SAN ▇▇▇▇ PARTNERS, L.L.C.
PURCHASE AGREEMENT
by
DOMINION ENERGY, INC., as Buyer
and
▇'▇▇▇▇▇▇▇▇ OIL & GAS COMPANY, INC., et al., as Sellers
Dated: JANUARY 19, 1999,
BUT EFFECTIVE AS OF
JANUARY 1, 1999
TABLE OF CONTENTS
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Page
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1. DEFINITIONS...................................................... 1
2. SALE AND TRANSFER OF LLC UNITS; CLOSING.......................... 11
2.1 LLC UNITS................................................. 11
2.2 CONSIDERATION............................................. 11
2.2.1 TOTAL CONSIDERATION.............................. 11
2.2.2 CASH CONSIDERATION............................... 11
2.2.3 CONTINGENT CONSIDERATION......................... 13
2.2.4 RETAINED INTEREST IN INFILL ▇▇▇▇▇................ 13
2.3 CLOSING................................................... 14
2.4 CLOSING OBLIGATIONS....................................... 14
2.5 THE DEVON OPTION.......................................... 15
2.6 PURCHASE OF REMAINING ROYALTY INTERESTS................... 15
2.6.1 LIQUIDATION OF THE TRUST......................... 15
2.6.2 REQUIRED BID OF THE COMPANY...................... 16
2.6.3 PURCHASE FOR 105% OF HIGHEST ACCEPTABLE OFFER.... 16
2.6.4 SELLERS' OBLIGATION TO REPURCHASE................ 17
2.6.5 STANDSTILL....................................... 18
3. REPRESENTATIONS AND WARRANTIES OF SELLERS........................ 19
3.1 ORGANIZATION AND GOOD STANDING........................... 19
3.2 AUTHORITY; NO CONFLICT................................... 19
3.3 CAPITALIZATION........................................... 20
3.4 FINANCIAL STATEMENTS..................................... 21
3.5 BOOKS AND RECORDS........................................ 21
3.6 TITLE TO PROPERTIES; ENCUMBRANCES........................ 21
3.7 NO UNDISCLOSED LIABILITIES............................... 22
3.8 TAXES.................................................... 22
3.9 NO MATERIAL ADVERSE CHANGE............................... 23
3.10 EMPLOYEES................................................ 23
3.11 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS........................................... 23
3.12 LEGAL PROCEEDINGS; ORDERS................................ 24
3.13 ABSENCE OF CERTAIN CHANGES AND EVENTS.................... 25
3.14 CONTRACTS; NO DEFAULTS................................... 26
3.15 INSURANCE................................................ 27
3.16 ENVIRONMENTAL MATTERS.................................... 28
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3.17 DISCLOSURE............................................... 29
3.18 AFFILIATE CONTRACTS...................................... 29
3.19 BROKERS OR FINDERS....................................... 29
3.20 SECTION 29 TAX CREDIT ▇▇▇▇▇.............................. 30
3.21 CERTAIN PRODUCTION MATTERS............................... 30
3.22 SEC FILINGS.............................................. 30
3.23 BURLINGTON PURCHASE AGREEMENT............................ 30
4. REPRESENTATIONS AND WARRANTIES OF BUYER.......................... 31
4.1 ORGANIZATION AND GOOD STANDING........................... 31
4.2 AUTHORITY; NO CONFLICT................................... 31
4.3 INVESTMENT INTENT........................................ 31
4.4 CERTAIN PROCEEDINGS...................................... 31
4.5 BROKERS OR FINDERS....................................... 32
4.6 FINANCING................................................ 32
4.7 ACKNOWLEDGMENTS.......................................... 32
5. INDEMNIFICATION; REMEDIES........................................ 33
5.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY
KNOWLEDGE................................................ 33
5.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS........ 33
5.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER.......... 34
5.4 LIMITATIONS ON SELLERS' LIABILITY........................ 34
5.5 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS........ 36
6. POST-CLOSING COVENANTS........................................... 37
6.1 SECURITIES FILINGS....................................... 37
6.2 PREPARATION AND FILING OF 1998 TAX RETURN................ 37
6.3 ASSISTANCE IN CONNECTION WITH TRANSITION MATTERS AND
THE PURCHASE OF THE REMAINING ROYALTY INTERESTS.......... 37
7. GENERAL PROVISIONS............................................... 37
7.1 EXPENSES................................................. 37
7.2 PUBLIC ANNOUNCEMENTS..................................... 38
7.3 SELLERS' REPRESENTATIVE; NOTICES......................... 38
7.4 JURISDICTION; SERVICE OF PROCESS......................... 39
7.5 FURTHER ASSURANCES....................................... 39
7.6 WAIVER................................................... 39
7.7 ENTIRE AGREEMENT AND MODIFICATION........................ 40
7.8 DISCLOSURE LETTER........................................ 40
7.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS....... 40
7.10 SEVERABILITY............................................. 41
7.11 SECTION HEADINGS, CONSTRUCTION........................... 41
7.12 TIME OF ESSENCE.......................................... 41
7.13 GOVERNING LAW............................................ 41
7.14 COUNTERPARTS............................................. 41
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SAN ▇▇▇▇ PARTNERS, L.L.C.
PURCHASE AGREEMENT
This Purchase Agreement ("Agreement") is made January 19, 1999, but
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effective as of January 1, 1999, by Dominion Energy, Inc., a Virginia
corporation ("Buyer"), ENCAP Energy Capital Fund III, L.P., a Texas limited
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partnership, ENCAP Energy Acquisition III-B, Inc., a Texas corporation, ECIC
Corporation, a Texas corporation, BOCP Energy Partners, L.P., a Texas limited
partnership, First Union Investors, Inc., a North Carolina corporation,
▇'▇▇▇▇▇▇▇▇ Oil & Gas Company, Inc., a Texas corporation, ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
an individual resident in Houston, Texas, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III, an individual
resident in Houston, Texas, ▇▇▇▇▇ ▇. ▇▇▇▇▇ Funding, LLC, a Texas limited
liability company, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, an individual resident in Houston, Texas,
and Andover Group, Inc., a Texas corporation (all of the above listed parties,
other than Buyer, are called herein collectively "Sellers" and individually
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"Seller").
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RECITALS
Sellers desire to sell, and Buyer desires to purchase, all of the issued
and outstanding units (the "LLC Units"), regardless of type, of limited
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liability company membership interests of San ▇▇▇▇ Partners, L.L.C., a Texas
limited liability company (the "Company") and become a member of the Company as
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a result thereof, for the consideration and on the terms set forth in this
Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"Accounting Firm"--As defined in Section 2.2.2 of this Agreement.
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"AFE"--As defined in Section 2.2.4 of this Agreement.
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"Agreed Rate"--a floating per annum rate of interest equal to the ninety
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(90) day federal treasury ▇▇▇▇ rate as set forth in the Key Interest Rates table
of the Wall Street Journal for each week during the calculation period.
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"Agreement"--as defined in the first paragraph of this Agreement.
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"Applicable Contract"--any Contract (a) under which the Company has or may
---------------------
acquire any rights, (b) under which the Company has or may become subject to any
obligation or liability, including, without limitation, authorities for
expenditures and joint operating agreements, or (c) by which the Company or any
of the assets owned or used by it is or may become bound.
"Assets"--all assets of the Company, including without limitation the
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following: (i) the New Mexico Properties, (ii) all other rights, benefits,
duties and obligations acquired by the company pursuant to the Burlington
Purchase Agreement including, without limitation, rights in, to and under the
Unit Agreement, Unit Operating Agreement, Leases, Equipment, Trust Agreement and
the Net Profits Conveyance (as each of the foregoing are defined in the
Burlington Purchase Agreement), (iii) all rights, benefits, duties and
obligations of the Company in and to the Burlington Purchase Agreement, (iv) the
South Texas Properties, (v) 5,702,968 Trust Units, (vi) all Records of the
Company, and (vii) all Contracts to which the Company is a party.
"Best Efforts"--the efforts that a prudent Person desirous of achieving a
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result would use in similar circumstances to ensure that such result is achieved
as expeditiously as possible.
"Breach"--a "Breach" of a representation, warranty, covenant, obligation,
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or other provision of this Agreement or any instrument delivered pursuant to
this Agreement will be deemed to have occurred if there is or has been (a) any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision, or (b) any
claim (by any Person) or other occurrence or circumstance that is or was
inconsistent with such representation, warranty, covenant, obligation, or other
provision, and the term "Breach" means any such inaccuracy, breach, failure,
claim, occurrence, or circumstance.
"Broker Letter"--As defined in Section 3.19.
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"Burlington Purchase Agreement"--that certain Purchase and Sale Agreement
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dated October 21, 1998 between Burlington Resources Oil & Gas Company and the
Company.
"Buyer"--as defined in the first paragraph of this Agreement.
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"Cash Consideration"-- as defined in Section 2.2.1.
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"Closing"--as defined in Section 2.3.
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"Closing Date"--the date and time as of which the Closing actually takes
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place.
"Company"--as defined in the Recitals of this Agreement.
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"Company's Bid Distribution"--as defined in Section 2.6.2.
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"Consent"--any approval, consent, ratification, waiver, or other
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authorization (including any Governmental Authorization).
"Contemplated Transactions"--all of the transactions contemplated by this
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Agreement, including:
(a) the sale of the LLC Units by Sellers to Buyer;
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(b) the performance by Buyer and Sellers of their respective covenants and
obligations under this Agreement; and
(c) Buyer's acquisition and ownership of the LLC Units, admission as the
sole member of the Company and exercise of control over the Company.
"Contingent Consideration" -- As defined in Section 2.2.3 of this
--------------------------
Agreement.
"Contract" -- any agreement, contract, obligation, promise, or undertaking
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(whether written or oral and whether express or implied) that is legally
binding.
"Damages" -- as defined in Section 5.2.
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"Devon" -- as defined in Section 2.5.
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"Devon Agreement" -- as defined in Section 2.5.
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"Devon Holdback Amount" -- the amount set forth in Section 2.5(d) of the
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Disclosure Letter.
"Devon Interest" -- as defined in Section 2.5.
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"Devon Option" -- as defined in Section 2.5.
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"Devon Payment" -- the amount paid by Devon to the Company if Devon
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exercises the Devon Option.
"Devon Shortfall" -- as defined in Section 2.5.
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"Disclosure Letter" -- the disclosure letter delivered by Sellers to Buyer
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concurrently with the execution and delivery of this Agreement.
"Encumbrance" -- any charge, claim, community property interest, condition,
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equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
"Environment" -- soil, land surface or subsurface strata, surface waters
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(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"Environmental Assessment" -- the Phase I Environmental Site Assessment
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Report, 121 Sites in the Northeast ▇▇▇▇▇▇ Unit San ▇▇▇▇ and Rio Arriba Counties,
New Mexico, dated
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December 14, 1998 and Addendum No. 1, dated December 15, 1998 prepared by AGRA
Earth & Environmental ("AGRA") together with letter dated January 6, 1994 from
AGRA to the Company.
"Environmental, Health, and Safety Liabilities"--any cost, damages,
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expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions (including
on-site or off-site contamination, occupational safety and health, and
regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational Safety
and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remediation or response
actions ("Cleanup") required by applicable Environmental Law or Occupational
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Safety and Health Law (whether or not such Cleanup has been required or
requested by any Governmental Body or any other Person) and for any natural
resource damages; or
(d) any other compliance, corrective, investigative, or remedial measures
required under Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the types
of activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. (S) 9601 et seq., as amended
("CERCLA").
"Environmental Law"--any Legal Requirement that requires or relates to:
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(a) advising appropriate authorities, employees, and the public of intended
or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of pollutants
or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and used so
that they do not present unreasonable risks to human health or the Environment
when used or disposed of;
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(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the transportation
of hazardous substances, pollutants, oil, or other potentially harmful
substances;
(g) cleaning up pollutants that have been released, preventing the threat
of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them, for
damages done to their health or the Environment, or permitting self-appointed
representatives of the public interest to recover for injuries done to public
assets.
"Exchange Act"--as defined in Section 3.5 hereof.
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"Final Adjusted Base Price"--as defined in Section 2.2.2.
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"Final Adjustment"--as defined in Section 2.2.2.
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"Final Repurchase Amount"--as defined in Section 2.6.4(c).
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"Final Settlement Statement"--as defined in Section 2.2.2.
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"Fruitland Coal Formation" --the coal seam with vertical limits comprising
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all coal seams within the equivalent of the stratigraphic interval from a depth
of approximately 2,450 feet to 2,880 feet as shown on the Gamma Ray/Bulk Density
Log from Amoco Production Company's ▇▇▇▇▇▇▇▇▇ Gas Company "B" Well No. 1 located
1,110 feet from the South line and 1,185 feet from the West line of Section 28,
Township 32 North, Range 10 West, NMPM, San ▇▇▇▇ County, New Mexico.
"GAAP"--United States generally accepted accounting principles in effect
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from time to time.
"Gathering Agreement"--the Gas Gathering Dehydrating and Treating Agreement
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dated May 3, 1990 between Meridian Oil Gathering, Inc. and Meridian Oil Trading,
Inc., as amended to date.
"Governmental Authorization"--any approval, consent, license, permit,
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waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"Governmental Body"--any:
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(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
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(c) governmental or quasi-governmental authority of any nature (including
any governmental agency, branch, department, official, or entity and any court
or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
"Hazardous Materials"--any waste or other substance that is listed,
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defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof.
"Highest Acceptable Offer"--pursuant to Section 9.03(e) of the Trust
--------------------------
Agreement, after termination of the Trust, the highest offer, net of any
commissions or other fees payable by the Trust, made for the purchase of the
Remaining Royalty Interests.
"Indemnified Persons"--as defined in Section 5.2.
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"Infill Well Provisions"--as defined in Section 2.2.4.
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"Infill ▇▇▇▇▇"--all ▇▇▇▇▇ drilled in the Northeast ▇▇▇▇▇▇ Unit after the
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date hereof as a result of a change to existing spacing regulation for the
Fruitland Coal Formation or a change allowing additional ▇▇▇▇▇ to be drilled on
a drilling or spacing unit for the Fruitland Coal Formation, in each case after
the date hereof, together with all replacement ▇▇▇▇▇ drilled for any such
additional ▇▇▇▇▇.
"IRC"--the Internal Revenue Code of 1986 or any successor law, and
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regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS"--the United States Internal Revenue Service or any successor agency,
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and, to the extent relevant, the United States Department of the Treasury.
"Knowledge"--an individual will be deemed to have "Knowledge" of a
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particular fact or other matter if:
(a) such individual is actually aware of such fact or other matter; or
(b) a prudent individual could be expected to discover or otherwise become
aware of such fact or other matter in the course of conducting a reasonably
comprehensive investigation concerning the existence of such fact or other
matter.
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer, partner, member, executor, or trustee
of such Person (or in any similar capacity) has, or at any time had, Knowledge
of such fact or other matter.
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"Legal Requirement"--any federal, state, local, municipal, foreign,
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international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"LLC Units"--as defined in the Recitals of this Agreement.
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"Net Profits Conveyance"--that certain Net Profits Interest Conveyance
------------------------
dated as of May 1, 1993 from Meridian Oil Production Inc. in favor of the Trust.
"New Mexico Properties"-- all of the Company's working and net revenue
-----------------------
interest in and to the Northeast ▇▇▇▇▇▇ Unit as more particularly set forth in
Section 1 of the Disclosure Letter.
"Northeast ▇▇▇▇▇▇ Unit"--the unit formed for the exploration and production
-----------------------
of hydrocarbons from the Fruitland Coal Formation pursuant to that certain Unit
Agreement for the Development and Operation of the Northeast ▇▇▇▇▇▇ Unit Area
dated July 16, 1951, recorded in Book 182, Page 52 of the real property records
of San ▇▇▇▇ County, New Mexico and Volume 11, Page 361 of the real property
records of Rio Arriba County, New Mexico.
"Order"--any award, decision, injunction, judgment, order, ruling,
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subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"Ordinary Course of Business"--an action taken by a Person will be deemed
-----------------------------
to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person and is
taken in the ordinary course of the normal day-to-day operations of such Person;
(b) such action is not required to be authorized by the board of directors
of such Person (or by any Person or group of Persons exercising similar
authority); and
(c) such action is similar in nature and magnitude to actions customarily
taken, without any authorization by the board of directors (or by any Person or
group of Persons exercising similar authority), in the ordinary course of the
normal day-to-day operations of other Persons that are in the same line of
business as such Person.
"Organizational Documents"--(a) the articles or certificate of
--------------------------
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; (e) any limited
liability company articles of organization, certificate of organization and
regulations; and (f) any amendment to any of the foregoing.
"Permitted Encumbrances"--As defined in Section 3.6 of this Agreement.
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"Person"--any individual, corporation (including any non-profit
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corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"Preliminary Adjusted Base Price"--as defined in Section 2.2.2.
---------------------------------
"Preliminary Adjustment"--as defined in Section 2.2.2.
------------------------
"Preliminary Closing Statement"-- as defined in Section 2.2.2.
-------------------------------
"Proceeding"--any action, arbitration, audit, hearing, investigation,
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litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Properties"--the New Mexico Properties and South Texas Properties,
------------
collectively.
"Records"--all lease files, land files, well files, gas and oil sales
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contract files, gas treating, gathering and processing files, division order
files, abstracts, title opinions, land surveys, technical information, insurance
policies and bonds, contracts, evidence that Taxes have been paid, computer
sensible copies of all computer records, written plans for exploration and
development, applications, inspection reports, environmental impact statements,
assessments and studies, permits, licenses, orders, consents, and all other
books, records, intangibles, files, maps and accounting records with respect to
the Properties or the business of the Company to the extent owned by or under
the control of the Company or Sellers..
"Related Person"--with respect to a particular individual:
----------------
(a) each other member of such individual's Family (as hereinafter defined);
(b) any Person that is directly or indirectly controlled by such individual
or one or more members of such individual's Family;
(c) any Person in which such individual or members of such individual's
Family hold (individually or in the aggregate) a Material Interest (as
hereinafter defined); and
(d) any Person with respect to which such individual or one or more members
of such individual's Family serves as a director, officer, partner, executor, or
trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person;
(b) any Person that holds a Material Interest in such specified Person;
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(c) each Person that serves as a director, officer, partner, executor, or
trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material Interest;
(e) any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or (c).
For purposes of this definition, (a) the "Family" of an individual includes
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(i) the individual, (ii) the individual's spouse and former spouses, (iii) any
other natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other natural person who resides with
such individual, and (b) "Material Interest" means direct or indirect beneficial
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ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of voting securities or other voting interests representing at least 10% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 10% of the outstanding equity securities or
equity interests in a Person.
"Remaining Royalty Holdback Amount"--$6,194,064.
-----------------------------------
"Remaining Royalty Interests"--all of the Royalty Interests owned by the
-----------------------------
Trust on the date of termination of the Trust pursuant to Section 9.03(b) of the
Trust Agreement.
"Representative"--with respect to a particular Person, any director,
----------------
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"Repurchase Amount"--as defined in Section 2.6.4 hereof.
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"Repurchase Final Settlement Statement"--as defined in Section 2.6.4(c)
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hereof.
"Repurchase Settlement Statement Delivery Date"--as defined in Section
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2.6.4(c) hereof.
"Required Bid Amount"--as defined in Section 2.6.2 of this Agreement.
---------------------
"Retained Interest"--as defined in Section 2.2.4 of this Agreement.
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"Royalty Interests"--has the same meaning given such term in Article II of
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Net Profit Conveyance.
"SEC Documents"--As defined in Section 3.22.
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"Securities Act"--the Securities Act of 1933 or any successor law, and
----------------
regulations and rules issued pursuant to that Act or any successor law.
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"Sellers"--as defined in the first paragraph of this Agreement.
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"Sellers' Account"--as defined in Section 2.2.1 of this Agreement.
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"Sellers' Representative"--▇'▇▇▇▇▇▇▇▇ Oil & Gas Company, Inc., a Texas
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corporation, or upon thirty (30) days prior written notice to Buyer, such other
Person as shall be designated by Sellers.
"Settlement Statement Delivery Date"--As defined in Section 2.2.2 of this
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Agreement.
"South Texas Properties"-- all, right, title and interest of the Company in
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and to the properties located in Goliad, Kleberg, ▇▇▇ ▇▇▇▇ and Lavaca Counties
in the State of Texas as more particularly set forth in Section 1 of the
Disclosure Letter.
"Special Distribution"--as defined in the Trust Agreement.
----------------------
"Subsidiary"--with respect to any Person (the "Owner"), any corporation or
------------ -----
other Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of the Company.
"Taxes"--all federal, foreign, state, local or other net or gross income
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(whether measured by or based on income), gross receipts, profits, capital,
wealth, social security, sales, use, stamp, documentary, transfer, occupation,
environmental, service, rental, lease, real property gains or transfer, ad
valorem, property (including in-lieu-of taxes), value added, franchise,
production, severance, withholding, payroll, employment, excise or similar
taxes, assessments, duties, fees, levies or other governmental charges, together
with any interest thereon, any penalties, additions to tax or additional amounts
with respect thereto and any interest in respect of such penalties, additions or
additional amounts.
"Tax Return"--any return (including any information return), report,
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statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Taxes or in connection with the administration, implementation, or
enforcement of or compliance with any Legal Requirement relating to any Taxes.
"Threatened"--a claim, Proceeding, dispute, action, or other matter will be
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deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
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"Trigger Date"--As defined in Section 2.6.4 of this Agreement.
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"Trust"--Burlington Resources Coal Seam Gas Royalty Trust created pursuant
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to the Trust Agreement.
"Trust Agreement"--the Trust Agreement of Burlington Resources Coal Seam
-----------------
Gas Royalty Trust dated May 1, 1993 among Meridian Oil Production Inc.,
Burlington Resources Inc, Mellon Bank (DE) National Association, and NationsBank
of Texas, N.A.
"Trust Units"--certificated, undivided pro rata fractional interests in the
-------------
beneficial rights of the Trust, as determined pursuant to the Trust Agreement.
"Unadjusted Base Price"--$90,176,164.
-----------------------
"Unresolved Claim"--As defined in Section 2.7.
------------------
2. SALE AND TRANSFER OF LLC UNITS; CLOSING
2.1 LLC UNITS
Subject to the terms and conditions of this Agreement, at the Closing,
Sellers will sell and transfer the LLC Units to Buyer, and Buyer will purchase
the LLC Units from Sellers.
2.2 CONSIDERATION
2.2.1 TOTAL CONSIDERATION
The total consideration for the LLC Units is the Unadjusted Base Price, as
adjusted pursuant to Section 2.2.2 (the "Cash Consideration"), together with the
------------------
Contingent Consideration and Retained Interest set forth in Sections 2.2.3 and
2.2.4. The Cash Consideration shall be paid by Buyer to Sellers collectively at
Closing by wire transfer of immediately available funds to the SJP Stub
Liquidating Trust, Account No. 1566568059 at Bank One, Houston, Texas (the
"Sellers' Account") or as otherwise directed by Sellers' Representative.
-----------------
2.2.2 CASH CONSIDERATION
(a) The Unadjusted Base Price shall be increased by:
(i) The Devon Payment;
(ii) The revenues received by or credited to Buyer
attributable to periods prior to January 1, 1999 other than
distributions received by the Company from the Trust with respect to
the fourth quarter of 1998 and operating costs charged to and paid by
Sellers attributable to periods after January 1, 1999.
- 11 -
(b) The Unadjusted Base Price shall be decreased by:
(i) $305,426 being the value of tax credits attributable to the
479R Well included in the New Mexico Properties if it were to qualify
for tax credits pursuant to Section 29 of the IRC;
(ii) Revenues received by or credited to Sellers attributable to
periods after January 1, 1999 and all operating costs or capital
expenses charged to and paid by Buyer attributable to periods prior to
January 1, 1999;
- 12 -
(iii) Any fees charged by the Trust to the Company in connection
with the liquidation of the Remaining Royalty Interests including,
without limitation, the fees of ▇▇▇▇▇▇▇▇ & Associates; and
(iv) Any general and administrative costs incurred by or on
behalf of the Company solely in connection with this Agreement or the
Contemplated Transactions other than any expenses incurred by Buyer in
connection therewith; and
(v) The Devon Shortfall.
(c) Not later than two (2) days prior to Closing, Sellers'
Representative shall prepare a preliminary calculation of all adjustments
to be made pursuant to Sections 2.2.2(a) and (b) in the form attached
hereto as Exhibit A (the "Preliminary Closing Statement") based on Sellers'
-----------------------------
Representative's good faith estimate of the adjustments. The Unadjusted
Base Price shall be adjusted for Closing purposes by the net adjustment
(the "Preliminary Adjustment") set forth in the Preliminary Closing
----------------------
Statement. (The Unadjusted Base Price as adjusted by the Preliminary
Adjustment is referred to as the "Preliminary Adjusted Base Price").
-------------------------------
Nothing in this Section 2.2.2(c) shall diminish Buyer's or Sellers' rights
to a full accounting as set forth in Section 2.2.2(d), it being the
agreement of the parties that the Final Adjusted Base Price will be
determined in accordance with the procedures set forth in Section 2.2.2(d).
(d) Not later than the later to occur of (i) ten (10) days following
the closing of the sale of the Devon Interest to Devon, if Devon exercises
the Devon Option or (ii) May 15, 1999, if Devon does not exercise the Devon
Option, Buyer shall prepare and deliver to Sellers' Representative a
proposed settlement statement setting forth any required additional
adjustments to the Preliminary Adjusted Base Purchase Price (the "Final
-----
Adjustment"). The date on which such proposed settlement statement is
----------
delivered is called the "Settlement Statement Delivery Date." Sellers'
----------------------------------
Representative shall have the right for fifteen (15) days after the
Settlement Statement Delivery Date to take exception to any proposed
adjustments. The settlement statement shall become final and binding upon
the parties on the fifteenth (15/th/) day following the Settlement
Statement Delivery Date except with respect to matters as to which Sellers'
Representative shall have given written notice of disagreement to Buyer on
or prior to such date. If not resolved by Sellers' Representative and
Buyers within 30 days after the Settlement Statement Delivery Date, all
such matters shall be submitted for review and resolution, in accordance
with Section 2.2.2(f). The settlement statement that becomes final and
binding on the parties either pursuant to this Section 2.2.2(d) or Section
2.2.2(f) shall be referred to as the "Final Settlement Statement." The
--------------------------
Preliminary Adjusted Base Price shall be adjusted by the Final Adjustment
set forth in the Final Settlement Statement, and the Preliminary Adjusted
Base Price, as adjusted by the Final Adjustment is referred to as the
"Final Adjusted Base Price".
--------------------------
(e) If, at the Settlement Date, the Final Adjusted Base Price exceeds
the Preliminary Adjusted Base Price, then, within ten (10) days after the
Settlement Date, Buyer shall pay Sellers by deposit into Sellers' Account
the excess together with interest thereon
- 13 -
at the Agreed Rate from the Closing Date to the date of payment. If at the
Settlement Date, the Final Adjusted Base Price is less than the Preliminary
Adjusted Base Price, then, within ten (10) days after the Settlement Date,
Sellers' Representative, on behalf of all Sellers, shall pay Buyer the
difference together with interest thereon at the Agreed Rate from the
Closing Date to the date of payment.
(f) If the Sellers' Representative and Buyer are unable to agree
on the settlement statement as described in Section 2.2.2(d), the Sellers'
Representative and Buyer shall engage Deloitte & Touche or another
nationally recognized accounting firm mutually acceptable to the parties
(the "Accounting Firm") to resolve any disputed items and the Accounting
---------------
Firm shall be required to render its decision within 30 days after the
dispute is referred to it. The decision of the Accounting Firm shall be
final and binding on the parties. The fees and expenses of the Accounting
Firm shall be paid 50% by Buyer and 50% by Sellers as a group.
2.2.3 CONTINGENT CONSIDERATION
In addition to the Cash Consideration set forth in Section 2.2.2 hereof,
Buyer shall pay Sellers by deposit into Sellers Account, and Sellers shall be
entitled to receive from Buyer, the following (collectively the "Contingent
----------
Consideration"):
-------------
(a) The Excess Gas Payment described in Exhibit B attached
hereto and made a part hereof for all purposes,
(b) Any amount required to be paid by Buyer to Sellers pursuant
to Section 2.5;
(c) All or a portion of the Remaining Royalty Holdback Amount to
the extent required to be paid to Sellers in accordance with Section 2.6.2
or 2.6.3 together with any additional payments to be made by Buyer to
Sellers pursuant to Section 2.6.2 or 2.6.3; and
(d) Any amounts required to be paid by Buyer to Sellers pursuant
to Section 2.7.
2.2.4 RETAINED INTEREST IN INFILL ▇▇▇▇▇
(a) In addition to the Cash Consideration and the Contingent
Consideration described above, Sellers shall have the right to participate,
on a well by well basis in and to any and all ▇▇▇▇▇ drilled or completed as
Infill ▇▇▇▇▇ in the Northeast ▇▇▇▇▇▇ Unit from and after the Closing Date
for an aggregate undivided forty seven and one-half percent (47.5%) of the
working and net revenue interests owned by the Company on the date hereof,
or acquired by the Company in accordance with Section 2.6 of this
Agreement, less the Devon Interest if Devon exercises the Devon Option as
set forth in Section 2.5 (the "Retained Interest").
-----------------
- 14 -
(b) The procedures and conditions under which each Seller shall
participate in each Infill Well shall be governed by the Unit Operating
Agreement and by the provisions set forth on Exhibit C attached hereto and
made a part hereof for all purposes (the "Infill Well Provisions"). The
----------------------
Infill Well Provisions shall apply only to the relationship between Sellers
and Buyer with respect to Infill ▇▇▇▇▇. In the event of a conflict between
the Unit Operating Agreement and the Infill Well Provisions, as between
Sellers and Buyers, the Infill Well Provisions shall govern and control.
2.3 CLOSING
The purchase and sale (the "Closing") provided for in this Agreement will
-------
take place at the offices of Sellers' counsel at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ at 11:00 a.m. (local time) on January 19, 1999, or at such other
time and place as Sellers' Representative and Buyer may agree. Failure to
consummate the purchase and sale provided for in this Agreement on the date and
time and at the place determined pursuant to this Section 2.3 will not result in
the termination of this Agreement and will not relieve any party of any
obligation under this Agreement. In the event Closing occurs on or after 12:00
a.m. Houston time on January 25, 1999 solely as a result of Sellers' delay, the
Cash Consideration shall be reduced by $300,000 for each week after such date
that Closing is delayed; provided, however, if Closing is delayed for less than
a full week, the Cash Consideration shall be reduced by an amount equal to
$300,000 multiplied by a fraction the numerator of which is the number of days
the Closing is delayed and the denominator of which is seven (7).
2.4 CLOSING OBLIGATIONS
At the Closing:
(a) Sellers will deliver to Buyer
(i) An assignment of the LLC Units in the form attached hereto
as Exhibit D executed by each of the Sellers;
(ii) all of the Records of the Company;
(iii) full releases of liens with respect to any indebtedness
of the Company;
(iv) opinions of counsel with respect to each Seller which is an
entity in a form previously reviewed by Buyer's counsel; and
(v) Certificates of Non-Foreign Status in the form attached
hereto as Exhibit E, executed by each of the Sellers.
- 15 -
(b) Buyer will deliver:
(i) the Preliminary Adjusted Purchase Price to Sellers by
wire transfer to Sellers' Account; and
(ii) an opinion of counsel with respect to Buyer in a form
previously reviewed by Sellers' counsel.
2.5 THE DEVON OPTION
(a) Pursuant to that certain letter agreement dated July 9, 1998
between the Company and Devon Acquisition Corporation ("Devon"), a copy of
-----
which is attached hereto as Exhibit F and made a part hereof for all
purposes (the "Devon Agreement"), Devon has the option (the "Devon Option")
--------------- ------------
to purchase from the Company an undivided 6.7% of 19.647531% working
interest and 6.7% of 16.539598% net revenue interest in the Northeast
▇▇▇▇▇▇ Unit (the "Devon Interest") owned by the Company if the Company,
--------------
within eighteen (18) months of the date, the Devon Agreement (i) acquires
the underlying working interests burdened by the Trust from Burlington and
(ii) acquires the Remaining Royalty Interests of the Trust. The Devon
Option may be exercised by Devon by paying to the Company 6.7% of the
Acquisition Costs as defined in the Devon Agreement. The Company has
notified Devon that the conditions precedent to the triggering of the Devon
Option may occur, and Devon has indicated that it may exercise the Devon
Option at such time.
(b) If Devon timely exercises the Devon Option, and the amount
actually paid to the Company by Devon for the Devon Interest exceeds the
sum of (i) estimated Devon Payment set forth on the Preliminary Closing
Statement plus (ii) costs incurred by Buyer or the Company after January 1,
1999 that were not included in calculating the estimated Devon Payment,
then Buyer shall pay Sellers by deposit into Sellers' Account the excess
within ten (10) days after Buyer's receipt of the Devon Payment.
(c) If Devon exercises the Devon Option, and the amount actually paid
to the Company by Devon for the Devon Interest is less than the estimated
Devon Payment set forth on the Preliminary Closing Statement, then Sellers
shall pay Buyer the difference (the "Devon Shortfall") within ten (10) days
---------------
after Buyer notifies Sellers' Representative of the Devon Shortfall.
(d) If Devon does not exercise the Devon Option, Buyer shall pay
Sellers by deposit into Sellers' Account, within ten (10) days after the
earlier to occur of Buyer's receipt of notice thereof or the expiration of
the period in which Devon may exercise the Devon Option, an amount equal to
the Devon Holdback Amount as set forth in Section 2.5(d) of the Disclosure
Letter together with interest on the Devon Holdback Amount at the Agreed
Rate from the Closing Date to the date of payment.
- 16 -
2.6 PURCHASE OF REMAINING ROYALTY INTERESTS
2.6.1 LIQUIDATION OF THE TRUST
The Company owns or controls the voting interest of more than sixty-six and
two-thirds percent (66 2/3%) of the issued and outstanding Trust Units and on
December 28, 1998, pursuant to a meeting duly called and noticed, voted, in
accordance with the Trust Agreement, to terminate the Trust. There remain
3,097,032 Trust Units (or 35.19354% of the issued and outstanding Trust Units)
which are not owned by the Company. In accordance with the Trust Agreement,
after termination of the Trust, the Remaining Royalty Interests, constituting
all of the assets of the Trust, are to be liquidated and the proceeds
distributed to the holders of the Trust Units. The Trustee is contemporaneously
conducting the liquidation process through its adviser, ▇▇▇▇▇▇▇▇ & Associates.
2.6.2 REQUIRED BID OF THE COMPANY
(a) Buyer and Sellers hereby agree that the Company shall bid,
pursuant to the general bid procedure conducted by the Trustee for the
purchase of the Remaining Royalty Interests, an amount not less than
$61,600,000 and not more than $74,800,000 for the Remaining Royalty
Interests (the "Required Bid Amount").
-------------------
(b) In the event the Company is the successful bidder for the
Required Bid Amount, such amount shall be paid by Buyer to the Trustee in
consideration for the purchase of the Remaining Royalty Interests, it being
agreed that if the Company is the successful bidder, and the Trustee
requires the Company to pay the portion of the Required Bid Amount that
would be distributed to the Company as owner of 5,702,968 Trust Units (the
"Company's Bid Distribution") to the Trustee, Sellers shall pay Buyer
--------------------------
interest on the Company's Bid Distribution at the Agreed Rate from the date
Buyer pays the Required Bid Amount to the Trust through the date the
Company receives the Special Distribution (as defined in the Trust
Agreement).
(c) Contemporaneously with the payment to the Trustee, Buyer
shall pay to Sellers, by deposit to Sellers' Account, the Remaining Royalty
Hold Back Amount together with interest thereon at the Agreed Rate from the
Closing Date to the date of payment.
(d) In the event the successful Required Bid Amount is between
$70,400,000 and $74,800,000, no further payments shall be owing by Buyer to
Sellers other than the payment required pursuant to Section 2.6.2(c)
hereinabove and so otherwise provided for in this Agreement. However, in
the event the successful Required Bid Amount is less than $70,400,000,
Buyer shall make an additional payment to Sellers, by deposit into the
Sellers' Account, of an amount equal to fifty percent (50%) of the
difference between $70,400,000 U.S.D. and the amount of the successful
Required Bid Amount multiplied by 35.19354%.
- 17 -
2.6.3 PURCHASE FOR 105% OF HIGHEST ACCEPTABLE OFFER
(a) If (i) the Company's Required Bid Amount is not the Highest
Acceptable Offer for the Remaining Royalty Interests, (ii) Buyer elects to
cause the Company to exercise its rights under Section 9.03(e) of the Trust
Agreement to purchase the Remaining Royalty Interests for 105% of the
Highest Acceptable Offer, and (iii) such amount is equal to or less than
$92,400,000, Buyer shall pay such amount to the Trustee in consideration
for the purchase of the Remaining Royalty Interests.
(b) Contemporaneously with the payment to the Trustee, Buyer
shall pay to Sellers, by deposit to the Sellers' Account, an amount equal
to the excess, if any, of (i) the Remaining Royalty Hold Back Amount over
(ii) the product of (A) the actual amount paid for the Remaining Royalty
Interests less $74,800,000 multiplied by (B) 35.19354%, together with
interest on such excess at the Agreed Rate from the Closing Date to the
date of payment.
(c) If the amount required to purchase the Remaining Royalty
Interests for 105% of the Highest Acceptable Offer is greater than
$92,400,000, Buyer shall have the option, but not the obligation, to pay
such additional amount required in excess of the Remaining Royalty Hold
Back Amount. Buyer may exercise this option by providing written notice
thereof to Sellers' Representative within twenty-four (24) hours after
receipt of notice from the Trustee of the final price required to purchase
the Remaining Royalty Interests. If Buyer elects not to exercise the option
described above, the Sellers' Representative and Buyer shall attempt to
agree upon a mutually acceptable resolution of whether the Company shall
buy the Remaining Royalty Interests and, if so, which party shall pay what
portion of the acquisition costs. If Buyer elects not to exercise its
option and Sellers' Representative and Buyer are unable to agree upon a
resolution, Sellers shall have the option, but not the obligation, to pay
to Buyer such additional amount required in excess of the Remaining Royalty
Hold Back Amount to purchase the Remaining Royalty Interests. Sellers may
exercise this option by providing written notice thereof to Buyer (together
with payment of the additional amount to Buyer) on or before twenty-four
(24) hours after failure of Buyer and Sellers' Representative to reach a
mutually agreeable resolution. If Sellers exercise this option, Buyer shall
cause the Company to purchase the Remaining Royalty Interests. If Sellers
fail to exercise this option or deliver the additional amount to Buyer in a
timely fashion, Buyer shall again have the option, but not the obligation,
to pay such additional amount required in excess of the Remaining Royalty
Hold Back Amount, which option may be exercised by providing written notice
thereof to Sellers' Representative within twenty-four (24) hours after
Sellers decline or fail to exercise their option.
2.6.4 SELLERS' OBLIGATION TO REPURCHASE
In the event Buyer elects not to exercise its second option provided for in
Section 2.6.3 hereof, Buyer shall not exercise its right to purchase the
Remaining Royalty Interests for 105% of the Highest Acceptable Offer pursuant to
Section 9.03(e) of the Trust Agreement. After the sale by the Trust of the
Remaining Royalty Interests to the third party submitting the Highest Acceptable
- 18 -
Offer and upon receipt by the Company of the proceeds therefrom pursuant to the
final Special Distribution (as defined in the Trust Agreement), Sellers shall
repurchase from Buyer the New Mexico Properties and the South Texas Properties
for the Repurchase Amount (as hereinafter defined). Such repurchase shall be
effective as of the first day of the month following the month in which the
Special Distribution occurs (the "Trigger Date"). Contemporaneously with the
------------
repurchase, the Contingent Consideration and the Retained Interest shall be
terminated. As used herein, the term "Repurchase Amount" shall mean the
-----------------
Preliminary Adjusted Base Price adjusted as follows :
(a) The Preliminary Adjusted Base Price shall be increased by
(i) The net cash received by Sellers attributable to periods
beginning January 1, 1999 and ending on the Trigger Date;
(ii) a fee of Two Hundred Fifty Thousand Dollars ($250,000) to
reimburse Buyer for the value of the time and effort incurred
internally, both directly and indirectly; and
(iii) any capital expenditures related to the Properties
incurred by Buyer attributable to the period beginning 1/1/99 and
ending on the Trigger Date.
(b) The Preliminary Adjusted Base Price shall be decreased by:
(i) The production from the Properties for periods beginning
January 1, 1999 and ending on the Trigger Date multiplied by
$1.30/mmbtu;
(ii) Any costs, including capital expenditures, attributable to
the periods beginning January 1, 1999 and ending on the Trigger Date
not paid by the Buyer; and
(iii) Any amount received by the Company pursuant to the final
Special Distribution.
(c) Not later than one hundred and twenty (120) days after the date
of the repurchase, Sellers shall prepare and deliver to Buyer a proposed
settlement statement setting forth any required additional adjustments to
the Repurchase Amount (the "Final Repurchase Adjustment"). The date on
---------------------------
which such proposed settlement statement is delivered is called the
"Repurchase Settlement Statement Delivery Date." Buyer shall have the
----------------------------------------------
right for fifteen (15) days after the Repurchase Settlement Statement
Delivery Date to take exception to any proposed adjustments. The
settlement statement shall become final and binding upon the parties on the
fifteenth (15/th/) day following the Repurchase Settlement Statement
Delivery Date except with respect to matters as to which Buyer shall have
given written notice of disagreement to Sellers on or prior to such date.
If not resolved by Sellers' Representative and Buyer within 30 days after
the Repurchase Settlement Statement Delivery Date, all such matters shall
be submitted for review and resolution, in accordance with Section
2.2.2(f). The repurchase settlement statement that becomes final and
binding on the parties either pursuant to this Section 2.6.4(c) or Section
2.2.2(f) shall be referred to as the "Repurchase
----------
- 19 -
Final Settlement Statement." The Repurchase Amount shall be adjusted by the
--------------------------
Repurchase Final Adjustment set forth in the Repurchase Final Settlement
Statement, and the Repurchase Amount, as adjusted by the Final Repurchase
Adjustment is referred to as the "Final Repurchase Amount".
-----------------------
The Properties shall be conveyed to Sellers without warranty of any kind
whatsoever except a limited, by, through or under warranty of title. From and
after the date of the repurchase, (i) Buyer shall have the right to receive and
retain all proceeds of production, tax credits and other benefits, and shall
bear and pay all costs expenses and other liabilities attributable to the New
Mexico Properties and the South Texas Properties for the period commencing
January 1, 1999 and ending with the Trigger Date and (ii) Sellers shall have the
right to receive and retain all proceeds of production, tax credits and other
benefits, and shall bear and pay all costs expenses and other liabilities
attributable to the New Mexico Properties and the South Texas Properties for the
period commencing on the Trigger Date.
2.6.5 STANDSTILL. From and after the date hereof, except as set
forth in Section 2.6.3 hereof, neither Sellers nor any Related Person will in
any manner acquire, agree to acquire or make any proposal to acquire the
Remaining Royalty Interests or advise, encourage, provide assistance (including
financial assistance) or information or hold discussions with any other Person
in connection with the sale of the Remaining Royalty Interests.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers represent and warrant to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) The Company is a limited liability company duly organized,
validly existing, and in good standing under the laws of its jurisdiction
of organization, with full corporate power and authority to conduct its
business as it is now being conducted, to own or use the properties and
assets that it purports to own or use, including the Assets, and to perform
all its obligations under Applicable Contracts. The Company is duly
qualified to do business as a foreign corporation and is in good standing
under the laws of each state or other jurisdiction in which either the
ownership or use of the properties owned or used by it, or the nature of
the activities conducted by it, requires such qualification.
(b) Sellers have delivered to Buyer true, correct and complete
copies of the Organizational Documents of the Company, as currently in
effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Sellers, enforceable against Sellers in accordance with its
terms. Sellers have the absolute and
- 20 -
unrestricted right, power, authority, and capacity to execute and deliver,
and the Sellers have duly executed and delivered, this Agreement and any
other documents contemplated hereby and to perform their obligations under
this Agreement.
(b) Except as set forth in Section 3.2 of the Disclosure Letter,
neither the execution and delivery of this Agreement nor the consummation
or performance of any of the Contemplated Transactions will, directly or
indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A)
any provision of the Organizational Documents of the Company, or (B)
any resolution adopted by the members of the Company;
(ii) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to challenge any
of the Contemplated Transactions or to exercise any remedy or obtain
any relief under, any Legal Requirement or any Order to which the
Company or any of Sellers, or any of the assets owned or used by the
Company, may be subject;
(iii) contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any Governmental Body the
right to revoke, withdraw, suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by the Company or that
otherwise relates to the business of, or any of the assets owned or
used by, the Company;
(iv) cause Buyer or the Company to become subject to, or to
become liable for the payment of, any Taxes;
(v) cause any of the assets owned by the Company to be
reassessed or revalued by any taxing authority or other Governmental
Body;
(vi) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Applicable
Contract; or
(vii) result in the imposition or creation of any Encumbrance
upon or with respect to any of the assets owned or used by the
Company.
Except as set forth in Section 3.2 of the Disclosure Letter, no Seller
nor the Company is or will be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of
this Agreement or the consummation or performance of any of the
Contemplated Transactions.
- 21 -
3.3 CAPITALIZATION
The authorized equity ownership interests of the Company consist of (i)
22,587,443 Class A Units and (ii) 5,646,841 Class B Units, $1.00 par value per
unit, all of which are issued and outstanding. Such Class A and Class B Units
constitute all of the LLC Units of the Company. Sellers are and will be on the
Closing Date the record and beneficial owners and holders of all of the LLC
Units, free and clear of all Encumbrances. Each of Sellers own the number and
class of LLC Units set forth opposite such Seller's name in the chart in Exhibit
G hereto and made a part hereof for all purposes representing the percentage
ownership interest in the Company set forth opposite such Seller's name in the
chart in Exhibit A. There are no Contracts relating to the issuance, sale, or
transfer of any equity securities or other securities of the Company. None of
the LLC Units of the Company was issued in violation of the Securities Act or
any other Legal Requirement. There are not any member agreements, voting trusts
or other agreements or understandings to which any Seller is a party or by which
it is bound relating to the voting of the LLC Units that will limit in any way
the Closing of the Contemplated Transactions. The Company does not own, nor
does it have any Contract to acquire, any equity securities or other securities
of any Person or any direct or indirect equity or ownership interest in any
other business. The LLC Units constitute all of the right, title and interest
of Sellers or any other Person in the Company.
3.4 FINANCIAL STATEMENTS
Sellers have delivered to Buyer true, correct and complete copies of the
following financial statements: (i) the unaudited balance sheets of the Company
as of December 31, 1998, and the related unaudited statements of income, changes
in members' equity, and cash flow for the fiscal year then ended, together with
the report thereon of Easley, Endres, ▇▇▇▇▇▇▇▇ and Brackendorff, P.C.,
independent certified public accountants, and (ii) an unaudited balance sheet of
the Company as of the Closing Date. Such financial statements and notes fairly
present the financial condition and the results of operations, changes in
members' equity, and cash flow of the Company as at the date of and for the
period referred to in such financial statements, all in accordance with GAAP.
The financial statements referred to in this Section 3.4 reflect the consistent
application of GAAP throughout the periods involved. No financial statements of
any Person other than the Company are required by GAAP to be included in the
consolidated financial statements of the Company.
3.5 BOOKS AND RECORDS
The books and records of the Company are complete and correct and have been
maintained in accordance with sound business practices and the requirements of
Section 13(b)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the Texas Limited Liability Company Act, including the
-------------
maintenance of an adequate system of internal controls. The Records contain
accurate and complete records of all meetings held of, and limited liability
company action taken by, the members or managers and no meeting of any such
members or managers has been held for which minutes have not been prepared and
are not contained in the Records. At the Closing, all of the Records will be in
the possession of the Company.
- 22 -
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
(a) The Company's interests in the Properties are such that, after
giving effect to existing Encumbrances (i) the Company is entitled, during
the respective lives of the Properties, to a share of all oil, gas and
other minerals produced from each of the Properties which is not less than
the net revenue interest described in Section 3.6(a) of the Disclosure
Letter for such Properties except with respect to any changes in such
interests which may result from the expansion or contraction of any
applicable units pursuant to the terms of the Unit Agreement, the Unit
Operating Agreement or applicable statutes, rules or regulations, (ii) the
Company owns an undivided interest equal to the working interest described
in Section 3.6 of the Disclosure Letter in and to all property and rights
incident such working interest including all rights in, to and under all
agreements, leases permits and easements, licenses and orders in any way
relating thereto, and in and to all ▇▇▇▇▇, personal property, fixtures and
improvements thereon, appurtenant thereto or used or obtained in connection
therewith or with the production or treatment or sale or disposal of
hydrocarbons or water produced therefrom or attributable thereto, (iii) the
Company is obligated, during the respective lives of the Properties, for a
fraction of the costs relating to the exploration, development, operation
and maintenance of each of the Properties no greater than the working
interest described in Section 3.6(a) of the Disclosure Letter without a
proportionate increase in the net revenue interest attributable thereto
except with respect to any changes in such interests which may result from
the expansion or contraction of any applicable units pursuant to the terms
of the Unit Agreement, the Unit Operating Agreement or applicable statutes,
rules or regulations,.
(b) Neither the Sellers nor the Company has ever been advised by any
lessor under any of the leases, nor by the operator of the Properties of a
breach or default, which claim of breach or default has not been resolved.
(c) Except as set forth in Section 3.6(c) of the Disclosure Letter,
the Properties are not subject to any Encumbrance except (i) imperfections
of title, if any, as do not materially detract from the value or interfere
with the use of the Properties for the purposes for which they are
presently used or otherwise materially impair the business operations of
the Company, (ii) liens for taxes and general and special assessments not
in default and payable without penalty or interest, (iii) liens which have
not materialized that are created by or arise under contracts for the sale,
purchase, exchange or processing of hydrocarbons, (iv) liens which have not
materialized that are created by or arise under any operating agreement,
pipeline, gathering or transportation agreement or other agreement pursuant
to which the Properties are otherwise subject, and (v) easements, rights-
of-way, servitudes, permits, surface leases and other conditions,
restrictions or rights in respect of surface operations, timber leases,
pipelines, roads, highways railways, power lines, grazing, logging, canals
ditches, and the like on, over or in respect of any of such interests for
the purposes for which they are presently used (collectively together with
the items set forth in Section 3.6(c) of the Disclosure Letter, the
"Permitted Encumbrances").
-----------------------
3.7 NO UNDISCLOSED LIABILITIES
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Except as set forth in Section 3.7 of the Disclosure Letter, to the
Knowledge of Sellers, as of the date hereof, there is not and has not been any
event or occurrence (or lack of event or occurrence) which, with notice or the
passage of time or both, would give rise to liabilities or obligations of any
nature (whether known or unknown and whether absolute, accrued, contingent, or
otherwise) of the Company, and the consummation or performance of the
Contemplated Transactions will not create any such liabilities or obligations.
3.8 TAXES
(a) The Company has filed or caused to be filed (on a timely basis
since its inception) all Tax Returns that are or were required to be filed
by or with respect to it pursuant to applicable Legal Requirements and the
members will (on a timely basis) report their allocable share of the
Company's income, gain, loss, deduction and credits to be reported on any
such Tax Returns and will cause to be paid all Taxes shown to be due on
their individual Tax Returns for the relevant periods. The Company has
paid, or made provision for the payment of, all Taxes that have or may have
become due pursuant to those Tax Returns or otherwise, or pursuant to any
assessment received by Sellers or the Company.
(b) The charges, accruals, and reserves with respect to Taxes on the
respective books of the Company are adequate (determined in accordance with
GAAP) and are at least equal to the Company's liability for Taxes. There
exists no proposed tax assessment against the Company. All Taxes that the
Company is or was required by Legal Requirements to withhold or collect
have been duly withheld or collected and, to the extent required, have been
paid to the proper Governmental Body or other Person.
(c) There is no tax sharing agreement that will require any payment
by the Company after the date of this Agreement.
3.9 NO MATERIAL ADVERSE CHANGE
Since January 1, 1999, there has not been any material adverse change in
the business, operations, properties, prospects, assets, or condition of the
Company, and no event has occurred or circumstance exists that may result in
such a material adverse change.
3.10 EMPLOYEES
The Company has no employees nor has it ever had any employees.
3.11 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Section 3.11 of the Disclosure Letter:
(i) the Company is, and at all times since the date of its
formation, has been, in full compliance with each Legal Requirement
that is or was applicable to it
- 24 -
or to the conduct or operation of its business or the ownership or use
of any of its assets;
(ii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) may constitute or result in a
violation by the Company of, or a failure on the part of the Company
to comply with, any Legal Requirement, or (B) to the Knowledge of
Sellers, may give rise to any obligation on the part of the Company to
undertake, or to bear all or any portion of the cost of, any remedial
action of any nature; and
(iii) the Company has not received, at any time since the date
of its formation, any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding (A)
any actual, alleged, possible, or potential violation of, or failure
to comply with, any Legal Requirement, or (B) any actual, alleged,
possible, or potential obligation of the Company to undertake, or to
bear all or any portion of the cost of, any remedial action of any
nature.
(b) Section 3.11 of the Disclosure Letter contains a complete and
accurate list of each Governmental Authorization that is held by the
Company or that otherwise relates to the business of, or to any of the
assets owned or used by, the Company. Each Governmental Authorization
listed or required to be listed in Section 3.11 of the Disclosure Letter is
valid and in full force and effect. Except as set forth in Section 3.11 of
the Disclosure Letter:
(i) the Company is, and at all times since the date of its
formation, has been, in full compliance with all of the terms and
requirements of each Governmental Authorization identified or required
to be identified in Section 3.11 of the Disclosure Letter;
(ii) no event has occurred or circumstance exists that may
(with or without notice or lapse of time) (A) constitute or result
directly or indirectly in a violation of or a failure to comply with
any term or requirement of any Governmental Authorization listed or
required to be listed in Section 3.11 of the Disclosure Letter, or (B)
result directly or indirectly in the revocation, withdrawal,
suspension, cancellation, or termination of, or any modification to,
any Governmental Authorization listed or required to be listed in
Section 3.11 of the Disclosure Letter;
(iii) the Company has not received, at any time since the date
of its formation, any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding (A)
any actual, alleged, possible, or potential violation of or failure to
comply with any term or requirement of any Governmental Authorization,
or (B) any actual, proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification
to any Governmental Authorization; and
- 25 -
(iv) all applications required to have been filed for the renewal
of the Governmental Authorizations listed or required to be listed in
Section 3.11 of the Disclosure Letter have been duly filed on a timely
basis with the appropriate Governmental Bodies, and all other filings
required to have been made with respect to such Governmental
Authorizations have been duly made on a timely basis with the
appropriate Governmental Bodies.
The Governmental Authorizations listed in Section 3.11 of the Disclosure Letter
collectively constitute all of the Governmental Authorizations necessary to
permit the Company to lawfully conduct and operate its business in the manner it
currently conducts and operates such business and to permit the Company to own
and use its assets, including the Assets, in the manner in which it currently
owns and uses such assets.
3.12 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Section 3.12(a) of the Disclosure Letter,
there is no pending Proceeding:
(i) that has been commenced by or against the Company or that
otherwise relates to or may materially, adversely affect the business
of, or any of the assets owned or used by, the Company; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Sellers, (1) no such Proceeding has been Threatened,
and (2) no event has occurred or circumstance exists that may give rise to
or serve as a basis for the commencement of any such Proceeding. Sellers
have delivered to Buyer copies of all pleadings, correspondence, and other
documents relating to each Proceeding listed in Section 3.12(a) of the
Disclosure Letter. The Proceedings listed in Section 3.12(a) of the
Disclosure Letter will not have a material adverse effect on the business,
operations, assets, condition, or prospects of the Company.
(b) Except as set forth in Section 3.12(b) of the Disclosure Letter:
(i) there is no Order to which the Company, or any of the assets
owned or used by the Company, is subject; and
(ii) none of Sellers is subject to any Order that relates to the
business of, or any of the assets owned or used by, the Company.
3.13 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Section 3.13 of the Disclosure Letter, since its
inception, the Company has conducted its business only in the Ordinary Course of
Business and there has not been any:
- 26 -
(a) change in the Company's authorized or issued units; grant of any
option or right to purchase units of the Company; issuance of any security
convertible into such units or membership interests; grant of any
registration rights; purchase, redemption, retirement, or other acquisition
by the Company of any units or membership interests of the Company; or
declaration or payment of any dividend or other distribution or payment in
respect of units;
(b) amendment to the Organizational Documents of the Company;
(c) payment or increase by the Company of any bonuses, salaries, or
other compensation to any stockholder, director, officer, member, manager,
or employee or entry into any employment, severance, or similar Contract
with any of the foregoing;
(d) damage to or destruction or loss of any asset or property of the
Company, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or
prospects of the Company, taken as a whole;
(e) except the Gas Contract (as defined in the Burlington Purchase
Agreement) that was terminated in connection with the termination of the
Trust, or as disclosed in Section 3.13(e) of the Disclosure Letter, entry
into of any Contract or transaction that continues after the Closing or,
termination of, or receipt of notice of termination of any Contract or
transaction which would have continued after the Closing, but for such
termination;
(f) sale, lease, or other disposition of any asset or property of the
Company or mortgage, pledge, or imposition of any lien or other encumbrance
on any material asset or property of the Company;
(g) except to the extent canceled or waived in connection with the
closing of the transactions described in the Burlington Purchase Agreement
and in connection with the termination of the Trust, cancellation or waiver
of any claims or rights which would otherwise continue after the Closing;
(h) material change in the accounting methods used by the Company;
(i) any election not to participate in any operation proposed to be
conducted with respect to the Assets; or
(j) agreement, whether oral or written, by the Company to do any of
the foregoing.
3.14 CONTRACTS; NO DEFAULTS
(a) Section 3.14(a) of the Disclosure Letter contains a complete and
accurate list, and Sellers have delivered to Buyer true and complete
copies, of each Applicable Contract
- 27 -
whether for performance of services, delivery of goods or materials,
capital expenditures or otherwise, which will be binding on the Company
after the Closing.
(b) Except as set forth in Section 3.14 of the Disclosure Letter,
each Contract identified or required to be identified in Section 3.14 of
the Disclosure Letter is in full force and effect and is valid and
enforceable in accordance with its terms.
(c) Except as set forth in Section 3.14 of the Disclosure Letter:
(i) the Company is, and at all times since the date of its
formation has been, in full compliance with all applicable terms and
requirements of each Contract under which the Company has or had any
obligation or liability or by which the Company or any of the assets
owned or used by the Company is or was bound;
(ii) each other Person that has or had any obligation or
liability under any Contract under which the Company has or had any
rights is, and at all times since the date of its formation has been,
in full compliance with all applicable terms and requirements of such
Contract;
(iii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) may contravene, conflict with, or
result in a violation or breach of, or give the Company or other
Person the right to declare a default or exercise any remedy under, or
to accelerate the maturity or performance of, or to cancel, terminate,
or modify, any Applicable Contract; and
(iv) the Company has not given to or received from any other
Person, at any time since the date of its formation, any notice or
other communication (whether oral or written) regarding any actual,
alleged, possible, or potential violation or breach of, or default
under, any Contract.
(d) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any amounts paid or payable to the
Company under current or completed Contracts with any Person and, to the
Knowledge of Sellers and the Company, no such Person has made written
demand for such renegotiation.
3.15 INSURANCE
(a) Sellers have delivered to Buyer:
(i) true and complete copies of all policies of insurance to
which the Company is a party or under which the Company, or any
manager or member of the Company, is or has been covered at any time
within the one year preceding the date of this Agreement;
- 28 -
(ii) true and complete copies of all pending applications for
policies of insurance; and
(iii) any statement by the auditor of the Company's financial
statements with regard to the adequacy of such entity's coverage or of
the reserves for claims.
(b) Except as set forth on Section 3.15 of the Disclosure Letter:
(i) All policies to which the Company is a party or that
provide coverage to either Sellers, the Company, or any manager or
member of the Company:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially sound and
reputable;
(C) taken together, provide adequate insurance coverage for
the assets and the operations of the Company for all risks
normally insured against by a Person carrying on the same
business or businesses as the Company;
(D) are sufficient for compliance with all Legal
Requirements and Contracts to which the Company is a party or by
which it is bound;
(E) will continue in full force and effect following the
consummation of the Contemplated Transactions; and
(F) do not provide for any retrospective premium adjustment
or other experienced-based liability on the part of the Company.
(ii) None of the Sellers or the Company has received (A) any
refusal of coverage or any notice that a defense will be afforded with
reservation of rights, or (B) any notice of cancellation or any other
indication that any insurance policy is no longer in full force or
effect or will not be renewed or that the issuer of any policy is not
willing or able to perform its obligations thereunder.
(iii) The Company has paid all premiums due, and has otherwise
performed all of its obligations, under each policy to which the
Company is a party or that provides coverage to the Company or
managers thereof.
(iv) The Company has given notice to the insurer of all claims
that may be insured thereby.
3.16 ENVIRONMENTAL MATTERS
- 29 -
Except as set forth in Section 3.16 of the Disclosure Letter:
(a) The Company is, and at all times has been, in full compliance
with, and has not been and is not in violation of or liable under, any
Environmental Law. None of the Sellers or the Company has any basis to
expect, nor has any of them, or, to the Knowledge of Sellers or the
Company, any other Person for whose conduct they are or may be held to be
responsible received, any actual or Threatened order, notice, or other
communication from any Governmental Body or private citizen acting in the
public interest, of any actual or potential violation or failure to comply
with any Environmental Law, or of any actual or Threatened obligation to
undertake or bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Assets or any other properties or
assets (whether real, personal, or mixed) in which Sellers or the Company
has had an interest, or with respect to any property or facility at or to
which Hazardous Materials were generated, manufactured, refined,
transferred, imported, used, or processed by Sellers, the Company, or any
other Person for whose conduct they are or may be held responsible, or from
which Hazardous Materials have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(b) There are no pending or, to the Knowledge of Sellers or the
Company, Threatened claims, Encumbrances, or other restrictions of any
nature, resulting from any Environmental, Health, and Safety Liabilities or
arising under or pursuant to any Environmental Law, with respect to or
affecting any of the properties and assets (whether real, personal, or
mixed) in which Sellers or the Company has or had an interest.
(c) None of the Sellers nor the Company has Knowledge of any basis to
expect, nor has any of them or any other Person for whose conduct they are
or may be held responsible, received any citation, directive, inquiry,
notice, Order, summons, warning, or other communication that relates to
Hazardous Activity, Hazardous Materials, or any alleged, actual, or
potential violation or failure to comply with any Environmental Law, or of
any alleged, actual, or potential obligation to undertake or bear the cost
of any Environmental, Health, and Safety Liabilities with respect to any of
the properties or assets (whether real, personal, or mixed) in which
Sellers or the Company has an interest, or with respect to any property or
facility to which Hazardous Materials generated, manufactured, refined,
transferred, imported, used, or processed by Sellers, the Company, or any
other Person for whose conduct they are or may be held responsible, have
been transported, treated, stored, handled, transferred, disposed,
recycled, or received.
(d) None of the Sellers nor the Company, nor, to the Knowledge of
Sellers and the Company, any other Person for whose conduct they are or
may be held responsible, has any Environmental, Health, and Safety
Liabilities with respect to the properties and assets (whether real,
personal, or mixed) in which Sellers or the Company (or any predecessor),
has or had an interest, or at any property geologically or hydrologically
adjoining any such property or assets.
- 30 -
(e) Sellers have delivered to Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed
or initiated by Sellers or the Company pertaining to Hazardous Materials or
Hazardous Activities in, on, or under the properties or assets owned by the
Company, or concerning compliance by Sellers, the Company, or any other
Person for whose conduct they are or may be held responsible, with
Environmental Laws, including the Environmental Assessment.
3.17 DISCLOSURE
(a) No representation or warranty of Sellers in this Agreement, no
statement in the Disclosure Letter, and no information provided to Buyer by
Sellers, the Company or, to the Knowledge of Sellers and the Company, their
Representatives contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements herein or
therein, in light of the circumstances in which they were made, not
misleading.
(b) There is no fact known to any of the Sellers that has specific
application to any of the Sellers or the Company (other than general
economic or industry conditions) and that, as far as any Seller can
reasonably foresee, materially threatens, the assets, business, prospects,
financial condition, or results of operations of the Company that has not
been set forth in this Agreement or the Disclosure Letter.
3.18 AFFILIATE CONTRACTS
Except as set forth in Section 3.18 of the Disclosure Letter, none of the
Sellers or any Related Person of Sellers or of the Company is a party to any
Contract with, or has any claim or right against, the Company.
3.19 BROKERS OR FINDERS
Except with respect to those fees provided for in that certain letter
agreement between the Company and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Co. agreed to and
accepted by the Company on January 7, 1999 (the "Broker Letter"), Sellers and
-------------
their agents have incurred no obligation or liability, contingent or otherwise,
for brokerage or finders' fees or agents' commissions or other similar payment
in connection with this Agreement. All fees provided for in the Broker Letter
shall be the sole obligation and responsibility of Sellers.
3.20 SECTION 29 TAX CREDIT ▇▇▇▇▇
To the Knowledge of Sellers, except as set forth in Section 3.20 of the
Disclosure Letter, all production from each well included in the New Mexico
Properties qualifies for the federal income tax credit set forth in Section 29
of the IRC.
3.21 CERTAIN PRODUCTION MATTERS
- 31 -
(a) The Company has not received, and neither the Company nor any of
the Sellers have Knowledge of any operator receiving, any claim, notice or
order from any Governmental Body due to hydrocarbon production from the
Properties being in excess of allowables or similar violations which could
result in curtailment of hydrocarbon production from the Properties after
Closing.
(b) The Company is not obligated, by virtue of a "take or pay" or
other prepayment arrangement, a production payment, or any other Contract,
to deliver any volume of hydrocarbons, or permit any other person to take
any volume of hydrocarbons, produced from or attributable to the Properties
at any time without receiving full payment therefor.
(c) Except as set forth in Section 3.21(c) of the Disclosure Letter,
as of January 1, 1999 and as of the Closing Date, there were no outstanding
authority for expenditures or other commitments to make capital
expenditures which were binding on the Properties or the Company.
(d) The Company has not received any notice that any Governmental Body
or Person intends or seeks to reform, amend, cancel, restate or terminate
or alter the Unit Agreement or the Unit Operating Agreement and has no
reason to believe any Governmental Body or Person intends or seeks to do
so.
3.22 SEC FILINGS
The Company and Sellers have filed all statements, forms, reports and other
documents with the SEC required to be filed pursuant to the Securities Act or
the Exchange Act since the Company's formation (collectively, the "SEC
---
Documents"). The SEC Documents, as of their respective filing dates, complied
as to form in all material respects with all applicable Legal Requirements and
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
3.23 BURLINGTON PURCHASE AGREEMENT
Other than as set forth in Section 3.23 of the Disclosure Letter, there are
no contracts, agreements or other understandings between the Company and
Burlington which would affect the Company's ability to seek indemnity from
Burlington under the Burlington Purchase Agreement for any matter thereunder for
which Burlington is obligated to indemnify the Company. To Sellers' Knowledge,
the representations and warranties made by Burlington under the Burlington
Purchase Agreement were true and correct at the closing of the acquisition
contemplated thereunder and remain true and correct as of the Closing Date.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
- 32 -
4.1 ORGANIZATION AND GOOD STANDING
Buyer is a corporation duly organized, validly existing, and in good
standing under the laws of the Commonwealth of Virginia, and has full corporate
power and authority to own its properties and carry on its business as it is now
being conducted.
4.2 AUTHORITY; NO CONFLICT
(a) This Agreement has been duly executed and delivered by Buyer and
constitutes the legal, valid, and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms. Buyer has the absolute and
unrestricted right, power, and authority to execute and deliver this
Agreement and to perform its obligations under this Agreement.
(b) Neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions will
(with the giving of notice or the passage of time or both) give any Person
the right to prevent, delay, or otherwise interfere with any of the
Contemplated Transactions pursuant to:
(i) any provision of Buyer's Organizational Documents;
(ii) any resolution adopted by the board of directors or the
stockholders of Buyer;
(iii) any Legal Requirement or Order to which Buyer may be
subject; or
(iv) any Contract to which Buyer is a party or by which Buyer
may be bound.
Buyer is not and will not be required to obtain any Consent from any Person
in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions, except
for consents already obtained.
4.3 INVESTMENT INTENT
Buyer is acquiring the LLC Units for its own account and not with a view to
their distribution within the meaning of Section 2(11) of the Securities Act.
4.4 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against Buyer and
that challenges, or may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, any of the Contemplated Transactions. To Buyer's
Knowledge, no such Proceeding has been Threatened.
4.5 BROKERS OR FINDERS
- 33 -
Buyer and its officers and agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement and will indemnify
and hold Sellers harmless from any such payment alleged to be due by or through
Buyer as a result of the action of Buyer or its officers or agents.
4.6 FINANCING
Buyer now has and, on the Closing Date and on each subsequent date on which
a payment is required to be made by Buyer pursuant to the terms of this
Agreement, will have sufficient funds available to pay the Cash Consideration
and the Contingent Consideration.
4.7 ACKNOWLEDGMENTS
(a) Except as and to the extent specifically set forth in this
Agreement, Buyer acknowledges and agrees that the Sellers make no
representations or warranties whatsoever, and except as specifically set
forth herein, that Sellers disclaim all liability and responsibility for
any representation, warranty, statement or information made or communicated
(orally or in writing) to Buyer or to Buyer's Representatives (including,
without limitation, any opinion, information or advice which may have been
provided to Buyer by any Representative of Sellers or any of them).
Without limiting the generality of the foregoing, Buyer acknowledges and
agrees that Sellers make no representations or warranties as to (i) the
amount of petroleum, gas, condensate, or other reserves attributable to any
properties of the Company or (ii) any geological, geophysical, engineering,
economic, or other interpretations, forecasts, or evaluations.
(b) In determining to acquire the LLC Units, Buyer has made its own
investigation, analysis, and evaluation of the Assets of the Company
(including, without limitation, visual onsite inspection of the surface of
such properties and assets), and based thereon and on the representations,
warranties, covenants and agreements made by Sellers in this Agreement,
Buyer has formed an independent judgment concerning the Company and its
Assets (including its own estimate and appraisal of the extent and value of
its petroleum and gas reserves), results of operations and prospects and
the inherent risks associated with owning and operating said Assets.
(c) Except for the representations, warranties, covenants and
indemnities made in this Agreement or in any document delivered pursuant to
this Agreement by Sellers, the Assets of the Company are accepted by Buyer
"AS IS" and "WHERE IS".
5. INDEMNIFICATION; REMEDIES
5.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE
- 34 -
All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Letter, and any other certificate or document
delivered pursuant to this Agreement will survive the Closing to the extent set
forth in this Article 5. The waiver of any condition based on the accuracy of
any representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
Damages, or other remedy based on such representations, warranties, covenants,
and obligations.
5.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS
Subject to the provisions of Section 5.4 hereof, each of the Sellers will
indemnify and hold harmless Buyer, the Company, and their respective
Representatives, unitholders, controlling persons, and affiliates (collectively,
the "Indemnified Persons") for, and will pay to the Indemnified Persons the
-------------------
amount of, any loss, liability, claim, damage (including incidental and
consequential damages), expense (including costs of investigation and defense
and reasonable attorneys' fees) or diminution of value, whether or not involving
a third-party claim (collectively, "Damages"), arising, directly or indirectly,
-------
from or in connection with:
(a) any Breach of any representation or warranty made by Sellers in
this Agreement, the Disclosure Letter, or any other certificate or document
delivered by Sellers pursuant to this Agreement;
(b) any Breach by any of the Sellers of any covenant or obligation of
such Seller in this Agreement;
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with any of the Sellers or the
Company (or any Person acting on their behalf) in connection with any of
the Contemplated Transactions;
(d) the Company's or any Seller's failure to pay any Taxes that are
imposed on the Company or Sellers for the periods prior to January 1, 1999;
(e) any claim by any Person with respect to any act or omission of the
Company or Sellers with regard to the Company prior to January 1, 1999;
(f) subject to the limitations of Section 5.4(d) hereof, the failure
of gas delivered under the Gathering Agreement to conform to the CO\\2\\
specification set forth therein. In the event Buyer receives notice that
its gas will be shut-in pursuant to Section 4.2 of the Gathering Agreement
solely as a result of BRGI (as defined in the Gathering Agreement) electing
to exercise its rights under Article 4.2 of Appendix A to the Gathering
Agreement for high CO2 content and not as a result of any force majeure
event, Buyer shall provide written notice to Sellers thereof no later than
forty-eight (48) hours after receipt of notification from BRGI under the
Gathering Agreement. Buyer and Sellers shall jointly cooperate with one
another to find a mutually acceptable resolution to BRGI's refusal to
accept the gas as a result of high CO\\2\\ content that will minimize
Sellers' liability under this
- 35 -
indemnity provision. Buyer shall take no action with respect thereto
without Sellers having adequate opportunity to exercise its rights under
Section 5.4(d) hereof; provided, however, if Sellers are unable to timely
provide an alternative pursuant to section 5.4(d), Buyer shall have the
right to enter into another agreement with a third Person giving due regard
to minimizing Sellers obligations under this indemnity provision.
The remedies provided in this Section 5.2 will not be exclusive of or limit any
other remedies that may be available to Buyer or the other Indemnified Persons;
provided, however, the limitations set forth in Section 5.4 hereof shall limit
all liabilities of Sellers to Buyer or any Indemnified Person under this
Agreement, the Disclosure Letter or any other certificate or document delivered
to Sellers pursuant to this Agreement.
5.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Sellers, and will pay to Sellers the
amount of any Damages arising, directly or indirectly, from or in connection
with (a) any Breach of any representation or warranty made by Buyer in this
Agreement or in any certificate or document delivered by Buyer pursuant to this
Agreement, (b) any Breach by Buyer of any covenant or obligation of Buyer in
this Agreement, or (c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on its
behalf) in connection with any of the Contemplated Transactions, or (d) any
claim by any Person with respect to any act or omission of the Company or Buyer
on or after the Closing Date.
5.4 LIMITATIONS ON SELLERS' LIABILITY
(a) Notwithstanding anything else to the contrary contained herein,
Sellers shall have no liability (for indemnification or otherwise) with
respect to any representation or warranty, or covenant or obligation to be
performed and complied with under the terms of this Agreement, other than
those set forth in Sections 3.7 (only to the extent same are not covered by
another representation or warranty set forth in Article 3 hereof), 3.8,
3.20, 3.23, 5.2(d) and 5.2(f) unless on or before the first anniversary of
the date hereof, Buyer notifies Sellers of a claim specifying the factual
basis of that claim in reasonable detail to the extent then known by Buyer.
Sellers shall have no liability (for indemnification or otherwise) with
respect to claims made with respect to matters covered by Section 3.7 which
are not also covered by another representation or warranty set forth in
Article 3 hereof and Sections 3.8, 3.20, 3.23 and 5.2(d) unless on or
before the fifth anniversary of the date hereof, Buyer notifies Sellers of
a claim specifying the factual basis of that claim in reasonable detail to
the extent then known by Buyer. Unless sooner terminated pursuant to
Section 5.4(d) hereof, Sellers shall have no liability (for indemnification
or otherwise) with respect to claims made with respect to matters covered
by Section 5.2(f) unless on or before the stated expiration date of the
Gathering Agreement (not taking into account any amendment thereto
subsequent to the date hereof which would extend the termination date
thereof, i.e. December 31, 2007), Buyer notifies Sellers of a claim
thereunder specifying the factual basis of that claim in reasonable detail
to the extent then know by Buyer. Sellers shall have no liability
- 36 -
whatsoever to Buyer or any other Person under the terms of this Agreement
from and after such stated expiration date of the Gathering Agreement
except as set forth in Section 5.4(e) hereof.
(b) Sellers' aggregate liability to Indemnified Persons under this
Agreement shall not exceed $28,000,000 for claims for which notice is
received from Buyer during the one (1) year period immediately following
the date hereof; provided, however, that with respect to claims for which
notice is first received after the first anniversary of the date hereof,
Sellers' aggregate liability to Indemnified Persons under this Agreement
shall not exceed $10,000,000 with respect to such claims.
(c) Sellers liability to Indemnified Persons under this Article 5
shall be joint and several only with respect to the first $10,000,000 of
liability during the one year period from and after the date hereof. All
liability of Sellers under this Agreement in excess of $10,000,000 or for
which notice is provided to Sellers after the one year anniversary hereof
shall be borne by Sellers severally and individually, but not jointly, such
that each Seller shall only be liable and responsible for such Seller's pro
rata share, as set forth in Section 5.4(c) of the Disclosure Letter, of any
Damages arising hereunder in excess of $10,000,000 or for which notice is
given after the one year anniversary hereof.
(d) Sellers's indemnification obligations pursuant to Section 5.2(f)
hereof shall terminate upon delivery to Buyer of one of the following:
(1) An amendment to the Gathering Agreement acceptable to Buyer
that eliminates the rights of BRGI (as defined in the Gathering
Agreement) thereunder to refuse gas if the CO2 content of the gas is
less than 20% and otherwise upon the same terms and conditions as
currently contained in the Gathering Agreement;
(2) A second or backup gathering agreement acceptable to Buyer
upon substantially similar terms and conditions as the Gathering
Agreement with a third Person other than BRGI that would become
effective upon the termination of the Gathering Agreement as to
certain receipt points, cover any period of time that Buyer is shut-in
under the Gathering Agreement due to excess CO2 content and allows
such back-up Person to refuse the gas for excess CO2 only when and to
the extent such CO2 exceeds 20%; or
(3) Any other enforceable arrangement that is reasonably
acceptable to Buyer and eliminates Buyer's risk with respect to the
treatment of gas up to a CO2 content of 20%.
(e) With respect to any liabilities arising from or related to any actions
or inactions by a Seller which are finally determined in a court of competent
jurisdiction to be intentional misrepresentation or fraud, the limitations set
forth in Sections 5.4(a), (b) and (c) hereof shall not apply and there shall be
no limitation on such Seller's liabilities hereunder arising therefrom or
related thereto.
- 37 -
5.5 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under Section 5.2
or 5.3 of notice of the commencement of any Proceeding against it, such
indemnified party will, if a claim is to be made against an indemnifying
party under such Section, give notice to the indemnifying party of the
commencement of such claim, but the failure to notify the indemnifying
party will not relieve the indemnifying party of any liability that it may
have to any indemnified party, except to the extent that the indemnifying
party demonstrates that the defense of such action is prejudiced by the
indemnifying party's failure to give such notice.
(b) If any Proceeding referred to in Section 5 is brought against an
indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will, unless the
claim involves Taxes, be entitled to participate in such Proceeding and, to
the extent that it wishes (unless (i) the indemnifying party is also a
party to such Proceeding and the indemnified party determines in good faith
that joint representation would be inappropriate, or (ii) the indemnifying
party fails to provide reasonable assurance to the indemnified party of its
financial capacity to defend such Proceeding and provide indemnification
with respect to such Proceeding), to assume the defense of such Proceeding
with counsel satisfactory to the indemnified party and, after notice from
the indemnifying party to the indemnified party of its election to assume
the defense of such Proceeding, the indemnifying party will not, as long as
it diligently conducts such defense, be liable to the indemnified party
under this Section 5 for any fees of other counsel or any other expenses
with respect to the defense of such Proceeding, in each case subsequently
incurred by the indemnified party in connection with the defense of such
Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims
made in that Proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such claims may be
effected by the indemnifying party without the indemnified party's consent
unless (A) there is no finding or admission of any violation of Legal
Requirements or any violation of the rights of any Person and no effect on
any other claims that may be made against the indemnified party, and (B)
the sole relief provided is monetary damages that are paid in full by the
indemnifying party; and (iii) the indemnified party will have no liability
with respect to any compromise or settlement of such claims effected
without its consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within
ten days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding,
the indemnifying party will be bound by any determination made in such
Proceeding or any compromise or settlement effected by the indemnified
party.
(c) Notwithstanding the foregoing, if an indemnified party determines
in good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary
damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the
- 38 -
indemnifying party, assume the exclusive right to defend, compromise, or
settle such Proceeding, but the indemnifying party will not be bound by any
determination of a Proceeding so defended or any compromise or settlement
effected without its consent (which may not be unreasonably withheld).
(d) Sellers hereby consent to the non-exclusive jurisdiction of any
court in which a Proceeding is brought against any Indemnified Person for
purposes of any claim that an Indemnified Person may have under this
Agreement with respect to such Proceeding or the matters alleged therein,
and agree that process may be served on Sellers with respect to such a
claim anywhere in the world.
5.6 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification is
sought.
6. POST-CLOSING COVENANTS
6.1 SECURITIES FILINGS
Buyer and Sellers agree to use their respective good faith efforts to
cooperate with each other in connection with all securities filings required to
be made by Sellers, Buyer and the Company in connection with this Agreement and
the Contemplated Transactions, including, without limitation, any filings or
amendments thereto required under Section 13(d) of the Exchange Act.
6.2 PREPARATION AND FILING OF 1998 TAX RETURN
Buyer and Sellers agree to fully cooperate with one another in the
preparation, review and timely filing of the Company's 1998 tax return. In
connection therewith, Sellers' Representative shall prepare and submit same to
Buyer for Buyer's review and ultimate filing with the IRS.
6.3 ASSISTANCE IN CONNECTION WITH TRANSITION MATTERS AND THE PURCHASE OF
THE REMAINING ROYALTY INTERESTS
Sellers agree to use their reasonable best efforts to assist Buyer in
connection with all transition matters and the Company's participation in the
liquidation process of the Remaining Royalty Interests. Such activities may
include, without limitation, maintaining communications with ▇▇▇▇▇▇▇▇ &
Associates in connection with the sale process.
7. GENERAL PROVISIONS
7.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance
- 39 -
of this Agreement and the Contemplated Transactions, including all fees and
expenses of agents, representatives, counsel, and accountants. Sellers will
cause the Company not to incur any out-of-pocket expenses in connection with
this Agreement or the Contemplated Transactions except Buyer's costs associated
therewith or, except as otherwise set forth in this Agreement, any costs after
the Closing Date. Sellers shall pay one hundred percent (100%) of the Company's
pro rata share of the fees charged to the Trust in connection with the
liquidation of the Remaining Royalty Interest. In the event of termination of
this Agreement, the obligation of each party to pay its own expenses will be
subject to any rights of such party arising from a Breach of this Agreement by
another party.
7.2 PUBLIC ANNOUNCEMENTS
Unless required by Legal Requirements, neither Buyer nor Sellers shall
issue any press release, public announcement or similar publicity with respect
to this Agreement or the Contemplated Transactions without the prior consent of
the other party.
7.3 SELLERS' REPRESENTATIVE; NOTICES
(a) Each Seller hereby authorizes the Sellers' Representative to take
all actions, execute and deliver all documents and notices, and receive all
payments and notices contemplated under this Agreement to be taken,
executed, delivered or received by Sellers or on behalf of Sellers. The
foregoing grant of authority is irrevocable and a power coupled with an
interest and shall survive the death of any Seller. Buyer shall be
entitled to rely conclusively on the power and authority of the Sellers'
Representatives and will not be obligated to ascertain that any agreement
among the Sellers has been complied with or inquire into the necessity or
expedience of any act or action of the Sellers' Representative.
(b) All notices, consents, waivers, and other communications under
this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt),
(b) sent by telecopier (with written confirmation of receipt), provided
that a copy is mailed by registered mail, return receipt requested, or (c)
when received by the addressee, if sent by a nationally recognized
overnight delivery service (receipt requested), in each case to the
appropriate addresses and telecopier numbers set forth below (or to such
other addresses and telecopier numbers as a party may designate by notice
to the other parties):
SELLERS:
c/o ▇'▇▇▇▇▇▇▇▇ Oil & Gas Company, Inc.
Attention: C.N. ▇'▇▇▇▇▇▇▇▇
▇'▇▇▇▇▇▇▇▇ Oil & Gas Company, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
- 40 -
BUYER:
Dominion Energy, Inc.
Attention: ▇.▇. ▇▇▇▇, ▇▇.
Sr. Vice President - Oil and Gas
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Dominion Resources, Inc.
Attention: ▇▇▇▇ ▇. ▇▇▇▇
Assistant General Counsel
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
7.4 JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or based on
any right arising out of, this Agreement may be brought against any of the
parties in the courts of the State of Texas, County of ▇▇▇▇▇▇, or, if it has or
can acquire jurisdiction, in the United States District Court for the Southern
District of Texas, and each of the parties consents to the jurisdiction of such
courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any action
or proceeding referred to in the preceding sentence may be served on any party
anywhere in the world.
7.5 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
7.6 WAIVER
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither the failure nor any delay by any party in exercising
any right, power, or privilege under this Agreement or the documents referred to
in this Agreement will operate as a waiver of such right, power, or privilege,
and no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right
- 41 -
arising out of this Agreement or the documents referred to in this Agreement can
be discharged by one party, in whole or in part, by a waiver or renunciation of
the claim or right unless in writing signed by the other party; (b) no waiver
that may be given by a party will be applicable except in the specific instance
for which it is given; and (c) no notice to or demand on one party will be
deemed to be a waiver of any obligation of such party or of the right of the
party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the documents referred to in this
Agreement.
7.7 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This Agreement
may not be amended except by a written agreement executed by the party to be
charged with the amendment.
7.8 DISCLOSURE LETTER
(a) The disclosures in the Disclosure Letter, and those in any
Supplement thereto, must relate only to the representations and warranties
in the Section of the Agreement to which they expressly relate and not to
any other representation or warranty in this Agreement.
(b) In the event of any inconsistency between the statements in the
body of this Agreement and those in the Disclosure Letter (other than an
exception expressly set forth as such in the Disclosure Letter with respect
to a specifically identified representation or warranty), the statements in
the body of this Agreement will control.
7.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement without the
prior consent of the other parties, which will not be unreasonably withheld;
provided, however, (a) Sellers shall have the right to convey (i) at closing,
their respective rights and obligations hereunder to the SJP Stub Liquidating
Trust; provided, however Sellers shall remain obligated for all of the duties
and obligations of Sellers hereunder and (ii) all or any portion of the
Contingent Consideration without the prior consent of Buyer; provided, however,
no such transfers of the Contingent Consideration shall be binding upon Buyer
until written notice thereof has been provided to Buyer; and (b) Buyer shall
have the right to assign its rights and obligations hereunder to an affiliated
entity provided, however Buyer shall remain obligated for all of the duties and
obligations of Buyer hereunder.
- 42 -
Subject to the preceding sentence, this Agreement will apply to, be binding in
all respects upon, and inure to the benefit of the successors and permitted
assigns of the parties. Nothing expressed or referred to in this Agreement will
be construed to give any Person other than the parties to this Agreement any
legal or equitable right, remedy, or claim under or with respect to this
Agreement or any provision of this Agreement. This Agreement and all of its
provisions and conditions are for the sole and exclusive benefit of the parties
to this Agreement and their successors and assigns.
7.10 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
7.11 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
7.12 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
7.13 GOVERNING LAW
This Agreement will be governed by the laws of the State of Texas without
regard to conflicts of laws principles.
7.14 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when
taken together, will be deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
BUYER:
Dominion Energy, Inc.
By:
-----------------------------------
▇.▇. ▇▇▇▇, ▇▇.
- ▇▇ -
▇▇▇▇▇▇ ▇▇▇▇ President - Oil and Gas
SELLERS:
EnCap Energy Capital Fund III, L.P.
By: EnCap Investments L.C.,
its general partner
By:
-----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Managing Director
EnCap Energy Acquisition III-B, Inc.
By:
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Managing Director
ECIC Corporation
By:
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Managing Director
BOCP Energy Partners, L.P.
By: EnCap Investments L.C.,
its general partner
By:
-----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Managing Director
First Union Investors, Inc.
By:
-----------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇
Managing Partner
- 44 -
▇'▇▇▇▇▇▇▇▇ Oil & Gas Company, Inc.
By:
-----------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇▇
President
---------------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III
▇▇▇▇▇ ▇. ▇▇▇▇▇ Funding, L.L.C.
By:
-----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
Manager
---------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Andover Group, Inc.
By:
-----------------------------------
A. ▇▇▇▇ ▇▇▇▇▇, Jr.
President
- 45 -
Each of the parties listed below hereby executes this Agreement to evidence
their intent and agreement to be bound hereby with respect to their respective
community property interest herein.
-------------------------------------------
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Spouse of ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Spouse of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Spouse of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
- 46 -
SELLERS' REPRESENTATIVE'S JOINDER
The undersigned, intending to be legally bound, joins in the execution of this
Agreement to evidence its agreement to undertake the duties and obligations of
the Sellers' Representative and agrees to be bound by the provisions of this
Agreement relating to Sellers' Representative.
▇'▇▇▇▇▇▇▇▇ Oil & Gas Company, Inc.
By:
------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇▇
President
- 47 -