AGREEMENT FOR PURCHASE AND SALE
BY AND BETWEEN
HI-PRO PRODUCTION, LLC
as Seller
and
ROCKY MOUNTAIN GAS, INC.
as Buyer
December 18, 2003
TABLE OF CONTENTS
Page
1. Sale and Purchase of the Gas Properties
1.1. The Gas Properties 1
1.2. Excluded Assets 2
2. Purchase Price 3
2.1. Basic Amount 3
2.2. Adjustments to Purchase Price 3
2.3. Closing Statement 4
2.4. Title Procedure 4
3. Representations and Warranties of Seller 4
3.1. Organization 4
3.2. Authority and Authorization 4
3.3. Enforceability 4
3.4 Conflicts 4
3.5. Contracts 5
3.6. Litigation and Claims 5
3.7. Approvals and Preferential Rights 5
3.8. Compliance with Law and Permits 5
3.9. Environmental Compliance 6
3.10. Status of Contracts 6
3.11. Production Burdens, Taxes, Expenses and Revenues 6
3.12. Current Commitments 6
3.13. Liens and Encumbrances 7
4. Representations and Warranties of Buyer 7
4.1. Organization 7
4.2. Authorization and Authority 7
4.3. Enforceability 7
4.4. Conflicts 7
4.5. Reliance 8
4.6. Qualified Leaseholder 8
4.7. Qualified Purchaser 8
4.8. Available Funds 8
5. Covenants of Seller Pending Closing 8
5.1. Conduct of Business Pending Closing 8
5.2. Access 9
5.3 Notification 9
6. Covenants of Buyer Pending Closing 9
6.1. Notifications 9
6.2. Governmental Bonds 10
7. Conditions Precedent to the Obligations of Buyer 10
7.1. Representations and Warranties 10
7.2. Compliance 10
7.3. Consents 10
7.4. No Pending Suits 10
7.5. Liens and Encumbrances 10
8. Conditions Precedent to the Obligations of Seller 10
8.1. Representations and Warranties 10
8.2. Compliance 10
8.3. Consents 11
8.4. No Pending Suits 11
9. Closing 11
9.1 The Closing 11
9.2. Documents to be Delivered at Closing 11
9.3. Possession 12
9.4. Payment of Purchase Price 12
10. Termination 12
10.1. Events of Xxxxxxxxxxx 00
00. Taxes, Prorations and Assumption of Obligations 12
11.1. Tax Prorations 12
11.1.1 Severance/Ad Valorem Taxes 13
11.1.2 Conservation Taxes 13
11.2 Assumption of Obligations 13
11.3 Suspense and/or Escrow Accounts 13
11.4 Gas Transactions 14
12. Final Accounting 14
12.1. Settlement Statement 14
12.2. Arbitration of Final Settlement 14
12.3. Payment 14
13. Survival and Indemnification 15
13.1. Survival 15
13.2. Liabilities 15
13.3. Indemnification by Seller 15
13.4. Indemnification by Buyer 15
13.5. Liability Limitations 16
13.6. Waiver of Representations 18
14. Environmental Review and Remedies for Environmental Defects 19
14.1. Environmental Review 19
14.2. Conduct of Review 20
15. Further Assurances 20
15.1. General 20
15.2. Filings, Notices and Certain Governmental Approvals 20
15.3. Logos and Names 20
16. Access by Buyer after Closing 20
17. Notices 21
18. Assignment 22
19. Governing Law 22
20. Expenses and Fees 22
21. Integration 22
22. Waiver or Modification 22
23. Headings 23
24. Invalid Provisions 23
25. Waiver of Jury Trial 23
26. Multiple Counterparts 23
27. Confidentiality. 23
TABLE OF DEFINED TERMS
Term Section
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Adjusted Purchase Price 2.1
Agreement Page 1
Business Day 17
Buyer Page 1
Buyer Indemnified Parties 13.3
Closing 9.1
Closing Date 9.1
Closing Period 2.2.1
Closing Statement 2.3
Contracts 1.1.7
Data 1.1.6
Dispute 28.1
Effective Date 1
Equipment 1.1.5
Equitable Limitations 3.3
Excluded Assets 1.2
Final Settlement Statement 12.1
Liabilities 13.2
Gas Properties 1.1.1
Permits 1.1.8
Properties 1
Purchase Price 2.1
Seller Page 1
Seller Indemnified Parties 13.4
Substances 1.1.3
Surface Rights 1.1.4
Xxxxx 1.1.2
AGREEMENT FOR PURCHASE AND SALE
This Agreement for Purchase and Sale ("Agreement") is made and entered
into on this the 18th day of December, 2003, by and between Hi-Pro Production,
LLC ("Seller"), and Rocky Mountain Gas, Inc. ("Buyer").
1. SALE AND PURCHASE OF THE PROPERTIES. Subject to the terms and conditions
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and for the consideration herein set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Seller agrees to sell, assign, convey and deliver to Buyer, and Buyer agrees to
purchase and acquire from Seller at Closing, but effective as of 8:00 a.m. at
the location of each of the Gas Properties on November 1, 2003 (the "Effective
Date"), all of the interest of Seller in and to the following properties, other
than the Excluded Assets ("Proper-ties"):
1.1. THE PROPERTIES.
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1.1.1. GAS PROPERTIES. All right, title and interest in and to any
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agreements or contracts granting the right or option to explore for and produce
coalbed methane gas, including but not limited to lease-hold interests, fee
mineral interests or operating rights in the oil and gas and coalbed methane gas
leases described in Part I of the Exhibit (the "Gas Properties").
1.1.2. XXXXX. All --coalbed methane gas xxxxx located on the Gas
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Proper-ties, whether producing, operating, shut-in or temporarily abandoned
(the "Xxxxx").
1.1.3. SEVERED SUBSTANCES. All severed coalbed methane gas produced
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from the Gas Properties and sold on or after the Effective Date (the
"Substances").
1.1.4. SURFACE RIGHTS. All surface use agreements, right-of-way
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agreements or other agreements relating to the use or ownership of surface
properties that are used or held for use for access, roads, discharge of water,
pipelines, flow lines, or any other purpose in connection with the production of
Substances from the Gas Properties, including the rights-of-way agreements and
other agreements described in the Exhibit and all fee interests in those surface
parcels described on the Exhibit (the "Surface Rights").
1.1.5. EQUIPMENT. All equipment, fixtures and physical facilities of
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every type and description located on the Gas Properties (the "Equipment").
1.1.6. INFORMATION AND DATA. All engineering, geological and
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geophysical data, title opinions, lease and land files, filings with and reports
to regulatory agencies, gas and sales contract files, division order files and
other books, files and records to the extent that they are related to Gas
Properties and the transfer thereof is not prohibited by existing contractual
obligations (the "Data").
1.1.7. CONTRACTS. All con-tracts and arrangements that relate to the
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Gas Properties and the production, storage, treatment, transportation,
processing, purchase, sale, disposal or other disposition of Substances
therefrom, including but not limited to joint operating agreements, pooling
agreements, communitization agreements, unit agreements and farmouts, and any
and all amendments, ratifications or extensions of the fore-going, to the extent
that any of the foregoing relate to periods on or after the Effective Date (the
"Contracts"), and all rights to make claims and receive proceeds under any
insurance policy held by or on behalf of Seller in connection with the Gas
Properties for any claim that arises from the Effective Date through the Closing
Date in connection with the Proper-ties.
1.1.8. PERMITS. All franchises, licenses, permits, approvals,
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consents, certificates and other authorizations and other rights granted by
governmental authorities and all certificates of convenience or necessity,
immunities, privileges, grants and other rights, that relate to the Gas
Properties or the ownership or operation of any thereof (the "Permits").
1.1.9. WINGS GATHERING, COMPRESSION AND TRANSMISSION FACILITIES
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("WGCTF"). All easements, rights-of-way, contracts, pipelines, discharge
pipeline, compressor leases, service agreements and other rights and personal
property serving as the gathering and compression facility for the Wings field
together with the high pressure gas transmission line acquired by Seller from
Western Gas Resources, Inc. on December 11, 2003, and as described in Part I.B
of the Exhibit.
1.2. EXCLUDED ASSETS. As used herein, "Excluded Assets" means (a) all
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trade credits and all accounts, instruments and general intangibles (as such
terms are defined in the Wyoming Uniform Commercial Code) attributable to the
Gas Properties with respect to any period of time prior to the Effective Date;
(b) all claims and causes of action of Seller (i) arising from acts, omissions
or events, or damage to or destruction of property, occurring prior to the
Effective Date, (ii) arising under or with respect to any of the Contracts that
are attributable to periods of time prior to the Effective Date (including
claims for adjustments or refunds), or (iii) with respect to any of the Excluded
Assets; (c) all rights and interests of Seller (i) under any policy or agreement
of insurance or indemnity, (ii) under any bond, or (iii) to any insurance or
condemnation proceeds or awards arising, in each case, from acts, omissions or
events, or damage to or destruction of property, occurring prior to the
Effective Date; (d) all Substances produced and sold from the Gas Properties
with respect to all periods prior to the Effective Date, together with all
proceeds from or of such Substances; (e) claims of Seller for refunds of or loss
carry forwards with respect to (i) production or any other taxes attributable to
any period prior to the Effective Date, (ii) income or franchise taxes, or (iii)
any taxes attributable to the Excluded Assets; (f) all amounts due or payable to
Seller as adjustments to insurance premiums related to the Properties with
respect to any period prior to the Effective Date; (g) all proceeds, income or
revenues (and any security or other deposits made) attributable to (i) the
Properties for any period prior to the Effective Date, or (ii) any Excluded
Assets; (h) all personal computers and associated peripherals and all radio and
telephone equipment; (i) all of Seller's proprietary computer software, patents,
trade secrets, copyrights, names, trademarks, logos and other intellectual
property; (j) all documents and instruments of Seller that may be protected by
an attorney-client privilege; (k) data that cannot be disclosed or assigned to
Buyer as a result of confidentiality arrangements under agreements with persons
unaffiliated with Seller; (l) all audit rights arising under any of the
Contracts or otherwise with respect to any period prior to the Effective Date or
to any of the Excluded Assets; and (m) all equipment and personal property not
located on the Gas Properties or not currently utilized in connection with the
Gas Properties.
2. PURCHASE PRICE.
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2.1. BASIC AMOUNT. The purchase price for the Gas Proper-ties, subject
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to adjustment as provided in Section 2.2, shall be $7,250,000.00 (the "Purchase
Price"), of which the Buyer will make a down payment of $375,000.00 into escrow
in accordance with Section 2.1.1, leaving a remaining purchase price to be paid
at closing of $6,875,000.00, consisting of 376,000 common shares of unregistered
stock in U.S. Energy Corp. and $5,875,000.00 in cash. The remaining purchase
price as adjusted pursuant to Section 2.2 is referred to in this Agreement as
the "Adjusted Purchase Price."
2.1.1. DOWN PAYMENT ESCROW. Buyer will pay, on or before December
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29, 2003, the sum of $375,000.00 as a down payment to an account at the First
National Bank, Buffalo, Wyoming, and the parties have instructed the First
National Bank, Buffalo, Wyoming, to pay $75,000.00 to Seller, per week,
beginning December 29, 2003, and each Friday thereafter until the Closing, at
which time any remaining balance shall be paid to Seller, unless Buyer gives
written notice to Seller and the First National Bank, Buffalo, Wyoming, as
allowed by Article 7.6.
2.2. ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price shall be
adjusted as provided in this Section 2.2.
2.2.1. The Purchase Price shall be increased by the following
amounts (without duplication):
(a) An amount equal to the costs and expenses that are (i)
attributable to the Properties for the period from the Effective Date to
the Closing Date (the "Closing Period"), whether paid before or after the
Effective Date, and (ii) paid by Seller, including, without limitation,
bond and insurance premiums paid by or on behalf of Seller attributable to
coverage during the Closing Period.
(b) An amount equal to the revenue received by the Buyer for gas sales
prior to the Effective Date attributable to the Seller's interest in the
Gas Properties.
2.2.2. The Purchase Price shall be decreased by the following
amounts (without duplication):
(a) An amount equal to the proceeds received by Seller for the sale
during the Closing Period of Substances, net of all applicable taxes not
reimbursed to Seller by a purchaser of Substances.
(b) An amount equal to all proceeds received by Seller from whatever
source derived that relate to the Properties and are attributable to
periods on or after the Effective Date, other than operator's overhead
reimbursements received by Seller under joint operating agreements in which
Seller is designated as the operator.
(c) The amount of all taxes prorated to Buyer in accordance with
Section 11.
(d) The amount, if any, allowed for title defects as described in
Section 2.4,below.
2.3. CLOSING STATEMENT. Seller shall de-liver to Buyer not less than
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four Business Days before the Closing Date a statement (the "Closing Statement")
setting forth the adjustments to the Purchase Price provided in Section 2.2 and
those that have been agreed to by Seller and Buyer, if any, prior to such date
or determined by arbitration prior to such date. The Closing Statement shall be
prepared in accordance with customary ac-counting principles used in the oil and
gas industry.
2.4 TITLE PROCEDURE. If any of the information or materials supplied
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by Seller pursuant to this Agreement, or any other information or data,
including the Buyer's due diligence examination of title, reflects the existence
of any encumbrance, encroachment, defect in or objection to title that renders
title to the gas properties defective or encumbered, and not capable of being
conveyed due to a title defect that would make the Gas Properties unmarketable
("Title Defects"), then:
(a) Buyer shall notify Seller in writing of the Title Defects as they
are identified, providing Seller with adequate information to enable Seller
to go forward with curing the Title Defects. Within five (5) days prior to
closing, Seller shall furnish Buyer all documentation reasonably satisfying
the Title Defects.
(b) If Seller is unable to cure the Title Defects, Buyer shall have
the option to: accept the Gas Properties with the Title Defects and adjust
the Purchase Price in an amount to be agreed upon between Buyer and Seller
or terminate this Purchase and Sale Agreement and receive a refund from the
Seller of the down payment described in Section 2.1, above. The value of
the Title Defects must exceed $100,000 in value before any adjustment in
the Purchase Price will be made. The value of Title Defects as to all
producing Gas Properties shall be based on Buyer's bid amount as it relates
to each producing well. The value of Title Defects as to all non-producing
Gas Properties shall be based on Buyer's bid amount as it relates to the
mineral leases covering the non-producing Gas Properties. In the event
Buyer identifies Title Defects having a value of $100,000, or more, and the
same are not cured within five (5) days prior to closing and the Buyer and
Seller have not negotiated a reduction of the Purchase Price in exchange
for a waiver of the Title Defects within two (2) days prior to closing,
either party may terminate this Agreement as allowed in Section 10.1.
Notwithstanding this limitation, Seller shall always have the option to
remove any of the Gas Properties upon which there are Title Defects from
this transaction, reducing the Purchase Price by the value assigned to the
Title Defects and the affected interests. As to all producing Gas
Properties, Buyers shall not identify a title defect as to any Gas Property
that has been producing for more than two (2) years and as to which
Seller's title has not been challenged.
3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and warrants
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to Buyer as follows (any representation of Seller in this Section that relates
to Gas Properties in which Seller is a non-operator under a joint operating
agreement or similar agreement is limited to the knowledge of Seller):
3.1. ORGANIZATION. Seller is a limited liability company duly organized,
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validly existing and in good standing under the laws of the State of Wyoming.
Seller is qualified to do business in and is in good standing under the laws of
each state in which the Properties are located.
3.2. AUTHORITY AND AUTHORIZATION. Seller has full power and authority to
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carry on its business as presently con-ducted, to enter into this Agreement and
to perform its obligations under this Agreement. The execution and delivery of
this Agreement by Seller have been, and the performance by Seller of this
Agreement and the transactions contemplated hereby shall be at the time required
to be per-formed hereunder, duly and validly authorized by all requisite action
on the part of Seller.
3.3. ENFORCEABILITY. This Agreement has been duly executed and delivered on
behalf of Seller and constitutes the legal, valid and binding obligation of
Seller enforce-able in accordance with its terms, except as enforceability may
be limited by applicable bankrupt-cy, reorganization or moratorium statutes, or
other similar laws affecting the rights of creditors generally or equitable
principles (collectively, "Equitable Limitations"). At the Closing all documents
and instruments required hereunder to be executed and delivered by Seller shall
be duly executed and delivered and shall constitute legal, valid and binding
obligations of Seller enforceable in accordance with their terms, except as
en-force-ability may be limited by Equitable Limitations.
3.4. CONFLICTS. The execution and delivery of this Agreement by Seller does
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not, and the consummation of the trans-actions contemplated by this Agreement
shall not, (a) violate or be in conflict with, or require the consent of any
person or entity under, any provision of Seller's governing documents, (b)
violate any provision of or require any consent, authorization or approval under
any judgment, decree, judicial or administrative order, award, writ, injunction,
statute, rule or regulation applicable to Seller, or (c) result in the creation
of any lien, charge or encumbrance on any of the Properties.
3.5. CONTRACTS. The Exhibit sets forth a list of the following contracts,
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agreements, and commitments to which any of the Gas Properties are bound: (a)
any agreement with any affiliate of Seller; (b) any agreement or contract of
Seller for the sale, exchange or other disposition of Substances produced from
the Gas Properties that is not cancellable without penalty on not more than 120
days prior written notice; (c) any agreement of Seller to sell, lease, farmout
or otherwise dispose of any of its interests in any of the Gas Properties other
than conventional rights of reassignment; (d) any operating agreement to which
Seller's interest in any of the Gas Properties is subject; and (e) any contract
that commits Seller to expend more than $10,000 in any year in connection with
the Gas Properties, unless made upon consultation and approval of the Buyer.
3.6. LITIGATION AND CLAIMS. Except as is set forth on the Exhibit, (a) no
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claim, demand, filing, investigation, administrative proceeding, action, suit or
other legal proceeding is pending or, to the best of Seller's knowledge,
threatened, with respect to the Gas Properties or the ownership or operation of
any thereof, other than proceedings relating to the oil and gas industry
generally and as to which Seller is not a named party; and (b) no written notice
from any govern-mental authority or any other person (including employees) has
been received by Seller claiming any violation or repudiation of the Gas
Properties or any violation of any law, rule, regulation, ordinance, order,
decision or decree of any governmental authority (including, without limitation,
any such law, rule, regulation, ordinance, order, decision or decree
concerning the conservation of natural resources).
3.7. APPROVALS AND PREFERENTIAL RIGHTS. The Exhibit contains a complete and
---------------------------------
accurate list of (a) all approvals and consents required to be obtained by
Seller for the assignment or transfer of the Gas Properties to Buyer, other than
approvals and consents of governmental authorities that are customarily obtained
in similar transactions after the consummation of the transaction, and (b) all
preferential purchase rights that affect the transactions contemplated by this
Agreement.
3.8. COMPLIANCE WITH LAW AND PERMITS. The Gas Properties have been and
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currently are operated, and Seller and the Gas Proper-ties are, in compliance
with the provisions and requirements of existing laws, rules, regulations,
ordinances, orders, decisions and decrees of all governmental authorities having
jurisdiction with respect to the Gas Properties or the ownership or operation of
any thereof. All necessary governmental permits, licenses and other
authorizations with regard to the ownership or operation of the Gas Properties
have been obtained and maintained in effect. No violations exist in respect of
such permits, licenses or other authorizations, except for violations that would
not have a material adverse effect on the ownership or operation of the Gas
Properties.
3.9. ENVIRONMENTAL COMPLIANCE. Except as set forth on the Exhibit, no
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pollutant, waste, contaminant, or hazardous, extremely hazardous, or toxic
material, substance, chemical or waste identified, defined or regulated as such
under any law relating to health and safety or environmental matters is present,
or has been handled, managed, stored, transported, processed, treated, disposed
of, released, migrated or has escaped on, in, from, under or in connection with
the Gas Properties or the ownership or operation thereof such as to cause a
condition or circumstance that would result in a violation of any existing law
relating to health and safety or environmental matters or in a remediation,
removal, response, restoration, abatement, investigative or monitoring
obligation.
3.10. STATUS OF CONTRACTS. All of the Contracts are in full force and
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effect, and Seller is not in breach of, or with the lapse of time or the giving
of notice, or both, would be in breach of, any of its obligations there-under
except to the extent that such breaches would not have a material adverse effect
on the ownership or operation of the Properties.
3.11. PRODUCTION BURDENS, TAXES, EXPENSES AND REVENUES. All payments due
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under or with respect to the Gas Proper-ties have been properly and timely paid
or funds set aside in escrow for such purpose. All ad valorem, property,
production, severance and other taxes based on or measured by the owner-ship of
the Gas Properties or the production of Substances there-from have been properly
and timely paid. All expenses pay-able under the terms of the Con-tracts have
been properly and timely paid except for such expenses as are being currently
paid prior to delinquency in the ordinary course of business. All of the
proceeds from the sale of Substances are being properly and timely paid to
Seller by the purchasers of production without suspension or indemnity other
than standard division order indemnities. Seller has not nor will Seller be
obligated by virtue of any prepayment made under any production sales contract
or any other contract containing a "take or pay" clause, or under any
arrangement, to deliver oil, gas or other minerals produced from or allocated to
any of the Gas Properties at some future time without receiving full payment
therefor at the time of delivery. Seller has conducted all sales of gas which is
subject to the balancing rights of third parties in accordance with the
operating agreement and gas balancing agreement covering the specific Gas
Property. Seller will clear all imbalances as of the Effective Date.
3.12. CURRENT COMMITMENTS. The Exhibits contain a true and complete list as
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of the date of this Agreement of all authorities for expenditures to drill or
rework Xxxxx or for capital expenditures pursuant to any of the Contracts for
which all of the activities anticipated in such authorities for expenditures or
commitments have not been completed by the date of this Agreement.
3.13 LIENS AND ENCUMBRANCES. During Seller's ownership of the Properties
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and to the best of Seller's knowledge, except as shown on the Exhibit, there are
no liens or encumbrances burdening the Properties that will not be released at
Closing. At Closing Seller will pay and discharge all liens and encumbrances on
the Properties.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants
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to Seller that:
4.1. ORGANIZATION. Buyer is a corporation duly organized, validly existing
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and in good standing under the laws of the State of Wyoming, and qualified to do
business in the State of Wyoming.
4.2. AUTHORIZATION AND AUTHORITY. The execution and delivery of this
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Agreement have been and the performance of this Agreement and the transactions
contemplated hereby shall be at the time required to be performed hereunder,
duly and validly authorized by all requisite corporate action on the part of
Buyer. Buyer has full corporate power and authority to carry on its business as
presently con-ducted, to enter into this Agreement, to purchase the Properties
on the terms de-scribed in this Agreement and to perform its other obligations
under this Agreement.
4.3. ENFORCEABILITY. This Agreement has been duly executed and delivered on
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behalf of Buyer, and constitutes a legal, valid and binding obligation of Buyer
enforceable in accordance with its terms, except as enforce-ability may be
limited by Equitable Limitations. At the Closing all documents required
hereunder to be executed and de-livered by Buyer shall be duly executed and
delivered and shall constitute legal, valid and binding obligations of Buyer
enforceable in accordance with their terms, except as enforceability may be
limited by Equitable Limitations.
4.4. CONFLICTS. The execution and delivery of this Agreement by Buyer does
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not, and the consummation of the transactions contemplated by this Agreement
shall not, (a) violate or be in conflict with, or require the consent of any
person or entity under, any provision of Buyer's Certificate of Organization,
bylaws or other governing documents, (b) conflict with, result in a breach of,
constitute a default (or an event that with the lapse of time or notice, or
both, would constitute a default) under any agreement or instrument to which
Buyer is a party or is bound, or (c) violate any provision of or require any
consent, authorization or approval under any judgment, decree, judicial or
administrative order, award, writ, injunction, statute, rule or regulation
applicable to Buyer.
4.5. RELIANCE. Prior to executing this Agreement, Buyer has been afforded
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an opportunity to (a) examine the Gas Properties and such materials as it has
requested to be provided to it by Seller, (b) discuss with representatives of
Seller such materials and the nature and operation of the Gas Properties and (c)
investigate the condition, including subsurface condition, of the Gas Properties
and Surface Rights and the condition of the Equipment. In entering into this
Agreement, Buyer has relied solely on the express representations and covenants
of Seller in this Agreement, its independent investigation of, and judgment with
respect to, the Equipment and the Gas Properties and the advice of its own
legal, tax, economic, environmental, engineering, geological and geophysical
advisors and not on any comments or statements of any representatives of, or
consultants or advisors engaged by, Seller or the persons representing the
Seller.
4.6. QUALIFIED LEASEHOLDER. Buyer meets the area-wide bonding and any other
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bonding requirements of the Bureau of Land Management and other governmental
authorities, and, after the Closing, Buyer anticipates that it will continue to
be able to meet such bonding requirements. Buyer is, and, after the Closing, is
expected to continue to be, otherwise qualified to own the Gas Properties.
4.7. QUALIFIED PURCHASER. Buyer is an experienced and knowledgeable
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investor and operator in the oil and gas business. Buyer is acquiring the Gas
Properties 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. ' 77a et seq., and any other rules, regulations, and laws
pertaining to the distribution of securities.
4.8. AVAILABLE FUNDS. The Buyer has, or reasonably believes it can obtain a
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commitment to acquire, the funds by which to pay the Purchase Price at Closing.
5. COVENANTS OF SELLER PENDING CLOSING.
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5.1. CONDUCT OF BUSINESS PENDING CLOSING. Seller covenants that from the
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date hereof to the Closing Date, except (a) as provided herein, (b) as required
by any obligation, agreement, lease, contract, or instrument referred to on the
Exhibit, or (c) as otherwise consented to in writing by Buyer, Seller will:
5.1.1. Not (i) operate or in any manner deal with, incur obligations
with respect to, or undertake any transactions relating to, the Gas Properties
other than transactions (A) in the normal, usual and customary manner, (B) of a
nature and in an amount consistent with prior practice, and (C) in the ordinary
and regular course of business of owning and operating the Gas Proper-ties; (ii)
dispose of, encumber or relinquish any of the Gas Proper-ties (other than
relinquishments resulting from the expiration of leases that Seller has no right
or option to renew); or (iii) waive, com-promise or settle any right or claim
that would materially and adversely affect the ownership, operation or value of
any of the Gas Properties after the Effective Date.
5.1.2. Make or give all notifications, filings, consents or approvals,
from, to or with all govern-mental authorities, and take all other actions
reasonably requested by Buyer, necessary for, and co-operate with Buyer in
obtaining, the issuance, assignment or transfer, as the case may be, by each
such authority of such Permits as may be necessary for Buyer to own and operate
the Properties following the consummation of the transactions contemplated in
this Agreement.
5.1.3. Maintain in effect insurance providing the same type coverage,
in the same amounts with the same deductibles as the insurance maintained in
effect by Seller or its affiliates on the Effective Date.
5.1.4. In Seller's sole discretion, enter into forward sales contracts
with respect to gas to be produced from the Gas Properties, at prices and upon
terms Seller believes are prudent, provided, however, that the daily volume
thereof shall not exceed 2,500 mcf/day and the terms thereof shall expire on or
before December 31, 2004. Seller shall give Buyer immediate notice of any such
forward sale (hedge) of gas.
5.2. ACCESS. Seller shall afford to Buyer and its authorized
------
representatives from the date hereof until the Closing Date, during normal
business hours, reasonable access to the Gas Properties operated by Seller and
to Seller's title, contract, and legal materials and operating data and
information avail-able as of the date hereof and that becomes available to
Seller at any time prior to the Closing Date, other than any documents that are
protected by an attorney-client privilege.
5.3 NOTIFICATIONS. Seller will notify Buyer in writing promptly after the
-------------
discovery by Seller of any facts or circumstances that causes or would cause any
representation or warranty of Buyer contained in this Agreement to be untrue in
any material respect on the Closing Date. In addition, Seller will notify Buyer
in writing of the discovery by Seller of any facts or circumstances that causes
or would cause any representation or warranty of Seller contained in this
Agreement to be untrue in any material respect on the Closing Date.
6. COVENANTS OF BUYER PENDING CLOSING.
--------------------------------------
6.1. NOTIFICATIONS. Buyer will notify Seller in writing promptly after
-------------
the discovery by Buyer of any facts or circumstances that causes or would cause
any representation or warranty of Seller contained in this Agreement to be
untrue in any material respect on the Closing Date. In addition, Buyer will
notify Seller in writing of the discovery by Buyer of any facts or circumstances
that causes or would cause any representation or warranty of Buyer contained in
this Agreement to be untrue in any material respect on the Closing Date. Buyer
will notify Seller in writing promptly after discovery by Buyer of any fact or
circumstance rendering any of Seller's representations or warranties to be
untrue in any material respect on the Closing Date. Buyer will notify Seller in
writing promptly after discovery of any defect in title rendering title
unmerchantable as to any of the Gas Properties.
6.2. GOVERNMENTAL BONDS. At or prior to Closing, Buyer shall deliver
-------------------
to Seller evidence of the posting of bonds or other security with the Bureau of
Land Management, State of Wyoming (for state leases) and all other applicable
governmental authorities, including the Wyoming Oil and Gas Conservation
Commission, meeting the requirements of those authorities to own and, where
appropriate, operate, the Gas Properties.
7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER. The obligations of
---------------------
Buyer to be performed at Closing are subject to the fulfillment, before or at
Closing, of each of the following conditions:
7.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties by
------------------------------
Seller set forth in this Agreement shall be true and correct in all material
respects as of the Closing Date except for changes therein specifically
contemplated by this Agreement.
7.2. COMPLIANCE. Seller shall have performed and complied in all material
----------
respects with each of the covenants and conditions required by this Agreement of
which performance or compliance is required prior to or at the Closing.
7.3. CONSENTS. The consents specified in the Exhibit have been obtained
--------
(except for the Xxxxxxx Surface Use Agreement dated January 18, 2001) and any
preferential rights specified in the Exhibit have been waived or have expired.
7.4. NO PENDING SUITS. At the Closing Date, no suit, action or other
------------------
proceeding shall be pending or threatened before any court or governmental
agency in which it is sought to re-strain or prohibit the performance of or to
obtain damages or other relief in connection with this Agreement or the
consummation of the transactions contemplated hereby.
7.5 LIENS AND ENCUMBRANCES. On or before Closing, Buyer shall have received
----------------------
from Seller evidence that all liens and encumbrances affecting Buyer's ownership
of its interests in the Gas Properties have been satisfied by release or waiver,
or will be satisfied by release or waiver at Closing.
7.6 FINANCING. In the event Buyer determines that its financing has failed
---------
prior to Closing, Buyer shall give written notice thereof to Seller and First
National Bank, Buffalo, Wyoming, and in such event this Agreement shall be
terminated and Buyer shall be entitled to receive any funds then remaining in
escrow.
7.7. BOARD APPROVAL. On or before December 29, 2003, Seller shall have
---------------
obtained approval of this Agreement from its Board of Directors as well as the
Boards of Directors of U.S. Energy Corp. and Crested Corp., which approvals
shall be deemed to have been obtained unless Seller gives written notice of such
failure on or before December 30, 2003.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER. The obligations of
---------------------
Seller to be performed at Closing are subject to the fulfillment, before or at
Closing, of each of the following conditions:
8.1. REPRESENTATIONS AND WARRANTIES. The representations and
--------------------------------
warranties by Buyer set forth in this Agreement shall be true and correct in all
material respects as of the Closing Date except for changes therein
specifically contemplated by this Agreement.
8.2. COMPLIANCE. Buyer shall have performed and complied in all
----------
material respects with each of the covenants and conditions required by this
Agreement of which performance or compliance is required prior to or at the
Closing.
8.3. CONSENTS. The consents specified in the Exhibit have been obtained and
--------
any preferential rights specified in the Exhibit have been waived or have
expired.
8.4. NO PENDING SUITS. At the Closing Date, no suit, action or other
------------------
proceeding shall be pending or threatened before any court or governmental
agency in which it is sought to re-strain or prohibit the performance of or to
obtain damages or other relief in connection with this Agreement or the
consummation of the transactions contemplated hereby.
9. CLOSING.
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9.1. THE CLOSING. The assignment and purchase of the Proper-ties pursuant
------------
to this Agreement (the "Closing") shall be consummated in Sheridan, Wyoming, at
the offices of Xxxxxxxxx and Xxxxx, before 11:00 A.M. on the 30th day of
January, 2004, or such other date and place as mutually agreed by Buyer and
Seller (the "Closing Date").
9.2. DOCUMENTS TO BE DELIVERED AT CLOSING.
-----------------------------------------
9.2.1. At the Closing, Seller shall deliver to Buyer the following
instruments, dated the Closing Date, properly executed by authorized officers
and, where appropriate, acknowledged:
(a) Counterparts of an Assignment of Leases and Xxxx of Sale in the
form of Annex III sufficient to convey to Buyer title in and to the Gas
Properties;
(b) Counterparts of an Assignment, Xxxx of Sale and Assumption
Agreement in the form of Part I.B of the Exhibit sufficient to convey to
Buyer the WGCTF.
(c) Such other instruments as are necessary to effectuate the
conveyance of the Gas Properties to Buyer;
(d) Letters in lieu of division orders addressed to each purchaser of
the Substances;
(e) With respect to any Xxxxx that Seller owns less than all of the
operating rights or leasehold interests and is designated as the operator,
(i) Seller will assign to Buyer its rights as Operator, and (ii) any forms
promulgated by the appropriate governmental authority and completed by
Buyer designating Buyer as the operator that Seller is required to execute
by the governmental authority. With respect to any Xxxxx that Seller owns
all of the leasehold interests or operating rights and is designated as the
operator, any forms promulgated by the appropriate governmental authority
and completed by Buyer designating Buyer as the operator that Seller is
required to execute by the governmental authority; and
(f) A certificate in the form of Annex I.
9.2.2. At the Closing, Buyer shall deliver to Seller a certificate in
the form of Annex II dated the Closing Date and properly executed by an
authorized officer.
9.3. POSSESSION. At the Closing, Seller shall deliver to Buyer possession
----------
of the Gas Properties other than the Data. Within five Business Days after
Closing, Seller shall deliver to Buyer at Seller's offices all of the Data.
9.4. PAYMENT OF PURCHASE PRICE. At the Closing, against delivery of the
----------------------------
documents and materials described in Section 9.2, Buyer shall pay to Seller the
estimated Adjusted Purchase Price by wire transfer of immediately available
funds and shall deliver properly issued shares of U.S. Energy Corp. as described
in Section 2.1.
10. TERMINATION.
-----------
10.1. EVENTS OF TERMINATION. This Agreement may be terminated at any time
-----------------------
prior to the Closing:
10.1.1. By the mutual written consent of Buyer and Seller; and
10.1.2. By Seller if for any reason the Closing has not occurred by
January 30, 2004, in which case Seller shall retain as its property the down
payment.
10.1.3. By the Buyer prior to Closing in the event Buyer finds
material Title Defects valued at $100,000, or more, as described in Section 2.4,
above, which Title Defects are not timely cured by the Seller, in which case
Seller shall retain as its property the down payment.
10.1.4. By the Seller prior to Closing in the event Buyer finds
material Title Defects valued at $100,000, or more, as described in Section 2.4,
above, and the parties have not negotiated an adjustment to the Purchase Price,
in which case Seller shall retain as its property the down payment.
10.1.5. By Buyer if Buyer determines that its financing has failed as
allowed by Section 7.6.
11. TAXES, PRORATIONS AND ASSUMPTION OF OBLIGATIONS.
----------------------------------------------------
11.1. TAX PRORATIONS. Real and personal property taxes for the Gas
---------------
Properties shall be prorated between Buyer and Seller as of the Effective Date.
If the actual taxes are not known on the Closing Date, Seller's share of such
taxes shall be determined by using (a) the rates and millage for the year prior
to the year in which the Closing occurs, with appropriate adjustments for any
known and verifiable changes thereto, and (b) the assessed values for the year
in which Closing occurs. When Buyer receives the actual tax statements for the
Gas Properties from the appropriate taxing authorities, Buyer shall deliver to
Seller a copy of such statements, together with the amount, if any, by which
Seller's proration exceeds the proration that would have been made had actual
tax statements been used to calculate Seller's proration. If the proration for
Seller that would have been made using actual tax statements exceeds that made
at Closing, Seller shall pay to Buyer such difference within twenty Business
Days of receipt of such statement.
11.1.1. SEVERANCE AND AD VALOREM TAXES. Seller represents that it has
---------------------------------
paid all severance taxes due as a result of production from the Gas Properties
as of September 30, 2003. Seller warrants and represents that it will pay all
severance taxes due for production from the Gas Properties until the Effective
Date. Seller agrees and represents that it has paid one-half of the ad valorem
taxes applicable and payable on production through December 31, 2002, and will
timely pay the remaining one-half on or before May 1, 2004. Seller warrants and
represents that it will pay all ad valorem taxes for the Gas Properties and
production therefrom until the Effective Date. Seller shall as soon as possible
after the Closing provide Buyer with an estimate of the ad valorem taxes due for
the tax year 2003 until the Effective Date. The Seller's portion of such taxes
shall be placed in escrow to assure prompt payment of such taxes when due.
11.1.2. CONSERVATION TAXES. Seller represents that it has paid all
-------------------
conservation taxes as a result of production from the Gas Properties through
-June 30, 2003. Seller warrants and represents that it will pay all conservation
taxes due for the period of time prior to the Effective Date. Buyer agrees and
represents that it will pay all conservation taxes applicable and payable on
production arising on or after the Effective Date. The parties will calculate
the conservation taxes due on production from the Gas Properties from July 1,
2003 through December 31, 2003, and will each contribute their respective shares
of such conservation taxes to be paid on or before February 25, 2004.
11.2. ASSUMPTION OF OBLIGATIONS. At Closing, Buyer shall assume (a)
---------------------------
the obligation to (i) plug and abandon or remove and dispose of all xxxxx,
structures, flow lines, pipelines, and the other equipment now or hereafter
located on the Gas Properties and Surface Rights, (ii) cap and bury all flow
lines and other pipelines now or hereafter located on the Gas Properties and
Surface Rights, and (iii) dispose of all other pollutants, wastes, contaminants,
now or hereafter located on the Gas Properties or Surface Rights; (b) all
obligations and liabilities arising from or in connection with any gas
production, gas compression, gathering and transmission agreements attributable
to Substances produced from Gas Properties arising on or after the Effective
Date; and (c) all other costs, obligations and liabilities that arise under the
Gas Properties or Contracts or otherwise relate to the Gas Properties and, in
each case, arise from or relate to events occurring on or after the Effective
Date. All such plugging, replugging, abandonment, removal, disposal, and
restoration operations shall be in compliance with applicable laws and
regulations and contracts, and shall be conducted in a good and workmanlike
manner.
11.3 SUSPENSE AND/OR ESCROW ACCOUNTS. At Closing, Seller agrees to pay to
--------------------------------
Buyer all royalty and/or working interest amounts held in suspense by Seller, or
otherwise paid into an escrow account that relates to the Gas Properties
conveyed at Closing, together with a written explanation (as contained in the
Seller's files) of why such money is held in suspense or in escrow. Buyer
agrees to take and apply such monies in a manner consistent with prudent oil and
gas practices and consistent with discharging the obligations of an operator of
oil and gas properties.
11.4 GAS SALES COMMITMENTS. At Closing, Seller shall transfer, assign and
----------------------
convey to Buyer all of the gas sales transactions held by the Seller as of the
Effective Date, a list of the same being attached to the Exhibit as "Current
Commitments" and the Buyer agrees to assume the Seller's obligations thereunder
and to perform all obligations of the Seller thereunder.
12. FINAL ACCOUNTING
-----------------
12.1. SETTLEMENT STATEMENT. As soon as practical and, in any event, no
--------------------
later than ninety calendar days after the Closing Date, Seller shall prepare and
deliver to Buyer a statement (the "Final Settlement Statement") setting forth
the adjustments to the Purchase Price in accordance with Section 2.2. The Final
Settlement Statement shall be prepared in accordance with customary accounting
principles used in the oil and gas industry. The Final Settlement Statement
shall reflect all amounts shown on the Closing Statement and shall deduct all
such amounts from the amounts calculated under the Final Settlement Statement.
Within thirty calendar days after Buyer's receipt of the Final Settlement
Statement, Buyer and Seller shall endeavor to agree on the final accounting.
12.2. ARBITRATION OF FINAL SETTLEMENT. If Seller and Buyer cannot
----------------------------------
agree upon the Final Settle-ment Statement, the Casper, Wyoming Office of the
accounting firm of Macy and XxXxx, certified public accountants, is designated
to act as an arbitrator and to decide all points of disagreement with respect to
the Final Settlement State-ment, such decision to be binding on both parties. If
such firm is unwilling or unable to serve in such capacity, Seller and Buyer
shall attempt to, in good faith, designate another accept-able person as the
sole arbitrator under this Section. If the parties are unable to agree upon the
designation of a person as substitute arbitrator, then Seller or Buyer, or both
of them, may in writing request the Judge of the State District Court for the
Sixth Judicial District of the State of Wyoming to appoint the substitute
arbitrator. The arbitration shall be conducted under the Wyoming Uniform
Arbitration Act and the rules of the American Arbitration Association to the
extent such rules do not conflict with the terms of such Act and the terms
hereof. The costs and expenses of the arbitrator, whether the firm designated
above, or a third party appointed pursuant to the preceding sentence shall be
shared equally by Seller and Buyer.
12.3. PAYMENT. Within five Business Days after the agreement of Seller and
-------
Buyer on the Final Settlement Statement or after the decision of the arbitrator,
Buyer or Seller, as the case may be, shall promptly make a cash payment to the
other equal to the sums as may be found to be due in the Final Settlement
Statement.
13. SURVIVAL AND INDEMNIFICATION.
------------------------------
13.1. SURVIVAL. The liability of Buyer and Seller under each of their
--------
respective representations, warranties and covenants contained in this Agreement
shall survive the Closing and execution and delivery of the assignments
contemplated hereby.
13.2. LIABILITIES. The term "Liabilities" shall mean any and all
-----------
payments, charges, judgments, assessments, liabilities, damages, penalties,
fines or costs and expenses paid or incurred by the person seeking
indemnification, including any legal or other expenses reasonably incurred in
connection therewith.
13.3. INDEMNIFICATION BY SELLER. After the Closing, Hi-Pro Production,
---------------------------
LLC shall be responsible for, shall pay on a current basis, and shall indemnify,
save, hold harmless, discharge and release Buyer, all of its affiliates,
successors and permitted assignees, and all of its and their respective
stockholders, directors, officers, employees, agents and representatives
(collectively, "Buyer Indemnified Parties") from and against any and all
Liabilities arising from, based upon, related to or associated with (a) any act,
omission or event involving or relating to the Properties occurring during the
period in which the Seller had title to the Gas Properties, other than
obligations and liabilities assumed by Buyer pursuant to Section 11.2; (b) any
act or omission by either Seller involving or relating to the Excluded Assets
whether occurring before or after the Effective Date; (c) the inaccuracy of any
representation or warranty of Seller set forth in this Agreement or in any other
agreement, instrument, document or certificate executed or delivered in
connection with this Agreement; (d) the breach of, or failure to perform or
satisfy, any of the covenants of either Seller set forth in this Agree-ment or
in any other agreement, instrument, document or certificate executed or
delivered in connection with this Agreement; and (e) any violation of permits,
requirement to obtain permits or other non-compliance that occurred prior to the
Effective Date.
13.4. INDEMNIFICATION BY BUYER. After the Closing, Buyer shall assume, be
--------------------------
responsible for, shall pay on a current basis, and shall indemnify, save, hold
harmless, discharge and release Seller, its affiliates, its individual members
and owners, its and their successors and permitted assigns, and all of their
respective members, officers, employees, agents and representatives
(collectively, "Seller Indemnified Parties") from and against any and all
Liabilities arising from, based upon, related to or associated with (a) any act,
omission, event, condition or circumstance involving or relating to the Gas
Properties accruing or existing on or after the Effective Date; (b) liabilities
and obligations assumed by Buyer pursuant to Section 11.2; (c) any act,
omission, event, condition or circumstance involving or relating to the
Properties accruing or existing before the Effective Date that was not properly
asserted by Buyer on or prior to the date specified in Section 13.5.1; (d) any
brokers' or finders' fees or commissions arising with respect to brokers or
finders retained or engaged by any person other than Seller and resulting from
or relating to the transactions contemplated in this Agreement; (e) the
inaccuracy of any representation or warranty of Buyer set forth in this
Agreement or in any other agreement, instrument, document or certificate
executed or delivered in connection with this Agreement; and (f) the breach of,
or failure to perform or satisfy any of the covenants of Buyer set forth in this
Agreement or in any other agreement, instrument, document or certificate
executed or delivered in connection with this Agreement.
13.5. LIABILITY LIMITATIONS.
----------------------
13.5.1. After the Closing, any assertion by any Buyer Indemnified
Party that Seller is liable (a) for the inaccuracy of any representation or
warranty, (b) for the breach of any covenant, (c) for indemnity under the terms
of this Agreement or (d) otherwise in connection with the transactions
contemplated in this Agreement, must be made by Buyer in writing and must be
given to Seller on or prior to the first anniversary of the Closing Date. The
notice shall state the facts known to Buyer that give rise to such notice in
sufficient detail to allow Seller to evaluate the assertion.
13.5.2. None of the Buyer Indemnified Parties shall be entitled to
assert any right to indemnification hereunder or to otherwise seek any damages
or other remedies for or in connection with (a) the inaccuracy of any
representations of Seller contained in this Agreement or in any other agreement,
instrument, document or certificate executed or delivered in connection with
this Agreement; (b) the breach of, or failure to perform or satisfy any of the
covenants of Seller set forth in this Agreement or in any other agreement,
instrument, document or certificate executed or delivered in connection with
this Agreement; or (c) any liabilities otherwise arising in connection with or
with respect to the transactions contemplated in this Agreement until the
aggregate amount of the Liabilities for such misrepresentations, breaches or
liability actually suffered by Buyer exceeds five percent of the Purchase Price,
and then only to the extent of such excess. The limitations in this Section
shall not apply, however, to the obligations of Seller under Sections 11.1,
12.1, 12.2, 12.3 and 20.
13.5.3. The amount of any Liabilities for which any of the Buyer
Indemnified Parties or Seller Indemnified Parties is entitled to indemnification
or other compensation under this Agreement or in connection with or with respect
to the transactions contemplated in this Agreement shall be reduced by any
corresponding (a) tax benefit created or generated or (b) insurance proceeds
realized under the relevant insurance arrangements.
13.5.4. Seller shall not be required to indemnify any Buyer
Indemnified Parties 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 fifty percent of the Adjusted Purchase Price.
13.5.5. None of the Buyer Indemnified Parties nor the Seller
Indemnified Parties shall be entitled to recover from Seller or Buyer,
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. Buyer on behalf of
each of the Buyer Indemnified Parties and Seller on behalf of each of the Seller
Indemnified Parties waives any right to recover punitive, special, exemplary and
consequential damages arising in connection with or with respect to the
transactions contemplated in this Agreement, except to the extent recoverable
from a third party.
13.5.6. If the Closing occurs, the sole and exclusive remedy of each
of the Buyer Indemnified Parties and the Seller Indemnified Parties with respect
to the purchase and sale of the Properties shall be pursuant to the express
indemnification provisions of this Section 13. Any and all (a) claims relating
to the representations, warranties, covenants and agreements contained in this
Agreement, (b) other claims pursuant to or in connection with this Agreement or
(c) other claims relating to the Gas Properties and the purchase and sale
thereof shall be subject to the provisions set forth in this Section 13. Except
for claims made pursuant to the express indemnification provisions of this
Section 13, Buyer on behalf of each of the Buyer Indemnified Parties and Seller
on behalf of each of the Seller Indemnified Parties shall be deemed to have
waived, to the fullest extent permitted under applicable law, any right of
contribution against Seller or any of its affiliates and any and all rights,
claims and causes of action it may have against Seller or any of its affiliates
or Buyer or any of its affiliates, respectively, arising under or based on any
federal, state or local statute, law, ordinance, rule or regulation or common
law or otherwise.
13.5.7. No person entitled to indemnification hereunder or otherwise
to damages in connection with or with respect to the transactions contemplated
in this Agreement shall settle, compromise or take any other action with respect
to any claim, demand, assertion of liability or legal proceeding that could
prejudice or otherwise adversely impact the ability of the person providing such
indemnification or potentially liable for such damages to defend or otherwise
settle or compromise with respect to such claim, demand, assertion of liability
or legal proceeding.
13.5.8. Seller and Buyer acknowledge that the payment of money, as
limited by the terms of this Agreement, shall be adequate compensation for
breach of any representation, warranty, covenant or agreement contained herein
or for any other claim arising in connection with or with respect to the
transactions contemplated in this Agreement. As the payment of money shall be
adequate compensation, Buyer and Seller waive any right to rescind this
Agreement or any of the transactions contemplated hereby.
13.5.9. Each person entitled to indemnification hereunder or otherwise
to damages in connection with the transactions contemplated in this Agreement
shall take all reasonable steps to mitigate all losses, costs, expenses and
damages after becoming aware of any event or circumstance that could reasonably
be expected to give rise to any losses, costs, expenses and damages that are
indemnifiable or recoverable hereunder or in connection herewith.
13.5.10. THE INDEMNIFICATION, RELEASE AND ASSUMPTION PROVISIONS
PROVIDED FOR IN THIS AGREEMENT SHALL BE APPLICABLE WHETHER OR NOT THE LOSSES,
COSTS, EXPENSES AND DAMAGES IN QUESTION AROSE SOLELY OR IN PART FROM THE ACTIVE,
PASSIVE OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF ANY
INDEMNIFIED PARTY. BUYER AND SELLER ACKNOWLEDGE THAT THIS STATEMENT COMPLIES
WITH THE EXPRESS NEGLIGENCE RULE AND IS CONSPICUOUS.
13.5.11. Seller shall not have any obligation or liability under this
Agreement or in connection with or with respect to the transactions contemplated
in this Agreement for any (i) breach, misrepresentation or noncompliance with
respect to any representation, warranty, covenant, or obligation or (ii) any
indemnity (a) if such breach, misrepresentation, noncompliance or indemnity
rights shall have been waived by Buyer, (b) if Buyer had knowledge of the
relevant facts at or before Closing or (c) if Buyer should have known, in the
exercise of reasonable diligence, of the relevant facts at or before Closing.
13.6. WAIVER OF REPRESENTATIONS.
---------------------------
13.6.1. EXCEPT TO THE EXTENT OF THE EXPRESS REPRESENTATIONS AND
WARRANTIES OF SELLER CONTAINED IN THIS AGREEMENT AND IN THE CERTIFICATE TO BE
DELIVERED BY SELLER PURSUANT TO SECTION 9.2.1, SELLER EXPRESSLY DISCLAIMS AND
NEGATES, AND BUYER HEREBY WAIVES, ANY CLAIM OF LIABILITY OR RESPONSIBILITY FOR,
(I) ALL REPRESENTATIONS AND WARRANTIES, EXPRESS, IMPLIED OR STATUTORY AND (II)
ANY STATEMENT OR INFORMATION ORALLY OR IN WRITING MADE OR COMMUNICATED TO BUYER,
INCLUDING, BUT NOT LIMITED TO, ANY OPINION, INFORMATION OR ADVICE THAT MAY HAVE
BEEN PROVIDED TO BUYER BY ANY OFFICER, DIRECTOR, EMPLOYEE, AGENT, CONSULTANT OR
REPRESENTATIVE OR SELLER, ANY ENGINEER OR ENGINEERING FIRM OR ANY OTHER AGENT,
CONSULTANT OR REPRESENTATIVE. BUYER SHALL INDEMNIFY AND HOLD HARMLESS THE SELLER
AS WELL AS WATEROUS & CO., NETHERLAND, XXXXXX & ASSOCIATES, INC., XXXXXXX &
ASSOCIATES, LLC, OR THEIR OFFICERS DIRECTORS, EMPLOYEES OR MEMBERS.
13.6.2. SELLER EXPRESSLY DISCLAIMS AND NEGATES, AND BUYER HEREBY
WAIVES, ANY LIABILITY OR RESPONSIBILITY FOR, (I) ANY REPRESENTATION OR WARRANTY
WITH RESPECT TO THE QUALITY, QUANTITY OR VOLUME OF THE RESERVES, IF ANY, OF GAS
OR OTHER HYDROCARBONS IN OR UNDER THE PROPERTIES; AND (II) ANY WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, AS TO THE QUALITY, MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, CONFORMITY TO SAMPLES, OR CONDITION OF ANY OF THE GAS
PROPERTIES OR ANY PART THERETO.
13.6.3. EXCEPT FOR THE EXPRESS REPRESENTATIONS CONTAINED IN THIS
AGREEMENT AND IN THE CERTIFICATE TO BE DELIVERED PURSUANT TO SECTION 9.2.1 THE
ITEMS OF PERSONAL PROPERTY, EQUIPMENT, IMPROVEMENTS, FIXTURES AND APPURTENANCES
CONVEYED AS PART OF THE PROPERTIES ARE SOLD, AND BUYER ACCEPTS SUCH ITEMS "AS
IS, WITH ALL FAULTS."
13.6.4. THERE ARE NO WARRANTIES THAT EXTEND BEYOND THE FACE OF THIS
AGREEMENT AND THE CERTIFICATE TO BE DELIVERED PURSUANT TO SECTION 9.2.1.
13.6.5. BUYER ACKNOWLEDGES THAT THE WAIVERS IN THIS SECTION 13.6 ARE
CONSPICUOUS.
14. ENVIRONMENTAL REVIEW AND REMEDIES FOR ENVIRONMENTAL DEFECTS.
-----------------------------------------------------------------
14.1. ENVIRONMENTAL REVIEW. Buyer and its employees, agents, and
---------------------
contractors shall have the right, prior to Closing, at Buyer's sole expense but
with the cooperation and assistance of Seller to:
14.1.1. enter all or any portion of the Gas Properties to inspect,
inventory, test, investigate, study, and examine the Properties;
14.1.2. conduct air, water, or soil tests on the Gas Properties and
make such samples and borings and analysis as Buyer may consider necessary or
appropriate;
14.1.3. conduct such other independent inspections, inventories,
tests, investigations, studies, or examinations as may be necessary or
appropriate in Buyer's sole judgment for the preparation of health, safety,
environmental, or other reports or assessments relating to the operation, use,
maintenance, condition, or status of the Gas Properties, their suitability for
Buyer's purposes, and their compliance with all applicable laws, regulations,
ordinances, orders, permits, and licenses; and
14.1.4. conduct an independent assessment of the extent of any
possible existing or contingent liabilities due or related to the operation,
use, maintenance, condition, or status of the Gas Properties.
14.2. CONDUCT OF REVIEW. All inspections and reviews shall be
-------------------
undertaken with a minimum of disruption to ongoing operations and shall only be
undertaken after reasonable notice to Seller. Buyer shall not undertake any
destructive testing without the prior approval of Seller. Buyer shall provide
Seller with a copy of the results and reports of all such inspection, testing
and review. Buyer shall indemnify, defend, and hold harmless Seller and its
respective affiliates, officers, members, partners, employees, attorneys, and
agents from any and all losses, liabilities, liens, or encumbrances for labor or
materials, claims or causes of action arising out of any injury to or death of
any persons, or damage to property occurring to or on the Gas Properties as a
result of the exercise of Buyer's rights hereunder, except to the extent that
any such indemnified event or occurrence is the result of the sole negligence or
willful misconduct of Seller.
14.3 REMEDIES. In the event the environmental review identifies any
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existing or contingent liability in excess of $100,000, the Purchase price will
be adjusted to reflect the liability to the extent the Seller is not already
obligated under Section 13 to indemnify the Buyer, such adjustment to be made in
the stock portion of the Purchase Price.
15. FURTHER ASSURANCES.
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15.1. GENERAL. After the Closing, Seller and Buyer shall execute,
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acknowledge and deliver or cause to be executed, acknowledged and delivered such
instruments and take such other action as may be necessary or advisable to carry
out their obligations under this Agreement and under any exhibit, document,
certificate or other instrument delivered pursuant hereto.
15.2. FILINGS, NOTICES AND CERTAIN GOVERNMENTAL APPROVALS. Promptly after
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Closing Buyer shall (a) record the assignments of the Gas Properties executed at
the Closing in all applicable real property records, (b) send notices to vendors
supplying goods and services for the Properties of the assignment of the Gas
Properties to Buyer and, if applicable, the designation of Buyer as the operator
thereof, (c) actively pursue the unconditional approval by the Bureau of Land
Management, the State of Wyoming, and all other applicable governmental
authorities of the assignment of the Gas Properties to Buyer and the designation
of Buyer as the operator thereof, and (d) actively pursue all other consents and
approvals that may be required in connection with the assignment of the Gas
Properties to Buyer, and the assumption of the liabilities assumed by Buyer
hereunder, and that shall not have been obtained prior to Closing. Buyer
obligates itself to take any and all action required by the Bureau of Land
Management, the State of Wyoming, or any other regulatory agency in order to
obtain such unconditional approval, including but not limited to, the posting of
any and all bonds or other security that may be required in excess of its
existing lease, pipeline or area-wide bond.
15.3. LOGOS AND NAMES. As soon as practicable after the Closing, Buyer will
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remove or cause to be removed the names and marks used by Seller and all
variations and derivatives thereof and logos relating thereto from the
Properties.
16. ACCESS BY BUYER AFTER CLOSING. After the Closing Date, Buyer and its
--------------------------------
authorized representatives shall have reason-able access (at Buyer's sole cost
and expense) during Seller's normal business hours to (i) all books and records
of Seller pertaining to the Gas Properties for periods prior to the Effective
Date and (ii) the Gas Properties for the sole purpose of prosecuting or
defending claims, lawsuits or other proceedings, for audit purposes, or to
comply with legal process, rules, regulations or orders of any governmental
authority. Buyer, at its sole expense, may copy such records that it deems
appropriate. Buyer agrees to maintain such books and records for a minimum of
two years after Closing.
17. NOTICES. All notices required or permitted under this Agreement shall
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be in writing and, (a) if by air courier, shall be deemed to have been given one
Business Day after the date deposited with a recognized carrier of overnight
mail, with all freight or other charges prepaid, (b) if by tele-copier, shall be
deemed to have been given when actually received, and (c) if mailed, shall be
deemed to have been given three Business Days after the date when sent by
registered or certified mail, postage prepaid, addressed as follows:
To Buyer: Rocky Mountain Gas, Inc.
000 Xxxxx 0xx Xxxx
Xxxxxxxx, Xxxxxxx 00000
Attn: Xxxx Xxxxxx - President
Telecopier: 000-000-0000
To Seller: Hi-Pro Production, LLC
0000 Xxxxxxx Xxxx
X.X. Xxx 0000
Xxxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxxxxx - President
Telecopier: (000) 000-0000
-and to-
Xxx X. Xxxxx
Xxxxxxxxx and Xxxxx
00 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
X.X. Xxxxxx 0000
Xxxxxxxx, Xxxxxxx 00000
Telecopier: (000) 000-0000
"Business Day" shall mean a day other than Saturday or Sunday or any legal
holiday for commercial banking institutions under the laws of the State of
Wyoming.
18. ASSIGNMENT. Neither Seller nor Buyer may assign its rights or
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delegate its duties or obligations arising under this Agreement, in whole or in
part, by operation of law or otherwise, before or after Closing, without the
prior written consent of the other party, which consent will not be unreasonably
withheld.
19. GOVERNING LAW. This Agreement shall be governed and construed in
--------------
accordance with the laws of the State of Wyoming without giving effect to any
principles of conflicts of laws. The validity of the various conveyances
affecting the title to real property shall be governed by and construed in
accordance with the laws of the jurisdiction in which such property is situated.
The representations and warranties contained in such conveyances and the
remedies available because of a breach of such representations and warranties
shall be governed by and construed in accordance with the laws of the State of
Wyoming without giving effect to the principles of conflicts of laws.
20. EXPENSES AND FEES. Whether or not the transactions contemplated
-------------------
by this Agreement are consummated, each of the parties hereto shall pay the fees
and expense of its counsel, accountants and other experts incident to the
negotiation and preparation of this Agreement and con-summation of the
trans-actions contemplated hereby. Buyer shall be responsible for the cost of
all fees for the recording of transfer documents and any sales, transfer, stamp
or other excise taxes resulting from the transfer of the Gas Properties to
Buyer. All other costs shall be borne by the party incurring such costs.
21. INTEGRATION. This Agreement, including the Exhibit, and the other
-----------
agreements to be entered into by the parties under the provisions of this
Agreement executed by Buyer and the Seller set forth the entire agreement and
understanding of the parties in respect of the transactions contemplated hereby
and supersede all prior agreements, prior arrangements and prior under-standings
relating to the subject matter hereof.
22. WAIVER OR MODIFICATION. This Agreement may be amended, modified,
------------------------
superseded or canceled, and any of the terms, covenants, representations,
warranties or conditions hereof may be waived, only by a written instrument
executed by a duly authorized officer of Buyer and Seller, or, in the case of a
waiver or consent, by or on behalf of the party or parties waiving compliance or
giving such consent. The failure of any party at any time or times to require
performance of any provision of this Agreement shall not affect its right at a
later time to enforce such provision. No waiver by any party of any condition,
or of any breach of any covenant, agreement, representation or warranty
contained in this Agreement, in any one or more instances, shall be deemed to be
or construed as a further or continuing waiver of any such condition or breach
or waiver of any other condition or of any breach of any other covenant,
agreement, representation or warranty.
23. HEADINGS. The Section headings contained in this Agreement are
--------
for convenient reference only and shall not in any way affect the meaning or
interpretation of this Agreement.
24. INVALID PROVISIONS. If any provision of this Agreement is held to
-------------------
be illegal, invalid or unenforceable under present or future laws effective
during the term hereof, such provision shall be fully severable; this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof; and the remaining provisions of
this Agreement shall remain in full force and effect and shall not be affected
by the illegal, invalid or unenforceable provision or by its severance from this
Agreement.
25. WAIVER OF JURY TRIAL. SELLER AND BUYER HEREBY IRREVOCABLY WAIVE,
----------------------
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO A TRIAL BY JURY IN
ANY ACTION, SUIT OR OTHER LEGAL PROCEEDING BASED ON, ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN.
26. MULTIPLE COUNTERPARTS. This Agreement may be executed in a number
----------------------
of identical counterparts, each of which for all purposes is to be deemed an
original, and all of which constitute, collectively, one agreement. In addition,
this Agreement may be executed in a number of counterparts, any one of which may
contain the execution of either Buyer or Seller, and all of such counterparts
taken together shall constitute one completely executed original agreement.
27. CONFIDENTIALITY. Buyer and Seller agree that neither party shall
---------------
issue any press release or make any public announcement mentioning the Seller's
name until the Closing. After the Closing, the parties shall keep confidential
the consideration paid by the Seller to the Buyer pursuant to this Agreement and
will each use their best efforts not to disclose the purchase price or the terms
of this Agreement to third parties except as may be required by law, and except
to parties in a confidential relationship with a party hereto such as
accountants, tax advisors, attorneys, investment bankers and investors. Buyer
contemplates making a press release after the Closing, and will send the same to
Seller for Seller's input and consent, which consent will not be unreasonably
withheld. Nothing contained herein shall be construed to require either party to
obtain approval of the other party hereto in order to disclose information with
respect to the transaction contemplated by this Agreement to any state or
federal governmental agency or authority to the extent required by applicable
law or by any applicable rule, regulation or order of any governmental authority
or agency having jurisdiction or necessary to comply with disclosure
requirements of securities laws.
EXECUTED as of the date first set forth above.
SELLER:
HI-PRO PRODUCTION, LLC
By: /S/ Xxxxxx X. Xxxxxxxxxx
Name: Xxxxxx X. Xxxxxxxxxx
Title: President
BUYER:
ROCKY MOUNTAIN GAS, INC.
By: /S/ Xxxx Xxxxxx
Name: Xxxx Xxxxxx
Title: President
