN ARTICLE 13.4):
(i) for the period on and after the effective time of the 1997
PSA and prior to
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the Effective Time, regardless of when due or payable, but only to the extent
not previously paid by Seller, shall be the sole obligation of Buyer and Buyer
shall hold Seller harmless from and against same; and
(ii) for the period subsequent to the Effective Time,
regardless of when due or payable, shall be the sole obligation of Buyer and
Buyer shall promptly pay, or if paid by Seller, promptly reimburse Seller for
and hold Seller harmless from and against same.
12.3 Records. Copies, made at Buyer's expense, of all files, records,
documentation, and data of Seller that Buyer may reasonably request relating to
(or evidencing) Seller's ownership or rights in the Properties or other rights
and interests described herein, including, but not limited to lease files, land
files, well files, production sales agreements files, division order files,
title opinions and abstracts, governmental filings, production reports,
proprietary seismic data, production logs, core sample reports, and land maps,
as such data is assembled and maintained in the normal course of business
(collectively, the "Records"), will be, as soon as is reasonably possible after
Closing, delivered to Buyer's offices, at Buyer's expense. To the extent not
obtained or satisfied as of Closing, Seller agrees to continue to use all
reasonable efforts and to cooperate with Buyer's efforts to obtain for Buyer
access to files, records and data relating to the Property in the possession of
third parties. To the extent Seller may do so without violating third party
agreements, Seller shall provide Buyer with access to all of Seller's seismic
data and information relating to the Properties.
12.4 Notices. All notices hereunder shall be in writing and any
communication or delivery hereunder shall be deemed to have been duly made when
personally delivered to the individual indicated below, or if mailed, when
received by the party charged with such notice and addressed as follows:
BUYER: ▇▇▇▇▇▇▇ Petroleum LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇.▇. ▇▇▇▇▇▇▇
and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
SELLER: ▇▇▇▇▇▇▇▇ Energy, Inc.
Attn: ▇▇▇▇▇▇▇▇ ▇. Hair, Jr.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
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Any party may, by written notice so delivered to the other, change the address
of the individual to which or to whom delivery shall thereafter be made.
12.5 Recording Documents. Buyer shall pay all documentary, filing, and
recording fees incurred in connection with the filing and recording of the
instruments of conveyance. Seller shall pay all fees incurred in connection with
the filing and recording of the Releases.
12.6 Right of Termination. This Agreement and the transactions
contemplated hereby may be terminated at any time at or prior to the Closing by
mutual agreement of Buyer and Seller in writing, or by either party due to the
failure of the other party to meet a material condition to Closing. Upon the
failure of either party to, the other party at its option, may (i) enforce
whatever legal or equitable rights may be appropriate and applicable, or (ii)
terminate this Agreement, thereby waiving all other remedies available to it.
12.7 Sales Taxes. The Purchase Price provided for hereunder excludes
any sales taxes or other taxes in connection with the sale of the Seller's
interest in the Properties pursuant to this Agreement. If a determination is
ever made that a sales tax or other transfer tax applies, Buyer shall pay such
tax as well as any applicable conveyance, transfer, and recording fees, and real
estate transfer stamps or taxes imposed on any transfer of property pursuant to
this Agreement. Buyer shall defend, indemnify, and hold Seller harmless with
respect to the reporting and payment of all such taxes, if any, including any
interest or penalties assessed thereon.
12.8 Taxes. All ad valorem, severance, or other such production or
property tax relating to the period after the effective time of the 1997 PSA and
prior to the Effective Time shall be shared by Seller 60% and Buyer 40%
regardless of when assessed or payable. Any such ad valorem, severance, or other
such production or property tax relating to the period prior to the effective
time of the 1997 PSA and to the period after the Effective Time and beyond shall
be the responsibility of the Buyer. Adjustments to the Purchase Price to account
for such taxes shall be made as provided in Section 2.3, but any such adjustment
shall not affect the parties' obligations under this Section 12.8 if the
adjustments are later determined to have been inaccurate.
ARTICLE 13. ASSUMPTION OF OBLIGATIONS; INDEMNIFICATION
13.1 Definitions. As used in this Agreement, "Losses" means any
liabilities, losses, claims, demands, causes of action, costs and expenses
(including, but not limited to, court costs and reasonable attorneys' fees and
other costs and expenses incident to proceedings or investigations respecting,
or the prosecution or defense of, a claim) of every kind and character
13.2 Assumption of Contracts. The sale of the Properties is and will
be made subject to the Contracts to which the Properties are presently subject.
Buyer shall assume and be
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responsible for all obligations accruing under the Contracts after the Effective
Time and accruing under the contracts prior to the effective time of the 1997
PSA.
13.3 Imbalances. For purposes hereof, an "Imbalance" shall include any
circumstance regarding production taken or marketed from the Seller's interest
in the Properties which Buyer is acquiring pursuant to this Agreement which
could result in (i) a portion of Buyer's interest in such production being sold
without Buyer receiving payment therefor; or (ii) Buyer being obligated to make
payment to any person or entity as a result of such imbalance; or (iii) any
other circumstance by which Buyer would be obligated by virtue of any prepayment
arrangement, take-or-pay agreement, or similar arrangement binding on the
Properties after Closing, to deliver hydrocarbons produced from the Properties
at some future time without then receiving full payment therefor. The Properties
will be conveyed specifically subject to Imbalances which exist as of the
Effective Time, with Buyer bearing and assuming all obligations with respect to
any over production account for liability and receiving the benefit of and being
credited with any under production account or credit. At Closing, Seller shall
deliver to Buyer all amounts in Seller's position due third-party owners of
interest in the Properties, and Buyer agrees that it shall be solely responsible
for the disposition of such funds, the payment thereof to the rightful owners
and the payment, if any, of a royalty or interest thereon.
13.4 SELLER'S GENERAL INDEMNITY. WITH THE EXCEPTION OF CLAIMS, COST
AND EXPENSES AND LIABILITIES ATTRIBUTABLE TO ENVIRONMENTAL CONDITION OF THE
PROPERTIES, SELLER SHALL BE RESPONSIBLE FOR AND DISCHARGE ALL COSTS, EXPENSES
AND LIABILITIES ATTRIBUTABLE TO SELLER'S INTEREST IN THE PROPERTIES RESULTING
FROM PERSONAL INJURY CLAIMS, UNDERPAYMENT OF ROYALTIES AND UNDERPAYMENT OF
SEVERANCE TAXES WHICH ACCRUE OR RELATE TO THE TIME ON OR AFTER THE EFFECTIVE
TIME OF THE 1997 PSA AND PRIOR TO THE EFFECTIVE TIME AND WHICH ARE PRESENTED TO
SELLER BY BUYER, IN WRITING, WITHIN 18 MONTHS AFTER CLOSING. SELLER SHALL SAVE
HARMLESS AND INDEMNIFY BUYER, ITS DIRECTORS, OFFICERS, STOCKHOLDERS AND MEMBERS
FROM ALL LOSS, COSTS, EXPENSE (INCLUDING ATTORNEY'S FEES AND EXPENSES) PENALTIES
AND LIABILITIES FROM SELLER'S FAILURE TO PERFORM SUCH OBLIGATIONS. THIS SECTION
13.4 SHALL NOT APPLY TO THE ACCRUED OBLIGATIONS OF SELLER TO BUYER WHICH BUYER
HAS FORGONE THE ENFORCEMENT AND COLLECTION OF AS PART OF THE CONSIDERATION FOR
THIS AGREEMENT AS PROVIDED IN SECTION 2.1.
13.5 BUYER'S GENERAL INDEMNITY. BUYER SHALL BE RESPONSIBLE FOR AND
DISCHARGE ALL CLAIMS, COSTS, EXPENSES AND LIABILITIES WITH RESPECT TO THE
SELLER'S INTEREST IN THE PROPERTIES (EXCEPT FOR THOSE WHICH SELLER RETAINS IN
ARTICLE 13.4) WHICH ACCRUE OR RELATE TO THE TIMES BEFORE AND AFTER THE EFFECTIVE
TIME INCLUDING (I) ALL COSTS ATTRIBUTABLE TO THE OPERATION OF THE
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PROPERTIES AND (II) ANY ASSERTED LIABILITY ARISING FROM ANY INJURY OR
OCCURRENCE. BUYER SHALL SAVE HARMLESS AND INDEMNIFY SELLER, ITS DIRECTORS,
OFFICERS AND STOCKHOLDERS FROM ALL LOSS, COST, EXPENSE (INCLUDING ATTORNEYS'
FEES AND EXPENSES), PENALTIES AND LIABILITIES FROM BUYER'S FAILURE TO PERFORM
SUCH OBLIGATIONS.
ARTICLE 14. ARBITRATION
14.1 Selection of Arbitrators. Any controversy between the parties
hereto arising under this Agreement and not resolved by agreement shall be
determined by a board of arbitration upon notice of submission given by either
party to the other, which notice shall name a qualified, independent arbitrator.
Within ten (10) days after the receipt of such notice, the other party shall
name a qualified, independent arbitrator, or if it fails to do so, the party
giving notice shall name the second. The two arbitrators so appointed shall name
the third qualified, independent arbitrator with thirty (30) days of the
appointment of the second arbitrator, or if they fail to do so, the arbitrator
may be appointed by the Senior Judge (in service) of the United States District
Court for Colorado. Each party shall pay for the fees and expenses of the
arbitrator it names and shall share equally the fees and expenses of the third
arbitrator. Each party shall pay its experts' fees and expenses.
14.2 Determination. The arbitrators selected to act hereunder shall be
qualified by education and experience to pass on the particular question in
dispute. The arbitrators shall promptly hear and determine (after due notice of
hearing and giving the parties a reasonable opportunity to be heard) the
questions submitted, and shall render their decision within sixty (60) days
after appointment of the third arbitrator. If within said period, a decision is
not rendered by the board, or by a majority thereof, new arbitrators may be
named and shall act hereunder, at the election of either Buyer or Seller, in
like manner as if none had been previously named.
14.3 Decision Binding. The decision of the arbitrators, or the
majority thereof, made in writing shall be final and binding upon the parties
hereto as to the questions submitted, and Buyer and Seller will abide by and
comply with such decision. The prevailing party shall be entitled to recover
reasonable attorneys' fees and expenses.
ARTICLE 15. PHYSICAL CONDITION OF THE PROPERTIES
15.1 Prior Use of Properties. THE PROPERTIES HAVE BEEN USED FOR OIL
AND GAS DRILLING AND PRODUCING OPERATIONS AND RELATED OIL FIELD OPERATIONS,
PHYSICAL CHANGES IN THE LAND MAY HAVE OCCURRED AS A RESULT OF SUCH USES. THE
PROPERTIES ALSO MAY INCLUDE BURIED PIPELINES AND OTHER EQUIPMENT, WHETHER OR NOT
OF A SIMILAR NATURE, THE LOCATIONS OF WHICH MAY NOT NOW BE KNOW BY SELLER OR
READILY APPARENT BY A PHYSICAL INSPECTION OF THE PROPERTY. BUYER
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UNDERSTANDS THAT SELLER DOES NOT HAVE THE REQUISITE INFORMATION WITH WHICH TO
DETERMINE THE EXACT NATURE OR CONDITION OF THE PROPERTIES OR THE EFFECT ANY SUCH
USE HAS HAD ON THE PHYSICAL CONDITION OF THE LANDS BURDENED BY THE PROPERTIES.
15.2 Assumption of Properties in Present Condition. BUYER ACKNOWLEDGES
THAT (i) THE CONSUMMATION OF THIS AGREEMENT BY BUYER SHALL BE ON THE BASIS OF
ITS OWN INVESTIGATION OF THE PHYSICAL CONDITION OF THE PROPERTIES, INCLUDING,
WITHOUT LIMITATIONS, SUBSURFACE CONDITION; (ii) THE PROPERTIES HAVE BEEN USED IN
THE MANNER AND FOR THE PURPOSES SET FORTH ABOVE AND THAT PHYSICAL CHANGES TO THE
PROPERTIES AND THE LAND BURDENED THEREBY MAY HAVE OCCURRED AS A RESULT OF SUCH
USE; AND (iii) NORM AND MAN-MADE MATERIAL FIBERS (MMMF) MAY BE PRESENT AT SOME
LOCATIONS. BUYER ACKNOWLEDGES THAT NORM IS A NATURAL PHENOMENON ASSOCIATED WITH
MANY OIL FIELDS IN THE UNITED STATES AND THROUGHOUT THE WORLD. BUYER SHALL 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 OR AFFECTING THE PROPERTIES. BUYER SHALL ASSUME THE RISK THAT THE PROPERTIES
MAY CONTAIN WASTES OR CONTAMINANTS AND ADVERSE PHYSICAL CONDITIONS, INCLUDING
THE PRESENCE OF PIPELINES, EQUIPMENT AND OTHER ITEMS OF PERSONAL PROPERTY, AND
WASTES OR CONTAMINANTS WHICH MAY NOT HAVE BEEN REVEALED BY BUYER'S
INVESTIGATION. ALL RESPONSIBILITY AND LIABILITY RELATED TO DISPOSALS, SPILLS,
WASTES, OR CONTAMINATION OR OTHER ADVERSE PHYSICAL CONDITIONS ON, BELOW, OR
RELATED TO OR AFFECTING THE PROPERTIES SHALL BE ASSUMED BY BUYER AND BUYER
SHALL, NOTWITHSTANDING WHEN THE BASIS FOR ANY CLAIM, ACTION, SUIT, JUDGMENT
(INCLUDING, WITHOUT LIMITATION, THOSE FOR DEATH, PERSONAL INJURY OR PROPERTY
DAMAGE) SHALL HAVE OCCURRED, INDEMNIFY, DEFEND AND HOLD SELLER HARMLESS
THEREFROM.
ARTICLE 16. MISCELLANEOUS
16.1 Amendment. This Agreement may not be amended nor any rights
hereunder waived except by an instrument in writing signed by the party to be
charged with such amendment or waiver and delivered by such party to the party
claiming the benefit of such amendment or waiver.
16.2 Gender. References made in this Agreement, including use of a
pronoun, shall be deemed to include where applicable, masculine, feminine,
singular or plural, individuals, partnerships, limited liability companies or
corporations. As used in this Agreement, "person" shall mean any natural person,
corporation, partnership, limited liability company, trust, estate, or other
entity.
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16.3 Entire Agreement. This Agreement constitutes the entire
understanding among the parties with respect to the subject matter hereof,
superseding all negotiations, prior discussions, and prior agreements and
understandings relating to such subject matter.
16.4 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of, the parties hereto and, except as otherwise
prohibited, their respective successors and assigns; and except as otherwise
stated herein, nothing contained in this Agreement, or implied herefrom, is
intended to confer upon any other person or entity any benefits, rights, or
remedies.
16.5 Survivability. Except as otherwise specifically provided in this
Agreement, all indemnification's, covenants, agreements, representations, and
warranties shall survive the execution of the Agreement, the Closing, and the
delivery and recordation of any deeds, assignments, or bills of sale which
convey the Seller's interest in the Properties from Seller to Buyer. Nothing in
this Agreement shall be deemed to affect the special warranty of Seller as
provided in the Assignment delivered pursuant to this Agreement. Said special
warranty shall prevail over any provisions of this Agreement that might
otherwise be considered inconsistent therewith.
16.6 Severability. If a court of competent jurisdiction determines
that any clause or provisions of this Agreement is void, illegal, or
unenforceable, the other clauses and provisions of the Agreement shall remain in
full force and effect and the clauses and provisions which are determined to be
void, illegal, or unenforceable shall be limited so that they shall remain in
effect to the extent permissible by law.
16.7 Governing of Law. This Agreement shall be governed and construed
under the laws of the State of Texas (excluding any conflict of laws provision
that would require the application of any other jurisdiction).
16.8 Assignability. Except as provided in Section 2.4, neither party
hereto shall assign this Agreement or any of its rights or obligations hereunder
without the prior written consent of the other party.
16.9 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each
party and delivered to the other party.
16.10 DPTA Waiver-Waiver of Consumer Rights. TO THE EXTENT APPLICABLE
TO THE PROPERTIES OR ANY PORTION THEREOF, BUYER HEREBY WAIVES THE PROVISIONS OF
THE TEXAS DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT, CHAPTER 17,
SUBCHAPTER E, SECTIONS 17.41 THROUGH 17.63,
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INCLUSIVE (OTHER THAN SECTION 17.555, WHICH IS NOT WAIVED), TEX. BUS. & COM.
CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER
CONSULTATION WITH AN ATTORNEY OF BUYER'S OWN SELECTION, BUYER VOLUNTARILY
CONSENTS TO THIS WAIVER. IN ORDER TO EVIDENCE ITS ABILITY TO GRANT SUCH WAIVER,
BUYER HEREBY REPRESENTS AND WARRANTS TO SELLER THAT IT (i) IS IN THE BUSINESS OF
SEEKING OR ACQUIRING, BY BUYER OR LEASE, GOODS OR SERVICES FOR COMMERCIAL OR
BUSINESS USE; (ii) IS REPRESENTED BY LEGAL COUNSEL IN SEEKING OR ACQUIRING THE
GOODS OR SERVICES HEREUNDER; (iii) HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL,
BUSINESS AND OIL AND FAS MATTERS THAT ENABLE IT TO EVALUATE THE MERITS AND RISKS
OF THE TRANSACTIONS CONTEMPLATED HEREBY; (iv) IS NOT IN A SIGNIFICANTLY
DISPARATE BARGAINING POSITION; AND (v) THAT THIS WAIVER IS A MATERIAL AND
INTEGRAL PART OF THIS AGREEMENT AND THE CONSIDERATION THEREOF.
16.11 Termination. Except as otherwise provided in this Agreement, all
of the Seller's and Buyer's rights and obligations under the 1997 PSA and the
A&E Agreement shall terminate if the Closing under this Agreement takes place.
Otherwise, the parties' rights and obligations under the 1997 PSA and the A&E
Agreement shall continue, and nothing contained in this Agreement shall be
deemed to release those rights and obligations.
16.12 Press Release. Neither party shall issue a press release
pertaining to the purchase and sale of the Properties under this Agreement
unless (i) the proposed form of the press release has first been sent to the
other party, and (ii) such other party has first approved the press release,
which approval shall not be unreasonably withheld or delayed.
16.13 Amended Exhibits. Buyer and Seller acknowledge that the Exhibits
attached to this Agreement may contain ▇▇▇▇▇▇▇'▇ errors. Buyer and Seller agree
to use their best efforts to verify the accuracy of the Exhibits and to correct
any errors prior to Closing.
The parties have executed on this Agreement as of the date first above
mentioned,
▇▇▇▇▇▇▇ PETROLEUM LLC
By: ▇▇▇▇▇▇▇ and Associates, Inc.
By:
-----------------------------
▇. ▇. ▇▇▇▇▇▇▇
President
▇▇▇▇▇▇▇▇ ENERGY, INC.
By:
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▇▇▇▇▇▇▇▇ ▇. Hair, Jr.
Senior Vice President - Land
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