EXHIBIT 2.2
AGREEMENT FOR PURCHASE AND SALE
dated September 19, 2000
by and between
APACHE CANYON GAS, L.L.C.,
a Delaware limited liability company
as Seller
and
EVERGREEN RESOURCES, INC.
a Colorado corporation
as Buyer
(Lorencito)
EXECUTION VERSION
AGREEMENT FOR PURCHASE AND SALE
THIS AGREEMENT dated as of the 19th day of September, 2000, between Apache
Canyon Gas, L.L.C., a Delaware limited liability company ("Seller"), and
Evergreen Resources, Inc., a Colorado corporation (herein referred to as
"Buyer").
W I T N E S S E T H:
WHEREAS, Seller owns certain real estate oil and gas leasehold and mineral
interests and related equipment situated in the State of Colorado along with an
interest in an LLC holding similar interests, all of which it holds in
connection with its business of petroleum exploration and production; and
WHEREAS, Seller desires to sell and Buyer desires to acquire these
interests and related assets on the terms and conditions hereinafter provided;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms, as used herein, shall have the following meanings:
1.1 "Agreement" means this Agreement for Purchase and Sale between Seller
and Buyer.
1.2 "Assets" means the following described assets and properties (except
to the extent constituting Excluded Assets):
(a) "Real Property Assets" which consist of the following:
(1) the Subject Interests;
(2) the Lands;
(3) the Incidental Rights;
(4) the Claims; and
(5) all Hydrocarbons produced from or attributable to the
Subject Interests with respect to all periods subsequent to
the Effective Time, together with all proceeds from or of
such Hydrocarbons.
1
(b) The Ownership Interest.
(c) In the event a preferential right to purchase is exercised with
regard to any part of the Assets, the definition of "Assets" herein shall be
amended to exclude such properties for which the preferential right has been
exercised.
1.3 "Assumed Obligations" means (i) all liabilities and obligations of
Seller with respect to the Claims, (ii) all liabilities and obligations of
Seller arising or accruing under or with respect to the Assets from and after
the Effective Time, (iii) all liabilities and obligations of Seller, whether
accrued or not, with respect to plugging and abandoning any ▇▇▇▇▇, removing
structures and facilities and the restoration of the surface pertaining to the
Assets, (iv) a pro-rata share of Property Taxes with respect to the Assets for
the Tax Period in which Closing occurs and all Transfer Taxes, (v) all
liabilities and obligations of Seller arising or accruing under or with respect
to the Oil and Gas Purchase and Processing Agreements from and after the
Effective Time, (vi) all liabilities and obligations under the Basic Documents
from and after the Effective Time except to the extent that a particular
obligation is otherwise expressly retained by Seller hereunder, and (vii) all
other liabilities and obligations assumed by Buyer under this Agreement,
including but not limited to liabilities and obligations assumed by Buyer under
Article XIV.
1.4 "Basic Documents" means all Material Contracts, agreements, and other
legally binding rights and obligations to which the Assets may be subject, or
that may relate to the Assets including, without limitation, leases, assignments
in the chain of title, overriding royalty assignments, farmout and farmin
agreements, option agreements, pooling and unitization agreements, operating
agreements. production sales and marketing agreements, processing agreements,
transportation agreements, production purchasing agreements, permits, licenses
and orders.
1.5 "Buyer's Credits" is defined in Section 3.2.
1.6 "Claims" means all obligations and benefits with respect to gas
production, pipeline, transportation or processing imbalances, all of which are
to be assumed or received by Buyer pursuant to this Agreement.
1.7 "Closing" is defined in Section 11.1.
1.8 "Closing Date" is defined in Section 11.1.
1.9 "Conveyance" mean the Assignment, ▇▇▇▇ of Sale and Conveyance of the
Real Property Assets a form of which is set out in EXHIBIT C.
1.10 "Defensible Title" means such title to a Subject Interest that,
subject to and except for Permitted Encumbrances, (a) entitles Seller to receive
not less than the net revenue interest of Seller for the well or unit as set
forth in EXHIBIT A of all Hydrocarbons produced, saved and marketed from or
attributable to such well or unit and (b) obligates Seller to bear the costs and
expenses relating to the maintenance, development and operation of such well or
unit in an amount not greater
2
than the working interest of Seller for such well or unit as set forth in
EXHIBIT A (unless Seller's net revenue interest therein is proportionately
increased) it being understood that the existence of Permitted Encumbrances
affecting any Asset shall not form the basis for a claim that Seller does not
have Defensible Title to such Asset.
1.11 "Effective Time" means either: (i) 7:00 a.m. Mountain Time on
September 1, 2000 if the Closing Date occurs on or before September 22, 2000; or
(ii) 7:00 a.m. Mountain Time on September 30, 2000 if the Closing Date is after
September 22, 2000.
1.12. "Excluded Assets" mean the following:
(a) all rights, interests, assets and properties of Seller which are
expressly excluded from this sale under other provisions of this Agreement or
which are set forth in EXHIBIT D;
(b) (i) except to the extent constituting or attributable to Claims,
all trade credits, accounts receivable, notes receivable and other receivables
attributable to Seller's interest in the Assets with respect to any period of
time prior to the Effective Time, and (ii) all deposits, cash, checks in process
of collection, cash equivalents and funds attributable to Seller's interest in
the Assets with respect to any period of time prior to the Effective Time;
(c) all corporate, financial, tax and legal (other than title)
records of Seller, however, Buyer shall be entitled to receive copies of any
financial, tax (subject to Section 12.2(d) of this Agreement) or legal records
which directly relate to the Subject Interests or to the Ownership Interest;
PROVIDED, HOWEVER, THAT Buyer's said entitlement shall not extend to any records
whose disclosure may expose Seller to any possible claim of breach of privilege
or confidentiality under any agreement or under federal or state laws;
(d) except to the extent constituting Claims and except as otherwise
provided in this Agreement, all claims and causes of action of Seller (i)
arising from acts, omissions or events, or damage to or destruction of property,
occurring prior to the Effective Time, or (ii) with respect to any of the
Excluded Assets;
(e) except as otherwise provided in clause (vi) of the definition of
Incidental Rights or in Article XV hereof, all rights, titles, claims and
interests of Seller (i) under any policy or agreement of insurance or indemnity,
(ii) under any bond or (iii) to any insurance or condemnation proceeds or
awards;
(f) all (i) Hydrocarbons produced from or attributable to the Assets
with respect to all periods prior to the Effective Time, together with all
proceeds from or of such Hydrocarbons, and (ii) Hydrocarbons which, at the
Effective Time, are owned by Seller or to which Seller has title and are in
storage, within processing plants, or in pipelines;
(g) Seller's share of any and all claims, as well as Seller's claims,
for refund of or loss carry forwards with respect to (i) federal, state and
local, sales and use, ad valorem, property, excise, production, severance, gross
receipts, payroll, withholding or other taxes attributable to any
3
period prior to the Effective Time; (ii) federal, state and local income or
franchise taxes; or (iii) any taxes attributable to the Excluded Assets;
(h) all amounts due or payable to Seller as adjustments or refunds
under any audit pertaining to periods prior to the Effective Time;
(i) all amounts due or payable to Seller as adjustments or refunds
under any contracts or agreements respecting periods prior to the Effective
Time, other than Claims;
(j) all amounts due or payable to Seller as adjustments to insurance
premiums related to the Assets with respect to any period prior to the Effective
Time;
(k) except to the extent included in the Claims, all proceeds,
benefits, income or revenues accruing (and any security or other deposits made)
with respect to (i) the Assets prior to the Effective Time or (ii) any Excluded
Assets;
(l) any logo, service ▇▇▇▇, copyright, trade name or trademark
associated with Seller or any business of Seller; and
(m) all files, information and data expressly excluded from the
definition of Incidental Rights.
(n) all vehicles, tractors, trailers and similar equipment owned by
Seller.
(o) Seller's obligation for 50% of legal costs of the Lessor in the
MGP litigation referred to on EXHIBIT J in accordance with that agreement
evidenced by letters from ▇▇▇▇▇▇▇▇ & Associates, LLC to ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇, dated June 28, 1999 and June 29, 1999, respectively
1.13 "GAAP" means Generally accepted accounting principles, consistently
applied.
1.14 "Hydrocarbons" means crude oil, natural gas, casinghead gas,
condensate, sulphur, natural gas liquids and other liquid or gaseous
hydrocarbons (including C02), and also refers to all other minerals of every
kind and character which may be covered by or included in the Subject Interests.
1.15 "Incidental Rights" shall mean all right, title and interest of Seller
in and to or derived from the following insofar as the same directly relate to
the Subject Interests: (i) all unitization, communitization and pooling
designations, declarations, agreements and orders covering Hydrocarbons in or
under the Lands or any portion thereof and the units and pooled or communitized
areas created thereby; (ii) all easements, rights-of-way, surface leases,
permits, licenses, servitudes or other interests, including; (iii) all equipment
and other personal property, fixtures and improvements situated upon the Lands
and used or held for use in connection with the exploration, development or
operation of the Subject Interests or Lands or the production, treatment,
storage, compression, processing or transportation of Hydrocarbons from or in
the Subject Interests or Lands;
4
(iv) all Material Contracts; (v) originals of all lease files, land files, well
files, gas and oil sales contract files, gas processing files, division order
files, abstracts, title opinions, and all other books, files and records,
information and data (including copies of engineering, geological and
geophysical data to the extent same may be transferred, but subject in all
events to any and all consents concerning ownership and transfer), and all
rights thereto, of Seller insofar as the same are directly related to and
necessary to the realization of value by Buyer of any of the Subject Interests
or Lands and to the extent the transfer thereof is not prohibited by existing
contractual obligations with third parties; and (vi) to the extent transferable
and subject to Article XVI hereof, all interest of Seller in and to all claims
and causes of action which Seller may have against insurance companies and
others by reason of injury or damage to or destruction or loss of all or any
part of the Assets by reason of events occurring subsequent to the Effective
Time.
1.16 "Lands" mean, except to the extent constituting Excluded Assets, each
and every kind and character of right, title, claim or interest which Seller has
in and to the lands covered by the Subject Interests.
1.17 "LGG" means Lorencito Gas Gathering, L.L.C., a Colorado limited
liability company.
1.18 "Material Contracts" means all contracts related to the Assets, the
absence of which would cause a material change either in the operations of the
Assets or their value, as set forth on EXHIBIT E.
1.19 "Ownership Interest" means Seller's ownership in LGG described in
Exhibit A-2, hereto.
1.20 "Permitted Encumbrances" shall mean any of the following matters:
(a) the terms, conditions, restrictions, exceptions, reservations,
limitations and other matters contained in the agreements, instruments and
documents which create or reserve to Seller its interests in any of the Assets
provided they do not operate to reduce the net revenue interest, nor increase
the working interest (unless Seller's net revenue interest therein is
proportionately increased) of Seller in the Subject Interests as reflected in
EXHIBIT A hereto;
(b) encumbrances that arise under operating agreements to secure
payment of amounts not yet delinquent and are of a type and nature customary in
the oil and gas industry;
(c) encumbrances that arise as a result of pooling and unitization
agreements, declarations, orders or laws to secure payment of amounts not yet
delinquent;
(d) any materialman's, mechanics', repairman's, employees',
contractors', operators' or other similar liens or charges for liquidated
amounts arising in the ordinary course of business, (w) which are inchoate, (x)
which Seller has agreed to assume or pay pursuant to the terms hereof, (y) for
which Seller is responsible for paying or releasing at Closing;
5
(e) any liens for taxes, tax assessments not yet delinquent, or tax
assessments that are being contested in good faith, and other assessments not
yet delinquent, or if delinquent, that are being contested in good faith;
(f) any liens or security interests created by law or reserved in oil
and gas leases for royalty, bonus or rental or for compliance with the terms of
the Subject Interests;
(g) any obligations or duties affecting the Assets to any
municipality or public authority with respect to any franchise, grant, license
or permit, and all applicable laws, rules and orders of governmental authority;
(h) any (i) easements, rights-of-way, servitudes, permits, surface
leases and other rights in respect of surface operations, pipelines, grazing,
hunting, fishing, logging, canals, ditches, reservoirs, or the like, or (ii)
easements for streets, alleys, highways, pipelines, telephone lines, power
lines, railways and other similar rights-of-way, on, over, or in respect of
property owned or leased by Seller or over which Seller owns rights-of-way,
easements, permits, or licenses, to the extent such matters, individually or in
the aggregate, do not interfere materially with oil and gas operations currently
conducted on the Subject Interests;
(i) all lessors' royalties, overriding royalties, net profits
interests, carried interests, reversionary interests and other burdens to the
extent that the net cumulative effect of such burdens does not operate to reduce
the net revenue interest of Seller in any of the Subject Interests to below the
applicable net revenue interest set forth in EXHIBIT A hereto;
(j) all defects and irregularities affecting title to the Subject
Interests which individually or in the aggregate do not operate to reduce the
net revenue interest, nor increase the working interest (unless Seller's net
revenue interest is increased proportionately) of Seller in the Subject
Interests as reflected in EXHIBIT A hereto or otherwise interfere materially
with the operation, value or use of the Subject Interests;
(k) preferential rights to purchase and required third party consents
to assignments and similar agreements with respect to which waivers or consents
are obtained from the appropriate parties with respect to the sale contemplated
hereunder or, following the furnishing by Seller to the appropriate party of all
requisite notices and information, the applicable time period for asserting such
rights has expired without an exercise of such rights with respect to such sale;
(l) all rights to consent by, required notices to, filings with, or
other actions by governmental entities in connection with the sale or conveyance
of oil and gas leases or interests therein if the same are customarily obtained
contemporaneously with or subsequent to such sale or conveyance;
(m) (i) Material Contracts, division orders, unitization and pooling
designations, declarations, orders and agreements, and (ii) contracts and
agreements with affiliates of Seller of the kind enumerated in subclause (i) of
this clause (m) that have been disclosed to Buyer in EXHIBIT H hereto;
6
(n) any encumbrance, title defect or matter (whether or not
constituting a Title Defect) waived or deemed waived by Buyer pursuant to
Article VII hereof; and,
(o) any agreement, contract, lease, instrument, permit, amendment or
extension entered into by Seller in accordance with Article IX hereof.
1.21 "Property Taxes" is defined in Section 12.2.
1.22 "Purchase Price" is defined in Section 3.1.
1.23 "Seller's Credits" is defined in Section 3.2.
1.24 "Subject Interests" means, except to the extent constituting Excluded
Assets, any and all interests owned by Seller and set forth in EXHIBIT A-1 or
which Seller is now entitled to receive by reason of any existing participation,
joint venture, farm-in or other agreement, in and to the oil, gas and/or mineral
leases, permits, licenses, concessions, leasehold estates, fee, royalty and
overriding royalty interests described in EXHIBIT A-1 attached hereto including,
without limitation, Seller's minerals, mineral fee and reversionary interests
in, on and under the lands described in EXHIBIT A.
1.25 "Tax Period" is defined in Section 12.2.
1.26 "Title Defect" is defined in Section 7.3.
1.27 "Transfer Taxes" is defined in Section 12.2.
ARTICLE II
SALE AND PURCHASE
Subject to the terms and conditions of this Agreement and the Permitted
Encumbrances, Seller agrees to sell and convey to Buyer and Buyer agrees to
purchase and pay for the Assets.
ARTICLE III
PURCHASE PRICE AND PAYMENT
3.1 PURCHASE PRICE. (a) The total consideration for the sale and
conveyance of the Assets to Buyer is Buyer's payment of Thirty-Five Million
Dollars ($U.S. 35,000,000.00) (the "Purchase Price"). The Purchase Price,
together with and subject to such adjustments, if any, as are expressly provided
for elsewhere in this Agreement, shall be paid by Buyer to Seller at Closing by
means of completed Federal Funds transfers to Seller's account in Apache Canyon
Gas, L.L.C., routing number ▇▇▇▇▇▇▇▇▇, account number 9870964996
3.2 PURCHASE PRICE CREDITS.
7
(a) Within 10 days after December 31, 2000, the parties shall
exchange information with respect to revenues received from production and other
operating sources (excluding interest income), from or attributable to the
Assets for periods on or after the Effective Date received by Seller ("Buyer's
Credits") and shall calculate all exploration, production, development,
operating, overhead, general and administrative and other costs paid or incurred
by Seller with respect to the Assets for such period charged under applicable
operating agreements or, if no operating agreement is applicable, then under the
most recent ▇▇▇▇▇ Accounting Procedure Joint Operations ("Seller's Credits")
excluding all non-cash charges attributable to depletion, depreciation, bad debt
losses, lease abandonment, etc.; provided that Seller shall have no obligation
to make any payment that would constitute a Seller's Credit after the Effective
Time. Only items of revenue, cost and expense attributable to the Assets shall
be included in the foregoing calculations. If Seller's Credits exceed Buyer's
Credits, the difference shall be due Seller by Buyer. If Buyer's Credits exceed
Seller's Credits, the difference shall be due Buyer by Seller. Prior to the end
of the ten day period beginning with December 31, 2000, Seller shall furnish
Buyer with an estimated accounting showing the amount of Seller's Credits and
the amount of Buyer's Credits. The amount of the final credit, as adjusted,
shall be paid in cash on final adjustment by the party owing it. If within such
time period, the parties are unable to agree as to whether an item of income or
expense belongs in the period before or after the Effective Time, or is properly
included in Seller's Credits or Buyer's Credits, or as to any other accounting
matters, then such item or matter may be submitted for determination to a
mutually acceptable accounting firm in accordance with Section 13.2 hereof.
Final settlement shall be made within ten (10) business days following agreement
by the Buyer and Seller or final determination by said accounting firm (which
final determination shall be binding upon Buyer and Seller).
(b) Seller and Buyer or representatives of each shall determine the
amount of the Hydrocarbons existing in storage tanks, gathering lines,
pipelines, gasoline plants, and other facilities as of the Effective Date using
the point or points of delivery to Seller's purchasers as a zero reference
point. Seller shall receive a credit in the final adjustment of the Purchase
Price as provided for in paragraph (a) above equal to an amount calculated by
multiplying the volume of such Hydrocarbons by (i) in the case of oil, the
posted price in the field, as of the Effective Time (or if none, a mutually
agreeable price) or (ii) in the case of gas, the prevailing spot market price
net of transportation and basis differential, as of the Effective Time
3.3 PURCHASE PRICE ALLOCATIONS. Seller and Buyer mutually agree to
allocate the Purchase Price among the Assets as set forth in EXHIBIT B attached
hereto. Seller and Buyer agree that said allocation as set forth in EXHIBIT B is
the proper allocation of the Purchase Price in accordance with the fair market
value of the Assets, and that said allocation of the Purchase Price of the
Assets as set forth in EXHIBIT B shall apply for purposes of Sections 755 and
1060 of the Internal Revenue Code of 1986 (as amended and together with any
regulations promulgated thereunder, the "Code"). Seller and Buyer agree (and
each agrees to cause its affiliates) to report the federal, state and local
income and other tax consequences of the transactions contemplated herein, and
in particular to report the information required under Section 1060(b) of the
Code (and any regulations promulgated thereunder), in a manner consistent with
such allocation. Seller and Buyer further agree (and each agrees to cause its
affiliates) to not take any tax position inconsistent with such allocation in
connection with the examination of any of their tax returns, refund claims or
8
litigation, investigations or other proceedings involving any of their tax
returns. Seller and Buyer each further agree that they will not take any
position inconsistent with this allocation in preparing financial statements,
tax returns, reports to shareholders or government authorities or otherwise.
Buyer and Seller each agree to furnish the other a copy of IRS Form 8594
(Asset Acquisition Statement under Section 1060 of the Code) as filed with the
Internal Revenue Service by such party or any affiliate thereof, pursuant to
Sections 755 and 1060 of the Code, as a result of the consummation of the
transactions contemplated hereby, within thirty (30) days of the filing of such
form with the Internal Revenue Service.
ARTICLE IV
SELLER'S REPRESENTATIONS
4.1 SELLER'S REPRESENTATIONS. Seller represents to Buyer as of the date
hereof that:
(a) Seller is a limited liability company duly formed and existing
pursuant to the laws of the State of Delaware and is qualified to do business in
the State of Colorado.
(b) Subject to Sections 8.1, 8.2, and 15.1, and except as set forth
on EXHIBIT I, the consummation of the transactions contemplated by this
Agreement will not violate, or be in conflict with, any provision of the
governing documents of Seller, any provision of any agreement or instrument to
which Seller is a party or by which Seller is a party or by which it is bound or
to the knowledge of Seller, any judgment, decree, order, statute, rule or
regulation applicable to Seller.
(c) The execution, delivery and performance of this Agreement and the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action by Seller.
(d) This Agreement constitutes, and all documents and instruments
required hereunder to be executed and delivered by Seller at Closing will
constitute, legal, valid and binding obligations of Seller in accordance with
their respective terms, subject to applicable bankruptcy and other similar laws
of general application with respect to creditors;
(e) There are no bankruptcy, reorganization or arrangement
proceedings pending, being contemplated by, or to the actual knowledge of the
officers of Seller, threatened against Seller;
(f) Seller may contract for brokerage or finder's services against
which it shall hold Buyer harmless pursuant to Section 15.4;
(g) Except as shown on EXHIBIT J hereto, there is no claim, demand or
suit, action or other proceeding pending in which Seller has been served with
process, or to Seller's knowledge threatened, before any, court or governmental
agency which if adversely decided could reasonably be expected to result in a
material impairment or loss of title to any material part of the Assets taken as
a whole or the value thereof taken as a whole or which might materially hinder
or impede the operation of the Assets taken as a whole;
9
(h) Except as shown on EXHIBIT J and as may be referred to in Article
XIV, Seller, to its knowledge, has not violated, and to Seller's knowledge there
are no alleged violations by Seller of, any applicable rules, regulations or
orders of any governmental agency having jurisdiction over the Assets which
would affect in any material respect the value of the Assets taken as a whole;
and
(i) Seller is a United States person within the meaning of Section
7701(a)(30) of the Internal Revenue Code of 1986, as amended.
(j) Seller makes no representation or warranty, express or implied
with respect to whether any of the Subject Interests are qualified for, or
whether Buyer might be qualified to take, tax credits under Section 29 of the
Internal Revenue Code with respect to production from the Subject Interests.
(k) Seller is not a Public Utility Holding Company as defined in the
Public Utility Holding Company Act of 1935, and, to the knowledge of Seller, it
is not a partner with any party who is a Public Utility Holding Company.
(l) Seller is not in breach or default, or to Seller's knowledge,
alleged to be in breach or default, under any of (i) the Material Contracts,
(ii) any of the instruments creating or reserving the Subject Interests, or
(iii) any other material agreement or contract affecting or included within the
Assets, other than a breach or default which would not have a material adverse
effect, and, to Seller's knowledge, no other party to any of the instruments and
agreements described in (i) through (iii), of this paragraph (l) is in breach of
or default thereunder. No event, condition or occurrence exists which after
notice or lapse of time or both would constitute a breach or default by Seller
under any of the foregoing except for such breaches or defaults that would not
have a material adverse effect.
(m) There are no gas imbalances, other than imbalances affecting the
pipeline, on the Subject Interests except as described on Exhibit M.
(n) Solely with respect to the LLC Ownership Asset, the Seller
represents and warrants to Buyer the following:
(i) LGG is a limited liability company duly organized, validly
existing and in good standing under the laws of Colorado and
is duly qualified and in good standing to carry on its
business in Colorado.
(ii) Except as set forth on EXHIBITS I AND J: (i) the Ownership
Interest is duly and validly authorized for issuance,
legally issued, fully paid and nonassessable, and has not
been issued, and is not held, in violation of any preemptive
rights; (ii) Seller is the lawful and beneficial owner of
record of the Ownership Interest and has full right, title
and interest to such Ownership Interest free and clear of
all liens, encumbrances, claims and restrictions; (iii)
there are no agreements or
10
understandings with respect to the voting of the Ownership
Interest and there are no options, subscriptions, warrants
or rights to purchase, convert into or otherwise acquire any
ownership interest of LGG, nor are there any plans,
understandings or agreements to issue any such options,
subscriptions, warrants or rights to purchase, convert into
or otherwise acquire any ownership interest of LGG.
(iii) To the best of Seller's knowledge, except as set forth on
EXHIBITS I AND J, (i) the execution, delivery and
performance of this Agreement by Seller and the consummation
by it of the transactions contemplated hereby does not
require the consent, waiver, approval, license or
authorization of any person, entity or public authority
which will not have been obtained on or prior to Closing;
does not, with or without the giving of notice or the
passage of time or both, violate any provision of law or the
organizing documents of LGG, or conflict with or result in a
breach, termination or acceleration of any provision of,
constitute a default under, or result in the creation of any
lien, claim, security interest or encumbrance upon any of
the assets of Seller or LGG pursuant to any mortgage, deed
of trust, indenture or other agreement or instrument, or any
order, judgment, decree or any other restriction of any kind
or character, to which either Seller or LGG are a party or
by which they or any of their assets may be bound.
(iv) Seller and Buyer agree that, except as otherwise expressly
provided in this Agreement, the Ownership Interest is being
purchased "AS IS," "WHERE IS" and "WITH ALL FAULTS," latent
and patent. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
SELLER HAS NOT MADE AND WILL NOT MAKE, AND HEREBY EXPRESSLY
DISCLAIMS, ANY WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED,
WITH RESPECT TO OR RELATING TO THE OWNERSHIP INTEREST AND
UNDERLYING ASSETS OR ANY PORTION THEREOF, INCLUDING WITHOUT
LIMITATION, MERCHANTABILITY, HABITABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. Buyer expressly acknowledges that,
except as specifically provided for in this Agreement, Buyer
is not authorized to rely, has not relied and will not rely
on any representation, statement or warranty of Seller or of
any representative and will not rely on any representation,
statement or warranty of Seller or of any representative
Seller.
Except as otherwise expressly provided herein, Seller makes
no representations, warranties or indemnities for any claim,
condition or liability arising before or after this
Agreement pursuant to, or arising under, any federal, state
or local law, rule or ordinance, including
11
those relating to protection of the environment such as,
without limitation, the Clean Water Act, the Resource
Conservation and Recovery Act and/or the Comprehensive
Environmental Response, Compensation, and Liability Act.
(o) Seller is aware of no liabilities of LGG other than those
included on the balance sheet provided by Seller to Buyer. Seller is aware of no
other Material Contracts other than those included on EXHIBIT E hereto.
ARTICLE V
BUYER'S REPRESENTATIONS
5.1 BUYER'S REPRESENTATIONS. Buyer represents to Seller as of the date
hereof that:
(a) It is a corporation, duly organized, validly existing and in good
standing under the laws of the State of Colorado, and Buyer is or prior to
Closing will be duly qualified pursuant to any and all applicable laws, statutes
and regulations to own and operate the Assets;
(b) It has all requisite power and authority to carry on its business
as presently conducted, to enter into this Agreement and the other documents and
agreements contemplated hereby, to purchase the Assets on the terms described in
this Agreement, and to perform its other obligations under this Agreement and
the other documents and agreements contemplated hereby. Subject to Section 15.1,
the consummation of the transactions contemplated by this Agreement will not
violate., nor be in conflict with, any provision of Buyer's charter, or
governing documents, or any material agreement or instrument to which Buyer is a
party or by which it is bound, or any judgment, decree, order, statute, rule or
regulation applicable to Buyer;
(c) The execution, delivery and performance of this Agreement and the
transactions contemplated hereunder have been duly and validly authorized by all
requisite action on the part of Buyer;
(d) This Agreement constitutes, and all documents and instruments
required hereunder to be executed and delivered by Buyer at Closing will
constitute, legal, valid and binding obligations of Buyer in accordance with
their respective terms, subject to bankruptcy and other similar laws of general
application with respect to creditors;
(e) There are no bankruptcy, reorganization or arrangement
proceedings pending, being contemplated by, or to the actual knowledge of the
officers of Buyer, threatened against Buyer;
(f) No broker or finder has acted for or on behalf of Buyer in
connection with this Agreement or the transactions contemplated by this
Agreement, and no broker or finder is entitled to any brokerage or finder's fee
or commission in respect thereof based in any way on agreements, arrangements or
understandings made by or on behalf of Buyer;
12
(g) Buyer is now or prior to Closing will be, and after Closing shall
continue to be, qualified to own Federal and State oil, gas and mineral leases
in all jurisdictions where any such Subject Interests are located, and the
consummation of the transactions contemplated hereby will not cause Buyer to be
disqualified as such an owner or to exceed any acreage limitation imposed by any
law, statute, rule or regulation;
(h) Buyer has arranged to have available by the Closing Date
sufficient funds to enable the Buyer to pay in full the Purchase Price, together
with all costs and expenses relative thereto, and otherwise to perform its
obligations under this Agreement.
(i) Buyer is purchasing the Ownership Interest for its own account
and sole interest, and is purchasing the Ownership Interest for investment and
not with a view to, or in connection with, any offering, resale, disposition or
distribution of any of the Ownership Interest.
(j) Buyer understands and acknowledges that no registration statement
relating to the Ownership Interest has been filed under the Securities Act of
1933, as amended (the "Act") and that consequently the Ownership Interest will
constitute "restricted securities" within the meaning of Rule 144 under the Act
and accordingly must be held by Buyer indefinitely and may not be sold or
otherwise disposed of in the absence of registration or an exemption from
registration under the Act and under applicable state securities laws. Buyer
realizes that there is no existing public market for the Ownership Interest and
that even if such market did exist, reliance upon Rule 144 under the Act for
public sales in limited amounts could occur only if adequate public information
about LL was available and only after Buyer has held the Ownership Interest
continuously for a period of at least two years from and after the date on which
the full purchase price for the Ownership Interest is paid. Buyer understands
and acknowledges that the Seller is under no obligation to register the
Ownership Interest under the Act or to aid Buyer in obtaining any exemption from
registration under the Act.
(k) The following is made as of the Closing Date only: Buyer has had
the opportunity to examine all information regarding LGG provided by Seller, and
Buyer has had the opportunity to ask questions of directors and officers of
Seller. The investment decision of Buyer to acquire the Ownership Interest has
been based solely upon Seller's representations with respect to the LGG and the
evaluation made by Buyer.
(l) Seller is not a Public Utility Holding Company as defined in the
Public Utility Holding Company Act of 1935, and, to the knowledge of Seller, it
is not a partner with any party who is a Public Utility Holding Company.
ARTICLE
13
VI
ACCESS TO INFORMATION AND INSPECTION
6.1 FILES. Seller has permitted Buyer and its representatives access to
all accounting records, abstracts of title, title opinions, title files,
ownership maps, lease files, assignments, division orders, check vouchers,
payout statements and agreements pertaining to the Assets insofar as the same
are now in existence and in the possession of Seller. Buyer and Seller
acknowledge that Buyer has had access to such records and information, prior to
the execution of this Agreement.
6.2 OTHER FILES. Seller has made available to Buyer for inspection by
Buyer all geological, geophysical, production and engineering books, records and
data in possession of Seller, except such records or data which Seller is
prevented by contractual obligations with third parties from disclosing.
6.3 CONFIDENTIALITY AGREEMENT. Buyer and Seller entered into that certain
Confidentiality Agreement dated June 23, 2000, between Seller and Buyer, the
terms of which are incorporated herein by reference and made a part of this
Agreement. The Confidentiality Agreement shall expire at Closing.
6.4 INSPECTIONS. Seller has permitted Buyer and its representatives at
reasonable times and at their sole risk, cost and expense, to conduct reasonable
inspections of the Assets; provided, however, Buyer shall repair any damage to
the Assets resulting from such inspections and Buyer does hereby indemnify and
hold harmless Seller from and against any and all losses, costs, damages,
obligations, claims, liabilities, expenses or causes of action arising from
Buyer's inspection of the Assets, including, without limitation, claims for
personal injuries, property damage and reasonable attorney's fees and further
including claims arising in whole or part from Seller's negligence.
ARTICLE VII
TITLE
7.1 NO WARRANTY OR REPRESENTATION. Seller shall convey Seller's interests
in and to the Real Property Assets to Buyer subject to the Permitted
Encumbrances and without any warranty of title, express or implied, except as to
claims by, through and under Seller, but not otherwise, as provided in the form
of Assignment, ▇▇▇▇ of Sale and Conveyance attached as Exhibit C hereto. Seller
makes no warranty or representation, express or implied, with respect to the
accuracy or completeness of the information, records and data now, heretofore or
hereafter made available to Buyer in connection with this Agreement (including,
without limitation, any description of the Real Property Assets, pricing
assumptions, potential for production of Hydrocarbons from the Subject
Interests, prospects for LGG, or any other matters contained in any other
material furnished to Buyer by Seller or by Seller's agents or representatives).
7.2 BUYER'S TITLE REVIEW.
(a) For 45 calendar days after Closing, Buyer may at Buyer's sole
cost and expense commence and diligently pursue such examination of title to the
Subject Interests as Buyer
14
desires. Seller shall fully cooperate with Buyer and shall make available to
Buyer at Seller's offices in Overland Park, Kansas, all documents, records and
material in Seller's possession (except to the extent disclosure of same is
prohibited pursuant to agreements with third parties) and all assistance
reasonably necessary to assist Buyer in determining the validity of Seller's
title in and to the Subject Interests. In no event, however, does Seller warrant
or represent the sufficiency, completeness or accuracy of such documents,
records and materials, and Buyer's reliance thereon shall be at Buyer's sole
risk and expense. In the event more than one property is being conveyed
hereunder, Buyer will review title on a property by property basis commencing
with the property being deemed to have the greatest value and then in descending
order of value as set forth on EXHIBIT B. Immediately upon completion of Buyer's
title review of each property, Buyer shall notify Seller of any Title Defects
associated with such property in accordance with Section 7.3 below. Buyer will
conclude Buyer's title review and give notice to Seller of all asserted Title
Defects not later than five (5) days after the end of said 45 day period. To be
effective, Buyer's written notice of a Title Defect must include (i) a brief
description of the matter constituting the asserted Title Defect and (ii)
supporting documents reasonably necessary for Seller (or a title attorney or
examiner hired by Seller) to verify the existence of such asserted Title Defect.
Any matters not described in a written notice of Title Defect as provided above
shall conclusively be deemed to have been waived and accepted by Buyer, and
shall be deemed Permitted Encumbrances hereunder.
(b) Upon receipt of the notice set forth under Section 7.2(a) Seller
shall have the right, but not the obligation, for 10 calendar days to cure all
or any portion of asserted Title Defects, such curative costs to be borne solely
by Seller. If Buyer elects to waive or is deemed to have waived any asserted or
unasserted Title Defects, such waived or unasserted Title Defects shall be
deemed Permitted Encumbrances hereunder. If Seller within the time provided
above is unable, elects not, or refuses, to cure such asserted Title Defects,
Buyer may, subject to Section 7.4 below, by written notice delivered to Seller
not later than two (2) business days after the end of such period, and as
Buyer's sole and exclusive remedy and only if the thresholds of Section 12.9
have been met, elect to have Seller refund to Buyer, a portion of the Purchase
Price by an amount attributable to the reserves to which title has failed as
mutually agreed upon by the parties and based upon the allocations made pursuant
to Section 3.3, and Buyer shall reconvey such portion of the Subject Interests
to Seller. Failure by Buyer to timely assert a claim for an adjustment to the
Purchase Price shall be deemed an election by Buyer to waive such claim and
retain the interest covered by the asserted but uncured Title Defect. In the
event Buyer and Seller are unable to agree upon the amount of the downward
adjustment of the Purchase Price attributable to a Title Defect for the purposes
of the foregoing, then the same shall be submitted for determination to a
mutually acceptable reservoir engineering firm whose determination shall be
final.
(c) Matters set out in EXHIBIT I shall not constitute a Title Defect;
provided, however, any mortgages listed in Exhibit I, if not released at
Closing, shall constitute a Title Defect.
7.3 TITLE DEFECTS. For the purposes of this Agreement, a portion of the
Subject Interests shall be deemed to have a "Title Defect" if any one or more of
the following statements is untrue in any material respect with respect to such
portion of the Subject Interests as of the Effective Time:
(i) Seller has Defensible Title thereto.
15
(ii) All royalties, rentals, ▇▇▇▇ clause payments, shut-in gas
payments and other payments due with respect to such portion of the Subject
Interests have been properly and timely paid, except for payments held in
suspense for title or other reasons which are customary in the industry and
which will not result in grounds for cancellation of Seller's rights in such
portion of the Subject Interests.
(iii) Except as set forth in any of the Exhibits hereto, Seller is not
in default under the material terms of any leases, farmout agreements or other
contracts or agreements respecting such portion of the Subject Interests which
could (1) materially interfere with the operation; value or use thereof, (2)
materially prevent Seller from receiving the proceeds of production attributable
to Seller's interest therein, or (3) result in cancellation of Seller's interest
therein.
(iv) There is no lien, charge, encumbrance, defect or objection
(other than a Permitted Encumbrance) against, in or to Seller's title thereto or
right or interest therein, and no fact or circumstance relative thereto exists
of such significance that a reasonable and prudent person engaged in the
business of the ownership, development and operation of oil and gas properties
with knowledge of all the facts and appreciation of their legal significance
would be unwilling to accept and pay for the Subject Interest or portion thereof
which is affected thereby.
Notwithstanding the foregoing, loss of any Subject Interest or portion
thereof following the Effective Time due to (i) any election or decision made by
Seller in accordance with Article IX or (ii) expiration of the primary or
secondary term of a lease shall not constitute a Title Defect as long as Seller
shall not have breached the provisions of Article IX. Subject to Section 15.1
below, the failure of any governmental office to approve or consent to any
assignment or other conveyance of a Subject Interest filed with such office
shall not constitute a Title Defect; provided that such office has not expressly
and specifically refused to grant such consent or approval as a result of the
existence of a Title Defect.
7.4 TITLE INDEMNIFICATION. Notwithstanding any other provisions of this
Article VII, Seller shall have the option to execute and deliver to Buyer a
title indemnity whereby Seller shall keep Buyer indemnified from and against any
and all liability, loss, costs (including legal costs), suits, judgments, causes
of action, claims or damages arising or incurred in connection with any uncured
Title Defects, to the extent the same relate to acts, omissions or other matters
occurring prior to the Effective Time and only with respect to such uncured
Title Defects. The title indemnity shall be limited to the amount determined in
accordance with this Article VII with respect to the particular Asset for which
the indemnity is given. If Seller provides such a title indemnity, the relevant
uncured Title Defects shall be deemed to be cured and removed for the purposes
of this Agreement.
ARTICLE VIII
PREFERENTIAL PURCHASE RIGHTS AND CONSENTS
8.1 PREFERENTIAL RIGHT. A preferential purchase right exists with respect
to the Subject Interests and the Ownership Interest. Immediately upon signing of
this Agreement, a copy of this
16
Agreement along with the requisite notices under the preferential purchase
rights shall be sent to the parties entitled thereto.
8.2 CONSENTS. A consent to the transfer of the Ownership Interest is
required. In the event the consent is not received before Closing, Seller shall,
at Closing, transfer the beneficial ownership of the Ownership Interest to Buyer
and shall designate, as Seller's representatives with respect to management of
LGG, persons designated by Buyer. Seller shall provide all notices to Buyer that
it receives and shall act as Buyer's agent with respect to LGG, but only based
on instructions from Buyer. Buyer shall indemnify Seller with respect to all any
and all claims made against Seller with respect to Seller's actions on Buyer's
behalf with respect to LGG.
ARTICLE IX
COVENANTS OF SELLER
9.1 COVENANTS OF SELLER PENDING CLOSING. From and after the date of
execution of this Agreement and until the Closing, except as otherwise consented
to by Buyer in writing and subject to Section 9.2 below and the terms of
applicable operating and other agreements, Seller shall:
(a) Subject to Seller's right to obtain Seller's Credits pursuant to
Section 3.2, continue to operate the Assets owned by it for the account of Buyer
in a manner consistent with past practices;
(b) Maintain in full force and effect all policies of insurance
covering the Assets now maintained by Seller;
(c) Use reasonable efforts to preserve in full force and effect all
material leases, operating agreements, easements, rights-of-way, permits,
licenses, contracts and other material agreements included in the Incidental
Rights which relate to the Assets in which it owns an interest and perform all
material obligations of Seller in or under any such agreement relating to such
Assets;
(d) Not enter into any agreement or arrangement granting any
preferential right to purchase any of the Assets or requiring the consent of any
person to the transfer and assignment of any of the Assets hereunder, except in
connection with the performance by Seller of an obligation or agreement existing
on the date hereof or pursuant to this Agreement;
(e) Not dedicate, sell, farm out, encumber or dispose of any Assets
without Buyer's written consent except (i) sales of oil and gas production in
the ordinary course of business and (ii) as to a portion of the Assets that do
not, in the aggregate, constitute a material portion of the Assets; and
(f) Maintain all material equipment included in the Assets in
accordance with customary industry operating practices and procedures.
17
Notwithstanding the other provisions of this Article IX, (i) Seller may
take any action with respect to the Assets if reasonably necessary under
emergency circumstances and provided Buyer is notified as soon thereafter as
reasonably practical, (ii) except as to a reduction in the Purchase Price
attributable to a Title Defect, Seller shall have no liability to Buyer for the
incorrect payment of royalties, shut-in royalties or similar payments or for any
failure to pay any such payments through mistake or oversight (including
Seller's negligence), and (iii) Seller's non-willful failure to comply with any
of the requirements of this Article IX shall not be deemed a default by Seller
hereunder, serve as a basis for a claim by Buyer for damages (other than a
reduction of the Purchase Price as a result of the failure of title), afford
Buyer the right to make a claim for damages or permit Buyer not to close this
sale if such failure does not have a material adverse effect on the value of the
Assets taken as a whole. Any consent requested of Buyer with respect to the
matters covered by this Article IX shall not be unreasonably withheld or action
with respect thereto unduly delayed.
9.2 LIMITATIONS ON SELLER'S COVENANTS PENDING CLOSING.
(a) To the extent Seller is not the operator of any of the Assets,
the obligations of Seller in Section 9.1 above, which have reference to
operations or activities which normally or pursuant to existing contracts are
carried out or performed by the operator, shall be construed to require only
that Seller use reasonable efforts (without being obligated to incur any expense
or institute any cause of action) to cause the operator of such Assets to take
such actions or render such performance within the constraints of the applicable
operating agreements and other applicable agreements.
(b) Notwithstanding anything to the contrary in this Article IX,
should Seller not wish to pay any lease rental or other payment or participate
in any reworking, deepening, drilling, completion, equipping or other operation
on or with respect to any well or other Asset which may otherwise be required by
Section 9.1 above, Seller shall give Buyer timely written or oral notice thereof
as soon as reasonably practicable after Seller receives written notice thereof
from the operator of such property (or if Seller is the operator, at the same
▇▇▇▇ ▇▇▇▇▇▇ gives written notice thereof to the non-operators of such property);
and Seller shall not be obligated to make any such payment or to elect to
participate in any such operation which Seller does not wish to make or
participate in unless Seller receives from Buyer, within a reasonable time prior
to the date when such payment or election is required to be made by Seller, (i)
the written election and agreement of Buyer to require Seller to take such
action and to indemnify Seller therefrom and (ii) all funds necessary for such
action. Notwithstanding the foregoing, Seller shall not be obligated to pay any
lease rental or other payment or to elect to participate in any operation if the
third party operator of the property involved recommends that such action not be
taken. If Buyer advances any funds pursuant to this Section 9.2(b) and the
Assets to which such payments relate are not conveyed to Buyer at Closing, and
Seller does not reimburse Buyer for all advances made by Buyer with respect to
such Assets pursuant to this Section 9.2(b) within thirty (30) days after this
Agreement terminates with respect to such Assets, then (i) Buyer shall own and
be entitled to any right of Seller that would have lapsed but for such payment,
and (ii) in the case of operations, Buyer shall be entitled to receive the
penalty which Seller, as nonconsenting party, would have suffered under the
applicable operating agreement with respect to such operations as if Buyer were
a consenting party thereunder.
18
ARTICLE X
CLOSING CONDITIONS
10.1 SELLER'S CLOSING CONDITIONS. The obligations of Seller under this
Agreement are subject, at the option of Seller, to the satisfaction at or prior
to the Closing of the following conditions:
(a) All representations and warranties of Buyer contained in this
Agreement shall be true in all material respects at and as of the Closing as if
such representations and warranties were made at and as of the Closing, and
Buyer shall have performed and satisfied all agreements required by this
Agreement to be performed and satisfied by Buyer at or prior to the Closing;
(b) Seller shall have received a certificate dated as of the Closing,
executed by a duly authorized officer of Buyer, to the effect that to such
officer's knowledge the statements made under Article V above are true at and as
of the Closing;
(c) Seller believes that, pursuant to Section 802.3 of the FTC
regulations, no ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act filing is necessary, with respect to this
transaction. If Buyer disagree with Seller's determination, the Buyer shall
notify Seller within 10 days after the execution of this Agreement. If Buyer and
Seller cannot agree, then the following becomes a Seller's Closing Condition:
Except for approvals covered by Section 15.1 hereof, all necessary consents of
and filings with the Federal Trade Commission and any other state or federal
governmental authority or agency relating to the consummation of the
transactions contemplated by this Agreement shall have been obtained,
accomplished or waived, and the applicable waiting periods prescribed in
connection with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act shall have elapsed or terminated (by
early termination or otherwise) since the dates of the filings by the parties
with respect thereto; and
(d) As of the Closing Date, no suit, action or other proceeding
(excluding any such matter initiated by Seller) shall be pending or threatened
before any court or governmental agency seeking to restrain Seller or prohibit
the Closing or seeking damages against Seller as a result of the consummation of
this Agreement.
(e) All material third party consents required for the transfer of
the Subject interests to Buyer shall have been received, waived, or the time for
exercise has expired so as to bar their exercise.
(f) Satisfactory releases of Seller's lender's mortgages on the
Assets shall have been received.
(g) Seller reserves the right to exchange, for other property of like
kind and qualifying use within the meaning of Section 1031 of the Internal
Revenue Code of 1986 and the regulations promulgated thereunder, the Real
Property Assets which, in part, are the subject of this Agreement. Seller
expressly reserves the right to assign its rights, but not its obligations,
hereunder to a "qualified intermediary" as provided in Section 1.103(k)-1(g)(4)
of the U.S. Treasury regulations
19
on or before the Closing Date. Buyer agrees to take all actions reasonably
required of it, including, but not limited to, executing and delivering
documents, to permit Seller to effect the exchange described in the this
Section. The Seller agrees to indemnify and hold harmless the Buyer from all
costs, losses, expenses, and liabilities arising out of the Buyer's cooperation
with the Seller in accomplishing such an exchange. The Buyer makes no warranty
or representation with regard to the Seller's ability to qualify for a tax-free
exchange pursuant to Section 1031 of the Internal Revenue Code.
10.2 BUYER'S CLOSING CONDITIONS. The obligations of Buyer under this
Agreement are subject, at the option of Buyer, to the satisfaction at or prior
to the Closing of the following conditions:
(a) All representations and warranties of Seller contained in this
Agreement shall be true in all material respects at and as of the Closing as if
such representations and warranties were made at and as of the Closing, and
Seller shall have performed and satisfied all agreements required by this
Agreement to be performed and satisfied by Seller at or prior to the Closing;
(b) Buyer shall have received a certificate dated as of the Closing,
executed by a duly authorized officer of Seller, to the effect that to such
officer's knowledge the statements made under Article IV above by Seller are
true at and as of the Closing;
(c) Seller believes that, pursuant to Section 802.3 of the FTC
regulations, no ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act filing is necessary, with respect to this
transaction. If Buyer disagree with Seller's determination, the Buyer shall
notify Seller within 10 days after the execution of this Agreement. If Buyer and
Seller cannot agree, then the following becomes a Buyer's Closing Condition:
Except for approvals covered by Section 15.1 hereof, all necessary consents and
filings with the Federal Trade Commission and any other state or federal
governmental authority or agency relating to the consummation of the
transactions contemplated by this Agreement shall have been obtained,
accomplished or waived, and the applicable waiting periods prescribed in
connection with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act shall have elapsed or terminated (by
early termination or otherwise) since the dates of the filings by the parties
with respect thereto; and
(d) As of the Closing Date, no suit, action or other proceeding
(excluding any such matter initiated by Buyer) shall be pending or threatened
before any court or governmental agency seeking to restrain Buyer or prohibit
the Closing or seeking damages against Buyer as a result of the consummation of
this Agreement.
(e) All material third party consents required for the transfer of
the Subject interests to Buyer shall have been received, waived, or the time for
exercise has expired so as to bar their exercise.
(f) Satisfactory releases of Seller's lender's mortgages on the
Assets shall have been received.
20
ARTICLE XI
CLOSING
11.1 CLOSING. The closing of this transaction (the "Closing") shall be held
at 10:00 a.m., Central Standard Time, at the offices of Seller at 10740 ▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ on the second business day following the
expiration of the ten day preferential right period provided to ▇▇▇▇▇▇▇▇ &
Associates, Inc. in accordance with LGG's operating agreement and the joint
operating agreement and joint development agreement on the property, or at such
other date or place as the parties may agree in writing (herein called "Closing
Date"). Regardless of when the Closing shall occur, Closing shall be effective
with respect to each Asset as of the Effective Time, as specified in Section
1.11.
11.2 SELLER'S CLOSING OBLIGATIONS. At Closing (except Seller shall have a
reasonable period after the Closing for items d, e, f and g), Seller shall
deliver to Buyer the following:
(a) The Assignments, Bills of Sale and Conveyances substantially in
the form attached hereto as EXHIBIT C and such other documents as may be
reasonably necessary to convey Seller's interest in the Assets to Buyer in
accordance with the provisions hereof;
(b) The certificate of Seller referred to in Section 10.2(b) hereof;
(c) Evidence of Seller's compliance with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act
(if necessary);
(d) Transfer or division orders, or letters-in-lieu thereof, to be
effective at the Effective Time in the form required by the purchasers of the
Hydrocarbons from the producing properties, provided that if any purchasers
prepare the same, the execution and delivery thereof may be deferred until they
are prepared;
(e) All title opinions, abstracts of title, lease records, data
sheets, status and other reports pertaining to the Subject Interests heretofore
received by Seller or to which Seller has access;
(f) All of the Basic Documents, and the files pertaining thereto, and
all other contracts, documents and files affecting title to the Subject
Interests to which Seller has access; and
(g) All lease files, land files, well files, gas and oil sales
contract files, gas processing files, division order files, abstracts, title
opinions, and all other books, files and records information and data, except
insofar as Seller is prevented from transferring same by contractual obligations
to third parties or applicable law.
(h) A tax certificate representing the fact that Seller is not a
foreign entity.
11.3 BUYER'S CLOSING OBLIGATIONS. At Closing, Buyer shall deliver to Seller
the following:
21
(a) The Purchase Price (subject to such adjustments, if any, as are
expressly provided for in this Agreement) in immediately available funds to
Seller as provided in Section 3.1 hereof (or to such other account within the
continental United States of America designated by Seller to Buyer at least five
(5) days prior to the Closing Date);
(b) The certificate of Buyer referred to in Section 10.1(b) hereof;
(c) Evidence of Buyer's compliance with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act (if
necessary).
ARTICLE XII
EFFECT OF CLOSING
12.1 REVENUES. To the extent not included in the reimbursements under
Section 3.2 hereof, all proceeds, accounts receivable, notes receivable,
revenues, monies and other items included in or attributable to the Excluded
Assets and all other Excluded Assets shall belong to and be paid over to Seller
and all other proceeds, accounts receivable, notes receivable, revenues, monies
and other items relating to the period of time after the Effective Time and
included in or attributable to the Assets shall belong to and be paid over to
Buyer.
12.2 TAXES.
(a) Apportionment of Ad Valorem and Property Taxes. All ad valorem,
real property taxes and personal property taxes, including interest and
penalties attributable thereto (hereinafter "Property Taxes"), attributable to
the Assets with respect to the tax assessment period ("Tax Period") during which
the Effective Time occurs shall be apportioned as of the Effective Time between
Seller and Buyer, with Seller paying a fraction thereof based upon the number of
days in the Tax Period prior to the Effective Time and Buyer paying the balance
thereof. This allocation prevails even if the assessment for the Tax Period is
attributable, in whole or in part, to a prior calendar year. The owner of record
on the assessment date shall file or cause to be filed all required reports and
returns incident to the Property Taxes and shall pay or cause to be paid to the
taxing authorities all Property Taxes relating to the Tax Period during which
the Effective Time occurs. If Seller is the owner of record on the assessment
date, then Buyer shall pay to Seller Buyer's pro rata portion of Property Taxes
within thirty (30) days after receipt of Seller's invoice therefor, except to
the extent taken into account as an adjustment to the Purchase Price pursuant to
Section 3.2. If Buyer is the owner of record as of the assessment date then
Seller shall pay to Buyer Seller's pro rata portion of Property Taxes within
thirty (30) days after receipt of Buyer's invoice therefor, except to the extent
taken into account as an adjustment to the Purchase Price pursuant to Section
3.2.
(b) Sales Taxes. The Purchase Price provided for hereunder excludes,
and Buyer shall be liable for, any Transfer Taxes (as defined below) required to
be paid in connection with the sale of the Assets pursuant to this Agreement. To
the extent required by applicable law, Seller shall collect and remit any
Transfer Taxes that are required to be paid as a result of the transfer of the
Assets by Seller to the Buyer. If the transfer of the Assets pursuant to this
Agreement is exempt from any Transfer Taxes, Buyer shall, at Closing, provide
Seller with properly executed exemption
22
certificates or other documentation acceptable under applicable law. As used
here, the term "Transfer Taxes" shall mean any sales, use, excise, stock, stamp,
document, filing, recording, registration, authorization and similar taxes, fees
and charges.
(c) Other Taxes. With the exception of income and franchise taxes,
all other federal, state and local taxes (including interest and penalties
attributable thereto) on the ownership or operations of the Assets which are
imposed with respect to periods or portions of periods prior to the Effective
Time shall be paid by Seller and all such taxes imposed with respect to periods
or portions of periods beginning on or after the Effective Time shall be paid by
Buyer.
(d) Cooperation. After the Closing, each party to this Agreement
shall provide the other party with reasonable access to all relevant documents,
data and other information (other than that which is subject to any
attorney-client privilege) which may be required by the other party for the
purpose of preparing tax returns, filing refund claims and responding to any
audit by any taxing jurisdiction. Each party to this Agreement shall cooperate
with all reasonable requests of the other party made in connection with
contesting the imposition of taxes. Notwithstanding anything to the contrary in
this Agreement, neither party to this Agreement shall be required at any time to
disclose to the other party any Tax Return or other confidential tax
information. Except where disclosure is required by applicable law or judicial
order, any information obtained by a party pursuant to this Section 12.2(d)
shall be kept confidential by such party, except to the extent disclosure is
required in connection with the filing of any Tax Returns or claims for refund
or in connection with the conduct of an audit, or other proceedings in response
to an audit, by a taxing jurisdiction.
12.3 EXPENSES. To the extent not included in the reimbursements under
Section 3.2 hereof or in the Assumed Obligations, all accounts payable and other
costs and expenses (other than taxes described in Section 12.2) with respect to
the Seller's interest in the Assets which are attributable under GAAP to the
period prior to the Effective Time shall be the obligation of and be paid by
Seller, and those which are attributable under GAAP to the period commencing
with the Effective Time, as well as all Assumed Obligations, shall be the
obligation of and be paid by Buyer.
12.4 SHARED OBLIGATIONS. If monies are received by any party hereto which,
under the terms of this Article XII, belong to another party, the same shall
immediately be paid over to the proper party. If an invoice or other evidence of
an obligation is received which under the terms of this Article XII is partially
the obligation of Seller and partially the obligation of Buyer, then the parties
shall consult each other and each shall promptly pay its portion of such
obligation to the obligee, provided that if either party hereto shall fail
promptly to pay its portion of such obligation to the obligee, the other party
hereto shall have the right (but not the obligation) to pay such portion of such
obligation, whereupon the defaulting party shall promptly reimburse such other
party for the defaulting party's portion so paid, plus interest on said amounts
until reimbursed, at the rate applicable under Article III above.
12.5 SELLER OPERATED PROPERTIES. It is expressly understood and agreed that
Seller shall not be obligated to continue operating any of the Assets following
the Closing Date and Buyer hereby
23
assumes full responsibility for operating (or causing the operation of) all
Assets following the Closing Date.
12.6 RESERVATION OF RIGHT TO QUALIFY UNDER SECTION 29 OF THE CODE. Seller
hereby retains, and Buyer consents thereto, the right to seek qualification of
certain of the Real Property Assets under Section 29 of the Internal Revenue
Code of 1986, as amended, and as gas produced from coal seams under Section 503
of the Natural Gas Policy Act of 1978 (and including any successor or similar
state or federal legislation) before the Federal Energy Regulatory Commission,
or its successor agency. This reservation is not intended to reserve any rights
to claim Section 29 credits with respect to production occurring after the
Effective Date, but rather is to assure Seller's right to such credits prior to
the Effective Date. Buyer agrees to cooperate fully with Seller at Seller's
expense and to permit access to Buyer's records and all reasonable time to
permit Seller to complete this qualification process.
ARTICLE XIII
SETTLEMENT OF PRORATIONS
13.1 ACCOUNTING. Prior to Closing, Seller shall furnish Buyer with an
estimated accounting showing in reasonable detail the prorating of any amounts
described in and subject to Article XII of this Agreement. If pursuant to such
estimated accounting either Seller or Buyer shall owe any obligation to the
other which is not included in the reimbursements under Section 3.2, then the
Purchase Price paid at Closing shall be further adjusted to reflect such charges
and credits which are necessary to accomplish such adjustment. Promptly after
the Closing Date (but not later than one hundred twenty (120) days thereafter),
Seller shall furnish Buyer with a final accounting showing in reasonable detail
the prorating of any amounts described in and subject to Article XII hereof.
13.2 SETTLEMENT OF DISPUTES. If within thirty (30) days after Seller
furnishes such final accounting to Buyer, Buyer and Seller are unable to agree
on such final accounting or the adjustments provided for in Section 3.2 hereof,
then either Seller or Buyer may submit such proration or allocation dispute to a
mutually acceptable accounting firm, and the determination made as to such
proration or allocation by such accounting firm shall be final and binding upon
Seller and Buyer. Final settlement shall be made within ten (10) business days
following agreement by the Buyer and Seller or final determination by said
accounting firm. All determinations and adjustments with respect to allocating
items to the periods before or after the Effective Time shall be in accordance
with GAAP. The fees charged by said accounting firm for making determinations
under Section 3.2 or this Section 13.2 shall be paid one-half (1/2) by Buyer and
one-half (1/2) by Seller.
ARTICLE XIV
ENVIRONMENTAL
14.1 AVAILABILITY OF DATA TO BUYER: The Assets which are the subject of
this Agreement have been utilized by Seller for the purposes of exploration,
development and production of oil and gas, for related oilfield operations and
possibly for the storage and disposal of waste materials or hazardous
substances. Seller shall make available to Buyer, during the environmental
assessment period described in Section 14.3 below, Seller's historical files
regarding the foregoing operations,
24
to the extent available and to the extent Seller is authorized to disclose same
(excepting documents subject to confidentiality restrictions or legal
privilege).
14.2 SPILLS AND NORM: Without changing the allocation of risk reflected in
Section 13.7 and 13.8, and without creating knowledge on Buyer's part that could
or would limit or eliminate Seller's indemnification under Section 13.8(c)(ii).
Buyer acknowledges that in the past there may have been spills of wastes, crude
oil, produced water, or other materials (including, without limitation, any
toxic, hazardous or extremely hazardous substances) onto the Lands. In addition,
some production equipment may contain asbestos and/or Naturally Occurring
Radioactive Material (hereinafter referred to as "NORM"). In this regard Buyer
expressly understands that NORM may affix or attach itself to the inside of
▇▇▇▇▇, materials and equipment as scale or in other forms, that said ▇▇▇▇▇,
materials and equipment located on the Lands or included in the Assets described
herein may contain NORM and that NORM-containing material may have been buried
or otherwise disposed of on the Lands. Buyer also expressly understands that
special procedures may be required for the remediation, removal, transportation
and disposal of asbestos, NORM or other materials from the Assets and Lands
where such material may be found and that Buyer assumes all liability for or in
connection with the assessment, containment, removal, remediation,
transportation and disposal of any such materials, in accordance with all past,
present or future applicable laws, rules, regulations and other requirements of
any governmental or judicial entities having jurisdiction and also with the
terms and conditions of all applicable leases and other contracts.
14.3 BUYER AGREES TO RELEASE, INDEMNIFY, DEFEND AND HOLD SELLER HARMLESS
FROM ANY CLAIM, CAUSE OF ACTION, JUDGMENT, LIABILITY, LOSS, DAMAGE OR OTHER COST
WHATSOEVER BROUGHT BY OR IN FAVOR OF ANY PERSON FOR INJURY, ILLNESS OR DEATH,
DAMAGE TO OR LOSS OF PROPERTY, FOR DAMAGE OR HARM TO THE ENVIRONMENT OR FOR ANY
OTHER MATTER CAUSED BY BUYER'S ACCESS TO THE LANDS OR THE ENVIRONMENTAL
ASSESSMENT OR TESTING THEREOF, EVEN IF SUCH LIABILITY IS ATTRIBUTABLE TO THE
CONTRIBUTORY NEGLIGENCE OF SELLER; PROVIDED, THE FOREGOING SHALL NOT APPLY TO
ANY CLAIM, CAUSE OF ACTION, JUDGMENT, LIABILITY, LOSS, DAMAGE OR OTHER COST
WHATSOEVER TO THE EXTENT ARISING FROM CONDITIONS ON THE LANDS AS OPPOSED TO
BUYER'S ACTIVITIES ON THE LAND PRIOR TO CLOSING.
14.4 MATERIAL ADVERSE ENVIRONMENTAL CONDITIONS: Buyer's sole and exclusive
remedy for environmental conditions is as provided in Section 14.8.
14.5 "AS IS, WHERE IS" PURCHASE: Subject to Section 14.8, Buyer shall
acquire the Assets in an "AS IS, WHERE IS" condition and shall assume all risks
that the Assets may contain waste materials (whether toxic, hazardous, extremely
hazardous or otherwise) or other adverse physical conditions, including, but not
limited to, the presence of unknown abandoned oil and gas ▇▇▇▇▇, water ▇▇▇▇▇,
sumps, pits, pipelines or other waste or spill sites which may not have been
revealed by Buyer's investigation. On and after the Effective Time, all
responsibility and liability related to all such conditions, whether known or
unknown, fixed or contingent, will be transferred from Seller to Buyer, except
as provided in Section 14.8.
25
14.6 DISPOSAL OF MATERIALS, SUBSTANCES AND WASTES: Buyer shall properly
handle, remove, transport and dispose of any material, substance or waste
(whether toxic, hazardous, extremely hazardous or otherwise) from the Assets or
Lands (including, but not limited to, produced water, drilling fluids and other
associated wastes), whether present before or after the Effective Time, in
accordance with applicable local, state and federal laws and regulations. To the
extent that the Lands are not sold in fee to Buyer, Buyer shall keep records of
the types, amounts and location of materials, substances and wastes which are
transported, handled, discharged, released or disposed onsite and offsite. When
and if any lease, an interest in which has been assigned pursuant to this
Agreement, is terminated, Buyer shall take whatever additional testing,
assessment, closure, reporting or remedial action with respect to the Assets or
Lands as is necessary to meet any local, state or federal requirements directed
at protecting human health or the environment in effect at that time, and any
other action as necessary to restore the Lands or Assets to their original
condition.
14.7 BUYER'S INDEMNITY:
(a) SUBJECT TO SECTION 14.8, AND (i) BEGINNING ON A DATE TWO YEARS
FROM CLOSING, WITH RESPECT TO ALL LIABILITIES DESCRIBED HEREIN AND (ii) FROM THE
CLOSING DATE WITH RESPECT TO ALL LIABILITIES NOT SUBJECT TO SECTION 14.8 BELOW,
BUYER SHALL INDEMNIFY, HOLD HARMLESS, RELEASE AND DEFEND SELLER FROM AND AGAINST
ALL DAMAGES, LOSSES, CLAIMS, DEMANDS, CAUSES OF ACTION, JUDGMENTS AND OTHER
COSTS (INCLUDING BUT NOT LIMITED TO ANY CIVIL FINES, PENALTIES, COSTS OF
ASSESSMENT, CLEAN-UP, REMOVAL AND REMEDIATION OF POLLUTION OR CONTAMINATION, AND
EXPENSES FOR THE MODIFICATION, REPAIR OR REPLACEMENT OF FACILITIES ON THE LANDS)
BROUGHT BY ANY AND ALL PERSONS AND ANY AGENCY OR OTHER BODY OF FEDERAL, STATE OR
LOCAL GOVERNMENT, ON ACCOUNT OF ANY PERSONAL INJURY, ILLNESS OR DEATH, ANY
DAMAGE TO, DESTRUCTION OR LOSS OF PROPERTY, AND ANY CONTAMINATION OR POLLUTION
OF NATURAL RESOURCES (INCLUDING SOIL, AIR, SURFACE WATER OR GROUNDWATER) TO THE
EXTENT ANY OF THE FOREGOING DIRECTLY OR INDIRECTLY IS CAUSED BY OR OTHERWISE
INVOLVES ANY ENVIRONMENTAL CONDITION OF THE ASSETS OR LANDS, WHETHER CREATED OR
EXISTING BEFORE, ON OR AFTER THE EFFECTIVE TIME, INCLUDING, BUT NOT LIMITED TO,
THE PRESENCE, DISPOSAL OR RELEASE OF ANY MATERIAL (WHETHER HAZARDOUS, EXTREMELY
HAZARDOUS, TOXIC OR OTHERWISE) OF ANY KIND IN, ON OR UNDER THE ASSETS OR THE
LANDS.
(b) SUBJECT TO SECTION 14.8, BUYER'S INDEMNIFICATION OBLIGATIONS
SHALL EXTEND TO AND INCLUDE, BUT NOT BE LIMITED TO (I) THE NEGLIGENCE OR OTHER
FAULT OF SELLER, BUYER AND THIRD PARTIES, WHETHER SUCH NEGLIGENCE IS ACTIVE OR
PASSIVE, GROSS, JOINT, SOLE OR CONCURRENT, (II) SELLER'S OR BUYER'S STRICT
LIABILITY, AND (III) SELLER'S OR BUYER'S LIABILITIES OR OBLIGATIONS UNDER THE
COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT OF 1980, AS
AMENDED (42 U.S.C. SECTIONS 9601 ET. SEQ.), THE RESOURCE CONSERVATION AND
RECOVERY ACT OF 1976 (42 U.S.C. SECTIONS 6901 ET. SEQ.), THE CLEAN WATER ACT (33
U.S.C. SECTIONS 466 ET. SEQ.), THE SAFE
26
DRINKING WATER ACT (14 U.S.C. SECTIONS 1401-1450), THE HAZARDOUS MATERIALS
TRANSPORTATION ACT (49 U.S.C. SECTIONS 1801 ET. SEQ.), THE TOXIC SUBSTANCES
CONTROL ACT (15 U.S.C. SECTIONS 2601-2629), THE CLEAN AIR ACT (42 U.S.C.
SECTIONS 7401 ET. SEQ,) AS AMENDED, THE CLEAN AIR ACT AMENDMENTS OF 1990 AND ALL
STATE AND LOCAL LAWS AND ANY REPLACEMENT OR SUCCESSOR LEGISLATION OR REGULATION
THERETO. THIS INDEMNIFICATION SHALL BE IN ADDITION TO ANY OTHER INDEMNITY
PROVISIONS CONTAINED IN THIS AGREEMENT, AND IT IS EXPRESSLY UNDERSTOOD AND
AGREED THAT ANY TERMS OF THIS ARTICLE SHALL CONTROL OVER ANY CONFLICTING OR
CONTRADICTING TERMS OR PROVISIONS CONTAINED IN THIS AGREEMENT.
14.8 SELLER'S INDEMNITY:
(a) SUBJECT TO THE TERMS AND PROVISIONS OF SECTIONS 14.7 AND 15.7 OF
THIS AGREEMENT, AND WITH RESPECT TO ANY CLAIM DESCRIBED IN THIS SECTION 13.8(a),
WRITTEN NOTICE OF WHICH BUYER HAS GIVEN SELLER WITHIN A TWO-YEAR PERIOD
FOLLOWING THE CLOSING DATE, SELLER SHALL INDEMNIFY, HOLD HARMLESS, RELEASE AND
DEFEND BUYER FROM AND AGAINST DAMAGES, LOSSES, CLAIMS, DEMANDS, CAUSES OF
ACTION, JUDGMENTS AND OTHER COSTS (INCLUDING BUT NOT LIMITED TO ANY CIVIL FINES,
PENALTIES, COSTS OF ASSESSMENT, CLEAN-UP, REMOVAL AND REMEDIATION OF POLLUTION
OR CONTAMINATION, AND EXPENSES FOR THE MODIFICATION, REPAIR OR REPLACEMENT OF
FACILITIES ON THE LANDS BUT ONLY TO THE EXTENT SUCH ITEMS EXCEED $1 MILLION) BUT
ONLY IF BROUGHT BY ANY AGENCY OR OTHER BODY OF FEDERAL, STATE OR LOCAL
GOVERNMENT OR A THIRD PARTY, WHICH IS ENTIRELY UNAFFILIATED WITH BUYER, ON
ACCOUNT OF CLAIM OR VIOLATION OF ANY ENVIRONMENTAL LAW OR REGULATION TO THE
EXTENT ANY OF THE FOREGOING DIRECTLY OR INDIRECTLY IS CAUSED BY OR OTHERWISE
INVOLVES ANY ENVIRONMENTAL CONDITION OF THE ASSETS OR LANDS, CREATED OR EXISTING
BEFORE THE EFFECTIVE TIME, AND WHICH CONSTITUTES A VIOLATION OF APPLICABLE
ENVIRONMENTAL LAWS IN EFFECT AS OF THE EFFECTIVE TIME, INCLUDING, BUT NOT
LIMITED TO, THE PRESENCE, DISPOSAL OR RELEASE OF ANY MATERIAL (WHETHER
HAZARDOUS, EXTREMELY HAZARDOUS, TOXIC OR OTHERWISE) OF ANY KIND IN, ON OR UNDER
THE ASSETS OR THE LANDS.
(b) SELLER'S INDEMNIFICATION OBLIGATIONS SHALL EXTEND TO AND INCLUDE,
BUT NOT BE LIMITED TO (I) THE NEGLIGENCE OR OTHER FAULT OF SELLER, BUYER AND
THIRD PARTIES, WHETHER SUCH NEGLIGENCE IS ACTIVE OR PASSIVE, GROSS, JOINT, SOLE
OR CONCURRENT, (II) SELLER'S OR BUYER'S STRICT LIABILITY, AND (III) SELLER'S OR
BUYER'S LIABILITIES OR OBLIGATIONS UNDER THE COMPREHENSIVE ENVIRONMENTAL
RESPONSE, COMPENSATION AND LIABILITY ACT OF 1980, AS AMENDED (42 U.S.C. SECTIONS
9601 ET. SEQ.), THE RESOURCE CONSERVATION AND RECOVERY ACT OF 1976 (42 U.S.C.
SECTIONS 6901 ET. SEQ.), THE CLEAN WATER ACT (33 U.S.C. SECTIONS 466 ET. SEQ.),
THE SAFE DRINKING WATER ACT (14 U.S.C. SECTIONS 1401-1450), THE HAZARDOUS
MATERIALS TRANSPORTATION ACT (49 U.S.C. SECTIONS 1801
27
ET. SEQ.), THE TOXIC SUBSTANCES CONTROL ACT (15 U.S.C. SECTIONS 2601-2629), THE
CLEAN AIR ACT (42 U.S.C. SECTIONS 7401 ET. SEQ.) AS AMENDED, THE CLEAN AIR ACT
AMENDMENTS OF 1990 AND ALL STATE AND LOCAL LAWS, AS IN EFFECT AS OF THE DATE OF
THIS AGREEMENT. THIS INDEMNIFICATION SHALL BE IN ADDITION TO ANY OTHER INDEMNITY
PROVISIONS CONTAINED IN THIS AGREEMENT, AND IT IS EXPRESSLY UNDERSTOOD AND
AGREED THAT ANY TERMS OF THIS ARTICLE SHALL CONTROL OVER ANY CONFLICTING OR
CONTRADICTING TERMS OR PROVISIONS CONTAINED IN THIS AGREEMENT.
(c) SELLER'S INDEMNIFICATION SHALL NOT EXTEND TO MATTERS OR
CONDITIONS (i) FOR WHICH AN ADJUSTMENT OF THE PURCHASE PRICE WAS MADE, OR (ii)
WHICH WERE DISCLOSED TO OR KNOWN BY BUYER ON OR BEFORE BUYER'S EXECUTION OF THIS
AGREEMENT.
14.9 REDUCTION. There shall be no reduction in the Purchase Price under
Section 7.2 unless Seller's share of a proposed reduction as to any single
incident exceeds $50,000.00; this shall be determined on an incident by incident
basis. In addition, if Seller's share of the proposed reduction under Section
7.2 as to any single incident exceeds $50,000.00, there shall be no reduction in
the Purchase Price until such time as the total of these excess amounts (over
$50,000.00) exceeds $500,000.00. Seller's indemnity under Section 14.8 shall not
be applicable until such time as Seller's share of liability under Section 14.8
exceeds $1,000,000.00.
ARTICLE XV
MISCELLANEOUS
15.1 CERTAIN GOVERNMENTAL CONSENTS. At the Closing, Seller shall execute
and deliver to Buyer such assignments of Federal and State leases as require
consent to assignment, on the forms required by the governmental agency having
jurisdiction thereof. Seller and Buyer will use reasonable efforts after Closing
to obtain approval of such assignments.
15.2 PUBLIC ANNOUNCEMENTS. The parties hereto agree that prior to making
any public announcement or statement with respect to the transaction
contemplated by this Agreement, the party desiring to make such public
announcement or statement shall consult with the other party hereto and exercise
reasonable efforts to (i) agree upon the text of a joint public announcement or
statement to be made by both of such parties or (ii) obtain approval of the
other party hereto to the text of a public announcement or statement to be made
solely by Seller or Buyer, as the case may be. Nothing contained in this
paragraph shall be construed to require either party to obtain approval of the
other party hereto to disclose information with respect to the transaction
contemplated by this Agreement to any state or federal governmental authority or
agency to the extent required by applicable law or by any applicable rules,
regulations or orders of any governmental authority or agency having
jurisdiction or necessary to comply with disclosure requirements of any major
stock exchange and applicable securities laws .
15.3 FILING AND RECORDING OF ASSIGNMENTS, ETC. Buyer shall be solely
responsible for all filings and recording of assignments and other documents
related to the Assets and for all fees
28
connected therewith, and upon request Buyer shall advise Seller of the pertinent
recording data. Seller shall not be responsible for any loss to Buyer because of
Buyer's failure to file or record documents correctly or promptly. Buyer shall
promptly file all appropriate forms, declarations or bonds with Federal, State
and Indian agencies relative to its assumption of operations and Seller shall
cooperate with Buyer in connection with such filings.
15.4 ASSUMPTION AND INDEMNITY. SUBJECT TO THE OTHER PROVISIONS HEREIN,
BUYER SHALL ASSUME ALL RISK OF LOSS WITH RESPECT TO ANY CHANGE IN THE CONDITION
OF THE ASSETS FROM AND AFTER THE EFFECTIVE TIME (EVEN THOUGH DUE IN WHOLE OR IN
PART TO SELLER'S NEGLIGENCE). BUYER AGREES TO ASSUME AND PAY, PERFORM, FULFILL
AND DISCHARGE ALL ASSUMED OBLIGATIONS, AND AGREES TO INDEMNIFY, DEFEND AND HOLD
SELLER HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, LOSSES, DAMAGES, COSTS,
EXPENSES, CAUSES OF ACTION OR JUDGMENTS OF ANY KIND OR CHARACTER WITH RESPECT TO
ALL LIABILITIES AND OBLIGATIONS OR ALLEGED OR THREATENED LIABILITIES AND
OBLIGATIONS ATTRIBUTABLE TO OR ARISING OUT OF THE ASSUMED OBLIGATIONS,
INCLUDING, WITHOUT LIMITATION, ANY INTEREST, PENALTY, REASONABLE ATTORNEY'S FEES
AND OTHER COSTS AND EXPENSES INCURRED IN CONNECTION THEREWITH OR THE DEFENSE
THEREOF. TO THE EXTENT NOT INCLUDED IN ASSUMED OBLIGATIONS AND SUBJECT TO THE
OTHER PROVISIONS HEREIN, SELLER AGREES TO PAY, PERFORM, FULFILL AND DISCHARGE
ALL COSTS, EXPENSES AND LIABILITIES INCURRED BY SELLER WITH RESPECT TO THE
OWNERSHIP OR OPERATION OF SELLER'S INTEREST IN THE ASSETS AND ACCRUING PRIOR TO
THE EFFECTIVE TIME EVEN THOUGH ASSERTED AFTER THE EFFECTIVE TIME, AND AGREES TO
INDEMNIFY, DEFEND AND HOLD BUYER HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS,
LOSSES, DAMAGES, COSTS, EXPENSES, CAUSES OF ACTION OR JUDGMENTS OF ANY KIND OR
CHARACTER WITH RESPECT TO ALL LIABILITIES AND OBLIGATIONS OR ALLEGED OR
THREATENED LIABILITIES AND OBLIGATIONS ATTRIBUTABLE TO OR ARISING OUT OF SUCH
OBLIGATIONS OF SELLER, INCLUDING, WITHOUT LIMITATION, ANY INTEREST, PENALTY,
REASONABLE ATTORNEY'S FEES AND OTHER COSTS AND EXPENSES INCURRED IN CONNECTION
THEREWITH OR THE DEFENSE THEREOF. FOR EXAMPLE, WITH RESPECT TO OPERATIONS
COMMITTED TO BY SELLER AND COMMENCED PRIOR TO THE EFFECTIVE TIME, BUT NOT
COMPLETED UNTIL AFTER THE EFFECTIVE TIME, THE COSTS ACCRUING WITH RESPECT
THERETO PRIOR TO THE EFFECTIVE TIME SHALL BE THE OBLIGATION OF SELLER AND THE
COSTS ACCRUING WITH RESPECT THERETO AFTER THE EFFECTIVE TIME SHALL BE THE
OBLIGATION OF BUYER. WITHOUT LIMITING THE PARTIES' RESPECTIVE REPRESENTATIONS IN
SECTIONS 4.1(f) AND 5.1(f) HEREOF, EACH PARTY HEREBY AGREES TO INDEMNIFY AND
HOLD THE OTHER HARMLESS FROM AND AGAINST ANY CLAIM FOR A BROKERAGE OR FINDER'S
FEE OR COMMISSION IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT TO THE EXTENT SUCH CLAIM ARISES FROM OR, IS
ATTRIBUTABLE TO THE ACTIONS OF SUCH INDEMNIFYING PARTY, INCLUDING, WITHOUT
LIMITATION, ANY AND ALL LOSSES, DAMAGES, ATTORNEY'S FEES, COSTS AND
29
EXPENSES OF ANY KIND OR CHARACTER ARISING OUT OF OR INCURRED IN CONNECTION WITH
ANY SUCH CLAIM OR DEFENDING AGAINST THE SAME.
15.5 FURTHER ASSURANCES AND RECORDS
(a) After the Closing, each of the parties will execute, acknowledge
and deliver to the other such further instruments, and take such other action,
as may be reasonably requested in order to more effectively assure to said party
all of the respective properties, rights, titles, interests, estates, and
privileges intended to be assigned, delivered or inuring to the benefit of such
party in consummation of the transactions contemplated hereby.
(b) Buyer agrees to maintain the files and records of Seller that are
acquired pursuant to this Agreement until the tenth (10th) anniversary of the
Closing Date (or for such longer period of time as Seller shall advise Buyer is
necessary in order to have records available with respect to open years for tax
audit purposes), or, if any of such records pertain to any claim or dispute
pending on the tenth (10th) anniversary of the Closing Date, Buyer shall
maintain any of such records designated by Seller until such claim or dispute is
finally resolved and the time for all appeals has been exhausted. Buyer shall
provide Seller and its representatives reasonable access to and the right to
copy such files and records for the purposes of (i) preparing and delivering any
accounting provided for under this Agreement and adjusting, prorating and
settling the charges and credits provided for in this Agreement, (ii) complying
with any law, rule or regulation affecting Seller's interest in the Assets prior
to the Closing Date, (iii) preparing any audit of the books and records of any
third party relating to Seller's interest in the Assets prior to the Closing
Date, or responding to any audit prepared by such third parties, (iv) preparing
tax returns, (v) responding to or disputing any tax audit or (vi) asserting,
defending or otherwise dealing with any claim or dispute under this Agreement.
In no event shall Buyer destroy any such files and records without giving Seller
sixty (60) days advance written notice thereof and the opportunity, at Seller's
expense, to obtain such files and records prior to their destruction.
(c) Buyer agrees that, as soon as practicable after the Closing, it
will remove or cause to be removed the names and marks used by Seller and all
variations and derivatives thereof and logos relating thereto from the Assets
and will not thereafter make any use whatsoever of such names, marks and logos.
(d) To the extent not obtained or satisfied as of Closing, Seller
agrees to continue to use reasonable efforts, but without any obligation to
incur any cost or expense in connection therewith, and to cooperate with Buyer's
efforts to obtain for Buyer (i) access to files, records and data relating to
the Assets in the possession of third parties; (ii) access to ▇▇▇▇▇ constituting
a part of the Assets operated by third parties for purposes of inspecting same;
and (iii) the waiver of confidentiality or other restrictions on the review by
and/or transfer to Buyer of seismic, geophysical, engineering or other data
pertaining to the Subject Interests.
15.6 LIMITATIONS. The express representations and warranties of Seller
contained in this Agreement (i) are made by Seller solely with respect to Assets
owned by Seller, (ii) are enforceable against the owner of the respective Assets
and are not a joint or collective liability and (iii) are
30
exclusive and are in lieu of all other representations and warranties, express,
implied or statutory, including without limitation any representation or
warranty with respect to title to the Assets or the quality, quantity or volume
of the reserves of oil, gas or other Hydrocarbons in or under the Subject
Interests and unless specifically provided otherwise in this Agreement, such
express representations and warranties of Seller shall terminate at Closing and
be of no further force and effect. The items of personal property, equipment,
fixtures and appurtenances conveyed as part of the Assets are sold hereunder "AS
IS, WHERE IS" and no warranties or representations of any kind or character,
express or implied, including any warranty of quality, merchantability, fitness
for a particular purpose or condition, are given by or on behalf of Seller. THE
WARRANTIES OF SELLER CONTAINED IN THIS AGREEMENT ARE EXCLUSIVE AND IN LIEU OF
ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, AND BUYER HEREBY WAIVES ALL
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED
WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR CONDITION.
BUYER ACKNOWLEDGES THAT SELLER HAS NOT MADE, AND SELLER HEREBY EXPRESSLY
DISCLAIMS AND NEGATES, AND BUYER HEREBY EXPRESSLY WAIVES, ANY REPRESENTATION OR
WARRANTY, EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE OR OTHERWISE RELATING TO
(a) PRODUCTION RATES, RECOMPLETION OPPORTUNITIES, DECLINE RATES, GAS BALANCING
INFORMATION OR THE QUALITY, QUANTITY OR VOLUME OF THE RESERVES OF HYDROCARBONS,
IF ANY, ATTRIBUTABLE TO THE ASSETS, (b) THE ACCURACY, COMPLETENESS OR
MATERIALITY OF ANY INFORMATION, DATA OR OTHER MATERIALS (WRITTEN OR ORAL) NOW,
HERETOFORE OR HEREAFTER FURNISHED TO BUYER BY OR ON BEHALF OF SELLER, AND (c)
THE ENVIRONMENTAL CONDITION OF THE ASSETS. NOTWITHSTANDING ANYTHING TO THE
CONTRARY IN THIS AGREEMENT, SELLER EXPRESSLY DISCLAIMS AND NEGATES, AND BUYER
HEREBY WAIVES, AS TO PERSONAL, MOVABLE AND IMMOVABLE PROPERTY, EQUIPMENT AND
FIXTURES CONSTITUTING A PART OF THE ASSETS (i) ANY IMPLIED OR EXPRESS WARRANTY
OF MERCHANTABILITY, (ii) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A
PARTICULAR PURPOSE, (iii) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO
MODELS OR SAMPLES OF MATERIALS, (iv) ANY RIGHTS OF PURCHASERS UNDER APPROPRIATE
STATUTES TO CLAIM DIMINUTION OF CONSIDERATION OR RETURN OF THE PURCHASE PRICE,
(v) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM VICES OR DEFECTS, WHETHER
KNOWN OR UNKNOWN, AND (vi) ANY AND ALL IMPLIED WARRANTIES EXISTING UNDER
APPLICABLE LAW AND (vii) ANY IMPLIED OR EXPRESS WARRANTY REGARDING ENVIRONMENTAL
LAWS, THE RELEASE OF MATERIALS INTO THE ENVIRONMENT OR PROTECTION OF THE
ENVIRONMENT OR HEALTH, IT BEING THE EXPRESS INTENTION OF BUYER AND SELLER THAT
(EXCEPT TO THE EXTENT EXPRESSLY PROVIDED IN ARTICLE IV) THE REAL PROPERTY,
IMMOVABLE PROPERTY, MOVABLE PROPERTY, EQUIPMENT, INVENTORY, MACHINERY, FIXTURES
AND PERSONAL PROPERTY SHALL BE CONVEYED TO BUYER AS IS AND IN THEIR PRESENT
CONDITION AND STATE OF REPAIR, AND BUYER REPRESENTS TO SELLER THAT BUYER HAS
MADE OR CAUSED TO BE MADE SUCH INSPECTIONS WITH RESPECT TO THE REAL PROPERTY,
IMMOVABLE PROPERTY, MOVABLE PROPERTY, EQUIPMENT, INVENTORY, MACHINERY, FIXTURES
AND PERSONAL PROPERTY AS BUYER DEEMS APPROPRIATE AND BUYER WILL ACCEPT
31
THE REAL PROPERTY, IMMOVABLE PROPERTY, MOVABLE PROPERTY, EQUIPMENT, INVENTORY,
MACHINERY, FIXTURES AND PERSONAL PROPERTY AS IS, IN THEIR PRESENT CONDITION AND
STATE OF REPAIR, IT BEING THE EXPRESS INTENTION OF BOTH BUYER AND SELLER THAT
THE PERSONAL PROPERTY, EQUIPMENT AND FIXTURES INCLUDED WITHIN THE ASSETS ARE
HEREBY CONVEYED TO BUYER IN THEIR PRESENT CONDITION AND STATE OF REPAIR, "AS IS"
AND "WHERE IS" WITH ALL FAULTS, AND THAT BUYER HAS MADE OR CAUSED TO BE MADE
SUCH INSPECTIONS AS BUYER DEEMS APPROPRIATE. SELLER AND BUYER AGREE THAT, TO THE
EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE DISCLAIMERS OF CERTAIN
WARRANTIES CONTAINED IN THIS SECTION ARE "CONSPICUOUS" DISCLAIMERS FOR THE
PURPOSES OF ANY APPLICABLE LAW, RULE OR ORDER. To the maximum extent permitted
by law, Buyer waives all provisions of the Texas Deceptive Trade Practices Act,
Chapter 17, Texas Business and Commerce Code (other than Section 17.555 thereof)
and, to the extent permitted by law, similar such provisions in like Acts in all
other applicable jurisdictions, insofar as the provisions of such act may be
applicable to this Agreement or the transactions contemplated hereby. To
evidence its ability to grant such waiver, Buyer hereby represents and warrants
to Seller that the Buyer (i) is seeking or acquiring, by purchase or lease,
goods or services for commercial or business use, (ii) has assets of $5 million
or more according to its most recent financial statement prepared in accordance
with GAAP, (iii) has knowledge and experience in financial and business matters
that enable it to evaluate the merits and risks of the transaction contemplated
hereby and (iv) is not in a significantly disparate bargaining position. Seller
makes no representation or warranty, express or implied with respect to whether
any of the Subject Interests are qualified for, or whether Buyer might be
qualified to take, tax credits under Section 29 of the Internal Revenue Code
with respect to production from the Subject Interests.
15.7 SURVIVAL. No representation, warranty, covenant or agreement made
herein shall survive the Closing except as provided in this Section 15.7. It is
expressly agreed that the terms and provisions of Articles I, III, IV, V, VIII,
XII, XIII, and XV and Sections 6.3, 6.4, 7.1, Sections 14.1 through 14.7 and
Section 14.9, shall survive the Closing. The terms and provisions of Section
14.8 shall expire according to its terms.
15.8 GAS IMBALANCE: Buyer acknowledges and agrees to the following
regarding gas imbalances as of the Effective Time on any of the Assets to be
transferred pursuant to this Agreement:
(a) GAS UNDERPRODUCTION: In the event Seller is underproduced as to
any ▇▇▇▇▇ located on the Lands or if any amounts are owed Seller with respect to
any pipeline, transportation or processing imbalances, Buyer agrees not to hold
Seller liable for such underproduction or such amounts. Seller, however, agrees
to assign to Buyer all of its contractual rights to make up such
underproduction, and to recover all amounts owed.
(b) GAS OVERPRODUCTION: In the event Seller is overproduced as to any
▇▇▇▇▇ located on the Lands or if any amounts are due from Seller with respect to
any pipeline, transportation or processing imbalances, Buyer acknowledges and
agrees that its share of gas from any such overproduced ▇▇▇▇▇ may at some point
be curtailed by underproduced working interest
32
owners and it may be required to satisfy, in kind or in value, such third party
transporters and processors for such imbalances. Seller shall not be liable to
Buyer in the event such curtailment occurs or satisfaction is required.
(c) GAS BALANCING STATEMENTS: Seller has furnished Buyer with
statements in its possession showing the most current status of the before
mentioned imbalances and these statements are summarized in EXHIBIT M.
(d) FUTURE LIABILITY: From and after the Effective Time, any and all
benefits, liabilities associated with such imbalance accounts shall accrue to
and be the responsibility of Buyer. Buyer shall assume Seller's overproduced or
underproduced position in the Assets as of the Effective Time, including but not
limited to Buyer's responsibility for payment of royalties on the volume of such
gas which Seller took in excess of its entitlement and any obligation to balance
whether in cash or in kind. Except as provided in Section 17.9(e), there shall
be no adjustment to the Purchase Price as a result of the imbalance accounts
attributable to the Assets.
(e) ADJUSTMENT TO PURCHASE PRICE: In the event either Seller or Buyer
determines no later than sixty (60) days after the Closing Date that a
"material" error was made with the imbalance account set forth in EXHIBIT M or
that a material change (either increase or decrease) exists between the
imbalance represented in EXHIBIT M and the imbalance as of the Effective Time in
such an account, the adjustments under Section 3.2, shall be adjusted to
compensate for the economic impact of the error or change. Such an error or
change is material only if the total difference in the value of the imbalance
accounts as set forth in EXHIBIT M and the correct or changed imbalance accounts
exceeds ten percent (10%) of the value of the imbalance accounts as set forth in
Exhibit M, but in no event less than $100,000.00. For the purposes of this
Section only, the value of such an imbalance account adjustment shall be
calculated by multiplying the applicable volume of gas by $2.50 per MMBtu which
shall represent the value of such imbalance and then making appropriate
adjustments for royalties and severance taxes and similar taxes, if any,
actually paid on such amount or which will be required to be paid. The Purchase
Price shall be reduced or increased by the adjustments for such gas imbalance
changes on the Effective Time for material errors discovered prior to the
Effective Time. Adjustments for material errors discovered after the Closing
Date shall be included in a final settlement statement as provided herein.
15.9 SIGNATURE OF KLT INC. This Agreement for Purchase and Sale is executed
by KLT Inc. solely for the purposes of Article XIV and 15.4 and for no other
purpose.
15.10 NOTICES. All notices authorized or required by any of the provisions
of this Agreement, unless otherwise specifically provided, shall be in writing
and delivered in person or by United States mail, courier service, telegram,
telex, telecopier, or any other form of facsimile, postage or charges prepaid,
and addressed to the parties at the addresses set forth below:
33
If to Seller: Apache Canyon Gas, L.L.C.
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: President
If to Buyer: Evergreen Resources, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may, by written notice so delivered to the other, change the address
to which delivery shall thereafter be made.
15.11 INCIDENTAL EXPENSES. Buyer shall bear and pay any and all Federal,
State or local Transfer Taxes as defined in Section 12.2(b) hereof incident to
the transfer, assignment or other conveyance of the Assets to Buyer. Each party
shall bear its own respective expenses incurred in connection with the Closing
of this transaction, including its own consultants' fees, attorneys' fees,
accountants' fees, and other similar costs and expenses.
15.12 ENTIRE AGREEMENT. Except for the Confidentiality Agreement referenced
in Section 6.3, this Agreement embodies the entire agreement between the parties
(superseding all prior agreements, arrangements and understandings related to
the subject matter hereof), and may be supplemented, altered, amended, modified
or revoked by writing only, signed by all of the parties hereto. No supplement,
amendment, modification, waiver or termination of this Agreement shall be
binding unless in writing and executed by both parties hereto. The headings
herein are for convenience only and shall have no significance in the
interpretation hereof.
15.13 GOVERNING LAW. Except for matters of title to the Subject Interests
or their transfer, which shall be governed by the law of their situs, this
Agreement shall be governed by and interpreted in accordance with the laws of
the State of Colorado without regard for any conflict of laws or choice of laws
principles that would permit or require the application of the laws of any other
jurisdiction.
15.14 EXHIBITS. All Exhibits and Schedules hereto which are referred to
herein are hereby made a part hereof and incorporated herein by reference.
15.15 CERTAIN TERMS. As used in this Agreement, the term "knowledge" means
actual knowledge of any fact, circumstance or condition by the officers or
management employees of the party involved at a supervisory or higher level, but
does not include (i) knowledge imputed to the party involved by reason of
knowledge of or notice to any person, firm or corporation other than its
officers or employees at a supervisory or higher level or (ii) knowledge deemed
to have been constructively given by reason of any filing, registration or
recording of any document or instrument
34
in any public record or with any governmental entity. As used in this Agreement,
the term "day" means any calendar day, and the term "business day" means any day
exclusive of Saturdays, Sundays and national holidays.
15.16 INTERIM ACCOUNTING, PAYMENT AND COLLECTION SERVICES. Buyer and Seller
agree to cooperate to transfer financial accounting services for the Assets as
promptly as practicable after the Effective Time.
15.17 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each and every counterpart shall be deemed for all purposes
one (1) agreement.
15.18 WAIVER. Any of the terms, provisions, covenants, representations,
warranties or conditions hereof may be waived, only by a written instrument
executed by the party waiving compliance. Except as otherwise expressly provided
in this Agreement, the failure of any party at any time or times to require
performance of any provision hereof shall in no manner affect such party's right
to enforce the same. No waiver by any party of any condition, or of the breach
of any term, provision, covenant, representation or warranty contained in this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be or construed as a further or continuing waiver of any such
condition or breach or a waiver of any other condition or of the breach of any
other term, provision, covenant, representation or warranty.
15.19 BINDING, EFFECT; ASSIGNMENT. All the terms, provisions, covenants,
representations, warranties and conditions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the parties hereto and
their respective successors; but this Agreement and the rights and obligations
hereunder shall not be assignable or delegable by Buyer without the express
written consent of Seller. Any assignment or delegation without such consent
will be void. In addition to its rights under Section 10.1(g), Seller shall have
the right to transfer its rights and obligations hereunder without Buyer's
consent so long as such transferee is capable of delivering to Buyer the same
title Seller is capable of delivering and Seller remains liable for its
warranties and representation made hereunder to the same extent Seller would
have been liable had such transfer not been made.
15.20 NO RECORDATION. Without limiting any party's right to file suit to
enforce its rights under this Agreement and except as to those portions of this
Agreement set forth in the Assignment, ▇▇▇▇ of Sale and Conveyance, Exhibit C,
Buyer and Seller expressly covenant and agree not to record or place of record
this Agreement or any copy or memorandum hereof.
15.21 INDEPENDENT INVESTIGATION. Buyer represents and acknowledges that it
is knowledgeable of the oil and gas business and of the usual and customary
practices of producers such as Seller and that it has had access to the Assets,
the offices and employees of Seller, and the books, records and files of Seller
relating to the Assets and in making the decision to enter into this Agreement
and consummate the transactions contemplated hereby, Buyer has relied solely on
the basis of its own independent due diligence investigation of the Assets and
upon the representations and warranties made in Article IV. Accordingly, Buyer
acknowledges that Seller has not made, and Seller hereby expressly disclaims and
negates any representation or warranty (other than those
35
express representations and warranties made in Article IV), express, implied, at
common law, by statute or otherwise, relating to the Assets.
15.22 TERMINATION. In the event the total amount of adjustments to the
Purchase Price under Sections 7.2 and 14.4 exceeds twenty-five percent (25%) of
the Purchase Price, either party may terminate this Agreement by notifying the
other party of its intention to terminate on or before the Closing Date and in
the event of such termination, neither Seller nor Buyer shall be under any
obligation to the other with regard to the purchase and sale of any of the
Assets or Subject Interests, such termination to be without liability to either
party.
15.23 COSTS. Each party shall pay its own costs, including fees and
expenses of its own counsel and accountants, in connection with the purchase and
sale of the Properties. Seller shall discharge all Encumbrances other than the
Permitted Encumbrances. Seller shall pay all sales and other transfer taxes, if
any, incurred in connection with the transaction contemplated by this Agreement.
Buyer shall pay all documentary, filing and recording fees.
15.24 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement shall entitle
any Person, other than the parties hereto or their respective permitted
successors and assigns, to any claim, cause of action, remedy or right of any
kind.
15.25 LIABILITIES OF THE PARTIES. The liability of the parties shall be
several, not joint or collective. Each party shall be responsible only for its
obligations. It is not the intention of the parties to create, nor shall this
agreement be construed as creating, a mining or other partnership, joint
venture, agency relationship or association, or to render the parties liable as
partners, co-venturers, or principals. In their relations with each other under
this agreement, the parties shall not be considered fiduciaries or to have
established a confidential relationship but rather shall be free to act on an
arm's-length basis in accordance with their own respective interest.
15.26 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO,
ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM
THIS AGREEMENT MAY BE LITIGATED ON IN STATE OR FEDERAL COURTS IN COLORADO. BUYER
AND SELLER HEREBY SUBMIT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED IN COLORADO, AND EACH HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER
OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY THE
OTHER.
15.27 WAIVER OR RIGHTS TO JURY TRIAL. BUYER AND SELLER HEREBY KNOWINGLY,
VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVE ALL RIGHTS TO
TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING, COUNTERCLAIM, OR OTHER
LITIGATION THAT RELATES TO OR ARISES OUT OF ANY OF THIS AGREEMENT OR OTHERWISE
WITH RESPECT THERETO. THE PROVISIONS OF THIS SECTION ARE MATERIAL INDUCEMENT FOR
SELLER ENTERING INTO THIS AGREEMENT.
36
ARTICLE XVI
CASUALTY LOSS AND CONDEMNATION
16.1 NO TERMINATION.
(a) Buyer shall assume all risk of loss with respect to, and any
change in the condition of, the Assets from the Effective Time until Closing for
production of oil, gas and/or other hydrocarbons through depletion (including
the watering-out of any well, collapsed casing or sand infiltration of any well)
and the depreciation of personal property due to ordinary wear and tear.
(b) If after the Effective Time and prior to the Closing any part of
the Assets shall be destroyed by fire or other casualty or if any part of the
Assets shall be taken in condemnation or under the right of eminent domain or if
proceedings for such purposes shall be pending or threatened, this Agreement
shall remain in full force and effect notwithstanding any such destruction,
taking or proceeding or the threat thereof.
16.2 PROCEEDS AND AWARDS. In the event of any loss described in Section
16.1(b), Seller shall either (i) at the Closing pay to Buyer all sums paid to
Seller by reason of such destruction less any costs and expenses incurred by
Seller in collecting same, or (ii) commit, use, or apply such sums (less any
costs and expenses incurred by Seller in collecting same) to repair, restore or
replace such damaged or taken Assets. To the extent the insurance proceeds,
condemnation awards or other payments are not committed, used or applied by
Seller prior to the Closing Date to repair, restore or replace such damaged or
taken Assets, Seller shall at the Closing pay to Buyer all sums paid to Seller
by reason of such destruction or taking, less any costs and expenses incurred by
Seller in collecting same. In addition and to the extent such proceeds, awards
or payments have not been committed, used or applied by Seller in repair,
restoration or replacement as aforesaid, Seller shall assign, transfer and set
over unto Buyer, without recourse against Seller, all of the right, title and
interest of Seller in and to any claims against third parties with respect to
the event or circumstance causing such loss and any unpaid insurance proceeds,
condemnation awards or other payments arising out of such destruction or taking,
less any costs and expenses incurred by Seller in collecting same. Any such
funds which have been committed by Seller for repair, restoration or replacement
as aforesaid shall be paid by Seller for such purposes or, at Seller's option,
delivered to Buyer upon Seller's receipt from Buyer of adequate assurance and
indemnity from Buyer that Seller shall incur no liability or expense as a result
of such commitment. Notwithstanding anything to the contrary in this Section
16.2, Seller shall not be obligated to carry or maintain, and shall have no
obligation or liability to Buyer for its failure to carry or maintain, any
insurance coverage with respect to any of the Assets, except as required by
Section 9.1 (b).
ARTICLE XVII
DEFAULT AND REMEDIES
17.1 SELLER'S REMEDIES. Upon failure of Buyer to comply herewith by the
Closing Date, as it may be extended in accordance herewith, Seller, at its sole
option, may (i) enforce whatever legal or equitable rights may be appropriate
and applicable in Seller's sole discretion or (ii) terminate this Agreement, all
other remedies (except as expressly retained in Section 17.3) being expressly
37
waived by Seller. Upon failure of Buyer to pay the Installment Payment when due
(including extensions, if any, under the Grace Period), Seller shall have the
right to exercise its rights under the Note and Mortgage and to exercise any
other rights to which it may be entitled under applicable law. In addition, and
not in lieu of any other remedies, Seller has the right to retain, free and
clear of any claim by Buyer, all amounts previously paid by Buyer to Seller,
including, without limitation, the Initial Payment, proceeds from the Production
Payment and all consideration, if any, paid in connection with the Grace Period.
17.2 BUYER'S REMEDIES. Upon failure of Seller to comply herewith by the
Closing Date, as it may be extended in accordance herewith, Buyer, at its sole
option and as its sole and exclusive remedy, may (i) bring an action for
specific performance of this Agreement or (ii) terminate this Agreement , all
other remedies (except as expressly retained in Section 17.3) being expressly
waived by Buyer.
17.3 OTHER REMEDIES. Notwithstanding the foregoing, termination of this
Agreement shall not prejudice or impair Buyer's obligations under Sections 6.3
(and the Confidentiality Agreement referenced therein), 6.4 and 9.2(b) and such
other portions of this Agreement as are necessary to the enforcement and
construction of Sections 6.3, 6.4 and 9.2(b). The prevailing party in any legal
proceeding brought under or to enforce this Agreement shall be additionally
entitled to recover court costs and reasonable attorney's fees from the
non-prevailing party.
17.4 NOTICE. Notice of termination under this Article XVII or under Section
15.22 shall be in writing and given as provided in Section 15.10. The party
receiving the notice shall have 30 days from receipt of such notice to cure of
remedy the circumstance giving rise to the termination right to the satisfaction
of the party delivering such notice.
[signature page follows]
38
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the date first above written.
APACHE CANYON GAS, L.L.C.,
a Delaware limited liability company
By: KLT Inc., as designated director of
KLT Gas, Inc., sole member
By:
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
Title: Managing Director
"SELLER"
EVERGREEN RESOURCES, INC.,
a Colorado corporation
By:
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and CEO
"BUYER"
KLT INC.
a Missouri corporation
Executed solely for the purpose of
ARTICLE XIV and Section 15.4
By:
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
Title: Managing Director
39
TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS ................................................ 1
ARTICLE II - SALE AND PURCHASE ......................................... 6
ARTICLE III - PURCHASE PRICE AND PAYMENT ............................... 7
ARTICLE IV - SELLER'S REPRESENTATIONS .................................. 8
ARTICLE V - BUYER'S REPRESENTATIONS .................................... 10
ARTICLE VI - ACCESS TO INFORMATION AND INSPECTION ...................... 12
ARTICLE VII - TITLE .................................................... 12
ARTICLE VIII - PREFERENTIAL PURCHASE RIGHTS AND CONSENTS ............... 14
ARTICLE IX - COVENANTS OF SELLER ....................................... 14
ARTICLE X - CLOSING CONDITIONS ......................................... 16
ARTICLE XI - CLOSING ................................................... 17
ARTICLE XII - EFFECT OF CLOSING ........................................ 18
ARTICLE XIII - SETTLEMENT OF PRORATIONS ................................ 21
ARTICLE XIV - ENVIRONMENTAL ............................................ 21
ARTICLE XV - MISCELLANEOUS ............................................. 24
-i-
EXHIBITS
A Net Revenue and Working Interests in Subject Interests
A-1 Seller's Subject Interests
A-2 Ownership Interest
B Purchase Price Allocation
C Assignment, ▇▇▇▇ of Sale and Conveyance
D Excluded Assets
E Material Contracts
F Advance Payments and Prepayments
G Oil and Gas Purchase and Processing Agreements
H Permitted Encumbrances / Contracts with affiliates
I Preferential Rights and Consents
J Litigation and Claims
K There is no Exhibit K
L There is no Exhibit L
M Gas Balancing Statements
-ii-
EXHIBITS
to that
Purchase and Sale Agreement
between
Apache Canyon Gas, LLC, as Seller
and
Evergreen Resources, Inc., as Purchaser
(Lorencito)
EXHIBIT A
NET REVENUE AND WORKING INTERESTS IN SUBJECT INTERESTS
EXHIBIT A-1
SELLER'S SUBJECT INTERESTS
All right, title and interest of Seller received in that Assignment,
Conveyance and ▇▇▇▇ of Sale from ▇▇▇▇▇▇▇▇ & Associates, LLC to Apache Canyon
Gas, L.L.C., effective April 1, 1999, which executed Assignment can be found at
Book 978, Page 370 , within document #639378 in the official records of Las
Animas County, Colorado.
To wit:
A fifty percent (50%) before-Payout interest and thirty-seven and one-half
percent (37.5%) after-Payout interest (subject, however, to the conditional
right to participate set forth in that certain Letter Agreement dated April 24,
1998, identified in Exhibit "a") in the following:
(i) LEASEHOLDS. Right, title and interest in oil and gas leasehold, oil,
gas and other minerals, including working interests, rights of assignment and
reassignment, net revenue interests, operating rights, record title interests,
and all other interests under or in oil, gas or mineral leases, and interests in
rights to explore for and produce oil, gas or other minerals which are described
in Exhibit "a" ("Leases") (commonly known as the "Lorencito Tract");
(ii) CONTRACT RIGHTS. Right, title and interest in or derived from orders
and decisions of state regulatory authorities establishing or relating to
drilling or spacing units, joint operating agreements, gas purchase agreements,
gathering agreements (and any leasehold interests, working interests, royalty
interests, or other interests acquired or reserved pursuant thereto), subleases,
and any other agreements, including without limit, those which relate to any of
the interests described in Exhibit "a";
(iii) EASEMENTS. Right, title and interest in rights-or-way, easements,
servitudes and franchises appurtenant to or used in connection with the property
described in Exhibit "a";
--------------------------------------------------------------------------------
EXHIBIT A/A-1
(iv) PERMITS. Right, title and interest in permits and licenses of any
nature owned, held or operated in connection with operations for the exploration
and production of oil, gas or other minerals to the extent the same are used or
obtained in connection with any of the property described in Exhibit "a";
(v) ▇▇▇▇▇. Right, title and interest in any and all producing,
non-producing and shut-in oil and gas ▇▇▇▇▇, saltwater disposal ▇▇▇▇▇, water
▇▇▇▇▇, production spacing units and undeveloped locations used or obtained in
connection with the property described in Exhibit "a";
(vi) EQUIPMENT. Right, title and interest in all personal property,
surface equipment, down-hole equipment and pipelines used or obtained in
connection with the property described in Exhibit "a";
(vii) REMAINING INTERESTS. Right, title and interest in, to or under or
derived from the Interests [defined as all of the above described interests],
even though improperly described in or omitted from Exhibit "a" hereto.
AND FURTHER, all right, title and interest of Seller received in that
Assignment, Conveyance and ▇▇▇▇ of Sale from ▇▇▇▇▇▇▇▇ & Associates, LLC to
Apache Canyon Gas, L.L.C., effective June 28, 1999, recorded at Document No.
640675, Book 981, Page 129 in the official records of Las Animas County,
Colorado.
To Wit:
An undivided fifty percent (50%) interest in that Oil and Gas Lease dated
June 28, 1999, between MGP Enterprises, L.P., as Lessor, and ▇▇▇▇▇▇▇▇ &
Associates, LLC, as lessee, covering seven tracts of land totaling 17,381.84
acres as described therein and reproduced as Exhibit "b" attached hereto, in Las
Animas County, Colorado (commonly known as the "Lorencito Tract"). A Memorandum
of Oil and Gas Lease was filed with respect to such lease in Book 978, Page 793
of the official records of Las Animas County, Colorado (the "MGP Lease").
PROVIDED, HOWEVER, that Seller makes no representation or warranty as to
the validity of the MGP Lease. Seller, by making the conveyance, does not imply
that the MGP Lease is valid, and Purchaser does not rely on the continued
validity of the MGP Lease in the acceptance of same; however, Purchaser shall
receive all right, title, and interest which Seller may own in the MGP Lease, if
any.
--------------------------------------------------------------------------------
EXHIBIT A/A-1
WELL # REV INT WELL NAME
8789008.06 42.0% LORENCITO 10-9-34-66 Total
8789037.06 42.0% LORENCITO ▇▇-▇▇-▇▇-▇▇ Total
8789039.06 42.0% LORENCITO 1-17-34-66 Total
8789015.06 42.0% LORENCITO ▇▇-▇▇-▇▇-▇▇ Total
8789012.06 42.0% LORENCITO 12-3-34-66 Total
8789009.06 42.0% LORENCITO 12-9-34-66 Total
8789038.06 42.0% LORENCITO ▇▇-▇▇-▇▇-▇▇ Total
8789027.06 42.0% LORENCITO 14-8-34-66 Total
8789022.06 42.0% LORENCITO ▇▇-▇▇-▇▇-▇▇ Total
8789028.06 42.0% LORENCITO 2-8-34-66 Total
8789007.06 42.0% LORENCITO 2-9-34-66 Total
8789017.06 42.0% LORENCITO 3-22-34-66 Total
8789014.06 42.0% LORENCITO 4-10-34-66 Total
8789005.06 42.0% LORENCITO 4-16-34-66 Total
8789034.06 42.0% LORENCITO 4-17-34-66 Total
8789029.06 42.0% LORENCITO 4-8-34-66 Total
8789026.06 42.0% LORENCITO 5-3-34-66 Total
8789036.06 42.0% LORENCITO 6-15-34-66 Total
8789016.06 42.0% LORENCITO 8-16-34-66 Total
8789033.06 42.0% LORENCITO 9-17-34-66 Total
8789023.06 42.0% LORENCITO 9-8-34-66 Total
8789021.06 37.8% LORENCITO 1-20-34-66 Total
8789010.06 37.8% LORENCITO 13-7-34-66 Total
8789018.06 37.8% LORENCITO ▇▇-▇▇-▇▇-▇▇ Total
8789032.06 37.8% LORENCITO ▇▇-▇▇-▇▇-▇▇ Total
8789031.06 42.0% LORENCITO 16-7-34-66 Total
8789051.06 37.8% LORENCITO 2-4-34-66 Total
8789020.06 37.8% LORENCITO 4-20-34-66 Total
8789035.06 37.8% LORENCITO 4-4-34-66 Total
8789025.06 37.8% LORENCITO 4-7-34-66 Total
8789019.06 37.8% LORENCITO 6-21-34-66 Total
8789006.06 42.0% LORENCITO 7-12-34-66 Total
8789024.06 42.0% LORENCITO 7-7-34-66 Total
8789030.06 42.0% LORENCITO 8-18-34-66 Total
8789040.06 37.8% LORENCITO 8-21-34-66 Total
8789001.06 42.0% MGP Enterprises #A-1
8789002.06 42.0% MGP Enterprises #A-3
8789003.06 42.0% MGP Enterprises #A-2
--------------------------------------------------------------------------------
EXHIBIT A/A-1
WELL # REV INT WELL NAME
8789004.06 42.0% MGP Enterprises #A-5
8789013.06 42.0% Lorencito #5-9-34-66
8789041.06 37.8% Lorencito #▇▇-▇▇-▇▇-▇▇
Note: The above revenue interests are before royalty reversion and yearly well
payout.
--------------------------------------------------------------------------------
EXHIBIT A/A-1
EXHIBIT A-2
LLC OWNERSHIP INTEREST
A 50% before Payout, 37.5% after Payout, ownership interest in Lorencito
Gas Gathering, LLC, a Colorado limited liability company, held by Apache Canyon
Gas, L.L.C. "Payout" is defined in the Operating Agreement of Lorencito Gas
Gathering, LLC, dated June 18, 1999.
--------------------------------------------------------------------------------
EXHIBIT A/A-1
EXHIBIT B
PURCHASE PRICE ALLOCATION
$21,000,000 Oil and Gas Leases and associated personal property
$14,000,000 Ownership Interest in Lorencito Gas Gathering, LLC
--------------------------------------------------------------------------------
EXHIBIT B Page 1 of 1
EXHIBIT C
ASSIGNMENT, ▇▇▇▇ OF SALE AND CONVEYANCE
ASSIGNMENT, CONVEYANCE AND ▇▇▇▇ OF SALE
THIS ASSIGNMENT, CONVEYANCE AND ▇▇▇▇ OF SALE is made effective this 1st day
of ____________________, 2000, by and between APACHE CANYON GAS, L.L.C., a
Delaware limited liability company, of ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇ (hereafter called "Assignor") and ___________________, of
_____________________________ (hereafter called "Assignee").
WHEREAS, Assignor is now the owner of certain undivided interests
("Assignor's Interests") in, to and under the following (the "Interests"):
To wit:
(i) LEASEHOLDS. Right, title and interest in oil and gas leasehold, oil,
gas and other minerals, including working interests, rights of assignment and
reassignment, net revenue interests, operating rights, record title interests,
and all other interests under or in oil, gas or mineral leases, and interests in
rights to explore for and produce oil, gas or other minerals which are described
in Exhibit "A" ("Leases");
(ii) CONTRACT RIGHTS. Right, title and interest in or derived from orders
and decisions of state regulatory authorities establishing or relating to
drilling or spacing units, joint operating agreements, gas purchase agreements,
gathering agreements (and any leasehold interests, working interests, royalty
interests, or other interests acquired or reserved pursuant thereto), subleases,
and any other agreements, including without limit, those which relate to any of
the interests described in Exhibit "A";
(iii) EASEMENTS. Right, title and interest in rights-or-way, easements,
servitudes and franchises appurtenant to or used in connection with the property
described in Exhibit "A";
(iv) PERMITS. Right, title and interest in permits and licenses of any
nature owned, held or operated in connection with operations for the exploration
and production of oil, gas or other minerals to the extent the same are used or
obtained in connection with any of the property described in Exhibit "A";
(v) ▇▇▇▇▇. Right, title and interest in any and all producing,
non-producing and shut-in oil and gas ▇▇▇▇▇, saltwater disposal ▇▇▇▇▇, water
▇▇▇▇▇, production spacing units and undeveloped locations used or obtained in
connection with the property described in Exhibit "A";
--------------------------------------------------------------------------------
EXHIBIT C Page 1 of 4
(vi) EQUIPMENT. Right, title and interest in all personal property,
surface equipment, down-hole equipment and pipelines used or obtained in
connection with the property described in Exhibit "A";
(vii) REMAINING INTERESTS. Right, title and interest in, to or under or
derived from the Interests [defined as all of the above described interests],
even though improperly described in or omitted from Exhibit "A" hereto.
WHEREAS, Assignor desires to assign, convey and deliver to Assignee and
Assignee desires to accept Assignor's Interests; and
WHEREAS, as consideration for this Assignment, Assignee has paid Assignor
the sum of $100.00, plus other valuable and sufficient benefits, the receipt of
which is acknowledged by Assignor.
NOW, THEREFORE, Assignor hereby grants, bargains, sells, transfers, assigns
and conveys to Assignee 100% of Assignor's Interests, being an undivided fifty
percent (50%) of 8/8 of the Interests before payout. Assignor will forever
warrant and defend title to Assignor's Interests against the lawful claims and
demands of all persons claiming title by, through or under Assignor, but not
otherwise. Said Interests are reduced after "Payout" as defined in the Joint
Development Agreement between Assignor and ▇▇▇▇▇▇▇▇ & Associates, LLC, to a
thirty-seven and one-half percent (37.5%) undivided interest, and are also
subject to a conditional right of participation pursuant to that certain Letter
Agreement dated April 24, 1998 by and between ▇.▇. ▇▇▇▇ d/b/a Hill Ranch, F.R.
Hill, Jr. d/b/a/ ▇. ▇. ▇▇▇▇ Company, and ▇▇▇▇▇▇▇▇ & Associates, Inc. No warranty
or representation is made by Assignor as for the before-payout or after-payout
status of the Interests.
TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns,
forever.
This Assignment, Conveyance and ▇▇▇▇ of Sale is expressly made subject to
the following agreements that are effective April 1, 1999: (i) that certain
Joint Development Agreement by and between Assignor and ▇▇▇▇▇▇▇▇ & Associates,
LLC, (ii) that certain Joint Operating Agreement by and between Assignor and
▇▇▇▇▇▇▇▇ & Associates, LLC, (iii) that certain Lorencito Gas Gathering LLC
Operating Agreement, and (iv) those certain rights of the Lessor to participate
in the development of the Leases.
The provisions of this Assignment, Conveyance and ▇▇▇▇ of Sale shall be
construed as covenants running with the Leases and Lands and shall be binding
upon Assignee, its successors and assigns.
APACHE CANYON GAS, L.L.C.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
--------------------------------------------------------------------------------
EXHIBIT C Page 2 of 4
ASSIGNMENT
KNOW ALL PERSONS BY THESE PRESENTS, that, in consideration of the sum of
One Dollar and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, APACHE CANYON GAS, L.L.C., a
Delaware limited liability company ("Assignor"), hereby irrevocably assigns,
sells, transfers, and conveys to EVERGREEN RESOURCES, INC., a ________
corporation (the "Assignee"), free and clear of any liens, pledges, claims,
charges, and security interests or encumbrances of any nature whatsoever, all of
Assignor's right, title and interest in and to a fifty percent (50%) membership
interest (the "Interest") in LORENCITO GAS GATHERING, L.L.C., a Colorado limited
liability company (the "Company") as a member in the Company, including, to the
extent attributable to the Interest, the following: (1) Assignor's right to
receive all heretofore undistributed profits, surplus and capital due Assignor
pursuant to the Operating Agreement of the Company (the "Operating Agreement");
(2) Assignor's right, title, and interest in and to a fifty percent (50%)
Interest (as defined in the Operating Agreement); and (3) Assignor's rights as a
member in connection with the administration of or operations of the Company
and/or the assets owned by the Company, together with Assignor' duties,
liabilities, and obligations under the Operating Agreement, whether such rights,
duties, liabilities, or obligations are known or unknown or matured or are
contingent.
Assignor covenants, represents and warrants to Assignee that (i) Assignor
is the lawful owner and holder of the rights, titles, and interests assigned,
sold, transferred and conveyed hereby, (ii) Assignor's Interest is free and
clear of all liens, security interests, encumbrances, charges, pledges, claims
of others, commitments, agreements, or equitable interests of any kind
whatsoever, (iii) Assignor has complete and unrestricted right, power and
authority to execute and deliver this Assignment and to make the Assignment,
sale, transfer, and conveyance contemplated hereby, (iv) Assignor has taken all
corporate or other action necessary or required to make this Assignment valid,
binding, and enforceable, and (v) the conveyance by Assignor of the Interest is
made pursuant to authorizations contained in the Operating Agreement. This
Assignment shall be binding upon Assignor and its successors and assigns, and
shall inure to the benefit of the Assignee and its successors and assigns.
Assignor shall warrant and defend the rights titles and interests hereby
assigned, sold, transferred and conveyed unto Assignee, its successors and
assigns, forever, against the lawful claims and demands of all persons
whomsoever. The Interest transferred hereby is subject to all of the terms,
conditions, and agreements contained in the Operating Agreement, including but
not limited to reduction to 37.5% after "Payout," as that term is defined in the
Operating Agreement.
This Assignment shall be effective as of ________, 2000.
--------------------------------------------------------------------------------
EXHIBIT C Page 3 of 4
In witness whereof, Assignor has executed this Assignment as of the ___ day
of _____, 2000.
APACHE CANYON GAS, L.L.C.
A DELAWARE LIMITED LIABILITY COMPANY
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
ACCEPTANCE OF ASSIGNMENT
The undersigned Assignee hereby accepts the assignment evidenced by that
certain Assignment dated the ___ day of ______, 2000, attached hereto, and
agrees to be bound by, and to assume and perform with respect to the interest,
all obligations, duties and responsibilities imposed upon a member owning such
interest by the terms of the Company's Operating Agreement, including the
obligations to make additional capital contributions to the extent provided
therein.
This Acceptance of Assignment is binding upon the undersigned and the
personal representatives, successors, and assigns of the undersigned and is for
the benefit of the Company and all of its members.
IN WITNESS WHEREOF, Assignee has executed this Acceptance of Assignment as
of the ___ day of ______, 2000.
EVERGREEN RESOURCES, INC.
A COLORADO CORPORATION
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
--------------------------------------------------------------------------------
EXHIBIT C Page 4 of 4
EXHIBIT D
EXCLUDED ASSETS
All assets not pertaining to the Subject Interests identified in Exhibit
A/A-1.
--------------------------------------------------------------------------------
EXHIBIT D Page 1 of 1
EXHIBIT E
MATERIAL CONTRACTS
1. Letter Agreement dated April 24, 1998 by and between ▇.▇. ▇▇▇▇ d/b/a ▇▇▇▇
Ranch, F.R. Hill, Jr. d/b/a/ Hill Company, and ▇▇▇▇▇▇▇▇ & Associates, Inc.,
granting Hill Ranch and ▇.▇. ▇▇▇▇ Company the conditional right to
participate in the development of the Lorencito Tract lease.
2. Joint Development Agreement, executed June 18, 1999, dated effective April
1, 1999, by and between ▇▇▇▇▇▇▇▇ & Associates, LLC and Seller respecting
the Lorencito Tract and other lands in a defined area of mutual interest.
3. Operating Agreement of Lorencito Gas Gathering. LLC, executed June 18,
1999, dated effective April 1, 1999, by and between ▇▇▇▇▇▇▇▇ & Associates,
LLC and Seller.
4. MGP Lease Agreement, 06/28/1999, with ▇▇▇▇▇▇▇▇ & Associates.
5. Letter from CIG to Lorencito Gas Gathering LLC, dated July 1 (or 12), 1999,
"Re: Interconnect into CIG's Picketwire Lateral S34-T33S-R66W, Las Animas
County, CO." This is a letter agreement between CIG and LGG relating to the
construction and installation of a metering station.
6. Letter from CIG to Lorencito Gas Gathering LLC, dated July 15, 1999, "Re:
Construction of New Gas Transmission Facilities and Provision of New Gas
Transportation Services."
7. Firm Transportation Service Agreement, Rate Schedule TF-1, between Colorado
Interstate Gas Company and Lorencito Gas Gathering LLC, dated July 1, 1999,
Contract No. 33240000.
8. Natural Gas Marketing and Purchase Agreement by and between ▇▇▇▇▇▇▇▇ &
Associates, LLC and Enserco Energy Inc. dated August 17, 1998.
9. Operating Agreement dated June 11, 1999, designating ▇▇▇▇▇▇▇▇ & Associates
as operator and Apache Canyon Gas, L.L.C. as non-operator.
10. Gas Compressor Equipment Master Rental Agreement by and between ▇▇▇▇▇▇▇▇ &
Associates, LLC and KCI Compression Company, L.P., dated May 25, 1999, and
associated Equipment Lease Schedule Unit No. KC-876. Seller believes there
is an additional Lease Schedule, but has not obtained a copy thereof.
--------------------------------------------------------------------------------
EXHIBIT E Page 1 of 1
EXHIBIT H
PERMITTED ENCUMBRANCES / CONTRACTS WITH AFFILIATES
None.
--------------------------------------------------------------------------------
EXHIBIT H Page 1 of 1
EXHIBIT I
PREFERENTIAL RIGHTS, CONSENTS AND MORTGAGES
The Subject Interests on Exhibit A/A-1 are mortgaged under that Mortgage,
Line of Credit Mortgage, Assignment, Security Agreement, Fixture Filing and
Financing Statement from Apache Canyon Gas, L.L.C. to Bank One, NA, Agent, filed
in Las Animas County, Colorado, on March 17, 2000, in Book 990, Page 210.
UCC-1 Financing Statements from Apache Canyon Gas, L.L.C., to Bank One, NA,
Agent, pertaining to the above Mortgage, filed in the following jurisdictions:
Jurisdiction Date Filing Information
Delaware Secretary of State Outstanding
Missouri Secretary of State 3/16/00 4027053
Kansas Secretary of State 4/4/00 3496957
Kansas Secretary of State 4/4/00 3496940
Colorado Secretary of State 3/17/00 20002024236
Colorado Secretary of State 3/17/00 20002024237
Las Animas County, Colorado 3/17/00 Book 990, Pg. 364
In conjunction with the litigation disclosed below in Exhibit J, Evergreen
Resources, Inc. has filed a Notice of Lis Pendens against the property leased by
MGP Enterprises, L.P. to ▇▇▇▇▇▇▇▇ & Associates and in which Seller has taken an
assignment.
Under that Operating Agreement dated June 11, 1999, covering the Subject
Interests on Exhibit A/A-I as the contract area, and designating ▇▇▇▇▇▇▇▇ &
Associates, LLC as Operator and Apache Canyon Gas, L.L.C. as non-operator,
Article VIII paragraph E provides for a preferential right in Operator, to wit:
"Should any party desire to sell all or any part of its interests under
this agreement, or its rights and interests in the Contract Area, it shall
promptly give written notice to the other parties, with full information
concerning its proposed sale which shall include the name and address of
the prospective purchaser (who must be ready, willing and able to purchase)
the purchase price, and all of the terms of the offer. The other parties
shall then have an optional prior right, for a period of ten (10) days
after receipt of the notice to purchase on the same terms and conditions
the interest which the other party proposes to sell; and, if this optional
right is exercised, the purchasing parties shall share the purchased
interest in the proportions that the interest of each bears to the total
interest of all purchasing parties."
Under that Joint Development Agreement dated effective April 1, 1999, by
and between ▇▇▇▇▇▇▇▇ & Associates, LLC and Seller, Section 8 provides for a
preferential right in the defined area of mutual interest, to wit:
--------------------------------------------------------------------------------
EXHIBIT I Page 1 of 3
"By this Agreement the parties also create an area of mutual interest
("AMI") identified on the attached Exhibit A-1. In the event that any party
hereto acquires any oil and gas interest in any lands all or a portion of
with [sic] lie within the AMI, such party shall provide a written offer to
the non-acquiring party of the opportunity to acquire the interest on the
same terms as the proposed acquisition in the same percentage of ownership
of the parties established herein. Within ten (10) days following receipt
of the written offer from the acquiring party, the non-acquiring party
shall notify the acquiring party, in writing, whether it elects to
participate. If the non-acquiring party elects to participate, such party
shall pay the acquiring party its share of the lease acquisition costs
within thirty (30) days of its election to participate..."
Transfer of the Joint Development Agreement is subject to the preferential
right to purchase set forth in the Operating Agreement referenced above, to wit:
"17. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their successors and assigns.
Assignability of the rights and obligations contained herein shall be
governed by the assignment and transfer provisions of the JOA."
Transfer of the Ownership Interest is subject to a preferential right to
purchase in ▇▇▇▇▇▇▇▇ & Associates, LLC, pursuant to Section 12.5 of the
Operating Agreement of Lorencito Gas Gathering, LLC, to wit:
"... the transferring Member shall promptly give written notice to the
other Member(s) with full information of the proposed transfer, including
copies of all agreements concerning the proposed transfer, which shall
include the name, address of the prospective purchaser, the purchase price
and all other material terms and conditions thereof. The non-transferring
Member shall then have a prior optional right, for a period of ten (10)
days after receipt of written notice, to exercise its right to purchase the
interest on the same terms and conditions on which the transferring Member
has agreed to sell. ..."
Transfer of the Ownership Interest is also subject to the unanimous consent
of the Management Committee of Lorencito Gas Gathering, LLC, pursuant to Section
12.1 of the Operating Agreement of Lorencito Gas Gathering, LLC, to wit:
"... Any Member may only sell, assign, or otherwise transfer its
interest in the Company with the unanimous consent of the Management
Committee. Such approval will not be unreasonably withheld but shall be
conditional upon the transferring Member's satisfaction of all outstanding
financial and accounting issues affecting the transferring Member. Any sale
of a Member's Interest shall be subject to the terms hereof. To be admitted
to the Company as an additional or
--------------------------------------------------------------------------------
EXHIBIT I Page 2 of 3
substitute Member, the transferee shall be required to ratify this
Agreement pursuant to which such transferee assumes a proportionate share
of the obligations of its transferor under this Agreement and agrees to be
bound by all the terms thereof...."
--------------------------------------------------------------------------------
EXHIBIT I Page 3 of 3
EXHIBIT J
LITIGATION AND CLAIMS
Evergreen Resources, Inc. v. MGP Enterprises, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ &
Associates, LLP, Case No 99-CV-104, Las Animas County District Court, Colorado.
MGP Enterprises ("MGP") leased certain properties (called the "Lorencito
Tract") adjacent to Apache Canyon properties to Evergreen Resources, Inc.
("Evergreen") After the lease expired due to lack of drilling, MGP
Enterprises leased the Lorencito Tract to ▇▇▇▇▇▇▇▇ & Associates, LLP
("▇▇▇▇▇▇▇▇"), on condition that ▇▇▇▇▇▇▇▇ enter into an indemnification
agreement with MGP and its principal, ▇▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇▇ entered into the
lease and an indemnification letter agreement, dated June 28, 1999. The
letter agreement provides, in part, that ▇▇▇▇▇▇▇▇ is responsible for the
full defense costs (including attorneys' fees) to defend MGP, ▇▇▇▇▇▇▇▇,
MGP's partners, counsel and affiliates in any suit brought by Evergreen
respecting the Lorencito Tract, and to indemnify those parties against any
judgments rendered, except to the extent of fraud, intentional misconduct
or other similar tort or contractual claim. Pursuant to an AMI agreement
between Apache Canyon Gas, L.L.C. ("Apache Canyon") and Chandler, Chandler
offered a 50% assignment of the lease, and the associated indemnification
agreement, to Apache Canyon. Apache Canyon agreed to the assignment of a
50% interest in the lease and assumption of 50% of the indemnification
obligations under the indemnification agreement.
Evergreen Resources subsequently filed suit against MGP, ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇, alleging that MGP had agreed to extend the lease, and that MGP
breached a lease covenant requiring MGP to provide Evergreen a right of first
offer on the lease granted to ▇▇▇▇▇▇▇▇.
Plaintiff amended the complaint to add new defendants, including Apache
Canyon Gas, L.L.C. and KLT Gas Inc. The amended complaint seeks, among other
things, monetary damages from certain of the named defendants (not including
Apache Canyon Gas, L.L.C. or KLT Gas Inc.) and a declaration that plaintiff has
a valid oil and gas lease to a certain tract of land in Las Animas County,
Colorado. KLT Gas Inc. has no direct interest in the tract.
--------------------------------------------------------------------------------
EXHIBIT J Page 1 of 1
EXHIBIT K
AGREEMENT REGARDING WATER AND SPECIAL USE PERMITS
--------------------------------------------------------------------------------
EXHIBIT K Page 1 of 1
EXHIBIT L
DISMISSAL FROM LITIGATION
--------------------------------------------------------------------------------
EXHIBIT L Page 1 of 1
EXHIBIT M
GAS BALANCING STATEMENTS
Apache Lorencito Apache Apache MMBTU
Sales Entitlement Gross Entitlement Actual Over
Date Prod % Sales Dth Sales Takes (Under)
Nov-99 50.00% 10,252 5,126 -- (5,126)
Dec-99 50.00% 53,105 26,553 29,000 2,448
Jan-00 49.82% 55,753 27,774 24,800 (2,974)
Feb-00 48.69% 62,519 30,443 29,700 (743)
Mar-00 48.08% 72,634 34,919 46,500 11,581
Apr-00 48.08% 81,648 39,252 33,800 (5,452)
May-00 48.05% 88,846 42,693 38,755 (3,938)
Jun-00 48.15% 87,640 42,201 55,000 12,799
--------
8,595
Jul-00 Est 48.10% 93,374 44,913 51,796 6,883
------- ------- ------- --------
605,771 293,873 309,351 15,478
======= ======= ======= ========
--------------------------------------------------------------------------------
EXHIBIT M Page 1 of 1