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EXHIBIT 10.43
PURCHASE AND SALE AGREEMENT
DATED
JUNE 30, 1997
AMONG
HSRTW, INC.
AND
HORIZON GAS PARTNERS, L.P.
AS SELLER
AND
GOTHIC ENERGY CORPORATION
AS BUYER
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PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement ("Agreement"), dated June 30, 1997,
is among HSRTW, INC. ("HSRTW"), a Delaware corporation, with an office address
of ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, and HORIZON GAS PARTNERS, L.P.
("Horizon"), a Delaware limited partnership, with an office address of ▇▇▇▇-▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ (collectively "Seller"), and GOTHIC
ENERGY CORPORATION ("Buyer"), an Oklahoma corporation, with an office address
of ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
In consideration of the mutual promises 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:
1PURCHASE AND SALE
1.1 PURCHASE AND SALE. Seller agrees to sell and convey and Buyer
agrees to pay for and receive the Interests (as defined in
Section 1.2), subject to the terms and conditions of this
Agreement.
1.2 INTERESTS. Subject to the reservations set forth in Section
1.3, all of Seller's right, title and interest in and to the
following shall herein be called the "Interests:"
(a) The oil and gas ▇▇▇▇▇ and locations described in
Exhibit "A-1" hereto (collectively the "▇▇▇▇▇"),
together with all oil, gas and mineral production
from the ▇▇▇▇▇ to the extent such production occurs
after the Effective Time;
(b) The leasehold estates created by the leases,
licenses, permits and other agreements described in
Exhibit "A-2," which Exhibit shall be provided by
Seller and approved by Buyer by July 15, 1997,
INSOFAR AND ONLY INSOFA, as they cover the land (the
"Land") described in Exhibit "A-2" (the leasehold
estates insofar as they cover the Land are called the
"Leases") together with all overriding royalty
interests, production payments and other payments out
of or measured by the value of oil and gas production
from or attributable to the Leases as to periods
after the Effective Time insofar as the Leases cover
the Lands, unless expressly excluded and reserved by
Seller;
(c) All personal property, fixtures and improvements
appurtenant to the ▇▇▇▇▇, or the Leases or used
exclusively in connection with the operation of the
▇▇▇▇▇, or the Leases or with the production,
treatment, sale or disposal of hydrocarbons or water
produced therefrom or attributable
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thereto, including without limitation, pipelines,
gathering systems and compression facilities
appurtenant to or located upon the Leases and cores,
cuttings, geophysical and other geological property
(to the extent transferable) relating exclusively to
the Lands and ▇▇▇▇▇; excluding, however, tools,
pulling machines, vehicles, mobile equipment, rolling
stock, tubulars or other drilling or production
inventory, or equipment temporarily located on the
Lands; and
(d) All rights, privileges, benefits, and appurtenances
in any way belonging, incidental to, or appertaining
to the property, interests and rights described in
Sections 1.2(a) through 1.2(c) to the extent
necessary or beneficial to the future operation of
such interests, including, to the extent
transferable, all agreements, product purchase and
sale contracts, surface leases, gas gathering
contracts, salt water disposal agreements and ▇▇▇▇▇,
processing agreements, compression agreements,
equipment leases, permits, gathering lines,
rights-of-way, easements, licenses, farmouts and
farmins, options, orders, pooling, spacing or
consolidation agreements and operating agreements and
all other agreements relating thereto;
(e) All lease, land, well, production, engineering,
geological, geophysical, litigation, accounting,
title, division order and tax files, copies of
relevant tax (other than income tax) files, emergency
response and environmental compliance plans,
abstracts, title opinions, logs, maps and all other
books, files, records and data of Seller insofar as
they relate exclusively to the Assets described in
Exhibit "A," but excluding any records or data that
cannot be transferred because of (i) prior legal
restrictions, (ii) are proprietary or confidential,
or (iii) are subject to attorney/client privilege;
(f) All other right, title or interest of Seller in and
to the interests and properties described in Exhibits
"A-1" and "A-2" not expressly reserved by Seller.
(g) All benefit or liability associated with gas
imbalance attributable to the ▇▇▇▇▇ prior to the
Effective Time.
1.3 RESERVED INTERESTS. Seller hereby shall reserve and except
from the sale and conveyance of the Interests in favor of
Seller, its successors and assigns, the following:
(a) All accounts receivable attributable to the Interests
that are, in accordance with generally accepted
accounting principles, attributable to the period
prior to the Effective Time;
(b) All claims and rights attributable to periods prior
to the Effective Time, other than claims relating to
underproduction of gas attributable to the Interests
as of the Effective Time, including, without
limitation, the right
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to initiate, prosecute or participate, at Seller's
sole cost and expense, in all audits, audit claims
and tax claims or proceedings relating to or
including periods prior to the Effective Time,
regardless of when commenced, arising out of or under
applicable law, operating or product sale agreements
or otherwise, and to recover all costs and expenses
claimed or shown by such audits or proceedings as
owing to the owner of the Interests for periods prior
to the Effective Time;
(c) All rights, if any, to recover additional production
or proceeds therefrom attributable to the Interests
for any production month prior to the Effective Time,
resulting from any adjustment to the net revenue
interest attributable to the Interests in the
applicable division orders; and
(d) All rights of access to and use of the Land,
including surface and subsurface rights, in
connection with exploration, drilling, development,
operations or any other purpose related to any right
and/or interest of Seller which has been excepted and
reserved hereunder including, without limitation,
ingress and egress over the Land for the aforesaid
purposes upon properties adjoining the Land.
1.4 EFFECTIVE TIME. The purchase and sale of the Interests shall
be effective as of July 1, 1997, at 7:00 a.m., at the location
of the Interests (the "Effective Time").
2 PURCHASE PRICE
2.1 PURCHASE PRICE. The purchase price to be paid by Buyer for
the Interests shall be $27,500,000 plus the properties
described on Exhibit "G" (the "Purchase Price") (such property
described on Exhibit "G" shall be referred to as "Buyer
Property"), subject to adjustment as set forth in Section and
payable as follows:
(a) an ▇▇▇▇▇▇▇ money deposit of $15,000 payable to Seller
plus delivery to HS Resources, Inc. of 1,500,000
shares of Buyer's Common Stock pursuant to the terms
of a Stock Subscription Agreement entered into
concurrently herewith a copy of which is attached as
Exhibit "H" and a Registration Rights Agreement
entered into concurrently herewith a copy of which is
attached hereto as Exhibit "I" (collectively the
"▇▇▇▇▇▇▇ Money"); and
(b) the Purchase Price, payable at Closing.
2.2 ADJUSTMENTS TO PURCHASE PRICE.
(a) The Purchase Price shall be adjusted upward by the
following:
(i) the value of all oil in storage above the
pipeline connection, being 16" from the tank
bottoms, or in transit as of the Effective
Time and not previously sold by Seller that
is attributable to the
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Interests, such value to be the market price
in effect as of the Effective Time or the
price set forth in any applicable purchase
contract, less taxes and gravity adjustments
deducted by the purchaser of such oil;
(ii) the amount of all expenditures; rentals and
other charges; ad valorem, property,
production, excise, severance and similar
taxes based upon or measured by the ownership
of property or the production of hydrocarbons
or the receipt of proceeds therefrom;
expenses billed under applicable operating
agreements and, in the absence of an
operating agreement, expenses of the sort
customarily billed under such agreements,
paid by or on behalf of Seller in connection
with the operation of the Interests, in
accordance with generally accepted accounting
principles, to the extent not provided for in
Section 2.2(a)(iii) below, attributable to
the period after the Effective Time; the
amount of overhead under operating agreements
for operations conducted during the period
from the Effective Time through the Closing
Date. On ▇▇▇▇▇ where Seller is acting as
operator, including salt water disposal
▇▇▇▇▇, overhead for the period between the
date of this Agreement and the Closing Date
shall be deemed to be $50,000. It is
expressly agreed that Seller shall retain all
▇▇▇▇▇ overhead payments made by third parties
for the period prior to the Effective Time;
(iii) an amount equal to all prepaid expenses
attributable to the Interests that are paid
by or on behalf of Seller that are, in
accordance with generally accepted accounting
principles, attributable to the period after
the Effective Time, including, without
limitation, prepaid utility charges and
prepaid ad valorem, property, production,
severance and similar taxes based upon or
measured by the ownership of property or the
production of hydrocarbons or the receipt of
proceeds therefrom; and
(iv) any other amount agreed upon by Seller and
Buyer.
(b) The Purchase Price shall be adjusted downward by the
following:
(i) proceeds of production received by Seller
attributable to the Interests that are, in
accordance with generally accepted accounting
principles, attributable to the period of
time from and after the Effective Time;
(ii) an amount equal to unpaid ad valorem,
property, production, severance and similar
taxes and assessments based upon or measured
by the ownership of the production
attributable to the
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Interests prior to the Effective Time, which
amounts shall, to the extent not actually
assessed, be computed based on such taxes and
assessments for the preceding tax year (such
amount to be prorated for the period of
Seller's and Buyer's ownership before and
after the Effective Time);
(iii) an amount equal to the sum of all Title
Defect and adjustments for Violations of
Environmental Laws, if any, which have been
agreed upon by the parties;
(iv) an amount equal to all cash in, or
attributable to, suspense accounts relative
to the Interests and held by Seller; and
(v) any other amount agreed upon by Seller and
Buyer.
2.3 ADJUSTMENTS TO PURCHASE PRICE FOR BUYER PROPERTY. Similar
adjustments as set forth in paragraph 2.2 shall be made for
the Buyer Property, except that the overhead for operations on
the Buyer Property shall be deemed to be $12,000 rather than
$50,000.
2.4 ALLOCATION OF PURCHASE PRICE. By July 15, 1997, Buyer shall
modify Exhibit "A-1" and submit such modification to Seller
for approval in order that Exhibit "A-1" sets forth an
allocation of the Purchase Price among Interests and other
designated items that comprise the Interests (the "Allocated
Value"). Seller shall prepare a similar allocation with
respect to the Buyer Property. The allocations will be
provided for the purpose of (a) establishing a basis for
certain taxes, (b) obtaining waivers of or making offers with
respect to any preferential rights to purchase the Interests,
and (c) handling those instances for which the Purchase Price
is adjusted as provided herein. If necessary to determine the
Allocated Value of a portion of any Interest for which an
Allocated Value is set forth on Exhibit "A-1", such allocation
shall be determined on a reasonable engineering basis
consistent with the evaluation implicit in the Allocated
Values shown on Exhibit "A-1."
3 REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF SELLER. Each Seller, as to
its portion of the Interests, represents and warrants to Buyer
as of the date hereof and as of the Closing Date as follows:
(a) Organization. HSRTW is a corporation duly organized,
validly existing and in good standing under the laws
of the state of Delaware, and is duly qualified to
carry on its business in each state where its portion
of the Interests are located. Horizon is a limited
partnership duly organized, validly existing and in
good standing under the laws of the state of
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Delaware and is qualified to carry on its business in
each state where its portion of the Interests are
located.
(b) Power. Each Seller has all requisite corporate, or
partnership, as appropriate, power and authority to
carry on its business as presently conducted, to
enter into this Agreement, and to perform its
obligations under this Agreement. The consummation
of the transactions contemplated by this Agreement
will not violate, or be in conflict with (i) any
provision of HSRTW's Articles of Incorporation or
Bylaws or the Limited Partnership Agreement of
Horizon, as the case may be, or (ii) any provision of
any agreement or instrument to which either Seller is
a party or by which either Seller is bound,
noncompliance with which would have a material effect
upon Buyer's ownership or operation of the Interests,
or upon any of the transactions contemplated by this
Agreement or, to its knowledge, any judgment, decree,
order, statute, rule or regulation applicable to
Seller; except that HSRTW is obligated under its
senior credit facility to obtain the consent of the
majority lenders under that facility (the "Bank
Consent") to consummate the transaction contemplated
by this Agreement, which consent must be obtained on
or before August 1, 1997.
(c) Authorization, Enforceability. This Agreement has
been duly authorized, executed and delivered on
behalf of Seller and constitutes the legal, valid and
binding obligation of Seller, enforceable in
accordance with its terms, subject, however, to the
effects of bankruptcy, insolvency, reorganization and
other laws for the protection of creditors.
(d) Broker. Seller has not incurred any liability,
contingent or otherwise, for brokers or finders fees
relating to the transactions contemplated by this
Agreement for which Buyer shall have any
responsibility whatsoever.
(e) Bankruptcy. There are no bankruptcy, reorganization
or other arrangement proceedings pending, being
contemplated by or, to the knowledge of Seller,
threatened against Seller.
(f) Royalties. To the actual knowledge of Seller, all
royalties, rentals, and other payments due and
payable by Seller under all Leases comprising the
Interests for the period Seller has owned such
Interests ("Seller's Ownership Period") have been
properly and timely paid to the extent that the
failure to so pay would cause a material adverse
effect on the Interests.
(g) Third-Party Waivers. To the actual knowledge of
Seller, all requisite third-party consents to assign
and preferential rights of purchase affecting the
Interests will be listed on Exhibits "B" and "C"
respectively, such Exhibits to be completed by Seller
on or before July 15, 1997.
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(h) Litigation, Proceedings and Claims. There are no
actions, suits or arbitration proceedings to which
Seller is a party pending or, to Seller's actual
knowledge, threatened in writing, before any court or
governmental agency that would result in material
impairment or loss of Seller's title to the Interests
or would otherwise materially adversely affect the
Interests.
(i) Mortgages and Other Instruments. Assuming the timely
receipt of the Bank Consent, neither the performance
of this Agreement, nor the consummation of the
transactions contemplated by this Agreement, will
cause a breach of any of the terms and conditions, or
will result in the creation or imposition of any lien
upon any of the Interests, or the production of oil,
gas or other minerals from the Interests pursuant to
the terms of any agreement or other instrument to
which Seller is a party or by which it is bound.
(j) Sales Contracts. Exhibit "D" will list all material
contracts or agreements to which Seller is a party
for the sale of oil or gas from the Interests which
are not terminable upon 90 days' or less notice, such
Exhibit to be completed by Seller on or before July
15, 1997.
(k) Contracts and Agreements. Except as will be set
forth on Exhibit "E" (the "Disclosure Schedule") or
otherwise identified pursuant to this Agreement,
there are no contracts or agreements to which Seller
is a party which are unusually burdensome and
non-standard and which materially and adversely
affect the value of the Interests, such Exhibit to be
completed by Seller on or before July 15, 1997.
(l) Prepayment or Related Arrangements. Seller has not
entered into any arrangement under which Buyer will
be obligated, by virtue of a prepayment arrangement,
a "take or pay" arrangement, a production payment, or
any other arrangement other than gas balancing
agreements or arrangements, to deliver hydrocarbons
from the Interests at some future time without then
or thereafter receiving full payment therefore, or to
make payment at some future time for hydrocarbons
already produced and sold from the Interests.
(m) Tax Partnership. To Seller's actual knowledge except
as may be disclosed in the Disclosure Schedule, no
portion of the Interest, are subject to any form of
agreement (whether formal or informal, written or
oral) deemed by any state or federal tax statute,
rule or regulation to be or to have created a tax
partnership.
3.2 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Seller as of the date hereof and as of the Closing
Date as follows:
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(a) Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws
of the state of Oklahoma and it is duly qualified to
carry on its business in each state where the
Interests are located.
(b) Power. Buyer has all requisite corporate power and
authority to carry on its business as presently
conducted, to enter into this Agreement, to purchase
the Interests on the terms described in this
Agreement and to perform its other obligations under
this Agreement. The consummation of the transactions
contemplated by this Agreement will not violate, or
be in conflict with (i) any provision of its Articles
of Incorporation or Bylaws; or (ii) any provision of
any agreement or instrument to which it is a party or
by which it is bound, noncompliance with which would
have a material effect upon any of the transactions
contemplated by this Agreement or Buyer's ability to
adhere to and/or perform any obligation hereunder or
in connection herewith, or, to its knowledge, any
judgment, decree, order, statute, rule or regulation
applicable to Buyer.
(c) Authorization, Enforceability. This Agreement has
been duly authorized, executed and delivered on
behalf of Buyer and constitutes the legal, valid and
binding obligation of Buyer, enforceable in
accordance with its terms, subject, however, to the
effects of bankruptcy, insolvency, reorganization and
other laws for the protection of creditors.
(d) Broker. Buyer has incurred no liability, contingent
or otherwise, for brokers or finders fees relating to
the transactions contemplated by this Agreement for
which Seller shall have any responsibility
whatsoever.
(e) Investment Purpose. The Interests to be acquired by
Buyer pursuant to this Agreement are being acquired
by it for its own account for investment purposes and
not for distribution within the meaning of any
securities law. In acquiring the Interests, it is
acting in the conduct of its own business and not
under any specific contractual commitment to any
third party, or any specific nominee agreement with
any third party, to transfer to, or to hold title on
behalf of, such third party, with respect to all or
any part of the Interests.
(f) Bankruptcy. There are no bankruptcy, reorganization
or arrangement proceedings pending, being
contemplated by or, to the knowledge of Buyer,
threatened against Buyer.
(g) Buyer Knowledge. Buyer is experienced and
knowledgeable in the oil and gas business and is
aware of its risks. Buyer has been afforded the
opportunity to examine materials made available to it
by Seller in the Offering Memorandum (and associated
data delivered to Buyer, including mechanical data)
and in the data room in Seller's offices in Tulsa,
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Oklahoma with respect to the Interests (collectively
the "Background Materials"). The Background
Materials are files, or copies thereof, that Seller
has used in its normal course of business and other
information about the Interests that Seller has
compiled or generated. Buyer acknowledges and agrees
that Seller has made no representations or
warranties, express or implied, written or oral, as
to the accuracy or completeness of the Background
Materials or any other information relating to the
Interests furnished by or on behalf of Seller or to
be furnished to Buyer or its representatives. In
entering into this Agreement, Buyer acknowledges and
affirms that it has relied and will rely solely upon
its independent analysis, evaluation and
investigation of, and judgment with respect to, the
business, economic, legal, tax or other consequences
of this transaction including its own estimate and
appraisal of the extent and value of the petroleum,
natural gas and other reserves of the Interests.
Buyer's representatives have visited Seller's office
and have been given opportunities to examine the
books and records Seller has made available relating
to the Interests. Neither Seller nor its affiliates,
agents, representatives or employees shall have any
liability to Buyer or its affiliates, agents,
representatives or employees resulting from any use,
authorized or unauthorized, of the Background
Materials or other information relating to the
Interests provided by or on behalf of Seller or its
agents, representatives or employees.
4 COVENANTS AND AGREEMENTS
4.1 COVENANTS AND AGREEMENTS OF SELLER. Seller covenants and
agrees with Buyer as follows:
(a) Upon execution of this Agreement, Seller will make
available to Buyer for examination at a location
designated by Seller, unless legally prohibited from
doing so or unless certain documents are subject to
attorney/client privilege, such title information,
production information and other information relating
to the Interests in Seller's possession, including
without limitation, accounting files, production
files, land files, lease files, well files, division
order files, contract files and marketing files.
Subject to the consent and cooperation of operators
and other third parties, Seller will cooperate with
Buyer in Buyer's efforts to obtain, at Buyer's sole
expense, such additional information relating to the
Interests as Buyer may reasonably desire, to the
extent in each case that Seller may do so without
violating legal constraints or any obligation of
confidence or unless certain documents are subject to
attorney/client privilege.
(b) During the period beginning on the date of this
Agreement and concluding on the Closing Date, Seller
shall, unless specifically waived by Buyer in
writing:
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(i) subject to the provisions of applicable
operating and other agreements, Seller shall
continue to operate and administer the
Interests in a good and workmanlike manner
consistent with its past practices, and shall
carry on its business with respect to the
Interests in substantially the same manner as
before execution of this Agreement;
(ii) Seller shall, except for emergency action
taken in the face of risk to life, property
or the environment, submit to Buyer for prior
written approval, all requests for operating
or capital expenditures and all proposed
contracts and agreements relating to the
Interests that involve individual commitments
of more than $50,000 net to Seller's
interest;
(iii) Buyer acknowledges that Seller owns an
undivided interest in certain of the
Interests, and Buyer agrees that the acts or
omissions of the other working interest
owners who are not affiliated with Seller
shall not constitute a violation of the
provisions of this Agreement, nor shall any
action required by a vote of working interest
owners constitute such a violation so long as
Seller has voted its interest in a manner
that complies with the provisions of this
Agreement; and
(iv) notwithstanding anything to the contrary in
this Agreement, Seller shall have no
liability to Buyer for the incorrect payment
of delay rentals, royalties, shut-in
royalties or similar payments or for any
failure to make any such payments through
mistake or oversight unless caused by
Seller's gross negligence or willful
misconduct.
4.2 COVENANTS AND AGREEMENTS OF BUYER. Buyer covenants and agrees
with Seller that:
(a) Buyer shall for the period between the date of this
Agreement and Closing maintain its corporate status
and assure that, as of the Closing Date, it will not
be under any material corporate, legal or contractual
restriction that would prohibit or delay the timely
consummation of the transaction contemplated
hereunder.
(b) With respect to ▇▇▇▇▇ operated by Seller included in
the Interests assigned to Buyer at Closing, Buyer
shall, subject to the applicable terms of existing
operating agreements, take over operations as of 7:00
a.m. local time at the wellsite on the day after
Closing. Upon taking over operations, Buyer shall
post all necessary state, federal and local bonds and
shall assist Seller in having Seller's existing bonds
released, or in the alternative, having the ▇▇▇▇▇
operated by Buyer released from Seller's existing
bond. Seller shall cooperate (without any obligation
to spend funds doing so)
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with Buyer in Buyer's effort to be elected or
appointed operator of any Well for which Seller
currently acts as operator. To the extent that Seller
is unable to have its resignation as operator of any
of the Interests become effective as of Closing,
Buyer's operations of such Interests shall be
considered contract operations on behalf of Seller.
Buyer shall defend, indemnify, save and hold harmless
Seller, its affiliates, and its and their, officers,
directors, employees, and agents against all losses,
damages, claims, demands, costs, expenses,
liabilities, and sanctions of each and every
character, including without limitation, reasonable
attorneys' fees, court costs, and costs of
investigation or arbitration, that arise from or in
connection with Buyer's operation of such Interests
from and after the Closing.
5 TITLE MATTERS
5.1 DEFENSIBLE TITLE.
(a) The term "Defensible Title" shall mean such title,
whether held by Seller or by a third party for the
benefit of Seller, that, except for and subject to
the Permitted Encumbrances (as defined in Section
5.1(b) below):
(i) entitles Seller to receive as to each Well
set forth in Exhibit "A-1," as to the Proved
Producing ("PDP"), Proved Developed
Non-Producing ("PDNP") or Proved Undeveloped
("PUD") formations set forth on Exhibit "A-1"
not less than the "Net Revenue Interest" set
forth in such Exhibit for such ▇▇▇▇▇ and
formations;
(ii) obligates Seller to bear costs and expenses
relating to the maintenance, development and
operation of each Well set forth on Exhibit
"A-1", as to the PDP, PDNP, and PUD
formations set forth on Exhibit "A-1," in an
amount not greater than the "Working
Interest" set forth in such Exhibit for such
▇▇▇▇▇ and formations without a proportionate
increase in the Net Revenue Interest; and
(iii) is free and clear of material liens,
encumbrances and defects.
(b) In the case of federal, Indian, or state leases,
Seller's title may be in the nature of either record
title or federal lease operating rights.
(c) The term "Permitted Encumbrances," as used herein,
shall mean, as follows:
(i) lessors' royalties, overriding royalties,
unitization and pooling designations and
agreements, reversionary interests and
similar burdens to the extent such matters do
not operate to reduce the "Net Revenue
Interest" of a Well as to the PDP, PDNP and
PUD
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formations set forth on Exhibit "A-1" below
the net revenue interest set forth in Exhibit
"A-1" with respect to such ▇▇▇▇▇ and
formations;
(ii) required third-party consents to assignments
and similar agreements with respect to which
(A) waivers or consents are obtained from the
appropriate parties, or (B) the appropriate
time period for asserting such rights has
expired without an exercise of such rights,
and all preferential rights to purchase;
(iii) all rights to consent by, required notices
to, filings with, or other actions by
governmental entities in connection with the
sale or conveyance of oil and gas leases or
interests therein if the same are customarily
obtained subsequent to such sale or
conveyance;
(iv) easements, rights-of-way, servitudes,
permits, surface leases and other rights with
respect to surface operations, pipelines,
grazing, logging, canals, ditches, reservoirs
or the like and easements for streets,
alleys, highways, pipelines, telephone lines,
power lines, railways and other easements and
rights-of-way, on, over or in respect of any
of the Interests;
(v) materialmen's, mechanics', repairmen's,
employees', contractors', operators', tax and
other similar liens or charges arising in the
ordinary course of business incidental to
construction, maintenance or operation of any
of the Interests (A) if they have not been
filed pursuant to law, (B) if filed, they
have not yet become due and payable or
payment is being withheld as provided by law,
or (C) if their validity is being contested
in good faith in the ordinary course of
business by appropriate action; and
(vi) any other liens, charges, encumbrances,
contracts, agreements, instruments,
obligations, defects or irregularities of any
kind whatsoever affecting the Interests that
individually or in the aggregate are not such
so as to have a material effect upon and/or
do not prevent Seller from receiving the
proceeds of production, and that do not
operate to (A) reduce the Net Revenue
Interest of Seller in a Well, as to the PDP,
PDNP and PUD formations set forth on Exhibit
"A-1" below the net revenue interest of
Seller set forth on Exhibit "A-1" with
respect to such ▇▇▇▇▇ and formations or (B)
increase the Working Interest of Seller in
such ▇▇▇▇▇ and formations above that set
forth on Exhibit "A-1" without a
proportionate increase in the Net Revenue
Interest of Seller.
(vii) such Title Defects that Buyer has waived;
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(viii) rights of reassignment, to the extent any
exist as of the date of this Agreement, upon
the surrender or expiration of any lease;
(ix) the terms and conditions of all division
orders, pooling or unitization orders,
agreements or declarations;
(x) rights reserved to or vested in any
governmental authority to control or regulate
any of the Interests in any manner; and all
applicable laws, rules, regulations and
orders of general applicability in the area;
(xi) liens arising under operating agreements,
unitization and pooling agreements and
production sales contracts securing amounts
not yet due or, if due, being contested in
good faith in the ordinary course of
business;
(xii) all other liens, charges, encumbrances,
contracts, agreements, instruments,
obligations, defects and irregularities
affecting the Interests that will not
materially interfere with or detract from the
ownership, operation, value or use of the
Interests; such defects include, without
limitation
(1) as to producing Leases, those which
have not prevented the receipt of
production proceeds by Seller or its
predecessors in title without
suspense by a production purchaser
and as to which no challenge to
title has been raised on the basis
of such defect, so long as it can
reasonably be concluded either that
such challenge is unlikely or that
such challenge would be unsuccessful
by reason of statutes of limitation,
waiver, estoppel or other defenses,
or
(2) those described by an attorney's
title opinion as advisory or
waivable as a matter of business
judgment, or
(3) those in the nature of customary
defects expected to be encountered
in the area involved and customarily
acceptable to Buyer or other prudent
operators and interest owners in the
area, including, without limitation,
defects that have been cured by
possession under applicable statutes
of limitation, defects in the early
chain of title such as failure to
recite marital status in documents,
omission of heirship or succession
proceedings, lack of survey and
failure to record releases of liens,
production payments or mortgages
that have expired of their own terms
or which through the passage of time
or statute are no longer enforceable
or other defects that either as a
practical matter
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have not resulted or are not likely
to result in claims that will
materially adversely affect Buyer's
title or are considered waivable
under local bar association-approved
title standards or customary title
practices in the area;
(xiii) liens, if any, to be released at Closing in a
form reasonably acceptable to Buyer.
(d) The term "Title Defect" as used herein shall mean any
material encumbrance or defect in Seller's title to a
Well (expressly excluding Permitted Encumbrances),
that renders Seller's title to such Well less than
Defensible Title.
5.2 TITLE DEFECT ADJUSTMENTS.
(a) No adjustment to the Purchase Price for Title Defects
shall be made unless and until, and only to the
extent that, the value of Title Defects exceeds
$10,000 per Well and the aggregate value of all Title
Defects to the extent exceeding the foregoing
deductible exceeds a threshold of $200,000, except
that the foregoing deductible amount shall not apply
to any Title Defect that consists of a certain and
indisputable lesser net revenue interest than is
shown on Exhibit "A-1" (including, but not limited
to, clerical errors in the preparation of Exhibit
"A-1"), and with respect to which Title Defect either
(i) the proceeds of production are not being received
by Seller for its account or (ii) if proceeds are
being received by Seller for its account
notwithstanding the Title Defect, continuation of the
receipt of proceeds of production by Seller would be
unlawful.
(b) Buyer shall give Seller written notice of Title
Defects immediately upon discovering such defects,
but in no event after August 1, 1997. Such notice
shall include:
(i) a description of the Title Defect with
supporting documentation;
(ii) the Allocated Value of the Well affected by
the Title Defect; and
(iii) the amount by which Buyer believes the
Allocated Value of such Well has been reduced
because of such Title Defect.
(c) Buyer shall be conclusively deemed to have waived all
Title Defects of which Seller has not been given
timely notice by Buyer.
(d) Subject to the limitation contained in Section 5.2(a)
and offsets for Interest Additions as provided in
Section 5.5, a Well affected by a Title Defect and
the Leases comprising the production unit or
proration unit for the Well shall be excluded from
the Interests to be purchased by Buyer hereunder
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and the Final Purchase Price shall be reduced and
settled in accordance with Sections 2.2(b)iii and
10.1(a) by an amount equal to the Allocated Value of
such Well unless on or prior to the Closing Date:
(i) the Title Defect has been removed or cured;
(ii) Buyer agrees to waive the relevant Title
Defect and purchase the affected Interests
notwithstanding the defect;
(iii) Seller agrees to indemnify Buyer, to the
extent of the Allocated Value of the affected
Well, against all losses, costs, expenses and
liabilities with respect to such Title Defect
claim asserted in writing by a third party
within two years from the Closing Date (in
which case Buyer shall use, reasonable
diligence and care not to disclose
information or take any action that could
increase the likelihood that a claim
regarding the potential defect would be
asserted); or
(iv) Buyer and Seller agree to an amount by which
the Allocated Value of the Well has been
reduced and the Purchase Price is reduced by
such amount in accordance with Section 2.2.
5.3 PREFERENTIAL RIGHTS AND CONSENTS.
(a) Some of the Leases may be subject to preferential
rights to purchase in favor of third parties or third
party consents to assignment and notices of sale.
The form and content of all solicitations for the
waivers and consents affecting the Interests shall be
determined and prepared by Seller, but shall not be
inconsist with the terms of this Agreement.
(b) In the event a third party exercises an applicable
preferential right to purchase an Interest prior to
the Closing Date, the affected Interest shall not be
treated as a Title Defect, but shall be removed from
this Agreement and the Purchase Price shall be
adjusted by the Allocated Value of that Interest. If
any preferential right to purchase an Interest is
exercised after the Closing Date, such affected
Interest shall not be treated as a Title Defect, and
no adjustment shall be made on account of such
exercise. All Interests that are subject to
preferential rights to purchase that have not been
exercised as of the Closing Date shall be conveyed to
(and paid for by) Buyer at the Closing. If any such
preferential right is exercised after Closing, Buyer
shall convey such affected Interest to the party
exercising such right on the same terms and
conditions under which Seller conveyed such Interest
to Buyer. Buyer shall retain all amounts paid by the
party exercising such preferential right to purchase.
In the event of such exercise, Buyer shall prepare a
form of conveyance of such interests from Buyer to
such exercising party, such conveyance to be in form
and
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substance as provided in this Agreement, except that
such conveyance shall be made free and clear of all
liens, encumbrances, royalty interests, production
payments and other charges or defects created by,
through or under Buyer.
5.4 CASUALTY LOSS. If subsequent to the date of this Agreement,
but prior to the Closing, all or any material portion of an
Interest to be conveyed to Buyer at Closing is destroyed by
fire or other casualty, is taken in condemnation or under the
right of eminent domain or proceedings for such purposes are
pending or threatened, Buyer shall purchase such Interest
notwithstanding any such destruction, taking or pending or
threatened taking and the Purchase Price shall not be
adjusted. Seller shall, at the Closing, pay to Buyer all sums
paid to Seller by third parties by reason of the destruction
or taking of such Interest to be assigned to Buyer, and shall
assign, transfer and set over unto Buyer all of the right,
title and interest of Seller in and to any unpaid awards or
other payments from third parties arising out of the
destruction, taking or pending or threatened taking as to such
Interests to be conveyed to Buyer. Seller shall not
voluntarily compromise, settle or adjust any material amounts
payable by reason of any material destruction, taking or
pending or threatened taking as to the Interests to be
conveyed to Buyer without first obtaining the written consent
of Buyer. Buyer shall maintain in effect insurance covering
the Assets of the general types and limits of coverage as
Seller presently has in effect, such types and limits of
coverage having been previously disclosed to Buyer.
5.5 INTEREST ADDITIONS. If prior to Closing an inaccuracy in
Exhibits "A-1" or "A-2" is discovered that results in an
increase in value of any portion of the Leases or ▇▇▇▇▇, such
as a net revenue interest that is stated to be lower than
Seller's actual net revenue interest, the amount of the
increased value (a "Credit Adjustment") shall be credited
against any potential reduction in the Purchase Price or
Seller's indemnification obligations under any provision of
this Agreement.
5.6 TITLE MATTERS FOR BUYER PROPERTY. Similar provisions to those
set forth in paragraphs 5.1, 5.2, 5.3, 5.4 and 5.5 shall apply
to Seller for its purchase of the Buyer Property, except that
the deductible and the threshold set forth in 5.2(a) shall be
changed to $1,000 and $10,000 respectively.
6 ENVIRONMENTAL MATTERS
6.1 INSPECTION. Prior to the Closing Date, and subject to any
necessary third-party operator approval, Seller shall permit
Buyer and its representatives at reasonable times and at their
sole risk, cost and expense, to conduct reasonable inspections
of the Leases. Buyer shall not conduct any soil or water
tests on the Lands or relating to the Interests without the
express written consent of Seller. Buyer shall repair any
damage to the Leases resulting from such inspections and Buyer
shall indemnify and hold harmless Seller and its partners,
subsidiaries and affiliates and
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its and their respective officers, directors, employees and
agents from and against any and all losses or causes of action
arising from Buyer's and/or its representatives' inspection of
the Leases, including, without limitation, claims for personal
injuries or death of employees of the Buyer, its contractors,
agents, consultants and representatives, and property damages,
or employees of Seller, its contractors, agents, consultants
and representatives or third parties.
6.2 VIOLATION OF ENVIRONMENTAL LAWS. Buyer shall notify Seller in
writing on or before October 30, 1997, of any environmental
matters disclosed by its inspection that Buyer reasonably
believes in good faith constitutes a Violation of
Environmental Laws (as hereinafter defined) including with
such notice, a detailed description of the specific matter
that is an alleged Violation of Environmental Laws. For
purposes of this Agreement, the term "Environmental Laws"
shall mean all federal, state or local laws, statutes,
ordinances, rules and regulations of any governmental
authority pertaining to protection of the environment in
effect as of the Effective Time and as interpreted by court
decisions or administrative orders as of the Effective Time in
the jurisdiction in which such Interest is located and as
enforced by the applicable authorities. For purposes of this
Agreement, the term "Violation of Environmental Laws" shall
mean the material violation of or failure to meet specific
objective requirements or standards regarding the physical
condition of the ▇▇▇▇▇ and well sites (as opposed to reports,
plans or other matters that may be required by Environmental
Laws) that are clearly applicable to such Interests under
applicable Environmental Laws where such requirements or
standards are in effect as of the Effective Time, and the term
does not include good or desirable operating practices or
standards that may be employed or adopted by other oil or gas
well operators or recommended by a governmental authority.
Seller has heretofore provided to Buyer copies of two
environmental reports prepared for Buyer's predecessor in
connection with the predecessor's acquisition of certain of
the Interests (the "Environmental Reports"). All matters
referred to in the Environmental Reports are hereby expressly
agreed not to constitute Violations of Environmental Laws
under this Agreement.
6.3 REMEDIES FOR VIOLATION OF ENVIRONMENTAL LAW. On or before
December 30, 1997, with respect to each Violation of
Environmental Laws:
(a) Seller and Buyer may agree on an adjustment to the
Purchase Price which adjustment shall reflect the
cost to remedy such Violation of Environmental Law;
(b) At the election of Seller, Seller may agree to
remediate the condition at Seller's cost;
(c) Seller and Buyer may agree that Seller will indemnify
Buyer against all losses, costs, expenses, and
liabilities with respect to such Violation of
Environmental Laws asserted in writing by a third
party within two years from the Closing Date (in
which case Buyer shall use reasonable diligence and
care not to disclose information or take any action
that could increase
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the likelihood that a claim regarding the potential
violation would be asserted); or
(d) Seller and Buyer may agree to remove that portion of
the Interests from the Interests being conveyed
hereunder and adjust the Purchase Price accordingly
based on the Allocated Value of the Well(s)
associated with such Interests.
If the parties cannot agree on a course of action under (a) or
(c), and Seller does not elect to remediate under (b), the
option set forth in subsection 6.3(d) above shall apply. No
remedy for a Violation of Environmental Law shall be
applicable unless and then only to the extent that (i) each
such Violation of Environmental Law exceeds $10,000 and (ii)
the aggregate value of all Violations of Environmental Laws to
the extent exceeding the foregoing deductible exceeds
$150,000. If after Closing an adjustment to the Purchase
Price is made under 6.3(a) Seller shall within 10 days of
agreement regarding such adjustment make the agreed payment to
Buyer. If an Interest or portion thereof is removed from the
Interests being conveyed hereunder pursuant to 6.3(d), Buyer
and Seller shall within 10 days of agreement regarding such
removal prepare the appropriate assignments and make the
appropriate payments or accounting adjustments to each other,
including adjustments for revenues and costs for a Well if
necessary, such that Seller and Buyer are returned to the
position existing prior to this Agreement as if the removed
Interest had not been initially covered by this Agreement.
6.4 ENVIRONMENTAL MATTERS REGARDING BUYER PROPERTY.
Similar provisions as those set forth in paragraphs 6.1, 6.2
and 6.3 shall apply to Seller regarding the purchase of the
Buyer Property, except that the deductibles set forth at the
end of paragraph 6.3 shall be changed to $1,000 and $15,000
respectively.
7 ANTITRUST
7.1 If the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇
(▇▇▇ "▇▇▇ ▇▇▇") is applicable to this transaction, both
parties shall promptly file with the Federal Trade Commission
and the Department of Justice the required notifications,
reports and supplemental information to comply in all respects
with the requirements of the Act. All filing fees required of
"Acquiring Persons" as determined by the Act shall be paid by
Buyer.
8 CONDITIONS TO CLOSING
8.1 SELLER'S CONDITIONS. The obligations of Seller at the Closing
are subject to the satisfaction at or prior to the Closing of
the following conditions:
(a) All representations and warranties of Buyer contained
in this Agreement shall be true in all material
respects at and as of the Closing as if such
representations and warranties were made at and as of
the Closing Date, and Buyer shall have performed and
satisfied in all material respects all
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agreements required by this Agreement to be performed
and satisfied by Buyer at or prior to the Closing.
(b) No order shall have been entered by any court or
governmental agency having jurisdiction over the
parties or the subject matter of this Agreement that
restrains or prohibits the purchase and sale
contemplated by this Agreement and which remains in
effect at the time of such Closing.
(c) The Closing shall be permitted to occur without
violation of the HSR Act and the rules and
regulations of the Federal Trade Commission and the
Department of Justice thereunder.
8.2 BUYER'S CONDITIONS. The obligations of Buyer at the Closing
are subject to the satisfaction at or prior to the Closing of
the following conditions:
(a) All representations and warranties of Seller
contained in this Agreement shall be true in all
material respects at and as of the Closing Date as if
such representations and warranties were made at and
as of the Closing, and Seller shall have performed
and satisfied in all material respects all agreements
required by this Agreement to be performed and
satisfied by Seller at or prior to the Closing.
(b) No order shall have been entered by any court or
governmental agency having jurisdiction over the
parties or the subject matter of this Agreement that
restrains or prohibits the purchase and sale
contemplated by this Agreement and which remains in
effect at the time of such Closing.
(c) The Closing shall be permitted to occur without
violation of the HSR Act and the rules and
regulations of the Federal Trade Commission and the
Department of Justice thereunder.
9 CLOSING.
9.1 DATE OF CLOSING. Unless the parties agree otherwise in
writing and subject to the conditions stated in this
Agreement, the consummation of the transactions contemplated
hereby (the "Closing") shall be held on August 28, 1997. The
date the Closing actually occurs is called the "Closing Date."
9.2 PLACE OF CLOSING. The Closing shall be held at the offices of
Seller in Denver, Colorado.
9.3 CLOSING OBLIGATIONS. At the Closing, the following events
shall occur, each being a condition precedent to the others
and each being deemed to have occurred simultaneously with the
others:
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(a) Seller and Buyer shall execute, acknowledge and
deliver an Assignment, ▇▇▇▇ of Sale and Conveyance
(in sufficient counterparts to facilitate recording)
in substantially the form of Exhibit "F" attached
hereto, conveying to Buyer the Interests without
warranty of title except with respect to defects
created by, through or under Seller. As required,
assignment forms for federal, Indian, or state leases
shall be prepared by Seller and executed. Buyer
shall execute, acknowledge and deliver to Seller an
Assignment, ▇▇▇▇ of Sale and Conveyance (in
sufficient counterparts to facilitate recording) in
substantially the form of Exhibit "F" attached hereto
conveying to Seller the Buyer Property without
warranty of title except with respect to defects
created by, through or under Seller.
(b) Seller and Buyer shall execute and deliver a
settlement statement, prepared by Seller in
accordance with this Agreement and generally accepted
accounting principles (the "Preliminary Settlement
Statement") that shall set forth the Preliminary
Purchase Price and each adjustment and the
calculation of such adjustments used to determine
such amount. Seller shall provide Buyer with a draft
of the Preliminary Settlement Statement three days
prior to Closing for Buyer's review and approval.
The term "Preliminary Purchase Price" shall mean the
Purchase Price, adjusted as provided in Section 2.2,
using for such adjustments the best information then
available. The Preliminary Settlement Statement
shall also include similar adjustments regarding the
Buyer Property.
(c) Buyer shall deliver to Seller the Preliminary
Purchase Price in immediately available federal funds
by wire transfer to the account designated by Seller.
(d) Seller and Buyer shall execute, acknowledge and
deliver Transfer Orders or Letters in Lieu thereof,
directing all purchasers of production to make
payment to Buyer of proceeds attributable to
production after the Effective Time from the
Interests assigned to Buyer.
(e) Seller shall prepare such notices to third-party
operators of the change in ownership of the Interests
from Seller to Buyer and such notices of change in
operatorship for those ▇▇▇▇▇ operated by Seller for
which Buyer has taken over operations as are
reasonable and customary in the industry.
(f) Seller and Buyer shall execute, acknowledge and
deliver such other instruments and take such other
action as may be necessary to carry out their
respective obligations under this Agreement,
including such transfer orders, notices and other
instruments relating to the Buyer Property.
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10 OBLIGATIONS AFTER CLOSING
10.1 POST-CLOSING ADJUSTMENT PROCEDURE.
(a) As soon as practicable after the Closing Date, but no
later than 90 days after the Closing Date, Seller
shall prepare and deliver to Buyer, in accordance
with this Agreement and generally accepted accounting
principles, a statement (the "Final Settlement
Statement") setting forth each adjustment or payment
that was not finally determined as of the Closing
Date and showing the calculation of such adjustments.
Within 15 days after receipt of the Final Settlement
Statement, Buyer shall deliver to Seller a written
report containing any changes that Buyer proposes be
made to the Final Settlement Statement. The parties
shall undertake to agree with respect to the amounts
due pursuant to such post-closing adjustment no later
than 15 days after Seller has received Buyer's
proposed changes. The date upon which such agreement
is reached or upon which the "Final Purchase Price"
is established, shall be called the "Final Settlement
Date." If, the Final Purchase Price is more than the
Preliminary Purchase Price, Buyer shall pay in
immediately available federal funds the amount of
such difference to Seller or to Seller's account (as
designated by Seller). If the Final Purchase Price
is less than the Preliminary Purchase Price, Seller
shall pay in immediately available federal funds the
amount of such difference to Buyer or to Buyer's
account (as designated by Buyer). Payment by Buyer
or Seller shall be made within five days after the
Final Settlement Date. The Final Settlement
Statement shall also include the appropriate
adjustments for the Buyer Property.
10.2 FILES AND RECORDS. Within 30 days after the Closing Date,
Seller shall make available to Buyer originals of all of
Seller's files and records relating to the Interests and Buyer
shall make available to Seller originals of all of Buyer's
files and records relating to the Buyer Property, but
excluding any records or data that cannot be transferred
because of (i) prior legal restrictions, (ii) are proprietary
or confidential, or (iii) are subject to attorney/client
privilege. Buyer shall retain and make available to Seller
for seven full calendar years following the year in which
Closing occurs, in Buyer's main corporate office during normal
business hours, files and records relating to the Interests.
Buyer shall include this retention obligation in any
subsequent transfer of an Interest by Buyer.
10.3 FURTHER ASSURANCE. After Closing, Seller and Buyer shall
execute, acknowledge and deliver or cause to be executed,
acknowledged and delivered such instruments, and shall take
such other actions as may be necessary or advisable to carry
out their obligations under this Agreement and under any
document, certificate or other instrument delivered pursuant
hereto and to fully implement the intent of this Agreement.
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10.4 LIMITATIONS. NOTWITHSTANDING ANYTHING TO THE CONTRARY,
ARTICLE 6 SHALL BE THE SOLE AND EXCLUSIVE REMEDY THAT BUYER
SHALL HAVE AGAINST SELLER WITH RESPECT TO ANY MATTER OR
CIRCUMSTANCES RELATING TO ENVIRONMENTAL LAWS, THE RELEASE OF
MATERIALS INTO THE ENVIRONMENT, OR PROTECTION OF THE
ENVIRONMENT OR HEALTH. BUYER HEREBY RELEASES AND DISCHARGES
ANY AND ALL CLAIMS AT LAW OR IN EQUITY, KNOWN OR UNKNOWN,
WHETHER NOW EXISTING OR ARISING IN THE FUTURE, CONTINGENT OR
OTHERWISE, AGAINST SELLER WITH RESPECT TO ANY MATTER OR
CIRCUMSTANCE RELATING TO ENVIRONMENTAL LAWS, THE RELEASE OF
MATERIALS INTO THE ENVIRONMENT OR PROTECTION OF THE
ENVIRONMENT OR HEALTH. BUYER ACKNOWLEDGES THAT SELLER HAS NOT
MADE AND WILL NOT MAKE AND EXPRESSLY DISCLAIMS ANY
REPRESENTATION OR WARRANTY REGARDING ANY MATTER OR
CIRCUMSTANCE RELATING TO ENVIRONMENTAL LAWS, THE RELEASE OF
MATERIALS INTO THE ENVIRONMENT OR PROTECTION OF THE
ENVIRONMENT OR HEALTH. BUYER HEREBY AGREES TO ASSUME THE RISK
THAT THE INTERESTS MAY CONTAIN WASTE MATERIALS, INCLUDING
NATURALLY OCCURRING RADIOACTIVE MATERIALS, OR HAZARDOUS
SUBSTANCES; THAT ADVERSE PHYSICAL CONDITIONS, INCLUDING
SUBSURFACE CONDITIONS MAY EXIST; AND UNKNOWN ABANDONED OIL AND
GAS ▇▇▇▇▇, WATER ▇▇▇▇▇, SUMPS AND PIPELINES MAY BE PRESENT,
ALL OF WHICH MAY NOT HAVE BEEN REVEALED BY BUYER'S
INVESTIGATION.
10.5 ASSUMPTION OF OBLIGATIONS.
(a) ASSIGNMENT OF THE INTERESTS TO BUYER SHALL CONSTITUTE
AN EXPRESS ASSUMPTION BY BUYER OF, AND BUYER
EXPRESSLYAGREES TO PAY, PERFORM, FULFILL AND
DISCHARGE, ALL CLAIMS, COSTS, EXPENSES, LIABILITIES
AND OBLIGATIONSACCRUING OR RELATING TO THE OWNING,
DEVELOPING, EXPLORING, OPERATING AND MAINTAINING OF
THE INTERESTSCONVEYED TO BUYER AT THE CLOSING,
INCLUDING WITHOUT LIMITATION, ALL VIOLATIONS OF
ENVIRONMENTAL LAW AND ALL OBLIGATIONS ARISING UNDER
OPERATING AGREEMENTS, PRODUCT SALES AGREEMENTS AND
OTHER AGREEMENTS COVERING OR RELATING TO THE
INTERESTS, REGARDLESS OF THE NEGLIGENCE OF SELLER OR
ITS PREDECESSORS, AND REGARDLESS OF WHEN THE EVENTS
OCCURRED GIVING RISE TO SUCH MATTERS
(b) BUYER ACKNOWLEDGES THAT SELLER HAS NOT MADE, AND
SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES, ANY
REPRESENTATIONOR WARRANTY, EXPRESS OR IMPLIED,
RELATING TO THE CONDITION OF ANY REAL OR IMMOVABLE
PROPERTY, PERSONAL OR MOVABLE PROPERTY, EQUIPMENT,
INVENTORY, MACHINERY AND FIXTURES CONSTITUTING PART
OF THE ASSETS INCLUDING, WITHOUT LIMITATION, (i) ANY
IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (ii)
ANY IMPLIEDOR EXPRESS WARRANTY OF FITNESS FOR A
PARTICULAR PURPOSE, (iii) ANY IMPLIED OR EXPRESS
WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF
MATERIALS, (iv) ANY RIGHTS OF BUYER UNDER APPROPRIATE
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STATUTES TO CLAIM DIMINUTION OF CONSIDERATION OR
RETURN OF THE PURCHASE PRICE, (v) ANY IMPLIED OR
EXPRESS WARRANTY OF FREEDOM FROM REEHIBITORY VICES OR
DEFECTS OR OTHER VICES OR DEFECTS, WHETHER KNOWN OR
UNKNOWN, (vi)ANY IMPLIED OR EXPRESS WARRANTY OF
FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT, (vii)
ANY IMPLIED OR EXPRESSWARRANTY REGARDING
ENVIRONMENTAL LAWS, THE RELEASE OF MATERIALS INTO THE
ENVIRONMENT INCLUDING NATURALLYOCCURRING RADIOACTIVE
MATERIAL, OR PROTECTION OF THE ENVIRONMENT OR HEALTH,
IT BEING THE EXPRESS INTENTIONOF BUYER AND SELLER
THAT THE REAL OR IMMOVABLE PROPERTY, PERSONAL OR
MOVABLE PROPERTY, EQUIPMENT, INVENTOR, MACHINERY AND
FIXTURES SHALL BE CONVEYED TO BUYER AS IS AND IN
THEIR PRESENT CONDITION AND STATE OFREPAIR. BUYER
REPRESENTS TO SELLER THAT BUYER HAS MADE OR CAUSED TO
BE MADE SUCH INSPECTIONS WITH RESPECTTO THE REAL OR
IMMOVABLE PROPERTY, PERSONAL OR MOVABLE PROPERTY,
EQUIPMENT, INVENTORY, MACHINERY AND FIXTURES AS BUYER
DEEMS APPROPRIATE AND BUYER WILL ACCEPT THE REAL OR
IMMOVABLE PROPERTY, PERSONAL OR MOVABLEPROPERTY,
EQUIPMENT, INVENTORY, MACHINERY AND FIXTURES AS IS,
WHERE IS, IN THEIR PRESENT CONDITION AND STATE OF
REPAIR.
(c) SELLER HEREBY EXPRESSLY NEGATES AND DISCLAIMS, AND
BUYER HEREBY WAIVES AND ACKNOWLEDGES THAT SELLER HAS
NOT MAD, ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, RELATING TO (i) THE ACCURACY, COMPLETENESS
OR MATERIALITYOF ANY INFORMATION, DATA OR OTHER
MATERIALS (WRITTEN OR ORAL) FURNISHED TO BUYER BY OR
ON BEHALF OF SELLER; (ii) PRODUCTION RATES,
RECOMPLETION OPPORTUNITIES, DECLINE RATES, GEOLOGICAL
OR GEOPHYSICALDATA OR INTERPRETATIONS, THE QUALITY,
QUANTITY, RECOVERABILITY OR COST OF RECOVERY OF ANY
HYDROCARBONRESERVES, ANY PRODUCT PRICING ASSUMPTIONS,
OR THE ABILITY TO SELL OR MARKET ANY HYDROCARBONS
AFTER CLOSING, OR (iii) ANY OTHER MATTER EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT.
(d) THE PARTIES AGREE THAT, TO THE EXTENT REQUIRED BY
APPLICABLE LAW TO BE OPERATIVE, THE DISCLAIMERS OF
WARRANTIES CONTAINED IN THIS SECTION ARE
"CONSPICUOUS" DISCLAIMERS FOR THE PURPOSES OF ANY
APPLICABLE LAW, RULEOR ORDER. Notwithstanding
anything in this Agreement to the contrary, the
Interests are being sold by Seller to Buyer without
recourse, covenant or warranty of any kind,
expressed, implied or statutory except as
specifically set forth in the documents of conveyance
described in Section 9.3.
(e) Buyer shall assume all obligations with respect to
all "suspense accounts" and the beneficial owners
thereof, regardless of when such obligations
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arose. Buyer shall indemnify, defend, and hold
harmless Seller from the claims of any party arising
because of the non-payment or mispayment of such
suspense accounts. Seller shall provide without
warranty or representation its records regarding
payee's names, addresses and applicable amounts.
10.6 INDEMNIFICATION. From and after the Closing Date, Buyer and
Seller shall indemnify the other as follows:
(a) Seller shall defend, indemnify and save and hold
harmless Buyer, its officers, directors, employees
and agents, against all losses, damages, claims,
demands, suits, costs, expenses, liabilities and
sanctions of every kind and character, including,
without limitation, reasonable attorneys' fees, court
costs and costs of investigation or arbitration, that
arise from or in connection with any breach by Seller
of this Agreement.
(b) Buyer shall defend, indemnify and save and hold
harmless Seller, its affiliates, and its and their,
officers, directors, employees, and agents, against
all losses, damages, claims, demands, suits, costs,
expenses, liabilities and sanctions of every kind and
character, including, without limitation, reasonable
attorneys' fees, court costs and costs of
investigation or arbitration, arise from or in
connection with (i) any of the claims, costs,
expenses, liabilities and obligations assumed by
Buyer pursuant to Section 10.5, and/or (ii) any
breach by Buyer of this Agreement.
(c) Seller, on the one hand, and Buyer, on the other,
shall indemnify and hold each other harmless from any
claim or demand for commission or other compensation
by any broker, finder, agent, or similar intermediary
claiming to have been employed by or on behalf of
Seller or Buyer, as the case may be, and shall bear
the cost of legal fees and expenses incurred in
defending against any such claim.
(d) As may otherwise be set forth in this Agreement.
10.7 RECORDING. Buyer shall immediately after Closing send for
filing and recording with all appropriate governmental
entities the necessary originals and counterparts of the
assignments required in Section 9.3(a). Buyer shall promptly
provide Seller copies of the recorded assignment(s) upon
receipt by Buyer. Buyer shall be responsible for all filings
with state, Indian and federal agencies for change of
operator, and shall promptly provide Buyer with the approved
copies of all such filings.
11 TERMINATION OF AGREEMENT
11.1 TERMINATION. This Agreement and the transactions contemplated
herein may be terminated in the following instances:
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(a) By Seller, if any of the conditions set forth in
Section 8.1 are not completely satisfied in all
material respects or waived by Seller as of the
Closing Date;
(b) By Buyer, if any of the conditions set forth in
Section 8.2 are not satisfied in all material
respects or waived by Buyer as of the Closing Date;
and
(c) At any time by the mutual written agreement of Buyer
and Seller.
11.2 LIABILITIES UPON TERMINATION OR BREACH.
(a) In the event of the termination of this Agreement by
Seller in accordance with subsection 11.1(a), Seller
shall have no liability hereunder of any nature
whatsoever to Buyer, including any liability for
damages. If Buyer terminates this Agreement in
accordance with subsection 11.1(b) above, it shall
have no liability hereunder of any nature whatsoever
to the Seller including any liability for damages and
Seller shall return to Buyer the Buyer Common Stock
delivered as part of the ▇▇▇▇▇▇▇ Money pursuant to
Exhibits "H" and "I" attached hereto. If Buyer
terminates or fails to perform this Agreement other
than in accordance with subsection 11.1(b), or, if
Seller terminates this Agreement in accordance with
subsection 11.1(a), Seller shall retain the ▇▇▇▇▇▇▇
Money and Buyer shall have no further liability
hereunder of any nature whatsoever to the Seller
including any liability for damages.
(b) Except as provided above in this subsection 11.2,
nothing contained herein shall be construed to limit
Seller's or Buyer's legal or equitable remedies in
the event of breach of this Agreement.
12 MISCELLANEOUS
12.1 EXHIBITS. The Exhibits referred to in this Agreement are
hereby incorporated by reference into and constitute a part of
this Agreement.
12.2 RECORDING AND FILING FEES. Buyer shall pay all documentary,
filing, and recording fees required in connection with the
filing and recording of the Assignment required in Section
9.3(a), and all other filings required or requested under this
Agreement, including change of operator forms and other forms
filed with governmental agencies. Except as otherwise
specifically provided for in this Agreement, all fees, costs
and expenses incurred by Buyer or Seller in negotiating this
Agreement or in consummating the transactions contemplated by
this Agreement shall be paid by the party incurring the same,
including, without limitation, legal, accounting and
consulting fees, costs and expenses.
12.3 SALES TAXES. At the Closing, Buyer and Seller may agree on an
amount representing state and local sales or use taxes,
attributable to the transactions
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contemplated herein, and applicable to that portion of the
Interests which is tangible personal property and Buyer shall
pay such amount to Seller at Closing. Seller shall remit any
such amounts received at Closing from Buyer in this regard to
the appropriate taxing authority in accordance with applicable
law. Buyer shall defend, indemnify, save and hold harmless
Seller, its affiliates, and its and their, officers,
directors, employees, and agents against all losses, damages,
claims, demands, costs, expenses, liabilities, and sanctions
of each and every character, including without limitation,
reasonable attorneys' fees, court costs, and costs of
investigation or arbitration, that arise from or in connection
with any sales or use tax assessed against Seller by any
taxing authority for any sales or use of taxes assessed
against Seller by any taxing authority relating to the
Interests sold that is in addition to the amounts paid to
Seller at Closing. Seller shall be responsible for any
penalties, interest and attorney's fees relating to the amount
paid by Buyer to Seller at Closing if Seller does not timely
remit such amount to the appropriate taxing authority. Should
this purchase and sale constitute an isolated or occasional
sale and not be subject to sales or use tax with any of the
taxing authorities having any jurisdiction over the
transaction, no sales or tax will be collected by Seller from
Buyer at Closing. Seller shall cooperate with Buyer in
demonstrating that the requirements for an isolated or
occasional sale or any other sales tax exemption have been
met.
12.4 NOTICES. All notices and communications required or
transmitted under this Agreement 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:
IF TO SELLER: HSRTW, INC.
c/o HS Resources, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President, Acquisitions & Divestitures
WITH A COPY TO:
General Counsel
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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IF TO BUYER: GOTHIC ENERGY CORPORATION
Suite 700
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
President
Any party may, by written notice so delivered to the other
party, change the address or individual to which delivery
shall thereafter be made.
12.5 AMENDMENTS. This Agreement may not be amended nor any rights
hereunder waived, except by an instrument in writing signed by
both parties.
12.6 ASSIGNMENT. Neither party may assign all or any portion of
its rights or delegate all or any portion of its duties
hereunder unless it continues to remain liable for the
performance of its obligations hereunder and obtains the prior
written consent of the other party, which consent shall not be
unreasonably withheld. For any assignment of any right or
obligation hereunder to be enforceable, the assignee thereof
shall first have agreed to fully assume such right or
obligation in writing, and such writing shall expressly set
forth that said assignment is subject to the terms and
conditions of this Agreement. Any attempted assignment, which
fails to fully comply with the express terms of this
subsection 12.6 shall be void ab initio.
12.7 ANNOUNCEMENTS. Seller and Buyer shall consult with each other
with regard to all press releases and other announcements
issued after the date of this Agreement and prior to the
Closing Date concerning this Agreement or the transactions
contemplated hereby and, except as may be required by
applicable laws, rules and regulations of any governmental
agency or stock exchange, neither Buyer nor Seller shall issue
any such press release or other publicity without the prior
written consent of the other party, which consent shall not be
unreasonably withheld.
12.8 COUNTERPARTS. This Agreement may be executed by Buyer and
Seller in any number of counterparts, each of which shall be
deemed an original instrument, but all of which together shall
constitute but one and the same instrument.
12.9 GOVERNING LAW. This Agreement and the transactions
contemplated hereby shall be construed in accordance with, and
governed by, the laws of the state of Colorado.
12.10 ENTIRE AGREEMENT. This Agreement (including the Exhibits
hereto) constitutes the entire understanding among the parties
with respect to the subject matter hereof, superseding all
negotiations, prior discussions and prior agreements,
excluding the Confidentiality Agreement dated January 13,
1997, which shall terminate at and as of the Closing.
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12.11 PARTIES IN INTEREST. This Agreement shall be binding upon,
and shall inure to the benefit of, the parties hereto, and
their respective successors and permitted assigns, and nothing
contained in this Agreement, express or implied, is intended
to confer upon any other person or entity any benefits, rights
or remedies.
12.12 SURVIVAL. The representations of Seller set forth in
paragraph 3.1 and covenants of Seller set forth in paragraph
4.1 shall not survive Closing. Otherwise the representations,
warranties, covenants, agreements and indemnities provided for
in this Agreement shall survive Closing in accordance with
their terms. No waiver, release, or forbearance of the
application of a provision of this Agreement in any given
circumstance shall operate as a waiver, release, or
forbearance as to any other circumstance. If the Closing
occurs, all Conditions to Closing shall be deemed to have been
satisfied or waived, and, after Closing, neither party shall
have any liability whatsoever to the other arising out of,
resulting from or attributable to any such Conditions to
Closing, regardless of whether such Conditions to Closing
were, in fact, satisfied or waived.
12.13 ARBITRATION.
(a) All disputes arising out of or in connection with
this Agreement, or any determination required to be
made by Buyer or Seller as to which the parties
disagree, shall be settled by arbitration in Denver,
Colorado. The arbitration shall be conducted in
accordance with the commercial arbitration rules of
the American Arbitration Association. Any award by
the arbitrator(s) shall be final, binding and not
appealable, and judgment may be entered thereon in
any court of competent jurisdiction.
12.14 ACTUAL KNOWLEDGE. The term "actual knowledge of the Seller,"
or any similar phrase, shall mean the actual present knowledge of Seller's
officers and Managers who are directly involved in the negotiation of this
Agreement.
Executed as of the date first above mentioned.
SELLER:
HSRTW, INC.
--------------------------------------
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President, Acquisitions &
Divestitures
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HORIZON GAS PARTNERS, L.P.
BY: HORIZON NATURAL RESOURCES, INC.
GENERAL PARTNER
-----------------------------------
By: R. ▇▇▇▇▇▇▇ ▇▇▇▇
Title: Vice-President
BUYER:
GOTHIC ENERGY CORPORATION
-----------------------------------
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: President
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