EXHIBIT 10.5
PURCHASE AND SALE AGREEMENT
BETWEEN
INTOIL, INC.
AND
ARATEX PRODUCTION COMPANY
AS SELLERS
AND
▇▇▇▇ ▇▇▇▇▇▇▇ CORPORATION
AS BUYER
Effective July 1, 2002
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS
ARTICLE II PURCHASE AND SALE
2.1 Purchase and Sale................................................... 6
2.2 Assets.............................................................. 6
2.3 Assumed Liabilities................................................. 8
2.4 Effective Time...................................................... 8
ARTICLE III PURCHASE PRICE
3.1 Purchase Price and Consideration.................................... 8
3.2 Performance Guarantee Deposit....................................... 8
3.3 Shareholder Approval................................................ 8
3.4 Allocation of the Purchase Price.................................... 8
3.5 Adjustment to Purchase Price........................................ 9
3.6 Purchase Price Adjustments For Title Defects....................... 10
3.7 Purchase Price Adjustment for Environmental Defects................ 11
3.8 Purchase Price Adjustment Disputes................................. 12
3.9 Preferential Rights................................................ 12
3.10 Casualty Loss...................................................... 13
3.11 Consents........................................................... 13
ARTICLE IV SELLERS' REPRESENTATIONS AND WARRANTIES
4.1 Organization and Standing.......................................... 13
4.2 Power.............................................................. 13
4.3 Authorization and Enforceability................................... 13
4.4 Liability for Brokers' Fees........................................ 14
4.5 Environmental Matters.............................................. 14
4.6 No Bankruptcy...................................................... 15
4.7 Litigation......................................................... 15
4.8 Material Agreements................................................ 15
4.9 Taxes.............................................................. 15
4.10 Absence of Certain Changes or Events............................... 15
TABLE OF CONTENTS
(continued)
PAGE
4.11 Liens and Encumbrances............................................. 16
4.12 Leases............................................................. 16
4.13 Gas Imbalances..................................................... 16
4.14 Oil or Gas Contracts............................................... 16
4.15 Non-Consent........................................................ 16
4.16 Production Tolerances.............................................. 16
4.17 Compliance With Laws............................................... 17
4.18 Financial Statements............................................... 17
4.19 Audits............................................................. 17
4.20 Employees.......................................................... 17
4.21 Assets Used in Business............................................ 17
4.22 Warranties, Indemnification and Representations.................... 17
ARTICLE V BUYER'S REPRESENTATIONS AND WARRANTIES
5.1 Organization and Standing.......................................... 18
5.2 Power.............................................................. 18
5.3 Authorization and Enforceability................................... 19
5.4 Liability for Brokers' Fees........................................ 19
5.5 Litigation......................................................... 19
5.6 Financial Resources................................................ 19
5.7 Independent Evaluation............................................. 19
ARTICLE VI COVENANTS AND AGREEMENTS
6.1 Covenants and Agreements of Sellers................................ 20
6.2 Covenants and Agreements of Buyer.................................. 22
6.3 Filings; Other Action.............................................. 22
6.4 Access To Information.............................................. 22
6.5 Notice of Inaccurate Information................................... 23
6.6 Access to Employees................................................ 23
6.7 Termination of Sellers' Employees.................................. 23
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TABLE OF CONTENTS
(continued)
PAGE
ARTICLE VII TAX MATTERS
7.1 Tax Reports and Returns............................................ 23
7.2 Sales Taxes........................................................ 23
ARTICLE VIII CONDITIONS TO CLOSING
8.1 Sellers' Conditions................................................ 24
8.2 Buyer's Conditions................................................. 24
ARTICLE IX TERMINATION
9.1 Termination by Mutual Consent...................................... 25
9.2 Termination by Sellers............................................. 25
9.3 Termination by Buyer............................................... 25
9.4 Effect of Termination and Abandonment.............................. 25
9.5 Extension; Waiver.................................................. 26
ARTICLE X SURVIVAL
10.1 Survival of Representations, Warranties and Covenants.............. 26
ARTICLE XI CLOSING
11.1 The Closing........................................................ 26
11.2 Closing Obligations................................................ 27
ARTICLE XII POST-CLOSING OBLIGATIONS
12.1 Records............................................................ 28
12.2 Additional Proceeds................................................ 28
12.3 Further Assurances................................................. 28
12.4 Purchase Price Allocation - Form 8594.............................. 28
ARTICLE XIII GENERAL PROVISIONS
13.1 Notices............................................................ 28
13.2 Assignment, Binding Effect......................................... 29
13.3 Entire Agreement................................................... 29
13.4 Amendment.......................................................... 30
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TABLE OF CONTENTS
(continued)
PAGE
13.5 Governing Law...................................................... 30
13.6 Counterparts....................................................... 30
13.7 Headings........................................................... 30
13.8 Interpretation..................................................... 30
13.9 Waivers............................................................ 30
13.10 Severability....................................................... 30
13.11 Arbitration........................................................ 30
13.12 Public Statements.................................................. 32
SCHEDULES
Schedule of Assets
2.2(a) Well Listing
2.2(b) Allocated Value
2.2(e)(1) Property, Plant and Equipment
2.2(e)(2) Easements and Rights of Way
2.2(g) Software
2.3 Assumed Liabilities
3.9 Preferential Rights
4.2 Power
4.5 Environmental
4.8 Material Agreements
4.9 Properties Subject to Tax Partnerships
4.10(b) Capital Expenditures in Excess of $100,000
4.10(g) Mortgaged Properties
4.13 Gas Imbalances
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TABLE OF CONTENTS
(continued)
PAGE
4.14 Oil and Gas Contracts
4.15 Non-Consent Properties
4.19 Audits
EXHIBITS
A. Leases
B. Escrow Agreement
C. Joinder Agreement
D-1 Form of Buyer's Officer's Certificate
D-2 Form of Seller's Officer's Certificate
E-1. Form of Assignment and ▇▇▇▇ of Sale
E-2 Form of Assignment and Assumption Agreement
F. Directors' and Officers' Insurance Policy
G. FIRPTA Certificate
H. Form Letter in Lieu
I. Form of Opinion of Buyer's Counsel
J. Form of Opinion of Sellers' Counsel
K. Balance Sheet
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT ("Agreement"), dated this 4th day of November,
2002 is by and between Intoil, Inc., a Delaware corporation ("Intoil"), and
Aratex Production Company, a Colorado corporation ("Aratex") (each as "Seller"
and collectively, the "Sellers") and ▇▇▇▇ ▇▇▇▇▇▇▇ Corporation, a Delaware
corporation ("BBC"), or wholly owned subsidiaries of BBC designated in writing
to Sellers prior to Closing pursuant to Section 2.1 (collectively, the "Buyer").
RECITALS
Sellers own and desire to sell certain real and personal property
interests, as more fully described in Section 2.2 below (collectively, the
"Assets"), and transfer certain associated liabilities, as more fully described
in Section 2.3 below (the "Assumed Liabilities").
Buyer desires to purchase the Assets and assume the Assumed Liabilities
pursuant to the terms of this Agreement.
AGREEMENT
In consideration of the mutual promises contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Buyer and Sellers agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set
forth below:
"Agreement" means this Purchase and Sale Agreement.
"Allocated Value" is defined in Section 3.4.
"Aratex" is defined in the preamble.
"Assets" is defined in Section 2.2.
"Assumed Liabilities" is defined in Section 2.3.
"Background Materials" means all materials and information provided to
Buyer by Sellers, their representatives, agents, and employees, in connections
with the Assets, Assumed Liabilities, and this Agreement.
"Balance Sheet" means the balance sheet attached for Intoil, Inc. dated as
of June 30, 2002, and attached as Exhibit K.
"Business Day" means any day other than a Saturday, a Sunday, a United
States federal holiday or a Colorado state-banking holiday.
"Buyer" is defined in the preamble.
"Casualty Loss" is defined in Section 3.10.
"Claim" means any claim, action, suit, investigation or proceeding before
or by any Governmental Authority or non-governmental department, commission,
board, bureau, agency, court, or other instrumentality, or arbitrator or by any
private person or entity known by Sellers.
"Closing" is defined in Section 11.1.
"Closing Date" is defined in Section 11.1.
"Company Debt" means the revolving note payable to U.S. Bank, N.A.
pursuant to the Revolving Line of Credit Agreement entered into by Intoil on
December 29, 1999.
"Confidentiality Agreement" means the confidentiality agreement dated July
31, 2002 between Buyer and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. on behalf of Seller.
"Conveyances" is defined in Section 11.2.
"Defensible Title" means such title held by the Sellers with respect to
each portion of the Assets described in Schedule 2.2(b) that, except for the
Permitted Encumbrances:
(a) entitles the Sellers to receive not less than the "Net Revenue
Interests" or "NRI" set forth in Schedule 2.2(a) pertaining to the oil, gas and
associated liquid and gaseous hydrocarbons and non-hydrocarbons produced, saved
and marketed from the E&P Properties; and
(b) obligates the Sellers to bear costs and expenses relating to
the ownership, operation, maintenance and repair of the E&P Properties in an
amount not greater than the "Working Interests" or "WI" set forth in Schedule
2.2(a), unless there is a corresponding increase in the Net Revenue Interests.
"Deposit" is defined in Section 3.2.
"Effective Time" means 7:00 a.m. on July 1, 2002.
"Environmental Breach" is defined in Section 3.7.
"Environmental Laws" is defined in Section 4.5(e).
"E&P Properties" means the Leases and the ▇▇▇▇▇.
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"Escrow Agent" means ▇▇▇▇▇ Fargo Bank West, National Association.
"Escrow Agreement" means the agreement attached as Exhibit B.
"Expedited Arbitration" means the arbitration process set forth in Section
13.11(c).
"GAAP" means United States generally accepted accounting principles.
"Governmental Authority" means Bahrain, the United States of America and
any other country, including any state or political subdivision thereof, agency,
division, court, or commission, board, bureau or other instrumentality.
"Hazardous Substance" is defined in Section 4.5.
"Indemnity Agreement" means the letter agreement between the Sellers and
Buyer dated October 15, 2002.
"Interest Additions" is defined in Section 3.6(e).
"Intoil" is defined in the preamble.
"Knowledge" of an entity means the actual knowledge of an officer,
director, or employee of such entity with responsibility over the Asset or
activity in regards to which a representation or covenant is made and
"knowledge" of an individual means the actual knowledge of such individual.
"Lands" is defined in Section 2.2(a).
"Leases" is defined in Section 2.2(a).
"Material Adverse Effect" means a material effect on the operation or
value of a material asset, provided that any change, effect, fact, event or
condition that adversely affects the oil and gas exploration and production
industry generally shall not be considered in determining whether a Material
Adverse Effect has occurred.
"Material Agreements" is defined in Section 4.8.
"Net Casualty Loss" is defined in Section 3.10.
"New Intoil" means New Intoil, e.c., a Bahrain holding company that is the
indirect parent of Sellers.
"Office Lease" means the Office Building Lease between Brookfield Colorado
Inc. and Intoil, Inc. dated August 7, 2001 for Suite 165 of the building known
as Highland Place II, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇.
"Outside Closing Date" is defined in Section 9.2.
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"Permitted Encumbrances" shall mean:
(a) lessors' royalties, overriding royalties, net profits interest,
production payments, reversionary interests and similar burdens if
the net cumulative effect of such burdens does not operate to reduce
the NRI set forth in Exhibit A;
(b) any preferential rights to purchase and required third party
consents to assignments of contracts and similar agreements, as set
forth on Schedule 3.9 and which are handled exclusively under
Section 3.9 below;
(c) liens for taxes or assessments not yet due or not yet delinquent or,
if delinquent, that are being contested in good faith in the normal
course of business;
(d) rights to consent by, required notices to, filings with, or other
actions by federal, state, local or tribal entities in connection
with the sale or conveyance of the E&P Properties if the same are
customarily obtained subsequent to such sale or conveyance;
(e) rights of reassignment, to the extent any exist as of the date of
the Effective time, upon the surrender or expiration of any lease;
(f) easements, rights-of-way, servitude, permits, surface leases and
other rights with respect to surface operations, on, over or in
respect of any of the properties or any restriction on access
thereto and that do not materially interfere with the operation of
the affected property;
(g) such Title Defects as Buyer has waived in writing in accordance with
Section 3.5(c);
(h) the terms and conditions of the Material Agreements, all division
orders, pooling or unitization orders, agreements or declarations;
(i) materialmen's, mechanics', repairmen's, employees', contractors',
operators' or other similar liens or charges arising in the ordinary
course of business incidental to construction, maintenance or
operation of the Assets (i) if they have not been filed pursuant to
law and the time for filing them has expired, (ii) if filed, they
have not yet become due and payable or payment is being withheld as
provided by law, or (iii) if their validity is being contested in
good faith by appropriate action;
(j) rights reserved to or vested in any governmental authority to
control or regulate any of the Assets in any manner; and all
applicable laws, rules, regulations and orders of general
applicability in the area;
(k) liens arising under operating agreements, unitization and pooling
agreements and production sales contracts securing amounts not yet
due or, if due, being contested in good faith in the ordinary course
of business; and
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(l) all calls on or preferential rights to purchase production for a
price at or above market price.
"Person" means an individual, a partnership, a limited liability company,
a corporation, an association, a trust, a joint venture, or an unincorporated
organization.
"Purchase Price" is defined in Section 3.1.
"Records" is defined in Section 2.2(f).
"Reserve Report" means the Intoil Inc. Evaluation of Oil and Gas Assets,
Rocky Mountain & Mid-Continent States, Escalated Case, Effective July 1, 2002 (2
vol.) prepared by ▇▇▇▇▇▇▇ Associates, Inc.
"Seller" and "Sellers" are defined in the preamble.
"Taxes" means all ad valorem, property, production, excise, net proceeds,
severance, windfall profit, sales taxes and all other taxes and similar
obligations assessed against the Assets or based upon or measured by the
ownership of the Assets or the production of hydrocarbons or the receipt of
proceeds therefrom, other than income taxes or estate taxes.
"Title Defect" means any material encumbrance, encroachment, irregularity,
defect in or objection to real property title, excluding Permitted Encumbrances,
that alone or in combination with other defects renders title of the Sellers
less than Defensible Title. Notwithstanding the foregoing, the following shall
not be considered Title Defects:
(a) defects based on lack of information in Sellers' files;
(b) defects in the chain of title consisting of the mere failure to
recite marital status in a document or successors of heirship
proceedings in a document, unless Buyer provides affirmative
evidence that such failure or omission has resulted in another
party's actual and superior claim of title to the relevant Asset;
(c) defects relating to the lack of a survey;
(d) defects that have been cured by possession under applicable statutes
of limitation for adverse possession or for prescription;
(e) defects based on failure to record leases issued by any state or the
United States of America or any state (or any assignments of record
title, operating rights in such leases or surface leases and
agreements), in the real property or other county records of the
county in which such portion of the Properties is located if such
recordation is not necessary to constitute constructive notice of
such leases pursuant to applicable statutes of limitation or
prescription; and
(f) defects related to the suspension of revenues due and owing a
Seller, if such suspension is not supported by the facts and
circumstances that would otherwise be a Title Defect hereunder.
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"Title Defect Adjustment" is defined in Section 3.6(b).
"Title Defect Value" is defined in Section 3.6(a).
"▇▇▇▇▇" is defined in Section 2.2(b).
ARTICLE II
PURCHASE AND SALE
2.1 PURCHASE AND SALE. Effective as of the Effective Time, Sellers agree
to sell and Buyer agrees to purchase the Assets, and Sellers agree to transfer
and Buyer agrees to assume the Assumed Liabilities. If all or some portion of
the Assets are purchased by a wholly owned subsidiary of Buyer, that subsidiary
entity shall sign a Joinder Agreement in a form substantially identical to the
agreement attached as Exhibit C.
2.2 ASSETS. All of the assets described in this Section 2.2, including,
but not limited to, all of Sellers' right, title and interest in and to the real
and personal property described on Exhibit A and Schedules 2.2(a), 2.2(b),
2.2(e)(1), 2.2(e)(2) and 2.2(g), and the other types of property associated
therewith may be referred to collectively as the "Assets."
(a) The oil and gas leases and overriding royalty interests
specifically described in Exhibit A, whether producing or non-producing and
whether fully or properly described or not (collectively, the "Leases"), the
royalties and overriding royalties burdening the Leases, and any and all right,
title and interest in and to the oil, gas and all other hydrocarbons in, on or
under the lands covered by the Leases, and other hydrocarbons and products,
whether liquid or gaseous, produced in association therewith ("Hydrocarbons")
after the Effective Time and all other minerals of whatever nature in, on or
under the Leases and Lands.
(b) The oil and gas ▇▇▇▇▇ located on the Leases and Lands, or
lands pooled or unitized therewith, including, without limitation, the oil and
gas ▇▇▇▇▇ specifically described in Schedule 2.2(a), whether producing or
non-producing and whether fully or properly described or not, (the "▇▇▇▇▇"), all
injection and disposal ▇▇▇▇▇ on the Leases or Lands, and all personal property
and equipment associated with the ▇▇▇▇▇ as of the Closing Date.
(c) The rights, to the extent transferable, in and to all existing
and effective unitization, pooling and communitization agreements, declarations
and orders, and the properties covered and the units created thereby to the
extent that they relate to or affect any of Sellers' properties and interests
described in Sections 2.2(a) and (b) or the production of Hydrocarbons, if any,
attributable to said properties and interests after the Effective Time.
(d) The rights, to the extent transferable, in and to
existing and effective oil, gas, liquids, condensate, casinghead gas and gas
sales, purchase, exchange, gathering, transportation and processing contracts,
operating agreements, balancing agreements, joint venture agreements,
partnership agreements, farmout agreements and other contracts, agreements and
instruments related to the properties and interests described in Sections 2.2(a)
through (c), including the Material Agreements, excluding, however, any
insurance contracts.
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(e) All of the personal property, inventory, fixtures,
improvements, permits, licenses, approvals, servitudes, rights-of-way, easements
(including Rights of Way and Easements on Schedule 2.2(e)(2)), surface leases
and other surface rights (including, but not limited to, any ▇▇▇▇▇, tanks,
boilers, buildings, injection facilities, saltwater disposal facilities,
compression facilities, gathering systems, vehicles, and other appurtenances and
facilities) located on or stored in storage yards or other locations, or used in
connection with or otherwise related to the exploration for or production,
gathering, treatment, processing, storing, sale or disposal of Hydrocarbons or
water produced from the properties and interests described in Sections 2.2(a)
through (d) as of the Effective Time (including property, plant and equipment on
Schedule 2.2(e)(1)), and all contract rights (including rights under leases to
third parties) related thereto, except to the extent acquired, disposed of or
terminated in the ordinary course of business after the Effective Time.
(f) The files, records, data and information relating to the items
described in Sections 2.2(a) through (e) maintained by Sellers (the "Records"),
including without limitation lease files, accounting files, land files, well
files, gas, oil and other hydrocarbon sales contract files, gas processing
files, division order files, abstracts, title opinions, AFEs, geological,
geophysical, seismic and other scientific data and all other information of
every type related exclusively or primarily to any of the Assets, including
geologic maps, log calculations, well bore diagrams, but excluding the
following: (i) all of Seller's internal appraisals and interpretive data related
to the Assets, (ii) all information and data subject to third-party consents to
assign, which Seller has requested and not obtained as of the Closing Date,
(iii) all privileged information except to the extent such information relates
directly to the Assets, (iv) Seller's corporate financial, employee and general
tax records that do not relate to the Assets and (v) all accounting files that
do not relate to the Assets.
(g) The software, to the extent transferable, and related
documentation used in connection with Seller's operation of the Assets,
including the software set forth on Schedule 2.2(g).
(h) The Office Lease.
(i) The Reserve Report and similar reports prepared for each of
the three years prior to the Reserve Report.
(j) All other Assets included in the Balance Sheet and all other
personal property owned by Seller at the Effective Time, including furniture,
computers, printers, copiers, and other office equipment and supplies.
(k) All other real property and personal owned and held by Sellers
as of the Effective Time, or acquired after the Effective Time and owned by
Sellers as of Closing Date, except to the extent disposed of or terminated in
the ordinary course of business after the Effective Time; and
(l) As of the Closing Date, all cash and cash equivalents, post
office boxes and lock boxes of Sellers as of the Closing and the following bank
accounts of Intoil and Aratex: Intoil Operating Account at US Bank #1 204 1307
1859, Intoil Revenue Account at US Bank #1
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036 5577 8878, Intoil Money Market Account at ▇▇▇▇▇ Fargo Bank #106-▇▇▇▇▇▇▇,
Aratex Operating Account at US Bank # 1 943 1120 9267 and Aratex Revenue Account
at US Bank #1 036 5577 8894.
2.3 ASSUMED LIABILITIES. On the Closing Date and effective as of
the Effective Time, the Buyer agrees to assume and become responsible for all of
the Assumed Liabilities. The "Assumed Liabilities" consist solely of the
liabilities of the Sellers specifically described and set forth on Schedule 2.3.
2.4 EFFECTIVE TIME. The transactions contemplated by this Agreement
shall be effective as of July 1, 2002 at 7:00 a.m. local time at the site of the
Assets (the "Effective Time").
ARTICLE III
PURCHASE PRICE
3.1 PURCHASE PRICE AND CONSIDERATION. The purchase price for the Assets
shall be $61,706,000 ("Purchase Price"). At Closing, Buyer shall pay Sellers the
Purchase Price, as adjusted pursuant to this Article III, less the Deposit,. The
total consideration from Buyer to Sellers shall include the Purchase Price, as
adjusted pursuant to this Article III, plus the assumption of the Assumed
Liabilities.
3.2 PERFORMANCE GUARANTEE DEPOSIT. Upon execution of this Agreement,
Buyer shall deliver to the Escrow Agent by wire transfer a deposit, in cash, in
the amount of $3,000,000 (the "Deposit") pursuant to the terms of the Escrow
Agreement attached as Exhibit B. The Deposit, together with accrued interest
less any applicable bank fees, shall be distributed by the Escrow Agent to the
Sellers and credited to the Purchase Price at Closing, or if this Agreement is
terminated, shall be distributed pursuant to Article IX.
3.3 SHAREHOLDER APPROVAL. Sellers shall use reasonable efforts to secure
approval of the Sellers' rights and obligations under this Agreement by the
shareholders of New Intoil on or before the Business Day that is or most
immediately follows the 28th day after the date of this Agreement. If such
approval is not secured by that date, Sellers shall pay to Buyer the sum of
$75,000 to reimburse Buyer for a portion of costs incurred in the course of due
diligence resulting from Buyer entering into this Agreement. This reimbursement,
if any, shall be made at the Closing or, if no Closing occurs, on or before
December 23, 2002.
3.4 ALLOCATION OF THE PURCHASE PRICE. With respect to the E&P
Properties, the Purchase Price shall be allocated to the Assets as set forth in
Schedule 2.2(b) (the "Allocated Values"), which allocation shall be binding on
Sellers and Buyer and shall be used for the purposes of adjusting the Purchase
Price pursuant to Sections 3.6, 3.7, 3.9 and 12.4 and is not intended as a means
of valuation for any other purpose.
3.5 ADJUSTMENT TO PURCHASE PRICE. The Purchase Price shall be adjusted
at Closing pursuant to the "Settlement Statement" prepared by Sellers and
submitted to Buyer at least nine days prior to Closing for Buyer's comment and
review. The Settlement Statement shall set forth
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the Adjusted Purchase Price and associated calculations used to determine such
adjustments. The "Adjusted Purchase Price" shall be calculated as follows:
Adjusted Purchase Price = $61,706,000 plus (Increased Debt + Credit
Interest + Oil in Tanks + Positive GAAP Adjustments (if the net amount of
all GAAP Adjustments is positive)) minus (Decreased Debt + Third Party
Fees + Title Adjustments + Environmental Adjustments + GAAP Adjustments
(if the net amount of all GAAP Adjustments is negative) and Gas
Imbalances).
Where:
"Increased Debt" means the principal balance of the Company Debt immediately
prior to the Closing minus the principal balance of the Company Debt as of the
Effective Time (as shown on the Balance Sheet) but only to the extent that the
proceeds from any increase in Company Debt during such period does not result in
a breach of the representations of Sellers in Section 4.10 or the covenants of
Sellers in Section 6.1. If this calculation results in a negative number, the
value of "Increased Debt" shall be deemed to be zero.
"Credit Interest" means any accrued but unpaid interest and Commitment Fees (as
defined in the Company Debt) relating to the Company Debt at the time
immediately prior to Closing.
"Oil in Tanks" means the value of all oil retained by Sellers in pipelines,
tanks or other storage as of the Effective Time, which has been calculated by
Sellers as $137,109, and is subject to review by the parties.
"GAAP Adjustments" means any the aggregate net dollar amount of adjusting
journal entries that would be necessary in order to fairly present in accordance
with GAAP, applied on a basis consistent with the audited financial statements
of the Seller for the years ended December 31, 2001 and 2000, the Balance Sheet
but excluding any adjustment made in relation to (a) federal or state taxes, (b)
account coding, (c) depreciation depletion and amortization (DD&A), or (d) any
adjustment that duplicates any other adjustment to the Purchase Price. It is
agreed that (i) any amount shown on the Balance Sheet as an account receivable
that has not been paid as of the Closing Date shall be deemed to be required
under GAAP to be subtracted from the assets on the Balance Sheet, (ii) any
liability of Sellers as of June 30, 2002 that is not recorded on the Balance
Sheet shall be deemed to be required under GAAP to be added to the liabilities
on the Balance Sheet, and (iii) the liabilities of Sellers required by GAAP to
be shown on the Balance Sheets as of June 30, 2002 shall include Seller's good
faith estimate of all Taxes, whether or not assessed as of June 30, 2002, that
are based upon or measured by ownership of the Assets as of June 30, 2002 or
production of Hydrocarbons through June 30, 2002. All adjustments, whether
positive or negative, shall be calculated, and the net amount of adjustments
determined. No positive or negative GAAP Adjustment shall be made unless the
absolute value of the net amount of all such adjustments is equal to or greater
than $150,000.
"Decreased Debt" means the principal balance of the Company Debt as of the
Effective Time (as shown on the Balance Sheet) minus the principal balance of
Company Debt immediately prior to Closing. If this calculation results in a
negative number, then the value of "Decreased Debt" shall be deemed to be zero.
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"Third Party Fees" means fees incurred after the Effective Time paid to ▇▇▇▇▇▇
▇▇▇▇▇▇▇ & Co. and ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP for services related to the
transactions contemplated by this Agreement as well as such fees for other third
parties, minus $80,000.
"Title Adjustments" means any Title Defect Adjustment made pursuant to Section
3.5 of this Agreement.
"Environmental Adjustment" means any adjustment to Purchase Price for an
Environmental Breach made pursuant to Section 3.6 of this Agreement.
"Gas Imbalances" means the gas imbalances shown on Schedule 4.13 calculated at
the rate of $2.00 per mcf.
3.6 PURCHASE PRICE ADJUSTMENTS FOR TITLE DEFECTS.
(a) Review of Title Records. Upon execution of this Agreement,
Sellers shall make available to Buyer during regular business hours all Records
in Sellers' possession relating to the title to the Properties. Buyer shall be
entitled to review said title Records. Buyer shall have the right to reasonably
request copies of any and all such title Records and, upon such request, Sellers
shall provide the requested copies to Buyer.
(b) Notice Of Title Defects. Buyer shall have the right to provide
Sellers with written notice of Title Defects at any time from the date of this
Agreement to ten (10) days before the Closing Date. Such notice shall be in
writing and shall be effective only if it includes all of the following: (i) a
description of the E&P Property affected by the Title Defect, (ii) the
reasonable basis for the Title Defect, (iii) reasonable documentation supporting
the basis for the Title Defect, (iv) the Allocated Value of the affected E&P
Property, and (v) the dollar value associated with the Title Defect (the "Title
Defect Value") and the computations upon which Buyer's belief is based.
"Reasonable documentation supporting the basis" shall mean, for Title Defects
having the following bases: (a) if the basis is derived from a document, a copy
of such document, or pertinent part thereof, (b) if the basis is a gap in
Sellers' chain of title, the document preceding and following the gap, or a
title opinion reciting the gap in reasonable detail, (c) if the basis is a lien
or encumbrance, the document creating the lien or encumbrance or a title opinion
or title report reciting the lien or encumbrance in reasonable detail including
recording references, or (d) if the basis is failure to pay a rental when due on
a federal lease, a serial register page or other documentation from the United
States Bureau of Land Management (BLM) or the United States Minerals Management
Service (MMS).
(c) Title Defect Adjustments And Exclusions. The Purchase Price
shall be reduced by an amount equal to the Title Defect Value (which reduction
shall be called a "Title Defect Adjustment") if the Title Defect Value for any
particular Asset exceeds $25,000 (as a threshold, but not as a deductible),
provided that the aggregate of all Title Defect Values exceed $100,000. No Title
Defect Adjustment shall be made if (i) Buyer agrees in writing to waive the
relevant Title Defect, (ii) the basis for the Title Defect has been removed by
Sellers at its sole cost and expense, or (iii) Sellers and Buyer reach an
agreement regarding cure of the Title Defect. If an Asset that is the subject of
the value of Title Defects has not been given an
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Allocated Value, or if the Asset's Allocated Value is zero, Sellers are deemed
to have Defensible Title to such Asset.
(d) Title Defect Value. The Title Defect Value for any Asset shall
not exceed the Allocated Value of the Asset and shall be determined as follows:
(i) If the effect of the Title Defect is to reduce the actual Net Revenue
Interest to an amount less than that stated in Schedule 2.2(b), and if the Asset
is not subject to a reversion after payout, then the Title Defect Value is the
product of the Allocated Value attributed to such Asset, multiplied by a
fraction, the numerator of which is the difference between the Net Revenue
Interest set forth in Exhibit A and the actual Net Revenue Interest, and the
denominator of which is the Net Revenue Interest stated in Exhibit A; or (ii) or
if the Title Defect represents an obligation, encumbrance, burden or charge upon
the affected Asset (including any increase in Working Interest for which there
is not a proportionate increase in the Net Revenue Interest), the amount of the
Title Defect Value is to be determined by Buyer after taking into account: (A)
Allocated Value of the Asset, (B) the portion of the Asset affected by the Title
Defect, (C) the legal effect of the Title Defect, (D) the potential economic
effect of the Title Defect over the life of the affected Asset, (E) if the Title
Defect is a lien or encumbrance on the affected portion of the Asset, the cost
of removing such lien or encumbrance, and (F) the Title Defect Values placed
upon the Title Defect by Buyer and Sellers.
(e) Interest Additions. No later than ten Business Days prior to
Closing, Buyer will notify Sellers of any interest that should be an Asset or
Assumed Liability hereunder, but that is not listed, including any interest that
entitles Sellers to receive more than the NRI or obligates Sellers to bear costs
and expenses in an amount less than the WI, as WI and NRI are set forth on
Schedule 2.2(b), and including overriding royalty interests in ▇▇▇▇▇ drilled and
completed prior to the Effective Time (collectively, "Interest Additions");
provided, however, that the following shall not be considered Interest
Additions: (a) an increased NRI resulting from a reduced royalty rate due to
stripper well classification and (b) an after payout increase in WI or NRI
pursuant to a farmin, farmout or other agreement. Buyer's notice under this
Section 3.6(e) shall be in writing and shall include (i) a description of the
Interest Addition, (ii) the basis for the Interest Addition, (iii) the Allocated
Value of the Asset affected by the Interest Addition, and (iv) the value of the
Interest Addition or the amount by which Buyer, as applicable, believes the
Allocated Value of the Asset has been increased by the Interest Addition ("Value
of Interest Addition") and the computations upon which Buyer's belief is based,
which shall be consistent with the manner in which Title Defect Values are
determined. The Purchase Price shall be adjusted upwards for Interest Additions
only if (1) an Interest Addition exceeds $25,000, and (2) the sum of all
Interest Additions exceed $100,000, in which case the value of such Interest
Additions shall be offset against any downward adjustments for Title Defects,
and the amount of offset shall not exceed the total amount of Title Defect
Adjustment.
3.7 PURCHASE PRICE ADJUSTMENT FOR ENVIRONMENTAL DEFECTS.
(a) Inspection of Premises. Upon execution of this Agreement and
subject to the Indemnification Agreement, Buyer shall be provided access during
regular business hours to the Seller-operated E&P Properties, and Sellers shall
use reasonable efforts to obtain permission for Buyer to gain access to the
third party-operated E&P Properties, for the purpose of inspecting the
environmental and physical condition of the same.
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(b) Notice. At any time from the date of this Agreement to ten
days before the Closing Date, Buyer shall have the right to provide Sellers with
written notice (an "Environmental Notice") of any fact or circumstance that
evidences the material breach of Sellers' representation in Section 4.5
("Environmental Breach"). The Environmental Notice shall be in writing and shall
include all of the following: (i) a description of the Asset Property affected
by the Environmental Breach, (ii) the reasonable basis for the Environmental
Breach, (iii) reasonable documentation supporting the basis for the
Environmental Breach, (iv) the Allocated Value of the affected Asset, and (v)
Buyer's good faith estimate of the dollar amount of loss that will be incurred
by Buyer as a result of the Environmental Breach (the "Environmental Breach
Value") and the computations upon which Buyer's belief is based.
(c) Adjustment for Environmental Breach. If Buyer delivers an
Environmental Notice to Sellers, Sellers, at their election, shall have the
option of (A) remediating the Environmental Breach to the satisfaction of (i)
the appropriate state and federal agencies having jurisdiction prior to Closing,
or (ii) a third party where that third party has brought a claim for damages
resulting from the same set of facts giving rise to the Environmental Breach, or
(B) subject to Section 3.9, paying the Environmental Breach Value associated
with the Environmental Breach, and thereafter, in either case, Buyer shall waive
and indemnify Sellers for all losses associated with such Environmental Breach.
The Purchase Price shall be reduced by the Environmental Breach Value (each such
adjustment, an "Environmental Breach Adjustment") if the loss with respect to
any particular E&P Property exceeds $25,000 (as a threshold and not as a
deductible), and further provided that the aggregate of all Environmental Breach
Adjustments exceed $100,000.
3.8 PURCHASE PRICE ADJUSTMENT DISPUTES. Notwithstanding Section 13.11(a)
and (b), if the parties disagree with the dollar amount of or information used
to calculate any adjustment to the Purchase Price pursuant to Section 3.5 or 3.6
or 3.7, then such party shall, at least seven (7) days prior to the Closing
Date, deliver a notice by facsimile or hand delivery to the other party stating
the existence and nature of such disagreement. Any such notice shall specify
those items or amounts subject to dispute. If such notice of disagreement is
delivered, then the Chief Operating Officer of Buyer and the President of
Sellers meet regularly as necessary for six (6) days following receipt of such
notice and use reasonable efforts to reach an agreement on the disputed items or
amounts. If within six (6) days following receipt of such notice the parties
have not reached an agreement, the parties shall submit the matter to Expedited
Arbitration for a final determination of the disputed matter.
3.9 PREFERENTIAL RIGHTS. The parties acknowledge that certain of the E&P
Properties may be subject to a preferential right to purchase, as set forth on
Schedule 3.9. To the extent any preferential right is validly exercised,
resulting in the transfer of a Lease or Well to a third party, the Purchase
Price shall be reduced, or that portion of the Purchase Price previously paid to
Sellers by Buyer shall be refunded, in an amount equal to the Allocated Value
for the portion of the Assets subject to the validly exercised preferential
right. This reduction or refund, as the case may be, shall be Buyer's sole
remedy for the exercise of any preferential right affecting the E&P Properties.
If Sellers have transferred title or an interest in such a property to Buyer,
Buyer shall take such steps as necessary to convey the property to the holder of
the preferential right.
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3.10 CASUALTY LOSS. Prior to Closing, if a portion of the Assets is
destroyed by fire or other casualty, is taken or threatened to be taken in
condemnation or under the right of eminent domain ("Casualty Loss"), Buyer shall
purchase the Asset at Closing for, at Buyer's option, (i) the Allocated Value of
the Asset reduced by the estimated cost to repair such Asset (with equipment of
similar utility) up to the Allocated Value thereof (the reduction being the "Net
Casualty Loss") or (ii) the Allocated Value of the Asset and Sellers shall
assign Buyer all of Sellers' rights to any awards or other payments from third
parties arising out of the Casualty Loss.
3.11 CONSENTS. If a necessary consent to assign any Lease or other Asset
has not been obtained as of the Closing, then the portion of the Assets for
which such consent has not been obtained shall not be excluded from the Assets
at the Closing, and Sellers shall use their reasonable efforts to, but shall not
be required to, obtain such consent as promptly as possible following Closing.
Buyer shall reasonably cooperate with Sellers in obtaining any required consent
including providing assurances of reasonable financial conditions, but Buyer
shall not be required to expend funds or make any other type of financial
commitments a condition of obtaining such consent.
ARTICLE IV
SELLERS' REPRESENTATIONS AND WARRANTIES
Sellers represent and warrant to Buyer as of the date of this Agreement
those matters set forth in this Article IV and the accompanying schedules. Any
disclosure set forth with respect to a particular section shall be deemed to be
disclosed in reference to all other applicable sections of this Agreement if the
disclosure with respect to a particular section is sufficient on its face
without additional inquiry to inform Buyer of the information required to be
disclosed in respect of the other sections to avoid a breach under the
representation and warranty or covenant corresponding to such other sections.
4.1 ORGANIZATION AND STANDING. Each Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
its organization, and is duly qualified to carry on its business in each state
where failure to be so qualified would have a Material Adverse Effect.
4.2 POWER. Each Seller has the requisite corporate power and authority
to carry on business as presently conducted and to enter into this Agreement.
Except as shown as Schedule 4.2, the execution and delivery of this Agreement
and the fulfillment of and compliance with the terms and conditions hereof will
not violate, or be in conflict with, any material provision of its articles of
incorporation or bylaws or any material provision of any agreement or instrument
to which Seller is a party or by which it is bound.
4.3 AUTHORIZATION AND ENFORCEABILITY. Subject to the approval of this
Agreement by the shareholders of New Intoil, the execution, delivery and
performance of this Agreement and the transactions contemplated hereby have been
duly and validly authorized by all requisite corporate and shareholder action on
each Seller's part. This Agreement constitutes Sellers' legal, valid and binding
obligation, enforceable in accordance with its terms, subject, however, to
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the effects of bankruptcy, insolvency, reorganization, moratorium and other laws
for the protection of creditors, as well as to general principles of equity,
regardless whether such enforceability is considered in a proceeding in equity
or at law. Neither the execution and delivery of this Agreement by Sellers nor
the consummation by Sellers of the transactions contemplated herein nor
compliance by Sellers with any of the provisions hereof will to the Knowledge of
Sellers violate any judgment, ruling, order, writ, injunction, decree, statute,
rule or regulation applicable to the Sellers, or any of the Assets which would
prevent the consummation of the transactions contemplated hereby or reasonably
be expected to have a Material Adverse Effect.
4.4 LIABILITY FOR BROKERS' FEES. The Sellers have not incurred any
liability, contingent or otherwise, for brokers' or finders' fees relating to
the transactions contemplated by this Agreement for which Buyer shall have any
responsibility whatsoever.
4.5 ENVIRONMENTAL MATTERS. Except for such matters that would not
reasonably be expected to have a Material Adverse Effect, and except as set
forth on Schedule 4.5:
(a) To the Knowledge of Sellers, there is no condition existing on
any real property or other asset owned, leased or operated by the Sellers or
resulting from operations conducted thereon that would reasonably be expected to
give rise to any liability to the Sellers under Environmental Laws or constitute
a violation of any Environmental Laws, and the Sellers is otherwise in
compliance with all applicable Environmental Laws.
(b) The Sellers are not subject to any pending or, to the
Knowledge of Sellers, threatened, action, suit, investigation, inquiry or
proceeding relating to any Environmental Laws by or before any Governmental
Authority and related to the Assets.
(c) To the Knowledge of Sellers, all permits, notices and
authorizations, if any, that are necessary for the operation of the Assets have
been duly obtained or filed.
(d) To the Knowledge of Sellers, Hazardous Materials have not been
released, disposed of or arranged to be disposed of by the Seller in relation to
the Assets, in violation of, or in a manner or to a location that would
reasonably be expected to give rise to liability under, any Environmental Laws.
(e) "Environmental Laws" means any and all Laws that relate to:
(a) the prevention of pollution or environmental damage, (b) the remediation of
pollution or environmental damage, and/or (c) the protection of the environment
generally; including without limitation, the Clean Air Act, as amended, the
Clean Water Act, as amended, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Federal Water Pollution
Control Act, as amended, the Resource Conservation and Recovery Act of 1976, as
amended, the Safe Drinking Water Act, as amended, the Toxic Substance and
Control Act, as amended, the Superfund Amendments and Reauthorization Act of
1986, as amended, the Hazardous and the Solid Waste Amendments Act of 1984, as
amended, and the Oil Pollution Act of 1990, as amended.
(f) "Hazardous Substance" means (a) any "hazardous substance," as
defined by the Comprehensive Environmental Response, Compensation and Liability
Act, (b) any
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"hazardous waste," as defined by the Resource Conservation and Recovery Act, or
(c) any pollutant or contaminant or hazardous, dangerous or toxic chemical or
material or any other substance including, but not limited to asbestos, buried
contaminants, regulated chemicals, flammable explosives, radioactive materials
(including without limitation naturally occurring radioactive materials),
polychlorinated biphenyls, regulated by, or that could result in the imposition
of liability under, any Environmental Law or other applicable law of any
applicable governmental authority relating to or imposing liability or standards
of conduct concerning any hazardous, toxic, or dangerous waste, substance or
material, all as amended or hereafter amended.
4.6 NO BANKRUPTCY. There are no bankruptcy proceedings pending, being
contemplated by, or to the Knowledge of Sellers, threatened against Sellers.
4.7 LITIGATION. Sellers have not received written notice of any pending
and has no Knowledge of any threatened, proceeding, action, suit, claim or
investigation before any federal, state or other governmental court, or any
arbitrator, board of arbitration or similar entity involving Seller or the
Assets.
4.8 MATERIAL AGREEMENTS. To Sellers' Knowledge, the agreements that are
material to the ownership or operation of the Assets as of the date of this
Agreement and as of the Effective Time are listed in Schedule 4.8 ("Material
Agreements").
4.9 TAXES. Sellers have timely paid all bills for Taxes submitted by
operators of the Assets. With respect to certain Assets, such Taxes have been
withheld by the operators from the proceeds of production attributable to the
Assets and the operators have assumed the obligation to pay such Taxes. Sellers
have or will have timely paid all Taxes if and when due that could result in a
lien or other claim against any of the Assets, unless contested by appropriate
proceeding. All Assets subject to a tax partnership under Subchapter K of the
Internal Revenue Code of 1986, as amended (the "Code"), are listed on Schedule
4.9.
4.10 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the Effective Time the
Sellers have conducted their businesses only in the ordinary course consistent
with standard industry practice and none of the following has occurred:
(a) Any material transaction by the Sellers;
(b) Any capital expenditure for an individual project in excess of
$100,000 by the Seller, except as set forth on Schedule 4.10(b); provided that
Sellers agree to provide Buyer with a new Schedule 4.10(b) within one week of
this Agreement that sets forth any capital expenditure for any individual
project that exceeds $75,000 by the Sellers;
(c) Any labor matters or other events or conditions of any
character, specifically relating to the Sellers' employees that, when considered
individually or in the aggregate, has had a Material Adverse Effect;
(d) The declaration, setting aside, or payment of a dividend or
other distribution with respect to the capital stock of the Sellers or any other
payment to Sellers'
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shareholders, or any direct or indirect redemption, purchase or other
acquisition by the Sellers of any of their shares of capital stock, except as
otherwise permitted in this Agreement;
(e) Any increase in the salary or other compensation payable or to
become payable (including a conveyance of an overriding royalty or other
interest in the Assets) by either Seller to any of its officers, directors,
employees, or contractors other than in the ordinary course of business, or the
declaration, payment, or commitment or obligation of any kind for the payment by
the Seller of a bonus or other additional salary or compensation to any such
person other than the ordinary course of business;
(f) As of the date of this Agreement, the amendment or
termination, or breach by either Seller, of any contract, agreement, or license
related to the Assets, and which would have a Material Adverse Effect;
(g) Except as set forth on Schedule 4.10(g), as of the date of
this Agreement, any mortgage, pledge or other encumbrance of any Asset that
would have a Material Adverse Effect;
(h) Any other events or conditions of any character within the
Knowledge of Sellers that, when considered individually or in the aggregate,
have had or might reasonably be expected to have a Material Adverse Effect.
(i) Prior to the date of this Agreement, there has been no
Casualty Loss.
4.11 LIENS AND ENCUMBRANCES. To Sellers' Knowledge, the Assets are held
free and clear of any liens, except: (i) liens set forth on Schedule 4.10(g),
(ii) liens securing Company Debt that will be released at Closing, (iii) liens
for current taxes not yet delinquent, (iv) such imperfections of title,
easements, liens, or other matters and failures of title as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, and (v) Permitted Encumbrances.
4.12 LEASES. To the Knowledge of Sellers, there is no event that with
notice or lapse of time, or both, would constitute a material default by either
Seller under any Lease.
4.13 GAS IMBALANCES. To the Knowledge of Sellers, Sellers have no gas
imbalances as of the Effective Time, except as set forth on Schedule 4.13.
4.14 OIL OR GAS CONTRACTS. Except as set forth in Schedule 4.14, the E&P
Properties (and the production therefrom) are not subject to any oil or gas
purchase agreement, sale agreement or similar marketing arrangement not
cancelable on thirty (30) days notice, nor are any of the E&P Properties subject
to any agreements with any affiliates that cannot be terminated immediately upon
Closing without penalty, cost or liability to Buyer.
4.15 NON-CONSENT. Except as set forth in Schedule 4.15, since the
Effective Time, there have been no operations associated with the E&P Properties
under an operating agreement, unit agreement or governmental order with respect
to which either Seller has become a non-consenting party.
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4.16 PRODUCTION TOLERANCES. To Knowledge of Sellers, ▇▇▇▇▇ of Aratex in
the State of Texas are within the production tolerances allocated by the Texas
Railroad Commission to such ▇▇▇▇▇.
4.17 COMPLIANCE WITH LAWS. To Sellers' Knowledge, Sellers are in material
compliance with all laws applicable to the ownership, operation, maintenance or
repair of the E&P Properties, and have not entered into and the Assets are not
subject to any agreements, consent orders, administrative orders or similar
obligations based on a violation or alleged violation of laws.
4.18 FINANCIAL STATEMENTS. The audited consolidated balance sheets of
Intoil, dated as of December 31, 2001 and 2000, the unaudited consolidated
Balance Sheet, the audited consolidated statements of earnings and statements of
cash flow for the 12-month periods ended December 31, 2001 and 2000, and the
unaudited consolidated statement of earnings and statement of cash flow for the
six-month period ended June 30, 2002 (the "Financial Statements"), have been
prepared in accordance with GAAP, consistently applied, and present fairly the
financial condition of Intoil as of such date and the results of operations of
the Sellers for the periods covered thereby (subject to normal year-end
adjustments and the absence of footnotes).
4.19 AUDITS. Except as disclosed in the Schedule 4.19, as of the date of
this Agreement, neither Seller is currently undergoing (i) as operator, any
unresolved audit of the joint account under the applicable joint operating
agreement or (ii) any audits conducted by any Governmental Authority for the
improper payment of or miscalculation of royalties, overriding royalties and/or
taxes attributable to production of Hydrocarbons from and/or ownership of any
oil and gas producing assets. To the knowledge of Sellers, as of the date of
this Agreement, and except as disclosed on Schedule 4.19, there is no pending or
potential material underpayments of any royalty, overriding royalty, or tax
attributable to the production of Hydrocarbons.
4.20 EMPLOYEES. Sellers acknowledge that Buyer has no obligation to
employ any employee previously employed by Sellers and Seller has made no
representation to either Seller's employees concerning employment with Buyer or
continued employment with Seller after the Closing Date.
4.21 ASSETS USED IN BUSINESS. The Seller owns or leases all the Assets,
and the Assets constitute all assets related to the Seller's business of
exploring for and developing oil and natural gas properties including but not
limited to all drilling equipment, intellectual property, inventory, and other
assets related to the Seller's business. All of the material property, plant and
equipment included in the Assets has in all material respects been maintained in
reasonable operating condition and repair, ordinary wear and tear excepted, and
is, in all material respects, sufficient to permit the Seller to operate the
Seller's business of exploring for and developing oil and natural gas properties
and to conduct the Seller's operation of the Assets in the ordinary course of
business in a manner consistent with the Seller's standard industry practices.
4.22 WARRANTIES, INDEMNIFICATION AND REPRESENTATIONS. THE E&P PROPERTIES
HAVE BEEN USED BY THE COMPANY AND EACH COMPANY SUBSIDIARY FOR THE
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PURPOSE OF EXPLORATION, DEVELOPMENT, AND/OR PRODUCTION OF OIL AND GAS. THE
COMPANY AND THE COMPANY SUBSIDIARIES HAVE MADE AVAILABLE TO BUYER PHYSICAL
ACCESS TO THE COMPANY'S AND EACH COMPANY SUBSIDIARY'S PROPERTIES AND, TO
SELLERS' KNOWLEDGE, HAVE DESCRIBED AND DISCLOSED ALL AVAILABLE DOCUMENTATION AND
INFORMATION REGARDING: CRUDE OIL, GAS, PRODUCED WATER, OR HAZARDOUS SUBSTANCES
WHICH HAVE BEEN OR MAY HAVE BEEN SPILLED OR DISPOSED OF ONSITE AND THE LOCATIONS
THEREOF; PIT CLOSURES, BURIAL, LANDFARMING, LANDSPREADING, AND UNDERGROUND
INJECTION; AND SOLID WASTE DISPOSAL SITES, IF ANY EXIST. BUYER ACKNOWLEDGES THAT
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, AND THAT ▇▇▇▇▇,
MATERIALS AND EQUIPMENT LOCATED ON THE REAL PROPERTY MAY CONTAIN NORM. BUYER
ALSO EXPRESSLY UNDERSTANDS THAT SPECIAL PROCEDURES MAY BE REQUIRED FOR THE
REMOVAL AND DISPOSAL OF ASBESTOS AND NORM FROM THE EQUIPMENT AND THE COMPANY'S
PROPERTIES WHERE IT MAY BE FOUND.
EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, SELLERS MAKE NO REPRESENTATION OR
WARRANTY, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, WITH RESPECT TO THE ACCURACY
OR COMPLETENESS OF DATA, REPORTS, OR MATERIALS NOT INCLUDED IN THIS AGREEMENT OR
THE SCHEDULES ATTACHED HERETO, OR ANY PROJECTIONS, ESTIMATES OR BUDGETS
DELIVERED TO OR MADE AVAILABLE TO BUYER OF FUTURE REVENUES, FUTURE RESULTS OF
OPERATIONS (OR ANY COMPONENT THEREOF, INCLUDING THE PRICE, QUALITY OR QUANTITY
OF HYDROCARBON RESERVES), FUTURE CASH FLOWS OR FUTURE FINANCIAL CONDITION (OR
ANY COMPONENT THEREOF) OF THE COMPANY OR COMPANY SUBSIDIARIES OR THE FUTURE
BUSINESS AND OPERATIONS OF THE COMPANY OR COMPANY SUBSIDIARIES.
ARTICLE V
BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer makes the following representations and warranties:
5.1 ORGANIZATION AND STANDING. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is duly qualified to carry on its business in each state where failure to so
qualify would have a Material Adverse Effect on Buyer or Buyer's ability to
consummate the transactions contemplated by this Agreement.
5.2 POWER. Buyer has the requisite corporate power and authority to
carry on its business as presently conducted and to enter into this Agreement.
The execution and delivery of this Agreement and consummation of the
transactions contemplated hereby and the fulfillment of
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and compliance with the terms and conditions hereof will not violate, or be in
conflict with, any material provision of its articles of incorporation or bylaws
or any material provision of any agreement or instrument to which it is a party
or by which it is bound.
5.3 AUTHORIZATION AND ENFORCEABILITY. The execution, delivery and
performance of this Agreement have been duly and validly authorized by all
requisite action on its part. This Agreement constitutes its legal, valid and
binding obligation, enforceable in accordance with its terms, subject, however,
to the effects of bankruptcy, insolvency, reorganization, moratorium and similar
laws for the protection of creditors, as well as to general principles of
equity, regardless whether such enforceability is considered in a proceeding in
equity or at law.
5.4 LIABILITY FOR BROKERS' FEES. Buyer has not incurred any liability,
contingent or otherwise, for brokers' or finders' fees relating to the
transactions contemplated by this Agreement for which Sellers shall have any
responsibility whatsoever.
5.5 LITIGATION. There is no action, suit, proceeding, claim or
investigation by any person, entity, administrative agency or governmental body
pending or, to its Knowledge, threatened, against it before any governmental
authority that impedes or is likely to impede its ability to consummate the
transactions contemplated by this Agreement.
5.6 FINANCIAL RESOURCES. Buyer has, or will have prior to the Closing,
sufficient cash, available lines of credit or other sources of immediately
available funds to enable it to make payment of the aggregate Purchase Price.
5.7 INDEPENDENT EVALUATION. Buyer is experienced and knowledgeable in
the oil and gas business and is aware of its risks. Buyer has been afforded the
opportunity to examine the Background Materials. Buyer acknowledges and agrees
that Sellers, their representatives, agents, and employees have made no
representations or warranties, express or implied, written or oral, as to the
accuracy or completeness of the Background Materials or any other information
relating to the Assets or Assumed Liabilities furnished by or on behalf of
Sellers, their representatives, agents, and employees or to be furnished to
Buyer or its representatives, except as expressly set fort in this Agreement. In
entering into this Agreement, Buyer acknowledges and affirms that it has relied
and will rely solely upon its independent analysis, evaluation and investigation
of, and judgment with respect to, the business, economic, legal, tax or other
consequences of this transaction including its own estimate and appraisal of the
extent and value of the petroleum, natural gas and other reserves included in
the Assets, except as expressly set fort in this Agreement. Buyer will undertake
prior to closing such further investigation and request additional documents as
it deems necessary. Neither Sellers nor their agents, representatives or
employees shall have any liability to Buyer or its agents, representatives or
employees resulting from any use, authorized or unauthorized, of the Background
Materials or other information relating to the Assets or Assumed Liabilities
provided by or on behalf of Sellers or their agents, representatives or
employees.
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ARTICLE VI
COVENANTS AND AGREEMENTS
6.1 COVENANTS AND AGREEMENTS OF SELLERS. Sellers covenant and agree with
Buyer as follows:
(a) Operations Prior to Closing.
(1) Operations. Except as otherwise consented to in writing
by Buyer or provided in this Agreement, from the date of execution hereof
to the Closing, Sellers shall use reasonable efforts, or shall use
reasonable efforts to cause any third-party operator of the Assets, to
maintain and operate the Assets in a good and workmanlike manner
consistent with standard industry practices. Sellers shall pay or cause to
be paid its proportionate share of all costs and expenses incurred in
connection with such operations. To the extent Sellers receive written
AFEs or actual notice of such, Sellers shall notify Buyer within
twenty-four (24) hours of receipt of such notice of ongoing activities and
major capital expenditures in excess of $75,000 per activity net to
Sellers' interest conducted on the producing E&P Properties and shall not
approve or participate in any such activities without written consent from
Buyer. Buyer shall provide to Sellers Buyer's approval or notice of
disapproval no later than twenty-four (24) hours prior to the time
Sellers' response is due pursuant to such AFE. Buyer's failure to provide
such notice shall be deemed to be approval of the AFE.
(2) Restrictions. Subject to subsection (1), unless Sellers
obtain the prior written consent of Buyer to act otherwise, Sellers will
use good faith efforts within the provisions of the applicable operating
agreements and other applicable agreements, or cause any third-party
operator of the Assets to use good faith efforts, not to (i) abandon any
part of the Assets (except in the ordinary course of business or the
abandonment of leases upon the expiration of their respective primary
terms or if not capable of production in paying quantities), (ii) approve
any operations on the properties anticipated in any instance to cost the
owner of the Assets more than $75,000 per activity net to Sellers'
interest (excepting emergency operations, operations required under
presently existing contractual obligations, ongoing commitments under
existing AFE's and operations undertaken to avoid a monetary penalty or
forfeiture provision of any applicable agreement or order), (iii) convey
or dispose of any material part of the Assets (other than replacement of
equipment or sale of oil, gas, and other liquid products produced from the
Assets in the regular course of business) or enter into any farmout,
farmin or other similar contract affecting the Assets if the net expense
to Sellers' interest will be in excess of $75,000, (iv) let lapse any
insurance now in force with respect to the Assets, (vi) materially modify
or terminate any Material Agreements, or (vii) declare, set aside or pay
any dividend or other distribution in respect of capital stock of the
Sellers or any other payment to Sellers' shareholders. Notwithstanding the
immediately preceding sentence, with respect to any Asset owned by Sellers
not subject to an operating agreement, unless Sellers obtain the prior
written consent from Buyer to act otherwise, Sellers will not convey or
dispose of all or any portion of the Leases, ▇▇▇▇▇, or other Asset (except
lease terminations or expirations triggered by the passage of time) or
enter
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into any farmout, farmin or similar contract affecting such undeveloped
acreage owned by Sellers.
(3) Marketing. Unless Sellers obtain the prior written
consent of Buyer to act otherwise, Sellers will not amend any existing
marketing contracts currently in existence, or enter into any new
marketing contracts or agreements providing for the sale of Hydrocarbons
for a term in excess of 30 days.
(b) Organizational Status. Sellers shall use their reasonable
efforts to maintain its organizational status from the date hereof until the
Closing and to assure that as of the Closing Date it will not be under any
material corporate, legal or contractual restriction that would prohibit or
delay the timely consummation of the transactions contemplated by this
Agreement.
(c) Notices of Claims. Sellers shall promptly notify Buyer, if,
between the date of this Agreement and the Closing Date, Sellers receive written
notice of any material Claim.
(d) Compliance with Laws. During the period from the date of this
Agreement to the Closing Date, Sellers shall attempt in good faith to comply in
all material respects with all applicable statutes, ordinances, rules,
regulations and orders relating to the ownership and operation of the Assets.
(e) Insurance. During the period from the date of this Agreement
to the Closing Date, Sellers shall maintain its insurance as such insurance is
now in force with respect to the Assets. Furthermore, Sellers shall purchase an
extension of its Directors' and Officers' insurance policy, a copy of which is
attached as Exhibit F, for a period of one year following the Closing Date for
coverage of employment practices and liability claims.
(f) Books and Records. During the period from the date of this
Agreement to the Closing Date, Sellers shall maintain the books and records
related to the Assets in a manner consistent with past practices.
(g) Preferential Rights. Commencing promptly after the date of
this Agreement and continuing to the Closing Date, Sellers shall provide notice
to all third parties that have or may have a preferential right to purchase some
portion of the Assets. Sellers shall provide all information necessary to comply
with the notice and other provisions of the applicable contract in which the
preferential right is contained, and shall advise Buyer, no later than ten days
prior to the Closing Date, of the status of each preferential right.
(h) Consents to Transfer. Commencing promptly after the date of
this Agreement and continuing to the Closing Date, Sellers shall use their
reasonable efforts to secure any consents necessary from third parties for the
transfer or assignment of any Asset to Buyer.
(i) Access to Confidential Information. During the period from the
date of this Agreement to the Closing Date, Sellers shall give their consent to
Buyer's potential lenders' access to the Reserve Report and other evaluation
material, and shall use reasonable efforts to
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secure such consents from third parties, subject to the execution of appropriate
confidentiality agreements by the potential lenders.
6.2 COVENANTS AND AGREEMENTS OF BUYER. Buyer covenants and agrees with
Sellers that:
(a) Organizational Status. Buyer shall maintain its organizational
status from the date hereof until the post-Closing adjustment, and assure that
as of the Closing Date it will not be under any material corporate, legal or
contractual restriction that would prohibit or delay the timely consummation of
the transaction contemplated hereby.
(b) Bonding; Insurance. On or before five Business Days prior to
Closing, Buyer shall provide evidence to Sellers that Buyer has arranged to have
in place, to be effective at Closing and relating to the ownership of the Assets
after the Closing (i) all necessary state, federal, tribal and local bonds and
(ii) insurance as is reasonable and customary in the industry.
6.3 FILINGS; OTHER ACTION. Subject to the terms and conditions herein
provided Buyer and Sellers shall and shall cause any appropriate other party to:
(a) use all reasonable efforts to cooperate with one another in (i) determining
which filings are required to be made prior to the Closing with, and which
consents, approvals, permits, or authorizations are required to be obtained
prior to the Closing from any Governmental Authority, in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, and (ii) timely making all such filings and
timely seeking all such consents, approvals, permits, or authorizations; and (b)
use all reasonable efforts to take, or cause to be taken, all other action and
do, or cause to be done, all other things necessary, proper, or appropriate to
consummate and make effective the transactions contemplated by this Agreement.
6.4 ACCESS TO INFORMATION.
(a) Subject to the terms of the Confidentiality Agreement and the
Indemnity Agreement, the Sellers shall, and shall cause officers of Seller to,
afford the officers and directors of Buyer complete access at all reasonable
times from the date hereof through the Closing to Seller's officers, key
employees, properties, facilities, books, records and contracts and shall
furnish Buyer all financial, operating and other data and information regarding
the Assets, as Buyer through its officers, employees or agents, may reasonably
request in a form that Buyer may reasonably request, including data required for
Buyer to operate the Assets after Closing; provided there is no material cost to
or effort required by Sellers to furnish such information.
(b) Without limiting the provisions of Section 6.4(a), Sellers
shall (i) deliver to Buyer on or before November 20, 2002, a full set of
financial statements prepared on a consistent basis, in accordance with GAAP,
for the nine month period ending September 30, 2002, (ii) make available to the
Buyer access to sufficient financial and accounting information and records to
enable the Buyer to work forward all balances of the Sellers, from September 30,
2002 to the date of the Closing, (iii) make available to the Buyer access to the
books and records of the Sellers so that the Buyer may perform reasonable due
diligence procedures on the Balance Sheet and the results of operations for the
six month period then ended and to verify the compliance of those financial
statements with GAAP, (iv) make available to the Buyer access to
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sufficient financial and accounting information and records to enable the Buyer
to work forward all balances of the Sellers, from June 30, 2002 to September 30,
2002, (v) permit Buyer to confirm cash balances directly to the Sellers'
bank(s), (vi) permit Buyer to confirm debt balances and debt covenant compliance
directly to the bank(s), (vii) subject to prior approval by Sellers of any
communication initiated by Buyer, which approval shall not be unreasonably
withheld, permit Buyer to confirm balances of amounts owing at both June 30,
2002 and September 30, 2002 directly with Sellers' vendors, and (viii) subject
to prior approval by Sellers of any communication initiated by Buyer, which
approval shall not be unreasonably withheld, permit Buyer to confirm accounts
receivable balances at both June 30, 2002 and September 30, 2002 directly with
sales customers.
6.5 NOTICE OF INACCURATE INFORMATION. Seller and Buyer each will notify
the other in writing as soon as possible of any events or occurrences that have
happened or that are reasonable foreseeable and that have caused or that are
reasonable foreseeable to cause any of the information contained in this
Agreement or in the Schedules to this Agreement to become inaccurate or
incomplete.
6.6 ACCESS TO EMPLOYEES. From the date of this Agreement until the
Closing, Sellers shall allow Buyer to interview Sellers' employees for the
purpose of determining, in Buyer's sole discretion, whether to employ such
employees after the Closing. Sellers shall cooperate with Buyer's request, if
any, regarding the transition of employees from employment with Sellers to
employment with Buyer.
6.7 TERMINATION OF SELLERS' EMPLOYEES. To the extent consistent with
applicable law, Sellers shall take such steps as required to (i) terminate the
employment by Sellers of all of Sellers' employees as of the Closing Date, (ii)
pay to all such employees such severance payments and related benefits to which
such employees may be entitled, (iii) use reasonable efforts to secure from all
employees a signed release, waiving any claims that an employee might have
against either Seller.
ARTICLE VII
TAX MATTERS
7.1 TAX REPORTS AND RETURNS. For the Tax period in which the Effective
Time occurs, Sellers agree to immediately forward to Buyer any such Tax reports
and returns received by Sellers after Closing and provide Buyer with appropriate
information which is necessary for Buyer to file any required Tax reports and
returns. Buyer agrees to file all Tax returns and reports applicable to the
Assets that Buyer is required to file after the Closing, pay all required Taxes
payable with respect to the Assets and indemnify Seller against liability for
the payment of Taxes and the filing of Tax returns (except for income tax
returns of Sellers) or reports, provided, however, that Sellers shall be
responsible for and pay when due income taxes of Sellers arising from the
operation of the Assets through the Closing Date and from the sale of the
Assets.
7.2 SALES TAXES. Buyer shall be liable for and shall indemnify Sellers
for, any sales and use taxes, conveyance, transfer and recording fees and real
estate transfer stamps or taxes that may be imposed on any transfer of the
Assets pursuant to this Agreement.
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ARTICLE VIII
CONDITIONS TO CLOSING
8.1 SELLERS' CONDITIONS. The obligations of Sellers at the Closing are
subject, at the option of Sellers, to the satisfaction at or prior to the
Closing of the following conditions:
(a) The shareholders of New Intoil shall have approved the
transactions contemplated by this Agreement;
(b) Buyer shall have performed in all material respects its
obligations contained in this Agreement required to be performed on or prior to
the Closing Date, the representations and warranties of Buyer contained in this
Agreement and in any document delivered in connection herewith shall be true and
correct in all material respects (except for such representations and warranties
that are qualified by material, materiality or similar words, which shall be
true and correct) as if made on the Closing Date (or to the extent that any such
representation or warranty is expressly made as of another specified date, the
same shall be true and correct, or true and correct in all material respects, as
applicable, as of such specified date), and Sellers shall have received a
certificate of the President or a Vice President of Buyer, dated the Closing
Date certifying to such effect in the form attached as Exhibit D-1; and
(c) No order shall have been entered by any court or governmental
agency having jurisdiction over the parties or the subject matter of this
Agreement that restrains or prohibits the purchase and sale contemplated by this
Agreement and which remains in effect at the time of Closing.
(d) Sellers shall have received an opinion of Buyer's Counsel
substantially in the form attached as Exhibit I.
8.2 BUYER'S CONDITIONS. The obligations of Buyer at the Closing are
subject, at the option of Buyer, to the satisfaction at or prior to the Closing
of the following conditions:
(a) Sellers shall have performed in all material respects their
obligations contained in this Agreement required to be performed on or prior to
the Closing Date, the representations and warranties of Sellers contained in
this Agreement and in any document delivered in connection herewith shall be
true and correct in all material respects (except for such representations and
warranties that are qualified by material, materiality or similar words, which
shall be true and correct) as of the Closing Date as if made on the Closing Date
(or to the extent that any such representation or warranty is expressly made as
of another specified date, the same shall be true and correct, or true and
correct in all material respects, as applicable, as of such specified date), and
Buyer shall have received a certificate of the President or a Vice President of
Sellers, dated the Closing Date, certifying to such effect in the form attached
as Exhibit D-2; and
(b) No order shall have been entered by any court or governmental
agency having jurisdiction over the parties or the subject matter of this
Agreement that restrains or prohibits the purchase and sale contemplated by this
Agreement and which remains in effect at the time of Closing.
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(c) Buyer shall have received an opinion of Sellers' Counsel
substantially in the form attached as Exhibit J.
(d) Buyer shall have received a proposed Settlement Statement no
later than nine (9) days prior to the Closing Date reflecting the applicable
party's Purchase Price Adjustments as of the date of Sellers' delivery of such
statement.
ARTICLE IX
TERMINATION
9.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated at
any time prior to the Closing Date, by the mutual consent of Buyer and Sellers.
9.2 TERMINATION BY SELLERS. This Agreement may be terminated at any time
prior to the Closing Date by action of the board of directors of Sellers (i) if
all conditions to Closing set forth in Sections 8.1 of this Agreement shall not
have been waived or satisfied by December 23, 2002 (the "Outside Closing Date");
provided that Sellers shall not be in breach in any material respect of their
obligations under this Agreement, (ii) if the aggregate of adjustments to the
Purchase Price for Title Defects pursuant to Section 3.6 are equal to or greater
than $750,000, or (iii) if the aggregate of adjustments to the Purchase Price
for Environmental Breaches pursuant to Section 3.7 are equal or greater than
$750,000.
9.3 TERMINATION BY BUYER. This Agreement may be terminated at any time
prior to the Closing Date, by action of the board of directors of Buyer (i) if
all conditions to Closing set forth in Section 8.2 hereof shall not have been
waived or satisfied by the Outside Closing Date; provided that Buyer shall not
be in breach in any material respect of its obligations under this Agreement,
(ii) if the aggregate of adjustments to the Purchase Price for Title Defects
pursuant to Section 3.6 are equal to or greater than $750,000, or (iii) if the
aggregate of adjustments to the Purchase Price for Environmental Breaches
pursuant to Section 3.7 are equal or greater than $750,000.
9.4 EFFECT OF TERMINATION AND ABANDONMENT. Subject to (a), (b), (c) and
(d) of this Section 9.4, if this Agreement is terminated pursuant to this
Article IX, all obligations of the parties hereto shall terminate.
(a) If all of the conditions of Sections 8.2 have been waived by
Buyer or satisfied, Sellers are not in breach in any material respect of its
obligations under this Agreement, and Buyer fails or refuses to consummate the
transactions contemplated by this Agreement, then Sellers shall, in addition to
any and all remedies available to them in law or in equity as a result of such
failure or refusal, receive the Deposit pursuant to the Escrow Agreement. If
pursued, such election to receive the Deposit and any actual damages incurred
shall be Sellers' sole remedy.
(b) If all of the conditions of Section 8.1 have been waived by
Sellers or satisfied, Buyer is not in breach in any material respect of its
obligations under this Agreement, and Sellers fails or refuses to consummate the
transactions contemplated by this Agreement, then
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Sellers shall immediately instruct the Escrow Agent to return the Deposit to
Buyer, with all accrued interest, and Buyer may elect to seek any and all
remedies available to it in law or equity as a result of such failure or
refusal.
(c) If the parties mutually agree to terminate this Agreement
pursuant to Section 9.1 or if (ii) Buyer is not in breach in any material
respect of its obligations under this Agreement and (x) Buyer elects to
terminate this Agreement pursuant to Section 9.3, or (y) Sellers elects to
terminate this Agreement pursuant to Section 9.2, then Buyer shall be entitled
to a distribution of the Deposit and all interest earned thereon from the Escrow
Agent.
(d) Except as set forth in (a) and (b) of this Section 9.4, if
this Agreement is terminated as permitted in Section 9.2 or 9.3 and such
termination results from the willful (i) failure to perform a material covenant
of this Agreement or (ii) breach by either party hereto of any material
representation or warranty contained in this Agreement, then such party shall be
fully liable for any and all damage, loss, liability and expense (including,
without limitation, reasonable attorneys' fees and expenses) incurred or
suffered by the other party as a result of such failure or breach.
9.5 EXTENSION; WAIVER. At any time prior to the Closing Date, any party
to this Agreement may (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any inaccuracies
in the representations and warranties made to such party contained herein or in
any document delivered pursuant to this Agreement, and (c) waive compliance with
any of the agreements or conditions for the benefit of such party contained in
this Agreement. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
ARTICLE X
SURVIVAL
10.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The parties
hereto agree that none of their respective representations, warranties contained
in this Agreement shall survive after the Closing Date, and that only those
covenants that by their express terms survive the Closing shall survive after
the Closing Date.
ARTICLE XI
CLOSING
11.1 THE CLOSING. Subject to the terms and conditions of this Agreement,
the closing of the transactions contemplated by this Agreement (the "Closing")
shall take place at the offices of ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP at ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m., local time, on December
16, 2002 or at such other time, date, or place as the parties may agree. The
date on which the Closing occurs is hereinafter referred to as the "Closing
Date."
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11.2 CLOSING OBLIGATIONS. At Closing, the following events shall occur,
each being a condition precedent to the others and each being deemed to have
occurred simultaneously with the others:
(a) Sellers shall execute, acknowledge and deliver to Buyer
assignments, bills of sale and conveyances of the Assets, effective as of the
Effective Time to Buyer (in sufficient counterparts to facilitate filing and
recording) as follows:
(1) substantially in the form of Exhibit E-1 conveying the
E&P Properties listed on Exhibit A, with a special warranty of title
by, through and under Sellers but not otherwise and with no warranties,
express or implied, as to the personal property and fixtures, which are
conveyed "as is, where is."
(2) such other assignments, bills of sale, or deeds
necessary to transfer the Assets to Buyer, including an Assignment and
Assumption Agreement substantially in the form attached as Exhibit E-2,
and also including without limitation any conveyances on official forms
of the Bureau of Land Management and each State in which the E&P
Properties are located and related documentation necessary to transfer
the Assets to Buyer in accordance with requirements of governmental
regulations (collectively, the "Conveyances");
(3) Sellers and Buyer shall execute the assignment of the
Office Lease;
(b) Sellers and Buyer shall execute and deliver the Settlement
Statement;
(c) Buyer shall deliver to Sellers the Closing Amount by wire
transfer in immediately available funds, or by such other method as may be
agreed to by the parties hereto;
(d) Sellers shall deliver to Buyer possession of the Assets;
(e) Buyer shall deliver to Sellers evidence of appropriate State,
federal, tribal and local bonds relating to ownership of the Assets after the
Closing and certificates of insurance evidencing that Buyer has obtained
appropriate insurance covering the Assets;
(f) Sellers shall deliver to Buyer a certificate substantiating
its non-foreign status in accordance with Treasury Regulations under Section
1445 of the Code, in the form of Exhibit G ("FIRPTA Certificate");
(g) Sellers shall deliver to the purchasers of Sellers'
Hydrocarbons, letters in lieu of transfer orders, stating that proceeds from
such sales of the Hydrocarbons shall be distributed to Buyer after the Effective
Time (the "Letters in Lieu"). Such Letters in Lieu shall be in the form of
Exhibit H.
(h) Buyer shall deliver to Sellers the opinion described in
Section 8.1(d);
(i) Sellers shall deliver to Buyer the opinion described in
Section 8.2(c).
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(j) Sellers shall deliver proof of insurance coverage for
Employment Practices and Liability Insurance for claims against Sellers for a
one-year period after the Closing Date.
(k) Seller shall deliver to Buyer releases of the liens on the
Assets securing the Company Debt.
ARTICLE XII
POST-CLOSING OBLIGATIONS
12.1 RECORDS. At and after the Closing Date, Sellers shall make the
Records available for pick up by Buyer. Sellers may retain copies of the Records
and Sellers shall have the right to review and copy the Records during business
hours upon reasonable notice to Buyer. Buyer agrees not to destroy or otherwise
dispose of the Records for a period of six years after the Closing without
giving Sellers reasonable notice and an opportunity to copy said Records.
12.2 ADDITIONAL PROCEEDS. From and after the Closing, promptly after
receipt thereof, but only to the extent that such proceeds shall not have been
the subject of an adjustment to the Purchase Price, (i) Seller agrees to pay
promptly to Buyer any and all proceeds received by Seller that are attributable
to the production of Hydrocarbons from the Assets on or after the Effective Time
and (ii) Buyer agrees to pay to Seller any and all proceeds that are
attributable to the production of Hydrocarbons from the Assets prior to the
Effective Time including any of such proceeds that were held in suspense by the
purchasers of production. All such payments to be made to Buyer shall include
the royalty or mineral owners' share of production which may be received by
Sellers and which is not distributed to the royalty or mineral owner because of
title defect or other similar reasons, and Buyer shall indemnify Seller against
any claim by such owner arising out of the distribution or improper payment of
such proceeds.
12.3 FURTHER ASSURANCES. From time to time after Closing, Sellers and
Buyer shall each execute, acknowledge and deliver to the other such further
instruments and take such other action as may be reasonably requested in order
more effectively to assure to the Buyer the full ownership, beneficial use and
enjoyment of the Assets and otherwise to accomplish the purposes of the
transactions contemplated by this Agreement. From and after the Closing, Buyer
shall have the right and authority to collect for its account all items to which
it is entitled as provided in this Agreement and to endorse with the name of
either Seller any checks or drafts received on account of any such items.
Sellers shall provide to Buyer a mailing list showing mail accounts that shall
be forwarded to Sellers new post office box after the date of the Closing.
12.4 PURCHASE PRICE ALLOCATION - FORM 8594. Sellers and Buyer shall
jointly prepare Internal Revenue Service Form 8594 consistently with the
Purchase Price allocation set forth in Section 3.4.
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ARTICLE XIII
GENERAL PROVISIONS
13.1 NOTICES. Any notice required to be given hereunder shall be
sufficient if in writing, and sent by facsimile transmission and by same day or
overnight courier service (with proof of service), hand delivery or certified or
registered mail (return receipt requested and first-class postage prepaid),
addressed as follows:
If to Buyer: If to the Sellers:
▇▇▇▇ ▇▇▇▇▇▇▇ Corporation Intoil, Inc. and Aratex Production Company
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ P.O. Box 3438
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Mr. J. ▇▇▇▇▇ ▇▇▇▇▇▇ USA
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Attention: ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to (which copies shall not With copies to (which copies shall not
constitute notice): constitute notice):
▇▇▇▇▇▇ ▇▇▇▇▇ LLP ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇ Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered, or delivered by courier or on the third
day after the mailing thereof.
13.2 ASSIGNMENT, BINDING EFFECT. Neither this Agreement nor any of the
rights, interests, or obligations, hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto and certain stockholders of the Company and other named beneficiaries of
covenants or agreements in the Agreement, or their respective heirs, successors,
executors, administrators, and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement.
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13.3 ENTIRE AGREEMENT. This Agreement, the confidentiality agreements
between the parties hereto and any schedules or agreements delivered in
connection with this Agreement constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto. The Confidentiality
Agreement shall remain in full force and effect until the consummation of the
transactions contemplated by this Agreement, or until it terminates pursuant to
its terms, whichever shall occur first. No information previously provided,
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
13.4 AMENDMENT. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
13.5 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the law of the State of Colorado, without regard to its rules of
conflict of laws. Subject to Section 13.11, forum and venue shall be exclusively
in state and federal court in Denver, Colorado.
13.6 COUNTERPARTS. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
Executed counterparts transmitted by facsimile shall be effective as originals;
provided originals of the executed counterparts are promptly delivered to the
other party.
13.7 HEADINGS. Headings of the Articles and Sections of this Agreement
are for the convenience of the parties only, and shall be given no substantive
or interpretive effect whatsoever.
13.8 INTERPRETATION. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
13.9 WAIVERS. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
13.10 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction unless the same is
material to the terms of this Agreement, in the judgment of either party to this
Agreement, in which case the parties shall
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negotiate in good faith to revise the same so as to be valid or enforceable. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
13.11 ARBITRATION. Subject to Section 3.8, any dispute between the parties
shall be resolved by binding arbitration in Denver, Colorado in accordance with
the following provisions; provided, however, that either party may seek
injunctive relief to preserve the status quo pending arbitration.
(a) Any party may submit any dispute to arbitration by giving
written notice to the other parties to such dispute. Within ten Business Days
after receipt of such notice, each party to the dispute shall appoint one
arbitrator and within ten Business Days thereafter the two arbitrators so
appointed shall select a third arbitrator. If either party shall fail to make
such appointment within such ten-day period, the other party may request the
American Arbitration Association to appoint the second arbitrator. The American
Arbitration Association may thereupon appoint the second arbitrator. If the two
appointed arbitrators shall fail to select the third arbitrator within such
ten-day period, the parties to the dispute shall mutually select the third
arbitrator. If such parties are unable to agree upon such selection, then any
party may, upon at least five Business Days' prior written notice to the other
party, request the American Arbitration Association to appoint the third
arbitrator. The American Arbitration Association may thereupon appoint the third
arbitrator ("Third Arbitrator"). The Third Arbitrator shall be experienced in
corporate and financial matters and shall be impartial and unrelated, directly
or indirectly, so far as employment of services is concerned to either of the
parties or any of their respective affiliates; provided that, to the extent
concern matters of (i) oil and gas law, geology, and/or petroleum engineering
and/or (ii) environmental law and/or environmental science, then the Third
Arbitrator must be trained and knowledgeable in such matters.
(b) The Third Arbitrator shall investigate the facts and shall
hold hearings at which the parties may conduct limited discovery, present
evidence and arguments, be represented by counsel and conduct cross examination.
The Third Arbitrator shall render a written decision on the matter presented to
him or her as soon as practicable after his or her appointment and in any event
not more than forty-five days after such appointment. The decision of the Third
Arbitrator, which may include equitable relief, shall be final and binding on
the parties hereto, and judgment upon the decision may be entered in any court
having jurisdiction thereof. If the Third Arbitrator shall fail to render a
decision within such forty-five day period, either party may institute such
action or proceeding in such court as shall be appropriate in the circumstances
and upon the institution of such action, the arbitration proceeding shall be
terminated and shall be of no further force and effect. The prevailing party (in
the arbitration or in the court proceeding, as applicable) shall be awarded
reasonable attorneys' fees, expert and nonexpert witness costs and expenses, and
other costs and expenses incurred in connection with the arbitration, and the
fees and costs of the Third Arbitrator shall be borne by the nonprevailing party
unless, in either case, the Third Arbitrator or the court, as the case may be
for good cause determine otherwise. In resolving any dispute, the Third
Arbitrator shall apply the provisions of this Agreement, without varying
therefrom in any respect. The Third Arbitrator shall not have the power to add
to, modify or change any of the provisions of this Agreement.
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(c) Expedited Arbitration. Subject to Section 3.8:
(1) A demand for arbitration shall be filed with the Denver
office of the American Arbitration Association ("AAA").
(2) The parties shall attempt to select a mutually
acceptable arbitrator. If the parties are unable to agree concerning the
selection of an arbitrator within three (3) days of the respondent's
receipt of the demand for arbitration, any party may notify AAA that the
parties are unable to agree, and shall simultaneously provide a copy of
its notice to all other parties. Within five (5) Business Days of AAA's
receipt of notice from the parties that they are unable to agree to an
arbitrator, AAA shall select an arbitrator.
(3) Within three (3) days of receipt of written notice
confirming the selection of the arbitrator, each party may submit to the
arbitrator a written brief in support of its position no longer than five
(5) pages, single spaced, on 8 1/2 by 11, with no more than twenty (20)
pages of exhibits.
(4) The arbitrator shall follow applicable law and
precedent.
(5) If the written briefs of both parties present one or
more questions of law and no genuine issue as to any material fact, the
arbitrator shall decide the dispute based solely upon the written
submissions of the parties. If the arbitrator determines that there is a
genuine concerning one or more material facts, the arbitrator may: (a)
make a single request that the parties submit additional information or
briefing within five (5) days of the arbitrator's request and/or (b)
schedule a hearing to be held no later than five (5) Business Days after
(i) the notice scheduling the hearing, if no additional information or
briefing is requested, or (ii) the last date permitted for the submission
of additional information or briefs, if applicable. Any hearing shall be
limited to two (2) days, unless otherwise agreed by the parties.
(6) The arbitrator shall render a decision within five (5)
Business Days after the latest of: (a) the arbitrator's receipt of the
written submissions of the parties; (b) the arbitrator's receipt of
additional information or briefing requested by the arbitrator, if
applicable; or (c) the conclusion of a hearing, if applicable. The
arbitrator need not provide a written rationale for his or her decision.
(7) There shall be no appeal from the decision of the
arbitrator, and the decision shall be enforceable in any court with
jurisdiction.
(d) Each party shall bear its own attorneys' fees and costs and
shall bear one-half of the AAA and arbitrator's fees and costs with
respect to any Arbitration.
13.12 PUBLIC STATEMENTS. All public statements concerning this Agreement
and the transactions contemplated pursuant to this agreement shall be made only
upon the mutual consent of Buyer and Sellers, which consent shall not be
unreasonably withheld.
[ SIGNATURE PAGE FOLLOWS ]
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IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be duly delivered on their behalf on the date first written above.
BUYER
▇▇▇▇ ▇▇▇▇▇▇▇ CORPORATION
By: /s/ ▇.▇. ▇▇▇▇▇▇
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Name: ▇.▇. ▇▇▇▇▇▇
Title: Chief Operating Officer
SELLERS
INTOIL, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
ARATEX PRODUCTION COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
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