EXHIBIT 10.1
PURCHASE AND SALE AGREEMENT
BETWEEN
CONOCO INC.
AND
SOUTHWEST ROYALTIES, INC.
1997 NORTH AMERICAN PROPERTY OFFERING
PERMIAN BASIN PACKAGE
PURCHASE AND SALE AGREEMENT
TABLE OF CONTENTS
INDEX OF DEFINED TERMS -iv-
RECITALS 1
ARTICLE 1. PROPERTY DESCRIPTION 1
1.1 The Property 1
1.2 Exclusions from the Property 2
1.3 Ownership of Production from the Property 4
ARTICLE 2. CONSIDERATION 5
2.1 Purchase Price 5
2.2 Adjustments at Closing 5
2.3 Adjustments after Closing 6
2.4 Payment Method 7
2.5 Principles of Accounting 7
2.6 Reporting Value of the Property 7
2.7 Section 1031 Exchange 7
ARTICLE 3. REPRESENTATIONS AND WARRANTIES 8
3.1 Reciprocal Representations and Warranties 8
3.2 ASSIGNOR's Representations and Warranties 8
3.3 ASSIGNEE's Representations and Warranties 9
3.4 Notice of Changes 10
3.5 Representations and Warranties Exclusive 10
ARTICLE 4. DISCLAIMER OF WARRANTIES 10
4.1 Title; Encumbrances 10
4.2 Condition and Fitness of the Property 10
4.3 Information About the Property 10
4.4 Subrogation of Warranties 11
ARTICLE 5. DUE DILIGENCE REVIEW OF THE PROPERTY 11
5.1 Records Review 11
5.2 Physical Inspection 11
5.3 Environmental Assessment 11
5.4 Government Approvals 13
5.5 Preferential Rights and Consents to Assign 14
5.6 Title Defects 15
5.7 Casualty Losses and Government Takings 17
5.8 Termination Due to Impairments to the Property 18
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ARTICLE 6. CLOSING AND POST-CLOSING OBLIGATIONS 18
6.1 Closing Date 18
6.2 Conditions to Closing 18
6.3 Closing 19
6.4 Post-Closing Obligations 20
ARTICLE 7. ASSUMED AND RETAINED RIGHTS AND OBLIGATIONS 20
7.1 ASSIGNEE's Rights After Closing 20
7.2 ASSIGNEE's Obligations After Closing 20
7.3 ASSIGNOR's Obligations After Closing 21
7.4 Plugging and Abandonment Obligations 22
7.5 Environmental Obligations 23
ARTICLE 8. INDEMNITIES 24
8.1 Definition of Claims 24
8.2 Application of Indemnities 25
8.3 ASSIGNEE's Indemnity 25
8.4 ASSIGNOR's Indemnity 26
8.5 Notices and Defense of Indemnified Claims 26
8.6 ASSIGNOR's Indemnity Limit 26
8.7 NORM 26
8.8 Pending Litigation and Claims 26
8.9 Waiver of Consequential and Punitive Damages 27
ARTICLE 9. TAXES AND EXPENSES 27
9.1 Recording Expenses 27
9.2 Ad Valorem, Real Property and Personal Property Taxes 27
9.3 Severance Taxes 27
9.4 Tax and Financial Reporting 28
9.5 Sales and Use Taxes 28
9.6 Income Taxes 28
9.7 Incidental Expenses 28
ARTICLE 10. OPERATIONS DURING THE TRANSITION PERIOD 28
10.1 Operations by ASSIGNOR 28
10.2 ASSIGNEE's Approval 29
10.3 Compensation of ASSIGNOR 29
10.4 Operation of Certain Property After Interim Period 29
ARTICLE 11. MISCELLANEOUS 29
11.1 Production Imbalances 29
11.2 Preferential Right to Purchase and Process Production 30
11.3 Dispute Resolution 31
11.4 Survival of Representations and Warranties 33
11.5 Public Announcements 33
11.6 Notices 33
11.7 Effective Date 33
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11.8 Assignment 33
11.9 Entire Agreement and Amendment 34
11.10 Successors and Assigns 34
11.11 Severability 34
11.12 Counterparts 34
11.13 Governing Law 34
11.14 Exhibits 34
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PURCHASE AND SALE AGREEMENT
INDEX OF DEFINED TERMS
Agreement 1
Allocated Value 7
Allocation of Purchase Price 5
ASSIGNEE 1
Assignee's Assumed Obligations 21
Assignment Documents 19
ASSIGNOR 1
Assignor's Retained Obligations 22
Casualty Loss 17
Claims 24
Closing 18
Closing Date 18
CONOCO 1
Consents 14
Effective Date 1
Environmental Obligations 23
Fee Mineral Interests 2
Fee Surface Interests 2
Final Settlement Statement 6
Gaseous Hydrocarbons 30
Government Taking 17
Xxxx-Xxxxx-Xxxxxx Act 13
Hydrocarbons 4
Interim Period 28
Leases 1
Liquid Hydrocarbons 30
NORM 23,26
Overriding Royalty Interests 2
Performance Deposit 5
Pipeline Inventory 4
Plugging and Abandonment Obligations 22
Preferential Rights 14
Preliminary Settlement Statement 5
Property 1
Property Records 20
Property Taxes 27
Purchase Price 5
Related Contracts 2
Stock Tank Oil 4
Title Defect 15
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PURCHASE AND SALE AGREEMENT
LIST OF EXHIBITS
A Schedule 1 - Leases
Schedule 2 - Pooled and Unitized Interests
Schedule 3 - Easements, Surface Leases and Permits
Schedule 4 - Related Contracts
Schedule 5 - Overriding Royalty Interests
Schedule 6 - Fee Mineral Interests
Schedule 7 - Fee Surface Interests
Schedule 8 - Equipment and Tangible Property
Schedule 9 - Allocation of Purchase Price
B B-1 - ASSIGNOR's Assignment Notice
B-2 - ASSIGNEE's Assignment Notice
C Pending Litigation and Claims Affecting the Property
D Assignment and Xxxx of Sale
E Assignment of Contracts
F Nonforeign Affidavit
G Production Imbalances
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PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (the "AGREEMENT"), executed on September 10,
1997, is between CONOCO INC. ("CONOCO"), a Delaware corporation, with offices at
000 Xxxxx Xxxxx Xxxxxxx, Xxxxxxx, Xxxxx 00000, and SOUTHWEST ROYALTIES, INC.
("SOUTHWEST"), a Delaware corporation with offices at 000 X. Xxx Xxxxxx,
Xxxxxxx, Xxxxx 00000. As used in this Agreement, the term "ASSIGNOR" means
CONOCO and the term "ASSIGNEE" means SOUTHWEST.
RECITALS:
CONOCO owns certain producing oil and gas properties in West Texas and Southeast
New Mexico, together with related facilities and contractual rights, and desires
to assign its interest in this property and facilities, and transfer these
contractual rights.
SOUTHWEST desires to acquire CONOCO's interest in these properties, facilities
and contractual rights.
Therefore, CONOCO and SOUTHWEST agree to the sale of CONOCO's interest in these
properties, facilities and contractual rights to SOUTHWEST on the terms and
conditions set forth in this Agreement.
ARTICLE 1. PROPERTY DESCRIPTION
1.1 The Property. Subject to the terms of this Agreement and effective as of
the Effective Date (hereinafter defined), ASSIGNOR shall convey and assign
to ASSIGNEE and ASSIGNEE shall accept all of ASSIGNOR's right and title to,
and interest in, the following (collectively the "PROPERTY"):
1.1.1 The oil, gas and mineral lease(s) and other interests in oil and
gas described in Exhibit A, Schedule 1, and all rights, privileges
and obligations appurtenant to those interests and leases INSOFAR
AND ONLY INSOFAR AS those interests and leases cover and include
the lands, depths and rights described in Exhibit A, Schedule 1
(the "LEASES");
1.1.2 All rights and interest in any unit or pooled area in which the
Leases are included, to the extent that these rights and interests
arise from and are associated with the Leases, including without
limitation all rights derived from any unitization, pooling,
operating, communitization or other agreement or from any
declaration or order of any governmental authority described in
Exhibit A, Schedule 2;
1.1.3 All oil, gas and condensate xxxxx (whether producing, not producing
or abandoned), water source, water injection and other injection or
disposal xxxxx and systems located on the Leases or lands unitized
or pooled with the Leases;
1.1.4 All equipment, facilities, pipelines, gathering systems, well pads,
tank batteries, improvements, fixtures, inventory, spare parts,
tools, and other personal property on the Leases or used in
developing or operating the Leases or producing, treating, storing,
compressing, processing or transporting hydrocarbons on or from the
Leases, other than that
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specifically designated as retained property in Exhibit A, Schedule
8 or excluded from the Property in Section 1.2;
1.1.5 To the extent assignable or transferable, all easements, rights-of-
way, licenses, permits, servitudes, surface leases, and similar
interests applicable to or used solely in operating the Leases, the
lands unitized or pooled with the Leases, or the personal property
described above, including, without limitation, those described in
Exhibit A, Schedule 3;
1.1.6 To the extent assignable or transferable, all contracts and
contractual rights, obligations and interests relating to the
Leases or lands unitized or pooled with the Leases, including
without limitation unit agreements, farmout agreements, farmin
agreements, operating agreements, and hydrocarbon sales, purchase,
gathering, transportation, treating, marketing, exchange,
processing and fractionating agreements described in Exhibit A,
Schedule 4 (the "RELATED CONTRACTS");
1.1.7 All other tangibles, miscellaneous interests or other assets on or
used in connection with the Leases, including without limitation
all lease files, land files, well files, production records,
division order files, abstracts, title opinions, and contract
files, insofar as they are directly related to the Leases or lands
unitized or pooled with the Leases;
1.1.8 Any overriding royalty interests described in Exhibit A, Schedule 5
(the "OVERRIDING ROYALTY INTERESTS"), including without limitation
all rights and obligations pertaining to the overriding royalty
interests under any of the Related Contracts; and
1.1.9 Any fee mineral interests described in Exhibit A, Schedule 6 (the
"FEE MINERAL INTERESTS"), including without limitation all rights
and obligations pertaining to the Fee Mineral Interests under any
of the Related Contracts. Record title to any Fee Mineral Interests
will be transferred to ASSIGNEE by mineral deed, which will
incorporate the terms and conditions of this Agreement. Any Fee
Mineral Interests transferred under this Agreement will be
considered part of the Property for all purposes under this
Agreement.
1.1.10 Any fee surface interests described in Exhibit A, Schedule 7 (the
"FEE SURFACE INTERESTS"), including without limitation all rights
and obligations pertaining to the Fee Surface Interests under any
of the Related Contracts. Record title to any Fee Surface Interests
will be transferred to ASSIGNEE by deed, which will incorporate the
terms and conditions of this Agreement. Any Fee Surface Interests
transferred under this Agreement will be considered part of the
Property for all purposes under this Agreement.
1.1.11 All other rights, titles, and interests of ASSIGNOR in and to the
lands, depths, and rights described on Exhibit A, Schedule 1, save
and except the rights excluded or retained by ASSIGNOR under
Section 1.2.
1.2 Exclusions from the Property. The Property to be conveyed and assigned
under this Agreement does not include:
1.2.1 Unless the parties otherwise agree in writing and enter into a
separate data license agreement, (i) seismic, geological,
geochemical, or geophysical data (including cores and other
physical samples or materials from xxxxx or tests) belonging to
ASSIGNOR or licensed
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from third parties, and (ii) interpretations of seismic,
geological, geochemical or geophysical data belonging to ASSIGNOR
or licensed from third parties;
1.2.2 ASSIGNOR's intellectual property used in developing or operating
the Property, including without limitation proprietary computer
software, computer software licensed from third parties, patents,
trade secrets, copyrights, names, marks and logos, all of which
ASSIGNOR will remove before or as soon as possible after Closing;
1.2.3 ASSIGNOR's right, title and interest in any easements, rights-of-
way, permits, licenses, surface leases and surface use agreements,
and servitudes and other surface rights appurtenant to the
Property, to the extent they are attributable and allocable to
rights and interests retained by ASSIGNOR (if any);
1.2.4 ASSIGNOR's corporate, financial and tax records, and legal files,
except that ASSIGNOR will provide ASSIGNEE with copies of any tax
records that are necessary for ASSIGNEE's ownership, administration
or operation of the Property;
1.2.5 Notwithstanding any other provision of this Agreement to the
contrary, any records or information that ASSIGNOR considers
proprietary or confidential (including without limitation employee
information and internal Property valuation data), or which
ASSIGNOR cannot legally provide to ASSIGNEE because of third-party
restrictions;
1.2.6 Trade credits and rebates from contractors and vendors, accounts
and notes receivable, and adjustments or refunds attributable to
ASSIGNOR's interest in the Property that relate to any period
before the Effective Date, including without limitation
transportation tax credits and refunds, tariff refunds, take-or-pay
claims, insurance premium adjustments, and audit adjustments under
the Related Contracts;
1.2.7 Deposits, cash, checks in process of collection, cash equivalents
and funds attributable to ASSIGNOR's interest in the Property
pertaining to any periods before the Effective Date;
1.2.8 Proceeds, benefits, income or revenues (and any security or other
deposits made) with respect to the Property attributable to periods
before the Effective Date;
1.2.9 Claims and causes of action arising from acts, omissions or events,
or damage or destruction of the Property before the Effective Date,
and all rights, titles, claims and interests of ASSIGNOR (i) under
any policy or agreement of insurance or indemnity, (ii) under any
bond or letter of credit, or (iii) to any insurance or condemnation
proceeds or awards;
1.2.10 Contracts for support services related to the Property (except for
those contracts specifically listed as part of the Related
Contracts in Exhibit A, Schedule 4), and the Related Contracts
insofar as they pertain to oil and gas interests of ASSIGNOR other
than the Leases, or lands unitized or pooled with the Leases, being
assigned and conveyed to ASSIGNEE under this Agreement;
1.2.11 Pipelines and other facilities located on the Leases or lands
unitized with the Leases that are not associated with or used in
connection with the Leases or lands unitized with the Leases,
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and any gas processing plants or their associated facilities,
pipelines or gathering lines located on the Leases or lands
unitized with the Leases; and
1.2.12 Radio towers, remote terminal units, computer equipment, vehicles,
communication equipment, and photocopy machines, located on the
Leases or lands unitized with the Leases and specifically excluded
from the Property in Exhibit A, Schedule 8; all leased vehicles and
equipment for which ASSIGNEE does not assume the applicable lease
under this Agreement; and all third party equipment and property
located on the Leases, including without limitation contractor
equipment.
1.3 Ownership of Production from the Property.
1.3.1 Production Before the Effective Date.
(i) ASSIGNOR will own all merchantable oil, gas, condensate and
distillate ("HYDROCARBONS") produced from the Property before
the Effective Date. If, on the Effective Date, Hydrocarbons
produced from the Property before the Effective Date are
stored in the Lease or unit stock tanks (the "STOCK TANK
OIL"), or in Lease or unit gathering lines or production
facilities upstream of the sale or custody transfer meters of
the purchaser or processor of Hydrocarbon production from the
Property (the "PIPELINE INVENTORY"), ASSIGNEE shall purchase
from ASSIGNOR the merchantable Stock Tank Oil above pipeline
connections in the stock tanks at a price equivalent to
ASSIGNOR'S published posted price for crude oil of like kind
and gravity in the vicinity, less any applicable
transportation charges. and the Pipeline Inventory at a price
equivalent to ASSIGNOR'S published posted price for crude oil
of like kind and gravity in the vicinity, less any applicable
transportation charges. ASSIGNEE will pay ASSIGNOR for the
Stock Tank Oil and Pipeline Inventory as an adjustment to the
Purchase Price at Closing, as provided in Section 2.2.
(ii) The Stock Tank Oil and the Pipeline Inventory will be gauged
and measured as of 7:00 a.m. local time where the Property is
located on the Effective Date. ASSIGNOR and ASSIGNEE will
accept the Lease or unit operator's tank gauge readings,
meter tickets or other inventory records of the Stock Tank
Oil and Pipeline Inventory.
1.3.2 Production After the Effective Date. ASSIGNEE will own all
Hydrocarbons produced from the Property on and after the Effective
Date. If the Effective Date precedes the Closing Date, ASSIGNOR
will sell on ASSIGNEE's behalf to a third party that is
unaffiliated with ASSIGNOR all Hydrocarbons produced from the
Property between the Effective Date and the Closing Date, and
ASSIGNOR will credit ASSIGNEE for the proceeds of these sales as an
adjustment at Closing, as provided in Section 2.2. Subject to any
continuing sale obligations under the Related Contracts, and
ASSIGNOR's preferential right to purchase Hydrocarbons from the
Property, as provided in Section 11.2, ASSIGNEE may sell
Hydrocarbons produced from the Property on and after the Closing
Date as it deems appropriate.
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ARTICLE 2. CONSIDERATION
2.1 Purchase Price.
2.1.1 Amount Due at Closing. At Closing, ASSIGNEE will pay ASSIGNOR
$75,281,000.00 for the Property (the "PURCHASE PRICE"), adjusted by
the Closing adjustments specified in Section 2.2. The Purchase
Price will be subject to the further post-Closing adjustments
specified in Section 2.3. The Purchase Price will be allocated
among the various portions of the Property and among depreciable
assets and nondepreciable assets as provided in Exhibit A, Schedule
9 (the "ALLOCATION OF PURCHASE PRICE").
2.1.2 Performance Deposit. Upon execution of this Agreement, ASSIGNEE
shall pay to ASSIGNOR five percent (5%) of the Purchase Price (U.S.
$3,764,050.00) as a performance deposit ("PERFORMANCE DEPOSIT") on
the Property to be transferred to ASSIGNEE to assure ASSIGNEE's
performance under this Agreement. The Performance Deposit is solely
to assure the performance of ASSIGNEE pursuant to the terms and
conditions of this Agreement. If ASSIGNEE refuses or is unable for
any reason (including failure to obtain financing), other than
breach or default by ASSIGNOR, to close the transaction in
accordance with the terms of this Agreement, ASSIGNOR may, at its
sole option and as its exclusive remedy therefore, retain the
Performance Deposit as agreed liquidated damages and not as a
penalty. However, if this Agreement is terminated pursuant to the
provisions of Section 5.3 (Environmental Assessment), Section 5.5
(Preferential Rights and Consents), Section 5.6 (Title Defects),
Section 5.7 (Casualty Loss), Section 5.8 (Termination Due to
Impairments to the Property), Section 6.2 (Conditions at Closing),
by failure of ASSIGNOR to obtain the requisite DuPont management
approvals, due to the failure of ASSIGNOR to perform any of the
obligations to be performed by ASSIGNOR prior to and on the Closing
Date, or due to any legal prohibition on closing the transaction
due to failure to obtain required governmental consents, the
Performance Deposit shall be returned promptly to ASSIGNEE without
interest. If Closing occurs, ASSIGNOR at its sole option may either
(i) return the Performance Deposit to ASSIGNEE, without interest,
at Closing, in which case ASSIGNEE must pay ASSIGNOR the full
amount of the Purchase Price at Closing, adjusted as provided in
Section 2.2, or (ii) retain and credit the Performance Deposit
against the Purchase Price at Closing, in which case ASSIGNEE must
pay ASSIGNOR an amount equal to the Purchase Price, adjusted as
provided in Section 2.2, less the Performance Deposit.
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2.2 Adjustments at Closing.
2.2.1 Preliminary Settlement Statement. At Closing, the Purchase Price
will be adjusted as set forth in Sections 2.2.2 and 2.2.3. No later
than five (5) days prior to Closing, ASSIGNOR will provide ASSIGNEE
a preliminary settlement statement identifying all adjustments to
the Purchase Price to be made at Closing (the "PRELIMINARY
SETTLEMENT STATEMENT"). ASSIGNOR and ASSIGNEE acknowledge that some
items in the Preliminary Settlement Statement may be estimates or
otherwise subject to change in the final settlement statement for
the Property, to be prepared pursuant to Section 2.3.
2.2.2 Upward Adjustments. The Purchase Price will be increased by the
following expenses and revenues:
(i) All actual production expenses, operating expenses, overhead
under applicable operating agreements and capital
expenditures paid or incurred by ASSIGNOR in connection with
the Property (including without limitation royalties, minimum
royalties, rentals, and prepaid charges), to the extent they
are attributable to operation of the Property on and after
the Effective Date;
(ii) Any proceeds for the sale of Hydrocarbon production and other
income from the Property received by ASSIGNEE, to the extent
they are attributable to the operation of the Property before
the Effective Date, and the value of the Stock Tank Oil and
the Pipeline Inventory;
(iii) Any other increases in the Purchase Price specified in this
Agreement.
2.2.3 Downward Adjustments. The Purchase Price will be decreased by the
following expenses and revenues:
(i) All actual production expenses, operating expenses, overhead
under applicable operating agreements and capital
expenditures paid or incurred by ASSIGNEE in connection with
the Property (including without limitation royalties, minimum
royalties, rentals, and prepaid charges), to the extent they
are attributable to operation of the Property before the
Effective Date;
(ii) Any proceeds for the sale of Hydrocarbon production and other
income received by ASSIGNOR from the Property, to the extent
they are attributable to the operation of that Property on
and after the Effective Date;
(iii) Any other decreases in the Purchase specified in this
Agreement.
2.3 Adjustments after Closing.
2.3.1 Final Settlement Statement. Within 120 days after Closing, ASSIGNOR
will prepare a final settlement statement for the Property
containing a final reconciliation of the adjustments to the
Purchase Price specified in Section 2.2 (the "FINAL SETTLEMENT
STATEMENT"). (However, failure of ASSIGNOR to complete the Final
Settlement Statement within 120 days after Closing will not
constitute a waiver of any right to an adjustment otherwise due.)
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ASSIGNEE will have 20 days after receiving the Final Settlement
Statement to provide ASSIGNOR with written exceptions to any items
in the Final Settlement Statement that ASSIGNEE believes in good
faith to be questionable. All items in the Final Settlement
Statement to which ASSIGNEE does not except within the 20-day
review period will be deemed correct.
2.3.2 Payment of Post-Closing Adjustments. Any additional adjustments to
the Purchase Price (including disputed items) will be offset
against each other so that only one payment is required. The party
owing payment will pay the other party the net post-closing
adjustment to the Purchase Price within 10 days after the
expiration of ASSIGNEE's 20-day review period for the Final
Settlement Statement. However, the payment of any disputed items
will be subject to the further rights of the parties under Section
2.3.3.
2.3.3 Resolution of Disputes Items. After the completion and delivery of
the Final Settlement Statement, the parties agree to negotiate in
good faith to attempt to reach agreement on the amount due with
respect to any disputed items in the Final Settlement Statement. If
the parties agree on the amount due with respect to any disputed
items, and a payment adjustment is required, the party owing
payment will pay the other party within 10 days after the parties
reach agreement. If the parties are unable to agree on the amount
due with respect to any disputed items within 60 days after
ASSIGNOR receives ASSIGNEE's written exceptions to the Final
Settlement Statement, then (i) the parties will attempt to resolve
their disagreement with respect to the disputed items by mediation,
as provided in Section 11.3, and (ii) if the parties are unable to
resolve their disagreement over the disputed items by mediation,
either party may seek a judicial determination of the amount
actually due in connection with the disputed items.
2.3.4 Further Revenues and Expenses. After the completion of the post-
Closing adjustments under this Section 2.3, (i) if either party
receives revenues that belong to the other party under this
Agreement, the party receiving the revenues agrees to promptly
remit those revenues to the other party, and (ii) if either party
pays expenses that are the responsibility of the other party under
this Agreement, the party on whose behalf the expenses were paid
agrees to promptly reimburse the other party for the expenses paid
on its behalf upon receiving satisfactory evidence of such payment.
However, neither party will be obligated to reimburse the other
party for any such expense in excess of $5,000 unless it has been
consulted about that expense prior to payment, unless that payment
was required by a government agency or other government entity.
2.4 Payment Method. Unless the parties otherwise agree in writing, all
payments under this Agreement will be by wire transfer in immediately
available funds to an account designated by the party receiving payment.
2.5 Principles of Accounting. The Preliminary Settlement Statement and Final
Settlement Statement will be prepared in accordance with generally accepted
accounting principles in the petroleum industry and with reasonable
supporting documentation for each item in those statements.
2.6 Reporting Value of the Property. Neither party will take any position in
preparing financial statements, tax returns, reports to shareholders or
governmental authorities, or otherwise, that is
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inconsistent with allocation of value for the Property in Exhibit A,
Schedule 9, unless the parties otherwise agree in writing. The value
assigned to each portion of the Property in Exhibit A, Schedule 9 is
hereafter referred to as the "ALLOCATED VALUE" of that portion of the
Property.
2.7 Section 1031 Exchange. ASSIGNOR and ASSIGNEE hereby agree that ASSIGNEE
shall have the right at any time prior to Closing to assign all or a portion of
its rights under this Agreement to a Qualified Intermediary (as that term is
defined in Section 1.1031(k)-1(g)(4)(v) of the Treasury Regulations) in order to
accomplish the transaction in a manner that will comply, either in whole or in
part, with the requirements of a like-kind exchange pursuant to Section 1031 of
the Internal Revenue Code of 1986, as amended, ("Code"). Likewise, ASSIGNOR
shall have the right at any time prior to Closing to assign all or a portion of
its rights under this Agreement to a Qualified Intermediary for the same
purpose. In the event either Party assigns its rights under this Agreement
pursuant to this Section 2.7, such Party agrees to notify the other Party in
writing of such assignment at or before Closing. If ASSIGNOR assigns its rights
under this Agreement for this purpose, ASSIGNEE agrees to (i) consent to
ASSIGNOR's assignment of its rights in this Agreement in form attached hereto as
Exhibit "B-1", and (ii) pay the Purchase Price into a qualified escrow or
qualified trust account at Closing as directed in writing. If ASSIGNEE assigns
its rights under this Agreement for this purpose, ASSIGNOR agrees to (i) consent
to ASSIGNEE's assignment of its rights in this Agreement in the form of Exhibit
"B-2", (ii) accept the Purchase Price from the qualified escrow or qualified
trust account at Closing, and (iii) at Closing, convey and assign directly to
ASSIGNEE the Assets which are the subject of this Agreement upon satisfaction of
the other conditions to Closing and other terms and conditions hereof. ASSIGNOR
and ASSIGNEE acknowledge and agree that any assignment of this Agreement to a
Qualified Intermediary shall not release either Party from any of their
respective liabilities and obligations to each other under this Agreement, and
that neither Party represents to the other that any particular tax treatment
will be given to either Party as a result thereof. ASSIGNOR agrees to indemnify
and hold ASSIGNEE harmless from and against any and all claims, demands, causes
of actions, liabilities, penalties, judgements, assessments, and expenses
(including reasonable attorneys' fees and costs) asserted against or incurred by
ASSIGNEE in connection with or as a consequence of its facilitation of any such
like-kind exchange.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES
3.1 Reciprocal Representations and Warranties. By their execution of this
Agreement, ASSIGNOR and ASSIGNEE each represent and warrant that the
following statements are true and accurate as to itself, as of the
execution date of this Agreement, the Effective Date and the Closing Date.
3.1.1 Corporate Authority. It is a corporation duly organized and in good
standing under the laws of its state of incorporation, is duly
qualified to carry on its business in the states where the Property
is located, and has all the requisite power and authority to enter
into and perform this Agreement.
3.1.2 Requisite Approvals. By the earlier of the Closing Date or the
Effective Date, it will have taken all necessary actions pursuant
to its articles of incorporation, by-laws and other governing
documents to fully authorize (i) the execution and delivery of this
Agreement and any transaction documents related to this Agreement;
and (ii) the consummation of the transaction contemplated by this
Agreement.
3.1.3 Validity of Obligation. This Agreement and all other transaction
documents it is to execute and deliver on or before the Closing
Date (i) have been duly executed by its authorized
8
representatives; (ii) constitute its valid and legally binding
obligations; and (iii) are enforceable against it in accordance
with their respective terms.
3.1.4 No Violation of Contractual Restrictions. Its execution, delivery
and performance of this Agreement does not conflict with or violate
any agreement or instrument to which it is a party or by which it
is bound, except any provision contained in agreements customary in
the oil and gas industry relating to (i) the preferential right to
purchase all or any portion of the Property; (ii) required consents
to transfer and related provisions; (iii) main tenance of uniform
interest provisions; and (iv) any other third-party approvals or
consents contemplated in this Agreement.
3.1.5 No Violation of Other Legal Restrictions. Its execution, delivery
and performance of this Agreement does not violate any law, rule,
regulation, ordinance, judgment, decree or order to which it or the
Property is subject.
3.1.6 Bankruptcy. There are no bankruptcy, reorganization or receivership
proceedings pending, being contemplated by, or to its actual
knowledge, threatened against it.
3.1.7 Broker's Fees. It has not incurred any obligation for brokers,
finders or similar fees for which the other party or parties would
be liable.
3.2 ASSIGNOR's Representations and Warranties. By its execution of this
Agreement, ASSIGNOR represents and warrants to ASSIGNEE that the following
statements are true and accurate, as of the execution date of this
Agreement, the Effective Date and the Closing Date.
3.2.1 Misrepresentations and Omissions. ASSIGNOR has not intentionally or
willfully misrepresented, omitted, or withheld any material
information about the Property.
3.2.2 Mortgages and Other Instruments. The transfer of the Property to
ASSIGNEE does not violate any covenants or restrictions imposed on
ASSIGNOR by any bank or other financial institution in connection
with a mortgage or other instrument, and will not result in the
creation or imposition of a lien on any portion of the Property.
3.2.3 Compliance with Laws. Except as disclosed by ASSIGNOR on attached
Exhibit "C", if ASSIGNOR is the operator of the Property, to the
best of ASSIGNOR's knowledge, it is in compliance with all federal
and state laws, rules, regulations and orders pertaining to the
Property. The representation in this Section 3.2.3 does not extend
to compliance with environmental laws and regulations pertaining to
the operation of the Property, which is separately addressed in
other provisions of this Agreement.
3.2.4 Permits. Except as disclosed by ASSIGNOR to ASSIGNEE in writing, if
ASSIGNOR is the operator of the Property, to the best of ASSIGNOR's
knowledge, it has all governmental permits necessary for the
operation of the Property and is not in default under any permit,
license or agreement relating to the operation and maintenance of
the Property.
3.2.5 Lawsuits and Claims. Except as disclosed in Exhibit C to this
Agreement, there is no demand or lawsuit, nor any compliance order,
notice of probable violation or similar governmental action,
pending or, to the best of ASSIGNOR's knowledge, threatened before
9
any court or governmental agency that (i) would result in an
impairment or loss of title to any part of the Property, or
impairment of the value thereof, (ii) involves or relates to the
alleged non-compliance of the Property or its operation with any
applicable federal, state, or local laws, regulations, and orders
(including without limitation, those relating to pollution and
protection of the environment) (iii) would hinder or impede the
operation of the Property, or (iv) seeks to restrain or prohibit,
or to obtain substantial damages from ASSIGNOR, with respect to
this Agreement or the consummation of all or part of the
transactions contemplated in this Agreement.
3.3 ASSIGNEE's Representations and Warranties. By its execution of this
Agreement, ASSIGNEE represents and warrants to ASSIGNOR that the following
statements are true and accurate, as of the execution date of this
Agreement, the Effective Date and the Closing Date.
3.3.1 Independent Evaluation. ASSIGNEE is an experienced and
knowledgeable investor in the oil and gas business. ASSIGNEE has
been advised by and has relied solely on its own expertise and
legal, tax, reservoir engineering and other professional counsel
concerning this transaction, the Property and the value thereof.
3.3.2 Qualification. ASSIGNEE is now or at Closing will be, and
thereafter will continue to be, qualified to own and operate any
federal oil, gas and mineral leases and oil, gas and mineral leases
for the State(s) of Texas and New Mexico that constitute part of
the Property, including meeting all bonding requirements.
Consummating the transaction contemplated in this Agreement will
not cause ASSIGNEE to be disqualified or to exceed any acreage
limitation imposed by law, statute or regulation.
3.3.3 Securities Laws and ASSIGNEE's Other Dealings. ASSIGNEE has
complied with all federal and state securities laws applicable to
the sale of the Property and will comply with such laws if it
subsequently disposes of all or any part of the Property. ASSIGNEE
is acquiring the Property for its own account and not with a view
to, or for offer of resale in connection with, a distribution
thereof, within the meaning of the Securities Act of 1933, 15
U.S.C. (S) 77a et seq., and any other rules, regulations, and laws
pertaining to the distribution of securities. Except for
traditional mortgage financing from reputable financial
institutions or corporate debt securities offerings by ASSIGNEE,
ASSIGNEE has not sought or solicited, nor is ASSIGNEE participating
with, investors, partners or other third parties in order to fund
the Purchase Price or the Performance Deposit and to close this
transaction, and all funds used by ASSIGNEE in connection with this
transaction are ASSIGNEE's own funds.
3.4 Notice of Changes. ASSIGNOR and ASSIGNEE will each give the other prompt
written notice of any matter materially affecting any of their unqualified
representations or warranties under this Article 3 or rendering any such
warranty or representation untrue or inaccurate.
3.5 Representations and Warranties Exclusive. All representations and
warranties contained in this Agreement (including without limitation those
in this Article 3 are exclusive, and are given in lieu of all other
representations and warranties, express or implied.
10
ARTICLE 4. DISCLAIMER OF WARRANTIES
4.1 Title; Encumbrances. ASSIGNOR CONVEYS THE PROPERTY TO ASSIGNEE SUBJECT TO
ALL ROYALTIES, OVERRIDING ROYALTIES, BURDENS, ENCUMBRANCES, NATIVE
ALLOTMENTS AND OTHER SURFACE RIGHTS OF PUBLIC RECORD IN THE APPLICABLE
JURISDICTION, AND WITHOUT WARRANTY OF TITLE, EXPRESS, STATUTORY, OR
IMPLIED.
4.2 Condition and Fitness of the Property. Except as set forth in Article 3 of
this Agreement, ASSIGNOR CONVEYS THE PROPERTY TO ASSIGNEE WITHOUT ANY
EXPRESS, STATUTORY OR IMPLIED WARRANTY OR REPRESENTATION OF ANY KIND,
INCLUDING WARRANTIES RELATING TO (i) THE CONDITION OR MER CHANTABILITY OF
THE PROPERTY, OR (ii) THE FITNESS OF THE PROPERTY FOR A PARTICULAR PURPOSE.
ASSIGNEE HAS INSPECTED, OR BEFORE CLOSING WILL INSPECT OR WILL HAVE BEEN
GIVEN THE OPPORTUNITY TO INSPECT, THE PROPERTY AND IS SATISFIED AS TO THE
PHYSICAL AND ENVIRONMENTAL CONDITION (BOTH SURFACE AND SUBSURFACE) OF THE
PROPERTY AND ACCEPTS THE PROPERTY "AS IS," "WHERE IS," AND "WITH ALL
FAULTS."
4.3 Information About the Property. EXCEPT AS EXPRESSLY SET FORTH IN ARTICLE 3
OF THIS AGREEMENT, ASSIGNOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS,
STATUTORY OR IMPLIED, AS TO (i) THE ACCURACY, COMPLETENESS, OR MATERIALITY
OF ANY DATA, INFORMATION OR RECORDS FURNISHED TO ASSIGNEE IN CONNECTION
WITH THE PROPERTY; (ii) THE QUALITY AND QUANTITY OF HYDROCARBON RESERVES
(IF ANY) ATTRIBUTABLE TO THE PROPERTY; (iii) THE ABILITY OF THE PROPERTY
TO PRODUCE HYDROCARBONS, INCLUDING WITHOUT LIMITATION PRODUCTION RATES,
DECLINE RATES AND RECOMPLETION OPPORTUNITIES; (iv) GAS BALANCING
INFORMATION, ALLOWABLES OR OTHER REGULATORY MATTERS, (v) THE PRESENT OR
FUTURE VALUE OF THE ANTICIPATED INCOME, COSTS OR PROFITS, IF ANY, TO BE
DERIVED FROM THE PROPERTY, OR (vi) THE ENVIRONMENTAL CONDITION OF THE
PROPERTY. ANY DATA, INFORMATION OR OTHER RECORDS FURNISHED BY ASSIGNOR ARE
PROVIDED TO ASSIGNEE AS A CONVENIENCE AND ASSIGNEE'S RELIANCE ON OR USE OF
THE SAME IS AT ASSIGNEE'S SOLE RISK, SAVE AND EXCEPT TO THE EXTENT
CONSTITUTING A BREACH OF ASSIGNOR'S REPRESENTATIONS AND WARRANTIES UNDER
ARTICLE 3 OF THIS AGREEMENT.
4.4 Subrogation of Warranties. To the extent transferrable, ASSIGNOR will give
and grant to ASSIGNEE, its successors and assigns full power and right of
substitution and subrogation in and to all covenants and warranties
(including warranties of title) by preceding owners, vendors, or others,
given or made with respect to the Property or any part thereof prior to the
Effective Date of this Agreement.
ARTICLE 5. DUE DILIGENCE REVIEW OF THE PROPERTY
5.1 Records Review. To allow ASSIGNEE to confirm ASSIGNOR's title and conduct
other due diligence with respect to the Property, ASSIGNOR shall give
ASSIGNEE, and ASSIGNEE's authorized representatives, at mutually agreeable
times before Closing, access to all contract, land
11
and lease, and operational records, to the extent such data and records are
in ASSIGNOR's possession and relate to the Property. Without limiting the
foregoing, ASSIGNOR will afford ASSIGNEE and its representatives access to
all accounting and related records for the Property, including basic
accounting records and source documents which, to the extent in existence
and within the possession or control of ASSIGNOR, are sufficient for
ASSIGNEE or its representatives to complete an audit in response to Rule 3-
05 of Regulation SX of the U.S. Securities Exchange Commission. With
ASSIGNOR's permission, ASSIGNEE may photocopy such records at its sole
expense. ASSIGNEE shall keep confidential all information made available to
ASSIGNEE until the later of the Closing Date or the Effective Date. Any
confidentiality agreement previously executed by ASSIGNOR and ASSIGNEE with
respect to the Property will continue in force until the later of the
Closing Date or the Effective Date, and for as long thereafter as provided
in the confidentiality agreement. ASSIGNEE shall take all reasonable steps
necessary to ensure that ASSIGNEE's authorized representatives comply with
the provisions of this Section 5.1 and any confidentiality agreement in
effect.
5.2 Physical Inspection. Before Closing, ASSIGNOR will permit ASSIGNEE and its
representatives, at their sole risk and expense, to conduct reasonable
inspections of the Property at times approved by ASSIGNOR. ASSIGNEE shall
repair any damage to the Property resulting from its inspection and shall
indemnify, defend and hold ASSIGNOR harmless from and against any and all
Claims (as defined in Section 8.1) arising from ASSIGNEE inspecting and
observing the Property, includ ing, without limitation, (i) Claims for
personal injuries to or death of employees of the ASSIGNEE, its
contractors, agents, consultants and representatives, and damage to the
property of ASSIGNEE or others acting on behalf of ASSIGNEE, regardless of
whether such claims are caused by the concurrent negligence of ASSIGNOR or
the condition of the Property, (ii) Claims for personal injuries to or
death of employees of ASSIGNOR or third parties, and damage to the property
of ASSIGNOR or third parties, to the extent caused by the negligence, gross
negligence or willful misconduct of ASSIGNEE.
5.3 Environmental Assessment.
5.3.1 Inspection and Testing. Prior to Closing, the ASSIGNEE will have
the right, at its sole cost, to conduct a Phase I environmental
assessment of the Property. However, the Phase I environmental
assessment must be conducted by an agent or representative of
ASSIGNEE acceptable to both ASSIGNOR and ASSIGNEE. For purposes of
this Agreement, a Phase I environmental assessment means (i) a
review of ASSIGNOR's and the government's environmental records,
(ii) the submission of pre-inspection questionnaires to ASSIGNOR,
(iii) a site visit to visually inspect the Property, and (iv)
interviews with corporate and site personnel of ASSIGNOR. A Phase I
environmental assessment does not include soil or groundwater
sampling or subsurface testing of any kind.
5.3.2 Inspection and Test Results. Each party will be entitled to receive
a copy of the Phase I inspection results for the Property,
including without limitation all written reports, data and
conclusions. ASSIGNEE agrees not to disclose the Phase I inspection
results for the Property, or any ASSIGNOR information reviewed
during the Phase I environmental assessment, to third parties
without the agreement of ASSIGNOR, except as required by law or by
the order of a court or regulatory agency. This confidentiality
obligation shall be effective for five (5) years after the Closing
Date and will survive the termination of this Agreement for any
reason.
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5.3.3 Notice of Environmental Conditions. Prior to Closing, ASSIGNEE will
review the inspection and testing results for the Property and
determine based on those results if any adverse environmental
conditions exist with respect to the Property. No later than three
(3) business days before Closing, ASSIGNEE will notify ASSIGNOR in
writing of any adverse environmental condition with respect to the
Property, and the estimated value of any such environmental
condition. The value of an environmental condition for purposes of
Section 5.3.4 will be the estimated amount of all costs and Claims
(as defined in Section 8.1) associated with the existence,
remediation or correction of the environmental condition, as
determined by the mutually approved agent or representative that
conducted the Phase I environmental assessment.
5.3.4 Right and Remedies for Environmental Conditions.
(i) With respect to any environmental condition affecting the
Property, ASSIGNEE may (a) request ASSIGNOR to cure the
environmental condition, but ASSIGNOR will have no obligation
to cure the environmental condition, or (b) request an
adjustment in the Purchase Price equal to the estimated value
of the environmental condition. If ASSIGNOR and ASSIGNEE are
unable to agree before Closing on curative measures or an
adjustment the Purchase Price with respect to any such
environmental condition, the parties will have the rights and
remedies set forth in subpart (ii) of this Section 5.3.4.
(ii) The rights and remedies of the parties with respect to
environmental conditions on the Property on which the parties
cannot agree on curative measures or a Purchase Price
adjustment are as follows:
(a) If the collective value of the environmental conditions
is less than one percent (1%) of the Purchase Price, the
parties will be obligated to proceed with Closing as to
all of the Property without curative action by ASSIGNOR
with respect to such environmental conditions and
without an adjustment to the Purchase Price.
(b) If the collective value of the environmental conditions
equals or exceeds one percent (1%) of the Purchase
Price, either ASSIGNOR or ASSIGNEE may exclude the
Property affected by the environmental condition, in
which case the Purchase Price will be reduced by the
Allocated Value of the excluded Property and the parties
will be obligated to proceed with Closing, subject to
the termination rights of the parties under Section 5.8
and this subpart (c) of this Section 5.3.4.
(c) If the collective value of the environmental conditions
equals or exceeds ten percent (10%) of the Purchase
Price, either party may terminate this Agreement, and
neither party will have any further obligation to
conclude the transfer of the Property under this
Agreement. However, the right of termination under this
subpart (c) must be exercised no later than 10 business
days before Closing, after which both parties will be
deemed to have waived their termination rights under
this subpart (c) in connection with environmental
conditions.
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(iii) Notwithstanding any agreement by ASSIGNOR to a attempt to
cure an environmental condition or to reduce the Purchase
Price due to an environmental condition with respect to the
Property, or any other provision of this Agreement, ASSIGNEE
at Closing will assume all Environmental Obligations (as
defined in Section 7.5) with respect to the Property, which
is conveyed to ASSIGNEE at Closing, subject to the right of
ASSIGNEE to require and compel performance by ASSIGNOR of any
corrective or remedial actions which ASSIGNOR has agreed to
in writing to undertake pursuant to the provisions of this
Section 5.3.4.
5.4 Government Approvals.
5.4.1 Title Pending Governmental Approvals. Until ASSIGNOR and ASSIGNEE
obtain federal and state approval of the assignment of Leases or
other Property requiring such approval:
(i) ASSIGNOR shall continue to hold record title to the Property
as nominee for ASSIGNEE;
(ii) ASSIGNEE shall indemnify and hold ASSIGNOR harmless from any
and all claims, expenses of any kind or character relating to
such Property accruing after Closing;
(iii) ASSIGNOR shall act as ASSIGNEE's nominee but shall be
authorized to act only upon and in accordance with ASSIGNEE's
specific written instructions, and ASSIGNOR shall have no
authority, responsibility or discretion to perform any tasks
or functions with respect to the Property other than those
which are purely administrative or ministerial in nature,
unless otherwise specifically requested and authorized by
ASSIGNEE in writing;
(iv) If ASSIGNOR continues to operate the Property pending such
approval, ASSIGNOR and ASSIGNEE will have the rights and
obligations with respect to the operation of the Property set
forth in Section 10.4.
5.4.2 Denial of Required Government Approvals. If any required approval
is finally denied, ASSIGNOR shall pay ASSIGNEE the Allocated Value
of the affected Leases or other affected Property, and ASSIGNEE
shall immediately reassign such Leases or other Property to
ASSIGNOR.
5.4.3 Xxxx-Xxxxx-Xxxxxx. This Agreement is subject in all respects to and
conditioned upon compliance by the parties with Title II of the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 (the "XXXX-
XXXXX-XXXXXX ACT"), and rules and regulations promulgated pursuant
thereto, to the extent that said act, rules and regulations are
applicable to the transaction contemplated by this Agreement.
ASSIGNEE and ASSIGNOR agree to make such filings with and provide
such information to the Federal Trade Commission and the Department
of Justice with respect to the transaction contemplated by this
Agreement as are required in connection with the Xxxx-Xxxxx-Xxxxxx
Act sufficiently in advance of the Closing Date to permit the
lapse, termination, or waiver of the initial waiting periods pre
scribed in connection with the Xxxx-Xxxxx-Xxxxxx Act before the
Closing Date.
14
5.5 Preferential Rights and Consents to Assign.
5.5.1 Notices to Holders.
(i) If any of the Property is subject to third party preferential
purchase rights, rights of first refusal, or similar rights
(collectively, "PREFERENTIAL RIGHTS"), or third party
consents to assign, lessor's approvals or similar rights
(collectively, "CONSENTS"), ASSIGNOR shall use reasonable
efforts to (a) notify the holders of the Preferential Rights
and Consents that it intends to transfer the Property to
ASSIGNEE, (b) provide them with any information about the
transfer of the Property to which they are entitled, and (c)
in the case of Consents, ask the holders of the Consents to
consent to the assignment of the affected Property to
ASSIGNEE.
(ii) ASSIGNOR shall promptly notify ASSIGNEE whether (a) any
Preferential Rights are exercised, waived or deemed waived,
(b) any Consents are denied, or (c) the requisite time
periods have elapsed without any Preferential Rights being
exercised or Consents being received. ASSIGNOR will not be
liable to ASSIGNEE if any Preferential Rights are exercised,
or any Consents are denied, except as expressly provided in
this Section 5.5.
5.5.2 Remedies Before Closing. If ASSIGNOR is unable before Closing to
obtain the required Consents (other than Consents ordinarily
obtained after closing and Consents on hydrocarbon sales, purchase,
gathering, transportation, treating, marketing, exchange,
processing and fractionating agreements) and waivers of all
Preferential Rights, then:
(i) ASSIGNOR and ASSIGNEE by agreement may proceed with Closing
as to the Property affected by the unwaived Preferential
Rights or unobtained Consents, subject to the further
obligations of ASSIGNOR and ASSIGNEE set forth in Section
5.5.3 in the event that such Preferential Rights are validly
exercised or such Consents are ultimately denied after
Closing;
(ii) Either ASSIGNOR or ASSIGNEE may exclude the affected portion
of the Property from the transaction under this Agreement,
adjust the Purchase Price by the Allocated Value of the
excluded Property, and proceed with Closing as to the rest of
the Property; or
(iii) In addition to the remedies set forth in subparts (i) and
(ii) of this Section 5.5.2, ASSIGNOR or ASSIGNEE may exercise
the termination rights set forth in Section 5.8.
5.5.3 Remedies After Closing.
(i) Preferential Rights. After Closing, if (a) any holder of
Preferential Rights alleges improper notice of sale, or (b)
ASSIGNOR or ASSIGNEE discover, or any third party alleges,
the existence of additional Preferential Rights, ASSIGNOR and
ASSIGNEE will attempt to obtain waivers of those discovered
or alleged Preferential Rights. If ASSIGNOR and ASSIGNEE are
unable to obtain waivers of such Preferential Rights, or the
third party ultimately establishes and exercises
15
its rights, and such exercise denies the Property to
ASSIGNEE, then ASSIGNEE shall satisfy all such Preferential
Rights obligations and shall indemnify, defend and hold
ASSIGNOR harmless from and against any and all Claims (as
defined in Section 8.1) arising from or related to ASSIGNEE's
satisfaction of any such Preferential Rights obligations.
ASSIGNEE shall be entitled to receive (and ASSIGNOR hereby
assigns to ASSIGNEE all of ASSIGNOR's rights to) all proceeds
received by ASSIGNOR in connection with the sale, due to an
exercise of Preferential Rights, of any portion of the
Property ASSIGNEE was to receive under this Agreement.
ASSIGNEE's receipt of proceeds from the sale of the affected
Property shall be ASSIGNEE's sole remedy if undiscovered or
alleged Preferential Rights are exercised after Closing.
(ii) Consents. After Closing, if ASSIGNOR or ASSIGNEE discover, or
any third party alleges, the existence of additional
Consents, ASSIGNOR and ASSIGNEE will attempt to obtain
waivers of those discovered or alleged Consents. If ASSIGNOR
and ASSIGNEE are unable to obtain waivers of such Consents
(other than Consents on hydrocarbon sales, purchase,
gathering, transportation, treating, marketing, exchange,
processing and fractionating agreements), and such unwaived
Consents deny the affected Property to ASSIGNEE, then
ASSIGNOR and ASSIGNEE will rescind the assignment of the
affected Property under this Agreement, after which ASSIGNOR
shall pay ASSIGNEE the Allocated Value of the affected
Property, and ASSIGNEE shall immediately reassign the
affected Property to the ASSIGNOR. Rescission of the
assignment of the affected Property and receipt of the
Allocated Value of the affected Property shall be ASSIGNEE's
sole remedy if undiscovered or alleged Preferential Rights
are exercised or Consents are denied after Closing.
5.6 Title Defects.
5.6.1 Definition of Title Defect. For the purposes of this Agreement, a
"TITLE DEFECT" means any impairment, encumbrance, encroachment,
irregularity, defect in, or dispute concerning ASSIGNOR's title to
the Property, and that in the opinion of ASSIGNEE would:
(i) Reduce, impair or prevent ASSIGNEE from receiving payment
from the purchasers of production from the Property;
(ii) Reduce ASSIGNEE's net revenue interest in all or a portion of
the Property;
(iii) Increase ASSIGNEE's working interest in all or a portion of
the Property without a corresponding increase in net revenue
interest; or
(iv) Restrict or extinguish ASSIGNEE's right to use the Property
as owner, lessee, licensee or permittee, as applicable.
(v) Any other encumbrance, condition or circumstance which under
customary title examination standards in the jurisdiction
where the Property is situated would be viewed as a title
defect.
16
Neither the environmental condition of the Property nor any failure
to obtain Consents to the transfer of Related Contracts will be
considered a Title Defect under this Section 5.6.
5.6.2 Notice of Title Defects. ASSIGNEE will review title to the Property
prior to Closing and notify ASSIGNOR in writing of any Title Defect
it discovers as soon as reasonably practicable after its discovery,
but in no event less than three (3) business days before the
Closing Date. ASSIGNEE will be deemed to have conclusively waived
any Title Defect about which it fails to notify ASSIGNOR in writing
at least three (3) business days before the Closing Date.
5.6.3 Request to Cure Title Defects. If ASSIGNEE notifies ASSIGNOR of a
Title Defect as provided in Section 5.6.2, Assignee may request
Assignor to cure the Title Defect, but ASSIGNOR will have no
obligation to cure any Title Defect in the Property. If ASSIGNOR
agrees to attempt to cure a Title Defect, ASSIGNOR must cure the
Title Defect before Closing, unless the parties otherwise agree in
writing.
5.6.4 Remedies for Uncured Title Defects. If ASSIGNEE notifies ASSIGNOR
of any Title Defect as provided in Section 5.6.2, and ASSIGNOR
refuses or is unable to cure the Title Defect before Closing, then
ASSIGNEE and ASSIGNOR will have the following rights and remedies
with respect to the uncured Title Defect(s) in the Property, unless
the parties otherwise agree in writing.
(i) ASSIGNEE may waive the uncured Title Defect and proceed with
Closing.
(ii) If an uncured, unwaived Title Defect reduces the value of the
portion of the Property affected by the Title Defect by an
amount less than one percent (1%) of the Allocated Value of
that Property, ASSIGNOR and ASSIGNEE will be obligated to
proceed with Closing as to the affected Property without
adjustment to the Purchase Price.
(iii) If an uncured, unwaived Title Defect reduces the value of the
portion of the Property affected by the Title Defect by an
amount equal to or more than one percent (1%) of the
Allocated Value of that Property, either ASSIGNOR or ASSIGNEE
may exclude the portion of the Property affected by the Title
Defect from the transaction under this Agreement, in which
case ASSIGNOR and ASSIGNEE will adjust the Purchase Price by
the Allocated Value of the excluded Property, and proceed
with Closing as to the rest of the Property.
(iv) In addition to the rights and remedies set forth in subparts
(i) through (iii) of this Section 5.6.4, ASSIGNOR and
ASSIGNEE will have the termination rights set forth in
Section 5.8.
5.7 Casualty Losses and Government Takings.
5.7.1 Notice of Casualty Losses. If, prior to the Closing Date, all or
part of the Property is damaged or destroyed by fire, flood, storm
or other casualty ("CASUALTY LOSS"), or is taken in condemnation or
under the right of eminent domain, or if proceedings for such
purposes shall be pending or threatened ("GOVERNMENT TAKING"),
ASSIGNOR must promptly notify
17
ASSIGNEE in writing of the nature and extent of the Casualty Loss
or Government Taking and ASSIGNOR's estimate of the cost required
to repair or replace that portion of the Property affected by the
Casualty Loss or value of the Property taken by the Government
Taking.
5.7.2 Remedies for Casualty Losses and Government Takings. With respect
ASSIGNOR and ASSIGNEE will have the following rights and remedies.
(i) If the agreed cost to repair or replace the portion of the
Property affected by the Casualty Loss or the agreed value of
the Property taken in any Government Taking is less than ten
percent (10%) of the Purchase Price, the Purchase Price will
be adjusted by the agreed cost of the Casualty Loss or the
agreed value of the Property taken by the Government Taking,
and the parties will proceed with Closing.
(ii) If the agreed cost to repair or replace the portion of the
Property affected by the Casualty Loss or the agreed value of
the Property taken in any Government Taking equals or exceeds
ten percent (10%) of the Purchase Price, ASSIGNOR and
ASSIGNEE by agreement may adjust the Purchase Price by the
agreed cost of the Casualty Loss or the agreed value of the
Property taken in any Government Taking, and proceed with
Closing.
(iii) In addition to the remedies set forth in subparts (i) and
(ii) of this Section 5.7.2, ASSIGNOR and ASSIGNEE will have
the termination rights in connection with Casualty Losses and
Government Takings set forth in Section 5.8.
5.7.3 Insurance Proceeds and Settlement Payments. If ASSIGNOR and
ASSIGNEE adjust the Purchase Price of the Property due to a
Casualty Loss or Government Taking, and proceed with Closing,
ASSIGNOR will be entitled to retain (i) all insurance proceeds
payable to ASSIGNOR with respect to any such Casualty Loss, (ii)
all sums paid to ASSIGNOR by third parties by reason of any such
Casualty Loss, and (iii) all compensation paid to ASSIGNOR with
respect to any such Government Taking.
5.7.4 Exclusion of Ordinary Depreciation and Depletion. ASSIGNEE will
assume all risk and loss with respect to any change, between the
Effective Date and the Closing Date, in the condition of the
Property resulting from production of Hydrocarbons through normal
depletion (including the watering-out or sand infiltration of any
well) and the depreciation of personal property through ordinary
wear and tear. None of the events or conditions set forth in this
Section 5.7.4 will be considered a Casualty Loss with respect to
the Property, nor will they be cause for any other reduction in the
Purchase Price, or give rise to any right to terminate this
Agreement.
18
5.8 Termination Due to Impairments to the Property.
5.8.1 Right to Terminate.
(i) If, on the Closing Date, the Allocated Value of all Property
to be excluded from the transaction contemplated by this
Agreement due to unwaived, uncured Title Defects, unobtained
Consents or environmental conditions on the Property exceeds
ten percent (10%) of the total Allocated Value of all of the
Property, either ASSIGNOR or ASSIGNEE may terminate this
Agreement, and neither party will have any further obligation
to conclude the transfer of the Property under this
Agreement.
(ii) If, on or before the Closing Date, a Casualty Loss or
Government Taking has occurred with respect to the Property,
and (a) ASSIGNOR and ASSIGNEE have been unable to agree on
the cost of the Casualty Loss or the value of the Property
taken in any Government Taking, or (b) the agreed cost to
repair or replace the portion of the Property affected by the
Casualty Loss or the agreed value of the Property taken in
any Government Taking equals or exceeds 10% of the total
Allocated Value of all the Property, then either ASSIGNOR or
ASSIGNEE may terminate this Agreement, and neither party will
have any further obligation to conclude the transfer of the
Property under this Agreement.
5.8.2 Notice of Termination. Any party exercising a right of termination
under this Section 5.8 must notify the other party in writing no
later than three (3) business days before the Closing Date of its
election to terminate this Agreement.
ARTICLE 6. CLOSING AND POST-CLOSING OBLIGATIONS
6.1 Closing Date. Unless ASSIGNOR and ASSIGNEE otherwise agree in writing, the
closing of the transaction contemplated by this Agreement (the "CLOSING")
will occur in ASSIGNOR's offices at 00 Xxxxx Xxxxx, Xxxxx 000 Xxxx,
Xxxxxxx, Xxxxx 00000 or another mutually agreed location on or before
November 1, 1997, or such earlier date subsequent to September 30, 1997 as
ASSIGNEE may unilaterally select and confer at least five (5) days notice
thereof upon ASSIGNOR (the actual date on which Closing occurs being the
"CLOSING DATE").
6.2 Conditions to Closing. ASSIGNOR and ASSIGNEE will not be obligated to
close the transaction described in this Agreement, and will have the right
to terminate this Agreement, unless each of the conditions to its
performance set forth in this Section 6.2 is satisfied as of the Closing
Date, or it waives in whole or part any such condition to its performance
that is unsatisfied as of the Closing Date. If a party elects to terminate
this Agreement because a condition to its performance is not satisfied, the
terminating party must give the other party written notice of termination
on or before the Closing Date, after which neither party will have any
further obligation to conclude the transfer of the Property under this
Agreement.
19
6.2.1 Representations and Warranties.
(i) ASSIGNOR will not be obligated to close if, as of the Closing
Date, any matter represented or warranted in this Agreement
by the ASSIGNEE is untrue, inaccurate or is misleading in any
material respect.
(ii) ASSIGNEE will not be obligated to close if, as of the Closing
Date, any matter represented or warranted in this Agreement
by the ASSIGNOR is untrue, inaccurate or is misleading in any
material respect.
6.2.2 Performance of Obligations.
(i) ASSIGNOR will not be obligated to close if, as of the Closing
Date, ASSIGNEE has not performed all obligations under this
Agreement that ASSIGNEE is required to perform on or before
Closing.
(ii) ASSIGNEE will not be obligated to close if, as of the Closing
Date, ASSIGNOR has not performed all obligations under this
Agreement that ASSIGNOR is required to perform on or before
Closing.
6.2.3 Legal Proceedings. Neither party will be obligated to close if, as
of the Closing Date, any suit or other proceeding is pending or
threatened before any court or governmental agency seeking to
restrain, prohibit, or declare illegal, or seeking substantial
damages in connec tion with, the transaction that is the subject of
this Agreement, or there is reasonable basis for any such suit or
other proceeding.
6.2.4 FTC Consent. Neither party will be obligated to close if, as of the
Closing Date, any necessary consent of the Federal Trade Commission
or any other state or federal governmental authority relating to
this Agreement has not been obtained or waived, or applicable
waiting periods prescribed by the Xxxx-Xxxxx-Xxxxxx Act have not
elapsed or terminated.
6.3 Closing. At Closing, ASSIGNOR and ASSIGNEE shall execute, acknowledge (if
necessary), and exchange, as applicable:
(i) Assignment documents (in sufficient counterparts for recording) for
the assignment and conveyance of the oil and gas interests to be
transferred under this Agreement in the forms set forth in Exhibit
D (the "ASSIGNMENT DOCUMENTS");
(ii) Assignment of Contracts in the form of Exhibit E;
(iii) Nonforeign Affidavits in the form of Exhibit F;
(iv) Other appropriate instruments necessary to effect or support the
transaction contemplated in this Agreement, including, without
limitation, any lease assignment forms or other forms or filings
required by federal or state agencies to transfer ownership of the
Property and appropriate letters-in-lieu of transfer orders
prepared by ASSIGNOR;
20
(v) Any ratification and joinder instruments required to transfer the
rights, obligations and interests in applicable Related Contracts
and other Property;
(vi) If ASSIGNEE is attempting to succeed ASSIGNOR as operator, fully
executed change of operator notices and evidence that ASSIGNEE has
obtained all required operational and plugging bonds for the
Property, and will be accepted as operator by the State of Texas
and any other state and federal agencies having jurisdiction;
(vii) Any applications necessary to transfer regulatory permits to which
the Property is subject, and which ASSIGNOR has agreed to transfer
under this Agreement; and
6.4 Post-Closing Obligations. ASSIGNOR and ASSIGNEE have the following post-
closing obligations:
6.4.1 Property Records. At or as soon as possible after Closing, ASSIGNOR
shall deliver to ASSIGNEE the originals or legible copies of all
property records relating to the Property, as described in Sections
1.1.7 of this Agreement (the "PROPERTY RECORDS"), at a location
designated by ASSIGNEE. If ASSIGNOR retains any original Property
Records, ASSIGNEE shall have the right to access and review those
original Property Records during normal business hours. ASSIGNEE
shall preserve and maintain all Property Records for at least seven
(7) years after the Closing Date. ASSIGNEE shall notify ASSIGNOR
before destroying any Property Records. ASSIGNOR reserves the right
to access and copy (at its own expense) all Property Records for
seven (7) years after the Closing Date, and ASSIGNEE agrees to
provide access to the Property Records to ASSIGNOR during normal
business hours.
6.4.2 Recording and Filing. ASSIGNEE, within thirty (30) days after
Closing, shall (i) record all Assignment Documents and all other
instruments that must be recorded to effectuate the transfer of the
Property; and (ii) file for approval with the applicable government
agencies all state and federal transfer and assignment documents
for the Property. ASSIGNEE shall provide ASSIGNOR a recorded copy
of each Assignment Document and other recorded instruments, and
approved copies of the state and federal transfer and assignment
documents as soon as they are available.
6.4.3 Change of Operator Requirements. If ASSIGNEE is attempting to
succeed ASSIGNOR as operator of any portion of the Property,
ASSIGNEE shall promptly file all appropriate forms, declarations or
bonds with federal and state agencies relative to its assumption of
operations.
6.4.4 Further Assurances. ASSIGNEE and ASSIGNOR agree to execute and
deliver from time to time such further instruments and do such
other acts as may be reasonably necessary to effectuate the
purposes of this Agreement.
ARTICLE 7. ASSUMED AND RETAINED RIGHTS AND OBLIGATIONS
7.1 ASSIGNEE's Rights After Closing. Upon and after Closing, ASSIGNEE will
receive and assume all of ASSIGNOR's right, title and interest in the
Property, with effect as of the Effective Date.
7.2 ASSIGNEE's Obligations After Closing.
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7.2.1 Description of Obligations. Upon and after Closing, ASSIGNEE will
assume, pay and perform all the obligations, liabilities and duties
with respect to the ownership and (if applicable) operation of the
Property that are attributable to periods on and after the
Effective Date (the "ASSIGNEE'S ASSUMED OBLIGATIONS"). The
Assignee's Assumed Obligations include without limitation:
(i) Responsibility for payment of all operating expenses and
capital expenditures related to the Property and attributable
to the period on and after the Effective Date;
(ii) Responsibility for performance of all express and implied
obligations and covenants under the terms of the Leases,
other instruments in the chain of title, the Related
Contracts and all other orders and contracts to which the
Property is subject arising on and after the Effective Date;
(iii) Responsibility for payment of all royalties, overriding
royalties, production payments, net profits obligations,
rentals, shut-in payments and other burdens or encumbrances
to which the Property is subject that are attributable to
periods on and after the Effective Date;
(iv) Responsibility for proper accounting for and disbursement of
production proceeds from the Property attributable to periods
on and after the Effective Date, including funds in any
suspense accounts received from ASSIGNOR;
(v) Responsibility for compliance with all applicable laws,
ordinances, rules and regulations pertaining to the Property,
and the procurement and maintenance of all permits required
by public authorities in connection with the Property on and
after the Effective Date;
(vi) The Plugging and Abandonment Obligations (as defined in
Section 7.4), the Environmental Obligations (as defined in
Section 7.5), and all other obligations assumed by ASSIGNEE
under this Agreement; and
(vii) Responsibility for all obligations with respect to gas
production or processing imbalances with third parties
attributable to the Property for production from and after
the Effective Date.
7.2.2 Non-Operator's Obligations. With respect to (i) any part of the
Property for which ASSIGNEE is not duly elected operator, or (ii)
any non-operating interests in the Property, ASSIGNEE shall assume
full responsibility and liability for Assignee's Assumed
Obligations with respect to the non-operating interests being
conveyed and assigned under this Agreement.
7.3 ASSIGNOR's Obligations After Closing.
7.3.1 Description of Obligations. After Closing, ASSIGNOR will retain
responsibility for all liabilities, obligations and duties with
respect to the ownership and (if applicable) operation of the
Property that are attributable to periods before the Effective
Date, except as otherwise
22
specifically provided in this Agreement (the "ASSIGNOR'S RETAINED
OBLIGATIONS"). The Assignor's Retained Obligations include without
limitation:
(i) Responsibility for the payment of all operating expenses and
capital expenditures related to the Property and attributable
to the period prior to the Effective Date.
(ii) Responsibility for performance of all express and implied
obligations and covenants under the terms of the Leases,
other instruments in the chain of title, the Related
Contracts and all other orders and contracts to which the
Property is subject arising before the Effective Date;
(iii) Responsibility for payment of all royalties, overriding
royalties, production payments, net profits obligations,
rentals, shut-in payments and other burdens or encumbrances
to which the Property is subject that are attributable to
periods before the Effective Date.
(iv) Responsibility for proper accounting for and disbursement of
production proceeds from the Property attributable to periods
before the Effective Date;
(v) Responsibility for compliance with all applicable laws,
ordinances, rules and regulations pertaining to the Property,
and the procurement and maintenance of all permits required
by public authorities in connection with the Property before
the Effective Date; and
(vi) Responsibility for the exclusions from the Plugging and
Abandonment Obligations described in Section 7.4.2, and the
exclusions from the Environmental Obligations described in
Section 7.5.2.
7.3.2 Non-Operator's Obligations. With respect to (i) any periods of time
before the Effective Date during which ASSIGNOR was not operator of
the Property, or (ii) any non-operating interests in the Property,
ASSIGNOR retains full responsibility and liability for ASSIGNOR's
Retained Obligations with respect to the non-operating interests
being conveyed and assigned under this Agreement.
7.4 Plugging and Abandonment Obligations.
7.4.1 ASSIGNEE's Obligations. Upon and after Closing, ASSIGNEE assumes
full responsibility and liability for the following plugging and
abandonment obligations related to the Property (the "PLUGGING AND
ABANDONMENT OBLIGATIONS"), regardless of whether they are
attributable to the ownership or operation of the Property before
or after the Effective Date:
(i) The necessary and proper plugging, replugging and abandonment
of all xxxxx on the Property, whether plugged and abandoned
before or after the Effective Date;
(ii) The necessary and proper removal, abandonment, and disposal
of all , structures, pipelines, equipment, abandoned property
and junk located on or comprising part of the Property;
23
(iii) The necessary and proper capping and burying of all
associated flow lines located on or comprising part of the
Property;
(iv) The necessary and proper restoration of the Property, both
surface and subsurface, to the condition they were in before
commencement of oil and gas operations; as may be required by
applicable laws, regulation or contract;
(v) Any necessary clean-up or disposal of Property contaminated
by naturally occurring radioactive material ("NORM");
(vi) All obligations arising from contractual requirements and
demands made by courts, authorized regulatory bodies or
parties claiming a vested interest in the Property; and
(vii) Obtaining and maintaining all bonds, or supplemental or
additional bonds, that may be required contractually or by
governmental authorities.
7.4.2 Exclusions from ASSIGNEE's Obligations. ASSIGNEE's obligations
under this Section 7.4 do not include any civil or criminal fines
or penalties (or any settlements of such fines and penalties) that
may be levied against ASSIGNOR by any court or regulatory authority
for non-compliance with applicable laws, regulations or orders in
connection with the ownership or operation of the Property before
the Effective Date.
7.4.3 Standard of Operations. ASSIGNEE shall conduct all plugging,
replugging, abandonment, removal, disposal and restoration
operations in a good and workmanlike manner and in compliance with
all applicable laws and regulations.
7.4.4 Non-Operator's Obligations. With respect to any non-operating
interests in the Property, ASSIGNEE shall assume full
responsibility and liability, from and after the Effective Date,
for the Plugging and Abandonment Obligations with respect to the
non-operating interests being conveyed and assigned under this
Agreement.
7.4.5 ASSIGNOR's Remedies. If ASSIGNEE defaults in the performance of its
obligations pursuant to this Section 7.4, ASSIGNOR, at its option,
and after reasonable notice, may complete, or have completed, the
plugging, replugging, abandonment, removal, disposal, capping,
burying, and restoration operations at ASSIGNEE's expense. Exercise
of ASSIGNOR's rights hereunder shall in no way limit ASSIGNOR's
rights to seek recovery for any uncompensated damages resulting
from such default or to exercise any other legal rights and
remedies hereunder.
7.5 Environmental Obligations.
7.5.1 ASSIGNEE's Obligations. Except as provided in Section 7.5.2 or to
the extent consittuting a breach of ASSIGNOR's representations and
warranties under Article 3 of this Agreement, upon and after
Closing, ASSIGNEE assumes full responsibility and liability for the
following occurrences, events and activities on or related to the
Property (the "ENVIRONMENTAL OBLIGATIONS"), regardless of whether
arising from the ownership or
24
operation of the Property before or after the Effective Date, and
regardless of whether resulting from any acts or omissions of
ASSIGNOR or the condition of the Property when acquired:
(i) Environmental pollution or contamination, including pollution
or contamination of the soil, groundwater or air by
Hydrocarbon, brine, NORM or otherwise;
(ii) Underground injection activities and waste disposal onsite;
(iii) Clean-up responses, and the cost of remediation, control,
assessment or compliance with respect to surface and
subsurface pollution caused by spills, pits, ponds or
lagoons;
(iv) Failure to comply with applicable land use, surface
disturbance, licensing or notification requirements;
(v) Disposal on the Property of any hazardous substances, wastes,
materials and products generated by or used in connection
with the ownership or operation of the Property before or
after the Effective Date; and
(vi) Non-compliance with environmental or land use rules,
regulations, demands or orders of appropriate state or
federal regulatory agencies.
7.5.2 Exclusions from ASSIGNEE's Obligations. ASSIGNEE's Environmental
Obligations do not include:
(i) Any civil or criminal fines or penalties (or any settlements
of such fines and penalties) that may be levied against
ASSIGNOR by any court or regulatory authority for any such
violation of any laws, rules or regulations in connection
with the ownership or operation of the Property before the
Effective Date, all of which shall remain the responsibility
of ASSIGNOR; and
(ii) Disposal offsite from the Property before the Effective Date
of any hazardous substances, wastes, NORM, materials and
products generated by or used in connection with the
ownership or operation of the Property before the Effective
Date.
7.5.3 Non-Operator's Obligations. With respect to any non-operating
interests in the Property being transferred to ASSIGNEE under this
Agreement, ASSIGNEE agrees to assume full responsibility and
liability, from and after the Effective Date, for the Environmental
Obligations with respect to the non-operating interests being
conveyed and assigned under this Agreement, save and except to the
extent constituting a breach of ASSIGNOR's representations and
warranties under Article 3 of this Agreement.
25
ARTICLE 8. INDEMNITIES
8.1 Definition of Claims. As used in this Agreement, the term "CLAIMS" means
any and all losses, liabilities, damages, punitive damages, obligations,
expenses, fines, penalties, costs, claims, causes of action and judgments
for: (i) breaches of contract; (ii) loss or damage to property, injury to
or death of persons, and other tortious injury; and (iii) violations of
applicable laws, rules, regulations, orders or any other legal right or
duty actionable at law or equity. The term "CLAIMS" also includes
reasonable attorneys fees, court costs, and other reasonable costs of
litigation resulting from the defense of any claim or cause of action
within the scope of the indemnities in this Agreement.
8.2 Application of Indemnities.
8.2.1 Covered Claims and Parties. All indemnities set forth in this
Agreement extend to the officers, directors, employees and
affiliates of the party indemnified. Unless this Agreement
expressly provides to the contrary, the indemnities set forth in
this Agreement apply regardless of whether the indemnified party
(or its employees, agents, contractors, successors or assigns)
causes, in whole or part, an indemnified Claim, including
indemnified Claims arising out of or resulting, in whole or part,
from the condition of the Property or the indemnified party's (or
its employees', agents', contractors', successors' or assigns')
sole or concurrent negligence, strict liability or fault. However,
the indemnities set forth in this Agreement do not extend to any
part of an indemnified Claim that (i) is the result of the gross
negligence, willful misconduct or fraud of the indemnified party,
(ii) is the result of the imposition of punitive damages on the
indemnified party arising from the acts of the indemnified party,
or (iii) is the result of the imposition of civil or criminal fines
or penalties by any court or regulatory authority on the
indemnified party due the indemnified party's failure to comply
with applicable laws, regulations or orders (including, without
limitation, any settlements of such fines and penalties).
8.2.2 Other Limitations. The indemnities of the indemnifying party in
this Agreement do not cover or include any amounts that the
indemnified party may legally recoup from other third party owners
under applicable joint operating agreements or other agreements, or
for which the indemnified party is reimbursed by any third party.
The indemnities in this Agreement do not relieve the parties to
this Agreement from any obligations to third parties. The
indemnities of the parties in this Agreement do not relieve the
indemnified party from, or extend to cover, any obligations of the
indemnified party under the terms of any operating agreement or
other cost-sharing arrangement which is applicable to any Claim.
There will be no upward or downward adjustment in the Purchase
Price as a result of any matter for which ASSIGNEE or Seller is
indemnified under this Agreement.
8.3 ASSIGNEE's Indemnity. ASSIGNEE shall indemnify, defend and hold ASSIGNOR
harmless from and against any and all Claims caused by, resulting from or
incidental to:
8.3.1 Assignee's Assumed Obligations, including without limitation the
Plugging and Abandonment Obligations and the Environmental
Obligations;
8.3.2 If applicable, ASSIGNOR's operation of the Property under Article
10, except to the extent caused by ASSIGNOR's gross negligence or
willful misconduct;
26
8.3.3 Any obligations for brokerage or finder's fee or commission
incurred by ASSIGNEE in connection with its purchase of the
Property;
8.3.4 Any violation by ASSIGNEE of state or federal securities laws, or
ASSIGNEE's dealings (including any dealings in breach of ASSIGNEE's
warranties and representations in Section 3.3.3) with its partners,
investors, financial institutions, assignees and other third
parties in connection with the transaction under this Agreement, or
any subsequent sale or other disposition of the Property (or
portion thereof) by ASSIGNEE, its affiliates or assignees;
8.3.5 Any oil and gas production imbalances associated with the Property
that ASSIGNEE assumes under Section 11.1; and
8.3.6 ASSIGNEE's ownership or operation of any portion of the Property is
reconveyed or reassigned to ASSIGNOR pursuant to Sections 5.4.2 or
5.5.3(ii) due to failure to obtain requisite Consents or government
approvals, except to the extent any such Claim is the direct result
of ASSIGNOR's ownership or operation of the Property before the
Effective Date.
8.4 ASSIGNOR's Indemnity. ASSIGNOR shall indemnify, defend and hold ASSIGNEE
harmless from and against any and all Claims caused by, resulting from or
incidental to:
8.4.1 Assignor's Retained Obligations, including the exclusions from the
Plugging and Abandonment Obligations and the exclusions from the
Environmental Obligations assumed by ASSIGNEE in the Assignee's
Assumed Obligations; and
8.4.2 If applicable, ASSIGNOR's operation of the Property under Article
10, to the extent caused by ASSIGNOR's gross negligence or willful
misconduct.
8.5 Notices and Defense of Indemnified Claims. Each party shall immediately
notify the other party of any Claim of which it becomes aware and for which
it is entitled to indemnification from the other party under this
Agreement. The indemnifying party shall be obligated to defend at the
indemnifying party's sole expense any litigation or other administrative or
adversarial proceeding against the indemnified party relating to any Claim
for which the indemnifying party has agreed to indemnify and hold the
indemnified party harmless under this Agreement. However, the indemnified
party shall have the right to participate with the indemnifying party in
the defense of any such Claim at its own expense.
8.6 ASSIGNOR's Indemnity Limit. Notwithstanding anything herein to the
contrary; (i) in no event shall ASSIGNOR be required to indemnify ASSIGNEE
for any Claim or pay any other amount in connection with or with respect to
the transactions contemplated in this Agreement in any amount exceeding in
the aggregate 35 percent of the Purchase Price as adjusted pursuant to
Section 2.2 and (ii) in no event shall ASSIGNOR be required to indemnify
ASSIGNEE for any Claim covered by ASSIGNOR's indemnity under Section 8.4,
if ASSIGNOR does not receive written notice of the Claim as provided in
Section 8.5 within 12 months after the Closing Date.
8.7 NORM. ASSIGNEE ACKNOWLEDGES THAT IT HAS BEEN INFORMED THAT OIL AND GAS
PRODUCING FORMATIONS CAN CONTAIN NATURALLY OCCURRING RADIOACTIVE MATERIAL
("NORM"). SCALE FORMATION OR SLUDGE DEPOSITS CAN
00
XXXXXXXXXXX XXX XXXXXX XX XXXX XX EQUIPMENT AND OTHER PROPERTY. SOME OR ALL
OF THE EQUIPMENT, MATERIALS AND OTHER PROPERTY SUBJECT TO THIS AGREEMENT
MAY HAVE LEVELS OF NORM ABOVE BACKGROUND LEVELS. A HEALTH HAZARD MAY EXIST
IN CONNECTION WITH THIS EQUIPMENT, MATERIALS AND OTHER PROPERTY BY REASON
THEREOF. THEREFORE, ASSIGNEE MAY NEED TO FOLLOW SAFETY PROCEDURES WHEN
HANDLING THIS EQUIPMENT, AND OTHER PROPERTY.
8.8 Pending Litigation and Claims. Notwithstanding anything in this Agreement
to the contrary, SOUTHWEST shall indemnify, defend and hold CONOCO harmless
from and against any Claims resulting from the litigation and claims listed
on Exhibit C under the section entitled "SOUTHWEST Responsibility," except
as may otherwise be expressly provided in that Exhibit. CONOCO shall
indemnify, defend and hold SOUTHWEST harmless from and against any Claims
resulting from the litigation and claims listed on Exhibit C under the
section entitled "Conoco Responsibility," except as may otherwise be
expressly provided in that Exhibit.
8.9 Waiver of Consequential and Punitive Damages. Neither ASSIGNEE nor
ASSIGNOR shall be entitled to recover from the other, respectively, for any
losses, costs, expenses, or damages arising under this Agreement or in
connection with or with respect to the transactions contemplated in this
Agreement any amount in excess of the actual compensatory damages, court
costs and reasonable attorney fees, suffered by such Party. ASSIGNEE AND
ASSIGNOR BOTH WAIVE ANY RIGHT TO RECOVER PUNITIVE, SPECIAL, EXEMPLARY AND
CONSEQUENTIAL DAMAGES ARISING IN CONNECTION WITH OR WITH RESPECT TO THE
TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT.
ARTICLE 9. TAXES AND EXPENSES
9.1 Recording Expenses. ASSIGNEE shall pay all costs of recording and filing
the Assignment Documents for the Property, all state and federal transfer
and assignment documents, and all other instruments.
9.2 Ad Valorem, Real Property and Personal Property Taxes. All Ad Valorem
Taxes, Real Property Taxes, Personal Property Taxes, and similar
obligations ("PROPERTY TAXES") on the Property are ASSIGNOR's obligation
for periods before the Effective Date and ASSIGNEE's obligation for periods
after the Effective Date. If Property Taxes for the current tax year have
not been assessed and paid as of the Closing Date, the ASSIGNEE shall file
all required reports and returns incident to the Property Taxes and pay the
Property Taxes for the current tax year and subsequent periods. The
ASSIGNOR will reimburse the ASSIGNEE promptly for the ASSIGNOR's
proportionate share of these taxes, prorated as of the Effective Date, upon
receipt of evidence of the ASSIGNEE's payment of the taxes. If Property
Taxes for the current tax year have been assessed and paid as of the
Closing Date, the ASSIGNEE will reimburse the ASSIGNOR for its
proportionate share of these taxes, prorated as of the Effective Date, as a
closing adjustment to the Purchase Price, as provided in Section 2.2 of
this Agreement.
9.3 Severance Taxes. ASSIGNOR shall bear and pay all severance or other taxes
measured by Hydrocarbon production from the Property, or the receipt of
proceeds therefrom, to the extent attributable to production from the
Property before the Effective Date. ASSIGNEE shall bear and
28
pay all such taxes on production from the Property on and after the
Effective Date. ASSIGNOR shall withhold and pay on behalf of ASSIGNEE all
such taxes on production from the Property between the Effective Date and
the Closing Date, if the Closing Date follows the Effective Date, and the
amount of any such payment shall be reimbursed to ASSIGNOR as a closing
adjustment to the Purchase Price pursuant to Section 2.2. If either party
pays taxes owed by the other, upon receipt of evidence of payment the
nonpaying party will reimburse the paying party promptly for its
proportionate share of such taxes.
9.4 Tax and Financial Reporting.
9.4.1 IRS Form 8594. If the parties mutually agree that a filing of Form
8594 is required, the parties will confer and cooperate in the
preparation and filing of their respective forms to reflect a
consistent reporting of the agreed upon allocation of the value of
the Property.
9.4.2 Financial Reporting. ASSIGNOR and ASSIGNEE agree to furnish to each
other at Closing or as soon thereafter as practicable any and all
information and documents reasonably required to comply with tax
and financial reporting requirements and audits.
9.4.3 Intangible Drilling Cost Recapture. ASSIGNOR and ASSIGNEE agree to
furnish to each other, at Closing or as soon as practicable
thereafter, data relative to deductions claimed, pursuant to
Section 263(c) of the Internal Revenue Code of 1986, for intangible
drilling costs related to the Property, and any other relevant data
to allow each party to calculate the carryover intangible drilling
costs associated with the Property that is subject to potential
recapture under Section 1254(a) of the Internal Revenue Code of
1986.
9.5 Sales and Use Taxes. ASSIGNEE shall be responsible for all sales, use and
similar taxes applicable to the transfer of the Property it receives under
this Agreement. If ASSIGNOR is required to pay such sales, use or similar
taxes on behalf of ASSIGNEE, ASSIGNEE will reimburse ASSIGNOR at Closing
for all sales and use taxes due and payable on the transfer of the Property
to ASSIGNEE.
9.6 Income Taxes. Each party shall be responsible for its own state and
federal income taxes, if any, as may result from this transaction.
9.7 Incidental Expenses. Each party shall bear its own respective expenses
incurred in connection with the negotiation and Closing of this
transaction, including its own consultants' fees, attorneys' fees,
accountants' fees, and other similar costs and expenses.
ARTICLE 10. OPERATIONS DURING THE TRANSITION PERIOD
10.1 Operations by ASSIGNOR. If ASSIGNOR is the operator of all or part of
the Property, and the Closing Date follows the Effective Date, ASSIGNOR
shall continue to operate that portion of the Property during the period
between the Effective Date and 7:00 a.m., local time, where the Property is
located, on the first day of the month following the month in which Closing
occurs, or such other date as ASSIGNOR and ASSIGNEE may agree in writing or
may be required by the applicable operating agreement (the "INTERIM
PERIOD"). However, ASSIGNOR will have no obligation to operate any portion
of the Property after the Interim Period. ASSIGNOR shall operate the
Property during the Interim Period in a prudent manner consistent with
generally accepted industry practices and standards, applicable laws and
regulations, and all applicable lease and operating agreements
29
and other applicable agreements. ASSIGNOR makes no representation or
warranty that ASSIGNEE will become operator of any portion of the Property,
as that matter is controlled by the applicable operating agreements and
governmental regulatory requirements.
10.2 ASSIGNEE's Approval. In conducting operations during the Interim
Period after the Closing Date, ASSIGNOR shall, except for emergency action
taken in the face of serious risk of life, property or the environment, (i)
obtain ASSIGNEE's prior written approval of all expenditures and proposed
contracts and agreements, or amendments to existing contracts and
agreements relating to the Property that involve individual commitments of
more than $10,000 net to ASSIGNEE'S interest; (ii) consult with and advise
ASSIGNEE regarding all material matters concerning the operation,
management and administration of the Property; and (iii) obtain ASSIGNEE's
written approval before voting under any operating, unit, joint venture or
similar agreement. ASSIGNOR shall notify ASSIGNEE of any emergency action
taken, and to the extent reasonably practicable, obtain ASSIGNEE's prior
approval of such actions. However, except for emergency action that must
be taken in the face of serious risk of life, property or the environment,
ASSIGNOR will have no obligation to undertake any actions with respect to
the Property that are not required in the course of the normal operation of
the Property.
10.3 Compensation of ASSIGNOR. ASSIGNEE will pay ASSIGNOR, as provided
under the applicable operating agreement, for ASSIGNEE's working interest
share of all operating expenses and other expenditures paid or incurred by
ASSIGNOR in connection with the operation of the Property during the
Interim Period, including overhead charges at the rate specified in the
applicable operating agreement (unless if ASSIGNOR owns all of the working
interest in the Property subject to the applicable operating agreement.
ASSIGNOR will have no obligation to make capital expenditures or
extraordinary operating expenditures in connection with the Property during
the Interim Period. Additionally, ASSIGNOR may require ASSIGNEE to prepay
on a monthly basis any and all expenses that ASSIGNOR estimates it will pay
or incur in connection with the operation of the Property. If ASSIGNEE is
ultimately selected as operator of the Property, ASSIGNEE will additionally
reimburse ASSIGNOR for the amounts of any unpaid operating expenses and
capital expenditures of other working interest owners paid or incurred by
ASSIGNOR and attributable to operations during the Interim Period and
ASSIGNOR shall assign all claims with respect thereto to ASSIGNEE. ASSIGNOR
will be entitled to retain any overhead payments received from other
working interest owners and attributable to operations during the Interim
Period.
10.4 Operation of Certain Property After Interim Period. ASSIGNOR and ASSIGNEE
recognize that ASSIGNOR may remain the record title owner of certain
portions of the Property after the Interim Period, pending receipt of
government transfer approvals, as provided in Section 5.4. If ASSIGNOR is
required to remain the operator of the affected Property until the required
approvals are obtained, then ASSIGNOR will operate the affected Property
during the period prior to receiving such approvals, as provided in this
Sections 10.1 through 10.3.
ARTICLE 11. MISCELLANEOUS
11.1 Production Imbalances. The Purchase Price paid by ASSIGNEE is based
on the assumed oil or gas production imbalances with respect to the
Property set forth in Exhibit G. If ASSIGNOR and ASSIGNEE determine no
later than 180 days after Closing that the production imbalances stated in
Exhibit G are inaccurate, the parties agree to exchange additional
compensation, as provided in
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Exhibit G, for the difference between the imbalances set forth in Exhibit G
and the revised imbalances determined by the parties. Thereafter, ASSIGNEE
will be solely responsible for any liability and solely entitled to any
benefit that results from revision of production imbalance information
about the Property after the Closing Date.
11.2 Crude Oil Marketing Opportunity. Subject to any existing marketing
contracts, ASSIGNOR shall not further dedicate or commit the oil,
condensate or other Liquid Hydrocarbons (Liquid Hydrocarbons) produced from
the Property. After Closing, and at such future times as ASSIGNEE seeks
offers or proposals to purchase the Liquid Hydrocarbons produced from the
Property, it is further understood and agreed between the parties that
ASSIGNEE will invite ASSIGNOR to submit an offer or bid to purchase any
such production. ASSIGNEE is in no way restricted as to when or to whom it
may solicit offers, nor as to the term to which ASSIGNEE may commit or
dedicate any such production. There shall be no obligations on the part of
ASSIGNEE to give preference to ASSIGNOR, but rather it is the intent of the
parties that ASSIGNOR shall have the continuing opportunity to participate,
on a competitive and good faith basis, in ASSIGNEE'S marketing process for
the Liquid and Gaseous Hydrocarbons produced from the Property.
11.3 Dispute Resolution. Compliance with this Section 11.3 shall
constitute a condition precedent to either Party seeking judicial
enforcement of any provisions of this Agreement. Any dispute concerning
this Agreement shall be resolved under the mediation and binding
arbitration procedures of this Section 11.3. ASSIGNEE and ASSIGNOR will
first attempt in good faith to resolve all disputes by negotiations between
management level persons who have authority to settle the controversy. If
either Party believes further negotiations are futile, such Party may
initiate the mediation process by so notifying the other Party in writing.
Both Parties shall then attempt in good faith to resolve the dispute by
mediation in Midland, Texas, employing management level persons with
authority to settle the dispute, in accordance with the Center for Public
Resources Model Procedure for Mediation of Business Disputes, as such
procedure may be modified by agreement of the Parties. If the dispute has
not been resolved pursuant to mediation within sixty (60) days after
initiating the mediation process, the dispute shall be finally resolved
through binding arbitration, as follows:
(i) If any dispute or controversy shall arise between the Parties out of
this Agreement, the alleged breach thereof or any tort in connection
therewith, or out of the refusal to perform the whole or any part
thereof, and the Parties shall be unable to agree with respect to the
matter or matters in dispute or controversy, the same shall be
submitted to arbitration before a panel of arbitrators in accordance
with the Texas General Arbitration Act, V.A.C.S. art. 224, et seq.
The panel of arbitrators shall be chosen as follows: Upon the written
demand of either Party and within ten (10) working days from the date
of such demand, each Party shall name an arbitrator and these two so
named shall promptly thereafter choose a third. If either Party shall
fail to name an arbitrator within ten (10) working days from such
demand, the other Party shall name the second arbitrator as well as
the first, or if the two arbitrators shall fail within ten (10)
working days from their appointment to agree upon and appoint the
third arbitrator, then upon written application by either Party such
third arbitrator may be appointed by the senior Judge in active
service of the United States District Court for the Western District
of Texas; and if said Judge shall fail to act, then such third
arbitrator shall be appointed by the President of the Center for
Public Resources, Inc. The arbitrators
31
selected to act hereunder shall be qualified by education,
experience, and training to pass upon the particular matter or
matters in dispute.
(ii) The panel of arbitrators so chosen shall proceed promptly to hear and
determine the matter or matters in dispute, after giving the Parties
due notice of hearing and a reasonable opportunity to be heard. The
procedure of the arbitration proceedings shall be in accordance with
the Center for Public Resources Rules for Non-Administered
Arbitration of Business Disputes, as may be modified by the panel of
arbitrators. Unless otherwise determined by the arbitrators, the
hearing and presentations of the Parties shall not exceed two days
cumulative. The location of all arbitration proceedings hereunder
shall be Midland, Midland County, Texas, unless the panel of
arbitrators determines that another venue is more appropriate. The
award of the panel of arbitrators or a majority thereof shall be made
within forty-five (45) days after the appointment of the third
arbitrator, subject to any reasonable delay due to unforeseen
circumstances. In the event of the panel or a majority thereof
failing to make a award within sixty (60) days after the appointment
of the third arbitrator, new arbitrators may at the election of
either Party be chosen in like manner as if none had been previously
selected.
(iii) The award of the arbitrators, or a majority thereof, shall be in
writing and shall be final and binding on the Parties as to the
question or questions submitted, and the Parties shall abide by such
award and perform the conditions thereof. The award of the
arbitrators shall be based on the applicable law and facts, the
merits of the Parties' positions in the controversy or dispute, and
the arbitrators' assessment of the fairness and reasonableness of any
settlement proposal of any Party. The award shall not provide or
create any rights or benefits in any person or entity which is not a
Party to this Agreement, as this Agreement and any arbitration
thereunder shall not be construed as a third party bene ficiary
contract. Unless otherwise determined by the arbitrators, all
expenses in connec tion with such arbitration shall be divided
equally between the Parties thereto, except that the expenses of
counsel, witnesses, and employees of each Party shall be borne solely
by the Party incurring them, and the compensation of any arbitrator
named by a Party shall be borne solely by such Party.
(iv) The arbitrators shall not be required to explain reasons for the
award. No transcript or other recording shall be made of the
arbitration proceedings. Except (a) in connection with a suit for
enforcement of the award, (b) as required by law, court order or
regulation, (c) when reasonably necessary to explain the terms and
conditions of the award to outside attorneys, auditors, and insurers,
or (d) as part of good faith compliance with disclosure obligations
under applicable law, the arbitration proceedings, the award, and the
Parties' actions in connection with the arbitration are confidential
and shall not be disclosed to third parties, and no disclosure of or
reference to the arbitration, the award, or of the par ties'
statements or actions in connection with the arbitration shall be
made to any third party. All offers, promises, conduct, statements,
and evidence, whether oral or written, made in the course of the
arbitration by any of the Parties, their agents, employees, experts,
or attorneys are confidential. Such offers, promises, conduct,
statements, and evidence shall be considered inadmissible under Rule
408 of the Federal Rules of Evidence and any similar state
provisions, and shall be inadmissible for any purpose, including
impeachment. However, evidence that is otherwise admissible shall not
be rendered inadmissible as a result of its use in the arbitration.
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(v) The award of the panel of arbitrators and the obligation to abide by
same and perform the conditions thereof shall be enforceable in the
Texas state district courts in Midland County, Texas, or in any
federal court having jurisdiction.
11.4 Survival of Representations and Warranties. All of the representations,
warranties, indemnities and agreements of or by the parties to this
Agreement will survive the execution and delivery of the closing documents
under this Agreement, and the transfer of the Property between the parties.
11.5 Public Announcements. Neither party may make press releases or other public
announcements concerning this transaction, without the other party's prior
written approval and agreement to the form of the announcement, except as
may be required by applicable laws or rules and regulation of any
governmental agency or stock exchange.
11.6 Notices. All notices under this Agreement must be in writing. Any notice
under this Agreement may be given by personal delivery, facsimile
transmission, U.S. mail (postage prepaid), or commercial delivery service,
and will be deemed duly given when received by the party charged with such
notice and addressed as follows:
If to ASSIGNOR: CONOCO INC.
0000 Xxxxx Xxxx
X. X. Xxx 0000
Xxxxx Xxxx, Xxxxxxxx 00000
Attention: Manager, Real Property Administration
Fax No.: (000) 000-0000
Telephone: (000) 000-0000
with copy to: CONOCO INC.
00 Xxxxx Xxxxx, Xxxxx 000 Xxxx
Xxxxxxx, Xxxxx 00000
Attention: Region Manager
Fax No.: (000) 000-0000
Telephone: (000) 000-0000
If to ASSIGNEE:
SOUTHWEST ROYALTIES, INC.
000 X. Xxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: X.X. Xxxxxxx III
Title: President________________________
Fax No.: (000) 000-0000____________
Telephone: (000) 000-0000
With Copy To:
Xxxx & Xxxx, L.L.P.
Attention: Xxxxxxx X. Xxxx, Xx.
X.X. Xxx 0000
Xxxxxxx, Xx
Fax No: (000) 000-0000
Telephone: (000) 000-0000
33
Any party, by written notice to the other, may change the address or the
individual to which or to whom notices are to be sent under this
Agreement.
11.7 Effective Date. The Effective Date of this Agreement will be 7:00
a.m., local time, where the Property is located, on OCTOBER 1, 1997.
11.8 Assignment. Prior to the later of the Closing Date or the Effective Date,
neither party may assign its rights or obligations under this Agreement
without the prior written consent of the other, unless the assignment
occurs by merger, reorganization or sale of all of a party's assets. If
ASSIGNEE sells or assigns all or a portion of the Property to a
subsequent purchaser, this Agreement and all rights and obligations under
this Agreement will remain in effect between ASSIGNEE and ASSIGNOR as to
all of the Property, notwithstanding such sale or assignment.
11.9 Entire Agreement and Amendment. This Agreement constitutes the entire
understanding between the parties, superseding all prior negotiations,
discussions, agreements and understandings between the parties regarding
the subject transaction, excepting any written agreements that may be
executed by the parties concurrently or after the execution of this
Agreement. This Agreement may be amended, modified, and supplemented only
by written agreement between duly authorized representatives of the
parties.
11.10 Successors and Assigns. This Agreement binds and inures to the benefit of
the parties hereto their respective permitted successors and assigns, and
nothing contained in this Agreement, express or implied, is intended to
confer upon any other person or entity any benefits, rights, or remedies.
11.11 Severability. If any provision of this Agreement is found by a court of
competent jurisdiction to be invalid or unenforceable, that provision
will be deemed modified to the extent necessary to make it valid and
enforceable and if it cannot be so modified, it shall be deemed deleted
and the remainder of the Agreement shall continue and remain in full
force and effect.
11.12 Counterparts. This Agreement may be executed in counterparts, each of
which shall constitute an original and all of which shall constitute one
document.
11.13 Governing Law. This Agreement is governed by and must be construed
according to the laws of the State of Texas, excluding any conflicts-of-
law rule or principle that might apply the law of another jurisdiction.
TO THE EXTENT THEY MAY BE APPLICABLE, THE PARTIES WAIVE THE PROVISIONS OF
THE "TEXAS DECEPTIVE TRADE PRACTICES ACT", OTHER THAN SECTION 17.555
THEREOF WHICH IS NOT WAIVED. The Assignment Documents, and any other
instruments of conveyance executed under this Agreement, will be governed
by and must be construed according to the laws of the state where the
Property to which they pertain is located, excluding any conflicts-of-law
rule or principle that might apply the law of another jurisdiction,
except as otherwise provided in the Assignment Documents or instruments.
11.14 Exhibits. The Exhibits attached to this Agreement are incorporated into
and made a part of this Agreement. In the event of a conflict between the
provisions of the Exhibits or the executed Assignment Documents and the
foregoing provisions of this Agreement, the provisions of this Agreement
shall take precedence. In the event of a conflict between the provisions
of the pro forma
34
Assignment Documents and other transaction documents attached to this
Agreement as Exhibits and the Assignment Documents and other transaction
documents actually executed by the parties, the provisions of the
executed Assignment Documents and other executed contractual documents
shall take precedence. The omission of certain provisions of this
Agreement from the Assignment Documents does not constitute a conflict
between this Agreement and the Assignment Documents, and will not effect
a merger of the omitted provisions.
11.15 Aprroval Requirement: This Agreement shall be subject to approval by the
Office of the Chief Executive of DuPont on or before September 17, 1997,
failing which either party may terminate this Agreement (with the
Performance Deposit to be immediately refunded to ASSIGNEE in the event
of any such termination). Furthermore, ASSIGNOR shall notify ASSIGNEE
immediately of any such approval or termination of this Agreement.
11.16 Suspense Accounts. At ASSIGNOR's option and as soon as practical after
Closing, ASSIGNOR shall transfer to ASSIGNEE all funds held by ASSIGNOR
in suspense related to proceeds of production and attributable to third
parties' interests in the Leases, including funds suspended awaiting
minimum disbursement requirements, funds suspended under division orders
and funds suspended for title and other defects, together with legible
copies of all pertinent records of ASSIGNOR relating to such suspended
funds. If such funds are transferred, ASSIGNEE agrees to administer all
such accounts and assumes all payment obligations relating thereto in
accordance with all applicable laws, rules and regulations, and shall be
liable for the payment thereof to the proper parties; provided however,
ASSIGNEE shall not be responsible for any interest or penalties that may
have accrued before the Effective Date.
IN WITNESS WHEREOF, the authorized representatives of CONOCO and
SOUTHWEST execute this Agreement on the dates stated below.
CONOCO INC. SOUTHWEST ROYALITES, INC.
By:_____________________________ By:___________________________
Name: Xxxxx X. Xxxxxx Name: Xxxx X. Xxxxxx
Title: Attorney-in-Fact Title: Vice President
Date:___________________________ Date:__________________________
Witnesses:______________________ Witnesses:_____________________
35